praveen kumar shetty (karnataka bank project)

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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 “A PROJECT REPORT ON PERFORMANCE EVALUATION OF KARNATAKA BANK LTD., MANGALORE” has been prepared by him in partial fulfillment for the requirement of the Bachelors Degree in Business Management, to be submitted to Mangalore University, under the supervision and guidance of Ms. MAMATHA, Lecturer, Department of Commerce and Business Management.

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Page 1: Praveen Kumar Shetty (Karnataka Bank Project)

Head of the Department of Commerce and Business

Management

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 “A PROJECT REPORT

ON PERFORMANCE EVALUATION OF KARNATAKA BANK

LTD., MANGALORE” has been prepared by him in partial

fulfillment for the requirement of the Bachelors Degree

in Business Management, to be submitted to Mangalore

University, under the supervision and guidance of Ms.

MAMATHA, Lecturer, Department of Commerce and

Business Management.

Guide Principal

Date:Place: Kundapura

Page 2: Praveen Kumar Shetty (Karnataka Bank Project)

BHANDARKARS’ ARTS AND SCIENCE

COLLEGE, KUNDAPUR

DECLARATION

I Mr. PRAVEEN KUMAR SHETTY , a student of

BHANDARKARS’ ARTS AND SCIENCE COLLEGE,

KUNDAPUR, Final Year B. B. M. 2007-08 do hereby

declare that this project report Titled “A PROJECT REPORT

ON PERFORMANCE EVALUATION OF KARNATAKA BANK LTD.,

MANGALORE” is my original work and that it has not

previously formed the basis for the reward of any

Degree / Diploma or other similar title.

This project is been prepared by me in partial fulfillment for the

requirement of the Bachelors Degree in Business Management, to

be submitted to Mangalore University, under the supervision and

guidance of Ms. MAMATHA, Lecturer, Department of

Commerce and Business Management.

Date:Place: Kundapura

Page 3: Praveen Kumar Shetty (Karnataka Bank Project)

(MR. PRAVEEN KUMAR SHETTY)

Page 4: Praveen Kumar Shetty (Karnataka Bank Project)

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.

Page 5: Praveen Kumar Shetty (Karnataka Bank Project)

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 Bachelor’s Degree in Business Management.

My grateful thanks are due to Prof. Narayan Rao. The

Principal, Bhandarkar’s Arts and Science College for extending

the necessary support in the preparation of this project.

A particular word of thanks is due to Prof. Shantharam,

H.O.D. of Commerce and Business Management and other faculty

members for their useful tips and encouragement. My esteemed

guide, Ms. Mamatha, Lecturer in Business Management, deserves

all appreciation and thanks for patiently and efficiently guiding

me throughout the preparation of this project.

I thank Mr. V.S.N. Karanth, Deputy General Manager, K.

Manoha,Chief Manager Mr. Sham Bhat, Manager and Ms. Sudha,

Officr Karnataka Bank Ltd. for giving me the opportunity to do my

summer training at their organization.I am extremely grateful to

Mr. Vijay Shanker Rai, AGM, Karnataka Bank Ltd. Mumbai, for his

words of wisdom, encouragement and the interest he had to

Page 6: Praveen Kumar Shetty (Karnataka Bank Project)

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.

Page 7: Praveen Kumar Shetty (Karnataka Bank Project)

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 fulfillment for the

requirement of the Bachelor’s Degree in

Business Management.

Page 8: Praveen Kumar Shetty (Karnataka Bank Project)

BHANDARKARS’ ARTS AND SCIENCE COLLEGE, KUNDAPUR

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CONTENTS

1. Industry Profile 1-7

2. Company Profile 8-203. Products and

Services Profile21-62

4. Schemes Evolved by Karnataka Bank Ltd.

63-66

5. Subsidiary Services of Karnataka Bank

67-72

6. Annexure 73-81

7. Conclusion 82-83

8. Bibliography 84

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INDUSTRY PROFILEMoney 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 late-

18th century, there were hardly any bank in India in the modern sense of the

term. At the time of the American Civil War, a void was created as the supply

of cotton to Lancashire stopped from the American’s. Some banks were opened

at that time which functioned as entities to finance industry, including

speculative trades in cotton. With large exposure to speculative ventures, most

of the banks opened in India during that period could not survive and failed.

The depositors lost money and lost interest in keeping deposits with banks.

Subsequently, banking in India remained the exclusive domain of Europeans

for next several decades until the beginning of the 20th century. The first bank

which was established in India was General Bank of India which came into

existence in 1786 which was followed by the Bank of Hindustan. Both these

banks are now defunct. The oldest bank in existence in India is the State Bank

of India being established as "The Bank of Bengal" in Calcutta in June 1806. A

couple of decades later, foreign banks like Credit Lyonnais started their

Calcutta operations in the 1850s. At that point of time, Calcutta was the most

active trading port, mainly due to the trade of the British Empire, and due to

which banking activity took roots there and prospered. The first fully Indian

owned bank was the Allahabad Bank, which was established in 1865.

By the 1900s, the market expanded with the establishment of banks such

as Punjab National Bank, and Bank of India, in 1906, both of which were

founded under private ownership. The Reserve Bank of India formally took

over the responsibility of regulating the Indian banking sector from 1935. After

India's independence in 1947, the Reserve Bank was nationalized and was

given broader powers. .

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HISTORYThe 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.

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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

man’s parlance it is definitely a social service.

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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.

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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

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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

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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.

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COMPANY PROFILEa) Back ground and inception of the company.

Karnataka Bank Ltd, a leading ‘A’ Class scheduled commercial Bank

in India, was incorporated on Feb 18th 1924 with a registered office at

Mangalore. The Bank commenced its business on 23rd May 1924 with

an Initial Paid up Capital of Rs. 11,580 contributed by 113

shareholders. Sri.B.R.Vyasaraya Achar was the first president of the

Bank. The Banks Memorandum of Association in its Objective

Clause states that the Bank apart from carrying on the general function

of Banking business, would “set apart and appropriate from the annual

net profit towards the general, mental, moral and physical

advancement of other beneficial purpose of the members of the

Dravidian Brahmin community, Such sums as may be deemed fit”.

The first three branches of the Bank were at Mangalore Dongerkery,

Madras George, and Udupi Car Street. Sri Kalmadi Gopal Krishna had

the distinguishion of becoming the first Branch Manager. At the end

of the Banks first year of operations the Banks deposits stood at Rs.

0.68 Lakhs and advances were Rs. 1.22 Lakhs. The Bank celebrated

its Silver Jubilee in the year 1949 in its Silver Jubilee year of

operation the Bank earned a net profit of Rs. 0.75 Lakhs with deposits

of Rs. 55.59 Lakhs and Advances of Rs. 39.39 lakhs. Sri.K.S.N.Adiga

became the chairman of the Bank on 23rd Nov 1958. The First real

recognition for the Mangalore based Bank came in the year 1959 with

the Bank being elevated from ‘C’ class to ‘B’ Class. In the stride of

progress and expansion, the Bank got reinforced by the takeover of 3

banks namely Shringeri Sharada Bank Ltd on 1st April

1960.,Chitradurga Bank Ltd on December 30th 1964, and Bank of

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Karnataka Ltd on Dec 29th 1966.,. In the year 1969 the Bank opened

its 75th branch where its deposits crossed Rs. 10 Crore mark to reach

Rs. 12.63 Crores, Advances were at Rs. 8.90 Crore and Net profits

were Rs. 3.05 Lakhs.

In year 1971 the Bank opened its first branch in the country’s financial

capital. The following year the Bank was elevated to ‘A’ class by the

Reserve Bank of India. In its Golden Jubilee year of its operation the

Banks total deposits were Rs. 33.14 Crores and Advances were Rs.

22.09 Crore with 146 branches and 126 employees. In 1977 Karnataka

Bank Ltd., adopted the star symbol as its unique visual identity

symbol. A product of Late Dr. Shivarama Karanth, it symbolises

stability, discipline, harmony and confidence. The Staff Training

College of the Bank was started at Mangalore Dongerkery on Sept 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 31-

12-1979. 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

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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

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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

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Today, personal finance is the fastest growing segment of banks credit

deployment. Among personal banking products, loans to salaried class,

occupies a prominent place. With this backdrop this loan product has

been modified from time to time

The purpose for which this loan scheme can be used are Purchase

household articles/consumer durables, Children’s Education, Marriage

and thread ceremony of self/dependents, Medical expenses of self\

dependents, Obsequies Expenses, Repair to own house and any other

Purpose as to the satisfaction of sanctioning authority

The quantum of loan provided shall be to a maximum of 10 times of the

monthly gross salary or composite credit limit consisting of fixed loan

and overdraft not exceeding 10 times of the monthly gross salary out of

which, the overdraft component shall not exceed 5 times of the gross

salary. The loan has to be repaid with interest within 5 Years.

KBL APNA GHAR

KBL Apna Ghar scheme was introduced in November 2001, duly

reviewing/ modifying Bank’s erstwhile housing finance scheme. The

terms and conditions of the scheme have been reviewed/ refined from

time to time.

The purpose for which loan can be provided are for construction of

house/purchase of ready built house or flat/purchase of site and build

house thereon. Renovation /remodeling/repairs to the existing house/flat.

The quantum of loan provided shall be to a maximum of 60 times of

latest monthly take home (net) salary in the case of salaried or 5 times of

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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.

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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

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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.

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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

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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 .

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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

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An individual applicant being a resident of rural/semi urban area, with a

definite source of income and sufficient means to meet the obligation on

demand is eligible to cover under the scheme.

Up to 25% of the annual income declared by the applicant and accepted

by the sanctioning authority for fixing up eligible credit limit. Cash flow

of the household need be insisted at the time of sanction and required

information may be called for at the time of Review / Renewal .For

women beneficiaries limit may be considered upto 35% of the annual

income declared and accepted by the sanctioning authority.

The facility should normally be valid for 24 months subject to an annual

review. The Review may result in continuation of the facility

/enhancement / reduction in limit (subject to limit of Rs.25,000/-) or

cancellation of the facility depending upon the performance of the

borrowal account.

KISAN SEVA KENDRAS (KSKs) of IOC

In order to reach diesel and other products in Kisan’s doorstep, it has

been decided to set up Kisan Seva Pumps in rural areas in line with

low cost retail outlets. These will be known as “ 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

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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.

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PRODUCTSMotor Spirit (MS i.e. petrol) facility:

The KSK are primarily meant to be having High Speed Diesel or HSD

facility. However, based on the potential of the site, the state HEAD ( of

the oil company) may take a decision to provide MS facility also

Other Products of IOC

The Kisan Seva Kendra will also sell lubricating oils or any other

products as decided by IOC from time to time to the customers.

Cost Investment by dealer

Rs.60 lakhs the sales building, driveway, fencing, other items such as fire

extinguisher etc.

Expected Sales volumes

DIESEL: 25 TO 50 KL per month

PETROL: facility to be provided only when minimum 10 KL

potential exists

( KL = kilo Litres, 1 KL = 1000 Litres )

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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

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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.

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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.

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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.

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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.

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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

Categor

y code

Category of

shareholders.

Number of

shareholder

s.

Total

number

of shares

Number of

shares held in

dematerialize

d form

Total

Shareholdin

g

As a % of

total

number of

shares

As a % of

A&B

A

Shareholding of

promoters and

promoters Group

0 0 0 0

BPublic

shareholding

(1) Institutions

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(a)Mutual

Funds/UTI9 3318446 3318446 2.74

(b)

Financial

institutions/Bank

s

9 518584 518584 0.43

(c)

Central

Government/Stat

e Government

0 0 0 0

(d)Venture Capital

Funds0 0 0 0

(e)Insurance

Companies3 1386231 1386231 1.14

(f) FIIs 39 36968417 36968417 30.47

(g)Foreign Venture

Capital Investors0 0 0 0

(h) Any other 0 0 0 0

Sub-Total (B)(1) 60 42191678 42191678 34.78

(2) Non-Institutions

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(a) Bodies Corporate 983 15675120 15675120 12.91

(b)

Individuals-

shareholders

holding nominal

share capital of

upto Rs. 1 lakh

67226 43932427 24563463 36.21

ii. Individuals-

shareholders

holding nominal

share capital in

excess of Rs. 1

lakh

673 19544323 16265423 16.10

Sub-Total (B)(2) 68882 79151870 56052195 65.22

Total Public

shareholding

(B)=(B)(1)+(B)

(2)

6894212134354

898243873 100.00

TOTAL(A)+(B) 6894212134354

898243873 100.00

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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

bank’s overall performance has been aptly described by Dr. C.

Rangarajan, the then Governor of Andhra Pradesh, while inaugurating the

KVB towers in Chennai as, “The Karur Vysya bank can be regarded as a

fine example of how a medium size bank can effectively play its part in

promoting regional development and in attending to the needs of small

and medium enterprise”.

Tamilnad Mercantile Bank Ltd:

Tamilnad Mercantile Bank Ltd is from Tuticorin. Its original incarnation

was as The Nandar Bank Ltd, promoted by a group of businessman in the

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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.

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Handling a volume of business not more than Rs 1.39lakh in the first

year, it could earn a net profit of Rs. 1019 and the next year it declared a

dividend of 12 percent. Though slow in expanding, it took a bold step in

taking over 12 small banks in 1964. The bank has carefully built up

relationship….Forever with its shareholders and Customers.

The South Indian Bank Ltd:

The South Indian Bank Ltd was born in Thrissur in 1929, two years after

the birth of Dhanalakshmi Bank Ltd. It has the record of taking over the

largest number of small banks-15 banks between 1961 and

1965.Amalgamating so many banks was intended a big task, considering

the difference in the nature of the business and the financial stature. But

in the process the bank could expand its business. Though it does not

have its own ATMs, it has tied up with Centurion Bank Ltd for sharing

their ATM network all over the country

The Vysa Bank Ltd:

The Bangalore–based, 72 year old bank, began its banking operation in a

small way like all other banks . It owes its formation to the effort made by

their founder directors, who were the businessman. The first chairman

was retired deputy commissioner of the Mysore state. The paid up capital

was only Rs.71000 in 1931. Till 1964 it was spreading activities into the

neighboring districts like Ananthpur, Bellary and Mysore. A branch was

opened in Madras during the year and paid up capital increased to Rs.

10.30 lakh.In 1979 , when the bank was celebrating its golden jubilee, its

capital base crossed the Rs 1 Crore mark and the deposits crossed the

Rs.100 crore level.

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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:

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Decision Making

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

-34-

Customer

Deposit

Application Review and documentation

Processing

Cash Cheque Draft Savings Account Current Acount

Accounts Department

Work Done

Page 56: Praveen Kumar Shetty (Karnataka Bank Project)

This is the work flow adopted by the bank at the time of receiving the

deposits from their customers.

The first step in this process is customer approaching the bank. When the

customers will have surplus money with them, they will be looking to

invest that money in some place where they can get good returns out of it.

Bank is one such place which accepts deposits from their customers and

pays interest on them. So the customers will be looking for that bank

which will pay them highest rate of interest on their deposits.

Once the customer identifies the bank where he is going to deposit his

amount, he has to go through the introduction stage, were the customer

needs to be introduced to the bank. He may be introduced to the bank by

the customer or an employee of that bank. He is asked for providing

documents like Ration card or any license for address, age & income

proof. Once the account is opened (i.e. Either S.B a/c, fixed deposits,

recurring deposits or current a/c) he/she will provide with facilities like

Cheque book, ATM or O.D if it’s a current a/c.

Once the customer opens an account in the bank he can deposit any

amount any number of times but in case of fixed deposit its one lump

sum amount deposited till its maturity it is not withdrawn. When amount

is deposited it goes to the hands of cashier and then to cash supervisor

and then to his account, but now due to CBS the entry is given within a

minute.

The depositors are eligible to withdraw the amount which is credited in

their account and not more than that unless it is current account.

Depositors can withdraw as an when they need but in case of fixed

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deposits prior 7 days notice to be given, but today’s banker will not ask

for any notice just give it in the spot with penalty. The process of

withdrawal is reverse of depositing where from his account it goes to cash

supervisor from him to cashier finally to the hands of customer, again

traditional work flow. Now all are computerized where in one person

does all the activity. Customer can directly withdraw in ATMs or can

directly issue Cheques to the other party.

Process Map Advances:

The various stages of granting loan to customers is depicted below

Chart No: 2

Chart Showing the process map advances of Karnataka Bank

-36-

Customers

Customer Specific Requirement

Filling of Application

Application Review

Decision

Reject

Documentation

Loan Disbursement

Repayment of interest

Page 58: Praveen Kumar Shetty (Karnataka Bank Project)

This is the work flow model followed by the bank at the time of giving

advances to their customers. Which involves the following series of steps,

they are:

Any party requiring funds through Bank first has to talk with the

respective manager of a branch of his area. One thing the manager has to

see that the amount of loan he has to sanction is in his power/ limit or else

he has to concern his higher authority. In this stage the process of

negotiation regarding rate of interest between party and Banker takes

place.

The important duty of a manager is to know his customer there are many

systematical techniques and process to know the real identification of the

customers. This is done mainly to avoid anti-laundering.

The purpose of loan to be sanctioned should be clearly understood either

by evaluating blue print of his project or balance sheet or performance

proof of his existing business. This is mainly done to make sure that

repayment of the amount is ensured and party won’t become Bankrupt. In

case of personal loan evaluation of the person is done through other

person who is known to the Banker.

The party in need of loan is capable of withdrawing the amount not more

then the amount sanctioned to him.

Documentation deals with filling of forms that are in contractual form

and most of the documentation process could be seen in all the stage. It

also deals with submission of security for their loan and its formalities.

After the purpose of the loan is served, the party is obliged to repay the

amount incorporating PLR and other Bank charges or according to the

agreement

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Future Growth prospectus

With a economy of the country growing at nearly 8% there high growth

potential for the bank. The bank is planning to enable ‘Money Click’ as a

payment gateway for shopping that coversast areas of business like Hotel

Booking, Ticket Booking, Purchase of goods etc. The Bank is also

planning to introduce mobile Top-up through ATMs and internet

Banking. Further Bank is also planning to tie up for online trading in

shares.

Mckensy’s7’s Frame Work

McKinsey & Companies 7S framework provides a useful way of studying

internal working of the organization. The model was developed by Tom

Peter and Robert Waterman, consultants of Mckensy’s and company. The

7’S Model was fiRs. t published by them in the article “Structure is not

organization”(1980) and in the books “The Art of Japanese

Management”(1981) and “In search of Excellence”. 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

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Chart No: 3

Chart showing Mckensy’s 7S Model

The functioning of Karnataka Bank Ltd can be better understood

with the help of following 7s

The 7’S are

Structure

Skill

Style

Strategy

Staff

Shared Values

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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 personnel’s. Organization charts indicates the

employees position in the hierarchy and their relationship within a

formal organisation

Structure at Branch level

The Karnataka Bank has totally 410 branches an on 31st March

2007.Each Branch is headed by a branch manger who has the

responsibility of overall administration of his or her branch.

Structure at Regional office Level

The Karnataka Bank has eight regional offices spread across the

country. Each regional office is headed by an assistant manager.

The Regional offices are responsible for controlling the branches

coming under them and also for implementation of decisions taken

at the head office of the bank.

For facilitating easy administration, the bank is divided into

different departments with each department headed by its

respective departmental head who are responsible for the overall

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administration of their department and also to carry out various

activities coming under their departments by taking the help of

executives, officers. and staff of their departments. The

organisation structure of the Karnataka Bank has been shown in the

chart below. The Board of Directors occupy the top most position

followed by the chairman who is next in the hierarchy. In the next

level of organizational structure there are DGM Human relations

and industrial relations, General Manager, planning and

development, GM Credit, GM Treasury, GM, recovery Legal and

RMD, And DGM inspection and Audit.

2) Skill

Skills refer to the fact that employees have the skills needed to

carry out the company’s strategies. Skillful employees are the

assets of the organization. Skills of the employees may be

improved by giving necessary training to them. The Bank believes

that skillful employees contribute to the Success of the Bank.

Development of human resource is an important factor for the

development of any industry. Banking is not an exception to that. It

involves various aspects like continuous training, rewards by way

of promotion, appreciations etc. The bank HRD policy is guided by

the Chinese Proverb “If you are planning for one year, grow rice. If

you are planning for twenty years plant trees. If u are planning for

centuries , develop men”.During the year 2006-2007,1424 officers,

517 clerks and 68 sub staff were given training under various

aspects to update/improve the knowledge. The officers of the bank

are also deputed at Bankers Training College, Mumbai, National

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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

At bankers TrainingCollege (RBI) & other

Training colleges ( Officers )

At Work shops &

Seminars.

709 517 68 260 455

3) Style

It is one of the seven levers which the top management can use to

bring about change in the organization. According to MC Kinsey’s

Framework, Becomes evident through the patterns of action taken

by the members of the top management team over a period of time.

The MC Kinsey’s Framework considers “Style” as more than the

style of top management.

Karnataka Bank Ltd. follows a Top to down style of management.

It also works in a participative style. The decisions are taken by the

top management concerning matters related to the organization.

The decisions relating to department matters are taken by the

departmental heads. The bank follows a democratic leadership

style which allows the employees to take part in the decision

making process. Employees are free to give any ideas, suggestions

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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.

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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

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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

Officers ClerksSub-

StaffTotal

As at the end of the Year 1594 2068 794 4456

Recruited during the year 74 198 32 304

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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

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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

software’s.

3. The Banks strengths lie in management capabilities, focused strategy,

speedy decision making.

4. There has been expansion of branches and ATM services by the bank

during the last few years.

5. The Banks provides good infrastructural facility to its to its staff and

help them to concentrate more on their job,

6. The Bank has introduced various schemes

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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.

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Opportunities

The Growth potentials or the opportunities are very huge as the bank had

mainly concentrated on the southern region of the country in its earlier

years it has the opportunity to expand its business to other parts of the

country wherein it can increase its customer base. The bank by virtue of

becoming a member of ATM networks like ‘VISA, ‘NFS’, ‘Cash Tree’,

besides continuing the bilateral arrangement with corporation Bank, has

enabled access to nearly 1 million ATMs and 25 Million POS across the

globe for its card holders. Bank is also facilitating inward remittance

facility through Western Union Money Transfer which has enabled vast

section of the population to receive hassle free remittance from abroad.

The bank is planning to enable ‘Money Click’ as a payment gateway for

shopping that covers vast areas of business like Hotel Booking, Ticket

Booking, Purchase of goods etc. The Bank is also planning to introduce

mobile Top-up through ATMs and Internet Banking, besides launching

value additions like SMS alerts to Non-Money Click Customers, Utility

bill payment and Air ticket booking through ATMs. Further Bank is also

planning to tie up for online trading in shares. The Bank is planning to

increase the number of its ATMs to 150 by 31.03.2008.

Threats

As the bank majority business comes from the south any effect to

the economy here would have an adverse effect on the performance of the

bank. The Bank is relatively smaller when compared to other banks like

SBI and ICICI Bank and some others. Since it’s a smaller bank when

compared to heavy weights like SBI and corporation Bank the bank is

always under treat of being taken over by other banks.

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SUMMARY OF LATEST ANNUAL REPORT

Karnataka Bank Ltd, is a leading ‘A’ Class scheduled commercial Bank

in India has earned a net profit of Rs. 177.03 crores as against Rs. 176.03

crores in the previous year an increase of 0.5% increase in comparison

with the previous year. For the year 2006-07 the total deposit of

Karnataka Bank registered a growth of 6% over the previous year. While

its advances rose by 22.60% over the previous year. The other key

financial data’s are mentioned below

Table No: 3

Table Showing the performance highlights of the Bank for the year

2006-2007

(Rs. In Crore)

Particulars.As on /for the year

ended 31.03.2007

As on /for the year

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

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The total business turnover of the bank touched Rs. 23590.12 crores,

an increase of 12.15% over the preceding.

The total assets of the bank increased from Rs. 14953.27 crores to Rs.

16222.52 crore recording a growth of 8.49%

The Net interest income rose from Rs 365.97 crore to Rs.419.86 crore

thereby registering a growth of 14.73% due to growth in advances.

The operating profit increased from Rs. 328.29 crores to Rs. 356.58

crore showing a growth of 8.62%

Total Deposits of the bank grew from Rs. 13243.16 crores as on

31.03.2006 to Rs. 14037.44 crore as on 31.03.2007, registering a

growth of 6%

The total advances grew from Rs. 7791.57 crores as on 31.03.2006 to

Rs. 9552.68 crores as on 31.03.2007an increase of 22.60%

Agricultural advances increased from Rs. 737.33 Crores to 791.39

Crore.

The priority sector advances increased from 2772.20 Crores to Rs.

3058.90 Crores.

The total investment of the bank as on 31st March 2007 stood at Rs.

5048.16 Crores as against Rs. 5548.58 Crores as on 31st March 2006

showing a reduction of 9.02%.

The banking posted an operating profit of RS. 356.58 Crore for the

year as against 328.29 Crore for the Fiscal 2006.

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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

General Reserves

19.00

Transfer to Proposed Dividend 49.69

Balance Carried to Balance

sheet

0.02

Total 177.09

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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

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Table No:5

Table Showing Lending of the Bank to Priority Sector

(Rs. in lakh)

Types of AdvancesNumber of

accounts at the end of the year

Balance outstanding at the end of the

year

a) Agriculture 52219 59295.59

b) Small Scale Industries of which Export Credit to SSI units

6549 115920.91

c) Setting up of the Industrial Estate

4 5935.99

d) Small Business Finance 5398 3896.81

e) Professional & Self Employed

4429 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

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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

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Table No: 5

Table showing Total Advances to Total Deposits ratio

(000’s omitted)

Particulars. Mar 07 Mar 06 Mar 05

Total Advances (Rs.) 9552,67,99 7791,56,78 6287,44,06

Total Deposits (Rs.) 14037,43,54 13243,16,04 10837,05,81

Total Advances to Total

Deposits ratio

0.6805 0.5883 0.5802

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

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Total Deposits

Table No: 6

Table Showing the Total Investments to Total Deposits Ratio

(000’s 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

Total Deposits ratio

0.3596 0.4189 0.4203

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

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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

Net Advances (Rs. in

crores)

955267.99 7791.57 6287.44

Net NPA to Net

Advances

1.2145 1.1744 2.2790

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

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Table No: 8

Table Showing the Return on Total Assets Ratio

(000 Omitted)

Particulars. Mar 07 Mar 06 Mar 05

Net Profit after Tax (Rs.) 1770344 1760339 1471464

Total Assets (Rs.) 162225162 149532729 125267181

Net Profit after Tax to

Total Assets

1.0912 1.1772 1.1746

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

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Table No: 9

Table Showing the Earnings per Share Ratio

(000s omitted)

Particulars. Mar 07 Mar 06 Mar 05

Net Profit available

for equity Shareholders. (Rs )

1770931 1760434 1471488

Number of Equity Shares 121262.41 121253.66 43206.743

EPS (Rs. ) 14.60 14.518 34.05

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

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

usual functions such as wage and salary administration.

I learnt about what is NPA’s in banks, Non Performing Advances

means an asset or account of borrower, which has been classified

by a bank or financial institution as sub-standard, doubtful or loss

asset, in accordance with the directions or guidelines relating to

asset classification issued by RBI. Conditions to treat an account as

NPA.

i. Interest and /or installment of principal remain overdue for a

period of more than 90 days in respect of a Loan,

ii. The account remains 'out of order' for a period of more than 90

days, in respect of an overdraft/ cash Credit(OD/CC),

iii. The bill remains overdue for a period of more than 90 days in the

case of bills purchased and discounted,

iv. Interest and/ or installment of principal remains overdue for two

harvest seasons but for a period not exceeding two half years. in

the case of an advance granted for agricultural purpose, and

v. Any amount to be received remains overdue for a period of more

than 90 days in respect of other accounts.

Secondly I had learnt about what is an overdue account it means

“An account should be treated as 'out of order' if the outstanding

balance remains continuously in excess of the sanctioned limit/

drawing power. In case where the outstanding balance in the

principal operating account is less than the sanctioned limit/

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drawing power, but there are no credits continuously for six

months as on the date of balance sheet or credits are not enough to

cover the interest debited during the same period, these account

should be treated as 'out of order'

The recovery department of the bank works for the recovery of

credit granted to customers. Recovery department will do the job of

getting back the loan granted to the customers. if they fail to repay

the loan amount.

As regards to the legal department it is concerned with providing

legal advices to various departments if there is any conflict in the

functioning of department.

1. Circulars pertaining to the products and services of Karnataka

Bank.

2. Karnataka Bank’s Annual Report 2004-2007.

3. Magazines and Brochures of Karnataka Bank.

4. Souvenir of the Bank.

5. www.karnatakabank.com

6. www.rbi.org

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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.

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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.

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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.

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SUBSIDIARY SERVICE OF KARNATAKA BANK

Demand Draft

Mail Transfer

Telegraphic Transfer

Pay Order

Safe Locker Facility

Safe Custody Services

Multi Branch Banking

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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.

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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.

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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

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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

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Page 92: Praveen Kumar Shetty (Karnataka Bank Project)

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.

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Page 93: Praveen Kumar Shetty (Karnataka Bank Project)

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.

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Page 94: Praveen Kumar Shetty (Karnataka Bank Project)

ANNEXUREBalance 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 243.66 182.69 420.74

Total Debt 11,080.72 13,425.85 14,458.18

Other Liabilities & Provisions 483.68 424.19 534.05

Total Liabilities 12,542.44 14,961.17 16,230.85

Assets

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Page 95: Praveen Kumar Shetty (Karnataka Bank Project)

Cash & Balances with RBI 687.68 535.39 826.82

Balance with Banks, Money at

Call684.80 679.22 334.69

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

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 31 st march, 2007

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Page 96: Praveen Kumar Shetty (Karnataka Bank Project)

Table no.9

(ooo’s omitted)

For the year

ended

31.03.2005

Rs.

For the year

ended

31.03.2006

Rs.

For the year

ended

31.03.2007

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

II. EXPENDITURE

Interest expended 523,04,35 652,06,63 836,39,05

Operating expenses 197,33,01 204,48,11 237,54,52

Provisions and

contingencies

193,56,19 152,25,75 179,55,30

Total 913,93,55 1008,80,49 1253,48,87

III. PROFIT

Net profit for the year 147,14,88 176,03,39 177,03,44

Transferred from

Investment

Fluctuation Reserve

0 120,00,00 0

Profit brought forward 24 95 5,87

Total 147,14,88 296,04,34 177,09,31

IV.

APPROPRIATIONS

Transfer to Statutory

Reserve

90,00,00 106,00,00 107,00,00

Transfer to Capital 0 1,25,46 1,38,21

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Page 97: Praveen Kumar Shetty (Karnataka Bank Project)

Reserve

Transfer to Revenue

Reserve

28,25,00 145,75,00 19,00,00

Transfer to Other

Funds

1,20,00 1,50,00 0

Transfer to Proposed

dividend

24,24,81 36,37,81 42,47,03

Transfer to Tax on

proposed dividend

3,44,12 5,10,20 7,21,78

Balance carried over

to Balance Sheet

95 5,87 2,29

Total 147,14,88 296,04,34 177,09,31

Number of shares

outstanding during the

year (Weighted

average)

4320,67,43 12,12,53,663 12,12,62,417

Earning per share (Rs

per share of Rs. 10/-

each -see note No: 5

of schedule 17)

Basic & Diluted 34.06 14.52 14,60

Notes on account

Accounting Policies

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Page 98: Praveen Kumar Shetty (Karnataka Bank Project)

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 AUDITED

Quarter ended Nine months ended Year Ended

31.12.2007

31.12.2006

31.12.2007

31.12.2006

31.03.2007

1 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

2Other Income

7391 3971 17261 13329 17427

3TOTAL INCOME (1+2)

47937 36170 132272 103634 143052

4Interest expended

28966 21695 79930 61205 83639

5Operating expenses (i+ii)

6823 5528 20736 17257 23755

i)Employees Cost

3817 3024 11853 9733 12909

ii)Other operating expenses

3006 2504 8883 7524 10846

6 TOTAL EXPENDITURE ((4+5) excluding provisions & Contingencies)

35789 27223 100666 78462 107394

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Page 99: Praveen Kumar Shetty (Karnataka Bank Project)

7Operating Profit before provisions & contingencies (3-6)

12148 8947 31606 25172 35658

8Provisions (other than tax) and Contingencies

1050 619 2650 2300 8378

9Exceptional Items

0 0 0 0 0

10Profit (+)/Loss (-) from Ordinary Activities before tax (7-8-9)

11098 8328 28956 22872 27280

11Tax Expense

4195 2940 10860 7845 9577

12Net Profit (+)/Loss (-) from Ordinary activities after Tax (10-11)

6903 5388 18096 15027 17703

13Extraordinary Items (net of tax expense)

0 0 0 0 0

14Net Profit (+)/Loss (-) for the period (12-13)

6903 5388 18096 15027 17703

15Paid up equity share capital

(Face Value Rs 10/-)

12135 12127 12135 12127 12135

16Reserves excluding revaluation reserves (as per balance sheet of previous accounting year)

- - - 111727

17Analytical Ratios

i)Percentage of shares held by Government of India

Nil Nil Nil Nil Nil

ii)Capital Adequacy Ratio (%)

13.11 11.83 13.11 11.83 11.03

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Page 100: Praveen Kumar Shetty (Karnataka Bank Project)

iii)

Earning per share (EPS) (Rs)

a) Basic EPS

b) Diluted EPS

before Extraordinary items (net of Tax expense)

b) ) Basic EPS

Diluted EPS

after Extraordinary items (net of Tax expense)

* Not Annualised

5.69*

5.68*

5.69*

5.68*

4.44*

4.44*

4.44*

4.44*

14.91*

14.88*

14.91*

14.88*

12.39*

12.39*

12.39*

12.39*

14.60

14.60

14.60

14.60

iv)

NPA Ratios as on date

a) Gross NPA Net NPAb) % of Gross NPA % of Net NPAc) Return on Assets- * Not Annualised

3792012825

3.561.23

0.38*

3894311883

4.321.36

0.35*

3792012825

3.561.23

1.05*

3894311883

4.321.36

0.99*

3873411604

3.951.221.15

18Public Shareholding-No of Shares-Percentage of Share holding

121343548

100%

121260348

100%

121343548

100%

121260348

100%

121343548

100%

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Page 101: Praveen Kumar Shetty (Karnataka Bank Project)

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

Complaints received during the

quarter

Complaints redressed during

the quarter

Complaints pending at the

end of the quarter

Nil 9 9 Nil

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Page 102: Praveen Kumar Shetty (Karnataka Bank Project)

Segmentwise ResultsPART A - Business Segment

For the three months period ended 31.12.2007 Rs in LakhsUNAUDITED AUDITED

Particulars Three Months ended

31.12.2007

Three Months ended

31.12.2006

Nine Months ended

31.12.2007

Nine Months ended

31.12.2006

Year ended31.3.2007

a)Segment Revenue

i) Treasury Operations

ii) Other Banking Operations

7552

40385

5034

31136

17622

114650

16946

86688

19867

123185

Total 47937 36170 132272 103634 143052

b)Segment Results

i) Treasury Operations

ii) Other Banking Operations

516

11266

-1469

10462

-2326

33358

-1523

26346

-4322

34294

Total 11782 8993 31032 24823 29972

Unallocated expenses 684 665 2076 1951 2692

Profit before Tax 11098 8328 28956 22872 27280

Income tax 4195 2940 10860 7845 9577

Extraordinary Profit/Loss

0 0 0 0 0

Net Profit 6903 5388 18096 15027 17703

Other Information

Segment Assets

i) Treasury Operations

ii) Other Banking Operations

iii) Unallocated Assets

188232

1638368

16374

206930

1349542

11601

188232

1638368

16374

206930

1349542

11601

156165

1448563

17524

Total Assets 1842974 1568073 1842974 1568073 1622252

Segment Liabilities

i) Treasury Operations

ii) Other Banking Operations

iii) Unallocated Liabilities

181261

1646459

15254

199959

1342752

25362

181261

1646459

15254

199959

1342752

25362

149194

1438508

34550

Total Liabilities 1842974 1568073 1842974 1568073 1622252

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Page 103: Praveen Kumar Shetty (Karnataka Bank Project)

CONCLUSIONKarnataka 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.

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Page 104: Praveen Kumar Shetty (Karnataka Bank Project)

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.

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Page 105: Praveen Kumar Shetty (Karnataka Bank Project)

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.

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