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This is to certify that Mr. Praveen Kumar Shetty is a student of Final Year B. B. M. 2007-08 of this institution. This project report has Titled “A PROJECT by REPORT in ON LTD., partial PERFORMANCE EVALUATION OF KARNATAKA BANK MANGALORE” been prepared him
fulfillment for the requirement of the Bachelors Degree in Business Management, to be submitted to Mangalore University, under the supervision and guidance of Ms. MAMATHA, Lecturer, Department of Commerce and Business Management.
Head of the Departm ent of Com m erce and Business Managem ent
Date: Place: Kundapura
BHANDARKARS’ ARTS AND SCIENCE COLLEGE, KUNDAPUR
I Mr. PRAVEEN KUMAR ARTS SHET TY, a student of
KUNDAPUR, Final Year
B. B. M. 2007-08 do hereby
declare that this project report Titled “ A PROJECT REPORT
ON PERFORMANCE EVALUATION OF KARNATAKA BANK LTD., MANGALORE ” is my original work and that it has not
previously formed the basis for the reward of any Degree / Diploma or other similar title. This project is been prepared by me in partial fulfillment for the requirement of the Bachelors Degree in Business Management, to be submitted to Mangalore University, under the supervision and guidance of Ms. MAMATHA, Lecturer, Department of
Commerce and Business Management.
Date: Place: Kundapura (MR. PRAVEEN KUMAR SHETTY)
Name of the organization : Methodology : Data collection is a step in the preparation of project report. The information is collected in the following manner. Primary Sources : Data is collected by the interacting with the bank Managers and Officers. Secondary Sources : The data is collected for report by various records maintained and standing orders of the banks which help us for preparing this reports. A lot of data were also collected by referring to magazines and news paper, annual reports of bank. Objectives : To study the loans and advances of the bank. To study the evaluation and performance of the bank. To study the all financial statement. To study the source of finance of the bank. To study the history of the bank. Karnataka Bank Ltd. Mangalore
I am very much beholden to Mangalore University for this wonderful opportunity to undertake the Project Study as a part of the fulfillment of Bachelor’s Degree in Business Management. My grateful thanks are due to Prof. Narayan Rao. The Principal, Bhandarkar’s Arts and Science College for extending the necessary support in the preparation of this project. A particular word of thanks is due to Prof. Shantharam, H.O.D. of Commerce and Business Management and other faculty members for their useful tips and encouragement. My esteemed guide, Ms. Mamatha, Lecturer in Business Management, deserves all appreciation and thanks for patiently and efficiently guiding me throughout the preparation of this project. I thank Mr. V.S.N. Karanth, Deputy General Manager, K. Manoha,Chief Manager Mr. Sham Bhat, Manager and Ms. Sudha, Officr Karnataka Bank Ltd. for giving me the opportunity to do my summer training at their organization.I am extremely grateful to Mr. Vijay Shanker Rai, AGM, Karnataka Bank Ltd. Mumbai, for his words of wisdom, encouragement and the interest he had to make
the summer training an interesting and educative one .And I also thank all the other employees of Karnataka Bank Ltd. for providing me with valuable in-house as well as other information required for the Project and most of all for their support and cooperation. Last but not least I thank Bhats Telecom Centre, Kundapura for helping me in typing and printing.
Mr. Praveen Kumar Shetty
Reg. No. 040070086
Under The Guidance of Ms. MAMATHA, Lecturer,
Department of Commerce and Business Management
Project Report submitted to Mangalore University in partial fulfillment for the requirement of the Bachelor’s Degree in Business Management.
BHANDARKARS’ ARTS AND SCIENCE COLLEGE, KUNDAPUR
CONTENTS 1.Industry Profile 2.Company Profile 3.Products and Services Profile 4.Schemes Evolved by Karnataka Bank Ltd. 5.Subsidiary Services of Karnataka Bank 6.Annexure 7.Conclusion 8.Bibliography 1-7 8-20 21-62 63-66 67-72 73-81 82-83 84
Money lending in India is an age old profession with a history of about 200 years. In the late 18th century, Tippu Sulthan, was accredited to have conceived the idea of organising banking as a part of state machinery for extending credit facilities to the needy at an affordable rates. At the end of late18th century, there were hardly any bank in India in the modern sense of the term. At the time of the American Civil War, a void was created as the supply of cotton to Lancashire stopped from the American’s. Some banks were opened at that time which functioned as entities to finance industry, including speculative trades in cotton. With large exposure to speculative ventures, most of the banks opened in India during that period could not survive and failed. The depositors lost money and lost interest in keeping deposits with banks. Subsequently, banking in India remained the exclusive domain of Europeans for next several decades until the beginning of the 20th century. The first bank which was established in India was General Bank of India which came into existence in 1786 which was followed by the Bank of Hindustan. Both these banks are now defunct. The oldest bank in existence in India is the State Bank of India being established as "The Bank of Bengal" in Calcutta in June 1806. A couple of decades later, foreign banks like Credit Lyonnais started their Calcutta operations in the 1850s. At that point of time, Calcutta was the most active trading port, mainly due to the trade of the British Empire, and due to which banking activity took roots there and prospered. The first fully Indian owned bank was the Allahabad Bank, which was established in 1865. By the 1900s, the market expanded with the establishment of banks such as Punjab National Bank, and Bank of India, in 1906, both of which were founded under private ownership. The Reserve Bank of India formally took over the responsibility of regulating the Indian banking sector from 1935. After India's independence in 1947, the Reserve Bank was nationalized and was given broader powers. .
The English word bank is derived from the Italian word “Banaco”, the Latin word “Baacus” and the French word “Banque” which means a bench. The word is also derived from the German word “Bank”, which means a joint stock company fund (i.e. heap money), rose from a large number of members of the public. Bank in one from or another was in existence even in ancient times. The writings of Manu (the maker of old Hindu law) and Kautilya (the minister of Chandragupta Maurya) and the teachings of Christ contained references to banking activities in Babylonia much before Christ. However modern banking is of recent origin. It came into existence only after the industrial revolution. After the industrial revolution, with the increase in the size of industrial and business units, joint stock company form of business organization came into existence. This form of organization encouraged people with small incomes to become shareholders of big industrial and business enterprises .Still, there were certain section of the public who were not prepared to invest their money on the shares of joint stock companies. But they were willing to part with their surplus money, if they were assured of the repayment of their money with some interest thereon. So, naturally there arose the need for the formation of financial institution that could collect the surplus funds of the people on terms acceptable to them and make them available to the needy for productive purpose.
A Banking company in India has been defined in the Banking companies Act, 1949 as “ Which transacts the business of Banking, which means accepting for the purpose of lending or investment, of deposits of money from the public repayable on demand or otherwise and with draw able by Cheques, drafts, orders or otherwise”.
Indian Banking Regulation Act
Sec 5(1) of the Indian Banking Regulation Act of 1949 defines the ‘Banking Company’ as “Any company which transacts the business of Banking”.
Business of Banking
Banking is a business and like any other business the aim is the maximisation of profits through customer service. The two main products are Deposits and Loans. On Deposits it pays interest whereas on Loans it charges interest and the rate on Deposits is always lower than the rate of Loans. The difference between these two constitutes the banks income. Banking is a business but profiteering is absent here. It is a unique business of pooling together the savings of the community scattered all over and from the very same pool granting loans to the needy in the society. Thus it acts as a link between the savers and the needy. This unique service is often called public utility service. In the common man’s parlance it is definitely a social service.
Banking is a business but it differs from other business in many respects. This business runs purely on the confidence of the members of the general public called the depositors who entrust their savings solely out of their confidence and trust that they will get back their money with interest whenever they need. So long as there is confidence on the bank in this way, the deposits will come to the bank. Similarly in case of loan. While giving, the bank reposes full trust and confidence on the Borrower that he will repay the same with interest. There could be security documents undertaking to repay anytime on demand by the bank and collateral securities for any eventuality. But the documents and securities are only collateral and secondary and the main consideration is only the confidence. Thus in both the cases of deposits and advances, confidence pays a vital role.
The partition of India in 1947 had adversely impacted the economies of Punjab and West Bengal, and banking activities had remained paralyzed for months. India's independence marked the end of a regime of the Laissez-faire for the Indian banking. The Government of India initiated measures to play an active role in the economic life of the nation, and the Industrial Policy Resolution adopted by the government in 1948 envisaged a mixed economy. This resulted into greater involvement of the state in different segments of the economy including banking and finance. The major steps to regulate banking included. In 1948, the Reserve Bank of India was nationalized, and it became an institution owned by the Government of India. In 1949, the Banking
Regulation Act was enacted which empowered the Reserve Bank of India (RBI) "to regulate, control, and inspect the banks in India”. The Banking Regulation Act also provided that no new bank or branch of an existing bank may be opened without a license from the RBI, and no two banks could have common directors. However, despite these provisions, control and regulations, banks in India except the State Bank of India, continued to be owned and operated by private persons. This changed with the nationalization of major banks in India on 19th July, 1969.
By the 1960s, the Indian banking industry had become an important tool to facilitate the development of the Indian economy. At the same time, it has emerged as a largest employer, and a debate has ensued about the possibility to nationalize the banking industry. Indira Gandhi, the-then Prime Minister of India expressed the intention of the Government of India in the annual conference of the All India Congress Meeting in a paper entitled "Stray thoughts on Bank Nationalisation." The paper was received with positive enthusiasm. Thereafter, her move was swift and sudden, and the Government of India issued an ordinance and nationalised the 14 largest commercial banks with effect from the midnight of July 19, 1969. Jayaprakash Narayan, a national leader of India, described the step as a "masterstroke of political sagacity." Within two weeks of the issue of the ordinance, the Parliament passed the Banking Companies Bill, and it received the presidential approval on 9th August, 1969.
A second dose of nationalisation of 6 more commercial banks followed in 1980. The stated reason for the nationalisation was to give the government more control of credit delivery. With the second dose of nationalisation, the Government of India controlled around 91% of the banking business of India. After this, until the 1990s, the nationalised banks grew at a pace of around 4%, closer to the average growth rate of the Indian economy.
In the early 1990s the then Narasimha Rao government embarked on a policy of liberalisation and gave licences to a small number of private banks, which came to be known as New Generation tech-savvy banks, which included banks such as UTI Bank, ICICI Bank and HDFC Bank. This move, along with the rapid growth in the economy of India, kick started the banking sector in India, which has seen rapid growth with strong contribution from all the three sectors of banks, namely, government banks, private banks and foreign banks.
Opportunities a Head
Currently, overall, banking in India is considered as fairly mature in terms of supply, product range and reach-even though reach in rural India still remains a challenge for the private sector and foreign banks. Even in terms of quality of assets and capital adequacy, Indian banks are considered to have clean, strong and transparent balance sheets-as compared to other banks in comparable economies in its region. The Reserve Bank of India is an autonomous body, with minimal pressure
from the government. The stated policy of the bank on the Indian Rupee is to manage volatility-without any stated exchange rate-and this has mostly been true. With the growth in the Indian economy expected to be strong for quite some time-especially in its services sector, the demand for banking services-especially retail banking, mortgages and investment services are expected to be strong. M&A, takeovers, asset sales and much more action will happen on this front in India. In March 2006, the Reserve Bank of India allowed Warburg Pincus to increase its stake in Kotak Mahindra Bank to 10%. This is the first time an investor has been allowed to hold more than 5% in a private sector bank since the RBI announced norms in 2005 that any stake exceeding 5% in the private sector banks would need to be vetted by them. As on date, India has 88 scheduled commercial banks (SCBs) - 28 public sector banks, 29 private banks and 31 foreign banks. They have a combined network of over 53,000 branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency, the public sector banks hold over 75 percent of total assets of the banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively.
a) Back ground and inception of the company.
Karnataka Bank Ltd, a leading ‘A’ Class scheduled commercial Bank in India, was incorporated on Feb 18th 1924 with a registered office at Mangalore. The Bank commenced its business on 23rd May 1924 with an Initial Paid up Capital of Rs. 11,580 contributed by 113 shareholders. Sri.B.R.Vyasaraya Achar was the first president of the Bank. The Banks Memorandum of Association in its Objective Clause states that the Bank apart from carrying on the general function of Banking business, would “set apart and appropriate from the annual net profit towards the general, mental, moral and physical advancement of other beneficial purpose of the members of the Dravidian Brahmin community, Such sums as may be deemed fit”. The first three branches of the Bank were at Mangalore Dongerkery, Madras George, and Udupi Car Street. Sri Kalmadi Gopal Krishna had the distinguishion of becoming the first Branch Manager. At the end of the Banks first year of operations the Banks deposits stood at Rs. 0.68 Lakhs and advances were Rs. 1.22 Lakhs. The Bank celebrated its Silver Jubilee in the year 1949 in its Silver Jubilee year of operation the Bank earned a net profit of Rs. 0.75 Lakhs with deposits of Rs. 55.59 Lakhs and Advances of Rs. 39.39 lakhs. Sri.K.S.N.Adiga became the chairman of the Bank on 23rd Nov 1958. The First real recognition for the Mangalore based Bank came in the year 1959 with the Bank being elevated from ‘C’ class to ‘B’ Class. In the stride of progress and expansion, the Bank got reinforced by the takeover of 3 banks namely Shringeri Sharada Bank Ltd on 1st April 1960.,Chitradurga Bank Ltd on December 30th 1964, and Bank of Karnataka Ltd on Dec 29th 1966.,. In the year 1969 the Bank opened its 75th branch where its deposits crossed Rs. 10 Crore mark to reach Rs. 12.63 Crores, Advances were at Rs. 8.90 Crore and Net profits were Rs. 3.05 Lakhs.
In year 1971 the Bank opened its first branch in the country’s financial capital. The following year the Bank was elevated to ‘A’ class by the Reserve Bank of India. In its Golden Jubilee year of its operation the Banks total deposits were Rs. 33.14 Crores and Advances were Rs. 22.09 Crore with 146 branches and 126 employees. In 1977 Karnataka Bank Ltd., adopted the star symbol as its unique visual identity symbol. A product of Late Dr. Shivarama Karanth, it symbolises stability, discipline, harmony and confidence. The Staff Training College of the Bank was started at Mangalore Dongerkery on Sept 27th 1977. In 1977 the foreign exchange Business of the Bank was opened with a separate department was established In Bangalore as central foreign exchange department which was later shifted to Mumbai (1979). The Bank achieved the target of Rs. 100 crores mark in deposits with the aggregate deposits being Rs. 104.24 crores as on 3112-1979. In 1980 the Madras George Town Branch celebrated its golden jubilee. In the diamond jubilee year of the Bank, the deposits of the bank were Rs. 211.34 Crores and Advances was Rs. 122.22 crores respectively. In 1989 the Banking year was extended from 12 months to 15 months to end on 31st March. The Banks Mumbai Borivili branch was declared as the first Model Branch of the Bank. In 1994-95 the first service branch was opened At Mumbai. The first Industrial Finance Branch was also opened at Bangalore on 20th March 1995. The first Agricultural Development Branch of the Bank was opened on 1 st April 1995. The Bank made it into the stock markets on October 1995 with a public issue of Rs. 81 crores which was over subscribed by about 2.5 times despite depressed market condition. During the year 2003, the Bank has taken up corporate agency for marketing the various life policies of Met Life India Insurance Company Ltd.; it has also taken up corporate agency of Bajaj Allianz General Insurance Co.
Ltd for marketing general insurance products. The banks all round excellence in the twin parameters of growth and stability has earned it rich laurels in the form of “P1+” rating for certificate of deposits from CRISIL. b) Nature of the Business Carried In the words of Late Shri T.A.Pai “Some people believe that Banking means money lending and that a Banker is not but a glorified Money lender. But Banking is not money-lending as money lender does not take the risk whereas the Banker does.” Bank is into pooling together the savings of the community scattered all over and from the very same pool granting loans to the needy in the society. Thus it acts as a link between the savers and the needy. Thus the two main products of the Bank are Deposits and Loans. c) Vision, Mission, and Quality Policy Vision Bank is a professional managed with good track record of customer loyalty and consistent profitability. The bank has the resilience to face the new challenges successfully and achieve the goals in vision by its management. Adopting ethical management practices, Bank reiterates its commitment to fulfill national and social priorities, present sound financial and above of all else improve and innovate to meet the challenges posed by a customer driven banking industry. Mission The Mission statement of any organisation generally represents its long term goals and strategies. Every organisation must have its own
mission, which describes present business scope of the organisation. The mission statement of Karnataka Bank Ltd is as follows. “To be a technology savvy, customer centric progressive bank with a national presence, driven by the highest standards of corporate governance and guided by sound ethical values”. Quality Policy The Quality policy of Karnataka Bank Ltd is of providing Quick and Better service and their by achieving Customer Satisfaction. Corporate Goal The Bank has envisaged to achieve a total business turnover of Rs. 28, 500 Crore, comprising of a deposit target of Rs. 17, 000 crore and advance target of Rs. 1, 500 Crore for the year ending March 31, 2008. The Bank is confident of achieving the same through better customer services and operational efficiency. Besides, the Bank has plans to increase its total number of business units to 580, by increasing the total number of branches to 430 and own ATM network to 150 by March 2008 d) Product/Service Profile Product for Financial Salaried Persons Today, personal finance is the fastest growing segment of banks credit deployment. Among personal banking products, loans to salaried class, occupies a prominent place. With this backdrop this loan product has been modified from time to time The purpose for which this loan scheme can be used are Purchase household articles/consumer durables, Children’s Education, Marriage
and thread ceremony of self/dependents, Medical expenses of self\dependents, Obsequies Expenses, Repair to own house and any other Purpose as to the satisfaction of sanctioning authority The quantum of loan provided shall be to a maximum of 10 times of the monthly gross salary or composite credit limit consisting of fixed loan and overdraft not exceeding 10 times of the monthly gross salary out of which, the overdraft component shall not exceed 5 times of the gross salary. The loan has to be repaid with interest within 5 Years.
KBL APNA GHAR KBL Apna Ghar scheme was introduced in November 2001, duly reviewing/ modifying Bank’s erstwhile housing finance scheme. The terms and conditions of the scheme have been reviewed/ refined from time to time. The purpose for which loan can be provided are for construction of house/purchase of ready built house or flat/purchase of site and build house thereon. Renovation /remodeling/repairs to the existing house/flat. The quantum of loan provided shall be to a maximum of 60 times of latest monthly take home (net) salary in the case of salaried or 5 times of latest annual Net income plus depreciation provided if any, as per P&L a/c in the case of traders /self employed persons/professionals Or Rs. 75.00 Lakhs. Whichever is less The quantum of loan provided in the case of
renovation/remodeling/repairs. of the existing house /flat maximum Rs. 10.00 lakh or upto 60% of the value of the house /flat owned by the
applicant, whichever is lower subject to maintaining a margin of 25% on estimated repairs . A maximum period of 15 years ( including a repayment holiday at the option of beneficiary till the completion of construction or 18 months from the date of first disbursal of the loan whichever is earlier ) for construction /purchase of house/ flat.For repairs / renovations/remodelingMaximum period of 7 years.
KBL-VARTHAK LOAN Was formulated during February 2000, for financing traders
/business persons. The purpose for which KBL-Varthak loan scheme was introduced was in order to provide for the Working Capital requirements of traders and business persons The maximum amount that can provided to individual trader/Businessman are Rs. 25.00 Lakh per Borrower The repayment conditions for KBL- Varthak Loan are that in case of Overdraft Accounts the amount has to be paid within a period of One Year And No Holiday period is given. And the loan is Repayable either in monthly or quarterly instalments.
KBL UDYOG MITHRA This scheme was introduced during February and the purposes for which the loan can be availed are for 1. Purchase of Medical Equipment/ Machineries/ Computers,
2. Furnishing the Office, Purchase of Furniture, Books etc. 3. Payment of Advance rent for setting up of an Office. The maximum Amount of loan facility that can be availed is as follows: • Maximum amount up to 90% of the cost of assets to be purchased in The case of purpose specified under 1 • Maximum amount up to 80% of the cost in the case of purpose specified under 2 and 3 • For setting up of an office Doctors , Chartered Engineering restricted to: • Rs. 75,000 – incase of Rural branches • Rs. 1,00,000 – incase of Semi-urban branches • Rs. 1,50,000 – in the case of Urban branches • Rs. 2,00,000 – in the case of Metropolitan branches Consultants Accountants,
the maximum quantum of Advance is
KBL CAR FINANCE Was formulated during November 1998 for the purpose of purchase of four wheelers. The maximum amount of loan that can be provided to individual under the scheme are as follows. 1. For NEW Vehicle: Maximum amount upto to 85% of the invoice value excluding vehicle tax and insurance.
2. And for Second hand Vehicle: The vehicle should not be older
than 3 years from the date of registration of the vehicle. Maximum amount of loan is Rs. 5.00 Lakh The loan has to be repayed within 60 months in case of new vehicle and 34 months in the case of second hand vehicle VIDYANIDHI EDUCATIONAL LOAN SCHEME Was introduced in the year 1998 on the occasion of platinum Jubilee Year of the Bank .The scheme was designed to provide financial support to the deserving and meritorious students for continuing their studies in India and abroad. The amount of loan facility which are provided for students Studying in India is a Maximum of Rs. 7.50 Lakh and for students studying abroad it is a Maximum Rs. 15.00 Lakh Repayment holiday/moratorium is course period +1 year or 6 months after getting job in earlier. The interest to be debited on simple basis during repayment holiday/moratorium period. There after on compounding basis with monthly rests. The loan to be repaid in 5 to 7 years after commencement of repayment. KBL VAHANA MITHRA In order to streamline delivery of credit to the transport industry, a customer friendly scheme tailored to meet the requirements of this sector was formulated in September 2003. The loan is provided for the purpose of purchase of new as well as old (up to 5 years.) Auto rickshaw, Jeep, Car, Maxi cab, Tempo Traveller,
TATA Sumo etc... And also for purchase of new tractor, JCB, Crane etc., to be registered/registered as public transport vehicle for hire. The Maximum amount of loan that can be provided under the scheme are mentioned below. For a New Vehicle: 1. Maximum upto 85% of the invoice value excluding vehicle tax and charges towards Insurance, Permit etc.
2. For Body Building charges up to 75% of the quotation furnished by the vehicle body builders. For an old vehicle Regional office are permitted to sanction loan under the scheme for purchase of up to 5 years old vehicle. Up to 3 years old vehicle – 30% margin on latest valuation has to be maintained. For 3 to 5 years old vehicle, 50% margin on the latest valuation has to maintain. The loan has to repaid within 84 months in case of Bus and Trucks and for others it is 60 months KBL EASY RIDE Scheme was formulated during October 2001 for the purchase of two – wheelers. The loan scheme was introduced for the purpose of acquisition of new two wheeler of popular brand and make (such as Bajaj, Hero Honda, TVS, Kinetic, Honda etc.) Maximum amount of loan that can be availed under this facility is 1. 15 times of net take home salary in the case of salaried persons, Or
2. Equivalent of annual gross income declared in the case of professionals / businessmen/ self-employed persons, or 3. Maximum up to 100% of the invoice value of the vehicle excluding Comp. Insurance , Road Tax and extra fittings 1, 2, and 3 whichever is less. However, the maximum amount of loan that can be considered as fixed at Rs. 75,000/- per borrower. The loan has to repaid within a Maximum period of 60 months. KBL- KRISHIK SARATHI SCHEME The KBL- Krishik Sarathi Scheme was introduced for purchase of Farm machineries like Tractor/Power Tiller, Trailer/other implements, Harvester, Sprayer/ Duster/Other Farm Machineries and Farm vehicles by Agriculture. A Maximum amount of loan is upto 90% of the cost (excluding Tax, Registration & Insurance) of new farm Machinery/Vehicle Max Limit Rs. 10.00 Lakh. The loan amount has to be repayed within 9 years. in case of
Tractor/combine in case of Power Tillers /Threshers its 7 years in case of Other Implements /Machineries/ 2 wheelers its 5 years and in case of Farm Vehicles (4 wheelers) its 7 years . KBL –KRISHIK SICHANA SCHEME The Purpose of the scheme is to provide for all types of Minor Irrigation development works like Purchase of oil engine/Electric Pump sets/Drip/Sprinkler/Other Irrigation Systems including purchase of pipes / Generators. / Repair or replacement of irrigation system/Generators. , open well, Bore well, Tube well.
A Maximum amount of upto 85% of the cost of new irrigation equipments or 60% of the Land value which ever is less. And Max. Limit being Rs.5.00lakhs. The loan amount has to be repaid between5-7 years. Scheme to Cover the Loans for General Credit card in Rural and Semi urban branches As advised by the RBI to scheduled commercial banks , for providing hassle – free credit to the individuals in rural and semi urban areas, it is proposed to introduce a “General Credit Card scheme” in the rural and semi-urban branches of India. The Scheme is in the nature of any operative working capital account i.e., in the nature of revolving credit, with no stipulation as to end use. The GCC holder can draw cash from his OD account up to the limit sanctioned. A cheque book may also be issued, if the borrower so insist Under the GCC, proper assessment of working capital requirement of an individual is to be made based on the income proof and cash flow statement submitted along with his /her application similar to that prevailing under normal credit assessment. Maximum limit is restricted to Rs. 25, 000 An individual applicant being a resident of rural/semi urban area, with a definite source of income and sufficient means to meet the obligation on demand is eligible to cover under the scheme. Up to 25% of the annual income declared by the applicant and accepted by the sanctioning authority for fixing up eligible credit limit. Cash flow of the household need be insisted at the time of sanction and required information may be called for at the time of Review / Renewal .For
women beneficiaries limit may be considered upto 35% of the annual income declared and accepted by the sanctioning authority. The facility should normally be valid for 24 months subject to an annual review. The Review may result in continuation of the facility /enhancement / reduction in limit (subject to limit of Rs.25,000/-) or cancellation of the facility depending upon the performance of the borrowal account. KISAN SEVA KENDRAS (KSKs) of IOC In order to reach diesel and other products in Kisan’s doorstep, it has been decided to set up Kisan Seva Pumps in rural areas in line with low cost retail outlets. These will be known as “ Kendras” The following are the objectives for which the KSKs was introduced Making diesel as well as the facilities / items required by the Kisan available to him under one roof at his door steps at least cost. Providing gainful employment opportunity to rural people. Fulfilling the corporate responsibility towards rural development NON OIL FACILITIES: For augmenting the revenues of the Kisan Seva Kendras as well as for the convenience of agricultural customers following non-oil facilities can be provided. Sale of agro inputs of fertilizers, seeds, pesticides, etc. Agricultural equipments, Nutan Stove, Hurricane lamp, etc.
Items of daily needs like Gur, Khandsari, Lal Chana, Flour, soap, etc. Sale of agro products like vegetables, etc. Provision of non agro facilities like banking, internet kiosk, communication facilities, etc. Sale of stationary items like notebook, pencil, etc. as well as newspaper (if possible), revenue stamp ( if possible), water mark (if possible), etc.
Motor Spirit (MS i.e. petrol) facility:
The KSK are primarily meant to be having High Speed Diesel or HSD facility. However, based on the potential of the site, the state HEAD ( of the oil company) may take a decision to provide MS facility also
Other Products of IOC
The Kisan Seva Kendra will also sell lubricating oils or any other products as decided by IOC from time to time to the customers.
Cost Investment by dealer
Rs.60 lakhs the sales building, driveway, fencing, other items such as fire extinguisher etc.
Expected Sales volumes
DIESEL: 25 TO 50 KL per month PETROL: facility to be provided only when minimum 10 KL potential exists ( KL = kilo Litres, 1 KL = 1000 Litres )
SWAROJGAR CREDIT CARD SCHEME (SCC) SCC was introduced in September 2003 consequent upon the announcement made my Prime Minister in his Independence Day Speech on 15 Aug 2003 SCC scheme aims at providing adequate and timely credit i.e. working capital or block capital or both to small artisans, handloom weavers, Service sector, Fishermen, self employed persons, Rickshaw owners , other Micro Entrepreneurs , SHGs, etc., from the banking system in a flexible , hassle free and cost effective manner. Borrowers in urban areas can be covered under SCC scheme. Small business covered priority sector is also eligible under SCC scheme. Any scheme / project that are income generating / employment generating may be covered under the scheme. The facility may also include a reasonable component for consumption need. Farm sector activities like fishers, dairy etc., can also be covered under the scheme. Generally such of the self- employment activities which have regular turnover/ income stream on short interval basis can also be covered under SCC scheme. The credit facility extended under the scheme is in the nature of a composite loan including term loan/ cash credit or both: The Maximum amount of loan that can be provided under the scheme is a loan Up to Rs. 25,000/- per borrower as composite loan. This is indicative. Banks may consider higher limits on the merits of the case. A component for consumption credit could be built in keeping in view the value of the family labour in the productive activity. The total limit
would have a relationship with projected net earning and repayment capacity of the borrower. SCC is normally valid for 5 years subject to satisfactory operation of the account and renewed on a yearly basis through simple review process. Issue of Credit: The beneficiaries under the scheme shall be issued with a laminated credit card and pass book. This will Serve as an identity card and facilitate recording of transaction on an ongoing basis. As far as possible, cluster approach may be followed in implementing the scheme. In case smart card are issued, fee towards issue of card /processing may not exceed Rs. 50/-per card Insurance: Beneficiaries under the scheme would automatically be covered under the group insurance scheme and the premium would be shared by the bank and the borrower equally. Each Bank may negotiate the terms of insurance with a company of its choices on a national or regional basis. Further as advised by general Insurers (public sector) Association of India (GIPSA) it would be advised for the banks to take up the matter of Personal Accident Insurance linked with SCC scheme individually with the insurance companies. Since many bank have tie-ups for bancasssurance agreement with general Insurance Companies they may decide to include SCC scheme also under their tie-ups.
Karnataka Bank Ltd aims to help customers build on a strong foundation by maximizing returns on investments and increasing their assets. Customers. can make use of their customized products to take care of their specific banking needs.
Abhyudaya Cash Certificate
A growth oriented scheme with maximum returns. Money invested multiplies after the specified period. The minimum period of deposit is 6 months and the maximum period is 120 months.
A deposit scheme for specified periods ranging from 15 days to 10 years. with interest payments made monthly, quarterly, half-yearly or yearly as required by the depositor.
Ready Money deposits:
A unique term deposit cum overdraft account, whereby a minimum deposit of Rs. . 10,000/- enables the customers withdraw up to 75% of the amount by cheque without presentation of the deposit receipt.
A flexible ‘twin gain’ deposit scheme that allows withdrawal of deposits in units of Rs. . 1,000/- each in case of need, without affecting the interest payable on the remaining units. Minimum amount of deposit is Rs. 5,000 and in multiples of Rs . 1,000/- thereto.
A monthly deposit scheme whereby a fixed amount is to be contributed monthly for a minimum period of 6 months and a maximum period of 10 years. This is an ideal scheme to save a fixed amount for future plans such as education, buying a home etc.
Insurance linked savings Bank deposit
By maintaining a stipulated minimum balance in SB account, customers become entitled to free accident insurance coverage of up to Rs. 2 lakh and Rs.10,000/- towards reimbursement of hospitalization expenses arising out of accidents.
It is a facility for all existing account holders that maximize the returns on surplus funds in the account. The stipulated level at present is Rs.10,000/-. Whenever the balance in the SB a/c surpasses this amount, the excess amount gets transferred to a term deposit in multiples of Rs.5,000/- for a specified period and earns interest applicable to a term deposit of that period.
Resident foreign currency (domestic) account
This account can be opened as a current account only. Foreign currency in USD, GBP and Euros may be deposited. The account carries no interest with it and there is no minimum amount for opening the account. Foreign exchange acquired in the form of currency notes, travelers cheques, gifts, honorarium received outside India, gifts received from relatives and earnings through the export of goods and services, can be credited to this account.
There are a wide range of deposit schemes for Non-Resident Indians. It includes non resident rupee account, foreign currency non resident (Bank) scheme (FCNR [B]) and non resident (ordinary) account (NRO) with very attractive and competitive rates. Resident foreign currency (RFC) (deposit) account for returning Indians is also available.
Area of Operation
The bank at present has 410 branches, 106 ATM outlets, 7 Extension counters, 8 regional offices, 1 International Division, 1 Data Center, 4 Service Branches, 2 Currency Chests, Spread over 19 States and 2 Union territories.
The share holding pattern in Karnataka Bank Ltd is as given below in the form of table Table No: 1.1 Showing the ownership pattern in Karnataka Bank
Total Shareholding As a % of total number of shares As a % of A&B
Categor y code
Category of shareholders.
Number of shareholders.
Total number of shares
Number of shares held in dematerialize d form
Shareholding of A promoters and promoters Group 0 0 0 0
Central (c) Government/State Government 0 0 0 0
Venture Capital Funds
Foreign Venture Capital Investors
Individualsshareholders (b) holding nominal share capital of upto Rs. 1 lakh 67226 43932427 24563463 36.21
ii. Individualsshareholders holding nominal share capital in excess of Rs. 1 lakh 673 19544323 16265423 16.10
Total Public shareholding 68942 (B)=(B)(1)+(B)(2 ) 12134354 8
All the banks in India are competitors for the Bank. Some of the major Competitors for the bank are.
City Union Bank Ltd.:
The oldest private sector bank, City Union Bank Ltd, was established in 1904 as the Kumbakonam Bank Ltd. It has taken over three local banks: Commonwealth Bank Ltd in 1957; City Forward Bank Ltd and Union Bank Ltd in 1965. Located in Kumbakonam, the temple city and having small outfit of 118 branches, mostly in Tamil Nadu, it is less know outside the state. In its long journey, it ventured out of the state only in 1980, Opening a branch in Bangalore. City Union Bank Ltd combines traditional banking with enduring relationship.
The Karur Vysya Bank Ltd.:
The Karur Vysya Bank Ltd was established in the year 1916. The Bank witnessed the vicissitudes of the banking sector during the two World wars. Expanding slowly, it has grown strong in its hometown Karur. The bank’s overall performance has been aptly described by Dr. C. Rangarajan, the then Governor of Andhra Pradesh, while inaugurating the KVB towers in Chennai as, “The Karur Vysya bank can be regarded as a fine example of how a medium size bank can effectively play its part in promoting regional development and in attending to the needs of small and medium enterprise”.
Tamilnad Mercantile Bank Ltd:
Tamilnad Mercantile Bank Ltd is from Tuticorin. Its original incarnation was as The Nandar Bank Ltd, promoted by a group of businessman in the
port town of Tuticorin in 1921. It became a scheduled bank in 1935. The present name was adopted in 1962. True to its name, it works as a Tamil Nadu bank. The Bank is making all efforts to remain as the totally motivated bank.
Nainital Bank Ltd:
Nainital Bank Ltd is a tiny little bank from Uttaranchal. During the British days, most of the hill stations like Simla, Mussorie, Darjeeling, and Ooty were having banking facilities , provided by either local banks or banks from outside. Nainitial where nature smiles in wilderness, saw the birth of a bank in 1922.One of its promoters was late Gobind Vallabh Panth, confining to a single state. On the eve of Independence, it had a capital base of only Rs 1.50 lakh and the number of branches was 5.
The Lakshmi Vilas Bank Ltd:
The bank from Karur, which adds good fortune to your life- Lakshmi Vilas Bank Ltd-was established in 1926 by a group of 7 leaders of the local business community, it was aiming at serving the traders and the people from the middle class. During the first two decades it could open only 10 branches. Contended in serving the small towns for nearly 50 years, it stepped out of the state only in 1974. For increasing the fee-based income the bank has entered into MOU with Dabur CGU Life Insurance Private Ltd for marketing the insurance products.
The Dhanlakshmi Bank Ltd:
The Dhanlakshmi BankLtd, was established by a group of eminent lawyers, in thrissur in 1927, with a initial paid up capital of Rs. 11,000. Handling a volume of business not more than Rs 1.39lakh in the first year,
it could earn a net profit of Rs. 1019 and the next year it declared a dividend of 12 percent. Though slow in expanding, it took a bold step in taking over 12 small banks in 1964. The bank has carefully built up relationship….Forever with its shareholders and Customers.
The South Indian Bank Ltd:
The South Indian Bank Ltd was born in Thrissur in 1929, two years after the birth of Dhanalakshmi Bank Ltd. It has the record of taking over the largest number of small banks-15 banks between 1961 and 1965.Amalgamating so many banks was intended a big task, considering the difference in the nature of the business and the financial stature. But in the process the bank could expand its business. Though it does not have its own ATMs, it has tied up with Centurion Bank Ltd for sharing their ATM network all over the country
The Vysa Bank Ltd:
The Bangalore–based, 72 year old bank, began its banking operation in a small way like all other banks . It owes its formation to the effort made by their founder directors, who were the businessman. The first chairman was retired deputy commissioner of the Mysore state. The paid up capital was only Rs.71000 in 1931. Till 1964 it was spreading activities into the neighboring districts like Ananthpur, Bellary and Mysore. A branch was opened in Madras during the year and paid up capital increased to Rs. 10.30 lakh.In 1979 , when the bank was celebrating its golden jubilee, its capital base crossed the Rs 1 Crore mark and the deposits crossed the Rs.100 crore level.
As regards to the infrastural facilities provided in Karnataka Bank Offices The Head office of Karnataka Bank Ltd has a central air condition system which helps the employees to escape from the heat of Mangalore City. Canteen The Bank provides canteen facility to all its employees and it is situated inside the Bank premises. System The Bank is one of the few banks in the country which uses Finical Software which in turn helps the bank to serve its customers more efficiently. The Bank also provides internet facility to its employees
Work Flow Model
The work flow model of Karnataka Bank Ltd is of two types and is shown below; Process Map- Deposit: Process Map Advances:
Process Map- Deposit: The below chart shows the work flow of depositing money Chart 1 Chart Showing the process map deposit in Karnataka Bank Ltd
Application Review and documentation
Cash Cheque Draft
This is the work flow adopted by the bank at the time of receiving the deposits from their customers. The first step in this process is customer approaching the bank. When the customers will have surplus money with them, they will be looking to invest that money in some place where they can get good returns out of it. Bank is one such place which accepts deposits from their customers and pays interest on them. So the customers will be looking for that bank which will pay them highest rate of interest on their deposits. Once the customer identifies the bank where he is going to deposit his amount, he has to go through the introduction stage, were the customer needs to be introduced to the bank. He may be introduced to the bank by the customer or an employee of that bank. He is asked for providing documents like Ration card or any license for address, age & income proof. Once the account is opened (i.e. Either S.B a/c, fixed deposits, recurring deposits or current a/c) he/she will provide with facilities like Cheque book, ATM or O.D if it’s a current a/c. Once the customer opens an account in the bank he can deposit any amount any number of times but in case of fixed deposit its one lump sum amount deposited till its maturity it is not withdrawn. When amount is deposited it goes to the hands of cashier and then to cash supervisor and then to his account, but now due to CBS the entry is given within a minute. The depositors are eligible to withdraw the amount which is credited in their account and not more than that unless it is current account. Depositors can withdraw as an when they need but in case of fixed deposits prior 7 days notice to be given, but today’s banker will not ask
for any notice just give it in the spot with penalty. The process of withdrawal is reverse of depositing where from his account it goes to cash supervisor from him to cashier finally to the hands of customer, again traditional work flow. Now all are computerized where in one person does all the activity. Customer can directly withdraw in ATMs or can directly issue Cheques to the other party. Process Map Advances: The various stages of granting loan to customers is depicted below Chart No: 2 Chart Showing the process map advances of Karnataka Bank
Customer Specific Requirement
Filling of Application
Repayment of interest
This is the work flow model followed by the bank at the time of giving advances to their customers. Which involves the following series of steps, they are: Any party requiring funds through Bank first has to talk with the respective manager of a branch of his area. One thing the manager has to see that the amount of loan he has to sanction is in his power/ limit or else he has to concern his higher authority. In this stage the process of negotiation regarding rate of interest between party and Banker takes place. The important duty of a manager is to know his customer there are many systematical techniques and process to know the real identification of the customers. This is done mainly to avoid anti-laundering. The purpose of loan to be sanctioned should be clearly understood either by evaluating blue print of his project or balance sheet or performance proof of his existing business. This is mainly done to make sure that repayment of the amount is ensured and party won’t become Bankrupt. In case of personal loan evaluation of the person is done through other person who is known to the Banker.
The party in need of loan is capable of withdrawing the amount not more then the amount sanctioned to him. Documentation deals with filling of forms that are in contractual form and most of the documentation process could be seen in all the stage. It also deals with submission of security for their loan and its formalities. After the purpose of the loan is served, the party is obliged to repay the amount incorporating PLR and other Bank charges or according to the agreement Future Growth prospectus With a economy of the country growing at nearly 8% there high growth potential for the bank. The bank is planning to enable ‘Money Click’ as a payment gateway for shopping that coversast areas of business like Hotel Booking, Ticket Booking, Purchase of goods etc. The Bank is also planning to introduce mobile Top-up through ATMs and internet Banking. Further Bank is also planning to tie up for online trading in shares.
Mckensy’s7’s Frame Work McKinsey & Companies 7S framework provides a useful way of studying internal working of the organization. The model was developed by Tom Peter and Robert Waterman, consultants of Mckensy’s and company. The 7’S Model was fiRs. t published by them in the article “Structure is not organization”(1980) and in the books “The Art of Japanese Management”(1981) and “In search of Excellence”. exhibited by the best managed companies. The McKinsey
Consulting Firm identified strategy as only one of seven elements
Strategy, structure and systems can be considered the "hardware" of success whilst style, staff, skills and shared values can be seen as the "software". Companies, in which these soft elements are present, are usually more successful at the implementation of strategy
Chart No: 3 Chart showing Mckensy’s 7S Model
The functioning of Karnataka Bank Ltd can be better understood with the help of following 7s The 7’S are ♦ Structure ♦ Skill ♦ Style ♦ Strategy ♦ Staff ♦ Shared Values
1) Structure It prescribes the formal relationship that should exist among various positions and activities. It is the duty of the top management to design the organisation structure of an organisation. It is one of the critical tasks. The designing of the super structure involves issues like division of organisation tasks and allocation of responsibilities between various departments. The hierarchy of superiorsubordinate relationship are defined by the organisation charts which are formal documents that indicate the chair of command and the titles that have been assigned to the managers and other personnel’s. Organization charts indicates the employees position in the hierarchy and their relationship within a formal organisation Structure at Branch level The Karnataka Bank has totally 410 branches an on 31st March 2007.Each Branch is headed by a branch manger who has the responsibility of overall administration of his or her branch. Structure at Regional office Level The Karnataka Bank has eight regional offices spread across the country. Each regional office is headed by an assistant manager. The Regional offices are responsible for controlling the branches coming under them and also for implementation of decisions taken at the head office of the bank. For facilitating easy administration, the bank is divided into different departments with each department headed by its respective departmental head who are responsible for the overall administration of their department and also to carry out various
activities coming under their departments by taking the help of executives, officers. and staff of their departments. The organisation structure of the Karnataka Bank has been shown in the chart below. The Board of Directors occupy the top most position followed by the chairman who is next in the hierarchy. In the next level of organizational structure there are DGM Human relations and industrial relations, General Manager, planning and development, GM Credit, GM Treasury, GM, recovery Legal and RMD, And DGM inspection and Audit.
2) Skill Skills refer to the fact that employees have the skills needed to carry out the company’s strategies. Skillful employees are the assets of the organization. Skills of the employees may be improved by giving necessary training to them. The Bank believes that skillful employees contribute to the Success of the Bank. Development of human resource is an important factor for the development of any industry. Banking is not an exception to that. It involves various aspects like continuous training, rewards by way of promotion, appreciations etc. The bank HRD policy is guided by the Chinese Proverb “If you are planning for one year, grow rice. If you are planning for twenty years plant trees. If u are planning for centuries , develop men”.During the year 2006-2007,1424 officers, 517 clerks and 68 sub staff were given training under various aspects to update/improve the knowledge. The officers of the bank are also deputed at Bankers Training College, Mumbai, National Institute of Bank Management, Pune, Institute of Development and
Specialized training was fond necessary. Table No.1 Table showing the number of employees who under went training during the year Banks own training College Officers Clerks Staff 709 517 Sub
At bankers Training College (RBI) & other Training colleges ( Officers )
At Work shops & Seminars.
3) Style It is one of the seven levers which the top management can use to bring about change in the organization. According to MC Kinsey’s Framework, Becomes evident through the patterns of action taken by the members of the top management team over a period of time. The MC Kinsey’s Framework considers “Style” as more than the style of top management. Karnataka Bank Ltd. follows a Top to down style of management. It also works in a participative style. The decisions are taken by the top management concerning matters related to the organization. The decisions relating to department matters are taken by the departmental heads. The bank follows a democratic leadership style which allows the employees to take part in the decision making
process. Employees are free to give any ideas, suggestions etc, for the betterment of the organisation. This will be taken with active consultation with the employees.
4) Strategy Strategy means action a company plans in response to or in anticipation of challenges in the external environment. The Karnataka Bank, in order to respond to the changes, has formed the following action plan with specific reference to product, pricing, and people
Action plans on product Introduction of Internet Banking Expansion of Banks on ATM Network Introduction of Debit Cards Retailing in Securities
Action plan on Pricing Increasing emphasis on fee based , Commission based activities, Collection of utility bills and other fee based services like mutual fund distribution which the bank to be more competitive.
The Bank plan to train employees on marketing of products like schematic loans, insurance, money transfer etc., The Bank has decided to give incentives to employees for group performance
The successful implementation of these strategies or action plans helps the bank to gain competitive advantage over the other banks.
5) System System means formal and informal procedures that govern everyday activities. The decision making systems within the organisation can range from management institutions to structured computer systems and formal and informal procedure that govern the everyday activities of the Bank. The System of the Karnataka Bank Includes
Computer System Training System Control System
Computer System Karnataka Bank was the first bank to realize the importance of Centralised Banking System and was the First to deploy Core Banking
system ‘Finacle’. A part from this the bank has computerised all activities and branches so to provide quick service to its Customers. Training System In a service industry like bank, quality of the service offered to the customers is very important. To provide such high quality service to its customers, the bank trains its employees in various areas as well as in advanced technology. The training is given at the Staff Training College of the bank and by some specialized outside agencies. Control System The Bank has well defined control system in all critical areas of operation i.e. corporate credit, forex, treasury, etc, which are documented and reviewed from time to time. The bank has also a full-fledged internal audit and inspection mechanism through which all branches are put under regular inspection encompassing the whole range of activities i.e., Forex, Customer Complaints, Income leakages etc. 6) Staff Staff means that the organization has hired able people trained them well and assigned them to the right jobs. Staffs are human resources working in an organisation. They are responsible for carrying out various activities of the organisation effectively and efficiently. The Karnataka Bank has well trained, devoted and skilled staffs who work very hard for the success of the bank. The number of people employed by the bank stood at 4456 as on 31st March 2007. The Business per employee has improved from Rs. 4.78 crores as on 31st March 2006 to Rs. 24 Crores as on 31st March 2007.The Bank during the 2006-2007 recruited 74 new officers , 198 clerks, and 32 sub staff.
Table No:2 Table showing the total staff position as on31-03-2007 Officer s As at the end of the Year 1594 SubStaff 794 32
Recruited during the year 74
7) Shared Values Shared values refer to the guiding concepts, values and aspirations that unite an organisation in some common purpose. They guide employees of any organisation towards valued behavior. Important concerns and goals that are shared by most of the people in a group, that tend to shape group behavior, and that often persist overtime even with changes in group membership. Shared values originally called as super ordinate goals; it is the guiding concepts and principles of the organisation - values and aspirations, often unwritten. They are also the things that influence a group to work together for a common goal. It acts as a guiding concept, fundamental ideas around which a business built. So it must be simple, usually stated at the abstract level, have great meaning inside the organisation even though outsiders may not see or understand them.
The Karnataka Bank goes for the following values Customer Satisfaction Quick and better Service Loyal to the Customers Honest in work SWOT Analysis Identification of the threats and opportunities in the environment and the strengths and weakness of the firm is the cornerstone of business policy formulation. It is these factors which determine the course of action to ensure the survival of the firm. The environment might present many opportunities but a company might not have strength to exploit all the opportunities. Similarly, sometimes a firm will not have the strength to meet the environmental threats. If a company, thus, finds that it will not have the competence to survive in a particular line of business, it will be prudent to give it up and concentrate on such business for which the firm is most competent. The economic liberalization in India in 1991 drastically changed the business environment. Many Companies have exited several of their business and have been concentrating on their core Business Strengths 1. The factors that have contributed to the success of the Bank is its workforce because the bank has highly educated workforce, young and energetic employees within the age group of 25-45This helps the
Junior employees to learn from the experience of the employees
2. The Bank is professionally managed. The bank is one of the few banks in India which gives importance to technology in order to serve it customers software’s. 3. The Banks strengths lie in management capabilities, focused strategy, speedy decision making. 4. There has been expansion of branches and ATM services by the bank during the last few years. 5. The Banks provides good infrastructural facility to its to its staff and help them to concentrate more on their job, 6. The Bank has introduced various schemes better it is one of the few banks which uses finacal
Weaknesses The weaknesses of the bank includes that the bank has majority of the branches in the southern region. The second Weakness of the bank is that of its aging work force. Non-verification of Reserve Bank of India defaulters list while processing credit proposals Delay in follow up on various accounts Bank had often involved in frequent cheque purchases of large amounts beyond the discretionary power .
While opening foreign letter of credit opinion report of the overseas party not obtained resulting in devolvement/likely developments. Delay in crystallisation of export bills discounted. Sanction terms and conditions were not complied with in many cases revealing inadequate/ineffective mechanism to monitor and follow-up of such cases. The stocks hypothecated to the Bank were not adequately insured/not insured in some cases There were instances of frequent returns of cheques and the branches had not taken up the matter with the borrowers concerned to maintain financial discipline.
Opportunities The Growth potentials or the opportunities are very huge as the bank had mainly concentrated on the southern region of the country in its earlier years it has the opportunity to expand its business to other parts of the country wherein it can increase its customer base. The bank by virtue of becoming a member of ATM networks like ‘VISA, ‘NFS’, ‘Cash Tree’, besides continuing the bilateral arrangement with corporation Bank, has enabled access to nearly 1 million ATMs and 25 Million POS across the globe for its card holders. Bank is also facilitating inward remittance facility through Western Union Money Transfer which has enabled vast section of the population to receive hassle free remittance from abroad. The bank is planning to enable ‘Money Click’ as a payment gateway for
shopping that covers vast areas of business like Hotel Booking, Ticket Booking, Purchase of goods etc. The Bank is also planning to introduce mobile Top-up through ATMs and Internet Banking, besides launching value additions like SMS alerts to Non-Money Click Customers, Utility bill payment and Air ticket booking through ATMs. Further Bank is also planning to tie up for online trading in shares. The Bank is planning to increase the number of its ATMs to 150 by 31.03.2008. Threats As the bank majority business comes from the south any effect to the economy here would have an adverse effect on the performance of the bank. The Bank is relatively smaller when compared to other banks like SBI and ICICI Bank and some others. Since it’s a smaller bank when compared to heavy weights like SBI and corporation Bank the bank is always under treat of being taken over by other banks.
SUMMARY OF LATEST ANNUAL REPORT
Karnataka Bank Ltd, is a leading ‘A’ Class scheduled commercial Bank in India has earned a net profit of Rs. 177.03 crores as against Rs. 176.03 crores in the previous year an increase of 0.5% increase in comparison with the previous year. For the year 2006-07 the total deposit of Karnataka Bank registered a growth of 6% over the previous year. While its advances rose by 22.60% over the previous year. The other key financial data’s are mentioned below Table No: 3
Table Showing the performance highlights of the Bank for the year 2006-2007 (Rs. In Crore) As on /for the year ended 31.03.2007 14037.44 9552.68 5048.16 1430.52 356.58 177.03 As on /for the year ended 31.03.2006 13243.16 7791.57 5548.58 1184.84 328.29 176.03
Particulars. Deposits Advances Investments Total Income Operating Profit Net Profit
The total business turnover of the bank touched Rs. 23590.12 crores, an increase of 12.15% over the preceding. The total assets of the bank increased from Rs. 14953.27 crores to Rs. 16222.52 crore recording a growth of 8.49% The Net interest income rose from Rs 365.97 crore to Rs.419.86 crore thereby registering a growth of 14.73% due to growth in advances. The operating profit increased from Rs. 328.29 crores to Rs. 356.58 crore showing a growth of 8.62%
Total Deposits of the bank grew from Rs. 13243.16 crores as on 31.03.2006 to Rs. 14037.44 crore as on 31.03.2007, registering a growth of 6% The total advances grew from Rs. 7791.57 crores as on 31.03.2006 to Rs. 9552.68 crores as on 31.03.2007an increase of 22.60% Agricultural advances increased from Rs. 737.33 Crores to 791.39 Crore. The priority sector advances increased from 2772.20 Crores to Rs. 3058.90 Crores.
The total investment of the bank as on 31st March 2007 stood at Rs.
5048.16 Crores as against Rs. 5548.58 Crores as on 31st March 2006 showing a reduction of 9.02%. The banking posted an operating profit of RS. 356.58 Crore for the year as against 328.29 Crore for the Fiscal 2006.
Appropriations The net profit of Rs. 177.03 Crore which along with a sum of Rs. 0.06 Crore brought forward from the previous year aggregated Rs. 177.09 Crore is appropriated as under. The corresponding figure for the previous year was Rs. 296.04 Crores.
Table No: 4 Table Showing Appropriation of profits of the bank for the year 20062007
Appropriation Transfer to Statutory Reserves Transfer to Capital Reserves Transfer to Revenues and
Rs. . in crore 107.00 1.38 19.00
General Reserves Transfer to Proposed Dividend 49.69
Balance Carried to Balance 0.02 sheet Total 177.09
Dividend: The bank declared a dividend of 35% for the year which totaled Rs. 42.47 Crores, which is 16.74% higher than the amount distributed for the year end 31.03.2006. The Dividend Payout ratio stood for the year stands at higher at 23.99% as compared to 20.67% during the year 2005-06 Earning per share / Book Value The Earning per share and the book value of the share stood at Rs. 14.60 and Rs. 102.08 Respectively as on 31st March 2007. Net Owned Funds and capital Adequacy Ratio
The net owned funds of the bank increased from Rs. 1111.13 Crore to Rs. 1238.63 Crore registering a growth of 11.47%. The capital adequacy ratio decreased from 11.78% as on 31st March 2006 to 11.03% as on 31st March 2007 after taking into account the market risk on investment as per RBI guidelines. The bank has been consistently maintaining Capital Adequacy Ratio well above the norm of 9% stipulated by the RBI. Forex Business During the year, Bank achieved foreign exchange business turnover of Rs. 6101.16 Crore as against Rs. 4638.59 Crore for the previous year, registering a growth of 31.53%. The advances to export sector increased from 894.81 Crore to Rs. 1095.31 Crore Advances to Priority Sector The advances of the bank to priority sectors are shown below in the form of a table
Table No:5 Table Showing Lending of the Bank to Priority Sector (Rs. in lakh) Number of accounts at the end of the year 52219 Balance outstanding at the end of the year 59295.59 115920.91
Types of Advances
b) Small Scale Industries 6549 of which Export Credit to SSI units
Setting up of Industrial Estate
the 4 5398
5935.99 3896.81 2766.27 13404.78 3715.53 14148.87 79542.43 781.65 452.46 6028.28 305889.57 71603.36
d) Small Business Finance
e) Professional & Self 4429 Employed f) Transport Operation g) Education h) Retail Trade i) Housing Loans j) Consumption loans k) Self Help Group l) Food Processing Total Export Finance excluding export credit to small scale industrial units 5456 2378 13755 11870 1627 1018 63 104766 915
Ratio Analysis Ratio Analysis is a widely used tool of financial analysis. It can be used to compare the risk and return relationship of a firm. It is defined as the systematic use of ratios to interpret the financial statements so that the strengths and weakness of a firm as well as its historical performance and its current financial conditions can be determined. The term ratio refers to the numerical or quantitative relationship between two items or variables. The rationale of ratio analysis lies in the fact that it makes related information comparable.
Significant Performance Indicators: Total Advances to Total Deposit Ratio: This ratio is generally expressed as a ratio between Total Advances and Total Deposits. The ratio is used to determine how much of the total deposits collected from the customers are lent as loan to public. It can be expressed as follows:
Total Advances Total Deposits
Table No: 5 Table showing Total Advances to Total Deposits ratio (000’s omitted) Particulars. Total Advances (Rs.) Total Deposits (Rs.) Mar 07 9552,67,99 14037,43,5 4 Total Advances to Total 0.6805 Deposits ratio It can be seen in the above table that there has been a steady increase in total advances in proportion to total deposits from Rs. 0.58 to Rs. 0.68. It can also be inferred that there has also been a steady increase in the amount of deposits collected by the bank over the period of three years. . 1) Total Investments to Total Deposits Ratio: This ratio is generally expressed as a ratio between Total Investment and Total Deposits. This ratio is to used to know what proportion of the total deposits are used by the Bank for its investments purpose such as Government Securities or Shares of other companies. It can be expressed as follows: Total Investments 0.5883 0.5802 Mar 06 7791,56,78 Mar 05 6287,44,06
Total Deposits Table No: 6 Table Showing the Total Investments to Total Deposits Ratio (000’s omitted) Particulars. Total Investments (Rs.) Total Deposits (Rs.) Mar 07 5048,16,44 14037,43,5 4 Total Investments to Total Deposits ratio The total investments in proportion to total deposits have shown a slight decline over the years from 0.4203 in March 2005 to 0.3596 in March 2007. 2) Net Non-Performing Assets to Net Advances This Ratio indicates the Advances or Loans that were lent by the Bank and which have turned out to be Non-Performing Advances. It can be expressed as follows: Net Non-Performing Assets = Opening Balance + Additions during the year – Reductions during the year. Net NPA 0.3596 Mar 06 5548,58,07 13243,16,0 4 0.4189 0.4203 Mar 05 4555,71,67 10837,05,81
Net Advances Table No: 7 Table Showing the Net Non-Performing Assets to Net Advances Ratio Particulars. Net NPA (Rs in lakh) Mar 07 11602.50 Mar 06 9151.19 7791.57 Mar 05 14329.54 6287.44
Net Advances (Rs. in 955267.99 crores) Net NPA to Net Advances 1.2145
NPAs are those advances where the interest and advances have been overdue for more than 90 days. The above table shown that there has been a steep decrease in Non performing assets of Bank from 2.2790 in March 2005 to 1.2145 in March 2007 this shows that there has been an increase in the efficiency of the Bank to collect its advances. 3) Return on Total Assets Return on total assets is the ratio of net profit to total resources. This ratio measures the productivity of the total assets of a concern. It indicates the profitability of a business. Net Profit *100 Total Assets
Table No: 8 Table Showing the Return on Total Assets Ratio (000 Omitted) Particulars. Net Profit after Tax (Rs.) Total Assets (Rs.) Mar 07 1770344 Mar 06 1760339 Mar 05 1471464 125267181 1.1746
162225162 149532729 1.1772
Net Profit after Tax to 1.0912 Total Assets
The data reveals that there has been a decrease on the return on total assets from 1.1746 in 2005 to 1.0912. 4) Earnings Per Share Ratio: This is a ratio between net profit available for equity shareholders that is net profit after taxes and preference dividends, and the number of equity shares. The more the EPS the better is the performance and future prospectus of the company. This ratio throws light on the performance of the company and helps in deciding whether the equity share capital is being utilized effectively or not. Net Profit available for Equity Shareholders Number of Equity Shares
Table No: 9 Table Showing the Earnings per Share Ratio (000s omitted) Particulars. Net Profit available for equity Shareholders. (Rs ) Number of Equity Shares 121262.4 1 EPS (Rs. ) 14.60 14.518 34.05 121253.66 43206.743 Mar 07 1770931 Mar 06 1760434 Mar 05 1471488
The above data shows that there has been a decline in EPS of the bank from Rs. 34.50 in 2005 to Rs. 14.60 in 2007. The decrease in the EPS is due to the increase in share capital of the Bank.
LEARNING EXPERIENCE The in-plant training was for four weeks. I had done my in plant in Karnataka Bank Ltd, Mangalore. As there was limitation of time, the study is done about the general information regarding the Karnataka Bank. In-plant training is really useful to know how class room study is applied in the organisation. It is true incase of Karnataka Bank Ltd. Every
organisation before carrying out any task has to perform managerial functions such as planning, organising, controlling and directing. Besides usual functions such as wage and salary administration.
I learnt about what is NPA’s in banks, Non Performing Advances means an asset or account of borrower, which has been classified by a bank or financial institution as sub-standard, doubtful or loss asset, in accordance with the directions or guidelines relating to asset classification issued by RBI. Conditions to treat an account as NPA. i. Interest and /or installment of principal remain overdue for a period of more than 90 days in respect of a Loan, ii. The account remains 'out of order' for a period of more than 90 days, in respect of an overdraft/ cash Credit(OD/CC), iii. The bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted, iv. Interest and/ or installment of principal remains overdue for two harvest seasons but for a period not exceeding two half years. in the case of an advance granted for agricultural purpose, and v. Any amount to be received remains overdue for a period of more than 90 days in respect of other accounts. Secondly I had learnt about what is an overdue account it means “An account should be treated as 'out of order' if the outstanding balance remains continuously in excess of the sanctioned limit/ drawing power. In case where the outstanding balance in the principal operating account is less than the sanctioned limit/ drawing power, but there are
no credits continuously for six months as on the date of balance sheet or credits are not enough to cover the interest debited during the same period, these account should be treated as 'out of order' The recovery department of the bank works for the recovery of credit granted to customers. Recovery department will do the job of getting back the loan granted to the customers. if they fail to repay the loan amount. As regards to the legal department it is concerned with providing legal advices to various departments if there is any conflict in the functioning of department. 1. Circulars pertaining to the products and services of Karnataka Bank. 2. Karnataka Bank’s Annual Report 2004-2007. 3. Magazines and Brochures of Karnataka Bank. 4. Souvenir of the Bank. 5. www.karnatakabank.com 6. www.rbi.org
SCHEMES EVOLVED BY KARNATAKA BANK LTD.
THE PHILOSOPHY "To open a shop is easy but to keep it open is an art" - were the golden words of noted philosopher Confucius. When we look back to the history of coffee finance in our bank, we feel proud because there is a perfect combination of the art and science.
THE CUP THAT CHEERS For centuries, coffee has been cheering and stimulating the task buds of millions of people worldwide. Fascinated by the fragrance of the steaming cup, Dr. S. Radhakrishnan eminent scholar and statesman.
THE ORIGIN The origins of coffee cultivation in India goes back to around 1600 A.D. when a Muslim Saint from India Baba Budan smuggled seven coffee seeds out of Yemen on his way back from a pilgrimage, near Chikmagalur. A picturesque town in Karnataka and this mountain now popularly known as "Baba Budan Giri" and origin of coffee in India.
THE VISION Born in the year 1924 at Mangalore the Karnataka Bank Ltd. was known for its commitment to the common man. The Bank choose to find a new path in the agricultural sector by financing this very needy but totally neglected area during the pre independence itself. For Karnataka bank, this transition period was not only critical but also historic it is all now that the same RBI has made agricultural finance a priority sector and earmarked a minimum of 18% of credit to agricultural sector. Hats off to the great vision of late Sri K.S.N. Adiga and other founder directors who were instrumental in showing a new path not only to the Bank but also to the nation!
THE NETWORK Encouraged by its early success in agricultural finance, the Bank started its first branch in the coffee belt in the year 1957 at Koppa followed by Balehonnur and Sunti Koppa in 1958 and then spread its tentacles to Hassan in 1960 and the coffee town of Chikmagalore in 1966. Viz Hassan and Chikmagalore. There after, there was no going back, as the Bank opened more and more branches in the unbanked coffee areas of Chikmagalore, Hassan and Kodagu districts. Today around 48 branches of the bank are exclusively. Coffee curing trading export etc. Out of 170672 latch of coffee cultivated area in these 3 d3istricts, Bank has financed fo3r 3mor3e than3 3537822 ha. The total outstanding Plantation credit of the Bank has reached a new height of Rs.229 crores.
THE NEW ERA The more scientific and technological orientation towards agricultural finance more especially towards plantation finance began during the year 1984 when bank started recruiting more technically qualified agricultural field officers (APOs). The service of these specialized officers has been utilized. "Under Head quarter based cluster branches approach" almost all the branches of the Bank are having agricultural advances, it was at this period that Bank upgraded its technical expertise in coffee finance and took early advantages in utilization of the refinance facilities of NABARD. The effective mobility of the AFOs in the field of agricultural credit the Bank has also started posting some of them as branch manages for some of the agricultural dominated branches.
THE A.D.B. All these strenuous efforts have culminated in designing the Chikmagalore branch as the first "(ADB) of bank in 1995. Further in order to provide modern banking facilities to the coffee exports is gave more fillips to the coffee exports. The bank also designed the said branch for crore business during 1977. The bank has created banking system i.e. "Agriculture" and "Foreign Exchange Business" apart from the traditional banking facilities.
SUBSIDIARY SERVICE OF KARNATAKA BANK
Demand Draft Mail Transfer Telegraphic Transfer Pay Order Safe Locker Facility Safe Custody Services Multi Branch Banking
SUBSIDIARY SERVICES OF KARNATAKA BANK
The Karnataka Bank Ltd. has rendered lots of subsidiary services to its Customer with reasonable service charges. Since its inception the Bank has attached high priority to customer service. The main motto of the Bank is "Service with a Smile". This motto added full benefits to its slogan of "Growth with Stability". Remittance of funds is major subsidiary service rendered by the Bank. It has twin benefits of attracting new clients towards it and increasing its commission, income. The important Subsidiary services rendered by the 'Karnataka Bank Ltd.' are as follows:
DEMAND DRAFTS (DPS) Demand drafts are negotiable instruments drawn by one branch upon another branch of the same Bank. It is an unconditional order to pay on demand, a specified person or to his order. Demand draft books supplied by H.O. shall always be held in joint custody, duly entered in the stock register. It shall bear the name, DPD code and RBI code of issuing branch at the top. If these particulars do not appear on the draft pads supplied by H.O. these particulars shall be stamped on the draft leaves on the day of receipt of stock.
TELEGRAPHIC TRANSFER In Telegraphic Transfer funds, are transferred from one branch to another branch by coded telegraphic massage for payment to the beneficiary of the TT by the drawee branch. Telegraphic transfers can be made between branches, which have prior arrangements in this regard. Branches can have reciprocal arrangements for both outward and inward transfer or for either inward or outward transfer only. The message should also contain the telegram serial number pertaining to the receiving branch. The coded message should be transmitted through telex. The issuing branch should compare the confirmatory received from the paying branch with the entry made in the Telegram Inward Register and make a not of receipt of the confirmatory against the entry in the register. If any discrepancy is noticed, it should be immediately followed up with the other branch for necessary correction.
PAY ORDERS / PAY SLIPS A pay order or a pay slip is an order by a branch of a Bank drawn upon it self to apply a certain sum of money to or to the order of the payee named therein. Although, the pay order is almost in the form of cheque since it is drawn on the branch it self, it is not covered by sections 85A and 131 of the Negotiable Instruments Act. The Bank will not therefore get protection in paying a pay order with a forged endorsement. Similarly, the collecting Bank will also not get protection, as pay order is not covered by section 131 of the Negotiable Instruments Act.
Payment due from the branch to the local parties / Banks, are also made by issuing pay order. The commission is to be collected as applicable to local drafts. Where a pay order is issued to third party at the request of customer, the credit slip meant for DDs / MTs may be used. While applying a pay order presented through clearing or across the counter for payment or for credit of an account, it should be scrutinized in all respects as in the case of cheques / drafts.
SAFE DEPOSIT LOCKERS Provide different sizes for rental purposes. Precaution while giving a locker on rental basis are as follows. 1. The locker hirer should have an introduced savings or current account with the bank. 2. The branch asks the hirer to fill in and sign a specimen signature card, with his full name, address, specimen signature and a password or a code word. 3. The banker specifies the timings of the operations of lockers. 4. Lockers cannot be rented out to a minor, as a minor has no contractual capacity to hire a locker.
SAFE CUSTODY SERVICE Traditionally bankers receive valuables such as negotiable securities jewellery and documents of title to property for safe custody. In fact the origin of Banking in India is said to lie in the fact that people going on pilgrimage for long periods used a keep their village or town. Being equipped with safes and storage rooms for the purpose of their business
modern bank is naturally a safe and convenient place to keep valuable in safe custody.
MULTI BRANCH BANKING Multi Branch Banking is a special facility offered by Karnataka Bank that gives the power to operate SB or Current Account of account holder through several branches in the cities of Bangalore, Mangalore, Chennai and Mumbai. Any customer who is eligible to open a SB account or a Current Account can open the privileged account and avail Multi Branch Banking facility. The minimum average balance to be maintained is Rs.5000/- for SB account and Rs.10000/- for Current Account. The Multi Branch Banking acquires power of geographical flexibility in Banking.
MERCHANT BANKING The RBI has allowed Indian Banks to undertake many ancillary services. In addition to their main business of banking Merchant banking is among one of the most important businesses now being undertaken by Banks.
Money plant ATMs An account holder, can use ATM card to withdraw cash, make balance enquiries and request statements, cheque books through ATMs. Money Plant ATMs give "round the clock" access to account through ATM counters across the country, as well as those ATMs under arrangement with Corporation Bank.
UTILITY BILL PAYMENT MADE EASY At Karnataka Bank one can now make telephone bill payments through the bank itself. Now customers need no longer wait long hours in a queue to pay phone bills.
WESTERN UNION MONEY TRANSFER A strategic arrangement with Western Union Financial Services Inc. of USA facilitates quick, reliable and convenient transfer of funds anywhere in the world.
SPEEDY MONEY TRANSFER WORLDWIDE The Bank is also a member of the Society for Worldwide Inter Bank Financial Tele Communication (SWIFT) for expeditious two way transfer of funds and has a wide network of correspondent Banks in 43 countries around the globe.
THE KRISHI CARD Karnataka Bank introduced Agricultural credit card known as 'KRISHI CARD' for its former clientele in the year 1989 it self. It is also now history that the RBI has made KISAN CREDIT CARDS mandatory for all banks since 1998. It has also extended this facility to the plantation sector during the platinum jubilee year.
THE COFFEE CONFERENCE
The dominance of the bank in plantation sector finance brought to the limelight "When Coffee Conference" was organised on 26-04-1998. It was again in historic occasion as more than 500 Planter delegates from all the three major coffee growing districts, viz Chikmagalor, Hassan and Kodagu have participated along from NABARD, Coffee Board, Growers Association, Tax Consultants, Carriers Exports, Bankers etc.
Balance sheet of the last three years Capital and Liabilities
March ’05 March ’06 March ‘07
Total Share Capital
Equity Share Capital Preference Share Capital Reserves Revaluation Reserves Net Worth Deposits Borrowings Total Debt
121.25 0.00 856.79 0.00 978.04
121.27 0.00 989.86 0.00 1,111.13
121.35 0.00 1,117.27 0.00 1,238.62
10,837.06 13,243.16 14,037.44 243.66 11,080.72 182.69 420.74
13,425.85 14,458.18 424.19 534.05
Other Liabilities & Provisions 483.68 Total Liabilities
12,542.44 14,961.17 16,230.85
Cash & Balances with RBI Balance with Banks, Money at Call Advances Investments Gross Block Accumulated Depreciation Net Block Capital Work In Progress Other Assets Total Assets
6,287.44 4,555.72 196.21 99.66 96.55 0.00 230.25
7,791.57 5,548.58 219.52 115.21 104.31 0.00 302.10
9,552.68 5,048.16 235.50 128.68 106.82 0.00 361.68
12,542.44 14,961.17 16,230.85
Contingent Liabilities 2,040.08 2,412.70 3,427.90
Bills for collection
Book Value (Rs)
Profit and loss account for the year ended 31st march, 2007
Table no.9 (ooo’s omitted) For the year ended 31.03.2005 Rs. I. INCOME Interest earned Other income Total II. EXPENDITURE Interest expended Operating expenses Provisions contingencies Total III. PROFIT Net profit for the year Transferred Investment Fluctuation Reserve Profit brought forward 24 Total IV. APPROPRIATIONS Transfer to Statutory 90,00,00 Reserve Transfer to Capital 0 1,25,46 1,38,21 106,00,00 107,00,00 147,14,88 95 296,04,34 5,87 177,09,31 147,14,88 176,03,39 120,00,00 177,03,44 0 from 0 913,93,55 1008,80,49 1253,48,87 523,04,35 197,33,01 and 193,56,19 652,06,63 204,48,11 152,25,75 836,39,05 237,54,52 179,55,30 839,93,33 221,14,86 1061,08,19 1018,03,73 166,80,15 1184,83,88 1256,25,04 174,27,27 1430,52,31 For the year ended 31.03.2006 Rs. For the year ended 31.03.2007 Rs.
Reserve Transfer to Revenue 28,25,00 Reserve Transfer Funds Transfer to Proposed 24,24,81 dividend Transfer to Tax on 3,44,12 proposed dividend Balance carried over 95 to Balance Sheet Total Number year average) Earning per share (Rs per share of Rs. 10/each -see note No: 5 of schedule 17) Basic & Diluted Notes on account Accounting Policies 34.06 14.52 14,60 of outstanding during the (Weighted 147,14,88 shares 4320,67,43 296,04,34 12,12,53,663 177,09,31 12,12,62,417 5,87 2,29 5,10,20 7,21,78 36,37,81 42,47,03 to Other 1,20,00 1,50,00 0 145,75,00 19,00,00
THE KARNATAKA BANK LIMITED: REGD & HEAD OFFICE: MANGALORE -575002 UNAUDITED QUARTERLY FINANCIAL RESULTS FOR THE THREE MONTHS ENDED 31.12.2007 Rs in Lakhs
UNAUDITED Quarter ended 31.12.200 7 1 Interest Earned (a+b+c+d) 40546 31.12.200 6 32199 Nine months ended 31.12.200 7 115011 31.12.200 6 90305 AUDITED Year Ended 31.03.2007 125625
Interest/Discoun t on advances/bills Income on Investments Interest on balances with Reserve Bank of India and other inter bank funds Others Other Income TOTAL INCOME (1+2) Interest expended Operating expenses (i+ii) Employees Cost Other operating expenses TOTAL EXPENDITURE ((4+5) excluding provisions & Contingencies)
d) 2 3
33 7391 47937
425 3971 36170
83 17261 132272
450 13329 103634
487 17427 143052
Operating Profit before provisions & contingencies (3-6) Provisions (other than tax) and Contingencies Exceptional Items Profit (+)/Loss (-) from Ordinary Activities before tax (7-8-9) Tax Expense Net Profit (+)/Loss (-) from Ordinary activities after Tax (10-11) Extraordinary Items (net of tax expense) Net Profit (+)/Loss (-) for the period (12-13) Paid up equity share capital (Face Value Rs 10/-) Reserves excluding revaluation reserves (as per balance sheet of previous accounting year) Analytical Ratios Percentage of shares held by Government of India Capital Adequacy Ratio (%)
Earning per share (EPS) (Rs) a) Basic EPS b) Diluted EPS before Extraordinary items (net of Tax expense) b) ) Basic EPS Diluted EPS after Extraordinary items (net of Tax expense) * Not Annualised NPA Ratios as on date a) Gross NPA Net NPA b) % of Gross NPA % of Net NPA c) Return on Assets* Not Annualised Public Shareholding -No of Shares -Percentage of Share holding
37920 12825 3.56 1.23 0.38*
38943 11883 4.32 1.36 0.35*
37920 12825 3.56 1.23 1.05*
38943 11883 4.32 1.36 0.99*
38734 11604 3.95 1.22 1.15
12134354 8 100%
12126034 8 100%
12134354 8 100%
12126034 8 100%
Notes: 1. 1.The Board of Directors have taken the above financial results for the quarter ended 31st December 2007 on record at their meeting held on 30th January 2008. 2. The above results have been arrived at after considering usual and necessary provisions as per RBI guidelines. 3. Provision for Employees Benefits for the quarter has been made on an estimated basis pending actuarial valuation of the liability. Additional provision (if any) required to comply with AS 15 (Revised) of The Institute of Chartered Accountants of India has not been quantified. 4. The Bank has identified two-business segments viz Treasury and Other Banking Operations and the Geographic Segments consist of the Domestic Segment, as the Bank does not have any foreign branch. The segment results are annexed. 5. During the nine months ended December 31, 2007, the ESOP Committee of the Board of Directors has granted in aggregate 990200 stock options, grant date being 21.08.2007 and 05.10.2007, to the employees of the Bank under The Karnataka Bank Employees Stock Options Scheme 2006 (ESOS 2006) at an exercise price of Rs 50 per share. These stock options would vest within a period not exceeding three years in a graded manner i.e.40%, 30% and 30%. Accordingly the Bank has transferred a sum of Rs 278.45 lakh being the proportionate compensation expenses for the option of 40%. 6. Status of the shareholders complaints is as under: Complaints pending at the beginning of the quarter Nil Complaints received during the quarter 9 Complaints redressed during the quarter 9 Complaints pending at the end of the quarter Nil
Segmentwise Results PART A - Business Segment For the three months period ended 31.12.2007 Particulars Three Months ended 31.12.2007 7552 40385 47937 UNAUDITED Three Months Nine Months ended ended 31.12.2006 31.12.2007 Rs in Lakhs AUDITED Nine Months Year ended ended 31.3.2007 31.12.2006
a)Segment Revenue i) Treasury Operations ii) Other Banking Operations Total b)Segment Results i) Treasury Operations ii) Other Banking Operations Total Unallocated expenses Profit before Tax Income tax Extraordinary Profit/Loss Net Profit 516 11266 11782 684 11098 4195 0 6903 -1469 10462 8993 665 8328 2940 0 5388 Other Information Segment Assets i) Treasury Operations ii) Other Banking Operations iii) Unallocated Assets Total Assets Segment Liabilities i) Treasury Operations ii) Other Banking Operations iii) Unallocated Liabilities Total Liabilities 1842974 1568073 1842974 1568073 1622252 181261 1646459 15254 199959 1342752 25362 181261 1646459 15254 199959 1342752 25362 149194 1438508 34550 1842974 1568073 1842974 1568073 1622252 188232 1638368 16374 206930 1349542 11601 188232 1638368 16374 206930 1349542 11601 156165 1448563 17524 -2326 33358 31032 2076 28956 10860 0 18096 -1523 26346 24823 1951 22872 7845 0 15027 -4322 34294 29972 2692 27280 9577 0 17703 5034 31136 36170 17622 114650 132272 16946 86688 103634 19867 123185 143052
Karnataka Ltd. a premier private sector Bank in India, incorporated in the year 1924 with a modest capital of Rs.11,580 has grown by leaps and bounds in key areas of banking thanks to its Shareholders, Customers and well wishers. Karnataka Bank Ltd. has registered a net profit of Rs. 180.96 crore for the 9 months period ended 31st December 07 as against Rs. 150.27 crore for the corresponding period last year, showing an increase of 20.42%. The profit for the third quarter showed an increase of 28.12% over corresponding quarter of the previous year from Rs.53.88 crore to Rs.69.03 crore. On a year-on-year basis, the total business growth was at 17.62% with deposit growth of 16.76% and advances growth of 18.96%. As at 31st December 2007, the deposits stood at Rs.15903 crore and advances at Rs.10414 crore as against Rs. 13620 crore and Rs.8754 crore as at 31st December 2006. The aggregate investments stood at Rs. 5748 crore as at 31st December 2007. The CD ratio stood at 65.48%. The net interest income for the nine months period has increased from Rs.291 crore to Rs. 351 crore. The Capital Adequacy ratio stood at 13.11%. The net NPA stood at 1.23% as at 31st December 2007 compared to 1.36% of the corresponding period of the previous year. Return on assets stands at 1.41%. As on date, all the 416 branches are networked under core banking solution covering 100% business.
The Banking industry has been undergoing rapid changes reflecting a number of underlying developments. As early as in March 2000, when all traditional banks were busy discussing their IT strategies, we did exactly what any foreword looking bank should have done we decided to go for core banking e-platform for gaining business agility and a competitive advantage in the market place. Today, Karnataka Bank has over 419 branches situated in important locations spread over 19 states and 2 union territories of the country connected to the Data Centre in Bangalore. The state-of-the-art "Finance", centralized core banking solution, provided by Infoys, Bangalore, was chosen by us to set up a core banking e-platform to replace our legacy system. Today all our computerized branches are offering anywhere banking facility to their customers and all transactions are done through the data center on online real time basis.
B.S. Raman M.L. Seth V.B. Hansa Banking Theory Money banking and International Trade Banking Theory
83rd Annual Report of Karnataka Bank Ltd.
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