A STUDY ON

FINANCIAL PERFORMANCE EVALUATION OF HDFC BANK

A
Synopsis

Submitted to the
FAKIR MOHAN UNIVERSITY
In partial fulfillment of the award of the degree of Master of
Commerce

By
MANOJ KUMAR SETHY
EXAM ROLL NO10601FM174014

Under
The guidance of
MISS. JYOTIRANI GUPTA

P.G. DEPARTMENT OF BUSINESS

MANAGEMENT
FAKI R MOHAN UNIVERSITY
VYASA VIHAR, BALASORE, ODISHA- 756019
March-2019
 CONTENT
1. Introduction
2. Background of the study
3. Rational of the study
4. Scope of the study
5. Review of literature
Identification of research gap

6. Methodology
Statement of the problem
Research objectives
Hypotheses of the study
Research Design
Sampling Design
Source of Data & Method of Data collection
Period of study
Statistical tools to be used

7. Sequence of the study/ chapterisation

8. References

Signature of the Guide Signature of the student

 1. Introduction
Financial evaluation is a scientific appraisal of the profitability and financial strength of business
concern. In fact, financial evaluation and financial statement analysis have the same meaning and
are generally used as synonyms. The tools and techniques of financial statement analysis are
used for the purpose of financial appraisal. Obviously financial appraisal is the process of
scientifically making a proper, critical and comparative evaluation of the profitability and
financial health of a given concern through the application of the techniques of financial
statements analysis. Financial statement analysis is a preliminary step towards the final
evaluation of the results drawn by the analyst or management accountant managerial makes
appraisal or evaluation of such results.
Financial performance evaluation covers a vast and is of great practical importance. Keeping in
view the evaluation of financial performance and those vast areas that it covers, we have carried
out the present research work. It is concerned with the banking organisation that offers a
personalized service. The bank uses various indicators for measuring the financial performance.
These indicators are great importance and tell us the true position of the bank. The indicators
show the strength and weakness of the bank and provide information to improve their future
working.

2. Background of the study

The economic development of a country depends more on a number of inter related and
independent factors including industrial growth and development, modernization of the primary
sector viz agriculture, growth in international trade etc. The role and importance of financial
service sector especially banking sector and the monetary mechanism cannot be undermined. On
account of the pivotal role played by banks in any economy, more attention should be given for
banks as an economic unit. Evaluation of financial performance of the banking sector is an
effective measure and an indicator of soundness of economic activities. The regulators have
come out with a detailed methodology named CAMEL (capital adequacy, asset quality,
management quality, earnings and liquidity) to assess and evaluate the performance and financial
soundness of the activities of the bank. All stake holders, governments, industries, depositors,
investors, require an idea regarding performance of these major banks.

3. Rationale of the study

The banking sector is one of the fastest growing sectors in India. Today's Indian banking sector
is becoming more complex. Evaluating Indian banking sector is not an easy task. There are so
many factors which need to be taken care of while differentiating good banks from bad ones. To
evaluate the performance of banking sector we have chosen the CAMEL model which measures
the performance of banks from each of the important parameters like Capital Adequacy, Assets
Quality, Management Efficiency, Earning Quality and Liquidity. Post liberalisation, there has
been a paradigm shift in the approach and style of functioning of Indian banking sector. There
has been a flurry of new entrants into the fray which has also made the competition sharp and
acute. Rapid application of technology and introduction of new financial products has made the
banking sector very much competitive. Gone are the days of old social models, now the banks
focus more on profitability and performance. Especially when the banking sector is passing
through a very crucial phase owing to demonetisation and mergers, performance of banks are
very critically observed. In the above backdrop, the present study is undertaken to examine the
performance of the top five public sector banks of India covering the recent period.

4. Scope of the Study

The study was analytical in nature and based on secondary data. The study covers the evaluation
financial performance of a private sector bank HDFC. This study refers to the performance
evaluation of a private sector bank HDFC by conducting some past figure data of that particular
bank. To evaluate the strength and weakness of the HDFC.

5. Review of literature
Introduction
The literature review is diverse on the field of bank financial performance in India. The role of
commercial banks in meeting the finance requirements generate income, employment and assets
to targeted section is yet to be studied in depth covering different regions that is not surprising.
Commercial banks are recent entrants into banking operations in our country. A few studies on
performance evaluation of bank general are also included in the present review for providing the
necessary background.
Review on financial evaluation of banks
Monoj N K S & Asha Thomas & Chandapilani N A (2018) analyse the performance
evaluation of five public sectors banks based on CAMEL model banks are likely State bank of
India, Bank of Borada, Punjab National bank, IDBI bank &Canada bank for the time period from
2013-16. The analyse the all banks position at a satisfactory methods capital adequacy ratio,
assets quality management capability, earning capacity, and liquidity. They conclude that the
present study has been conducted to examine the economic sustainability of the biggest public
sectors banks. Through the analysis of CAMEL Parameter State bank of India at top position and
IDBI is at the bottom position.

Dr.Sneha and S. Shukla (2015) analyse financial strength of some public and private sector
banks by using CAMEL approach. They evaluate financial performance of banks for the period
from 2010 to 2013. They taking three public bank that is Punjab National Bank, Bank of Baroda,
IDBI bank and three private banks Axis Bank, ICICI Bank, HDFC Bank. They analyse the all
ratio by CAMEL parameters. After using all ratio they conclude that different banks have obtain
different financial performance with respective to CAMEL model.

K.V.N. Prasada and G. Ravinder (2012) In this study article titled “A Camel Model Analysis
of Nationalized Banks in India”, has been conducted to examine the economic sustainability of a
sample of thirty nine banks in India using CAMEL model during the period 2006-10. The study
revealed that Canara Bank stood at top position in terms of capital adequacy, in front of asset
quality, Andhra Bank& Bank of Baroda was at top most position, in context of management
efficiency, Punjab & Sindh bank positioned at first, in terms of earnings quality Indian Bank
sustained the top position Bank of Baroda rated top in case of liquidity position, overall
performance table shows that, Andhra Bank is ranked first followed by Bank of Baroda,Punjab
& Sindh Bank, Indian bank , Corporation Bank and in bottom five, Central Bank of India was on
the last position

Sangmi and Nazir (2010) analysed the performance evaluation of biggest nationalized public
bank Punjab national bank and a biggest private sector bank Jammu and Kashmir bank using
CAMEL model for the period from 2001 to 2005. They analysed the position of both banks
using satisfactory case study of capital adequacy, asset quality, management position, earning
capacity, liquidity. They conclude that the position of the banks under study is sound and
satisfactory.

Sisodiya et al. (2007): Adopted CAMEL model to assess the performance of Indian banks. The
authors analyzed 67 banks for the year 2006-07. On the basis of composite ranking of all the
selected banks, they selected 10 CAMEL topper banks under public and private sector and
foreign banks category. They concluded that with the efficiency in the economy led by robust
corporate performance, the banking sector reported sterling performance.

Uppal and Kaur (2007) analysed the efficiency of all the bank groups in the post banking sector
reforms era i.e.1999-2000 to 2004-05. The paper concluded that the efficiency of all the bank
groups increased in the second post banking sector reforms period but these banking sector
reforms were more beneficial for new private sector banks and foreign banks.

Wirnker and Tanko (2006) introduced the title of subject is “overall financial performance of
bank” they evaluated the adequacy of CAMEL approach for capturing a particular bank
performance. The overall study concludes that no one factor in CAMEL suffices to describe the
performance of the bank. The best ratio for capital adequacy was found to be the ratio of
shareholder’s fund to total risk weighted assets.

S.K. Khatik and P. K. Singh (2005) analysed the efficiency of “financial performance of IDBI
bank.” They use the time period of IDBI bank from 1997 to 2001 to evaluate the financial
performance. They using the CAMEL approach they analysis the performance of bank they use
the ratios which is based on norms issued by RBI like capital adequacy ratio, NPA analysis and
PSA they also analysis the SLR, CRR and CDR. Statistical tools also use for hypothesis testing.
Overly they conclude the bank financial performance was based on satisfactory and best
management practice.

Prasuna (2003) analyzed the performance of Indian banks by adopting the CAMEL model. The
performance of 65 banks was studied for the period 2003-04. The author concluded that the
competition was tough and consumers benefited from better services quality, innovative products
and better bargains.
Identification of research gap
During the literature collection it is observed that few studies have been made on financial
evaluation of banks and other studies made on comparative financial performance between two
banks, and some other studies are made on strength of the banks. But still a few studies has made
on the financial performance evaluation of HDFC bank for the time period from 2013-14 to
2017-18. So by this present study an attempt is made to evaluate the financial performance of
HDFC bank using CAMEL model.
6. Methodology
Methodology describes the research route to be followed, the instruments to be used, universe
and sample of the study for the data to be collected, the tools of analysis used and pattern of
deducing conclusions. For the purpose of the present study, the research instrument used is the
CAMEL Model which is the recent innovation in the area of financial performance evaluation of
banks.

Statement of the problem

Financial system of a country is the most essential factor for the successful economic
development and performance of the country. The Indian banking system provides the financial
services to the society. So, it plays a significant role in Indian economy and it is considered that
bank and their financial performance are the important component of a sound and satisfactory
financial system of the country. Financial analysis is mainly done to compare the financial
performance and credit deposit capacity of the respective bank by analysing the information
from the financial statements. Financial analysis is done to evaluate the performance and growth
rate of the bank by properly analysing the items of the balance sheet.
Research objective
The main objectives of the study are:
To analyze the overall financial performance of the HDFC bank using CAMEL Model.
Capital adequacy ratio
 Asset quality
Management capability
Earnings capacity and
Liquidity
Hypothesis of the study.
Null hypothesis (H0) - financial performance of HDFC bank is not satisfactory.
Alternative hypothesis (H1) - Financial performance of HDFC bank is satisfactory.
Research design
In this present study a longitudinal research design is adopted to evaluate the financial
performance of HDFC bank.
Sample design
Non-Probability sampling design is used for this study and HDFC bank is selected as sample by
using purposive sampling method.
Sources of data and method of data collection
The source of data used for this study is secondary data by different journals, articles, annual
reports etc.
Period of Study
Current study is analysed for the 5 year, for the time period from 2013-14 to 2017-18.
Statistical tools to be used
Different ratios are used to measure the different parameters of this study. And t-test is used to
test the above hypothesis.
7. Sequence of study/ Chapterasation

This study divided into 7 chapters as follows:

Chapter 1: is introduction
Chapter 2: is review of literature
Chapter 3: is conceptual framework
Chapter 4: is research methodology
Chapter 5: is bank profile
Chapter 6: is analysis and interpretation of data
Chapter 7: Are findings, suggestions and conclusions.
8. References
1. Dr.Sneha and S. Sukla, Analysing financial strength of public and private sector; A CAMEL
approach, Pacific Business Review International
Volume 7, Issue 8, February 2015
2. K.V.N. Prasada and G. Ravinder , A Camel Model Analysis of Nationalized Banks in India,
International Journal of Trade and Commerce-IIARTC January-June 2012, Volume 1, No. 1, pp.
23-33 ISSN-2277-5811
3.K.V.N. Prasad, Dr. D. Maheshwara Reddy, “Evaluating Performance of Nationalized Banks
and SBI Groupthrough CAMEL Model”, Academician, an International Multidisciplinary
Research Journal, Volume 2, Issue 3, March-2012, P. 32-39
4. Khatik, S.K. & Singh P.K (2005), Financial Appraisal of IDBI Bank Ltd. Indian Journal of
Accounting, XXXIII, 35-42.
5. Monoj N.K.S. & Asha Thomas & ChandapilaniN. A, Performance Evaluation of Public Sector
Banks based onCamel Methodology, International Journal of Engineering Technology Science
and ResearchIJETSR, www.ijetsr.com, ISSN 2394 – 3386, Volume 5, Issue 1 January 2018
6. Prof. Dr.Mohi-Ud-Din Sangmi and Dr.TabussumNazir, “Analyzing Financial Performance of
Commercial Banks in India: Application of CAMEL Model”, Pak. J. Commer. Soc. SCI., 2010,
Vol. 4(1) P. 40-45
7. Sisodiya, A. S.; Bharathi, Y. Bala. ; and Kavitha, P. (2007), “Indian Banking Sector of
Performance, Progress and Challenges”, Chartered Financial Analyst, Special Issue, October,
pp.26-56.
8. Websites of various Public Sector banks and RBI