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Creating New Presence

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According to Hindu legend, Lord Brahma began his creation at Karur, also known as "the place of the sacred cow". Tucked away in this small town in Tamil Nadu is not one, but two of the oldest private sector banks in the country: the Karur Vysya Bank (KVB) and the Lakshmi Vilas Bank. The former was set up in 1916, and the latter in 1926.

Primarily an agricultural region, Karur is best known for its entrepreneurial home textile industry: bed linen, toilet linen, table linen, etc. Another allied industry is leather. Karur's textile firms earn an estimated $300 million a year through direct and indirect exports.

To some degree, KVB has been instrumental in fostering industrialisation in the region; EID Parry has a sugar factory in Karur; so does Tamil Nadu Paper, which produces paper from sugarcane waste. Karur is also home to Chettinad Cement. The bank has, thus, become a strong regional presence.

With the changes in the banking landscape, however, KVB had to start looking for opportunities outside Tamil Nadu. The bank has a fairly diversified credit book across industries; in FY10 KVB made a few big-ticket loans to the infrastructure sector; the bulk of that lending is to the state governments' projects.

"Despite being a small bank we have some big corporate families and business houses that we have funded through consortiums for their industrial projects," says P.T. Kuppuswamy, managing director and chief executive officer and Karur Vysya Bank. The focus on building a portfolio of loans to the infrastructure and power sectors is part of a plan to diversify the credit portfolio. In 2010-11 (FY11), growth will come from agriculture and the SME (small and medium enterprise) segments.

Those moves are part of a five-year plan to integrate all branches with the core banking facility and win over new large corporate customers. By 2012 it wants to do business of Rs 50,000 crore, and within five years the bank wants to increase its business to Rs 1,25,000 crore.

The bank is also working on diversifying its customer base. "We decided to capture a younger  bankable population," says Kuppuswamy. "Forty per cent of our deposits are from people within 30 years of age. The average age of our employees is 32; we have wooed young workers with an ESOP plan, which is available to all our 44,000 employees."

KVB is diversifying geographically too, and looking at making its presence felt in northern and western India. KVB now has 22 branches in Maharashtra and 12 in Gujarat. Kuppuswamy says that they have invested heavily in marketing the image of a bank that is predominantly from Tamil Nadu.

"Our business in the north is growing and we are trying to see if we can scale up in those regions," he says. But back in Tamil Nadu, KVB is taking on the bigger banks in the large industry segment. "Apart from priority sector lending, we see many new entrepreneurs emerging in the south and we are focusing on this segment," says Kuppuswamy.

KVB offers its retail customers a suite of services that go beyond the standard debit and credit cards, and loan products such as automobile and housing loans. You can now pay for your air tickets through KVB's network of 376 ATMs (it has 335 branches). It has built online payment facilities through tie-ups with payment gateway companies such as Bill Desk.

Its adoption of new technology extends to back-office operations too: it has a back-up data management system in Hyderabad in case disaster strikes Karur. But it hasn't forgotten its rural roots either. KVB has added almost 25 branches on average in each of the past three years, and has applied for branch licences to open in another 100 villages by 2015.

But that expansion will be undertaken in a phased manner; Kuppuswamy wants to make sure that his branches are individually profitable in two years. "We like to take it slow and experiment with a few branches in a geography before expanding," he says.

vishal dot krishna at abp dot in