The Hindu Business Line : Karnataka Bank to expand in North

Mangalore, Jan. 5 It is the ninth year in office as the Chairman and Chief Executive Officer of Karnataka Bank for Mr Ananthakrishna. When he assumed office as Chairman in July 2000, the bank had registered a business of Rs 7,625 crore for 1999-2000. Eight years after that, the bank registered a four-fold increase in business with a pan-India presence. Mr Ananthakrishna spoke to Business Line recently on various issues related to the banking industry. Excerpts:

Your bank is one of the premier old generation private sector banks in the country. Is it a strength or weakness to be an old generation private bank’?

Old generation private sector banks have a public sector work culture (with all the restrictive practices) and private sector brand. These banks have to compete with the new private banks with the burden of legacy on their shoulder. This sometimes may be strength since impulsive reactions are less on account of experience; and many a times a weakness because facing competition with such issues will be difficult.

What plans do you have for increasing your branch network?

We have made arrangements to open 30 branches during the next one year, a few of them in Karnataka and the rest outside, mainly in North India. We are selecting urban and semi-urban under banked areas for opening new branches to reach more population and thereby enhance business. (At present, the bank has 435 branches).

Have you revised the business targets for the current fiscal in the current scenario?

We have not revised the targets and we are confident of achieving the targets. We have projected a moderate growth rate of around 25 per cent for 2008-09 and business turnover of Rs 35,000 crore, comprising of Rs 21,000 crore deposits and Rs 14,000 crore advances.

How do you see the effect of the slowdown on banking industry?

Even though the slowdown in the world economy, particularly that of the US, has been very sharp, its impact on the Indian economy has not been that significant in view of the good regulation; as reflected in the GDP growth, there has been only a marginal set back.

Credit expansion by the banking industry was comparatively high during 2008-09, the overall credit-deposit ratio being around 75 per cent. In the coming days, the quality of credit expansion may face issues relating to slowdown and there may be delayed repayment of loans.

To meet this, the RBI has come out with restructuring guidelineshow do you see the lending and deposit rates moving?

The interest rates, both on deposits and advances, are bound to move southwards in view of the measures taken by the Government and the RBI.

What future do you see for the growth of home loans?

The growth in home loans will decline and may touch the minimum.There are two types of buyers in this segment. One who wants to own a house, and the other who buys it as investment. Statistics say that there are large number of vacant flats and houses .

In this market, putting money in real estate as investment is almost at a standstill. Many who wanted to own a house have done so. >> More on the Web: www.businessline.in/Web Extras

How is the performance in agri loans?

The performance of the agri loans is satisfactory. However, the repayment culture underwent a change because of the Government measures. It is felt that due recognition was not accorded to the honest and prompt re-payers of the loan.

What plans do you have to increase the non-interest income of the bank?

Our non-interest income for the year 2007-08 was about 12.6 per cent of the total income, and we propose to increase it to around 15 per cent by improving treasury activities and increasing agency business.

Do you face large-scale retirements in the coming years? What plans do you have on recruitment front?

We do not face any large scale retirement during any particular period. We have been recruiting staff at clerical and junior officer levels almost every year to meet the attrition.

See, on an average we recruit 200-300 people every year. Of them, 75 per cent is to meet the attrition – may be due to retirement or due to replacement for those who leave the organisation – and 25 per cent to meet the needs of business expansion.

Is there any plan to raise fresh capital?

Our capital adequacy ratio is comfortable at around 13 per cent, and even under Basel II, it may not undergo any significant change. By augmenting the reserves from the internal accruals we are trying to maintain the CAR always above 11 per cent even with the increased business as per projection. In this background, we may raise capital only if needed.

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