PROJECT REPORT On A COMPARATIVE ANALYSIS OF HDFC BANK FIXED DEPOSIT

Submitted in the partial fulfillment of the requirement of the degree of Master of Business Administration (Business Economics)

(Session: 2007-09)
Under the Supervision of: Dr. Sanjay Nandal Faculty Deptt. Of Business Economics Submitted By: SURENDER SINGH Roll No-4907 MBA (BE) 4th Sem

Submitted To:

Department Of Business Economics

Maharshi Dayanand University, Rohtak

DECLARATION:

I, Surender Singh Roll No. 4907 M.B.A (B.E) 4th Semester of Department of Business Economics hereby declare that the project Report entitled A Comparative Analysis Of HDFC fixed Deposit is an original work and the same has not been submitted to any other institute for the award of any other degree. The seminar presentation was made on ________. The suggestions as approved by the faculty were dully incorporated

Signature Of Supervisor

Signature of the Candidate

Countersigned Head of Department

ACKNOWLEDGEMENT:
I want to clarify that this is not just a formal acknowledgement but also a sincere note of thanks and regard from my side. I feel a deep sense of gratitude and affection for those who were associated with the project and without whose cooperation and guidance this research could not have been conducted properly. I would especially like to thank Dr. SANJAY NANDAL faculty of our (Department of Business Economics-M.D.U Rohtak) For taking keen interest in the completion of my report. Last but not least I dedicate this effort of mine to those persons who are light of my life: My Father, Mother, Friends who have been behind every successful endeavor in my life.

(Surender singh)

PREFACE

I am the sort of person who backs himself for whatever he goes. That is why whenever someone used to mention about experienced people getting all the preference in jobs, I used to get assertive. I always persisted that I can compete with very best in the industry and it does not make sense to benefit someone on the basis of experience alone. But my slumber was broken in the very first day in the market. All my theoretical knowledge and percentage counted for nothing. By the time I finished my training I had firm belief in the old saying "Experience is the best teacher" .These eight weeks have taught me what all my education failed to. Now I feel more confidence about myself and have hardened to core. This training taught me what to expect from others. How the things move in corporate world, what the market has for you in store and much more, which can't be expressed in words? It is a great experience and one should try to take advantage of the opportunity given to him/her. I thank everyone who has contributed to make this experience complete and stimulating.

TABLE OF CONTENTS
Page No.

Declaration Acknowledgement Preface Executive Summary

Chapter 1 (a) Introduction to project 11-16 (b) Company profile
Background Business Objective Board of Directors Profit and Loss Account Balance Sheet Awards Won 18

II III IV

19 20 21

23 24

(c) H D FC F i x e d D e p os i t s
HDFC Fixed Deposits Benefits Features of Fixed Deposits 28 29 33

S c h e me o f F i x e d D e p o s i t s

38 5

Interest on Fixed Deposits

47

C o mp a r i s o n o f HD F C F i x e d D e p o s i t s Wi t h Other Banks

50

Chapter 2 (a) Research Methodology 56 (b) Research Method used Chapter 3 (a) Findings (b) Reccomendations Annexure 69 71 74 60

E X E C UT I V E S UM M A R Y

Market research is the function that links the consumer, customer, and public to the marketer through information-information used to identify and define marketing opportunities and problems; generate refine, and evaluate marketing actions; monitor marketing performance; and improve understanding of marketing as a process. Speaking in laymens language marketing research is the systematic and objective identification, collection, analysis, dissemination and use of information for the purpose of assisting management in decision making related to the identification and solution of problems (and opportunities) in marketing. As marketing Research is systematic, thus, systematic planning is required at all stages of the marketing research process. Marketing Research attempts top provide accurate information that reflects a true state of affairs. Therefore the motto of every researcher should be, Find it and tell it like it is. Basically marketing research is of two types: 1. Problem identification Research 2. Problem Solving Research

PROBLEM IDENTIFICATION RESEARCH : -

It is the process under which complete survey is being done about the s u b j e c t i n w h i c h e v e r y i m p o r t a n t c o n c ep t i s b e i n g c o v e r e d a n d problematic area is detected. Survey can be regarding available resources, appropriation of available funds, competitors policy, etc. Under this process we can under go following researches: -

1. Market Potential Research 2. Market Share Research 3. Image Research 4. Market characteristics Research 5. Sales Analysis Research 6. Forecasting Research 7. Business Trends Research

P R O B L E M S O L VI N G R E S E A RC H : -

In this process after finding the problem we try to find out the solution and giving the recommendations to the concerned party. After this process it becomes easy for the institution to grab the opportunities. For problem solving we can go for following researches: 1. Segmentation research 2. Product research 3. Pricing research 4. Promotion research 5. Distribution research

NAT UR E O F JO B AS S I G N ED

 T h e j o b a s s i gn e d w a s t o c o n d u c t i n t e r v i e w s w i t h c u s t o m e r s o f various fixed deposits to surface and define their key p r e f e r e n c e s a n d p r i o r i t i e s w h i l e s e l e c t i n g d ep o s i t o f a n y b a n k . To study the attitude of depositors by knowing their

expectations and viewpoint about fixed deposits. Prepare statistical findings and analysis and reports related to t h e c u s t o m e r s c h o i c e f o r f i x e d d ep o s i t s . T o p r ep a r e a n d d e f i n e s u r v e y q u e s t i o n n a i r e t o f i n d t h e l e v e l a n d pattern of considerations of customers while choosing any bank for d ep o s i t i n g t h e m o n e y .

To conduct discussions and interviews to collect maximum possible information. To correlate the data collected using Kendalls Coefficient of concordance and mode (measure of central tendency).

I N T R O D UC T I O N O F T H E T O P IC

:-

10

Topic

of

the project

is

on

Market

research

for

C o mp a r a t i v e

a n a l y s i s o f HD F C d e p o s i t s T h e a n a l y s i s o f t h e p r o j e c t w a s b a s e d o n the Information fetched from various depositors coming to the banks. For the study of fixed deposits the primary data was collected based on a survey research, using a structured questionnaire with both open ended and closed ended questions.

Th e s a m p l e s i z e w a s a r o u n d 2 0 S t u d e n t s f r o m d i f f e r e n t c u s t o m e r s o f banks the mode of the survey was of personal interview of the depositors of the banks fill the questionnaire. Secondary data was also taken from the various annual reports, brochures of different banks and the Internet.

After collecting the data proper analysis has been done by using s t a t i s t i c a l t o o l s s u c h a s K en d a l l s m e t h o d a n d m o d e ( m e a s u r e o f central tendency). O n a n a l y s i s f i n d i n gs a r e b e i n g p r e s e n t e d i n s u c h a f o r m s o t h a t i t c a n give proper results easily understandable by layman.

The project concludes with results and findings of the analysis, which we hope, will provide enough information about the factors influencing deposits coming to any bank.

Re g ul a r f i x e d d e po s i t s i n I n di a : Gr e a t w a y t o ea r n mor e i nt e r e s t t h a n s a vi n g s ac c ou n t : -

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F i x e d d ep o s i t s c a n h e l p y o u s e c u r e y o u r h a r d e a r n e d m o n e y f o r l o n g durations while giving you higher risk-free returns on your money than regular savings account. With the stock market performing p h e n o m en a l l y , t h e p o p u l a r i t y o f f i x e d d e p o s i t s h a v e d e c l i n e d b u t , they are regaining ground at a gradual pace. As the name implies a fixed deposit is a financial instrument meant for people who want to deposit their money with banks for a fixed duration ranging from 15 days to 5 years and above, and earn a higher rate of interest on their money than conventional savings account. After the maturity of fixed deposit the investor gets a return which is equal to the principal plus the interest earned on this principal over the entire duration of fixed deposit. F i x e d d ep o s i t s h a v e b e e n v e r y p o p u l a r a m o n g i n v e s t o r s a n d k e e p i n g this fact in mind banks in India have a wide variety of fixed deposit schemes to suit almost every need.

In t e r e s t r at e s o n r e g u l ar f i x e d d e p o s i t s
At current prevailing rates a regular fixed deposit can earn you an interest up to 8.75% and senior citizens who opt for such a fixed deposit scheme are eligible for an additional 0.5 percent increase, which makes the effective interest rate 9.25% for certain fixed deposit intervals. F i x e d d ep o s i t s t h o u gh a r e i n v e s t e d f o r a c e r t a i n t i m e p e r i o d b u t t h e y can be a source of money and funds can be withdrawn partly, from 12

fixed deposits in times of need. Depending on the bank's policies, t h i s w i t h d r a w a l m a y o r m a y n o t a t t r a c t p en a l t y .

Fe at u r e s o f a r eg u l ar fi x e d d e p o s i t
The interest rates on regular fixed deposits are time based and fixed deposit for longer duration attract better interest rates. For example from HDFC Bank, a fixed deposit amount below 15 lakhs of 15 - 29 days will earn 5.50% interest rate for general public and 6.00% for senior citizens. For the same amount , a fixed deposit of 100 - 101 days will earn you an interest rate of around 6.75% and 7.25% if you are a senior citizen. Similarly, for an amount below 15 lakhs a fixed deposit between the period 2 years 15 days - 2 years 16 days will g i v e a 8 . 7 5 % i n t e r e s t r a t e r e t u r n a n d t h i s w i l l b e 9 . 2 5 % f o r s en i o r citizens.

The power of compounding on your side

The earning potential of fixed deposit is greatly increased by the power of compounding. If the fixed deposit allows the potential to earn compound interest by reinvesting the principal amount along with the interest earned during the period, it can dramatically i n c r e a s e t h e a m o u n t y o u w i l l g e t a t t h e m a t u r i t y o f f i x e d d ep o s i t . T o get the maximum returns one should compare fixed deposit schemes from various banks before settling for one. I f y o u h a v e s u r p l u s f u n d s , i n s t e a d o f k e e p i n g t h e m i n y o u r s a v i n gs account and thereby earning a paltry interest rate, you can add them

13

t o y o u r f i x e d d e p o s i t . Th i s w a y t h e f u n d s w i l l e a r n a m u c h h i g h e r rate of interest.

How to open a fixed deposit?

T h e p r o c e s s o f o p en i n g a f i x e d d e p o s i t i s v e r y s i m p l e a n d t h i s i s accessible to almost all section of Indian population. For example: resident individuals , Hindu undivided families, sole proprietorship firms, partnership firms, limited companies, trust accounts etc. all can open fixed deposits. Banks in India have a certain minimum i n i t i a l d e p o s i t l i m i t l i k e R s . 1 0 , 0 0 0 t o o p en a f i x e d d e p o s i t a n d t h e value of fixed deposit can be increased in multiples of a minimum amount (for example Rs. 5000). These limits can vary and also depend upon rural, urban or semi-urban nature of population. The limits are very low for rural areas so that even those with a low i n c o m e s c a n o p en a f i x e d d e p o s i t . Calculation of interest rates and tax deductions on regular fixed deposit How the interest rate is calculated on your fixed deposit varies from bank to bank. For a fixed deposit of six months or above the banks may calculate the

interest on a quarterly basis. In case the tenure of fixed deposit is less than six months the interest is calculated at maturity as simple interest. The compounding factor or interest for re-investment is calculated on a quarterly basis. E v e r y f i x e d d ep o s i t i s s u b j e c t t o t h e I n d i a n i n c o m e t a x r e g u l a t i o n s prevalent from time to time. Keeping these regulations in mind banks

14

deduct tax at source from your fixed deposits and issue you a TDS certificate for the same. Regular fixed deposits bring increased returns on your savings as compared to regular fixed deposits. These are great instruments for i n v e s t i n g m o n e y . Th e f a c t t h a t t h e y c a n b e u s e d a s g u a r a n t e e f o r loans and financial transactions make them even more valuable.

Documentation
Applicants must satisfy the following documentation requirements:

Identity proof Proof of communication address Self cheque (if the applicant is not visiting the branch for account opening)

Fixed Deposit Eligibility

Resident Indian.

OBJECTIVE

The basic objective of my comparative analysis was to analyze t h e g e n e r a l v i e w o f p u b l i c o n H D F C f i x e d d ep o s i t s . T h e m a i n a i m o f t h e p r o j e c t i s t o s t u d y t h e c u r r e n t p o s i t i o n o f H D F C d ep o s i t s i n t h e market by taking public view with the help of questionnaire and then afterwards study the feedback got from the same.

Th e p r o j e c t a l s o f o c u s e s o n t h e p e o p l e i n c l i n a t i o n t o w a r d s a particular criterion after interest rates, which they consider while choosing any bank for their fixed deposits. My research also browsed many different reasons which people take into account when they deposit their money in banks.

15

Th e r e s e a r c h s o n e o f t h e a i m s w a s t o f i n d o u t t h e c u r r e n t position of HDFC deposits as compare to other competitive banks, finding out different areas of improvement where HDFC is lagging behind in the race of deposits with other banks.

Company profile
16

C O M P AN Y P R OFI L E

B AC K G R OU N D
HDFC Bank was incorporated in August 1994, and, currently has an nationwide network of 1412 Branches and 3275 ATM's in 528 Indian towns and cities.and w i t h t h e p r i m a r y o b j e c t i v e o f m e e t i n g a social need that of promoting home ownership by providing longterm finance to households for their housing needs.

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HDFC was promoted with an INITIAL SHARE CAPITAL of Rs. 100 .

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 liberalisation of the Indian Banking Industry in 1994. The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank in January 1995.

B US I N E S S OBJ E C T I VE
The main objectives of HDFC are as follows: To enhance residential housing stock in the country through the provision of housing finance in a systematic and professional manner, To promote home ownership, by enabling a common man to buy a house by providing him loans and advances. Another objective is to increase the flow of resources to the housing sector by integrating the housing finance sector with the overall domestic financial markets.

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O R G AN I S AT I O N AL G OAL S

HDFCs main goals are as follows: Develop close relationships with individual households, Maintain its position as the premier housing finance institution in the country, Transform ideas into viable and creative solutions, P r o v i d e c o n s i s t e n t l y h i gh r e t u r n s t o s h a r e h o l d e r s , a n d To grow through diversification by leveraging off the existing client base.

B O A R D O F DI R E C T OR S

HDFC is a professionally managed organization with a board of d i r e c t o r s c o n s i s t i n g o f e m i n en t p e r s o n s w h o r e p r e s e n t v a r i o u s f i e l d s including policy finance, taxation, construction to deliver and urban policy value & to development. The board primarily focuses on strategy formulation, and control, designed increasing shareholders.

Board of directors: Mr. Deepak S Parikh Chairman Mr. Keshub Mahindra Vice Chairman Ms. Renu S Karnad ... Executive Director

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Mr. K. M. Mistry .. Managing Director Dr. S.A Dave Mr.D.N Ghosh Mr. S. Venkitaramanan Mr. Ram S Tarneja Mr. N. M Munjee Mr.D.M Satwalekar

P R O F I T A N D L O S S A C C O UN T F O R T H E Y EA R E N D E D MARCH 21, 2008 P A R T I C UL A R S A M O UN T ( A S A M O UN T ( A S ON 31, ON 31, MARCH M A RC H 2 0 0 7 ) 2008) IN C OM E Op e r a t i n g 3 298, 8 8, 1 0 , 6 88 294 3 , 0 5 , 25 , 83 8 expenses 1 01 ,7 2, 3 1 , 81 8 1 25 , 87 , 7 3 , 83 2 Fe e s a n d o t h e r charges 9, 83 , 5 9, 21 9 8, 98, 5 3 , 5 95 Ot h e r i n c o m e 3 41 0, 4 4 , 0 1 , 7 25 30 77 , 91 , 5 3 , 5 29 EXP E N DI T U R E AN D C HA RG E S In t e r e s t a n d o t h e r charges Staff expenses Es t a b l i s h m e n t expenses Ot h e r e x p e n s e s De p r e c i a t i o n 195 9, 4 2, 84 , 90 5 64 , 89, 5 0 , 91 9 23 , 05 , 3 7, 20 9 73 ,5 8, 92, 1 7 3 1 8, 6 8, 7 9 , 9 84 14 ,0 0 , 0 0 , 0 0 0 21 5 3 , 65 , 45 ,1 90 187 3 , 66, 3 1 , 7 62 5 8, 15 , 85 , 3 0 2 22, 7 1 , 6 2, 1 5 2 61, 81 , 4 2, 4 25 23, 5 8, 3 2, 8 89 11 ,0 0 , 0 0 , 0 0 0 205 0, 93 , 5 4 , 5 3 0
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1 25 6, 7 8, 5 6, 5 3 5 220 , 20 , 0 0 , 0 0 0 1 03 6, 5 8,5 6, 5 3 5

10 26, 97 , 98 , 9 99 175 , 20 , 0 0 , 0 0 0 85 1, 7 7 , 98, 99 9

Pr o v i s i o n fo r contingencies P ROF I T B E F OR E TA X Le s s : P r o v i s i o n fo r t a x P ROF I T A F T E R TA X AVA I L A B L E F OR

APPROPRIATION

265 , 0 0 , 0 0 , 0 0 0 282, 83 , 0 6 , 5 7 0 5 ,0 0, 0 0 , 0 0 0 4 23 , 5 0 , 5 2, 4 4 4 5 9,3 9, 6 6, 1 0 5 85 , 31 , 4 1 6 1 03 6, 5 8,5 6, 5 3 5

23 0 , 0 0 , 0 0 , 0 0 0 24 2, 1 8, 97 , 3 1 4 4, 00 , 0 0 , 0 0 0 33 293 , 3 1 , 1 3 4 4 2, 65 , 7 0 , 5 5 1 -85 1, 7 7 , 98, 99 9

APPROPRIATIONS

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BALANCE SHEET as at March 31, 2008

P A R T I C UL A R S S OU RC E S OF F UN DS Share capital Re s e r v e a n d surplus LOA N F UN DS A M O UN T (As on 31, march 2008) 24 9, 1 1 , 68 , 1 7 0 363 3, 9 8, 6 2, 0 65 3 883 , 1 0 , 3 0 , 23 5 3664 7 , 3 9, 5 5 , 9 94 4 05 3 0, 4 9, 86 , 2 29 Amount (As on 31, march 2007) 24 6, 61 , 3 2, 0 60 3 14 7, 1 7 , 5 7 , 625 3 393 , 7 8, 8 9, 685 28684 , 0 3 , 87 , 1 3 3 3 20 7 7 , 8 2, 8 7 , 1 3 3

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360 1 1 , 4 9, 6 6, 9 1 1 31 30 , 0 3 , 63 , 69 2 69, 3 8, 2 9, 5 4 6 298 2, 1 3 , 2 7 , 6 20

27 97 4 , 27 , 23 , 0 1 7 27 93 , 3 6, 5 6, 5 15 5 4,5 8, 29, 5 4 6 23 96, 4 4 , 4 4 , 0 7 0

( 195 7 , 3 9, 84 , 7 93 ) ( 17 5 8, 4 7 , 1 1 , 1 67 ) 5 67, 86, 3 3 , 5 1 2 ( 27 3 , 0 1 ,5 0 , 25 9) 4 05 3 0, 4 9, 86 , 2 29 7 34 ,1 1 , 5 7 , 62 9 ( 296, 4 8, 2 2, 7 9 2) 320 7 7 , 82, 7 6, 81 8

AP P L I C A T I O N S OF F UN DS Lo a n s In v e s t m e n t s De f e r r e d t a x
Today HDFC Ltd. is a great brand name and has very good reputation among all the nationalized banks. This is due to the fact that HDFC has won many prestigious awards.

A W A R D S F O R H D F C L T D :-

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CNN-IBN Nasscom IT User Award 2008 Business India Forbes Asia Asian Banker Excellence in Retail Financial Services Asiamoney Microsoft & Indian Express Group World Trade Center Award of honour

'Indian of the Year (Business)' 'Best IT Adoption in the Banking Sector' 'Best Bank 2008' Fab 50 companies in Asia Pacific Best Retail Bank 2008

Best local Cash Management Bank Award voted by Corporates Security Strategist Award 2008

For outstanding contribution to international trade services.

Business Today- One of India's "Most Innovative Companies" Monitor Group survey Financial Express-Ernst & Young Award Global HR Excellence Awards - Asia Pacific HRM Congress: Business Today 2007 Dun & 'Corporate Best Bank' Award Best Bank Award in the Private Sector category

'Employer Brand of the Year 2007 -2008' Award - First Runner up, & many more

'Best Bank' Award

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Bradstreet American Express Corporate Best Bank Award 2007 The Bombay Stock Exchange and Nasscom Foundation's Business for Social Responsibility Awards 2007 Outlook Money & NDTV Profit The Asian Banker Excellence in Retail Financial Services Awards Asian Banker 'Best Corporate Social Responsibility Practice' Award

Best Bank Award in the Private sector category. Best Retail Bank in India

Our Managing Director Aditya Puri wins the Leadership Achievement

Mr. Deepak Parekh, Chairman, HDFC Ltd. Conferred with the

prestigious Padma Bhushan award.. HDFC receives award for The Best Presented Accounts of

the institute of chartered accountants of India for 2004-05 HDFC Ranked as Indias Third Best Managed Company by

Finance Asia 2005 Mr. Deepak Parekh awarded the 'Hall of Fame' award by

Outlook Money magazine.

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HDFC receives the 'Dream Home' award for the best Housing

Finance Company for 2004 from Outlook Money magazine Awards galore by HDFC at the 44th ABCI Awards!!! 5th Best Company to work for in India, ranked by Business

Today in November 2004

HDFC fixed deposits

F I X E D D E P O S I T S : - F i x e d d ep o s i t i s t h a t d e p o s i t p r o v i d e d b y b a n k s in which money can be deposited after equal intervals or after any p e r i o d o f t i m e a s p r o v i d e d u n d e r t h e r e s p e c t i v e s c h em e o f b a n k . Interest is provided by bank as in accordance with the interest rates of the scheme. Interest rate may vary from time to time as well as according to the amount deposited.

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HDFC been

FIXED able to

DEPOSITS: mobilize

HDFC

has

instituted 8 lack

well-defined depositors.

s e r v i c e s t a n d a r d s f o r b o t h d ep o s i t o r s a n d d e p o s i t a g e n t s . H D F C h a s deposits from over Outstanding deposits grew from Rs. 1,458 crores in March 1994 to Rs. 7,840 crores in March 2005. Much of this success can be attributed to its strong brand image, superior services, security and above all, the significant contribution made by HDFC's deposit a g e n t s . H D F C h a s o v e r 5 0 , 0 0 0 d ep o s i t a g e n t s a n d d i s t r i b u t e s a l l i t s r e t a i l s a v i n g s ( d e p o s i t ) p r o d u c t s p r i m a r i l y t h r o u gh t h i s c h a n n e l . HDFC has been awarded AAA rating for its deposits from both CRISIL and ICRA for the ELEVENTH consecutive year, representing h i g h e s t s a f e t y a s r e g a r d s t i m e l y p a y m en t o f p r i n c i p a l a n d i n t e r e s t .

F i x e d d e p o s i t s i n I n d i a: B e n ef i t s , d r a w b a c k s an d precautions:Any investment portfolio should comprise the right mix of safe, m o d e r a t e a n d r i s k y i n v e s t m e n t s . Wh i l e m u t u a l f u n d s a n d s t o c k s a r e the favorite contenders for moderate and risky investments, fixed deposits, government bonds etc. are considered safe investments. F i x e d d ep o s i t s h a v e b e e n p a r t i c u l a r l y p o p u l a r a m o n g a l a r g e s e c t i o n of investors in India as a safe investment option for a long period.

With fixed deposits or FDs as they are popularly known, a person can

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invest an amount for a fixed duration. The banks provide interest r a t e s d ep e n d i n g o n t h i s l o a n a m o u n t a n d t h e t e n u r e o f d e p o s i t . H e r e are the benefits, drawbacks of fixed deposits and precautions one should take while making such investments.

Benefits

1 . Sa f e t y
T h e f i x e d d ep o s i t s o f r e p u t e d b a n k s a n d f i n a n c i a l i n s t i t u t i o n s regulated by RBI (Reserve Bank of India) the banking regulator in India are very secure and considered as one of the safest investment methods.

2 . Re gu l a r I nc o me
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F i x e d d ep o s i t s e a r n f i x e d i n t e r e s t r a t e s f o r t h e i r e n t i r e t e n u r e , w h i c h is usually compounded quarterly. So, those who want an income on a r e g u l a r b a s i s c a n i n v e s t i n t o f i x e d d ep o s i t s a n d u s e t h e i n t e r e s t r a t e a s t h e i r i n c o m e . Th i s m a k e s a f i x e d d ep o s i t v e r y p o p u l a r w a y o f investing money for retirees.

3. Saves tax
W i t h t h e d i r e c t i v e s o f t h e i n c o m e t a x d ep a r t m e n t s t a t i n g t h a t investment in fixed deposits up to a maximum of Rs.100,000 for 5 years are eligible for tax deductions under section 80 C of income tax act, fixed deposits have again become popular. Fixed deposits save t a x a n d g i v e h i gh r e t u r n s o n i n v e s t e d m o n e y .

Dr a w b a c k s

1 . Lowe r r a t e of r e t u r n s
While the money invested in stock markets may give you a return of 20% the fixed deposits will yield only about 10%. So, the money g r o w s s l o w l y i n t h e c a s e o f f i x e d d ep o s i t s .

2 . Ta x e s
The interest earned on fixed deposits is fully taxable and is added to the annual income of the individual. Gains from stocks are considered capital gains while dividends are tax free. 29

3 . Ri si n g i n f l at i on ca n wi pe ou t t he i nt e r e st benefits
T h e a c t u a l b en e f i t s o r i n c o m e f r o m f i x e d d e p o s i t c a n b e a n n u l l e d b y a rising inflation. Suppose the inflation which is currently at 3 % rises t o a b o u t 6 %, y o u r f i x e d d ep o s i t a t 1 0 % a n n u a l r e t u r n w i l l e f f e c t i v e l y y i e l d o n l y ( 1 0 % - 6 %) = 4 % o f r e t u r n . T h i s r e t u r n w o u l d h a v e b e e n ( 1 0 % - 3 % ) = 7 % i f t h e r a t e o f i n f l a t i o n h a d n o t c h a n g e d . Th i s c a n drastically eat into your fixed deposit income.

P r e c a u t i on 1 . Co mp a n y f i x e d de p osi t s
Company fixed deposits are not considered as safe as fixed deposits from leading banks and financial institutions regulated by the RBI. So, if a company runs into losses or goes bankrupt the money invested into its fixed deposit can be lost. To lure investors, such companies offer a fixed deposit interest rate which is much higher than those offered by banks. Before investing in any company fixed deposit it is advised to check the credentials of the company.

2 . I nt e r e st r at e c o mp ou n di n g pe ri od
T h e i n t e r e s t r a t e s o f f e r e d o n f i x e d d ep o s i t v a r y g r e a t l y w i t h b a n k s a n d t e n u r e s . Wh e t h e r t h e i n t e r e s t r a t e i s c o m p o u n d e d q u a r t e r l y o r monthly will determine how much a person earns from his fixed deposit. A fixed deposit with interest rate compounded monthly will

30

earn more than one which is compounded quarterly. It is therefore a d v i s e d t o s h o p a r o u n d f o r t h e r i g h t f i x e d d e p o s i t s c h em e .

3. Premature ending of fixed de p o si t s

B a n k s w i l l i m p o s e a p en a l t y i f y o u b r e a k y o u r f i x e d d ep o s i t b e f o r e t h e m a t u r i t y p e r i o d . M a k e s u r e y o u g e t t h e f a c t s r i gh t a b o u t t h i s thing. How the bank calculates this penalty and what all charges will it levy when you break a fixed deposit should be noted carefully.

H D F C S TA F F : Human resources are HDFCs most valuable assets. The efficiency of HDFCs staff is evident from the fact that, the number of offices increased from 41 in 1998 to181 currently as against the number of employees which increased from 806 to 1291 during the same period. This staff strength of 1291 includes professionals from the fields of finance, law, accountancy, engineering and marketing.

SU B S I DI A R Y C OM P AN I E S

HDFC Developers Limited. HDFC Investment Limited. HDFC Holdings Limited. HDFC Trustee Company Limited. HDFC Realty Limited. Home Loan services India Private Limited. 31

HDFC Venture Capital Limited. HDFC Venture Trustee Company Limited. HDFC Chubb General Insurance Company Limited. GRUH Finance Limited. HDFC Asset Management Company Limited. Intel net global Services Private Limited. Credit Information Bureau (India) Limited. HDFC Bank Limited.

32

LATEST

INTEREST

GRAPH

P R O F I T S O F H D FC

Profits of HDFC for past few years are showing a rising trend. It has showing average growth rate of 24.28% in 2005, 23.33% in 2006, 20.53% in 2007, and 22.39% in 2008.

33

Profits for these years can be shown with the help of following schedule:

PRO F I T S O F HD F C 20 04
PROFIT AFTER TAX PROFIT BEFORE TAX

2005 5 80 691

2006

2007 85 2 1 027

2008 1 03 7 1 25 7

474 556

690 85 1

After analyzing above table we can say that profits of HDFC Ltd are increasing at fluctuating rate.

The above schedule can be explained with the help of following g r a p h . Th e b e l o w s h o w n g r a p h r e p r e s e n t s t h a t H D F C p r o f i t s h a v e been rising continuously after 2001.

34

1400 1200 1000 800 600 400 200 0 2004 2005 2006 2007 2008 profit after tax profit before tax

The above graph also shows that HDFC profits are rising every year. For the years not shown in the graph growth rate is as follows: starting from 26.67% in 1995-96, 18.34% in 1996-97 to 22.46% in 2000-01.There is no consistency in the change in profits sometimes it is increasing to decreasing in few years.

HDFC Ltd today is competing to leading Indian banks due to proper management of funds and resources available. Allocation of HDFC Ltd resources can be shown with the help of 35

profit

and

loss

account.

Also

there

are

different

sources

and

a p p l i c a t i o n s o f f u n d s o f H D F C L t d . Th e r e c a n b e d i f f e r e n t s o u r c e s o f funds like share capital, reserve and surplus, loan funds. Whereas applications of funds can be loans given to general public, investments made, current assets, fixed assets, which play very important role in development of any organization.

Proper allocation of funds like expenses and incomes along with composition of assets and liabilities can be shown with the help of following profit and loss account and balance sheet: -

C UR R E N T D E P O S I T S C H E M E S O F H D F C : -

The current deposit rate scheme provided by HDFC is as follows: -

PERIOD Rate of interest (% p.a) (Months) Monthly Non Annual *Cumulative Income Cumulative Income Option Plan Option plan Quarterly HalfYearly

36

12 13-59 60-84

7.25 7.00 7.25

7.30 7.05 7.30

7.35 7.10 7.35

7.50 7.25 7.50

7.50 7.25 7.50

*Interest compounded annually. Senior citizens Additional rate of

0.25 % p.a T h i s a b o v e - m en t i o n e d s c h e m e i s a v a i l a b l e f o r a l l t h e i n d i v i d u a l s e i t h e r t h e y a r e c u s t o m e r s o f H D F C L t d o r n o t . Th e r e i s o n e m o r e scheme, which is specially designed for HDFC Ltd customers. The scheme is as follows: home loan

The current deposit rate scheme provided by HDFC to home loan customers is as follows: -

PERIOD Rate of interest (% p.a) (Months) Monthly Non Annual *Cumulative Income Cumulative Income Option Plan Option plan Quarterly HalfYearly 12-59 60-84 7.50 7.75 7.55 7.80 7.60 7.85 7.75 8.00 7.75 8.00

*Interest compounded annually *0.25% p.a additional for senior citizens

37

VARIABLE RATE DEPOSIT: - Interest rate on variable deposit is linked to the benchmark rate and will vary from time to time with benchmark rate. Benchmark rate is that rate which is applicable on H D F C f i x e d r a t e d ep o s i t p r o d u c t f o r t h e c o r r e s p o n d i n g p e r i o d . R a t e of interest on the first day of interest period will be applicable for the entire interest period.

Deposit once placed cannot be interchanged between variable rate till the date of maturity.

fixed and

B e n e f i t s o f a n H D FC I n d i v i d u a l D e p os i t :
1. Highest Safety 2. Tax benefit 3. Attractive Returns 4. Quick Loan Facility 5. Nomination Facility 6. Demand Draft Facility 7. High Service Standards 8. Electronic Clearing service

38

T h e s e b e n e f i t s c a n b e e x p l a i n e d a s f ol l o ws : 1. Highest Safety: 'FAAA' and 'MAAA' rating affirmed for the eleventh consecutive year by CRISIL and ICRA respectively. 2. Quick Loan Facility: Loan against deposit is available after 3 months from the date of deposit up to 75% of the deposit amount subject to the other terms and conditions framed by HDFC. Interest on such loans will be 2% above the deposit rate

3. Tax Benefits: TDS: No tax deduction at source on interest from deposits upto Rs. 5,000/- per branch in a Financial Year.

ANNUAL INCOME PLAN PERIOD RATE OF ( MO N T H S ) INTEREST (% PER 12-23 24-35 36-59 ANNUM) 5.75 6.00 6.50

MAXIMUM DEPOSIT WI T H O U T T D S ( R s ) INDIVIDUALS SENIOR CITIZENS 86,000 83,000 76,000 80,000 76,000 71,000 68,000

60-84 6.75 74,000 Maximum Deposit Amount Rs. 5,000

39

4. Attractive Returns: HDFC deposits are Available throughout the year and offer Attractive, Assured returns to investors. Interest rates offered are higher than that offered by most of the commercial banks. 5 . N o mi n a t i o n F a c i l i t y : I n d i v i d u a l d e p o s i t o r s , s i n g l y o r j o i n t l y , c a n nominate under this facility. In case the deposit is placed in the name of a minor only a person lawfully entitled to act on behalf of the minor can make the nomination. Power of attorney holder or any person acting in representative capacity as holder of an office or o t h e r w i s e c a n n o t n o m i n a t e . T h e n o m i n e e s h a l l h a v e t h e r i gh t t o receive the amount due in respect of deposit on death of all the depositors and payment by HDFC to the nominee shall constitute full discharge to HDFC of its liability in respect of the deposit.

6 . D e ma n d D r a f t F a c i l i t y : O u t s t a t i o n d ep o s i t o r s c a n s e n d d e m a n d drafts after deducting demand draft charges. This facility is not available to investors under Easy way Savings. This facility is applicable for places where HDFC does not have an office.

7. High Service Standards: Depositors are offered across the counter services for new deposits, renewals, repayments and loan against deposit facility. Further, all enquiries through email, post, telephone and in person are attended to immediately.

40

8.

Electronic

Clearing

Service:

Th i s

facility

is

provided

to

depositors in select centers whereby the interest will be credited directly to the depositors' bank account. The depositor would receive a credit entry "ECS HDFC" in his passbook/bank statement. Intimation of interest credited would be sent on an annual basis. Your bank will not levy any charge for this facility as per present RBI guidelines. Presently this facility is being offered by us at the following centers ECS Centers: Ahmedabad, Bangalore, Bhubaneshwar, Kolkata, Chandigarh, Chennai, Hyderabad, Jaipur, Kanpur, Mumbai, Nagpur, Nasik, New Delhi, Pune and Vadodara.

Other main features attached to HDFC deposits: -

1.

Mode

of

acceptance :

-Deposits

can

be

made

by

cash/cheques/demand drafts. Cheques and drafts are drawn in the favour of HOUSING DEVELOPMENT FINANCE CORPORATION Ltd or HDFC Ltd and should be marked Account Payee Only.

2 . R e n e w a l s a n d R e p a y me n t : - F o r r e n e w a l s o r r e p a y m e n t o f d e p o s i t , the duly discharged deposit receipt must be surrendered to HDFC at least a week before the date of maturity. A crossed Account Payee

41

cheque favoring the first named depositor will make repayment of deposit amount.

3. Agents: - HDFC invites deposits through the channel of authorized agents. HDFC has agent network of over 50,000 and a depositor b a s e o f a r o u n d 1 mi l l i o n .

4 . P r e ma t u r e Wi t h d r a w a l s : - p r e m a t u r e w i t h d r a w a l s w i l l n o t b e allowed before completion of 3 months from the date of deposit. In case of request for premature withdrawal after the expiry of three months, the rates given in the following table shall apply: -

T A B L E F O R P R E M A T UR E W I T H D R A WA L S : -

Mo n t h s c o m p l e t e d fr o m t h e Ra t e of i nt er e s t pa ya b l e date of deposit 3 less than 6 6 l e s s t h a n 12 N o i nt er e s t 3. 5 0% p. a

42

12 less than ma t u r i t y

F i x e d r at e d ep os i t : 2% l e s s t h an t h e r a t e a pp l i c a b l e f or t he co mp l e t e d p er i o d. Var i a b l e r at e d ep os i t : 2% l e s s t h an t h e r a t e a pp l i c a b l e f or t he co mp l e t e d p er i o d u nd er va r i a b l e r at e d ep os i t pr o du ct o n t he r es pe c t i ve i n t e r e s t r e s e t d at es .

P O S I T I O N O F H D FC D E P O S I T S : H D F C h a s a d e p o s i t o r b a s e o f 1 m i l l i o n . P u b l i c d ep o s i t s c o n s t i t u t e approximately 80% of the total deposits of the corporation. Deposits of HDFC for past few years are as follows: -

43

YEARS 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-03 2 0 02 - 0 5 2003-07 2004-08

DEPOSITS 2 5 12 . 6 9 3 5 02 . 1 9 4423.79 5252.40 6223.85 7249.83 8491.02 9121.55 9337.65 7840.09

Fixed deposits can be shown with the help of following diagram. The graph shows that HDFC deposits are increasing upto 2003-04 and showed a decline in 2007-08.

I N T E R E S T RA T E O N F I X E D D E P O S I T S O F H D F C BANK
When you open a Fixed deposit with HDFC Bank Your i n t e r e s t i s c a l c u l a t e d o n a q u a r t e r l y b a s i s f or d e p o s i t s o f 6 m o n t h s a n d a b o v e F o r t h o s e d e p o s i t s wi t h a t e n u r e o f below 6 months, your interest is calculated at maturity as 44

Simple Interest. The period of Fixed Deposit is calculated in number of days. Interest for re-investment is calculated every quarter, and the Principal is increased to include interest earned during the previous quarter. Tax at source is deducted as per the Income Tax regulations prevalent from time to time.

DOMESTIC TERM DEPOSITS

Period Amount Interest Rate (per annum) 3.00% **Senior Citizen Rates (per annum) 3.50% Effective From

7 - 14 days

Below Rs.15 Lacs Below Rs.15 Lacs Below Rs.15

August 6, 2007 August 6, 2007 July 3, 2008

15 - 29 days 30 - 45 days

5.50% 6.00%

6.00% 6.50%

45

Lacs 46 - 60 days Below Rs.15 Lacs Below Rs.15 Lacs Below Rs.15 Lacs Below Rs.15 Lacs Below Rs.15 Lacs Below Rs.15 Lacs Below Rs.15 Lacs Below Rs.15 Lacs Below Rs.15 Lacs Below Rs.15 Lacs Below Rs.15 6.00% 6.50% July 3, 2008 July 3, 2008 July 3, 2008 July 3, 2008 July 3, 2008

61 - 90 days

6.25%

6.75%

91 - 99 days

7.00%

7.50%

100 - 101 days 102 - 180 days 6 months 1 day - 6 months 14 days 6 months 15 days - 6 months 16 days 6 months 17 days - 9 months 14 days 9 months 15 days - 9 months 16 days 9 months 17 days - 1 year 1 year 1 day - 1 year 14

7.75%

8.25%

7.00%

7.50%

8.00%

8.50%

July 3, 2008

8.25%

8.75%

July 3, 2008

8.00%

8.50%

July 3, 2008

9.00%

9.50%

July 3, 2008

8.75% 9.00%

9.25% 9.50%

July 3, 2008 August 8, 2008

46

days 1 year 15 days - 1 year 16 days 1 year 17 days - 2 years 2 years 1 day - 2 years 14 days 2 years 15 days - 2 years 16 days 2 years 17 days - 3 years 3 years 1 day - 5 years 5 years 1 day - 8 years

Lacs Below Rs.15 Lacs Below Rs.15 Lacs Below Rs.15 Lacs Below Rs.15 Lacs Below Rs.15 Lacs Below Rs.15 Lacs Below Rs.15 Lacs 10.00% 10.50% August 8, 2008 August 8, 2008 August 8, 2008

9.00%

9.50%

9.50%

10.00%

10.00%

10.50%

August 8, 2008

9.50%

10.00%

August 8, 2008 August 8, 2008 August 8, 2008

9.50%

10.00%

9.50%

10.00%

Interest rates are subject to change from time to time. Applicable interest rates will be given as on the date of receipt o f t h e f u n d s b y t h e b a n k . W h en b o o k i n g F D t h r o u g h N e t B a n k i n g please note the actual interest rate being applied on the " C o n f i r m " s c r e e n . Th i s s c r e e n a p p e a r s b e f o r e y o u c o n f i r m y o u r request for opening a new FD.

Only Senior Citizens / Retired Personnel (60 years and above) who are Resident Indians are eligible. The special rates are a p p l i c a b l e o n l y f o r I N R d ep o s i t s .

47

The FD rate applicable for a monthly interest option will be a discounted rate over the standard FD Rate. Please contact the nearest Branch for further information.

For interest rates on Fixed Deposits for Rs. 15 Lacs and above, please contact your nearest HDFC Bank branch.

Effective 01st Dec'06, the interest rate applicable for premature c l o s u r e o f d ep o s i t s w i l l b e l o w e r o f :

the original rate at which the deposit has been booked OR the base rate applicable for the tenure for which the deposit has been in force with the Bank.

The base rate is the rate applicable to deposits of less than Rs.15 lacs.

The Fixed Deposit Advice will be dispatched to your recorded m a i l i n g a d d r e s s w i t h i n 3 - 4 w o r k i n g d a y s o f a c c o u n t o p en i n g .

48

COMPARISON OF INTEREST RATES OF FIXED D E P O S I T S O F D I F F E R E N T NA T I O N A L I S E D B A N K S

Interest rates for fixed deposits for different nationalized banks with respect to different time period can be shown with the help of following graphs: -

Interest rates are for following banks: (1). HDFC

49

(2). State Bank of India (3). Punjab and Sindh Bank (4). Centurian Bank of Punjab (5). Indus Ind Bank (6). Bank of Baroda (7). ICICI Bank (8). IDBI Bank (9). UTI Bank (10). Standard chartered (11). HSBC Bank (12). ING Vyasya (13). Union Bank of India (14). State Bank of Patiala

Table based on 16march 2009 data INTEREST RATES ON FIXED DEPOSITS

In the above table we can see that HDFC Ltd provides interest rates f o r t h e t i m e p e r i o d o f 1- 2 y e a r s t h a t i s 8 . 0 0 % .

In the above table we can see that Public sector banks provide interest rates for the time period of 2-3 years that is 8.00%

50

In the above table we can see that Public sector banks provide maximum interest rates for the time period of 5years above that is 8.00 %.

Below ONE Year

Foreign Banks BANK NAME / DURATION ABN-Amro Bank Barclays Citi Bank DBS Bank Standard Charted Bank The Bank of Nova Scotia 15- 30- 46- 61- 91- 120- 180- 27129 45 60 90 120 179 270 364 days days days days days days days days 4.00 4.50 4.50 4.50 6.50 6.50 6.50 6.50 3.75 4.00 4.25 5.00 5.50 5.50 5.75 6.00 3.50 4.50 5.00 5.50 7.00 7.00 8.00 8.00 4.00 5.50 5.50 5.75 6.00 6.00 7.25 7.25 4.00 4.50 4.50 5.75 6.50 6.50 6.75 6.75 4.75 5.75 5.75 5.75 6.75 6.75 6.75 6.75

The HongKong & Shanghai 3.50 4.25 5.25 5.25 5.25 5.25 5.50 8.00

Indian Banks - Public Sector

15- 30- 46- 61- 91- 120- 180- 271BANK NAME / DURATION 29 45 60 90 120 179 270 364 days days days days days days days days Allahabad Bank Andhra Bank Bank of Baroda Bank of India Bank of Maharashtra Canara Bank Central Bank of India Corporation Bank Dena Bank IDBI Bank Indian Bank Indian Overseas Bank Punjab & Sind Bank Punjab National Bank 4.25 4.25 5.50 5.50 6.75 6.75 7.75 8.25 4.50 4.50 5.25 5.25 6.75 6.75 7.00 7.00 4.75 4.75 5.25 5.25 6.75 6.75 8.00 8.00 4.25 4.50 6.00 6.00 6.25 6.25 7.25 7.50 4.50 4.75 5.50 5.50 7.25 7.25 7.75 8.25 4.00 4.00 5.50 5.50 6.25 6.25 7.00 7.25 4.75 4.75 7.00 7.00 7.50 7.50 7.75 7.75 4.00 5.00 5.00 5.50 6.75 6.75 7.25 8.00 4.25 4.75 5.25 5.25 6.75 7.00 7.50 8.00 5.00 5.00 5.50 5.50 6.75 6.75 8.00 8.00 3.75 4.00 5.00 5.00 6.00 6.00 7.25 7.50 4.25 4.75 5.00 5.00 6.00 6.50 7.50 7.75 4.00 4.00 5.50 5.50 7.50 7.50 7.50 7.50 4.00 4.00 5.00 5.00 5.50 5.50 7.00 7.00 51

Oriental Bank of Commerce 4.25 4.75 6.00 6.00 7.00 7.75 7.75 8.00

State Bank of Bikaner & Jaipur State Bank of Hyderabad State Bank of India State Bank of Mysore State Bank of Patiala State Bank of Travancore Syndicate Bank UCO Bank Union Bank of India United Bank of India Vijaya Bank

4.50 4.50 5.50 5.50 6.75 6.75 7.50 7.50 4.50 4.50 5.25 5.25 6.50 6.50 7.25 7.25 4.25 4.25 5.25 5.25 6.50 6.50 7.25 7.25 4.50 4.50 5.25 5.25 7.00 7.00 7.75 7.75 4.25 4.25 6.00 6.00 7.00 7.00 8.00 8.00 4.25 4.25 5.25 5.25 6.75 6.75 7.50 7.50 3.75 4.25 5.00 5.25 6.00 6.50 7.25 7.50 4.00 5.00 5.50 6.00 6.75 6.75 8.00 8.00 3.75 4.00 5.00 5.00 6.00 6.00 7.25 7.50 4.00 4.50 5.00 5.50 6.50 6.50 7.50 7.50 4.00 4.50 5.50 5.50 6.75 6.75 7.25 7.50

Indian Banks - Private Sector

BANK NAME / DURATION Axis Bank City Union Bank Development Credit Bank HDFC Bank ICICI Bank IndusInd Bank ING Vysya Bank Karnataka Bank Kotak Bank The Bank of Rajasthan Ltd The Catholic Syrian Bank The Dhanalakshmi Bank The Federal Bank The J & K Bank The Karur Vysya Bank The Lakshmi Vilas Bank The South Indian Bank 15- 30- 46- 61- 91- 120- 180- 27129 45 60 90 120 179 270 364 days days days days days days days days 3.00 4.00 5.00 5.00 6.50 6.50 7.00 8.00 5.50 5.50 6.00 6.00 7.25 7.25 8.75 8.75 6.00 6.00 7.00 7.00 8.00 8.00 9.00 9.00 3.50 4.00 4.50 5.00 5.50 5.50 7.00 8.75 3.75 4.00 4.00 4.00 6.25 6.25 7.25 8.00 4.25 5.00 5.00 5.25 7.00 7.00 7.25 7.75 5.00 5.50 5.50 7.00 8.00 8.00 8.00 8.00 4.50 4.50 5.50 5.50 7.50 7.50 8.50 8.50 3.50 4.00 5.00 5.00 6.00 6.00 7.00 7.50 4.25 4.25 4.50 4.50 7.25 8.00 8.75 4.75 5.75 5.50 5.50 7.25 7.25 8.50 8.50 4.75 4.75 5.50 5.50 7.00 7.00 8.00 8.00 4.50 4.50 5.50 5.50 7.00 7.00 8.00 8.00 4.00 6.00 6.00 6.00 7.50 7.50 7.50 7.75 4.50 5.00 5.00 5.00 6.00 6.00 7.50 7.50 5.00 5.50 6.00 6.00 7.00 7.00 8.25 8.50 4.50 4.50 5.50 5.50 7.00 7.00 8.00 8.00

Tamilnadu Mercantile Bank 5.50 5.50 7.00 7.00 7.50 7.50 8.75 8.75

52

TNSC Bank

4.00 4.50 5.00 5.00 6.00 6.00 7.50 7.50

1year-5 year Foreign Banks

BANK NAME / DURATION ABN-Amro Bank Barclays CitiBank DBS Bank Standard Charted Bank The Bank of Nova Scotia The HongKong & Shanghai 1 year < 2 years 8.00 6.25 8.00 9.00 7.00 6.75 8.00 2 years < 3 years 8.00 6.50 8.00 7.50 7.00 6.75 7.50 3 years < 5 years 8.00 6.50 8.00 8.25 7.25 6.75 7.50

Indian Banks - Public Sector

BANK NAME / DURATION Allahabad Bank Andhra Bank Bank of Baroda Bank of India Bank of Maharashtra Canara Bank Central Bank of India Corporation Bank Dena Bank IDBI Bank Indian Bank Indian Overseas Bank Oriental Bank of Commerce Punjab & Sind Bank 1 year < 2 years 8.50 8.00 8.50 8.00 8.75 8.25 8.50 8.25 8.75 8.50 8.00 8.00 8.25 8.50 2 years < 3 years 8.75 8.00 8.75 8.25 8.75 8.25 8.50 8.25 8.75 8.50 8.00 8.50 8.50 8.00 3 years < 5 years 8.75 8.00 8.50 8.25 8.50 8.25 8.50 8.25 8.50 8.25 8.00 8.00 8.50 8.00

53

Punjab National Bank State Bank of Bikaner & Jaipur State Bank of Hyderabad State Bank of India State Bank of Mysore State Bank of Patiala State Bank of Travancore Syndicate Bank UCO Bank Union Bank of India United Bank of India Vijaya Bank

8.00 9.00 8.25 8.10 8.50 8.50 8.50 8.00 8.50 8.00 8.50 8.00

8.00 9.25 8.25 8.25 9.00 8.75 8.75 8.00 8.50 8.00 8.50 8.00

8.00 8.50 8.50 8.50 8.50 8.50 8.50 8.00 8.25 8.00 8.25 8.00

Indian Banks - Private Sector

BANK NAME / DURATION Axis Bank City Union Bank Development Credit Bank HDFC Bank ICICI Bank IndusInd Bank ING Vysya Bank Karnataka Bank Kotak Bank Tamilnad Mercantile Bank The Bank of Rajasthan Ltd The Catholic Syrian Bank The Dhanalakshmi Bank The Federal Bank The J & K Bank 1 year < 2 years 8.55 10.00 10.25 8.00 8.25 8.00 9.00 9.00 8.00 10.00 9.50 9.50 9.00 9.00 8.75 2 years < 3 years 8.25 10.25 10.25 8.00 8.25 8.25 8.50 9.00 8.00 10.00 9.00 9.50 9.00 9.00 8.75 3 years < 5 years 8.00 9.50 9.00 8.00 8.25 8.25 8.50 9.50 8.00 9.75 8.75 9.25 8.50 8.75 8.25 54

The Karur Vysya Bank The Lakshmi Vilas Bank The South Indian Bank TNSC Bank

9.50 9.75 9.00 8.00

9.50 10.00 9.00 7.75

8.00 9.50 8.75 7.50

This data is based on Marc h, 2009

RESEARCH
55

METHODOLOGY

RESEARCH METHODOLOGY S T A T E M E N T O F T H E P R O B L EM A N D I T S S I G N I F I C A NC E
T h e s t u d y i s o n a s p e c i a l s y n o p s i s o n f i x e d d ep o s i t s . I t c o v e r s a s p e c t s l i k e i n t e r e s t r a t e s , s a f e t y o f f u n d s , s e r v i c e s p r o v i d e d e t c . Th e s t u d y is a mode to understand the importance of brand name of the institute, financial aspects while choosing a fixed deposit.

The present study is both qualitative and quantitative in nature as it seeks to find out the aesthetical as well as financial considerations t a k e n b y c u s t o m e r s w h i l e s e l e c t i n g a f i x e d d ep o s i t . R e s e a r c h s i m p l y means a search for facts answers to questions and solutions to problems. It is a purposive investigation. It is an organized enquiry.

56

In other words research means search for knowledge and research methodology is a systematic way to solve the research problem. It is a science of study how the search is actually done. It presents the source of data collection, the sampling procedures and tools of investigation and limitations of the study. Our research project has a specified framework for collecting the data in an effective manner. Such framework is called research design.

The research methodology, which was followed by us, consists of the following steps: -

(1). DEFINING THE RESEARCH PROBLEM AND RESEARCH OBJECTIVES: The definition of the problem includes the study of fixed deposits of various banks, different policies of competitor banks and finding out the unique features of various banks along with the customers preference towards a specific banks fixed deposit.

(2). DEVELOPING THE RESEARCH PLAN: -

The development of research plan has the following steps: DATA SOURCE: The source of the data was primary data only. Primary Data defined as the data, which is collected for the

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first time. It is new in nature. His type of data is collected d i r e c t l y f r o m t h e s o u r c e o f i n f o r m a t i o n . Th e t e c h n i q u e s , w h i c h were involved in collecting the primary data, are personal interview, questionnaire etc.

RESEARCH

APPROACH:

Surveys

are

best

suited

for

descriptive research. Surveys are undertaken to learn about p e o p l e s k n o w l e d g e , b e l i e f s , p r ef e r e n c e s , s a t i s f a c t i o n a n d s o o n and to measure these magnitudes in the general public. Therefore I have done this survey for the descriptive research process. RESEARCH INSTRUMENT: Questionnaire was conducted for

survey had both closed-ended and open-ended. A questionnaire considered a set of question was presented to customers.

SAMPLING PLAN: The sampling plan calls for three decisive SAMPLING UNIT: Sampling unit is who is to be surveyed? The target population must be defined thats to be sampled it is necessary so as o develop sampling frames so that everyone in the target population has an equal chance of being sampled. My sample unit was various Branches of different banks and the account holders in Chandigarh and Panchkula.

SAMPLE SIZE: Sample size is how many people have to be surveyed?

SAMPLING METHOD: Here method used for sampling is convenience sampling.

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Ge n e r a l l y , l a r g e s a mp l e s gi ve mo r e r e s u l t s t h an t he s ma l l e r samples. The sample r e f er s to the nu mb e r of r e s p o n d e n t s fr o m t h e u ni ver s e. My s am p l e s i ze wa s t o t a l 22 B a n k b r a n c h e s o f va r i o u s ar ea s i n Ch an d i ga r h an d P an c h ku l a

CONTACT METHOD: once the sampling plan has determined, the question was how the subject should be contacted, i.e. by telephone, mail or personal interviews. But the single way to contact the subject was personal interviews.

REASEARCH METHODS USED:-

The method used for deriving some important conclusions out of survey conducted and questions being asked by general public the following methods are being used: ( 1 ) . K e n d a l l s me t h o d (2). Mode

(1). KENDALLS METHOD

Kendalls coefficient of concordance, represented by the symbol W, is an important non-parametric measure of relationship. It is used for 59

determining the degree of association among several (k) sets of ranking of N objects or individuals. Kendalls coefficient of concordance (W) is considered an appropriate measure of studying the degree of association among three or more sets of rankings.

The basis of Kendalls coefficient of concordance is to imagine how the given data would look if there were no agreement among several set of rankings, and then to imagine how it would look if there were perfect agreement among several sets.

This method is being used for finding the criteria ranked highest by the maximum depositors while selecting as given to them by H D F C a s c o m p a r e t o o t h e r b a n k s . U n d e r t h i s me t h o d o n l y those potential depositors are considered who know about HDFC deposits.

By using kandells method calculations are being done as follows: -

ASSUMPTION: Before showing calculations here it is being observed that although people consider safety of their funds the most important criteria for selecting any deposit but still they want high interest rates therefore in our question most of people marked interest rates as the most selected criteria. Therefore while finding the choice to which maximum people give importance we have eliminated our option of interest rate as to give unbiased results. 60

PROCEDURE: The procedure for computing and interpreting Kendalls coefficient o f c o n c o r d a n c e ( W) i s a s f o l l o w s . (A) All the objects are ranked by all (k) different respondents and put in the form of k by N matrix (B) The sum of ranks (Rj) for each object assigned by all judges is determined. (C). Rj is determined and then value of s is determined by the formula S = E (Rj Rj) ^ 2

(D). Kendalls coefficient of concordance is worked out by the formula

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S W = -------------------------1 / 1 2 x k^ 2 ( N ^3 N )

W h e r e , k = N o . Of r e s p on d e n t s N = N o. Of o bj e ct s r an ke d

(E). Significant value of W may be interpreted and understood as if the respondents are applying essentially the same standards in ranking n objects under consideration. Kendall therefore suggested that the best estimate of the TRUE ranking is provided by the order of sum of the ranks. The best estimate is related to the lowest value observed amongst Rj.

METHOD: -

Let safety of funds be x1, liquidity be x2, services be x3, additional benefits be x4, market reputation be x5. Now on the basis of calculations made in the table we will calculate as follows: -

HYPOTHESIS ASSUMED: For ranks given by public let us take a Null hypothesis that there i s n o s i gn i f i c a n c e d i f f e r e n c e b e t w e e n t h e s a m p l e s i z e o f 2 0 p e o p l e and their considerations of safety of funds while selecting a fixed deposit. (Ho).

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By putting the values in the formula: 1214.8 W = -------------------------1/12 x 20^2 (5^3 5) W = 0.3037 T o j u d g e t h e s i gn i f i c a n c e o f t h i s W , w e l o o k i n t o t a b l e f o r c r i t i c a l values of S in the KANDELLS Coefficient of Concordance for f i n d i n g v a l u e o f s a t 5 % l e v e l f o r k = 2 0 a n d N = 5 . Th i s v a l u e i s 4 6 8 . 5 a n d o u r c a l c u l a t e d v a l u e i s 12 1 4 . 8 m u c h h i g h e r t h e n t h e t a b u l a r value therefore we reject the null hypothesis and infer that the people are applying essentially the same standard in ranking the N objects i . e . , t h e r e i s s i gn i f i c a n t a g r e e m e n t i n r a n k i n g b y p e o p l e a t 5 % l e v e l .

The lowest value observed amongst Rj is 41 and as best estimate of true rankings in the case of criteria x1, all people on the whole placed this criterion on the first most important criteria.

Therefore we can say that people consider SAFETY OF FUNDS as the most important criteria for going for any fixed deposit.

(2). MODE

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Mode is the most commonly or frequently occurring value in a series. The mode in a distribution is that around which there is maximum concentration. In general, mode is the size of item, which has maximum frequency, but at items such an item may not be mode on account of the effect of the frequencies of the neighboring items. Like median, mode is a positional average and is not affected by the values of extreme items. It is therefore, useful in all situations where we want to eliminate the effect of extreme variations. Mode is particularly useful in the study of popular sizes. M o d e r e p r e s e n t s t h e v a r i a b l e h a v i n g h i gh e s t f r e q u e n c y .

P R O C E D UR E
Finding out the frequency for every criterion firstly by assigning the tally mark then by counting the tally mark and then finding the modal v a l u e b y c o n s i d e r i n g t h e h i gh e s t f r e q u e n c y . We are giving different time periods different variables. Let < 1 year be x1 1-2 years be x2 2-5 years be x3 And 5 years above be x4 N o w w h en 3 0 p e o p l e w e r e a s k e d a b o u t t h e t i m e p e r i o d t h e y w i l l prefer to deposit their money then we observe following observations: CRETERIA FREQUENCY

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X1 X2 X3 X4

5 16 6 3

Now with the help of following table we can find that generally p e o p l e p r ef e r 1 - 2 y e a r s f o r d e p o s i t i n g t h e i r m o n e y .

The above used method can also be shown with the help of following graph as well. 16 14 12 10 8 6 4 2 0 X1 X2 X3 X4 East

Where X1 represents <1 year for depositing the money. X2 represents 1-2 years. 65

X3 represents 2-5 years. X4 represents more than 5 years.

FOR REFERENCE: -

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JUDGES 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Sum of ranks (Rj) (Rj Rj) (Rj Rj)^2

X1 1 1 2 2 3 1 2 1 2 3 1 1 2 2 3 2 3 1 3 1 41 -18.8 353. 44

X2 2 3 1 1 2 4 1 3 2 1 2 2 3 3 1 1 5 4 4 5 50 -9.8 96.04

X3 5 1 4 4 3 5 4 5 3 5 5 4 1 1 5 3 1 2 1 3 65 5.2 27.04

X4 3 2 3 3 4 3 3 2 4 4 3 3 4 4 4 4 4 3 5 2 67 7.2 2 51.84

X5 4 4 5 5 1 2 5 4 5 2 4 5 5 5 2 5 2 5 2 4 76 26. 686.44

TA B L E F O R K A N D E L L S M E T H O D

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In the above table we have assigned points to our ranks, which are being allotted to the options by the people being questioned. In order to calculate the values out of collected data we have to sum total our rank points therefore we have given ranks as follows: Point 1 to 5th rank. Points 2 to 4th rank. Points 3 to 3rd rank. Points 4 to 2nd rank. Points 5 to 1st rank.

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FINDINGS
AND RECOMENDATION S

FINDINGS AND RECOMENDATIONS

F I N D I N G S A ND C O N C L US I O N S

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(1). HDFC deposits are increasing year by year but at diminishing r a t e . W h e r e d e p o s i t s a r e i n c r e a s i n g l i k e 2 5 12 . 6 9 i n 1 9 9 5 - 9 6 , 3 5 02 . 1 9 in 1996-97 to 6223.85 in 1999-2000 and 8471.02 in 2004-05 with a decline in 2007-08 at 7840.09 as compare to previous year 2006-07 with 9337.65.

(2). Main motive behind depositing money in fixed deposits is that people want their money safe and intact for sometime. Generally income derived from fixed deposits is so low as compare to other investment options that people dont consider interest income while g o i n g f o r f i x e d d ep o s i t t h e y j u s t w a n t t h a t t h e i r m o n e y c a n b e s a f e for this they consider those institutes which can ensure safety of their funds.

(3). HDFC has been given AAA rating by CRISIL and ICRA (institutions which rank financial institutions on the basis of services provided by them) of which general public is not aware of. If general public is aware of this fact then HDFC can have more deposits as people only go for the institutes, which can ensure them safety of their funds.

( 4 ) . L e s s a w a r e n e s s a b o u t H D F C d ep o s i t s i n g e n e r a l p u b l i c . H D F C i s mainly recognized as loan giving institution and very few people are a w a r e o f t h e f a c t t h a t H D F C a l s o g o f o r f i x e d d e p o s i t s . W h en 3 0 people were asked about HDFC deposits only 8 were aware of it and 22 people were unaware of HDFC deposits. This can be explained with the help of following diagram.

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Fi g u r e 1 1

yes 27% yes no no 73%

(5). People also take into consideration the services provided to them by other HDFC departments. If they are unsatisfied with the services of any HDFC departments services then in spite of the fact that HDFC is giving highest interest rate on 1 year deposit that is 7% p.a p e o p l e w i l l a v o i d t o g o f o r H D F C d ep o s i t s .

RECOMMENDATIONS
(1). ADVERTISEMENT: People are not aware of HDFC deposits therefore in order to increase the awareness level among public more advertisements should be

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there. These advertisements can be in newspapers, economic journals or they can be on televisions. People should be made more aware of the fact that HDFC Ltd has been given AAA ranking by CRISIL and ICRA. (2). People just want safety of their funds while depositing their m o n e y i n f i x e d d ep o s i t s a n d a s H D F C L t d h a s t h e c a p a b i l i t y o f k e e p i n g t h e f u n d s s a f e t h e r e f o r e i t s h o u l d h i gh l i g h t t h i s c a p a b i l i t y t o t h e p u b l i c s o t h a t m o r e f u n d s c a n b e g a i n e d . T o d a y a l s o m a n y p eo p l e believe that depositing money in government banks is more safe rather to deposit the money in any private bank therefore it is very important for HDFC to ensure safety of their funds. ( 3 ) . B e t t e r S e r v i c e s c a n f e t c h m o r e c u s t o m e r s . S o m e t i m e s i t h a p p en s that people consider old relations and services provided by the bank before going for future dealings. (4). HDFC has won so many prestigious awards of which people are not aware therefore HDFC should advertise more and more so that more people can become aware of this fact and this can help to fetch more deposits.

BIBLIOGRAPHY

A N N UA L R E P O R T O F H D F C Lt d

www.hdfc.com
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www.myiris.com www.google.com RESEARCH METHODOLOGY METHODS & TECHNIQUES ( C.R KOTHARI) www.hdfc.com

C o m p a r a t i v e s t u d y o f d i f f er e n t b an k s

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ANNEXURE

Q U E S T I O N N A I R E F O R C U S T O M E R S V I E WS O N F I X E D DEPOSITS

Name:

Ph no:

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Q1. Are you aware of HDFC fixed deposits? Yes/No If Yes: Do you know HDFC offers highest interest rates on deposits for 1 year? Do you know HDFC is being rated AAA by CRISIL and ICRA for 11th consecutive year? Q2. Do you have any investment in HDFC deposits? YES/NO Q3. What would be the main reason for deposits? Put a tick mark. To put your money safe and intact To spread your money in different To ensure availability of money at To ensure regularity of income. you to invest in for sometime. investment options. some point of time.

Q4. Can you mention the period for which you would invest in fixed deposits? <1 year 1-2 years 2-5 years 5 years and above Q5.If you prefer to invest in deposits, what criteria you use for selecting one? Assign rates & simultaneously rate HDFC deposits on these criteria. (Scale 1-5, 5 to excellent and 1 to poor). Selection criteria HDFC ranking Interest rates -----------Safety of funds -----------Liquidity -----------Services -----------Additional benefits -------------------------------------------------------------------

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Market reputation ------------

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

Q6. Are you satisfied with HDFC deposits? YES/NO If not, state the reason

Q7. Your suggestions may help us serve you better & offer you the best. (Please be specific in giving suggestions).

THANK YOU

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