4374980 Project on Hdfc Bank[1]

8/8/2019 4374980 Project on Hdfc Bank[1]

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PROJECT REPORT

ON

MARKETINGSTRATEGIES

OF

BY

SIBAJI JANA


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A project report on

COMPANY GUIDE FACULTY GUIDE

================ ==============Mr. Shibnath Pradhan ProfT.SENGUPTABranch Manager BHAWANIPURKOLKATA. EDUCATION

SOCIETY COLLEGE

Prepared by :

SIBAJI JANA


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Acknowledgements

If words are considered to be signs of gratitude then let these words

Convey the very same My sincere gratitude to HDFC BANK for

providing me with an opportunity to work with BANK and giving

necessary directions on doing this project to the best of my abilities.

I am highly indebted to Mr. Shibnath Pradhan , Branch Manager and

company project guide, who has provided me with the necessary

information and also for the support extended out to me in the

completion of this report and his valuable suggestion and comments

on bringing out this report in the best way possible.

I also thank Prof. T.SENGUPTA , BGES-KOLKATA, who has

sincerely supported me with the valuable insights into the completion

of this project.


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I am grateful to all faculty members of BHAWANIPUR EDUCATION

SOCIETY COLLEGE and my Teachers who have helped me in the

successful completion of this project.


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CONTENTS

Sr. No. Subject Covered Page No.

1 Banking Structure in India 6-7

2 Indian Banking Industries 8-9

3 Upcoming Foreign Bank in India 10

4 HDFC BANK 11-12

5 Company Profile 13-15

6 Technology used 16-19

7 Product and Customer segments 20-23

8 Business Strategy 24-25

9 Inside Hdfc Bank 26-31

10 Rupee Earned Rupee Spent 32-33

11 Recent Development 34-41

12 SWOT Analysis 42-48

13 Project on Plastic Money 49-55


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BANKING STRUCTURE IN INDIA

Scheduled Banks in India

(A) Scheduled Commercial Banks

Public sector Banks

Private sector Banks

ForeignBanks in

India

Regional RuralBank

(28) (27) (29) (102) Nationalized

Bank Other Public

Sector Banks(IDBI)

SBI and itsAssociates

Old PrivateBanks

NewPrivateBanks

(B) Scheduled Cooperative Banks

Scheduled Urban CooperativeBanks (55)

Scheduled State CooperativeBanks (31)


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Here we more concerned about private sector banks and competition

among them. Today, there are 27 private sector banks in the banking sector: 19 old private sector banks and 8 new private sector banks.

These new banks have brought in state-of-the-art technology and

Aggressively marketed their products. The Public sector banks are

Facing a stiff competition from the new private sector banks.

The banks which have been setup in the 1990s under the guidelines

of the Narasimham Committee are referred to as NEW PRIVATE

SECTOR BANKS.

New Private Sector Banks

Superior Financial Services

Designed Innovative Products

Tapped new markets

Accessed Low cost NRI funds Greater efficiency


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INDIAN BANKING INDUSTRIES

The Indian banking market is growing at an astonishing rate, with

Assets expected to reach US$1 trillion by 2010. An expanding

economy, middle class, and technological innovations are all

contributing to this growth.

The countrys middle class accounts for over 320 million people.

In correlation with the growth of the economy, rising income levels,

increased standard of living, and affordability of banking products

are promising factors for continued expansion.


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The Indian banking Industry is in the middle of an IT revolution,

Focusing on the expansion of retail and rural banking.

Players are becoming increasingly customer - centric in their

approach, which has resulted in innovative methods of offering new

banking products and services. Banks are now realizing the

importance of being a big player and are beginning to focus their

attention on mergers and acquisitions to take advantage of

economies of scale and/or comply with Basel II regulation.

Indian banking industry assets are expected to reach US$1 trillion by

2010 and are poised to receive a greater infusion of foreign capital,

says Prathima Rajan , analyst in Celent's banking group and author of

the report. The banking industry should focus on having a smallnumber of large players that can compete globally rather than having

a large number of fragmented players."
http://www.celent.com/bios/PRajan.htmhttp://www.celent.com/bios/PRajan.htm


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UPCOMING FOREIGN BANKS IN INDIA

By 2009 few more names is going to be added in the list of foreign

banks in India. This is as an aftermath of the sudden interest shown

by Reserve Bank of India paving roadmap for foreign banks in India

greater freedom in India. Among them is the world's best private bankby EuroMoney magazine , Switzerland's UBS.

The following are the list of foreign banks going to set

up business in India :-

Royal Bank of Scotland

Switzerland's UBS US-based GE Capital

Credit Suisse Group

Industrial and Commercial Bank of China


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WE UNDERSTAND YOUR WORLD

The Housing Development Finance Corporation Limited (HDFC) was

amongst the first to receive an 'in principle' approval from the

Reserve Bank of India (RBI) to set up a bank in the private sector, aspart of the RBI's liberalization of the Indian Banking Industry in 1994.

The bank was incorporated in August 1994 in the name of 'HDFC

Bank Limited', with its registered office in Mumbai, India. HDFC Bank

commenced operations as a Scheduled Commercial Bank in January

1995.

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

impeccable track record in India as well as in international markets.

Since its inception in 1977, the Corporation has maintained a

consistent and healthy growth in its operations to remain the market

leader in mortgages. Its outstanding loan portfolio covers well over a

million dwelling units. HDFC has developed significant expertise in

retail mortgage loans to different market segments and also has a


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large corporate client base for its housing related credit facilities.

With its experience in the financial markets, a strong market

reputation, large shareholder base and unique consumer franchise,

HDFC was ideally positioned to promote a bank in the Indian

environment.

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

World Class Indian Bank. We realized that only a single minded

focus on product quality and service excellence would help us get

there. Today, we are proud to say that we are well on our way

towards that goal.


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COMPANY PROFILE

STRONG NATIONAL NETWORK

HDFC BANK


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As of March 31, 2008, the Banks distribution network was at 761

Branches and 1977 ATMs in 327 cities as against 684 branches

and 1,605 ATMs in 320 cities as of March 31, 2007.

Against the regulatory approvals for new branches in hand, the

Bank expects to further expand the branch network by around 150

branches by June 30, 2008. During the year, the Bank stepped up

retail customer acquisition with deposit accounts increasing from6.2 million to 8.7 million and total cards issued (debit and credit

cards) increasing from 7 million to 9.2 million.

Whilst credit growth in the banking system slowed down to about

22% for the year ended 2007-08, the Banks net advances grew

by 35.1% with retail advances growing by 38.6% and wholesale

advances growing by 30%, implying a higher market share in both

segments.

March 2006 March 2007 March 2008

Citied 228 316 327

Branches 535 684 761

ATMs 1323 1605 1977


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The transactional banking business also registered healthy growth

With cash management volumes increased by around 80% and

trade services volumes by around 40% over the previous year.

Portfolio quality as of March 31, 2008 remained healthy with gross

nonperforming assets at 1.3% and net non-performing assets at

0.4% of total customer assets. The Banks provisioning policies for

specific loan loss provisions remained higher than regulatory

requirements.


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TECHNOLOGY USED IN HDFC BANK

In the era of globalization each and every sector faced the stiff

competition from their rivals. And world also converted into the flat

from the globe. After the policy of liberalization and RBI initiatives to

take the step for the private sector banks, more and more changesare taking the part into it. And there are create competition between

the private sector banks and public sector bank.

Private sector banks are today used the latest technology for the

different transaction of day to day banking life. As we know that

Information Technology plays the vital role in the each and every

industries and gives the optimum return from the limited resources.

Banks are service industries and today IT gives the innovative

Technology application to Banking industries. HDFC BANK is the

leader in the industries and today IT and HDFC BANK together

combined they reached the sky. New technology changed the mind of

the customers and changed the queue concept from the history


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banking transaction. Today there are different channels are available

for the banking transactions.

We can see that the how technology gives the best results in the

below diagram. There are drastically changes seen in the use of

Internet banking, in a year 2001 (2%) and in the year 2008 ( 25%).

These type of technology gives the freedom to retail customers.

Centralized Processing Units Derived Economies of Scale

Electronic Straight ThroughProcessing

Reduced Transaction Cost

Data Warehousing , CRM Improve cost efficiency,Cross sell

Innovative TechnologyApplication Provide new or superior products

HDFC BANK is the very consistent player in the New private sector

banks. New private sector banks to withstand the competition from

public sector banks came up with innovative products and superior

service.


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2001

Branches 43

ATM 40%

Phone Bankin14%

Internet 2%

Mobile 1%

2005

Branches 17

ATM 45%

Phone Bankin12%

Internet 25%

Mobile 1%

( % customer initiated Transaction by Channel )


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HDFC BANK PRODUCT AND CUSTOMERSEGMENTS

PERSONAL BANKING

Loan Product Deposit Product Investment & Insurance

Auto Loan Loan Against

Security Loan Against

Property Personal loan Credit card 2-wheeler loan Commercial

vehicles finance Home loans Retail business

banking Tractor loan Working Capital

Finance Construction

EquipmentFinance

Health CareFinance

Saving a/c Current a/c Fixed deposit Demat a/c Safe Deposit

Lockers

Mutual Fund Bonds Knowledge Centre Insurance General and Health

Insurance Equity and

Derivatives Mudra Gold Bar


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Education Loan Gold Loan

Cards Payment Services Access To Bank

Credit Card Debit Card Prepaid Card

--------------------------------

Forex Services--------------------------------

Product &Services

Trade Services Forex service

Branch Locater RBI Guidelines

NetSafe Merchant Prepaid Refill Billpay Visa Billpay InstaPay DirectPay

VisaMoneyTransfer eMonies

Electronic FundsTransfer

Online Paymentof Direct Tax

NetBanking OneView InstaAlertMobileBanking ATM Phone Banking Email Statements

Branch Network


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WHOLESALE BANKING

Corporate Small and MediumEnterprises

Financial Institutionsand Trusts

FundedServices

Non FundedServices

Value Added

Services InternetBanking

Funded Services Non Funded

Services Specialized

Services

Value addedservices Internet Banking

BANKS Clearing Sub-

Membership RTGS

submembership

Fund Transfer ATM Tie-ups Corporate Salary a/c Tax CollectionFinancial Institutions

Mutual Funds

Stock Brokers

Insurance Companies

CommoditiesBusiness

Trusts


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BUSINESS MIX

Total Deposits Gross Advances Net Revenue

Retail Wholesale

HDFC Bank is a consistent player in the private sector

bank and have a well balanced product and business

mix in the Indian as well as overseas markets.

Customer segments (retail & wholesale) account for

84% of Net revenues ( FY 2008)

Higher retail revenues partly offset by higher operating

and credit costs.

Equally well positioned to grow both segments.

.


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NRI SERVICES

Accounts & Deposits Remittances Rupee Saving a/c Rupee Current a/c Rupee Fixed Deposits Foreign Currency Deposits Accounts for Returning

Indians

North America UK Europe South East Asia Middle East Africa Others

Quick remitIndiaLinkCheque LockBox

Telegraphic/ Wire Transfer Funds Transfer

Cheques/DDs/TCs

Investment & Insurances Loans

Mutual Funds Insurance Private Banking Portfolio Investment

Scheme

Home Loans Loans Against Securities Loans Against Deposits Gold Credit Card

Payment Services Access To Bank

NetSafe BillPay InstaPay DirectPay Visa Money Online Donation

NetBanking OneView InstaAlert ATM PhoneBanking Email Statements Branch Network


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BUSINESS STRETEGY

HDFC BANK mission is to be " a World Class Indian Bank ",

benchmarking themselves against international standards and best

practices in terms of product offerings, technology, service levels,

risk management and audit & compliance. The objective is to build

sound customer franchises across distinct businesses so as to be a

preferred provider of banking services for target retail and wholesale

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

consistent with the Bank's risk appetite. Bank is committed to do this

while ensuring the highest levels of ethical standards, professional

integrity, corporate governance and regulatory compliance. Continue

to develop new product and technology is the main business strategy

of the bank. Maintain good relation with the customers is the main

and prime objective of the bank.

HDFC BANK business strategy emphasizes the following:


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Increase market share in Indias expanding banking and

financial services industry by following a disciplined growth

strategy focusing on quality and not on quantity and delivering

high quality customer service.

Leverage our technology platform and open scaleable systems

to deliver more products to more customers and to control

operating costs.

Maintain current high standards for asset quality through

disciplined credit risk management.

Develop innovative products and services that attract the

targeted customers and address inefficiencies in the Indian

financial sector. Continue to develop products and services that reduce banks

cost of funds.

Focus on high earnings growth with low volatility.

INSIDE HDFC BANK


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FIVE S , PART OF KAIZEN

WORK PLACE TRANSFORMATION

Focus on effective work place organization

Believe in

Small changes lead to large improvement

Every successful organization have their own strategy to win the

race in the competitive market. They use some technique and

methodology for smooth running of business. HDFC BANK also

aquired the Japanese technique for smooth running of work and

effective work place organization.

Five S Part of Kaizen is the technique which is used in the bank

For easy and systematic work place and eliminating unnecessary

things from the work place.

BENEFIT OF FIVE S


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It can be started immediately. Every one has to participate. Five S is an entirely people driven initiatives. Brings in concept of ownership. All wastage are made visible.

FIVE S Means :-

S-1 SORT SEIRIS-2 SYSTEMATIZE SEITONS-3 SPIC-N-SPAN SEIROS-4 STANDARDIZE SEIKETSUS-5 SUSTAIN SHITSUKE

(1) SORT :-

It focus on eliminating unnecessary items from the work place.

It is excellent way to free up valuable floor space.

It segregate items as per require and wanted.

(2) SYSTEMATIZE :-

Systematize is focus on efficient and effective Storage method.

FrequentlyRequired

LessFrequentlyRequiredRemove

everything fromworkplace

Junk

Wanted butnot Required Junk


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That means it identify, organize and arrange retrieval.

It largely focus on good labeling and identification practices.

Objective :- A place for everything and everything in its place.

(3) SPIC- n - SPAN :-

Spic-n-Span focuses on regular clearing and self

inspection. It brings in the sense of ownership.

(4) STANDERDIZE :-

It focus on simplification and standardization. It involve standard

rules and policies. It establish checklist to facilitates autonomous

maintenance of workplace. It assign responsibility for doing

various jobs and decide on Five S frequency.

(5) SUSTAIN:-

It focuses on defining a new status and standard of

organized work place. Sustain means regular training to maintain

standards developed under S-4. It brings in self- discipline and

commitment towards workplace organization.


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LABELLING ON FILE

FILE NUMBER

SUBJECT

FROM DATE

TO DATE

OWNER

BOX LABEL

For Example

1 / 3 / A / 6

1 Work Station (1)3 Drawer (3)A - Shelf (A)6 File Number ( 6)


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COLOUR CODING OF FILES

DEPARTMENT

Welcome Desk

Personal Banker

Teller

Relationship Manager

Branch Manager

Demat

Others

In the HDFC BANK each department has their different color coding

apply on the different file. Due to this everyone aware about their

particular color file which is coding on it and they save their valuable

time. It is a part of Kaizen and also included in the system of the Five

S. Logic behind it that , the color coding are always differentiate the

things from the similar one.


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RUPEE EARNED - RUPEE SPENT

It is more important for every organization to know about from where

and where to spent money. And balanced between these two things

rupee earned and rupee spent are required for smooth running of

business and financial soundness. This type of watch can control

and eliminate the unnecessary spending of business. In this diagram

it include both things from where Bank earned Rupee and where to

spent.


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HDFC BANK earned from the Interest from Advances 51.14 % ,

Interest from Investment 27.12 %, bank earned commission

exchange and brokerage of 15.25 %. These are the major earning

sources of the bank. Bank also earned from the Forex and

Derivatives and some other Interest Income.

Bank spent 39.75 % on Interest Expense, 30.27 % on Operating

Expense and 14.58 % on Provision. Bank also spent Dividend and

Tax on dividend, Loss on Investment , Tax.

As we discuss above that balancing is must between these two for

every organization especially in the era of globalization where there

are stiff competition among various market players.

RECENT DEVELOPMENT


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The Reserve Bank of India has approved the scheme of

amalgamation of Centurion Bank of Punjab Ltd. with HDFC Bank

Ltd. with effect from May 23, 2008.

All the branches of Centurion Bank of Punjab will function as

branches of HDFC Bank with effect from May 23, 2008. With RBIs

approval, all requisite statutory and regulatory approvals for the

merger have been obtained.


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The combined entity would have a nationwide network of 1167

branches; a strong deposit base of around Rs.1,22,000 crores and

net advances of around Rs.89,000 crores. The balance sheet size of

the combined entity would be over Rs.1,63,000 crores.

Merger with Centurion Bank of Punjab Limited

On March 27, 2008, the shareholders of the Bank accorded their

consent to a scheme of amalgamation of Centurion Bank of Punjab

Limited with HDFC Bank Limited. The shareholders of the Bank

approved the issuance of one equity share of Rs.10/- each of HDFC

Bank Limited for every 29 equity shares of Re. 1/- each held in

Centurion Bank of Punjab Limited. This is subject to receipt of Approvals from the Reserve Bank of India, stock exchanges and

Other requisite statutory and regulatory authorities. The shareholders

Also accorded their consent to issue equity shares and/or warrants

convertible into equity shares at the rate of Rs.1,530.13 each to

HDFC Limited and/or other promoter group companies on preferential basis, subject to final regulatory approvals in this regard. The

Shareholders of the Bank have also approved an increase in the

authorized capital from Rs.450 crores to Rs.550 crores.


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Promoted in 1995 by Housing Development Finance Corporation

(HDFC), India's leading housing finance company, HDFC Bank is one

of India's premier banks providing a wide range of financial products

and services to its over 11 million customers across hundreds of

Indian cities using multiple distribution channels including a pan-India

network of branches, ATMs, phone banking, net banking and mobile

banking. Within a relatively short span of time, the bank has emerged

as a leading player in retail banking, wholesale banking, and treasury

operations, its three principal business segments.

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

and the ability to deliver world-class service with rapid response time.

Over the last 13 years, the bank has successfully gained market

share in its target customer franchises while maintaining healthy

profitability and asset quality.


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As on March 31, 2008, the Bank had a network of 761 branches and

1,977 ATMs in 327 cities. For the year ended March 31, 2008, the

Bank reported a net profit of INR 15.90 billion (Rs.1590.2crore),

up 39.3%, over the corresponding year ended March 31, 2007.

As of March 31, 2008 total deposits were INR 1007.69 billion,

(Rs.100,769 crore) up 47.5% over the corresponding year ended

March 31, 2007. Total balance sheet size too grew by 46.0% to INR

1,331.77 billion (133177 crore). Leading Indian and international

Publications have recognized the bank for its performance and

quality.

Centurion Bank of Punjab is one of the leading new generation

private sector banks in India. The bank serves individual consumers, small and medium businesses and large corporations with a full

range of financial products and services for investing, lending and


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advice on financial planning. The bank offers its customers an array

of wealth management products such as mutual funds, life and

general insurance and has established a leadership 'position'.

The bank is also a strong player in foreign exchange services,

personal loans, mortgages and agricultural loans.

Additionally the bank offers a full suite of NRI banking products to

Overseas Indians. On 29th August 2007, Centurion Bank of Punjab

merged with Lord Krishna Bank (LKB), post obtaining all requisite

statutory and regulatory approvals. This merger has further

strengthened the geographical reach of the Bank in major towns and

cities across the country, especially in the State of Kerala, in addition

to its existing dominance in the northern part of the country.

Centurion Bank of Punjab now operates on a strong nationwide

franchise of 404 branches and 452 ATMs in 190 locations across the

country, supported by employee base of over 7,500 employees.

In addition to being listed on the major Indian stock exchanges,

the Banks shares are also listed on the Luxembourg Stock


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Exchange.

ACHIEVEMENT IN 2007

Business Today-Monitor Groupsurvey

One of India's " Most Innovative Companies "

Financial Express-Ernst & YoungAward

Best Bank Award in the Private Sector category


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Global HR Excellence Awards- Asia Pacific HRMCongress:

'Employer Brand of the Year 2007 -2008' Award - First Runner up, & many more

Business Today 'Best Bank' Award

Dun & Bradstreet American ExpressCorporate BestBank Award 2007

'Corporate Best Bank' Award

The Bombay Stock Exchange and

NasscomFoundation'sBusiness for SocialResponsibilityAwards 2007

'Best Corporate Social ResponsibilityPractice' Award

Outlook Money & NDTV Profit

Best Bank Award in the Private sector category.

The Asian Banker Excellence in RetailFinancial ServicesAwards

Best Retail Bank in India

Asian Banker HDFC BANK Managing Director Aditya Puri wins the Leadership Achievement Award for India
http://www.hdfcbank.com/aboutus/awards/default.htm#%23http://www.hdfcbank.com/aboutus/awards/default.htm#%23http://www.hdfcbank.com/aboutus/awards/default.htm#%23http://www.hdfcbank.com/aboutus/awards/dun_awards_07.HTMhttp://www.hdfcbank.com/aboutus/awards/default.htm#%23http://www.hdfcbank.com/aboutus/awards/default.htm#%23http://openwindow%28%22/common/bestbank07.htm%22,%22%22,%22width=640,height=450,scrollbars=yes%20,menubar=no,location=no,left=0,top=0%22)http://www.hdfcbank.com/aboutus/awards/award_2006.htmhttp://www.hdfcbank.com/aboutus/awards/award_2006.htmhttp://www.hdfcbank.com/aboutus/awards/default.htm#%23http://www.hdfcbank.com/aboutus/awards/default.htm#%23http://www.hdfcbank.com/aboutus/awards/default.htm#%23http://www.hdfcbank.com/aboutus/awards/dun_awards_07.HTMhttp://www.hdfcbank.com/aboutus/awards/default.htm#%23http://www.hdfcbank.com/aboutus/awards/default.htm#%23http://openwindow%28%22/common/bestbank07.htm%22,%22%22,%22width=640,height=450,scrollbars=yes%20,menubar=no,location=no,left=0,top=0%22)http://www.hdfcbank.com/aboutus/awards/award_2006.htmhttp://www.hdfcbank.com/aboutus/awards/award_2006.htm


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SWOT ANALYSIS

STRENGTH

Right strategy for the

right products.

Superior customer

service vs. competitors.

WEAKNESSES

Some gaps in range for

certain sectors.

Customer service staff need

training.


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Great Brand Image

Products have required

accreditations.

High degree of customer

satisfaction.

Good place to work

Lower response time

with efficient and

effective service. Dedicated workforce

aiming at making along-term career inthe field.

Processes and systems, etc

Management cover

insufficient.

Sectoral growth isconstrained by lowunemployment levels andcompetition for staff


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Opportunities

Profit margins will be good.

Could extend to overseas

broadly.

New specialist applications.

Could seek better customer deals .

Fast-track career

development opportunities

on an industry-wide basis.

An applied research centreto create opportunities for developing techniques toprovide added-valueservices.

Threats

Legislation could impact.

Great risk involved

Very high competition

prevailing in the industry.

Vulnerable to reactive

attack by major competitors Lack of infrastructure in

rural areas could constrain

investment.

High volume/low cost

market is intenselycompetitive.


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COMPETITIVE SWOT ANALYSIS WITH ICICI BANK

STRENGTHS WEAKNESSES

OPPORTU

NITIES

S O Strategies

Strength: Large Capital base.

Opportunity: Market Expansion.

Strategy: Deep Penetration into

Rural Market.

W O Strategies

Weakness: Workforce

Responsiveness.

Opportunity: Outsourcing of Non Core Business.

Strategy: Outsource Customer Care & other E-Helps.

THREATS

S T Strategies

Strength: Low operating costs

Threat: Increased Competitionfrom others Pvt. Banks.

Strategy: Steps to EnsureLoyalty by oldCustomers.

W T Strategies

Weakness: Not Equal toInternational Standards.

Threat: Entry of many ForeignBanks.

Strategy: Consider additionalbenefits


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Detailed Analysis:

i. Strength - Opportunity Analysis.

Strength:

It is well know that ICICI Bank has the largest Authorised Capital

Base in the Banking System in India i.e. having a total capacity to

raise Rs. 19,000,000,000 (Non Premium Value).

Opportunity:

Seeing the present financial & economic development of Indian

Economy and also the tremendous growth of the Indian

Companies including the acquisition spree followed by them,

it clearly states the expanding market for finance requirements

and also the growth in surplus disposal income of Indian citizens

has given a huge rise in savings deposits from the above point it

is clear that there is a huge market expansion possible in banking

sector in India.

Strategy:

From the analysis of Strength & Opportunity the simple and


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straight possible strategy for ICICI Bank could be - to penetrate

into the rural sector of India for expanding its market share as well

as leading all other Pvt. Banks from a great gap.

ii. Strength - Threat Analysis.

Strength:

ICICI Bank is not only known for large capital but also for having a

low operations cost though having huge number of branches and

services provided.

Threat:

After showing a significant growth overall, India is able to attract

many international financial & banking institutes, which are known

for their state of art working and keeping low operation costs.

Strategy:

To ensure that ICICI Bank keeps going on with low operation cost

& have continuous business it should simply promote itself well &

provide quality service so as to ensure customer loyalty, therefore

guaranteeing continuous business.


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iii. Weakness - Opportunity Analysis.

Weakness:

It is well known that workforce responsiveness in banking sector is

Very low in Indian banking sector, though ICICI Bank has better

responsible staff but it still lacks behind its counterparts like HSBC,

HDFC BANK, CITI BANK, YES BANK etc.

Opportunity:

In the present world, India is preferred one of the best places for

out sourcing of business process works and many more.

Strategy:

As international companies are reaping huge benefits after out-

sourcing there customer care & BPOs, this same strategy should

be implemented by ICICI Bank so as to have proper customer

service without hindering customer expectations.


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iv. Weakness - Threat Analysis.

Weakness:

Though having a international presence, ICICI Bank has not been

able to keep up the international standards in providing customer

service as well as banking works.

Threat:

In recent times, India has witnessed entry of many international

banks like CITI Bank, YES Bank etc which posses an external

entrant threat to ICICI Bank as this Banks are known for their art

of working and maintain high standards of customer service.

Strategy:

After having new entrants threat, ICICI Bank should come up with

More additional benefits to its customer or may be even reduce

some fees for any additional works of customers.


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PROJECT ON PLASTIC MONEY

I give the project on Plastic Money to bank. The objective behind this

project is to increase the rich customers list in a bank. Plastic Money

title itself says the use of Credit Card and Debit Card in day to day

transaction of the business. I prepared the presentation on it and


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submitted to bank and Bank already started work on this project.

Idea behind this project is to sale the bulk product. Target customer

Of this project are two parties one is Wholesaler and second is

Retailer. Due to this idea bank also sell their swipe machine to

wholesaler and create brand image in the market.

The idea behind this, bank give the credit card swipe machine to

wholesalers and retailers use the credit card of the bank. Bank gives

the 50 days credit to their credit card holders. So here retailers can

get benefit of long credit period and on the other side wholesalers can

get the benefit of same day payment. As a result bank got the wide

list of customers of wholesalers and retailers.


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POWERPOINT PRESENTATION ON PLASTICMONEY


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Meet toMeet to whwh This power point slide shows the how idea works behind this project.Meet the wholesaler first and get the details about their retailers and

convince both parties and shows the benefit of using this type of transaction by plastic money.


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Bulk Bulk prodprodBank always find those customers which are more involve in the

banking transaction. These type of group transaction between the

wholesalers and retailers maintain the well account in a bank.


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MM

I t's showI t's showDirectors Report Year End : Mar '08 The Directors have great pleasure in presenting the of your Banktogether with the audited accounts for theFourteenth Annual Report on the business and operations year endedMarch 31, 2008.

Financial Performance

(Rs. in crores)

For the year ended

March 31, 2008 March 31, 2007

Deposits and Other Borrowings 105,247.5 71,113.3Advances 63,426.9 46,944.8Total Income 12,398.2 8,164.2*Profit before Depreciation and Tax 2,552.4 1,858.4Net Profit 1,590.2 1,141.5Profit brought forward 1,932.0 1,455.0


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Total Profit available for Appropriation 3,522.2 2,596.5

Appropriations

Transfer to Statutory Reserve 397.5 285.4Transfer to General Reserve 159.0 114.1Transfer to Investment Reserve Account (net) 38.5 3.0Proposed Dividend 301.3 223.6Tax including Surcharge andEducation Cess on Dividend . 51.2 38.0Dividend paid for Prior Years 0.1 0.4Balance carried over to Balance Sheet 2,574.6 1,932.0

* Change pursuant to reclassification

The Bank posted total income and net profit of Rs. 12,398.2 crores andRs. 1,590.2 crores respectively for the financial year 2007-08 asagainst Rs. 8,164.2 crores and Rs. 1,141.5 crores respectively in theprevious year. Appropriations from the net profit have been effected asper the table given above.

Dividend

Your Bank has had a consistent dividend policy of balancing the twinobjectives of appropriately rewarding shareholders and retainingcapital to maintain a healthy capital adequacy ratio to support futuregrowth. It has had a consistent track record of moderate but steadyincreases in dividend declarations over the last so many years with thedividend payout ratio ranging between 20% and 25%. In line with this,and in recognition of the robust performance during 2007-08, yourdirectors are pleased to recommend a dividend of 85% for the year endedMarch 31, 2008, as against 70% for the year ended March 31, 2007. Thisdividend shall be subject to tax on dividend to be paid by the Bank.

Awards

As in the past years, awards and recognition have been conferred onyour Bank by leading domestic and international organizations duringthe fiscal 2007-08. Some of them are:

- For the fifth consecutive year, your Bank has bagged the BusinessTodays Best Bank Award.

- Outlook Money and NDTV Profits Best Bank in the private sectorcategory.

- Bombay Stock Exchange and Nasscom Foundations Business for Social

Responsibility Award.

- Dun & Bradstreet - American Express Corporate Best Bank Award2007. There were 26 categories in all, including FMCG, Telecom andSoftware & IT.

- The Financial Express-Ernst & Young Best Bank award in the PrivateSector category - Your bank shared the top slot with another bank

- The Asia Pacific HRM Congress in Mumbai - Your Bank bagged as many as


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Your Banks total Capital Adequacy Ratio (CAR) stood at a healthy13.6%, well above the regulatory minimum of 9.0%. Of this, Tier I CARwas 10.3%.

Amalgamation of Centurion Bank of Punjab Limited with the Bank On March27, 2008, the shareholders of the Bank accorded their consent to ascheme of amalgamation of Centurion Bank of Punjab Limited with HDFCBank Limited. The shareholders of the Bank approved the issuance of oneequity share of Rs. 10/- each of HDFC Bank Limited for every twentynine equity shares of Re. 1/- each held in Centurion Bank of PunjabLimited. This is subject to receipt of approvals from the Reserve Bankof India, stock exchanges and other requisite statutory and regulatoryauthorities. The shareholders also accorded their consent to issueequity shares and/ or warrants convertible into equity shares at therate of Rs. 1,530.13 each to HDFC and/or other promoter group companieson preferential basis, subject to final regulatory approvals in thisregard. The Shareholders of the Bank have also approved an increase inthe authorized capital from Rs. 450 crores to Rs. 550 crores.

SUBSIDIARY COMPANIES

In terms of the approval granted by the Government of India, theprovisions contained under Section 212(1) of the Companies Act, 1956shall not apply in respect of the Banks subsidiaries namely, HDFCSecurities Limited (HSL) and HDB Financial Services Limited (HDBFSL).Accordingly, a copy of the balance sheet, profit and loss account,report of the Board of Directors and Report of the Auditors of HSL andHDBFSL have not been attached to the accounts of the Bank for the yearended March 31, 2008.

Investors who wish to have a copy of the annual accounts and detailedinformation on HSL and HDBFSL may write to the Bank for the same.Further, the said documents shall also be available for inspection bythe investors at the registered offices of the Bank, HSL and HDBFSL.

MANAGEMENTS DISCUSSIONS AND ANALYSIS

Macro-economic and Industry Developments

In the 25 years till 2007, the countrys real GDP grew on an average at6.2% per annum. In the last four years, however, GDP growth has beenfaster at 8.8% per annum. The real GDP growth for 2007-08 is expectedto have been between 8.7-8.9%. Investment expenditure, so crucial toeconomic growth, increased from 22.8% of GDP in FY02 to 35.9% in FY07.The domestic savings rate increased from 23.5% in FY02 to 34.8% inFY07.

The services sector with a share of nearly 60% in Indias GDP andaccounting for almost three-fourth in its overall growth, continues tobe the key driver. The manufacturing sector has shown good growth tooon the back of domestic and exportled demand. The countrysmerchandise exports have grown by a healthy 21.6% in the April07-January 08 period as compared to 23.7% in the corresponding periodof previous year.

For most part of the year, liquidity in the banking system was volatilebut largely in surplus due to strong capital flows and softening credit


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demand. The Reserve Bank of India (RBI) followed a tight monetarypolicy to check inflationary pressures arising to a large extent, outof hardening global energy and commodity prices. The RBI increasedreserve requirements to suck out excess liquidity from the bankingsystem directly and raised the Cash Reserve Ratio (CRR) by 150 basispoints during the financial year ended March 31 2008.

Deposit rates remained flat (7.50% to 9.00% p.a.) for most of the firsthalf of the year, but rose by about 0.5% p.a. across tenors inSeptember 2007, primarily due to the onset of the busy credit seasonand tightening of monetary policy. Longer tenor yields, however fell byroughly 0.5% on the back of falling credit demand. The short tenordeposit rates, however, moved up by 0.25% in December 2007 but did notsee the sharp spike that had been experienced in the March 2007quarter.

The yield on the one-year government security (G-sec), which largelyreflects the liquidity in the economy, fell by 15 basis points to 7.52%in first half of the financial year. The 10-year G-sec yield droppedby about 40 basis points to 7.6% during the same period. However, high

inflation numbers in March 2008, and market apprehensions of large debtissuance by the government pushed the yields up in the second fortnightof March 2008.

Some signs of moderation in growth became apparent in 2007-08. Retailconsumer borrowing and spending slowed down in the second half of2006-07 in the wake of the monetary tightening. This has impactedsectors like automobiles and consumer durables where consumer credithas played a key role in driving demand. Rise in interest rates hasalso taken its toll on demand for housing and the growth of the realestate sector. Non-food credit clocked a 22% growth in the lastfortnight of February 2008 as against 28.9% in the last week of March2007. However, downward revisions (of 50 basis points on an average) inlending rates in the March 2008 by a number of banks could reverse thistrend at least partially.

On the foreign trade side, though overall exports showed an acceleratedgrowth during the last year, a number of sectors such as textiles,handicrafts, and leather products saw growth moderating. The rupeeappreciated sharply over the last year (by as much as 11%), which waslargely responsible for the deceleration in exports. The prospect of aslowdown in the global economy has increased the risk of a prolongedslowdown in exports.

Imports however remained robust in 2007-08, growing almost 30% in thefirst three quarters of the year (as against 22% for the correspondingperiod last year) on the back of higher global prices of oil and

food.This widened the trade deficit to USD 67 billion in April-JanuaryFY08 from USD 45 billion in the corresponding period of previous year.Despite the increase in the trade deficit, overall, balance of paymentswas comfortable due to large capital inflows (comprising mainly foreigndirect investment, portfolio inflows and external borrowings). Foreignexchange reserves grew by 7 billion during the year.

Indian equity markets gained sharply in the first nine-months of2007-08. However, as the global financial crisis deepened, benchmarkindices fell sharply in the last quarter. Markets are likely to track


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the global financial markets and remain volatile in 2008-09 althoughthe Indian economic fundamentals still remain strong and attractive inabsolute terms. Diminished risk appetite among investors couldadversely impact capital inflows into emerging markets like India.

(Sources: Ministry of Finance, RBI, CSO)

Industry structure and development

Indian banks faced a new set of challenges brought about by changes inboth the international and domestic environment. International creditmarkets tightened considerably on the back of rising defaults andforeclosures in the US mortgage market and the resultant risk aversion.Its impact was first felt in the mortgage-linked securities and theinter-bank money markets. A number of large US and European banksreported large loan losses and write- downs. The contagion effectssubsequently spread to other asset classes including emerging marketsbonds and equities. The expectation is that the turmoil in thefinancial sector will spill over to the real estate sector. Growth inthe G-7 economies, particularly the US is expected to be lower in 2008

and this is likely to impinge on growth in other economies, includingIndia.

The Indian economy appeared to have entered a phase of moderation in2007-08.The Central Statistical Organisation (CSO) has estimated adecline in the growth rate of Indias Gross Domestic Product (GDP) to8.7% in 2007-08 from 9.6% in 2006-07. The growth in credit off-takefrom scheduled commercial banks (measured year on year) has fallen to21.9% in the last fortnight of February 2008 from 28.2% in the firsthalf of April 2007.

Risks and concerns

While Indian banks have limited direct exposure to the internationalmarkets for mortgage linked securities, they are unlikely to becompletely insulated from the turmoil in the global financial markets.Reduced availability of global finance through external commercialborrowings on the back of rising risk aversion in the global marketscould affect domestic growth, particularly investments in capacityexpansion.This in turn could have some impact on demand for domesticcredit.

Lower capital inflows could also impact domestic liquidity, which haslargely been a function of external capital inflows for most of 2007-08with the ratio of net foreign exchange assets to reserve moneyconsistently exceeding 100%.

The initial moderation in bank credit growth rates in 2007- 08 seems tohave been largely confined to the retail segment (housing, consumerdurables and auto loans). It is possible that the moderation in growthin 2008-09 could be more broad-based, affecting both retail and certainwholesale segments, due to trends in consumption and capital formation.This has obvious implications for the credit portfolio of the bankingsystem. A low 2.1 % growth in the capital goods component of theindex of industrial production (IIP) for January 2008 seems to indicatea further decline in investment demand going forward which could affectoverall credit growth for the banking system, particularly in term


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loans and project finance.

Rising global commodity prices created inflationary pressures for mostof 2007-08. A benign base-effect and the suppression in the petroleumproduct prices kept headline wholesale price inflation in a comfortzone for the first three quarters of the year. However, given the focuson managing underlying price pressures rather than headline inflation,monetary policy showed no signs of easing in 2007-08.Thus banksoperated in an environment where the central bank did not allow anysurplus liquidity in the system, resulting in interest rates remainingfirm.

Despite the prospect of a slowdown in the global economy, commodityprice pressures, particularly those in food and mineral oils, showlittle sign of abating. As the base-effect wears off, headlineinflation is likely to ramp up to well over 7%. So, inflation concernsare likely to influence monetary policy stance going forward and theprospect of an economic slowdown need not entail immediate monetaryeasing. Thus, the operating environment of banks in 2008- 09 could be acombination of slower credit growth and some upward bias in interest

rates. Opportunities

The-financial system in India has witnessed considerably less turmoiland volatility than that in advanced economies.

Given this scenario, domestic corporates are more likely to turn tolocal sources of funding. Cyclical slowdown is unlikely to impactsegments of the economy such as agriculture where a structural shift isunder way. The rural economy has been the greater focus of governmentpolicy in recent years, and significant opportunities lie for bankshere where the penetration of credit and financial products is stillrelatively low.

The central and state governments appear to be driving an ambitiousprogramme in the infrastructure sectors.The eleventh five year plan(2007-2012) envisages an investment of USD 500 billion, withapproximately USD 80 billion envisaged for 2008-09 alone. This presentsa major opportunity for banks and financial institutions to financethese investments.

Although growth in retail credit has moderated in the last year, thelow penetration levels of retail credit (estimated at less than 12% ofGDP), the shift in demographics towards a higher proportion of youngerworking population, the changing attitudes towards borrowings, higherincome levels amongst the growing middle class, and the large pent-up

demand for housing, cars etc., all augur well for the long-term,sustainable growth of retail lending in the Indian market.

Outlook

The Indian economy seems likely to see some moderation in growth ratesin 2008-09 relative to 2007-08. It is still likely to experiencehealthy growth in absolute terms and will probably remain one of thefastest growing economies in the world. Nonetheless, with a lower GDPgrowth coupled with tighter liquidity conditions (as RBI tackles


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concerns on inflation) and stable or slightly higher interest rates,system credit growth is likely to be lower than in 2007-08. Downwardpressures on economic growth may not immediately translate into anexpansionary monetary policy, given the continued risks of inflationfrom global energy and commodity prices. Thus, slightly slower creditgrowth could coexist with firm, if not rising, interest rates. GivenIndias strong macro-economic fundamentals, however, structural driverswill continue to support growth which is a positive for banks as well.

Mission and Business Strategy

Our mission is to be a World Class Indian Bank, benchmarkingourselves against international standards and best practices in termsof product offerings, technology, service levels, risk management andaudit & compliance. The objective is to build sound customerfranchises across distinct businesses so as to be a preferred providerof banking services for target retail and wholesale customer segments,and to achieve a healthy growth in profitability, consistent with theBanks risk appetite. We are committed to do this while ensuring thehighest levels of ethical standards, professional integrity, corporate

governance and regulatory compliance. Our business strategy emphasizes the following:

- Increase our market share in Indias expanding banking and financialservices industry by following a disciplined growth strategy focusingon balancing quality and volume growth while delivering high qualitycustomer service;

- Leverage our technology platform and open scaleable systems todeliver more products to more customers and to control operating costs;

- Maintain high standards for asset quality through disciplined creditrisk management;

- Develop innovative products and services that attract our targetedcustomers and address inefficiencies in the Indian financial sector;

- Continue to develop products and services that reduce our cost offunds; and

- Focus on healthy earnings growth with low volatility. FinancialPerformance

The financial performance during the fiscal year 2007- 08 remainedhealthy with total net revenues (net interest income plus other income)increasing by 50.7% to Rs. 7,511.0 crores from Rs.4,984.7 crores in

2006-07. The revenue growth was driven principally by an increase innet interest income. Net interest income grew by 50.7% primarily due toincrease in the average balance sheet size by 39.8% and an increase innet interest margin from 4.0% to around 4.4%. The key driver in volumeswas growth in advances. Margin expansion was contributed by increase inyields across all products partially offset by increase in time depositcosts.

The other income (non-interest revenue) increased by 50.6% to Rs.2,283.2 crores primarily due to fees and commissions, profit/(loss) on


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revaluation / sale of investment and income from foreign exchange andderivatives income. In 2007-08, commission income increased by 32.7% toRs. 1,714.5 crores with the main drivers being commission fromdistribution of third party mutual funds and insurance, fees ondebit/credit cards, transactional charges/fees on deposit accounts,processing fees of retail assets and cards, and fees from tradeproducts. The Bank earned a profit on sale / revaluation of investmentsof Rs. 241.8 crores during the year. Foreign exchange and derivativesrevenues grew from Rs. 280.3 crores to Rs. 319.8 crores which largelyrelated to customer transactions. Of this, 80% of the revenues camefrom plain vanilla foreign exchange transactions.

Operating (non-interest) expenses increased from Rs. 2,420.8 crores in2006-07 to Rs. 3,745.6 crores in 2007- 08, due to higher infrastructureand staffing expenses in relation to the expansion in the branchnetwork, (including branches which were in the process of being set upand would be commissioned in the June 2008 quarter) and growth in theretail loan and credit card businesses. Operating cost to net revenuesincreased to 49.9%, from 48.6% in the corresponding year. Staffexpenses accounted for 34.7% of non-interest expenses in 2007-08 as

against 32.1% in 2006-07, due to an increase in staff strength andincrease in average salary levels. A large portion of the increase hasbeen in the direct sales infrastructure which stepped the pace ofliability and card account acquisitions substantially during the year.Loan loss provisions and provision for standard assets increased fromRs. 861.0 crores to Rs. 1,216.0 crores in 2007-08 which was broadly inline with the increase in retail loans and the product mix acrossvarious loan products. The Bank also provided Rs. 264.4 -crores ascontingent provisions for tax, legal and other contingencies.

Net profit increased by 39.3% from Rs. 1,141.5 crores in 2006-07 toRs.1,590.2 crores in 2007-08. Return on average net worth was lower at16.1% as against the previous year of 19.4% due to expansion ofnetworth as a result of infusion of over Rs. 3,800 crores of capitalduring the year. The Banks basic earning per share increased fromRs.36.3 to Rs.46.2 per equity share.

During 2007-08, the Banks total balance sheet size increased by 46.0%to Rs. 133,177 crores. Total Deposits increased from Rs. 68,298 crores(as of March 31, 2007) to Rs. 100,769 crores (as of March 31, 2008).With Savings account deposits at Rs. 26,154 crores and current accountdeposits at Rs. 28,760 crores, demand (CASA) deposits were around 54.5%of total deposits as of March 31, 2008. During 2007-08, gross advancesgrew by 35.8 % to Rs. 67,582 crores. This was driven by a growth of38.8% in retail advances to Rs. 39,316 crores, and an increase of 31.8%in wholesale advances to Rs.28,266 crores.

Business Segment Update:

As in the past, this year too the bank has been able to achieve healthygrowth across various operating and financial parameters. Thisperformance reflects the strength and diversity of the banks threeprimary business franchises - retail banking, wholesale banking andtreasury, and of its disciplined approach to risk - reward management.

The retail banking business continued its growth in 2007- 08. In thisbusiness, your Bank has positioned itself as a one-stop shop financial


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services provider, catering primarily to the middle class, massaffluent and high networth customers. Your Banks range of retailfinancial products and services is fairly exhaustive and includesdeposit products of virtually all types, loans, credit cards, debitcards, depository (custody services), investment advisory, billpayments and several transactional services. Apart from its ownproducts, your Bank sells third party financial products like mutualfunds and insurance too. To provide its customers greater flexibilityand convenience as well as to reduce servicing costs, the bank hasinvested in multiple channels - branches, ATMs, phone banking, internetbanking and mobile banking. The success of the

Banks multi-channel strategy is evidenced in the fact that almost 83%of customer initiated transactions are serviced through the non-branchchannels. Your Banks data warehouse and Customer RelationshipManagement (CRM) solutions have helped it target existing and potentialcustomers more effectively and cost effectively and offer them productsappropriate to their profile and needs. Reduced costs of acquisitionapart, this has also led to deepening of customer relationships andlower credit losses.

Your Banks total customer base increased to over 11.6 million. On thedistribution side, your Bank added 77 new branches during the year totake the total to 761 branches (across 327 cities) as of March 2008from 684 branches (in 316 cities) in March 2007. 372 new ATMs were alsoadded during 2007-08 taking the size of the ATM network from 1605 to1977. Your Banks focus on semi-urban and under-banked marketscontinued, with 58% of the Banks branches now outside the top nineIndian cities. Savings account deposits, which reflect the strength ofthe retail liability franchise, grew by 33.5% to Rs 26,154 crores in2007-08. The retail gross loan portfolio grew 38.8% to Rs 39,316 croresduring the year.

In credit cards, your Bank continued with its strategy of focusing onquality customer acquisitions and improving processes to reduce cycletimes and bringing in cost efficiencies. Your Bank had 3.8 millioncards in force as at March 2008. It has a significant presence in themerchant acquiring business also with the total number of point-of-sale (POS) terminals installed at over 61,000. On housing loans, yourBank continued originating home loans under its arrangement withHousing Development Finance Corporation with monthly home loanorigination crossing Rs.550 crores (sanctions) by March 2008. Duringthe year, the Bank did not exercise its option to take any part of the70% of its HDFC home loan origination that it has the right to takeback on its books as AAA mortgage backed securities.

The wholesale banking business too registered a robust growth in

2007-08. In this business, the Bank provides its corporate andinstitutional clients a wide range of commercial and transactionalbanking products, backed by high quality service and relationshipmanagement.

Banks commercial banking business covers not only the top end of thecorporate sector but also the emerging corporate segments and othersmall and medium enterprises (SMEs). The Bank now has four businessgroups catering to various SME customers with a wide range of bankingservices covering their working capital and term finance, trade


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services, cash management, foreign exchange and electronic bankingrequirements.

During financial year 2007-08, growth in the wholesale banking businesscontinued to be driven by new customer acquisition and highercross-sell with a focus on optimizing yields and increasing productpenetration. Your Banks cash management and vendor & distributorfinance products continued to be an important contributor to growth inthe corporate banking business. Your Bank further consolidated itsposition as a leading player in the cash management business (coveringall outstation collection, disbursement and electronic fund transferproducts across the Banks various customer segments) with volumesgrowing to over Rs. 24 trillion an increase of more than 80% over thevolumes in FY 2006-07. Your Bank also strengthened its marketleadership in cash settlement services for major stock exchanges andcommodity exchanges in the country. Yet again, your Bank met theoverall priority sector lending requirement of 40% of net bank creditand improved its performance in certain sub- limits where it fell shortof the requirements.

Your Bank also achieved healthy growth in its agriculture andmicro-finance portfolios. With products including the Kisan Gold Card,rural supply chain initiatives and commodity finance the Bank is wellpositioned to meet its customers requirements across the entireagriculture financing cycle.

farmers.

The Bank has relationships with 110 micro finance institutions and hasextended credit facilities, whereby 1.61 million households have beenbeneficiaries of financial inclusion. In addition, the Bank under thedirect SHG linkage programme, has credit-linked and financed over32,000 Self-Help Groups with roughly half a million householdsbenefiting from this.

RETAIL BANKING

Retail banking means mobilizing deposit form individuals and providing loanfacilities to them in the form of home loans, auto loans, credit cards, etc, is becoming

popular. This used to be considered by the banks as a tough proposition because of thevolume of operations involved. But during the last couple of years or so, banks seem to haverealized that the only sustainable way to increase deposits is to look at small and middle class

consumer retail deposit and not the price sensitive corporate depositors. With financial sector reforms gathering momentum, the banking system is facing increasing companies from non- banks and the capital market. More and more companies are tapping the capital marketdirectly for finance. This is one of the main reasons for the banks to focus vigourously on themuch ignored retail deposits. Another reason is the current liquidity the margins are 1 to 2

percent above the prime rate; in retail market they are 3to4 percent.


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It is reported that Indian retail market has the potential to be second only to the USA.

National Readership Survey 5puts Indian households with monthly of over Rs. 5000 at 4.5

million. According to the survey, the category of households with annual income of Rs. 2

lakhs and above is growing at the rate of 30 per cent per annum. No winder, banks with

vision and insight are trying to woo this market through a series of innovative additions to

their products, services, technology and marketing methods. Fixed and unfixed Deposits,

(cluster deposits which can be broken into smaller units to help meet depositors overdraft

without breaking up entirely), centralised database for any branch banking (whereby the

customer can access his account in any of the branches irrespective of where the account is

maintained), room services (whereby the customers are visited at their residences offices to

enable them to open their accounts), automatic teller machines, tele banking network,

extended banking time, courier pickup for cheques and documents, etc are some of the privileges extended to the customers by the banks in are eagerness to cultivate the retail

market. In short, in the bold new world of retail banking the customer is crowned as king.

RETAIL BANKING-A COOL OASIS

To bankers struggling through the shifting sands of corporate credit, retail banking looks likea cool oasis. Corporate Credit, retail banking looks like a cool oasis. Corporate customersrely less on commercial banks every day as other fund raising avenues present themselves.As this disintermediation takes place and competition shrinks margins, retail banking hasgained an irresistible allure for banks because of its apparently higher margins and potentialfir growth.

With their large branch networks, banks have secured sizeable deposits-23 percent of GDP.On the assets side, however, retail advances account for a mere seven per cent of totallending. The penetration of products like car loans or credit cards is very low. With very fewfocused multi-line banks, non banks are often significant players in retail lending, as HDFC is in house loans. Yet, many non-banks lack the minimum size to make the necessaryinvestments and address the challenges of retail banking.

A large number of banks and non-banks have launched or relaunched retail products and are

attempting to grow their share of the personal financial services market. Even the term

lending institutions have decided that they need to go retail to raise funds. Many organization

like ICICI are betting that a large part of their future growth will come from retail customers.
http://www.hdfcbank.com/http://www.icicibank.com/http://www.hdfcbank.com/http://www.icicibank.com/


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Retail banking is much more than as opportunity to addressing dwindling margins. It is an

imperative to preserve profits and market positions. Customers now have many more

personal financial options, a growing credit culture, a willingness to switch between financial

services providers, and a demand for lower interest rates. As they witness these trends, banks

realize that they cannot remain passive. The new private sector banks are making inroads in

the markets they serve, while competition from non-banks is growing. In respect, older

institutions need to revamp their distribution capabilities, customer management capabilities,

operating culture, compensation system and operations processing.

WEB IMPACT ON BANKS RETAIL REVENUES:

For all those gurus whove been predicting that the net will end the business of said banks,

heres a shocker.

Even in the SILICON valley-driven USA, Internet is not expected to have a major impact in

banks retail revenues.

The reason: the absence of a convenient alternative at present to using cash.

According to a report by moodys Investors service, at least in the intermediate term, the

internet is not expected to impact large US banks core profitability or competitive position.

This is despite the despite business being the simple-most important profit source for most

American retail banks.

The core retail banking business of deposit taking will be sheltered form web-based

competitors and margin shrinkage on this business.

Need for convenient access to physical locations coupled with the advantages of multiple

delivery channels like branch, ATM, telephone and computers, consumers need to leave

money in transactional accounts; customer inertia and the relatively limited cost savings

available to consumers from net banking, are cited as the main factors supporting its view.


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The moodys report, however, cautions that other consumer business such as residential

mortgages, auto loans and credit cards may be more vulnerable to web-based competitors.

However, most US banks have thin margins or low market shares in these businesses

mitigating this impact, says the report made available to the Economic Times.

The rating agency is skeptical of banks ability to generate substantial incremental revenues

from cross-selling financial products to existing customers via the net.

Banks have to maintain a comprehensive and effective web based capability to maintain their

competitive position, cautions moodys.

The need for customers to take frequent physical receipts, make convenient physical receipts,

make convenient physical delivery of cheques using ATMs, inhibition towards paying ATMcharges for using another banks ATM network by the consumer and time consuming,

difficult and disruptive nature of switching accounts also contribute to the stickiness of

retail deposits.

With low bank fees for individual transactions and relatively small bank deposits, theopportunity cost in terms of interest income for customers is not material where thedeposits are not large.

Banks offer convenience and choice and the web-based channels of banks have reportedrapid growth in the number of customers by retaining current customers.

According to moodys a survey indicated that 35 per cent of Internet banking customer

disconnect because they dont find it convenient.

Customers prefer to use a variety of channels to conduct their banking which is why it

remains to be seen whether a business model based solely on internet banking will generate

adequate returns and sustain long term competition against conventional banking systems.

The advent of the internet could, however have a powerful effect on banks acquisition

strategies by creating uncertainty about the value of purchasing large branch networks, the

study says.


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For some banks, however, the Internet could facilitate an increase in fee income by

generating fees from Internet service arrangements like bill presentment and clearing.

However, if smart cards or stored value cards or other electronic cash substitute gain

popularity, alternatives could become more attractive to customers.

On the other hand, banks might be able to reduce costs of servicing the retail customers by

moving them over into a paperless environment.

Banks could introduce various incentives to the persuade customers to forego paper

statements for the basic savings account and credit card, says moodys.

THE RULES HAVE CHANGED

As the 1900s come to their close and we look eagerly towards the new millennium, a

revolution that will change the rules and every thing we have understood of the retail market,

financial products and other services. Economic boundaries are disappearing, and the global

village is a reality where the retail customer will have a choice in a manner we may have

never imagined.

Providers of retail products and services will battle for market and market share. It is battle

that will be fought at different levels and the real winner will be the customer, who will

benefit from increased competition through better products, distribution, technology, pricing,

and post transaction service.

The quality and range of products will expand exponentially convenience of usage,

customization to individual needs, and a host of other user-friendly add-ons will create a

whole new frontier of applications. Companies will have to innovate and continuously

upgrade their products. Anticipation, listening and responding to your customers needs, will

be the buzz-words of this thrust.

Distribution will be the next key benchmark of success. The customer will demand (and

therefore the provider will have to respond) for greater convenience of access to the product

or service and all this at the best cost of delivery. Re-defined methods, the use of technology


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specifically the Internet-and realigned strategies will drive this important criterion of

success. Constraints of location, timing, accessibility etc will all be history. No matter how

brilliant the product you have, your distribution flexibility will be the customers selection

parameter.

Again, quality of the product and responsive strategies for distribution will also have a link to

price. Efficiencies on this front will be the next item on your report card. Through innovation

in production and delivery and cost reduction strategies, the price to the customer will have to

be at maximum benefit. The intelligent customer will be ruthless with any price distortions,

which as a consequence of inefficiencies or market exploitation his cost benefit analysis

will not allow for these variables.

Would you prefer a product, which (hopefully) is never expected to need post sale service or

one which offers the best after sale service if required ? Clearly, the relationship with the

customer starts with the transaction, does not and with it. Organisation we have to give equal

importance to cost sale needs of customers as the pitch made prior to the sale.

Technology will perhaps be the single largest driver of this detail thrust. The entire strategy

will evolve around the absolute ability of the organisation to be at the cutting as edge of

technology. We will have to invest in technology far ahead of immediate needs and be able to

anticipate the future direction at a pace we are perhaps not used to. Being able to keep

abreast, but more importantly, being able to recognize the immense potential that technology

provides at all stages in the retail chain will be of paramount importance. To leverage, exploit

and link technology to your business will be the greatest challenge of the new millennium

and I am convinced that the retail war will be won and lost on this one aspect, purely because

technology increasingly we influence on the entire chain in a retail business cycle.

Above all these, I would list attitude towards customer as the single point basis ondetermining the winner of the race. Attitude to the customer will influence all the areas we

have discussed and will ensure excellence in each one of them. It is an intangible, it is not

prescribed in a manual nor is it a quantifiable item in the balance sheet, but an organizations

attitude to the customer will be the basis determinant of success for any retail operation.


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4374980 Project on Hdfc Bank[1]

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