Alm@hdfc
Alm@hdfc
Alm@hdfc
IN HDFC BANK
Abstract
Property and Liabilities manage (ALM) is a unique mind-set of building, getting decrease all
over again via, planning and controlling the focal obsessions and liabilities – their blends,
volumes, of development, yields and costs to perform a named net interest income (NII). The NII
is the department among pinnacle charge remuneration and top rate costs and the focal
wellspring of banks restriction. The pulling in of controls on financing expenses has provoked
better credit score rating rate tremendousness in India. proper now, is a want to have a have a
study and show the credit score charge introduction of Indian paper entitled "A study on the
belongings and Liabilities manage (ALM) Practices with cute reference to hobby charge risk
control at HDFC economic enterprise" is foreseen looking on the interest price threat in HDFC
Bank by way of the usage of using the use of hollow evaluation making use of direct open facts,
this paper endeavors to don not forget the financing charge hazard surpassed on via the Housing
Development Financial Corporation in March 2020, 2021, 2022, 2023 and 2023. The exposures
exposed that the economic enterprise considers financing charge threat.
HDFC: Housing Development Financial Corporation
INTRODUCTION
Asset Liability Management (ALM) is a strategic approach of managing the balance sheet
dynamics in such a way that the net earnings are maximized. This approach is concerned with
management of net interest margin to ensure that its level and riskiness are compatible with the
risk return objectives of the.
If one has to define Asset and Liability management without going into detail about
its need and utility, it can be defined as simply “management of money” which carries value
and can change its shape very quickly and has an ability to come back to its original shape
with or without an additional growth. The art of proper management of healthy money is
As major part of funds at the disposal of come from outside sources, the management
is concerned about RISK arising out of shrinkage in the value of asset, and managing such
risks became critically important to them. Although co-operative are able to mobilize deposits,
major portions of it are high cost fixed deposits. Maturities of these fixed deposits were not
properly matched with the maturities of assets created out of them. The tool called ASSET
AND LIABILITY MANAGEMENT provides a better solution for this.
The need of the study is to concentrates on the growth and performance of The Housing
Development Finance Corporation Limited (HDFC) and to calculate the growth and
performance by using asset and liability management. And to know the management of
nonperforming assets.
Due to this pandemic situation of Covid19 Company officials are not allowing students in
Organization.. So we done this project work completely based on secondary data.
Collected from books regarding, journal, and management containing relevant information
about ALM and Other main sources were
There are many analytical techniques for measurement and management of interest rate risk. In
MIS of ALM, Here in this project I used the traditional gap analysis is considered as a suitable
method to measure the interest rate risk.
Using the duration analysis to assess the sensitivity of the market value of assets and liabilities.
Ds xS = (D x A) – (DL x L)
Where Ds = Duration Gap/ Duration of surplus
DA= Duration of Assets, DL = Duration of liabilities
A= Assets L= Liabilities
S = Surplus/ Gap
Current ratio
Turnover Ratio
The Basel II norms (2004) focused on international standard for the amount of capital to be
maintained by banks as a safeguard against various risks they come across in the banking
business. Basel II proposed setting up rigorous risk and capital management requirements
designed to ensure that a bank holds capital reserves appropriate to the risk the bank exposes
itself to through its leading and investment practices. It infers that the greater risk to which the
bank is exposed, the greater the amount of capital the bank needs to hold to ensure solvency and
stability.
Marrison (2002) had opined that the major aspect of bank management is not deposit
mobilization and giving credit they should also follow the effective credit risk management
which reduces the risk of customer default. The survival of a bank depends on its capability to
handle credit. Mismanagement of bad lending can lead to bank failure. The author had also
suggested that irregular meetings of loan committees, false loan, treasury losses, high sums of
unrecorded deposits and money laundering in large amounts also can contribute to bank failures..
Milir Venkatesh and Bhargav (2008) focused on price matching and maintaining spreads. Taking
one step ahead, the banks now focus on integrated balance-sheet management where all the
relevant factors which effect an appropriate balance sheet composition deserve consideration.
Therefore various components of balance sheet are analyzed keeping in view the strengths of a
bank. The earlier approach of managing certain deposits, loans and advances has no much
relevance. The basic difference in earlier approach and dynamic approach can be described in
term of focus on value addition, analysis of different scenarios, comprehensive risk and dynamic
approach of balance sheet evaluation in the present ALM system.
Dash and Pathak (2011) proposed a linear model for asset-liability assessment. They found that
public sector banks have best asset liability management positions, maintaining profitability,
satisfying the liquidity constraints, and reducing interest rate risk exposure. The present study
analyses the impact of RBI guidelines on effective management of ALM in banks.
Impact of Credit Risk management
Kosmas njanike(2009) had emphasized on the impact of effective Credit risk management on
banks survival. A number of financial institutions have collapsed or faced financial stress due to
the inefficiency in credit risk management systems. The study had described the ways to manage
the credit risk faced by the bank. The author had examined that the main reason lies with a bank
towards for poor risk management practice created by high level insider loans, speculative
lending, high concentration of credit in certain sectors. In the changing economic environment
interest rates charged by banks are fast overtaken by inflation and borrowers find it difficult to
repay loans as real income fall. Banks failures were also attributed due to improper lending
practice lack of experience, organizational and informational systems to assess the credit risk.
The effective credit risk management is important in banks to improve the performance and
prevent distress.
Miller (1996) studied the impact of effective Credit management for banks survival. He
identified certain situations which cause bank failure. like too many rigid rules making the banks
to disregard the rigid system of rule. It can inhibit banks from achieving regulatory goals set for
them and serve as a disincentive for improvement.
Ogilo Fredrick (2012) had advised that bank should establish certain standards which enable
them to monitor the quality of the credit portfolio on a daily basis and take precautionary steps as
and when the deterioration takes place. The management had stated that the bank’s policy should
provide procedural guidelines regarding credit risk monitoring. The procedure for credit
monitoring included frequent monitoring, Periodic examination of collateral loan covenants,
Identification of any deterioration in any loan.
Anita Makker and shweta singh (2013) The authors had advocated the problems faced by the
banks towards interest rate risk. It arises due to the changes in interest rates in the market as it is
a risk to earnings or capital to the banks. The authors had identified the reason for interest rate
risk to be due to the imperfect correlation in the adjustment of interest rate earned and paid on
different instruments. Failure to manage this risk would affect the financial stability of a bank,
which leads to the probability of insolvency. The decline in net interest income is due to the
global recession. The interest rate risk arises in the timing differences in the reprising of assets
and liabilities and off – balance sheet instruments.. The authors had analyzed from the study that
SBI, PNB, ICICI have got negative balance in different time buckets, which are highly prone to
interest rate risk. HDFC is the safest and strongest bank in the selected sample which scored
positive score based on the performance of both public and private sector banks. The study
revealed that private sector banks are in a better position than public sector banks. To overcome
this situation banks should keep the degree of mis match of assets and liabilities in a manageable
limits. This would also help them in better risk management.
Ila patnaik. & Ajay shah (2002) had studied the interest rate risk in the Indian bank system by
measuring the interest rate risk profile of major banks in india. It consisted of evaluating the
impact on equity capital of the interest rate shocks and elasticity of bank stock prices toward the
fluctuation in interest rates. Finally they suggested that banks and their supervision will benefit
from computing interest rate exposure through these approaches.
Enzo Scannella (2013) had found an empirical investigation on the exposure of banks to interest
risk. Interest rate risk has become an important tool to measure, manage and assess the impact of
its volatility on the economics of banking. The author had also opined that interest rate
fluctuations have an effect on bank’s deposits, loans and off- balance sheet financial operations.
If the interest rate declines, the amount of interest on deposits also will decrease but the market
value of the liability will increase. On the other side if the amount of interest on loans and other
financial instruments decrease the market value of assets portfolio will increase. If the interest
rates decline such fluctuations in the amount of interest will hamper the bank’s economic equity.
Interest rate risk of banks is usually affected by maturity. impact of interest rate risk is measured
by two approaches namely, the current earnings approach and the economic value approach..To
measure, monitor and control the interest rate risk most banks have followed an asset-liability
management (ALM) perspective.
Drago and fabozzi konishia, saita 2000) had studied about the interest rate risk and asset liability
management perspective in banks..Interest rate risk can cause a threat to a bank’s earnings and
capital base. Changes in interest rates affect a banks earnings by changing its net interest income
and operating expenses and to measure, control and monitor the interest rate risk most banks
have adopted an ALM perspective. which consists theoretical, empirical and regulatory
implications.
THEORITICAL REVIEW
Introduction:
In the normal course, they are exposed to credit and market risks in view of the asset
liability transformation. With the liberalization in the
Indian financial markets over the last few years and growing integration of domestic
markets and with external markets the risks associated with operations have become complex,
large, requiring strategic management. Are now operating in a fairly deregulated environment
and are required to determine on their own, interest rates on deposits and advance in both
domestic and foreign currencies on a dynamic basis. The interest rates on investments in
government and other securities are also now market related. Intense competition for business
involving both the assets and liabilities, together with increasing volatility in the domestic
interest rates, has brought pressure on the management of to maintain a good balance among
spreads, profitability and long-term viability. Impudent liquidity management can put earnings
an reputation at great risk. These pressures call for structured and comprehensive measures and
not just adahoc action. The management of has to base their business decisions on a dynamic
and integrated risk management system and process, driven by corporate strategy. are exposed
to several major risks in course of their business-credit risk, interest rate and operational risk
therefore important than introduce effective risk management systems that address the issues
related to interest rate, currency and liquidity risks.
The initial focus of the ALM function would be to enforce the risk management
discipline, viz., and managing business after assessing the risks involved.
In addition, the managing the spread and riskiness, the ALM function is more
appropriately viewed as an integrated approach which requires simultaneous decisions about
asset/liability mix and maturity structure.
Risk management is a dynamic process, which needs constant focus and attention. The
idea of risk management is a well-known investment principle that the largest potential returns
are associated with the riskiest ventures. There can be no single prescription for all times,
decisions have to be reversed at short notice. Risk, which is often used to mean uncertainty,
creates both opportunities and problems for business and individuals in nearly every walk of
life.
Risk sometimes is consciously analyzed and managed; other times risk is simply
ignored, perhaps out of lack of knowledge of its consequences. If loss regarding risk is certain
to occur, it may be planned for in advance and treated as to definite, known expense.
Businesses and individuals may try to avoid risk of loss as much as possible or reduce its
negative consequences.
Several types of risks that affect individuals and businesses were introduced, together
with ways to measure the amount of risk. The process used to systematically manage risk
exposure is known as RISK MANAGEMENT. Whether the concern is with a business or an
individual situation, the same general steps can be used to systematically analyze and deal with
risk.
➢ Risk identification
➢ Risk evaluation
➢ Risk management technique
➢ Risk measurement
➢ Risk review decisions
Risk identification:
The first step in the risk management process is to identify relevant exposures to risk.
This step is important not only for traditional risk management, which focuses on uncertainty
of risks, but also for enterprise risk management, where much of the focus is on identifying the
firm’s exposures from a variety of sources, including operational, financial, and strategic
activities.
Risk evaluation:
For each source of risk that is identified, an evaluation should be performed. At this
stage, uncertainty of risks can be categorized as to how often associated losses are likely to
occur. In addition to this evaluation of loss frequency, an analysis of the size, or severity, of
the loss is helpful. Consideration should be given both to the most probable size of any losses
that may occur and to the maximum possible losses that might happen. Risk management
techniques:
The results of the analyses in second step are used as the basis for decisions regarding
ways to handle existing risks. In some situations, the best plan may be to do nothing. In other
cases, sophisticated ways to finance potential losses may be arranged. The available
techniques for managing risks are GAP Analysis, VAR Analysis, Heinrich Domino theory
etc., with consideration of when each technique is appropriate.
Risk measurement:
Once risk sources have been identified it is often helpful to measure the extent of the
risk that exists. As part of the overall risk evaluation, in some situations it may be possible to
measure the degree of risk in a meaningful way. In other cases, especially those involving
individuals computation of the degree of risk may not yield helpful information.
Following a decision about the optimal methods for handling identified risks, the
business or individual must implement the techniques selected. However, risk management
should be an ongoing process in which prior decisions are reviewed regularly. Sometimes new
risk exposures arise or significant changes in expected loss frequency or severity occur. The
dynamic nature of many risks requires a continual scrutiny of past analysis and decisions.
DIMENSIONS OF RISK
Specifically two broad categories of risk are the basis for classifying financial services
risk.
(1) Product market Risk.
This risk decision relate to the operating revenues and expenses of the form that impact
the operating position of the profit and loss statements which include crisis, marketing,
operating systems, labor cost, technology, channels of distributions at strategic focus. Product
Risks relate to variations in the operating cash flows of the firm, which effect Capital Market,
required Rates Of Return;.
Risk in Product Market relate to the operational and strategic aspects of managing
operating revenues and expenses. The above types of Product Risks are explained as follows.
1. CREDIT RISK:
The most basic of all Product Market Risk in a or other financial intermediary is the
erosion of value due to simple default or non-payment by the borrower. Credit risk has been
around for centuries and is thought by many to be the dominant financial services today.
intermediate the risk appetite of lenders and essential risk ness of borrowers. manage this risk
by;
(A) Making intelligent lending decisions so that expected risk of borrowers is both
accurately assessed and priced;
(B) Diversifying across borrowers so that credit losses are not concentrated in time;
(C) Purchasing third party guarantees so that default risk is entirely or partially shifted
away from lenders.
This is the risk that entire lines of business may succumb to competition or
obsolescence. In the language of strategic planner, commercial paper is a substitute product
for large corporate loans. Strategic risk occurs when not ready or able to compete in a newly
developing line of business. Early entrants enjoyed a unique advantage over newer entrants.
The seemingly conservative act of waiting for the market to develop posed a risk in itself.
Business risk accrues from jumping into lines of business but also from staying out too long.
Commodity prices affect and other lenders in complex and often unpredictable ways.
The macro effect of energy price increases on inflation also contributed to a rise in interest
rates, which adversely affected the value of many fixed rate financial assets. The subsequent
crash in oil prices sent the process in reverse with nearly equally devastating effects.
Few risks are more complex and difficult to measure than those of personnel policy; they
are Recruitment, Training, Motivation and Retention. Risk to the value of the Non-Financial
Assets as represented by the work force represents a much more subtle of risk. Concurrent
with the loss of key personal is the risk of inadequate or misplaced motivation among
management personal. This human redundancy is conceptually equivalent to safety
redundancy in operating systems. It is not inexpensive, but it may well be cheaper than the risk
of loss. The risk and rewards of increased attention to the human resources dimension of
management are immense.
This is the risk that the legal system will expropriate value from the shareholders of
financial services firms. The legal landscape today is full of risks that were simply
unimaginable even a few years ago. More over these risks are very hard to anticipate because
they are often unrelated to prior events which are difficult and impossible to designate but the
management of a financial services firm today must have these risks at least in view. They can
cost millions.
In the Capital Market Risk decision relate to the financing and financial support of
Product Market activities. The result of product market decisions must be compared to the
required rate of return that results from capital market decision to determine if management is
creating value. Capital market decisions affect the risk tolerance of product market decisions
related to variations in value associated with different financial instruments and required rate
of return in the economy.
1. LIQUIDITY RISK
3. CURRENCY RISK
4. SETTLEMENT RISK
5. BASIS RISK
1. LIQUIDITY RISK:
For experienced financial services professionals, the foremost capital market risk is that of
inadequate liquidity to meet financial obligations. The obvious form is an inability to pay
desired withdrawals. Depositors react desperately to the mere prospect of this situation.
They can drive a financial intermediary to collapse by withdrawing funds at a rate that
exceeds its capacity to pay. For most of this century, individual depositors who lost faith in
ability to repay them caused failures from liquidity. Funds are deposited primarily as a
financial of rate. Such funds are called “purchased money” or “headset funds” as they are
frequently bought by employees who work on the money desk quoting rates to institutions that
shop for the highest return. To check liquidity risk, firms must keep the maturity profile of the
liabilities compatible with that of the assets. This balance must be close enough that a
reasonable shift in interest rates across the yield curve does not threaten the safety and
soundness of the entire firm.
In extreme conditions, Interest Rate fluctuations can create a liquidity crisis. The
fluctuation in the prices of financial assets due to changes in interest rates can be large enough
to make default risk a major threat to a financial services firm’s viability. There’s a function of
both the magnitude of change in the rate and the maturity of the asset. This inadequacy of
assessment and consequent mispricing of assets, combined with an accounting system that did
not record unrecognized gains and losses in asset values, created a financial crisis. Risk based
capital rules pertaining to have done little to mitigate the interest rate risk management
problem. The decision to pass it of, however is not without large cost, so the cost benefit
tradeoff becomes complex.
3. CURRENCY RISK:
The risk of exchange rate volatility can be described as a form of basis risk among
currencies instead of basis risk among interest rates on different securities. Balance sheets
comprised of numerous separate currencies contain large camouflaged risks through financial
reporting systems that do not require assets to be marked to market. Exchange rate risk affects
both the Product Markets and The Capital Markets. Ways to contain currency risk have
developed in today’s derivative market through the use of swaps and forward contracts. Thus,
this risk is manageable only after the most sophisticated and modern risk management
technique is employed
4. SETTLEMENT RISK:
Settlement Risk is a particular form of default risk, which involves the competitors.
Amounts settle obligations having to do with money transfer, check clearing, loan
disbursement and repayment, and all other inter- transfers within the worldwide monetary
system. A single payment is made at the end of the day instead of multiple payments for
individual transactions.
5. BASIS RISK :
Basis risk is a variation on the interest rate risk theme, yet it creates risks that are less
easy to observe and understand. To guard against interest rate risk, somewhat non comparable
securities may be used as a hedge. However, the success of this hedging depends on a steady
and predictable relationship between the two no identical securities. Basis can negate the
hedge partially or entirely, which vastly increases the Capital Market Risk exposure of the
firm.
CHAPTER III
INDUSTRY PROFILE & COMPANY PROFILE
Currently, India has 96 scheduled commercial banks (SCBs) - 27 public sector banks (that is
with the Government of India holding a stake), 31 private banks (these do not have
government stake; they may be publicly listed and traded on stock exchanges) and 38 foreign
banks. They have a combined network of over 53,000 branches and 17,000 ATMs. According
to a report by ICRA Limited, a rating agency, the public sector banks hold over 75 percent of
total assets of the banking industry, with the private and foreign banks holding 18.2% and
6.5% respectively
Early history
Banking in India originated in the last decades of the 18th century. The first banks were The
General Bank of India which started in 1786, and the Bank of Hindustan, both of which are
now defunct. The oldest bank in existence in India is the State Bank of India, which originated
in the Bank of Calcutta in June 1806, which almost immediately became the Bank of Bengal.
This was one of the three presidency banks, the other two being the Bank of Bombay and the
Bank of Madras, all three of which were established under charters from the British East India
Company. For many years the Presidency banks acted as quasi-central banks, as did their
successors. The three banks merged in 1921 to form the Imperial Bank of India, which, upon
India's independence, became the State Bank of India.
Indian merchants in Calcutta established the Union Bank in 1839, but it failed in 1848 as a
consequence of the economic crisis of 1848-49. The Allahabad Bank, established in 1865 and
still functioning today, is the oldest Joint Stock bank in India. It was not the first though. That
honor belongs to the Bank of Upper India, which was established in 1863, and which survived
until 1913, when it failed, with some of its assets and liabilities being transferred to the
Alliance Bank of Simla.
When the American Civil War stopped the supply of cotton to Lancashire from the
Confederate States, promoters opened banks to finance trading in Indian cotton. With large
exposure to speculative ventures, most of the banks opened in India during that period failed.
The depositors lost money and lost interest in keeping deposits with banks. Subsequently,
banking in India remained the exclusive domain of Europeans for next several decades until
the beginning of the 20th century.
Foreign banks too started to arrive, particularly in Calcutta, in the 1860s. The Comptoire
d'Escompte de Paris opened a branch in Calcutta in 1860, and another in Bombay in 1862;
branches in Madras and Pondichery, then a French colony, followed. HSBC established itself
in Bengal in 1869. Calcutta was the most active trading port in India, mainly due to the trade
of the British Empire, and so became a banking center.
The Bank of Bengal, which later became the State Bank of India.
The first entirely Indian joint stock bank was the Oudh Commercial Bank, established in 1881
in Faizabad. It failed in 1958. The next was the Punjab National Bank, established in Lahore in
1895, which has survived to the present and is now one of the largest banks in India.
Around the turn of the 20th Century, the Indian economy was passing through a relative period
of stability. Around five decades had elapsed since the Indian Mutiny, and the social, industrial
and other infrastructure had improved. Indians had established small banks, most of which
served particular ethnic and religious communities.
The presidency banks dominated banking in India but there were also some exchange banks
and a number of Indian joint stock banks. All these banks operated in different segments of the
economy. The exchange banks, mostly owned by Europeans, concentrated on financing
foreign trade. Indian joint stock banks were generally under capitalized and lacked the
experience and maturity to compete with the presidency and exchange banks. This
segmentation let Lord Curzon to observe, "In respect of banking it seems we are behind the
times. We are like some old fashioned sailing ship, divided by solid wooden bulkheads into
separate and cumbersome compartments."
The period between 1906 and 1911, saw the establishment of banks inspired by the Swadeshi
movement. The Swadeshi movement inspired local businessmen and political figures to found
banks of and for the Indian community. A number of banks established then have survived to
the present such as Bank of India, Corporation Bank, Indian Bank, Bank of Baroda, Canara
Bank and Central Bank of India.
The fervour of Swadeshi movement lead to establishing of many private banks in Dakshina
Kannada and Udupi district which were unified earlier and known by the name South Canara
( South Kanara ) district. Four nationalised banks started in this district and also a leading
private sector bank. Hence undivided Dakshina Kannada district is known as "Cradle of Indian
Banking".
PROFILE OF THE INDUSTRY
The Housing Development Finance Corporation Limited (HDFC) was amongst the first to
receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the
private sector, as part of the RBI's liberalization of the Indian Banking Industry in 1994. The
bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its
registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled
Commercial Bank in January 1995.
The shares are listed on the Bombay Stock Exchange Limited and The National Stock
Exchange of India Limited. The Bank's American Depository Shares (ADS) are listed on the
New York Stock Exchange (NYSE) under the symbol 'HDB' and the Bank's Global
Depository Receipts (GDRs) are listed on Luxembourg Stock Exchange under ISIN No
US40415F2002.
Mr. Jagdish Capoor took over as the bank's Chairman in July 2001. Prior to this, Mr. Capoor
was Deputy Governor of the RBI
MANAGEMENT
The MD, Mr. Sashidhar Jagdishan, 04-Aug-2023 — Jagdishan joined the bank in 1996 as a
Manager in the finance function, and then went on to become Business Head - Finance in
1999.
The Bank's Board of Directors is composed of eminent folks with a wealth of experience in
public policy, administration, industry and commercial banking. Senior executives
representing HDFC are also on the Board.
Senior banking professionals with substantial experience in India and abroad head various
businesses and functions and report to the Managing Director. Given the professional expertise
of the management team and the overall focus on recruiting and retaining the best talent in the
industry, the bank believes that its people are a significant competitive strength.
BOARD OF DIRECTORS
Sr. No. Name of Director Designation
1 Mr. Atanu Chakraborty Part Time Chairperson and Additional Independent Director*
2 Mr. Malay Patel Independent Director
3 Mr. Umesh Chandra Sarangi Independent Director
4 Mrs. Renu Karnad Non-Executive Director
5 Mr. Srikanth Nadhamuni Non-Executive Director
6 Mr. Sanjiv Sachar Independent Director
7 Mr. Sandeep Parekh Independent Director
8 Mr. MD Ranganath Independent Director
9 Dr. (Ms). Sunita Maheshwari Additional Independent Director*
10 Mr. Sashidhar Jagdishan Managing Director & Chief Executive Officer
11 Mr. Kaizad Bharucha Executive Director
REGISTERED OFFICE
HDFC Bank offers a wide range of commercial and transactional banking services and
treasury products to wholesale and retail customers. The bank has three key business segments
Treasury
Within this business, the bank has three main product areas - Foreign Exchange and
Derivatives, Local Currency Money Market & Debt Securities, and Equities. With the
liberalisation of the financial markets in India, corporates need more sophisticated risk
management information, advice and product structures. These and fine pricing on various
treasury products are provided through the bank's Treasury team. To comply with statutory
reserve requirements, the bank is required to hold 25% of its deposits in government securities.
The Treasury business is responsible for managing the returns and market risk on this
investment portfolio
Awards and Achievements - Banking Services
2022[edit]
2019[edit]
Corporate Governance:
The bank was among the first four companies, which subjected itself to a Corporate
Governance and Value Creation (GVC) rating by the rating agency, The Credit
Rating Information Services of India Limited (CRISIL).
We are aware that all these awards are mere milestones in the continuing, never-
ending journey of providing excellent service to our customers. We are confident,
however, that with your feedback and support, we will be able to maintain and
improve our services.
Technology:
HDFC Bank operates in a highly automated environment in terms of information
technology and communication systems. All the bank's branches have online
connectivity, which enables the bank to offer speedy funds transfer facilities to its
customers. Multi-branch access is also provided to retail customers through the
branch network and Automated Teller Machines (ATMs).
The Bank has made substantial efforts and investments in acquiring the best
technology available internationally, to build the infrastructure for a world class
bank. The Bank's business is supported by scalable and robust systems which
ensure that our clients always get the finest services we offer.
The Bank has prioritised its engagement in technology and the internet as one of its
key goals and has already made significant progress in web-enabling its core
businesses. In each of its businesses, the Bank has succeeded in leveraging its
market position, expertise and technology to create a competitive advantage and
build market share.
Mission and Business Strategy:
Our mission is to be "a World Class Indian Bank", benchmarking ourselves against
international standards and best practices in terms of product offerings, technology, service
levels, risk management and audit & compliance. The objective is to build sound customer
franchises across distinct businesses so as to be a preferred provider of banking services for
target retail and wholesale customer segments, and to achieve a healthy growth in profitability,
consistent with the Bank's risk appetite. We are committed to do this while ensuring the
highest levels of ethical standards, professional integrity, corporate governance and regulatory
compliance.
Increase our market share in India’s expanding banking and financial services industry by
following a disciplined growth strategy focusing on quality and not on quantity and
delivering high quality customer service.
Leverage our technology platform and open scalable systems to deliver more products to
more customers and to control operating costs.
Maintain our current high standards for asset quality through disciplined credit risk
management.
Develop innovative products and services that attract our targeted customers and address
inefficiencies in the Indian financial sector.
Continue to develop products and services that reduce our cost of funds. Focus on high
The Bank also has 3,898 networked ATMs across these cities. Moreover, HDFC
Bank's ATM network can be accessed by all domestic and international
Visa/MasterCard, Visa Electron/Maestro, Plus/Cirrus and American Express
Credit/Charge cardholders.
CHAPTER IV
DATA ANALYSIS
AND
INTERPRETATION
RISK MANAGEMENT SYSTEM :
The implementation of risk management varies from business to business, from one
management style to another and from one time to another. Risk management in the financial
services industry is different from others. Circumstances, Institutions and Managements are
different. On the other hand, an investment decision is no recent history of legal and political
stability, insights into the potential hazards and opportunities.
Many risks are managed quantitatively. Risk exposure is measured by some numerical
index. Risk cost tradeoff many tools are described by numerical valuation formulas.
Risk management can be integrated into a risk management system. Such a system can
be utilized to manage the trading position of a small-specialized division or an entire financial
institution. The modules of the system can be implemented with different degrees of accuracy
and sophistication.
RISK MANAGEMENT SYSTEM
The important ingredient of the risk management approach is the treatment of risk factors
and securities as an integrated portfolio. Analyzing the correlation among the real, financial
and strategic assets of an organization leads to clear understanding of risk exposure. Special
attention is paid to risk factors, which translate to correlation among the values of securities.
Identifying the correlation among the basic risk factors leads to more effective risk
management.
They were required by the to introduce effective risk management systems to cover
Credit risk, market risk and Operations risk on priority.
Asset and liability management (ALM) is “the Art and Science of choosing the best mix
of assets for the firm’s asset portfolio and the best mix of liabilities for the firm’s liability
portfolio”. It is particularly critical for Financial Institutions.
For a long time it was taken for granted that the liability portfolio of financial firms was
beyond the control of the firm and so management concentrated its efforts on choosing the
asset mix. Institutions treasury department used the funds provided by deposits to structure an
asset portfolio that was appropriate for the given liability portfolio.
With the advent of Certificate of Deposits (CDs), had a tool by which to manipulate the
mix of liabilities that supported their Asset portfolios, which has been one of the active
management of assets and liabilities.
Asset and liability management program evolve into a strategic tool for management, the
main elements of the ALM system are:
➢ ALM INFORMATION.
➢ ALM ORGANISATION.
➢ ALM FUNCTION.
ALM INFORMATION :
ALM is a risk management tool through which Market risk associated with business are
identified, measured and monitored to maintain profits by restructuring Assets and Liabilities.
The ALM framework needs to be built on sound methodology with necessary information
system as back up. Thus the information is key element to the ALM process.
There are various methods prevalent worldwide for measuring risks. These range from
the simple Gap statement to extremely sophisticate and data intensive Risk adjusted
profitability measurement (RAPM) methods. The central element for the entire ALM exercise
is the availability of adequate and accurate information.
However, the existing systems in many Indian do not generate information in manner
required for the ALM. Collecting accurate data is the biggest challenge before the s,
particularly those having wide network of branches, but lacking full-scale computerization.
Therefore the introduction of these information systems for risk measurement and
monitoring has to be addressed urgently.
The large network of branches and the lack of support system to collect information
required for the ALM which analysis information on the basis of residual maturity and
behavioral pattern, it would take time for in the present state to get the requisite information.
ALM ORGANISATION :
• Reviewing the interest rate outlook for pricing of assets and liabilities (Loans and
Deposits)
• Deciding on the introduction of any new loan / deposit product and their impact on
interest rate / exchange rate and other market risks;
• Reviewing the asset and liability portfolios and the risk limits and thereby, assessing
the capital adequacy;
• Deciding on the desired maturity profile of incremental assets and liabilities and
thereby assessing the liquidity risk; and
• Reviewing the variances in actual and projected performances with regard to Net
Interest Margin (NIM), spreads and other balance sheet ratios.
COMPOSITION OF HDFC
The size (number of members) of HDFC would depend on the size of each institution,
business mix and organizational complexity, To ensure commitment of the Top management
and timely response to market dynamics, the CEO/MD or the GM should head the committee.
The chiefs of Investment, Credit, Resources Management or Planning, Funds Management /
Treasury (domestic), etc., can be members of the committee. In addition, the head of the
computer (technology) Division should also be an invitee for building up of
MIS and related computerization. Some may even have Sub-Committee and Support
Groups.
❖ ALM BOARD
❖ HDFC
❖ ALM CELL
❖ COMMITTEE OF DIREC
ALM BOARD
The Board of management should have overall responsibility for management of risk and
should decide the risk management policy of the set limits for liquidity and interest rate risks.
HDFC
This is constituted an Asset- Liability committee (HDFC). The committee may consist of
the following members.
The Business issues that an HDFC would consider interlaid will include fixation of interest
rates for both deposits and advances, desired maturity profile of the incremental assets and
liabilities etc.
The HDFC would also articulate the current interest rate due of the base its decisions for
future business strategy on this view. In respect of funding policy, for instance, its
responsibility would be decided on source and mix of liability.
Individual will have to decide the frequency for their HDFC meetings. However, it is
advised that HDFC should meet at least once in a fortnight. The HDFC should review results
of and process in implementation of the decisions made in the previous meetings
ALM CELL
The ALM desk / cell consisting of operating staff should be responsible for analyzing,
monitoring and reporting the profiles to the HDFC. The staff should also prepare forecasts
(simulations) showing the effects of various possible changes in market conditions related to
the balance sheet and recommend the action needed to adhere to internal limits.
COMMITTEE OF DIRECTORS
The RBI guidelines mainly address Liquidity Risk Management and Interest Rate Risk
Management.
The following are the concepts discussed for analysis of ’s Asset-Liability Management
under above mentioned risks.
● Liquidity Risk
● Maturity profiles
● Gap analysis
Measuring and managing liquidity needs are vital activities of the s. By assuring a
ability to meet its liability as they become due, liquidity management can reduce the
probability of an adverse situation development. The importance of liquidity transcends
individual institutions, as liquidity shortfall in one institution can have repercussions on the
entire system.
Liquidity risk management refers to the risk of maturing liability not finding enough
maturing assets to meet these liabilities. It is the potential inability to meet the’s liability as
they became due. This risk arises because borrows funds for different maturities in the form
of deposits, market operations etc. and lock them into assets of different maturities.
The statement of structural liquidity may be prepared by placing all cash inflows and
outflows in the maturity ladder according to the expected timing of cash flows.
The MATURITY PROFILE could be used for measuring the future cash flows in
different time bands.
The position of Assets and Liabilities are classified according to the maturity patterns a
maturing liability will be a cash outflow while a maturing asset will be a cash inflows. The
measuring of the future cash flows of is done in different time buckets.
The time buckets, given the statutory Reserve cycle of 14 days may be distributed as
under:
1. 1 to 14 days
2. 15 to 28 days
8. Over 5 years.
MATURITY PROFILE – LIQUIDITY
A.OUTFLOWS
1.Capital, Reserves and Surplus Over 5 years bucket.
5. NPAs
b. Sub-standard Doubtful (I) 2-5 years bucket.
c. and Loss (ii) Over 5 years bucket.
7. Other-office Adjustment
(i) Inter-office Adjustment (i) As per trend analysis,
Intangible items or items not
representing cash
Receivables may be shown
in over 5 years bucket.
(ii) Others (i) Respective maturity
buckets. Intangible assets
and assets not representing
cash receivables may be
shown in over 5 years
bucket.
Terms used:
Other Liabilities: Cash payables, Income received in advance, Loan Loss and Depreciation in
Investments.
Other assets: Cash Receivable, Intangible Assets and Leased Assets.
2. Interest Rate Risk :
Interest Rate Risk refers to the risk of changes in interest rates subsequent to the
creation of the assets and liabilities at fixed rates. The phased deregulations of interest rates
and the operational flexibility given to in pricing most of the assets and liabilities imply the
need for system to hedge the interest rate risk. This is a risk where changes in the market
interest rates might adversely affect a’s financial conditions.
The changes in interest rates affect in large way. The immediate impact of change in
interest rates is on’s earnings by changing its Net Interest Income (NII). A long term impact of
changing interest rates is on ’s Market Value of Equity (MVE) or net worth as the economic
value of ’s assets, liabilities and off-balance sheet positions get affected due to variation in
market interest rates.
The risk from the earnings perspective can be measured as changes in the Net Interest
Income (NII) OR Net Interest Margin (NIM).
There are many analytical techniques for measurement and management of interest rate
risk. In MIS of ALM, slow pace of computerization in and the absence of total deregulation,
the traditional GAP ANALYSIS are considered as a suitable method to measure the interest
rate risk.
COMPARATIVE ASSET LIABILITY SHEET OF THE YEARENDING 31ST MARCH 2019-20
ABSOLUTEIN CHAN
PARTICULARS 2019 2020
C GEIN
REASE/ %
ASSETS
CURRENT ASSETS
CASH & BANK
2,88,272 14,70,425 11,82,152 410.08
BALANCE
SUNDRY DEBTORS 1,53,226 63,467 -89,759 58.58
DEPOSITS 2,64,600 4,07,046 1,42,446 53.83
INVENTORIES 9,39,57,410 14,71,99,579 5,32,42,169 568.98
TOTAL 9,48,83,080 15,05,13,360 5,56,30,280 58.63
LOANS &GROUP
CONCERNS (INTER 1,47,40,135 2,59,27,598 1,11,87,463 75.89
CORPORATE BODIES)
ADVANCE TO CANE
1,07,85,042 1,19,58,868 11,73,826 18.88
GROWERS
STAFF ADVANCE 2,72,023 2,21,082 -50,941 18.72
OTHER ADVANCE 7,40,058 7,30,579 -9,474 1.28
TOTAL 2,65,37,258 3,88,38,127 1,23,00,869 46.35
TOTAL CURRENT
12,14,20,338 18,93,51,487 -2,69,51,931 12.46
ASSETS
FIXED ASSETS
LAND 67,28,750 1,33,5,275 66,21,525 98.41
FACTORY BUILDINGS 2,48,18,492 2,29,32,318 -18,86,174 70.59
NON FACTORY
99,56,491 94,58,666 -4,97,825 5.00
BUILDINGS
PLANT & MACHINERY 4,63,31,692 5,77,53,189 1,14,21,497 24.65
FURNITURE’S &
FIXTURES 5,66,109 8,24,981 2,58,872 45.72
TOTAL FIXED ASSETS 8,95,42,436 10,50,01,624 1,54,59,187 17.26
MISCELLANEOUS
EXPENDITURES
PRELIMINARY EXPENSES 3,66,900 2,44,600 -1,22,300 33.33
INTERPRETATION:
The comparative balance sheet of the co-reveals that during the year 2019 fixed assets
increased by RS 1,54,59,187 I.e… 17.26%while long term liability from outsides (loans)
has increased by 4,95,73,311 i.e.28.72% and there is neither increase nor decrease in share
capital. The pattern of investment towards Fixed Assets reveals that long term sources of
funds are utilized for fixed assets.
The current assets has been decreased by 2, 69, 51,931by 12.46%. the current liabilities
have increased by 79,04,091 to 3,41,59,744 by Rs.2,62,55,653 i.e.332.18%. The deviation
of the current assets of liabilities is very low. In this year the co-working capital positions
it not good.
Reserves and surplus have increased from 37, 22,163 to 1, 11, 61,236 the amount of RS.
74, 39,073. It shows that the company’s profitability position of the company is good.
The overall Asset position of the HDFC. During the period of study is satisfactory.
.
COMPARATIVE ASSET LIABILITY SHEET OF THE YEAR ENDING 31ST MARCH 2021
ABSOLUTE CHANGE
PARTICULARS 2020 2021
INCREASE/ IN%
DECREASE
ASSETS
CURRENT ASSETS
CAST& BANK 14,70,425 14,121,860 1,26,51,435 860.39
BALANCE
SUNDRY 63,467 65,10,948 64,47,491 10,158,82
DEBTORS
DEPOSITS 4,07,046 2,91,926 -1,16,020 28.44
INVENTORIES 14,71,99,579 11,75,48,402 -102,82,84,45 -698.56
TOTAL 15,05,13,360 14,25,96,956 -79,16,404 5.265
LOANS &
ADVANCS
STAFF ADVANCE 2,21,082 1,73,317 -47,765 21.61
OTHER ADVANCE 7,30,579 8,59,690 1,29,111 54.46
TOTAL 3,88,38,127 5,99,92,347 2,11,54,220 54.46
TOTALCURRENT 18,93,51,487 20,25,89,303 1,32,37,816 6.99
ASSETS
FIXED ASSETS
LAND 1,33,50,275 1,33,50,275 - -
FACTORY 2,29,32,318 2,06,71,981 -22,60,337 9.86
BUILDINGS
NON FACTORY 94,58,666 89,85,733 -4,72939 4.99
BUILDINGS
PLANT & 5,77,53,189 7,16,13,335 - 87.6
MACHINERY 50,5,05,91,85
4
FURNITURE’S & 8,24,981 9,07,913 82,932 10.05
FIXTURES
TOTAL FIXED 10,50,01,624 11,78,44,260 1,28,42,638 12.23
ASSETS
PRELIMINARY 2,44,600 1,22,300 1,22,300 50.00
EXPENSES
WRITTEN OF
TOTAL ME
TOTAL ASSETS 29,45,97,711 32,05,55,863 2,59,58,152 8.81
LIABILITES
PAID UP EQUITY 2,71,11,890 2,71,11,890 - -
SHARES
CAPITAL
RESERVES & 1,11,61,236 3,46,30,113 2,34,68,877 210.27
SURPLUS
TOTAL 3,82,73,126 6,17,42,003 2,34,68,877 61.32
CAPITAL
&RESERVES
LONGTERM
LIABILITES
SECURED 43,69,20,357 19,10,18,611 1,25,45,805 7.03
LOANS
UNSECURED 17,84,72,806 1,94,57,888 -4,17,46,247 95.55
LOANS
TOTAL LONG 2,22,16,4841 27,22,18,502 -1,16,88,342 5026
TERM
LIABILITIES
SUNDRY 2,70,29,530 3,00,94,997 30,65,467 11.34
CREDITORS
FOR
MATERIALS
SUNDRY 65,39,347 2,68,009 -38,59,338 59.02
CREDITORS
FOR
EXPENSES
OTHER 5,90,867 48,81,795 42,90.928 726.21
LIABILITIES &
PROVISIONS
TOTAL 3,41,59,744 4,83,37,361 14,177,617 41.50
CURRENT
LIABILITIES
TOTAL 29,45,97,711 32,05,55,863 2,59,58,152 8.81
LIABILITIES
INTERPRETATION:
The comparative balance sheet of the co-reveals that during the year 2020 fixed assets
increased by RS 1,28,42,638 i.e,12.23%.while long term liability from outsides (loans) has
decreased by 1,16,88,342 i.e.50.26% and there is neither increase nor decrease in share
capital. The pattern of investment towards Fixed Assets reveals that long term sources of
funds are utilized for fixed assets.
The current assets have been increased by 1, 32, 37,816 by 6.99%. the current liabilities
have increased by 3,41,59,744 to 4,83,37,361by Rs.1,41,77,617 i.e.41.50%. The deviation
of the current assets of liabilities is very low. In this year the co-working capital positions
it not good.
Reserves and surplus have increased from 1,11,61,236 to 3,43,30,113 the amount of
RS.2,34,68,877. It shows that the company’s profitability position of the company is good.
The overall Asset position of the HDFC. During the period of study is satisfactory.
COMPARATIVE ASSET LIABILITY SHEET AS ON 31ST MARCH 2022
ABSOLUTE
CHANGE
PARTICULARS 2021 2022 INCREASE/
IN %
DECREAES
ASSETS
CURRENT ASSETS
CASH &BANK
14,121,860 15,11,751 -1,26,10,109 89.29
BALANCE
SUNDRY DEBTORS 65,10,948 16,22,803 -48,88,145 75.07
DEPOSITS 2,91,926 8,27,407 5,35,544 183.45
CENVANT 24,03,543 64,25,816 40,22,273 167.34
INCOME TAX 2,49,757 6,14,801 3,65,044 146.15
ADVANCE TAX 12,58,000 19,50,000 6,92,000 55.00
INVENTORIES 11,75,48,402 21,16,88,390 94,13,99,88 80.88
EXCISE DUTY PAID IN
1,52,682 5,44,356 3,91,674 256.52
ADVANCE
TAX DETECTED AT
59,838 - -59,838 100
SOURCE
TOTAL 14,25,96,956 22,51,85,387 -8,25,88,431 57.99
LOANS& ADVANCS
LOANS & GROUP
2,09,12,698
CONCERNS (INTER 4,09,11,931 -199,99,233 48.88
13,34,70,060
CORPORATE BODIES)
ADVANCE TO CANE
1,80,47,409 80,04,767
GROWERS
STAFF ADVANCE 1,73,317 3,99,273 2,25,956 130.37
OTHER ADVANCE 8,59,690 6,41,023 -21,86,67 25.43
TOTAL 5,99,92,347 16,34,27,821 10,34,35,474 172.41
TOTALCURRENT
20,25,89,303 55,20,41,029 34,94,51,726 172.49
ASSETS
TOTAL FIXED 11,78,44,260 11,29,58,523 -48,85,737 4.14
ASSETS
MISCELLANIOUS
EXPENDITURES
PRELIMINARY 122,300 19,57,834 18,35,534 15,00.82
EXPENSES
WRITTEN OF TOTAL
ME
TOTAL ASSETS 32,05,55,863 50,35,29,565 18,29,73,702 57.08
LIABILITES
SHARE CAPITAL &
RESULTS & SURPLUS
PAID UP EQUITY 2,71,11,890 2,71,11,890 - -
SHARES CAPITAL
RESERVES & 3,46,30,113 5,08,12,447 1,61,82,334 46.72
SURPLUS
TOTAL CAPITAL 6,17,42,003 7,79,24,337 1,61,82,334 26.20
&RESERVES
LONGTERM 58.35
LIABILITES
SECURED LOANS 19,10,18,611 7,95,55,940 -11,14,62,671 1384.47
UNSECURED LOANS 1,94,57,888 28,88,46,517 26,93,88,621 63.95
TOTAL LONG TERM 27,22,18,502 44,63,26,794 17,41,08,292 63.95
LIABILITIES
CURRENT LIABILTY
& PROVISON
SUNDRY CREDITORS 3,00,94,997 5,54,93,648 2,53,98,471 84.39
FOR MATERIALS
SUNDRY CREDITORS 2,68,009 14,12,857 11,44,848 427.16
FOR EXPENSES
OTHER LIABILITIES 48,81,795 2,96,446 -45,85,349 93.92
& PROVISIONS
PROVISION FOR TAX 1,06,80,560 - -1,06,80,560 100
TOTAL CURRENT 4,83,37,361 5,72,02,771 88,65,410 183.40
LIABILITIES
TOTAL LIABILITIES 32,05,55,863 50,35,29,565 18,29,73,702 5.08
INTERPRETATION:
The comparative balance sheet of the co-reveals that during the year 2021 fixed assets
decreased by RS 48,85,737 I.e… 4.14%while long term liability from outsides (loans) has
increased by 17,41,08,292 i.e, 4.14%and there is neither increase nor decrease in share capital.
The pattern of investment towards Fixed Assets reveals that long term sources of funds are
utilized for fixed assets.
The current assets has been increased by 34,94,51,726i.e,172.49% the current liabilities
have increased by 4,83,37,361 to 5,72,62,771 by Rs 88,65,410i.e.183.40%. The deviation
of the current assets of liabilities is very low. In this year the co-working capital positions
it not good.
Reserves and surplus have increased from 3,46,30,113 to 5,08,12,447 by rs 1,61,82,334 . It
shows that the company’s profitability position of the company is good.
The overall Asset position of the HDFC. During the period of study is satisfactory.
COMPARTIVE ASSET LIABILITY SHEET OF YEAR ENDING 31ST MARCH2023
LONGTERM LIABILITES
INTERPRETATION:
The comparative balance sheet of the co-reveals that during the year 2023 fixed assets
increased by RS 1,39,57,590 by1235.62%while long term liability from outsides (loans)
has increased by 13,37,79,92,426 i.e.299.78% and there is neither increase nor decrease in
share capital. The pattern of investment towards Fixed Assets reveals that long term
sources of funds are utilized for fixed assets.
The current assets has been increased by 7, 11, 30,365 i.e, 31.59%. the current liabilities
have decreased by 5,72,02,771 to 3,13,59,340by Rs2,58,43,431. i.e.45.18%. The deviation
of the current assets of liabilities is very low. In this year the co-working capital positions
it not good.
Reserves and surplus have increased from 37, 22,163 to 5, 08, 12,447the amount of RS.1,
54, 20,898. It shows that the company’s profitability position of the company is good.
The overall Asset position of the HDFC. During the period of study is satisfactory.
(RUPEES IN LAKHS)
YEARS CURRENT CURRENT CURRENT
ASSETS LIABILITIES RATIOS
2019-2020 234274 340710 0.687
2020-2021 589973 401302 1.470
2021-2022 263114 196578 1.338
2022-2023 256922 233971 1.098
INTERPRETATION:
The current ratio the significance is 2:1 whereas the company is not able to reach in this 4years
it is recommended to increase the current ratio.
QUICK RATIO (OR) ACID TEST RATIO:
This is the ratio of liquid assets to current liabilities. Is shows a firm’s ability to meet
current liabilities with its most liquid or quick assets. The standard ratio 1:1 is considered ideal
ratio for a concern. Liquid assets are those, which can be converted into cash within a short
period of time without loss of value. This can be calculated by using the formula.
Liquid assets of quick asset includes Sundry debtors, cash and bank balance and
loan and advance.
Current liabilities include current liabilities and provisions.
(RUPEES IN LAKHS)
YEARS QUICK CURRENT CURRENT
ASSETS LIABILITIES RATIOS
2019-2020 188182 340710 0.55
2020-2021 536531 395877 1.35
2021-2022 214366 196578 1.09
2022-2023 195500 233972 0.83
INTERPRETATION:
The significance of this ratio is 1:1 whereas the company is able to reach this in the year 2019-
19, 2020-21, all other years it is below the ratio.
1. LEVERAGE RATIOS
This ratio examines the relationship between borrowed funds and owner’s funds of a firm. In
other words, it measures the relative claims of creditors and owners against the assets of a
firm. This ratio is also known as debt to net worth ratio. It is calculated as follows:
(RUPEES IN LAKHS)
YEARS LONG TERM SHARE HOLDER’S DEBT EQUITY
LIABILITIES FUNDS RATIOS
2019-2020 662910 350000 1.89
2020-2021 79700 350000 0.23
2021-2022 8248 164512 0.05
2022-2023 54743449 49093096 1.11
INTERPRETATION: Explains the relationship between long term debts to share holder’s
funds which is gradually decreasing from 2021-22.
FIXED ASSETS RATIO:
This ratio shows the relationship between fixed assets and capital employed.
Fixed assets ratio explains whether the firm has raised adequate long term funds to meet its
fixed assets requirements and it gives an idea as to what part of the capital employed has been
used in purchasing fixed assets for the concern. If the ratio is less than one it is good for the
concern. The ideal ratio is 0.67 and it is calculated as under.
(RUPEES IN LAKHS)
INTERPRETATION:
In case of fixed assets ratio, it is a showing a trend of fluctuation i.e. increase and decrease
trend.
CURRENT ASSETS TO FIXED ASSETS RATIO:
This ratio will differ from industry to industry and, therefore no standard can be laid down. A
decrease in the ratio may mean that trading is slack or more mechanization has been put
through. An increasing in the ratio may reveal that inventories and debtors have unduly
increased or fixed assets have been intensively used.
(RUPEES IN LAKHS)
INTERPRETATION:
2022-22 this ration is decreased and thereafter it has decreased to the maximum existent.
1. TURNOVER RATIO
INVENTORY TURNOVER RATIO:
This ratio, also known as stock turnover ratio, establishes relationship between cost of goods
sold during a given period and the average amount of inventory held during that period. This
ratio reveals the number of items finished stock is turned over during a given accounting
period. Higher the ratio the better it is because it shows that finished stock rapidly turned over.
On the other hand, a low stock turnover ratio is not desirable because it reveals the
accumulation of obsolete stock, or the carrying of too much stock. This ratio is calculated as
follows:
STOCK TURNOVER RATIO = COST OF GOODS SOLD / AVERAGE STOCK
For the calculation of this ratio
INTERPRETATION:
This ratio will explain the relationship between cost of goods sold to average stock the
inventory turnover ratio is gradually decreasing and thereafter increased in a year 2022-23.
CHAPTER V
FINDINGS, SUGGESTIONS AND CONCLUSION
FINDINGS
1. ALM technique is aimed to tackle the market risks. Its objective is to stabilize and
improve Net interest Income (NII).
2. Implementation of ALM as a Risk Management tool is done using maturity profiles and
GAP analysis.
3. ALM presents a disciplined decision making framework for while at the same time
guarding the risk levels.
5. 2022-23 this ration is decreased and thereafter it has decreased to the maximum existent.
6. The current ratio the significance is 2:1 whereas the company is not able to reach in these 4
years it is recommended to increase the current ratio.
7. The significance of this ratio is 1:1 whereas the company is able to reach this in the year
2019-20, 2020-21, all other years it is below.
8. The relationship between long term debts to share holders funds which is gradually
decreasing from 2019-20.
9. fixed assets ratio, it is a showing a trend of fluctuation i.e. increase and decrease trend
SUGGESTIONS
1. They should strengthen its management information system (MIS) and computer
processing capabilities for accurate measurement of liquidity and interest rate
Risks in their Books.
1. In the short term the Net interest income or Net interest margins (NIM) creates
economic value of the which involves up gradation of existing systems &
Application software to attain better & improvised levels.
2. It is essential that remain alert to the events that effect its operating environment &
react accordingly in order to avoid any undesirable risks.
3. HDFC requires efficient human and technological infrastructure which will future
lead to smooth integration of the risk management process with effective business
strategies.
CONCLUSION
The burden of the Risk and its Costs are both manageable and transferable. Financial
service firms, in the addition to managing their own risk, also sell financial risk management to
others. They sell their services by bearing customers financial risks through the products they
provide. A financial firm can offer a fixed-rate loan to a borrower with the risk of interest rate
movements transferred from the borrower to the. Financial innovations have been concerned
with risk reduction than any other subject. With the possibility of managing risk near zero, the
challenge becomes not how much risk can be removed.
Financial services involve the process of intermediation between those who have financial
resources and those who need them, either as a principal or as an agent. Thus, value breaks into
several distinct functions, and it includes the intermediation of the following:
Maturity Preference mismatch, Default, Currency Preference Mis-match, Size of
transaction and Market access and information.
BIBILIOGRAPHY
4. Web sites
WWW.HDFC.IN
www.googlefinance.com
www.assectindia.com