CHAPTER:- 01.

INDUSTRY PROFILE
INTRODUCTION

History
Indian Banking Industry originated in the first decade of 18th country as
The General Bank of India came into existence in the year 1786. And
then later Bank of Hindustan was started. The India’s oldest bank which
is in existence is the State Bank of India being established as ‘The Bank
of Bengal’ in Calcutta in June in the year 1806. A couple of decades later
in the year 1850 the foreign banks like Credit Lyonnais started their
operations in Calcutta. Calcutta was the most active trading port at that
time which was during the British Empire, due to these reasons the
banking activity took roots there and prospered. In the year 1865, the
first fully Indian owned bank was established in Allahabad.

Punjab National Bank was established expanding the markets by the

1900s, Bank of India the year in 1895 in Lahore and the same Bank of
India 1906, in Mumbai - both were founded under private ownership.
Then later in the year 1935, the Reserve Bank of India formally took over
the responsibility of regulating Indian banking sector. In the year 1947,
after India’s independence the Reserve Bank was nationalized and given
more powers.

The Indian Banking Industry in 1960 became an important tool to

facilitate the financial development of the Indian economy.
Simultaneously it emerged as a large employer and debate prevailed that
ensured about the possibility of nationalization of the banking industry.
The then Prime Minister of India, Indira Gandhi expressed the intention
of the GOI in the annual conference of the Ail India Congress Meeting.
This was received with positive enthusiasm by the whole nation. Later
the GOI was issued an ordinance and nationalized the 14 largest
commercial banks with effect from the midnight of July 19, 1969. In
1980 for the second time nationalization of 6 more commercial banks
was done. The nationalization was done to give the government more
control of credit delivery. With this the GOI controlled around 91% of the
banking business of India
 Narasimha Rao government formulated a policy of liberalization in the
year 1990 and gave licenses to a small number of private banks, which
was known as the New Generation tech-savvy banks, some of the banks
were like the UTI Bank(now re-named as Axis Bank), ICICI Bank and
HDFC Bank.

Liberalization along with the rapid growth in the economy of India

boosted the banking sector in India, which has seen strong contribution
from all the three sectors of banks, namely, government banks, private
banks and foreign banks. The next stage for the Indian Banking Industry
was to setup with the proposed relaxation in the norms for Foreign Direct
Investment (FDI), where voting rights were given to all the Foreign
Investors in banks which could exceed the present cap of 10%, at present
it has gone up to 49% with some restrictions.

The structure of Indian banking sector

Present Scenario
As per the Reserve Bank of India (RBI), India’s banking sector is
sufficiently capitalized and well-regulated. The financial and economic
conditions in the country are far superior to any other country in the
world. Credit, market and liquidity risk studies suggest that Indian
banks are generally resilient and have withstood the global downturn
well.

Indian banking industry has recently witnessed the roll out of innovative
banking models like payments and small finance banks. RBI’s new
measures may go a long way in helping the restructuring of the domestic
banking industry.

The digital payments system in India has evolved the most among 25
countries with India’s Immediate Payment Service (IMPS) being the only
system at level 5 in the Faster Payments Innovation Index (FPII).

Market Size

The Indian banking system consists of 27 public sector banks, 21 private

sector banks, 49 foreign banks, 56 regional rural banks, 1,562 urban
cooperative banks and 94,384 rural cooperative banks, in addition to
cooperative credit institutions (FY17 data). In FY07-18, total lending
increased at a CAGR of 10.94 per cent and total deposits increased at a
CAGR of 11.66 per cent. India’s retail credit market is the fourth largest
in the emerging countries. It increased to US$ 281 billion on December
2017 from US$ 181 billion on December 2014.

Investments/developments

Key investments and developments in India’s banking

industry include:

 As of September 2018, the Government of India launched India

Post Payments Bank (IPPB) and has opened branches across 650
districts to achieve the objective of financial inclusion.
 The total value of mergers and acquisition during 2017 in NBFC
diversified financial services and banking was US$ 2,564 billion,
US$ 103 million and US$ 79 million respectively @.

 The biggest merger deal of FY17 was in the microfinance segment

of IndusInd Bank Limited and Bharat Financial Inclusion Limited
of US$ 2.4 billion @.

 In May 2018, total equity funding's of microfinance sector grew at

the rate of 39.88 to Rs 96.31 billion (Rs 4.49 billion) in 2017-18
from Rs 68.85 billion (US$ 1.03 billion)
Functions of Bank

The functions of banks are briefly highlighted in following Diagram

or Chart.

A. Primary Functions of Banks

The primary functions of a bank are also known as banking

functions. They are the main functions of a bank.

1. Accepting Deposits

The bank collects deposits from the public. These deposits can be
of different types, such as :-

Saving Deposits
Fixed Deposits
Current Deposits
Recurring Deposits
a. Saving Deposits

This type of deposits encourages saving habit among the public.

The rate of interest is low. At present it is about 4% p.a.
Withdrawals of deposits are allowed subject to certain restrictions.
This account is suitable to salary and wage earners. This account
can be opened in single name or in joint names.

b. Fixed Deposits

Lump sum amount is deposited at one time for a specific period.

Higher rate of interest is paid, which varies with the period of
deposit. Withdrawals are not allowed before the expiry of the
period. Those who have surplus funds go for fixed deposit.

c. Current Deposits

This type of account is operated by businessmen. Withdrawals are

freely allowed. No interest is paid. In fact, there are service charges.
The account holders can get the benefit of overdraft facility.

d. Recurring Deposits

This type of account is operated by salaried persons and petty

traders. A certain sum of money is periodically deposited into the
bank. Withdrawals are permitted only after the expiry of certain
period. A higher rate of interest is paid.

2. Granting of Loans and Advances

The bank advances loans to the business community and other

members of the public. The rate charged is higher than what it
pays on deposits. The difference in the interest rates (lending rate
and the deposit rate) is its profit.

The types of bank loans and advances are :-

Overdraft
Cash Credits
Loans
Discounting of Bill of Exchange

a. Overdraft

This type of advances are given to current account holders. No

separate account is maintained. All entries are made in the current
account. A certain amount is sanctioned as overdraft which can be
withdrawn within a certain period of time say three months or so.
Interest is charged on actual amount withdrawn. An overdraft
facility is granted against a collateral security. It is sanctioned to
businessman and firms.

b. Cash Credits

The client is allowed cash credit upto a specific limit fixed in

advance. It can be given to current account holders as well as to
others who do not have an account with bank. Separate cash credit
account is maintained. Interest is charged on the amount
withdrawn in excess of limit. The cash credit is given against the
security of tangible assets and / or guarantees. The advance is
given for a longer period and a larger amount of loan is sanctioned
than that of overdraft.

c. Loans

It is normally for short term say a period of one year or medium

term say a period of five years. Now-a-days, banks do lend money
for long term. Repayment of money can be in the form of
installments spread over a period of time or in a lumpsum amount.
Interest is charged on the actual amount sanctioned, whether
withdrawn or not. The rate of interest may be slightly lower than
what is charged on overdrafts and cash credits. Loans are normally
secured against tangible assets of the company.
 d. Discounting of Bill of Exchange

The bank can advance money by discounting or by purchasing bills

of exchange both domestic and foreign bills. The bank pays the bill
amount to the drawer or the beneficiary of the bill by deducting
usual discount charges. On maturity, the bill is presented to the
drawee or acceptor of the bill and the amount is collected.

B. Secondary Functions of Banks

The bank performs a number of secondary functions, also called as

non-banking functions.

These important secondary functions of banks are explained below.

1. Agency Functions

The bank acts as an agent of its customers. The bank performs a

number of agency functions which includes :-

Transfer of Funds
Collection of Cheques
Periodic Payments
Portfolio Management
Periodic Collections
Other Agency Functions

a. Transfer of Funds

The bank transfer funds from one branch to another or from one
place to another.

b. Collection of Cheques

The bank collects the money of the cheques through clearing

section of its customers. The bank also collects money of the bills
of exchange.
c. Periodic Payments

On standing instructions of the client, the bank makes periodic

payments in respect of electricity bills, rent, etc.

d. Portfolio Management

The banks also undertakes to purchase and sell the shares and
debentures on behalf of the clients and accordingly debits or
credits the account. This facility is called portfolio management.

e. Periodic Collections

The bank collects salary, pension, dividend and such other periodic
collections on behalf of the client.

f. Other Agency Functions

They act as trustees, executors, advisers and administrators on

behalf of its clients. They act as representatives of clients to deal
with other banks and institutions.

2. General Utility Functions

The bank also performs general utility functions, such as :-

Issue of Drafts,Letter of Credits, etc.

Locker Facility
Underwriting of Shares
Dealing in Foreign Exchange
Project Reports
Social Welfare Programmes
Other Utility Functions
a. Issue of Drafts and Letter of Credits

Banks issue drafts for transferring money from one place to

another. It also issues letter of credit, especially in case of, import
trade. It also issues travellers' cheques.

b. Locker Facility

The bank provides a locker facility for the safe custody of valuable
documents, gold ornaments and other valuables.

c. Underwriting of Shares

The bank underwrites shares and debentures through its merchant

banking division.

d. Dealing in Foreign Exchange

The commercial banks are allowed by RBI to deal in foreign

exchange.

e. Project Reports

The bank may also undertake to prepare project reports on behalf

of its clients.

f. Social Welfare Programmes

It undertakes social welfare programmes, such as adult literacy

programmes, public welfare campaigns, etc.

g. Other Utility Functions

It acts as a referee to financial standing of customers. It collects

creditworthiness information about clients of its customers. It
 provides market information to its customers, etc. It provides
travellers' cheque facility.

Government Initiatives

 As of September 2018, the Government of India has made the

Pradhan Mantri Jan Dhan Yojana (PMJDY) scheme an open ended
scheme and has also added more incentives.

 The Government of India is planning to inject Rs 42,000 crore (US$

5.99 billion) in the public sector banks by March 2019 and will
infuse the next tranche of recapitalization by mid-December 2018.

Achievements

Following are the achievements of the government in the year 2017-

18:

 To improve infrastructure in villages, 204,000 Point of Sale (PoS)

terminals have been sanctioned from the Financial Inclusion Fund
by National Bank for Agriculture & Rural Development (NABARD).

 Between December 2016 and March 2017, a major drive was

undertaken to boost use of debit cards, resulting in an increase in
the number of Point of Sale (PoS) terminals by an additional 1.25
million by 2017 end from 1.52 million as on November 30, 2016.

 The number of total bank accounts opened under Pradhan Mantri

Jan Dhan Yojana (PMJDY) reached 333.8 million as on November
28, 2018.
Road Ahead

Enhanced spending on infrastructure, speedy implementation of projects

and continuation of reforms are expected to provide further impetus to
growth. All these factors suggest that India’s banking sector is also
poised for robust growth as the rapidly growing business would turn to
banks for their credit needs.

Also, the advancements in technology have brought the mobile and

internet banking services to the fore. The banking sector is laying greater
emphasis on providing improved services to their clients and also
upgrading their technology infrastructure, in order to enhance the
customer’s overall experience as well as give banks a competitive edge.
India’s digital lending stood at US$ 75 billion in FY18 and is estimated to
reach US$ 1 trillion by FY2023 driven by the five-fold increase in the
digital disbursements.

Exchange Rate Used: INR 1 = US$ 0.0159 as on March 31, 2019

 CHAPTER:- 02
COMPANY PROFILE
 1. HDFC BANK LTD.

HDFC Bank Limited

We understand your world

Type Private

Traded as BSE: 500180

NSE: HDFCBANK
NYSE: HDB
BSE SENSEX Constituent
CNX Nifty Constituent

ISIN US40415F1012

Industry Banking, financial services

Founded August 1994; 25 years ago

Headquarters Mumbai, Maharashtra, India

Area served India

Key people  Shyamala Gopinath

(Non-Exe Chairperson)[1]
 Aditya Puri
(Managing Director)[2][3]

Products Credit cards, consumer banking, banking, finance and

insurance, investment banking, mortgage loans, private
 banking, private equity, wealth management[4]

Revenue ₹116,597 crore (US$17 billion) (2019)[5]

Operating ₹23,263 crore (US$3.4 billion) (2019)[5]
income
Net income ₹21,078 crore (US$3.0 billion) (2019)[5]

Total assets ₹1,189,432 crore (US$170 billion) (2019)[6]

Number of 104,154 (June 30, 2019)[7]
employees

Website www.hdfcbank.com

HDFC Bank Ltd. is an Indian banking and financial services

company headquartered in Mumbai, Maharashtra. It has a base of
111,208 permanent employees as of 30 September 2019. HDFC Bank is
India’s largest private sector lender by assets. It is the largest bank in
India by market capitalization as of February 2016. It was ranked 60th in
2019 Brands Top 100 Most Valuable Global Brands.

Vision
To be customer driven best managed enterprise that enjoys market
leadership in providing housing related finance.

Mission
HDFC banks mission is to be “a world class Indian Bank”. Benchmarking
themselves against international standards and best practices in terms of
product offerings, technology, service levels, risk management and audit
& compliance.
 2. Axis Bank

Type Promoted by SUUTI

Traded as BSE: 532215

LSE: AXBC
NSE: AXISBANK

ISIN INE238A01034

Industry Banking, Financial services

Founded 1993; 26 years ago

Headquarters Mumbai, Maharashtra, India[1]

Number of 4094 branches [2] (March 2019)

locations

Area served Worldwide

Key people  Shri Rakesh Makhija

(Chairman)[3]
 Amitabh Chaudhry
(MD & CEO)[4]

Products Retail banking, corporate banking, investment banking, mortgage

loans, private banking, wealth management, credit cards, finance and
insurance

Revenue ₹681 billion (US$9.9 billion) (2019)[5]

Operating ₹190 billion (US$2.7 billion) (2019)[5]

income
 Net income ₹46.77 billion (US$680 million) (2019)[5]

Total assets ₹8.00997 trillion (US$120 billion) (2019)[5]

Number of 61,940 (2019)[6]

employees

Axis Bank is the fifth-largest bank in India offering a wide assortment of

financial products. The bank has its head office in Mumbai,
Maharashtra. It has 4,050 branches, 11,801 ATMs and 4,917 cash
recyclers spread across the country as of 31 March 2019 and nine
international offices. The bank employs over 55,000 people and had a
market capitalization of ₹1.31 trillion (US$19 billion) (as on 31 March
2018).It sells financial services to large and mid-size corporate, MSME
and retail businesses.

As of 30 June 2016, 30.81% shares are owned by promoters and

promoter group (United India Insurance Company Limited, Oriental
Insurance Company Limited, National Insurance Company Limited, New
India Assurance Company Ltd, GIC, LIC and UTI). The remaining 69.19%
shares are owned by mutual funds, FIIs, banks, insurance companies,
corporate bodies and individual investors among others.

Vision
To emerge as a “best practices bank” by pursuing global benchmarks in
profitability, operational efficiency, asset quality, risk management and
expanding global reach.

Mission
 Customer service and product innovation tuned to diverse needs of
individual and corporate clientele.
 Continuous technology up gradation while maintaining human
values.
 Progressive globalization and achieving international standards.
 Efficiency and effectiveness built on ethical practices.
 3. ICICI BANK

ICICI Bank Limited

ICICI Bank Headquarter in Bandra Kurla Complex, Mumbai

Type Public

 BSE: 532174
Traded as
 NSE: ICICIBANK
 NYSE: IBN
 BSE SENSEX Constituent
 CNX Nifty Constituent

ISIN INE090A01021

Industry Banking, Financial services

Founded 5 January 1994; 25 years ago

Headquarters ICICI Bank Towers, Bandra Kurla complex, Mumbai, India[1]

Area served Worldwide

Key people  Girish Chandra Chaturvedi

(Chairman)[2]
 Sandeep Bakhshi
(MD & CEO)

Products Retail banking, corporate banking, investment banking, mortgage

loans, private banking, wealth management, credit cards, finance and
 insurance

Revenue ₹77,913 crore (US$11 billion) (2019)[3]

Operating ₹9,702 crore (US$1.4 billion) (2019)[3]

income

Net income ₹3,363 crore (US$490 million) (2019)[3]

Total assets ₹929,652 crore (US$130 billion) (2019)[3]

Number of 84,922 (2019)[3]

employees

Website www.icicibank.com

ICICI Bank Limited is an Indian multinational banking and

financial services company headquartered in Mumbai, Maharashtra with
its registered office in Vadodara, Gujarat. As of 2018, ICICI Bank is the
second largest bank in India in terms of assets and market
capitalization. It offers a wide range of banking products and financial
services for corporate and retail customers through a variety of delivery
channels and specialized subsidiaries in the areas of investment banking,
life, non-life insurance, venture capital and asset management. The bank
has a network of 4882 branches and 15101 ATMs across India and has
a presence in 17 countries including India

Vision
To be leading provider of financial services in India and a major global
bank.

Mission
 Play a proactive role in the full realization of India’s potential.
 Maintain a healthy financial profile and diversify our earnings
across business and geographies.
 CHAPTER:-03
LITERATURE REVIVEW
1. Abel, E.E. (2011) the researcher conducted research “The study
on Non- Performing assets in selected panel data from 19 out
of a total of 25 banks operating in Nigeria. In year 2011. The
main objective Exacerbated by the inability of banks to optimally
use their huge assets capacity to enhance their earnings profiles.
The results showed excess liquidity syndrome and relatively huge
capital bases fuelled reckless lending by banks; and that increase
in the level of unsecured credits in banks’ portfolios ironically
helped to mitigate the level of NPA. The data were collected in the
period from 2004-2008. It multivariate constant coefficient
regression model is adopted as the estimation technique tools were
used for analysis. A multivariate constant coefficient regression
model is adopted as the estimation technique. Based on the
analysis, it is found that deterioration in asset quality and
increased credit crisis in the Nirerian banking industry between
the periods 2004 and 2008 were exacerbated by the inability of
banks to optimally use their huge asset capacity to enhance their
earnings profiles.

2. Shajari, P. and Samara H. (2010), the researcher conducted

research "The study on Non-Performing assets and financial
soundness." In the year 2010. The main objective confirmed that
assets quality and capital adequacy are influenced by the business
cycle. The data were collected in the period from1979-2009. It
applied a combination of reduce from model of Jimenez and
Saausina (2005) and also the approach adopted by Demirguc Kunt
and Huizinga (2010) tools were used for analysis. The results of the
study confirmed that asset quality and capital adequacy are
influenced by the business cycle. Lending interest rate has a
negative effect on asset quality. Capital adequacy is affected by
short term deposit interest Pate and changes in the exchange rate.
Profitability fluctuates with the inflation rate and NPA ratio. Beside
the macroeconomic variables, the study identified management
instability as one of the important determinants of the asset quality
in Iran's Banking system.

3. Usha Arors (2008) in the research on "An Analytical Study of

growth of Credit Scheme of Selected Banks" analyzed and
compared the performance (in terms of loan disbursement and
non- performing assets) of credit schemes of selected banks for the
last five years. Bank wise as well as year wise comparisons are
 done with the help of compound Annual Growth Rate, mean and
Standard deviation and in the second part, a positive relationship
is found between total loan disbursement and total NPA of selected
banks with the help of correlation technique. The study found a
positive relationship between total loan disbursement and total
NPA outstand of selected banks.

4. Renu Jatana (2009) in her research paper title, "Impact of NPAs

on profitability of banks" had analyzed the impact of NPAS on
profitability of public sector banks and private sector banks with
special reference and comparison of four banks like SBBJ, Oriental
Bank of commerce, ICICI hank and Bank of Rajasthan. And at last
she conclude that among the four selected banks ICICI is
performing well in managing the NPA as regard their profitability in
comparison to other banks.

5. Arora and Ostwal (2014) conducted study on "Unearthing the

Epidemie of Non-Performing Assets: A Study of Public and
Private Sector Banks" which deals with the concept of Non-
performing assets and analyze the classification of loan assets of
public and private sector banks. It also explores the comparison of
loan assets of Public sector and private sector banks. The study
concluded that private sectors improving due to decline in NPAS
ratio compare to Public sector banks due to recovery management
done in NPAs and suggest that there is need to check the NPAs of
public sector banks so that Indian banking system becomes
efficient.

6. sikder and Makkad (2013) the researcher conducted research

"The role . Non-Performing Assets in risk frame work of
selected Indian commercial banks." in year 2013.The main
objective of the research way highlight the significant steps taken
and procedures implemented by major Indian commercial banks,
within the public and private sector towards recovery of loans and
advance falls into the NPA bracket. The data were collected annual
report of commercial banks in focus for the year ending March-
2012.It extensive study on annual publication on performance of
 public sector and private sector commercial banks by the Indian
banks association (IBA) were used for analysis. The study conclude
that problem of NPAs can be tackled only with proper credit
assessment and risk management mechanism. Further, research
highlights the significant steps taken and procedures implemented
by major Indian commercial banks, within the public and private
sector, towards recovery of loans and advances falls into the NPA
bracket.

7. Malyadri and Sirisha (2011) the research conducted research

"The study on the NPA of Public Sector and Private sector
banks." in year 2011.The main objective of the research way revels
that public sector banks have achieved a greater penetration
compared to the private sector banks. The data were collected from
Report on Trends and Progress of Banking in India, 2004-10. It has
been analyzed by statistical tools such as percentages and
compound Annual Grow Rate tools were used for analysis. The
scope of the study was limited to the analysis of NPAs pertaining to
only weaker sections during the period 2004-2010. The inference
based on analysis revealed that Asset quality of PSBs and private
sector banks improved consistently during the study period as
reflected in the decline in the ratios such as NPAs as percentage of
advances to weaker sections.

8. Olweny, T. And Shipho (2011). T.M. the researcher conducted

research “Impact on bank-specific factor like NPA” in year
2011. The main objective of the research way the study showed
that all bank specific factors had a statistically significant impact
on profitability, while none of the market factor had a significant
impact. The data were collected for 2002-08. It encourage revenue
diversification, reduce operational costs, minimize credit risk and
encourage banks to minimize their liquidity tools were used for
analysis. The impact of bank specific factors bolding like capital
adequacy, asset quality, liquidity, and operational cost efficiency
and income diversification on the profitability of commercial banks
in Kenya. The study used financial statements of 38 Kenyan banks
for the period 2002-2008 and applied regression method to
evaluate the objectives.
9. Narula and single(2014), the researcher conducted research on
"The Non-Performing Assets of Punjab National Banks" in the
year 2014.The main objective of the research way positive relation
between net profit and NPA of PNB. It is because of the
mismanagement of the side of bank. The data were collected for the
period of six year from 2006-07 to 2011-12. It shows relation
between total advance, Net profit, Gross and Net NPA tools were
used for analysis. The study concluded that NPA is an important
parameter for assessing financial performance of banks in terms of
profitability, liquidity and economies of scale in operation and
banks has to take timely action against degradation of good
performing assets.

10. D.D.DUBET. Pankaj Trivadi (January 2016) an “asset

becomes non-performing when it ceases to generate for the
bank and is then termed as Non-performing Assets (NPA).” It
has been observed that with passage of time, recovery prospects
usually diminish. NPA is an important parameter in the analysis
ofn financial performance of a bank as it result in higher
provisioning requirements and thus decreasing margin. Mounting
level NPAs can severely affects the economy in many ways. This
paper looks at an empirical analysis of the entire universe of
46banks ( comprising 26 PSU banks and 20 private sector banks)
and attempts to find high level linkages spanning banking and
legal segments of the economy. Methodology an attempt has been
made to construct a composite indicator backed up by a
conceptually grounded framework, by means of analytical
hierarchical process (AHP) technique.