A Project Report On Financial Performance Based On Ratios at HDFC Bank

A Study on Financial Performance based on Ratios
At HDFC Bank
Contents
Sl. No. Titles Page No.
I Chapter 1
Executive summary
Introduction
Statement of the Problem
Purpose of the Study
Scope of the study
Objectives of the Study
II Chapter 2
Organization Profile
Data Collection Method
Measuring tools
III Chapter 3
Analysis and interpretation
Findings
Suggestions
Conclusion
IV Chapter 4
Appendix
Bibliography
Babasabpatilfreepptmba.com Page 1
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EXECUTIVE SUMMARY
Finance is a life blood of business it is required from the establishment of the

business to liquidity or winding up of a business, so financial institutions played a
very important role on the operation of the business.
In the early days banking business was been confined to receiving of deposits and
lending of money. But now a modern banker under take wide variety of functions
to assist their customers. They provide various facilities to customers which
makes the transaction easy and comfortable.
Financial institutions such as banks, financial service companies, insurance
companies, securities firms and credit unions have very different ways of
reporting financial information. Running a bank is just difficult as analyzing it for
investment purposes.
In this report I made an effort to know the financial position of the HDFC
Bank .My topic is A study of financial performance based on ratio analysis
which means that a process to identify the financial performance of a firm by
properly establishing the relationship between the items of balance sheet and
profit or loss account. Thus, we can say that, Financial Analysis is a starting point
for making plans before using any sophisticated forecasting and planning.
Introduction
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When we observed the financial statement comprising the balance sheet and profit
or loss account is that they do not give all the information related to financial
operations of firm, they can provide some extremely useful information to the
extent that the balance sheet shows the financial position on a particular date in
terms of structure of assets, liabilities and owners equity and profit or loss
account shows the results of operation during the year. Thus the financial
statements will provide a summarized view of the firm. Therefore in order to learn
about the firm the careful examination of an valuable reports and statements
through financial analysis or ratio is required.
Meaning and Definition

Ratio analysis is one of the powerful techniques which are widely used
for interpreting financial statements. This technique serves as a tool for assessing
the financial soundness of the business. it can be used to compare the risk and
return relationship of firms of different sizes. The term ratio refers to the
numerical or quantitative relationship between two items/ variables.
The idea of ratio analysis was introduced by Alexander Wall for the first
time in 1919. Ratios are quantitative relationship between two or more variables
taken from financial statements.
Ratio analysis is defined as, the systemic use of ratio to interpret the financial
statement so that the strength and weakness of the firm a well as its historical
performance and current financial condition can be determined.
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In the financial statement we can find many items are co-related with each
other for example current assets and current liabilities, capital and long term debt,
gross profit and net profit purchase and sales etc
Basis of comparison
Ratios are relative figures reflecting the relationship between variables. They
enable analysts to draw conclusions regarding financial operations. The use of the
ratios, as a tool of financial analysis involves their comparison, for a single ratio
like absolute figures, fails to reveal the true position. For example, if in the case of
a firm, the return on capital employed is 15 percent in a particular year, what does
it indicate? Only if the figure is related to the fact that in the preceding year the
relevant return was 12 per cent or 18 percent, it can be inferred whether the
profitability of the firm has declined or improved. Alternatively, if we know that
the return for the industry as a whole is 10 percent or 20 percent, the profitability
of the firm in question can be evaluated. Comparison with related facts is,
therefore, the basis of ratio analysis. Four types of comparison are involved
i. Trend ratio
Trend ratios involve a comparison of the ratios of a firm over time, that
is, present ratios are compared with the past ratio of the same firm. Trend ratio
indicates the direction of change in the performance, improvement,
deterioration or constancy- over the years. This kind of ratio particularly
applicable to the items of profit and loss account. It is advisable that trends of
the sales and the net income may be studied in the light of two factors: the rate
of fixed expansion or secular trend in the growth of the business and the
general price level. it might be found in practice that a number of firms would
show a persistent growth over the period of the years.
ii. Intra firm comparison
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Intra firm comparison involving comparison of the ratio of the firm with
those of the others in the same line of business or for the industry as a whole
reflects its performance in relation to its competitors.
iii. comparison of items within a single years financial statement of a

firm
iv. Comparison with standard or plans.
STATE Of THE PROBLEM
Importance of the ratio analysis

As a tool of financial management, ratios are of crucial significance. The
importance of the ratio analysis lies in the fact that it presents facts on a
comparative basis and enables the drawing of inference regarding the
performance of a firm. Ratio analysis is relevant in assessing the performance of a
firm in respect of the following aspects
1. liquidity position
With the help of ratio analysis conclusion can be drawn regarding the
liquidity position of the firm. The liquidity position of the firm would be
satisfactory if it is able to meet its current obligation when they become due. a
firm can be said to have the ability to meet its short term liabilities if it has
sufficient liquidity funds to pay the interest on its short maturing debts usually
within a year as well as to repay the principal.
2. Long term solvency
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Ratio analysis is equally useful for assessing the long term viability
of a firm. This aspect of the financial position of a borrower is of concern to
long term creditor, security analysts and the present and potential owners of a
business. The long term solvency is measured by the leverage/ capital
structure profitability ratio which focus on earning power and operating
efficiency. Ratio analysis reveals the strength and weakness of the firm in this
respect.
3. Operating efficiency
Yet another dimension of the usefulness of the ratio analysis, relevant
from the view point of the management, is that it throws light on the degree of
the efficiency in the management and utilization of its assets. The various
activity ratios measure this kind of operational efficiency. In fact, the solvency
of a firm is, in the ultimate analysis, dependent upon the sales generated by
the use of its assets-total as well as its components.
4. Overall profitability
Unlike the outside parties which are interested in one aspect of the
financial position of a firm, the management is constantly concerned about the
overall profitability of the enterprise. That is, they are concerned about the
ability of the firm to meet its short term as well as long term obligations to its
creditors, to ensure a reasonable return to its owners and secure optimum
utilization of the assets of the firm. This is possible if an integrated view is
taken and all the ratios are considered together.
5. Inter-firm comparison
Ratio analysis not only throws the light on the financial position of a
firm but also serves as a stepping stone to remedial measures. This is made
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possible due to interfirm comparison and comparison with the averages. A

single figure of a particular ratio is meaningless unless it is related to some
standard or norm. One of the popular techniques to compare the ratio of the
firm with the industry average. It should be reasonably expected that the
performance of a firm should be in broad conformity with that of the industry
to which it belongs. An interfirm comparison would demonstrate the firms
position vis--vis its competitors.
6. Trend analysis
Finally, ratio analysis enables a firm to take the time dimension into
account. In other words, whether the financial position of a firm is improving
or deteriorating over the years. This is made possible by the use of the trend
analysis. The significance of a trend analysis of the ratio lies in the fact that
the analyst can know the direction of movement, that is, whether the
movement is favourable or unfavourable.
Guidelines for the financial statement analysis
1. Use ratio to get clues to ask the right questions: By themselves ratios rarely
provide answers, but they definitely help you to raise the right questions.
2. Be selective in the choice of the ratios you can compute scores of the
different ratios and easily drown yourself into the confusion. For most
purposes a small set of the ratios- three to seven- would suffice. Few ratios,
aptly chosen, would capture most of the information that you can derive from
the financial statements.
3. Employ proper benchmarks: It is a common practice to compare the ratios
(calculated from the set of financial statements) against some benchmarks.
This benchmark may be the average ratios of the industry or the ratios of the
industry leaders or the historic ratios of the firm itself.
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4. Know the tricks used by accountants since firms tend to manipulate the
reported income, you should learn about the devices employed by them.
5. Read the footnotes: Footnotes sometimes contain valuable information. They
may reveal the things that the management may try to hide. The more
difficult it to read a footnote, the more information- laden it may be.
6. Remember that financial statement analysis is an odd mixture of art and
science financial statement analysis cannot be regarded as a simple,
structured exercise. It is a process requiring care, thought, common sense, and
business judgment a process for which there are no mechanical substitutes.
ADVANTAGES AND DISADVANTAGES OF RATIO ANALYSIS:

Advantages:
Simplifies financial statements: Ratio Analysis simplifies the
comprehension of financial statements. Ratios tell the story of changes
in financial condition of the business.
Facilitates inter firm comparison: Ratio analysis provides data for
inter company comparison. Ratio highlights the association with
successful and unsuccessful firms. They also reveal strong and weak
companies, overvalued and undervalued companys.
Makes intra firm comparison possible: Ratio analysis also makes
possible comparison of the performance of different division of the
company. The ratio helpful in deciding about their efficiency.
Helps in planning: Ratio Analysis helps in planning and forecasting
over period of time a company develops certain norms that may
indicates future success/ failure. If relationship changes in firms data
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over different time periods. The ratio may provide clues on trends and
future problems.
Liquidity position: With the help of ratio analysis conclusions can be
drawn regarding liquidity position of the company. The liquidity
position of a company could be satisfactory if it is able to meet its
current obligations when they become due.
Long term solvency: Ratio analysis equally useful for assessing the
long-term financial viability of a firm. The long-term solvency is
measured by the leverage / capital structure and profitability ratios,
which focus on earning power and operating efficiency.
Disadvantages:
Ratio analysis is a widely used tool of financial analysis. Yet, it suffers from
various limitations. The operational implication of this is that while using ratios,
the conclusion should not been taken on their face value. Some of the limitation
which characterize ratio analysis are
1. Difficulty in comparison
One serious limitation of ratio analysis arises out of the difficulty
associated with their comparability. One technique that is employed is
interfirm comparison. But such comparisons are vitiated by different
procedures adopted by various firms. The difference may relate to
Difference in the basis of inventory valuation
Different depreciation methods (i.e. straight line vs. written down
basis)
Estimated working life of the assets, particularly of plant and
equipment
Amortization of intangible assets like goodwill, patents and so on.
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Amortization of deferred revenue expenditure such as preliminary

expenditure and discount on issue of shares
Capitalization of lease
Treatment of extraordinary items of income and expenditure and so
on
Secondly, apart from different accounting procedures, companies may have
different accounting periods, implying differences in the composition of the
assets, particularly the current assets. For these reasons, the ratios of two firms
may not be strictly comparable.
2. Impact of inflation
The second major limitation of the ratio analysis as a tool of financial
analysis is associated with price level changes. This, in fact is a weakness of
the traditional financial statement which are based on historical cost. An
implication of this feature of the financial statement as regards ratio analysis is
that assets acquired at different periods are, in effect, shown at different prices
in the balance sheet, as they are not adjusted for changes in the price level. As
a result, ratio analysis will not yield strictly comparable and therefore,
dependable results.
3. Conceptual Diversity
Yet another factor which affects the usefulness of ratios is that there
is difference of opinion regarding the various concepts used to compute the
ratios. there is scope for diversity of opinion as to what constitutes
shareholders equity, debt, asset, profit and so on. Different firms may use
these terms in different senses or the same firm may use them to mean
different things at different times.
Reliance on a single ratio for a particular purpose may not be a
conclusive indicator. for instance, the current ratio alone is not a adequate
measure of short-term financial strength; it should be supplemented by the
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acid test ratio, debtors turnover ratio and inventory and inventory turnover
ratio to have a real insight into the liquidity aspect.
Classification of ratio
1. Profitability Ratios
a. Ratio of profit to total income
b. Ratio of profit to deposits
c. Return on equity
d. Return on Capital
e. Ratio of return on assets
f. Net interest margin
g. Ratio of interest income to average working fund
h. Ratio of non-interest income
i. Cash dividend
j. EPS
2. Operating Ratios
a. Ratio of interest earned to interest paid
b. ratio of interest paid to total income
c. Ratio of staff expenses to total expenses
d. Ratio of total expenses to total income.
e. Ratio of operating expenses to average working fund
f. Ratio of interest expenses to average working fund
3. Solvency ratios
a. ratio of cash to deposit
b. ratio of investment to deposits
c. Credit deposit ratio
d. ratio of fixed assets to net worth
e. Current assets ratio
f. Quick ratio
g. Fixed assets ratio
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4. Safety ratio
a. ratio of Net NPA to Net advance
b. Capital adequacy ratio
DESIGN OF THE STUDY
Title of the project:

A Study of Financial Performance Based On Ratios at HDFC Bank Belgaum
Statement of the problem

Ratios are very useful to draw the conclusion so management wants to know
what are the factor contributing for the future growth and also wants to maintain
the same in the longer run and also improve the profitability and liquidity of the
organization.
Research problem
To know the financial performance of the organization through ratio analysis, by
comparing three years financial performance of the bank
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Purpose of the study

A financial services sector plays a critical role in fulfilling the needs of growing
and increasingly diverse economy, offering high quality services to business and
individual alike. Though Indian banking system registered commendable progress
in terms of geographical and functional coverage, its performance in terms of
operational efficiency and viability still leaves considerable room for
improvement
A banks balance sheet and income statement are valuable
information sources for identifying risk taking and assessing risk management
effectiveness. Although amounts found on these statements does not provide
valuable insights of performance so ratio analysis is required for determining
good or bad performance of bank and also for determining its causes. The study
includes the calculation of different financial ratios. It compares three years
financial statements of the company to know its performance in these different
years.
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Scope of the study

The scope of the study is limited to financial aspects of HDFC bank
OBJECTIVES OF STATEMENT
To know the financial performance of the organization
To study different ratios in HDFC bank
To determine the profitability and liquidity of the bank through ratios
analysis
To compare the present and previous years performance of HDFC bank
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ANISATION PROFILE
HDFC is India's premier housing finance company and enjoys an impeccable

track record in India as well as in international markets. Since its inception in
1977, the Corporation has maintained a consistent and healthy growth in its
operations to remain the market leader in mortgages. Its outstanding loan portfolio
covers well over a million dwelling units. HDFC has developed significant
expertise in retail mortgage loans to different market segments and also has a
large corporate client base for its housing related credit facilities. With its
experience in the financial markets, a strong market reputation, large shareholder
base and unique consumer franchise, HDFC was ideally positioned to promote a
bank in the Indian environment.
The Housing Development Finance Corporation Limited (HDFC) was amongst

the first to receive an 'in principle' approval from the Reserve Bank of India (RBI)
to set up a bank in the private sector, as part of the RBI's liberalization of the
Indian Banking Industry in 1994. The bank was incorporated in August 1994 in
the name of 'HDFC Bank Limited', with its registered office in Mumbai, India.
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HDFC Bank commenced operations as a Scheduled Commercial Bank in January

1995.
BROAD AREAS IN WHICH IT OPERATES
The Bank operates in three segments: retail banking, wholesale banking and
treasury services. The retail banking segment serves retail customers through a
branch network and other delivery channels. The wholesale banking provides
loans and transaction services to corporate and institutional customers. The
treasury services segment undertakes trading operations on the proprietary
account, foreign exchange operations and derivatives trading. The Bank operates
in India.
Retail Banking
This segment raises deposits from customers and makes loans and provides
advisory services to such customers. The objective of the Retail Bank is to
provide its target market customers a 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 service and delivered to the customers
through the growing branch network, as well as through alternative delivery
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channels like automated teller machines (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 been designed
keeping in mind needs of customers who seek distinct financial solutions,
information and advice on various investment avenues. The Bank also has an
array of retail loan products, including auto loans, loans against marketable
securities, personal loans and loans for two-wheelers. It is also a provider of
depository participant (DP) services for retail customers, providing customers the
facility to hold their investments in electronic form.
HDFC Bank has launched an international debit card in association with VISA
(VISA Electron) and also issues the MasterCard Maestro debit card. The Bank
launched its credit card business during the fiscal year ended March 31, 2001. By
September 30, 2005, the bank had a total card base (debit and credit cards) of 5.2
million cards. The Bank is also engaged in the merchant acquiring business with
over 50,000 point-of-sale (POS) terminals for debit/credit cards acceptance at
merchant establishments.
Wholesale Banking
, The Bank's target market ranges from large, blue-chip manufacturing companies
in the Indian corporate to small and mid-sized corporates and agri-based
businesses. For these customers, the Bank provides a range of commercial and
transactional banking services, including working capital finance, trade services,
transactional services and cash management. The bank is also a provider of
structured solutions, which combine cash management services with vendor and
distributor finance for facilitating superior supply chain management for its
corporate customers. It provides cash management and transactional banking
solutions to corporate customers
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Treasury Services
Within this business, the bank has three main product areas: Foreign Exchange
and Derivatives, Local Currency Money Market & Debt Securities, and Equities.
Risk management information, advice and product structures, as well as fine
pricing on various treasury products are provided through the Bank's Treasury
team. The Treasury business is responsible for managing the returns and market
risk on this investment portfolio.
MISSION
HDFC Bank's mission is to be a World-Class Indian Bank which is

benchmarked against international standards and best practices in terms of
product offerings, technology, service levels, risk management and audit
compliance.
Objectives of HDFC 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 bank's risk appetite. The bank is committed to maintain the highest level of
ethical standards, professional integrity, corporate governance and regulatory
compliance. HDFC Bank's business philosophy is based on four core values -
Operational Excellence, Customer Focus, Product Leadership and People.
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BUSINESS STRATEGY
Increase our market share in Indias expanding banking and financial
services industry by following a disciplined growth strategy and delivering
high quality customer service.
Leverage our technology platform and open, scaleable systems to deliver
more products to more customers and to control operating costs.
Maintain our current high standards for asset quality through disciplined
credit risk management.
Develop innovative products and services that attract our targeted
customers and address inefficiencies in Indian financial sectors.
Continue to develop products and services that reduce our cost of funds
and
Focus on healthy earnings growth with low volatility.
CAPITAL STRUCTURE
Authorized capital of HDFC Bank is Rs.450 crore (Rs.4.5 billion). The paid-up
capital is Rs.311.9 crore (Rs.3.1 billion). The HDFC Group holds 22.1% of the
bank's equity and about 19.4% of the equity is held by the ADS Depository (in
respect of the bank's American Depository Shares (ADS) Issue). Roughly 31.3%
of the equity is held by Foreign Institutional Investors (FIIs) and the bank has
about 190,000 shareholders. The shares are listed on the The Stock Exchange,
Mumbai and the National Stock Exchange. The bank's American Depository
Shares are listed on the New York Stock Exchange (NYSE) under the symbol
"HDB
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VARIOUS SERVICES
FOREX AND TRADE SERVICES
., HDFC Bank has a range of products and services that one can choose from to
transact smoothly.
The following are different methods of transacting in foreign exchange and
remitting money.
Travelers cheques
Foreign currency cash.
Foreign currency drafts
Cheque deposits
Remittances
Cash to master
Trade services
Foreign services branch locator
Important guidelines and schedules

All Foreign Exchange transactions are conducted by strictly adhering to RBI
guidelines. Depending on the nature of your transaction or point of travel, you
will need to understand your Foreign Exchange limits.
LOANS
Home Loans
Personal Loans
Two Wheeler Loans
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New Car Loans

Used Car Loans
Overdraft Against Car
Express Loans
Loans Against Securities
Loans Against Property
PERSONAL BANKING
Savings Accounts
These Accounts are primarily meant to inculcate a sense of saving for the future,
accumulating funds over a period of time. Whatever may be the occupation, bank
is confident that customer will find the perfect banking solution. Open an account
in your name (customers name) or register for one jointly with a family member
today.
Current Accounts
Now, with an HDFC Bank Current Account, experience the freedom of multi-city
banking! Customer can have the power of multi-location access to his account
from any of banks 500 branches in 220 cities. Not only that, he can do most of
his banking transactions from the comfort of his office or home without stepping
out.
At HDFC Bank, it understands that running a business requires time and money,
also that customers business needs are constantly evolving. That's where it comes
in. It provides him with a choice of Current Account options to exclusively suit
his business - whatever the size or scope.
Fixed Deposits
Long-term investments form the chunk of everybody's future plans. An alternative
to simply applying for loans, fixed deposits allow the customer to borrow from his
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own funds for a limited period, thus fulfilling his needs as well as keeping his
savings secure.
As per the finance (No 2) Act 2004, all fees & charges mentioned in the
Tariffs, Charges or Fees Brochures will attract Service Tax @10% & Education
Cess @2% of the service tax amount effective 10th September 2004. The same
will appear as separate debits in the statements.
PRIVATE BANKING
HDFC Bank offers Private Banking services to high net worth individuals and
institutions. Banks team of seasoned financial and investment professionals
provide objective guidance backed by thorough research and in-depth analysis
keeping in mind customers financial goals.
Multiple Recognition from Euro money

At HDFC Bank, they have always strived towards providing exceptional service
to each of their esteemed customers. As testament to this dedication, they have
earned the following ranks in a recently conducted Euromoney Survey.
Rated as the best private bank in the super effluent category in India
HDFC Bank Investment Advisory Services - Helping you take your
Investment portfolio further.
Dedicated investment advisor
HDFC Private Banking service involves a high degree of personalization.
When customer avail of this facility, a dedicated Investment Advisor serves
him. This seasoned finance professional adds value to his portfolio by keeping
him up to date with financial markets and investment opportunities
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MUTUAL FUNDS PRODUCTS SCHEMES

Equity fund
HDFC growth fund
HDFC long term Advantage fund
HDFC Index fund
HDFC Capital Builder fund
HDFC tax saver
HDFC top 200 funds
HDFC core & satellite fund
HDFC premier multi-Cap fund
HDFC long term equity fund
Balanced Fund
HDFC Childrens gift fund investment plan
HDFC childrens gift fund saving plan
HDCF Balanced Fund
HDCF Prudence Fund
Debt Fund
HDCF Income fund
HDCF liquid fund
HDCF gift fund short term plan
HDCF gift fund long term plan
HDCF short term plan
HDCF floating rate income fund short term plan
HDCF floating rate income fund long term plan
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HDCF liquid fund- premium plan

HDCF liquid fund- premium plus plan
HDCF high interest fund
HDCF high interest fund short term plan
HDCF cash management fund saving plan
HDCF cash management fund call plan
HDCF MF monthly plan
PAYMENT SERVICES
With HDFC Bank's payment services, one can bid goodbye to queues and paper
work. Its range of payment options make it easy for customer to pay for a variety
of utilities and services.
Verified by visa
If one wants to be worry free for his online purchases. Now he can shop
securely online with his existing Visa Debit/Credit card.
Net safe
Now shop online without revealing your (customers) HDFC Bank Credit Card
number.
Prepaid refill
If a person is a HDFC Bank Account holder and a prepaid customer, he can
now refill his Prepaid Mobile card with this service.
Bill pay
One can pay his telephone, electricity and mobile phone bills at his convenience.
Through the Internet, ATMs, his mobile phone and telephone - with Bill Pay, banks
comprehensive bill payments solution
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Visa Bill Pay

One can pay his utility bills from the comfort of his home! Pay using his
HDFC Bank Visa credit card and forget long queue and late payments forever
Insta pay
One can Pay his bills, make donations and subscribe to magazines without
going through the hassles of any registration.
Direct pay
Shop or Pay bills online without cash or card. Debit your(customers ) account
directly with banks Direct Pay service!
Smart pay(with credit cards)
With Smart Pay, paying customers electricity, telephone, mobile phone, water
bills, gas and insurance premia payments becomes easy like never before.
Visa money transfer
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One can transfer funds to any Visa Card (debit or credit) within India at his
own convenience through HDFC Bank's Net Banking facility.
e-Monies Electronic Funds Transfer
Transfer funds from customers account to any account in any Bank in India
at 15 locations - FREE of cost!
Online payment of excise and service tax
One can make his Excise and Service Tax payments at his own convenience.
PREFFERED/CLASSIC BANKING
If a customer expects more from everything, even HDFC bank, will invite him
into the world of exclusive banking. Where he will never again have to wait to
be served. With HDFC Bank Preferred Programme, his comfort always comes
first.
Ideal for seasoned professionals or businessmen, this programme will provide

him with a banker dedicated to take care of all his banking and investment
needs. It also means he get preferential rates on various banking products and
other exclusive benefits.
HDFC BANK CLASSIC BANKING

If a person wants to experience banking beyond the ordinary, our HDFC Bank
Classic Programme is just for him. Becoming an HDFC Bank Classic
customer entitles him to a host of benefits, including a bouquet of
preferentially priced products and specialized wealth management solutions.
AWARDS AND ACHIEVMENTS
HDFC Bank began 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
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and service excellence would help them get there. Today, they are proud to say
that they are well on the way towards that goal.
2006
Business Today Best Bank in India.

Forbes Magazine One of Asia Pacific's Best 50 companies.
Businessworld Best listed Bank of India.
The Asset Best Domestic Bank.
Magazine's Triple A
Country Awards
Asiamoney Awards Best Local Cash Management Bank in Large and
Medium segments.
Euromoney Awards "Best Bank" in India.
2005
Asia money Awards Best Domestic Commercial Bank

Asia money Awards Best Cash Management Bank - India .
The Asian Banker Retail Banking Risk Management Award in India.
Excellence
Hong Kong-based Best Bank India
Finance Asia
magazine
Economic Times "Company of the Year" Award for Corporate
Awards Excellence.
Asiamoney also named the bank:
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Best Local Cash Management Bank in India 2004 - US$11-100m

Best Local Cash Management Bank in India 2004 - >US$501m
Best Local Cash Management Bank in India 1989-2004 (poll of polls)
Best Overall Domestic Trade Finance Services in India 2004
Most Improved company for Best Management Practices in India 2004
The Business Today-KPMG Survey published in the leading Indian business

magazine Business Today has named HDFC Bank "Best Bank in India" for the
third consecutive year in 2005.
The Asset magazine named HDFC Bank "Best Cash Management Bank" and
"Best Trade Finance Bank" in India, in 2006.
HDFC Bank named the "Most Customer Responsive Company - Banking and
Financial Services in The Economic Times - Avaya Global Connect Customer
Responsiveness Awards 2005"
HDFC Bank has been named Best Domestic Bank in India in The Asset Triple A
Country Awards 2005.
HDFC Bank has been named Best Domestic Bank in India Region in The Asset
Triple A Country Awards 2004 and 2003.
In 2004, HDFC Bank was selected by BusinessWorld as "One of India's Most

Respected Companies" as part of The Business World Most Respected Company
Awards 2004.
In 2004, Forbes Global again named us in its listing of Best Under a Billion, 100
Best Smaller Size Enterprises in Asia/Pacific and Europe, in its November 1, 2004
issue.
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In 2004, HDFC Bank won the award for "Operational Excellence in Retail
Financial Services" - India as part of the Asian Banker Awards 2003.
In 2003, Forbes Global named us in its ranking of "Best Under a Billion, 200 Best
Small Companies for 2003".
Leading business newspaper The Financial Express named HDFC Bank the "Best
New Private Sector Bank 2003" in the FE-Ernst & Young Best Banks Survey
2003.
Leading Personal Finance Magazine in India Outlook Money named HDFC Bank
the "Best Bank in the Private Sector" for the year 2003.
Leading Indian business magazine Business Today in a survey rated us "Best

Bank in India" 2003, and "Best Private Sector Bank" in India in 1999.
NASSCOM and economictimes.com have named us the 'Best IT User in Banking'

at the IT Users Awards 2003.
There have been some other proud moments as well:
London-based Euromoney magazine gave us the award for "Best Bank - India"
in 1999, "Best Domestic Bank" in India in 2000, and "Best Bank in India" in
2001 and 2002
Asiamoney magazine has named us "Best Commercial Bank in India 2002".
For our use of information technology we have been recognized as a
"Computerworld Honors Laureate" and awarded the 21st Century
Achievement Award in 2002 for Finance, Insurance & Real Estate category by
Computerworld, Inc., USA.
Our technology initiative has been included as a case study in their online
global archives.The Economic Times has conferred on us The Economic
Times Awards for Corporate Excellence as the Emerging Company of the Year
At HDFC Bank
2000-01.
Leading Indian business magazine Business India named us "India's Best
Bank" in 2000.
In the year 2000, leading financial magazine Forbes Global named us in its list
of "The 300 Best Small Companies" in the world and as one of the "20 for
2001" best small companies in the world.
CORPORATE GOVERNARCE
HDFC Bank recognizes the importance of good corporate governance, which is

generally accepted as a key factor in attaining fairness for all stakeholders and
achieving organizational efficiency. This Corporate Governance Policy, therefore,
is established to provide a direction and framework for managing and monitoring
the bank in accordance with the principles of good corporate governance.
BOARD OF DIRECTORS
At HDFC Bank
Mr. Jagdish Capoor, Chairman

Mr. Aditya Puri , Managing Director
Mr. Keki Mistry
Dr. (Mrs.) Amla Samanta
Mr.Anil Ahuja
Dr. Venkat Rao Gadwai
Mr.Vineet Jain
Renu Karnad
Mr.Aravind Pande
Mr. Ranjan Kanpur(w.e.f January 9, 2004)
Mr. Bobby Parikh (w.e.f.January 9,2004)
VICE PRESIDENT(LEGAL)& COMPANY SECRETARY

Mr. Sanjay Dongre
AUDITOTS
Mr. P.C. Hansotia&Co
(Chartered accountants)
REGISTERED OFFICE
HDFC BANK House
Senapati Bapat Marg
Lower Parel
Mumbai 400013
Tel No: 56521000
Fax No: 24960739
Web site : www.hdfcbank.com
At HDFC Bank
Methodology
Data Collection method

Primary Data : The information Collected from Personnel Interaction with
manager and other staff
Secondary:- Annual report of HDFC bank and websites
Measurement technique/ Statistical tool

1. Accounting ratio
2. Financial statement of the company
Analytical technique
At HDFC Bank
Statistical technique used for calculation of ratios is in terms of percentage

method.
At HDFC Bank
I. Profitability Ratio
This ratio shows the earning ability of organization. The operating efficiency
of the firm and its ability to ensure adequate return to its shareholders depends
ultimately on the profits earned by it. The profitability of the firm can be
measured by its profitability ratio. In other words profitability ratios designed to
provide answers to questions such as
a) Is profit earned by the firm adequate?
b) What rate of return does it represents?
c) What is the rate of profit for various divisions and segments of the firm?
d) What is the rate of return to equity shareholders?
The profitability of the firm can be determined on the following ratios
At HDFC Bank
1. Ratio of Net profit to total income
This ratio implies that the percentage of profit earned by the

organization
Out of its income.
= Net profit
X 100
Total income
(Rupees
in lakhs)
At HDFC Bank
Year 2006-2007 2007-2008 2008-2009

Profit (Rs) 50950 66556 87078
Total income(Rs) 302896 374483 559932
Ratio (%) 16.82% 17.7% 15.55%
Ratio of Net profit to total income

Percentage
18.00% 17.70%
16.82%
17.00%
16.00% 15.55% Ratio (%)
15.00%
14.00%
2006- 2007- 2008-
2007 2008 2009
year
Interpretation
The ratio of profit to total income in the first year (2006-07) was
16.8% and in 07-08 ratio increased 17.7% due to increase in interest income
and non interest
income but in 2008-09 ratio decreased 15.55% because there was loss on
revaluation of investment and increase in expenses.
2. Ratio of Net profit to total deposit

This ratio shows organization earning on deposits
(Rupees in lakhs)
Year 2006-2007 2007-2008 2008-2009
Profit (Rs) 50950 66556 87078
At HDFC Bank
Total Deposit (Rs) 3040886 3635425 5579682

Ratio (%) 1.67% 1.83% 1.56%
Ratio of net profit to total deposit
1.90% 1.83%
percentage
1.80%
1.70% 1.67%
Ratio (%)
1.60% 1.56%
1.50%
1.40%
2006-2007 2007-2008 2008-2009
year
Interpretation
The ratio of profit to deposits in the year 06-07 was 1.67% it was increased in 07-
08 by 1.83% and it decreased to 1.56% compared to last year it was more. This
shows that the deposits have increased at a faster rate than income.
3. Ratio of return on equity

This ratio measures the return on the owners (both equity and preference
shareholders) invested in the firm.
= PAT
Net worth (rupees in lakhs)
Year 2006-2007 2007-2008 2008-2009
Profit (Rs) 50950 66556 87078
Net worth (Rs) 181580 340238 444855
Ratio (%) 28.05% 19.56% 19.57%
At HDFC Bank
Return on equity
30.00% 28.05%
percentage 25.00%
19.56% 19.57%
20.00%
15.00% Ratio (%)
10.00%
5.00%
0.00%
2006-2007 2007-2008 2008-2009
year
Interpretation
Return on equity in the first year was 28.05% it has decreased to 19.56% to
19.57% in the year 07-08 and 08-09 compared to first year. Return on equity is
constant for the year. This indicates generation of return for capital invested by
owner of the company is constant for last two year. Major portion of net profit is
transfer to general reserve which leads to decrease in the return of shareholder.
4. Return on Asset
An indicator of how profitable a company is relative to its total assets. ROA
gives an idea as to how efficient management is at using its assets to generate
earnings. Calculated by dividing net income by its total assets
= Net income
Total Assets (rupees in lakhs)
Year 2006-2007 2007-2008 2008-2009
Profit (Rs) 50950 66556 87078
Total Assets (Rs) 4230699 5142900 7350639
Ratio (%) 1.20% 1.29% 1.18%
At HDFC Bank
Ratio of return on assets
1.29%
1.30%
Percentage
1.25%
1.20%
1.20% 1.18% Ratio (%)
1.15%
1.10%
2006-2007 2007-2008 2008-2009
Year
Interpretation
Ratio of return on asset in first year was 1.20% and in second year it increased to
1.29% it indicates that company is better at converting its investment into profit
but in third year earning generated from invested capital has been reduced to
1.18% this indicates company is slow in converting its investment into profit.
5. Return on capital employed
This ratio shows the return on capital employed (share capital, reserve,
retained earning and long term borrowings) used in the organization.
= PBT (profit before tax)
Capital employed (rupees in
lakhs)
Year 2006-2007 2007-2008 2008-2009
PBT (Rs) 71896 97894 125351
Capital employed 412362 819239 730703
(Rs)
Ratio (%) 17.43% 11.94% 17.15%
At HDFC Bank
Ratio of return on capital employed
20.00% 17.43% 17.15%

Percentage
15.00% 11.94%
10.00% Ratio (%)
5.00%
0.00%
2006-2007 2007-2008 2008-2009
Year
Interpretation
Return on capital for the first year 06-07 was 17.43% which was decline in
second year and increased in third year by 17.15%. This indicates that earning
capacity of the capital employed is satisfactory because of borrowing and long
term debts are increased.
6. Net interest Margin

Net interest margin is the gross margin on a banks lending and investment
activities. It tells you the average interest margin that the bank is receiving by
borrowing and lending funds. It is determined as.
Net interest income = total interest income- total interest expense
= Net interest income X 100
Total earning assets
Year 2006-2007 2007-2008 2008-2009
Net interest 133788 177793 254584
income (Rs)
Total asset (Rs) 4230699 5142900 7350639
Ratio (%) 3.16% 3.45% 3.46%
At HDFC Bank
Net interest margin
3.50% 3.45% 3.46%

Percentage
3.40%
3.30%
Ratio (%)
3.20% 3.16%
3.10%
3.00%
2006-2007 2007-2008 2008-2009
Year
Interpretation
Ratio of net interest margin in first year was 3.16% it has increased in constant
rate by 3.45% and 3.46% in second and third year. This indicates that average
interest margin the bank is receiving by borrowing and lending fund is constant
and satisfactory.
7. Ratio of interest income to average working fund

It is a ratio of interest income to average working fund. It shows
how income is earned from average asset.
Average working fund= opening total asset + closing total asset / 2
Interest income
= X 100
Average working fund
(Rupees in
lakhs)
Year 2006-2007 2007-2008 2008-2009

At HDFC Bank
Interest 254893 309349 447534

income(Rs)
Average working 3636553.5 4686799.5 6246769.5
fund (Rs)
Ratio (%) 7.0% 6.6% 7.16%
Ratio of interest income to AWF
7.40%
Percentage
7.16%
7.20%
7.00%
7.00%
6.80% Ratio (%)
6.60%
6.60%
6.40%
6.20%
2006-2007 2007-2008 2008-2009
Year
Interpretation
Ratio of interest income to AWF in first year was 7.0% in second year it was
6.60% and it increased in third year by 7.16% compared to previous year. Increase
in interest income due to increase in interest/ discount on advance, income from
investment. This also indicates interest earned is more.
8. Ratio of non-interest income to Average working fund
This ratio is determined by dividing non-interest income by AWF.
This tells how much is the non-interest income (other income) from average
working fund.
= Non-interest income X 100
At HDFC Bank
(Rupees in lakhs)
Year 2006-2007 2007-2008 2008-2009
Non interest 48003 65134 112398
income(Rs)
AWF (Rs) 3636553.5 4686799.5 6246769.5
Ratio (%) 1.32% 1.38% 1.79%
Ratio of non interest income to AWF
2.00% 1.79%
percentage
1.50% 1.32% 1.38%
1.00% Ratio (%)
0.50%
0.00%
2006-2007 2007-2008 2008-2009
year
Interpretation
Ratio of non interest income to AWF in 06-07 was 1.32% and it increased to
1.38% to 1.79% in 07-08 and 08-09 because of increase in profit on sale of
investment, commission, exchange & brokerage, Miscellaneous income
etc.increase in non interest income increase the profitability of the firm. There is
significant growth in non operating income in year 2009.
At HDFC Bank
9. Ratio of Cash Dividend to Net income
A cash dividend to net income indicates how much of earnings

are paid out to shareholders. Conversely, it indicates how much of earnings
are retained to build the banks capital account. Smaller banks, because they
have limited capital market access, tend to rely more heavily on earnings
retention to build capital.
Cash Dividend
Net income
(Rupees in
lakhs)
Year 2006-2007 2007-2008 2008-2009
Cash dividend __ 26 __
(Rs)
Net income(Rs) 50950 66556 87078
Ratio (%) __ __
Cash dividend for 06-07 is not paid. Dividend of previous is paid in 07-08
26Lac is paid out of net income. In 2008-2009 dividend is not declared
At HDFC Bank
10. EPS (earning per share)

It measures the profit available to equity shareholders on a per share
basis, that is, the amount that they can get on every share held. It is calculated
by dividing the profits available to shareholders by the number of outstanding
shares. The profits available to the ordinary shareholders are represented by
net profits after taxes and preference dividend. Thus
EPS = PAT (profit after tax)
Number of shares outstanding
Year 2006-2007 2007-2008 2008-2009
PAT (Rs) 50950 66556 87078
No. of shares 283806538 290383946 311939366
outstanding (Rs)
Ratio (Rs) 17.95 22.91 27.91
Earning per share
30 27.91
25 22.91
Perce
ntage
20 17.95
15 Ratio (Rs)
10
0
2006-2007 2007-2008 2008-2009
Year
Interpretation
Earning per share in 06-07 was 17.95 Rs. it increased by 22.91 and 27.91 Rs. for
last two years. EPS simply shows the profitability of the firm on a per share basis.
II. Operating ratio
At HDFC Bank
This ratio gives the operation efficiency of the organization. The efficiency can be
determined by following ratios.
1. Ratio of interest earned to interest paid

This ratio shows the percentage of interest earned on loans and advances
and interest paid on deposits.
= Interest earned
Interest paid
(Rupees in lakhs)
Year 2006-2007 2007-2008 2008-2009
Interest earned 254893 309349 447534
(Rs)
Interest paid (Rs) 121105 131556 192950
Ratio (times) 2.10 2.35 2.31
Ratio of interest earned to interest paid
2.4
2.35
2.35 2.31
Percentage
2.3
2.25
2.2
Ratio (times)
2.15
2.1
2.1
2.05
1.95
2006-2007 2007-2008 2008-2009
Year
Interpretation
Ratio of interest earned to interest paid in first was 2.10% that was very less
compared to second year it grew to 2.35% and third year decline by 4% because
interest paid on borrowing was more. Firms earning capacity is satisfactory.
At HDFC Bank
2. Ratio of interest paid to total income

This ratio shows the percentage of interest paid to deposits accepted.
= interest paid
X 100
Total income
(Rupees in lakhs)
Year 2006-2007 2007-2008 2008-2009

Interest paid (Rs) 121105 131556 192950
Total income (Rs) 302896 374483 559932
At HDFC Bank
Ratio (%) 39.98% 35.13% 34.45%
Ratio of interest paid on total income
42.00%
percentage
39.98%
40.00%
38.00%
36.00% 35.13% Ratio (%)
34.45%
34.00%
32.00%
30.00%
2006-2007 2007-2008 2008-2009
Year
Interpretation
Ratio of interest paid on total income in first year was 39.98% and second and
third year was constant. In first interest paid on borrowing was more by this
even the interest earned was decline. Second and third year, firms interest
paid is constant it is satisfactory.
3. Ratio of staff expense to total expense
This ratio shows the percentage of staff expense to total expense.
= Staff expense
X 100
At HDFC Bank
Total expense
(Rupees
in lakhs)
Year 2006-2007 2007-2008 2008-2009

Staff expenses 20409 27667 48682
(Rs)
Total expenses 251946 307927 472854
(Rs)
Ratio (%) 8.10% 8.98% 10.29%
Ratio of staff expenses to total

expenses
percentage
12.00% 10.29%
10.00% 8.98%
8.10%
8.00%
6.00% Ratio (%)
4.00%
2.00%
0.00%
2006-2007 2007-2008 2008-2009
Year
Interpretation
Ratio of staff expenses to total expenses in the year 06-07 was 8.10% it has been
increased to 8.98% to 10.29% in the last two year. This indicates payment for the
employees are increasing. Hence profit per employee is increasing.
4. Ratio of total expenditure to total income

This shows the percentage of total expenses to total income
At HDFC Bank
= Total expenditure
X 100
Total income
Year 2006-2007 2007-2008 2008-2009

Total expenditure 251946 307927 472854
(Rs)
Total income (Rs) 302896 374483 559932
Ratio (%) 83.17% 82.22% 84.44%
Interpretation
At HDFC Bank
The ratio of total expenditure to total income in the year 06-07 was 83.17% and it
was decreased in the second year by 82.22% but in third year total expenditure
increased to 84.44% because of increase in interest expenses , operating expenses
and there was loss on revaluation of investments.
5. Ratio of operating expenses to Average working fund
Operating expense are those expenses which are connected to

running of the organization it includes staff salary, rent, taxes, printing and
stationary, advertisement etc. this ratio shows the percentage of operating
expenses to AWF.
= Operating Expenses X 100
Year 2006-2007 2007-2008 2008-2009

Operating 81000 108540 169109
expenses(Rs)
Average working 3636553.5 4686799.5 6246769.5
fund (Rs)
Ratio (%) 2.22% 2.31% 2.70%
At HDFC Bank
Ratio operating expense to AWF
3.00% 2.70%
Percentage 2.50% 2.22% 2.31%
2.00%
1.50% Ratio (%)
1.00%
0.50%
0.00%
2006-2007 2007-2008 2008-2009
Year
Interpretation
Ratio of operating expenses to AWF in first year was 2.22% it has increased to
2.31% to 2.70% in 07-08 and 08-09 due to increase in Rent, taxes, lightning,
printing & stationary, Advertisement and publicity, Repairs and maintenance
etc.Along with interest income and non interest income even operating expenses
is growing year by year. By this percentage of profit will decrease.
At HDFC Bank
6. Ratio of interest expenses to Average working fund

This ratio is determined by dividing interest expenses to AWF. It
indicates what percentage or rate of interest is paid from working fund.
= Interest Expenses X 100
Year 2006-2007 2007-2008 2008-2009

Interest exp(Rs) 121105 131556 192950
Average working 3636553.5 4686799.5 6246769.5
fund (Rs)
Ratio (%) 3.33% 2.80% 3.08%
At HDFC Bank
Ratio of interest expenses to AWF
3.40% 3.33%
percentage
3.20% 3.08%
3.00%
2.80% Ratio (%)
2.80%
2.60%
2.40%
2006-2007 2007-2008 2008-2009
year
Interpretation
Ratio of interest expenses to AWF in 06-07 was 3.33% and in second year it
decrease to 2.80% and in third year it increased to 3.08% compared to last year
due to increase in interest expenses and operating expense. If we compare interest
income and interest expense, the percentage of interest paid is more than interest
earned so it is unfavorable.
III. Solvency ratio
This ratio helps to know the liquidity of the firm i.e. ability to meet its short term
obligations or current liabilities. The solvency of the firm can be determined in
the following ratios.
1. Ratio of Total cash to total deposits

This ratio helps to find what extent the deposits used and cash balance
in hand. The conversion into cash while payment of deposits is very important for
any bank. If there is more need of deposit liquidity the bank as to keep more funds
in cash. This ratio can be calculated with the following formula.
At HDFC Bank
= Total Cash
X 100
Total deposits
(Rupees
in lakhs)
Year 2006-2007 2007-2008 2008-2009
Total cash (Rs) 254198 265013 330661
Total deposits (Rs) 3040886 3635425 5579682
Ratio (%) 8.35% 7.28% 5.92%
Ratio of total cash to total deposits
10.00%
percentage
8.35%
8.00% 7.28%
5.92%
6.00%
Ratio (%)
4.00%
2.00%
0.00%
2006-2007 2007-2008 2008-2009
Year
Interpretation
Ratio of cash to total deposits in the first year 06-07 was 8.35% it was decreased
by 7.28% to 5.92% in 07-08 and 08-09. Compared to the first year ratio has
reduced year by year it indicates that firm has no idle fund in bank. But still firm
has to maintain cash reserve to meet its current obligation.
At HDFC Bank
2. Ratio of investment to total deposits

This ratio shows at what extent the firm invested its deposits on securities
from its total deposits.
= Total investment
X 100
Total deposits
Year 2006-2007 2007-2008 2008-2009

Total investment 1936346 1934981 2839396
(Rs)
Total deposits (Rs) 3040886 3635425 5579682
Ratio (%) 63.32% 53.22% 50.88%
At HDFC Bank
Ratio of total investment to total deposits
percentage
70.00% 63.32%
60.00% 53.22% 50.88%
50.00%
40.00%
Ratio (%)
30.00%
20.00%
10.00%
0.00%
2006-20072007-20082008-2009
Year
Interpretation
Ratio of total investment to total deposits for the first year stood at healthy i.e.
63.32% and in second and third year it decreased to 53.22% to 50.88% because
of decreased shares received, other approved securities and decreased in
certificate of deposits.
3. Credit deposits ratio
This ratio shows the percentage of loans and advances provided by bank
from its deposits. This ratio is purely depending upon the lending policy of the
bank and also the loan requirements of bank customer. If there is increase in loans
demand higher then the likely rise in deposits the bank has to keep more of its
funds in liquid assets to meet the increase in the loan demand and this is also
depending upon the nature of loan and type of deposit of the bank.
= loans and advances
Total deposits
Year 2006-2007 2007-2008 2008-2009

Loan and 1774451 2556630 3506126
At HDFC Bank
advance (Rs)
Total deposits 3040886 3635425 5579682
(Rs)
Ratio (times) 0.58 0.70 0.62
credit deposit ratio
0.8
0.7
0.7
0.62
Percentage
0.58
0.6
0.5
0.4 Ratio (times)
0.3
0.2
0.1
0
2006-2007 2007-2008 2008-2009
Year
Interpretation
Ratio of credit to deposits in 06-07 was 0.58 times and it was increased in 07-
08 by 0.70 times but in 08-09 it decreased to 0.62 times compare to previous
year it was more. This indicates that banker has lag behind in the loan and
advances. Therefore measures are to taken to increase the loan and advance to
the customer.
At HDFC Bank
4. Ratio of loans to Total assets
The loans to total assets ratio measures the total loans as a

percentage of total assets. The higher this ratio indicates a bank is loaned up and
its liquidity is low. The higher the ratio more risky the bank may be to higher
defaults. This figure is determined as follows:
= Loans X 100
Total asset
Year 2006-2007 2007-2008 2008-2009

Total loan (Rs) 1455054 2091063 3368449
Total Assets (Rs) 4230699 5142900 7350639
Ratio (%) 34.39% 40.65% 45.82%
At HDFC Bank
Ratio of total loans to total assets
50.00% 45.82%
percentage
40.65%
40.00% 34.39%
30.00%
Ratio (%)
20.00%
10.00%
0.00%
2006-2007 2007-2008 2008-2009
year
Interpretation
Ratio of loans to total assets in first year was 34.39% it increased to 40.65% to
45.82% in last two year. Increase in loan out of total asset indicates bank is
loaned up and its liquidity is low. This show that bank is at risk side by this
NPA also increases over a period of time. This may also affect the earning of
the bank and bank may not be able to recover interest and principal amount.
At HDFC Bank
5. Ratio of provision for loan losses to Average assets

The provision for loan losses to average assets is a charge to
current earnings to build the allowance for loan and lease losses. The ALL is a
general reserve kept by the bank to absorb loan losses. This important figure
is a reserve account to cover unexpected default on loans by borrowers. These
are generally referred to as nonperforming loans.
= Provision for loan loss X 100

Average assets
Year 2006-2007 2007-2008 2008-2009

Provision for 17828 17622 47976
loan loss (Rs)
Average 3636553.5 4686799.5 6246769.5
Assets(Rs)
Ratio (%) 0.49% 0.37% 0.76%
At HDFC Bank
Ratio of provision for loan loss to Average asset
0.80% 0.76%
0.70%
Percentage 0.60%
0.49%
0.50%
0.37%
0.40% Ratio (%)
0.30%
0.20%
0.10%
0.00%
2006-2007 2007-2008 2008-2009
Year
Interpretation
Ratio of provision for loan loss to average asset in 06-07 was 0.49% and in
second year it was 0.37% and it increased in third year by o.76% loan loss on
average assets (its means if one Hundred Rupees is average asset 0.76 paise is
loan loss). Moreover, there is sufficient loan loss reserve to absorb probable
loan losses.
IV. Safety Ratio

1. Ratio of Net NPA to Net Advances
At HDFC Bank
The ratio of NPAs to advances reflects the quality of a banks loan

portfolio. A distinction is often made between gross NPA and net NPA. Net NPA,
which is obtained by deducting from gross NPA items like interest due but not
recovered, part payment received and kept in suspense account, etc. is
internationally accepted as the more relevant indicator of financial health of
banks. If the NPA is increasing it shows Bad sign to the organization.
= Net NPA X100

Net advances
Year 2006-2007 2007-2008 2008-2009
Net NPA (Rs) 2795 6063 15518
Net Advances(Rs) 1774451 2556630 3506126
Ratio (%) 0.15% 0.23% 0.44%
Ratio of net NPA to net Advance
0.50%
0.44%
0.45%
0.40%
Percentage
0.35%
0.30%
0.25% 0.23% Ratio (%)
0.20%
0.15%
0.15%
0.10%
0.05%
0.00%
2006-2007 2007-2008 2008-2009
Year
Interpretation
Ratio of Net NPA to Net Advances in 06-07 was 0.15% and in second and third
year
At HDFC Bank
Has increased to 0.23% to 0.44% because of increase in total loan even NPA has
increased over a period of time. However this ratio is satisfactory with industry
norms where on an average this ratio is 3-5%. This ratio tells the credit quality of
the bank.
2. Capital Adequacy Ratio

Capital adequacy is a key element in maintaining the stability of banking
corporations. A crucial - though not the only - tool for testing capital adequacy is
the maintenance of a minimum ratio of capital to the weighted risk elements of
banking business. However, it must be emphasized that the minimum ratio
required in this regulation is not necessarily the optimum ratio, and most banking
corporations are expected to maintain a higher ratio.
The following are the current minimum capital adequacy ratios:
Tier one capital to total risk weighted credit must not be less than 4%.
Total capital (tier one plus tier two less certain deductions) to total risk
weighted credit exposures must not be less than 8%.
Tier 1 Capital: In relation to the capital adequacy ratio, tier one capital can
absorb losses without a bank being required to cease trading. This is core
capital, and includes equity capital and disclosed reserves. In other words, this
ratio is designed to indicate the amount of equity or capital support or assets
that can protect the bank from unexpected events.
At HDFC Bank
Tier 2 Capital: In relation to the capital adequacy ratio, tier two capital can
absorb losses in the event of a winding-up, and so provides a lesser degree of
protection to depositors. It includes items such as undisclosed reserves,
general loss reserves, and subordinated term debt.
Tier 1 Capital
Capital = includes paid up capital, statutory reserve, general reserve, balance in
profit and loss account and amalgamation reserve. Deferred asset if any deducted
Tier 1 Capital X 100

Total Risk Weighted Asset
Year 2006-2007 2007-2008 2008-2009
Capital (Rs) 222970 396216 514991
Total Risk 2777382 4127103 6021762
weighted asset
(Rs)
Ratio (%) 8.03% 9.60% 8.55%
Tier 2
Capital = includes general loss reserve, investment fluctuation reserve and
subordinated debt.
Tier 2 Capital X100
Total Risk Weighted Asset
Year 2006-2007 2007-2008 2008-2009

Capital (Rs) 100812 105473 172071
Total Risk 2777382 4127103 6021762
weighted asset
(Rs)
Ratio (%) 3.62% 2.56% 2.86%
At HDFC Bank
Year Tier 1 Capital Tier 2 Capital Total Capital

Adequacy Ratio
2006-2007 8.03% 3.62% 11.66%
2007-2008 9.60% 2.56% 12.16%
2008-2009 8.55% 2.86% 11.41%
Total Capital Adequacy Ratio
12.40%
12.16%
12.20%
Percentage
12.00%
11.80% 11.66% Total Capital Adequacy

11.60% Ratio
11.41%
11.40%
11.20%
11.00%
2006-2007 2007-2008 2008-2009
Year
Interpretation
Total capital adequacy ratio for 2006-2007 was 11.66% which is not less 8% and
in second year it increased to 12.16% and third year it decreased to 11.41%
compared to second year but capital adequacy ratio is more than 8% so it can
absorb losses in the event of a winding-up, and also provide protection to
depositors. It indicates that bank is maintaining a sound and efficient financial
system.
Findings
I. Profitability Ratio
At HDFC Bank
1. Ratio of net profit to total income has been decreased from 17.70% to
15.55% in last year i.e. 08-09 compared to first two years.
2. Ratio of net profit to total deposit has been decreased in last year by
1.56%.as compared to previous years.
3. Return on equity of firm is constant for last two year.
4. Return on Asset in first year was 1.20% it increased to 1.29% in the year
07-08 and decreased to 1.18% in 08-09.
5. Return on Capital employed is increased by 17.15% in the last year
6. Net interest margin in 06-07 was 3.16% and it increased by 3.45% to
3.46% in 07-08 & 08-09 and its constant for both years.
7. Ratio of interest income to average working fund is increased in 08-09 to
17.16% as compared to last two year.
8. Ratio of non- interest income to average working fund is increasing year
by year. In first year it was 1.32% it increased to 1.79%.
9. There is no dividend paid for 06-07 & 08-09
10. EPS of the firm also increasing. First year it was 17.95% and it increased
to 27.91%.
II. Operating Ratio

1. Ratio of interest earned to interest paid in the first year it was 2.10% and
second year it increased to 2.35% and it decreased by 4% compared to
second year.
2. Ratio of interest paid to total income is decreased by 35.13% to 34.45% in
07-08 & 08-09 as compared to first year it was 39.98%.
3. Ratio of staff expenses to total expenses in the year 06-07 was 8.10% it
has been increased to 8.98% to 10.29% in last two year.
At HDFC Bank
4. ratio of total expenditure to total income in first year it was 83.17% it

decreased in 07-08 to 82.22% and in 05-06 it increased to 84.44%
5. Ratio of operating expenses to average working fund in first year i.e.06-07
was 2.22% it increased to 2.31% to 2.70% on last two year.
6. Ratio of interest expenses to Average working fund in 06-07 was 3.33%
and in second year it was 2.80% and in last year it increased to 3.08%.
III. Solvency Ratio

1. Ratio of total cash to total deposits is decreasing from 8.35% in 03-04 to
5.92% in 08-09
2. Ratio of investment to total deposits in first year was 63.32% in second
year it was 53.22% and it decreased to 50.88% in 08-09.
3. Credit deposits ratio in first year it was 58.35% it increased in second and
third year compared to first year.
4. Ratio of loans to total asset is increasing year by year. In first year it was
34.39% it increased to 45.82%.
5. Ratio of provision for loan loss to Average asset in 06-07 was 0.49%, in
07-08 it was 0.37% and in 08-09 it increased to 0.76% compared to last
two years.
IV. Safety
At HDFC Bank
1. Ratio of net NPA to net advances is increasing year by year in first year it
was 0.15% and it increased to 0.44%
2. Capital Adequacy ratio in 06-07 was 11.66%, in 06-08 it was 12.11%, 08-
09 it decreased to 11.41% as compared to first and second year.
Recommendation
1. The organization can improve on selection of assets class for

investment and other related factors such as timing etc. This could
enhance their Return to Total Assets and Total Investment to Total
Deposits ratios.
2. The organization can concentrate on improving on Net Margin
ratio which is relatively low. The above mentioned suggestion
would extend to better this position.
3. The organization might reconsider their dividend policy, which has
been pretty dormant. In view of increased free reserves as well as
EPS, this suggestion holds sanctity. It would enhance the market
positioning of the organization.
4. The expense to income ratio seems stagnant (82 to 85%) in these 3
years. The synergy of large scale operations may need to be looked
into.
5. The organization could improve on its short term (liquid)
investments to take care of returns as well as liquidity.
At HDFC Bank
6. Compared to previous year NPA has increased so Bank should

adopt new strategy to improve NPA and also take almost care in
lending the money. It should follow tight credit policy.
Conclusion
Overall Prospects of the bank looks good. HDFC is doing well in its performance.
To maintain the same position in market it as to concentrate on liquidity position
and make the investment in good class of asset to earn more returns. HDFC
should also concentrate highly on expenses which is increasing year by year
which would lead to decrease in the profitability of the firm.
At HDFC Bank
At HDFC Bank
At HDFC Bank
BIBOLOGRAPHY
Books:
Financial Management : Khan and Jain
Financial Accounting : Narayanaswamy
Annual Report of HDFC bank
Magazine : Reserve Bank of India Bulletin
Websites:
www.google.com
www.HDFCbank.com

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A Study on Financial Performance based on Ratios

Finance is a life blood of business it is required from the establishment of the

Meaning and Definition

ii. Intra firm comparison

iii. comparison of items within a single years financial statement of a

STATE Of THE PROBLEM

Importance of the ratio analysis

2. Long term solvency

possible due to interfirm comparison and comparison with the averages. A

Guidelines for the financial statement analysis

ADVANTAGES AND DISADVANTAGES OF RATIO ANALYSIS:

Amortization of deferred revenue expenditure such as preliminary

DESIGN OF THE STUDY

Title of the project:

Statement of the problem

Purpose of the study

Scope of the study

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

The Housing Development Finance Corporation Limited (HDFC) was amongst

HDFC Bank commenced operations as a Scheduled Commercial Bank in January

BROAD AREAS IN WHICH IT OPERATES

HDFC Bank's mission is to be a World-Class Indian Bank which is

Objectives of HDFC bank

Important guidelines and schedules

New Car Loans

Multiple Recognition from Euro money

MUTUAL FUNDS PRODUCTS SCHEMES

HDCF liquid fund- premium plan

Visa Bill Pay

Visa money transfer

Ideal for seasoned professionals or businessmen, this programme will provide

HDFC BANK CLASSIC BANKING

AWARDS AND ACHIEVMENTS

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

Business Today Best Bank in India.

Asia money Awards Best Domestic Commercial Bank

Asiamoney also named the bank:

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

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

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

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

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

There have been some other proud moments as well:

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

Mr. Jagdish Capoor, Chairman

VICE PRESIDENT(LEGAL)& COMPANY SECRETARY

Data Collection method

Measurement technique/ Statistical tool

Statistical technique used for calculation of ratios is in terms of percentage

The profitability of the firm can be determined on the following ratios

1. Ratio of Net profit to total income

This ratio implies that the percentage of profit earned by the

Out of its income.

Year 2006-2007 2007-2008 2008-2009

Ratio of Net profit to total income

2. Ratio of Net profit to total deposit

Total Deposit (Rs) 3040886 3635425 5579682

Ratio of net profit to total deposit

3. Ratio of return on equity

Ratio of return on assets

Ratio of return on capital employed

20.00% 17.43% 17.15%

10.00% Ratio (%)