Project Karnataka Bank
181
EFFECTIVE RECOVERY OF LOANS PROJECT REPORT ON “A STUDY RELATES TO ANALYSIS OF THE EFFECTIVE RECOVERY OF LOANS AND ADVANCES IN KARNATAKA BANK” “A Report submitted in partial fulfillment of the requirements for the award of the degree of MASTER OF BUSINESS ADMINISTRATION FROM Enrolment Number: Under the guidance of ____________________________ ______ SAGAR BUSINESS ACADEMY- BANGALORE 1
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Transcript of Project Karnataka Bank
EFFECTIVE RECOVERY OF LOANS
PROJECT REPORT ON
“A STUDY RELATES TO ANALYSIS OF THE
EFFECTIVE RECOVERY OF LOANS AND
ADVANCES IN KARNATAKA BANK”
“A Report submitted in partial fulfillment of the
requirements for the award of the degree of
MASTER OF BUSINESS ADMINISTRATION
FROM
Enrolment Number:
Under the guidance of
__________________________________ SAGAR BUSINESS ACADEMY- BANGALORE
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EFFECTIVE RECOVERY OF LOANS
This is to certify that the PROJECT report is a bonafide work of,Enrolment No. for the
partial fulfillment of the requirements for the award of the degree of Masters of Business
Administration from under my guidance This project work is original and not submitted
earlier for the award of any degree/diploma fellowship/ any prizes elsewhere.
__________________________________ SAGAR BUSINESS ACADEMY- BANGALORE
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CERTIFICATE OF GUIDECERTIFICATE OF GUIDE
EFFECTIVE RECOVERY OF LOANS
I hereby declare that the Project report submitted to is, for the partial fulfilment of the
requirements for the award of Masters of Business administration is a record of original
report done by me under the supervision and guidance of
Place: Bangalore
Date:
__________________________________ SAGAR BUSINESS ACADEMY- BANGALORE
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DECLARATION BY THE STUDENT
DECLARATION BY THE STUDENT
DECLARATION BY THE STUDENT
DECLARATION BY THE STUDENT
DECLARATION BY THE STUDENT
DECLARATION BY THE STUDENT
EFFECTIVE RECOVERY OF LOANS
The successful completion of any task would be incomplete without
mentioning the people who have made it possible. So it’s with the gratitude that I
acknowledge the help, which crowned my efforts with success.
I would also like to convey my sincere thanks to faculty of MBA department of
for helping me out and showing keen interest in my project.
I extend my deep gratitude to for his constant guidance and support.
I would also like to thank the various department officials and staff who not
only provided me with required opportunity but also extended their valuable time
and I have no words to express my gratefulness to them.
Last but not the least I am very much indebted to my family and friends, for
their warm encouragement and moral support in conducting this project work.
__________________________________ SAGAR BUSINESS ACADEMY- BANGALORE
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ACKNOWLEDGEMENT ACKNOWLEDGEMENT
EFFECTIVE RECOVERY OF LOANS
CONTENTS
SI NO PARTICULERS
Page No:
1.1
1.2
1.3
CHAPTER: 01 INTRODUCTION
GENERAL INTRODUCTION HISTORY
PROFILE OF THE ORGANIZATION
VARIOUS PRODUCTS OFFERED BY THE BANK
7-13
13-26
26-76
2.1
2.2
CHAPTER: 02 OBJECTIVES
RESEARCH DESIGN
OBJECTIVES OF THE STUDY
BANKING SCENARIO
78
79
7
3.1
CHAPTER:03 CONTENTS
ANALYSIS AND INTERPRETATION OF DATA 80-106
4.1
CHAPTER 04: FINDING AND CONCLUSION
FINDINGSSUGGESTION FROM STUDYCONCLUSION
107-112
5.1
CHAPTER 05: ANNEXUREBIBLIOGRAPHY 113-114
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CHAPTER 1
INTRODUCTION
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1.1 INTRODUCTION
In our present day economy, finance is defined as the provision of money at the time
when it is required. Every enterprise, whether big or small, needs finance to carry on its
operations and to achieve its target. In fact, finance is so indispensible today that it is
rightly said to be the lifeblood of enterprise. Without adequate finance no enterprise can
possibly accomplish its objectives. Finance refers to the management of flows of money
through an organization. It concerns with the application of skills in the manipulation, use
and control of money.
Finance management is that managerial activity which is concerned with the
planning and controlling of a firms financial reserve.
Financial management as an academic discipline has undergone fundamental changes as
regards its scope and coverage. In early years of its evolution it was treated
synonymously with the raising of funds, and little significance was attached to the
analytical thinking in the financial decision making and problem solving. In the current
literature pertaining to this growing academic discipline, a broader scope so as to include
in addition to procurement of funds, efficient use of resources is universally recognized.
Financial analysis can be defined as a study of relationship between many factors as
disclosed by the statement and the study of trend of these factors.
The objective of financial analysis is the pinpointing of strength and weakness
of a business undertaking by regrouping and analyzing of figures obtained from financial
statement and balance sheet by the tools and techniques of management accounting.
Financial analysis is as the final step of accounting that results in the presentation of final
and the exact data that helps the business managers, creditors and investors.
Based on this reasoning, this project is an attempt to analyze the financial performance of
Universal Systems Technologies Inc. In the financial analysis a ratio is used as an index
for evaluating the financial position and performance of the firm.
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The absolute accounting figures reported in the financial statement do not provide a
meaningful understanding of the performance and the financial position of the firm. But
the accounting figures convey the meaning when it is related to some other relative
information. For example :- Rs 5 crore net profits may look impressive, but the firms
performance can be said good or bad only when net figures is related to the firm’s
investment.
Accounting ratios are relation expressed in the mathematical terms between figures that
are connected with each other in the same manner. The information contained in the
balance sheet, profit and loss account or the income statements are used by the
management, creditors, investors and others to form judgment about the operating
performance and the financial strengths and weakness of the firm, if we properly analyze
the information reported in the statement.
1.2 INDUSTRIAL BACKGROUND
The Indian Information Technology industry accounts for a 5.19% of the
country's GDP and export earnings as of 2009, while providing employment to a
significant number of its tertiary sector workforce. More than 2.5 million people are
employed in the sector either directly or indirectly, making it one of the biggest job
creators in India and a mainstay of the national economy. In 2010-11, annual revenues
from IT-BPO sector is estimated to have grown over US$76 billion compared
to China with $35.76 billion and Philippines with $8.85 billion. India's outsourcing
industry is expected to increase to US$225 billion by 2020. The most prominent IT hub is
IT capital Bangalore. The other emerging destinations are
Chennai, Hyderabad, Kolkata, Pune, Mumbai, NCR and Kochi. Technically proficient
immigrants from India sought jobs in the western world from the 1950s onwards as
India's education system produced more engineers than its industry could absorb. India's
growing stature in the information age enabled it to form close ties with both the United
States of America and the European Union. However, the recent global financial
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crises has deeply impacted the Indian IT companies as well as global companies. As a
result hiring has dropped sharply and employees are looking at different sectors like the
financial service, telecommunications, and manufacturing industries, which have been
growing phenomenally over the last few years.
India's IT Services industry was born in Mumbai in 1967 with the
establishment of Tata Group in partnership with Burroughs. The first software export
zone SEEPZ was set up here way back in 1973, the old avatar of the modern day IT Park.
More than 80 percent of the country's software exports happened out
of SEEPZ, Mumbai in 80s.
Each year India produces roughly 500,000 engineers in the country, out of them only
25% to 30% possessed both technical competency and English language skills, although
12% of India's population can speak in English. India developed a number of outsourcing
companies specializing in customer support via Internet or telephone connections. By
2009, India also has a total of 37,160,000 telephone lines in use, a total of
506,040,000 mobile phone connections, a total of 81,000,000 Internet users—comprising
7.0% of the country's population, and 7,570,000 people in the country have access
to broadband Internet— making it the 12th largest country in the world in terms
of broadband Internet users. Total fixed-line and wireless subscribers reached 543.20
million as of November, 2009.
Formative Years (Till 1991)
The Indian Government acquired the EVS EM computers from the Soviet Union, which
were used in large companies and research laboratories. In 1968 Tata Consultancy
Services—established in SEEPZ, Mumbai by the Tata Group—were the country's largest
software producers during the 1960s. As an outcome of the various policies of Jawaharlal
Nehru (office: 15 August 1947 – 27 May 1964) the economically beleaguered country
was able to build a large scientific workforce, third in numbers only to that of the United
States of America and the Soviet Union.
On 18 August 1951 the minister of education Maulana AbulKalam Azad, inaugurated
the Indian Institute of Technology at Kharagpur in West Bengal. Possibly modeled after
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EFFECTIVE RECOVERY OF LOANS
the Massachusetts Institute of Technology these institutions were conceived by a 22
member committee of scholars and entrepreneurs under the chairmanship of N. R. Sarkar.
Relaxed immigration laws in the United States of America (1965) attracted a number of
skilled Indian professionals aiming for research. By 1960 as many as 10,000 Indians were
estimated to have settled in the US. Kapur (2006)By the 1980s a number of engineers
from India were seeking employment in other countries. In response, the Indian
companies realigned wages to retain their experienced staff. In the Encyclopedia of India,
Kamdar (2006) reports on the role of Indian immigrants (1980 - early 1990s) in
promoting technology-driven growth:
The United States’ technological lead was driven in no small part by the brain power of
brilliant immigrants, many of whom came from India. The inestimable contributions of
thousands of highly trained Indian migrants in every area of American scientific and
technological achievement culminated with the information technology revolution most
associated with California’s Silicon Valley in the 1980s and 1990s.
The National Informatics Centre was established in March 1975. The inception of The
Computer Maintenance Company (CMC) followed in October 1976. Between 1977-1980
the country's Information Technology companies Tata Infotech, Patni Computer
Systems and Wipro had become visible. The 'microchip revolution' of the 1980s had
convinced both Indira Gandhi and her successor Rajiv Gandhi that electronics and
telecommunications were vital to India's growth and development. MTNL underwent
technological improvements. Between 1986-1987, the Indian government embarked upon
the creation of three wide-area computer networking schemes: INDONET (intended to
serve the IBM mainframes in India), NICNET (the network for India's National
Informatics Centre), and the academic research oriented Education and Research
Network (ERNET).
1991–2001
Videsh Sanchar Nigam Limited (VSNL) introduced Gateway Electronic Mail Service in
1991, the 64 kbit/s leased line service in 1992, and commercial Internet access on visible
scale in 1992. Election results were displayed via National Informatics Centre's NICNET.
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EFFECTIVE RECOVERY OF LOANS
The Indian economy underwent economic reforms in 1991, leading to a new era
of globalization and international economic integration. Economic growth of over 6%
annually was seen between 1993-2002. The economic reforms were driven in part by
significant the internet usage in the country. The new administration under AtalBihari
Vajpayee—which placed the development of Information Technology among its top five
priorities— formed the Indian National Task Force on Information Technology and
Software Development.Wolcott & Goodman (2003) report on the role of the Indian
National Task Force on Information Technology and Software Development:
Within 90 days of its establishment, the Task Force produced an extensive background
report on the state of technology in India and an IT Action Plan with 108
recommendations. The Task Force could act quickly because it built upon the experience
and frustrations of state governments, central government agencies, universities, and the
software industry. Much of what it proposed was also consistent with the thinking and
recommendations of international bodies like the World Trade
Organization (WTO), International Telecommunications Union (ITU), and World Bank.
In addition, the Task Force incorporated the experiences of Singapore and other nations,
which implemented similar programs. It was less a task of invention than of sparking
action on a consensus that had already evolved within the networking community and
government.
The New Telecommunications Policy, 1999 (NTP 1999) helped further liberalize
India's telecommunications sector. The Information Technology Act 2000 created legal
procedures for electronic transactions and e-commerce.
Throughout the 1990s, another wave of Indian professionals entered the United States.
The number of Indian Americans reached 1.7 million by 2000. This immigration
consisted largely of highly educated technologically proficient workers. Within the
United States, Indians fared well in science, engineering, and management. Graduates
from the Indian Institutes of Technology (IIT) became known for their technical skills.
Thus GOI planned to established new Institutes specially for Information Technology to
enhance this field. In 1998 India got the first IT institute name Indian Institute of
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EFFECTIVE RECOVERY OF LOANS
Information Technology at Gwalior. The success of Information Technology in India
not only had economic repercussions but also had far-reaching political consequences.
India's reputation both as a source and a destination for skilled workforce helped it
improve its relations with a number of world economies. The relationship between
economy and technology—valued in the western world—facilitated the growth of an
entrepreneurial class of immigrant Indians, which further helped aid in promoting
technology-driven growth.
2001
India is now one of the biggest IT capitals in the modern world.
The economic effect of the technologically inclined services sector in India—accounting
for 40% of the country's GDP and 30% of export earnings as of 2006, while employing
only 25% of its workforce is summarized by Sharma (2006).
Today, Bangalore is known as the Silicon Valley of India and contributes 33% of Indian
IT Exports. India's second and third largest software companies are head-quartered in
Bangalore, as are many of the global SEI-CMM Level 5 Companies.
Next to Bangalore Chennai plays an important role in IT. Lot of companies were
developed in Chennai, in the last few years. And Mumbai too has its share of IT
companies that are India's first and largest, like TCS and well established
like Reliance, Patni, LnTInfotech, i-Flex, WNS, Shine, Naukri, Jobspert etc. are head-
quartered in Mumbai. and these IT and dot com companies are ruling the roost of
Mumbai's relatively high octane industry of Technology. Such is the growth in
investment and outsourcing; it was revealed that Cap Gemini will soon have more staff in
India than it does in its home market of France with 21,000 personnel+ in India.
On 25 June 2002 India and the European Union agreed to bilateral cooperation in the
field of science and technology. A joint EU-India group of scholars was formed on 23
November 2001 to further promote joint research and development. India holds observer
status at CERN while a joint India-EU Software Education and Development Center is
due at Bangalore
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EFFECTIVE RECOVERY OF LOANS
Introduction to Banking in India:
Without a sound and effective banking system in India it cannot have a healthy economy.
The banking system of India should not only be hassle free but, it should be able to meet
new challenges posed by the technology and any other external and internal factors.
Banking in India has its origin as early as Vedic Period. It is believed that the transition
from money lending to banking must have occurred even before Manu, the great Hindu
Jurist who has devoted a section of his work to deposits and advances and laid down the
rules relating to rates of interest. During the days of East India Company it was the turn
of the agency houses to carry on the banking business.
Banking in India originated in the first decade of 18th century. The first banks were The
General Bank of India, which started in 1786, and Bank of Hindustan, both of which are
now defunct. The oldest bank in existence in India is the State Bank of India, which
originated in the "The Bank of Bengal" in Calcutta in June 1806. This was one of the
three presidency banks, the other two being the Bank of Bombay and the Bank of
Madras. The presidency banks were established under charters from the British East India
Company. They merged in 1925 to form the Imperial Bank of India, which, upon India's
independence, became the State Bank of India. For many years the Presidency banks
acted as quasi-central banks, as did their successors.
The Reserve Bank of India formally took on the responsibility of
regulating the Indian banking sector from 1935. After India's independence in 1947, the
Reserve Bank was nationalized and given broader powers. A couple of decades later,
foreign banks such as 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.
Early history in Indian Banking
The first fully Indian owned bank was the Allahabad Bank, established in 1865.
However, at the end of late-18th century, there were hardly any banks 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 Americas. Some banks were opened
at that time to finance industry, including speculative trading in cotton. With large
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EFFECTIVE RECOVERY OF LOANS
exposure to speculative ventures, most of the banks opened in India during that period
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 Bank of Bengal, which later became the State Bank of India.
At this time, the Indian economy was passing through a relative period of
stability. Around five decades have elapsed since the India's First war of Independence,
and the social, industrial and other infrastructure have developed. At that time there were
very small banks operated by Indians, and most of them were owned and operated by
particular communities.
The presidency banks dominated banking in India. There were also some
exchange banks and a number of Indian joint stock banks. All these banks operated in
different segments of the economy. The exchange banks, mostly owned by Europeans,
concentrated on financing foreign trade. Indian joint stock banks were generally
undercapitalized and lacked the experience and maturity to compete with the presidency
and exchange banks. This segmentation let Lord Curzon to observe, "In respect of
banking it seems we are behind the times. We are like some old fashioned sailing
ship, divided by solid wooden bulkheads into separate and cumbersome
compartments."By the 1900s, the market expanded with the establishment of banks such
as Punjab National Bank, in 1895 in Lahore and Bank of India, in 1906, in Mumbai -
both of which were founded under private ownership. Punjab National Bank is the first
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EFFECTIVE RECOVERY OF LOANS
Swadeshi Bank founded by the leaders like Lala Lajpat Rai, Sardar Dyal Singh Majithia.
The Swadeshi movement in particular inspired local businessmen and political figures to
found banks of and for the Indian community. A number of banks established then have
survived to the present such as Bank of India, Corporation Bank, Indian Bank, Bank of
Baroda, Canara Bank and Central Bank of India.
From World War I to Independence
The period during the First World War (1914-1918) through the end of the
Second World War (1939-1945), and two years thereafter until the independence of India
were challenging for Indian banking. The years of the First World War were turbulent,
and it took its toll with banks simply collapsing despite the Indian economy gaining
indirect boost due to war-related economic activities. At least 94 banks
in India failed between 1913 and 1918 as indicated in the following
table:
YearsNumber of banksthat failed
Authorized capital(Rs. Lakhs)
Paid-up Capital(Rs. Lakhs)
1913 12 274 35
1914 42 710 109
1915 11 56 5
1916 13 231 4
1917 9 76 25
1918 7 209 1
Post-independence
The partition of India in 1947 adversely impacted the economies of Punjab and West
Bengal, paralyzing banking activities 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
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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, India's central banking authority, was
nationalized, and it became an institution owned by the Government of India.
In 1949, the Banking Regulation Act was enacted which empowered the Reserve
Bank of India (RBI) "to regulate, control, and inspect the banks in India."
The Banking Regulation Act also provided that no new bank or branch of an
existing bank may be opened without a license from the RBI, and no two banks
could have common directors.
However, despite these provisions, control and regulations, banks in India except the
State Bank of India, continued to be owned and operated by private persons. This
changed with the nationalization of major banks in India on 19th July, 1969.
Nationalization
By the 1960s, the Indian banking industry has become an important tool to
facilitate the development of the Indian economy. At the same time, it has emerged as a
large 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
GOI in the annual conference of the All India Congress Meeting in a paper entitled "Stray
thoughts on Bank Nationalization." The paper was received with positive enthusiasm.
Thereafter, her move was swift and sudden, and the GOI issued an ordinance and
nationalized 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
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EFFECTIVE RECOVERY OF LOANS
." Within two weeks of the issue of the ordinance, the Parliament passed the
Banking Companies (Acquition and Transfer of Undertaking) Bill, and it received the
presidential approval on 9th August, 1969. A second dose of nationalization of 6 more
commercial banks followed in 1980. The stated reason for the nationalization was to give
the government more control of credit delivery. With the second dose of nationalization,
the GOI controlled around 91% of the banking business of India. Later on, in the year
1993, one of the nationalized banks, namely, New Bank of India was merged with Punjab
National Bank. It was the first and only merger of a Nationalized Bank into a
Nationalized Bank, resulting in the reducing the number of Nationalized Banks from 20
to 19.After this, until the 1990s, the nationalized banks grew at a pace of around 4%,
closer to the average growth rate of the Indian economy.
Liberalization
In the early 1990s the then Narsimha Rao government embarked on a policy of
liberalization and gave licenses to a small number of private banks, which came to be
known as New Generation tech-savvy banks, which included banks such as Global Trust
Bank (the first of such new generation banks to be set up)which later amalgamated with
Oriental Bank of Commerce, UTI Bank(now re-named as Axis 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.
The next stage for the Indian banking has been setup with the proposed relaxation
in the norms for Foreign Direct Investment, where all Foreign Investors in banks may be
given voting rights which could exceed the present cap of 10%, at present it has gone up
to 49% with some restrictions.
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The new policy shook the Banking sector in India completely. Bankers, till this time,
were used to the 4-6-4 method (Borrow at 4%; Lend at 6%; Go home at 4) of functioning.
The new wave ushered in a modern outlook and tech-savvy methods of working for
traditional banks. All this led to the retail boom in India. People not just demanded more
from their banks but also received more.
The Indian Banking System:
The formal banking system in India comprises the RBI, Commercial Banks,
Regional Rural Banks and the co-operative banks. In the recent past, private non-banking
finance companies also have been active in the financial system, and are being regulated
by the RBI.
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Scheduled Banks of India
Scheduled Commercial Banks
Public Sector Banks
Scheduled Urban Co-operative Banks
Scheduled State Co-operative Banks
Private Sector Banks
Foreign Banks
Regional Rural Bank
Nationalized Banks
State Bank of India and associate banks. Old Private
Banks.New Private Banks.
EFFECTIVE RECOVERY OF LOANS
Reserve Bank of India:
The RBI, established in 1935, is the central banking and monetary authority in
India. The RBI manages the country’s money supply and foreign exchange and also
serves as a bank for the Government of India and for the country’s commercial banks. In
addition to these traditional central banking roles, the RBI undertakes certain
developmental and promotional roles. The RBI issues guidelines on various areas
including exposure standards, income recognition, asset classification, provisioning for
non-performing assets, investment valuation and capital adequacy standards for
commercial banks, long-term lending institutions and non-bank finance companies. The
RBI requires these institutions to furnish information relating to their businesses to the
RBI on a regular basis.
Public Sector Banks (PSBs):
The banking sector in India has been characterized by the predominance of Public
Sector Banks. They include the State Bank of India and its associate banks, 19
nationalized banks and 196 regional rural banks. The aggregate loan assets of all Public
Sector Banks stood at Rs.67295 crores at end Financial Year 06-07 accounting for
73.39% of loan assets of all Scheduled Commercial Banks in India and their total
operating profits amounted to Rs.42, 485 crores. The Public Sector Banks large network
of branches enables them to fund themselves out of low-cost deposits.
Private Sector Banks:
In July 1993, as part of the banking sector reform process and as a measure to
induce competition in the banking sector, the RBI permitted entry by the private sector
into the banking system. At the end of the Financial Year 06-07, the total loan assets of
private sector banks aggregated Rs.197, 620 crores and accounted for 19.70% of the total
loan assets of all Scheduled Commercial Banks and their total operating profits amounted
to Rs.8209 crores. The share of private sector banks in total loan assets has increased
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EFFECTIVE RECOVERY OF LOANS
from 18.77% at the end of the Financial Year 06 to 19.70% at the end of the Financial
Year 07 mainly due to the increase in the loan assets of new private sector bank.
Foreign Banks:
As on June 30, 2007, there are 40 foreign banks operating in India with 236
branches. Some foreign banks have also set up representative offices in India. Foreign
banks operate only in urban cities and metropolitan cities. As on March 2007, deposits of
foreign banks stood at 15.1%. At the end of the 2006, the loan assets of foreign banks
aggregated Rs.65,652 crores and accounted for 6.95% of the total assets of all Scheduled
Commercial Banks and their total operating profits of the foreign banks as on March 31,
2007 amounted to Rs.5,687 crores.
Co-operative Banks:
Co-operative banks cater to the financing needs of agriculture, small industry and
self-employed businessmen in urban and semi-urban areas of India. The state land
development banks and the primary land development banks provide long-term credit for
agriculture. In the light of liquidity and insolvency problems experienced by some co-
operative banks in fiscal 2001, the RBI undertook several interim measures, pending
formal legislative changes, including measures related to lending against shares,
borrowings in the call market and term deposits placed with other urban co-operative
banks. Presently the RBI is responsible for supervision and regulation of urban
cooperative societies, and the National Bank for Agriculture and Rural Development for
State Co-operative Banks and District Central Cooperative Banks.
Non-Scheduled banks are those, which have not been included in the Second Schedule of
the RBI Act, 1934.]
Current situation
Currently (2007), banking in India is generally fairly mature in terms of supply,
product range and reach-even though reach in rural India still remains a challenge for the
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EFFECTIVE RECOVERY OF LOANS
private sector and foreign banks. In terms of quality of assets and capital adequacy,
Indian banks are considered to have clean, strong and transparent balance sheets relative
to other banks in comparable economies in its region. The Reserve Bank of India is an
autonomous body, with minimal pressure from the government.
The stated policy of the Bank on the Indian Rupee is to manage volatility but without
any fixed 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. One may also
expect M&As, takeovers, and asset sales.
In March 2006, the Reserve Bank of India allowed Warburg Pincus to increase its
stake in Kotak Mahindra Bank (a private sector 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.
Currently, India has 88 scheduled commercial banks (SCBs) - 27 public sector
banks (that is with the Government of India holding a stake)after merger of New Bank of
India in Punjab National Bank in 1993, 29 private banks (these do not have government
stake; they may be publicly listed and traded on stock exchanges) and 31 foreign banks.
They have a combined network of over 53,000 branches and 17,000 ATMs. According to
a report by ICRA Limited, a rating agency, the public sector banks hold over 75 percent
of total assets of the banking industry, with the private and foreign banks holding 18.2%
and 6.5% respectively.
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Types of Banks in India
CENTRAL BANK (1): RESERVE BANK OF INDIA
NATIONALIZED BANKS(19) : ALLAHABAD BANK, ANDHRA BANK ·
BANK OF BARODA · BANK OF INDIA · BANK OF MAHARASHTRA ·
CANARA BANK · CENTRAL BANK OF INDIA · CORPORATION BANK ·
DENA BANK · INDIAN BANK · INDIAN OVERSEAS BANK · ORIENTAL
BANK OF COMMERCE · PUNJAB & SIND BANK · PUNJAB NATIONAL
BANK · SYNDICATE BANK · UNION BANK OF INDIA · UNITED BANK
OF INDIA · UCO BANK · VIJAYA BANK · IDBI BANK
STATE BANK GROUP(8): STATE BANK OF INDIA · STATE BANK OF
BIKANER & JAIPUR · STATE BANK OF HYDERABAD · STATE BANK OF
INDORE · STATE BANK OF MYSORE · STATE BANK OF PATIALA ·
STATE BANK OF SAURASHTRA · STATE BANK OF TRAVANCORE
PRIVATE BANKS(26): AXIS BANK · BANK OF RAJASTHAN · BHARAT
OVERSEAS BANK · CATHOLIC SYRIAN BANK · CENTURION BANK OF
PUNJAB · CITY UNION BANK · DEVELOPMENT CREDIT BANK ·
DHANALAKSHMI BANK · FEDERAL BANK · GANESH BANK OF
KURUNDWAD · HDFC BANK · ICICI BANK · INDUSIND BANK · ING
VYSYA BANK · JAMMU & KASHMIR BANK · KARNATAKA BANK
LIMITED · KARUR VYSYA BANK · KOTAK MAHINDRA BANK ·
LAKSHMI VILAS BANK · NAINITAL BANK · RATNAKAR BANK · SBI
COMMERCIAL AND INTERNATIONAL BANK · SOUTH INDIAN BANK ·
AMAZING MERCANTILE BANK · YES BANK
FOREIGN BANKS(6): ABN AMRO BANK · BARCLAYS BANK ·
CITIBANK · HSBC · STANDARD CHARTERED · DEUTSCHE BANK
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REGIONAL RURAL BANKS(4): SOUTH MALABAR GRAMIN BANK ·
NORTH MALABAR GRAMIN BANK · PRAGATHI GRAMIN BANK ·
SHREYAS GRAMIN BANK
FINANCIAL SERVICES(7): REAL TIME GROSS SETTLEMENT(RTGS) ·
NATIONAL ELECTRONIC FUND TRANSFER (NEFT) · STRUCTURED
FINANCIAL MESSAGING SYSTEM (SFMS) · CASHTREE · CASHNET ·
AUTOMATED TELLER MACHINE (ATM)
Loan
A loan is a type of debt. Like all debt instruments, a loan entails the redistribution of
financial assets over time, between the lender and the borrower.
In a loan, the borrower initially receives or borrows an amount of money, called
the principal, from the lender, and is obligated to pay back or repay an equal amount of
money to the lender at a later time. Typically, the money is paid back in
regular installments, or partial repayments; in an annuity, each installment is the same
amount.
The loan is generally provided at a cost, referred to as interest on the debt, which
provides an incentive for the lender to engage in the loan. In a legal loan, each of these
obligations and restrictions is enforced by contract, which can also place the borrower
under additional restrictions known as loan covenants.
Types of Loans offered by the Banks:
Secured loan
A secured loan is a loan in which the borrower pledges some asset (e.g., a car or
property) as collateral (i.e., security) for the loan. Commonly Mortgage loan is provided
by the banks.
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EFFECTIVE RECOVERY OF LOANS
Unsecured Loans
Unsecured loans are monetary loans that are not secured against the borrowers assets
(i.e., no collateral is involved). These may be available from financial institutions under
many different guises or marketing packages:
Bank overdrafts
Corporate bonds
Credit card debt
Credit facilities or lines of credit
Personal loans
THE KARNATAKA BANK Ltd
KARNATAKA BANK LIMITED: REGD & HEAD OFFICE : MANGALORE- 575002 History
Karnataka Bank Limited, a leading 'A' Class Scheduled Commercial Bank in India, was
incorporated on February 18th, 1924 at Mangalore, a coastal town of Dakshina Kannada
district in Karnataka State. The bank took shape in the aftermath of patriotic zeal that
engulfed the nation during the freedom movement of 20th Century India. Over the years
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EFFECTIVE RECOVERY OF LOANS
the Bank grew with the merger of Sringeri Sharada Bank Ltd., Chitradurga Bank Ltd. and
Bank of Karnataka.
With over 87 years experience at the forefront of providing professional
banking services and quality customer service, we now have a national presence with a
network of 479 branches spread across 20 states and 2 Union Territories.
Managed by a dedicated & professional management team, we have over 5,844
employees, 86,868 shareholders and over 4.84 million customers. Today, we have
emerged as a leading financial service institution in India.
Technology Throughout the years, we have focused on one task, one mission - To Give You The
Best in Services and In Products. Among other Banks, it was Karnataka Bank who first
realized the importance of having a Centralized Banking system and was among the first
to deploy the Core Banking System in the year 2000. This system enabled us to store and
process all the customers' accounts from one single place - the Data Centre at Bangalore.
To ensure that you have the Best, we have deployed the State-Of-Art technology from the
best players in the Industry like Infosys, Sun and Wipro. These systems provide the
highest reliability thus enabling us to offer to you Non-Stop services of the highest order.
We have taken a lead and implemented a Disaster Recovery Centre. This centre will
replicate the Banks Centralized Banking system and all its data. This centre will also be
the backup for the ATM operations. In the event of a natural disaster at Bangalore, this
centre will immediately come into force and provide full continuous service. Leaving
nothing to chance. At Karnataka Bank, Business never stops.
We have ensured your business is protected by Non-Stop Banking.
The mission
Our mission is 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."
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EFFECTIVE RECOVERY OF LOANS
At Karnataka Bank, we understand that all customers are different in unique
ways, which is why, regardless of the size of your business or your aspirations, we treat
everyone as individual and special. This means offering you choices, not only in relation
to our products and services but also in the way you interact with us. We understand the
changes in your lifestyle recognize these changes and support you with a high standard of
professionalism and service. As a premier bank, we have developed comprehensive range
of customized products & services suitable for every kind of market, trade or perceived
need - Business or Personal.
They include, borrowing facilities, deposits, providing optimum returns on surplus funds
or helping with overseas transactions.
COMPANY PROFILE
Back ground and management of the Karnataka Bank
The bank was incorporated on Feb 18, 1924 as the Karnataka Bank Ltd at
Mangalore, in Karnataka state to cater to the banking needs of the south Karnataka
region. The certificate to commence business was obtained on May 23, 1924.
During the period of four decades, i.e., from 1906 to 1945, the district attained
renown as the cradle of a banking revolution in the country, since as many as 22 banks of
different sizes had their origin in the district, 9 of which were from Mangalore, which is
the capital and also the trading and commercial activities of the district, (5 leading banks
including Karnataka Bank Ltd).
Inspired by the Swadeshi movement, a few prominent and enterprising citizens of
the district, mostly hailing from the communities of farmers, merchants, doctors,
advocates incorporated the banking institution in the district. One such pioneer was Sri.
B.R. Vyasaraya Achar, who along with his contemporaries promoted the Karnataka bank
ltd, in 1924 under his chairmanship,
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EFFECTIVE RECOVERY OF LOANS
In the stride towards progress and expansion, the bank got reinforced by the
takeover of 3 banks, viz. Sri Sharada Bank Ltd., on April 1st 1960, Chitradurga Bank Ltd.,
on December 30th 1964, and The Bank of Karnataka on December 29th 1966. And during
the year 2003, the bank has taken up corporate agency for marketing the various life
policies of Met Life India Insurance Co Ltd.
The bank has shifted its Registered and Head office from P.B. No 716,
Kodialbail, Mangalore 575003 to P.B. No 599, Mahaveera Circle, Kankanady,
Mangalore 575002 in September 2003. The bank made rapid strides under the dynamic
leadership of exemplary vision, who guided the banks fortunes for over 30 years. Today,
Karnataka bank has national presence with a network in excess of 433 branches, spread
across 19 states and 2 Union Territories. The bank has over 4677 employees, 89407 share
holders and 2.6 million customers.
It is one of the leading private sector banks in the country known for its steady
and disciplined growth and cordial borrower service. As on March 31st 2008, its total
business exceeds Rs 28000 crores, deposits were Rs 17016.19 crores, advances were Rs
10841.97 crores and net profit for the year ended 31st March 2008 was Rs 241.74 crores.
Background of the Logo:
The person who had such a dream, Sri Adiga with all his dream met Dr Shivaram
Karanth, simple line came from Dr Karanth’s pen became the logo of Karnataka Bank.
Bank logo is indicative of creation and potency, which is also a manifestation of human
soul, which has the external existence with infinitive. Logo also represents growth with
safety, security and enduring success for all the beings. The sign also signifies with
family concept of father, mother and their progeny, symbolizing their security which is
reflected in the bank motto, “your family bank across India”.
The Bank has adopted a new brand color, which signifies brightness, cheerfulness
and forward looking nature. At Karnataka bank they understand that customer are
different in unique ways, which is why regardless of the size of your business or your
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EFFECTIVE RECOVERY OF LOANS
aspiration, we treat everyone as individual and special among other things, this means
offering you choice, not only in relation to our products and services but also in the way
you interact with us. We understand the changes in your lifestyle recognize these changes
and support you with a high standard of professionalism and services.
Values:
We at Karnataka bank offer a total value package, a one stop shop for all you’re
banking need and create the right solution with speed and efficiency, for your maximum
benefit
Mission Statement:
The mission statement of any organization generally represents its long term goals
and strategies. Every organization must have its own mission, which describes present
business scope of the organization. The mission of Karnataka Bank Ltd is as follows:
“Our mission is to be a technology savvy, customer centric progressive bank with the
presence, driven by the highest standards of corporate governance and guided by sound
ethical values”.
Vision Statement:
“We believe in a total quality at a total value package, a one stop shop for all your
banking needs. Our motto is to serve you with high standard of professionalism with the
personal touch built on trust. After all, this is your bank- your family bank, across India”.
There are various departments in the bank head office to assist in the smooth
functioning of the banking activities namely:
1. Credit Department
2. Treasury and Accounts department
3. Risk Management department
4. Inspection and audit Department
5. Human resources and Industrial relations department
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EFFECTIVE RECOVERY OF LOANS
6. Recovery Department
7. Investment department
8. Planning and Development Department
9. Vigilance Department
10. Information system Department
11. Legal department
12. IT Department
13. Secretarial section
Infrastructural Facility:
As regards to the infrastructural facilities provided in Karnataka Bank:
Offices: The Head office of Karnataka Bank Ltd and other 70% branches has a central air
condition system with well furnished branches which the employees to escape from the
heat of Mangalore City and other heat areas. And also provide good environment to do
work to employees.
Facilities: The Bank provides canteen facility to all its employees and bank also provides
internet facility its employees. And also give accommodation facilities to employees.
Allowances: The bank provides basically petrol, 100% medical allowance and promotion
and wage revenue plan.
Services: Karnataka Bank offers total value packing, nonstop shop for all banking needs.
The bank is committed to provide with customized services designed to suit individual
requirements, whether it high caring deposits, easy and convenient loans, life insurance,
utility bill payment is enabling to keep track of finances thereby saving time.
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EFFECTIVE RECOVERY OF LOANS
Work flow model of the Bank:
Mobilization of funds
Mobilization of fund:
This is the first process in the bank, it will mobilize the funds from various sources like
individual savers corporate, and other financial institution and RBI also supply the
necessary funds.
Lending:
After mobilization the necessary funds, it has to maintain necessary funds as reserves. It
has to maintain reserves like CRR, SLR and so on. After fulfilling the necessary
requirement of the RBI, the bank will lend to various corporate, individuals.
Recovery:
After the maturity of loan period, the bank will recover the loans. For this purpose the
bank has a separate recovery department. This process is continuous in the bank; again
recovered amount will be invested.
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Lending
Recovery
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EFFECTIVE RECOVERY OF LOANS
Memorable Milestone:
In 1984 the bank celebrated its Diamond Jubilee year, to make this occasion
memorable it introduced a new scheme i.e., Diamond Jubilee Cash Certificate,
Abhyudaya magazine was introduced.
In 1998-99, the bank introduced two new deposit schemes i.e., Suvarna Nidhi and Ready
Money Krishi Card an easy and quick substitute for Crop loan was introduced. In this
year Merchant Banking division was started.
In 1992-93 the first currency chest- the first in Karnataka by any private sector
bank was opened on May 17th in Bangalore. Stock – invest scheme was introduced.
The 18th February 1998 was witnessed the bank’s advent into its Platinum Jubilee
year. To make the occasion memorable the bank has chalked out an extensive and phased
programmed encompassing publicity, even marketing social welfare schemes and
corporate identity symbols. Two new deposit schemes – Platinum Lakpathi and Platinum
Double and Vidyanidhi Education loan schemes have been introduced.
Achievements/ Awards:
The credit rating agency ‘ICRA Limited’ one of the leading rating agencies of the
country has recorded “A1+” rating to the bank’s certificate of deposit programme. The
rating symbol “A1+” indicates highest degree of safety for timely payment of principal
and interest.
Further ICRA and ‘credit analysis and research ltd (ICRA)’ have assigned “LA+”
and “CARE A+” ratings respectively indicating adequate credit quality to Rs. 150 crores
raised by the bank during the year under report by way of unsecured redeemable non-
convertible subordinated bonds.
The bank has won the prestigious SUN and NDTV green IT award instituted SUN
Microsystems and NDTV, recognizing organizations which have pledged their positive
commitment to the planet and engaged eco-efficient green technologies to run their
business.
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EFFECTIVE RECOVERY OF LOANS
Nature of business carried out:
Karnataka bank is the No.1 private sector banks in India which is providing all the
services of a modern bank to its customer. It accepts deposits from the customers,
provides loans and advances to the needy people. It also provides for the remittance of
funds and some other facilities. It will also carry various activities like D-mat,
securitization etc.
Quality policy:
The quality policy of the Karnataka Bank is as follows
“We believe in total quality at all levels. We are aiming at a total value package, a one-
stop shop for all your banking needs. Our motto is to serve you with high standard of
professionalism with a personal touch built on trust. After all this is your Bank. Your
Family Bank Across India”.
External Certificate and Recognition:
The credit rating agency, ICRA Ltd. one of the leading credit rating agency of the
country, has accorded ‘A1+ rating’ to the bank’s Certificate of Deposit programme. The
rating symbol A1+ indicates highest degree of safety for timely payment of principal and
interest.
Corporate Goals:
The bank has envisaged achieving a total business turnover of Rs 35000 crore,
comprising of a deposit target of Rs 21000 crore and advance target of Rs.14000 crore for
the year ending 31st March 2009. The bank is confident of achieving the same through
customer services and operational efficiency. Besides, the bank ha plans to increase its
total no. of business units to 640, by increasing the total no. of branches to 460 and own
ATM network to 180 by March 2009.
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EFFECTIVE RECOVERY OF LOANS
Area of operation :
The area of operation is spread all over India. It has its branches in 19states and 2
union territories. As on 31-03-2008, it has 433 branches. All the branches are
computerized branches. It has more than 150 ATM outlets,7 extension counters, 8
regional offices, 1 international division, 1 Data center, 4 service branches, 2 currency
chests.
Besides banking operation involve into variety of services selling insurance,
mutual fund products of other companies and they help in the payment of electric and
telephone bills, as they already have a large customer base for which they give similar or
related service under a single umbrella.
Karnataka bank is already dealing with MetLife and Franklin Templeton
investments, India. Karnataka bank has signed a MOU with ICICI and Bajaj Allianz.
Branch Network:
The bank has a national presence through a widespread network of 433 branches.
Specialized branches have been established to cater to the needs of key borrower
segments in the core area of agriculture, industrial finance and foreign exchange. The
branch network is administered by 8 regional offices and an international division.
During the year 2006-07, the bank shifted its 22 branches and Mumbai-Regional
office to new spacious premises. The regional offices are situated at Mangalore,
Shimoga, Bangalore, Chennai, Hubli, Mumbai, Mysore and Delhi. With overall
supervision and control by the head office personalized borrower service is its key
success factor. The bank has also diversified into new avenue of business such as
Merchant Banking and Leasing.
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EFFECTIVE RECOVERY OF LOANS
Future growth and prospectus:
With an economy of the country growing at nearly 8% there is high growth
potential for the bank. The bank is planning to enable ‘Money Click’ as a payment
gateway for the shopping that covers as the areas of business like Hotel Booking, Ticket
Booking, Purchase of goods etc. The bank is also planning to introduce mobile Top-up
through ATM’s and internet banking. Further bank is also planning to tie up for online
trading in shares.
Karnataka bank has taken significant strides on the technology front. All the
branches and offices are connected to ‘core banking solution’. Bank’s tie up with ‘M/S
Tech Process Solutions Limited’, facilitates online payment in merchant establishments.
The bank ties up with ‘Tata Mutual Fund’ for distribution of their mutual fund products.
E-hundi facility has been made available to a few reputed temples. ‘White label
agreement’ has been made with ‘Calyon Bank Limited’ France, provide risk management
services.
In the area of farm credit, the bank has signed a Memorandum of Understanding
with ‘M/S Mahindra and Mahindra Limited’, for financing purchase of tractors/ power
tillers/ vehicles and form equipments. The bank has also entered into a pact with ‘M/S
Motors Limited’, for financing purchase of tractors/ power tillers and farm equipment.
The bank intends to participate in initiatives of RBI like NFC’s and expand
centralized loan account opening at ‘Central Processing Centre’ (CPC) for all branches.
The bank has plans to launch students’ prepaid card and online trading facility for capital
market products.
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EFFECTIVE RECOVERY OF LOANS
The bank has on its agenda opening of a few more branches to take the tally of
branches to 500 besides adding more ATM’s to 250 by end 2012.
Loan Scheme of the Karnataka Bank:
The Karnataka Bank has following wide ranges of loan schemes.
1. KBL Apna Ghar-
a) Housing Loan Scheme for resident individuals :
Under this scheme maximum quantum of Rs.50 lakh may be given as loan for
fulfilling once dream of buying or constructing his own house or flat. The security for
loan is mortgage of property. Apart from this, loan is also given to an extent of maximum
Rs.10 lakh for repair, renovation of existing house or flats for a period of 7 years.
The period of this housing Loan is for 15 years. Rate of interest up to 5 years
8.50% p.a is charged, above 5 years and up to 10 years 8.75% p.a is charged, above 10
years up to 15 years - up to and inclusive of Rs.15.00 lakh 9% p.a and above Rs. 15.00
lakh 10% p.a is charged.
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CATEGORY NO OF BRANCHES
METRO 120
URBAN 134
SEMI-URBAN 89
RURAL 88
TOTAL 433
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EFFECTIVE RECOVERY OF LOANS
b) Housing loan scheme for NRI’s:
Under this scheme a loan is given to a non resident of India (NRI), were the loan
is given up to the period of 15 years. For repairs/renovation/remodeling maximum period
of loan is fixed at 7 years. Under this scheme maximum of Rs.50 lakh is given for the
construction of house/purchase of flat/ site/ and construction of house there on. In the
case of renovation/remodeling/repairs of existing house/flat maximum of Rs.10 lakh is
given. Nonresident Indian holding Indian passport and having permanent job or self
employed with a minimum monthly income of Rs.10000 is eligible. They should also
have an operative account with bank the bank with regular operations for @least 1 year.
The loan is granted for a period for 15 years, rate of interest up to 5 years 8.50%
p.a. is charged, above 5 years and up to 10 years 8.75% p.a is charged, above 10 years up
to 15 years - up to and inclusive of Rs.15.00 lakh 9% p.a and above Rs. 15.00 lakh 10%
p.a.
2. KBL Car Finance Scheme:
An individual purchase of a motor vehicle who is an income tax assesses with
sufficient repayment capacity is eligible for this scheme. Under this scheme finance will
be given for the purchase of new as well as second hand cars by the Bank. In case of new
cars finance to an extent of 85% of invoice value of the car excluding vehicle tax and
insurance, whereas a maximum of Rs.5 lakh will be given for purchasing second hand
cars not older than 3 years from the date of registration of the vehicle.
Rate of interest is charged up to and inclusive of Rs.10 lakh-10% p.a, above
Rs.10 lakh-11% p.a. For second hand vehicles up to Rs. 3 lakh-12% p.a. Maximum
period of loan for new vehicle is 60 months and 34 months in the case of second hand
vehicle. Up to 3 years interest will be charged 10.50%, more than 3 years 11%.
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EFFECTIVE RECOVERY OF LOANS
3. KBL Easy Ride-(Two Wheeler Loan):
Individuals, professionals and companies are eligible for finance under this
scheme. In this scheme finance will be given for the purchase of two wheelers to any
individuals, companies etc., to an extent of 100% of invoice value of the vehicle by the
Bank for a period of 5 years. Maximum amount of Rs. 100000/-borrower is given.
4. KBL Insta Cash:
In this scheme loan will be given to the persons aged above 18 years for
consumption purpose. The unique advantage of this scheme is that it enables credit while
keeping the borrowers investment intact. The quantum of loan ranges from Minimum of
Rs.5000 to of Maximum Rs.5 lakh. Rate of interest charged is 12% p.a. Maximum period
is for 60 months and for OD 24 months.
5. Salaried Persons (Scheme Loans) :
This scheme is meant for permanent employees of any reputed institutions or co’s
for purchasing household articles, for meeting medical expenses, children’s education
etc., provided they are not aged more than 55 years and are having maximum 3 years of
remaining service. The loan is granted up to Rs.50000 and the maximum period of this
loan is for 5 years.
6. KBL Swarna Nidhi:
Under this scheme loan for purchasing gold ornaments, gold bars and coins from
reputed jewelers will be given exclusively to resident Indian woman whether working or
not working, self employed or professional. All resident Indian Women within the age
group of 18 to 60 years in case of self employed/professionals. The minimum advance
given is 10000 Rs and maximum advance is of Rs.300000.00 is given. The rate of interest
charged is 11% p.a and the maximum period is for 5 years.
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7. KBL Udyog Mithra:
Under this scheme loan will be given to any individuals practicing as lawyers,
charted accountants, doctors and engineering consultants and loan is given only if they
are having satisfactory dealings with the Bank for more than 6 months. The main purpose
is for the purpose of purchase of medical equipments/machineries/computers, furnishing
the office, purchase of furniture, books and for the payment of advance rent for setting up
of an office. Maximum advance of Rs.75000/- in the case of rural branches, Rs. 100000/-
in the case if Semi-urban branches, Rs. 150000/- in the case of urban branches and RS
200000/- in the case of Metropolitan branches
8. Vidyanidhi-Education Loan Scheme:
In this scheme financial assistance in the form of loan will be given to both minor
and major students of Indian nationality for pursuing their education in various
disciplines specified by the Bank in India as well as for abroad. Mainly the scheme was
designed to provide financial support to the deserving and meritorious students for
continuing their studies in India and abroad. The main eligibility for the student is any
major student representing himself or a minor student represented by parent or guardian,
of Indian nationality. The finance is provided in the form of short term/term loan subject
to repaying capacity of the parents/students and the following ceilings:
Studies in India -Maximum Rs.7.5 lakh
Studies abroad- Maximum of Rs.15 lakh
The loan to be repaid in 5 to 7 years after commencement of repayment
9. KBL Varthak-Loan:
Under this scheme finance for meeting the working capital needs of traders,
commission agents, distributers, stockiest etc, will be given subject to a maximum extent
of Rs.25 lakh for a period of 34 months for OPN, 12 months for OD will be provided by
the Bank. The rate of interest to be charged up to and inclusive of Rs.2.00 lakh—11% p.a
and above Rs. 2 lakh up to Rs. 25 lakh –12% p.a. is charged.
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EFFECTIVE RECOVERY OF LOANS
10. KBL Vahana Mithra:
In this scheme finance to individuals, HUF, partnership firms or a company will
be given for purchasing new cars, maxi cabs, TATA sumo, bus, lorry, old (up to 5 years)
auto rickshaw, jeep etc., and also for purchase of new Tractor, JCB, Crane etc., which are
to be registered as public transport vehicles to an extent of 85% of the invoice value the
vehicle excluding vehicle tax and insurance, permit etc, and body building charges up to
75% of the quantum finished by vehicle body builders. The period of this loan is
Maximum up to 84 months for Bus and Trucks, and a maximum of 60 months for all
other vehicles. The rate of interest charged under this scheme is @10% p.a for loan limit
up to Rs.10 lakhs and 12% p.a or limits above Rs.10 lakhs.
TERM LOAN APPRAISAL:
Term loans are generally granted for acquisition of assets. Short term credit
facilities are granted to meet working capital needs by of cash and discounting of bills,
etc.
Term (long term) loan is a loan made by the bank / financial institutions to a
business having an initial maturity of more than 1 year.
With the growth of industrialization, a number of specialized credit institutions have been
set up to assist the industries in raising long term fund. Term lending institutions like
industrial finance corporation of India, state finance corporations, national small
industries corporation limited, industrial credit and investment corporation of India
limited, industrial development bank of India, export import bank of India, infrastructure
development finance corporation, etc., assist industrial in raising long term funds by
granting term loans, guaranteeing deferred payments, subscribing to and underwriting
public issues of shares and debentures, etc.
Financial institutions referred to above mainly provide medium and long term
finance to industries and the commercial bank normally finance short term requirements.
In addition to the indirect long term finance provided by the private bank
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EFFECTIVE RECOVERY OF LOANS
Above, they also grant direct loans to industries. Besides, they assist industries in
raising long term funds, particularly from industrial development bank of india through
its refining scheme.
Features of term loan
Maturity: The maturity period of term loan is typically longer in case of sanctions
by financial institutions in the range of 6 -10 years in comparison to 3-5 years of bank
advance.
Negotiated: The term loans are negotiated loans between borrowers and the lenders.
Security: All term loans are secured. While the assets financed by term loans serve as
primary security, all the other present and future assets of the company provide
collateral / secondary security for the term loan.
While evaluating proposals for term loans or deferred payment guarantees, besides
undertaking a detailed study of applications, the following broad aspects relating to the
project, are to be examined.
Any proposal should be vetted on the following four parameters.
Technical appraisal
Managerial appraisal
Marketing appraisal
Financial appraisal
For term loan appraisal the above should be thoroughly scrutinized and adhered to. In
case of working capital appraisal for a running unit it should be ensured that the
technical, managerial and marketing viability had already been established. Any loose
ends should be brought in the process note as risk factor (along with mitigating factors, if
any financial analysis should be thoroughly carried out).
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EFFECTIVE RECOVERY OF LOANS
The term loan appraisal is normally carried out by studying the following:
Technical appraisal:
Technical feasibility will depend upon the following:-
Choice of technology and process know-how: The technology and the process to
be adopted should neither be experiment nor obsolete. A detailed survey by technical
experts in the relative industry may be necessary at times.
The review done by the financial institution focuses mainly on the following aspects:
Product mix
Capacity
Process of manufacture
Engineering know-how and technical collaboration
Raw materials and consumables.
Location and site
Building
Plant and machinery
Manpower requirements
Breakeven point
1. Land details-
Whether adequate land is available and whether permission from competent
authorities (municipality, corporation etc.) to use the same for industrial / envisaged
proposal is available.
2. Location-
Proximity to raw material source/market to be examined, any adverse factors (i.e.
terrorism, frequency of natural calamities) to be examined.
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EFFECTIVE RECOVERY OF LOANS 3. Availability of raw material-
Its sources, landed cost to be examined in detail. Similarly consumable and spare
requirements to be examined
4. Power-
Availability of adequate power through electricity board captive power plants to be
ensured, the peak load and connected load requirement to be ascertained and verified
(preferably through an electric engineer).
5. Pollution-
NOC from pollution control board (Air and water) should have been obtained.
6. Building-
Type of construction. In, whether it will be ideal for the proposed manufacturing activity
to be studied, whether the building will be constructed on their own or through architect /
contractors. If so, the capacity of the company / architect/ contractors to construct /
execute the same to be analyzed
7. Plant and machinery-
The source of plant and machinery (imported or indigenous), the reputation and capacity
of the supplier, guarantee and warranty clause to be examined. The landed cost of the
machinery (from the quotations) to be arrived at, if second hand machinery, age of
machinery, resale value restrictions on import on financing machinery (more than 5 year
old) are to be examined in detail.
The name of user of machinery should be ascertained and performance to be cross
checked. It should be ensured that pollution control equipments and utility equipment
(boiler act) are included in the list of plant and machinery whether it is applicable. The
reasonableness of cost to be ensured.
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EFFECTIVE RECOVERY OF LOANS 8. Miscellaneous fixed assets-
The miscellaneous fixed assets normally consist of assets like furniture+ fixture etc,
which are incidental to production. The necessary and reasonableness of cost to be
ensured
9. Preliminary and pre-operative expenses-
This consists of expenses like share issue expenses, interest during construction period
etc. the reasonableness of the same to be ensured. Normally they are written off over a
period of 10 years (maximum).
10. Contingencies-
The provision for contingencies (a reasonable %) is normally loaded on cost of building,
plant and machinery, miscellaneous fixed assets to take care of unforeseen price
variation.
11. Margin on working capital requirements-
The basis for ascertaining the working capital requirements of a company is
ascertained in later para.
12. Based on above the total cost of the project is arrived at.
13. The financing of the cost of project may be through various sources.
The common sources are:-
Promoters contribution (either in the form of capital or unsecured loan)
Internal accruals
Term loan from bank / financial institutions, normally 20% to 25% (maximum)
margin from promoter is insisted. When internal accruals are taken as a source it should
be ensured that the borrower has adequate capability to bring the same from his source in
case the same is not materializing. A part from traditional ratios for term loan appraisal
the following are looked in to.
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EFFECTIVE RECOVERY OF LOANS Payback period
It represents the length of time required to recover the initial cash outlay
on the project – a project with shorter payback period is desirable.
Average rate of return
The numerator of ratio is the average annual post tax profit over the life of
investment and the denominator is average book value of fixed assets committed to the
project. The higher the average rate of return the better is the project.
Net present value
The net present value of the project is equal to the sum of present value of all the
cash flows associated with the project. The discount rate employed for evaluating the
present value of the expected future cash flows.
Internal rate of return
The IRR of a project is the discount rate which makes its net present value equal
to zero. If the rate of interest paid on borrowed for the project is higher than the project is
not available.
Debt service coverage ratio
The numerator of this ratio is profit after tax plus non cash expenses
(depreciation etc) plus interest on term loan payable during the year. It should be ensure
projected repayment period (minimum of 1.25) and average debt service coverage ratio is
at least 1.50:1. A higher debt service coverage ratio call for shorter repayment period.
Managerial Appraisal
The managerial appraisal consists of appraisal of the background of the
promoters, their qualification and experience and how for it is relevant to the proposed
activity. The scope also included as to whether the name of promoters / group/ associate
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EFFECTIVE RECOVERY OF LOANS are in the defaulter list of RBI / caution list of ECGE etc. The performance of group /
associates and the conduct of the account with their bankers should also be examined.
Appraisal
The marketing appraisal consists of industry scenario, demand supply gap
(existing as well as project), extent of competition, and likely entrants in the field,
government policy seasonal characteristics, and performance of other player in the field.
The extent of expenses to be incurred on selling and distribution also to be examined
The cost of project and means of finance has to be arrived at. It should be
ensured that cost is reasonable (by expert opinion, cost of similar project if implemented
recently). The promoters’ margin as stipulated should be brought in and proof should be
held on record.
MOBILE BANKING
With Karnataka Bank, Banking is no longer what it used to be. Karnataka Bank offers
Mobile Banking facility to all its Bank customers. Karnataka Bank Mobile Banking
enables you to bank while being on the move.
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EFFECTIVE RECOVERY OF LOANS
M-Commerce:
Karnataka Bank offers you the convenience of paying for utility bills, mobile recharge,
movie tickets, online purchases, retail shopping and much more at over 15,000merchants
directly from your mobile. So, Start Paying with your Mobile. Mobile Recharge, Movie
Any Tickets, Shopping....Time, Any Where Karnataka Bank Mobile Banking SMS Alerts
keeps you informed about the significant transactions in your Accounts. It keeps you
updated wherever you go.
LOANS
A family man has different financial needs at different stages in his life.
By understanding your changing financial needs, we have developed products that cater
to your every step in life, be it luxury or providing quality standard of life to your family.
The products we offer to you are honest in intent and quality in content. It offers you the
individuality with respect to your needs and to your earnings. And most of all, it comes
with understanding you and your special individual needs.
Our product suite include Vidyanidhi Education loan scheme, Apna Ghar home loans,
Car finance scheme, Varthak loans, Easy ride, Scheme for salaried persons, Udyog
mithra, Niveshan loans, Krishi card, K-Power.
Cards
Karnataka Bank introduces a range of cards depending upon your requirement. These
cards gives you access to your account whenever you want, wherever you are.
MoneyPlant TM Debit Cards : MoneyPlantTM International Debit Card allows you to
purchase goods at Merchant Establishment and also gives freedom to withdraw cash from
ATMs in India and abroad. This card gives you the freedom of making the purchases
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EFFECTIVE RECOVERY OF LOANS
without the hassle of paying in cash. No need to carry the cash or no need to pay the bill
at the end of the month, your purchase will be debited to your account instantly.
You can use your Debit card as a credit card with credit facility of maximum limit
of Rs. 25000/- for 45 days under K Power Scheme.
Visa Classic Debit Card
Visa Gold Debit Card
PRODUCTS FROM KARNATAKA BANK
Spectrum of Term Deposit Spectrum of Advances
KBL Bouquet of SavingsKBL & Western Union Money Transfer
KBL Kishore & Tarun KBL Salary PrivilegeKBL Current Account KBL NRI ServicesKBL RFC (Resident Foreign Currency Account)
KBL MoneyAlert
KBL KYC Policy KBL QuickRemitKBL Mobile Banking KBL eCommerceKBL Gold Card KBL Student Prepaid CardKBL Vanitha KBL Agri GoldKBL Krishik Bhandar KBL Krishik PushpankarKBL Krishik Sarathi KBL Krishik SinchanaKBL Apna Ghar KBL Car FinanceKBL Contractor KBL Easy RideKBL Ghar Niveshan KBL Insta CashKBL Lease N Cash KBL Mahila UdyogKBL Mortgage KBL MSEKBL Ravi Kiran KBL Salaried Persons
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EFFECTIVE RECOVERY OF LOANS
MULTI BRANCH BANKING
Multi Branch Banking facility is a value added service to our customers taking advantage
of "Core Banking Solution". It is a 'technology driven-anywhere banking' facility and 'at
par' facilities for Savings Bank and Current account with structured schedule of services
and charges. Now the customer can access his account at all branches of the Bank.
The salient features of the scheme are as under:
1. The concept of 'anywhere' banking is extended to all domestic SB and Current
Accounts except NO Frills Accounts. Even SB-General and Current-General
accounts are eligible for MBB facility with Multicity Cheques.
2. SB-General (SBGEN), SB-Money Sapphire, SB-Money Platinum, Current A/c
General (CAGEN), CA- Money Pearl, CA - Money Ruby, CA- Money
Diamond, CA-Money Platinum, are MBB accounts with structured free services
and Multicity Cheque facility with cheques payable at par at all Branches.
Facilities available under MBB:
Payment Services:
# Any where Cash withdrawal for self cheques only
# Multicity Cheques
# Funds Transfer
# Funds Transfer through RTGS/NEFT
Collection Services:
# Any where Cash Deposit- By self only
# Collection of out station cheques
# Any where Deposit of cheques for collection
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EFFECTIVE RECOVERY OF LOANS
Other Facilities:
# Internet Banking
# Mobile Banking (SMS alerts)
# Demat Account
# 'MoneyPlant' Visa International Debit Card
We believe in total quality at all levels. We have deployed the most modern information
technology to deliver products & services for your benefit with an aim to develop an
effective long-term relationship. But most of all, Technology is matched to your
expectations of service, for today & for the future.
Personal Banking
We at Karnataka Bank offer a total value package, a one-stop shop for all your banking
needs. We thoroughly research these needs and create the right solution at the right time,
with speed and efficiency, for your maximum benefit. We are committed to providing
you with customized services designed to suit your individual requirements whether it be
high earning deposits, easy & convenient loans, life insurance, utility bill payments or
enabling you to keep track of your finances, thereby saving your time.
We have worked with one focus - YOU. We are relentless in finding ways to make your
hard earned money work harder.
You can find one product that is just right for you and your Family.
Insurance Services
In conformity with our endeavor to become a financial supermarket and to provide total
financial solutions to our customers, we have diversified into the marketing of life
insurance products of MetLife India Insurance Co. Ltd., an affiliate of MetLife, the
140 year old, largest life insurance company in the USA.
We offer a wide range of solutions to help you plan for your various financial needs like
your children's education & wedding, your retirement, protection of your housing loan
repayments, protection for your family etc. For further details, Karanataka Bank forayed
into General Insurance business by promoting a Joint Venture company called Universal
Sompo General Insurance Co. Ltd.
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EFFECTIVE RECOVERY OF LOANS
And entered into a Corporate Agency arrangement for distribution of their General
Insurance products through our branches. You can now get your assets insured against
fire, burglary and a host of other eventualities. You can also cover yourself as well as
your near and dear ones against the contingencies of accidental death, hospitalization etc.
For further details, please click the link: s a means to the total protection of your
family and your assets.
Real Time Gross Settlement (RTGS)
RTGS is a payment system in which both processing and final settlement of fund transfer
instructions take place on real time basis. It is a gross settlement system where fund-
transfers are settled individually, i.e. without netting debits against credits. RTGS effects
final settlement continuously and the settlements are immediate, final and irrevocable.
Each Bank branch participating in the RTGS is identified by a unique Indian Financial
system code.
With the advancement of the Technological changes in the Banking industry the RTGS
introduction has become a boom in settling the Interbank funds instantaneously. The
Customer can avail this facility and make instantaneous transfer of funds to beneficiary`s
account Karnataka Bank became a member of Real Time Gross Settlement (RTGS)
System from 16th July 2004 and has been settling Inter-Bank transactions in Mumbai
since then. MoneyQuick services can be accessed by customers which uses RTGS
service. This MoneyQuick facility provides INTERBANK funds transfer.
Western Union Money Transfer
Western Union Financial Services International has a legacy of public trust built through
more than 150 years of extra ordinary continuous service. This international money
transfer system facilitates quick, secure, reliable and convenient transfer of funds all over
the world. Neither the sender nor the receiver has to have a Bank account with us and the
receiver pays no fee. The person who remits you the money will fill in a prescribed form
giving details of beneficiary and deposit the money along with the requisite service
charges (fee) at its agent abroad.
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EFFECTIVE RECOVERY OF LOANS
The remitter will give one Test Question and its answer for identification of beneficiary.
The remitter then gets a receipt with Money Transfer Control Number (MTCN) which he
will inform to you as the beneficiary of the transfer. The amount so deposited will be
available to you within 10 seconds. Customers walk into any of the branches of our Bank
offering this facility in India, fill in the form giving information available with you
including MTCN, test question etc., along with proof of identification like ration card /
driving license / voter identity card / credit card etc. The paying branch will access the
Western Union System for authorization and make payment.
Business Banking
Continuous improvement is the only business strategy that can provide you with a clear
competitive edge and keep you ahead of the fierce competition. We understand the
dynamics of competition in today's fast changing world. We understand the growth need
of every business irrespective of the size. We offer a variety of carefully drafted tailor
made Banking products to help your business get that edge in this competitive
environment.
Working Capital Finance , Term Loans and Infrastructure Finance to helps Business
grow. With providing these type of finances to start an industry, to financing working
capital, we have Business Finance Products both fund based and non-fund based suited
to all sectors of Industry.
MoneyPlant ATM
In a major step towards ushering in convenience-Banking for the Customers, Karnataka
Bank has entered into ATM sharing arrangement with NPCI-NFSand CashTree ATM
network. The NFS network with NPCI has 54 Member Banks and covers around 73,823
ATMs while CashTree network has 13 member Banks and covers around 7400 ATMs.
All Debit & MoneyplantTM International Visa Debit Card/MoneyplantTM ATM card
holding customers of Karnataka Bank can avail the facility of withdrawal through Banks'
MoneyPlantTM ATMs and shared network ATMs. Member Bank ATMs. All The Member
Banks' customers of both networks can avail of acquirer services at all Karnataka Bank
ATMs across the country.
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EFFECTIVE RECOVERY OF LOANS
SENIOR EXECUTIVES
GENERAL MANAGERS
Shri K.H. Shivaswamy
Shri P. Jairama Hande
Shri M.V.C.S. Karanth Shri B. Ashok Hegde
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Shri N. Upendra Prabhu
EFFECTIVE RECOVERY OF LOANS
DEPUTY GENERAL MANAGERS
SHRI B. VITTAL RAO SHRI K.G. RAMESH RAO
DR. MEERA LAETITIA B ARANHA SHRI M.S. MAHABALESHWARA BHAT
SHRI V.N. MANOHAR SHRI I. SANTHOSH KUMAR
SHRI S. RAMACHANDRA BHAT SHRI RAGHURAMA
SHRI S.ANANDARAMA ADIGA SHRI M.V.MOHAN
SHRI G.T.HEGDE SHRI M.RAGHAVENDRA BHAT
SHRI SUBHASCHANDRA PURANIK SHRI BALACHANDRA Y.V
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EFFECTIVE RECOVERY OF LOANS
DEPOSITORY PARTICIPANT SERVICES
Karnataka Bank has been foraying into newer areas of banking products and services to
meet the increasing needs of its customers. As a further step towards this Karnataka Bank
has become a Depository Participant of Central Depository Services (India)
Limited (CDSL) and has launched the DP services from 16-03-2006.
INTRODUCTION TO DEPOSITORY SERVICES:
A Bank where its Head Office provides the facility of opening and conduct of Accounts
through its branches, a Depository institution extends various services to the investors
through its agents known as Depository Participant. In India, now there are two
Depositories. They are CDSL and NSDL. Participant can be anybody who complies with
the eligibility requirements. Participant (DP) can be a Bank also. All the various
functions undertaken and enabled through Demat accounts is referred to as DP activity.
Under the depository system, a demat account holder or holder/owner of securities who is
entitled to all the benefits (such as dividend or interest/bonus or right shares etc), is
known as a Beneficial Owner (BO). However, in the books of the issuer company, the
name of the Depository will appear as the Registered Owner against those securities
which are held by the BO in his demat account with that Depository.
PREREQUISITES OF OPENING A DEMAT ACCOUNT:
The formalities involved in opening a bank account and a demat account are similar. An
investor desirous of holding his securities in electronic form can open a demat account
with a DP of his choice by completing necessary account opening formalities after
furnishing proof of his/her identity, photograph and proof of address. An agreement with
the DP in the prescribed format is to be executed by paying requisite stamp duty.
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EFFECTIVE RECOVERY OF LOANS
DEMATERIALISATION OF SECURITIES:
After getting the demat account number from the DP, the BO can cause credit of fresh
purchases of securities to his demat account and/or transfer the balances held in demat
account held with other DP to this newly opened demat account. He can also tender the
securities held by him/her in physical form to DP for dematerialization and credit to the
demat account. After necessary verification, DP forwards the physical securities (duly
defaced) either to the company or to their duly appointed RTA (Registrar and Transfer
Agent) who, after necessary scrutiny, destroys the certificates in physical form and
authorizes the depository to give corresponding (electronic) credit to the subject demat
account. The details and balance in the BO account recorded and maintained with the
Depository are available to DPs in their office through the continuous connectivity via V-
sat or leased lines. The DP is required to provide the BO, at regular intervals, with a
statement of account, which gives the details of transactions and closing balance.
FREE FACILITIES BY CDSL TO ITS DEMAT ACCOUNT HOLDERS:
The evolution of the Indian capital market has seen several enhancements during the past
few years and this has been a result of innovative use of newer technologies. In the
reduced settlement cycle era, investors require updated demat account information at a
much faster pace than ever before. In other words, the quest for account status
information has risen manifold.
In order to facilitate a CDSL demat account holder to easily adapt to the fast reducing
settlement cycle, CDSL has introduced Internet-enabled services
called "easi" and "easiest" to empower a demat account holder in managing his
securities 'anytime-anywhere' in an efficient and convenient manner, all in a state-of-
the-art secure environment. Further to effective risk control mechanism for monitoring of
demat account, CDSL has also introduced "smart" facility.
MUTUAL FUND DISTRIBUTION
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EFFECTIVE RECOVERY OF LOANS In our pursuit of accomplishing the goal of becoming One Stop Financial
Supermarket we have been foraying into newer areas of banking products and
services to meet the increasing needs of our customers. As a further step towards
this, we have entered into a Distribution Agreement with the following AMCs for
distribution of their mutual fund products.
1. M/s. Franklin Templeton Asset Management India (P) Ltd.
2. M/s. Tata Asset Management Ltd.
3. M/s. ICICI Prudential Asset Management Company Ltd.
Revolutionize the Way2Trade Online... with KBL
online trading services
Welcome to KBL Online Trading Services in alliance with M/s Way2Wealth Brokers
Pvt. Your KBL Online Trading is a dynamic online trading system, blending the best of
technology, convenience, speed and efficiency with Traditional Broking..
INTEGRATED 3-IN-1 ACCOUNT
Your KBL Online Trading is a 3-in-1 account, integrating your Savings,Demat and
Trading account. The savings and Demat accounts will be of Karnataka Bank while your
trading account will be of Way2Wealth Brokers Pvt. Ltd.
MOST CONVENIENT WAY2TRADE ONLINE
KBL Online Trading offers the convenience of trading from any internet enabled location
with highest levels of professionalism and security. It is Swift, Safe and convenient,
offering one solution for all markets with suitable trading platforms for Beginners and
Active investors.
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EFFECTIVE RECOVERY OF LOANS
ADVANTAGES
1. Option to link existing Karnataka Bank Savings and Demat account
If you are an existing client of Karnataka Bank having a Savings Bank account and/or
Demat account to avail Online Trading facility you only need to have your accounts
internet enabled and an online trading from Way2Wealth.
2. Trade anytime/anywhere
Buy/Sell shares on a click from anywhere, anytime, you have the power and convenience
to trade without any geographical limits.
3. Trade After or Before Market Hours too
Get the Convenience of putting trades anytime. You can place trades after the closing of
regular market hours or before the start of market hours
4. Flexibility to transact through other channels too
You get 24x7 access to your trading account online, plus incase you are at a place where
there is no internet connectivity or at a place where you do not have access to a computer
you can use the Call 'n' Trade facility, thus, you can place orders on phone while you are
on the move.
5. Instant execution
Get real-time quotes on your screen and experience instant trade execution without
having to wait for your call to be answered by your broker. In a dynamic market, where
speed is of essence, this can make a big difference to your execution price.
6. Seamless Fund Transfer
Your transactions are further aided by Karnataka Bank online payment gateway through
which you can transfer funds from your bank account to your trading account and get
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EFFECTIVE RECOVERY OF LOANS
enhanced trading limits, instantly without delay. In case of technical problems, you can
also allow physical cheque transactions.
7. Investment ideas based on in-depth advisory and analytics
KBL Online Trading Account holders have access to Way2Wealth research reports via
one of the various means i.e your Trading Screen, SMS,Emails and Newsletters. Get
advanced investment research and technical analysis at no additional cost.
8. Reduced Paperwork
With an integrated trading, bank and depository accounts, experience the convenience of
reduced paperwork such as writing cheques and DP instructions. Your Contact Notes
reach you in digital form and you can check all your Account Statements such as Ledgers,
Bills, DP Holdings etc online. Online Trading is not only user friendly but eco-friendly
too!
9. Highest Levels of Security
KBL Online account is protected with a unique User ID and 2-levels of password
authentication. All your online transactions take place over a secure connection enabled
on Secure Socket Layer with encryption upto 256-bit, the strongest encryption level for
eCommerce transactions.
10. Superior Customer Service
A dedicated customer care desk gives you complete assistance related to your trading
account. Customer Support Centre is accessible on Toll Free No. 1800 - 425 - 67890 to
answer your queries.
PRODUCT FEATURES
Single Screen Trading
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EFFECTIVE RECOVERY OF LOANS
With your KBL Online Trading Account, you can trade on multiple-exchanges (Equity)
through a Single Screen simultaneously, providing you an opportunity to keep watch of
different markets at the same time.
Products on offer
Cash N Carry: When you make a trade (purchase) with the intention to take delivery
of shares, resorts to Cash Trading. The shares will automatically be credited to your
demat account on the day settlement takes place in the stock exchange and your funds
will be debited from your bank account at the time of transaction.
Margin Trading: Intra-day trades or trades made with the intension of not taking
delivery of shares. You can trade upto a specified multiple of the funds allocated. The
transactions will have to be squared off, before an appointed time, on the same day.
Buy Today Sell Tomorrow facility: Buy Today Sell Tomorrow is a facility offered
where you can sell shares before getting actual delivery of the same. In other
words,clients are allowed to sell their shares against their receivable position in same
share/stock. What you bought today can be sold tomorrow, even before they are credited
to your demat account on T+2.
IPO
You can invest in Initial Public Offers online. No need to go through cumbersome
paperwork.
NRI
Modes of remittance of funds from abroad
Cable/TT Remittance
Draft/Cheque drawn on foreign centre or payable on local banks.
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EFFECTIVE RECOVERY OF LOANS Foreign Currency/Traveller's cheque tendered by the NRI during temporary visit to
India.
Demand Draft issued by Exchange house in Gulf countries.
How to remit funds from abroad to an account in India?
Funds can be remitted by means of Cable/TT through Nostro accounts maintained by us
with our correspondent Banks as per details furnished below. Please give the instructions
as " Please credit USD ..... to the USD account number 8033166096 of Karnataka Bank
Ltd,(Swift - KARBINBB) held with Bank of New York, New York, USA (Swift-
IRVTUS3N) for further credit to Account Number ...... of Mr./Mrs. ...... with Karnataka
Bank Ltd, ...... branch".
MoneyClick - Internet Banking
NRIs maintaining accounts in any of our branches can avail of this facility. The hosts of
facilities available are -
Balance Inquire
Cheque status Inquiry
Fund transfer between self account, third party account within the bank and across
other banks.
Statement of Account Request.
Demand Draft Request.
Cheque Book Request.
Deposit Renewal Request.
Standing Instruction Request.
Utility Bill Payment Facilities
SMS Banking
SMS Alerts
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EFFECTIVE RECOVERY OF LOANS
MoneyPlant - Visa International Debit Card
NRIs are eligible for the Debit Card - Conditions apply.
Online Shopping Service through Internet Banking (MoneyClick):
We have tied up with major shopping websites to facilitate online shopping for all our
Internet Banking customers. The Customers can choose their products online and pay
conveniently through MoneyClick.
Online Shopping Service through Debit Card (ecommerce Transactions):
MoneyplantTM International VISA Classic and Gold Debit card can now be used for
online purchases. The ecommerce transactions would facilitate and benefit the debit card
holders for buying goods/services online through Internet which accept Visa as a
payment method. Our debit card holders would be able to buy airline/railway/bus tickets,
movie tickets, pay mobile and utility bills online.Our debit card holders can enjoy
enhanced security of online shopping with Verified by Visa(VbV) by means of an
additional password.
Verified by Visa(VbV) is a service that improves the security of payment transactions in
the electronic commerce environment. It is a service that will let you use a personal
password with your Karnataka Bank Moneyplant Visa Debit Card to make purchases
over the Internet. The process is simple to use and secure.
THE BANKING SCENARIO
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EFFECTIVE RECOVERY OF LOANS 1.Although Banking in India originated in the first decade of 18th century with The
General Bank of India coming into existence in 1786, though we gained independence in
the year 1947, and though Republican Indian Constitution was brought into force on
26th January, 1950, Indian banking industry was not a critical tool, if I may say so, to
monitor the growth and development of the Indian economy till 1960. By the 1960s, the
Indian banking industry became an important tool to facilitate the development of the
Indian economy.
At the same time, it had emerged as a large employer. Under the political leadership
of Smt. Indira Gandhi, the then Prime Minister of India, by a swift and a sudden action,
Government of India issued an ordinance nationalizing the 14 largest commercial banks
from the mid-night of 19th July, 1969. A second dose of nationalization of six more
commercial banks followed in 1980. With the second dose of nationalization, the
Government of India controlled around 91% of the banking business of India. After this,
until the 1990s, the nationalized banks grew at a pace of around 4%, closer to the average
growth rate of the Indian economy. In the early 1990s,the then
Narasimha Rao government embarked on a policy of liberalization and gave licenses to a
small number of private banks, which came to be known as New Generation tech-savvy
banks. 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.
2. Karnataka Bank Limited occupies an enviable and pride position in the comity of
Private Sector Banks in the country today. I have some details of laudable performances
of the Bank. Karnataka Bank has secured "A1+" rating for its Certificates of
Deposit program from ICRA, thus indicating highest quality rating to short term
instrument. It is stated that instruments rated in this category carry the lowest credit risk
in the short term. The financial results of the year ended 31st March, 2009 of the Bank
speak volumes for its strong credentials. The total business of the Bank
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EFFECTIVE RECOVERY OF LOANS surpassed Rs.32143 crore. Net profit of the bank went up to Rs.266.70 crore. Capital
funds of the Bank stood at Rs.1990.57 crore.
The Capital Adequacy Ratio (CAR) of the Bank was 13.48 under Basel II and
13.54% under Basel I, well above the RBI prescription of 9%. The earning per share
(EPS) was Rs.21.96. The Bank which has been consistently paying dividend over the
years has paid a dividend of 60% for the year 2008-09. The Bank has a highly dedicated
team of around 5300 employees ably patronized by over 74000 shareholders and over 4
million clientele base. Bank's Net NPA and the return on assets stood at 0.98% and
1.25% respectively. The Bank's rural orientation programmes, services of NRIs and its
performance in user-friendly loan schemes are quite laudable and astounding.
3. The success of the bank is built upon sacrifices and services of its founders and
successive Boards of Directors and staff of the Bank. Karnataka Bank Limited,
established in the year 1924, thanks to a host of illustrious and imaginative founder-
promoters, is a highly progressive bank with a vision and mission of a unique corporate
personality. The untiring efforts of the founder members with their burning passion to
serve the community have given the bank a firm footing assimilating the past with
astounding flexibility to adapt to the sea changes sweeping the banking industry
especially after nineteen hundred nineties.
Their selfless and single-minded devotion to give their best to the society resulted in
the birth of the Bank, which occupies an enviable position in the comity of Private Sector
Banks in the country today. The seed sown in a spirit of love and compassion by the
founding fathers has grown into a big tree bearing fruits on all its 461 branches spread
across the country. Over 85 years of its fruitful existence has stood the test of time by its
steady growth and vast, varied and versatile dispensations marked by personalised and
dedicated services. This astounding success should go to and be shared by its illustrious
founders, 74000patron-shareholders and over 4 million patron-clientele, and above all,
the most dedicated services rendered by the successive Boards of Directors and staff of
the Bank, and all of them richly deserve compliments from the society.
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EFFECTIVE RECOVERY OF LOANS 4. As you know, I am neither an economist nor a banker. My exposure in these fields
is almost nil. I am only a client of the Bank, I mean, Karnataka Bank Limited. But, I have
considerable exposure in law in general, Constitutional Law and Human Rights law in
particular. Globalization and recent global recession undeniably have their impact on
Indian economy and consequently human rights of the people in this country.
Therefore, when I was called upon to speak on any topic of my choice as a part of
Karnataka Bank's Founders Day Celebrations, I thought of speaking on the topic
"Globalization, Global Recession and Their Impact on Human Rights." But, at the
outset, I wish to tell you that my comments and observations in the course of the lecture
should not be taken to be an expert opinion, but, a feeling of a layman of this country,
who wants to share with an audience, which consists of large number of experts on Indian
economy, Indian Banking, Globalization, Global recession. In other words, my Lecture
by no standard can be said to be a well-researched article. Having said it, without much
ado, I proceed to the subject of my lecture.
5. Globalization intends to integrate the world into one capitalist political economy
operating under a neo-liberal free market ideology. Economic globalization as witnessed
in the world today is not a new phenomenon. It has been evolving for the past several
years and gaining momentum day by day. The trend, at present, is a shift from a world
economy based on national market economies to a borderless global market economy
increasingly governed by one set of rules. In this context, globalization means global
economic liberalization, developing a global financial system and a transnational
production system which is based on a homogenized worldwide law of value.
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EFFECTIVE RECOVERY OF LOANS The demise of the Cold War helped the emergence of a new aggressive
competitive global economic order. This was possible mainly due to the integration of the
newly industrialized countries and much of the developing nations. Although
globalization and market liberalization have made some progress in terms of economic
growth in certain countries, it has also had many negative impacts in developing
societies.
6.Richard Barnet of the Institute of Policy Studies describes globalization in terms
of four increasing webs of global commercial activity: (i) global cultural bazaar; (ii) the
global shopping mall; (iii) the global financial network and (iv) the global
workplace. The global cultural bazaar promotes the notion of uniform cultural values and
products across the world.
This idea influenced billions of people, shaping their goals and
homogenizing their tastes and attitudes towards a desired fantasy lifestyle. The
unprecedented increase in global trade -- the buying and selling of goods and services
among countries - has created a planetary supermarket.
The cultural bazaar and shopping mall intersect through the vehicle of
advertising. Media has become a powerful player in the globalization process. In fact,
globalization of economies has also led to the globalization of media.
Media is used to impose the culture and power of the wealthy nations from the
global North. The global financial market has created a new atmosphere to search for
quick profits.
The foreign exchange market is mainly dealing with currency speculation, bet for or
against foreign currencies. The increasing mobility of jobs has created global workplaces
and this has boosted international labour migration. In other words, the globalization and
market-oriented economic reforms helped transnational companies shift their
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EFFECTIVE RECOVERY OF LOANS manufacturing units to developing countries. Because of this more people are crossing
borders in search of jobs and in most conditions people are forced to work in inhuman
conditions for lower wages.
All these proved the fact that globalization is not a simple but a very
complex set of process that operates at multiple levels - political, economic and
cultural. In this era of globalization humanity is pursued as fundamentally one, with a
common destiny, that is the result of technology revolution in information and
communication and the awareness of the unsustainability of the current way of life.
7. According to Nikhil Aziz, an Asian scholar, globalization can be seen in two
different perspectives: Globalization from above, for short, (GA) and Globalization from
Below, for short, (GB). At the political level, GA manifests itself in its action of the
Western countries, particularly the United States ofAmerica, and global financial
institutions in pressuring countries of the South to democratize. This translates as the
adoption of a Western-style liberal democratic system of governance.
They closely tie economic Globalization from Above to the political aspect
in that (1) the source of pressure for change is the same, and (2) close links are alleged
between the ideologies of free markets and free societies. Economic Globalization from
Above entails countries of the South to accept - within the parameters of the dominant
World capitalist system -the imposition of structural
Adjustment programmes, neo-liberal economic policies, including the wholesale
liberalization of domestic economies, to allow unrestricted entry to transnational
capital. On a cultural level, GA arises from the control of the global information and
communication networks by Western media corporations; and the spread of modern
technologies of a consumerist culture, and Western cultural expressions as the global
culture.
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EFFECTIVE RECOVERY OF LOANS 8.The transnational companies are the spearheads of globalization and have become
the dominant economic and political force in the world economy. Increasing competition
and pressure on transnational companies to increase profits leads to a relentless search for
cheap labour markets. Many of the companies from the developed and the Newly
Industrialized Countries (NIC) have shifted their manufacturing and service industries to
developing countries.For example, several major airlines now have their global
accounting done in India. A large number of computer software companies from
the United Statesare developing software in Bangalore, at less than one-fifth of the price
in other countries.
The German car manufacturing company BMW and Lorean car manufacturers like
Daewoo and Hyundai have already established their manufacturing units in Vietnam. The
Export Processing Zones of many developing countries are catering to the needs of the
transnational companies by way of providing cheap labour. The International Labor
Resource and Information Group based at the University of Cape Town has described
these phenomena a race downhill in which countries underbid each other. Because they
cannot see an alternative, workers also end up underbidding one another.
The main arguments are competitiveness and the need to survive. But for workers it
is a race to the bottom, and the bottom means slave like conditions. When work moves to
less developed countries, the shift does not automatically bring Western levels of
employment and prosperity to the host countries.
What it does bring are very profitable high-tech islands and Export processing Zones
where they protect transnational capital, with the help of the state, from social
responsibility.
There may be short-term advances in the living standards of a small group of
workers. Nevertheless, when some workers elsewhere lead the race to the
bottom, those jobs may disappear. A report by UNCTAD notes that transnational
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EFFECTIVE RECOVERY OF LOANS companies encroach on areas over which sovereign responsibilities have traditionally
been reserved for national governments. A situation has arisen where many governments
of developing countries no longer control the flow of financial capital; so they can no
longer control their own economies.
9. Globalization has substantially contributed to the intensification of debt, poverty
and economic crisis in the developing world. The Structural Adjustment
Programmes (SAP) designed and imposed by the global creditor institutions is a typical
instrument to create a favorable atmosphere for globalization, which ultimately affects
developing countries. In order to meet the mandates set by the SAP, a country spends less
by cutting back government expenditures, social services, and economic investments so
that resources can be placed elsewhere. More money is being spent on export orientation,
which results in local economies becoming dependent on the integration with the world
economy.
The international lenders demand poor economies to divert substantial resources
away from sectors serving domestic needs: withdraw all subsidies for poor people,
privatize the state sector, deregulate the market, and decrease wages. In effect, this
process opens up countries to globalization. Thus structural adjustment programs and
import-export-led strategies of industrialization were part of a political and economic
restructuring process, a prelude to globalization.
10. The relation between globalization, development and human rights raises policy
and legal questions. One such question is whether globalization of market-oriented
economic system is essential for development and protection of human rights? While
searching for an answer to this question we should analyze how we perceive the concept
of development and human rights, especially in the context of developing countries.
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EFFECTIVE RECOVERY OF LOANS Human rights have become an integral part of the process of globalization in many
ways. The Western countries are increasingly using their view of human rights concept as
a yardstick to judge developing countries and to deal with economic and trade relations to
extend development assistance. At the same time globalization intensifies
impoverishment by increasing the poverty, insecurity, fragmentation of society and thus
violates human rights and human dignity of millions of people.
11. The preamble of the Declaration of the Right to Development, adopted by the
UN General Assembly in 1986, describes "development as a comprehensive economic,
social, cultural and political process that aims at the constant improvement of the well-
being of the entire population and of all individuals on the basis of their active, free and
meaningful participation in development and in the fair distribution of resulting
benefits".
The 1990 UN Global Consultation on the Right to Development as a Human Right,
stated that the right to development is an inalienable human right with the human being
as the central subject to the right and that all the aspects of the right to development set
forth in the Declaration of the Right to Development are indivisible and interdependent,
and these include civil, political, economic, social, and cultural rights.
It was further maintained that the right to development is the right of individuals, groups
and peoples to participate in, contribute to, and enjoy continuous economic, social,
cultural and political development, in which all human rights and fundamental freedoms
can be fully realized.
A development strategy that disregards or interferes with human rights is the very
negation of development. The aims and objectives of the so-called development models
promoted by different governments or international development agencies are not
compatible with human rights standards. A new model of development ideology is being
promoted that is based on the market and its logic. Several decades of discussion on
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EFFECTIVE RECOVERY OF LOANS alternative development model is withering away and a dominant model of market
oriented development taking roots in that place.
As a result of the globalization process, more negative effects are visible
now. Global integration of the structures, processes, and ideologies produce injustice,
oppression, exploitation and mal-development in society. The systematic integration of
the forces that are dominant in the globalization process intensifies human rights
violations.
12.Globalization has its winners and losers. With the expansion of trade, market,
foreign investment, developing countries have seen the gaps among themselves
widen. The imperative to liberalize has demanded a shrinking of state involvement in
national life, producing a wave of privatization, cutting jobs, slashing health, education
and food subsidies, etc. affecting the poor people in society. In many cases, liberalization
has been accompanied by greater inequality and people are left trapped in utter poverty.
Meanwhile, in many industrialized countries unemployment has soared to levels not
seen for many years and income disparity to levels not recorded since last century.
The collapse of the economies of the Asian Tigers are examples of this. The Human
development Report of 1997 revealed that poor countries and poor people too often find
their interests neglected as a result of globalization. Although globalization of the
economy has been characterized as a locomotive for productivity, opportunity,
technological progress, and uniting the world, it ultimately causes increased
impoverishment, social disparities and violations of human rights. That is what we see
today.
13. This takes me to Global Recession. A recession is a disease of an economy,
which grows over a period of time, tends to slow down the growth as a part of the normal
economic cycle. In other words, recession is a decline in a country's gross domestic
product (GDP) growth for two or more consecutive quarters of a year. A recession
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EFFECTIVE RECOVERY OF LOANS normally takes place when consumers lose confidence in the growth of the economy and
spend less.
This leads to a decreased demand for goods and services, which in turn
leads to a decrease in production, lay-offs and a sharp rise in unemployment. Investors
spend less; as they fear stocks values will fall and thus stock markets fall on negative
sentiment. Risk aversion, deleveraging and frozen money markets and reduced investor
interest adversely affect capital and financial flows, import-export and overall GDP of an
economy. This is exactly what happened in US and as a result of contagion effect spread
all over the world due to high integration in the global economy.
14. While people in developed countries are feeling the impacts of the crisis, there is a
global consensus that those who are already living in poverty, particularly in developing
countries, are the most vulnerable to the harsh effects of the downturn. While the greatest
impacts may be difficult to quantify, as of today there is no doubt that the financial crisis
does not only have financial and monetary implications; the negative impact of the crisis
on the enjoyment and realization of human rights is both evident and alarming.
The financial crisis has exacerbated the difficult situation of the extreme poor, who
were already greatly affected by dramatic rise in food and energy prices and by the
challenges posed by the impact of climate change. Roughly 150 million people have
already been pushed into poverty as a result of the food price crisis, and estimates project
that the current crisis may push many more million into extreme poverty in coming
years. Number of people suffering from malnutrition, over a billion, is quite alarming.
In the world, more than fifty million new-born babies will not survive to
see their first birth day due to malnutrition. International Labor Organization has
predicted loss of million and millions of jobs due to recession. Not only will there be
more unemployment, but labour conditions are also likely to worsen due to the shortage
of opportunities. People have already lost the capacity to achieve an adequate standard of
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EFFECTIVE RECOVERY OF LOANS living for themselves and their families and they are denied of social protection and
justice.
15. The world faces its worst recession since the 1930s. In India, the impact of the
crisis has been deeper than what was estimated by our policy makers although it is less
severe than in other emerging market economies. The extent of impact has been restricted
due to several reasons such as-
(I) Indian financial sector particularly our banks have no direct
exposure to tainted assets and its off-balance sheet activities have been limited. The credit
derivatives market is in an embryonic stage and there are restrictions on investments by
residents in such products issued abroad.
(II) India's growth process has been largely domestic demand driven
and its reliance on foreign savings has remained around 1.5 per cent in recent period.
(III) India's comfortable foreign exchange reserves provide confidence
in our ability to manage our balance of payments notwithstanding lower export demand
and dampened capital flows.
(IV) Headline inflation, as measured by the wholesale price index (WPI),
has declined sharply. Consumer price inflation too has begun to moderate.
(V) Rural demand continues to be robust due to mandated agricultural
lending and social safety-net program
(VI) India's merchandise exports are around 15 per cent of GDP, which
is relatively modest.
Despite these mitigating factors, India too has to weather the negative impact of the
crisis due to rising two-way trade in goods and services and financial integration with the
rest of the world.
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EFFECTIVE RECOVERY OF LOANS 16.As already said by me, the world's poor and disadvantaged are bearing the brunt
of the suffering resulting from the current global financial crisis and ensuing economic
turmoil. The downturn in economies around the world has already undermined access to
work, affordability of food and housing, as well as of water, basic health care and
education etc. Therefore, it is necessary that the State should ensure that domestic policy
adjustments, particularly those in fiscal spending, are not taken at the expense of the poor
through cutbacks in basic services and social protection mechanisms and programmes. A
human rights approach will contribute to making solutions more durable in the medium
and long run.
The State should also identify the specific needs and entitlements of
vulnerable groups and individuals, particularly women and children, migrants, refugees,
indigenous peoples , minorities and persons with disabilities, because, they stand at the
frontlines of hardship, and are most likely to lose their jobs and access to social safety
nets and services.
It is already seen that as an impact of recession migrant workers are
already being affected in many countries, and that there is a clear risk of increased
xenophobia as a result of the crisis. These workers are most likely to be the first in line to
losing their jobs not only because their status is called into question, but also because
they are employed in sectors that are particularly affected by the economic
crisis. Worse, we see, recession may give rise to xenophobic passions, discriminatory
practices and even attacks against migrants and their families.
Taking into account the scenario pictured above, Ms. Navi Pillay, UN High
Commissioner for Human Rights, in her address to a Special Session of the Human
Rights Council on 20th February, 2009 called on the international community including
the World Bank and the International Monitory Fund to draw on the full range of their
policy advice and resources, as appropriate, to help developing countries and countries
with economies in transition to strengthen their economies, maintain growth and protect
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EFFECTIVE RECOVERY OF LOANS the most vulnerable groups against the severe impacts of the current downturn. She also
appealed to the States and the corporate world to ensure that their policies and practices
do not jeopardize peoples human rights.
17.It is apt to notice what Amnesty International, which is an international non-
government human rights monitoring organization, in the 400 pages report published by
it, has opined. According to Amnesty International, security issues, the response to global
terror and the pursuit of economic recovery after the global economic meltdown has led
to severe Human Rights violations amongst 157 countries. It has warned that the rising
poverty in these countries could lead to instability and mass violence. According to it,
sustained economic recovery will not happen unless governments tackle human rights
and bring an end to armed conflicts. In view of these findings, Amnesty International has
launched a new campaign titled –
Demand Dignity: It has called on the world's strongest economic powers to set an
example and defuse what is described as a human rights time bomb. In the report of the
Amnesty International, many factors were credited for the increasing levels of hunger
and malnutrition, and too little, they claim, is being done to provide people with their
basic needs. It has opined that structural policies based on market economics have
widened the gap between the rich and the poor, and left hundreds of millions of people
vulnerable to poverty with no safety net to catch them. It has claimed that increasingly
authoritarian governments have ignored the problem at hand.
The opinion of the Amnesty International deserves to be viewed very
seriously by the States and it is their responsibility to take conducive and effective steps
and measures to fight the vicious impacts of Globalization and Global Recession so as to
ensure that the people of the world particularly marginalized segments of the people live
with human dignity and decent living conditions of life.
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EFFECTIVE RECOVERY OF LOANS 18. In this scenario, what is the role of banking industry? As we all know the
banking industry is a highly regulated industry with detailed and focused regulators. Each
regulatory agency has their own set of rules and regulations to which banks and thrifts
must adhere. The changing economic environment has a significant impact on banks and
thrifts as they struggle to effectively manage their interest rate spread in the face of low
rates on loans, rate competition for deposits and the general market changes, industry
trends and economic fluctuations.
It has been a challenge for banks to effectively set their growth strategies
with the recent economic market. So how can we manage our banks' challenges? The
banking industry is far one of the most difficult type of business to manage. It is simply
the business where stocks are hard to analyze, unstable and most of all, clients are
demanding.
We have to realize that in the current situation of recession, the banking
industry is being hit hard. This is mainly because money circles around banks. One of the
major problems of banks is money laundering. Money laundering is simply the practice
of engaging in financial transactions to conceal the identity, source, or destination of
illegally gained money. Money laundering happens in almost every country in the globe.
A single scheme typically involves transferring money through several
different countries so that the origin would not be tracked. In our current situation, it is
predicted that banks will fail due to recession. The banks that are smaller are the ones that
will most likely be hit by this recession since they can't cope up with the declination of
the economy.
19.Experts enlist banks challenges into major and minor issues. Major issues mainly
include the issues arising out of global recession. Global Banking plays a big role in our
economy. Today, banks are being used in different ways. Some store their money in the
banks and eventually it will increase because of the interest; others use banks for business
transactions or borrow money from the bank for emergency or business purposes. Banks
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EFFECTIVE RECOVERY OF LOANS ought not to be parties for money laundering, because such acts on the part of
the banks undeniably are anti-national and anti-people.
The most common types of criminals who need to launder money are drug
traffickers, embezzlers, corrupt politicians and public officials, mobsters, terrorists and
con artists. Drug traffickers are in dire need of good laundering systems because they
deal almost exclusively in cash, which causes all sorts of logistic problems. The minor
issues are the problems with employees who fail to follow the prescribed rules,
regulations, norms and business standards. Earning trust from the people and quality of
service is a must for all banks. A single mistake may reduce number of people who
transact with the bank. Further, interests of the investors will be in jeopardy.
For small banks, building a good-will from the public is the most difficult
thing to do, and we cannot deny that this is one of the necessary factors in order to
succeed in this competitive world.
20.In the past, banks were seen as individuals and solo branches with no integration
in them. The scenario is altogether different today. We are in the new age and as we all
know, technology plays a big part in every aspect of businesses around the
world. Especially in this recession, banking should really be involved on how to respond
to it. New technologies are always being introduced that is why banks should also focus
on finding these technologies to help them cope up.
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EFFECTIVE RECOVERY OF LOANS It is stated that there are three concerns that affect the banks' performance critically
and sometimes dramatically. These are customer retention, cost pressure and increased
competition. Banking industry, as a whole, has a critical and dynamic role to play in
containing and overcoming the impacts of globalization and global recession as well as in
nurturing and protecting human rights of the people by adopting customer-centric
services, cost reduction and product differentiation. I have no doubt that under the
able and pragmatic stewardship of Sri Ananthkrishna, Chairman and Sri P. JayaramBhat,
Managing Director and Chief Executive Officer, who are well-known economists and
bankers at the national level, and host of other distinguished personalities who constitute
the Board of Directors of Karnataka Bank Ltd. with the kind of concern, commitment and
devotion possessed by the managerial and ministerial staff of the bank, Karnataka Bank
would rise to the occasion and serve the interest of banking industry as well as
humanitarian interests of the large populace of this country, particularly, the interests of
marginalized segments of the society like Dalits, tribals, women, children and other
backward classes in the expected measure in the critical years ahead. I wish them all the
best in their pursuits.
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EFFECTIVE RECOVERY OF LOANS
CHAPTER 2
OBJECTIVE
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EFFECTIVE RECOVERY OF LOANS
\
DESIGN OF THE STUDY
Research design
1. Statement of problem
The study relates to analysis of the effective recovery of loans and advances with
reference to Karnataka bank. Karnataka bank is one of the private sector banks in India,
which provides loans and advances when it is required by individual or companies and
accepts the deposits from the public.
2. Objectives:
To know the various types of loans and advances provided by the bank.
To study the importance of advances in the area.
To study the faults in lending loans and advances.
To know the effectiveness of recovery of loans and advances.
To know the NPA condition of the bank.
To know the techniques used by the bank to recover the loans.
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EFFECTIVE RECOVERY OF LOANS To know about the percentage of recovery of loans.
To know about the functioning of in the field of Loans and Advances.
To study about the lending policy followed by the bank.
Methodology:
Sources of data collection:
The data is most vital and the integral aspect, which is responsible for the completion of
any project. The data can be gained and derived from two methods, that is:
o Primary data collection
o Secondary data collection
Primary data collection :
Personal observation in to the banking system
Discussion and clarification with the guide and other managers
Taking personal guidance from the employees working in that organization.
Secondary data collection:
Through internet, magazines, journals, annual reports, income and expenditure statement.
Limitations:
The time is the main constraint of this project. The project report would be more
specific and more informative if more time would be allotted.
The data derived may not be accurate up to mark. Lot of errors may prevail in the
data collection process. Especially the data collected by the primary sources may
contain errors.
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EFFECTIVE RECOVERY OF LOANS Detailed analysis was not possible because of non availability of the sufficient
data.
The study is confined to the extent of information provided by the banker and it is
assumed to be factual and validity is not questioned.
CHAPTER 3
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EFFECTIVE RECOVERY OF LOANS
CONTENTS
ANALYSIS & INTERPRETATION OF DATA
TABLE 1:
KBL Apna Ghar: [ Housing Loan for Scheme for resident
individuals]
YEAR Balance outstanding (Rs. In lakhs)
NPA(Rs. In lakhs)
2007-08 65380.87 2540.292008-09 72675.82 3206.812009-10 83600.25 2724.05
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EFFECTIVE RECOVERY OF LOANS
ANALYSIS & INTERPRETATION:In the year 2008 balance outstanding and NPA were Rs. 65,380.87 Lakhs and
2540.29 lakhs respectively. But in the year 2009 there was a slight increase in both
balance outstanding and NPA which was 72675.82 and 3206.81 respectively. But in the year 2009 again balance outstanding and NPA increased to Rs 83600.25 lakhs and Rs 2724.05 lakhs. From the above graph it is clear that, issue of loan has been increased simultaneously their NPA amount has been decreased. By this we can interpret that their recovery of loans & advances is effective in this type of loan.
GRAPH 1:
KBL Apna Ghar: [ Housing Loan for Scheme for resident individuals]
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EFFECTIVE RECOVERY OF LOANS
TABLE 2:
KBL Housing Finance for NRIs: [Housing loan scheme for NRI’s]
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EFFECTIVE RECOVERY OF LOANS YEAR Balance outstanding. (Rs.
In lakhs)NPA(Rs. In lakhs)
2007-08 1402.79 2.822008-09 1407.23 0.002009-10 1286.62 6.16
ANALYSIS & INTERPRETATION:
In the year 2008 balance outstanding and NPA were Rs. 1402.79 Lakhs and 2.82
lakhs respectively. But in the year 2009 there was a slight decrease in balance
outstanding which was 1407.23. But in case of NPA it case decreased to 0.00. In the year
2009 again balance outstanding and NPA increased up to Rs 1286.62 lakhs and Rs 6.16
lakhs.
GRAPH 2:
KBL Housing Finance for NRIs: [Housing loan scheme for NRI’s]
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EFFECTIVE RECOVERY OF LOANS
By analyzing the above graph we can say that, the bank has reduced lending loan in this
type of loan might be due to less chances of recovering loan where the NPA has been
increased suddenly. So we can interpret that, the recovery of loans & advances is little
less in this type of loan.
TABLE 3:
KBL Car Loan: [Car Finance Scheme]
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EFFECTIVE RECOVERY OF LOANS YEAR Balance outstanding. (Rs. In
lakhs)NPA(Rs. In lakhs)
2007-08 17247.09 473.57
2008-09 21506.97 613.93
2009-10 25845.73 575.70
ANALYSIS & INTERPRETATION:
In the year 2008 balance outstanding and NPA were Rs. 17247.09 Lakhs and
473.57 lakhs respectively. But in the year 2009 there was an increase in both balance
outstanding and NPA which was 21506.97 and 613.93 respectively. In the year 2010
there is an increase of balance outstanding by Rs 25845.73 lakhs and NPA decreased to
Rs. 575.70 lakhs.
From the above analysis it is clear that, the bank has increased its lending, as the bank is
quite good in recovering the issued loans. So we can interpret that, the recovery of loans
and advances is quite good in this type of loan.
GRAPH 3:
KBL Car Loan: [Car Finance Scheme]
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EFFECTIVE RECOVERY OF LOANS
ANALYSIS & INTERPRETATION:
In the year 2008 balance outstanding and NPA were Rs. 17247.09 Lakhs and
473.57 lakhs respectively. But in the year 2009 there was an increase in both balance
outstanding and NPA which was 21506.97 and 613.93 respectively. In the year 2010
there is an increase of balance outstanding by Rs 25845.73 lakhs and NPA decreased to
Rs. 575.70 lakhs.
From the above analysis it is clear that, the bank has increased its lending, as the bank is
quite good in recovering the issued loans. So we can interpret that, the recovery of loans
and advances is quite good in this type of loan.
TABLE 4:
KBL Udyog Mithra: [Professional loan for lawyers, charted accountant, etc.]
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EFFECTIVE RECOVERY OF LOANS YEAR Balance outstanding. (Rs. In lakhs) NPA
(Rs. In lakhs)
2007-08 696.52 97.252008-09 711.80 76.162009-10 782.06 52.52
ANALYSIS & INTERPRETATION:
In the year 2008 balance outstanding and NPA were Rs. 696.52 Lakhs and 97.25
lakhs respectively. But in the year 2009 there was a slight increase in both balance
outstanding and NPA which was 711.92 and 76.16 respectively. In the year 2010 there is
an increase of balance outstanding by 782.06lakhs and NPA decreased to Rs52.52lakhs.
From the above graph it is clear that, the bank has increased its lending, as they are good
in recovering the issued loans and advances. So we can interpret that, the effective
recovery of loans exists in this type of loan.
GRAPH 4:
KBL Udyog Mithra: [Professional loan for lawyers, charted accountant, etc.]
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EFFECTIVE RECOVERY OF LOANS
TABLE 5:
KBL Varthak Loan: [working capital loans for traders, agents etc.]
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EFFECTIVE RECOVERY OF LOANS YEAR Balance outstanding. (Rs.
In lakhs)NPA(Rs. In lakhs)
2007-08 15240.80 1148.19
2008-09 16664.65 1240.56
2009-10 18535.51 791.25
ANALYSIS& INTERPRETATION:
In the year 2008 balance outstanding and NPA were Rs. 15240.80 Lakhs and
1148.19 lakhs respectively. But in the year 2009 there was a slight increase in both
balance outstanding and NPA which was 16664.65 and 1240.56 respectively. In the year
2010 there is an increase of balance outstanding by Rs 18535.51 lakhs and NPA
decreased to Rs 791.25lakhs.
From the above graph it is clear that, the bank has increased its lending, as they are
good in recovering the issued loans and advances. So we can interpret that, the effective
recovery of loans exists in this type of loan.
GRAPH 5:
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EFFECTIVE RECOVERY OF LOANS
KBL Varthak Loan: [working capital loans for traders, agents etc.]
TABLE 6:
KBL Easy Ride: [ Two wheeler Loan]
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EFFECTIVE RECOVERY OF LOANS YEAR Balance outstanding. (Rs.
In lakhs)NPA(Rs. In lakhs)
2007-08 2883.41 179.69
2008-09 2596.76 173.96
2009-10 2851.46 100.88
ANALYSIS& INTERPRETATION:
In the year 2008 balance outstanding and NPA were Rs. 2883.41 Lakhs and 179.69 lakhs
respectively. But in the year 2009 there was a slight decrease in both balance outstanding
and NPA which was 2596.76 and 173.96 lakhs respectively. . In the year 2010 there is an
increase of balance outstanding by Rs 2851.46 lakhs and NPA decreased to Rs 100.88
lakhs.
From the above graph it is clear that, the bank has increased its lending, as they are good
in recovering the issued loans and advances. So we can interpret that, the effective
recovery of loans exists in this type of loan.
GRAPH 6:
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EFFECTIVE RECOVERY OF LOANS
KBL Easy Ride: [ Two wheeler Loan]
TABLE 7:
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EFFECTIVE RECOVERY OF LOANS KBL Vidhyanidhi: [ Educational loan]
YEAR Balance outstanding. (Rs. In lakhs)
NPA(Rs. In lakhs)
2007-08 5549.43 53.09
2008-09 7356.09 137.54
2009-10 9268.13 159.26
ANALYSIS & INTERPRETATION:
In the year 2008 balance outstanding and NPA were Rs. 5549.43 Lakhs and 53.09 lakhs
respectively. But in the year 2009 there was a slight increase in both balance outstanding
and NPA which was 7356.09 and 137.54 respectively. In the year 2010 both balance
outstanding and NPA increased to Rs 9268.13lakhs and 159.26 lakhs.
In this type of loan the bank is still issuing loans even though their recovery is low. So we
can understand that, the recovery of loan in this type is little less.
GRAPH 7:
KBL Vidhyanidhi: [ Educational loan]
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EFFECTIVE RECOVERY OF LOANS
TABLE 8:
Loan to Salaried Persons:[Loan for permanent employees of any reputed institutions]
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EFFECTIVE RECOVERY OF LOANS
YEAR Balance outstanding. (Rs. In lakhs)
NPA(Rs. In lakhs)
2007-08 10098.86 1503.33
2008-09 8831.93 1506.51
2009-10 7765.15 890.08
ANALYSIS & INTERPRETATION:
In the year 2008 balance outstanding and NPA were Rs. 10098.86 Lakhs and
1503.33 lakhs respectively. But in the year 2009 there was a slight decrease in both
balance outstanding and NPA which was 8831.93 and 1506.51 respectively. In the year
2010 both balance outstanding and NPA have decreased to Rs 7765.15 lakhs and Rs
890.08 lakhs. From the above table and graph we can understand that, even though the
recovery of loans is effective, the bank has reduced its lending. So we can interpret that,
the recovery of loans and advances is good in this type of loan.
GRAPH 8:
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EFFECTIVE RECOVERY OF LOANS
Loan to Salaried Persons:[Loan for permanent employees of any reputed institutions]
TABLE 9:
KBL Niveshan Loan: [Loan for the purchase of house sites]
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EFFECTIVE RECOVERY OF LOANS
YEAR Balance outstanding. (Rs. In lakhs)
NPA(Rs. In lakhs)
2007-08 2976.98 84.26
2008-09 2004.62 95.55
2009-10 701.52 59.44
ANALYSIS& INTERPRETATION:
In the year 2008 balance outstanding and NPA were Rs. 2976.98 Lakhs and 84.26 lakhs
respectively. But in the year 2009 there was a decrease in both balance outstanding and
NPA which was 2004.62 lakhs and 95.55 lakhs respectively. In the year 2010 there is a
drastic decrease in both balance outstanding and NPA of 701.52 and 59.44.
The bank has reduced issuing this kind of loan as there is less demand for this type of
loan.
GRAPH 9:
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EFFECTIVE RECOVERY OF LOANS KBL Niveshan Loan: [Loan for the purchase of house sites]
TABLE 10:
KBL swarna Nidhi: [loan for purchasing gold ornaments, bars and coins etc]
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EFFECTIVE RECOVERY OF LOANS
YEAR Balance outstanding. (Rs. In lakhs)
NPA(Rs. In lakhs)
2007-08 205.63 17.57
2008-09 201.64 21.64
2009-10 132.10 20.24
ANALYSIS& INTERPRETATION:
In the year 2008 balance outstanding and NPA were Rs. 205.63 Lakhs and 17.57
lakhs respectively. But in the year 2009 there was a slight decrease in both balance
outstanding and NPA which was 201.64 and 21.64 respectively. In the year 2010 there is
a decrease in both balance outstanding and NPA of Rs 30.57 lakhs and Rs 20.24 lakhs.
From the above table it is clear that, the bank has reduced issuing this type of loan and
the NPA has also reduced, so we can clearly say that the recovery of this type of loan is
effective.
GRAPH 10:
KBL swarna Nidhi: [loan for purchasing gold ornaments, bars and coins etc]
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EFFECTIVE RECOVERY OF LOANS
TABLE 11:
KBL Insta Cash: [ loan to persons aged above 18 years for consumption purpose]
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EFFECTIVE RECOVERY OF LOANS
YEAR Balance outstanding. (Rs. In lakhs)
NPA(Rs. In lakhs)
2007-08 3048.22 28.53
2008-09 2170.31 46.82
2009-10 3602.75 15.13
ANALYSIS:In the year 2008 balance outstanding and NPA were Rs. 3048.22 Lakhs and 28.53 lakhs
respectively. But in the year 2009 there was a slight decrease in both balance outstanding
and NPA which was 2170.31 and 46.82 respectively. In the year 2010 there is an increase
of balance outstanding by Rs 3602.75 lakhs and NPA decreased to Rs 15.13 lakhs.
From the above table it is clear that, the amount of loan issued this year is more in comparison with the last year. It is also clear that, the recovery of loans is effective, as the NPA has also been reduced from last year
GRAPH 11:
KBL Insta Cash: [ loan to persons aged above 18 years for consumption purpose]
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EFFECTIVE RECOVERY OF LOANS
.
TABLE 12:
KBL Vahana Mitra: [ Loan for purchasing vehicles like cars, bus etc]
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EFFECTIVE RECOVERY OF LOANS
YEAR Balance outstanding. (Rs. In lakhs)
NPA(Rs. In lakhs)
2007-08 10911.61 400.32
2008-09 12183.99 619.01
2009-10 15127.28 614.87
ANALYSIS& INTERPRETATION:
In the year 2008 balance outstanding and NPA were Rs. 10911.61 Lakhs and
400.32 lakhs respectively. But in the year 2009 there was a slight increase in both balance
outstanding and NPA which was 12183.99 and 619.01 respectively. In the year 2010
there is an increase of balance outstanding by Rs 15127.28 lakhs and NPA decreased to
Rs 614.87 lakhs.
GRAPH 12:
KBL Vahana Mitra: [ Loan for purchasing vehicles like cars, bus etc]
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EFFECTIVE RECOVERY OF LOANS
TABLE 13:
KBL Krishik Sarathi: [ loans for buying tractors etc
YEAR Balance Outstanding. (Rs. In lakhs)
NPA(Rs. In lakhs)
2007-08 3031.42 33.19
2008-09 3399.43 221.97
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EFFECTIVE RECOVERY OF LOANS 2009-10 4438.93 203.76
ANALYSIS& INTERPRETATION:
In the year 2008 balance outstanding and NPA were Rs. 3031.42lakhs and Rs.
33.19lakhs respectively. But in the year 2009 both balance outstanding and NPA have
been increased to Rs. 3399.43lakhs and Rs. 221.97 lakhs respectively. In the year 2010
there is an increase of balance outstanding by Rs 15127.28 lakhs and NPA decreased to
Rs 614.87 lakhs.
From the above table it is clear that, the recovery of loans is effective as the NPA has
reduced from last year to this year.
GRAPH 13:
KBL Krishik Sarathi: [ loans for buying tractors etc]
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EFFECTIVE RECOVERY OF LOANS
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EFFECTIVE RECOVERY OF LOANS
CHAPTER 4
FINDINGS ANDSUGGESTIONS
FINDINGS:
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EFFECTIVE RECOVERY OF LOANS The bank has been focusing on containing the non performing assets through better credit
monitoring as well as intensified drive for the recovery of the impaired assets, asset
recovery branches and steps under SARFAESI Act 2002 for the speedy takeover and
disposal of the assets of defaulting borrowers resulted in reduction of gross NPA Rs. 284
crores as on 31.03.2009 to Rs. 171 crores as on 31.03.2010.
From Lender’s point of view:
1. The bank has a good lot of finance and well written procedure for the purpose of
lending of advances to the borrowers.
2. They have the right to take appreciable collateral security against advances, to
demand any type of document related with them, to file a suit against borrower if
needs and also can seek the help from the consulting firms for their own purpose,
mainly for the feasibility study of the project.
3. They have the power of rejecting the proposal as per the appraisal of the projects
and also have power to monitor, inspect and visit the industry.
4. Advances of bank are not safe after lending the amount due to uncertainty; also
the uncertainty affects the viability of the projects.
5. Proper monitoring and follow up the project is lagging. Also the procedure of
lending is detail but due to some flaws, accounts are converting into NPA.
6. In some cases banks are providing advances without proper security and also due
to the influence of certain person, thus the risk is very high.
7. In the sense of legal proceedings, it is very slow in India.
8. Some security may be overvalued by the borrower which may have deposited
against the advances.
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EFFECTIVE RECOVERY OF LOANS 9. There may have less activeness of the advances collection unit of the bank. Also
there may not have good customer relationship between bank and the borrower.
10. The combined lending by more than one bank may or may not be advantageous
always.
11. Banks are lending their funds in almost all area of business including agricultural
sector.
12. It has a high opportunity to play a key role in development of economy of the
nation and also to help different sick units for their revival, diversification and
expansions.
13. The main problem of the banks is survival problems due to huge chunk of NPA
and influential advances to the borrower. Due to influence some cases banks are
not able to recollect the advances with its invest.
From borrower’s point of view:
1. Most of the borrowers are willful defaulter. That means they are showing attitude
towards the repayment of advances and interest due to some flaws from the
bank’s side.
2. Borrowers are lacking of competing the market domestically and globally.
3. They are not able to commerce the business at perfect time due to which they are
lagging in export.
4. They are also lagging in proper management of funds and in diversification and
expansion area.
5. Some scans are also affecting the borrowers in their business performance.
6. Industrialists are lacking in the technical knowhow of the project.
7. Once the loan is borrowed, the bank’s performance depends on the borrower’s
performance.
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EFFECTIVE RECOVERY OF LOANS
8. Ineffective recovery of loans and delay in legal proceedings causes the advantage
to the borrowers.
9. As the bank has the power to monitor the industrialists’ performance constantly
through every angle the borrower becomes laxative.
10. Once the loan is sanctioned, it is not easy to recall the loan. This helps the
borrower to delay the payment.
11. Borrowers are mainly depends upon the share distributed to the public for purpose
of lending finance.
12. Almost all the company are keeping some portion of finance as a loan. Once it is
sanctioned, bank’s people always follow the borrower.
13. Borrowers are getting the supervisory facility by the bank.
14. For each and every change made either in products or in management borrower
have to inform bank.
15. The main opportunity for the borrower is utilized their profit in the expansions
and diversification. In this case, company will be appraised and encouraged.
16. Once the company is in the profitable stage, banks will end extra without any
hesitation.
17. If the company shows sickness, borrower will be in deep analysis in the list of
lender.
18. Production of quality goods and services are another problem for the company to
compete their product against globally and domestically too.
19. Some borrowers are getting loans and advances without proper security, those
loans and advances are difficult to recollect.
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EFFECTIVE RECOVERY OF LOANS
20. The borrowers mention the reasons for NPA are very simple but it adversely
affects the viability of the bank or financial institution.
Suggestions from the study:
The following suggestions have been made for the purpose of reducing NPA in Banking
Sectors:
To reduce the risk of lending, the bank should never lend their loans and advances
without adequate collateral securities. This will reduce the major risk of the
banks.
The bank should monitor and follow up the project in which they have lended
their resources.
The project appraisal must be perfectly made before sanctioning the loan. This
will help in reinforcing the project oneself to commit a wrong decision.
There should not be any type of pressure and influence from any top and emir
persons for the sanction of loan and advances. This will enhance the efficiency of
the offers and create clear and fair environment to work in the organization.
There should not be ny unethical practices by any of the officers of the banks.
They should perform their duty and responsibility very well. Ultimately it will
increase the performance of the bank.
Bankers should be given the power to enforce the security without approaching
the judiciary which would take a long time for settlement. This will save the time
of settlement of cases.
The bankers should have to in continuous touch with the borrowers so that their
attitude should not change towards the bank. This will motivate the borrower that
bankers are taking care of them.
The communication between the bankers and the borrowers of all activities like
transaction of business and other financial activities should always be well
known. This will help the bankers to find the present financial conditions of the
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EFFECTIVE RECOVERY OF LOANS
Borrowers will ultimately helps the banker to take required decision about the
project, if needed it can solved by the utilization of the internet.
Recapitalization of banks with Government aid.
Conclusion:
As analyzed in the analysis and interpretation part the following conclusions have been
drawn.
1. In the majority of the cases both the banker and borrower are responsible to
become an account NPA. The reasons may be different in their own sides.
2. The problem of NPA is behavioral as well as economic in nature.
3. Due to lagging in proper realizable security from the borrowers, banks are facing
difficulty to recover its loans and advances.
4. The monitoring mechanism of the bank is one of the reasons to become an
account NPA.
5. After lending the amount, the attitude of the lender and borrower are changing
due to some circumstances.
6. The borrowers are turning towards willful defaulters due to some problem in
procedure of debt realization.
7. They have continuous monitoring and follow up deficiency.
8. Bankers are lagging in continuous check, inspections, guiding to borrowers as
there are the right of the banks.
9. At the time bank can ask for the required information as they needed for the
performance evaluation of the project.
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EFFECTIVE RECOVERY OF LOANS 10. From the bankers’ side the main fault is not having proper security or adequate
security in some cases.
CHAPTER 5
ANNEXURE
BIBLIOGRAPHY
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EFFECTIVE RECOVERY OF LOANS
BIBLIOGRAPHY
For the purpose of the study the following books have been
Referred :-
Books Referred:
1. Management Accounting : Shashi K. Gupta
2. Financial Management : Shashi K. Gupta
3. Investment Management : V. K.Bhalla
Website Referred:
1. www.google.com
2. www.wikipedia.com
3. www.ask.com
4. www, encyclopedia.com
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