CHAPTER- I

INTRODUCTION

1
 INTRODUCTION:
"The establishment of budgets relating the responsibilities of executives to the requirements of
a policy, and the continuous comparison of actual with budgeted results, either to secure by
individual action the objective of that policy, or to provide a basis for its revision".
A budget is a quantitative expression of a plan of action relating to the forthcoming budget
period. It represents a written operational plan of management for the budget period.” A plan
expressed in money. It is prepared and approved prior to the budget period and may show
income, expenditure, and the capital to be employed, may be drawn up showing incremental
effects on former budgeted or actual figures, or be compiled by zero based budgeting”. Budget
and Budgetary control. The terms budget and budgetary control are often used interchangeable
to refer to a system of managerial control. Budgetary control implies the use of a
comprehensive system of budgeting to aid management in carrying out its functions like
planning, co-ordination and control.
BUDGET:
According to Institute of Chartered Management Accountants (ICMA) England “A plan
qualified in monetary term prepared and approved prior to a defined period of time usually
showing planned income to be generated and or to be incurred during that period and the
capital to be employed to attain a given objective”.
Budgetary control methods
a) Budget:
 A formal statement of the financial resources set aside for carrying out specific activities in a
given period of time.
 It helps to co-ordinate the activities of the organization.
 An example would be an advertising budget or sales force budget.
b) Budgetary control:
 A control technique whereby actual results are compared with budgets.
 Any differences (variances) are made the responsibility of key individuals who can
either exercise control action or revise the original budgets.

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Budgetary control and responsibility centres;
These enable managers to monitor organizational functions.
A responsibility centre can be defined as any functional unit headed by a manager who is
responsible for the activities of that unit.
There are four types of responsibility centres:
 Revenue centres: Organizational units in which outputs are measured in monetary
terms but are not directly compared to input costs.
 Expense centres: Units where inputs are measured in monetary terms but outputs are
not.
 Profit centres: Where performance is measured by the difference between revenues
(outputs) and expenditure (inputs). Inter-departmental sales are often made using
"transfer prices".
 Investment centres : Where outputs are compared with the assets employed in
producing them, i.e. ROI.
Advantages of budgeting and budgetary control
There are a number of advantages to budgeting and budgetary control:
 Compels management to think about the future, which is probably the most important
feature of a budgetary planning and control system. Forces management to look ahead,
to set out detailed plans for achieving the targets for each department, operation and
(ideally) each manager, to anticipate and give the organisation purpose and direction.
 Promotes coordination and communication.
 Clearly defines areas of responsibility. Requires managers of budget centres to be made
responsible for the achievement of budget targets for the operations under their
personal control.
 Provides a basis for performance appraisal (variance analysis). A budget is basically a
yardstick against which actual performance is measured and assessed. Control is
provided by comparisons of actual results against budget plan. Departures from budget
can then be investigated and the reasons for the differences can be divided into
controllable and non-controllable factors.
 Enables remedial action to be taken as variances emerge.
 Motivates employees by participating in the setting of budgets.
 Improves the allocation of scarce resources.

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NEED OF THE STUDY
 To know about the budget and budgetary control of a “The Housing Development
Finance Corporation Limited (HDFC).”
 To know about the status of a company by different financial Budgetary policies.
 To know about the present scenario of Thermal companies Investment estimation that
are existed in the market.
 To know about the present impact of budgetary control on the Financial position of the
company.
 To know about the fast performance to based on future Estimation of the budgetary
control of the techniques.

SCOPE OF THE STUDY

The scope of the study limited to collecting the data published in the reports of the
company and opinions of the employees of the organization with reference to the objective
stated above and theoretical framework of the data. With a view to suggest solutions to various
problems relating to budget and budgetary control.

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OBJECTIVE OF THE STUDY
 To provide the material frame work of budget and budgetary control
 To describe the profit of the organization as a backdrop for undertaking a study of
budgetary control system.
 To analyze the budgetary system in practice in The Housing Development Finance
Corporation Limited (HDFC) with particular reference to their objectives and phases
of organizational and re-appropriation.
 In addition to the analysis of the conventional budgetary system in practice in The
Housing Development Finance Corporation Limited (HDFC). The study aims at
evaluation and modification to the current budgetary system with reference to the
various types of budgets. The scope in the formulation of performance budget is also
studied.
 To study the budgeted estimates and accruals of the revenue expenditure and revenue
receipts.
 To study the variations of the accruals from the budgeted estimates.
 To study the working of the financial department at The Housing Development
Finance Corporation Limited (HDFC).

METHODOLOGY OF THE STUDY

Research is the systematic investigation of fact that seeks to establish relationship
between two types.
Primary data:
 Officers of accounts sections.
 Executives and staff of financial and accounts department.
 Meeting with concerned people.
 Personal observation.
Secondary data:
 Annual reports of The Housing Development Finance Corporation Limited
(HDFC). Financial management text books.
 Printed Materials.
 Journals and magazines
 News papers.

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LIMITATIONS OF THE STUDY
 The study is purely based on the information provided by the company and the data is
collected from the reports, annual reports, and magazines of the company.
 Estimates are used as basis for budget plan and estimates are based mostly on available
facts and best managerial judgment
 Budgetary control cannot reduce the managerial function to a formula. It is only a
managerial.
 Tool which increase effectiveness of managerial control.
 The use of budget may be to restricted use of resources. Budgets an often taken as
limits.
 Efforts may therefore not be made to exceed the performance beyond the budgeted
targets.
 Frequent changes may be called for in budgets due to first changing industrial climate.
 In order that a system may be successful, adequate budgets education should be
imparted at least through the formative period. Sufficient training programs should be
arranged to make employees give positive response to budgetary activities.
 To study is restricted to The Housing Development Finance Corporation Limited
(HDFC).
 To study is restricted to limited period.

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 CHAPTER - II
REVIEW OF LITERATURE

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INTRODUCTION TO BUDGET AND BUDGETARY CONROL
Meaning:
Budgetary control is the process of determining various actual results with budgeted figures for
the enterprise for the future period and standards set then comparing the budgeted figures with
the actual performance for calculating variances, if any. First of all, budgets are prepared and
then actual results are recorded.
The comparison of budgeted and actual figures will enable the management to find out
discrepancies and take remedial measures at a proper time. The budgetary control is a
continuous process which helps in planning and co-ordination. It provides a method of control
too. A budget is a means and budgetary control is the end-result.
Definitions:
“According to Brown and Howard, “Budgetary control is a system of controlling costs which
includes the preparation of budgets, coordinating the departments and establishing
responsibilities, comparing actual performance with the budgeted and acting upon results to
achieve maximum profitability.” Weldon characterizes budgetary control as planning in
advance of the various functions of a business so that the business as a whole is controlled.
J. Batty defines it as, “A system which uses budgets as a means of planning and controlling all
aspects of producing and/or selling commodities and services. Welsch relates budgetary control
with day-to-day control process.” According to him, “Budgetary control involves the use of
budget and budgetary reports, throughout the period to co-ordinate, evaluate and control day-
to-day operations in accordance with the goals specified by the budget.”
From the above given definitions it is clear that budgetary control involves the follows:
The objects are set by preparing budgets.
 The business is divided into various responsibility centres for preparing various
budgets.
 The actual figures are recorded.
 The budgeted and actual figures are compared for studying the performance of different
cost centres.
 If actual performance is less than the budgeted norms, a remedial action is taken
immediately.

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OBJECTIVES OF BUDGETARY CONTROL:
Budgetary control is essential for policy planning and control. It also acts an instrument of co-
ordination.
The main objectives of budgetary control are the follows:
 To ensure planning for future by setting up various budgets, the requirements and
expected performance of the enterprise are anticipated.
 To operate various cost centres and departments with efficiency and economy.
 Elimination of wastes and increase in profitability.
 To anticipate capital expenditure for future.
 To centralise the control system.
 Correction of deviations from the established standards.
 Fixation of responsibility of various individuals in the organization.
ESSENTIALS OF BUDGETARY CONTROL:
There are certain steps which are necessary for the successful implementation budgetary
control system.
These are as follows:
1. Organisation for Budgetary Control
2. Budget Centres
3. Budget Mammal
4. Budget Officer
5. Budget Committee
6. Budget Period
7. Determination of Key Factor.
1. Organization for Budgetary Control:
The proper organization is essential for the successful preparation, maintenance and
administration of budgets. A Budgetary Committee is formed, which comprises the
departmental heads of various departments. All the functional heads are entrusted with the
responsibility of ensuring proper implementation of their respective departmental budgets.
The Chief Executive is the overall in-charge of budgetary system. He constitutes a budget
committee for preparing realistic budgets A budget officer is the convener of the budget
committee who co-ordinates the budgets of different departments. The managers of different
departments are made responsible for their departmental budgets.

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2. Budget Centres:
A budget centre is that part of the organization for which the budget is prepared. A budget
centre may be a department, section of a department or any other part of the department. The
establishment of budget centres is essential for covering all parts of the organization.
The budget centres are also necessary for cost control purposes. The appraisal performance of
different parts of the organization becomes easy when different centres are established.
3. Budget Manual:
A budget manual is a document which spells out the duties and also the responsibilities of
various executives concerned with the budgets. It specifies the relations amongst various
functionaries.
4. Budget Officer:
The Chief Executive, who is at the top of the organization, appoints some person as Budget
Officer. The budget officer is empowered to scrutinize the budgets prepared by different
functional heads and to make changes in them, if the situations so demand. The actual
performance of different departments is communicated to the Budget Officer. He determines
the deviations in the budgets and the actual performance and takes necessary steps to rectify
the deficiencies, if any.
He works as a coordinator among different departments and monitors the relevant information.
He also informs the top management about the performance of different departments. The
budget officer will be able to carry out his work fully well only if he is conversant with the
working of all the departments.

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5. Budget Committee:
In small-scale concerns the accountant is made responsible for preparation and implementation
of budgets. In large-scale concerns a committee known as Budget Committee is formed. The
heads of all the important departments are made members of this committee. The Committee is
responsible for preparation and execution of budgets. The members of this committee put up
the case of their respective departments and help the committee to take collective decisions if
necessary. The Budget Officer acts as convener of this committee.
6. Budget Period:
A budget period is the length of time for which a budget is prepared and employed. The budget
period depends upon a number of factors. It may be different for different industries or even it
may be different in the same industry or business.
The budget period depends upon the following considerations:
1. The type of budget i.e., sales budget, production budget, raw materials purchase budget,
capital expenditure budget. A capital expenditure budget may be for a longer period i.e.
3 to 5 years purchase, sale budgets may be for one year.
2. The nature of demand for the products.
3. The timings for the availability of the finances.
4. The economic situation of the country.
5. The length of trade cycles.
All the above-mentioned factors are taken into account while fixing period of budgets
7. Determination of Key Factor:
The budgets are prepared for all functional areas. These budgets are interdependent and inter-
related. A proper co-ordination among different budgets is necessary for making the budgetary
control a success. The constraints on some budgets may have an effect on other budgets too. A
factor which influences all other budgets is known as Key Factor or Principal Factor.
There may be a limitation on the quantity of goods a concern may sell. In this case, sales will
be a key factor and all other budgets will be prepared by keeping in view the amount of goods
the concern will be able to sell. The raw material supply may be limited, so production, sales
and cash budgets will be decided according to raw materials budget. Similarly, plant capacity
may be a key factor if the supply of other factors is easily available.
The key factor may not necessarily remain the same. The raw materials supply may be limited
at one time but it may be easily available at another time. The sales may be increased by
adding more sales staff, etc. Similarly, other factors may also improve at different times.

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The key factor also highlights the limitations of the enterprise. This will enable the
management to improve the working of those departments where scope for improvement
exists.
ADVANTAGES OF BUDGETARY CONTROL:
The budgetary control system help in fixing the goals for the organization as whole and
concerted efforts are made for its achievements. It enables ‘economies in the enterprise.
Some of the advantages of budgetary control are:
1. Maximization of Profits:
The budgetary control aims at the maximization of profits of the enterprise. To achieve this
aim, a proper planning and co ordination of different functions is undertaken. There is a proper
control over various capital and revenue expenditures. The resources are put to the best
possible use.
2. Co-ordination:
The working of different departments and sectors is properly coordinated. The budgets of
different departments have a bearing on one another. The co-ordination of various executives
and subordinates is necessary for achieving budgeted targets.
3. Specific Aims:
The plans, policies and goals are decided by the top management. All efforts are put together to
reach the common goal, of the organization. Every department is given a target to be achieved.
The efforts are directed towards achieving some specific aims. If there is no definite aim then
the efforts will be wasted in pursuing different aims.
4. Tool for Measuring Performance:
By providing targets to various departments, budgetary control provides a tool for measuring
managerial performance. The budgeted targets are compared to actual results and deviations
are determined. The performance of each department is reported to the top management. This
system enables the introduction of management by exception.
5. Economy:
The planning of expenditure will be systematic and there will be economy in spending. The
finances will be put to optimum use. The benefits derived for the concern will ultimately
extend to industry and then to national economy. The national resources will be used
economically and wastage will be eliminated.
6. Determining Weaknesses:
The deviations in budgeted and actual performance will enable the determination of weak
spots. Efforts are concentrated on those aspects where performance is less than the stipulated.

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7. Corrective Action:
The management will be able to take corrective measures whenever there is a discrepancy in
performance. The deviations will be regularly reported so that necessary action is taken at the
earliest. In the absence of a budgetary control system the deviations can be determined only at
the end of the financial period.
8. Consciousness:
It creates budget consciousness among the employees. By fixing targets for the employees,
they are made conscious of their responsibility. Everybody knows what he is expected to do
and he continues with his work uninterrupted.
9. Reduces Costs:
In the present day competitive world budgetary control has a significant role to play. Every
businessman tries to reduce the cost of production for increasing sales. He tries to have those
combinations of products where profitability is more.
10. Introduction of Incentive Schemes:
Budgetary control system also enables the introduction of incentive schemes of remuneration.
The comparison of budgeted and actual performance will enable the use of such schemes.

Budget is essential in every walk of our life – national, domestic and Business. A
budget is prepared to have effective utilization of funds and for the realization of objective as
efficiently as possible. Budgeting is a powerful tool to the management for performing its
functions i.e., formulation plans, coordination activities and controlling operations etc.,
efficiently. For efficient and effective management planning and control are tow highly
essential functions. Budget and budgetary control provide a set of basic techniques for
planning and control.

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 A budget fixes a target in terms of rupees or quantities against which the actual
performance is measured. A budget is closely related to both the management function as well
as the accounting function of an organization.
As the size of the organization increases, the need for budgeting is correspondingly
more because a budget is an effective tool of planning and control. Budget is helpful in
coordinating the various activities (such as production, sales, purchase etc) of the organization
with result that all the activities precede according to the objective. Budgets are means of
communication. Ideas of the top management are given the practical shape. As the activities of
various department heads are coordinated at the much needed for the very success of an
organization. Budget is necessary to future to Motivate the staff associated, to coordinate the
activities of different departments and to control the performance of various persons operating
at different levels.
Budgets may be divided into two basic classes. Capital and operating budgets. Capital
budget are directed towards proposed expenditure for new projects and often require special
financing.
The operating budgets are directed towards achieving short-term operational goals of
the organization for instance, production or profit goals in a business firm. Operating budgets
may be sub-divided into various departmental of functional budgets.
STEPS IN BUDGETING CONROL:
Organization for budgeting:
The setting up of a definite plan of organization is the first step towards installing
budgetary controlling system in an organization a budget manual should be prepared giving
details of the powers, duties, responsibilities and areas of operation of each executive in the
organization.
Budget Manual:
A Budget manual lays down the details of the organizational set up, the routine procedures
and programmers to be followed for developing budgets for various items and the duties and
responsibilities of the executives regarding the operation of the budgetary control system.
CIMA England defines a budget manual as “a document schedule or Booklet which sets out,
inter alia, the routine of and the forms and records required for budgetary control”. Thus, it is a
written document which guides the executives in preparing various budgets. Budgets are to be
drawn keeping in view the objectives of the organization given in the budget manual.
Responsibility and functions of each executive in regard to budgeting are written down in the
budget manual to avoid any duplication or overlapping of responsibilities.

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 Steps and the methods for developing various budgets and the methods of reporting
performance against the budget are written down in the budget manual. In short it is a written
document which gives everything relating to the preparation and execution of various budgets.
It should be clear and there should be no ambiguity in it.
The following are some of the most important matters covered in a Budget manual:
a) Introducing and brief explanation of the objects, benefits and principles of
budgetary control.
b) Organization chart giving the titles to different personnel’s with full explanation of
the duties of each to operating system and preparation of departmental and functional
budgets.
c) Length of budget periods and control periods should be clearly stated.
d) A method of accounting and control of expenditure.
e) A statement showing the responsibility and of authority given to each manger for
approval of budgets, vouchers and all other forms and documents which authorize them
to spend the money. The authority for granting approval must be clearly stated.
f) The entire process of budgeting programme including the time table for periodical
reporting. A schedule should be drawn for this.
g) Purpose, specimen form and number of copies to be used for each report and
statement. Budget centers involved should also be stated clearly.
h) Outline of main budgets and their accounting relationships.
i) Explanation of key budgets.
FIXATION OF BUDGET PERIOD:
The budget period mean the period for which a budget is prepared and employed. The
budget period will depend upon the type of business and the control aspect.
Budget period mean the period for which a budge is prepared and employed. The
budget period depends upon the nature of the business and the control techniques. For
example, in case of seasonal industries (i.e., food or clothing) the budget period should be a
short one and should cover one season. But in case of industries with heavy capital expenditure
such as heavy engineering works, the budget period should be long enough to meet the
requirements of the business. From control point of view, the budget period should be a short
one so that the actual results may be compared with the budget each week end or month end
and discussed with and discussed with the Budget committee. Long term budgets should be
supplemented by short term budgets to make the budgetary control successful, as short-terms
budgets will helping exercising control over day-today operations.

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 In short, the budget period should not be too long so that there may be sufficient time
before budget implementation. For most business, annual budget is quite common because it
compares with the financial accounting year.
There should be a regular time plan for budget preparation. It may be on the following lines.
 Long-term budgets for three to five years should be prepared for expansion and
modernization of the undertaking, introduction of new products or new projects and
undertaking heavy advertisement.
 Annual budgets coinciding with financial accounting year should be prepared for the
operations activities (i.e., sales, purchases, and production etc, of the business)
 For control purposes, short-term budgets-monthly or even weekly budget-should be
prepared for watching progress of actual performance against targets. Short-term
budgets are prepared to see that actual performance is proceeding according to the
budgets and early corrective action may be taken if there is any pitfall.
The responsibility for preparation and implementation of the budgets may be fixed as
under.
Budgetary controller:
Although the chief executive l finally responsible for the budgetary programme. It is
better if a large part of the supervisory responsibility is deluged to an official designated as
Budget Controller or Budget Director. Such a person should have knowledge of the technical
details of the business and report directly to the president or the chief executive.
Rolling (Continues) Budget:
This is a budget which is updated continuously by adding a further period (a
month\quarter) and deducting a corresponding earlier period. Budgeting is a continuous
process under these methods of preparation of budget. Once the first period elapses, the
forecast for that period is dropped and the forecast for the future period beyond the existing
could not be predicted and forecast reliably, this method is useful. However, it is a costly
exercise but matched by considerable reduction in operational variances.
Annual Vs Continues budgeting system:
In some organizations budgets are prepared on annual basis. But annual budgets may
not help the management to have control because variances due to rapidly changing conditions
affect the sales in quantity and prices, severe rapidly changing conditions affect the sales in
quantity and prices, severe inflationary conditions exist resulting fast increase in the prices of

16
inputs without reflecting in sales prices immediately and wide range of products being
produced making it not feasible to have precise estimate of levels of activity for a year.
The procedure in continuous budgeting will be that a year will be divided into four
quarters. Monthly budgets for the first quarter and three quarterly budgets for the next year can
be prepared. For the first quarter precise estimates can be drawn up monthly. The budget
estimates for the second quarter may be revised working out separately monthly estimates on
more precise basis for control purposes before the starting of the second quarter.
Similarly procedure may be followed for third and fourth quarters. This method a time
which need not be in respect of or coincide with the financial year. It will enable to evolve a
precise plan of action and control of variance functions at least for the immediate quarter and a
broad tentative one the subsequent three quarters on a continues basis.
Principal Budget (limiting) factor:
Principal budget factor is such an important factor that it would affect all the functional
budgets to a large extent. The extent of its influence must be assessed first in order to ensure
that functional budgets are reasonably capable of fulfillment. This is the factor in the activities
of an undertaking which at a particular point in time or over a period will limit the volume of
output. It is the governing factor which is a major constraint on all the operational activities of
the organization, so this factor is taken into consideration to determine whether the budgets are
capable of attainment. It is essential to locate the limiting factor may be any one of the
following:
Is there sufficient demand for the product? (customer demand)
Will a required quality and quantity of materials be available? (availability of raw material)
Is the plant capacity sufficient to cope up with the expected sales? (plant capacity)
Is the required type of labor available? (available of labor)
Is cash position sufficient to finance the expected volume of sales? (cash position)
Are there any Government restrictions? (Government restrictions)
For example, a concern has the capacity to produce 50,000 units of particular item per year.
But only 30, 000 units can be sold in the market. In this case, low demand for the product is the
limiting factor. Therefore, sales budget should be prepared first and other functional budgets
such as production budget, labor budget, plant utilization budget, cash budget etc. should be
prepared in accordance with this case plant capacity is limited. Therefore, production budget
should be prepared first and other budgets should follow the production budget.

17
 Thus, the budget relating to limiting factor should be prepared first and the other
budgets should be prepared in the light of that factor. All budgets should be co-coordinated
keeping in view the principal budget factor if the budgetary control is to achieve the desired
results.
Principal budget factor is not static. It may vary rapidly from time to time due to
internal and external factors. It is of temporary nature and in the long run can be overcome by
suitable management taking sales promotion steps as increasing sales staff and advertising.
Plant capacity can be improved by better planning, simplification of product or extension of
plant.
DIFFERENT TYPES OF BUDGET:
Different types of budgets have been developed keeping in view the different purposes
they serve. Budgets can be classified according to:
 The coverage they encompass;
 The capacity to which they are related;
 The conditions on which they are based; and
 The periods which they cover.
Functional Budget:
A functional budget is a budget which relates to any of the functions of an undertaking
e.g., sales, production, research and development, cash etc, the following budgets are
generally prepared.
Budget prepared by
1. Sales Budget including selling and Sales Manager
Distribution Cost Budget
2. Production Budget Production Manager
3. Material Budget Purchase Manager
4. Labor and Personnel Budget Personnel Manager
5. Manufacturing Overheads Production Manager
6. Administration Cost Budget Finance Manager
7. Plant Utilization Budget Production Manager
8. Capital Expenditure Budget Chief Executive
9. Research and Development
Cost Budget R&D Manager
10. Cash Budget Finance Manager

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Sales Budget:
Sales budget is the most important budget and of primary importance. It forms the basis
on which all the budgets are built up. This budget is a forecast of quantities and values of sales
to be achieved in a budget in a budget period. Every effort should be made to ensure that its
figures are as accurate as possible because this is usually the starting budget (sales being
limiting factor on which all the other budgets are built up). The sales Manger should be made
directly responsible for the preparation and execution of the budget. The sales budget may be
prepared according to products, sales territories, types of customers; salesmen etc., in the
preparation of the sales budget, the sales manager should take into consideration the following
factors:
1. Past Sales Figures and Trends.
2. Salesmen’s Estimation.
3. Plant Capacity.
4. Availability of Raw Material and other Supplies.
5. General Trade Prospects.
6. Orders in Hand.
7. Seasonal Fluctuations.
8. Financial Aspect.
9. Adequate Return on Capital Employed.
10. Competition.
11. Miscellaneous Considerations.
Production Budget:
Production budget is a forecast of the total output of the whole organization broken
down into estimates of output of each type of product with a scheduling of operations (by
weeks and months) to be performed and a forecast of the closing finished stock. This budget
may be expressed in quantitative (weight, units etc) r financial (rupees) units or both. This
budget is prepared after taking into consideration the estimated opening stock, the estimated
sales and the desired closing finished stock of each product.
The works manger is responsible for the total production budget and the departmental
managers are responsible for the departmental production budget. In preparing the production
budget, the following factors are considered.
The time lag between the production in the factor and sales to the customer should be
considered so as to allow fro the time required or the dispatch of goods from the factory to the
place of the customers.

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 The stock of goods to be maintained both at the factory’s go gown and at he sales
centers. The level of production needed to meet the sales programme. Monthly production
targets should be fixed and it should be seen that production is kept more or less at uniform
level throughout the year. The material labor and plant requirements should be ascertained to
have the desired production to meet the sales programme.
The sales and the production are inter-dependant because production budget is
governed by the sales budget and the sales budget is largely determined by the production
capacity and by production costs.
Cost of production Budget:
After determining the volume of output the cost of procuring the output must be
obtained by preparing a cost of production budget. This budget is an estimate of cost of output
planned for a budget period and may be classified into material cost budget, labor cost budget
and overhead budget because cost of production includes material, labor and overheads.
Materials Budget:
In drawing up the production budget, one of the first requirements to be considered is
material. As we know, materials may be direct or indirect. The materials budget deals with the
requirements and procurement of direct materials. Indirect materials are dealt with under the
works overhead budget. The budget should be related to the production budget and the period
of the budget should be of short duration because this budget has an important bearing on the
cash budget
Purchase Budget:
Purchase Budget is mainly dependent on production budget and material requirement
budget. This budget provides information about the materials to be acquired from the market
during the budget period.
Purchase budget should be prepared by the purchase manger by getting relevant
information about capital items, tools, general supplies and direct materials required during the
budget period from other related departments. Like other budgets, the purchase
budget has to be approved by the budget committee. After approval it becomes the
responsibility of the purchase officer to see that purchases are made as per the purchase budget.
Sometimes additional purchases which are not covered by the purchase budget are made under
the following circumstances.
If there is increase in production not anticipated while preparing the purchase budget
and purchase of larger quantities of materials becomes necessary. If accumulation of stock
becomes necessary to avoid shortage of materials.

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If overstocking is desired to take advantage of lower prices and there is fear that price will
increase in near future. The purchase manger should get additional sanctions from the higher
authorities for making the additional purchases not covered by the purchase budget.
Direct Labor Budget:
This budget gives as estimate of the requirements of direct labor essential to meet the
production target. This budget may be classified into labor Requirements budget and
recruitment budget. The labor recruitment budget is developed on the basis of requirement of
the production budget given and detailed information regarding he different classes of labor
e.g., fitters, welders, turner, millers, and grinders and drillers etc., required for each
department, their scales of pay and hours to be spent. This budget is prepared with a view too
enable the personnel department to carry out programmers of training and transfer and to find
out sources of labour needed so that every effort may be made to remove difficulties arising in
production the available workers in each department, the expected changes in the labour force
during the budget period due to the labour turnover. This budget gives information about the
personnel specification for the jobs for which workers are to be recruited, the degree for skill
and experience required and the rates of pay. Where standard costing system is applied, the
labor cost budget is dev eloped on the basis of standard labor cost per unit multiplied by the
quantity of anticipated production determined in the production budget.
If standard costing system is not being followed in the organization, the information of
labour cost may be obtained from past records or estimated cost.
Sometimes another budget known as Manpower budget is prepared. This budget
gives the requirements of direct and indirect labour necessary to meet the programme set out in
the sales, manufacturing, maintenance, research and development and capital expenditure
budgets. The labor terms are expressed of rupee value, number of labour hours, number and
grade of workers etc. this budget makes provision for shift and overtime work and for the
effective training for new workers on labour cost.
Manufacturing Overheads Budget:
This budget gives an estimate of the works overhead expenses to be incurred in a
budget period to achieve the production target. The budget includes the cost of indirect
material, indirect labour and indirect works expenses. The budget may be classified into fixed
cost, variable cost and semi-variable cost. It can be broken into departmental overhead budget
to facilitate control. In preparing the budget, fixed works overhead can be estimated on the
basis of past information after taking into consideration the expected changes which may occur

21
during the budget period. Variable expenses are estimated on the basis of the budgeted output
because these expenses are bound to change with the change in output.
The Cost Accountant prepares this budget on the basis of figures available in the
manufacturing overhead ledger or the head of the workshop may be asked to give estimates for
the manufacturing expenses. A good method is to combine the estimates of the Cost
Accountant and the shop executive.
Administrative Expenses Budget:
This budget covers the expenses incurred in framing policies, directing the organization
and controlling the business operations. In other words, the budget provides as estimate of the
expenses of the central office and of management salaries. The budget can be prepared with the
help of past experience and anticipated changes. Budget may be prepared be prepared for each
administration department so that responsibility for increasing such expenses. This budget
covers the expenses incurred in framing policies, directing the organization and controlling the
business operations. In other words, the budget provides an executive.

Much difficulty is not experiences in developing such budget as most of the administration
expenses are of a fixed nature. Although fixed expenses remain constant and are not related to
sale volume in the sort run, they are dependent upon sales in the long run. With a small change
in output, they do not change. However, if there is persistent fall in output, administration
expenses will have to be reduced by discharging the services of some members of the staff and
taking other economy measures. On the other hand, with persistent increase in output or
business activity, administration expenses will increase but they may lag behind business
activity.
Budgeted Income Statement:
A budgeted income statement summarizes all the individual budges i.e., sales budget,
cost of goods sold budget, selling budget, and administrative sales budget. This budget
determines income before taxes. If the tax rate is available net income after taxes can also be
computed.
Selling and Distribution Costs Budget:
This budget is the forecast of the cost selling and distribution for budget period and is
clearly related to the sale budget. All expenses related to selling and distribution of the various
products as indicated in the sales budget are included in it. These expenses are based on the
volume of sales set in the sales budget and budget and budgets are prepared for each item of
selling and distribution overhead. Long term expenses.

22
 As advertisement are spread over more than one period. Selling and distribution
overheads are divided into fixed and variable category with reference to volume of sales.
Separate budgets are prepared for variable and fixed items of selling and distribution
overheads. Certain items of selling and distribution costs as cost of transport department are
included in the departmental production cost budget from control point of view rather that
including in selling and distribution costs budget.
Plant Utilization Budget:
This budget lays down the requirements of plant capacity to carry out the production as
per the production programme. This budget is terms of convenient physical units as weight or
number of products or working hours. The main functions of this budget are:
 It will show the machine load in each department during the
 Budget period.
 It will indicate the overloading on some departments, machine or group of machine and
alternative courses of actions as working overtime, off loading, procurement or
expansion of plants, sub-contracting etc., can be taken.
 Idle capacity in some departments may be utilized by making efforts to increase the
demand for the products by providing after sale service, conducting advertisement
campaign, reducing prices, introducing lucky prize coupons, recruiting efficient sales
staff etc.
Capital Expenditure Budget:
The capital expenditure budget gives an estimate of the amount of capital that may be
needed for acquiring the assets required for fulfilling production requirements a specified in the
production budget. The budget is prepared after taking into consideration in the available
productive capacities, probable reallocation of the existing assets such as plant and equipment
budget, building budget etc. The capital expenditure budget is an important budget proving for
acquisition of assets, necessitated by the following factors:
RESEARCH AND DEVELOPMENT COST BUDGET:
While developing research and development cost budget, it should be clear in mind that
work relating to research and development is different from that relating to the manufacturing
function. Manufacturing function gives quicker results than research and development which
may go on for several years. Therefore, these budgets are established on a long term basis; say
for 5 to 10 years which can be further subdivided into short-term budgets on annual basis. As a
rule research workers are less cost conscious; so they are not susceptible to strict control. A

23
research and development budget is prepared taking into consideration the research projects in
hand and the new research projects in hand and the new search and development projects to be
taken up. Thus this budget provides an estimate of the expenditure to be incurred on research
and development during the budget period.
After fixation of the research and development cost budget, the research executive fixes
priorities for the various research and development projects and submits research and
development project authorization forms to the budget committee. The projects are finally
approved by the senior executive. Before giving the approval, the expenditure on research and
development is matched against the benefits likely to be availed of from the new project; after
the approval of the budget, a close watch is kept on the expenditure so that it may not exceed
budget provisions. It is also seen that extent of progress made is commensurate with the
expenditure incurred.
CASH (FINANCIAL) BUDGET;
The cash budget can be prepared by any of the following method:
1. Receipts and payments method
2. The adjusted profit and loss method
3. The balance sheet method
1. Receipts and payments method: In case of this method the cash receipts from various
sources and the cash payments to various agencies are estimated. In the opening balance
of cash, estimated cash receipts are added and from the total of estimated cash payments
are deducted to find out of the closing balance.
2. The adjusted profit and loss method: In case of this method the cash budget is prepared
n the basis of opening cash and bank balance of the various assets an liabilities.
3. The balance sheet method: With the help of budget balances at end except cash and
bank balances, a budgeted balance sheet can be prepared and the balancing figure would
be the estimated closing cash\bank balance.
Thus under this method, closing balances, other than cash\bank will have to be found out first
to be put in the budget balance sheet. This can be done by adjusting the anticipated.
Master Budget (Finalized Profit Plan):
The Master Budget is consolidated summary of the various functional budgets. It has
been defined as “a summary of the budget schedules in capsule form made for the purpose of
presenting, in one report, the highlights of the budget forecast”. The definition of this budget
given by the Chartered Institute of Management Accountant, England, is as follows:

24
 “Thus summary budget incorporating its components functional budgets and which are
finally approved and employed”.
The master budget is prepared by the budget committee on the basis of co-coordinated
functional budgets and becomes the target for the company during the budget period when it is
finally approved by the committee.
This budget summaries functional budget to produce a budgeted Profit and Loss
Account and a Budget Balance Sheet as at the end of the budget period.
Fixed Budget:
This budget is drawn for one level of activity and one set of conditions. It has been
defined as a budget which is designed to remain unchanged irrespective of the volume of
output or turnover attained. It is rigid budget and is drawn on the assumption that there will be
no change in the budgeted level of activity. A fixed budget will, therefore, be useful only when
the actual level of activity corresponds to the budgeted level of activity. A master budget
tailored to a single output level of (say) 20,000 units of sales is a typical example of a fixed
budget. But in practice, the level of activity and set conditions will change as a result of
internal limitations and external factors like changes in demand and price, shortage of materials
and power, acute competition etc. It is hardly of any use as a mechanism of budgetary control
because it does not make any distinction between fixed, variable and semi-variable costs and
provides for no adjustment in the budget fixed as result of change in cost due to change in level
of activity. It is also not helpful at all in the fixation of price and submission of tenders.
Flexible Budget:
The Chartered Institute of Management Accountants, defines a flexible budget also
called sliding scale budget as a budget which, by recognizing the difference in behavior
between field an d variable costs in relation to fluctuations in output, turnover, or other variable
factors such a number of employees, is designed to change appropriately with such
fluctuations. This, a flexible budget gives different budgeted costs for different levels of
activity. A flexible budget making an intelligent classification of all expenses between fixed,
semi-variable and variable because the usefulness of such a budget depend upon the accuracy
with which the expenses can be classified. Such a budget is prescribed in the following cases.
Where the level of activity during the year varies from period, either due to the seasonal
nature of the industry or to variation in demand.
 Where the business is a new one and it is difficult to foresee the demand.

25
  Where the undertaking is suffering from shortage of a factor of production such as
materials, labour, plant, capacity etc. The level of activity depends upon the availability
of such a factor of production.
 Where an industry is influenced by changes in fashion.
 Where there are general changes in sales.
 Where the business units keep on introducing new products or make changes in the
design of its products frequently.
 Where the industries are engaged in make to order business like shipbuilding.
Basic Budget:
A Basic budget has been defined as a budget which is prepared for use unaltered over a
long period of time. This does not take into consideration current conditions and can be
attainable under standard conditions.
Current Budget:
A Current budget can be defined a budget which is related to the current conditions and
is prepared for use over a short period of time. This budget is more useful than a basic budget,
as a target of lays down will be corrected to current conditions.
Long-Term Budget:
A Long-term budget can be defined as a budget which is prepared for periods longer
than a year. These budgets help in business forecasting and forward planning. Capital
Expenditure Budget and Research and Development Budget are examples of long-term
budgets.
Short- Term Budget:
This budget is defined as a budget which is prepared for period less than year and is
very useful to lower levels of management for control purposes. Such budgets are prepared for
those activities the trend in which is difficult to foresee over longer periods. Cash budget and
material budget are examples of short term budget.
Performance Budget:
Performance Budgeting has its origin in U.S.A. after second World War. It tries to
rectify some of the shortcoming in the traditional budget. In the traditional budget amount are
earmarked for the objects of expenditures such as salaries, travel, office expenses, grant in aid
etc. In such system of budgeting the money concept was given more prominence i.e.
estimating or projecting rupee value for the various accounting heads or classification of
revenue and cost. Such system of budgeting was more popularly used in government

26
department and many business enterprises. But is such system of budgeting control of
performance in terms of physical units or the related costs cannot be achieved.
Performance oriented budgets are established in such a manner that each item of
expenditure related to a specific responsibility centre is closely linked with the performance of
that centre. The basic issue involved in the fixation of performance budgets is that of
developing work programmers and performance expectation by assigned responsibility,
necessary for the attainment of goals and objectives of the enterprise, it involves establishment
of well defined centers of responsibilities, establishment for each responsibility centre-a
programmed of target performance e in physical units, forecasting the amount of expenditure
required to meet the physic al plan laid down and evaluation of performance.
Zero Based Budgets:
This budge is the preparation of budget starting from Zero or from a clean state. As a
new technique it was proposed by Patter Peal of Texas Instruments Inc., U.S.A. This technique
was introduced in the budgeting in the state of Georgia by Mr. Jimmy Carter who was then the
Government of that state. ZBB was tried in federal budgeting as a means of controlling state
expenditures.
The use of zero-based budgeting as a managerial tool has become increasingly popular since
the early 1970’s It is steadily gaining acceptance e in the business world because it is
providing it utility as a tool integrating the managerial function of planning and control. ZBB
is not based on the incremental approach and previous year’s figures are not adopted as a base.
Rather, zero is taken as a base aw the name goes. Taking zero as a base, a budget is developed
on the basis of likely activities for the future period. In ZBB, by declining the budget from the
past, the past mistakes are not repeated. Funds required for any for the next budget period
should be obtained by presenting a convincing case. Funds will not be available as a matter of
course.
ADVANTAGES OF BUDGETARY CONTROL:
The most important advantage of a budgetary control is to enable management to
conduct business in the most efficient manner because budgets are prepared to get the effective
utilization of resources and the realization of objectives as efficiently.
It lies down as objective for the business as a whole. Even though a monetary reward is
not offered the budget becomes a game – a goal to achieve or a target to shoot at – and hence it
is more likely to be achieved or hit that if there was no predetermined goal or target.

27
 The budget is an impersonal policeman that maintains ordered effort and brings about
efficiency in result. It ensures effective utilization of men, materials, machines and money
because production is planned according to the availability of these items.
Everyone working in the concern knows what exactly to do because budgetary control
laid emphasis on the staff organization. It ensures that individual responsibilities are clearly
defined and that the required authority commensurate with the responsibility is delegated so
that buck passing ay is prevented when the budgeted results are not achieved. Budgetary
control takes the help of different levels of management in the preparations of the budget.
Budget finally approved represents the judgment of the entire organization and not merely that
of an individual or a group of individuals. Thus, it ensures team work.
Management by exception is possible because the comparison of actual and budgeted
results points out weak spots so that remedial action is taken against weak spots which are not
in conformity with the budgeted performance.
Budgetary control creates conditions for setting up a system of standard costing.
It is helpful in reviewing current trends in the business and in determining further
policy of the business because current and future trends are studied in the preparation of the
budget.
DIS-ADVANTAGES OF A BUDGET:
While budgets may be essential part of activity they do have number of disadvantages,
particularly in perception terms. Budgets can be seen pressure devices imposed by
management, thus resulting in:
a) bad labor relations
b) Inaccurate record-keeping.

28
 CHAPTER-III
INDUSTRY PROFILE
&
COMPANY PROFILE

29
INDUSTRY PROFILE
As per the Reserve Bank of India (RBI), India’s banking sector is sufficiently capitalised and
well-regulated. The financial and economic conditions in the country are far superior to any
other country in the world. Credit, market and liquidity risk studies suggest that Indian banks
are generally resilient and have withstood the global downturn well.
Indian banking industry is expected to witness better growth prospects in 2015 as a sense of
optimism stems from the Government’s measures towards revitalizing the industrial growth in
the country. In addition, RBI’s new measures may go a long way in helping the restructuring of
the domestic banking industry.
A bank is a financial institution that accepts deposits and channels those deposits into lending
activities. Banks primarily provide financial services to customers while enriching investors.
Government restrictions on financial activities by banks vary over time and location. Banks are
important players in financial markets and offer services such as investment funds and loans. In
some countries such as Germany, banks have historically owned major stakes in industrial
corporations while in other countries such as the United States banks are prohibited from
owning non-financial companies. In Japan, banks are usually the nexus of a cross-share
holding entity known as the keiretsu. In France, bancassurance is prevalent, as most banks
offer insurance services (and now real estate services) to their clients.
India’s banking sector is constantly growing. Since the turn of the century, there has been a
noticeable upsurge in transactions through ATMs, and also internet and mobile banking.
Following the passing of the Banking Laws (Amendment) Bill by the Indian Parliament in
2012, the landscape of the banking industry began to change. The bill allows the Reserve Bank
of India (RBI) to make final guidelines on issuing new licenses, which could lead to a bigger
number of banks in the country. Some banks have already received licences from the
government, and the RBI's new norms will provide incentives to banks to spot bad loans and
take requisite action to keep rogue borrowers in check.
Over the next decade, the banking sector is projected to create up to two million new jobs,
driven by the efforts of the RBI and the Government of India to integrate financial services into
rural areas. Also, the traditional way of operations will slowly give way to modern technology.

30
History
Origin of the word
The name bank derives from the Italian word banco "desk/bench", used during the Renaissance
by Jewish Florentine bankers, who used to make their transactions above a desk covered by a
green tablecloth. However, there are traces of banking activity even in ancient times, which
indicates that the word 'bank' might not necessarily come from the word 'banco'.
In fact, the word traces its origins back to the Ancient Roman Empire, where moneylenders
would set up their stalls in the middle of enclosed courtyards called macella on a long bench
called a bancu, from which the words banco and bank are derived. As a moneychanger, the
merchant at the bancu did not so much invest money as merely convert the foreign currency
into the only legal tender in Rome—that of the Imperial Mint.
The earliest evidence of money-changing activity is depicted on a silver drachm coin from
ancient Hellenic colony Trapezus on the Black Sea, modern Trabzon, c. 350–325 BC,
presented in the British Museum in London. The coin shows a banker's table (trapeza) laden
with coins, a pun on the name of the city.
In fact, even today in Modern Greek the word Trapeza (Τράπεζα) means both a table and a
bank.
MARKET SIZE
The Indian banking system consists of 26 public sector banks, 25 private sector banks, 43
foreign banks, 56 regional rural banks, 1,589 urban cooperative banks and 93,550 rural
cooperative banks, in addition to cooperative credit institutions. Public-sector banks control
nearly 80 percent of the market, thereby leaving comparatively much smaller shares for its
private peers.
As of November 11, 2015, 192.1 million accounts had been opened under Pradhan Mantri Jan
Dhan Yojna (PMJDY) and 165.1 million RuPay debit cards were issued. These new accounts
have mustered deposits worth Rs 26,819 crore (US$ 4 billion).
Standard & Poor’s estimates that credit growth in India’s banking sector would improve to 12-
13 per cent in FY16 from less than 10 per cent in the second half of CY14.
INVESTMENTS/DEVELOPMENTS
In the past few months, there have been many investments and developments in the Indian
banking sector
 Global rating agency Moody's has upgraded its outlook for the Indian banking system
to stable from negative based on its assessment of five drivers including improvement
in operating environment and stable asset risk and capital scenario.

31
 Lok Capital, a private equity investor backed by US-based non-profit organisation
Rockefeller Foundation, plans to invest up to US$ 15 million in two proposed small
finance banks in India over the next one year.
 The Reserve Bank of India (RBI) has granted in-principle licences to 10 applicants to
open small finance banks, which will help expanding access to financial services in
rural and semi-urban areas.
 IDFC Bank has become the latest new bank to start operations with 23 branches,
including 15 branches in rural areas of Madhya Pradesh.
 The RBI has given in-principle approval to 11 applicants to establish payment banks.
These banks can accept deposits and remittances, but are not allowed to extend any
loans.
 The Bank of Tokyo-Mitsubishi (BTMU), a Japanese financial services group, aims to
double its branch count in India to 10 over the next three years and also target a 10 per
cent credit growth during FY16.
 State Bank of India has tied up with e-commerce portal Snapdeal and payment gateway
Paypal to finance MSME businesses.
 The United Economic Forum (UEF), an organisation that works to improve socio-
economic status of the minority community in India, has signed a memorandum of
understanding (MoU) with Indian Overseas Bank (IOB) for financing entrepreneurs
from backward communities to set up businesses in Tamil Nadu
 The RBI has allowed third-party white label automated teller machines (ATM) to
accept international cards, including international prepaid cards, and said white label
ATMs can now tie up with any commercial bank for cash supply.
 The RBI has allowed Indian alternative investment funds (AIFs), to invest abroad, in
order to increase the investment opportunities for these funds.
 In order to boost the infrastructure sector and the banks financing long gestation
projects, the RBI has extended its flexible refinancing and repayment option for long-
term infrastructure projects to existing ones where the total exposure of lenders is more
than Rs 500 crore (US$ 75.1 million).
 RBI governor Mr Raghuram Rajan and European Central Bank President Mr Mario
Draghi have signed an MoU on cooperation in central banking. “The memorandum of
understanding provides a framework for regular exchange of information, policy
dialogue and technical cooperation between the two institutions. Technical cooperation

32
 may take the form of joint seminars and workshops in areas of mutual interest in the
field of central banking,” RBI said on its website.
 RBL Bank informed that it would be the anchor investor in Trifecta Capital’s Venture
Debt Fund, the first alternative investment fund (AIF) in India with a commitment of
Rs 50 crore (US$ 7.51 million). This move provides RBL Bank the opportunity to
support the emerging venture debt market in India.
 Bandhan Financial Services raised Rs 1,600 crore (US$ 240.2 million) from two
international institutional investors to help convert its microfinance business into a full
service bank. Bandhan, one of the two entities to get a banking licence along with
IDFC, launched its banking operations in August 2015.
GOVERNMENT INITIATIVES
The government and the regulator have undertaken several measures to strengthen the Indian
banking sector.
 The Government of India is looking to set up a special fund, as a part of National
Investment and Infrastructure Fund (NIIF), to deal with stressed assets of banks. The
special fund will potentially take over assets which are viable but don’t have additional
fresh equity from promoters coming in to complete the project.
 The Reserve Bank of India (RBI) plans to soon come out with guidelines, such as
common risk-based know-your-customer (KYC) norms, to reinforce protection for
consumers, especially since a large number of Indians have now been financially
included post the government’s massive drive to open a bank account for each
household.
 To provide relief to the state electricity distribution companies, Government of India
has proposed to their lenders that 75 per cent of their loans be converted to state
government bonds in two phases by March 2017. This will help several banks,
especially public sector banks, to offload credit to state electricity distribution
companies from their loan book, thereby improving their asset quality.
 The Reserve Bank of India (RBI), the Department of Industrial Policy & Promotion
(DIPP) and the Finance Ministry are planning to raise the Foreign Direct Investment
(FDI) limit in private banks sector to 100 per cent from 74 per cent.
 Government of India aims to extend insurance, pension and credit facilities to those
excluded from these benefits under the Pradhan Mantri Jan Dhan Yojana (PMJDY).<
 The Government of India announced a capital infusion of Rs 6,990 crore (US$ 1.05
billion) in nine state run banks, including State Bank of India (SBI) and Punjab

33
 National Bank (PNB). However, the new efficiency parameters would include return on
assets and return on equity. According to the finance ministry, “This year, the
Government of India has adopted new criteria in which the banks which are more
efficient would only be rewarded with extra capital for their equity so that they can
further strengthen their position."
 To facilitate an easy access to finance by Micro and Small Enterprises (MSEs), the
Government/RBI has launched Credit Guarantee Fund Scheme to provide guarantee
cover for collateral free credit facilities extended to MSEs upto Rs 1 Crore (US$ 0.15
million). Moreover, Micro Units Development & Refinance Agency (MUDRA) Ltd.
was also established to refinance all Micro-finance Institutions (MFIs), which are in the
business of lending to micro / small business entities engaged in manufacturing, trading
and services activities upto Rs 10 lakh (US$ 0.015 million).
 The central government has come out with draft proposals to encourage electronic
transactions, including income tax benefits for payments made through debit or credit
cards.
 The Union cabinet has approved the establishment of the US$ 100 billion New
Development Bank (NDB) envisaged by the five-member BRICS group as well as the
BRICS “contingent reserve arrangement” (CRA).
 The government has plans to set up a fund that will provide surety to banks against
loans given to students for higher education.
ROAD AHEAD
The Indian economy is on the brink of a major transformation, with several policy initiatives
set to be implemented shortly. Positive business sentiments, improved consumer confidence
and more controlled inflation are likely to prop-up the country’s the economic growth.
Enhanced spending on infrastructure, speedy implementation of projects and continuation of
reforms are expected to provide further impetus to growth. All these factors suggest that India’s
banking sector is also poised for robust growth as the rapidly growing business would turn to
banks for their credit needs.
Also, the advancements in technology have brought the mobile and internet banking services to
the fore. The banking sector is laying greater emphasis on providing improved services to their
clients and also upgrading their technology infrastructure, in order to enhance the customer’s
overall experience as well as give banks a competitive edge.

34
Many banks, including HDFC, ICICI and AXIS are exploring the option to launch contact-less
credit and debit cards in the market shortly. The cards, which use near field communication
(NFC) mechanism, will allow customers to transact without having to insert or swipe.
Indian banking sector credit growth has grown at a healthy pace
• Credit off-take has been surging ahead over the past decade, aided by strong economic
growth, rising disposable incomes, increasing consumerism and easier access to credit
• Total credit extended went up to US$ 1,089 billion by FY15
• Credit to non-food industries increased 9.75 per cent to US$ 1,073.4 billion in FY15, from
the previous financial year
• Demand has grown for both corporate and retail loans

Reserve Bank of India (RBI) in its fifth bi-monthly monetary policy review has maintained
status status quo in key policy interest rate. The key policy interest rates were kept unchanged
on the basis of an assessment of the current and evolving macroeconomic situation in the
country. The Key policy interest rates are Repo rate under the liquidity adjustment facility
(LAF): unchanged at 6.75 per cent. Reverse repo rate under the LAF: unchanged at 5.75 per
cent Marginal standing facility (MSF) rate and the Bank Rate has unchanged at 7.75 per cent.
Cash Reserve Ratio (CRR) of scheduled banks: Unchanged at 4.0 per cent of net demand and
time liability (NDTL). Continuation of liquidity under overnight repos at 0.25 per cent of bank-
wise NDTL at the LAF repo rate. Continuation of liquidity under 14-day term repos as well as
longer term repos of up to 0.75 per cent of NDTL of the banking system through auctions.

35
 COMPANY PROFILE
PROFILE OF THE BANK
The Housing Development Finance Corporation Limited (HDFC) was amongst the first to
receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the
private sector, as part of the RBI's liberalization of the Indian Banking Industry in 1994. The
bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its registered
office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial
Bank in January 1995..
OVERVIEW OF THE INDUSTRY
HDFC is India's premier housing finance company and enjoys an impeccable track
record in India as well as in international markets. Since its inception in 1977, the Corporation
has maintained a consistent and healthy growth in its operations to remain the market leader in
mortgages. Its outstanding loan portfolio covers well over a million dwelling units. HDFC has
developed significant expertise in retail mortgage loans to different market segments and also
has a large corporate client base for its housing related credit facilities. With its experience in
the financial markets, a strong market reputation, large shareholder base and unique consumer
franchise, HDFC was ideally positioned to promote a bank in the Indian environment.
As on 31st March, 2015 the authorized share capital of the Bank is Rs. 550 crore. The paid-up
share capital of the Bank as on the said date is Rs 501,29,90,634/- (2506495317) equity shares
of Rs. 2/- each). The HDFC Group holds 21.67 % of the Bank's equity and about 18.87 % of
the equity is held by the ADS / GDR Depositories (in respect of the bank's American
Depository Shares (ADS) and Global Depository Receipts (GDR) Issues). 32.57 % of the
equity is held by Foreign Institutional Investors (FIIs) and the Bank has 4,41,457 shareholders.
The shares are listed on the Bombay Stock Exchange Limited and The National Stock
Exchange of India Limited. The Bank's American Depository Shares (ADS) are listed on the
New York Stock Exchange (NYSE) under the symbol 'HDB' and the Bank's Global Depository
Receipts (GDRs) are listed on Luxembourg Stock Exchange under ISIN No US40415F2002.
MANAGEMENT
Mrs. Shyamala Gopinath holds a Master’s Degree in Commerce and is a CAIIB. Mrs.
Gopinath has 39 years of experience in financial sector policy formulation in different
capacities at RBI. As Deputy Governor of RBI for seven years and member of the Board. Mrs.
Gopinath had been guiding and influencing the national policies in the diverse areas of
financial sector regulation and supervision, development and regulation of financial markets,

36
 capital account management, management of government borrowings, forex reserves
management and payment and settlement systems.The Managing Director, Mr. Aditya Puri, has
been a professional banker for over 25 years and before joining HDFC Bank in 1994 was
heading Citibank's operations in Malaysia.
The Bank's Board of Directors is composed of eminent individuals with a wealth of experience
in public policy, administration, industry and commercial banking. Senior executives
representing HDFC are also on the Board.
Senior banking professionals with substantial experience in India and abroad head various
businesses and functions and report to the Managing Director. Given the professional expertise of
the management team and the overall focus on recruiting and retaining the best talent in the
industry, the bank believes that its people are a significant competitive strength.
BOARD OF DIRECTORS

Sr. No. Name Of Director Category

1 Mr. Deepak S. Parekh Chairman
2 Mr. B. S. Mehta Independent Director
3 Mr. D. M. Sukthankar Non-Executive Director
4 Mr. D. N. Ghosh Independent Director
5 Dr. S. A. Dave Independent Director
6 Mr. N. M. Munjee Independent Director
7 Dr. Bimal Jalan Independent Director
8 Dr. J. J. Irani Independent Director
9 Mr. V. Srinivasa Rangan Executive Director
10 Ms. Renu Sud Karnad Managing Director
Vice Chairman & Chief
11 Mr. Keki. M. Mistry
Executive Officer

REGISTERED OFFICE
HDFC Bank House,
Senapati Bapat Marg,
Lower Parel,

37
Website: www.hdfcbank.com
HDFC Bank offers a wide range of commercial and transactional banking services and treasury
products to wholesale and retail customers. The bank has three key business segments
Wholesale Banking Services
The Bank's target market ranges from large, blue-chip manufacturing companies in the Indian
corporate to small & mid-sized corporates and agri-based businesses. For these customers, the
Bank provides a wide range of commercial and transactional banking services, including
working capital finance, trade services, transactional services, cash management, etc. The bank
is also a leading provider of structured solutions, which combine cash management services
with vendor and distributor finance for facilitating superior supply chain management for its
corporate customers. Based on its superior product delivery / service levels and strong
customer orientation, the Bank has made significant inroads into the banking consortia of a
number of leading Indian corporates including multinationals, companies from the domestic
business houses and prime public sector companies. It is recognised as a leading provider of
cash management and transactional banking solutions to corporate customers, mutual funds,
stock exchange members and banks.
Retail Banking Services
The objective of the Retail Bank is to provide its target market customers a full range of
financial products and banking services, giving the customer a one-stop window for all his/her
banking requirements.
The products are backed by world-class service and delivered to customers through the
growing branch network, as well as through alternative delivery channels like ATMs, Phone
Banking, NetBanking and Mobile Banking.
The HDFC Bank Preferred program for high net worth individuals, the HDFC Bank Plus and
the Investment Advisory Services programs have been designed keeping in mind needs of
customers who seek distinct financial solutions, information and advice on various investment
avenues. The Bank also has a wide array of retail loan products including Auto Loans, Loans
against marketable securities, Personal Loans and Loans for Two-wheelers. It is also a leading
provider of Depository Participant (DP) services for retail customers, providing customers the
facility to hold their investments in electronic form.
HDFC Bank was the first bank in India to launch an International Debit Card in association
with VISA (VISA Electron) and issues the MasterCard Maestro debit card as well. The Bank
launched its credit card business in late 2001. By March 2013, the bank had a total card base
(debit and credit cards) of over 19.7 million. The Bank is also one of the leading players in the

38
 business with over 270,000 Point-of-sale (POS) terminals for debit / credit cards acceptance at
merchant establishments. The Bank is well positioned as a leader in various net based B2C
opportunities including a wide range of internet banking services for Fixed Deposits, Loans,
Bill Payments, etc.
Treasury
Within this business, the bank has three main product areas - Foreign Exchange and
Derivatives, Local Currency Money Market & Debt Securities, and Equities. With the
liberalisation of the financial markets in India, corporates need more sophisticated risk
management information, advice and product structures. These and fine pricing on various
treasury products are provided through the bank's Treasury team. To comply with statutory
reserve requirements, the bank is required to hold 25% of its deposits in government securities.
The Treasury business is responsible for managing the returns and market risk on this
investment portfolio
Awards and Achievements - Banking Services
HDFC Bank began operations in 1995 with a simple mission: to be a"World-class Indian Bank". We
realised that only a single-minded focus on product quality and service excellence would help us get there.
Today, we are proud to say that we are well on our way towards that goal.
It is extremely gratifying that our efforts towards providing customer convenience have been appreciated
both nationally and internationally.
2015

IDRBT Banking Technology Excellence Best Bank Award for Cyber Security Risk Management
Awards 2014-15 among Large Banks
FinanceAsia Country Awards 2015 - Best Asian Bank
- Best Domestic Bank - India
Forbes Asia Fab 50 Companies List for the 9th year
AIMA Managing India Awards 2015 - Business Leader of the Year - Aditya Puri
Barron's - World's 30 Best CEOs - Mr Aditya Puri
Finance Asia poll on Asia's Best - Best Managed Public Company - India'
Companies 2015 Best CEO- Aditya Puri
Best Corporate Governance- Rank 3
Best Investor Relations- Rank 3
J. P Morgan Quality Recognition Award - Best in class straight Through Processing Rates

39
2014

Businessworld-PwC India Best Banks - Best Large Bank

Survey 2014 - Fastest Growing Large Bank
Asiamoney FX Poll 2014 - Best Domestic Provider of FX options
- Best Domestic Provider of FX products & Services
- Best Domestic Provider of FX research & market
coverage
- Best Domestic provider for FX Services
The Asian Banker Strongest Bank in India in the Asian Banker 500 (AB 500)
Strongest Bank by Balance Sheet Ranking 2014
Dun & Bradstreet - Polaris Financial - Best Bank - Managing IT Risk (Large Banks)
Technology Banking Awards 2014 - Best Bank - Mobile Banking (Large Banks)
- Best Bank - Best IT Team (Private Sector Banks)
Forbes Asia Fab 50 Companies List for the 8th year
BrandZ TM Top 50 Most Valuable India's Most Valuable Brand
Indian Brands study by Millward
Brown
Asiamoney Best of Best Domestic Banks - India
Dun & Bradstreet - Manappuram Best Corporate in Banking Sector
Finance Limited Corporate Award

2013
IBA Innovation Awards Most Innovative use of Technology

Dun & Bradstreet Polaris

Financial Technology Banking - Best Private Sector Bank Technology Adoption
Award 2013 - Best Private Sector Bank Retail
- Overall Best Private Sector Bank

Institutional Investor
- Best Bank in Asia
- Mr. Aditya Puri - Best CEO

40
 Forbes Asia
Fab 50 Companies List for the 7th year

Sunday Standard Best Banker

Awards - Best Private Sector Bank: Large
- Safest Bank: Large
- Mr. Aditya Puri: Top Achiever

UTI Mutual Fund CNBC TV

18 Financial Advisory Awards Best Performing Bank - Private
2012
Asia Money 2013

Corporate Governance:
The bank was among the first four companies, which subjected itself to a Corporate
Governance and Value Creation (GVC) rating by the rating agency, The Credit Rating
Information Services of India Limited (CRISIL).
The rating provides an independent assessment of an entity's current performance and an
expectation on its "balanced value creation and corporate governance practices" in future. The
bank has been assigned a 'CRISIL GVC Level 1' rating, which indicates that the bank's
capability with respect to wealth creation for all its stakeholders while adopting sound
corporate governance practices is the highest.
We are aware that all these awards are mere milestones in the continuing, never-ending journey
of providing excellent service to our customers. We are confident, however, that with your
feedback and support, we will be able to maintain and improve our services.
Technology:
HDFC Bank operates in a highly automated environment in terms of information technology
and communication systems. All the bank's branches have online connectivity, which enables
the bank to offer speedy funds transfer facilities to its customers. Multi-branch access is also

41
provided to retail customers through the branch network and Automated Teller Machines
(ATMs).
The Bank has made substantial efforts and investments in acquiring the best technology
available internationally, to build the infrastructure for a world class bank. The Bank's business
is supported by scalable and robust systems which ensure that our clients always get the finest
services we offer. The Bank has prioritized its engagement in technology and the internet as
one of its key goals and has already made significant progress in web-enabling its core
businesses. In each of its businesses, the Bank has succeeded in leveraging its market position,
expertise and technology to create a competitive advantage and build market share.
Mission and Business Strategy:
Our mission is to be "a World Class Indian Bank", benchmarking ourselves against
international standards and best practices in terms of product offerings, technology, service
levels, risk management and audit & compliance. The objective is to build sound customer
franchises across distinct businesses so as to be a preferred provider of banking services for
target retail and wholesale customer segments, and to achieve a healthy growth in
profitability, consistent with the Bank's risk appetite. We are committed to do this while
ensuring the highest levels of ethical standards, professional integrity, corporate
governance and regulatory compliance.
Our business strategy emphasizes the following :
Increase our market share in India’s expanding banking and financial services industry by
following a disciplined growth strategy focusing on quality and not on quantity and
delivering high quality customer service.
Leverage our technology platform and open scaleable systems to deliver more products to
more customers and to control operating costs.
Maintain our current high standards for asset quality through disciplined credit risk
management.
Develop innovative products and services that attract our targeted customers and address
inefficiencies in the Indian financial sector.
Continue to develop products and services that reduce our cost of funds.
Focus on high earnings growth with low volatility.

HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable network of
1,725 branches spread in 771 cities across India. All branches are linked on an online real-

42
time basis. Customers in over 500 locations are also serviced through Telephone Banking.
The Bank's expansion plans take into account the need to have a presence in all major
industrial and commercial centres where its corporate customers are located as well as the
need to build a strong retail customer base for both deposits and loan products. Being a
clearing/settlement bank to various leading stock exchanges, the Bank has branches in the
centres where the NSE/BSE have a strong and active member base.
The Bank also has 3,898 networked ATMs across these cities. Moreover, HDFC Bank's
ATM network can be accessed by all domestic and international Visa/MasterCard, Visa
Electron/Maestro, Plus/Cirrus and American Express Credit/Charge cardholders.
AIMS:
 Continuous effort to improving the services.
 Evaluating individual skill trough training and motivations.
 Total involvement through participant’s management activities.
 Creating healthy and safe environment.
 Social development.
Credit Rating
The Bank has its deposit programs rated by two rating agencies - Credit Analysis & Research
Limited (CARE) and Fitch Ratings India Private Limited. The Bank's Fixed Deposit
programmed has been rated 'CARE AAA (FD)' [Triple A] by CARE, which represents
instruments considered to be "of the best quality, carrying negligible investment risk." CARE
has also rated the bank's Certificate of Deposit (CD) programmed "PR 1+" which represents
"superior capacity for repayment of short term promissory obligations".
Fitch Ratings India Pvt. Ltd. (100% subsidiary of Fitch Inc.) has assigned the "AAA (ind)"
rating to the Bank's deposit programmed, with the outlook on the rating as "stable". This rating
indicates "highest credit quality" where "protection factors are very high".
Corporate Governance Rating
The bank was one of the first four companies, which subjected itself to a Corporate
Governance and Value Creation (GVC) rating by the rating agency, The Credit Rating
Information Services of India Limited (CRISIL). The rating provides an independent
assessment of an entity's current performance and an expectation on its "balanced value
creation and corporate governance practices" in future. The bank was assigned a 'CRISIL GVC
Level 1' rating in January 2007 which indicates that the bank's capability with respect to wealth
creation for all its stakeholders while adopting sound corporate governance practices is the
highest.

43
44
 CHAPTER - IV
DATA ANALYSIS
AND
INTERPRETATION

Tab 4.1 CALCULATION OF REVENUE RECEIPTS BUDGET FOR THE YEAR 2018-
2019
(Cr……)
S.No DESCRIPTION BUDGETED ACTUALS VARIANCE

45
 1. Interested Earned 2916.47
51386.37 48469.
90 867.12
2. Other Income
9863.47 2015.37
8996.35
3. Balance in
bank(Inventory) 10836.37
8821.00

Total 72086.21 66287.25 5798.96

Fig 5.1 GRAPHICAL REPRESENTATION OF REVENUE RECEIPTS BUDGET FOR

THE YEAR 2018-2019

INTERPRETATION
In this year it can be seen that every item actual are below the budget estimate which
reprehensions a positives indications of savings, the actual are beyond budget estimates due to
revision in pay scales. This can be ignored, because in total budget estimates are more than the
actual. In revenue receipts, the actual are below the budgeted. Except in increase in inventory
value is negative. The budget estimates with a good variation percentage.

Tab 4.2 CALCULATION OF REVENUE EXPENDITURE BUDGET FOR THE

YEAR 2018-2019

46
 (Cr……)

S. DESCRIPTION BUDGETE ACTUAL VARIANC

No. D S E
1. Interested Expanded 28327.77 26074.24 2253.53

2. Operating Expenses 15327.34 13987.55 1339.79

3. Employee Remuneration 5323.39 4750.96 527.43

& Benefits

4. Administrative 16363. 15768. 594.8

&Operation Expenses 74 85 9

5. Provisions &
Contingencies 8586.3 1397.8
6. 9 7188.56 3
Depreciation

703.55 656.30

47.25

Total 746332.18 68426.46 6205.72

Fig 5.2 GRAPHICAL REPRESENTATION OF REVENUE EXPENDITURE BUDGET

FOR THE YEAR 2018-2019

47
INTERPRETATION
In this year it can be seen that every item actuals are bellow the budget estimate which
reprehensions a positives indications of savings, the actual are beyond budget estimates due to
revision in pay scales. Which can be ignored, because in total budget estimates are more then
the actual

Tab 4.3 CALCULATION OF REVENUE RECEIPTS BUDGET FOR THE YEAR 2017-
2018
(Cr……)

48
S.No DESCRIPTION BUDGETED ACTUALS VARIANCE

1. Interested Earned 41583.55 41135.53 448.02

134.74
2. Other Income 8054.38 7919.64 641.54

3. Balance in 14879.55 14238.01

bank(Inventory)

Total 64517.48 63293.18 1224.30

Fig 5.3 GRAPHICAL REPRESENTATIONOF REVENUE RECEIPTS BUDGET FOR

THE YEAR 2017-2018

INTERPRETATION
In this year it can be seen that every item actuals are bellow the budget estimate which
reprehensions a positives indications of savings, the actual are beyond budget estimates due to
revision in pay scales. Which can be ignored, because in total budget estimates are more then
the actual
In revenue receipts, the actual are below the budgeted. Except in increase in inventory
value is negative. The budget estimates with a good variation percentage.

Tab 4.4 CALCULATION OF REVENUE EXPENDITURE BUDGET FOR THE YEAR

2017-2018

49
S. DESCRIPTION BUDGETED ACTUALS VARIANCE
No.
1. Interested Expanded 22987.65 22652.90 334.75

2. Operating Expenses 12396.53 12042.20 354.33

3. Employee Remuneration & 4673.92 4178.98 494.94

Benefits

Administrative &Operation 3136.3 2939.9 196.4

4. Expenses 2 2 0

5. Provisions & Contingencies

6032.39 5881.70 150.69
6. Depreciation
754.61 671.61 83.00

Total 49979.42 48367.31 1612.11

(Cr……)

Fig 5.4 CALCULATION OF REVENUE EXPENDITURE BUDGET FOR THE YEAR

2017-2018

INTERPRETATION
In this year it can be seen that every item actuals are bellow the budget estimate which
reprehensions a positives indications of savings, the actual are beyond budget estimates due to
revision in pay scales. Which can be ignored, because in total budget estimates are more then
the actual.

Tab 4.5 CALCULATION OF REVENUE RECEIPTS BUDGET FOR THE YEAR 2017-
2018
(Cr……)

50
S.No DESCRIPTION BUDGETED ACTUALS VARIANCE

1. Interested Earned 28967.39 27286.35 1681.04

129.90
2. Other Income 5463.31 5333.41
65.95
3. Balance in 6012.58 5946.63
bank(Inventory)
Total 40443.28 38566.39 1876.89

Fig 5.5 CALCULATION OF REVENUE RECEIPTS BUDGET FOR THE YEAR 2017-
2018

INTERPRETATION
In this year it can be seen that every item actuals are bellow the budget estimate which
reprehensions a positives indications of savings, the actuals are beyond budget estimates due to
revision in pay scales. Which can be ignored, because in total budget estimates are more then
the actuals
In revenue receipts, the actuals are below the budgeted. Except in increase in inventory
value is negative. The budget estimates with a good variation percentage.
Tab 4.6 CALCULATION OF REVENUE RECEIPTS BUDGET FOR THE YEAR 2016-
2017
(Cr……)

51
S.No DESCRIPTION BUDGETED ACTUALS VARIANCE

1. Interested Earned 38323.83 35064.87 3258.96

82.19
2. Other Income 6934.81 6852.62 779.71

3. Balance in 13432.48 12652.77

bank(Inventory)
Total 58691.12 54570.26 4120.86

Fig 5.6 CALCULATION OF REVENUE RECEIPTS BUDGET FOR THE YEAR 2016-
2017

Fig:5.6
INTERPRETATION
In this year it can be seen that every item actuals are bellow the budget estimate which
reprehensions a positives indications of savings, the actuals are beyond budget estimates due to
revision in pay scales. Which can be ignored, because in total budget estimates are more then
the actuals
In revenue receipts, the actuals are below the budgeted. Except in increase in inventory
value is negative. The budget estimates with a good variation percentage.
Tab 4.7 CALCULATION OF REVENUE EXPENDITURE BUDGET FOR THE YEAR
2016-2017

52
Fig 5.7 CALCULATION OF REVENUE EXPENDITURE BUDGET FOR THE YEAR

S. DESCRIPTION BUDGETED ACTUALS VARIANCE

No.
1. Interested Expanded 20436.37 19253.75 1182.6
4
Operating Expenses 12396.53 11236.12
2. 1160.41
Employee Remuneration & 4073.92 3965.38
3. Benefits 108.54
Administrative &Operation 2936. 2703.
Expenses 32 08 233.
4. Provisions & Contingencies 24

5. Depreciation 4832. 4701.

39 34 131.
6. 05
729.5
3 651.67
77.86

Total 45405.06 42511.34 2893.27

2016-2017

INTERPRETATION
In this year it can be seen that every item actuals are bellow the budget estimate which
reprehensions a positives indications of savings, the actual are beyond budget estimates due to
revision in pay scales. Which can be ignored, because in total budget estimates are more then
the actual

Tab 4.8 CALCULATION OF REVENUE RECEIPTS BUDGET FOR THE YEAR 2015-
2016

53
 S.No DESCRIPTION BUDGETED ACTUALS VARIANCE

1. Interested Earned 28967.39 27286.35 1681.04

129.90
2. Other Income 5463.31 5333.41
65.95
3. Balance in 6012.58 5946.63
bank(Inventory)
Total 40443.28 38566.39 1876.89
FIG 5.8 CALCULATION OF REVENUE RECEIPTS BUDGET FOR THE YEAR 2015-
2016

INTERPRETATION
In this year it can be seen that every item actuals are bellow the budget estimate which
reprehensions a positives indications of savings, the actuals are beyond budget estimates due to
revision in pay scales. Which can be ignored, because in total budget estimates are more then
the actuals
In revenue receipts, the actuals are below the budgeted. Except in increase in inventory
value is negative. The budget estimates with a good variation percentage.
TAB 4.9 INTERESTED EXPANDED
YEAR BUDGETED ACTUALS
2014-2015 9501.34 9385.08
2015-2016 15154.94 14989.58
2016-2017 20436.37 19253.75

54
 2017-2018 41583.55 41135.53
2018-2019 28327.77 26074.24
(Cr……)

INTERPRETATION
In this year it can be seen that every item actuals are bellow the budget estimate which
reprehensions a positives indications of savings, the actual are beyond budget estimates due to
revision in pay scales. Which can be ignored, because in total budget estimates are more then
the actual

TABLE: 4.10 INTERESTED EXPANDED

YEAR BUDGETED ACTUALS
2014-2015 9501.34 9385.08
2015-2016 15154.94 14989.58
2016-2017 20436.37 19253.75
2017-2018 41583.55 41135.53
2018-2019 28327.77 26074.24

55
FIG: 5.10 CALCULATION OF REVENUE EXPENDITURE BUDGET FOR THE
YEAR 2014-2015

INTERPRETATION
By observing the above graph the materiel consumption is fluctuating from 2014-2019. So the
company needs effective budget technique to get targeted actual.

TABLE: 4.11 PROVISIONS AND CONTINGENCES

YEAR BUDGETED ACTUALS
2014-2015 3254.69 3004.88
2015-2016 3452.23 3221.46
2016-2017 4832.39 4701.34
2017-2018 6032.39 5881.70
2018-2019 8586.39 7188.56

56
FIG:5.11 CALCULATION OF REVENUE EXPENDITURE BUDGET FOR THE YEAR
2015-2016

Fig:5.11
INTERPRETATION
By observing the above graph the consumable stores is fluctuating from 2013-2017. The value
is decreased from 3004.88 in 2014-2015 to 7188.56 in 2018-2019 so the company needs
effective budget techniques to get targeted actual.

TABLE: 4.12 EMPLOYEE REMUNERATION & BENEFITS

YEAR BUDGETED ACTUALS
2014-2015 2974.21 2836.04
2015-2016 3548.45 3399.91
2016-2017 4154.54 3965.38
2017-2018 4673.92 4178.98
2018-2019 5323.39 4750.96

57
FIG:5.12 CALCULATION OF REVENUE EXPENDITURE BUDGET FOR THE YEAR
2015-2016

INTERPRETATION
By observing the above graph the employee remuneration and benefits are fluctuating from
2014 to 2019. There is an increase in the values from 2836.08 in 2015 to 4750.96 in 2019. So
the company should follow the same technique and also improve to get targeted actual.

TABLE: 4.13 ADMINISTRATIVE & OPERATION EXPENSES

YEAR BUDGETED ACTUALS
2014-2015 21579.64 20435.32
2015-2016 28974.21 27452.68
2016-2017 2965.65 2854.51
2017-2018 3136.32 2939.92
2018-2019 16363.74 15768.85

FIG:5.13 CALCULATION OF REVENUE EXPENDITURE BUDGET FOR THE YEAR

2015-2016

58
INTERPRETATION
By observing the above graph the administrative and operation expenses are fluctuating from
2014 to 2019. There is a decrease in the values from 20435.32 in 2015 to 15768.85 in 2019 so
the company needs effective budget techniques to get targeted actual.

TABLE: 4.14 BANKING EXPENSES

YEAR BUDGETED ACTUALS
2014-2015 2785.64 2510.82
2015-2016 2967.12 2647.25
2016-2017 3125.84 3965.38
2017-2018 4054.85 4178.98

2018-2019 5323.39 4750.96

FIG:5.14 CALCULATION OF REVENUE EXPENDITURE BUDGET FOR THE YEAR

2014-2015

59
INTERPRETATION
By observing the above graph the Banking expenses are fluctuating from 2014-2019 there is a
increase in the values from 2510.82 in 2015 to 4750.96 in 2019. So the company should follow
the same technique and also improve to get targeted actual.

60
 CHAPTER-V
FINDINGS
SUGGESTIONS
CONCLUSION

FINDINGS
 The budget and budgetary control of HDFC. Was found to be very effective when
considered all categories of items.
 In spite of having techniques many techniques of budget system, the company is not
following any of the system to control budget.
 In the 2014-2019 the total budgets value was high. Where was in the next two years it
has come down drastically.
 In all the five years budget expenditure was of high consumption a value.
 Material consumed which is one of the inputs for the production.

61
  It is also found that the reasons for maintaining huge stock of Banking expenses in 2014-
2015 is due to high production of manufacturing expenses as well as the sales is also high
in the year of 2014-2019 compared to other year.

SUGGESSIONS
 It is recommended to the company that every item to be considered when categorizing
the items into budgets.
 As company is not using any budget techniques we can suggest the company to follow
budget techniques for better and effective budget and budgetary control.
 Pre audit of all expenditure proposals before issue of order and to check whether the
expenditure is legitimate, approved by appropriate authority and availability of funds for
the above items.

62
  The budget estimations should be made that they will reach with the actual for every year
with very less variation.
 In HDFC revenue expenditure and revenue receipts are not interdependent on each other.
 The revenue expenditure will be spent based on the production target irrespective of the
revenue receipts.
 In this proves the effective financial performance of budget department in the
organization

CONCLUSION
Since, all the production units in HDFC. Will run perpetually throughout the year, there
will be minimum variations in the revenue expenditure budget estimates and actual. As the
expenditure will be incurred more or less to the estimations made by the organization.
In concern with overhead expenses, it will also be with minimum variations between
budget estimates and actual. Since the production process will be consistent. Any change in the
items of expenditure, will lead to the review in the budget estimates by the accounts and

63
finance department. It is also suggested to the company that budget techniques will be very
useful to control and manage cost effectively.

64
 BIBLIOGRAPHY

BIBLIOGRAPHY

TEXT BOOKS
 Alic C.Lee, John C. Lee, “Financial An Analysis, Planning and Forecasting”, 2009, 2nd
Edition Cambridge.
 Grewal T.S., “Introduction to Account”, 2009, S. Chand Publishers.

65
 N. Ramachandran, Ramkumar Kakani, “Financial Account for management”, 2009, 2nd
Edition Tata McGraw Hill Publishing Pvt. Ltd.,
 Dr. Jawaharlal, “Accounting for management” 2010, 5th Edition Himalya Publishing
House.
 Paresh Sha, “Basic Financial Account for management”, 2009, 5th Edition Oxford
university Press.
 Ambarish Gupta, “Financial Account for Management”, 2009, An Analytical Prespective,
3rd Edition, Pearson Education.

WEB SITES:
 http://www.investopedia.com/terms/w/workingcapitalmanagement.asp
 http://www.studyfinance.com/lessons/workcap/
 https://www.efinancemanagement.com/working-capital-financing/importance-of-working-
capital-management
 http://www.businessdictionary.com/definition/working-capital-management.html

REFERENCES:
 D Hendricks, J Patel, R Zeckhauser - The Journal of finance
 M Grinblatt, G Jostova, L Petrasek… - and 2016
 S Parida, T Teo - Journal of Banking & Finance, 2016

66