A PROJECT REPORT ON THE BANKING SECTOR : CREDIT CARDS WITH REFERENCE TO HDFC BANK SUBMITTED TO THE UNIVERSITY OF PUNE

IN PARTIAL FULFILMENT OF BACHELOR OF BUSINESS ADMINISTRATION FOR THE ACADEMIC YEAR 2010-11 BY MISS JAYANTI NATH OF BBA (SEM VI) ROLL NO. 96 OF NESS WADIA COLLEGE OF COMMERCE, PUNE-411001 UNDER THE GUIDANCE OF PROF. PINKY AGARWAL AND PROF. NEENA RANKA

FINANCIAL SERVICES IN INDIA

FINANCIAL SERVICES IN INDIA :

Meaning ancd definition of financial services :
The term financial services in its broader sense refers to, the mobilizing and allocation of savings. It is identified as inclusive of all those activities involved in the process of converting savings into investment. Financial services also include Financial Mediators such as merchant bankers, venture capitalists, commercial banks, insurance companies etc. In other words, financial services are concerned with individuals, organizations and their finances that is to say, they are servuices that are directed specifically at peoples intangible assets (i.e., their money/ wealth). Financial services basically mean all those kind of services provided in financial or monetory terms, where the essential commodity is money. The term is often used broadly to cover a whole range of banking services, insurance (both life and general), stock trading, asset management, credit cards, foreign exchange, trade finance, venture capital and so on. These different services are designed to meet a range of different needs and take on many different forms. They usually require a formal relationship between the provider and the consumers and they typically require a degree of modification (quite limited in case of a basic bank account, but quite extensive incase of venture capital).

Chracteristics of financial services in India :

a. Financial services involve atleast two people or firms, namely, the service provider and the service user. b. Financial institutions intermediate the flow of funds between the different economic decision - making units. c. The financial services are intangible. They smoothen the functioning of the corporate sector by providing funds within the stipulated period of time. d. Financial services must be customer friendly and they should provide the services according to the requirements of the customers. e. Financial service is an innovative activity and requires dynamism.

f. It has to be consistently refined on the basis of the economic changes that occur in the global market

Current trends in financial services in India :

These are as follows: a. Dynamism : Presently, the financial system in India is in a process of rapid transformation, after the liberalization of the financial sector. The main objective of the financial sector reforms is to promote an efficient, competitive and diversified financial system in the country. Currently, the Indian financial services sector is very dynamic and is adopting itself to the changing needs. b. Primary Equity Market : The primary market in India is now very active. India is now witnessing the emergence of many private sector financial services. Capital market is one of the major places to raise finance. The collective funds raised in the Indian capital market have doubled over a decade. c. Concept of Credit Rating : The facility of credit rating helps the investors in finding a profitable and safe debt capital. It rates the debt issues and instructs the investors not to invest in debt capital of the firms that are badly rated. The regulators of the Indian capital market are considering the introduction of equity grading, which helps the investors to cautiously invest their savings. d. Process of Globalization :Globalization has made way for the entry of innovative and advanced financial products in India. The Government of India is very enthusiastic in removing all the barriers in the financial sector. Indian capital market has high potential for the introduction of innovative financial products. e. Process of Liberalization : The Finance Act of the Government fo India is bringing in various modifications every year to keep the financial sector very flexible. The Government of India has initiated many steps to reform the financial services industry. The interest rates have been deregulated. The private sector has been permitted to participate in banking and mutual fund sectors.

THE INDIAN BANKING SECTOR

THE INDIAN BANKING SECTOR :

Introduction :
The Indian Banking Sector, which is governed by the Banking Regulation Act of India, 1949 can be broadly classified into two major categories, non-scheduled banks and scheduled banks. Scheduled banks comprise commercial banks and the co-operative banks. In terms of ownership, commercial banks can be further grouped into nationalized banks, the State Bank of India and its group banks, regional rural banks and private sector banks (the old, new, domestic and foreign). These banks have over 67,000 branches spread across the country. The first phase of financial reforms resulted in the nationalization of 14 major banks in 1969 and resulted in a shift from Class banking to Mass banking. This in turn resulted in a significant growth in the geographical coverage of banks. Every bank had to earmark a minimum percentage of their loan portfolio to sectors identified as priority sectors. The manufacturing sector also grew during the 1970s in protected environs and the banking sector was a critical source. The next wave of reforms saw the nationalization of 6 more commercial banks in 1980. Since then the number of scheduled commercial banks increased four-fold and the number of bank branches increased eight-fold. After the second phase of financial sector reforms and liberalization of the sector in the early nineties, the Public Sector Banks (PSBs) found it extremely difficult to compete with the new private sector banks and the foreign banks. The new private sector banks first made their appearance after the guidelines permitting them were issued in January 1993. 8 new private sector banks are presently in operation. These banks due to their late start have access to state-of-the-art technology, which in turn helps them to save on manpower costs and provide better services. During the year 2000, the State Bank Of India (SBI) and its 7 associates accounted for a 25 percent share in deposits and 28.1 percent share in credit. The 20 nationalized banks accounted for 53.2 percent of the deposits and 47.5 percent of credit during the same period. The share of foreign banks (numbering 42), regional rural banks and other scheduled commercial banks accounted for 5.7 percent, 3.9 percent and 12.2 percent respectively in deposits and 8.41 percent, 3.14 percent and 12.85 percent respectively in credit during the year 2000.

Current Scenario :
The sector is currently in a transition phase. On one hand, the PSBs, which are the mainstay of the Indian Banking sector are in the process of shedding their flab in terms of excessive manpower, excessive non Performing Assets (NPAs) and excessive governmental equity, while on the other hand the private sector banks are consolidating themselves through mergers and acquisitions.

PSBs, which currently account for more than 78 percent of total banking industry assets are saddled with NPAs (a mind-boggling Rs 830 billion in 2000), falling revenues from traditional sources, lack of modern technology and a massive workforce while the new private sector banks are forging ahead and rewriting the traditional banking business model by way of their sheer innovation and service. The PSBs are of course currently working out challenging strategies even as 20 percent of their massive employee strength has dwindled in the wake of the successful Voluntary Retirement Schemes (VRS). The private players however cannot match the PSBs great reach, great size and access to low cost deposits. Therefore, one of the means for them to combat the PSBs has been through the merger and acquisition (M&A) route. Over the last two years, the industry has witnessed several such instances. For instance, HDFC Banks merger with Times Bank, ICICI Banks acquisition of ITC Classic, Anagram Finance and Bank of Madura. Centurion Bank, IndusInd Bank, Bank of Punjab, Vysya Bank are said to be on the lookout. The UTI bank - Global Trust Bank merger however opened a Pandoras box and brought about the realization that all was not well in the functioning of many of the private sector banks. Private sector Banks have pioneered internet banking, phone banking, anywhere banking, mobile banking, debit cards, Automatic Teller Machines (ATMs) and combined various other services and integrated them into the mainstream banking arena, while the PSBs are still grappling with disgruntled employees in the aftermath of successful VRS schemes. Also, following Indias commitment to the WTO agreement in respect of the services sector, foreign banks, including both new and the existing ones, have been permitted to open up to 12 branches a year with effect from 1998-99 as against the earlier stipulation of 8 branches. Talks of government diluting their equity from 51 percent to 33 percent in November 2000 has also opened up a new opportunity for the takeover of even the PSBs. The FDI rules being more rationalized in Q1FY02 may also pave the way for foreign banks taking the M&A route to acquire willing Indian partners. Meanwhile the economic and corporate sector slowdown has led to an increasing number of banks focusing on the retail segment. Many of them are also entering the new vistas of Insurance. Banks with their phenomenal reach and a regular interface with the retail investor are best placed to enter into the insurance sector. Banks in India have been allowed to provide fee-based insurance services without risk participation, invest in an insurance company for providing infrastructure and services support and set up of a separate joint-venture insurance company with risk participation.

Aggregate Performance of the Banking Sector :

Aggregate deposits of scheduled commercial banks increased at a Compounded

Annual Average Growth Rate (CAGR) of 17.8 percent during 1969-99, while bank credit expanded at a CAGR of 16.3 percent per annum. Banks investments in government and other approved securities recorded a CAGR of 18.8 percent per annum during the same period. In FY01 the economic slowdown resulted in a Gross Domestic Product (GDP) growth of only 6.0 percent as against the previous years 6.4 percent. The WPI Index (a measure of inflation) increased by 7.1 percent as against 3.3 percent in FY00. Similarly, money supply (M3) grew by around 16.2 percent as against 14.6 percent a year ago. The growth in aggregate deposits of the scheduled commercial banks at 15.4 percent in FY01 percent was lower than that of 19.3 percent in the previous year, while the growth in credit by PSBs slowed down to 15.6 percent in FY01 against 23 percent a year ago. The industrial slowdown also affected the earnings of listed banks. The net profits of 20 listed banks dropped by 34.43 percent in the quarter ended March 2001. Net profits grew by 40.75 percent in the first quarter of 2000-2001, but dropped to 4.56 percent in the fourth quarter of 2000-2001. On the Capital Adequacy Ratio (CAR) front while most banks managed to fulfill the norms, it was a feat achieved with its own share of difficulties. The CAR, which at is 9.0 percent, was hiked to 12.0 percent in the year 2004 based on the Basle Committee recommendations. Any bank that wishes to grow its assets needs to also shore up its capital at the same time so that its capital as a percentage of the risk-weighted assets is maintained at the stipulated rate. While the IPO route was a much-fancied one in the early 90s, the current scenario doesnt look too attractive for bank majors. Consequently, banks have been forced to explore other avenues to shore up their capital base. While some are wooing foreign partners to add to the capital others are employing the M&A route. Many are also going in for right issues at prices considerably lower than the market prices to woo the investors.

Interest Rate Scene :

The two years, post the East Asian crises in 1997-98 saw a climb in the global interest rates. It was only in the later half of FY01 that the US Federal Reserve System cut interest rates. India has however remained more or less insulated. The past 2 years in our country was characterized by a mounting intention of the Reserve Bank Of India (RBI) to steadily reduce interest rates resulting in a narrowing differential between global and domestic rates. The RBI has been affecting bank rate and CRR cuts at regular intervals to improve liquidity and reduce rates. The only exception was in July 2000 when the RBI increased the Cash Reserve Ratio (CRR) to stem the fall in the rupee

against the dollar. The steady fall in the interest rates resulted in squeezed margins for the banks in general.

Governmental Policy :
After the first phase and second phase of financial reforms, in the 1980s commercial banks began to function in a highly regulated environment, with administered interest rate structure, quantitative restrictions on credit flows, high reserve requirements and reservation of a significant proportion of lend able resources for the priority and the government sectors. The restrictive regulatory norms led to the credit rationing for the private sector and the interest rate controls led to the unproductive use of credit and low levels of investment and growth. The resultant financial repression led to decline in productivity and efficiency and erosion of profitability of the banking sector in general. This was when the need to develop a sound commercial banking system was felt. This was worked out mainly with the help of the recommendations of the Committee on the Financial System (Chairman: Shri M. Narasimham), 1991. The resultant financial sector reforms called for interest rate flexibility for banks, reduction in reserve requirements, and a number of structural measures. Interest rates have thus been steadily deregulated in the past few years with banks being free to fix their Prime Lending Rates (PLRs) and deposit rates for most banking products. Credit market reforms included introduction of new instruments of credit, changes in the credit delivery system and integration of functional roles of diverse players, such as, banks, financial institutions and Non-Banking Financial Companies (NBFCs). Domestic Private Sector Banks were allowed to be set up, PSBs were allowed to access the markets to shore up their Cars.

Implications Of Some Policy Measures :

The allowing of PSBs to shed manpower and dilution of equity are moves that will lend greater autonomy to the industry. In order to lend more depth to the capital markets the RBI had in November 2000 also changed the capital market exposure norms from 5 percent of banks incremental deposits of the previous year to 5 percent of the banks total domestic credit in the previous year. But this move did not have the desired effect, as in, while most banks kept away almost completely from the capital markets, a few private sector banks went overboard and exceeded limits and indulged in dubious stock market deals. The chances of seeing banks making a comeback to the stock markets are therefore quite unlikely in the near future. The move to increase Foreign Direct Investment (FDI) limits to 49 percent from 20 percent during the first quarter of this fiscal came as a welcome announcement to foreign players wanting to get a foot hold in the Indian markets

by investing in willing Indian partners who are starved of net worth to meet CAR norms. Ceiling for FDI in companies was also increased from 24.0 percent to 49.0 percent and have been included within the ambit of FDI. The abolishment of interest tax of 2.0 percent in budget 2001-02 will help banks pass on the benefit to the borrowers on new loans leading to reduced costs and easier lending rates. Banks will also benefit on the existing loans wherever the interest tax cost element has already been built into the terms of the loan. The reduction of interest rates on various small savings schemes from 11 percent to 9.5 percent in Budget 2001-02 was a much awaited move for the banking industry and in keeping with the reducing interest rate scenario, however the small investor is not very happy with the move. Some of the not so good measures however like reducing the limit for Tax Deducted at Source (TDS) on interest income from deposits to Rs 2,500 from the earlier level of Rs 10,000, in Budget 2001-02, had met with disapproval from the banking fraternity who feared that the move would prove counterproductive and lead to increased fragmentation of deposits, increased volumes and transaction costs. The limit was thankfully partially restored to Rs 5000 at the time of passing the Finance Bill in the Parliament.

April 2001-Credit Policy Implications :

The rationalization of export credit norms in will bestow greater operational flexibility on banks, and also reduce the borrowing costs for exporters. Thus this move could trigger exports growth in the future. Banks can also hope to earn increased revenue with the interest paid by RBI on CRR balances being increased from 4.0 percent to 6.0 percent. The stock market scam brought out the unholy nexus between the Cooperative banks and stockbrokers. In order to usher in greater prudence in their operations, the RBI has barred Urban Cooperative Banks from financing the stock market operations and is also in the process of setting up of a new apex supervisory body for them. Meanwhile the foreign banks have a bone to pick with the RBI. The RBI had announced that Foreign Exchange (ForEx) loans are not to be calculated as a part of Tier-1 Capital for drawing up exposure limits to companies effective 1 April 2002. This will force foreign banks either to infuse fresh capital to maintain the capital adequacy ratio (CAR) or pare their asset base. Further, the RBI has also sought to keep foreign competition away from the nascent net banking segment in India by allowing only Indian banks with a local physical presence, to offer Internet banking

Crystal Gazing :
On the macro economic front, GDP is expected to grow by 6.0 to 6.5 percent while the projected expansion in broad money (M3) for 2001-02 is about 14.5 percent. Credit and deposits are both expected to grow by 15-16 percent in

FY02. India's foreign exchange reserves should reach US$50.0 billion in FY02 and the Indian rupee should hold steady. The interest rates are likely to remain stable this fiscal based on an expected downward trend in inflation rate, sluggish pace of non-oil imports and likelihood of declining global interest rates. The domestic banking industry is forecasted to witness a higher degree of mergers and acquisitions in the future. Banks are likely to opt for the universal banking approach with a stronger retail approach. Technology and superior customer service will continue to be the imperatives for success in this industry. PSBs that imbibe new concepts in banking, turn tech savvy, leaner and meaner post VRS and obtain more autonomy by keeping governmental stake to the minimum can succeed in effectively taking on the private sector banks by virtue of their sheer size. Weaker PSBs are unlikely to survive in the long run. Consequently, they are likely to be either acquired by stronger players or will be forced to look out for other strategies to infuse greater capital and optimize their operations. Foreign banks are likely to succeed in their niche markets and be the innovators in terms of technology introduction in the domestic scenario. The outlook for the private sector banks indeed looks to be more promising vis--vis other banks. While their focused operations, lower but more productive employee force etc will stand them good, possible acquisitions of PSBs will definitely give them the much needed scale of operations and access to lower cost of funds. These banks will continue to be the early technology adopters in the industry, thus increasing their efficiencies. Also, they have been amongst the first movers in the lucrative insurance segment. Already, banks such as ICICI Bank and HDFC Bank have forged alliances with Prudential Life and Standard Life respectively. This is one segment that is likely to witness a greater deal of action in the future. In the near term, the low interest rate scenario is likely to affect the spreads of majors. This is likely to result in a greater focus on better asset-liability management procedures. Consequently, only banks that strive hard to increase their share of fee-based revenues are likely to do better in the future. http://www.researchandmarkets.com/reports/4020/indian_banking_industry

OBJECTIVE OF STUDY

OBJECTIVES OF STUDY :
Objectives of the study are as under :

a) b) c)

In order to facilitate understanding of the working of the banks in India and their policies. To be able to study the nature and scope of the banking sector in India. In order to understand the concept of credit cards.

SCOPE OF STUDY

SCOPE OF STUDY :
Banking sector is considered to be the life blood of the national economy. Without the banking sector, trading and business activities cannot be carried on

smoothly. Banks are the distributors and protectors of liquid capital which is of vital significance to a developing country. Efficient administration of the banking sector helps in the economic growth of the nation. Banking is useful to trade and commerce. Banking activities are useful to trade and industry in the following ways: a) b) c) Money deposited in a bank remains safe. Precious articles too can be kept in the safe custody of banks in lockers. Banks provide credit facilities to their customers. Customers with bank accounts also enjoy better credit in the business world. Banks encourage the habit of saving and thrift among people. They mobilize savings and invest them in productive activities. Thus, they help in increasing the rate of savings and investment in the country. Banks provide a convenient and safe means of transferring money from one place to another and facilitate business dealings/ transactions. Banks collect and realize bills, cheques, interest and dividend warrants etc. on behalf of their customers. Foreign trade is facilitated considerably with the help of banks which receive and make payments, provide credit and deal in foreign exchange. They protect importers from the risk of loss on account of exchange rate fluctuations. They issue letter of credit and provide information on the credit worthiness of importers. They also act as referees of their customers. Banks meet the financial needs of small-scale business units which are located in economically backward areas. Farmers and artisans in rural areas can also avail of bank credit for financing their activities. Commercial banks provide many other services to the general public which includes locker facility, issue of travelers cheques and gift cheques, payment of insurance premium, etc.

d) e) f)

g) h) i)

Service activities of banking sector :

Service activities of the banking sector may be categorized as follows: 1. Agency services :

Banks undertake/various agency services for their customers. These are outlined below. a) b) c) d) e) f) g) 2. Collection of cheques, drafts, and bills of exchange on behalf of customers. Collection of dividend and interest warrants of customers. Collection of pension of government employees. Purchase and sale of securities on the instructions of customers. Executing standing orders for payment of rent, electricity bill, insurance premium etc. Acting as correspondent or representative of customers in dealing with other banks. Acting as trustee or executor when so nominated. General Services :

A commercial bank also performs the following services of general utility to the public: a) b) c) d) e) f) Issue of letters of credit, travelers cheques and circular notes. Safe custody of valuables like gold jewellery and important documents in safe deposit vaults (lockers) available on hire. Supply of trade information. Acting as a referee as regards financial status of customers. Acceptance of bills of exchange on behalf of customers. Underwriting loans floated by government and public bodies.

http://www.nios.ac.in/srsec319/319-32.pdf

ORGANISATION PROFILE

ORGANIZATIONAL PROFILE :
HDFC BANK :

About HDFC :
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.

Promoter :
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.

Business focus :
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.

Capital structure :
As on 30th June, 2010 the authorized share capital of the Bank is Rs. 550 cr. The paid-up capital as on said date is Rs. 459,69,07,030/- (45,96,90,703 equity shares of Rs. 10/- each). The HDFC Group holds 23.63 % of the Bank's equity and about 17.05 % of the equity is held by the ADS Depository (in respect of the bank's American Depository Shares (ADS) Issue). 27.45% of the equity is held by Foreign Institutional Investors (FIIs) and the Bank has about 4,33,078 shareholders. 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.

CBoP and Times bank amalgamation :

On May 23, 2008, the amalgamation of Centurion Bank of Punjab with HDFC Bank was formally approved by Reserve Bank of India to complete the statutory and regulatory approval process. As per the scheme of amalgamation, shareholders of CBoP received 1 share of HDFC Bank for every 29 shares of CBoP. The merged entity will have a strong deposit base of around Rs. 1,22,000 cr and net advances of around Rs. 89,000 cr. The balance sheet size of the combined entity would be over Rs. 1,63,000 cr. The amalgamation added significant value to HDFC Bank in terms of increased branch network, geographic reach, and customer base, and a bigger pool of skilled manpower. 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. This was the first merger of two private banks in the New Generation Private Sector Banks. 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.

Distribution network :
HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable network of 1,725 branches spread in 780 cities across India. All branches are linked on an online real-time basis. Customers in over 500 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 have a strong and active member base. The Bank also has 5,016 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.

Management :
Mr. C.M. Vasudev has been appointed as the Chairman of the Bank with effect from 6th July 2010 subject to the approval of the Reserve Bank of India and the shareholders. Mr. Vasudev has been a Director of the Bank since October 2006. A retired IAS officer, Mr. Vasudev has had an illustrious career in the civil services and has held several key positions in India and overseas, including Finance Secretary, Government of India, Executive Director, World Bank and Government nominee on the Boards of many companies in the financial sector. 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.

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 prioritized 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.

Businesses :
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 corporates 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 worldclass service and delivered to 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 MasterCard Maestro debit card as well. The Bank launched its credit card business in late 2001. By March 2010, the bank had a total card base (debit and credit cards) of over 14 million. The Bank is also one of the leading players in the merchant acquiring business with over 90,000 Point-of-sale (POS) terminals for debit / credit cards acceptance at merchant establishments. The Bank is well positioned as a leader in various net based B2C opportunities including a wide range of internet banking services for Fixed Deposits, Loans, Bill Payments, etc. 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, 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.

Ratings :
Credit Rating : The Bank has its deposit programs rated by two rating agencies - Credit Analysis & Research Limited (CARE) and Fitch Ratings India Private Limited. The Bank's Fixed Deposit programme has been rated 'CARE AAA (FD)' [Triple A] by CARE, which represents instruments considered to be "of the best quality, carrying negligible investment risk". CARE has also rated the bank's Certificate of Deposit (CD) programme "PR 1+" which represents "superior capacity for repayment of short term promissory obligations". Fitch Ratings India Pvt. Ltd. (100% subsidiary of Fitch Inc.) has assigned the "AAA ( ind )" rating to the Bank's deposit programme, with the outlook on the rating as "stable". This rating indicates "highest credit quality" where "protection factors are very high" The Bank also has its long term unsecured, subordinated (Tier II) Bonds rated by CARE and Fitch Ratings India Private Limited and its Tier I perpetual Bonds and Upper Tier II Bonds rated by CARE and CRISIL Ltd. CARE has assigned the rating of "CARE AAA" for the subordinated Tier II Bonds while Fitch Ratings India Pvt. Ltd. has assigned the rating "AAA (ind)" with the outlook on the rating as

"stable". CARE has also assigned "CARE AAA [Triple A]" for the Banks Perpetual bond and Upper Tier II bond issues. CRISIL has assigned the rating "AAA / Stable" for the Bank's Perpetual Debt programme and Upper Tier II Bond issue. In each of the cases referred to above, the ratings awarded were the highest assigned by the rating agency for those instruments. Corporate Governance Rating : The bank was one of 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). The rating provides an independent assessment of an entity's current performance and an expectation on its "balanced value creation and corporate governance practices" in future. The bank has been assigned a 'CRISIL GVC Level 1' rating which indicates that the bank's capability with respect to wealth creation for all its stakeholders while adopting sound corporate governance practices is the highest. http://www.hdfcbank.com/aboutus/general/default.htm

PRODUCT OF STUDY : CREDIT CARDS

CREDIT CARDS :

Introduction :
A credit card is a small plastic card issued to users as a system of payment. It allows its holder to buy goods and services based on the holder's promise to pay for these goods and services. The issuer of the card creates a revolving account and grants a line of credit to the consumer (or the user) from which the user can borrow money for payment to a merchant or as a cash advance to the user. A credit card is different from a charge card. A charge card requires the balance to be paid in full each month. In contrast, credit cards allow the consumers a continuing balance of debt, subject to interest being charged. A credit card also differs from a cash card, which can be used like currency by the owner of the card. Most credit cards are issued by banks or credit unions, and are the shape and size specified by the ISO/IEC 7810 standard as ID-1. This is defined as 85.60 53.98 mm (3.370 2.125 in) (33/8 21/8 in) in size. The numbers found on credit cards have a certain amount of internal structure, and share a common numbering scheme. The card number's prefix, called the Bank Identification Number, is the sequence of digits at the beginning of the number that determine the bank to which a credit card number belongs. This is the first six digits for MasterCard and Visa cards. The next nine digits are the individual account number, and the final digit is a validity check code. In addition to the main credit card number, credit cards also carry issue and expiration dates (given to the nearest month), as well as extra codes such as issue numbers and security codes. Not all credit cards have the same sets of extra codes nor do they use the same number of digits.

History of credit cards :

The concept of using a card for purchases was described in 1887 by Edward Bellamy in his utopian novel Looking Backward. Bellamy used the term credit card eleven times in this novel. The modern credit card was the successor of a variety of merchant credit schemes. It was first used in the 1920s, in the United States, specifically to sell fuel to a growing number of automobile owners. In 1938 several companies started to accept each other's cards. Western Union had begun issuing charge cards to its frequent customers in 1921. Some charge cards were printed on paper card stock, but were easily counterfeited. The Charga-Plate was an early predecessor to the credit card and used in the U.S. from the 1930s to the late 1950s. It was a 2" 1" rectangle of sheet

metal, similar to a military dog tag, and embossed with the customer's name, city and state. It held a small paper card for a signature. In recording a purchase, the plate was laid into a recess in the imprinter, with a paper "charge slip" positioned on top of it. The record of the transaction included an impression of the embossed information, made by the imprinter pressing an inked ribbon against the charge slip. Charga-Plate was a trademark of Farrington Manufacturing Co. Charga-Plates was issued by large-scale merchants to their regular customers, much like department store credit cards of today. In some cases, the plates were kept in the issuing store rather than held by customers. When an authorized user made a purchase, a clerk retrieved the plate from the store's files and then processed the purchase. Charga-Plates speeded back-office bookkeeping that was done manually in paper ledgers in each store, before computers. The concept of customers paying different merchants using the same card was implemented in 1950 by Ralph Schneider and Frank McNamara, founders of Diners Club, to consolidate multiple cards. The Diners Club, which was created partially through a merger with Dine and Sign, produced the first "general purpose" charge card, and required the entire bill to be paid with each statement. That was followed by Carte Blanche and in 1958 by American Express which created a worldwide credit card network (although these were initially charge cards that acquired credit card features after BankAmericard demonstrated the feasibility of the concept). However, until 1958, no one had been able to create a working revolving credit financial instrument issued by a third-party bank that was generally accepted by a large number of merchants (as opposed to merchant-issued revolving cards accepted by only a few merchants). A dozen experiments by small American banks had been attempted (and had failed). In September 1958, Bank of America launched the BankAmericard in Fresno, California. BankAmericard became the first successful recognizably modern credit card (although it underwent a troubled gestation during which its creator resigned), and with its overseas affiliates, eventually evolved into the Visa system. In 1966, the ancestor of MasterCard was born when a group of California banks established Master Charge to compete with BankAmericard; it received a significant boost when Citibank merged its proprietary Everything Card (launched in 1967) into Master Charge in 1969. Early credit cards in the U.S., of which BankAmericard was the most prominent example, were mass produced and mass mailed to bank customers who were thought to be good credit risks; that is, they were unsolicited. These mass mailings were known as "drops" in banking terminology, and were outlawed in 1970 due to the financial chaos that they caused, but not before 100 million credit cards had been dropped into the U.S. population. After 1970, only credit card applications could be sent unsolicited in mass mailings.

The fractured nature of the U.S. banking system under the GlassSteagall Act meant that credit cards became an effective way for those who were traveling around the country to move their credit to places where they could not directly use their banking facilities. In 1966 Barclaycard in the UK launched the first credit card outside of the U.S. There are now countless variations on the basic concept of revolving credit for individuals (as issued by banks and honored by a network of financial institutions), including organization-branded credit cards, corporate-user credit cards, store cards and so on. Although credit cards reached very high adoption levels in the US, Canada and the UK in the mid twentieth century, many cultures were more cash-oriented, or developed alternative forms of cash-less payments, such as Carte bleue or the Euro card (Germany, France, Switzerland, and others). In these places, adoption of credit cards was initially much slower. It took until the 1990s to reach anything like the percentage market-penetration levels achieved in the US, Canada, or UK. In some countries, acceptance still remains poor as the use of a credit card system depends on the banking system being perceived as reliable. Japan remains a very cash oriented society, with credit card adoption being limited to only the largest of merchants, although an alternative system based on RFIDs inside cell phones has seen some acceptance. Because of strict regulations regarding banking system overdrafts, some countries, France in particular, were much faster to develop and adopt chip-based credit cards which are now seen as major anti-fraud credit devices. Debit cards and online banking are used more widely than credit cards in some countries. The design of the credit card itself has become a major selling point in recent years. The value of the card to the issuer is often related to the customer's usage of the card, or to the customer's financial worth. This has led to the rise of CoBrand and Affinity cards - where the card design is related to the "affinity" (a university or professional society, for example) leading to higher card usage. In most cases a percentage of the value of the card is returned to the affinity group.

How credit cards work :

Credit cards are issued by a credit card issuer, such as a bank or credit union, after an account has been approved by the credit provider, after which cardholders can use it to make purchases at merchants accepting that card. Merchants often advertise which cards they accept by displaying acceptance marks generally derived from logos or may communicate this orally, as in "Credit cards are fine" (implicitly meaning "major brands"), "We take (brands X, Y, and Z)", or "We don't take credit cards".When a purchase is made, the credit card user agrees to pay the card issuer. The cardholder indicates consent to pay by signing a receipt with a record of the card details and indicating the amount to be paid or by entering a Personal Identification Number (PIN). Also, many merchants now accept verbal authorizations via telephone and electronic authorization using the Internet, known as a Card Not Present transaction (CNP). Electronic verification systems allow merchants to verify in a few seconds that the card is valid and the credit card customer has sufficient credit to cover the purchase, allowing the verification to happen at the time of purchase. The verification is performed using a credit card payment terminal or Point-ofSale (POS) system with a communication link to the merchant's acquiring bank. Data from the card is obtained from a magnetic or chip on the card; the latter system is called Chip and PIN in the United Kingdom and Ireland, and is implemented as an Europay, MasterCard and Visa (EMV) card. For CNP transactions, where the card is not shown (e.g., e-commerce, mail order, and telephone sales), merchants additionally verify that the customer is in physical possession of the card and is the authorized user by asking for additional information such as the security code printed on the back of the card, date of expiry, and billing address. Each month, the credit card user is sent a statement indicating the purchases undertaken with the card, any outstanding fees, and the total amount owed. After receiving the statement, the cardholder may dispute any charges that he or she thinks are incorrect (see 15 U.S.C. 1643, which limits cardholder liability for unauthorized use of a credit card to $50, and the Fair Credit Billing Act for details of the US regulations). Otherwise, the cardholder must pay a defined minimum proportion of the bill by a due date, or may choose to pay a higher amount up to the entire amount owed. The credit issuer charges interest on the amount owed if the balance is not paid in full (typically at a much higher rate than most other forms of debt). In addition, if the credit card user fails to make at least the minimum payment by the due date, the issuer may impose a "late fee" and/or other penalties on the user. To help mitigate this, some financial institutions can arrange for automatic payments to be deducted from the user's bank accounts, thus avoiding such penalties altogether as long as the cardholder has sufficient funds.

Interest charges :

Credit card issuers usually waive interest charges if the balance is paid in full each month, but typically will charge full interest on the entire outstanding balance from the date of each purchase if the total balance is not paid. For example, if a user had a $1,000 transaction and repaid it in full within this grace period, there would be no interest charged. If, however, even $1.00 of the total amount remained unpaid, interest would be charged on the $1,000 from the date of purchase until the payment is received. The precise manner in which interest is charged is usually detailed in a cardholder agreement which may be summarized on the back of the monthly statement. The general calculation formula most financial institutions use to determine the amount of interest to be charged is APR/100 x ADB/365 x number of days revolved. Take the Annual Percentage Rate (APR) and divide by 100 then multiply to the amount of the Average Daily Balance (ADB) divided by 365 and then take this total and multiply by the total number of days the amount revolved before payment was made on the account. Financial institutions refer to interest charged back to the original time of the transaction and up to the time a payment was made, if not in full, as RRFC or Residual Retail Finance Charge. Thus after an amount has revolved and a payment has been made, the user of the card will still receive interest charges on their statement after paying the next statement in full (in fact the statement may only have a charge for interest that collected up until the date the full balance was paid, i.e. when the balance stopped revolving). The credit card may simply serve as a form of revolving credit, or it may become a complicated financial instrument with multiple balance segments each at a different interest rate, possibly with a single umbrella credit limit, or with separate credit limits applicable to the various balance segments. Usually this compartmentalization is the result of special incentive offers from the issuing bank, to encourage transfers from cards of other issuers. In the event that several interest rates apply to various balance segments, payment allocation is generally at the discretion of the issuing bank, and payments will therefore usually be allocated towards the lowest rate balances until paid in full before any money is paid towards higher rate balances. Interest rates can vary considerably from card to card, and the interest rate on a particular card may jump dramatically if the card user is late with a payment on that card or any other credit instrument, or even if the issuing bank decides to raise its revenue.

Grace Periods :
A credit card's grace period is the time the customer has to pay the balance before interest is assessed on the outstanding balance. Grace periods may vary, but usually range from 20 to 50 days depending on the type of credit card and the issuing bank. Some policies allow for reinstatement after certain conditions are met.

Usually, if a customer is late paying the balance, finance charges will be calculated and the grace period does not apply. Finance charges incurred depend on the grace period and balance; with most credit cards there is no grace period if there is any outstanding balance from the previous billing cycle or statement (i.e. interest is applied on both the previous balance and new transactions). However, there are some credit cards that will only apply finance charge on the previous or old balance, excluding new transactions.

Parties involved :
Cardholder: The holder of the card used to make a purchase; the consumer. Card-issuing bank: The financial institution or other organization that issued the credit card to the cardholder. This bank bills the consumer for repayment and bears the risk that the card is used fraudulently. American Express and Discover were previously the only card-issuing banks for their respective brands, but as of 2007, this is no longer the case. Cards issued by banks to cardholders in a different country are known as offshore credit cards. Merchant: The individual or business accepting credit card payments for products or services sold to the cardholder. Acquiring bank: The financial institution accepting payment for the products or services on behalf of the merchant. Independent sales organization: Resellers (to merchants) of the services of the acquiring bank. Merchant account: This could refer to the acquiring bank or the independent sales organization, but in general is the organization that the merchant deals with. Credit Card association: An association of card-issuing banks such as Visa, MasterCard, Discover, American Express, etc. that set transaction terms for merchants, card-issuing banks, and acquiring banks. Transaction network: The system that implements the mechanics of the electronic transactions. May be operated by an independent company, and one company may operate multiple networks. Affinity partner: Some institutions lend their names to an issuer to attract customers that have a strong relationship with that institution, and get paid a fee or a percentage of the balance for each card issued using their

name. Examples of typical affinity partners are sports teams, universities, charities, professional organizations, and major retailers.

Transaction steps :
Authorization: The cardholder pays for the purchase and the merchant submits the transaction to the acquirer (acquiring bank). The acquirer verifies the credit card number, the transaction type and the amount with the issuer (Card-issuing bank) and reserves that amount of the cardholder's credit limit for the merchant. An authorization will generate an approval code, which the merchant stores with the transaction. Batching: Authorized transactions are stored in "batches", which are sent to the acquirer. Batches are typically submitted once per day at the end of the business day. If a transaction is not submitted in the batch, the authorization will stay valid for a period determined by the issuer, after which the held amount will be returned back to the cardholder's available credit (see authorization hold). Some transactions may be submitted in the batch without prior authorizations; these are either transactions falling under the merchant's floor limit or ones where the authorization was unsuccessful but the merchant still attempts to force the transaction through. (Such may be the case when the cardholder is not present but owes the merchant additional money, such as extending a hotel stay or car rental.) Clearing and Settlement: The acquirer sends the batch transactions through the credit card association, which debits the issuers for payment and credits the acquirer. Essentially, the issuer pays the acquirer for the transaction. Funding: Once the acquirer has been paid, the acquirer pays the merchant. The merchant receives the amount totaling the funds in the batch minus either the "discount rate," "mid-qualified rate", or "non-qualified rate" which are tiers of fees the merchant pays the acquirer for processing the transactions. Chargebacks:

A chargeback is an event in which money in a merchant account is held due to a dispute relating to the transaction. Chargebacks are typically initiated by the cardholder. In the event of a chargeback, the issuer returns the transaction to the acquirer for resolution. The acquirer then forwards the chargeback to the merchant, who must either accept the chargeback or contest it. A merchant is responsible for the chargeback only if she has violated the card acceptance procedures as per the merchant agreement with card acquirers.

Features :
As well as convenient, accessible credit, credit cards offer consumers an easy way to track expenses, which is necessary for both monitoring personal expenditures and the tracking of work-related expenses for taxation and reimbursement purposes. Credit cards are accepted worldwide, and are available with a large variety of credit limits, repayment arrangement, and other perks (such as rewards schemes in which points earned by purchasing goods with the card can be redeemed for further goods and services or credit card cash back). Some countries, such as the United States, the United Kingdom, and France, limit the amount for which a consumer can be held liable due to fraudulent transactions as a result of a consumer's credit card being lost or stolen.

Security problems and solutions :

Credit card security relies on the physical security of the plastic card as well as the privacy of the credit card number. Therefore, whenever a person other than the card owner has access to the card or its number, security is potentially compromised. Once, merchants would often accept credit card numbers without additional verification for mail order purchases. It's now common practice to only ship to confirmed addresses as a security measure to minimize fraudulent purchases. Some merchants will accept a credit card number for in-store purchases, whereupon access to the number allows easy fraud, but many require the card itself to be present, and require a signature. A lost or stolen card can be cancelled, and if this is done quickly, will greatly limit the fraud that can take place in this way. For internet purchases, there is sometimes the same level of security as for mail order (number only) hence requiring only that the fraudster take care about collecting the goods, but often there are additional measures. European banks can require a cardholder's security PIN be entered for in-person purchases with the card. The PCI DSS is the security standard issued by The PCI SSC (Payment Card Industry Security Standards Council). This data security standard is used by acquiring banks to impose cardholder data security measures upon their merchants.

A smart card combining credit card and debit properties. The 3 by 5 mm security chip embedded in the card is shown enlarged in the inset. The contact pads on the card enable electronic access to the chip.

The low security of the credit card system presents countless opportunities for fraud. This opportunity has created a huge black market in stolen credit card numbers, which are generally used quickly before the cards are reported stolen. The goal of the credit card companies is not to eliminate fraud, but to "reduce it to manageable levels". This implies that high-cost low-return fraud prevention measures will not be used if their cost exceeds the potential gains from fraud reduction - as would be expected from organizations whose goal is profit maximization. Internet fraud may be by claiming a chargeback which is not justified ("friendly fraud"), or carried out by the use of credit card information which can be stolen in many ways, the simplest being copying information from retailers, either online or offline. Despite efforts to improve security for remote purchases using credit cards, security breaches are usually the result of poor practice by merchants. For example, a website that safely uses SSL to encrypt card data from a client may then email the data, unencrypted, from the web server to the merchant; or the merchant may store unencrypted details in a way that allows them to be accessed over the Internet or by a rogue employee; unencrypted card details are always a security risk. Even encryption data may be cracked. Controlled Payment Numbers which are used by various banks such as Citibank (Virtual Account Numbers), Discover (Secure Online Account Numbers) Bank of America (Shop Safe), 5 banks using eCarte Bleue and CMB's Virtualis in France, and Swedbank of Sweden's eKort product are another option for protecting against credit card fraud. These are generally one-time use numbers that front one's actual account (debit/credit) number, and are generated as one shop online. They can be valid for a relatively short time, for the actual amount of the purchase, or for a price limit set by the user. Their use can be limited to one merchant. If the number given to the merchant is compromised, it will be rejected if an attempt is made to use it again. A similar system of controls can be used on physical cards. For example if a consumer has a Chip and PIN (EMV) enabled card, the card can be limited so that it be used only at point of sale locations (i.e. restricted from being used on-

line) and only in a given territory (i.e. only for use in Canada). This technology provides the option for banks to support many other controls too that can be turned on and off and varied by the credit card owner in real time as circumstances change (i.e., they can change temporal, numerical, geographical and many other parameters on their primary and subsidiary cards). Apart from the obvious benefits of such controls: from a security perspective this means that a customer can have a Chip and PIN card secured for the real world, and limited for use in the home country. In this eventuality a thief stealing the details will be prevented from using these overseas in non chip and pin (EMV) countries. Similarly the real card can be restricted from use on-line so that stolen details will be declined if this tried. Then when card users shop online they can use virtual account numbers. In both circumstances an alert system can be built in notifying a user that a fraudulent attempt has been made which breaches their parameters, and can provide data on this in real time. This is the optimal method of security for credit cards, as it provides very high levels of security, control and awareness in the real and virtual world. Furthermore it requires no changes for merchants at all and is attractive to users, merchants and banks, as it not only detects fraud but prevents it. Additionally, there are security features present on the physical card itself in order to prevent counterfeiting. For example, most modern credit cards have a watermark that will fluoresce under ultraviolet light. A Visa card has a letter V superimposed over the regular Visa logo and a MasterCard has the letters MC across the front of the card. Older Visa cards have a bald eagle or dove across the front. In the aforementioned cases, the security features are only visible under ultraviolet light and are invisible in normal light. Similar security features are present in paper and certain ID cards in the United States, as well. The Federal Bureau of Investigation and U.S. Postal Inspection Service are responsible for prosecuting criminals who engage in credit card fraud in the United States, but they do not have the resources to pursue all criminals. In general, federal officials only prosecute cases exceeding US$5,000. Three improvements to card security have been introduced to the more common credit card networks but none has proven to help reduce credit card fraud so far. First, the on-line verification system used by merchants is being enhanced to require a 4 digit Personal Identification Number (PIN) known only to the card holder. Second, the cards themselves are being replaced with similar-looking tamperresistant smart cards which are intended to make forgery more difficult. The majority of smart card (IC card) based credit cards comply with the EMV (Europay MasterCard Visa) standard. Third, an additional 3 or 4 digits Card Security Code (CSC) is now present on the back of most cards, for use in card not present transactions. Stakeholders at all levels in electronic payment have recognized the need to develop consistent global standards for security that account for and integrate both current and emerging security technologies. They have begun to address these needs through organizations such as PCI DSS and the Secure POS Vendor Alliance.

Credit card security code :

The Card Security Code (CSC), sometimes called Card Verification Data (CVD), Card Verification Value (CVV or CVV2), Card Verification Value Code (CVVC), Card Verification Code (CVC or CVC2), Verification Code (VCode or V Code), or Card Code Verification (CCV) are different terms for security features for card transactions, providing increased protection against credit card fraud. There are several types of security codes: 1. The first code, called CVC1 or CVV1, is encoded on the magnetic stripe of the card and used for transactions in person. The purpose of the CVC1 or CVV1 is to ensure the data stored on the magnetic stripe of the card is valid and was generated by the issuing bank. This value is submitted as part of transactions and is verified by the issuing bank. The second code, and the most cited, is CVV2 or CVC2. This CSC (also known as a CCID or Credit Card ID) is often asked for by merchants for them to secure CNP transactions occurring over the Internet, by mail, fax or over the phone. Contact less card and chip cards may supply their own codes generated electronically, such as iCVV or Dynamic CVV.

2.

3.

These codes should not be confused with the standard card account number appearing in embossed or printed digits. (The standard card number undergoes a separate validation algorithm called the Luhn algorithm which serves to determine whether a given card's number is appropriate.) These codes should also not be confused with a card's PIN or passwords associated with MasterCard Secure Code or Verified by Visa. These codes are not printed or embedded in the card but are manually entered at the time of transaction.

Costs :
Credit card issuers (banks) have several types of costs: Interest expenses: Banks generally borrow the money they then lend to their customers. As they receive very low-interest loans from other firms, they may borrow as much as their customers require, while lending their capital to other borrowers at higher rates. If the card issuer charges 15% on money lent to users, and it costs 5% to borrow the money to lend, and the balance sits with the cardholder for a year, the

issuer earns 10% on the loan. This 10% difference is the "net interest spread" and the 5% is the "interest expense". Operating costs: This is the cost of running the credit card portfolio, including everything from paying the executives who run the company to printing the plastics, to mailing the statements, to running the computers that keep track of every cardholder's balance, to taking the many phone calls which cardholders place to their issuer, to protecting the customers from fraud rings. Depending on the issuer, marketing programs are also a significant portion of expenses. Charge offs: When a consumer becomes severely delinquent on a debt (often at the point of six months without payment), the creditor may declare the debt to be a chargeoff. It will then be listed as such on the debtor's credit bureau reports (Equifax, for instance, lists "R9" in the "status" column to denote a charge-off.) The item will include relevant dates, and the amount of the bad debt. A charge-off is considered to be "written off as uncollectible." To banks, bad debts and even fraud are simply part of the cost of doing business. However, the debt is still legally valid, and the creditor can attempt to collect the full amount for the time periods permitted under state law, which is usually 3 to 7 years. This includes contacts from internal collections staff, or more likely, an outside collection agency. If the amount is large (generally over $1500$2000), there is the possibility of a lawsuit or arbitration. In the United States, as the charge off number climbs or becomes erratic, officials from the Federal Reserve take a close look at the finances of the bank and may impose various operating strictures on the bank, and in the most extreme cases, may close the bank entirely. Rewards: Many credit card customers receive rewards, such as frequent flyer points, gift certificates, or cash back as an incentive to use the card. Rewards are generally tied to purchasing an item or service on the card, which may or may not include balance transfers, cash advances, or other special uses. Depending on the type of card, rewards will generally cost the issuer between 0.25% and 2.0% of the spread. Networks such as Visa or MasterCard have increased their fees to allow issuers to fund their rewards system. Some issuers discourage redemption by forcing the cardholder to call customer service for rewards. On their servicing website, redeeming awards is usually a feature that is very well hidden by the issuers. Others encourage redemption for lower cost merchandise; instead of an

airline ticket, which is very expensive to an issuer, the cardholder may be encouraged to redeem for a gift certificate instead. With a fractured and competitive environment, rewards points cut dramatically into an issuer's bottom line, and rewards points and related incentives must be carefully managed to ensure a profitable portfolio. Unlike unused gift cards, in whose case the breakage in certain US states goes to the state's treasury, unredeemed credit card points are retained by the issuer. Fraud: In relative numbers the values lost in bank card fraud are minor, calculated in 2006 at 7 cents per 100 dollars worth of transactions (7 basis points). In 2004, in the UK, the cost of fraud was over 500 million. When a card is stolen, or an unauthorized duplicate made, most card issuers will refund some or all of the charges that the customer has received for things they did not buy. These refunds will, in some cases, be at the expense of the merchant, especially in mail order cases where the merchant cannot claim sight of the card. In several countries, merchants will lose the money if no ID card was asked for, therefore merchants usually require ID card in these countries. Credit card companies generally guarantee the merchant will be paid on legitimate transactions regardless of whether the consumer pays their credit card bill. Most banking services have their own credit card services that handle fraud cases and monitor for any possible attempt at fraud. Employees that are specialized in doing fraud monitoring and investigation are often placed in Risk Management, Fraud and Authorization, or Cards and Unsecured Business. Fraud monitoring emphasizes minimizing fraud losses while making an attempt to track down those responsible and contain the situation. Credit card fraud is a major white collar crime that has been around for many decades, even with the advent of the chip based card (EMV) that was put into practice in some countries to prevent cases such as these. Even with the implementation of such measures, credit card fraud continues to be a problem. Promotion: Promotional purchase is any purchase on which separate terms and conditions are set on each individual transaction unlike a standard purchase where the terms are set on the cardholders account record and their pricing strategy. All promotional purchases that post to a particular account will be carrying its own balance called as Promotional Balance. Revenues: Offsetting costs are the following revenues: Interchange fee:

In addition to fees paid by the card holder, merchants must also pay interchange fees to the card-issuing bank and the card association. For a typical credit card issuer, interchange fee revenues may represent about a quarter of total revenues. These fees are typically from 1 to 6 percent of each sale, but will vary not only from merchant to merchant (large merchants can negotiate lower rates), but also from card to card, with business cards and rewards cards generally costing the merchants more to process. The interchange fee that applies to a particular transaction is also affected by many other variables including: the type of merchant, the merchant's total card sales volume, the merchant's average transaction amount, whether the cards were physically present, how the information required for the transaction was received, the specific type of card, when the transaction was settled, and the authorized and settled transaction amounts. In some cases, merchants add a surcharge to the credit cards to cover the interchange fee, encouraging their customers to instead use cash, debit cards, or even cheques. Interest on outstanding balances: Interest charges vary widely from card issuer to card issuer. Often, there are "teaser" rates in effect for initial periods of time (as low as zero percent for, say, six months), whereas regular rates can be as high as 40 percent. In the U.S. there is no federal limit on the interest or late fees credit card issuers can charge; the interest rates are set by the states, with some states such as South Dakota, having no ceiling on interest rates and fees, inviting some banks to establish their credit card operations there. Other states, for example Delaware, have very weak usury laws. The teaser rate no longer applies if the customer doesn't pay their bills on time, and is replaced by a penalty interest rate (for example, 23.99%) that applies retroactively. Fees charged to customers: The major fees are for: 1. Late payments or overdue payments 2. Charges that result in exceeding the credit limit on the card (whether done deliberately or by mistake), called over limit fees 3. Returned cheque fees or payment processing fees (e.g. phone payment fee) 4. Cash advances and convenience cheques (often 3% of the amount) 5. Transactions in a foreign currency (as much as 3% of the amount). A few financial institutions do not charge a fee for this.

6. Membership fees (annual or monthly), sometimes a percentage of the credit limit. 7. Exchange rate loading fees (sometimes these might not be reported on the customer's statement, even when applied). The variation of exchange rates applied by different credit cards can be very substantial, as much as 10% according to a Lonely Planet report in 2009.

Over limit charges :

Consumers who keep their account in good order by always staying within their credit limit and always making at least the minimum monthly payment will see interest as the biggest expense from their card provider. Those who are not so careful and regularly surpass their credit limit or are late in making payments are exposed to multiple charges that were typically as high as 25 - 35 until a ruling from the Office that they would presume charges over 12 to be unfair which led the majority of card providers to reduce their fees to exactly that level. US The Credit CARD Protection Act of 2009, initiated during the term of President G W Bush, and signed into law by President Obama, requires that consumers "optin" to over-limit charges. Some card issuers have therefore commenced solicitations requesting customers to opt in to over limit fees, presenting this as a benefit as it may avoid the possibility of a future transaction being declined. Other issuers have simply discontinued the practice of charging over limit fees. Whether a customer opts in to the over limit fee or not, banks will in practice have discretion as to whether they choose to authorize transactions above the credit limit or not. Of course, any approved over limit transactions will only result in an over limit fee for those customers who have opted in to the fee. This legislation took effect on February 22, 2010. UK The higher level of fees originally charged were claimed to be designed to recoup the costs of the card operator's overall business and to ensure that the credit card business as a whole generated a profit, rather than simply recovering the cost to the provider of the limit breach which has been estimated as typically between 3-4. Profiting from a customer's mistakes is arguably not permitted under UK common law, if the charges constitute penalties for breach of contract, or under the Unfair Terms In Consumer Regulations 1999. Subsequent rulings in respect of personal current accounts suggest that the argument that these charges are penalties for breach of contract is weak, and given the OFT's ruling it seems unlikely that any further test case will take place.

Whilst the law remains in the balance, many consumers have made claims against their credit cards providers for the charges that they have incurred, plus interest that they would have earned had the money not been deducted from their account. It is likely that claims for amounts charged in excess of 12 will succeed, but claims for charges at the OFT's 12 threshold level are more contentious.

http://en.wikipedia.org/wiki/Credit_card http://en.wikipedia.org/wiki/Card_security_code

http://en.wikipedia.org/wiki/Credit_card_fraud

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Get an HDFC Bank International Gold Card and get introduced to a whole new world of privileges.

Features and Benefits :

Attractive Reward Points : Your HDFC Bank Gold Credit Card is now 50% more rewarding! Earn 1 Reward Point for every Rs.150 for spends up to Rs. 10,000 per statement cycle. For incremental spends above Rs. 10,000 in a statement cycle, earn 50% more Reward Points i.e. 1.5 Reward Points per Rs. 150. Rewards points redemption : After earning all those reward points on your HDFC Bank Gold Credit Card, redeem them for exciting gifts and services! You could even convert them to airline miles with India's leading airlines through the MyRewards programme. Worldwide acceptance : Accepted at over 23 million Merchant Establishments around the world, including 110,000 Merchant Establishments in India. Revolving credit facility : Pay a minimum amount, which is 5% (subject to a minimum amount of Rs.200) of your total bill amount or any higher amount whichever is convenient and carry forward the balance to a better financial month. For this facility you pay a nominal charge of just 3.25% per month (39.0% annually). Free Add-on card : You can share these wonderful features with your loved ones too - we offer the facility of an add-on card for your spouse, children or parents. Allow us to offer add-on cards to you FREE OF COST with our compliments. Interest free credit facility :

Avail of up to 50 days of interest free period from the date of purchase (subject to the submission of the charge by the Merchant). Zero liability on lost card : If you happen to lose your Card, report it immediately to our 24-hour call centre. After reporting the loss, you carry zero liability on any fraudulent transactions on your card. Annual fee Rs.199 Credit Card Limit Rs.30000 to Rs.100000

Womans Gold Credit Card :

A unique offering for todays Woman, with all conveniences of a Gold Credit Card.

Features and Benefits :

Attractive rewards programme : Your HDFC Bank Woman's Gold Credit Card is now 50% more rewarding! Earn 1 Reward Point for every Rs.150 for spends up to Rs. 10,000 per statement cycle. For incremental spends above Rs. 10,000 in a statement cycle, earn 50% more Reward Points i.e. 1.5 Reward Points per Rs. 150. Wide choice of redemption : MyRewards gives you an array of redemption opportunities for your Points From microwaves to refrigerators, from Barbie dolls to latest Fashion labels, we take pride in giving you one of the widest options for getting rewarded! You can also redeem your accumulated reward points for air miles on leading airlines like Jet Airways, Air India, Kingfisher Airlines .

Revolving credit facility : Pay a minimum amount, which is 5% (subject to a minimum amount of Rs.200) of your total bill amount or any higher amount whichever is convenient and carry forward the balance to a better financial month. For this facility you pay a nominal charge of just 3.25% per month (39% annually). Zero liability on lost card : If you happen to lose your Card, report it immediately to our 24-hour call centre. After reporting the loss, you carry zero liability on any fraudulent transactions on your card. Interest free credit facility : Avail of up to 50 days of interest free period from the date of purchase (subject to the submission of the charge by the Merchant). Worldwide acceptance : Accepted at over 23 million merchant establishments around the world, including 110,000 merchant establishments in India. Annual fee Rs.199 Credit Card Limit Rs.30000 to Rs.100000

Business Gold Credit Card :

Welcome to the world of exclusive privileges and world class services. The HDFC Bank International Business Gold Card is designed to add value to your business, while keeping in mind the conveniences and lifestyle benefits for BUSINESS OWNERS and the SELF EMPLOYED community specifically.

Features and Benefits :

Higher Credit limit :

Get up to Rs.10 lacs as credit limit on the card basis the company / business financials. Attractive Business Savings : Save on your business related spends with our unique features and extensive partner tie-ups. These smart features include 1% Cashback on Air spends * Now buy domestic air tickets through domestic airline websites and enjoy 1% cashback 1% Cashback on Utility Bill Payments * Enjoy 1% cashback on utility bill payments (e.g. Electricity, Phone, Mobile etc.) Petro Surcharge Waiver * Drive the extra mile with the Business Gold Card. Enjoy full waiver of the fuel surcharge across all fuel pumps. Surcharge waiver on Rail tickets * Enjoy surcharge waiver on Rail ticket bookings done through www.irctc.co.in Business Savings Indicator **

Spend category Air ticket

Estimated Annual Expenses 6 Air tickets @ Rs.5000 per ticket (Total Rs.30000) Rs.40000

HDFC Bank Business Gold Card Offer 1% Cashback * 1% Cashback * Surcharge waiver * Surcharge waiver

Business Savings Rs. 300

Utility Bill Payments (e.g. Electricity Bill, Telephone Bill etc.)

400

Rail ticket booked 6 Rail tickets @ throughwww.irctc.co.in Rs.1000 per ticket (Total Rs.6000) Petrol Total Rs.48000 Rs. 124000

108

1200 Rs.2008

*subject to minimum statement balance of Rs.7500/- and would get credited in the next statement. ** The above indicator is based on hypothetical expense estimates.

Revolving credit facility :

Pay a minimum amount, which is 5% (subject to a minimum amount of Rs.200) of your total bill amount or any higher amount whichever is convenient and carry forward the balance to a better financial month. For this facility you pay a nominal charge of just 3.25% per month (39.0% annually). Interest free credit facility : Avail of up to 50 days of interest free period from the date of purchase (subject to the submission of the charge by the Merchant). Worldwide acceptance : Accepted at over 23 million Merchant Establishments around the world, including 110,000 Merchant Establishments in India. Cash at your fingertips : In a situation where you need cash, just step into any one of our ATMs or MasterCard Member ATMs and withdraw cash upto 20% of your credit limit at a very nominal charge. Zero liability on lost card : If you happen to lose your Card, report it immediately to our 24-hour call centre. After reporting the loss, you carry zero liability on any fraudulent transactions on your card.
w.e.f. 1st July 2009, No Reward Point would get accrued on existing and new cards but enjoy cashback feature as described under Business Savings program above.

Annual fee Rs.199 Credit Card Limit Rs.30000 to Rs.100000

Titanium Credit Card :

Convenience and savings with fuel surcharge waiver across all fuel stations.

Features and Benefits :

Titanium Rewards :

Your HDFC Bank Titanium Credit Card is now 50% more rewarding! Earn 2 Reward Points for every Rs.150 for spends up to Rs. 15,000 per statement cycle. For incremental spends above Rs. 15,000 in a statement cycle, earn 50% more Reward Points i.e. 3 Reward Points per Rs. 150. Zero petrol surcharge : Earn while you spend on your fuel !!! As a HDFC Bank Titanium Card customer, you enjoy not only a full waiver of the fuel surcharge** that would be normally applicable otherwise, you also get the benefit of earning reward points on these spends !! Zero liability on lost card : If you happen to lose your Card, report it immediately to our 24-hour call centre. After reporting the loss, you carry zero liability on any fraudulent transactions on your card. Interest free credit facility : Avail of up to 50 days of interest free period from the date of purchase (subject to the submission of the charge by the Merchant). Revolving Credit Facility : You can enjoy the Revolving Credit Facility of the Titanium Credit Card at an interest rate of 3.15% per month. Annual fee Rs.249 Credit Card Limit Rs.75000 to Rs.150000

Platinum Plus Chip Credit Card :

Platinum Plus Credit Card with Chip Technology for enhanced security At HDFC Bank, we understand your need for safe and secure transactions. The HDFC Bank Platinum Plus Credit Card with Card Secure is one such solution. Card Secure is an additional feature that makes all your Credit Card transactions more secure, convenient and rewarding! Let's find out how:

Features and Benefits :

Safe and secure transactions : The Chip Card processes your data with unparalleled security and is virtually impossible to copy or tamper with. It also protects your card against counterfeiting and skimming. Online Security : Online transactions are authenticated with an additional password for enhanced security through Verified by VISA 0% Fuel surcharge : You can now fuel up as and when you want, without worrying about the surcharge. Enjoy complete freedom from fuel surcharge when you purchase fuel between Rs. 400 and Rs. 5000 with your Platinum Plus Credit Card. Attractive Reward Points : Your HDFC Bank Platinum Plus Chip Credit Card is now 100% more rewarding! Earn 2 Reward Points for every Rs.150 for spends up to Rs. 20,000 per statement cycle. For incremental spends above Rs. 20,000 in a statement cycle, earn 100% more Reward Points i.e. 4 Reward Points per Rs. 150. Zero liability on lost card : If you happen to lose your Card, report it immediately to our 24-hour call centre. After reporting the loss, you carry zero liability for any fraudulent transactions on your Card. Interest free credit facility : Avail of up to 50 days of interest free period from the date of purchase (subject to the submission of the charge by the Merchant). Revolving Credit Facility : You can enjoy the Revolving Credit Facility of the Platinum Plus Credit Card at an interest rate of 3.15% per month. Free Add-on Card : You can share these wonderful features with your loved ones too! We offer upto

3 life time free add-on cards to your spouse, children (above 18 years of age), parents, brother or sister. Utility bills through your credit card : Register your Platinum Plus Credit Card with SmartPay, HDFC Bank's Utility Bill payment service. Ensure that all your utility bills are paid on time, without any hassle! Annual fee Rs.399 Credit Card Limit Rs.100000 to Rs.300000

Business Platinum Credit Card :

The HDFC Bank Business Platinum Card is a premium Business Card that helps you SAVE on your Business expenses, while keeping in mind your affluent lifestyle. To know more about the features, services and how you can benefit from the HDFC Bank Business Platinum Card, read on.

Features and Benefits :

Clipper Lounge Access : Get access to Airport lounges at various Airports in India with your MasterCard Business Platinum credit card - a unique offer from MasterCard. Higher Credit limit : Get up to Rs.20 lacs as credit limit on the card basis the company / business financials. Attractive Business Savings :

Save on your business related spends with our unique features and extensive partner tie-ups. These smart features include 1% Cashback on Air spends * Now buy air tickets through domestic airline websites and enjoy 1% cash back 1% Cashback on Utility Bill Payments * Enjoy 1% cashback on utility bill payments (e.g. Electricity, Phone, Mobile etc.) Petro Surcharge Waiver Drive the extra mile with the Business Platinum Card. Enjoy full waiver of the fuel surcharge across all fuel pumps in India (for transactions between Rs.400 Rs.5000). Surcharge waiver on Rail tickets * Enjoy surcharge waiver on Rail ticket bookings done through www.irctc.co.in

Business Savings Indicator ** Estimated Annual Expenses Rs.50,000 (10 Air tickets @ Rs.5000 per ticket ) Rs.2,40,000 HDFC Bank Business Business Card Savings Rs. Offer 1% Cashback * 500

Spend category Air ticket

Utility Bill Payments (e.g. Electricity Bill, Telephone Bill etc.)

1% Cashback *

2,400

Rail ticket booked Rs.10,000 through (10 Rail tickets @ www.irctc.co.in Rs.1000 per ticket.) Petrol Total Rs.60,000 Rs.3,60,000

Surcharge waiver * Surcharge waiver

180

1,500 Rs.4,580

*subject to minimum statement balance of Rs.7500/- and would get credited in the next statement. ** The above indicator is based on hypothetical expense estimates.

Revolving credit facility : Pay a minimum amount, which is 5% (subject to a minimum amount of Rs.200) of your total bill amount or any higher amount whichever is convenient and carry

forward the balance to a better financial month. For this facility you pay a nominal charge of just 3.15% per month (37.8% annually). Interest free credit facility : Avail of up to 50 days of interest free period from the date of purchase (subject to the submission of the charge by the Merchant). Worldwide acceptance : Accepted at over 23 million Merchant Establishments around the world, including 110,000 Merchant Establishments in India. Cash at your fingertips : In a situation where you need cash, just step into any one of our ATMs or MasterCard Member ATMs and withdraw cash upto 30% of your credit limit at a very nominal charge. Zero liability on lost card : If you happen to lose your Card, report it immediately to our 24-hour call centre. After reporting the loss, you carry zero liability on any fraudulent transactions on your card. Annual fee Rs.399 Credit Card Limit Rs.100000 to Rs.300000

Visa Signature Chip Credit Card :

Visa Signature Credit Card with Chip Technology for enhanced security! At HDFC Bank, we understand your need for safe and secure transactions. The HDFC Bank Visa Signature Credit Card with Card Secure is one such solution. Card Secure is an additional feature that makes all your Credit Card transactions more secure, convenient and rewarding! Let's find out how:

Features and Benefits :

Safe and secure transactions : The Chip Card processes your data with unparalleled security and is virtually impossible to copy or tamper with. It also protects your card against counterfeiting and skimming. Online Security : Online transactions are authenticated with an additional password for enhanced security through Verified by VISA. Signature Access : Don't let airport transfers wear you out. HDFC Bank Visa Signature Credit card entitles you a Priority pass that provides you access to exclusive airport lounges across the world. Priority Pass is the world's largest independent airport lounge program, which gives the cardholder access to more than 500 airport lounges in more than 275 cities worldwide. Priority Pass is Priced at Rs.500/annum. Signature Rewards : What does one reward a connoisseur for? We reward them for their passion, refinement, taste and experience. The rewards range from exotic to interesting to measurable. All yours with a powerful Rewards Program. Earn 2 Reward Points for every Rs.150 spent on your card and double Reward Points (2 extra points) for every Rs.150 spent above Rs.15000 per statement cycle*. Experience the power of the HDFC Bank Visa Signature Credit Card. Experience the delights. *Double Reward Points on incremental spends above Rs.15,000 per statement cycle is valid only till 31st August 2010. From 1st September 2010, earn 200% more Reward Points (6 Reward Points per Rs.150) on incremental spends above Rs.35,000 per statement cycle. Signature Benefits : Superiority of HDFC Bank Visa Signature Credit Card is evident even in everyday use. You also enjoy an interest free period upto 50 days, the lowest interest rate of 3.05% on revolving credit facility (36.6% annually)# and petrol surcharge waiver of 2.5% across all petrol pumps in the country. Enjoy the world at your fingertips. Zero liability on lost card :

If you happen to lose your Card, report it immediately to our 24-hour call centre. After reporting the loss, you carry zero liability on any fraudulent transactions on your card. Annual fee Rs.499 Credit Card Limit Rs.100000 to Rs.300000

World Master Credit Card :

HDFC Bank presents the World MasterCard Credit Card - a very premium offering for the truly elite. A card with tailor-made premium privileges that complement a discerning lifestyle. Presenting the HDFC Bank World MasterCard Credit Card.

Features and Benefits :

World Luxury : HDFC Bank World Master Card entitles you to an exclusive "Taj Epicure" membership. Indulge yourself in the hospitality of Taj hotels and resorts world wide. And there's more! You can now enjoy the fine culinary delights of the Taj and enjoy a discount on all your visits through Taj Epicure membership. Taj Epicure Membership is priced at Rs.2500/annum. World Rewards : What does one reward a connoisseur for ? We reward them for their passion, refinement, taste and experience. The rewards range from exotic to interesting to measurable - all yours with a powerful Rewards Program! Earn 2 Reward Points per Rs.150 spent. Earn double (2 extra points) per Rs.150 spent on Departmental Store, Super Markets & International spends.

World Benefits : Superiority of HDFC Bank World MasterCard Credit Card is evident even in everyday use.You also enjoy an interest free period upto 50 days, the lowest interest rate of 3.05% on revolving credit facility (36.6% annually) # and petrol surcharge waiver of 2.5% across all petrol pumps in the country. Enjoy the world at your fingertips. Zero liability on lost card : If you happen to lose your Card, report it immediately to our 24-hour call centre. After reporting the loss, you carry zero liability on any fraudulent transactions on your card. Should you need any more information or assistance on the world credit card our customer care representatives are available round-the-clock for your assistance. Come experience the world of many contented moments. Annual fee Rs.499 Credit Card Limit Rs.100000 to Rs.300000

In order to apply for a HDFC bank credit card, a customer need not necessarily hold an account with the bank. Prospective customers can apply for the banks credit card through the open market. Before issuing the credit card the Average Quarterly Balance (AQB) of the prospective customer is expected to be Rs.20000.

Gold/ womans Gold/ Business Gold

1st year fee waiver condition

Rs.5000 retail spends in 1st 3 months from the card setup date

Renewal fee (2nd year onwards) waiver condition

Rs.15000 retail spends in 12 months from card renewal date

Titanium Spend condition for waiver of annual charges

1s year fee waiver condition

Rs.10000 retail spends in 1st 3 months from the card setup date

Renewal fee (2nd year onwards) waiver condition

Rs.30000 retail spends in 12 months from card renewal date

Platinum Plus Chip Card/ Business Platinum/ Visa Signature Chip Card/ World Master Card

1st year fee waiver condition

Rs.15000 retail spends in 1st 3 months from the card setup date

Renewal fee (2nd year onwards) waiver condition

Rs.50000 retail spends in 12 months from the card renewal date

http://www.hdfcbank.com/personal/cards/credit_landing.htm

DATA COLLECTION PROCEDURE

DATA COLLECTION PROCEDURE :

Collection of data is the preliminary step in the inquiry. After the information is collected, it must be analyzed properly to bring out the important features. This needs arranging of data according to certain common features. This leads to classification, tabulation and graphical presentation. Utmost care must be taken while collecting data because data constitute the foundation on which the super structure of statistical analysis is built. The results obtained from the analysis are properly interpreted and policy decisions are taken. Hence, if data is inaccurate and inadequate, the whole analysis may be faulty and the decisions taken misleading. To avoid this the data must be collected accurately. Depending on the source, statistical data are classified under two categories :

Primary Data :

Primary data is the information collected during the course of an experiment during experimental research. It can also be obtained through observation or through direct communication, with the person associated with the selected subject, by performing surveys or descriptive research. There are several methods of collecting primary data. These are as follows : a. Observation method : The observation method is the commonly used method in social sciences. In this method, instead of questioning the respondent, the researcher observes the subject and records relevant behavior. Observation may be defined as a systematic viewing of a specific phenomenon in its proper setting for the specific purpose of gathering data for a particular study. Usually one observes the current happenings, but past happenings can be observed by inference i.e. by looking at the results of such past phenomenon. Observation is both a physical and mental activity. It is selective and purposive. b. Interview method : In every field of research the interview method is used very extensively. In interview, a social scientist or his representative for the purpose, meet individuals to integrate them about various things. An interview is a direct method of enquiry. The subject of interview, however, is not to collect superficial details about the interviewee, but is rather to probe into the inner life of the interviewee. Hence, the interview method is a direct as well as depth study. c. Questionnaires and Schedules : A questionnaire method is that method in which a number of printed questions are used for collecting data. This list of questions is sent by mail to respondents. After filling up the questionnaire they return it to the investigator. A schedule is a list or set of questions, which is helpful in collecting data or requisite information. In this method, the investigator himself presents the questionnaire to the individuals whose responses are required. d. Other methods are warranty cards, distributor audits, pantry audits, consumer panels, using mechanical devices, through projective techniques, depth interviews and content analysis, their survey, e-mail internet survey.

Secondary data :

Data which are not originally collected but are rather obtained from published or unpublished sources are known as secondary data. For example, for the office of the Registrar General and Census Commissioner, the census data are primary whereas for all others, who use such data, they are secondary. The secondary data constitute the chief material on the basis of which statistical work is carried out in many investigations. Various sources of collecting secondary data are as under : a. Private documents such a s life history, diaries, autobiographies, letters and testaments. b. Reports published by various Research Organizations, Universities, National and International Social Organizations, Demographic Year Books, World Bank, IMF, WTO, Industrial Organizations, Banks, Insurance Corporations, Stock Exchanges, Business Organizations, NGOs, ILOs, UNO, Federations and Associations of various types organizations, International Bodies, State and Foreign Governments, Semi-Government Organizations. c. Books, magazines, journals, newspapers, booklets, prospectus, annual reports etc. d. Technical and trade journals. e. Various publications of State and Central Government. f. Encyclopedias, bibliography, indexes etc. g. Use of mechanical devices. h. Census survey reports. i. Statistical abstracts, statistical books, statistical information etc. j. Data contained in thesis of Ph.D. students.

Nirali Publications, A Text Book for TY BBA Students (Sem V)

DATA PROCESSING AND ANALYSIS

DATA PROCESSING AND ANALYSIS :

Data editing : The first step in processing of data, is editing of completed
schedules/ questionnaires. Editing is a process of checking, to detect and correct errors and omissions. Editing means inspecting, correcting and modifying the collected data. The completed questionnaires returned from the field require careful editing. Even the best interviewer is liable to make errors, omit to ask questions or to record answers. During the time of interview, brief notes or symbols are used to record the data, since it is very difficult to fill up the entire interview schedule. Editing is done at the time of collecting data or later in the central office.

Classification : Classification means arranging the raw data in different

groups according to common characteristics. Each group is homogeneous within itself so far as the particular characteristics is concerned. The characteristics of one group is different from that of the other.

Tabulation : Tabulation means the systematic presentation of classified data

in rows and columns so as to bring out its essential features and important characteristics involved in the data. Rows are horizontal arrangements and columns are vertical arrangements. A statistical table is the logical listing of related quantitative data in vertical columns and horizontal rows of numbers with sufficient explanatory and qualifying words, phrases and statements in the form of titles, heading, notes to make clear the full meaning of data and their origin.

Codification : Coding is considered as the classification process. The object

of coding is to classify the answers to a question into meaningful categories which is essential for tabulation of data. Thus, coding aims at summarizing the survey answers, so that the handling of such data becomes easy for further analysis. Coding is a useful means of quantifying the qualitative data. Coding is the process of assigning numbers or other symbols to answers so that responses can be grouped into a limited number of categories or classes. In short, the collected data to be divided into meaningful categories mean coding.

Scaling : When the concepts to be measured are complex and abstract, and if
we do not possess the standardized measurement tools, we face the problem of their valid measurements e.g. while measuring attitudes and opinions, we face

such problems. Scaling is a procedure which enables us to measure the abstract concepts more accurately. Scaling describes the procedure of assigning numbers to various degrees of opinion, attitude and other concepts. This can be done by 1. making a judgement about some characteristics of an individual and then placing him directly on a scale that has been defined in terms of that characteristics and 2. constructing questionnaires in such a way that the score of individuals responses assigns him a place on the scale. Scaling has been defined as a procedure for the assignment of numbers (or other symbols) to a property of objects in order to impart some of the characteristics of numbers to the properties in the question. The term scaling is applied to procedures for attempting to determine quantitative measures of subjective abstract concepts. A scale is a continuum, consisting of the highest point (in terms of some characteristics e.g. preference, favorableness, etc.) and the lowest point along with several intermediate points between these two extreme points. The scalepoint positions are so related to each other that when the first point happens to be the highest points, the second point indicates a higher degree in terms of a given characteristic as compared to the third point; third point indicates a higher degree as compared to the fourth, and so on. Thus, numbers for measuring the distinctions of degree in the attitudes or opinions are assigned to individuals corresponding to their scale positions.

Measurement : Measurement is a part and parcel of our daily life. We

measure physical objects as well as abstract concepts. The term measurement implies aligning numbers to objects or observations, the level of measurement being a function of the rules under which the numbers are assigned. Technically speaking, measurement is a process of mapping of a domain onto other aspects of a range according to some rule of correspondence. The process involves devising a scale in the range and then transforming or mapping the properties of objects from the domain onto this scale.

Hypothesis : The word hypothesis is a compound of two words hypo and

thesis. Literally hypo means under or below and thesis means a reasoned theory or rational viewpoint. Accordingly, hypothesis would mean a theory which is not fully reasoned. In other words, hypothesis is a theory entertained in order to study the facts and examine the validity of the theory.

DOCUMENTATION REQUIRED