SR TOPIC NAME PAGE

NO. NO.
DESIGN OF THE STUDY 1-3
OBJECTIVES 1
LIMITATIONS 2
SCOPE 3

1. GLOBAL PERSPECTIVE 6-11

1.1 INTRODUCTION
1.2 HISTORY
1.3 STANDARD BANKING ACTIVITIES
1.4 BANKS IN THE ECONOMY
1.5 SIZE OF THE GLOBAL BANKING
INDUSTRY
1.6 GLOBALIZIATION IN THE BANKING
INDUSTRY

2. INDINA PERSPECTIVE 12-21

2.1 HISTORY OF INDIAN BANKING
2.2 CLASSIFICATION OF BANKING INDUSTRY
INDIA
2.3 ADOPTION OF BANKING TECHNOLOGY
2.4 REGULATIONS FOR INDIAN BANKS
2.5 NATIONALIZATION
2.6 LIBERLIZATION

3. OVERVIEW OF HDFC & SBI BANK 22-30

3.1 INTRODUCTION
 3.2 HISTORY
3.3 SOURCES OF INCOME
3.4 SWOT ANALYSIS

4. COMPARATIVE STUDY OF FINANCIAL 31-46

ASPECTS
4.1 STATEMENT OF PROFIT AND LOSS
ACCOUNT
 HDFC BANK
 SBI BANK
4.2 BALANCESHEET STATEMENT
 HDFC BANK
 SBI BANK
4.3 RATIO ANALYSIS

5. CASE STUDY 47-50

5.1 CASE STUDY ON HDFC BANK
5.2 CASE STUDY ON SBI BANK
6. DETAILS OF THE STUDY 51-55
6.1 FINDINGS OF THE STUDY
6.2 RESEARCH AND METHDOLOGY
6.3 REVIEW OF LITERATURE
6.4 SUGGESTIONS
6.5 CONCLUSIONS

ANNEXURE 56
WEBLIOGRAPHY & BIBLIOGRAPHY 57
DESIGN OF THE STUDY
OBJECTIVES

1. To Compute and compare the financial performance of HDFC and SBI

through Profitability ratios.
2. The present study attempts to analyse the profitability of the two major
banks in India; HDFC and SBI.
3. The Fundamental Analysis, which aims at developing an insight into the
economic performance of the business, is of paramount importance from
the view point of investment decisions.
4. The present study attempts to analyse the profitability of the two major
banks in India; HDFC and SBI. The variables taken for the study are
Operating profit margin (OPM), Gross profit margin (GPM), Net profit
margin (NPM).
5. The main objective of the study is to analyse and compare the financial
performance of select banks in terms of Deposits mobilization, Lending
and Recovery Performance Investment Management efficiency and
profitability of public and private sector banks through select financial
ratios.
6. The present study focuses on a critical evaluation of financial
performance of select public sector and private sector banks through
financial fiscal investment management efficiency and profitability ratios.
7. It also compares the financial performance of SBI and HDFC over select
parameters namely, trends of Deposits, Lending, and Recovery
Performance.
LIMITATIONS

 The researcher has tried to study about the profitability of HDFC Bank
and SBI Bank in depth, however faced some difficulties in collecting
information and also faced limitations.
 Time constraint was the main limitation faced while making the project.
 One of the major limitations of this study is all the banks in Hyderabad
were not considered as the network of operation of all the banks is quite
distinguishable.
 The banks considered are only single banks i.e. HDFC from private
sector bank and SBI from public sector Bank sector bank as they are the
leading banks.
 Co-operative banks and foreign banks are kept out of the study as they
follow different set of guidelines given by RBI.
SCOPE OF THE STUDY

 The first chapter deals with the global view of the banking industry,
which includes introduction to banking industry and evolution of the
banking industry. Further, it also includes history of various foreign
countries banking system.
 The second chapter deals with the Indian view of the banking industry,
which includes how the banking system started in India and history of the
banking industry.
 The third chapter deals with the introduction, history, sources of income
and SWOT Analysis of HDFC Bank and SBI Bank.
 The fourth chapter includes the major financial aspects of HDFC Bank &
SBI Bank.
 The fifth chapter includes case studies of HDFC Bank and SBI Bank.
 The sixth chapter includes findings, recommendations, conclusions and
Annexure.
CHAPTER 1. GLOBAL PERSPECTIVE
1.1 INTROIDUCTION
1.2 HISTORY
1.3 STANDARD BANKING ACTIVITIES
1.4 BANKS IN THE ECONOMY
1.5 SIZE OF THE GLOBAL BANKING
INDUSTRY
1.6 GLOBALIZATION IN THE BANKING
INDUSTRY
1.1 INTRODUCTION

A Bank is a financial intermediary that creates credit by lending money to a

borrower, thereby creating a corresponding deposit on the bank’s balance sheet.
Lending activities can be performed either directly or indirectly through capital
markets. Due to their importance is the financial system and influences on
national economics, banks are highly regulated in most countries. Most nations
have institutionalized a system known as fractional reserve banking under
which banks hold liquid assets equal to only a portion of their current liabilities.
In addition to other regulations intended to ensure liquidity, banks are generally
subject to minimum capital requirements based on an international set of capital
standards, known as the Basel Accords.
Banking in its modern sense evolved in the 14th century in the rich cities of
Renaissance Italy but in many ways was a continuation of ideas and concepts of
credit and lending that had their roots in the ancient world. In the history of
banking, a number of banking dynasties—notably, the medicis, the Fuggers, the
welsers, the Berenbergs and the Rothschilds--- have played a central role over
many centuries, The oldest existing retail bank is Monte dePaschi di Siena,
while the oldest existing merchant bank is Berenberg Bank.
1.2 HISTORY

Banking begins with the first prototype banks of merchants of the ancient
world, which made grain loans to farmers and traders who carried goods
between cities. This began around 2000 BC in Assyria and Babylonia. Later, in
ancient Greece and during the Roman Empire, lenders based in temples, made
loans and added two important innovations: they accepted deposits and changed
money, Archaeology from this period in ancient China and India also shows
evidence of money lending activity.
The origins of modern banking can be traced to medieval and early Renaissance
Italy, to the rich cities in the north like Florence, Lucca, Siena, Venice, and
Genoa. The Bardic and Peruzzi dominated banking in 14th Century Florence,
establishing branches in many other parts of Europe. One of the most famous
Italian banks was the Medici bank, set up by Giovanni di Bicci de’ in 1937. The
earliest known state deposit bank, Banco di san Giorgio (Bank of St. George),
was founded in 1407 at Genoa, Italy.
Modern banking practices, including fractional reserve banking and the issue of
banknotes, emerged in the 17th and 18th centuries. Merchants started to store
their gold with the goldsmiths of London, who possessed private vaults, and
charged a fee for that service. In exchange for each deposit of precious metal,
the goldsmiths issued receipts certifying the quantity and purity of the metal
they held as a Bailee; these receipts could not be assigned, only the original
depositor could collect the stored goods.

Gradually the goldsmiths began to lend the money out on behalf of the
depositor, which led to the development of modern banking practices;
promissory notes (which evolved into bank notes) were issued for money
deposited as a loan to the goldsmith. The Goldsmith paid interest on this
deposits. Since the promissory notes were payable on demand, and the advances
(loans) to the goldsmith’s customers were repayable over a longer time period.
This was an early form of fractional reserve banking. The promissory notes
developed into an assignable instrument which could circulate as a safe and
convenient form of money backed by the goldsmith’s promise to pay, allowing
goldsmiths to advance loans with little risk of default. Thus, the goldsmiths of
London became the forerunners of banking by creating new money based on
credit.
The Bank of England was the First to begin permanent issue of banknotes, in
1695. The Royal Bank of Scotland establishes the first overdraft facility in
1728. By the beginning of the 19th century a banker’s clearing house was
established in London to allow multiple banks to clear transactions. The
Rothschilds pioneered international finance on a large scale, financing the
purchase of the Suez Canal for the British Government.
1.3 BANKING ACTIVITIES
STANDARD ACTIVITIES

Banks at as payment agents by conducting checking or current accounts for

customers. Paying cheques drawn by customers on the bank, and collecting
cheques deposited to customers’ current accounts. Banks also enables customer
payments via other payment methods such as Automated Clearing House
(ACH), wire transfer or telegraphic transfer, EFTOPS and Automated Teller
machine (ATM).
Banks borrow money by accepting deposited on current accounts, by accepting
term deposits, and by issuing debt securities such as banknotes and bonds.
Banks lend money by making advances to customers on current accounts, by
making instalment loans, and by investing in marketable debt securities and
other forms of money lending.
Banks provide different payment services, and a bank account is considered
indispensable by most businesses and individuals. Non-banks that provide
payment services such as remittance companies are normally not considered as
an adequate substitute for a bank account.
Banks can create new money when they make a loan. New loans throughout the
banking system generate new deposits elsewhere in the system. The money
supply is usually increased by the act of lending, and reduced when loans are
repaid faster than new ones are generated. In the United Kingdom between 1997
and 2007, there was an increase in the money supply, largely cause by much
more bank lending, which served to push up property prices and increase
private debt. The account of money in the economy as measured by M4 in the
UK went from €750 billion to £1700 billion between 1997 and 2007, much of
the increase caused by bank lending. If all the banks increase their lending
together, then they can expect new deposits to return to them and the amount of
money in the economy will increase. Excessive or risky lending can cause
borrowers to default, the banks then become more cautions, so there is less
lending and therefore less money so that the economy can go from boom to bust
as happened in the UK and many other Western economies after 2007.
RANGE OF ACTIVITY
Activities undertaken by bank include -

 Personal banking
 Corporate banking
 Investment banking
 Private banking
 Insurance
 Consumer finance
 Foreign exchange trading
 Commodity trading
 Trading in equities
 Futures and options trading and money market trading
CHANNELS
Bank offer many different channel to access their banking and other services:

 Automated Teller Machine.

 A branch is a retail location.

 Call center

 Mail: most bank accept cheque deposits via mail and use mail to
communicate to their customer, e.g. by sending out statements.

 Mobile banking is a method of using one's mobile phone to conduct banking

transactions.

 Online banking is a term used for performing multiple transactions,

payments etc. over the internet.

 Relationship manger, mostly for private banking or business banking,

often visiting customers at their homes or business

 Telephone banking is a service which allows its customers to conduct

transactions over the telephone with automated attendant or when
requested with telephone operator.

 Video banking is a term used for performing banking transactions or

professional banking consultations via a remote video and audio
connection. video banking can be performed via purpose built banking
transaction machines (similar to an Automated Teller Machine), or via a
video conference enabled bank branch clarification

 DSA is a Direct Selling Agent, who works for the bank based on a
contract. its main job is to increase the customer base for the bank.
1.4 BANKS In THE ECONOMY
ECONOMIC FUNCTIONS
The economic functions of banks include:

1. Issue of money, in the form of banknotes and current account subject to

check or payment at the customer’s order. These claims on banks can act as
money because they are negotiable or repayable on demand, and hence valued
at par. They are effectively transferable by mere delivery, in the case of
banknotes, or by drawing a check that the payee may bank or cash.

2. Netting and settlement of payment -banks act as both collection and paying
agent for customers, participating in interbank clearing and settlement systems
to collect, present, be presented with, and pay payment instruments. This
enables the offsetting of payment flows between geographical areas, reducing
the cost of settlement between them.

3. Credit intermediation -bank borrow and lend back-to -back on their own
account as middle men.

4. Credit quality improvement - banks lend money to ordinary commercial

and personal borrower (ordinary credit quality), but are high quality borrowers.
The improvement comes from diversification of the bank's assets and capital
which provides a buffer to absorb losses without defaulting on its obligations.

5. However, banknotes and deposits are generally unsecured; if the bank gets
into difficulty and pledges assets as security, to raise the funding it need to
continue to operate , This Put holders and depositor’s in an economically
subordinated position.

6. Asset liability mismatch/maturity transformation banks borrow more one

demand debt and short term debit, but more long term loans.in other word, they
borrow short and led log. With a stronger credit quality than most other
borrower, banks can do this by aggregating issue (e.g. Accepting deposits and
issuing banknotes) and redemption (e.g. Withdrawals and redemption of
banknotes), maintaining reserves of cash, investing in marketable securities that
can be really converted to cash if needed, and raising replacement funding as
needed from various Sources (e.g. wholesale cash markets and securities
Market).
7. Money creation -whenever a bank gives out a loan in a fractional-reserve
banking system, a new sum of virtual money is created.
1.5 SIZE OF GLOBAL BANKING INDUSTRY
Assets of the largest 1,000 bank in the world grew by 6.8% in the 2008/2009
financial year to a record US$96.4 trillion while profit declined by 85% to
US$115 billion. Growth in assets in adverse market conditions was largely a
result of recapitalization. EU bank held the largest share of the total, 56% in
2008/2009, don form 61% in the previous year. Asian banks share increased
from 12% to 14% during the year, while the share of us banks increased from
11% to 13%. Fee revenue generated by global investment banking totaled
US$66.3 billion in 2009, up 12% on the previous year

The United States has the most banks in the world in term of institutions (7,085
at the end of 2008) and possibly branches (82,000).This is an institutions of the
geography and regulatory structure of the USA , resulting in a large number of
small to medium-sized institution in its banking system. As of November 2009,
china's top 4 banks have in excess of 67,000 branches (ICBC:
18000+BOC: 12000+, CCB: 1300+, ABC: 24000+) with an additional 140
smaller banks with an undetermined number of branches. Japan had 129 banks
and 12,000 branches. In 2004, Germany, France, and Italy each had more than
30,000 branches---more than double the 15,000 branches in the UK.
1.6 GLOBALIZATION IN THE BANKING INDUSTY

In modern time there has been huge reductions to the barriers of global
completion in the banking industry. Increases in telecommunication and other
financial technologies, such as Bloomberg, have allowed banks to extend their
reach all over the world, since they no longer have to be near customer to
manage both their finances and their risk. The growth in cross-border activates
has also increased the demand for banks that can provide various services across
borders to different nationalities.However,despite these reduction in barriers and
growth in cross-border activities, the banking industry is nowhere near as
globalized as some other industries. in the USA,for instance, very few banks
even worry about the Rigel-Neal Act, which promotes more efficient interstate
banking. in the vast majority of nations around globe the market share for
foreign owned banks is currently less than a tenth of all market shares for banks
in a particular nation. One reason the banking industry has not been fully
globalized is that it is that it is more convenient to have local provide loans to
small business and individuals. On the other hand for large corporations it is not
as important in what nation the bank is in, since the corporation's financial
information is available around the globe.
CHAPTER 2. INDIAN PERSPECTIVE

2.1 HISTORY OF INDIAN BANKING

2.2 CLASSIFICATION OF BANKING INDUSTRIN INDIA

2.3 ADOPTION OF BANKING TECHNOLOGY

2.4 REGULATIONS FOR INDIAN BANKING

2.5 NATIONALIZATION

2.6 LIBERALIZATION
2.1 HISTORY OF INDIAN BANKING
Banking in India In the modern sense originated in the last decades of the 18 th
century. Among the first bank of Hindustan, which was established in 1770 and
liquidated in 1829-32; and the General Bank of India, established 1786 but
failed in 1791.

The largest bank, and the oldest still in existence, in the state Bank of India. It
originated as the Bank of Calcutta in June 1806. In 1809, it was renamed as the
bank of Bengal. This was one of the three banks funded by a presidency
government, the other two were the Bank of Bombay and the Bank of Madras.
The three banks were merged in 1921 to form the imperial Bank of India in
1955. For many years the presidency banks had acted as quasi-central banks, as
did their successors, until the Reserve Bank of India was established in 1935,
under the reserve Bank of India Act, 1934.

In 1960, the State Banks of India was given control of eight state-associated
banks under the state Bank of India (Subsidiary Banks) Act, 1959. These are
now called its associate banks. In 1969 the India government nationalized 14
major private banks. In 1980, 6 more private banks were nationalized. These
nationalized banks are the majority of lenders in the Indian economy. They
dominate the banking sector because of their large size and widespread
networks.

The Indian banking sector is broadly classified into scheduled banks and non-
scheduled banks. The scheduled banks are those which are included under the
2nd Scheduled of the Reserve Bank of India Act, 1934.

The scheduled banks ae further classified into; nationalized banks; state bank of
India and its associates; regional rural banks (RRBs); foreign banks; and other
Indian private sector banks. the team commercial banks refers to both scheduled
and non scheduled commercial banks which are regulated under the banking
regulation Act, 1949.

generally banking in India was fairly mature in terms of sully , product range
and reach-even though reach in rural India and to poor still remains a challenge.
the government has developed initiatives to address this though the state bank of
India expanding its branch network and though the national bank for agriculture
and rural development with things like microfinance
2.2 CLASSIFICATION OF BANKING INDUSRY IN
INDIA
The organized banking system in India can be classified as given
below:
RESERVE BANK OF INDIA (RBI):
The country had no central bank prior to the establishment ot the RBI. The RBI
is the supreme monetary and banking authority in the country and controls the
banking system in India. it is called the Reserve Bank as it keeps the reserves of
all commercial bank.

COMMERCIAL BANK:
Commercial banks mobilize savings of general public and make them available
to large and small industrial and trading units mainly for working capital
requirements.

Commercial bank in India are largely Indian-public sector and private sector
with a few foreign banks. The public sector banks account for more than 92
percent of the entire banking business in India-occupying a dominant position in
the commercial banking. The State bank of India and its 7 associate banks along
with another 19 banks are the public sector banks.

SCHEDULED AND NON-SCHEDULED BANKS:

The scheduled banks are those which are enshrined i the second schedule of the
RBI Act, 1934. These banks have a paid-up capital and reserves of an aggregate
value of not less than Rs.5 lakhs. They have to satisfy the RBI that their affairs
carried out in the interest of their depositors.

All commercial banks (Indian and foreign), regional rural banks, and state Co-
operative banks are scheduled banks. Non-scheduled banks are those which are
not included in the second schedule of the RBI Act, 1934.At present these are
only three such banks in the country.

REGIONAL RURAL BANKS:

The Regional Banks (RRBs) the newest form of banks, came into existence in
the middle of 1970s (sponsored by individual nationalized commercial bank)
with the objective of developing rural economy by providing credit and deposit
facilities for agriculture and other productive activities of all kinds in rural
areas.
The emphasis is on providing such facilities to small and marginal farmers,
agricultural laborers, rural artisans and other small entrepreneurs in rural areas.

OTHER SPECIAL FEATURES OF THESE BANKS ARE:

(1) Their area of operation is limited to a specified region, comprising one or
more districts in any state;

(2) Their lending rates cannot be higher than the prevailing lending rates of Co-
operative credit societies in any particular state;

(3) The paid-up capital of each rural bank is Rs.25 lakh, 50 percent of which has
been contributed by the Central GVT, 1 percent by commercial bank which are
also responsible for actual setting up of the RRBs.

These banks are helped by higher-level agencies: the sponsoring banks lend
them finds and advise and train their senior staff, the NABARD (National Bank
for Agriculture and Rural Development) gives them short-term and medium
term loans: the RBI has kept CRR (Cash Reserve Requirements) of hem at 2%
and SLR (Statutory Liquidity Requirement) at 25% of their total net liabilities,
whereas for other commercial banks the required minimum ratios have been
varied over time.

CO-OPERATIVE BANKS:
Co-operative banks are so-called because they are organized under the provision
of the Co-operative Credit Societies Act of the states. The major beneficiary of
the Co-operative Banking is the agricultural sector in particular and the rural
sector in general.

The co-operative credit institutions operating in the country are mainly of two
kind: agricultural (dominant) and non-agricultural. There are two separate Co-
operative agencies for the provision of agricultural credit: one for short and
medium-term credit, and the other for long-term credit. The former has three
tier and federal structure.

At the apex is the State Co-operative bank (SCD) (cooperation being a state
subject in India), at the intermediate (district) level are the Central Co-operative
Bank (CCBs) and at the village level are primary Agricultural Credit Societies
(PACs).

Long-term agriculture credit is provided by the Land Development

Banks. The Fund of the RBI meant for the agriculture sector actually
pass through SCBs and CCBs. Originally based in rural sector, the
Co-operative credit movement has now spread to urban areas also and
there are many urban Cooperative banks coming under SCBs.
2.3 ADOPTION OF BANKING TECHNOLOGY
The IT revolution has had a great impact on the Indian banking system. The use
of computers has led to the introduction of online banking in India. The use of
computers in the banking sector in India has increased many fold after the
economic liberalization of 1991 as the country’s banking sector has been
exposed to the world’s market. Indian banks were finding it difficult to compete
with the international banks in terms of customer service, without the use of
information technology.
The RBI set up a number of committees to define and co-ordinate banking
technology. These have included:

 In 1984 was 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 were introducing MICR technology in all the banks in the
metropolises in India. This provided for the use of standardized cheques
forms and encoders.
 In 1988, the RBI set up the committee on computerisation in Banks
(1988) headed by Dr. C Rangarajan. It emphasized that settlement
operation must be computerized in the clearing houses of RBI in
Bhubaneswar, Guwahati, Jaipur, Patna and Thiruvananthapuram. It
further stated that there should be National Clearing of 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 implanting on-line banking. The committee
submitted its reports in 1989 and Computerisation began from 1993 with
the settlement between IBA and bank employee’s associations.
 In 1994, the committee on Technology Issues relating to Payment
systems, Cheque Clearing and Securities in the Banking Industry (1994)
was set up under Chairman W S 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 those banks with more than 100 branches.
 In 1995, the committee for proposing Legislation on Electronic Funds
Transfer and other Electronic Payment (1995) again emphasized EFT
system.

 2.4 REGULATIONS FOR INDIAN BANKS
 The banking system in India is regulated by the Reserve Bank of India
(RBI), through the provisions of the Banking Regulations Act, 1949.
Some important aspects of the regulations which govern banking in this
country, as well as RBI circulates that relate to banking in India, will be
dealt with in this article:

 EXPOSURE LIMITS
 Lending to a single borrower is limited to 15% of the bank’s capital funds
(tier I and tier 2 capital), which may be extended to 20% in case of
infrastructure projects. For group borrowers, lending is limited to 30% of
the bank’s capital funds, with an option to extend it to 40 % for
infrastructure projects. The lending limit can be extended by a further 5%
with the approval of the bank’s board of directors. Lending includes both
fund based and non-fund based exposure.

 CASH RESERVE RATIO (CRR) AND STATUTORY

LIQUIDITY RATIO (SLR)
 Banks in India are required to keep minimum of 4% of their net demand
and time liabilities (NDTL) in the form of cash with the RBI. These
currently earn no interest. The CRR needs to be maintained on a
fortnightly basis, while the daily maintenance need to be at least 95% of
the required reserves. In case of default on daily maintenance, the penalty
is 3% above the bank rate applied on the number of days of default
multiplied by the amount by which the amount falls short of the
prescribed level.
 Over and above the CRR, a minimum of 22% and maximum of 40% of
NDTL, which is known as the SLR, needs to be maintained in the form of
gold, cash or certain approved securities. The excess SLR holdings can be
used to borrow under the Marginal Standing Facility (MSF) on an
overnight basis from the RBI. The interest charged under MSF is higher
than the repo rate by 100 bps, and te amount that can be borrowed is
limited to 2% of NDTL.

 PROVISIONING
 assets are those assets with NPA status for less than 12 months, at the end of which
they are categorized as doubtful assets. A loss is Non-performing assets ( NPA)
are classified under 3 categories: Substandard, Doubtful and Loss. An
 asset becomes non-performing if there have been no interest or
principal payments for more than 90 days in the case of a term loan.
Substandard one for which the bank or auditor expects no repayment or recovery
and is generally written off the books.
 For substandard asset, it is required that a provision of 15% of the
outstanding loan amount for secured loans and 25% of the outstanding
loan amount for unsecured loans to be made. For doubtful assets,
provisioning for the secured part of the loan varies from 25% of the
outstanding loan for NPA’s which have been in existence for less than
one year to 40% for NPA’s in existence between one and three years to
100% for NPA’s with a duration of more than three years, while for the
unsecured part it is 100%.
 Provisioning is also required on standard assets. Provisioning for
agriculture and small and medium enterprises is 0.25% and for
commercial real estate it is 1% (0.75% for housing), while it is 0.4% for
the remaining sectors.
 Provisioning for standard asset cannot be deducted from gross NPA’s to
arrive at net NPA’s. Additional provisioning over and above the standard
provisioning is required for loans given to companies that have unhedged
foreign exchange exposure.

 PRIORITY SECTOR LENDING

 The priority sector broadly consists of micro and small enterprises, and
initiatives related to agriculture, education, housing, and lending to low-
earning or less privileged groups (classified aa ‘’Weaker sections”). The
lending target of 40% of adjusted net bank credit (ANBC) (outstanding
bank credit minus certain bills and non-SLR bonds) – or the credit
equivalent amount of off balance sheet exposure ( sum of current credit
exposure + potential future credit exposures that is calculated using a
credit conversion factor), whichever is higher – has been set for domestic
commercial banks and foreign banks with greater than 20 branches, while
a target of 32% exists for foreign .banks with less than 20 branches.
 The amount that is disbursed as loans to the agriculture sector should
either be the credit equivalent of off balance sheet exposures, or 18% of
ANBC – whichever of the two figures is higher. Of the amount that is
loaned to micro enterprises and small businesses, 40% should be
advanced to those enterprises with equipment that has a maximum value
of 200,000 rupees, and plant and machinery valued at a maximum of half
a million rupees, while 20% of the total amount lent is to be advanced to
 micro-enterprises with plant and machinery ranging in value from just
above 500,000 rupees to a maximum of a million rupees and equipment
with a value above 200,000 rupees but not more than 250,000 rupees.

 The total value of loans given to weaker sections should be either be 10%
of ANBC or the credit equivalent amount of off balance sheet exposure,
whichever is higher. Weaker sections include specific castes and tribes
that have been assigned that categorization, as well as small farmers etc.
There are no specific targets for foreign banks with less than 20n
branches.

 NEW BANK LICENSE NORMS

 The new guidelines state that the groups applying for a license should
have a successful track record of at least 10 years and the bank should be
operated through a non-operative financial holding company(NOFHC)
wholly owned by the promoters. The minimum paid-up voting equity
capital has to be five billion rupees, with the NOFHC holding at least
40% of it and gradually bringing it down 15% over 12 years. The shares
have to be listed within 3 years of the start of the bank’s operations.

 The foreign shareholding is limited to 49% for the first 5 years of its
operations, after which RBI approval would be needed to increase the
stake to maximum of 74%. The board of the bank should have a majority
of independent directors and it would have to comply with the priority
sector lending targets discussed earlier.
 The NOFHC and the bank are prohibited from holding any securities
issued by the promoter group and the bank is prohibited from holding any
financial securities held by the NOFHC. The new regulations also
stipulates that 25% of the branches should be opened in previously rural
areas.

 WILFUL DEFAULTERS
 A wilful defaults takes place when a loan isn’t repaid even through
resources are available, or if the money lent is used for purposes other
than the designated purpose, or if a property secured for a loan is sold off
without the bank’s knowledge or approval. In case a company within a
group defaults and the other group companies that have given guarantees
fail to honour their guarantees, the entire group can be termed as a wilful
defaulter. Wilful defaulters (including the directors) have no access to
 funding, and criminal proceedings may be initiated against them. The
RBI recently changed the regulations to include non-group companies
under the wilful defaulter tag as well if they fail to honour a guarantee
given to another company outside the group.

 THE BOTTOM LINE

 The way a country regulates its financial and banking sectors is in some
senses a snapshot of its priorities, its goals, and the type of financial
landscape and society it would like to engineer. In the case of India, the
regulations passed by its reserve bank give us a glimpse into its
approaches to financial governance and shows the degree to which it
prioritizes stability within its banking sector, as well as economic
inclusiveness.
 Though the regulatory structure of India’s banking system seems a hit
conservative, this has to be seen in the context in the context of the
relatively under-banked nature of the country.

 The excessive capital requirements that have been set are required to
build up trust in the banking sector while the priority lending targets are
needed to provide financial inclusion to those to whom the banking sector
would not generally lend given the high level of NPA’s and small
transaction sizes. Since the private banks have been left with that burden.
A case could also be made for adjusting how the priority sector is
defined, in light of the high priority given to agriculture, even though its
share of GDP has been going down.
2.5 NATIONALIZATION
Despite the provisions, control and regulations of the Reserve Bank of India,
banks in India except the State Bank of India (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 nationalization 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 Nationalization”. 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 14th largest commercial banks with
effect from the midnight of 19th July 1969. These banks contained 85 percent of
bank deposits in the country. Shri 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 Undertakings) Bill, and it received the
presidential approval on 9th August 1969.
A second dose of nationalization of 6 more commercial banks followed in 1980.
The stated reason for the nationalization was to give the government more
control of credit delivery. With the second dose of 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 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.
2.6 LIBERLIZATION
In the early 1990s, the then government embarked on a policy of liberalization
licensing a small number of private banks. These came to 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.
The new policy shook the Banking sector in India completely. Banker’s, till this
time, were used to the 4-6-4 method (borrow at 4%; lend at 6%; go home at 4%)
of functioning. The new wave ushered in a modern outlook and tech-savvy
methods of working for traditional banks. All this led to the retail boom in
India. People demanded more from their banks and received more.
CHAPTER 3. OVERVIEW OF HDFC AND SBI BANK
3.1 INTRODUCTION
3.2 HISTORY
3.3 SOURCES OF INCOME
3.4 SWOT ANALYSIS
3.1 INTRODUCTION
Banking is the backbone of the modern economy. Health of banking industry is
one of the most important pre-conditions for sustained economic progress of
any country. The world of banking has assumed a new dimension at the dawn of
the 21st century with the advent of tech banking, thereby lending the industry a
stamp of universality. In general, banking may be classified as retail and
corporate banking. Retail banking, which is designed to meet the requirements
of individual customers and encourage their savings, includes payment utility
bills, consumer loans, credit cards, checking account balances. ATMs,
transferring funds between accounts and the like. Corporate banking, on the
other hand, caters to the needs of corporate customers like bills discounting,
opening letters of credit and managing cash.
HDFC Bank was incorporated in August 1994 and promoted by Housing
Development Finance Corporation Limited (HDFC) India’s premier housing
finance company, which also enjoys an impeccable track record in India as well
as in international markets.
The State Bank of India, the country’s oldest bank and a premier in terms of
balance sheet size, number of branches, market capitalisation and profits is
today going through a momentous phase of change and transformation? The
two hundred year old public sector behemoth is today stirring out of its public
sector legacy and moving with an ability to give the private and foreign banks
run for their money.

HDFC
HDFC Bank was incorporated in August 1994 and Promoted by Housing
Development Finance Corporation Limited (HDFC) India’s premier housing
finance company, which also enjoys an impeccable track record in India as well
as in International markets. HDFC was amongst the first to receive an ‘in
principal’ approval from the Reserve Bank of India (RBI) to set up a bank in the
private sector, as part of the RBI’s liberalisation of the Indian Banking Industry.
HDFC bank concentrates is four areas – corporate banking, treasury
management, custodial services and retail banking. It has entered the banking
consortia of over 50 corporates for providing working capital finance, trade
services, corporate finance and merchant banking. HDFC bank has become the
first private sector bank to be authorised by the Central Board of Direct Taxes
(CBDT) as well as the RBI to accept direct taxes, commencing April 01, 2001.
The taxes will be accepted at specified branches of the bank. Also is has
announced a strategic tie-up with a Bangalore-based business solutions software
developer Tally Solutions Pvt. Ltd. (TSPL) for developing and offering
products and services facilitating on-line accounting and banking services to
SMEs (Small and Medium Enterprises). In 2001-02, the bank was listed on the
New York Stock Exchange in the form of ADS. Each ADS represents 3 equity
shares. Consequent to the issue, the paid up capital of the Bank has increased by
RS. 37.42 crores.

SBI
The origin of the State Bank of India goes back to the first decades of the
nineteenth century with the establishment of the Bank of Calcutta in 1806 in
Calcutta. Three years later the bank received its charter and was re-designed as
the Bank of Bengal (2nd January 1809). A unique institution, it was the first
joint-stock bank of British India sponsored by the Government of Bengal. The
Bank of Bombay (15 April 1840) and the Bank of Madras (1 July 1843)
followed the bank of Bengal.
These three bank remained at the apex of modern banking in India till their
amalgamation as the Imperial Bank of India on 27 January 1921.
Primarily Anglo-Indian creations, the three presidency banks came into
existence either as a result of the compulsions of imperial finance or by the felt
needs of local European commerce and where not imposed from outside in an
arbitrary manner to modernise India’s economy.
Their evolution was, however, shaped by ideas called from similar
developments in Europe and England, and was influenced by changes occurring
in the structure of both the local trading environment and those in the relations
of the Indian economy to the economy of Europe and the Global economic
framework.
3.2 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 principal’ 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. / 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.
In 2008, HDFC Bank acquired Centurion Bank of Punjab taking its total
branches to more than 1,000. The amalgamated bank merged with a base of
about Rs. 1,22,000 crore and net advances of about Rs. 89,000 crore. The
balance sheet size of the combined entity is more than Rs. 1,63,000 crore.

SBI
The roots of the State Bank of India lie in the first decade of 19th century, when
the Bank of Calcutta, later renamed the bank of Bengal, was established on 2
June 1806. The Bank of Bengal was one of three Presidency banks, the other
two being the Bank of Bombay (incorporated on 15 April 1840) and the bank of
Madras ( incorporated on 1 July 1843). All three Presidency banks were
incorporated as joint stock companies and were the result of the royal charters.
These three banks received the exclusive right to issue paper currency till 1861
when with the Paper Currency Act, the right was taken over by the Government
of India.
The Presidency banks amalgamated on 27 January 1921, and the re-organized
banking entity took as its name Imperial Bank of India. The Imperial bank of
India remained a joint stock company but without Government participation.
Pursuant to the provisions of the State Bank of India Act of 1955, the Reserve
Bank of India, which is India’s central bank, acquired a controlling interest in
the Imperial Bank of India. On 30 April 1955, the imperial Bank of India
become State bank of India. The government of India recently acquired the
Reserve Bank of India’s stake in SBI so as to remove any conflict of interest
because the RBI is the country’s banking regulatory authority. In 1959, the
government passed the State Bank of India (Subsidiary Banks) Act, which made
eight state banks associates of SBI.
3.3 SOURCES OF INCOME
HDFC
 Products-

HDFC Bank offers the following core products:

 NRI Banking
Under NRI Banking, HDFC offers:
 Accounts & Deposits
 Money Transfer
 Investments & Insurance
 Research Reports
 Payment Services
 SME Banking
Under SME Banking, HDFC offers:
 Accounts & Deposits
 Business Financing
 Trade Services
 Payments & Collections
 Cards
 ATM
 Wholesale Banking

HDFC offers Wholesale Banking for Corporate and Financial Institutions

& Trusts. The Bank also provides services such as Investment Banking
and other services in the Government sector.

Services
 Wholesale Banking Services
 Retail banking services
 Treasury-

HDFC Bank has two subsidiaries:

 HDB Financial Services Limited (‘HDBFS’):

small and medium business enterprises. It also runs call canters for collection services to the
HDFC bank’s retail loan products. HDFC Bank holds 97.4% shares in HDBFS. HDBFS is
engaged in retail asset Financing. It is a non-deposit taking non-bank finance
company (NBFC). Apart from lending to individuals, the company grants loans
to Micro,

HDFC SECURITIES LIMITED (‘HSL’):

SBI
PRODUCT AND SERVICES
Personal Banking
 Deposits
 Loans
 Cards
 Investments
 Insurance
 Demat Services
 Wealth Management
NRI Banking
 Money Transfer
 Bank accounts
 Investment
 Property Solutions
 Insurance
 Loans

Business Banking
 Corporate net banking
 Cash Management
 Trade Services
 FX Online
 SME services
 Online Taxes
 Custodial services
SUBSIDIARIES
SBI has five associate bank; all use the State Bank of India logo, which is a blue
circle, an all use the “State Bank of India” name, followed by the regional
headquarters’ name”:
 State Bank of Bikaner & Jaipur
 State Bank of Hyderabad
 State Bank of Mysore
 State Bank of Patiala
 State Bank of Travancore

NON SUBSIDIARIES
Apart from its five associate banks, SBI also has the following Non-banking
subsidiaries:
 SBI Capital Markets Ltd
 SBI Funds Management Pvt Ltd
 SBI Factors & Commercial Services Pvt Ltd
 SBI Cards & Payments Services Pvt. Ltd. (SBICPSL)
 SBI DFHI Ltd
 SBI Life Insurance Company Limited
 SBI General insurance
3.4 SWOT ANALYSIS
HDFC

STRENGTH
 First Private life insurance Company who got license by IRDA.
 Domestic image of HDFC supported by Standard life’s international
image is strength of the company.
 Strong and well spread network of qualified intermediaries and
salesperson.
 Strong capital and reverse base.
 The company provides customer service of the highest order.
 Huge basket of product range which are suitable to all age and income
groups.

WEAKNESSES
 Less number of branches compare to nearest competitors.
 Heavy management expenses and administrative costs.
 Lower customer confidence on the private players.
 Poor retention percentage of tied up agents.

OPPORTUNITIES
 International companies will help in building world class expertise in
local markets by introducing the best global practices.
 There will be inflow of managerial and financial expertise from the
world’s leading insurance markets.
 The burden of educating consumers will also be shared among many
players.
THRATES
 Poaching of customer base by other companies.
 People have more trust on big public sector insurance companies like Life
insurance Corporation (LIC) of India, Oriental insurance Ltd., New India
Assurance Company Ltd., etc.
  Other private insurance companies also aim for the same uninsured
population.

SBI

STRENGTH
SBI has largest bank in India in terms of market share, revenue and assets
 As per recent data the bank has more than 13,000 outlets and 25,000
ATM centres.
 The bank has its presence in 32 countries engaging currency trade all over
the world.
 The bank has a merged with State Bank of Saurashtra, State Bank of
Indore and the bank is planning to go further acquisition in the current
financial year 2012.
 SBI has the first mover advantage in commercial banking service.
 SBI has recently changed its vision and mission statements showing a
sign of inclination towards new age banking services.

 WEAKNESSES

 Lack of proper technology driven services when compared to private banks.

 Employees show reluctance to solve issues quickly due to higher job security and
customer’s waiting period is long when compared to private banks.
The banks spends a huge amount on its rented buildings.
 SBI has the largest number of employees in banking sector, hence the banks spends a
considerable amount of its income in employee’s salary compensation.
 In spite of modernization, the bank still carries the perception of traditional bank to
new age customer.
 SBI fails to attract salary accounts of corporate and many government sector
employees salary accounts are also shifted to private bank for ease of operations
unlike before.
OPPORTUNITIES
 SBI’s merger with five more banks namely State Bank of Hyderabad,
State Bank of Patiala, State Bank of Bikaner and Jaipur, State Bank of
Travancore and State Bank of Mysore are in approval stage.
 SBI is planning to expand and invest in international operations due to
good inflow of money from Asian market.
 Mergers will result in expansion of market share to defend its number one
position.
 Young and talented pool of graduates and B schools are in rise to open
new horizon to so called “old government bank”.

THRATES
 This shows the reduce in market share to its close competitor ICICI other
private banks like HDFC, AXIS bank etc.
 FDIs allowed in banking sector is increased to 49%, this is a major threat
to SBI as people tend to switch to foreign banks for better facilities and
technologies in banking service.
 Other government banks like PNB, Andhra, Allahabad bank and Indian
bank are showing.
 Customer prefer to switch to private banks and financial service providers
for loans and mortgages, as SBI involves stringent verification procedures
and take long time for processing.
CHAPTER 4. COMPARATIVE STUDY OF FINANCIAL
ASPECTS
4.1 STATEMENT OF PROFIT AND LOSS ACCOUNT
 HDFC BANK
 SBI BANK
4.2 BALANCESHEET STATEMENT
 HDFC BANK
 SBI BANK
4.3 RATIO ANALYSIS
 HDFC BANK
 SBI BANK
 4.1 PROFIT AND LOSS ACCOUNT
HDFC BANK
STATEMNET OF PROFIT AND LOSS ACCOUNT AS ON
Particulars Mar 2018 Mar 2017 Mar 2016 Mar 2015 Mar 2014

( ).Cr ( ).Cr ( ).Cr ( ).Cr ( ).Cr

INCOME :
Interest Earned 80241.36 69305.96 60221.45 48469.90 41135.53
Other Income 15220.30 12296.50 10751.72 8996.35 7919.64
Total 95461.66 81602.46 70973.17 57466.25 49055.17
II. Expenditure
Interest 40146.49 36166.73 32629.93 26074.24 22652.90
expended
Payments 6805.74 6483.66 5702.20 4750.96 4178.98
to/Provisions for
Employees
Operating 4802.03 4453.22 3998.66 3396.44 2968.47
Expenses &
Administrative
Expenses
Depreciation 906.34 833.12 705.84 656.30 671.61
Other Expenses, 16103.75 11526.63 9298.61 7259.60 5811.16
Provisions &
Contingencies
Provision for Tax 10107.25 7916.97 6507.59 5204.03 4269.41
Deferred Tax -896.68 -327.54 -165.88 -91.23 24.27
Total 95461.66 81602.46 70973.17 57466.25 49055.17
III. Profit & Loss
Reported Net 17486.73 14549.64 12296.21 10215.92 8478.38
Profit
Adjusted Net 17486.73 14549.64 12296.21 10208.55 8476.19
Profit
Profit brought 32668.94 23527.69 18627.79 14654.15 11132.18
forward
IV.
Appropriations
Transfer to 4371.68 3637.41 3074.05 2553.98 2119.59
Statutory
Reserve
Transfer to Other 1939.99 1772.67 1443.25 1274.05 909.32
Reserves
Trans. to 3390.58 -1.69 2879.02 2414.25 1927.49
Government
/Proposed
Dividend
Balance carried 40453.42 32668.94 23527.69 18627.79 14654.15
forward to
Balance Sheet
Equity Dividend 650.00 550.00 475.00 400.00 342.50
%
Earnings Per 67.38 56.78 46.70 39.13 34.18
Share-Unit Curr
 SBI BANK
STATEMENT OF PROFIT AND LOSS ACCOUNT AS ON
Particulars Mar 2018 Mar 2017 Mar 2016 Mar 2 Mar 2014
( ).Cr ( ).Cr ( ).Cr 015
( ).Cr ( ).Cr
INCOME :
Interest 220499.32 175518.24 163998.30 1 136350.80
Earned 5
2
3
9
7
.
0
7
Other Income 44600.69 35460.93 27845.37 2 18552.92
2
5
7
5
.
8
9
Total 265100.01 210979.17 191843.67 1 154903.72
7
4
9
7
2
.
9
6
II.
Expenditure
Interest 145645.60 113658.50 106803.49 9 87068.63
expended 7
3
8
1
.
8
2
Payments 33178.68 26489.28 25113.82 2 22504.28
to/Provisions 3
for 5
Employees 3
7
.
0
7
Operating 10959.58 8384.64 7696.25 7 6519.86
Expenses & 2
Administrative 3
Expenses 2
.
5
7
Depreciation 2919.47 2293.31 1700.30 1 1333.94
1
1
6
.
4
9
Other 87924.92 45298.26 36755.73 2 21303.13
Expenses, 6
Provisions & 3
Contingencie 9
s 1
.
 0
4
Provision for 673.54 4033.29 3577.93 6 4227.46
Tax 6
8
9
.
9
5
Deferred Tax -9654.33 337.78 245.47 - 1055.25
4
7
7
.
5
6
Total 265100.01 210979.17 191843.67 1 154903.72
7
4
9
7
2
.
9
6
III. Profit &
Loss
Reported Net -6547.45 10484.10 9950.65 1 10891.17
Profit 3
1
0
1
.
5
7
Extraordinary -28.73 -25.82 -11.54 - -25.70
Items 2
7
.
8
8
Adjusted Net -6518.72 10509.92 9962.19 1 10916.87
Profit 3
1
2
9
.
4
5
Profit brought 0.32 0.32 0.32 0 0.34
forward .
3
2
IV.
Appropriatio
ns
Transfer to 0.00 3145.23 2985.20 4 3339.62
Statutory 0
Reserve 2
9
.
0
8
Transfer to 2123.74 4923.93 4612.63 5 5013.39
Other 9
Reserves 9
4
.
5
6
Trans. to 0.00 2414.94 2352.84 3 2538.18
Government 0
/Proposed 7
Dividend 7
.
9
3
Balance -8670.88 0.32 0.32 0 0.32
carried .
forward to 3
Balance 2
Sheet
Equity 0.00 260.00 260.00 3 300.00
Dividend % 5
0
.
0
0
Earnings Per 0.00 12.76 12.39 1 141.88
Share-Unit 6
Curr .
9
7
4.2 BALANCESHEET STATEMENT

HDFC BANK
BALANCESHEET OF HDFC BANK
BASED ON LAST FIVE YEARS
Particulars Mar 2018 Mar 2017 Mar 2016 Mar 2015 Mar 2014
( ).Cr ( ).Cr ( ).Cr ( ).Cr ( ).Cr
SOURCES OF
FUNDS :
Capital 519.02 512.51 505,64 501.30 479.81
Reserve Total 105775.98 88949.84 72172.13 61508.12 42998.82
Deposits 788770.64 643639.66 546424.19 450795.64 367337.48
Borrowings 123104.97 74028.87 84968.98 45213.56 39438.99
Other Liabilities & 45817.45 56830.80 36818.98 32557.39 41402.97
Provisions
Total Liabilities 1063988.06 863961.68 740889.92 590576.01 491658.07
Application Of
Funds:
Cash & Balances 104670.47 37896.87 30058.31 27510.45 25345.63
With RBI
Balances with 18244.61 11055.22 8860.53 8821 14238.01
Bank & Money at
Call
Investments 242200.24 214463.34 195836.28 151641.75 120951.07
Advances 658333.09 554568.20 464593.96 303000.27 239720.64
Fixed Assets 3607.20 3626.74 3343.16 3121.73 2939.92
Other Assets 36932.43 42351.30 38197.69 33986.03 25183.17
Miscellaneous
Expenditure not
written off
Total Assets 1063988.04 863961.67 740889.93 590575.99 491658.85
Contingent 875488.22 817869.58 853318.11 975233.95 723154.92
Liability
Bill for Collection 42753.83 30848.04 23490 22304.93 20943.06
SBI
BALANCESHEET OF SBI BANK
BASED ON LAST FIVE YEARS
Particulars Mar 2018 Mar 2017 Mar 2016 Mar 2015 Mar 2014
( ).Cr ( ).Cr ( ).Cr ( ).Cr ( ).Cr
SOURCES OF
FUNDS :
Capital 892.46 797.35 776.28 746.57 746.57
Reserve Total 218236.10 187488.71 143498.16 127691.65 117535.68
Deposits 2706343.29 2044751.39 1730722.44 1613264.64 1431079.90
Borrowings 362142.07 317693.66 323344.59 168678.90 146459.49
Other Liabilities 167138.08 155235.19 163185.42 141113.87 98748.45
& Provisions
Total Liabilities 3454752 2705966.30 2361526 2051495.63 1794570.00
Application Of
Funds:
Cash & 150397.18 127997.62 129629.33 115883.84 84955.66
Balances With
RBI
Balances with 41501.46 43974.03 37838.33 38871.94 47593.97
Bank & Money
at Call
Investments 1060986 765979.38 575651 481758 398799.57
Advances 1934880 1571078 1463700 1300026 1209828
Fixed Assets 39992.25 42918.92 10389.28 9329.16 8002.16
Other Assets 226994.20 154007 144317.75 105625.54 45390.01
Miscellaneous 0.00 0.00 0.00 0.00 0.00
Expenditure not
written off
Total Assets 3454752 2705966 2361526 2051495 1794570
Contingent 1162020 1046440 971956 1000627 1017329
Liability
Bill for 74027.90 65640.42 92211.65
Collection
4.3 RATIO ANALYSIS
1) Demand Deposit Ratio
The sum of money that is given to a bank but can be withdrawn as per the
requirement of the depositor.
Amounts that are lying in the savings and current accounts are known as
demand deposits because they can be used at any point of time. Demand
Deposit Ratio= Demand Deposit/ Total Deposit
Year HDFC SBI
2015 19.92 14.92
2016 22.24 15.24
2017 22.27 14.04
2018 19.41 11.78
Mean 20.96 13.95
SD 1.90 2.85
CV 10.12 20.35

RATIO ANALYSIS
25

20

15

10

0
2015 2016 2017 2018

HDFC SBI
As shown in table the ration of demand deposit is more in HDFC bank (20.96)
Demand Deposit is more in HDFC bank than in SBI it may be because no
interest is paid on these accounts except in special cases where a large dormant
balance is kept which could otherwise be transferred to the savings deposits.
2) Saving Deposit Ratio
Accounts that pay interest and can be withdrawn on upon demand Offered by
banks, credit unions, and Savings and Loans. Saving Deposit Ratio = Saving
Deposit/ Total Deposit.

RATIO ANALYSIS
40

35

30

25

20

15

10

0
2015 2016 2017 2018

HDFC SBI

Year HDFC SBI

2015 24.45 26.71
2016 29.79 32.01
2017 29.99 35.36
2018 30.31 35.37
Mean 28.63 32.36
SD 2.92 4.15
CV 9.95 12.78
As shown in table the ratio of savings deposit to total deposit is maximum in
case of SBI (32.36) it is an account at a bank in which the customer deposits
money for any non-immediate use. For example, one may utilize a savings
deposit to save funds for an expensive purchase, such as a house or a car.
Because most customers keep money in a savings deposit for a longer period
than a checking account, a savings deposit pays a slightly higher interest rate.
3) Net Interest Margin
A measure of the return on a Company’s investments relative to its interest
expenses. The net interest margin helps a company determine whether or not it
has made wise investment decisions. A negative net interest margin indicates
that interest expenses exceed investment returns and that the company therefore
has a net negative return. A positive net interest margin indicates the opposite.
Net Interest Margin = (Interest Received-Interest Paid)/ total Assets

Year SBI HDFC

2015 2.3 4.2
2016 2.4 3.9
2017 2.9 4.1
2018 3.3 3.9
Mean 2.72 4.02
SD 0.46 0.15
CV 17.04 3.72

4.5

3.5

2.5

1.5

0.5

0
2015 2016 2017 2018

SBI HDFC
As shown in table NIM of HDFC is more than others i.e. 4.02 which shows that
interest earned by HDFC bank is much more than expended and other banks are
earning less interest. Interest earned by bank is there foremost income which is
more in case of HDFC and other banks following are almost at same level and
chart shows that there is very less variation in case of HDFC bank and more
variation in SBI bank.
4) Credit Deposit Ratio:
The proportion of loans generated by banks from the deposits received. Credit
Deposit Ratio = Credit/ Deposit

Year SBI HDFC

2015 26.71 24.45
2016 32.01 29.79
2017 35.36 30.42
2018 35.37 29.99
Mean 32.36 28.66
SD 4.08 2.82
CV 12.62 9.84

40

35

30

25

20

15

10

0
2015 2016 2017 2018

SBI HDFC

As per the SBI bank is issuing maximum credit as per the deposits generated
against maximum in case of HDFC.
5) DEBT EQUITY RATIO
The debt-to-equity ratio (debt/equity ratio, D/E) is a financial ratio indicating
the relative proportion of entity’s equity and debt used to finance an entity’s
assets. If the ratio is increasing, the company is being financed by creditors
rather than from its own financial sources which may be a dangerous trend. A
debt-to-equity ratio is calculated by taking the total liabilities and dividing it by
the shareholder’s equity: Debt-to-equity ratio= Debt/Equity

Year SBI HDFC

2015 15.4 10.1
2016 14.9 8
2017 16.7 8.7
2018 14.8 9
Mean 15.45 8.95
SD 0.87 0.87
CV 5.65 9.76

18

16

14

12

10

0
2015 2016 2017 2018

SBI HDFC
As shown in the table debt equity is ratio is maximum in case of SBI, and
variation is least in case of HDFC.
6) RETURN ON ASSETS
Return on assets is the ratio of annual net income to average total assets of a
business during a financial year. It measures efficiency of the business in
using its assets to generate net income. ROA= Net Income/ Total Assets
Year SBI HDFC
2015 0.8 1.2
2016 0.8 1.3
2017 0.6 1.4
2018 0.8 1.5
Mean 0.75 1.35
SD 0.1 0.12
CV 13.33 9.56

1.6

1.4

1.2

0.8

0.6

0.4

0.2

0
2015 2016 2017 2018

SBI HDFC

As shown in the table ROA is highest is case of HDFC 1.35 respectively and
variation is more in case of SBI. This return is related with overall profitability.
7) RETURN ON EQUITY
One of the most important profitability metrics is return on equity (or ROE for
short). Return on equity reveals how much profit a company earned in
comparison to the total amount of shareholder equity found on the balance
sheet. ROE= Net Income/ Shareholders Fund
Year SBI HDFC
2015 15.1 14.9
2016 14.1 13.9
2017 12.8 15.6
2018 14.4 17.4
Mean 14.1 15.45
SD 0.96 1.47
CV 6.82 9.5

20

18

16

14

12

10

0
2015 2016 2017 2018

SBI HDFC

As shown in table ROE is maximum in case of HDFC 15.45 has least variation
in this and SBI is having more variation.
8) CAPITAL ADEQUECY RATIO
Capital adequacy ratio is the ratio which determines the bank’s capacity to meet
the time liabilities and other risks such as credit risk, operational risk etc. CAR
is similar to leverages, in the most basic formulation, it is comparable to the
inverse of debt-to-equity leverage formulations (although CAR uses equity over
assets instead of debt-to-equity, since assets are by definition equal to debt plus
equity, a transformation is required). Unlike traditional leverage, however, CAR
recognize that assets can have different levels of risk.
Year SBI HDFC
2015 14.3 15.7
2016 13.4 17.4
2017 12 16.2
2018 13.9 16.5
Mean 13.4 16.45
SD 1.00 0.71
CV 7.48 4.34

20

18

16

14

12

10

0
2015 2016 2017 2018

SBI HDFC
In this case HDFC BANK has the capacity to meet the time liabilities and other
risks such as credit risk, operational risk etc. at 16.45
9) OPERATING MARGIN RATIO
Operating margin ratio or return on sales ratio is the ratio of operating income
of a business to its revenue. It is profitability ratio showing operating income as
a percentage of revenue. Operating Margin= Operating Profit/ Total Revenue

Year SBI HDFC

2015 19.5 19.87
2016 16.96 24.36
2017 16.97 30.58
2018 16.29 27.19
Mean 17.43 25.5
SD 1.41 4.53
CV 8.12 17.77

35

30

25

20

15

10

0
2015 2016 2017 2018

SBI HDFC

As shown in table operating margin of HDFC is maximum 25.5 followed by

operating margin is directly concerned with profitability, SBI is least variable is
more variable which states that SBI bank’s profitability doesn’t change much.
10) NET PROFIT MARGIN RATIO
Net profit margin is the percentage of revenue remaining after all operating
expenses, interest, taxes, and preferred stock dividends (but not common stock
dividends) have been deducted from a company’s total revenue. Net Profit
Margin = Net Profit/ Total Revenue
Year SBI HDFC
2015 12.03 11.35
2016 10.54 14.76
2017 8.55 16.09
2018 9.73 15.93
Mean 10.21 14.53
SD 1.46 2.20
CV 14.31 15.15

18

16

14

12

10

0
2015 2016 2017 2018

SBI HDFC

As per table HDFC bank enjoys more net profit than other bans at 14.
5.1 CASE STUDY ON HDFC BANK
COMPANY PROFILE

NAME : Housing Development Finance

Corporation ltd

FOUNDED IN : August 1994

TYPE : Public Company

HEADQUAETERS : Mumbai, Maharashtra, India

KEY PEOPLE : Mr . Deepak Parekh, Chairman

Mr . Aditya Puri, MD

AREASERVED : Worldwide

TOTAL ASSETS : US $98.74 billion

NO. OF : 70000
EMPLOYEES
NO.OF : 4014
BRANCHES
NO.OF ATMS : 11766

HDFC Bank is an Indian Banking and Financial Services Company

headquartered in Mumbai India. The Bank was promoted by a premier housing
finance company set up in 1997 of India.

CASE – LAUNCH OF ULTRA PREMIUM

CREDIT CARD
The HDFC Bank is the largest credit card issuer in country. Also HDFC bank is
one of the leading players in the private banking space, The High Network
Individuals (HNI) in Indian grew by 20.8% with India rising to 12 th position and
being within the striking distance of top global pecking order. The Bank aimed
to become the undisputed leader. It also aimed to fulfil the need of Number –
rich clientele.
CHALLENGEGES FACED
The plan to provide appropriate spending base in order to match the high end
lifestyle of uber –rich customers proved to be challenging. Also it being a credit
card, issuance and marketing it in a developing country like India proved to be a
challenge.

SOLUTIONS
In order to make the strategy a success, Infinia Credit was ‘launched. it was a
super-premium card offered to rich Indians with handpicked employees
managing the transactions and other attributes .

BENEFITS
The launch of Infinia Credit Card has resulted in the growth of clientele of
HDFC Bank. The clientele includes not only middle class and salaried
employees but also rich individuals as well as it has positive impact on it s
profitability.

CONCLUSION
Introduction of Infinia Credit Card has enhanced the prospects of India in
Global Banking Industry and also strengthened the position of HDFC Bank as
the leading player .
5.2 CASE STUDY ON SBI
COMPANY PROFILE

NAME : State Bank of India

FOUNDED IN : 1935

TYPE : Public Company

HEADQUAETERS : Mumbai ,Maharashtra, India

KEY PEOPLE : Arundhati Bhattacharya

AREASERVED : Worldwide

TOTAL ASSETS : US $ 200 billion

NO. OF EMPLOYEES : 205000

NO.OF BRANCHES : 17350

NO.OF ATMS : 20000

This report is a case study of the State Bank of India (SBI) and its journey to
implementing a new core system in its domestic footprint. This domestic
footprint is one of the largest in the world, with over 17,385 branches of State
Bank of India and its six Associate Bank running one the TCS Banks system.
CASE – THE DECISIONS TO MIGRATE CORE SYSTEM
“STATE BANK OF INDIA “was running a branch system, meaning that you
did business with the branch, not the bank .All records of accounts activity
resided in the branch. The bank found itself at a competitive disadvantages with
respect to both the global banks (Citi, Standard, Chartered , HSBC) and the
private(as opposed to publicly owned)banks such as ICICI Bank and HDFC
Bank ,which had a single centralized core banking system in India so that
customers could do business with any branch. Corporate customers were
moving to other banks that could work with a single bank operating across the
country rather than multiple branches that couldn’t offer real time consolidation
of positions.
Because SBI was at a technology disadvantages with the branch system, the
bank was losing deposit share due to entrants in the market. The private banks
were rolling out new products on modern systems. And State Bank of India had
trouble keeping up with this innovation. On the Bank master branch server, this
alone made it much more difficult to compete in the Indian market.

CHALLENGE FACED
Providing high level of satisfaction to consumer as well as Bank at lower cost in
large scale and being technology based were the biggest challenges.

SOLUTIONS
In order to make the strategy a success, the SBI Bank needed robust technology
that would help in achieving profile maximization. After Intense evolution, SBI
Bank selected TCS (TATA CONSULTANCY SERVICES) as the Technology
partner. TCS provide Finale, Universal banking solutions as core banking
platform.
BENEFITS
Some of the main basic benefits relates case are as follows.
 Now they could be controlled centrally, providing greater speed,
accuracy , and consistency of pricing across branches. There was also
centralized risk reporting and control, given that all branches were on
a single system.
 Standardizing the KYC(know your Customer) process was an
additional benefit of installing the BANCS system.
 State Bank Of India executed a business process reengineering (BPR)
in conjunction with its core migration.
 Increase in transaction levels.
 Increase in the ability to manage more no. of users effectively.

CONCLUSIONS
Moving to a centralized modern core system was a competitive requirement for
the State Bank Of India. As they saw from their nationalized brethren, those
who did not do so would lose share to the privately held and foreign banks .
Bank looking to reduce IT cost should consider moving to an open system that
can provide the reliability, and availability that largest banks in the world
require.
CHAPTER 6. DETAILS OF THE STUDY
6.1 FINDINGS OF THE STUDY
6.2 SUGGESTONS
6.3 CONCLUSTIONS
6.1 FINDINGS OF THE STUDY
1. It is found that net profit margin and Adjusted Cash Margin of both banks
registered a low level of volatility .The Return on Net Worth(RNW) and
Adjusted Return on Net worth (ARNW)of SBI and HDFC was found
almost with similar trend.3
2. It is found that the deposits of SBI are superior to HDFC Bank. This is
because of the confidence of the people in SBI as it is largest public
sector bank in India. The volumes of Demand Deposits of SBI and HDFC
Bank are almost similar, but the volume of savings and term Deposits are
significantly differing.
3. It is found that the loans and advances, term loans, and short term loans
of SBI are greater than HDFC Bank as SBI is having a greater network
and customer base.
4. The operating profit per share of SBI and HDFC reported a mixed trend.
It is due to dynamics in the business profit of the individual banks.
5. The net operating per share of SBI is found declining where as, HDFC
bank reported very least growth as the operating profit of SBI differed
significantly from HDFC bank.
6. It is found that Other Income over the Total Income of SBI is very high in
percent when compared to HDFC. It can be concluded that the private
banks concentrate on real core bank activities for generating the income
to the possible extent, whereas, the public sector banks are not.
7. Interest Expended/Interest Earned of HDFC followed a declining trend,
where the SBI reported a gradual increase in the same over the study
period.
8. In the case of Advance/Loan Funds ratio SBI reported a poor
performance, whereas, HDFC Bank experienced an opposite trend.
9. The volume of profit of SBI and HDFC Bank are very satisfactory as they
are more than degree of 1. But comparatively, the profits before
provisions are significant in the case of HDFC bank.
6.2 RESEARCH AND METHDOLOGY
Data has been collected from the following sources:
 Primary Data
 Secondary Data
All the data has been collected by visiting official websites and other web
pages of HDFC Bank & SBI Bank.
6.3 REVIEW OF LITERATURE

Banks are important in mobilizing and allocating savings in an economy and

can solve important moral hazard and adverse selection problems by
monitoring and screening borrowers and depositors. Besides, banks are
important in directing funds where they are most needed in an efficient manner
and have direct implications on capital allocation, industrial expansion, and
economic growth (Berger, Demirguc-Kunt, and Haubrich 2003; Levine 1997).
Banks also play an important role in diminishing informational asymmetries
and risks in the financial system. Hence, the study of the banking industry and
its impact on the economy is of the utmost importance. The effects of
concentration and competition on bank performance are pertinent since they
have important policy implications. A recent global trend of consolidation in
the banking sector has intensified, generating important debates on its effects
on the profitability of banks, consumer costs, the efficiency in allocating
resources in an economy, and on overall financial stability.

Kailash M (2012)- The paper compares public and private sector banks in
Global and Indian level. The findings revealed that private sector banks have
good services to customers and they retained customers by providing better
facilities. The study finds out importance of new products and services for
banks for retaining customers.

The studies mentioned above clearly points out to the importance of having a
structured study on this where banks in different categories are compared with
respect to the service quality aspect which will help them to find out their core
competencies and to capitalize on them and at the same time find out the areas
where they can improve
6.4 SUGGESTIONS
In order to improve their financial performance, the SBI and HDFC banks are
advised the following based on the analysis.
 The minimum balance for Saving Account in HDFC Bank should be
reduced from RS.10000 to RS. 1000so that people who are not financially
strong enough can maintain their account properly.
 The banks should motivate and impart right knowledge about banking to
their staff.
 The bank have to fundamentally reorient its business models by moving
from product centric silos to customer centric strategies.
 The bank must become more clients centric by leveraging sophisticated
insights to improve risk management pricing, channel performance and
client satisfaction.
6.5 CONCLUSIONS
 It is very important to study the profitability of the banking sector. It is
only profits that make the banking sector healthy and strong.
 The comparative analysis of the profitability of the two banks clearly
reveals that there is no significant difference in the financial performance
in terms of profitability ratios of SBI and HDFC.
 Therefore, profitability ratios are employed by management in order to
assess how efficiently they carry on their business operations and also it
is suggested for the entire bank to take effective steps to improve the
operating efficiency of the business
ANNEXURE
QUESTIONNAIRE FOR BANK MANAGER OF HDFC & SBI
Q.1 Say something about some specific features of your bank?
Q.2 Say something related to structure of your bank?
Q.3 How the HDFC/SBI Bank earn more profit other than public /private sector
bank?
Q.4 What are the strategy used for increasing your profit?
Q.5 From which branch you get more profit than other branches?
Q.6 Tell me about your one of the best policy used by the bank and their
positive effects on your profitability?
Q.7 From which source you get more income?
Q.8 Which kind of people prefer your bank?
Q.9 For which kind of purpose the people prefer your bank?
Q.10 Which kind of steps you take to increase your profitability?
Q.11 How your bank maintain brand image?
Q.12 What are the major area of expenses?
Q.13 Which steps you take for minimize your expenses?
Q.14 How they affects your profitability?
Q.15 Which year is more profitable for your bank?
WEBLIOGRAPHY
www.hdfc .com
www.sbi.com

BIBLIOGRAPHY
Annual Reports of HDFC Banks
Annual Reports of SBI Bank
GROUND WORK
HDFC Bank, new panvel Branch.
SBI Bank, wagle estate Branch.
Data has been collected from the following sources:
 Primary Data
 Secondary Data
All the data has been collected by visiting official websites and
other web pages of HDFC Bank & SBI Bank.