BHANDARKARS ARTS AND SCIENCE

COLLEGE, KUNDAPUR

CERTIFICATE
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

Titled

PROJECT

REPORT

PERFORMANCE EVALUATION OF KARNATAKA BANK

MANGALORE

has

been

prepared

by

him

in

ON
LTD.,

partial

fulfi llment 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.

Guide

Date:
Place: Kundapura

Head of the Department of

Comm erce and Business
Managem ent

Principal

BHANDARKARS ARTS AND SCIENCE

COLLEGE, KUNDAPUR

DECLARATION
I

Mr.

PRAVEEN

KUMAR

BHANDARKARS

ARTS

KUNDAPUR, Final Year

SHET TY ,

AND

SCIENCE

student

of

COLLEGE,

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,

Commerce and Business Management.

Date:
Place: Kundapura

Department

of

(MR. PRAVEEN KUMAR SHETTY)

EXECUTIVE SUMMARY
Name of the organization :

Karnataka Bank Ltd. Mangalore

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.

ACKNOWLEDGEMENT
I am very much beholden to Mangalore University for this
wonderful opportunity to undertake the Project Study as a part of
the fulfillment of Bachelors Degree in Business Management.
My grateful thanks are due to Prof. Narayan Rao. The
Principal, Bhandarkars 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.

Submitted By

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 fulfi llment for the
requirement of the Bachelors 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

INDUSTRY PROFILE
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 Americans. 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. .

-1-

HISTORY
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.

-2-

 Definition
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
mans parlance it is definitely a social service.

-3-

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.

Post-Independence
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.

-4-

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.

Nationalisation
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

-5-

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.

Liberalisation
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

-6-

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.

-7-

COMPANY PROFILE
a) Back ground and inception of the company.
Karnataka Bank Ltd, a leading A Class scheduled commercial Bank
in India, was incorporated on Feb 18 th 1924 with a registered office at
Mangalore. The Bank commenced its business on 23 rd 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

-8-

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 countrys 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 27 th

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 1st April 1995. The Bank made it into the stock markets on

-9-

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

-10-

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

-11-

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, Childrens 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 Banks 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

-12-

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/remodeling- Maximum 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.

-13-

 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

Accountants,

Engineering Consultants the maximum quantum of Advance is

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

-14-

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.

-15-

 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

-16-

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 .

-17-

 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

-18-

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 Kisans 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

Kisan Seva

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

-19-

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.

-20-

PRODUCTS
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,

-21-

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

-22-

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.

-23-

DEPOSIT PRODUCTS:
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.
Fixed deposits
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.
Soulabhya Deposit
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.

-24-

 Cumulative deposit
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.

K-Flexi Deposit
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.

-25-

 NRI Services
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.

-26-

Ownership Pattern
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

Category

Category of

Number of

code

shareholders.

shareholders.

Total
number of
shares

Number of
shares held in
dematerialized
form

As a % of
total
number of
shares
As a % of
A&B

Shareholding of
A

promoters and

3318446

3318446

2.74

promoters Group

Public
shareholding

(1)

Institutions

(a)

Mutual

-27-

Funds/UTI

(b)

Financial

518584

518584

0.43

1386231

1386231

1.14

39

36968417

36968417

30.47

Any other

Sub-Total (B)(1)

60

42191678

42191678

34.78

983

15675120

15675120

12.91

institutions/Banks

Central
(c)

Government/State
Government

(d)

(e)

(f)

(g)

(h)

Venture Capital
Funds

Insurance
Companies

FIIs

Foreign Venture
Capital Investors

(2)

Non-Institutions

(a)

Bodies Corporate

-28-

Individualsshareholders
(b)

holding nominal

67226

43932427

24563463

36.21

673

19544323

16265423

16.10

68882

79151870

56052195

65.22

68942

121343548

98243873

100.00

68942

121343548

98243873

100.00

share capital of
upto Rs. 1 lakh

ii. Individualsshareholders
holding nominal
share capital in
excess of Rs. 1
lakh

Sub-Total (B)(2)

Total Public
shareholding
(B)=(B)(1)+(B)(2)

TOTAL(A)+(B)

-29-

Competitors Information
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
banks 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

-30-

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.

-31-

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 Bangalorebased, 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.

-32-

Infrastructural Facility
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:

-33-

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
Customer

Deposit

Application Review
and documentation

Processing

Cash
Cheque
Draft
Savings
Account
Current

Accounts
Department

Work Done
-34-

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 its 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

-35-

deposits prior 7 days notice to be given, but todays 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
Customers

Customer Specific
Requirement

Filling of Application

Application Review

Decision
Reject
Documentation

Loan Disbursement

Repayment of interest

-36-

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 wont 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

-37-

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.

Mckensys7s 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 Mckensys and
company. The 7S 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.

The

McKinsey Consulting Firm identified strategy as only one of seven

elements exhibited by the best managed companies.
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

-38-

Chart No: 3
Chart showing

Mckensys 7S Model

The functioning of Karnataka Bank Ltd can be better understood

with the help of following 7s
The 7S are
Structure
Skill
Style
Strategy
Staff
Shared Values

-39-

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 superior-subordinate 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 personnels. 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

-40-

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 companys 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

-41-

Institute of Bank Management, Pune, Institute of Development and

Research

in

Banking

Technology,

Hyderabad.

Whenever

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 Sub
Staff
709

3)

517

At bankers Training
College (RBI) & other
Training colleges ( Officers )

At Work
shops &
Seminars.

260

455

68

Style
It is one of the seven levers which the top management can use to
bring about change in the organization. According to MC Kinseys
Framework, Becomes evident through the patterns of action taken
by the members of the top management team over a period of time.
The MC Kinseys 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
-42-

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.

-43-

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

-44-

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

Recruited during the year 74

-45-

Clerks

SubStaff

Total

2068

794

4456

198

32

304

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

-46-

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

senior

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 better it is one of the few banks which uses finacal
softwares.
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

-47-

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.

-48-

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 its 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.

-49-

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 datas are mentioned below
Table No: 3
Table Showing the performance highlights of the Bank for the year
2006-2007
(Rs. In Crore)

Particulars.

As on /for the year

As on /for the year

ended 31.03.2007

ended 31.03.2006

Deposits

14037.44

13243.16

Advances

9552.68

7791.57

Investments

5048.16

5548.58

Total Income

1430.52

1184.84

Operating Profit

356.58

328.29

Net Profit

177.03

176.03

-50-

 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 31 st March 2007 stood at Rs.
5048.16 Crores as against Rs. 5548.58 Crores as on 31 st 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.

-51-

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
2006-2007
Appropriation

Rs. . in crore

Transfer to Statutory Reserves

107.00

Transfer to Capital Reserves

1.38

Transfer

to

Revenues

and

19.00

General Reserves
Transfer to Proposed Dividend

49.69

Balance Carried to Balance 0.02

sheet
Total

177.09

-52-

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

-53-

Table No:5
Table Showing Lending of the Bank to Priority Sector
(Rs. in lakh)
Number of
accounts at the
end of the year

Types of Advances

a) Agriculture

52219

Balance
outstanding at
the end of the
year
59295.59

b) Small Scale Industries 6549

of which Export Credit
to SSI units

115920.91

c)

5935.99

Setting up of
Industrial Estate

the 4

d) Small Business Finance

5398

3896.81

e) Professional & Self 4429

Employed

2766.27

f) Transport Operation

5456

13404.78

g) Education

2378

3715.53

h) Retail Trade

13755

14148.87

i) Housing Loans

11870

79542.43

j) Consumption loans

1627

781.65

k) Self Help Group

1018

452.46

l) Food Processing

63

6028.28

Total

104766

305889.57

Export Finance excluding

export credit to small scale
industrial units

915

71603.36

-54-

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

-55-

Table No: 5
Table showing Total Advances to Total Deposits ratio
(000s omitted)
Particulars.

Mar 07

Mar 06

Total Advances (Rs.)

9552,67,99

Total Deposits (Rs.)

14037,43,54 13243,16,04 10837,05,81

Total Advances to Total 0.6805

7791,56,78

Mar 05

0.5883

6287,44,06

0.5802

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

-56-

Total Deposits
Table No: 6
Table Showing the Total Investments to Total Deposits Ratio
(000s omitted)
Particulars.

Mar 07

Mar 06

Mar 05

Total Investments (Rs.)

5048,16,44

5548,58,07

4555,71,67

Total Deposits (Rs.)

14037,43,54 13243,16,04 10837,05,81

Total Investments to

0.3596

0.4189

0.4203

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

-57-

Net Advances
Table No: 7
Table Showing the Net Non-Performing Assets to Net Advances Ratio
Particulars.

Mar 07

Mar 06

Mar 05

Net NPA (Rs in lakh)

11602.50

9151.19

14329.54

7791.57

6287.44

1.1744

2.2790

Net Advances (Rs. in 955267.99

crores)
Net NPA to Net

1.2145

Advances
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

-58-

Table No: 8
Table Showing the Return on Total Assets Ratio
(000 Omitted)
Particulars.

Mar 07

Mar 06

Net Profit after Tax (Rs.)

1770344

Total Assets (Rs.)

162225162 149532729

Net Profit after Tax to 1.0912

1760339

1.1772

Mar 05
1471464
125267181
1.1746

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

-59-

Table No: 9
Table Showing the Earnings per Share Ratio
(000s omitted)
Particulars.
Net Profit available

Mar 07
1770931

Mar 06
1760434

Mar 05
1471488

for equity Shareholders. (Rs )

Number of Equity Shares

121262.41 121253.66

43206.743

EPS (Rs. )

14.60

34.05

14.518

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

-60-

functions such as planning, organising, controlling and directing. Besides

usual functions such as wage and salary administration.

I learnt about what is NPAs 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/

-61-

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 Banks Annual Report 2004-2007.

3.

Magazines and Brochures of Karnataka Bank.

4.

Souvenir of the Bank.

5.

www.karnatakabank.com

6.

www.rbi.org

-62-

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.

-63-

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.

-64-

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.

-65-

SUBSIDIARY SERVICE OF
KARNATAKA BANK

Demand Draft

Mail Transfer

Telegraphic Transfer

Pay Order

Safe Locker Facility

Safe Custody Services

Multi Branch Banking

-66-

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.

-67-

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.

-68-

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

-69-

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

-70-

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.

-71-

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.

-72-

ANNEXURE
Balance sheet of the last three years
Capital and Liabilities
March 05 March 06

March 07

Total Share Capital

121.25

121.27

121.35

Equity Share Capital

121.25

121.27

121.35

Preference Share Capital

0.00

0.00

0.00

Reserves

856.79

989.86

1,117.27

Revaluation Reserves

0.00

0.00

0.00

Net Worth

978.04

1,111.13

1,238.62

Deposits

10,837.06 13,243.16 14,037.44

Borrowings

243.66

182.69

Total Debt

11,080.72

13,425.85 14,458.18

Other Liabilities & Provisions 483.68

Total Liabilities

424.19

420.74

534.05

12,542.44 14,961.17 16,230.85

Assets
-73-

Cash & Balances with RBI

687.68

535.39

826.82

684.80

679.22

334.69

Advances

6,287.44

7,791.57

9,552.68

Investments

4,555.72

5,548.58

5,048.16

Gross Block

196.21

219.52

235.50

Accumulated Depreciation

99.66

115.21

128.68

Net Block

96.55

104.31

106.82

Capital Work In Progress

0.00

0.00

0.00

Other Assets

230.25

302.10

361.68

Total Assets

12,542.44 14,961.17 16,230.85

Balance with Banks, Money at

Call

Liabilities
Contingent Liabilities

2,040.08

2,412.70

3,427.90

Bills for collection

363.36

463.09

672.88

Book Value (Rs)

80.66

91.62

102.07

Profit and loss account for the year ended 31st march, 2007

-74-

Table no.9
(ooos omitted)
For the year

For the year

For the year

ended

ended

ended

31.03.2005

31.03.2006

31.03.2007

Rs.

Rs.

Rs.

I. INCOME
Interest earned

839,93,33

1018,03,73

1256,25,04

Other income

221,14,86

166,80,15

174,27,27

Total

1061,08,19

1184,83,88

1430,52,31

Interest expended

523,04,35

652,06,63

836,39,05

Operating expenses

197,33,01

204,48,11

237,54,52

and 193,56,19

152,25,75

179,55,30

913,93,55

1008,80,49

1253,48,87

147,14,88

176,03,39

177,03,44

120,00,00

Profit brought forward 24

95

5,87

Total

296,04,34

177,09,31

106,00,00

107,00,00

1,25,46

1,38,21

II. EXPENDITURE

Provisions
contingencies
Total
III. PROFIT

Net profit for the year

Transferred

from 0

Investment
Fluctuation Reserve
147,14,88

IV.
APPROPRIATIONS
Transfer to Statutory 90,00,00
Reserve
Transfer

to

Capital 0
-75-

Reserve
Transfer to Revenue 28,25,00

145,75,00

19,00,00

1,50,00

36,37,81

42,47,03

5,10,20

7,21,78

5,87

2,29

296,04,34

177,09,31

12,12,53,663

12,12,62,417

14.52

14,60

Reserve
Transfer

to

Other 1,20,00

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

147,14,88
of

shares 4320,67,43

outstanding during the

year

(Weighted

average)
Earning per share (Rs
per share of Rs. 10/each -see note No: 5
of schedule 17)
Basic & Diluted

34.06

Notes on account
Accounting Policies

-76-

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

AUDITED

Nine months ended

Year
Ended

31.12.2007

31.12.2006

31.12.2007

31.12.2006

31.03.2007

Interest Earned
(a+b+c+d)

40546

32199

115011

90305

125625

a)

Interest/Discount
on
advances/bills

28862

21226

81930

57574

81352

b)

Income on
Investments

11383

10308

32210

30717

41270

c)

Interest on
balances with
Reserve Bank of
India and other
inter bank funds

268

240

788

1564

2516

d)

Others

33

425

83

450

487

7391

3971

17261

13329

17427

47937

36170

132272

103634

143052

28966

21695

79930

61205

83639

6823

5528

20736

17257

23755

3817

3024

11853

9733

12909

3006

2504

8883

7524

10846

2
3

4
5

Other Income
TOTAL INCOME
(1+
2)
Interest expended
Operating
exp
ense
s
(i+ii
)

i)
ii)

Employees Cost
Other operating
exp
ense
s

-77-

9
10

11

TOTAL
EXPENDITURE
((4+5) excluding
provisions &
Contingencies)
Operating Profit
befo
re
prov
isio
ns
&
cont
inge
ncie
s (36)
Provisions (other
than
tax)
and
Con
ting
enci
es
Exceptional Items
Profit (+)/Loss (-)
fro
m
Ordi
nary
Acti
vitie
s
befo
re
tax
(78-9)
Tax Expense

35789

27223

100666

78462

107394

12148

8947

31606

25172

35658

1050

619

2650

2300

8378

11098

8328

28956

22872

27280

4195

2940

10860

7845

9577

-78-

12

Net Profit

6903

5388

18096

15027

17703

6903

5388

18096

15027

17703

12135

12127

12135

12127

12135

(+)/
Los
s (-)
fro
m
Ordi
nary
acti
vitie
s
after
Tax
(1011)
13

Extraordinary
Item
s
(net
of
tax
exp
ense
)

14

Net Profit
(+)/
Los
s (-)
for
the
peri
od
(1213)

15

Paid up equity
shar
e
capi
tal
(Face Value Rs
10/-)

-79-

16

111727

Nil

Nil

Nil

Nil

Nil

13.11

11.83

13.11

11.83

11.03

Reserves
excl
udin
g
reva
luati
on
rese
rves
(as
per
bala
nce
shee
t of
prev
ious
acco
unti
ng
year
)

17
i)

Analytical Ratios
Percentage of
shar
es
held
by
Gov
ern
men
t of
Indi
a

ii)

Capital Adequacy
Rati
o
(%)

-80-

iii)

Earning per
sha
re
(EP
S)
(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

iv)

18

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

5.69*
5.68*

4.44*
4.44*

14.91*
14.88*

12.39*
12.39*

14.60
14.60

5.69*
5.68*

4.44*
4.44*

14.91*
14.88*

12.39*
12.39*

14.60
14.60

37920
12825
3.56
1.23
0.38*

121343548
100%

38943
11883
4.32
1.36
0.35*

121260348
100%

-81-

37920
12825
3.56
1.23
1.05*

121343548
100%

38943
11883
4.32
1.36
0.99*

121260348
100%

38734
11604
3.95
1.22
1.15

121343548
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

-82-

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

UNAUDITED
Three Months Nine Months
ended
ended
31.12.2006
31.12.2007

Three
Months
ended
31.12.2007

Rs in Lakhs
AUDITED
Nine Months Year ended
ended
31.3.2007
31.12.2006

a)Segment Revenue
i) Treasury Operations

7552

5034

17622

16946

19867

ii) Other Banking

Operations

40385

31136

114650

86688

123185

Total

47937

36170

132272

103634

143052

516

-1469

-2326

-1523

-4322

ii) Other Banking

Operations

11266

10462

33358

26346

34294

Total

11782

8993

31032

24823

29972

684

665

2076

1951

2692

11098

8328

28956

22872

27280

4195

2940

10860

7845

9577

6903

5388

18096

15027

17703

b)Segment Results
i) Treasury Operations

Unallocated expenses
Profit before Tax
Income tax
Extraordinary
Profit/Loss
Net Profit

Other Information
Segment Assets
i) Treasury Operations
ii) Other Banking
Operations

188232

206930

188232

206930

156165

1638368

1349542

1638368

1349542

1448563

16374

11601

16374

11601

17524

1842974

1568073

1842974

1568073

1622252

181261

199959

181261

199959

149194

1646459

1342752

1646459

1342752

1438508

15254

25362

15254

25362

34550

1842974

1568073

1842974

1568073

1622252

iii) Unallocated Assets

Total Assets
Segment Liabilities
i) Treasury Operations
ii) Other Banking
Operations
iii) Unallocated
Liabilities
Total Liabilities

-83-

CONCLUSION
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.

-84-

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.

-85-

BIBILIOGRAPHY
B.S. Raman

Banking Theory

M.L. Seth -

Money banking and International Trade

V.B. Hansa -

Banking Theory

83rd Annual Report of Karnataka Bank Ltd.

-86-