A STUDY ON

“RISK MANAGEMENT IN BANKING INDUSTRY”

WITH SPECIAL REFERENCE TO

Submitted in Partial Fulfillment of the Award of the Degree Of

MASTER OF BUSINESS ADMINISTRATION

Submitted By

M.B.A

SINDHU

H.T NO: ______________

Under The Guidance Of

Mrs. _______________

M.B.A (ASST.PROF)

DEPARTMENT OF MANAGEMENT STUDIES

RISHI UBR PG COLLEGE FOR WOMEN

(AFFILIATED TO OSMANIA UNIVERSITY)

HYDERABAD

2011-2013

DECLARATION

1

I sindhu (HT: )hereby declare that the project report titled“RISK

MANAGEMENT IN BANKING INDUSTRY” at JM FINANCIAL SERVICES.

HYDERABAD, has been completed successfully and this project submitted towards the

partial fulfillment of the requirement for award of MBA DEGREE with a specialization

in “FINANCE” from OSMANIA UNIVERSITY , is my own and has not been

submitted Any Where Before To Any Other University Or Institution.

DATE: 20 -04-2012,

SINDHUPLACE: HYDERABAD.

2

ACKNOWLEDGEMENT

I am very thankful to my Internal Guide Ms______, asst coordinator, RISHI UBR PG

COLLEGE For her valuable suggestions throughout my project work.

I take great pleasure to express my deep sense of gratitude to one and all in the company

who has been directly or indirectly helpful to me in completing the project.

I am also immensely thankful to my project guide Mr. SRI HARI, who helped in

successful completion of this project work.

I take this opportunity to express my heartfelt thanks to the jm financial services

panjagutta Hyderabad, for giving me an opportunity to undertake my project work.

SINDHU

3

CONTENTS

CHAPTERS

PARTICULARS PAGE:NO

1

INTRODUCTION 1-26

NEED & IMPORTANCE OF THE STUDY

OBJECTIVES OF THE STUDY

SCOPE OF THE STUDY

METHODOLOGY OF THE STUDY

LIMITATIONS OF THE STUDY

2 LITERATURE REVIEW 27-37

3COMPANY PROFILE

38-42INDUSTRY PROFILE

4

DATA ANALYSIS &INTERPREATION 43-51

5 CONCLUSIONS FINDINGS, SUGGESTIONS 52-53

BIBLIOGRAPHY

4

CHAPTER I:

INTRODUCTION

5

INTRODUCTION

Risk management underscores the fact that the survival of an organization depends

heavily on its capabilities to anticipate and prepare for the change rather than just waiting for the

change and react to it. The objective of risk management is not to prohibit or prevent risk taking

activity, but to ensure that the risks are consciously taken with full knowledge, purpose and clear

understanding so that it can be measured and mitigated. It also prevents an institution from

suffering unacceptable loss causing an institution to suffer or materially damage its competitive

position. Functions of risk management should actually be bank specific dictated by the size and

quality of balance sheet, complexity of functions, technical/ professional manpower and the

status of MIS in place in that bank.

Risk: the meaning of ‘Risk’ as per Webster’s comprehensive dictionary is “a chance of

encountering harm or loss, hazard, danger” or “to expose to a chance of injury or loss”. Thus,

something that has potential to cause harm or loss to one or more planned objectives is called

Risk.

The word risk is derived from an Italian word “Risicare” which means “To Dare”. It is an

expression of danger of an adverse deviation in the actual result from any expected result.

Banks for International Settlement (BIS) has defined it as- “Risk is the threat that an event or

action will adversely affect an organization’s ability to achieve its objectives and successfully

execute its strategies.”

Risk Management: Risk Management is a planned method of dealing with the potential loss or

damage. It is an ongoing process of risk appraisal through various methods and tools which

continuously

• Assess what could go wrong

• Determine which risks are important to deal with

• Implement strategies to deal with those risks

6

OBJECTIVE OF THE STUDY

To study of selected bank equity AXIS &HDFC JAN 2012)

To know the risk &returns both equities.

Covering different aspects of risk assessment

Identifying keys for effective risk management

To understand the challenges and impact of Implementing of banks.

To analyze the current progress of banks

7

NEED FOR THE STUDY

The study of risk management of selected banks data need for finding best returns to get

for his deposits to overcome risk factors.

Banks data collected information from NSE.

These date help in qualifying the overall potential / actual loss on account of Operational

Risk and initiate measure for plugging these risk areas.

Bank may suitably at a latter date move to appropriate models for measuring and

managing Operational Risk also after receipt of RBIs Guidance Note.

8

SCOPE OF THE STUDY

Norms came as an attempt to reduce the gap in point of views between conflict practices.

Therefore, the implementation of those resolutions emerged by the banks. Regarding this issue

the survey has been made.

Study problem can be stated as follows:

To what extent banks have implemented selected banks related to enhancing internal control in

the banks?

9

METHODOLOGY

DATA COLLECTION:

Primary information: DATA SOURCES FROM NSE

Secondary information: Analyzing Data With Descriptive Statistics

SORCE OF DATA:

NSE INDIA (AXISI&HDFC)

Return (%) = current price –previous price

*100

Previous price price

10

LIMITATION OF THE STUDY

The major limitation of this study shall be data availability as the data is proprietary and

not readily shared for dissemination.

Due to the ongoing process of globalization and increasing competition, no one model or

method will suffice over a long period of time and constant up gradation will be required.

As such the project can be considered as an overview of the various risks prevailing in

icici and Hdfc in the Banking Industry.

Each bank, in conforming to the RBI guidelines, may develop its own methods for

measuring and managing risk.

The concept of risk management implementation is relatively new and risk management

tools can prove to be costly.

Out of the various ways in which risks can be managed, none of the method is perfect and

may be very diverse even for the work in a similar situation for the future.

11

CHAPTER II:

LITRETURE REVIEW

12

Basel I Accord: The Basel Committee on Banking Supervision, which came into existence in

1974, volunteered to develop a framework for sound banking practices internationally. In 1988

the full set of recommendations was documented and given to the Central banks of the countries

for implementation to suit their national systems. This is called the Basel MONEY Accord or

Basel I Accord. It provided level playing field by stipulating the amount of MONEY that needs

to be maintained by internationally active banks.

Basel II Accord: Banking has changed dramatically since the Basel I document of 1988.

Advances in risk management and the increasing complexity of financial activities / instruments

(like options, hybrid securities etc.) prompted international supervisors to review the

appropriateness of regulatory MONEY standards under Basel I. To meet this requirement, the

Basel I accord was amended and refined, which came out as the Basel II accord.

The new proposal is based on three mutually reinforcing pillars that allow banks and supervisors

to evaluate properly the various risks that banks have to face and realign regulatory MONEY

more closely with underlying risks. Each of these three pillars has risk mitigation as its central

board. The new risk sensitive approach seeks to strengthen the safety and soundness of the

industry by focusing on:

● Risk based MONEY (Pillar 1)

● Risk based supervision (Pillar 2)

● Risk disclosure to enforce market discipline (Pillar 3)

13

FRAMEWORK

The new proposal is based on three mutually reinforcing pillars that allow banks and supervisors

to evaluate properly the various risks that banks face and realign regulatory MONEY more

closely with underlying risks.

Basel II

Framework

Pillar I Pillar II Pillar III

Minimum MONEY Supervisory Market

Requirements Review Process Discipline

2.2.1 THE FIRST PILLAR – MINIMUM MONEY REQUIREMENTS

The first pillar sets out minimum MONEY requirement for the bank. The new framework

maintains minimum MONEY requirement of 8% of risk assets.

Basel II focuses on improvement in measurement of risks. The revised credit risk measurement

methods are more elaborate than the current accord. It proposes for the first time, a measure for

operational risk, while the market risk measure remains unchanged.

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THE SECOND PILLAR - SUPERVISORY REVIEW PROCESS

Supervisory review process has been introduced to ensure not only that bank have adequate

MONEY to support all the risks, but also to encourage them to develop and use better risk

management techniques in monitoring and managing their risks. The process has four key

principles-

a) Banks should have a process for assessing their overall MONEY adequacy in relation to their

risk profile and a strategy for monitoring their MONEY levels.

b) Supervisors should review and evaluate bank’s internal MONEY adequacy assessment and

strategies, as well as their ability to monitor and ensure their compliance with regulatory

MONEY ratios.

c) Supervisors should expect banks to operate above the minimum regulatory MONEY ratios

and should have the ability to require banks to hold MONEY in excess of the minimum.

d) Supervisors should seek to intervene at an early stage to prevent MONEY from decreasing

below minimum level and should require rapid remedial action if MONEY is not mentioned or

restored.

THE THIRD PILLAR – MARKET DISCIPLINE

Market discipline imposes strong incentives to banks to conduct their business in a safe, sound

and effective manner. It is proposed to be effected through a series of disclosure requirements on

MONEY, risk exposure etc. so that market participants can assess a bank’s MONEY adequacy.

These disclosures should be made at least semi-annually and more frequently if appropriate.

Qualitative disclosures such as risk management objectives and policies, definitions etc. may be

published annually.

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TYPES OF RISKS

When we use the term “Risk”, we all mean financial risk or unexpected financial loss. If we

consider risk in terms of probability or occur frequently, we measure risk on a scale, with

certainty of occurrence at one end and certainty of non-occurrence at the other end. Risk is the

greatest phenomena where the probability of occurrence or non-occurrence is equal. As per the

Reserve Bank of India guidelines issued in Oct. 1999, there are three major types of risks

encountered by the banks and these are Credit Risk, Market Risk & Operational Risk. Further

after eliciting views of banks on the draft guidelines on Credit Risk Management and market risk

management, the RBI has issued the final guidelines and advised some of the large PSU banks to

implement so as to gauge the impact. Risk is the potentiality that both the expected and

unexpected events may have an adverse impact on the bank’s MONEY or its earnings. The

expected loss is to be borne by the borrower and hence is taken care of by adequately pricing the

products through risk premium and reserves created out of the earnings. It is the amount

expected to be lost due to changes in credit quality resulting in default. Where as, the unexpected

loss on account of the individual exposure and the whole portfolio is entirely borne by the bank

itself and hence care should be taken. Thus, the expected losses are covered by

reserves/provisions and the unexpected losses require MONEY allocation.

CREDIT RISK

In the context of Basel II, the risk that the obligor (borrower or counterparty) in respect of a

particular asset will default in full or in part on the obligation to the bank in relation to the asset

is termed as Credit Risk.

Credit Risk is defined as-“The risk of loss arising from outright default due to inability or

unwillingness of the customer or counter party to meet commitments in relation to lending,

trading, hedging, settlement and other financial transaction of the customer or counter party to

meet commitments”.

Credit Risk is also defined, “as the potential that a borrower or counter party will fail to meets its

obligations in accordance in agreed terms”.

16

MARKET RISK

It is defined as “the possibility of loss caused by changes in the market variables such as interest

rate, foreign exchange rate, equity price and commodity price”. It is the risk of losses in, various

balance sheet positions arising from movements in market prices.

RBI has defined market risk as the possibility of loss to a bank caused by changes in the market

rates/ prices. RBI Guidance Note focus on the management of liquidity Risk and Market Risk,

further categorized into interest rate risk, foreign exchange risk, commodity price risk and equity

price risk.

Market risk includes the risk of the degree of volatility of market prices of bonds, securities,

equities, commodities, foreign exchange rate etc., which will change daily profit and loss over

time; it’s the risk of unexpected changes in prices or rates. It also addresses the issues of Banks

ability to meets its obligation as and when due, in other words, liquidity risk.

OPERATIONAL RISK

Operational risk is the risk associated with the operations of an organization. It is defined as “risk

of loss resulting from inadequate or failed internal process, people and systems or from external

events.”

It includes legal risk. It excludes strategic and reputational risks, as the same are not quantifiable.

Operational risk includes the risk of loss arising from fraud, system failures, trading error and

many other internal organizational risks as well as risk due to external events such as fire, flood

etc. the losses due to operation risk can be direct as well as indirect. Direct loss means the

financial losses resulting directly from an incident or an event. E.g. forgery, fraud etc. indirect

loss means the loss incurred due to the impact of an incident.

17

REGULATORY RISK

The owned funds alone are managed by an entity, it is natural that very few regulators operate

and supervise them. However, as banks accept deposit from public obviously better governance

is expected from them. This entails multiplicity of regulatory controls. Many Banks, having

already gone for public issue, have a greater responsibility and accountability in this regard. As

banks deal with public funds and money, they are subject to various regulations. The various

regulators include Reserve Bank of India (RBI), Securities Exchange Board of India (SEBI),

Department of Company Affairs (DCA), etc. More over, banks should ensure compliance of the

applicable provisions of The Banking Regulation Act, The Companies Act, etc. Thus all the

banks run the risk of multiple regulatory-risks which inhibits free growth of business as focus on

compliance of too many regulations leave little energy scope and time for developing new

business. Banks should learn the art of playing their business activities within the regulatory

controls.

ENVIRONMENTAL RISK

As the years roll the technological advancement takes place, expectation of the customers change

and enlarges. With the economic liberalization and globalization, more national and international

players are operating the financial markets, particularly in the banking field. This provides the

platform for environmental change and exposure of the bank to the environmental risk. Thus,

unless the banks improve their delivery channels, reach customers, innovate their products that

are service oriented; they are exposed to the environmental risk.

18

BASEL’S NEW MONEY ACCORD

Bankers’ for International Settlement (BIS) meet at Basel situated at Switzerland to address the

common issues concerning bankers all over the world. The Basel Committee on Banking

Supervision (BCBS) is a committee of banking supervisory authorities of G-10 countries and has

been developing standards and establishment of a framework for bank supervision towards

strengthening financial stability through out the world. In consultation with the supervisory

authorities of a few non-G-10 countries including India, core principles for effective banking

supervision in the form of minimum requirements to strengthen current supervisory regime, were

mooted. The 1988 MONEY Accord essentially provided only one option for measuring the

appropriate MONEY in relation to the risk weighted assets of the financial institution. It focused

on the total amount of bank MONEY so as to reduce the risk of bank solvency at the potential

cost of bank’s failure for the depositors. As an improvement on the above, the New MONEY

Accord was published in 2001 by Basel Committee of Banking Supervision. It provides

spectrum of approaches for the measurement of credit, market and operational risks to determine

the MONEY required. The spread and nature of the ownership structure is important as it

impinges on the propensity to induct additional MONEY. While getting support from a large

body of shareholders is a difficult proposition when the bank’s performance is adverse, a smaller

shareholder base constrains the ability of the bank to garner funds. Tier I MONEY is not owed to

anyone and is available to cover possible unexpected losses. It has no maturity or repayment

requirement, and is expected to remain a permanent component of the core MONEY of the

counter party. While Basel standards currently require banks to have a MONEY adequacy ratio

of 8% with Tier I not less than 4%, RBI has mandated the banks to maintain CAR of 9%. The

maintenance of MONEY adequacy ratio is like aiming at a moving target as the composition of

risk-weighted assets gets changed every now and then on account of fluctuations in the risk

profile of a bank. Tier I MONEY is known as the core MONEY providing permanent and readily

available support to the bank to meet the unexpected losses. In the recent past, owners of PSU

banks, the government provided adequate MONEY to weaker banks to ease the burden. In doing

so, the government was not acting as a prudent investor as return on such MONEY was never a

consideration. Further, MONEY infusion did not result in any cash flow to the receiver, as all the

MONEY was required to be reinvested in government securities yielding low returns. Receipt of

MONEY was just a book entry with the only advantage of income from the securities.

19

MONEY ADEQUACY

Subsequent to nationalization of banks, MONEYization in banks was not given due importance

as it was felt necessary for the reason that the ownership of the banks rested with the

government, creating the required confidence in the mind of the public. Combined forces of

globalization and liberalization compelled the public sector banks, hitherto shielded from the

vagaries of market forces, come by the condition of terms market realities, where certain

minimum MONEY adequacy has to be maintained in the face of stiff norms in respect of income

recognition, asset classification and provisioning. It is clear that multi pronged approach would

be required to meet the challenges of maintaining MONEY at adequate levels in the face of

mounting risks in the banking sector. In banks, asset creation is an event happening subsequent

to the MONEY formation and deposit mobilization.

RISK AGGREGATION & MONEY ALLOCATION

MONEY Adequacy in relation to economic risk is a necessary condition for the long-term

soundness of banks. Aggregate risk exposure is estimated through Risk Adjusted Return on

MONEY (RAROC) and Earnings at Risk (EaR) method. Former is used by bank with

international presence and the RAROC process estimates the cost of Economic MONEY &

expected losses that may prevail in the worst-case scenario and then equates the MONEY

cushion to be provided for the potential loss. RAROC is the first step towards examining the

institution’s entire balance sheet on a mark to market basis, if only to understand the risk return

trade off that have been made. As banks carry on the business on a wide area network basis, it is

critical that they are able to continuously monitor the exposures across the entire organization

and aggregate the risks so that an integrated view can be taken. The Economic MONEY is the

amount of the MONEY (besides the Regulatory MONEY) that the firm has to put at risk so as to

cover the potential loss under the extreme market conditions. In other words, it is the difference

in mark-to-market value of assets over liabilities that the bank should aim at or target. As against

this, the regulatory MONEY is the actual MONEY Funds held by the bank against the Risk

Weighted Assets. After measuring the economic MONEY for the bank as a whole, bank’s actual

MONEY has to be allocated to individual business units on the basis of various types of risks.

This process can be continued till MONEY is allocated at transaction/customer level.

20

RISK BASED SUPERVISION (RBS)

The Reserve Bank of India presently has its supervisory mechanism by way of on-site inspection

and off-site monitoring on the basis of the audited balance sheet of a bank. In order to enhance

the supervisory mechanism, the RBI has decided to put in place, a system of Risk Based

Supervision. Under risk based supervision, supervisors are expected to concentrate their efforts

on ensuring that financial institutions use the process necessarily to identify measure and control

risk exposure. The RBS is expected to focus supervisory attention in accordance with the risk

profile of the bank. The RBI has already structured the risk profile templates to enable the bank

to make a self-assessment of their risk profile. It is designed to ensure continuous monitoring and

evaluation of risk profile of the institution through risk matrix. This may optimize the utilization

of the supervisory resources of the RBI so as to minimize the impact of a crises situation in the

financial system. The transaction based audit and supervision is getting shifted to risk focused

audit. Risk based supervision approach is an attempt to overcome the deficiencies in the

traditional point-in-time, transaction- validation and value based supervisory system. It is

forward looking enabling the supervisors to differentiate between banks to focus attention on

those having high-risk profile. The implementation of risk based auditing would imply that

greater emphasis is placed on the internal auditor’s role for mitigating risks. By focusing on

effective risk management, the internal auditor would not only offer remedial measures for

current trouble-prone areas, but also anticipate problems to play an active role in protecting the

bank from risk hazards.

21

RISK MANAGEMENT:

KEYS FOR EFFECTIVE RISK MANAGEMENT:

• To direct risk behavior & influence the shape of a firm’s risk profile, management should

use all available options. Using financial incentives and penalties to influence risk taking

behaviour is effective management tool.

• Sharing of information by keeping confidentiality intact is also helpful to find out

different ways for controlling the risk as valuable inputs may be received through this

sharing. Even information on creditworthiness of counterparties that are known to take

substantial risk can also help.

• Diversification is extremely important. As it lowers the variance in investor portfolios,

improves corporate ability to raise debt, reduces employment risks, & heightens operating

efficiency.

• Governance should never be ignored. Careful structuring of the alliance in advance of the

deal and continual adjustment thereafter help to build a constructive relationship.

• One should not trust while in business. Personal chemistry is good but is no substitute for

monitoring mechanism, co-operation incentives, & organizational alignment.

• Without support system within the organization itself, external alliances are doomed to

fail.

22

MARKET RISK MANAGEMENT:

We may believe that there are limited tools available to mitigate this risk, but this is not so.

Future, option, derivatives trading and its many sub types are some of the tools which help to

investors to protect the investment or minimize there exposure toward market risk. In case of

derivatives as in broader sense derivatives are considered to be used to hedge against market risk,

but they can be used to mitigate various other types of risks, like credit risk, operational risk.

The importance of managing market risk has now been well understood by financial institutions

and corporate across the world. Market risk has made the global financial conditions uncertain

and unsettled and still recovery of problem is not visible in the near time.

CREDIT RISK MANAGEMENT

Tools of Credit Risk Management: The instruments and tools, through which credit risk is

managed are: Exposure Ceilings, Review/Renewal, Risk Rating Model, Risk based scientific

pricing, Portfolio Management, Loan Review Mechanism

OPERATIONAL RISK MANAGEMENT:

This risk can be reduced to great extent by effectively controlling organization as a whole by

taking certain steps, like assuring that designed processes is carried out carefully & with the help

of experts, and are followed in desired way.

23

COMPUTATION OF MONEY REQUIREMENT

CREDIT RISK APPROACHES

Credit Risk

Standardized approach Advanced Approach

Foundation IRB Advanced IRB

Standardized approach: the Basel committee as well as RBI provides a simple methodology

for risk assessment and calculating MONEY requirements for credit risk called Standardized

approach. This approach is divided into the following broad topics for simpler and easier

understanding

1. Assignment of Risk Weights: all the exposures are first classified into various customer types

defined by Basel committee or RBI. Thereafter, assignment of standard risk weights is done,

either on the basis of customer type or on basis of the asset quality as determined by rating of the

asset, for calculating risk weighted assets.

2. External Credit Assessments: the regulator or RBI recognizes certain risk rating agencies and

external credit assessment institutions (ECAIs) and rating assigned by these ECAIs, to the

borrowers may be taken as a basis for assigning risk weights to the borrowers. Better rating

means better quality of assets and lesser risk weights and hence lesser requirement of MONEY

allocation.

3. Credit Risk Mitigation: Basel recognized Collaterals and Basel recognized Guarantees are two

securities that banks obtain for loans / advances to cover credit risk, which are termed as “Credit

Risk Mitigants”

24

Advanced Approach: Basel II framework also provides for advanced approaches to calculate

MONEY requirement for credit risk. These approaches rely heavily on a banks internal

assessment of its borrowers and exposures. These advanced approached are based on the internal

ratings of the bank and are popularly known as Internal Rating Based (IRB) approaches. Under

Advanced Approaches, the banks will have 2 options as under

a) Foundation Internal Rating Based (FIRB) Approaches.

b) Advanced Internal Rating Based (AIRB) Approaches.

The differences between foundation IRB and advanced IRB have been captured in the following

table: Table 2.9.1.1: The differences between foundation IRB and advanced IRB

25

Data Input Foundation IRB Advanced IRBProbability of Default Provided by bank based on

own estimates

Provided by bank based on own

estimatesLoss Given Default Supervisory values set by the

Committee

Provided by bank based on own

estimatesExposure at Default Supervisory values set by the

Committee

Provided by bank based on own

estimatesEffective Maturity Supervisory values set by the

Committee

Provided by bank based on own

estimates Or At the national

discretion, provided by bank

based on own estimates

2.9.2 MARKET RISK APPROACHES

Market Risk

Standardized Internal Model

Approach Based approach

Maturity Duration

Based Based

RBI has issued detailed guidelines for computation of MONEY charge on Market Risk in June

2004. The guidelines seek to address the issues involved in computing MONEY charge for

interest rate related instruments in the trading book, equities in the trading book and foreign

exchange risk (including gold and precious metals) in both trading and banking book. Trading

book will include:

• Securities included under the Held for trading category

• Securities included under the Available for Sale category

• Open gold position limits

• Open foreign exchange position limits

• Trading position in derivatives and derivatives entered into for hedging trading book

exposures.

26

2.9.3 OPERATIONAL RISK APPROACHES

Operational

Risk

Basic Indicator Standardized Advanced

Approach Approach Measurement

Approach

Basic Indicator Approach: Under the basic indicator approach, Banks are required to hold

MONEY for operational risk equal to the average over the previous three years of a fixed

percentage (15% - denoted as alpha) of annual gross income. Gross income is defined as net

interest income plus net non-interest income, excluding realized profit/losses from the sale of

securities in the banking book and extraordinary and irregular items.

Standardized Approach: Under the standardized approach, banks activities are divided into eight

business lines. Within each business line, gross income is considered as a broad indicator for the

likely scale of operational risk. MONEY charge for each business line is calculated by

multiplying gross income by a factor (denoted beta) assigned to that business line. Total

MONEY charge is calculated as the three-year average of the simple summations of the

regulatory MONEY across each of the business line in each year.

Advanced Measurement Approach: Under advanced measurement approach, the regulatory

MONEY will be equal to the risk measures generated by the bank’s internal risk measurement

system using the prescribed quantitative and qualitative criteria.

27

BENEFITS OF BASEL

1. Better allocation of MONEY and reduced impact of moral hazard through reduction in

the scope for regulatory arbitrage: By assessing the amount of MONEY required for each

exposure or pool of exposures, the advanced approach does away with the simplistic risk buckets

of current MONEY rules.

2. Improved signal quality of MONEY as an indicator of solvency: the proposed rule is

designed to more accurately align regulatory MONEY with risk, which will improve the quality

of MONEY as an indicator of solvency.

3. Encourages banking organizations to improve credit risk management: One of the

principal objectives of the proposed rule is to more closely align MONEY charges and risk. For

any type of credit, risk increases as either the probability of default or the loss given default

increases.

4. More efficient use of required bank MONEY: Increased risk sensitivity and improvements

in risk measurement will allow prudential objectives to be achieved more efficiently.

5. Incorporates and encourages advances in risk measurement and risk management: The

proposed rule seeks to improve upon existing MONEY regulations by incorporating advances in

risk measurement and risk management made over the past 15 years.

6. Recognizes new developments and accommodates continuing innovation in financial

products by focusing on risk: The proposed rule also has the benefit of facilitating recognition

of new developments in financial products by focusing on the fundamentals behind risk rather

than on static product categories.

7. Better alignment of MONEY and operational risk and encourages banking organizations

to mitigate operational risk: Introducing an explicit MONEY calculation for operational risk

eliminates the implicit and imprecise “buffer” that covers operational risk under current MONEY

rules.

8. Enhanced supervisory feedback: all three pillars of the proposed rule aim to enhance

supervisory feedback from federal banking agencies to managers of banks and thrifts. Enhanced

feedback could further strengthen the safety and soundness of the banking system.

28

9. Enhanced disclosure promotes market discipline: The proposed rule seeks to aid market

discipline through the regulatory framework by requiring specific disclosures relating to risk

measurement and risk management.

10. Preserves the benefits of international consistency and coordination achieved with the

1988 Basel Accord: An important objective of the 1988 Accord was competitive consistency of

MONEY requirements for banking organizations competing in global markets. Basel II

continues to pursue this objective.

LIMITATIONS OF BASEL II:

1. Lack of sufficient public knowledge: knowledge about banks’ portfolios and their future

risk-weight, since this will also depend on whether banks will use the standardized or IRB

approaches.

2. Lack of precise knowledge: as to how operational risk costs will be charged. The banks are

expected to benefit from sharpening up some aspects of their risk management practices

preparation and for the introduction of the operational risk charge.

3. Lack of consistency: at least at this stage, as to how insurance activities will be accounted for.

One treatment outlined in the MONEY Accord is that banks deduct equity and other regulatory

MONEY investments in insurance subsidiaries and significant minority investments in insurance

entities. An alternative to this treatment is to apply a risk weight age to insurance investments.

29

CHALLENGES FOR INDIAN BANKING SYSTEM UNDER BASEL II

• Costly Database Creation and Maintenance Process: The most obvious impact of

BASEL II is the need for improved risk management and measurement. It aims to give

impetus to the use of internal rating system by the international banks.

• Additional MONEY Requirement: Here is a worrying aspect that some of the banks will

not be able to put up the additional MONEY to comply with the new regulation and they may

be isolated from the global banking system.

• Large Proportion of NPA's: A large number of Indian banks have significant proportion of

NPA's in their assets. Along with that a large proportion of loans of banks are of poor quality.

There is a danger that a large number of banks will not be able to restructure and survive in

the new environment. This may lead to forced mergers of many defunct banks with the

existing ones and a loss of MONEY to the banking system as a whole.

• Increased Pro-Cyclicality: The increased importance to credit ratings under Basel II could

actually imply that the minimum requirements could become pro-cyclical as banks are

required to raise MONEY levels for loans in times of economic crises.

• Low Degree of Corporate Rating Penetration: India has as few as three established rating

agencies and the level of rating penetration is not very significant as, so far, ratings are

restricted to issues and not issuers. While Basel II gives some scope to extend the rating of

issues to issuers, this would only be an approximation and it would be necessary for the

system to move to ratings of issuers. Encouraging ratings of issuers would be a challenge.

• Cross Border Issues for Foreign Banks: In India, foreign banks are statutorily required to

maintain local MONEY and the following issues are required to be resolved;

1. Validation of the internal models approved by their head offices and home country

supervisor adopted by the Indian branches of foreign banks.

2. Date history maintained and used by the bank should be distinct for the Indian branches

compared to the global data used by the head office

3. MONEY for operational risk should be maintained separately for the Indian branches in

India

30

IMPACT OF BASEL II IMPLEMENTATION ON THE INDIAN BANKING

INDUSTRY

1. Changes in MONEY Risk Weighted Assets Ratio (CRAR): Most of the banks are already

adhering to the Basel II guidelines. However, the Government has indicated that a cushion

should be maintained by the public sector banks and therefore their CRAR should be above 12%.

Basel I focused largely on credit risk, whereas Basel II has 3 risks to be considered, viz., credit

risk, operational risk and market risks. As Basel II considers all these 3 risks, there are chances

of a decline in the MONEY Adequacy Ratio.

2. High costs for up-gradation of technology: Full implementation of the Basel II framework

would require up-gradation of the bank-wide information systems through better branch-

connectivity, which would entail huge costs and may raise IT-security issues. The

implementation of Basel II can also raise issues relating to development of HR skills and

database management. Small and medium sized banks may have to incur enormous costs to

acquire required technology, as well as to train staff in terms of the risk management activities.

There will be a need for technological up gradation and access to information like historical data

etc.

3. Rating risks: Problems embedded in Basel II norms include rating of risks by rating agencies.

Whether the country has adequate number of rating agencies to discharge the functions in a

Basel II compliant banking system, is a question for consideration. Further, to what extent the

rating agencies can be relied upon is also a matter of debate.

Entry norms for recognition of rating agencies should be stricter. Only firms with international

experience or background in ratings business should be allowed to enter. This is necessarily

given that the Indian rating industry is in its growth phase, especially with the implementation of

new Basel II MONEY norms that encourage companies to get rated.

4. Improved Risk Management & MONEY Adequacy: One aspect that hold back the critics

of Basel II is the fact that it will tighten the risk management process, improve MONEY

adequacy and strengthen the banking system.

31

5. Curtailment of Credit to Infrastructure Projects: The norms require a higher weight age

for project finance, curtailing credit to this is very crucial sector. The long-term impacts for this

could be disastrous.

6. Preference for Mortgage Credit to Consumer Credit Lower Risk Weights to Mortgage

credit: Preference for Mortgage Credit to Consumer Credit Lower Risk Weights to Mortgage

credit would accentuate bankers’ preference towards it vis-à-vis consumer credit.

7. Basel II: Advantage Big Banks: It would be far easier for the larger banks to implement the

norms, raising their quality of risk management and MONEY adequacy. This combined with the

higher cost of MONEY for smaller players would queer the pitch in favour of the former. The

larger banks would also have a distinct advantage in raising MONEY in equity markets.

Emerging Market Banks can turn this challenge into an advantage by active implementation and

expanding their horizons outside the country.

8. IT spending: Advantage to Indian IT companies: On the flipside, Indian IT companies,

which have considerable expertise in the BFSI segment, stand to gain. Major Indian IT

companies such as I-flex and Infosys already have the products, which could help them develop

an edge over their rivals from the developed countries.

32

CHAPTER III

33

COMPANY PROFILE

34

INDUSTRY PROFILE

Today, Foundation partners with thirteen local charity organizations in India. It helps children to

be in the primary schools to realize their right to education as the first step towards breaking the

cycle of poverty.

The Foundation depends on voluntary contributions for all its activities. The Foundation runs an

annual fund raising campaign to help garner support from employees of its three entities for the

cause. To make a contribution, please contact Joyatri.r@ingvysyabank.com or visit

A bank is a financial institution and a financial intermediary that accepts deposits and channels

those deposits into lending activities, either directly by loaning or indirectly through MONEY

markets. A bank is the connection between customers that have MONEY deficits and customers

with MONEY surpluses.

Due to their influence within a financial system and an economy, banks are generally highly

regulated in most countries. Most banks operate under a system known as fractional reserve

banking where they hold only a small reserve of the funds deposited and lend out the rest for

profit. They are generally subject to minimum MONEY requirements which are based on an

international set of MONEY standards, known as the Basel Accords.

The oldest bank still in existence is Monte dei Paschi di Siena, headquartered in Siena, Italy,

which has been operating continuously since It is followed by Berenberg Bank of Hamburg and

Sveriges Riksbank of Sweden (1668).

Banking in its modern sense evolved in rich cities of Renaissance Italy, such as Florence, Venice

and Genoa. In the history of banking, a number of banking dynasties—among them notably

MediciFugger, Welser, Berenberg, Baringand Rothschild played a central role over many

centuries.

35

Definition

The definition of a bank varies from country to country. See the relevant country page (below)

for more information.

Under English common law, a banker is defined as a person who carries on the business of

banking, which is specified as:

conducting current accounts for his customers,

paying cheques drawn on him/her, and

collecting cheques for his/her customers.

Banco de Venezuela in Coro.

Branch of Nepal Bank in Pokhara, Eastern Nepal.

In most common law jurisdictions there is a Bills of Exchange Act that codifies the law in

relation to negotiable instruments, including cheques, and this Act contains a statutory definition

of the term banker: banker includes a body of persons, whether incorporated or not, who carry on

the business of banking' (Section 2, Interpretation). Although this definition seems circular, it is

actually functional, because it ensures that the legal basis for bank transactions such as cheques

does not depend on how the bank is organized or regulated.

The business of banking is in many English common law countries not defined by statute but by

common law, the definition above. In other English common law jurisdictions there are statutory

definitions of the business of banking or banking business. When looking at these definitions it is

important to keep in mind that they are defining the business of banking for the purposes of the

legislation, and not necessarily in general. In particular, most of the definitions are from

legislation that has the purposes of entry regulating and supervising banks rather than regulating

the actual business of banking. However, in many cases the statutory definition closely mirrors

the common law one. Examples of statutory definitions:

36

"banking business" means the business of receiving money on current or deposit account, paying

and collecting cheques drawn by or paid in by customers, the making of advances to customers,

and includes such other business as the Authority may prescribe for the purposes of this Act;

(Banking Act (Singapore), Section 2, Interpretation).

"banking business" means the business of either or both of the following:

receiving from the general public money on current, deposit, savings or other similar account

repayable on demand or within less than... or with a period of call or notice of less than that

period;

paying or collecting checks drawn by or paid in by customers.

Since the advent of EFTPOS (Electronic Funds Transfer at Point Of Sale), direct credit, direct

debit and internet banking, the cheque has lost its primacy in most banking systems as a payment

instrument. This has led legal theorists to suggest that the cheque based definition should be

broadened to include financial institutions that conduct current accounts for customers and

enable customers to pay and be paid by third parties, even if they do not pay and collect checks.

Banking

Large door to an old bank vault.

Banks act as payment agents by conducting checking or current accounts for customers, paying

cheques drawn by customers on the bank, and collecting cheques deposited to customers' current

accounts. Banks also enable customer payments via other payment methods such as Automated

Clearing House (ACH), Wire transfers or telegraphic transfer, EFTPOS, and automated teller

machine (ATM).

Banks borrow money by accepting funds deposited on current accounts, by accepting term

deposits, and by issuing debt securities such as banknotes and bonds. Banks lend money by

making advances to customers on current accounts, by making installment loans, and by

investing in marketable debt securities and other forms of money lending.

37

Banks provide different payment services, and a bank account is considered indispensable by

most businesses and individuals. Non-banks that provide payment services such as remittance

companies are normally not considered as an adequate substitute for a bank account.

Banks can create new money when they make a loan. New loans throughout the banking system

generate new deposits elsewhere in the system. The money supply is usually increased by the act

of lending, and reduced when loans are repaid faster than new ones are generated. In the United

Kingdom between 1997 and 2007, there was a big increase in the money supply, largely caused

by much more bank lending, which served to push up property prices and increase private debt.

The amount of money in the economy as measured by M4 in the UK went from £750 billion to

£1700 billion between 1997 and 2007, much of the increase caused by bank lending. [16] If all

the banks increase their lending together, then they can expect new deposits to return to them and

the amount of money in the economy will increase. Excessive or risky lending can cause

borrowers to default, the banks then become more cautious, so there is less lending and therefore

less money so the economy can go from boom to bust as happened in the UK and many other

Western economies after 2007.

Channels

Banks offer many different channels to access their banking and other services:

Automated Teller Machines

A branch is a retail location

Call center

Mail: most banks accept cheque deposits via mail and use mail to communicate to their

customers, e.g. by sending out statements

Mobile banking is a method of using one's mobile phone to conduct banking transactions

Online banking is a term used for performing multiple transactions, payments etc. over the

Internet

38

Relationship Managers, mostly for private banking or business banking, often visiting customers

at their homes or businesses

Telephone banking is a service which allows its customers to perform transactions over the

telephone with automated attendant or when requested with telephone operator

Video banking is a term used for performing banking transactions or professional banking

consultations via a remote video and audio connection. Video banking can be performed via

purpose built banking transaction machines (similar to an Automated teller machine), or via a

video conference enabled bank branch clarification

A bank can generate revenue in a variety of different ways including interest, transaction fees

and financial advice. The main method is via charging interest on the MONEY it lends out to

customers.[citation needed] The bank profits from the difference between the level of interest it

pays for deposits and other sources of funds, and the level of interest it charges in its lending

activities.

This difference is referred to as the spread between the cost of funds and the loan interest rate.

Historically, profitability from lending activities has been cyclical and dependent on the needs

and strengths of loan customers and the stage of the economic cycle. Fees and financial advice

constitute a more stable revenue stream and banks have therefore placed more emphasis on these

revenue lines to smooth their financial performance.

In the past 20 years American banks have taken many measures to ensure that they remain

profitable while responding to increasingly changing market conditions. First, this includes the

Gramm-Leach-Bliley Act, which allows banks again to merge with investment and insurance

houses. Merging banking, investment, and insurance functions allows traditional banks to

respond to increasing consumer demands for "one-stop shopping" by enabling cross-selling of

products (which, the banks hope, will also increase profitability).

Second, they have expanded the use of risk-based pricing from business lending to consumer

lending, which means charging higher interest rates to those customers that are considered to be

a higher credit risk and thus increased chance of default on loans. This helps to offset the losses

39

from bad loans, lowers the price of loans to those who have better credit histories, and offers

credit products to high risk customers who would otherwise be denied credit.

Third, they have sought to increase the methods of payment processing available to the general

public and business clients. These products include debit cards, prepaid cards, smart cards, and

credit cards. They make it easier for consumers to conveniently make transactions and smooth

their consumption over time (in some countries with underdeveloped financial systems, it is still

common to deal strictly in cash, including carrying suitcases filled with cash to purchase a

home).However, with convenience of easy credit, there is also increased risk that consumers will

mismanage their financial resources and accumulate excessive debt. Banks make money from

card products through interest payments and fees charged to consumers and transaction fees to

companies that accept the credit- debit - cards. This helps in making profit and facilitates

economic development as a whole.

A debit card (also known as a bank card or check card) is a plastic card that provides the

cardholder electronic access to his or her bank account(s) at a financial institution. Some cards

have a stored value with which a payment is made, while most relay a message to the

cardholder's bank to withdraw funds from a payee's designated bank account. The card, where

accepted, can be used instead of cash when making purchases. In some cases, the primary

account number is assigned exclusively for use on the Internet and there is no physical card.

In many countries, the use of debit cards has become so widespread that their volume has

overtaken or entirely replaced cheques and, in some instances, cash transactions. The

development of debit cards, unlike credit cards and charge cards, has generally been country

specific resulting in a number of different systems around the world, which were often

incompatible. Since the mid-2000s, a number of initiatives have allowed debit cards issued in

one country to be used in other countries and allowed their use for internet and phone purchases.

Unlike credit and charge cards, payments using a debit card are immediately transferred from the

cardholder's designated bank account, instead of them paying the money back at a later date.

Debit cards usually also allow for instant withdrawal of cash, acting as the ATM card for

withdrawing cash. Merchants may also offer cashback facilities to customers, where a customer

can withdraw cash along with their purchase.

40

There are currently three ways that debit card transactions are processed: EFTPOS (also known as online debit or PIN debit), offline debit (also known as signature debit) and the Electronic Purse Card System.[3] One physical card can include the functions of all three types, so that it can be used in a number of different circumstances.

Although many debit cards are of the Visa or MasterCard brand, there are many other types of

debit card, each accepted only within a particular country or region, for example Switch (now:

Maestro) and Solo in the United Kingdom, Interac in Canada, Carte Bleue in France, Laser in

Ireland, EC electronic cash (formerly Eurocheque) in Germany, UnionPay in China and EFTPOS

cards in Australia and New Zealand. The need for cross-border compatibility and the advent of

the euro recently led to many of these card networks (such as Switzerland's "EC direkt", Austria's

"Bankomatkasse" and Switch in the United Kingdom) being re-branded with the internationally

recognised Maestro logo, which is part of the MasterCard brand. Some debit cards are dual

branded with the logo of the (former) national card as well as Maestro (for example, EC cards in

Germany, Laser cards in Ireland, Switch and Solo in the UK, Pinpas cards in the Netherlands,

Bancontact cards in Belgium, etc.). The use of a debit card system allows operators to package

their product more effectively while monitoring customer spending. An example of one of these

systems is ECS by Embed International.

Online Debit System

Online debit cards require electronic authorization of every transaction and the debits are

reflected in the user’s account immediately. The transaction may be additionally secured with the

personal identification number (PIN) authentication system; some online cards require such

authentication for every transaction, essentially becoming enhanced automatic teller machine

(ATM) cards.

One difficulty with using online debit cards is the necessity of an electronic authorization device

at the point of sale (POS) and sometimes also a separate PINpad to enter the PIN, although this is

becoming commonplace for all card transactions in many countries.

Overall, the online debit card is generally viewed as superior to the offline debit card because of

its more secure authentication system and live status, which alleviates problems with processing

lag on transactions that may only issue online debit cards. Some on-line debit systems are using

41

the normal authentication processes of Internet banking to provide real-time on-line debit

transactions. The most notable of these are Ideal and POLl.

[edit]Offline Debit System

Offline debit cards have the logos of major credit cards (for example, Visa or MasterCard) or

major debit cards (for example, Maestro in the United Kingdom and other countries, but not the

United States) and are used at the point of sale like a credit card (with payer's signature). This

type of debit card may be subject to a daily limit, and/or a maximum limit equal to the

current/checking account balance from which it draws funds. Transactions conducted with

offline debit cards require 2–3 days to be reflected on users’ account balances.

In some countries and with some banks and merchant service organizations, a "credit" or offline

debit transaction is without cost to the purchaser beyond the face value of the transaction, while a

fee may be charged for a "debit" or online debit transaction (although it is often absorbed by the

retailer). Other differences are that online debit purchasers may opt to withdraw cash in addition

to the amount of the debit purchase (if the merchant supports that functionality); also, from the

merchant's standpoint, the merchant pays lower fees on online debit transaction as compared to

"credit" (offline)

42

CHAPTER IV:

ANALYSIS & INTERPRETATION

43

s.no Symbol Date Prev Close Close Price RETURN(X)

1 HDFC 3-Jan-12 728.35 728.2 -0.022 HDFC 4-Jan-12 728.2 731.75 0.493 HDFC 5-Jan-12 731.75 708.1 -3.234 HDFC 6-Jan-12 708.1 706.9 -0.175 HDFC 7-Jan-12 706.9 683.9 -3.256 HDFC 10-Jan-12 683.9 653.6 -4.437 HDFC 12-Jan-12 653.6 659.35 0.888 HDFC 11-Jan-12 659.35 680.65 3.239 HDFC 13-Jan-12 680.65 667.35 -1.95

10 HDFC 14-Jan-12 667.35 641.75 3.410 HDFC 17-Jan-12 641.75 663.65 3.41

12 HDFC 18-Jan-12 663.65 658.35 -0.8013 HDFC 19-Jan-12 658.35 653.1 -0.8014 HDFC 20-Jan-12 653.1 660.6 1.1515 HDFC 21-Jan-12 660.6 651.2 -1.4216 HDFC 24-Jan-12 651.2 669.45 2.8017 HDFC 25-Jan-12 669.45 670.2 0.1118 HDFC 27-Jan-12 670.2 667.1 -0.4619 HDFC 28-Jan-12 667.1 645.25 -3.2820 HDFC 31-Jan-12 645.25 628.35 -2.62

PERFORMANCE FOR THE MONTH OF JAN-2012

Mean -0.71

Standard Deviation 2.32

Sample Variance 5.40

44

OBSERVATIONS

• Almost all of the participating banks have a risk management department.

• Most of the industry’s risk managers’ report to the Chief Executive Officer, Asset and

liability manager and Chief Risk Officer accounting for the balance in equal proportions.

• Slightly more attention is paid to credit and operational risk than to Market risk, as 40 %

of the banks operating do not have risk committee.

INTERPRETATION

• Despite the relatively small size of banks, they are generally well aware of the risk

management function, and for this purpose, risk managers spend over half their time

performing these functions.

45

s.no Symbol Date Prev Close Close Price RETURN(X)1 HDFC 1-Feb-12 628.35 633.25 0.782 HDFC 2-Feb-12 633.25 617.45 -2.503 HDFC 3-Feb-12 617.45 624.3 1.114 HDFC 4-Feb-12 624.3 604.15 -3.235 HDFC 7-Feb-12 604.15 590.65 -2.236 HDFC 8-Feb-12 590.65 589.15 -0.257 HDFC 9-Feb-12 589.15 608.3 3.258 HDFC 10-Feb-12 608.3 595.85 -2.059 HDFC 12-Feb-12 595.85 623.15 4.58

10 HDFC 14-Feb-12 623.15 642.8 3.1511 HDFC 15-Feb-12 642.8 646.6 0.5912 HDFC 16-Feb-12 646.6 626.9 -3.0513 HDFC 17-Feb-12 626.9 650.05 3.6914 HDFC 18-Feb-12 650.05 643.85 -0.9515 HDFC 21-Feb-12 643.85 648.1 0.6616 HDFC 22-Feb-12 648.1 641.1 -1.0817 HDFC 23-Feb-12 641.1 647 0.9218 HDFC 24-Feb-12 647 616.8 -4.6719 HDFC 25-Feb-12 616.8 623.6 1.1020 HDFC 28-Feb-12 623.6 629.2 0.90

PERFORMANCE FOR THE MONTH OF JAN-2012

Mean 0.51Standard Deviation 1.89Sample Variance 3.56

46

s.no Symbol Date Prev Close Close Price RETURN(X)1 HDFC 1-Mar-12 629.2 650.75 3.422 HDFC 3-Mar-12 650.75 672.1 3.283 HDFC 4-Mar-12 672.1 681.5 1.404 HDFC 7-Mar-12 681.5 667 -2.135 HDFC 8-Mar-12 667 675.15 1.226 HDFC 9-Mar-12 675.15 672.7 -0.367 HDFC 10-Mar-12 672.7 666.8 -0.888 HDFC 12-Mar-12 666.8 660.4 -0.969 HDFC 14-Mar-12 660.4 671.45 1.67

10 HDFC 15-Mar-12 671.45 663.1 -1.2411 HDFC 16-Mar-12 663.1 659.85 -0.4912 HDFC 17-Mar-12 659.85 637 -3.4613 HDFC 18-Mar-12 637 620.3 -2.6214 HDFC 21-Mar-12 620.3 626.45 0.9915 HDFC 22-Mar-12 626.45 637.8 1.8116 HDFC 23-Mar-12 637.8 640.2 0.3817 HDFC 24-Mar-12 640.2 644.1 0.6118 HDFC 25-Mar-12 644.1 663.7 3.0419 HDFC 28-Mar-12 663.7 667.9 0.6320 HDFC 29-Mar-12 667.9 683.05 2.2721 HDFC 30-Mar-12 683.05 698.45 2.2522 HDFC 31-Mar-12 698.45 701.2 0.39

s.no Symbol Date Prev Close Close Price RETURN(X)1 HDFC 1-Apr-12 701.2 708.2 1.002 HDFC 4-Apr-12 708.2 705.55 -0.373 HDFC 5-Apr-12 705.55 698.35 -1.024 HDFC 6-Apr-12 698.35 698.9 0.085 HDFC 7-Apr-12 698.9 715.7 2.406 HDFC 8-Apr-12 715.7 710.65 -0.717 HDFC 12-Apr-

12710.65 690.15 -2.88

8 HDFC 13-Apr-12

690.15 718 4.04

47

PERFORMANCE FOR THE MONTH OF march -2012Mean 0.06Standard Deviation 1.85Sample Variance 3.42

9 HDFC 15-Apr-

12 718 706.7 -1.57

10 HDFC 18-Apr-

12 706.7 692.1 -2.07

11 HDFC 19-Apr-

12 692.1 694.6 0.36

12 HDFC 20-Apr-

12 694.6 715 2.94

13 HDFC 21-Apr-

12 715 732.2 2.41

14 HDFC 25-Apr-

12 732.2 731.05 -0.16

15 HDFC 26-Apr-

12 731.05 722.85 -1.12

16 HDFC 27-Apr-

12 722.85 722.1 -0.10

17 HDFC 28-Apr-

12 722.1 717.35 -0.66

PERFORMANCE FOR THE MONTH OF JAN-2012

Mean -0.06

Standard Deviation 1.67

Sample Variance 2.80

48

Symbol Series Date Prev Close

Close Price return(x)

AXISBANK EQ 3-Jan-12 1,350.10 1,367.65 1.30AXISBANK EQ 4-Jan-12 1,367.65 1,347.95 -1.44AXISBANK EQ 5-Jan-12 1,347.95 1,310.90 -2.75AXISBANK EQ 6-Jan-12 1,310.90 1,305.85 -0.39AXISBANK EQ 7-Jan-12 1,305.85 1,280.65 -1.93AXISBANK EQ

10-Jan-12 1,280.65 1,254.60 -2.03

AXISBANK EQ

12-Jan-12 1,254.60 1,300.20 3.63

AXISBANK EQ

12-Jan-12 1,300.20 1,313.35 1.01

AXISBANK EQ

13-Jan-12 1,313.35 1,265.45 -3.65

AXISBANK EQ

14-Jan-12 1,265.45 1,201.60 2.28

AXISBANK EQ

17-Jan-12 1,201.60 1,229.00 2.28

AXISBANK EQ

18-Jan-12 1,229.00 1,278.25 4.01

AXISBANK EQ

19-Jan-12 1,278.25 1,280.10 0.14

AXISBANK EQ

20-Jan-12 1,280.10 1,285.10 0.39

AXISBANK EQ

21-Jan-12 1,285.10 1,287.05 0.15

AXISBANK EQ

24-Jan-12 1,287.05 1,325.75 3.01

AXISBANK EQ

25-Jan-12 1,325.75 1,297.20 -2.15

AXISBANK EQ

27-Jan-12 1,297.20 1,298.95 0.13

AXISBANK EQ

28-Jan-12 1,298.95 1,253.50 -3.50

AXISBANK EQ

31-Jan-12 1,253.50 1,242.20 -0.90

data analysys

Mean -0.02

49

Standard Deviation 2.30

Sample Variance 5.28

50

Symbol Series Date Prev Close Close Price return(x)AXISBANK EQ 1-Feb-12 1,242.20 1,242.65 0.04AXISBANK EQ 2-Feb-12 1,242.65 1,225.05 -1.42AXISBANK EQ 3-Feb-12 1,225.05 1,256.35 2.55AXISBANK EQ 4-Feb-12 1,256.35 1,222.60 -2.69AXISBANK EQ 7-Feb-12 1,222.60 1,228.55 0.49AXISBANK EQ 8-Feb-12 1,228.55 1,290.70 5.06AXISBANK EQ 9-Feb-12 1,290.70 1,260.65 -2.33AXISBANK EQ 10-Feb-12 1,260.65 1,265.55 0.39AXISBANK EQ 12-Feb-12 1,265.55 1,221.70 -3.46AXISBANK EQ 14-Feb-12 1,221.70 1,270.05 3.96AXISBANK EQ 15-Feb-12 1,270.05 1,274.80 0.37AXISBANK EQ 16-Feb-12 1,274.80 1,296.80 1.73AXISBANK EQ 17-Feb-12 1,296.80 1,317.50 1.60AXISBANK EQ 18-Feb-12 1,317.50 1,296.80 -1.57AXISBANK EQ 21-Feb-12 1,296.80 1,306.95 0.78AXISBANK EQ 22-Feb-12 1,306.95 1,264.65 -3.24AXISBANK EQ 23-Feb-12 1,264.65 1,255.00 -0.76AXISBANK EQ 24-Feb-12 1,255.00 1,290.35 2.82AXISBANK EQ 25-Feb-12 1,290.35 1,232.50 -4.48AXISBANK EQ 28-Feb-12 1,232.50 1,218.55 -1.13

DATA ANALYSIS

Mean 0.67

Standard Deviation 2.15

Sample Variance 4.62

51

Symbol Series Date Prev Close Close Price return(x)AXISBANK EQ 1-Mar-12 1,218.55 1,288.80 5.77AXISBANK EQ 3-Mar-12 1,288.80 1,309.80 1.63AXISBANK EQ 4-Mar-12 1,309.80 1,328.30 1.41AXISBANK EQ 7-Mar-12 1,328.30 1,283.40 -3.38AXISBANK EQ 8-Mar-12 1,283.40 1,312.50 2.27AXISBANK EQ 9-Mar-12 1,312.50 1,300.95 -0.88AXISBANK EQ 10-Mar-12 1,300.95 1,285.05 -1.22AXISBANK EQ 12-Mar-12 1,285.05 1,265.70 -1.51AXISBANK EQ 14-Mar-12 1,265.70 1,290.35 1.95AXISBANK EQ 15-Mar-12 1,290.35 1,282.95 -0.57AXISBANK EQ 16-Mar-12 1,282.95 1,318.60 2.78AXISBANK EQ 17-Mar-12 1,318.60 1,291.10 -2.09AXISBANK EQ 18-Mar-12 1,291.10 1,269.20 -1.70AXISBANK EQ 21-Mar-12 1,269.20 1,279.35 0.80AXISBANK EQ 22-Mar-12 1,279.35 1,295.90 1.29AXISBANK EQ 23-Mar-12 1,295.90 1,315.40 1.50AXISBANK EQ 24-Mar-12 1,315.40 1,319.45 0.31AXISBANK EQ 25-Mar-12 1,319.45 1,364.95 3.45AXISBANK EQ 28-Mar-12 1,364.95 1,384.25 1.41AXISBANK EQ 29-Mar-12 1,384.25 1,422.15 2.74AXISBANK EQ 30-Mar-12 1,422.15 1,426.45 0.30AXISBANK EQ 31-Mar-12 1,426.45 1,403.85 -1.58

DATA ANALYSISMean 0.667337761Standard Error 0.45802582Standard Deviation 2.148331522Sample Variance 4.61532833

52

CHAPTER V:

FINDINGS AND SUGGESTIONS

53

FINDINGS

1) Investors consider that money market is not predictable and that is the biggest risk. It is a

fluctuating market hence it cannot be trusted.

2) Investors invest large portion of their total amount to be invested in fixed income avenues

and less portion in equity because the returns in equity market are not sure and it is a

risky investment.

3) Also large numbers of investors choose fixed income avenues as their first priority to

invest in because they are safer investment avenues as compared to other investment

avenues. They contain less or no risk.

4) A large number of investors generally in equity market in order to get money

appreciation.

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SUGGESTIONS

Evaluating an investment option is never an attempt to run down the credentials of other

instruments in the block. Rather the aim is to uncover ways to make the scene more persuasive

and more rational. Mutual funds are an ideal investment in more ways than one.

After a number of investigation and back seat squabbling over the latest budget, investors have

finally started asking for the right investment instrument that truly fits his needs. At the backdrop

of this uncertainty I am trying to size up the depts.

And breadth of benefits of six investment instruments in this section of triggering thoughts.

Abandoning the marketing tricks, I stretched out my analysis with a ranking scale of 10 as a

fundamental figure crunching exercise. Gradually, I have identified and categorized all the

investment requirements into three broad heads to seize the flaws into procedure.

And in a remarkable finding, mutual funds appears to act as a treat to all embodies investment at

its best and widely addresses the savings component of safety to suite your income tolerance.

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CONCLUSION

Implementation of banks has been described as a long journey rather than a destination

by itself. Undoubtedly, it would require commitment of substantial MONEY and human

resources on the part of both banks and the supervisors.

RBI has decided to follow a consultative process while implementing Basel II norms and

move in a gradual, sequential and co-ordinate manner. For this purpose, dialogue has

already been initiated with the stakeholders. As envisaged by the Basel Committee, the

accounting profession too, will make a positive contribution in this respect to make

Indian banking system still stronger.

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BIBLIOGRAPHY

WEB SITES

• www.bis.org

• www.rbi.org

• www.google.com

• www.yahoo.com

BOOKS

• Hand Book on Risk management & Basel II norms

• Finance management Henry fayal 13th edition

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