Project On HDFC Bank

EXECUTIVE SUMMARY
Introduction
Financial analysis is the starting point for making plans, before using any
sophisticated forecasting and planning procedures. Understanding the past is a
prerequisite for anticipating the future. Financial analysis is the process of
identifying the financial strength and weakness of the firm by properly
establishing relationship between the items of the balance sheet and the profit
and loss account. Financial analysis can be undertaken by management of the
firm, or by parties outside the firm, viz. owners, creditors, investors and
others. The nature of analysis will differ depending on the purpose of the
analyst.
 Investors: Who invested their money in the firm’s shares, are most
concerned about the firm’s earnings. They more confidence in those
firm’s that show steady growth in earnings. As such, they concentrate
on the analysis of the firm’s present and future profitability. They are
also interested in the firm’s financial structure to that extent influence
the firm’s earning ability and risk.
 Trade creditors and financial instutitution: They are

interested in firm’s ability to meet their claims over a very short period
of time. Their analysis will, therefore, confine to the evolution of the
firms liquidity position. And the financial institutions are interested in
the financial statements of the borrowing concern to ascertain its short-
term as well as long-term solvency and also it profitability.
 Suppliers: On the other hand, are concerned with the firm’s long-
term solvency and survival. They analysis the firm’s profitability over
time, its ability to generate cash to be able to pay interest and repay
principal and the relationship between various sources of funds (capital
structure relationships). Long-term creditors do analysis the historical
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financial statements, but they place more emphasis on the firm’s projected,
or pro forma, financial statements to make analysis about its future
solvency and profitability.
 Management and employees: The firm would be interested in

every aspect of the financial analysis. It is their overall responsibility to
see that the resources of the firms are used to most effectively and
efficiently, and that the firm’s financial condition is sound. The
foresaid features of financial statement analysis that really facilitates
the organization to determine their financial strengths and weakness. In
connection with this the researcher has opted a HDFC bank ltd to
analyze their financial abilities and suggests them for a long-term
growth prospective. And the employees of a concern are interested in
the financial statement of the firms to ascertain its profitability and
ability to offer higher wages, bonus, better working conditions, etc.
 Government: The Government is interested in the financial

statements of a concern for purposes of taxation, and also for the
purpose of regulating the activities of the concern
Objectives of the financial analysis

 To determine the profitability or earning capacity and progress of the
concern
 To judge the financial position of the concern and also analyze the
strength and weakness of the firm
 To find out the solution to the unfavorable financial conditions and
financial performance
 To involve comparison for a useful interpretation of the financial
statement
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To act of analysis may also reveal areas where control is deficit and desirable
for the efficient operating of the bank which in turn help to achieve
organizational goals.
TITLE OF THE STUDY
“THE ANALYSIS AND INTERPRETATI'ON OF THE FINANCIAL

STATEMENT OF HDFC BANK LIMITED, BANGALORE.”
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OBJECTIVES OF THE STUDY
The objectives of the study are to evaluate the financial position and
performance of the “HDFC BANK LTD”. The purpose of the study mainly
centers on the critical analysis of the financial statements of the bank. And
makes attempt to get better in sight about the financial strength and weakness
of the bank by analyzing and interpreting the data reported in its statements.
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RESEARCH DESIGN OF THE STUDY
Research design means a search of facts, answers to question and
solution to the problems. It is a prospective investigation. Research is a
systematical logical study of an issue or problem through scientific method. It
is a systematic and objective analysis and recording of controlled observation
that may lead to the development of generalization, principles, resulting in
prediction ultimate control of events.
Research design is the arrangement of conditions for the collection

and analysis of data in manner that aims to combine relevance to the research
purpose with relevance to economy. There are various designs, which are
descriptive and helpful for analytical research.
In brief a research design contains

• A clear statement of the research problem.
• A specification of data required
• Procedure and techniques to be adopted for data collection.
• A method of processing and analysis of data.
Research design used in the specific study includes the following

• Identifying the statement of the problem.
• Collection of the company’s specific literature i.e., annual reports for
the study period and the profile of the company.
• Scanning through standard books to understand the theory behind the
financial performance evaluation
• Collection of information from various journals to understand the
industrial background of the study.
• Decision regarding study prior in this case it was decided to be 5 years
i.e., from 2002-2003.
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METHODOLOGY
Sources of data can be classified into two groups they are:
• Primary data and
• Secondary data
Primary data
The data are originally collects the data directly from the company or
from the agency for the first time, for any statistical investigation and used by
them in the statistical analysis are termed as primary data. It has been
collected through different books of accounting, broaches, catalogs, company
prospects, company file etc.
Secondary data
The data published or un published, which have already been collected
and processed by some agencies for their statistical work are termed as
secondary data. As for as secondary data is concerned the second agency if
and when it publishes and files such data, it becomes secondary data sources
to any one who later uses that data.
This is related to collect the required information about the study. My

sources of information are the data available with the bank by on going
through the annual reports. The study is basically relies on secondary data
supplied by the bank. The primary data used for this study consist of informal
discussion, interviews with the deputy manager of the bank.
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Analysis and Interpretation of Financial Statement
The Financial Statement Provides a Summarized view of the financial

position and operation of the firm, therefore much can be learnt about a firm
from an examination of its financial statements ad invaluable documents /
performance reports. The analysis of financial statements is a processes of
scanning and evaluating with a view to get a necessary information and
interpretation is drawing conclusions with regard to the nature of the inter
relationship between figures and analyzed.
It is necessary to note in the context that analysis and interpretation are

complementary and one cannot be stressed or favored as against the other.
Infact the very object of the analysis is to interpret the significance relation
ship between figures and there cannot be any interpretation without first
analyzing the data. Thus analysis and interpretation go hand in hand. The
main objectives of the analysis is the analyzing the strength and weakness of
the firm, obtained from the Financial Statement and balance sheet of the
company. The Financial Analysis is a final step of accounting that resulting
presentation of the final and the exact data, which helps the business manager,
creditors, investors and other related people to know the financial position of
the company and their strength.
The subject matter of the Finance has been changing at a rapid pace
about three decades ago. The scope of Financial Management was
circumscribed to the raising Funds whenever is needed and a little significance
used to be attached to Financial Decisions and problem solving. As a
consequence the traditional finance context was structured around the theme
and contains discussion of the instruments and institution of rising funds and
of the major events such as Promotion, re-organization, re-adjustment,
Mergers, Consolidation, etc., when fund are required to be raised.
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Finance is a life blood of business; it is rightly termed as the science of
money. It is the foundation of each and every economic activity and is the
pivot around whichever business rotates. So it is very essential for the smooth
running of the business. It has made possible tremendous savings of time and
trouble in the marshalling productive facilities and in the distribution of the
output of the industry to final consumers. It has brought about rapid economic
progress be facilitating specialization and division of labour technological
progress, large scale production and expansion of various forms of business
and financial organization and it controls the Policies, activities and decision
of every business.
Finance may be defined as a “It is that the business activities which is

concerned with the organization and conservation of capital funds in meeting
the financial needs and over all objective of the business enterprises”
The Financial Management is a Managerial activity and an integral part
of the all Management of the business. It is concerned with the proper
planning and controlling of the firm’s financial resources as a separate activity
of discipline has under fundamental changes as regards it scope and
coverage’s. It is of recent origin. It was a branch of economies till 1890. Still
today, it has no unique body of knowledge of it own and depend economics
for its theoretical concepts.
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The Financial Management concerned with:
 The ascertainment of finance both long term and short term needed by
the firm
 Determination of suitable resources under given circumstance
 Collection of funds with in the time and control over utilization of
funds
 And also to maximization of profit of the firm, share holder’s wealth
maximization.
 Ensure a fair return in investment to the share holders
 Creating of reserves for growth and expansion
Based on this reasoning the Financial Analysis is a study of relationship

between many factor as disclosed by the company financial statement and the
study of the trend of these essential factors.
FINDINGS
 Average Quarterly balance for urban area are slight high for
common people
 Penetrating rural market
 In the era where India is witnessing emergence of eminent
foreign banks, HDFC Bank has still maintain its glory
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LIMITATIONS
 The financial statements are prepared on the basis of historical costs or

original costs. The value of assets decreases with the passage of time
current price changes are not taken into account.
 The financial statements are expressed in monetary values, so they
appear to give final and accurate position, but some times it does not
give exact position.
 The precision of financial statement data is not possible because the
statements deal with natters which cannot be precisely stated.
 The bank wanted not to disclose some of the analysis carried on.
Hence some of them are not included in this report.
CONCLUSION
The study is entitle “A Study of Financial Statement Analysis of the

HDFC Bank Limited” has been undertaken with the objective to analyze and
interpret the bank’s financial performance.
In general, the bank has achieved tremendous progress over the recent
years. The bank has a healthy financial performance. The bank has been able
to achieve heavy growth across multiple parameters, including customer’s
acquisition, geographical spread, business volumes and revenues.
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COMPANY PROFILE
Origin Of The Organization
HDFC BANK LTD. is leading private sector bank and financial services
company in India. The Housing Development Finance Corporation Limited
(HDFC) was amongst the first to receive an in principle approval from the
Reserve Bank of India (RBI) to set up a bank in the private sector, as part of
RBI`s liberalization of the Indian Banking Industry in 1994. The Bank was
incorporated in August 1994 in the name of “HDFC BANK LTD.”, with its
registered office in Mumbai, in India and commenced operation as a
Scheduled Commercial Bank in January 1995. The Bank is a banking
company governed by India’s Banking Regulations Act, 1949. The Bank’s
shares are listed on the Bombay Stock Exchange Ltd., the National Stock
Exchange of India Limited and its ADSs are listed on the New York Stock
Exchange.
The bank is a part of the HDFC Group of Companies founded by out

parent. This bank is public limited company established under the laws of
India. HDFC LTD. and its subsidiaries owned approximately 22% of our
outstanding Equity Shares as of March 31st 2006. From the beginning, HDFC
Bank its operation with the aim of becoming a world-class Indian Bank and
the endeavor of fulfilling all the financial requirements of customer under one
roof. Over the years, by delivering superior financial products and services,
the bank has build a stable and long lasting relationship with nearly 7 million
customers without compromising standard for maintaining high quality
association, culture for learning, quick absorption of latest and best
technologies and unwavering adherence to best practice in governance have
been the core strength that have brought the bank to the present position with
the constant learning to growth, the bank has continued to use the dividends of
leadership to fuel future expansion and presence.
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The strategy of bank is to provide comprehensive range of financial
products and services for their customers through multiple distributed in
channels, with high quality service and superior execution. The multiple
distribution channel including an electronically linked branch network,
automated telephone banking, internet banking and banking by mobile phone,
to offer customer convenient access to their product. The quality of service is
provided by bank through intensive staff training and the use of our
technology platform. Their focus on knowledgeable and personalized services
draws customers to our products and increases the loyalty to the existing
customers.
The HDFC Bank’s philosophy is based on four core values that is

Operational excellence, Customer focus, Product leadership and People. The
bank is professionally managed organization with board of directors consisting
of eminent persons who represent various fields including finance, taxation,
construction, urban policy and development. The board primarily focus on
strategy formulation policy and control, design to delivery increasing value to
share holders.
Today, HDFC are market leader in most of the segments that they
operate and their goal is to acquire the best position in attracting customers.
The bank has grown rapidly since commencing operations in Jan 1995.
Currently the bank has a nation spread over 583 branches in 263 cities across
the country by operating in three principle segments, that is
 Wholesale banking
 Retail banking
 Treasury service
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Wholesale Banking Services
The Bank's target market ranges from large, blue-chip
manufacturing companies in the Indian corporate to small & mid-sized
corporate and agri-based businesses. For these customers, the Bank provides a
wide range of commercial and transactional banking services, including
working capital finance, trade services, transactional services, cash
management, etc. The bank is also a leading provider of structured solutions,
which combine cash management services with vendor and distributor finance
for facilitating superior supply chain management for its corporate customers.
It is recognized as a leading provider of cash management and transactional
banking solutions to corporate customers, mutual funds, stock exchange
members and banks.
Retail Banking Services

The objective of the Retail Bank is to provide its target market
customers a full range of financial products and banking services, giving the
customer a one-stop window for all their banking requirements. The products
are backed by world-class service and delivered to the customers through the
growing branch network, as well as through alternative delivery channels like
ATMs, Phone Banking, Net Banking and Mobile Banking.
Treasury
Within this business, the bank has three main product areas - Foreign
Exchange and Derivatives, Local Currency Money Market & Debt Securities,
and Equities. With the liberalization of the financial markets in India,
corporate need more sophisticated risk management information, advice and
product structures. These and fine pricing on various treasury products are
provided through the bank's Treasury team. To comply with statutory reserve
requirements, the bank is required to hold 25% of its deposits in government
securities. The Treasury business is responsible for managing the returns and
market risk on this investment portfolio.
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It is well-recognized fact that the quality of financial management is a
key ingredient in determining the success of an organization. This is even
more relevant in a service industry like banks. In this bank, they work for
ultimate identity and success of their bank will reside, as it always has, in the
exceptional quality of their people and their extraordinary effort. The bank is
only as strong as its infrastructure and its processes. The bank, right from
inception, they have invested in a robust technology platform, that’s
seamlessly integrated with centralized and audited processes. This has
enabled them to expand rapidly and grow manifold while maintaining
acceptable service standards.
The bank’s well-documented procedures, high levels of automation,

intensive training of personnel and ongoing audit review had enabled then to
improve the reliability of their operational processes. ISO 9002 certifications
of their cash management, retail centralized processing and custody and
depository operations are indicative of their achievements in this regard.
According to leading Indian Business magazine, Business World, a survey
was carried out and it was noted that HDFC Bank stand best in India for the
year 2006. The bank was ranked as “India’s” third best company by Finance
Asia 2005. The bank received the “Dream Home” award for the best housing
finance company for 2004 from outlook money magazine. And also has been
named best domestic bank in India in the Asset Triple a country awards in the
year 2004. In 2003 the bank won the award for operational excellence in retail
financial services India as a part of Asian Banker excellence in retail financial
services program.
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MANAGEMENT
Directors and executives
HDFC Bank’s Memorandum and articles of association provides

that until otherwise determined by a general meeting of shareholders. The
number of our directors shall not be less than three (3) or more than fifteen
(15) directors, excluding directors appointed pursuant to the term of issue date.
Bank’s board of directors consisted of nine (9) members as of March 31 st 2006
were comprised of;
Mr. Jagadeesh Kapoor (Chairmen)

Mr.Aditya puri (Managing Director)
Dr. V.R.Gadwal (Non Executive Director)
Mr. Vineet Jain (Non Executive Director)
Mr. K.M.Mistry (Non Executive Director)
Mrs. Renukarnad (Non Executive Director)
Mr. Aravind Pande (Non Executive Director)
Mr. Bobby Parikh (Non Executive Director)
Mr. Ashim Samanta (Non Executive Director)
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ORGANIZATIONAL STRUCTURE
Structure of the branch
BOARD OF DIRECTORS
CHAIRMAN AND
MANAGING DIRECTKOR
EXEUTIVE DIRECKTOR
REGIONAL BUSINESS
MANAGER
STATE MANAGER
BRANCH MANAGER
SUPERVISOR SUPERVISOR
AUTHORITIES AUTHORITIES
PERSONAL BANKER TELLER AND

RELATIONSHIP MANAGER
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PRODUCT PROFILE
The products, which are found in HDFC Bank, are
 Saving Account
 Current Account
 Fixed Account
 Preferred Program
 Demat Account
 NRI Account
 ForexPlus travel’s Card
 Bill pay
 Insta Alert
 Direct banking Channel
Saving Bank Account

People with steady and monthly income save their excess earning
through this account. There are certain restrictions in the withdrawals. Bank
pays interest at a nominal rate. Small savings are encouraged in this account.
The bank has these accounts under the savings accounts are
 Regular Account
 Salary Account
 Trust account
 Kids Advantage Account
Current Account
These deposits constitute major portion of banks circulating medium of
exchange. Normally business people keep money in his accounts as they can
withdraw and issues cheques any number of times. Banks does not pay any
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interest for these deposits. The different accounts that can be opened under
the current accounts are:
 Regular Account
 Premium Account
 Plus Account
 Trade Account and Merchant Establishment
Fixed Deposits
Money is accepted for a fixed period it cannot be with draw on before
expiry of fixed period. The interest’s rate higher than other accounts.
Minimum amount of new fixed accounts is Rs. 10,000 and addition on fixed
deposits is 5,000. Since fixed deposits was booked for a period 14 days
interest is paid only if the fixed deposits runs for at least 15 days if the
deposits was booked for 14 days or less interest is paid if the fixed deposits
runs for at least 7 days.
Preferred Program
The following are the components of preferred program
 Free Gold Debit card with enhanced daily limit
 ATM at par cheque book
 Free Gold Debit card
 Fixed discount up to 8 paise on card rate
 Free intercity transaction
 Monthly combined statement
 Free cheque book pick-up and delivery
 Discount on loans
 Free standing instructions.
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Demat account
With SEBI making trading mandatory in the Demat form advent of
rolling settlement, it is imperative that all investors have a Demat account with
a depository participant. When a customer places an order the seller can
deliver the securities in Demat form, which can only be traded to the Demat
account.
The following are the benefits of Demat account in HDFC bank

 Nominal annual maintenance charges
 Competitive fees for transaction
 Demat account status on the Internet
 Option to open Demat account with NSDL or CDSL or both
 Personalize Instruction Book
 Paper less trading which will help to prevent mutilation, loss and
misplacement of certificate and eliminate the problems of bad delivery
 Safety of securities with HDFC bank
 Problem of bad delivery, mutilation is eliminated
 Zero stamp duty
 Faster settlement of buying and selling of orders, direct credit of allotment
for public/rights/bonus issue.
NRI Account
The different types of NRI Accounts are
♦ NRO Accounts: It is an account that can be opened in Indian rupees. One
can also open on account in any form; be it savings, current or term
deposits. Interest on account can be repatriated.
♦ NRE Account: Non Resident External account at HDF Bank is available
as a savings, current and term deposit. One can also get an international
debit card with your NRE Account, the average quarterly balanced are
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NRE savings accounts is Rs. 10,000 and current and fixed deposit account
is Rs. 25,000.
♦ FCNR Account : In foreign currency non resident account you get
protection against exchange risk, apart from earning attractive interest rate
the fund can also be repatriated abroad
♦ RFC Account: It is an account is to retain fund in foreign currency.
Forex Plus Travel’s Card

The Forex plus Travel Card is a non-personalized car in association with
Visa. It is a prepaid USD/EUR/GBP denominated card. Moreover, it can also
be used at ATM with pin and with signature. The main features of the Forex
plus Travel card are
 Minimum loading $500 and E400 and Maximum loading $10,000 and
E8, 000
 Per day limit ATM $2,000
 Personal accident covers Rs. 2 lakhs
 Loss of baggage covers Rs. 20,000
Hence, Forex plus Card cannot be used for the cash withdrawal in India,
Nepal and Bhutan. The customers are not able to check outstanding balance at
HDFC Bank ATMs. Also, the card Pin cannot be changed.
Bill Pay Account

Through Bill Pay, a customer can not only pay his Electricity, Mobile,
Telephone bills but also Life Insurance premium. The customer can also
subscribe or renew his Internet account through the Direct Pay facility.
Hence, the Bill Pay through the Internet is done by logging to Net Banking
using the customer ID and password. Then the customer has to click on the
bill payment icon and select the company of which the bill is to be paid and
confirm payment. Bill Pay through Phone is done just by calling Phone
banking in the city and then follows the simple instruction that’s given. Bill
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Pay through Mobile Phone is just to access your HDFC Bank account on your
mobile phone to pay your bills, while you are on the move. Bill Pay at ATMs
is simply by selecting the others option in the main menu. Then, select the bill
payment option in the sub-menu. And finally, just confirm the amount of the
bill that you wish to pay. However, you must be registered for Net banking
and Mobile Banking in order to use these channels for Bill pay.
Insta Alert
HDFC Bank makes its customer life simple with the introduction of its
new Insta alert service. With this facility, one can get regular updates on his
bank account via SMS or e-mail. Hence, Insta alert ensures its customer
complete peace of mind. For our salary account holders, Insta alert helps in
getting an SMS or e-mail the moment the salary gets credited.
The main features of the Insta Alert are Utility bill payments due and weekly
balance alert. For these services they charge Rs: 25 per account quarterly for
savings account and for current account they charge Rs: 50 per account
quarterly.
Direct banking channels

There are three types of direct banking channels. They are
 Net banking
 Mobile banking
 Phone banking
Net banking
Net banking relates to the benefits through financial and non financial
transactions. They are Free Funds transfer, Demand Draft, Bank Credit Card,
Bill Pay for financial transactions. For non financial transactions, account
balance, statement download update mailing address, cheque book request
etc…
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Mobile banking
Mobile banking product proposition is based on the SMS (Short
Messaging Service) protocol. The information available on the cell phone
screen is in the form of text message.
Phone banking
Phone banking is the transaction between non-financial and financial
phone banking that give the details of both the mentioned transactions.
Examples are Free Funds transfer, Demand Draft, Bank Credit Card, Bill Pay
for financial transactions. For non financial transactions, account balance,
statement download update mailing address, cheque book request etc…
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Risk management and portfolio quality of HDFC Bank
Taking on various types of risk is integral to the banking business.

Sound risk management and balancing risk reward trade offs are therefore
critical to a bank’s success. Business and revenue growth have therefore to be
weighed in the context of the risks implicit in the bank’s business strategy. Of
the various types of risks the bank is exposed to, the most important are credit
risk, market risk (which includes liquidity risk and price risk) and operational
risk. The identification, measurement, monitoring and management of risks
remain a key focus area for the bank. For credit risk, distinct policies and
processes are in place for the retail and wholesale businesses.
In retail loan businesses, the credit cycle is managed through appropriate

front-end credit, operational and collection processes. For each product,
programs defining customer segments, underwriting standards, security
structure etc., are specified to ensure consistency of credit buying patterns.
Given the granularity of individual exposures, retail credit risk is managed
largely on a portfolio basis, across various products and customer segments.
For
Wholesale credit exposures, management of credit risk is done through target
market definition, appropriate credit approval processes, ongoing post-
disbursement monitoring and remedial management procedures. Overall
portfolio diversification and reviews also facilitate mitigation and
management.
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The risk monitoring committee of the Board monitors the Bank’s
management policies and procedure, vets treasury risk limits before they are
considered by the Board, and reviews portfolio composition and impaired
credits, from an industry concentration perspective, as of March 31 2005, the
retail asset portfolio constituted 49% of the total customer assets (including
advances, corporate debt instruments, etc.). Other larger industry exposures
include automotive at 9% land transport at 4%, housing finance at 4% and
heavy engineering/equipment at 1% of total customer assets. The well-

diversified nature of the portfolio is evidenced in the fact that 23 industries
account for 1%or more of the Bank’s customer assets portfolio.
As of March 31st 2005, the Bank’s ratio of gross non-performing assets

(NPA) to total customer assets was 1.47% as against 1.50% as of March 31st
2004. Increases in non-performing assets during the year were primarily
related to delinquencies in various retail loan products. These delinquencies
and NPAs were within the expected levels for each of the retail asset products
given the seasoning of the retail portfolio. Net non-performing assets were
0.24% of net advances and 0.20% of customer assets as of March 31st 2005 as
against 0.16% and 0.12% respectively as of March 31st 2004. The specific
loan loss provisions that the Bank has made for its non-performing assets
continue to be more conservative than the regulatory requirement.
The bank continues to have a policy of creating general provisions

upfront based on estimated portfolio losses for its major retail loan product
programs against which specific provisions are set-off as the portfolio ages
and NPAs surface. As on March 31st 2005, total general loan loss provisions
were 0.6% of the standard advances as against the regulatory requirement of
0.25%. The bank has been tracking the farming of the New Basel Capital
Accord (Basel II) and the guidelines of the Reserve Bank of India in this
regard. It has also assessed the key requirements of the framework, identified
the areas in rating systems, risk architecture, technology support, process
documentation, etc., needing augmentation and has laid down a road map for
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meeting the requirements in this respect. The Bank is in the process of
implementing a solution, which meets its requirements in the wholesale credit
area in connection with the Internal Rating Based (IRB) Approach for credit
risk. This will supplement the risk management systems the Bank already has
in place since inception.
PROJECT OVERVIEW
Theoretical overview of Financial Statement Analysis
Financial Statement
An organization communicates its financial information to the users

through financial statements and reports. Financial statements contain
summarized information of the organization’s financial affairs, organized
systematically. These statements comprise the incomer statements or profit
and loss account and the position statement or the balance sheet.
These financial statements have been prepared in accordance with

accounting principles generally accepted in the United States of America.
This principles differs in certain material respects from accounting principles
generally accepted in India, the requirements of India’s Banking Regulations
Act and related regulations issued by the Reserve Bank of India which form
the basis of the statutory general purpose financial statements of the Bank of
India. Principal differences in so far as they deferred income taxes, stock
based compensation, employee benefits, loan origination fees and derivative
financial instruments, and the presentation format and disclosures of the
financial statements and related notes. The preparation of financial
statements in conformity with US GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
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these financial statements and the reported amounts of revenues and expenses
for the years presented. Actual results could differ from these estimates.
Material estimates included in these financial statements that are susceptible to
change include the allowance for credit losses and the valuation of unlisted
investments.
To give a full view of the financial affairs of the undertaking it is also

necessary to include a statement of retained earnings, a statement of changes
in the financial position and a few schedules such as schedule of fixed assets
and schedule of debtors.
 Income Statement: The profit and loss account sets out income as
well as expenses of the same period and after matching the two, the
difference being the net profit or net loss, is shown as the difference
between the two sides of the account. Thus, the earning capacity and
the potential of an organization are reflected by its profit and loss
account.
 Position Statement: And also know as Balance sheet. It displays

the total resources of a business and the owners and creditor’s equity in
these resources. It indicates a statement of affair of a business at a
particular moment of time and thus it is static in nature.
 Statement of Retained Earnings: Also known, as the profit and

loss appropriation account, is generally a part of the profit and loss
account. It shows how the profit of the business for the accounting
period is appropriated towards reserve and dividend and how much of
the same is carried forwarded as retained earnings.
 Statement of Changes in Financial Position: Also known as the

fund flow statement summarized the changes in assets, liabilities and
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the owner’s equity between two balance sheet dates. Thus, it is a
statement of flows, which is it measures the changes that have been
taken place in the financial position of a firm between two balance
sheet dates. It summarizes the sources and uses of the funds obtained.
TITLE OF THE STUDY
“THE ANALYSIS AND INTERPRETATI'ON OF THE FINANCIAL

STATEMENT OF HDFC BANK LIMITED, BANGALORE.”
The analysis of the statement is a evaluating the financial position and

analyzing the performance of the bank and also evaluating the financial
strength and weakness of the bank. The analysis is based on absolute
accounting figures reported in the financial statement, like Balance Sheet,
Profit and Loss Account and other Income Statement, which were prepared by
the bank.
The essence of financial statement of the bank lies in balancing its goal,
commercial strategy and resultant financial needs. The bank should have
financial capabilities and flexibility to peruse its commercial strategies.
27
OBJECTIVES OF THE STUDY
The objectives of the study are to evaluate the financial position and
performance of the “HDFC BANK LTD”. The purpose of the study mainly
centers on the critical analysis of the financial statements of the bank. And
makes attempt to get better in sight about the financial strength and weakness
of the bank by analyzing and interpreting the data reported in its statements
Various objectives of the analysis are:
 To study the service offered by the HDFC BANK LTD., to the
customers and financial activities, and also study the new planes and
schemes of the bank.
 Study is mainly focused on the financial and commercial activities of
the bank
 To indicate the trend progress of downfall of the bank
 To evaluate the profitability of the bank
 To show the relative strength and weakness of the bank
 To determine the financial condition and financial performance of the
bank
 To involve comparison for a useful interpretation of the financial
statement
 To find out the solution to the unfavorable financial conditions and
financial performance
 To analyze how the bank as utilized its each financial resources and its
sources
 To find out the market share of the bank
28
To act of analysis may also reveal areas where control is deficit and
desirable for the efficient operating of the bank which in turn help to achieve
organizational goals.
Need of the Study

Any company would like to know its position against its competitors.
The ultimate performance indicator of any company is the financial
parameters because invariably all cost efficiencies, activities and solvency
position of the company will be reflected in the financial mirror.
The following are stated as the need for the study:

 To understand the volume of the profit and its reasonableness.
 To understand the movement of profit over a period of time.,
 To know the reason for the variation in the profit.
 To know the present standing of the company.
SCOPE OF THE STUDY

The study is confined to HDFC BANK LTD., the annual reports of the
bank constitutes primary sources of statistical data for deciding its working
results and financial stand besides the information given by the finance
manager also constitute a part of information for the study. The financial
information dealing with the Balance sheet and Profit and Loss account have
been analyzed and interpreted to arrive at definite conclusion. The statements
are prepared on 31st March of every year.
The analysis of financial statement and financial performance is a well-

researched area and innumerable studies have proved the utility and usefulness
29
of this analytical technique. This research seeks to investigate and
constructively contribute to help,
 The bank in finding out the gray areas for improvement in performance
 The bank to understand its own position overtime
 The managers to understand the contribution to the performance of
bank
The present and potential investors outside parties such as the creditors,
debtors, government and many more to get an idea of the over all performance
of the bank.
30
METHODOLOGY
Sources of data can be classified into two groups they are:
• Primary data and
• Secondary data
Primary data
The data are originally collects the data directly from the company or
from the agency for the first time, for any statistical investigation and used by
them in the statistical analysis are termed as primary data. It has been
collected through different books of accounting, broaches, catalogs, company
prospects, company file etc.
Secondary data
The data published or un published, which have already been collected
and processed by some agencies for their statistical work are termed as
secondary data. As for as secondary data is concerned the second agency if
and when it publishes and files such data, it becomes secondary data sources
to any one who later uses that data.
This is related to collect the required information about the study. My

sources of information are the data available with the bank by on going
31
through the annual reports. The study is basically relies on secondary data
supplied by the bank. The primary data used for this study consist of informal
discussion, interviews with the deputy manager of the bank.
Financial Analysis
The focus of financial is on key figures in the Financial Statements and

the significant relationship that exists between them. The analysis of financial
statement is a process of evaluating relationship between component parts of
the financial statement to obtain a better understanding of the firm’s position
their strength and weakness and performance of the firm. The purpose of
financial analysis is to disclose the information contained in the financial
statements so as to judge the profitability and financial soundness of the
organization. The first task of the financial analysis is to select the
information relevant to decision under consideration from the total
information contained in the financial statement. The second step involved in
financial analysis is to arrange the information in a way to highlight significant
relationship. The final step is interpretation and drawing of inference and
conclusions. In brief financial analysis is the process of selection, relation and
evaluation.
Types of Financial Analysis

There are two types of financial analysis, they are
 On the basis of material used
 On the basis of modus operandi
On the basis of material used
32
According to material used, financial analysis can be of two types, they
are
 External Analysis: This analysis is done by outsiders who do not have

access to the detailed internal accounting records of the business firm.
These outsiders include investors, potential investors, creditors,
potential creditors, government agencies, credit agencies and the
general public.
 Internal Analysis: This analysis conducted by persons who have

access to the internal accounting records of a business firm is known as
internal analysis. Such analysis can, therefore, performed by
executives and employees of the organization as well as government
agencies which have statutory powers vested in them.
On the basis of modus operation
According to the method of operation followed in the analysis, financial
analysis can also be of two types, they are
 Horizontal Analysis: This analysis refers to the comparison of

financial data of a company for several years. This type of analysis is
also called ‘Dynamic Analysis’ as it is based on the data from year to
year rather than on data of any one year.
 Vertical Analysis: This analysis refers to the study of relationship of

the various items in the financial statements of one accounting period.
In this type of analysis the figures from financial statement of a year
are compared with a base selected from the year’s statement.
Techniques of Financial Statement Analysis
33
Analysis of the financial statement by selecting the appropriate
techniques according to the purpose of analysis financial statement may be
analyzed by means of any of the following techniques, they are
 Ratio Analysis
 Comparative Statements Analysis
 Common-size Statements Analysis
 Trend Analysis
 Cash flow Statements Analysis
 Fund flow Statements Analysis
Ratio analysis
It is one of the powerful tools of the financial analysis and it is a
statistical yard stick that provides a measure of relationship between two
accounting figures. Ratio analysis of financial statement stands for the process
of determining and presenting the relationship of items and group of items in
the statement. Ratio analysis can be used both in the trend analysis and static
analysis. Ratio is thus the numerical or an arithmetical relationship between
two figures, it expressed where one figures is divided by another. It is very
useful analytical techniques to raise pertinent questions on a number of
managerial issues. It provides bases or clues to investigate such issues in
details. While assessing the financial health of a company ratio analysis
answers to question relating to the companies profitability, asset utilization
and liquidity and financial capability of the firm. The ratio can be classified as
follows,
• Profitability ratios
• Coverage ratios
• Turnover ratios
• Financial ratios
Comparative Financial Statement analysis
34
The preparation of comparative financial statement is an important
device of horizontal financial analysis. Financial data become more
meaningful when compared with similar data for a previous period or a
number of prior periods. Statements prepare in a form that reflect financial
data for two or more periods are known as comparative financial statement
analysis. Any statement prepared in a comparative form will be covered in
comparative statements. This statement not only the comparison of the figures
of two periods but also be relationship between balance sheet and income
statement enables an in depth study of financial position and operative results.
The financial data will be comparative only when same accounting principles
used in preparing these statements. In case of any deviation in the use of

accounting principles this fact must be mentioned at the foot of a financial
statements and the analyst should be careful in using these statements the two
comparative statements are balance sheet and income statement
Common size Statements

Ratio analysis apart, another useful way of analyzing Financial
Statement is convert them into common size statement by expressing absolute
rupees amount into percentages, when this method is pursued. Then income
statement exhibits each expenses item or group of expenses. Item as a
percentage of net sales and net sales are taken at 100%. Similarly each
individual assets and liability classification is show as a percentage of total
assets and liabilities respectively. Statement prepare in this way are referred
to as common size statements. This prepared for one firm over the year would
highlight the relative changes in each group of expenses, assets and liabilities.
These statements can be equally useful for inter-firm comparison. This
statement shows the relation of each component to the whole. It is useful in
vertical financial analysis and comparison of two business enterprises at a
certain dates.
35
Trend Analysis
The financial statements may be analyzed by computing trends of
services of information. This method determines the direction upwards or
downwards and involves the computation of the percentage relationship that
each statement item bears to the same item in base year. Clearly the
comparison of the past data over a period of time with a base year is known as
trend analysis. Under trend analysis the percentage relationship that each
financial statement item of each year bears to the same in the base year is
taken as hundred and on that the base trend analysis for the corresponding
item in the other years are calculated.
Cash flow Statement analysis

A statement changes in financial position on cash basis commonly know
as the cash flow statement analysis. Summarize the causes of changes in case
position between dates of two balance sheets. It indicates the sources and uses
of each. It is similar to the fund flow analysis except that it focuses attention
on cash instead of working capital funds. The cash flow statement classifies
cash flows during the period from operating investing and financial activities.
Fund flow Statement analysis

Fund flow statement is a statement has to be prepared to show the
changes in the assets and liabilities from the end of one period of time to the
end of another period of time. And the fund flow statement is a statement
which shows the movement of funds and is a report of the financial operations
of the business undertaking. It indicates various means by which funds were
obtained during a particular period and the ways in which these funds were
employed. In simple word ‘it is a statement of sources and application of
funds’. This statement shows the changes in the position of Working capital
that is may decrease or increase. The working capital is defined as a
difference between current assets and current liability.
36
1. Fixed assets ratio
This ratio establishes the relationship between fixed assets and share
holders funs. This ratio indicates the extent to which share holders funds are
sunk in the fixed assets. Generally, in the purchase of fixed assets should be
financed by the share holder’s equity, which includes Reserves, Surplus and
retained earnings
Fixed assets ratio = Fixed assets / Net worth * 100
Table-1
(Rs in Lacs)
Years Fixed assets Net worth Ratios (%)
2001-2002 371.10 1,951.33 19.02

2002-2003 528.58 2,251.74 23.47
2003-2004 616.91 2,693.33 22.90
2004-2005 708.32 4,562.85 15.52
2005-2006 855.08 5,306.53 16.11
The above table shows that the fixed assets to the net worth in the
year 2002 it was 19.02%, then it increased to 23.47% in 2003, but it decreased
37
to 22.90% and 15.52% in 2004 and 2005 respectively. Then it has increased
to 16.11% in the year 2006. This ratio is in good position as the net worth is
more than the fixed assets. The share holder’s funds are sufficient to finance
the fixed assets.
Chart 1:
25
20
15
ratios
10
0
2002 2003 2004 2005 2006
years
38
2. Proprietary ratio
This ratio establishes the relationship between the share holders fund and
the total assets of the firm. It establishes the claims of the share holders on the
firm’s assets. It is usually expressed as a pure ratio.
Proprietary ratio = share holders fund / Total assets *

100
Table - 2
(Rs in Lacs)
Years Share holders Total assets Ratios (%)
funds
2001-2002 1,951.33 23,787.39 8.20

2002-2003 2,251.74 30,424.08 7.40
2003-2004 2,693.33 43,306.99 6.21
2004-2005 4,562.85 51,428.00 8.87
2005-2006 5,306.53 73,506.39 7.21
39
The above table indicates that the Proprietary ratio reflects the
financial strength of the bank. In the year 2002, the ratio was 8.20%, and then
it decreased to 7.40% and 6.21%, in the year 2003 and 2004 respectively.
Then it increased to 8.87% in the year 2005, but again decreased to 7.21% in
the year 2006.
Chart 2:
10
6
ratios
0
2002 2003 2004 2005 2006
years
40
3. Return on equity
It indicates the how the firm has used the resources of the owners. This
ratio is one of the most important ratios in financial analysis. The earnings of
a satisfactory return are one of the most desirable objectives of a business. The
ratio of net profit to owner’s equity reflects the extent to which the objective
has been accomplished.
ROE = Profit after Tax / Equity Share holders fund * 100
Table – 3
(Rs in Lacs)
Years PAT Equity share Ratios (%)
holders fund
2001-2002 297.04 281.37 105.56

2002-2003 387.60 282.05 137.42
2003-2004 509.50 284.79 178.90
2004-2005 665.56 309.88 214.77
2005-2006 870.78 313.14 278.08
41
The above table shows that, this reflects the financial strength of the
bank. In the year 2002, the ratio was 105.56%, and then it was continuously
increased to 137.42%, 78.08%, 214.77% and 278.08% in the year 2003, 2004,
2005 and 2006 respectively.
Chart 3:
300
250
200
ratios
150
100
50
0
2002 2003 2004 2005 2006
years
42
4. Return on assets
Also called as Return on Investments ratio, it is the ratio of net profit to

total assets. Return here means, net profit after taxes and total assets, all
realizable assets including intangible assts. If they are realizable this ratio
measures the productivity of the total assets of a concern.
ROA = Net profit / Total assets * 100
Table – 4
(Rs in Lacs)
Years Net profit Total assets Ratios (%)
2001-2002 297.04 23,787.39 1.25

2002-2003 387.60 30,424.08 1.27
2003-2004 509.50 43,306.99 1.17
2004-2005 665.56 51,428.00 1.29
2005-2006 870.78 73,506.39 1.18
43
The above table shows that, the ratio indicates the return on assets. In
the year 2002 it was 1.25% and it increased to 1.27% in 2003. But it was
decreased to 1.17% in 2004, and again it has been increased to 1.29% in the
year 2005 and was decreased to 1.18% in the year 2006.
Chart 4:
1.5
ratios
0.5
0
2002 2003 2004 2005 2006
years
44
5. Equity Multiplier
This ratio establishes relationship between total assets and total equity
capital of the bank.
Equity Multiplier = Total assets / Total equity capital
Table – 5
(Rs in Lacs)
Years Total assets Total equity Ratios (%)
capital
2001-2002 23,787.39 281.37 84.54

2002-2003 30,424.08 282.05 107.87
2003-2004 43,306.99 284.79 148.56
2004-2005 51,428.00 309.88 165.96
2005-2006 73,506.39 313.14 234.74
45
The above table indicates that the relationship between the bank total
assets and total equity. In the year 2002, it was 84.54% then it increased to
107.87%, 148.56%, 165.96% and 254.74, in the year 2003, 2004, 2005 and
2006 respectively.
Chart 5:
250
200
150
ratios
100
50
0
2002 2003 2004 2005 2006
years
46
6. Earnings per share
It is the ratio between net profits available for equity share holders (i.e.
net profits after tax and preference dividend) and the number of equity shares.
EPS = Net profit / No. of equity shares
Table – 6
Years Net profit No. of equity Ratios

(Rs in Lacs) holders
2001-2002 297.04 28,13,74,613 11.01

2002-2003 387.60 28,20,45,713 13.75
2003-2004 509.50 28,47,91,713 17.95
2004-2005 665.56 30,98,75,308 22.92
2005-2006 870.78 31,31,42,408 27.92
The above table shows that the bank earnings position was
satisfactory. So that the bank EPS has continuously increased that is 11.01 per
47
share in 2002 and 13.75, 17.95, 22.92 and 27.92 in the year 2003, 2004, 2005
and 2006 respectively.
Chart 6:
48
30
25
20
ratios
15
10
0
2002 2003 2004 2005 2006
years
7. Profit margin
This ratio is establishes the relationship between the net profit and
total income of the company.
Profit margin = Net profit / Total income * 100
49
Table – 7
(Rs in Lacs)
Years Net profit Total income Ratios (%)
2001-2002 297.04 2,036.24 14.59

2002-2003 387.60 2,479.16 15.63
2003-2004 509.50 3,028.96 16.82
2004-2005 665.56 3,744.83 17.79
2005-2006 870.78 5,599.32 15.55
This above table shows that the profit margin of the bank was
satisfactory. That was 14.59% in the year 2002, then it continuously increased
to 15.63%, 16.82%, 17.79% in the year 2003, 2004, 2005. But it again
decreases in the year 2006 that is 15.55%.
Chart 7:
50
20
16
12
ratios
8
0
2002 2003 2004 2005 2006
years
8. Interest expenses ratio
IER= Interest Expended / Total income * 100
Table – 8
51
(Rs in Lacs)
Years Interest Total income Ratios (%)
expended
2001-2002 1,073.74 2,036.24 52.73

2002-2003 1,191.96 2,479.16 48.08
2003-2004 1,211.05 3,028.96 39.98
2004-2005 1,315.56 3,744.83 35.13
2005-2006 1,929.50 5,599.32 34.45
The above table shows that the interest expended ratio that is it
establishes relationship between the interests expended and total income of the
bank. This ratio was 52.73% in the year 2002, then it increased to 48.08% in
2003, and then it decreased to 39.98%, 35.13% and 34.45% in 2004, 2005 and
2006 respectively.
Chart 8:
52
60
50
40
ratios 30
20
10
0
2002 2003 2004 2005 2006
years
9. Non interest expenses ratio
= Non interest expended / Total income * 100
Table – 9:
53
(Rs in Lacs)
Years Non interest Total income Ratios (%)
expenses
2001-2002 417.95 2,036.24 20.53

2002-2003 591.85 2,479.16 23.87
2003-2004 810.00 3,028.96 26.74
2004-2005 1085.40 3,744.83 28.98
2005-2006 1691.09 5,599.32 30.23
The above table shows that the relationship between the non interest
expenses and total income to found non interest expenses ratio. This ratio was
20.53% in the year 2002 and then in continuously increased to 23.87%,
26.74%, 28.98% and lastly 30.23% in the year 2003, 2004, 2005 and 2006
respectively.
Chart 9:
54
35
30
25
20
ratios
15
10
0
2002 2003 2004 2005 2006
years
10. Tax ratio
= Provision for tax / Total income * 100
Table – 10
55
(Rs in Lacs)
Years Provision for Total income Ratios (%)
tax
2001-2002 247.51 2,036.24 12.15

2002-2003 322.55 2,479.16 13.01
2003-2004 498.41 3,028.96 16.45
2004-2005 678.31 3,744.83 18.11
2005-2006 1,117.95 5,599.32 19.78
The above table shows that the relationship between the provision for
taxation and total income of the bank. This ratio was 12.15% in the year 2002.
Then it increases to 13.01%, 16.45%, 18.11% and 19.78% in the year 2003,
2004, 2005 and 2006 respectively.
Chart 10:
56
24
20
ratios 16
12
0
2002 2003 2004 2005 2006
years
11. Net interest margin
This ratio is shows relationship between net interest income and total
earning assets.
NIM = NII / Total earning assets * 100
Table - 11
57
(Rs in Lacs)
Years NII Total earning Ratios (%)
assets
2001-2002 629.25 23,787.39 2.65

2002-2003 821.65 30,424.08 2.70
2003-2004 1,337.88 43,306.99 3.16
2004-2005 1,777.99 51,428.00 3.46
2005-2006 2,545.84 73,506.39 3.46
The above table shows that the net interest margin, which is
relationship between the net interest income and total earnings assets. That
ratio was 2.65% in the year 2002, and then it was increased to 2.70%, 3.16%,
3.46% and 3.46% in the year 2003, 2004, 2005 and 2006 respectively.
Chart 11:
58
5
3
ratios
2
0
2002 2003 2004 2005 2006
years
12. Efficiency (cost- income) ratio
= Non interest expenses / Net total income * 100
Table – 12
59
(Rs in Lacs)
Years Non interest Net total Ratios (%)
expenses income
2001-2002 417.95 962.50 43.42

2002-2003 591.85 1,287.20 45.98
2003-2004 810.00 1,817.91 44.56
2004-2005 1,085.40 2,429.27 44.68
2005-2006 1,691.09 3,669.82 46.08
The above table shows that the efficiency ratio that included cost and
income. This ratio was reflects that the relationship between the non interest
expenses and net total income of the bank.
Chart 12:
60
44
34
ratios
24
14
4
2002 2003 2004 2005 2006
years
13. Over head efficiency ratio
= Non interest income / Non interest expenses * 100
Table – 13
61
(Rs in Lacs)
Years Non interest Non interest Ratios (%)
income expenses
2001-2002 333.25 417.95 0.79

2002-2003 465.55 591.85 0.79
2003-2004 480.03 810.00 0.59
2004-2005 651.34 1,085.40 0.60
2005-2006 1,123.98 1,691.09 0.66
The above table shows that the over head efficiency of the bank by efficiency
ratio that is the relationship between the non interest income and non interest
expenses of respected years.
Chart 13:
62
1
0.75
ratios
0.5
0.25
0
2002 2003 2004 2005 2006
years
14. Asset utilization
= Total income / Total assets * 100
Table – 14
63
(Rs in Lacs)
Years Total income Total assets Ratios (%)
2001-2002 2,036.24 23,787.39 8.56

2002-2003 2,479.16 30,424.08 8.15
2003-2004 3,028.96 43,306.99 7.16
2004-2005 3,744.83 51,428.00 7.28
2005-2006 5,599.32 73,506.39 7.62
The above table shows that the asset utilization that is the relationship
between total income and total assets of the bank
Chart 14:
64
12
8
ratios
0
2002 2003 2004 2005 2006
years
Comparative Balance Sheet of HDFC Band Ltd

For the year ending 31st March 2002 and 2003
(Rs Lacs)
Year ending Increase/ Increase/
31st March Decrease Decrease
2002 2003 (Amounts) (Percentages)
65
Capital and
Liabilities
Capital 281.37 282.05 0.68 0.24
Reserves and Surplus 1,660.91 1,962.78 301.87 18.17
Employees stock
option (grants) O/S 9.05 6,91 (2.14) (23.65)
Deposits 17,653.81 22,376.07 4,722.26 26.75

Borrowings 1,823.02 2,084.65 261.63 14.35
Subordinated debt 200.00 200.00 --- ---
Other liabilities and
provisions 2,159.22 3,511.62 1,352.40 62.63
23,787.
Total 38 30,424.08 6,636.70 27.90
Assets
Cash and balance with 1,211.1
RBI 7 2,081.96 870.79 71.90
Balance with banks 2,247.02 1,087.26 (1,159.76) (51.61)
Investments 12,044.02 13,388.08 1,384.06 11.53
Advances 6,813.72 11,754.86 4,941.14 72.52
Fixed assets 371.18 528.58 157.40 42.40
Other assets 1,140.35 1,583.34 442.99 38.85
Total 23,787.38 30,424.08 6,636.70 27.90

For the year ending 31st March 2003and 2004
(Rs Lacs)
2003 2004
(Amount (Percentages)
s)
Capital and Liabilities
66
Capital 282.05 284.79 2.74 0.97
Reserves and Surplus 1,962.78 2,407.09 444.31 22.64
Employees stock option
(grants) O/S
6,91 1.45 (5.46) (79.02)
Deposits 22,376.07 30,408.86 8,032.79 35.90
Borrowings 2,084.65 2,307.82 223.17 10.71
Subordinated debt 200.00 600.00 400.00 200.00
Other liabilities provisions 3,511.62 6,296.98 2,785.36 79.32
30,424.
Total 08 42,306.99 11,882.91 39.06
Assets
Cash and balance with
RBI 2,081.96 2,541.98 460.02 22.10
Balance with banks 1,087.26 1,115.57 28.31 2.60
Investments 13,388.08 19,256.79 5,868.71 43.83
Advances 11,754.86 17,744.51 5,989.65 50.95
Fixed assets 528.58 616.91 88.33 16.71
Other assets 1,583.34 1031.23 (552.11) (34.87)
Total 30,424.08 42,306.99 11,882.91 39.06

(Rs Lacs)
2004 2005 (Amounts) (Percentages)
67
Capital and
Liabilities 284.79 309.88 25.09 8.81
Capital
Reserves and 2,407.09 4,209.97 1,802.88 74.90
Surplus
Employees stock
option (grants)
out standing 1.45 0.43 (1.02) (70.34)
Deposits 30,408.86 36,354.25 5,945.39 19.55

Borrowings 2,307.82 4,790.01 2,482.19 107.55
Subordinated debt 600.00 500.00 (100.00) (16.67)
Other liabilities and
provisions 6,296.98 5,264.46 (1,032.52) (16.40)
Total 42,306.99 51,429.00 9,122.01 21.56
Assets
Cash and balance
with RBI 2,541.98 2,650.13 108.15 4.25
Balance with banks 1,115.57 1,823.87 708.30 80.78
Investments 19,256.79 19,349.81 93.02 0.48
Advances 17,744.51 25,566.30 7,821.79 44.08
Fixed assets 616.91 708.32 91.41 14.82
Other assets 1031.23 1,330.57 299.34 29.03
Total 42,306.99 51,429.00 9,122.01 21.56

(Rs Lacs)
2005 2006
(Amounts) (Percentages)
68
Capital and
Liabilities
Capital 309.88 313.14 3.26 1.05
Reserves and
Surplus 4,209.97 4,986.39 776.42 18.44
Employees stock
option (grants)
out standing 0.43 0.07 (0.36) (83.72)
Deposits 36,354.25 55,796.82 19,442.57 53.48
Borrowings 4,790.01 2,858.48 (1,931.53) (40.32)
Subordinated debt 500.00 1,702.00 1,202.00 240.40
Other liabilities and 5,264.46 7,849.49 2,585.03 49.10
provisions
Total 51,429.00 73,506.39 22,077.39 42.29
Assets
Cash and balance
with RBI 2,650.13 3,306.61 656.48 24.77
Balance with banks 1,823.87 3,612.39 1,788.52 98.06
Investments 19,349.81 28,393.96 9,044.15 46.74
Advances 25,566.30 35,061.26 9,494.96 37.13
Fixed assets 708.32 855.08 146.76 20.71
Other assets 1,330.57 2,277.09 946.52 71.14
Total 51,429.00 73,506.39 22,077.39 42.29
Findings from the comparative balance sheet of the year 2002 -2003
The comparative balance sheet of the bank reveals that during 2003, there
has been increased in fixed assets of Rs. 157.4 lakhs i.e. 42% and the
subordinated debt outstanding as at March 31 2003 is a long term unsecured
non-convertible debt aggregating Rs 200 cores of the year i.e. 2002 Rs. It was
69
also 2002 cores when it compare to the 2002 and 2003. and also included
deposits and borrowings also has been increased in the year 2003.
Reserves and surplus, there has been increased by Rs. 301.87 lakhs that
is from 1,660.91 to 1,962.78 lakhs i.e. 18.7%. The bank has made an
appropriation from the profit and loss account balance of Rs. 38.76 lakhs out
of profit for the year ended March 31 2003 to general reserves and 28.88 lakhs
in the year of 2002.
The cash balance with the RBI, it has been increased to 870.79 lakhs in
the year 2003 i.e. 71.90% from the year 2002 and also cash balance with
banks and money at call and short notices has decreased to 1,159.76 lakhs in
2003 i.e. 51.61% reduction from the year 2002.
Findings from the comparative balance sheet of the year 2003-2004

There has been increase of Rs 88.33 lakhs in fixed assets i.e. 16.71%
.The increase in fixed assets has been financed out of increase in owners fund
by Rs 2.74 lakhs i.e. 0.97% and subordinate debt by Rs 400 lakhs i.e. 200%
70
increased in 2004 from the year 2003. The financing of increased in fixed
assets out of owners fund and subordinate fund is a sound financial policy
There has been increased in investments by Rs 5868.71 lakhs i.e. 43.83%
in the year 2004. The increased in long term investments has been financed
out of increased in the long –term borrowed funds. The financing of long –
term investments by long term borrowed funds is also a good financial policy-
deposits and borrowings.
There has been an increase in reserves and surplus by Rs 444.31 lakhs

i.e. 22.64 in the year 2004. As a result, the liquidity portion of the concern has
improved in the year 2004 to conclude, the financial portion of the concern is
quite good.
Findings from the comparative balance sheet of the year 2004-2005

This year comparative balance sheet of the bank reveals that during 2005,
there has been increase of Rs 91.41 lakhs in fixed assets i.e. 14.82%. The
increased in fixed assets has been financed through additional capital of Rs
71
25.04 i.e. 8.81% and deposits and borrowing of Rs. 5,945 lakhs and 2,482
lakhs i.e., 19.55% and 107.55% respectively. The financing the increase in
fixed assets through additional capital and deposits and borrowing is a sound
financial policy.
There has been substantial increase in advances by Rs 7,821.79 lakhs
i.e., 44.08% and investment are treated as long term investments there has
been an increase of Rs lakhs i.e.. The increase in investment is a
appreciable. There has been as increase of 80.78% in cash with banks and
4.25% with RBI. Cash is an idle asset the means a huge cash balance is kept
idle.
There is an increase of Rs. 1,802.88 lakhs in reserve i.e., 74.90%. This
suggests that the profitability of the concern is good. To conclude the
financial position of the concern seems to be good.
Findings from the comparative balance sheet of the year 2005 -2006
In this comparative balance sheet of the company, there has been an
overall increase of Rs. 146.76 lakhs in fixed assets i.e., 20.17%. The above
increase in fixed assets has been financial through the raising of additional
72
capital of Rs. 3.26 lakhs i.e. 1.05%. Financing the increase in fixed assets
through additional equity share capital is a sound financial policy.
There is an increased Rs 776.42 lakhs in reserve created out of profit i.e.
18.44%. This is indicates not only the increased financial strength of the bank,
but also the profitability of the operations.
There has been increased in investments by Rs 9,044.15 i.e. 46.74% in
the year 2006. The increased in long term investment has been financed out of
increased in the long term borrowed funds. The financing of long term
investments by long-term borrowed and deposits is also a good financial
positions. There has been increased in subordinate debt by Rs. 1,202 lakhs i.e.
240.14% in the year 2006. To conclude the overall financial position and the
profitability of the concern are good.
Common-size Balance Sheet of HDFC Band Ltd

Year ending 31st March (Rs Lacs)
2002 2003
73
Amount % Amount %

Capital 281.37 1.18 282.0 0.93
Reserves and Surplus 1,660.91 6.98 1,962.7 6.45
(grants) out standing
9.05 0.04 6,9 0.02
Deposits 17,653.81 74.22 22,376.0 73.55
Borrowings 1,823.02 7.66 2,084.6 6.85
Other liabilities and 2,159.22 9.08 3,511.6 11.54
provisions
Total 23,787.38 100 30,424.0 100
Assets
Cash and balance with 1,211.17 5.09 2,081.96 6.84
RBI 2,247.02 9.45 1,087.26 3.57
Balance with banks 12,044.02 50.46 13,388.08 44.00
Investments 6,813.72 28.65 11,754.86 38.65
Advances 371.18 1.56 528.58 1.74
Fixed assets 1,140.35 4.79 1,583.34 5.20
Other assets
Total 23,787.38 100 30,424.0 100

2004 2005
74
Amount % Amount %

Capital 284.79 0.67 309.88 0.60
Reserves and Surplus 2,407.09 5.69 4,209.97 8.19
1.45 --- 0.43 ---
Deposits 30,408.86 71.88 36,354.25 70.69
Borrowings 2,307.82 5.45 4,790.01 9.31
Other liabilities and 6,296.98 14.88 5,264.46 10.24
provisions
Total 42,306.99 100 51,429.00 100
Assets
RBI 2,541.98 6.00 2,650.13 5.15
Investments 19,256.79 45.52 19,349.81 37.62
Advances 17,744.51 41.94 25,566.30 49.71
Fixed assets 616.91 1.46 708.32 1.38
Other assets 1031.23 2.44 1,330.57 2.59
Total 42,306.99 100 51,429.00 100

2005 2006
75
Amount % Amount %

Capital
Reserves and Surplus 309.88 0.60 313.14 0.43
Employees stock option 4,209.97 8.19 4,986.39 6.78
Deposits 0.43 --- 0.07 ---

Borrowings 36,354.25 70.69 55,796.82 75.90
Subordinated debt 4,790.01 9.31 2,858.48 3.89
Other liabilities and 500.00 0.97 1,702.00 2.32
provisions 5,264.46 10.24 7,849.49 10.68
Total 51,429.00 100 73,506.39 100

Assets
RBI 2,650.13 5.15 3,306.61 4.50
Investments 19,349.81 37.62 28,393.96 38.63
Advances 25,566.30 49.71 35,061.26 47.70
Fixed assets 708.32 1.38 855.08 1.16
Other assets 1,330.57 2.59 2,277.09 3.10
Total 51,429.00 100 73,506.39 100
TREND ANALYSIS
1. Total income
76
The total income of the year 2002 was 2,036.24 loch and was increased
to 122.58% in the year 2003, 148.75% in 2004,183.91 in 2005and 274.98 in
2006. When compared to base year the bank earning position was satisfactory.
This income was earned from investment, interest/discount, advance/bills,
interest on balance with RBI and other bank funds. These major incomes to
the bank and some other income as commission, exchange and brokerage,
profit on sales of assets, profit on exchange transaction, etc. The bank total
income of these years was satisfactory
Chart 1:
300
250
percentage
200
150
100
50
2002 2003 2004 2005 2006
years
2. Profit before Depreciation and Tax
Profit before tax and depreciation in the year 2002 was 494.40 lakhs. It
was increased to 136%, 170.85%, 227.14% and 289.66% in the year 2003,
77
2004, 2005 and 2006 respectively, when it compared to the base year 2002.
The earning position is satisfactory.
Chart 2:
350
300
250
percentage
200
150
100
50
2002 2003 2004 2005 2006
years
3. Net profit
The net profit of the banking the year 2002 was 297.04. It was increased
to 130.48%, 171.52%, 224.06%, and 293.13% in the year 2003, 2004, 2005
and 2006 respectively, when it compared to the base year 2002. This shows
78
the financial strength of the bank and also growth of the Bank in every year.
And it attracts the share holders and other financial institutions to increase the
financial position.
Chart 3:
350
300
250
percentage
200
150
100
50
2002 2003 2004 2005 2006
years
4. Deposits and other Borrowings
Deposits and other Borrowings were 19,476.08 during the year 2002. It
increased to 125.59%, 167.98%, 211.25% and 301.15% during the year 2003,
2004, 2005 and 2006respectively, when it compared to the base year 2002. It
79
is go on increasing as the company’s earning position is good and is providing
good service.
Chart 4:
350
300
250
percentage
200
150
100
50
2002 2003 2004 2005 2006
years
5. Advances
Advances of the bank, it was 6813.72 during the year 2002. And In
2003, it was 11,754 i.e, 172.52% increase from the previous year and during
2004 it was 17, 744.51 i.e. increased to 260.42%. And then in 2005 it was
80
25,566.30, i.e. increased to 375.22%. in the year 2006 it increased to 514.57%
i.e., 35,061 compared to the year 2002.
Chart 5:
550
500
450
400
percentage
350
300
250
200
150
100
50
2002 2003 2004 2005 2006
years
6. Investments
Banks invest their money to government securities, other approved

securities, shares, debentures and bonds joint ventures, units, certificates of
deposits and others. It invests 12,004.02 during 2003, and it was increased to
81
111.53%, 160.42%, 161.19%, and 236.54% in the year 2003, 2004, 2005 and
2006 respectively, when it compared to the base year 2002.
Chart 6:
300
250
percentage
200
150
100
50
2002 2003 2004 2005 2006
years
7. Fixed assets
Fixed assets was 371.10 lakhs in the year 2002 and was increased to
142.44%, 166.24%, 190.87% and 230.42%, during 2003, 2004, 2005 and
2006 respectively, when it compared to the base year 2002. The fixed assets of
the company have increased i.e. There is regular purchase of the required
82
fixed assets when compared to base year. The company has to utilize all the
fixed assets properly so that it will help in increasing sales and reduces
blockage of capital.
Chart 7:
300
250
percentage
200
150
100
50
2002 2003 2004 2005 2006
years
8. Net worth
Net worth represent that the total share holder’s fund, that included
equity share holder’s fund, reserves and surplus etc. the net worth of the year
2002 was 1,951.33 lakhs. Then it continuously increased to 115%, 138%,
234% and 272% in the year 2003, 2004, 2005 and 2006 respectively, when it
83
compared to the base year 2002. The main reason for increased in net worth
was tremendous growth in the profit of the bank. To conclude the b and
earnings position, and financial position was satisfactory.
Chart 8:
300
250
percentage
200
150
100
50
2002 2003 2004 2005 2006
years
9. Cash balances of the bank
The bank has kept their cash balance with RBI and also other banks.
Balance has been maintaining by current accounts and other accounts with
Indian banks and also out side Indian banks. The cash balance of the year
2002 was 3,458.19 lakhs with both RBI and other banks but in the year 2003 it
84
has been decreased to 91.6% and it continuously increased to 105%, 129% and
200% in the year 2004, 2005 and 2006 respectively, when it compared to the
base year 2002. To conclude the bank financial position was good.
Chart 9:
250
230
210
190
percentage
170
150
130
110
90
70
50
2002 2003 2004 2005 2006
years
10. Total profit for appropriation
The profits was available for the appropriation to, they are statutory
reserve, general reserve, capital reserve, investment fluctuation reserves
proposed dividend etc. the profit for apportion was 297.04 in the year 2002.
85
Then it increased to 197.9%, 291.4%, 360% and 659% in the year 2003, 2004,
2005 and 2006 respectively, when it compared to the base year 2002.
Chart 10:
650
550
450
percentagd
350
250
150
50
2002 2003 2004 2005 2006
years
Cash flow Statement Analysis
Information about the cash flow of an enterprise in useful in providing

users of financial statements with a basis to the asses the ability of the
enterprise to generate cash and cash equivalents and the needs of the enterprise
to utilize those cash flows. The economic decisions that are taken by users
86
require an evaluation of the ability of an enterprise to generate cash and cash
equivalents and the timing and certain of their generations. The cash flow
statement which classifies cash flows during the period from operating,
investing and financing activities.
The following terms are used in this statements with the meaning
specified,
 Cash comprises cash on hand and demand deposits with banks.
 Cash and cash equivalents are short term, highly liquid investments
that are readily convertible in cash and which are subject to an
insignificant risk o changes in value.
 Cash flow are inflow and outflows of cash and cash equivalents
Cash flow arising from the following activities, they are
• Cash flow from Operating activities: These are the principal

revenue producing activities of the enterprises and other activities
which the operations of the enterprise have generated sufficient cash
flows to maintain the operating capability of the enterprise, pay
dividends, repay loans and make new investments without recourse to
external sources of financing.
• Cash flow from investing activities: These are the acquisition and
disposal of long term assets and other investments not included in cash
equivalents. The separate disclosure of cash flows have been made for
resources intended to generate future income and cash flows.
• Cash flow from financing activities: These are the activities that
result in changes in the size and composition of the owner’s capital
(including preference share capital) and borrowings of the enterprise.
This is an important activity than other activities because it is useful in
predicting claims on future cash flows by providers of funds (both
capital and borrowing) to the enterprise.
87
Financial enterprise may be reported on a net basis are:
 Cash receipts and payments for the acceptance and repayment of
deposits with a fixed maturity date
 The placement of deposits with and withdraws of deposits from other
financial enterprises
 Cash advances and loans made to customer to customers and the
repayment of the advances and loans.
These are all activities may be reported on a net basis:

 Cash receipts and payments on behalf of customers when the cash
flows reflects the activities of the customer rather than those of the
enterprises and
 Cash receipts and payments for items in which the turnover is quick,
the amounts are large and the maturities are short.
Cash Flow Statement for the

Year ended 31st March 2002 and 2003
(Rs Lacs)
88
Particulars 31-03-2002 31-03-2003
Cash flows from operating activities
Net profit before income tax 425.38 570.85
Adjustment for:
Depreciation and amortizations 95.16 162.27
loan loss provisions 85.77 88.39
ESOs compensation lapsed (54) (12)
Contingencies provision 14.06 ---
(Profit)/Loss on sale of fixed assets 81 (1.08)
620.64 820.31
Adjustment for:
(Increase) in Investment (4,875.54) (1,436.63)
(Increase) in Advances (2,262.83) (5,029.53)
Increase in Borrowings 590.12 261.63
Increase in Deposits 5,995.70 4,722.26
(Increase) in other assets net of opening deferred
tax (180.26) (403.13)
Increase in Other liabilities and provisions 520.42 1,317.79
Increase in Deposit Placements --- (774.74)
408.25 (522.04)
Direct taxed paid (148.70) (237.47)
Net cash flow from operating activities 259.55 (759.51)
(contd.) 31-03-2002 31-03-2003

Cash flow from investing activities
Purchase of fixed assets (168.27) (253.43)
Proceeds from sale of fixed assets 10.10 1.69
Long term investments (2.50) ---
Net cash used in investing activities (160.67) (251.74)
89
Cash flows from financing activities
Proceeds from issue of shares abroad net of under-
writing commission 780.34 ---
Money receives on exercise of stock options by

employees. 10.25 17.98
Dividend provided last year paid during the year (53.69) (70.34)
Dividend paid during the year on stock option
exercised during the previous year --- (10)
Net cash generated from financing activities 736.90 (52.46)
Net increase/(decrease)in cash and cash

equivalents 835.78 (1,063,71)
Cash and cash equivalents at 1st April 2,622.41 3,458.19
Cash and cash equivalents as at 31st March 3,458.19 2,394.48
Findings on cash flow statement from 2002 – 2003

The net profit (before tax) has been increased to 570.85 lacks in the year
2003, from 425.28 lacks in 2002. the bank earnings position was satisfactory
when it compare to the year 2003 to 2002 but the cash and cash equivalents
position of the bank was low in the year 2003 when it compare to the year
2002 due to the, The net cash flow from operating activities has been negative
value in
90
the year 2003. and The net cash used in investing activities has been negative
value in both year but in 2003 has shown more negative value than the year
2002
and also The net cash generated from financing activities was Rs 736.90 lacks
in the year 2002 but in 2003 it has shown negative value.

Year ended 31st March 2003and 2004
(Rs Lacs)
Particulars 31-03-2003 31-03-2004
91
Adjustment for:
loan loss provision 88.39 178.28
ESOs compensation lapsed (12) (4)
Contingencies provision --- 16.70
(Profit)/Loss on sale of fixed assets (1.08) 45
820.31 1,145.55
Adjustment for:
(Increase) in Investment (1,436.63) (5,981.59)
Increase in Borrowings 261.63 223.17
tax (403.13) 635.09
Increase in Other liabilities and provisions 1,317.79 2,634.40
Increase in Deposit Placements (774.74) 418.22
(522.04) 1,055.77
Net cash flow from operating activities (759.51) 771.38
(contd.) 31-03-2003 31-03-2004

Proceeds from sale of fixed assets 1.69 2.48

Proceeds from issue of subordinated debt --- 400.00
Tax on Dividend --- (10.88)
92
Dividend paid during the year on stock option
exercised during the previous year (10) ---
Net cash generated from financing activities (52.46) 347.08

equivalents (1,063,71) 906.55

In these years the position of cash and cash equivalents has been
increased during the year 2004 to 3,301.03 lacks from 2,394.48 lacks in 2003
and the profit (before tax) was also increased to 718 lacks in the year 2004
from 570 lacks in2003. The reasons is the operating profit from the operating
activities has been increased to 771.78 lacks in 2004. The net cash generated
from financing activities also increased to 347.08 lacks The net cash used in
financing as well as
investing activities in 2003 shown all the negative value but it has been
increased in the year 2004, which is shown positive cash balance due to
sufficient net cash flow from position has improved but it is note that such
93
improvements were brought about due to availability of more net profit rather
increased interest charges.

(Rs Lacs)
Particulars 31-03-2004 31-03-2005
Adjustment for:
94
ESOs compensation lapsed (4) ---
Contingencies provision and provision for wealth
tax 91.70 65
(Profit)/Loss on sale of fixed assets 45 (21)
1,145.55 1,473.75
Adjustment for:
(Increase) in Investment (5,981.59) (160.43)
Increase in Borrowings 223.17 2,482.19
tax 635.09 (232.71)
Increase in Other liabilities and provisions 2,634.40 (1,146.64)
Increase in Deposit Placements 418.22 (376.48)
1,055.77 23.89
Net cash flow from operating activities 771.38 (348.06)
(contd.) 31-03-2004 31-03-2005

Proceeds from sale of fixed assets 2.48 95

(Redemption)/Proceeds from issue of subordinated
debt 400.00 (100.00)
Proceeds from ADR issue --- 1,274.77
Tax on Dividend (10.88) (13.08)
Net cash generated from financing activities 347.08 1,138.03
95
equivalents 906.55 546.64

During the year 2005 the cash and cash equivalent position has slightly
increased from the year 2004 that is 3,194.36 lacks to 3741 lacks due to
increased the net profit before tax and also increased in the cash generated
from financing activities. Even though the cash flow from operating activities
and also the cash used in investing activities has shown negative value but in
has not effected to the cash earnings position of the bank. The main reason of
cash out flow of the bank has been purchased of fixed assets but to
proportionately increased in the net profit could not be bought about therefore
further investment will have to be made with cautions
96
(Rs Lacs)
Particulars 31-03-2005 31-03-2006
Net profit before income tax 978.94 1,253.51
Adjustment for:
Contingency provision 65 30
(Profit)/Loss on sale of fixed assets (21) (27)
97
1,473.75 2,246.71
Adjustment for:
(Increase) in Investment (160.43) (9,350.30
Increase in Borrowings 2,482.19 (1,931.53)
tax (232.71) (738.33)
Increase in Other liabilities and provisions (1,146.64) 2,495.49
Increase in Deposit Placements (376.48) 2.66
23.89 2,277.92
Net cash flow from operating activities (348.06) 1,724.76
(contd.) 31-03-2005 31-03-2006

Proceeds from sale of fixed assets 95 5.15
Long term investments --- (19.13)

Proceeds / (Redemption)from issue of
subordinated debt (100.00) 1,202.00
Proceeds from ADR issue net of commission 1,274.77 ---
Tax on Dividend (13.08) (19.64)
Net cash generated from financing activities 1,138.03 1,104.87
Net increase/(decrease)in cash and cash 546.64 2,447.66
98
equivalents

During the year 2006 the position of cash and cash equivalent has
proportionately increased from the year 2005, it was 3,741 lacks to 6,188
lacks. The main reasons for increased in the cash position that are, Increasing
the net cash flow from operating activities and also proportionately increased
in the net profit. But the net cash used in investing activities has shown
negative value and
the cash generated from financing activities also decreased from the year 2005
to 2006, it was 1,138 lacks to 1,104.87 lacks. Even though the net cash from
financing activities decreased and investing activities has shown negative
value but it has not affected to the cash earning position of the year 2006. And
the overall cash position of the year 2006 was satisfactory.
Interpretation
The directed policy of the bank is to be well appreciated for the reason
that comp any has paid for dividend to equity share holders when it was
making profits while the company had not paid any amount when it incurred a
loss.
99
The main reasons of cash outflow of the bank has been purchased of
fixed assets but to proportionately increased in the net profit could not be
brought about therefore further investment will have to be made with cautions.
Present situation does not warrant any amount to be invested in the

fixed assets rather aim of the company most be to utilize existing assets
capacity to maximum while spreading up the recovery of debts.
Finally the cash earnings position of the bank was satisfactory.
FINDINGS
 Average Quarterly balance for urban area are slight high for
common people
 Penetrating rural market
 In the era where India is witnessing emergence of eminent
foreign banks, HDFC Bank has still maintain its glory
 HDFC Bank has excelled in all the banking products starting
from saving account and current account till the critical fields
like investment and insurance
 HDFC Bank possess a treasure of highly qualify and
professionalized employees which helps the bank to excel in all
the banking fields
 All the products are carefully hand picked and molded in order
to meet the needs of its customers
 The bank success is reflected by its share price, which is ever
increasing since the day of its commencement.
 HDFC Bank is a blend of antiquity and modernity
100
LIMITATION OF THE STUDY
The main limitation of the study is time constraints some other limitation
as follows,
 The financial statements are prepared on the basis of historical costs or
original costs. The value of assets decreases with the passage of time
current price changes are not taken into account.
 The financial statements are expressed in monetary values, so they
appear to give final and accurate position, but some times it does not
give exact position.
 The precision of financial statement data is not possible because the
statements deal with natters which cannot be precisely stated.
 The bank wanted not to disclose some of the analysis carried on.
Hence some of them are not included in this report.
 The study had to be fully dependent upon past financial statements as
such it may fail to reflect the financial stand and capacity of the bank a
near future.
 More emphasis has been laid on the accounting ratios as they reveal
the trend over a period.
101
 A conclusion from this analysis is not real indications of the efficiency
of the management and hence requires further investigation.
 The balance sheet ratio cannot be fully relied upon as the balance sheet
show the financial position as particular data.
 For the industrial average comparisons analysis the data were not
available.
 Difference in definitions of basic concepts renders the comparison
inaccurate. Hence ratio value might vary significantly.
In spite of all these limitation, study was grand success as it helped to

improve the knowledge and give better experience and exposes to factory
practice and surrounding all the attempts have been made to make right type
of interpretation and suggestion.
SUGGESTION
 As the bank has already establish a good demand in the product, it

should try to keep the same by developing the effective and efficient
marketing strategies
 The bank should try and continue with the relation they are
maintaining with their employees, because they are the biggest assets
for the bank
 For better customer satisfaction, the bank should know the product and
marketing strategies of its competitors
 Bank should try to improve the reward system so as to motivate the
employees
 HDFC Banks can provide more ATM’s and branches in different
localities.
The bank can increase its market share in India’s expanding banking
and financial services industry by following a disciplined growth strategy and
delivering high quality customer service. The bank can service its customers
102
through multiple channels that are phoned Banking, Internet banking and
mobile banking.
If the bank has to attract more customers and deal with more
transactions, the bank can provide advances and loans to the general public
for the following purposes:
 Loan to small scale industries and cottage industries.

 Loan to self-employed person or young entrepreneurs.
 Increase short-term deposits and long-term deposits by providing
higher rate of interest.
 Provide the facilities of car loans.
CONCLUSION
The study is entitle “A Study of Financial Statement Analysis of the

HDFC Bank Limited” has been undertaken with the objective to analyze and
interpret the bank’s financial performance.
In general, the bank has achieved tremendous progress over the recent
years. The bank has a healthy financial performance. The bank has been able
to achieve heavy growth across multiple parameters, including customer’s
acquisition, geographical spread, business volumes and revenues.
The HDFC Bank Limited is selling close to 50 percent of its new

consumer loan in smaller towns and under banked territories. It has applied to
the Reserve Bank of India for a wholly owned non-banking Finance company
for business in small towns and take on finance house run by foreign banks.
103
Recently, HDFC Bank managing director, Aditya Puri has told that more
than 50 percent of the consumer lending is now from 14 cities of the country.
If things go forward, then this lending could go up by 5 percent. Also more
than 50 percent of HDFC Bank branches are now in semi urban bank or under
bank regions. Current year bank is looking at 45-50 percent of new branches.
An under bank region covers a population of over 16 thousand people.

In recent years, private sector banks have been setting up branches in semi
urban and rural areas where public sector banks have a strong presence. The
present government is also keen that private banks set up shops in these areas.
BIBLIOGRAPHY
 Financial Management - Prasanna Chandra
 Financial Planning Analysis and Control - P.V. Kulkarni
 Financial Markets & Services - K. Nattarajan
 Financial Management - I.M. Pandey
Annual reports of HDFC BANK
Website: www.hdfcbank.Com
104

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Project On HDFC Bank

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EXECUTIVE SUMMARY

 Trade creditors and financial instutitution: They are

 Management and employees: The firm would be interested in

 Government: The Government is interested in the financial

Objectives of the financial analysis

TITLE OF THE STUDY

“THE ANALYSIS AND INTERPRETATI'ON OF THE FINANCIAL

Research design is the arrangement of conditions for the collection

In brief a research design contains

Research design used in the specific study includes the following

This is related to collect the required information about the study. My

The Financial Statement Provides a Summarized view of the financial

It is necessary to note in the context that analysis and interpretation are

Finance may be defined as a “It is that the business activities which is

Based on this reasoning the Financial Analysis is a study of relationship

 The financial statements are prepared on the basis of historical costs or

The study is entitle “A Study of Financial Statement Analysis of the

Origin Of The Organization

The bank is a part of the HDFC Group of Companies founded by out

The HDFC Bank’s philosophy is based on four core values that is

Retail Banking Services

The bank’s well-documented procedures, high levels of automation,

Directors and executives

HDFC Bank’s Memorandum and articles of association provides

Mr. Jagadeesh Kapoor (Chairmen)

Structure of the branch

PERSONAL BANKER TELLER AND

The products, which are found in HDFC Bank, are

Saving Bank Account

The following are the benefits of Demat account in HDFC bank

Forex Plus Travel’s Card

Bill Pay Account

Direct banking channels

Taking on various types of risk is integral to the banking business.

In retail loan businesses, the credit cycle is managed through appropriate

heavy engineering/equipment at 1% of total customer assets. The well-

As of March 31st 2005, the Bank’s ratio of gross non-performing assets

The bank continues to have a policy of creating general provisions

An organization communicates its financial information to the users

These financial statements have been prepared in accordance with

To give a full view of the financial affairs of the undertaking it is also

 Position Statement: And also know as Balance sheet. It displays

 Statement of Retained Earnings: Also known, as the profit and

 Statement of Changes in Financial Position: Also known as the

TITLE OF THE STUDY

“THE ANALYSIS AND INTERPRETATI'ON OF THE FINANCIAL

The analysis of the statement is a evaluating the financial position and

Need of the Study

The following are stated as the need for the study:

SCOPE OF THE STUDY

The analysis of financial statement and financial performance is a well-

This is related to collect the required information about the study. My

The focus of financial is on key figures in the Financial Statements and

Types of Financial Analysis

On the basis of material used

 External Analysis: This analysis is done by outsiders who do not have

 Internal Analysis: This analysis conducted by persons who have

 Horizontal Analysis: This analysis refers to the comparison of

 Vertical Analysis: This analysis refers to the study of relationship of

Techniques of Financial Statement Analysis

used in preparing these statements. In case of any deviation in the use of

Common size Statements