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A PROJECT REPORT

ON
A STUDY OF INVESTORS PRCEPTION TOWARD DERIVATIVES AT
KMBL
FOR
KOTAK MAHINDRA BANK, RAJKOT
Submitted to
Marwadi Education Foundations Group Of Institutions
In partial fulfillment of the requirement of the award for the degree of
Master Of Business Administration
Under
Gujarat Technological University
Under the guidance of
Faculty Guide:

Company Guide:

Mr. Ruturaj Doshi

Mr. Rajiv Parekh


Submitted by
VARDHANI AANCHAL MAHESHKUMAR
Enrollment No: 157340592228
MBA Semester III

Marwadi Education Foundations Group Of Institutions


MBA Program
Affiliated to Gujarat Technological University
Ahmedabad
1

July 2016

COLLEGE CERTIFICATE

COMPANY CERTIFICATE

STUDENT DECLARATION
I Vardhani Aanchal Maheshkumar hereby declare that the report for Summer
Training Project entitled A Study Of Derivative Market is a result of my own
work and my indebtedness to other work publications, references, if any, have
been duly acknowledged.
Place : Rajkot

Student Signature:
Vardhani Aanchal Maheshkumar

EXECUTIVE SUMMARY
The service industry is one of the fastest growing sectors in India today. The
upcoming sectors, which are really showing the graph towards upwards, are
Telecom, Banking, and Insurance. These sectors really have a lot of
responsibility towards the economy. Main focus of this report is based on the
DERIVATIVE MARKET. Kotak Mahindra Bank Ltd is one of Indias leading
financial institutions, offering complete financial solutions that encompasses
every sphere of life. From commercial banking, to stock broking, to mutual
funds, to life insurance, to investment banking, the group caters to the
financial needs of individuals and corporate. The project report gives an
insight about the benefits that Kotak Mahindra Bank Ltd provides to the
people who deal in Derivative Market and throws the lights upon the SWOT (
Strengths, Weakness, Opportunities, Threats) analysis of bank.

ACKNOWLEDGMENT
Words put on paper are mere ink marks, but when they have a purpose there
exists a thought behind them. I too have a purpose to express my gratitude
towards those individuals without whose guidance the project would not have
been possible.

I would like to express my thanks to Mr. Rajiv Parekh ( Area Sales


Manager), Kotak Mahindra Bank Ltd. who has kindly permitted me to
undertake the project in the organization.

I am also thankful to Mr. Parth Dhagat and Mr. Shailesh Gondalia and other
members of the organization for their support and providing the required
information.

It was a pleasure to be associated with Kotak Mahindra Bank Ltd. The


experience that I have garnered has had a profound impact on my career
choices and has helped me realize what is requisite for success in the
corporate world. I carry high regards for the complete team of Kotak Mahindra
Bank Ltd.

I also take this opportunity to express a great sense of gratitude towards our
Dean, Dr. Sunnet Saxena and internal project guide Mr. Ruturaj Doshi for
providing me vital inputs to co-relate the present project work and hence
provide a sound base to the report structure. A special word of thanks also
goes to all the teaching and non teaching staff of my institute and my Friends.
Vardhani Aanchal Maheshkumar.

Particulars
Sr No
1

5
6
7
8
9
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Part I General Information


Industry Overview
1.1 History
1.2 Growth and Development
1.3 Market players in the industry
Company Overview
2.1 History
2.2 Growth and Development
2.3 Performance and other key performing
data
2.4 Products/ Service overview
2.5 SWOT Analysis
Part II Research Work
Introduction of the study
3.1 Background of the study
3.2 Review of literature
3.3 Statement of problem
3.4 Objectives of the study
3.5 Contribution and learning from the
project
Research Methodology
4.1 Research design
4.2 Sampling Method
4.3 Sampling Size
4.4 Sources of data
4.5 Data collection method
4.6 Data collection instrument
4.7 Model specification/ Data processing
Analysis and interpretation of data
Results and findings
Suggestions and conclusion
Limitations of the study
Scope for further research
Bibliography
Annexures

INDEX

PART 1

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GENERAL INFORMATION

1. Industry Overview
1.1 History

How did banking originate? What activity resulted in Banking, as we know it


today? To answer these questions it is necessary to step back into history to
several thousands of years and study its origins.
Barter
Man was, in the dawn of history, simple and self-sufficient. He lived in
caves, killed animals when hungry and he had no other wants. As
time passed, men began living in villages and started to till the
ground. Often the produce of a farmers fields was more that he
required. Similarly, a fisherman often caught more than his family required. In
the ideal situation, the farmer would exchange his produce for fish with the
fisherman. This exchange is known as barter. And in the ideal world they
would both be content. However, a complication could and would arise if the
farmer did not require steel there would be tremendous and horrendous
difficulty in matching those that individuals ha with that which they needed.
And it was on account of this difficulty of meeting needs that the barter system
surrendered to money.
Money

Money was created rather born to reduce the value of the


items people had to a common denominator to facilitate
exchange of products to satisfy needs. The fisherman would
sell his fish as would the farmer for money. The farmer would
then armed with the money he has in hand purchase a plough. The fisherman
with the money he has received, would buy the food he needs for his family.

The earliest form of money was bones on which marks were made to
distinguish between values. Metals then began to be used the most popular
being gold, silver and bronze. Symbols, sizes and signs on these differed from
time to time and from country to country, as men began to travel from country
to country to exchange goods and to trade, banking was born.
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The term money is derived from the temple of Juno Moneta which was used
by the Romans as a mint for their coins.

Banking

Banks were born to facilitate trade to lend monies to


purchase goods, to store monies and to change currencies.
Banking began thousands of years ago. The Assyrians,
Babylonians and Ancient Greeks practice simple forms of banking
safekeeping, exchanging foreign coins and making loans mainly in
connection with trade. Temples such as those of Ephesus and Delphi were
Greek banking institutions. The Romans did not have State Banks but had
minute regulations regarding private banks. These were calculated to create
utmost confidence in the system. Ancient Rome had two types of bankers
those who made loans and those who exchanges foreign monies.

The term bank is derived from the Italian word banco which means bench.
The early bankers, the Jews of Lombard, transacted their business at
benches in the market place and later in inns and taverns. In those days if a
banker failed, his banco or bench was broken, hence the term bankrupt.
Another opinion is that the term bank evolved from the German word back
meaning a joint stock fund which was Italianised into banco. As many of
these inns/taverns were known by the signs they had such as eagle, crossed
swords etc.

BANKING SYSTEM IN INDIA

Banking in India originated in the first decade of 18 th century. The first banks
were The General Bank of India, which started in 1786, and Bank of
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Hindustan both of which are now defunct. The oldest bank in existence in
India is the State Bank of India, which originated in the The Bank of Bengal
in Calcutta in June 1806. This was one of the three presidency banks, the
other two being the Bank of Bombay and the Bank of Madras. The presidency
banks were established under charters from the British East India Company.
They merged in 1925 to form the Imperial Bank of India, which, upon Indias
independence , became the State Bank of India. For many years the
Presidency banks acted as quasi-central banks, as did their successors.

The Banking System in India consists

of:

Reserve

Bank

Development Banks
Public Sector Bank
Foreign Banks
Private Sector Banks
Cooperative Banks
Regional Rural Banks

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The Reserve Bank Of India

The Reserve Bank of India is the Central Bank of the Country and came into
being by the Reserve Bank of India Act 1934. It was nationalized in 1948.
The bank that issues and regulates the issue of currency in India.
The banker to the government of India and the State governments. It
manages the public debt. It has the obligation to transact the banking
business of the Central Government. It undertakes to accept money on
behalf of the Government and make payment on its behalf.
The bankers bank. Commercial banks maintain their current account
with the Reserve Bank of India.
The bank that manages the volume of credit created by the commercial
banks to ensure price stability.
The bank that manages the volume of credit created by the commercial
banks to ensure price stability.
The bank that manages the external value of the currency.
The lender of Last Resort. It will lend to banks in trouble.

Development Banks
These were set up to give long term finance for the development of the
country. These are the Industrial Finance Corporation of India and the
Industrial Development Bank of India. The Industrial Reconstruction Bank of
India and the National Bank for Agriculture and Rural Development. A former
development bank, the Industrial Credit and Investment Corporation of India
Ltd. By a reverse merger in 2002, became a normal commercial bank. It is
expected that the other development banks, having outlived their utility would
also be either converted to commercial banks or merged with commercial
banks.
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Public Sector Banks


These are banks which the Government either owns or has a majority stake
in. The largest is the State Bank of India, which was formed by the merger of
the Presidency Banks the Bank of Bengal, the Bank of Bombay and the
Bank of Madras in 1921. It was then known as the Imperial Bank. It was
nationalized in 1955 by the passing of the State Bank of India Act, 1955. It has
seven subsidiaries or associates. The other nationalized banks came into
being on July 19, 1969 when Mrs. Gandhis Government nationalized fourteen
banks that had deposits of Rs 50 crores or more. On April 15, 1980, six more
banks having demand and time liabilities of not less than Rs. 200 crores were
nationalized. This was done to take banking to the villages and serve the
developmental needs of all sectors of the economy.

Foreign Banks
These are branches of banks incorporated outside India.
The larger ones that have been operating in India for many years are
Standard Chartered Bank, Citibank, American Express Bank, ABN Amro, BNP
Paribas and Hong Kong and Shanghai Banking Corporation.
In 1995/96 many other foreign banks opened branches in India. However,
after banking began to become increasingly competitive and margins began
to squeeze coupled with large non-performing assets, many banks closed
their branches. These include Dresdner Bank, Comerz Bank, KBC Bank and
Commercial Bank of Siam.

Private Sector Banks

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These banks are not government owned or controlled. Their shares are freely
traded in the stock markets. These may be divided into:
Old Private Sector Banks such Federal Bank, Dhanlakshmi Bank,
Catholic Syrian Bank
Cooperative Banks
Cooperative Banks are those that created by a group of individuals to support
either a community or a religious group. They operate in metropolitan, urban
and semi urban centers to cater to the needs of small borrowers.
These are controlled by the RBI and by State Cooperative Acts.
In recent years these have been under a cloud on account as several
(particularly in Gujarat and Andhra Pradesh) collapsed under controversy.
They were used as vehicles by individuals to finance activities which did not
succeed.

Regional Rural Banks


These came into being on October 2, 1975 when 5 regional rural banks were
established under what became the Regional Rural Banks Act 1975. These
were to bridge the gap in rural credit granting loans and advances to small
and marginal farmers, artisans, small entrepreneurs and persons of small
means engaged in trade, commerce, industry or other productive actitivites
within their area of operation.

Local Area Banks

Local Area Banks came into existence in 1999 and licences were given for
these banks as it was felt that regular commercial banks were not financial the
rural/agricultural sector adequately. Licences have given to open branches in
three districts. Branches in urban/semi urban areas have granted only after
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ten branches were established in rural areas/villages. Four licences were in


total granted two in Andhra, one in Punjab and one in Gujarat. They have
opened with an initial capital of Rs 5 crore. A report issued in 2002 has
recommended that the capital shoul increased to Rs 25 crores and that thses
be permitted to operate in six districts.

1.2 Growth & Development


INTRODUCTION
As per the Reserve Bank of India (RBI), Indias banking sector is sufficiently
capitalized 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 the roll out of innovative
banking models like payments and small finance banks. 11 payment banks
are expected to be launched in 2016 and 2017. Separately about 10 small
finance banks are also expected to be launched. RBIs new measures may go
a long way in helping the restructuring of the domestic banking industry.

Market Size
There are currently 27 public sector banks in India out of which 19 are
nationalised banks and 6 are SBI and its associate banks, and rest two are
IDBI Bank and Bharatiya Mahila Bank, which are categorised as other public
sector banks. There are total 93 commercial banks in India.

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1.3 Market Players in the industry


Public Sector Bank

1. Allahabad Bank
2. Andhra Bank
3. Bank of Baroda
4. Bank Of India
5. Bank of Maharashtra
6. Canara Bank
7. Central Bank of India
8. Corporation Bank
9. Dena Bank
10. IDBI Bank
11. Indian Bank
12. Indian Overseas Bank
13. Oriental Bank of Commerce
14. Punjab National Bank

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15. Punjab and Sind Bank


16. State Bank of India
16.1 State Bank of Bikaner and Jaipur
16.2 State Bank of Hyderabad
16.3 State Bank of Mysore
16.4 State Bank of Patiala
16.5 State Bank of Travancore
17. Syndicate Bank
18. UCO Bank
19. Union Bank of India
20. United Bank of India
21. Vijaya Bank
Private Sector Bank
1. Axis Bank
2. Development Credit Bank
3. HDFC Bank
4. ICICI Bank
5. Induslnd Bank
6. Kotak Mahindra Bank
7. Yes Bank
8. Catholic Syrian Bank
9. Dhanalakshmi Bank
10. Federal Bank
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11. Jammu & Kasmir Bank


12. Karnataka Bank Ltd.
13. Karur Vysya Bank
14. Lakshmi Vilas Bank
15. South Indian Bank
16. Tamilnadu Mercantile Bank Ltd.

Some Foreign Private Banks in India


1. Abu Dhabi Commercial Bank Limited
2. American Express Banking Corporation
3. Bank of America
4. Bank of Bahrain & Kuwait BSC
5. Barclays Bank Plc.
6. BNP Paribas
7. Citibank N.A.
8. Deutsche Bank
9. HSBC Ltd.
10. J.P. Morgan Chase Bank N.A.
11. Standard Chartered Bank
12. State Bank of Mauritius

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PART 2
COMPANY OVERVIEW

Think big, think fast, think ahead. Ideas are no ones monopoly
DHIRUBHAI AMBANI

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2.1 History

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Kotak Mahindra
Bank is an Indian
private sector
banking
headquarterd in
Mumbai,

Type

Pubic Company

Traded as

BSE : 500247
NSE : KOTAKBANK

Maharastra, India.
February 2003,
Reserve Bank of
India (RBI) gave
licence to Kotak
Mahindra Finance
Ltd., the groups
flagship company,
carry on banking
business.

Industry

Banking, Financial Service

Founded

1985 (as Kotak Mahindra

Finance Ltd)

In

the

Headquarters

Mumbai, India

Key people

Uday Kotak(Founder &

Executive Vice Chairman, Dipak Gupta (Joint


MD).

to

Products

Deposit accounts, Loans,

Investment Services
Revenue

109.63 billion(2011)

Net Income

15.69 billion(2011)

It offers a wide

Total assets

USD 15.8 billion(2015)

range of banking

No.

products and

of employees

financial services

Vysya )(2015)

29,200 (before merger with ING


for

corporate and retail


customers through

variety of delivery
channels and
specialized subsidiaries in the areas of personal finance, investment banking,
life insurance, and wealth management.

As of 30 September 2014, Kotak Mahindra Bank has a network of 641


branches and over 1159 ATMs spread across 363 locations in the country.
The bank, which has garnered positive reviews from its customers and clients

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before its merger with ING Vysya, had around 29000 employees. In 2014, it
was the fourth largest private bank in India by market capitalization.

Senior Management
Get acquainted with the Board of Directors at the Kotak Mahindra Group and
meet some of the most knowledgeable and recognized names in the financial
world.
UDAY KOTAK
Executive Vice Chairman and Managing
Director Kotak Mahindra Bank Ltd
As a young 26-year old entrepreneur in 1985,
Uday Kotak started Kotak Capital Management
Finance Ltd. (which later became Kotak
Mahindra Finance Ltd). The vision was to
eventually become a banking company. Private
Indian banks were not even a speck on the
horizon at that time. On 22nd March 2003, Kotak
Mahindra Finance Ltd. Became the first nonbanking financial company (NBFC) in Indias
corporate history to be converted into a bank.
Kotak Mahindra Bank Ltd. (KMBL) is regarded as one of the most efficient
and high performing banks in India, built on the principles of simplicity and
prudence. Uday remains unfazed by market euphoria and his basics of
banking approach has ensured that the loan book is of high quality an the
bank is well capitalized in a journey spanning nearly three decades, Uday has
not only helped the company grow to this scale but also earn respect.

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Today, Kotak Mahindra Group, a first generation enterprise, with revenue of


US $ 2.8 billion, has a global presence, employs over 30,000 people and its
recognized as one of the topmost employers in India. The group has the
distimction of providing a 48% CAGR to its hareholders over a 29 year period.
The core of the business model is concentrated India, diversified financial
services.
Uday has a storng focus on community development and inclusive growth,
whoch is reflected by the Groups initiatives to provide low cost services to
rural customers and its welfare programmes. Uday feels strongly that
education is key to the alleviation of the social malaise afflicting Indias underpriviliged in a bid to address this issue, he has established the Kotak
Education Foundation that focuses on the education needs of underprivileged
children.
Mr. DIPAK GUPTA
Joint Managing Director
Kotak Mahindra Bank Ltd

Dipak Gupta, Joint Managing Director, Kotak


Mahindra Bank has been with Kotak Mahindra
group since 1992. He was appointed as Executive
Director of Kotak Mahindra Finance Limited (now
Kotak Mahindra Bank Limited) on 1st October
1999. Dipak overlooks Group Human Resource,
Administration, Infrastructure, Operations and IT.
He also heads the Asset Reconstruction business of the Bank.
Dipak joined Kotak Mahindra Financee Limited (KMFL) in the corporate
Finance division. With over 25 years experience , he has played a key role in
building various businesses for Kotak Mahindra Group. Dipak was
instrumental in the collaboration of Kotak Mahindra with Ford Credit
International to form Kotak Mahindra Prime Limited (KMPL), of which the was
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the first CEO. He was also responsible for setting up the retail businesses
post the conversion into a Bank.

2.2 Growth & Development


Since the inception of the erstwhile Kotak Mahindra Finance Limited in 1985,
it has been a steady and confident jorney leading to growth and success. The
milestones of the group growth story are listed below year wise
YEAR
1985
1987
1990
1991
1995

MILESTONE
Kotak Mahindra Finance Ltd. Commences bill discounting

business
Enters lease and hire purchase business
Starts auto finance division for financing passenger car
Establishes investment banking division
Joint venture with Goldman Sachs Group Inc for investment
banking incorporation of Kotak Mahindra Capital Company

1996

(KMCC)
Auto finance is hived off into a separate company Kotak
Mahindra Primus Limited (now known as Kotak Mahindra Prime
Limited), a joint venture with Ford Creit to finance non Ford
vehicles.
Kotak Mahindra takes a significant stake in Ford Creit Kotak

1998

Mahindra Ltd, for financing Ford vehicles.


Kotak Mahindra Group launches Indias first gilt fund through

2001

Kotak Mahindra Asset Management company (KMAMC)


Kotak Mahindra Group launches life insurance business, partners
Old Mutual plc to form Kotak Mahindra Old Mutual Life Insurance

2003

Ltd.
Kotak Mahindra Finance Ltd. (KMFL), the groups flagship
company, receives banking licence from the Reserve Bank of
India (RBI). With this, KMFL becomes the first non-banking
finance company in India to be converted into a commercial bank
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2004

Kotak Mahindra Bank Ltd.


Kotak Mahindra Group enters alternate assets business with the

2005

launch of a private equity fund.


Kotak Mahindra Group realigns joint venture with Ford Credit;
takes 100% ownership of Kotak Mahindra Prime (formerly known
as Kotak Mahindra Primus Limited) and sells its stake in Ford

2006

Credit Kotak Mahindra to Ford


Kotak Alternate Assets launches a real estate fund
Kotak Mahindra Bank buys out Goldman Sachs equity stake in

2008
2009

Kotak Mahindra Capital Company and Kotak Securities Ltd.


Kotak Mahindra Bank opens a representative office in Dubai
Kotak Mahindra Group launches a pension fund under Indias

2014

National Pension System (NPS)


Thrust on digital and social with the launch of innovative solutions
first of its kind fully integrated social bank account Jifi, and
worlds first bank agnostic instant funds transfer olatform using
Facebook KayPay. Subsequently in Jan 2015, Jifi Saver a
savings bank account with secure and seamless trasactions om
popular social networks was launched.
Kotak Mahindra bank aquires 15% equity stake in Multi
Commodity Exchange of India Limited (MCX)
Kotak Mahindra Asset Management Company Ltd. Acquires
schemes of Pinebridge Mutual Fund.
Kotak Mahindra Group announces its foray into General

2015

Insurance business.
Reserve Bank of India (RBI) approves merger of ING Vysya Bank
with Kotak Mahindra Bank effective April 1, 2015.

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AWARDS & ALLOCADES (FY 2015-16)


At Kotak Mahindra Group they take a client-centric view and
constatntly innovate to provide us with the best of services
and infrastructure. They have regularly received accolades
that stand testimony to their success in their endeavour.
Some of their recent achievements are:
Kotak Mahindra Bank Ltd. (KMBL)
Uday Kotak - the sole Indian Financier to feature in Money Masters:
The Most Powerful People in The Financial World, by Forbes
magazine, USA (May 2016)
Uday Kotak wins Entrepreneur of the Year award at Forbes India
Leadership Awards 2015
Uday Kotak received ET Business Leader of the Year award at ET
awards 2015 for Corporate Excellence from Hon'ble Finance Minister
Shri Arun Jaitley
Uday Kotak received the AIMA-JRD Tata Corporate Leadership Award
2015 at AIMA-s 2nd National Leadership Conclave
Uday Kotak recognised as Best Transformational Leader Award 2015
by Asian Centre for Corporate Governance & Sustainability in 2016
Jaimin Bhatt, President & Group CFO, recognised with ICAI Award
2015 under the CA CFO - Banking sector category
Shanti Ekambaram, President, Consumer Banking, recognised as one
of the Most Powerful Women 2015 by Business Today
Karthi Marshan recognised as Marketer of the Year in the Banking
category by the International Advertising Association (IAA) Leadership
Awards
Karthi Marshan recognised as Digital Marketer of the Year in the
Banking category at Digital Marketers' Awards organised by Internet
and Mobile Association of India's (IAMAI) Digital Marketers' Awards
2016
CFO India magazine recognized six Kotakites in the CFO100 Roll of
Honour 2016:
Himanshu Vasa, EVP & Financial Controller & Chief of Internal
Vigilance, Kotak Mahindra Bank, in the Mergers & Acquisitions
category
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Rajeev Saptarshi, COO, Kotak Investment Advisors Limited, in

the Funds Management category


Gobind Jain, EVP - Group Finance, Kotak Mahindra Bank, in the

Corporate Governance category


Trivikram Kamath, EVP & Head Operations, Finance &

Technology, Kotak Securities, Integration of Technology


Subramanian N R, EVP & CFO, Infina Finance, in the Risk

Management category
Sanjay Tibrewala, CFO, Phoenix ARC, in the Cost Management

category
Bhargesh Ojha recognised in the Top GC Power List (February - March
2016) by Legal Era magazine
Prakash Nayak, EVP, Corporate Banking was awarded Outstanding
Manager Award 2015 by Ahmedabad Management Association (AMA)
Kulin Thaker & Arif Khan won CIO & Leader Business Impact Award
2015 by 9.9 Mediaworx
Kulin Thaker & Arif Khan won DataQuest Business Technology Award
2015 by Data Quest magazine
Agnelo Dsouza & Jaypaul Reddy won CSO Next 2015 Award by 9.9
Media
Arif Khan recognised as India's Future CIO at Next100 2015 Awards by
IT Next
Kulin Thaker & Ashok Singh recognised by EMC Corporation as:
EMC Outstanding Customer Award 2015
EMC Transformer Award 2015
Kulin Thaker & Arif Khan recognised by Citrix Technologies for Best
Desktop Virtualization Implementation
Mumbai Marathon 2016:
Second Highest Fundraising corporate in the Corporate Challenge

category at Mumbai Marathon 2016


Shanti Ekambaram, President - Consumer Banking, recognised as
Highest Fundraising Individual in the Corporate Challenge category

at Mumbai Marathon 2016


Manish Kothari, Sr. EVP & Business Head - Mid & Large
Corporates, Corporate Banking, recognised as Second Highest
Fundraising Individual in the Corporate Challenge category at
Mumbai Marathon 2016

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Most Future Ready Bank in Business Today-KPMG's Best Bank Study


2015
Best Medium Sized Bank in the Business world Best Bank Survey
2014-15
Best Retail Growth Performance award at Dun & Bradstreet Banking
Awards 2015
Bank of the year - 2015 at the 12th India International Gold Convention
in the Emerging Nominated Agency - Bullion Category
Recognised by Asiamoney Cash Management Poll 2015 as:
Best Local Cash Management Bank across all categories for Small,

Medium and Large size corporate


Best Overall Domestic Cash Management Services for Small,

Medium and Large size corporate


Best Overall Cross-Border Cash Management Services for Small

and Large Size Corporate


STP Award 2014 for Outstanding Payment Formatting and Straight
Through Rate in the Trade Finance category by Bank of New York
(BNY) Mellon
Best Debit Cards Portfolio Growth award for India and South Asia at
Visa's Future of Digital Payments Forum 2015
Best Project Financing Deal in Asia for refinancing of the Pune-Solapur
Expressway project at GlobalCapital Asia Regional Capital Markets
Awards 2015
Recognised by NPCI's National Payments Excellence Awards 2015 for:
Excellent Performance in CTS (small banks category)
Excellent Performance in IMPS (small banks category)
Recognised by Global Custodian India Domestic Survey 2015 as:
Market Outperformer
Best in Technology
Finnoviti Award 2016 for Bharat Banking App by Banking Frontier's
magazine
Best Bond Deal for financing of SP JUHi project awarded at IJ Global
(Euromoney) Awards (Asia Pacific)
Recognised by Global Custodian in -2015 Survey of Agent Banks in
Emerging Markets- in the Indian market as:
Category Outperformer, notching highest scores in the entire seven
categories, namely Relationship & Client Service, Value Delivered,
Settlement, Asset Servicing, Ancillary Services, Reporting and
Technology
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Market Outperformer
Global Outperformer

2.3 PERFORMANCE & OTHER KEY PERFORMING DATA


Kotak bank has a many key groups companies which also perform a very
vital role for the customers.
Kotak Mahindra Capital Company
Kotak Mahindra Capital Company Limited
(KMCC), India's Premier Investment Bank and a
Primary Dealer (PD) approved by the RBI, is a
strategic Joint Venture between Kotak Mahindra
Bank Limited and the Goldman Sachs Group, LLP. KMCC's core business
areas include Equity Issuances, Mergers & Acquisitions, Structured Finance
and Advisory Services, Fixed Income Securities and Principal Business.
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Kotak Securities
Kotak Securities Ltd., a strategic Joint Venture
between Kotak Mahindra Bank Limited and the
Goldman Sachs Group, LLP.is one of India's largest brokerage and
securities distribution house in India. Over the years Kotak Securities has
been one of the leading investment broking houses catering to the needs
of both institutional and retails investor categories with presence all over
the country through franchisees and co - coordinators. Kotak Street - the
retail arm of Kotak Securities Ltd., offers online (through
www.kotakstreet.com) and offline services well researched expertise and
financial products to the retail investors.
Kotak Mahindra Prime
Kotak Mahindra Primus Limited (KMP), is a
Joint Venture Between Kotak Mahindra Bank
Ltd and Ford Credit International Inc., (USA),
formed to finance all non-Ford passenger vehicles. KMP is one of the
country's leading players in car finance and is focused to financing and
supporting automotive and automotive related manufacturers, dealers and
retail customers.
Kotak Mahindra Old Mutual Life Insurance Limited
Kotak Mahindra Old Mutual Life Insurance Ltd. is a joint
venture between Kotak Mahindra Bank Ltd. and Old
Mutual plc. Kotak Life Insurance helps customers to take important financial
decisions at every in life by offering them a wide range of innovative life
insurance products, to make them financially independent.

Kotak International Business


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Kotak International Business specializes in providing a range of services to


overseas customers seeking to invest in India. For institutions and high net
worth individuals outside India, Kotak International Business offers asset
management through a range of offshore funds with specific advisory and
discretionary investment management services.
Kotak Mahindra Asset

Management Company Ltd. (KMAMC)


Kotak Mahindra Asset Management Company
offers a complete bouquet of asset
management products and services that
are designed to suit the diverse risk return
profiles of each and every type of

investor. KMAMC and

Kotak Mahindra Bank are the sponsors of

Kotak Mahindra

Pension Fund Ltd, which has been

appointed as one of six fund managers to manage pension funds under the
New Pension Scheme (NPS).
Kotak Private Equity Group
Kotak Private Equity Group helps nurture
emerging businesses and mid-size
enterprises to evolve into tomorrow's industry
leaders. With a proven track record of helping build companies, KPEG also
offers expertise with a combination of equity capital, strategic support and
value added services. What differentiates KPEG is not merely funding
companies, but also having a close involvement in their growth as board
members, advisors, strategists and fund-raisers.
Kotak Realty Fund

31

Kotak

Realty Fund deals with equity investments


covering sectors such as hotels, IT parks,
residential townships, shopping centers,
industrial real estate, health care, retail,
education and property management. The
investment focus here is on development
projects and enterprise level investments,
both in real estate intensive businesses.

Kotak Mahindra Bank Ltd


Kotak Mahindra Bank Ltd is a one stop shop for
all banking needs. The bank offers personal
finance
accounts to
life insurance

solutions of every kind from savings


credit cards, distribution of mutual funds to
products. Kotak Mahindra Bank offers

transaction banking, operates lending verticals, manages IPOs and provides


working capital loans. Kotak has one of the largest and most respected
Wealth Management teams in India, providing the widest range of solutions to
high net worth individuals, entrepreneurs, business families and employed
professionals

32

2.4 Products/ Service overview


1. SAVING ACCOUNT
Kotak Mahindra bank Savings Accounts
are

designed

to

ensure

that

the

customer receive the benefits of quick &


convenient banking transactions along
with options for money to earn high
returns.

Ace Savings Account


Pro Savings Account
33

Edge Savings Account


Corporate Salary Account
Nova Saving Account

2. Current Accounts
Kotak Mahindra Bank offers unparalleled advantages with its three
Current Account offerings. Whether a person has a small/ mid
size business or have an enterprise
spread across multiple locations in the
country, they would find a Current
Account

that's

just

designed

for

businessmen. With features ranging from


Free DDs, Free Cheque Collection, Free At-Par Cheque facility to
Free Trading Account & free Demat Account, and more.

Kotak Pro Plus Current Account


Astra 05 Current Account
Astra 25 Current Account
Global Trade Current Account

3. Loans and overdrafts


Kotak Mahindra Bank provides you loans accompanied by highly customised
facilities and services for a seamless and
pleasurable

experience.In a market where the

basic product is largely similar, the differentiator


is our ability to understand the customer's
need completely and structure the eligibility
and loan amount appropriately.

Car loan
Personal loan
Home loan
Education loan
5 loan against property
Loan against securities
34

Gold loan

4. Investments & Insurance

Risks and uncertainties are an unavoidable


part of life's design - death, accident and
illnesses are built into the working of the
universe, waiting to happen. Kotak
Mahindra

Bank

Ltd

offers

life

insurance policies of Kotak Mahindra Old Mutual Life Insurance Ltd to its
customers. These policies offer you protection from lifes uncertainties and
avenues to save for your long term financial goal.
5. NRI Account
Non Resident External Term Deposit is a tax free and fully
repairable Indian Rupee deposit account
opened by NRIs / PIOs to earn safe and
secured return from the income earned
through foreign sources.
Get Kotak NRE / NRO Term Deposits
and earn attractive returns.
Minimum amount required for booking
NRE

and

NRO

is Rs.50,000/- only.
Auto renewal of term deposits on maturity.
6. Working capital finance

35

Term

Deposit

Working Capital Finance

Each business has its own unique set of


requirements so we have a dedicated
team of experts who work with you to
understand the specific nature of your
business and structure solutions most
suitable for you. We offer complete bouquet
of working capital facilities to help you manage
your cash flow and ensure smooth running of your business.

Channel Finance

Every business needs appropriate finance options for growth and sustenance.
We, understanding this core need, provide end-to-end solutions for channel
partners/vendors of credible corporate dealing in FMCG, Healthcare,
Pharmaceuticals & Medical equipment, Industrial equipment, Textiles, IT,
Electronics, Engineering Goods and many more. Funding is provided to
channel partners to meet their Working Capital requirement of the goods
purchased from corporate
7. Convenience banking
Net Banking
SMS Banking
Kotak Payment Gateway
Mobile Banking
Immediate Payment Service
Unstructured Supplementary Service

Data (USSD)

Alerts
ATM Network
Phone Banking
Cash Deposit Machine
Cheque Deposit

8. Trade Services
36

Bank Guarantee
Experienced trade finance team that focuses on client requirements
Reduces your risks

InternationalImports
Tailor-made solutions to suit all your import needs
Experienced trade finance team that focuses on client requirements
Leverage our global network of correspondent banks

Domestic
Extensive range of trade-related services
Experienced trade finance team that focuses on client requirements
Tailor-made solutions to suit all your trading needs

InternationalExports
Tailor-made solutions to suit all your export needs
Experienced trade finance team that focuses on client requirements
Leverage our global network of correspondent banks

TREASURY PRODUCTS
At Kotak Mahindra Bank they understand the challenges and complexities
faced by corporations in managing cash flows.
Foreign Exchange
Kotak Mahindra Bank Ltd. have a state-of-the-art dealing room situated at
BKC, Mumbai. The dealing room handles inter-bank transactions and
corporate foreign exchange flows generated by the various branches.
37

Key Features

A state-of-the-art dealing room


Wide range of products and services

Products

Spot foreign exchange transactions (for value up to two business days)


Forward foreign exchange transactions (for value greater than two

business days)
Inward/outward remittances
Derivatives such as Options, Future Contracts, etc.

Services

Active dealings in the inter-bank market for major currencies, spot and

forwards
Quick and competitive dealing in prices in major currencies
Customised solutions for specific client exposures
Trading recommendations based on technical analysis
Regular fundamental analysis
Established correspondent banking relationships
FX Live is Kotak Mahindra Banks web-based foreign exchange trading
platform.

Money Market
Kotak Mahindra Bank Ltd. Money Market and Fixed Income Desk is an active
player in the Rupee markets and caters to the treasury requirements of clients
across the Inter-Bank, Co-operative bank, Corporate, Pension Fund and Trust
sectors.
With an active sales force in Mumbai, Delhi, Kolkata, Chennai, Bangalore and
Ahmedabad, banks are equipped to meet client requirements across the
country. Bank also offer the entire spectrum of services involved in the
origination and placement of corporate debt.
Key Features
38

Bank cater to the treasury requirements of clients across the InterBank, Co-operative bank, Corporate, Pension Fund and Trust sectors.

Bank also offer the entire spectrum of services involved in the


origination and placement of corporate debt.

Fixed Income Solutions

Short Term Needs: Purchase/ Sale of Treasury Bills, Commercial


Paper, Certificate of Deposits

Long Term Needs: Purchase/ Sale of government and corporate debt

Distribution Needs: Placement of debt issues

Depository Needs: Constituent SGL facility

Retail Needs: Purchase/Sale of instruments in smaller lots is also


offered

Derivative Solutions

Hedging Needs: Market maker in the Rupee interest rate swap market
in tenors tenure uptoup to 5 years

Benchmark PLR
The 'Benchmark PLR' of the Bank is 18.25% with effect from October
05, 2015
Base Rate of Kotak Mahindra Bank Ltd with effect from October 05,
2015: 9.50%

39

2.5 SWOT ANALYIS


SWOT analysis (alternatively SWOT matrix) is an acronym for strengths,
weaknesses, opportunities, and threatsand is a structured planning method
that evaluates those four elements of a project or business venture. A SWOT
analysis can be carried out for a company, product, place, industry, or person.

40

STRENGTHS
Innovative financial products of diverse categories
Kotak Mahindra Finance Ltd. is the first company in the Indian banking
history to convert to a bank
Comprehensive Cash Management System
Has over 20,000 employees
Customer account base of over 2.7 million

WEAKNESSES
Lesser penetration as being late entrants

41

Low publicity and marketing as compared to other premium banks in


the urban areas
OPPORTUNITIES
Increase in Industry banking
Explore opportunities abroad by International banking
THREATS
Economic slowdown
Highly competitive environment
Stringent Banking Norms

42

PART 2

RESEARCH WORK

3.1 Background of the Study


43

No one is original. Every one is derivative.


Sonny Rollins.
A derivative is a financial instrument whose value depends
on other, more basic, underlying variables. The variables
underlying could be prices of traded securities and stock,
prices of gold or copper.
Derivatives have become increasingly important in the field of finance.
Options and Futures are traded actively on many exchanges, Forward
contracts, Swap and different types of options are regularly traded outside
exchanges by financial institutions, banks and their corporate clients in what
are termed as over-the-counter markets in other words, there is no single
market place or organized exchanges.

Derivative Defined
A derivative is a product whose value is derived from the value of one or more
underlying variables or assets in a contractual manner. The underlying asset
can be equity, forex, commodity or any other asset.

The Forwards Contracts (Regulation) Act, 1952, regulates the forward/futures


contracts in commodities all over India. As per this Forward Markets
Commission (FMC) continues to have jurisdiction over commodity future
contracts. However when derivatives trading in securities was introduced in
2001, the term security in the Securities Contracts (Regulation) Act, 1956
(SCRA), was amended to include derivative contracts in securities.
Consequently, regulation of derivatives came under the purview of Securities
Exchange Board of India (SEBI). We thus have separate regulatory
authorities for securities and commodity derivative markets.

Types Of Derivatives
44

I.

FORWARD CONTRACT

A forward contract is an agreement to buy or sell an asset on a specified date


for a specified price. One of the parties to the contract assumes a long
position and agrees to buy the underlying asset on a certain specified future
date for a certain specified price. The other party assumes a short position
and agrees to sell the asset on the same date for the same price. Other
contract details like delivery date, price and quantity are negotiated bilaterally
by the parties to the contract. The forward contracts are normally traded
outside the exchanges.
Basic Features of Forward Contracts

They are bilateral contracts and hence exposed to counter-party risk.


Each contract is custom designed, and hence is unique in terms of

contract size, expiration date and the asset type and quality.
The contract price is generally not available in public domain.
On the expiration date, the contract has to be settled by delivery of the

asset.
If the party wishes to reverse the contract, it has to compulsory go to
the same counter-party, which often results in high prices being
charged.

However forward contracts in certain markets have become very


standardized, as in the case of foreign exchange, thereby reducing
45

transaction costs and increasing transactions volume. This process of


standardization reaches its limit in the organized future market. Forward
contracts are often confused with future contracts. The confusion is primarily
because both serve essentially the same economic functions of allocating risk
in the presence of future price uncertainty. However futures are a significant
improvement over the forward contracts as they eliminate counterparty risk
and offer more liquidity.
How it works (Example):
If you plan to grow 500 bushels of wheat next year, you could sell your wheat
for whatever the price is when you harvest it, or you could lock in a price now
by selling a forward contract that obligates you to sell 500 bushels of wheat to,
say, Kellogg after the harvest for a fixed price. By locking in the price now, you
eliminate the risk of falling wheat prices. On the other hand, if prices rise later,
you will get only what your contract entitles you to.
If you are Kellogg, you might want to purchase a forward contract to lock in
prices and control your costs. However, you might end up overpaying or
(hopefully) underpaying for the wheat depending on the market price when
you take delivery of the wheat.

46

II.

FUTURE CONTRACT

In finance, a futures contract is standardized contract, traded on a futures


exchange, to buy or sell a certain underlying instrument at a certain date in
the future, at a pre-set price. The future date is called the delivery date or final
settlement date. The pre-set price is called the futures price. The price of the
underlying asset on the delivery date is called the settlement price. The
settlement price, normally, converges towards the future price on the delivery
date.
A futures contract gives the holder the right and the obligation to buy or sell,
which differs from an options contract, which gives the buyer the right, but not
the obligation, and the option seller the obligation, but not the right. To exit the
commitment, the holder of a futures position has to sell his long position or
47

buy back his short position, effectively closing out the futures position and its
contract obligations. Futures contracts are exchange traded derivatives. The
exchange acts as a counterparty on all contracts, sets margin requirements,
etc.

BASIC FEATURES OF FUTURE CONTRACT

1. STANDADIZATION
Future contracts ensure their liquidity by being highly standardized, usually by
specifying:

The underlying. This can be anything from a barrel of sweet crude oil to

a short term interest rate.


The type of settlement, either cash settlement or physical settlement.
The amount an units of the underlying asset per contract. This can be
the notional amount of bonds, a fixed number of barrels of oil, units of
foreign currency, the notional amount of the deposit over which the

short term interest rate is traded, etc.


The currency in which the futures contract is quoted.
The grade of the deliverable. In case of bonds, this specifies which
bonds can be delivered. In case of physical commodities, this specifies

48

not only the quality of the underlying goods but also the manner and

location of delivery. The delivery month.


The last trading date.

2. Margin
Although the value of a contract at time of trading should be zero, its price
constantly fluctutates. This renders the owner liable to adverse changes in
value, and creates a credit risk to the exchange, who always acts as
counterparty. To minimize the risk, the exchange demands that contract
owners post a form of collateral, commonly known as Margin requirements
are waived or reduced in some cases for hedgers who have physical
ownership of the covered commodity or spread traders who have offsetting
contracts balancing the position.
Initial Margin: is paid by both buyer and seller. It represents the loss on that
contract, as determined by historical price changes, which is not likely to be
exceeded on a usual days trading. It may be 5% or 10% of total contract
price.
Mark to market Margin: Because a series of adverse price changes may
exhaust the initial margin, a further margin, usually called variation or
maintenance margin, is required by the exchange. This is calculated by the
futures contract, i.e. agreeing on a price at the end of each day, called the
settlement or mark-to-market price of the contract.
To understand the original practice, consider that a futures trader, when taking
a position, deposits money with the exchange, called a margin. This is
intended to protect the exchange against loss. At the end of every trading day,
the contract is marked to its present market value. If the trader is on the
winning side of a deal, his contract has increased in value that day, and the
exchange pays this profit into his account. On the other hand, if he is on the
losing side, the exchange will debit his account. If he cannot pay, then the
margin is used as the collateral from which the loss is paid.
3. Settlement

49

Settlement is the act of consummating the contract, and can be done in one of
two ways, as specified per type of futures contract:

Physical delivery the amount specified of the underlying asset of the


contract is delivered by the seller of the contract to the exchange, and
by the exchange to the buyers of the contract. In practice, it occurs only
on a minority of contracts. Most are cancelled out by purchasing a
covering position that is, buying a contract to cancel out an earlier
sale covering a long short, or selling a contract to liquidate an earlier

purchase (covering a long).


Cash settlement a cash payment is made based on the underlying
reference ratio, such as short term interest rate index such as Euribor,
or the closing value of a stock market index. A future contract might
also opt to settle against an index based on trade in a related spot
market.

Expiry is the time when the final prices of the future are determined. For
many equity index and interest rate future contracts, this happens on the
Last Thursday of certain trading month. On this day the t+2 futures
contract becomes the t forward contract.

50

TABLE 1DISTINCTION BETWEEN FUTURES AND FORWARDS CONTRACTS


FEATURE
Operational

FORWARD CONTRACT
Traded directly between

FUTURE CONTRACT
Traded on the

Mechanism

two parties (not traded on

exchanges.

Contact specification

the exchanges).
Differ from trade to trade.

Contract are

Exists.

standardized contracts.
Exists. However,

Counter party risk

assumed by the clearing


corp, which becomes the
conter party to all the
traded or unconditionally
guarantees their
Liquidation profile

Price discovery

Low, as contracts are tailor

settlement.
High, as contracts are

made contracts catering to

standardized exchange

the needs of the needs of

traded contract.

the parties.
Not efficient, as markets

Efficient, as markets are

are scattered.

centralized and all


buyers an sellers come
to a common platform to

Examples

Currency market in India.

discover the price.


Commodities, futures,
Index Futures and
Individual stock Futures
in India.

OPTIONS

51

A derivative transaction that gives the option holder the right but not the
obligation to buy or sell the underlying asset at a price, called the strike price,
during a period or on a specific date in exchange for payment of a premium is
known as option. Underlying asset refers to any asset that is traded. The
price at which the underlying is traded is called the strike price.

There are two types of options i.e., CALL OPTION & PUT OPTION.

CALL OPTION

A contract that gives its owner the right but not the obligation to buy an
underlying asset-stock or any financial asset, at a specified price on or before
a specified date is known as a Call option. The owner makes a profit
provided he sells at a higher current price and buys at a lower future price.

PUT OPTION
A contract that gives its owner the right but not the obligation to sell an
underlying asset-stock or any financial asset, at a specified price on or before
a specified date is known as a Put Option. The owner makes a profit he buys
at a lower current price and sells at a higher future price. Hence, no option will
be exercised if the future price does not increase.

Put and calls almost written on equities, although occasionally preference


shares, bonds and warrants become the subject of options.

EXCHANGE TRADED V/S OTC DERIVATIVES MARKET


52

The OTC derivatives markes have witnessed rather sharp growth over the last
few years, which has accompanied the modernization of commercial and
investment banking and globalization of financial activities. The recent
developments in information technology have contributed to agreta extent to
these developments. While both exchange-traded and OTC derivatives
contracts offer many benefits, the former have rigid structures compare to the
latter. It is known that highly leveraged institutions and their OTC derivative
positions were the main cause of turbulence in financial markets in 1998.
These episodes of turbulence revealed the risks posed to market stability
originating in features of OTC derivative instruments and markets.
The OTC derivatives markets have the following features compared to
exchange-traded derivatives:

The management of counter-party risk is decentralized and located

within individual institutions.


There are no formal centralized limits on individual positions, leverage,

or margining.
There are no formal rules for risk and burden-sharing.
There are no formal rules or mechanisms for ensuring market stability
and integrity, and for safeguarding the collective interests of market

participants, and
The OTC contracts are generally not regulated by a regulatory
authority and the exchanges self-regulatory authority and the
exchanges self-regulaoty organization, although they are affecte
indirectly by national legal systems, banking supervision and market
survellience.

FACTORS CONTRIBUTING TO THE GROWTH OF DERIVATIVES


Price Volatility
Globalisation of Markets
Technological Advances
Advances in Financial Theories

BENEFITS OF DERIVATIVES
53

Risk Management
Price Discovery
Operaional Advantages
Market Efficiency
Ease of Speculation

DERIVATIVES AT GLANCE WITH KMBL


SERVICES OFFERED
GLOBAL TRADE CURRENT A/C
Presenting the Kotak Global Trade Current Account, power-packed with
exclusive features that can make a tremendous difference to the way you do
business.
FEATURES & BENEFITS
1. A dedicated team of well experienced officers in Trade and Forex
2. Wide network of branches covering all major locations/industrial
clusters
3. Large network of correspondent banking relationship across the globe
4. Online FX Rate booking system (FX Live) offers booking of FX rates at
your convenience

54

HOW IT WORKS

EA
D
N
K
C
L
D
E
L
W
O
TR
N
E
M
G
T
IP
C
E

EA
D
N
K
C
L
D
E
L
W
O
TR
N
E
M
G
T
IP
C
E

IV
L
X
F
IT
S
E

U
Q
E
R
R
P
A
T
S
E
IC

EQ
R
TA
S
E
U
E
IC
R
P

C
A
TR
P
E
C
E
IC

5. E-banking platform provides information on outstanding bills/ credit


limits online
6. Tracking mechanism of the deals booked (Auto e-deal confirmation)
7. E-advices facilitate timely accounting and reconciliation
8. E-SWIFT to provides faster communication with your overseas
business partner
9. Capital Account Transactions: The trade team is well equipped to
handle your Capital Account transactions, advice the clients on
regulatory aspects on Foreign Direct Investment (FDI) and the
Investment abroad in JV/WoS.
55

L/C & BG
Letters of Credit
Backed by the strong trade finance set-up, we offer import financing services
through Letters of Credit (L/C), which are well accepted globally. Our trade
team is equipped to structure the solutions for a variety of purchase
requirements.

Bank Guarantees
To facilitate growth in trade and commerce and promote project exports, we
offer wide range of guarantees (both inland and foreign), that addresses
varying client requirements and risk profiles.
These include

Performance guarantee

Financial guarantees

Bid bonds

Import & Export Services


Import services
Our Import services help you grow your business cost effectively and
efficiently, through arrangements with a number of foreign banks.
Products & Services Offered

Issuance of Letters of Credit

Handling of advance import bills

56

Handling of direct import payments

Handling of bank to bank collection documents

Arrangement of Buyer's Credit

Key Features

Our LCs are globally accepted

Trade Finance support by an experienced team

Quicker turnaround times and smooth processing of documents

A wide global network giving a competitive edge in multi-currency


payments

Export Services
Our export products/services facilitate hassle-free handling of transactions
and faster turn-around time for effective utilisation of funds.
Products & Services Offered

EEFC Accounts

Handling of advance exports

Exports bills collections

Pre & post-shipment financing

Advising & confirmation of export Letters of Credit

Key Features

57

Smooth processing of documents giving faster turnaround times

Diligent payment follow-ups for faster recovery of receivables

Established correspondent banking relationship for smooth flow of


funds

Large network of correspondent banking relationship across the globe

Other Remittances Inward/Outward


We understand the criticality of faster credit of inward remittances and hence
offer convenient modes of operations for quick and hassle free transactions
processing. The facility is extended through arrangements with reputed,
correspondent banks located in all major countries across the world. The
team is well trained to handle all such transactions and the system is
automated so that the details of credit/debit and the swift copy are sent to you
by mail.
Services Offered
1. Other remittances like agency commission
2. Freight charges
3. Royalty & technical know-how
4. Dividend payments
5. Other miscellaneous remittances
Key Features

Swift messages to your mail box

Automated credit/debit advices

One time standing instruction for repeated nature of payments


58

Fees & Charges


QTP USD 50K
Product / Service / Particulars

Exim Pro /
Classic

Inward Remittance
FIRC

FREE
FREE
59

QTP USD 100


K Exim Elite
FREE
FREE

QTP USD
250 K
Exim Ace
FREE
FREE

BRC
Exports - Collection Bills (LC/NonLC)

FREE
Rs. 400 per bill

Advance Export Bills

Rs. 400 per bill

Non Trade Outward Remittances

Rs. 400 per bill

Advance Payments for Imports

Rs. 400 per bill

Direct Import Bills

Rs. 400 per bill

Import Bills for Collection


(LC/Non-LC)

Rs. 400 per bill

Swift Charges
Courier Charges
Registered Post Charges
Export LC Advising

FREE
FREE
FREE
FREE

GR Release

Rs. 400 per bill

FREE
Rs. 300 per

FREE
Rs. 200

bill
Rs. 300 per

per bill
Rs. 200

bill
Rs. 300 per

per bill
Rs. 200

bill
Rs. 300 per

per bill
Rs. 200

bill
Rs. 300 per

per bill
Rs. 200

bill

per bill

Rs. 300 per

Rs. 200

bill

per bill

FREE
FREE
FREE
FREE
Rs. 300 per

FREE
FREE
FREE
FREE
Rs. 200

bill

per bill

Rs. 3000

Rs. 5000

Charges for not routing committed


volume or not maintaining AQB

Rs. 1500

(NMC will be charged)

Terms and Conditions

The above pricing is offered on the basis of Average Quarterly


Through-put (QTP) of USD 50K/100K/250K (or its equivalent in other
currencies) respectively for Global Trade Current Account Pro/Classic,
Elite, Ace

Bank has the option to discontinue/amend this pricing, any time in


future, by giving 30 days' notice.

60

SAMPLE OF SUBSCRIPTION FORM

61

62

SAMPLE OF CERTIFIED TRUE COPY FOR ENTERING INTO


DERIVATIVES WITH KMBL

3.2 Review Of Literature

63

literature review is a text of a scholarly paper, which


includes the current knowledge including substantive
findings, as well as theoretical and methodological
contributions to a particular topic. Literature
reviews are secondary sources, and do not
report new or original experimental work.
RAVICHANDRAN, D. K. (2008, July-Sep).,"A Study On Investors

Preferences Towards Various Investment Avenues in Capital Market With


Special Seference to Derivatives", Journal of Contemporary Research in
Management studied Investors Preferences towards various investment
avenues in Capital Market with special reference to Derivatives. The study
shows that in the current scenario, investing in stock markets is a major
challenge ever for professionals. Derivatives acts as a major tool for reducing
the risk involved in investing in the stock marketsfor getting the best results
out of it. The study also focuses that investors should be aware of the various
hedging and speculation strategies, which can be used for reducing their risk.
Awareness regarding various uses of derivatives can help investors to reduce
risk and increase profits.

Pasha, D. S. (2013).,"Retail Investors Percption On Financial Derivatives


In India, European Scientific Journal, 9 (22). Studied Retail investors
perception on financial derivatives in India. It is found that 55 percent of the
small investors (respondents) are of the opinion that derivatives are new,
complex, and high-tech products. 38 percent of the respondents, who are
familiar with derivatives, said derivatives are not new, complex, and high
tech products. And the remaining 7 percent of the investors could not answer
the question. This shows that a large number of investors are not familiar with
derivatives. The study also found that 62 percent of the small investors are of
the opinion that derivatives are purely speculative and highly leveraged
instruments.
Tripathi, G. (2014).,"An Empirical Investigation of Investors Perception
Towards

Derivative

Trading",

Global
64

Journal

of

Finance

and

Management., 6(2), 99-104 Studied Investors Perception towards Derivative


Trading. The study shows Indian investors mainly invest their money in real
estates and insurance as they are the options offering great returns with
minimum risk associated with it. It is found that more than 75 percent of
investors are aware about derivatives, out of which 74 percent have invested
in derivatives. Most of the users often invest 10 percent 20 percent of their
total investment in derivatives followed by users who invest 20 percent 35
percent of their total investment in derivatives. Out of derivative users 76
percent investors have invested in options which offer benefits like risk
diversification and promises their investors great profits with minimum
investment. The study concluded that derivative market is dominated by male
investor with 72 percent whereas female investors are only 28 percent.

DR. Y. NAGARAJU, S. R. (2014).,"A Study on Investors' Perception


Towards Derivative Instruments and Markets", International Journal of
Research In Commerce, Economics & Management, 4(7). Studied
investors' perception towards derivative instruments and markets. The study
shows that even though most people look at derivatives with fear, they should
understand the fact that derivatives help in shifting the risk to the other party.
There are many myths that surround derivative market. All these can be done
away with proper system in place. Today institutional investors do most of the
derivative transactions. It is very important that even individual investors
participates in the derivative market actively and reap the benefits from it.
After this study it is clear that derivative instruments and derivative markets
are not so popular among individual investors. Only educated investors with
the help of friends and brokers are investing in this market. The reasons for
not investing in this market are lack of knowledge and very complex nature of
instruments. Some people have a wrong perception about derivatives. The
study suggests that measures should be taken to make sure that the investors
get a right picture of the instruments and their risk factors.
3.3 Statement of problem

65

The global liberalization and integration of financial markets have created new
investment opportunities, which in turn require the development of new
instruments that are more efficient to deal with increased risks. The most of
desired instruments that allow market participants to manage risk in the
modern securities trading are derivative instruments. The main logic behind
trading is that derivatives reduce risk by providing additional channel to invest
with lower trading cost and it facilitates the investors to extend their settlement
through the future contracts. They provide extra liquidity. In India, exchange
traded financial derivatives were introduced in the year 2000. But even after
16 years the institutional investors are actively engaged in this market. Only
limited IMPORTERS - EXPORTER trade actively in this market.

3.4 Objective Of The Study

66

To understand the concept of Financial Derivatives (FUTURE &


FORWARD CONTRACTS, OPTIONS)
Perception of investors regarding derivatives.
To know which instrument of derivative is mostly used by IMPORTERS
EXPORTERS in RAJKOT CITY.

3.5 CONTRIBUTION AND LEARNINGS

67

The project covers the derivatives market and its instruments. For
better understanding various strategies with different situations and
actions have been given. It includes the data collected primarily.
There is not much awareness of the derivative concept in the market.
Many investors dont use the instrument as they find it quite risky.
The data analysis further shown proves that FUTURE & FORWARD
CONTRACTS are mostly dealt with rather than OPTIONS as it reduces
the burden of paying premium.

4 RESEARCH METHODOLOGY

68

4.1 Research Design

69

The research design refers to the overall strategy that you choose to
integrate the different components of the study in a coherent and logical way,
thereby, ensuring you will effectively address the research problem; it
constitutes the blueprint for the collection, measurement, and analysis of data.
In research design I collected data from people who are dealing core into
IMPORTS & EXPORTS.
Design types and sub-types

Descriptive (e.g., case-study, naturalistic observation, Survey)

Correlational (e.g., case-control study, observational study)

Semi-experimental (e.g., field experiment, quasi-experiment)

Experimental (Experiment with random assignment)

Review (Literature review, Systematic review)

In this report, Descriptive study is suitable.


Research Design : Descriptive Studies. A descriptive study is one in which
information is collected without changing the environment (i.e., nothing is
manipulated). Sometimes these are referred to as correlational or
observational studies.

70

4.2 Sampling Method


Sampling methods are classified as either probability or non probability.
In probability samples, each member of the population has a known nonzero probability of being selected. Probability methods include random
sampling, systematic sampling, and stratified sampling.
For this research, sampling method is convenience sampling method.
In convenience sampling, sample elements are selected based on the
convenience of a research and the researcher includes sample which are
readily available. In this research, samples has been selected which are
nearby bank area where people are responsive and friendly.

71

4.3 Sampling Size


Sample size refers to total number of samples used for the study. Here, for
this study, I have done research on 90 people who are into IMPORT
EXPORT business.

72

4.4 Sources of data


There were mainly two sources of data collection

Primary data
Through structured questionnaire

Secondary data
Websites
Published articles
Journals
Through internet, various official sites of the Bank.
Data used for study is primary sources of data as in this study data are
collected with the help of questionnaire by the respondents.

73

4.5 Data Collection Method


Data is being collected through questionnaire.
Type of Data Primary data
Data collection Method Questionnaire
Data is collected from various company through personal interaction. Specific
questionnaire is prepared for collecting data. Data is collected with more
interaction and formal discussion with Small and medium enterprises.

Type of Data Secondary data


Data collection Method Through using various website.

74

4.6 Data Collection Instrument


Instrument used for the purpose of data collection in this study is structured
researchers administered questionnaire. Questionnaire is the data collection
instrument through which data related to study are collected from respondent
in order to reach the conclusion. This is the simplest and effective way for
collecting the data.
Questionnaire
A questionnaire consists of questions presented to the respondents for their
answers. Because of its flexibility, the questionnaire is by far the most
common instrument used to collect primary data.
In our study, the questionnaire contained both open-end and close-end
questions depending upon the type of information to be gathered.
The research was conducted to fill up questionnaire by personally meeting
with the customers in Rajkot City.
4.7 Model Specification / Data Processing
For this research I used MS-word, MS-excel and Google form

75

5
ANAYSIS &
INTERPRETATION OF DATA
Analysis and Interpretation.
The process by which sense
and meaning are made of the
data gathered in qualitative
research, and by which the
emergent knowledge is applied
to clients' problems.

76

1. Which bank are you currently associated with?


Name Of Bank
KOTAK MAHINDRA BANK
STATE BANK OF INDIA
AXIS
HDFC
YES
INDUSLND BANK
UNION BANK O INDIA
BANK OF BARODA
CANARA BANK
ICICI
DENA BANK
STANDARD CHARTERED
BANK OF INDIA
CENTRAL BANK OF INDIA
CORPORATION BANK

Response
24
15
6
32
3
4
5
6
2
8
7
4
6
5
7

RESPONSE
RESPONSE
5
4

2
3

7
6

6
6

32
15

24

INTERPRETATION The above analysis shows a clear trend trending towards


private sectors in which KOTAK and HDFC are dominating.

77

2. What kind of account do you maintain in this bank?


ACCOUNTS
Current account
Saving account
CC/OD account
Global Trade account
Any Other

NO OF RESPONSES
26
32
4
18
9

Response
Response
Any Other

GT
CC / OD

18
4

Saving

32

Current

26

INTERPRETATION
The survey which i conducted shows the trend that people are still more
dealing more into current a/c. There is a very less knowledge of Global Trade
a/c within the city.

3. Are you trading in derivative market?


78

OPTIONS
YES
NO

RESPONSE
43
21

RESPONSE

NO; 33%

YES; 67%

Interpretation
With the 90 surveys done, only 64 people knew about derivatives of out of
which approx 67% are people dealing with the instrument.

4. If No is the reply in the Q3 question, reason for not investing in


derivative market?

79

OPTIONS
Lack of knowledge
Lack of awareness
Very risky / counter party risk
Huge amount of investment
Other

RESPONSE
2
3
9
5
2

Response
10
9
8
7
6
5
4
3
2
1
0

Response

Interpretation
The people who are no dealing with the instrument say they ound it more
risky to be in the contract. And, many parties are dealing without
derivatives on mutual relations.

5. Which of the following Derivative instruments do you deal in?


OPTIONS
Future Contract
Forward Contract

RESPONSE
16
9
80

Stock Options
Swaps

14
4

Reponse

Swaps; 9%
Future; 37%
Stock Option; 33%

Forward; 21%

Interpretation
Its clear from the graph that people are more into Future Contracts as they
can save themselves from paying off premiums, if they deal in options.

6. Are you satisfied with the current performance of the derivative


market?
OPTIONS
Do Not Trade
Strongly Disagree
Disagree
Neutral

RESPONSE
21
9
15
13
81

Agree
Strongly Agree

10
22

Response
Response
22

21
15

13
10

Interpretation
The results are very neutral. Though the scenario is changing and people are
much trending towards dealing in derivatives.

7. Are you aware with benefits that Kotak provides in regards to


Derivatives?
OPTIONS
YES
NO

RESPONSE
30
34

82

Reponse
35
34
33
32
31
30
29
28

YES

NO

Interpretation
We are all aware with the reputed name KOTAK MAHINDRA BANK and its
emerging as one of the best. And , many importers exporters are dealing
with the HEDGING instrument through KMBL.

8. Would you like to know about products of Kotak Mahindra Bank?


OPTIONS
YES
NO

RESPONSE
52
38

83

60
52
50
38

40
30
20
10
0

YES

No
Response

Interpretation
The respondents are very much aware with the benefits Kotak Bank is
providing.

9. Would you want to switch to Kotak Mahindra Bank in Future?


OPTIONS
Definitely would switch
Probably would switch
Might switch
Probably wouldnt switch
Definetely wouldnt

RESPONSE
21
17
18
12
22
84

25

22

21
20

17

18

15

12

10
5
0

Response
Definitely would switch

Probably would switch

Probably wouldnt switch

Definetely wouldnt

Might switch

Interpretation
Due to the huge cut throat competitions amongst banking, responses of
switching to KOTAK BANK are more sound. Due to recent merger of ING
KOTAK, KMBL is growing with a good pace.

6 Results & Findings


From the above analysis it can be concluded that:
Derivative market is growing very fast in the Indian Economy.
Many of the respondents are trading in derivative market.
Those who are not trading, found the derivatives very risky .
37%, 21%, 33%, 9% trade in Future, Forward, Stock Options and
Swaps respectively.
85

After analyzing data it is clear that the main factors that are driving the
growth of Derivative Market are Market improvement in communication
facilities as well as long term saving & investment is also possible
through entering into Derivative Contract. So these factors encourage
the Derivative Market in India.
It encourages entrepreneurship in India. It encourages the investor to
take more risk & earn more return. So in this way it helps the Indian
Economy by developing entrepreneurship. Derivative Market is more
regulated & standardized so in this way it provides a more controlled
environment. In the nutshell, we can say that the rule of High Risk &
High Return apply in Derivatives. If we are able to take more risk then
we can earn more profit under derivatives.

7 Suggestions & Conclusions


It can be concluded from the above study that most of the investors invest in
derivative market on the basis of their own awareness, guidance from
financial advisor and broker. Investors give more preference to some factors
such as hedging fund, risk control, their own knowledge regarding financial
product, and high volatility in the market etc. while taking decision to invest in
derivatives.
Suggestions

86

Kotak Mahindra Bank Ltd is a renowned name in the banking sector. To


grow in trade department, Bank must lessen its charges.
There must be limits for collateral as other players in the industry are
providing collateral limits which are than more preferred by investors.
Brief knowledge about how to deal in derivative instruments must be
given.
Conclusions
Derivative market should be developed in order to keep it at par with
other derivative markets in the world.
Speculation should be discouraged.
There must be more derivative instruments aimed at individual
investors.

8 Limitations of the Study


1. Limited Time
The time available to conduct the study was 45 days. It being a wide topic had
a limited time.
2. Limited Resources
Limited no of IMPORTERS EXPORTERS are available to collect the
information about the commodity trading.
3. Volatility
87

Market is so much volatile and it is difficult to forecast any thing about it.
4. Aspects Coverage
Some of the aspects may not be covered in my study.

9 Scope For Further Research


Yes there is a scope for further future enlarged research.
This study is the foundation stone for carrying out further research in the field
of derivative market. This preliminary research work can help to open up
many new dimensions for researchers. Although the objective taken in
research study is diverse, yet a trend can be observed from the findings for
future research work.
Time was major constraint during the whole project work; one can
spend more time for the better analysis.
88

Data collection instrument in the project report is questionnaire for the


further studies; to know the better views of customers one can go for
personal interview, telephonic interview etc. of the customers.

10 Bibliography
BOOK REFERRED
John C. Hull (May 2016) (9 th Edition) Options, Futures & Other
Derivatives , Wiley India Pvt Ltd

Websites

www.kotak.com
www.derivativesindia.com
www.investopedia.com
www.economictimes.com
89

JOURNALS

RAVICHANDRAN, D. K. (2008) A Study On Investors Preferences


Towards Various Investment Avenues in Capital Market With Special
Seference to Derivatives", Journal of Contemporary Research in

Management
Pasha, D. S. (2013) Retail Investors Percption On Financial

Derivatives In India, European Scientific Journal, 9 (22).


Tripathi, G. (2014) "An Empirical Investigation of Investors Perception
Towards Derivative Trading", Global Journal of Finance and

Management., 6(2), 99-104


DR. Y. NAGARAJU, S. R. (2014) "A Study on Investors' Perception
Towards Derivative Instruments and Markets", International Journal of
Research In Commerce, Economics & Management, 4(7)

ANNEXURE
QUESTIONNAIRE ON DERIVATIVE INSTRUMENT USED BY
1 Basic Information
Name:
Name of the firm:
Type of firm:
Contact no.
2 Which bank are you currently associated with?
a.

b.

Other.

3 What kind of account do you maintain in this bank?


90

Current account
Saving account
CC/OD account
Demat account
Global Trade account
Loan account
Trinity Account
Any Other

4 Are you trading in derivative market?


Yes No
5 If No is the reply in the Q4 question, reasons for not investing
in derivative market?
Lack of knowledge
Lack of awareness
Very risky / counter party risk
Huge amount of investment
Other
6 Which of the following Derivative instruments do you deal
in?
Future Contract
Forward Contract
Stock Options
Swap
Currency

91

7 Are you satisfied with the current performance of the


derivative market?
Do Not Trade
Strongly Disagree
Disagree
Neutral
Agree
Strongly Agree
8 Are you aware with benefits that Kotak provides in
regards to Derivatives?
Yes No

9 Would you like to know about products of Kotak


Mahindra Bank?
Yes No
10 Would you want to switch to Kotak Mahindra Bank in
future?
Scale

Description

Definetely

Probably

Might

Probably

Definetely

would

would

switch

wouldnt

wouldnt

switch

switch

switch

switch

92

93

94

95

96

97

98

99

100

101

102

103

104

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