A Summer Project Report

ON

FINANCIAL PERFORMANCE OF SDYN

FOR THE PERIOD 2007-2008 to2009-2010

Submitted to

Gurukul Kangri University Haridwar

In partial fulfillment of the two years full time post graduate degree in

MASTER OF BUSINESS ADMINISTRATION (MBF)

Supervised by: Submitted by:

Dr. Bindu Arora Rosy Tyagi

MBA(BF)

Department of Management Studies

Kanya Gurukul Mahavidhyaly, Dehradun

2nd Campus, Gurukul Kangri University, Haridwar

2009-2011

ACKNOWLEDGEMENT

I am indebted to those helping hands that have given their Willingness and significant

contribution in preparing this project under various limitations that we had to work in.

I would also like to express my gratitude towards the Gurukul Kangri Vishvavidhyalya for

giving me the opportunity to undergo summer internship at Standard Chartered Bank.

I am very grateful to our HOD Dr. Surekha Rana my guide Dr. Bindu Arora and all faculty

members to their excellent guidance in the completion of my project work.

I am always beholden to God, for always being with me and showing me the right ways, my

family members, for always doing favors to me and my friends and colleagues.

Last but not the least I would like to thank my Research Guide, Mr. Davinder Yadav, for his

support.

I would also like to thank every person who is directly or indirectly related to the completion of

this project.

ROSY TYAGI

DECLARATION

It is here by testified that this project is an original work done by ROSY TYAGI on behalf of

KANYA GURUKUL MAHAVIDHYALYA DEHRADUN. This work has not been submitted

anywhere else for any other degree/diploma. The original work was carried during my Summer

Internship in STANDARD CHARTERED BANK GURGAON BRANCH.

Any unauthorized use of this project is strictly prohibited without the prior permission of the

authority.

DATE

PLACE ROSY TYAGI

Contents

1. Introduction

Early history

World War I to Independence

Post-independence

Nationalisation

Liberalisation/Globalization

2. Private Banks In India

SCB

HDFC

HSBC

3. Objective of the study

4. Research Methodology

5. Comparative study of Private Banks

Comparative analysis of saving accounts

Comparative analysis of operating profit per employee and profit per employee

Comparative analysis of operating profit per equity and profit per equity

Ratio analysis

NPA’s of Foreign Banks

6. Government policies

7. Internship at bank

8. Benefits of Internship at bank

9. Challenges facing banking industry in India

10. Conclusion

11. Bibliography

Introduction

Currently, India has 96 scheduled commercial banks (SCBs) 27 public sector banks (that is

with the Government of India holding a stake), 31 private banks (these do not have government

stake; they may be publicly listed and traded on stock exchanges) and 38 foreign banks. They

have a combined network of over 53,000 branches and 49,000 ATMs. According to a report by

ICRA Limited, a rating agency, the public sector banks hold over 75 percent of total assets of the

banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively.

Early history

Banking in India originated in the last decades of the 18th century. The first banks were The

General Bank of India which started in 1786, and the Bank of Hindustan, both of which are now

defunct. The oldest bank in existence in India is the State Bank of India, which originated in the

Bank of Calcutta in June 1806, which almost immediately became the Bank of Bengal. This was

one of the three presidency banks, the other two being the Bank of Bombay and the Bank of

Madras, all three of which were established under charters from the British East India Company.

For many years the Presidency banks acted as quasi-central banks, as did their successors. The

three banks merged in 1921 to form the Imperial Bank of India, which, upon India's

independence, became the State Bank of India.

Indian merchants in Calcutta established the Union Bank in 1839, but it failed in 1848 as a

consequence of the economic crisis of 1848-49. The Allahabad Bank, established in 1865 and

still functioning today, is the oldest Joint Stock bank in India. It was not the first though. That

honor belongs to the Bank of Upper India, which was established in 1863, and which survived

until 1913, when it failed, with some of its assets and liabilities being transferred to the Alliance

Bank of Simla.

Foreign banks too started to arrive, particularly in Calcutta, in the 1860s. The Comptoire

d'Escompte de Paris opened a branch in Calcutta in 1860, and another in Bombay in 1862;

branches in Madras and Pondicherry, then a French colony, followed. HSBC established itself

in Bengal in 1869. Calcutta was the most active trading port in India, mainly due to the trade of

the British Empire, and so became a banking center.

The Bank of Bengal, which later merged with the Bank of Bombay and the Bank of Madras

to form the Imperial Bank of India in 1921.

The first entirely Indian joint stock bank was the Oudh Commercial Bank, established in 1881

in Faizabad. It failed in 1958. The next was the Punjab National Bank, established in Lahore

in 1895, which has survived to the present and is now one of the largest banks in India.

Around the turn of the 20th Century, the Indian economy was passing through a relative period

of stability. Around five decades had elapsed since the Indian Mutiny, and the social, industrial

and other infrastructure had improved. Indians had established small banks, most of which

served particular ethnic and religious communities.

The period between 1906 and 1911, saw the establishment of banks inspired by the Swadeshi

movement. The Swadeshi movement inspired local businessmen and political figures to found

banks of and for the Indian community. A number of banks established then have survived to the

present such as Bank of India, Corporation Bank, Indian Bank, Bank of Baroda, Canara

Bank and Central Bank of India.

The fervour of Swadeshi movement lead to establishing of many private banks in Dakshina

Kannada and Udupi district which were unified earlier and known by the name South Canara

( South Kanara ) district. Four nationalised banks started in this district and also a leading private

sector bank. Hence undivided Dakshina Kannada district is known as "Cradle of Indian

Banking".

World War I to Independence

The period during the First World War (1914-1918) through the end of the Second World

War (1939-1945), and two years thereafter until the independence of India were challenging for

Indian banking. The years of the First World War were turbulent, and it took its toll with banks

simply collapsing despite the Indian economy gaining indirect boost due to war-related economic

activities. At least 94 banks in India failed between 1913 and 1918 as indicated in the following

table:

Post-independence

The partition of India in 1947 adversely impacted the economies of Punjab and West

Bengal, paralyzing banking activities for months. India's independence marked the end of a

YearsNumber of banksthat failed

Authorised capital(` Lakhs)

Paid-up Capital(` Lakhs)

1913 12 274 351914 42 710 1091915 11 56 51916 13 231 41917 9 76 251918 7 209 1

regime of the Laissez-faire for the Indian banking. The Government of India initiated measures

to play an active role in the economic life of the nation, and the Industrial Policy Resolution

adopted by the government in 1948 envisaged a mixed economy. This resulted into greater

involvement of the state in different segments of the economy including banking and finance.

The major steps to regulate banking included:

In 1948, the Reserve Bank of India, India's central banking authority, was nationalized,

and it became an institution owned by the Government of India.

In 1949, the Banking Regulation Act was enacted which empowered the Reserve Bank of

India (RBI) "to regulate, control, and inspect the banks in India."

The Banking Regulation Act also provided that no new bank or branch of an existing

bank could be opened without a license from the RBI, and no two banks could have

common directors.

However, despite these provisions, control and regulations, banks in India except the State

Bank of India, continued to be owned and operated by private persons. This changed with the

nationalisation of major banks in India on 19 July 1969.

Nationalization

The RBI was nationalized on January 1, 1949 in terms of the Reserve Bank of India (Transfer

to Public Ownership) Act, 1948 (RBI, 2005b).

By the 1960s, the Indian banking industry had become an important tool to facilitate the

development of the Indian economy. At the same time, it had emerged as a large employer, and

a debate had ensued about the possibility to nationalize the banking industry. Indira Gandhi,

the-then Prime Minister of India expressed the intention of the GOI in the annual conference

of the All India Congress Meeting in a paper entitled "Stray thoughts on Bank Nationalisation."

The paper was received with positive enthusiasm. Thereafter, her move was swift and sudden,

and the GOI issued an ordinance and nationalised the 14 largest commercial banks with effect

from the midnight of July 19, 1969. Within two weeks of the issue of the ordinance, the

Parliament passed the Banking Companies (Acquisition and Transfer of Undertaking) Bill, and

it received the presidential approval on 9 August 1969.

A second dose of nationalization of 6 more commercial banks followed in 1980. The stated

reason for the nationalization was to give the government more control of credit delivery. With

the second dose of nationalization, the GOI controlled around 91% of the banking business of

India. Later on, in the year 1993, the government merged New Bank of India with Punjab

National Bank. It was the only merger between nationalized banks and resulted in the reduction

of the number of nationalised banks from 20 to 19. After this, until the 1990s, the nationalised

banks grew at a pace of around 4%, closer to the average growth rate of the Indian economy. The

nationalised banks were credited by some, including Home minister P. Chidambaram, to have

helped the Indian economy withstand the global financial crisis of 2007-2009.

Liberalisation/Globalization

In the early 1990s, the then Narsimha Rao government embarked on a policy of

liberalization, licensing a small number of private banks. These came to be known as New

Generation tech-savvy banks, and included Global Trust Bank (the first of such new generation

banks to be set up), which later amalgamated with Oriental Bank of Commerce, Axis

Bank(earlier as UTI Bank), ICICI Bank and HDFC Bank. This move, along with the rapid

growth in the economy of India, revitalized the banking sector in India, which has seen rapid

growth with strong contribution from all the three sectors of banks, namely, government banks,

private banks and foreign banks.

The new policy shook the Banking sector in India completely. Bankers, till this time, were

used to the 4-6-4 method (Borrow at 4%; Lend at 6%; Go home at 4) of functioning. The new

wave ushered in a modern outlook and tech-savvy methods of working for traditional banks. All

this led to the retail boom in India. People not just demanded more from their banks but also

received more.

Currently (2010), banking in India is generally fairly mature in terms of supply, product range

and reach-even though reach in rural India still remains a challenge for the private sector and

foreign banks. In terms of quality of assets and capital adequacy, Indian banks are considered to

have clean, strong and transparent balance sheets relative to other banks in comparable

economies in its region. The Reserve Bank of India is an autonomous body, with minimal

pressure from the government. The stated policy of the Bank on the Indian Rupee is to manage

volatility but without any fixed exchange rate-With the growth in the Indian economy expected

to be strong for quite some time-especially in its services sector-the demand for banking

services, especially retail banking, mortgages and investment services are expected to be strong.

One may also expect M&As, takeovers, and asset sales.

In March 2006, the Reserve Bank of India allowed Warburg Pincus to increase its stake in

Kotak Mahindra Bank (a private sector bank) to 10%. This is the first time an investor has been

allowed to hold more than 5% in a private sector bank since the RBI announced norms in 2005

that any stake exceeding 5% in the private sector banks would need to be vetted by them.

In recent years critics have charged that the non-government owned banks are too aggressive in

their loan recovery efforts in connection with housing, vehicle and personal loans. There are

press reports that the banks' loan recovery efforts have driven defaulting borrowers to suicide and

this has mostly been true.

PRIVATE BANKS IN INDIA

Standard Chartered plc is a British financial services company headquartered in London,

UK with operations in more than seventy countries. It operates a network of over 1,700 branches

and outlets (including subsidiaries, associates and joint ventures) and employs 73,000 people.

Despite its British base, it has few customers in the United Kingdom and 90% of its profits come

from Asia, Africa, and the Middle East. Because the bank's history is entwined with the

development of the British Empire, its operations lie predominantly in former British colonies,

though over the past two decades it has expanded into countries that have historically had little

British influence. It aims to provide a safe regulatory bridge between these developing

economies. It now focuses on consumer, corporate, and institutional banking, and on the

provision of treasury services—areas in which the Group had particular strength and expertise.

Standard Chartered is listed on the London Stock Exchange, Hong Kong Stock Exchange and

the Indian Stock Exchanges and is a constituent of the FTSE 100 Index. Its largest shareholder

is Temasek Holdings.

History

Standard Chartered was formed in 1969 through a merger of two banks: The Standard Bank of

British South Africa, founded in 1863, and the Chartered Bank of India, Australia and China,

founded in 1853. Both companies were keen to capitalise on the huge expansion of trade and to

earn the handsome profits to be made from financing the movement of goods between Europe,

Asia and Africa.

Type PublicIndustry Banking, Financial servicesArea served World wideKey people John W. Peace(chairman of the board)

Peter A. Sands(CEO)Products Finance and insurance, Consumer Banking, Corporate Banking,

Investment Banking, Investment management, Private Banking, Private Equity, Mortgage Loan, Credit Card

Revenue £12.926 billion (2009)Operating Income

£5.151 billion (2009)

Net income £3.279 billion (2009)Total assets £435.068 billion (2009)Total equity £23.447 billion (2009)Employees 73,800 (2008)Website StandardChartered.com or SC.com

The chartered bank

Founded by James Wilson following the grant of a Royal Charter by Queen Victoria in

1853.

Chartered opened its first branches in Mumbai (Bombay), Kolkata and Shanghai in 1858,

followed by Hong Kong and Singapore in 1859.

Traditional trade was in cotton from Mumbai (Bombay), indigo and tea from Kolkata,

rice from Burma, sugar from Java, tobacco from Sumatra, hemp from Manila and silk

from Yokohama.

Played a major role in the development of trade with the East which followed the opening

of the Suez Canal in 1869 and the extension of the telegraph to China in 1871.

In 1957 Chartered Bank bought the Eastern Bank together with the Ionian Bank's Cyprus

Branches. This established a presence in the Gulf.

The Standard Bank

Founded in the Cape Province of South Africa in 1862 by John Paterson. Commenced

business in Port Elizabeth, in January 1863.

Was prominent in financing the development of the diamond fields of Kimberley from

1867 and later extended its network further north to the new town of Johannesburg when

gold was discovered there in 1885.

Expanded in Southern, Central and Eastern

Recent alliances and developments

In 2000, Standard Chartered acquired Grindlays Bank from ANZ Bank, increasing its

presence in private banking and further expanding its operations in India and Pakistan. In

India, Standard Chartered integrated most of Grindlays' operations, making Standard

Chartered the largest foreign bank in the country.

On 15 April 2005, the bank acquired Korea First Bank, beating HSBC in the bid. Since

then the bank has rebranded the branches as SC First Bank.

On 9 August 2006 Standard Chartered announced that it had acquired an 81%

shareholding in the Union Bank of Pakistan in a deal ultimately worth $511 million.

This deal represented the first acquisition by a foreign firm of a Pakistani bank and the

merged bank, Standard Chartered Bank (Pakistan), is now Pakistan's sixth largest

bank.

On 22 October 2006 Standard Chartered announced that it had received tenders for

more than 51 per cent of the issued share capital of Hsinchu International Bank

(“Hsinchu”), established in 1948 in Hsinchu city in Taiwan. Standard Chartered,

which had first entered Taiwan in 1985, acquired majority ownership of the bank.

In 2007, Standard Chartered opened its Private Banking global headquarters in

Singapore.

On 23 August 2007 Standard Chartered entered into an agreement to buy a 49 percent

share of an Indian brokerage firm (UTI Securities) for $36 million in cash from Securities

Trading Corporation of India Ltd., with the option to raise its stake to 75 percent in 2008

and, if both partners agree, to 100 percent by 2010. UTI Securities offers brokering,

wealth management and investment banking services across 60 Indian cities.

On 29 February 2008, Standard Chartered PLC announced it had received all the required

approvals leading to the completion of its acquisition of American Express Bank Ltd.

(AEB) from the American Express Company (AXP). The total cash consideration for the

acquisition is US$823 million.

On 12 September 2009, The Times newspaper in the United Kingdom reported that

Standard Chartered had signed a record equaling £20million a season sponsorship deal

with Liverpool FC to commence at the start of the 2010/2011 English Premier League

season and last for four years, in a deal equally the record amount set by Manchester

United's sponsorship deal with insurance giant A on.

Liverpool football club announced on the club's official website on 14 September 2009

that Standard Chartered bank will be the new shirt sponsor starting from 2010 to 2014.

On 27 November 2009, Dow Jones Financial News reported the city of Dubai will

restructure its largest corporate entity. Amongst international banks, Standard Chartered

has one of the largest loan portfolios in the Dubai market and the UAE as a whole,

estimated to be $7.77bn in total. This amounts to 4.2% of Standard Chartered's total loans

outstanding. Other impacted banks included HSBC, Barclays, and RBS.

Segmentation of total assets

4%5%

9%

12%

45%

18%

4%

0% 1% 0% 1% 1%

Segmentation of Total Assets

cash and balances at central bank

financial assets

financal instruments

loans and advances to banks

loans and advances to customers

invesment securities

other assets

current tax assets

prepayment and accured income

interest in associates

goodwill and intangible assets

property, plant and equipment

The major portion of total Assets is covered by loans and advances to customers which

amounts to ` 198292 And that shows the strong position of the bank.

Segmentation of total liabilities:

The major portion of the total liabilities is covered by customers account which amounts to `

251244.

9%

58%

3%

8%

7%

4%

0%

1%

4%

0%

0%

0%

0%

6%

Segmentation of Total Liabilities

deposits by bank

customers account

financial liabilities

financial instruments

debt securities in issue

other liabilities

current tax liabilities

accural and deffered income

subordinated liabilities and other borrowed funds

deffered tax liabilities

provisions for liabilities and charges

retirement benefits obligations

capital

reserves

Products and services provided by Standard Chartered Bank

Standard Chartered Bank Promotes Online Shopping for its customers through Avenues

After entering into an Agreement with Avenues in May 2010, Standard Chartered Bank has gone

live with the direct debit payment facility for online shopping through the Avenues Payment

Gateway. This new facility will provide Standard Chartered Bank account holders with easy

access to the goods and services of thousands of online merchants who use the Avenues Payment

Gateway Services. The best part is that any Standard Chartered Bank account holder can now

purchase online products or services ranging from clothes to cinema tickets; jobs portal

memberships to matrimonial site memberships; hotel reservations to concert tickets .or even

cricket match tickets and pay for these directly from their Standard Chartered Bank Account

without the need for a credit card.

Standard Chartered Bank has a strong national presence through 82 branches and 210 ATMs

spread across India and sizable international operations in more than 70 countries with more than

1,700 branches. This wide spread nature of the bank’s operations will deepen the reach of

Avenues’ associated merchants, hoteliers, event holders and travel affiliates throughout the

Indian Sub-continent.

Personal banking

Deposits Cards LoansSaving Account e$averFixed DepositCurrent Account

Priority Banking Visa InfinitePlatinum Visa & MastercardBusiness Visa Platinum & GoldGold Visa & Master CardClassic Visa & MasterCardAmway MasterCardNissan Advantage VisaSupplementary Visa & MasterCardOnline RewardsCredit Card Advantages Benefits

Home LoansPersonal LoansOverdraft

Investments Unit TrustForeign Currency DepositsPremium Currency Investment GoldStructured InvestmentsPortfolio Management ServicesMoney ManagerTools Financial Health CheckRisk Profiler

Insurance General InsuranceLife Insurance

ServicesOnline BankingMobile BankingPhone BankingSMS BankingSMS and Email AlertsConvenient Servicese-StatementContact the Bank

Promotions

Tailored solutions designed specifically to meet the international business and wealth

management needs of Global Indians.

Whether you live in your home country or abroad, we have specialised services designed to

meet the unique wealth management and international business needs of Global Indians. Our

Private Bankers are primarily Global Indians themselves and have the extensive knowledge and

understanding to appreciate your needs and aspirations. Their aim is to deliver the whole of

Standard Chartered through service excellence.

For Global Indians who are entrepreneurs our focus is on both your personal and business

needs. Whether you require simple deposits through investment products, or personal or business

credit facilities, we can help. The combination of our corporate banking expertise, extensive

global network and dedicated Private Bankers means you can benefit from tailored solutions that

move beyond conventional wealth management.

Wholesale banking

Standard Chartered’s Wholesale Banking provides corporate and institutional clients with trade

finance, cash management, securities services, foreign exchange and risk management, capital

raising and corporate finance solution. Building on a rich history of over 150 years, Wholesale

Banking is noted in the industry for its on-the-ground expertise, relationship-focused approach to

business and solid track record of award-winning solutions.

Cash management

Our key cash management services include: Current Account, Savings Account, Time

Deposits, Remittances and Bank Drafts, Investment Services

We also have an extensive range of banking services to make managing your money easier

and more convenient

ATM Service, Phone Banking Services, Straight2Bank, Standard Chartered Online, Facsimile

Banking, Cash Deposit Machines, Cheque Deposit Machines, Courier Service, Cheque Deposit

Box, and Consolidated Statements

SME treasury services

With an international network of more than 1,500 branches in 50 countries across Asia, Africa

and the Middle East, we give you unlimited access to expert advice and regular market updates.

Our SME Treasury Services, services and solutions are designed to help minimise your foreign

exchange risks and we offer competitive rates for a wide range of foreign currencies.

Trade finance & working capital

Import services : We provide a wide range of import services, including letters of credit,

shipment guarantees, custom bonds and guarantees

Export services : Our comprehensive range of export services includes credit bills negotiation,

pre-shipment export financing, export letters of credit and export bills for collection.

Express trade: To support your trade finance and working capital needs, we'll give you a quick

turnaround on a partially secured line of credit for up to 10 times your collateral value.

Cross-border financing: We also provide products and services to meet the cross-border

financing needs of subsidiaries, affiliates or associates that are incorporated or domiciled in a

different jurisdiction to that of the parent company.

Loans & mortgages

SME mortgages : We provide long-term loans to help finance owner-occupied and investment

property purchases for residential or commercial use.

Business power : By combining a loan with an overdraft facility, Business Power gives you

more working capital and helps support your long-term financial needs.

Profit before taxation on the basis of geographical region

Here we have shown the company’s profit before taxation on the basis of its geographic region.

This graph shows the two year profit of the bank. And it shows the ups and down of profit

between two years. Hong Kong and India contributes the most and ie., 21% and 20%

respectively.

Hong Kong Singapore Korea Other Asia Pacific

India Middle East Africa America, UK & Europe

21%

14%

7%

15%19%

14%

8%

2%

21%

14%

6%

15%

20%

7%

9%

8%

Chart Title2008 2009

Profit before taxation by class of business

This graph shows the profit before taxation from each class of business of the two years. And

whole sale banking contributes the maximum in earning profit.

Consumer Banking Wholesale Banking Corporate Items Not Allocated

16%

80%

4%

24%

66%

10%

Chart Title2009 2008

Major awards

Asia banking and finance award 2009

Best International Bank of the Year – Singapore

Best Retail Bank of the Year – Singapore

Best Core Banking Initiative (Virtual Banking Relationship Centre) – Singapore

Best Self-Service Initiative (Online Banking) – Singapore

Asiamoney best country deals of the year 2009

Deal of the Year: Republic of Indonesia, $650 million 8.8% sukuk due 2014 – Indonesia

Deal of the Year: San Miguel, P38.8 billion ($802 million) multitranche bond issue –

Philippines

Best Syndicated Loan: Noble Group, $2.4 billion three-tranche revolving loan facility

Asiamoney FX poll 2009 as voted by corporate

First for Best Overall FX Services – India

First for Best for Competitive and Prompt Spot and Forward Pricing – India

First for Best FX (Vanilla) Options Provider for Non-Asian and Local (Asian) Currencies

–India

First for Best Innovative FX Products and Structured Ideas – India

First for Best Currency Strategy – India

First for Best Macroeconomic Research – India

First for Best Technical Analysis – India

First for Best Post-Trade Services – India

First for Best Customer Service – India

Asia risk corporate end-user survey 2009

First for Currency Derivatives - Asia

First for Cross-Currency Swaps in IDR, INR, KRW, RMB & TWD

First for Currency Options in MYR

First for Currency Forwards in SGD

The asset triple A Asian awards 2008

Best Cash Management specialist: Payment and Receivables – Indonesia

The asset triple a country awards 2009

Best Deal China: GOME Fundraising

Best Deal Indonesia: Republic of Indonesia $650 million Global Sukuk

Best Deal Korea: Oriental Brewery Acquisition Financing

Best Deal Pakistan: PMCL Eurobond Buy-back

Best Deal Thailand: Bangkok Mass Transit System Plc

Best Deal Philippines: San Miguel

Brands council award

Brand of the Year – Pakistan

Cards and payments Europe Global awards 2009

Best New Debit Card – India

Consumers association of Pakistan: Consumers choice award 2009

Best Credit Card – Pakistan

Global Finance 2010

Best Bank for Liquidity Management – Africa and Middle East

Best Trade Finance Provider – Africa, Asia and Singapore

Best Foreign Exchange Provider – Africa, Asia Pacific, Southeast Asia, Gambia, India

and Singapore

HRM Awards 2009

Employer of Choice – Hong Kong

Best HR Young Gun – Hong Kong

Best Corporate & Employee Citizenship Award – Singapore

Interactive Media Awards 2009

Outstanding Achievement in Banking

Outstanding Achievement in Financial Services

Private banker international 2009

Outstanding Private Bank Asia Pacific

Editor’s Special Award: Peter Flavel

Outstanding Young Private Banker Asia Pacific: Zubin Dabu, Feroze Sukh

Structure products Asia awards 2009

Best in Taiwan

Distribution & Design: Best in India

Treasury management international (TMI) awards for innovation & excellence

Best Bank Risk and Cash Management – Middle East and Africa

Best Bank SWIFT for Corporate – Asia

HDFC Bank Ltd. is a major Indian financial services company based in Mumbai,

incorporated in August 1994, after the Reserve Bank of India allowed establishing private

sector banks. The Bank was promoted by the Housing Development Finance Corporation, a

premier housing finance company (set up in 1977) of India. HDFC Bank has 1,412 branches and

over 3,295 ATMs, in 528 cities in India, and all branches of the bank are linked on an online

real-time basis. As of September 30, 2008 the bank had total assets of INR 1006.82 billion. For

the fiscal year 2008-09, the bank has reported net profit of ` 2244.9 crore, up 41% from the

previous fiscal. Total annual earnings of the bank increased by 58% reaching at ` 19,622.8 crore

in 2008-09.HDFC Bank is one of the Big Four Banks of India, along with State Bank of India,

ICICI Bank and Axis Bank — its main competitors

Type PublicIndustry Banking, financial ServicesFounded August 1994Founders Deepak ParekhHeadquarters Mumbai, DelhiKey people Jagdish Capoor (chairman)

Aditya Puri (MD)Products Investment banking, commercial banking, retail banking, private

banking, mortgages, credit card, asset managementRevenue US$ 3.826 billion (2009)Operating income US$ 634 million (2009)Profit US$ 296 million (2009)Total Asset US$ 39.723 billion (2009)Total Equity US$ 4.904 billion (2009)Employees 52,687 (2009)

Housing Development Finance Corporation Limited, more popularly known as HDFC Bank

Ltd, was established in the year 1994, as a part of the liberalization of the Indian Banking

Industry by Reserve Bank of India (RBI). It was one of the first banks to receive an 'in principle'

approval from RBI, for setting up a bank in the private sector. The bank was incorporated with

the name 'HDFC Bank Limited', with its registered office in Mumbai. Today, the bank boasts of

as many as 1412 branches and over 3275 ATMs across India

Amalgamations

In 2002, HDFC Bank witnessed its merger with Times Bank Limited (a private sector bank

promoted by Bennett, Coleman & Co. / Times Group). With this, HDFC and Times became the

first two private banks in the New Generation Private Sector Banks to have gone through a

merger. In 2008, RBI approved the amalgamation of Centurion Bank of Punjab with HDFC

Bank. With this, the Deposits of the merged entity became ` 1,22,000 crore, while the Advances

were ` 89,000 crore and Balance Sheet size was ` 1,63,000 crore

Capital Structure

At present, HDFC Bank boasts of an authorized capital of ` 550 crore (` 5.5 billion), of this

the paid-up amount is ` 424.6 crore (Rs.4.2 billion). In terms of equity share, the HDFC Group

holds 19.4%. Foreign Institutional Investors (FIIs) have around 28% of the equity and about

17.6% is held by the ADS Depository (in respect of the bank's American Depository Shares

(ADS) Issue). The bank has about 570,000 shareholders. Its shares find a listing on the Stock

Exchange, Mumbai and National Stock Exchange, while its American Depository Shares are

listed on the New York Stock Exchange (NYSE), under the symbol 'HDB'.

Business Focus

HDFC Bank deals with three key business segments – Wholesale Banking Services, Retail

Banking Services, and Treasury. It has entered the banking consortia of over 50 corporate for

providing working capital finance, trade services, corporate finance and merchant banking. It is

also providing sophisticated product structures in areas of foreign exchange and derivatives,

money markets and debt trading and equity research.

Distribution Network

HDFC Bank is headquartered in Mumbai. The Bank has a network of 1,725 branches spread in

771 cities across India. All branches are linked on an online real-time basis. Customers in over

500 locations are also serviced through Telephone Banking. The Bank has a presence in all

major industrial and commercial centers across the country. Being a clearing/settlement bank to

various leading stock exchanges, the Bank has branches in the centers where the NSE/BSE has a

strong and active member base. The Bank also has 3,898 networked ATMs across these cities.

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

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

cardholders

HSBC Holdings plc is a financial services corporation incorporated in the United Kingdom

in 1990 following its name change from The Hongkong and Shanghai Banking Corporation,

and headquartered in London, United Kingdom since 1993. As of 2010, it is both the world's

largest banking and financial services group and the world's 8th largest company according to a

composite measure by Forbes magazine. Hong Kong served as the bank's headquarters until

1992 when it moved to London as a condition of completing the acquisition of Midland Bank

and as the handover of Hong Kong's sovereignty approached. Today, whilst no single

geographical area dominates the group's earnings, Hong Kong still continues to be a significant

source of its income. Recent acquisitions and expansion in China are returning HSBC to part of

its roots. HSBC has an enormous operational base in Asia and significant lending, investment,

and insurance activities around the world. The company has a global reach and financial

fundamentals matched by few other banking or financial multinationals. HSBC is listed on the

London, New York, Hong Kong, Paris and Bermuda Stock Exchanges, and is a constituent

of the FTSE 100 Index and the Hang Seng Index.

HSBC Bank is a subsidiary of HSBC Holdings plc, a London based banking giant which,

according to the Forbes magazine, is the largest banking group in the world, and the 6th largest

company in the world as of April 2009. HSBC Holdings had been established in Hong Kong in

the year 1990 as the parent company to the Hongkong and Shanghai Banking Corporation

(HSBC). Further, the bank moved its headquarters from Hong Kong to London.

Type PublicIndustry Banking, Financial services, Investment

servicesFounded Hong Kong(1865)Founders Thomas SutherlandHeadquarters London, United KingdomNumber of locations 9,500 offices in 88 countries & territoriesArea served World wideKey people Stephen Green(Group Chairman)

Michael Geoghegan(Group CEO)Products Finance and Insurance, Consumer Banking,

Corporate Banking, Investment Banking, Investment Management, Global Wealth Management, Private Equity, Mortgages, Credit Card

Revenue $103.74 billion (2009Operating Profit $7.079 billion (2009Profit $5.834 billion (2009Total Assets $2.364 trillion (2009Total Equity $128.299 billion (2009Employees 302,000 (2009)Subsidiaries HSBC Bank plc, HSBC GLT India, the Hong

Kong and Sanghai Banking Corporation, HSBC Bank USA, HSBC Mexico, HSBC Bank Middle East,

.

Key attributes

With a loan-deposit ratio of 90%, HSBC Bank is said to be one of the five British banks that

claim to have more deposits than loans. Such a high loan-deposit ratio of the bank has been able

to retain the trust of its investors and customers, keeping them assured of its financial strengths.

The sound financial position of the bank can also be attributed to the fact that its stocks

maintained relatively high price even during the credit crunch phase, something not commonly

seen to have happened to other banks.

Presence in India

In India, the introduction of HSBC Bank can be dated as early as the year 1853, with the

establishment of the Mercantile Bank of India in Mumbai. Currently, HSBC Group operates

through a number of its subsidiaries in India, viz. The Hongkong and Shanghai Banking

Corporation Limited (HSBC), HSBC Asset Management (India) Private Limited, HSBC Global

Resourcing / HSBC Electronic Data Processing (India) Private Limited, HSBC Insurance

Brokers (India) Private Limited, HSBC Operations and Processing Enterprise (India) Private

Limited, HSBC Private Equity Management (Mauritius) Limited, HSBC Professional Services

(India) Private Limited, HSBC Securities and Capital Markets (India) Private Limited and HSBC

Software Development (India) Private Limited. The group carries out its Commercial Banking,

Banking Technology, Asset Management, Global Resourcing, Insurance and Data Processing.

OBJECTIVE OF STUDY

This comparative study between the banks is made to analyze the performance of

different private banks functional in India using Liquidity ratio, Profitability ratio and

Capital structure ratio.

To know the various facilities provided by the banks on Savings a/c.

To get a general view of NPA’s.

RESEARCH METHODOLOGY

Research problem:

To access the financial position of the private banks and future opportunities.

Research objective

The main objective of this project is to have a deeper insight into the financial position of the foreign banks and make analysis of balance sheet and profit and loss account.

Research design: research design is a best plan or a model for the collection of formal information. Descriptive type of research has been used; it is concerned with describing the characteristics of a particular individual or a group.

Collection of data :

Basically there are two sources through which data is collected i.e., primary and secondary sources.

But in my project report only secondary data is used.

Secondary data:

Secondary data means data that are already available i.e., they refer to that data which have been collected. Analysis of existing documents, this method involves the study of various documents available in the organisation which may contain information required for the study. It includes the following documents:

Annual report and financial statement of the banks.

COMPARATIVE STUDY OF PRIVATE BANKS

Comparative analysis of savings accounts

The first phase of the internship at the Bank involved gaining product knowledge of various

products offered by the Bank. This information was then compared with the products of its

competitors and then reaching a conclusion. This phase also gave an opportunity to analyze the

marketing strategy offered by the bank and give ideas and suggestions. And this graph shows

that the standard chartered bank is providing many facilities free of cost and at minimum cost.

Comparison of banks according to operating profit per employee and profit

per employee:

According to the available data we have calculated operating profit and profit per employee

and we came to the conclusion that the HDFC bank has more operating profit and profit per

employee and SCB is at second place.

SCB HDFC HSBC

Operating Profit Per Employee

6979674.79 12033328.9 2344039.73

Profit Per Em-ployee

4443089.43 5618084.15 1931788.07

1000000

3000000

5000000

7000000

9000000

11000000

13000000

Comparison of banks according to operating profit and profit per equity

We have calculated operating profit and profit per equity from the data available to us and

we came to the conclusion that HDFC bank has acquired more return from its equity in

comparison to the SCB and HSBC. As shown in the graph:

SCB HDFC HSBC

Operating Profit Per Equity 0.22 1.29 0.0551

Profit Per Equity 0.1398 0.6035 0.0454

0.1

0.3

0.5

0.7

0.9

1.1

1.3

RATIO ANALYSIS

Meaning

Ratio is an expression of relationship of one figure with another it may be defined as the

relationships or proportion that one amount bears to other financial ratios express arithmetical

relationships between two figures or two groups of figures which are related to other.

OBJECTIVE OF RATIO ANALYSIS

Ratio analysis is the important technique of financial analysis. It can be called as the heart of

financial analysis. The way, in which we estimate the health of our body through heart beats,

similarly through the technique of ratio analysis, estimation can be made regarding the financial

position of a business concern. The main objectives of ratio analysis are:

1. Relative study: The facts and figures expressed in financial statements if studied in isolation,

may make no sense but if two related items are studied in comparison to the others may suggest

something significant.

2. Conciseness: With the help of Ratio, large figures or group of figures are presented precisely

so as to make them understandable.

3. Analysis of business activities: On the basis of the comparative study of ratios, results

related to the progress or failure of a business concern can be easily obtained.

IMPORTANCE OF RATIO ANALYSIS

Ratio analysis is the most important tool of financial analysis:

1. Helpful to management : The ratio analysis is proves to be of significant value to the

management in the process of discharge of its elementary functions such as planning, co-

ordination, communication and control.

2. Helpful in trend analysis : The ratio analysis facilitates a firm to consider the time

dimension into account, i.e. whether the financial position of a firm is showing any improvement

or deterioration over years. This is effected through the use of trend analysis. With the help of

the financial analysis one can ascertain whether the trend is favorable or unfavorable.

3. Useful in comparative study : Ratio analysis is also helps in comparative study. It helps to

make an inter-firm comparison either between the different departments of a firm or between two

firms employed in the identical types of business or between the same firms on two different

dates.

4. Helpful in communication : Through ratio analysis it is possible to know the changes that

had taken place in business between two periods.

5. Helpful in determining the standards : Keeping in mind the old ratios and present operating

efficiency, the standard can be fixed. In this way ratio analysis is considered to be the essential

part of budgetary control and standard costing.

6. Helpful in effective control : On the basis of ratios, by establishing standards the effective

control can be exercised upon the activity of the firm. On the comparison of standard ratios with

actual ratios adverse financial position can be found out and corrective measures can be taken.

7. Helpful in evaluation of financial soundness : With the help of liquidity, solvency,

profitability and capital gearing ratios is detailed information can be gathered related to financial

soundness of any institution.

LIMITATIONS OF RATIO ANALYSIS

1. Limited Use of a Single Ratio : A single ratio in itself is meaningless; it does not furnish a

complete picture. In other words, one single ratio used without reference to other ratios may

produce misleading results. Hence, a number of financial statements. For example, to test the

Liquidity, make use of all the Liquidity ratios.

2. Ignores Qualitative Factors : The ratio facilitates wholly quantitative analysis only. The

qualitative factors which are so important for the successful functioning of the organisation are

completely ignored and hence, whatever conclusion drawn may get distorted. For example, the

grant of credit to an enterprise may depend more upon the character and capacity of the owner

than on the conclusion drawn from the so called Ratio analysis.

3. Only a part of the information needed in the process of decision taking : It should also be

remembered that ratio analysis helps in providing only a part of the information needed in the

process of decision making.

4. Possibility of window-dressing: Ratio depends on figures of the financial statements. But in

most cases, the figures are window dressed. As a result, the correct picture cannot be drawn up

by the ratio analysis.

Different meaning to accounting terms

Comparisons are also made difficult due to differences in definition of various terms used in

computing ratios.

1. Variations in Accounting Policies : Comparison between two variables proves worth

provided their basis of valuation is identical but in reality it is not possible.

2. Difficulty in Evolving Standard Ratio : It is very difficult to ascertain the normal or

standard ratio in order to make proper comparison.

3. Historical Analysis : Ratios delve in the past as they are obtaining from the financial

statements which are considered to be historical documents. A financial analyst is more

concerned the probable happenings in the future rather than those in the past.

4. Effect of price changes are not taken into account : A change in the price level can

seriously affect the validity of comparisons of ratios computed for different time periods.

5. Personal bias : Ratios are only means of financial analysis and not end in itself. They can

be affected with the personal ability and bias of the analyst.

CLASSIFICATION OF FINANCIAL RATIOS

1. Liquidity Ratios

2. Capital Structure Ratios

3. Activity or Turnover Ratios

4. Profitability or Profit Earning Capacity Ratio.

LIQUIDITY RATIOS

Current Ratio

It is essential that a business unit should have a reasonable current ratio. Although there is no

hard and fast rule, conventionally a current ratio of 2:1 is considered satisfactory. But according

to available data from which we have calculated current ratio of the 3 banks which we can see in

the graph below is less than satisfactory level. Hence it can be said that the liquidity position of

the banks is not good.

SCB HDFC HSBC

0.51

0.13

1.06

Current Ratio

Current Ratio

CAPITAL STRUCTURE RATIO

Fixed Assets Ratio

It is well established that fixed assets should be financed only out of long term funds. This ratio

shows whether this is so. It should not be more than 1:1. After calculating fixed assets ratio we

can conclude that banks have good position.

SCB HDFC HSBC

0.03

0.06

0.01

Fixed Assets to Total Business RatioFixed Assets to Total Business Ratio

PROFITABILITY RATIO

Net Profit Ratio

It is a measure of over-all profitability of a business concern. Net Profit Ratio indicates the

relationship between the net profits earned by the concern and net sales. The motive of

calculation of net profit ratio is to check the total efficiency and performance of business

concern. And after calculating this ratio we find that the profitability of these banks is very low.

SCB HDFC HSBC

2.40%

3.60%

1.70%

Net Profit to Total Business Ratio

Net Profit to Total Business Ratio

Non perfoming assets

Non Performing Asset means an asset or account of borrower, which has been classified by a bank or financial institution as sub-standard, doubtful or loss asset, in accordance with the directions or guidelines relating to asset classification issued by The Reserve Bank of India.

Ninety days overdue

With a view to moving towards international best practices and to ensure greater transparency, it has been decided to adopt the '90 days overdue' norm for identification of NPAs, form the year ending March 31, 2004. Accordingly, with effect form March 31, 2004, a non-performing asset (NPA) shall be a loan or an advance where:

1. interest and /or installment of principal remain overdue for a period of more than 90 days in respect of a Term Loan,

2. the account remains 'out of order' for a period of more than 90 days, inrespect of an overdraft/ cash Credit(OD/CC),

3. the bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted,

4. interest and/ or installment of principal remains overdue for two harvest seasons but for a period not exceeding two half years in the case of an advance granted for agricultural purpose,

BANK-WISE GROSS NON-PERFORMING ASSETS, GROSS ADVANCES AND

GROSS NPA RATIO OF FOREIGN BANKS- 2009

Amount In Lakhs

Foreign Banks Gross NPA’s Gross Advances Gross NPA’s RatioHDFC 198392 10023935 1.98HSBC 154006 2873771 5.36Standard Chartered Bank

105751 3805944 2.78

HDFC HSBC Standard Chartered0

1

2

3

4

5

6

NPAs

NPAs

GOVERNMENTAL POLICIES

The Government Bank regulations are a form of government regulation which subject banks to

certain requirements, restrictions and guidelines, aiming to uphold the soundness and integrity of

the financial system.

General principles of bank regulation:

Banking regulations can vary widely across nations and jurisdictions. Most countries' bank

regulations however address certain similar policy goals and requirements. This section of the

article describes general principles of bank regulation throughout the world.

Accounting and taxation aspects

The Institute of Chartered Accountants of India (ICAI) has issued guidance notes on

accounting of derivatives transactions in the equity derivatives market. The ICAI could be

requested to develop similar guidelines for accounting of exchange-based transactions in interest

rate derivatives. The tax issues incidental to derivative transactions in the equity market could be

similarly applicable to interest rate derivative transactions.

Reserve requirement

The reserve requirement sets the minimum reserves each bank must hold to customer deposits

and notes. This is because reserve requirements apply to just transaction deposits today. Reserve

requirements serve monetary policy goals by limiting the growth and supply of money. The

higher a bank's reserve requirement is, the more money it must hold in reserve and thus cannot

lend (which would thereby create new money). Reserve requirements also serve a safety and

soundness role by as a cushion in case of a severe recession that leads to a "bank run." See the

description of "Regulation D" above for more specific information on regulatory reserve

requirements for US banks.

Capital requirement

The capital requirement sets a framework on how banks and depository institutions must

handle their capital in relation to their assets. Internationally, the Bank for International

Settlements’ Basel Committee on Banking Supervision influences each country's capital

requirements. In 1988, the Committee decided to introduce a capital measurement system

commonly referred to as the Basel Capital Accords.

The latest capital adequacy framework is commonly known as Basel II. The most aggressive

foreign bank this year has been HSBC. Though it has a presence in 77 countries, it has made an

investment of $ 150 million this year in India alone. The bank is willing to step up investments in

India as it expects the economy to sustain over seven per cent growth in coming years. Plans are

also underway to foray into the pension sector and set up a non- bank finance company as soon

as it gets clearance from the Reserve Bank of India. Says group Chairman Sir John Bond said,

"The Indian economy is growing at seven per cent. Our judgment is that any change in growth

will be on the upside." "Our revenues are likely to grow with faster economic growth. We are

willing to invest more in India," he said. Revenues from Indian operations grew by 20 per cent in

2004-05. India, which contributes about one per cent of HSBC’s global profits, is still slightly

behind China that adds up to two per cent of its profits. The group recorded a pre-tax profits

were at $10.64 billion for the first six months of 2005.

HSBC has also opens its fifth service centre in India, in Kolkata. The centre will take up the

basic data entry and the back office job for the US and UK. Subsequently the operations will be

extended to other countries. The other centers are located in Hyderabad, Bangalore and

Vishakhapatnam. The other banking giant Standard Chartered Bank is not far behind. It has

already invested $ 120 million so far this year in its Indian operations, which is expected to

contribute over 10 per cent of its global profits in 2005. "Last year, the Indian operations

contributed about $200 million or 10 per cent of the global profits. We hope to maintain it and

grow it," Standard Chartered General Manager (South Asia), Jaspal S Bindra said.

Standard Chartered Bank Plc posted 39 per cent growth in profit before tax at $ 2.16 billion

from worldwide operations in 2004. The bank plans to continue expanding its Indian operations

by opening 10-12 branches every year and focus on India's booming retail segment. The bank is

in no hurry to acquire banks in India as of now, but will explore such possibilities after

government and RBI relaxes the regulations governing mergers and acquisitions of banks. It is

also a partner with other Indian banks in setting up an asset reconstruction company.

The German multinational bank closed down its single branch retail service five years ago. The

bank has now opened a branch in Mumbai with limited services. Other branches will be

operational in Delhi, Kolkata, Chennai, Bangalore, Gurgaon and Noida. The bank finds so much

potential in India, that it is the first Asian country to where its retail banking operations will be

functional.

Ajay Bimbhet, Managing Director in-charge of retail banking, Deutsche Bank India, said, "We

will enter all retail products except auto loans. Services like doorstep delivery will be available to

certain categories of customers." The bank is looking to cater to anyone with income of above `

5 lakh per annum, he said.

Deutsche Bank will expand in a big way in India in the coming years. Rainer Neske, Member

of Group Executive Committee, Deutsche Bank, said, “India is one of the most exciting growth

markets today. We want to expand our presence as much as the regulator will allow." Citigroup

needs no introduction. It already has a substantial presence in the India market both in retail and

corporate banking, is now expanding its presence in the specialised Research and Equity

businesses.

The expansion plan included new hires with an aim to bring in extensive experience of

delivering cross border and domestic capital market deals. Citigroup Country Officer for India

and Area Head - Bangladesh, Sri Lanka and Nepal - Sanjay Nayar said ''India is a local economy

and a big opportunity market.” This new venture is likely to consolidate the bank’s wealth

management model.

Citigroup Investment Research and India Equities are expanding not only in India but also in

Hong Kong, Singapore, London and New York to drive the business.

Little-known French investment and corporate bank Calyon Bank has also set up five branches

in India over the last few months. Though ruling out a big retail presence in India, Chairman,

Jeane Laurent said, "We intend being a long-term player in India." The bank has already

syndicated $2.5 billion external commercial borrowings for domestic financial institutions and

corporate in the first nine months of this year.

The bank also intended to get a substantial share of the aviation financing business. India as a

destination seems to have arrived. The pace of economic reforms, the performance of corporate,

the bull run on the stock market and interest of foreign institutional investors and the changing

image of the country has added to the growing market potential of the economy and has attracted

all the top foreign banks. With JP Morgan and BNP Paribas also likely to join the brigade in the

coming months, India is becoming a hot banking destination.

Internship at the bank

Hierarchical order at the branch

The Gurgaon Branch of the Bank lies under the NCR area. The bank has appointed respective

heads for each area. This includes:

1. Country head: He is the head of all departments and is in-charge of the Indian region of the

bank.

2. Regional sales manager: He is the in-charge of the regional division, for example: NCR,

Delhi. He reports directly to the Country Head.

3. Area sales manager: He is the in-charge of a particular area of the bank and supervises all the

marketing related activities pertaining to that area. He reports directly to the Regional Sales

Manager.

4. Relationship manager: He is the marketing head of a branch. He executes the policies

communicated to him to the sales executives. He also deals with the Excel Banking/Priority

Banking customers.

5. Sales executives: They lie under the executionary level of management and their work is to

bring business to the bank. The Sales Executives are in direct touch with the customers.

In-bank training

This involved a training regarding the process and involved lectures from the staff of the bank

regarding various aspects of the Banking Industry. The lectures contained information related to

the various products offered by the bank with a highlight on their USPs. The in-bank training

also involved developing an acquaintance with the process of starting a relationship with the

bank.

Benefits of the internship

As a management trainee one gets benefits manifold at the Standard Chartered Bank. The

Summer Internship at the bank was helpful in the following ways:

1. Firstly, it instilled a sense of the corporate world which is very important these days.

2. The training helped in developing the required managerial skills for being a successful

manager.

3. The training helps in developing a sound knowledge about the Banking Industry.

4. To acquaint myself with the working of this organisation.

5. Developing the necessary skills needed to excel as a manager in a Multi National

Company (A must for courses like International Business).

6. Inculcating the necessary soft-skills needed by a manager in the contemporary Corporate

World.

7. Evaluating oneself as a person ready-to-work.

8. Analyzing the Current Scenario of the banking Industry.

9. Enumerating the Governmental policies related to the banking Business.

10. Knowing the Implications of Some Recent Policy Measures.

11. Crystal Gazing the future of banking Sector in India.

Challenges facing banking industry in India

The banking industry in India is undergoing a major transformation due to changes in

economic conditions and continuous deregulation. These multiple changes happening one after

other has a ripple effect on a bank trying to graduate from completely regulated seller market to

completed deregulated customers market.

Challenges Facing Indian Banking Industry

Bank Matching skills

Better Service

Demanding customers

Squeezed spreads

New channels

New Players

Deregulation

Need for new orientation

Diffused Customer loyalty

Pressure on Efficiency

New rules of the game

Missed opportunities

Heightened Competition

Deregulation

This continuous deregulation has made the Banking market extremely Competitive with

greater autonomy, operational flexibility and decontrolled interest rate and liberalized norms for

foreign exchange. The deregulation of the industry coupled with decontrol in interest rates has

led to entry of a number of players in the banking industry. At the same time reduced corporate

credit off take thanks to sluggish economy has resulted in large number of competitors batting

for the same pie.

New rules

As a result, the market place has been redefined with new rules of the game. Banks are

transforming to universal banking, adding new channels with lucrative pricing and freebees to

offer. Natural fall out of this has led to a series of innovative product offerings catering to

various customer segments, specifically retail credit.

Efficiency

This in turn has made it necessary to look for efficiencies in the business. Banks need to access

low cost funds and simultaneously improve the efficiency. The banks are facing pricing pressure,

squeeze on spread and have to give thrust on retail assets.

Diffused customer loyalty

This will definitely impact Customer preferences, as they are bound to react to the value added

offerings. Customers have become demanding and the loyalties are diffused. There are multiple

choices; the wallet share is reduced per bank with demand on flexibility and customization.

Given the relatively low switching Costs; customer retention calls for customized service and

hassle free, flawless service Delivery.

Misaligned mindset

These changes are creating challenges, as employees are made to adapt to changing conditions.

There is resistance to change from employees and the Seller market mindset is yet to be changed

coupled with Fear of uncertainty and Control Orientation. Acceptance of technology is slowly

creeping in but the utilization is not maximized.

Competency gap

Placing the right skill at the right place will determine success. The competency gap needs to

be addressed simultaneously otherwise there will be missed opportunities. The focus of people

will be on doing work but not providing solutions, on escalating problems rather than solving

them and on disposing customers instead of using the opportunity to cross sell.

Strategic options with banks to cope with the challenges

Leading players in the industry have embarked on a series of strategic and tactical initiatives to

sustain leadership. The major initiatives include:

Investing in state of the art technology as the back bone to ensure reliable service

delivery

Leveraging the branch network and sales structure to mobilize low cost current and

savings deposits

Making aggressive forays in the retail advances segment of home and personal loans

Implementing organization wide initiatives involving people, process and technology to

reduce the fixed costs and cost per transaction

Focusing on fee based income to compensate for squeezed spread.

Innovating Products to capture customer ‘mind share’ to begin with and later the wallet

share

Improving the asset quality as per Base II norms.

CONCLUSION

Among the banks SCB appear to be a better option for savings a/c.

HDFC is better than SCB in terms of operating profit per employee and profit per employee

and therefore it must take some steps to improve it.

Liquidity position of the banks is not satisfactory.

The profitability of the SCB is low in comparison to HDFC but better than HSBC.

SCB holds second position in terms of NPA’s.

As per Liquidity ratio, capital structure ratio and profitability ratio HDFC fares well in all the

aspects.

BIBLIOGRAPHYBooks:

• Standard Chartered Bank in Asia, Standard Chartered’s in house publication, (2009).

• Banking in India: Emerging Trends; McKenzie Fredrick, (2010).

Internet:

• Standard Chartered India (www.standardchartered.com.in) for information regarding the

Bank, its products and offerings.

• IIFT, Delhi Research Papers (www.iift.edu) for information on the research done on

Banking in India.

• Google Resource (www.google.com.in) for miscellaneous information.

• Wikipedia Encyclopaedia (www.en.wikipedia.com)

• HSBC Bank India (www.hsbc.com)

• HDFC Bank (www.hdfc.com)

Journals and other Publications

• Standard Chartered Official Journal (January 2008 to June 2009)

• International Business Research Papers.

• Government Gazette (RBI Regulations)