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 Head of the Departm ent of Principal

Com m erce and Business
Managem ent
Date:
Place: Kundapura
 BHANDARKARS’ ARTS AND SCIENCE
COLLEGE, KUNDAPUR

DECLARATION

I Mr. PRAVEEN KUMAR SHET TY, 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
(MR. PRAVEEN KUMAR SHETTY)
 EXECUTIVE SUMMARY

Name of the organization : Karnataka Bank Ltd. Mangalore

Methodology :
Data collection is a step in the preparation of project report.
The information is collected in the following manner.

Primary Sources :
Data is collected by the interacting with the bank Managers and
Officers.

Secondary Sources :
The data is collected for report by various records maintained
and standing orders of the banks which help us for preparing
this reports. A lot of data were also collected by referring to
magazines and news paper, annual reports of bank.

Objectives :
 To study the loans and advances of the bank.
 To study the evaluation and performance of the bank.
 To study the all financial statement.
 To study the source of finance of the bank.
 To study the history of the bank.
 ACKNOWLEDGEMENT

I am very much beholden to Mangalore University for this

wonderful opportunity to undertake the Project Study as a part of

the fulfillment of 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 make

the summer training an interesting and educative one .And I also

thank all the other employees of Karnataka Bank Ltd. for providing

me with valuable in-house as well as other information required

for the Project and most of all for their support and cooperation.

Last but not least I thank Bhats Telecom Centre, Kundapura for

helping me in typing and printing.

 Submitted By

Mr. Praveen Kumar Shetty

Reg. No. 040070086

Under The Guidance of

Ms. MAMATHA,
Lecturer,
Department of Commerce and Business Management

Project Report submitted to Mangalore

University in partial fulfillment for the

requirement of the Bachelor’s Degree in

Business Management.
BHANDARKARS’ ARTS AND SCIENCE
COLLEGE, KUNDAPUR
 CONTENTS

1.Industry Profile 1-7

2.Company Profile 8-20
3.Products and
21-62
Services Profile
4.Schemes Evolved
by Karnataka Bank 63-66
Ltd.
5.Subsidiary
Services of 67-72
Karnataka Bank
6.Annexure 73-81
7.Conclusion 82-83
8.Bibliography 84
 INDUSTRY PROFILE
Money lending in India is an age old profession with a history of about
200 years. In the late 18th century, Tippu Sulthan, was accredited to have
conceived the idea of organising banking as a part of state machinery for
extending credit facilities to the needy at an affordable rates. At the end of 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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 HISTORY
The English word bank is derived from the Italian word “Banaco”,
the Latin word “Baacus” and the French word “Banque” which means a
bench. The word is also derived from the German word “Bank”, which
means a joint stock company fund (i.e. heap money), rose from a large
number of members of the public.

Bank in one from or another was in existence even in ancient times.

The writings of Manu (the maker of old Hindu law) and Kautilya (the
minister of Chandragupta Maurya) and the teachings of Christ contained
references to banking activities in Babylonia much before Christ.

However modern banking is of recent origin. It came into existence

only after the industrial revolution. After the industrial revolution, with
the increase in the size of industrial and business units, joint stock
company form of business organization came into existence. This form of
organization encouraged people with small incomes to become
shareholders of big industrial and business enterprises .Still, there were
certain section of the public who were not prepared to invest their money
on the shares of joint stock companies. But they were willing to part with
their surplus money, if they were assured of the repayment of their money
with some interest thereon. So, naturally there arose the need for the
formation of financial institution that could collect the surplus funds of
the people on terms acceptable to them and make them available to the
needy for productive purpose.

 Definition

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 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.

In 1948, the Reserve Bank of India was nationalized, and it became an

institution owned by the Government of India. In 1949, the Banking

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 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
the ordinance, the Parliament passed the Banking Companies Bill, and
it received the presidential approval on 9th August, 1969.

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 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
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

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 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.

COMPANY PROFILE
a) Back ground and inception of the company.

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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
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.

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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 27th
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 1 st
April 1995. The Bank made it into the stock markets on 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.

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 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
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

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 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

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

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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 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

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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.

 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,

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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

 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.

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 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.

 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,

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 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
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

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 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 .

 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.

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 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

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

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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

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.

-19-
 Items of daily needs like Gur, Khandsari, Lal Chana, Flour, soap,
etc.

 Sale of agro products like vegetables, etc.

 Provision of non agro facilities like banking, internet kiosk,

communication facilities, etc.

 Sale of stationary items like notebook, pencil, etc. as well as

newspaper (if possible), revenue stamp ( if possible), water mark (if
possible), etc.

-20-
 PRODUCTS
Motor Spirit (MS i.e. petrol) facility:

The KSK are primarily meant to be having High Speed Diesel or HSD
facility. However, based on the potential of the site, the state HEAD ( of
the oil company) may take a decision to provide MS facility also

Other Products of IOC

The Kisan Seva Kendra will also sell lubricating oils or any other
products as decided by IOC from time to time to the customers.

Cost Investment by dealer

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

Expected Sales volumes

 DIESEL: 25 TO 50 KL per month

 PETROL: facility to be provided only when minimum 10 KL

potential exists

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

-21-
 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 limit

-22-
 would have a relationship with projected net earning and repayment
capacity of the borrower.

SCC is normally valid for 5 years subject to satisfactory operation of

the account and renewed on a yearly basis through simple review
process.

Issue of Credit:

 The beneficiaries under the scheme shall be issued with a

laminated credit card and pass book. This will Serve as an
identity card and facilitate recording of transaction on an ongoing
basis.

 As far as possible, cluster approach may be followed in

implementing the scheme.

 In case smart card are issued, fee towards issue of card

/processing may not exceed Rs. 50/-per card

Insurance:

Beneficiaries under the scheme would automatically be

covered under the group insurance scheme and the premium would be
shared by the bank and the borrower equally. Each Bank may negotiate
the terms of insurance with a company of its choices on a national or
regional basis. Further as advised by general Insurers (public sector)
Association of India (GIPSA) it would be advised for the banks to take
up the matter of Personal Accident Insurance linked with SCC scheme
individually with the insurance companies. Since many bank have tie-ups
for bancasssurance agreement with general Insurance Companies they
may decide to include SCC scheme also under their tie-ups.

-23-
DEPOSIT PRODUCTS:

Karnataka Bank Ltd aims to help customers build on a strong foundation

by maximizing returns on investments and increasing their assets.
Customers. can make use of their customized products to take care of
their specific banking needs.

 Abhyudaya Cash Certificate

A growth oriented scheme with maximum returns. Money invested

multiplies after the specified period. The minimum period of deposit is
6 months and the maximum period is 120 months.

 Fixed deposits

A deposit scheme for specified periods ranging from 15 days to 10

years. with interest payments made monthly, quarterly, half-yearly or
yearly as required by the depositor.

 Ready Money deposits:

A unique term deposit cum overdraft account, whereby a minimum

deposit of Rs. . 10,000/- enables the customers withdraw up to 75% of
the amount by cheque without presentation of the deposit receipt.

 Soulabhya Deposit

A flexible ‘twin gain’ deposit scheme that allows withdrawal of

deposits in units of Rs. . 1,000/- each in case of need, without affecting
the interest payable on the remaining units. Minimum amount of
deposit is Rs. 5,000 and in multiples of Rs . 1,000/- thereto.

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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.

-25-
 NRI Services

There are a wide range of deposit schemes for Non-Resident Indians.

It includes non resident rupee account, foreign currency non resident
(Bank) scheme (FCNR [B]) and non resident (ordinary) account
(NRO) with very attractive and competitive rates. Resident foreign
currency (RFC) (deposit) account for returning Indians is also
available.

Area of Operation

The bank at present has 410 branches, 106 ATM outlets, 7 Extension
counters, 8 regional offices, 1 International Division, 1 Data Center, 4
Service Branches, 2 Currency Chests, Spread over 19 States and 2 Union
territories.

-26-
Ownership Pattern

The share holding pattern in Karnataka Bank Ltd is as given below in the
form of table

Table No: 1.1

Showing the ownership pattern in Karnataka Bank

Total

Shareholding

As a % of
Number of
Total
total
Categor Category of Number of shares held in
number of
y code shareholders. shareholders. dematerialize
number of
shares
d form
shares

As a % of

A&B

Shareholding of

A promoters and 0 0 0 0

promoters Group

Public
B
shareholding

(1) Institutions

(a) Mutual 9 3318446 3318446 2.74

-27-
 Funds/UTI

Financial
(b) 9 518584 518584 0.43
institutions/Banks

Central

(c) Government/State 0 0 0 0

Government

Venture Capital
(d) 0 0 0 0
Funds

Insurance
(e) 3 1386231 1386231 1.14
Companies

(f) FIIs 39 36968417 36968417 30.47

Foreign Venture
(g) 0 0 0 0
Capital Investors

(h) Any other 0 0 0 0

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

(2) Non-Institutions

(a) Bodies Corporate 983 15675120 15675120 12.91

-28-
 Individuals-

shareholders

(b) holding nominal 67226 43932427 24563463 36.21

share capital of

upto Rs. 1 lakh

ii. Individuals-

shareholders

holding nominal
673 19544323 16265423 16.10
share capital in

excess of Rs. 1

lakh

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

Total Public

shareholding
12134354
68942 98243873 100.00
8
(B)=(B)(1)+(B)(2

12134354
TOTAL(A)+(B) 68942 98243873 100.00
8

-29-
Competitors Information

All the banks in India are competitors for the Bank. Some of the major
Competitors for the bank are.

City Union Bank Ltd.:

The oldest private sector bank, City Union Bank Ltd, was established in
1904 as the Kumbakonam Bank Ltd. It has taken over three local banks:
Commonwealth Bank Ltd in 1957; City Forward Bank Ltd and Union
Bank Ltd in 1965. Located in Kumbakonam, the temple city and having
small outfit of 118 branches, mostly in Tamil Nadu, it is less know outside
the state. In its long journey, it ventured out of the state only in 1980,
Opening a branch in Bangalore. City Union Bank Ltd combines
traditional banking with enduring relationship.

The Karur Vysya Bank Ltd.:

The Karur Vysya Bank Ltd was established in the year 1916. The Bank
witnessed the vicissitudes of the banking sector during the two World
wars. Expanding slowly, it has grown strong in its hometown Karur. The
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

-30-
port town of Tuticorin in 1921. It became a scheduled bank in 1935. The
present name was adopted in 1962. True to its name, it works as a Tamil
Nadu bank. The Bank is making all efforts to remain as the totally
motivated bank.

Nainital Bank Ltd:

Nainital Bank Ltd is a tiny little bank from Uttaranchal. During the British
days, most of the hill stations like Simla, Mussorie, Darjeeling, and Ooty
were having banking facilities , provided by either local banks or banks
from outside. Nainitial where nature smiles in wilderness, saw the birth of
a bank in 1922.One of its promoters was late Gobind Vallabh Panth,
confining to a single state. On the eve of Independence, it had a capital
base of only Rs 1.50 lakh and the number of branches was 5.

The Lakshmi Vilas Bank Ltd:

The bank from Karur, which adds good fortune to your life- Lakshmi
Vilas Bank Ltd-was established in 1926 by a group of 7 leaders of the
local business community, it was aiming at serving the traders and the
people from the middle class. During the first two decades it could open
only 10 branches. Contended in serving the small towns for nearly 50
years, it stepped out of the state only in 1974.

For increasing the fee-based income the bank has entered into MOU with
Dabur CGU Life Insurance Private Ltd for marketing the insurance
products.

The Dhanlakshmi Bank Ltd:

The Dhanlakshmi BankLtd, was established by a group of eminent

lawyers, in thrissur in 1927, with a initial paid up capital of Rs. 11,000.
Handling a volume of business not more than Rs 1.39lakh in the first year,

-31-
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.

Infrastructural Facility

-32-
As regards to the infrastural facilities provided in Karnataka Bank

Offices

The Head office of Karnataka Bank Ltd has a central air condition system
which helps the employees to escape from the heat of Mangalore City.

Canteen

The Bank provides canteen facility to all its employees and it is situated
inside the Bank premises.

System

The Bank is one of the few banks in the country which uses Finical
Software which in turn helps the bank to serve its customers more
efficiently. The Bank also provides internet facility to its employees

Work Flow Model

The work flow model of Karnataka Bank Ltd is of two types and is shown
below;

Process Map- Deposit:

Process Map Advances:

-33-
Process Map- Deposit:

The below chart shows the work flow of depositing money

Chart 1

Chart Showing the process map deposit in Karnataka Bank Ltd

Customer

Deposit

Application Review
and documentation

Decision Making

Processing

 Cash

 Cheque

 Draft

Accounts
Department

Work Done

-34-
This is the work flow adopted by the bank at the time of receiving the
deposits from their customers.

The first step in this process is customer approaching the bank. When the
customers will have surplus money with them, they will be looking to
invest that money in some place where they can get good returns out of it.
Bank is one such place which accepts deposits from their customers and
pays interest on them. So the customers will be looking for that bank
which will pay them highest rate of interest on their deposits.

Once the customer identifies the bank where he is going to deposit his
amount, he has to go through the introduction stage, were the customer
needs to be introduced to the bank. He may be introduced to the bank by
the customer or an employee of that bank. He is asked for providing
documents like Ration card or any license for address, age & income
proof. Once the account is opened (i.e. Either S.B a/c, fixed deposits,
recurring deposits or current a/c) he/she will provide with facilities like
Cheque book, ATM or O.D if 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
deposits prior 7 days notice to be given, but today’s banker will not ask

-35-
for any notice just give it in the spot with penalty. The process of
withdrawal is reverse of depositing where from his account it goes to cash
supervisor from him to cashier finally to the hands of customer, again
traditional work flow. Now all are computerized where in one person does
all the activity. Customer can directly withdraw in ATMs or can directly
issue Cheques to the other party.

Process Map Advances:

The various stages of granting loan to customers is depicted below

Chart No: 2

Chart Showing the process map advances of Karnataka Bank

Customers

Customer Specific
Requirement

Filling of Application

Application Review

Decision

Reject

-36-
 Documentation

Loan Disbursement

Repayment of interest

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.

-37-
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

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.

-38-
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

-39-
 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

-40-
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
administration of their department and also to carry out various

-41-
 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
Institute of Bank Management, Pune, Institute of Development and

-42-
 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

At bankers Training At Work
College
College (RBI) & other shops &
Training colleges ( Officers ) Seminars.
Officers Clerks Sub
Staff

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

-43-
 process. Employees are free to give any ideas, suggestions 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.

-44-
 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.

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

-45-
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
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.

-46-
 Table No:2

Table showing the total staff position as on31-03-2007

Officer Sub-
Clerks Total
s Staff

As at the end of the Year 1594 2068 794 4456

Recruited during the year 74 198 32 304

7) Shared Values

Shared values refer to the guiding concepts, values and

aspirations that unite an organisation in some common purpose. They
guide employees of any organisation towards valued behavior.

Important concerns and goals that are shared by most of the

people in a group, that tend to shape group behavior, and that often persist
overtime even with changes in group membership. Shared values
originally called as super ordinate goals; it is the guiding concepts and
principles of the organisation - values and aspirations, often unwritten.
They are also the things that influence a group to work together for a
common goal. It acts as a guiding concept, fundamental ideas around
which a business built. So it must be simple, usually stated at the abstract
level, have great meaning inside the organisation even though outsiders
may not see or understand them.

-47-
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
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

-48-
 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

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 .

-49-
  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.

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

-50-
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.

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

-51-
 Table Showing the performance highlights of the Bank for the year
2006-2007

(Rs. In Crore)

As on /for the year As on /for the year

Particulars.
ended 31.03.2007 ended 31.03.2006

Deposits 14037.44 13243.16

Advances 9552.68 7791.57

Investments 5048.16 5548.58

Total Income 1430.52 1184.84

Operating Profit 356.58 328.29

Net Profit 177.03 176.03

 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%

-52-
 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.

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

-53-
 Appropriation Rs. . in crore

Transfer to Statutory Reserves 107.00

Transfer to Capital Reserves 1.38

Transfer to Revenues and 19.00

General Reserves

Transfer to Proposed Dividend 49.69

Balance Carried to Balance 0.02

sheet

Total 177.09

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

-54-
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

Table No:5

Table Showing Lending of the Bank to Priority Sector

(Rs. in lakh)

Balance
Number of
outstanding at
Types of Advances accounts at the
the end of the
end of the year
year

a) Agriculture 52219 59295.59

b) Small Scale Industries 6549 115920.91

of which Export Credit
to SSI units

-55-
 c) Setting up of the 4 5935.99
Industrial Estate

d) Small Business Finance 5398 3896.81

e) Professional & Self 4429 2766.27

Employed

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 915 71603.36

export credit to small scale
industrial units

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.

-56-
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

-57-
 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.) 14037,43,5 13243,16,04 10837,05,81

4

Total Advances to Total 0.6805 0.5883 0.5802

Deposits ratio

It can be seen in the above table that there has been a steady
increase in total advances in proportion to total deposits from Rs. 0.58 to
Rs. 0.68. It can also be inferred that there has also been a steady increase
in the amount of deposits collected by the bank over the period of three
years. .

1) Total Investments to Total Deposits Ratio:

This ratio is generally expressed as a ratio between Total

Investment and Total Deposits. This ratio is to used to know what
proportion of the total deposits are used by the Bank for its
investments purpose such as Government Securities or Shares of
other companies. It can be expressed as follows:

Total Investments

-58-
 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.) 14037,43,5 13243,16,0 10837,05,81

4 4

Total Investments to 0.3596 0.4189 0.4203

Total Deposits ratio

The total investments in proportion to total deposits have shown a slight

decline over the years from 0.4203 in March 2005 to 0.3596 in March
2007.

2) Net Non-Performing Assets to Net Advances

This Ratio indicates the Advances or Loans that were lent by the
Bank and which have turned out to be Non-Performing Advances.
It can be expressed as follows:

Net Non-Performing Assets = Opening Balance + Additions

during the year – Reductions during the year.

Net NPA

-59-
 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 955267.99 7791.57 6287.44

crores)

Net NPA to Net 1.2145 1.1744 2.2790

Advances

NPAs are those advances where the interest and advances have
been overdue for more than 90 days. The above table shown that there has
been a steep decrease in Non performing assets of Bank from 2.2790 in
March 2005 to 1.2145 in March 2007 this shows that there has been an
increase in the efficiency of the Bank to collect its advances.

3) Return on Total Assets

Return on total assets is the ratio of net profit to total

resources. This ratio measures the productivity of the total assets of a
concern. It indicates the profitability of a business.

Net Profit *100

Total Assets

-60-
 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 1.0912 1.1772 1.1746

Total Assets

The data reveals that there has been a decrease on the return on total
assets from 1.1746 in 2005 to 1.0912.

4) Earnings Per Share Ratio:

This is a ratio between net profit available for equity

shareholders that is net profit after taxes and preference dividends, and the
number of equity shares. The more the EPS the better is the performance
and future prospectus of the company. This ratio throws light on the
performance of the company and helps in deciding whether the equity
share capital is being utilized effectively or not.

Net Profit available for Equity Shareholders

Number of Equity Shares

-61-
 Table No: 9

Table Showing the Earnings per Share Ratio

(000s omitted)

Particulars. Mar 07 Mar 06 Mar 05

Net Profit available 1770931 1760434 1471488

for equity Shareholders. (Rs )

Number of Equity Shares 121262.4 121253.66 43206.743

1

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

-62-
organisation before carrying out any task has to perform managerial
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/ drawing power, but there are

-63-
 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

-64-
 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.

-65-
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.

-66-
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.

-67-
SUBSIDIARY SERVICE OF
KARNATAKA BANK

 Demand Draft

 Mail Transfer

 Telegraphic Transfer

 Pay Order

 Safe Locker Facility

 Safe Custody Services

 Multi Branch Banking

-68-
 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.

-69-
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.

-70-
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
equipped with safes and storage rooms for the purpose of their business

-71-
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
counters across the country, as well as those ATMs under arrangement
with Corporation Bank.

-72-
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.

THE COFFEE CONFERENCE

-73-
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.

-74-
 ANNEXURE
Balance sheet of the last three years

Capital and Liabilities

March ’05 March ’06 March ‘07

Total Share Capital 121.25 121.27 121.35

Equity Share Capital 121.25 121.27 121.35

Preference Share Capital 0.00 0.00 0.00

Reserves 856.79 989.86 1,117.27

Revaluation Reserves 0.00 0.00 0.00

Net Worth 978.04 1,111.13 1,238.62

Deposits 10,837.06 13,243.16 14,037.44

Borrowings 243.66 182.69 420.74

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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Cash & Balances with RBI 687.68 535.39 826.82

Balance with Banks, Money at

684.80 679.22 334.69
Call

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 31st march, 2007

-76-
 Table no.9

(ooo’s omitted)

For the year For the year For the year

ended ended ended
31.03.2005 31.03.2006 31.03.2007
Rs. Rs. Rs.
I. INCOME
Interest earned 839,93,33 1018,03,73 1256,25,04
Other income 221,14,86 166,80,15 174,27,27
Total 1061,08,19 1184,83,88 1430,52,31
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 193,56,19 152,25,75 179,55,30
contingencies
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 0 120,00,00 0
Investment
Fluctuation Reserve
Profit brought forward 24 95 5,87
Total 147,14,88 296,04,34 177,09,31
IV.
APPROPRIATIONS
Transfer to Statutory 90,00,00 106,00,00 107,00,00
Reserve
Transfer to Capital 0 1,25,46 1,38,21

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Reserve
Transfer to Revenue 28,25,00 145,75,00 19,00,00
Reserve
Transfer to Other 1,20,00 1,50,00 0
Funds
Transfer to Proposed 24,24,81 36,37,81 42,47,03
dividend
Transfer to Tax on 3,44,12 5,10,20 7,21,78
proposed dividend
Balance carried over 95 5,87 2,29
to Balance Sheet
Total 147,14,88 296,04,34 177,09,31
Number of shares 4320,67,43 12,12,53,663 12,12,62,417
outstanding during the
year (Weighted
average)
Earning per share (Rs
per share of Rs. 10/-
each -see note No: 5
of schedule 17)
Basic & Diluted 34.06 14.52 14,60
Notes on account
Accounting Policies

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 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

31.12.200 31.12.200 31.12.200 31.12.200 31.03.2007

7 6 7 6

1 Interest Earned 40546 32199 115011 90305 125625

(a+b+c+d)

a) Interest/Discoun 28862 21226 81930 57574 81352

t on
advances/bills

b) Income on 11383 10308 32210 30717 41270

Investments

c) Interest on 268 240 788 1564 2516

balances with
Reserve Bank of
India and other
inter bank funds

d) Others 33 425 83 450 487

2 7391 3971 17261 13329 17427

Other Income

3 47937 36170 132272 103634 143052

TOTAL INCOME
(1+2)

4 28966 21695 79930 61205 83639

Interest expended

5 6823 5528 20736 17257 23755

Operating
expenses (i+ii)

i) 3817 3024 11853 9733 12909

Employees Cost

ii) 3006 2504 8883 7524 10846

Other operating
expenses

6 TOTAL 35789 27223 100666 78462 107394

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

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7 12148 8947 31606 25172 35658
Operating Profit
before provisions
& contingencies
(3-6)

8 1050 619 2650 2300 8378

Provisions (other
than tax) and
Contingencies

9 0 0 0 0 0
Exceptional Items

10 11098 8328 28956 22872 27280

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

11 4195 2940 10860 7845 9577

Tax Expense

12 6903 5388 18096 15027 17703

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

13 0 0 0 0 0
Extraordinary
Items (net of tax
expense)

14 6903 5388 18096 15027 17703

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

15 12135 12127 12135 12127 12135

Paid up equity
share capital
(Face Value Rs
10/-)
16 - - - 111727
Reserves
excluding
revaluation
reserves (as per
balance sheet of
previous
accounting year)

17
Analytical Ratios

i) Nil Nil Nil Nil Nil

Percentage of
shares held by
Government of
India

ii) 13.11 11.83 13.11 11.83 11.03

Capital Adequacy
Ratio (%)

-80-
i Earning per
ii) share (EPS) (Rs) 5.69* 4.44* 14.91* 12.39* 14.60
a) Basic EPS 5.68* 4.44* 14.88* 12.39* 14.60
b) Diluted EPS
before
Extraordinary
5.69* 4.44* 14.91* 12.39* 14.60
items (net of Tax
expense) 5.68* 4.44* 14.88* 12.39* 14.60
b) ) Basic EPS
Diluted EPS
after
Extraordinary
items (net of Tax
expense)
* Not Annualised
iv)
NPA Ratios as on
date 37920 38943 37920 38943 38734
a) Gross NPA 12825 11883 12825 11883 11604
Net NPA 3.56 4.32 3.56 4.32 3.95
b) % of Gross 1.23 1.36 1.23 1.36 1.22
NPA 0.38* 0.35* 1.05* 0.99* 1.15
% of Net NPA
c) Return on
Assets-
* Not Annualised
Public
18
Shareholding 12134354 12126034 12134354 12126034 121343548
-No of Shares 8 8 8 8 100%
-Percentage of 100% 100% 100% 100%
Share holding

-81-
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 Complaints Complaints Complaints

pending at the received during the redressed during pending at the
beginning of the quarter the quarter end of the
quarter quarter
Nil 9 9 Nil

-82-
 Segmentwise Results
PART A - Business Segment
For the three months period ended 31.12.2007 Rs in Lakhs
UNAUDITED AUDITED
Particulars Three Three Months Nine Months Nine Months Year ended
Months ended ended ended 31.3.2007
ended 31.12.2006 31.12.2007 31.12.2006
31.12.2007
a)Segment Revenue
i) Treasury Operations 7552 5034 17622 16946 19867
ii) Other Banking 40385 31136 114650 86688 123185
Operations

Total 47937 36170 132272 103634 143052

b)Segment Results
i) Treasury Operations 516 -1469 -2326 -1523 -4322
ii) Other Banking 11266 10462 33358 26346 34294
Operations

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 0 0 0 0 0
Profit/Loss

Net Profit 6903 5388 18096 15027 17703

Other Information

Segment Assets
i) Treasury Operations 188232 206930 188232 206930 156165
ii) Other Banking 1638368 1349542 1638368 1349542 1448563
Operations
16374 11601 16374 11601 17524
iii) Unallocated Assets

Total Assets 1842974 1568073 1842974 1568073 1622252

Segment Liabilities
i) Treasury Operations 181261 199959 181261 199959 149194
ii) Other Banking 1646459 1342752 1646459 1342752 1438508
Operations
15254 25362 15254 25362 34550
iii) Unallocated
Liabilities

Total Liabilities 1842974 1568073 1842974 1568073 1622252

-83-
 CONCLUSION
Karnataka Ltd. a premier private sector Bank in India, incorporated in the
year 1924 with a modest capital of Rs.11,580 has grown by leaps and
bounds in key areas of banking thanks to its Shareholders, Customers and
well wishers.

Karnataka Bank Ltd. has registered a net profit of Rs. 180.96 crore for the
9 months period ended 31st December 07 as against Rs. 150.27 crore for
the corresponding period last year, showing an increase of 20.42%. The
profit for the third quarter showed an increase of 28.12% over
corresponding quarter of the previous year from Rs.53.88 crore to
Rs.69.03 crore. On a year-on-year basis, the total business growth was at
17.62% with deposit growth of 16.76% and advances growth of 18.96%.

As at 31st December 2007, the deposits stood at Rs.15903 crore and

advances at Rs.10414 crore as against Rs. 13620 crore and Rs.8754 crore
as at 31st December 2006.

The aggregate investments stood at Rs. 5748 crore as at 31st December

2007. The CD ratio stood at 65.48%.

The net interest income for the nine months period has increased from
Rs.291 crore to Rs. 351 crore.

The Capital Adequacy ratio stood at 13.11%. The net NPA stood at 1.23%
as at 31st December 2007 compared to 1.36% of the corresponding period
of the previous year. Return on assets stands at 1.41%.

As on date, all the 416 branches are networked under core banking
solution covering 100% business.

-84-
The Banking industry has been undergoing rapid changes reflecting a
number of underlying developments. As early as in March 2000, when all
traditional banks were busy discussing their IT strategies, we did exactly
what any foreword looking bank should have done we decided to go for
core banking e-platform for gaining business agility and a competitive
advantage in the market place.

Today, Karnataka Bank has over 419 branches situated in important

locations spread over 19 states and 2 union territories of the country
connected to the Data Centre in Bangalore. The state-of-the-art "Finance",
centralized core banking solution, provided by Infoys, Bangalore, was
chosen by us to set up a core banking e-platform to replace our legacy
system.

Today all our computerized branches are offering anywhere banking

facility to their customers and all transactions are done through the data
center on online real time basis.

-85-
 BIBILIOGRAPHY
 B.S. Raman - Banking Theory

 M.L. Seth - Money banking and International Trade

 V.B. Hansa - Banking Theory

 83rd Annual Report of Karnataka Bank Ltd.

-86-