AResearch Report

On“Performance Appraisal in HDFC Bank ”

In Partial Fulfillment of the requirement for

MBA DEGREE PROGRAMME

Of G.B.T.U. Lucknow

(Session 2009-11)Under the Esteemed Guidance of:

Mr. Nirmal Singh(Manager)

Submitted to : Submitted By:Miss Sukhmeet Kaur Shilpi KulshresthaFaculty (HR) MBA IVth Sem.

Roll No.

UTTAM INSTITUTE OF MANAGEMENT STUDIESRUNAKTA KIRAWLI ROAD,AGRA

1

DECLARATION

I, Shilpi Kulshrestha student of Masters of Business Administration,4th Sem

UTTAM INSTITUTE OF MANAGEMENT STUDIES, AGRA (U.P.),

hereby declare that I have completed Summer Internship on “Performance

Appraisal in HDFC Bank ” as part of the course requirement.

I further declare that the information presented in this Research Reportis true

and original to the best of my knowledge.

Shilpi Kulshrestha

MBAIVth SEM.

Date: Roll. No.

Place: AGRA

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ACKNOWLEDGEMENTS

It is essential to acknowledge the help received from the

people of various quarters. I find myself at a loss as to how to

thank them. These words are not a formality but a sincere

voice of my heart & I owe gratitude to all of them.

At the onset I would like to thank Faculty Miss Sukhmeet

Kaur. (Faculty Guide) for providing me a wonderful opportunity

to work on this project. Their valuable time and guidance went

a long way in helping to make a quality work out of this project.

I also owe my regards to my Faculty Members, who has helped

me in every possible way to make this Research Reporta

success.

Last but not the least, I would like to thank all the

Faculty members and Staff members who all helped me in

completing my Research Reportsuccessfully.

Shilpi Kulshrestha

MBAIVth SEM.

3

PREFACEIn its broadest sense the research report is necessary to make the students of B-school familiar to the Industrial environment in the World. To be competitive and work aggressively, students need to know the policies, procedures and trends going on in the present Industrial World. Whether it is the question of demonstrating a modernized procedure, step by step to the to an old production hand or guiding a new division head through the intricacies of preparing his own budget, The responsible supervisor or manager must make the trainee Learn and communicate.The purpose and objective of this study is to analyses the various products, produced by the organization and to understand the price durability of these products. The tools and devices used in this study are standard and modified according to the organizational needs.

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EXECUTIVE SUMMARY

The Research Report “Performance Appraisal in HDFC Bank ”is an attempt

to find out new areas of development through which business can be generated

for the company.

Lets understand the meaning of the of the Research Report title, employee and

employer base means the group of employees and/or employer that a HR

relation in the company.

A future aspect means something that will exist or happen in times to come

which will an appearance to the eye or mind.

Auto industry is going a long way in developing, formulating and implementing

promotional strategies to cope up with the tough competition. Strategies are

formulated not only keep up with cut throat competition but also to meet the

highly volatile consumer preferences.

The analysis revealed that most of the customers were motivated by the gifts

provided by the subscriptions rather than the price reduction. Thus it brought

out that gifts play a key role in the success of promotional schemes.

The market survey was conducted to confirm the facts revealed by the sales

data analysis vindicated that the speculations were true since most respondents

agreed to that they were motivated by the gifts, especially by the brand value

and utility of it

Hence from the findings of the Human Resources Department and by different

analysis performed effective strategies has been formulated and proposed which

might be useful in devising the future strategies for Hero Honda two wheeler

sale and promotion at Agra.

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Introduction

Objective

Research methodology

Training

Development

Analysis and Interpretation

Findings

Suggestions

Conclusion

Appendix

Bibliography

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INTRODUCTION PERFORMANCE APPRAISAL

What is Performance Appraisal?

A “Performance Appraisal” is a process of evaluating an employee’s

performance on jobs in terms of its requirements or we may call it a

postmortem of a subordinate's performance by his superior during a

predetermined period of time, often the proceeding year. 

It is systematic evaluation of the individual with respect to his or her

performance on the job and his or her potential for development for growth.

According to Hegel-

“ It is the process of evaluating the performance and qualification of the

employee’s in terms of the requirements of the job for which he is employed,

for the purpose of administration including placement, selection for promotion,

providing financial reward and other actions which requires differential

treatment among the member of a groups as distinguished from action all

members equally.” 

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Advantages Of Performance Appraisal

Performance Appraisal replaces casual expert with formal, systematic

procedures. Employees know they are being evaluated and are told the criteria

that will be used in the course of arrival. It offers competitive advantage to a

firm by improving performance, help making correct decisions, ensuring legal

compliance, minimizing job dissatisfaction & employee's turnover and ensuring

consistency between organizational strategy and behavior.

In BARS method, employee’s behavior is measured. This method aims at

specific dimensions of job performance. It is said to be behaviorally anchored

as the scale represent a range of descriptive statements of behavior varying

from the least to the most effective.

MULTIPLE USES OF PERFORMANCE ASSESSMENT

GENERAL APPLICATIONS SPECIFIC PURPOSES

Developmental Uses: 1. Identification of individual needs.

2. Performance feedback.

3. Fixing transfers and job assignments.

4. Identification of strength and Weakness.

Administrative Uses: 1. Salaries.

2. Promotion.

3. Retention, Termination.

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4. Layoffs.

Organizational 1. HR Planning

Maintenance 2.Determining training needs.

Objectives: 3.Evaluation of organizational goal achievement.

4. Evaluation of HR systems.

Documentation: 1. Help meeting legal requirement.

2.Useful for future research.

IMPORTANCE AND PURPOSE

Performance Appraisal has been considered as a most significant and

indispensable tools for an organization. It is highly useful in making decisions

regarding various personal aspects such as promotion and incentives to be

given.

Accurate information plays a vital role in organization as a whole. They

help to pinpoint weak areas in the primary system (e.g. Marketing, Finance and

Production).

It is easy for manager to see which employee's need for training or counseling

because jobs are grouped by categories.

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If valid performance data are available; timely, accurate, objectives,

standardization, and relevant management can maintain consistent promotion

and compensation policies throughout the total system.

To effect promotions based on compensation & performance.

To confirm the services of probationary employees upon whether they

are completing the probationary period satisfactorily.

Access the training and development needs of employees.

To decide upon a pay rise.

To let the employees know, where they stand so far, as their

performance is concerned and to assess them with constructive criticism

and guidance for the purpose of their development.

To improve communication.

To evaluate whether HR programs such as selection, training, transfers

are being effective or not.

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Establish job expectation

Design an Appraisal Program

Objective of Performance Appraisal

Appraise Performance

Performance Interview

Use Appraisal data for appropriate purpose

APPRAISAL PROCESS IN HDFC

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WHAI IT ACHIEVES?

Performance Appraisal system aims at achieving the following objectives

of employee’s development:

1. Training and Development of individuals.

2. Improving efficiency and effectiveness.

3. Involvement of the review in his self-development.

4. To lay basis for maximum objective advancement/promotion.

5. To lay basis for career planning.

6. To identify exceptional talents for special assignment.

7. To understand the strengths and weaknesses of the subordinates and help

them to realize this.

8. To understand the difficulties of their subordinates and try to remove

them.

9. To encourage subordinates to accept more responsibilities.

10.To help the subordinates to become aware of the prevailing conditions.

11.To help subordinates to acquire new capability.

Performance Appraisal is common in government as well as in private

sector in the form of “Annual Confidential Reports”. However in private

industries more systematic performance appraisal also called “Merit Rating or

Employees Rating” has been developed.

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These appraisals are often needed as a basis of selecting candidates

for promotion for better jobs; hence, sometime it may also be called

“Potential Appraisal”. There are also so many methods of performance

appraisal and out of them three are major namely;

The free report

➢ The checklist

➢ The analysis of critical incidents

An appraisal might ask from the assigning officer to consider the

following attributes and characteristics:

(a) Knowledge of skills/formal qualifications, utilized during the review

period.

(b)Abilities to delegate/plan supervision.

(c) Personal qualities; appearance, personality, deposition, enthusiasm,

compatibility with colleagues, physical makeup, health.

(d)Establish priorities, assume responsibilities, cope with stress,

exercise/leadership.

(e) Critical analysis like creativity, judgmental, problem solving and decision

taking abilities.

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TECHNIQUES OF PERFORMANCE APPRAISAL

Broadly there are some following appraisal techniques:-

RATING BY SUPERVISOR:-

a) This can be done by several methods like graphic rating scale,

under it; each person is rated with the help of printed form. The

rater can mark at any point on the scale according to his

evaluation.

b) In forced distribution system, the employees are rated only on two

characteristics i.e. job performance and profitability.

c) In ranking, it involves arranging individual in order of the merit

for particular characteristics.

d) In free written rating, the supervisor describes the subordinate's

performance and feels how good it is. This method is simple but

time consuming.

e) In forced choice appraisal, there are some choice and superior are

asked to give one choice which best suits the subordinate.

f) In critical method, the appraiser makes rates of the positive

instances on the job performance as well as indicates instances

soon after the event had occurred.

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RATING BY SELF OR GROUP:-

In self-appraisal a person appraises himself on a form provided and

in group appraisal; a group of persons appraises an individual.

THE FIELD REVIEW TECHNIQUE:-

In this method, a personnel man goes to the field to obtain

information about the work of the individual employee. He asks

questions and informally converse with appraiser of the persons who are

being evaluated. Replies or answers are noted by the personnel man. It

does not include any paper work and is linked to the appraiser

APPRAISAL USING PERFORMANCE STATISTICS:-

In recent times quantitative methods are being supported for rating. Here

standards of performance are used for appraisal, subordinates may be made

profit centers and their performance is appraised as per their achievements.

Standards are prepared for each activity.

FORCED CHOICE METHOD:-

It contains a series of group of statements and the rater checks out

effectively the statement describing each individual being evaluated. Contents

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of both the statements may be positive or negative. Though both of them

describe the feature of an employee, the rater is forced to mark only one, which

appears to be more descriptive.

MANAGEMENT BY OBJECTIVE (MBO):-

MBO has become a popular method of planning, setting standards,

motivating and appraising performance. MBO makes comparative

assessment of multiple personnel rather difficult while in traditional methods

all persons are rated on common factors.

In MBO each person will have different set of goals of non-comparable

complexity and difficulty of accomplishment. Management may make various

decisions on a comparative basis.

360-DEGREE FEEDBACK:-

360-Degree method provides a wider perspective about an employee’s

performance. In such a method, employee is evaluated by himself, his

peers, his superiors and his subordinates too. This brings with it a

circular assessment of the individual.

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BEHAVIORALLY ANCHORED RATING SCALE:-

These are rating scales whose scale points are fixed by statement of

effective and ineffective behavior. They represent a range of descriptive

statements of behavior varying from least to most effective. Scales are

anchored by description of actual job behavior.

ASSESSMENT CENTRES:-

It is a central location where manager come together to have participation

in job related exercises evaluated by trained observer.

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PERFORMANCE APPRAISAL IN HDFC

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OBJECTIVES OF PERFORMANCE APPRAISAL

➢ The aim of performance appraisal is to encourage employees to set his

objectives for the next time period following his past performance in

order to improve his performance on the job.

➢ These objectives should be mutually agreed, for twelve months, as far as

every employee should be aware of transaction objectives, since they

provide a basis for individual’s performance objectives.

➢ The other basis is the appraisal on the wish of employee himself, in order

to set worthwhile objectives, it is necessary.

➢ Objectives of Appraisal includes effective promotions and transfers,

assess training needs etc.

➢ These objectives are appropriate as long as the approach in individual.

Appraisal in future would assume system orientation.

➢ In system's approach, appraisal aims at improving the performance

instead of merely assessing it.

➢ Emphasis is not on individual assessment, rewards or punishment, but it

is on how the work system affects the individual performance.

RESEARCHMETHODOLOGY OF THE STUDY

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 The research instrument or the tool used by us for collecting data is

QUESTIONNAIRE. Questionnaires like a sample form consisting of several

forms. Officers are asked to fill these questionnaire and answer the questions.

The questions easy to understand and in such a way that the answer can be

given in the form of YES or NO or in the simple queries or in the multiple

choice. We offered our respondents a no. of specific alternatives from which

they were asked to choose one or more through specific information. All these

served us a helping hand in the exploratory stages our research .

 In our study various tables & pie diagrams are drawn, these diagrams help us to

calculate the percentage of responses .Thus it is easier to know officers opinion

about the E-PMS.

  HYPOTHESIS

 PROBLEM IDENTIFIED:- “The employees in HDFC are satisfied with the

existing programs or not.”

  NULL HYPOTHESIS:- “The employees are satisfied”.

  ALTERNATIVE HYPOTHESIS:- “The employees are not satisfied”.

 TOOLS AND TECHNIQUES USED:

 Tools and techniques mean the methods and ways that how the data for the

research is collected and analyzed in order to fulfill the objective of the research

work.

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 DATA COLLECTION:

 Primary Data :- 1) Through questionnaire

 Secondary Data :- 1) Through weekly journal- Duran

                             2) Through monthly journal- Grahpatrika

                              3) www.hdfcbank.com

Literature survey :- Administration staff .

 

ANALYSIS OF DATA

The data after collection, has to be processed and analyzed in accordance with 

the objective laid down for the purpose of the research work. This is essential

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for ensuring that we have all relevant data for making analysis. The term

analysis refers to the computation of certain measures like editing, coding,

classification and tabulation of collected data so that they are amendable to

analysis along with searching for patterns of relationships that exists among

data- groups.

 There are various methods of analyzing the data. But in this Research

Reportwork, I used Pie charts and Bar charts for analyzing the collected data,

which is using Excel Sheet. In this Research Reportwork, Pie charts & Bar

charts are prepared with the help of collected with the help of  Questionnaire.

The graphical  presentation of the data is helpful in understanding each & every

aspect of the collected data very easily.

 

INTRODUCTION OF HDFC BANK

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HDFC started its there operation way back in year 1977 with an aim to provide

houses to individuals. The era between the independence to 1977 no financial

institution is providing detailed house loan. ‘Mr. Ketan Parekh’ formerly

founder of HDFC started the company with a public issue of Rs 7 per unit

share. Campaigning the share prices of Rs 570 even in this period of twenty-

seven years can assess the growth of the group. Thrice the market crash only

few companies are able to maintain their growth vis-à-vis. Customer

satisfaction, roughly around twenty one lac houses are into the process of

repayment of their housing loan to HDFC. HDFC as a group has diversified

themselves into various finance related business including Banking &

Depository Services, Portfolio Management, Credit Information Bureau, Life

and General Insurance, not only making the ship wider but to run it properly

and profitability. The aim of this study is not to understand the working but the

inside core of their processes and culture. Now we will discuss all their core

business separately and at last but not the least we go through to understand

their newly ventured Life Insurance business.

The Housing Development Finance Corporation Limited (HDFC) was amongst

the first to receive an 'in principle' approval from the Reserve Bank of India

(RBI) to set up a bank in the private sector, as part of the RBI's liberalization of

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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.

Promoted in 1995 by Housing Development Finance Corporation (HDFC),

India's leading housing finance company, HDFC Bank is one of India's premier

banks providing a wide range of financial products and services to its over 15

million customers across hundreds of Indian cities using multiple distribution

channels including a pan-India network of branches, ATMs, phone banking, net

banking and mobile banking. Within a relatively short span of time, the bank

has emerged as a leading player in retail banking, wholesale banking, and

treasury operations, its three principal business segments.

The bank’s competitive strength clearly lies in the use of technology and the

ability to deliver world-class service with rapid response time. Over the last 13

years, the bank has successfully gained market share in its target customer

franchises while maintaining healthy profitability and asset quality.

As of March 31, 2009, the Bank had a distribution network with 1,412 branches

and 3,295 ATMs in 528 cities.

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For the quarter ended March 31, 2009, the Bank earned total income of INR

53.65 billion (Rs.5,365.5crore) as against INR 35.05 billion (Rs.3,505.5crore)

in the corresponding period of the previous year. Net revenues (net interest

income plus other income) for the quarter ended March 31, 2009 were INR

29.66 billion (Rs.2,966.7crore), up by 35.4% over INR 21.91 billion

(Rs.2191.4crore) for the quarter ended March 31, 2008. Net Profit for the

quarter ended March 31, 2009 was INR 6.30 billion (Rs.630.9crore), up by

33.9% over the corresponding quarter ended March 31, 2008.

The Bank’s total balance sheet size increased by 37.6% from INR 1331.77

billion (Rs. 133,177 crore) as of March 31, 2008 to INR 1832.71 billion

(Rs.183,271crore) as of March 31, 2009. Total deposits were INR 1428.12

billion (Rs.142,812crore), an increase of 41.7% from March 31, 2008.

Total income for the year ended March 31, 2009 grew by 58.2% to INR 196.22

billion (Rs19622.9crore) over the corresponding year ended March 31, 2008.

Leading Indian and international publications have recognized the bank for its

performance and quality Helping Indians experience the joy of home

ownership. The road to success is a tough and challenging journey in the dark

where only obstacles light the path. However, success on a terrain like this is

not without a solution.

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As we found out nearly three decades ago, in 1977, the solution for success is

customer satisfaction. All you need is the courage to innovate, the skill to

understand your clientele and the desire to give them your best.

Today, nearly three million satisfied customers whose dream we helped realise,

stand testimony to our success.

Our objective, from the beginning, has been to enhance residential housing

stock and promote home ownership.

Now, our offerings range from hassle-free home loans and deposit products, to

property related services and a training facility.

We also offer specialized financial services to our customer base through

partnerships with some of the best financial institutions worldwide.

COMPANY PROFILE

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The Composition of the Board of Directors of the Bank is governed by the

Companies Act, 1956, the Banking Regulation Act, 1949 and the listing

requirements of the Indian Stock Exchanges where securities issued by the

Bank are listed. The Board has strength of 12 Directors as on March 31, 2008.

All Directors other than Mr. AdityaPuri, Mr. Harish Engineer and Mr. Paresh

Sukthankar are non-executive directors. The Bank has five independent

directors and six non-independent directors. The Board consists of eminent

persons with considerable professional expertise and experience in banking,

finance, agriculture, small scale industries and other related fields.

None of the Directors on the Board is a member of more than 10

Committees and Chairman of more than 5 Committees across all the

companies in which he/she is a Director. All the Directors have made

necessary disclosures regarding Committee positions occupied by them

in other companies.

- Mr. JagdishCapoor, Mr. KekiMistry, Mrs. RenuKarnad, Mr. AdityaPuri,

Mr. Harish Engineer and Mr. PareshSukthankar are non-independent

Directors on the Board.

- Mr. ArvindPande, Mr. AshimSamanta, Mr. Gautam Divan, Mr. C. M.

Vasudev and Dr. PanditPalande are independent directors on the Board.

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- Mr. KekiMistry and Mrs. RenuKarnad represent HDFC Limited on the

Board of the Bank.

- The Bank has not entered into any materially significant transactions

during the year, which could have a potential conflict of interest between the

Bank and its promoters, directors, management and/or their relatives, etc.

other than the transactions entered into in the normal course of business. The

Senior Management have made disclosures to the Board confirming that

there are no material, financial and/or commercial transactions between them

and the Bank which could have potential conflict of interest with the Bank at

large.

Details of the Board of Directors in terms of their directorships/memberships in

committees of public companies (excluding HDFC) as on November 20, 2009

are as under.

Dr. J. J. Irani has been appointed as a special director under Articles 125 and

126 of the Articles of Association of the Corporation w.e.f. January 18, 2008.

 * Independent directors have confirmed having met the criteria laid under

Clause 49(I)(A)(iii) of the listing agreements.

** Directorships do not include alternate directorships, directorships of private

limited companies and of companies incorporated outside India.

 *** In terms of Clause 49 (I)(C)(ii) of the Listing Agreements, a director shall

not become a member in more than 10 committees or act as Chairman of more

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than 5 committees across all public companies in which he is a director. For this

purpose only Audit Committee and Investors' Grievance Committee have been

considered.

 + Categorized as an independent director w.e.f. November 14, 2008 pursuant to

his retirement as the Managing Director & Chief Executive Officer of HDFC

Standard Life Insurance Company Limited, a subsidiary of the Corporation.

ORGANISATION STRUCTURE: -

HDFC is a professionally managed organization with a board of directors

consisting of eminent persons who represent various fields including finance,

taxation, construction and urban policy & development. The board primarily

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focuses on strategy formulation, policy and control, designed to deliver

increasing value to shareholders.

Excluding the directorships mentioned above, Mr. Deepak S. Parekh is an

alternate director in 4 companies.

Mr. D S Parekh - Chairman

Mr. Keshub Mahindra - Vice Chairman

Ms. Renu S. Karnad - Executive Director

Mr. R V S Rao - Executive Director

Mr. K M Mistry - Managing Director

Mr. D M Sukthankar

Mr. D N Ghosh

Mr. S Venkitaramanan

Dr. Ram S Tarneja

Mr. N M Munjee

Mr. D M Satwalekar

Mr. Shirish B Patel

Mr. Bansi S Mehta

Dr. S A Dave

HDFC FOUNDER

Man With A Mission

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Hasmukhbhai Parekh

If ever there was a man with a mission it was

Hasmukhbhai Parekh, our Founder and Chairman-

Emeritus, who left this earthly abode on November 18,

1994.

Born in a traditional banking family in Surat, Gujarat, Mr. Parekh started his

financial career at HarkisandassLukhmidass - a leading stock broking firm. The

firm closed down in the late seventies, but, long before that, he went on to

become a towering figure on the Indian financial scene.

In 1956 he began his lifelong financial affair with the economic world, as

General Manager of the newly-formed Industrial Credit and Investment

Corporation of India (HDFC). He rose to become Chairman and continued so

till his retirement in 1972.

At the ripe age of 60, Hasmukhbhai started his second dynamic life, even more

illustrious than his first. His vision for mortgage finance for housing, gave birth

to the Housing Development Finance Corporation - it was a trend-setter for

housing finance in the whole Asian continent.

He was a true development banker. His building up HDFC without any

government assistance, is itself a brilliant chapter in financial history. His

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wisdom and warmth drew people from all walks of life to him, for advice,

guidance and inspiration.

HDFC has a staff strength of 1029, which includes professionals from the fields

of finance, law, accountancy, engineering and marketing.

A soft spoken man of few words, Mr. Parekh nevertheless held strong and

definite views with a quiet conviction. He was always concerned with building

bridges, improving and encouraging communication between people.

He was also a writer in his own right. There are over 200 published articles by

him, full of incisive comments on finance and economics. In 1953 he brought

out a volume called: The Bombay Money Market. It detailed the intricate

working of the Indian money market. His works in Gujarati - HiranePatro,

HiraneVadhuPatro - occupy pride of place in Gujarati literature. In 1992, the

Government of India honoured him with the Padma Bhushan Award. The

London School of Economics & Political Science conferred on him an

Honorary Fellowship.

But there was much more to the man than his financial genius. In his own

unassuming way, Hasmukhbhai devoted all his life to raising resources for

philanthropic causes. He took active interest in the Bombay Community Public

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Trust, designed specifically to serve the needs of the city's underprivileged

citizens.

When Mr. Deepak Parekh took over as Chairman from Hasmukhbhai, he said:

"Taking over from H.T. Parekh is a formidable task; his vision. brought about

not only an institution, but an entire concept which has proved itself to be of

lasting importance."

In his last years, developments in the financial sector brought him some

measure of satisfaction. Says HDFC Chairman, N. Vaghul: "The most

gratifying aspect about his life is that values he cherished all his life, came into

reality in the last years. opening up the financial sector, and deregulation of

lending rates were issues he stood for all his life, and this happened before he

passed away."Farewell dear Hasmukhbhai! All of us will miss not only H.T.

Parekh the financial wizard, but much more so, the man. The only and best

tribute we can pay to such an individual is to try and follow in his footsteps,

keeping in mind his high ideals and philanthropic outlook.

HISTORY OF THE ORGANIZATION

HDFC stands for Housing Development Financial Corporation. It was

incorporate in year 1977 as a public limited company under company’s act

1956 as to commence its business in housing finance, i.e. to provide the

financial services such as loans, etc to the general public in respect to their

33

requirements. It has grown to be a leader in housing finance. It was the pioneer

in housing finance as well as the first private Sector Company in the field of

housing finance. It is the first private sector retail housing finance company. It

is India’s largest housing finance institution with an asset base of over

Rs.15,000crore. It has helped finance over 17 lakhs homes through

Its 84 branches across India, as well as it has 3 overseas Service Associates and

one International Office. HDFC is listed in both BSE and NSE with a good

price in the market. CRISIL and ICRA have awarded the ‘AAA’ rating, which

is known as the best rating in the business, to HDFC Limited, for the last six

years consecutively. HDFC Limited has over 11 lakh depositors and over

46,000 deposit agents. Over the years it has won many awards and accolades,

and has promoted several group companies to meet investors and customer

needs.

HDFC currently holds 24.4% of equity in HDFC Bank. Its stock also listed on

NYSE in the form of American Depository Shares. In India HDFC has a

network of over 231 branches in 122 cities and over 750 ATMs all over the

country. HDFC also provides the various facilities like phone banking, mobile

and internet banking to its is precious customers. It has a customer base of over

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3.2 million accounts. HDFC Bank has its three key business areas i.e.

Wholesale banking, Retail banking, and Treasury operations.

HDFC hikes stake in HDFC Bank through warrant conversion India’s

largest mortgage financier Housing Development Finance Corporation (HDFC)

has converted warrants issued by HDFC Bank into shares just two days before

these expired. In a notice to the stock exchanges, HDFC Bank on Monday

announced that it had allotted 2,62,00,220 shares to its parent at Rs 1,530.13 per

share. The warrants were to expire on December 2.

As of September 30, HDFC held a 19.29 per cent stake in HDFC Bank, the

country’s second-largest private sector lender. The mortgage lender’s stake in

HDFC Bank will now rise to 23.8 per cent.

The warrants were issued to HDFC in June last year during the merger of

HDFC Bank with Centurion Bank of Punjab, to allow the mortgage lender to

maintain its shareholding in the merged entity.

HDFC received 26.2 million warrants at Rs 1,530.13 per warrant on a

preferential basis, adding up to Rs 4,000 crore. Of this, HDFC had to pay 10 per

cent of the total amount or Rs 400.9 crore upfront, in line with guidelines on

preferential allotment.

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HDFC Bank’s capital adequacy ratio (CAR), or capital as a percentage of total

risk-weighted assets, was 15.7 per cent at the end of the September quarter,

with Tier-I CAR at 10.9 per cent. The bank’s CAR will now rise above 17 per

cent.

On June 3, 2008, the date on which the warrants were issued, HDFC Bank’s

stock price was Rs 1,282.55 per share on the Bombay Stock Exchange. During

the stock market bear run, the stock hit a low of Rs 774 on March 6, 2009, but

regained when the markets bounced back.

HDFC Bank’s stock was trading at Rs 1,756.25 at the end of trading on the

Bombay Stock Exchange on Monday, up 0.49 per cent over the previous close.

HDFC Bank was incorporated in August 1994, and, currently has an nationwide

network of 1,506 Branches and 3,573 ATM's in 635 Indian towns and cities.

Mumbai Country's second largest private sector lender HDFC Bank is planning

to open 300 branches this fiscal, taking its total number of branches to over

1,700.

The bank has necessary regulatory approval for opening 300 branches this year,

according to a senior official of HDFC Bank.

36

With the addition, the total number of branches would go up to 1712.

Currently, the bank has a nationwide network of 1412 branches and 3295

ATM's in 528 cities in the country.

HDFC Bank posted a 30.5 per cent increase in its net profit at Rs 606.1 crore

for the first quarter ended June 2009, driven by a robust rise in income from

fees and commissions.

The private sector lender had a net profit of Rs 464.35 crore in the first quarter

of FY'09.

The bank's earnings from fees and commissions was Rs 649.3 crore in the same

quarter, up 27 per cent over the year-ago period.

Income from other sources, too, registered a strong growth rate of 75.9 per cent

from Rs 593.4 crore in Q1 of FY'09 to Rs 1,043.7 crore.

The total income of the bank rose 22 per cent to Rs 5,136.75 crore during the

first quarter of FY'10 from Rs 4,215.15 crore in the corresponding period a

year-ago.

HDFC stands for Housing Development Financial Corporation. It was

incorporate in year 1977 as a public limited company under company’s act

37

1956 as to commence its business in housing finance, i.e. to provide the

financial services such as loans, etc to the general public in respect to their

requirements. It has grown to be a leader in housing finance. It was the pioneer

in housing finance as well as the first private Sector Company in the field of

housing finance.

On analyzing the balance sheets and annual report of the company we came out

with the conclusion that during the financial year ending 2000-2001 the

quantum of loans approved were Rs. 68.80 billion as compared to its loan

disbursed comes out to be Rs. 58.03 billion. In the financial year 2001-2002

both the loans approved and loan disbursed drastically changed and the figure

comes out be Rs. 90.41 billion and Rs. 76.17 billion loans approved as well as

loan disbursed respectively. The last year annual report and balance sheet

clearly indicates the growth in terms of loan approved and loan disbursed the

figure itself speaks the success story of HDFC as the graph of loan approved

touches the benchmark of Rs.117.32 billion as compared to loan disbursed

which comes out to be Rs.99.51 billion.

On scrutinizing the financial year health of the last three years of the company,

we find out that the conversion ratio is very high i.e. almost all the loans

approved are converted in to the final approval resulting in to the disbursement

of finance amount.

38

The brief knowledge of the Performance indicator of the group can be briefly

understood through its loan approval and its disbursements, which can be seen

through ‘Bar Graph’, which is as follows.

HDFC’s GEOGRAPHICAL SPREADS: -

HDFC geographical spreads extents throughout India except the state of Jammu

and Kashmir, Himachal Pradesh, and North-East states of the country. It has

wide network of regional offices and branch offices covering almost each and

every territory, part, and state region of the country. It current strength of

regional offices and branch offices covers almost 2400 towns and cities.

If we see the HDFC geographic spread in the last decade we would find out that

it has increased from 26 number to 145 numbers, with the advent of LPG

(Liberalization, Privatization, and Globalization). HDFC came out with offices

with a geographical spread of 26 in numbers. In the year 1997 the numbers

comes out to be 32, in 1998 it becomes 48, in 1999 it has 49, in the year 2000

the number comes to be 67, in 2001 it was 87 and now in the current year it has

a network of 145 offices (Including Regional and Branch Offices) excluding

branch counters in township branches.

If we analysis the growth rate and geographical spread of HDFC in the last

decade we would came out with the conclusion that the growth of HDFC only

in terms of geographical spreads is more then five times. It is a sure sign of

39

success. As a company, bank, institution can only survive when it has got a

large network spread in throughout the country. It has out of reach program out

90 locations in the upcoming future.

Talking about the present scenario it has deposits and loan production offered to

individuals in over 2000 towns and cities. During the last financial year 2002-

2003 it has open 24 offices in the different parts of the country. To sum up we

can conclude that HDFC’s regional offices and branch offices are evenly spread

throughout the country and 145 in numbers. The geographical spread of the

HDFC’s can be seen through the following map. It shows that how the group is

spreading its network throughout the nation. It also shows the number of

Regional and Branch offices of the group from the 1992 to the year 2008.

MARKET SCENARIO: -

The market scenario gives us the information that how HDFC group is moving

steadily in the housing development industry. The current market scenario of

HDFC groups can be understood from the following points and discussions: -

Improved affordability and huge shortage: -

40

Mortgages contribute 1% of India’s GDP as compared to 51% in USA. On

analyzing the report/survey done by agency SSB, it is clear that in India

there is greater opportunities as regard to housing finance because in India

people are not worried about their cars, club membership or any material

pertaining to luxury, but they are searching for ‘ROTI, KAPDA and

MAKAN’. HDFC started its there operation way back in year 1977 with an

aim to provide houses to individuals. The total mortgage in India contributes

1% of GDP (Gross Domestic Product) as compared to USA the amount of

mortgage comes out to be 51% of the GDP. Thus there are much more

opportunities for a housing finance companies in India, as the total mortgage

in India contributes only 1% of GDP (Gross Domestic Product).

Growth in demand is driven by improved affordability: -

Falling property prices: Another factor of market scenario for a housing

finance company like HDFC is falling property prices. The prices of the

properties are falling drastically both in Urban and Rural areas. This has

become possible only after the advent of new avenues of investments. Thus

if the prices of the property falls there are greater chances of housing

finance.

Lowest interest rates since inception: Another factor for a better market

scenario for a housing finance company like HDFC is its lowest interest

41

rate. It provides most affordable, competitive, and best deals in the whole of

the housing finance industry.

Rising income levels: Another factor for a better market scenario is the

rising income level of the Indian residents. After the advent of LPG

(Liberalization, Privatization, and Globalization) the income level of an

individual has increased drastically, resulting into increasing saving and

purchasing power of the individual. This factor also acts as a catalyst to the

market scenario of housing finance industry.

Fiscal incentives on both interest and principal repayments: Another factor

for a better market scenario for a housing finance company like HDFC is

fiscal incentives on both interest and principal repayments. This has become

possible due to finance bill 2002-2003 i.e. the Budget of India. It provides

tax concession and tax relief on both interest and principal repayments of

housing finance.

Increasing urbanization: -

One of the major factors of increasing market scenario of housing finance

companies is increasing urbanization. People are rushing from rural areas to

urban areas in the search of employment, in the urban areas they need separate

house to live in, thus the need of housing finance arises and this can be fulfilled

42

by means of housing finance companies and HDFC is amongst them satisfying

their needs.

Increased network of outlets: -

Another factor of market scenario for a housing finance company like HDFC is

increased network of outlets. It has increased its outlets since 1992 to 2003

from 26 (nos.) to 145 (nos.). During the last financial year it has opened 24 new

offices and now its deposit and loans products offered to individuals in over

2400 towns and cities countrywide.

Housing shortage of 19.4 million units: -

12.7 m units in rural areas.

6.7 m units in urban areas.

Centurion Bank of Punjab has a nationwide reach through its network of 240

branches and extension counters and 388 ATMs. The bank aims to serve all the

banking and financial needs of its customers through multiple delivery

channels, each of which is supported by state-of-the-art technology

architecture.

Centurion Bank of Punjab was formed by the merger of Centurion Bank and

Bank of Punjab.Incorporated in August 1994 as HDFC Bank Limited, the bank

43

now has a wide network of over 531 branches across 228 cities in India, and

over a thousand networked ATM's.

HDFC Bank is India's second-largest bank with total assets of about Rs. 1

trillion and a network of about 540 branches and offices and over 1,000 ATMs

Currently, the bank has a nationwide network of 1412 branches and 3295

ATM's in 528 cities in the country.

HDFC Bank posted a 30.5 per cent increase in its net profit at Rs 606.1 crore

for the first quarter ended June 2009, driven by a robust rise in income from

fees and commissions.

The private sector lender had a net profit of Rs 464.35 crore in the first quarter

of FY'09.

The bank's earnings from fees and commissions was Rs 649.3 crore in the same

quarter, up 27 per cent over the year-ago period.

Mumbai Country's second largest private sector lender HDFC Bank is planning

to open 300 branches this fiscal, taking its total number of branches to over

1,700.

The bank has necessary regulatory approval for opening 300 branches this year,

according to a senior official of HDFC Bank.

44

With the addition, the total number of branches would go up to 1712.

Currently, the bank has a nationwide network of 1412 branches and 3295

ATM's in 528 cities in the country.

HDFC Bank posted a 30.5 per cent increase in its net profit at Rs 606.1 crore

for the first quarter ended June 2009, driven by a robust rise in income from

fees and commissions.

The private sector lender had a net profit of Rs 464.35 crore in the first quarter

of FY'09.

The bank's earnings from fees and commissions was Rs 649.3 crore in the same

quarter, up 27 per cent over the year-ago period.

Income from other sources, too, registered a strong growth rate of 75.9 per cent

from Rs 593.4 crore in Q1 of FY'09 to Rs 1,043.7 crore.

The total income of the bank rose 22 per cent to Rs 5,136.75 crore during the

first quarter of FY'10 from Rs 4,215.15 crore in the corresponding period a

year-ago.

The Asian Banker declares HDFC Bank the Best Retail Bank

HDFC Bank makes it 3rd time in a row.

45

Chosen as the best retail bank amongst 120 banks and financial

institutions from 22 countries across the Asia Pacific, Gulf and Central

Asian regions.

Mumbai, April 28, 2009 : HDFC Bank, one of India’s premier banks, has won

The Asian Banker's ’Best Retail Bank in India’ award for year 2009. Beating a

host of other competitors in Asia Pacific, Gulf Cooperation Council (GCC) and

Central Asia on a range of parameters, the Bank won for the third year in a row.

HDFC Bank won the Best Retail Bank in India award ”based on robust core

funding, superior financial performance, sustainability and effective distribution

channels amidst a highly challenging environment,” in the words of The Asian

Banker magazine. For retail financial services, HDFC Bank was able to manage

its retail operations better than any of its competitors. HDFC Bank was not only

able to increase its retail asset market share without sacrificing margins but also

maintained profitability. “With the merger of Centurion Bank of Punjab”, the

magazine adds “HDFC Bank transformed into a sizeable financial powerhouse,

having the largest branch network among all private sector banks in the

country.”

The impact on the branch network was the most significant as HDFC Bank not

only doubled its branch network but also its sales. HDFC bank’s strong

46

integration capability is believed to bear further fruits in 2009. The bank was

successful in enhancing product cross-sell capabilities by starting to engage

customers earlier in the lifecycle. The magazine noted, ”The bank was able to

capture large volume of core retail deposits with a relatively lower cost of fund

than its private sector peers.” Announcing the Asian Banker Excellence awards

2009, the magazine reiterates, “HDFC Bank firmed up its market share with a

more rational pricing compared to other traditional players in the banking

system.”

The Asian Banker Excellence in Retail Financial Services Programme was

instituted in 2001 on the premise that an outstanding player in the retail

financial services industry should build business franchises that are sustainable,

competitive and profitable over a period of time.

The break up of the assets of HDFC Group is as follows: -

86% of the assets consists of loans including preference shares, Equity

shares, Debentures and corporate deposits for real estate projects.

09% of assets profile consists of Investments.

03% of assets profile consists of Net Current assets.

02% of assets profile consists of Fixed Assets.

47

CORPORATE STENGTHS: -

Strong Brand: - HDFC has got its own brand value since 1977. Since then

HDFC has grown up as a leader in housing finance. Since then it is enjoying

brand loyalty and strong brand image in the industry.

Customer base of over 2 million: - Another corporate strength of HDFC is

that it has a customer base of over 2 million peoples. This is only possible

because the company is consistently involved in the housing finance

activities since 1977 through its various offices spread throughout the

country.

Stable and experienced management: - One of the major corporate

strength of HDFC is its stable and experienced management. Though on the

management desk there is a provision of directors retiring by rotation, but

maximum number of directors of HDFC are non-retiring one and those who

are liable to retire by rotation are re appointed by the board itself. This

provides stable and strong management.

As HDFC is a finance and Banking institution so its requires those directors

who are professionally and technically sound in all the economic and

financial aspects. Most of the directors on the board of HDFC are well

equipped in handling financial problems as well as handling day to day

affairs.

48

Provision for contingencies: - Another corporate strength of HDFC is high

quality of loan and greater provision for contingencies. On analyzing the

balance sheet of last three financial years i.e. 2000-2001, 2001-2002, 2002-

2003 we find out that the ratio of non-performing assets/loans is much lower

than provision for contingencies. The detailed break up of non-performing

assets/loans and provision for contingencies are depicted through the Bar-

Graph from the following page.

Constant technological up gradation of system: - as the time passes many

organization are not resist change, but here in HDFC all the operational

work is done through computers. Company is using latest technology i.e. all

the computer systems are Pentium (P4) systems, besides this company is

providing various electronic services like Net-Banking, On line services as

well as ATM cards etc.

Capital adequacy ratio: - Last but not the least corporate strength of HDFC

is that its capital adequacy ratio, it is purely and entirely depends upon tier-1,

which is considered to be the best capital adequacy ratio for finance

company. On analyzing and scrutinizing of balance-sheet we find out that

the total capital of HDFC group consist of Rs. 2.44 billion and its reserves

and surplus amount to Rs. 28 billion and the rest amount of liabilities

attributes borrowings in the form of deposit, domestic term loan, bonds &

49

debentures, and international borrowings. The total quantum of borrowings

is of Rs. 232.52 billions.

Let us consider the liabilities in the form of percentage, for the purpose of

capital adequacy ratio – Tier 1.Its comes out to be 1% for Capital, 11% for

Reserve and Surplus and 88% for borrowings. This could be easily

understood by ahead given pie-chart.

RECENT DEVELOPMENTS: -

As we all know that HDFC has started its business from housing finance, many

developments were made by HDFC. Presently HDFC is doing its operation in

many business sectors. The recent developments, which the HDFC has made,

are as follows: -

Strong retail growth continues.

Expansion of spreads

50

Growth in portfolio.

Reduction in funding cost.

FRN issue / Syndicated Yen Loan.

Securitization.

Packaged home loan product with special offers from group companies.

Cross-selling through HDFC Bank.

ARRANGEMENT WITH HDFC BANK: -

Arrangement to leverage on the strengths of the two organizations.

HDFC’s expertise in credit, legal, technical appraisal and cost structure.

HDFC Bank’s network and customer base

HDFC Bank to source home loans for a fee.

Loans to be originated in the books of HDFC.

HDFC to offer 70% of the fully disbursed loans for sale to HDFC Bank

through issue of ‘AAA’ rated Mortgage Pass Through Certificates.

PRODUCT AND SERVICES:

Personal Banking

Savings Accounts

Salary Accounts

Current Accounts

Fixed Deposits

51

Demat Account

Safe Deposit Lockers

Loans

Credit Cards

Debit Cards

Prepaid Cards

Investments & Insurance

Forex Services

Payment Services

NetBanking

InstaAlerts

MobileBanking

InstaQuery

ATM

PhoneBanking

NRI Banking

Rupee Savings Accounts

Rupee Current Accounts

Rupee Fixed Deposits

Foreign Currency Deposits

Accounts for Returning

Indians

Quickremit (North America,

UK, Europe, Southeast Asia)

IndiaLink (Middle East,

Africa)

ChequeLockBox

Telegraphic / Wire Transfer

Funds Transfer through

Cheques / DDs / TCs

Mutual Funds

Private Banking

Portfolio Investment Schemes

Loans

Payment Services

NetBanking

InstaAlerts

MobileBanking

InstaQuery

ATM

PhoneBanking.

52

HDFC Bank

Over the years, HDFC has helped to promote institutions in the field of housing

finance, and in the financial sector in general. Notable amongst these has been

HDFC Bank. This was initially promoted in a strategic alliance with Natwest

Markets-UK. HDFC Bank commenced its operations in February 1995.

53

HDFC Bank currently has strategic business collaboration with The Chase

Manhattan Bank. HDFC Bank is presently the largest private sector bank

following the merger with Times Bank Limited. The merger has provided

HDFC Bank a strong presence in the retail-banking segment.

HDFC currently holds 24.4 % of equity in HDFC Bank, Stock also listed on

NYSE in the form of American Depository Shares. During the years of its

operations HDFC has increased its network presently HDFC having a network

of over 250 branches spread over 135 cities and having over 800 ATMs nation

wide. Beside this HDFC is providing various facilities to its customers like

phone banking, mobile and internet banking as a result it has a customer base of

over 3.1 million accounts.

Key business areas

Wholesale banking.

Retail banking.

Treasury operations.

HDFC BANK AT GLANCE: -

HDFC Bank Limited, 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 of the RBI's liberalization of

54

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.

Promoter

HDFC is India's premier housing finance company and enjoys an impeccable

track record in India as well as in international markets. Since its inception in

1977, the Corporation has maintained a consistent and healthy growth in its

operations to remain a market leader in mortgages. Its outstanding loan

portfolio covers well over a million dwelling units. HDFC has developed

significant expertise in retail mortgage loans to different market segments and

also has a large corporate client base for its housing related credit facilities.

With its experience in the financial markets, a strong market reputation, large

shareholder base and unique consumer franchise, HDFC was ideally positioned

to promote a bank in the Indian environment.

Business Focus

HDFC Bank's mission is to be a World-Class Indian Bank. The Bank's aim is to

build sound customer franchises across distinct businesses so as to be the

preferred provider of banking services in the segments that the bank operates in

and to achieve healthy growth in profitability, consistent with the bank's risk

55

appetite. The bank is committed to maintain the highest level of ethical

standards, professional integrity and regulatory compliance. HDFC

Bank's business philosophy is based on four core values: Operational

Excellence, Customer Focus, Product Leadership and People.

Capital Structure

The authorized capital of HDFC Bank is Rs.450 crore (Rs.45 billion). The paid-

up capital is Rs.282 crore (Rs.28.2 billion). The HDFC Group holds 24.4% of

the bank's equity while about 13.2% of the equity is held by the depository in

respect of the bank's issue of American Depository Shares (ADS/ADR Issue).

The Indian Private Equity Fund, Mauritius (IPEF) and Indocean Financial

Holdings Ltd., Mauritius (IFHL) (both funds advised by J P Morgan Partners,

formerly Chase Capital Partners) together hold about 5.5% of the bank's equity.

Roughly 23% of the equity is held by FIIs, NRIs/OCBs while the balance is

widely held by about 2,50,000 shareholders. The shares are listed on The Stock

Exchange, Mumbai and the National Stock Exchange. The bank's American

Depository Shares are listed on the New York Stock Exchange (NYSE) under

the symbol "HDB".

Times Bank Amalgamation

In a milestone transaction in the Indian banking industry, Times Bank Limited

(another new private sector bank promoted by Bennett, Coleman & Co./Times

56

Group) was merged with HDFC Bank Ltd., effective February 26, 2000. As per

the scheme of amalgamation approved by the shareholders of both banks and

the Reserve Bank of India, shareholders of Times Bank received 1 share of

HDFC Bank for every 5.75 shares of Times Bank. The amalgamation added

significant value to HDFC Bank in terms of increased branch network,

expanded geographic reach, enhanced customer base, skilled manpower and the

opportunity to cross-sell and leverage alternative delivery channels.

Distribution Network

HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable

network of over 250 branches spread over 135 cities across the country. All

branches are linked on an online real-time basis. Customers in 80 locations are

also serviced through Phone Banking. The Bank's 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 the centers where the NSE/BSE have a strong and active member

base.

The Bank also has a network of over 800 networked ATMs across these cities.

Moreover, HDFC Bank's ATM network can be accessed by all domestic and

57

international Visa/MasterCard, Visa Electron/Maestro, Plus/Cirrus and

American Express Credit/Charge cardholders.

Management

Mr. Jagdish Kapoor took over as the bank's Chairman in July 2001. Prior to

this, Mr.Capoor was a Deputy Governor of the Reserve Bank of India.

The Managing Director, Mr. Aditya Puri, has been a professional banker for

over 25 years, and before joining HDFC Bank in 1994 was heading Citibank's

operations in Malaysia.

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.

Technology

HDFC Bank operates in a highly automated environment in terms of

information technology and communication systems. The entire bank's

branches have connectivity, which enables the bank to offer speedy funds

58

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 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, saleable and web-enabled.

The Bank has priorities 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.

Business Profile

HDFC Bank caters to a wide range of banking services covering both

commercial and investment banking on the wholesale side and transactional /

branch banking on the retail side. The bank has three key business areas:

a) Wholesale Banking Services

59

The Bank's target market is primarily large, blue-chip manufacturing companies

in the Indian corporate sector and to a lesser extent, emerging mid-sized

corporate. For these corporate, the Bank provides a wide range of commercial

and transactional banking services, including working capital finance, trade

services, transactional services, cash management, etc. The bank is also a

leading provider of structured solutions which combine cash management

services with vendor and distributor finance for facilitating superior supply

chain management for its corporate customers. Based on its superior product

delivery / service levels and strong customer orientation, the Bank has made

significant inroads into the banking consortia of a number of leading Indian

corporate including multinationals, companies from the domestic business

houses and prime Public Sector companies. It is recognized as a leading

provider of cash management and transactional banking solutions to corporate

customers, mutual funds, stock exchange members and banks.

b) Retail Banking Services

The objective of the Retail Bank is to provide its target market customers a full

range of financial products and banking services, giving the customer a one-

stop window for all his/her banking requirements. The products are

60

backed by world-class service and delivered to the customers through the

growing branch network, as well as through alternative delivery channels like

ATMs, Phone Banking, NetBanking and MobileBanking.

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 Services to retail customers, offering

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 Master card Master debit

card as well. The debit card allows the user to directly debit his account at the

point of purchase at a merchant establishment, in India and overseas. The Bank

launched its credit card in association with VISA in November 2001. The Bank

is also one of the leading players in the “merchant acquiring” business with

over 25,000 Point-of-sale (POS) terminals for debit / credit cards acceptance at

merchant establishments. The Bank is well positioned as a leader in various net-

61

based B2C opportunities including a wide range of internet banking services for

Fixed Deposits, Loans, Bill Payments, etc.

c) Treasury Operations

Within this business, the bank has three main product areas - Foreign Exchange

and Derivatives, Local Currency Money Market & Debt Securities, and

Equities. With the liberalization of the financial markets in India, corporate

need more sophisticated risk management information, advice and product

structures. These and fine pricing on various treasury products are provided

through the bank's Treasury team. To comply with statutory reserve

requirements, the bank is required to hold 25% of its deposits in government

securities. The Treasury business is responsible for managing the returns and

market risk on this investment portfolio.

Rating

HDFC Bank has its deposit programmes rated by two rating agencies - Credit

Analysis & Research Limited (CARE) and Fitch Ratings India Private Limited.

The Bank’s Fixed Deposit programme has been rated ‘CARE AAA (FD)’

[Triple A] by CARE, which represents instruments

considered to be “of the best quality, carrying negligible investment risk”.

CARE has also rated the Bank’s Certificate of Deposit (CD) programme “PR

62

1+” which represents “superior capacity for repayment of short-term

promissory obligations”. Fitch Ratings India Pvt. Ltd. (100% subsidiary of

Fitch Inc.) has assigned the “tAAA (ind)” rating to the Bank’s deposit

programme, with the outlook on the rating as “stable”. This rating indicates

“highest credit quality” where “protection factors are very high”. In each case

referred to above, the ratings awarded were the highest assigned by the rating

agency for those instruments.

Corporate Governance Rating

The bank was one of the first four companies which subjected itself to a

Corporate Governance and Value Creation (GVC) rating by the rating agency,

The Credit Rating Information Services of India Limited (CRISIL). The rating

provides an independent assessment of an entity’s current performance and an

expectation on its “balanced value creation and corporate governance practices”

in future. The bank has been assigned a ‘CRISIL GVC Level 1’ rating which

indicates that the bank’s capability with respect to wealth creation for all its

stakeholders while adopting sound corporate governance practices is the

highest.

OBJECTIVES & BACKGROUND

63

Against the milieu of rapid urbanization and a changing socio-economic

scenario, the demand for housing has grown explosively. The importance of the

housing sector in the economy can be illustrated by a few key statistics.

According to the National Building Organization (NBO), the total demand for

housing is estimated at 2 million units per year and the total housing shortfall is

estimated to be 19.4 million units, of which 12.76 million units is from rural

areas and 6.64 million units from urban areas. The housing industry is the

second largest employment generator in the country. It is estimated that the

budgeted 2 million units would lead to the creation of an additional 10 million

man-years of direct employment and another 15 million man-years of indirect

employment.

Having identified housing as a priority area in the Ninth Five Year Plan (1997-

2002), the National Housing Policy has envisaged an investment target of Rs.

1,500 billion for this sector. In order to achieve this investment target, the

Government needs to make low cost funds easily available and enforce legal

and regulatory reforms.

Background

HDFC was incorporated in 1977 with the primary objective of meeting a social

need - that of promoting home ownership by providing long-term finance to

64

households for their housing needs. HDFC was promoted with an initial share

capital of Rs. 100 million.

Business Objectives

The primary objective of HDFC is to enhance residential housing stock in the

country through the provision of housing finance in a systematic and

professional manner, and to promote home ownership. Another objective is to

increase the flow of resources to the housing sector by integrating the housing

finance sector with the overall domestic financial markets..

Organizational Goals

HDFC's main goals are to a) develop close relationships with individual

households, b) maintain its position as the premier housing finance institution in

the country, c) transform ideas into viable and creative solutions, d) provide

consistently high returns to shareholders, and e) to grow through diversification

by leveraging off the existing client base.

Organization & Management

HDFC is a professionally managed organization with a board of directors

consisting of eminent persons who represent various fields including finance,

taxation, construction and urban policy & development. The board primarily

focuses on strategy formulation, policy and control, designed to deliver

increasing value to shareholders.

65

Awards

HDFC Bank began operations in 1995 with a simple mission: to be a "World-

class Indian Bank". We realized that only a single-minded focus on product

quality and service excellence would help us get there. Today, we are proud to

say that we are well on our way towards that goal.

It is extremely gratifying that our efforts towards providing customer

convenience have been appreciated both nationally and internationally.

FINANCIAL INFORMATION

The last twelve years have been very fulfilling. We can of course wax eloquent

about it in so many ways, but they say, figures don't lie, so we will let the

figures do all the talking. They will give you a fair idea of how we have grown

in the past few years .

Financial Results

RBI Order of Amalgamation - CBOP

Scheme of Amalgamation - CBOP (as approved by RBI)

Annual Reports

66

Mission and Business Strategy

Our mission is to be "a World Class Indian Bank", benchmarking ourselves

against international standards and best practices in terms of product offerings,

technology, service levels, risk management and audit & compliance. The

objective is to build sound customer franchises across distinct businesses so as

to be a preferred provider of banking services for target retail and wholesale

customer segments, and to achieve a healthy growth in profitability, consistent

with the Bank's risk appetite. We are committed to do this while ensuring the

highest levels of ethical standards, professional integrity, corporate governance

and regulatory compliance.

OUR BUSINESS STRATEGY EMPHASIZES THE FOLLOWING :

Increase our market share in India’s expanding banking and financial

services industry by following a disciplined growth strategy focusing on

quality and not on quantity and delivering high quality customer service.

Leverage our technology platform and open scalable systems to deliver

more products to more customers and to control operating costs.

Maintain our current high standards for asset quality through disciplined

credit risk management.

Develop innovative products and services that attract our targeted

67

customers and address inefficiencies in the Indian financial sector.

Continue to develop products and services that reduce our cost of funds.

TERMS AND CONDITIONS

This document lays out the Terms and Conditions which shall be applicable to

all the accounts which are existing or may be opened anytime in future with

HDFC Bank. The words, I, me, my and Customer refer to the person(s) who

open the account and shall include both singular and plural. Reference to

masculine shall include the feminine and neuter gender. The Bank refers to

HDFC Bank Ltd., a banking company incorporated in India under the

Companies Act 1956 and having its registered office at HDFC Bank House,

SenapatiBapatMarg, Lower Parel, Mumbai-400013.

1. GENERAL -

APPLICABLE TO ALL

SERVICES

2. SAVINGS

ACCOUNTS

3. CURRENT

ACCOUNTS4. FIXED DEPOSITS

5. SUPERSAVER

ACCOUNTS / FACILITY

6. SWEEP IN

INSTRUCTIONS

68

7. RECURRING

DEPOSITS

8. ATM USABLE

CARDS

9. PHONEBANKING10. BILL PAY

FACILITY

11. INSTAQUERY 12. INSTAALERT

13. NET BANKING14. VISA MONEY

TRANSFER

15. INTERNATIONAL

DEBIT CARD

16. EMAIL

STATEMENTS

17. PASSBOOK

18. INVESTMENT

SERVICES

ACCOUNT

19. AVERAGE

QUARTERLY BALANCE

20. DOORSTEP

BANKING

SERVICES

21. ADD-ON CARD ON

MOBILE

PROMOTER

69

HDFC is India's premier housing finance company and enjoys an impeccable

track record in India as well as in international markets. Since its inception in

1977, the Corporation has maintained a consistent and healthy growth in its

operations to remain the market leader in mortgages. Its outstanding loan

portfolio covers well over a million dwelling units. HDFC has developed

significant expertise in retail mortgage loans to different market segments and

also has a large corporate client base for its housing related credit facilities.

With its experience in the financial markets, a strong market reputation, large

shareholder base and unique consumer franchise, HDFC was ideally positioned

to promote a bank in the Indian environment.

BUSINESS FOCUS

HDFC Bank's mission is to be a World-Class Indian Bank. The objective is to

build sound customer franchises across distinct businesses so as to be the

preferred provider of banking services for target retail and wholesale customer

segments, and to achieve healthy growth in profitability, consistent with the

bank's risk appetite. The bank is committed to maintain the highest level of

ethical standards, professional integrity, corporate governance and regulatory

compliance. HDFC Bank's business philosophy is based on four core values -

Operational Excellence, Customer Focus, Product Leadership and People.

CAPITAL STRUCTURE

70

As on 31st March, 2009 the authorized share capital of HDFC Bank is Rs. 550

crore. The paid-up capital as on the said date is Rs. 425,38,41,090/-

( 42,53,84,109 equity shares of Rs 10/- each). The HDFC Group holds 19.38%

of the Bank's equity and about 17.70 % of the equity is held by the ADS

Depository (in respect of the bank's American Depository Shares (ADS) Issue).

27.69 % of the equity is held by Foreign Institutional Investors (FIIs) and the

Bank has about 5,48,774 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.

CENTURION BANK OF PUNJAB & TIMES BANK AMALGAMATION

71

On May 23, 2008, the amalgamation of 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 merged entity will have a strong deposit base of around Rs. 1,22,000crore

and net advances of around Rs. 89,000 crore. The balance sheet size of the

combined entity would be over Rs. 1,63,000crore. The amalgamation added

significant value to HDFC Bank in terms of increased branch network,

geographic reach, and customer base, and a bigger pool of skilled manpower.

In a milestone transaction in the Indian banking industry, Times Bank Limited

(another new private sector bank promoted by Bennett, Coleman & Co. / Times

Group) was merged with HDFC Bank Ltd., effective February 26, 2000. This

was the first merger of two private banks in the New Generation Private Sector

Banks. As per the scheme of amalgamation approved by the shareholders of

both banks and the Reserve Bank of India, shareholders of Times Bank received

1 share of HDFC Bank for every 5.75 shares of Times Bank.

DISTRIBUTION NETWORK

72

HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable

network of 1,506 branches spread in 635 cities across India. All branches are

linked on an online real-time basis. Customers in over 500 locations are also

serviced through Telephone Banking. The Bank's expansion plans take into

account the need to have a presence in all major industrial and commercial

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 the centers where the NSE/BSE have a strong and active member

base. The Bank also has 3,573 networked ATMs across these cities. Moreover,

HDFC Bank's ATM network can be accessed by all domestic and international

Visa/MasterCard, Visa Electron/Maestro, Plus/Cirrus and American Express

Credit/Charge cardholders.

Management

Mr. JagdishCapoor took over as the bank's Chairman in July 2001. Prior to this,

Mr. Kapoor was a Deputy Governor of the Reserve Bank of India. The

Managing Director, Mr. AdityaPuri, 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,

73

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.

BUSINESSES

HDFC Bank offers a wide range of commercial and transactional banking

services and treasury products to wholesale and retail customers. The bank has

three key business segments:

Wholesale Banking Services

The Bank's target market ranges from large, blue-chip manufacturing

companies in the Indian corporate to small & mid-sized 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

74

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.

PURPOSE OF STUDY

75

When a performance appraisal indicates performance improvement is needed.

To "benchmark" the status of improvement so far in a performance

improvement effort.

As part of an overall professional development program.

As part of succession planning to help an employee be eligible for a planned

change in role in the organization

To "pilot", or test, the operation of a new performance management system.

To train about a specific topic.

The benefits that accrue to the organization from training &development are-

Increased job satisfaction and morale among employees

Increased employee motivation

Increased efficiencies in processes, resulting in financial gain a

Increased capacity to adopt new technologies and methods

Increased innovation in strategies and products

Reduced employee turnover

Enhanced company image, employee or group conducting ethics training

Risk management, employee or group training about sexual harassment,

diversity training ,

 ANALYSIS AND INTERPRETATION

76

1. Awareness of the performance appraisal system:

               YES (1)                  NO (2)

               95%                   5%

 

Graph 1:awareness of performance appraisal system

YES (1), 95%

NO(2), 5%

YES (1)NO(2)

INTERPRETATION: 

The result clearly shows that overall officers are aware about the performance

appraisal system, only 5% are not aware.

 

2. Degree of transparency in the performance appraisal system:

low (1) moderate (2) high (3)

77

10% 55% 35%

 

  

graph 2 : degree of transparecy in perfomance appraisal system

low (1), 10%

moderate (2) , 55%

high (3) , 35%

low (1)

moderate (2) high (3)

INTERPRETATION:

According to the collected data mare than 50% officers opined that the

transparency in the performance appraisal system is moderate, but 35% officers

viewed that the transparency is high and 10% officers opined that transparency

is low.

3. Clarity in the appraisal system:

78

 YES (1) NO (2)

80% 20%

 

  

graph 3: clarity in appraisal system

YES (1), 80%

NO (2), 20%

YES (1)NO (2)

INTERPRETATION:

The result clearly shows that overall officers are opined that there is clarity in

performance appraisal system, only 20% viewed that there is no clarity in the

system.

4. Drawbacks associated with the appraisal system:

79

 YES (1) NO (2)

40% 60%

      

Graph 4:Drawback associated with the appraisal system

YES (1), 40%

NO (2), 60%YES (1)

NO (2)

INTERPRETATION:

The result shows that more than 50% officers opined that there does not have

any limitations in the appraisal system. Less than 50% opined that there are

drawbacks associated with appraisal system.

5. Feedback:

YES (1) NO (2)

80

70% 30%

 

 

Graph 5: Feedback

YES (1), 70%

NO (2), 30%

YES (1)NO (2)

INTERPRETATION:

The results shows that 70% officers are getting feedback by their immediate

supervisors. 30% are not getting feedback by their bosses.

6. E-PMS for non officers:

 

81

YES (1) NO (2)

95% 5%

 

 

Graph 6: E-pms for non officer

YES (1), 95%

NO (2), 5%

YES (1)NO (2)

INTERPRETATION:

The data clearly shows that mostly officers opined that computerization of

performance appraisal system for non officers will improve the efficiency and

transparency in the system. 

 

 

7. Training to appraise after appraisal

  YES (1) NO (2)

82

100% NIL

 

        

Graph 7: Training to appraisee after appraisal

YES (1), 100%

NO(2), 0%

YES (1)NO(2)

  INTERPRETATION:

According to the collected data , all the officers opined that training should be

provided to appraise after every appraisal.

8. Training to appraiser

83

YES (1) NO (2)

90% 10%

  

 

Graph 8:Training to appraiser

YES (1), 90%

NO (2), 10%

YES (1)NO (2)

INTERPRETATION:

According to the above data 90% officers opined that training should be

provided to appraiser, but according to 10% officers there is no need of training

for appraiser.

 

9. Monetary linkage of appraisal system as a bonus

84

 YES (1) NO (2)

60% 40%

 

 

Graph 9 : Monetary linkage of a appraisal system as a bonus

YES (1), 60%

NO (2), 40%

YES (1)NO (2)

 

INTERPRETATION:

The result shows that 60% officers are satisfied with the monetary linkage of

appraisal system as a bonus, BUT 40% are not satisfied.

 

10. Appraisal system on a 5-point rating scale

85

Unsatisfactory(1)  below

satisfactory(2)

satisfactory

(3)

above

satisfactory

(4)

outstanding(5)

10% 10% 20% 30% 30%

  

Graph10:Appraisal system on 5 point rating scale

Unsatisfactory(1), 10%Below satisfactory

?(2), 10%

satisfactory(3), 20%

Above satisfactory (4), 30%

Outstanding(5), 30% Unsatisfactory(1)

Below satisfactory ?(2)

satisfactory(3)Above satisfactory (4)

Outstanding(5)

`

INTERPRETATION:

According to the collected data 60% officers are above satisfactory,20% are

satisfied and 20% are below satisfactory with the appraisal system in the HDFC

BANK.

 11. Periodicity of performance appraisal

  half-yearly (2) annually (3)

86

 Quarterly (1)

25% 25% 50%

 

Graph 12:periodicity of performance appraisal

quaterly(1), 25%

halfyearly(2)), 25%

annualy(3), 50% quaterly(1)halfyearly(2))

annualy(3)

INTERPRETATION:

According to the above data mostly officers opined that performance appraisal

should be annually, but some of them are not satisfied. Performance appraisal

according to them should be half-yearly and quarterly.

     

FINDINGS:-

 According to our study most of the officers want that performance appraisal

should be done annually.

87

Training should be given to the appraiser

Appraise get the feedback from their appraiser.

Officers are well aware about the performance management system.

Officers are satisfied with the appraisal system used in HDFC BANK.

Computerized PMS increases the efficiency of the employees.

 

 

 

 

 

 

 

 

CONCLUSION

 According to the research, he employees are not very much aware about to deal

the HDFC BANK. So the superiors should give the proper training to the

88

employees to fill the form available on the HDFC BANK system.

There should be clarity in appraisal system.The feedback should be

provided by the appraiser to the appraise. Performance

Appraisal should be results oriented .Performance meets to corporation

goal.  

 

RECOMMENDATIONS AND SUGGESTIONS

Performance Appraisal methods should be result oriented and HDFC

BANK should move away from the present practice of assessing

89

performance appraisal through personality traits.

Career plans should be made known to employees.

Performance appraisal should be written in the presence of employees

after discussion with them. The employees may be agreeable to the

appraisal made ,but it should be in his knowledge with sufficiently

explained to him .

Any weakness and strength should be informed to the officers and

areas of improvement also be indicated by the immediate supervisor.

The officer should be given whether performance is

satisfactory/good/outstanding and why?

For individual whose performance adverse should be informed so can

be made in successive year.

 

LIMITATIONS OF THE STUDY:-

 There are many shortcomings in the study due to various reasons .The main

limitations of the study are as follows:-

90

 

The size of sample is small due time and resources.

Some respondents are not ready to fill the questionnaire.

The study found a great deal of hesitation among the respondents

while giving information

Due to shortage of time availability the possibility of having

suggestion to exactly be true is quite less.

BIBLIOGRAPHY

Organizational Behaviour- Stephen P. Robbins

Personnel Management- C.B Mamoria&S.V. Gankar

91

Journals like Human Capital, Business Today & Indian Journal of

Training & Development.

Internet sites- google.com and other corporate sites

Studies

Notes

Questionnaire

Web site

www.google.com

www.hdfc.com

www.hdfcbank.com

92