Ac 1 bank final

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UNIVERSITY OF MUMBAI
PROJECT REPORT
ON
“BANK”
First Year M. Com. (Advance accounting)
2013-2014
Submitted By
RAJESH KUMAR SITARAM
Roll No.52
PROJECT GUIDE
PROF. SURESH PUJARI
People’s Education Society’s
DR. AMBEDKAR COLLEGE OF COMMERCE AND
ECONOMICS
Wadala, Mumbai – 400 031.

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People’s Education Society’s
DR. AMBEDKAR COLLEGE OF COMMERCE AND ECONOMICS
WADALA , MUMBAI- 4000 31.
NAAC ACCREDITED
CERTIFICATE
This is to certify that, Mr RAJESH KUMAR SITARAM of ADVANCE
ACCOUNTING, (2013-2014) has successfully completed the project on
“ADVANCE FINANCIAL ACCOUNTING” under the guidance of Prof.
SURESH PUJARI It is fit to be submitted for evaluation.
(Signature of Co-ordinator) (Signature of Principal)
(Signature of Project Guide) (Signature of External Examiner)

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DECLARATION
I Mr. RAJESH KUMAR SITARAM the student of Dr. Ambedkar
College of Commerce & Economics, studying in First Year
M.Com ADANVCE ACCOUNTING hereby declare that I have
completed the project report on “BANK” in the academic year
2013- 14.
The information submitted is true and original to the best of my
knowledge.
___________________
Date: _________ Signature of student
(RAJESH KUMAR SITARAM)
(Roll No.52)
Place: _________

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ACKNOWLEDGEMENT
I express my sincere gratitude to the Principal Dr. SIDDHARTH R. KAMBLE &
ADANVCE ACCOUNTING co-ordinator Prof. SANJAY KHAIRE for their continuous
support & guidance.
I also sincerely thank Prof. SURESH PUJARI for guiding to me through project work.
I also thanks to my parents, relatives and colleagues for their encouragement and
support.
Last but not least, I would like to thank all these people, who helped me in completion
Of the project directly or indirectly.
Place : MUMBAI RAJESH KUMAR SITARAM
DATE : (SIGNATURE)

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INDEX
Sr.
No.
Topic Page No.
1 Introduction to Banks 6
2 Role of Banks 11
3 Functions of bank 14
4 Statues Governing Banks 18
5 NPA’s in Banks 24
6
An Analysis of ‘Banks’ Financial
Statement
29
7 HDFC BANKHOME LOAN 38
8 Conclusion 42
9 Bibliography 43

INDIAN BANKING SECTOR REVIEW
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Introduction
For the past three decades India's banking system has several outstanding achievements to
its credit. The most striking is its extensive reach. It is no longer confined to only
metropolitans or cosmopolitans in India. In fact, Indian banking system has reached even
to the remote corners of the country. This is one of the main reasons of India's growth
process. The government's regular policy for Indian bank since 1969 has paid rich
dividends with the nationalization of 14 major private banks of India. The first bank in
India, though conservative, was established in 1786. From 1786 till today, the journey of
Indian Banking System can be segregated into three distinct phases. Those are:-
Early phase from 1786 to 1969 of Indian Banks
Nationalizations of Indian Banks and up to 1991 prior to
Indian banking sector Reforms
New phase of Indian Banking System with the advent of
Indian Financial & Banking Sector Reforms after 1991
The steps taken by the Government of India to Regulate Banking
Institutions in the Country:
1949: Enactment of Banking Regulation Act.
1955: Nationalization of State Bank of India.
1959: Nationalization of HDFC BANKsubsidiaries.
1961: Insurance cover extended to deposits.
1969: Nationalization of 14 major banks.
1971: Creation of credit guarantee corporation.
1975: Creation of regional rural banks.
1980: Nationalization of seven banks with deposits over 200crore.

Without a sound and effective banking system in India it cannot have a healthy economy.
The banking system of India should not only be hassle free but it should be able to meet
new challenges posed by the technology and any other external and internal factors.
For the past three decades India's banking system has several outstanding achievements to
its credit. It is no longer confined to only metropolitans or cosmopolitans in India; in fact,
Indian banking system has reached even to the remote corners of the country. This is one
of the main reasons of India's growth process. The government's regular policy for Indian
bank since 1969 has paid rich dividends with the nationalisation of 14 major private banks
of India. Not long ago, an account holder had to wait for hours at the bank counters for
getting a draft or for withdrawing his own money. Today, he has a choice. Gone are days
when the most efficient bank transferred money from one branch to other in two days.
Now it is simple as instant messaging or dial a pizza. Money has become the order of the
day.
Post independence
 In 1948, the Reserve Bank of India, India's central banking authority, was nationalized,
and it became an institution owned by the Government of India.
 In 1949, the Banking Regulation Act was enacted which empowered the Reserve Bank
of India (RBI) "to regulate, control, and inspect the banks in India."
 The Banking Regulation Act also provided that no new bank or branch of an existing
bank may be opened without a license from the RBI, and no two banks could have
common directors.
Current situation
Currently, India has 88 scheduled commercial banks (SCBs) - 28 public sector banks (that
is with the Government of India holding a stake), 29 private banks (these do not have
government stake; they may be publicly listed and traded on stock exchanges) and 31
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.
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Over the last four years, India’s economy has been on a high growth trajectory, creating
unprecedented opportunities for its banking sector. Most banks have enjoyed high growth
and their valuations have appreciated significantly during this period. Looking ahead, the
most pertinent issue is how well the banking sector is positioned to cater to continued
growth. A holistic assessment of the banking sector is possible only by looking at the roles
and actions of banks, their core capabilities and their ability to meet systemic objectives,
which include increasing shareholder value, fostering financial inclusion, contributing
to GDP growth, efficiently managing intermediation cost, and effectively allocating
capital and maintaining system stability.
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LIBERALIZATION
PRIVATIZATION
GLOBALIZATION

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Liberalization
The new policy shook the Banking sector in India completely. Bankers, till this time, were
used to the 4-6-4 method (Borrow at 4%; Lend at 6%; Go home at 4) of functioning. In the
early 1990s the then Narasimham Rao government embarked on a policy of liberalization
and gave licenses to a small number of private banks, which came to be known as New
Generation tech-savvy banks, which included banks such as Global Trust Bank (the first of
such new generation banks to be set up)which later amalgamated with Oriental Bank of
Commerce, UTI Bank(now re-named as Axis Bank), ICICI Bank and HDFC Bank.
Privatization
In January 1993. RBI has issued guidelines for licensing of new banks in the private sector.
It had granted licenses of new banks in the private sector. It has granted licenses to 10
banks which are presently in business: based on a review of experience gained on the
functioning of new private sector banks, revised guidelines were issued in January 2000.
Following are the major revised provisions:
 Initial minimum paid up capital shall be Rs 200 crore which will be raised to Rs 300
crore within three years of commencement of business.
 Contribution of promoters shall be minimum of 40 per cent of the paid up capital of
the bank at any point of time. This contribution of 40 percent shall be locked in for
5 years from the date of licensing of the bank.
 While augmenting capital to Rs 300 crore within three 7yeaRs promoters shall
bring in at least 40 percent of the fresh capital which will also be locked in for 5
years.
 NRI participation in the primary equity of a new bank shall be to the maximum
extent of 40 per cent.

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GLOBALISATION
Introduction
Globalization refers to widening and Deeping of international flow of trade, capital,
labour,
Technology, information and services. Globalization has led to an overall economic,
political and
Technological integration of the world. In our country, first economic reforms (1991) gave
birth to globalization and second phase of banking sector reforms strengthened the
globalization. Various reform measures introduced in India have indeed strengthened the
Indian banking system in preparation for the global challenges ahead. The major impact
of banking sector reforms can be viewed from the following chart:
Globalization, which is outcome of economic reforms, is both a challenge and an
opportunity for Indian banks to gain strength in the domestic market and increase
presence in the global market. The present paper analyzes the impact of globalization on
Indian banking from the point view of penetration of Indian banks in foreign countries
and compares the performance of Indian banks particularly the performance of branches
operating in foreign countries with that of foreign banks operating in India and at the end
suggests some strategies for the globalization of Indian banks.

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ROLE OF BANKING
Money lending in one form or the other has evolved along with the history of the mankind.
Even in the ancient times there are references to the moneylenders. Shakespeare also
referred to ‘Shylocks’ who made unreasonable demands in case the loans were not repaid
in time along with interest. Indian history is also replete with the instances referring to
indigenous money lenders, Sahukars and Zamindars involved in the business of money
lending by mortgaging the landed property of the borrowers.
Towards the beginning of the twentieth century, with the onset of modern industry in the
country, the need for government regulated banking system was felt. The British
government began to pay attention towards the need for an organised banking sector in
the country and Reserve Bank of India was set up to regulate the formal banking sector in
the country. But the growth of modern banking remained slow mainly due to lack of
surplus capital in the Indian economic system at that point of time. Modern banking
institutions came up only in big cities and industrial centers. The rural areas, representing
vast majority of Indian society, remained dependent on the indigenous money lenders for
their credit needs.
Independence of the country heralded a new era in the growth of modern banking. Many
new commercial banks came up in various parts of the country. As the modern banking
network grew, the government began to realize that the banking sector was catering only
to the needs of the well-to-do and the capitalists. The interests of the poorer sections as well
as those of the common man were being ignored.
In 1969, Indian government took a historic decision to nationalize 14 biggest private
commercial banks. A few more were nationalized after a couple of years. This resulted in
transferring the ownership of these banks to the State and the Reserve Bank of India could
then issue directions to these banks to fund the national programmers, the rural sector, the
plan priorities and the priority sector at differential rate of interest. This resulted in
providing fillip the banking facilities to the rural areas, to the under-privileged and the
downtrodden. It also resulted in financial inclusion of all categories of people in almost all
the regions of the country.

However, after almost two decades of bank nationalization some new issues became
contextual. The service standards of the public sector banks began to decline. Their
profitability came down and the efficiency of the staff became suspect. Non-performing
assets of these banks began to rise. The wheel of time had turned a full circle by early
nineties and the government after the introduction of structural and economic reforms in
the financial sector, allowed the setting up of new banks in the private sector.
The new generation private banks have now established themselves in the system and have
set new standards of service and efficiency. These banks have also given tough but healthy
competition to the public sector banks.
Modern Day Role
Banking system and the Financial Institutions play very significant role in the economy.
First and foremost is in the form of catering to the need of credit for all the sections of
society. The modern economies in the world have developed primarily by making best use
of the credit availability in their systems. An efficient banking system must cater to the
needs of high end investors by making available high amounts of capital for big projects in
the industrial, infrastructure and service sectors. At the same time, the medium and small
ventures must also have credit available to them for new investment and expansion of the
existing units. Rural sector in a country like India can grow only if cheaper credit is
available to the farmers for their short and medium term needs.
Credit availability for infrastructure sector is also extremely important. The success of any
financial system can be fathomed by finding out the availability of reliable and adequate
credit for infrastructure projects. Fortunately, during the past about one decade there has
been increased participation of the private sector in infrastructure projects.
The banks and the financial institutions also cater to another important need of the society
i.e. mopping up small savings at reasonable rates with several options. The common man
has the option to park his savings under a few alternatives, including the small savings
schemes introduced by the government from time to time and in bank deposits in the form
of savings accounts, recurring deposits and time deposits. Another option is to invest in the
stocks or mutual funds.
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In addition to the above traditional role, the banks and the financial institutions also
perform certain new-age functions which could not be thought of a couple of decades ago.
The facility of internet banking enables a consumer to access and operate his bank account
without actually visiting the bank premises. The facility of ATMs and the credit/debit
cards has revolutionized the choices available with the customers. The banks also serve as
alternative gateways for making payments on account of income tax and online payment of
various bills like the telephone, electricity and tax. The bank customers can also invest
their funds in various stocks or mutual funds straight from their bank accounts. In the
modern day economy, where people have no time to make these payments by standing in
queue, the service provided by the banks is commendable.
While the commercial banks cater to the banking needs of the people in the cities and
towns, there is another category of banks that looks after the credit and banking needs of
the people living in the rural areas, particularly the farmers. Regional Rural Banks (RRBs)
have been sponsored by many commercial banks in several States. These banks, along with
the cooperative banks, take care of the farmer-specific needs of credit and other banking
facilities.
Future
Till a few years ago, the government largely patronized the small savings schemes in which
not only the interest rates were higher, but the income tax rebates and incentives were also
in plenty. The bank deposits, on the other hand, did not entail such benefits. As a result,
the small savings were the first choice of the investors. But for the last few years the trend
has been reversed. The small savings, the bank deposits and the mutual funds have been
brought at par for the purpose of incentives under the income tax. Moreover, the interest
rates in the small savings schemes are no longer higher than those offered by the banks.
Banks today are free to determine their interest rates within the given limits prescribed by
the RBI. It is now easier for the banks to open new branches. But the banking sector
reforms are still not complete. The option of allowing foreign direct investment beyond 50
per cent in the Indian banking sector has also been under consideration.
Banks and financial intuitions have played major role in the economic development of the
country and most of the credit- related schemes of the government to uplift the poorer and
the under-privileged sections have been implemented through the banking sector. The role
of the banks has been important, but it is going to be even more important in the future.
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FUNCTIONS
The functions of HDFC BANKcan be grouped under two categories, viz., the Central
Banking functions and ordinary banking functions.
A. Central Banking Functions:
The HDFC BANKacts as agent of the RBI at the places where the RBI has no branch.
Accordingly, it renders the following functions:
A. Central Banking Functions:
The HDFC BANKacts as agent of the RBI at the places where the RBI has no branch.
Accordingly, it renders the following functions:
(a) Banker to the government
(b) Banker to banks in a limited way
(c) Maintenance of currency chest
(d) Acts as clearing house
(e) Renders promotional functions
(1) Banker to the Government:
The HDFC BANKfunctions as the banker to the central and state governments. It receives
and pays money on behalf of the governments. Especially it renders the following functions
as directed by the RBI in this regard.
(a) Collection of charges on behalf of the government e.g. collection of tax and other
payments
(b) Grants loans and advances to the governments
(c) provides advises to the government regarding economic conditions, etc.,
(2) Banker's Bank:
Commercial Banks have accounts with CENTARL BANK. When the banks face financial
shortage, the HDFC BANKprovides assistance to them as it is considered a big brother in

the banking industry. It discounts the bills of the other commercial banks. Due to the
functions on this line the HDFC BANKis considered in a limited sense as the banker's
bank.
(3) Currency Chest:
The RBI maintains currency chests at its own offices. But RBI Offices are situated only in
big cities. CENTARL BANK, buy its wide network of branches operate in urban as well as
rural areas. RBI therefore, in such places keeps money at currency chests with CENTARL
BANK.
Whenever needs arise, the currency is withdrawn from these chests under proper
accounting and reporting to RBI. Presently RBI entrust currency chest to other Public
Sector Banks and a few Private Sector Banks also.
(4) Acts as Clearing House:
In all the places, where RBI has no branch, the HDFC BANKrenders the functions of
clearing house. Thus, it facilitates the inter bank settlements. Since, all the banks in such
places have accounts with CENTARL BANK; it is easy for the CENTARL BANK, to act as
clearing house.
(5) Renders Promotional Functions:
State Bank of India also renders various promotional functions. It provides various
facilities to the following priority sectors:
(I) Agriculture
(ii) Small - Scale Industries
(iii) Weaker sections of the society
(iv) Co-operative sectors
(v) Small - traders
(vi) Unemployed Youth
(vii) Others.
In this respect HDFC BANKis like any other commercial bank.
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B. General Banking Functions
Besides the above specialized functions, the HDFC BANKrenders the following functions
under Section 33 of the Act.
1. Accepting deposits from the public under current, savings, fixed and recurring deposit
accounts.
2. Advancing and lending money and opening cash credits upon the security of stocks,
securities, etc.
3. Drawing, accepting, discounting, buying and selling of bills of exchange and other
negotiable instruments.
4. Investing funds, in specified kinds of securities.
5. Advancing and lending money to court of wards with the previous approval of State
Government.
6. Issuing and circulating letters of credit.
7. Offering remittance facilities such as, demand drafts, mail transfers telegraphic
transfers, etc.
8. Acting as administrator, executor, trustee or otherwise.
9. Selling and realizing the movable or immovable properties that come into the banks in
satisfaction of claims.
10. Transacting pecuniary agency business on commission stocks.
11. Underwriting of the issue of authorized shares debentures, and other securities. (This
function is done through subsidiaries now)
12. Buying and selling of gold and silver.
13. It operates Public Provident Fund Accounts for the general public.
14. It operates Non-Resident External Accounts and Foreign Currency Accounts.
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15. Providing Factoring service (through subsidiaries).
16. Provides shipping finance.
17. Promotes Export through Export Credit. Provides Project Export Finance.
18. Provides Merchant Banking Facilities.
19. Provides specialized services like "Global Link Services ".
20. Promotes housing finance through "HDFC BANKHome Finance Ltd ".
21. Offers community services Banking. It provides grants to many socially relevant
research projects undertaken by various universities and academic institutions in the
country.
22. Provides Leasing Finance and Project Finance Facilities.
23. Participates in Lead Bank Scheme.
24. The State Bank may with the sanction of the Central Government, enter into ne -
gotiations for acquiring the business of any other Banking Institutions.
25. Other Services
 Agriculture/Rural Banking
 NRI Services
 ATM Services
 Demit Services
 Corporate Banking
 Internet Banking
 Mobile Banking
 International Banking
 Safe Deposit Locker
 RBIEFT
 E-Pay
 E-Rail
 HDFC BANKVishwa Yatra Foreign Travel Card
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 Broking Services
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STATUES GOVERNING BANKS
Bank regulations are a form of government regulation which subject banks to certain
requirements, restrictions and guidelines. This regulatory structure creates transparency
between banking institutions and the individuals and corporations with whom they
conduct business, among other things. Given the interconnectedness of the banking
industry and the reliance that the national (and global) economy hold on banks, it is
important for regulatory agencies to maintain control over the standardized practices of
these institutions. Supporters of such regulation often hinge their arguments on the "too
big to fail" notion. This holds that many financial institutions (particularly investment
banks with a commercial arm) hold too much control over the economy to fail without
enormous consequences. This is the premise for government bailouts, in which federal
financial assistance is provided to banks or other financial institutions who appear to be on
the brink of collapse. The belief is that without this aid, the crippled banks would not only
become bankrupt, but would create rippling effects throughout the economy. Others
advocate deregulation, or free banking, whereby banks are given extended liberties as to
how they operate the institution.
The objectives of bank regulation, and the emphasis, vary between jurisdictions. The most
common objectives are:
1. Prudential—to reduce the level of risk to which bank creditors are exposed (i.e. to
protect depositors)
2. Systemic risk reduction—to reduce the risk of disruption resulting from adverse
trading conditions for banks causing multiple or major bank failures
3. Avoid misuse of banks—to reduce the risk of banks being used for criminal
purposes, e.g. laundering the proceeds of crime
4. To protect banking confidentiality
5. Credit allocation—to direct credit to favoured sectors
Banking regulations can vary widely across nations and jurisdictions. This section of the
article describes general principles of bank regulation throughout the world.

Minimum requirements
Requirements are imposed on banks in order to promote the objectives of the regulator.
Often, these requirements are closely tied to the level of risk exposure for a certain sector
of the bank. The most important minimum requirement in banking regulation is
maintaining minimum capital ratios.
Supervisory review
Banks are required to be issued with a bank license by the regulator in order to carry on
business as a bank, and the regulator supervises licensed banks for compliance with the
requirements and responds to breaches of the requirements through obtaining
undertakings, giving directions, imposing penalties or revoking the bank's license.
Market discipline
The regulator requires banks to publicly disclose financial and other information, and
depositors and other creditors are able to use this information to assess the level of risk and
to make investment decisions. As a result of this, the bank is subject to market discipline
and the regulator can also use market pricing information as an indicator of the bank's
financial health.
Instruments and requirements of bank regulation
Capital requirement
The capital requirement sets a framework on how banks must handle their capital in
relation to their assets. Internationally, the Bank for International Settlements' Basel
Committee on Banking Supervision influences each country's capital requirements. In
1988, the Committee decided to introduce a capital measurement system commonly
referred to as the Basel Capital Accords. The latest capital adequacy framework is
commonly known as Basel III. This updated framework is intended to be more risk
sensitive than the original one, but is also a lot more complex.
Reserve requirement
The reserve requirement sets the minimum reserves each bank must hold to demand
deposits and banknotes. This type of regulation has lost the role it once had, as the
emphasis has moved toward capital adequacy, and in many countries there is no minimum
reserve ratio. The purpose of minimum reserve ratios is liquidity rather than safety. An
example of a country with a contemporary minimum reserve ratio is Hong Kong, where
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banks are required to maintain 25% of their liabilities that are due on demand or within 1
month as qualifying liquefiable assets.
Reserve requirements have also been used in the past to control the stock
of banknotes and/or bank deposits. Required reserves have at times been gold coin, central
bank banknotes or deposits, and foreign currency.
Corporate governance
Corporate governance requirements are intended to encourage the bank to be well
managed, and is an indirect way of achieving other objectives. As many banks are
relatively large, with many divisions, it is important for management to maintain a close
watch on all operations. Investors and clients will often hold higher management
accountable for missteps, as these individuals are expected to be aware of all activities of
the institution. Some of these requirements may include:
1. To be a body corporate (i.e. not an individual, a partnership, trust or other
unincorporated entity)
2. To be incorporated locally, and/or to be incorporated under as a particular type of
body corporate, rather than being incorporated in a foreign jurisdiction.
3. To have a minimum number of directors
4. To have an organisational structure that includes various offices and officers, e.g.
corporate secretary, treasurer/CFO, auditor, Asset Liability Management
Committee, Privacy Officer etc. Also the officers for those offices may need to be
approved persons, or from an approved class of persons.
5. To have a constitution or articles of association that is approved, or contains or does
not contain particular clauses, e.g. clauses that enable directors to act other than in
the best interests of the company (e.g. in the interests of a parent company) may not
be allowed.
Financial reporting and disclosure requirements
Among the most important regulations that are placed on banking institutions is the
requirement for disclosure of the bank's finances. Particularly for banks that trade on the
public market, the Securities requires management to prepare annual financial statements
according to a financial reporting standard, have them audited, and to register or publish
them. Often, these banks are even required to prepare more frequent financial disclosures,
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such as Quarterly Disclosure Statements. The Sarbanes-Oxley Act of 2002 outlines in detail
the exact structure of the reports that the SEC requires.
In addition to preparing these statements, the SEC also stipulates that directors of the
bank must attest to the accuracy of such financial disclosures. Thus, included in their
annual reports must be a report of management on the company's internal control over
financial reporting. The internal control report must include: a statement of management's
responsibility for establishing and maintaining adequate internal control over financial
reporting for the company; management's assessment of the effectiveness of the company's
internal control over financial reporting as of the end of the company's most recent fiscal
year; a statement identifying the framework used by management to evaluate the
effectiveness of the company's internal control over financial reporting; and a statement
that the registered public accounting firm that audited the company's financial statements
included in the annual report has issued an attestation report on management's assessment
of the company's internal control over financial reporting. Under the new rules, a company
is required to file the registered public accounting firm's attestation report as part of the
annual report. Furthermore, the SEC added a requirement that management evaluate any
change in the company's internal control over financial reporting that occurred during
a fiscal quarter that has materially affected, or is reasonably likely to materially affect, the
company's internal control over financial reporting.
Credit rating requirement
Banks may be required to obtain and maintain a current credit rating from an
approved credit rating agency, and to disclose it to investors and prospective investors.
Also, banks may be required to maintain a minimum credit rating. These ratings are
designed to provide color for prospective clients or investors regarding the relative risk
that one assumes when engaging in business with the bank. The ratings reflect the
tendencies of the bank to take on high risk endeavors, in addition to the likelihood of
succeeding in such deals or initiatives. The rating agencies that banks are most strictly
governed by, referred to as the "Big Three" are the Fitch Group, Standard and
Poor's and Moody's. These agencies hold the most influence over how banks (and all public
companies) are viewed by those engaged in the public market. In recent years, following
the Great Recession, many economists have argued that these agencies face a serious
conflict of interest in their core business model. Clients pay these agencies to rate their
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company based on their relative riskiness in the market. The question then is, to whom is
the agency providing its service: the company or the market?
European financial economics experts- notably the World Pensions Council (WPC) have
argued that European powers such as France and Germany pushed dogmatically and
naively for the adoption of the “Basel II recommendations”, adopted in 2005, transposed in
European Union law through the Capital Requirements Directive (CRD). In essence, they
forced European banks, and, more importantly, the European Central Bank itself, to rely
more than ever on the standardized assessments of “credit risk” marketed aggressively by
two US credit rating agencies- Moody’s and S&P, thus using public policy and ultimately
taxpayers’ money to strengthen anti-competitive duopolistic practices akin to exclusive
dealing. Ironically, European governments have abdicated most of their regulatory
authority in favor of a non-European, highly deregulated, private cartel.
Large exposures restrictions
Banks may be restricted from having imprudently large exposures to
individual counterparties or groups of connected counterparties. Such limitation may be
expressed as a proportion of the bank's assets or equity, and different limits may apply
based on the security held and/or the credit rating of the counterparty. Restricting
disproportionate exposure to high-risk investment prevents financial institutions from
placing equity holders' (as well as the firm's) capital at an unnecessary risk.
Activity and affiliation restrictions
In 1933, during the first 100 days of President Franklin D. Roosevelt’s New Deal,
the Securities Act of 1933 and the Glass-Seagull Act (GSA) were enacted, setting up a
pervasive regulatory scheme for the public offering of securities and generally prohibiting
commercial banks from underwriting and dealing in those securities. GSA prohibited
affiliations between banks (which means bank-chartered depository institutions, that is,
financial institutions that hold federally insured consumer deposits) and securities firms
(which are commonly referred to as “investment banks” even though they are not
technically banks and do not hold federally insured consumer deposits); further
restrictions on bank affiliations with non- banking firms were enacted in Bank Holding
Company Act of 1956 (BHCA) and its subsequent amendments, eliminating the possibility
that companies owning banks would be permitted to take ownership or controlling interest
in insurance companies, manufacturing companies, real estate companies, securities firms,
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or any other non-banking company. As a result, distinct regulatory systems developed in
the United States for regulating banks, on the one hand, and securities firms on the other.
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Public sector banks
A Public Sector bank is one in which, the Government of India holds a majority stake. It is
as good as the government running the bank.
Since the public decide on who runs the government, these banks that are fully/partially
owned by the government are called public sector banks.
The term public sector banks is used commonly in India. This refers to banks that have
their shares listed in the stock exchanges NSE and BSE. It is also known as nationalised
banks.
In order to understand it better we will take the example of STATE BANK OF INDIA in
this project which is also a nationalised bank.

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NON PERFORMING ASSET
A Non-performing asset (NPA) is defined as a credit facility in respect of which the interest
and/or installment of principal has remained ‘past due’ for a specified period of time.
NPA is a classification used by financial institutions that refer to loans that are in
jeopardy of default. Once the borrower has failed to make interest or principal payments
for 90 days the loan is considered to be a non-performing asset. Non-performing assets are
problematic for financial institutions since they depend on interest payments for income.
Troublesome pressure from the economy can lead to a sharp increase in non-performing
loans and often results in massive write-downs.
With a view to moving towards international best practices and to ensure greater
transparency, it has been decided to adopt the ‘90 days’ overdue’ norm for identification of
NPA, from the year ending March 31, 2004. Accordingly, with effect from March 31, 2004,
a non-performing asset (NPA) shall be a loan or an advance where;
 Interest and/or instalment of principal remain overdue for a period of more than 90
days in respect of a term loan,
 The account remains ‘out of order’ for a period of more than 90 days, in respect of
an Overdraft/Cash Credit (OD/CC),
 The bill remains overdue for a period of more than 90 days in the case of bills
purchased and discounted,
 Interest and/or instalment of principal remains overdue for two harvest seasons but for
a period not exceeding two half years in the case of an advance granted for agricultural
purposes, and
 Any amount to be received remains overdue for a period of more than 90 days in
respect of other accounts.
Non Performing Assets (npa) in CENTARL BANK
With a steep rise in the ratio of the nonperforming assets all over the country, it has been
really tough for the RBI to control and manage in the given time frame. No doubt, public
sector banks including HDFC BANKhave been in the list of banks that have been
implementing the procedures to control the default line of the borrowers. On the other
hand, it should also be noted that non performing assets (npa) in HDFC BANKis ought to

plague the whole banking structure. To know the latest report and status on CENTARL
BANK’s NPA, you can also call or fill up the enquiry form with your queries.
Update on NPA for HDFC BANK
 The recent report on the statistics of non performing assets (npa) in HDFC BANKstates
that it witnessed an unexpected rise in the percentage of NPA. Other public sector banks
excluding HDFC BANKexperienced a rise of 10.5% till March 2012. On the other hand,
some of the banks of the country such as Punjab National Bank, Punjab and Sind Bank,
Central Bank of India and Indian Bank reported a massive increase in the nonperforming
assets that were above 35% in gross magnitude in the same fiscal.
Cause for the steep rise in NPA percentage
 With a quick rise in the disbursal of restructured loans in the standard category, NPA has
really risen over the limit although the limiting ratio is not so much alarming. With the net
NPA rate standing steady at the 1.5% for public sector banks, restructured loans is a
matter of primary concern. Moreover, the contribution of such loans in the aggregate
advances for these banks are supposed to be critical at 5.4%. And, amazingly 12% of those
structured loans got converted into non performing assets (npa) in CENTARL BANK.
HDFC BANKis at a war against the sticky loans and nonperforming assets now.
25

26
STATE BANK OF INDIA (Nationalised Bank)
HISTORY
The roots of the State Bank of India lie in the first decade of 19th century, when the Bank
of Calcutta, later renamed the Bank of Bengal, was established on 2 June 1806. The Bank
of Bengal was one of three Presidency banks, the other two being the Bank of
Bombay (incorporated on 15 April 1840) and the Bank of Madras (incorporated on 1 July
1843). All three Presidency banks were incorporated as joint stock companies and were the
result of the royal charters. These three banks received the exclusive right to issue paper
currency in 1861 with the Paper Currency Act, a right they retained until the formation of
the Reserve Bank of India. The Presidency banks amalgamated on 27 January 1921, and
the re-organized banking entity took as its name Imperial Bank of India. The Imperial
Bank of India remained a joint stock company.
Pursuant to the provisions of the State Bank of India Act of 1955, the Reserve Bank of
India, which is India's central bank, acquired a controlling interest in the Imperial Bank of
India. On 30 April 1955, the Imperial Bank of India became the State Bank of India.
The government of India recently acquired the Reserve Bank of India's stake in HDFC
BANKso as to remove any conflict of interest because the RBI is the country's banking
regulatory authority.
In 1959, the government passed the State Bank of India (Subsidiary Banks) Act, which
made eight state banks associates of CENTARL BANK. A process of consolidation began

on 13 September 2008, when the State Bank of Saurashtra merged with CENTARL
BANK.
HDFC BANKhas acquired local banks in rescues. The first was the Bank of Behar (est.
1911), which HDFC BANKacquired in 1969, together with its 28 branches. The next year
HDFC BANKacquired National Bank of Lahore (est. 1942), which had 24 branches. Five
years later, in 1975, HDFC BANKacquired Krishna ram Baldeo Bank, which had been
established in 1916 in Gwalior State, under the patronage of Maharaja Madho Rao
Scindia. The bank had been the Dukan Pichadi, a small moneylender, owned by the
Maharaja. The new banks first manager was Jall N. Broacha, a Parsi. In 1985, HDFC
BANKacquired the Bank of Cochin in Kerala, which had 120 branches. HDFC BANKwas
the acquirer as its affiliate, theState Bank of Travancore, already had an extensive network
in Kerala.
CURRENT BOARD OF DIRECTORS
After the end of O. P. Bhatt's reign as HDFC BANKchairman on 31 March 2011, the post
was taken over by Pratip Chaudhuri, who is the former deputy managing director of the
international division of CENTARL BANK. As of 4 August 2011, there are twelve
members in the HDFC BANKboard of directors, including Subir Gokarn, who is also one
of the four deputy governors of the Reserve Bank of India. The complete list of the Board
members is:
1. Pratip Chaudhuri (Chairman)
2. Hemant G. Contractor (Managing Director)
3. Diwakar Gupta (Managing Director)
4. A Krishna Kumar (Managing Director)
5. Dileep C Choksi (Director)
6. S. Venkatachalam (Director)
7. D. Sundaram (Director)
8. Parthasarathy Iyengar (Director)
9. G. D. Nadaf (Officer Employee Director)
10. Rashpal Malhotra (Director)
11. D. K. Mittal (Director)
12. Subir V. Gokarn (Director)
27

The eight banking subsidiaries are:
 State Bank of Bikaner and Jaipur (SBBJ)
 State Bank of Hyderabad (SBH)
 State Bank of India (CENTARL BANK)
 State Bank of Indore (CENTARL BANKR)
 State Bank of Mysore (SBM)
 State Bank of Patiala (SBP)
 State Bank of Saurashtra (SBS)
 State Bank of Travancore (SBT)
28

29
FINANCIAL ANALYSIS OF
STATE BANK OF INDIA

30
BALANCE SHEET OF CENTARL BANK
Balance Sheet --------In crs-------
Mar '11 Mar '12
Capital and Liabilities:
Total Share Capital 635.00 671.04
Equity Share Capital 635.00 671.04
Share Application Money 0.00 0.00
Preference Share Capital 0.00 0.00
Reserves 64,351.04 83,280.16
Revaluation Reserves 0.00 0.00
Net Worth 64,986.04 83,951.20
Deposits 933,932.81 1,043,647.52
Borrowings 119,568.96 127,005.57
Total Debt 1,053,501.77 1,170,652.93
Other Liabilities & Provisions 105,248.39 80,915.09
Total Liabilities 1,223,752.20 1,335,519.22
Assets
Cash & Balances with RBI 94,395.50 54,525.94
Balance with Banks, Money at Call 28,478.65 43,087.23
Advances 756,719.45 867,578.89
Investments 295,600.57 312,197.61
Gross Block 13,189.28 14,792.33
Accumulated Depreciation 8,757.33 9,658.46
Net Block 4,431.95 5,133.87
Capital Work In Progress 332.23 332.68
Other Assets 43,777.85 53,113.02
Total Assets 1,223,752.20 1,335,519.24
Contingent Liabilities 585,294.50 698,064.74
Bills for collection 205,092.29 201,500.44
Book Value (Rs) 1,023.40 1,251.05

31
PROFIT AND LOSS OF CENTARL BANK
Profit & Loss account -- in Rs. Cr. --
Mar '11 Mar '12
Income
Interest Earned 81,394.52 106,521.45
Other Income 14,935.09 14,351.45
Total Income 96,329.45 120,872.90
Expenditure
Interest expended 48,867.96 63,230.37
Employee Cost 14,480.17 16,974.04
Selling and Admin Expenses 12,141.19 15,625.18
Depreciation 990.50 1,052.17
Miscellaneous Expenses 12,479.30 12,350.13
Preoperative Exp Capitalised 0.00 0.00
Operating Expenses 31,430.88 37,563.09
Provisions & Contingencies 8,660.28 8,393.43
Total Expenses 88,959.12 109,186.89
Net Profit for the Year 7,370.35 11,686.01
Extraordinary Items 0.00 21.28
Profit brought forward 0.34 6.05
Total 7,370.69 11,713.34
Preference Dividend 0.00 0.00
Equity Dividend 1,905.00 2,348.66
Corporate Dividend Tax 246.52 296.49
Per share data (annualised)
Earning Per Share (Rs) 116.52 174.15
Equity Dividend (%) 300.00 350.00
Book Value (Rs) 1,023.40 1,251.05
Appropriations
Transfer to Statutory Reserves 2,488.96 3,531.35
Transfer to Other Reserves 2,729.87 5,552.50
Proposed Dividend/Transfer to Govt 2,151.52 2,645.15
Balance c/f to Balance Sheet 0.34 0.34
Total 7,370.69 11,713.34

32
FINANCIAL RATIOS OF CENTARL BANK
RATIOS 2011 2012
Total Debt/Equity Ratio 0.10 0.05
Total Asset Turnover Ratio 0.08 0.09
Asset Turnover Ratio 7.24 8.06
Return On Equity (%) 12.62 15.72
Return On Asset (%) 0.73 0.91
Return On Capital Employed (%) 5.61 6.39
Current Ratio 0.32 0.30
Quick Ratio 8.50 12.05
Earning Per Share 116.52 174.15
Dividend Pay Out Ratio 26.03 22.59

33
Analysis
1. Total debt/ equity ratio
Total debt/ equity ratio = debt equity
Total debt equity ratio tests the long term stability of a company. A low debt- equity ratio
also indicates stability and flexibility in arranging finance for future.
The total debt-equity ratio of HDFC BANKhas decreased from 0.10 in 2011 to
0.05 in 2012. This indicates that the bank is stable and flexible in arranging finance for
future.
2. Total Assets Turnover Ratio
Total Asset Turnover Ratio=sales/Avg. Total asset
This ratio shows how much sales the firm is generating for every dollar of investment in
asset .The higher the ratio ,the better the firms is performing.
The total asset turnover ratio of HDFC BANKis increased from
0.08 in 2011 to 0.09 in 2012.
3. Asset Turnover ratio
Asset Turnover Ratio=Sales/Total assets
It is a measure of how well a firm is putting its asset to work. If the asset turnover ratio is
low, it may indicate that the firm has too many unproductive asset.
The asset turnover ratio of HDFC BANKhas increased from 7.24 in
2011 to 8.06 in 2012. It indicates that HDFC BANKhas reduced its no. of unproductive
asset and the bank is using its assets effectively.

4. Return On Equity (%)
Return On Equity = Net Income/Average Shareholders Equity *100
The return on equity ratio means how much the shareholders earned for their investment
in the company. The higher the rato the percentage ,the better return is for the investors
to invest
34
The return On Equity Ratio has increased from 12.62 in 2011 to 15.72
in 2012 . it has shown a great increase in return on equity. This would help the bank to
attract more investors.
5.Return On Assets (%)
Return On Assets= Net Income/Avg Total Asset
The return On Asset Percentage shoes how profitable a company s asset are in generating
revenue . The number tells you what the company tells you what the company can do with
what it has
The return on asset % has increased from 0.73 in 2011 to 0.91 in 2012
.This indicates that HDFC BANKis utilizing its assets efficiently.
6.Return On Capital Employed
Return On capital Employed %=NPAT/Capital Employed *100
ROCE compares earnings with capital invested in the company. ROCE is used to prove
the value that the bussines gains from its asset and liabilities. The higher the ratio the
better is the return on capital employed.
ROCE of HDFC BANKhas increased from 5.61 in 2011 to 6.39
in2012. This indicates that the HDFC BANKhas
7.Current Ratio
Current Ratio=Current Assets/Current Liability

Current ratio tests the short term financial strength of the company. it tests the company’s
ability to pay its current liability. Acceptable current ratio vary from industry to industry
and are generally between 1.5 to 3 for healthy bussines. If a company’s current ratio is
below 1 then the company may have problem in meeting its short-term obligations.
35
In case of HDFC BANKthe current ratio has been 0.32 in 2011
and 0.30 in 2012. This shows that the current ratio is less than 1 and HDFC BANKmay
face problems in meeting its short term obligation as it is below 1.
8.Quick Ratio
Quick Ratio=Quick Assets/Quick Liability
Quick ratio or liquid ratio measures the ability of a company to use its near cash or quick
assets to extinguish or retire its current liability immediately. Quick assets include those
current assets that presumably can be quickly converted to cash at close to their book
value
The ratio of HDFC BANKhas increased from 8.50 in 2011 to
12.05 in 2012 .HDFC BANKhas a good quick ratio.
9.Earning Per Share
Earnings per share=net profit for equity share/numbe r of equity share
Earnings per share is a test of profitability from equity shareholders point of view. the
more the eps the more people will invest in the share of this company.
The eps of HDFC BANKwas 116.52 in 2011 which has increase to 174.15
in 2012.HDFC BANKhas shown a growing trend in eps. This would help them to attract
more investors
10 .Dividend payout ratio
Dividend Payout Ratio=Dividends/Earnings

Dividend payout ratio is the ratio of cash dividend paid through earning for a period.
36
The dividend payout ratio of HDFC BANK has reduced
from 26-03 in 2011 to 22-59 in 2012
State Bank of India
BSE: 500112 | NSE: CENTARL BANKN | ISIN: INE062A01012
Market Cap: [Rs.Cr.] 111,719 | Face Value: [Rs.] 10
Industry: Banks - Public Sector
BOARD MEETING
12-Aug-13
State Bank of India has informed BSE that a Meeting of the Bank's Central Board will
be held on August 12, 2013, to take on record the Reviewed Working Results of the Bank
for the quarter ended June 30, 2013 (Q1).
23-May-13
14-Feb-13
19-Jan-13
09-Nov-12
ANNUAL GENERAL MEETING
21-Jun-13
State Bank of India has informed BSE that the 58th Annual General Meeting (AGM) of
the Company will be held on June 21, 2013. With reference to earlier announcement
dated May 17, 2013 regarding AGM on June 21, 2013, State Bank of India has now
submitted to BSE a copy of the Notice dated May 29, 2013 being issued in the news
papers, informing Shareholders of the availability of Proxy Forms and Attendance Slips
for the captioned AGM. (As Per BSE Announcement Dated On 04.06.2013) State Bank of
India has informed BSE that the 58th Annual General Meeting (AGM) of the Bank was
held on June 21, 2013, under Clause 35A. (As Per BSE Announcement Dated On
24.06.2013)

22-Jun-12
20-Jun-11
16-Jun-10
19-Jun-09
EXTRA ORDINARY GENERAL MEETING
18-Feb-13
State Bank of India has informed BSE that a General Meeting of the Shareholders of the
Bank will be held on March 18, 2013. State Bank of India has submitted to BSE a copy of
the Special Resolution passed by the Shareholders of the Bank in the General Meeting
held on March 18, 2013. State Bank of India has informed BSE regarding the details of
Voting result at the General Meeting of the Bank, pursuant to clause 35A and Extracts of
the Minutes of the proceedings of the General Meeting of the Shareholders of the Bank
was held on March 18, 2013. (As per BSE Announcement Dated on 18.03.2013)
30-Jan-13
19-Mar-12
24-Jun-11
12-Jan-09
INDIA INFOLINE RESEARCH
State Bank of India (Q1 FY14)
Mr. Pratip Chaudhuri, Chairman, State Bank of India
37

38
HDFC BANKHOME LOAN
TOP-UP LOAN
 Loan for any purpose other than speculative.
 Repayment period co-terminus with the underlying Home Loan account.
 Upto two Home Equity Loans allowed to exist together.
 No prepayment/ pre closure penalty.
Eligibility
 All Home Loans with a satisfactory repayment track of at least one year.
 Valid mortgage should have been created in favour of the Bank.
Loan Amount
 Minimum: Rs. 0.50 lacs
 Maximum: Rs. 2 crores.
 Permissible Loan amount is calculated at 75% of present market value of the house
property less present outstanding in the Home Loan account.
Interest Rate
 Term Loan: 1.25% over Base Rate, present effective rate:11% p.a.
 Overdraft: 1.50% over Base Rate, present effective rate:11.25% p.a.
Loan Tenure
 The tenure of the loan will be co-terminus with the original residual maturity of the
Home Loan or the option exercised by customer, whichever is earlier.
 The loan has to be liquidated before the borrower attains the age of 70 years.
EARNEST MONEY DEPOSIT (EMD) SCHEME
LOAN FOR EARNEST MONEY FOR ALLOTMENT OF A HOUSE/PLOT
 Many Government agencies, viz. Urban Development Authorities and Housing
Boards, periodically come out with schemes for allotment of plots/houses, wherein
applicants have to deposit 10-20% of the total cost of plot/house as Earnest Money
Deposit (EMD).

 HDFC BANKEarnest Money Deposit Scheme provides finance for Earnest Money
deposit to all individuals above 21 years of age.
 Applicant should have regular source of income.
 No minimum income criteria.
 Margin waived. Finance upto 100% of application money, subject to a maximum
loan amount of Rs.10 Lacs.
 No security, irrespective of the loan amount.
Above mentioned features of the scheme are applicable subject to the
following conditions:
Allotment letters/refund orders should be routed through CENTARL BANK.
 Lump sum amount equal to 6 months interest to be paid upfront.
 Two PDCs, one for the principle amount of EMD and another towards interest for
the next 6 months should be taken to meet the eventuality of refund getting delayed.
HDFC BANKREVERSE MORTGAGE LOAN
LOAN FOR THE WELFARE OF SENIOR CITIZENS IN INDIA
House-owning Senior Citizens having inadequate income can avail this loan to meet their
financial needs for renovation/repairs to house, medical & other personal uses.
 No compulsion for the borrower to repay the loan amount during his or her lifetime
or till such time he or she continues to stay in the house.
 Borrowers have the options to prepay the loan at any time without any pre-payment
39
penalty.
Interest Rate
 2.75% above the Base Rate, present effective rate being 12.50% p.a. (Fixed) subject
to reset every 5 years.
Disbursement
 Either in Monthly/Quarterly payments or 50% of the sanctioned limit in lump-sum
and the remaining in periodic payments.

Scheduled Banks in India (Public Sector)
The following are the Scheduled Banks in India (Public Sector):
 Allahabad Bank
 Andhra Bank
 [[Bank of baroda ]
 Bank of India
 Bank of Maharashtra
 Canara Bank
 Central Bank of India
 Corporation Bank
 Dena Bank
 IDBI Bank (Industrial Development Bank of India)
 Indian Bank
 Indian Overseas Bank
 Oriental Bank of Commerce
 Punjab and Sindh Bank
 Punjab National Bank
 State Bank of Bikaner and Jaipur
 State Bank of Hyderabad
 State Bank of India
 State Bank of Mysore
 State Bank of Patiala
 State Bank of Travancore
 Syndicate Bank
 UCO Bank
 Union Bank of India
 United Bank of India
 Vijaya Bank
Scheduled Banks in India (Private Sector)
The following are the Scheduled Banks in India (Private Sector)
 Abhyudaya Bank [4]
 Axis Bank Ltd
 Bank of Punjab Ltd
 Bank of Rajasthan
 Catholic Syrian Bank
40

 Centurion Bank Ltd
 City Union Bank
 Development Credit Bank
 Dhanlaxmi Bank
 Federal Bank Ltd
 HDFC Bank Ltd
 ICICI Banking Corporation Bank Ltd
 IndusInd Bank
 ING Vysya Bank
 Jammu & Kashmir Bank
 Nainital Bank, estb. 1954
 Karur Vysya Bank
 Karnataka Bank
 Kotak Mahindra Bank
 Lakshmi Vilas Bank
 South Indian Bank Ltd
 Tamilnad Mercantile Bank Limited
 Yes Bank
 The Ratnakar Bank Ltd
Scheduled Foreign Banks in India
The following are the Scheduled Foreign Banks in India:
 American Express Bank Ltd.
 ANZ Bank
 Bank of America NT & SA
 Bank of Tokyo Ltd.
 Banque Nationale de Paris
 Barclays Bank Plc
 Citibank
 Deutsche Bank AG
 Hongkong and Shanghai Banking Corporation
 The Royal Bank of Scotland
 The Chase Manhattan Bank Ltd.
 Dresdner Bank AG
 Standard Chartered Bank
41

42
CONCLUSION
The Indian banks are hopeful of becoming a global brand as they are the major source of
financial sector revenue and profit growth. The financial services penetration in India
continues to be healthy, thus the banking industry is also not far behind. As a result of this,
the profit for the Indian banking industry will surely surge ahead.
The profit pool of the Indian banking industry is probable to augment from US$ 4.8 billion
in 2005 to US$ 20 billion in 2010 and further to US$ 40 billion by 2015. This growth and
expansion pace would be driven by the chunk of middle class population.
The increase in the number of private banks, the domestic credit market of India is
estimated to grow from US$ 0.4 trillion in 2004 to US$ 23 trillion by 2050.
 Fundamental analysis can be valuable, but it should be approached with caution. If
you are reading research written by a sell-side analyst, it is important to be familiar
with the analyst behind the report.
 We all have personal biases, and every analyst has some sort of bias. There is
nothing wrong with this, and the research can still be of great value.
 Learn what the ratings mean and the track record of an analyst before jumping off
the deep end.
 Corporate statements and press releases offer good information, but they should be
read with a healthy degree of scepticism to separate the facts from the spin.
 Press releases don't happen by accident; they are an important Personal Research
tool for companies.
 Investors should become skilled readers to weed out the important information and
ignore the hype.

43
BIBLIOGRAPHY
 Money.livemint.com
 Competitionmonstor.com
 Preserveaticles.com
 Wikipedia
 Nonperforming assets. in

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