Asstes and Liab Managmnt

A project report on asset and liability management
ACKNOWLEDGEMENT
Chapter No.
Title
Pg. No. 5-13
INTRODUCTION
14-16 2 RESEARCH DESIGN OF THE STUDY
INDUSTRY PROFILE
17-27
COMPANY PROFILE
28-58
ANALYSIS AND INTERPRETATION
59-76
SUMMARY OF FINDINGS, SUGGESTIONS AND CONCLUSION
77-84
BIBLIOGRAPHY
85
ACHARYA INSTITUTE OF GRADUATE STUDIES
Page 1
LIST OF TABLES Table No. 4.1 4.2 4.3 4.4 4.5 4.6 Title Net Interest Income Net Interest Margin GAP Relative Gap Interest Sensitive Ratio Liquidity Ratio Page No 65 67 69 71 73 75
LIST OF GRAPHS Chart No 4.1 4.2 4.3 4.4 4.5 4.6 Net Interest Income Net Interest Margin GAP Relative Gap Interest Sensitive Ratio Liquidity Ratio TITLE Page No 66 68 70 72 74 76
Page 2
CHAPTER-1 INTRODUCTION 1.1 ASSET-LIABILITY MANAGEMENT (ALM): Asset-liability management (ALM) is a term whose meaning has evolved. It is used in slightly different ways in different contexts. ALM was pioneered by financial institutions, but corporations now also apply ALM techniques. Traditionally, banks and insurance companies used accrual accounting for essentially all their assets and liabilities. They would take on liabilities, such as deposits, life insurance policies or annuities. They would invest the proceeds from these liabilities in assets such as loans, bonds or real estate. All assets and liabilities were held at book value. Doing so disguised possible risks arising from how the assets and liabilities were structured. Asset Liability management is very much importance for a bank. Banks are making profit from various services provided to their customers. Banks profit is functions of revenue earned form the assets and the cost incurred for the liability that has occurred for acquiring funds for financing the assets. Proper management of bank assets and liabilities can increase the profitability of the bank. So the earnings of a bank ultimately depend on liabilities. Banks have to incur costs for its liability. For example, they have to give interest to the public and also to the lending institutions. So banks liability is not cost-free. Efficient use of liabilities depends on effective liability management. Effective liability management indicates that the cost of the liability will be less and also it will less volatile. But less cost and less volatility is inversely related. If
ACHARYA INSTITUTE OF GRADUATE STUDIES Page 3
we give our concentration only to less cost fund, then the funds will be volatile. Again if we give our attention to only to less volatility, then the cost of fund will be high because only the fixed deposit has the characteristics of less volatility. So we have to make coordination between least costs fund and least volatile fund. ALM has mainly two components. One is asset management and the other is liability management. Asset management deals with how a manager can appropriately handle the assets of the bank and efficiently use the profitable opportunities. On the other hand, liability management deals with the liability side of the balance sheet. A banks earning or spread is the difference between the revenue generated mainly from the asset side of the business and expense generated mainly from the liability side of the business. The foal of liability management is to gain control over the banks funds sources. Almost in every moment in our life we are confronted with different types of risk. Human mind is programmed to learn to manage risk. Managing risk is unique and fundamental in banking industry, because unlike other industry it is exposed to multi-dimensional that has aggravated with the advent of deregulation and globalization. No banking industry in the world is isolated from the risks, and in this project paper my efforts should concentrate on understanding and appreciating these risks specially managing asset and liability so that I can learn more how can manage them efficiently, appropriately and in a timely manner. The major risks that a bank encounters in its business are as follows: 1) Asset Liability Management Risk 2) Credit/ Lending Risk 3) Foreign Exchange Risk
Page 4
4) Internal Controls and Compliance Risk 5) Money Laundering Risk This Project paper is based on Asset Liability management of HDFC Bank. To manage the above risk effectively and to ensure sustainable performance and good governance of the banking company, the following requirements must be fulfilled: 1) An effective regulatory frame work 2) a sound operations system to support the regulatory framework. 3) A Socio ethical standard to ensure that the people engaged in the organization is committed towards their stakeholders in a meaningful way. Given the fact that an appropriate asset liability management system was required to manage risk better
1.2 ASSET LIABILITY MANAGEMENT POLICY: Asset Liability Management (ALM) is an integral part of Bank Management; and so, it is essential to have a structured and systematic process for manage the Balance Sheet. Banks must have a committee comprising of the senior management of the bank to make important decisions related to the Balance Sheet of the Bank. The committee, typically called the Asset Liability Committee (ALCO), should meet at least once every month to analysis, review and formulate strategy to manage the balance sheet. In every ALCO meeting, the key points of the discussion should be minted and the action points should be highlighted to better position the banks balance sheet. Asset Liability management is one of the pillars of banking- in fact the concept of AssetLiability management is at the core of financial business. The importance of appropriate and effective Asset Liability management has always been
outlined by regulators, market operatives and individuals and yet we hear of instances of failures in Asset Liability management mechanism-the most notable amongst them the Barings Bank and Long Term Capital Management. The Asset Liability Risk Management system essentially focuses on risks that arise out of liquidity and interest rate mismatches and management of Capital Adequacy. This aspect of risk management has become increasingly important due to volatility that arises from a deregulated market- driven environment. Here to the policy guideline, outlines all the areas that are required to be covered through preciously laid down statement on Capital Adequacy, borrowing limits commitment limits, loan deposit ratios and medium term funding ratio. The organization structure and job responsibilities are also outlined and the globally accepted ALCO or The Asset Liability Committee process is detailed. The ALCO process ensures that the management is constantly apprised of the risks arising out of liquidity and interest rate mismatch and step can be taken through this continuous monitoring of risk to manage it effectively.
1.3 ALM INFORMATION SYSTEMS: Information is the key to the ALM process. Considering the large network of branches and the lack of an adequate system to collect information required for ALM which analyses information on the basis of residual maturity and behavioural pattern it will take time for banks in the present state to get the requisite information. The problem of ALMneeds to be addressed by following an ABC approach i.e. analysing the behaviour of asset and liability products in the top branches accounting for significant business and then making rational assumptions about the
way in which assets and liabilities would behave in other branches. In respect of foreign exchange, investment portfolio and money market operations, in view of the centralized nature of the functions, it would be much easier to collect reliable information. The data and assumptions can then be refined over time as the bank management gain experience of conducting business within an ALM framework. The spread of computerization will also help banks in accessing data.
1.4 ALM PROCESS: The scope of ALM function can be described as follows: Liquidity risk management Management of market risks (Including Interest Rate Risk) Funding and capital planning Profit planning and growth projection Trading risk management
The guidelines given in this note mainly address Liquidity and Interest Rate risks. The Asset Liability Committee (ALCO) is responsible for balance sheet (asset liability) risk management. Managing the asset liability is the most important responsibility of a bank as it runs the risks for not only the bank, but also the thousands of depositors who put money into it.The responsibility of Asset liability Management is on the Treasury Department of the bank. Specifically, the Asset liability Management (ALM) desk of the Treasury Department manages the balance sheet. The results of balance sheet analysis along with recommendation is placed in the ALCO meeting by the Treasurer where important decisions are made to minimize risk and maximize returns.
1.5 ASSET LIABILITY STRUCTURE OF A BANK:
Asset Liability Management Flowchart:

OPERATION
TREASURY
ALCO MEETING
IMPLEMENT ATION & FEED BACK
FINANCE
To understand how a bank operates, first we examine the bank balance sheet, which list sits assets and liabilities. As the name implies, this list balance, that is, it has the characteristics that
Total Assets = Total Liabilities + Capital Furthermore, a banks balance sheet lists sources of banks funds (liabilities) and uses to which they are pit (assets). Banks obtain funds by borrowing and by issuing other liabilities such as deposits. They then use these funds to acquire assets such as securities and loans. The revenue that banks receive from their holdings of securities and loans covers the expenses of issuing liabilities and ideally yields a profit.
Page 8
1.6 ADMINISTRATION OF ALM: There is a separate department to manage asset and liability. The treasury department maintains asset and liability of a bank. To maintain asset and liability treasury department has a policy to follow. This policy guideline is given below:
1.7 POLICY GUIDELINES: Responsibility of the Board of Directors: The overall responsibility of establishing broad business strategy, significant policies and understanding significant risks of the bank rests with the Board of Directors. Through the establishment of Audit Committee the Board of Directors can monitor the effectiveness of internal control system. Bangladesh Bank has already instructed the banks to establish Audit Committee. The internal as well as external audit reports will be sent to the board without any intervention of the bank management and ensure that the management takes timely and necessary actions as per the
recommendations Have periodic review meetings with the senior management to discuss the effectiveness of the internal control system of the bank and ensure that the management has taken appropriate actions as per the recommendations of the auditors and internal control. ALCO & Asset Liability Management (ALM): The banks asset liability management is monitored through ALCO. The information
Flow in the ALCO can be diagrammed as below:
Corporate banking Feedback & recommendation
Feedback & recommendation
Depo-advFinancefeedback & recommendation Trend outlook key balance sheet features
Feedback& Treasury recommendation Recommend ALCO MeetingCEO Actions BS Status&
S T R A T E G Y & A C T I O N P O I N T S
Depo-adv Trend outlook Other Balance sheet features
Feedback & Recommendation Other Depts. Feedback & Recommendation Consumer Banking
An Insight into the Asset Liability Management of HDFC Bank
The Committee: As the Treasury Department is primarily responsible for Asset Liability Management, ideally the Treasurer (or the CEO) is the Chairman of the ALCO Committee. The committee consists of the following key personnel of a bank: - Chief Executive Officer / Managing Director - Head of Treasury / Central Accounts Department - Head of Finance - Head of Corporate Banking - Head of Consumer Banking - Head of Credit - Chief Operating Officer / Head of Operations
The committee calls for a meeting once every month to set and review strategies on ALM. Key Agendas: ALCO attends the following issues while managing Balance Sheet Risks: Review of actions taken in previous ALCO. Economic and Market Status and Outlook. Liquidity Risk related to the Balance Sheet. Review of the price / interest rate structure. Actions to be taken.
Page 11
Policy Recognition and Assessment: An effective internal control system continually recognizes and assesses all of the material risks that could adversely affect the achievement of the banks goals. Effective risk assessment must identify and consider both internal and external factors. Internal factors include complexity of the organization structure, the nature of the Banks activities, the quality of personnel, organization changes and also employee turnover. External factors include fluctuating economic conditions, changes in the industry, sociopolitical realities and technological advances. Risk assessment by Internal Control System differs from the business risk management process, which typically focuses more on the review of business strategies developed to maximize the risk/reward trade-off within the different areas of the bank. The risk assessment by Internal Control focuses more on compliance with regulatory requirements, social, ethical and environmental risks those affect the banking industry. Asset liability management In banking, asset and liability management (often abbreviated ALM) is the practice of managing risks that arise due to mismatches between the assets and liabilities (debts and assets) of the bank. This can also be seen in insurance. Banks face several risks such as the liquidity risk, interest rate risk, credit risk and operational risk. Asset liability management (ALM) is a strategic management tool to manage interest rate risk and
Page 12
liquidity risk faced by banks, other financial services companies and corporations. Banks manage the risks of asset liability mismatch by matching the assets and liabilities according to the maturity pattern or the matching of the duration, by hedging and by securitization. Much of the techniques for hedging stem from the delta hedging concepts introduced in the Black Scholes model and in the work of Robert C. Merton and Robert A. Jarrow. The early origins of asset and liability management date to the high interest rate periods of 1975-6 and the late 1970s and early 1980s in the United States. Van Deventer, Imai and Mesler (2004), chapter 2, outline this history in detail. Modern risk management now takes place from an integrated approach to enterprise risk management that reflects the fact that interest rate risk, credit risk, market risk, and liquidity risk are all interrelated. The JarrowTurnbull model is an example of a risk management methodology that integrates default and random interest rates. The earliest work in this regard was done by Robert C. Merton. Increasing integrated risk management is done on a full mark to market basis rather than the accounting basis that was at the heart of the first interest rate senility gap and duration calculations.
Page 13
CHAPTER- 2 RESEARCH DESIGN OF THE STUDY
2.1 RATIONALE OF THE STUDY: I am preparing this report to know the insight of the asset liability Management of a bank. Sample Bank: HDFC Bank
2.2 SCOPE OF THE STUDY: As my supervisor is very helpful and cooperative, I got some privilege to prepare this report. As one of my friends is an employee of HDFC Bank, I have special opportunity to collect important and sensitive data, which make this report different from others.
2.3 OBJECTIVE OF THE STUDY: The main objectives of preparing this Report: To identify the management of asset and liability of HDFC Bank Ltd. To analyse and find out degree of risks involved in each area. To suggest how to manage this areas risks for minimizing the risk.
2.4 NEED FOR THE STUDY: An effective Asset Liability Management Technique aims to manage the volume, mix, maturity, rate sensitivity, quality and liquidity of assets and liabilities as a whole so as to attain a predetermined acceptable
risk/reward ration. It is aimed to stabilize short-term profits, long-term earnings and long-term substance of the bank.
2.5 METHODOLOGY:
1. Sources of Data Collection: To undertake the study in the light of research objectives, information both from the primary and secondary sources are necessary. Primary data collected from the bank managers and officials. And secondary data collected through standard textbooks, reference books, domestic and foreign journals and annual reports of bank.
2. Data Analysis: The collected information has then been tabulated, analysed and the findings thereof have laid the basis of research report. Data processing and analysis has been done both manually and by using computer. Tabular method, ratio analysis, and suitable statistical tools and techniques have been used to operationally the research where required.
2.6 LIMITATIONS OF THE STUDY: There were some problems while this research is conducted. A wholehearted effort was applied to overcome the limitations and to bring a reliable and fruitful result. In spite of having the wholehearted effort, there exist some limitations, which acted as a barrier to conduct the research. The limitations were 1. The major problem faced while conducting the research was unavailability of relevant data. No banks provided the costs of their
particular liability. Even some banks did not agree to give their annual reports. 2. No banks provided the cost components of their liabilities. Thats why the cost of various liabilities is assumed on the basis of historical trend. 3. While almost care has been given to cover every part of Asset Liability Management, a few complex issues related to Market Risk have not been covered in details. 2.7 TYPE OF RESEARCH The study type is analytical, quantitative, and historical. Analytical because facts and existing information is used for analysis. Quantitative as relationship is examined by expressing variables in measurable terms and also historical information is used for analysis and interpretation.
CHAPTER SCHME
CHAPTER-1:- INTRODUCTION 1.1 ASSET-LIABILITY MANAGEMENT (ALM): 1.2 ASSET LIABILITY MANAGEMENT POLICY 1.3 ALM INFORMATION SYSTEMS: 1.4 ALM PROCESS: 1.5 ASSET LIABILITY STRUCTURE OF A BANK: 1.6 ADMINISTRATION OF ALM: 1.7 POLICY GUIDELINES: CHAPTER- 2:- RESEARCH DESIGN OF THE STUDY 2.1 RATIONALE OF THE STUDY: 2.2 SCOPE OF THE STUDY: 2.3 OBJECTIVE OF THE STUDY:
2.4 NEED FOR THE STUDY: 2.5 METHODOLOGY: 2.6 LIMITATIONS OF THE STUDY: 2.7 TYPE OF RESEARCH CHAPTER-3:- INDUSTRY PROFILE 3.1 About 3.2 HISTROY CHAPTER-4:- COMPANY PROFILE 4.1 About 4.2 History 4.3 Some of Mr. H.T. Parikhs major achievements are: 3.4 Origin of the Organization 4.5 MANAGEMENT: 4.6 RATINGS/ AWARDS: 4.7 MILESTONES IN THE HISTORY PRODUCT PROFILE CHAPTER 5:- ANALYSIS AND INTERPRETATION CHAPTER 6 FINDINGS, SUMMARY AND CONCLUSION
Page 17
CHAPTER-3 INDUSTRY PROFILE 3.1 About Banking in India in the modern sense originated in the last decades of the 18th century. The first banks were and Bank of Hindustan (17701829) and The General Bank of India, established 1786 and since defunct. The largest bank and the oldest still l in existence 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. The three banks merged in 1921 to form the Imperial Bank of India, which, upon India's independence, became the State Bank of India in 1955. For many years the presidency banks acted as quasi-central banks, as did their successors, until the Reserve Bank of India was established in 1935. In 1969 the Indian government nationalised all the major banks that it did not already own and these have remained under government ownership. They are run under a structure known as 'profit-making public sector undertaking' (PSU) and are allowed to compete and operate as commercial banks. The Indian banking sector is made up of four types of banks, as well as the PSUs and the state banks; they have been joined since 1990s by new private commercial banks and a number of foreign banks.
Banking in India was generally fairly mature in terms of supply, product range and reach-even though reach in rural India and to the poor still remains a challenge. The government has developed initiatives to address this through the State bank of India expanding its branch network and through through the National Bank for Agriculture and Rural Development with things like microfinance. 3.2 HISTROY:In ancient India there is evidence of loans from the Vedic period (beginning 1750 BC). Later during the Maurya dynasty (321 to 185 BC), an instrument called adesha was in use, which was an order on a banker desiring him to pay the money of the note to a third person, which corresponds to the definition of a bill of exchange as we understand it today. During the Buddhist period, there was considerable use of these instruments. Merchants in large towns gave letters of credit to one another. Colonial era During the colonial era merchants established the Union Bank of Calcutta in 1829, first as a private joint stock association, then partnership. Its proprietors were the owners of the earlier Commercial Bank and the Calcutta Bank, who by mutual consent created Union Bank to replace these two banks. In 1840 it established an agency at Singapore, and closed the one at Mirzapore that it had opened in the previous year. Also in 1840 the Bank revealed that it had been the subject of a fraud by the bank's accountant. Union Bank was incorporated in 1845 but failed in 1848, having been insolvent for some time and having used new money from depositors to pay its dividends.
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 honour 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 appear, particularly in Calcutta, in the 1860s. The Comptoird'Escompte de Paris opened a branch in Calcutta in 1860, and another in Bombay in 1862; branches in Madras and Pondicherry, then a French possession, 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 centre. 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 presidency banks dominated banking in India but there were also some exchange banks and a number of Indian joint stock banks. All these banks operated in different segments of the economy. The exchange banks, mostly owned by Europeans, concentrated on financing foreign trade. Indian joint stock banks were generally under capitalised and lacked the experience and maturity to compete with the presidency and exchange banks. This segmentation let Lord Curzon to observe, "In
respect of banking it seems we are behind the times. We are like some old fashioned sailing ship, divided by solid wooden bulkheads into separate and cumbersome compartments." 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". During the First World War (19141918) through the end of the Second World War (19391945), 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 warrelated economic activities. At least 94 banks in India failed between 1913 and 1918 as indicated in the following table:
Page 21
Year Number of Banks that failed 1913 1914 1915 1916 1917 1918 12 42 11 13 9 7
Authorised Capital (Rs. Lakhs) 274 710 56 231 76 209
Paid Up capital (Rs. Lakhs) 35 109 5 4 25 1
Post-Independence The partition of India in 1947 adversely impacted the economies of Punjab and West Bengal, paralysing banking activities for months. India's independence marked the end of a regime of the Laissez-faire for the Indian banking. The Government of India initiated measures to play an active role in the economic life of the nation, and the Industrial Policy Resolution adopted by the government in 1948 envisaged a mixed economy. This resulted into greater involvement of the state in different segments of the economy including banking and finance. The major steps to regulate banking included:
The Reserve Bank of India, India's central banking authority, was established in April 1935, but was nationalised on 1 January 1949 under the terms of the Reserve Bank of India (Transfer to Public Ownership) Act, 1948 (RBI, 2005b).
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"
Page 22
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.
Nationalisation in the 1960s Despite the provisions, control and regulations of Reserve Bank of India, banks in India except the State Bank of India or SBI, continued to be owned and operated by private persons. 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 nationalisation of the banking industry. Indira Gandhi, the then Prime Minister of India, expressed the intention of the Government of India in the annual conference of the All India Congress Meeting in a paper entitled "Stray thoughts on Bank Nationalisation." The meeting received the paper with enthusiasm. Thereafter, her move was swift and sudden. The Government of India issued an ordinance ('Banking Companies (Acquisition and Transfer of Undertakings) Ordinance, 1969')) and nationalised the 14 largest commercial banks with effect from the midnight of 19 July 1969. These banks contained 85 present of bank deposits in the country.Jayaprakash Narayan, a national leader of India, described the step as a "masterstroke of political sagacity." Within two weeks of the issue of the ordinance, the Parliament passed the Banking Companies (Acquisition and Transfer of Undertaking) Bill, and it received the presidential approval on 9 August 1969.
Page 23
A second dose of nationalisation of 6 more commercial banks followed in 1980. The stated reason for the nationalisation was to give the government more control of credit delivery. With the second dose of nationalisation, the Government of India 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 nationalised 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. Liberalisation in the 1990s In the early 1990s, the then NarasimhaRao government embarked on a policy of liberalisation, 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, UTI Bank (since renamed Axis Bank), ICICI Bank and HDFC Bank. This move, along with the rapid growth in the economy of India, revitalised the banking sector in India, which has seen rapid growth with strong contribution from all the three sectors of banks, namely, government banks, private banks and foreign banks. The next stage for the Indian banking has been set up with the proposed relaxation in the norms for Foreign Direct Investment, where all Foreign Investors in banks may be given voting rights which could exceed the present cap of 10%,at present it has gone up to 74% with some restrictions.
Page 24
The new policy shook the Banking sector in India completely. Bankers, till this time, were used to the 464 method (Borrow at 4%; Lend at 6%; Go home at 4) of functioning. The new wave ushered in a modern outlook and tech-savvy methods of working for traditional banks. All this led to the retail boom in India. People not just demanded more from their banks but also received more. Current period By 2010, banking in India was generally fairly mature in terms of supply, product range and reach-even though reach in rural India still remains a challenge for the private sector and foreign banks. In terms of quality of assets and capital adequacy, Indian banks are considered to have clean, strong and transparent balance sheets relative to other banks in comparable economies in its region. The Reserve Bank of India is an autonomous body, with minimal pressure from the government. The stated policy of the Bank on the Indian Rupee is to manage volatility but without any fixed exchange rate-and this has mostly been true. With the growth in the Indian economy expected to be strong for quite some timeespecially 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.
Page 25
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. Adoption of banking technology The IT revolution had a great impact in the Indian banking system. The use of computers had led to introduction of online banking in India. The use of the modern innovation and computerisation of the banking sector of India has increased many folds after the economic liberalisation of 1991 as the country's banking sector has been exposed to the world's market. The Indian banks were finding it difficult to compete with the international banks in terms of the customer service without the use of the information technology and computers. Number of branches of scheduled banks of India as of March 2005 The RBI set up a number of committees to define and coordinate banking technology. These have included:
In 1984 formed the Committee on Mechanisation in the Banking Industry (1984) whose chairman was Dr C Rangarajan, Deputy Governor, Reserve
Bank of India. The major recommendations of this committee was introducing
MICR technology in all the banks in the metropolis in India. This provided use of standardized cheque forms and encoders.
In 1988, the RBI set up the Committee on Computerisation in Banks (1988)headed by Dr. C.R. Rangarajan which emphasized
Page 26
that settlement operation must be computerized in the clearing houses of RBI in Bhubaneshwar, Guwahati, Jaipur, Patna and Thiruvananthapuram. It further stated that there should be National Clearing of inter-city cheques at Kolkata, Mumbai, Delhi, Chennai and MICR should be made Operational. It also focused on computerisation of branches and increasing connectivity among branches through computers. It also suggested modalities for implementing on-line banking. The committee submitted its reports in 1989 and computerisation began from 1993 with the settlement between IBA and bank employees' association.
In 1994, Committee on Technology Issues relating to Payment systems, Cheque Clearing and Securities Settlement in the Banking Industry (1994)[was set up under chairman Shri WS Saraf. It emphasized Electronic Funds Transfer (EFT) system, with the BANKNET communications network as its carrier. It also said that MICR clearing should be set up in all branches of all banks with more than 100 branches.
In 1995, Committee for proposing Legislation on Electronic Funds Transfer and other Electronic Payments (1995) again emphasized EFT system.
Number of ATMs of different Scheduled Commercial Banks of India as on end March 2005 Total numbers of ATMs installed in India by various banks as on end June 2012 is 99,218. The New Private Sector Banks in India is having the largest numbers of ATMs which is followed by offsite ATMs belonging to SBI and its subsidiaries and then it is followed by
Page 27
New Private Banks, Nationalised banks and Foreign banks. While on site is highest for the Nationalised banks of India. Ever since the initiation of the process of deregulation of the Indian banking systemand gradual freeing of interest rates to market forces, and consequent injection of a dose of competition among the banks, introduction of asset-liability management (ALM) in the public sector banks (PSBs) has been suggested by several experts. But, initiatives in this respect on the part of most bank managements have been absent. This seems to have led the Reserve Bank of India to announce in its monetary and credit policy of October 1997that it would issue ALM guidelines to banks. While the guidelines are awaited, an informal check with several PSBs shows that none of these banks has moved decisively to date to introduce ALM.One reason for this neglect appears to be a wrong notion among bankers that their banks already practice ALM. As per this understanding, ALM is a system of matching cash inflows and outflows, and thus of liquidity management. Hence, if a bank meets its cash reserve ratio and statutory liquidity ratio stipulations regularly without undue and frequent resort to purchased funds, it can be said to have a satisfactory system of managing liquidity risks, and, hence, of ALM.The actual concept of ALM is however much wider, and of greater importance to banks performance . Historically, ALM has evolved from the early practice of managing liquidity on the bank's asset side, to a later shift to the liability side, termed liability management, to a still later realisation of using both the assets as well as liabilities sides of the balance sheet to achieve optimum resources management. But that was till the1970s. In the 1980s, volatility of interest rates in USA and Europe caused
the focus to broaden to include the issue of interest rate risk. ALM began to extend beyond the bank treasury to cover the loan and deposit functions. The induction of credit risk into the issue of determining adequacy of bank capital further enlarged the scope of ALM in later1980s. In the current decade, earning proper returns of bank equity and hence maximisation of its market value has meant that ALM covers the management of the entire balance sheet of a bank. This implies that the bank managements are now expected to target required profit levels and ensure minimisation of risks to acceptable levels to retain the interest of investors in their banks. This also implies that costing and pricing policies have become of paramount importance in banks.In the regulated banking
environment in India prior to the 1990s; the equation of ALM to liquidity management by bankers could be understood. There was no interest rate risk as the interest rates were regulated and prescribed by the RBI. Spreads between the deposit and lending rates were very wide (these still are considerable); also, these spreads were more or less uniform among the commercial banks and were changed only by RBI. If a bank suffered significant losses in managing its banking assets, the same were absorbed by the comfortably wide spreads. Clearly, the bank balance sheet was not being managed by banks themselves; it was being `managed' through prescriptions of the regulatory authority and the
government. This situation has now changed. The banks have been given a large amount of freedom to manage their balance sheets. But the knowledge, newsystems and organisational changes that are called for to manage it, particularly the newbanking risks, are still lagging. The turmoil in domestic and international markets
duringthe last few months and impending changes in the country's financial system are a grimwarning to our bank managements to gear up their balance sheet management in a single heave. To begin with, as the RBI's monetary and credit policy of October 1997recommends, an adequate system of ALM to incorporate comprehensive riskmanagement should be introduced in the PSBs. It is suggested that the PSBs shouldintroduce ALM which would focus on liquidity management, interest rate riskmanagement and spread management. Broadly, there are 3 requirements to implement ALMin these banks, in the stated order: o Developing a better understanding of ALMconcepts, o Introducing an ALM information system, and, o Setting up ALM decision-making processes (ALM Committee/ALCO). The above requirements are already met bythe new private sector banks, for example. These banks have their balance sheetsavailable at the close of every day. Repeated changes in interest rates by them during thelast 3 months to manage interest rate risk and their maturity mismatches are based on dataprovided by their MIS. In contrast, loan and deposit pricing by PSBs is based partly on hunches, partly on estimates of internal macro data, and partly on their competitors' rates.Hence, PSBs would first and foremost need to focus son putting in place an ALM whichwould provide the necessary framework to define, measure, monitor, modify and manage interest rate risk. This is the need of the hour.
Page 30
CHAPTER-4 COMPANY PROFILE 4.1 About

HDFC Bank Limited (BSE: 500180, NSE: HDFCBANK, NYSE: HDB) is an Indian financial services company based in Mumbai, Maharashtra that was incorporated in August 1994. HDFC Bank is the fifth or sixth largest bank in India by assets and the first largest bank by market capitalization as of November 1, 2012. The bank was promoted by the Housing Development Finance Corporation, a premier housing finance company (set up in 1977) of India. As on December 2012, HDFC Bank has 2,776 branches and 10,490 ATMs, in 1,399 cities in India, and all branches of the bank are linked on an online real-time basis. As of December 2012 the bank had balance sheet size of Rs. 3837 billion. For the fiscal year 2011-12, the bank has reported net profit of 5167.07 crore (US$950 million), up 31.6% from the previous fiscal. On March 14, 2013 an online magazine named Cobrapost.com released video footage from Operation Red Spider showing high ranking officials and some employees of HDFC bank willing to turn black money into white which is violation of Money Laundering Control Act. After this the government of India and Reserve Bank of India have ordered an inquiry
Page 31
4.2 History HDFC Bank was incorporated in 1994 by Housing Development Finance Corporation Limited (HDFC), India's largest housing finance company. It was among the first companies to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector. The Bank started operations as a scheduled commercial bank in January 1995 under the RBI's liberalisation policies. Times Bank Limited (owned by Bennett, Coleman & Co./The Times Group) was merged with HDFC Bank Ltd., in 2000. This was the first merger of two private banks in India. Shareholders of Times Bank received 1 share of HDFC Bank for every 5.75 shares of Times Bank. The balance sheet size of the combined entity is more than Rs.1, 63,000 crore. In 2008 HDFC Bank acquired Centurion Bank of Punjab taking its total branches to more than 1,000. The amalgamated bank emerged with a base of about Rs. 1, 22,000 crore and net advances of about Rs.89, 000crore. Business focus HDFC Bank deals with three key business segments. - Wholesale Banking Services, Retail Banking Services, Treasury. It has entered the banking consortia of over 50 corporates 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.
Page 32
Wholesale banking services For customers from ongoleBlue-chip manufacturing companies in the Indian crop to small & mid-sized corporates and agri-based businesses 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 the above services to its corporate customers, mutual funds, stock exchange members and banks. Retail banking services HDFC Bank was the first bank in India to launch an International Debit Card in association with VISA (Visa Electron) and issues the Master Card Maestro debit card as well. The Bank launched its credit card business in late 2001. By March 2009, the bank had a total card base (debit and credit cards) of over 13 million. The Bank is also one of the leading players in the merchant acquiring business with over 70,000 Point-of-sale (POS) terminals for debit / credit cards acceptance at merchant establishments. The Bank is positioned in various net based B2C opportunities Including a wide range of Internet banking services for Fixed Deposits, Loans, Bill Payments, etc. With Finest of Technology and Best of Man power in Banking Industry HDFC Bank's retail services have become by and large the best in India and since the contribution to CASA i.e. total number of current and savings account of more than 50%, HDFC BANK has full potential to become India's No.1 Private Sector Bank.
Page 33
Treasury Within this business, the bank has three main product areas - Foreign Exchange and Derivatives, Local Currency Money Market & Debt Securities, and Equities. These services 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. Distribution network
An HDFC Bank Branch HDFC Bank is headquartered in Mumbai and as of March 31, 2012, the Banks distribution network was at 2,544 branches and 8,913 ATMs in 1,399 cities as against 1,986 branches and 10000 ATMs in 996 cities as of October 2012
Page 34
HDFC FOUNDER: Mr. H.T. Parekh ~ An industrialist, writer and philanthropist ~
Born on March 10, 1911 in a banking family at Surat, Mr. Hasmukh Thakordas Parekh, fondly referred to as Hasmukhbhai was the doyen of the Indian housing and financial sector. A graduate in Economics from Mumbai, Mr. Parekh also pursued a BSc. degree in Banking and Finance from the London School of Economics. After returning to India in 1936, Mr. Parekh began his financial career with a leading stockbroking firm, Harkisandass Lukhmidass. Simultaneously, he was a lecturer in Economics at the St. Xavier's College in Mumbai for about three years. He considered his twodecade long stint at the broking firm valuable, as it not only gave him his most basic lessons in the business but also immensely contributed to his personal growth.
Page 35
During this period Mr. Parekh also continued to study and write on different aspects of the economy and economic policy, money and banking, and also participated in public discussions. Driven by deep interest in investment banking, he decided to move on to his next major assignment. In 1956, Mr. Parekh joined the newly set up development finance institution Industrial Credit and Investment Corporation of India Limited (ICICI). Under his leadership ICICI grew impressively to gain acceptance of the Indian business community, recognition of Government and even became a show piece for the World Bank. For decades he had been stressing the need for a financial corporation specializing in providing long term finance for ownership housing. Thus even at the age of 66, when most people think of retirement, Mr. Parekh was determined to set up his most ambitious enterprise. His lifelong dream of helping Indians own their home, as he had seen abroad during his student days, led to the formation of the Housing Development Finance Corporation Limited (HDFC) in 1977. It was the first-ofits-kind in India. It is under Mr. Parekhs leadership and direction that HDFC grew manifold while being strongly rooted in the principles of integrity, transparency and professionalism. Soon HDFC became a major role model not only for the country but for the entire Asian region. In keeping with his zeal for promoting new ventures, in 1983, Mr. Parekh promoted the first private sector oil exploration company in India, Hindustan Oil Exploration Company Limited. He also set up Gujarat Rural Housing Finance Corporation Limited in 1986.
Page 36
Mr. Parekhs love for writing blossomed right from his school days. In addition to being a regular contributor to the media with over 200 published articles to his credit on a variety of subjects such as industry, economic policy, capital market, development banking, credit policy, etc., he was the author of several books. He authored The Bombay Money Market, a novel book detailing the intricate workings of the money market in lndia. He also chronicled his considerable experience as a development banker in his book, The Story of a Development Bank (ICICI: 1955-1979). Some of his other books include The Future of Joint-Stock Enterprise in India, India and Regional Development, Management of Industry in India and The Indian Capital Market - Past, Present & Future. Also, his writings in Gujarati, HiranePatro and HiraneVadhuPatro are considered works of great importance in Gujarati literature. His wisdom and warmth drew people from all walks of life to him for advice, guidance and inspiration. Mr. Parekh was a man of few words, and believed that strong views need not be expressed in strong words. He had a keen eye for talent and nurtured it by providing direction and ample learning opportunities. Known for his humility, affection and concern for fellowmen, Mr. Parekh was associated with several philanthropic causes and welfare
organizations. In 1986, he was one of the founders of the Centre for Advancement of Philanthropy and served as its Chairman since its inception until his retirement in 1993. His concern and love for the city of Mumbai (erstwhile Bombay) led him to form the BombayCommunity Public Trust in 1991. This venture was
designed specifically to address the needs of disadvantaged citizens in the city of Mumbai. He took the initiative to finance Mu mbais first public toilet by any corporate house Sulabh Shauchalaya. Additionally, Mr. Parekh served as trustee of the Sameeksha Trust, Saurashtra Trust, Kasturba Gandhi National Memorial Trust, The India Foundation, The India Heritage Trust, The Chakallas Puraskar Trust and also served as the President of theSocial ServiceLeague. 4.3Some of Mr. H.T. Parekhs major achievements are:
The James Taylor prize for standing 1st in B.A. (Economics) from the University of Mumbai.
Honorary Fellow of the London School of Economics and Political Science, U.K.
Padma Bhushanby the Government of India for his contribution to the field of economic activities in 1992.The thoughts and dreams of a legend like Mr. H.T. Parekh live on forever, changing human lives for the better.
HDFC Bank Limited
Type
Public BSE: 500180
Traded as
NSE: HDFCBANK NYSE: HDB
Page 38
BSE SENSEX Constituent Industry Founded Banking, Financial services August 1994
Headquarters Mumbai, Maharashtra, India Area served Key people Worldwide Mr Aditya Puri (MD) Credit cards, consumer banking, corporate banking, finance and insurance, Products investment banking, mortgage loans, private banking, private equity, wealth management Revenue Operating income Profit Total assets Total equity Employees Website US$ 6.487 billion (2012) US$ 1.451 billion (2012) US$ 978.3 million (2012) US$ 70.17 billion (2012) US$ 7.793 billion (2012) 66,076 (2012) HDFCBank.com
Page 39
3.4Origin of the Organization HDFC BANK LTD. is leading private sector bank and financial services company in India. 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 ofRBI`s liberalization of the Indian Banking Industry in 1994.The Bank was incorporated in August 1994 in the name of HDFC BANK LTD., with its registered office in Mumbai, in India and commenced operation as a Scheduled Commercial Bank in January 1995. The Bank is a banking company governed by Indias Banking Regulations Act, 1949. The Banks shares are listed on the Bombay Stock Exchange Ltd., the National Stock Exchange of India Limited and its ADSs are listed on the New York Stock Exchange.
The bank is a part of the HDFC Group of Companies founded by outparent.This bank is public limited company established under the laws ofIndia.HDFC LTD. and its subsidiaries owned approximately 22% of our outstanding Equity Shares as of March 31st 2006.From the beginning, HDFCBank its operation with the aim of becoming a world-class Indian Bank andthe endeavour of fulfilling all the financial requirements of customer under one roof. Over the years, by delivering superior financial products and services, the bank has built a stable and long lasting relationship with nearly 7 million customers without compromising standard for maintaining high quality association, culture for learning,
Page 40
quick absorption of latest and best technologies and unwavering adherence to best practice in governance have been the core strength that have brought the bank to the present position withthe constant learning to growth, the bank has continued to use the dividends of leadership to fuel future expansion and presence. The strategy of bank is to provide comprehensive range of financial products and services for their customers through multiple distributed in channels, with high quality Service and superior execution. Themultiple distribution channel including an electronically linked branch network, automated telephone banking, internet banking and banking by mobile phone, to offer customer convenient access to their product. The quality of service is provided by bank through intensive staff training and the use of our technology platform. Their focus on knowledgeable and personalized services draws customers to our products and increases the loyalty to the existing customers. The HDFC Banks philosophy is based on four core values that is Operational excellence, Customer focus, Product leadership and People. The bank is professionally managed organization with board of directors consisting of eminent persons who represent various fields including finance, taxation, construction, urban policy and development. The board primarily focus on strategy formulation policy and control, design to delivery increasing value to share holders. Today, HDFC are market leader in most of the segments that the yope rate and their goal is to acquire the best position in attracting customers. The bank has grown rapidly since commencing operations in Jan 1995.Currently the bank has a nation spread over 583 branches in 263 cities across the country by operating in three principle segments, that is Wholesale banking
A project report on asset and liability management Retail banking Treasury service
4.5 MANAGEMENT: Mr. C.M. Vasudev has been appointed as the Chairman of the Bank with effect from 6th July 2010. Mr. Vasudev has been a Director of the Bank since October 2006. A retired IAS officer, Mr. Vasudev has had an illustrious career in the civil services and has held several key positions in India and overseas, including Finance Secretary, Government of India, Executive Director, World Bank and Government nominee on the Boards of many companies in the financial sector. 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.
Page 42
Directors and executives: HDFC Banks Memorandum and articles of association providest hat until otherwise determined by a general meeting of shareholders. The number of our directors shall not be less than three (3) or more than fifteen (15) directors, excluding directors appointed pursuant to the term of issue date. Banks board of directors consisted of nine (9) members were comprised of; Mr. C.M. Vasudev (Chairmen) Mr.Aditya Puri (Managing Director) Dr. V.R.Gadwal (Non-Executive Director) Mr. Vineet Jain (Non-Executive Director) Mr. K.M.Mistry (Non-Executive Director) Mrs. Renukarnad (Non-Executive Director) Mr. Aravind Pande (Non-Executive Director) Mr. Bobby Parikh (Non-Executive Director) Mr. Ashim Samanta (Non-Executive Director)
BACKGROUND: -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 RBIs liberalisation of the Indian Banking Industry in 1994. The bank was incorporated in August 1994 in the name of HDFC Bank Limited, w ith its registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank in January 1995.
Page 43
A project report on asset and liability management PROMOTER:-HDFC is Indias 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, strong market reputation, large shareholder base and unique consumer franchise, HDFC was ideally positioned to promote a bank in the Indian environment BUSINESS FOCUS: -HDFC Banks mission is to be a World Class Indian Bank. The objective is to build sound customer franchises across distinct businesses so as to be the preferred provider of banking services for target retail and wholesale customer segments, and to achieve healthy growth in profitability, consistent with the banks risk appetite. The bank is committed to maintain the highest level of ethical standards, professional integrity, corporate governance and regulatory compliance. HDFC Banks business philosophy is based on four core values: Operational Excellence, Customer Focus, Product Leadership and People.
Page 44
CAPITAL STRUCTURE: -As on 31st March, 2013 the authorized share capital of the Bank is Rs. 550 crore. The paid-up capital as on the said date is Rs 475,88,38,060/- (2379419030 equity shares of Rs. 2/- each). The HDFC Group holds 22.83% of the Bank's equity and about 17.08% of the equity is held by the ADS / GDR Depositories (in respect of the bank's American Depository Shares (ADS) and Global Depository Receipts (GDR) Issues). 34.07% of the equity is held by Foreign Institutional Investors (FIIs) and the Bank has 4, 40,853 shareholders. The shares are listed on the Bombay Stock Exchange Limited and The National Stock Exchange of India Limited. The Bank's American Depository Shares (ADS) are listed on the New York Stock Exchange (NYSE) under the symbol 'HDB' and the Bank's Global Depository Receipts (GDRs) are listed on Luxembourg Stock Exchange under ISIN No US40415F2002.
AMALGAMATION OF TIMES BANK & CENTURION BANK OF PUNJAB WITH HDFC BANK: - On May 23, 2008, the amalgamation of Centurion Bank of Punjab with HDFC Bank was formally approved by Reserve Bank of India to complete the statutory and regulatory approval process. As per the scheme of amalgamation, shareholders of CBoP received 1 share of HDFC Bank for every 29 shares of CBoP. The amalgamation added significant value to HDFC Bank in terms of increased branch network, geographic reach, and customer base, and a bigger pool of skilled manpower. In a milestone transaction in the Indian banking industry, Times Bank Limited (another new private sector bank promoted by Bennett, Coleman & Co. / Times Group) was merged with HDFC Bank Ltd., effective February 26, 2000. This was the first merger of two private banks in the New Generation Private Sector Banks. As per the scheme of amalgamation approved by the
shareholders of both banks and the Reserve Bank of India, shareholders of Times Bank received 1 share of HDFC Bank for every 5.75 shares of Times Bank. DISTRIBUTION BANK: -HDFC Bank is headquartered in Mumbai. As on March 31, 2013, the Bank has a network of 3062 branches in 1845 cities across India. All branches are linked on an online real-time basis. Customers in over 1397 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 centres where the NSE / BSE have a strong and active member base. The Bank also has a network of 10743 ATMs across India. 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.
TECHNOLOGY: -HDFC Bank operates in a highly automated environment in terms of information technology and communication systems. All the banks branches have online connectivity, which enables the bank to offer speedy funds transfer facilities to its customers. Multi-branch access is also provided to retail customers through the branch network and Automated Teller Machines (ATMs). The Bank has made substantial efforts and investments in acquiring the best technology available internationally, to build the infrastructure for a world class bank. In terms of core banking software, the Corporate Banking business is supported by Flex cube, while the Retail
Banking business by Fin ware, both from i-flex Solutions Ltd. The systems are open, scalable and web-enabled. The Bank has prioritised its engagement in technology and the internet as one of its key goals and has already made significant progress in web-enabling its core businesses. In each of its businesses, the Bank has succeeded in leveraging its market position, expertise and technology to create a competitive advantage and build market share.
HDFC Bank caters to a wide range of banking services covering commercial and investment banking on the wholesale side and transactional / branch banking on the retail side. The bank has three key business segments:
Wholesale Banking The Banks target market is primarily large, blue-chip manufacturing companies in the Indian corporate sector and to a lesser extent, small & mid-sized corporate 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 corporate 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
Page 47
members and banks.
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 liberalisation of the financial markets in India, corporates need more sophisticated risk management information, advice and product structures. These and fine pricing on various treasury products are provided through the banks 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. GVC Level 1' rating in January 2007 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.
Retail Banking 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 customers through the growing branch network, as well as through alternative delivery channels like ATMs, Phone Banking, Net Banking and Mobile Banking. The HDFC Bank Preferred program for high net worth individuals, the HDFC Bank Plus and the Investment Advisory Services programs have
Page 48
been designed keeping in mind needs of customers who seek distinct financial solutions, information and advice on various investment avenues. The Bank also has a wide array of retail loan products including Auto Loans, Loans against marketable securities, Personal Loans and Loans for Two-wheelers. It is also a leading provider of Depository Participant (DP) services for retail customers, providing customers the facility to hold their investments in electronic form. HDFC Bank was the first bank in India to launch an International Debit Card in association with VISA (VISA Electron) and issues the MasterCard Maestro debit card as well. The Bank launched its credit card business in late 2001. By March 2013, the bank had a total card base (debit and credit cards) of over 19.7 million. The Bank is also one of the leading players in the "merchant acquiring" business with over 270,000 Point-of-sale (POS) terminals for debit / credit cards acceptance at merchant establishments. The Bank is well positioned as a leader in various net based B2C opportunities including a wide range of internet banking services for Fixed Deposits, Loans, Bill Payments, etc.
4.6RATINGS/ AWARDS: 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 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 was assigned a 'CRISIL GVC Level 1' rating in January 2007 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 and Accolades: HDFC Bank began operations in 1995 with a simple mission: to be a "World-class Indian Bank". We realized that only a singleminded 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.
Over the years, the Bank has received recognition and awards from several leading organizations and publications, both domestic and international (details are available on
http://www.hdfcbank.com/aboutus/awards/default.htm).
Some important awards that the Bank won: NASSCOM CNBC- TV18 IT Innovation Award The National Quality Excellence Awards FE Best Bank Awards Skoch Financial Inclusion Awards 2013 - Security in Bank (2nd time in a row) DSCI Information Technology Award 2012 - Security Leader of the Year (Banking) Business world Awards for Banking Excellence 2012 HT-Mars Customer Satisfaction Survey CSO Forum Information Technology Award 2012 - Most tech-friendly Bank - Deal of the year (Rupee Bonds) Bank and Credit Card customer satisfaction Survey Best Organisation for Information Security Practice (2nd time in a row)
Page 51
Best IT Driven Innovation in Banking (COMMERCIAL) Best Customer Service Result
HDFC Bank wins in 3 categories at FE Best Bank Awards Organisation of the Year
The Economic Times CNBC TV18's India Best Banks and Financial Institutions Awards 2012 Mint-Aon Hewitt study on India's Best Managed Boards 2012 Forbes Asia
ET Awards for Corporate Excellence Company of the Year 2012 Best Private sector Bank
Our Bank among India's six best managed Boards 2012 Fab 50 Companies - Winning for the 6th year - Best Online Bank - Best use of Business Intelligence
IBA Banking Technology Awards 2011
- Best Customer Relationship Initiative - Best Risk Management & Security Initiative - Best use of Mobility Technology in Banking - Overall Best Bank
Dun & Bradstreet Banking Awards - Best Private Sector Bank 2012 - Asset Quality - Private Sector - Retail Banking -Private Sector IDRBT Banking Technology Excellence Awards 2011-12 Asia Money 2012 Best Bank in 'IT for Operational Effectiveness' category Best Domestic Bank in India
Page 52
4.7 MILESTONES IN THE HISTORY HDFC Bank began its operations in 1995 with a simple mission: to be a "World-class Indian Bank". They realized that only a single-minded focus on product quality and service excellence would help us get there. Today, they are proud to say that they are well on our way towards that goal. It is extremely gratifying that their efforts towards providing customer convenience have been appreciated both nationally and internationally. 2007 Business Today-Monitor Group survey Financial Express-Ernst & Young Award Global HR Excellence Awards Asia Pacific HRM Congress: One of India's "Most Innovative Companies". Best Bank Award in the Private Sector category. Employer Brand of the Year 2007-2008-Award- First Runnerup. Business Today Dun & Bradstreet American Express Corporate Best Bank Award 2007 The Bombay Stock Exchange and Best Corporate Social Nasscom Foundation's Business for Responsibility Practice Award. Social Responsibility Awards 2007 Outlook Money & NDTV Profit Best Bank Award in the Private sector category. The Asian Banker Excellence in Retail Financial Services Awards Asian Banker Managing Director Aditya Puri
Page 53
Best Bank Award. Corporate Best Bank-Award.
Best Retail Bank in India.
won the Leadership achievement Award for India. 2006 Business Today Forbes Magazine Best Bank in India. One of Asia Pacific's Best 50 companies. Business world The Asset Magazine's Triple A Country Awards Asia money Awards Best Local Cash Management Bank in Large and Medium segments. Euro money Awards 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. Hong Kong-based Finance Asia magazine Economic Times Awards "Company of the Year" Award for Corporate Excellence. Best Bank in India "Best Bank" in India. Best listed Bank of India. Best Domestic Bank.
Page 54
The Asset Triple A Country Awards
Best Domestic Bank in India Region 2005
The Business Today-KPMG Survey
Best Local Cash Management Bank in India US$11-100m 2005
The Business Today-KPMG Survey
"Best Bank in India" for the third consecutive year in 2005.
Economic Times - Avaya Global Connect Customer Responsiveness Awards 2004 Asia money Awards
"Most Customer Responsive Company - Banking and Financial Services - 2005
Best Local Cash Management Bank in India US$11-100m
Asia money Awards
Best Local Cash Management Bank in India >US$501m
Asia money Awards
Best Local Cash Management Bank in India 1989-2004 (poll of polls)
Asia money Awards
Best Overall Domestic Trade Finance Services in India 2004
Asia money Awards
Most Improved company for Best Management Practices in India 2004
Business World
One of India's Most Respected Companies 2004
Forbes Global
Best Under a Billion, 100 Best

Page 55
Smaller Size Enterprises in Asia/Pacific and Europe - 2004 Asian Banker Awards Operational Excellence in Retail Financial Services 2004 The Asset Triple A Country Awards Best Domestic Bank in India 2004 2003 Forbes Global Best Under a Billion, 200 Best Small Companies - 2003 The Asset Triple A Country Awards Best Domestic Bank in India 2003 Business World - The Business World Most Respected Company Awards The Asset magazine The Asset magazine One of India's Most Respected Companies Best Cash Management Bank Best Trade Finance Bank 2003 Outlook Money Best Bank in the Private Sector 2003 Business Today NASSCOM & economictimes.com IT Users Awards 2002 Hong Kong-based Finance Asia Best Local Bank - India Best Bank in India -2003 Best IT User in Banking 2003
FE-Ernst & Young Best Banks Survey Best New Private Sector Bank
Page 56
magazine Hong Kong-based Finance Asia magazine Euro money magazine Asia money magazine "Best Bank in India Commercial Bank in India 2002 2001 Hong Kong-based Finance Asia magazine Hong Kong-based Finance Asia magazine Euro money magazine Forbes Global Best Domestic Commercial Bank India "Best Domestic Commercial Bank India "Best Bank in India Named in The 300 Best Small Companies one of the "20 for 2001" best FE-E&Y Best Banks small companies The Economic Times Awards for Corporate Excellence as the Emerging Company of the Year 2000 Hong Kong-based Finance Asia magazine Hong Kong-based Finance Asia magazine Euro money magazine Best Domestic Commercial Bank India "Best Domestic Commercial Bank India Best Domestic Bank "Best Local Bank - India"
Page 57
Business India Forbes Global
" India 's Best Bank" Named in The 300 Best Small Companies one of the "20 for 2001" best FE-E&Y Best Banks small companies
MERGER:- HDFC Bank and Centurion Bank of Punjab merger at share swap ratio of 1:29, The Boards of HDFC Bank and Centurion Bank of Punjab met on 25 February, 2008 and approved, subject to due diligence, the share swap ratio for the proposed merger of Centurion Bank of Punjab with HDFC Bank. The Scheme of Amalgamation envisages a share exchange ratio of one share of HDFC Bank for twenty nine shares of Centurion Bank of Punjab. The combined entity would have a nationwide network of 1,148 branches (the largest amongst private sector Banks) a strong deposit base of around Rs. 1,200 billion and net advances of around Rs. 850billion. The balance sheet size of the combined entity would be over Rs. 1,500 billion. Commenting on the proposed merger, Mr. Deepak Parekh, Chairman, HDFC said, We were amongst the first to get a banking license, the first to do a merger in the private sector with Times Bank in 1999, and now if this deal happens, it would be the largest merger in the private sector banking space in India. HDFC Bank was looking for an appropriate merger opportunity that would add scale, geography and experienced staff to its franchise. This opportunity arose and we thought it is an attractive route to supplement HDFC Banks organic growth. We believe that Centurion Bank of Punjab would be the right fit in terms of culture, strategic intent and approach to business.
Page 58
Mr. Aditya Puri, Managing Director, HDFC Bank said, These are exciting times for the Indian banking industry. The proposed merger will position the combined entity to significantly exploit opportunities in a market globally recognized as one of the fastest growing. Im particularly bullish about the potential of business synergies and cultural fit between the two organizations. The combined entity will be an even greater force in the market. Mr. Rana Talwar, Chairman, Centurion Bank of Punjab stated, Over the last few years, Centurion Bank of Punjab has set benchmarks for growth. The bank today has a large nationwide network, an extremely valuable franchise, 7,500 talented employees, and strong leadership positions in the market place. I believe that the merger with HDFC Bank will create a world class bank in quality and scale and will set the stage to compete with banks both locally as well on a global level. Mr. Shailendra Bhandari, Managing Director and CEO, Centurion Bank of Punjab said, We are extremely pleased to receive the go ahead from our board to pursue this opportunity. A merger between the banks provides significant synergies to the combined entity. The proposed merger would further improve the franchise and customer proposition offered by the individual banks.
Page 59
PRODUCT PROFILE
HDFC Bank offers a bunch of products and services to meet the every need of the people. The company cares for both, individuals as well as corporate and small and medium enterprises. For individuals, the company has a range accounts, investment, and pension scheme, different types of loans and cards that assist the customers. The customers can choose the suitable one from a range of products which will suit their life-stage and needs. For organizations the company has a host of customized solutions that range from funded services, Non-funded services, Value addition services, Mutual fund etc. These affordable plans apart from providing long term value to the employees help in enhancing goodwill of the company The products, which are found in HDFC Bank, are Saving Account Current Account Fixed Account Preferred Program Demat Account NRI Account Forex Plus travels Card Bill pay Instant Alert Direct banking Channel Saving Bank Account
Page 60
People with steady and monthly income save their excess earning through this account. There are certain restrictions in the withdrawals. Bank pays interest at a nominal rate. Small savings are encouraged in this account. The bank has these accounts under the savings accounts are: Regular Account Salary Account Trust account Kids Advantage Account Current Account These deposits constitute major portion of banks circulating medium of exchange. Normally business people keep money in his accounts as they can withdraw and issues cheques any number of times. Banks does not pay any interest for these deposits. The different accounts that can be opened under the current accounts are: Regular Account Premium Account Plus Account Trade Account and Merchant Establishment Fixed Deposits Money is accepted for a fixed period it cannot be with draw on before expiry of fixed period. The interests rate higher than other accounts. Minimum amount of new fixed accounts is Rs. 10,000 and addition on fixed deposits is 5,000.Since fixed deposits was booked for a period 14 days interest is paid only if the fixed deposits runs for at least 15 days if the deposits was booked for 14 days or less interest is paid if the fixed deposits runs for at least 7 days.
Page 61
Program Preferred
The following are the components of preferred program: Free Gold Debit card with enhanced daily limit ATM at par cheque book Free Gold Debit card Fixed discount up to 8 paisa on card rate Free intercity transaction Monthly combined statement Free cheque book pick-up and delivery Discount on loans Free standing instructions.
Demat account
With SEBI making trading mandatory in the Demat form advent of rolling settlement, it is imperative that all investors have a Demat account with a depository participant. When a customer places an order the seller can deliver the securities in Demat form, which can only be traded to the Demat account. The following are the benefits of Demat account in HDFC bank Nominal annual maintenance charges Competitive fees for transaction Demat account status on the Internet Option to open Demat account with NSDL or CDSL or both
A project report on asset and liability management Personalize Instruction Book Paper less trading which will help to prevent mutilation, loss andm is placement of certificate and eliminate the problems of bad delivery Safety of securities with HDFC bank Problem of bad delivery, mutilation is eliminated Zero stamp duty Faster settlement of buying and selling of orders, direct credit of allotment for public/rights/bonus issue.
NRI Account
The different types of NRI Accounts are NRO Accounts: It is an account that can be opened in Indian rupees. One can also open on account in any form; be it savings, current or term deposits. Interest on account can be repatriated. NRE Account: Non Resident External account at HDFC Bank is available as a savings, current and term deposit. One can also get an international debit card with your NRE Account, the average quarterly balanced are NRE savings accounts is Rs. 10,000 and current and fixed deposit account is Rs. 25,000. FCNR Account: In foreign currency non-resident account you get protection against exchange risk, apart from earning attractive interest rate the fund can also be repatriated abroad. RFC Account: It is an account is to retain fund in foreign currency.
Page 63
A project report on asset and liability management Forex Plus Travels Card
The Forex plus Travel Card is a non-personalized car in association with Visa. It is a prepaid USD/EUR/GBP denominated card. Moreover, it can also be used at ATM with pin and with signature. The main features of the Forex plus Travel card are: Minimum loading $500 and E400 and Maximum loading $10,000 and E8, 000 Per day limit ATM $2,000 Personal accident covers Rs. 2 lakhs Loss of baggage covers Rs. 20,000 Hence, Forex plus Card cannot be used for the cash withdrawal in India, Nepal and Bhutan. The customers are not able to check outstanding balance at HDFC Bank ATMs. Also, the card Pin cannot be changed. Bill Pay Account Through Bill Pay, a customer can not only pay his Electricity, Mobile, Telephone bills but also Life Insurance premium. The customer can also subscribe or renew his Internet account through the Direct Pay facility.Hence, the Bill Pay through the Internet is done by logging to Net Bankingusing the customer ID and password.Then the customer has to click on thebill payment icon and select the company of which the bill is to be paid andconfirm payment.Bill Pay through Phone is done just by calling Phonebanking in the city and then follows the simple instruction thats given.BillPay through Mobile Phone is just to access your HDFC Bank account on yourmobile phone to pay your bills, while you are on the move.Bill Pay at ATMsis simply by selecting the others option in the
main menu. Then, select the billpayment option in the sub-menu. And finally, just confirm the amount of thebill that you wish to pay. However, you must be registered for Net bankingand Mobile Banking in order to use these channels for Bill pay.
Instant Alert HDFC Bank makes its customer life simple with the introduction of its new Instant alert service.With this facility, one can get regular updates on hisbank account via SMS or e-mail.Hence, Instant alert ensures its customercomplete peace of mind.For our salary account holders, Instant alert helps ingetting an SMS or e-mail the moment the salary gets credited.The main features of the Instant Alert are Utility bill payments due and weeklybalance alert.For these services they charge Rs: 25 per account quarterly forsavings account and for current account they charge Rs: 50 per accountquarterly.
Direct banking channels There are three types of direct banking channels. They are Net banking Mobile banking Phone banking Net banking Net banking relates to the benefits through financial and nonfinancialtransactions. They are Free Funds transfer, Demand Draft, Bank Credit Card,Bill Pay for financial transactions.For non-financial transactions, accountbalance, statement download update mailing address, cheque book request etc.
Page 65
Mobile banking Mobile banking product proposition is based on the SMS
(ShortMessaging Service) protocol. The information available on the cell phonescreen is in the form of text message.
Phone banking Phone banking is the transaction between non-financial and financial phone banking that give the details of both the mentioned transactions. Examples are Free Funds transfer, Demand Draft, Bank Credit Card and Bill Pay for financial transactions. For non-financial transactions, account balance, statement download update mailing address, cheque book request etc.
4.8 Risk management and portfolio quality of HDFC Bank: Taking on various types of risk is integral to the banking business. Sound risk management and balancing risk reward trade-offs are therefore critical to a banks success. Business and revenue growth have therefore to be weighed in the context of the risks implicit in the banks business strategy.Ofthe various types of risks the bank is exposed to, the most important are credit risk, market risk (which includes liquidity risk and price risk) and operational risk. The identification, measurement, monitoring and management of risksremain a key focus area for the bank. For credit risk, distinct policies andprocesses are in place for the retail and wholesale businesses.In retail loan businesses, the credit cycle is managed through appropriatefront-end credit, operational and collection processes.For each product, programs defining customer segments, underwriting standards, securitystructure etc., are specified to ensure consistency of credit buying patterns.Given the granularity of individual
exposures, retail credit risk is managedlargely on a portfolio basis, across various products and customer segments.
ForWholesale credit exposures, management of credit risk is done through targetmarket definition, appropriate credit approval processes, on-going post-disbursement monitoring and remedial management procedures.Overallportfolio diversification and reviews also facilitate mitigation andmanagement.
The
risk
monitoring
committee
of
the
Board
monitors
the
Banksmanagement policies and procedure, vets treasury risk limits before they areconsidered by the Board, and reviews portfolio composition and impairedcredits, from an industry concentration perspective, as of March 31 2005, theretail asset portfolio constituted 49% of the total customer assets (includingadvances, corporate debt instruments, etc.).Other larger industry exposuresinclude automotive at 9% land transport at 4%, housing finance at 4% andheavy engineering/equipment at 1% of total customer assets.The welldiversified nature of the portfolio is evidenced in the fact that 23 industriesaccount for 1%or more of the Banks customer assets portfolio. As of March 31st 2005, the Banks ratio of gross non-performing assets(NPA) to total customer assets was 1.47% as against 1.50% as of March 31st2004.Increases in non-performing assets during the year were primarilyrelated to delinquencies in various retail loan products. These delinquenciesand NPAs were within the expected levels for each of the retail asset productsgiven the seasoning of the retail portfolio.Net nonperforming assets were0.24% of net advances and 0.20% of customer assets as of March 31st 2005 asagainst 0.16% and 0.12% respectively as
of March 31st 2004.The specificloan loss provisions that the Bank has made for its non-performing assetscontinue to be more conservative than the regulatory requirement.The bank continues to have a policy of creating general provisionsupfront based on estimated portfolio losses for its major retail loan productprograms against which specific provisions are set-off as the portfolio agesand NPAs surface.As on March 31st 2005, total general loan loss provisionswere 0.6% of the standard advances as against the regulatory requirement of0.25%.The bank has been tracking the farming of the New Basel CapitalAccord (Basel II) and the guidelines of the Reserve Bank of India in thisregard.It has also assessed the key requirements of the framework, identifiedthe areas in rating systems, risk architecture, technology support, processdocumentation, etc.,needing augmentation and has laid down a road map formeeting The requirements in this respect.The Bank is in the process ofimplementing a solution, which meets its requirements in the wholesale creditarea in connection with the Internal Rating Based (IRB) Approach for creditrisk.This, will supplement the risk management systems the Bank already has in place since inception.
Page 68
CHAPTER 5 ANALYSIS AND INTERPRETATION
GAP ANALYSIS: Gap management techniques require management to perform an analysis of the maturities and re-pricing opportunities associated with the banks interest sensitive assets, depositsand money market borrowings. A bank can hedge itself by making sure for each time period that Rate Sensitive Assets (RSA) = Rate Sensitive Liabilities (RSL) The most familiar example of re-pricing assets is loans that are about to mature or are coming up for renewal. If interest rates have risen since these loans were first made, the bank will renew them only if it can get an expected yield that approximates the higher yields currently expected on other financial instruments of comparable quality. Re-pricing liabilities include CDs about to mature or be renewed, floating rate deposits, and money market borrowings. 1. Interest Sensitive Gap: A gap exists between these interest sensitive assets and interest sensitive liabilities when Interest Sensitive Gap = Interest Sensitive Assets Interest Sensitive Liabilities. If interest sensitive assets in each planning period exceed (= >0) the volume of interest sensitive liabilities, the bank is said to have a positive gap and to be asset sensitive. In this situation if interest rate rises, the banks net interest margin will increase because the interest revenues generated by the banks assets will increase more than the cost of borrowed funds and vice-versa. The banks with positive gap will reduce
if interest rate falls. In the opposite situation the bank has a negative gap and is said to be liability sensitive. Liability sensitive (negative) gap = interest sensitive assets interest sensitive liabilities < 0. In that case, rising interest rate will lower the banks net interest margin, because the rising cost associated with interest Sensitive liabilities will exceed increase in interest revenue from the banks earning assets and vice-versa. Only if interest sensitive assets and liabilities are equal is a bank relatively insulated from interest rate risk. As a practical matter, however, a zero gap does not eliminate all interest rate risk, because the interest rate attached to bank assets and liabilities are not perfectly correlated in the real world. Loan interest rate, for example, tends to lag behind interest rates on money market borrowings. In practical world, zero gaps are almost impossible. 2. Maturity Gap: The total effect of interest rate change can be summarized by its maturity gap, i.e. the difference between interest Rate Sensitive Assets (RSA) and the interest Rate Sensitive Liabilities (RSL) 3. Rate Sensitive Assets (RSA) of the Bank isMoney call at short notice Investment (in shares and securities) Short Term Loan and Advance Non-Banking Asset 4. Rate Sensitive Liabilities (RSL) of the Bank isBorrowing from other banks, financial institutions and agents Deposit and other accounts (except fixed deposits) Total share Holders Equity
Page 70
DURATION ANALYSIS: Duration is a value and time weighted measure of maturity that considers the timing of all cash flows from earning assets and all cash outflows associated with liabilities. In effect, duration measures the average time needed to recover the funds committed to an investment. The net worth (NW) of any bank is equal to the value of its assets (A) less the value of its liability (L): NW = A L As interest rates changes, the value of both a banks assets and liabilities will change, resulting in a change in net worth: NW = A L Portfolio Theory of Finance Told That 1. A rise in market rates of interest will cause the market value (price) of both bank fixed-rate assets and liabilities to decline. 2. The longer the maturity of a banks assets and liabilities, the more they in the market value (price) when market interest rates rise. Duration analysis can be used to stabilize the market value of a banks net worth (NW). It measures the sensitivity of the market value of financial instruments to changes in interest rates. The interest rate risk of financial instruments is directly proportional to their duration. Positive Duration Gap = Asset Duration Liability Duration > 0 Negative Duration Gap = Asset Duration Liability Duration < 0 With liability having a longer duration than the banks assets, a parallel change in all interest rates will generate a larger change in liability values than assets values. If interest rates fall, the banks liabilities will increase more in value than its assets and net worth will decline. If interest rates
Page 71
rise, however, liability values will decrease faster than assets value and banks net worth position will increases in value. This method of measuring interest rate risk examines the sensitivity of the market value of the banks total assets and liabilities to changes interest rates. Duration is a useful concept because it provides a good approximation of the sensitivity of a securitys market value to a change in its interest rates. % in Market Value of Security = - (% in Interest Rate)* Duration in Year. Duration analysis involves comparing the average duration of the banks assets to the average duration of its liabilities. Let us suppose that the average duration of HYPO BANKS assets is 5 years, while the average duration of its liabilities is 3years. With a5% increase in interest rates, the market value of the banks assets fall by 25% = (5%*years) and the market value of the liabilities declined by 15%(= - 5%*3 years). The net result is that the net worth has declined by 10% of the total asset value. The interest sensitive gap is interest sensitive assets minus the interest sensitive liabilities, where interest sensitive assets and liabilities are those items on a banks balance sheet that mature or whose interest rate can be changed during a given interval of time. A bank, which is asset sensitive, will suffer a decline in its net interest margin if market interest rates fall. A bank that is liability sensitive will experience decrease in its met margin if interest rates rise. One of the most popular methods of neutralizing these gap risks is to buy or sell financial futures contracts. A financial futures contract is an agreement between a buyer and a seller reached today that call for the delivery of a particular security in exchange for cash at some future date. The market of futures contract
Page 72
changes daily as the market price of the security to be exchanged moves over time. The financial futures market are designed to shift the risk of interest rate fluctuations from risk averse investors, such as commercial bank, to speculators willing to accept and possibly profit from such risks. When a bank contracts an exchange broker and offers to sell futures contract, this means it is promising to deliver securities of a certain kind and quality to the buyer of those contracts on a stipulated date at predetermined price. Conversely, a bank may enter the future markets as a buyer of futures contracts, agree into accept delivery of a particular security named in each contract or to pay cash to the exchange-clearing house the day the contacts mature, based on their price at that time. A futures hedge against interest rate changes generally requires a bank to take an opposite position in the futures market from its current position in the cash market. Thus, a bank planning to buy bond contracts (go long) in the cash market today may try o to protect the bonds value by selling bond contracts (go short) in the futures market. Then, if bond prices fall in the cash market there will be an offsetting profit in the futures market, minimizing the loss due to changing interest rates.
TABULATION AND ANALYSIS OF DATA: The collected data have been tabulated after collection. Through tabulation data are condensed into necessary tables. After tabulation data are used for better analysis. Formula Used in Analysis of Asset Liability Management: Total Assets = Total Liabilities + Capital The Loan Deposit ratio = Loan/(Deposit + Capital + Funded Reserve) Net interest income (NII) = Interest income interest Expense
A project report on asset and liability management Net worth = A-L Rate sensitive Assets (RSA) = Rate Sensitive Liabilities (RSL) Interest sensitive gap = interest sensitive assets interest sensitive liabilities GAP=RSA- RSL Positive duration gap =Asset duration Liability duration>0 Negative duration gap =Asset duration Liability duration<0 % in market value of security = -(% in interest rate)* duration in year. Profitability: Return on Assets (ROA) = Net Income / Assets (NI/A) Return on Equity (ROE) = Net Income / Equity (NI/E) Return on Earning Assets (ROEA) = Net Income / Earning Assets (NI/EA) Return on Loans (ROL) = Interest Income / Loans (II/L) Interest Income / Earning Assets (II/EA) Net Interest Income / Earning Assets (NII/EA) Interest Margin (IM) = Return on Fund - Cost of Fund (IM)
Page 74
EMPIRICAL ANALYSIS OF ASSET LIABILITY MANAGEMENT OF HDFC BANK.
To analyse the asset liability management I have analysed of thebanksNet Interest Income, Net Interest Margin (Nim), Gap, Duration, Interest Sensitivity Ratio, and Liquidity Ratio and tried to compare with banks profitability to find that whether there exists any relationship between these factors. Analysis is given below:
Table 5.1:NET INTEREST INCOME (NII): We know: Net interest income (NII) = Interest income Interest Expense
Net Interest Income
(in millions of Rs.)
Year
Interest Income (-)Interest expenses
NII
2008-2009 2009-2010 2010-2011 2011-2012
457.84 723.84 1139.96 1686.87
330.72 447.70 820.68 1258.70
127.12 245.38 319.27 430.17
Page 75
Analysis: In the above table shows the Net Interest Income in the year 2008-09, Rs. 457.84 and interest expenses Rs.330.72 than the output is NII(457.84330.72) Rs.127.12. &In the year of 2009-10 the Net Interest Income Rs.723.84 and interest expenses 447.70 than the output is NII(723.84447.70) Rs 245.38 & In the year 2010-11, the net interest income Rs.1139.96 and interest expenses Rs.820.68 than the output is (1139.96820.68) Rs.319.27 & In the year of 2011-12 the net interest income Rs.1686.87 and the interest expenses Rs.1258.70 than the output is (1686.87-1258.70)Rs.430.17 this analysis shows the net interest income has been increased year to year, Chart 5.1: Net Interest Income
NII
500 400 300 200 100 0 2009 2010 2011 2012 NII
Interpretation:
Here NII is increasing day by day because there is increase in interest rates earned by assets, otherwise increase in interest paid on funding will decrease NII.
Page 76
TABLE5.2:-NET INTEREST MARGIN (NIM):
We know that NIM= NII/ EA : Net Interest Margin (in million of Rs.)
Year
Net Interest Income
Earning Assets
NIM
2008-2009 2019-2010 2010-2011 2011-2012
127.12 245.38 319.27 430.17
5369.61 8300.61 14779.16 17419.05
2.36% 2.95% 2.16% 2.46%
Analysis: In the above table shows in the year of 2008-09, Rs. The net interest income Rs.127.12 and the Earning asset Rs.5369 than the output is NIM Rs 2.36% and in the year of 2009-10 the net interest income Rs.245.38 and the Earning asset Rs.8300.61than the output is NIM RS.2.96% and in the year of 2010-11 net interest income Rs.319.27 and the Earning asset Rs.14779.16 than the output is Rs.2.16% and in the year of 2011-12, the net interest income Rs.430.17 but the Earning asset Rs.17419.05 than the output is Rs.2.46% this analysis shows the NIM has been increased in the year 2009-2010 and 2011-2012,
Page 77
Chart 5.2: Net Interest Margin
NIM
3 2.5 2 1.5 1 0.5 0 2009 2010 2011 2012 NIM
Interpretation: Here NIM was highest in 2010, after that gone down in 2011 and again increased in2012. So we can say that NIMs were on an average sequence and ALM is going on moderate way.
Page 78
Table 5.3: GAP We know GAP = RSA- RSL Table 3: GAP Year 2008-2009 2009-2010 2010-2011 2011-2012 RSA 412.54 739.51 1585.18 2420.93 RSL 1036.21 14327.34 26328.25 32197.08 (in million of Rs.) GAP -9903.66 -13587.83 -24713.06 -29776.14
Analysis: - in the above table shows in the year of 2008-09 the rate sensitive assets (RSA) Rs.412.54 but the RSL Rs.1036.21 than the output is GAP Rs.-9903.66 (1036.21-412.54) and in the year of 2009-10 the RSA Rs.739.51 and the rate sensitive liabilities (RSL) Rs.14327.34 than the output is GAP Rs.-13587.83(739.51-14327.34) and the year of 201011 the rate sensitive assets (RSA) Rs.1585.18 and the rate sensitive liabilities (RSL) Rs.26328.25 than the output is Rs.-24713. And in the year of 2011-12 the rate sensitive assets (RSA) Rs.2420.93 and the rate sensitive liabilities (RSL) Rs.32197.08 than the output is -29776.14 this analysis shows the GAP has been increased year to year,
Page 79
Chart 5.3
GAP
0 2009 -10000 -20000 -30000 2010 2011 2012
GAP
GAP
Interpretation: Here gap is negative and this gap has increased year by year, which is not good sign for the bank.
Page 80
Table 5.4:- RELATIVE GAP: Relative Gap= Gap/ Total asset Relative Gap YEAR GAP TOTAL ASSET 2008-2009 2009-2010 2010-2011 2011-2012 -9903.66 -13587.83 -24713.06 -29776.14 5832.10 9037.53 15931.03 19306.99 (in million Rs.) RELATIVE GAP RATIO -1.69 -1.50 -1.55 -1.54
Analysis: - in the above table shows in the year of 2008-09, the GAP Rs.9903.66 the total asset Rs.5832.10 than the output is RELATIVE GAP RATIO is Rs.-1.69% and in the year of 2009-10 the GAP is Rs.-13587.83 the total asset is Rs.9037.53 than the output is RELATIVE GAP RATIO is Rs.-1.50% and in the year of 2010-11 the GAP is Rs.-24713.06 the total asset is Rs.15931.03 than the output is RELATIVE GAP RATIO is Rs.-1.55% and in the year of 2011-12 the GAP Rs. -29776.14 the total asset Rs.19306.99 than the output is RELATIVE GAP RATIO is Rs.1.54% this analysis shows the RELATIVE GAP RATIO has been increased in the year of 2008-09,
Page 81
Chart 5.4: Relative Ratio Chart
RELATIVE RATIO
-1.4 2009 -1.5 -1.6 -1.7 2010 2011 2012
RELATIVE RATIO
RELATIVE RATIO
Integration: Here relative gap is negative but has reduced over the time. It is somehow good sign that they tried to cover up this gap.
Page 82
TABLE 5.5: INTEREST SENSITIVITY RATIO: ISR = RSA/RSL ISR YEAR 2008-2009 2009-2010 2010-2011 2011-2012 RSA 412.54 739.51 1585.18 2420.93 RSL 1036.21 14327.34 26328.25 32197.08 (in million of Rs.) ISR 0.039 0.050 0.060 0.075
Analysis: in the above table shows in the year of 2008-09 the RSA Rs.412.54 the RSL is Rs.1036.21 than the output ISR Rs.0.039 and in the year of 2009-10 the RSA is Rs.739.51 the RSL is Rs.14327.34 than the output ISR Rs. 0.050 and in the year of 2010-11 the RSA is Rs.1585.18 the RSL is Rs.26328.25 than the output ISR Rs. 0.060 and the last year 2011-12 the RSA is Rs.2420.93 the RSL is Rs.32197.08 than the output ISR is Rs.0.075 this analysis shows the ISR has been increased year to year,
Page 83
Chart 5.5
ISR
0.08 0.06 0.04 0.02 0 2009 2010 ISR 2011 2012 ISR
INTERPETION: Here is seen interest sensitivity ratio is always less than 1, A financial institution at a given time is asset or liability sensitive, If the financial institution is asset sensitive it will be positive gap Positive relative gap, Interest sensitivity ratio is greater than 1. If financial institution is liability sensitive it will be negative gap, negative relative gap, and interest sensitivity ratio is less than 1. Here in HDFC Bank Gap is Negative, relative Gap is Negative; Interest Sensitivity Ratio is less than 1. So it is liability sensitive financial institution.
Page 84
TABLE 5.6:- LIQUIDITY RATIO: LD Ratio = Loan/ Deposit *100 : LD Ratio YEAR 2009 2010 2011 2012 LOAN 3437.13 5904.18 11692.97 14373.26 DEPOSIT 5158.11 7163.67 13164.13 16098.54 (in million of Rs.) LD RATIO 66.64% 82.42% 88.82% 89.28%
Analysis: In the above table shows in the year of 2009, the loan is Rs.3437.13 the deposit is Rs.5158.11 than the output is LD RATIO is Rs.66.64% and in the year of 2010, the loan is Rs.5904.18 the deposit is Rs.7163.67 than the output LD RATIO is Rs.82.42% and in the year of 2011 the loan is Rs.11692.97 the deposit is Rs.13164.13 than the output is LD RATIO is Rs.88.82% and the last year 2012 the loan is Rs.14373.26 the deposit is Rs.16098.54 than the output is Rs.89.28% this analysis show the LD RATIO has been increased year to year,
Page 85
CHART 6: LIQUIDITY RATIO
LIQUIDITY RATIO
100.00% 90.00% 80.00% 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% 1 2 3 4
LD RATIO
INTERPRETATION: Liquidity Ratio should be 80% to 85% for a Bank. But here is 64% to 89%. So we can say that they can use their deposits effectively to earn more profit.
Page 86
CHAPTER 6 FINDINGS, SUMMARY AND CONCLUSION
6.1 SUMMARY: There is no disagreement that the performance of the commercial banks of a country should be judged in the context of the objectives of development and socio-economic conditions prevailing in that country. At the same time, the question of cost effectiveness of the operation of the commercial banks should also be given due weight age. A bank will be cost effective, if it can collect low cost and less volatile funds and can effectively invest it in profitable secretors. For achieving the objective of cost effectiveness the banks should perform proper asset liability management. Banking has started with asset liability management. Like other financial intermediaries, commercial banks also intermediate between the savers and the borrower, to mobilize the financial surpluses of the savers and allocate these savings to the credit-worthy borrowers of different sectors in the economy. In this way, they not only help in the financial development of a country, but also facilitate the economic development. By doing this intermediation function, commercial banks are creating liability for the banks. Commercial banks are financial intermediaries who mobilize funds from surplus economic units and deploying these funds to deficit economic units. At the very beginning of the commencement of the business, commercial banks need funds for its survival. They collect funds and the
Page 87
again lend these funds to deficit spenders. By this way they are making profit. Banks profit is the difference between revenues earned form the lending to the deficit units and interest expense to the surplus unit. Banks can collect its funds from mainly three sources- from public as deposit, from money market borrowing and from off balance sheet sources. Among the sources, deposit source is the most costly but captures almost eighty present shear in the liability portfolio. Again deposit can be divided into three types current deposit, savings deposit and fixed deposit. Current deposit is the least costly funds of the bank. No interest cost is involved in that fund. It is generally kept by businessmen. Some administrative cost is involved in current deposit. But the problem is that current deposit is the most volatile deposit among the deposit portfolio. Banks are bound to refund the funds when claims are raised from depositors. It is against the principle of stability in liability management. If current deposit has the large portion in the deposit portfolio, then the bank cannot afford to go for long-term investment. Because in these cases banks may face liquidity crisis. Savings and fixed deposits are the costly sources of funds for a bank. These funds are relatively stable in nature. If bank has large portion of fixed deposit in the liability portfolio, then the bank has to incur a large volume of interest expense. Banks can also collect its necessary funds from the money market. Money market is an arrangement where the banks lend its surplus cash to other banks that need funds. The money market interest rate is generally lower than the deposit interest rate. If there is strong money market in the economy, it reduces the dependency of bank on the costly source of fund, i.e. deposits. Commercial banks can borrow from the money market as and when required.
Another important source of bank funds, which is very much popular in developed world, is the off-balance sheet source. They are asset securitization, loan selling, financial futures, interest rate options and interest rate swaps. But in our country only the traditional off-balance sheet items such as letters of credit, letter of guarantee, and bills for collection constitute an important element in the liability structure of most of the banks. Interest cost does not involve in case of off-balance sheet items. Only some administrative cost such as telephone, telegrams and stamps are involved here. When analysing the annual report of the sampled banks, it is found that for all the banks deposit has the major contribution in the liability portfolio. The next share is for the off-balance sheet activities and money market borrowing respectively. The following findings are mention worthy 1. HDFC Bank limited, representative of commercial banks in the study, is a Liability Sensitive Financial Institution. The liability structure of the HDFC Bank is not appropriate. The bank fails to make balance between less costly and stable funds.
2. Beside interest cost, there must have some other reason that is manpower productivity that contributes to the profitability of HDFC Bank. It means that other than interest cost, some variables has strong influence on the profitability of the bank, which is not anormal phenomena. 3. Effective liability management also depends of the effective use of the collected funds.
Page 89
HDFC bank invested most of its funds in advances. But the problem of the bank is the huge amount of classified advances. In 2010, 45.32% of total advances were classified. It places an adverse pressure on the profit potential of the bank. Besides, the bank has to pay interest on the funds collected for funding these advances. But the bank is getting no return on these advances. This made the situation for the bank unfortunate. 4. Newly established private commercial banks are giving attention to liability management in the context of effective utilization of the collected funds. But they have also failed to maintain a balance between less costly funds and less volatile funds. 5. About 80%of total deposits of HDFC bank are term deposit. It means that it fails to maintain balance between demand deposit and term deposit. But the bank is successful in proper utilization of its collected funds. It makes the bank profitable. But the bank could have enhanced its profit if it could make a balance between less costly funds. 6. The bank is investing majority of its funds in advances. In 2007, 2.04% of total advances were classified. It indicates proper utilization of the collected funds. In this context, it can be said that the bank is successful in managing its liability.
6.2FINDINGS OF ASSET /LIABILITY MANAGEMENT (ALM): NII is increasing year on year because there is an increase in interest rates earned on asset, otherwise increase in interest paid on funding will decrease NII. NIM is similar sequence up to 2% that ALM is going on moderately. Gap is negative. Relative Gap is also negative.
A project report on asset and liability management Interest sensitivity ratio is always less than 1, Liquidity Ratio should be 80% to 85% for a Bank. But here is 64% to 89%. Sowed can say that they can use their deposits effectively to earn more profit. A financial institution at a given time is asset or liability sensitive, if the financial institutions asset sensitive, it will be positive gap, positive relative gap, and interest sensitivity ratio is greater than 1. If financial institution is liability sensitive it will be negative gap, negative relative gap, and interest sensitivity ratio is less than 1. Here in HDFC Bank Gap is Negative, relative Gap is Negative; Interest Sensitivity Ratio is less than 1. So it is a Liability Sensitive Financial Institution 6.3 LIABILITY MANAGEMENT AND ITS IMPACT ON PROFITABILITY: It is already mentioned that effective liability management depends on less cost and less volatile fund. It also depends on the effective utilization of the collected funds. From the analysis, it is already clear that current deposit is the least costly source of deposited funds whereas fixed deposit is the most costly source of deposited funds. But current deposit is the most volatile sources in nature and fixed deposit is the stable nature. Term deposit is consists of savings and fixed deposit. So, for getting an appropriate liability structure, bank management must make a balance between current and term deposit. It can also use money market borrowing because it is less costly and flexible compared to deposit. A bank can also rely on various off-balance sheet items for funding to its needs. Liability management also depends on the effective use of the collected funds. Improper use makes the collected funds burden for the
Page 91
bank. In this part, various ratios are analysed both in the context of interest cost of the funds and their effective utilization.
Profitability ratio: (Millions of Rs.) Ratio Return on Assets(ROA) Return on Equity(ROE) Operating Profit 19.90 Margin Net Interest Margin(NIM) Net Profit( in million) Earning Per Share Price Earning Ratio(times) 15.18 40.30 14.32 12.56 21.07 14.80 26.12 12.38 336.17 247.19 259.23 187.52 2.47 2.16 2.95 2.37 21.68 26.32 21.51 21.72 20.30 19.61 30.74 2012 1.74 2011 1.55 2010 2.106 2009 1.68
The value of ROA and ROE depends on the volume of net income after tax. So, if banks use excess deposits, especially term deposits as sources of fund then ultimately the interest cost will be increased. As a result values of the mentioned ratios will be decreased. The value of ROA has decreasing trend. The ROA of HDFC Bank is growing over the first two years. After 2009 it has increased again. It indicates that the management is somehow able to achieve consistent
A project report on asset and liability management growth in the banks spread through close control over the banks earning assets and the pursuit of the cheapest sources of funding.
If we see only net interest margin (NIM) then the impact of liability management can be realized directly. Because interest expense depends on liability portion but the income portion depends on how one can utilize the funds in an efficient and profitable way. In this case the ratio of net non-interest margin and net operating margin can explain the impact of liability on profitability. The vulnerable trend of Earning Spread of HDFC Bank reflects the low efficiency of its intermediation functions and its strong position in the competition. A liability structure will be effective only if the bank can earn profit by using it. And the liability will give profit only if it is stable and less costly. In all respect HDFC Bank failed to manage its liability. As HDFC Bank is a service oriented private bank, it cannot say no to the public regarding the acceptance of deposits. The bank has to accept a huge amount of term loan every year. But it does not have the much opportunity to invest those loans. The bank is suffering from bad loans. So, interest revenue from the earning assets is becoming due in every year. It affects the banks net interest margin. Incas of investment, HDFC bank invested majority of its funds to advances. It enhances the default risk. The next major portion in the use of fund is money market lending sector. The bank also has to maintain the required provision for classified loans that places an adverse impact on the profit as well as on the capital of the bank.
Page 93
6.4 CONCLUSION WITH RECOMMENDATION:
On
the
basis
of
the
findings,
the
following
actions
are
recommended 1. HDFC bank should have a strong Asset-Liability Management Committee (ALCO) which will develop investment policy guidelines, develop the desired risk-return trade-off, will give decision regarding which types of deposit will be accepted and which type of assets will be financed by which type of liability.
2. HDFC bank should have a clear ALM Policy. In the study it is found that HDFC is utilizing their collected funds properly. Improper use of funds will increase the cost of the liability. Again a bank can make profit even by accepting funds at high cost if it can use the funds properly.
3. The non-interest expense of the bank should be reduced.
4. The bank should accept funds according to the potentiality of investing them. If a bank cannot invest its funds, it will increase the real cost of the fund. Strong Money Market should be developed in this country. If strong money market is developed, then a bank can borrow funds from the market as and when required. It will reduce the dependency of the bank on the deposit. As the money market borrowing is less costly compared to deposited funds, it will reduce the banks cost of fund.
5. HDFC Bank should go for new off-balance sheet sources for getting the required funds. It can securitize its assets when it needs funds. Again it can sell the loan to other banks when funds are needed. Other offbalance sheet sources can be used according to their nature. 6. Bank should invest a significant amount in research and developments so that it can identify the appropriate source of funned according to the nature of investment. 7. Bank should have a strong monitoring cell so that the investment cannot be a bad one. In this respect, the cell can give advice to the borrower in technical, financial and other related issues that will ensure the efficient use of funds by the borrower. 8. HDFC Bank should give its customer a greater amount of ancillary service. No funds are involved in providing ancillary services. It will reduce the dependency of the bank on funds, which in turn will increase the fee earnings of the bank. 9. Government must take necessary steps in the development of strong money market in the country.
Page 95
Bibliography
Web search: www. HDFC Bank Limited.com Web Search: www. Asset Liability Management.com Annual Report of HDFC (2007 to 2011) Book: 1.Commercial Banking, The Management of Risks, Gup & kolari, 3rd Edition, publisher Tata Mc Graw , page no. 347 to 359. 2. Bank Management & Financial Service, Peter. S. Rose Sylviac. Hudgins, 6th Edition.
Page 96

Asstes and Liab Managmnt

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Asstes and Liab Managmnt

Uploaded by

Copyright:

Available Formats

A project report on asset and liability management

Pg. No. 5-13

14-16 2 RESEARCH DESIGN OF THE STUDY

ANALYSIS AND INTERPRETATION

SUMMARY OF FINDINGS, SUGGESTIONS AND CONCLUSION

ACHARYA INSTITUTE OF GRADUATE STUDIES

A project report on asset and liability management

ACHARYA INSTITUTE OF GRADUATE STUDIES

A project report on asset and liability management

A project report on asset and liability management

ACHARYA INSTITUTE OF GRADUATE STUDIES

A project report on asset and liability management

A project report on asset and liability management

A project report on asset and liability management

A project report on asset and liability management

1.5 ASSET LIABILITY STRUCTURE OF A BANK:

Asset Liability Management Flowchart:

IMPLEMENT ATION & FEED BACK

ACHARYA INSTITUTE OF GRADUATE STUDIES

A project report on asset and liability management

A project report on asset and liability management

Flow in the ALCO can be diagrammed as below:

Corporate banking Feedback & recommendation

Feedback & recommendation

Depo-advFinancefeedback & recommendation Trend outlook key balance sheet features

Feedback& Treasury recommendation Recommend ALCO MeetingCEO Actions BS Status&

Depo-adv Trend outlook Other Balance sheet features

A project report on asset and liability management

An Insight into the Asset Liability Management of HDFC Bank

ACHARYA INSTITUTE OF GRADUATE STUDIES

A project report on asset and liability management

ACHARYA INSTITUTE OF GRADUATE STUDIES

A project report on asset and liability management

ACHARYA INSTITUTE OF GRADUATE STUDIES

A project report on asset and liability management

CHAPTER- 2 RESEARCH DESIGN OF THE STUDY

A project report on asset and liability management

A project report on asset and liability management

A project report on asset and liability management

ACHARYA INSTITUTE OF GRADUATE STUDIES

A project report on asset and liability management

A project report on asset and liability management

A project report on asset and liability management

A project report on asset and liability management

ACHARYA INSTITUTE OF GRADUATE STUDIES

A project report on asset and liability management

Authorised Capital (Rs. Lakhs) 274 710 56 231 76 209

Paid Up capital (Rs. Lakhs) 35 109 5 4 25 1

ACHARYA INSTITUTE OF GRADUATE STUDIES

A project report on asset and liability management

ACHARYA INSTITUTE OF GRADUATE STUDIES

A project report on asset and liability management

ACHARYA INSTITUTE OF GRADUATE STUDIES

A project report on asset and liability management

ACHARYA INSTITUTE OF GRADUATE STUDIES

A project report on asset and liability management

Bank of India. The major recommendations of this committee was introducing

ACHARYA INSTITUTE OF GRADUATE STUDIES

A project report on asset and liability management

ACHARYA INSTITUTE OF GRADUATE STUDIES

A project report on asset and liability management

A project report on asset and liability management

A project report on asset and liability management