CHAPTER 1

PROFILE OF THE COMPANY

1.1 Introduction to HDFC BANK Ltd.

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 RBIs 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 Banks 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
banks risk appetite. The bank is committed to maintain the highest level of ethical
standards, professional integrity, corporate governance and regulatory compliance. HDFC
Banks business philosophy is based on five core values: Operational Excellence,
Customer Focus, Product Leadership, Sustainability and People.

1.11 Company Information

S.no

Particulars

1.

Name

2.

Logo

Details
HDFC Bank Ltd.

3.
Address

HDFC Bank Ltd., 9th Floor, Ansal Tower,

Rajouri Garden, New Delhi.
Tel: 7428122352

4.
Registered Office

HDFC Bank House, Senapati Bapat Marg,

Lower Parel (W), Mumbai - 400 013
Tel: +91 - 22 - 6652 1000

5.

Branches

3,403 branches in 2,171 locations.

6.

Website

www.hdfcbank.com

7.

E-Mail

amit.munjal@hdfcbank.com

Table No 1.1: Company Information and Contact Details

1.12 Distribution Network

HDFC Bank is headquartered in Mumbai. As of March 31, 2014, the Banks distribution
network was at 3,403 branches in 2,171 locations. All branches are linked on an online
real-time basis. Customers in over 1397 locations are also serviced through Telephone
Banking. The Banks expansion plans take into account the need to have a presence in all
major industrial and commercial centers, 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
centers

where

the

NSE/BSE

have

strong

and

active

member

base.

The Bank also has a network of 11,256 ATMs across India. HDFC Banks ATM network
can be accessed by all domestic and international Visa / MasterCard, Visa Electron /
Maestro, Plus / Cirrus and American Express Credit / Charge cardholders.

Figure No - 1.1

Figure No - 1.2

Figure - 1.1 & 1.2 Increase in Branches and Locations over the years
4

Figure No 1.3
Figure - 1.3 Distribution Network in the country

1.2 Business Profile

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

Wholesale Banking

b.

Retail Banking

c.

Treasury

1.21 Wholesale Banking

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

of cash management and transactional banking solutions to corporate customers, mutual

funds, stock exchange members and banks.

1.22 Retail Banking

The objective of the Retail Bank is to provide its target market customers a full range of
financial products and banking services, giving the customer a one-stop window for all
his/her banking requirements. The products are backed by world-class service and
delivered to customers through the growing branch network, as well as through alternative
delivery channels like ATMs, Phone Banking, Net Banking and Mobile Banking.
The HDFC Bank Preferred program for high net worth individuals, the HDFC Bank Plus
and the Investment Advisory Services programs have been designed keeping in mind
needs of customers who seek distinct financial solutions, information and advice on
various investment avenues. The Bank also has a wide array of retail loan products
including Auto
Loans, Loans against marketable securities, Personal Loans and Loans for Two-wheelers.
It is also a leading provider of Depository Participant (DP) services for retail customers,
providing customers the facility to hold their investments in electronic form. HDFC Bank
was the first bank in India to launch an International Debit Card in association with VISA
(VISA Electron) and issues the MasterCard Maestro debit card as well. The Bank launched
its credit card business in late 2001. By March 2013, the bank had a total card base (debit
and credit cards) of over 19.7 million.

The Bank is also one of the leading players in the merchant acquiring business with over
270,000 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.

1.23 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, corporates need more sophisticated risk
management information, advice and product structures. These and fine pricing on various
treasury products are provided through the banks 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.

1.3 HDFC Banks Vision and Mission

1.31 Vision of the Company
To build a World-Class Indian Bank By offering a wide of relevant products and
services.
a. Tailored Solutions for Customers.
b. Ensure Unmatched Customer Service.

c. Providing the Right Solution at Right Place.

d. Have Wide and Extensive Reach.
The delivery backbone for providing the above shall be by adopting world class
technology.

1.32 Mission and Core Values of the Company

Use Enabling Technology to provide valued added products and services to customers.
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 banks risk
appetite. The bank is committed to maintain the highest level of ethical standards,
professional integrity, corporate governance and regulatory compliance.
In order to achieve the above said mission bank follows certain values.
The Banks Five Core Values are:
(a) Customer Focus: To Achieve sustainable competitive advantage. HDFC Bank relies not
only on strong customer service, but also on measuring customer experience. The Bank
has invested in CRM Technology which provides triggers for selling various products
depending on the customer profile. The Relationship Manager is a trusted advisor to the
customer he/she has the best interest of the customer and can advise competitor product,
if the Banks product does not fit Customer needs.

(b) Operational Excellence: With a dedicated team to monitor quality and service standards,
several of HDFC Banks process segments, including HR Operations are ISO certified.
Over 2200 quality improvement projects, aimed at improving operational excellence have
been successfully implemented. Over 550 employees have qualified for Six Sigma
Certification and over 80 have earned the yellow belt.
(c) Product Leadership: HDFC Bank has consistently developed innovative products and
services that attract its targeted customers. Focusing on high earnings growth and low
volatility, HDFC Bank continues to develop and distribute products / services that reduce
cost of funds, by leveraging its extensive branch network. The Bank actively tracks the
performance of various products and depending on the feedback received, tweaks product
features, to better address the customer needs.
(d) Sustainability: HDFC Bank recognize Social and Environmental aspects as essential
elements of a Sustainable business philosophy and is committed to enhance its
performance on these fronts.
(e) People: People are the Banks greatest strength. HDFC Bank believes that the ultimate
identity and success of Bank will reside in the exceptional quality of its people and their
extraordinary efforts. For this reason, the Bank is committed to hiring, developing,
motivating and retaining the best people in the industry.

People Value can be defined as: (Professionalism, Respect for Individual,

Can Do Attitude, and Employee Care)

10

1.4 Product Range under Business Banking Mortgages

1.41 Loan against Property- LAP
It is a loan given on the basis of the market value of the property held by the applicant and
Restricted by repayment capacity. The property acts as a collateral and is oral mortgaged
as against the loan facility. Simple tool of raising credit against existing property for all
personal and business needs of a customer. (Loan can be easily processed once a Do-ability
Check is done)

1.42 Loan to Purchase Commercial Property- LCP

It is also a loan which is provided to applicant where he/she wants to buy a commercial
property for business

1.43 Overdraft against property- DOD

An Overdraft facility offered against self-occupied Residential & Commercial Property.
Considering the eligibility of the customer, line of credit is provided to the customer with
easy re-payment option.

1.44 Loan against Rental Receivables- LARR

Lease Rental Discounting of Commercial Property where the tenant is a reputed Corporate.
Only Commercial Property as considered as collateral.

11

1.5 Size of Organization

1.51 Size of Manpower
The Bank has branches in over five hundred cities covering a wide geographical area of
the country. Employees come from varied cultural, social and ethnic backgrounds.
Employees are Banks greatest assets. As of 31 March 2014, 50,906 employees were part
of the HDFC Bank. The follow a non-discrimination policy with regards to employment
and have employees with varied degrees of disabilities in certain functions of the bank.

1.52 Turnover and Financials

(a) Profit and Loss Account: Year ended March 31, 2014
For the year ended March 31, 2014, the Bank earned total income of `49,055.17 crores.
Net revenue for the year ended March 31, 2014 were `26,402.27 crores, up by 16.49%
over 22,663.7 crores for the year ended March 31, 2013. The Banks Net Profit for the
year ended March 31, 2014 was `8478 crores, up 26.04%, over the year 2013.

Figure No - 1.4

Figure 1.4 Increase in Net Profit over the years

12

(b) Balance Sheet: As of March 31, 2014

The Banks total balance sheet size increased by 22.8% to Rs 491,600 crores as of March
31, 2014 from Rs 400,332 crores as of March 31, 2013. Total net advances as of March
31, 2014 were Rs 303,000 crores, an increase of 26.4% over March 31, 2013. Total
Deposits were Rs 367,337.5 crores, an increase of 24% over March 31, 2013.

Figure No - 1.5

Figure No - 1.6

Figure - 1.5 & 1.6 Increase in Balance Sheet and Advances over the years

Figure No - 1.7

Figure No - 1.8

Figure - 1.7 & 1.8 Increase in Deposits and Saving Deposits over the years

13

1.6 Organisation Structure of the Company

Mr. C.M. Vasudev has been appointed as the Chairman of the Bank with effect from 6th
July 2010 subject to the approval of the shareholders. Mr. Vasudev has been a Director of
the Bank since October 2006. A retired IAS officer, Mr. Vasudev has had an illustrious
career in the civil services and has held several key positions in India and overseas,
including Finance Secretary, Government of India, Executive Director, World Bank and
Government nominee on the Boards of many companies in the financial sector.
The Banks Managing Director, Mr. Aditya Puri, has been a professional banker for
over 25 years and before joining HDFC Bank in 1994 was heading Citibank's operations
in Malaysia. The Bank's Board of Directors comprises 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.

14

Board Of Directors
Mr. C. M. Vasudev (Ch.)
Mr. A. N. Roy
Mr. Bobby Parikh
Mr. Keki Mistry
Dr. Pandit Palande
Mr. Partho Datta
Mrs. Renu Karnad
Mr. Vijay Merchant
Table No 1.2: HDFC Banks Board of Directors

Name

Designation

Mr. Aditya Puri

Managing Director

Mr. Paresh Sukthankar

Mr. Kaizad Bharucha

Deputy Managing Director

Executive Director

Business Heads
Abhay Aima

Equities & Private Banking and NRI Banking

Anil Jaggia

IT, Admin, Legal, Infrastructure, SLI

Ashish Parthasarthy

Treasury

Bhavesh Zaveri

Operations

Jimmy Tata

Credit and Market Risk

Navin Puri

Branch Banking

Rahul Bhagat
Sashi Jagdishan

Retail Liabilities, Marketing & Direct Banking Channels

Finance

V. Chakrapani

Audit

Deepak Maheshwari

Wholesale Credit & Market Risk

Table No 1.3: HDFC Banks Management Team

15

1.7 Market Position of HDFC Bank

HDFC Bank is one of the Top Four banks in India along with State Bank Of India, Axis
Bank and ICICI Bank. However as per the The Business Today-KPMG Best Bank 2013
study HDFC Bank has emerged as the best large bank because of good asset quality,
high loan growth, a healthy capital adequacy ratio and an improvement in returns on capital
employed.

Figure 1.9: HDFC ranks first amongst Top Performing Banks in Country

16

1.8 Leadership Initiatives

a. During the Internship session there were many occasions when client meetings
happened and initiatives were taken to be the active participant of the conversation and
also there was regular interaction with the employees of the Organization.
b. Telephonic conversation with clients to get their feedback about the services.
c. Client visits with the Banks Representative to get a fair idea about quoting for a
product.

Names of Employees

S.no

Particulars

Details

Amit Munjal

Sales Manager (Internship Mentor)

Nikhil Rahi

Area Sales Manager

Nirmal Kalra

Credit Manager

Mahinder Seth

Branch Manager

Table No 1.4: Interaction with Employees

1.9 Sources of Data Collection

1.91 Primary Data Source
Primary Data was gathered by asking and collecting information from the Internship
Mentor Mr. Amit Munjal and also by communicating with other employees.

17

Personal Observation also played an important role to get to know about organizations
internal environment and client dealing.

1.92 Secondary Data Source

a. Data collected from hdfcportal a knowledge center available within the
organizations intranet.
b. Help of Online material from www.hdfcbank.com
http://businesstoday.intoday.in/ (KPMG Report)
c. Annual Report of HDFC BANK year 2013-2014 & 2012-2013.

18

CHAPTER 2
SWOT ANALYSIS

19

2. SWOT ANALYSIS

S.W.O.T. is an acronym stands for Strengths, Weaknesses, Opportunities, and Threats.

SWOT analysis is an organized list of a businesss greatest strengths, weaknesses,
opportunities, and threats. A SWOT analysis can be carried out for a product, place,
industry or person. It involves specifying the objective of the business venture or project
and identifying the internal and external factors that are favorable and unfavorable to
achieve that objective.

The technique is credited to Albert Humphrey, who led a convention at the Stanford
Research Institute (now SRI International) in the 1960s and 1970s using data from
Fortune 500 companies. The degree to which the internal environment of the firm
matches with the external environment is expressed by the concept of strategic fit.
Setting the objective should be done after the SWOT analysis has been performed. This
would allow achievable goals or objectives to be set for the organization.
Strengths: are the characteristics of the business that give it an advantage over others.
Weaknesses: are the characteristics that place the business or project at a disadvantage
relative to others.
Opportunities: elements that the project could exploit to its advantage
Threats: elements in the environment that could cause trouble for the business or project

20

Existing businesses can use a SWOT analysis, at any time, to assess a changing
environment and respond proactively. New businesses can use a SWOT analysis as a part
of their planning process.

2.11 SWOT MATRIX for HDFC Bank

Helpful in achieving
the Objective.

Harmful to achieving
the Objective.

Strengths

Weakness
a. Less Credit Facility in Remote

a. Top Performer amongst the

Areas.

Competitor

b. Lacks in marketing strategies as

b. Vast Distribution Network

compared to competitors.

c. Large Employee Strength

c. Low per employee productivity.

d. Cost Conscious.

d. No Global Existence.

e. Strong Management.

Opportunities

Threats
a.

Upcoming Private Banks.

b.

Better Performing Competitors.

c.

Introduction of Foreign Bank

c. New Products Offering

d.

Decreasing Profits Margins.

d. Extensive Marketing Policies

e.

Close product substitutes.

a.

Opportunity in Global Markets

b. Could seek better customer deals.

Table No 2.1: SWOT Analysis for HDFC Bank

21

2.12 Strengths
(a) Top Performer amongst the Competitor:
HDFC Bank has emerged as the best large bank because of good asset quality, high loan
growth, a healthy capital adequacy ratio and an improvement in returns on capital
employed
(b) Vast Distribution Network:
Banks distribution network was at 3,403 branches in 2,171 locations.
(c) Large Employee Strength:
Bank has huge employee base of 69,065 people as of 31st March 2013.
(d) Cost Conscious:
Bank has its unique cost management practices which helps in controlling the operating
cost within defined budgetary parameters.
(e) Strong Management:
Senior banking professionals with substantial experience in India and abroad, head various
businesses and functions

22

2.13 Weakness
(a) Less Credit Facility in Remote Areas
Bank is conservative in providing credit facility in rural areas as compared to the urban
area.
(b) Lacks in marketing strategies as compared to competitors:
Bank does not follow extensive marketing techniques as competitor banks do.
(c) Low per employee productivity:
Even after having a huge employee base, per employee productivity is not adequate
(d) No Global Existence:
HDFC Bank operates with in the country it only have 2 Branches outside the nation.

2.14 Opportunities
(a) Opportunity in Global Markets:
HDFC Bank can achieve new horizons in global markets looking at the performance within
the country.
(b) Could seek better customer deals:
Bank could come up with fairer customer deals to increase their existing and prospect
customers.

23

(c) New Products Offering:

Newer products with more benefits to customer will help the bank to survive the
competition in terms of close substitute products.
(d) Extensive Marketing Policies:
Extensive marketing policies can be adopted to reach out the masses.

2.15 Threats
(a) Upcoming Private Banks:
Entry of new private banks into the market may act as a threat to the Bank.
(b) Better Performing Competitors:
Competitors like ICICI Bank and Axis Bank is not far behind. Their performance is also
improving.
(c) Introduction of Foreign Bank:
Entry of big foreign Banking players in Indian market will be a threat to the bank
(d) Decreasing Profits Margins:
Bank is performing well however its profits margin are increasing but at a decreasing rate
and that can be seen in the financials of the Bank.

24

(e) Close product substitutes:

Customer while opting for Banking products or services easily substitute their choice
having very small variation in interest rates

2.2 Best Practices in Different Functional Areas

2.21 Human Resource

Human Resources Development has been a key and constant focus area for bank. The
human resources agenda, that includes within its gamut the attraction and retention of
talent, skills development, reward and recognition, performance management and
employee engagement are realized through a number of key initiatives, systems and
processes.
a) Employee Development: Performance Management is one of the most critical
dimensions pertaining to the management of human resources and the Organization has a
comprehensive Performance Management System (PMS) to assess performance. The PMS
facilitates the differentiation between the various categories of performance. Higher
rewards for higher levels of performance have been a fundamental philosophy of bank.
Employee development and growth is realized through an array of functional and
behavioral programs that bank conducts throughout the year as well as on the job training.

25

b) Rewards and Recognition: Rewards and Recognition play a key role to attract, retain
and engage employees. Bank is committed to ensure that employees are competitively
positioned vis--vis market with respect to both fixed as well as variable pay.

2.22 Information Technology

HDFC Bank operates in a highly automated environment in terms of information
technology and communication systems.
All the banks branches have online connectivity, which enables the bank to offer speedy
funds transfer facilities to its customers. Multi-branch access is also provided to retail
customers through the branch network and Automated Teller Machines (ATMs). The Bank
has made substantial efforts and investments in acquiring the best technology available
internationally, to build the infrastructure for a world class bank. In terms of core banking
software, the Corporate Banking business is supported by Flexcube, while the Retail
Banking business by Finware, both from i-flex Solutions Ltd. The systems are open,
scalable and web-enabled.
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-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.

26

2.23 SLI Initiative-Sustainable Livelihood Initiative:

Bank is committed to reaching out to the unbanked and under banked people at the bottom
of the pyramid, particularly in rural India and bringing them into the banking fold.
Banks Sustainable Livelihood Initiative has helped empower thousands of people,
particularly women, in rural parts of India.
Through this initiative, the Bank reaches out to the un-banked and under-banked segment
of the population and in doing so, helps as many people as possible at the bottom of the
pyramid by providing them with livelihood training and finance.
It involves a holistic approach- from offering training and enhancing occupation skills to
providing credit counseling, financial literacy and market linkages which financially
empowers people and brings them into the banking fold. About 9 lac families were covered
this year and about 27 lac families have so far benefitted from this initiative.

2.24 Corporate Governance

The Bank believes in adopting and adhering to the best recognized corporate governance
practices and continuously benchmarking itself against each such practice. The Bank
understands and respects its fiduciary role and responsibility towards its shareholders and
strives hard to meet their expectations. The Bank believes that best board practices,
transparent disclosures and shareholder empowerment are necessary for creating
shareholder value.

27

The Bank has infused the philosophy of corporate governance into all its activities. The
philosophy on corporate governance is an important tool for shareholder protection and
maximization of their long term values. The cardinal principles such as independence,
accountability, responsibility, transparency, fair and timely disclosures, credibility,
sustainability etc. serve as the means for implementing the philosophy of corporate
governance in letter and spirit.

2.3 Deviations
a. Even after having strong HR Policies job security is a concern for employees.
b. Customer Satisfaction is always treated as the main focus of any Organization in books
however in real life scenario completion of targets on time is a bigger priority

28

CHAPTER 3
DATA COLLECTION & PRESENTATION

29

3.1 Marketing
3.11 Product Lines and Width

Retail Banking
Loan Products:

Deposit Products:

Auto Loans

Savings Accounts

Personal Loans

Current Accounts

Home Loans / Mortgages

Fixed / Recurring Deposits

Commercial Vehicles Finance

Corporate Salary Accounts

Retail Business Banking

Credit Cards
Loans against Gold

Other Products / Services:

2-Wheeler/Consumer Durable Loans

Construction Equipment Finance

Depository Accounts/ Broking

Loans against Securities

Mutual Fund Sales

Agri and Tractor loans

Private Banking

Education Loans

Insurance Sales (Life, General)

Self Help Group Loans

NRI Services

Joint Liability Group Loans

Bill Payment Services

Kisan Gold Card

POS Terminals
Debit Cards
Foreign Exchange Service

Table 3.1 Showing Different Product Line of HDFC BANK

30

Wholesale Banking
Commercial Banking:

Key Segments:

Working Capital

Large Corporate

Term Loans

Emerging Corporates

Bill / Invoice discounting

Financial Institutions

Forex & Derivatives

Government / PSUs

Wholesale Deposits

Business Banking / SME

Letters of Credit

Supply Chain (Suppliers and Dealers)

Guarantees

Agriculture
Commodities

Transactional Banking:

Investment Banking:

Cash Management

Debt Capital Markets

Custodial Services

Equity Capital Markets

Clearing Bank Services

Project Finance

Correspondent Banking

M&A and Advisory

Tax Collections
Banker to Public Issues

Table 3.1 Showing Different Product Line of HDFC BANK (cont.)

31

Treasury
Products / Segments:

Other Functions:

Foreign Exchange

Asset Liability Management

Debt Securities

Statutory Reserve Management

Derivatives
Equities
Table 3.1 Showing Different Product Line of HDFC BANK (cont.)

3.12 Channel Management

The Bank has a distribution network of 3,403 branches in 2,171 locations. All branches
are linked on an online real-time basis. Handling Customer base of over 28 million, new
customer acquisition of 3 million in FY 2014.

(a) Classification of Branches on the Basis of Locations

Figure 3.1 Showing Distribution of Branches over the Years

(cont.)

32

3.13 Customer Relationship Management

HDFC bank uses CRM technology when interacting with the customers. They are as
follows; Call center Automation, Data warehousing, Email Management, Field Service
Automation, and Marketing Automation.

(a) The bank selected CRMnext's solution in 2008 which promised to fulfill the banks
needs. Including the following
i.

Creating a unified customer view by collating and massaging data from various
sources including the data warehouse.

ii.

Controlling customer information based on the role of users.

iii.

Enabling aces to single view across various channels like branch, phone banking,
etc.

iv.

Ensuring information availability at al customer touch points to boost the quality

of interactions.

(b) Cross Selling Capability The platform operates across all channels, providing global
visibility and status of offers. Various systems integrated to provide event based
triggering such as large deposits, channel usage, etc. Marketing team continuously
generates cross-sell offers and next best products to be sold and provides one stop
solution for all customer needs.

33

3.14 Major Competitors (in Private Sector)

BASIS
Marketing

ICICI BANK

YES BANK

AXIS BANK

Aggressive Marketing

Knowledge banking

Rebranding from

approach

Outlook

CRM as
Focus Area

Online
Popularity

previous UTI

Marketing and

To have more

To have broader

competitive sales

interactive

approach

approach.

It is now ranked as

Establishing market

Following

2nd

through Social

footsteps of others

markets

networking sites

Market

Bank young stars,

Retail segment

Segment

bank @campus, and

partner in

women account

progress.

Table 3.2 Major Competitors of Bank

34

As a preferred

3.14 Environmental Responsibility

Your Bank regards climate change mitigation and environmental improvements as
essential elements of a sustainable business. This belief embodies the Banks approach on
reduction of carbon emissions. The Bank has taken various steps to manage GHG emission,
through multichannel delivery such as ATMs, PhoneBanking, NetBanking and
MobileBanking which have cut down customers' need to commute to our branches. Bank
has ensured that many of its major locations have energy efficient lighting systems in place.
Bank has also adopted a Phase-out policy to replace inefficient lighting options and have
also started incorporating the use of unconventional energy sources to power our ATMs in
areas with fluctuating power supply. Promotion of video conference and video chatting on
IP phone has also resulted in reducing travelling and fuel consumption; Bank has also
introduced server and desktop Virtualization thereby reducing Power Consumption.
Bank performs some of the following practices to lead a better environment:
a) Reducing the Use of Paper
b) Energy Conservation
c) Exploring Renewable Energy
d) Managing Waste
e) Green Procurement

35

3.2 Human Resource Management

HDFC Bank is a young and dynamic bank, with a youthful and enthusiastic team
determined to accomplish the vision of becoming a world-class Indian bank. Believing
that the ultimate identity and success of bank will reside in the exceptional quality of
people and their extraordinary efforts. For this reason, HDFC is committed to hiring,
developing, motivating and retaining the best people in the industry
Banks Total employee strength is 69,065 as of 31st March 2013.Which is a big advantage
to the Bank.
Recruiting and selecting the right people is paramount to the success of the HDFC BANK
LTD. and its ability to retain a workforce of the highest quality. This recruitment and
selection policy sets out the procedure to ensure that the best people are recruited on merit
and that are the recruitment process is free from bias and discrimination.

3.12 Recruitment & Selection Process

(a) Candidate sourcing:
The hiring manager along with the Human Resource Department would decide the channel
/ source to use based on the nature of the recruitment.

36

The following sources of recruitment may be considered.

i.

Internal Sources

Whenever any vacancy arises, the possibility of fulfilling the requirement internally via
reassignment and relocation, re-allocation of the responsibilities or internal promotion will
be explored by the hiring function along with the HR Department. Internal job postings to
explore internal candidates.
Employee Referrals HDFC encourages employees to refer suitable candidates for open
positions.
ii.

External Sources

Recruitment agencies, External job postings, College / campus requirement, Requirement

advertisements.

(c) Interview Process

i.

All candidates are required to undergo a face to face interview with the interview
panel before selection.

ii.

Interviews may be conducted at a place at mutually convenient locations and time

in an effort to maintain confidentiality of the hiring effort.

iii.

One on one meeting shall be preferred as the interview format, however

depending on the constraints panel interviews / telephone / video conference
screening could be used.

37

iv.

For recruitment at junior levels, job fairs, universities etc, where large volume of
candidates, HDFC will use recruitment tests for purpose of short listing. The
candidate may be tested on the basic aptitude, analytical skills or other skills
required for the job of the candidates.

v.

The interview process will focus on the evaluating the candidates suitability in
terms of the job description and fit within the organization.

vi.

Each interviewer will complete the interview feedback form and submit it to HR.
HR will compile the results from a various interviews and provide these to the
line manager for the final decision.

(d) Pre-Employment Check

i.

This will include both a professional reference check as well as the background
check.

ii.

Professional reference check will be completed by the hiring manager. HDFC

will request contact information for 2 references from the candidate, and check
the

quality

of

previous

work

experience

and

key

personal

characteristics/conduct/ previous record etc.

iii.

For key positions in areas, HDFC will also perform a background check to assess
the integrity / conduct of the candidate.

38

iv.

The following information regarding the candidate will be verified:

Proof of educational qualifications, Any professional certificate that is essential
to the job

v.

Address and Passport Details.

vi.

Date

of

birth

Proof

of

previous

employment

(service

certificate)

Any negative feedback and comment in the reference check will be investigated
by HR and if found genuine shall be a cause for disqualification of the candidate
or dismissal from employment.

(e) Offer Process

i.

Once the hiring decision is finalized, HR will prepare an offer / fitment as per
the compensation structure and grade and keeping in mind the internal equity.

ii.

The offer would be communicated to the selected candidates by the hiring

manager along with HR. The candidate will sign the contract letter to formally
accept employment from the organization.

(f) Probation Policy

Probation is a trial that is mutual opportunity for the employee and HDFC to confirm
suitability for continued employment. The probation period is to establish a stronger
understanding of mutual capabilities, expectations and understanding which may include

39

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

3.12 Number of Employees

Total employee strength reached 69,065 as of 31st March 2013, out of which 12,295 were
women. In June 2013, the company reported an annual attrition rate of approx. 20%.
As of 31 March 2014, 50,906 employees were part of the HDFC Bank. Women employees
stood at 9,075 as of 31 March 2014.

Total Employees

12295
9075
56770
41831

2013

2014

Female Employee

12295

9075

Male Employee

56770

41831

Figure 3.2
40

Figure 3.2 Showing Total

Number of Banks Employees
(Gender-wise Distribution)

Total Employees
Total Employees

69,065

Figure 3.3 Showing Decrease

in Number of Employees over
the past year

50,906

2013

2014

Total Employees

Linear (Total Employees)

Figure 3.3

Total Number of Banks Employees reduced from 69,065 to 50,906 as per the Business
Responsibility Report for year 2013 and 2014. Which shows that 18,159 employees left
the organization and the annual attrition rate was reported at 26% approx.

3.13 Employee Training and Development

To enhance the learning and
development of employees,
bank conduct trainings in
Technical

as

well

as

Behavioral aspects. Focused

sessions on technical and
functional

training

were

Figure 3.4 Employees Trained with Technical Skills

conducted through the year where employees were trained in aspects of innovative
banking operations and behavioral solutions such as effective planning & decision making

41

In the reporting period (2013-2014), the average duration of training undergone by each
employee was 39 hours.

Figure 3.5 Employees participated in Functional and Behavior Training

3.13 Employee Engagement and Wellness

HDFC Bank believes that employees are its greatest assets. A motivated workforce is the
key to achieving important business goals. Bank has adequate systems and initiatives in
place to keep its employees informed, engaged and empowered.
Some of the key initiatives towards engagement and wellness are:

Josh Unlimited:
An in-house series of multi-city, multi-discipline sports events held in over 15 cities
in 2013-14
Stepathlon:
An international pedometer-based team event that encourages activity in a simple,
inclusive, fun and relevant manner to compliment hectic schedules and healthy
lifestyles.
42

Sensations:
An 'In-house Musical Band' where employees across locations & functions come
together to share their passion for music & form their bands
Other Wellness/Diversity Initiatives:
Celebrations during Diwali/ Christmas, Special workshops during Women's day
Creating forums for employees to connect

Health and Wellness:

Providing complete health check-up packages for Banks employees
HDFC Bank Voice Hunt Contest:
A platform for all the employees of the Bank who are passionate about singing, to
showcase their talent on a National Level
Figure 3.6 Employees Engagement and Wellness Initiatives by Bank

3.13 Employee Benefits

(a) Gratuity
The Bank provides for gratuity to all employees. The benefit is in the form of lump sum
payment to vested employees on resignation, retirement, death while in employment or on
termination of employment of an amount equivalent to 15 days basic salary payable for
each completed year of service. Vesting occurs upon completion of five years of service.

43

The Bank makes contributions to funds administered by trustees and managed by insurance
companies for amounts notified by the said insurance companies.

(b) Leave Encashment

The Bank does not have a policy of encashing unavailed leave for its employees, except
for certain eLKB employees under Indian Banks Association (IBA) structure. The Bank
provides for leave encashment / compensated absences based on an independent actuarial
valuation at the balance sheet date, which includes assumptions about demographics, early
retirement, salary increases, interest rates and leave utilisation.

(c) Superannuation
Employees of the Bank, above a prescribed grade, are entitled to receive retirement benefits
under the Banks Superannuation Fund. The Bank contributes a sum equivalent to 13% of
the employees eligible annual basic salary (15% for the Managing Director, Executive
Directors and for certain eligible erstwhile Centurion Bank of Punjab (eCBoP) staff) to
insurance companies, which administer the fund. The Bank has no liability for future
superannuation fund benefits other than its contribution, and recognises such contributions
as an expense in the year incurred, as such contribution is in the nature of defined
contribution.

44

(d) Provident fund

In accordance with law, all employees of the Bank are entitled to receive benefits under
the provident fund. The Bank contributes an amount, on a monthly basis, at a determined
rate (currently 12% of employees basic salary). Of this, the Bank contributes an amount
equal to 8.33% of employees basic salary up to a maximum salary level of ` 6,500/- per
month, to the Pension Scheme administered by the Regional Provident Fund Commissioner
(RPFC). The balance amount is contributed to a fund set up by the Bank and administered
by a board of trustees.

3.3 Finance
3.31 Financial Performance
The financial performance of Bank during the financial year ended March 31, 2014
remained healthy with total net revenues (net interest income plus other income)
increasing by 16.5% to ` 26,402.3 crore from ` 22,663.7 crore in the previous financial
year. Revenue growth was driven by an increase
in both, net interest income and other income. Net
interest

income

grew

by 16.9% due to

acceleration in loan growth of 26.4% coupled

with a net interest margin (NIM) of 4.4% for the
Figure 3.7 Net Interest Margin (previous years)

year ending March 31, 2014.

45

Financial Highlights (2013-2014)

Figure 3.8 Financial Highlights for FY-2013-14

46

Other income grew 15.6% over that in the previous year to ` 7,919.6 crore during the
financial year ended March 31, 2014. The largest component of other income was fees and
commissions, which increased by 11.0% to ` 5,734.9 crore with the primary drivers being
commissions on debit and credit cards, transactional charges, fees on deposit accounts,
processing fees on retail assets and
commission

on

distribution

Other Income

of

8,000.00
7,800.00

Insurance products. Foreign exchange

7,919.64

7,600.00
7,400.00

and derivatives revenues were `

7,200.00

1,401.1 crore, gain on revaluation /

7,000.00
6,800.00

sale of investments were ` 110.5 crore

and

recoveries

from

6,400.00

written-off

6,200.00

accounts were ` 622.6 crore in the

6,852.62

6,600.00

Other Income

2013

2014

6,852.62

7,919.64

Figure 3.9 Rise in Other Income

financial year ended March 31, 2014.

Operating (non-interest) expenses increased from ` 11,236.1 crore in the previous

financial year to ` 12,042.2 crore in the year under consideration. During the year, Bank
opened 341 new branches and 513 ATMs which resulted in higher infrastructure and
staffing expenses. Staff expenses also increased on account of annual wage revisions. Cost
to income ratio was at 45.6% for the year ended March 31, 2014, as against 49.6% for the
previous year.

47

Total provisions and contingencies were ` 1,588 crore for the financial year ended March
31, 2014 as compared to ` 1,677.0 crore during the previous year. Banks provisioning
policies for specific loan loss provisions remain higher than regulatory requirements. The
coverage ratio based on specific provisions alone without including general and floating
provisions was 176% as on March 31, 2014. Bank made general provisions of ` 221.3 crore
during the financial year ended March 31, 2014.
Banks Profit Before Tax was` 12,772.1 crore, an increase of 31.0% over the year ended
March 31, 2013. With the effective tax rate for the year at 33.6% as against 31.0% for the
previous year.
The Bank posted total income and net profit of ` Rs. 49,055.2 crore and ` Rs. 8,478.4 crore
respectively for the financial year ended March 31, 2014 as against ` Rs. 41,917.5 crore
and ` Rs. 6,726.3 crore respectively in the previous year.

Figure 3.10 Rise in PAT (Net Profit)

48

As at March 31, 2014, Banks total balance sheet was at ` 491,600 crore, an increase of
22.8% over ` 400,332 crore as at March 31, 2013. Total deposits increased 24.0% from `
296,247 crore as on March 31, 2013 to ` 367,337 crore as on March 31, 2014.
These included US$ 3.4 billion deposits raised under the RBI window for attracting
Foreign Currency Non-Resident (FCNR) deposits. Under this window the Bank could raise
foreign currency denominated deposits and swap them into rupees with RBI at a
concessional rate. Savings account deposits grew by 16.9% to ` 103,133 crore while current
account deposits grew by 17.5% to ` 61,488 crore as on March 31, 2014. The proportion
of current and savings deposits to total deposits was at 44.8% as on March 31, 2014.

Figure No 3.10

Figure No 3.11

Figure 3.10 & 3.11 Showing Balance Sheet Size and Deposits Made with Bank

During the financial year under review, net advances grew by 26.4% to ` 303,000 crore.
Banks retail advances grew by 20.8% to reach ` 164,763 crore. Adjusted for the one time

49

increase in FCNR deposits swapped with RBI under the special window and the related
foreign currency loans, core deposits and advances growth for the year ended March 31,
2014 was 16.9% and 21.8% respectively. The Bank had a market share of approximately
4.4% and 4.7% in total domestic system deposits and advances respectively.

3.32 Structure of Earnings and Expenses

Figure No 3.12
F

B
C

D
E

Figure No 3.13
E

B
D

D
B

E
F
Figure 3.12 & 3.13 Structure of Expenses and Earnings

50

3.33 Capital Structure

As on March 31, 2014 the authorized share capital of the Bank is Rs. 550 crore. The paidup capital as on the said date is Rs 4,798,100,870/- (2,399,050,435) equity shares of Rs.
2/- each). The HDFC Group holds 22.64 % of the Bank's equity and about 16.97 % of the
equity is held by the ADS / GDR Depositories (in respect of the bank's American
Depository

Shares

(ADS)

Global

and

Depository

Receipts

SHAREHOLDING PATTERN
HDFC Group
23%

Others
26%

(GDR) Issues). 34.11 %

of the equity is held by
Foreign

Institutional

ADS / GDR
Depositories
17%

FII's
34%

Investors (FIIs) and the

Bank

has

422,314

shareholders.

HDFC Group

ADS / GDR Depositories

FII's

Others

Figure 3.14 Shareholding Pattern

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.

51

3.34 Earnings per Share (EPS)

Basic and Diluted earnings per equity share have been calculated based on the net profit
after taxation of 8,743.49 crore (previous year: ` 6,869.64 crore) and the weighted average
number of equity shares outstanding during the year of 2,390,289,717 (previous year:
2,360,960,867)
Basic earnings per share (as reported) as on March 31, 2014 is 35.47

Figure 3.15 Earning per Share over the years

3.35 Dividends
Bank has had a dividend policy that balances the dual objectives of appropriately rewarding
shareholders through dividends and retaining capital in order to maintain a healthy capital
adequacy ratio to support future growth. It has had a consistent track record of moderate
but steady increase in dividend declarations over its history with the dividend payout ratio
ranging between 20% and 25%.

52

Consistent with this policy and in recognition of the overall performance during this
financial year, directors were pleased to recommend a dividend of ` 6.85 per equity share
of ` 2 for the year ended March 31, 2014 as against ` 5.50 per equity share of ` 2 for the
previous year ended March 31, 2013. This dividend shall be subject to tax on dividend to
be paid by the Bank.

Figure 3.15 Dividends per Share over the years

3.4 Information Technology

Bank had successfully completed the program to refresh its Retail Core Banking System
to the latest technology platform. Continuing with the program from the previous financial
year, Bank migrated the remaining 60% of the Retail Accounts to this new technology
platform during the financial year ended March 31, 2014. This new Retail Core Banking
System is deployed on a more robust architecture, enabling Bank to provide more features
to its customers and respond faster to business and market needs.

53

Bank continues to make substantial investments in its technology platforms and systems
and spread its electronically linked branch network. Banks direct banking platforms
continue to be stable and robust, supporting ever increasing transaction volumes, as
customers adopt newer self-service technologies.
Over 215,000 of your Banks Point-of
Sale terminals have been made safer
and

more

secure,

following

implementation of RBIs security and

encryption mandates. Also, Rupay
cards are now accepted on these
terminals and at Internet merchants
enlisted with Bank.

Figure 3.16 POS Terminals installed over the years

Bank continuously seek to improve environmental performance by promoting the use of

energy efficient and environment friendly technologies as detailed below:

IT Enabled Communication:
Video Conference and Video Chatting on IP phone reduces travelling cost and time.

Virtualization of Systems:
Server and desktop virtualization reducing power consumption

54

Integrated Printing:
Printer consolidation over many offices to reduce the printing hassles and power
saving.
Going Paperless:
Engaging in electronic media rather than print communication. Encouraging retail
customers to subscribe to e-statements
Figure 3.17 ITs Initiatives

3.42 Leveraging Technology

HDFC Bank understands that technology played an important role in its success over the
years. From past 20 years bank is leveraging technology as a key strategic element. Bank
consider itself as early adopters as it keeps on updating new advanced technologies for
making its operations more efficient.
Below is the presentation of how bank has grown from technology.

Multiple Delivery Channels

Greater Choice and Convenience for Retail Customers

Central / Regional Processing Units

Economies of Scale; Branch focus: Sales & Service

Electronic Straight through Processing

Lower Transaction Costs & Error Rates

Data Warehousing, CRM, Analytics

Higher Sales & Credit Efficiencies, Cross-sell

Innovative Technology Applications

Enable new Products / Channels including Apps

Figure 3.18 Leveraging Technology

55

2004

2014

10%
10%

25%
53%

55%

15%

27%
5%
ATM

Branches

ATM

Branches

Phone Banking

Internet & Mobile

Phone Banking

Internet & Mobile

Figure 3.19

Figure 3.20

Figure 3.19 and 3.20 Changes in technology trends over the decade
(The charts above cover transactions initiated by banks customers at banks channels &
which could have been transacted at the Banks branches)

3.42 NetBanking (Online Banking)

HDFC Bank offers a comprehensive range of transactions across multiple products
through its NetBanking channel. Customers need to log in to NetBanking and they can
conduct 135 + transactions from the comfort of their home or office.
Customers can check their Account Balance, book Fixed and Recurring Deposits,
Download A/c Statement up to 5 years, pay Bills, Recharge Mobile/ DTH connection, and
much more in a secure environment. NetBanking service is secured with industry standard
technology and infrastructure.

56

CHAPTER 4
FUNCTIONAL ANALYSIS

57

4. Functional Analysis of HDFC Bank Ltd.

HDFC Bank began operations in 1995 with a simple mission: to be a "World-class Indian
Bank". At early stage bank realized that product quality and service excellence would help
it to reach its objective. Today HDFC Bank is proud to say that it is well on its way towards
that objective.
In the past years, awards and recognition were conferred upon Bank by leading domestic
and international organizations. Some of them are:
a. Business Today-KPMG Bank Survey: Best Bank
b. Business Standard: Aditya Puri (Banker of the Year)
c. Forbes Asia: Fab 50 Companies (7th time) , Best Bank in India
d. GUINNESS WORLD RECORD: Largest Blood Donation Drive
e. IBA Innovation Awards: Most Innovative use of Technology
The key to Banks initial success probably lay in the fact that HDFC preferred the solid
conservatism of the tried and tested to the new. This often meant that other banks pioneered
new ideas, but HDFC Bank could jump in once a concept was proven. It took very few big
risks. HDFC Bank started off steadily and safely and thats why it managed to become one
of the largest bank of the country with a huge customer base.

58

4.1 Inferences from different Functional Areas

4.11 Marketing
HDFC Bank is one of the best private bank in India. Banks efficient marketing strategies
and core values including Operational Excellence, Customer Focus, Product Leadership,
People and Sustainability helped it to achieve this position which it is holding today.
HDFC Bank focuses on delivering excellence to its customer by providing them value
added products and services. Bank has positioned itself in a best possible manner using its
quick adaptability in market.
Following are the highlights of banks Marketing Practices and Strategies
a. Huge Distribution Network across the nation enables the bank to reach out the
customer easily. Which acts as a competitive advantage to the bank. Network
includes Branches and ATMs both.
b. Bank keeps on developing new innovative products and services that attracts the
targeted customers and provides the product leadership in market.
c. HDFC Bank exercises the Cross Selling of products which provides its customer a
one stop solution for all their financial requirements.
d. Strong relationship and engaging with stakeholders on a consistent and continuous
basis is essential for healthy business growth. Bank acknowledge and value the role

59

played by its stakeholders both internal and external, which has helped HDFC
Bank to maintain its position among the leaders in the financial sector.
e. Bank uses Customer Relationship Management Technology to retain a huge
customer base. It helps to understand customer needs and also helps in providing
different solutions accordingly.
f. Bank has an effective systems that ensure transparency and accuracy in-line with
the Corporate Communications Policy. Complete and correct information is passed
onto customers to help them make informed decisions.
g. Bank takes many initiative as a part of Social Responsibility including
environmental responsibility.

4.12 Human Resource

An organization cannot build a good team of working professionals without good Human
Resources. The key functions of the Human Resources Management (HRM) team include
recruiting people, training them, performance appraisals, motivating employees as well as
workplace communication, workplace safety, and much more.
HDFC Bank has a youthful and enthusiastic team which is considered as one of the main
success factor for bank. Some of the Human Resource highlights are:

60

a. Human resource department of HDFC Bank is committed to hiring, developing,

motivating and retaining the best people in the industry
b. Bank has large employee base which helps the bank to facilitate its large operation
network.
c. HDFC Bank maintains a gender-inclusive environment and ensure the safety of
female employees. All cases of harassment are treated with great sensitivity and are
escalated in time for resolution
d. Bank regularly conducts Technical and Behavioral training sessions to enhance the
learning and development of the employees.
e. Bank takes adequate initiative to motivate its employees by engaging them into
different wellness and development activities.

4.13 Finance
It is impossible for an organization to achieve long-term and short-term goals without
effectively managing finances. It is significant for business growth, market competition,
and to keep business operational and maintain your customer base.
Here are some Highlights of Banks Finances and Financial Performance
a. The Financial Performance of HDFC Bank during Financial year 2013-2014
remained healthy.

61

b. Bank recorded a growth of 16% approx. in its total income which led to the
increase in its profits.
c. HDFC Bank has emerged as the best large bank because of good asset quality, high
loan growth, a healthy capital adequacy ratio and an improvement in returns on
capital employed
d. Financial Performance of subsidiary companies, HDFC SECURITIES LIMITED
and HDB FINANCIAL SERVICES LIMITED remained also strong.

4.14 Information Technology

Information Technology played a very important role in the success of HDFC Bank and
its existence as a one of the top bank in the country. Information Technology has always
been one of the key strategies of HDFC Bank.
Bank has always adopted to new technology in order to gain maximum efficiency.
Following are some highlights of Information Technology at HDFC
a. Bank is leveraging technology as a key strategic element from past 20 years.
b. Bank always seek to improve its performance by promoting the use of latest
technologies.
c. All the banks branches and ATMs have online connectivity, which enables the
bank to offer speedy funds transfer facilities to its customers.

62

d. Bank has taken various technology initiatives and same has been applied amongst
the employees

4.2 Porters Five Forces Model

Porter's Five Forces of Competitive Position Analysis were developed in 1979 by Michael
E Porter of Harvard Business School as a simple framework for assessing and evaluating
the competitive strength and position of a business organization.
This theory is based on the concept that there are five forces that determine the competitive
intensity and attractiveness of a market. Porters five forces help to identify where power
lies in a business situation. This is useful both in understanding the strength of an
organizations current competitive position, and the strength of a position that an
organization may look to move into.
Porters five forces helps to understand whether new products or services are potentially
profitable. By understanding where power lies, the theory can also be used to identify
areas of strength, to improve weaknesses and to avoid mistakes.
Five Forces that act together to determine the nature of competition within an industry are
follows:
a. Threat of new Entrants
b. Bargaining power of Supplier
c. Bargaining power of Buyers

63

d. Threat of substitute products or Services

e. Rivalry among existing Competitors.

Figure 4.1 Porters Five Forces

a. Threat of new entry: Profitable markets attract new entrants, which erodes
profitability and intensify the rivalry. Unless incumbents have strong and durable
barriers to entry, for example, patents, economies of scale, capital requirements or
government policies, then profitability will decline to a competitive rate. If barriers to
entry are low then the threat of new entrants will be high, and vice versa.

64

b. Supplier power: An assessment of how easy it is for suppliers to drive up prices. This
is driven by the: number of suppliers of each essential input; uniqueness of their product
or service; relative size and strength of the supplier; and cost of switching from one
supplier to another.
c. Buyer power: An assessment of how easy it is for buyers to drive prices down. This is
driven by the: number of buyers in the market; importance of each individual buyer to
the organization; and cost to the buyer of switching from one supplier to another. If a
business has just a few powerful buyers, they are often able to dictate terms.
d. Threat of substitution: Where close substitute products exist in a market, it increases
the likelihood of customers switching to alternatives in response to price increases. This
reduces both the power of suppliers and the attractiveness of the market.
e. Competitive rivalry: The main driver is the number and capability of competitors in
the market. Many competitors, offering undifferentiated products and services, will
reduce market attractiveness.

4.21 Porters Five Force Model for HDFC BANK Ltd.

a. Threat of New Entrants: As a part of on-going banking sector reforms, New Licenses
would be issued to a few new players shortly. And yet the fact remains that anyone
and everyone cannot start up a bank. Nevertheless, there are services, such as internet
bill payment, on which entrepreneurs can capitalize.

65

Bank is fearful of being squeezed out of the payments business, because it is good
source of fee-based revenue. Another drift that poses a threat is companies offering
other financial services e.g.; an insurance company offering mortgage and loan
services. As far as regional banks are concerned the possibility of a mega bank
entering into the market poses a real threat to HDFC Bank.
b. Supplier power: The providers of capital might not posture a gigantic hazard, but the
threat of suppliers luring away human capital does. Retention of talent becomes
difficult in a situation wherein a talented individual working in bank may be stolen
away by other bigger banks, investment firms, etc.
c. Buyer power: One single retail customer may not really pose much of a threat to the
Bank, but one major factor affecting the power of buyers is relatively high switching
costs. If a person has a mortgage, car loan, credit card, checking account and mutual
funds with one particular bank, it can be extremely tough for that person to switch to
another bank. In an attempt to lure in customers, competitor banks try to lower the
price of switching, but many people would still rather stick with their current Bank.
On the other hand, large corporate clients have banks running after them, offering
innovative plans and schemes. Financial institutions - by offering better exchange
rates, more services, and exposure to foreign capital markets - work extremely hard to
get high-margin corporate customers.

66

d. Threat of substitution: Our market, as is well known, has a parallel economy based
on black money and grey operators. Even if, for a moment, we discard such realities,
there would still be plenty of substitutes in the banking industry. Banks offer a suite
of services over and above taking deposits and lending money, but whether it is
insurance, mutual funds or fixed income securities, chances are there is a non-banking
financial services company that can offer similar services.
On the lending side of the business, banks are seeing competition rise from
unconventional companies that offer preferred financing to customers who buy big
items. If a company is offering 0% financing, why would anyone want to get a loan
from the bank for the same commodity and pay expensive interest?
e. Competitive rivalry: The banking sector is highly competitive. The financial services
industry has been around for a good amount of time and simply put across, anyone
and everyone who needs banking services, already has the access to such services.
Banks, therefore, have no choice but to make attempts to lure clients away from their
competitors.
A bank may do so by offering lower financing, preferred rates and investment services
but such an action may cause banks to experience pretty lower profit margins. In such
a scenario, concerned bank(s) have an incentive to take on high-risk projects. In the
long run, we're likely to see more consolidation in the banking industry. Big fish may,
logically, prefer to digest smaller fish rather than spending or cutting on own margins.

67

The Indian banking sector is linked to the world economy but the Indian banking
system has had no direct exposure to the sub-prime mortgage assets or to the failed
institutions. It has very limited off-balance sheet activities or securitized assets. In fact,
our banks continue to remain safe and healthy. The Indian banking sector has been
well shielded by the central bank and has managed to sail through most of the crisis
with relative ease. It is hoped that the trend would continue for a foreseeable future.

4.22 In a Nutshell
It is true that banks have been under tremendous pressure, especially during the present
fiscal. It is wrong to see such a trend in isolation as a host of factors have been contributing
to such a trend. With new RBI Governor at the helm of affairs, banking industry is
optimistic even though the pressure would continue for a while. Even though SBI remains
the biggest of all, banks like HDFC and AXIS Bank have been successful in leading with
their operational efficiencies and resultant productivity. The future that envisages growth
of the nation, cannot ignore a parallel growth of banking sector and that being something
inevitable, future looks bright for the industry despite present hiccups and glitches.

68

CHAPTER 5
SUMMARY & CONCLUSIONS

69

5.1 Findings
a. HDFC Bank is among the top banks in the private sector domain. The bank boasts of
a huge amount of operational efficiencies for over the years.
b. Having strong competitors like ICICI Bank, AXIS Bank and Kotak Mahindra Bank,
HDFC Bank has managed its customer base and market share very competently.
c. Bank has a very strong market reputation which holds the loyalty factor within its
customers.
d. Bank doesnt runs after the sales as it follows a conservative approach which
eventually reduces the risk of losses.
e. Banks enormous distribution network is well positioned in India which makes HDFC
Bank easily accessible by customers from different parts of the country.
f. Bank provides variety of financial products and services which targets different
customer segments in the market and which also provides competitive advantage to
bank.
g. Bank has got a very good asset quality, high loan growth and good coverage ratios and
thats what makes HDFC Bank the best performer among other private banks.
h. Bank recorded a consistent growth in its total income over the year which has also
increased the profit margins.
i. As explained in previous chapter, the bank has positive net interest margins (NIMs) of
almost 4.5% and it is felt and believed that it would be able to maintain that for the
foreseeable future, especially so when the worst appears to be over.

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j. The Banks stock has been giving healthy returns in terms of appreciation. Even
though it may not be the sector leader as far as dividend is concerned, it has been
consistent nevertheless.
k. HDFC Bank has large employee base which helps the bank to facilitate its operations
and also enhances the productivity of the Bank.
l. HDFC Bank acknowledge the roles of internal and external stakeholders and it also
maintains the communication with both.
m. HDFC Bank keeps on taking initiatives for employees wellness and their development
and it also works for the development of the society and protection of environment.
n. Technology is a key strategy for bank, technology has played an important role in
overall growth of bank, Bank always welcome new and advanced technologies for
improving its efficiency.

5.2 Learnings
HDFC Bank is one of the prestigious organizations of the country where carrying out a
management internship is really a big opportunity. It has been a wonderful experience
working with HDFC Bank where the researcher had given a chance to work as a part of
the Organization.
This practical exposure gave an opportunity to the researcher to put the previous
educational knowledge gained so far into use and enhance the existing knowledge by
facing the real life corporate world.

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The whole Training tenure was full of opportunities and learnings for the researcher.
a. Being a management intern researcher worked with Mortgage Team of HDFC
Bank which looks after the Sales of Mortgage Loan Products.
b. The researcher was allotted with all major responsibilities that are usually being
done by other employees.
c. Researcher learned how to interact with clients during different client meetings
which is really essential for a marketing personnel.
d. Researcher has gained knowledge about different Mortgage products so as to
offer the right product to the clients.
e. Follow-ups of sales lead by making calls to the team members was also done by
researcher during the training period.
f. Researcher interacted with different Branch Managers in regards to the sales data
and sales leads of their respective branches.
g. Interaction with other employees of the organization also helped the researcher to
know more about the work culture and organizations internal environment.
h. HDFC Banks knowledge center enabled researcher to learn about organizations
code of conduct, rules and governance.

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i. Researcher participated in monthly sales closing which takes place at the end of
every month where reports are prepared for the business generated during the
month.
j. Researcher also learned the effectiveness of cross-selling in banking industry as it
does not only helps in increasing the sales but also helps to retain customers by
providing them one-stop solution for their needs.

5.3 Suggestions
a. More training opportunities must be given to management students to peruse their
training in HDFC Bank.
b. HDFC Bank is a great platform for trainees for exposure to the corporate world.
c. Different functional departments of the organization may help an intern to
improve his/her functional skills.
d. HDFC is the right place for an intern to learn customer interaction and client
dealings which is an essential for a management learner.
e. Banks internal environment improves the practical as well as conceptual
learnings.
f. Dedicated workforce motivates the trainee and boosts up the morale.

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