CHAPTER 1: INTRODUCTION OF THE STUDY

1.1 Introduction

Banks are closely related to masses. Banks are extremely important as they are the
entities that come in direct contact with people. “Banking system is an important part
and parcel of any financial system. It is responsible for the performance of an important
task of mobilizing savings from the people and converting them into investment. To
perform these functions effectively, there is a need of well-spread banking concerns in
every nook and corner of the country. Only then effective mobilization of savings from
the masses can become possible. The rise in population demands equal proportional rise
in the growth of banking concerns.” 1
Banking system has always been an important focal point in the economy of any
developing nation. Banks perform specialized functions in the financial intermediation
and payment system and hence, are regarded special in any economy. Also, an effective
banking system plays an important role in economic development of nation. Banks
occupy an important place in the organized money market with its large number of
branches, huge deposits and advances. Banks are the financial institutions that accept
the deposit of the public and provide loans to the one who needs it. They are the
financial institution whom assists in the economic development as a whole.
As blood and pulse are important to keep human alive, similarly profit and profitability
are important for growth, expansion and survival of banks. Therefore, profitability is an
important component for any bank and without it the bank would be like a body without
backbone. Low or negative profitability makes the survival of the banks very difficult.
All the business has one common objective of profit maximization. The performance of
the banks indicates their efficiency.

1
Dastane S., Thakkar S (2017), “Developing A Population Relativistic Growth Assessment
Indices For Banks With Case Study of Growth of UCBs In Thane District of Maharashtra”,
ASM’s International E-Journal on Ongoing Research in Management and IT, E-ISSN-2320-
0065, INCON–XII 2017) (Dastane S., 2017)

1
Banks, as we know, provides a wide range of products and services and help business
organizations, however, these products and services are more or less identical from one
bank to another. There is hardly any scope to differentiate between the products and
services of different banks. Hence, measuring each bank’s performance with an
objective to determine its contribution to business development is very important.
Banks are the entities that attract significant attention from the public and hence, there
is a growing need for scrutiny of banks by financial regulators and their evaluation in a
more efficient manner. Now-a-days, not only supervising institutions, management
bodies and regulators, but also bank customers are becoming more concerned about
banks sustainability and stability.
“As a significant component of modern economy, the efficiency of the banking is
especially important. In order to ensure health of the financial system and the efficiency
of the economy, we must make a careful assessment and analysis of the banks.” 2
Banks come under the purview of Reserve Bank of India (RBI) that was established as a
central bank for the country in 1935. The process of regulation and supervision was
limited by the provisions of RBI Act, 1934 and the Companies Act; 1913. The Indian
banking system can broadly be classified into organized and unorganized banking
system. There are money lenders, lending pawn brokers, native bankers, etc. who
constitute the unorganized banking sector. On the other hand, the organized banking
sector consists of scheduled commercial banks and scheduled urban cooperative banks
which have RBI’s permission for conducting banking business. Banks listed in the
second schedule of the RBI Act, 1934 comprises the scheduled banking structure in
India. Commercial, rural, urban and state cooperative banks are all scheduled banks
which are regulated under the Banking Regulation Act, 1949. The Scheduled bank
includes all the commercial banks like nationalized, cooperative, development, foreign
and regional rural bank. Whereas Non-scheduled banks are those banks that are not
included in the second schedule of the RBI Act, 1934.

2
D Rengasamy (2012), Need to Evaluate Bank Performance, The Borneo Post,
Sabah, Malaysia
2
 Figure no. 1. 1 - Structure of Banking in India
Source: (ShikaraAcademy, 2019)
The above chart shows the structure of Banking in India
India.. The classification
classificat of the
banking industry in India is as under:

 Scheduled Commercial Banks:

The Scheduled Commercial Banks include the Banks as under:

1. Public Sector Banks:

Public Sector Banks are the major type of government owned banks in India where the
majority of stake i.e. more than 50% is held by the Ministry of Finance of the
Government of India or State Ministry of Finance of various states in India.

2. Private Sector Banks:

Private Sector Banks are the banks in which private individuals own a major portion of
thee bank’s equity. These banks adhere to the guidelines of the Central Bank; still they
are free to develop their financial strategies for their customers. The shares of these

3
 banks are traded in the stock market and anyone can purchase a significant portion of
the shares on the stock market.

3. Foreign Banks:
A foreign bank is the one that provides its services to the international customers from
outside of its native country. They have their registered and head office in foreign
country but have their operating branches in India. The foreign banks complies the laws
of both the countries. The primary activity of most of the foreign banks being corporate
segment, some of the larger banks have also made consumer financing as a major part
of their portfolios. In the mid 1990’s the number of foreign banks along with private
banks increased.

 Cooperative Credit Institutions:

1. Regional Rural Banks:

Regional Rural Banks are government owned scheduled commercial banks of India that
works at the regional level in different states of India. These banks work under the
Ministry of Finance, Government of India. They were created to serve rural areas with
basic banking and financial services. Also RRB’s have urban branches. They provide
credit to small farmers, artisans, small entrepreneurs and agricultural labours.

2. Urban Cooperative Banks (UCB’s):

The Urban Cooperative Banks (UCB’s) consist of single tier, i.e. Primary Co-operative
banks which are commonly referred to as Urban Co-operative Banks.

a. Scheduled Cooperative Banks:

 Scheduled Urban Cooperative Banks:

A bank is called a scheduled bank in India, if it is listed in the second schedule of the
RBI Act, 1934. In order to be included under this schedule of the RBI Act, banks have
to fulfill certain statutory conditions such as:

 The banks need to have paid up capital and reserves of at least Rs. 0.5 million (50 Lac)
 They should satisfy the CRAR norms and other prudential norms of RBI

4
 They should satisfy the RBI that their business is not being conducted in a manner
prejudicial to the interests of its depositors.

 Scheduled State Cooperative Banks:

Scheduled State Cooperative Banks are the banks that run their banking activities at the
state level. They have to comply the laws as prescribed by the Reserve Bank of India.

 Non-Scheduled Urban Cooperative Banks:

A bank is a non-scheduled bank in India, if it is not included in the second schedule of
RBI Act, 1934. The banks need not maintain balance with the RBI in the form of cash
reserve ratio and statutory liquidity ratio.

3. Rural Cooperative Banks: On the basis of their lending operations, rural credit
societies are divided into short term and long term. The Rural Cooperative Banks are
divided into two types as under:
a. Short Term Rural Cooperatives
b. Long Term Rural Cooperatives

The Short Term Rural Cooperatives are further subdivided as under:

1. State Cooperative Bank (SCB)
2. Central Cooperative Bank (CCBs)
3. Primary Agricultural Credit Societies (PACS)

The Long term Rural Cooperatives are further subdivided as under:

1. State Cooperative Agriculture and Rural Development Banks (SCARDBs)
2. Primary Cooperative Agriculture and Rural Development Banks (PCARDBs)

5
1.1.1 Cooperative Banking in India

A cooperative bank is a financial institution run and owned by its members, who also
happen to be its customers. Co-operative banks are often created by a group of persons
who share a same interest or who are members of the same local or professional
community. Cooperative banks often provide their members with a wide range of
banking and financial services (loans, deposits, banking accounts etc.). The structure,
purpose, ideals, and governance of cooperative banks set them apart from other banks.
In most countries, banking authorities supervise and control them, and they must
conform to prudential banking rules, which put them on an equal footing.

Co-operatives are organized groups of individuals in India that run enterprises that are
democratically governed and collaboratively managed. They seek to serve their
members and depositors with more benefits and services. In their day-to-day operations,
cooperative banks display professionalism by demonstrating skills and standards in
completing the responsibilities allocated to them. The bank demands current and future
advancements in information technology.

Cooperative banks must invest appropriate resources in order to maximise their profits
by providing effective services. In India, cooperative banks have existed for over a
century. They play a major and dominant role in the financial structure of the country.
They have become a significant player in the money market. As a result, a rapid
assessment of their progress should be taken into account. Cooperative banks have a
long and illustrious history that dates back to 1904.

The credit society act was passed in India to boost the cooperative movement. From
1904 until 1951, however, the expansion of cooperative banks was the most dismal. The
founding and regulation of cooperative societies was the first stage in the development
of co-operative banks. The Government of India Act of 1919, enacted as a result of
constitutional amendments, moved responsibility for "cooperation" from the central
government to the provinces. The first State Cooperative Societies Act was passed by
the Government of Bombay in 1925, “not only giving the movement its size and shape,
but also setting the pace for co-operative activities and emphasising the vital ideals of

6
thrift, self-help, and mutual aid.” This marked the start of the second phase of Co-
operative Credit Institutions history.

Cooperative banks are intended to fulfill specific tasks, such as offering all types of
credit to customers in cash and in kind, advancing consumer loans, providing banking
services in rural areas, mobilizing deposits, monitoring loan repayment, and so on. A
cooperative bank has its own set of requirements. They've experienced a lot of
problems, which has slowed cooperative bank expansion. As a result, more
investigation was required. In 1958-59, the RBI conducted the first study on Urban Co-
operative Banks. The 1961 Report recognized the extensive and financially sound
framework of urban co-operative banks, underlined the necessity to build primary urban
co-operative banks in new centre’s, and recommended that state governments actively
assist their expansion. The Varde Committee advised in 1963 that such banks be
established in all urban areas with a population of one lakh or more, rather than by a
single community or caste. The committee developed the concept of a minimum capital
requirement as well as population factors for determining where UCBs should be
located.

1.1.2 Structure of Cooperative Banking in India

The origin of cooperative banking in India can be traced back to 1904. Official efforts
were made for the creation of a new institution based on the principles of cooperation
which was thought to be the only solution to solve financial problems of Indian
agriculture. Even today cooperative banks play an important role in rural financing and
in recent years its importance has increased in urban areas too. With the advent of
national economic planning in independent India, cooperative banks got an important
role. It soon became an integral part of five year plans. Cooperative banks in India are
subsidized financial agency that is sponsored and supported by the government. RBI,
NABARD, central and state government financially help cooperative banks.

7
 Figure no. 1. 2 - Structure of Co-operative
operative Banks in India
Source: (structure
(structure-of-cooperative-banking-in-india,
india, 2019)

The cooperative banking structure in India can be divided into two types - urban
cooperative banks and rural cooperative credit institutions. Urban cooperative banks
include a single tier – primary cooperative bank which are often referred as urban
cooperative banks. However, the rural cooperative credit institutions are divided into
short term and long term. Short term cooperative credit structure are further divided into
three tier structure including Primary Agri
Agricultural
cultural Credit Societies (PACS) at the
bottom, Central Cooperative banks (CCB) at the district level and State Cooperative
Banks (SCB) at the state level. However, in case of small states and union territories
there is just a two tier structure and SCB directly
directly performing the functions of PACS.
A three-tier federal co-operative
operative banking framework exists.

A, State Co-operative
operative Bank is the highest level of government cooperation (i.e. works at
state level).

B. The Central Co-operative

operative Bank is a medium
medium-sized cooperative
ooperative bank. (For example,
the District Cooperative)

8
C. Primary Co-operative credit societies at base level (At village level)

1.1.3 Urban Cooperative Banks in India

Urban cooperative banks become important because of the fact that commercial banks
are not interested in making credit available to urban middle class as it is not beneficial
for them in providing small amount of loans on account of high cost of advancing and
recovery. Therefore, a middle class man in urban area who is in need of funds will
automatically be driven to money lenders or similar agencies which charge extremely
high rate of interest. This led to rise of urban cooperative credit movement in India. The
main objective of this movement was to cater to the banking and credit needs of the
urban middle class of population including small traders, businessmen, the artisans,
salaried people and factory workers who had limited fixed income. The movement has
dual objective - first, to save middle class people and men of modest means from the
clutches of private money lenders and second, to inculcate the habit of thrift and savings
among them. This has made it possible for people belonging to weaker section of
society to get an opportunity of investing their savings and thereby enabling the hard
pressed people to overcome to period of stress.
The Urban Cooperative Banks play a vital role in any economy and are instrumental in
furthering financial inclusion by providing traditional, if not more modern, type of
banking services to the people belonging to disadvantaged section of society.
Cooperative has their presence throughout the world in different forms. UCBs have got
the potential that they can be the harbinger of economic empowerment of vast number
of people who are financially excluded. “The number of borrowers of UCBs is 67lac.
This is quite a huge number by itself and there are many cases of transformational
changes that UCBs have brought to its customers” 3 However, it is quite disheartening to
know that there is still a large number of population who do not have access to formal
credit even today, which indicates that what has been achieved is not enough either
from the standpoint of potential or need.
There is still a lot more to be done by the financial institutions that work on the
principle of cooperation. The main objective of UCBs must be to evolve as
neighborhood banks of choice and its main aim must be financial inclusion by providing

3
Report of the Expert Committee on Urban Co-operative Banks (2021), RBI.
Mumbai
9
inclusive finance as the core of the business model. This vision can be achieved only if
operations of UCBs are based on financial strength, cutting edge technology driven
processes, strong bonding, skilled human resources and regulatory environment. These
banks play an important part in fulfilling the credit requirements of Small and Medium
Size industries. This is the only sector where banking and cooperation go hand in hand.
It works on the principles of self-help and mutual-help. Urban and Rural Co-operatives
are the types of cooperatives that operate in Indian urban and semi urban regions over
last 100 years. Though, there has been a sustained growth in UCBs, the sector has gone
through a lot of turmoil in the last few years. UCBs have been instrumental in
addressing problems such as economic inequality and concentration of wealth in few
hands which results in exploitation of poor by handful of rich population.

There are in all 1539 UCBs (including Scheduled and Non-scheduled UCB’s) in India.
Still they form a very tiny part of the banking system accounting for less than 3 per cent
of the total banking assets and deposits and less than 3.5 per cent of the total advances.
Despite of its presence in 25 states of India, almost 80 per cent of the functioning of
UCBs happens in the five states including Andhra Pradesh, Gujarat, Karnataka, Tamil
Nadu and Maharashtra - with the lion’s share going to Maharashtra. More than 60 per
cent of the total banking business of UCBs was concentrated in Maharashtra but the
numbers have started dwindling in the recent years. UCBs have been providing banking
services to grass root people. “As on 31st March 2011, there were 1645 UCBs all over
India and their total deposits were 2,09,949 crore, indicating faith of the common man
in the UCBs”4 However, during past few years, several UCBs have closed down and
customers lost their hard-earned money. The unique and exclusive organizational set up
of UCBs serve as the most effective tool in achieving financial inclusion and taking
banking services to urban poor. Hence, there is a need to check the performance of the
dwindling banks.
UCBs have grown rapidly since the early 1990s. During the phase of rapid expansion,
however, the sector showed certain weaknesses arising out of (a) lack of sound
corporate governance, (b) unethical lending, (c) comparatively high level of loan
defaults and (d) inability to operate in a liberalized and competitive environment. The

4
Report of the Expert Committee on Licensing of New Urban Co-operative Banks – 2011

10
RBI, therefore, has been striving to harness the growth of UCBs with appropriate
application of prudential regulation and supervision to safeguard the interests of
depositors. Keeping in view the weak financial position of many UCBs, the RBI has
undertaken a series of measures directed towards strengthening of the UCBs. Since
March 31, 1993, the UCBs have been advised to adhere to the prudential norms which
include, inter alia, the following.
1. Applying capital adequacy standards.
2. Prescribing an asset-liability management framework.
3. Enhancing the proportion of holding of Government and other approved securities for
the purpose of Statutory Liquidity Ratio (SLR) stipulation.
4. Restriction on bank finance against the security of corporate shares and debentures.
5. Limiting the exposure to capital market investment. 5

Cooperation is considered to be a backbone of any economy. Weak links of system

should not be allowed to destroy cooperation. RBI and state government have power to
put in place a proper system to ensure the success of cooperative movement. UCBs play
a vital role in overall banking and credit environment of the nation. These banks act as
an important tool of financial inclusion and over a period of time it has provided credit
facilities to disadvantaged section of the society very effectively. The only thing that is
missing in the working of UCBs is proper cushioning, support, and guidance.

The micro study gives a more realistic view and deep insight of the problem.
Researcher, therefore, decided to take up Thane district for the purpose of study.

1.1.4 Scheduled and Non-scheduled Urban Cooperative Banks in India

Urban Cooperative banks are required to maintain certain amount of cash reserve and
liquid assets. The scheduled primary (urban) cooperative banks are required to maintain
with the Reserve Bank of India an average daily balance, the amount of which should
not be less than 5 per cent of their net demand and time liabilities in India in terms of
Section 42 of the Reserve Bank of India Act, 1934. Non-scheduled (urban) cooperative

5
Book on Cooperative Banks in India, Functioning and Reforms, author - Amit Basak, Page no. 123

11
 banks, under the provision of Section 18 of Banking Regulation Act, 1949 (As
Applicable to Cooperative Societies) should maintain a sum equivalent to at least 3 per
cent of their total demand and time liabilities in India on day-to-day basis. For
scheduled cooperative banks, CRR is required to be maintained with Reserve Bank of
India, whereas for non-scheduled cooperative banks, it can be maintained by way of
either cash with themselves or in the form of balances in a current account with the
Reserve Bank of India or the state co-operative bank of the state concerned or the
central cooperative bank of the district concerned or by way of net balances in current
accounts with public sector banks. In addition to the cash reserve, every primary (urban)
cooperative bank (scheduled/non-scheduled) is required to maintain liquid assets in the
form of cash, gold or unencumbered approved securities which should not be less than
25 per cent of the total of its demand and time liabilities in accordance with the
provisions of Section 24 of the Banking Regulation Act, 1949 (As Applicable to
Cooperative Societies). Both Scheduled and Non-scheduled Urban Cooperative Banks
can be single state or multi-state.

The performance of these banks can be analyzed on the basis of their capital,
number of branches, number of employees, quality of services, profitability, non-
performing assets, survey of the stakeholders etc.

 Key Differences between Scheduled and Non-Scheduled Urban

Cooperative Banks

The differences in the Scheduled and Non-scheduled Banks are as under:

 A banking institution whose paid up capital is Rs. 5 lac or more and protects the interest
of the depositors, is called as Scheduled Banks ( Scheduled includes all commercial
banks like nationalised, foreign, development, cooperative and regional rural banks)
 The banks which do not comply with the provision of RBI are Non-scheduled banks.
 The Scheduled banks are covered in the second schedule of RBI.
 The Non-scheduled banks are the banks that are not covered in the second schedule of
RBI.

12
 The Scheduled banks need to maintain cash reserves with RBI in the form of Cash
Reserve Ratio at the rates prescribed by the RBI from time to time.
 The Non-scheduled banks also need to keep the reserves but with themselves or in the
form of current account with the RBI or the State Cooperative Banks of the state
concerned or the Central Cooperative Banks of the district concerned or by way of net
balances in current account with public sector Banks.
 The Scheduled banks can borrow money from the RBI for regular banking purposes.
 Such borrowing is not entitled in the case of Non-scheduled banks. Only under
abnormal condition, they can request the Central bank for accommodation.
 The Scheduled banks are required to submit the periodic returns to the Reserve Bank of
India from time to time.
 The Non-scheduled banks are not liable for such submissions.
 The Scheduled banks are given the right to become the member of the clearing house.
 In the case of Non-scheduled banks no such facility is allowed.

The micro study gives a more realistic view and deep insight of the problem.
Researcher, therefore, decided to take up Thane district for the purpose of study. Taking
in mind the above points, the present research work is proposed to study:
“A Comparative study of the performance of Scheduled and
Non-scheduled Urban Cooperative Banks in Thane district.”

1.1.6 Profile of Thane district

Maharashtra’s Thane district is one of the state’s few industrialized districts. According
to the 2011 census, Thane is the state’s second most populous district, with a total land
area of 9558 km2, accounting for 3.1 percent of the state’s total land area. The Sahyadri
mountain range lies to the east of Thane, while the Arabian Sea lies to the west.
Similarly, Gujarat state is to the north of the district, while Mumbai, India’s economic
metropolis, is to the south. Thane, Kalyan, Ulhasnagar, Ambernath, and Bhiwandi are
some of the cities in Maharashtra. Vasai and Palghar are two of the district’s most
industrialized Talukas. Shahapur, Murbad, Wada, and Jawhar, on the other hand. Tribal
Talukas include Mokhada, Dahanu, Vikramgad, and Talasari.

13
This is city in Maharashtra, India, which is located at the confluence of the Thane creek
and the Thane river. Thane is the Thane districts administrative headquarters. The first
train of G.I.P Railway’s in India rolled out on 16th April, 1853, from “Boree Bunder” (
today known as the Chhatrapati Shivaji Terminus) to “Thane” which is a distance of 3.4
kilometres. This began the era of Railway Age in India. According to the 2011 census,
the population of Thane is about 1.8 million people living inside its municipal limits,
covering an area of 147 km2. Thane is located partly on the mainland across the Thane
creek and partly on an island to the northeast of Mumbai (which it shares with the
Mumbai city district, Mumbai suburban district, and Mira - Bhayandar Municipal
Corporation). The city’s size is around147 km2 and is at an elevation of 7 metres above
the sea level. The Yeoor and Parsik hills are located at its surroundings. Thane city is
one of the oldest cities which has a history of 2000 years back. To the south Kopri is
located Pachpakhadi, Naupada, Wagle estate is located to the west, Diva, Kalwa,
Mumbra is to the east, Manpada, Bramand, Kasarwadavli, Kapurbawdi is to the north.
Thane district is the third most developed in the state in terms of industrial
development. Because of this industrial development, more than half of the district is
deemed to be socioeconomically developed. The Maharashtra State Industrial
Development Corporation has established ten industrial zones in the district. The
industries are concentrated in the district’s southern and western areas.
In Thane District, there are 19,695 cooperative societies, 411 of which are agriculture
cooperative societies, 1381 of which are non-agriculture cooperative organizations, and
17903 of which are other cooperative societies. This shows that co-operative societies
and co-operative banks form an important part of Thane district.
There is a huge number of large and medium scale and small scale industries in Thane.
Around 1548 large and medium scale and 18480 small scale industries are functional
here. These industries are engaged in manufacturing adhesives, plastics, rubber, steel,
engineering, fertilizers, electronics, textiles, Iron and Steel products. Highly
sophisticated modern industries are situated in Thane-Badlapur-Kalyan industrial belt.
Around 4000 industries are situated in just six tehsils- Ulhasnagar, Badlapur, Vasai.
Murbad, Ambernath and Bhiwandi which contribute towards the industrialization of the
district. The district is the centre place for the manufacture of machinery, machine tools
and parts together with iron and steel industry and metal products. Biggest group of
industries are established in Thane. Boilers, refrigerators, machine tools, computing and

14
accounting machinery,
y, prime movers, industrial machinery, chemical machinery, paper
and cement industries are also set up here

Figure no. 1. 3 - Thane District Map

Source: (Digital Marketing, 2022)

Below are the list of Scheduled and Non

Non-Scheduled
Scheduled Urban Cooperative Banks that are
established in Thane district.

Table no. 1. 1 - List of Scheduled UCBs established in Thane District

Sr. No Bank Establishment Year

1. G. P. Parsik Janata Sahakari 1972

Bank Ltd.

2. Dombivli Nagari Sahakari Bank 1970

Ltd.

3. The Kalyan Janata Sahakari 1973

Bank Lttd.

4. The Thane Bharat Sahakari 1905

Bank

5. The Thane Janata Sahakari Bank 1972

Ltd.

source:https://rbidocs.rbi.org.in/rdocs/Content/pdfs/schedulec
https://rbidocs.rbi.org.in/rdocs/Content/pdfs/schedulecoop.pdf
oop.pdf

15
 Table no. 1. 2 - List of Non-Scheduled UCBs established in Thane District

Sr.No Bank Establishment Year

1. Navjeevan Co-operative Bank Ltd. 1985

2. Abhinav Sahakari Bank Ltd. 1976

3. Ambarnath Jai Hind Co-operative Bank Ltd. 1985

4. Dahanu Co-operative Janata Cooperative 1982

Bank Ltd.

5. Jawahar Urban Co-operative Bank Ltd. 1949

6. Konark Bank Ltd. 1998

7. Nagarik Sahakari Bank Ltd. 1970

Source: https://rbidocs.rbi.org.in/rdocs/Content/pdfs/nonschedulecoop.pdf

1.2 Objectives of the Study:

The study is based on following objectives:

1. To have an overview of Urban Cooperative Banks in Thane District

2. To analyze the performance of Scheduled and Non-Scheduled Urban Cooperative
Banks in Thane District
3. To analyze and interpret the primary data collected from the customers and bank
managers/ senior executive officers
4. To offer meaningful suggestions for improving the efficiency and effectiveness of
Urban Cooperative Banks in selected region.

1.3 Hypothesis of the study:

A hypothesis is a concept or an idea that the researcher frames for the purpose of
testing. In other words, it is a prediction that can be tested. Most researchers come up
with a hypothesis statement at the beginning of the study and then proceed with the data
collection and analysis in order to test the hypothesis.

16
Hypothesis 1
H0: There is no statistically significant difference in the Overall Services offered by
Scheduled and Non-scheduled Urban Cooperative Banks

H1: There is statistically significant difference in the Overall Services offered by Bank
by Scheduled and Non-scheduled Urban Cooperative Banks

Hypothesis 2
H0: There is no statistically significant difference in the Performance related customer
services by the categories of the Cooperative Bank

H1: There is statistically significant difference in the Performance related customer

services by the categories of the Cooperative Bank

Hypothesis 3
H0: There is no statistically significant relationship between Existing and New Policies
and Services offered and Cooperative Banks

H1: There is statistically significant relationship between Existing and New Policies and
Services offered and Cooperative Banks

Hypothesis 4
H0: There is no statistically significant relationship between Employees Approach
towards Customers and Cooperative Banks

H1: There is statistically significant relationship between Employees Approach towards

Customers and Cooperative Banks

Hypothesis 5
H0: There is no statistically significant difference in the Performance of Digital Banking
by the categories of the Cooperative Banks

17
 H1: There is statistically significant difference in the Performance of Digital Banking by
the categories of the Cooperative Banks

Hypothesis 6
H0: There is no significant impact of Managerial efforts on improvement of financial
performance of banks

H1: There is significant impact of Managerial efforts on improvement of financial

performance of banks

1.4 Scope of the Study:

1. The geographical scope of the study is limited to Thane district of Maharashtra

2. The study covers the financial analysis of 5 years (2016-17 to 2020-21)
3. Both Scheduled and Non-Scheduled Urban Co-operative Banks form the part of the
study
4. The number of banks under study is three Scheduled Urban Cooperative bank and three
Non-Scheduled Urban Cooperative bank.

1.5 Need of the Study:

Urban Cooperative Banks are one of the important segments of Indian banking industry.
These banks cater to people of small means. Basic objective of co-operative banks is to
co-operate people and these banks are set up on the principle of self-help and mutual
help. In India Urban Cooperative Banks have played an imperative role in financial
system with its huge network of branches in rural as well as urban area. These banks are
also playing an important role in achieving the objectives of Five Year Plans.

Hence, an attempt has been made to study the Performance of Scheduled and Non
Scheduled Urban Cooperative Banks in Thane District.

18
 1.6 Research Methodology:

Research methodology is a way to systematically solve the research problem. It may be

understood as a science of study how research is done scientifically. In it we study the
various steps that are generally adopted by the researcher in studying the research
problem along with the logic behind them. In the present study, the descriptive research
design was used and a survey method had been used in which a structured questionnaire
was distributed to customers and Managers/Employees of the selected six banks (three
scheduled and three non-scheduled) located in Thane district. The responses received
from customers are 600. The responses from the Bank managers and senior executive
officers are 72 who were selected randomly. Also the study comprises of secondary data
collected from the Annual Reports and websites of the selected banks for five years,
from 2016-17 till 2020-21. The secondary data consists of financial indicators such as
deposits, investments, loans and advances, Non-performing assets, no. of employees etc.
Cronbach’s alpha was used to determine the reliability of the data.

1.6.1 Research Design:

The study is based on questionnaire method. The researcher has formulated structured
questionnaire and paid visit to selected bank branches to contact the bank employees
and the customers to elicit necessary information.
The Study Area of the research is as under:
1. Thane
2. Bhiwandi (Bhiwandi and Shahapur)
3. Kalyan (Kalyan and Murbad)
4. Ulhasnagar (Ulhasnagar and Ambarnath)
For the purpose of study the above four sub-divisions are selected. Bank branches of
selected banks spread in these sub-divisions are studied. In all there are 12 scheduled
and non-scheduled UCBs that are established in Thane district. Hence, 6 are selected for
the study - 3 scheduled UCBs and 3 non-scheduled UCBs for the purpose of study. The
list of banks selected for study is as follows:

19
 Table no. 1. 3 - List of Scheduled and Non-Scheduled UCBs Selected for the Study

Scheduled UCBs Selected for Study Non-Scheduled UCBs Selected for Study

1. The Thane Janata Sahakari 1. Navjeevan Co-operative Bank Ltd.

Bank Ltd.

2. The Kalyan Janata Sahakari 2. Konark Bank Ltd.

Bank Ltd.

3. Dombivli Nagari Sahakari 3. Ambarnath Jai-Hind Co-operative

Bank Ltd. Bank Ltd.

Due to geographical limitation and time constraint, all the branches of the bank cannot
be studied, hence, some of the bank branches are selected for the purpose of study. The
list is as follows:

Table no. 1. 4 - Number of Branches of Selected Bank Selected For Study

Sub- The Thane The Kalyan Dombivli Navjeevan Konark Ambarnath

Division Janata Janata Nagari Co- Bank Ltd. Jai-Hind
Sahakari Sahakari Sahakari operative Co-
Bank Ltd. Bank Ltd. Bank Ltd. Bank Ltd. operative
Bank Ltd.

T S T S T S T S T S T S

Thane 22 02 04 02 05 02 01 01 - - 01 01

Bhiwandi 04 02 02 02 03 02 - - - - 01 01

Kalyan 03 02 09 02 02 02 01 01 - - 02 02

Ulhasnagar 04 02 04 02 02 02 04 02 03 02 12 02

Total 33 08 19 08 12 08 06 04 03 02 16 06

Source: Primary Data

20
 (Note: T = Total, S = Selected)
There is great variation in number of branches across sub-divisions. Hence, fixed
proportion of branches from each sub-division cannot be taken. Systematic random
sampling technique is used to select the branches. The number of branches selected
from each sub-division is 2 or less than 2, depending on the number of branches. Total
36 branches are selected for the purpose of study. The list of bank branches selected is
as follows:

Table no. 1. 5 - Bank Branches Selected For Study

Name of Bank Sub-Division Number of Branches

Thane 2

Bhiwandi 2
The Thane Janata Sahakari
Bank Ltd.
Kalyan 2

Ulhasnagar 2

Thane 2

Bhiwandi 2
The Kalyan Janata Sahakari
Bank Ltd.
Kalyan 2

Ulhasnagar 2

Thane 2
Dombivli Nagari Sahakari Bank
Ltd. Bhiwandi 2

Kalyan 2

21
 Ulhasnagar 2

Thane 1

Navjeevan Co-operative Bank

Ltd. Kalyan 1

Ulhasnagar 2

Konark Bank Ltd. Ulhasnagar 2

Thane 1

Ambarnath Jai-Hind Bhiwandi 1

Cooperative Bank Ltd.
Kalyan
2

Ulhasnagar 2

Source: Primary Data

22
1.6.2 Population Framework:

The study is based on questionnaire method and the financial analysis on the basis of
financial variables. The researcher has formulated structured questionnaire and paid a
visit to selected bank branches to contact the bank employees and the customers to elicit
necessary information. To examine the research objectives of the present study, data
was primarily collected from banks customers and Managers and Senior Executive
Officers.

1.6.3 Sampling Method and Sample Size

The research is conducted with a sample of 600 respondents comprising of males (53%)
and females (47%) and Managers/Senior Executive Officers from selected Scheduled
and Non-scheduled Urban Cooperative banks in Thane district. The sampling technique
used in this study is non probability and the sampling method is convenience sampling
and voluntary sampling for selection of customers. It is used for selection of above
banks as these are selected on the basis of availability of data and willingness of bank
officials to fill up the questionnaire.

Sample Size:
Sample size refers to the number of participants or observations included in a study. The
population considered for the types of respondents was infinite. The sample size
calculated on the basis of following formula
Here’s the formula:
SS = (Z-score)² * p*(1-p) / (margin of error)²
The required sample size with a 5% margin of error and a 95% confidence level is-
SS = (1.96)² * 0.5*(1-0.5) / (0.05)²
SS = 3.8416 * 0.25 / 0.0025
SS = 384.16
(Z-score is 1.96 for a 95% confidence level)
Sample size as per calculator is 385 customers.

23
The data was collected from 600 customers and 72 managers and senior executive
officers by way of structured questionnaire. Hence, data is analyzed based on the
responses of 600 customers and 72 Managers of the selected banks.

1.6.4 Pilot Study:

A pilot study is a mini-version of a full-scale study or it can be said to be a trial run

which is done before final questionnaire is filled up by respondents. It is a kind of
specific pre-testing of research instruments, including questionnaire or interview
schedules. Once, the researcher has a clear version of the research topic and questions,
what techniques and methods will be used and what the research schedule will look like,
the pilot study can be conducted. Pilot study helps the researcher to try out the research
methods and techniques that he/she has in her mind to understand how well it works in
practice. Once the pilot study is done researcher will come to know if the questionnaire
can be finalized or it still needs modifications.
The pilot study in this research was mainly a try-out of research techniques, methods
and questionnaire. Pilot study in this research can therefore be defined as pre-testing of
instruments and questionnaire. This study helped to identify some unclear or ambiguous
items in questionnaire which were then corrected in the final questionnaire.

Selection of Respondents for Pilot Study:

The same selection criteria have been used for selection of respondents for pilot study as
for the final intervention. Respondents for this were selected form Ulhasnagar sub-
division only as researcher resides in Ulhasnagar and it was convenient to meet the
respondents. Around 50 respondents were contacted for pilot study. The Cronbach's
reliability test is used to test the reliability coefficient alpha, which indicates the degree
of consistency among the items. The Cronbach's alpha coefficient was evaluated using
the guidelines suggested by George and Mallery (2018) where > .9 excellent, > .8 good,
> .7 acceptable, > .6 questionable, > .5 poor, and ≤ .5 unacceptable.

24
Results

The items for Services Offered By Bank had a Cronbach's alpha coefficient of .96,
indicating excellent reliability

Table no. 1. 6 - Reliability Table for Services Offered By Bank

Scale No. of Items α Lower Bound Upper Bound

Services Offered By 10 .96 .95 .96

Bank

Note: The lower and upper bounds of Cronbach's α were calculated using a 95.00%
confidence interval.
Some modifications were done to the final selection criteria as a result of the outcomes
of the pilot study.

Table no. 1. 7 - Reliability Table for Steps Taken By Bank to Improve its
Performance

Scale No. of Items α Lower Bound Upper Bound

Steps Taken By Bank to 8 .96 .93 .97

Improve its Performance

Note: The lower and upper bounds of Cronbach's α were calculated using a 95.00%
confidence interval.
Some modifications were done to the final selection criteria as a result of the outcomes
of the pilot study.

1.6.5 Various Statistical Tests and Tools used:

Descriptive statistical tools such as frequency distribution, mean values, percentage are
used to analyze the data. Shapiro-Wilk test, Levene’s test, Chi-square Test of
Independence, T-test has been used to test the hypothesis of the study.

25
1.7 Limitations of the Study:

1. Only one segment of banking sector i.e., Co-operative Banks are taken up for
the study. Within Co-operative Banks, only Urban Co-operative Banks form
the core of the study. Other banks are not the part of this research.
2. Study pertains to evaluate the performance of the banks with the help of three
parameters only i.e. Customers and Managers/Senior Executive Officers
survey through structured questionnaire and the financial performance of five
years only.
3. Data is collected from selected Scheduled and Non-scheduled Urban
Cooperative banks established in Thane district only.
4. The responses collected are subjective as per the perception of Customers and
Managers and their state of mind at the time of filling the questionnaire.

1.8 Significance of the Study:

The significance of the study is vital and useful to the following stakeholders:

1.8.1 Significance to the Management of the Banks:

Although the Management of the banks is very well known about their bank
performance, the study will surely at a glance reflect the important three parameters that
are most important in analyzing the performance of their banks. The Scheduled and
Non-scheduled Urban Cooperative Bank managers will clearly understand their
strengths and weaknesses regarding customer services, customer satisfaction, internal
operations and financial performance. They may get a new and innovative approach to
proceed for the same by critically evaluating the findings and conclusion.

1.8.2 Significance to the Government:

The government will get a blueprint regarding Scheduled and Non-scheduled

Cooperative bank’s performance. The government along with the RBI may think about
measures to improve the banks performance, i.e. by providing more facilities, some

26
more concessions etc. New strategies can be framed in order to stabilize the Cooperative
banks.

1.8.3 Significance to the Customers:

The customers will come to know that which bank’s performance is excellent, which
one is working satisfactorily and also which is of a weak financial condition. But if
certain measures are used by the government to improve the reliability of the
cooperative banks, it can prove to be a boom to the cooperative banking sector.
Moreover in this study the customer satisfaction survey is done, with its help the public
in general can come to know the perception of the cooperative bank customers.

1.8.4 Significance to the Creditors:

The creditors play an important role in providing funds to the banks which in return is
used by the bankers for the betterment of the bank. The study will help the creditors in
knowing the actual performance of the banks, its financial viability in a very clear way.
It will help them to take the necessary decisions by them.

1.8.5 Significance to the Future Researchers:

The study will definitely help the future researchers, that focus can be put on Scheduled
and Non-scheduled Urban Cooperative banks, especially the Non-scheduled Urban
Cooperative banks where much research is not been found. They may conduct research
on some other parameters such as performance appraisal, training and development,
motivation to employees, in depth study about the policies of banks that can be covered
to know the performance of the banks well. This comparative study will help the future
researchers understand more about the scheduled and non-scheduled urban cooperative
banks and its performance.

27