Banking on peoples’ trust

With a share capital of Rs 10,000 a century ago, Canara Bank now boasts of $2 billion market capitalisation and is one of the leading financial powerhouses in the country. Yet, the Bank has remained steadfastly committed to the service of the community

“A GOOD bank is not only the financial heart of the community, but also one with an obligation of helping in every possible manner to improve the economic conditions of the common people.” This sounds like a mission statement of a bank chairman in present day India. Surely it is from a banker, but the important difference is that he made this the motto of his bank 100 years ago when it was founded in a small village Dongerkery (now part of Mangalore city) in coastal Karnataka. The man we are referring to is Ammembal Subba Rao Pai, the founder of Canara Bank, today the third largest public sector bank in the country with a total business volume of Rs 157,329 crore.

To describe Subba Rao Pai as just another banker would undermine his stature. As a practicing lawyer, Pai had several advantages, having secured BA and BL degrees, both with top ranks, from the prestigious Madras University. His conception about Canara Bank was with regard to a moral mission and not to make money.

History

Very early part of the century, there was only a branch of Madras Bank, a British Bank, in Mangalore, considered as a rich man’s bank, charging exorbitant interest rate and employing only British officers. Only the clerks and peons were Indians! It lent money only to bigger traders or merchants. The smaller traders who required only a few hundreds or, at the most few thousands could approach only the money lenders, who charged exorbitant rates of interest.

Pai saw this as a total disgrace and wanted to start a bank which would give the opportunity for Indians to occupy top positions. That he achieved this goal is a compliment to his genius though he did not live long to see the meteoric rise of Canara Bank into a financial behemoth.

Earlier, in 1894, some lawyers in Madurai along with some merchants had formed the Madurai Hindu Permanent Fund Ltd, which by 1904 had been doing very well. It was this Fund that served as a model to the Canara Hindu Permanent Fund Ltd.

The journey

Little did Subba Rao Pai know in 1906, when he started ‘Canara Hindu Permanent Fund’ (original name of the bank) that it would last for 100 years and grow to become one of India’s finest commercial banks. Canara Bank entered into its centenary year on July 1, 2005. From a tiny seed sown in Mangalore, the bank has grown into a mighty Oak tree with branches spread literally all over India and across the shores of the country.

Starting with a staff of four and one branch, it today employs over 47,500 men and women and serves 2.6 crore customers through 2,513 branches across the country. It has emerged more than just a nationalised bank. It is truly a national institution.

What the bank’s founder A Subba Rao Pai, an eminent educationist, philanthropist and a social reformer, had in mind was service to the community. That has been the philosophy of the bank since July 1, 1906 when it was founded. True to its mission statement: “Serving to grow, growing to serve”, Canara Bank has emerged as the leading financial supermarket in India with a wide array of financial products for all sections of the society.

Initial share capital

From a meagre share capital of Rs 10,000, a handful of deposits of Rs 40,000 and advances of Rs 80,000, the bank has grown manifold to reach a deposit base of Rs 96,908 crore and advances of Rs 60,421 crore as on March 31, 2005. The total capital has increased to Rs 410 crore.

The global business of the bank has grown to Rs 1,57,329 crore. Its net profit stood at Rs 1,110 crore for the year 2004-05.

With $2 billion market capitalisation, Canara Bank has succeeded in scaling up its international operations significantly. Now, it is the fourth largest bank in the country under cross border trade and remittance business. Its foreign business turnover aggregated Rs 84,517 crore as on March 31, 2005. Canara Bank’s share of deposits among all the public sector banks in the country stands at 5.69 per cent, while the Bank’s share of total public sector advances is at 5.60 per cent during FY05.

The path taken

Canara Bank’s significant growth process is attributed to a host of success factors, the starting point of which is the strong belief in teamwork and team motivation. There are indeed certain core competencies, which have been instrumental in taking the bank to unprecedented heights. These include total commitment to clients, a committed workforce, scientific systems and procedures, a comprehensive risk management mechanism, pursuit of relationship banking, technological capabilities and, most importantly, outward and pro-active orientation to the forces of change coupled with strategic planning process, says its Chairman and Managing Director M B N Rao.

Imbued with a distinct culture of its own, the Bank has withstood the demands of time and maintained its intrinsic strength and cohesion. It has, over the years, taken into its fold 11 banks to grow as a banking behemoth.

The initial public offer of the bank in November 2002 was another milestone that served as a precursor to many more highs the Bank could attain under major business and efficiency parameters.

Thrust on social sector

Following the footsteps of Ammembal Subba Rao Pai to improve “economic conditions of the common people” the Bank has initiated several socio-economic measures. Its priority sector domain encompasses loans to agriculture sector, SSIs, weaker sections, minority communities and a host of other priority sectors. Furtherance of education has also been uppermost in the Bank’s agenda. Besides, the Bank has actively participated in various government sponsored programmes and the highly successful Kisan Credit Card Scheme.

The Bank’s contribution in the self-employment promotion has been a notch above the rest. Self-employment training institutes, promoted by the Bank all across the country, do have an impressive settlement record, providing employment for the talented youth, especially in the countryside. The Bank has also been furthering entrepreneurship development among the women through consultancy, training, marketing and financial support. Till now it has financed 52,300 self-help groups.

Financial supermarket

Canara Bank today functions as a financial supermarket with its seven subsidiaries in the fields of home finance, venture fund, investment management, etc, providing a wide range of services to its diverse clientele. The Bank, over the last 100 years has launched several innovative retail schemes to meet the different needs of wide cross sections of the society. Within the core business, retail business accounts for a major share under new services and level of advances. Recent schemes launched in the retail arena include Canjewel, Cantech and Cantravel, suited to niche segments.

For the year 2004-05, retail disbursal amounted to Rs 6,015 crore, taking outstanding retail loans to Rs 11,277 crore, forming 18.45 per cent of the Bank’s net credit.

The Bank has also made forays into new areas in recent years. Under bancassurance, it has tied up with Aviva Life Insurance Company (India) Pvt Ltd in the life segment and with United India Insurance Company Ltd in the non-life segment. It has also entered mutual fund business by cross selling schemes of mutual fund majors.

Technology initiatives

The Bank has not lagged behind in embracing the technology in its operations. All of its branches have been computerised. About 1,471 branches have been fully computerised and 1,041 partially computerised. After its first ATM was commissioned in 1987, the number now has gone up to 710. It has 762 branches under Internet and mobile banking service covering 165 locations, while number of branches providing ‘Anywhere banking’ services increased to 901, covering 200 centres.

Future plans

Canara Bank plans to achieve a business of Rs 1,82,000 crore comprising of Rs 1,10,000 crore deposits and Rs 72,000 crore advances during 2005-06. Advances growth will be driven by renewed focus on the retail and agriculture sectors. ATMs strength is targeted to reach 1,000 by March 2006 while Anywhere Banking and Internet & Mobile Banking will be extended to 1,000 branches each.

The bank also plans to open a representative office in China and convert its representative office in Hong Kong into a branch and also open branches in South Africa, North America and the Middle East countries.

The Bank is also looking out for merger and acquisitions in the days to come. It is also planning to merge the regional rural banks sponsored by the bank in various states during the current fiscal.

Centenary celebrations

To mark its centenary celebrations, Canara Bank is launching a Rs 20 crore year long programme targeting wide ranging customers including senior citizens, students, artisans and farmers.

During the centenary celebrations inaugurated by Union Finance Minister P Chidambaram at a glittering function on Friday (July 1, 2005), the bank introduced Canrelax, the annuity scheme for the aged people that will guarantee monthly income on a deposit of Rs 100,000 and more, with the principal and cumulative interest calculated at bank rates.

“With about 50 per cent of the population below 25 years, the number of senior citizens has been growing across the country. In the absence of an organised pension scheme for the aged population, Canrelax will provide assured income on five or 10 year period,” Mr Rao said.

The bank also launched ‘Cantools’, a separate scheme for artisans and ‘Canproduce’ for improving the income levels of farmers. As part of its social commitment, the bank will adopt one village each in 23 lead districts across the country during the current fiscal year (2005-06) to improve infrastructure facilities at an estimated cost of Rs 5 crore.

The Bank is also instituting awards for outstanding people engaged in social activities, conduct symposiums and seminars on social banking, infrastructure development in government schools and construction of a centenary block at Sevakshetra Hospital in Bangalore, Mr Rao disclosed.

“In our core business, retail business accounts for a major share under new services and advances. For the niche segments, we have launched several retail schemes in the retail arena, including Canjewel, Cantech and Cantravel,” Mr Rao said. The Bank also plans to release a commemorative stamp during November on the Founders Day.

Future

With consolidation as the buzzword and the likely fallout of switching over to the Basel II framework, one can foresee a major shakeout by virtue of which Indian banking system will move much closer to the global standards. Four to five major banks are likely to be in the global centrestage in the medium term and Canara Bank will surely find its place prominently among them. This is the dream and vision of each member of the Canbank family.

CANARA BANK: GROWTH RECORD

Year, Deposits, Advances, No. of branches

1907 0.004 0.008 1

1917 0.439 0.629 1

1927 3.095 3.505 3

1937 8.396 0.627 36

1947 5.260 2.030 40

1957 17.840 8.790 61

1967 126.560 80.350 247

1977 1083.510 713.140 1102

1987 7878.430 4659.280 1864

1997 31445.000 14413.000 2262

2003 72095.000 40472.000 2424

2004 86345.000 48439.000 2469

2005 96908.000 60421.000 2513

(Rs in crore)