This project expresses an empirical study with the objective mainly to appraise the human resources in financial terms in banking sector and to analyze the Productivity of employees in the same. The data collected for this purpose is mainly by secondary authentic sources, the number of banks which we took for the study are 5 (SBI, HDFC, Axis, ICICI, Kotak Mahindra) contributing to approximately 80% of the market share in India and the period of study extends from the financial year 2013-14 to 2015- 2016.

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An Appraisal of HR
Accounting in Banking Sector
Project Report
HR Accounting
I I M R A N C H I
Submitted by:
Group 15
Ajay Burman
(H002-15)
Niharika (H025-15)
Ronita Saha (H036-15)

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ABSTRACT
Human resource is the most valuable asset held by an organization today. Its represent the single
greatest potential asset and the single greatest liability that an organization acquires as it goes about
its business. Still, the Human Resource is one of the most neglected aspects of Financial Statement
disclosures of corporate entities in India. The managements avoid to disclose the facts about HR,
whether they are pleasant or unpleasant facts. To overcome this problem, the concept of Human
Resource Accounting came into light. This project expresses an empirical study with the objective
mainly to appraise the human resources in financial terms in banking sector and to analyze the
Productivity of employees in the same. The data collected for this purpose is mainly by secondary
authentic sources, the number of banks which we took for the study are 5 (SBI, HDFC, Axis, ICICI,
Kotak Mahindra) contributing to approximately 80% of the market share in India and the period of
study extends from the financial year 2013-14 to 2015- 2016.
The major findings of this study are that the productivity of employees of Kotak Mahindra Bank is the
lowest and that of ICICI Bank is highest.
INTRODUCTION
Human resource (HR) is the most valuable asset held by an organization today. It is a unique and
elusive asset to manage for a variety of reasons. Human resources simultaneously represent the
single greatest potential asset and the single greatest liability that an organization acquires as it goes
about its business. The Human Resource is one of the most neglected aspects of Financial Statement
disclosures of corporate entities in India. The managements avoid to disclose the facts about HR,
whether they are pleasant or unpleasant facts. HR is more important asset than any other tangible
asset because without it other factors of production cannot be utilized. Thus, this feature of the
human asset places the human resource at a higher level than the nonhuman assets. Therefore, the
investments on HR have become an important factor in accounting systems. In the words of
Flamholtz (1999) “Accounting today is still based on an industrial paradigm in which physical and
tangible property is considered as an asset. One accounting tool that is relevant to the measurement
and, in turn, the management of intellectual capital, specifically human capital, is Human Resource
Accounting.” Human resource accounting includes a profile of human assets value, human resource
cost, compensation, training &development, human resource productivity and the total wealth of the
concern. It is an accounting technique concerned with the measurement of the cost and economic
value of human resources to take decision regarding human resources and measure the financial
efficiency of an organization in totality. It has been observed that the Government of India took the
initiative way back in 1968, by issuing the guidelines for incorporating the required information in the
Annual Reports of the Public Sector Enterprises. Many public sector enterprises are disclosing this
information as part of the Annual Report. Some of the companies have also ventured to value the HR
which they disclose in the Annual Reports.

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REVIEW OF LITERATURE
Hermanson (1964) proposed an adjusted present value model to value the human capital of a
company. In this first to compute the present value of future wage payment for five years then find
out the efficiency ratio and this ratio is applied to adjust the present value of the future wage
payment.
Pyle (1970) the use of HR Accounting as an improved managerial artisanship in the sense that the
system would unfold many hidden facts involved to develop or otherwise of the human capabilities
and their utilization. He also highlighted that the publish data of HRA would help in analyzing the
financial aspect of an organization.
Flamholtz (1971) developed a stochastic model to quantify the value of human resources and
considered the movement of employees from one position to another position over a time period. He
has established the value of an individual equal to present value of future rewards adjusted with the
probability of mobility and separation.
Lev & Schwartz (1971) developed a mathematical model to quantify the value of human capital. The
value of human capital is the present value of the future earnings of people till retirement. The model
considers employee compensation as the reasonable measure of individual’s value to an
organization.
Rao (1993) threw light on the complexities of managing human being in the present day
organizations and attempted to find out how do employee related activities flourish in various other
sectors like urban government, co-operatives, informal sector and small scale sectors. Different
aspects of training, organizational development, employee coordinating activities have also been put
to close examination.
OBJECTIVE OF THE STUDY
a) To have an analysis of the Human Asset, i.e. whether such assets are conserved, depleted, or
appreciated in these 5 banks (SBI, HDFC, Axis, ICICI, and Kotak Mahindra).
b) To monitor effectively the use of human resources by the management.
c) To furnish cost value information for making proper and effective management decisions about
acquiring, allocating, developing, and maintaining human resources in order to achieve cost effective
organizational objectives.
SIGNIFICANCE OF THE STUDY
Undoubtedly, Human Resource Accounting as a branch of accounting is gaining momentum and is
becoming useful for company’s management in making organizational policies and to take managerial

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decisions. Although, this research work is for academic purpose, it would also help business
executives, accountants, Government planners, research scholars and common public. It would be
helpful to improve the HRA Practices and its disclosure in the annual report of SBI, HDFC, ICICI, Axis
Bank, Kotak Mahindra Bank and other business organizations in India.
RESEARCH DESIGN
SCOPE OF THE STUDY
This is a micro level study. The study has been confined to do the analysis of the Human Asset, i.e.
whether such assets are conserved, depleted, or appreciated in these 5 banks (SBI, HDFC, Axis, ICICI,
and Kotak Mahindra).
TYPE OF THE STUDY
Based on the objective, the present study is descriptive in nature.
PERIOD OF THE STUDY
The period of study extends from the financial year 2013-2014 to 2015- 2016. Thus period of 3 years
have been taken for the purpose of objective analysis in the study.
COLLECTION OF DATA
This study is based on the information collected mainly by secondary authentic sources i.e. annual
reports, reports of C.A.G., websites of the companies. A number of books on human resource
accounting and related topics, journals, magazines, have also been used to develop the conceptual
base of the study.
ANALYSIS OF DATA
The analysis has been carried out by making use of various statistical tools such as percentage, ratio
analysis, descriptive statistics etc. as per the requirement on the tabulated data to analyze the same
and bring out the hidden fact.
ANALYSIS AND FINDINGS
Table 1 shows various financial data and derived financial ratios of the 5 banks that covers 80% of the
banking sector in India. Other ratios are self-explanatory. Table 2 shows the CAGR of each ratios
calculated over the three years. The Average number of employees in Table 1 is calculated using
Profit per employee ratio mentioned in the Annual Reports.
The Utilization Rate measures the overall efficiency of the organization in the utilization of
employees. The Utilization Rate shows increasing trend for all banks except for Kotak Mahindra Bank.
It is significantly high for ICICI Bank.
HR Cost per rupee profit ratio evaluates the cost incurred on employee against the net profit. Table 1
shows positive trend for SBI and significantly high for Kotak Mahindra, however a negative trend is
seen for rest of the banks.

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Revenue per Employee, also known as the Human Capital Revenue Factor, quantifies the value of
labor as a revenue generator to an organization. The simple form of this calculation provides a
measurement to determine human productivity as a per employee sum of the revenue generated in a
fiscal year. This value is showing a positive trend for all banks except for Kotak Mahindra.
Operating profit per employee shows how much Operating Profit each employee generates. This
value is showing a positive trend for all banks except for Kotak Mahindra.
Net Profit per Employee shows how much Overall Profit each employee generates. This value is
showing a negative trend for SBI and Kotak Mahindra, and positive for HDFC and Axis Bank.
HR Cost per employee shows how much company spends per employee on HR. This value is showing
a positive trend for all banks except ICICI Bank.
Revenue per Employee, also known as the Human Capital Revenue Factor, quantifies the value of
labor as a revenue generator to an organization. The simple form of this calculation provides a
measurement to determine human productivity as a per employee sum of the revenue generated in a
fiscal year. This value is showing a positive trend for all banks except Kotak Mahindra.
Table 1: HR Costs (all ₹ in crores)

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Table 2: CAGR Ratios
SUMMARY OF FINDINGS
1. For Kotak Mahindra Bank, there is negative growth (14%) in utilization rate and positive
growth (31%) in in HR Cost per rupee profit ratio. It reveals that the compensation paid to the
employee is increasing faster than operating profit and net profit.
2. Kotak Mahindra Bank shows a negative trend (3%) in Revenue per employee. It reveals that
increase in number of employees is faster than the revenue being generated.
3. Operating profit per employee shows a negative trend (6%) for Kotak Mahindra Bank. It
reveals that increase in number of employees is faster than the operating profit.
4. HR Cost per employee is showing a negative trend (15%) for ICICI Bank. It reveals that they
have been able to control their spending on the employees.
5. HR Cost per employee is showing a significantly positive trend (9-10%) for SBI, Axis Bank and
Kotak Mahindra Bank. It reveals that they are spending heavily on their human resources.
CONCLUSIONS
The negative trend Operating Profit per employee of Kotak Mahindra Bank illustrates that although
the number of employees is increasing at a rapid rate, the productivity of the employees have
reduced. When we verify the absolute figures, we see that the productivity of the Kotak Mahindra
Bank employees is lowest in among the top 5 banks. This is being observed even when this bank is
spending heavily on their employees. We see that the number of employees for this bank has jumped
almost 75% up from FY 2014-15 to FY 2015-16. This might have led to decreased productivity. So the
hiring rate should be controlled until the appropriate productivity levels are not reached and costs
are in control. The above analysis suggests Kotak Mahindra Bank for the effective utilization of the
employees by imparting on the job training and selling the time of employees to different and varied
tasks through job rotation.
The ICICI Bank shows a positive trend in contribution of the employees towards profit and revenue.
They have also been able to control HR cost. This could be attributed to the introduction of
automation of multiple transactions in the bank, leading to better utilization and efficiency.

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REFERENCES
1) Annual Reports of SBI, retrieved from www.sbi.co.in
2) Annual Reports of Axis Bank, retrieved from www.axisbank.com
3) Annual Reports of HDFC Bank, retrieved from www.hdfcbank.com
4) Annual Reports of ICICI, retrieved from www.icicibank.com
5) Annual Reports of Kotak Mahindra Bank, retrieved from ir.kotak.com
6) Flamholtz, E. G. (1971). "A Model for Human Resource Valuation: A Stochastic Process with
Service Rewards". The Accounting Review, April, pp. 253-267
7) Lev, B. and Schwartz, A. (1971). "On the Use of the Economic Concept of Human Capital in
Financial Statements", The Accounting Review, January, pp.103-112.
8) Rao, D. Prabhakar. "Human Resource Accounting". Inter India Publications, New Delhi: 2008