asstes and liab managmnt
TRANSCRIPT
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ACKNOWLEDGEMENT
Chapter No. Title Pg. No.
1 INTRODUCTION
5-13
2 RESEARCH DESIGN OF THE STUDY
14-16
3 INDUSTRY PROFILE17-27
4 COMPANY PROFILE 28-58
5 ANALYSIS AND INTERPRETATION59-76
6 SUMMARY OF FINDINGS, SUGGESTIONSAND CONCLUSION
77-84
BIBLIOGRAPHY85
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LIST OF TABLES
Table No. Title Page No
4.1 Net Interest Income 65
4.2 Net Interest Margin 67
4.3 GAP 69
4.4 Relative Gap 71
4.5 Interest Sensitive Ratio 73
4.6 Liquidity Ratio 75
LIST OF GRAPHS
Chart
No
TITLE Page
No
4.1 Net Interest Income 66
4.2 Net Interest Margin 68
4.3 GAP 70
4.4 Relative Gap 72
4.5 Interest Sensitive Ratio 74
4.6 Liquidity Ratio 76
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CHAPTER-1
INTRODUCTION
1.1 ASSET-LIABILITY MANAGEMENT (ALM):
Asset-liability management (ALM) is a term whose meaning has evolved.
It is used in slightly different ways in different contexts. ALM was
pioneered by financial institutions, but corporations now also apply ALM
techniques.
Traditionally, banks and insurance companies used accrual accounting for
essentially all their assets and liabilities. They would take on liabilities,
such as deposits, life insurance policies or annuities. They would invest
the proceeds from these liabilities in assets such as loans, bonds or real
estate. All assets and liabilities were held at book value. Doing so
disguised possible risks arising from how the assets and liabilities were
structured. Asset Liability management is very much importance for a
bank. Banks are making profit from various services provided to their
customers. Banks profit is functions of revenue earned form the assets
and the cost incurred for the liability that has occurred for acquiring funds
for financing the assets. Proper management of bank assets and liabilitiescan increase the profitability of the bank. So the earnings of a bank
ultimately depend on liabilities. Banks have to incur costs for its liability.
For example, they have to give interest to the public and also to the
lending institutions. So banks liability is not cost-free. Efficient use of
liabilities depends on effective liability management. Effective liability
management indicates that the cost of the liability will be less and also it
will less volatile. But less cost and less volatility is inversely related. If
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we give our concentration only to less cost fund, then the funds will be
volatile. Again if we give our attention to only to less volatility, then the
cost of fund will be high because only the fixed deposit has the
characteristics of less volatility. So we have to make coordination
between least costs fund and least volatile fund.
ALM has mainly two components. One is asset management and the
other is liability management. Asset management deals with how a
manager can appropriately handle the assets of the bank and efficiently
use the profitable opportunities. On the other hand, liability management
deals with the liability side of the balance sheet. A banks earning or
spread is the difference between the revenue generated mainly from the
asset side of the business and expense generated mainly from the liability
side of the business. The foal of liability management is to gain control
over the banks funds sources.
Almost in every moment in our life we are confronted with different
types of risk. Human mind is programmed to learn to manage risk.
Managing risk is unique and fundamental in banking industry, because
unlike other industry it is exposed to multi-dimensional that has
aggravated with the advent of deregulation and globalization. No banking
industry in the world is isolated from the risks, and in this project paper
my efforts should concentrate on understanding and appreciating these
risks specially managing asset and liability so that I can learn more how
can manage them efficiently, appropriately and in a timely manner. The
major risks that a bank encounters in its business are as follows:
1) Asset Liability Management Risk
2) Credit/ Lending Risk
3) Foreign Exchange Risk
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4) Internal Controls and Compliance Risk
5) Money Laundering Risk
This Project paper is based onAsset Liability management of HDFC
Bank. To manage the above risk effectively and to ensure sustainable
performance and good governance of the banking company, the following
requirements must be fulfilled:
1) An effective regulatory frame work
2) a sound operations system to support the regulatory framework.
3) A Socio ethical standard to ensure that the people engaged in the
organization is committed towards their stakeholders in a meaningful
way. Given the fact that an appropriate asset liability management system
was required to manage risk better
1.2 ASSET LIABILITY MANAGEMENT POLICY:
Asset Liability Management (ALM) is an integral part of Bank
Management; and so, it is essential to have a structured and systematic
process for manage the Balance Sheet. Banks must have a committee
comprising of the senior management of the bank to make important
decisions related to the Balance Sheet of the Bank. The committee,
typically called the Asset Liability Committee (ALCO), should meet at
least once every month to analysis, review and formulate strategy to
manage the balance sheet. In every ALCO meeting, the key points of the
discussion should be minted and the action points should be highlighted
to better position the banks balance sheet. Asset Liability management is
one of the pillars of banking- in fact the concept of AssetLiability
management is at the core of financial business. The importance of
appropriate and effective Asset Liability management has always been
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outlined by regulators, market operatives and individuals and yet we hear
of instances of failures in Asset Liability management mechanism-the
most notable amongst them the Barings Bank and Long Term Capital
Management.
The Asset Liability Risk Management system essentially focuses on risks
that arise out of liquidity and interest rate mismatches and management of
Capital Adequacy. This aspect of risk management has become
increasingly important due to volatility that arises from a deregulated
market- driven environment. Here to the policy guideline, outlines all the
areas that are required to be covered through preciously laid down
statement on Capital Adequacy, borrowing limits commitment limits,
loan deposit ratios and medium term funding ratio. The organization
structure and job responsibilities are also outlined and the globally
accepted ALCO or The Asset Liability Committee process is detailed.
The ALCO process ensures that the management is constantly apprised of
the risks arising out of liquidity and interest rate mismatch and step can
be taken through this continuous monitoring of risk to manage it
effectively.
1.3 ALM INFORMATION SYSTEMS:
Information is the key to the ALM process. Considering the
large network of branches and the lack of an adequate system to collect
information required for ALM which analyses information on the basis of
residual maturity and behavioural pattern it will take time for banks in the
present state to get the requisite information. The problem of ALMneeds
to be addressed by following an ABC approach i.e. analysing the
behaviour of asset and liability products in the top branches accounting
for significant business and then making rational assumptions about the
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way in which assets and liabilities would behave in other branches. In
respect of foreign exchange, investment portfolio and money market
operations, in view of the centralized nature of the functions, it would be
much easier to collect reliable information. The data and assumptions can
then be refined over time as the bank management gain experience of
conducting business within an ALM framework. The spread of
computerization will also help banks in accessing data.
1.4 ALM PROCESS:
The scope of ALM function can be described as follows:
Liquidity risk management
Management of market risks (Including Interest Rate Risk)
Funding and capital planning
Profit planning and growth projection
Trading risk management
The guidelines given in this note mainly address Liquidity and Interest
Rate risks. The Asset Liability Committee (ALCO) is responsible for
balance sheet (asset liability) risk management. Managing the asset
liability is the most important responsibility of a bank as it runs the risks
for not only the bank, but also the thousands of depositors who put money
into it.The responsibility of Asset liability Management is on
theTreasury Department of the bank. Specifically, the Asset liability
Management (ALM) desk of the Treasury Department manages the
balance sheet. The results of balance sheet analysis along with
recommendation is placed in the ALCO meeting by the Treasurer where
important decisions are made to minimize risk and maximize returns.
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1.5 ASSET LIABILITY STRUCTURE OF A BANK:
Asset Liability Management Flowchart:
To understand how a bank operates, first we examine the bank balance
sheet, which list sits assets and liabilities. As the name implies, this list
balance, that is, it has the characteristics that
Total Assets = Total Liabilities + Capital
Furthermore, a banks balance sheet lists sources of banks funds
(liabilities) and uses to which they are pit (assets). Banks obtain funds by
borrowing and by issuing other liabilities such as deposits. They then use
these funds to acquire assets such as securities and loans. The revenue
that banks receive from their holdings of securities and loans covers the
expenses of issuing liabilities and ideally yields a profit.
OPERATION
FINANCE
TREASURY ALCOMEETING
IMPLEMENTATION &
FEED BACK
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1.6 ADMINISTRATION OF ALM:
There is a separate department to manage asset and liability. The treasury
department maintains asset and liability of a bank. To maintain asset and
liability treasury department has a policy to follow. This policy guideline
is given below:
1.7 POLICY GUIDELINES:
Responsibi li ty of the Board of Di rectors:
The overall responsibility of establishing broad business strategy,
significant policies and understanding significant risks of the bank rests
with the Board of Directors.
Through the establishment of Audit Committee the Board of Directors
can monitor the effectiveness of internal control system. Bangladesh
Bank has already instructed the banks to establish Audit Committee.
The internal as well as external audit reports will be sent to the board
without any intervention of the bank management and ensure that the
management takes timely and necessary actions as per the
recommendations
Have periodic review meetings with the senior management to discuss
the effectiveness of the internal control system of the bank and ensure
that the management has taken appropriate actions as per the
recommendations of the auditors and internal control.
ALCO & Asset Liability Management (ALM):
The banks asset liability management is monitored through ALCO. The
information
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Flow in the ALCO can be diagrammed as below:
Corporate banking Feedback & recommendation
Feedback & recommendation
Depo-advFinancefeedback & recommendation
Trend outlook key balance sheet features
Feedback&
Treasuryrecommendation BS Status&
Recommend
ALCO
MeetingCEO
Actions
Depo-adv
Trend outlook Other Balance sheet features
Feedback & Recommendation
Other Depts.
Feedback & Recommendation
Consumer Banking
S
T
RA
T
E
G
Y
&
AC
T
I
O
N
P
O
I
N
T
S
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An Insight into the Asset Liability Management of HDFC Bank
The Committee:
As the Treasury Department is primarily responsible for Asset Liability
Management, ideally the Treasurer (or the CEO) is the Chairman of the
ALCO Committee. The committee consists of the following key
personnel of a bank:
- Chief Executive Officer / Managing Director
- Head of Treasury / Central Accounts Department
- Head of Finance
- Head of Corporate Banking
- Head of Consumer Banking
- Head of Credit
- Chief Operating Officer / Head of Operations
The committee calls for a meeting once every month to set and review
strategies on ALM.
Key Agendas:
ALCO attends the following issues while managing Balance Sheet Risks:
Review of actions taken in previous ALCO. Economic and Market Status and Outlook. Liquidity Risk related to the Balance Sheet. Review of the price / interest rate structure. Actions to be taken.
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Policy Recognition and Assessment:
An effective internal control system continually recognizes and assesses
all of the material risks that could adversely affect the achievement of the
banks goals.
Effective risk assessment must identify and consider both internal and
external factors. Internal factors include complexity of the organization
structure, the nature of the Banks activities, the quality of personnel,
organization changes and also employee turnover. External factors
include fluctuating economic conditions, changes in the industry, socio-
political realities and technological advances.
Risk assessment by Internal Control System differs from the business
risk management process, which typically focuses more on the review of
business strategies developed to maximize the risk/reward trade-off
within the different areas of the bank. The risk assessment by Internal
Control focuses more on compliance with regulatory requirements, social,
ethical and environmental risks those affect the banking industry.
Asset liability management
In banking, asset and liability management(often abbreviated ALM) is
the practice of managing risks that arise due to mismatches between the
assets and liabilities (debts and assets) of the bank. This can also be seen
in insurance. Banks face several risks such as the liquidity risk, interest
rate risk, credit risk and operational risk. Asset liability management
(ALM) is a strategic management tool to manage interest rate risk and
http://en.wikipedia.org/wiki/Riskhttp://en.wikipedia.org/wiki/Liquidity_riskhttp://en.wikipedia.org/wiki/Interest_rate_riskhttp://en.wikipedia.org/wiki/Interest_rate_riskhttp://en.wikipedia.org/wiki/Credit_riskhttp://en.wikipedia.org/wiki/Operational_riskhttp://en.wikipedia.org/wiki/Strategic_managementhttp://en.wikipedia.org/wiki/Strategic_managementhttp://en.wikipedia.org/wiki/Operational_riskhttp://en.wikipedia.org/wiki/Credit_riskhttp://en.wikipedia.org/wiki/Interest_rate_riskhttp://en.wikipedia.org/wiki/Interest_rate_riskhttp://en.wikipedia.org/wiki/Liquidity_riskhttp://en.wikipedia.org/wiki/Risk -
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liquidity risk faced by banks, other financial services companies and
corporations.
Banks manage the risks ofasset liability mismatchby matching theassets
and liabilities according to the maturity pattern or the matching of the
duration, by hedging and by securitization. Much of the techniques for
hedging stem from the delta hedging concepts introduced in the Black
Scholes model and in the work of Robert C. Merton and Robert A.
Jarrow. The early origins of asset and liability management date to the
high interest rate periods of 1975-6 and the late 1970s and early 1980s in
the United States. Van Deventer, Imai and Mesler (2004), chapter 2,
outline this history in detail.
Modern risk management now takes place from an integrated approach
to enterprise risk management that reflects the fact thatinterest rate risk,
credit risk,market risk,andliquidity risk are all interrelated. TheJarrow-
Turnbull model is an example of a risk management methodology that
integrates default and random interest rates. The earliest work in this
regard was done by Robert C. Merton. Increasing integrated risk
management is done on a full mark to market basis rather than the
accounting basis that was at the heart of the first interest rate senility gap
and duration calculations.
http://en.wikipedia.org/wiki/Bankhttp://en.wikipedia.org/wiki/Corporationhttp://en.wikipedia.org/wiki/Asset_liability_mismatchhttp://en.wikipedia.org/wiki/Assethttp://en.wikipedia.org/wiki/Liabilitieshttp://en.wikipedia.org/wiki/Securitizationhttp://en.wikipedia.org/wiki/Hedge_%28finance%29http://en.wikipedia.org/wiki/Delta_hedginghttp://en.wikipedia.org/wiki/Black%E2%80%93Scholeshttp://en.wikipedia.org/wiki/Black%E2%80%93Scholeshttp://en.wikipedia.org/wiki/Black%E2%80%93Scholeshttp://en.wikipedia.org/wiki/Robert_C._Mertonhttp://en.wikipedia.org/wiki/Robert_A._Jarrowhttp://en.wikipedia.org/wiki/Robert_A._Jarrowhttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Risk_managementhttp://en.wikipedia.org/wiki/Interest_rate_riskhttp://en.wikipedia.org/wiki/Credit_riskhttp://en.wikipedia.org/wiki/Market_riskhttp://en.wikipedia.org/wiki/Liquidity_riskhttp://en.wikipedia.org/wiki/Jarrow-Turnbull_modelhttp://en.wikipedia.org/wiki/Jarrow-Turnbull_modelhttp://en.wikipedia.org/wiki/Robert_C._Mertonhttp://en.wikipedia.org/wiki/Risk_managementhttp://en.wikipedia.org/wiki/Risk_managementhttp://en.wikipedia.org/wiki/Risk_managementhttp://en.wikipedia.org/wiki/Risk_managementhttp://en.wikipedia.org/wiki/Robert_C._Mertonhttp://en.wikipedia.org/wiki/Jarrow-Turnbull_modelhttp://en.wikipedia.org/wiki/Jarrow-Turnbull_modelhttp://en.wikipedia.org/wiki/Liquidity_riskhttp://en.wikipedia.org/wiki/Market_riskhttp://en.wikipedia.org/wiki/Credit_riskhttp://en.wikipedia.org/wiki/Interest_rate_riskhttp://en.wikipedia.org/wiki/Risk_managementhttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Robert_A._Jarrowhttp://en.wikipedia.org/wiki/Robert_A._Jarrowhttp://en.wikipedia.org/wiki/Robert_C._Mertonhttp://en.wikipedia.org/wiki/Black%E2%80%93Scholeshttp://en.wikipedia.org/wiki/Black%E2%80%93Scholeshttp://en.wikipedia.org/wiki/Delta_hedginghttp://en.wikipedia.org/wiki/Hedge_%28finance%29http://en.wikipedia.org/wiki/Securitizationhttp://en.wikipedia.org/wiki/Liabilitieshttp://en.wikipedia.org/wiki/Assethttp://en.wikipedia.org/wiki/Asset_liability_mismatchhttp://en.wikipedia.org/wiki/Corporationhttp://en.wikipedia.org/wiki/Bank -
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CHAPTER- 2
RESEARCH DESIGN OF THE STUDY
2.1 RATIONALE OF THE STUDY:
I am preparing this report to know the insight of the asset liability
Management of a bank.
Sample Bank:
HDFC Bank
2.2 SCOPE OF THE STUDY:
As my supervisor is very helpful and cooperative, I got some privilege to
prepare this report. As one of my friends is an employee of HDFC Bank,
I have special opportunity to collect important and sensitive data, which
make this report different from others.
2.3 OBJECTIVE OF THE STUDY:
The main objectives of preparing this Report:
To identify the management of asset and liability of HDFC Bank Ltd.
To analyse and find out degree of risks involved in each area.
To suggest how to manage this areas risks for minimizing the risk.
2.4 NEED FOR THE STUDY:
An effective Asset Liability Management Technique aims to manage the
volume, mix, maturity, rate sensitivity, quality and liquidity of assets and
liabilities as a whole so as to attain a predetermined acceptable
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risk/reward ration. It is aimed to stabilize short-term profits, long-term
earnings and long-term substance of the bank.
2.5 METHODOLOGY:
1. Sources of Data Collection:
To undertake the study in the light of research objectives, information
both from the primary and secondary sources are necessary. Primary data
collected from the bank managers and officials. And secondary data
collected through standard textbooks, reference books, domestic and
foreign journals and annual reports of bank.
2. Data Analysis:
The collected information has then been tabulated, analysed and the
findings thereof have laid the basis of research report. Data processing
and analysis has been done both manually and by using computer.
Tabular method, ratio analysis, and suitable statistical tools and
techniques have been used to operationally the research where required.
2.6 LIMITATIONS OF THE STUDY:
There were some problems while this research is conducted. A
wholehearted effort was applied to overcome the limitations and to bring
a reliable and fruitful result. In spite of having the wholehearted effort,
there exist some limitations, which acted as a barrier to conduct the
research. The limitations were
1. The major problem faced while conducting the research was
unavailability of relevant data. No banks provided the costs of their
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particular liability. Even some banks did not agree to give their annual
reports.
2. No banks provided the cost components of their liabilities. Thats why
the cost of various liabilities is assumed on the basis of historical trend.
3. While almost care has been given to cover every part of Asset Liability
Management, a few complex issues related to Market Risk have not been
covered in details.
2.7 TYPE OF RESEARCH
The study type is analytical, quantitative, and historical. Analytical
because facts and existing information is used for analysis. Quantitative
as relationship is examined by expressing variables in measurable terms
and also historical information is used for analysis and interpretation.
CHAPTER SCHME
CHAPTER-1:- INTRODUCTION
1.1 ASSET-LIABILITY MANAGEMENT (ALM):
1.2 ASSET LIABILITY MANAGEMENT POLICY
1.3 ALM INFORMATION SYSTEMS:
1.4 ALM PROCESS:
1.5 ASSET LIABILITY STRUCTURE OF A BANK:
1.6 ADMINISTRATION OF ALM:
1.7 POLICY GUIDELINES:
CHAPTER- 2:- RESEARCH DESIGN OF THE STUDY
2.1 RATIONALE OF THE STUDY:
2.2 SCOPE OF THE STUDY:
2.3 OBJECTIVE OF THE STUDY:
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2.4 NEED FOR THE STUDY:
2.5 METHODOLOGY:
2.6 LIMITATIONS OF THE STUDY:
2.7 TYPE OF RESEARCH
CHAPTER-3:- INDUSTRY PROFILE
3.1 About
3.2 HISTROY
CHAPTER-4:- COMPANY PROFILE
4.1 About
4.2 History
4.3 Some of Mr. H.T. Parikhsmajor achievements are:
3.4 Origin of the Organization
4.5 MANAGEMENT:
4.6 RATINGS/ AWARDS:
4.7 MILESTONES IN THE HISTORY
PRODUCT PROFILE
CHAPTER5:- ANALYSIS AND INTERPRETATION
CHAPTER6 FINDINGS, SUMMARY AND CONCLUSION
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CHAPTER-3
INDUSTRY PROFILE
3.1 About
Banking in India in the modern sense originated in the last decades of
the 18th century. The first banks were and Bank of Hindustan (1770-
1829) and The General Bank of India, established 1786 and since
defunct. The largest bank and the oldest still l in existence 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 theBank of Bombay and
the Bank of Madras,all three of which were established under charters
from theBritish East India Company.The three banks merged in 1921 to
form the Imperial Bank of India, which, upon India's independence,
became the State Bank of India in 1955. For many years the presidency
banks acted as quasi-central banks, as did their successors, until the
Reserve Bank of India was established in 1935.
In 1969 the Indian governmentnationalised all the major banks that it did
not already own and these have remained under government ownership.
They are run under a structure known as 'profit-making public sector
undertaking' (PSU) and are allowed to compete and operate as
commercial banks.The Indian banking sector is made up of four types of
banks, as well as the PSUs and the state banks; they have been joined
since 1990s by new private commercial banks and a number of foreign
banks.
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Banking in India was generally fairly mature in terms of supply, product
range and reach-even though reach in rural India and to the poor still
remains a challenge. The government has developed initiatives to address
this through the State bank of India expanding its branch network and
through through the National Bank for Agriculture and Rural
Development with things likemicrofinance.
3.2 HISTROY:-
In ancient India there is evidence of loans from the Vedic period
(beginning 1750 BC). Later during the Maurya dynasty (321 to 185 BC),
an instrument called adesha was in use, which was an order on a banker
desiring him to pay the money of the note to a third person, which
corresponds to the definition of a bill of exchange as we understand it
today. During the Buddhist period, there was considerable use of these
instruments. Merchants in large towns gave letters of credit to one
another.
Colonial era
During the colonial era merchants established the Union Bank ofCalcutta
in 1829, first as a private joint stock association, then partnership. Its
proprietors were the owners of the earlier Commercial Bank and the
Calcutta Bank, who by mutual consent created Union Bank to replace
these two banks. In 1840 it established an agency at Singapore, and
closed the one at Mirzapore that it had opened in the previous year. Also
in 1840 the Bank revealed that it had been the subject of a fraud by the
bank's accountant. Union Bank was incorporated in 1845 but failed in
1848, having been insolvent for some time and having used new money
from depositors to pay its dividends.
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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
honour 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.
Foreign banks too started to appear, particularly inCalcutta,in the 1860s.
The Comptoird'Escompte de Paris opened a branch in Calcutta in 1860,
and another in Bombay in 1862; branches in Madras and Pondicherry,
then a French possession, followed.HSBC established itself inBengal in
1869. Calcutta was the most active trading port in India, mainly due to
the trade of theBritish Empire,and so became a banking centre.
The first entirely Indian joint stock bank was the Oudh Commercial
Bank, established in 1881 inFaizabad.It failed in 1958. The next was the
Punjab National Bank,established inLahore 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.
The presidency banks dominated banking in India but there were also
some exchange banks and a number of Indianjoint stockbanks. 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 under capitalised and
lacked the experience and maturity to compete with the presidency and
exchange banks. This segmentation let Lord Curzon to observe, "In
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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 andCentral Bank of India.
The fervour of Swadeshi movement lead to establishing of many private
banks inDakshina Kannada andUdupi 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".
During theFirst World War (19141918) through the end of theSecond
World War (19391945), and two years thereafter until the independence
of India were challenging for Indian banking. The years of the First
World War were turbulent, and it took its toll with banks simply
collapsing despite theIndian economy gaining indirect boost due to war-
related economic activities. At least 94 banks in India failed between
1913 and 1918 as indicated in the following table:
http://en.wikipedia.org/wiki/Swadeshihttp://en.wikipedia.org/wiki/Bank_of_Indiahttp://en.wikipedia.org/wiki/Corporation_Bankhttp://en.wikipedia.org/wiki/Indian_Bankhttp://en.wikipedia.org/wiki/Bank_of_Barodahttp://en.wikipedia.org/wiki/Bank_of_Barodahttp://en.wikipedia.org/wiki/Canara_Bankhttp://en.wikipedia.org/wiki/Central_Bank_of_Indiahttp://en.wikipedia.org/wiki/Dakshina_Kannadahttp://en.wikipedia.org/wiki/Udupi_districthttp://en.wikipedia.org/wiki/First_World_Warhttp://en.wikipedia.org/wiki/Second_World_Warhttp://en.wikipedia.org/wiki/Second_World_Warhttp://en.wikipedia.org/wiki/Indian_independencehttp://en.wikipedia.org/wiki/Economy_of_Indiahttp://en.wikipedia.org/wiki/Economy_of_Indiahttp://en.wikipedia.org/wiki/Indian_independencehttp://en.wikipedia.org/wiki/Second_World_Warhttp://en.wikipedia.org/wiki/Second_World_Warhttp://en.wikipedia.org/wiki/First_World_Warhttp://en.wikipedia.org/wiki/Udupi_districthttp://en.wikipedia.org/wiki/Dakshina_Kannadahttp://en.wikipedia.org/wiki/Central_Bank_of_Indiahttp://en.wikipedia.org/wiki/Canara_Bankhttp://en.wikipedia.org/wiki/Bank_of_Barodahttp://en.wikipedia.org/wiki/Bank_of_Barodahttp://en.wikipedia.org/wiki/Indian_Bankhttp://en.wikipedia.org/wiki/Corporation_Bankhttp://en.wikipedia.org/wiki/Bank_of_Indiahttp://en.wikipedia.org/wiki/Swadeshi -
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Year Number of Banks
that failed
Authorised Capital
(Rs. Lakhs)
Paid Up capital
(Rs. Lakhs)
1913 12 274 35
1914 42 710 109
1915 11 56 5
1916 13 231 4
1917 9 76 25
1918 7 209 1
Post-Independence
The partition of India in 1947 adversely impacted the economies of
Punjab andWest Bengal,paralysing banking activities for months. India's
independence marked the end of a regime of the Laissez-faire for the
Indian banking. The Government of India initiated measures to play an
active role in the economic life of the nation, and the Industrial Policy
Resolution adopted by the government in 1948 envisaged a mixed
economy.This resulted into greater involvement of the state in different
segments of the economy including banking and finance. The major steps
to regulate banking included:
The Reserve Bank of India, India's central banking authority, wasestablished in April 1935, but was nationalised on 1 January 1949
under the terms of the Reserve Bank of India (Transfer to Public
Ownership) Act, 1948 (RBI, 2005b).
In 1949, the Banking Regulation Act was enacted whichempowered the Reserve Bank of India (RBI) "to regulate, control,
and inspect the banks in India"
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The Banking Regulation Act also provided that no new bank orbranch of an existing bank could be opened without a license from
the RBI, and no two banks could have common directors.
Nationalisation in the 1960s
Despite the provisions, control and regulations of Reserve Bank of India,
banks in India except the State Bank of India or SBI, continued to be
owned and operated by private persons. By the 1960s, the Indian banking
industry had become an important tool to facilitate the development of
the Indian economy. At the same time, it had emerged as a large
employer, and a debate had ensued about the nationalisation of the
banking industry. Indira Gandhi, the then Prime Minister of India,
expressed the intention of the Government of India in the annual
conference of the All India Congress Meeting in a paper entitled "Stray
thoughts on Bank Nationalisation."The meeting received the paper with
enthusiasm.
Thereafter, her move was swift and sudden. The Government of India
issued an ordinance ('Banking Companies (Acquisition and Transfer of
Undertakings) Ordinance, 1969')) and nationalised the 14 largest
commercial banks with effect from the midnight of 19 July 1969. These
banks contained 85 present of bank deposits in the country.Jayaprakash
Narayan,a national leader of India, described the step as a "masterstroke
of political sagacity."Within two weeks of the issue of the ordinance, the
Parliamentpassed the Banking Companies (Acquisition and Transfer of
Undertaking) Bill, and it received thepresidential approval on 9 August
1969.
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A second dose of nationalisation of 6 more commercial banks followed in
1980. The stated reason for the nationalisation was to give the
government more control of credit delivery. With the second dose of
nationalisation, the Government of India controlled around 91% of the
banking business of India. Later on, in the year 1993, the government
mergedNew Bank of India withPunjab National Bank. It was the only
merger between nationalised banks and resulted in the reduction of the
number of nationalised banks from 20 to 19. After this, until the 1990s,
the nationalised banks grew at a pace of around 4%, closer to the average
growth rate of the Indian economy.
Liberalisation in the 1990s
In the early 1990s, the then NarasimhaRao government embarked on a
policy ofliberalisation,licensing a small number of private banks. These
came to be known as New Generation tech-savvy banks, and included
Global Trust Bank (the first of such new generation banks to be set up),
which later amalgamated with Oriental Bank of Commerce, UTI Bank
(since renamed Axis Bank), ICICI Bank and HDFC Bank. This move,
along with the rapid growth in the economy of India, revitalised the
banking sector in India, which has seen rapid growth with strong
contribution from all the three sectors of banks, namely, government
banks, private banks and foreign banks. The next stage for the Indian
banking has been set up with the proposed relaxation in the norms for
Foreign Direct Investment, where all Foreign Investors in banks may be
given voting rights which could exceed the present cap of 10%,at present
it has gone up to 74% with some restrictions.
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The new policy shook the Banking sector in India completely. Bankers,
till this time, were used to the 464 method (Borrow at 4%; Lend at 6%;
Go home at 4) of functioning. The new wave ushered in a modern
outlook and tech-savvy methods of working for traditional banks. All this
led to the retail boom in India. People not just demanded more from their
banks but also received more.
Current period
By 2010, banking in India was generally fairly mature in terms of supply,
product range and reach-even though reach in rural India still remains a
challenge for the private sector and foreign banks. In terms of quality of
assets and capital adequacy, Indian banks are considered to have clean,
strong and transparent balance sheets relative to other banks in
comparable economies in its region. The Reserve Bank of India is an
autonomous body, with minimal pressure from the government. The
stated policy of the Bank on the Indian Rupee is to manage volatility but
without any fixed exchange rate-and this has mostly been true. With the
growth in the Indian economy expected to be strong for quite some time-
especially in its services sector-the demand for banking services,
especiallyretail banking,mortgages and investment services are expected
to be strong. One may also expect M&as, takeovers, and asset sales.
In March 2006, the Reserve Bank of India allowed Warburg Pincus to
increase its stake inKotak Mahindra Bank (a private sector bank) to 10%.
This is the first time an investor has been allowed to hold more than 5%
in a private sector bank since the RBI announced norms in 2005 that any
stake exceeding 5% in the private sector banks would need to be vetted
by them.
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In recent years critics have charged that the non-government owned
banks are too aggressive in their loan recovery efforts in connection with
housing, vehicle and personal loans. There are press reports that the
banks' loan recovery efforts have driven defaulting borrowers to suicide.
Adoption of banking technology
The IT revolution had a great impact in the Indian banking system. The
use of computers had led to introduction of online banking in India. The
use of the modern innovation and computerisation of the banking sector
of India has increased many folds after the economic liberalisation of
1991 as the country's banking sector has been exposed to the world's
market. The Indian banks were finding it difficult to compete with the
international banks in terms of the customer service without the use of the
information technology and computers.
Number of branches of scheduled banks of India as of March 2005
The RBI set up a number of committees to define and coordinate banking
technology. These have included:
In 1984 formed the Committee on Mechanisation in the BankingIndustry (1984) whose chairman was Dr C Rangarajan, Deputy
Governor, Reserve
Bank of India. The major recommendations of this committee wasintroducing
MICR technology in all the banks in the metropolis in India. Thisprovided use of standardized cheque forms and encoders.
In 1988, the RBI set up the Committee on Computerisation inBanks (1988)headed by Dr. C.R. Rangarajan which emphasized
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that settlement operation must be computerized in the clearing
houses of RBI in Bhubaneshwar, Guwahati, Jaipur, Patna and
Thiruvananthapuram. It further stated that there should be National
Clearing of inter-citycheques at Kolkata, Mumbai, Delhi, Chennai
and MICR should be made Operational. It also focused on
computerisation of branches and increasing connectivity among
branches through computers. It also suggested modalities for
implementing on-line banking. The committee submitted its reports
in 1989 and computerisation began from 1993 with the settlement
between IBA and bank employees' association.
In 1994, Committee on Technology Issues relating to Paymentsystems,Cheque Clearing andSecurities Settlement in the Banking
Industry (1994)[was set up under chairman Shri WS Saraf. It
emphasized Electronic Funds Transfer (EFT) system, with the
BANKNET communications network as its carrier. It also said that
MICR clearing should be set up in all branches of all banks with
more than 100 branches.
In 1995, Committee for proposing Legislation on Electronic FundsTransfer and other Electronic Payments (1995) again emphasized
EFT system.
Number of ATMs of different Scheduled Commercial Banks of India as
on end March 2005 Total numbers ofATMs installed in India by various
banks as on end June 2012 is 99,218. The New Private Sector Banks in
India is having the largest numbers of ATMs which is followed by off-
site ATMs belonging to SBI and its subsidiaries and then it is followed by
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New Private Banks, Nationalised banks and Foreign banks. While on site
is highest for the Nationalised banks of India.
Ever since the initiation of the process of deregulation of the Indian
banking systemand gradual freeing of interest rates to market
forces, and consequent injection of a dose of competition among
the banks, introduction of asset-liability management (ALM) in the
public sector banks (PSBs) has been suggested by several experts.
But, initiatives in this respect on the part of most bank
managements have been absent. This seems to have led the Reserve
Bank of India to announce in its monetary and credit policy of
October 1997that it would issue ALM guidelines to banks. While
the guidelines are awaited, an informal check with several PSBs
shows that none of these banks has moved decisively to date to
introduce ALM.One reason for this neglect appears to be a wrong
notion among bankers that their banks already practice ALM. As
per this understanding, ALM is a system of matching cash inflows
and outflows, and thus of liquidity management. Hence, if a bank
meets its cash reserve ratio and statutory liquidity ratio stipulations
regularly without undue and frequent resort to purchased funds, it
can be said to have a satisfactory system of managing liquidity
risks, and, hence, of ALM.The actual concept of ALM is howevermuch wider, and of greater importance to banks performance.
Historically, ALM has evolved from the early practice of managing
liquidity on the bank's asset side, to a later shift to the liability side,
termed liability management, to a still later realisation of using
both the assets as well as liabilities sides of the balance sheet to
achieve optimum resources management. But that was till the1970s.
In the 1980s, volatility of interest rates in USA and Europe caused
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the focus to broaden to include the issue of interest rate risk. ALM
began to extend beyond the bank treasury to cover the loan and
deposit functions. The induction of credit risk into the issue of
determining adequacy of bank capital further enlarged the scope of
ALM in later1980s. In the current decade, earning proper returns of
bank equity and hence maximisation of its market value has meant
that ALM covers the management of the entire balance sheet of a
bank. This implies that the bank managements are now expected to
target required profit levels and ensure minimisation of risks to
acceptable levels to retain the interest of investors in their banks.
This also implies that costing and pricing policies have become of
paramount importance in banks.In the regulated banking
environment in India prior to the 1990s; the equation of ALM to
liquidity management by bankers could be understood. There was
no interest rate risk as the interest rates were regulated and
prescribed by the RBI. Spreads between the deposit and lending
rates were very wide (these still are considerable); also, these
spreads were more or less uniform among the commercial banks
and were changed only by RBI. If a bank suffered significant
losses in managing its banking assets, the same were absorbed by
the comfortably wide spreads. Clearly, the bank balance sheet wasnot being managed by banks themselves; it was being `managed'
through prescriptions of the regulatory authority and the
government. This situation has now changed. The banks have been
given a large amount of freedom to manage their balance sheets.
But the knowledge, newsystems and organisational changes that are
called for to manage it, particularly the newbanking risks, are still
lagging. The turmoil in domestic and international markets
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duringthe last few months and impending changes in the country's
financial system are a grimwarning to our bank managements to
gear up their balance sheet management in a single heave. To begin
with, as the RBI's monetary and credit policy of October
1997recommends, an adequate system of ALM to incorporate
comprehensive riskmanagement should be introduced in the PSBs.
It is suggested that the PSBs shouldintroduce ALM which would
focus on liquidity management, interest rate riskmanagement and
spread management.
Broadly, there are 3 requirements to implement ALMin these
banks, in the stated order:
o Developing a better understanding of ALMconcepts,o Introducing an ALM information system, and,o Setting up ALM decision-making processes (ALM
Committee/ALCO).
The above requirements are already met bythe new private sector
banks, for example. These banks have their balance sheetsavailable
at the close of every day. Repeated changes in interest rates by
them during thelast 3 months to manage interest rate risk and their
maturity mismatches are based on dataprovided by their MIS. In
contrast, loan and deposit pricing by PSBs is based partly on
hunches, partly on estimates of internal macro data, and partly on
their competitors' rates.Hence, PSBs would first and foremost need
to focus son putting in place an ALM whichwould provide the
necessary framework to define, measure, monitor, modify and
manage interest rate risk. This is the need of the hour.
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CHAPTER-4
COMPANY PROFILE
4.1 About
HDFC Bank Limited(BSE:500180,NSE:HDFCBANK,NYSE:HDB)
is an Indian financial services company based in Mumbai, Maharashtra
that was incorporated in August 1994. HDFC Bank is the fifth or sixth
largest bank in India by assets and the first largest bank by market
capitalization as of November 1, 2012. The bank was promoted by the
Housing Development Finance Corporation, a premier housing finance
company (set up in 1977) of India. As on December 2012, HDFC Bank
has 2,776 branches and 10,490 ATMs, in 1,399 cities in India, and all
branches of the bank are linked on an online real-time basis. As of
December 2012 the bank had balance sheet size of Rs. 3837 billion. For
the fiscal year 2011-12, the bank has reported net profit of 5167.07crore
(US$950 million), up 31.6% from the previous fiscal.
On March 14, 2013 an online magazine named Cobrapost.com released
video footage from Operation Red Spider showing high ranking officials
and some employees of HDFC bank willing to turn black money into
white which is violation ofMoney Laundering Control Act.After this the
government of India andReserve Bank of India have ordered an inquiry
http://en.wikipedia.org/wiki/Bombay_Stock_Exchangehttp://www.bseindia.com/bseplus/StockReach/AdvanceStockReach.aspx?scripcode=500180http://en.wikipedia.org/wiki/National_Stock_Exchange_of_Indiahttp://www.nseindia.com/marketinfo/companyinfo/companysearch.jsp?cons=HDFCBANK§ion=7http://en.wikipedia.org/wiki/New_York_Stock_Exchangehttp://www.nyse.com/about/listed/lcddata.html?ticker=hdbhttp://en.wikipedia.org/wiki/Financial_servicehttp://en.wikipedia.org/wiki/Mumbai,_Maharashtrahttp://en.wikipedia.org/wiki/Market_capitalizationhttp://en.wikipedia.org/wiki/Market_capitalizationhttp://en.wikipedia.org/wiki/Housing_Development_Finance_Corporationhttp://en.wikipedia.org/wiki/Crorehttp://en.wikipedia.org/wiki/Operation_Red_Spiderhttp://en.wikipedia.org/wiki/Money_Laundering_Control_Acthttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Reserve_Bank_of_Indiahttp://en.wikipedia.org/wiki/Indian_rupeehttp://en.wikipedia.org/wiki/Reserve_Bank_of_Indiahttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Money_Laundering_Control_Acthttp://en.wikipedia.org/wiki/Operation_Red_Spiderhttp://en.wikipedia.org/wiki/Crorehttp://en.wikipedia.org/wiki/Housing_Development_Finance_Corporationhttp://en.wikipedia.org/wiki/Market_capitalizationhttp://en.wikipedia.org/wiki/Market_capitalizationhttp://en.wikipedia.org/wiki/Mumbai,_Maharashtrahttp://en.wikipedia.org/wiki/Financial_servicehttp://www.nyse.com/about/listed/lcddata.html?ticker=hdbhttp://en.wikipedia.org/wiki/New_York_Stock_Exchangehttp://www.nseindia.com/marketinfo/companyinfo/companysearch.jsp?cons=HDFCBANK§ion=7http://en.wikipedia.org/wiki/National_Stock_Exchange_of_Indiahttp://www.bseindia.com/bseplus/StockReach/AdvanceStockReach.aspx?scripcode=500180http://en.wikipedia.org/wiki/Bombay_Stock_Exchange -
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4.2 History
HDFC Bank was incorporated in 1994 by Housing Development Finance
Corporation Limited (HDFC), India's largest housing finance company. It
was among the first companies to receive an 'in principle' approval from
the Reserve Bank of India (RBI) to set up a bank in the private sector.
The Bank started operations as a scheduled commercial bank in January
1995 under the RBI's liberalisation policies.
Times Bank Limited (owned by Bennett, Coleman & Co./The Times
Group) was merged with HDFC Bank Ltd., in 2000. This was the first
merger of two private banks in India. Shareholders of Times Bank
received 1 share of HDFC Bank for every 5.75 shares of Times Bank.
The balance sheet size of the combined entity is more than Rs.1, 63,000
crore. In 2008 HDFC Bank acquiredCenturion Bank of Punjab taking its
total branches to more than 1,000. The amalgamated bank emerged with a
base of about Rs. 1, 22,000 crore and net advances of about Rs.89,
000crore.
Business focus
HDFC Bank deals with three key business segments. - Wholesale
Banking Services, Retail Banking Services, Treasury. It has entered the
banking consortia of over 50 corporates for providing working capital
finance, trade services,corporate finance,andmerchant banking.It is also
providing sophisticated product structures in areas of foreign exchange
and derivatives, money markets and debt trading And Equity research.
http://en.wikipedia.org/wiki/Reserve_Bank_of_Indiahttp://en.wikipedia.org/w/index.php?title=Times_Bank&action=edit&redlink=1http://en.wikipedia.org/wiki/The_Times_Grouphttp://en.wikipedia.org/wiki/The_Times_Grouphttp://en.wikipedia.org/wiki/Centurion_Bank_of_Punjabhttp://en.wikipedia.org/wiki/Working_capitalhttp://en.wikipedia.org/wiki/Corporate_financehttp://en.wikipedia.org/wiki/Merchant_bankinghttp://en.wikipedia.org/wiki/Merchant_bankinghttp://en.wikipedia.org/wiki/Corporate_financehttp://en.wikipedia.org/wiki/Working_capitalhttp://en.wikipedia.org/wiki/Centurion_Bank_of_Punjabhttp://en.wikipedia.org/wiki/The_Times_Grouphttp://en.wikipedia.org/wiki/The_Times_Grouphttp://en.wikipedia.org/w/index.php?title=Times_Bank&action=edit&redlink=1http://en.wikipedia.org/wiki/Reserve_Bank_of_India -
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Wholesale banking services
For customers from ongoleBlue-chip manufacturing companies in the
Indian crop to small & mid-sized corporates and agri-based businesses
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 the
above services to its corporate customers, mutual funds, stock exchange
members and banks.
Retail banking services
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 2009, 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. The Bank is positioned in various net based
B2C opportunities
Including a wide range of Internet banking services for Fixed Deposits,
Loans, Bill Payments, etc. With Finest of Technology and Best of Man
power in Banking Industry HDFC Bank's retail services have become by
and large the best in India and since the contribution to CASA i.e. total
number of current and savings account of more than 50%, HDFC BANK
has full potential to become India's No.1 Private Sector Bank.
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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
An HDFC Bank Branch
HDFC Bank is headquartered in Mumbai and as of March 31, 2012, the
Banks distribution network was at 2,544 branches and 8,913 ATMs in
1,399 cities as against 1,986 branches and 10000 ATMs in 996 cities asof October 2012
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HDFC FOUNDER: -
Mr. H.T. Parekh
~ An i ndustrialist, wri ter and phil anthropist ~
Born on March 10, 1911 in a banking family at Surat, Mr. Hasmukh
Thakordas Parekh, fondly referred to as Hasmukhbhai was the
doyen of the Indian housing and financial sector. A graduate in
Economics from Mumbai, Mr. Parekh also pursued a BSc. degree in
Banking and Finance from the London School of Economics.After
returning to India in 1936, Mr. Parekh began his financial career
with a leading stockbroking firm, Harkisandass Lukhmidass.
Simultaneously, he was a lecturer in Economics at the St. Xavier's
College in Mumbai for about three years. He considered his two-
decade long stint at the broking firm valuable, as it not only gave
him his most basic lessons in the business but also immensely
contributed to his personal growth.
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During this period Mr. Parekh also continued to study and write on
different aspects of the economy and economic policy, money and
banking, and also participated in public discussions.
Driven by deep interest in investment banking, he decided to move
on to his next major assignment. In 1956, Mr. Parekh joined the
newly set up development finance institution Industrial Credit and
nvestment Corporation of India Limited (ICICI). Under his
leadership ICICI grew impressively to gain acceptance of the Indian
business community, recognition of Government and even became a
show piece for the World Bank. For decades he had been stressing
the need for a financial corporation specializing in providing long
term finance for ownership housing. Thus even at the age of 66,
when most people think of retirement, Mr. Parekh was determined
to set up his most ambitious enterprise. His lifelong dream o
helping Indians own their home, as he had seen abroad during his
student days, led to the formation of the Housing Development
Finance Corporation Limited (HDFC) in 1977. It was the first-of-
its-kind in India. It is under Mr. Parekhs leadership and direction
that HDFC grew manifold while being strongly rooted in the
principles of integrity, transparency and professionalism. Soon
HDFC became a major role model not only for the country but forthe entire Asian region. In keeping with his zeal for promoting new
ventures, in 1983, Mr. Parekh promoted the first private sector oil
exploration company in India,Hindustan Oil Exploration Company
Limited. He also set up Gujarat Rural Housing Finance
Corporation Limited in 1986.
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Mr. Parekhs love for writing blossomed right from his school days.
In addition to being a regular contributor to the media with over 200
published articles to his credit on a variety of subjects such as
industry, economic policy, capital market, development banking,
credit policy, etc., he was the author of several books. He authored
The Bombay Money Market, a novel book detailing the intricate
workings of the money market in lndia. He also chronicled his
considerable experience as a development banker in his book, The
Story of a Development Bank (ICICI: 1955-1979). Some of his
other books include The Future of Joint-Stock Enterprise in India,
India and Regional Development, Management of Industry in India
and The Indian Capital Market - Past, Present & Future. Also, his
writings in Gujarati, HiranePatro and HiraneVadhuPatro are
considered works of great importance in Gujarati literature.
His wisdom and warmth drew people from all walks of life to him
for advice, guidance and inspiration. Mr. Parekh was a man of few
words, and believed that strong views need not be expressed in
strong words. He had a keen eye for talent and nurtured it by
providing direction and ample learning opportunities. Known for
his humility, affection and concern for fellowmen, Mr. Parekh was
associated with several philanthropic causes and welfare
organizations. In 1986, he was one of the founders of the Centre for
dvancement of Philanthropy and served as its Chairman since its
inception until his retirement in 1993. His concern and love for the
city of Mumbai (erstwhile Bombay) led him to form the
BombayCommunity Public Trust in 1991. This venture was
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designed specifically to address the needs of disadvantaged citizens
in the city of Mumbai. He took the initiative to finance Mu mbais
first public toilet by any corporate house Sulabh Shauchalaya.
Additionally, Mr. Parekh served astrustee of the Sameeksha Trust,
Saurashtra Trust, Kasturba Gandhi National Memorial Trust, The
India Foundation, The India Heritage Trust, The Chakallas Puraskar
Trustand also servedas the President of theSocial ServiceLeague.
4.3Some of Mr. H.T. Parekhs major achievements are:
The James Taylor prize for standing 1st in B.A. (Economics)from the University of Mumbai.
Honorary Fellow of the London School of Economics andPolitical Science, U.K.
Padma Bhushanby the Government of India for hiscontribution to the field of economic activities in 1992.The
thoughts and dreams of a legend like Mr. H.T. Parekh live on
forever, changing human lives for the better.
HDFC Bank Limited
Type Public
Traded as
BSE:500180
NSE:HDFCBANK
NYSE:HDB
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BSE SENSEX Constituent
Industry Banking,Financial services
Founded August 1994
Headquarters Mumbai,Maharashtra,India
Area served Worldwide
Key people Mr Aditya Puri (MD)
Products
Credit cards,consumer
banking,corporate banking,
finance and insurance,
investment banking,
mortgage loans,private
banking,private equity,
wealth management
Revenue US$ 6.487 billion (2012)
Operating
income US$ 1.451 billion (2012)
Profit US$ 978.3 million (2012)
Total assets US$ 70.17 billion (2012)
Total equity US$ 7.793 billion (2012)
Employees 66,076 (2012)
Website HDFCBank.com
http://en.wikipedia.org/wiki/BSE_SENSEXhttp://en.wikipedia.org/wiki/Financial_serviceshttp://en.wikipedia.org/wiki/Mumbaihttp://en.wikipedia.org/wiki/Maharashtrahttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Managing_Directorhttp://en.wikipedia.org/wiki/Credit_cardhttp://en.wikipedia.org/wiki/Retail_bankinghttp://en.wikipedia.org/wiki/Retail_bankinghttp://en.wikipedia.org/wiki/Commercial_bankhttp://en.wikipedia.org/wiki/Financial_serviceshttp://en.wikipedia.org/wiki/Investment_bankinghttp://en.wikipedia.org/wiki/Mortgage_loanhttp://en.wikipedia.org/wiki/Private_bankinghttp://en.wikipedia.org/wiki/Private_bankinghttp://en.wikipedia.org/wiki/Private_equityhttp://en.wikipedia.org/wiki/Wealth_managementhttp://en.wikipedia.org/wiki/United_States_dollarhttp://en.wikipedia.org/wiki/Earnings_before_interest_and_taxeshttp://en.wikipedia.org/wiki/Earnings_before_interest_and_taxeshttp://en.wikipedia.org/wiki/Earnings_before_interest_and_taxeshttp://en.wikipedia.org/wiki/Net_incomehttp://en.wikipedia.org/wiki/Assethttp://en.wikipedia.org/wiki/Assethttp://en.wikipedia.org/wiki/Equity_%28finance%29http://en.wikipedia.org/wiki/Equity_%28finance%29http://www.hdfcbank.com/http://www.hdfcbank.com/http://en.wikipedia.org/wiki/Equity_%28finance%29http://en.wikipedia.org/wiki/Assethttp://en.wikipedia.org/wiki/Net_incomehttp://en.wikipedia.org/wiki/Earnings_before_interest_and_taxeshttp://en.wikipedia.org/wiki/Earnings_before_interest_and_taxeshttp://en.wikipedia.org/wiki/United_States_dollarhttp://en.wikipedia.org/wiki/Wealth_managementhttp://en.wikipedia.org/wiki/Private_equityhttp://en.wikipedia.org/wiki/Private_bankinghttp://en.wikipedia.org/wiki/Private_bankinghttp://en.wikipedia.org/wiki/Mortgage_loanhttp://en.wikipedia.org/wiki/Investment_bankinghttp://en.wikipedia.org/wiki/Financial_serviceshttp://en.wikipedia.org/wiki/Commercial_bankhttp://en.wikipedia.org/wiki/Retail_bankinghttp://en.wikipedia.org/wiki/Retail_bankinghttp://en.wikipedia.org/wiki/Credit_cardhttp://en.wikipedia.org/wiki/Managing_Directorhttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Maharashtrahttp://en.wikipedia.org/wiki/Mumbaihttp://en.wikipedia.org/wiki/Financial_serviceshttp://en.wikipedia.org/wiki/BSE_SENSEX -
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3.4Origin of the Organization
HDFC BANK LTD. is leading private sector bank and financial services
company in India. 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 ofRBI`s liberalization of the Indian Banking Industry in
1994.The Bank was incorporated in August 1994 in the name of HDFC
BANK LTD., with its registered office in Mumbai, in India and
commenced operation as a Scheduled Commercial Bank in January 1995.
The Bank is a banking company governed by Indias Banking
Regulations Act, 1949. The Banks sharesare listed on the Bombay Stock
Exchange Ltd., the National Stock Exchange of India Limited and its
ADSs are listed on the New York Stock Exchange.
The bank is a part of the HDFC Group of Companies founded by
outparent.This bank is public limited company established under the laws
ofIndia.HDFC LTD. and its subsidiaries owned approximately 22% of
our outstanding Equity Shares as of March 31st 2006.From the beginning,
HDFCBank its operation with the aim of becoming a world-class Indian
Bank andthe endeavour of fulfilling all the financial requirements of
customer under one roof.
Over the years, by delivering superior financial products and services, the
bank has built a stable and long lasting relationship with nearly 7 million
customers without compromising standard for maintaining high quality
association, culture for learning,
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quick absorption of latest and best technologies and unwavering
adherence to best practice in governance have been the core strength that
have brought the bank to the present position withthe constant learning to
growth, the bank has continued to use the dividends of leadership to fuel
future expansion and presence. The strategy of bank is to provide
comprehensive range of financial products and services for their
customers through multiple distributed in channels, with high quality
Service and superior execution. Themultiple distribution channel
including an electronically linked branch network, automated telephone
banking, internet banking and banking by mobile phone, to offer
customer convenient access to their product. The quality of service is
provided by bank through intensive staff training and the use of our
technology platform. Their focus on knowledgeable and personalized
services draws customers to our products and increases the loyalty to the
existing customers. The HDFC Banks philosophy is based on four core
values that is
Operational excellence, Customer focus, Product leadership and People.
The bank is professionally managed organization with board of directors
consisting of eminent persons who represent various fields including
finance, taxation, construction, urban policy and development. The board
primarily focus on strategy formulation policy and control, design to
delivery increasing value to share holders.
Today, HDFC are market leader in most of the segments that the yope
rate and their goal is to acquire the best position in attracting customers.
The bank has grown rapidly since commencing operations in Jan
1995.Currently the bank has a nation spread over 583 branches in 263
cities across the country by operating in three principle segments, that is
Wholesale banking
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Retail banking Treasury service
4.5 MANAGEMENT:
Mr. C.M. Vasudev has been appointed as the Chairman of the Bank with
effect from 6th July 2010. 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 Managing Director, Mr.
Aditya Puri, has been a professional banker for over 25 years, and before
joining HDFC Bank in 1994 was heading Citibank's operations in
Malaysia.
The Bank's Board of Directors is composed of eminent individuals with a
wealth of experience in public policy, administration, industry and
commercial banking. Senior executives representing HDFC are also on
the Board. Senior banking professionals with substantial experience in
India and abroad head various businesses and functions and report to the
Managing Director. Given the professional expertise of the management
team and the overall focus on recruiting and retaining the best talent in
the industry, the bank believes that its people are a significant competitive
strength.
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Directors and executives:
HDFC Banks Memorandum and articles of association providest hat
until otherwise determined by a general meeting of shareholders. The
number of our directors shall not be less than three (3) or more than
fifteen (15) directors, excluding directors appointed pursuant to the term
of issue date. Banks board of directors consisted of nine (9) members
were comprised of;
Mr. C.M. Vasudev (Chairmen) Mr.Aditya Puri (Managing Director) Dr. V.R.Gadwal (Non-Executive Director) Mr. Vineet Jain (Non-Executive Director) Mr. K.M.Mistry (Non-Executive Director) Mrs. Renukarnad (Non-Executive Director) Mr. Aravind Pande (Non-Executive Director) Mr. Bobby Parikh (Non-Executive Director) Mr. Ashim Samanta (Non-Executive Director)
BACKGROUND: -The Housing Development Finance Corporation Limited
(HDFC) was amongst the first to receive an in principle approval from the
Reserve Bank of India (RBI) to set up a bank in the private sector, as part of
RBIs liberalisation of the Indian Banking Industry in 1994. The bank was
incorporated in August 1994 in the name of HDFC Bank Limited, with its
registered office in Mumbai, India. HDFC Bank commenced operations as a
Scheduled Commercial Bank in January 1995.
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PROMOTER:-HDFC is Indias premier housing finance company and enjoys
an impeccable track record in India as well as in international markets. Since
its inception in 1977, the Corporation has maintained a consistent and healthy
growth in its operations to remain the market leader in mortgages. Its
outstanding loan portfolio covers well over a million dwelling units. HDFC
has developed significant expertise in retail mortgage loans to different market
segments and also has a large corporate client base for its housing related
credit facilities. With its experience in the financial markets, strong market
reputation, large shareholder base and unique consumer franchise, HDFC was
ideally positioned to promote a bank in the Indian environment
BUSINESS FOCUS: -HDFC Banks 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 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 four core values: Operational Excellence, Customer
Focus, Product Leadership and People.
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CAPITAL STRUCTURE: -As on 31st March, 2013 the authorized share
capital of the Bank is Rs. 550 crore. The paid-up capital as on the said date is
Rs 475,88,38,060/- (2379419030 equity shares of Rs. 2/- each). The HDFC
Group holds 22.83% of the Bank's equity and about 17.08% of the equity is
held by the ADS / GDR Depositories (in respect of the bank's American
Depository Shares (ADS) and Global Depository Receipts (GDR) Issues).
34.07% of the equity is held by Foreign Institutional Investors (FIIs) and the
Bank has 4, 40,853 shareholders. 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.
AMALGAMATION OF TIMES BANK & CENTURION BANK OF
PUNJAB WITH HDFC BANK: - On May 23, 2008, the amalgamation o
Centurion Bank of Punjab with HDFC Bank was formally approved by
Reserve Bank of India to complete the statutory and regulatory approval
process. As per the scheme of amalgamation, shareholders of CBoP received 1
share of HDFC Bank for every 29 shares of CBoP. The amalgamation added
significant value to HDFC Bank in terms of increased branch network,
geographic reach, and customer base, and a bigger pool of skilled manpower.
In a milestone transaction in the Indian banking industry, Times Bank Limited
(another new private sector bank promoted by Bennett, Coleman & Co. /
Times Group) was merged with HDFC Bank Ltd., effective February 26,
2000. This was the first merger of two private banks in the New Generation
Private Sector Banks. As per the scheme of amalg