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WHICH BANK TO BANK WITH???
A Project By Mr. Rahul Iyer
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PROJECT REPORT ON


PREPARED BY

Mr. RAHUL IYER

UNDER THE GUIDANCE OF

Prof. Mr. E.V. GIREESH

SUBMITTED TO UNIVERSITY OF MUMBAI

FOR THE AWARD OF

BACHELOR OF MANAGEMENT STUDIES

ACADEMIC YEAR

2007 - 2008

2


Certificate

I, Mr. E.V.GIREESH hereby certify that Mr. RAHUL IYER of

T.Y.B.M.S (Semester V) of SIES (Nerul) College of Arts Science &

Commerce has completed the project on WHICH BANK TO BANK

WITH??? in the Academic year 2007 - 08. The information submitted is

true and original to the best of my knowledge.

_____________________________ ______________________________

(Prof. E.V. GIREESH) (Dr. U.B. JHANGAM)

Signature of the Project Signature of the Principal

Coordinator of the college

3


Declaration

I, Mr. RAHUL IYER of SIES (Nerul) College of Arts, Science &

Commerce Studying in T.Y.B.M.S (Semester V) hereby declare that I

have completed this project on WHICH BANK TO BANK WITH??? in

Academic year 2007-08. The information submitted true & original to

the best of my Knowledge.

Signature of the student

______________________

(Mr. RAHUL IYER)

4


Acknowledgement
Before starting with the project I take pride in thanking the following people without whom I
wouldn‘t be able to complete this project.

First and foremost I would like to thank BMS Coordinator, Mrs. Swatee Sarangi who supported
me, understood my right motive towards the project and helped me get the right guide for my
project.

Mr. E.V.Gireesh – My Professor for guiding me throughout the project and making me learn the
concepts of Banking in brief and relating them to the 7P‘s of Service Marketing.

Mr. K.S.Ganeshan – Manager, Bank of Baroda & Mrs. Mahalakshmi Iyer - .Senior Manager,
HDFC Bank for providing me the knowledge related to this project and guiding me throughout
the project.

I would also like to thank Mrs. Renuka Iyer, Mr. Ninad Sawant, Ms. Prerna Dandona and
Ms.Kinjal Chitalia who assisted me in completing this project

5


EXECUTIVE SUMMARY
In India, with competition heating up in the banking industry and the increase in the number of
private banks in the post liberalization era, all players in this market are gearing up their supply
chain management processes for better customer acquisition and retention. Most of these new
private sector banks are handicapped by the lack of a strong branch network as compared to their
public sector counterparts to distribute their products or services. In the absence of such a
network, the market place has seen the emerged of a lot of innovative services by the players to
increase their market share and reduce their cost of service delivery through direct distribution
strategies of Non-Branch Delivery. In this way, private sector banks in terms of innovation, in
attracting potential customers by offering a range of services which are aimed at not only big
corporate houses bur also the small time businessmen and middle class families. A host of
customer friendly approaches have been adopted to make banking more pleasant and smooth.
Although some Indian public sector banks have started catching up to the tunes of the time by
adopting some innovative measures, still the approach is rather less problematic and seems more
out of compulsion.

After comparing both the private sector banks and public sector banks in all aspects, it was found
that:-

Private sector banks are having poor performance, lack of training, absence of initiative,
reluctant to use modern banking techniques by the employees. Lack of recruitment of
professional in lateral stage, pressure of trade union is the other reasons of poor performance of
employees of public sector banks. In public sector banks, overstaffing with a average of 20 per
cent is also highlighted. Private sector banks employees are highly motivated and handsome
remuneration is being paid to them in comparison to public sector banks. In public sector banks,
majority of the bank employees are not aware of TT. In public sector banks, there is a lack of
awareness of responsibility. In public sector banks employees create a gap between the services
promised and services offered. In public sector, the policy manner and senior executive make
provision for improving the quality of services but bank managers and the frontline staff as a
barrier. Some of the key problems of public sector banks are the information gap, negative
attitude and indecent behaviour but private sector banks does not face such problems, since the
concerned employees found responsible for obstructing the process of offering services are
demotivated and punished.

As of now, New Private Sector and Foreign Banks have an edge over Public Sector Banks as far
as implementation of technological solutions is concerned
6


Sr.No. TOPIC Page Nos.

1. Introduction to Banks 8 - 18
All about Banks 8 - 18

2. Banking in India 19 - 34
History of Banking in India 20
Pre - Independence 21
Post - Independence 21 - 22
Nationalization, Liberalization and Current Situation 22 - 24
Public Sector Banks v/s Private Sector Banks 24 - 34

3. BANK OF BARODA(BOB) 35 - 53
History 35 - 37
Various initiatives taken up by the Bank 38 - 43
4P‘s of Marketing w.r.t Banking 44 - 53

4. HOUSING DEVELOPMENT AND FINANCE
CORPORATION BANK (HDFC BANK) 54 - 72
About the Bank 54 - 60
4P‘s of Marketing w.r.t Banking 61 - 72

5. INTERVIEW WITH THE BRANCH MANAGERS OF 73 - 76
BANK OF BARODA AND HDFC BANK
Interview with Mr. K.S.Ganeshan, Manager BOB 73 - 74
Interview with Mrs. Mahalakshi Iyer, Senior Manager HDFC
Bank 75 - 76

6. Conclusion 77

7. Bibliography 78

7


All About BANKS

A banker is a person who carries on the business of banking.

The legal definition of the business of banking is:

 Conducting current accounts for customers
 Paying to the customer's order (e.g. the customer's cheques drawn on the bank),
and
 Collecting the cheques deposited to the customers‘ account, as the customer's
agent and crediting the proceeds to the customer's current account.

Since the advent of EFTPOS (Electronic Funds Transfer and Point Of Sale), the cheque has lost
its primacy in most banking systems as a payment instrument, leading legal theorists to suggest
that the cheque based definition should be broadened to include financial institutions that
conduct current accounts for customers and enable customers to pay and be paid by third parties,
even if they do not pay and collect cheques.

However the commercial role of banks is wider than banking, and includes:

 Issue of banknotes (promissory notes issued by a banker and payable to bearer on
demand)
 Processing of payments by way of telegraphic transfer, EFTPOS, internet banking
or other means
 Issuing bank drafts and bank cheques
 Accepting money on term deposit
 Lending money by way of overdraft, installment loan or otherwise
 Providing documentary and standby letters of credit, guarantees, performance
bonds, securities underwriting commitments and other forms of off balance sheet
exposures
 Safekeeping of documents and other items in safe deposit boxes
 Sale, distribution or brokerage, with or without advice, of insurance, unit trusts
and similar financial products as a 'financial supermarket‘

8


Economic functions
The economic functions of banking include:

 Credit intermediation -- banks borrow and lend back to back on their own account
as middle men
 Maturity transformation -- banks borrow on demand debt and short term debt, but
provide long term loans
 Settlements of payments -- banks handle payments between geographically
remote parties, and can net off payment flows in opposite directions to reduce the
cost of settling payment obligations.

Entry regulation
Currently in most jurisdictions commercial banks are regulated and require a bank license to
operate.

Usually the definition of the business of banking for the purposes of regulation is extended to
include acceptance of deposits, even if they are not repayable to the customer's order, however
money lending is generally not included in the definition.

Unlike most other regulated industries, the regulator is typically also a participant in the market,
i.e. government owned bank (a central bank). Central banks also typically have a monopoly on
the business of issuing banknotes. However, in some countries this is not the case, e.g. in the UK
the Financial Services Authority licenses banks and some commercial banks issue their own
banknotes in competition with the Bank of England.

Some types of entity may be partly or wholly exempt from bank license requirements and are
regulated by separate regulators, e.g. building societies and credit unions.

Politics and History
Banks have influenced economies and politics for centuries. Historically, the primary purpose of
a bank was to provide loans to trading companies. Banks provided funds to allow businesses to
purchase inventory, and collected those funds back with interest when the goods were sold. For
centuries, the banking industry only dealt with businesses, not consumers. Commercial lending
today is a very intense activity, with banks carefully analyzing the financial condition of their
business clients to determine the level of risk in each loan transaction. Banking services have
9


expanded to include services directed at individuals, and risk in these much smaller transactions
is pooled.

Origin of the Word
The name bank derives from the Italian word banco "desk/bench", used during the Renaissance
by Florentines bankers, who used to make their transactions above a desk covered by a green
tablecloth. However, there are traces of banking activity even in ancient times.

Banking channels

Banks offer many different channels to access their banking and other services:

A branch, banking centre or financial centre is a retail location where a bank or financial
institution offers a wide array of face to face service to its customers

ATM is a computerized telecommunications device that provides a financial institution's
customers a method of financial transactions in a public space without the need for a human
clerk or bank teller. Most banks now have more ATMs than branches, and ATMs are providing a
wider range of services to a wider range of users. For example in Hong Kong, most ATMs
enable anyone to deposit cash to any customer of the bank's account by feeding in the notes and
entering the account number to be credited. Also, most ATMs enable card holders from other
banks to get their account balance and withdraw cash, even if the card is issued by a foreign
bank.

Mail is part of the postal system which itself is a system wherein written documents
typically enclosed in envelopes, and also small packages containing other matter, are delivered to
destinations around the world. This can be used to deposit cheques and to send orders to the bank
to pay money to third parties. Banks also normally use mail to deliver periodic account
statements to customers.

Telephone banking is a service provided by a financial institution which allows its
customers to perform transactions over the telephone. This normally includes bill payments for
bills from major billers (e.g. for electricity).

Online banking is a term used for performing transactions, payments etc. over the
Internet through a bank, credit union or building society's secure website

10


Types of banks
Banks' activities can be divided into retail banking, dealing directly with individuals and small
businesses; business banking, providing services to mid-market business; corporate banking,
directed at large business entities; private banking, providing wealth management services to
High Net Worth Individuals and families; and investment banking, relating to activities on the
financial markets. Most banks are profit-making, private enterprises. However, some are owned
by government, or are non-profits.

Central banks are normally government owned banks, often charged with quasi-regulatory
responsibilities, e.g. supervising commercial banks, or controlling the cash interest rate. They
generally provide liquidity to the banking system and act as Lender of last resort in event of a
crisis.

Banks in the economy
A bank raises funds by attracting deposits, borrowing money in the inter-bank market, or issuing
financial instruments in the money market or a capital market. The bank then lends out most of
these funds to borrowers.

However, it would not be prudent for a bank to lend out all of its balance sheet. It must keep a
certain proportion of its funds in reserve so that it can repay depositors who withdraw their
deposits. Bank reserves are typically kept in the form of a deposit with a central bank. This
behaviour is called fractional-reserve banking and it is a central issue of monetary policy. Note
that under Basel I (and the new round of Basel II), banks no longer keep deposits with central
banks, but must maintain defined capital ratios.

Worldwide assets of the largest 1,000 banks grew 15.5% in 2005 to reach a record $60.5 trillion.
This follows a 19.3% increase in the previous year. EU banks held the largest share, 50% at the
end of 2005, up from 38% a decade earlier. The growth in Europe‘s share was mostly at the
expense of Japanese banks whose share more than halved during this period from 33% to 13%.
The share of US banks also rose, from 10% to 14%. Most of the remainder was from other Asian
and European countries.

The US had by far the most banks (7,540 at end-2005) and branches (75,000) in the world. The
large number of banks in the US is an indicator of its geography and regulatory structure,
resulting in a large number of small to medium sized institutions in its banking system. Japan

11


had 129 banks and 12,000 branches. In 2004, Germany, France, and Italy had more than 30,000
branches each—more than double the 15,000 branches in the UK.

Banks are susceptible to many forms of risk which have triggered occasional systemic crises.
Risks include liquidity risk (the risk that many depositors will request withdrawals beyond
available funds), credit risk (the risk that those who owe money to the bank will not repay), and
interest rate risk (the risk that the bank will become unprofitable if rising interest rates force it to
pay relatively more on its deposits than it receives on its loans), among others.

Banking crises have developed many times throughout history when one or more risks
materialize for a banking sector as a whole. Prominent examples include the U.S. Savings and
Loan crisis in 1980s and early 1990s, the Japanese banking crisis during the 1990s, the bank run
that occurred during the Great Depression, and the recent liquidation by the central Bank of
Nigeria, where about 25 banks were liquidated.

Challenges within the banking industry
The banking industry is a highly regulated industry with detailed and focused regulators. All
banks with FDIC-insured deposits have the FDIC as a regulator; however, for examinations, the
Federal Reserve is the primary federal regulator for Fed-member state banks; the Office of the
Comptroller of the Currency (―OCC‖) is the primary federal regulator for national banks; and the
Office of Thrift Supervision, or OTS, is the primary federal regulator for thrifts. State non-
member banks are examined by the state agencies as well as the FDIC. National banks have one
primary regulator—the OCC.

Each regulatory agency has their own set of rules and regulations to which banks and thrifts must
adhere.

The Federal Financial Institutions Examination Council (FFIEC) was established in 1979 as a
formal interagency body empowered to prescribe uniform principles, standards, and report forms
for the federal examination of financial institutions. Although the FFIEC has resulted in a greater
degree of regulatory consistency between the agencies, the rules and regulations are constantly
changing.

In addition to changing regulations, changes in the industry have led to consolidations within the
Federal Reserve, FDIC, OTS and OCC. Offices have been closed, supervisory regions have been
merged, staff levels have been reduced and budgets have been cut. The remaining regulators face
an increased burden with increased workload and more banks per regulator. While banks
12


struggle to keep up with the changes in the regulatory environment, regulators struggle to
manage their workload and effectively regulate their banks. The impact of these changes is that
banks are receiving less hands-on assessment by the regulators, less time spent with each
institution, and the potential for more problems slipping through the cracks, potentially resulting
in an overall increase in bank failures across the United States.

The changing economic environment has a significant impact on banks and thrifts as they
struggle to effectively manage their interest rate spread in the face of low rates on loans, rate
competition for deposits and the general market changes, industry trends and economic
fluctuations. It has been a challenge for banks to effectively set their growth strategies with the
recent economic market. A rising interest rate environment may seem to help financial
institutions, but the effect of the changes on consumers and businesses is not predictable and the
challenge remains for banks to grow and effectively manage the spread to generate a return to
their shareholders.

The management of the banks‘ asset portfolios also remains a challenge in today‘s economic
environment. Loans are a bank‘s primary asset category and when loan quality becomes suspect,
the foundation of a bank is shaken to the core. While always an issue for banks, declining asset
quality has become a big problem for financial institutions. There are several reasons for this,
one of which is the lax attitude some banks have adopted because of the years of ―good times.‖
The potential for this is exacerbated by the reduction in the regulatory oversight of banks and in
some cases depth of management. Problems are more likely to go undetected, resulting in a
significant impact on the bank when they are recognized. In addition, banks, like any business,
struggle to cut costs and have consequently eliminated certain expenses, such as adequate
employee training programs.

Banks also face a host of other challenges such as aging ownership groups. Across the country,
many banks‘ management teams and board of directors are aging. Banks also face ongoing
pressure by shareholders, both public and private, to achieve earnings and growth projections.
Regulators place added pressure on banks to manage the various categories of risk. Banking is
also an extremely competitive industry. Competing in the financial services industry has become
tougher with the entrance of such players as insurance agencies, credit unions, check cashing
services, credit card companies, etc.

13


Banking Regulations
Bank regulations are a form of government regulation which subject banks to certain
requirements, restrictions and guidelines, aiming to uphold the soundness and integrity of the
financial system. The combination of the instability of banks as well as their important
facilitating role in the economy led to banking being thoroughly regulated. The amount of capital
a bank is required to hold is a function of the amount and quality of its assets. Major banks are
subject to the Basel Capital Accord promulgated by the Bank for International Settlements. In
addition, banks are usually required to purchase deposit insurance to make sure smaller investors
are not wiped out in the event of a bank failure.

Another reason banks are thoroughly regulated is that ultimately, no government can allow the
banking system to fail. There is almost always a lender of last resort—in the event of a liquidity
crisis (where short term obligations exceed short term assets) some element of government will
step in to lend banks enough money to avoid bankruptcy.

Profitability
A bank generates a profit from the differential between the level of interest it pays for deposits
and other sources of funds, and the level of interest it charges in its lending activities. This
difference is referred to as the spread between the cost of funds and the loan interest rate.
Historically, profitability from lending activities has been cyclic and dependent on the needs and
strengths of loan customers. In recent history, investors have demanded a more stable revenue
stream and banks have therefore placed more emphasis on transaction fees, primarily loan fees
but also including service charges on array of deposit activities and ancillary services
(international banking, foreign exchange, insurance, investments, wire transfers, etc.). However,
lending activities still provide the bulk of a commercial bank's income.

In the past 10 years in the United States, banks have taken many measures to ensure that they
remain profitable while responding to ever-changing market conditions. First, this includes the
Gramm-Leach-Bliley Act, which allows banks again to merge with investment and insurance
houses. Merging banking, investment, and insurance functions allows traditional banks to
respond to increasing consumer demands for "one-stop shopping" by enabling cross-selling of
products (which, the banks hope, will also increase profitability). Second, they have expanded
the use of risk-based pricing from business lending to consumer lending, which means charging
higher interest rates to those customers that are considered to be a higher credit risk and thus
increased chance of default on loans. This helps to offset the losses from bad loans, lowers the
14


price of loans to those who have better credit histories, and offers credit products to high risk
customers who would otherwise been denied credit. Third, they have sought to increase the
methods of payment processing available to the general public and business clients. These
products include debit cards, pre-paid cards, smart-cards, and credit cards. These products make
it easier for consumers to conveniently make transactions and smooth their consumption over
time (in some countries with under-developed financial systems, it is still common to deal
strictly in cash, including carrying suitcases filled with cash to purchase a home). However, with
convenience there is also increased risk that consumers will mismanage their financial resources
and accumulate excessive debt. Banks make money from card products through interest
payments and fees charged to consumers and transaction fees to companies that accept the cards.

The banking industry's main obstacles to increasing profits are existing regulatory burdens, new
government regulation, and increasing competition from non-traditional financial institutions.

Banking Stats and Information
1. Top ten bank holding companies in the world ranked by profit (Figures in US $)

Rank Country Company Profit (US $)

1 United States Citigroup 22.13 billion

2 United States Bank of America 21.13 billion

3 United Kingdom HSBC 22.086 billion

4 United States JP Morgan Chase 14.44 billion

5 United Kingdom Royal Bank of Scotland Group 12.1 billion

6 Switzerland UBS 9.79 billion

7 United States Goldman Sachs 9.34 billion

8 United States Wells Fargo 8.48 billion

9 United States Wachovia 7.79 billion

10 United States Morgan Stanley 7.45 billion

15


2. Top ten banking groups in the world ranked by Tier 1 capital (Figures in US $)

Rank Country Company Tier 1 Capital (US $)

1 United Kingdom HSBC 79 billion

2 United States Citigroup 75 billion

3 United States Bank of America 73 billion

4 United States JP Morgan Chase 72 billion

5 Japan Mitsubishi UFJ Financial Group 64 billion

6 France Credit Agricole Group 60 billion

7 United Kingdom Royal Bank of Scotland 48 billion

8 Japan Sumitomo Mitsui Financial Group 40 billion

9 Japan Mizuho Financial Group 39 billion

10 Spain Santander Central Hispano 38 billion

3. Top ten banking groups in the world ranked by shareholder equity ($m)

Rank Country Company Shareholder equity ($m)

1 United States Citigroup 112537 $mln

2 United States JPMorgan Chase 107211 $mln

3 United States Bank of America 101224 $mln

4 United Kingdom HSBC 98226 $mln

5 Japan Mitsubishi UFJ Financial Group 83281 $mln

6 France Credit Agricole Group 65137 $mln

16


7 United Kingdom Royal Bank of Scotland Group 64453 $mln

8 France BNP Paribas 56610 $mln

9 Spain Santander Central Hispano 53640 $mln

10 Japan Mizuho Financial Group 52243 $mln

4. Top ten banking groups in the world ranked by assets

Rank Country Company Assets (US $)

1 United Kingdom HSBC Holdings 1,861 billion

2 Switzerland UBS 1,533 billion

3 United States Citigroup 1,484 billion

4 Japan Mizuho Financial Group 1,296 billion

5 France Credit Agricole Group 1,243 billion

6 France BNP Paribas 1,234 billion

7 United States JPMorgan Chase & Co. 1,157 billion

8 Germany Deutsche Bank 1,144 billion

9 United Kingdom Royal Bank of Scotland 1,119 billion

10 United States Bank of America 1,110 billion

17


5. Top ten banks in the world ranked by market capitalization

Rank Country Company Market Capitalization (US $)

1 United States Citigroup 275 billion

2 China ICBC 250 billion

3 United States Bank of America 230 billion

4 United Kingdom HSBC 200 billion

5 United States JPMorgan Chase 165 billion

6 Japan Mitsubishi UFJ 145 billion

7 Italy Unicredit 130 billion (2007)

8 United States Wells Fargo 120 billion

9 Switzerland UBS 110 billion

10 United Kingdom Royal Bank of Scotland 100 billion

18


BANKING IN INDIA
Banking in India originated in the first decade of 18th century with The General Bank of India
coming into existence in 1786. This was followed by Bank of Hindustan. Both these banks are
now defunct. The oldest bank in existence in India is the State Bank of India being established as
"The Bank of Bengal" in Calcutta in June 1806. A couple of decades later, foreign banks like
Credit Lyonnais started their Calcutta operations in the 1850s. At that point of time, Calcutta was
the most active trading port, mainly due to the trade of the British Empire, and due to which
banking activity took roots there and prospered. The first fully Indian owned bank was the
Allahabad Bank, which was established in 1865.

By the 1900s, the market expanded with the establishment of banks such as Punjab National
Bank, in 1895 in Lahore and Bank of India, in 1906, in Mumbai - both of which were founded
under private ownership. The Reserve Bank of India formally took on the responsibility of
regulating the Indian banking sector from 1935. After India's independence in 1947, the Reserve
Bank was nationalized and given broader powers.

19


History
At the end of late-18th century, there were hardly any banks in India in the modern sense of the
term. At the time of the American Civil War, a void was created as the supply of cotton to
Lancashire stopped from the Americas. Some banks were opened at that time which functioned
as entities to finance industry, including speculative trades in cotton. With large exposure to
speculative ventures, most of the banks opened in India during that period could not survive and
failed. The depositors lost money and lost interest in keeping deposits with banks. Subsequently,
banking in India remained the exclusive domain of Europeans for next several decades until the
beginning of the 20th century.

At the beginning of the 20th century, Indian economy was passing through a relative period of
stability. Around five decades have elapsed since the India's First war of Independence, and the
social, industrial and other infrastructure have developed. At that time there were very small
banks operated by Indians, and most of them were owned and operated by particular
communities. The banking in India was controlled and dominated by the presidency banks,
namely, the Bank of Bombay, the Bank of Bengal, and the Bank of Madras - which later on
merged to form the Imperial Bank of India, and Imperial Bank of India, upon India's
independence, was renamed the State Bank of India. There were also some exchange banks, as
also a number of Indian joint stock banks. All these banks operated in different segments of the
economy. The presidency banks were like the central banks and discharged most of the functions
of central banks. They were established under charters from the British East India Company. The
exchange banks, mostly owned by the Europeans, concentrated on financing of foreign trade.
Indian joint stock banks were generally under capitalized and lacked the experience and maturity
to compete with the presidency banks, and the exchange banks. There was potential for many
new banks as the economy was growing. Lord Curzon had observed then in the context of Indian
banking: "In respect of banking it seems we are behind the times. We are like some old fashioned
sailing ship, divided by solid wooden bulkheads into separate and cumbersome compartments."

Under these circumstances, many Indians came forward to set up banks, and many banks were
set up at that time, a number of which have survived to the present such as Bank of India and
Corporation Bank, Indian Bank, Bank of Baroda, and Canara Bank.

The Bank of Bengal, which later became the State Bank of India
20


Pre-Independence
The period during the First World War (1914-1918) through the end of the Second World War
(1939-1945), and two years thereafter until the independence of India were challenging for the
Indian banking. The years of the First World War were turbulent, and it took toll of many banks
which simply collapsed despite the Indian economy gaining indirect boost due to war-related
economic activities. At least 94 banks in India failed during the years 1913 to 1918 as indicated
in the following table:

Number of banks Authorised capital Paid-up Capital
Years
that failed (Rs. Lakhs) (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 had adversely impacted the economies of Punjab and West Bengal,
and banking activities had remained paralyzed 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
21


greater involvement of the state in different segments of the economy including banking and
finance. The major steps to regulate banking included:

In 1948, the Reserve Bank of India, India's central banking authority, was nationalized, and it
became an institution owned by the Government of India.

In 1949, the Banking Regulation Act was enacted which empowered the Reserve Bank of India
(RBI) "to regulate, control, and inspect the banks in India."

The Banking Regulation Act also provided that no new bank or branch of an existing bank may
be opened without a licence from the RBI, and no two banks could have common directors.

However, despite these provisions, control and regulations, banks in India except the State Bank
of India, continued to be owned and operated by private persons. This changed with the
nationalization of major banks in India on 19th July, 1969.

Nationalization

By the 1960s, the Indian banking industry has become an important tool to facilitate the
development of the Indian economy. At the same time, it has emerged as a large employer, and a
debate has ensued about the possibility to nationalize the banking industry. Indira Gandhi, the-
then Prime Minister of India expressed the intention of the GOI in the annual conference of the
All India Congress Meeting in a paper entitled "Stray thoughts on Bank Nationalization." The
paper was received with positive enthusiasm. Thereafter, her move was swift and sudden, and
the GOI issued an ordinance and nationalized the 14 largest commercial banks with effect from
the midnight of July 19, 1969. 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
Parliament passed the Banking Companies (Acquition and Transfer of Undertaking) Bill, and it
received the presidential approval on 9th August, 1969.

A second dose of nationalization of 6 more commercial banks followed in 1980. The stated
reason for the nationalization was to give the government more control of credit delivery. With
the second dose of nationalization, the GOI controlled around 91% of the banking business of
India.

After this, until the 1990s, the nationalized banks grew at a pace of around 4%, closer to the
average growth rate of the Indian economy.

22


Liberalization
In the early 1990s the then Narasimha Rao government embarked on a policy of liberalization
and gave licenses to a small number of private banks, which came to be known as New
Generation tech-savvy banks, which included banks such as UTI Bank(now re-named as Axis
Bank) (the first of such new generation banks to be set up), ICICI Bank and HDFC Bank. This
move, along with the rapid growth in the economy of India, kick started 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 setup 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 49% with some
restrictions. The new policy shook the Banking sector in India completely. Bankers, till this time,
were used to the 4-6-4 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 situation
Currently (2007), banking in India is 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, especially retail 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 in Kotak
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.
23


Currently, India has 88 scheduled commercial banks (SCBs) - 28 public sector banks (that is
with the Government of India holding a stake), 29 private banks (these do not have government
stake; they may be publicly listed and traded on stock exchanges) and 31 foreign banks. They
have a combined network of over 53,000 branches and 17,000 ATMs. According to a report by
ICRA Limited, a rating agency, the public sector banks hold over 75 percent of total assets of the
banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively

Public Sector Banks v/s Private Sector Banks:
PUBLIC SECTOR BANKS:
Among the Public Sector Banks in India, United Bank of India is one of the 14 major banks
which were nationalized on July 19, 1969. Its predecessor, in the Public Sector Banks, the United
Bank of India Ltd., was formed in 1950 with the amalgamation of four banks viz. Comilla
Banking Corporation Ltd. (1914), Bengal Central Bank Ltd. (1918), Comilla Union Bank Ltd.
(1922) and Hooghly Bank Ltd. (1932).

Oriental Bank of Commerce (OBC), a Government of India Undertaking offers Domestic, NRI
and Commercial banking services. OBC is implementing a GRAMEEN PROJECT in Dehradun
District (UP) and Hanumangarh District (Rajasthan) disbursing small loans. This Public Sector
Bank India has implemented 14 point action plan for strengthening of credit delivery to women
and has designated 5 branches as specialized branches for women entrepreneurs.

List of Public sector banks in India

SBI group:
State Bank of India, with its seven associate banks commands the largest banking resources in
India. SBI and its associate banks are:

 State Bank of India

 State Bank of Bikaner & Jaipur

 State Bank of Hyderabad

 State Bank of Indore

 State Bank of Mysore

24


 State Bank of Patiala

 State Bank of Saurashtra

 State Bank of Travancore

After the amalgamation of New Bank of India with Punjab National Bank, currently there are 19
nationalized banks in India:

 Allahabad Bank

 Andhra Bank

 Bank of Baroda

 Bank of India

 Bank of Maharashtra

 Canara Bank

 Central Bank of India

 Corporation Bank

 Dena Bank

 Indian Bank

 Indian Overseas Bank

 Oriental Bank of Commerce

 Punjab & Sind Bank

 Punjab National Bank

 Syndicate Bank

 Union Bank of India

 United Bank of India

 UCO Bank

 Vijaya Bank
25


IMPORTANT TRANSACTIONS DURING THE YEAR 2006:
(Figures in crores):

DEPOSITS:

TOTAL OF 19 1054070
NATIONALISED BANKS

TOTAL OF STATE BANK 1622479
GROUP.

ADVANCES:

TOTAL OF 19 383445
NATIONALISED BANKS

GROUP.

26


INVESTMENTS:

TOTAL OF 19 682309
NATIONALISED BANKS

GROUP.

TOTAL ASSETS:

TOTAL OF 19 1234443
NATIONALISED BANKS

GROUP.

27


TOTAL INCOME:

TOTAL OF 19 95375
NATIONALISED BANKS

GROUP.

TOTAL EXPENSES:

TOTAL OF 19 72364
NATIONALISED BANKS

GROUP.

28


NET PROFIT:

TOTAL OF 19 10022
NATIONALISED BANKS

GROUP.

PRIVATE SECTOR BANKS:
Private banking in India was practiced since the beginning of banking system in India. The first
private bank in India to be set up in Private Sector Banks in India was IndusInd Bank. It is one of
the fastest growing Private Sector Banks in India. IDBI ranks the tenth largest development bank
in the world as Private Banks in India and has promoted world class institutions in India.

The first Private Bank in India to receive an in principle approval from the Reserve Bank of
India was Housing Development Finance Corporation Limited, to set up a bank in the private
sector banks in India as part of the RBI's liberalization of the Indian Banking Industry. It was
incorporated in August 1994 as HDFC Bank Limited with registered office in Mumbai and
commenced operations as Scheduled Commercial Bank in January 1995.

ING Vysya, yet another Private Bank of India was incorporated in the year 1930. Bangalore has
a pride of place for having the first branch inception in the year 1934. With successive years of
patronage and constantly setting new standards in banking, ING Vysya Bank has many credits to
its account.

List of Private sector banks in India

 Axis Bank (formerly UTI Bank)

29


 Bank of Rajasthan

 Bharat Overseas Bank

 Catholic Syrian Bank

 Centurion Bank of Punjab

 City Union Bank

 Development Credit Bank

 Dhanalakshmi Bank

 Federal Bank

 Ganesh Bank of Kurundwad

 HDFC Bank

 ICICI Bank

 IDBI Bank

 IndusInd Bank

 ING Vysya Bank

 Jammu & Kashmir Bank

 Karnataka Bank Limited.

 Karur Vysya Bank

 Kotak Mahindra Bank

 Lakshmi Vilas Bank

 Lord Krishna Bank ( now Centurian Bank of Punjab)

 Nainital Bank

 Ratnakar Bank

 Rupee Bank

30


 Saraswat Bank

 SBI Commercial and International Bank

 South Indian Bank

 Tamilnad Mercantile Bank Ltd.

 Thane Janata Sahakari Bank

 Bassein Catholic Bank

 United Western Bank

 YES Bank

IMPORTANT TRANSACTIONS DURING THE YEAR 2006:
(Figures in crores):

DEPOSITS:

TOTAL OF 21 OLD PVT 131372
BANKS

TOTAL OF 8 NEW PVT 291965
BANKS

31


ADVANCES:

BANKS

BANKS

INVESTMENTS:

BANKS

BANKS

32


TOTAL ASSETS:

BANKS

BANKS

TOTAL INCOME:

BANKS

BANKS

33


TOTAL EXPENSES:

BANKS

BANKS

NET PROFIT:

BANKS

BANKS

In the Comparative Analysis which I am supposed to do, I have selected BANK
OF BARODA from the Public Sector Bank and HDFC BANK form the Private
Sector.
34


BANK OF BARODA (BOB).

History of the Bank:
It all started with a visionary Maharaja's uncanny foresight into the future of trade and
enterprising in his country. On 20th July 1908, under the Companies Act of 1897, and with a
paid up capital of Rs 10 Lacs started the legend that has now translated into a strong, trustworthy
financial body, THE BANK OF BARODA.

It has been a wisely orchestrated growth, involving corporate wisdom, social pride and the vision
of helping others grow, and growing itself in turn.

The founder, Maharaja Sayajirao Gaekwad, with his insight into the future, saw "a bank of
this nature will prove a beneficial agency for lending, transmission, and deposit of money and
will be a powerful factor in the development of art, industries and commerce of the State and
adjoining territories."

These words are etched into the mind, body and soul of what has now become a banking legend.
Following the Maharaja's words, the emblem has been crafted to represent wealth, safety,
industrial development and an inclination to better and promote the country's agrarian economy.
This emblem shows a coin, symbolizing wealth, embossed with an upraised palm, a safety cover

35


for the depositor's money, with a cogwheel that promotes industrial growth in tandem with the
two corn ears that stand for the progress of the staple agricultural growth in the country.

Between 1913 and 1917, as many as 87 banks failed in India. Bank of Baroda survived the
crisis, mainly due to its honest and prudent leadership. This financial integrity, business
prudence, caution and an abiding care and concern for the hard earned savings of hard working
36


people, were to become the central philosophy around which business decisions would be
effected. This cardinal philosophy was over the 94 years of its existence, to become its biggest
asset. It ensured that the Bank survived the Great War years. It ensured survival during the Great
Depression. Even while big names were dragged into the Stock Market scam and the Capital
Market scam, the Bank of Baroda continued its triumphant march along the best ethical
practices.

No history is complete without mention of its heroes, mostly ordinary people, who turn in extra-
ordinary performances and contribute to building an institution. Over the years, there have been
thousands of such people. The Bank salutes these "unknown soldiers" who passionately
helped to create the legend of Bank of Baroda.

There were also the leaders, both corporate and royal, who provided the vision and guided the
Bank through trail blazing years, and departing, left behind footprints on the sands of time. This
Roll of Honor will be incomplete without mention of men, of the stature of Maharaja Sayajirao
Gaekwad, Sampatrao Gaekwad, Ralph Whitenack, Vithaldas Thakersey, Tulsidas
Kilachand and NM Chokshi.

Bank of Baroda salutes these leaders whose vision helped to create an institution.

37


Various initiatives taken up by the Bank:

Marketing Initiatives
The mid-eighties marked the beginning of the shift to a buyers` market. The Bank orchestrated
its business strategies around the centrality of the customer. It diversified into areas of merchant
banking, housing finance, credit cards and mutual funds. A string of segment specific branches
entrenched operations in the profitable markets. Overseas operations were revamped and
structural changes intensified in the territories to cater to second generation NRIs. Slowly but
surely, the move to become a one stop financial supermarket had been set in motion. Service
delivery standards were stipulated.

Technology was adopted to add punch. Employees across the board were inculcated with the
marketing concept. Aggressive marketing became the new business philosophy.

People Initiatives
Bank of Baroda has always had an immense faith in the infinite potential of its people. This has
been historically demonstrated in its recruitment practices, developmental initiatives, placement
processes and promotion policies. Strategic HR interventions like, according cross border and
cross cultural work exposure to its managers, hiring diverse functional specialists to support line
functionaries and complementing the technical competencies of its people by imparting
conceptual, managerial and leadership skills, gave the Bank competitive advantage. The
elaborate man management policies also made the Bank a breeding ground for business leaders.
The Bank provided around a dozen CEOs to the industry- men who went on to build other great
institutions. People initiatives were blended with IR initiatives to create an effectively
harmonious workplace, where everyone prospered.

Financial Initiatives
New norms for capital adequacy required new capital management strategies. In 1995 the Bank
raised Rs 300 crores through a Bond issue. In 1996 the Bank tapped the capital market with an
IPO of Rs 850 crores, despite adverse market conditions prevailing then, the issue was over
subscribed, reflecting the positive public perception of the Bank's fundamental financial strength.
38


Digital Initiatives
Bank of Baroda pioneered the shift from manual operating systems to a computerized work
environment. Starting with ledgers, to ledger posting machines, through ALPMs, the Bank
graduated to the use of Unix based systems to Mainframes, to client server based Total Branch
Mechanization Systems. Today, the Bank has 1918 computerized branches, covering 70% of its
network and 91.64% of its business. Alive to the growing complexities of an intensely
competitive marketplace and the mounting expectations of customers fuelled by this competition,
the Bank reworked its distribution strategy. It ventured beyond the brick and mortar delivery
channel into ATMs and the OmniBOB range of anytime, anywhere electronic channels of PC
banking, telephone banking. The e-banking products used state of the art technologies like digital
certificates, smart card authentication and secure networking.

The new IT strategy, in the process of implementation will see the deployment of Core Banking
Systems, Multi Service Transaction Switch, Payment Gateways - all geared to deliver
convenience banking.

Quality Initiatives
In its relentless striving for quality perfection, the Bank secured the ISO 9001:2000 certification
for 15 branches. By end of the current financial, the Bank is targeting 54 more branches for this
quality certification.

The Future
Revolutionary and discontinuous changes in the operating environment are a stark reminder that
business success is 'impermanent'. The emergence of IT as a major driver for change, has
accentuated the need to initiate a major transformation program. The conversion to an IT savvy,
market driven bank will be a prerequisite to survival and growth. A major and strategic step in
hi-tech, was the establishment of the Integrated Treasury branch, as a forerunner to full-fledged
global treasury operations. Towards creating a future Bank of Baroda, the Bank has adopted a
revolutionary new business strategy that will be enabled by a revolutionary new IT strategy.
Actioning this strategy will position Bank of Baroda as India's uncontested premier bank.

At Bank of Baroda, change is a journey. It has a beginning. There will be no end. It will be a
long and difficult march. And the Bank will emerge stronger, more resilient and positioned to
become India's first bank of truly global standards. The relocation to the imposing Baroda
39


Corporate Centre, is a true reflection of the Bank's resolve to move ahead of the times. It will not
be out of place now, as it stands on the threshold of a digital era, to echo the same sentiments that
guided the Bank in its platinum jubilee year - 'a promising future is the sequel to a glorious past'.

The key business indicators and dividend paid (YoY):
Key Business Indicators (Rs. in Crore) 31.03.2007 31.03.2006
Total Deposits 1,24,915.98 93,661.99

Total Advances 83,620.87 59911.78

Total Investments 34943.63 35114.22

Total Assets 143146.17 113392.53

Net Profit 1026.47 826.96

Capital Adequacy Ratio (percentage) 11.80 13.65

Net Non Performing Loans to Net Advances (percentage) 0.60 0.87

Operating profit to working funds (percentage) 1.94 1.81

Business Per Employee (Lacs) 548 396.07

Dividend History (Percentage)
2007 60

2006 50

2005 50

40


2004 65

2003 60

2002 40

2001 40

2000 40

1999 30

1998 30

The Network of BOB:
Branch Network (as of 2/11/2007)

Area No. of Branches

Metro 490

Urban 495

Semi-Urban 561

Rural 1162

Total (Indian) 2708

Foreign (Overseas) 63

Total (Global) 2771

Controlling Offices
Zonal Offices 10

Regional Offices 43

41


Human Resources (Staff as of September 2006)
Officers 13525

Clerks 16497

Sub - Staff 8041

Total 38063

Where the Bank functions (District/State/Countries):
Banks Lead Districts
State No. of Lead Districts

Gujarat 11

Uttar Pradesh 14

Uttaranchal 2

Rajasthan 11

Madhya Pradesh 1

42


BRANCHES SUBSIDIARIES

- Bahamas - Bostwana

- Belgium - Guyana

- Fiji Islands - Kenya

- Hong Kong - Tanzania

- Mauritius - Trinidad and Tobago

- South Africa - Uganda

- Scychelles

- Singapore JOINT VENTURE
- Sultanate of Oman - Zambia

- United Arab Emirates

- United Kingdom

- United States of America

REPRESENTATIVE OFFICE

- Australia

- China

- Malaysia

- Thailand

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PRODUCTS OFFERED BY BANK OF BARODA:

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PRICE

PLACE
Bank of Baroda is located in and around the country. It has a total of 2771 branches in and
around India, Its Head Office is located at Mandvi, Gujarat.

PROMOTION TECHNIQUES
Bank of Baroda does a lot of Promotion about its products and services. That is the main reason
it‘s called INDIA‘S INTERNATIONAL BANK. It has RAHUL DRAVID, as its Brand
Ambassador.

53


HOUSING DEVELOPMENT AND
FINANCE CORPORATION BANK LTD
(HDFC BANK.)

About the Bank:
The Housing Development Finance Corporation Limited (HDFC) was amongst the first to
receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the
private sector, as part of the RBI's liberalization of the Indian Banking Industry in 1994. The
bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its registered
office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank
in January 1995.

HDFC is India's premier housing finance company and enjoys an impeccable track record in
India as well as in international markets. Since its inception in 1977, the Corporation has
maintained a consistent and healthy growth in its operations to remain the market leader in
mortgages. Its outstanding loan portfolio covers well over a million dwelling units. HDFC has
developed significant expertise in retail mortgage loans to different market segments and also
has a large corporate client base for its housing related credit facilities. With its experience in the
financial markets, a strong market reputation, large shareholder base and unique consumer
franchise, HDFC was ideally positioned to promote a bank in the Indian environment.

HDFC Bank's mission is to be a World-Class Indian Bank. The objective is to build sound
customer franchises across distinct businesses so as to be the preferred provider of banking
services for target retail and wholesale customer segments, and to achieve healthy growth in
profitability, consistent with the bank's risk appetite. The bank is committed to maintain the
highest level of ethical standards, professional integrity, corporate governance and regulatory
compliance. HDFC Bank's business philosophy is based on four core values - Operational
Excellence, Customer Focus, Product Leadership and People.
54


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. 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 acquisition 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 of the Bank:
HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable network of over
772 branches spread over 327 cities across India. All branches are linked on an online real-time
basis. Customers in over 120 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 centres 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 centres where the NSE/BSE
have a strong and active member base.

Currently HDFC Bank has 753 branches, 1,716 ATMs, in 320 cities in India, and all branches of
the bank are linked on an online real-time basis. The bank offers many innovative products &
services to individuals, corporate, trusts, governments, partnerships, financial institutions, mutual
funds, insurance companies.

It is a path breaker in the Indian banking sector.

Management:
Mr. Jagdish Capoor took over as the bank's Chairman in July 2001. Prior to this, Mr. Capoor was
a Deputy Governor of the Reserve Bank of India.

The Managing Director, Mr. Aditya Puri, has been a professional banker for over 25 years, and
before joining HDFC Bank in 1994 was heading Citibank's operations in Malaysia.

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
55


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. All the bank's branches have online connectivity, which enables the
bank to offer speedy funds transfer facilities to its customers. Multi-branch access is also
provided to retail customers through the branch network and Automated Teller Machines
(ATMs).

The Bank has made substantial efforts and investments in acquiring the best technology available
internationally, to build the infrastructure for a world class bank. The Bank's business is
supported by scalable and robust systems which ensure that our clients always get the finest
services we offer.

The Bank has prioritised 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.

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
56


management, etc. The bank is also a leading provider of structured solutions, which
combine cash management services with vendor and distributor finance for facilitating
superior supply chain management for its corporate customers. Based on its superior
product delivery / service levels and strong customer orientation, the Bank has made
significant inroads into the banking consortia of a number of leading Indian corporates
including multinationals, companies from the domestic business houses and prime public
sector companies. It is recognised as a leading provider of cash management and
transactional banking solutions to corporate customers, mutual funds, stock exchange
members and banks.

 Retail Banking Services

The objective of the Retail Bank is to provide its target market customers a full range of
financial products and banking services, giving the customer a one-stop window for all
his/her banking requirements. The products are backed by world-class service and
delivered to the customers through the growing branch network, as well as through
alternative delivery channels like ATMs, Phone Banking, NetBanking and Mobile
Banking.

The HDFC Bank Preferred program for high net worth individuals, the HDFC Bank Plus
and the Investment Advisory Services programs have been designed keeping in mind
needs of customers who seek distinct financial solutions, information and advice on
various investment avenues. The Bank also has a wide array of retail loan products
including Auto Loans, Loans against marketable securities, Personal Loans and Loans for
Two-wheelers. It is also a leading provider of Depository Participant (DP) services for
retail customers, providing customers the facility to hold their investments in electronic
form.

HDFC Bank was the first bank in India to launch an International Debit Card in
association with VISA (VISA Electron) and issues the Mastercard Maestro debit card as
well. The Bank launched its credit card business in late 2001. By September 30, 2005, the
bank had a total card base (debit and credit cards) of 5.2 million cards. The Bank is also
one of the leading players in the "merchant acquiring" business with over 50,000 Point-
of-sale (POS) terminals for debit / credit cards acceptance at merchant establishments.

 Treasury

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

57


Derivatives, Local Currency Money Market & Debt Securities, and Equities. With the
liberalisation of the financial markets in India, corporates need more sophisticated risk
management information, advice and product structures. These and fine pricing on
various treasury products are provided through the 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

Ratings:
 Credit Rating

The Bank has its deposit programs rated by two rating agencies - Credit Analysis &
Research Limited (CARE) and Fitch Ratings India Private Limited. The Bank's Fixed
Deposit programme has been rated 'CARE AAA (FD)' [Triple A] by CARE, which
represents instruments considered to be "of the best quality, carrying negligible
investment risk". CARE has also rated the bank's Certificate of Deposit (CD) programme
"PR 1+" which represents "superior capacity for repayment of short term promissory
obligations". Fitch Ratings India Pvt. Ltd. (100% subsidiary of Fitch Inc.) has assigned
the "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".

The Bank also has its long term unsecured, subordinated (Tier II) Bonds rated by CARE
and Fitch Ratings India Private Limited and its Tier I perpetual Bonds and Upper Tier II
Bonds rated by CARE and CRISIL Ltd. CARE has assigned the rating of "CARE AAA"
for the subordinated Tier II Bonds while Fitch Ratings India Pvt. Ltd. has assigned the
rating "AAA (ind)" with the outlook on the rating as "stable". CARE has also assigned
"CARE AAA [Triple A]" for the Banks Perpetual bond and Upper Tier II bond issues.
CRISIL has assigned the rating "AAA / Stable" for the Bank's Perpetual Debt programme
and Upper Tier II Bond issue. In each of the cases referred to above, the ratings awarded
were the highest assigned by the rating agency for those instruments.

 Corporate Governance Rating

The bank was one of the first four companies, which subjected itself to a Corporate
Governance and Value Creation (GVC) rating by the rating agency, The Credit Rating
Information Services of India Limited (CRISIL). The rating provides an independent
assessment of an entity's current performance and an expectation on its "balanced value
58


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.

Recognition:
Over a decade of its operations, HDFC Bank has been recognized, rated and
awarded by a number of organizations, which includes:

 Best Domestic Bank in India in The Asset Triple A Country Awards 2005, 2004 and
2003.

 ―Company of the Year‖ Award in The Economic Times Awards for Corporate
Excellence 2004-05.

 Asiamoney's Awards for Best Domestic Commercial Bank as well as Best Cash
Management Bank - India in 2005.

 The Asian Banker Excellence in Retail Banking Risk Management Award in India for
2004.

 Finance Asia ―Best Bank - India‖ in 2005, "Best Domestic Commercial Bank – India‖ in
1999, 2000 and 2001 respectively and ―Best Local Bank – India‖ in 2002 and 2003.

 Business Today ―Best Bank in India‖ in 2003, 2004, 2005 and 2006.

 ―Best Overall Local/Domestic Bank – India‖ in the Corporate Cash Management Poll
conducted by Asiamoney magazine.

 Selected by BusinessWorld as "one of India's Most Respected Companies" as part of The
Business World Most Respected Company Awards 2004.

 In 2004, Forbes Global named HDFC Bank in its listing of Best Under a Billion, 100
Best Smaller Size Enterprises in Asia/Pacific and Europe.

 In 2004, HDFC Bank won the award for ―Operational Excellence in Retail Financial
Services‖ - India as part of the Asian Banker Awards 2003.

59


 In 2003, Forbes Global named HDFC Bank in its ranking of ―Best Under a Billion, 200
Best Small Companies for 2003‖.

 The Financial Express named HDFC Bank the ―Best New Private Sector Bank 2003‖ in
the FE-Ernst & Young Best Banks Survey 2003.

 Outlook Money named HDFC Bank the ―Best Bank in the Private Sector‖ for the year
2003.

 NASSCOM and economictimes.com have named HDFC Bank the ‗Best IT User in
Banking‘ at the IT Users Awards 2003.

 Euromoney magazine gave HDFC Bank the award for "Best Bank – India‖ in 1999,
―Best Domestic Bank‖ in India in 2000, and ―Best Bank in India‖ in 2001 and 2002.

 Asiamoney magazine has named us ―Best Commercial Bank in India 2002‖

 For its use of information technology, HDFC Bank has been recognized as a
―Computerworld Honors Laureate‖ and awarded the 21st Century Achievement Award in
2002 for Finance, Insurance & Real Estate category by Computerworld, Inc., USA. Its
technology initiative has been included as a case study in their online global archives.

 Business India named HDFC Bank ―India‘s Best Bank‖ in 2000.

 In 2000, Forbes Global named HDFC Bank in its list of ―The 300 Best Small
Companies‖ in the world and as one of the ―20 for 2001‖ best small companies in the
world.

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Products offered by HDFC Bank Ltd:
[1.] SAVINGS ACCOUNT

I. SAVINGS ACCOUNT:

An easy-to-operate savings account that allows you to issue cheques, draw Demand Drafts and
withdraw cash. Check up on your balances from the comfort of your home or office through Net
Banking, Phone Banking and Mobile Banking.
Need money urgently? Withdraw cash from any of the 1,740 ATM centers spread across the
country.

II. SAVINGS PLUS ACCOUNT:

Introducing the best banking option for you with HDFC Bank Savings Plus Account. Now you
can get access to some of the finest banking facilities with HDFC Bank's Savings Plus Account.
All you have to do is maintain an Average Quarterly Balance of Rs. 10,000/- and experience the
benefits as mentioned below:

III. SAVINGS MAX ACCOUNT:

Welcome to a world of convenience. Presenting SavingsMax account, loaded with maximum
benefits to make your banking experience a pleasure. By maintaining an average quarterly
balance of just Rs. 25,000/- you get a host of premium services from HDFC Bank absolutely
free.

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IV. NO FRILLS SAVINGS ACCOUNT:

In an effort to make banking simpler and more accessible for our customers, we have
introduced the 'No Frills' Savings Account, which offers you all the basic banking facilities.
You can even avail of services like NetBanking, Mobilebanking free of cost. All this with a
Zero Initial Pay-in and a Zero Balance account.

V. RETAIL TRUST ACCOUNT:

The Retail Trust Account is beneficial for Trusts and Societies as it earns them a higher
interest as compared to a conventional Current Account that offers no interest.

HDFC Bank's Retail Trust now offers features and benefits previously offered only on
Current Accounts.

VI. KIDS ADVANTAGE ACCOUNT:

Start saving for your child today and secure his/her future. Open a Savings Account and
transfer money every month into his/her Kids Advantage Account. Watch the savings grow
as your child grows. The accumulated savings in the Kids Advantage Account can over the
years help in meeting your child's needs.

VII. PENSIONS SAVINGS BANK ACCOUNT:

A Pension Saving Account is a Zero Balance Account that accumulates your pension over
the years. It comes with a free International Debit Card and facilities like Phone and Net
Banking. You can access this Account from any branch within the HDFC network and also
request for transfer to another bank.

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VIII. FAMILY SAVINGS GROUP ACCOUNT:

The Family Savings Group links together upto four individual HDFC Bank accounts (same
family) under a single group. Take advantage of the group Average Quarterly Balance
(AQB) and operate your individual accounts without worrying about minimum balance.

IX. CLASSIC SALARY ACCOUNT:

The Classic Salary account is a Zero Balance Account which earns you interest on your
savings from salary at a competitive rate fixed by the bank from time to time. There is no fee
applicable for branch transactions and you receive banking statements once every six
months.

X. PREMIUM SALARY ACCOUNT:

A power-packed account for successful salaried professionals, the Premium Salary account
comes with a free International Debit Card and add-on Debit card for life, with the option of
choosing between a Silver or Gold credit card at preferential rates.

XI. DEFENCE SALARY ACCOUNT:

Are you defence personnel employed with the Indian Armed Forces or the Indian Navy?
Then this account is for you.
Rather than collecting your cheque/cash at the end of the month, you can instruct your salary
wing to start crediting your salary to your Defence Salary Account.

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XII. NO FRILLS SALARY ACCOUNT:

As a financial inclusion initiative, we have introduced the "No Frills Salary" product
specifically targeted at the "urban" poor and the low salaried class. This is a Zero Balance
Salary Account!

[2.] CURRENT ACCOUNT:

I. PLUS CURRENT ACCOUNT:

In today's fast-paced world, your business regularly requires you to receive and send funds to
various cities in the country. HDFC Bank Plus Current Account gives you the power of inter-
city banking with a single account and access to more than 316 cities.

From special cheques that get treated at par with local ones in any city where we have a
branch, faster collection of outstation cheques (payable at branch locations), free account to
account funds transfer between HDFC Bank accounts to Free inter-city clearing of up to 100
lakhs per month, our priority services have become the benchmark for banking efficiency.

Plus Current Account requires you to maintain an average quarterly balance of Rs. 100,000.

II. TRADE CURRENT ACCOUNT:

In today's changing business requirements, you need to transfer funds across cities, and time
is of the essence. HDFC Bank Trade Current Account gives you the power of inter-city
banking with a single account.

From special cheques that get treated at par with local ones in any city where we have a
branch, to free account to account funds transfer between HDFC Bank accounts, to free inter-
city clearing of up to 50 lakhs per month, our priority services have become the benchmark
for banking efficiency. Trade Current Account requires you to maintain an average quarterly
balance of Rs. 40,000.

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III. PREMIUM CURRENT ACCOUNT:

Your business needs a partner who can manage your finances while you concentrate on
growing your business.

You can avail benefits of inter-city banking account with Premium Current Account, that
requires an average quarterly balance of only Rs. 25,000, offers Payable-At-Par cheque book
facility & FREE inter-city clearing transactions across our network up to Rs.25 Lacs per
month.

A Current Account with the benefits of accessing your account from a large network of
branches, and through direct access channels - the phone, mobile, Internet and through the
ATM.

Enter into a profitable relationship and access all the privileges flowing your way.

IV. REGULAR CURRENT ACCOUNT:

A Current account is ideal for carrying out day-to-day business transactions. With the HDFC
Bank Regular Current Account, you can access your account anytime, anywhere, pay using
payable at par cheques or deposit cheque at any HDFC bank branch. It also facilitates FREE
NEFT transactions & FREE RTGS collections for faster collections in your account. Regular
Current Account requires you to maintain an average quarterly balance of only Rs. 10,000.

With a vast network of branches in cities all over the country, and access to a multitude of
ATM's, you can keep track of all your transactions anytime.

V. REIMBURSEMENT CURRENT ACCOUNT:

No more paperwork, no more receipts to keep track of - a hassle-free account that allows you
to deposit the reimbursements you receive from your company on a monthly basis.

How to Open a Reimbursement Account

 Procure an Account Opening Document (AOD) from HDFC Bank. (If you have just
joined, first request your company to open up a Salary Account for you).

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 Mention your Salary Account number and your Debit Card number on the AOD so that
your Debit card can be linked to both, your Salary Account as well as your new
Reimbursement Account.

Request your company to directly credit cash payments to the Reimbursement Account.

VI. RFC DOMESTIC ACCOUNT:

Have you accumulated foreign currency from travelling abroad frequently? Received gifts
from relatives in foreign currency? Or earned it by any other means as approved by the
Reserve Bank of India?

If so, open Resident Foreign Currency Domestic Account* and manage your foreign
currency efficiently. You can choose to set up your account either in US Dollar, Great Britain
Pound or Euro.

How to Open a RFC Domestic Account

Choose the currency in which you wish to operate.

Open your account with an initial amount as per the following-US Dollar = 250 | Great Britain
Pound = 200 | Euro = 250 and maintain an Average Quarterly Balance of the same amount.

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[3.] FIXED DEPOSIT ACCOUNT:
I. REGULAR FD ACCOUNT:

If you believe in long-term investments and wish to earn higher interests on your savings,
NOW is the time to invest your money in our Fixed Deposit. Get upto 9.00% on HDFC Bank
Fixed Deposit with an additional 0.50% for Senior Citizens. What's more NO PENALTY if
you withdraw part of the FD in times of need? Flexibility, Security and High Returns all
bundled into one offering.

II. FIVE YEAR TAX SAVING FD ACCOUNT:

Fixed Deposits at one time were the most popular investment avenue.
However with the changing market scenario-booming financial markets, FDs lost their sheen.

However today they have once again become attractive !! In 2006, it was announced for the first
time that Bank fixed deposits booked by an Individual/HUF for 5 years & upto Rs. 1,00,000/-
will be allowed exemption under Sec 80C of the Income Tax Act,1961 subject to necessary
declarations taken from the Customer.

III. SUPER SAVER FACILITY:

Enjoy a high rate of interest along with the liquidity of a Savings Account by opting for a
SuperSaver Facility on your savings account. Avail of an overdraft facility of up to 75% of
the value of your Fixed Deposit.

IV. SWEEP-IN FACILITY:

Do you wish to avoid taking overdrafts, and still take advantage of your Fixed Deposits?
Then what you need is a Sweep-In Facility on your savings account.

Link your Fixed Deposit to your Savings or Current Account and use it to fall back on in case
of emergencies. A deficit in your Savings or Current Account is taken care of by using up an
exact value from your Fixed Deposit. Since deposits are broken down in units of Re 1/-, you
will lose interest only for the actual amount that has been withdrawn.

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[4.] DEMAT ACCOUNT:
I. DEMAT ACCOUNT:

HDFC BANK is one of the leading Depository Participant (DP) in the country with over 8
Lac demat accounts.

HDFC Bank Demat services offers you a secure and convenient way to keep track of your
securities and investments, over a period of time, without the hassle of handling physical
documents that get mutilated or lost in transit.

HDFC BANK is Depository particpant both with -National Securities Depositories Limited
(NSDL) and Central Depository Services Limited (CDSL).

II. SAFE DEPOSIT LOCKERS:

A Safe Deposit Locker with HDFC Bank is the solution to your concern. Located at select
branches in cities all over the country, our lockers ensure the safe keeping of your valuables.

ADVANTAGES / KEY BENEFITS:

 Wide Availability.

 Lockers available in various sizes. i.e. Small, Medium, Large and Extra Large with varying
rents.

 Lockers are rented out for a minimum period of one year. Rent is payable in advance.

 No deposits are required to avail a locker. Just open an account and get the locker facility OR
the rent may be conveniently paid from your deposit account with us.

 Direct debits for locker rentals from your account rid you of the hassles in writing out
cheques.

 There is a nominal annual charge, which depends on the size of the locker and the centre in
which the branch is located.

ELIGIBILITY:

An individual (not minor), firms, limited company, associations, clubs, trusts, societies, etc
may hire a locker.

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NOMINATION FOR SAFE DEPOSIT LOCKER:

 The Lockers and their contents can be nominated to people near and dear to you.

 Nomination facility is available to individual hirer of Safe Deposit Locker.

 In the case of a sole hirer of a safe deposit locker, nomination can be made in favour
of only one individual.

 Where the safe deposit locker is hired in the name of a minor, the nomination shall be
made by a person lawfully entitled to act on behalf of the minor.

TERMS AND CONDITIONS:

 For obtaining a Locker at HDFC Bank you must be an account holder with our
Bank.

 Lockers can be allotted individually as well as jointly.

 The Locker holder is permitted to add or delete names from the list of persons
who can operate the Locker and can have access to it.

 Loss of Key is to be immediately informed to the concerned Branch.

 For Schedule of Rentals, please contact the branch nearest to you.

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[5.] PRIVATE BANKING:

HDFC Bank offers Private Banking services to high net worth individuals and institutions. Our
team of seasoned financial and investment professionals provide objective guidance backed by
thorough research and in-depth analysis keeping in mind your financial goals.

MULTIPLE RECOGNITION FROM EUROMONEY

At HDFC Bank, we have always strived towards providing exceptional service to each of our
esteemed customers. As testament to this dedication, we have earned the following ranks in a
recently conducted Euromoney Survey.

Rated as the Best Private Bank in the Super Affluent Category in India .

HDFC Bank Investment Advisory Services - Helping you take your Investment portfolio
further.

Some of the advantages you can benefit from:

1. Dedicated Investment Advisor.

2. Advisory services across all asset categories - Direct Equity and its derivatives,
Mutual Funds, Insurance and more.

DEDICATED INVESTMENT ADVISOR:

Our Private Banking service involves a high degree of personalization. When you avail of this
facility, a dedicated Investment Advisor serves you. This seasoned finance professional adds
value to your portfolio by keeping you up to date with financial markets and investment
opportunities.

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