Banking gains

Aggressive campaigns and a shrewd business sense have helped the major nationalised banks originating from the State reap profits.

The State Bank

KARNATAKA has been a cradle of banking in India. Seven of Indias major banks originated in the State Canara Bank, Syndicate Bank, Corporation Bank, Vijaya Bank, Karnataka Bank, Vysya Bank and the State Bank of Mysore. Novel methods were used to establish many of these banks.

In 1906, Ammembai Subba Rao Pai, the founder of the giant Canara Bank, went door to door and collected handfuls of rice from each household, pooled the rice, sold it and used the receipts for the banks capital. Today the bank has a strong pan-Indian presence with over 2,600 branches (as at end August 2007). It served a diverse clientele of over three crores and did an aggregate business crossing Rs.2.40 lakh crore in the financial year ended March 2007. During 2006-07, the bank earned a profit of Rs.1,421 crore, its highest ever. The banks present stature is largely owing to the consolidation efforts it pursued between 1961 and 1985, when it took over 11 other banks to scale up its size and business, thus sustaining a market share of over 5 per cent.

Says M.B.N. Rao, Canara Banks Chairman and Managing Director: Even today Canara Bank is assiduously pursuing the goals of bank consolidation, with the overall objective of making the banking system sounder with greater global recognition.. According to him, the bank envisions emerging as a Global Bank with Best Practices in the medium term, with an enhanced global footprint. Canara Banks business portfolio is imbued with quality and consistency and is broad-based, including diverse sections and various segments. The bank was recently awarded the First National Award, instituted by the Ministry of Micro, Small & Medium Enterprises for excellence in Micro and Small Enterprises Lending for 2006-07.

According to M.B.N. Rao, Canara Banks role in making banking a one touch affair places the bank in a formidable position in the comity of banks. As part of a major diversification drive during the 1980s, Canara Bank further scaled up its market position to emerge as a major financial conglomerate in India with eight subsidiaries/sponsored entities/joint ventures in diverse fields ventures such as investment management, venture capital funding, factoring, software development and consultancy, housing finance, financial services and gilt securities trading. In addition, the bank provides services such as Bancassurance (marketing of life and non-life insurance products), cross-selling of mutual fund products, corporate cash management, agricultural consultancy, industrial advisory, depository, merchant banking and executor-, trustee- and taxation-related services.

Recently it entered into joint ventures with the Hong Kong and Shanghai Banking Corporation (Asia-Pacific) Holdings and the Oriental Bank of Commerce for its life insurance business, and with the Robeco Group for its asset management business. Apart from its flagship overseas branch in London, the bank has a branch in Hong Kong, a representative office in Shanghai and a joint venture bank (the Commercial Bank of India LLC) in Moscow in association with the State Bank of India. The bank also has a host of international banking arrangements with 540 banks across 94 countries. It plans to cover another 21 prominent centres across the world.

According to M.B.N. Rao, some of the objectives of the Bank during 2007-08 are a top line growth of 20-22 per cent in deposits and advances, attention to retail business and retail term deposits by fully leveraging the branch network and a strong people force. Focus will also be on lending to productive sectors such as agriculture, small and medium enterprises (SME), infrastructure and services. Credit growth will carry forward the rebalancing of asset portfolio already initiated. It has set itself a target of opening one million no-frill accounts.

Not far behind in performance is Syndicate Bank, established in 1925. Today it has a total business of Rs.1,32,718 crore (Rs.80,124 crore in deposits and Rs.52,594 crore by way of advances). In 2006-07, as much as 40 per cent (Rs.18,520 crore) of the banks advances were made by way of priority lending, while advances to the agriculture sector totalled Rs.7,695 crore.

The bank has been carrying on a campaign for opening savings bank accounts. In 2006-07, as many as 25.30 lakh no-frill accounts were opened. Says George Joseph, Syndicate Banks Executive Director: This year we are hoping to open 38 lakh accounts. All the 2,120 branches have been asked to open on an average 150 new accounts every month. And they are already clocking 120.

The banks computer system is capable of accommodating 21 lakh transactions a day, but at present it undertakes only around eight lakh transactions; hence the bank wants to utilise this spare capacity. The bank has been running door-to-door campaigns, with teams of officials visiting houses sometimes with a photographer in tow, in order to persuade people to open accounts. For the bank it is not just more numbers, it is sure that it can also cross-sell its varied financial products to these new customers.

Designated the lead bank of Karnataka by the Reserve Bank of India, Syndicate Bank has been implementing the financial inclusion programme (ensuring that every household has a bank account) in seven districts Bagalkot, Udipi, Dakshina Kannada, Uttara Kannada, Bellary, Bijapur and Belgaum. While the programme in the first two districts has been completed successfully, it will, according to George Joseph, be achieved in the others very shortly.

After earmarking 1,124 of its branches, especially those in semi-urban and rural areas, the bank has directed that each of them adopt two villages for financial inclusion. Says George Joseph: The idea is to provide no-frill savings bank accounts to all the households in these chosen villages, and then spread it to the entire State and eventually the entire country. It is a business proposition for us. We have realised that on an average around Rs.2,000 gets deposited in each of these accounts. Last year we mobilised Rs.7 lakh through this scheme.

With the pygmy daily collection scheme, one of the banks flagship products started in 1928, having lost its charm of late, the bank is recruiting 1,800 fresh agents. Each will be provided with a hand-held electronic machine to issue receipts to the pygmy account holder. The account holders will also be offered a small credit facility, with daily repayments being collected by the pygmy account collection agents.

The bank, which last year won the Asian Banker Award for best core banking solution implementation among the large-sized banks in the Asia-Pacific region, has promoted over 1,000 branches to core banking. It also has 728 automated teller machines (ATMs), of which 400 were added last year. According to George Joseph, the bank will have 1,000 ATMs by the end of the 2007-08 financial year. It also plans to open 122 branches and launch mobile banking shortly.

Syndicate Bank is also going in for an image makeover. For the first time in 20 years it has gone in for a large recruitment drive. Says George Joseph: We are taking 1,000 officers and 800 clerks. The target is young people. Its Synd Vidyarthi scheme offers professional college students a specially designed zero balance debit card and a Rs.10,000 line of credit. The outstanding amount can be paid back at the end of the study period.

Started on Vijayadashami day in 1931, Vijaya Bank is the youngest of the four public sector banks that originated in the coastal district of Dakshina Kannada. It was the first to cross the landmark of doing Rs.50,000-crore worth of business before completing the platinum jubilee.

Today the bank has graduated from a small- to a mid-sized bank. Says Vijaya Banks Chairman and Managing Director Prakash P. Mallya: During the 2006-07 financial year, we added Rs.18,000 crore worth of business. There was an unprecedented growth of 39 per cent over the previous year. Net profit was up by 161 per cent at Rs.331.34 crore. Today we are doing Rs.66,000 crore worth of business Rs.26,000 crore by way of advances and Rs.40,000 crore by way of deposits. The net non-performing assets (NPAs) ratio also came down to 0.49 per cent during 2006-07. And during the first quarter of 2007-08 we recovered Rs.73 crore worth of NPAs, and upgraded Rs.18 crore of NPAs to standard assets. Mallya also pointed out that net profits (Rs.111 crore) during the first quarter of 2007-08 had shown an increase of 53 per cent over the corresponding period last year.

Vijaya Bank has spared no effort in becoming technology-savvy. Core banking solutions have been put in place in 522 of its 987 branches, accounting for 85 per cent of all business. The banks target is to have 1,050 branches by March 2008, with 675 of them under core banking. The bank, which at present has 210 ATMs, plans to add 375 more before March 2008. In August, it joined the National Financial Switch (NFS) ATM consortium, thus enabling reciprocal access to the ATMs of 27 other banks in the country, which come under the NFS. The NFS is a network promoted by the Institute for Development & Research in Banking Technology established by the Reserve Bank of India. With this tie-up, all Vijaya Bank ATM card-holders will be able to access any of the member-banks ATMs.

With a view to presenting a younger face the average age of the banks employees is now 45 it has gone on a campus recruitment drive. Says Mallya: We want new thinking and new blood. Up to the level of deputy general manager, I have recruited directly from outside. These youngsters can be used for treasury management, foreign exchange and balance sheet operations and risk management.

Mallya is confident that the bank will touch a business of Rs.76,000 crore (Rs.45,000 crore in deposits and Rs.31,000 crore as advances) before March 2008. Commenting on the possibility of taking over a bank, Vijaya Banks Executive Director T. Valliappan said that the Bank would love to acquire a bank in the northern or western part of the country.

Established by Sir M. Visvesvaraya in 1913 with the objective of inculcating the banking habit among people and for the economic development of the old Mysore state, the State Bank of Mysore (SBM) has made good progress over the decades. Its dictum of safe, conservative banking is paying rich dividends. Profits rose to Rs.249.23 crore in 2006-07 (an increase of 15 per cent), with the earnings per share pegged at Rs.692. The net worth of the bank as on March 31, 2007, stood at Rs.1,121.56 crore. It has also achieved a capital adequacy ratio of 11.47 per cent.

With a network of 644 branches and 20 extension counters spread all over India, the SBM continues to view Karnataka as its principal area of operation. It has 526 branches in Karnataka, of which 322 are in rural and semi-urban areas. It is also the lead bank for Mysore, Tumkur and Chamarajanagar districts and has sponsored two regional rural banks (RRBs), Cauvery Grameena Bank and Kalpatharu Grameena Bank. The two RRBs were amalgamated in May 2006 as the Cauvery Kalpatharu Grameena Bank, which has a network of 203 branches.

According to P.P. Pattanayak, Managing Director, the aggregate deposits of the bank stood at Rs.22,871.11 crore as on June 2007. Of the banks total advances of Rs.17,309.34 crore, 37.18 per cent or Rs.5,969.57 crore were made to the priority sectors. Among the other financial indicators, advances to agriculture was Rs.2,273 crore, export credit Rs.1,046.19 crore and the small-scale industrial sector Rs.931.71 crore. The bank has also been able to reduce its net non-performing asset ratio to 0.45 per cent.

Says Pattanayak: The SBM has successfully completed the implementation of the first phase of the financial inclusion programme in Chamarajanagar district. Financial inclusion programmes have already been taken up in Tumkur and Mysore districts, and we hope to complete our programme in both by September 30.

The bank has 270 ATMs and card-holders can access the 6,600 ATMs of the State Bank group; all branches are networked.

Commenting on the SBMs future plans, Pattanayak said that it hoped to achieve a target growth of Rs.5,000 crore under deposits, Rs.4,025 crore under advances, an operating profit of Rs.615 crore and a net profit of Rs.314 crore for 2007-08. It is also planning to open 20 branches in 2007-08. During the current year it has accorded priority to rebalancing its credit portfolio and giving greater attention to growth sectors such as SMEs, agriculture, housing loans to the poor, microfinance and education loans.