Study On Business Loans

A STUDY ON BUSINESS LOANS AT KARNATAKA BANK LTD
INTRODUCTION
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FINANCE Finance is the study of funds and management. Its general areas are business finance, personal finance, and public finance. It also deals with the concepts of time, money, risk, and the interrelation between the given factors. It is basically focused on how the money is spent and budgeted. It is one of the most important aspects in handling business. Finance addresses the methods wherein business entities used their financial resources on a certain period of time. It is the application of a set of techniques used by organizations in managing their financial affairs. The income and expenditure are emphasized in finance and its differences can easily be indicated. Nowadays, loans have been packaged for resale. This means that the debt has been bought by an investor from the bank. These bonds are sold to investors by financial corporations who have exceeded beyond their expenditures. The investor can now collect all the interests and be sold again through a secondary market. Banks serve as facilitators to companies in the provision of credit and mutual funds. Investments are managed carefully under a financial risk management to control gambling chances of these financial assets. Financial instruments are also used to secure these assets on securities exchanges such as stock exchanges and bonds. A bank provokes the activities of both borrowers and lenders. Lenders pay deposits to banks on which it pays the interest rates. The central banks are the last resorts that handle the monetary funds. These banks affect the interest rates being charged such as an increase in the money supply will result to a decrease in the interest rates. Financial capital is a monetary resource allows businesses to purchase items that will create goods for production and other services. The budget is the documentation of the entire entrepreneurship. The outline includes the objectives of the business, the target sets, resulting costs, required investment, planned sales, growth, financing source, and financial results. It can be directed on long term or on a short term basis. The capital budget is mainly concerned with the proposed fixed asset requirements. The financing of the expenditure is also indicated in the capital budget. A detailed plan of all the sources and cash usage is emphasized in the cash budget. It has six main sections such as the beginning cash balance, cash collections, cash disbursements, cash excess, cash deficiencies, financing, the ending cash balance, and the management of current assets.
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A credit comes in various forms such as of open accounts, instalment sales, credit cards, and supplier credits. The advantages of a credit trade are gaining loyalty and goodwill amongst costumers, drawing in more customers than cash trades, stimulates agricultural and industrial production, and increases rates. But there are also disadvantages to credit trades as well such as risks of bad debt, high administration expenses, necessitates more working capital, risks of bankruptcy declaration, and leading to purchasing nonessential items.
An effective credit control may lead to increase in sales, increase in profits, reduces bad debts, builds customer loyalty, and increases company capitalization. The information on creditworthiness is acquired through credit agencies, bank references, credit agencies, chambers of commerce, and credit application forms. Taking legal actions is one part of the many duties of the credit department.
Meanwhile, a corporate finance holds a task in providing financial resources for certain organizations and balances risks and profitability. It is referred as SME finance for small enterprises. Managerial finance maximizes a companys wealth and it also values the stocks. Bonds are long-term funds created by ownership equity and long-term credits. Short-term funding comes from a line of credit given by banks as a working capital.
Studying finance will lead you in wiser decisions making on your financial funds. It can help you identify risks and benefits if you are planning to put up your own business. Finance discipline requires you certain abilities and trainings which can be developed over a period of time. Finally, it will give you optimum control over your financial assets which will certainly help you in attaining a financially secured life.
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Why Finance is important to the economy?
From a macro perspective, Finance is merely the practical application of economics. The Financial System is the means by which an economy allocates money to its highest valued use. In English, it is how people, businesses, and governments raise the cash needed to do business.
The goal of any financial system is to make sure that those with good ideas get the money necessary to implement the ideas. How this is accomplished in a market-based economy is through the stock and bond markets.
In a market-based economy, investors invest in a firm and the firm takes the investment and uses it to implement the business ideas.
People do not give money without the expectation of getting something in return. If money is given, something is expected back in return. In this case more money.
The way to get the most money back is to invest in firms that will put the money to the best use. Of course others know this as well. As more invest with a firm the value of the firm's stock rises.
In competition for more money, firms will strive to find better investments. This leads to economic growth, more jobs, and hopefully a higher standard of living.
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FINANCIAL INSTITUTION
In financial economics, a financial institution is an institution that provides financial services for its clients or members. Probably the most important financial service provided by financial institutions is acting as financial intermediaries. Most financial institutions are highly regulated by government. Broadly speaking, there are three major types of financial institutions: 1. Deposit-taking institutions that accept and manage deposits and make loans, including banks, building societies, credit unions, trust companies, and mortgage loan companies. 2. Insurance companies and pension funds; and 3. Brokers, underwriters and investment funds. Financial institutions provide service as intermediaries of financial markets. They are responsible for transferring funds from investors to companies in need of those funds. Financial institutions facilitate the flow of money through the economy. To do so, savings a risk brought to provide funds for loans. Such is the primary means for depository institutions to develop revenue. Should the yield curve become inverse, firms in this arena will offer additional fee-generating services including securities underwriting, and pre. Fds. Financial institutions in most countries operate in a heavily regulated environment as they are critical parts of countries' economies. Regulation structures differ in each country, but typically involve prudential regulation as well as consumer protection and market stability. Some countries have one consolidated agency that regulates all financial institutions while others have separate agencies for different types of institutions such as banks, insurance companies and brokers. Countries that have separate agencies include the United States, where the key governing bodies are the Federal Financial Institutions Examination Council (FFIEC), Office of the Comptroller of the Currency - National Banks, Federal Deposit Insurance Corporation (FDIC) State "non-member" banks, National Credit Union Administration (NCUA) - Credit Unions, Federal Reserve (Fed) - "member" Banks, Office of Thrift Supervision - National Savings & Loan Association, State governments each often regulate and charter financial institutions.
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CORPORATE FINANCE
Corporate finance is the area of finance dealing with monetary decisions that business enterprises make and the tools and analysis used to make these decisions. The primary goal of corporate finance is to maximize shareholder value. Although it is in principle different from managerial finance which studies the financial decisions of all firms, rather than corporations alone, the main concepts in the study of corporate finance are applicable to the financial problems of all kinds of firms. The discipline can be divided into long-term and short-term decisions and techniques. Capital investment decisions are long-term choices about which projects receive investment, whether to finance that investment with equity or debt, and when or whether to pay dividends to shareholders. On the other hand, short term decisions deal with the short-term balance of current assets and current liabilities; the focus here is on managing cash, inventories, and short-term borrowing and lending (such as the terms on credit extended to customers). The terms corporate finance and corporate financier are also associated with investment banking. The typical role of an investment bank is to evaluate the company's financial needs and raise the appropriate type of capital that best fits those needs. Thus, the terms corporate finance and corporate financier may be associated with transactions in which capital is raised in order to create, develop, grow or acquire businesses.
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BANK A bank is a financial institution and a financial intermediary that accepts deposits and channels those deposits into lending activities, either directly or through capital markets. A bank connects customers with capital deficits to customers with capital surpluses. Banking activities Banks act as payment agents by conducting checking or current accounts for customers, paying check drawn by customers on the bank, and collecting checks deposited to customers' current accounts. Banks also enable customer payments via other payment methods such as Automated Clearing House (ACH), Wire transfers or telegraphic transfer, EFTPOS, and automated teller machine (ATM).
Banks borrow money by accepting funds deposited on current accounts, by accepting term deposits, and by issuing debt securities such as banknotes and bonds. Banks lend money by making advances to customers on current accounts, by making instalment loans, and by investing in marketable debt securities and other forms of money lending.
Banks provide almost all payment services, and a bank account is considered indispensable by most businesses, individuals and governments. Non-banks that provide payment services such as remittance companies are not normally considered an adequate substitute for having a bank account.
Banks borrow most funds from households and non-financial businesses, and lend most funds to households and non-financial businesses, but non-bank lenders provide a significant and in many cases adequate substitute for bank loans, and money market funds, cash management trusts and other non-bank financial institutions in many cases provide an adequate substitute to banks for lending savings too.
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BANKING IN INDIA
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Banking in India originated in the last decades of the 18th century. The first banks were The General Bank of India, which started in 1786, and Bank of Hindustan, which started in 1790; both are now defunct. The oldest bank in existence in India is the State Bank of India, which originated in the Bank of Calcutta in June 1806, which almost immediately became the Bank of Bengal. This was one of the three presidency banks, the other two being the Bank of Bombay and the Bank of Madras, all three of which were established under charters from the British East India Company. For many years the Presidency banks acted as quasi-central banks, as did their successors. The three banks merged in 1921 to form the Imperial Bank of India, which, upon India's independence, became the State Bank of India in 1955.
Indian merchants in Calcutta established the Union Bank in 1839, but it failed in 1848 as a consequence of the economic crisis of 1848-49. The Allahabad, established in 1865 and still functioning today, is the oldest Joint Stock bank in India.(Joint Stock Bank: A company that issues stock and requires shareholders to be held liable for the company's debt) It was not the first though. That honour belongs to the Bank of Upper India, which was established in 1863, and which survived until 1913, when it failed, with some of its assets and liabilities being transferred to the Alliance Bank of Simla.
When the American Civil War stopped the supply of cotton to Lancashire from the Confederate States, promoters opened banks to finance trading in Indian cotton. With large 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.
Foreign banks too started to arrive, particularly in Calcutta, in the 1860s. The Comptoire d'Escompte de Paris opened a branch in Calcutta in 1860, and another in Bombay in 1862; branches in Madras and Pondicherry, then a French colony, followed. HSBC established itself in Bengal in 1869. Calcutta was the most active trading port in India, mainly due to the trade of the British Empire, and so became a banking centre.
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The first entirely Indian joint stock bank was the Oudh Commercial Bank, established in 1881 in Faizabad. It failed in 1958. The next was the Punjab National Bank, established in Lahore in 1895, which has survived to the present and is now one of the largest banks in India.
The presidency banks dominated banking in India but 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.
The period between 1906 and 1911, saw the establishment of banks inspired by the Swadeshi movement. The Swadeshi movement 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.
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LOANS
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 instalments, or partial repayments; in an annuity, each instalment 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. Although this article focuses on monetary loans, in practice any material object might be lent.
Acting as a provider of loans is one of the principal tasks for financial institutions. For other institutions, issuing of debt contracts such as bonds is a typical source of funding.
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Types of loans
1. Secured A secured loan is a loan in which the borrower pledges some asset (e.g. a car or property) as collateral. A mortgage loan is a very common type of debt instrument, used by many individuals to purchase housing. In this arrangement, the money is used to purchase the property. The financial institution, however, is given security a lien on the title to the house until the mortgage is paid off in full. If the borrower defaults on the loan, the bank would have the legal right to repossess the house and sell it, to recover sums owing to it. In some instances, a loan taken out to purchase a new or used car may be secured by the car; in much the same way as a mortgage is secured by housing. The duration of the loan period is considerably shorter often corresponding to the useful life of the car. There are two types of auto loans, direct and indirect. A direct auto loan is where a bank gives the loan directly to a consumer. An indirect auto loan is where a car dealership acts as an intermediary between the bank or financial institution and the consumer.
2. Unsecured Unsecured loans are monetary loans that are not secured against the borrower's assets. These may be available from financial institutions under many different guises or marketing packages:

credit card debt personal loans bank overdrafts credit facilities or lines of credit corporate bonds (may be secured or unsecured) The interest rates applicable to these different forms may vary depending on the lender and the borrower. These may or may not be regulated by law. In the United Kingdom, when applied to individuals, these may come under the Consumer Credit Act 1974.
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Interest rates on unsecured loans are nearly always higher than for secured loans, because an unsecured lender's options for recourse against the borrower in the event of default are severely limited. An unsecured lender must sue the borrower, obtain a money judgment for breach of contract, and then pursue execution of the judgment against the borrower's unencumbered assets (that is, the ones not already pledged to secured lenders). In insolvency proceedings, secured lenders traditionally have priority over unsecured lenders when a court divides up the borrower's assets. Thus, a higher interest rate reflects the additional risk that in the event of insolvency, the debt may be uncollectible.
3. Demand Demand loans are short term loans (typically no more than 180 days) that are atypical in that they do not have fixed dates for repayment and carry a floating interest rate which varies according to the prime rate. They can be "called" for repayment by the lending institution at any time. Demand loans may be unsecured or secured.
4. Subsidized A subsidized loan is a loan on which the interest is reduced by an explicit or hidden subsidy. In the context of college loans in the United States, it refers to a loan on which no interest is accrued while a student remains enrolled in education.[2] Otherwise, it may refer to a loan on which an artificially low rate of interest (or none at all) is charged to the borrower. An unsubsidized loan is a loan that gains interest at a market rate from the date of disbursement.
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BUSINESS LOANS
Business loans are most important for any companys survival. Money is necessary for making growth and investment. The challenges that company face is in actually arrange the money, and pay the debt. The first option of many businesses is to go to the bank, but the problem is that the banks will only deal with companies who have solid operating records. A key point of funding that many businesses take advantage of is personal savings. With personal savings there is no one to repay a debt to, so issues such as interest and monthly payments become moot. Consider it a personal-favour business loan. The obvious risk is that if your business does fail, it is your personal funding that is taking the hit. While money is a large part of keeping a business intact, there are many other important aspects such as knowledge, experience, and organization. Keeping a business plan and following a schedule can be the difference between failure and success. When loaning your funds, take a second and think of how much you will need and why. The cost of borrowing money can be very high in the end.
Importance of business loans Business and SME loans are becoming increasingly popular financing options across the world and more and more people are going for business loans since they need capital for their businesses and business loans can satisfy their requirements.
Small businesses cannot build capital solely by issuing shares and debentures.
To deal with the interim requirements and fluctuating profits, and at the same time to pay dividends to the shareholders, business loan becomes a necessity.
A business loan helps the businesses to flourish and thus it contributes to the economic growth of the country.
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IMPORTANCE OF BUSINESS LOANS TO BANKS It involves only short term transactions. No bargaining capacity is involved since the bank regulates the interest rates according to the RBI guidelines. It helps to create connection with other businesses. Yields and returns are more compared to other types of loans. Losses can be compensated since the loans provided are widely spread. Better rated.
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Types of business loans
Unsecured Business Loans: In this type of loan no collateral is offered as security and loans are granted based on ones credit history and capability to make repayments in time. It may be difficult to get an unsecured loan but then impressive line of credit can also be secured. What matters is credit rating of the business organization and its repayment capability. Once this gets established, financers do not put any restrictions on the amount granted.
Secured Business Loans: In this type of loan, the borrower has to give some kind of guarantee that it is going to repay back the loan in time. This guarantee normally is in the form of collaterals wherein creditors receive some property documents from the borrower as security for the money received. This makes it possible for the lender to get back the amount lent out, just in case, if the borrower defaults. The assets pledged are, however, returned back by the creditor whenever the borrower makes full repayment of loans along with interest. Secured loan provides security to the creditor as they can sell the collateral to regain the amount of money that is loaned.
Trade loans: Trade loans are made available to owners so as to help them start a new entrepreneurship or continue with an existing one. The amount of the loan can range from Rs. 25000 to Rs 100 lakh and it depends upon the age of the customer, his financial standing, repayment capacity and period within which it has to be repaid (tenure).
Professional Loans: As the name goes, this form of loan is meant for self employed professionals like architects, doctors, interior designers, chartered accountants, etc. This type of loan is also unsecured in nature and cannot be given to units that are in manufacturing, trading or processing. This form of loan can vary from Rs 25000 to 25 lakhs keeping into consideration applicants age, financial standing, and repayment capacity. The tenure of the loan is maximum up-to 5 yrs.
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Short term business loan: This form of loan is provided to people who all of a sudden run in a crisis situation and need instant cash. This form of loans have short repayment period and normally the borrower has to pay back within one year span. The loan amount granted is substantial but then since it is provided instantly so the repayment period is kept short.
Intermediate Business Loans: This form of loan has a repayment period of 1 to 3 years. It is given to entrepreneurs who are in need of capital for starting a new business, to buy equipment, for building inventory and for increasing working capital.
Long term business loans: This form of loan is meant for business organizations that are well established. It allows enterprises to increase their fixed assets for business expansion and acquisition. The loan has period of 3 to 5 years within which it has to be returned. This form of funding can be used for start-up businesses, to provide money for construction efforts, for purchasing land or buildings, and to support long term working capital with sufficient funds.
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How banks set the price for loans to small businesses Bank lending to small businesses is one of the most important services banks undertake. Lending enables businesses to grow, take on more employees and ultimately generate greater wealth. While the benefits of lending to small- to medium-sized enterprises (SMEs) and to the wider society are clear, it is important that banks can earn a return on this activity in order to sustain that service throughout the business cycle. Ultimately, the price of lending is determined by the market. Lending is one of the key areas for competition as firms choose where to place their business or switch banks: banks that overprice will lose business, while those that underprice will not be able to sustain their operations. There are three key drivers behind how banks price lending:

cost of funds; cost of risk and capital; and Administration costs. Cost of funds In order to lend money to businesses, banks need to attract funds from depositors by paying them interest. They also need to aim to hold deposits for similar lengths of time as the term of loans financed. For this reason many institutions must pay higher interest rates for deposits. Cost of risk and capital For every loan a bank makes, it must set capital aside to ensure the bank remains solvent and depositors are secure, even if that loan isnt repaid. To ensure the confidence and security of savers, all banks around the world are currently holding higher levels of capital than in recent years. There is a cost to holding this capital and, as banks have increased the amount set aside, this cost has risen along with it. Price reflects the probability in the banks experience and according to its data of the borrower not being able to repay the debt. The higher the level of risk, the higher the price must be to cover the likely loss. This amount of risk is also influenced by the level of security offered by the borrowing, so that when the value of security falls, such as commercial property values, the risk increases, and vice versa. The methodology and calculations used to determine the cost associated with the risk of lending are set by the Basel III regulatory framework. Risk-reflective pricing enables higher-risk, but still viable businesses, to access finance, whilst lower-risk and well-managed firms get the benefit of lower-cost funding. Pricing to risk is in businesses interest: even more marginal businesses can still get access to finance.
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Cost of administration Meeting a business customer, assessing an application for finance, setting up a facility, providing the documentation, then monitoring and controlling that facility as well as providing regular information and revising facilities as required has a cost. While banks may use credit and performance-scoring tools, most will also require a judgement to be made by an experienced relationship manager. Smaller facilities tend to have a relatively higher administrative cost per pound lent than larger facilities, and not all of that cost can be recovered through fees. So small facilities tend to bear higher margins, even if the risk is comparable with larger lending. Changes since the financial crisis In the run-up to 2007, some banks used the wholesale markets to source a proportion of their deposits that they lent to businesses. At the time, that money was relatively inexpensive and enabled banks to offer lower lending prices than was historically normal. However, from 2008, with the dramatic freezing of wholesale markets, this source of funding proved much less attractive. This has increased demand for other, more traditional funding sources, such as retail deposits, which in turn has increased the costs of banks raising funds to lend to something more like a historical norm. Banks have also been asked by regulators to raise deposits over longer terms than they have historically, and to hold greater liquidity buffers against unforeseen circumstances. This means that banks must pay higher market rates for longer term deposits, and that a higher proportion of those deposits raised cannot be lent to customers but must be put aside, incurring additional cost. Combined, these factors mean that (although reference rates like Bank of England base rate and LIBOR continue to be used in quoting finance costs for example, two per cent over Bank of England base rate) they do not reflect the real cost of funding and banks real costs are considerably higher. In addition to changes in how banks fund lending, the amount of capital banks are required to hold by regulators has risen sharply, leading to a corresponding increase in the cost of capital that is included in the price of debt. All these factors have considerably increased the cost to banks of providing finance compared to the more benign economic conditions up to 2007.
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Changes in the cost of finance for SMEs The vast majority of SMEs are paying substantially less than two years ago in absolute terms, as a result of reductions in the Bank of England base rate (and other reference rates such as LIBOR) having been passed on to customers in full. The Bank of England base rate is currently the lowest since World War II.
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The key aspects which bank considers before providing the business loan: Constitution acts and laws. Nature of the business. What all types of business does the bank finance. Character. Capacity. Credit worthiness. Volume of the business. Securities provided. Performance (past and future forecast) of the security. In case of a new company analysis of the projected financial statement. In case of existing business 3 years financial statements along with projections for the next two years.
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DESIGN OF THE STUDY
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INTRODUCTION TO THE SUBJECT BACKGROUND A business loan is funding given to business by a bank, an individual(s), or an organization usually to be repaid by a certain date with a certain amount of interest. The amount of a loan, the amount of interest, the repayment date, the qualification of the loan recipient to merit the loan, the credit analysis, and the number of lenders used to achieve the desired loan amount are all variable.
RESEARCH DESIGN A Research design is defined as a framework or blue print for conducting the research project. It specifies the details of the procedures necessary for obtaining the information needed to structure and/or solve the research problems. Thus, a research design lays the foundation for conducting the project effectively and efficiently.
TITLE OF THE STUDY A project on A Study On Business Loans At Karnataka Bank Limited.
OBJECTIVES OF THE STUDY 1. 2. 3. 4. Study of mechanism of business loans. Policies of banks towards business loans. Securities accepted as guarantee. Procedures for analysing the applications of business loans. STATEMENT OF PROBLEM Business loans are needed for the purpose of growth and sustenance of an enterprise. Entrepreneurs venturing into a new business or planning to see business expansion can see things really happening in their favour if they have enough capital to support their entrepreneurship goals. Financial institutions that offer loans help entrepreneurs to bail themselves out of their crippled state. Business loans are provided by banks to enterprises so as to help them meet their short and long term financial need.
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Business loan is found to be essential for any enterprise to build a firm footing in business. Be it the initial stage or growth phase, capital is required to keep up with the momentum. Private and public sector banks provide business loans to help entrepreneurs realize their business goals. Such kind of loans can be availed by Self employed individuals Partnership firms Private limited companies and limited companies Sole Proprietorship firms.
RESEARCH METHODOLOGY The research methodology is DESCRIPTIVE in nature.
METHODS OF DATA COLLECTION Primary data: conversation with chief manager and few branch managers of KBL, conversation with other staff members and trainees. Questionnaire - The questionnaire is used as a tool to collect the appropriate data. A structured and undisguised questionnaire was prepared with a combination of close and open-ended questions. Secondary data: banks website, loan policy prescribed towards business loans by KBL, internet, journals.
LIMITATIONS OF THE STUDY The sample size is limited to 50 business concerns only. Study was limited to only one unit. Interaction with customers was very limited. Study was conducted under the assumption that information provided by the respondents are true
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COMPANY PROFILE
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Company profile
Karnataka Bank Ltd, a leading A Class scheduled commercial Bank. In India, was incorporated on Feb 18th 1924 with a registered office at Mangalore. The Bank commenced its business on 23rd May 1924 with an Initial Paid up Capital of Rs. 11,580 contributed by 113 shareholders. Sri.B.R.Vyasaraya Achar was the first president of the Bank. The Banks memorandum of Association in its Objective Clause states that the Bank apart from carrying on the general function of banking business, would set apart and appropriate from the annual net profit towards the general, mental, moral and physical advancement of other beneficial purpose of the members of the Dravidian Brahmin community, such sums as may be deemed fit. The first three branches of the Bank were at Mangalore Dongerkery, Madras George, and Udupi Car Street. Sri Kalmadi Gopal Krishna had the distinguishion of becoming the first Branch Manager. At the end of the Banks first year of operations the Banks deposits stood at Rs. 0.68 Lakhs and advances were Rs. 1.22 Lakhs. The Bank celebrated its Silver Jubilee in the year 1949 in its Silver Jubilee year of operation the Bank earned a net profit of Rs. 0.75 Lakhs with deposits of Rs.55.59 Lakhs and Advances of Rs. 39.39 lakhs.
Revenue Market Cap Corporate Address
Management Details
Business Operation
531.699 ( USD in Millions ) 12820.8142206 ( Rs. in Millions ) P B No 599,Mahaveera Circle,KankanadyMangalore-575002, Karnataka www.karnatakabank.com Chairperson - Ananthakrishna MD - P Jayarama Bhat Directors - Ananthakrishna, H Ramamohan, Harshendra Kumar, Jairama Hande P, M Bheema Bhat, P Jayarama Bhat, R V Shastri, S R Hedge, S V Manjunath, Sitarama Murty M, T S Vishwanath, TR Chandrasekaran, U R Bhat, UR Bhat, Y V Balachandra Bank - Private
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Corporate Goal The Bank has envisaged to achieve a total business turnover of Rs. 28, 500 Crore, comprising of a deposit target of Rs. 17, 000 Crore and advance target of Rs. 1, 500 Crore for the year ending March 31, 2008. The Bank is confident of achieving the same through better customer services and operational efficiency. Besides, the Bank has plans to increase its total number of business units to 580, by increasing the total number of branches to 430 and own ATM network to 150 by March 2008.
Nature of the Business

In the words of Late Shri T.A.Pai Some people believe that Banking means money lending and that a Banker is not but a glorified Money lender. But Banking is not money-lending as money lender does not take the risk whereas the Banker does. Bank is into pooling together the savings of the community scattered all over and from the very same pool granting loans to the needy in the society. Thus it acts as a link between the savers and the needy. Thus the two main products of the Bank are Deposits and Loans.
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History Sri.K.S.N.Adiga became the chairman of the Bank on 23rd Nov 1958. The First real recognition for the Mangalore based Bank came in the year 1959 with the Bank being elevated from C class to B Class. In the stride of progress and expansion, the Bank got reinforced by the takeover of 3banks namely: Shringeri Sharada Bank Ltd on 1st April1960. Chitradurga Bank Ltd on December 30th 1964. Bank of Karnataka Ltd on Dec 29th 1966. In the year 1969 the Bank opened its 75th branch where its deposits crossed Rs. 10 Crore mark to reach Rs. 12.63 Crores, Advances were at Rs. 8.90 Crore and Net profits were Rs. 3.05 Lakhs. In year 1971 the Bank opened its first branch in the countrys financial capital. The following year the Bank was elevated to A class by the Reserve Bank of India. In its Golden Jubilee year of its operation the banks total deposits were Rs. 33.14 Crores and Advances were Rs.22.09 Crore with 146 branches and 126 employees. In 1977 Karnataka Bank Ltd., adopted the star symbol as its unique visual identity symbol. A product of Late Dr. Shivarama Karanth, it symbolises stability, discipline, harmony and confidence. The Staff Training College of the Bank was started at Mangalore Dongerkery on Sept 27th1977. In 1977 the foreign exchange Business of the bank was opened with a separate department was established In Bangalore as central foreign exchange department which was later shifted to Mumbai (1979). The Bank achieved the target of Rs. 100 Crores mark in deposits with the aggregate deposits being Rs. 104.24 Crores as on 31-12-1979. In 1980 the Madras George Town Branch celebrated its golden jubilee. In the diamond jubilee year of the Bank, the deposits of the bank were Rs. 211.34 Crores and Advances was Rs. 122.22 Crores respectively. In 1989 the Banking year was extended from 12 months to 15 months to end on 31st March. The Banks Mumbai Borivili branch was declared as the first Model Branch of the Bank. In 1994-95 the first service branch was opened At Mumbai. The first Industrial Finance Branch was also opened at Bangalore on 20th March 1995. The first Agricultural Development Branch of the Bank was opened on 1st April 1995. The Bank made it into the stock markets on October 1995with a public issue of Rs. 81 Crores which was oversubscribed by about 2.5 times despite depressed market condition. During the year 2003, the Bank has taken up corporate agency for marketing the various life policies of Met Life India Insurance Company Ltd. It has also taken up corporate agency of Bajaj Allianz General Insurance Co. Ltd for marketing general insurance products. The banks all round excellence in the twin parameters of growth and stability has earned it rich laurels in the form of P1+ rating for certificate of deposits from CRISIL.
Vision, Mission, and Quality Policy Vision Bank is a professional managed with good track record of customer loyalty and consistent profitability. The bank has the resilience to face the new challenges successfully and achieve the goals in vision by its management. Adopting ethical management practices, Bank reiterates its commitment to fulfil national and social priorities, present sound financial and above of all else improve and innovate to meet the challenges posed by a customer driven banking industry.
Mission The Mission statement of any organisation generally represents its long term goals and strategies. Every organisation must have its own mission, which describes present business scope of the organisation. The mission statement of Karnataka Bank Ltd is as follows: 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.
Quality Policy The Quality policy of Karnataka Bank Ltd is of providing Quick and Better service and their by achieving Customer Satisfaction.
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Product/Service Profile Product for Financial Salaried Persons

Today, personal finance is the fastest growing segment of banks credit Deployment. Among personal banking products, loans to salaried class, occupies a prominent place. With this backdrop this loan product has been modified from time to time. The purposes for which this loan scheme can be used are Purchase household articles/consumer durables, Childrens Education, Marriage and thread ceremony of self/dependents, Medical expenses of self\dependents, Obsequies Expenses, Repair to own house and any other purpose as to the satisfaction of sanctioning authority. The quantum of loan provided shall be to a maximum of 10 times of the monthly gross salary or composite credit limit consisting of fixed loan and overdraft not exceeding 10 times of the monthly gross salary out of which, the overdraft component shall not exceed 5 times of the gross salary. The loan has to be repaid with interest within 5 Years.
KBL APNA GHAR

KBL Apna Ghar scheme was introduced in November 2001, duly reviewing/ modifying Banks erstwhile housing finance scheme. The terms and conditions of the scheme have been reviewed/ refined from time to time. The purpose for which loan can be provided are for construction of house/purchase of ready built house or flat/purchase of site and build house thereon. Renovation /remodelling/repairs to the existing house/flat. The quantum of loan provided shall be to a maximum of 60 times of latest monthly take home (net) salary in the case of salaried or 5 times of latest annual Net income plus depreciation provided if any, as per P&L a/c in the case of traders /self employed persons/professionals Or Rs. 75.00 Lakhs. Whichever is less. The quantum of loan provided in the case of renovation/remodelling/repairs. Of the existing house /flat maximum Rs.10.00 lakh or up to 60% of the value of the house /flat owned by the applicant, whichever is lower subject to maintaining a margin of 25% on estimated repairs . A maximum period of 15 years (including a repayment holiday at the option of beneficiary till the completion of construction or 18 months from the date of first disbursal of the loan whichever is earlier ) for construction /purchase of house/ flat, For repairs / renovations/remodelling- Maximum period of 7 years.
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KBL-VARTHAK LOAN
It was formulated during February 2000, for financing traders/business persons. The purpose for which KBL-Varthak loan scheme was introduced was in order to provide for the Working Capital requirements of traders and business persons. The maximum amount that can provided to individual trader/Businessman are Rs. 25.00 Lakh per Borrower. The repayment conditions for KBL- Varthak Loan are that in case of Overdraft Accounts the amount has to be paid within a period of one year and No Holiday period is given. And the loan is Repayable either in monthly or quarterly instalments.
KBL UDYOG MITHRA

This scheme was introduced during February and the purposes for which the loan can be availed are for 1. Purchase of Medical Equipment/ Machineries/ Computers, 2. Furnishing the Office, Purchase of Furniture, Books etc. 3. Payment of Advance rent for setting up of an Office. The maximum Amount of loan facility that can be availed is as follows: Maximum amount up to 90% of the cost of assets to be purchased. Maximum amount up to 80% of the cost in the case of purpose specified under 2 and 3. For setting up of an office Doctors, Chartered Accountants, Engineering consultants the maximum quantum of Advance is restricted to: Rs. 75,000 in case of rural branches Rs. 1, 00,000 in case of Semi-urban branches. Rs. 1, 50,000 in the case of urban branches. Rs. 2, 00,000 in the case of Metropolitan branches.
1. 2. 3. 4.
VIDYANIDHI EDUCATIONAL LOAN SCHEME

Was introduced in the year 1998 on the occasion of platinum Jubilee Year of the Bank .The scheme was designed to provide financial support to the reserving and meritorious students for continuing their studies in India and abroad. The amount of loan facility which are provided for students studying in India is a Maximum of Rs. 7.50 Lakh and for students studying abroad it is a Maximum Rs. 15.00 Lakh repayment holiday/moratorium is course period +1 year or 6 months after getting job in earlier. The interest is to be debited on simple basis during repayment holiday/moratorium period. Thereafter on compounding basis with monthly rests. The loan has to be repaid in 5 to 7 years after commencement of repayment.
KBL CAR FINANCE

It was formulated during November 1998 for the purpose of purchase of four wheelers. The maximum amounts of loan that can be provided to individual under the scheme are as follows: 1. For NEW Vehicle: Maximum amount up to 85% of the invoice value excluding vehicle tax and insurance. 2. And for Second hand Vehicle: The vehicle should not be older than 3 years from the date of registration of the vehicle. Maximum amount of loan is Rs. 5.00 Lakh. The loan has to be repaid within 60 months in case of new vehicle and 34 months in the case of second hand vehicle.
KBL VAHANA MITHRA

In order to streamline delivery of credit to the transport industry, a customer friendly scheme tailored to meet the requirements of this sector was formulated in September 2003. The loan is provided for the purpose of purchase of new as well as old (up to 5 years.) Auto rickshaw, Jeep, Car, Maxi cab, Tempo Traveller, TATA Sumo etc... And also for purchase of new tractor, JCB, Crane etc., to be registered/registered as public transport vehicle for hire. The Maximum amounts of loan that can be provided under the scheme are mentioned below.
For a New Vehicle:

1. Maximum up to 85% of the invoice value excluding vehicle tax and charges towards Insurance, Permit etc. 2. For Body Building charges up to 75% of the quotation furnished by the vehicle body builders. For an old vehicle Regional office are permitted to sanction loan under the scheme for purchase of up to 5 years old vehicle. Up to 3 years old vehicle 30% margin on latest valuation has to be maintained. For 3 to 5 years old vehicle, 50% margin on the latest valuation has to maintain. The loan has to repaid within 84 months in case of Bus and Trucks and for others it is 60 months.
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KBL EASY RIDE

The scheme was formulated during October 2001 for the purchase of two wheelers. The loan scheme was introduced for the purpose of acquisition of new two wheelers of popular brand and make (such as Bajaj, Hero Honda, TVS, Kinetic, Honda etc.). 1. Maximum amount of loan that can be availed under this facility is 1. 15 times of net take home salary in the case of salaried persons, Or 2. Equivalent of annual gross income declared in the case of professionals / businessmen/ self-employed persons, or 3. Maximum up to 100% of the invoice value of the vehicle excluding Comp. Insurance, Road Tax and extra fittings 1, 2, and 3 whichever is less. However, the maximum amount of loan that can be considered as fixed at Rs. 75,000/- per borrower. The loan has to be repaid within a Maximum period of 60 months.
KBL- KRISHIK SARATHI SCHEME

The KBL- Krishik Sarathi Scheme was introduced for purchase of Farm machineries like Tractor/Power Tiller, Trailer/other implements, Harvester, Sprayer/ Duster/Other Farm Machineries and Farm vehicles by Agriculture. A Maximum amount of loan is up to 90% of the cost (excluding Tax, Registration & Insurance) of new farm Machinery/Vehicle Max Limit Rs. 10.00 Lakh. The loan amount has to be repaid within 9 years. In case of Tractor/combine in case of Power Tillers /Threshers its 7 years in case of other Implements /Machineries/ 2 wheelers its 5 years and in case of Farm Vehicles (4 wheelers) its 7 years.
KBL KRISHIK SICHANA SCHEME

The Purpose of the scheme is to provide for all types of Minor Irrigation development works like Purchase of oil engine/Electric Pump sets/Drip/Sprinkler/Other Irrigation Systems including purchase of pipes / Generators. / Repair or replacement of irrigation system/Generators, open well, Bore well, Tube well. A Maximum amount of up to 85% of the cost of new irrigation equipments or 60% of the Land value whichever is less. And Max. Limit being Rs.5.00lakhs. The loan amount has to be repaid between5-7 years.
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Competitors
THE MAJOR PLAYERS (INCLUDING PUBLIC, PRIVATE, AND FOREIGN SECTOR). 1. 2. 3. 4. 5. Public Sector Banks Bank of Baroda, State Bank of India, Canara Bank, Punjab National Bank, Allahabad Bank.
1. 2. 3. 4.
Private Sector Banks HDFC Bank, ICICI bank, Kotak Mahindra Bank, UTI Bank.
1. 2. 3. 4. 5.
Foreign Sector Banks Citi Bank, Standard Chartered PLC, HSBC Bank, ABN AMRO Bank, American Express.
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Sales (Rs.Million) 199282.12 259740.53 151548.06 Current Change Price (%) 437.60 721.95 878.50 -1.22 -0.71 0.60 P/E Ratio 22.83 14.54 9.60 Market Cap.(Rs.Million) 1024187.40 832073.92 362446.96 52-Week High/Low 520/396 1158/641 1461/810
Company HDFC Bank ICICI Bank Axis Bank Kotak Mahindra Bank Indusind Bank Yes Bank Centurion Bk of Punj Federal Bank ING Vysya Bank Karur Vysya Bank Bank of Raj J&K Bank South Indian Bank Standard Chartered City Union Bank Karnataka Bank Lakshmi Vilas Bank Devp Credit Bank Dhanlakshmi Bank
43035.58
456.70
-1.46
35.59
337578.56
515/333
35893.57 40417.47 12685.30 40520.28 26940.64
239.60 252.00 41.40 352.20 290.00
-2.22 -2.02 0.00 -1.99 -0.15
16.00 10.49 52.93 9.24 11.33
111829.03 88686.35 78932.68 60242.93 43459.66
292/181 341/234 43/41 477/326 390/275
22176.95 13594.89 37131.32 24460.17
345.45 212.10 692.25 20.55
-1.57 1.80 0.26 0.00
8.08 0.00 4.88 6.94
37039.49 34222.35 33558.76 23223.83
479/344 214/207 915/645 26/17
63524.25
75.20
-0.53
0.88
18048.00
135/69
12184.08
41.90
4.10
6.96
17068.19
51/36
23708.47
68.10
-1.66
5.82
12820.81
155/66
10648.36
83.45
0.91
7.62
8138.53
130/80
5362.62
34.60
-1.98
16.63
6930.61
66/33
9064.18
48.65
-0.61
15.83
4141.88
136/46
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Organisation structure
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Balance sheet of KBL Mar ' 11 Sources of funds Owner's fund Equity share capital Share application money Preference share capital Reserves & surplus Loan funds Secured loans Unsecured loans Total Uses of funds Fixed assets Gross block Less : revaluation reserve Less : accumulated depreciation Net block Capital work-in-progress Investments Net current assets Current assets, loans & advances Less : current liabilities & provisions Total net current assets Miscellaneous expenses not written Total 707.01 841.14 -134.13 11,517.74 653.80 1,130.12 -476.32 9,663.81 487.05 953.52 -466.47 8,633.50 430.11 801.83 -371.71 5,711.77 353.34 525.71 -172.38 4,982.61 328.91 183.38 145.53 11,506.34 313.85 165.77 148.08 9,992.05 292.41 153.92 138.49 8,961.49 261.65 141.88 119.77 5,963.71 235.50 128.68 106.82 5,048.16 188.20 2,240.89 133.99 1,698.76 121.58 1,445.44 121.35 1,258.25 121.35 1,117.27 Mar ' 10 Mar ' 09 Mar ' 08 Mar ' 07
27,336.45 23,730.65 20,333.29 17,016.19 14,037.44 29,765.53 25,563.40 21,900.31 18,395.80 15,276.06
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Capital structure (in crores) From Year To Year Class Of Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Equity Share Authorized Capital Issued Paid Up Capital Shares (Nos) Paid Up Face Value Paid Up Capital
2010
2011
200.00
188.22
188190652
10
188.19
2009
2010
200.00
134.00
133976322
10
133.98
2008
2009
200.00
121.60
121574878
10
121.57
2007
2008
150.00
121.40
121343548
10
121.34
2006
2007
150.00
121.40
121343548
10
121.34
2005
2006
150.00
121.40
121260348
10
121.26
2004
2005
150.00
121.40
121240348
10
121.24
2003
2004
50.00
40.48
40424716
10
40.42
2002
2003
50.00
40.48
40416966
10
40.42
2001
2002
20.00
13.51
13486222
10
13.49
2000
2001
20.00
13.51
13486222
10
13.49
1998
1999
20.00
13.51
13486222
10
13.49
1997
1998
20.00
13.51
13502772
10
13.50
1996
1997
20.00
13.51
13502772
10
13.50
1995
1996
20.00
13.50
13501310
10
13.50
1994
1995
20.00
4.50
4500000
10
4.50
1978
1979
1.00
0.50
250000
20
0.50
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SWOT Analysis 1. Strength Karnataka Bank Ltd. has posted a net profit of Rs.90.86 crore for the SIX months period ended September, 2011 as against Rs. 75.20 Crore as at 30.09.2010 showing a growth rate of 20.82%. The business Turnover of the bank has touched Rs. 47916 crore registering a growth of 17.65 % on a year-on-year basis. The deposit of the bank grew from Rs. 25045 Crore to Rs. 28849 Crore (15.19% increase) and advances grew from Rs. 15683 Crore to Rs. 19067crore (21.58 % increase). The half yearly Gross income of the bank has increased from Rs. 1248.74 Crore to Rs. 1609.22 Crore recording a growth rate of 28.87%. The operating profit of the Bank has increased from Rs. 151.11crore to Rs. 223.79 Crore showing a growth rate of 48.10%. The Net Interest Income has increased by 34.57% on a year-on-year basis to Rs. 335.33 Crore from Rs. 249.19 Crore. The capital adequacy ratio of the Bank stood at 12.85% (under Basel II) as at the end of September, 2011. The Bank has retained its "A1+" (pronounced as A one plus) Rating to its Certificate of Deposits programme of Rs. 2000 Crore. This rating is the highestcredit-quality rating assigned by ICRA to short term debt instruments. Instruments rated in this category carry the lowest credit risk in the short term. The Bank has a wide range of technology backed services such as MoneyplantTM International Debit Card, Internet banking facility, e-shopping, online railway ticket booking, VISA bill payment, etc.
2. Weakness Less reach across country in terms of ATMs, branches as compared to. Brand visibility is less due to lack of advertising.
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3. Opportunities The Bank has its presence in 20 States and 2 Union Territories of the country has 486 Branches and 299 ATMs as on date. The Bank has plans to increase the number of branches to above 500 and take the tally of its ATMs to 325 by March 2012. All the 486 branches have been networked under core banking solution covering 100% business. The Bank is tech savvy and is keen on upgrading its technology-driven offerings periodically to meet the varying needs and demands of its clients and be at par with other leading private and public sector banks in the country. The Bank by networking all its branches under Core Banking solution is offering Anytime Anywhere banking facility to its customers. The Bank has introduced a slew of new products which include Point of Sale (POS) terminal facility also. The Bank has a strategic tie up with M/s Way2Wealth Brokers Pvt. Ltd. for providing Online Trading facility. Way2Wealth Online trading platform is available to the Karnataka Bank's account holders. It will enable the customers of the bank to trade from any Internet-enabled location. Bank has bagged the Best Bank Award for "Managing IT Risk" under small bank category for the year 2010-11, instituted by Institute for Development and Research in Banking Technology (IDRBT). This is for the second consecutive year that the Bank has won the award. The Bank had bagged "Special Award for use of IT for Internal effectiveness" for the year 2009 instituted by IDRBT. The Bank which is tech savvy is the first private sector bank to have introduced core banking solution way back in 2000. The Bank which has adopted "FINACLE" designed and developed by the IT major Infosys Technologies has networked all its existing 483 branches thereby ensuring Anywhere Anytime banking facility to its customers. The Bank proposes to introduce Gift card, Travel card and ASBA (Application Supported by Blocked Amount) facilities for its customers during the current financial year.
4. Threats Economic slowdown Highly competitive environment Stringent Banking Norms.
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DATA ANALYSIS AND INTERPRETATION
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1.0 Analysis on the basis of Type of business:
This data analysis was made to find out what types of business are they currently running i.e. the nature of business they are running and the activities they are into.
SPECIFICATIONS MANUFACTURING TRADING DISTRIBUTION OTHERS
REPONDENTS 13 28 08 01
% 26% 56% 16% 02%
ANALYSIS
According to this table we came to know that majority of the business concerns are trading businesses. The next highest is the manufacturing businesses and remaining consists of distributing firms and others like (professionals).It is represented graphically:
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Type of business
OTHERS 2%
DISTRIBUTION 16%
MANUFACTURI NG 26%
TRADING 56%
INTERPRETATION The above graph shows that majority of the business concerns who have borrowed loans from the bank are trading based companies (56%). This shows the market side of the business loan category. The manufacturing units or concerns are next to follow (26%) followed by the firms who involve in distribution activities. Others (2%) refer to private agencies etc.
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1.1 Analysis on the basis of form of business:
This data analysis was made to find out what form of business are they currently running i.e. the ownership pattern of business they are running.
SPECIFICATIONS SOLE PROPRIETORSHIP PRIVATE LTD PARTNERSHIP PUBLIC CO
% 56% 06% 36% 02%
ANALYSIS
According to this table we came to know that majority of the business concerns are single or sole proprietorship businesses. The next highest partnership businesses and remaining consists of private and public limited companies. It is represented graphically:
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Form of business
PUBLIC CO 2%
PARTNERSHIP 36%
SOLE PROPRIETORSHI P 56%
PRIVATE LTD 6%
INTERPRETATION The above graph shows that most of the companys ownership patterns are based on sole proprietorship i.e. single ownership led company (56%). The next highest are the partnership based company (36%). The least of the sample indicates the private and public limited companies.
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1.2 Analysis on the basis of term of the business:
This data analysis was made to find the term of the business i.e. the duration through which the business has been running.
SPECIFICATIONS < 3 YEARS 3 5 YEARS 5 10 YEARS ABOVE 10 YEARS
% 10% 38% 36% 16%
ANALYSIS
According to this table we can infer that there is narrow gap in the sample size between the business concerns running from (3 5 years and 5 10 years). And the business running from past ten years are in minority. It is represented graphically:
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Term of the business
< 3 YEARS 10% ABOVE 10 YEARS 16%
5 10 YEARS 36%
3 5 YEARS 38%
INTERPRETATION From the above graph we can say that business concerns running from 3-5 years and 5-10 years are in majority of the sample collected. The minority percentage is gained by the business concerns whose life span is less than 3 years.
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1.3 Analysis to find out the purpose for borrowing the loan:
This data analysis is made to find out the various purposes for which the business loan has been availed by the business concern.
SPECIFICATIONS STARTING NEW BUSINESS EXPANSION RUNNING CURRENT BUSINESS OTHERS
REPONDENTS 07 12 29
% 14% 24% 58%
02
04%
ANALYSIS
According to the table we can conclude that majority of the sample size borrow loans for the purpose running current business i.e. day to day business transactions, working capital etc. Funds are also borrowed for the purpose of expanding the business. It is represented graphically:
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Purpose for borrowing loan

OTHERS 4%
STARTING NEW BUSINESS 14%
EXPANSION 24% RUNNING CURRENT BUSINESS 58%
INTERPRETATION
From the above graph we can say that more than half of the majority (58%) borrows business loans for the purpose of running current business activities. The next highest percent is used for expanding the scale of business and the remaining is distributed for starting up of a new business and other purposes like modernisation, new product line (diversification).
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1.4 Analysis to find out about the amount of loan borrowed:
This data analysis is made to find out the limit of loan borrowed by the business concern from the bank.
SPECIFICATIONS 10 30 LAKHS 30 60 LAKHS 60 90 LAKHS 1 CRORE AND ABOVE
% 40% 32% 06% 22%
ANALYSIS
According to the table we came to the conclusion that most of the business concerns have borrowed smaller limit of loan (10 30 Lakhs). And there is a moderate borrowing in the range from (30 60 Lakhs).and there is also a high percentage of borrowers who have borrowed more than one Crore. It is represented graphically:
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Amount of Loan borrowed
1 CRORE AND ABOVE 22% 10 30 LAKHS 40%
60 90 LAKHS 6%
30 60 LAKHS 32%
INTERPRETATION
From the above graph we can infer that majority of the sample size are borrowers who have borrowed mostly from the range of 10 60 lakhs. There is also a high percentage of borrowers who have borrowed from the range of 1 Crore and above.
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1.5 Analysis on the basis of type of business loan borrowed:
This data analysis was made to find what kind of business loan is borrowed by the business concern.
SPECIFICATIONS CASH CREDIT/ OVERDRAFT TERM LOAN BANK GUARANTTEE LETTER OF CREDIT
% 54% 24% 12% 10%
ANALYSIS
According to this table we can conclude that majority of the survey have opted for overdraft facility. After the overdraft majority prefer to borrow term loan. While only a minority of the sample prefer bank guarantee and letter of credit. It is represented graphically:
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Type of business loan borrowed
LETTER OF CREDIT 10% BANK GUARENTTEE 12%
TERM LOAN 24%
CASH CREDIT/ OVERDRAFT 54%
INTERPRETATION
According to the above graph the majority of the borrowers opt for overdraft/cash credit facility because it is short term in nature and fund can be raised in quick time. Business concerns also prefer to go for term loan because of the fixed time periods of payments and fixed interest rates.
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1.6 Analysis on the basis of time taken to process the loan:
This data analysis was made to find the total time taken by the bank to analyse, process, and sanction the loan to the business concern.
SPECIFICATIONS <1 WEEK 1 WEEK FORTNIGHT FORTNIGHT 1 MONTH 1 MONTH AND ABOVE
% 04% 22% 40% 34%
ANALYSIS
According to the table we can say that majority are of the opinion that it takes a fortnight to a month to process and sanctioning of the loan. The latter feel that it takes 1 week to fortnight to process the loan, while others feel that it takes more than a month to process the loan. It is represented graphically:
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Time taken to process the loan

<1 WEEK 4%
1 MONTH AND ABOVE 34%
1 WEEK FORTNIGHT 22%
FORTNIGHT 1 MONTH 40%
INTERPRETATION
According to the above graph we can infer that majority of the customers think that the time taken by the bank to process the loan is fortnight to a month while the next higher majority feels that the bank takes more than a month to process the business loan.
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1.7 Analysis on the basis of opinion on interest charged :
This data analysis was made to find what the customers think about the interest rate that is charged to them in comparison to other banks and the current market trend.
SPECIFICATIONS VERY HIGH HIGH MODERATE LOW
% 06% 36% 52% 06%
ANALYSIS
According to this table we came to know that majority of the business concerns think that the interest rate charged to them is moderate. The next higher majority says that the interest rate charged by the bank is quite high. While only a minority thinks that the interest rate is very high. It is represented graphically:
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Opinion on interest rate charged

VERY HIGH 6% LOW 6%
HIGH 36% MODERATE 52%
INTERPRETATION
The above graph shows that more than half of the total sample thinks that the sample rate charged by the bank is moderate when compared to other banks. The next opinion says that the interest rate charged is high followed by those concerns who feel the interest rate is quite low. The least of the sample size shows that the concerns feel that the interest rate is very high.
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1.8 Analysis on the basis of type of security mortgaged:
This data analysis was made to find the type of property mortgaged as security in order to obtain the loan.
SPECIFICATIONS VACANT LAND RESIDENTIAL PROPERTY COMMERCIAL PROPERTY INDUSTRIAL PROPERTY PLEDGE OF DEPOSITS
RESPONDENTS 08 09 17 13 03
% 16% 18% 34% 26% 06%
ANALYSIS
According to the table majority of the business concerns while obtaining a particular business loan keep commercial property as security. The next higher percentages of customers keep industrial property as security. It is represented graphically:
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Type of propert motgaged as security

DEPOSITS 6%
VACANT LAND 16% INDUSTRIAL PROPERTY 26%
RESIDENTIAL PROPERTY 18%
COMMERCIAL PROPERTY 34%
INTERPRETATION
From the above graph we can conclude that most of the customers have pledged their commercial property as security to obtain the loan, while few others have pledged the securities in the form vacant land, industrial property, residential property, and pledging of deposits.
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1.9 Analysis on the basis of reason for borrowing the loan from KBL:
This data analysis was made to find the reason for which the particular business concern has borrowed the loan from Karnataka Bank Limited.
SPECIFICATIONS RATE OF INTEREST SERVICES PROXIMITY OF BRANCH OTHERS
% 40% 40% 16% 04%
ANALYSIS
According to this table we can say that the majority of business concerns prefer to borrow business loans from KBL because of the rate of interest offered by the bank and quality of service provided by them. It is represented graphically:
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Reason for borrowing the loan from KBL

OTHERS 4%
PROXIMITY OF BRANCH 16% RATE OF INTEREST 40%
SERVICES 40%
INTERPRETATION
From the above graph we can infer that majority of the customers of KBL appreciate the bank for the quality of the services provided by them and the rate of interest. While the minority states that proximity or availability of various branches as the reason to opt for KBL.
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2.0 Analysis on the basis of duration for which the business concern has been availing the services of KBL:
This data analysis was made to find out the duration for which the particular business concern has been availing the services of Karnataka Bank Limited.
SPECIFICATIONS < 1 YEAR 1 5 YEARS 5 10 YEARS ABOVE 10 YEARS
% 08% 30% 46% 16%
ANALYSIS
According to the table we can state that majority of the customers have been with the bank and availing its services from past 5-10 years. And the next higher percentage state that their relationship with the bank has been there from past 1-5 years. It is represented graphically:
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Duration with KBL
< 1 YEAR 8% ABOVE 10 YEARS 16%
1 5 YEARS 30%
5 10 YEARS 46%
INTERPRETATION
From the above graph we can infer that majority of KBLS customers have been with them from past 5-10 years. There is also a significant percent of customers (16%) who have been availing the services of the bank since more than 10 years.
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2.1 Analysis on the basis of sources of loan awareness:
SPECIFICATIONS FRIENDS/RELATIVES PRINT MEDIA COLLEAGUES BANK OFFICIALS
% 40% 30% 14% 16%
ANALYSIS
According to the table majority of the information about the business loan has been obtained from friends and relatives (informal circle) and the next higher percentage indicates that information is obtained from print media. It is represented graphically:
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Sources of loan awareness
COLLEAGUES 14% PRINT MEDIA 30%
FRIENDS/RELATIVES
40%
BANK OFFICIALS 16%
INTERPRETATION
The above graph shows that around 40% of the information about the loan has been obtained from friends and relatives; the next medium through which information about the loan is obtained is from print media. Print media refers to news papers, journals, magazines, pamphlets etc. There is a small gap of 2% between the colleagues and bank officials. Bank officials refer to interaction of the borrowers with the banks authority.
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2.2 Analysis to find out the opinion about the banks post loan services:
This data analysis was made to find what the customers think about the post loan services provided to them by the bank in comparison to other banks and the current market trend.
SPECIFICATIONS EXCELLENT GOOD AVERAGE POOR
PERCENTAGE 20% 52% 24% 06%
ANALYSIS
According to the table we came to the conclusion that more than half of the sample size say the post loan services of the bank has been good and up to the mark. And 20% of the business entities say that the post loan services of the bank has been excellent. A few of them suggest certain major changes and grade the post loan services as average. It is represented graphically:
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Sources of loan awareness

POOR 6% EXCELLENT 20% AVERAGE 23%
GOOD 51%
INTERPRETATION
From the above graph we can infer that more than half of the sample size (51%) has an opinion that the post loan services of the bank has been good and a fair percent of customers say that the post loan services of the bank has been excellent (20%) therefore we can infer that majority of the customers are satisfied and have given a positive feedback about the banks post loan services.
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2.3 Analysis to find the special features that the business concerns look forward to in a financing institution:
This data analysis was made to find out the ideal features that the business concerns desire/ look forward to in a firm that is providing those funds and various other services relating to it.
SPECIFICATIONS RESPONSIVENESS INTEREST RATE QUICKNESS OTHERS
PERCENTAGE 28% 52% 16% 04%
ANALYSIS
According to the table we can state that customers (business concerns in particular) look for financing institutions which provide lower interest rate. The other main features are responsiveness, quickness in solving problems, and other factors. It is represented graphically:
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Features of ideal financing institution

OTHERS 4%
QUICKNESS 16% RESPONSIVENES S 28%
INTEREST RATE 52%
INTERPRETATION
From the above graph we can state that borrowers look for financing firms which offer low interest rates compared to other banks, the next feature they look for is the responsiveness of the institution to the queries of the customers.
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2.4 Analysis to find out whether the existing customers would like to continue their relationship with the Bank:
SPECIFICATIONS YES NO
REPONDENTS 44 06
PERCENTAGE 88% 12%
ANALYSIS
According to the table we can tell that almost the mass of the sample size (88%) would like to continue the relationship with the bank. And only a negligible part of the sampled survey would not like to continue their relationship with the bank. It is represented graphically:
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OPINION ABOUT CONTINUING THE RELATIONSHIP WITH THE BANK

NO 12%
YES 88%
INTERPRETATION
From the above graph we can infer that the mass percent of the sample (88%) are happy with services, interest rate, post loan services, availability, and responsiveness of the bank and therefore they would like to continue with the bank.
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FINDINGS, CONCLUSIONS AND SUGGESTIONS.
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FINDINGS: 1. Majority of the customers of KBL are firms doing Trading activities. 2. Most of the business concerns are incorporated in the form of sole proprietorship. 3. Generally the duration of the business which has borrowed loans are from 3 5 years. 4. The main purposes for which the business concerns borrow loans are for carrying out day to day business operations, working capital. 5. The amount of loan borrowed varies in the range of 10 30 Lakhs. 6. Majority of the business concerns opt for overdraft/cash credit facility. 7. According to the customers it takes a period of a fortnight to a month to process and sanction the loan. 8. The majority of the customers feel that the interest rate charged by KBL is moderate. 9. Most of the business entities pledge their commercial property as security in order to obtain loan. 10.The customers state that the reason to borrow the loan from KBL is because of quality of service and interest rate. 11.Majority of business concerns are availing the services of KBL from past 5 10 years. 12.The sources of loan awareness are friends and relatives.
13.Majority of the customers state that KBL is good in providing the post loan services and facilities. 14.The most special feature which a business concern looks for in a financing institution is the interest rate (low). 15.Majority of the customers (88%) would like to continue their relationship with bank.
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CONCLUSION:
I would like to conclude by stating that Karnataka Bank Limited which is one of the oldest banks in south India has a strong base and foothold in the banking industry.
The customer care centre takes care of all the queries and problems of the customers within a short period of time. The customers of KBL are very happy with the quality of services and the interest rate charged by them.
The business loan processing is done by highly qualified personnels and depending upon the limit of loan the interest rate is set by the bank. And the loan processing is also carried out effectively and time to time reporting is done by the subordinates to the superiors.
Customers as of today would opt for quality services rather than only interest rate and some of the KBL customers are so loyal that even though a better rate of interest is provided to them they would not like to shift or move away from KBL.
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SUGGESTIONS: As I would suggest is that 1. Since private sector banks are capturing the customers/ taking over the accounts based on better interest rates hence better measures are to be taken in order to maintain the firm relationship with the customers. 2. Promoting the business loans and the facilities through various mediums like news paper ads, television commercials, hoardings since the private sector banks are able to pull the market through these methods. 3. KBL can improve its business loan customer database through network relationship i.e. we have seen in the above findings that loan awareness is made through friends, relatives, colleagues so if current customer network is strong then capturing a new market would be less difficult.
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BIBILOGRAPHY: Books: Journals published by KBL, Broachers, Pamphlets, Magazines.
Internet: www.businessloansindia.com www.google.com www.wikipedia.com/businessloans www.karnatakabank.com
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ANNEXURE
I am VIGNESH HOLLA P.S, studying BBM, student of PES, as a part of curriculum; I am carrying out a Project titled A STUDY ON BUSINESS LOANS AT KARNATAKA BANK LIMITED with reference to Karnataka Bank Ltd. I would be grateful if you could spare some time in filling this questionnaire. I further declare that whatever information would be given by you will be kept strictly confidential and will be used for academic purpose only.
1. Business name: 2. Business type: a)Manufacturing c) Trading b) Distribution d) others (specify)
3. In what form is your business incorporated? a) Sole proprietorship c) Partnership e) Others b) Public Ltd d) Private Ltd
4. Since how long business is being run? a) < 3 years c) 5-10 years b) 3-5 years d) above 10 years
5. What is the purpose for which you have borrowed the loan? a)Starting a new business c) Running current business b) Expansion d) others
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6. What is the amount of loan borrowed? a)10 30 Lakhs c)60 90 Lakhs b)30 60 Lakhs d) above 1 Crore
7. What kind of business loan have you borrowed? a)Overdraft/cash credit c)Bank guarantee b)Term loan d)Letter of credit
8. How long did it take to process the loan? a)<1 week c)Fortnight- 1month b)1 week- fortnight d)above 1 month
9. What do you think of the interest charged on the said loan?
a) Very High c) Moderate
b) High d) Low
10. What kind of security have you mortgaged to avail this business loan? a) Vacant land c) Commercial property e) Pledge of deposits. b) Residential property d) Industrial property
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11. What is the reason for borrowing the loan from KBL? a) Rate of interest c) Proximity of branch b) Services d) others (specify)
12. Since how long have you been availing the services of KBL?
a)< 1 year c)5-10 years
b)1-5 years d) above 10 years
13. Which among these have been the sources of loan awareness?
a) Print media c) Colleagues
b) Bank officials d) Friends
14. How effective has Karnataka Bank been in post-loan servicing?
a) Excellent c) Average
b) good d) Poor
15. What are the special features of your financed organisation? a)Responsiveness c)Quickness b) interest rate d) others
16. Continue relationship with the bank a) Yes b) No
---------------------THANK YOU----------------------
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81

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A STUDY ON BUSINESS LOANS AT KARNATAKA BANK LTD

A STUDY ON BUSINESS LOANS AT KARNATAKA BANK LTD

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A STUDY ON BUSINESS LOANS AT KARNATAKA BANK LTD

A STUDY ON BUSINESS LOANS AT KARNATAKA BANK LTD

A STUDY ON BUSINESS LOANS AT KARNATAKA BANK LTD

A STUDY ON BUSINESS LOANS AT KARNATAKA BANK LTD

A STUDY ON BUSINESS LOANS AT KARNATAKA BANK LTD

A STUDY ON BUSINESS LOANS AT KARNATAKA BANK LTD

A STUDY ON BUSINESS LOANS AT KARNATAKA BANK LTD

A STUDY ON BUSINESS LOANS AT KARNATAKA BANK LTD

A STUDY ON BUSINESS LOANS AT KARNATAKA BANK LTD

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A STUDY ON BUSINESS LOANS AT KARNATAKA BANK LTD

A STUDY ON BUSINESS LOANS AT KARNATAKA BANK LTD

A STUDY ON BUSINESS LOANS AT KARNATAKA BANK LTD

A STUDY ON BUSINESS LOANS AT KARNATAKA BANK LTD

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A STUDY ON BUSINESS LOANS AT KARNATAKA BANK LTD

A STUDY ON BUSINESS LOANS AT KARNATAKA BANK LTD

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A STUDY ON BUSINESS LOANS AT KARNATAKA BANK LTD

A STUDY ON BUSINESS LOANS AT KARNATAKA BANK LTD

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A STUDY ON BUSINESS LOANS AT KARNATAKA BANK LTD

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A STUDY ON BUSINESS LOANS AT KARNATAKA BANK LTD

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35893.57 40417.47 12685.30 40520.28 26940.64

239.60 252.00 41.40 352.20 290.00

-2.22 -2.02 0.00 -1.99 -0.15

16.00 10.49 52.93 9.24 11.33

111829.03 88686.35 78932.68 60242.93 43459.66

292/181 341/234 43/41 477/326 390/275

22176.95 13594.89 37131.32 24460.17

345.45 212.10 692.25 20.55

-1.57 1.80 0.26 0.00

8.08 0.00 4.88 6.94

37039.49 34222.35 33558.76 23223.83

479/344 214/207 915/645 26/17