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Karnataka Bank Directors Report, Karnataka Bank Reports by Directors
Karnataka Bank
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Directors Report Year End : Mar '13    Mar 12
The Directors have pleasure in presenting the Eighty Ninth Annual
 Report together with the Audited Statement of Accounts for the year
 ended, 31st March 2013 and the Auditors'' Report.
 Your Directors are pleased to inform that during the year under report,
 your Bank has been able to achieve satisfactory growth in Its business.
 Performance highlights for the financial year in the key financial
 Areas areas under
                                                (Rs.in Crore)
 Particulars                      As on/for the       As on / for the 
                                  year ended          year ended
                                    31,03,2013        31.03.2012
 Deposits                            36055.33          31508.32
 Advances                            25207,53           0720.70
 Invest mints                          134324          12041.23
 Gross Income                           41.33           3447.27
 Operating Profit                       35.34            510.21
 Net Pruitt                            345.05            246.07
 The total business turnover of the Bank was Rs.61263.90 crore easy on
 31st March 2013, an increase of 17.07 parent over the preceding
 year. The total assets of the Bank increased team Rs.36321.57 crore to
 Rs.41526.38 crorO recording a growth (Of 14.33 percent for the year 
 The total deposits of the Bank gnu from Rs. 31605.32 crore as on 31st
 March, 2012 to Rs. 30055.22 crore as on 31st March 2013, registering a
 growth of 14.07 percent [During Ihe year, low cost deposits of the Bank,
 viz, Savings and Currant Account Deposits, have shown growth of 15.71
 percent. The market share of the Bank In deposits was 0.52 percent as
 against 0.51 percent last year.
 The total advances grew from Rs. 20720.  crore as on 31st March, 2012
 to Rs.2520 /.SB crore as on 31 st March.  2013, an increase of 21.65
 percent. The priority sector ad van necks increased from Rs.7570.27 re
 to Rs.9362.52 crore forming 45.19 percent of ANBC as against 40 percent
 stipulated by RBI and agricultural advances increased from Rs.  556.35
 crore to Rs.3715.24 crore Rs.16.47 percent of ANBC as against
 stipulated 15 percent, lending under various socio-economic schemes
 has shoo Win sat is-actor tog rasps. The market share of the Bank in
 loans and advances remained at 0.43 percent.
 As on 31st March, 2013 the total investments of the Bank stood at Rs.
 13432.48 crore as against Rs.12841.23 crore  as on 31st March 2012,
 an increase of 4.60 percent.
 In the competitive and challenging business environment, the overall
 parlor ne of you'' Bank during the year 3013-13 was satisfactory. The
 gross income of this Bank was Rs. 4161.93 crons and total expenditure
 {excluding provisions and contingencies) was Rs. 3526.59 crore. The net
 interest income was Rs. 903.73 crore.
 Your Hank earned an overhang profit of f 535.34 crore lord tint year 20
 t203 as against T 510.21 crore for the previous year showing a growth
 0f Rs.4,53 percent The net profit of the Bank Increased from Rs. 246.07
 crore to Rs.348.08 crons.
 The net profit of Rs. 340.08 crore which along with a sum of 
 Rs.0.09 crore brought forward from the previous yeast, aggregating 
 Rs.343.11 crore,  appropriated as under. The corresponding figure for 
 the previous year was. 10 Crore
 Appropriation                          Rs.In Crore
 Transfar to Statutory Raserve             160.00
 Transter to Capital Reserve                 3.25
 Tfsnsfer to Revenue, Genera 
 Specie I Reserves                          85.11
 Transfer to Invastmenl Reserve             11.47
 Transferto Proposed Dividend 
 (including tax) Be, is Balance 
 carried to Balance Sheet                    0.09
 TOtal                                     348.11
 Having regard to the overall performance of the Bank and the positive
 outlook for the future, the Board of Directors recommended a dividend
 or 40 percent for the reporting year. The dividend payout ratio for the
 year works out to 21.66 percent.
 The earnings per share (basic) and the book value of the shares as on
 31st March, 2013 stood at Rs. 18.48 and Rs. 151.70 respectively.
 In order to augment its Capital funds, during the year under report
 your Bank has raised Rs.250 crore by way of issue of Unsecured 
 Redeemable Non-Convertible Subordinated (lower Tier-II) debt 
 instruments redeem noblest the end of 10 years on private placement
 basis lacing The aggregate of such funds raised to Rs. 600 crore. 
 During the year under review, the net owned funds of your
 Bank increased from Rs. 2598.21 crore to Rs. 2857.08 crore, 
 registering a growth of 9.96 percent, The Capital Adequacy Ratio 
 stood at 13.22 percent as on 31-03-2013, as per BASEL II norms 
 (Previous year 12.84 percent). Tha Bank has been consistently 
 maintaining the Ratio well above the ininlrnum of 9 patent stipulated 
 by the Reserve Bank of India. The markets capitalisation as on March 
 31,201A was Rs.2462.59 Crore
 During the year under report, your Bank achieved a turnover of Rs.
 10083.26 crors in foreign exchange business as against Rs.9243.71 crors 
 tha previous year. The out standing ad vanes to export set tor snood
 at Rs. 1702.09 crore as on 31-03-2013.
 Your Dank has been focusing on containing the non- performing assets
 through better credit mentoring as well as intensified efforts to
 recover The impaired assets Ranch''s. Cross Nash''s on 31st March, 13 had
 decreased from f 6B4.72 crore (3.27 percent) to
 Rs.638.88 crore by the year end (2.51 percent). The Net NPAs stood at
 Rs.377.75 crors (1.51 percent) as against Rs. 435.20 crore (2.11 percent)
 as on 31st March 2012.  The Provision Coverage Fabio (PCR) computed in
 accordance with the RBI guidelines works out to 55.36 portent as On
 March 31. 2013 (Previous year 47.18 percent).
 The credit rating agency. ICRA Ltd. (ICRA) has accorded ''A1 ''rating
 to the Banks Certificate of Deposit Programmed. The rating symbol,
 indicates tha highest degree of safety for timely payment of
 principal and interest.
 The Unsecured Redeemable Non-Converti&ie Subordinated (lower Tier-H)
 debt issued during the year have teen rated  (pronounced A) by JCRA 
 Limited (ICRA} and ''CARE A''(s ingle A) by
 Credit Analysis and Research Limited, (CARE). The above rating
 agencies have also retained the fating tsar A'' and CARE A
 respective I; assigned to the subordinated debt instruments of crore 
 issued by the Bank during the earlier years. The instruments with
 these rating are considered to have adequate/high degree of safety
 regarding timely servicing or financial obligations. Such 
 During the year under report, your Ban has opened 47 new branches in 1
 Rs.slates i.e three in Andhra Pradesh
 one in Delhi, one in Goo. three in Haryana, one in Jharkhand, 32 in
 Karnataka one in Getafe. one in Madyapradesh, one in Maharashtra, one m
 Odessa.  one n laminate and one in West Bengal Out to 32 new branches
 opened in Karnataka, lore Branches opened under the financial
 inclusion phi Further, as per the direction of Goal. of India (GOI),
 your Sank has opened 6 Ultra Small Branches in the villages where
 Brick & Mortar Branches are not viable, in addition (o these branches,
 your Bank also opened an Extension counter at feta Group of
 Educational Institution.   l. Bangalore. Further, your Bank
 added 152 ATM outlets at various locations during the yea* 012-13.
 As at 31st March, 01 S. your Dank had 1.056 Service Outlets I.e. 550
 branches {which include one Corporate Finance branch at Fort Mumbai, an
 Agricultural [development Branch at Chick magi a lure, 160 specialized
 MSME branches, IB financial Inclusion branches] Four extension counters
 and 504 ATMs, five service branches, two currency chests, three asset
 recovery management branches, 10 Regional Offices, an 
 Division, a Data Centre, a Customer Care Centre, and two Central
 Processing Centers spread across 20 States and two Union Territories.
 Further, for better ambience and improved customer service, your Bank
 had shifted 21 to new premises du ring  2012-13.
 A total of 59020 equity shares wore allotted to though employees of your
 Bank, pursuant to the exercise of options vested under the Employee
 Stock Option Scheme of the Bank. Disclosure In respect of Employee
 Stock Option Scheme pursuant to SEDI (Employee Stock Option Scheme and
 Employee Snick Purchase Scheme} Guidelines tS99 is given in Annexure I
 to this report.
 Messrs U R Bhat. Bitarama Marty m arid S V Maniunath are retiring by
 rotation and are eligible for re- appointmarrt at I he forthcoming
 Annual General Meeting Mr S R Hate, ret irked as Director of the Bhnk 
 upon attaining the upper age limit of   years was Rs.  02.07,2012 as per 
 the extant guidelines of RBI . The Board places on record Its 
 appreciation of the active involvement and useful contribution made 
 Mr S R Hedge during his tenure   a Director of the Bank
 Further, the Board has appoiniad Mr Ashok Haranahalli, Senior Advocate,
 Bangalore (former Advocate General - Government of Karnataka} as an
 Additional Director under Section the Companies Act, 1956. The
 brief resume and other details regaling to the directors who are to he
 re- appointed are furnished in the notice of the Annual General Meeting
 CORPOHATB governance
 Your Bank is committed to following the best practices of Corporate
 governance to protect the interests of ell the stakeholders old the
 Bank, vii. shareholders, depositors, other customers. employees and the
 society in general and maintains transparency at all levels. A detailed
 report on corporate governance practices & given as Annexure ill to
 this report.
 As per Section ai7(2AA) to Companies (Amendment) Act. 000, your
 Directors report that:
 r. The accounts for the year 2012-13 were prepared by following the
 accounting standards in so far as they apply to banks.
 il.  Accounting pedicles adopted and applied consistently by Bank
 are in tune with the RBI guidelines issued from time to time.
 Reasonable prudent judgments and estimates have been made m the
 accounts, so as to give a true and fair view to the state orate iris
 of the Bank and of the profit opt the Bank for the financial year ended
 31st March, 2013.
 LI. The Bank had taken proper and sufficient care for maintaining
 adequate records m accordance with the provisions opt the Companies Act
 195C. in so tar a* they apply to banks.
 iv. The annual accounts for the year ended 31st March, 2013 have been
 prepared on a Going Concern'' basis.
 Considering the nature  the Bank''s business, the provisions old
 Section 217(1) (e) of the Companies Act.  1relating to conservation of
 energy and technology absorption do not apply to your Bank. The Bank
 has.  however, used information tech no logy extensively in its
 There were no employees who ware In receipt of remuneration during the
 year ended March 31, 2D13 requiring disclosure under Section 2l7(2A) of
 the Com panics Act. 195G read with Companies (Pa reticule airs of
 Employees) Rules, 1975.
 Businesses ere an integral part of society and have a critique active
 role in the sustenance and improvement of a healthy ecosystem in
 fostering social inclusive nests rib aqua and u pho Id  el
 hi I practices and good governance. It is believed that integrating
 social, environ mental and ethical responsibilities into governance of
 business ensures long term successes, competencies and sustainability.
 With this in mind your Bank continues to engage in accepting various
 social responsibilities. The Corporate Social Responsibility
 initiatives the Hank are designed to ensure Bank adds
 social environmental and economic mail its activities to make a
 positive. sustainable impact on both society and business. In this
 direction the Bank has been responding well over the years through
 various initiatives like participation in social, cultural.
 educational activities etc., aimed at improving the knowledge, standard
 of lowing and he quality of life of the people and society. The Bank
 firmly believes that being an integral part of society, it Is the
 inclusive growth of society which contributes ultimately to the growth
 of If Bank.
 Financial Inclusion means making available the full range of banking
 services an affordable cost to the people who do not have access to
 banking services. It mainly focuses on the section of society not
 having formal financial institutional support, Through the Financial
 Inclusion Phan, Bank arms at ''connecting people'' With the Bank and not
 just opening accounts This includes meeting the small credit needs of
 the rural public, giving them access the payments, providing
 remittance facility and life and health insurance, Efforts arc being
 made (a optimize the resources to achieve the goal extending banking
 facilities to the un-ban  rived sections.
 All the branches of the Bank are under Core Banking Solution (CSS) and
 all the branches to be opened in future will also be under CBS. Out of
 5SQ branches, Bank has 108 Rural branches and all these branches are
 provided with offering all banking facilities la the rural clientele in
 the Gram or villages Where are located. the rum I branches are acting as
 financial literacy centers (fl-Cs) and imparting Banking literacy among 
 the rural Populace
 Summary of activities undertaken by the Bank under Financial Inclusion
 Initiatives a re as under
 1) Financial Literacy and Credit Counseling 
 The Ban first F LOC Center opened in B ,C Road.  Banta. Karnataka
 for the financial year 201l conducted 17E financial literacy
 campaigns covering 55 visages The second FLCC Center was opened at
  Dharma District, Karnataka on 16.03.013, in association
 with JnanaJyolhi F LCC Trust Mani pal. guidelines all
 the rural branches of your Bank are conducting financial literacy camps
 In the financial year 2013-14, the Bank is planning to open four
 {additional FLCC Centers in Karnataka State In association worth Janna
 Mythoi, Mani pal.
 2) Karnatake Farmers Resource Center (KFRC)
 The Bank ig one of the trustees of the Karnataka farmers Resource
 The Bank has contributed  50lakh towards capital
 expenditure/corpus of KFPC, 3) Electronic Benefit Tan (EBT) - Pilot 
 Project of Govt, of Karnataka:-
 The Bonk is Participating in Govt, of Karnataka (GOK) EBT Plot project
 for NREGA/SSP beneficiaries under - One District -Many Bank Model''
 with tie up arrangement with M''s Integra Micrcsysle/ns for
 technology as we as for providing seen/ice Payments under EBT have
 commenced in five Gram Panchayath locations in Chitradunga, Bellary and
 Daygirl districts.  During the financial year 201 -13. the Bank has
 disbursed an amount of Rs. 0.04 laths under NREGA/5SP payments scheme
 by using smart card and hand held machines
 4) Revised Strategy and Guidelines for Financial Inclusion Plan
 In tune with the revised Strategy & Guidelines of Department of
 Financial (DFS), Ministry of Finance, GO I. the; Finn 
 ion Plan of the Bank has been revised . Under the revised Plan.
 207 Gram consisting of 1002 villages with a (octal population
 old about 10,31,000 as per  census naps been allocated to The Bank
 in Karnataka, Andhra Pradesh & Chhattisgarh states. Gram Panchayats
 ( 40s villages with a total population of about 5,23,099 as per 2001
 census) are covered by brick and mortar branches. These branches wilt
 be responsible for all financial inclusion activities.  During
 the financial year, the Bank has opened 10 small branches across the
 country in rhe remaining Gram Panchayals consisting of 591 villages
 with an approximate population of &, 11,059 as per Z001 census, banking
 services will be provided through Business Correspondent Model with
 Ultra Small Branches (USBs). As on date the Bank has o pond 2 S
 USBs in Tucker, Mysore, Darwin (Karnataka agate) and Ananlhpur
 Districts (Andhra Pradesh State).  The remaining locations will he
 covered by 31.12.2013.
 5} Direct Boniest transfer:
 The Bank is actively participating in Direct Benefit Transfer (DST)
 programmed of Golf wherein, benefits under various schemes will be
 transferred directly to beneficiaries of ''Adhere'' enabled bank
 accounts. For this purpose, the Bank has already on boarded with Nepal
 for Adhere Payment Bridge System (APBS) under National Automated
 Clearing House (NACH). In the directing more than  lakh accounts had
 been seeded with Adhere number, out of which, 40.000 accounts had been
 enabled as ''Adhere Edna bled Accounts''
 Bank bagged the following awards during the year unite re|jort
 in recognition of its technology initiatives, operational excel e one
 and I nests:
 1) I BA Banking Tech no logy Awards 5011 Adjudged as Hoe Second Runner
 Up for the Best Finance Inclusion Initiatives under the category of
 Private Sector Banks.
 2) I BA Banking Technology Awards SG11 Adjudged as the Second Runner Up
 for the Best Risk Management and Security Initiatives under I he
 category of Private Sector Banks.
 3) NFS- Operational Excellence Awards 20i: Special Jury Award for
 Excellent Performance in Key Parameters in respect of ATMs and Switch
 con nested to N FS ATM network.
 4} ''Best Banker in Customer Friend Irises-Runner Up'' award in the
 Midsized: Banks'' category at the ''Sunday Standard Finn 201  Best
 Bankers'' awards instituted by the New Indian Express Group.
 Further, your Bank has received ISO 27001:2005 certificate tor three IT
 set-ups . Data Centre, Near Line Site and Head Office -IT Department
 including Disaster Recovery Site from NQA, a leading assessment,
 verification and certification body accredited to the United Kingdom
 Accreditation Service Lukas)
 Your Directors would like to place on record their sincere gratitude to
 the RBi. other government and regulatory authorities, financial
 institutions and correspondent banks for their continued guidance and
 support. Your directors also place on record their gratitude to the
 Bank''s shareholders, depositors and other Customers tor their continued
 support, paranoia and goodwill. Your directors express their deep
 sense of appreciation to the employees, tor their contribution In your
 Banks quest for sustained growth and profitability arid look forward
 to their continued confab untie in scaling greater heights
                          For and on behalf of he Board of Directors
 Place; Mangalore         Ananlhakr Istina
 Date : May 15th, 2013   Chairman
Source : Dion Global Solutions Limited
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