SUMMER PROJECT ON

STRATEGIES ADOPTED BY HDFC BANK DURING ECONOMIC SLOWDOWN & A SMALL STUDY ON COMPARATIVE ANALYSIS ON PRIORITY BANKING AT HDFC BANK & ICICI BANK
PROJECT SUBMITTED BY:

Acknowledgements

If words are considered to be signs of gratitude then let these words Convey the very same My sincere gratitude to HDFC BANK for providing me with an opportunity to work with BANK and giving necessary directions on doing this project to the best of my abilities. I am highly indebted to Mr. ASHISH KUMAR., Senior Branch Manager company project guide, who has provided me with the necessary information and also for the support extended out to me in the completion of this report and his valuable suggestion and comments on bringing out this report in the best way possible. . I am grateful to all faculty members of IMED, Pune and my friends who have helped me in the successful completion of this project.

INDEX

1. HDFC BANK: COMPANY PROFILE 2. ORGANIZATION AND MANAGEMENT 3. TECHNOLOGY IN BANK 4. BANK PRODUCT AND CUSTOMER SEGMENT 5. BUSINESS STRATEGY 6. RECENT DEVELOPMENT 7. ACHIVEMENT AND AWARDS 8. MANAGEMENT STRATEGIES OF HDFC BANK 9. MAJOR RECESSIONARY TRENDS IN INDIA 10. CORRECTIVE STEPS TO CHECK RECESSION 11. OPPORTUNITIES IN INDIA DUE TO RECESSION 12. STRATEGIES ADOPTED BY HDFC BANK DURING SLOWDOWN 13. INCIDENTS SUPPORTING THE SUCCESS OF STRATEGIES 14. COMPARISON BETWEEN PRIORITY BANKING AT HDFC BANK AND PRIVILEGE BANKING AT ICICI BANK 15. COMPARISON FROM MARKETING POINT OF VIEW 16. INDIA PRIVATE BANK COMPARISON

HDFC BANK:
COMPANY PROFILE 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. The past days are witness to an hour wait before withdrawing cash from accounts or a cheque from north of the country being cleared in one month in the south. HDFC was incorporated in 1977 with the primary objective of meeting a social need that of promoting home ownership by providing long-term finance to households for their housing needs. HDFC was promoted with an initial share capital of Rs. 100 million.

Business Objectives
The primary objective of HDFC is to enhance residential housing stock in the country through the provision of housing finance in a systematic and professional manner, and to promote home ownership. Another objective is to increase the flow of resources to the housing sector by integrating the housing finance sector with the overall domestic financial markets.

Organisational Goals
HDFCs main goals

are to :-

The primary objective of HDFC is to enhance residential housing stock and to promote home ownership. To acquire by purchase, lease, exchange, hire or otherwise lands & property or any interest in the same in India. To advance money to any person/ persons, company or corporation, society or association either at interest without, and or with or without any security and in particular to advance money to shareholders of the company or to other persons to enable the person to erect, or purchase, or enlarge, or repair any house or building or any part or portions thereof or to purchase any freehold or leasehold or any lands or estate or property in India upon the terms and conditions as laid by the company. To develop & turn to account any land acquired by the company or in which the company is interested, and in particular by laying out and preparing the same for building purposes, constructing, altering pulling down, decorating, maintaining; furnishing, fitting up and improving buildings, and by planting, paving draining, farming, cultivating, letting on building lease or building agreement, and by advancing money and entering into contracts and agreements of all kinds with builders, tenants and others. Subject to the provisions of the Banking Regulation Act 1949, to receive moneys on deposits, loans or otherwise with or without interest and to secure the same in such manner and on such terms and conditions as the company may think fit and proper and to guarantee the debts, obligations and contracts of any person, firm, company, or corporation whatsoever.

QUALITY POLICY
SECURITY: The bank provides long term financial security to their policy. The bank

does this by offering life insurance and pension products.

TRUST: The bank appreciates the trust placed by their policy holders in the bank.

Hence, it will aim to manage their investments very carefully and live up to this trust.
INNOVATION: Recognizing the different needs of our customers, the bank offers a

range of innovative products to meet these needs. INTEGRITY CUSTOMER CENTRIC PEOPLE CARE ONE FOR ALL AND ALL FOR ONE TEAM WORK JOY AND SIMPLICITY

To negotiate loans of every description.

To finance or assist in financing the sale of house, buildings, flats, either furnished or otherwise, by way of hire purchase or deferred payment or similar transactions and to institute, enter into, carry on, subsidize finance or assist in subsidizing or financing he sale of these houses, buildings, flats, furnished or otherwise, upon any term whatsoever. Besides these the company has certain objectives incidental or ancillary to the attainment of the main objective. These are : To aid any government, state, or any municipal corporation, or company or association or individual with capital, credit, means or resources for the prosecution of any work, undertakings, project or enterprises which are conducive to all or any of the object of the company. To adopt such means of making known to the business of the company as may seen expedient, and in particular by the advertisement in the press, by circulars, by purchase and

exhibition of work, of art of interest, by publication of books and periodicals, by granting prices, rewards and donations. To provide for the welfare of the employees or ex employees of the company and the wives, widows and the children or the dependents of such persons in such manner as the company deems fit and proper. To effect and maintain insurance against loss of or inure to any property of or any persons employed by the company or against any other loss to the company. To undertake and carry on the business in India or abroad of Merchant Banking including consultancy services of all kinds and description, investment counseling, portfolio management, providing of financial and investment assistance, syndication of loans, counseling, and tie-up for project and working capital finance, syndication of financial arrangements wheth4er in domestic or international markets, handling of mergers and amalgamations, assisting in the setting up of joint ventures, foreign currency lending, tax consultancy, underwriting of any securities, whether singly or in consortium and without prejudice to the generality of the foregoing to act as advisors and consultants, managers to the issue of shares, debentures, stocks, bonds and securities.

ORGANISATION AND MANAGEMENT

HDFC is a professionally managed organization with a board of directors consisting of eminent persons who represent various fields including finance, taxation, construction and urban policy & development. The board primarily focuses on strategy formulation, policy and control, designed to deliver increasing value to shareholders. FOUNDER OF HDFC: Man with a Mission An extract from the book 'A Tribute' If ever there was a man with a mission it was Hasmukhbhai Parekh, Founder and Chairman-Emeritus, who left this earthly abode on November 18, 1994. Born in a traditional banking family in Surat, Gujarat, Mr. Parekh started his financial career at Harkisandass Lukhmidass a leading stock broking firm. The firm closed down in the late seventies, but, long before that, he went on to become a towering figure on the Indian financial scene. In 1956 he began his lifelong financial affair with the economic world, as General Manager of the newly-formed Industrial Credit and Investment Corporation of India (ICICI). He rose to become Chairman and continued so till his retirement in 1972. At the ripe age of 60, Hasmukhbhai started his second dynamic life, even more illustrious than his first. His vision for mortgage finance for housing gave birth to the Housing Development Finance Corporation it was a trend-setter for housing finance in the whole Asian continent. He was a true development banker. His building up HDFC without any government assistance is itself a brilliant chapter in financial history. His wisdom and warmth drew people from all walks of life to him, for advice, guidance and inspiration.

A soft spoken man of few words, Mr. Parekh nevertheless held strong and definite views with a quiet conviction. He was always concerned with building bridges, improving and encouraging communication between people. Lives of great men all remind us We can make our life sublime, And, departing leave behind us Footprints on the sands of time. As Henry W. Longfellow said:

HDFC BANK :

March 2006 Cities Branches ATMs 228 535 1323

March 2007 316 684 1805

March 2008 327 961 2677

March 2009 528 1412 3295

TECHNOLOGY IN HDFC BANK In the era of globalization each and every sector faced the stiff competition from their rivals. And world also converted into the flat. From the globe. After the policy of liberalization and RBI initiatives to take the step for the private sector banks, more and more changes are taking the part into it. And there are create competition between the private sector banks and public sector bank. Private sector banks are today used the latest technology for different transaction of day to day banking life. As we know that Information Technology plays the vital role in the each and every industries and gives the optimum return from the limited resources. 9

Banks are service industries and today IT gives the innovative Technology application to Banking industries. HDFC BANK is the leader in the industries and today IT and HDFC BANK together combined they reached the sky. New technology changed the mind of banking transaction. Today there are different channels are available for the banking transactions. There are drastically changes seen in the use of Internet banking, in a year 2001 (2%) and in the year 2008 ( 25%). These type of technology gives the freedom to retail customers. HDFC BANK is the very consistent player in the New private sector banks. New private sector banks to withstand the competition from public sector banks came up with innovative product service.

Branches 43% ATM 40% Phone Banking 14% Internet 2% Mobile 1%

2004

2008

10

Branches 17% ATM 45% Phone Banking 12% Internet 25% Mobile 1%

( % customer initiated Transaction by Channel ) HDFC BANK PRODUCT AND CUSTOMER SEGMENTS PERSONAL BANKING Loan Product Deposit Product Investment & Insurance

Auto Loan Loan Against Security Loan Against Property Personal loan Credit card 2-wheeler loan Commercial vehicles finance Home loans Retail business

Saving a/c Current a/c Fixed deposit Demat a/c Safe Deposit Lockers

Mutual Fund Bonds Knowledge Centre Insurance General and Health Insurance Equity and Derivatives Mudra Gold Bar

11

banking Tractor loan Working Capital Finance Construction Equipment Finance Health Care Finance Education Loan Payment Services Access To Bank Gold Loan Cards

Credit Card Debit Card Prepaid Card

NetSafe Merchant Prepaid Refill Billpay Visa Billpay InstaPay DirectPay VisaMoney Transfer eMonies Electronic Funds Transfer

NetBanking OneView InstaAlert ATM Phone Banking Email Statements Branch Network

MobileBanking

-------------------------------Forex Services ------------------------------- Product & Services Trade Services Forex service Branch Locater RBI Guidelines

Online Payment of Direct Tax

WHOLESALE BANKING

12

Corporate Funded Services Non Funded Services Value Added Services Internet Banking

Small and Medium Enterprises Funded Services Non Funded Services Specialized Services Value added services Internet Banking

Financial Institutions and Trusts BANKS Clearing Sub-Membership RTGS submembership Fund Transfer ATM Tie-ups Corporate Salary a/c Tax Collection

Financial Institutions Mutual Funds Stock Brokers Insurance Companies Commodities Business Trusts

BUSINESS MIX

13

Total Deposits Retail Wholesale

Gross Advances

Net Revenue

HDFC Bank is a consistent player in the private sector bank and have a well balanced product and business mix in the Indian as well as overseas markets Customer segments (retail & wholesale) account for 84% of Net revenues ( FY 2008) Higher retail revenues partly offset by higher operating and credit costs. Equally well positioned to grow both segments.

NRI SERVICES

Accounts & Deposits Rupee Saving a/c Rupee Current a/c Rupee Fixed Deposits Foreign Currency Deposits Accounts for Returning Indians

Remittances North America UK Europe South East Asia Middle East Africa Others

Quick remit IndiaLink Cheque LockBox Telegraphic/ Wire Transfer Funds Transfer Cheques/DDs/TCs

14

Investment & Insurances Mutual Funds Insurance Private Banking Portfolio Investment Scheme

Loans Home Loans Loans Against Securities Loans Against Deposits Gold Credit Card

Payment Services NetSafe BillPay InstaPay DirectPay Visa Money Online Donation

Access To Bank NetBanking OneView InstaAlert ATM PhoneBanking Email Statements Branch Network

BUSINESS STRETEGY
HDFC BANK mission is to be "a World Class Indian Bank", benchmarking themselves against international standards and best practices in terms of product offerings, technology,

15

service levels, risk management and audit & compliance. The objective is to build sound customer franchises across distinct businesses so as to be a Preferred provider of banking services for target retail and wholesale customer segments, and to achieve a healthy growth in profitability, consistent with the Bank's risk appetite. Bank is committed to do this while ensuring the highest levels of ethical standards, professional integrity, corporate governance and regulatory compliance. Continue to develop new product and technology is the main business strategy of the bank. Maintain good relation with the customers is the main and prime objective of the bank. HDFC BANK business strategy emphasizes the following: Increase market share in Indias expanding banking and financial services industry by following a disciplined growth strategy focusing on quality and not on quantity and delivering high quality customer service. Leverage our technology platform and open scaleable systems to deliver more products to more customers and to control operating costs . Maintain current high standards for asset quality through disciplined credit risk management. Develop innovative products and services that attract the targeted customers and address inefficiencies in the Indian financial sector. Continue to develop products and services that reduce banks cost of funds. Focus on high earnings growth with low volatility.

FIVE S , PART OF KAIZEN

WORK PLACE TRANSFORMATION

16

Focus on effective work place organization Believe in Small changes lead to large improvement Every successful organization have their own strategy to win the race in the competitive market. They use some technique and methodology for smooth running of business. HDFC BANK also aquired the Japanese technique for smooth running of work and effective work place organization.

Five S Part of Kaizen is the technique which is used in the bank For easy and systematic work place and eliminating unnecessary things from the work place.

BENEFIT OF FIVE S

It can be started immediately. Every one has to participate. Five S is an entirely people driven initiatives. Brings in concept of ownership. All wastage are made visible.

FIVE S Means :S-1 S-2 SORT SYSTEMATIZE 17 SEIRI SEITON

S-3 S-4 S-5 (1) SORT :-

SPIC-N-SPAN STANDARDIZE SUSTAIN

SEIRO SEIKETSU SHITSUKE

It focus on eliminating unnecessary items from the work place. It is excellent way to free up valuable floor space. It segregate items as per require and wanted.

Frequently Required Wanted but not Required

Remove everything from workplace

Junk

Less Frequently Required Junk

(2) SYSTEMATIZE :Systematize is focus on efficient and effective Storage method. That means it identify, organize and arrange retrieval. It largely focus on good labeling and identification practices. Objective :- A place for everything and everything in its place.

(3) SPIC- n - SPAN :Spic-n-Span focuses on regular clearing and selfinspection. It brings in the sense of ownership. (4) STANDERDIZE :It focus on simplification and standardization. It involve standard

18

rules and policies. It establish checklist to facilitates autonomous maintenance of workplace. It assign responsibility for doing various jobs and decide on Five S frequency. (5) SUSTAIN:It focuses on defining a new status and standard of organized work place. Sustain means regular training to maintain standards developed under S-4. It brings in self- discipline and commitment towards workplace organization.

RUPEE EARNED - RUPEE SPENT It is more important for every organization to know about from where and where to spent money. And balanced between these two things rupee earned and rupee spent are required for smooth running of business and financial soundness. This type of watch can control and eliminate the unnecessary spending of business. In this diagram it include both things from where Bank earned Rupee and where to spent.

19

HDFC BANK earned from the Interest from Advances 51.14 % ,Interest from Investment 27.12 %, bank earned commission exchange and brokerage of 15.25 %. These are the major earning sources of the bank. Bank also earned from the Forex and Derivatives and some other Interest Income.Bank spent 39.75 % on Interest Expense, 30.27 % on Operating Expense and 14.58 % on Provision. Bank also spent Dividend and Tax on dividend, Loss on Investment , Tax. As we discuss above that balancing is must between these two for every organization especially in the era of globalization where there are stiff competition among various market players.

RECENT DEVELOPMENT

The Reserve Bank of India has approved the scheme of amalgamation of Centurion Bank of Punjab Ltd. with HDFC Bank Ltd. with effect from May 23, 2008.

20

All the branches of Centurion Bank of Punjab will function as branches of HDFC Bank with effect from May 23, 2008. With RBIs approval, all requisite statutory and regulatory approvals for the merger have been obtained.

The combined entity would have a nationwide network of 1167 branches; a strong deposit base of around Rs.1,22,000 crores and net advances of around Rs.89,000 crores. The balance sheet size of the combined entity would be over Rs.1,63,000 crores.sOn March 27, 2008, the shareholders of the Bank accorded their consent to a scheme of amalgamation of Centurion Bank of Punjab Limited with HDFC Bank Limited. The shareholders of the Bank approved the issuance of one equity share of Rs.10/- each of HDFC Bank Limited for every 29 equity shares of Re. 1/- each held in Centurion Bank of Punjab Limited.This is subject to receipt of Approvals from the Reserve Bank of India, stock exchanges and Other requisite statutory and regulatory authorities. The shareholders Also accorded their consent to issue equity shares and/or warrants convertible into equity shares at the rate of Rs.1,530.13 each to HDFC Limited and /or other promoter group companies on preferential basis, subject to final regulatory approvals in this regard. The Shareholders of the Bank have also approved an increase in the authorized capital from Rs.450 crores to Rs.550 crores.

21

Promoted in 1995 by Housing Development

Finance

Corporation (HDFC), India's

leading housing finance company, HDFC Bank is one of India's premier banks providing a wide range of financial products and services to its over 11 million customers across hundreds of Indian cities using multiple distribution channels including a pan-India network of branches, ATMs, phone banking, net banking and mobile banking. Within a relatively short span of time, the bank has emerged as a leading player in retail banking, wholesale banking, and treasury operations, its three principal business segments. The bank's competitive strength clearly lies in the use of technology and the ability to deliver world-class service with rapid response time. Over the last 13 years, the bank has successfully gained market share in its target customer franchises while maintaining healthy profitability and asset quality. Additionally the bank offers a full suite of NRI banking products to Overseas Indians. On 29th August 2007, Centurion Bank of Punjab merged with Lord Krishna Bank (LKB), post obtaining all requisite statutory and regulatory approvals. This merger has further strengthened the geographical reach of the Bank in major towns and cities across the country, especially in the State of Kerala, in addition to its existing dominance in the northern part of the country. Centurion Bank of Punjab now operates on a strong nationwide franchise of 404

branches and 452 ATMs in 190 locations across the country, supported by employee base of over 7,500 employees.In addition to being listed on the major Indian stock exchanges, the Banks shares are also listed on the Luxembourg Stock Exchange

Achievements & awards

22

HDFC Bank began operations in 1995 with a simple mission: to be a"World-class Indian Bank". We realised that only a single-minded focus on product quality and service excellence would help us get there. Today, we are proud to say that we are well on our way towards that goal. It is extremely gratifying that HDFCS efforts towards providing customer convenience have been appreciated both nationally and internationally.

2009 Euromoney Awards 'Best Bank in India' 2009 Economic Times Brand Equity & Nielsen Research annual survey 2009 Asia Money 2009 Awards Most Trusted Brand - Runner Up

'Best Domestic Bank in India'

IBA Banking 'Best IT Governance Award - Runner up' Technology Awards 2009 Global Finance Award IDRBT Banking Technology Excellence Award 2008 'Best Trade Finance Bank in India for 2009 'Best IT Governance and Value Delivery'

Asian Banker 'Asian Banker Best Retail Bank in India Award 2009 ' Excellence in Retail Financial Services 2008 Finance Asia 'Best Bank and Best Cash Management Bank' Country Awards for Achievement 2008 CNN-IBN Nasscom IT User 'Indian of the Year (Business)' 'Best IT Adoption in the Banking Sector'

23

Award 2008 Business India Forbes Asia 'Best Bank 2008' Fab 50 companies in Asia Pacific

Asian Banker Best Retail Bank 2008 Excellence in Retail Financial Services Asiamoney Microsoft & Indian Express Group Best local Cash Management Bank Award voted by Corporates Security Strategist Award 2008

World Trade Center For outstanding contribution to international trade services. Award of honour Business TodayMonitor Group survey Financial ExpressErnst & Young Award One of India's "Most Innovative Companies"

Best Bank Award in the Private Sector category

Global HR 'Employer Brand of the Year 2007 -2008' Award - First Excellence Awards - Runner up, & many more Asia Pacific HRM Congress: Business Today 2007 Dun & Bradstreet American Express Corporate Best Bank Award 2007 The Bombay Stock Exchange and Nasscom Foundation's Business for Social Responsibility Awards 2007 Outlook Money & NDTV Profit The Asian Banker 'Corporate Best Bank' Award 'Best Bank' Award

'Best Corporate Social Responsibility Practice' Award

Best Bank Award in the Private sector category. Best Retail Bank in India

24

Excellence in Retail Financial Services Awards Asian Banker Our Managing Director Aditya Puri wins the Leadership Achievement Award for India

. MARKETING STRATEGIES OF HDFC BANK

H D F C
ow ifferent rom e

ompetitors

A sneak peek at HDFC's 'We understand your world' campaign

MARKETING STRATEGIES TOWARDS CUSTOMERS BY HDFC: Banks should be aware of the fact that a bank's interaction with its clients, through employees, influences the effectiveness of the institution's CRM strategies. Specifically, two variables influence the effectiveness of the CRM strategies in banks, namely the knowledgeability and the attitude of the bank employees. The knowledgeability of bank employees with regard to banking products, services, policies and/or procedures and the attitude of bank employees in each banking branch should be positively adapted in order to improve a banks CRM.Strategies to improve, specifically, the knowledgeability and attitude of bank employees can and should be implemented by banks in ways to positively influence their CRM. In effect, this will increase the service quality of the bank. Ultimately, this will contribute to the bank's success, which will ensure economic stability and prosperity for a country. According to one of the report by one of the economic journal of India on the performance of service quality to customers for four banks, HDFCs performance is as under:-

25

Major players & their competitive framework with respect to industry and the company:
BANK NAME SBI ICICI PNB HDFC OTHERS % OF SHARE 30% 25% 20% 15% 10%

26

mrket share of leading banks in India

others HDFC Banks PNB ICICI SBI 0% 5% 10% 15% 20% 25% 30%

share (in%)

FACTORS RESPONSIBLE FOR PERFORMANCE OF HDFC BANK

PARAMETERS PRODUCT ADVERTISMENT MANPOWER NET-BANKING PHONE BANKING INVESTMENT SCHEME NETWORK

% OF SHARE 50% 5% 25% 2% 5% 10% 3%

27

60% 50% PERSENTAGE 40% 30% 20% 10% 0% % OF SHARE PARAMETERS 10% 5% 2% 5% 3% 25% 50% PRODUCT ADVERTISMENT MANPOWER NET-BANKING PHONE BANKING INVESTMENT SCHEME NETWORK

Major Recessionary Trends in India

What Is Recession? A Recession is a contraction phase of the business cycle. National Bureau of Economic Research (NBER) is the official agency in charge of declaring that the economy is in a state of recession. They define recession as : Significant decline in economic activity lasting more than a few months, which is normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.

28

 For this reason, the official designation of recession may not come until after we are in a recession for six months or longer.

What Causes Recession ?

An economy typically expands for 6-10 years and tends to go into a recession for about six months to 2 years. A recession normally takes place when consumers loose confidence in the growth of the economy and spend less. This leads to a decreased demand for goods and services, which in turn leads to a decrease in production, lay-offs and a sharp rise in unemployment. Investors spend less as they fear stocks values will fall and thus stock markets fall on negative sentiment.

US Crisis Hits India

US faced major crisis because of Subprime mortgage crisis (homeloan defaults) Rising oil prices at $100 a barrel Global Inflation High unemployment rates A declining dollar value

All this slowed down the growth of the economy and as the GDP growth rate fell to 2%, recession set in.

29

Impact on India
A slowdown in the US economy is bad news for India because: Indian companies have major outsourcing deals from the US India's exports to the US have also grown substantially over the years. Indian companies with big tickets deals in the US are seeing their profit margins shrinking.

Anatomy of the economic depression in India

30

 Share Market More people have sold the shares in the indian share market than they bought in the recent weeks. This has added to the fall of sensex to lower points. Foreign investors have pulled out from stock markets leading to heavy losses in stocks and mutual funds Stock broking houses are laying-off people Because of such uncertainty many people have started saving money in banks rather than investing IT and Real Estate Sector The key challenges faced by the industry now are inflation and the psychological impact of the US crisis, leading the companies to hit the panic button. Bonuses, perks, lavish parties, and many other benefits are missing as companies look to cut cost. India's IT export growth is also slowering down One of the casualties this time are real estate, where building projects are half-done all over the country and in this tight liquidity situation developers find it difficult to raise finances. Layoffs and Unemployment Hundreds of workers have lost jobs in diamond jewellery, textiles and leather industry. Companies in IT industry have stopped hiring and projected lower manpower need. Firms attached to the capital market are laying off people and large companies are putting their future expansion plans on hold.

31

 Industrial sector Government and other private companies are reluctant in starting new ventures and starting new projects. Projects that are halfway to completion, or companies that are stuck with cash flow issues on businesses that are yet to reach break even, will run out of cash. Car, bike & truck sales down Steel plants are cutting production Hospitality and airlines are hit by poor demand

On the issue Mr. Manmohan Singh suggested A coordinated fiscal stimulus by countries that are in a position to do so would help to mitigate the severity and duration of the recession It would also send a strong signal to investors around the world. Resort to fiscal stimulus may be viewed as risky in some situations, but if we are indeed on the brink of the worst downturn since the Great Depression, the risk may be worth taking, he added.

Corrective Steps to Check Recession

RBI needs to neutralise the outflow of FII money by unwinding the market stabilisation securities that it had used to sterilise the inflows when they happened. This will mean drawing down the dollar reserves which is important at this hour. In the IT sector, there should be correction in salary offerings rather than job cutting Public should spend wisely and save more Taxes including excise duty and custom duty should be reduced to lighten the adverse effect of economic crunch on various industries 32

In real estate the builders should drop prices, so as to bring buyers back into the market. Also, the government should try and improve liquidity, while CRR and SLR must be cut further Indian Companies have to adopt a multi-pronged strategy, which includes diversification of the export markets, improving internal efficiencies to maintain cost competitiveness in a tight export market situation

Opportunities in India due to US recession

US recession may be a boon for Indian offshore software companies The impact of recession is higher to small and medium sized (SMEs) enterprises whose bottom lines get squeezed due to lack of spending by consumers SMEs in the US are under severe pressure to increase profitability and business margins to survive. This will force them to outsource and even have M&A arrangements with Indian firms. India is going to be a great beneficiary of this trend which will minimize the impact of the US recession on Indian industry By March 2008, India had received SME outsourcing deals worth $7 billion from the US as against $6.2 billion in the previous year

33

Strategies adopted by HDFC Bank during Economic Slowdown:

Quality Sourcing

HDFC BANK is now in search for potential customers ,to fulfill their objective i.e. business, bank starts following a strategy of opening new savings account (regular) at Rs. 10,000/= which was earlier only Rs. 5,000/= and at Rs 5,000/= for senior citizens which was earlier only Rs.2,000/=. This step is taken only to have focus on the potential customers ,that is who have the capability of maintaining the average quarterly balance of Rs. 10,000/= ,i.e. on the basis of Customer Profitability Analysis as according to , HDFC Bank skips volume game to protect margins 15 Jan 2009, HDFC Bank, the second largest private sector lender, continued to report robust double digit growth in its bottom line during the quarter ended December 2008 despite liquidity crisis in the market and weak business growth.

34

The growth, which was in line with the momentum seen in the previous two quarters of the current fiscal, is due to a stable net interest margin (NIM) and improvement in operating efficiency. The banks net profit grew 30.2% in the third quarter compared with the corresponding quarter of the previous year. However, the growth was over the combined numbers of HDFC Bank and Centurion Bank of Punjab (CBoP). The latter had merged with HDFC Bank on April 1, 2008. During times of slowdown, a bank can choose either to retain its business volume by reducing interest rates on advances or to protect its NIM by sacrificing volume growth. It is seen that HDFC Bank has chosen the second option. While growth in its business (sum of advances and deposits) has slowed from 26.5% in the September 2008 quarter to 18%, NIM has inched up to 4.3% from 4.2% by similar comparison. The bank preferred not to push loans during uncertain business conditions. Though the overall market was facing liquidity crisis in October, the bank was still a net lender in the call market, which shows that it was not short in liquidity. The fact that the bank could retain its NIM under tough business environment indicates that it was successful in passing on the rise in cost of deposits to its borrowers in the form of higher interest on advances. The strategy of maintaining its margins has paid off, as the profit growth is intact. While quarterly results of other banks are still awaited, HDFC Bank may emerge as one of the few banks to have improved its NIM in the December quarter. The year-on-year improvement of 150 bps in the banks operating ratio is on account of lower growth in salaries and other operating expenses. Going forward, the loan growth is expected to be high compared to what has been seen

35

during the quarter following the Reserve Bank of Indias measures to calm down the turbulence in the money market

More focus on virtualization of services: i.e.

E services,like phone banking ,mobile banking, net banking etc -

HDFC Bank started various awareness programme in order to aware customers about the benefits from e-services .Also they tried to make the procedures of using various e-services more simpler & easy to understand, like for e.g. In case of phone banking services, earlier customers have to remember their customer id &password ,which is difficult to remember, so to solve this problem customers now have to enter only 16-digit debit card no.& password & can access through their account details like balance enquiry, last five transaction details, their account status etc. anytime anywhere..: Check your account balance - Get up-to-the-second details of your Savings or Current Accounts and your Fixed Deposits. You can also get the details of the last 5 transactions on your account, or have a mini statement of last 9 transactions faxed across to you. Enquire on the cheque status - You can use PhoneBanking to check on the status of cheques issued or deposited from anywhere in India. Stop Payment - Stop payment of a single cheque or a series of cheques, 24 hours a day Loan Related queries - Get details of the outstanding loan amount, enquire about your loan account, request for an interest certificate and repayment schedule, etc. Just call PhoneBanking in your city and dial 4 to speak to our PhoneBanker Transfer Funds between accounts*# - You can also transfer money from one of your accounts to another. Both accounts must be linked to your Customer ID. You can transfer amounts upto Rs 1 Lac in a single day 36

HDFC Bank Customers Can Now Save 'Favourite Transaction' On ATMs

Yahoo local, Google local, localized GPS services. Service providers world over seem to be climbing the customization bandwagon to better serve consumers. Banks do not wish to be left behind in this arena. Imagine getting a personal loan request of a particular amount from your bank that matches your risk profile or your bank calling you and wishing you on your birthday or your bank asking you for your new address after the bounce of a physical mail. HDFC Bank is making all these possibilities come true for its customers. The bank aims to offer targeted messaging and other customised services using NCRs 'Aptra eMarketing' software. The bank will be running one-to-one (customized) and one-to-all targeted messaging via all self-service channels like the ATM, mobile banking and Internet banking. Most banks do not have clean data of the customer with regards to residential address and other details. This implementation will help HDFC Bank with a more thorough analysis of the change in customer demographics and thus, plan their campaigns better after being equipped with a thorough data repository in the data warehouse. Along with targeted messaging, the bank will also be offering fast ATM services. HDFC Bank has launched favourite transaction that allows the customer to set a particular amount for withdrawal so that every time he visits the ATM he will not be accessing the same screens. This will reduce the number of screens the customer must access while using the ATM machine for withdrawing cash. Till now, the customer had to access 9 screens, which has now been reduced to five screens, which has in turn resulted in a reduction of 40 percent in the time taken to complete a transaction. The customer also has the option to undo the 'favourite transaction' and go on with the regular screens. "HDFC bank runs 3,100 ATMs pan India with a daily turnover of 300 transactions per day per ATM, which adds up to about one million transactions per day. Imagine the amount of time saved by HDFC customers at a compounded rate," said Anil Jaggia, CIO HDFC Bank. 37

"HDFC is globally the first bank to use the entire suite of offerings from Aptra eMarketing; it has deployed everything except the call centre suite," said Peter Frielick, VP Marketing for South Asia Pacific, NCR. Let us now look at how HDFC Bank integrated and stitched together the three self-service channels with the Aptra eMarketing software. We have been powered by the data warehousing, data mining, modeling and analytics abilities and have structured data in the CRM to implement this software."

"The major benefits from the implementation will be saving about 40 percent of the transaction time at the ATMs, ability to personalize communication via self-service channels enabling active engagement with the customer, which further enhances the ability of the CRM for analytics," NCRs Aptra eMarketing software offers the customers of various banks the option of personalising their favourite transaction on the ATM, which as per company claims reduces transaction time by nearly 40 percent. The ATM channel has been identified as the most preferred banking channel for customers across the globe and the same is reaffirmed in the case of HDFC Bank. Of all the transactions that are recorded by the bank, 84 percent are carried out through direct banking channels. Targeted messaging service is yet another important feature of this software, which when integrated with HDFC Banks CRM technology and analytics capability, will allow the bank to filter each customers profile and offer them products and solutions that are relevant to them. This service will be non-intrusive as a banks representative will only reach out to the customer if they evince interest in a particular product or service. Thus, HDFC Bank will be able to better understand the needs of its customers and offer them products and services most appropriate for them.

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APTRA eMarketing is customization and CRM software with in-built Personalization and Targeted Messaging capabilities. This software can be easily integrated with the existing back-end and front-end interface system of a banks ATM network. NCR will be deploying the APTRA eMarketing software across all HDFC Bank ATMs in the country in a phased manner. Successful roll outs have already been completed across the banks ATMs in Pune, Nash and Ahmednagar.

More focused towards priority banking: portfolio management services : Portfolio Management : technique to retain profitable customers

HDFC Bank Imperia Banking HDFC Bank Imperia Premium Banking programme is designed for the royalty of today you. It seeks to enhance the exclusivity that you are accustomed to and pampers you with services that others can only dream about. Be it a dedicated Client Relationship Manager, customised investment advisory or exclusive privileges, Imperia takes care of every little detail to ensure a banking experience like no other HDFC Bank Preferred Banking If you expect more from everything, even your bank, we invite you into the world of exclusive banking. Where you will never again have to wait to be served. With our HDFC Bank Preferred Programme, your comfort always comes first. Ideal for seasoned professionals or businessmen, this programme will provide you with a banker dedicated to take care of all your banking and investment needs. It also means you get preferential rates on various banking products and other exclusive benefits HDFC Bank Classic Banking If you want to experience banking beyond the ordinary, our HDFC Bank Classic Programme is just for you.

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Becoming an HDFC Bank Classic customer entitles you to a host of benefits, including a bouquet of preferentially priced products and specialised Investment solutions

'Banks Are Investing In Customer-Facing Technologies Despite Crisis'

HDFC bank recently undertook a joint initiative with NCR to make its ATMs faster by embedding NCR's Aptra eMarketing software into the same. Biztech2.0 spoke to Pradeep Sen, managing director, NCR Corporation, India, to see how the companys software makes ATMs faster. How does HDFC Bank view such IT investments in times of recession? If one look at the last three quarters of this year, banks have continued to invest in customer-facing technologies that improve the consumer experience and increase loyalty. This technology also enables operational efficiencies and improvements in customer service. HDFC believe that the following factors will remain significant in 2009. - Core consumer deposits growth and retention remain the highest priority for retail banks - Retention, acquisition, customer service, and operational efficiency will garner the lion's share of capex and opex in 2009. - Self-service and consumer-facing technologies that enable the above will remain high on technology spending lists for global banks.

HDFC Banks advances shrink

Advances outstanding fell from Rs102,222.30 crore at the end of September to Rs98,784.17 crore at the end of December Till now it was ICICI Bank Ltd that was shrinking to safety. In the December quarter, HDFC Bank Ltd seems to have followed suit. The banks total customer assets , which includes advances, corporate debentures and the like, amounted to Rs100,682 crore as on 31 December, compared with Rs107,820 crore as on 30 September. Thats a contraction of 6.6% over the quarter.

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Advances outstanding fell from Rs102,222.30 crore at the end of September to Rs98,784.17 crore at the end of December. But the banks gross non-performing assets, or NPAs, still went up by Rs235 crore during the quarter to Rs1,911 crore. One reason for the spike in NPAs is the lower quality of advances of Centurion Bank of Punjab that merged with it. The banks balance sheet size, however, increased during the quarter. On the asset side, it was primarily because of higher investments. The bank was able to make a neat profit on the fall in interest rates during the period, with profit on revaluation and sale of investments at Rs232.1 crore during the December quarter, compared with Rs131.5 crore in the yearago period. Its deposits, too, rose substantially in the quarter (8.3%). HDFC Banks results for the December quarter are for the merged entity, while the results for the year-ago period are for HDFC Bank before the merger, which makes them not comparable. A better option would be to contrast September quarter results, which also include Centurion Bank, with those for the December quarter. Seen from that perspective, HDFC Banks net profits are up 44.8% in the December quarter, compared with 43.3% in the September quarter. But net revenues (net interest income plus other income) rose at a far more sedate pace (37.9%) than in the September quarter (52.6%). So, how come growth in net profits was so much higher, on a year-onyear basis, in the December quarter? The main reason is that operating expenses rose at a much lower rate during the December quarter. Operating expenses were 50% of net revenues, compared with 55.3% of net revenues for the September quarter. Loan loss provisions amounted to Rs465.4 crore against Rs337.3 crore during the September quarter. Net interest margin has been higher at 4.3% in the December quarter, compared with 4.2% in the September quarter. This has happened in spite of a lower proportion of low-cost current and savings accounts. The bank management says that this was a consequence of the bank not chasing bulk deposits. They also say that the fall in the CASA (current account, savings account) proportion was on account of high growth in fixed deposits last quarter and this rate of growth is expected to come down in future. What lies ahead? The bank management says the negative growth in advances during the quarter was a one-off, the result of the liquidity crunch. Next fiscal, the management

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expects total bank credit to grow by 17-20% and HDFC Banks loan growth has traditionally been about 5-6 percentage points higher than growth for the system. Margins are likely to revert to the 4-4.2% range. But bad debt is likely rise, not only for advances made by Centurion Bank but also in HDFC Banks own small and medium enterprise portfolio. The banks strategy of going slow on growth is the right one in the current environment. Returns from investments will help cushion the slowdown in advances, but much depends on the efficiencies that the bank is able to squeeze out of its operations and on the extent to which bad loans increase.

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HDFC Bank using Customer Retention Strategies

With bad economy, HDFC Bank has come out with well tailored customer retention strategies. Though not known to be as aggressive as ICICI Bank, HDFC Bank has now started to focus more on existing customers. This is done more in order to prevent existing customers from switching accounts. Last morning I got a call from a lady who told me that she has been assigned to my account based on the balance I maintain. So for my account 1) All charges has been waived off 2) Services like locker, de-mat etc would now be charged at 50%. Would let me know in case it can be waived off completely 3) The charges on my debit card have been taken off. 4) Gave her number to contact regarding any service This happened not only for my high balance account but all 4 accounts which my wife, brother and father maintain. I was particularly moved by the way they waived off all charges and converted my account to a classic account. While they have little relationship with HDFC but they were much ready to discuss the home loan stuff and wanted to help on that front too. I see this more as a welcome move at the time when finance markets has to get down to the basics i.e. look after their existing customers. I am sure others would now follow suit and ultimate beneficiary would be the customer. Everyone must recall how last year people shifter tomes of money from private banks to public ones like SBI. Though too late, these banks have started to reposnse.

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Incidents supporting the success of strategies adopted by HDFC Bank:

Tuesday, February 17, 2009

HDFC bank from India the biggest gainer among top 500 financial brands
Indian banks have positioned itself amongst the worlds top 500 financial brands amidst the tight financial crisis. Around 19 Indian banks have positioned themselves especially at the time when global financial brands staggered due to tight financial crisis. In terms of brand value the top 500 banks lost around $218.1 billion (about Rs10.8 trillion) which means a 32 percent drop over the past year, while their market capitalization slumped by 51 percent to $3.9 trillion. In comparison to the previous year's list around 209 banks have been out positioned as they became victim of the recession in U.S., Europe and Japan. From India HDFC Bank had turned out to be the biggest gainer. According to the Economic Times HDFC bank brand value rose by $243 million from 2007 to $611 million in 2008, and it positioned to 151 in the league table in 2008 from 236 in 2007. "Emerging market brands have significantly outperformed world brands in 2008. Many of the best known developed world banks have died in 2008. Some are walking dead awaiting a silver bullet before they finally go. Governments hold the gun," said David Haigh, CEO of Brand Finance. Axis Bank has positioned itself at the 267 position while Kotak Mahindra Bank occupied 278 positions. However, State Bank of India (SBI) has been ranked 69 in the latest survey; it has come down from 60 a year earlier, with a brand value of $1.44 billion, down from $2.852 billion. SBI slipped down because its market capitalization fell to $9.83 billion from $12 billion. Besides them 13 new public sector banks from have made entry including Punjab National Bank, Bank of India, Canara Bank, Bank of Baroda, Union Bank of India, Indian Overseas Bank, Indian Bank, Power Finance Corporation, Oriental Bank of Commerce and Syndicate Bank. The list also includes the three associate banks of SBI viz. State Bank of Hyderabad, State Bank of Patiala and State Bank of Bikaner & Jaipur. While in the previous year, only six Indian banks could make in Brand Finance's list. The rankings were provided by the Brand Finance along with The Banker magazine. The

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rankings were used through a discounted cash flow (DCF) technique to discount estimated future royalties, at an appropriate discount rate, to arrive at a net present value (NPV) of the trademark and associated intellectual property: the brand value.

Wednesday, May 13, 2009 HDFC Bank awarded Best Retail Bank in India
HDFC Bank has won award for offering best retail banking services. On Tuesday bank released a statement in which it stated it has won The Asian Banker's Best Retail Bank in India award for the year 2008. In the statement it also said that bank has won the award for the third year in a row. The Asian Banker magazine reported that HDFC Bank has been awarded the Best Retail Bank in India because for its robust core funding, superior financial performance, sustainability and effective distribution channels amidst a highly-challenging environment. HDFC Bank Selected For Citrix 2009 Innovation Award By: Biztech2 Staff | Apr 30, 2009 HDFC Bank, Emory Healthcare and Tesco have been announced as the finalists for the 2009 Citrix Innovation Award. These finalists were chosen for their innovative use of Citrix virtualisation and networking solutions to simplify their IT businesses. The three finalists will be recognised at the upcoming Citrix Synergy 2009 conference, to be held at the MGM Grand Hotel in Las Vegas from May 4-7, 2009, for the way they used Citrix technology to simplify IT, transform their businesses and better serve users. HDFC Banks Journey HDFC Bank is Indias second largest private bank with more than 37,000 employees, 1,400 branches throughout India and approximately $3 billion in revenue. HDFC Bank used Citrix solutions to cut system installation time at new branch locations to three working days from 10 working days, enabling more rapid branch expansion and a 30 percent reduction in IT expenditures. Using XenApp and Citrix NetScaler, key components 45

of the Citrix Delivery Center, HDFC Bank is continuing to expand delivery of commercial banking services to Indias underserved geographical areas that lack traditional communications infrastructure. Specifically, the company used XenApp to deliver 45 core banking, treasury and cash management applications to branch employees. To load balance Web servers for high availability, and to optimise delivery of its Web applications, including the key Internet banking solution for customers, HDFC Bank installed NetScaler appliances. NetScaler was chosen for its ability to provide a high level of security and protection against Internet threats, a vital feature for customers sharing financial information. Emory Healthcare, HDFC Bank and Tesco were chosen for their use of virtualisation and networking technologies as a way to gain competitive advantage, expand their businesses into new markets utilising state-of-the-art IT architectures. The 2009 Innovation Award winner will be announced live at Citrix Synergy 2009.

Boosting competitiveness through innovation Taking the current recession as an opportunity to innovate, Indian CIOs are using this period to demonstrate the ability and potential of IT to transform business. Take for example Indias second largest private sector bank, HDFC Bank. The bank has used this period to sharpen its focus on improving the quality of its assets. The IT team at HDFC Bank has worked very closely with its Credit Risk department to grow the Retail Credit business while maintaining the portfolio quality through a stringent credit policy administration. HDFC Bank has used technology effectively to make this happen. To standardize norms of providing credit rating, the bank has decided to template the credit policy implementation which will impact credit underwriting and credit buying by more than 300 credit officers supporting over 1400 plus locations. Mittal, the bank's Executive VP for IT, clarifies that while the loan origination workflow and retail credit & credit cards application processing systems already had interfaces with internal positive and negative De-duplication systems and credit bureaus for bureau reports, the decision to use a template will remove the dependency of 'different

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interpretations by different credit officers of the same bureau' by making the 'bureau score' available in a straight through manner to officers at the credit underwriting stage. Says he, A score is a score and is not subject to interpretation; the action is fixed for a range of the score. In the next couple of months, the team will improve this process further, by giving an internal application score available to this process, followed by a behavioral score in the months to come. These initiatives are under various stages of implementation, and have already crossed the concept and approval stage. The asset quality of HDFC Bank, which is said to be one of the best in the Indian banking space, is set to improve further, with these initiatives.

Another example of innovation by HDFC Bank is a feature called Customer Power, which allows the customer to choose and register any specific withdrawal transaction as their favorite transaction. This has reduced the number of screens and clicks from the earlier nine to five now for an end-to-end ATM withdrawal transaction session. Says an excited Mittal, This initiative has made our ATMs 40% faster, and will result in our ATMs creating more transaction capacity without investing in more ATMs in the same location. The customer too benefits from reduction of queues and reduced turnaround time for withdrawing money. This feature will be available at over 1600 HDFC Bank ATMs by the end of March 2009, up from the 300 or so that it has already been rolled out to. With focused initiatives backed by technology, Mittal believes that the bank can maintain the retail credit growth at around 24% and upwards.

Using IT to boost market share HDFC Bank is betting big on its analytics to enhance its decision-making capability. Anticipating early, in first quarter of 2008-09 fiscal, we ran a pilot to take database & analytical marketing to the next step, through event based marketing. We generated double the committed actual revenue from the pilot, explains Mittal, on how the bank has successfully used technology to drive market growth. The bank has now successfully commercialized 40 such event-based marketing triggers, which run multiple programs

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during the day. With the immense success of this campaign, the team is now expanding this capacity to over 200 triggers, which will result in approximately 500 odd daily eventbased campaigns to reach specific customers. Buoyed by the success, the bank will now allocate at least 25% of the fresh investment budget to create business or revenue growth through innovative solutions such as event-based marketing, text-mining-based intelligent call or e-mail routing for supporting customer service groups.

As the initiatives of these technology savvy organizations show, it is important to keep on investing in technology to improve efficiencies which is avoided by most organizations in a slowdown. IT is a catalyst for growth, and any investment made in IT is bound to help organizations navigate the choppy waters of the current environment with more clarity and direction. Wednesday, March 4, 2009

HDFC Bank launched a unique scholarship scheme for school children

HDFC Bank leading private bank in India has launched a scheme HDFC Bank Meritus scholarship. The scheme is first of its kind related to education program. The aim of the scheme is to cover students of class 4 to 9 across the country and to shortlist the best 5000 students for an educational scholarships amounting to Rs 1.5 crore per year using various academic and non- curricular criteria. Bank has launched this program in alliance with Horlicks. The HDFC Bank Meritus Scholarship programme is a motivating program, which look for rewarding all-round excellence among students and help add to their overall development. The awardees from all over the country would receive a scholarship ranging from Rs.2, 500 to Rs.10 Lakh. Publicizing this first of its kind scholarship program, Group Head, HDFC Bank Rahul Bhagat, notified, This initiative emphasizes the values our Bank stands for. It is a small contribution we are making towards the nation by facilitating young India in its quest for excellence. We are confident well play the role of mentors to these bright children for 48

years to come, and help them create an India that is better, more educated, and, more prosperous. Parents have to fill in the registration form available in respective schools to get their wards registered in the scheme. Otherwise, one can also register online by visiting the bank website www.hdfcbank.com/meritus. The last date is February 22, 2009 for submitting the registration form. One can see all the details of the program on the bank website. .Bank will select the final 5000 awardees on the bases of the final round scores, extracurricular achievements and academics. To make the selection of scholarship awardees completely fair, an independent panel of qualified judges will select the scholarship awardees. Tuesday, February 10, 2009

Man behind HDFC Bank incredible growth- HDFCs Aditya Puri

The Indian Inc had go through very tough time in the year 2008 with major economies in recession. The inflation was at peak and Sensex had dipped, for many it made difficult to sustain. Only few were able to keep up with situation. HDFC Bank was the only bank to be able to show steady growth, while some of its competitors got trapped in the sub prime mess. The bank continued its climb high. In the third quarter the bank demonstrated a 45 per cent jump in its profits, incredible when banks around the world were thawing out. HDFC Bank is having the largest branch network of over 1,400 among all private sector banks - thanks to the smooth acquirement of Centurion Bank of Punjab. Aditya Puri while in process of making his bank into world class one, carefully managed risks even though being called a conservative sometimes.

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His insight is being praised today with the global economy in chaos. Amid 2009 is also expected to be a difficult year for businesses worldwide, the industry will be looking at Puri for leadership.

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Comparison between priority banking at HDFC Bank & privilege banking at ICICI Bank:

HDFC Bank's Imperia Programme is the royal decree that enhances the exclusivity that you are accustomed to. It makes you feel special at every step, pampering you with services those others can only dream about. Imperia goes beyond the obvious, rises above the expected, so that the whole world can see, that even today, the grandeur and magnificence of royalty is alive and well. We welcome you to a world like no other. The Benefits Personalized Attention

Imperia Client Relationship Manager Your prosperity and peace of mind are your Imperia Client Relationship Manager's main concerns. They will effectively take care of your financial needs whether it is expert investment advice, or having a demand draft issued.

Investment Advisory Services

Investwise Our Investment Advisory Services not only protect your wealth, but also advise you on how to make it grow. Our range of services include: 1. Client profiling

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2. Portfolio structuring and ongoing portfolio reviews 3. Financial planning and asset allocation 4. Research reports

Private Banking Services This programme takes you to the realm of customized and comprehensive investments advise across diverse asset categories, helping you make the choice that's just right for you. A highly trained personal advisor is assigned to you as a one point contact, guiding you and attending to all your investment related needs such as Direct Equity advisory, Derivatives of equities, Portfolio management services and so on.

Exclusive privileges At HDFC bank we understand your preference for finer things in life. Which is why we would like to engage you in more than just banking with us. Enjoy the host of privileges, designed exclusively for you.

Exclusive Imperia PhoneBanking Service The Imperia Phone Banking service gives you the freedom to do almost anything over the phone - balance enquiry, loan-related queries, bill payment and lots more.

HDFC Bank EasyShop Imperia Debit Card You can almost carry your entire kingdom with you wherever you go, thanks to the HDFC Bank EasyShop Imperia Debit Card. It offers you wide range of benefits like enhanced limits, cash back and much more.

Financial Services Your affairs of state as well as your personal comfort are important to us. All your banking related needs are taken care of, quietly and efficiently through a wide range of financial services like:

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Loans at Preferential Rates Customised Business Solutions Hassle - free Foreign Remittances Gold Bars at Preferential Rates

Banking Convenience The Imperia programme is designed to make banking a pleasure for you. And so we like to pay attention to every tiny detail to make banking a pleasure for you via benefits like:

Combined Monthly Statements for your savings, current and fixed deposit accounts Payable At Par Imperia Cheque Book Free Self/ third party cash deposit at non home branches Sweep-In Facility on your savings accounts Waiver on a host of service charges

Anytime, Anywhere Banking The world is your playground, and we're there to ensure you always have an unfair advantage, through an enviable Branch and ATM Network, and state-of-the-art e-Age banking Services.

HDFC Bank Branch Network HDFC Bank ATM Network Free e-Age Banking

Other Privileges At HDFC Bank, we understand your preference for finer things in life. Which is why we'd like to engage you in more than just banking with us. We look forward to enjoying your company at exclusive events, bearing in mind your personal preferences on

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cultural activities, and you can expect to keep abreast of latest trends in fashion, travel... even the world of finance through our monthly magazine that offers you all this and much more Eligibility Criteria Membership to the HDFC Bank Imperia Programme is by invitation only. To be eligible for the exclusive benefits you need to:

Hold at least one Savings Account, sole or joint account, with HDFC Bank. Maintain a minimum Average Monthly Balance of Rs.30 Lakhs across all your Savings and Fixed Deposit* accounts. OR Maintain an Average Quarterly Balance of Rs.10 Lakhs in your Savings account

The requisite balance can be maintained over your accounts and over those of your immediate family members. *The tenure of the Fixed Deposits should be at least six months. **Entry into the Imperia Programme is at the sole discretion of the Bank. HDFC Bank reserves the right to change the benefits / services offered as part of the programme.

Welcome to HDFC Bank Classic - a whole new world of banking benefits exclusively for you.

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As an HDFC Bank Classic customer, you and your family are now entitled to a host of benefits, including a bouquet of preferentially priced products and specialised investment solutions. So go ahead and unlock the true value of being an HDFC Bank Classic customer. Our way of saying...Thank You. Exclusive Benefits Classic EasyShop Gold Debit card Credit Cards Locker Facilities HDFC Securities e-Broking Account Monthly Statement BillPay InstaAlert Free Transactions on Non HDFC Bank ATM Loans at Special Rates Forex Service Charges Convenience e-Age Banking

Classic EasyShop Gold Debit card As a Classic customer, you can avail a Classic EasyShop Gold Debit card for Free without any annual charge this entitles you for an enhanced limit of Rs. 50,000/- per day on ATM withdrawals and Rs 50000/- when you use the card at a merchant establishment.

Credit Cards As a Classic customer, we are proud to offer you a life time free HDFC Bank Credit Card which offers you exclusive and preferential benefits, just one more way in which we thank 55

you!

Locker Facilities You can avail of a locker at any branch in the country at a 50% waiver on annual locker rental rates. * * Subject to availability

HDFC Securities e-Broking Account Enjoy the convenience of e-Broking through the HDFC Securities Trading account. Contact your Branch Manger for details on special pricing offered exclusively to you.

Monthly Statement It's more convenient than ever before to track your money with the Bank. As an HDFC Bank Classic customer, you will receive a statement every month. Your monthly statement will provide you with details of all CASA and FD accounts, where you are the principal account holder.

BillPay Leave it to us to take care of your bill payments with HDFC Bank BillPay, and take the hassle out of utility bill payments. You are entitled to a waiver on annual BillPay charges of Rs.25/- as long as you remain an HDFC Bank Classic customer.

InstaAlert You can opt to be kept informed of select debit and credit transactions on your account by registering for our InstaAlert facility. You can get these alerts through an SMS sent to your mobile number (which needs to be registered with us), or through an email sent to your 56

email ID (which, again, needs to be registered with us). In addition, on registering for the InstaAlert facility, you will also be kept informed each time you use your Debit Card at a merchant establishment.

Free Transactions on non-HDFC Bank ATMs If you transact on non-HDFC Bank ATMs, the charges for balance enquiry and cash withdrawal will be waived. You can avail of this benefit on transactions on any non-HDFC Bank ATM (Visa/ MasterCard/ Euronet/ State Bank of India/ Andhra Bank) across the country.

Loans at Special Rates HDFC Bank Classic customers are entitled to enjoy reduced pricing on select loan products.

Forex Just inform your Branch Manager and your currency conversion transactions can earn the benefit of an improvement of 5 paise over the day's card rate, helping you save money when you're buying currency or earn money when you're selling currency-either way...you win!

Service Charges As long as you are an HDFC Bank Classic customer, you will not be charged any service charges for not meeting the minimum Average Quarterly Balance requirement in your accounts, or those of your family (provided these are also linked to your HDFC Bank Classic account).

Convenience You can enjoy real-time, online banking through our network of over 3275 ATMs in over 528 cities. 1412 branches and

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e-Age Banking Enjoy any time banking at your doorstep through Mobile Banking, Net Banking and Phone Banking, none of which you have to pay for!

Eligibility You can avail of these privileges as an HDFC Bank Classic customer if you maintain an account with us in your individual capacity and meet the following eligibility criteria. A minimum Average Quarterly Balance of just Rs.1 Lakh in Savings Bank account (this can be maintained across Savings Bank accounts of you and your immediate family (i.e. spouse/ parents/ children)) (OR) A minimum Average Monthly Balance of just Rs 5 Lakh in a combination of Savings Bank account and Term Deposit (this can be maintained across accounts of you and your immediate family (i.e. spouse/ parents/ children)).

Privilege banking at icici bank

Privilege Banking
At ICICI Bank, we value the trust which you have reposed in us, as your preferred banking partner. It is our great privilege to select valued customers like you and offer a host of exclusive benefits across multiple products and services, specially designed for you.

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Titanium Privilege Account Gold Privilege Account As good as Gold Silver Privilege Account Solid Silver Service Charges & Fees >>

Titanium Privilege banking :-features

It is our privilege to serve valued customers. In our constant endeavor to fulfill all youre banking needs and enhance exclusivity ICICI Bank launched Titanium Privilege Account - tailored to take care of your banking and investment requirements and status. This account offers a dedicated Branch Relationship Manager supported with a Phone Banking Relationship Manager. Below are the unique benefits that List you can enjoy with this account. Branch Relationship Manager supported with Phone Banking Relationship Manager. Priority processing at all ICICI bank branches and through customer care. A higher daily withdrawal and spend limit on a Titanium debit card. Free International Titanium Debit Card. Unlimited free access to any banks ATM throughout the country. Free usage of multi-city cheque book. Free physical monthly account statement. Anywhere banking. Complete waiver on DD/PO charges. Preferential rate on purchase of ICICI Bank Pure Gold. Preferential rates on purchase of foreign exchange with a complete waiver on commission charges. Discounted rates on safety locker charges. Nomination facility is available. Interest is payable half-yearly.

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Nomination

Nomination facility available for bank deposits. There can be only one Nominee for a deposit account whether held singly or jointly. A person legally empowered to operate a minor's account can file a nomination on behalf of the minor. Applicants can make nomination by filling up the Form prescribed under the Banking Companies (Nomination) Rules 1985. The nomination details can be changed during the subsistence of the account relationship by filling up the Form prescribed under the Banking Companies (Nomination) Rules 1985.

Eligibility Criterion
You can realize the benefits of a Titanium Privilege Account on the basis of your total relationship value (TRV) with us. You would need to maintain a TRV of between Rs. 5 lac and Rs. 10 lac and a quarterly average balance (QAB) of Rs.75,000. In addition to this, there is waiver of QAB charges, subject to FD of min. 3.75 Lac. The TRV consists of the following products either singly or jointly:

Balances in bank accounts Fixed Deposits Mutual Funds Bonds / Small Savings Investment portion of Life Insurance policies Alternate Products (Real Estate Funds, Private Equity Funds, Structured Products etc)

In addition to the above, if QAB falls below Rs. 75000, transaction charges will be applicable and charges will be levied as mentioned in table below

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QAB maintained in the account Rs.50,000/- =< QAB < Rs.75,000/Rs.25,000/- =< QAB < Rs.50,000/Rs.10,000/- =< QAB < Rs.25,000/QAB < Rs.10,000/-

Charges to be levied Rs. 150/Rs. 250/Rs. 500/Rs. 750/-

The QAB requirement is not applicable if you have a salary account with us. Subscription to Bank Account Statements by E Mail Monthly account statements by Email: You will receive the account statement in the first week of every month. Monthly email statements are absolutely free of cost. Quarterly account statements in the physical form: ICICI Bank will be providing you with account statements in the physical form on a quarterly basis. This will be provided free of cost.

Sr. No. 1 2

Frequency of Account Statement Monthly Quarterly

Mode of receipt E-mail Physical

Amount Free Free

Monthly physical statement will be issued only to TASC, Titanium Privilege, Wealth, GPC and Current Account Holders.

Gold Privilege banking

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Features
Payable-at-par chequebook at no extra cost The ICICI Bank International VISA GOLD debit card is a debit-cum-ATM card providing you with the convenience of acceptance at merchant establishments and cash withdrawals at ATMs. Money Multiplier Facility. Internet Banking is offered free of cost. Anywhere Banking - This facility entitles the account holder to withdraw or deposit cash across all ICICI Bank branches. Service charges are applicable. You can give us various types of standing instructions like transferring to fixed deposit accounts at regular intervals Nomination facility is available. Interest is payable half-yearly

Nomination

Nomination facility available for bank deposits. There can be only one Nominee for a deposit account whether held singly or jointly. A person legally empowered to operate a minor's account can file a nomination on behalf of the minor. Applicants can make nomination by filling up the Form prescribed under the Banking Companies (Nomination) Rules 1985. The nomination details can be changed during the subsistence of the account relationship by filling up the Form prescribed under the Banking Companies (Nomination) Rules 1985.

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Eligibility
The Gold Privilege Account brings to you exclusive benefits, especially created for valuable customers like you. The minimum quarterly average balance (QAB) requirement for Gold Privilege account is Rs.50,000. Non-maintenance of the required QAB in any quarter attracts a charge as per the following guidelines:

If QAB is between Rs.50,000 and Rs.25,000, charge of Rs.250 will be levied If QAB is between Rs.25,000 and Rs.10,000, charge of Rs.500 will be levied If QAB falls below Rs.10,000, charge of Rs.750 will be levied

Waiver of non-maintenance of QAB charges subject to FD of min Rs.2.5 lacs in the same CUST ID Non-maintenance of QAB charges is not applicable for Salary customers

Silver Privilege banking Features

The ICICI Bank International VISA debit card is a debit-cum-ATM card providing you with the convenience of acceptance at merchant establishments and cash withdrawals at ATMs

Money Multiplier Facility

Money Multiplier Feature

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The Money Multiplier feature gives you the liquidity of a Savings Account coupled with high earnings of a Fixed Deposit. This is achieved by creating a Fixed Deposit linked to your Savings Account providing you the following unique facilities.

Maximum returns - Your money is never idle. Creation of a linked FD ensures higher rate of interest on your Savings Bank Deposits. You can issue instructions through any channel such as the ICICI Bank Branch, ICICI Bank Phone Banking and ICICI Bank's Internet Banking for creation of Fixed Deposit(s) from the surplus funds in your Savings Bank Account (subject to a minimum of Rs. 10,000). The Fixed Deposits will be created in multiples of Rs. 5,000 for a tenure of one year or more as instructed by you.

Maximum Liquidity - You can withdraw the funds from your savings account through any channel such as the ICICI Bank ATM, ICICI Bank Internet Banking or by issuing a cheque. etc. All linked Fixed Deposits will be enabled for automatic Reverse Sweep in multiples of Rs. 5000 on a Last-In-First-Out (LIFO) basis when the balance in the Savings Account falls below Rs.10, 000. The amount reverse swept will earn interest rates at the applicable rate for the period that the deposit was held with the Bank. The remaining amount will continue to earn higher interest at the original rate applicable to the fixed deposit.

Auto Renewal - Under this facility, when your deposits fall due, the bank will automatically renew the principal and accrued interest for the same tenure as the original deposit.

Internet Banking is offered free of cost. Anywhere Banking - This facility entitles the account holder to withdraw or deposit cash across all ICICI Bank branches. Service charges are applicable. You can give us various types of standing instructions like transferring to fixed deposit accounts at regular intervals Nomination facility is available. Interest is payable half-yearly 64

Special Privileges
Your Silver Privilege account entitles you to select privileges and offers: Waiver of Multicity cheque payment for up to Rs.100,000 per month. Free and unlimited access (cash withdrawals and balance enquiry) to any Bank's ATM in the country using your ICICI Bank international silver ATM-cum-Debit card. Waiver of DD/PO charges for up to Rs.50,000 per day. Discount on annual fee for safe Deposit lockers. Preferential rates for Gold Coins. Better rates for Foreign Exchange Service. Special asset deals from time to time. * All the above offers are subject to change from time to time by the Bank without any prior information to the customer. ** All offers are non-negotiable and non-transferable. *** The above offers cannot be clubbed with any other offer.

Eligibility
The Silver Privilege Account brings to you exclusive benefits, especially created for valuable customers like you. The minimum quarterly average balance (QAB) requirement for Silver Privilege account is Rs.25, 000. Non-maintenance of the required QAB in any quarter attracts a charge as per the following guidelines:

If QAB is between Rs.25,000 and Rs.10,000, charge of Rs.500* will be levied If QAB falls below Rs.10,000, charge of Rs.750* will be levied*Waiver of nonmaintenance of QAB charges subject to FD of min Rs.1.25 lacs in the same CUST ID.Non-maintenance of QAB charges is not applicable for Salary customers.

Service fees & charges

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Silver Privilege (NonSenior Citizen) Available to Eligibility Minimum average quarterly balance Rs.25,000* Rs.50,000* All cities Resident Indian, >18yrs All cities Resident Indian, >18yrs All cities Resident Indian, >18yrs Min. Rs 5 lac as TRV** and Rs.75,000 as QAB Rs.150 per quarter if QAB is between Rs.75,000 and Charges for non minimum quarterly average balance Rs.500 per quarter, if QAB is between Rs.10,000 Rs.750 per quarter if QAB falls below Rs.10,000 Rs.250 per quarter if QAB is between Rs.50,000 and Rs.25,000 Rs.500 per quarter, if QAB is between Rs.25,000 and Rs.10,000 Rs.750 per quarter if QAB falls below Rs.10,000 Rs.50,000; Rs.250 per quarter if QAB is between Rs.50,000 and Rs.25,000; Rs.500 per quarter, if QAB is between Rs.25,000 and Rs.10,000; Rs.750 per quarter if QAB falls below Rs.10,000. Waiver of nonmaintenanace of QAB charges Cash Subject to FD of min Rs.1.25 lacs under the same CUST ID Unlimited Free of Subject to FD of min Rs.2.5 lacs under the same CUST ID Unlimited Free of Cost Subject to FD of min Rs.3.75 lacs under the same CUST ID Unlimited Free of Cost Gold Privilege (Non-Senior Citizen) Titanium Privilege (Non Senior Citizen)

maintenance of Rs.25,000 and

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transactions at base branch (branches in same city) Anywhere Cash customer or customers representative to the debit of the customers own savings Account at a non-base branch i.e. city Anywhere Cash deposit customers representative to the credit of the customers own savings Account at a non-base branch ATM Interchange Free Free Free Nil for the first cash withdrawal of a Thereafter in the month, Rs.5 per thousand rupees or part thereof, subject to a minimum of Rs.150 (Maximum withdrawal limit Self: Rs.50,000 per Rs.15,000 per day) Nil for the first cash deposit of a calendar the month, Rs.5 per thousand rupees or part thereof, subject to a minimum of Rs.150 Waived off. Waived off Waived off. (Maximum withdrawal limit Self: Rs.50,000 per day, Third party: Rs.15,000 per day) Waived off (Maximum withdrawal limit Self: Rs.50,000 per day, Third party: Rs.15,000 per day) Cost

Withdrawals by calendar month;

branch in other day, Third party:

by customer or month; Thereafter in

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(Transactions at Non ICICI Bank ATMs) Issue of DD drawn on ICICI Nil upto for D.D. up Nil upto for D.D. up to Bank by cheque/transfer Free Quarterly Statement Statement Free Quarterly Statement Free Monthly Statement Free monthly e-mail statement on request to Rs.50,000 per day Rs.100,000 per day Nil

Free monthly e-mail Free monthly e-mail statement statement on request on request

Debit Card Fees for first Account Holder Debit Card Fees for joint Account Holder Debit Card Cash withdrawal limit Internet Banking Mobile Banking Cheque Books Daily spending/withdrawal limit: 25,000/25,000 Free Daily spending/withdrawal limit: 50,000/50,000 Daily spending/withdrawal limit:1,50,000/1,00,000 Free Free Free Free, payable-at-par Rs.99 p.a. Nil Nil Rs.99 p.a. Nil Nil

Free Free Free Free, payable-at-par

Phone Banking Free Free Nil for 30 payableat-par cheque leaves in a quarter; Rs. 30

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for every additional cheque book of 15 leaves Charges for Multicity cheque payment Transactions at ICICI Bank ATMs Unlimited Free of Cost Upto Rs. 10,000 Cheque collection charges from upcountry locations (IBank branch) Rs. 50 per instrument. Rs. 10,001 to Rs. 1 lakh Rs 100 per instrument. Above Rs. 1 lakh Rs. 150 per instrument Upto Rs. 10,000 Cheque collection charges from upcountry locations (Non I-Bank branch) Rs. 50 per instrument. Rs. 10,001 to Rs. 1 lakh Rs 100 per instrument. Above Rs. 1 lakh Rs. 150 per instrument Cash branch in the Nil for the first three Nil for the first three transactions of a quarter; transactions at transactions of a Upto Rs. 10,000 Rs. 50 per instrument. Rs. 10,001 to Rs. 1 lakh Rs 100 per instrument. Above Rs. 1 lakh - Rs. 150 per instrument Upto Rs. 10,000 Rs. 50 per instrument. Rs. 10,001 to Rs. 1 lakh Rs 100 per instrument. Above Rs. 1 lakh - Rs. 150 per instrument Upto Rs. 10,000 Rs. 50 per instrument. Rs. 10,001 to Rs. 1 lakh Rs 100 per instrument. Above Rs. 1 lakh - Rs. 150 per instrument Upto Rs. 10,000 Rs. 50 per instrument. Rs. 10,001 to Rs. 1 lakh Rs 100 per instrument. Above Rs. 1 lakh - Rs. 150 per instrument Unlimited Free of Cost Unlimited Free of Cost Nil up to Rs 1,00,000 per month Free Free

quarter; Thereafter in Thereafter in the quarter, Rs. 60

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event of nonmaintenance of QAB Non-IVR calls to Customer Care in the event of nonmaintenance of QAB Cheque books in the event of nonmaintenance of QAB

the quarter, Rs. 60 per transaction

per transaction

Rs. 50 per call

Rs. 50 per call

Rs. 5 per cheque leaf for all cheque books issued during the quarter

Rs. 5 per cheque leaf for all cheque books issued during the quarter

Note: * This is applicable for customers who hold the Privilege Banking account August 21, onwards. Nonmaintenance of QAB charges not applicable to Salary customers For customers who hold the Privilege Account between April 10, 2008 and August 20, 2008 - The new minimum balance requirement and charges will be applicable October 1, 2008 onwards. - The current minimum required TRV for Gold Privilege Account is Rs.100,000 out of which min QAB requirement in savings account is Rs.50,000 - The current minimum required TRV for Silver Privilege Account is Rs.50,000 out of which min QAB requirement in savings account is Rs.25,000 - The current minimum required TRV for Blue Privilege Account is Rs.25,000 out of which min QAB requirement in savings account is Rs.10,000 - If the required minimum balances are not maintained for two consecutive quarters, Privilege Banking facilities will be withdrawn. - In addition to the above, If QAB falls below Rs.10,000, non-maintenance of QAB charge @ Rs.750 per

70

quarter is levied. These charges are not applicable for Salary customers For customers who hold the Privilege Account as on April 9, 2008 - The new definition will be applicable October 1, 2008 onwards. - The current minimum required TRV for Gold Privilege Account is Rs.100,000 out of which min QAB requirement in savings account is Rs.50,000 - The current minimum required TRV for Silver Privilege Account is Rs.50,000 out of which min QAB requirement in savings account is Rs.25,000 - The current minimum required TRV for Blue Privilege Account is Rs.25,000 out of which min QAB requirement in savings account is Rs.10,000 - If the required minimum balances are not maintained for two consecutive quarters, Privilege Banking facilities will be withdrawn. - No non-maintenance of QAB charges applicable ** The Total Relationship Value (TRV) consists of the following products either singly or jointly - Balances in bank accounts - Fixed Deposits - Mutual Funds - Bonds / Small Savings - Investment portion of Life Insurance policies - Alternate Products (Real Estate Funds, Private Equity Funds, Structured Products etc) The above investments should be through ICICI Bank. Service tax @ 10.30 % (as per Govt rules) W.e.f. 24-Feb-09 is applicable over and above charges indicated above. The charges indicated above are subject to periodic revision.

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Analysis
In case of priority banking at HDFC bank vs privilege banking at ICICI bank ,following are the main noticeable points regarding the services:-

HDFC Bank maintained with AQB than ICICI Bank. HDFC Bank charges cut are less than ICICI Bank. HDFC Bank offers are more attractive to customer than ICICI Bank. HDFC Banks offers more tailored services than ICICI Bank.

Swot Analysis: HDFC BANK

STRENGTH WEAKNESSES

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Right strategy for the right products.

Some gaps in range for certain sectors.

Superior customer service vs. competitors.

Customer service staff need training. Processes and systems, etc Management cover insufficient. Sectoral growth is

Great Brand Image Products have required

accreditations. High degree of customer

constrained by low unemployment levels and competition for staff time with image of home loan lender

satisfaction. Good place to work Lower response

efficient and effective service. Dedicated workforce aiming at making a long-term career in the field. lender image of home loan

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Opportunities

Threats

Profit margins will be good. Could extend to overseas broadly. New specialist applications. Could seek better customer deals. Fast-track basis. career development

Legislation could impact. Great risk involved Very high competition prevailing in the industry.

Vulnerable to reactive attack by major competitors

opportunities on an industry-wide

An applied research centre to create opportunities for developing techniques to provide added-value services.

Lack of infrastructure in rural areas could constrain investment.

High volume/low cost market is intensely competitive.

COMPARATIVE ANALYSIS FROM MARKETING VIEW POINT wrt ICICI BANK:

HDFC Bank and ICICI Bank-are following very different strategies for growth.

To be sure, growth is the single-minded objective for both, but the game plan to achieve that growth couldn't be more different.

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For instance, right from start, HDFC Bank's focus has been margin-led growth. ICICI Bank on the other hand is obsessed with volumes and market share. In the 13th BTKPMG study on India's best banks, HDFC Bank takes pole position, thanks largely to consistency of performance over the past few years. ICICI Bank has emerged as the fastestgrowing bank in the survey. As far as scores go, HDFC Bank tallied 2,487.50, edging out ICICI Bank which follows close behind with 2,453. Whilst both banks ran neck-and-neck on parameters like operating profit growth and fee income to total income, what tilted the scales in HDFC Bank's favour was the quality of earnings ranking, where it comes in fourth, as against ICICI Bank's 33rd position.

Strengths and weaknesses of the two banks. ICICI BANK STRENGTHS Strong balance sheet Expanding international and rural business Well-established subsidiaries in life and non-life insurance and AMC business Strong bench-strength WEAKNESSES Frequent capital dilution Lesser share in low-cost deposits, still to fix liability mix Large retail portfolio may breed NPAs going forward No promoters, shareholding quite scattered

HDFC BANK STRENGTHS Large share of low-cost deposits, higher net interest margin Better quality of assets, NPA of 0.4 per cent Free float available, FIIs can buy its stock Higher profitability WEAKNESSES Marginal international presence 75

Not very aggressive in M&A space, growing only organically Possible takeover target

While HDFC Bank maintained its best bank status for the fourth year in a row, ICICI Bank has pole-vaulted from 13th position in the 2005 ranking to the runners-up slot in 2006. A section of market analysts feels it's unfair to stack up the two banks against each other, as ICICI is more than three times HDFC's size, which makes it difficult to compare their growth rates. Bank too is extremely keen to borrow overseas, and thereby also play a role in funding India Inc's overseas acquisitions and capacity expansions. Whilst ICICI Bank may be a step ahead on the overseas front, the two are running in tandem back home with their strategies, not just in the cities but in semi-urban and rural India too. HDFC's game plan is two-pronged: To offer a better customer experience in the densely banked areas even as it explores new territories. ICICI Bank doesn't have any such qualms, as it goes about aggressively chasing retail growth with the 300-million strong middle class as its target customer base. Yet, one way the bank is spreading its risks is by moving away from the big cities, into smaller towns and villages with a low-cost franchisee model (as against putting up higher-cost branches). In the meanwhile, HDFC Bank has lined up products for the rural masses. ICICI Bank trails HDFC Bank on the quality of earnings and quality of assets fronts, it may be because it still has to get its liability mix right, thanks to the legacy it inherited from ICICI before it was merged into bank. Even today, a substantial portion of its liability continues to be corporate deposits, whereas for the banking system it is quite the reverse. HDFC has no such issues and in fact has the

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highest share of casa (current account and saving account) in the Indian banking system, at 55 per cent. ICICI Bank's casa share is in the 20-25 per cent region. HDFC Bank enjoys a superior price-earnings ratio (P-E), of 21 on 2007-08 earnings as against a P-E of 18 for ICICI Bank. HDFC Bank's return on equity is better; also foreign institutional investors can buy stock as free float is easily available.

India Private Banks Comparison: HDFC a Clear Winner Over ICICI

The Banking sector in India - even private banks - has seen some compelling valuations of late. Like me, if you are looking to identify the best pockets of value, (and looking at say HDFC Bank (HDB) or ICICI Bank (IBN), both of which trade publicly in the U.S.), additional perspective can be gained from a quick peer comparison against the most important metrics for analysing bank stocks. Let's see how the private banks peer comparison throws up the best and the worst managed in India. For good measure, I have

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deliberately included PSU State Bank of India as well as a few smaller banks.

Strong Capital Base A strong capital base is the number one issue to consider before investing in a lender. Almost all the private banks managed to raise adequate funds in 2007 and thus maintain Capital Adequacy ratios in FY08 well above the mandatory nine percent stipulated by RBI. None of the banks seem to be very highly leveraged either, with SBI being on the higher side. (An average bank has a Financial Leverage of 12x as compared to 2x or 3x for a nonfinancial company.)

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However the NPA (Non-Performing Assets) levels tell a story as well. ICICI Bank (IBN) stands out with the poorest record on NPAs, and given the overall deteriorating credit quality scenario (due to the slowing economy), should give investors cause for concern. On the flip side, Yes Bank in particular, Axis Bank, and HDFC Bank (HDB) are managing NPA levels nicely. The provisioning coverage ratio (Provision Expense/Gross NPAs) reveals much more. While HDFC Bank (HDB) lives up to its conservative image with a high provision cover of 241 percent, ICICI Bank (IBN) has the lowest provision coverage at ~54 percent, lower than even PSU State Bank of India. However the best record here belongs to the smallest, Yes Bank. Return on Equity (RoE) and Return on Assets (RoA) These metrics are the de-facto standards for gauging bank profitability. Generally investors should look for mid- to high-teen returns on equity. It is easy to boost a bank's earnings in the short term by under-provisioning or leveraging up the balance sheet, which can be unduly risky over the long term. For this reason, it is good to see a high level of return on assets as well. For banks, a top RoA is in the 1.2 to 1.4 percent range There are only three levers for boosting ROE: Net Margin, Asset Turnover and Financial Leverage. Again, among all the private banks, ICICI Bank (IBN) has the poorest record. As we can see, it is the dismal net margin (~5% ) that has resulted in such poor Return on Equity (~8%) and Return on Asset (~0.7%) ratios. Again, Yes Bank shines bright with the best RoEs and the best ROAs followed by HDFC Bank (HDB), closely followed by surprisingly, State Bank of India. Efficiency Ratio The efficiency ratio, or cost to income ratio, measures non-interest expenses, or operating costs, as a percentage of income. Basically it tells you how efficiently the bank is managed. Many good banks have efficiency ratios under 55% (the lower the better). Again, Yes Bank presents the best record on cost efficiency among the private banks. What is remarkable is the way Yes Bank has shown significant improvement in cost-efficiency levels over the years. From a high of 83% in FY06, Operating costs as a percentage of

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Total Income has progressively come down, year on year, to 29.5% in FY08. State Bank is the biggest surprise here, coming in second at ~36%, with Axis Bank following closely behind. Both HDFC Bank (HDB) at 48% and ICICI Bank (IBN) at 51% are way behind the others in this sector. Net Interest Margins (NIM) Another simple measure to watch is net interest margin, which looks at net interest income as a percentage of average earning assets. Track margins over time to get a feel for the trend. This is where HDFC Bank's (HDB) NIM record is unmatched. It's the reason why it is valued so highly. A consistently high NIM of over 4% for several years takes some doing, especially in the rising interest scenario that we witnessed in the last few years in India. What is also notable is how Net Interest Income as a percentage of Total Assets has improved over the years. Axis Bank comes in a creditable second, followed by what is no longer a surprise, State Bank of India. Strong Revenues Historically many of the best-performing bank investments have been those that have proven capable of above-average revenue growth. Yes Bank has been growing at a scorching pace for the last four years, albeit on a much smaller base. This shows in the overall growth track record of over 225 percent CAGR over four years. What is also commendable is that Interest Income as a percentage of Total Assets has been steadily rising. FY08 levels are at 7.72%, beating HDFC Bank's (HDB) 7.6%. Other private banks like HDFC Bank (HDB) and Axis Bank have maintained a very decent growth rate in excess of 40%. ICICI Bank has also clocked a growth rate of over 44%. However that growth has come at the cost of rising NPAs and declining margins and profitability. Price to Book

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Because a banks balance sheet consists mostly of financial assets with varying degrees of liquidity, book value is a good proxy for the value of a banking stock. Also, many of the assets included in their book value are marked-to-marketin other words, they are revalued every quarter to reflect shifts in the marketplace, which means that book value is reasonably current. So the base value for a bank should be the book value. Any premium over that, investors are paying for future growth and excess earnings. Typically big reputed banks trade at 2x to 4x book value. Yes Bank is currently (Mar 30, 2009) trading at 1.12 Book Value, historically at its lowest levels in the last 4 years. Similarly on a price-to-earnings measure, it is quoting at 5x TTM earnings, again historically the lowest levels in 4 years. State Bank of India too is quoting at 1.05x Book Value. It is significant to note that the two banks - Yes Bank and SBI - have the best RoE records, with 18.34% and 16.78% respectively. With low P/B relative to their peers but with the highest RoEs, Yes Bank and SBI are potential bargains, but we will want to do some gold digging. P/BV and RoE have a very strong correlation for Bank stocks as mentioned in 1. Valuing Financial Services Firms Fig 216, pp 37-38 and 2. The Five Rules for Successful Stock Investing, Valuation -The Basics chapter, pp 130131 While we need to dig deeper to make sure, it is promising to see that Yes Bank in particular, and State Bank too, have impressive records on some of the most important metrics for bank stocks, as we have seen from the above Indian private banks comparison. Overall Verdict There might be some big concerns on derivatives exposures and other contingent liabilities that are not reflected in this snapshot. However, if you are to choose between the two U.S.-listed Indian banks, ICICI Bank (IBN) and HDFC Bank (HDB), HDFC Bank is the clear winner. It has grown at a similar 40% plus five-year CAGR to ICICI bank, maintaining high RoEs. In fact, it has the best RoA record, at 1.42%, among all Indian banks. Its NIM record is unmatched, and to its credit, it has proven conservative in managing and provisioning for NPAs. 81

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