A

SYNOPSIS

ON

FOREIGN EXCHANGE

AT

HDFC BANK LTD

A synopsis submitted to Osmania University

In partial fulfillment for the Award of the Degree of

MASTER OF BUSIUNESS ADMINISTRATION

Submitted by

KADIGALLA SUDHARANI

HT NO: 212118672056

UNDER THE GUIDANCE OF

------------------------------------------

ARISTOTLE PG COLLEGE

(Affliated To Osmania University,Hyderabad)

Recognized By UGC under section 2(f) of UGC Act 1956

Beside Moinabad Police Station,

Chilkur, Moinabad ,Ranga Reddy District, Telangana.

 CHAPTER-I
INTRODUCTION
INTRODUCTION
A Foreign exchange is a market in which currencies are bought and sold. It is to be

distinguished from a financial market where currencies are borrowed and lent. General

Features Foreign exchange market is described as an OTC (Over the counter) market as there

is no physical place where the participants meet to execute their deals. It is more an informal

arrangement among the banks and brokers operating in a financing centre purchasing and

selling currencies, connected to each other by telecommunications like telex, telephone and a

satellite communication network, SWIFT. The term foreign exchange market is used to refer

to the wholesale a segment of the market, where the dealings take place among the banks.

The retail segment refers to the dealings take place between banks and their customers. The

retail segment refers to the dealings take place between banks and their customers. The retail

segment is situated at a large number of places. They can be considered not as foreign

exchange markets, but as the counters of such markets.

The leading foreign exchange market in India is Mumbai, Calcutta, Chennai and Delhi is

other centers accounting for bulk of the exchange dealings in India. The policy of Reserve

Bank has been to decentralize exchanges operations and develop broader based exchange

markets. As a result of the efforts of Reserve Bank Cochin, Bangalore, Ahmadabad and Goa

have emerged as new centre of foreign exchange market. Size of the Market Foreign

exchange market is the largest financial market with a daily turnover of over USD 2 trillion.

Foreign exchange markets were primarily developed to facilitate settlement of debts arising

out of international trade. But these markets have developed on their own so much so that a

turnover of about 3 days in the foreign exchange market is equivalent to the magnitude of
world trade in goods and services. The largest foreign exchange market is London followed

by New York, Tokyo, Zurich and Frankfurt.

DEFINITIONS
The simple definition of Foreign Exchange is the exchange of one currency for another. The
foreign exchange market allows Companies, Banks and individuals to buy and sell foreign
currency. Unlike other financial market, the foreign exchange market has no single location-
trading is done globally via telephone and computer links. The forex market is huge: the
trading volume is in excess of 1.9 trillion USD per day, providing the greatest liquidity to the
investors.
In the past small investors have limited access to the lucrative forex market. The interbank
market is no longer the exclusive domain of large players. Technological leaps (such as state
of the art deal boo FX2 trading software) have opened up this exciting market to small
speculations. Real-time interbank dealing rates allow the trader to place a buy or sell order
and see it executed within a fraction of a second. There are always buyers and sellers in the
forex market. The market absorbs trading volumes. A trader is never struck in a position due
to a lack of market interest, volume and/or liquidity.
When companies conduct business across borders, they must deal in foreign currencies.
Companies must exchange foreign currencies for home currencies when dealing with
receivables, and vice versa for payables. This is done at the current exchange rate between
the two countries. Foreign exchange risk is the risk that the exchange rate will change
unfavorably before the currency is exchanged. An over-the-counter market where buyers and
sellers conduct foreign exchange transactions. The Forex market is useful because it helps
enable trade and transactions between countries, and it also allows an investment opportunity
for risk seeking investors who don't mind engaging in speculation. Individuals who trade in
the Forex market typically look carefully at a country's economic and political situation, as
these factors can influence the direction of its currency. One of the unique aspects of the
Forex market is that the volume of trading is so high, partially because the units exchanged
are so small.
The Forex, and also known as "The Foreign Exchange" market exists wherever one currency
is traded for another. It's the largest financial market in the world. Simply if we compare the
New York Stock Exchange trades vs changing hands in forex, we will discover Forex market
is a lot of times larger than both Equity and Treasury markets combined. There are more and
less popular pairs of exchange in the forex market. Euro Dollar is one of the most important
pairs and you are likely to see it written in the form of EUR/USD on all forex display screens.
There are of course other tradable pairs such as GPB/USD (British Pound/ American dollar),
USD/JPY (American dollar/Japanese Yen), USD/CHF (American dollar/Swiss Franc). Yet,
they are far less popular than the EUR/USD pair.
CHAPTER –II
REVIEW OF LITERATURE
1. (Krishnan et al., 2018) very clearly indicate that technical analysis is profitable in
currency trading in foreign exchange spot market, which is proven by the fact that all
the four currency pairs, six time frames and ten indicators under consideration yielded
trading profits in foreign spot market.
2. (Venkatesh et al., 2017) inferred that at shorter horizons there exists a skew towards
reliance on Technical Analysis, while the skewness moves towards fundamental
analysis for long term Investments.
3. Anand and Kaushik (2016) examine what motivates the management to use foreign
currency derivatives in corporate India; they compare the significant differences, if
any, in the motivation of the firms which either use foreign currency derivatives or
have a documented foreign exchange risk management policy in place, with those
which do not. They also examine the motivation behind the use of foreign currency
derivatives in a factor-analytic framework. Most of the respondent firms (70.4
percent) have documented foreign exchange risk management
plan/policy/programme. Transaction exposure as a foreign currency risk is more
critical to the firms (74.5 percent) followed by translation exposure (58.3 percent
manifested a moderate degree of risk) and economic exposure (54.3 percent
manifested a low degree of risk). To reduce the volatility in profit after tax, cash flows
and the cost of capital and thus increase the value of the firm on the one side and to
reduce the risks faced by the management on the other are among the major reasons
which motivate the firms to use foreign currency derivatives in India. Firms with a
high debt ratio are more likely to use foreign currency derivatives. The major
objective of using derivatives is hedging the risk (96.1 percent ranked it as the number
one objective), arbitrage (55.3 ranked it as number two objective) and price discovery
(36.4 percent assigned it rank two and 33.3 percent assigned it rank three).
Speculative objective is the least preferred option (62.1 percent assigned rank four).
4. Dash and Madhava (2015) analyses the impact of INR/USD exchange rate
fluctuation on the Indian IT sector The analysis is performed on a random sample of
fifty major IT companies. This survey was conducted in the light of drastic
appreciation of INR against USD during last part of 2007. The results of the study
showed that foreign exchange exposure was especially alarming for a small fraction
 of small-cap IT companies. The mid-cap and large-cap IT companies had relatively
low/moderate exposure levels. The majority of large-cap companies 34 had already
hedged their foreign exchange risk, and were not significantly affected by their
respective foreign exchange exposures.
5. Sivakumar and Sarkar (2014) attempt to evaluate the various alternatives available
to the Indian corporates for hedging currency exposure. The study was based on 2006-
07 annual report of 8 listed companies. By studying the use of hedging instruments by
Indian firms from different sectors, the paper concludes that most Indian firms use
forwards and options to hedge their foreign currency exposure. This implies that these
firms chose short-term measures to hedge as opposed to foreign debt. This preference
is possibly a consequence of their costs being in rupees, the absence of a Rupee
futures exchange in India and curbs on foreign debt. It also follows that most of these
firms behave like net exporters and are adversely affected by appreciation of the local
currency. There are a few firms which have import liabilities which would be
adversely affected by rupee depreciation.
6. Jain, Yadav, and Rastogi (2013) examines and compares the policies of foreign
exchange risk and interest rate risk management followed by public Sector, private
sector business houses and foreign controlled firms in India. The study reveals that
Indian firms are aware of their foreign exchange and Interest rate risk. However, all
the risks are not managed and the type of ownership control significantly influences
the usage of the techniques to manage exchange rate risk and interest rate risk.
'Exposures are not large enough' is the most widespread and prominent reason for not
managing risks. Ownership has been observed to be a significant determinant of firms'
strategy towards risk management.
CHAPTER-III
RESEARCH METHODOLOGY

NEED FOR THE STUDY

The simple definition of Foreign Exchange is the exchange of one currency for another. The
foreign exchange market allows Companies, Banks and individuals to buy and sell foreign
currency. Unlike other financial market, the foreign exchange market has no single location-
trading is done globally via telephone and computer links. The forex market is huge: the
trading volume is in excess of 1.9 trillion USD per day, providing the greatest liquidity to the
investors.
In the past small investors have limited access to the lucrative forex market. The interbank
market is no longer the exclusive domain of large players. Technological leaps (such as state
of the art deal boo FX2 trading software) have opened up this exciting market to small
speculations. Real-time interbank dealing rates allow the trader to place a buy or sell order
and see it executed within a fraction of a second.
There are always buyers and sellers in the forex market. The market absorbs trading
volumes. A trader is never struck in a position due to a lack of market interest, volume and/or
liquidity.
When companies conduct business across borders, they must deal in foreign currencies.
Companies must exchange foreign currencies for home currencies when dealing with
receivables, and vice versa for payables. This is done at the current exchange rate between
the two countries. Foreign exchange risk is the risk that the exchange rate will change
unfavorably before the currency is exchanged.
An over-the-counter market where buyers and sellers conduct foreign exchange transactions.
The Forex market is useful because it helps enable trade and transactions between countries,
and it also allows an investment opportunity for risk seeking investors who don't mind
engaging in speculation. Individuals who trade in the Forex market typically look carefully at
a country's economic and political situation, as these factors can influence the direction of its
currency. One of the unique aspects of the Forex market is that the volume of trading is so
high, partially because the units exchanged are so small.
OBJECTIVES OF THE STUDY:
The main objectives of the study are:

1 To study the effectiveness of credit process.

2 To study the risk process followed in HDFC BANK.

3 To know and analyze the procedure of loan disbursement and its evaluation criteria.

4 To study and analyze the factors contributing to default rate and their interrelations.

5 To suggest suitable strategies for improving credit and risk management.

SCOPE OF THE STUDY
Let us say that the businessman who operates in more than one country needs to understand
not only the mechanism of the foreign exchange system, but also why changes in monetary
values occur and how to cope with them.
Foreign exchange is the monetary mechanism by which transactions in two or more
currencies are affected.
In the beginning, trade took place on a barter basis. That had an obvious disadvantage: each
of the parties in a transaction had to have something the other wanted. The basis of the
alternative, a monetary exchange system, is a material that has an intrinsic value that is
relatively stable and so is wanted by both parties in a transaction. Therefore the need of
foreign exchange has been araised.
Following are the needs of Forex.,
 With the development of nations, each with its own monetary system, and
international trade, a foreign exchange mechanism became necessary and was
developed. By means of foreign exchange, goods produced in one country can be
purchased in another country.
 Regardless of its direction, such an international transaction must be denominated in a
currency other than that of either the seller or buyer; that is, one party to the
transaction must either buy or sell a foreign currency.
 It does so through the international banking system, and the result is a foreign
exchange transaction. The problem that then arises is convertibility, or the relative
values of two different currencies.
 Despite the existence of an international monetary system, changes in the value of one
currency in relation to another are common, and they make the management of
international business more complex.
 Changes in monetary values are of two kinds: those that reflect supply and demand in
the day-to-day market, and those that reflect an imbalance between the economies of
countries.
RESEARCH METHODOLOGY OF THE STUDY:
The study is both descriptive and analytical in nature. It is a blend of primary data and

secondary data. The primary data has been collected personally by approaching the online

share traders who are engaged in share market. The data are collected with a carefully

prepared questionnaire. The secondary data has been collected from the books, journals and

websites which deal with online share trading.

Source of data

Primary Sources: The primary data was collected through structured unbiased questionnaire

and personal interviews of investors. For this purpose questionnaire included were both open

ended & close ended & multiple-choice questions.

Secondary method: The secondary data collection method includes:

 Websites

 Journals

 Text books

Method Used For Analysis of Study

The methodology used for this purpose is Survey and Questionnaire Method. It is a time

consuming and expensive method and requires more administrative planning and supervision.

It is also subjective to interviewer bias or distortion.

Sampling Unit: Businessmen, Government Servant, Retired Individuals

Statistical Tools: MS-excel and pie and bar diagrams are used to analyze the data.
LIMITATIONS OF THE STUDY

 The study was limited to only foreign currency.

 The data is compared and analyzed on the basis of performance of the forex currency
rates over the past months.
 The required data available on net from 1st Aug 2018 to 30th Jan 2018.
 It was very difficult to obtain the data regarding the currency rates yielded by
USDINR, GBPINR, EURINR and JPYINR.
CHAPTER-III
COMPANY PROFILE
About
The Housing Development Finance Corporation Limited (HDFC) was amongst the first to
receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the
private sector, as part of RBI's liberalisation of the Indian Banking Industry in 1994. The
bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its
registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled
Commercial Bank in January 1995.
Awards and Achievements - Banking Services

HDFC Bank began operations in 1995 with a simple mission: to be a "World-class Indian
Bank". We realised that only a single-minded focus on product quality and service
excellence would help us get there. Today, we are proud to say that we are well on our way
towards that goal.
It is extremely gratifying that our efforts towards providing customer convenience have been
appreciated both nationally and internationally.

2019

BrandZ Top 75 Most • HDFC Bank - India's Most Valuable Brand for 6th year in
Valuable Indian a row
Brands 2019

Institutional Investor • Among The Most Honored Company List

All-Asia (ex-Japan)
Executive Team 2019
survey

Euromoney Awards • India's Best Bank

for Excellence 2019

Greenwich Associates • Joint No. 1 in Large Corporate Banking with 75 per cent
study share of market
•Leader in overall Quality of client relationship in
 Corporate Banking
• No. 1 in Middle-Market Banking with 60 per cent share of
market
• Leader in overall Quality of client relationship in Middle-
Market Banking

Euromoney Awards India’s Best Bank

for Excellence 2019

UTI MF -CNBC Best Performing Bank (Private sector)

TV18 Financial
Advisor Awards '18-
19

BrandZ Top 100 HDFC Bank featured for the fifth time in the BrandZ's Top
Most Valuable Global 100 Global Brands List
Brands 2019

Governance Now -Digital Bank

BFSI Awards 2019. -Tech Trendsetter

Businessworld Magna -Best Large Bank

Awards 2019 -Fastest Growing Large Bank - Runner up

American Indian Aditya Puri honoured for corporate and philanthropic

Foundation leadership

Express Computer Leadership Award for Outstanding Initiatives in Big Data /

BFSI Digital Analytics Artificial Intelligence Enterprise Applications
Innovation Awards
2019.

The Banker Bank of Bank of the Year - India

the Year Awards
2018

The Banker Global Best Private Bank in India

Private Banking
Awards 2018.

Mint - EY Emerging Winner - Robotic Process Automation (Software) category.

Technology Awards

Forbes' World's Best No. 1 Bank in India - HDFC Bank

Banks report

Euromoney Trade Best Service (Asian Banks only) - India

Finance Survey 2019 Market Leader (Asian Banks only) - India

The Financial Best Bank - New Private Sector category

Express India's Best
Banks Awards 2017-
18

FE CFO Awards Best CFO / Newsmaker of the Year

2019

Asiamoney Best Best Digital Bank (India)

Bank Awards 2019

AIMA-JRD Tata HDFC Bank MD Mr. Aditya Puri has been conferred the
Corporate Leadership AIMA-JRD Tata Corporate Leadership Award for the Year
Award 2018 2018

Outlook Money Best Private Sector Bank Award - Gold

Awards 2019

IDC Financial Asia's Most Secure Bank

Insights Innovation
Awards (FIIA) 2019

Dun & Bradstreet India's Leading Bank - Private Sector

BFSI Awards 2019

Euromoney Private No. 1 in Asset Management category

Banking and Wealth
Management Survey
2019

Business Today - - Bank of the Year - HDFC Bank and SBI

KPMG India's Best Best Large Bank - HDFC Bank
Bank Awards 2019

FE Best Bank Awards Best Bank: New Private Sector

CHAPTER-V

CHAPTERIZATION
CHAPTERIZATION
CHAPTER-1
INTRODUCTION
CHAPTER-2
REVIEW OF LITERATURE
CHAPTER-3
RESEARCH METHODOLOGY
 NEED OF THE STUDY
 OBJECTIVES OF THE STUDY
 SCOPE OF THE STUDY
 DATA COLLECTION
 LIMITATIONS
 STATISTICAL TOOLS
CHAPTER-4
INDUSTRY/COMPANY PROFILE
CHAPTER-5
DATA ANALYSIS
CHAPTER-6
FINDINGS
CHAPTER-7
SUGGESTION & CONCLUSION
BIBLIOGRAPHY
ANNEXURES