EXECUTIVE SUMMARY

The Project report is prepared on Retail Banking at HDFC Bank. It is on a

research to find out weather people of Rajkot city prefer to deal with private sector

banks or nationalized banks. It is also to find out the reasons why they deal with their

bank and the most frequently services by them

This was basically to find out for what reason they deal with particular bank

and to know their level of satisfaction with the services of their bank.

I have collected the research by collecting the primary data. This research was

conducted with the employees of private and government sector, businessman,

professionals and students in equal numbers.

This report gives a brief idea about the banking industry and the tough

competition faced by the banks. Secondly it gives an overview of the company, its

history, its products, its various marketing strategy and much more.

Then the main part of the project comes wherein the research and the analysis

is included. Stratified random sampling was adopted where the people of various

occupations were selected at random from different part of the city. The sampling size

selected was 50.

Data analysis was done as per the questions through various techniques as per

requirement. Finally findings and the data collected concluded that the most preferred

bank was HDFC Bank, and the most people were highly satisfied with the services of

HDFC Bank where ATM was the most frequently used services. It was found that for

what reason private and government employees, students, professionals and

businessman deal with the bank and how frequently they visit the bank. Through this

research the company can know the choice of different occupational groups and the

research for how satisfied they are with the bank they deal with. They can also know

the most frequently used services so that they can improve further improve it or

encourage the use of their services.

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INTRODUCTION AND HISTORY OF

BANKING

Without a sound and effective banking system in India it cannot have a healthy

economy. The banking system of India should not only be hassle free but it should be

able to meet new challenges posed by the technology and any other external and

internal factors.

For the past three decades India's banking system has several outstanding

achievements to its credit. The most striking is its extensive reach. It is no longer

confined to only metropolitans or cosmopolitans in India. In fact, Indian banking

system has reached even to the remote corners of the country. This is one of the main

reason of India's growth process.

The government's regular policy for Indian bank since 1969 has paid rich dividends

with the nationalization of 14 major private banks of India.

Not long ago, an account holder had to wait for hours at the bank counters for getting

a draft or for withdrawing his own money. Today, he has a choice. Gone are days

when the most efficient bank transferred money from one branch to other in two days.

Now it is simple as instant messaging or dial a pizza. Money have become the order

of the day.

The first bank in India, though conservative, was established in 1786. From 1786 till

today, the journey of Indian Banking System can be segregated into three distinct

phases. They are as mentioned below:

Early phase from 1786 to 1969 of Indian Banks

Nationalizations of Indian Banks and up to 1991 prior to Indian banking sector

Reforms.

New phase of Indian Banking System with the advent of Indian Financial &

Banking Sector Reforms after 1991.

To make this write-up more explanatory, I prefix the scenario as Phase I, Phase II and

Phase III.

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Phase I

The General Bank of India was set up in the year 1786. Next came Bank of Hindustan

and Bengal Bank. The East India Company established Bank of Bengal (1809), Bank

of Bombay (1840) and Bank of Madras (1843) as independent units and called it

Presidency Banks. These three banks were amalgamated in 1920 and Imperial Bank

of India was established which started as private shareholders banks, mostly

Europeans shareholders.

In 1865 Allahabad Bank was established and first time exclusively by Indians, Punjab

National Bank Ltd. was set up in 1894 with headquarters at Lahore. Between 1906

and 1913, Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian

Bank, and Bank of Mysore were set up. Reserve Bank of India came in 1935.

During the first phase the growth was very slow and banks also experienced periodic

failures between 1913 and 1948. There were approximately 1100 banks, mostly small.

To streamline the functioning and activities of commercial banks, the Government of

India came up with The Banking Companies Act, 1949 which was later changed to

Banking Regulation Act 1949 as per amending Act of 1965 (Act No. 23 of 1965).

Reserve Bank of India was vested with extensive powers for the supervision of

banking in India as the Central Banking Authority.

During those day’s public has lesser confidence in the banks. As an aftermath deposit

mobilization was slow. Abreast of it the savings bank facility provided by the Postal

department was comparatively safer. Moreover, funds were largely given to traders.

Phase II

Government took major steps in this Indian Banking Sector Reform after

independence. In 1955, it nationalized Imperial Bank of India with extensive banking

facilities on a large scale especially in rural and semi-urban areas. It formed State

Bank of India to act as the principal agent of RBI and to handle banking transactions

of the Union and State Governments all over the country.

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Seven banks forming subsidiary of State Bank of India was nationalized in 1960 on

19th July, 1969, major process of nationalization was carried out. It was the effort of

the then Prime Minister of India, Mrs. Indira Gandhi. 14 major commercial banks in

the country were nationalized.

Second phase of nationalization Indian Banking Sector Reform was carried out in

1980 with seven more banks. This step brought 80% of the banking segment in India

under Government ownership.

The following are the steps taken by the Government of India to Regulate Banking

Institutions in the Country:

1949 : Enactment of Banking Regulation Act.

1955 : Nationalisation of State Bank of India.

1959 : Nationalisation of SBI subsidiaries.

1961 : Insurance cover extended to deposits.

1969 : Nationalisation of 14 major banks.

1971 : Creation of credit guarantee corporation.

1975 : Creation of regional rural banks.

1980 : Nationalisation of seven banks with deposits over 200 crore.

After the nationalisation of banks, the branches of the public sector bank India rose to

approximately 800% in deposits and advances took a huge jump by 11,000%.

Banking in the sunshine of Government ownership gave the public implicit faith and

immense confidence about the sustainability of these institutions.

Phase III

This phase has introduced many more products and facilities in the banking sector in

its reforms measure. In 1991, under the chairmanship of M Narasimham, a committee

was set up by his name which worked for the liberalization of banking practices.

The country is flooded with foreign banks and their ATM stations. Efforts are being

put to give a satisfactory service to customers. Phone banking and net banking is

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introduced. The entire system became more convenient and swift. Time is given more

importance than money.

The financial system of India has shown a great deal of resilience. It is sheltered from

any crisis triggered by any external macroeconomics shock as other East Asian

Countries suffered. This is all due to a flexible exchange rate regime, the foreign

reserves are high, the capital account is not yet fully convertible, and banks and their

customers have limited foreign exchange exposure.

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DEVELOPMENTS IN BANKING SECTOR

During the year 2003-04, the banking sector witnessed strong growth in deposits and

advances. The aggregate deposits of scheduled commercial banks (SCBs) grew by

17.5 per cent compared to 13.4 per cent in 2002-03. Credit and investments by SCBs

increased by 15.3 per cent and 25.1 per cent, respectively in 2003-04 compared to

16.1 per cent and 23.3 per cent respectively in 2002-03. These developments coupled

with a decline in gross NPAs enabled SCBs to improve their financial performance,

despite a lower income growth consequent upon low interest rates. Ratio of net profits

to total assets of SCBs improved marginally from 1.0 per cent to 1.1 per cent. Ratio of

operating profits to total assets improved from 2.4 per cent in 2002-03 to 2.7 per cent

in 2003-04. The total income of SCBs increased by 6.6 per cent to Rs. 1,83,767 crore

in 2003-04 as compared to an increase of 14.0 per cent in 2002-03.

Banks and consumer finance

Private banks are on an ascending trend. In 2003-04, they made huge inroads into the

over Rs 1,00,000 crore ($21.5 billion) retail business market that has so far been

dominated by PSU banks.

Banks such as ICICI Bank, HDFC Bank, UTI Bank and IDBI Bank registered

a 62 per cent growth and offered retail loans worth over Rs 11,743 crore ($2.5

billion) in FY04. On the other hand, PSU banks such as SBI, PNB, Canara

Bank, Bank of Baroda and Bank of India together posted 36 per cent growth in

personal loans at over Rs 80,813 crore ($17.4 billion).

PSU banks showed a growth figure of 50.44 per cent in the home loans

category at over Rs 40,000 crore ($8.6 billion), but private banks surged ahead

of them with 58 per cent growth at Rs 3,437 crore ($742 million).

In consumer durable loans, private banks listed a marginal growth of 7.72 per

cent at Rs 291 crore ($62.8 million) during the year, while PSU banks

recorded nearly a 15 per cent drop in credit at Rs 1,838 crore ($396.8 million).

Private Banks grew significantly in the rest of the personal loan category at 67

per cent (Rs 8,015 crore or $1.7 billion), while PSU banks witnessed 26.84 per

cent (Rs 4,801.55 crore or $1 billion) in 2003.

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An annual survey of India's best banks places a local concern, Mumbai-based HDFC

Bank, as the country's No. 1 pick in the large-bank category. But other names on the

list will no doubt be familiar to U.S. investors -- especially a number of global players

that Standard & Poor's considers attractive.

HSBC Holdings (HBC; S&P investment rank 3 STARS, hold)) moved to No. 2

among the large banks, from No. 7 a year earlier. Citigroup (C; 5 STARS, strong

buy), a multinational with scale and size but limited exposure to India, dropped to the

sixth slot, from its No. 2 showing a year earlier.

"India is a bastion of growth where financial-services firms are looking to leverage

and allocate capital," says U.S.-based S&P equity analyst Mark Hebeka, noting he

expects expansion in dynamic emerging markets in general in 2006 and beyond. "We

view the larger firms as having an advantage due to their ability to invest more capital

and sustain longer periods of building," Hebeka explains. "We view their diverse

product offerings and the many relationships that most currently have as competitive

advantages as well."

Hebeka views the rapid development of businesses in India as offering strong

potential for commercial lending, as well as a large retail base with growing wealth

and buying power. Some banks can't expand fast enough. JPMorgan, which admitted

it was strapped for human resources in India, said it plans to expand in India by hiring

4,500 employees on the subcontinent over the next two years.

Half of India's population of roughly 1.2 billion is under the age of 25. So for at least

the next 20 years, India will have a growing population of people in their prime

working years -- unlike emerging-market rival, China, which has a rapidly aging

population. Many businesses appear likely to benefit from the boom, including

financial services. There were close to 300 foreign, public-sector, and regional banks

-- up from about 60 in 1997 -- doing business in India last year. Not surprisingly, it

was a year in which total bank loans alone grew about 30%, and consumer lending

grew 8%.

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India's low interest-rate environment is spurring a borrowing boom among the nation's

consumers. As a result, Indians are buying homes, cars, and other products at rates

never before seen on the subcontinent. India, which bills itself as the world's fastest-

growing democracy, has a growing consumer base -- the latest estimates place its

middle class between 250 million and 300 million strong. That's an eye-catching

number for growth-minded global banks.

There's still room for Indian consumers to increase their debt load, according to a

2004 report by Merrill Lynch . Indian household debt was a mere 4% of gross

domestic product -- the lowest among a group of south Asian countries including

South Korea and Taiwan, each of which reported household debt exceeding 60% of

GDP, and Malaysia and Thailand, with 25% each.

What's evident is that India, along with China and the rest of South Asia, is one of the

fastest-growing consumer bases for credit-, debit-, and cash-card services from Visa,

MasterCard, and American Express (AXP; 3 STARS). The $150 billion credit-card

market in Asia is projected by Boston Consulting Group to grow at about 15% to 20%

yearly for the next three years.

Private Banking boom: However, the size of the Indian credit-card market is

estimated to be about $4 billion and growing at 35% yearly, according to GE Money,

which was formed when GE Capital, the finance arm of conglomerate General

Electric (GE; 3 STARS) partnered in 1998 with State Bank of India, provider of a

quarter of all loans in India. GE Money states that it has experienced double-digit

growth since then. In January, the company reached a big milestone, signing its 2-

millionth cardholder.

GE's goal is to have $10 billion in consumer-finance assets on the Asian subcontinent

by 2010. In August, 2005, Vishal Pandit, the head of GE Money, claimed to have the

equivalent of $1.3 billion in Indian consumer-finance assets. He said he also plans to

make acquisitions to increase growth after 2009, when foreign-investment rules for

banking investment are scheduled to be relaxed.

India is the second-largest new-growth market for private banking -- after China -- in

terms of the number of wealthy households

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MAJOR PLAYERS

STANDARD CHARTERED BANK

Standard Chartered Bank in India is the largest international banking Group in India.

The Combined Balance Sheet (as at March 31, 2001) of SCB India is Rs. 24515.9 cr.

The key businesses of Standard Chartered Bank in India include consumer banking -

primarily credit cards, mortgages, personal loans and wealth management - and -

wholesale banking, where the Bank specializes in the provision of cash management,

trade, finance, treasury and custody services.

BANK OF INDIA

Bank of India, founded on 7th September in the year 1906 was nationalized along

with 13 other banks in July 1969. Then its paid-up capital was Rs.50 lakh with only

50 employees and the only office in Mumbai.

Today Bank of India has been spread with 2594 branches including 93 specialized

branches controlled by 48 Zonal Offices.

Bank of India was the first fully computerized branch among the nationalized banks

with ATM facility at the Mahalaxmi Branch, Mumbai is the year 1989.

It is an association that has blossomed into a joint venture with BSE, called the BOI

Shareholding Ltd. to extend depository services to the stock broking community.

CANARA BANK IN INDIA

Canara Bank in India has a history of nine decades and is the largest public sector

banks in India. Canara Bank India has a deposit advance base of Rs.640 bn and Rs

332 bn (figure in the year 2002).

Canara Bank of India has a total of 47,843 employees and is spread with 2409

branches throughout the country. Canara Bank India has an exposure to petroleum,

engineering, infrastructure, factoring, investment management, venture capital, home

finance and securities.

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CENTRAL BANK

Central Bank of India (CBI) was established in 1911. This was the first Indian

commercial bank to be wholly owned and managed by Indians. The establishment of

the Central Bank of India was the ultimate realization of the dream of Sir Koradji

Pochkhanawala, founder of the Bank. Sir Pherozesha Mehta was the first Chairman of

a truly 'Swadeshi Bank'.

Among the Public Sector Banks, Central Bank of India can be truly described as an

All India Bank, due to distribution of its large network in 27 out of 28 States as also in

4 out of 7 Union Territories in India. Central Bank of India holds a very prominent

place among the Public Sector Banks on account of its network of 3146 branches and

275 extension counters at various centers throughout the length and breadth of the

country.

In view of its large network of branches as also number of savings and other

innovative services offered, the total customer base of the Bank at over 25 million

account holders is one of the largest in the banking industry.

ALLAHABAD BANK

Allahabad Bank is the oldest public sector bank in India with branches all over India.

Allahabad Bank India was established in the year 1865. Apart from serving to

domestic customers, Allahabad Bank NRI section also provides a wide range of

attractive Deposit Schemes to Non-Resident Indians.

Allahabad Bank has more than 1800 branches all over the country. In Uttar Pradesh

alone Allahabad Bank has approximately 600 branches and approximately 500 in

West Bengal. Allahabad Bank also has 7 days banking branches. They are as under:

UTI BANK

UTI Bank India, the first bank to begin operations as new private banks in 1994 after

the Government of India allowed new private banks to be established. UTI Bank was

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jointly promoted by the Administrator of the specified undertaking of the Unit Trust

of India (UTI-I), Life Insurance Corporation of India (LIC) and General Insurance

Corporation Ltd. Also with associates viz. National Insurance Company Ltd., The

New India Assurance Company, The Oriental Insurance Corporation and United

Insurance Company Ltd.

AMERICAN EXPRESS BANK

American Express India was established in 1921 providing high quality travel and

financial services. American Express in India is the largest company to have wide

network of travel locations in the country.

American Express Card division also tops upon other credit card issuer. American

Express Credit Cards in India is of basic two varieties, namely International Gold

Amex Card and International Green Amx Card.

CITIBANK

Citibank India is since 1902. Citibank India was the first bank to lend actively to

individuals. Citibank is the largest Consumer Finance lender in the world.

With Citibank online banking one can enjoy the following services from anywhere in

the world. For Citibank online banking one has to log on to www.citibank.co.in

Redeem your rewards points

Pay Bills Online

Send Demand Draft anywhere in India

Get statements by e-mail

Register for Instant alerts

Mobile Banking

Citibank online Security Tips

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CORPORATION BANK

Since 1906, Corporation Bank in India is dedicated to give vast, varied and versatile

services to the nation with a comfort and zeal stealing the common say in the Banking

Sector, "The Bank of Pride". Close to hit the mark '100 years at your service',

Corporation Bank India has regularly tried to keep a personal touch with customers.

Corporation Bank India is one of the well-run Public Sector Bank in India. The key

factor of the success of Corporation Bank India is its young and dynamic manpower

which gives service with efficiency and dedication. Even in this era of technology and

stiff competition, Corp Bank is rapidly growing confidence among its clients.

HSBC BANK

HSBC Bank is the largest bank in Hong Kong and second largest group in the world

after Citicorp. Before moving its headquarter to London in 1990, it was headquartered

in Hong Kong. HSBC India is having branches in Ahmedabad, Bangalore, Chennai,

Chandigarh, Coimbatore, Gurgaon, Hyderabad, Jaipur, Kochi, Kolkata, Ludhiana,

Mumbai, New Delhi, Noida, Pune, Thane, Trivandrum and Visakhapatnam.

HSBC NRI centres are located in Asia-Pacific, the Middle East, Europe and North

America. HSBC NRI centre provide full range of personal and private banking

products in India and overseas. HSBC Internet banking adds to the services of HSBC

India abroad.

HSBC India, along with HSBC Investment product and HSBC Insurance, it offers

international Gold Card and Classic Credit Cards from VISA and MasterCard and

debit cards from Visa. HSBC in India gives 24 hour banking services, extensive

network of ATMs, integrated Call Centre and also HSBC e-banking.

ICICI BANK

ICICI Limited, was established in 1955 by the World Bank, the Government of India

and the Indian Industry, for the promotion of industrial development in India by

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giving project and corporate finance to the industries in India.

ICICI Bank has grown from a development bank to a financial conglomerate and has

become one of the largest public financial institutions in India. ICICI Bank has

financed all the major sectors of the economy, covering 6,848 companies and 16,851

projects. As of March 31, 2000, ICICI had disbursed a total of Rs. 1,13,070 crores,

since inception.

INDIANOVERSEAS BANK

Indian Overseas Bank (IOB) is a one of the major bank based in Chennai, with over

1,400 domestic branches and 6 branches abroad.

India Overseas Bank was established in 1937 to encourage overseas banking and

foreign exchange operations. The Indian Overseas Bank started simultaneously with

three branches. They are:

Indian Overseas Bank Chennai

Indian Overseas Bank Rangoon

Indian Overseas Bank Singapore

Oriental Bank of Commerce India was established in the year 1943 on 19th February

in Lahore. After partition, Oriental Bank of Commerce shifted its Registered Office

from Lahore to Amritsar paying every rupee to its departing customers.

ORIENTAL BANK OF COMMERCE

Oriental Bank of Commerce was nationalised on 15th April in 1980. Then OBC bank

had 307 branches with Rs. 282.61 crores as deposits and as advance Rs. 152.69. The

National Institute of Bank Management (NIBM), rated OBC Bank as "Customer

Friendly" Bank.

Punjab National Bank with 4497 offices and the largest nationalised bank is serving

its 3.5 crore customers with the following wide variety of banking services:

Corporate banking

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Personal banking

Industrial finance

Agricultural finance

Financing of trade

International banking

PUNJAB NATIONAL BANK

Punjab National Bank has been ranked 38th amongst top 500 companies by The

Economic Times. PNB has earned 9th position among top 50 trusted brands in India.

Punjab National Bank India maintains relationship with more than 200 leading

international banks world wide. PNB India has Rupee Drawing Arrangements with 15

exchange companies in UAE and 1 in Singapore.

STATE BANK OF INDIA

State Bank of India (SBI) was nationalised in July 1955 under the SBI Act of 1955.

Seven banks of SBI formed subsidiary and was nationalised on 19th July, 1960.

The State Bank of India is India's largest commercial bank and is ranked one of the

top five banks worldwide. It serves 90 million customers through a network of 9,000

branches and it offers -- either directly or through subsidiaries -- a wide range of

banking services.

IDBI BANK

Industrial Development Bank of India (IDBI) is the tength largest bank in the world in

terms of development. The National Stock Exchange (NSE), The National Securities

Depository Services Ltd. (NSDL), Stock Holding Corporation of India (SHCIL) are

some of the institutions which has been built by IDBI. IDBI is a strategic investor in a

plethora of institutions which have revolutionized the Indian Financial Markets.

IDBI Bank, promoted by IDBI Group started in November 1995 with a branch at

Indore with an equity capital base of Rs. 1000 million.

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ANDHRA BANK

Andhra Bank was founded by Dr.Bhogaraju Pattabhi Sitaramayya. The Bank was

registered on 20th November 1923 and commenced business on 28th November 1923

with a paid up capital of Rs 1.00 lakh and an authorised capital of Rs 10.00 lakhs.

The Bank has entered into ATM sharing arrangements with IDBI, UTI Bank, SBI,

Indian Bank, HDFC Bank, thus offering over 9,000 ATMs spread across the country

for use by Customers. Instant Funds Transfer Facility is provided through 566

Branches.

UNITED BANK OF INDIA

Headquartered in Calcutta, United Bank of India continues to grow from strength to

strength, adding not only to profits but also to Capacities to undertake new business.

Total business increased by 19.3% from Rs 31,179 crore to Rs 37,187 crore.

INDUSTRY ANALYSIS

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Currently 2005 ,overall banking in India is considered as 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. Even in terms of quality of assets

and capital adequacy, Indian banks are considered to have clean, strong and

transparent balance sheets-as compared 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-without any stated exchange rate-and this has mostly been true.

With the growth in the Indian economy expected to be strong for quite some time-

especially in its services sector, the demand for banking services-especially retail

banking, mortgages and investment services are expected to be strong. M&As,

takeovers, asset sales and much more action (as it is unravelling in China) will happen

on this front in India.

Recently (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.

RESERVE BANK OF INDIA

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ESTABLISHMENT

The Reserve Bank of India was established on April 1, 1935 in accordance with the

provisions of the Reserve Bank of India Act, 1934.

The Central Office of the Reserve Bank has been in Mumbai since inception. The

Central Office is where the Governor sits and is where policies are formulated.

Though originally privately owned, since nationalisation in 1949, the Reserve Bank is

fully owned by the Government of India.

MAIN FUNCTIONS

Monetary Authority:

Formulates, implements and monitors the monetary policy.

Objective: maintaining price stability and ensuring adequate flow of credit to

productive sectors.

Regulator and supervisor of the financial system:

Prescribes broad parameters of banking operations within which the country's

banking and financial system functions.

Objective: maintain public confidence in the system, protect depositors'

interest and provide cost-effective banking services to the public.

Manager of Foreign Exchange

Manages the Foreign Exchange Management Act, 1999.

Objective: to facilitate external trade and payment and promote orderly

development and maintenance of foreign exchange market in India.

Issuer of currency:

Issues and exchanges or destroys currency and coins not fit for circulation.

Objective: to give the public adequate quantity of supplies of currency notes

and coins and in good quality.

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Developmental role

Performs a wide range of promotional functions to support national objectives.

Related Functions

Banker to the Government: performs merchant banking function for the

central and the state governments; also acts as their banker.

Banker to banks: maintains banking accounts of all scheduled banks.

COMPANY OVERVIEW

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HISTORY

The Housing Development Finance Corporation Limited (HDFC) was amongst the

first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set

up a bank in the private sector, as part of the RBI's liberalization of the Indian

Banking Industry in 1994. The bank was incorporated in August 1994 in the name of

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

commenced operations as a Scheduled Commercial Bank in January 1995.

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

record in India as well as in international markets. Since its inception in 1977, the

Corporation has maintained a consistent and healthy growth in its operations to

remain the market leader in mortgages. Its outstanding loan portfolio covers well over

a million dwelling units. HDFC has developed significant expertise in retail mortgage

loans to different market segments and also has a large corporate client base for its

housing related credit facilities. With its experience in the financial markets, a strong

market reputation, large shareholder base and unique consumer franchise, HDFC was

ideally positioned to promote a bank in the Indian environment.

CAPITAL STRUCTURE

The authorized capital of HDFC Bank is Rs.450 core (Rs.4.5 billion). The paid-up

capital is Rs.311.9 crore (Rs.3.1 billion). The HDFC Group holds 22.1% of the bank's

equity and about 19.4% of the equity is held by the ADS Depository (in respect of the

bank's American Depository Shares (ADS) Issue). Roughly 31.3% of the equity is

held by Foreign Institutional Investors (FIIs) and the bank has about 190,000

shareholders. The shares are listed on the The Stock Exchange, Mumbai and the

National Stock Exchange. The bank's American Depository Shares are listed on the

New York Stock Exchange (NYSE) under the symbol "HDB".

DISTRIBUTION NETWORK

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

network of over 531 branches spread over 228 cities across India. All branches are

linked on an online real-time basis. Customers in over 120 locations are also serviced

through Telephone Banking. The Bank's expansion plans take into account the need to

have a presence in all major industrial and commercial centres where its corporate

customers are located as well as the need to build a strong retail customer base for

both deposits and loan products. Being a clearing/settlement bank to various leading

stock exchanges, the Bank has branches in the centres where the NSE/BSE have a

strong and active member base.

The Bank also has a network of about over 1054 networked ATMs across these cities.

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

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

Express Credit/Charge cardholders.

MANAGEMENT

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

Capoor was a Deputy Governor of the Reserve Bank of India.

The Managing Director, Mr. Aditya Puri, has been a professional banker for over 25

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

Malaysia.

The Bank's Board of Directors is composed of eminent individuals with a wealth of

experience in public policy, administration, industry and commercial banking. Senior

executives representing HDFC are also on the Board.

Senior banking professionals with substantial experience in India and abroad head

various businesses and functions and report to the Managing Director. Given the

professional expertise of the management team and the overall focus on recruiting and

retaining the best talent in the industry, the bank believes that its people are a

significant competitive strength.

BUSINESSES

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HDFC Bank offers a wide range of commercial and transactional banking services

and treasury products to wholesale and retail customers. The bank has three key

business segments:

Wholesale Banking Services

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

the Indian corporate to small & mid-sized corporates and agri-based businesses. For

these customers, the Bank provides a wide range of commercial and transactional

banking services, including working capital finance, trade services, transactional

services, cash management, etc. The bank is also a leading provider of structured

solutions, which combine cash management services with vendor and distributor

finance for facilitating superior supply chain management for its corporate customers.

Based on its superior product delivery / service levels and strong customer

orientation, the Bank has made significant inroads into the banking consortia of a

number of leading Indian corporates including multinationals, companies from the

domestic business houses and prime public sector companies. It is recognised as a

leading provider of cash management and transactional banking solutions to corporate

customers, mutual funds, stock exchange members and banks.

Retail Banking Services

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

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

for all his/her banking requirements. The products are backed by world-class service

and delivered to the customers through the growing branch network, as well as

through alternative delivery channels like ATMs, Phone Banking, NetBanking and

Mobile Banking.

The HDFC Bank Preferred program for high net worth individuals, the HDFC Bank

Plus and the Investment Advisory Services programs have been designed keeping in

mind needs of customers who seek distinct financial solutions, information and advice

on various investment avenues. The Bank also has a wide array of retail loan products

including Auto Loans, Loans against marketable securities, Personal Loans and Loans

for Two-wheelers. It is also a leading provider of Depository Participant (DP) services

- 21 -

for retail customers, providing customers the facility to hold their investments in

electronic form.

HDFC Bank was the first bank in India to launch an International Debit Card in

association with VISA (VISA Electron) and issues the MasterCard Maestro debit card

as well. The Bank launched its credit card business in late 2001. By September 30,

2005, the bank had a total card base (debit and credit cards) of 5.2 million cards. The

Bank is also one of the leading players in the "merchant acquiring" business with over

50,000 Point-of-sale (POS) terminals for debit / credit cards acceptance at merchant

establishments.

Treasury

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

Derivatives, Local Currency Money Market & Debt Securities, and Equities. With the

liberalization of the financial markets in India, corporates need more sophisticated

risk management information, advice and product structures. These and fine pricing

on various treasury products are provided through the bank's Treasury team. To

comply with statutory reserve requirements, the bank is required to hold 25% of its

deposits in government securities. The Treasury business is responsible for managing

the returns and market risk on this investment portfolio.

CREDIT RATING

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

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

Bank's Fixed Deposit programme has been rated 'CARE AAA (FD)' [Triple A] by

CARE, which represents instruments considered to be "of the best quality, carrying

negligible investment risk". CARE has also rated the Bank's Certificate of Deposit

(CD) programme "PR 1+" which represents "superior capacity for repayment of short

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

Inc.) has assigned the "tAAA (ind)" rating to the Bank's deposit programme, with the

outlook on the rating as "stable". This rating indicates "highest credit quality" where

"protection factors are very high". HDFC Bank also has its long term unsecured,

subordinated (Tier II) Bonds of Rs.4 billion rated by CARE and Fitch Ratings India

- 22 -

Private Limited. CARE has assigned the rating of "CARE AAA" for the Tier II Bonds

while Fitch Ratings India Pvt. Ltd. has assigned the rating "AAA(ind)" with the

outlook on the rating as "stable". In each of the cases referred to above, the ratings

awarded were the highest assigned by the rating agency for those instruments.

Corporate Governance Rating

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

Governance and Value Creation (GVC) rating by the rating agency, The Credit Rating

Information Services of India Limited (CRISIL). The rating provides an independent

assessment of an entity's current performance and an expectation on its "balanced

value creation and corporate governance practices" in future. The bank has been

assigned a 'CRISIL GVC Level 1' rating which indicates that the bank's capability

with respect to wealth creation for all its stakeholders while adopting sound corporate

governance practices is the highest.

AWARDS

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

Indian Bank". We realised that only a single-minded focus on product quality and

service excellence would help us get there. Today, we are proud to say that we are

well on our way towards that goal.

It is extremely gratifying that our efforts towards providing customer convenience

have been appreciated both nationally and internationally.

2005

Asia money Awards

“Best Domestic Commercial Bank”

Asia money Awards

“Best Cash Management Bank - India .”

The Asian Banker Excellence

“Retail Banking Risk Management Award in India for 2004”

- 23 -

Hong Kong-based Finance Asia magazine

“Best Bank – India”

The Asian Banker Excellence

“Retail Banking Risk Management Award for 2004”

Hong Kong-based Finance Asia magazine

"Best Bank in India"

Asia money Awards

“Best Domestic Commercial Bank Best Cash Management Bank - India.”

Economic Times Awards

"Company of the Year" Award for Corporate Excellence 2004-05.

Asia money also named the bank:s

Best Local Cash Management Bank in India 2004 - US$11-100m

Best Local Cash Management Bank in India 2004 - >US$501m

Best Local Cash Management Bank in India 1989-2004 (poll of polls)

Best Overall Domestic Trade Finance Services in India 2004

Most Improved Company for Best Management Practices in India 2004

The Business Today-KPMG Survey published in the leading Indian business

magazine Business Today has named HDFC Bank "Best Bank in India" for the third

consecutive year in 2005.

The Asset magazine named HDFC Bank "Best Cash Management Bank" and "Best

Trade Finance Bank" in India, in 2006.

HDFC Bank named the "Most Customer Responsive Company - Banking and

Financial Services in The Economic Times - Avaya Global Connect Customer

Responsiveness Awards 2005"

HDFC Bank has been named Best Domestic Bank in India in The Asset Triple A

Country Awards 2005.

HDFC Bank has been named Best Domestic Bank in India Region in The Asset Triple

A Country Awards 2004 and 2003.

- 24 -

In 2004, HDFC Bank was selected by Business World as "One of India's Most

Respected Companies" as part of The Business World Most Respected Company

Awards 2004.

In 2004, Forbes Global again named us in its listing of Best Under a Billion, 100 Best

Smaller Size Enterprises in Asia/Pacific and Europe, in its November 1, 2004 issue.

In 2004, HDFC Bank won the award for "Operational Excellence in Retail Financial

Services" - India as part of the Asian Banker Awards 2003.

In 2003, Forbes Global named us in its ranking of "Best Under a Billion, 200 Best

Small Companies for 2003".

Leading business newspaper The Financial Express named HDFC Bank the "Best

New Private Sector Bank 2003" in the FE-Ernst & Young Best Banks Survey 2003.

Leading Personal Finance Magazine in India Outlook Money named HDFC Bank the

"Best Bank in the Private Sector" for the year 2003.

Leading Indian business magazine Business Today in a survey rated us "Best Bank in

India" 2003, and "Best Private Sector Bank" in India in 1999.

NASSCOM and economictimes.com have named us the 'Best IT User in Banking' at

the IT Users Awards 2003.

CORPORATE GOVERNANCE

HDFC Bank recognizes the importance of good corporate governance, which is

generally accepted as a key factor in attaining fairness for all stakeholders and

achieving organizational efficiency. This Corporate Governance Policy, therefore, is

established to provide a direction and framework for managing and monitoring the

bank in accordance with the principles of good corporate governance.

The bank believes in adopting and adhering to the most superior corporate governance

practices and continuously benchmarking itself against each such practice in the

industry. The bank understands and respects its fiduciary role and responsibility to

shareholders and continually strives to fulfill their expectations. We strongly believe

- 25 -

that the best board practices, transparent disclosures and shareholder empowerment

are necessary for creating shareholder value.

The bank has infused the philosophy of corporate governance in all its activities. The

philosophy on corporate governance is an important tool for shareholder protection

and maximization of their long term values. The cardinal principles such as

independence, accountability, responsibility, transparency, fair and timely disclosures,

credibility etc. serve as the means for implementing the philosophy of corporate

governance in letter and in spirit.

BUSINESS UPDATE

As of December 31, 2005, the Bank’s distribution network was at 535 branches and

1326 ATMs in 228 cities from 425 branches and 1069 ATMs in 195 cities as of

December 31, 2004. As of December 2005, the number of debit cards issued by the

bank touched 3.7 million while credit cards issued crossed the 2 million mark.

Portfolio quality as of December 31, 2005 remained healthy with net non-performing

assets at 0.4% of net advances as against 0.3% of net advances as of December 31,

2004. In September 2005, the Bank had filed a shelf registration for raising long-term,

unsecured, subordinated bonds qualifying as Tier II capital upto Rs.1000 crores and

had got a AAA rating for such bonds. During the quarter ended December 31, 2005,

the Bank raised Rs. 414 crores as Tier II capital in the form of such subordinated

bonds having a maturity of around 9.5 years and at an interest rate of 7.5% per

annum. As a result, the Bank’s Capital Adequacy Ratio (CAR) was at 10.3% as of

December 31, 2005.

PRODUCTS

Some of the important products of the HDFC Bank are:

- 26 -

SAVINGS ACCOUNTS

These Accounts are primarily meant to inculcate a sense of saving for the future,

accumulating funds over a period of time. Whatever your occupation, we are

confident that you will find the perfect banking solution. Open an account in your

name or register for one jointly with a family member today.

CURRENT ACCOUNTS

Now, with an HDFC Bank Current Account, experience the freedom of multi-city

banking! You can have the power of multi-location access to your account from any

of our 500 branches in 220 cities. Not only that, you can do most of your banking

transactions from the comfort of your office or home without stepping out.

We make it our business, to help you with your business, by offering you a Current

Account with all the benefits you need, to stay ahead of your competition.

At HDFC Bank, we understand that running a business requires time and money, also

that your business needs are constantly evolving. That's where we come in. We

provide you with a choice of Current Account options to exclusively suit your

business - whatever the size or scope.

Open an HDFC Bank Current Account & control your business operations centrally.

 

Choose the product most suitable for you:

Download a Product comparison document (Excel format)

FIXED DEPOSITS

- 27 -

Long-term investments form the chunk of everybody’s future plans. An alternative to

simply applying for loans, fixed deposits allow you to borrow from your own funds

for a limited period, thus fulfilling your needs as well as keeping your savings secure.

DEMAT

The perfect complement to your equity investments, our Demat account comes with

Zero account opening fees and low maintenance costs.

As per the finance (No 2) Act 2004, all fees & charges mentioned in the Tarriffs,

Charges or Fees Brochures will attract Service Tax @10% & Education Cess @2% of

the service tax amount effective 10th September 2004. The same will appear as

separate debits in the statements.

 PERSONAL LOANS  

Borrow up to Rs 10,00,000 for any purpose depending on your requirements.

Flexible Repayment options, ranging from 12 to 48 months.

Repay with easy EMIs.

One of the lowest interest rates.

Hassle free loans - No guarantor/security/collateral required.

Speedy loan approval.

Convenience of service at your doorstep.

Customer privileges

If you are an HDFC Bank account holder, we have special rates for you.

If you are an existing Auto Loan customer with a clear repayment of 12 months or

more from any of our approved financiers or us, you can get a hassle free personal

loan (without income documentation).

If you are an existing HDFC Bank Personal Loan customer with a clear repayment

of 12 months or more, we can Top-Up your personal loan.

- 28 -

 

HOME LOANS

a. Home Loan - We offer home loans for individuals to purchase (fresh / resale)

or construct houses. Home loans can be applied for jointly. HDFC finances up

to 90% of the cost of the property (Agreement value + Stamp duty +

Registration charges).

b. Home Improvement Loan - HIL facilitates internal and external repairs and

other structural improvements like painting, waterproofing, plumbing and

electric works, tiling and flooring, grills and aluminium windows. HDFC

finances up to 85% of the cost of renovation (100% for existing

customers).

c. Home Extension Loan - HEL facilitates the extension of an existing dwelling

unit. All the terms are the same as applicable to Home Loan.

d. Land Purchase Loan - Be it land for a dream house, or just an investment for

the future, HDFC Land Purchase Loan is a convenient loan facility to

purchase land. HDFC finances up to 70% of the cost of the land (Conditions

Apply). Repayment of the loan can be done over a maximum period of 10

years.

e. Choose from Fixed Rate or Floating Rate with options to structure your

loan as Partly Fixed or Partly Floating.

f. Flexible repayment options to suit your individual needs.

g. E-age saving account - As a special offer you can open an HDFC Bank E-

Age Savings Account at a lower Average Quarterly Balance of Rs. 2,500,

instead of the regular Rs. 5,000. You can avail of benefits like free Phone

Banking, Free Net Banking, 24-Hour ATM access, Inter-branch/Inter-city

banking, a personalized cheque book and much more.

- 29 -

h. Free International credit card - Enjoy a waiver on the fees for the first year

on International Credit Card from HDFC Bank. The credit card is accepted

world-wide and comes with the most comprehensive insurance coverage. You

can even withdraw 30% of your entire credit limit through the ATM.

i. Automated Repayment of Home loan EMI - You can give us standing

instructions to repay your Home Loan EMIs directly from your HDFC Bank

Savings Account, thus, saving you the trouble of procuring, signing and

tracking post-dated cheques.

j. Customer privileges - If you are an existing HDFC Bank Home Loan

customer, you can avail of other loans (such as Personal Loans, Car Loans,

Two-wheeler Loans and Loan against securities) at lower interest rates.

  Apply Now

CAR LOANS

Covers the widest range of cars and multi-utility vehicles in India.

Borrow up to 90% of the car's invoice value.

Flexible repayment options, ranging from 12 to 84 months.

Borrow up to 3 times your annual salary (for salaried professionals) and 6

times your annual income (for self employed professionals)*.

Speedy processing - within 48 hours.

Repay with easy EMIs.

Attractive car loan plans - To Fastrack your loan, just choose the plan that

is right for you.

Among the lowest interest rates.

Hassle-free documentation.

Prepayment option - prepay the loan anytime after 6 months at a small

charge.

Customer Privileges

If you are an HDFC Bank account holder, we have special rates for you.

- 30 -

If you have had a Preferred Account or a Corporate Salary Account with

HDFC Bank for more than six months, you can get fast approvals on your

loans with minimal documentation.

If you are an existing HDFC Bank Car Loan customer with a clear

repayment of 12 months or more we can Top-Up your car loan at a reduced

interest rate.

VALUE PLUS CREDIT CARD

Cash Back Of Up to 5%

Get up to 5% of your spends as cash back to your Credit Card Statement.

Hospitals, Medical Stores and Railways 5 %

Groceries, Supermarket, Apparels and Utility Payments 250%

All other Category Spends 1.25%

Applicable on utility payments through SmartPay

Children Future Secured

The Happiness and the Well-being of your children is your most important

responsibility. HDFC Bank values your Commitment and has designed a

comprehensive insurance package of Rs1 Lakh enabling your children to continue

their education in the unfortunate event of loss of your life due to accident.

House hold Insurance

HDFC Bank Value Plus Credit Card also comes with a comprehensive House Hold

Insurance Policy that covers damage caused to household contents by fire and

burglary up to a value of Rs 1 Lakh.

Worldwide acceptance

- 31 -

The HDFC Bank International Value Plus Credit Card is accepted at over 23 million

Merchant Establishments around the world, including 110,000 Merchant

Establishments in India.

Cash Advance

Just step into any one of our ATMs or VISA Member ATMs and withdraw cash up to

30% of your credit limit at a very nominal charge (Please refer to the Schedule of

charges).

Revolving credit facility

This feature allows you to pay a minimum amount, which is 5% (subject to a

minimum amount of Rs.200) of your total bill amount or any higher amount

whichever is convenient for you. You can then carry forward the balance to a better

financial month, for which you pay a charge of 2.95% (2.75% for existing HDFC

Bank customers), per month.

Interest Free Credit Period

Free Credit Period of up to 50 days from the date of purchase (subject to the

submission of the charge by the Merchant). Subsequently, if you carry forward your

outstanding balance you just pay a nominal interest of 2.95% (2.75% for existing

HDFC Bank customers) per month.

Balance Transfer Option

If you have any other credit card and wish to transfer their balances to your HDFC

Bank International Value Plus Card, those balances will attract a nominal charge for a

period of six months from the transfer date. The outstanding amount transferred can

be up to 50% of your HDFC Bank International Value Plus Card Credit Limit.

Comprehensive Insurance

With the HDFC Bank Value Plus Credit Card comes an unmatched feeling of

security, its carefully crafted insurance package offers comprehensive coverage

against the various risks like accidental death, Hospitalization expenses due to an

accident

- 32 -

Accidental Death

In case of death in an air accident your nominated next of kin will receive a

compensation of Rs.2,00,000. And in case of death in a rail or road accident, your

nominated next of kin will receive a compensation of Rs.1,00,000.

Lost Card Liability

If you happen to lose your Card, don't panic. The first thing to do is Call us at any of

our 24-Hour Customer Call Centers and report the loss. Please make sure that you file

a Lost report for the Lost/ Stolen Card at the nearest police station and send us the

acknowledgement copy.

DEBIT CARDS

Daily Limits: Rs. 25000 at ATM's and Rs. 50000 at merchant establishments

Cash Back: For every Rs. 100 that you will spend, you will receive Re. 1 as

cash back. This cash back is valid on all purchases made through the card, at

all times of the year.

0 % petrol surcharge at select Petrol pumps* : As a Gold Card holder, no

surcharge would be levied on you at the petrol pumps.

Zero Liability of fraudulent usage on lost and stolen cards* : If it's not your

purchase you don't have to pay for it!! Your Debit Card is safer than ever!

In case you lose your Debit Card, call us on our phonebanking numbers or

visit the nearest HDFC Bank branch. Click here for more details.

Now get an Alert on your mobile phone or email for every purchase

transaction done using your Debit Card at a merchant outlet !! All you need to

do is register for Insta Alerts!

Insurance cover* : The following are included in the insurance covers:

o Death Cover by Air / Road - Sum assured Rs. 5,00,000

- 33 -

o Fire & Burglary for the items purchased under Debit Card (upto 6

months) - Sum assured Rs. 50,000

o Loss of Baggage Insurance - Sum assured Rs. 20,000

BONDS

Just as people need money, so do companies and governments. A company needs

funds to expand into new markets, while governments need money for everything

from infrastructure to social programs. The problem large organizations run into is

that they typically need far more money than the average bank can provide. The

solution is to raise money by issuing bonds (or other debt instruments) to a public

market. Thousands of investors then each lend a portion of the capital needed. A bond

is nothing more than a loan for which you are the lender. The organization that sells a

bond is known as the issuer. You can think of a bond as an IOU given by a borrower

(the issuer) to a lender (the investor).

For example, say an investor buys a bond with a face value of Rs 1,000, a coupon of

8%, and a maturity of 10 years. This means the investor receives a total of Rs 80 (Rs

1,000 * 8%) of interest per year for the next 10 years. Actually, because most bonds

pay interest semi-annually, the investor receives two payments of Rs 40 a year for 10

years. When the bond matures after a decade, the investor gets your Rs 1,000 back.

The different types of bonds include government securities, corporate bonds,

commercial paper, treasury bills, strips etc. These bonds are either fixed interest

bonds or floating rate bonds. In fixed interest bonds, the interest component remains

the same throughout the tenure of the security. Say a 10-year bond issued today bears

8% interest. Even if 5 years hence, the interest rate in the economy goes down to 5%,

this 8% bond will continue to earn the investor 8% interest. In a floating rate bond, the

interest rate varies depending on the interest rate of a security that the bond chooses to

benchmark its interest rate to.

- 34 -

MARKETING STATEGIES OF HDFC BANK

Indian banking, a conservative club with exclusive membership, was forced to open

its doors to some new members in the id-’90s. These new members—the private

banks, helped by the winds of liberalization—changed the face of banking as we

knew it, forever.

Earlier, the banking sector had just two types of players. On the one hand, there were

the foreign banks, which were choosy and decided who to accept as a customer. At

the other extreme were the public sector banks which catered to the masses but which

were seriously found wanting in terms of products and services. Then there were the

old private sector banks and co-operative banks, but they were mainly community-

oriented. A large number of middle-class customers, though a tolerant lot, were

looking for a change. This was the scenario when the new private banks stepped into

the picture in 1995, HDFC Bank being the first.

MARKET ANALYSIS

When HDFC Bank entered the scene, market shares were skewed heavily in favour of

public sector banks. They held 86.19 per cent of the deposits, with the foreign banks

holding

7.14 per cent and the old private banks holding 6.67 per cent share.

The public sector banks did not believe in pursuing customers, preferring instead to

wait for them to come to the banks. Given the width of distribution, most customers

had virtually no choice. Foreign banks, meanwhile, concentrated primarily on the

large metros and the immediate vicinity of their branches. While most foreign banks

were happy waiting for their customers to come to the branches, some American

banks had begun developing Direct Sales Agents to go to the customer’s doorstep and

solicit deposits.

- 35 -

EVOLVING INDIAN CUSTOMER

While the banking industry was in a state of flux, the customers were evolving too.

With liberalisation and the entry of international brands into the country, customer

expectations had begun to change in terms of quality and service. The media boom

and the advent of several satellite channels changed attitudes further. Indians had

begun to travel internationally either on work or for leisure and had become more

discerning. No longer were they willing to wait in long queues or tolerate

condescending behaviour. This change began to reflect itself in terms of expectations

from banks too. Players would be benchmarked against global standards, while

services would be compared to the best of other industries as well. There seemed to be

an opportunity for a bank that served customers well at a reasonable price.

CONSUMER BEHAVIOUR ANALYSIS

Research conducted amongst customers of foreign and public sector banks revealed

the following:

Customers perceived banks to be trustees of the money they had deposited with them.

However, when they dealt with public sector banks, they felt the bank staff behaved

like they were doing them a favour. On the other extreme, the foreign banks seemed

to emerge as fair-weather friends who dealt with them with clinical efficiency. Actual

consumer statements of dissatisfaction with both segments are detailed below:

Reasons for dissatisfaction with public sector banks:

I cannot stand the rush and noise. It looks like a railway platform.

Nobody cares whether a customer’s work is done or not.

The whole attitude is that of a government employee.

The whole bank is a mess with people shouting and files all over.

- 36 -

Their standard is to give cash in five minutes. It always takes 30 minutes.

They do not treat you as a customer, more like a beggar.

Reasons for dissatisfaction with foreign banks:

They suddenly raised the minimum balance and asked me to either

increase the balance or go.

The whole atmosphere is artificial.

They look for posh people.

They charge you for everything.

They talk to you nicely but you know that it is unnatural.

They are trained. Their smiles are synthetic.

Consumer perception of the HDFC Brand

The favourable image that the parent company has amongst the burgeoning middle

class, having disbursed housing loans for over two decades, also helped greatly.

Associations with HDFC

Consumers connected emotionally with the brand, as it had helped them buy

homes

While they had lent money, they treated consumers with grace, trust and

professional service

- 37 -

Influencing factors for relationships

Intensity of relationshipsHow are relationships built?

Interactions that lead to bonding

REPSTM

HDFC Bank could ride on this image

The Opportunity:

In the polarised banking scenario, with a large unfulfilled need gap, a bank that

offered the best of both worlds had a ready and waiting market.

ACQUISITION STRATEGIES

An effective Acquisition Strategy is based on acquiring profitable customers at a low

cost and is based on an effective business plan that covers a host of activities:

Customer segmentation as an Acquisition Strategy

Research revealed that there were basically two types of customers: those who were

willing to pay for service and those who weren’t. These customers lay in two buckets,

either with public sector banks or foreign banks . What was revealing was that there

were several customers who were willing to pay for service but currently banked with

public sector banks, as they had no choice. This was the market that appealed to

HDFC Bank and was consciously targeted for conversion with success. Those

customers who were unwilling to pay for service with public sector banks and those

who associated with foreign banks for the status attached to them were not targeted as

it would have been a waste of resources.

Value proposition as an Acquisition Strategy

Addressing the need gap, HDFC Bank decided to offer ‘international levels of service

at a reasonable price’. This proposition was relevant to a vast and statistically

significant middle-class market. Given the fact that this was what the market was

waiting for, it met with great success and helped make acquisition an easier task, as it

addressed consumer needs.

Pricing as an Acquisition Strategy

- 38 -

Consumers. One could choose between a foreign bank with an opening balance of Rs

10,000 and upwards or a public sector bank at Rs 500, with polarised levels of

service. HDFC Bank decided to offer international levels of service and technology at

Rs 5,000, thus suddenly growing the market as a huge chunk of public sector bank

customers who were willing to pay for service found an alternative.

Distribution as an Acquisition Strategy

It is also important to know where your most important markets are, and thus focus on

those for best results. RBI data (July 2000), for example, shows that the top 10 cities

account for 38 per cent of the all-India market in deposits. It therefore enables us to

concentrate on getting maximum market share in those markets by offering a wide

range of products and services. Once the top ten centres were covered, focus was

shifted to the next 20 cities. This focus on the top 30 cities covered 49 per cent of the

deposit market.

HDFC bank also consciously decided to have a ‘Centralised Processing Unit (CPU)’

that took care of all back-office functions and thus left branches to concentrate on

selling. This allowed the bank to set up smaller branches at a lower cost

Technology as an Acquisition Strategy

‘Harnessing enabling technology to provide convenience and

quality service through multiple channels at value for money price points’ has been

the bank’s mission from inception. To this end the bank invested in open systems and

a scalable architecture that allowed it to ramp up easily and handle the rapidly

growing volume of customers, apart from reducing costs.

Product range as an Acquisition Strategy

A complete range of products, from a basic savings account to value-added services,

loans, NRI and depository services, enables the bank to straddle the full product

- 39 -

spectrum that fulfills any financial need. Thus we provide a customer the choice to

start a relationship with several options.

Products Value-added services:

Savings Accounts Internet Banking

Current Accounts Phone Banking, Mobile Banking, ATMs

Loans cars, Personal, LAS

Demat International Debit Card

NRI Services Bill Payment through channels

Choice of Channels for servicing as an Acquisition Strategy

HDFC Bank offers multiple channels to customers to access their bank. There are

customers who prefer to deal with the bank by coming to branches...and we have 126

of them in 46 cities. There are others who prefer to bank from electronic channels like

ATMs, phone, Internet or even the mobile. This choice helps in acquiring customers

with varying behaviour patterns.

Value propositions as an Acquisition Strategy

Different segments have different needs, and to offer a value proposition that appeals

to each of these segments, the bank has launched various products. Younger, tech-

savvy customers who are comfortable with direct banking channels like ATM, mobile

phone, Internet and debit card can open a Freedom Account with just Rs. 1,000.

Those who seek the familiarity of branch banking can avail of the basic savings

account at Rs. 5,000. While High Net worth Customers (HNW) are invited by the

bank to start a relationship through the Preferred Account when their relationship size

exceeds Rs. 5 lakh.

- 40 -

People as an Acquisition Strategy

While one may talk of technology, access channels and products, one simply cannot

ignore the human element. A human face and personal relationships are still

imperative for growth. Therefore, getting the right kind of people at the right positions

becomes crucial. At HDFC Bank, we have people who understand servicing, and our

front-office staff belongs to various service sectors such as travel, hospitality, credit

cards, etc.

Data Management as an Acquisition Strategy

To enable the bank to understand the customer and consequently service him better,

we have invested huge amounts to implement a data-warehousing and data-mining

solution. This helps us analyze customer behaviour and thus develop relevant

products and services for prospects.

Cross-Selling as an Acquisition Strategy

With a wide network and multiple channel access, customers deal with the bank in

several ways. Each interaction is an opportunity to cross-sell another product. After

all, historically it has always been cheaper to sell to an existing customer than to

acquire a new one. More banks are also leveraging routine communication such as

account statements to carry marketing messages and cross-sell products while driving

down communication costs.

Micro Marketing as an Acquisition Strategy

Given the nature of the banking sector, customers always operate in a micro market

which revolves around their residence. As bank branches are spread across the city,

each branch vies for customers with competition in the vicinity. This also varies

within a city and most certainly between larger metros and smaller metros due to the

difference in competitive presence, service benchmarks and customer expectations.

Acquiring customers requires different propositions and consequently every branch

- 41 -

needs to draw up its own marketing plan. There also needs to be tight co-ordination of

all sales channels — DSAs, phone, DM, Mass media etc, for greater efficiency and

optimum results.

Alliances as an Acquisition Strategy

Several corporates focus on the same type of customer even though they may not be

competing in the same business category. For example an ISP, a car manufacturer, a

cellular services provider, or a computer seller may be targeting the same SEC A

customer. There is great merit in leveraging customer bases and making joint offers to

customer bases and acquiring them.

Internet as an Acquisition Strategy

While one may talk of various strategies and products etc. one needs to be alert to the

changes that the Internet is bringing about. It has already challenged established

paradigms, and will also force us to change our thinking. The medium obviously

affords a wide reach and it is a boon, especially in reaching out to our NRI customers.

Also, the interactivity of the medium offers an opportunity to have a one-to-one

dialogue with the customers and get their feedback instantaneously. As and when web

cams become a norm in most homes, one can also envision a virtual relationship

manager (like Anna Nova the virtual web caster).

Mergers an Acquisition Strategy

However, finally, organic growth has its limitations. Toady’s dynamic environment is

forcing organisations to grow and reap the benefits of economies of scale at speeds

hitherto unheard of. HDFC Bank set the tone for another first in the banking industry

by acquiring TimesBank and overnight grew its customer base by over 3 lakh in 38

branches. With this precedent, mergers might just become the norm for rapid growth

and customer acquisition in the banking industry.

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RESEARCH METHODOLOGY

RESEARCH OBJECTIVES

To find out how frequently does the respondent visits his/her bank.

To find out whether the respondent prefers to deal with a nationalized bank or

a private bank.

To find out how the respondents rank the banks of Rajkot city on the basis

their overall performance.

To find out with which bank they deal with and the reasons for the same.

To find out the level of satisfaction of the services provided by the banks.

To find out the most frequently used services of the banks.

To find out whether they would like to change the bank with which they

regularly deal with.

To find out the reasons because of which the respondents would change the

bank with which they deal with regularly.

HYPOTHESIS

NULL HYPOTHESIS:

HDFC BANK is not the most preferred bank of Rajkot City.And most of the

customers are not highly satisfied with the services provided by the bank.

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ALTERNATE HYPOTHESIS:

HDFC BANK is the most preferred bank of Rajkot City .And most of the customers

are highly satisfied with the services provided by the bank.

SCOPE OF THE STUDY

This research can be used to find out which is the most preferred bank

amongst private & nationalized.

This research is helpful to know the most frequently used services by the the

customers.

This research is used to find out the reasons why they would like to change

their banks.

This research would also help to find out what the respondents expect from

their bank.

The banks could use this research to rectify their pitfalls tin order to satisfy

and hold on to their customers.

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DATA COLLECTION

PRIMARY DATA:

As far as our research is concerned primary data is the main source of information. I

have collected the primary data through the use of questionnaires and some

information from the respondents.

MODE OF DATA COLLECTION:

Data was collected by face-to-face conversation with the respondents and was

recorded in the questionnaires.

SAMPLING DESIGN

SAMPLE SIZE:

The sample size taken is 50 .

SAMPLING TECHNIQUES

I have used the stratified random sampling technique.

SAMPLING UNIVERSE

I have taken Rajkot city as the sampling universe.

LIMITATIONS

LIMITATION OF TIME

The duration for conducting the survey was very limited and even the people

who were interviewed personally had a very limited time to share their views ,

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mainly because of March ending i.e. when research was conducted. So overall

information was collected in a limited time period.

LIMITATION OF SAMPLE SIZE

The sample size selected was too less as compared to the actual target

audience.So it may not be enough representative of the population to a large

extent.

LIMITATION OF MANPOWER

It is very difficult to cover this huge target audience by a single person.

LIMITATION OF RESPONDENT INDISPOSITION

Respondents might not have given correct information or might have hesitated

in giving correct information. therefore, respondent’s indisposition is a major

limitation of any research.

LIMITATION OF SKILL

Being a student, there is a lack of experience and skill of conducting a

marketing research.The expertise needed is not available to high extent at this

level.

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DATA ANALYSIS AND INTERPRRETATION

SAMPLE DISTRIBUTION

As stratified sampling has been used, 10 respondents from each occupation category has been selected.

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FREQUENCY OF USING THE BANK BY THE RESPONDENTS

Frequency Private Employees

Government Employees

Businessman Professionals Students TOTAL

Daily 0 0 5 0 0 5Weekly 1 1 3 5 4 14Fortnightly 1 3 1 2 3 10Monthly 8 6 1 3 3 21

From the data that was collected regarding the frequency of using the bank by the respondents it was found that private employees and government employees mostly use the bank on monthly basis. Most businesssman uses bank daily, most professionals and students use it weekly.

And from the data collected it can also be interpreted that most of the people uses their on monthly basis.

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TYPE OF THE BANK WITH WHICH THE RESPONDENTS WOULD LIKE TO DEAL WITH.

From the above given graph we could see that most of the respondents would like to deal with the private banks rather than the nationalized banks. There are 35 respondents out of 50 who prefers to deal with private banks.

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RANKING OF DIFFERENT BANKS OF RAJKOT CITY BY THE RESPONDENTS BASED ON THEIR OVERALL PERFORMANCE.

RANK 1 RANK 2 RANK 3HDFC 18 8 5ICICI 15 12 4KM 2 6 12CORP.BANK 2 4 5BOI 1 1 3BOB 7 9 16SBS 2 7 0CENT. BANK

0 0 1

IDBI 2 0 2PNB 0 1 2SBI 1 2 0

The respondents were asked to rank the banks on the basis of their overall performance. Above given is the data that was collected. It was found that most of the respondents ranked 1 to HDFC Bank followed by ICICI Bank with a minimal difference of just 3 votes. Most of them ranked 2 to ICICI Bank. Most of them ranked 3 to Bank of Baroda .

THE BANKS WITH WHICH MOST OF THE RESPONDENTS DEAL WITH

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From the above collected data we can say that majority of the respondents deal with HDFC Bank followed by ICICI Bank. Since the difference between the votes for 2 banks is very minimal, we can say that ICICI Bank proves to be a tuff competitor for the HDFC Bank.

THE REASONS FOR DEALING WITH A PARTICULAR BANK.

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On asking the respondents regarding the reasons for dealing with a particular bank the respondents showed the above shown results.It can be seen from the graph that private employees , businessman and professionals mostly look for services while dealing with a particular bank.whereas, it has been found that government employees and students would look for the convenient location first and then for the services. However overally we can interpret that most of the respondents gives the bank services as their prior preference for dealing with a particular bank and secondly the location of the bank.

MOST FREQUENTLY USED SERVICES OF THE BANK.

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When the respondents were asked about the MOST frequenlty used service by them form their banks we came up with the above shown graph. It shows very distinctively that maximum number of respondents use the ATM/debit card services of the bank. Secondly, few customers would mostly use liability products. However, some of the serices like phone banking, insta alert, etc are NOT MOSTLY used by the respondents.

ARE THE RESPONDENTS SATISFIED WITH THE BANKS THEY DEAL WITH?

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On inquiring about the satisfaction level of the respondents with the banks with which they deal with, we got the above results. From the graph thus formed we can interpret that the level of satisfaction by the respondents dealing with HDFC Bank is maximum as out of 16 respondents dealing with HDFC Bank 8 of them are highly satisfied whereas in IDBI Bank 2 out of 4 are highly satisfied.

WOULD THE RESPONDENTS CHANGE THE BANK WITH WHICH THEY ARE CURRENTLY DEALING?

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From the above graph we can see that out of the 50 respondents there were 33 of them who are satisfied with the banks with which they deal. But, there were 17 of them who for some or the other reason would like to change the bank with which they deal regularly.

REASONS FOR THE CHANGE OF BANK.

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From the above graph we can interpret that out of 17 respondents who would like to change their bank, maximum of them wanted to change as they were unsatisfied with the services provided by their bank.And the second reason for which they would like to change the bank is because of the inconvenient location of the bank.

SUGGESTIONS

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On the basis of the analysis of the research done they were few

recommendations for the company by the respondents.

When the respondents were asked for what reason they would change the bank

they deal with, most of them were of the opinion that they would change if :

1)They are dissatisfied with the services for that the company should fulfill the

expectations of the customers and try to lend best services.

2)Inconvenient location was another reason to consider as the customers who

are frequently visiting the bank for them it becomes difficult if the location is

not in the city area.

These were reasons for which a person can change their bank. So the bank

should try to open branches at prime locations and provide the best of the services to

have competitive advantage.

3).Most of the people use ATM services more frequently.

a).So bank should open more ATM’s at various locations for

customer’s convenience

b).People also use liability products such as savings account and fixed

deposits considering that the bank should give interest at competitive

rates to attract more people.

People should be provided with the true information for all the products of the bank

when they apply for it the false information can lead to bad reputation of the company

and the staff attitude towards the customers should be very polite and satisfying .This

is helpful to sustain in the competitive era .

CONCLUSION

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Liberalisation has really changed the banking industry. It is no longer enough for

banks to just manage money efficiently; they also have to manage customers, who

now have a wide choice of alternatives. The future promises to be even more exciting,

interesting and challenging, thanks to technology.

No longer will banks, or any large organisation, treat customers as a group and

segment them into just some demographic and psychographic profiles. The Internet

has enabled us to talk to each customer as an individual, with different needs and

requirements. Products will need to be developed to meet those needs, and services

will become the crucial diffrentiator. For years, customers were part of the banks’

Fixed Assets; now they have moved into the Current Assets category, and it will be a

task keeping them there.

From the research we can derive many useful conclusions like:

1) Most of the people deal with private sector banks.

2) Mostly the businessman visit the bank daily otherwise private employees visit

it monthly or fortnightly.

3) Most of the people use ATM morefrequently followed by liability products

and loans.

4) Most of the people deal with HDFC Bank followed by ICICI Bank and Bank

of Baroda.

5) Most of the customers of HDFC Bank IDBI Bank are highly satisfied.

6) Most of the customers deal with the bank due to the services provide to the m

and secondly due to convenient location.

 

 

BIBLIOGRAPHY

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www.google.com

www.rbi.org.in

www.rbi.org.in

www.hdfcbank.com

www.indiainfoline.com

www.indiamart.com

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