Business Standard

KARNATAKA BANK@100: SMALL IS BEAUTIFUL

- (Amol Agrawal teaches at Ahmedabad University and has written a book on history of Banking in South Canara District)

Banks celebratin­g their centenarie­s is a tremendous and a rare feat. It is even rarer to see a small bank celebratin­g their centenary.the business of banking is highly dependent on the vagaries of the business cycles and in a 100-year period multiple such cycles take place. Even with the government­s and the regulators bailing out banks, many banks close down. If a bank does manage to complete it centenary, it is expected to be a large bank. Karnataka Bank bucks the trend by completing its centenary as a small bank.

Karnataka Bank was establishe­d in 1924 by B.r.vyasaraya Achar, a high court lawyer from Mangalore, then par t of South Canara District. Interestin­gly, the bank was on the same street which gave birth to Canara Bank (in 1906) as well. Infact, both the banks were part of larger galaxy of twenty two banks that were establishe­d in South Canara District. Out of the twenty-two banks, four banks became national-level banks and one Karnataka Bank continued to function as a private sector bank. Given its contributi­on to Indian banking, South Canara was called as cradle of Indian banking. The bank was formed to spread banking in larger Karnataka area (State of Karnataka was not formed yet).the bank started with a paid-up capital was a Rs. 11,580. The smallness of the initial capital base of Karanataka Bank is highlighte­d by the fact that nearly 120 years ago, Presidency Bank of Bengal was establishe­d with a paid up capital of Rs 50 lakhs. The Reserve Bank of India (RBI) was establishe­d in 1935. By then, Karnataka Bank’s capital had increased to Rs 1.5 lakhs, deposits were Rs 16 lakhs and had three branches. The Bank was placed in list of ‘B’ category banks, banks whose paid-up capital and reserves were between Rs 1 lakh and Rs 5 lakhs.

In 1938, the failure of Travancore National and Quilon Bank created havoc in the banking system especially banks in the South. There was a need for a rigorous banking law to reform the banking system. Due to the Second World War and Independen­ce, the law was delayed. Finally, in 1949, Banking Regulation Act (B.R. Act) was enacted which mandated that all the commercial banks, existing and new, were to seek licence from RBI and be listed in the second schedule of RBI Act (1934). In the same year, Karnataka bank completed its Silver Jubilee had capital of Rs 3.75 lakhs, deposits of Rs 55 lakhs and 9 branches.

The Bank gradually brought its balance sheet and practices as per B.R. Act and was included in the second schedule in 1958. Soon thereafter, another major Southern bank – Palai Central Bank- failed in 1960. The failure led the Government to introduce Deposit Insurance in 1962. The RBI also encouraged smaller Southern banks to merge with larger better-managed banks. Karnataka Bank also merged three banks Sringeri Sri Sharda Bank, Chitladurg Savings Bank and Bank of Karnataka- all three from different places in State of Karnataka. Really interestin­g how Karnataka Bank merged Bank of Karnataka!

In 1969, the government nationalis­ed 14 major private banks in the country.the government decided that all the banks with deposits of Rs 50 crore shall be nationalis­ed. Two banks from South Canara were nationalis­ed – Canara Bank and Syndicate Bank. It was really remarkable that these two banks from a remote region were in the list of other private banks from major regions of Bombay, Calcutta and Madras (older names). In 1969, the deposits of Karnataka Bank were Rs 12 crore. Out of 72 banks, Karnataka Bank ranked 32 in terms of deposits and its share in total deposits is 0.25 percent. The bank had 75 branches and it had given loans worth Rs 85 lakhs. In 1974, during its golden jubilee the bank’s deposits were Rs 33 crore and had 146 branches. The bank crossed 150 branches milestone, a year later. In 1977, the bank adopted its current logo designed by Dr. K. Shivarama Karantha, a noted Kannada writer & Jnanapeeth­a Awardee. In 1980, the government nationalis­ed 6 more private banks having deposits more than Rs 200 crores. Once again, two banks from South Canara – Vijaya Bank and Corporatio­n Bank- were nationalis­ed. The deposits of Karnataka Bank were Rs 115 crore. Its ranking was 36 (out of 72 banks) and contribute­d 0.28% of total deposits. In 1991, the Government ushered economic reforms and by then deposits of the bank had surged to Rs 502 crore. The Bank’s rank in terms of deposits was 32 (out of 52 banks) and contribute­d 0.27 percent of total deposits. As part of economic reforms, the government licenced new private banks. Karnataka Bank and other private banks were now categorize­d as Old Private Sector Banks.

In 1999, the bank celebrated its platinum jubilee and its deposits touched Rs 4382 crore. The bank started celebratin­g its foundation on 18th February of each year. A year later, the bank was listed on the National Stock Exchange.

Fast forward to its centenary, the Bank has excelled beyond imaginatio­n in a period which has been really eventful in not just India’s banking history but that of South Canara too.there are just two banks of South Canara that exist now: Canara Bank and Karnataka Bank. The other three nationalis­ed banks have been merged with other public sector banks.

In this long battled history, it is a stupendous achievemen­t that the Bank has never made a loss! In 2023, the bank had deposits worth Rs 87368 crore and its contributi­on was 0.5% of total deposits. The Bank’s Chairperso­n (part-time) is Mr. P Pradeep Kumar and its Managing Director & Chief Executive Office is Mr. Srikrishna­n Hari Hara Sarma. Karnataka Bank’s story reminds you of the classic tale of hare and tortoise where the tortoise achieves the milestones without trying to outpace the hare.

 ?? ?? Srikrishna­n H, MD & CEO, Karnataka Bank
Srikrishna­n H, MD & CEO, Karnataka Bank
 ?? ?? Pradeep Kumar Panja, Part-time Chairman, Karnataka Bank
Pradeep Kumar Panja, Part-time Chairman, Karnataka Bank
 ?? ?? Sekhar Rao, E.D., Karnataka Bank
Sekhar Rao, E.D., Karnataka Bank

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