Dear Esteemed Stakeholders,
The year gone by your Bank completed the momentous milestone of a centenary of its
existence and operations. I reflect with profound gratitude to the vision of the founders,
who established Karnataka Bank on February 18, 1924. In the midst of India's independence
movement, their foresight and commitment laid a foundation of trust and resilience. From
our humble beginnings in Mangaluru, we have grown into a pillar of financial stability and
innovation, a testament to their enduring legacy.
Centenary Year: Foundations of Trust
Our centenary celebration was not merely a retrospective; it was a forward-looking
endeavour that married our rich heritage with our aspirations for the future. This
landmark year was marked by several significant initiatives that honour our history and
demonstrate our commitment to innovation and growth. We have inaugurated a centenary
building, complete with a museum that chronicles our storied past. Additionally, we issued
commemorative coins and stamps, symbolising our enduring legacy and commitment to
preserving our cultural roots.
As we celebrate our glorious past, we are also advancing towards future growth through
strategic initiatives focused on digital transformation, customer-centric models, and
innovative banking solutions. These efforts are designed to enhance operational
efficiencies, expand our service offerings, and enrich customer experiences in an
increasingly dynamic financial landscape. As we traverse this route between honouring our
past with our ambitions for the future, The Karnataka Bank remains steadfast in its
mission to lead with integrity, resilience, and foresight.
During the year gone by there has been a successful transition to a new MD& CEO. We
have also recruited laterally from the market to fill skill gaps and to take advantage of
the emerging scenarios in the Banking Industry. The organisational structure has been
redesigned to enable the Bank to be nimble and take advantage of the emerging
opportunities.
Navigating the Global Economic Landscape
The global economic landscape in the coming year presents a mix of challenges and
opportunities. While there are signs of improvement in near-term prospects, growth remains
subdued by historical standards. Factors such as geopolitical tensions, trade
fragmentation, sustained high interest rates, and climate-related disasters continue to
pose significant challenges. These conditions test the ability of Banks to generate income
and manage costs in unprecedented ways.
In India, however, the outlook is more optimistic. Supported by robust macroeconomic
indicators, the Reserve Bank of India's (RBI) recent report as of March 2024 highlights
strong capital ratios and minimal nonperforming assets among scheduled commercial Banks.
The positions of the Indian Banks favourably to support economic growth and infrastructure
development. The Karnataka Bank is well- poised to capitalise on these strengths,
emphasising digital transformation and customer-centric innovation to ensure sustained
growth and financial stability.
Commitment to Governance and Risk Management
Risk Management: Enhancing Strategies and Systems
We have significantly advanced our risk management framework, integrating several new
strategies to bolster our financial stability and mitigate potential threats. To ensure
more prudent lending practices, the Bank enhanced its credit risk assessment tools and
leveraged advanced technologies. Our centralised risk management functions have markedly
improved oversight and efficiency across our operations.
Our proactive use of data analytics allows us to identify and mitigate risks more
effectively while maintaining strong capital adequacy ratios to absorb potential losses
and ensure continued financial soundness.
Asset Quality and Financial Risk Mitigation
Maintaining asset quality and mitigating financial risks remain paramount for our
institution.
Stringent credit assessment procedures ensure prudent lending, with focus on
diversifying our loan portfolio through the Retail and MSME sectors. Regular portfolio
reviews and robust provisioning practices are in place to address potential issues
proactively and ensure financial stability.
To manage credit risks, we have formulated a comprehensive Policy on Loans &
Advances, incorporating various risk parameters and prudential limits. Regular credit
audits and stock audits of large credit exposures help limit the magnitude of credit and
interest rate risks. Our dedicated Credit Monitoring Department (CrMD) and regional
collection hubs ensure efficient post-sanction monitoring and collection activities.
Advanced tools such as behavioural and early warning systems (EWS) help us identify and
prioritise collection activities, maintaining a strong handle on asset quality.
Governance: Strengthening Frameworks and Practices
Over the past year, we have fortified our governance framework to address the unique
challenges and opportunities in the banking sector. Enhancements include advanced
technological solutions, improved compliance integration, and adherence to RBI, IRDAI, and
SEBI guidelines. These measures ensure a resilient and agile response to industry demands.
We have introduced new governance practices to enhance transparency and accountability,
compliance monitoring systems, increased frequency of internal audits, and improved
reporting mechanisms to stakeholders. Our governance philosophy, rooted in sound ethical
values, drives us to achieve excellence in corporate governance.
We have meticulously enriched our board composition to include distinguished experts in
digital banking, regulatory compliance, financial technology, and cybersecurity. This
strategic diversification bolsters our board's capability to navigate the intricacies of
modern banking, thereby ensuring informed decisionmaking. To further amplify the board's
efficacy, we have instituted specialised committees, undertaken comprehensive performance
evaluations, and organised intensive training sessions focused on emerging banking trends
and evolving regulatory changes. Our commitment to continuous education, upskilling,
active participation in industry forums and consistent updates from our compliance and
risk management teams ensures that our board remains exceptionally well-versed in the
current dynamics and regulatory requirements of the industry.
Fostering Inclusive Growth Through CSR
At Karnataka Bank, our Corporate Social Responsibility (CSR) initiatives reflect our
commitment to creating a positive social impact and fostering inclusive growth. We have
strategically designed our CSR programmes to address a wide spectrum of societal needs,
focusing on healthcare, education, livelihood enhancement and the empowerment of women and
socially and economically disadvantaged communities. Our efforts in environmental
sustainability, the protection of heritage and culture, promotion of sports, rural
development, and the Swachh Bharat mission underscore our dedication to holistic societal
development.
Bank's Contribution of Rs. 18.41 crore under CSR was allocated to Education: 41.97%,
Healthcare: 16.75%, Environmental Sustainability/Green Initiatives: 6.20% and Other
initiatives: 35.08%. These initiatives are instrumental in enhancing financial inclusion
and supporting economic empowerment.
Looking Ahead: Sustainability and Innovation
Our journey forward is guided by a strong commitment to sustainability and ethical
governance. Karnataka Bank has made significant strides in advancing its sustainability
and ESG initiatives. We have seamlessly integrated these principles into our operations,
reflecting our commitment through various strategic projects and partnerships.
Our participation in the National Jan Samarth portal and the RBI's Central Bank Digital
Currency (CBDC) platform highlights our dedication to digital innovation and sustainable
banking practices. We have also progressed in collecting statutory tax payments such as
Customs Duty and Goods & Services Tax (GST) for the Central Board of Indirect Taxes
and Customs (CBIC) and Direct Tax (Income Tax/ Advance Tax) for the Central Board of
Direct Taxes (CBDT). These efforts streamline financial processes and underscore our role
as a top government collection Bank.
Our future goals for ESG include continuing to integrate digital solutions for
statutory payments, enhancing our sustainable banking practices and expanding our role
through various state-level treasury integrations. We are committed to supporting students
through career development and skill development initiatives under CSR programmes and
expanding our geographic reach to impart financial literacy and extend banking services to
rural unbanked areas.
Gratitude and Commitment: Our Journey Forward
In closing, I extend my deepest gratitude to you, our esteemed stakeholders. Your trust
and confidence in our abilities, and loyal support have been the driving force behind our
success. As we stand at the cusp of a new era, our commitment to you, supported by our
rich heritage and our dedication to a sustainable future is stronger than ever, renewed
with fresh passion and purpose. Together, we can navigate a promising future.
At Karnataka Bank, we remain committed in our mission to integrate digital solutions,
enhance sustainable banking practices and expand our reach to serve the unbanked and
underbanked populations. With your continued support, we look forward to achieving new
milestones and contribute to the overall development of the society.
Thank you for being an integral part of our journey.
Warm regards,
P Pradeep Kumar Non-Executive Chairman