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Collaboration between banks & fintechs will be a win-win game: Mahabaleshwara MS, MD & CEO, Karnataka Bank


Mangaluru-headquartered private lender posted an all-time high annual net profit at Rs 508 crore in 2021-22 as it prepares to celebrate its centenary next year. ET’s KR Balasubramanyam discusses the bank’s growth and plans with MD& CEO Mahabaleshwara MS.
Edited excerpts:

Your recent results have set a new benchmark?
That’s right. Not just in annual net profit, we crossed Rs 100 crore in net profit in every individual quarter in the last fiscal year. Our fundamentals have also shown positive traction as the NIM for the year was 3.18%, CRAR was 15.66%, PCR was 73.47% and our CASA was at 32.97% while our NPAs declined. A string of strategies that we adopted under our transformation journey KBL-Vikaas with

Consulting Group (BCG) as our consultant acted as an enabler to achieve this. In fact, we are now in the process of implementation of KBL-Vikaas 2.0 and working towards the KBL NxT initiatives.

How are you gearing up your bank to stay competitive as it will turn 100 next year?
With this aim of making Karnataka Bank Limited (KBL) a next-generation Bank by the time it enters its next century, we roped in BCG four years ago. We reached out to all our staff, explained the opportunities ahead, and made each one a transformation agent in the Bank’s journey.

We first identified the areas for transformation like Advances, HR, Technology and Customer experience and completed the task successfully. Our entire KBL staff today is repositioned as a sales and marketing team.

How far are you taking the technology deployment?
We are transforming ourselves into a new age bank with a banking culture more focussed on marketing and sales. With technology, we are now on a par with any new age bank. We are one of the few banks doing digital underwriting of retail loans.

We have set up a Digital Centre of Excellence in Bengaluru to develop digital innovations and technological value-adds. We have also identified a few major areas to take our transformation journey forward under the KBL-Vikaas 2.0.

We will have an end-to-end digital solution for all aspects of banking, not just customer-facing, but even internal. For instance, we have introduced 24×7 surveillance (Elfrms) to prevent frauds, which has helped in instilling confidence among the users of digital banking platforms. We are also planning to open a representative office in the UAE to further enhance our reach abroad.

What has been the customer response to your technology interface initiatives?
The data shows customers are increasingly accepting our digital experience. What was around 32% about 10 years ago, 93% of day-to-day transactions happen in digital format today. At another level, this increased use of technology has led to cost saving and improved efficiency for the bank. For customers, this is a part of digital empowerment as their comfort and satisfaction level increases coupled with increased ease-of-doing banking.

Which are the newer areas for growth?
The RBI has empanelled Karnataka Bank as the agency bank, enabling us to handle government businesses. This gives us a great cross-selling opportunity besides increasing CASA as well. This segment is set to grow as we tap other state governments and union government bodies. On the lending side, co-lending is picking up and we will continue to explore all the new pastures.

What is the likely impact of inflation on your business?
This is an area we are vigilant about. Our advances are growing at a healthy clip. We see grassroots level economic activities picking up. While doing business during the Covid-19 also, we never lost sight of our long-term goals. With a firm focus on our asset quality, we reached out to our customers and did handhold them in their time of difficulty. We will continue to evaluate the emerging situation and focus on healthy growth in interest earning assets.

Old private sector banks like yours are getting sandwiched between the new age private banks and Fintechs creaming away business. What do you need to do to keep gaining market share and customers?
I feel that Fintechs and other financial start-ups are not a threat to banks. Instead, they are business enablers for the banking sector and play a complementary role. We have tie-ups with many Fintechs for business acceleration and exploring a new area of banking like neo banking etc., and a perfect collaboration between Fintechs and banks will surely be a win-win game for both.

Even though ours is a time-tested universal bank in the private sector, we adapt fast to changing situations. Today, our digi sanctions under the eligible retail loan sanctions are at par with new age private sector banks. In the case of the salaried class personal loan segment, it is at 100%.

We are now on track to gain the market share considerably going forward. We are on a mission mode to on-board all types of new-to-bank (NTB) customers with special focus on millennials. Our mobile banking app, ‘KBL Mobile Plus’ is customer friendly and popular. Through this app, a customer can carry out most of their banking activities 24×7.

You have had record high profits last year. But your stock price is where it was a decade ago. What is the bank doing to gain investors interested in it?
A combination of factors including sentiments influence stock price movements, not just financial performance. We are still largely a retail shareholders’ bank. I am optimistic that the trading in our shares will gain traction going forward, so also the share price. However, the book value of the share is continuously increasing. In fact, over the decade it increased from Rs 137.99 to Rs 227.83 as on March 31, 2022.

You had said that your best is yet to come on the NIM front? What are you doing to improve that number?
Our NIM is getting improved over the years. In the financial year 2022 it was at 3.18 % from 2.91% in March 2021 with a 27 bps of growth. With many enablers in place, such as consistently improving CASA, lower cost of funds, healthy spread, improving asset quality, healthy credit growth, lower credit cost, overall improvement in efficiency etc., I believe the NIM is well poised for further improvement.

How is Karnataka Bank facing this challenge of stiff competition in the banking sector chasing small and mid-corporates and retail?
Competition has picked up after the sector was opened to new players. Digital capabilities, customer service and customer loyalty have been our hallmark. We have recorded a decent growth in the retail sector and mid-corporate sectors. Minimum turn-around-time for sanction of loan makes the customers attracted towards our bank. This year also, we will continue to focus on retail and MSMEs along with agriculture and mid-corporate segments. We have a robust credit monitoring system which ensures prompt collection of dues on or before the due date and hence, going forward, I expect a sustainable growth.



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