Canara Bank is one of the leading banks of India in the public sector. Founded as 'Canara Bank Hindu Permanent Fund' in 1906, by late Sri. Ammembal Subba Rao Pai, a philanthropist, this small seed blossomed into a limited company as 'Canara Bank Ltd.' in 1910 and became Canara Bank in 1969 after nationalization.
The Bank has been almost consistently showing robust growth in Business Growth and its credit deployment is sound and steady.
The following is an extract of its credit deployment as the end of financial year 2008-09.
Advances (net)
The Bank's advances (net) witnessed a robust 28.9% growth in 2008-09 to reach Rs. 1, 38,219 crore. In quantum terms, credit increased by about Rs.31000 crore. Responding to emergent credit needs of varied segments of the economy that evolved during post September 2008 scenario, the Bank stepped up credit to all productive segments of the economy like agriculture and Micro, Small and Medium Enterprises (MSME), exposure to corporate and infrastructure segments. The number of borrowal accounts, as at March 2009, rose to 4.30 million. Backed by strong growth in advances, the credit to deposit ratio further improved to 73.96% as at March 2009 against 69.6% in the previous year.
Retail Lending Operations
Retail lending operations of the Bank regained the growth momentum during the year. While disbursals under the retail lending stood at Rs. 4558 crore, the outstanding advances rose to Rs. 19798 crore, accounting for 14.66% of the net credit.
(Amt. in Rs. Crore)
Retail Lending
March 2008
March 2009
Growth (%)
Retail Lending
17665
19798
12.1
Housing (Direct)
6658
7896
18.6
Retail Trade
3789
4451
17.2
Other Personal
7209
7451
3.4
The Bank took several measures during the year to expand retail credit, including special packages for housing and auto loans. To facilitate speedy disposal of proposals and credit flow, 21 Centralised Processing Units (CPU) for housing and personal loans were functioning at major centres apart from a Retail Asset Hub in Bangalore. This apart, the Bank introduced retail sale of gold coins through selected branches across the country.
Asset Quality
Given the sharp rise in credit during the previous quarters and the present economic slowdown, the asset quality of the Bank came under stress.
The gross NPA level rose to Rs. 2168 crore during the year. However, with a gross NPA ratio of 1.56%, the Bank continues to be one of the lowest among the peers. With a net NPA level of Rs.1507 crore, net NPA ratio stood at 1.09% as at March 2009.
Cash recovery during the year aggregated to an all time high of Rs. 1289 crore, well exceeding the preceding year's cash recovery of Rs. 1030 crore.
The Bank restructured a total number of 72184 accounts during 2008-09, aggregating to a total outstanding of Rs.2066 crore under the special regulatory treatment.
Priority Sector Advances
As a strategic player in the domestic banking industry, the Bank's relentless pursuit of varied goals under national priorities has been well recognized. The remarkable performance during 2008-09 further reinforced the Bank's commitment to the large and growing productive segments of the economy, including agriculture, small enterprises, education, micro-credit, weaker sections, SC/STs and minorities.
Priority Sector Advances of the Bank as at March 2009 increased by Rs.5560 crore to Rs.48763 crore, covering 35 lakhs borrowers recording a y-o-y growth of 13%. Priority Sector Advances formed over 46% of the Bank's Adjusted Net Bank Credit (ANBC), well above the 40% stipulated norm.
(Amt. in Rs. Crore)
Priority Sector Advances
As of 31st March
Growth
2008
2009
Amount
Percentage
Agriculture
17996
20144
2148
11.9
Small Enterprises
14175
16316
2141
15.1
Other Priority Segments
11032
12303
1271
11.5
Total Priority Sector O/s
43203
48763
5560
12.9
With a focus on credit delivery to agriculture, the Bank's advances under agriculture rose by Rs. 2148 crore to reach Rs. 20144 crore, covering 26 lakh farmers. Agriculture credit as a proportion of ANBC rose to 19.01%, surpassing the mandatory targeted level of 18%. Advances to agriculture (direct) reached a level of Rs. 15510 crore, with a 20% y-o-y growth and accounting for 14.64% of ANBC.
Under Kisan Credit Card Scheme, the Bank issued 2.51 lakh cards during the year, with credit coverage of Rs.1815 crore. As at March 2009, the cumulative number of Kisan Credit Cards reached 26.97 lakhs, involving credit coverage of Rs.12075 crore.
The Bank continues to support human capital formation in the country through financing higher education. Sustaining the highest education loan portfolio among nationalized banks in India, the Bank's advances under Vidyasagar Education Loan Scheme recorded a growth of 32.5% to reach Rs.2301 crore, covering more than 1,46,800 students as at March 2009.
The Bank also extended financial assistance to other priority sectors, such as, retail traders, housing and micro credit. As at March 2009, advances to these sectors reached a level of Rs.12303 crore.
During the year, the Bank actively participated in various Government Sponsored Schemes, such as, PMRY, SGSY, SJSRY, SLRS and DRI. As at 31st March 2009, the outstanding advances under these schemes aggregated to Rs.553 crore, involving 1.32 lakh beneficiaries.
Performance under Various Government Sponsored Schemes
Name of the Schemes
No. of Accounts
Amt. in Rs. Crore
PMRY
73235
338
SGSY
28688
118
SJSRY
11686
47
SLRS
963
2
DRI
17333
48
Total
131905
553
In support of the underprivileged sections of the society, the Bank's advances to SC/ST beneficiaries reached Rs.2863 crore as at March 2009. Advances to weaker sections aggregated to Rs.10809 crore, with 22 lakh borrowers, forming 10.20% of ANBC against the norm of 10%. As at March 2009, advances by the Bank to minority communities aggregated to Rs. 5452 crore.
During the year, the Bank has formed 64659 Self-Help Groups (SHGs) taking the cumulative number of SHGs formed to 2.75 lakhs as at March 2009. With 52,358 SHGs credit linked during the year, the cumulative tally under credit linking reached 2.25 lakhs since inception.
The Bank established an exclusive institute in Karnataka to extend training to SHGs.
The total exposure of the Bank under SHG finance rose to Rs. 728 crore, spreading over 87,627 SHGs. Konnur branch in Hubli, Karnataka was adjudged the second best branch under SHG finance by NABARD for the year 2007-08.
Advances to MSME reached Rs.23823 crore, registering a y-o-y growth of over 28%. The Bank easily surpassed the mandatory y-o-y growth of 20%.
The Bank covered 29,684 accounts with an exposure of over Rs. 638 crore as at March 2009 under Credit Guarantee Scheme for Micro and Small Enterprises (CGMSE), occupying No.1 position among the nationalized banks in terms of number of accounts covered.
Considering the importance of MSME sector in the national economy, the Bank has developed specific loan products to meet the diverse requirements of entrepreneurs in the segment. Cluster based lending is adopted to cater to the units in industrial clusters. Area/ cluster specific loan products introduced to meet specific requirements.
The Bank has implemented Prime Minister's Employment Generation Programme (PMEGP), the ambitious project of Government of India for employment generation through enterprise creation. Another scheme for rejuvenation, modernization and technology upgradation of Coir Industry was also taken up for implementation by the Bank.
To enable the MSME sector to face the challenges of economic slowdown, the Bank acted swiftly and rolled out a Special Package to provide relief to MSME. The comprehensive package includes, among other facilities, additional/adhoc working capital, extended tenability for receivables, concession in interest and debt restructuring. MSME Care Centers were established across the country to resolve the grievances of MSME.
The Bank received an amount of Rs. 5.4 crore from the Ministry of Micro, Small and Medium Enterprises, Government of India, during the year as a Nodal Agency for Technology Upgradation of SSI units under Credit Linked Capital Subsidy Scheme (CLCSS) and amount utilized during the year stood at Rs. 8.8 crore.
FINANCIAL SUPERMARKET
Subsidiaries, Sponsored Entities and Joint Ventures
Canara Bank, with an objective of offering 'One Stop Banking Mart' for the customers forayed into diversified business activities by opening subsidiaries during late 1980s. Today, the Bank functions as a 'Financial Supermarket' with as many as nine subsidiaries/ sponsored entities/ joint ventures in diversified areas. The Bank has taken significant steps towards strengthening fundamentals of these entities so as to emerge as a strong 'Financial Supermarket' in India. The performance of the Bank's subsidiaries/ sponsored entities/ joint ventures was satisfactory during the financial.
Canbank Venture Capital Fund Limited (CVCFL)
CVCFL, the Trustee and Manager of Canbank Venture Capital Fund (CVCF), is a wholly owned subsidiary of the Bank. Currently, it manages three Funds with a corpus of Rs. 39.6 crore. During the financial year 2008-09, CVCFL assisted 95 Ventures involving a sum of Rs. 107.57 crore. The Company recorded a profit after tax of Rs.79.67 lakh for the year 2008-09. CVCF is all set to float 5th Fund with a corpus of Rs. 500 crore.
Can Fin Homes Limited (CFHL)
CFHL, a sponsored entity of Canara Bank, is one of the premier housing finance entities in the country. The Company sanctioned and disbursed loans amounting to Rs.356.27crore and Rs.300.55crore respectively, taking cumulative sanctions to Rs.5518.78 crore and disbursement to Rs.4782.31 crore as at March 2009. As at March 2009, the company posted a profit after tax of Rs.31.52 crore, as against Rs.28.40 crore during the previous year.
Canbank Factors Limited (CFL)
Canbank Factors Limited, which is a factoring subsidiary of the Bank, is a member of Factors Chain International. Factors Chain International is an umbrella organization for factoring companies across the world. The Company achieved a total business turnover of Rs. 3178.54 crore as at March 2009 and posted a profit after tax of Rs. 19.68 crore.
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Question:-
Discuss the Credit Deployment strategy of Canara Bank with special focus on its performance as on 31-3-2009 in the midst of economic slowdown.
