An Analysis Of Karnataka Bank Limited Commerce Essay


Karnataka Bank Limitedis a private sector banking institution based in the town ofMangaloreinKarnataka,India. TheReserve Bank of Indiahas designated Karnataka Bank as an A-class scheduled commercial bank. The bank now has a national presence with a network of some 463 branches across 19 states and 2 Union Territories. It has over 4,800 employees and 3.5 million customers, including farmers andartisansin villages and small towns throughout the country. Its shares are entirely privately-owned by some 68,942 shareholders. For the quarter that ended on December 12, 2008; the total interest earned was Rs. 508.4 crores.The total income for the bank was Rs. 607.17 crores and the expenditure, Rs. 468.86 crores, thereby yielding a profit of Rs. 138.31 crores.

The Karnataka Bank has been striving to keep pace with advances in banking technology by adoptingCore bankingandInternet banking, and establishing itsMoney PlantAutomated Teller Machinesystem. In August 2008, Karnataka Bank received the Sun and NDTV Green IT Award.Sun MicrosystemsandNDTVgave the award to Karnataka Bank in recognition of the bank's "green policies" and use of earth-friendly technology such aspower Karnataka Bank was incorporated on February 18, 1924, as The Karnataka Bank Limited and commenced business on May 23, 1924. Its founders established it atMangalore, a coastal town in theDakshina Kannadadistrict ofMadras Presidency.Among the founders, who created the bank to serve the South Kanara region, was B. R. Vysaray Achar.Another important personality associated with the bank was K. S. N. Adiga, who served as Chairman from 1958 to 1979.

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v 1960: Karnataka Bank acquired theSringeri Sharada Bank, which had been established in 1942 and which had four branches.

v 1964: Karnataka Bank took over the assets and liabilities of theChitradurga Bank(also known as Chitladurg Bank), which had been established in 1868 inMysore Stateand was the oldest bank in Mysore.

v 1966: Karnataka Bank took over the assets and liabilities of theBank of Karnataka, inHubli. Bank of Karnataka had been established in 1946 and had opened one branch inBelgaumin 1947. At the time of the acquisition, Bank of Karnataka had 13 branches.

v In the year 2000, Karnataka Bank signed amemorandum of understandingwithInfosys Technologiesto develop a core-banking solution calledFINACLE.Over 221 branches were networked up to March 31, 2004.The main motto of this programme is "Anytime/Anywhere banking".In 2002, the bank concluded a pact withCorporation Bankfor sharing its ATMs.A year later, the bank introduced the Moneyplant card that allows customers to withdraw money from any of their Karnataka bank accounts.

v In September 2003, the bank shifted its head office fromKodialbailtoKankanady

v In August 2008, the Karnataka Bank introduced Quick Remit, a facility to make money transfer easy forNon-Resident Indiansliving inCanada,USAand theUK.The bank also runs a 24-hour internet banking service called Money click.

Karnataka Bank also offers multi-branch banking, deposit schemes as Abhyudaya cash certificate, fixed deposits, ready money deposit, Soulabhya deposit, cumulative deposit, Platinum lakhpathi, insurance linked savings bank deposit, K-Flexi deposit, resident foreign currency (domestic) account, NRI services, Senior Citizens Deposit Scheme and loan schemes as Vidyanidhi education loan scheme, Apna ghar home loans, car finance scheme, Varthak loans, Easy ride, Scheme for salaried persons, Udyog mithra, Niveshan loans, Krishi card, K-Power, Lease ‘n' Encash, Suvarna Nidhi, InstaCash and VahanaMitra


Banks are the most significant players in the Indian financial market. They are the biggest purveyors of credit, and they also attract most of the savings from the population. Dominated by public sector, the banking industry has so far acted as an efficient partner in the growth and the development of the country. Driven by the socialist ideologies and the welfare state concept, public sector banks have long been the supporters of agriculture and other priority sectors. They act as crucial channels of the government in its efforts to ensure equitable economic development.

The Indian banking can be broadly categorized into nationalized (government owned), private banks and specialized banking. The Reserve Bank of India acts a centralized body monitoring any discrepancies and shortcoming in the system. Since the nationalization of banks in 1969, the public sector banks or the nationalized banks have acquired a place of prominence and has since then seen tremendous progress. The need to become highly customer focused has forced the slow-moving public sector banks to adopt a fast track approach. The unleashing of products and services through the net has galvanized players at all levels of the banking and financial market grid to look anew at their existing portfolio offering. Conservative banking practices allowed Indian banks to be insulated partially from the Asian currency crisis. Indian banks are now quoting al higher valuation when compared to banks in other Asian countries (viz. Hong Kong, Singapore, Philippines etc.) that have major problems linked to huge Non Performing Assets (NPAs) and payment defaults. Co-operative banks are nimble footed in approach and armed with efficient branch networks focus primarily on the ‘high revenue' niche retail segments.

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The Indian banking has finally worked up to the competitive dynamics of the ‘new' Indian market and is addressing the relevant issues to take on the multifarious challenges of globalization. Banks that employ IT are perceived to be ‘futuristic' and proactive players capable of meeting the multifarious requirements of the large customer's base. Private Banks have been fast on the uptake and are reorienting their strategies using the internet as a medium The Internet has emerged as the new and challenging frontier of marketing with the conventional physical world tenets being just as applicable like in any other marketing medium.

The Indian banking has come from a long way from being a sleepy business Karnataka to a highly proactive and dynamic entity. This transformation has been largely brought about by the large dose of liberalization and economic reforms that allowed banks to explore new business opportunities rather than generating revenues from conventional streams (i.e. borrowing and lending). The banking in India is highly fragmented with 30 banking units Karnataka to almost 50% of deposits and 60% of advances. Indian nationalized banks (banks owned by the government) continue to be the major lenders in the economy due to their sheer size and penetrative networks which assures them high deposit mobilization. The Indian banking can be broadly categorized into nationalized, private banks and specialized banking institutions.

The popularity of these banks can be gauged by the fact that in a short span of time, these banks have gained considerable customer confidence and consequently have shown impressive growth rates. Today, the private banks corner almost four per cent share of the total share of deposits. Most of the banks in this category are concentrated in the high-growth urban areas in metros (that account for approximately 70% of the total banking business). With efficiency being the major focus, these banks have leveraged on their strengths and competencies viz. Management, operational efficiency and flexibility, superior product positioning and higher employee productivity skills.

The private banks with their focused business and service portfolio have a reputation of being niche players in the industry. A strategy that has allowed these banks to concentrate on few reliable high net worth companies and individuals rather than cater to the mass market. These well-chalked out integrates strategy plans have allowed most of these banks to deliver superlative levels of personalized services. With the Reserve Bank of India allowing these banks to operate 70% of their businesses in urban areas, this statutory requirement has translated into lower deposit mobilization costs and higher margins relative to public sector banks.

Karnataka Bank Limited, a leading 'A' Class Scheduled Commercial Bank in India, was incorporated on February 18th, 1924 at Mangalore, a coastal town of Dakshina Kannada district in Karnataka State. The bank took shape in the aftermath of patriotic zeal that engulfed the nation during the freedom movement of 20th Century India. Over the years the Bank grew with the merger of Sringeri Sharada Bank Ltd., Chitradurga Bank Ltd. and Bank of Karnataka.With over 85 years experience at the forefront of providing professional banking services and quality customer service, we now have a national presence with a network of 464 branches spread across 20 states and 2 Union Territories.Managed by a dedicated & professional management team, we have over 4,900 employees, 71,822 shareholders and over 3.7 million customers.Today, we have emerged as a leading financial service institution in India.

Looking ahead, the Union Budget for 2009-10

With marginal relaxation in the tax structure and moderate boost to agriculture sector, the Budget projects a fiscal deficit of 6.8% of GDP, the highest ever in 16 years, which translates into a deficit of Rs.4,00,000 crore. Fiscal deficit is put at Rs.3,32,835 crore as per the 2009-10 interim budget estimates but now it is Rs.4,00,996 crore as per the 2009-10 final budget estimates. The fiscal deficit of 6.8% appears to be slightly above the comfort level and this level of fiscal deficit, half of which is likely to be met through market borrowings may pose some sort of challenge to banking industry as well.

Monetary PolicyAnnual Policy Statement (quarter review of 2009-10 (Apr-Mar) left key policy rates unchanged even as it placed GDP growth for the current fiscal at 6 per cent with an upward bias. The benchmark rates such as bank rate, repo rate, reverse repo rate, cash reserve ratio (CRR) and statutory liquidity ratio (SLR) are kept intact.It also notched up the inflation projection for the current fiscal to 5 per cent from 4 per cent projected in the Annual Policy Statement in April 2009. It forecasts M3 at 18%, deposit growth at 19% and credit growth at 20% for FY10. RBI has maintained its accommodative monetary stance while sensitizing the market towards the need to withdraw the monetary accommodation gradually, once there are definite and robust signs of recovery in the economy.

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Performance of your Bank during 2008-09With the above background, I would proceed to brief you about the performance of your Bank during the financial year 2008-09. You will be happy to note that your Bank has registered satisfactory progress in important areas like deposits, advances, recovery of impaired assets, profitability, geographical presence with new branches and their networking, etc.the report that your Bank's total business has stood Rs.32,143 crore as at 31st March 2009. Deposits have increased to Rs. 20333.29 crore at the end of March 2009 from Rs. 17016.19 crore during the same period last year thus recording a growth of 19.49 %. Advances have touched Rs.11810.05 crore at the end of the year as against Rs. 10841.97 crore as on 31.03.2008 indicating a rise of 8.93%. The advances to priority sector have increased to Rs. 4372.16 crore from Rs. 3966.87 crore. The net NPA stood at 0.98% at the end of March 2009.

Profitability and Working Results The net profit of your Bank rose to Rs.266.70 crore from Rs. 241.74 crore. Your Bank posted an operating profit of Rs. 480.21 crore during 2008-09.

Capital Adequacy Ratio The capital funds of your Bank increased from Rs.1618.73 crore to Rs.1991 crore, registering a growth of 23%. The Capital Adequacy Ratio of your Bank stood at 13.48% at the end of the fiscal 2008-09. This is well above RBI's prescription of 9%.

Forex Business During the year, the Bank achieved foreign exchange business turnover of Rs. 7850.65 crore as against Rs.7836.62 crore for the previous year.



Technology plays a very important role in bank's internal control mechanisms as well as services offered by them. It has in fact given new dimensions to the banks as well as services that they cater to and the banks are enthusiastically adopting new technological innovations for devising new products and services.

The latest developments in terms of technology in computer and telecommunication have encouraged the bankers to change the concept of branch banking to anywhere banking. The use of ATM and Internet banking has allowed ‘anytime, anywhere is banking' facilities. Automatic voice recorders now answer simple queries, currency accounting machines makes the job easier and self-service counters are now encouraged. Credit card facility has encouraged an era of cashless society. Today MasterCard and Visa card are the two most popular cards used world over. The banks have now started issuing smartcards or debit cards to be used for making payments. These are also called as electronic purse. Some of the banks have also started home banking through telecommunication facilities and computer technology by using terminals installed at customers home and they can make the balance inquiry, get the statement of accounts, give instructions for fund transfers, etc. Through ECS we can receive the dividends and interest directly to our account avoiding the delay or chance of loosing the post.

Today banks are also using SMS and Internet as major tool of promotions and giving great utility to its customers. For example SMS functions through simple text messages sent from your mobile. The messages are then recognized by the bank to provide you with the required information.

All these technological changes have forced the bankers to adopt customer-based approach instead of product-based approach.


Banking is as old as authentic history and the modern commercial banking are traceable to ancient times. In India, banking has existed in one form or the other from time to time. The present era in banking may be taken to have commenced with establishment of bank of Bengal in 1809 under the government charter and with government participation in share capital. Allahabad bank was started in the year 1865 and Punjab national bank in 1895, and thus, others followed

Every year RBI declares its 6 monthly policy and accordingly the various measures and rates are implemented which has an impact on the banking sector. Also the Union budget affects the banking sector to boost the economy by giving certain concessions or facilities. If in the Budget savings are encouraged, then more deposits will be attracted towards the banks and in turn they can lend more money to the agricultural sector and industrial sector, therefore, booming the economy. If the FDI limits are relaxed, then more FDI are brought in India through banking channels.


Government and RBI policies affect the banking sector. Sometimes looking into the political advantage of a particular party, the Government declares some measures to their benefits like waiver of short-term agricultural loans, to attract the farmer's votes. By doing so the profits of the bank get affected. Various banks in the cooperative sector are open and run by the politicians. They exploit these banks for their benefits. Sometimes the government appoints various chairmen of the banks.

Various policies are framed by the RBI looking at the present situation of the country for better control over the banks.


Before nationalization of the banks, their control was in the hands of the private parties and only big business houses and the effluent sections of the society were getting benefits of banking in India. In 1969 government nationalized 14 banks. To adopt the social development in the banking sector it was necessary for speedy economic progress, consistent with social justice, in democratic political system, which is free from domination of law, and in which opportunities are open to all. Accordingly, keeping in mind both the national and social objectives, bankers were given direction to help economically weaker section of the society and also provide need-based finance to all the sectors of the economy with flexible and liberal attitude. Now the banks provide various types of loans to farmers, working women, professionals, and traders. They also provide education loan to the students and housing loans, consumer loans, etc.

Banks having big clients or big companies have to provide services like personalized banking to their clients because these customers do not believe in running about and waiting in queues for getting their work done. The bankers also have to provide these customers with special provisions and at times with benefits like food and parties. But the banks do not mind incurring these costs because of the kind of business these clients bring for the bank.



It is very important for any bank to identify the 7 P's of services so was understands their customers better and provide them with best of service. The 7 P's are:









The product mix of a company includes all different product lines a company offers to its customers. The product line of a bank might easily include more than 100 different services. In today's competitive scenario it has become very necessary for a bank to provide it's customers with a wide variety of services and the best technology in order to attract them. Here is an example of some of the products offered by Karnataka Bank to its customers.


Karnataka Bank's Savings Account is just the right product for everyone, salaried, employees or businessmen, high net worth individuals and NRI's. The unmatched package of Bank Savings Bank account given below brings the benefits of better, efficient and hassle free banking.

• ATM Network

A Savings Bank Account with Karnataka Bank entitles you to a free ATM card, which enables you to access your account anytime and at any ATM centre across the country. You can withdraw and deposit money and cheques with your ATM card. Unlike most other ATMs, a Bank ATM allows you to withdraw up to Rs. 20,000 a day. In addition, cash can be withdrawn from any of the ATMs against your MasterCard (domestic/international).

• 7-Day Banking

At select branches spread over the country, you can bank on all the 7 days of the week (except for public holidays), over extended working hours.

• Telebanking

Telebanking service provides you instant access to your account. It offers you a wide range of services over the phone such as account information, Balance Enquiry, Transaction Details, Statement of Account, Status of your Cheque, etc.

• IConnect-Internet Banking

This is the concept of "the Bank on your desk-top". You can look-up the status of your account, query and undertake a range of financial transactions, simply by clicking the mouse. Now don't you think you have a great opportunity to see yourself laughing your way to the bank?

· Offering

Karnataka Bank has joined hands with bank, to give rise to a new kind of card power - unique and unmatched benefits and international at the most competitive rates.

· Rewards

Karnataka bank Card combines dual conveniences of high purchase power and flexible payment facility. Purchase of high-value items is now convenient and when it comes to payback time, your bill can be paid in installments, depending on your financial liquidity at a given moment. The Revolving Credit Facility lets you pay as little as 5% of your total outstanding every month. Giving you the power to buy now and pay later in parts!

· Dial-A-Draft

One can use your Karnataka bank Card to pay for your personal expenses at places where credit cards are not accepted yet. Like paying for investments, telephone and electricity bills, school fees and much more.

· 24-Hour ATMs

One can withdraw emergency cash up to 60% of your credit limit from 24-Hour ATMs in Ahmadabad, Bangalore, Calcutta, Chennai, Delhi, Hyderabad, Mumbai and Pune. While traveling overseas you can draw cash from MasterCard ATMs spread across the globe. The same is applicable for any bank branch. Also the cash you withdraw is insured against theft for a period of 12 hours after withdrawal. A never before facility is brought to you with the Bank Card at a transaction fee of 2.5% or Rs.50 whichever is higher. All cash advances also carry a service charge from the date of the transaction. The cash withdrawal limit for the first year is Rs. 5,000.Through the Money plantInternational Visa Debit Card/Money plantATM Card you can withdraw, get Mini Statements, find out Balance, and change PIN, request for Loans, request for Statements & Cheque Books.

You can link your various accounts across different Karnataka BankNetworked Branchesto a single Money Plantcard. This gives you a facility to use one card to access & withdraw from any of your accounts of Karnataka Bank. Money plantInternational Visa Debit Card/Money PlantATM cards can also be packed withK-Power, a special facility to draw money from your savings account even when you run short of balance.

With Money plantInternational Visa Debit Card/Money plantATM Card you simply carry your Bank account in your pocket and access your account from anywhere in the World - Anytime Day and Night.

The Bank's Debit Card / ATM card holders are hereby notified that with effect from 15.10.2009, the charges for transactions in ATMs are depicted in the below table.




Financial and Non Financial Transaction


For use of KBL ATMs for any purpose.



For use of other Bank ATMs for balance enquiries.



For use of other Bank ATMs for Cash withdrawals.

Freeupto5 cash withdrawals per calendar month and above that charges @Rs.20/- per transaction will be levied. The maximum cash withdrawal limit isRs.10,000/- per transaction and minimum isRs.500/-


For use of ATMs located abroad.

Rs.100/- per Financial transaction

Rs.25/ per Non Financial transaction

*Subject to change

· Concession on Personal Remittances

Do you often need to remit funds to other cities using facilities such as Drafts/Telegraphic Transfers, etc.? Here's a benefit you would most appreciate. A 25% rebate on standard commission is offered on personal remittances at Karnataka Bank branches.

· Overdraft facility

Karnataka Bank credit card provides you with an overdraft facility to the extent of 75% of the value of your holdings of Demit Shares and Units! Moreover, you get a waiver of 0.5% on interest rate chargeable under the scheme. All you need to avail yourself of these benefits is a Demat A/c with Karnataka Bank.

· Free ATM Card

The Karnataka Bank Credit Card offers you a free ATM Card, which can be used at over 250 Karnataka Bank ATM centers all over India. All you have to do is open a saving bank/current Account with Bank.

· Other features

Karnataka bank Card has the widest possible reach - welcomed by 1,10,000 Merchant Partners across India and Nepal and yet another 160 lakh Merchant Establishments worldwide. The card can be used both for major occasions, and also for everyday purchases like groceries, cosmetics, and petrol and auto accessories. It can also be used to buy high-value items like consumer durables (refrigerators, washing machines, microwave ovens, etc.). And even paying customs duty and hospital bills becomes convenient with the Card.



Width of the product mix is the number of product lines a company is offering. The product width could be a narrow one or a wide one depending from bank to bank. A wide mix encourages more sales since the banks are able to diversify and provide more to their customers and they also appeal to a larger target market.


Depth of the product mix is the number of product items in each product line. Banks with more schemes and services have more depths than those offering only a few.

Here is table giving an example of Width and Depth in the Product Mix:

Similarly, different banks plan out their product portfolios and based on that, the depth and width of their product mix can be determined.

In today's scenario, where there is cutthroat competition and new foreign banks entering the Indian markets, it has became more or less like a law to have very wide product lines with more and more number of products in each line.


Core Benefit:

It is the main or core reason why the customer will buy the service of the bank. More like the basic purpose or necessity.

Basic Product:

The core benefit is converted into a basic product. That is the service can used by the customer in order to fulfill his/her needs.

Expected Product:

It refers to the set of attributes and conditions expected by the customers when they purchase the service.

Augmented Product:

It is the additional feature that the banks provide which exceeds the customer's expectations.

Potential Product:

Innovations and product differential is the bases of a Potential Product. If the banks alter its services according to the requirements of the individual customers it reaches this level.

Thus it can be seen how a particular product passes through different levels. In today's competitive scenario most banks try offering services at the Augmented and Potential level.


The price mix in the banking sector is nothing but the interest rates charged by the different banks. In today's competitive scenario where customer is the king, the banks have to charge them interest at a rate in accordance with the RBI directives. Banks also compete in terms of annual fees for services like credit cards, DMAT etc. Another important aspect of the bank's pricing policy today is the interest charged on the Home Loans and Car Loans. With India's economy progressing, there are more and more buyers seeking these loans but at a very competitive interest rate.

Let's understand this with an example. A particular buyer approaches a bank for a car loan for a period of 3 years. He is charged Rs. 20,000 as interest. However, if a sale representative of another bank comes to know of this deal, he will try to attract the customer by giving him a better deal i.e. a loan at a lower rate on interest. In this way, it is the customer that ultimately benefits.

· Value pricing:

Banks having unique or different products or schemes mainly do this type of pricing. They usually charge a combination of high and low prices depending on the customer loyalty as well as the products. This type of pricing strategy is usually coupled with promotion programmes.

· Going Rate pricing:

The most commonly used pricing technique is the going rate pricing. In going rate pricing, the bank bases its price largely depending on the competitor's prices. The banks however have to stay within the RBI directives and compete. The banks may charge higher or lower than their competitors. After 1991 when the foreign banks entered the Indian market this method of pricing has gained increasing importance.

· Mark up pricing:

This is a pricing technique wherein the cost of the service is determined and a small margin is added to it and then the final price is offered to the customers. This type of pricing is the not very popular since in the banking sector it is not very easy to arrive at the cost of the service. Thus most banks use a combination of mark - up pricing and going rate pricing.


This model shows a pricing strategy, which should be adopted in order to ensure maximum satisfaction to both the bank as well as the customers.

The price should be set in such a manner that the customer is assured that he is not being cheated or overcharged by the bank and at the same time the bank is able to reap maximum profits. Such a pricing stand helps the bank get maximum sales as well as profits since the customer feels that by entering such a transaction he is winning.


Place mix is the location analysis for banks branches. There are number a factors affecting the determination of the location of the branch of bank. It is very necessary a bank to situated at a location where most of its target population is located.

Some of the important factors affecting the location analysis of a bank are:

1. The trade area

2. Population characteristics

3. Commercial structure

4. Industrial structure

5. Banking structure

6. Proximity to other convenient outlets

7. Real estate rates

8. Proximity to public transportation

9. Drawing time

10. Location of competition

11. Visibility

12. Access

It is not necessary that all the above conditions have to be satisfied while selecting the location but it should be tried to satisfy as many of them as possible.

1. The Trade Area:

The trade area is a very important factor determining the place where a bank branch should be set up. For e.g. a particular location maybe a huge trading place for textiles, diamonds or for that case even the stock market. Such locations are ideal for setting up of bank branches.

2. Population Characteristics:

The demography of a place is a very important factor. This includes:

➢ The income level of the population

➢ The average age

➢ The average male female population

➢ The caste, religion, culture and customs

➢ The average spending and saving habit of the people.

These factors are very important for a bank as the help them decide the kind of business the branch will get.

3. Commercial Structure:

The commercial structure refers to the level of commerce i.e. business activities taking place at a particular location. The higher the level of business activities taking place in a particular location the more preferable it is for setting up a bank branch.

4. Industrial Structure:

This is nothing but a combination of the trade area analysis and the commercial structure. However the industrial structure focuses more on the kind of industries operating in a particular location. For example, an area like SEEPZ is marked with a lot of electronic manufacturing units. Thus the industrial stricture determines the kind of financial transactions that could take place in a particular location.

5. Banking Structure:

The Banking structure refers to the existence of other banks in the area. Whether there is already an efficient network of other bank branches operating at that particular area. Thus the overall infrastructure needed for the working of a bank.

6. Proximity of other convenient outlets:

This refers to the other branches of the same bank as well other commercial, entertainment and industrial outlets.

7. Real Estate Rates:

This is mainly dealing with the cost factor involved in opening up a bank branch at a particular location. The real estate rate is a very strong factor influencing the location decision for a bank branch.

8. Proximity to public transportation:

The location should be proximate to public transportation facilities. This means it should have bus stops close by as well as it should be proximate to railway stations so as to make it convenient for the common man.

9. Drawing Time:

Drawing time refers to the time period during which a customer can draw money from the banks. It should be convenient to the customer and somewhat flexible to accommodate the customer's needs. No bank has more than a certain amount with them and in case a customer wants to withdraw an amount more than that available with the bank, the bank needs to draw that amount from other banks. Hence, a location must be such that it facilitates minimum drawing time.

10. Location of Competition:

The existence of other banks also means competition. If the level of competition is very high in a particular location, it is necessary that a bank does a lot of market research before opening a branch so as to estimate the kind of business it would get.


The location of a branch should be such that it is visible and easily noticed by the customers as well other people


The bank branch should be very easily accessible to the customers. If this is not the case, the customer might switch to some other bank, which is more convenient to him and very easily accessible. The location should be such that it is very convenient for the customer to reach.

Promotion Mix

Promotion is nothing but making the customer more and more aware of the services and benefits provided by the bank. The banks today can use a lot of new technology to communicate to their customers. Two of the fastest growing modern tools of communicating with the customers are:

1. Internet Banking

2. Mobile Banking

This can be better explained with the example of KARNATAKA bank.

SMS services

SMS functions through simple text messages sent from your cellular phone. These messages are recognized by Karnataka bank to provide you with the required information.

For example, when you enter ‘IBAL' your cellular phone screen will display the current balance in your primary account. Thus with the help of SMS a wide range of query based transactions can be performed without even making a call.

Karnataka was the first organization in India to provide Wireless Application Protocol (WAP) based services. Mobile commerce using WAP technology, allows secure online access of the web using mobile devices..

Thus different methods are used by different banks to promoter its services.

A bank may have very attractive schemes and services to offer to their customers but they are of no use if they are not communicated properly to the customers. Promotion is o inform and remind the individuals and persuade them to accept, recommend or use of product, service or idea. However there some very important points that is to be considered before the promotion strategy is made. These points are:

Finalizing the Budget

Before the bank decides the kind of promotion that should be done, it very important to finalize the budget for it. The formulation of a sound budget is essential to remove the financial constraints in the process. The budget is determined on the basis of volume of business of the bank. In addition to this the intensity of competition also plays a decisive role.

Selecting a suitable vehicle

Another very important task is to select a suitable vehicle for driving the message. There are a number of devices to advertise such as broadcast media, telecast media and the print media. The selecting of the mode of advertising is strongly influenced by the kind of budget decided. Usually for promoting banks the most effective and economical form of advertising has been the print media.

Making possible creativity

Making possible creativity is nothing but the kind of slogans, punch lines etc. that are supporting the message. They should be very creative but yet simple to be understood by the common man. It should appeal to the customers. It should be distinct from that of the competitors and should be successful in informing and sensing the customers.

Testing the Effectiveness

It should be borne in mind that the advertisement is first tested for its effectiveness. This should be done with the help of various techniques like testing effectiveness on a sample group. This helps determine the success of the advertisement and in case of any problem the advertisement can be altered and remedied.

Instrumentality of Branch Managers

At a micro level, it is the responsibility of the branch managers to promote and drive the message to the people in the local area. They should organize small programs in order to attract people and crate awareness in the local area about the new schemes of the bank.

Different Ways of Promotion

Public Relations:

In today's competitive scenario developing strong public relations is very important for any bank to be successful. Most banks today have a separate Public Relations department. However primarily it is considered as a responsibility of the various bank managers to develop a steady and strong relationship with their present customers as well as potential customers. This can be done by a constant follow up, small programmes etc.

Personal Selling:

Personal selling is found to be one of the most effective and popular forms of promoting bank business. The main reason for this is that banking is a service in which trust plays a very important role. In personal selling, a bank representative goes to the customers and explains the scheme to the customers. Also he gives the customers any kind consultation he might need. He provides the customers all the information sought by him. The representative tries to persuade the customers to go for the scheme provided by the bank by telling him all the benefits. Here are some of the important features of personal selling

➢ It is a direct relation between the buyers and the seller

➢ It is oral presentation in conversation

➢ It is personal and social behavior

➢ It is found to be more effective in service oriented organizations

➢ It is based on the professional excellence or expertise of an individual

· Sales Promotion:

Sales promotions are basically giving the customers some additional benefits, maybe at times just some small gifts, in order to promote the schemes. The more innovative the sales promotions the more positive are the results. Some of the most popular sales promotions techniques are gifts, contests, fairs and shows, discounts and commission, entertainment and traveling plans for bankers, additional allowance, low interest financing etc. It is very important that the sales promotions benefits are designed in such a manner that they are better than those of the competitors.

· Word - of - mouth Promotion:

This form of promotions is not only very effective in banking services but in any kind of service. However it is more important in banking for the only reason that this is a service where trust plays a very important role. If a particular bank's services are recommended by friends, relatives, or other well wishers the person is more influenced and inclined towards that bank. It is very important to note that the internal employees of the bank play a very important role in word - of - mouth promotion technique. This is because they can start the process by recommending the bank to their friends and relatives and after that it is like a chain, which spreads like a wild fire.

· Telemarketing:

In recent times telemarketing has gained increasing importance as an effective tool for promotion. The telemarketing is a process of making use of sophisticated communication network for promoting the banks. This includes promoting through television, telephone, and radio. Nowadays, cell phones are used extensively for the same. This is the most popular form of promotion. Banks today have started using ‘SMS' and many other services supported by cell phones to provide benefits to their customers and thus have tried to increase their sales. In today's competitive and modern scenario it very important that banks makes use of telemarketing techniques very efficiently to have desirable results.

· Internet:

The use of Internet as a promotional tool is increasing. More and more banks are using Internet to promote their services. The online banking has made it even easier for the customers to avail the bank's services. No longer do people have to go to their bank branches for small petty matters like checking their balance etc. All this can be done with the help of a few clicks.Thus, these were the numerous ways in which a bank can promote its services and create more awareness amongst the people.

· People

People are the employees that are the service providers. In a banking sector, the service provider plays a very important and determinant role in rendering the customers a satisfactory and a good service. It is extremely essential that the service provider understand what his customers expect from him. In the banking sector, the customer needs to be guided in a lot of matters, which is possible only with the help of the service provider.

The position in the ekarnataka of the customer will be perceived by appearance, attitude and behavior of the customer contact employees. Not only does the customer contact employee influence the customer's perception but also the customer base of the organization does so.

Process Mix

The process mix constitutes the overall procedure involved in using the services offered by the bank. It is very necessary that the process is very customer friendly. In other words a process should be such that the customer is easily able to understand and easy to follow. Today if particular banks formalities are long and the procedure very complicated the overall process fails and the customer may not be inclined towards using that banks services.

Let's take for example the process for application for a car loan.

Now this mainly involves 3 things.

1. Producing of proper documents

2. Filling up of application form

3. Paying for the initial down payment.

Here the process may fail in the following cases:

1. If the customer is asked to produce a number of forms out of which some may not be necessary at all. Thus it is very necessary that the customer be asked for the minimum but most necessary document and not the other unnecessary documents.

2. In case of application form, the application form must be in a language best understood by the customers and it should not be very lengthy one or demanding a lot of unnecessary information.

3. Finally the payment of initial amount. The customer should be given options as to how he would like to pay by cheques or by credit card. Once again the amount should be very competitive not very high above the regular rates prevailing in the markets

The smaller and simpler the procedure, the better the process, and the customer will be more satisfied.


Physical evidence is the overall layout of the place i.e. how the entire bank has been designed. Physical evidence refers to all those factors that help make the process much easier and smoother. For example, in case of a bank, the physical evidence would be the placement of the customer service executive's desk, or the location of the place for depositing cheques. It is very necessary that the place be designed in such a manner so as to ensure maximum convenience to the customer and cause no confusion to him.

Let us see an example as to how banks try to make little changes so as to make the service better for their customers


An organization is supposed to cater to the changing needs of customers; it is only natural that all customers have their own likes and dislikes. They have some uniqueness, which throws a big imprint on their lifestyles. This makes the task of understanding a bit difficult. It has the context that we go through the problem of market segmentation in the banking service.

The study of the needs of customers invites a plethora of problems since in addition to other aspects; the regional considerations also influence the hierarchy of needs. To be more specific in the banking services, the banking organizations are supposed to satisfy different types of customers living in different segments. The segmentation of market makes the task of bank professionals easier. If the market segmentation is done in a right fashion, the task of satisfying the customers is simplified considerably. The modern marketing theories advocate the formulation of marketing policies and strategies for each segment, which an organization plans to solicit.

The marketing segmentation is based in the principle of divide and rule. If we divide the market into different segments, the size of market is made small and the process of study is found convenient. We find market segmentation division and subdivision of a market based on considerations. The bank professionals have to segment the market in such a way that the expectations of all potential customers are studied in a right perspective and the marketing resources are developed to fulfill the same. The marketing efforts can be made more proactive if the process and bases of segmentation are right.

It is essential that the bank professionals assign due weight age to the difference that we find in the market behavior due to geographical, age, sex, nationality, educational background, income classes, occupation, social and other considerations. If they overlook or underestimate key bases while segmenting, the study results can't be proactive to the formulation of creative marketing decisions. This makes it essential that the bank professionals are well aware of the criteria for market segmentation. The agriculture sector, industrial sector, services sector, household sector are found important in the very context. The gender segment is found important no doubt but we can't underestimate professional segments. Since the banking organizations serve different sectors and segments, the segmentation should be done carefully.


An important criterion for market segmentation is the economic system in which we find agricultural sector, industrial sector, services sector, household sector, and rural sector requiring the weight age while segmenting.


In the agricultural sector, there are four categories since the needs of all categories can't be identical.

The mechanization of agriculture, the improved or scientific system of cultivation, the help of nature, the magnitude of risk, the availability of infrastructural facilities influence the level of expectations vis-à-vis the needs and requirements. The banking organizations are supposed to know and understand the changing requirements of different categories of farmers.


The banking organizations are supposed to have an in-depth knowledge of the changing needs and requirements of the industrial sector. The large -sized, small- sized co-operative and tiny industries use the services of the banks. The expectation of all the categories can't be uniform.

The banking organizations are supposed to have an in-depth knowledge of the changing needs and requirements of the industrial segment. The emerging tends in competition, the pressure of inflation, the use of sophisticated technologies, and the business regulations are some of the important aspects influencing the hierarchy of needs.


It is an important sector to the economy where the banking organizations get profitable business. The two categories of organizations such as profit-making and non- profit making are found important in the very context.

The banking organizations need to identify the changing needs and requirements of the services sector with the frequent use of IT and with the mounting pressure of inflation and competition, we find a change in the hierarchy of needs.


This also constitutes an important sector where different income groups have different needs and requirements. In the below figure we can see the different segments of household sector.


The high income group, middle income group, subsistence level group and marginal income group have different hierarchy of needs which influence the level of their expectations.


In the gender segment we find males and females having different needs and requirements. The banking organizations are supposed to identify the level of expectations of both sexes as shown in the below figure.

* Housewives

* Gender Segment

* Sub- Segment

* Working Ladies

Some of the women are housewives and therefore they have different needs and requirements whereas some of them are working ladies having different needs and requirements.


In the profession segment, we find different categories of professions and therefore we find a change in their needs and requirements. As shown in the figure below:






White - Collar


Blue - Collar


The technocrats, bureaucrats, corporate , intellects, white-collar and blue collar employees have different needs and requirements and therefore the banking organizations should know their expectations.


In this sector we find different categories of organizations. Some of the organizations are known as charitable organizations, some of them are cultural/ social organizations, some of them are industrial and many of them are profit making and many are philanthropic and many of them are related to trade and commerce. It is natural that the needs and requirements vis-à-vis the level of expectations can't be identical in all cases. To satisfy and to increase the market share it is imperative that the banking organizations are familiar with changing needs and requirements. The emerging trends in the social transformation process determine the hierarchy of needs.

* Charitable Trusts

* Individual Originations

* Chamber of

* Commerce

* Trade and Commerce

* Health/Education

* Sports Org

* Philanthropic Organizations

Complaint Handling- Karnataka Bank

Whatever a service firm may do for customer, even the best firms are going to find themselves facing complaints from customers who feel that they are not being treated fairly. In dealing with these situations, it is important to know how to diffuse them and then turn them into positive experiences for all involved.

However, when it came to complaint handling, Karnataka Bank turned to the airline industry for inspiration. Impressed by the way an airline takes care of its customers from the time they enter the airport till they collect their luggage after landing, the bank maps the customer flow at its branch. The first change it brought to its branches was the 'May I help you' desk at the reception to guide the customer to the right counter. Next, it laid down efficiency parameters for each sub-process carried out at the branch. "We are constantly fine-tuning our processes to reduce time taken, especially on tasks. We monitor how long it takes for customer transactions as well as complaints to get processed".

The bank's 'moments of truth' surveys too are modeled after the airline industry's satisfaction surveys. These are given to customers just before they exit a branch after a transaction.

Karnataka Bank introduced changes for consumer convenience, starting with the reception area and with good reason. A traditional branch has always been an infrequent user's nightmare: cryptic boards are placed on counters leaving one as confused as ever, bank officials sit behind wire-meshes making it impossible to seek any guidance, and the long queues are frustrating, all the more so when you realize you stood in the wrong long line. But Karnataka branch models are trying to address this confusion, as well as the jail-like counters.

Karnataka believes that unless they change to create convenience for that customer, and add to his brand experience, they will fail to capture the loyalty they're trying so hard to earn. And unless they achieve this loyalty and increase their share of the customer's wallet substantially, the majority of their retail customers will continue to be unprofitable for them.

Customer Expectations

Well, customer expectations are not hard to exceed one time or two times or three times. It's very hard to keep exceeding customer expectations. And don't forget, customer expectations are going up and up and up. With every good experience they have at some other firm, every time a customer buys something in a store where he's treated very well, his expectations of the next store increase. So your competitor's actions have just as much an inflationary effect on customer expectations as your own actions.

I was dealing with a client of ours just a few days ago, operating in an industry that has very low customer satisfaction in general. And their customer satisfaction is no lower than anyone else's in the category, it's on a par, but it's like a commodity services category. And we were counseling them that that's not the measurement that the customer's going to hold you to. They're not going to look at their satisfaction with you versus your competitors. They're going to look at their satisfaction with you versus other companies in their lives, in different areas, in different industries, companies that have higher levels of satisfaction, companies that get it right, all the time, much more than you and your category competitors do. So you can't simply think of what your customer's expectations are relative to your particular industry or your particular category of service.

The companies that have done it right and exceed customer expectations in the short and the long term generally have several traits. First, they take the customer's perspective. They try to see their business from the customer's perspective, looking at their business with an "outside-in" view, rather than from their product's perspective or their service's perspective, looking out at the customer. They put themselves in the customer's position and they ask themselves "how would I like to be treated if I were the customer?" and then they try their best to do that. Companies that do a good job inculcate that particular attitude in the minds of their employees and their customer contact personnel and their channel partners. It is an attitude that is based on thinking that the most important thing for our business is earning the trust of the customer.

Let me give you an example: Royal Bank of Canada. They're an analytically sophisticated company. They have millions of customers, and they track something like 20,000 individual customer segments. They have something called the behavioral-based modeling tool, which evaluates marketing initiatives in terms of not just the amount of profit or cash returned from the initiative itself in the short term, but also the effect of that initiative on the lifetime values of the customers exposed to it. That way they can evaluate their initiatives in terms of the overall efficiency of the initiatives, not just in the short term but the long term. This has led Royal Bank of Canada to develop some really interesting policies. For instance, everyone at RBC gets automatic overdraft protection. You have to be a customer for 90 days, and you have to have at least one deposit in the last 30 days, with a good credit score. But this is true of the vast majority of its customers and if it's true of you, then after your first 90 days at the bank you get automatic overdraft protection. This means they won't return a check to you for an insufficient funds notice and a $35 service charge, like other banks would do, just because you miscalculated and overdrew your account by five dollars or ten dollars or even $50. Everybody's overdraft protection is unique to them, it's individually tailored. What Royal Bank of Canada has found is that overdraft protection like that tends to improve levels of customer satisfaction. It minimizes the costs of processing, all these things that minimize customer defections in the first few days or first few months of their new patronage at the bank. And it's been a win-win for everyone.

Another company that works hard to exceed customer expectations is JetBlue. And here's a company by the way, in a category, airlines, where people's expectations are generally low. All the big airlines have done a very good job of hammering down customer expectations over the last several years. They charge you for everything but the use of the restrooms on the plane. But now here comes an airline, JetBlue, that basically puts video in the seatbacks, is a very low price airline, the flight attendants are attentive and friendly and well-trained, as are the gate agents, and it's just a terrific airline to check in on. If you've never used them, I highly recommend JetBlue, I use them all the time. And one of the advantages that JetBlue has, and I think an advantage that people talk about a lot, but I think one of the biggest advantages they have is the simple fact that people's expectations of airlines in general is so low. It's not hard to exceed those expectations and especially if you've got a new carrier like JetBlue.

So, I think there are lots of examples of companies exceeding expectations. But it's hard to do and expectations are growing more and more ambitious all the time. Customers are just getting more and more demanding, so you have to hurry up just to keep up with them

Quality Concerns

The Bank's policy on Grievance Redresses follows the under noted principles :

* Our customers will be treated fairly at all times

* Complaints raised by our customers will be dealt with courtesy and in time

* Our customers will be fully informed of avenues to escalate their complaints/grievances within the organization and their rights to alternative remedy, if they are not fully satisfied with the response of the bank to their complaints

* Our Bank will treat all complaints efficiently and fairly as they can damage the Bank's reputation and business if handled otherwise.

* Our employees will work in good faith and without prejudice to the interests of the customer.

In order to make Bank's redressal mechanism more meaningful and effective, a structured system will function at Branches/Circle Offices/Head Office, which will ensure that redressal sought is just and fair and is within the given frame-work of rules and regulation.

This policy document will be made available at all branches. All the employees will be made aware about the complaint handling process to ensure better customer service and general awareness in the Bank.

1 The customer complaint arises due to:

a. The attitudinal aspects in dealing with customers

b. In adequacy of the functions/arrangements made available to the customers or gaps in standards of services expected and actual services rendered.

The customer is having full right to register his complaint if he/she is not satisfied with the services provided by the Bank. He/she can give his/her complaint in writing, orally or over telephone. If customer complaint is not resolved within given time or if he/she is not satisfied with the solution provided by the bank, he/she can approach Banking Ombudsman with his/her complaint or other legal avenues available for grievance redresses.

2. Internal Machinery to handle customer complaints/grievances

a. If the customer wants to make a complaint, we will inform :

o Where to make complaint

o How a complaint should be made

o When to expect a reply

o Whom to approach for redresses

o What to do if customers are not happy about the outcome

b. The Bank will inform customers where to find details of procedures for handling complaints fairly and quickly.

c. If the customer complaint is received in writing, we will Endeavour to send an acknowledgement/a response within a week. If customer complaint in relayed over phone at our designated telephone helpdesk or customer service number we shall provide a complaint reference number and keep customers informed of the progress within a reasonable period of time.

d. After examining the matter, we will send our final response or explain why we need more time to respond and shall Endeavour to do so within 30 days of receipt of complaint and will tell customers to take their complaint further if they are still not satisfied.

Integrated Gaps Model of Service Quality

The concept of liberalization & globalization opened the market to intense competition throughout the world. Now the purchase is made mostly on customer's perception of quality attached to a product. The quality is the vital aspect for a product. Also service quality (SQ) is the function of perceptions, expectations &performance. SQ defines as a comparison of what customers feel a service provider should offer with how the provider actually performs.

They proposed six dimensions;





5.Empathy and


Using the Expectations-Service Gap Chart and Grid enabled us to identify easily the attributes that need corrective actions. Attributes in Quadrant Land IV need corrective actions whereas attributes in Quadrant II and III were considered a low priority. However, banks need to narrow these gaps otherwise then gaps will widen and caused negative implications.

•Banks should carry out this analysis regularly and make improvement from time to time. Failing to identify and rectify problems will widen the gaps and finally failing to meet customers' expectations more consistently.

Drafting Service Recovery Strategies

Throughout the years, we have focused on one task, one mission - To Give You The Best in Services and In Products. Among other Banks, it was Karnataka Bank who first realised the importance of having a Centralized Banking system and was among the first to deploy the Core Banking System in the year 2000. This system enabled us to store and processes all the customers' accounts from one single place - the Data Centre at Bangalore. To ensure that you have the Best, we have deployed the State-Of-Art technology from the best players in the Industry like Infosys, Sun and Wipro. These systems provide the highest reliability thus enabling us to offer to you Non-Stop services of the highest order. We have taken a lead and implemented a Disaster Recovery Centre. This centre will replicate the Banks Centralized Banking system and all its data. This centre will also be the backup for the ATM operations. In the event of a natural disaster at Bangalore, this centre will immediately come into force and provide full continuous service. Leavin