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INDEX

S.No:
1.

CONTENTS
INTRODUCTION
 Scope of the Study  Objectives of the Study  Methodology of the Study  Limitations of the Study

PAGE NO.
1-4

2. 3. 4.

REVIEW OF THE LITERATURE COMPANY PROFILE DATA ANALYSIS & INTERPRETATION

5-20 21-30

31-65 66 67 68

5. 6.
7.

FINDINGS SUGGESTION BIBLIOGRAPHY

INTRODUCTION
Asset Liability Management(ALM) is a strategic approach of managing the balance sheet dynamics in such a way that the net earnings are maximized. This approach is concerned with management of net interest margin to ensure that its level and riskiness are compatible with the risk return objectives of the .

If one has to define Asset and Liability management without going into detail about its need and utility, it can be defined as simply management of money which carries value and can change its shape very quickly and has an ability to come back to its original shape with or without an additional growth. The art of proper management of healthy money is ASSET AND LIABILITY MANAGEMENT (ALM).

The Liberalization measures initiated in the country resulted in revolutionary changes in the sector. There was a shift in the policy approach of from the traditionally administered market regime to a free market driven regime. This has put pressure on the earning capacity of cooperative s, which forced them to foray into new operational areas thereby exposing themselves to new risks.

As major part of funds at the disposal of come from outside sources, the management are concerned about RISK arising out of shrinkage in the value of asset, and managing such risks became critically important to them. Although co-operative are able to mobilize deposits, major portions of it are high cost fixed deposits. Maturities of these fixed deposits were not properly matched with the maturities of assets created out of them. The tool called ASSET AND LIABILITY MANAGEMENT provides a better solution for this.

ASSET LIABILITY MANAGEMENT (ALM) is a portfolio management of assets and liability of an organization. This is a method of matching various assets with liabilities on the basis of expected rates of return and expected maturity patter

In the context of ,ALM is defined as a process of adjusting liability to meet loan demands, liquidity needs and safety requirements. This will result in optimum value of the , at the same time reducing the risks faced by them and managing the different types of risks by keeping it within acceptable levels.

NEED OF THE STUDY:

The need of the study is to concentrates on the growth and performance of The Housing Development Finance Corporation Limited (HDFC) performance by using nonperforming assets. and to calculate the growth and

asset and liability management. And to know the management of

To know financial position of The Housing Development Finance Corporation Limited (HDFC)

To analyze existing situation of The Housing Development Finance Corporation Limited (HDFC)

To improve the performance of The Housing Development Finance Corporation Limited (HDFC)

To analyze competition between The Housing Development Finance Corporation Limited (HDFC) with other cooperative s.

SCOPE OF THE STUDY:


In this study the analysis based on ratios to know asset and liabilities management under The Housing Development Finance Corporation Limited (HDFC) And to analyze the growth and performance of The Housing Development Finance Corporation Limited (HDFC) by using the calculations under asset and liability management based on ratio. y y y Ratio analysis Comparative statement Common size balance sheet.

OBJECTIVES OF THE STUDY


o To study the concept of ASSET & LIABLITY MANAGEMENT in The Housing Development Finance Corporation Limited (HDFC)

o To study process of CASH INFIOWS and OUTFLOWS in The Housing Development Finance Corporation Limited (HDFC)

o To study RISK MANAGEMENT under The Housing Development Finance Corporation Limited (HDFC) o To study RESERVES CYCLE of ALM under The Housing Development Finance Corporation Limited (HDFC)

o To study FUNCTIONS AND OBJECTIVES of ALM committee.

METHODOLOGY OF THE STUDY


The study of ALM Management is based on two factors.

1. Primary data collection.

2. Secondary data collection

PRIMARY DATA COLLECTION: The sources of primary data were

 The chief manager ALM cell

 Department Sr. manager financing & Accounting  System manager- ALM cell Gathering the information from other managers and other officials of the

SECONDARY DATA COLLECTION:

Collected from books regarding, journal, and management containing relevant information about ALM and Other main sources were

 Annual report of the Housing Development Finance Corporation Limited (HDFC)  Published report of the  RBI guidelines for ALM.

LIMITATION OF THE STUDY:

1. This subject is based on past data of The Housing Development Finance Corporation Limited (HDFC) 2. The analysis is based on structural liquidity statement and gap analysis. 3. The study is mainly based on secondary data.

Review of Litureature

ASSET LIABILITY MANAGEMENT (ALM) SYSTEM:

Introduction:

In the normal course, the are exposed to credit and market risks in view of the asset liability transformation. With the liberalization in the

Indian financial markets over the last few years and growing integration of domestic markets and with external markets the risks associated with operations have become complex, large, requiring stragic management. are now operating in a fairly deregulated environment and are required to determine on their own, interest rates on deposits and advance in both domestic and foreign currencies on a dynamic basis. The interest rates on investments in government and other securities are also now market related. Intense competition for business involving both the assets and liabilities, together with increasing volatility in the domestic interest rates, has brought pressure on the management of to maintain a good balance among spreads, profitability and long-term viability. Impudent liquidity management can put earnings an reputation at great risk. These pressures call for structured and comprehensive measuresand not just adahoc action. The management of has to base their business decisions on a dynamic and integrated risk management system and process, driven by corporate strategy. are exposed to several major risks in course of their business-credit risk, interest rate and operational risk therefore important than introduce effective risk management systems that address the issues related to interest rate, currency and liquidity risks.

s need to address these risks in a structured manner by upgrading their risk management and adopting more comprehensive Asset-Liability management (ALM) practices than has been done hitherto. ALM among other functions, is also concerned with risk management and provides a comprehensive and dynamic framework for measuring, monitoring and managing liquidity interest rate, foreign exchange and equity and commodity price risk of a that needs to be closely integrated with the business strategy. It involves assement of various types of risks altering the asset liability portfolio in a dynamic way in order to manage risks.

The initial focus of the ALM function would be to enforce the risk management discipline, viz., managing business after assessing the risks involved.

In addition, the managing

the spread and riskiness, the ALM function is more

appropriately viewed as an integrated approach which requires simultaneous decisions about asset/liability mix and maturity structure.

RISK MANAGEMENT IN ALM

Risk management is a dynamic process, which needs constant focus and attention. The idea of risk management is a well-known investment principle that the largest potential returns are associated with the riskiest ventures. There can be no single prescription for all times, decisions have to be reversed at short notice. Risk, which is often used to mean uncertainty, creates both opportunities and problems for business and individuals in nearly every walk of life.

Risk sometimes is consciously analyzed and managed; other times risk is simply ignored, perhaps out of lack of knowledge of its consequences. If loss regarding risk is certain to occur, it may be planned for in advance and treated as to definite, known expense. Businesses and individuals may try to avoid risk of loss as much as possible or reduce its negative consequences.

Several types of risks that affect individuals and businesses were introduced, together with ways to measure the amount of risk. The process used to systematically manage risk exposure is known as RISK MANAGEMENT. Whether the concern is with a business or an individual situation, the same general steps can be used to systematically analyze and deal with risk.

STEPS IN RISK MANAGEMENT:  Risk identification  Risk evaluation  Risk management technique  Risk measurement  Risk review decisions Integrated or enterprise risk management is an emerging view that recognizes the importance of risk, regardless of its source, in affecting a firms ability to realize its strategic objectives. The detailed risk management process is as follows;

Risk identification:

The first step in the risk management process is to identify relevant exposures to risk. This step is important not only for traditional risk management, which focuses on uncertainty of risks, but also for enterprise risk management, where much of the focus is on identifying the firms exposures from a variety of sources, including operational, financial, and strategic activities. Risk evaluation:

For each source of risk that is identified, an evaluation should be performed. At this stage, uncertainty of risks can be categorized as to how often associated losses are likely to occur. In addition to this evaluation of loss frequency, an analysis of the size, or severity, of the loss is helpful. Consideration should be given both to the most probable size of any losses that may occur and to the maximum possible losses that might happen. Risk management techniques:

The results of the analyses in second step are used as the basis for decisions regarding ways to handle existing risks. In some situations, the best plan may be to do nothing. In other

cases, sophisticated ways to finance potential losses may be arranged. The available techniques for managing risks are GAP Analysis, VAR Analysis, Heinrich Domino theory etc., with consideration of when each technique is appropriate.

Risk measurement:

Once risk sources have been identified it is often helpful to measure the extent of the risk that exists. As pert of the overall risk evaluation, in some situations it may be possible to measure the degree of risk in a meaningful way. In other cases, especially those involving individuals computation of the degree of risk may not yield helpful information.

Risk review decisions:

Following a decision about the optimal methods for handling identified risks, the business or individual must implement the techniques selected. However, risk management should be an ongoing process in which prior decisions are reviewed regularly. Sometimes new risk exposures arise or significant changes in expected loss frequency or severity occur. The dynamic nature of many risks requires a continual scrutiny of past analysis and decisions.

DIMENSIONS OF RISK

Specifically two broad categories of risk are the basis for classifying financial services risk. (1) Product market Risk. (2) Capital market Risk.

Economists have long classified management problems as relating to either The Product Markets Risks or The Capital Markets Risks.

TOTAL FINANCIAL SERVICES FIRMS RISK.

Total Risk (Responsibility of CEO)

Business Risk

Financial Risk

Product Market Risk

Capital Market Risk

(Responsibility of the

(Responsibility of the

Chief Operating Officer)

Chief Financial Officer)

Credit Strategic Regulatory Operating Human resources

Interest rate Liquidity currency Settlement Basis Legal

(I).PRODUCT MARKET RISK:

This risk decision relate to the operating revenues and expenses of the form that impact the operating position of the profit and loss statements which include crisis, marketing, operating systems, labor cost, technology, channels of distributions at strategic focus. Product Risks relate to variations in the operating cash flows of the firm, which effect Capital Market, required Rates Of Return;.

(1) CREDIT RISK

(2) STRATEGIC RISK

(3) COMMODITY RISK

(4) OPERATIVE RISK

(5) HUMAN RESOURCES RISK

(6) LEGAL RISK

Risk in Product Market relate to the operational and strategic aspects of managing operating revenues and expenses. The above types of Product Risks are explained as follows.

1. CREDIT RISK:

The most basic of all Product Market Risk in a or other financial intermediary is the erosion of value due to simple default or non-payment by the borrower. Credit risk has been around for centuries and is thought by many to be the dominant financial services today. intermediate the risk appetite of lenders and essential risk ness of borrowers. manage this risk by ; (A) making intelligent lending decisions so that expected risk of borrowers is both accurately

assessed and priced; (B) Diversifying across borrowers so that credit losses are not concentrated in time; (C) purchasing third party guarantees so that default risk is entirely or partially shifted away from lenders.

(2). STRATEGIC RISK:

This is the risk that entire lines of business may succumb to competition or obsolescence. In the language of strategic planner, commercial paper is a substitute product for large corporate loans. Strategic risk occurs when a is not ready or able to compete in a newly developing line of business. Early entrants enjoyed a unique advantage over newer entrants. The seemingly

conservative act of waiting for the market to develop posed a risk in itself. Business risk accrues from jumping into lines of business but also from staying out too long.

(3). COMMODITY RISK:

Commodity prices affect and other lenders in complex and often unpredictable ways. The macro effect of energy price increases on inflation also contributed to a rise in interest rates, which adversely affected the value of many fixed rate financial assets. The subsequent crash in oil prices sent the process in reverse with nearly equally devastating effects.

(4). OPERATING RISK:

Machine-based system offer essential competitive advantage in reducing costs and improving quality while expanding service and speed. No element of management process has more potential for surprise than systems malfunctions. Complex, machine-based systems produce what is known as the black box effect. The inner working of system can become opaque to their users. Because developers do not use the system and users often have not constitutes a significant Product Market Risk. No financial service firm can small management challenge in the modern financial services company.

(5). HUMAN RESOURCES RISK:

Few risks are more complex and difficult to measure than those of personnel policy; they are Recruitment, Training, Motivation and Retention. Risk to the value of the Non-Financial Assets as represented by the work force represents a much more subtle of risk. Concurrent with the loss of key personal is the risk of inadequate or misplaced motivation among management personal. This human redundancy is conceptually equivalent to safety redundancy in operating systems. It is not inexpensive, but it may well be cheaper than the risk of loss. The risk and rewards of increased attention to the human resources dimension of management are immense.

(6). LEGAL RISK:

This is the risk that the legal system will expropriate value from the shareholders of financial services firms. The legal landscape today is full of risks that were simply unimaginable even a few years ago. More over these risks are very hard to anticipate because they are often unrelated to prior events which are difficult and impossible to designate but the management of a financial services firm today must have these risks at least in view. They can cost millions.

(II). CAPITAL MARKET RISK:

In the Capital Market Risk decision relate to the financing and financial support of Product Market activities. The result of product market decisions must be compared to the required rate of return that results from capital market decision to determine if management is creating value. Capital market decisions affect the risk tolerance of product market decisions related to variations in value associated with different financial instruments and required rate of return in the economy.

1. LIQUIDITY RISK

2. INTEREST RATE RISK

3. CURRENCY RISK

4. SETTLEMENT RISK

5. BASIS RISK

1. LIQUIDITY RISK:

For experienced financial services professionals, the foremost capital market risk is that of inadequate liquidity to meet financial obligations. The obvious form is an inability to pay desired withdrawals. Depositors react desperately to the mere prospect of this situation.

They can drive a financial intermediary to collapse by withdrawing funds at a rate that exceeds its capacity to pay. For most of this century, individual depositors who lost faith in ability to repay them caused failures from liquidity. Funds are deposited primarily as a financial

of rate. Such funds are called purchased money or headset funds as they are frequently bought by employees who work on the money desk quoting rates to institutions that shop for the highest return. To check liquidity risk, firms must keep the maturity profile of the liabilities compatible with that of the assets. This balance must be close enough that a reasonable shift in interest rates across the yield curve does not threaten the safety and soundness of the entire firm.

2. INTEREST RATE RISK:

In extreme conditions, Interest Rate fluctuations can create a liquidity crisis. The fluctuation in the prices of financial assets due to changes in interest rates can be large enough to make default risk a major threat to a financial services firms viability. Theres a function of both the magnitude of change in the rate and the maturity of the asset. This inadequacy of assessment and consequent mispricing of assets, combined with an accounting system that did not record unrecognized gains and losses in asset values, created a financial crisis. Risk based capital rules pertaining to have done little to mitigate the interest rate risk management problem. The decision to pass it of, however is not without large cost, so the cost benefit tradeoff becomes complex.

3. CURRENCY RISK:

The risk of exchange rate volatility can be described as a form of basis risk among currencies instead of basis risk among interest rates on different securities. Balance sheets comprised of numerous separate currencies contain large camouflaged risks through financial reporting systems that do not require assets to be marked to market. Exchange rate risk affects both the Product Markets and The Capital Markets. Ways to contain currency risk have developed in todays derivative market through the use of swaps and forward contracts. Thus, this risk is manageable only after the most sophisticated and modern risk management technique is employed

4. SETTLEMENT RISK:

Settlement Risk is a particular form of default risk, which involves the competitors. Amounts settle obligations having to do with money transfer, check clearing, loan disbursement and repayment, and all other inter- transfers within the worldwide monetary system. A single payment is made at the end of the day instead of multiple payments for individual transactions.

5. BASIS RISK :

Basis risk is a variation on the interest rate risk theme, yet it creates risks that are less easy to observe and understand. To guard against interest rate risk, somewhat non comparable securities may be used as a hedge. However, the success of this hedging depends on a steady and predictable relationship between the two no identical securities. Basis can negate the hedge partially or entirely, which vastly increases the Capital Market Risk exposure of the firm.

Industry Profile Banking in India


Banking in India originated in the last decades of the 18th century. The oldest bank in existence in India is the State Bank of India, a government-owned bank that traces its origins back to June 1806 and that is the largest commercial bank in the country. Central banking is the responsibility of the Reserve Bank of India, which in 1935 formally took over these responsibilities from the then Imperial Bank of India, relegating it to commercial banking functions. After India's independence in 1947, the Reserve Bank was nationalized and given broader powers. In 1969 the government nationalized the 14 largest commercial banks; the government nationalized the six next largest in 1980. Currently, India has 96 scheduled commercial banks (SCBs) - 27 public sector banks (that is with the Government of India holding a stake), 31 private banks (these do not have government stake; they may be publicly listed and traded on stock exchanges) and 38 foreign banks. They have a combined network of over 53,000 branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency, the public sector banks hold over 75 percent of total assets of the banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively Early history Banking in India originated in the last decades of the 18th century. The first banks were The General Bank of India which started in 1786, and the Bank of Hindustan, both of which are now defunct. The oldest bank in existence in India is the State Bank of India, which originated in the Bank of Calcutta in June 1806, which almost immediately became the Bank of Bengal. This was one of the three presidency banks, the other two being the Bank of Bombay and the Bank of Madras, all three of which were established under charters from the British East India Company. For many years the Presidency banks acted as quasi-central banks, as did their successors. The three banks merged in 1921 to form the Imperial Bank of India, which, upon India's independence, became the State Bank of India.

Indian merchants in Calcutta established the Union Bank in 1839, but it failed in 1848 as a consequence of the economic crisis of 1848-49. The Allahabad Bank, established in 1865 and still functioning today, is the oldest Joint Stock bank in India. It was not the first though. That honor belongs to the Bank of Upper India, which was established in 1863, and which survived until 1913, when it failed, with some of its assets and liabilities being transferred to the Alliance Bank of Simla. When the American Civil War stopped the supply of cotton to Lancashire from the Confederate States, promoters opened banks to finance trading in Indian cotton. With large exposure to speculative ventures, most of the banks opened in India during that period failed. The depositors lost money and lost interest in keeping deposits with banks. Subsequently, banking in India remained the exclusive domain of Europeans for next several decades until the beginning of the 20th century. Foreign banks too started to arrive, particularly in Calcutta, in the 1860s. The Comptoire d'Escompte de Paris opened a branch in Calcutta in 1860, and another in Bombay in 1862; branches in Madras and Pondichery, then a French colony, followed. HSBC established itself in Bengal in 1869. Calcutta was the most active trading port in India, mainly due to the trade of the British Empire, and so became a banking center.

The Bank of Bengal, which later became the State Bank of India. The first entirely Indian joint stock bank was the Oudh Commercial Bank, established in 1881 in Faizabad. It failed in 1958. The next was the Punjab National Bank, established in Lahore in 1895, which has survived to the present and is now one of the largest banks in India.

Around the turn of the 20th Century, the Indian economy was passing through a relative period of stability. Around five decades had elapsed since the Indian Mutiny, and the social, industrial and other infrastructure had improved. Indians had established small banks, most of which served particular ethnic and religious communities. The presidency banks dominated banking in India but there were also some exchange banks and a number of Indian joint stock banks. All these banks operated in different segments of the economy. The exchange banks, mostly owned by Europeans, concentrated on financing foreign trade. Indian joint stock banks were generally under capitalized and lacked the experience and maturity to compete with the presidency and exchange banks. This segmentation let Lord Curzon to observe, "In respect of banking it seems we are behind the times. We are like some old fashioned sailing ship, divided by solid wooden bulkheads into separate and cumbersome compartments." The period between 1906 and 1911, saw the establishment of banks inspired by the Swadeshi movement. The Swadeshi movement inspired local businessmen and political figures to found banks of and for the Indian community. A number of banks established then have survived to the present such as Bank of India, Corporation Bank, Indian Bank, Bank of Baroda, Canara Bank and Central Bank of India. The fervour of Swadeshi movement lead to establishing of many private banks in Dakshina Kannada and Udupi district which were unified earlier and known by the name South Canara ( South Kanara ) district. Four nationalised banks started in this district and also a leading private sector bank. Hence undivided Dakshina Kannada district is known as "Cradle of Indian Banking".

Company Profile

PROFILE OF THE INDUSTRY


The Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector, as part of the RBI's 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.

OVERVIEW OF THE INDUSTRY


HDFC is India's premier housing finance company and enjoys an impeccable track record in India as well as in international markets. Since its inception in 1977, the Corporation has maintained a consistent and healthy growth in its operations to remain the market leader in mortgages. Its outstanding loan portfolio covers well over a million dwelling units. HDFC has developed significant expertise in retail mortgage loans to different market segments and also has a large corporate client base for its housing related credit facilities. With its experience in the financial markets, a strong market reputation, large shareholder base and unique consumer franchise, HDFC was ideally positioned to promote a bank in the Indian environment. As on 31st December, 2009 the authorized share capital of the Bank is Rs. 550 crore. The paidup capital as on said date is Rs. 455,23,65,640/- (45,52,36,564 equity shares of Rs. 10/- each). The HDFC Group holds 23.87 % of the Bank's equity and about 16.94 % of the equity is held by the ADS Depository (in respect of the bank's American Depository Shares (ADS) Issue). 27.46 % of the equity is held by Foreign Institutional Investors (FIIs) and the Bank has about 4,58,683 shareholders.

The shares are listed on the Bombay Stock Exchange Limited and The National Stock Exchange of India Limited. The Bank's American Depository Shares (ADS) are listed on the New York Stock Exchange (NYSE) under the symbol 'HDB' and the Bank's Global Depository Receipts (GDRs) are listed on Luxembourg Stock Exchange under ISIN No US40415F2002.

Mr. Jagdish Capoor took over as the bank's Chairman in July 2001. Prior to this, Mr. Capoor was Deputy Governor of the RBI

MANAGEMENT
The Managing Director, Mr. Aditya Puri, has been a professional banker for over 25 years, and before joining HDFC Bank in 1994 was heading Citibank's operations in Malaysia.

The Bank's Board of Directors is composed of eminent individuals with a wealth of experience in public policy, administration, industry and commercial banking. Senior executives representing HDFC are also on the Board.

Senior banking professionals with substantial experience in India and abroad head various businesses and functions and report to the Managing Director. Given the professional expertise of the management team and the overall focus on recruiting and retaining the best talent in the industry, the bank believes that its people are a significant competitive strength.

BOARD OF DIRECTORS
Mr. Jagdish Capoor, Chairman Mr. Keki Mistry Mrs. Renu Karnad Mr. Arvind Pande Mr. Ashim Samanta Mr. Chander Mohan Vasudev Mr. Gautam Divan Dr. Pandit Palande Mr. Aditya Puri, Managing Director Mr. Harish Engineer, Executive Director Mr. Paresh Sukthankar, Executive Director Mr. Vineet Jain (upto 27.12.2008)

REGISTERED OFFICE
HDFC Bank House, Senapati Bapat Marg, Lower Parel, Website: www.hdfcbank.com

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

Retail Banking Services The objective of the Retail Bank is to provide its target market customers a full range of financial products and banking services, giving the customer a one-stop window for all his/her banking requirements. The products are backed by world-class service and delivered to customers

through the growing branch network, as well as through alternative delivery channels like ATMs, Phone Banking, NetBanking and Mobile Banking. The HDFC Bank Preferred program for high net worth individuals, the HDFC Bank Plus and the Investment Advisory Services programs have been designed keeping in mind needs of customers who seek distinct financial solutions, information and advice on various investment avenues. The Bank also has a wide array of retail loan products including Auto Loans, Loans against marketable securities, Personal Loans and Loans for Two-wheelers. It is also a leading provider of Depository Participant (DP) services for retail customers, providing customers the facility to hold their investments in electronic form. HDFC Bank was the first bank in India to launch an International Debit Card in association with VISA (VISA Electron) and issues the Mastercard Maestro debit card as well. The Bank launched its credit card business in late 2001. By March 2009, the bank had a total card base (debit and credit cards) of over 13 million. The Bank is also one of the leading players in the merchant acquiring business with over 70,000 Point-of-sale (POS) terminals for debit / credit cards acceptance at merchant establishments. The Bank is well positioned as a leader in various net based B2C opportunities including a wide range of internet banking services for Fixed Deposits, Loans, Bill Payments, etc.

Treasury Within this business, the bank has three main product areas - Foreign Exchange and Derivatives, Local Currency Money Market & Debt Securities, and Equities. With the liberalisation of the financial markets in India, corporates need more sophisticated risk management information, advice and product structures. These and fine pricing on various treasury products are provided through the bank's Treasury team. To comply with statutory reserve requirements, the bank is required to hold 25% of its deposits in government securities. The Treasury business is responsible for managing the returns and market risk on this investment portfolio

Awards and Achievements - Banking Services


2010 Global Finance Award 2 Banking Technology Awards 2009 SPJIMR Marketing Impact Awards (SMIA) 2010 Business Today Best Employer Survey 2009 Business India Businessman of the Year Award for 2009. Businessworld Best Most Tech-savvy Bank Bank Awards 2009 Outlook Money NDTV Profit Awards 2009 Best Bank Mr. Aditya Puri, MD, HDFC Bank Listed in top 10 Best Employers in the country 2nd Prize 1) Best Risk Management Initiative and 2) Best Use of Business Intelligence. Best Trade Finance Provider in India for 2010

Forbes Asia GQ India's Man of the Year (Business) UTI MF-CNBC TV18 Financial Advisor Awards 2009 Business Standard Best Banker Award Fe Best Bank Awards 2009

Fab 50 Companies in Asia Pacific Mr. Aditya Puri, MD, HDFC Bank

Best Performing Bank

Mr. Aditya Puri, MD, HDFC Bank

- Best Innovator of the year award for - Second Best Private Bank in India - Best in Strength and Soundness

our MD Mr. Aditya Puri

Award

Euromoney Awards Best Bank in India 2009 Economic Times Brand Equity & Nielsen Research annual survey 2009 Asia Money 2009 Awards IBA Banking Technology Awards 2009 Global Finance Award Best Trade Finance Bank in India for 2009 Best IT Governance Award - Runner up Best Domestic Bank in India Most Trusted Brand - Runner Up

IDRBT Banking Technology Excellence Award 2008 Asian Banker Excellence in Retail Financial Services

Best IT Governance and Value Delivery

Asian Banker Best Retail Bank in India Award 2009

Corporate Governance:
The bank was among the first four companies, which subjected itself to a Corporate Governance and Value Creation (GVC) rating by the rating agency, The Credit Rating Information Services of India Limited (CRISIL).

The rating provides an independent assessment of an entity's current performance and an expectation on its "balanced value creation and corporate governance practices" in future. The bank has been assigned a 'CRISIL GVC Level 1' rating, which indicates that the bank's capability with respect to wealth creation for all its stakeholders while adopting sound corporate governance practices is the highest.

We are aware that all these awards are mere milestones in the continuing, neverending journey of providing excellent service to our customers. We are confident, however, that with your feedback and support, we will be able to maintain and improve our services.

Technology:
HDFC Bank operates in a highly automated environment in terms of information technology and communication systems. All the bank's branches have online connectivity, which enables the bank to offer speedy funds transfer facilities to its

customers. Multi-branch access is also provided to retail customers through the branch network and Automated Teller Machines (ATMs).

The Bank has made substantial efforts and investments in acquiring the best technology available internationally, to build the infrastructure for a world class bank. The Bank's business is supported by scalable and robust systems which ensure that our clients always get the finest services we offer.

The Bank has prioritised its engagement in technology and the internet as one of its key goals and has already made significant progress in web-enabling its core businesses. In each of its businesses, the Bank has succeeded in leveraging its market position, expertise and technology to create a competitive advantage and build market share.

Mission and Business Strategy:


Our mission is to be "a World Class Indian Bank", benchmarking ourselves against international standards and best practices in terms of product offerings, technology, service levels, risk management and audit & compliance. The objective is to build sound customer franchises across distinct businesses so as to be a preferred provider of banking services for target retail and wholesale customer segments, and to achieve a healthy growth in profitability, consistent with the Bank's risk appetite. We are committed to do this while ensuring the highest levels of ethical standards, professional integrity, corporate governance and regulatory compliance.

Our business strategy emphasizes the following : 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 scaleable systems to deliver more products to

more customers and to 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 inefficiencies 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.

HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable network of 1,725 branches spread in 771 cities across India. All branches are linked on an online real-time basis. Customers in over 500 locations are also serviced through Telephone Banking. The Bank's expansion plans take into account the need to have a presence in all major industrial and commercial centres where its corporate customers are located as well as the need to build a strong retail customer base for both deposits and loan products. Being a clearing/settlement bank to various leading stock exchanges, the Bank has branches in the centres where the NSE/BSE have a strong and active member base.

The Bank also has 3,898 networked ATMs across these cities. Moreover, HDFC Bank's ATM network can be accessed by all domestic and international Visa/MasterCard, Visa Electron/Maestro, Plus/Cirrus and American Express Credit/Charge cardholders.

DATA ANALYSIS & INTERPRETATION

RISK MANAGEMENT SYSTEM :

Assuming and managing risk is the essence of business decision-making. Investing in a new technology, hiring a new employee, or launching a marketing campaign is all decisions with uncertain outcomes. As a result all the major management decisions of how much risk to take and how to manage the risk.

The implementation of risk management varies from business to business, from one management style to another and from one time to another. Risk management in the financial services industry is different from others. Circumstances, Institutions and Managements are different. On the other hand, an investment decision is no recent history of legal and political stability, insights into the potential hazards and opportunities.

Many risks are managed quantitatively. Risk exposure is measured by some numerical index. Risk cost tradeoff many tools are described by numerical valuation formulas.

Risk management can be integrated into a risk management system. Such a system can be utilized to manage the trading position of a small-specialized division or an entire financial institution. The modules of the system can be implemented with different degrees of accuracy and sophistication.

RISK MANAGEMENT SYSTEM

Dynamics of risk factors

Cash flows Generator

Arbitrage Pricing Model

Price and Risk Profile Of Contingent Claims

Dynamic Trading Rules

Risk Optimizer

Target Risk Profile

1.2 RISK MANAGEMENT SYSTEM

Arbitrage pricing models range from simple equations to large scale numerically sophisticated algorithms. Cash flow generators also vary from a single formula to a simulator that accounts for the dependence of cash flows on the history of the risk factors.

Financial engineers are continuously incorporating advances in econometric techniques, asset pricing models, simulation techniques and optimization algorithms to produce better risk management systems.

The important ingredient of the risk management approach is the treatment of risk factors and securities as an integrated portfolio. Analyzing the correlation among the real, financial and strategic assets of an organization leads to clear understanding of risk exposure. Special attention is paid to risk factors, which translate to correlation among the values of securities. Identifying the correlation among the basic risk factors leads to more effective risk management.

CONCLUSION

The burden of the Risk and its Costs are both manageable and transferable. Financial service firms, in the addition to managing their own risk, also sell financial risk management to others. They sell their services by bearing customers financial risks through the products they provide. A financial firm can offer a fixed-rate loan to a borrower with the risk of interest rate movements transferred from the borrower to the . Financial innovations have been concerned with risk reduction then any other subject. With the possibility of managing risk near zero, the challenge becomes not how much risk can be removed.

Financial services involve the process of intermediation between those who have financial resources and those who need them, either as a principal or as an agent. Thus, value breaks into several distinct functions, and it includes the intermediation of the following : Maturity Preference mismatch, Default, Currency Preference mis-match, Size of transaction and Market access and information.

RISK MANAGEMENT IN ICICI

The were required by the to introduce effective risk management systems to cover Credit risk, market risk and Operations risk on priority.

Narasimham committee II , advised to address market risk in a structured manner by adopting Asset and Liability Management practices with effect from April 1st 1989.

Asset and liability management (ALM) is the Art and Science of choosing the best mix of assets for the firms asset portfolio and the best mix of liabilities for the firms liability portfolio. It is particularly critical for Financial Institutions.

For a long time it was taken for granted that the liability portfolio of financial firms was beyond the control of the firm and so management concentrated its efforts on choosing the asset mix. Institutions treasury department used the funds provided by deposits to structure an asset portfolio that was appropriate for the given liability portfolio.

With the advent of Certificate Of Deposits (CDs), had a tool by which to manipulate the mix of liabilities that supported their Asset portfolios, which has been one of the active management of assets and liabilities.

Asset and liability management program evolve into a strategic tool for management, the main elements of the ALM system are :

 ALM INFORMATION.

 ALM ORGANISATION.

 ALM FUNCTION.

ALM INFORMATION :

ALM is a risk management tool through which Market risk associated with business are identified, measured and monitored to maintain profits by restructuring Assets and Liabilities. The ALM framework needs to be built on sound methodology with necessary information system as back up. Thus the information is key element to the ALM process.

There are various methods prevalent worldwide for measuring risks. These range from the simple Gap statement to extremely sophisticate and data intensive Risk adjusted profitability measurement (RAPM) methods. The central element for the entire ALM exercise is the availability of adequate and accurate information.

However, the existing systems in many Indian do not generate information in manner required for the ALM. Collecting accurate data is the biggest challenge before the s, particularly those having wide network of branches, but lacking full-scale computerization.

Therefore the introduction of these information systems for risk measurement and monitoring has to be addressed urgently.

The large network of branches and the lack of support system to collect information required for the ALM which analysis information on the basis of residual maturity and behavioral pattern, it would take time for in the present state to get the requisite information.

ALM ORGANISATION :

Successful implementation of the risk management process requires strong commitment on the part of senior management in the to integrate basic operations and strategic decision making with risk management. The Board of Directors should have overall responsibility for management of risk and should decide the risk management policy of the , setting limits for liquidity, interest rate, foreign exchange and equity / price risk. The Asset Liability Management Committee (HDFC) consisting of the senior management, including CEO/CMD should be responsible for ensuring adherence to the limits set by the Board of Directors as well as for deciding the business strategy of the (on the assets and liabilities sides) in line with the budget and decided risk management objective. The ALM support group consisting of operation staff should be responsible for analyzing, monitoring and reporting the risk profiles to the HDFC. The staff should also prepare forecasts (simulations) showing the effects of various possible changes in market condition related to the balance sheet and recommend the action needed to adhere to internal limits, The HDFC is a decision-making unit responsible for balance sheet planning from a riskreturn perspective including the strategic management of interest rate and liquidity risks. Each has to decide on the role of its HDFC, its responsibility as also the decision to be taken by it. The business and risk management strategy of the should ensure that the operates within the limits / parameters set by the Board. The business issues that an HDFC would consider, inter alia, will include product pricing for deposits and advances, desired maturity profile and mix of the incremental Assets and Liabilities, etc. in addition to monitoring the risk levels of the , the HDFC should review the results of and progress in implementation of the decisions made in the previous meetings. The HDFC would also articulate the current interest rate view of the and base its decisions for future business strategy on this view. In respect of this funding policy, for

instance, its responsibility would be to decide on source and mix of liabilities or sale of assets. Towards this end, it will have to develop a view on future direction of interest rate movements and decide on funding mixes between fixed vs. floating rate funds, wholesale vs. retail deposits, Money markets vs. Capital market funding, domestic vs. foreign currency funding etc. Individual will have to decide the frequency for holding their HDFC meetings.

TYPICAL BUSINESS OF HDFC y Reviewing of the impact of the regulatory changes on the industry.

Overseeing the budgetary process;

Reviewing the interest rate outlook for pricing of assets and liabilities (Loans and Deposits)

Deciding on the introduction of any new loan / deposit product and their impact on interest rate / exchange rate and other market risks;

Reviewing the asset and liability portfolios and the risk limits and thereby, assessing the capital adequacy;

Deciding on the desired maturity profile of incremental assets and liabilities and thereby assessing the liquidity risk; and

Reviewing the variances in actual and projected performances with regard to Net Interest Margin(NIM), spreads and other balance sheet ratios.

COMPOSITION OF HDFC

The size ( number of members) of HDFC would depend on the size of each institution, business mix and organizational complexity, To ensure commitment of the Top management and timely response to market dynamics, the CEO/MD or the GM should head the committee. The chiefs of Investment, Credit, Resources Management or Planning, Funds Management / Treasury (domestic), etc., can be members of the committee. In addition, the head of the computer (technology) Division should also be an invitee for building up of

MIS and related computerization. Some may even have Sub-Committee and Support Groups.

ALM ORGANIZATION consists of following categories :

 ALM BOARD  HDFC  ALM CELL  COMMITTEE OF DIREC

ALM BOARD

The Board of management should have overall responsibility for management of risk and should decide the risk management policy of the and set limits for liquidity and interest rate risks.

HDFC

The has constituted an Asset- Liability committee (HDFC). The committee may consists of the following members.

i) General Manager /

Head of Committee

ii) General Manager (Loans & Advances)

Member

iii) General Manager (CMI & AD)

Member

iv) AGM / Head of the ALM Cell

Member

The HDFC is a decision making unit responsible for ensuring adherence to the limits set by board as well as for balance sheet planning from risk return perspective including the strategic management of interest rate and liquidity risks, in line with the budget and decided risk management objectives.

The Business issues that an HDFC would consider interlaid will include fixation of interest rates for both deposits and advances, desired maturity profile of the incremental assets and liabilities etc.

The HDFC would also articulate the current interest rate due of the and base its decisions for future business strategy on this view. In respect of funding policy, for instance, its responsibility would be decided on source and mix of liability.

Individual will have to decide the frequency for their HDFC meetings. However, it is advised that HDFC should meet at least once in a fortnight. The HDFC should review results of and process in implementation of the decisions made in the previous meetings

ALM CELL

The ALM desk / cell consisting of operating staff should be responsible for analyzing, monitoring and reporting the profiles to the HDFC. The staff should also prepare forecasts (simulations) showing the effects of various possible changes in market conditions related to the balance sheet and recommend the action needed to adhere to internal limits.

COMMITTEE OF DIRECTORS

They should also constitute professional, management and supervisory committee, consisting of three to four directors, which will oversee the implementation of the ALM system, and review its functioning periodically.

ALM PROCESS

The scope of ALM function can be described as follows:

1. Liquidity Risk Management

2. Interest Rate Risk Management

3. Currency Risk Management

4. Settlement Risk Management

5. Basis Risk Management

The RBI guidelines mainly address Liquidity Risk Management and Interest Rate Risk Management.

The following are the concepts discussed for analysis of s Asset-Liability Management under above mentioned risks.

Liquidity Risk

Maturity profiles

Interest rate risk

Gap analysis

1. Liquidity Risk Management :

Measuring and managing liquidity needs are vital activities of the s. By assuring a ability to meet its liability as they become due, liquidity management can reduce the probability of an adverse situation development. The importance of liquidity transcends individual institutions, as liquidity shortfall in one institution can have repercussions on the entire system. Liquidity risk management refers to the risk of maturing liability not finding enough maturing assets to meet these liabilities. It is the potential inability to meet the s liability as they

became due. This risk arises because borrows funds for different maturities in the form of deposits, market operations etc. and lock them into assets of different maturities.

Liquidity Gap also arises due to unpredictability of deposit withdrawals, changes in loan demands. Hence measuring and managing liquidity needs are vital for effective and viable operations of the .

Liquidity measurement is quite a difficult task and usually the stock or cash flow approaches are used for its measurement. The stock approach used certain liquidity ratios. The liquidity ratios are the ideal indicators of liquidity of operating in developed financial markets, the ratio do not reveal the real liquidity profile of which are operating generally in a fairly illiquid market. The assets, which are commonly considered as liquid like Government securities, have limited liquidity when the market and players are in one direction. Thus analysis of liquidity involves tracking of cash flow mismatches.

The statement of structural liquidity may be prepared by placing all cash inflows and outflows in the maturity ladder according to the expected timing of cash flows.

The MATURITY PROFILE could be used for measuring the future cash flows in different time bands.

The position of Assets and Liabilities are classified according to the maturity patterns a maturing liability will be a cash outflow while a maturing asset will be a cash inflows. The measuring of the future cash flows of is done in different time buckets.

The time buckets, given the statutory Reserve cycle of 14 days may be distributed as under: 1. 1 to 14 days

2. 15 to 28 days

3. 29 days and upto 3 months

4. Over 3 months and upto 6 months

5. Over 6 months and upto 1 year

6. Over 1 year and upto 3 years

7. Over 3 years and upto 5 years

8. Over 5 years. MATURITY PROFILE LIQUIDITY

HEAD OF ACCOUNTS

Classification into time buckets

A.OUTFLOWS 1.Capital, Reserves and Surplus Over 5 years bucket.

2.Demand Deposits (Current & Savings Deposits)

Demand Deposits may be classified into volatile and core portions, 25 % of deposits are generally withdraw able on demand. This portion may be treated as volatile. While volatile portion may be placed in the first time bucket i.e., 1-14 days, the core portion may be placed in 1-2 years, bucket.

3. Term Deposits

Respective maturity buckets.

4. Borrowings 5. Other liabilities and provisions (i) Bills Payable

Respective maturity buckets.

(i)

1-14 days bucket

(ii)

Inter-office Adjustment

(ii)

Items not representing cash payable may be placed in over 5 years bucket

(iii)

Provisions for NAPs

(iii)

a) sub-standard b) doubtful and Loss . (iv) provisions for depreciation in Investments (iv)

a) 2-5 years bucket. b) Over 5 years bucket

Over 5 years bucket.

(v)

provisions for NAPs in investment

(v)

a)

2-5 years bucket.

b) Over 5 years bucket

(vi)

provisions for other purposes (vi) Respective buckets depending on the purpose.

B. INFLOWS

1. Cash 2. Balance with other s (i) Current Account

1-14 days bucket.

(i)

Non-withdraw able portion on account of stipulations of minimum balances may be shown Less than 1-14 days bucket.

(ii)

Money at call and short Notice, Term Deposits and other Placements

(ii)

Respective maturity buckets.

3. Investments (i) Approved securities (i) Respective maturity buckets excluding the amount required to be reinvested to maintain SLR (ii) Corporate Debentures and (ii) Respective Maturity buckets. Investments classified as NPAs Should be shown under 2-5 years bucket (sub-standard) or over 5 shares, Mutual years bucket (doubtful and loss). (iii) Over 5 years bucket.

bonds, CDs and CPs, redeemable preference units of

Funds (close ended). Etc. (iii) Share / Units of Mutual Funds (open ended) (iii) Investment subsidiaries / Joint Ventures. in (iv) Over 5 years bucket.

4. Advances (performing / standard) (i) Bills Purchased and Discounted (including bills DUPN) (iii) Cash Credit / Overdraft (including TOD) and Demand Loan component of Working Capital. under (i) Respective Maturity buckets. (ii) should undertake a styud of behavioral and seasonal pattern of a ailments based on outstanding and the core and volatile portion should be identified. While the volatile portion could be shown in the respective maturity bucket. The core portion may be shown under 1-2 years bucket. (iii) Term Loans (iii) Interim cash flows may be shown under respective maturity buckets.

5. NPAs b. Sub-standard c. Doubtful and Loss (I) 2-5 years bucket. (ii) Over 5 years bucket.

6. Fixed Assets

Over 5 years bucket.

7. Other-office Adjustment (i) Inter-office Adjustment (i) As per trend analysis, Intangible items or items not representing cash

receivables may be shown in over 5 years bucket. (ii) Others (i) Respective maturity

buckets. Intangible assets and assets not representing cash receivables may be shown in over 5 years bucket.

Terms used:

CDs: Certificate of Deposits.

CPs: Commercial Papers.

DTL PROFILE: Demand and Time Liabilities. Inter office adjustment:

Outflows: Net Credit Balances

Inflows: Net Debit Balances

Other Liabilities: Cash payables, Income received in advance, Loan Loss and Depreciation in Investments.

Other assets: Cash Receivable, Intangible Assets and Leased Assets.

2.Interest Rate Risk :

Interest Rate Risk refers to the risk of changes in interest rates subsequent to the creation of the assets and liabilities at fixed rates. The phased deregulations of interest rates and the operational flexibility given to in pricing most of the assets and liabilities imply the need for system to hedge the interest rate risk. This is a risk where changes in the market interest rates might adversely affect a s financial conditions.

The changes in interest rates affect in large way. The immediate impact of change in interest rates is on s earnings by changing its Net Interest Income (NII). A long term impact of changing interest rates is on s Market Value of Equity (MVE) or net worth as the economic value of s assets, liabilities and off-balance sheet positions get affected due to variation in market interest rates.

The risk from the earnings perspective can be measured as changes in the Net Interest Income (NII) OR Net Interest Margin (NIM).

There are many analytical techniques for measurement and management of interest rate risk. In MIS of ALM, slow pace of computerization in and the absence of total deregulation, the traditional GAP ANALYSIS is considered as a suitable method to measure the interest rate risk.

COMPARATIVE ASSET LIABILITY SHEET OF THE YEARENDING 31ST MARCH 2006-07 PARTICULARS ASSETS CURRENT ASSETS CASH & BANK BALANCE SUNDRY DEBTORS DEPOSITS INVENTORIES TOTAL LOANS &GROUP CONCERNS (INTER CORPORATE BODIES) ADVANCE TO CANE GROWERS STAFF ADVANCE OTHER ADVANCE TOTAL TOTAL CURRENT ASSETS FIXED ASSETS LAND FACTORY BUILDINGS NON FACTORY BUILDINGS PLANT & MACHINERY
FURNITURES & FIXTURES

2006

2007

ABSOLUTEINC REASE/

CHANGEIN %

2,88,272 1,53,226 2,64,600 9,39,57,410 9,48,83,080 1,47,40,135 1,07,85,042 2,72,023 7,40,058 2,65,37,258 12,14,20,338 67,28,750 2,48,18,492 99,56,491 4,63,31,692 5,66,109 8,95,42,436

14,70,425 63,467 4,07,046 14,71,99,579 15,05,13,360 2,59,27,598 1,19,58,868 2,21,082 7,30,579 3,88,38,127 18,93,51,487 1,33,5,275 2,29,32,318 94,58,666 5,77,53,189 8,24,981 10,50,01,624

11,82,152 -89,759 1,42,446 5,32,42,169 5,56,30,280 1,11,87,463 11,73,826 -50,941 -9,474 1,23,00,869 -2,69,51,931 66,21,525 -18,86,174 -4,97,825 1,14,21,497 2,58,872 1,54,59,187

410.08 58.58 53.83 568.98 58.63 75.89 18.88 18.72 1.28 46.35 12.46 98.41 70.59 5.00 24.65 45.72 17.26

TOTAL FIXED ASSETS MISCELLANEOUS EXPENDITURES PRELIMINARY EXPENSES WRIT TERN OF TOTAL ME TOTALASSETS LIABILITIES PAID UP EQUITY SHARES CAPITAL RESERVES& SURPLUS TOTAL CAPITAL &RESERVE LONGTERMLIABILITES SECURED LOANS UNSECURED LOANS

3,66,900

2,44,600

-1,22,300

33.33

21,13,29,674 2,71,11,890 37,22,163 3,08,34,053

29,45,97,711 2,71,11,890 1,11,61,236 3,82,73,126

-8,32,68,037 74,39,073 74,39,073

39.40 199.85 199.85

69,14,784 16,56,76,746

43,69,20,357 17,84,72,806

2,54,55,579 1,27,96,060

36.81 7.72

TOTAL CAPITAL &RESERVES LONGTERM LIABILLTES SECURED LOANS UNSECURED LOANS TOTAL LONG TERM LIABILITIES CURRENT LIABILITY &PROVISON SUNDRY CREDITORS FOR MATERIALS PROVISION FOR TAX TOTAL CURRENT LIABILITIES TOTAL LIABILITIES

3,08,34,053

3,82,73,126

74,39,073

199.85

69,14,784 16,56,76,746 17,25,91,530

43,69,20,357 17,84,72,806 2,22,16,4841

2,54,55,579 1,27,96,060 4,95,73,311

36.81 7.72 28.72

62,35,100 79,04,091 21,13,29,674

2,70,29,530 3,41,59,744 29,45,97,711

2,07,94,430 2,62,55,653 8,32,68,037

333.51 -332.18 39.40

INTERPRETATION:

The comparative balance sheet of the co-reveals that during the year 2006 fixed assets increased by RS 1,54,59,187 I.e 17.26%while long term liability from outsides (loans) has increased by 4,95,73,311 i.e.28.72% and there is neither increase nor decrease in share capital. The pattern of investment towards Fixed Assets reveals that long term sources of funds are utilized for fixed assets. The current assets has been decreased by 2, 69, 51,931by 12.46%. the current liabilities have increased by 79,04,091 to 3,41,59,744 by Rs.2,62,55,653 i.e.332.18%. The deviation of the current assets of liabilities is very low. In this year the co-working capital positions it not good.

Reserves and surplus have increased from 37, 22,163 to 1, 11, 61,236 the amount of RS. 74, 39,073. It shows that the companys profitability position of the company is good. The overall Asset position of the HDFC. During the period of study is satisfactory.

COMPARATIVE ASSET LIABILITY SHEET OF THE YEAR ENDING 31ST MARCH 2007-08 ABSOLUTE PARTICULARS 2007 2008 INCREASE/DECREASE ASSETS CURRENT ASSETS CAST& BANK 14,70,425 14,121,860 1,26,51,435 BALANCE SUNDRY 63,467 65,10,948 64,47,491 DEBTORS DEPOSITS 4,07,046 2,91,926 -1,16,020 INVENTORIES 14,71,99,579 11,75,48,402 -102,82,84,45 TOTAL LOANS & ADVANCS STAFF ADVANCE OTHER ADVANCE TOTAL TOTALCURRENT ASSETS FIXED ASSETS LAND FACTORY BUILDINGS NON FACTORY BUILDINGS PLANT & MACHINERY FURNITURES & FIXTURES TOTAL FIXED ASSETS PRELIMINARY EXPENSES WRITTEN OF TOTAL ME TOTAL ASSETS LIABILITES PAID UP EQUITY SHARES CAPITAL RESERVES & SURPLUS TOTAL CAPITAL 15,05,13,360 14,25,96,956 -79,16,404

CHANGE IN%

860.39 10,158,82 28.44 -698.56 5.265

2,21,082 7,30,579 3,88,38,127 18,93,51,487

1,73,317 8,59,690 5,99,92,347 20,25,89,303

-47,765 1,29,111 2,11,54,220 1,32,37,816

21.61 54.46 54.46 6.99

1,33,50,275 2,29,32,318 94,58,666 5,77,53,189 8,24,981 10,50,01,624 2,44,600

1,33,50,275 2,06,71,981 89,85,733 7,16,13,335 9,07,913 11,78,44,260 1,22,300

-22,60,337 -4,72939 -50,5,05,91,854 82,932 1,28,42,638 1,22,300

9.86 4.99 87.6 10.05 12.23 50.00

29,45,97,711

32,05,55,863

2,59,58,152

8.81

2,71,11,890

2,71,11,890

1,11,61,236 3,82,73,126

3,46,30,113 6,17,42,003

2,34,68,877 2,34,68,877

210.27 61.32

&RESERVES LONGTERM LIABILITES SECURED LOANS UNSECURED LOANS TOTAL LONG TERM LIABILITIES SUNDRY CREDITORS FOR MATERIALS SUNDRY CREDITORS FOR EXPENSES OTHER LIABILITIES & PROVISIONS TOTAL CURRENT LIABILITIES TOTAL LIABILITIES

43,69,20,357 17,84,72,806 2,22,16,4841

19,10,18,611 1,94,57,888 27,22,18,502

1,25,45,805 -4,17,46,247 -1,16,88,342

7.03 95.55 5026

2,70,29,530

3,00,94,997

30,65,467

11.34

65,39,347

2,68,009

-38,59,338

59.02

5,90,867

48,81,795

42,90.928

726.21

3,41,59,744

4,83,37,361

14,177,617

41.50

29,45,97,711

32,05,55,863

2,59,58,152

8.81

INTERPRETATION:

The comparative balance sheet of the co-reveals that during the year 2007 fixed assets increased by RS 1,28,42,638 i.e,12.23%.while long term liability from outsides (loans) has decreased by 1,16,88,342 i.e.50.26% and there is neither increase nor decrease in share capital. The pattern of investment towards Fixed Assets reveals that long term sources of funds are utilized for fixed assets.

The current assets have been increased by 1, 32, 37,816 by 6.99%. the current liabilities have increased by 3,41,59,744 to 4,83,37,361by Rs.1,41,77,617 i.e.41.50%. The deviation of the current assets of liabilities is very low. In this year the co-working capital positions it not good.

Reserves and surplus have increased from 1,11,61,236 to 3,43,30,113 the amount of RS.2,34,68,877. It shows that the companys profitability position of the company is good. The overall Asset position of the HDFC. During the period of study is satisfactory.

COMPARATIVE ASSET LIABILITY SHEET AS ON 31ST MARCH 2008-09


PARTICULARS ASSETS CURRENT ASSETS CASH &BANK BALANCE SUNDRY DEBTORS DEPOSITS CENVANT INCOME TAX ADVANCE TAX INVENTORIES EXCISE DUTY PAID IN ADVANCE TAX DETECTED AT SOURCE TOTAL LOANS& ADVANCS LOANS & GROUP CONCERNS (INTER CORPORATE BODIES) ADVANCE TO CANE GROWERS STAFF ADVANCE OTHER ADVANCE TOTAL TOTALCURRENT ASSETS TOTAL FIXED ASSETS MISCELLANIOUS EXPENDITURES PRELIMINARY EXPENSES WRITTEN OF TOTAL ME TOTAL ASSETS LIABILITES SHARE CAPITAL & RESULTS & SURPLUS PAID UP EQUITY SHARES CAPITAL 2008 2009 ABSOLUTE INCREASE/ DECREAES CHANGE IN %

14,121,860 65,10,948 2,91,926 24,03,543 2,49,757 12,58,000 11,75,48,402 1,52,682 59,838 14,25,96,956

15,11,751 16,22,803 8,27,407 64,25,816 6,14,801 19,50,000 21,16,88,390 5,44,356 22,51,85,387 2,09,12,698 13,34,70,060 80,04,767 3,99,273 6,41,023 16,34,27,821 55,20,41,029 11,29,58,523

-1,26,10,109 -48,88,145 5,35,544 40,22,273 3,65,044 6,92,000 94,13,99,88 3,91,674 -59,838 -8,25,88,431

89.29 75.07 183.45 167.34 146.15 55.00 80.88 256.52 100 57.99

4,09,11,931 1,80,47,409 1,73,317 8,59,690 5,99,92,347 20,25,89,303 11,78,44,260

-199,99,233

48.88

2,25,956 -21,86,67 10,34,35,474 34,94,51,726 -48,85,737

130.37 25.43 172.41 172.49 4.14

122,300

19,57,834

18,35,534

15,00.82

32,05,55,863

50,35,29,565

18,29,73,702

57.08

2,71,11,890

2,71,11,890

RESERVES & SURPLUS TOTAL CAPITAL &RESERVES LONGTERM LIABILITES SECURED LOANS UNSECURED LOANS TOTAL LONG TERM LIABILITIES CURRENT LIABILTY & PROVISON SUNDRY CREDITORS FOR MATERIALS SUNDRY CREDITORS FOR EXPENSES OTHER LIABILITIES & PROVISIONS PROVISION FOR TAX TOTAL CURRENT LIABILITIES
TOTAL LIABILITIES

3,46,30,113 6,17,42,003

5,08,12,447 7,79,24,337

1,61,82,334 1,61,82,334

46.72 26.20 58.35

19,10,18,611 1,94,57,888 27,22,18,502

7,95,55,940 28,88,46,517 44,63,26,794

-11,14,62,671 26,93,88,621 17,41,08,292

1384.47 63.95 63.95

3,00,94,997 2,68,009 48,81,795 1,06,80,560 4,83,37,361 32,05,55,863

5,54,93,648 14,12,857 2,96,446 5,72,02,771 50,35,29,565

2,53,98,471 11,44,848 -45,85,349 -1,06,80,560 88,65,410 18,29,73,702

84.39 427.16 93.92 100 183.40 5.08

INTERPRETATION:

The comparative balance sheet of the co-reveals that during the year 2008 fixed assets decreased by RS 48,85,737 I.e 4.14%while long term liability from outsides (loans) has increased by 17,41,08,292 i.e, 4.14%and there is neither increase nor decrease in share capital. The pattern of investment towards Fixed Assets reveals that long term sources of funds are utilized for fixed assets.

The current assets has been increased by 34,94,51,726i.e,172.49% the current liabilities have increased by 4,83,37,361 to 5,72,62,771 by Rs 88,65,410i.e.183.40%. The deviation of the current assets of liabilities is very low. In this year the co-working capital positions it not good.

Reserves and surplus have increased from 3,46,30,113 to 5,08,12,447 by rs 1,61,82,334 . It shows that the companys profitability position of the company is good. The overall Asset position of the HDFC. During the period of study is satisfactory.

COMPARTIVE ASSET LIABILITY SHEET OF YEAR ENDING 31ST MARCH2010


PARTICULARS ASSETS CASH &BANK BALANCE SUNDRY DEBTORY DEPOSITS CENVANT TAX DEDUCTED SOURCE ADVANCE TAX INVENTORIES INCOME TAX TOTAL OTHER ADVANCES TOTAL TOTAL CURRENT ASSETS FIXED ASSETS TOTAL ASSETS PAID UP EQUITY SHARE CAPITAL RESERVES & SURPLUS TOTAL CAPITAL & RESERVES 2009 15,11,751 2010 1,99,36,365 ABSOULT INCRESE/DECRESE 18,42,46,614 CHANGE IN% 1218.75

16,22,803 8,27,407 64,25,816 19,50,000 21,16,88,390 61,48,01 22,51,85,387 85,96,90 16,34,27,821 38,86,13,208,

16,50,832 8,71,404 10,63,21,121 3,647 16,23,415 15,01,52,853 29,63,15,752 10,07,589 10,66,4695 30,69,80,447

28,209 43,997 9,98,95,305 3,647 -3,26,585 61,535537 -6,14,801 7,11,30,365 147,899 -15,27,63,126 -8,16,32761

1.73 5.32 1554.59 16.75 29.07 100 31.59 17.20 93.47 21.00

11,29,58,523 50,35,29,565 2,71,11,890 5,08,12,447 7,79,24,337

1,50,86,98113 1,8,56,78,560 2,71,11,890 35,39,1549 14,25,03,439

13,95,73,9590 1,31,21,48,995 -1,54,20,898 6,45,79,102

1235.62 260.59 30.35 82.87

LONGTERM LIABILITES SECURED LOANS UNSECURED LOANS TOTAL LONG TERM LIABILITIES SUNDRY CREDITORS FOR MATERIALS SUNDRY CREDITORS FOR EXPENSES OTHER LIABILITIES & PROVISIONS 7,95,55,940 28,88,46517 44,63,26794 5,54,93,648 14,12,857 2,96,446 1,02,34,73,851 61,83,41,930 1,78,43,19,220 24,77,0016 48,11,183 14,37,208 94,3917911 32,9495,413 13,37,99,2426 -30,72,3632 33,98,326 11,40,762 1186.48 114.07 299.78 55.36 240.52 384.81

TOTAL CURRENT LIABILITIES TOTAL LIABILITIES INTERPRETATION:

5,72,02,771 50,35,29,365

31,35,9340 18,15,678,560

-25,84,3431 13,12,14,8995

45.18 260.59

The comparative balance sheet of the co-reveals that during the year 2010 fixed assets increased by RS 1,39,57,590 by1235.62%while long term liability from outsides (loans) has increased by 13,37,79,92,426 i.e.299.78% and there is neither increase nor decrease in share capital. The pattern of investment towards Fixed Assets reveals that long term sources of funds are utilized for fixed assets.

The current assets has been increased by 7, 11, 30,365 i.e, 31.59%. the current liabilities have decreased by 5,72,02,771 to 3,13,59,340by Rs2,58,43,431. i.e.45.18%. The deviation of the current assets of liabilities is very low. In this year the co-working capital positions it not good.

Reserves and surplus have increased from 37, 22,163 to 5, 08, 12,447the amount of RS.1, 54, 20,898. It shows that the companys profitability position of the company is good. The overall Asset position of the HDFC. During the period of study is satisfactory.

LIQUIDITY RATIOS CURRENT RATIO: This is the most widely used ratio. It is the ratio of current assets and current liabilities. It shows a firms ability to cover its current liabilities with its current assets. Generally 2:1 is considered ideal for concern i.e. current assets should be twice of the current liabilities. If the current assets are two times of the current liabilities, there will be no adverse effect on business operations when the payment of current liabilities is made. If the ratio is less than 2, difficulty may be experienced in the payment of current liabilities and day-to-day operation of the business may suffer. If the ratio is higher than 2, it is comfortable for the creditor but, for the business

concern, it is indicator of idle funds and a lack of enthusiasm for work. It is calculated as follows: CURRENT RATIO = CURRENT ASSETS / CURRENT LIABILITIES For the calculation this ratio
y Current assets include inventories, sundry debtors, cash and bank balances and loans and advances. y Current liabilities include current liabilities and provisions.

(RUPEES IN LAKHS) YEARS CURRENT ASSETS 2006-2007 2007-2008 2008-2009 2009-2010 234274 589973 263114 256922 CURRENT LIABILITIES 340710 401302 196578 233971 CURRENT RATIOS 0.687 1.470 1.338 1.098

700000 600000 500000 400000 CURRENT ASSETS 300000 200000 100000 0 2006-2007 2007-2008 2008-2009 2009-2010 CURRENT LIABILITIES

INTERPRETATION:

The current ratio the significance is 2:1 whereas the company is not able to reach in this 4 years it is recommended to increase the current ratio.

QUICK RATIO (OR) ACID TEST RATIO:

This is the ratio of liquid assets to current liabilities. Is shows a firms ability to meet current liabilities with its most liquid or quick assets. The standard ratio 1:1 is considered ideal ratio for a concern. Liquid assets are those, which can be converted into cash within a short period of time without loss of value. This can be calculated by using the formula.

QUICK RATIO = QUICK ASSETS / CURRENT LIABILITIES

For the calculation of this ratio


y Liquid assets of quick asset includes Sundry debtors, cash and bank balance and loan and advance. y Current liabilities include current liabilities and provisions.

(RUPEES IN LAKHS) YEARS QUICK ASSETS 2006-2007 2007-2008 2008-2009 2009-2010 188182 536531 214366 195500 CURRENT LIABILITIES 340710 395877 196578 233972 CURRENT RATIOS 0.55 1.35 1.09 0.83

600000 500000

400000

300000

LIQUID ASSETS CURRENT LIABILITIES

200000

100000

0 2006-2007 2007-2008 2008-2009 2009-2010

INTERPRETATION: The significance of this ratio is 1:1 whereas the company is able to reach this in the year 200607, 2007-08, all other years it is below.

1. LEVERAGE RATIOS

DEBT EQUITY RATIO:

This ratio examines the relationship between borrowed funds and owners funds of a firm. In other words, it measures the relative claims of creditors and owners against the assets of a firm. This ratio is also known as debt to net worth ratio. It is calculated as follows:

DEBT EQUITY RATIO =

LONG TERM LIABILITIES SHARE HOLDERS FUNDS

For the calculation of this ratio

y y

Long term liabilities included secured loans, unsecured loans and deferred credits. Shareholder s funds include share capital and reserves and surplus.

(RUPEES IN LAKHS) YEARS LONG TERM LIABILITIES 2006-2007 2007-2008 2008-2009 2009-2010 662910 79700 8248 54743449 SHARE HOLDERS FUNDS 350000 350000 164512 49093096 DEBT EQUITY RATIOS 1.89 0.23 0.05 1.11

60000000

50000000

40000000

30000000

LONG TERM LIABILITIES SHARE HOLDER S FUNDS

20000000

10000000

0 2006-2007 2007-2008 2008-2009 2009-2010

INTERPRETATION: Explains the relationship between long term debts to share holders funds which is gradually decreasing from 2006-09.

FIXED ASSETS RATIO:

This ratio shows the relationship between fixed assets and capital employed. Fixed assets ratio explains whether the firm has raised adequate long term funds to meet its fixed assets requirements and it gives an idea as to what part of the capital employed has been used in purchasing fixed assets for the concern. If the ratio is less than one it is good for the concern. The ideal ratio is 0.67 and it is calculated as under.

FIXED ASSETS RATIO = FIXED ASSETS / CAPITAL EMPLOYED

(RUPEES IN LAKHS)

YEARS 2006-2007 2007-2008 2008-2009 2009-2010

Fixed Assets 45379 77378 85938 80886283

Capital Employed 1900277 493131 263114 256921819

Fixed Asset ratio 0.023 0.156 0.326 0.314

30000000 25000000 20000000 15000000 10000000 50000000 0 2006-2007 2007-2008 2008-2009 2009-2010 SHAREHOLDER S FUNDS TOTAL ASSETS

INTERPRETATION: In case of fixed assets ratio, it is a showing a trend of fluctuation i.e. increase and decrease trend.

CURRENT ASSETS TO FIXED ASSETS RATIO:

This ratio will differ from industry to industry and, therefore no standard can be laid down. A decrease in the ratio may mean that trading is slack or more mechanization has been put through. An increasing in the ratio may reveal that inventories and debtors have unduly increased or fixed assets have been intensively used.

RATIO OF CURRENT ASSETS TO FIXED ASSETS = CURRENT ASSETS / FIXED ASSETS

(RUPEES IN LAKHS)

YEARS

CURRENT ASSTES

FIXED ASSETS

CURRENT ASSETS/ FIXED ASSETS

2006-2007 2007-2008 2008-2009

234274 589973 263114

45379 77378 85938

5.16 7.62 3.06

2009-2010

256922

80886283

0.003

900000 800000 700000 600000 500000 400000 300000 200000 100000 0 2006-20072007-20082008-20092009-2010 FIXED ASSETS CURRENT ASSETS/ FIXED ASSETS CURRENT ASSTES

INTERPRETATION : 2009-10 this ration is decreased and thereafter it has decreased to the maximum existent.

2. TURNOVER RATIO

INVENTORY TURNOVER RATIO: This ratio, also known as stock turnover ratio, establishes relationship between cost of goods sold during a given period and the average amount of inventory held during that period. This ratio reveals the number of items finished stock is turned over during a given accounting period. Higher the ratio the better it is because it shows that finished stock rapidly turned over. On the other hand, a low stock turnover ratio is not desirable because it reveals the accumulation of obsolete stock, or the carrying of too much stock. This ratio is calculated as follows : STOCK TURNOVER RATIO = COST OF GOODS SOLD / AVERAGE STOCK For the calculation of this ratio

COST OF GOODS SOLD = OPENING STOCK + PURCHASES + MANUFACTURING EXPENSES CLOSING STOCK

AVERAGE STOCK = OPENING STOCK + CLOSING STOCK / 2 (RUPEES IN LAKHS)

YEARS

COST OF GOODS SOLD

AVERAGE STOCK

STOCK TUNROVER RATIO

2006-2007 2007-2008 2008-2009 2009-2010

13008 20255 18080 202967

4157 4561 3521 35146

3.12 TIMES 4.44 TIMES 5.13 TIMES 5.77 TIMES

250000

200000

150000 Series1 100000 Series2 Series3 50000

0 2006-2007 2007-2008 2008-2009 2009-2010

INTERPRETATION: This ratio will explain the relationship between cost of goods sold to average stock the inventory turnover ratio is gradually decreasing and thereafter increased in a year 2009-10.

FINDINGS
1. ALM technique is aimed to tackle the market risks. Its objective is to stabilize and improve Net interest Income (NII). 2. Implementation of ALM as a Risk Management tool is done using maturity profiles and GAP analysis. 3. ALM presents a disciplined decision making framework for while at the same time guarding the risk levels. 4. Turnover ratio is gradually decreasing and thereafter increased in a year 2009-10.

5. 2009-10 this ration is decreased and thereafter it has decreased to the maximum existent.

6. The current ratio the significance is 2:1 whereas the company is not able to reach in this 4 years it is recommended to increase the current ratio.

7. The significance of this ratio is 1:1 whereas the company is able to reach this in the year 2006-07, 2007-08, all other years it is below.

8. The relationship between long term debts to share holders funds which is gradually decreasing from 2006-09. 9. fixed assets ratio, it is a showing a trend of fluctuation i.e. increase and decrease trend

Suggestions
1. They should strengthen its management information system (MIS) and computer processing capabilities for accurate measurement of liquidity and interest rate Risks in their Books. 1. In the short term the Net interest income or Net interest margins (NIM) creates economic value of the which involves up gradation of existing systems &

Application software to attain better & improvised levels. 2. It is essential that remain alert to the events that effect its operating environment & react accordingly in order to avoid any undesirable risks. 3. HDFC requires efficient human and technological infrastructure which will future lead to smooth integration of the risk management process with effective business strategies.

BIBILIOGRAPHY

Title of the Books

Author

1. Risk management

Gustavson hoyt

2. Management Research magazine

P.M.Dileep Kumar

3. India financial system

M.Y. Khan

4. Web sites

WWW.HDFC.IN
www.googlefinance.com www.assectindia.com

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