Project Report 200406

INTRODUCTION

In India the banking sector is segregated as public or private sector banks, cooperative banks and regional rural banks. Private banking in India was practiced since the beginning of banking system in India. With years, banks are also adding services to their customers. The Indian banking industry is passing through a phase of customers market. The customers have more choices in choosing their banks. A competition has been established within the banks operating in India. With stiff competition and advancement of technology, the services provided by banks has become more easy and convenient. This section of banking deals with the latest discovery in the banking instruments along with the polished version of their old systems.

Commercial Banking

The commercial banks are the usual type of institution, which dominates the entire banking system in every country. It derives its name from the fact that it confines its business largely to transactions with businessman and business institutions. According to the modern concept banking is a business which not only deals with borrowing, lending and remittance of funds but it is also an important instrument for fostering economic growth.

Project Report 200406

Bank credit is the primary institutional source of working capital finance in India. In fact, it represents the most important source for financing of current assets. The competitive climate in the financial market has changed dramatically over the last few years.

Foams of working Capital

Over Draft Cash Credit Term Loan Bill Discounting Letter of Credit Packing Credit

Project Report 200406

COMPANY PROFILE

HDFC BANK LIMITED

Background
The Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector, as part of the RBI's liberalisation of the Indian Banking Industry in 1994. The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank in January 1995.

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

Project Report 200406

Business Focus
HDFC Bank's mission is to be a World-Class Indian Bank. The objective is to build sound customer franchises across distinct businesses so as to be the preferred provider of banking services for target retail and wholesale customer segments, and to achieve healthy growth in profitability, consistent with the bank's risk appetite. The bank is committed to maintain the highest level of ethical standards, professional integrity, corporate governance and regulatory compliance. HDFC Bank's business philosophy is based on four core values - Operational Excellence, Customer Focus, Product Leadership and People.

Capital Structure
The authorised capital of HDFC Bank is Rs.450 crore (Rs.4.5 billion). The paid-up capital is Rs.309.9 crore (Rs.3.09 billion). The HDFC Group holds 22.2% of the bank's equity and about 19.5% of the equity is held by the ADS Depository (in respect of the bank's American Depository Shares (ADS) Issue). Roughly 31.7% of the equity is held by Foreign Institutional Investors (FIIs) and the bank has about 190,000 shareholders. The shares are listed on the The Stock Exchange, Mumbai and the National Stock Exchange. The bank's American Depository Shares are listed on the New York Stock Exchange (NYSE) under the symbol "HDB".

TimesBank Amalgamation
In a milestone transaction in the Indian banking industry, Times Bank Limited (another new private sector bank promoted by Bennett, Coleman & Co./Times Group) was merged with HDFC Bank Ltd., effective February 26, 2000. As per the scheme of amalgamation approved by the shareholders of both banks and the Reserve Bank of India, shareholders of Times Bank received 1 share of HDFC Bank for every 5.75
4

Project Report 200406

shares of Times Bank. The acquisition added significant value to HDFC Bank in terms of increased branch network, expanded geographic reach, enhanced customer base, skilled manpower and the opportunity to cross-sell and leverage alternative delivery channels.

Distribution Network
HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable network of over 500 branches spread over 220 cities across India. All branches are linked on an online real-time basis. Customers in over 120 locations are also serviced through Telephone Banking. The Bank's expansion plans take into account the need to have a presence in all major industrial and commercial centres where its corporate customers are located as well as the need to build a strong retail customer base for both deposits and loan products. Being a clearing/settlement bank to various leading stock exchanges, the Bank has branches in the centres where the NSE/BSE have a strong and active member base. The Bank also has a network of about over 1054 networked ATMs across these cities. Moreover, HDFC Bank's ATM network can be accessed by all domestic and international Visa/MasterCard, Visa Electron/Maestro, Plus/Cirrus and American Express Credit/Charge cardholders.

Management
Mr. Jagdish Capoor took over as the bank's Chairman in July 2001. Prior to this, Mr. Capoor was a Deputy Governor of the Reserve Bank of India. The Managing Director, Mr. Aditya Puri, has been a professional banker for over 25 years, and before joining HDFC Bank in 1994 was heading Citibank's operations in Malaysia.
5

Project Report 200406

The Bank's Board of Directors is composed of eminent individuals with a wealth of experience in public policy, administration, industry and commercial banking. Senior executives representing HDFC are also on the Board. Senior banking professionals with substantial experience in India and abroad head various businesses and functions and report to the Managing Director. Given the professional expertise of the management team and the overall focus on recruiting and retaining the best talent in the industry, the bank believes that its people are a significant competitive strength.

Technology
HDFC Bank operates in a highly automated environment in terms of information technology and communication systems. All the bank's branches have online connectivity, which enables the bank to offer speedy funds transfer facilities to its customers. Multi-branch access is also provided to retail customers through the branch network and Automated Teller Machines (ATMs). The Bank has made substantial efforts and investments in acquiring the best technology available internationally, to build the infrastructure for a world class bank. In terms of software, the Corporate Banking business is supported by Flexcube, while the Retail Banking business by Finware, both from i-flex Solutions Ltd. The systems are open, scaleable and web-enabled. The Bank has prioritised its engagement in technology and the internet as one of its key goals and has already made significant progress in web-enabling its core businesses. In each of its businesses, the Bank has succeeded in leveraging its market position, expertise and technology to create a competitive advantage and build market share.

Project Report 200406

Business Profile
HDFC Bank caters to a wide range of banking services covering both commercial and investment banking on the wholesale side and transactional / branch banking on the retail side. The bank has three key business segments:

a) Wholesale Banking Services

The Bank's target market is primarily large, blue-chip manufacturing companies in the Indian corporate sector and to a lesser extent, small & mid-sized corporates and agribased businesses. For these customers, the Bank provides a wide range of commercial and transactional banking services, including working capital finance, trade services, transactional services, cash management, etc. The bank is also a leading provider of structured solutions, which combine cash management services with vendor and distributor finance for facilitating superior supply chain management for its corporate customers. Based on its superior product delivery / service levels and strong customer orientation, the Bank has made significant inroads into the banking consortia of a number of leading Indian corporates including multinationals, companies from the domestic business houses and prime public sector companies. It is recognised as a leading provider of cash management and transactional banking solutions to corporate customers, mutual funds, stock exchange members and banks.

b) 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 his/her 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, NetBanking and Mobile Banking.
7

Project Report 200406

The HDFC Bank Preferred program for high net worth individuals, the HDFC Bank Plus and the Investment Advisory Services programs have been designed keeping in mind needs of customers who seek distinct financial solutions, information and advice on various investment avenues. The Bank also has a wide array of retail loan products including Auto Loans, Loans against marketable securities, Personal Loans and Loans for Two-wheelers. It is also a leading provider of Depository Participant (DP) services for retail customers, providing customers the facility to hold their investments in electronic form. HDFC Bank was the first bank in India to launch an International Debit Card in association with VISA (VISA Electron) and issues the Mastercard Maestro debit card as well. The Bank launched its credit card business in late 2001. By March 2005, the bank had a total card base (debit and credit cards) of 4.2 million cards. The Bank is also one of the leading players in the "merchant acquiring" business with over 42,000 Point-of-sale (POS) terminals for debit / credit cards acceptance at merchant establishments. The Bank is well positioned as a leader in various net based B2C opportunities including a wide range of internet banking services for Fixed Deposits, Loans, Bill Payments, etc.

c) Treasury
Within this business, the bank has three main product areas - Foreign Exchange and Derivatives, Local Currency Money Market & Debt Securities, and Equities. With the liberalisation of the financial markets in India, corporates need more sophisticated risk management information, advice and product structures. These and fine pricing on various treasury products are provided through the 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.

Project Report 200406

RATINGS/AWARDS
a) Credit Rating
HDFC Bank has its deposit programmes rated by two rating agencies - Credit Analysis & Research Limited. (CARE) and Fitch Ratings India Private Limited. The Bank's Fixed Deposit programme has been rated 'CARE AAA (FD)' [Triple A] by CARE, which represents instruments considered to be "of the best quality, carrying negligible investment risk". CARE has also rated the Bank's Certificate of Deposit (CD) programme "PR 1+" which represents "superior capacity for repayment of short term promissory obligations". Fitch Ratings India Pvt. Ltd. (100% subsidiary of Fitch Inc.) has assigned the "tAAA (ind)" rating to the Bank's deposit programme, with the outlook on the rating as "stable". This rating indicates "highest credit quality" where "protection factors are very high". HDFC Bank also has its long term unsecured, subordinated (Tier II) Bonds of Rs.4 billion rated by CARE and Fitch Ratings India Private Limited. CARE has assigned the rating of "CARE AAA" for the Tier II Bonds while Fitch Ratings India Pvt. Ltd. has assigned the rating "AAA(ind)" with the outlook on the rating as "stable". In each of the cases referred to above, the ratings awarded were the highest assigned by the rating agency for those instruments.

b)

Corporate Governance Rating

The bank was one of the first four companies, which subjected itself to a Corporate Governance and Value Creation (GVC) rating by the rating agency, The Credit Rating Information Services of India Limited (CRISIL). The rating provides an independent assessment of an entity's current performance and an expectation on its "balanced value creation and corporate governance practices" in future. The bank has been assigned a 'CRISIL GVC Level 1' rating which indicates that the bank's capability with respect to wealth creation for all its stakeholders while adopting sound corporate governance practices is the highest.
9

Project Report 200406

c)

Awards and Accolades

Over the years, HDFC Bank has received recognition and awards from various leading organisations and publications, both domestic and international. In June 2005, HDFC Bank won Asiamoney magazine's "Best Domestic Commercial Bank Award 2005" for India. The Bank was awarded The Asian Banker's, "Excellence in Retail Banking Risk Management Award for 2004", a pan-Asia recognition of the bank's risk management abilities. The Asset (Triple A Country Awards) rated HDFC Bank as the "Best Domestic Bank in India - 2004" and "Best Domestic Bank in India - 2003". Forbes Global again named the Bank in its listing of 'Best Under a Billion, 100 Best Smaller Size Enterprises in Asia/Pacific and Europe", in its November 2004 issue. The Bank was rated as the "Best Overall Local/Domestic Bank - India" in the Corporate Cash Management Poll conducted by the Hong Kong based Asiamoney magazine. The said magazine also awarded the Bank with the titles of "Overall Most Improved Company for Best Management Practices in India" in the Best Managed Companies poll 2004, "Best Local Cash Management Bank", Best Overall Domestic Trade Finance Services Award", and also awarded the Managing Director, Mr. Aditya Puri as the "Best Chief Executive Officer in India". In May 2004, the Bank also won the "Operational Excellence in Retail Financial Services - India" award as part of the Asian Banker Excellence in Retail Financial Services Program 2003. HDFC Bank was selected by Finance Asia as the "Best Local Bank - India 2003", "Best Local Bank in India 2002", "Best Domestic Commercial Bank - India 2001", "Best Domestic Commercial Bank - India 2000" and "Best Domestic Commercial Bank - India 1999". Euromoney rated HDFC Bank as "Best Bank in India 2002", "Best Bank - India 2001", "Best Domestic Bank - India 2000" and "Best Bank - India 1999". For its use of information technology the bank has been recognized as a "Computerworld Honors Laureate" and awarded the 21st Century Achievement Award in 2002 for Finance, Insurance & Real Estate category by Computerworld, Inc., USA.

10

Project Report 200406

Closer home, HDFC Bank was selected as the "Best Bank in India" for the second consecutive year in 2004 by Business Today. The Bank was selected by Business World as "one of India's Most Respected Companies" as part of The Business World Most Respected Company Awards 2004. In the FE-E&Y Best Banks Survey for 200203, HDFC Bank was selected as the number one new generation private-sector bank. Outlook Money Awards selected HDFC Bank as the "Best Bank - Private Sector 2003-04" in February 2004. HDFC Bank was ranked India's Best Bank - 2003 by Business Today and as Best Bank for the year 2000 by Business India. It was also the winner of The Economic Times Award - Corporate Excellence for Emerging Company of the Year 2000-01. HDFC Bank was awarded the Best IT User award 2003 (category: Banking) as part of the IT User Awards 2003 conferred by Economictimes.com & Nasscom.

Product Range
Savings, Fixed Deposits, Current and Demat Accounts Savings Account: Apart from the usual facilities, you get a free ATM Card, Interbranch banking, NetBanking, BillPay, PhoneBanking, Debit Card and MobileBanking, among others. HDFC Bank Preferred: A preferential Savings Account where you are assigned a dedicated Relationship Manager, who is your one-point contact. You also get privileges like fee waivers, enhanced ATM withdrawal limit, priority locker allotment, free Demat Account and lower interest rates on loans, to name a few. Sweep-In Account: A fixed deposit linked to your Savings Account. So, even if your Savings Account runs a bit short, you can issue a cheque (or use your ATM Card). The money is automatically swept in from your fixed deposit into your Savings Account.

11

Project Report 200406

Super Saver Account: Gives you an overdraft facility up to 75% of your Fixed Deposit. In an emergency, you can access your funds while your Fixed Deposit continues to earn high interest. HDFC Bank Plus: Apart from Regular and Premium Current accounts we also have HDFC Bank Plus, a Current Account and then some more. You can transfer up to Rs. 50 lakh per month at no extra charge, between the four metros. You can also avail of cheque clearing between the four metros, get cash delivery/pickup upto Rs. 25,000/-, home delivery of Demand Drafts, at-par cheques, outstation cheque clearance facility, etc. Demat Account: Conduct hassle-free transactions on your shares. You can also access your Demat Account on the Internet. Innovative services for your convenience... PhoneBanking: 24-hour automated banking services with 39 PhoneBanking numbers available. ATM 24-hour banking: Apart from routine transactions, you can also pay your utility bills and transfer funds, at any of our ATMs across the country all year round. Inter-city/Inter-branch Banking: Access your account from any of our 500 branches in 220 cities. NetBanking: Access your bank account from anywhere in the world, at anytime, at your own convenience. You can also view your Demat Account through NetBanking. International Debit Card: An ATM card you can shop with all over the country and in over 140 countries with. You can spend in any currency, and pay in Rupees.
12

Project Report 200406

MobileBanking: Access your account on your mobile phone screen at no airtime cost. Use SMS technology to conduct your banking transactions from your cellphone. BillPay: Pay your telephone, electricity and mobilephone bills through our ATMs, Internet, phone or mobile phone. No more standing in long queues or writing cheques. Loans for every need Now, our loans come to you in easy-to-pay monthly installments, and are available with easy documentation and quick delivery. Personal Loans: Take a loan of up to Rs. 3 lakh for a wedding, education, purchase of a computer or an exciting holiday. New Car Loans and Used Car Loans: Finance up to 90% of the cost of a car, new or used! And the loans come to you with easy documentation and speedy processing at attractive interest rates. Loans Against Shares: Get an overdraft up to Rs. 10 lakh at an attractive interest rate against physical shares, up to 50% of the market value of your shares. In case of Demat Shares, you can get a Loans Against Shares of up to 65% of the market value of your shares, till Rs. 20 lakh. Two Wheeler & Consumer Loans: To help you buy the best durables for your home. Demat Account: Protect your shares from damage, loss and theft, by maintaining your shares in electronic form. You can also access your demat account on the internet.

13

Project Report 200406

Current Account: Get a personalised cheque book, monthly account statements, inter-branch banking and much more. Mutual Funds: Apart from a wide choice of mutual funds to suit your individual needs, you benefit from expert advice on choosing the right funds based on in-depth market analysis. International Credit Card: Get an option of Silver, Gold, or Health Plus Credit card, accepted worldwide from a world-class bank. If you have outstanding balance on your other credit card, you can transfer that balance to this card at a lower interest rate. NRI Services: A comprehensive range, backed by unmatched features and worldclass service, ensures NRIs all the banking support they need. Forex Facilities: Avail of foreign currency, travellers cheques, foreign exchange demand drafts, to meet your travel needs. Insurance*: HDFC Bank now brings you Life Insurance and Pension Solutions like Risk Cover Scheme, Savings Scheme, Children's Plan and Personal Plan from HDFC Standard Life Insurance Co. Ltd.

14

Project Report 200406

WORKING CAPITAL

Working capital is the business's lifeblood, to help keep it flowing, and to. If a business is operating profitably, then it should, in theory, generate cash surpluses. If it does not generate surpluses, the business will eventually run out of cash and expire. The faster a business expands the more cash it will need for working capital and investment. The cheapest and best sources of cash exist as working capital right within business. Good management of working capital will generate cash will help improve profits and reduce risks. The cost of providing credit to customers and holding stocks can represent a substantial proportion of a firm's total profits. Two elements in the business cycle absorb cash - Inventory (stocks and workin-progress) and Receivables (debtors). The main sources of cash are Payables (your creditors) and Equity and Loans.

Nature of working Capital

Working capital is the amount required to carry on the day-to-day operations in a business. It is difference between the current assets and current liabilities. The term current assets refers to those assets which in ordinary course of business can be, or will be, converted into cash within one year without undergoing a diminution in value and without disrupting the operations of the firm. The major current assets are cash, marketable securities, accounts receivables and inventory. Current liabilities are those liabilities, which are intended, at their inception, to be paid in the ordinary course of business, within a year, out of the current assets or earnings of the concern.

15

Project Report 200406

Concepts of working Capital

There are two concepts of working capital, they are:

Gross working capital: - it refers to the firms investment in current assets.

Current assets are the assets which can be converted into cash within an accounting year and include cash, short-term securities, debtors, bills receivables and stock.

Net working capital: -

it refers to the difference between current assets and

current liabilities or it is that portion of current assets which is financed with longterm funds. Current liabilities are those claims of outsiders, which are expected to mature for payment within an accounting year and include creditors, bills payable and outstanding expenses. Net Working capital can be positive or negative. A Positive net working capital will arise when current assets exceed current liabilities. A negative working capital occurs when current liabilities are in excess of current assets.

Need for Working Capital

The need for working capital to run the day-to-day activities cannot be over emphasized. We will hardly find a business firm, which does not require any amount of working capital. Indeed, firms differ in their requirements of the working capital. in order to maximize the wealth of its shareholders a firm should earn sufficient return from its operations. Earning a steady amount of profit requires successful activity. The firm has to invest enough funds in current assets for generating sales. Current assets are needed because sales do not convert into cash simultaneously. There is always an operating cycle involved in the conversion of sales into cash.

16

Project Report 200406

Operating Cycle
Operating cycle is the time duration required to convert sales, after the conversion of resources into inventories, into cash. The continuing flow from cash to suppliers, to inventory, to accounts receivable and back to cash is what is called the operating cycle. involves :Operating cycle is a continuous process. If it were possible to complete the sequences instantaneously, there would be no need for working capital. but since it is not possible, the firm is forced to have current assets. Since cash inflows and outflows do not match, firms have to necessarily keep cash or invest in short-term securities so that they will be in a position to meet obligations when they become due. Similarly, adequate inventory provides a cushion against being out of stock. It the firms have to be competitive they must sell goods to their customers on credit, when necessitates the holding of accounts receivables. It is in these ways than an adequate level of working capital is absolutely necessary for smooth sales activity, which, in turn, enhances owners wealth.

17

Project Report 200406

18

Project Report 200406

WORKING CAPITAL PRODUCTS

Overdraft
Bank provides overdraft facility to the current account holders through which they are allowed to withdraw more than their deposits. An over draft is a fluctuating account wherein the balance some times may be in credit and at other times in debit. In this case a limit is agreed upon by the banker and the customer, beyond which the customer is not allowed to withdraw. Interest is charged only on the amount actually overdrawn.

Cash Credits
A cash credit is essentially a drawing account against credit granted by the bank and is operated in the same way as a current account in which overdraft limit has been sanctioned. The bank opens a cash credit account in the name of the borrower and credits the amount sanctioned as cash credit. The Banker allows the borrower to withdraw money up to a certain limit. Interest is charged on the amount actually withdrawn from the account.

Packing credit
Packing credit is essentially a short-term advance granted by a bank to an exporter to assisting him to buy, process, pack and ship the goods.

Letter of Credit
Letter of credit is an indirect form of working capital financing and the banks assume only the risk, the being provided by the supplier himself. The purchaser of the goods on credit obtains a letter of credit from a bank. The bank undertakes the responsibility to make payment to the supplier in case the buyer fails to meet his obligations.
19

Project Report 200406

Bill Discounting
Under this method a holder of a bill of exchange can get it discounted by the bank. After making some marginal deductions as discount, the bank pays the value of the bill to the holder. When the bill of exchange matures, the bank gets its payment from the acceptor of the bill.

Term Loan
If the loans are granted for more than one year they are called term loans. Under this method bank advance loans for 3-7 years repayable in yearly or half-yearly installments.

20

Project Report 200406

NEED AND SCOPE OF THE STUDY

The project concerns "A study on the identification of potential customers for working capital funds for HDFC Bank". The study is done to find out weather the current account holders of the HDFC bank are eligible for working capital funds. The scope and spectrum of this analysis revalues in and around banglore city. The primary objective of the study is to identify the potential customers from existing current account holders of HDFC Bank for the requirements of working capital funds. By this study I can understand the customers preferences and their interests about the working capital funds. Hope this study will be of considerable use to the company.

21

Project Report 200406

OBJECTIVES
Primary objective
To identify the potential customers from existing current account holders of HDFC Bank for the requirements of working capital funds.

Secondary Objective
1. To understand the interest rate of working capital funds of other banks. 2. To identify customers preference for the different types of working capital products. 3. To suggest a suitable target segment for working capital funds for small and medium segment. 4. To know which facility is most widely used by the small and medium Enterprises. 5. To know the existing clients interest towards HDFC Banks working capital products. 6. To analyze the selected respondents in terms of their Vintage, Sales Turnover, Collateral etc.

22

Project Report 200406

RESEARCH METHODOLOGY
The success of analysis mostly depends on the methodology on which it is carried out. The appropriate methodology will improve the validity of the findings generally methodology consists of the two type of data collection.

Title of the study

"A study on the identification of potential customers for working capital funds for HDFC Bank."

Research Design
The study is descriptive in nature. Descriptive research includes surveys and factfindings enquire of different kind. However all the efforts have been made to collect both primary and secondary data as accurately as possible.

Universe of the study

All the current account holders of HDFC Bank C.M.H road Banglore is taken in to consideration as the universe of the study.

Sample Design
Convenience Sampling.

Sample Area
The study was under taken in some major places in banglore city.

23

Project Report 200406

Sample Size
The sample size for the study is 75. From whom the data is collected directly from their office.

Data Collection Method

The study is based on the data collected through primary and secondary Sources.

Primary Data
A Interview schedule was designed to collect the primary data.

Secondary Data
Secondary data was collected from the company broachers, Magazines, Journals, websites etc.

Tools used for analysis

1. Simple Percentage method. 2. Graphical aids. 3. Constructed an index for ranking the eligibility of potential customers on the basis of their Turnover, Capacity to offer Collateral security, Vintage and Profitability.

24

Project Report 200406

METHODOLOGY USED FOR THE CONSTRUCTION OF INDEX

An attempt is made to rank the potential customers to HDFC Bank wherein a ranking Index is constructed. There are four parameters, which the bank expects to be a potential customer. They are: 1. Annual turnover of the Customer should be more than 75lakhs per annum.

2. The potential customers must be willing to offer collateral security for getting assistance.

3. The potential customer should profit track record of business during three years.

the preceding

4. The length of experience\Existence in the business which in vintage to be a potential customer.

Only the customers who fulfill the above four criteria are deemed to be the potential customers to the HDFC Bank. Thus to be a potential customer an index number is constructed based on the above four criteria of the four criteria appropriate weight age is given to identify the potential customer. Among the four criteria the HDFC Bank assigns grater weight age to volume of turnover generated by the customer. The Ability to offer collateral security as the second important factor. The third factor is given to profitability of the business. The fourth factor is given to the track record of existence with business. Accordingly the following weights are assigned to the four criteria.
25

Project Report 200406

Criteria
1. 2. Turnover Capacity to offer Collateral = = =

Points
40 points 30 points 10 points

3. Profitability of the Business 4. Years of experience I.e. Vintage of the Business

10 points

Total

100 points

It is considered that a potential customer must have at least 100 points in the constructed index. Out of 75 respondents from whom I have received the response in my primary survey, Only 25 customers are observed to fulfilling the bank created norms to be potential customers. Now the question is out of 25 customers, who are the preferable customer? In order to identify the preferable customers, the 25 customers need to be ranked based on the bank norms. Index numbers are constructed with appropriate weight age for each customer. The turnover of each customer is classified into different classes with class interval of 25lakhs beginning with 75 lakhs to 300 lakhs. We have the following 10 classes.

26

Project Report 200406

Turn Over 75-100 100-125 125-150 150-175 175-200 200-225 225-250 250-275 275-300 > 300

Points 1 2 3 4 5 6 7 8 9 10

Depending the reported turnover of a customer. The frequencies are marked for each class. The weight age is given according to the magnitude of turnover. The highest turnover customer is given a weight age of 10 points whereas the lowest customer having a turnover of 75lakh will have weight age of one point. Like that according to reported turnover appropriate weight age points are assigned. The weighted points for the turnover criteria are multiplied by the weight age of importance (i.e. 40 points) for the turnover criteria in the constructed index. The second criterion to be a potential customer given by the bank is for the ability to offer collateral security. A weight age of 30 points is assigned if a customer is able to offer collateral security. If the a customer is not able to offer a collateral security, then the weight age will be zero in the construction of index. The third criteria considered for a potential customer considered by the bank is profitability of the business. The data available are in the form of profit margin of the turnover. The profit margin of the potential customers is ranging from 2 percent to 10 percent of their turnover. The reported profit margin percentage of a customer is multiplied by the corresponding weight age (i.e. 20 points) in the construction of the index.
27

Project Report 200406

The forth criteria which the bank give significance for the identification of potential customer is track record of existence i.e. vintage of the customer for which 10 points are assigned in the construction of index number. The vintage of the customers range from 3 years to 25 years. The length of existence of each customer is directly multiplied by the weight age points say 10 points. If a customer has three years of experience then his vintage in the index would be 3*10=30 points, and if 7 years 7*10=70 and so on. Thus index numbers are constructed for each potential customer. Based on the value of index numbers the potential customers are ranked in the ascending order. A customer whose index is highest is ranked as first and so on.

28

Project Report 200406

LIMITATION
Scope of the study is limited to Bangalore City only. The result may not be widely applicable. Since the Data Collection tool is questionnaire, all the limitations of the questionnaire will reflect in this study. The Respondents were scattered in the city of Banglore and was difficult to reach them. Some of the respondents hesitated to give the required details due to security reasons.

29

Project Report 200406

Table No:1

Constitution
Type Pvt Ltd Public Ltd Proprietorship Partnership Total Total Number 6 0 65 4 75 Percentage 8% 0% 87 % 5% 100 %

Interpretation
From the above table it is understood that 87 % of the respondents were belongs to the proprietorship constitution.8% of the respondents are belongs to Pvt ltd, and remaining 5% coming under partnership. None of the respondents belongs to Public Ltd.

Inference
The survey shows that majority of the respondents were belonging to sole proprietorship type of constitution.

CHART SHOWING TYPE OF CONSTITUTION

30

Project Report 200406

CONSTITUTION

5%

8%

0% Pvt Ltd Public Ltd Proprietorship Partnership

87%

31

Project Report 200406

Table No:2

Segment
Type Trader Manufacturer Distributor Retailer Services Total Total Number 36 8 10 15 6 75 Percentage 48 % 11 % 13 % 20 % 8% 100 %

Interpretation
The above table shows that majority of the customers are belongs to traders that is 48% after that the retailers 20% followed by distributors 13%, and manufacturers 11% finally the services 8%

Inference
The majority current account holders in the bank were traders and after that retailers the other categories are distributors and services.

32

Project Report 200406

CHART SHOWING TYPE OF SEGMENT

SEGMENT

8% 20% 48% Trader Manufacturer Distributor Retailer Services

13% 11%

33

Project Report 200406

Table No:3

Vintage
Type Less than one year 1-10 years 10-20years 20-30 years 30 years and above Total Total Number 3 41 25 4 2 75 Percentage 4% 55 % 33 % 5% 3% 100 %

Interpretation
The above table clearly interprets that majority of the respondents coming under the experience category 1-10 years. They were above 55%. 33% of the respondents belong to 10-20 years of vintage followed by the 20-30 category is about 5% and 4% less than one year experience. Finally 3% is has got about 30 years of experience.

Inference
The survey shows that majority of the respondents participated in the survey had around 1-10 years experience.

34

Project Report 200406

CHART SHOWING VINTAGE OF BUSINESS

VINTAGE
5% 3% 4%

Less than one year 1-10 years 33% 55% 10-20years 20-30 years 30 years and above

35

Project Report 200406

Table No:4

Current Banker
Type SBI SBM HDFC ICICI STANDARD CHARTERED ING VYSHYA SYNDICATE BANK CENTURION BANK VIJAYA BANK UCO BANK CITY BANK CANARA BANK LORD KRISHNA BANK Total Total Number 16 8 10 8 4 3 9 3 5 5 2 1 1 75 Percentage 21 % 11% 13 % 11 % 5% 4% 12 % 4% 7% 7% 3% 1% 1% 100 %

36

Project Report 200406

Interpretation
Out of the 75 respondents 21% of the respondents were dealing with SBI.13% of them dealing with HDFC.12% of them deals with Syndicate Bank.11% of the respondents were deals with ICICI bank and SBM. 7% of the respondents deal with Vijaya bank and UCO bank. And rest of the respondents deals with various banks.

Inference
The respondents participated in the survey deals with different banks such us SBI, SBM, HDFC, Syndicate Bank, ICICI Bank etc.

37

Project Report 200406

CHART SHOWING CURRENT BANKER OF THE RESPONDENTS

CURRENT BANKER

1% 1% 3% 7% 4% 12% 4% 5% 11% 13% 11% 7% 21%

SBI SBM HDFC ICICI STANDARD CHARTERED ING VYSHYA SYNDICATE BANK CENTURION BANK VIJAYA BANK UCO BANK CITY BANK CANARA BANK LORD KRISHNA BANK

38

Project Report 200406

Table No-5

Relationship with current Banker

Type Less than one year 1-5 years 5-10 years More than 10 years Total

Total Number 4 51 15 5 75

Percentage 5% 68 % 20 % 7% 100 %

Interpretation
The above table clearly shows that 68% of the respondents have got 1-5 years experience with the bank. And 20%of the respondents deals with the banks at around 5-10 years and 7% of the respondents has got more than 10 years experience finally only 5% of the respondents deals with the bank far less than one year.

Inference
The majority of the respondents who participated in the survey has got more than 5 years or up to 5 years experience with the respective bank.

39

Project Report 200406

CHART SHOWING RELATIONSHIP WITH CURRENT BANKER

RELATIONSHIP WITH CURRENT BANKER

60 50 40 30 20 10 0 4 Less than one year 68% 1-5 years 5-10 years 15 20% 5 Total Number Percentage 7% 51

5%

40

More than 10 years

Project Report 200406

Table No:6

Facility Enjoyed
Type Cash Credit Overdraft Term Loan Packing Credit Bill discounting Letter of credit Total Total Number 11 49 13 0 0 0 75 Percentage 15 % 65 % 17 % 0% 0% 0% 100 %

Interpretation
From the above table it is clear that 65% of the respondents are enjoying the O.D facility followed by 17% at the respondents are enjoying term loans and 15% of the respondents enjoying C.C facility. None of the respondents are enjoying the like Packing credit, Bill Discounting and Letter of Credit.

Inference
Majority of the respondents opinioned that the most preferred working capital product was overdraft followed by Term Loan and Cash Credit.

CHAPTER SHOWING FACILITY ENJOYED

41

Project Report 200406

FACILITY ENJOYED
0% 0% 0% 18% 15% Cash Credit Overdraft Term Loan Packing Credit Bill discounting Letter of credit

67%

42

Project Report 200406

Table No:7

Facility Value
Type Less than 1lakh 1-20lakh 20-40lakh 40-60lakh 60-80lakh 80-1crore 1crore & above Total Total Number 1 58 7 3 1 1 2 75 Percentage 1% 77 % 9% 4% 1% 1% 3% 100 %

Interpretation
The above table clearly shows that majority of the respondents are enjoying 1-20lakhs facility value that is 77%.Followed by 9% of the customers enjoying 20-40lakhs and 4% of the respondents has got 40-60lakhs of facility value.3% of the customers are having 1crore and above facility value and finally 1% of the respondents are using less than one lakh, 60lakhs, 80lakhs respectively.

Inference
The majority portion of the respondents has got more than 1lakh or up to 20lakh facility value with their respective banker

43

Project Report 200406

CHART SHOWING FACILITY VALUE

FACILITY VALUE

10%

1% 4% 1% 3% 1%

80%

Less than 1lakh 1-20lakh 20-40lakh 40-60lakh 60-80lakh 80-1crore 1crore & above

44

Project Report 200406

Table No:8

Rate of interest
Type 9.5-11 % 11-12 % 12-13 % 13 & above Total Total Number 17 19 29 3 75 Percentage 23 % 25 % 39 % 4% 100 %

Interpretation
The above table shows that 39% of the total respondents come under 12-13% rate of interest.25% of the respondents are paying 11-12% of interest rate and 23% of the respondents are paying 9.5-11% interest and 4% of the respondents pays 13% and above interest.

Inference
Major portion of the respondents are paying 12-13% of interest rate to the respective bank for their loan.

45

Project Report 200406

CHART SHOWING RATE OF INTEREST

RATE OF INTEREST

4%

25% 9.5-11 % 11-12 % 12-13 % 13 & above 28%

43%

46

Project Report 200406

Table No:9

Collateral Offered
Type Residential Commercial Industrial Other Total Total Number 55 18 2 0 75 Percentage 73 % 24 % 3% 0% 100 %

Interpretation
From the above table it is clear that 73% of the total respondents are offering residential property as collateral.24% of the respondents are offering commercial property as collateral. And 3% of the respondents are offering industrial property as collateral. None of the respondents are offering property in others category.

Inference
The survey shows that majority of the respondents are offering collateral in the form of residential property.

47

Project Report 200406

CHART SHOWING COLLATERAL OFFERING CAPACITY OF RESPONDENTS

COLLATERAL OFFERED

3% 0% 24% Residential Commercial Industrial Other 73%

48

Project Report 200406

Table No:10

Annual sales turnover

Type < 75lakh 75-100lakhs 100-200lakhs 200-300lakhs Total Total Number 48 16 10 1 75 Percentage 64 % 21 % 13 % 1% 100 %

Interpretation
From the above table it is clear that 64% of the respondents are having less than 75lakh turnover 21% of the respondents has got 75-100lakh turnover followed by 13% has got 100-200lakh turnover and finally 1% has got 200-300lakh turn over.

Inference
The annual sales turnover of the majority of the respondents are less than 75lakhs followed by 75-100lakh turnover.

49

Project Report 200406

CHART SHOWING ANNUAL SALES TURNOVER OF RESPONDENTS

ANNUAL SALES TURNOVER

13%

1%

< 75lakh 21% 65% 75-100lakhs 100-200lakhs 200-300lakhs

50

Project Report 200406

Table No:11

Profit Margin
Type 2-4 % 4-6 % 6-8 % 8-11 % Total Total Number 29 14 15 15 75 Percentage 39 % 19 % 20 % 20 % 100 %

Interpretation
The above table shows that the majority of the respondents are having a profit margin of 2-4% that is 39%.Followed by 20% of the respondents has got 6-8% and 8-11% of profit margin. And finally 19% of the respondents has got 4-6% profit margin.

Inference
The survey show that majority of the respondents has got more than 2% or up to 4% of profit margin. Followed by 6-8% and 8-11% respectively.

CHART SHOWING PROFIT MARGIN OF RESPONDENTS

51

Project Report 200406

PROFIT MARGIN

21% 39% 2-4 % 4-6 % 6-8 % 8-11 % 19%

21%

52

Project Report 200406

Table No:12

Satisfied with current Bankers service

Type Good Very good Satisfactory Not Satisfactory Total Total Number 39 22 11 1 75 Percentage 52% 29% 15% 1% 100 %

Interpretation
From the above table it is clear that 52% of the total respondents are having an opinion as good towards current bankers service. Followed by 29% of the respondents commented as very good and 15% of the customers commented as satisfactory .Finally 1% of the customers are not satisfactory with the existing level of service.

Inference
Majority of the customers say 99% of the respondents were found to be satisfied with the current banker.

53

Project Report 200406

CHART SHOWING THE RESPONDENTS OPINION ABOUT THEIR CURRENT BANKER

SATISFIED WITH CURRENT BANKERS SERVICE

15%

1% Good Very good Satisfactory Not Satisfactory

54% 30%

54

Project Report 200406

Table No:13

Interested to move to HDFC Bank

Type Yes No Total Total Number 54 21 75 Percentage 72 % 28 % 100 %

Interpretation
The table shows that majority of the respondents are ready to move to HDFC Banks working capital funds and 20% are not willing to move.

Inference
The survey shows that majority of the respondents are ready to move to HDFC from the current bank. Due to the speedy transaction, competitive interest rates and service quality.

CHART SHOWING RESPONDENTS INTEREST TO MOVE TO

55

Project Report 200406

HDFC BANK

INTERESTED TO MOVE TO HDFC BANK

28% Yes No 72%

56

Project Report 200406

TABLE SHOWING RANK OF THE PREFERRED CUSTOMERS

Table showing rank 1-5

Criteria-1 Criteria-2 Criteria-3

Criteria-4

Number Company Name 1 2 3 4 5 Padmini Marketing Rajadhani Tyres S.P.N

Sales turnover 400 240 320

Collatera Profitability l security 30 30 30 30 30 60 120 80 60 40

Vintage Total weigh 140 200 130 200 200 t age 630 590 560 530 510

Rank

1 2 3 4 5

Enterprises Sujeeth 240 Enterprises Paramesh 240 wari Traders

57

Project Report 200406

Table showing Rank 5-10

Criteria-1 Criteria-2
Number Company Name 6 7 8 9 10 Topaz Electrex India Pvt Ltd Sree Nagalakshmi Hittico Sri Andavar Sales turnover 320 240 240 40 40 security 30 30 30 30 30

Criteria-3

Criteria-4
Vintage Total weight age 500 480 460 440 410 Rank

Collateral Profitability

80 60 40 120 140

70 150 150 250 200

6 7 8 9 10

58

Project Report 200406

Table showing rank 10-15

Criteria-1 Criteria-2 Number Company Name 11 12 13 14 15 Mahaveer Mubalia Traders Sreegopu Sales turnover 40 240 40

Criteria-3

Criteria-4 Total weight age 360 350 340 330 320 Rank

Collateral Profitability Vintage security 30 30 30 30 30 140 50 120 140 80 150 30 150 120 50

11 12 13 14 15

Enterprises Sky 40 Marketing CeeDee Enterprises 160

59

Project Report 200406

Table showing rank 15-20

Criteria-1 Criteria-2 Number Company Name 16 17 18 19 20 21 Apotex A one silks Meridian Lakshmi Sales turnover 80 40 40 40

Criteria-3

Criteria-4 Vintage Total weight age 300 290 290 280 270 260 Rank

Collateral Profitability security 30 30 30 30 30 30 40 120 180 80 60 80

150 100 40 130 100 70

16 17 17 18 19 20

Enterprises Cotton Fab 80 Rvg & 80 Sons

60

Project Report 200406

Table showing rank 20-25

Criteria-1 Criteria-2 Number Company Name 22 23 24 25 Sales turnover

Criteria-3

Criteria-4 Total weight age 250 220 220 140 Rank

Collateral Profitability Vintage security 30 30 30 30 120 60 80 60 60 90 70 10

JK garments 40 Kanchipuram 40 Silks Ambika Nexus 40 40

21 22 22 23

61

Project Report 200406

FINDINGS
Majority of the respondents are traders. Manufacturing firms are having high sales turnover and need more funds than other segment. Retailers are having high profit margin than other segment. Manufacturers, traders and distributors are showing more interest than other category because this segments needs more working capital funds for their operation. Majority of the respondents are using overdraft and cash credit facility because of convenience. Most of the respondents are really interested in HDFC banks working capital funds because of its innovative products and services.

Other reason for opting Working capital funds from HDFC is comparatively low interest rates and easy terms and conditions. Majority of respondents has got more than one year or less than 10 years experience in business i.e. vintage. Majority of the respondents are banking with SBI because of easy terms and conditions. Other banks are also offering less interest rate.
62

Project Report 200406

Majority of the respondents has got 1-5 years relation with the current banker for their cash transactions. Majority of the respondents has got working capital loans in between 1-20lakhs. All most all of the respondents are offering collateral security. Majority of the respondents are having less than 75lakhs turnover. But the eligibility as per HDFC Bank is more than 75lakh turn over. Majority of the respondents are satisfied with their current banker in terms of loans. Customers mainly taking working capital funds for improving their day today business activities. An index is constructed to find out the most preferred customer and the least preferred customer. Base on the index a list of eligible customers for HDFC Bank is created they are grouped in to five clusters based on their rank obtained. So the company can accordingly target based on the most eligible and least eligible customer.

63

Project Report 200406

SUGGESTION AND RECOMMENDATIONS

1.

Base on the index a list of eligible customers for HDFC Bank is created they are grouped in to five clusters based on their rank obtained. So the company can accordingly target based on the most eligible customers say 1 to 5 and least eligibility say 21 to 23.And the companies ranked in their order of importance with respect to the eligibility fulfilling criteria like turnover, capacity to offer collateral security, Profitability and Vintage.

2.

With respect to demand for working capital products there is huge potential even among the existing current account holders say out of 5000 current account holders at least one third of them might be eligible and can be easily tapped going by the current study.

3.

The company can attract the customers by using the strong sales force to tap the potential customers and try to influence the prospective customers because most of them are willing to shift.

4.

As among its prospective clients it is enjoying a very good brand image the company can use this aspect to its advantage and win more customers.

5.

Over and above the prospect of their own current account holders company can also generate leads through referrals.

64

Project Report 200406

CONCLUSION

The project work entitled made an attempt to find out the potential customers and their interest towards HDFC Bank. Through the study researcher came to know about various factors that make their influence in working capital funds. The survey shows that majority of the respondents are ready to move to HDFC from their current banker. Because of its innovative products and the speedy dispersal of loans, competitive interest rates and service quality. Other reason for opting working capital funds from HDFC is easy terms and conditions. An index is constructed to find out the most preferred customer and the least preferred customer. Base on the index a list of eligible customers for HDFC Bank is created they are grouped in to five clusters based on their rank obtained. So the company can accordingly target based on the most eligible and least eligible customer. As among its prospective clients it is enjoying a very good brand image the company can use this aspect to its advantage and win more customers. With respect to demand for working capital products there is huge potential even from its existing current account holders at least one third of them might be eligible and can be easily tapped going by the current study.

65

Project Report 200406

BIBLIOGRAPHY
Books: Authors Kothari C.R, Research Methodology New Age International (P) Limited, New Delhi, 1985.

Dr. D.D Sharma Marketing Research Sulthan Chand & sons 4792\23 Daryagni, New Delhi-110002 MY Khan, P.K Jain, Financial Management Third Edition, Tata McGraw-Hill Publishing Company Limited. New Delhi. 2000

S.P Guptha, Operation Research ,S.Chand & Co New Delhi-110055

Website
1. www.hdfcbank.com 2. www.google.com

66