Hdfc bank

HDFC Bank Ltd.
SECTION-I
S.V Institute of Management, Kadi
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HDFC Bank Ltd.
RESERCH METHODOLOGY
1. RESERCH OBJECTIVE:
1. To understand the basic functional areas and their respective functions.
2. To evaluate the company’s performance in over all industry growth.
3. To measure individual functional area in bank’s performance.
4. The effect of various political, social, economical and technological factors.
2. RESERCH METHODOLOGY:
Source of Data:
The data collected for the study was primary in nature as well as secondary data
Research Instrument:
Research tools were in depth interview of company employees.
Sample Unit:
Data collection from various departmental heads including Managers and
executives.
Sampling procedure:
Non-probability judgment sample was selected for accurate information.
Contact method:
Here we have conducted personal interview for data collection.
SECTION-II
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HDFC Bank Ltd.
SECTOR PROFILE
1. History of Indian banking
A bank is a financial institution that provides banking and other financial services. By
the term bank is generally understood an institution that holds a Banking Licenses.
Banking licenses are granted by financial supervision authorities and provide rights to
conduct the most fundamental banking services such as accepting deposits and making
loans. There are also financial institutions that provide certain banking services without
meeting the legal definition of a bank, a so-called Non-bank. Banks are a subset of the
financial services industry.
The word bank is derived from the Italian banca, which is derived from German and
means bench. The terms bankrupt and "broke" are similarly derived from banca rotta,
which refers to an out of business bank, having its bench physically broken.
Moneylenders in Northern Italy originally did business in open areas, or big open rooms,
with each lender working from his own bench or table.
Typically, a bank generates profits from transaction fees on financial services or the
interest spread on resources it holds in trust for clients while paying them interest on the
asset. Development of banking industry in India followed below stated steps.
Ø Banking in India has its origin as early as the Vedic period. It is believed that the
transition from money lending to banking must have occurred even before Manu,
the great Hindu Jurist, who has devoted a section of his work to deposits and
advances and laid down rules relating to rates of interest.
Ø Banking in India has an early origin where the indigenous bankers played a very
important role in lending money and financing foreign trade and commerce.
During the days of the East India Company, was the turn of the agency houses to
carry on the banking business. The General Bank of India was first Joint Stock
Bank to be established in the year 1786. The others which followed were the
Bank Hindustan and the Bengal Bank.
Ø In the first half of the 19th century the East India Company established three
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HDFC Bank Ltd.
banks; the Bank of Bengal in 1809, the Bank of Bombay in 1840 and the Bank of
Madras in 1843. These three banks also known as Presidency banks were
amalgamated in 1920 and a new bank, the Imperial Bank of India was established
in 1921. With the passing of the State Bank of India Act in 1955 the undertaking
of the Imperial Bank of India was taken by the newly constituted State Bank of
India.
Ø The Reserve Bank of India which is the Central Bank was created in 1935 by
passing Reserve Bank of India Act, 1934 which was followed up with the
Banking Regulations in 1949. These acts bestowed Reserve Bank of India (RBI)
with wide ranging powers for licensing, supervision and control of banks.
Considering the proliferation of weak banks, RBI compulsorily merged many of
them with stronger banks in 1969.
Ø The three decades after nationalization saw a phenomenal expansion in the
geographical coverage and financial spread of the banking system in the country.
As certain rigidities and weaknesses were found to have developed in the system,
during the late eighties the Government of India felt that these had to be addressed
to enable the financial system to play its role in ushering in a more efficient and
competitive economy. Accordingly, a high-level committee was set up on 14
August 1991 to examine all aspects relating to the structure, organization,
functions and procedures of the financial system. Based on the recommendations
of the Committee (Chairman: Shri M. Narasimham), a comprehensive reform of
the banking system was introduced in 1992-93. The objective of the reform
measures was to ensure that the balance sheets of banks reflected their actual
financial health. One of the important measures related to income recognition,
asset classification and provisioning by banks, on the basis of objective criteria
was laid down by the Reserve Bank. The introduction of capital adequacy norms
in line with international standards has been another important measure of the
reforms process.
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HDFC Bank Ltd.
1. Comprises balance of expired loans, compensation and other bonds such as
National Rural Development Bonds and Capital Investment Bonds. Annuity
certificates are excluded.
2. These represent mainly non- negotiable non- interest bearing securities issued
to International Financial Institutions like International Monetary Fund,
International Bank for Reconstruction and Development and Asian
Development Bank.
3. At book value.
4. Comprises accruals under Small Savings Scheme, Provident Funds, Special
Deposits of Non- Government
Ø In the post-nationalization era, no new private sector banks were allowed to be
set up. However, in 1993, in recognition of the need to introduce greater
competition which could lead to higher productivity and efficiency of the
banking system, new private sector banks were allowed to be set up in the Indian
banking system. These new banks had to satisfy among others, the following
minimum requirements:
(i) It should be registered as a public limited company;
(ii) The minimum paid-up capital should be Rs 100 crore;
(iii) The shares should be listed on the stock exchange;
(iv) The headquarters of the bank should be preferably located in a centre
which does not have the headquarters of any other bank; and
(v) The bank will be subject to prudential norms in respect of banking
operations, accounting and other policies as laid down by the RBI. It will have to
achieve capital adequacy of eight per cent from the very beginning.
Ø A high level Committee, under the Chairmanship of Shri M. Narasimham, was
constituted by the Government of India in December 1997 to review the record of
implementation of financial system reforms recommended by the CFS in 1991
and chart the reforms necessary in the years ahead to make the banking system
stronger and better equipped to compete effectively in international economic
environment. The Committee has submitted its report to the Government in April
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HDFC Bank Ltd.
1998. Some of the recommendations of the Committee, on prudential accounting
norms, particularly in the areas of Capital Adequacy Ratio, Classification of
Government guaranteed advances, provisioning requirements on standard
advances and more disclosures in the Balance Sheets of banks have been accepted
and implemented. The other recommendations are under consideration.
Ø The banking industry in India is in a midst of transformation, thanks to the
economic liberalization of the country, which has changed business environment
in the country. During the pre-liberalization period, the industry was merely
focusing on deposit mobilization and branch expansion. But with liberalization, it
found many of its advances under the non-performing assets (NPA) list. More
importantly, the sector has become very competitive with the entry of many
foreign and private sector banks. The face of banking is changing rapidly. There
is no doubt that banking sector reforms have improved the profitability,
productivity and efficiency of banks, but in the days ahead banks will have to
prepare themselves to face new challenges.
Indian Banking: Key Developments
1969 Ø Government acquires ownership in major banks
Ø Almost all banking operations in manual mode
Ø Some banks had Unit record Machines of IBM for IBR & Pay roll
1970- 1980 Ø Unprecedented expansion in geographical coverage, staff,
business & transaction volumes and directed lending to
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HDFC Bank Ltd.
agriculture, SSI & SB sector
Ø Manual systems struggle to handle exponential rise in transaction
volumes --
Ø Outsourcing of data processing to service bureau begins
Ø Back office systems only in Multinational (MNC) banks' offices
1981- 1990 Ø Regulator (read RBI) led IT introduction in Banks
Ø Product level automation on stand alone PCs at branches
(ALPMs)
Ø In-house EDP infrastructure with Unix boxes, batch processing in
Cobol for MIS.
Ø Mainframes in corporate office
1991-1995 Ø Expansion slows down
Ø Banking sector reforms resulting in progressive de-regulation of
banking, introduction of prudential banking norms entry of new
private sector banks
Ø Total Branch Automation (TBA) in Govt. owned and old private
banks begins
Ø New private banks are set up with CBS/TBA form the start
1996-2000 Ø New delivery channels like ATM, Phone banking and Internet
banking and convenience of any branch banking and auto sweep
products introduced by new private and MNC banks
Ø Retail banking in focus, proliferation of credit cards
Ø Communication infrastructure improves and becomes cheap.
IDRBT sets up VSAT network for Banks
Ø Govt. owned banks feel the heat and attempt to respond using
intermediary technology, TBA implementation surges ahead
under fiat from Central Vigilance
Ø Commission (CVC), Y2K threat consumes last two years
2000-2003 Ø Alternate delivery channels find wide consumer acceptance
Ø IT Bill passed lending legal validity to electronic transactions
Ø Govt. owned banks and old private banks start implementing
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HDFC Bank Ltd.
CBSs, but initial attempts face problems
Ø Banks enter insurance business launch debit cards
(Source: M.Y.KHAN, “INDIAN FINANCIAL SYSYEM”,3rd edition Publication by
TATA McGraw hill)
2. CURRENT SCENARIO
The banking industry in India is in a midst of transformation, thanks to the economic
liberalization of the country, which has changed business environment in the country.
During the pre-liberalization period, the industry was merely focusing on deposit
mobilization and branch expansion. But with liberalization, it found many of its advances
under the non-performing assets (NPA) list. More importantly, the sector has become
very competitive with the entry of many foreign and private sector banks. The face of
banking is changing rapidly. There is no doubt that banking sector reforms have
improved the profitability, productivity and efficiency of banks, but in the days ahead
banks will have to prepare themselves to face new challenges.
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HDFC Bank Ltd.
Ø For the first quarter ended June 2004, the banking sector recorded a bottom line
growth of 18% to Rs 4852.50 crores. Higher net interest income and lower
provisioning were the main reasons for the profit growth during the quarter.
However, the above results were achieved despite higher operating expenses and
a lower rise in non-interest income.
Ø Among banks, public sector banks outperformed private sector banks by
registering a 20% rise in the net profit compared to an 11% growth reported by
private sector banks. This was mainly due to a higher rise in other income (OI)
and a lower increase in operating expenses by public sector banks compared to a
fall in OI and higher operating expenses by private sector banks. However, at the
net interest level, private sector banks outperformed public sector banks by
registering a growth of 36% compared to a 14% rise reported by public sector
banks. .
Ø The net interest income of the overall banking sector during the quarter rose 17%
to Rs 11962.53 crores, mainly due to low cost of funds. The interest earned rose
4% to Rs 29747.88 crores, contributed mainly by interest income from core
operations (i.e., lending). The interest expenses decreased by 4% to Rs 17785.35
crores. The interest spread of most banks witnessed an increase over the
corresponding previous quarter, as the decline of yield on lending was lower than
the cost of funds. In the falling interest rate scenario, the rate on deposits for most
banks fell faster than advances. Thus, interest expenses came down faster to
protect profit
Ø The sound economic growth, soft interest rate regime, upward migration of
incomes and wider distribution to cover a larger proportion of the population are
expected to increase the demand for retail loans in a significant manner. The retail
credit as a percentage of GDP in India is only around 5% as compared to levels of
30 - 50% in other Asian economies and, therefore, offers significant growth
opportunities. Also, favorable demographic profile like 69% of the population
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HDFC Bank Ltd.
estimated to be under 35 years and an increase in upper middle/high income
households are to be the main drivers for retail credit. In the medium term,
stronger demand for credit from the corporate sector is also expected consequent
to the resurgence of this sector. Earlier, banks were seeing lower credit off take
from corporate because of weak business sentiments and lower credit requirement
due to improved operational efficiency
Ø Also, most banks are aggressively augmenting their fee incomes and have
embarked upon cross selling of products. They are also focusing on fuller
utilization of their IT investments such as ATMs by entering into sharing
arrangement with other banks to earn extra OI. Many banks are hopeful of
effecting significant NPA recoveries due to the Securitization Act. Recoveries
from NPAs, which have been provided for, add to OI.
Ø The banking sector is poised to grow in line with the growth of the economy.
However, there are concerns that directed focus on lending to agriculture and SSI
sector may increase NPAs of banks. Further, volatility and a sharp fall in g-sec
prices may lead to trading losses or even depreciation provision for some banks,
going forward.
Banking
With the economic growth picking up pace and the investment cycle on the way to
recovery, the banking sector has witnessed a transformation in its vital role of
intermediating between the demand and supply of funds. The revived credit off take (both
from the food and non food segments) and structural reforms have paved the way for a
change in the dynamics of the sector itself. Besides gearing up for the compliance with
Basel accord, the sector is also looking forward to consolidation and investments on the
FDI front.
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HDFC Bank Ltd.
(source: www.wss.rbi.org.in)
Public sector banks have been very proactive in their restructuring initiatives be it in
technology implementation or pruning their loss assets. Windfall treasury gains made in
the falling interest rate regime were used for writing off the doubtful and loss assets.
Incremental provisioning made for asset slippages have safeguarded the banks from
witnessing a sudden impact on their bottom lines.
Retail lending (especially mortgage financing) formed a significant portion of the
portfolio for most banks and the entities customized their products to cater to the diverse
demands. With better penetration in the semi urban and rural areas the banks garnered a
higher proportion of low cost deposits thereby economizing on the cost of funds.
(Source: www.bulletin.rbi.org.in )
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HDFC Bank Ltd.
Apart from streamlining their processes through technology initiatives such as ATMs,
telephone banking, online banking and web based products, banks also resorted to cross
selling of financial products such as credit cards, mutual funds and insurance policies to
augment their fee based income.
(Source: M.Y.KHAN, “INDIAN FINANCIAL SYSYEM”, 3rd edition Publication by
TATA McGraw hill)
3. PROSPECTS
The prospect of Indian banking sector is very good. It is going to be flourished in years to
come. As India is going to become outsourcing hub for foreign companies. Some of the
factors which have contributed to good prospects of banks are as under:
Ø RBI's soft interest rate policy has helped increase the liquidity in the market,
however credit off take has not exactly been robust. Going forward, the scenario
is set to change in favour of higher credit off take due to expected improvement
in agricultural output on the back of good monsoons as well as revival in the
Indian industry. However the same cannot be said for the interest rate regime.
Higher inflation and the prospect of the US raising interest rates may necessitate
a hike in interest rates in the domestic markets also. This may in turn curb the
growth of the credit in the economy. Hence while the growth in credit may still
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HDFC Bank Ltd.
be robust, a higher interest rate scenario may however limit the potential.
Ø While the new law regarding securitization and foreclosure of assets may
take a while to bear any large benefits, currently the benefits of increased
power in the hands of the lender are making the borrowers to come to the
negotiating table. FY04 saw a scenario where the borrowers were forced to
negotiate with the lenders, which consequently led to the borrowers returning
some of the dues to the lenders. Going forward the new law will bring about
greater accountability within the system and ensure that borrowers do not
take undue advantage of the system. Already an asset reconstruction
company has been set up by SBI in partnership with other institutions like
ICICI Bank and IDBI. If properly implemented, this new law may lead to
significant benefits for the banking sector as a whole.
Ø Currently the banking sector in the country is strongly fragmented and hence
with further policy changes taking place in the sector, consolidation is likely
to take place at a faster rate. However this is subject to the removal of the
ceiling on voting rights will ensure that private sector and foreign banks will
be in a much better position to carry out acquisitions in the banking sector. A
hike in FDI capital limits in the sector would further go a long way in the
process of consolidation.
Ø In terms of credit growth, going forward. India's core sector is witnessing a
revival of sorts. The manufacturing sector especially led by steel and cement
industries has shown significant improvement in FY04. We expect the trend
to continue. Hence as corporate growth picks up lending too is likely to see
an up tick. Retail credit off-take is expected to remain strong going forward
with the housing finance industry, the main contributor to credit off-take
from this segment, expected to grow between 20%-25% in the next 3-4 years.
(Source: Magazine, Banking Finance April-2005, page: 22-27)
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HDFC Bank Ltd.
4. STRUCTURE OF INDIAN BANKING INDUSTRY
Organized banking was active in India since the establishment of the General Bank of
India in 1786. After independence, the Reserve Bank of India (RBI) was established as
the central bank and in 1955, the Imperial Bank of India, the biggest bank at the time,
was taken over by the government to form state-owned State Bank of India (SBI). RBI
had undertaken an exercise to merge weak banks to strong banks and the total number of
banks thus reduced from 566 in 1951 to 85 in 1969.
With the objective of reaching out to masses and meeting the credit needs of all sections
of people, the government nationalized 14 large banks in 1969 followed by another 6
banks in 1980. This period saw enormous growth in the number of branches and the
banks’ branch network became wide enough to reach the weakest sections of the society
in a vast country like India. Sib’s network of 9033 domestic branches and 48 overseas
offices is considered to be one of the largest for any bank in the world.
The economic reforms unleashed by the government in early nineties included banking
sector too, to a significant extent. Entry of new private sector banks was permitted under
specific guidelines issued by RBI. A number of liberalization and de-regulation measures
aimed at consolidation, efficiency, productivity, asset quality, capital adequacy and
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HDFC Bank Ltd.
profitability have been introduced by the RBI to bring Indian banks in line with
International best practices. With a view to giving the state-owned banks operational
flexibility and functional autonomy, partial privatization has been authorized as a first
step, enabling them to dilute the stake of the government to 51 per cent. The government
further proposed, in the Union Budget for the financial year 2000-01, to reduce its
holding in nationalized banks to a minimum of 33 per cent on a case by case basis.
The banking system can be broadly classified as organized and unorganized banking
system. The unorganized banking system comprises of moneylenders, indigenous
bankers, lending pawnbrokers, landlords, traders, etc. Whereas the organized banking
system comprises of Scheduled Banks and Non-Scheduled Banks that are permitted by
RBI to undertake banking business.
4.1. Types of Banks
A. Scheduled Banks
Scheduled commercial banks are those that come under the purview of the Second
Schedule of Reserve Bank of India (RBI) Act, 1934. The banks that are included
under this schedule are those that satisfy the criteria laid down vide section 42 (6 of
the Act).
1. The bank is dealing in banking business in India only.
2. The paid up capital and total funds of the bank should not be less than five lakh
rupees.
3. It should convince RBI that its activities would not be against the interest of
investors.
4. The bank must be:
(a) State cooperative bank, or
(b) A company according to the definition of the companies Act1956, or
(c) An institution notified by the central government, or
(d) A corporation or a company incorporated by or under any law in force in
any place outside India.
Thus,
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HDFC Bank Ltd.
(I) Indian Commercial Banks
(II) Foreign Commercial Banks, and
(iii) State Cooperative Banks fulfilling the above condition are considered
as scheduled banks.
Moreover under the RBI Act section 42, the Central Government has
declared the following banks as scheduled banks.
(i) State Bank of India and its seven subsidiary banks,
(ii) Twenty nationalized banks, and
(iii) Urban Banks.
In June 1980 there were 149 scheduled banks which included
(i) Public Sector Banks
(ii) Private sector Banks,
(iii) Foreign Exchange Banks and
(iv) State Cooperative Banks.
A bank which wants to register its name as scheduled bank has to apply to the Central
Government. On receiving such application, the central government orders RBI to
investigate the banks’ accounts. If RBI gives favorable reports, the central government
sanctions its proposal, and the bank is listed under schedule annexure II and is considered
as a scheduled bank.
Some co-operative banks come under the category of scheduled commercial banks
though not all co-operative banks.
Ø PUBLIC SECTOR BANKS
Public sector banks are those in which the Government of India or the RBI is a
majority shareholder. These banks include the State Bank of India (SBI) and its
subsidiaries, other nationalized banks, and Regional Rural Banks (RRBs). Over
70% of the aggregate branches in India are those of the public sector banks. Some
of the leading banks in this segment include Allahabad Bank, Canara Bank, Bank
of Maharashtra, Central Bank of India, Indian Overseas Bank, State Bank of
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HDFC Bank Ltd.
India, State Bank of Patiala, State Bank of Bikaner and Jaipur, State Bank of
Travancore, Bank of Baroda, Bank of India, Oriental Bank of Commerce, UCO
Bank, Union Bank of India, Dena Bank and Corporation Bank.
Ø PRIVATE SECTOR BANKS
Private Banks are essentially comprised of two types:
Old banks and New banks
The old private sector banks comprise those, which were operating before
Banking Nationalization Act was passed in 1969. On account of their small size,
and regional operations, these banks were not nationalized. These banks face
intense rivalry from the new private banks and the foreign banks. The banks that
are included in this segment include: Bank of Madura Ltd. (now a part of ICICI
Bank), Bharat Overseas Bank Ltd., Bank of Rajasthan, Karnataka Bank Ltd., Lord
Krishna Bank Ltd., The Catholic Syrian Bank Ltd., The Dhanalakshmi Bank Ltd.,
The Federal Bank Ltd., The Jammu & Kashmir Bank Ltd., The Karur Vysya
Bank Ltd., The Lakshmi Vilas Bank Ltd., The Nedungadi Bank Ltd. and Vysya
Bank.
The new private sector banks were established when the Banking Regulation Act
was amended in 1993. Financial institutions promoted several of these banks.
After the initial licenses, the RBI has granted no more licenses. These banks are
gearing up to face the foreign banks by focusing on service and technology.
Currently, these banks are on an expansion spree, spreading into semi-urban areas
and satellite towns. The leading banks that are included in this segment include
Bank of Punjab Ltd., Centurion Bank Ltd., Global Trust Bank Ltd., HDFC Bank
Ltd., ICICI Banking Corporation Ltd., IDBI Bank Ltd., IndusInd Bank Ltd. and
UTI Bank Ltd.
Ø Co-operative Banks
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HDFC Bank Ltd.
Co-operative banks act as substitutes for moneylenders, and offer timely and
adequate short-term and long-term institutional credit at reasonable rates of
interest. Co-operative banks are relatively similar in terms of functions to the
other banks except for the following:
a) They are organized and managed on the principal of co-operation, self-help,
And mutual help.
b) They operate under the rule of "one member, one vote".
c) Operate on "no profit, no loss" basis.
d) Co-operative bank conducts all the main banking functions of deposit
mobilization, supply of credit and provision of remittance facilities. Co-operative
banks offer limited banking products and are functionally
specialists in agriculture-related products, and even in providing housing
loans of late. Urban Co-operative Banks offer working capital loans and term
loans as well.
e) Co-operative banks primarily operate in the agriculture and rural sector.
However, UCBs, SCBs, and CCBs function in semi urban, urban, and
metropolitan areas too
f) Co-operative banks are probably the first government sponsored,
government-supported, and government-subsidized financial agency in India.
They get financial and other aid from the Reserve Bank of India NABARD,
central government and state governments. They are the "most favored"
banking sector with risk of nationalization.
g) Co-operative banks normally concentrate on "high revenue" niche retail
segments.
Ø Development Banks
Development banks are primarily intended to encourage industrial development
by providing adequate flow of funds to industrial projects. In other words, these
institutions undertake the responsibility of aiding all-round development in the
country’s economy by promoting new industrial projects, and providing financial
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HDFC Bank Ltd.
assistance for the expansion, diversification, and up gradation of the existing
units. Development Banks may be classified as All India development banks and
Regional development banks. While All India development banks include
Industrial Development Bank of India and Industrial Finance Corporation of
India, examples of Regional development banks include State Financial
Corporation and State Industrial Development Corporation.
BB Non-scheduled Banks:
The banks, which are not included in the second schedule of RBI Act, 1934, are
known as non-scheduled banks. Such banks total share capital is less than five
lakh. These banks are not governed according to the RBI Act and they receive no
benefits from the RBI. These banks have no place in the list of recognized banks
of the RBI. These banks are not much trusted by the people and they do not get
handsome deposits. Since 1951 the numbers of such banks have been gradually
decreasing. In 1979 there were only five non-scheduled banks.
Generally now days we found many cooperative banks which are belongs to the
non-schedule co-operative banks. Following are the types of non-schedule banks
they are work like the schedule banks but here difference in its status and it not
having the status of the schedule banks.
a. Deposits Banks
b. Cooperative Banks
c. Central Banks
d. Exchange Banks
e. Investment or Industrial Banks
f. Land Development Banks
g. Savings Banks
(a) Deposits Banks:
Generally, banks which provide short-term loans to business and industrial units and
which mobilize savings of people as deposits are called deposit banks. Deposit banks
accept deposits from people, and provide short-term advances. They provide
overdraft and cash credit facilities to merchants. To meet the long-term requirement
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HDFC Bank Ltd.
of industrial units is not possible for these banks. They accept three types of deposits-saving
bank deposits, fixed deposits and current account deposits. They accept these
deposits which are payable on demand or on short notice, and provide funds to
trading and commercial units for short durations.
(b) Cooperative Banks
Cooperative banks meet the short-term financial needs of farmers. Agriculturists,
petty farmers and artisans organize themselves on cooperative principles and form
cooperative societies and banks. Cooperative banks raise funds through various
means, besides receiving all kinds of deposits to make them available as lendable
funds to its members. In India developed cooperative banks supply finance for
agriculture and non-agriculture activities.
(c) Central Banks
A central bank is a special institution which controls and regulates the entire banking
structure of country. It also strives to maintain monetary stability of the country.
Central bank is also known as the apex bank of a country. Since it functions in the
best interest of the country and making profits is unknown to it, it is entrusted the
right it issue currency notes. No other bank is allowed this right. It operates in close
cooperation with the government of implementing economic policies, thereby
promoting economic development.
(d) Exchange Banks:
There is a difference in financing of foreign trade and financing of internal trade.
Generally a person carrying on international trade requires foreign currencies to meet
his obligation. It is here that exchange banks play the role of financing the dealer for
setting transactions involved in foreign trade, there are specialized banks for
exchange business. In India, there is an Export-Import Bank (EXIM).
(e) Investment or Industrial Banks:
Investment banks provide long-term credit to industries. They raise their funds by
way of share capital, debentures, and long-term deposits from the public. They also
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HDFC Bank Ltd.
raise funds by the issue of bonds for business operations and government agencies.
Usually they underwrite fresh issue of shares and debentures of companies. Such
banks also buy the entire issue of new securities of public limited companies and try
to get them subscribed at a higher price by the public.
(f) Land Development Banks:
Land development banks were earlier known as land mortgage banks. In India, there
is limited number of such banks. There are special institutions providing long-term
loans to agricultures and farmers. They provide loans on security of land and other
immovable properties. They supply long-term funds for periods exceeding six years.
Agriculturists and farmers need such funds for making permanent improvements to
land and for buying farming machinery and equipment.
(g) Savings Banks:
Savings Banks are specialized institutions, which encourage general public to save
something from their earnings. In other words such banks pool the small savings of
middle and lower income sections of society. They are the banks in the true sense of
the term and their main aim is to promote and collect of the public. Not only the
depositors are given interest, but also they are allowed to withdraw in times of need.
The numbers of withdrawal are, however, restricted. Separate savings banks are
organized in various nations. The government can also run a savings bank. In India
the postal department runs the postal saving bank all over the country. It is very
popular in rural areas where no branches where no branches of established
commercial bank operate. In urban areas, commercial bank handles savings business
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Table-1:
Structure of the Indian banking industry, March 31, 2004
Sr.
No.
Bank Group No. Of
Banks
Deposits Loans &
Advances
Net Profit
1. Public Sector Banks
Share Percentage
27
7.6 %
10796
76.8 %
5493
72.1 %
123
69.8 %
1. a State Bank Group
Share (per cent)
8
2.2 %
3910
27.8 %
1892
24.8 %
45
25.6 %
1. b Nationalized Banks
Share (per cent)
19
5.3 %
6886
49 %
3604
47.2 %
78
44.2 %
2. Private Sector Banks
Share (per cent)
30
8.4 %
2072
14.8 %
1389
18.2 %
30
16.8 %
2.a Old Private Sector Banks
Share (per cent)
21
5.9 %
914
6.5 %
494
5.3 %
12
7 %
2.b New Private Sector Banks
Share (per cent)
9
2.5 %
1158
8.3 %
895
11.9 %
17
9.8 %
3. Foreign Banks
Share (per cent)
36
10 %
693
4.3 %
522
6.8 %
18
10.4 %
4. Total Pvt Sector Banks
Share (per cent) {2+3}
66
18.5 %
2765
19.7 %
1911
25.1 %
48
27.2 %
5. Total Comm. Banks
Share (per cent) {1+4}
93
26 %
13559
96.6 %
7405
97.1 %
171
97 %
6. Regional Rural Banks
Share (per cent)
264
74 %
483
3.4 %
218
2.9 %
5
3 %
7. Total of Banks
Share (per cent)
357
100 %
14042
100 %
7623
100 %
76
100 %
(Source: M.Y.KHAN, “INDIAN FINANCIAL SYSYEM”, 4th edition Publication by
TATA McGraw hill)
5. PEST ANALYSIS
The PEST analysis considers the broad external environment facing the business
organization. It is an outward looking analysis. The PEST analysis attempts to answer
the question: What broad determinants are going to affect the macro environment in
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HDFC Bank Ltd.
which the firm will be competing, over the next five (or more) years? The PEST
analysis is so-called, because it is an acronym for the four categories into which the
analyst will try and include all of the relevant factors and trends: Political, Economic,
Social, and Technological.
Like any model, the PEST model is a simplification; the choice of Political, Economic,
Social, and Technological factors may strike you as arbitrary. You may be right.
However, these categories are as adequate as any in attempting to put a form to the
myriad trends, developments, events and causations that will assist or hinder the firm as
it attempts to breach the Gap between where its is now, and where it ultimately wants to
be.
.
Political-legal factors
1. Government policy and budget:
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HDFC Bank Ltd.
Government affects the performance of banking sector most by legislature and framing
policies. Government through its budget affects the banking activities. The much-needed
reforms in the banking sector have transformed the sector drastically in the last
few years. Falling interest rates as well as strengthening of the hands of banks
(Securitization Act) have changed the dynamics of the Indian banking sector itself. The
new Securitisation Act has given more power to the banking sector against defaulting
borrowers. Further, changes to be implemented on the issue of voting rights among
private sector banks are likely to speed up the consolidation process. The impact that
budget 2004-05 will have on banking has been analysed below:
Budget measures:
Autonomy to RBI to implement reforms in banking sector.
Amendment of the Banking Regulation Act.
Allow banking companies to issue preference shares to boost their Tier-I capital.
Introduce provisions to enable the consolidated supervision of banks and their
subsidiaries by RBI.
Increase bank lending to agricultural sector by 30% and PSU banks to increase number
of agricultural borrowers by 5 m.
Remove the lower and upper bounds to the statutory liquidity ratio (SLR) and removal
of the limits on the cash reserve ratio (CRR) to provide flexibility to RBI to prescribe
prudential norms
Enable RBI to lend or borrow securities by way of repo, reverse repo or otherwise.
0.1% banking transaction tax to be imposed on cash withdrawals above Rs 10,000 on a
single day.
Removal of benefits available to depositors (Section 80-L)
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HDFC Bank Ltd.
Budget Impact on banking sector:
Higher autonomy to RBI will enable the apex bank to vary the CRR and SLR limits as
per the liquidity requirements of banks (in consonance with the credit growth) and this
in turn, will facilitate more flexible conduct of monetary policy. Also, enabling RBI to
lend or borrow securities by way of repo or reverse repo will enhance trading of
government securities.
The proposal to amend the Banking Regulation Act does not specify the intended
modifications to be brought in the act. However, the same may consider the
enhancement of FDI limits and higher voting rights cap.
Allowing banking companies to issue preference shares will enable them to infuse more
Tier I capital and thereby help them comply with Basel requirements
Mandation on PSU banks to hike their agricultural lending may resurface the problem
of NPAs for these banks.
Banks are also likely to be the beneficiaries of higher infrastructure lending by way of
routing their funds through the 'Infrastructure financing SPV' for eligible and appraised
projects. While this would provide an impetus to core advances of banks, the quality of
such advances is likely to be better. In this light, there is relatively less NPA risk.
The 0.1% banking transaction tax will discourage cash transactions.
The removal of benefits to individuals with respect to Section 80-L i.e. deduction to a
limit on interest on bank deposits could impact deposit growth.
KEY POSITIVES
Amendment to Securitization Act:
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HDFC Bank Ltd.
The amendment proposed to make it mandatory for borrowers who prefer an appeal to
the Debt Recovery Appellate Tribunal (DRAT), to deposit upfront 50 % of the amount
decreed by the DRT (Debt Recovery Tribunal). However, the DRT can reduce the
upfront payment to 25 per cent. The said amendment reduced the possibility of
defaulters delaying the recovery process through frivolous appeals.
One time transfer of assets from AFS to HTM:
The RBI initiated one time transfer of investments from AFS to HTM category
safeguarded the banks' investment portfolio to the vagaries of the interest rate
movements.
Tax breaks for consolidation:
The finance ministry proposed amendments in the tax laws to offer tax breaks under
section 72A in all involuntary amalgamations of banking companies- that are initiated
through the action of RBI. Tax breaks will also be offered to FIs merging with banks.
Higher margin on advances against shares: To reiterate its concern over the huge FII
inflows and hinting at its possible "temporary" nature, RBI has increased the margins
on all advances against shares from 40% to 50%. The regulator has also advised banks
to raise the minimum cash margin of 20% to 25%. The move is aimed to protect banks
that fund investments, against a sharp drop in share prices.
FII limit from 20% to 49% in PSU banks: MoF is considering raising the FII limit from
20% to 49% - the maximum possible in PSU banks, so as to allow PSU banks to issue
ADRs and GDRs while keeping the overall government equity limit of 51%. Overseas
listing will not only bring better transparency and efficiency in the banks' operations
but also enable the banks access global capital markets at competitive rates.
Clarity on the risk evaluation front: RBI's draft guidelines for implementation of Basel
II in India clarified the ambiguity that was persisting on the 'approach' to be adopted for
risk evaluation. Keeping in view the goal to have consistency and harmony with
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HDFC Bank Ltd.
international standards, the RBI decided that all banks in India should adopt '
standardized approach' for credit risk and 'basic indicator approach' for operational risk.
KEY NEGATIVES
Liquidity crunch:
The SEBI dictate that Mutual funds will not to be allowed to invest in bank deposits
might create liquidity crunch for the banks in the short term, forcing them to accept
deposits at higher rates and paring their interest margins.
Hike in wages:
The 8th bipartite wage settlement that paved the way for 13.25% hike in wages has
caused accumulation of huge arrears to the tune of Rs 66 bn to be paid to the bank
employees across the industry. The hike in wages was more than what the banks had
expected and provisioned for and therefore the entities will have to provide for them in
the coming quarters.
Interest rate dampener:
The interest rate movement in the short term is likely to be with an upward bias.
Although a marginal hike will not trigger any sensitivity, an upward movement in
inflation, leading to a parallel rise in interest rates may put the current credit growth on
hold.
Impediments in sectoral reforms: The hike in the FDI cap in private banking sector to
74% and a revision in the voting rights to make it commensurate with equity holding
were expected to bring sea changes in the Indian banking scenario. However,
opposition from Left and resultant cautious approach from the North Block may
hamper the reforms to materializing in the near term
(Source: www.personalfn.com, www.equitymaster.com)
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HDFC Bank Ltd.
Economic factors
Economic factors show the way in which economy is moving. How these all affect the
industry should be analyzed. Economic factors such as Interest rates, inflation rates,
unemployment rates, gross national product, sectoral growth rate of agriculture,
industry infrastructure, level of disposable income, availability of credits affect each
industry.
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HDFC Bank Ltd.
1. GDP:
Gross domestic product (GDP) is the measure of national income. Its trend shows the
actual picture of country’s economy. It is a measure of wealth and health of economy.
India is one of the fastest growing economies in world today. Everybody is looking at
India. It’s GDP is higher than most countries in the world.
Source: CMIE
In the FY 2004 GDP grew at 8%. This affect positively on banking sector. Overall
economy boosted. There was increase in transactions and increase in investment.
Demand for money increased and good sign for economy. GDP is expected to grow at
7% in FY2005. Which is good sign for economy.
There is consistent increase in growth rate of GDP. The Goldman Sachs has projected
long term trend in GDP, which is expected to be higher than other developing countries
like china and Brazil.
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HDFC Bank Ltd.
2. Inflation
High inflation can adversely affect Indian economy. It is a high inflation period in India
due to increase in crude oil prices in international market and below average monsoon
in India this year.
It is the joint responsibility of RBI and Government to bring down inflation. RBI
through some measures like change in interest rate cut in CRR and SLR and open
market operations control the inflation. This will directly have a impact on banking
sector if there is rise in CRR ratio, the banks will left with less amount to offer to public
and can affect their profitability. Interest rate changes can affect banks as well.
High inflation discourages deposits especially long term. Because the real increase in
deposit will be negligible if there is high inflation. So, people invest their money in
mutual funds and stock market to earn higher return.
3. Savings and investment
The main activity of banking sector is to provide link between those who have surplus
money and those who have deficit. It takes money from savers and distribute to
investors. The amount of savings can affect the performance of banking sector. There
can be positive and negative impact of savings on banking sector as well on economy
also. If there are enough savings, then entrepreneurs will get loans at cheaper rates and
encourage them to take risk and start new venture and this will boost overall economy.
It has negative side also. High savings shows that people are not spending money.
There expenditure is less and not making demand. So, if there is less demand which in
turn affect the investment, employment and economy negatively.
4. Agriculture credit:
As per the agenda of its Common Minimum Program (CMP), the UPA government
plans to double agricultural credit by 2007. This means a CAGR of 25% over the next
three years. The agricultural credit has been growing at a healthy 17-18% in the last
three years. At a more realistic 20% CAGR too, the agricultural credit would touch
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HDFC Bank Ltd.
around Rs1500bn by 2007. This means a bonanza for farmers, as it will put more
money in their hands.
Exhibit: Expected growth in agricultural credit
1600
1400
1200
1000
800
600
400
200
0
2001 2002 2003 2004 2005E 2006E 2007E
Rs.bn
Source: RBI, IIL Estimates
A look at the composition of total agricultural credit shows some interesting details.
The exposure of commercial banks in total agricultural credit has declined over the last
few years from 53% in 2001 to 50% in 2004, while on the other hand the share of Co-op
banks have shown a corresponding increase. Banks will be asked to directly lend to
the farmers instead of following the usual indirect lending practice of subscribing to
NABARD bonds.
EXHIBIT: Flow of Agricultural Credit
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HDFC Bank Ltd.
50 50 53 53 50 50 50 53
6 7 7 8 8 7 6 8
44 43 40 39 42 43 44 39
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
20 04E
20 05E
19 98
19 99
20 00
20 01
20 02
20 03
Commercial
Banks
RRBs
Co-op banks
Source: Economic Survey, IIL Estimates
5. STOCK market
Recently there is a bullish trend in stock market. Sensex is going to touch 6000 points.
Most of the shares are at their historic high positions. Investors’ confidence in stock
market has increased. They expect this trend to persist for a long time. This has affected
negatively on banking industry. People has attracted toward direct investment in shares
as they are giving higher return than banks. Mutual funds are performing best, so all
these factors have contributed toward fall in deposits. But on the other economy
flourishes, demand for money for investment is increasing.
6. INTEREST rate
By monetary policy 2004-05 RBI kept interest rate unchanged at 6%. Before that
Interest rate was decreasing. This will lead to increase in demand for loans because if
the loans are available at cheaper rate then people will ask for more loans to make
investments.
Socio-cultural factors
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HDFC Bank Ltd.
Socio-cultural factors also affect the business. They show way in which people behave
in country. Socio-cultural factors like taboos, customs, traditions, tastes, preferences,
buying and consumption habit of the people, their language, beliefs and values affect
the business. Banking industry is also operates under these social environment and it is
also affected by this factors. These factors are changing continuously. People’s life
style, their behaviour, consumption pattern etc. is changing and also creating
opportunities and threat for banking industry. There are some socio-cultural factors that
affect banking in India have been analyzed below:
1. TRADITIONAL mahajan pratha
Before the birth of the banks, people of India were used to borrow money from local
moneylenders, shahukars, mahajan and shroffs. They were used to charge higher
interest and also mortgage land and house. Farmers were exploited by these shahukars.
But farmers need money. So, they did not have any choice other than going to
shahukars and borrow money from them in spite of exploitation by these people. But
after emergence of banks attitude of people was changed.
Traditional mahajan pratha still exist in India especially in rural areas. This affects the
banking sector. Rural people afraid to go to banks to borrow money instead they prefer
to borrow from shahukars with whom they have relationships from the time of their
fore fathers. Banking infrastructure is also week in some interior areas of India. So, this
is reason it still exist.
2. SHIFT towards nuclear family
Attitude of people of India is changing. Now, younger generation wants to remain
separate from their parents after they get married. Joint families are breaking-up. There
are many reasons behind that. But banking sector is positively affected by this trend. A
family need home, consumer durables like freeze, washing machine, television, bike,
car etc. so, they demand for these products and borrow from banks. Recently there is a
boost in housing finance and vehicle loans. As they do not have money they go for
installments. So, banks satisfy nuclear families wants.
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HDFC Bank Ltd.
3. CHANGE in life style
Life style of people of India is changing rapidly. They are demanding high-class
products. They have become more advanced. People want everything car, mobile etc.
what their forefather had dreamed of. Now teenagers also have mobile and vehicle.
Even middle class people also want to have well furnished home, television, mobile,
vehicle and this has opened opportunities for banking sector to tap this change. Every
thing is available on installment so it has become easy to purchase anything even if you
do not have lump sum.
4. LITERACY rate
Literacy rate in India is very low compared to developed countries. Illiterate people
hesitate to transact with banks. So, this impacts negatively on banks. But there is
positive side of this as well i.e. illiterate people trust more on banks to deposit their
money; they do not have market information. Opportunities in stocks or mutual funds.
So, they look bank as their sole and safe alternative. Literacy rate of India is around
65%.
TABLE: literacy rate in India
Year Persons Male Female
1951 18.3 27.2 8.9
1961 28.3 40.4 15.3
1971 34.5 46.0 22.0
1981 41.4 53.4 28.5
1991 52.2 64.1 39.3
2001 65.4 75.8 52.1
Source: census of India 2001, series 1 India, paper 1 of 2001.
5. DEMOGRAPHIC of large population:
About 60% of Indian population composed of youth. And these people do not have
enough savings, as their expenditure is large because they have to settle in life. Even if
they have savings, they do not prefer to deposit in banks rather they prefer to invest in
share market and mutual funds.
TABLE: Percentage distribution of India’s population by age group
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HDFC Bank Ltd.
Year 0-14
(Age)
15-60 age 60 and
above age
1931 38.3 60.2 1.5
1961 41.0 53.3 5.7
1971 41.4 53.4 5.2
1981 39.7 54.1 6.2
1991 36.5 57.1 6.4
2001 35.7 57.6 6.7
Source: census of India 2001, series 1 India, paper 1 of 2001.
Young people take high risk expecting high return. Bank’s interest rate does not attract
them. But it has positive side also. These people use different facilities of banks
maximum. And are of entrepreneur nature so, take loans to start new business.
Technological Factors
Technology in Banks:
Both public and private banks are spending large amounts of money on technology to
provide innovative products and services to their customers with more convenience and
satisfaction. Technology is reducing the cost of transaction and helping to increase
customer base and enable wider reach. These innovations are happening not only in the
retail-banking segment but also in the corporate segment.
Today, banks are able to provide products, which were a distant dream in the past. For
example, RBI declared that it is going to start an innovative payment and settlement
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HDFC Bank Ltd.
system named Real Time Gross Settlement, which will make the banking, services
faster and more efficient for the customers. Funds transfer between banks under the
system will be on real time basis.
Technology is changing the way banks interface with their customers, resulting in
increased customer base for the banks. The customer need not go to a branch for a
transaction; he can do it via Internet, mobile phone or even the landline.
Ø Core Banking Solution
Core banking solution is the buzzword today and every bank is trying to adopt it.
It is a centralized banking platform through which a bank can control its entire
operation. The adoption of core banking solution will help banks to roll out new
products and services.
Ø ATMs
China has around 65,000 installed ATMs and the global average is of two or three
ATMs per branch. Compared to these figures, India is far behind with an installed
ATMs base of around 10,000. Though banks plan to invest heavily in new ATMs
in the coming two to three years, it is expected that there will be only around
17,000 ATMs by the end of 2004.
Cost per transaction at an ATM is much less than a transaction at the branch and it
can be reduced by as much as 50% of the cost at a branch.
Ø Internet
While Internet banking is in place for the last four years in India, it has just started
showing signs of picking up. Today, banks in India are in the process of Web-enabling
their services in order to offer Internet banking to their customers.
Through Internet, banks can provide their services in a cost-effective manner.
Internet Banking has numerous benefits like greater reach to customers, quicker
time to market, ability to introduce new products and services quickly and
successfully, ability to understand its customer’s needs, greater customer loyalty
etc.
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HDFC Bank Ltd.
6. Porter's Five Forces Model of Competition
The nature of competition in an industry in large part determines the content of
strategy, especially business-level strategy. Based as it is on the fundamental
economics of the industry, the very profit potential of an industry is determined
by competitive interactions. Where these interactions are intense, profits tend to
be whittled away by the activities of competing. Where they are mild and
competitors appear docile, profit potential tends to be high. Yet a full
understanding of the elements of competition within an industry is easy to
overlook and often difficult to comprehend.
Porter has identified five basic forces that collectively describe the state of competition
in an industry:
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HDFC Bank Ltd.
1. The intensity of rivalry among competitors
2. The threat of new entrants to the market
3. The amount of bargaining power possessed by the
firm's/industry's suppliers
4. The amount of bargaining power possessed by the
firm's/industry's customers
5. The extent that substitute products present a threat to a
firm's/industry's products
These forces assist in identifying the presence or absence of potential high returns. The
weaker are Porter's five forces, the greater is the opportunity for firms in an industry to
experience superior profitability. More generally, understanding how these forces affect
competition within an industry allows the strategist to identify the most advantageous
strategic position.
The actors within an industry on whom these forces exert pressure are, respectively, the
industry's competing firms themselves, potential new entrants to the industry's markets,
suppliers (vendors), customers, and makers of substitute products.
Obviously, the starting point for conducting an analysis of the five forces of
competition is to identify all the competitors, potential new entrants, major suppliers,
the demographics of customers, and makers of and nature of substitute products.
Competitors would not only have to be identified, but various distinguishing data about
the industry would also have to be specified. For each competitor this data would
include market share, product line differences/similarities, market segments served,
price/quality relationships represented by products, growth/decline trends, financial
strength differences, and any other information that will help describe the industry.
Porter’s FIVE-FORCE analysis for Indian banking industry
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HDFC Bank Ltd.
Key Points:
Supply
Liquidity is controlled by the Reserve Bank of India (RBI).
Demand
India is a growing economy and demand for credit is high though it could be cyclical.
Barriers to entry
Licensing requirement, investment in technology and branch network.
Bargaining power of suppliers
High during periods of tight liquidity. Trade unions in public sector banks can be anti
reforms. Depositors may invest elsewhere if interest rates fall.
Bargaining power of customers
For good creditworthy borrowers bargaining power is high due to the availability of large
number of banks
Competition - High
39
BARGAINING POWER OF
SUPPLIERS
-Low supplier bargaining power
-Few alternatives available
-Subject to RBI Rules and Regulations
-Not concentrated
-Forward integration
-Nature of suppliers
THREAT OF NEW
ENTRANT
-Low barriers to entry
-Government policies are
supportive
-Globalization and
liberalization policy
-High exit barriers
INDUSTRY RIVARLY
Intense competition
Many private, public,
Co-operative, foreign banks
BARGAINING POWER OF
CUSTOMERS
-High bargaining power
-Low switching cost
-Large no. of alternatives
-Homogeneous service by banks
-Full information available with customers
threat OF
sUBSTITUTES
High threat from
substitutes
Like
Mutual funds,
T-bills,
Government securities

HDFC Bank Ltd.
There are public sector banks, private sector and foreign banks along with non banking
finance companies competing in similar business lines.
RIVALRY AMONG THE INDUSTRY
Rivalry in banking industry is very high. There are so many private, public, co-operative
and non-financial institutions operating in the industry. They are fighting for
same customers. Due to government liberalization and globalization policy, banking
sector became open for everybody. So, newer and newer private and foreign firms are
opening their branches in India. This has intensified the competition. The no. of factors
have contributed to increase rivalry those are:
1. A large no. Of banks
There are so many banks and non-financial institutions fighting for same pie, which has
intensified competition.
2. High market growth rate
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HDFC Bank Ltd.
India is seen as one of the biggest market place and growth rate in Indian banking
industry is also very high. This has ignited the competition.
3. Low switching cost
Customer switching cost is very low. They can easily switch from one bank to another
bank and very little loyalty exists.
4. In differentiate services
Almost every bank provides similar services. No differentiation exists. Every bank tries
to copy each other services and technology, which increases the level of competition.
5. High fixed cost
6. High exit barrier
High exist barriers humiliate banks to earn profit and retain customers by providing
world-class services.
7. Low government regulations:
There are low regulation exist to start a new business due LPG policy adopted by
India. So, sector is open for everybody.
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HDFC Bank Ltd.
BARGAINING POWER OF SUPPLIERS
Suppliers of banks are depositors. These are those people who have excess money and
prefer regular income and safety. In banking industry Suppliers have low bargaining
power. Following are the reasons for low bargaining power of suppliers.
1. Nature of suppliers
Suppliers of banks are generally those people who prefer low risk and those who need
regular income and safety as well. Bank is best place for them to deposit their surplus
money. They believe that banks are very safe than other investment alternatives. So,
they do not consider other alternatives very seriously, which lower their bargaining
power.
2. Few alternatives
Suppliers are risk averters and want regular income. So, they have few alternatives
available with them to invest like Treasury bills, government bonds. So, few
alternatives lower their bargaining power.
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HDFC Bank Ltd.
3. RBI Rules and Regulations
Banks are subject to RBI rules and regulations. Banks have to behave in the way that
RBI wants. So, RBI takes all decisions relating to interest rates. This reduces suppliers
bargaining power.
4. Suppliers are not concentrated
Banking industry’s suppliers are not concentrated. There are numerous suppliers with
negligible portion to offer. So, this reduces their bargaining power. If they were
concentrated then they can bargain with banks or can collectively invest in other no-risky
projects.
5. Forward integration
Forward integration is possible like mutual funds, but only few people now about this.
Only educated people can forwardly integrate where as large no. Of suppliers are
unaware about these alternatives.
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HDFC Bank Ltd.
BARGAINING POWER OF CUSTOMERS
Customers of the banks are those who take loans, advances and use services of banks.
Customers have high bargaining power. Following are the reasons for high bargaining
power of customers.
1. Large no. Of alternatives
Customers have very large no. of alternatives. There are so many banks, which fight
for same pie. There are many non-financial institutions like ICICI, HDFC, IFCI etc.,
which has also jumped into these business. There are foreign banks, private banks,
cooperative banks and development banks together with the specialized financial
companies that provide finance to customers. These all increase preferences for
customers.
2.low switching cost
Cost of switching from one bank to another is low. Banks are also providing zero
balance account and other types of facilities. They are free to select any bank‘s service.
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HDFC Bank Ltd.
Switching costs are becoming lower with Internet Banking gaining momentum and as a
result consumers’ loyalties are harder to retain.
3. Undiffernciated service
Banks provide merely similar services. There is no much difference in services
provided by different banks. So, bargaining power of customers increases. They cannot
be charged for differentiation.
4.Full information about the market
Customers have full information about the market due to globalization and digitization
consumers have become advance and sophisticated. They are aware with each market
conditions. So, banks have to be more competitive and customer friendly to serve them.
THREAT OF NEW ENTRANT
Barriers to an entry in banking industry no longer exist. So, lots of private and foreign
banks are entering in the market. Competitors can come from any industry to “
disintermediate” banks. Product differentiation is very difficult for banks and exit is
difficult. So, every bank strives to survive in highly competitive market. So, we see
intense competition and mergers and acquisition.
Government policies are supportive to start a new bank. There are less statutory
requirements needed to start a new venture. Every bank tries to achieve economies of
scale through use of technology and selecting and training manpower.
Threat of substitutes
Competition from the non-banking financial sector is increasing rapidly. Sony and
Software giants such as Microsoft are attempting to replace the banks as intermediaries.
The threat of substitute products is very high. These new products include credit
unions and investment houses. One feature of using an investment house is that the
fees that the investment house charges are tax deductible, where as a bank it is
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HDFC Bank Ltd.
considered a personal expense, which are not tax deductible. The rate of return with
using investment houses is greater than a bank. There are other substitutes as well for
banks like mutual funds, stocks (shares), government securities, debentures, gold, real
estate etc. so, there is a high threat fro substitute.
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HDFC Bank Ltd.
Conclusion:
Indian banking sector is one of the highly competitive sectors where high growth rate and
high degree of competition exist. Low entry barriers and high exit barriers ignites
competition in this industry. Every bank strives to survive in the shadow of these barriers.
There are so many substitutes available with customers and they have high bargaining
power where as suppliers i.e. depositors have low power in their hands.
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HDFC Bank Ltd.
SECTION-III
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HDFC Bank Ltd.
ABOUT HDFC BANK’S PROFILE
1. ABOUT HDFC BANK
The Housing Development Finance Corporation (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 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 Bank, the pioneer of the retail-banking movement in India, is one of the fastest
growing and most profitable banks in India with a strong urban presence. The bank, with
a market share of 2.5% has a wide reach across the country with a branch network of 425
branches and 950 ATMs. Strong understanding of the retail sphere (46% of total
advances in 9mFY05) and technology initiatives has made the bank the second largest
private sector bank in the country. The bank has largely outpaced the sector growth over
the last few years, but of late the growth momentum has been subdued due to competitive
reasons.
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 to
each other through 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 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.
The Bank also has a chain of over 800 networked ATMs across these cities. Moreover,
HDFC Bank's ATM network can be accessed by all domestic and international
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HDFC Bank Ltd.
Visa/MasterCard, Visa Electron/Maestro, Plus/Cirrus and American Express
credit/charge cardholders.
HDFC Bank operates in a highly automated environment in terms of information
technology and communication systems. All the bank's branches have 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 required 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, scalable and web-enabled.
The Bank has prioritized its engagement in technology and the internet as one of its key
goals and has already made significant progress in web- enabling its core businesses. In
each of its businesses, the Bank has succeeded in leveraging its market position, expertise
and technology to create a competitive advantage and build market share.
The Bank has received recognition both nationally and internationally for 'The Best Bank'
on various parameters in publications like Euro money and Finance Asia.
The Bank's IT department has a total staff strength of 120 (approx.), with a mix of
functional and technical specialists. The project managers for new IT initiatives are
designated both from this group and from businesses. Almost all the project development
and application maintenance activities are outsourced to IT vendors.
2. History of the Bank
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HDFC Bank Ltd.
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 households for their
housing needs. HDFC was promoted with an initial share capital of Rs. 100 million.
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
Organisation (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.
MILE STONES
Ø Acquired TimesBank in merger from Times Of India Group (5 – 6% present
holding)
Ø in 2000.
Ø ·HDFC owns only 24.4%, rest owned by public and private equity investors JP
Morgan Chase (5 -6%).
Ø ·Large Foreign Insitutional Investors (in India) including Putnam, etc. (big vote in
Ø Indian equity markets) – 10-11%
Ø ·W arburg Pincus has a significant holding in HDFC (its promoter
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.
Mission
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HDFC Bank Ltd.
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 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.
(source: Annual report-2004-05)
GOAL AND OBJECTIVES
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 as follows:
Ø Develop close relationships with individual households,
Ø Maintain its position as the premier housing finance institution in the country,
Ø Transform ideas into viable and creative solutions,
Ø Provide consistently high returns to shareholders, and
Ø To grow through diversification by leveraging off the existing client base.
3. INFORMATION ABOUT BOARD OF DIRECTORS AND
BOARD COMMITTEE
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HDFC Bank Ltd.
ORGANISATION AND 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.
Board of Directors
Mr. D S Parekh - Chairman
Mr. Keshub Mahindra - Vice Chairman
Ms. Renu S. Karnad - 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
SHARE HOLDING PATTERN
53
Share Holding Pattern
Indian Promoters 24.20%
Foreign collaborators 13.10%
Indian inst/Mut Fund 2.10%
FIIs/GDR 26.90%
Free float 33.70%
Shareholders 215,630

HDFC Bank Ltd.
HDFC has a staff strength of 1029, which includes professionals from the fields of
finance, law, accountancy, engineering and marketing. Click here for details of Senior
Management
(Source: Annual report 2004-05)
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HDFC Bank Ltd.
4. ORGANIZATION CHART OF FINANCE FUNCTION IN
BANK
Chairman
Vice Chairman
Executive Director
Managing Director
Senior General Manager
Chief Financial General Manager
Accounting and Officer and Treasurer
Taxation Group
Assistant Financial Account Manager
Officer
Assistant
ORGANISATION STRUCTURE OF BRANCH
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HDFC Bank Ltd.
Branch Manager
Personal Banker Teller Authorizer Clearinghouse Sales
Authorizer Executive
Personal Banker Teller
Functions
Branch manager
Ø Require approval from BM for transaction more than 50,000 RS.
Ø organising coordinating and motivating employees in the organization.
Ø Develop his territory.
Personal Banker authorizer
Ø After his approval, all the applications collect and checked by PB, Executives go for
further process to branch manager.
Ø -Daily stock (welcome kit, debit pin number, cheque book, and debit card) requires
approval of PB authorizer.
Personal Banker
Ø Maintain contacts with walk-in customers, existing customers and provide
satisfactory service to them.
Ø Handle all the complaint of the customers and resolve it.
Ø Maintain daily stock reports and take approval from the PB authorizer.
Teller Authorizer
Ø He gives approval to all types cheques and DDs by checking all the details and
validity of it.
Ø At the end of the day all the cash on hand in the bank require signature of him.
Ø Report of cash loading in ATM is to be submitted to him. He is responsible for it.
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HDFC Bank Ltd.
Teller
Ø Maintain daily transactions of cheque withdrawal, cheque deposits, cash withdrawal
cash deposit, fund transfer and DD etc.
Ø Check the validity of all the above transactions.
Clearinghouse
Ø All the cheques are being transferred to this department and it checks the sign,
balance amount in his/ her a/c, date of issuing.
Ø It also maintains the transaction with other branches and banks.
Ø DRF forms are being handled by this department.
Sales Executive
Ø Generate new inquiries by cold calling and tele marketing.
Ø Handle existing and new customers.
Ø Maintain customer relation ships.
5. PRODUCTS OF HDFC BANK
1. Savings Account
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HDFC Bank Ltd.
It is a unique savings account in India, which helps you withdraw or deposit cash through
wide network of branches and ATMs across India.
Features
Ø Comforts of free Phone Banking, Mobile Banking and NetBanking from practically
anywhere, anytime with your savings account.
Ø International Debit Card to shop at over 80 lakh establishments in 140 countries. Pay
your electricity, mobile phone and telephone bills through the phone, Internet or the
ATM with the unique BillPay Facility. All this is yours for a minimum balance of just
Rs. 5000/-.
e-Age Advantages
HDFC Bank uses state-of-the-art technology to give you an array of value-added
services.
Use this convenient facility to pay your electricity, phone and mobile phone bills with a
single call, mouse click or from any of HDFC Banks ATMs. The bill amount for all
services you have registered for is presented online.
ATM facility
User can access their account with International Debit card, 24 hours a day, 365 days a
year from ATMs spread across India." Withdraw cash form over 1000 ATMs in India &
over 5.3 lakh ATMs across the globe.
Inter-city and inter-branch banking
You can conveniently bank across the counter at any of our 467 branches across the
country, absolutely FREE, for transactions up to Rs. 50,000/- per day. For transactions
over this limit, you incur nominal charges. 3.50% interest per annum* credited to your
account, at quarterly intervals.
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HDFC Bank Ltd.
Fund Transfers & Demand Drafts
Free Funds transfers to another HDFC Bank account in any city/branch. Demand draft
available at nominal charges
Safe deposit lockers in different sizes, for your valuables and important documents in
select cities.
Sweep-In Account
With the Sweep-In facility, you can automatically transfer funds from your Fixed Deposit
to your Savings Account whenever needed.
Super Saver Account
You can transfer a part of your Fixed Deposit funds into your Savings Account without
breaking the Fixed Deposit or losing interest on it.
Requirement for new account
Resident Individual (sole or joint account), Minor below 18 yrs.
(sole account), a Hindu Undivided Family, a Trust, an Association, a Club or a Society.
If you are a Foreign National residing in India, you may temporarily open a Savings
Account by attaching an undertaking (QA 22 form), stating sources of credit and a copy
of your Residence Permit.
All you need to do is deposit Rs. 5000/- and maintain the same as average quarterly
balance.
Fees
You can open your Savings Account with a minimum deposit of only Rs. 5,000/-. *
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HDFC Bank Ltd.
Alternatively, you automatically gain access to a zero balance Savings Account, when
you open a Fixed Deposit for Rs. 50,000/-. When you select this option, you are not
charged a service fee, even if you are unable to maintain an average balance of Rs.
5,000/-.* your minimum average quarterly balance maintained must be Rs. 5,000/-. If
you’re minimum average quarterly balance is less than Rs. 5,000/- a service charge of Rs.
750/- will be levied per quarter.
2. Current account
The Advantages
You can access your account anytime and anywhere, to withdraw cash, deposit
cash/cheques, make balance inquiries or ask for mini-statements, or make a cheque book
request.
Useful inter-city banking
Safe & convenient intra-city banking
3. Sweep-In Account
Need cash urgently?
With the Sweep-In Facility you can automatically transfer funds from your Fixed Deposit
to your Current Account whenever needed
Attractive rates for inter-city/inter-branch transactions.
Your funds will be transferred at Rs.1.50/- per Rs.1000/-. The minimum charge is Rs.
50/-. You can also deposit or withdraw cash for an additional charge of Rs. 2.50/- per Rs.
1000/- (on full amount, if amount is more than Rs. 50,000) at branches other than the
branch where you have opened your account.
Acceptance of cash at the home branch is as per branch's discretion
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HDFC Bank Ltd.
Safe deposit locker available in select cities and branches for valuables and important
documents.
Free personalized cheque book of 50 leaves for enhanced security. Rs. 2/- per leaf is
charged for subsequent cheque books.
For banking services that complement your business, open a Regular Current Account
with HDFC Bank right away.
Fees
All you need is to maintain an average balance of Rs.10,000/- per quarter. (Non-maintenance
of this balance entails a nominal charge of Rs. 750/-)
4. Demat Account
Mutilated certificates, lost certificates, postal delays and counterfeit shares are a thing of
the past. Enter a world of safe, secure and convenient buying, selling and transacting
without suffering endless paperwork and delays. Convert your securities to electronic
format with the HDFC Bank Demat Account. It's as easy as opening a bank account.
HDFC Bank provides online access to your Demat Account, so that you can check your
holding using the NetBanking facility.
The advantages of opening a demat account
Ø Shorter settlements thereby enhancing liquidity
Ø No stamp duties on transfer of securities held in demat form.
Ø No concept of Market Lots.
Ø Change of name, address, dividend mandate, registration of power of attorney,
transmission etc. can be effected across companies held in demat form by a single
instruction to the DP.
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HDFC Bank Ltd.
Features of Demat Account:
Ø Dematerialization of Securities
Ø Settlement of Securities traded on the exchange as well as off market transactions
Ø Pledging and Hypothecation of Dematerialized Securities
Ø Electronic credit in public issue
Ø Receipt of non-cash benefits in electronic form
Ø T + 2 Settlements
Ø From April 1, 2003, SEBI has made T+2 settlements mandatory when you buy or sell
shares.
Ø Demat Account with HDFC Bank; link it to a trading and savings account to do
online trading with any of the e-brokers empanelled with us for the facility.
Check out the many advantages you benefit from:
Ø Personalized instruction book
Ø Free Demat Account
Ø Access to your Demat Account over the Internet
Ø Competitive rates
Ø Depository gateway for e-broking
HDFC Bank offers a convenient service that enables to settle trades faster.
HDFC Bank will:
Verify the signature of all the account holders.
Verify the names in the demat account and the certificates.
Forward the certificates to the Registrar/Company for further processing/credit in
your account.
Once you get a credit in the account, the scrip will be reflected as free balance in your
demat account statement.
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HDFC Bank Ltd.
5. Private Banking
Private Banking is a comprehensive and exclusive service, offered by HDFC Bank, to
select high net worth individuals and institutions. The service is provided by an advisory
team specialized in financial and investment services. These experienced professionals
put together unbiased and objective guidance based on strong research and in-depth
analysis of financial instruments taking into account your financial goals and
requirements.
An experienced Relationship Manager serves as your one-point contact, for your
complete banking and investment needs and requirements.
6. Car loans
Car Loan - New Car Loans
HDFC Bank's Car Loans Scheme is the most convenient way to get a loan for your new
dream car.
Advantages of our New Car Loans Services
Ø Speedy processing - within 48 hours.
Ø Covers the widest range of cars and multi-utility vehicles in India.
Ø Whatever the car you choose, we finance you, for up to 90% of its invoice value.
Ø Flexible repayment options - 12 to 60 month period.
Ø Attractive car loan plans.
Ø Among the lowest interest rates.
Ø Stress-free documentation.
Ø Prepayment - prepay the loan anytime after 6 months at a small charge.
Ø Special rates for HDFC Bank account holders.
Where and how can you apply?
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HDFC Bank Ltd.
Applying for a New Car Loans is absolutely simple. Just fill the online Apply form and
representative get in touch with you shortly.
Phone Banking service is also available.
Criteria
Ø For salaried individuals:
Minimum age of Applicant: 21 years
Maximum age of Applicant at loan maturity: 58 years
Minimum employment: 1 year in current employment and minimum 2 years of
employment
Minimum Annual Income: Rs 100000 net annual income
Telephone: Must at residence
Ø For self employed:
Minimum age of Applicant: 21 years
Maximum age of Applicant at loan maturity: 65 years
Minimum employment: At least 3 years in business
Minimum Annual Income: Net profit Rs. 60000 p.a for standard cars and Rs.100000 p a
for mid-sized and premium cars
Telephone: Must at residence
Ø For partnership firms:
Minimum Income: Net profit Rs. 60000 p.a for standard cars and Rs.100000 p a for mid-sized
and premium cars
Minimum turnover: Turnover Rs 4.5 lacs
Telephone: One phone at least at business and at residence of the loan executing partner
Ø For private limited company:
and premium cars
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HDFC Bank Ltd.
Telephone: One phone at least at business premises
Ø For public limited company:
and premium cars
Telephone: One phone at least at business premises
DOCUMENTATION
Ø For salaried individuals:
Proof of Identity: - Passport copy, PAN Card, Voters Id car, driving license (Laminated,
Recent, Legible)
Income Proof: - Latest salary slip with form 16.
Address Proof: - Ration card/Driving license/Voters card/passport copy/telephone bill/
electricity bill/Life insurance policy PAN Card.
Bank Statement: - Not mandatory
Ø For self employed:
Proof of Identity: - Passport copy, PAN Card, Voters Id car, driving license (Laminated,
Recent, Legible)
Income Proof: - Latest ITR
Address Proof: - Ration card/Driving license/Voters card/passport copy/telephone bill/
electricity bill/Life insurance policy PAN Card.
Bank Statement: - Waived for small cars, for mid - sized and premium cars if income is
greater than Rs 1.5 lacs then bank statement requirement can be waived.
Ø For partnership firms:
Proof of Identity: - NA
Income Proof: - Audited balance sheet, Profit & loss Account for latest two years and the
latest 2 years IT returns of the company
Address Proof: - Telephone Bill/Electricity Bill/Shop & Establishment Act certificate/SSI
registered certificate/Sales Tax certificate
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HDFC Bank Ltd.
Bank Statement: - Waived for small cars, for mid - sized and premium cars if income is
greater than Rs 1.5 lacs then bank statement requirement can be waived.
Ø For private limited company:
Income Proof: - Audited balance sheet, Profit & loss Account for latest two years and the
latest 2 years IT returns of the company
Bank Statement: - NA
Ø For public limited company:
Income Proof: - Audited balance sheet, Profit & loss Account for latest two years
Bank Statement: - NA
7. Personal Loans
A wedding in the family. Maybe your house needs renovation. Or your daughter has
obtained admission to a medical college. These are moments in life when you may need a
helping hand. That's when you can rely on HDFC Bank Personal Loan. We offer all kind
of personal loan meeting your personal requirements in India.
The procedures are simple, documentation is minimal and approval is quick.
Advantages of our Personal Loan Services
Speedy loan approval
Flexibility to borrow Rs 25,000/- to 10, 00,000/- depending on your needs.
Convenience of service at your doorstep.
Repayment options of 12 to 48 months to suit your wallet.
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HDFC Bank Ltd.
One of the lowest interest rates.
No guarantor/security/collateral required.
And if you are an HDFC Bank account holder, we have special rates for you.
8. Home loans
Buying a property requires a complete knowledge of real estate and in today's complex
financial market it is difficult to choose the appropriate home loan company. HDFC Bank
brings home loans at your doorstep. With over 25 years of experience of our parent
company HDFC Ltd. and their dedicated team of experts offering a complete package to
meet your housing finance needs, and ever eager to guide you with a basket of value
added products and services.
The benefits of availing a loan from HDFC
Ø Option to choose your loan as Fixed Rate or Floating Rate
Ø Option to structure your loan as Partly Fixed or Partly Floating.
Ø In-house scrutiny of Property documents for your complete peace of mind
Ø Option to choose flexible repayment option to suit your individual needs
Ø Option to apply for a loan from the comfort of your office or residence.
9. Credit cards
To help you keep up with the changing times, HDFC Bank offers the finest payment
solutions, from Debit Cards to Credit Cards, all internationally valid.
Specifically, the HDFC Bank Credit Cards are available as two variants, the HDFC Bank
International Silver Card and the HDFC Bank International Gold Card
From the best insurance package to the most powerful Rewards Program and the most
attractive discount schemes, you will find everything you would naturally expect from
HDFC bank.
o International Gold Card
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HDFC Bank Ltd.
o International Silver Card
o Health Plus International Credit Card
o E-Seva International Silver Card
International gold card
Introducing the HDFC Bank International Gold Credit Card, customized to suit your
conveniences and make your lifestyle a truly cherish able golden experience.
FEATURES
Recognized the World Over
The HDFC Bank International Gold Card is accepted at over 18 million VISA Merchant
Establishments around the world, including 110,000 Merchant Establishments in India.
Cash Advance
In a situation where you need cash, just step into any one of our ATMs or VISA Member
ATMs and withdraw cash up to 40% of your credit limit at a very nominal charge (Please
refer to the Schedule of charges).
Revolving credit facility
Financial flexibility for managing your finances. The revolving credit gives you the
flexibility to handle credit card bills, depending on what your resources are for that
month. This feature allows you to pay a minimum amount, which is 5% (subject to a
minimum amount of Rs.200) of your total bill amount or any higher amount whichever is
convenient for you. You can then carry forward the balance to a better financial month,
for which you pay a charge of 2.95% per month.
Interest Free Credit Period
Your Card now gets you the highest Free Credit Period of up to 55 days from the date of
purchase (subject to the submission of the charge by the Merchant). Subsequently, if you
carry forward your outstanding balance you just pay a nominal interest of 2.95% p.m.
Comprehensive Insurance
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HDFC Bank Ltd.
Provide insurance covers against the various risks you might face. What's special is that
the Add-on Card member gets all the insurance covers with the same amounts as the
Primary Card member.
Accidental Death:
In case of death in an air accident your nominated next of kin will receive a
compensation of Rs.25,00,000. And in case of death in a rail or road accident, your
nominated next of kin will receive a compensation of Rs.3,00,000.
Hospitalization expenses due to an accident:
This unique feature ensures that your hospital bills won't leave you feeling sick. Let's say
that you are injured in an accident and need to be hospitalized. We will cover your
hospital expenses up to Rs.50,000
Purchase Protection:
All purchases made on your Card are automatically insured against any loss or damage
due to burglary or fire. This insurance is valued up to a sum of Rs.50,000 and for a period
of 180 days from the date of purchase.
Household Insurance:
As a HDFC Bank Gold Cardmember, you will be covered against fire and burglary of
your household contents up to Rs.75,000.
Travel Made Easy
Your Card offers you a host of travel-related benefits so that you can travel with ease and
comfort.
Air Ticketing:
You can get a discount of 3.5% on domestic and 5.5% on international air tickets and
have the tickets delivered at your doorstep. All you have to do is call our authorized
travel agent and have them delivered at your doorstep*.
Rail Ticketing:
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HDFC Bank Ltd.
Our tie-ups with an authorized travel agent(s) across the country ensure that the tickets
are delivered at your doorstep.* (subject to their availability).
Global Travel Related Insurance
To ensure a hassle free travel, a host of travel-related insurance covers are provided on
your card.
Loss of Baggage
Post the arrival of your flight, if your checked-in baggage is reported lost/ misplaced, you
would be reimbursed up to Rs.60,000 for international flights and up to Rs.20,000 for
domestic flights.
Loss of Air Ticket:
If you happen to lose your international Air ticket during international travel, you would
be reimbursed expenses incurred in obtaining a new ticket up to Rs.10,000.
Delayed Flight
If your flight gets delayed beyond 12 hours from its scheduled departure time, you would
be reimbursed up to Rs.15,000 for international flights and up to Rs.5000 for domestic
flights.
Late Baggage Arrival
You would be reimbursed up to Rs. 10,000 if your checked-in baggage is delayed by over
3 hours in case of international flights and over 6 hours in case of connecting domestic
flights. For domestic air travel you would be reimbursed up to Rs.5,000 if your checked-in
baggage is delayed by over 12 hours.
Loss of Passport
During international travel, if you happen to lose your Passport/ Visa, you would be
reimbursed expenses incurred in obtaining a new Passport/ Visa subject to a limit of
Rs.25,000.
Hijacking
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HDFC Bank Ltd.
In an unfortunate event of your flight getting Hijacked, you would be eligible to claim
upto Rs.300,000 @ Rs.12,500 per hour for international and connecting domestic flights
and upto Rs.1,50,000 @ Rs.6,250 per hour for domestic flights.
Note: The Hijacking cover is applicable upto a maximum period of 24 hours post 12
hours of hijacking.
All the travel-related covers applicable to international flights will apply to connecting
domestic flights also. Insurance covers are not provided by HDFC Bank.
Exclusions/Limitations are applicable as per policies issued by the Insurance companies
with whom the Bank is tied up.
International Business Travelers' Club (IBTC) Membership
As our privileged customer, you shall now get a free International Business Travelers'
Club (IBTC) Blue Card membership which gets you discounts upto 50% at over 5500
star hotels worldwide and upto 25% on rentals of Hertz Rent-a-Car at over 7500 locations
worldwide.
Exclusive Airport Lounge Facilities
As our esteemed Card member, you will now have access to Domestic and International
Airport lounges of Oberoi at Mumbai, Kolkata and Chennai*, Welcome group at Delhi
and Taj at Chennai** and you can enjoy the world- renowned services offered by these
lounges. You can also enjoy complimentary refreshments so that your wait is a
comfortable one. To enjoy the above facilities, you would have your Gold Card imprinted
for zero value at the reception desk as a record of your visit.
Lost Card Liability
If you happen to lose your Card, don't panic.
Bank immediately blocks all transactions on your Card and delivers a new Card to you
free of cost.
Rewards Program
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HDFC Bank Ltd.
Enjoy the benefits of our exciting Rewards Programme. You will earn 2 Rewards Points
for every Rs.100 spent on your Card. You can accumulate these Rewards Points for a
maximum of 18 months and redeem them for exciting gifts and offers, as soon as you
accumulate 1000 points. Please note that cash advances and other fee charges do not
qualify for the Rewards programme.
Utility Bill Payments Made Easy
Paying your insurance premium and electricity /telephone/mobile bills can become easy.
Just give us a call at our 24-hour Customer Call Center and request a Demand Draft for
the utility bill that you want. These payments will be deducted from your available cash
limit and will attract interest from the date of request.
Balance transfer option
If you have any other credit card and wish to transfer their balances to your HDFC Bank
International Gold Card, those balances will attract a special interest rate of only 1.25%
p.m. for a period of six months from the transfer date. The outstanding amount
transferred can be upto 75% of your HDFC Bank International Gold Card Credit Limit.
International silver card
The HDFC Bank International Silver Credit Card offers you the best features a card can
provide along with the conveniences offered by a bank. Be it low interest balance transfer
facility or comprehensive insurance cover, each of its features will help you manage your
finances better and leave you free to live a better life.
Balance Transfer at a lower interest rate
Most cards charge interest at the rate of 2.95% per month. Transfer the same balance to
HDFC Bank's credit card and you will pay interest at the rate of only 1.65% per month.
For existing customers of HDFC Bank, we offer a special rate of 1.45% per month for 6
months. Why pay more when you have another way out?
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Hdfc bank

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