A PROJECT REPORT ON BANK AS A FINANCIAL INTERMEDIARY WITH REFERENCE TO

SUBMITTED TO SINHGAD INSTITUTE OF MANAGEMENT IN PARTIAL FULFILMENT OF REQUIREMENT FOR THE AWARD OF PGDM FINANCE 2011-2013

BY GOLDY SHARMA

PROJECT GUIDE PROF. ALEKH PANDA

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ACKNOWLEDGEMENT

I would like to take this opportunity to convey my sincere thanks to the management of the Sinhgad Institute of Management; Pune .Who had allowed me to venture into this project. My special thanks and deep felt gratitude is due to PROF. ALEKH PANDA under whose kind endeavour and guidance has allowed me to carry this project. I am thankful to authority of HDFC BANK LIMITED for providing me an opportunity to work with them MR.HIMANSHU TONDON and MR. SURYA PRAKASH GUPTA Boost up my morale in the completion of my work. The support provided to me during my project was overwhelming and was conducive to work.

With a deep sense of reverence, I would like to express my whole hearted thanks and deep gratitude to my parents who have always been a source of inspiration of me. There everlasting cooperation smiling affection inspired me to zenith to what I am today.

Finally I am grateful to library and my batch mates who have extended their help and cooperation while doing the project and without whose help my endeavours would not have come true.

Goldy Sharma PGDM FINANCE (2011-2013)

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DECLARATION

I hereby declare that the project titled A STUDY ON BANK AS A FINANCIAL INTERMEDIARY AT HDFC BANK IN VARANASI is an original piece of research work carried out by me under the guidance and supervision of PROF. ALEKH PANDA. The information has been collected from genuine & authentic sources. The work has been submitted in partial fulfilment of the requirement of POST GRADUATE DPLOMA MANAGEMENT IN FINANCE of SINHGAD INSTITUTE OF MANAGEMENT for the academic year 2011- 2013.

Place:

Signature GOLDY SHARMA

Date:

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INDEX

CHAPTER 1) EXECUTIVE SUMMARY

Pg. no 1

2) LITERATURE REVIEW

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3) COMPANY PROFILE

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4) THEORETICAL & CONCEPTUAL BACKROUND

5) OBJECTIVE OF THE STUDY 6) SCOPE AND LIMITATION

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7) RESEARCH METHODOLOGY

8) DATA ANALYSIS AND INTERPRETATION 9) FINDINGS AND RECOMMENDATIONS 10) CONCLUSION

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11) BIBLIOGRAPHY

12) ANNEXURE

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EXECUTIVE SUMMARY This study is conducted as part of course curriculum of PGDM FINANCE, offered by the SINHGAD INNSTITUTE OF MANAGEMENT (2012- 2013). Training is considered to be essential as it interacts with happenings in the corporate sector. It is a matter of pride in having training at HDFC BANK LTD. This project covers the topic of A STUDY OF BANK AS A FINANCIAL INTERMEDIARY AT HDFC BANK IN VARANASI

This report begins with the introduction of HDFC BANK LTD. Followed by the introduction, research methodology, and findings the major role played by banking sector as financial intermediary &awareness towards its customer regarding product and services availed by HDFC BANK & data analysis, conclusion and recommendation and finally bibliography.

The research methodology adopted for the study is mentioned in a nutshell. The sample size of the study is 50 customers in Varanasi, after collecting the data; it was analyzed in depth by using appropriate research tools. Analysis part is followed by some findings about the research. The conclusion is made on the basis of the study and also the limitations and measures that should be adopted are mentioned.

Lastly some suggestions are given in the areas where HDFC BANK can upgrade their intermediarys services towards customer with trust

An attempt has been made to provide all relevant and important details regarding the topic to support the theoretical edifice with concrete research evidence.

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LITERATURE REVIEW Banks are the oldest and most important intermediaries in the financial system. They are short term institutions, borrowing from the public up to 3 to 5 years and lending to government private and corporate sectors for short term working capital or current expenditure and for term loans for project finance.. The banking system in India comprises of the reserve bank of India, commercial banks and cooperative banks and credit societies. The commercial banks are the premier institutional structure of the banking system. The principal function of these institutions is to satisfy simultaneously the portfolio preferences of the borrowers on one side and the lenders on the other. They mobilise resources from the savers in the form of deposits and extend credit facilities to borrowers in the form of loans, advances and securities. Loans and advances provided by these institutions can be categorised into short term funds and long term funds. However the traditional British banking practice, commercial banks provide more short term funds to the investors in industry and trade than long term loans REFORMS IN BANKING SECTOR Reforms in banking sector were started after Narasimham Committee on financial reforms (1991) has made its recommendations, most of which were accepted. During 1992- 1993, insurance sector reforms were started with the setting up of the R.N. Malhotra committee. Reforms in the financial sector regarding NBFCS were initiated with the setting up of a committee under the chairmanship of AC shah. In 1993-94 full provisioning of non performing Assets ( NPA) was introduced .special recovery tribunal was set up for recovery of bad debts of banks. In 1994-95 private sector banks were licensed for the first time since reforms started and six new private sector banks commenced operations. 49 regional rural banks were taken up for restructuring and revival. Banks were allowed to fix their own PLRs based on the bank deposit rates. Banking companies act was amended in 1994-95 to allow nationalised banks to access capital market. In 1995-96, private sector mutual funds were allowed into call money market and money market mutual funds were licensed to operate in money market. Refinance against government securities which was allowed from 1992 was withdrawn in 1996-97. In 1997, cooperative banks were allowed to participate in leasing and hire purchase activities . the cash reserve ratio ( CRR) and SLR on inter bank liabilities were removed. Licensing and registration with RBI by NBFCs and their regulation by the DOS of the RBI was started. Bank rate was activated as a signal of interest rate changes by RBI in 1997 and deposit rates were freed for medium and long term deposits.
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 Another development in 1996 -97 is the sanction by the RBI for the private sector local banks to be set up .by end march 1998 some 4 such banks were granted license in principle to be set up. The recent reforms , effected since 1992 in banking sector are briefly set out : Interest rate deregulation both in respect of deposits and advances. Bank rate is made flexible and intended to reflect the refinance rate of RBI as well as the branch mark rate for all other interest rates in the banking and financial sector. CRR and SLR were drastically cut down with the result that banks are left with larger discretionary funds for lending on commercial lines and improve the profitability of banks. Although the govt. continued to provide some budgetary allocation for capital restructuring of banks, they are now allowed to access the capital market funds directly. New private sector banks have been licensed to start business and were asked to maintain 100% provision by marking to market value their investment portfolio. Capital adequacy, income recognition and provisioning for bad and doubtful debts. Improve the loan delivery system by increasing the loan component of maximum permissible bank finance(MPBF) , which will ultimately replace the cash credit system. Greater autonomy for PSBs to operate as commercial lines and increase their profitability. Net interest spread of scheduled banks (interest income minus interest expended) has been showing a rise due to these reforms of the banking system. It was around 2.9% point in 2003-2004. TELEBANKING AND ELECTRONIC BANKING By telebanking, a customer can access the information about his account through a telephone call and by giving the coded personal identification number (PIN) to the bank branch. This facility is made available by some banks like SBI, Indian Bank, Andhra Bank etc .to selected branches of their .another facility is Automatic withdrawals and transmission of the cash balance data and other information about an Account in a number of branches of a Bank in a consolidated from through fax or telex. PAYMENT GATEWAY A payment gateway is third party network that acquires the transaction from an ecommerce portal and processes it through the banking or credit card system. It serves as a link between the banking network and the internet, as the public will have no access into the banking network. PAYMENT SERVICE

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A payment service is internet banking provided bank on a portal site of a merchant. Payment service is vendor and bank specific, it takes a transaction, then certifies it and routes it after securing it with encryption . SET Set is an encryption technology that helps protect the transfer of payment information over the internet. COMPONENTS OF BANKING The various components of e- banking are already available in banking sector. Many banks have been using e- banking components in isolation. Bank must gear up to create e- banking environment by using the required components in integrated banking software. Banks have to use integrated banking software technology for all their uses and achieve integration of their activities bank wise and of all banks together in the banking system.
Govt. agencies Corporat e units Individual & houseolds Service organisati ons

Business to business commerce ebanking

Inter connected e- commerce of options Emerging Scenario

Corporat e business

RBI

Bank Abroad

Bank in India

Bank branches

The interconnections of the banking sector involve: Commerce business to business involving payments on bank branches, Bank wise integration. All banking sector integration Receipts & payments & settlements. Fund transfer electronically.

Electronic payment and settlement system The RBI has announced in 2004 that they would set up a board for payment and settlement systems (BPSS), which would lay down the policies for regulation and supervision of settlement systems, comprising of both domestic and cross border systems. The real time gross settlement system (RTGS) was implemented by the RBI on March 2004.
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This system has about 94 participants, comprising of scheduled commercial banks and primary dealers, with an average daily turnover of Rs. 24000 core. By the year end of 2004 2005. The coverage is expected to be 3000 branches in 275 centres. PROGRESS OF IT IN BANKING The reserve bank has taken the led to propagate the I.T. tools in banks both for better customer service and improved efficiency and profitability in banks. The major initiative was taken by RBI is introducing mechanized cheque clearing facility through magnetic ink character recognition (MICR) technology. This lead to faster and safer cheque clearing through networking in banks. During the later half of nineties, the RBI has introduced the Negotiated Dealing System (NDS) for screen based trading government securities. The growth of ATM and sharing of ATM by a group of banks through networking and compatible computerization systems in banks was also achieved.

ELECTRONIC CARD BUSINESS The latest craze in banking using electronic media is internet banking. By visiting , the website of each bank , one can enter his key password and know the account balance and even pass his own credit and debit entries. Such internet banking facility is opened up by GTB, in December 1999 . The credit card base in India has grown from the level of 3.5 million in 1999 to 11 million by end October 2004. The plastic money is expected to account for 15% of all transactions in India by a decade next from just 1% at present. In the years to come, mobile phones will drive banking transactions. These mobile phones will be equipped with smart cards that are embedded with the banking and other information .instead of going to the bank ATM, all you do is to punch up your cell phone. This mobile phone banking facility is yet to come but the mechanics of linking the banking with cell phone is being worked out. WEB BANKING SOLUTIONS City bank has launched in January 2000 two new web based based corporate banking solutions in India, namely, speed collect 2000 and city commerce. These two products provide their corporate customers with essential link in the present day e-commerce environment- online information, financial settlement and reconciliation. VIRTUAL BANKING The provision of banking and related services is through extensive use of information technology without direct resources to the bank by the customer. The practices of banks have undergone significant changes in the nineties due to economic and financial reforms and the introduction of electronic technology in banking.
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The origin of virtual banking in developed countries can be traced back to the services with the installation of Automated Teller Machines.

Banks as Financial Intermediaries All financial institutions do or enable some form of intermediation. Some of them collect deposits, some others lend, while some others, such as Life Insurance Corporation [LIC], cater to the needs of insurance. Mutual fund organizations concentrate in pooling the resources from individuals, invest them in the market, and pass on the profits to the investors. Banks enjoy the benefit of being the only institutions through which the money can be transferred from one person to another and from one place to another. Therefore, banks become the constituent of the payment system of the economy. All other financial intermediaries at one point or other depend on banks and cannot work efficiently in their absence. Banks, because of their reach, trust of the people, and other roles that they play, have enabled them to emerge as the largest financial intermediaries of the world. By virtue of this, the economic prosperity of the economy as a whole and of different regions and industries depends upon the banks. Banks are able to lend a major portion of their deposits, and play the role of a financial intermediary and constitute the payment system because of the understanding that banks will honour the commitments that they have made to the people. If this trust is broken for any reason, the banks will not be able to survive. Failure of one bank will lead to the failure of other banks too because their role as a constituent of the payment system make them have substantial dealings with and dependence on each other. Isolation of a region or an industry can take place if banks lack interest. Not only those who are discarded suffer, but such an outlook may impact the economy as a whole. Therefore, banks being the largest financial intermediaries have a crucial role to play in achieving balanced growth of industries, regions, and the economy at large. Services offered by banks as financial intermediary 1. Deposit services 2. Loan or credit services 1. Deposit Services Banks accept demand deposits and fixed or time deposits. Demand deposits are repayable on demand while fixed deposits have a fixed maturity period and are repayable only after the agreed period. Since demand deposits are more liquid as compared to fixed deposits, the interest paid on such deposits is at a low rate or no interest is paid at all. Lower the liquidity, higher is the rate of interest. Therefore, longer the period of the fixed deposit, higher will be the interest that is paid.

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While demand deposits are cheaper in terms of the interest paid on them, the cost of maintaining demand deposit accounts is higher than that of fixed deposit accounts in view of the large number of transactions involved in demand deposits. The various products offered by banks within the deposit services are: Current accounts Savings bank accounts Fixed deposit accounts Recurring deposit accounts 2. Loan or Credit Services The products offered by banks within loan services are as follows:
o o o o o o o o o o o

Retail loans Personal overdrafts Credit cards Business/Corporate credit Working capital facilities Business card Post-sale finance or trade finance

ROLE OF FINANCIAL INTERMEDIARY Abstract Financial Intermediaries are performing various roles in addition to what they used to do earlier by innovating and upgrading themselves in many ways. Some of the important roles they are expected to perform in the 21st century is to help in the reduction of Poverty, Restructuring of firms in distress, Markets for firm's Assets and so on. Keywords Financial Intermediary/ Types of Financial Intermediary/ Need for financial intermediary/ Roles performed by financial intermediary/ Financial Intermediary for Poverty Reduction/ Markets for Firm's Assets/ Pension Funds Introduction The term financial intermediary may refer to an institution, firm or individual who performs intermediation between two or more parties in a financial context. Typically the first party is a provider of a product or service and the second party is a consumer or customer. Financial intermediaries are banking and non-banking institutions which transfer funds from economic agents with surplus funds (surplus units) to economic agents (deficit units) that would like to utilize those funds. FIs are basically two types: Bank Financial Intermediaries, BFIs (Central banks and Commercial banks) and Non-Bank Financial Intermediaries, NBFIs

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(insurance companies, mutual trust funds, investment companies, pensions funds, discount houses and bureaux de change).

Financial intermediaries can be :

Banks; Building Societies; Credit Unions; Financial adviser or broker; Insurance Companies; Life Insurance Companies; Mutual Funds; or Pension Funds.

The borrower who borrows money from the Financial Intermediaries/Institutions pays higher amount of interest than that received by the actual lender and the difference between the Interest paid and Interest earned is the Financial Intermediaries/Institutions profit. Financial Intermediaries are broadly classified into two major categories: 1) Fee-based or Advisory Financial Intermediaries 2) Asset Based Financial Intermediaries. Fee Based/Advisory Financial Intermediaries: These Financial Intermediaries/ Institutions offer advisory financial services and charge a fee accordingly for the services rendered. Their services include: Issue Management Underwriting Portfolio Management Corporate Counselling Stock Broking Syndicated Credit Arranging Foreign Collaboration Services Mergers and Acquisitions Detective Trusteeship Capital Restructuring ASSET-BASED Financial Intermediaries: These Financial Intermediaries/Institutions finance the specific requirements of their clientele. The required infra-structure, in the form of required asset or finance is provided for rent or interest respectively. Such companies earn
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their incomes from the interest spread, namely the difference between interest paid and interest earned. The financial institutions may be regulated by various regulatory authorities, or may be required to disclose the qualifications of the person to potential clients. In addition, regulatory authorities may impose specific standards of conduct requirements on financial intermediaries when providing services to investors. Role of Financial Intermediaries for Poverty Reduction Finding innovative ways to provide financial services to the poor so that they can improve their productive capacity and quality of life is the role of the financial intermediaries in the 21st century. Most of the poor live in the rural areas, and are engaged in agricultural activities or a variety of micro-enterprises.

The poor are vulnerable to income fluctuations and hence are exposed to risk. They are unable to access conventional credit and insurance markets to offset this.

Most formal financial institutions do not serve the poor because of perceived high risks, high costs involved in small transactions, perceived low profitability, and most importantly, inability to provide the physical collateral generally required by such institutions. About 95 percent of poor households still have little access to institutional financial services. Most poor and low-income households continue to rely on meagre self-finance or informal sources of finance. Providing efficient micro-finance to the poor is important for many reasons:

Efficient provision of savings, credit and insurance facilities can enable the poor to smoothen their consumption, manage risks better, gradually build assets, develop micro-enterprises, enhance income earning capacity, and generally enjoy an improved quality of life. Efficient micro-finance services can also contribute to improvement of resource allocation, development of financial markets and system, and ultimately economic growth and development. With improved access to institutional micro-finance, the poor can actively participate in and benefit from development opportunities. The latent capacity of the poor for entrepreneurship would be encouraged with the availability of small-scale loans and would introduce them to the small-enterprise sector. This could allow them to be more self-reliant, create employment opportunities, and, not least, engage women in economically productive activities. Micro-finance activities prove that poor households can and do save rather than borrow, and it is possible to successfully mobilize funds from poor households. Another important fact is that contrary to expectations, the poor are creditworthy and financial services can be provided to the poor on a profitable basis at low transaction costs without having to rely on physical collateral. Finally, micro-finance services contribute to the development of rural financial markets and to strengthening the social and human capital of the poor.

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There are many problems that should be resolved for the further development of microfinance in Poverty Reduction:

Policy environments in many developing countries are not favourable for the sustainable growth of micro-finance. In particular, interest rate ceilings and subsidized credit limit the ability of micro-finance institutions to provide services to the poor. Inappropriate and extensive intervention by governments in micro-finance undermines its efficient operation. Inadequate financial infrastructure is another major problem in the region. Financial infrastructure includes legal, information, and regulatory and supervision systems. In addition, most microfinance institutions do not have adequate capacity to expand the scope and outreach of services on a sustainable basis to potential clients. Specifically, they lack the ability to leverage funds, provide services compatible with the potential clients' characteristics, adequate network and delivery mechanisms, and so forth.

Financial Intermediaries as Markets for Firm's Assets

Financial intermediaries appear to have a key role in the restructuring and liquidation of firms in distress. In particular, there is rich evidence that financial intermediaries play an active role in the reallocation of displaced capital, meant both as the piecemeal reallocation of assets (such as the redeployment of individual plants) and, more broadly, as the sale of entire bankrupt corporations to healthy ones. A key part of reorganization under main bank supervision or management is the implementation of a plan of asset sales with proceeds typically used to recover bank loans. In Germany a function of banks during reorganizations is to "use bank contacts to facilitate a merger with another firm as a means of resolving the crisis". Knowing possible synergies among firms, banks can suggest solutions for the efficient reallocation of assets and of corporate control and that in several countries there is widespread anecdotal evidence, though not quantitative one, on this role of banks. Healthy firms search around for the displaced capital of bankrupt firms but matching is imperfect and firms can end up with machines unsuitable for them. Financial intermediaries arise as internal, centralized markets where information on machines and buyers is readily available, allowing displaced capital to migrate towards its most productive uses. Financial intermediaries can perform this role by aggregating the information on firms collected in the credit market. The function of intermediaries as matchmakers between savers and firms in the credit market can support their function as internal markets for assets. Intuitively, by increasing the number of highly productive matches in the credit market, intermediaries increase the share of highly productive second hand users in the decentralized resale market. This improvement in the quality of the decentralized secondary market reduces the incentive of firms to address financial intermediaries for their ability as re-deployers. However, by increasing the number of highly productive matches in the credit market, intermediaries create also wealthy buyers without assets and contribute to decrease the thickness of the decentralized resale market. This makes the decentralized market less appealing and increases the incentive of firms to use intermediaries as resale markets. When the quality improvement in the decentralized market is not too big and the second effect prevails, better matchmaking in the credit market supports the function of intermediaries as internal markets for assets.

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Role of Pension Funds as Financial Intermediaries Pension funds may be defined as forms of institutional investor, which collect pool and invest funds contributed by sponsors and beneficiaries to provide for the future pension entitlements of beneficiaries. They thus provide means for individuals to accumulate saving over their working life so as to finance their consumption needs in retirement, either by means of a lump sum or by provision of an annuity, while also supplying funds to end-users such as corporations, other households (via securitized loans) or governments for investment or consumption. We now assess pension funds relative to the various financial functions one by one, in order correctly to identify the role funds play in stimulating change in the financial landscape.

Clearing and settling payments: Pension funds have had an important indirect role in boosting the efficiency of the financial systems, by influencing the structure of securities markets. By demanding liquidity, pension funds help to generate it, firstly by their own activity in arbitrage, trading and diversification, secondly via the fact that liquidity is a form of increasing return to scale, as larger markets in which pension funds are active attract more trading, reducing costs and improving liquidity further. A third effect arises from funds' countervailing power as they press for improvements in market structure and regulation. These include deregulation and reduction in commissions, advanced communication and information systems, reliable clearing and settlements systems, and efficient trading systems, all of which help to ensure that there is efficient arbitrage between securities and scope for diversification. Provision of a mechanism for pooling of funds and subdivision of shares: Pension funds offer much lower costs of diversification by proportional ownership. Pension funds can also offer the possibility of investing in large denomination and indivisible assets such as property which are unavailable to small investors. Furthermore, pension funds reduce the cost of transacting by negotiating lower transactions costs and custodial fees. The direct participation costs to households of acquiring information and knowledge needed to invest in a range of assets, as well as in undertaking complex risk trading and risk management are reduced (although costs of monitoring the asset manager remain). The net effect is that individuals are likely to switch to pension funds from direct holdings of securities and from bank deposits. Provision of ways to transfer economic resources: Pension funds act in an unusual manner in this regard, in that they may increase the volume of saving besides the disposition of household funds. At a micro level, company or other obligatory pension funds can implement enforced saving by deferring wages and salaries, thereby reducing risk of a low replacement ratio. At a macro level, the increase in saving is not usually one-to-one, as increased contractual saving via pension funds is typically partly or wholly offset by declining discretionary saving. Pension funds increase the supply of long term funds to capital markets, and reduce bank deposits, even abstracting from changes in aggregate saving, so long as households do not increase the liquidity of the remainder of their portfolios fully to offset growth of pension assets. Provision of ways to manage uncertainty and control risk: Pension funds provide risk control directly to households via the forms of retirement income insurance they provide, an advantage which largely reflects the unusual (among financial intermediaries) link of pension funds to employers. To assist in undertaking this risk

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control function they diversify assets as noted above and also act in securities and derivatives markets to hedge and control risk. Providing price information: pension funds seek publication of information from companies directly, and press for market-value based accounting systems. This is of benefit to all users of the market - although it disadvantages banks, which in making loans tend to rely on private information not available to other investors. Providing ways to deal with incentive problems: Dealing with incentive problems in equity finance is one of the most crucial aspects of pension funds' activities as financial intermediaries. The basic issue in corporate governance is simply stated. Given the divorce of ownership and control in the modern corporation, principalagent problems arise, as shareholders cannot perfectly control managers acting on their behalf. Managers, who have superior information about the firm and its prospects and at most a partial link of their compensation to the firms' profitability, may divert funds in various ways away from those who sink equity capital in the firm, notably expropriation or diversion to unattractive projects from a shareholder's point of view. Principal-agent problems in equity finance imply a need for shareholders such as pension funds to exert control over management, while also remaining sufficiently distinct to let them buy and sell shares freely without breaking insider trading rules. If difficulties of corporate governance are not resolved, these market failures in turn also have implications for corporate finance in that equity will be costly and often subject to quantitative restrictions. Effectiveness of corporate governance is typically enhanced by presence of large investors, such as pension funds. They will have the leverage to oblige managers to distribute profits to providers of external finance either directly or via the threat to sell to takeover raiders. They are needed because individual investors may find it difficult to enforce their rights, owing to difficulty of acting in a concerted manner against management and related free rider problems which make it not worthwhile for an individual to collect information and monitor management. Since pension fund stakes are typically limited to 5% of a company, they also avoid the "downside" to dominant investors, who if they own a large proportion of the company may override the interests of minority shareholders and could even reduce measured profitability.

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COMPANY PROFILE

AN INTRODUCTION TO THE COMPANY FORMATION OF THE COMPANY HDFC BANK was incorporated in august 1994, and, currently has a nationwide network of 1,725 branches and 5016 ATMs in 780 Indian towns and cities. The Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an in principle approval from the Reserve Bank of India (RBI) to set up a bank in the private sector, as part of the RBIs Liberalization of the Indian Banking Industry in 1994. The bank was incorporated in august 1994 in the name of HDFC BANK LIMITED, with its registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank in January 1995.

PROMOTER HDFC is Indias premier housing finance company and enjoys an impeccable track record in India as well as in international markets. Since its inception in 1997, the Corporation has maintained a consistent and healthy growth in its operations to remain the market leader in mortgages. Its outstanding loan portfolio covers well over a million dwelling units. HDFC has developed significant expertise in retail mortgage loans to different market segments and also has a large corporate client base for its housing related credit facilities. With its experience in the financial markets, a strong market reputation, large shareholder base and unique consumer franchise, HDFC was ideally positioned to promote a bank in the Indian environment.

DISTRIBUTION NETWORK HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable network of over 761 branches spread over 327 cities across India. All branches are linked on an online real- time basis. Customers in over 120 locations are also serviced through telephone banking. The banks expansion plans take into account the need to have a presence in all major industrial and commercial centres where its corporate customers are located as well as the need to build a strong retail customer base for both deposits and loan products. Being a clearing/ settlement bank to various leading stock exchanges, the bank has branches in the centres where the NSE/BSE has a strong and active member base. The bank also has a network of about over 1977- networked ATMs across these cities. Moreover, all domestic
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and international Visa/ MasterCard, Visa Electron/Maestro, plus/ Cirrus and American Express Credit/ Charge cardholders can access HDFC Banks ATM network.

CAPITAL STRUCTURE

The authorized capital of HDFC Bank is Rs. 450crore (Rs. 4.5 billion). The paid-up capital is Rs. 311.9 crore (Rs.3.1 billion). The HDFC group holds 22.1% of the banks equity and about 19.4% of the equity is held by the ADS Depository (in respect of the banks American Depository Shares (ADS) issue). Roughly 31.3% of the equity is held by Foreign Institutional Investors (FIIs) and the bank has about 190,000 shareholders. The shares are listed on the the stock exchange, Mumbai and the National Stock Exchange (NSE) under the symbol HDB.

VISION, MISSION OF HDFC BANK The HDFC Bank is committed to maintain the highest level of ethical standards, professional integrity and regulatory compliance. MISSION HDFC Banks mission is to be a World Class Indian Bank.

OBJECTIVE The objective is to build sound customer franchises across distinct businesses so as to be the preferred provider of banking services for target retail and wholesale customer segments, and to achieve healthy growth in profitability, consistent with the banks risk appetite. BUSINESS STRATEGY The bank is committed to maintain the highest level of ethical standards, professional integrity, corporate governance and regulatory compliance. HDFC Banks business

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philosophy is based on four core values Operational Excellence, Customer Focus, Product Leadership and people. Increase our 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 scalable systems to deliver more products to more customers and control operating costs. Maintain our current high standards for asset quality through disciplined credit risk management. Develop innovative products and services that attract our targeted customers and address in efficiencies in the Indian financial sector. Continue to develop products and services that reduce our cost of funds. Focus on high earnings growth with low volatility.

PRODUCT PROFILE HDFC Bank offers a wide range of commercial and transactional banking services and treasury products to wholesale and retail customers. The bank has three key business segments: WHOLESALE BANKING SERVICES The banks target market ranges from large, blue chip manufacturing companies in the Indian corporate to small & mid- sized corporate and agro- based business. For these customers, the bank provides a wide range of commercial and transactional banking services, including working capital finance, trade services, transactional services, cash management etc.

The bank is also a leading provider of structured solutions, which combine cash management services with vendor and distributor finance for facilitating superior supply chain management for its corporate customers. Based on its superior product delivery/ service levels and strong customer orientation, the bank has made significant inroads into the banking consortia of a number of leading Indian corporate including multinationals, companies from the domestic business houses and prime public sector companies. It is recognized as a leading provider of cash management and transactional banking solutions to corporate customers, mutual funds, stock exchange members and banks.

RETAIL BANKING SERVICES The objective of the retail bank is to provide its target market customers a full range of financial products and banking services, giving the customer a one- stop window for all his/her banking requirements. The products are backed by world- class service and delivered
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to the customers through the growing branch network , as well as through alternative delivery channels like ATMs , phone banking , online banking and mobile banking. The HDFC Bank preferred for high net worth individuals, the HDFC Bank plus and the Investment Advisory Services programs have been designed keeping in mind needs of customers who seek distinct financial solutions, information and advice on various investment avenues. The bank also has a wide array of retail loan products including Auto Loans, Loans against marketable securities, Personal Loans and Loans for Two- wheelers, Doctors Loans. It is also a leading provider of Depository Participant (DP) services for retail customers, providing customers the facility to hold their investments in electronic form. HDFC Bank was the first bank in India to launch an International Debit Card in association with VISA (VISA Electro) and issues the MasterCard Maestro debit card as well. The bank launched its credit card business in late 2001. By September 30, 2005, the bank had a total card base (debit and credit cards) of 5.2 million cards. The bank is also one of the leading players in the merchant acquiring business with over 50,000 point of sale (POS) terminals for debit / credit cards acceptance at merchant establishments. TREASURY Within the business, the bank has three main product areas- Foreign Exchange and Derivatives, Local Currency Money Market & Debt Securities, and Equities. With the Liberalization of the financial markets in India, corporate need more sophisticated risk management information, advice and product structures. These and fine pricing on various treasury products are provided through the banks Treasury team. To comply with statutory reserve requirements, the bank is required to hold 25% of its deposits in government securities. The Treasury business is responsible for managing the returns and market risk on this investment portfolio. PRODUCT SCOPE HDFC Bank offers a bunch of products and services to meet the every need of the people. The company cares for both, individuals as well as corporate and small and medium enterprises. For individual, the company has a range of products which will suit their life stage and needs .for organizations the company has a host of customized solutions that range from funded services, non funded services, value addition services, mutual fund etc. These affordable plans apart from providing long term value to the employees help in enhancing goodwill of the company. The products of the company are categorized into various sections which are as follows: Account and deposits. Loans Investments and insurance Forex and payment services
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Cards Customer centres.

FUNCTIONAL DEPARTMENT OF THE ORGANIZATION

HDFC BANK LTD

DIRECT SALES TEAM

BRANCH MANAGER

AREA SALES HEAD

PERSONAL BANKER OPERATIONA L DEPARTMENT

AREA SALES MANAGER

SALES MANAGER

ACCOUNT DEPARTMENT

TEAM LEADER

TRALER

CONTRACT SALES EXECUTIVE

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ORGANIZATION STRUCTURE AND ORGANIZATION CHARTOF HDFC BANK

CHAIRMAN

MANAGING DIRECTOR / CEO

JOINT MANAGING DIRECTOR (DOMESTIC BANKING)

JOINT MANAGING DIRECTOR (INTERNATIONAL BUSINESS)

EXECUTIVE DIRECTOR CORPORATE

EXECUTIVE DIRECTOR (PROJECT FINANCE)

EXECUTIVE DIRECTOR (RETAIL BANKING)

EXECUTIVE DIRECTOR (WHOLESALE)

Sr. GENERAL MANAGERS

GENERAL MANAGERS

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BOARD OF DIRECTORS The composition of the board of directors of the bank is governed by the companies act, 1956, the Banking Regulation Act, 1949 and the listing requirements of the Indian Stock Exchanges where securities issued by the Bank are listed. The Board has strength of 12 Directors as on March 31. 2008. All directors other than Mr. Aditya Puri , Mr. Harsh Engineer and Mr. Paresh Sukthankar are non- executive directors. The bank has five independent directors. The board consists of eminent persons with considerable professional expertise and experience in banking. Finance, agriculture, small scale industries and other related fields. None of the Directors on the Board is a member of more than 10 committees and Chairman of more than 5 committees across all the companies in which he/she is a director. All the directors have made necessary disclosures regarding committee positions occupied by them in other companies. Mr. Jagdish Kapoor , Mr. Keki Mistry, Mrs. Renu Karnad, Mr. Aditya Puri, Mr. Harish Engineer and Mr. Paresh Sukthankar are non- independent Directors on the board. Mr. Arivand Pande , Mr. Ashim Samanta, Mr. Gautam Divan, Mr. C. M. Vasudev and Dr. Pandit Palande are independent directors on the board. Mr. Keki Mistry and Mrs. Renu Karnad represent HDFC Limited on the board of the bank.

The bank has not entered into materially significant transactions during the year, which could have a potential conflict of interest between the Bank and its promoters, directors, management and /or their relatives, etc. other than the transactions entered into in the normal course of business. The senior management have made disclosures to the board confirming that there are no material, financial and/or commercial transactions between them and the bank which could have potential conflict of interest with the Bank at large.

TECHNOLOGY HDFC Bank operates in a highly automated environment in terms of information technology and communication systems. All the banks branches have online connectivity, which enables
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the bank to offer speedy funds transfer facilities to its customers. Multi- branch is also provided to retail customers through the branch network and Automated Teller Machines (ATMs). The bank has made substantial effort and investments in acquiring the best technology available internationally, to build the infrastructure for a world class bank. The banks business is supported by scalable and robust systems which ensure that our clients always get the finest services we offer. AWARDS AND ACHIEVEMENTS HDFC Bank began operations in 1995 with a simple mission: to be a world class Indian Bank. We realized 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 our efforts towards providing customer convenience have been appreciated both nationally and internationally.

AWARDS IN 2009 Euro money Awards 2009 Economic Times Brand Equity & Nielson Research annual survey Asia Money 2009 Awards IBA Banking Technology Awards 2009 Global Finance Award IDRBT Banking Technology Excellence Award 2008 Asian Banker Excellence in Retail Financial Services Best Bank in India Most Trusted Brand Runner Up

Best Domestic Bank in India Best IT Governance Award Runner Up Best Trade Finance Bank in India for 2009 Best IT Governance and Value Delivery Asian Banker Best Retail Bank in India Award 2009

AWARD IN 2008 Finance Asia Country Awards for Achievement 2008 CNN-IBN Nasscom IT User Award 2008 Business India Forbes Asia
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Best bank and best cash management bank Indian of the year Business Best IT Adoption in the Banking System Best Bank 2008 Flab 50 companies in Asia Pacific

Asian Banker Excellence in Retail Financial Services Microsoft & Indian Express Group World Trade Centre Award of honour Business Today Monitor Group survey Financial Express- Ernst & young Award Global HR Excellence Awards- Asia Pacific HRM Congress Business Today

Best Retail Bank 2008 Security Strategist Award 2008 For outstanding contribution to international trade services One of Indias most innovative companies Best Bank Award in the private sector category Employer Brand of the year 20072008 Award First Runner up & many more Best Bank Award

SWOT HDFC Swot analysis is a strategic planning method used to evaluate the strengths, weakness, opportunities, and threats involved in a project or in a business venture. STRENGTH 1- HDFC is the strongest and most venerable play on Indian mortgages over the long term. The management of the bank is termed to be one of the best in the country. 2- HDFC has differentiated itself from its peers with its diversified network and revamped distribution strategy. 3- HDFC has been highly proactive in passing on the cost and benefit to customers. 4- High degree of customer satisfaction. 5- Lower response time with efficient and effective service. 6- Large share of low- cost deposits, higher net interest margin. 7- Better quality of assets , NPA of 0.4 percent 8- Higher profitability

WEAKNESSES 1- High dependence on individual loans.

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2- Major stake held by American Financial groups which are under stress due to economic slowdown. 3- Customer service staff needs training. 4- Processes and systems, etc need to be better managed. 5- Management covers insufficient. 6- Sect oral growth is constrained by low unemployment levels and competition for staff. 7- Marginal international presence.

OPPORTUNITIES 12345Fast growing insurance business in the country. Untapped rural markets. Could extend to overseas broadly. Fast- track career development opportunities on an industry- wide basis. An applied research centre to create opportunities for developing techniques to provide added value services. 6- Unique partnership to create job opportunities for IFBIs PGDBO students. 7- HDFC bank automates business processes with staff ware; HDFC Bank anticipates major cost savings whilst maintaining high levels of customer service thanks to new enterprise software agreement. 8- HDFC Bank plans to set up a non- banking finance company (NBFC) to undertake fund- based activities. 9- After showing a significant growth overall, India is able to attract many international financial & banking institutes, which are known for their state of art working and keeping low operation costs.

THREATS 1- Loss of market share to commercial banks and HDFCs 2- Higher than expected increase in funding cost. 3- Risk of fraud and NPA accretion due to increase rates and fall in property prices is inherent to the mortgage business. 4- Lack of infrastructure in rural areas could constrain investment. 5- High volume/ low cost market are intensely competitive. 6- Very high competition prevailing in the industry. 7- Extension overseas holds a lot of risk.

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THEORTICAL BACKGROUND

BANK AS A FINANCIAL INTERMEDIARY The world of banking has assumed a new dimension at drawn of the 21st century with the advent of tech banking, thereby lending the industry a stamp of universality. In general, banking may be classified as retail and corporate banking. Retail banking, which is designed to meet the requirement of individual customers and encourage their savings, includes payment of utility bill, consumer loans, credit cards, checking account and the like. Corporate banking, on the other hand, caters to the need of corporate customers like bill discounting, opening letters of credits, managing cash etc. Metamorphic changes took place in the Indian financial system during the eighties and nineties consequent upon deregulation and liberalization of economic policies of the government. India began shaping up its economy and earmarked ambitious plan for economic growth. Consequently, a sea change in money and capital markets took place. Application of marketing concept in the banking sector was introduced to enhance the customer satisfaction the policy of privatization of banking services aims at encouraging the competition in banking sector and introduction of financial services .Consequently, services such as Demat, Internet banking , portfolio management , venture capital ,etc came into existence to cater to the needs of public. An important agenda for every banker today is greater operational efficiency and customer satisfaction. The new watchword for the bank is pretty ambitious: customer delight.

The oxford dictionary defines the banks as: An establishment for the custody of money, which it pays out, on a customers order According to white head a bank is defined as an institution which collects surplus funds from the public, safeguards them, and makes them available to the true owner when required and also lends sums be their true owners to those who are in need of funds and can provide security. Banking company in India has been defined in the banking companies at 1949. One which transacts the business of banking which means the excepting for the purpose of lending or investment of the deposit or money from the public , repayable on demand, or otherwise and withdraw able by cheque, draft, order or otherwise . The banking system is an integral subsystem of the financial system. It represents an important channel of collecting small saving from the household and lending it to the corporate sector.

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The Indian banking system has RBI as the apex body for all matters relating to the banking system. It is a central bank of India. It is also known as the banker to all other bank. EVOLUTION OF INDIAN BANKING Ancient banking system of India constituted of in business bankers. They have been carrying on their age- old banking operations in different parts of the country under different names. The modern age of banking constitute the fundamental basis of economic growth. The term bank is being used since long time but there is no clear conception regarding its beginning. According to the view point in good old age, Italian money lenders were known as ban chi because they kept a special type of table to transact their business. Importance of banking: Today banks have become a part and parcel of Kodak banks life. There was a time when jewellers of the city alone could enjoy their services. How bank offers access to even a common man and their activities extend to areas neither untouched. Bank caters to the need of agriculturist, industrialist, and traders and to all the other section of the society. in modern age ,the banking constitutes the fundamental basis of economic growth, thus the accelerate the economic growth of a country and steer the wheels of the economic towards its goal of self reliance in all fields, it naturally arouses Kodak banks interest in knowing more about the banks and the various man and the activities connected with it. Indian banking system Banking in India has its origin as early as the Vedic period. It was believed that transition from money lending to banking must have occurred even before Manu, the great Hindu jurist, who has devoted a section of his work to deposit advance and laid down rules relating to rates of interest. During the mogul period, the indigenous bankers played a very important role in lending money financing foreign trade and commerce. During the days of East India Company, it was turning over the agency houses to carry on the business. The General Bank of India was the first to join sector in the year 1786. The others that followed were the bank of Hindustan and the Bengal bank. The bank of Hindustan is reported to have continued till 1906 while the other two failed in the meantime. In the first half of the 19th century the East India Company established three banks; 1- Bank of Bengal (1809). 2- Bank of Bombay (1840). 3- Bank of Madras (1843). These three banks are also known as presidency banks were independent units and functional well. These three banks were amalgamated in 1920 and Imperial Bank of India was established on 27th January 1921, which started as private shareholders banks, mostly Europeans shareholders, with the passing of time imperial bank was taken over by the newly constituted State Bank of India act in 1955. In 1865
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Allahabad Bank was established and first time exclusively by Indians, Punjab National Bank ltd. Was set up in 1894 with headquarters at Lahore. Between 1906 and 1913, bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank, and Bank of Mysore were set up. Reserve Bank of India came in 1935. On July, 1969, 14 major banks of India were nationalized and on 15th April, 1980 six more commercial private banks were also taken over by the government. RESERVE BANK OF INDIA The Banking system is an integral sub- system of the financial system. it represents an important channel of collecting small savings from the households and lending it to the corporate sector. The Indian banking system has the RESERVE BANK OF INDIA (RBI) as the apex body from all matters relating to the banking system. It is the Central Bank of India and act as the banker to all other banks. FUNCTION OF RBI: Currency issuing authority Banker to the government Banker to other bank Framing of monetary policy Exchange control Custodian to foreign exchange and gold reserves Development activities Research and development in the banking sector

CLASSIFICATION OF BANKS

On the basis of ownership PUBLIC SECTOR BANKS Public sector banks are those banks that are owned by the government. The government owns these banks. In India 20 banks were nationalized in 1969 and 1980 respectively. Social welfare is there main objective. PRIVATE SECTOR BANKS These banks are those banks that are owned and run by private sector. An individual has control over these banks in proportion to the shares of the banks held by him. CO-OPERATIVE BANKS These are those banks that are jointly run by a group of individuals. Each individual has an equal share in these banks. Its shareholders manage the affairs of the bank. ACCORDING TO THE LAW
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SCHEDULED BANK Schedule banks are the banks, which are included in the second schedule of the banking regulation act 1965. According to this schedule bank: 1- Must have paid-up capital and reserve of not less than RS 500,000 2- Must also satisfy the RBI that its affairs are not conducted in a manner determine to the interest of its depositors. Schedule banks are sub- divided as:A) State co-operative banks B) Commercial banks NON SCHEDULED BANKS Schedule of the banking regulation act 1956. It means they do not satisfy the conditions ay down by that schedule. These are the banks having paid up capital, less than Rs.5Lakhs. They are further classified as follows:a. Co-operative banks primary credit societies. b. Commercial banks COMMERCIAL BANKS These are the banks that do banking business to earn profit. These banks make loans for short to business and in the process create money. Credit creation is the main function of these banks. FOREIGN BANKS These are those banks that are incorporated by foreign company. They have set up their branches in India. These banks have their head offices in foreign countries. Their principle function is to make credit arrangement or the export and the import of the country and these banks deals in foreign exchange

INDUSTRIAL BANKS Industrial banks are those banks that offer long term and medium term loan to the industries and also work for their development. These banks help industries in sale of their shares, debentures and bonds. They give loan to the industries for the purchase of land and machinery.

AGRICULTURAL BANKS Agricultural banks are those banks that give credit to agriculture sector of the economy
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SAVING BANKS The principle function of these banks is to collect small saving across the country and put them to the productive use. In India department of post office functions a saving banks.

CENTRAL BANK Central bank is the apex bank of the banking system of the country. It issues currency notes and acts a bankers bank. Economics stability is the principle function of this bank. In short, it regulates and controls the banking system of the country. RBI is the central bank of India.

PRIVATIZATION OF INDIAN BANKING For the public banks, the era of bumper profit is over. For much of the last decade the process of collaborated financial liberalization had cleared up the banks balance sheet enabling them to with stand increased competition global financing, turmoil and even unprotected industrial slow down. But the cycle of liberalization has run its full course. Now it is the tie for the big structural leap, rationalization, mergers, and privatization. Unless the banks undertake these fundamental changes, their profit will stay under pressure. There are two areas of competitions which banking industry is facing internationally and nationally. In the pre- liberalization era, Indian banks could grow in a closed economy but the banking sector opened up for private competition. It is possible that private banks could become dominant players even within India. It has been recorded a rapid rise of the new private sector banks and it has tracked the transformation of the public sector banks as they grapple with the changes of financial deregulation. Use of ATM cards, internet banking, phone banking, mobile banking are the new innovative channels of banking which are widely used as they result in saving both time and money which are two essential things that everyone is short of and is running to catch hold them. Moreover private sector banks are aligning its infrastructures, marketing quality and technology to build deep commitment in building consumer and retail banking. The main focus of these banks is on innovative range of services or products.

STRUCTURE OF BANKING SYSTEM Different countries of the world have different types of banking systems. However, commercial banking had grown under all these banking systems. To understand the structure of banking system, let us take up various types of banking systems one by one. These types are:
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UNIT BANKING Unit banking originated in the united state of America. It grew in the United States of America. As a counter part of independent or industrial

ADVANTAGES OF FINANCIAL INTERMEDIARY The main comparative advantage of financial intermediaries over financial markets is in overcoming the information asymmetry between borrowers and lenders. Financial intermediaries are better suited to reducing the public good problem of free-riding. This is because financial intermediaries can make investments without revealing their actions instantaneously in public markets. With well functioning financial markets information is revealed instantaneously through financial prices, providing individual investors with less incentive to acquire information. Financial intermediaries are also better at ex post monitoring and exerting corporate control than financial markets. This is because with liquid financial markets, individual investors are able to readily sell their shares and have fewer incentives to monitor managers thoroughly. They also generally have less inside information about firms than financial intermediaries. Financial intermediaries may also be better able to exert ex post corporate control if firms are reliant on them for external finance. Intermediaries are particularly well suited to providing external finance to newer firms that require staged finance. This is because financial intermediaries can more credibly commit to providing additional funds as projects develop, whereas pre-committed stage finance is more difficult to arrange with publicly traded securities (debt or equity). Information asymmetries tend to be larger for small firms. This is because of reduced economies of scale with respect to acquiring information about small firms. Gertler and Gilchrist (1994a and 1994b), for example, find that bank-dependent firms with poor access to (non-bank) capital markets are typically smaller in size for the manufacturing sector in the United States. Because of the comparative advantage of financial intermediaries over financial markets in terms of collecting and processing information, countries with a large number of small firms might be expected to be more reliant on financial intermediaries than markets for external finance. Moreover, financial intermediaries are better able to diversify aggregate risk. For example, banks have a unique ability to hedge against market wide liquidity shocks (Gatev and Strahan 2003). This is because banks are viewed as safe havens by investors. Deposits tend to flow in during periods of financial distress (low liquidity), at a time when borrowers want to draw on backup lines of credit as external finance from public securities markets has become too expensive because of low liquidity. By eliminating liquidity risk, banks can increase investment in high-return, illiquid assets and accelerate growth. Financial markets can reduce liquidity risk, but do not eliminate it. In addition, financial intermediaries can provide intertemporal risk sharing. Financial markets are generally less well suited to provide this insurance. This is because intertemporal risk sharing requires the accumulation of reserves in safe assets whereas investors in financial markets would theoretically (though perhaps not practically) continuously adjust their portfolios to earn the highest rate of return (Dolar and Meh 2003).
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Intermediaries directly undertake ex post monitoring of firm managers and exert corporate control when it is costly for outside investors to verify project returns. In Diamonds (1984) model, financial intermediaries are delegated the costly task of monitoring loan contracts. A financial intermediary must choose an incentive contract such that it has incentives to monitor the information, make proper use of it and make sufficient payments to savers to attract deposits. Providing loan contracts and monitoring is costly and diversification can reduce these costs. In Diamonds model, the financial intermediary need not be monitored because it bears all penalties for any shortfall of payments and because the diversification of its portfolio makes the probability of incurring these penalties very small. Moreover, the optimal size for a financial intermediary is infinite. This is because costs are lowered indefinitely by diversification, as long as the returns to borrowers are not perfectly correlated with each other. Financial markets can also promote corporate control, for example, by structuring compensation such that managerial earnings are conditioned on firms performance or by easing takeovers of poorly managed firms (Jensen and Murphy 1990). With takeovers, outsiders buy poorly managed firms, fire managers and transform firms into a more productive enterprise. While takeovers may not always improve performance, in practice the threat of takeover acts to discipline management and so it is difficult to measure the full value of this function. Financial markets possibly facilitate takeovers better than financial intermediaries and thus enhance the flow of capital to its highest value use. Financial markets provide an alternative to intermediaries and an outlet to limit the potential problems created by powerful banks. Financial intermediaries focus on obtaining information that is not available to other lenders. This focus is crucial to overcome information asymmetry and provide finance, but they may use this inside information to extract rents from firms or to protect firms with close bank ties from competition (Rajan 1992). Financial intermediaries may also collude with firm managers against other lenders and hence obstruct efficient corporate governance (Wenger and Kaserer 1998). For firms able to access them, financial markets may be better suited for dealing with uncertainty, innovation and new ideas than financial intermediaries because they allow for diversity of opinion. Financial intermediaries such as banks may have a bias towards low risk projects that have a high probability of success. Intermediated financing delegates decisions about investment projects to a relatively small number of decision makers. Disagreement and discrete decision making increases the likelihood of a loan application being rejected and as a result, without specialised intermediaries, intermediated finance may result in the underinvestment in new technologies, for example. For firms with such projects, and which can not access financial markets, the role of specialised intermediaries may be pronounced. In summary, financial intermediaries and financial markets can in many cases act as substitute sources of financial services. Lenders/savers in particular have a choice between the risk, return and liquidity offered by both segments of the financial system. Each segment is able to offer a different range of investments and offers services to firms that are not complete substitutes. Broadly speaking, financial markets provide lower cost arms length debt or equity finance to a smaller group of firms able to obtain such finance, while financial intermediaries offer finance with a higher cost reflecting the expense of uncovering information and ongoing monitoring. Financial intermediaries and markets may also provide complementary financial services to many firms.

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DISADVANTAGES The modern capitalist economy relies upon financial institutions to facilitate translations between different parties. For example, if you want to buy stock in a certain company, you must use the services of a stock broker to purchase shares of the stock on your behalf. Financial institutions like banks and stock brokerages that act as middlemen for financial translations are sometimes called financial intermediaries. While financial intermediaries allow lenders and borrowers to connect they introduce several financial disadvantages. Lower Returns on Investment

Financial intermediaries are in business to make profit, so using their services can result in lower returns on investment or savings than what might be possible otherwise. For example, when you save money at a bank, the bank pays you interest on the money you save and then lends those funds to other consumers or companies at a higher interest rate to make a profit. In this case, the bank acts as an intermediary between you and the borrower. While you will receive interest on your savings from the bank, you could potentially make more money if you lent directly to a borrower rather than channeling money to them through a bank.

Fees and Commissions

Another possible drawback of financial intermediaries is that they may impose fees or charge commissions for their services. For instance, a stock brokerage firm might charge you a flat $20 to place buy and sell orders for stocks, which would reduce the amount of money you can actually invest. Similarly, a mutual fund might impose commissions that amount to a certain percentage of your total investment, which would serve to reduce the effective annual return on your investment.

Opposing Goals

Financial intermediaries like stock brokers and personal financial advisers might provide helpful advice about investments and savings opportunities, but their overall goals may be counter to the goals of their clients. For instance, as an investor, your goal might be to make as much money as possible to grow your net worth. A financial adviser or stock broker, however, ultimately wants to profit by charging you fees and commissions that serve to sap your net worth. Differences in goals could potentially result in intermediaries giving sub-optimal advice or taking advantage of clients.

Considerations

It is important to consider the cost of fees, commissions, interest rates and potential alternatives before making any sort of financial transaction. Consumers should be wary of opportunities that seem too good to be true or that promise high guaranteed returns.

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OBJECTIVE OF THE STUDY To know the awareness towards customer regarding bank which act as a financial intermediary To know the major role of banking sector which act as a financial intermediaries To know the different product and services provided by HDFC Bank

To know the satisfactory level of customer availed in HDFC Bank To know how bank care for both individual as well as corporate and small & medium enterprises.

To study the overall function of banking sector To get aware regarding different products and services , investment ,securities etc

To study how financial intermediary help in private sector banks. To study the comparative analysis between public sector and private sector banks.

To study the popularity of the service of HDFC bank. To study how bank as a financial intermediary beneficial to the society.

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SCOPE AND LIMITATION SCOPE The scope of this project is limited to the activities of the operations unit of the banking system which include opening of Account, Deposit of funds, Withdrawal of funds and transfer. LIMITATION The following were the limitations of the study: Non representative sample: in this research project a sample survey was conducted. Shortage of time: the time period of study was very limited. It is very difficult to have in detail study on project work due to limited time period. The period of 4 to 6 week is not enough for the proper study of the project.

Inadequate data: the data provided was not up to the mark due to which we faced problems in our research. Lack of scientific method: the lack of scientific training in methodology of research was great impediment in our research program, which led to the delay of research.

Cost factor: it was not possible to conduct extensive research due to paucity of funds.

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RESEARCH METHDOLOGY Research is a common parlance which refers to search for knowledge. It is a procedure of logical and systematic application of the fundamentals of science to the general and overall questions of a study and scientific technique, which provide precise tools, specific procedures, and technical rather philosophical means for getting and ordering the data prior to their logical analysis and manipulating different type of research designs is available depending upon the nature of research project, availability of manpower and circumstances.

According to D. Salinger and M. Stephenson research may be defined as the manipulation of things , concepts or symbols for the purpose of generalizing to extend, correct or verify knowledge, whether that knowledge aids in the construction of theory or in the practice of an art. Thus it is original contribution to the existing stock of knowledge of making for its advancement. In short, the search of knowledge through objective and systematic method of finding solution to a problem is research.

RESEARCH DESIGN A research design is the arrangement of conditions for collection and analysis of data in a manner that aims to combine relevance to the research design is the conceptual structure within which research is conducted. This research was descriptive in nature. DESCRIPTIVE RESEARCH The research undertaken was a descriptive research as it was concerned with specific predictions, with narration of facts and characteristics concerning product and services provided by HDFC BANK. SAMPLE DESIGN THE FOLLOWING FACTORS HAVE BEEN DECIDED WITHIN THE SCOPE OF SAMPLE DESIGN: Universe of the study: Universe of the study means all the persons who are the customers of HDFC BANK in the world. Theoretical: it covered all the individuals who are the customers of HDFC Bank in the word. Accessible: it covered all the individuals who are the customers of HDFC Bank in India who are within our reach. In this study accessible population was customers of HDFC Bank in India.

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Sample size: a sample of minimum respondents was selected from various areas of Varanasi. An effort was made to select respondents evenly. The survey was carried out on 50 respondents. SAMPLE UNIT: in this project sampling unit consisted of the various individuals who had their bank accounts with HDFC Bank. SAMPLING TECHNIQUE: for the purpose of research convenient sampling technique was used. SAMPLING FRAME: it consisted of various sources from where information about the respondent is extracted. Mainly personal links and employees of HDFC Bank, Varanasi are used for getting information about the respondents.

DATA COLLECTION AND ANALYSIS 1- DATA COLLECTION There were two types of data sources used in this research. These were

PRIMARY DATA Primary data is the data collected for the first time form the source and never have been used earlier. The data can be collected through interviews, observations and questionnaires. In this project, an appropriate questionnaire was designed which was filled by the customers of HDFC Bank to know their awareness regarding banking services provided by HDFC Bank SECONDARY DATA Secondary data is the data collected from already been use or published information like journals , diaries, books etc. in this research project, secondary source used were various journals, and website of various online journals. DATA ANALYSIS 1- Tools of presentation: It means what all tools are used to present the data in a meaningful way so that it becomes easily understandable. In this research Tables and Graphs were used for presenting the data. Tools of analysis In this research the tools of analysis used were percentages. SPSS software was used to conduct Friedman ANOVAs. Reliability analysis and Factor Analysis.
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DATA ANALYSIS AND INTERPRETATION STATEMENT 1: Demographic Profile of the Respondents Table 1: Demographics Age: Below 20 yrs 20 - 35 yrs 35 - 50 yrs 50 60 yrs 65 yrs and above total QUALIFICATION: Undergraduate Graduate Post graduate total OCCUPATION: Businessman Self Employed Service Student Professional total ANNUAL INCOME Less than 2 lakhs Rs 2- 6 lakhs Rs 6- 10 lakhs Rs 10- 15 lakhs Total Analysis and interpretation From the data collected it was found majority of respondents that is 40 % belonged to the age of 35 to 50 years, followed by the age group of 20 to 35 years. It was found that the majority of the respondents were graduates. It was found that the majority of respondents were from the business class followed by the service class and self employed people. It was found that the number of the respondents fell between the incomes of Rs. 6 to 10 lakhs, followed by income group between 2 to 6 lakhs. Number of Respondents 1 18 20 9 2 50 5 25 20 50 16 8 13 4 9 50 8 16 19 7 50 Percentage of Respondents 2% 36 % 40 % 18 % 4% 100 % 10 % 50 % 40 % 100 % 32 % 16 % 26 % 8% 18 % 100% 16 % 32 % 38 % 14 % 100 %

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This can be concluded that the majority of the respondents were knowledgeable and were informed about the banking products and services and bank play major role in financial intermediaries.

Statement1: bank play crucial role as a financial intermediary. Table 1: assumption Strongly agree agree No opinion disagree Strongly disagree Total Number of respondents 38 10 2 0 0 50 Percentage of respondents 76% 20% 4% 0% 0% 100 %

Column2
80% 70% 60% 50% 40% 30% 20% 20% 10% 0% strongly agree agree no opinion disagree stongly disagree 4% 0% 0% Column2 76%

Analysis and interpretation: From the data collected, it can be that the number of respondents that is 76 % of the person are aware of financial intermediaries in banking sector and are strongly agree that bank play crucial role in contributing financial lending and borrowing with customers satisfaction,
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followed by 20 % agree on every financial intermediaries such as mutual funds and other also crucial part of with banking.

statement2: time period since the HDFC Banks services are being availed Table 2: Products and services Less than 2 years 2 - 5 years 5 10 years More than 10 years Number of respondents 3 9 15 23 Percentage of respondents 6% 18 % 30 % 46 %

TOTAL

50

100%

column1
50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% less than 2 years 2 -5 years 5 - 10 years more than 10 years 6% 18% column1 30% 46%

Analysis and interpretation From the data collected, it can be that the majority of the respondents that is 46 % of the respondents have been HDFC Banks customer for more than 10 years, followed by 5 to 10 years with 30 % of respondents. It can be concluded that the number of the respondents have been HDFC Banks customer for more than 10 years.

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Statement 3: awareness regarding all products and services offered by HDFC Bank. Table 3: awareness yes no total Number of respondents 48 2 50 Percentage Of respondents 96 % 4% 100 %

Column1
4%

yes no 96%

Analysis and interpretation From the data collected it was found that the number of the respondents that is 96 % was aware of the product and services provided by the HDFC Bank while just 4 % of the respondents were not aware of the different product and services. It was concluded that majority of the respondents were aware of different product and services offered by HDFC Bank.

Statement: 4 HDFC Bank offers competitive interest rate. Table 5: Assumption yes no Cant say total
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Number of Respondents 36 10 4 50

Percentage of Respondents 72 % 20% 8% 100 %

80% 70% 60% 50% 40% 30% 20% 10% 0%

72%

coloumn 1

20% 8%

yes

no

can't say

Analysis and interpretation From the following data it conclude that the there is a competitive interest rate offered by HDFC Bank rather than its peers , as 72 % of respondents said yes while other with 20 % answered no due to non satisfaction regarding interest rate , other 8 % were in dilemma regarding the standard interest rate. Statement 5: perception about the services offered by HDFC Bank. Table 6:

perception Lucrative Non lucrative Cant say total

Number of respondents 35 5 10 50

Percentage of respondents 70 % 10 % 20 % 100 %

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80% 70% 60% 50% 40% 30% 20% 10% 0%

70%

Series 1

20% 10%

lucrative

non lucrative

can't say

Analysis and interpretation From the data collected, it was found that the majority of the respondents that is 70 % said that the products and services offered by HDFC Bank were lucrative, while just 10 % of the respondents said that the products and services offered were non lucrative and the remaining 20 % were not able to form any opinion. It can be inferred that the majority of the felt that the products and services offered by HDFC Bank were lucrative.

Statement 6: ways to access to HDFC Bank. Table 7:

Ways Online banking ATM Branch Network Phone Banking Email Statement total

Number of respondents 10 9 26 3 2 50

Percentage of respondents 20 % 18 % 52 % 6% 4% 100 %

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6%

4%

20% online banking ATM 18% Branch Network phone banking email statement

52%

Analysis and interpretation It was found from the data collected that 52 % of the respondents accessed the bank through Branch Network. About 20 % of the respondents accessed the bank through online banking followed by ATM with about 18 %. Marginally 4 % and 6 % of the respondents used email statement and phone banking to access the bank. It was inferred that majority of the respondents accessed the bank through branch network. Statement7: the most transaction you visit to the bank. Table 8: transaction Withdrawal Deposit Balance Enquiry Pass Book Updating Cheque Demand Draft Total Number of respondents 15 22 1 2 5 5 50 Percentage of respondents 30 % 44 % 2% 4% 10 % 10 % 100 %

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10% 10% 4% 2% 30% withdrawal deposit balance enquiry pass book updating 44% cheque demand draft

Analysis and interpretation From the data collected, that majority of the respondents visit the bank alternatively for the bank deposit, numbers of respondents from HDFC Bank were 44% and 30 % for the withdrawal, rest they visited for other transaction such as maintaining demand draft and cheque with 10 % following pass book updating and balance enquiry with 4% and 2 %. This concludes that the majority of respondents visit bank for depository and withdrawal purposes. Statement 8: E- Banking services are you comfortable with. Table 9: services ATM Online banking Internet banking Mobile banking Total Number of respondents 25 12 8 5 50 Percentage of respondents 50 % 24 % 16 % 10 % 100 %

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50% 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% ATM online banking internet banking mobile banking 16% 10% 24% Series 1

Analysis and interpretation Through this data it concludes that the number of e banking services provided by HDFC Bank is compatible in nature and fast viewing, number of respondents were most comfortable with the ATMs with 50 % followed by online banking 24 %, other services availed were 16 % with internet banking and rest 10 % with mobile banking, as ATM now a days play vital role in financial treatment with fast service anywhere and everyone.

Statement 9: computerization has helped me to reduce the waiting time for any transaction in the bank. Table10: Assumption Strongly agree agree No opinion disagree Strongly disagree Total Number of respondents 30 16 0 3 1 50 Percentage of respondents 60 % 32 % 0% 6% 2% 100 %

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0% 6%

2%

32% 60%

strongly agree agree no opinion disagree strongly disagree

Analysis and interpretation From the data it concludes that now a days computerization has helped in reducing the waiting time in any transaction in the bank while observing the accuracy and efficiency of technical ability majority of respondents were strongly agreed upon with 60 % followed by agreed respondents with 32 %, rest Few old respondents were disagreed who were compatible with traditional banking process with 6 % and 2 % few were not framed to be answerable gone with no opinion.

Statement 10: HDFC Bank caters all your banking needs. Table 11: assumption Yes No total Number of respondents 38 12 50 Percentage of respondents 76 % 24 % 100 %

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24%

yes no 76%

Analysis and interpretation It was found that the majority of the respondents that is 76 % said that yes bank caters all banking needs by providing securities and safety, providing loans and deposits , by offering investments schemes etc , while rest 24 % of respondents said no because they didnt find bank as a first place where funds and others financial needs could be fulfilled .

Statement 11: kind of account do you maintain in this bank. Table 12: account Current Saving Loan/ ac Demat credit Total Number of respondents 7 30 10 2 1 50 Percentage of respondents 14 % 60 % 20 % 4% 2% 100 %

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4% 2% 20%

14%

current saving loan/ac demat credit

60%

Analysis and interpretation From the data it was found that the most of the respondents were stacked with the saving with 60 % and other respondents go for loan/ ac with 20 %, it was found that there was few current a/c customers availed in HDFC Bank with 14 % and rest with credit and demat as they were found riskier to invest money on it .

Statement 12: HDFC Bank has differentiated itself from its peers with its diversified network and revamped distribution strategy. Table 13: assumption Strongly agree agree No opinion disagree Strongly disagree Total Number of respondents 28 14 2 4 2 50 Percentage of respondents 56 % 28 % 4% 8% 4% 100 %

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4%

8%

4% strongly agree agree

28%

56%

no opinion disagree strongly disagree

Analysis and interpretation It was found that the majority of the respondents were strongly agreed with 56 % because they found that HDFC Bank is the strongest and most venerable play on Indian mortgages over the long term. The management of the bank is termed to be one of the best in the country with diversified network, high degree of customer satisfaction followed by agreed with 28 %.few persons were framed to be non opinion and disagreed with 4 % and 8 %.

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Summary of the study I went through a good learning practice in my HDFC Bank for the past 1 month s which has developed me to heights of understanding the customers mind as well their taste and preferences in the field of service sector.

The banking financial intermediaries and awareness towards customer regarding product and services is a big and ambitious project. I am thankful for being provided this great opportunity to work on it. As already mentioned, this project has gone through extensive research work. On the basis of the research work, we have successfully designed and implemented bank as a financial intermediary. The working environment was excellent which enabled me to learn the products and services as well the internal aspects of management level in my bank.

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FINDINGS OF THE STUDY

The majority of the respondents have been HDFC Banks customer for more than 10 years. The majority of the respondents availed the deposit account among the various products and services offered by the HDFC Bank.

The majority of the felt that the products and services offered by HDFC Bank were lucrative. The majority of the respondents accessed the bank through branch network.

The majority of the respondents were aware of the bank as a financial intermediaries The majority of the respondents said that they visited the bank branch every alternate day

The number of respondent said that the main reason of visiting the bank is to make deposit. The majority of the respondent felt that the innovative and new technical banking service was better than traditional banking.

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CONCLUSION The introduction to financial intermediaries has been changing the attire of banking. The brick and mortar banking is slowly giving place to click of the mouse banking. Technology is aiding globalization and integration of financial markets across the globe. Customers expectations for new products and alternatives delivery channels have been rising. Banks are under pressure to offer today, what customers would be expecting tomorrow. Thanks to innovations and spread of all intermediaries, banks today offer the customer a choice to conduct his business across the counter over phone or via a computer. As banks are the oldest and most important intermediaries in the financial system. They are short- term institutions, borrowing from the public up to 3 to 5 years and lending to government, private and corporate sectors for short term- working capital or current expenditure and for term loans and project finance. Different sources of fund involved in banking financial intermediaries .in literature , the major emphasis has laid on significant innovation and investment is underway that could lead to very rapid expansion in providing business to business and consumer to consumer payment in near time. While the pace of change in these markets makes it difficult to determine, eventually these innovations will generate substantial efficiencies in retail payment system. The objective of the study was to comprehend how bank play major role in financial intermediaries with awareness towards its customer regarding financial services provided by HDFC Bank. The research was descriptive in nature. The universe of the study was the customers of the HDFC Bank. The survey was carried out on 50 respondents. In this research for data analysis tool used were tables, graphs and pie charts. Majority of the respondents were aware of financial intermediary, how it deals with lending and borrowing. It is hoped that the survey findings will have some useful applications.

Financial institutions (intermediaries) perform the vital role of bringing together those economic agents with surplus funds who want to lend, with those with a shortage of funds who want to borrow. In doing this they offer the major benefits of maturity and risk transformation. It is possible for this to be done by direct contact between the ultimate borrowers, but there are major cost disadvantages of direct finance. Indeed, one explanation of the existence of specialist financial intermediaries is that they have a related (cost) advantage in offering financial services, which not only enables them to make profit, but also raises the overall efficiency of the economy. The other main explanation draws on the analysis of information problems associated with financial markets

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RECOMMENDATIONS The bank should make some efforts to familiarize the customers to various products and services through demonstrations. The bank should adopt more up gradated techniques to make their customer feel more secure while accessing their accounts.

Effective awareness campaigns should be taken by the banks to make their customers more aware of financial intermediaries which bank provides. The bank should make an effort to provide a platform from where the customers can access different accounts at a single time without extra charge.

The bank should take steps to create a trust in mind of customers towards security of their accounts.

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ANNEXURE QUESTIONNAIRE 1- Name 2- Age

1) Do you agree that bank play crucial role as a financial intermediary? a) b) c) d) e) Strongly agree Agree No opinion Disagree Strongly disagree

2) For how many years you are availing HDFC Bank services? a) b) c) d) Less than 2 years 2 5 years 5 -10 years More than 10 years

3) Are you aware of all the product and services offered by HDFC Bank? a) Yes b) No

4) Do you think HDFC Bank offers competitive interest rate? a) Yes b) No c) Cant say

5) By which way you access to HDFC Bank? a) Online banking b) ATM c) Branch network
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d) Phone banking e) Email statement

7) Which of the following transaction you visit to the bank? a) b) c) d) e) f) Withdrawal Deposit Bank enquiry Pass book updating Cheque Demand draft

8) Which of the following E- banking services are you comfortable with? a) b) c) d) ATM Online banking Internet banking Mobile banking

9) Computerization has helped me to reduce the waiting time for any transaction in the bank? a) b) c) d) e) Strongly agree Agree Non opinion Disagree Strongly disagree

10) Do you think HDFC Bank caters all your need? a) Yes b) No

11) What kind of account do you maintain in this bank? a) b) c) d) e) Current Saving Loan/ac Demit Credit card

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12) Do you agree HDFC Bank has differentiated itself from its peers with its diversified network and revamped distribution strategy? a) b) c) d) e) Strongly agree Agree No opinion Disagree Strongly disagree

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BIBLIOGRAPHY BOOKS Himalya publication house V.A.adhwani , Marketing of financial services. CR.kothari , research methodology.

WEBSITES www.hdfcbank.com www.rbi.org.in www.wikipedia.in www.google.com

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