How Karur Vysya Bank Achieved 100 Years – The Inside Story

I had blogged about Karur Vysya Bank completing its 100 years in 2016. It was even celebrated with President of India gracing the occasion. However, the media responses were muted. There was hardly any discussion/oped in the mainstream newspapers. Who is really interested in such things really? It is after all just a small old private sector bank based out of Karur.

Though, there are some media places which showed some interest. Seasonal Magazine does a good review of the 100 year journey of the bank:

This is what Dr. APJ Abdul Kalam, Chief Guest at the Founders’ Day celebration of this bank, said around ten years back – “I would like to quote Mahatma Gandhi who had said the difference between what we do and what we are capable of doing would suffice to solve more of world’s problems. This has been proved by Karur Vysya Bank by rising to the occasion, facing challenges, and coming out gloriously from every situation.”

If one thing that will remain undisputed about Kalam forever is that he never speaks without understanding, never opines without studying. When he is invited for any event or a speech, that is how he ends up mesmerizing the audience as well as the hosts. More than that, when Kalam says something the world notices it as something substantial.

What made Dr. Kalam say this about Karur Vysya Bank back then? That is a long story, and before that should be mentioned one cardinal point about KVB and its Centenary.

How did KVB manage the feat where most failed:

Now, coming back to why Dr. Kalam was so impressed with KVB’s achievements through the decades.

1916 to 2016 was by no means easy to survive for most businesses, forget banks. When KVB started its life, World War I was raging on, drawing even Indian soldiers serving the British army, into action. In 1929, Wall Street would crash starting the Great Depression across the world, for the next 10 years.

But by the time the world started coming out of the Great Depression, it was time for World War II which began in our neighbourhood with the Japanese invasion of China in 1937 and Nazi invasion of Poland in 1939. For the next 6 years, the greatest war the world has ever seen would rage on across continents and nations, pulling India and its soldiers too into the picture, and postponing Indian Independence for nearly another decade.

Soon after World War II and Indian Independence, it was time for reconstructing India, with the country having only a handful of banks. Karur Vysya Bank too played its part in all those years, supporting the local economy of Karur and neighbouring districts effectively.

While India’s reconstruction was on in full swing over the next few decades, India would also be drawn into three wars with Pakistan and one with China, not to mention the Emergency period, Sikh terrorism in Punjab, and finally Iraq’s invasion of Kuwait and the first Gulf War that resulted in India’s infamous Balance of Payments crisis in late 80s and early 90s.

How a small cap bank like KVB traversed these treacherous times will one day end up as a case study in leading business schools in India and abroad. Three factors have been outstanding in Karur Vysya Bank’s performance through these 100 years. Firstly, it never breached depositor confidence. Secondly, it never failed to support its lenders.

However, the third one is the most impressive, which is that KVB has always been profitable, and that it has always shared profits to its shareholders as dividends, through these one hundred years. Given how many banks have not even survived 50 years to tell their story even, this focus on profitability or sustainability is what has helped KVB to beat all odds.

Generating profits and sharing it equitably has happened in KVB when there was a large promoter group in the bank, and also when later day regulations limited promoter group holdings in all private sector banks.

Profitability and yet were inclusive for most part of their history. And we think banks could either be profitable or inclusive.

Few would know that even Laxmi Vilas Bank hails from Karur. What made Karur home to two of the oldest banks in India:

All through the difficult decades and their challenges, there were also significant happenings in the country that proved pivotal for Karur Vysya Bank’s growth. While continuous wars and food imports led to the Green Revolution and White Revolution in India, focus on promotion of employment-intensive sectors like textiles and automotive, resulted in these sectors booming in various pockets across the country, of which one was Tamilnadu’s central region, in and around Karur.

That is how Karur District as well as its neighbouring ones like Namakkal in the North, Dindigul in the South, Tiruchirapalli in the East, and Erode & Tiruppur Districts on its West became thriving hubs for textiles, automotive, and agri based businesses including thousands of supportive SME units in these sectors.

More research is needed on this Karur bit. It is amazing how a small town as Karur sustained two banks all these years when banks failed even in big cities.

4 Responses to “How Karur Vysya Bank Achieved 100 Years – The Inside Story”

  1. Kimi Says:

    Awesome note

  2. MS Says:

    Yes, definitely an awesome note. What would be very interesting to understand is how these banks stay immune to external interference in lending, laundering and overall political interference. Will be impossible to get an account of those…

    Also, I was looking for some evidence of the strong community (read: caste based) owner customer relationships that sustain these regional banks. Even banks that sold out, like Tamilnad Mercantile Bank, still have a strong caste ecosystem around them. Probably similar to American Credit Unions that remarkably survived many crises

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