A

Summer Training Project Report

Viva- Voce-507

“Customer Satisfaction of Iffco product”

Submitted in partial fulfillment of the requirements for the degree

Bachelor of Business Administration

Session 2022-23

IIMT College of Management

Affiliated to CCS University, Meerut

SUBMITTED To: - SUBMITTED BY: -

Faculty Name-Mr chhavi prakash Student’s Nam -Mohd Suhel

Designation-professor Roll Number – 200613105084

BBA – 5th Semester
 DECLARATION

bank

Customer
I, the undersigned hereby declare that project report entitled “ satisfaction of Iffco products
” written and submitted by me to CCS University, Meerut in partial fulfillment of requirements for the
award of degree of Bachelor of Business Administration under the guidance ofMr. Chhavi prakash is my original
work and interpretations drawn therein are based onmaterial collected by myself.

Place: - Greater Noida Signature

Date:- 22/12/2022 Name of Student-Mohd Suhel

2
 CERTIFICATE

This is to certify that project entitled “Customer satisfaction of Iffco products” submitted by
RahulLoriya, Roll No200613105113 in partial fulfillment of Bachelor of BusinessAdministration, Vsem.
Of IIMT COLLEGE OF MANAGEMENT, Greater Noida is a record of student’s own work carried out
under my supervision and guidance. While working on project they were sincere, disciplined and
enthusiastic.

As per our knowledge this work is original and genuine.

Faculty Name – Mr.Chhavi prakash

Professor
Dept. of Management Dept. of Management

3
 PREFACE

In any organization, the two important financial statements are the Balance Sheet and

Profit & Loss Account of the business. Balance Sheet is a statement of the financial

position of an enterprise at a particular point of time. Profit & Loss account shows the net

profit or net loss of a company for a specified period of time. When these statements of

the last few years of any organization are studied and analyzed, significant conclusions

may be arrived regarding the changes in the financial position, the important policies

followed and trends in profit and loss etc. Analysis and interpretation of financial

statements has now become an important technique of credit appraisal. The investors,

financial experts, management executives and the bankers all analyze these statements.

Though the basic technique of appraisal remains the same in all the cases, the approach

and the emphasis in the analysis vary. A banker interprets the financial statement so as to

evaluate the financial soundness and stability, the liquidity position and the profitability

or the earning capacity of borrowing concern. Analysis of financial statements is

necessary because it helps in depicting the financial position on the basis of past and

current records. Analysis of financial statements helps in making the future decisions and

strategies. Therefore it is very necessary for every organization whether it is a financial

or manufacturing, to make a financial statement and to analyze it .

4
 Table of content

Chapter PARTICULARS Page no.

no.
1 About The Company 6 -29

2 Research Methodology 29-50

3 Data analysis and interpretation 50-76

4 Conclusion and suggestions 76-80

5 Bibliography, annexure 80-85

5
 CHAPTER 1
About the Company

6
INTRODUCTION

Finance is the master key that unlocks all production and merchandising opportunities. For the

preparation and administration of financial decisions, financial success is critical. It is a method

of determining how well a firm uses its assets from its core business model to generate money, as

well as a method of determining an organization's overall financial health over time

Every business, large, medium, or small, requires funding to continue operations and meet its

goals. Finance is so important nowadays that it is rightfully referred to as the "living blood" of

businesses. No business can achieve its goals without enough funding. As a result, the study of

financial performance is critical, as it is the process of calculating the financial results of a

company's operations.

Financial performance analysis is the process of determining a company's financial strengths and

weaknesses by correctly defining the relationship between balance sheet and profit and loss

account components. It also aids in short- and long-term forecasting, as well as the identification

of growth through the use of various financial techniques in financial performance analysis. In

the development of the Indian economy, the bank plays a critical role. In emerging countries, a

sound and efficient banking sector provides the required financial inputs to the economy. It also

assesses an organization's overall financial health over a period of time. The financial

performance of an organization is concerned with the bank's financial strengths and weaknesses,

as well as the relationship between the balance sheet and the income statement.

7
 1.2 INDUSTRY AND COMPANY PROFILE

1.2.1 INDUSTRY PROFILE

E A bank is a financial institution that offers its customers banking and other financial services.

A bank is a financial institution that performs basic banking functions such as receiving deposits

and disbursing loans. Money lenders conducted financial transactions prior to the foundation of

banks. Interest rates were extremely expensive at the time, and there was no guarantee of public

savings or loan consistency. To address these issues, the government built an organized banking

system, which is strictly regulated

The Reserve Bank of India is the country's central bank. The Reserve Bank of India (RBI) oversees

and governs India's financial system. It is in charge of overseeing and implementing exchange

control, banking laws, and the government's monetary policy. The Indian banking sector operates

in accordance with the Reserve Bank of India's (RBI) standards.

The banking industry is the contemporary economy's lifeblood. The bank is crucial in terms o f

deposit mobilization and credit disbursement to various sectors of the economy. It manages

savings and current accounts, extends credit to borrowers through loans and credit cards, and acts

as a trustee for its customers

. The structure of banking system in India consists of

1.RBI: The Reserve Bank supervises, control and regulates the activity of the banking sector

8
. The Reserve Bank of India is the currency issuing authority of the country. The main functions of

the RBI are

: • Welfare of the public.

• To maintain the financial stability of the country

. • To execute the financial transactions safely and effectively.

• To develop the financial infrastructure of the country.

• To allocate the funds effectively without any partiality.

2.Scheduled commercial banks: Among the banks, the commercial banks are one of the oldest in

the country. There are two subtypes of commercial banks based on ownership and control over

management. They are:

• Public sector banks: The public sector banks are where the government owns 50% or more stake.

Currently there are 27 commercial public sector banks operating in India.

• Private sector banks: The private sector banks are where the majority of stake is held by the

shareholders of the bank. Currently there are 15 private sector banks operating in India.

• Foreign banks: These banks are registered and have their headquarters in a foreign country but

operate their branches in our country. Foreign banks have brought the latest banking practices in

India. Examples of foreign banks in India are: HSBC, Citibank, Standard chartered Bank, etc.

9
• Co-operative Banks: These banks are government sponsored, government supported and

government subsidized financial agencies in India. It aims at providing credit to primary

agriculture credit societies at a lower rate of interest. They are located in rural, urban and semi

urban areas.

1.2.2 Bank Profile

HDFC Bank, a subsidiary of the Housing Development Finance Corporation, was founded in 1994

and is headquartered in Mumbai, Maharashtra, India.Manmohan Singh, the then Union Finance

Minister, launched the company's first corporate headquarters and a full-service branch at Sandoz

House in Worli.The bank's distribution network had 5,500 branches in 2,764 cities as of 30 June

2019. In fiscal year 2017, it installed 430,000 point - of - sale terminals and issued 23,570,000

debit cards and 12 million credit cards. As of March 21, 2020, it had 1,16,971 permanent

employees.

VISION

To be the premiere financial partner in ensuring sustainable housing and living standards.

MISSION

Committed to provide financial solutions for sustainable living and assist entrepreneurs in value

addition.

VALUE

10
The goal of HDFC Bank is to become a world - class Indian bank. It aims to accomplish two

things: First and foremost, to be the preferred banking service provider for the target retail and

wholesale customer categories. The second goal is to generate profitable growth that is in line with

the bank's risk appetites. The bank is dedicated to upholding the highest ethical standards,

professional integrity, corporate governance, and regulatory compliance possible

The corporate concept of HDFC Bank is founded on five basic values:

• Customer focus

• Product leadership

• Sustainability

• Operational excellence

Products and Services

HDFC Bank provides a number of products and services such as wholesale banking, retail

banking, treasury, auto loans, two-wheeler loans, personal loans, loans against property, consumer

durable loan, lifestyle loan and credit cards

FOREX AND TRADE SERVICES

., HDFC Bank has a range of products and services that one can choose from to transact

11
smoothly.

The following are different methods of transacting in foreign exchange and remitting money.

➢ Travelers cheques

➢ Foreign currency cash.

➢ Foreign currency drafts

➢ Cheque deposits

➢ Remittances

➢ Cash to master

➢ Trade services

➢ Foreign services branch locator

Important guidelines and schedules

All Foreign Exchange transactions are conducted by strictly adhering to RBI guidelines.

Depending on the nature of your transaction or point of travel, you will need to understand your

12
Foreign Exchange limits.

LOANS

➢ Home Loans

➢ Personal Loans

➢ Two Wheeler Loans

➢ New Car Loans

➢ Used Car Loans

➢ Overdraft Against Car

➢ Express Loans

➢ Loans Against Securities

➢ Loans Against Property

“A Study on Analysis the Financial Performance of HDFC Banks”

13
PERSONAL BANKING

Savings Accounts

These Accounts are primarily meant to inculcate a sense of saving for the future, accumulating

funds over a period of time. Whatever may be the occupation, bank is confident that customer

will find the perfect banking solution. Open an account in your name (customer’s name) or

register for one jointly with a family member today.

Current Accounts

Now, with an HDFC Bank Current Account, experience the freedom of multi-city banking!

Customer can have the power of multi-location access to his account from any of banks 500

branches in 220 cities. Not only that, he can do most of his banking transactions from the

comfort of his office or home without stepping out.

At HDFC Bank, it understands that running a business requires time and money, also that

Customers' business needs are constantly evolving. That's where it comes in. It provides him with a

choice of Current Account options to exclusively suit his business - whatever the size or scope.

Fixed Deposits

14
Long-term investments form the chunk of everybody's future plans. An alternative to simply

applying for loans, fixed deposits allow the customer to borrow from his own funds for a limited

period, thus fulfilling his needs as well as keeping his savings secure.

As per the finance (No 2) Act 2004, all fees & charges mentioned in the Tariffs, Charges or

Fees Brochures will attract Service Tax @10% & Education Cess @2% of the service tax amount

effective 10th September 2004. The same will appear as separate debits in the statements.

PRIVATE BANKING

“A Study on Analysis the Financial Performance of HDFC Banks”

HDFC Bank offers Private Banking services to high net worth individuals and institutions. Banks

team of seasoned financial and investment professionals provide objective guidance backed by

thorough research and in-depth analysis keeping in mind customer’s financial goals.

Multiple Recognition from Euro money

At HDFC Bank, they have always strived towards providing exceptional service to each of their

esteemed customers. As testament to this dedication, they have earned the following ranks in a

recently conducted the Euromoney Survey.

15
➢ Rated as the best private bank in the super effluent category in India

HDFC Bank Investment Advisory Services - Helping you take your Investment portfolio further.

➢ Dedicated investment advisor

HDFC Private Banking service involves a high degree of personalization. When customer avail

of this facility, a dedicated Investment Advisor serves him. This seasoned finance professional

adds value to his portfolio by keeping him up to date with financial markets and investment

opportunities

MUTUAL FUNDS PRODUCTS SCHEMES

Equity fund

HDFC growth fund

HDFC long term Advantage fund

HDFC Index fund

HDFC Capital Builder fund

HDFC tax saver

HDFC top 200 funds

16
HDFC core & satellite fund

HDFC premier multi-Cap fund

HDFC long term equity fundBalanced Fund

HDFC Children’s gift fund investment plan

HDFC children’s gift fund saving plan

HDCF Balanced Fund

HDFC Prudence Fund

Debt Fund

HDFC Income fund

HDFC liquid fund

HDFC gift fund short term plan

HDFC gift fund long term plan

HDFC short term plan

HDCF floating rate income fund short term plan

HDCF floating rate income fund long term plan

17
HDFC liquid fund- premium plan

HDFC liquid fund- premium plus plan

HDFC high interest fund

HDFC high interest fund short term plan

HDCF cash management fund saving plan

HDCF cash management fund call plan

HDFC MF monthly plan

PAYMENT SERVICES

With HDFC Bank's payment services, one can bid goodbye to queues and paper work. Its range

payment options make it easy for customers to pay for a variety of utilities and services.

➢ Verified by visa

If one wants to be worry free for his online purchases. Now he can shop securely online with his

existing Visa Debit/Credit card.

➢ Net safe

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Now shop online without revealing your (customers) HDFC Bank Credit Card number.

➢ Prepaid refill

If a person is a HDFC Bank Account holder and a prepaid customer, he can now refill his Prepaid

Mobile card with this service.

➢ Bill pay

One can pay his telephone, electricity and mobile phone bills at his convenience. Through the

Internet,

ATMs, his mobile phone and telephone - with Bill Pay, bank’s comprehensive bill payments

solution

➢ Visa Bill Pay

One can pay his utility bills from the comfort of his home! Pay using his HDFC Bank Visa credit

card and forget long queue and late payments forever

➢ Insta pay

One can Pay his bills, make donations and subscribe to magazines without going through the

hassles of any registration.

19
➢ Direct pay

Shop or Pay bills online without cash or card. Debit your(customers ) account directly with

bank’s Direct Pay service!

➢ Smart pay(with credit cards)

With Smart Pay, paying customer’s electricity, telephone, mobile phone, water bills, gas and

insurance premium payments become easy like never before.

➢ Visa money transfer

One can transfer funds to any Visa Card (debit or credit) within India at his own convenience

through HDFC Bank's Net Banking facility.

➢ e-Monies Electronic Funds Transfer

Transfer funds from customers account to any account in any Bank in India at 15 locations -

FREE of cost!

➢ Online payment of excise and service tax

20
One can make his Excise and Service Tax payments at his own convenience.• People

• Sustainability

• Operational excellence

Wholesale banking

Wholesale banking is the provision of services by banks to larger customers or organizations such

as mortgage brokers, large clients, mid-sized companies, real estate developers and investors,

international trade finance businesses, institutional customers, and services offered to other banks

or other financial institutions. Wholesale finance refers to financial services conducted between

financial services companies and institutions such as banks, fund managers, and stockbrokers.

Retail Banking

Retail banking, also known as consumer banking or personal banking, is the provision of services

by a bank to the general public, rather than to companies, corporations or other banks, which are

often described as wholesale banking. Banking which are regarded as retail include provision of

savings and transactional accounts, personal loans, debit credit cards. Retail banking is also

distinguished from investment banking or commercial banking. It may also refer to a division or

department of a bank which deals with individual customers.

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Credit Cards

Credit card is a payment card issued to users (cardholders) to enable the cardholder to pay a

merchant for goods and services based on the cardholder's accrued debt (i.e., promise to the card

issuer to pay them for the amounts plus the other agreed charges). The card issuer (usually a bank

or credit union) creates a revolving account and grants a line of credit to the cardholder, from

which the cardholder can borrow money for payment to a merchant or as a cash advance. There are

two credit card groups: consumer credit cards and business credit cards. Most cards are plastic, but

some are metal cards (stainless steel, gold, palladium, titanium), and a few gemstone-encrusted

metal cards.

Subsidiaries

1.HDFC Securities: HDFC Securities Limited is a financial services Limited is a financial services

intermediary and a subsidiary of HDFC Bank, a private sector bank in India. HDFC Securities was

founded in the year 2000 and is headquartered in Mumbai with its branches across major cities and

towns in India

. Products and services:

• Equities: Investment in stocks of listed companies

. • Mutual funds: Investment in mutual funds including equity, hybrid, tax saving or debt schemes

from asset management companies.

• SIPs: Systematic investment plan that allows automated investments.

22
• IPOs: Investment in initial public offerings (IPO).

• Derivatives: Hedge or speculate on the price movement of stocks or index through its derivative

products.

• Bonds, NCDs and Corporate FDs: Investment in fixed income instruments such as bonds, NCDs

and Corporate FDs

1.HDFC ERGO General Insurance company:

HDFC ERGO is a 51:49 joint venture firm between HDFC International AG, one of the insurance

entities of the Munich Re Group in Germany operating in the insurance field under the BFSI

sectors. The company offers products in the retail, corporate and rural sectors. The retail sector

products are health, motor, travel, home, personal accident and cybersecurity policy. Corporate

products include liability, marine and poverty insurance. Rural sector caters to the farmers with

crop insurance and cattle insurance.

2.HDFC Financial Services Limited:

HDFC Financial Services, a subsidiary company of HDFC Bank, is one of the biggest

NonBanking Financial Companies (NBFC) in our country who provides a variety of loans and

finance to the people. It is known for providing various easy financial services and loans to their

customers such as:

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• Personal loan

• Doctor loan

• New to Credit loan

• Gold loan

• Car loan

• Loan against property

• Loan against insurance policies

• Two-wheeler loans and many more

3.Next Gen Publishing:

Next Gen Publishing Ltd was incorporated in October 2004 and commercial operations from

January 2005 with the promise of offering the finest in the field of publishing. It is a

publishing company created by its parent companies Forbes Group, a subsidiary of Shapoorji

Pallonji Group and HDFC Bank. Its services include the following:

• Print Magazines

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• Awards properties

• Digital Publishing

1.2 History of HDFC bank

The HDFC Bank was incorporated in August 1994 by the name of 'HDFC Bank Limited', with its

registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled

Commercial Bank in January 1995. The Housing Development Finance Corporation (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.

HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable network of over

1416 branches spread over 550 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

also has a network of about over 3382 networked ATMs across these cities.

The promoter of the company HDFC was conceived in 1977 is India's premier housing finance

company and enjoys an impeccable track record in India as well as in international markets. 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.

25
The shares are listed on the Bombay Stock Exchange Limited and The National Stock Exchange of

India Limited. The Bank's American Depositary 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.

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.1.2 Statement of Problem:

The statement of problem is based on finance and aims to analyze the financial performance of the

HDFC bank for the past 5 years. Financial performance analysis enables the outsiders and

investors to evaluate the past and current performance and financial position and to predict future

performance. The study is conducted to know whether the financial 8 performance in the

organization is sound or not with the help of last five years financial statements.

The merged entity now holds a strong deposit base of around Rs. 1,22,000 crore and net advances

of around Rs. 89,000 crore. The balance sheet size of the combined entity would be over Rs.

1,63,000 crore. 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

26
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

CAPITAL STRUCTURE

Authorized capital of HDFC Bank is Rs.450 crore (Rs.4.5 billion). The paid-up capital is

Rs.311.9 crore (Rs.3.1 billion). The HDFC Group holds 22.1% of the bank's equity and about

19.4% of the equity is held by the ADS Depository (in respect of the bank's American Depository

Shares (ADS) Issue). Roughly 31.3% of the equity is held by Foreign Institutional Investors

(FIIs) and the bank has about 190,000 shareholders. The shares are listed on the The Stock

Exchange, Mumbai and the National Stock Exchange. The bank's American Depository Shares

are listed on the New York Stock Exchange (NYSE) under the symbol "HDB

1.3 Objective of the study

● To analyze the financial performance of HDFC bank for the five years from 2016-2017 to

2020-2021

● To examine the liquidity and solvency position of the bank

● To examine the profitability position of the bank

1.4 Research Design

1.4.1 Nature of the study

27
Study is analytical in nature, meaning that it deals primarily with secondary data collected

from the HDFC Bank’s financial statements over the last five years.

1.4.2 Nature of Data

The data used is secondary in nature. Secondary data are those data which have already

been collected and stored.

1.4.3 Sources of data

Secondary data had been collected from the annual report published by the Bank. These annual

reports had been downloaded from the official website of the company

1.4.4 Period of Study

The study on financial performance of HDFC BANK Ltd is confined to a period of five years

from 2016-2017 to 2020-2021. It took 3 weeks to collect the data and come to a conclusion on

the study.

1.5 Sample Design

Sample used in this study is HDFC BANK Ltd. Company is randomly chosen.

1.6 Tools for analysis

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• Ratio analysis

• Comparative Balance sheet

1.7 Limitations of the Study

• The study takes into account only a limited period of five years.

• It considers only monetary aspects. Non-monetary aspects like human behavior, their

relationships, etc. are not considered.

• The study possesses the limitations of secondary data i.e, Annual reports of the bank taken

from the official website.

29
 Chapter 2

Research methodology

30
 Research Methodology

MEANING:-

Research is an academic activity and as such the term should be used in a technical sense.

According to Clifford Woody research comprises defining and redefining problems, formulating

hypotheses or suggested solutions; collecting, organizing and evaluating data; making deductions

and reaching conclusions; and at last carefully testing the conclusions to determine whether they fit

the formulating hypothesis. D. Steiner and M. Stephenson in the Encyclopedia of Social Sciences

define research as “the manipulation of things, concepts or symbols for the purpose of generalizing

to extend, correct or verify knowledge, whether that knowledge aids in construction of theory or in

the practice of an art.” It is actually a voyage of discovery. We all possess the vital instinct of

inquisitiveness for, when the unknown confronts us, we wonder and our inquisitiveness makes us

probe and attain full and fuller understanding of the unknown. This inquisitiveness is the mother of

all knowledge and the method, which man employs for obtaining the knowledge of whatever the

unknown, can be termed as research.

31
It is an empirical study, so researchers have followed a scientific approach to design the research

methodology for investigation. For this study researcher is using secondary data as a source of

information for this research e.g. the Annual Reports, websites and other publications.The

following tool & techniques have been classification in the study

(A)Accounting Techniques (B) Statistical Techniques

ACCOUNTING TECHNIQUES:

The researcher picks up the techniques to suit their requirement and also bases the data available

to them. The accounting techniques which are used for the analysis are as under. Ratio Analysis A

ratio is a quotient of two numbers and the relation expressed between two figures. Ratio analysis is

a process of comparison of one figure against another, which makes a ratio. Ratio analysis is very

powerful. The ratio analysis concentrates on the inter-relation-ship among the figures appearing in

the financial statement.

Statistical analysis:

statistical analysis is the process of collecting and analyzing data in order to discern patterns and

trends. It is a method for removing bias from evaluating data by employing numerical analysis.

This technique is useful for collecting the interpretations of research, developing statistical models,

and planning surveys and studies.

RESEARCH OBJECTIVES:-

32
1. Knowing the Profitability of Business

2. Knowing the Solvency of the Business

3. Judging the Growth of the Business

Nature of Study

The nature of study of this project is analytical study. In analytical study, one has to use facts or

information already available and analyze these to make critical evaluation of the material.

SOURCES OF DATA:

Primary Data:-

Primary data refers to that data which has been obtained by the researcher directly from the

respondents for specific research work.

Secondary Data:-

Secondary data refers to that data which is already in existence and someone has obtained it for a

specific purpose but reutilized by the researcher. The said research work is based on the secondary

Data of published financial statements of selected Indian industries and the selected companies

within them.

33
(1) The data of various financial parameters have been obtained from the Annual Reports of the

companies directly from the official web sites of the company or stock exchange website

. (2) The resources at CMIE (Centre For Monitoring Indian Economy) have also been utilized for

the same purpose.

For accounting analysis ratio analysis has been used. Ratio Analysis The term ‘ratio’ refers to the

mathematical relationship between any two interrelated variables. According to J. Batty Ratio can

be defined as “the term accounting ratio is used to describe the significant relationship which exists

between figures shown in a balance sheet and profit and loss account in a budgetary control system

or any other part of the accounting management.” As per Myers, “Ratio analysis is a study of

relationships among various financial factors in a business.” A ratio is a relationship expressed

between two different figures of the financial statement. Ratio analysis is an art of determining

relationships between different components of a financial statement so as to derive a meaningful

understanding of profitability, liquidity, solvency and efficiency of a Company. Profitability

Profitability can be measured in different ways- like income based, expense based and investment

based. This study is based on income based ratios and is confined to four ratios which are as

follows: Earning profit is one of the objectives of every business concern. A company must have

sufficient profits in relation to the capital employed by it. Profitability of a company is indicated by

the amount of profits earned in comparison to capital invested in businessThe term accounting

ratios is used to describe significant relationship between figures shown on balance sheet, in a

profit and loss account, in a budgetary control system or in any other part of the accounting

organization. Ratio simply refers to one number expressed in terms of another number. Ratio

analysis is a technique of analysis and interpretation of financial statements. It is the process of

34
establishing and interpreting the various ratios for helping in 20 making certain decisions.

However, ratio analysis is not an end to itself. It is only a means of better understanding of

financial strength, weakness of a firm. Calculation of mere accounting ratios does not serve any

purpose unless several appropriate ratios are analyzed and interpreted.

Objectives of Ratio Analysis

•To study the short-term solvency of a firm.

•To study the long-term solvency of a firm.

•To determine the profitability of a firm.

•To measure the performance of a firm.

•To facilitate the process of financial forecasting.

•To communicate the strength and weakness of a firm.

•To enable managerial decision making.

Ratios used to analyze the data:-

Liquidity Ratio

The term liquidity refers to the firm’s ability to meet its current liabilities. Liquidity ratios are

used to measure the liquidity position or short-term financial position of a firm. These ratios

35
are used to assess the short-term debt paying ability of a firm, important liquidity ratios are

current ratio and quick ratio.

Current Ratio

Current ratio may be defined as the relationship between current assets and current liabilities.

This ratio is also known as working capital ratio. It is a measure of general liquidity and is the

most widely used to make the analysis of short term financial or liquidity of a firm. It is

calculated by dividing the total current assets by total current liabilities and the ideal current

ratio is 2:1. It is calculated as follows

Current Ratio = Current asset

Current liabilities

The higher the current ratio, the greater the firm’s ability to meet the short-term debts. A very

a high current ratio indicates too much money is blocked in current assets etc. In short, a very

A high current ratio indicates that the firm will find it difficult to pay off its debts.

Quick Ratio

The term liquidity ratio refers to the ability of a firm to pay off its short-term obligations as

36
and when they become due. Cash in hand and cash at bank are the

most liquid asset. The other assets included in the liquid assets are bills receivables, sundry

debtors, marketable and short term or temporary investments. The Ideal liquid or quick ratio

is 1:1. The liquid ratio can be calculated as follows

Quick ratio = Liquid assets

Current liabilities

Quick Assets = Current Assets - (stock + prepaid expenses)

Liquid ratio is considered to be superior to current ratio in testing the liquidity position of a

firm. If the current ratio is 2:1 and quick ratio is 1:1; the liquidity position may be considered

satisfactory. If the current ratio is higher than 2:1, but quick ratio is less than 1:1, it indicates

excessive inventory.

Absolute Liquid Ratio or Cash Ratio

This ratio establishes the relationship between super quick assets and quick liabilities. And it

is taken as a ratio of absolute liquid assets or absolute quick assets include cash in hand, cash

at bank and marketable securities or short-term investments. It is also known as cash ratio.

37
And ideal absolute liquid ratio is 0.5: 19

Absolute Liquid Ratio = Absolute Liquid Assets

Current Liabilities

Solvency Ratio

Solvency ratio is one of the various ratios used to measure the ability of a company to meet

its long-term debts. Solvency ratio is also called leverage ratio. It focuses on the long-term

sustainability of a company instead of the current liability payments.

Proprietary Ratio

Proprietary ratio establishes the relationship between shareholders or proprietors fund and

total assets. This ratio shows how much funds have been contributed by shareholders in the

total assets of the firm. Proprietary ratio is also known as equity ratio or net worth ratio. It is

computed as follows:

Proprietary Ratio = Shareholder’s fund

Total assets

38
This ratio shows the financial health of the firm. A high ratio indicates safety to the creditors and

a low ratio shows greater risk to the creditors. The ideal ratio is 0.5:1 or above.

Profitability Ratios

The ultimate aim of any business enterprise is to earn maximum profit. To the management,

profit is the measure of efficiency and control. Profitability ratio measures the ability of the

firm to earn an adequate return on sales, total assets and invested capital. There are two types

of profitability ratios. First, profitability based on sales and it includes gross profit ratio,

operating ratio, operating profit ratio and net profit ratio. Second, profitability ratio based on

investment and it includes return on investment, return on shareholders fund ratio, return on

equity ratio and return on total assets. Profit is important for everyone associated with the

company including creditors and owners.

Return on shareholder’s fund

This is the ratio of net profit to shareholder’s fund or net worth. It measures the profitability

from shareholders point of view. This ratio is called the ‘mother of all the ratio’. This is

perhaps the most important ratio because it measures the return that is earned on the owner’s

39
capital. It is calculated as follows:

Return on shareholders’ fund = Net profit after interest and tax

Shareholder’s fund

Return in Investment (ROI)

When a firm invest money in a business, it naturally expects adequate return on its

investment. Therefore, the firm wants to know how much profit is earning on its investment.

For this, ROI is computed. It establishes the relationship between return and investment. It is

also called accounting rate of return.

ROI = Profit before interest and tax

Capital employed

Capital employed may be gross capital employed or net capital employed. Gross

capital employed means total assets minus current liabilities. Alternatively, it refers to total of

share capital, revenue reserves, debenture and other long-term loans. Profit before interest

and tax is calculated as gross profit minus operating expenses. The ideal return on investment

ratio is 15%. The higher the return on investment, greater is the overall profitability and more

40
is the efficient use of capital employed.

Net Profit Ratio

Net profit ratio is the ratio of net profits to revenues for the company or business segment. It

measures the overall profitability.Net profit and net sales are the two components of net profit

ratio. Net profit is the final profit after adjusting all expenses and all incomes. The main

ADVANTAGES AND DISADVANTAGES OF RATIO ANALYSIS:

Advantages:

❖ Simplifies financial statements: Ratio Analysis simplifies the comprehension of

financial statements. Ratios tell the story of changes in financial condition of the

business.

❖ Facilitates inter firm comparison: Ratio analysis provides data for inter company

comparison. Ratio highlights the association with successful and unsuccessful firms.

They also reveal strong and weak companies, overvalued and undervalued companies.

❖ Makes intra firm comparison possible: Ratio analysis also makes possible

41
comparison of the performance of different divisions of the company. The ratio helpful

in deciding about their efficiency.

❖ Helps in planning: Ratio Analysis helps in planning and forecasting over period of

time a company develops certain norms that may indicate future success/ failure. If

relationship changes in firms data over different time periods. The ratio may provide

clues on trends and future problems.

❖ Liquidity position: With the help of ratio analysis conclusions can be drawn

regarding the liquidity position of the company. The liquidity position of a company could

be satisfactory if it is able to meet its current obligations when they become due.

❖ Long term solvency: Ratio analysis equally useful for assessing the long-term

financial viability of a firm. The long-term solvency is measured by the leverage /

capital structure and profitability ratios, which focus on earning power and operating

efficiency.

Disadvantages:

42
Ratio analysis is a widely used tool of financial analysis. Yet, it suffers from various limitations.

The operational implication of this is that while using ratios, the conclusion should not been taken

on their face value. Some of the limitation which characterize ratio analysis are

1. Difficulty in comparison

One serious limitation of ratio analysis arises out of the difficulty associated with their

comparability. One technique that is employed is inter firm comparison. But such comparisons

are vitiated by different procedures adopted by various firms. The difference may relate to

● Difference in the basis of inventory valuation

● Different depreciation methods (i.e. straight line vs. written down basis)

● Estimated working life of the assets, particularly of plant and equipment

● Amortization of intangible assets like goodwill, patents and so on.

● Amortization of deferred revenue expenditure such as preliminary expenditure and

discount on issue of shares

● Capitalization of lease

● Treatment of extraordinary items of income and expenditure and so on

43
Secondly, apart from different accounting procedures, companies may have different

accounting periods, implying differences in the composition of the assets, particularly the current

assets. For these reasons, the ratios of two firms may not be strictly comparable.

2. Impact of inflation

The second major limitation of the ratio analysis as a tool of financial analysis is

associated with price level changes. This, in fact is a weakness of the traditional financial

statements which are based on historical cost. An implication of this feature of the financial

statement as regards ratio analysis is that assets acquired at different periods are, in effect,

shown at different prices in the balance sheet, as they are not adjusted for changes in the price

level. As a result, ratio analysis will not yield strictly comparable and therefore, dependable

results.

3. Conceptual Diversity

Yet another factor which affects the usefulness of ratios is that there is difference of

opinion regarding the various concepts used to compute the ratios. there is scope for diversity

of opinion as to what constitutes shareholders’ equity, debt, asset, profit and so on. Different

44
firms may use these terms in different senses or the same firm may use them to mean different

things at different times.

Reliance on a single ratio for a particular purpose may not be a conclusive indicator. for

instance, the current ratio alone is not a adequate measure of short-term financial strength; it

should be supplemented by the acid test ratio, debtors turnover ratio and inventory and

inventory turnover ratio to have a real insight into the liquidity aspect.

The objective of the ratio is to measure the overall profitability. This ratio indicates how much of

The sales are left after meeting expenses. The ideal net profit ratio is 5% - 10%.

Net profit ratio = Net Profit×100

Net sales

Net profits can be taken as profit before tax and profits after tax. Higher the ratio, better is the

profitability.

Classification of ratio

1. Profitability Ratios

45
a. Ratio of profit to total income

b. Ratio of profit to deposits

c. Return on equity

d. Return on Capital

e. Ratio of return on assets

f. Net interest margin

g. Ratio of interest income to average working fund

h. Ratio of non-interest income

i. Cash dividend

j. EPS

2. Operating Ratios

a. Ratio of interest earned to interest paid

b. ratio of interest paid to total income

c. Ratio of staff expenses to total expenses

“A Study on Analysis the Financial Performance of HDFC Banks”

46
d. Ratio of total expenses to total income.

e. Ratio of operating expenses to average working fund

f. Ratio of interest expenses to average working fund

3. Solvency ratios

a. ratio of cash to deposit

b. ratio of investment to deposits

c. Credit deposit ratio

d. ratio of fixed assets to net worth

e. Current assets ratio

f. Quick ratio

g. Fixed assets ratio

4. Safety ratio

a. ratio of Net NPA to Net advance

47
b. Capital adequacy ratio

Purpose of the study

A financial services sector plays a critical role in fulfilling the needs of growing and increasingly

diverse economy, offering high quality services to business and individuals alike. Though Indian

banking system registered commendable progress in terms of geographical and functional

coverage, its performance in terms of operational efficiency and viability still leaves considerable

room for improvement

A bank’s balance sheet and income statement are valuable information sources for

identifying risk taking and assessing risk management effectiveness. Although amounts found on

these statements does not provide valuable insights of performance so ratio analysis is required

for determining good or bad performance of a bank and also for determining its causes. The study

“A Study on Analysis the Financial Performance of HDFC Banks”

includes the calculation of different financial ratios. It compares three years financial statements

of the company to know its performance in these different years

48
Comparative Statement

Comparative statement is those statement which is used to study financial position for two or

more periods. It is also Called as horizontal financial analysis.

1 Comparative Balance sheet

2 Comparative Profit and Loss Account

Comparative Balance Sheet

It shows the account of current assets and current liability on different dates and also shows

the increase and decrease in these accounts.

Comparative Profit and Loss Account

It shows the operational results and progress of business in a given period of time

Fund Flow Analysis

A fund flow statement means a statement which shows increase or decrease in working

capital during a period. The fund flow statement contains the source of funds, use of funds

and changes in working capital. Changes in working capital are obtained by preparing a

statement called ‘Statement of changes in working capital’. It shows the changes in current

49
asset and current liability. Fund flow statement is also known as ‘ where got and where gone

statement’ or ‘statement of changes in financial position’.

Cash Flow Analysis

Cash flow statement is a statement showing the changes in cash position from one period to

another. It explains the reasons for increase or decrease in the amount of cash between two

balance sheet dates. In other words, it explains the reasons for inflow or outflow of cash. It is

the statement of sources and use of cash.

50
 Chapter 3

Data analysis & Interpretation

51
52
 Ratio analysis

One of the most powerful tools in financial analysis is the ratio analysis. It is the
procedure for calculating and understanding different ratios. The ratio analysis is used
to investigate a company's liquidity, profitability, and solvency. The financial
statements may be analyzed more clearly with the use of ratios, and decisions can be
taken based on this analysis.

Liquidity Ratio

a) Current ratio

current ratio = current asset (Ideal Ratio = 2:1)

current Liability

Table 4.1 Showing Current Ratio

Year Current Current Current

Asset Liability Ratio
2016 - 2017 48952.1 56709.32 0.86
2017 - 2018 122915.08 45763.72 2.69
2018 - 2019 81347.64 55108.29 1.48
2019 - 2020 86618.72 67394.4 1.29
2020 - 2021 119470.4 72602.15 1.65
Mean 91860.79 59515.58 1.59
Standard 30437.73 10603.62 0.68
Deviation
CV 33.13 17.82 42.6
CAGR -0.51 -0.74 -0.62

53
Source: Compiled from annual report of HDFC Bank

Table 4.1shows current assets and current liabilities over a period of 5 years from 2016-

2017 to 2020- 2021. The average current ratio is 1.59 and its Standard Deviation is 0.68.

Coefficient of Variation is 42.6 and CAGR follows a negative trend. Current ratio is

high during the period 2017 – 2018. It indicates the firm is liquid and low during the

period 2016 – 2017 and standard in another period.

Figure 4.1 Showing Current Ratio

54
Leverage / Solvency Ratio

Solvency or Leverage ratios are used to analyze the long-term financial position
of the firm. In other words, these ratios are used to analyze the capital structure
of a firm.

(a) Debt Equity Ratio

Debt to equity ratio is the most commonly used ratio to test the solvency of a firm.
This ratio indicates the relative proportion of debt and equity in financing the
assets of the firm.

Debt Equity Ratio =Total Debt (Ideal ratio =1:1)

Equity Shareholder Fund

Table 4.2 Showing Debt Equity Ratio

Year Total Debt Equity Total Debt
Equity Ratio
2016-2017 717668.58 89462.35 8.02
2017-2018 911875.61 106295.00 8.58
2018-2019 1040226.05 149206.35 6.97
2019-2020 1292130.83 170986.03 7.56
2020-2021 1470547.54 203720.83 7.22
Mean 1086489.72 143934.11 7.67
Standard 299352.69 46684.93 0.64
Deviation
CV 27.55 32.43 8.38
CAGR -0.59 -0.54 -0.82

55
Source: Compiled from annual report of HDFC Bank

The above table shows the Debt Equity Ratio. The average Debt Equity Ratio is 7.67

and its standard deviation is 0.64, the coefficient of variation is 8.38 and CAGR follows

a negative trend.The ideal debt equity ratio is 1:1. During the five years of study the

debt equity ratio is very high. This indicates the higher proportion of debt content in the

capital structure.

Showing Total Debt Equity Ratio

56
Proprietary Ratio
Proprietary ratio establishes the relationship between shareholders or proprietors fund

and total assets. This ratio shows how much funds have been contributed by

shareholders in the total assets of the firm. Proprietary ratio is also known as equity

ratio or net worth ratio.

Proprietary Ratio =Shareholder Fund (Ideal ratio= .5:1)

Total Asset

Table 4.3 Showing Proprietary Ratio

Year Shareholder’s Total Proprietary
fund Asset Ratio
2016 - 2017 89462.35 863840.2 0.1
2017 - 2018 106295 1063934.3 0.1
1
2018 - 2019 149206.35 1244540.6 0.12
9
2019 - 2020 170986.03 1530511.2 0.11
7
2020 - 2021 203720.83 174670.53 1.17
Mean 143934.11 975499.4 0.32
Standard 46684.93 510401.01 0.47
Deviation
CV 32.43 52.32 1.47

CAGR -0.54 -0.96 1.25

57
source: Compiled from annual report of HDFC Bank
The above table shows the proprietary ratio. The average proprietary ratio is .32 and its

standard deviation is .47. The coefficient of variation is 1.47 and the CAGR follows a

positive trend. The ratio is high during the period 2020-21. It indicates that the margin

for meeting no operating expenses, creating reserves and paying dividend is less.

Showing Proprietary Ratio

58
 Solvency Ratio
Solvency ratio is one of the various ratios used to measure the ability of a company to

meet its long-term debts. Solvency ratio is also called leverage ratio. It focuses on the

long-term sustainability of a company instead of the current liability payments.

Solvency Ratio = Total Asset

Total Debt

Table 4.4 Showing Debt Solvency Ratio

Year Total Total Solvency
Asset Debt Ratio
2016-2017 863840.20 717668.53 1.20
2017-2018 1063934.3 911875.61 1.17
1
2018-2019 1244540.6 1040226.0 1.20
9 5
2019-2020 1530511.2 1292130.8 1.18
7 3
2020-2021 1746870.5 1470547.5 1.19
3 4
Mean 1289939.4 1086489.7 1.19
0 1
Standard 354034.16 299352.70 0.01
Deviation

CV 20.27 20.36 1.18

CAGR -0.60 -0.59 -0.80

Source: Compiled from annual report of HDFC Bank

59
Generally, higher the solvency ratio the stronger is its financial position and vice versa.

From the above data it is clear that the assets are more than the outside liabilities. If all

year’s solvency ratio is above 1:1, it indicates that there is no difficulty in paying off its

outside liabilities.

Showing Solvency Ratio

60
 Fixed Asset to Net Worth Ratio

Fixed assets to net worth ratio show the relationship between fixed assets and

shareholder’s funds. Usually, fixed assets are purchased by using the owner's fund such

as equity capital, reserves and surplus, retained earnings etc. If the ratio is less than

100%, it implies that owner's funds are more than total fixed assets and part of the

working capital is financed by shareholders' funds and vice versa. Ideal ratio is

considered as 60% to 65%.

Fixed Asset to net worth ratio = Fixed Asset

(Ideal ratio = .67:1) Net worth

Table 4.5 Showing Fixed asset to Net worth ratio

Fixed Asset To
Year Fixed Asset Net worth
Net worth Ratio
2016-2017 3626.74 89462.35 0.04
2017-2018 3607.20 106295.00 0.03
2018-2019 4030.00 149206.35 0.03
2019-2020 4431.92 170986.03 0.03
2020-2021 4909.32 203720.83 0.02
Mean 4121.04 143934.11 0.03

Standard Deviation 555.58 46684.93 0.01

CV 13.48 32.43 22.54
CAGR -0.73 -0.54 -0.88

61
Source: Compiled from annual report of HDFC Bank

The above table shows the Fixed Asset to net worth ratio. The average Fixed Asset to net worth

ratio is 0.03 and its standard deviation is 0.01. The coefficient of variation is 22.54 and CAGR

follows a negative trend. The table shows fixed assets to proprietary ratio of the concern. Ratio

less than 1 indicates that all fixed assets are purchased out of proprietor’s fund and a part of the

proprietor's fund is invested in working capital.

Showing Fixed asset to net worth Ratio

62
 Capital Gearing Ratio

Capital gearing ratio is the ratio between total equity and total debt; this is a specifically

important metric when an analyst is trying to invest in a company and wants to compare

whether the company is holding the right capital structure or not.

Capital Gearing Ratio = Fixed Income Bearing fund

Equity Shareholder Fund

Table 4.6 Showing Capital Gearing Ratio

Fixed Income Bearing Equity Shareholder Capital Gearing
Year fund Fund Ratio
2016-2017 717668.53 89462.35 8.02
2017-2018 911875.61 106295.00 8.58
2018-2019 1040226.00 149206.35 6.97

2019-2020 1292130.80 170986.03 7.56

2020-2021 1470547.50 203720.83 7.22
Mean 1086489.69 143934.11 7.67
Standard
Deviation 299352.69 46684.93 0.64
CV 27.55 32.43 8.38
CAGR -0.59 -0.54 -0.82

63
Source: Compiled from annual report of HDFC Bank

The above table shows the Capital Gearing Ratio. The average Capital Gearing Ratio is

7.67 and its standard deviation is 0.64. The coefficient of variation is 8.38 and CAGR

follows a negative trend.

Showing capital Gearing Ratio

64
Profitability ratio

Profitability ratio measures the ability of the firm to earn an adequate return on sales,

total assets and invested capital

(a) Operating profit ratio

Operating profit expresses the relationship between operating cost and sales. It indicates

the overall efficiency in operating in business.

Operating Profit Ratio =Operating Profit × 100

Total Income

Table 4.7 Showing Operating profit ratio

Year Operating Profit Total Income Operating Profit Ratio
2016-2017 61899.12 81602.46 75.85
2017-2018 72771.28 95461.66 76.23
2018-2019 90478.57 116597.94 77.60
2019-2020 107375.94 138073.47 77.77
2020-2021 113340.49 146063.12 77.60
Mean 89173.08 115559.73 77.01
Standard Deviation 21965.88 27365.27 0.90
CV 24.63 23.68 1.16
CAGR -0.63 -0.64 -0.80

65
 Source: Compiled from annual report of HDFC Bank

The above table shows the Operating Profit Ratio. The average Operating Profit Ratio is

77.01 and its standard deviation is 0.90, the coefficient of variation is 1.16 and CAGR

follows a negative trend.

Showing Operating Profit Ratio

Net Profit Ratio

66
Net profit ratio is the ratio of net profit earned by a business and its net sales;it measures

overall profitability.

Net Profit Ratio =Net Profit × 100

Total Income

Showing Net Profit Ratio

Year Net Profit Total Income Net Profit Ratio

2016-2017 14549.64 81602.46 17.83

2017-2018 17486.73 95461.66 18.32

2018-2019 21078.17 116597.94 18.08

2019-2020 26257.32 138073.47 19.02

2020-2021 31116.53 146063.12 21.30

Mean 22097.68 115559.73 18.91

Standard Deviation 6669.25 27365.27 1.41

CV 30.18 23.68 7.46

CAGR -0.57 -0.64 -0.76

Source: Compiled from annual report of HDFC Bank

67
The above table shows the Net Profit Ratio. The average Net Profit Ratio is 18.91 and

its standard deviation is 1.41. The coefficient of variation is 7.46 and the CAGR follows

a negative trend. Here the bank has a very high net profit ratio and is above its idle ratio.

Hence this indicates there is high efficiency as well as profitability for the company and

they have to maintain this same satisfactory level as well.

Showing Net Profit Ratio

Return On Investment

68
 It establishes the relationship between return and investment. It is also called the

accounting rate of return.

ROI = Profit before interest and tax× 100

Capital employed

Showing Return on Investment

Year Operating Profit Capital Employed Return On Investment

2016-2017 61899.12 807130.88 7.67

2017-2018 72771.28 1018170.60 7.15

2018-2019 90478.57 1189432.50 7.61

2019-2020 107375.94 1463116.90 7.34

2020-2021 113340.49 1674268.40 6.77

Mean 89173.08 1230423.86 7.31

Standard Deviation 21965.88 345345.01 0.37

CV 24.63 28.07 5.01

CAGR -0.63 -0.59 -0.82

Source: Compiled from annual report of HDFC Bank

The above table shows the return on investment. The average return on investment is

69
7.31and its standard deviation is 37. The coefficient of variation is 5.01 and CAGR

follows a negative trend.The figure shows that the bank is not having sufficient return

on capital employed. Its ideal ratio is 15%. Overall banks profitability is low and

shows that there is inefficient use of capital employed.

Showing Return on Investment

Return on shareholder fund

This is the ratio of net profit to shareholder’s fund or net worth. It measures the

profitability from shareholders point of view. This ratio is called the ‘mother of all the

70
ratio’. This is perhaps the most important ratio because it measures the return that is

earned on the owner’s capital. It is calculated as follows:

Return on shareholders fund = Net profit after interest and tax× 100
Shareholders fund

Showing Return on shareholder fund

Year Net Profit Shareholder Fund Return On Shareholder Fund

2016-2017 14549.64 89462.35 16.26

2017-2018 17486.73 106295.00 16.45

2018-2019 21078.17 149206.35 14.13

2019-2020 26257.32 170986.03 15.36

2020-2021 31116.53 203720.83 15.27

Mean 22097.68 143934.11 15.49

Standard Deviation 6669.25 46684.93 0.93

CV 30.18 32.43 5.99

CAGR -0.57 -0.54 -0.81

Source: Compiled from annual report of HDFC Bank

The above table shows the return on shareholder funds. The average return on

investment is 15.49 and its standard deviation is 0.93. The coefficient of variation is 5.99

71
and CAGR follows a negative trend. The ideal ratio of return on shareholders’ funds is

15%. From the above figure it is clear that banks' Return on shareholders’ fund in all the

5 years is more than the standard ratio, which means there is better utilization of the

owner's fund and higher productivity.

Showing Return on Shareholder Fund

72
COMPARATIVE BALANCE SHEET

showing comparative balance sheet of financial year 2015 –16 to 2016 -2017

Amount Of
Particulars Percentage Of
2015-16 2016-17 Increase
Increase/Decrease
/Decrease
Capital And Liabilities
Capital 505.64 512.51 6.87 1.36
Reserves and Surplus 72172.13 88949.84 16777.71 23.25
Deposits 546424.19 643639.66 97215.47 17.79
Borrowings 53018.47 74028.87 21010.40 39.63
Other Liabilities and Provisions 36725.13 56709.32 19984.19 54.42
Total 708845.57 863840.19 154994.62 21.87
Assets
Cash And Balances with RBI 30058.31 37896.88 7838.57 26.08
Balances with Other Banks 8860.53 11055.22 2194.69 24.77
Investments 163885.77 214463.34 50577.57 30.86
Advances 464593.96 554568.20 89974.24 19.37
Fixed Assets 3343.16 3626.74 283.58 8.48
Other Assets 38103.84 42229.82 4125.98 10.83
Total 708845.57 863840.19 154994.62 21.87

In the financial year 2016-17 the fixed assets of the bank Increased by 8.48 % from the

previous year. There was only 1.36 % increase in the capital of the bank. While the

balances with other banks increased to 24.77 % in the year. The bank deposits increased

by 17.79 % and the advances provided increased by 19.37 %.

73
 showing comparative balance sheet of financial year 2016 -17 to 2017 -2018

Amount Of
Percentage Of
Particulars 2016-17 2017-18 Increase
Increase/Decreas
/Decrease
e
Capital And Liabilities
Capital 512.51 519.02 6.51 1.27
Reserves and Surplus 88949.84 105775.98 16826.14 18.92
Deposits 643639.66 788770.64 145130.98 22.55
Borrowings 74028.87 123104.97 49076.1 66.29
Other Liabilities and 56709.32 45763.72 -10945.6 -19.3
Provisions
Total 863840.19 1063934.3 200094.13 23.16
Assets
Cash And Balances with 37896.88 104670.47 66773.59 176.2
RBI
Balances with Other Banks 11055.22 18244.61 7189.39 65.03
Investments 214463.34 242200.24 27736.9 12.93
Advances 554568.2 658333.09 103764.89 18.71
Fixed Assets 3626.74 3607.2 -19.54 -0.54
Other Assets 42229.82 36878.7 -5351.12 -
12.67
Total 863840.19 1063934.3 200094.13 23.16

During the financial year 2017 -2018 the fixed asset decreased by .54 % and also other

asset and other liability and provision decreases, the bank borrowings increased by 66.29

% and investment increased by 12.93 %.

74
 showing comparative balance sheet of financial year 2017 -18 to 2018 -19

Amount Of
Percentage Of
Particulars 2017-18 2018-19 Increase
Increase/Decrease
/Decrease
Capital And Liabilities
Capital 519.02 544.66 25.64 4.94
Reserves and Surplus 105775.98 148661,69 42885.71 40.54
Deposits 788770.64 923140.93 134370.29 17.04
Borrowings 123104.97 117085.12 -6019.85 -4.89
Other Liabilities and Provisions 45763.72 55108.29 9344.57 20.42
Total 1063934.3 1244540.7 180606.37 16.98
Assets
Cash And Balances with RBI 104670.47 46763.62 -57906.85 -55.32
Balances with Other Banks 18244.61 34584.02 16339.41 89.56
Investments 242200.24 290587.88 48387.64 19.98
Advances 658333.09 819401.22 161068.13 24.47
Fixed Assets 3607.2 4030 422.8 11.72
Other Assets 36878.7 49173.95 12295.25 33.34
Total 1063934.3 1244540.7 180606.37 16.98

During the financial year 2018-2019 borrowings decreased by 4.89 % cash and

Balance with RBI decreased by 55.32.While banks deposits increased by 40.54% and

advances increased by 24.47%.

75
showing comparative balance sheet of financial year 2018 -19 to 2019 -2020

Amount Of
Percentage Of
Particulars 2018-19 2019-20 Increase
Increase/Decrease
/Decrease
Capital And Liabilities
Capital 544.66 548.33 3.67 0.67
Reserves and Surplus 148661.69 170437.7 21776.01 14.65
Deposits 923140.93 1147502.3 224361.36 24.3
Borrowings 117085.12 144628.54 27543.42 23.52
Other Liabilities and Provisions 55108.29 67394.4 12286.11 22.29
Total 1244540.69 1530511.3 285970.57 22.98
Assets
Cash And Balances with RBI 46763.62 72205.12 25441.5 54.4
Balances with Other Banks 34584.02 14413.6 -20170.42 -58.32
Investments 290587.88 391826.66 101238.78 34.84
Advances 819401.22 993702.88 174301.66 21.27
Fixed Assets 4030 4431.92 401.92 9.97
Other Assets 49173.95 53931.09 4757.14 9.67
Total 1244540.69 1530511.3 285970.57 22.98

During the financial year 2019-2020 Balance with other banks decreased by 58.32and

banks advance, investments and deposit increased.

76
showing comparative balance sheet of financial year 2019 -20 to 2020 -2021

Amount
Percentage Of
Particulars 2019-20 2020-21 Of
Increase/Decrea
Increase
se
/Decrease
Capital And Liabilities
Capital 548.33 551.28 2.95 0.54
Reserves and Surplus 170437.7 203169.55 32731.85 19.2
Deposits 1147502.3 1335060.2 187557.93 16.34
Borrowings 144628.54 135487.32 -9141.22 -6.32
Other Liabilities and 67394.4 72602.15 5207.75 7.73
Provisions
Total 1530511.3 1746870.5 216359.26 14.14
Assets
Cash And Balances with RBI 72205.12 97340.74 25135.62 34.81
Balances with Other Banks 14413.6 22129.66 7716.06 53.53
Investments 391826.66 443728.29 51901.63 13.25
Advances 993702.88 1132836.6 139133.75 14
Fixed Assets 4431.92 4909.32 477.4 10.77
Other Assets 53931.09 45925.89 -8005.2 -
14.84
Total 1530511.3 1746870.5 216359.26 14.14

During the financial year 2020-2021 borrowings decreased by 6.32% and other assets

decreased by 14.84 and deposit, investments, advances increased.

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 Chapter 5

Bibliography,Annexure

78
 FINDINGS

● During the study period the current ratio of banks is close to the ideal ratio 2:1,during
the 3 years from 2017-18 to 2019-20.The ratio was slightly low in the year 2016-17
and beyond the standard ratio in 2020-21.

● The ideal debt equity ratio is 1:1. During the five years of study the debt equity ratio
is very high. This indicates the higher proportion of debt content in the capital
structure.

● The ideal proprietary ratio is high during the year 2020-21.The bank having low
ratio during the last four years from 2016-17 to 2020-21.A low ratio indicates the
firm is more dependent on creditors for its working capital.

● During the period of study the solvency ratio is satisfactory.

● Fixed asset to net worth ratio is less than one; it indicates that all fixed asset are
purchased out of the proprietor's fund and a part of the proprietor fund is invested in
working capital.

● The Return on investment shows that the bank is not having the sufficient return on
capital employed. Its ideal ratio is 15% and overall bank profitability is low.

● During the period of study net profit is very high and is above ita ideal ratio its
indicates the bank have high profitability.

● In the financial year 2016-17 the fixed assets of the bank Increased by 8.48 % from
the previous year. There was only 1.36 % increase in the capital of the bank. While
the balances with other banks increased to 24.77 % in the year. The bank deposits

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 increased by 17.79 % and the advances provided increased by 19.37 %..

● During the financial year 2017 -2018 the fixed asset decreased by .54 % and also
other asset and other liability and provision decreases, the bank borrowings
increased by 66.29 % and investment has increased by 12.93 %..

● During the financial year 2018-2019 borrowings decreased by 4.89 % cash and

Balance with RBI decreased by 55.32. While bank deposits increased by 40.54%

and advances increased by 24.47%.

● During the financial year 2019-2020 Balance with other banks decreased by

58.32and banks advance, investments and deposit increased

● During the financial year 2020-2021 borrowings is decreased by 6.32% and

other assets decreased by 14.84 and deposit, investments, advances is

increased

SUGGESTIONS

5.2 Banks should focus on increasing the current assets and decreasing the current

liability so as to maintain a satisfactory level of current ratio.

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5.3 The bank needs to improve the long-term financial position

5.4 The bank should follow the recommendations of financial auditor,

5.5 The bank should take steps to improve its overall efficiency.

5.6 The bank has to reduce its overall debt.

CONCLUSIONS

The study mainly concentrates on the analysis of financial performance and soundness

of the bank. It helps to understand the working of the bank. From the study of financial

performance of HDFC BANK it can be concluded that the bank has a satisfactory

position with regard to profitability and the bank needs to improve its liquidity and

solvency. If the bank continues to work with more efficiency, it can have greater success

in the near future

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 Chapter 5

Conclusion, Suggestion

82
BOOKS

1. Jain, S. (2008). Cost and management accounting. Ludhiana: Kalyani

Publishers.

2. Introduction to Management Accounting – Horngren and Sundlem

3. Principles of Management Accounting – Manmohan & Goyal

WEBSITE

● https://www.wikipedia.org/

● https://shodhganga.inflibnet.ac.in/

● https://www.moneycontrol.com/

● https://ratiosys.com

● https://www.investopedia.com

● ● www.google.com

● ● www.HDFCbank.com

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ANNEXURE

84
ANNEXURES:

LIMITATIONS:

1. A company’s profitability, liquidity, solvency and efficiency may be

affected by numerous factors but in this research work the impact that

Financial Leverage on them has been analyzed.

2. For this research work, the impact of Financial Leverage has been studied

with regard to the profitability, liquidity, solvency and efficiency of the

selected Indian companies from seven different industries. Financial

Leverage may have several other effects on a company which are beyond

the purview of this research.

3. Field of study is limited to only Indian industries and the companies

belonging to them. There are so many other companies in foreign

countries which may be considered for analysis. But since the study is

limited to Indian industries, only Indian listed companies have been

selected for the study.

4. Financial analysis is based on selected accounting ratios.

5. The study covers only financial information and ignores completely

qualitative aspects. Hence performance valuation of the company from

qualitative aspects has been ignored.

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6. The accuracy of the study depends upon the accuracy of the financial data

of the respective company. Thus this study carries such limitations.

7. For the research work primary and secondary data can be used but

Considering the nature of this research work only secondary data are used.

8. A Study is undertaken by individual researcher therefore all the limitation

of the individual researcher exists here also

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