PROJECT REPORT ON PROCESSING OF COMMERCIAL LOAN AT HDFC IN RANCHI

PROJECT REPORT SUBMITTED IN PARTIAL FULFILLMENT OF REQUIREMENT FOR THE AWARD OF B.COM (HONS.) DEGREE UNDER RANCHI UNIVERSITY, RANCHI OF MARWARI COLLEGE, RANCHI

SUBMITTED BY: NAME: CLASS: SESSION: EXAM ROLL NO.:

UNDER THE GUIDANCE OF DR. DEPARTMENT OF COMMERCE & MANAGEMENT STUDIES MARWARI COLLEGE, RANCHI

HDFC Bank Limited, Rohini, 1st Floor, 56 Circular Road, Ranchi 834001 (Jharkhand)

Date: 03/04/2013 TO WHOM IT MAY CONCERN This is to certify that Ms. Ananya Singh, D/O Shri Kishor, student of B.Com Semester VI, Marwari College, Ranchi Visited HDFC Bank, Circular Road, Branch for the purpose of understanding the concept of Commercial Loan and collecting information of same for her project.

She was explained in detail about the Commercial Loan and information provided to her for her project at our Bank.

Thanking you

For HDFC Bank Ltd.

This letter is being issued for specific purpose, neither bank nor any of its employee will be held responsible for any other interpretation.

Regd. Office: HDFC Bank Limited, HDFC Bank House, Senapati Bapat Marg, Lower Parel (West), Mumbai-400 013.

CERTIFICATE

This is to certify that this project has been submitted by ANANYA SINGH a student of B.Com (Hons), (Finance), Semester-VI, Session 2009-12 bearing Exam Roll No.- 09MCRBC81666 of Marwari College, Ranchi on a given topic PROCESSING OF COMMERCIAL LOAN AT HDFC IN, RANCHI under my guidance. This is for partial fulfillment of award of B.Com (Hons.) degree under Ranchi University, Ranchi. The work done by him is appreciable of an outstanding level. I wish him for every success in his life.

PROJCET GUIDE

Date: Place: ..

DECLARATION

I ANANYA SINGH hereby declare that the project titled PROCESSING OF COMMERCIAL LOAN AT HDFC with reference to RANCHI has been prepared by me and submitted under B. Com Curriculum. All the Information, facts and figures are collected by me and are first hand in nature. Any resemblance from existing work is purely coincidental in nature.

Name of Candidate: ANANYA SINGH Exam Roll No. : 09MCRBC81666 Session : 2010-2013

Signature of the Candidate

ACKNOWLEDEMENT

With regard to my Project with Commercial Bank I would like to thank each and every one who offered help, guideline and support whenever required. First and foremost I would like to express gratitude to my guide, DR. R. R. SHARMA & PROF. ZUBAIR Ahmad for their valuable guidance and timely suggestions. And lastly, I would like to express my gratefulness to the parents for seeing me through it all.

TABLE OF CONTENT
Page No. 1. Introduction Objectives Methodology 2. Company Profile 3. Conceptual Framework 4. Analysis in the Organisation 5. Findings and Suggestions 6. Bibliography 10-16 17-46 47-49 50-52 53 1-9

CHAPTER 1 INTRODUCTION

LOAN
In finance, a loan is a debt evidenced by a note which specifies, among other things, the principal amount, interest rate, and date of repayment. A loan entails the reallocation of the subject asset(s) for a period of time, between the lender and the borrower. In a loan, the borrower initially receives or borrows an amount of money, called the principal, from the lender, and is obligated to pay back or repay an equal amount of money to the lender at a later time. Typically, the money is paid back in regular installments, or partial repayments; in an annuity, each installment is the same amount. The loan is generally provided at a cost, referred to as interest on the debt, which provides an incentive for the lender to engage in the loan. In a legal loan, each of these obligations and restrictions is enforced by contract, which can also place the borrower under additional restrictions known as loan covenants. Although this article focuses on monetary loans, in practice any material object might be lent. Acting as a provider of loans is one of the principal tasks for financial institutions. For other institutions, issuing of debt contracts such as bonds is a typical source of funding.

COMMERCIAL LOAN
Loans can also be subcategorized according to whether the debtor is an individual person (consumer) or a business. Common personal loans include mortgage loans, car loans, home equity lines of credit, credit cards, installment loans and payday loans. The credit score of the borrower is a major component in and underwriting and interest rates (APR) of these loans. The monthly payments of personal loans can be decreased by selecting longer payment terms, but overall interest paid increases as well. For car loans in the U.S., the average term was about 60 months in 2009. Loans to businesses are similar to the above, but also include commercial mortgages and corporate bonds. Underwriting is not based upon credit score but rather credit rating.

Nature of Business
The Bank operates in three segments:

Retail Banking

HDFC Bank Treasury Services

Wholesale Banking

LOANS Majority of the people are under the burden up debt, which make them avail various loans jus to consolidate their debt. By seeing its sudden importance many financial institutions and firms have started giving these loans on very affordable and nominal rates.

Landers first calculate the amt. you can borrow and that entirely depends upon the salary, expenditure and saving you have. Ones the loan in decided the next step is calculate the time frame, which can usually range from 1 to 25 years. There are few points to be kept in mind while availing the debt consolidation loan.

If possible consult any financial expert or broker for the exact information so that there is no problem in the future. Always choose the best and top rated financial firm for getting the loan, as this will let you get the loan at very affordable interest and amount. Try to make every installment on time so that there is no payment issue in the future. And also keep the track of all the payments made by you so that there is no confusion in the end. Try to use the advice of the people who have already availed the loan as they can guide you with their experiences. Therefore the person must keep all these points in the mind in order to get the full and fruitful usage of the loan amount. Thus, if you are buried under the piled up debt then debt consolidation loans are there for you to sail you out but opt for the best and trusted policy and company.

CUSTOMER SATISFACTION SURVEY In the study, a random sample of only existing customers of the HDFC Bank was taken, The customers studied under this survey were mostly walk-in customers. Proper care was taken to approach those customers who could easily fill up the questionnaire and were rational in their response. But there could be some errors in the analysis, which could have crept into due to lazy respondents, human errors and other factors.

METHODOLOGY

The achieve the objective of studying the data has been collected. Research methodology carried for this study can be two types 1. Primary 2. Secondary PRIMARY: The data, which has being collected for the first time and it is is the original data.

SECONDARY: The secondary information is mostly taken from websites, books, journals, etc.

CHAPTER-2 COMPANY PROFILE

COMPANY PROFILE
HDFC Bank Limited (BSE: 500180, NSE: HDFCBANK, NYSE: HDB) is an Indian financial services company based in Mumbai, Maharashtra that was incorporated in August 1994. HDFC Bank is the fifth or sixth largest bank in India by assets and the first largest bank by market capitalization as of November 1, 2012. The bank was promoted by the Housing Development Finance Corporation, a premier housing finance company (set up in 1977) of India. As on December 2012, HDFC Bank has 2,776 branches and 10,490 ATMs, in 1,399 cities in India, and all branches of the bank are linked on an online real-time basis. As of December 2012 the bank had balance sheet size of Rs. 3837 billion. For the fiscal year 2011-12, the bank has reported net profit of 5167.07 crore (US$950 million), up 31.6% from the previous fiscal.

On March 14, 2013 an online magazine named Cobrapost.com released video footage from Operation Red Spider showing high ranking officials and some employees of HDFC bank willing to turn black money into white which is violation of Money Laundering Control Act. After this The government of India and Reserve Bank of India have ordered an inquiry

History
HDFC Bank was incorporated in 1994 by Housing Development Finance Corporation Limited (HDFC), India's largest housing finance company. It was among the first companies to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector. The Bank started operations as a scheduled commercial bank in January 1995 under the RBI's liberalisation policies. Times Bank Limited (owned by Bennett, Coleman & Co./The Times Group) was merged with HDFC Bank Ltd., in 2000. This was the first merger of two private banks in India. Shareholders of Times Bank received 1 share of HDFC Bank for every 5.75 shares of Times Bank. In 2008 HDFC Bank acquired Centurion Bank of Punjab taking its total branches to more than 1,000. The amalgamated bank emerged with a base of about Rs. 1,22,000 crore and net advances of about Rs.89,000 crore. The balance sheet size of the combined entity is more than Rs. 1,63,000 crore

CHAPTER-3 CONCEPTUAL FRAMEWORK

Types of Commercial Loans Individuals and businesses borrow money from banks and other financial institutions. Money that is provided to businesses for a specific period of time, or term, is called a commercial loan. Commercial loans can be either long-term, used for purchasing, building or expanding a manufacturing plant, equipment or real estate, or short-term, used for seasonal inventory, accounts payable and smaller projects.

The Average Loan Fees on a Commercial Loan

Types of Bank Loans

1. Secured and Unsecured Loans

o

Loans can be secured or unsecured. A secured loan is supported by collateral or property. If the borrower does not pay back the loaned money by the agreed-upon time, the creditor can sell the property. For example, a store's loan may be backed by inventory. Thus, as its name suggests, a secured loan means that someone is providing "security" that the money borrowed will be repaid in accordance with the terms and conditions. A creditor does not grant an unsecured loan based on collateral. Rather, it is based on the borrower's credit standing. These loans have higher interest rates.

Equipment Loans
o

If you ask for equipment financing, the equipment you purchase will become the loan collateral. The risk is not as great as if your personal property backed the loan. Instead of losing your whole business or real estate if you default on your loan, you only risk the equipment you just bought. Depending on how large or small your business, equipment financing can either be a minimal amount or a major expense in the millions of dollars.

Working Capital
o

Businesses often go up and down in sales, depending on the time of the year and other factors, such as the strength of the economy. A line of credit establishes a maximum amount of money that a bank is willing to loan. It can be used whenever it is most needed and for whatever reason, normally for buying inventory and seasonal changes. Interest is only paid on the balance. Although lines of credit can be extended to several years, the creditor will review the loan every year. Normally, however, the loans are shorter term, such as 90 days.

Short-Term Loans
o

Short-term commercial loans are normally borrowed for a specific need, such as buying new equipment or paying off a debt. In this case, a specific amount of money is loaned for a set term. The interest is paid on the full amount. In most cases, these short-term loans are normally backed by collateral, especially for new businesses that have yet to build up credit history. The loan will run about 90 to 120 days and be extended as necessary.

Long-Term Loans
o

On the other hand, long-term loans normally run more than 3 years. They are almost always used for the purchase of new equipment and other similar assets. These loans are secured by the assets being bought and will normally have various loan covenants, such as changes in interest rates and prepayment penalties. Long-term loans are normally not given to new businesses, because they are too big of a risk. They have a better chance of getting an intermediate loan or line of credit.

Business Loan HDFC Banks Business Loan is designed to meet the varying business needs for self employed businessmen involved in manufacturing, trading and the service industry. Features

Unsecured Loan to self employed businessmen involved in Manufacturing, Trading and Service Industry.

Loan Amount up to Rs.15 Lakhs. (Up to Rs 30 Lakhs in selected locations). Flexible repayment options ranging from 12 36 Months. Hassle free processing. Speedy loan approval. Convenience of Service at your doorstep.

Benefits

The funds can be used for business expansion, working capital, child's education or home renovation.

No collateral/ Guarantor/ Security required. If you are an HDFC Bank Current or Savings Account holder, we have a special offer for you.

If you are an existing Auto Loan or Home Loan customer with a clear repayment of 6 months or more from any of our approved financiers or us, you can get a hassle free business loan (without income documentation).

If you have a Fixed Deposit with us you can get hassle free loan up to 90% of FD value.

You can also apply for enhancement of your existing loan. Credit Protect: In case of Natural / Accidental Death of the customer, the customer

/nominee can avail of the Payment Protection Insurance (Credit Protect) which insures the principle outstanding on the loan up to a maximum of the loan amount.

Benefits to HDFC Bank Customers:

o

Protects the family by paying off the loan amount in case of death of the customer Life Coverage provides peace of Mind One convenient package - loan + insurance Tax Benefits as per applicable laws No need to use other savings to repay the loan

o o o o

* Premium will be charged for Credit Protect will be deducted from the loan amount at the time of disbursal. Self Employed (Private Ltd. Co. and Partnership Firms) include Private Companies and Partnership firms in the Business of Manufacturing, Trading or Services. Eligibility Criteria:

Minimum Turnover of Rs. 40 Lakhs. Years in business: Minimum of 3 years in current business and 5 years total business experience

Business must be profit making for the last 2 years Minimum Annual Income (ITR): Rs. 1.5 Lakhs p.a.

Documents required:

PAN Card Address Proof (Ration card Tel/ Electricity Bill/ Lease agreement/ Passport/Trade license /Sales Tax certificate)

Bank Statement (latest 6 months bank) Last 2 Years ITRs (computation of income) Balance Sheet and Profit & Loss a/c. Audited or Certified by a CA

Proof of continuation (ITR/ Trade license /Establishment /Sales Tax certificate)

Sole Proprietor Declaration or Certified Copy of Partnership Deed, Certified true copy of Memorandum & Articles of Association & Board resolution (Original)

Self Employed (Individuals). Include - Sole proprietors, Partners & Directors Eligibility Criteria

Minimum age of Applicant: 21 years Maximum age of Applicant at loan maturity: 65 years Years in business: Minimum of 3 years in current business and 5 years total business experience

Minimum Annual Income (ITR): Rs. 1.5 Lakhs p.a.

Documents required:

Proof of Identity (Passport / Voters ID card/ Driving License/PAN Card) Address Proof (Ration card Tel/elect. Bill/ Lease agreement/ Passport/ Trade license /Sales Tax certificate)

Bank Statement (latest 6 months) Latest ITR along with computation of income, Balance Sheet & Profit & Loss a/c for the last 2 yrs. Audited or Certified by a CA

Proof of continuation (ITR/Trade license /Establishment /Sales Tax certificate)

Other Mandatory Documents (Sole Prop. Declaration Or Certified Copy of Partnership Deed, Certified true copy of Memorandum & Articles of Association (certified by Director) & Board resolution (Original)

Business Loan Rack Interest Rate Range

Features 17.50% to 22.00% Up to 2.50% of the loan amount subject to a minimum of Rs. 1,000/No pre-payment permitted until repayment of 6 EMIs 4% of the Principal Outstanding after repayment of 6 EMIs

Loan Processing Charges

Prepayment

Pre-payment charges

No Due Certificate / No Objection Certificate (NOC) Duplicate no due certificate / NOC Solvency Certificate

NIL

Rs 250/Not applicable @ 24 % p.a on amount outstanding from date of default

Charges for late payment of EMI

Charges for changing from fixed to floating rate of interest Charges for changing from floating to fixed rate of interest Stamp Duty & other statutory charges Credit assessment charges Non standard repayment charges

Not applicable

Not applicable

As per applicable laws of the state

Not applicable Not applicable

Cheque swapping charges Loan Re-booking charges / Rescheduling charges Loan cancellation charges Cheque Bounce Charges Legal / incidental charges CIBIL Report Copy Charges

Rs 500/- per event

Rs 1000/-

Rs. 1000/Rs 450/- per cheque bounce At actual Rs.50 Per Copy

ANNUAL REPORT

Net profit: 5,167 crore. An increase of 31.6% compared to the previous year Balance sheet size: 337,909 crore as at 31st March 2012 Total deposits: 246,706 crore. An increase of 18.3% compared to the previous year Total advances: 195,420 crore. An increase of 22.2% compared to the previous year Capital Adequacy Ratio: 16.5%. Regulatory minimum requirement is 9% Tier I capital ratio: 11.6% Non Performing Assets: 1,999 crore (gross); 1.0% of Gross Advances Network: Branches: 2544 ATMs: 8913 Cities: 1399

Customers View
Bebis Jari making enterprise grows Hailing from a small place in Varanasi called Macharahahaan, Bebi is known for her Jari work on sarees. She has been relying on her talent to make sarees and sell them for a profit. A fourteen thousand rupee loan from HDFC Bank has helped her eliminate her dependency on middlemen for raw materials. Bebi now buys her sequins and gold and silver thread directly from wholesalers, improving her product as well as her quality of life. Plantain farming thrives in Kerala Chaitanya Kudumbasree is a Self Help Group in Pandalam, Kerala. Comprising only of women, this group has improved the local agriculture industry in Kerala by investing in organised plantain farming. Taking a loan of one and a half lac rupees from the Bank, they have used the money to first lease appropriate farm land and then buy and plant plantain trees. Today, this group benefits from their farming venture since plantains are in high demand in the region. They now look forward to the additional income of thirty five thousand rupees that will be generated every year which they plan to re-invest in the plantain farm. A flower seller expands her business Sunita has been making and selling garlands outside the Shirdi Sai Ram temple in Wardha, Maharashtra. Using her HDFC Bank loan, she now makes floral arrangements as well, which has helped attract a new customer segment and increase profits. Her daily income has increased by thirty percent as a result. Bag makers achieve success Members of Self Help Group, Chand Jan Sambal, make a living from manufacturing bags made of fiber in Alwar, Rajasthan. A two lac rupee loan from HDFC Bank enabled them to sell their bags in bulk at the local market at Alwar. Proceeds from the sale are distributed to all members.

Each of the ten members now earns almost three thousand rupees as pure profit every month. Floras business prospers Flora, a resident of Margao, runs a fruit and vegetable stall promoted by the Goa State Horticulture Corporation. A loan of ten thousand rupees from HDFC Bank has helped her hold more stock at her stall. Floras daily income has increased by ten percent as a result. Through such initiatives we have reached out to 1.2 million households from the bottom of the pyramid and provide banking services on a sustainable basis. We have a board approved program to financially include 10 million households at the bottom of the pyramid in the next 5 years.

FINANCIAL PERFORMANCE
(Rs. in crore) For the year ended

March 31, 2012 Deposits and Other Borrowings 270,553.0

March 31, 2011 222,980.5

Advances Total Income Profit before Depreciation and Tax Net Profit Profit brought forward Total Profit available for Appropriation Appropriations: Transfer to Statutory Reserve Transfer to General Reserve Transfer to Capital Reserve Transfer to / (from) Investment Reserve

195,420.0 32,530.0 8,055.7 5,167.1 6,174.2 11,341.3

159,982.7 24,263.4 6,316.1 3,926.4 4,532.8 8,459.2

1,291.8 516.7 (41.7)

981.6 392.6 0.4 15.6

Proposed Dividend

1,009.1

767.6 124.5

Tax Including Surcharge and Education Cess on 163.7 Dividend Dividend (including tax/cess thereon) pertaining to previous year paid during the year Balance carried over to Balance Sheet 8,399.6 2.1

2.6

6,174.2

The Bank posted total income and net profit of ` 32,530.0 crore and ` 5,167.1 crore respectively for the financial year ended March 31, 2012 as against ` 24,263.4 crore and ` 3,926.4 crore respectively in the previous year. Appropriations from net profit have been effected as per the table given above.

What is involved in underwriting commercial loans The process of underwriting commercial loans varies depending on the businesses seeking the loan and the lenders themselves. It is a common practice in todays business environment. If a person wishes to start or expand a business, then he will likely have to take out a commercial loan in order to cover his costs. A lender will underwrite the loan, assessing the risk taken, and give the business owner some if not all of the money that he requires. Underwriting commercial loans involves evaluating the credit rating of the individual requesting the loan and comparing it with the amount of income he expects to receive during a set amount of time. The profit margin of the business will be estimated and taken into account, as will the borrower's credit rating. The amount of debt owed to the lender compared with the estimated amount of profits the business expects is called the debt service to coverage ratio (DSCR). These are major considerations for the lender. It can be difficult to make an educated guess about the potential profit margin of a loan-seeking business. Commercial underwriters must take many outside factors into account. Most important would be the amount of money required to make the business reach its profit potential. Then, the net operating income would be considered. This might include the amount of money required to rent a storefront, or other physical business location, the cost of bringing it up to code, any necessary taxes and insurance, and the cost of staffing.

Other factors to be considered when underwriting commercial loans would include the demand for the product or service the business supplies, and the proposed location of the business and/or its means of distributing services. In addition, the underwriter will take into account the cost of advertising; the amount of time required to have the business up and running; the status of competitors, and more. Loan underwriters consider all of these and use the information they gather to determine the DSCR. If the DSCR is too high, then the lender is unlikely to underwrite the loan. A high DSCR would mean that the

lender is unable to make a large enough profit to make the investment worthwhile. When most lenders consider underwriting commercial loans for a business to purchase more property, it is unlikely that they will loan the business the entire amount. The rest is usually covered by the business. The amount a business is expected to cover varies with the type of business and building in question. Restaurants generally receive the least, while retail establishments and owneroccupied buildings receive more coverage. Due to the high costs of starting up a business, and the need for businesses to expand occasionally, the process of underwriting commercial loans is a business in itself. It requires knowledge of the business world and expert risk estimation skills. Though it is a tedious process for owners of expanding businesses, it is not unmanageable for an entrepreneur with a marketable idea. The loan loss reserve and the loan loss provision Banks are in the business of using the funds provided by depositors to make loans and invest in securities. Lending entails assuming the risk that some loans wont be repaid. Banks maintain loan loss reserves for this likelihood. Basically, the loan loss reserve reflects managements estimate of the losses inherent in a banks loan portfolio at a given moment of time. Banks charge off bad loans against the reserve rather than directly against earnings. For each bank report in Value Lines Ratings & Reports, the loan loss reserve is shown at the bottom of the Asset/Liability box, on the left side of the page. To adjust the loan loss reserve for increases in bad loans during a quarter or a year, banks make non-cash provisions to their loan loss reserves that, like other expenses, reduce earnings. In Ratings & Reports, the loan loss provision is shown on line eleven of the Statistical Array, in the center of each bank report page. In a nutshell, loan loss provisions add to the reserve but reduce earnings. Charge-offs of bad loans reduce the reserve, and recoveries of loans that were

written off in the past increase the reserve. Neither loan charge-offs nor recoveries directly affects earnings. Banks take into account the type of borrower in figuring how much to add to the loan loss reserve. For their larger loans, including most of their business, construction, and commercial real estate credits, they assign specific reserves to loans. The allocations rely on managements assessment of the borrowers financial condition, the state of the economy, the current value of the collateral behind the loan, the loan structure, the industry of the borrower, and other factors, and are somewhat subjective. Moreover, the timing of when different banks charge off bad loans and build reserves also varies from bank to bank. Banks also add a general component to the loan loss reserve for pools of loans that share characteristics and are collectively evaluated using statistical estimates. Most consumer loans, which are generally charged off after they are delinquent for a set number of days, fall into this category. The size of loan loss provisions tracks the economic cycle. During recessions, problem loans typically rise, as economic pressures mount and borrowers experience difficulty in meeting their financial obligations. In such times, banks make larger provisions to their loan loss reserves to absorb higher levels of loan losses. Of all the items on bank income statements, the loan loss provision has been among the most volatile over the past five years, rising sharply during the 2007-2009 recession. Fifth Third Bancorp (FITB), whose problem loans doubled in 2008, made a total of $4.6 billion of provisions to its loan loss reserve that year, which nearly tripled the size of its reserve. On the other hand, when economic activity strengthens, and consumers and businesses regain their financial footing, problem loans typically decline, and some of the loan loss reserve is no longer needed. In such times, banks often reduce the reserve by making loan loss provisions that dont fully offset loans charged off within a given period. In response to improvement in its credit quality, Fifth Third reduced its loan loss reserve in 2010 by making quarterly loan loss provisions totaling $1.5 billion that didnt fully offset its $2.3 billion

of net loan losses that year. As economic activity in the U.S. ramps up modestly in 2011, most banks loan loss reserves will probably decline further. In the past, some banks have occasionally made zero or negative provisions to their loan loss reserves (they added a portion of the provisions taken in past periods back to earnings). Following a few years of dramatic asset-quality improvement, Bank of Hawaii (BOH) reversed a small portion of its loan loss reserve in 2004. It may surprise many investors that banks dont build extra reserves for a possible rainy day. Under current accounting rules, banks need to justify additions to their loan loss reserves based on the condition of their loan portfolios at a point of time. Although bank regulators want banks to have strong reserves, banks need to avoid managing earnings, that is, using surplus reserves to bolster earnings in tough times, which would raise quality-ofearnings issues with investors. Back in 1998, the Securities And Exchange Commission became concerned that some banks were keeping excess reserves. Following a review by the SEC that year, SunTrust Banks (STI) reduced its loan loss provisions for the 1994-1996 period by $100 million and restated its earnings. Since then, there has been occasional discussion regarding the advantages and disadvantages of the current practice of reserving for probable loan losses (which results in wide swings in loan loss provisions and earnings over the economic cycle) as opposed to building up the reserve in good times and drawing down reserves in tough times (which might result in a smoother earnings trajectory). Under current accounting practices, banks tend to add the least to their loan loss reserves when business activity is the strongest, which may result in earnings being overstated. Some in the industry have pointed out that, in the past, banks have relaxed lending standards in good times, so its appropriate that they build up loan loss reserves then. But we dont currently see any signs that the rules regarding loan loss reserves are likely to change.

CHAPTER-5 FINDINGS AND SUGGESTIONS

Findings

1. It is found that HDFC Bank is a favorable Bank Total loan loss provisions consisting of specific provisions for non-performing assets and floating provisions decreased from ` 1,433.0 crore to ` 1,351.6 crore for the financial year ended March 31, 2012, on account of healthy asset quality across both retail and wholesale customer segments. Your Banks provisioning policies for specific loan loss provisions remain higher than regulatory requirements, the coverage ratio based on specific provisions alone without including write-offs was 82.4% and that including general and floating provisions was 199.7% as on March 31, 2012. Your Bank made general provisions of ` 150.5 crore during the financial year ended March 31, 2012.

SUGGESTIONS
During the survey, it was found the customer had to wait too long for the loans to get disbursed. The processing time is too long. Customer had to wait for their loan processing done by the staff. Efforts should be made to reduce it. It was found out that there is lot of formalities in the loan disbursement process. Too much documentation is done. Customer is not aware of all the formalities to be done which he is asked to do. Reading loan agreement at the time of taking loan is time consuming. Therefore paper work should be more friendly and clear. After sales service is not up to the mark. Customers facing problems are not attended on time. Staff is generally co-operative only at the time of loan is sanctioned and disbursed. Therefore after sales service should be improved up to satisfaction level of the customer. Customers should be given proper information about EMI. They are generally not told how their EMI are calculated. They should know its calculation and its amount. Public dealing hours should be increased to some later time period because majority of the customers were found out to be salaried in the survey. Website of HDFC Bank should be up dated and should give more options and features to customers so that they can get maximum information sitting at home. Bank should make efforts to attract more and more customers through increased advertisement.

PERFORMANCE & APPRAISAL A performance appraisal, employee appraisal, performance review, or (career) development discussion is a method by which the job performance of an employee is evaluated (generally in terms of quality, quantity, cost, and time) typically by the corresponding manager or supervisor. A performance appraisal is a part of guiding and managing career development. It is the process of obtaining, analyzing, and recording information about the relative worth of an employee to the organization. Performance appraisal is an analysis of an employee's recent successes and failures, personal strengths and weaknesses, and suitability for promotion or further training. It is also the judgment of an employee's performance in a job based on considerations other than productivity alone. AIMS behind these are Generally, the aims of a performance appraisal are to:

Give employees feedback on performance Identify employee training needs Document criteria used to allocate organizational rewards Form a basis for personnel decisions: salary increases, promotions, disciplinary actions, bonuses, etc.

Provide the opportunity for organizational diagnosis and development Facilitate communication between employee and employer Validate selection techniques and human resource policies to meet federal Equal Employment Opportunity requirements.

To improve performance through counseling, coaching and development.

METHODS USED AT BRANCH LEVEL A common approach to assessing performance is to use a numerical or scalar rating system whereby managers are asked to score an individual against a number of objectives/attributes. In some companies, employees receive assessments from their manager, peers, subordinates, and customers, while also performing a self assessment this is known as a 360-degree appraisal and forms good communication patterns. The most popular methods used in the performance appraisal process include the following:

Management by objectives 360-degree appraisal Behavioral observation scale Behaviorally anchored rating scales systems, which rely on factors such as integrity and

Trait-based

conscientiousness, are also used by businesses but have been replaced primarily by more objective and results-oriented methods. The scientific literature on the subject provides evidence that assessing employees on factors such as these should be avoided. The reasons for this are twofold: 1) Trait-based systems are by definition based on personality traits and as such may not be related directly to successful job performance. In addition, personality dimensions tend to be static, and while an employee can change a behavior they cannot change their personality. For example, a person who lacks integrity may stop lying to a manager because they have been caught, but they still have low integrity and are likely to lie again when the threat of being caught is gone. 2) Trait-based systems, because they are vague, are more easily influenced by office politics, causing them to be less reliable as a source of information on an employee's true performance. The vagueness of these instruments allows managers to assess the employee based upon subjective feelings instead of

objective observations about how the employee has performed his or her specific duties. These systems are also more likely to leave a company open to discrimination claims because a manager can make biased decisions without having to back them up with specific behavioral information.

LINES FOLLOWD AT BRANCH LEVEL HDFC Bank is one of the few Indian companies to have a fully operational Business Continuity Plan (BCP) to ensure minimal impact to the organisation, its people, and most importantly, its customers. Our Business Continuity Planning (BCP) Program is a response plan which would ensure that in the event of a disaster we would be able to restore and recover operations for critical processes within a predetermined time after the disaster.

HDFC Bank Business Continuity Management Policy

To have a planned response in the event of any contingency ensuring recovery of critical activities at agreed levels within agreed timeframe thereby complying with various regulatory requirements and minimizing the potential business impact to BSLI. Additionally to create a system that fosters continuous improvement of business continuity management

REWARD SYSTEM AT BRANCH LEVEL Executive and employee reward We can help you design compensation programs for employees and executives that will help meet your corporate objectives. These would include staffing models, overall compensation strategy, benchmarking, equity design and implementation, and assistance with other operational issues such as proxy disclosure and communication support. Equity incentives We help you create and implement equity-based reward programs that can improve business performance by aligning employee motivation with business objectives and shareholder interests. We can help design an effective equity plan (or review existing ones) that takes into account the accounting, tax, and other issues of the participating countries. Our multi-faceted approach and understanding combined with our methodologies can save you and your employees money and bother. HR cost optimization We can identify initiatives for both HR program (including employee benefits) and service delivery cost improvements that are customized to meet your overall financial goals. Using a comprehensive methodology, we perform an independent, thorough review of each HR program and area to identify actual cash savings, cash flow improvements, quality, service and/or administrative improvements. Transactions and HR due diligence We utilize a range of tools, techniques and methodologies to help you during all phases of a corporate transaction:

HR due diligence: we can assist you in evaluating the EPS, tax, accounting and cash flow impacts from targeted compensation and

benefits programs. We help you to identify and quantify total compensation risk and liabilities and accelerating cycle time towards integration.

Day one readiness: after a deal has been finalized, a fast start to achieving your goals and avoiding early unplanned losses is often critical to long-term success. Key areas include talent retention, employment continuity planning, strategic messaging and integration planning.

Deal integration: achieving your goals in any transaction is dependent on successful integration. You can benefit from our experience and methodologies so that human resource functions and management practices can deliver synergies and create a positive environment for your new organization to thrive.

CONCLUSION
To be the leading provider of Commercial Loan of our customers and adds value to their lives. The company offers a range of loans in the secured and unsecured loans space that fulfill the financial needs of its target segment

To continually strive to enhance customer experience through innovative product offerings, dedicated relationship management and superior service delivery while striving to interact with our customers in the most convenient and cost effective manner.

Transparency: Crystal Clear communication to our partners and stakeholders Value to Customers: A product and service offering in which

customers perceive value

Rock Solid and Delivery on Promise: This translates into being financially strong, operationally robust and having clarity in loan process.

Customer-friendly: Advice and support in working with customers and partners Company honor own commitments and live by our words. Company offer equal opportunity to all and demonstrate honesty and transparency in dealings with employee. Company offer simple and best in class experience to customers by leveraging research, technology and processes. Company will invest in simplifying every aspect of the business model in India and be recognized as the industry leader. Company operate as a high performing team; we take pride in company work and support each other to achieve our professional and personal aspirations. Corporate Citizenship commit to take the benefits of insurance to all strata of society, particularly to our partners' customers. Company demonstrate responsibility towards society and the

environment through personal loan and policies.

Banking systems have been with us for as long as people have been using money. Banks and other financial institutions provide security for individuals, businesses and governments, alike. Let's recap what has been learned with this

tutorial:

In general, what banks do is pretty easy to figure out. For the average person banks accept deposits, make loans, provide a safe place for money and valuables, and act as payment agents between merchants and banks.

Banks are quite important to the economy and are involved in such economic activities as issuing money, settling payments, credit intermediation, maturity transformation and money creation in the form of fractional reserve banking.

To make money, banks use deposits and whole sale deposits, share equity and fees and interest from debt, loans and consumer lending, such as credit cards and bank fees.

In addition to fees and loans, banks are also involved in various other types of lending and operations including, buy/hold securities, non-interest income, insurance and leasing and payment treasury services.

History has proven banks to be vulnerable to many risks, however, including credit, liquidity, market, operating, interesting rate and legal risks. Many global crises have been the result of such vulnerabilities and this has led to the strict regulation of state and national banks.

However, other financial institutions exist that are not restricted by such regulations. Such institutions include: savings and loans, credit unions, investment and merchant banks, shadow banks, Islamic banks and industrial banks.

BIBLIOGRAPHY
Business World Personal Visit to :- HDFC Bank, Circular Road, Ranchi- Jharkhand

WEBSTIES

http://www.hdfcbank.com /business-loan/ www. Google.com www.moneycontrol.com www.amfiindia.com www project world .com