A PROJECT REPORT

ON
“measurement of customer
satisfaction at hdfc bank”

Submitted by:
Ankit Narain
Enrolment No.248855

Master of International Business Administration

2009-11
Faculty of Management Studies
Banaras Hindu University

Acknowledgement
To acknowledge all the persons who had helped for the fulfillment of the project is not possible

or any researcher but in spite of all that it becomes the foremost responsibility of the researcher

and also the part of research ethics to acknowledge those who had played a great role for the

completion of the project.

My sincere gratitude to HDFC BANK for providing me with an opportunity to work with
BANK and giving necessary directions on doing this project to the best of my abilities.

I am highly indebted to Mr. Shashank Shekar,Asst. Manager,Lahurabir BRANCH

VARANASI and company project guide, who has provided me with the necessary information
and also for the support extended out to me in the completion of this report and his valuable
suggestion bringing out this report in the best way possible.

I also thank DR. MADAN LAL, FMS-BHU, who has sincerely supported me with the
valuable insights into the completion of this project.

I am grateful to all faculty members of FMS-BHU, VARANASI and my friends who have
helped me in the successful completion of this project.
 Executive Summary

Banking Industry which is basically my concern industry around which my

project has to be revolved is really a very complex industry. And to work for

this was really a very good learning experience. Challenges which I faced

while doing this project were following-

- Banking sector was quite similar in offering and products and because

of that it was very difficult to discriminate between our product and

products of the competitors.

- Target customers and respondents were too busy persons that to get

their time and view for specific questions was very difficult.

- Sensitivity of the industry was also a very frequent factor which was

very important to measure correctly.

- Area covered for the project while doing job also was very large and it

was very difficult to correlate two different customers/respondents

views in a one.

- Every financial customer has his/her own need and according to the

requirements of the customer product customization was not possible.

So above challenges some time forced me to leave the project but any how I

did my project in all circumstances. Basically in this project I analyzed that-

What factors are really responsible for customer satisfaction in terms of

quality of services.
 Contents

1. Industry profile
1.1 Banking Industry……………
.2 History of Banking in India
1.3 Basel II
1.4 SWOT Analysis of Banking Industry….. …...……………………………………12

2. Company profile……………………………………………………………………………...14
2.1 Vision………………………………………………………………………………...15
2.2 Mission………………………………………………………………………………15
2.3 History……………………………………………………………………………….16
2.4 Organisational structure…………………………………………………………...16
2.5 Geographical spread………………………………………………………………..17
2.6 Capital structure……………………………………………………………………18
2.7 Balance sheet of HDFC..……………………………………………………………19
2.8 Financial Ratios……………………………………………………………………..20
2.9 Achievements………………………………………………………………………..22
2.10 SWOT Analysis of HDFC.………………………………………………………..23
2.11 Branch-specific SWOT……………………………………………………………24
2.12 Special development projects under HDFC.…………………………………….25
 Chapter 1

1.1 INTRODUCTION TO BANKING IN INDIA

 Banking Regulation act of India, 1949 defines Banking as “accepting, for the purpose of
landing or investment of deposit of money from the public, repayable on demand or
otherwise and withdrawable by cheques, draft, and order of otherwise”.

The essential function of a bank is to provide services related to the sorting of value and
extending credit. The evaluation of Banking dates back to the earliest writing, and continues in
the present where a bank is a financial institution that provides Banking and other financial
services. Currently the term bank is generally understood as an institution that holds a Banking
license. Banking licenses are generated by financial supervision authorities and provide rights to
conduct the most fundamental Banking services such as accepting deposit and making loans.
There are also financial institutions that provide certain Banking services without meeting the
legal definitions of a bank, as so called non-bank. Banks are a subset of the financial services
industry.

The collapse of the Banking Industry in the Financial Crisis, however, means that some of the
more extreme risk-taking and complex securitisation activities that banks increasingly engaged
in since 2000 will be limited and carefully watched, to ensure that there is not another banking
system meltdown in the future.

1.2 HISTORY OF BANKING IN 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. They are as
mentioned below:

• Pre -nationalization from 1786 to 1969 of Indian Banks

• Nationalization stage 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.

1.2.1 Pre-Nationalization Era:

 In India the business of banking and credit was practices even in very early times.
The remittance of money through Hundies, an indigenous credit instrument, was very popular.
The hundies were issued by bankers known as Shroffs, Sahukars, Shahus or Mahajans in
different parts of the country.

The General Bank of India was set up in the year 1786. Next came Bank of Hindustan and
Bengal Bank. The East India Company established Bank of Bengal (1809), Bank of Bombay
(1840) and Bank of Madras (1843) as independent units and called it Presidency Banks. These
three banks were amalgamated in 1920 and Imperial Bank of India was established which started
as private shareholders banks, mostly Europeans shareholders.

In 1865 Allahabad Bank was established and first time exclusively by Indians, Punjab National
Bank Ltd. was set up in 1894 with headquarters at Lahore. Between 1906 and 1913, Bank of
India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank, and Bank of Mysore
were set up. Reserve Bank of India came in 1935.

During the first phase the growth was very slow and banks also experienced periodic failures
between 1913 and 1948. There were approximately 1100 banks, mostly small. To streamline the
functioning and activities of commercial banks, The RBI (Reserve Bank of India) was
established in 1935 as the Central Bank of the Country the Government of India came up with
The Banking Companies Act, 1949 which was later changed to Banking Regulation Act 1949 as
per amending Act of 1965 (Act No. 23 of 1965). Reserve Bank of India was vested with
extensive powers for the supervision of banking in India as the Central Banking Authority.
During those day’s public has lesser confidence in the banks. As an aftermath deposit
mobilisation was slow. Abreast of it the savings bank facility provided by the Postal department
was comparatively safer. Moreover, funds were largely given to traders.

1.2.2 Nationalization Stages:

 After Independence, in 1951, the All India Rural Credit survey, committee of
Direction with Shri. A. D. Gorwala as Chairman recommended amalgamation of the Imperial
Bank of India and ten others banks into a newly established bank called the State Bank of India
(SBI). The Government of India accepted the recommendations of the committee and introduced
the State Bank of India bill in the Lok Sabha on 16th April 1955 and it was passed by Parliament
and got the president’s assent on 8th May 1955. The Act came into force on 1st July 1955, and the
Imperial Bank of India was nationalized in 1955 as the State Bank of India.

The main objective of establishing SBI by nationalizing the Imperial Bank of India was “to
extend banking facilities on a large scale more particularly in the rural and semi-urban areas and
to diverse other public purposes.”

In 1959, the SBI (Subsidiary Bank) act was proposed and the following eight
state-associated banks were taken over by the SBI as its subsidiaries.

Name of the Bank Subsidiary with effect from

1. State Bank of Hyderabad 1st October 1959

2. State Bank of Bikaner 1st January 1960

3. State Bank of Jaipur 1st January 1960

4. State Bank of Saurashtra 1st May 1960

5. State Bank of Patiala 1st April 1960

6. State Bank of Mysore 1st March 1960

7. State Bank of Indore 1st January 1968

8. State Bank of Travancore 1st January 1960

With effect from 1st January 1963, the State Bank of Bikaner and State Bank of
Jaipur with head office located at Jaipur. Thus, seven subsidiary banks State Bank of India
formed the SBI Group.
 The SBI Group under statutory obligations was required to open new offices in
rural and semi-urban areas and modern banking was taken to these unbanked remote areas.

On 19th July 1969, then the Prime Minister, Mrs. Indira Gandhi announced the nationalization of
14 major scheduled Commercial Banks each having deposits worth Rs. 50 crore and above. This
was a turning point in the history of commercial banking in India.
Later the Government Nationalized six more commercial private sector
banks with deposit liability of not less than Rs. 200 crores on 15th April 1980, viz.
i) Andhra Bank.
ii) Corporation Bank.
iii) New Bank if India.
iv) Oriental Bank of Commerce.
v) Punjab and Sind Bank.
vi) Vijaya Bank.

In 1969, the Lead Bank Scheme was introduced to extend banking facilities to
every corner of the country. Later in 1975, Regional Rural Banks were set up to supplement the
activities of the commercial banks and to especially meet the credit needs of the weaker sections
of the rural society.

Nationalization of banks paved way for retail banking and as a result there has
been an alt round growth in the branch network, the deposit mobilization, credit disposals and of
course employment.

The first year after nationalization witnessed the total growth in the agricultural
loans and the loans made to SSI by 87% and 48% respectively. The overall growth in the
deposits and the advances indicates the improvement that has taken place in the banking habits
of the people in the rural and semi-urban areas where the branch network has spread. Such credit
expansion enabled the banks to achieve the goals of nationalization, it was however, achieved at
the coast of profitability of the banks.
Consequences of Nationalization:

 The quality of credit assets fell because of liberal credit extension policy.
 Political interference has been as additional malady.
 Poor appraisal involved during the loan meals conducted for credit disbursals.
 The credit facilities extended to the priority sector at concessional rates.
 The high level of low yielding SLR investments adversely affected the profitability of the
banks.
 The rapid branch expansion has been the squeeze on profitability of banks emanating
primarily due to the increase in the fixed costs.
 There was downward trend in the quality of services and efficiency of the banks.

1.2.3 Post-Liberalization Era---Thrust on Quality and Profitability:

By the beginning of 1990, the social banking goals set for the banking industry
made most of the public sector resulted in the presumption that there was no need to look at the
fundamental financial strength of this bank. Consequently they remained undercapitalized.
Revamping this structure of the banking industry was of extreme importance, as the health of the
financial sector in particular and the economy was a whole would be reflected by its
performance.
The need for restructuring the banking industry was felt greater with the initiation
of the real sector reform process in 1992. the reforms have enhanced the opportunities and
challenges for the real sector making them operate in a borderless global market place. However,
to harness the benefits of globalization, there should be an efficient financial sector to support the
structural reforms taking place in the real economy. Hence, along with the reforms of the real
sector, the banking sector reformation was also addressed.
The route causes for the lackluster performance of banks, formed the elements of
the banking sector reforms. Some of the factors that led to the dismal performance of banks
were.
 Regulated interest rate structure.
 Lack of focus on profitability.
 Lack of transparency in the bank’s balance sheet.
  Lack of competition.
 Excessive regulation on organization structure and managerial resource.
 Excessive support from government.

Against this background, the financial sector reforms were initiated to bring about a
paradigm shift in the banking industry, by addressing the factors for its dismal performance.
In this context, the recommendations made by a high level committee on
financial sector, chaired by M. Narasimham, laid the foundation for the banking sector reforms.
These reforms tried to enhance the viability and efficiency of the banking sector. The
Narasimham Committee suggested that there should be functional autonomy, flexibility in
operations, dilution of banking strangulations, reduction in reserve requirements and adequate
financial infrastructure in terms of supervision, audit and technology. The committee further
advocated introduction of prudential forms, transparency in operations and improvement in
productivity, only aimed at liberalizing the regulatory framework, but also to keep them in time
with international standards. The emphasis shifted to efficient and prudential banking linked to
better customer care and customer services.
 1.3 BANKING IN INDIA
1.3.1 Overview of Banking:

Banking Regulation Act of India, 1949 defines Banking as “accepting, for the
purpose of lending or of investment of deposits of money from the public, repayable on demand
or otherwise or withdrawable by cheque, draft order or otherwise.” The Reserve Bank of India
Act, 1934 and the Banking Regulation Act, 1949, govern the banking operations in India.

1.3.2Organizational Structure of Banks in India:

In India banks are classified in various categories according to differ rent criteria.
The following charts indicate the banking structure:

Reserve Bank of India

Commercial Banks Co-operative Banks Development Banks

Nationalized Private Short-term Long-term

credit credit

Agricultural Urban
EXIM Industrial Agricultural
Credit Credit

1.3.3 Broad Classification of Banks in India:

1) The RBI: The RBI is the supreme monetary and banking authority in the country and has
the responsibility to control the banking system in the country. It keeps the reserves of all
scheduled banks and hence is known as the “Reserve Bank”.
2) Public Sector Banks:
• State Bank of India and its Associates (8)
• Nationalized Banks (19)
• Regional Rural Banks Sponsored by Public Sector Banks (196)

(3) Private Sector Banks:

• Old Generation Private Banks (22)

• Foreign New Generation Private Banks (8)
• Banks in India (40)

(4) Co-operative Sector Banks:

• State Co-operative Banks

• Central Co-operative Banks
• Primary Agricultural Credit Societies
• Land Development Banks
• State Land Development Banks

(5) Development Banks: Development Banks mostly provide long term finance for setting
up industries. They also provide short-term finance (for export and import activities)

• Industrial Finance Co-operation of India (IFCI)

• Industrial Development of India (IDBI)
• Industrial Investment Bank of India (IIBI)
• Small Industries Development Bank of India (SIDBI)
• National Bank for Agriculture and Rural Development (NABARD)
• Export-Import Bank of India

1.3.4 Role of Banks:

Banks play a positive role in economic development of a country as repositories

of community’s savings and as purveyors of credit. Indian Banking has aided the economic
development during the last fifty years in an effective way. The banking sector has shown a
remarkable responsiveness to the needs of planned economy. It has brought about a considerable
progress in its efforts at deposit mobilization and has taken a number of measures in the recent
past for accelerating the rate of growth of deposits. As recourse to this, the commercial banks
opened branches in urban, semi-urban and rural areas and have introduced a number of attractive
schemes to foster economic development.

The activities of commercial banking have growth in multi-directional ways as

well as multi-dimensional manner. Banks have been playing a catalytic role in area development,
backward area development, extended assistance to rural development all along helping
agriculture, industry, international trade in a significant manner. In a way, commercial banks
have emerged as key financial agencies for rapid economic development.

By pooling the savings together, banks can make available funds to specialized
institutions which finance different sectors of the economy, needing capital for various purposes,
risks and durations. By contributing to government securities, bonds and debentures of term-
lending institutions in the fields of agriculture, industries and now housing, banks are also
providing these institutions with an access to the common pool of savings mobilized by them, to
that extent relieving them of the responsibility of directly approaching the saver. This
intermediation role of banks is particularly important in the early stages of economic
development and financial specification. A country like India, with different regions at different
stages of development, presents an interesting spectrum of the evolving role of banks, in the
matter of inter-mediation and beyond.

Mobilization of resources forms an integral part of the development process in

India. In this process of mobilization, banks are at a great advantage, chiefly because of their
network of branches in the country. And banks have to place considerable reliance on the
mobilization of deposits from the public to finance development programmes. Further, deposit
mobalization by banks in India acquired greater significance in their new role in economic
development.
 Commercial banks provide short-term and medium-term financial assistance. The
short-term credit facilities are granted for working capital requirements. The medium-term loans
are for the acquisition of land, construction of factory premises and purchase of machinery and
equipment. These loans are generally granted for periods ranging from five to seven years. They
also establish letters of credit on behalf of their clients favouring suppliers of raw
materials/machinery (both Indian and foreign) which extend the banker’s assurance for payment
and thus help their delivery. Certain transaction, particularly those in contracts of sale of
Government Departments, may require guarantees being issued in lieu of security earnest money
deposits for

release of advance money, supply of raw materials for processing, full payment of bills on the
assurance of the performance etc. Commercial banks issue such guarantees also.

1.3.5 The Role of Reserve Bank of India (RBI) – Banker’s

Bank:

The Reserve Bank of India (RBI) is the central bank of India, and was
established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act,
1934. Since its inception, it has been headquartered in Mumbai. Though originally privately
owned, RBI has been fully owned by the Government of India since nationalization in 1949.

RBI is governed by a central board (headed by a Governor) appointed by the

Central Government. The current governor of RBI is Dr.Y.Venugopal Reddy (who succeeded
Dr. Bimal Jalan on September 6, 2003). RBI has 22 regional offices across India.The Reserve
Bank of India was set up on the recommendations of the Hilton Young Commission. The
commission submitted its report in the year 1926, though the bank was not set up for nine years.

Main Objective:

Monetary Authority
• Formulates, implements and monitors the monetary policy.
• Objective: maintaining price stability and ensuring adequate flow of credit to productive
sectors.

Regulator and supervisor of the financial system

• Prescribes broad parameters of banking operations within which the country’s banking
and financial system functions.
• Objective: maintain public confidence in the system, protect depositors’ interest and
provide cost-effective banking services to the public. The Banking Ombudsman Scheme
has been formulated by the Reserve Bank of India (RBI) for effective redressal of
complaints by bank customers

Manager of Exchange Control

• Manages the Foreign Exchange Management Act, 1999.

• Objective: to facilitate external trade and payment and promote orderly development and
maintenance of foreign exchange market in India.

Issuer of currency

• Issues and exchanges or destroys currency and coins not fit for circulation.
• Objective: to give the public adequate quantity of supplies of currency notes and coins
and in good quality.

Developmental role

• Performs a wide range of promotional functions to support national objectives.

Related Functions

• Banker to the Government: performs merchant banking function for the central and the
state governments; also acts as their banker.
• Banker to banks: maintains banking accounts of all scheduled banks.
• Owner and operator of the depository (SGL) and exchange (NDS) for government bonds.
There is now an international consensus about the need to focus the tasks of a central bank upon
central banking. RBI is far out of touch with such a principle, owing to the sprawling mandate
described above.

Supervisory Functions:

In addition to its traditional central functions, the Reserve bank has certain non-
monetary functions of the nature of supervision of banks and promotion of sound banking in
India. The Reserve Bank Act, 1934, and the Banking Regulation Act, 1949 have given the RBI
wide powers of supervision and control over commercial and cooperative banks, relating to
licensing and establishments, branch expansion, liquidity of their assets, management and
methods of working, amalgamation, reconstruction and liquidation. The RBI is authorized to
carry out periodical inspections of the banks and to call for returns and necessary information
from them. The nationalization of 14 major Indian scheduled banks in July 1969 has imposed
new responsibilities on the RBI for directing the growth of banking and credit policies towards
more rapid development of the economy and realization of certain desired social objectives. The
supervisory functions of the RBI have helped a great deal in improving the standard of banking
in India to develop on sound lines and to improve the methods of their operation.

Promotional Functions:

With economic growth assuming a new urgency since Independence, the range of
the Reserve Bank’s functions have steadily widened. The Bank now performs a variety of
developmental and promotional functions, which, at one time, were regarded as outside the
normal scope of central banking. The Reserve Bank was asked to promote banking habit, extend
banking facilities to rural and semi-urban areas, and establish and promote new specialized
financing agencies. Accordingly, the Reserve bank has helped in the setting up of the IFCI and
the SFC: it set up the Deposit Insurance Corporation of India in 1963 and the Industrial
Reconstruction Corporation of India in 1972. These institutions were set up directly or indirectly
by the Reserve Bank to promote saving habit and to mobilize savings, and to provide industrial
finance as well as agricultural finance. As far back as 1935, the RBI set up the Agricultural
Credit Department to provide agricultural credit. But only since 1951 the Bank’s role in this field
has become extremely important. The Bank has developed the co-operative credit movement to
encourage saving, to eliminate money-lenders from the villages and to route its short term credit
to agriculture. The RBI has set up the Agricultural Refinance and Development Corporation to
provide long-term finance to farmers.

Co-operative Banks:

The Co-operative bank has a history of almost 100 years. The Co-operative banks
are an important constituent of the Indian Financial System, judging by the role assigned to
them, the expectations they are supposed to fulfill, their number, and the number of offices they
operate. The co-operative movement originated in the West, but the importance that such banks
have assumed in India is rarely paralleled anywhere else in the world. Their role in rural
financing continues to be important even today, and their business in the urban areas also has
increased phenomenally in recent years mainly due to the sharp increase in the number of co-
operative banks.

While the co-operative banks in rural areas mainly finance agricultural based
activities including farming, cattle, milk, hatchery, personal finance etc. along with some small
scale industries and self-employment driven activities, the co-operative banks in urban areas
mainly finance various categories of people for self-employment, industries, small scale units,
home finance, consumer finance, personal finance, etc. Some of the co-operative banks are quite
forward looking and have developed sufficient core competencies to challenge state and private
sector banks.

According to NAFCUB the total deposits & lendings of Co-operative Banks is

much more than Old Private Sector Banks & also the New Private Sector Banks. This
exponential growth of Co-operative Banks is attributed mainly to their much better local reach,
personal interaction with customers, their ability to catch the nerve of the local clientele. Though
registered under the Co-operative Societies Act of the Respective States (where formed
originally) the banking related activities of the co-operative banks are also regulated by the
Reserve Bank of India. They are governed by the Banking Regulations Act 1949 and Banking
Laws (Co-operative Societies) Act, 1965.

There are two main categories of the co-operative banks.

(a) Short term lending oriented co-operative Banks – within this category there are three sub
categories of banks viz state co-operative banks, District co-operative banks and Primary
Agricultural co-operative societies.

(b) Long term lending oriented co-operative Banks – within the second category there are
land development banks at three levels state level, district level and village level.

Features of Cooperative Banks

Co-operative Banks are organized and managed on the principal of co-operation, self-help, and
mutual help. They function with the rule of “one member, one vote”. Function on “no profit, no
loss” basis. Co-operative banks, as a principle, do not pursue the goal of profit maximization.
Co-operative bank performs all the main banking functions of deposit mobilization, supply of
credit and provision of remittance facilities. Co-operative Banks provide limited banking
products and are functionally specialists in agriculture related products. However, co-operative
banks now provide housing loans also.

UCBs provide working capital loans and term loan as well.

The State Co-operative Banks (SCBs), Central Co-operative Banks (CCBs) and Urban Co-
operative Banks (UCBs) can normally extend housing loans upto Rs 1 lakh to an individual. The
scheduled UCBs, however, can lend upto Rs 3 lakh for housing purposes.
 The UCBs can provide advances against shares and debentures also. Co-operative
bank do banking business mainly in the agriculture and rural sector. However, UCBs, SCBs, and
CCBs operate in semi urban, urban, and metropolitan areas also.

The urban and non-agricultural business of these banks has grown over the years.
The co-operative banks demonstrate a shift from rural to urban, while the commercial banks,
from urban to rural. Co-operative banks are perhaps the first government sponsored,
government-supported, and government-subsidized financial agency in India. They get financial
and other help from the Reserve Bank of India NABARD, central government and state
governments. They constitute the “most favoured” banking sector with risk of nationalization.
For commercial banks, the Reserve Bank of India is lender of last resort, but co-operative banks
it is the lender of first resort which provides financial resources in the form of contribution to the
initial capital (through state government), working capital, refinance.

Co-operative Banks belong to the money market as well as to the capital market.
Primary agricultural credit societies provide short term and medium term loans. Land
Development Banks (LDBs) provide long-term loans. SCBs and CCBs also provide both short
term and term loans. Co-operative banks are financial intermediaries only partially. The sources
of their funds (resources) are (a) central and state government, (b) the Reserve Bank of India and
NABARD, (c) other co-operative institutions, (d) ownership funds and, (e) deposits or debenture
issues. It is interesting to note that intra-sectoral flows of funds are much greater in co-operative
banking than in commercial banking. Inter-bank deposits, borrowings, and credit from a
significant part of assets and liabilities of co-operative banks. This means that intra-sectoral
competition is absent and intra-sectoral integration is high for co-operative bank.

Some co-operative banks are scheduled banks, while others are non-scheduled
banks. For instance, SCBs and some UCBs are scheduled banks but other co-operative bank are
non-scheduled banks. At present, 28 SCBs and 11 UCBs with Demand and Time Liabilities over
Rs 50 crore each included in the Second Schedule of the Reserve Bank of India Act.
Co-operative Banks are subject to CRR and liquidity requirements as other scheduled and non-
scheduled banks are. However, their requirements are less than commercial banks. Since 1966
the lending and deposit rate of commercial banks have been directly regulated by the Reserve
Bank of India. Although the Reserve Bank of India had power to regulate the rate co-operative
bank but this have been exercised only after 1979 in respect of non-agricultural advances they
were free to charge any rates at their discretion. Although the main aim of the co-operative bank
is to provide cheaper credit to their members and not to maximize profits, they may access the
money market to improve their income so as to remain viable.

1.4 PRODUCTS AND SERVICES OFFERED BY BANKS

Broad Classification of Products in a bank:

The different products in a bank can be broadly classified into:

• Retail Banking.
• Trade Finance.
• Treasury Operations.

Retail Banking and Trade finance operations are conducted at the branch level while the
wholesale banking operations, which cover treasury operations, are at the hand office or a
designated branch.
1.4.1 Retail Banking:

• Deposits
• Loans, Cash Credit and Overdraft
• Negotiating for Loans and advances
• Remittances
• Book-Keeping (maintaining all accounting records)
• Receiving all kinds of bonds valuable for safe keeping

1.4.2 Trade Finance:

• Issuing and confirming of letter of credit.

• Drawing, accepting, discounting, buying, selling, collecting of bills of exchange,
promissory notes, drafts, bill of lading and other securities.

1.4.3 Treasury Operations:

• Buying and selling of bullion. Foreign exchange

• Acquiring, holding, underwriting and dealing in shares, debentures, etc.
• Purchasing and selling of bonds and securities on behalf of constituents.

The banks can also act as an agent of the Government or local authority. They
insure, guarantee, underwrite, participate in managing and carrying out issue of shares,
debentures, etc.

Apart from the above-mentioned functions of the bank, the bank provides a whole
lot of other services like investment counseling for individuals, short-term funds management
and portfolio management for individuals and companies. It undertakes the inward and outward
remittances with reference to foreign exchange and collection of varied types for the
Government.

Chapter 2
2.1 INTRODUCTION

Housing Development Finance Corporation Limited, more popularly known as HDFC

Bank Ltd, was established in the year 1994, as a part of the liberalization of the Indian
Banking Industry by Reserve Bank of India (RBI). It was one of the first banks to
receive an 'in principle' approval from RBI, for setting up a bank in the private sector.
The bank was incorporated with the name 'HDFC Bank Limited', with its registered
office in Mumbai. The following year, it started its operations as a Scheduled
Commercial Bank. Today, the bank boasts of as many as 1412 branches and over 3275
ATMs across India.

2.2VISION AND MISSION

Vision

To be a sound all India, customer centric, efficient retail bank with contemporary size,
technology and human capital; endeavouring to enrich lives across all sections of society; and
committed to upholding the highest standards of corporate governance.

Mission

HDFC Bank's mission is to be a World-Class Indian Bank. The objective is to build sound
customer franchises across distinct businesses so as to be the preferred provider of banking
services for target retail and wholesale customer segments, and to achieve healthy growth in
profitability, consistent with the bank's risk appetite. The bank is committed to maintain the
highest level of ethical standards, professional integrity, corporate governance and regulatory
compliance. HDFC Bank's business philosophy is based on four core values - Operational
Excellence, Customer Focus, Product Leadership and People.

2.3 management

Mr. Jagdish Kapoor took over as the bank's Chairman in July 2001. Prior to this, Mr.
Kapoor was a Deputy Governor of the Reserve Bank of India.

The Managing Director, Mr. Aditya Puri, has been a professional banker for over 25 years
and before joining HDFC Bank in 1994 was heading Citibank’s operations in Malaysia.

The Bank's Board of Directors is composed of eminent individuals 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.

2.4 promoters

HDFC is India's premier housing finance company and enjoys an impeccable track
record in India as well as in international markets. Since its inception in 1977, the
Corporation has maintained a consistent and healthy growth in its operations to remain
the market leader in mortgages. Its outstanding loan portfolio covers well over a million
dwelling units. HDFC has developed significant expertise in retail mortgage loans to
different market segments and also has a large corporate client base for its housing
related credit facilities. With its experience in the financial markets, a strong market
reputation, large shareholder base and unique consumer franchise, HDFC was ideally
positioned to promote a bank in the Indian environment.

2.5 CAPITAL STRUCTURE

The authorized capital of HDFC Bank is Rs550 crore (Rs5.5 billion). The paid-up
capital is Rs424.6 crore (Rs.4.2 billion). The HDFC Group holds 19.4% of the bank's
equity and about 17.6% of the equity is held by the ADS Depository (in respect of the
bank's American Depository Shares (ADS) Issue). Roughly 28% of the equity is held
by Foreign Institutional Investors (FIIs) and the bank has about 570,000 shareholders.
The shares are listed on the Stock
Exchange, Mumbai and the National Stock Exchange. The bank's American
Depository Shares are listed on the New York Stock Exchange (NYSE) under the
symbol 'HDB'.
2.6 DISTRIBUTION NETWORK
HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable
network of over 1229 branches spread over 444 cities across India. All branches are
linked on an online real-time basis. Customers in over 120 locations are also serviced
through Telephone Banking. The Bank's expansion plans take into account the need to
have a presence in all major industrial and commercial centers where its corporate
customers are located as well as the need to build a strong retail customer base for
both deposits and loan products. Being a clearing/settlement bank to various leading
stock exchanges, the Bank has branches in the centers where the NSE/BSE has a
strong and active member base. The Bank also has a network of about over 4220
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.

2.7 times bank amalgamation

In a milestone transaction in the Indian banking industry, Times Bank
Limited (another new private sector bank promoted by Bennett, Coleman & Co.
/Times Group) was merged with HDFC Bank Ltd., effective February 26, 2000. As
per the scheme of amalgamation approved by the shareholders of both banks and the
Reserve Bank of India, shareholders of Times Bank received 1 share of HDFC Bank
for every 5.75 shares of Times Bank. The acquisition added significant value to
HDFC Bank in terms of increased branch network, expanded geographic reach,
enhanced customer base, skilled manpower and the opportunity to cross-sell and
leverage alternative delivery channels.

2.8 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.

2.9 KEY BUSINESS SEGMENTS

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:

WHOLESALE BANKING SERVICES

The Bank's target market ranges from large, blue-chip manufacturing companies in the
Indian corporate to small & mid- sized corporate and agri-based businesses. For these
customers, the Bank provides a wide range of commercial and transactional banking
services, including working capital finance, trade services, transactional services, cash
management, etc. The bank is also a leading provider of structured solutions, which
combine cash management services with vendor and distributor finance for facilitating
superior supply chain management for its corporate customers. Based on its superior
product delivery / service levels and strong customer orientation, the Bank has made
significant inroads into the banking consortia of a number of leading Indian corporates
including multinationals, companies from the domestic business houses and prime
public sector companies. It is recognized as a leading provider of cash management
and transactional banking solutions to corporate customers, mutual funds,
stock
exchange members and banks.
RETAIL BANKING SERVICES

The objective of the Retail Bank is to provide its target market customers a full range of
financial products and banking services, giving the customer a one-stop window for all
his/her banking requirements. The products are backed by world-class service and
delivered to the customers through the growing branch network, as well as through
alternative delivery channels like ATMs, Phone Banking, Net Banking and Mobile
Banking. The HDFC Bank Preferred program for high net worth individuals, the HDFC
Bank Plus and the Investment Advisory Services programs have been designed
keeping in mind needs of customers who seek distinct financial solutions, information
and advice on various investment avenues. The Bank also has a wide array of retail
loan products including Auto Loans, Loans against marketable securities, Personal
Loans and Loans for Two-wheelers. It is also a leading provider of Depository
Participant (DP) services for retail customers, providing customers the facility to hold
their investments in electronic form. HDFC Bank was the first bank in India to launch an
International Debit Card in association with VISA (VISA Electron) and issues the Master
Card Maestro debit card as well. The Bank launched its credit card business in late
2001. By September 30, 2005, the bank had a total card base (debit and credit cards) of
5.2 million cards. The Bank is also one of the leading players in the "merchant
acquiring" business with over 50,000 Point-of-sale (POS) terminals for debit / credit
cards acceptance at merchant establishments.

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
liberalization of the financial markets in India, corporate 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.
Chapter 3
 3.1 Customer Services in Commercial Banks:

Customer service is the service provided in support of a bank’s core products.

Customer service often includes answering questions; handling complaints. Customer service
can occur on site (as when an onstage employee helps a customer or answers a question) or it can
occur over the phone or the Internet. Quality customer service is essential to building cordial
customer relationship.

Banking being a service industry, a lot depends on efficient and prompt customer
service. Customer service is the most important duty of the banking operations. Prompt and
efficient service with smile will develop good public relations reduce complaints and increase
business.

3.2 Why is Customer Service Important?

 Changing customer expectations: Today the customer is more demanding and more
sophisticated than he or she was thirty years ago.
 The increased importance of customer service: With changing customer expectations,
competitors are seeing customer service as a competitive weapon with which they
differentiate their products and services.
 The need for a relationship strategy: To ensure that a customer service strategy that
will create a value preposition for customers should be formulated implemented and
controlled. It is necessary to give it a central role and not one that is subsumed in the
various elements of the marketing mix.
 The customer is the kingpim in growth organizations like commercial banks. Only
those institutions which work according to his dictates will flourish. Quality, Consistency and
Durability at low price are the final expectations of a customer. Quality will have to be
unambiguous, of world class quality. Quality cannot be of minimum acceptable standards.
Customer responsiveness must be quick and also competent. Speed, performance and cost will
be the new values “mantra” for success.

The ten key areas of customer’s services to be attended timely and regularly are:

i. Submission of statement of A/Cs to customers

ii. Updating of savings pass books.
iii. Teller system efficiency.
iv. Cleanliness and Upkeep of premises.
v. Intermediate Credit for institution cheques/land bills.
vi. Advance intimation to customers for rewards of Term Deposits Receipts on maturity.
vii. Advance for Debit/credit to accounts.
viii. Punctuality of staff.
ix. Handling of complaint register.
x. Maintain a complaint register.

Customer’s dissatisfaction in the banking industry is neither recent nor unknown.

This is mainly due to delays in handling transactions across the counter in collections, update of
passbooks supply of statements of accounts, etc.

Failure to provide prompt and efficient customer service is likely to lead to

reduction in the number of customers and they may have to face closure. To event such situation
the following improvements in the customer services may be carried out:

1) Personal relations of the bank employee with customers will improve customer
satisfaction. 1 service with smile should be the motto of every bank employee.
2) Rapid customer services should be provided through automation of work and
simplification of procedures.
3) ATM’s may be introduced in all the branches of the banks, based upon the volume of
transactions. This shall facilitate non-stop banking.
4) Credit Cards Services, Debit Card Services, which should be provided to the customers,
must a link service with all the banks and branches if possible to facilitate the customer
and the business organizations.
5) E-mail service made freely available at all banking centers.
6) Foreign Exchange transactions are to be extended to all the branches to facilitate trade
and industries.
7) All the customers are not homogenous in their needs. Hence need based schemes may be
introduced.
8) Totally deregulated interest rate structure should be there.
9) The banking staff must be trained to understand the customer’s psychology, so they may
provide customer service in a qualified manner.
10) Educating the customers will increases better utilisation of banking services.
Chapter 4
4.1 Research methodology

4.1Research design for objective

Type of Research design: Descriptive Research

Research data: Primary data and secondary data
Questionnaire: Structured questions
Sampling Technique: Convenience sampling
Target population: Customers of HDFC, Lahurabir, Varanasi (3500)
Sample size: 100
Objective: Perception of the customers towards quality of services in HDFC Bank
Hypothesis:
H0: quality of services in HDFC is as per the customers expectations
 Tangibles at HDFC are as per the customers expectations
 Reliability at HDFC are as per the customers expectations
 Responsiveness at HDFC are as per the customers expectations
 Assurance at HDFC are as per the customers expectations
 Empathy at HDFC are as per the customers expectations

Tool used: z-test

4.2.1Questionnaire

Expectations This section of the survey deals with your opinions of banks. Please
show the extent to which you think banks should posses the following
features. What we are interested in here is a number that best shows
you expectations about institutions offering banking services.

You should rank each statement as follows:

Strongly Strongly
Disagre Agree

1 2 3 4 5

Statement Score

1. Excellent banking companies will have modern looking equipment.

Statement Score

2. The physical facilities at excellent banks will be visually appealing.

3. Employees at excellent banks will be neat in their appearance.

4. Materials associated with the service (pamphlets or statements) will be visually

appealing at an excellent bank.

5. When excellent banks promise to do something by a certain time, they do.

6. When a customer has a problem, excellent banks will show a sincere interest in
solving it.

7. Excellent banks will perform the service right the first time.

8. Excellent banks will provide the service at the time they promise to do so.

9. Excellent banks will insist on error free records.

10. Employees of excellent banks will tell customers exactly when services will be
performed.

11. Employees of excellent banks will give prompt service to customers.

12. Employees of excellent banks will always be willing to help customers.

13. Employees of excellent banks will never be too busy to respond to customers'
requests.

14. The behaviour of employees in excellent banks will instil confidence in

customers

15. Customers of excellent banks will feel safe in transactions.

16. Employees of excellent banks will be consistently courteous with customers.

17. Employees of excellent banks will have the knowledge to answer customers'
questions.

18. Excellent banks will give customers individual attention.

19. Excellent banks will have operating hours convenient to all their customers.

20. Excellent banks will have employees who give customers personal service.

21. Excellent banks will have their customers' best interest at heart.

22. The employees of excellent banks will understand the specific needs of their
 Statement Score

customers.

4.2.2 Questionnaire

Perceptions The following statements relate to your feelings about the particular
bank you have chosen. Please show the extent to which you believe
this bank has the feature described in the statement. Here, we are
interested in a number from 1 to 5 that shows your perceptions about
the bank.

You should rank each statement as follows:

Strongly Strongly
Disagree Agree

1 2 3 4 5

Statement Score

1. The bank has modern looking equipment.

2. The bank's physical features are visually appealing.

3. The bank's reception desk employees are neat appearing.

4. Materials associated with the service (such as pamphlets or statements) are

visually appealing at the bank.

5. When the bank promises to do something by a certain time, it does so.

6. When you have a problem, the bank shows a sincere interest in solving it.

7. The bank performs the service right the first time.

8. The bank provides its service at the time it promises to do so.

9. The bank insists on error free records.

 Statement Score

10. Employees in the bank tell you exactly when the services will be performed.

11. Employees in the bank give you prompt service.

12. Employees in the bank are always willing to help you.

13. Employees in the bank are never too busy to respond to your request.

14. The behaviour of employees in the bank instils confidence in you.

15. You feel safe in your transactions with the bank.

16. Employees in the bank are consistently courteous with you.

17. Employees in the bank have the knowledge to answer your questions.

18. The bank gives you individual attention.

19. The bank has operating hours convenient to all its customers.

20. The bank has employees who give you personal attention.

21. The bank has your best interests at heart.

22. The employees of the bank understand your specific needs.

4.3 Customer’s Responses & Calculation of Scores:

Dimension Statement Perception Expectation Gap Score Average for Dimension

Score Score (E-P)
Tangibles 1 2.97 3.47 0.5
2 3.21 3.88 0.67 0.35
3 3.07 3.20 0.13
4 3.05 3.15 0.1

Reliability 5 3.51 3.61 0.10

6 3.32 3.56 0.24 0.26
7 3.33 3.67 0.34
8 3.40 3.68 0.28
9 3.14 3.48 0.34

Responsiveness 10 3.33 3.49 0.16 0.247

11 3.54 3.7 0.16
 12 3.12 3.78 0.66
13 3.49 3.5 0.01

Assurance 14 3.44 3.58 0.14

15 3.35 3.69 .034 0.1725
16 3.25 3.36 0.11
17 3.32 3.42 0.10

Empathy 18 3.39 3.79 0.4

19 3.67 3.68 0.01
20 3.65 3.72 0.07 0.158
21 3.63 3.76 0.07
22 3.52 3.69 0.24

Unweighted Average SERVQUAL score: .2378

4.4 Analysis:

Mean Standard Value

deviation of z

Tangibles 0.35 0.243 2.88

Reliability 0.26 0.088 6.59

Responsiveness 0.25 0.246 2.03

Assurance 0.17 0.098 3.47

Empathy 0.16 0.143 2.52

4.5 Findings:

• Tangibles at HDFC were not upto the requirement of the customers. They want more
help from signboards, etc. and the hygiene factors are important from customers point of
view.
• Bank is lagging in terms of reliability.
• Response level of the employees is not very unsatisfactory.
• The level of assurance is also less but better than compared with other parameters.
• HDFC has not very bad picture in terms of empathy.

4.6 Suggestions:

Tangibles:

 Signboards at the branches should be made more comprehensive regarding the services
provided at different terminals.

 Provide pamphlets and forms of bank’s deposit schemes which are more visually appealing.

Reliability:
 The employees should try to perform the service right at the very first time.

 Accuracy of the data provided, letters send to the customers etc, should also be the insisted
upon.

Responsiveness:
 Employees should be friendly while transacting with the low deposit clients as well.

 The staff should be well trained to give timely answers to service related questions.

Assurance:
 The staff should be well trained to be consistent courteous with the customers.

 The knowledge base of the employees should be strong enough to answer the queries of the
customers related to other departments as well.

Empathy:
 Employees should be proactive in their approach.

4.7 LIMITATIONS OF THE STUDY

Although the study was carried out with extreme enthusiasm and careful planning there are
several limitations, which handicapped the research viz,

1. Time Constraints:
The time stipulated for the project to be completed is less and thus there are chances that some
information might have been left out, however due care is taken to include all the relevant
information needed.

2. Sample size:
Due to time constraints the sample size was relatively small and would definitely have been more
representative if I had collected information from more respondents.

3. Accuracy:
 It is difficult to know if all the respondents gave accurate information; some respondents tend to
give misleading information.

4. It was difficult to find respondents as they were busy in their schedule, and collection of data
was very difficult. Therefore, the study had to be carried out based on the availability of
respondents.

5 Bibliography

www.HDFCindia.co.in
www.rbi.org
http://en.wikipedia.org/wiki/SERVQUAL
http://www.indiabulls.com/securities/market/Live-Quotes/get-quote.aspx?
compName=HDFC
www.business-standard.com