Mfs Mini Project

Management of Financial Services

Mini Project – Interviewing managers in

Banking, Insurance & Mutual Fund sectors

Project done by:

Under guidance of:

MFS – Mini Project

2 TKM Institute of Management

Table of Contents

1. Introduction 3

2. Sector Overview 4

3. Insurance Company 13

4. Mutual Fund Company 23

5. Bank 27

6. Conclusion 31



1. Introduction

The theory what budding managers learn can only be applied in the

industry. Any real scenario in the industry can only provide real time learning.

The project is intended to provide an understanding of the industry and its

working pattern.

Objective

The objective of the project is to understand the various aspects of

Banking, Mutual funds and Insurance sectors including the products and

services offered by each of the sectors.

Methodology

The methodology adopted was direct interview and company

documentation to collect all the required information. The manager of the

office visited was interviewed to collect maximum and accurate information.

Details like the products and services offered were collected using company

documentation.



2. Sector Overview

Mutual Funds

The mutual fund industry started in India in a small way with the UTI Act

creating what was effectively a small savings division within the RBI. Over a

period of 25 years this grew fairly successfully and gave investors a good

return, and therefore in 1989, as the next logical step, public sector banks and

financial institutions were allowed to float mutual funds and their success

emboldened the government to allow the private sector to foray into this area.

The initial years of the industry also saw the emerging years of the Indian

equity market, when a number of mistakes were made and hence the mutual

fund schemes, which invested in lesser-known stocks and at very high levels,

became loss leaders for retail investors. From those days to today the retail

investor, for whom the mutual fund is actually intended, has not yet returned

to the industry in a big way. But to be fair, the industry too has focused on

bringing in the large investor, so that it can create a significant base corpus,

which can make the retail investor feel more secure.

India has been amongst the fastest growing markets for mutual funds

since 2004 witnessing a CAGR of 29 Percent in the five-year period from

2004 to 2008 as against the global average of4 percent. The increase in

revenue and profitability, however, has not been commensurate with the AUM

growth in the last five years. Low share of global assets under management,

low penetration levels, limited share of mutual funds in the household financial

savings and the climbing growth rates in the last few years that are amongst

the highest in the world, all point to the future potential of the Indian mutual

fund.



Challenges and Issues

Challenges and issues faced by the sector are mentioned below. Low

customer awareness levels and financial literacy pose the biggest challenge

to channelizing household savings into mutual funds. Further, fund houses

have shown limited focus on increasing retail penetration and building retail

AUM. Most AMCs and distributors have a limited focus beyond the top 20

cities that is manifested in limited distribution channels and investor servicing.

The Indian Mutual fund industry has largely been product- led and not

sufficiently customer focused with limited focus being accorded by players to

innovation and new product development.

Further there is limited flexibility in fees and pricing structures currently.

Distributors and the mutual fund houses have exhibited limited interest in

continuously engaging with customers post closure of sale as the

commissions and incentives have been largely in the form of upfront fees from

product sales. Limited focus of the public sector network including public

sector banks, India Post etc on distribution of mutual funds has also impeded

the growth of the industry. Further multiple regulatory frameworks govern

different verticals within the financial services sector, such as differential

policies pertaining to the PAN card requirement, mode of payment (cash vs.

cheque), funds management by insurance companies and commission

structures, among others.



Banking Sector

Banking in one form or another was in existence even in ancient times.

As early as 2000 B.C Babylonians had developed a system of banks. The

writings of Manu (he maker of Hindu Law) and Kautilya (the minister of

Chandragupta Maurya) and the teachings of Christ contained references to

banking. However modern banking came into existence only after the

industrial revolution. There was a need for the formation of financial

institutions that could collect the surplus funds of the people on terms

acceptable to them and make them available to the needy for productive

purposes. Accordingly a large number of such financial institutions called joint

stock banks were set up after the industrial revolution

The banking system in India is significantly different from that of other

Asian nations because of the country’s unique geographic, social, and

economic characteristics. India has a large population and land size, a diverse

culture, and extreme disparities in income, which are marked among its

regions. There are high levels of illiteracy among a large percentage of its

population but, at the same time, the country has a large reservoir of

managerial and technologically advanced talents. Between about 30 and 35

percent of the population resides in metro and urban cities and the rest is

spread in several semi-urban and rural centers. The country’s economic

policy framework combines socialistic and capitalistic features with a heavy

bias towards public sector investment. India has followed the path of growth-

led exports rather than the “export led growth” of other Asian economies, with

emphasis on self-reliance through import substitution. These features are

reflected in the structure, size, and diversity of the country’s banking and

financial sector.



The banking system has had to serve the goals of economic policies

enunciated in successive five year development plans, particularly concerning

equitable income distribution, balanced regional economic growth, and the

reduction and elimination of private sector monopolies in trade and industry.

In order for the banking industry to serve as an instrument of state policy, it

was subjected to various nationalization schemes in different phases (1955,

1969, and 1980). As a result, banking remained internationally isolated (few

Indian banks had presence abroad in international financial centers) because

of preoccupations with domestic priorities, especially massive branch

expansion and attracting more people to the system.

Moreover, the sector has been assigned the role of providing support to

other economic sectors such as agriculture, small-scale industries, exports,

and banking activities in the developed commercial centers (i.e., metro, urban,

and a limited number of semi-urban centers).The banking system’s

international isolation was also due to strict branch licensing controls on

foreign banks already operating in the country as well as entry restrictions

facing new foreign banks. A criterion of reciprocity is required for any Indian

bank to open an office abroad. These features have left the Indian banking

sector with weaknesses and strengths. A big challenge facing Indian banks is

how, under the current ownership structure, to attain operational efficiency

suitable for modern financial intermediation. On the other hand, it has been

relatively easy for the public sector banks to recapitalize, given the increases

in nonperforming assets (NPAs), as their Government dominated ownership

structure has reduced the conflicts of interest that private banks would face.

About 92 percent of the country’s banking segment is under State control

while the balance comprises private sector and foreign banks. The public

sector commercial banks are divided into three categories such as State Bank

group, nationalized banks and Regional Rural Banks.



Porters 5 forces analysis – Banking Sector

• Threat of New Entrants

The average person can't come along and start up a bank, but there

are services, such as internet bill payment, on which entrepreneurs can

capitalize. Banks are fearful of being squeezed out of the payments

business, because it is a good source of fee-based revenue. Another trend

that poses a threat is companies offering other financial services. What

would it take for an insurance company to start offering mortgage and loan

services? Not much. Also, when analyzing a regional bank, remember that

the possibility of a mega bank entering into the market poses a real threat.

• Power of Suppliers

The suppliers of capital might not pose a big threat, but the threat of

suppliers luring away human capital does. If a talented individual is

working in a smaller regional bank, there is the chance that person will be

enticed away by bigger banks, investment firms, etc.

• Power of Buyers

The individual doesn't pose much of a threat to the banking industry,

but one major factor affecting the power of buyers is relatively high

switching costs. If a person has a mortgage, car loan, credit card, checking

account and mutual funds with one particular bank, it can be extremely

tough for that person to switch to another bank. In an attempt to lure in

customers, banks try to lower the price of switching, but many people

would still rather stick with their current bank. On the other hand, large

corporate clients have banks wrapped around their little fingers. Financial



institutions - by offering better exchange rates, more services, and

exposure to foreign capital markets - work extremely hard to get high-

margin corporate clients.

• Availability of Substitutes

As you can probably imagine, there are plenty of substitutes in the

banking industry. Banks offer a suite of services over and above taking

deposits and lending money, but whether it is insurance, mutual funds or

fixed income securities, chances are there is a non-banking financial

services company that can offer similar services. On the lending side of the

business, banks are seeing competition rise from unconventional

companies.

• Competitive Rivalry

The banking industry is highly competitive. The financial services

industry has been around for hundreds of years and just about everyone

who needs banking services already has them. Because of this, banks

must attempt to lure clients away from competitor banks. They do this by

offering lower financing, preferred rates and investment services. The

banking sector is in a race to see who can offer both the best and fastest

services, but this also causes banks to experience a lower ROA. They then

have an incentive to take on high-risk projects. In the long run, we're likely

to see more consolidation in the banking industry. Larger banks would

prefer to take over or merge with another bank rather than spend the

money to market and advertise to people.



INSURANCE SECTOR

The Insurance sector in India governed by Insurance Act, 1938, the Life

Insurance Corporation Act, 1956 and General Insurance Business

(Nationalisation) Act, 1972, Insurance Regulatory and Development Authority

(IRDA) Act, 1999 and other related Acts. With such a large population and the

untapped market area of this population Insurance happens to be a very big

opportunity in India. Today it stands as a business growing at the rate of 15-

20 per cent annually. Together with banking services, it adds about 7 per cent

to the country’s GDP .In spite of all this growth the statistics of the penetration

of the insurance in the country is very poor. Nearly 80% of Indian populations

are without Life insurance cover and the Health insurance. This is an indicator

that growth potential for the insurance sector is immense in India. It was due

to this immense growth that the regulations were introduced in the insurance

sector and in continuation “Malhotra Committee” was constituted by the

government in 1993 to examine the various aspects of the industry.

The key element of the reform process was Participation of overseas

insurance companies with 26% capital. Creating a more efficient and

competitive financial system suitable for the requirements of the economy was

the main idea behind this reform. Since then the insurance industry has gone

through many changes .The competition LIC started facing from these

companies were threatening to the existence of LIC .since the liberalization of

the insurance industry has never looked back and today stand as the one of

the most competitive and exploring industry in India. The entry of the private

players and the increased use of the new distribution are in the limelight

today. The use of new distribution techniques and the IT tools has increased

the scope of the industry in the longer run.



India had the nineteenth largest insurance market in the world in 2003.

Strong economic growth in the last decade combined with a population of

over a billion makes it one of the potentially largest markets in the future.

Insurance in India has gone through two radical transformations. Before 1956,

insurance was private with minimal government intervention. In 1956, life

insurance was nationalized and a monopoly was created. In 1972, general

insurance was nationalized as well (endnote 1). But, unlike life insurance, a

different structure was created for the industry. One holding company was

formed with four subsidiaries. As a part of the general opening up of the

economy after 1992, a Government appointed committee recommended that

private companies should be allowed to operate. It took six years to

implement the recommendation. Private sector was allowed into insurance

business in 2000.

However, foreign ownership was restricted. No more than 26% of any

company can be foreign-owned. In what follows, we examine the insurance

industry in India through different regulatory regimes. A totally regulation free

regime ended in 1912 with the introduction of regulation of life insurance. A

comprehensive regulatory scheme came into place in 1938. This was

disabled through nationalization. But, the Insurance Act of 1938 became

relevant again in 2000 with deregulation. With a strong hint of sustained

growth of the economy in the recent past, the Indian market is likely to grow

substantially over the next few decades.



Porters 5 forces analysis – Insurance Sector

• Threat of New Entrants

The average entrepreneur can't come along and start a large

insurance company. The threat of new entrants lies within the insurance

industry itself. Some companies have carved out niche areas in which they

underwrite insurance. These insurance companies are fearful of being

squeezed out by the big players. Another threat for many insurance

companies is other financial services companies entering the market. In

some countries, regulations prevent banks and other financial firms from

entering the industry.

• Power of Suppliers

The suppliers of capital might not pose a big threat, but the threat of

suppliers luring away human capital does. If a talented insurance

underwriter is working for a smaller insurance company (or one in a niche

industry), there is the chance that person will be enticed away by larger

companies looking to move into a particular market.

• Power of Buyers

The individual doesn't pose much of a threat to the insurance

industry. Large corporate clients have a lot more bargaining power with

insurance companies. Large corporate clients like airlines and

pharmaceutical companies pay millions of dollars a year in premiums.

Insurance companies try extremely hard to get high-margin corporate

clients.



• Availability of Substitutes

This one is pretty straight forward, for there are plenty of substitutes

in the insurance industry. Most large insurance companies offer similar

suites of services. Whether it is auto, home, commercial, health or life

insurance, chances are there are competitors that can offer similar

services. In some areas of insurance, however, the availability of

substitutes are few and far between. Companies focusing on niche areas

usually have a competitive advantage, but this advantage depends entirely

on the size of the niche and on whether there are any barriers preventing

other firms from entering.

• Competitive Rivalry

The insurance industry is becoming highly competitive. The

difference between one insurance company and another is usually not that

great. As a result, insurance has become more like a commodity - an area

in which the insurance company with the low cost structure, greater

efficiency and better customer service will beat out competitors. Insurance

companies also use higher investment returns and a variety of insurance

investment products to try to lure in customers. In the long run, we're likely

to see more consolidation in the insurance industry. Larger companies

prefer to take over or merge with other companies rather than spend the

money to market and advertise to people.

3. Insurance Company

BIRLA SUN LIFE INSURANCE

Company profile

Established in 2000, Birla Sun Life Insurance Company Limited (BSLI)

is a joint venture between the Aditya Birla Group, a well known and trusted



name globally amongst Indian conglomerates and Sun Life Financial Inc,

leading international financial services organization from Canada. The local

knowledge of the Aditya Birla Group combined with the domain expertise of

Sun Life Financial Inc., offers a formidable protection for its customers' future.

With an experience of over 10 years, BSLI has contributed significantly

to the growth and development of the life insurance industry in India and

currently ranks amongst the top 6 private life insurance companies in the

country. Known for its innovation and creating industry benchmarks, BSLI has

several firsts to its credit. It was the first Indian Insurance Company to

introduce "Free Look Period" and the same was made mandatory by IRDA for

all other life insurance companies. Additionally, BSLI pioneered the launch of

Unit Linked Life Insurance plans amongst the private players in India. To

establish credibility and further transparency, BSLI also enjoys the prestige to

be the originator of practice to disclose portfolio on monthly basis. These

category development initiatives have helped BSLI be closer to its policy

holders' expectations, which gets further accentuated by the complete

bouquet of insurance products (viz. pure term plan, life stage products, health

plan and retirement plan) that the company offers.

Added to this, the company has extensive reach through its network of

600 branches and 1, 47,900 empanelled advisors. This impressive

combination of domain expertise, product range, reach and ears on ground,

helped BSLI cover more than 2.4 million lives since it commenced operations

and establish a customer base spread across more than 1500 towns and

cities in India. To ensure that our customers have an impeccable experience,

BSLI has ensured that it has lowest outstanding claims ratio of 0.00% for FY

2010-11. Additionally, BSLI has the best Turn Around Time according to

LOMA on all claims Parameters. Such services are well supported by sound



financials that the Company has. The AUM of BSLI stood at 19725 crs as on

April 30, 2011.

The various products are categorized into:

• Protection solutions

• Children's future solutions

• Wealth with protection

• Health and wellness

• Retirement solutions

The Aditya Birla Group

The Aditya Birla Group is one of India's largest business houses. Global

in vision, rooted in Indian values, the Group is driven by a performance ethic

pegged on value creation for its multiple stakeholders. The Group operates in

26 countries – India, UK, Germany, Hungary, Brazil, Italy, France,

Luxembourg, Switzerland, Australia, USA, Canada, Egypt, China, Thailand,

Laos, Indonesia, Philippines, UAE, Singapore, Myanmar, Bangladesh,

Vietnam, Malaysia, Bahrain and Korea.

A US $29 billion corporation in the League of Fortune 500, the Aditya

Birla Group is anchored by an extraordinary work force of 130,000

employees, belonging to 40 different nationalities. Over 60 per cent of its

revenues flow from its operations across the world. The Aditya Birla Group is

a dominant player in all its areas of operations viz; Aluminium, Copper,

Cement, Viscose Staple Fibre, Carbon Black, Viscose Filament Yarn,

Fertilisers, Insulators, Sponge Iron, Chemicals, Branded Apparels, Insurance,

Mutual Funds, Software and Telecom. The Group has strategic joint ventures

with global majors such as Sun Life (Canada), AT&T (USA), the Tata Group



and NGK Insulators (Japan), and has ventured into the BPO sector with the

acquisition of TransWorks, a leading ITES/BPO company.

Sun Life Financial

Sun Life Financial Inc is a leading international financial services

organization providing a diverse range of wealth accumulation and protection

products and services to individuals and corporate customers. Chartered in

1865, Sun Life Financial Inc and its partners today have operations in key

markets worldwide, including Canada, the United States, the United Kingdom,

Hong Kong, the Philippines, Japan, Indonesia, India, China and Bermuda.

Products and Solutions

• Protection solution

• Group solution

• Individual solution

• NRI solution

Protection solution

1. Protection Solution- Birla Sun Life Insurance Protection Solutions

help to meet the need for financial security for loved ones. The plans

are designed to give a life cover as per need at a reasonable

premium.

2. Children future plan- Birla Sun Life Insurance Children’s Future

Solutions are designed to help build a corpus that allows to meet the

major expenses of child in future. Besides providing life cover to

ensure that your child’s dream is secured, they also offer the choice



of guaranteed returns or the flexibility to manage fund options to

make money grow as per needs.

3. Wealth with protection scheme- Offer flexible plan suited to ones

goal.

4. Health and wellness solution- Birla Sun Life Insurance Health &

Wellness Solutions ensure that the insurer never lack the funds to go

in for quality treatment in case of medical emergencies. The plans

help you insure yourself and your family for an adequate sum,

against major illnesses and injuries. Insurer even has a choice of

plans that offer the cashless facility.

5. Retirement solution- During retirement, income stops but the

expenses don’t. With inflation increasing the cost of basic essentials,

your savings today might not suffice meeting the cost of necessities

throughout the retired life. It is therefore important to start saving

early and in a planned manner for a comfortable, stress-free retired

life. What is also important is to determine your goal for the

retirement corpus basis your projected needs during retired life. Birla

Sun Life Insurance Retirement Solutions ensure that insurer enjoys

a secure and happy retired life. The retirement plans that help

insured build a corpus that lasts throughout ones retired life. So,

whether one wish to retire early and start their own business or lead

a leisurely retired life, can be sure of the funds that make it the best

years of their life.

6. Rider- Riders are the additional benefits that you may buy and add

to your policy at a nominal cost. They allow you to enhance your

insurance cover, qualitatively and quantitatively.



GROUP SOLUTION

BSLI believe that employee benefit plans provided by employers to

their employees play a very important role in increasing employee loyalty

and productivity. Birla Sun Life uses its vast expertise in helping

organizations and groups design customized solutions to their employees.

1. Retirement Solution - BSLI employee benefit solutions are designed

to enable organizations and groups to offer superior benefits to their

employees to meet both statutory requirements like gratuity and

retirement solutions.

(1) Gratuity solution- While Gratuity is a statutory obligation it is also a

very important tool today to create employee loyalty. A

comprehensive gratuity plan can help organizations reduce both

business costs and corporate tax. Birla Sun Life’s gratuity solution

manages your gratuity liability effectively and also helps you release

resources for other business activities.

(2) Super Annuation- Today while there is a high awareness of the

impact of inflation and its affect on retirement savings among

employees, very few would have adopted a systematic and

disciplined savings plan to counter its effect. Organizations can play

a key role in helping employees to build the desired retirement

corpus while at the same time increasing employee loyalty. Birla Sun

Life’s solutions can be customized to effectively meet both employer

and employee requirements.

(3) Leave Encashment- Leave encashment liabilities for organization

keep growing with time thus straing the organizations resources.

These liabilities can bee effectively met through the management of



a dedicated fund for leave encashment. Birla Sun Life vast

experience in effectively managing funds and delivering superior

returns can help organizations effectively manage these liabilities.

2. Protection Solution - Birla Sun Life Insurance Group Protection

Solutions provide the benefit of an insurance cover to an entire group of

people as a single unit.

(1) Employer-Employee- At Birla Sun Life Insurance (BSLI), the goal is

to help client ensure your employees’ well being so that they can

enhance their performance & potential. BSLI protection solutions

combine new innovations in organizational benefits with the

traditional strength of employee assistance to help you. Protect your

investment in your people Reduce the liability, cost and negative

impact of mental reassures in the work place Maintain your position

as employer of choice; and Incorporate employer protection &

wellness into your core business practices.

(2) Affinity- An affinity group is a group consisting of persons who

assemble together with a commonality of purpose or engaging in a

common economic activity. In Insurance parlance Non-employer-

employee groups like employee welfare associations, borrowers of a

bank, professional associations or societies may also be treated as

affinity groups provided the president/ secretary/ manager/ group

organizer in his capacity as organizer of the group has an authority

from majority of the members of the group to arrange insurance on

their behalf.

3. Rural Insurance



A large population of India lives in the rural areas. The impact of risks

associated with life and health are far more severe on this population as

compared to the urban population with higher levels of income. Birla Sun

Life launched its rural program in 2001 to provide insurance to the rural

populace of India. This includes the endowment product that provides life

cover and guarantees returns to the insured on maturity. By virtue of the

benefits it provides, this product has been very well accepted and has

gone on to become the most popular product in the rural areas.

With changing times and with increasing disposable incomes in rural

areas, BSLI improved their solutions to the rural population and launched

two Micro Insurance Products in 2008 which include a pure term and

return of premium products. One of the unique features of these products

is that they provide a grace period of 180 days as opposed to 30 days for

other similar plans in the market. This gives policyholders the flexibility to

pay premiums.

4. NRI Solutions

Birla Sun Life's unique NRI solutions can help client ensure that

dreams and aspirations are not compromised even while you stay away

from your family. BSLI solutions can help you plan and fulfil all your goals

like planning for your child's education, planning for your retirement,

building a house, caring for your parents back home and more.

MARKETING OF BSLI PRODUCTS AND SERVICES

Marketing of their product is usually done by intermediaries called

Agents and Brokers. Agency manager and assistant agency manager monitor

the business performance of agents. Agents are known as insurance advisor.



The company has a marketing department which looks after the marketing

activities of the company. The entire marketing plan is prepared and

implemented by the marketing department. The marketing and finance

department collectively identify the target for each individual agents, assistant

agency manager and the agency manager usually based on the geography.

The functions of the agent include:

•Collecting database of prospect

•Meeting the client and explaining about the product and services based on

client requirements

•Negotiating with the client

•Assisting client in paying the premium

•Assisting in documentation process etc.

INTERVIEW EXCERPT

Person: Mr. Ambu S G

Position: Senior Agency Manager

Birla Sun Life Insurance is one of the leading insurance companies in

India. It’s a joint venture between Aditya Birla Group and Sun life financials.

Insurance industry is one of the fastest growing industries in India. There is

ample opportunity for MBA graduates in BSLI. Fresh MBAs are recruited in

two posts;

• Agency Manager-

• There should be at least 12 agents under him

• The annual target is minimum of 24 lakh per annum.



• Should have to get at least 100 policies

• Will get an initial salary of 2.17 lakh per annum

• Assistant Agency Manager

• There should be at least 6 agents working under him

• The annual target is minimum 6 lakh per annum

• Should have to get at least 50 policies

• Will get an initial salary of 1.85 lakh per annum.

• Sales Supportive Executive (SSE)

• Will have to do advisory recruitment

• Enact reward and recognition policy

• Enacting policy related to commission payable

• Account Management etc

• Branch Operation Executive (BOE)

• Will have to ensure smooth operation of the branch and formulate

branch operational policies.

� To become an insurance agent IRDA certification is mandatory

About job profile and job security in insurance business

Insurance job is one of the risky and high pressure jobs. Here only the

fittest will survive. Job security and career development is solely based on the

performance of the employee. If an employee is not performing up to the



mark, he cannot sustain in this field. If the employee is not able to meet the

target, he is asked why? As the disparity between actual and expected target

increases the number of why is also increased and finally he is forced to quit

the job.

To what extend recession has effected BSLI

Recession has definitely affected our business but we were in a

much better position compared to many peers and other international

insurance company. The lowering of business was due to psychological

fear more than technical. But at the same time this was the period when

we saw maximum growth in our unit linked insurance plan (ULIP). There

were educated clients who took this as an opportunity to invest and pooled

in lots of money.

4. Mutual Fund Company

HDFC ASSET MANAGEMENT COMPANY LTD

Company Profile

HDFC Asset Management Company Ltd (AMC) was incorporated under

the Companies Act, 1956, on December 10, 1999, and was approved to act

as an Asset Management Company for the HDFC Mutual Fund by SEBI vide

its letter dated July 3, 2000. The registered office of the AMC is situated at

Ramon House, 3rd Floor, H.T. Parekh Marg, 169, Backbay Reclamation,

Churchgate, Mumbai - 400 020. In terms of the Investment Management

Agreement, the Trustee has appointed the HDFC Asset Management

Company Limited to manage the Mutual Fund. HDFC Mutual Fund is one of

the largest mutual funds and well-established fund house in the country with



consistent and above average fund performance across categories since its

incorporation on December 10, 1999.

HDFC Mutual Fund has been one of the best performing mutual funds

in the last few years. HDFC Asset Management Company Limited (AMC)

functions as an Asset Management Company for the HDFC Mutual Fund.

AMC is a joint venture between housing finance giant HDFC and British

investment firm Standard Life Investments Limited. It conducts the operations

of the Mutual Fund and manages assets of the schemes, including the

schemes launched from time to time. As of Aug 2006, the fund has assets of

Rs.25,892 crores under management. In 2003, following a decision by the

Zurich Insurance Company (ZIC), the Sponsor of Zurich India Mutual Fund, to

divest its asset management business in India, AMC had entered into an

agreement with ZIC to acquire the asset management business.

Consequently, all the schemes of Zurich Mutual Fund in India had been

transferred to HDFC Mutual Fund and renamed as HDFC schemes

Products Offered

• Children’s Gift Fund - Children's Gift Fund with an objective to obtain

long term capital appreciation

• Debt/Income Fund - Invest in money market and debt instruments and

provide optimum balance of yield.

• Fund of Fund Schemes - Invests primarily in other scheme(s) of the

same mutual fund or other mutual funds

• Equity/Growth Fund - Invest primarily in equity and equity related instruments

• Fixed Maturity Plan - Invest primarily in Debt / Money Market

Instruments and Government Securities.



• Exchange Traded Funds - Invest primarily in equity and equity related

instruments

• Liquidity funds - Provide high level of liquidity by investing in money

market and debt instruments.

• Quarterly Interval Fund - Generate regular income through investments

in Debt / Money Market Instruments.

INTERVIEW EXCERPT

HDFC Mutual Fund, Kollam, located near the Andamukkam bus stand,

is headed by Mr. Manoj Mathew. An interview with Branch Manager, Mr.

Manoj Mathew and head in charge, Mr. Manoranj S.C helped us to

understand better the functioning of the organization and also the marketing

of mutual funds.

What are the main role & activities of HDFC-AMC?

There are eight branches of HDFC AMC in Kerala and every branch act

as an Investor Service Center (ISC). The main purpose of Investor Service

Centers is to provide services and to communicate with the existing and

potential investors within and outside India, about the performance of the

schemes, ownership details, finding new customers, disclosures made on an

ongoing basis and answers to frequently asked questions etc.

How does HDFC Mutual fund differentiated from other mutual funds?

HDFC follows a unique investment policy that ensures maximum return

with less return. The investment philosophy relies extensively on fundamental

research. It is driven by the belief that over time stock prices reflect a



business’ underlying intrinsic values and its long-term prospects. Some of the

basic principles for equity schemes include focus on long term, managing risk

and maintaining balanced outlook on the market. Similarly other schemes also

have such unique investment philosophy.

How is mutual funds marketed in HDFC-AMC?

HDFC Mutual Fund is one of the largest mutual funds in India with an

investor base of over 25lakh which is serviced primarily by their wide network

of distributors. HDFC AMC markets their products through channel sales like

all other asset management companies. Thus no direct sales are involved in

mutual fund marketing. HDFC Mutual Fund considers their distributors as the

most important link between the investors and them. To help distributors to

advise and service their clients better, the AMC together with the registrar

(CAMS) offer a range of facilities to the distributors. The main distributors of

mutual fund include broking firms, banks and individual financial advisors.

HDFC AMC mainly focuses on banks for their distribution. Country’s top

banks like HDFC bank, IndusInd Bank, Axis Bank, ICICI Bank, SBI Bank are

in the list. By partnering with banks for distribution, mutual funds expect to

reverse the distributor-induced portfolio churning by investors. Also, banks

charge a lower distribution fee compared with national distributors and some

independent financial advisors. By partnering with the banks HDFC has an

advantage of widening the reach of mutual funds in India.

What are the activities conducted to widen mutual fund reach?

Association of Mutual Funds in India (AMFI) has introduced many

programmes for the promotion of mutual funds in India. One among them is

Investor Awareness Programme, where a free training is to be given to the

interested investors and meet their queries, which is to be done every month



as per AMFI guidelines. Similarly, Distributors Training is conducted to have a

good rapport with the distributors, so that they can boost up the sales.

Conclusion

For HDFC AMC customers always comes first. Operations and

Customer Service are our key focus area and play an instrumental role in our

success. The organisation is dedicated towards customer satisfaction and

work hard to cater to their unique requirements. HDFC-AMC was the first

AMC to be assigned “Fund House Level 1 Rating” by Crisil. The rating reflects

highest fund governance levels and fund management practices at HDFC

AMC.

5. Banking Company

STATE BANK OF TRAVANCORE

Company Profile

The bank was established in 1945 as the Travancore Bank Ltd, at the

initiative of C. P. Ramaswami Iyer, then Divan of Travancore. Although the

Travancore government put up only 25% of the capital, the bank undertook

government treasury work and foreign exchange business, apart from its

general banking business. Its registered office was at Madras. In 1960, it

became a subsidiary of State Bank of India under the SBI Subsidiary Banks

Act, 1959, enacted by the Parliament of India. SBT is now headed by Mr.

Pradip Chaudhuri as Chairman and Mr. P Nanda Kumaran as the Managing

Director.

Products and Services



The bank offers various products and services. The banking services

are mainly catered through three heads, Personal banking, NRI banking and

Business banking. Bank also actively take part in Financial Inclusion

measures as well as Social and Rural banking. The services mainly include e-

payment facility for paying income tax, service tax and customs and duties;

remittance of money to and from other nations; insurance; mutual funds;

demat services; custodial services; international debit card; pilgrim service

centers and Viswa yatra card.

INTERVIEW EXCERPT

Manager: Mr Satisan M

Position: Assistant General Manager

Your association with SBT

I am with SBT for the past 33 years. I joined SBT as a clerk in the year

1978 and I am extremely satisfied with the association with SBT.

What are the normal functions of your branch?

As every bank we basically perform three functions-

o Accepting Deposit

o Lending Money

o Facilitating Fund Transfer

Do you believe increasing interest rate is solution for controlling

inflation?

I am not the right person to talk about this but I personally believe that

rising interest rate is not the right way to go. The current inflation is due to



rising demand and the major contributor to increasing demand is raising

consumption by lower income group. Many programs like Mahatma Gandhi

Rural Employment Program of central government has increased the living

standard of rural population drastically this in turn has resulted in increasing

demand. So we cannot complain about this. Another two factors which are

adding fuel to the fire are

� Low production level

� Poor supply chain management

Low production level and poor supply chain management has resulted

in high inflation. Therefore increasing the interest rate beyond a saturation

point is not going to help.

To what extend the recent recession affected SBT

Recession has affected the entire country as whole. But we are proud

to say that in the banking sector, we were the least affected.

Why SBT employees are opposing the proposal of merger with SBI

The reluctant to merger is purely because of personal reasons. Few

middle and top level management people believe that if the merger happens

they will lose their power. They will come under the direct discretion of SBI

officials. There is no chances of job lose at all but there will be a reshuffle and

nobody wants to lose their power. It’s completely because of personal gain

that they are reluctant to merger. But merger will happen in the next 2 or 3

years.

Difference between nationalized bank and new generation private bank

New generation private bank pays much more than the nationalized

bank but the output they expect from there employee is much more. Working



in a new generation bank is like a pressure cooker, the employee has to

deliver otherwise will be shown the doors. There is no job security in private

banks. In contrast the basic pay given in nationalized bank is less but when

we compare the amenities and other benefits it comes out to be par with what

is paid in private bank, moreover your job is secured here. Nationalized bank

is much better than private bank.

Working in SBT provides ample opportunity. A person joined as PO can

reach up to the position of General Manager. Moreover one may get an

opportunity to work in any of the SBT branch from Osaka to Alaska. So one

can also get international assignment during his tenure. Nationalized bank

perform both mass banking and class banking where as private bank

performs only class banking.

Entry options for MBAs in SBT

The only way to get into SBT is through bank exam. The post for which

MBAs can look for are-

� Probationary Officer (PO)

� Specialist Officer (SO)

The basic qualification required for PO is graduation with knowledge in

computer. A PO today is considered as blue eyed boy. The basic qualification

required SO is post graduation preferably MBAs, CAs etc.

Now the role of a bank employee has changed drastically, it’s no more

a monotonous job. A PO need to perform multitask. So he should be

extremely versatile. They are also allowed to do Cross selling business.

Views about resent downgrading of banking industry by credit rating

agencies



The downgrading of Indian banking industry is not at all going to affect

the banking sector in India. Our policies are much better and are at par with

international standard. Our profit margin is extremely good, also our economy

is expected to grow at the rate of 7.5% which is much better compared to

many developed and developing country, given the current scenario. So, we

are in a much stable position.

Concerns regarding NPA

NPAs will be there, be it any bank in the world. But our policies are so

stringent that our NPAs will not affect our financial stability. We have a well

laid down procedure in place for recovering NPAs. NPA and pension

commitment are not at all going to affect as in the coming future.

6. Conclusion

The project has given immense exposure in the various sectors such as

Banking, Insurance and Mutual Funds. The managers have shared much

information and shared their experiences.

Mfs Mini Project

Documents

Transcript of Mfs Mini Project