Behind Karnataka Bank’s digital transformation

The adoption of digital tools has increased the efficiency with which KBL processes its transactions.

The transformation journey of the Indian banking industry is well underway. Driven by the maturity of AI, banks have faced disruption in the past two years due to the pandemic forcing them to reformulate their business models. Several players in the sector are now gradually moving towards cloud from closed legacy IT systems. For a bank that was established 98 years ago, Karnataka Bank Limited has undertaken the uphill task of employing and expanding digital solutions ahead of crunch time. KBL was awarded earlier this year by the Confederation of Indian Industry (CII) at the DX 2021 Awards for Best Practice in Digital Transformation. 

We spoke to Rajkumar P.H., the General Manager of IT at Karnataka bank, about their route towards digital transformation and their partnership with IBM to realise their goals in this regard. 


Beginning its journey in 1924 in Mangaluru, Karnataka Bank Ltd. has come a long way to become one of the most important banks in the country with a pan-India presence. The institution is a first-generation private bank on the verge of celebrating its centenary year. “From its modest beginnings when it had a business turnover of Rs 20,000 in 1924, the bank has crossed a turnover of Rs 1.33 Lakh crores in December last year,” Rajkumar said. KBL offers a wide variety of corporate and retail banking products and services to its more than 12 million customers.

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Early digital transformation and adoption 

As early as 2017, Karnataka Bank began what Rajkumar said was a ‘holistic transformation journey.’ The bank embarked on ‘Project KBL – VIKAAS‘ in association with Boston Consulting Group, a leading global management consulting firm, as its partner. “The objective of this programme, founded on digital and technology as enablers, was to strengthen the bank’s fundamentals and build long-term capabilities to continue to stay ahead of the curve,” he stated.

Launch of ProjectKBL- VIKAAS at its head office in Mangaluru

“The digital foray commenced with the establishment of a one-of-a-kind Digital Centre of Excellence (DCoE) in Bengaluru, a digital innovation hub of the bank. DCOE is powering the launch of various digital journeys harnessing the latest cutting-edge technologies. 

Under KBL VIKAAS 1.0, digital sanctions are enabled for the Retail and MSME loan products, with capabilities like digital underwriting for online opening of savings accounts through Tab & Web banking. Along with this, a digital platform for customers to invest in Mutual Funds was also introduced,” he explained. 

Customers have become quickly acclimatised to several enhancements that have been made in mobile banking, internet banking, and other ADC products. Rajkumar said that internally as well, various digital tools for lead management, collection management, NPA management, digitisation of internal processes, and automation in MIS reports/dashboards were sanctioned with the best turnaround time in the industry. 

Use cases

“With digital underwriting, in-principle sanctions are provided with one of the best TAT or Turn Around Time in the industry. Currently, 94% of the eligible retail loan sanctions are happening digitally. The bank’s digital transactions, which were hovering around 65% during the F.Y. of 2018, have increased to more than 92% now,” Rajkumar said, noting the bank’s digital growth. 

KBL also launched mobile banking for NRIs. The bank also reported an increase in registered customers for mobile banking from around 11 lakhs to 24 lakhs. Currently, around 54% of the bank’s eligible saving accounts are opened digitally through the web facilities or tabs provided to the branches. The bank now also provides a digital facility for online KYC updation and online booking of safe deposit lockers. 

“Under digitisation of internal processes, the major initiatives implemented are a digital tool for claim settlement, compliance test report, education loan subsidy & onboarding of advocates, centralisation of office accounts, expenditure payment & 26Q, automation of submission,” Rajkumar added. 

He also revealed that the adoption of digital tools has increased the efficiency with which KBL processes its transactions. 

Customers have readily accepted these changes, with various retail lending and onboarding journeys having an adoption rate of over 80%. This showed with the bank’s improved customer satisfaction score (CSAT) having increased from 4.30 in the beginning to 4.78 at present, over a scale of 5. 

Setting up Analytical Centre of Excellence

KCL’s Digital Centre of Excellence in Bengaluru

Digital disruption is redefining the banking industry with a focus on customer experience and more personalisation. We strongly believe that disruptive AI technologies can dramatically improve banks’ ability to achieve four key outcomes: higher profits, at-scale personalisation, distinctive omnichannel experiences, and rapid innovation,” Rajkumar stated.

The bank is in the process of setting up an Analytical Centre of Excellence (ACoE) with the following broad objectives:

  • Develop an AI strategy
  • Define a use-case driven process
  • Experiment with prototypes
  • Build with confidence
  • Scale for deployment
  • Drive sustainable outcomes
  • Data & analytics play a vital role in many of the bank’s initiatives. The bank uses both internal & external unstructured data for data enrichment and decision-making in the areas of acquisitions, customer service and risk management.
  • Analytics-based dashboards are used for monitoring and to have a 360-degree view of the customer.

Collaboration with IBM

KBL’s applications are developed on Node.js or AngularJS with containerised Docker-based application deployment on RHEL OS on a three-tier application architecture layer. The database used is MSSQL.  

The bank is currently using IBM App Connect Enterprise, IBM API Connect, and Datapower Gateway to speed up digital integration. 

IBM App Connect

IBM App Connect Enterprise delivers a platform that supports the full breadth of integration needs across a modern digital enterprise.

KBL is using IBM App Connect Enterprise to connect applications, regardless of the message formats or protocols that they support. This connectivity means that all diverse applications can interact and exchange data with other applications in a flexible, dynamic, and extensible infrastructure. IBM App Connect Enterprise routes transform and enrich messages from one location to any other location.

IBM API Connect 

IBM API Connect is an integrated API management offering where all of the steps in the API lifecycle, and the actions that surround it, are performed within the offering. With this offering, KBL can create, secure, manage and socialise the APIs.

IBM API Connect Software helps banks manage internal and partners’ APIs in a centralised location, where common security policies like rate limiting, authentication, authorisation, TLS, and other policies can be applied. The API usage can be monitored using analytics, and a self-service and company-branded website/portal for API consumers/subscribers can be provisioned.

IBM DataPower Gateway

IBM DataPower Gateway is a single multichannel gateway that helps the bank provide security, control, integration, and optimised access to a full range of mobile, web, application programming interface (API), service-oriented architecture (SOA), B2B, and cloud workloads. The appliance provides a high-performance, scalable gateway with a set of built-in policies for security, traffic management, and mediation. It provides security policies to protect users against authenticated threats and manage traffic and other services.  

Vision for the future

“The bank is focussed on taking the digital initiatives to the next level with the ‘KBL NxT’ concept under wave 2.0 of ‘KBL VIKAAS’. ‘KBL NxT’ is focused on digitisation under various verticals of the bank,” Rajkumar said. The key areas that will be looked at under the plan are chatbots, account aggregators, neo-banking, trade finance automation, online account opening with V-CIP, digital insurance, corporate mobile banking, enhancements to internet banking, and retail mobile banking. Initiatives for these are already underway. “With this digital transformation under KBL-NxT, the bank endeavours to emerge as a ‘Digital Bank of the Future,” he stated. 

Poulomi Chatterjee
Poulomi is a Technology Journalist with Analytics India Magazine. Her fascination with tech and eagerness to dive into new areas led her to the dynamic world of AI and data analytics.

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