The glitz and razzmatazz associated with modern banking, housed in large glass-and-concrete buildings, is a far cry from the business’ humble origins. Udupi, a town renowned for its temples, was the unlikely birthplace of one of the most important financial institutions to emerge in India, Corporation Bank. It was established by Khan Bahadur Haji Abdullah Haji Kasim Saheb Bahadur, a merchant. The bank started its operations on March 12, 1906, as the Canara Banking Corporation Udipi Ltd.
This was one of the main reasons for the emergence of Dakshina Kannada in general and Udupi in particular emerged as the base of not just Corporation Bank but another large financial institution, Canara Bank, at around the same time mainly because the existing lending structures were extremely onerous for borrowers. Udupi was a small town with a population of 7,000 in 1906, and trade was the main source of economic activity. But small businesses’ access to credit was not only difficult but extremely costly; interest rates charged by moneylenders were in excess of 50 per cent per annum. But Kasim Saheb Bahadur’s novel enterprise was not motivated by business acumen. Obviously inspired by the freedom movement, he spoke of “Swadeshism” while establishing the bank 114 years ago. In fact, a public notice issued by the bank in February 1906 stated: “The Primary object in forming ‘Corporation’ is not only to cultivate habits of thrift amongst all classes of people, without distinction of caste or creed, but also habits of cooperation amongst all classes. This is ‘Swadeshism’ pure and simple and every lover of the country is expected to come forward and cooperate in achieving this end in view.”
The bank’s unique structure and the loans extended on flexible and far easier terms than those offered by moneylenders endeared it to the local community. Moreover, the collateral it demanded was far less burdensome for borrowers. Those whose loan amounts were smaller than the deposits they made with the bank did not have to furnish collateral. Those who borrowed more had to furnish the security of two other subscribers to the bank. Loans of even higher amounts required mortgaging of jewellery, but the interest rate in such cases was a mere 6.25 per cent—far less than the 50 per cent and more charged by the moneylenders. In fact, the first loan the bank extended, and the first deposit it accepted were identical, Rs.100 each, indicating its focus on small business.
In 1923 the bank opened its first branch, in Kundapur. This was followed two years later by a branch in Mangaluru. The bank stepped into the then Coorg State in 1934 by opening its seventh branch at Madikeri. In 1937, the bank was included in the second schedule of the Reserve Bank of India, (as per its Act 1934). In 1939, the bank’s name was changed to Canara Banking Corporation Ltd. It was changed to Corporation Bank Limited in 1972. It assumed its present name after the second phase of bank nationalisation on April 15, 1980.
The bank crossed the Rs.1,000 crore deposit mark in 1985 and launched into the 1990s with a focus on high quality growth embraced information technology. It joined hands with Canara Bank in introducing an innovation in banking: the credit card. The scheme was launched in October 1989 and by the end of March 1990, the bank had issued more than 2,200 cards to its customers. The end of the first phase of reforms in India saw the bank emerging as one of the most innovative and dynamic banks in the public sector, in terms of asset quality, capital adequacy, operational efficiency, a well diversified income base, profitability, productivity and a strong balance sheet.
Cash management services
During 1992-93, the bank pioneered cash management services, the primary aim of which was to provide enhanced liquidity to corporates by streamlining cash flows in an effective manner. Corporation Bank was the first public-sector bank to launch such a package using a specialised application software. Not surprisingly, the bank emerged as a market leader in this field. These measures resulted in turnover of over Rs.11,000 crore during 1994-95, resulting in a substantial increase in the bank’s fee-based income. In fact, the Indian Banks’ Association in 1995 described Corporation Bank as enjoying “the finest reputation amongst banks in India”. Soon, in 1997, the bank made its first initial public offer (IPO).
The bank’s total business crossed the Rs.50,000 crore mark in the financial year 2005-06. By 2010, the total volume of its business expanded threefold, reaching Rs. 1,56 lakh crore at the end of that financial year. The bank now has a network of 2,432 branches, 2,845 ATMs across the country and a wholly owned subsidiary, Corp Bank Securities Limited (CBSL). The bank’s volume of business was Rs 3.12 lakh crore at the half year ended September 2019. At the end of the current financial year, this is expected to reach Rs.3.26 lakh crore, according to P.V. Bharathi, Corporation Bank MD and CEO. That is a long way from the Rupees 38, annas 13 and pies 2, which was the first day’s business back in 1906. From a net worth of Rs.5,000 to Rs.16,798 crore and from the first branch at Kundapur to around 10,000 service outlets including branches, ATMs and branchless banking units across the country, the bank’s progress has been truly remarkable. It has over 18,000 employees and serves more than 27 million customers spread across 26 States and five Union Territories.
Corporation Bank is known for its pioneering ventures in the field of financial inclusion. Its vision is to “emerge as a model for inclusive growth and innovative banking services”, and the financial inclusion initiatives and branchless banking model taken up by it have won wide appreciation. The bank is active in implementing all the social security schemes introduced by the government. The Corporation Bank Economic Development Foundation (CBEDF), a non-profit economic outfit, has been pursuing its objectives of fulfilling social obligations in tune with its corporate mission. All CSR activities of the bank are conducted under the aegis of the foundation. Through “CorpKiran”, an association of spouses of the bank’s executives, the bank undertakes welfare activities and provides financial assistance across all the zones in India, for the welfare of underprivileged sections.
The bank has launched a series of innovative products and services. Savings deposits variants, especially Corp Elite, Corp Delite and other premium savings bank products including Corp payroll, Signature & Super, have been well received in the market. The bank’s increased in rural and semi-urban areas is a great opportunity for it to improve its exposure to agriculture, small and medium enterprises (SME) and the retail segment in order to register a balanced growth in its retail portfolio, in tandem with the wholesale business. The bank also provides a comprehensive range of innovative and business-friendly products and services for retail & MSME (micro, medium and small enterprises) entrepreneurs through its branches across the country.
Corporation Bank Self Employment Training Institutes are operating in Chikmagalur and Kodagu districts, catering to the training needs of unemployed rural youth in these districts, where the bank has the lead bank responsibility. Nearly 18,000 unemployed youth have been trained so far, with a cumulative settlement rate of 78 per cent. The institutes were graded “AA” by the Ministry of Rural Development for the year 2018.
As a part of Centenary Year celebrations of the Bank, a modern library was established in 2006 in Mangaluru and dedicated to the public. It has a stock of over 17,000 books on subjects such as literature, law, computer science, banking, marketing, engineering, religion and medicine. The library subscribes to 20 newspapers and 46 journals/magazines. About 620 CD/DVD/VCDs are available for lending. On an average about 300 people visit the library every day.
It has not been a bed of roses for the bank in recent years. Corporation Bank was placed under the Prompt Corrective Action (PCA) framework of the RBI because of the industry-wide challenges posed by the mounting quantum of non-performing assets. The bank has since made a conscious decision to rebalance its portfolio by focussing on retail banking rather than bulk business. Conservation of capital has been an important focus area in recent times, which has resulted in a significant lowering of its risk-weighted assets. Measures taken by the leadership have resulted in the containment of slippages.
Loan recovery mission
The strengthening of the loan recovery mechanism has also given benefits. The entire team of the bank was put on a mission mode. The “Mission Recovery” campaign has turned out to be a mega success with the wholehearted involvement of the rank and file. The bank also has separate verticals for credit monitoring and recovery. The bank has created a separate stressed asset management vertical (SAMV) for the resolution of stressed assets and initiated risk mitigation measures to arrest fresh slippages. All these measures have paid off, with the bank emerging out of the RBI’s PCA framework in February 2019.
The bank’s financial performance has shown an all-round improvement in the current financial year, with better recoveries and a stronger bottom line. The September 2019 results show that the bank has recorded a net profit of Rs.130 crore as against a profit of Rs.103 crore in June 2019. The Net NPA has been brought down to 5.59 per cent as on September 30, 2019, compared with 11.65 in the comparable period in 2018.
Considering the strong fundamentals of the bank, the government in August 2019 has decided on the amalgamation of Corporation Bank and Andhra Bank with Union Bank of India. The combined entity will be the fifth largest bank in terms of the volume of domestic business and the fourth largest in terms of branch network. The amalgamation is likely to help Corporation Bank to serve customers better. This will also provide impetus for adoption of best practices from the amalgamating entities, improved risk management and financial inclusion, resulting in a wider reach.