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Urban Cooperative Banks (UCBs) figure among the vital segments of the banking industry of the country. They essentially cater to the credit needs of persons of small means. Though some UCBs have performed creditably in the recent years, a large number of them have shown discernible signs of weakness. The operational efficiency is unsatisfactory and characterized by low profitability, ever-growing Non-Performing Assets (NPAs) and relatively low capital base. The large-scale sickness in the UCBs has shaken the public confidence in cooperative banks. In this context, this paper makes an attempt to examine the working and financial performance of the UCBs. To make the analysis simpler and presentable, the author takes up the Contai Co-operative Bank Ltd., one of the leading UCBs in West Bengal for a case study. The objective of the study is to identify and analyze the trend, progress and problems of this bank, to throw light on the problems of swelling NPAs and to offer some meaningful suggestions for improving the efficiency and effectiveness of this bank. The study is based on secondary data and other information provided by the bank in its published annual reports. The relevant data have been collected for the period from 1995-96 to 2006-07. This data have been analyzed with the help of statistical tools like ratios, percentages, averages and trend analysis, chi-square test, and multiple regression analysis.
Cooperative movement owes its origin to England, where the noted philosopher, Robert Owen (1771-1858) gave the idea of ‘self help through mutual help’ to mitigate the sufferings of the exploited class of society. The first ever effort towards the formation of a cooperative organization was made by 28 flannel weavers, at Rochdale near Manchester in England in the year 1844. Between 1855 and 1885, the urban cooperative movement in the global horizon received a filip following the success of the Urban Credit Institutions organized by Herman Schulze and Luigi Luzzatti of Germany and Italy, respectively. Likewise, the origin of urban credit movement in India dates back to February 5, 1889 when, under the guidance of Vithal Laxman Kavthekar, a mutual aid society was formed by some middle class Maharashtrian families in the State of Baroda. The cooperative movement in India gained momentum with the enactment of the Cooperative Credit Society Act, 1904. Thereafter, primary cooperative credit societies, called the Urban Cooperative Banks (UCBs), were set
* Senior Lecturer and Head, Department of Commerce, Susil Kar College, Champahati 743330, India. E- mail: firstname.lastname@example.org Performance Icfai University Press. All Rights Reserved. Case Study © 2009 The Appraisal of Urban Cooperative Banks: A 31
Maharashtra.161 cr and Rs. the UCBs are vital components of the banking industry of the country. when they were brought under the purview of the Banking Regulation Act. 78. the paper presents the backdrop and objectives of the study. 1949. there were 51 UCBs in West Bengal with total deposits of Rs. other weaknesses which generally hamper this sector are: high levels of loan delinquency. the number of UCBs decreased to 1813 with total deposits of Rs. In case.927 cr respectively.546 cr and Rs. etc. The operational efficiency is unsatisfactory and is characterized by low profitability. Probably. 24.501 and their deposits and advances rose significantly to Rs. Gujarat. erosion of capital base. 153 cr respectively. Over a long period of time. No..and middle-income strata of the urban population. VIII.861 cr and total loans and advances of Rs. ever-growing Non-Performing Assets (NPA) and relatively low capital base. deficiency in application of computerized system. the paper concludes by summarizing the findings of the analysis and suggesting certain remedial steps. 1. Today.983 cr and advances of Rs. especially the UCBs.211 cr. Objectives of the Study The main purpose of this study is to identify and analyze the trends. 1. progress and problems of this bank. 1. 2009 . there were about 1100 UCBs with deposits and advances of Rs. 120. In this context. we have taken up the workings of the Contai Co-operative Bank Ltd. To make our analysis simpler and more focused. In 1966.880 cr respectively. The analysis and interpretations are presented next and finally. banks are unable to generate income due to NPAs. poor management information system. Subsequently. in 2007. At the end of 1996. 64. Besides this. the paper makes an attempt to examine the working and financial performances of the UCBs. They essentially cater to the credit needs of people of small means. namely. paucity of funds for fresh deployment. At the end of March 2007. is the availability of quality assets. the resource base of UCBs has been getting eroded due to non-recovery of interest and instalment of loan portfolio. It then presents the data and methodology. Vol. 167 cr and Rs. one of the leading UCBs in West Bengal as a case study. 101. the biggest challenge facing the banking sector. Most of the UCBs (almost 80%) are concentrated in five states. To achieve the main purpose. the number of banks increased to 1. Operations of UCBs have expanded rapidly since 1966. unimaginative Human Resource Development (HRD) policies.660 cr. and deals with the profile of the bank. it will put the banks into liquidity crunch. ineffective credit planning. The spatial distribution of the UCBs across the country is skewed with significant concentration in the southern and western regions. some UCBs have performed reasonably well. when their number increased to 1941 and their deposits and advances to Rs. Karnataka. Initially. the following objectives are set forth: 32 The Icfai University Journal of Accounting Research. a large number of them have shown discernible signs of weakness. The UCBs continued to grow at a fast pace till 2003.up in the urban areas with the objective of promoting sustainable banking practices among the lower. 17. Though in recent years. Tamil Nadu and Andhra Pradesh. lack of professionalism in conduct and management.
14% in 1997-98 and were 26. Contai Co-operative Bank Ltd. which implies an increase of more than 321%. 12. 1986. The data collected are analyzed with the help of statistical tools like ratios. Presently. 1945 and was brought under the purview of the Banking Regulation Act.10%. percentages. 284. averages.• To analyze the performance of the UCB in mobilizing deposits.437. 6.60 lakh in 2006-07. At the end of March 2007. which was only 35 in 1945. The scope of membership of the bank includes the entire district of undivided Midnapur and the whole area of Kolkata Municipal Corporation. chi-square test.12 lakh in 1995-96 to Rs. It was registered on December 15. savings account. Nandigram. 20.500. as it had decreased from 32. • To identify the problem of swelling NPAs and examine whether the bank has initiated measures to keep NPAs under control and reduce these to the manageable level.747.87%. trend analysis. coefficient of determination (R2). (CCB). The number of members. 1.326. linear regression. 9. so that the bank does not fall into a lower category.92% in 1996-97 to 31.). Egra.23%. correlation coefficient (r).70% respectively in the subsequent years. the capital and deposits of the bank stood at Rs. –2. 5.124 at the end of March. • To evaluate the performance of the bank in terms of profit earned. Belda. the bank has grown as a large and immensely popular bank in the state. etc. Low-cost deposits (viz. current account. were Rs. 24..5% and 7. 1949 on November 18. 2. etc. 8.22%. Durgachak. rose to 66. Mahisadal. Ramnagar. • To identify the trends in the volume and direction of credit advanced by the bank. – A Profile Contai Co-operative Bank Ltd.53 Performance Appraisal of Urban Cooperative Banks: A Case Study 33 . Barbarisha. –0. multiple correlation and regression analysis.29%. is one of the leading UCBs not only in West Bengal but also in India.90%. Panskura. 3.85%. Initiated as a people’s bank way back in 1945 by five founder promoters.88 lakh in 1995-96 and Rs. Barabazar (Kolkata) and the main branch is within the premises of the head office at Kathi.430.26 cr and Rs. 2007. Analysis and Interpretations Deposit Mobilization Total deposits of the bank increased from Rs.38 cr respectively. Table 1 depicts the downward trend in growth of deposits over the years. 28. it has 13 branches situated at Contai. with a meager capital of Rs. Nandakumar. • To find out ways and means for improving the efficiency and effectiveness of the bank. Manglamaro. Data and Methodology The present study is based on secondary data and other information provided by the bank in its published annual reports for the period from 1995-96 to 2006-07. Haria.
403.653.20 (12.98 (12.63) 2001-02 557.87) (6.16 Note: Figures in the brackets denote ‘growth rate’ or ‘percentage change over the previous year’.476.71) (9.153.72 15.562.Table 1: Financial Position of Contai Co-operative Bank Ltd.62 2.65 24.06 1.07 7.45 66.20 16.53 3.24) (7.20 22.02 35.13) (0.68) 2000-01 496.00 788.70) (5.76 28.08 197.48 2.50 14.348.84 32.14) 947.80) (1. lakh in 2006-07.348.442. Source: Annual Reports of Contai Co-operative Bank Ltd.90) (19. 5.924. in Lakh) Diversification Ratio (%) Share Capital CD Ratio (%) Reserve and Other Fund Loans and Advances Net Profit Working Capital Deposits 1995-96 200.916.21% and 29.32 2.11) 6.71) (8.49 1.75 72. 19.90 (13.509.26 32.29) (4.24 1.26 79.10 15.28% during the study period.695.22) (7.58) (20.670.28 (21.131.747.10 (9.70 (12.98 753.90 27.14) (–0.09 (32.240.20 26.82) 1998-99 368.658.17 464.10 (31.25) 2004-05 783.20 18. as against Rs.85) (12.31 11.25) (24.264.71 236.85) (8.30 11.461.22) (–2.57 9.47 (11.540. 1.12 8.21 (33.68) (3.627.26 202.392.85 27.16) (6.16 1.437.52) 2006-07 926.521.52) 2005-06 859.37 58.40 lakh in 2006-07.351.797.92) 5.11 (25.56) Year 401.70 1.17 60.72) 612.09 4.15 71.361.348.41) 175.63 76.83 2.56) 1999-00 439.835.40) 1997-98 303.325.12) (25.312.98 1. The balance of loans and advances of the bank was Rs.352.70) (26.915.20 10.266.60 19.956.61 2.10 13.141.14 58.92 69.797.726.10) (3.50 (19.40 (7.74 26.73 32. VIII.17 7.94 12.45 4.10 1.58 3.01 62.20 18.968.13 1996-97 248.70 25.079.23) (24.32 565.708.12 (33.96 (24. These deposits relative to the total deposits of the bank ranged between 21.155.34 3. This implies a growth of 270% during the study period.34) (13.53) 8.782. (Rs. The growth in this respect 34 The Icfai University Journal of Accounting Research.40 14.02 735. No.17 lakh in 1995-96 (Table 1).81 5.341.92) (5.00) (19.72 30.30 (26.03) 2002-03 628.16 70.30 27.89 20.14 6.93) 2003-04 698.466.04) (31. 2009 .89 564.14 1.65 16.13 79.006.30 13.761.818.50) (4.17 355. Vol.67 (21.40 17. Loans and Advances Loans and advances play an important role in gross earnings and net profit of a bank and in promoting the economic development of a country.
53 –3.24 15.02 4.72 18.01% on average (Table 1). From Table 2. The main reason for this is the mounting overdues.088.941.85 12.175.726. deposits and borrowings must be utilized in a judicious and profitable manner. The ability of a bank in serving as an active channel of fund mobilization largely determined by its recovery of loans.99 –491. It maintained the cash reserve and liquid assets much above the statutory requirement.52% and 5. and again moved up to 6.02 –4.26 30. Table 2: Cash Reserve Ratio (CRR) and Statutory Liquid Reserve (SLR) Year 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 CRR (%) 4.53% during the period.36 21.207.25 5.145. It increased to 8.32 5.62 Source: Annual Reports of Contai Co-operative Bank Ltd. The credit deposit ratio stood at 62.70 4.75 5.25 SLR (%) 30. it is clear that the bank did not default in maintenance of CRR/SLR during the last 12 years.29 33.76 2.26 4.72% respectively.03% in 2001-02.96 5.69 25.54 1.75 16.83 12.395.12 34.52 3. in Lakh) 2000-01 Gross Advances Gross NPA Gross NPA (%) NPA Provision Net Advances Net NPA Net NPA (%) 13.835.95 3.32 5.37 35.63 0.88 13. then it reached its lowest at 3.25% in 2003-04.974.63% in the following year.320.92 4.482.92 4.21 NPA Management: Recovery of Loans and Advances Source: Annual Reports of Contai Co-operative Bank Ltd.171.80 –618.89 31.varied in the range of 19.366.453. Performance Appraisal of Urban Cooperative Banks: A Case Study 35 . otherwise there will be stagnation in credit flow.741.243. Resource Management The resources mobilized in the form of share capital. The Cash Reserve Ratio (CRR) and Statutory Liquid Reserve (SLR) maintained by the bank (as a percentage of Net Demand and Time Liabilities (NDTL)) during the last 12 years are given in Table 2.26 32.46 14.59 2. and finally registered a growth rate of 4. as it is an important aspect of resource management of the banking sector.14 17.915.392.56 32.58 34.46 14.43 3.046.98 5.63 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 19.10 4.797. as per the Banking Regulation Act.20 3.40 4.04 1.670.56% to 33.32 12.647.29 4.98 4.22 4.509.16 12.072.16 6.41 3.218.67 28. 1996-97 to 1999-2000.333. Table 3: Gross NPA and Net NPA (Rs.27 26.52% in 2004-05 from 7.92 26.66 3.03 25.60 31.11 16.45 30.66 31.79 24.94 –1346.50 13.93 3.91 12.498. during the last two years of the study period.94 120. which clog the process of credit recycling.10 –9.38 825. which is fixed at 3% and 25% of NDTL respectively.359.747.553.
40 26.453.266.92 174.87 –3.08 lakh in 1995-96 to Rs.67 lakh. 25. No.079.58 –3.72 19.55% on an average over the study period. trend values of deposits and deposit indices of CCB presented in Table 4.60 –243.20 27. Rs.023.10 14. 4. From Table 1.437.807. the amount of NPAs were Rs.80 401. 4.761. which is much higher than the stipulated level of 15% (as per the RBI norms).70 15.707.79 lakh. so that the bulk of the profit is used for strengthening the owned resources.36 lakh being 24. Profitability Although the primary objective of the cooperative bank is service and the profit motive is incidental.761.31 221.74 23.60 Indices 100.78 31.85 1.20 28.27 lakh.064. But in the present competitive environment.83% in the preceding year.68 11..19 13. VIII.12 8. dividend. 28.312.032.482. there is a ceiling on the return on capital.207.437.21 17. 4. As compared Table 4: Trend of Deposits (Rs.461.572. 25.369. it is clear that net profit of the bank increased from Rs.639. 26.964.78 330.10 22. reveals that during the period 2000-01 to 2006-07. 36 The Icfai University Journal of Accounting Research. The NPA provisions made by the bank during the last three years were much higher than the gross NPA.66 3.747.40 26.e.10 –1.54%.964.099. i. which implies an increase of nearly 320% during the study period. 2009 . 4.25% respectively relative to total loans and advances.236.48 392.98%.968.92 lakh.01 1. The relative share of gross NPA was 25.167.02%.93%. reveal that the deposits exhibit an increasing trend throughout the study period.76 27.00 132.56 –2.924.33 421.19 274.48 Trend Value (Yc) 8. which ultimately implies negative NPA (Table 3).69 Source: Annual Reports of Contai Co-operative Bank Ltd. 3.338. Rs. The percentage of net NPA to net advances has declined to 0.63% in 2000-01.217.76%.09 11.504. 1.10 27. Trend Analysis of Selected Financial Parameters Trend of Deposits Deposits.27 29.16 lakh in 2006-07.01 372.269.540.30 25. 4. Rs.18 404.44 –492.99% in 2003-04 from 6.32% and 21.03 lakh and Rs. Vol. Rs. in Lakh) Year 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 Actual Value 6.131.69 lakh. Rs.395. 4.741.218. It had initially increased to 16.38 2.302.07 3. unless a bank earns profit. 735.234.A perusal of the NPA position of the bank.35 391.25 25.403.29 Deviation –2. it cannot survive and ultimately falls into lower grades.145.305. 26.23 21.38% in 2001-02 from 13.20 18. 175.
02 19.22 249.24) is greater than the tabulated value of χ2 (19.92 in 1996-97 to Rs.708. 2.28 Source: Annual Reports of Contai Co-operative Bank Ltd.46 200.427.90 14.72 + 1. The average increase in deposits was Rs.69 334. 404. which implies that the difference between the actual values and the trend values of deposits are significant.835.10 19. Considering the year 1995-96 as the origin.70 16.509.26 1.141.835.36 16.50 13.69 17.68 Deviation –1. loans and advances.03 15.04 11.13 939.17 + 2.915. in Lakh) Year 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 Actual Value 5. whereas.70 274.59 –42.351.51X where the unit of X = one year and Y = Rupees in lakh. the indices of deposit increased from Rs.17 –144.17 Trend Value (Yc) 6. The significance of the difference between the actual and the trend values of deposits has also been examined by applying the statistical chi-square (χ2) test .20 508.223.726. and then declined in the two subsequent years.348.631.692.21 8.53 167. Trend of Loans and Advances Loans and advances.20 15.896.81 308. 132.65 258.05 7.38 9. The trend values of deposits show upward movement throughout the study period.33 X. in the rest of the years. we get: Yc = 6. Table 5: Trend of Loans and Advances (Rs. it increased to Rs. indices of loans and advances and trend values of loans and advances are presented in Table 5.00 133. X represents years and Y.958.30 287. The least square linear trend equation of loans and advances is obtained as: Yc = 5.10 17. Yc in Table 4 stands for computed value of deposits obtained based on the least squares equation: Yc = a+bX.392.30 13.17 –34. there were shortages in deposits. Finally.720.37 12.99 350.11 10.40 Indices 100. that in the period 1999-2000 to 2003-04. It is apparent from Table 4. where origin of X is 1995-96.70 18.670.488.80 in 2003-04.17 7. 421.70 14.570.304.66 –183. actual deposits were greater than their trend values.14 370.509.897.32 –497.366.35 20.265.067.51 lakh per year.956.88 –694.60 342.48 in 2006-07.100.675) at 5% level of significance with 11 degrees of freedom.71 10.to 1995-96.162.25 –691.221. The calculated value of χ2 (3.067.797. Performance Appraisal of Urban Cooperative Banks: A Case Study 37 .
155.61 –164.02 735.71 X.22. 1996-97 to 2006-07 with 1995-96 as the base year. 38 The Icfai University Journal of Accounting Research.265.53 322.92 134.99.96 349. The indices of loans and advances were 133. while the tabulated value of χ2 is 19.45 –55.53. 1.00 590. 308.81. net profit indices and trend value of net profit of the Bank are presented in Table 6.26 202. Trend of Net Profit Net profit.58 488.71 236.16 Indices 100.42 740.87 366.41 –86.58 441. in Lakh) Year 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 Actual Value 175.47 202.33 lakh per year.675 at 5% level of significance with 11 degrees of freedom.00 112.90 Trend Value (Yc) 142.03 419.The loans and advances show an increasing trend over the entire study period.84 –101.10 Source: Annual Reports of Contai Co-operative Bank Ltd. Table 6: Trend of Net Profit (Rs.11 659. 2003-04.86 265. 167.13 1. while in the remaining years the deviations were positive.63 –19.34 –202.153. 2002-03. To test the significance of the difference between the actual value and trend value of loans and advances.70.55 450.08 197.47 612.74 + 74.14 and 370. 274. X represents years and Y represents net profit.68.00 788. No.98 1. 200. chi-square (χ2) test was applied. Vol. 1997-98.71 665.11 –26. 2004-05.84 889. The trend values of loans and advances increased throughout the study period. it indicates that the differences between the actual values and the trend values of loans and advances are significant.55 964. 258.46.12 –51. 287.17 464. The calculated value of χ2 is 681. 249.45 217.94 115.7388. where origin of X is 1995-96. VIII. The least square linear trend equation of net profit is obtained as: Yc = 67. 2009 .53 –229.56 415. The average increase in the value of loans and advances was Rs.17 respectively in the period. 1996-97.17 355.29 516. 350.30. 334.13 814.16 291.89 564. As the calculated value of chi-square exceeds the critical value.65. 2005-06 and 2006-07. The deviations between the actual values and the trend values were negative during the years 1995-96.26 Deviation 32. 1.21 659.
Credit Deposit Ratio (CDR) and Return on Capital Employed (ROCE) in the light of CAMEL rating (Table 7).79 3.62 65.39 2. In this context.10 BPE (Rs. the calculated value of χ2 is 824. while the tabulated value of χ2 is 19. As compared to 1995-96. 735.45 66. Table 7: Performance Indicators of the Bank Year 2002-03 2003-04 2004-05 2005-06 2006-07 Average ROCE (%) 3.32 24. 175.95 17. while they were negative in the remaining years.16 70.43 270. To measure the relationship between profitability and other important parameters—capital adequacy.88 255. asset quality.9124. The multiple regression model used in this case is as follows: Performance Appraisal of Urban Cooperative Banks: A Case Study 39 . it recorded a growth of 319.08 17. management capacity and liquidity on the profitability through a sophisticated statistical technique.Net profit increased from Rs. Multiple Regression Analysis In the present study.25 25. Capital to Risk Weighted Assets Ratio (CRAR).06 Note: Here data for five years have been considered.98 25.06 2.16 lakh in 2006-07. Thus. The differences between the actual values and the trend values were positive during the years 1995-96.74 CRAR (%) 10.675 at 5% level of significance.71 lakh per year. Source: Annual Reports of Contai Co-operative Bank Ltd.32 21.09 NPATL (%) 26. it is important to study the different performance indicators such as. the indices of net profit increased from 112. asset quality.88 2.93 26. although this was introduced to commercial banks in 1993. In this case. it signifies that the differences between the actual values and the trend values of net profit are significant. management capacity and liquidity—of UCBs. an attempt has been made to empirically determine the impact of different selected parameters on the performance of the bank.96 in 2003-04 and fluctuated over the next three years. The negative deviation of the year 2004-05 was comparatively higher. an attempt has been made to examine the composite impact of capital adequacy.85 CDR (%) 58.56 1.24 21. Business Per Employee (BPE). because RBI implemented CRAR norms to UCBs in a phased manner with effect from April 1.08 lakh in 1995-96 to Rs.92 in 1996-97 to 659.72 272.84 11. As the calculated value of chi-square exceeds the tabulated value.29 280. Non-Performing Assets to Total Loans (NPATL). 74.02 25. in Lakh) 268.91 288.90% during the study period.17 60. 2002. The average increase in net profit stood at Rs.92 69. 2002-03 and 2003-04. The trend values of net profit show upward movement throughout the study period.
76%.02%. reveals that gross NPA relative to total loans and advances during the period 2000-01 to 2006-07 were 24.299 0.78% only. 26.136 0.98.98%. 28. R2 = 0. 1. • The net profit of the bank increased from Rs.72% on an average throughout the study period.047 t-value 2.731 Significance 0.55%.970 –2. Table 8: Multiple Correlation and Multiple Regression Analysis Variable Constant CRAR NPATL BPE CDR Regression Coefficient 12. which was just 4. 175.08090 Standard Error 5.26700 –0. It indicates that the profitability was highly influenced by CRAR. NPATL.NPATL + β3.153 – 1.BPE + β4.845 Source: Annual Reports of Contai Co-operative Bank Ltd.018 0. that 96.25% respectively and on an average it stood at 25.98. ROCE is the dependent variable and CRAR. • The percentage of deposits to working capital remained above 82% throughout the period of study. Conclusion From the analysis the following were concluded: • A perusal of the NPA position of CCB.00800 77.CDR In this analysis. ROCE. On the other hand. and independent variables taken together is 0.03928 –0. It implies that income from sources other than banking activities was very negligible and insignificant. NPATL. BPE and CDR are the explanatory variables. • The credit deposit ratio stood at 68. which is more than the optimum level of 60%. BPE and CDR (Table 8). Vol. NPATL.961). which is much higher than the stipulated level of 15% (as per the RBI norms).576 – 0.08 lakh in 1995-96 to Rs.16 lakh in 2006-07.02%-2.60200 0. 25. the relative share of the share capital in working capital was in the range of 2. 735. 40 The Icfai University Journal of Accounting Research. which implies an increase of nearly 320% during the study period. 2009 .961 Adj.277 – 0. It is also evident from the coefficient of determination (R2 = 0. 25.CRAR + β2.32% and 21.152 –1.ROCE = α + β1.54%. Coefficient of Determination (R2) = 0. • The diversification ratio of the bank was very low. No.277 0.21% on an average.93%. The multiple correlation coefficients between the dependent variable. BPE and CDR.333 Multiple Correlation Coefficient (R) = 0.1% of the variation in ROCE was accounted for by the joint variation in CRAR. VIII. 26.
51 lakh per year. • The multiple correlation coefficients between the dependent variable ROCE and the independent variables CRAR. Performance Appraisal of Urban Cooperative Banks: A Case Study 41 . NPATL. • The difference between the actual and trend values of net profit are also significant and have not arisen due to sampling fluctuations. Hence. In the period from 1999-2000 to 2003-04. It should adopt the strategies in two stages—pre-sanction in depth scrutiny and post-sanction in supervision and follow-up. Thus. thus. there is an urgent need to remedy this situation. BPE and CDR. through improved monitoring and follow-up. BPE and CDR taken together is 0. Firm measures should be followed while making credit appraisal. • The trend values of deposits also show upward movement throughout the study period. The management should keep NPAs under control and reduce the net NPAs to the permissible level. • From the coefficient of determination it clear that 96. the actual deposits were more than the trend values. documentation. which reflects the financial soundness of the bank.21% and 29. • The capital adequacy ratio were 10. disbursement. It is also found that the negative deviation of the year 2006-07 was comparatively higher. so that the bank does not fall in lower category.98.1% of the variation in profitability of the bank is explained by the four independent variables. 21. monitoring.08% respectively. • The difference between the actual and trend values of loans and advances are significant and have not arisen due to sampling fluctuations. during the last five years. CRAR.32% and 24. Suggestions On the basis of the analysis. so that the idle funds can be utilized for more productive purposes. which is fixed up to 3% and 25% of NTDL respectively.92% on an average. It maintained the cash reserve and liquid assets much above the statutory requirement. concluded that this parameter is not influenced by the time factor.28% of total deposits of the bank during the period under study.067. whereas in rest of the years there was a decrease in deposits.95%. and was only 24. 11. • The bank did not default in maintenance of CRR/SLR during the last 12 years. the following suggestions for improving the efficiency and effectiveness of the operation of the bank are offered: • It is apparent that the mounting overdues have become a major problem of this bank and its performance in managing NPAs is not satisfactory. proper care should be taken to avoid such surplus maintenance of both CRR and SLR. NPATL. The average increase in deposits stood at Rs. BPE and CDR.• The low-cost deposits of the bank were very low. as per the Banking Regulation Act.84%. 2. which implies that profitability is highly influenced by CRAR. These deposits ranged between 21. 17. etc. It is.24%. NPATL.
• It would be prudent to adopt corporate governance norms. • Mobilization of resources from the members of the bank should be given higher importance. • The bank can also go for such schemes as opening of savings bank accounts and other accounts treated as low-cost deposit. 2009 . I 42 The Icfai University Journal of Accounting Research. in the operations of the banks. etc. processing fee. like any other UCB. • This bank must be encouraged to take up ‘microcredit’ in a big way. because terms and conditions of HBL is much easier and ‘EMI’ can be implemented like any other commercial banks. etc. which could be a good source of extra income. safe deposit locker rent. need a high degree of professionalism in management. which would ultimately help in reducing poverty. In return. VIII. There should be a policy for ‘technology upgradation’ and it must have a technological vision. Vol. • It should consider technology upgradation to cope up with the changing banking scenario. To exercise proper control on their operations. UTI (Axis). good corporate governance is the only alternative. electricity bills. The bank can also undertake insurance business on referral basis or work as a corporate agent without risk participation. It can enhance its fee-based income through. with their newly-formed emphasis on prudential norms. on behalf of the customers. which generally creep in through the direct or indirect political interference. corporation tax. municipality tax.. HDFC. in order to expand its business. commission. • The bank should take the initiative for opening ‘No Frills Account’ to the vast sections of disadvantaged and low-income groups so as to ensure greater financial inclusion. telegraphic transfers. bonds and debentures.• The bank needs to prepare a comprehensive perspective plan for product diversification to maintain a competitive edge in the market. should be made effective. and adequate freedom to raise resources from the market through the issue of non-voting shares. It can collect and pay utility bills like telephone bills. whereby they can make the public aware of their marketing packages of various attractive loan schemes.. No. • The management of the bank should guard against its weaknesses. • It is suggested that the bank enters into tie-up agreements with commercial banks like ICICI. It must work as ‘Special Purpose Vehicle (SPV)’ for microfinance for reducing poverty and helping the informal economy to flourish. the bank would earn referral fees on the basis of premia collected. issue of demand drafts. so that the deposit base as well as the clientele base of the banks are expanded. in order to safeguard the interest of depositors and other stakeholders. account maintenance fee. • The bank should emphasize on ‘House Building Loan (HBL)’. 1. • This bank. the bank should go for more publicity and advertizements. In this context. etc.
Co-operation and Co-operative Management. Chakraborty Radha Gopal (2004). Mittal Publications. Sahitya Bhawan. Sultan Chad & Sons. London. Theory. Roy Durgadas (1982). 2. Kulkarni K R (1955). Himalaya Publishing House. 10. 15. Sage Publications India Pvt. A Study in the Co-operative Movement in India. Co-operative Banking in India. A Century of Co-operation. Kolkata. British Amal-o-Banglar Samabay. 13. 6th Edition. Loyal Book Depot. Ltd. Theory and Practice of Co-operation in India and Abroad. Mumbai. New Delhi. 12. History and Practice of Co-operation. 11. 6. The Co-operator’s Book Depot. 3. Agra. 9. Mithani D M and Gordon E (2004).Bibliography 1. New Dimensions of Co-operative Management. Pune. Cole G D H (1944). New Delhi. Vaikunth Mehata National Institute of Co-operative Management. 17. Iyengar A S K (1961). 4. Joshi Vasant C and Joshi Vinay V (2005). Mumbai. West Bengal State Co-operative Union. Himalaya Publishing House. Cooperative Societies and Rural Development. Laud G M (1980). 5. Mathur B S (1973). Samabay (Edited in Bengali). Bedi Raghubans Dev (1969). Federation of West Bengal Urban Co-operative Banks and Credit Societies Limited. 7. 16. Kolkata. New Delhi. West Bengal State Co-operative Union. George Allen and Unwin Ltd. New Delhi. Theory and Practice of Rural Banking in India. Kolkata. Kamat G S (1978). Mumbai. Managing Indian Banks: The Challenges Ahead. Dutta S K (1991). Nayak Umesh Chandra and Roy Ananta Kumar (1988). Principles and Philosophy of Co-operation. 8. Kalyani Publishers... Dubhashi P R (1988). Roy Asim (2001). Hough E M (1966). Banking and Financial System. Mumbai. Oxford University Press. Current Book House. Meerut. 14. 2nd Edition. New Delhi. Performance Appraisal of Urban Cooperative Banks: A Case Study 43 . Dhingra I C (1993). Reorganisation of Rural Credit in West Bengal Through the Co-operative Institutions During the Plan Period. Cooperative Movement in India. Response Books. Co-operation in India. Sage Publications. New Delhi.
Asia Publishing House. Vol. Thirunarayanan R (1996). Evolution of Co-operative Thoughts. Co-operatives in India. 22. Reference # 09J-2009-01-03-01 44 The Icfai University Journal of Accounting Research. New Delhi. No. Co-operative Banking in India. 1. 20. Mumbai. New Delhi. 2009 . Orient Longman. Recent Trends in the Co-operative Movement in India. Management and Impact of Non-Agricultural Credit Co-operatives in Tamil Nadu: A Socio-Economic Perspective. Sarangi Mrutyunjay and Selvaraju R (2005). 19. VIII. Sinha B K (1968). Tyagi R B (1968).18. Structure. Saxena K K (1973). Mittal Publications. New Delhi. National Co-operative Union of India. New Central Book House (P) Ltd. 21.
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