Breaking new ground TN's homegrown banks expand beyond their regional roots
CHENNAI: In recent years, Tamil Nadu’s traditional banks have been rewriting their narratives. Once deeply rooted in local communities and regional networks, institutions like the Tamilnad Mercantile Bank (TMB), City Union Bank, Karur Vysya Bank (KVB) and Indian Bank are reinventing themselves for a new era. In a bid to capture markets far beyond their established territories, these banks are embracing cutting-edge technology, diversifying into sectors such as micro, small and medium enterprises (MSMEs) and retail banking, and increasingly targeting niche customer segments like Non-Resident Indians (NRIs). This transformation not only reflects their ambition to grow but also highlights their strategic response to a rapidly evolving financial ecosystem.
Historically, Tamil Nadu’s homegrown banks are known for their strong community orientation. Founded by visionary entrepreneurs and local business communities, these banks initially served the immediate financial needs of traders, agriculturists and small business owners. Their evolution from regional players to nationally-recognised institutions has been marked by decades of steady growth, strategic mergers and a gradual shift towards embracing technology and modern banking practices.
What once began as modest operations has expanded into robust networks with thousands of branches, ATMs and automated service centres. At present, these banks are not only increasing their physical footprints but also reimagining customer service through digital innovations and data-driven decision making. The evolution from a community-centric model to one that competes on a national level is a testament to their ability to adapt to new market demands while retaining customer trust built over generations.
Tamilnad Mercantile Bank: A digital pioneer with storied past
Established in 1921 by the enterprising Nadar community, the Tamilnad Mercantile Bank (TMB) has grown from a regional institution to a dynamic player in India’s banking landscape. Initially focused on addressing the financial needs of the Nadar community, TMB has undergone a dramatic transformation over the decades. The bank’s journey is characterised by a steadfast commitment to innovation, operational efficiency and a customer-centric approach.
Currently, TMB is leveraging Artificial Intelligence (AI) and Machine Learning (ML) to streamline loan processing for MSMEs — a sector critical to India’s economic engine. Managing Director and CEO, Salee S Nair, said that by introducing AI-powered loan processing for amounts up to `50 lakh, the bank has reduced approval times by 25%, thereby enhancing its competitive edge. The establishment of eight Credit Management Centres, beginning with a pilot in Thoothukudi, is another strategic move to ensure faster loan disbursals and more effective risk management, he added.
TMB’s historical milestones are as remarkable as its technological advancements. The bank’s first branch in Thoothukudi in 1921 laid the foundation for robust expansion, including a brief international venture with a branch in Colombo between 1937 and 1939. Its first out-of-state branch in Bengaluru in 1976 signalled the start of its regional outreach, while the launch of its fully computerised branch in 1984 at WGC Road, Thoothukudi, heralded the bank’s modernisation. Further strengthening its operational infrastructure, TMB established a currency chest in Madurai in 1993 and introduced ATM cards in 2003.
Now, TMB boasts an extensive network of 572 branches, 1,161 ATMs, 369 cash recyclers and 122 e-lobbies across India. The bank’s currency chest in Pudukkottai is a notable example of its commitment to technological innovation — it is among the first in South India’s private banking sector to employ robotics for automated operations. Financially, the bank’s growth is staggering: from an initial deposit of just Rs 21,010 in 1921 to an impressive Rs 49,342 crore as of September 2024.
In addition to technological advancements, TMB is recalibrating its business model to attract deposits from a broader customer base. Facing stiff competition from mutual funds for deposit inflows, the bank has introduced a local NRI centre aimed at capturing funds from expatriates. A strategic tie-up with Oracle has further enhanced the customer experience by automating operations that traditionally consumed significant manpower and resources. This comprehensive strategy not only reinforces TMB’s commitment to operational efficiency but also positions it as a formidable player in both the MSME and retail banking sectors.
City Union Bank: Marrying tradition with innovation
City Union Bank, formerly known as ‘The Kumbakonam Bank Limited’, has been a pillar of India’s banking industry since its inception in 1904. Founded by a group of visionary citizens in Kumbakonam, the bank embarked on its journey with a regional focus, serving the Thanjavur delta district with unwavering dedication. Over the decades, City Union Bank’s narrative has been one of strategic growth, technological modernisation and an unwavering commitment to customer service.
The bank’s early expansion saw the opening of branches in key towns like Mannargudi, Nagapattinam and Tiruvarur over a span of 25 years. This regional consolidation was recognised by the Reserve Bank of India when the bank was included in the Second Schedule of the RBI Act in 1945. A series of mergers and acquisitions, including the integration of the Common Wealth Bank Limited in 1957 and the amalgamation of the City Forward Bank Limited and Union Bank Limited in 1965, helped expand its branch network and solidify its reputation as a reliable financial institution.
The transformative leadership of O R Srinivasan in 1969 marked a turning point for the bank. Under his guidance, the bank embarked on a phase of rapid expansion, establishing branches in major cities across Tamil Nadu such as Tiruchy, Madurai and Coimbatore. The subsequent era of modernisation under V Narayanan in 1980 further broadened the bank’s horizons, with the opening of its first out-of-state branch in Bengaluru and subsequent ventures into Hyderabad and Secunderabad.
Rebranded as City Union Bank Limited in December 1987, the bank has consistently embraced innovation. The establishment of a dedicated Staff Training College in 1989, the automation drive in 1990 and the implementation of core banking solutions in partnership with Tata Consultancy Services have been instrumental in enhancing operational efficiency. Entering the 21st century, the bank bolstered its service offerings with the introduction of ATMs, strategic partnerships with insurance companies and collaborations with global financial institutions to streamline money transfers.
A milestone in its rich history was the centenary celebrations in 2003, graced by dignitaries, including former president R Venkataraman. Despite the challenges following the demise of the visionary V Narayanan in 2004, City Union Bank’s leadership under S Balasubramanian and later Dr N Kamakodi continued to drive its innovation and expansion agendas.
Executive Director Vijay Anandh stated that, currently, City Union Bank operates 839 branches and is targeting an ambitious goal of reaching 1,000 branches by March 2026. “We are actively expanding into key markets such as Delhi, Maharashtra, Gujarat, Rajasthan, Madhya Pradesh and Chhattisgarh,” he said.
The bank’s focus on MSMEs remains strong, with digital banking solutions and 18 decision-making hubs that ensure faster loan approvals, thereby enhancing customer satisfaction and operational efficiency. “Our forte has always been MSMEs and our branch managers are tuned towards MSME products. We have completely gone digital. This has compressed our Turnaround Time (TaT) which had been running into weeks. This helped us take decisions on MSME files within eight hours of logging in, giving us a clear advantage,” he said.
Retail banking is another frontier for City Union Bank. Innovative partnerships, such as a co-branded credit card with the Chennai Super Kings, underscore its commitment to appealing to younger, tech-savvy customers. Future plans include collaborations with other sports franchises and tailored savings packages for NRIs. With deposits amounting to Rs 58,271 crore and advances of Rs 50,409 crore, the bank’s robust financial standing is complemented by its prudent risk management practices and customer-first approach.
Karur Vysya Bank: A century-old legacy in the modern era
The Karur Vysya Bank’s (KVB) beginnings can be traced all the way back to 1916 when it was established in Karur by M A Venkatarama Chettiar and Athi Krishna Chettiar. Initially set up with a modest capital of Rs 1 lakh to support local traders and agriculturists in the state’s textile hub, KVB has evolved into one of the country’s most prominent financial institutions.
The bank opened its first branch in Dindigul in 1927 and became a scheduled bank by 1952. The period between 1963 and 1965 saw a series of mergers that helped KVB expand its reach. By 1980, the bank had received a licence for foreign exchange business, underscoring its growing sophistication and regulatory compliance. Subsequent years saw the bank issuing bonus and rights shares, further solidifying its financial base.
The turn of the millennium brought with it rapid modernisation for KVB. By 2003, the bank had ventured into insurance and completed full computerisation of its operations — a move that paved the way for the adoption of core banking solutions between 2004 and 2005. The introduction of mobile banking services and a slew of innovative loan products further marked its transition into the digital age.
Between 2008 and 2010, KVB not only expanded its branch network but also earned several prestigious banking awards, reinforcing its reputation for excellence. Continuous expansion efforts have been evident through the subsequent subdivisions of equity shares and the enhancement of its digital service platforms. As of March 31, 2024, KVB operates an extensive network comprising 838 branches, 1,642 ATMs, 620 Bunch Note Recycler Machines and 217 Self-Service Passbook Kiosks.
Looking ahead, KVB is focused on a nationwide expansion strategy with plans to open 100 new branches in the current fiscal year. Its growth agenda is sharply focused on strengthening retail banking, supporting the agricultural sector and providing innovative financial solutions for MSMEs — all while maintaining robust financial health and profitability. The bank’s ability to combine a storied legacy with modern digital capabilities makes it a unique case study in sustainable growth and transformation.
Indian Bank: Nationalisation and the drive for financial inclusion
The Indian Bank, incorporated in 1907, stands as one of India’s oldest and most resilient financial institutions. Its establishment in the wake of the failure of the Madras-based Arbuthnot Bank marked the beginning of a journey defined by adaptability and service to the broader public. With the central government’s decision to nationalise the bank in 1969, Indian Bank’s focus shifted dramatically towards fostering financial inclusion and extending banking services to rural and underserved areas.
The bank’s expansion into international markets began early — opening its first overseas branch in Colombo in 1932, followed by another in Singapore in 1941. Nationalisation in 1969 not only broadened its mandate but also brought in the operational rigour and stability expected of a public sector institution. Indian Bank emerged as a key player in initiatives aimed at supporting agriculture, small-scale industries and economically weaker sections of society. Currently, with total business valued at approximately Rs 12.44 lakh crore — as per 2024 figures — Indian Bank is recognised as the seventh largest bank in the country.
The transformation of Indian Bank over the decades mirrors the broader evolution of the country’s banking sector. While the bank continues to serve its traditional mandate of financial inclusion, it has also embraced modern banking practices to remain competitive. Investments in digital banking platforms, streamlined customer services and innovative lending products have enabled Indian Bank to cater to an increasingly diverse clientele — balancing its legacy as a public sector stalwart with the demands of contemporary financial markets.
A common thread
The journeys of TMB, City Union Bank, KVB and Indian Bank towards transformative growth illustrate a common narrative of adaptation, resilience and forward-looking strategy. However, their distinct paths also highlight the varying challenges and opportunities faced by banks with deep regional roots.
All four banks have invested heavily in technology. While TMB and City Union Bank are leveraging AI, machine learning and advanced digital infrastructures to streamline operations and enhance customer experiences, KVB has focused on complete digital transformation — from mobile banking services to fully computerised operations. In contrast, Indian Bank has had to balance modernisation with its long-standing mandate of financial inclusion.
City Union Bank is aggressively expanding into non-traditional markets across northern and western India, with a clear focus on retail banking and MSMEs. TMB, meanwhile, is enhancing its operational efficiency through technology and targeting deposits from NRIs. KVB is steadily expanding its branch network nationwide, while Indian Bank continues to invest in reaching out to rural and underserved areas.