Kar­nataka Bank’s to­tal busi­ness crosses `1 tril­lion

The bank tar­gets ad­vances of `570 bil­lion for 2018-19:

Banking Frontiers - - Housing Hihglights - me­hul@bank­ingfron­tiers.com

The bank tar­gets ad­vances of `570 bil­lion for 2018-19

Kar­nataka Bank has re­ported its high­est ever quar­terly profit at `1.63 bil­lion, reg­is­ter­ing a growth of 22% in Q1,2018-19. The growth in ad­vances is 24.28% at `477.31 bil­lion in the quar­ter. The bank has recorded 28.36% an­nual loan growth in 2017-18, hav­ing out­stand­ing bal­ance of `482.45 bil­lion, with 445,200 ac­counts. The to­tal busi­ness turnover crossed the mile­stone of Rs1 tril­lion and stood at `1.101 tril­lion as on 31 March 2018, which rep­re­sents a yoy growth of 17.59%.

Ac­cord­ing to the bank’s MD and CEO Ma­ha­balesh­wara MS, re­tail loans formed 45% of the to­tal ad­vances, while agri­cul­ture sec­tor ac­counted for 12.12%, mi­cro small en­ter­prises sec­tor for 20.01%, medium en­ter­prises sec­tor for 3.16%, hous­ing sec­tor for 12.10% and other per­sonal loans 5.49%.

Says he: “Dur­ing the last fi­nan­cial year, the hous­ing sec­tor un­der the re­tail loan seg­ment has recorded higher yoy growth of 16.60%. This is be­cause we had launched a special cam­paign for hous­ing loans, which re­sulted in ac­cel­er­ated credit flow to the sec­tor. The bank tied up with 5 builders dur­ing 2017-18 and the de­mand is yet to pick up.”

The bank fi­nances SMEs to meet their work­ing cap­i­tal re­quire­ments and of­fers term loans to ac­quire plant and ma­chin­ery. Ma­ha­balesh­wara is of the view that SMEs do not make much in­vest­ments in in­for­ma­tion tech­nol­ogy to drive pro­duc­tiv­ity.


The bank has deep pen­e­tra­tion in the south­ern states. In to­tal, it has 622 branches as at the end of 2017-18 in these states. Re­gion-wise, the bank has max­i­mum num­ber of re­tail bor­row­ers in Mysore, cor­po­rate bor­row­ers in Delhi, MSME bor­row­ers in Shiva­mogga and agri­cul­ture bor­row­ers in Mysore.

Of the to­tal amount of ed­u­ca­tion loans given by the bank, `1.25bil­lion (57.76%) was for stud­ies in In­dia and `912.5 mil­lion (42.07%) for stud­ies abroad. Of the to­tal ed­u­ca­tion loans amount­ing to `2.16 bil­lion, the en­gi­neer­ing stream got the high­est (52.93%) share, fol­lowed by man­age­ment (12.65%), med­i­cal (9.89%), nurs­ing (1.80%) and others (22.73%).


The bank has launched an agro pro­cess­ing scheme for pro­vid­ing fi­nan­cial as­sis­tance to units un­der food and agro pro­cess­ing sec­tor. Un­der the scheme, en­trepreneurs can get fund­ing for es­tab­lish­ment and/ or im­prove­ment of their units, re­pairs and ren­o­va­tions, ac­quir­ing ma­chin­ery/ve­hi­cles/ equip­ment/any fixed as­sets and for meet­ing the work­ing cap­i­tal re­quire­ments. Says Ma­ha­balesh­wara: “The re­sponse to the scheme is pos­i­tive with a to­tal fresh sanc­tion of 96 ac­counts amount­ing to `894.5 mil­lion and the to­tal out­stand­ing be­ing 95 ac­counts, amount­ing to `1.05 bil­lion as on 31 March 2018.”

The bank has al­ready in­tro­duced pa­per­less pro­cess­ing for its car fi­nance scheme and is now propos­ing to in­tro­duce the same sys­tem for its Con­trac­tor Mi­tra Scheme. Ma­ha­balesh­wara says the Con­trac­tor Mi­tra Scheme is in­tended to meet the im­me­di­ate fund re­quire­ments of con­trac­tors and for faster pro­cess­ing of pro­pos­als.


The Mar­ginal Cost of funds based Lend­ing Rate (MCLR) of the bank as of 31 March 2017 was 9.15% p.a., which was re­duced to 8.9% p.a. start­ing 1 April 2017 and fur­ther re­duced to 8.75% start­ing 01 Novem­ber 2017 aim­ing to have a fair pric­ing of in­ter­est rates in the mar­ket. Says Ma­ha­balesh­wara: “With a view to aug­ment our re­tail port­fo­lio, par­tic­u­larly the home loan seg­ment, the pric­ing of in­ter­est rates was linked to 6 month MCLR in­stead of 1 year MCLR. The rate of in­ter­est un­der car loan was also re­duced by 75 bps.”


The bank is in the process of im­ple­ment­ing a trans­for­ma­tion project with Bos­ton Con­sul­tancy Group as its part­ner. The project en­vis­ages sev­eral pro­mo­tional and mar­ket­ing ac­tiv­i­ties dur­ing 2018-19. Ma­ha­balesh­wara says these ac­tiv­i­ties in­clude set­ting up of canopies at prom­i­nent lo­ca­tions, or­ga­niz­ing mar­ket­ing events for pro­mot­ing var­i­ous prod­ucts, health check­ups/blood do­na­tion camps, con­duct­ing var­i­ous com­pe­ti­tions for chil­dren with the in­ten­tion of show­cas­ing the bank’s brand and its prod­ucts. The bank will also par­tic­i­pate in events like prop­erty ex­pos.


The bank has been able to bring down its gross NPAs to 4.72% in Q1 2018-19 from 4.92% in the cor­re­spond­ing pe­riod of the pre­vi­ous year, while net NPAs de­clined to 2.92% (com­pared to 2.96%). Pro­vi­sions for bad loans in Q1 this year de­creased by 1.43% to `1.93 bil­lion, com­pared to `1.96 bil­lion re­ported in the same pe­riod of the pre­vi­ous year. Pro­vi­sion cov­er­age ra­tio im­proved to 57.21% for the quar­ter ended

June 2018 from 54.56% in the March quar­ter. Net NPAs of the bank was 2.64% a year ago. Fur­ther, CD ra­tio has in­creased to 76.1% from 68.3% as on 30 June 2017.

“The high­est ever quar­terly profit, his­tor­i­cally high CD ra­tio, re­duc­tion in slip­pages, mod­er­at­ing NPAs, im­proved NIM and NII are clear in­di­ca­tions of the ro­bust­ness of fu­ture growth prospects of the bank,” says Ma­ha­balesh­wara.

The bank is em­pan­el­ing ser­vice providers for ob­tain­ing Back­ground In­for­ma­tion Re­ports (BIRs) of bor­row­ers and ap­pli­cants. It has en­gaged 19 ser­vice providers so far for fur­nish­ing the BIRs. Their ser­vices are avail­able at nearly 80% of the branches. This pro­ce­dure will en­able screen­ing of ap­pli­cants hav­ing in­trin­sic weak­nesses at the en­try level it­self. Now, the bank has made it manda­tory for all loan ap­pli­cants to ob­tain of BIR wher­ever the ser­vice providers are avail­able.


The bank is also de­pend­ing on bu­reau scores from rec­og­nized credit in­for­ma­tion com­pa­nies to en­sure that the bor­row­ers have a de­pend­able credit his­tory and that there have not been any de­faults of delin­quen­cies on their part. In ad­di­tion, the bank also en­sures that bor­row­ers who ap­ply for loans above `500,000 do not fig­ure in the records of the Cen­tral Fraud Reg­istry (CFR) main­tained by RBI. Wher­ever prop­er­ties (non-agri­cul­tural) are of­fered as se­cu­rity, ex­is­tence of any prior charge on the same with CERSAI is be­ing ver­i­fied.

Ma­ha­balesh­wara men­tions that the bank’s credit mon­i­tor­ing depart­ment holds video con­fer­ences with the credit cells/ re­gional of­fices reg­u­larly to dis­cuss pos­si­ble stress of any ac­counts. The depart­ment also in­ter­acts with var­i­ous branches to mon­i­tor the po­si­tion on a daily ba­sis. The bank has also set up credit mon­i­tor­ing teams at all the re­gional of­fices to strengthen the credit mon­i­tor­ing sys­tem.


The bank ex­pects con­tin­u­a­tion of ex­ist­ing guide­lines by the reg­u­la­tors and author­i­ties. Ma­ha­balesh­wara says he has a pos­i­tive short to medium term outlook as a lender for the loans in met­ros, tier2 and tier 3 cities.

The bank’s net­work ex­pan­sion plan for 2018-19 in­cludes to­tal ser­vice out­lets to rise to 2235, com­pris­ing of 835 branches and 1400 ATMs. It has also fixed the tar­get of busi­ness turnover to be of `1.3 tril­lion, com­pris­ing de­posits of `730 bil­lion and ad­vances of `570 bil­lion for 2018-19.

Ma­ha­balesh­wara MS has a pos­i­tive short to medium term outlook for the bank for loans in met­ros, tier 2 and tier 3 cities

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