Karnataka Bank’s total business crosses `1 trillion
The bank targets advances of `570 billion for 2018-19:
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.”
MARKETING & BRANDING
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.
THOROUGH DUE DILIGENCE
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