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A STUDY OF PERFORMANCE EVALUATION OF
URBAN CO-OPERATIVE BANKS IN LATUR DISTRICT
Final Report of
Minor Research Project
Submitted to
The Joint Director, University Grant Commission
Western Regional Office, Ganeshkhind, Pune- 411007
Principal Investigator
DR. BASWARAJ BABURAO LAKSHETE,
Assistant Professor Department of Commerce,
Adarsh Education Society’s Arts, Commerce and Science College, Hingoli
File No: 23-114/12(WRO), 5Feb 2013 DECEMBER 2017
CONTENTS
Sr. No. Particulars Page No
ACKNOWLEDGEMENT II
LIST OF TABLES III
LIST OF GRAPHS VI
LIST OF ABBREVIATIONS VII
I INTRODUCTION 01
II RESEARCH METHODOLOGY 23
III PROFILE OF LATUR DISTRICT 30
IV GOVERNMENT POLICY TOWARDS URBAN COOPERATIVE BANK
37
V PERFORMANCE EVALUATION OF URBAN COOPERATIVE BANKS IN LATUR DISTRICT
57
VI LIMITATIONS/PROBLEMS OF URBAN COOPERATIVE BANKS IN LATUR DISTRICT
91
VII SUMMARY OF CONCLUSIONS AND SUGGESTIONS
110
BIBLIOGRAPHY 130
APPENDIX 134
ACKNOWLEDGEMENT
I wish to express my deep sense of gratitude and appreciation to UGC for
granting me this Minor Research Project which is a great opportunity for me to extend
my horizons of knowledge regarding the research work.
I owe a special word of gratitude to Honorable Shri Kamalkishorji Kabra
President, Adarsh Education Society’s, Arts, Commerce and Science College, Hingoli
and Vice-president, Shri Madhavraoji Naik, Secretary, Shri R. B. Bagadiya, Tresurer,
Shri Madhukarraoji Dodal, Joint- secretary, Shri Dyneshwarappa Gotre, and all
Management Members of Adarsh Education Society’s, Arts, Commerce and Science
College, Hingoli for giving me golden opportunity to do this research work.
I further wish to convey my sincere thanks and acknowledgements to the
Incharge Principal Dr. A. R. Lathi, Vice Principal Dr. B. D. Waghmare, Shift
Incharge Dr. V.B. Aaghav, Librarian Ms. Jyoti Shankpale, Office Superintendent Mr.
Vijay Kavane, Acountant Mr. Dilip Dube and all my colleagues, Adarsh
Mahavidyalaya, Hingoli for motivating and encouraging me during the study.
I am thankful to all the members of Commerce department i.e. Dr. A. B.
Gattani, Ms. Sapana Pupulwad, Mr. Rajesh Agrwal Mr. M. K. Dube, Mrs. Shubangi
Ingole, Ms. Pooja Saraswat, Ms. Sujata Mundada, Ms. S. B. Dad, Ms. D. V. Dube,
who have supported and promoted me a lot to complete my research work.
I am also thankful to all authors of reference books, reports and articles on the
subject.
I express my heartfelt thanks to my loving father, mother, brothers, Sisters,
friends, students and my wife Vaishali and my Little baby boy Viraj for their
motivation and moral support.
I am also thankful to Mr. Deepak Maske, Mr. Rahul Haral for bringing out this
project in its accurate, neat and well versed form.
At the last but not the least I am also grateful to all those who directly or
indirectly helped me to bring out this research work successfully.
- Dr. B.B. Lakshete
LIST OF TABLES Table No. Name of Table Page
No 1.1 Deposit Growth of UCBs (1991 to 2011) 10
1.2 Growth of Advances of UCBs (1991 to 2011) 11
1.3 Tier-wise Distribution of Urban Cooperative Banks 13
1.4 Distribution of UCBs by CRAR 14
1.5 Financial Performance of Scheduled and Non-scheduled Urban Cooperative Banks
15
1.6 Liabilities and Assets of Urban Cooperative Banks 16
1.7 Year wise Progress in Mergers/Acquisitions of UCBs 17
1.8 Investments by UCBS 18
1.9 Selected Indicators of Profitability of Urban Cooperative Banks 19
1.10 Banking Business per Branch for UCBs by Region 20
1.11 Non-performing Assets of Urban Cooperative Banks 21
2.1 Number of Banks Selected for the Study 26
3.1 The Existing Status of Industrial Areas in Latur District 34
3.2 Industries at a Glance in Latur District 34
3.3 Urban Cooperative Banks in Latur District 35
3.4 Commercial, Cooperative and other Banks in Latur District 36
4.1 Minimum SLR Investment by UCBs 43
4.2 Maintenance of CRR 45
5.1 Total Deposits of Urban Cooperative Banks in Latur District 57
5.2 Total Loans of Urban Cooperative Banks in Latur District 59
5.3 Membership of Urban Cooperative Banks in Latur District 61
5.4 Paid-up Capital of Urban Cooperative Banks in Latur District 63
5.5 Investments of Urban Cooperative Banks in Latur District 64
5.6 Profit of Urban Cooperative Banks in Latur District 66
Table No. Name of Table Page
No 5.7 Interest on Deposits of Urban Cooperative Banks in Latur District 68
5.8 Interest on Loans of Urban Cooperative Banks in Latur District 69
5.9 Percentage of Total Expenditure to Total Income of Urban Cooperative Banks in Latur District
71
5.10 Current Ratio’s of Urban Cooperative Banks in Latur District 74
5.11 Credit Deposit Ratio’s of Urban Cooperative Banks in Latur District 75
5.12 Current Assets to Fixed Assets Ratio’s of Urban Cooperative Banks in Latur District
76
5.13 Indebtedness Ratio’s of Urban Cooperative Banks in Latur District 77
5.14 Fixed Assets to Net worth Ratio’s of Urban Cooperative Banks in Latur District 78
5.15 Net Profit to Total Assets Ratio’s of UCBs in Latur District 79
5.16 Net Profit to Fixed Assets Ratio’s of UCBs in Latur District 80
5.17 Net Profit to Capital Employed Ratio’s of UCBs in Latur District 81
5.18 Return on Share Holders Fund Ratio’s of UCBs in Latur District 82
5.19 Bad Debts of Urban Cooperative Banks in Latur District 84
5.20 NPAs of Urban Cooperative Banks in Latur District 85
5.21 Loan Lent to Small Business Units of UCBs in Latur District 86
5.22 Deposits and Loans Show Increasing Trends of UCBs in Latur District 88
5.23 Rate of Return on Share Holder’s Investments of UCBs in Latur District 89
6.1 Number of Respondents for Interaction 91
6.2 Lack of Professional Management 92
6.3 Conflict of Interest in Following Prudential Norms in Sanctioning Loans and Advances
93
6.4 Problem of Recovery 94
6.5 Poor Monitoring Mechanism of Loans and Advances 95
6.6 Poor Profitability 97
6.7 Inability to Attract Fresh Deposits from Higher Income Groups 98
6.8 Poor Infrastructure 99
Table No. Name of Table Page
No 6.9 No Change in the Top Management 99 6.10 Disbursement of Loans 100
6.11 Poor Marketing Research/ Field Survey 101
6.12 Non Adoption of Modern Banking Facilities 102
6.13 Reasons for Poor Work Culture and Lower Morale 103
6.14 Reasons for Dissatisfaction of Customers 107
LIST OF GRAPHS
Graph No. Name of Graph Page
No 1.1 Selected Indicators of Profitability of Urban Cooperative Banks 20
1.2 Non-performing Assets of Urban Cooperative Banks 22
3.1 Location Map of Latur District 32
5.1 Total Deposit Mobilization of UCBs in Latur District 58
5.2 Total Loans of Urban Cooperative Banks in Latur District 60
5.3 Paid-up Capital of Urban Cooperative Banks in Latur District 63
5.4 Investments of Urban Cooperative Banks in Latur District 65
5.5 Profit of Urban Cooperative Banks in Latur District 67
LIST OF ABBRIVIATIONS
ADA Anil Dhirubhai Ambani
AML Anti Money Laundering
APPBO Average Population per Bank Office
ASP Application Server Provider
ATM Automated Teller Machine
BOD Board of Directors
CA Chartered Accountant
CAMEIS Capital Adequacy, Asset Quality, Management, Earnings, Liquidity, System and Procedures
CAP Customer Acceptance Plan
CDD Customer Due Diligence
CFT Combating Financing of Terrorism
CRAR Capital to Risk Assets Ratio
CRCS Central Registrar of Co-operative Societies
CRR Cash Reserve Ratio
DICGC Deposit Insurance and Credit Guarantee Corporation
EPN Entry Point Norms
FATA Financial Action Task Force
HDFC Housing Development Finance Corporation
ICICI Industrial Credit and Investment Corporation of India
IDBI Industrial Development Bank of India
IRAC Income Recognition and Asset Classification
KYC Know Your Customers
LABs Local Area Banks
LDCC Latur District Credit Cooperative Bank
LIC Life Insurance Corporation
LJMSB Latur Jilha Madhyawarti Sahakari Bank
LPG Liberalization, Privatization and Globalization
LUCB Laxmi Urban Cooperative Bank
MCED Maharashtra Center for Entrepreneurship Development
MIDC Maharashtra Industrial Development Corporation
MITCON Maharashtra Information Technology Consultancy
MOU Memorandum of Understanding
MRSB Maharashtra Rajya Sahakari Bank Mumbai
MSME Micro, Small and Medium Enterprises
MUCB Mahesh Urban Cooperative Bank
NABARD National Bank for Agricultural and Rural Development
NDTL Net Demand and Time Liabilities
NEFT National Electronic Fund Transfer
NEP New Economic Policy
NIM Net Interest Margin
NOC No objection Certificate
NPAs Non Performing Assets
OSS Off Site Surveillance
OTS One Time Settlement
PCARDB Primary Cooperative Agriculture and Rural Development Banks
PEPs Politically Exposed Persons
PLP Potential Linked Credit Plan
PSB Private Sector Banks
RBI Reserve Bank of India
ROA Return on Assets
ROE Return on Equity
SBH State Bank of Hyderabad
SBI State Bank of India
SCARDB State Cooperative Agriculture and Rural Development Banks
SEZ Special Economic Zones
SLA Service Level Agreement
SLR Statutory Liquidity Ratio
SUCB Saibaba Urban Cooperative Bank
SUCB Siddheshwar Urban Cooperative Bank
SWOC Strengths, Weaknesses, Opportunities and Challenges
TAFCUB Task Force for Urban Co-operative Banks
UCB Urban Co-operative Bank
UTI Unit Trust of India
UUCB Udgir Urban Cooperative Bank
U/s Under Section
CHAPTER I INTRODUCTION
___________________________________________________________ 1.1 Introduction.
The Co-operative movement was started in India to ameliorate the
condition of that co-operation offers a solution to the difficulties but also by the
town man in regard to credit as well as other aspects of his business and like. The
Mac Lagan Committee on Cooperation pointed out as early as 1915 that, “Urban
Credit Societies may serve useful purpose in training the upper and middle classes
to understand ordinary banking principles”. In 1931 the Central Banking Enquiry
Committee recommended that, “limited liability of cooperative societies generally
known as urban banks should be established wherever necessary facilities and
conditions exist for the benefit of middle classes of the population. We do not see
any objection to special societies for salary earners if these societies are looked
upon as thrift societies for collecting and investing the savings of their members.
The duty of these urban banks should be to try to do for the small trader, the small
merchant and the middle class population as like what the commercial banks are
doing for the big trader and the big merchant.”
Urban Cooperative Banks have a prestigious place in the Cooperative
Credit Structure. These banks in our country have been started and promoted by
the corporate without government assistance. These institutions had glorious past
of being voluntary in nature democratic in management and self reliant in
financial position with less risk in operations. Despite the fact that their growth is
heterogeneous, they have glittering future even in this competitive market
situation in the banking industry.
Now, in new liberalized economic environment, the cooperatives
enjoyed the special treatment from Government of India, State Government,
Reserve Bank of India and all other policy making bodies during the last 50 years.
Because of changed economic policies of Indian Governments the cooperatives
have landed in a competitive set-up. In this competitive environment, the survival
and the future of the cooperatives depend upon their performance.
Cooperation is a real way of life, a true democratic process and it
imbibes human values. Cooperation not only units people physically but also
integrates good qualities of human life. Cooperation is a lamp, which shows a path
in today’s changing socio-economic scenario. It is the only solution to the
problem of disintegration of classes which is the outcome of today’s market
economy, which is purely based on the principle of execution. In the process of
Globalization, cooperation is the only helping hand for the people which
otherwise will be thrown out of the development process. Cooperation will
strengthen the exploited classes and the weaker sections of the society to stand
firmly in this changing scenario.
Cooperative movement in India is seen as a means to attain socialistic
pattern of society. In order to accelerate the rate of economic growth and to fulfill
social justice within the framework of National Policy, cooperative sector has
played significant role in India. Urban Cooperative Banks played a very important
role in fostering and institutionalizing of saving and channelizing funds for the
socio-economic development of the country. Urban Cooperative Banks in India
have done a commendable work in providing banking facilities to millions of
people, served a larger social purpose in accordance with national priorities.
The Cooperative Banks are an important component of the economy of
the country and provide financing for small economic activities which include the
small traders, transport operators, small scale industries and financial services to
the people with small means. The importance of banks to national economies is
underscored by the fact that banking is universally a regulated industry and that
banks have access to government safety nets. The management of the UCBs is rest
with the board of directors mostly who are the elected political leaders and
businessmen’s and not possess the required knowledge about banking or laws. It
is crucial therefore those banks have strong Corporate Governance.
The UCBs have already fixed out a niche for themselves in the banking
sector. However, which liberalization and globalization, the UCBs sector has to
compete with others who are making roads into their domain. The threat and risks
to the UCBs are not going to come from foreign banks or private commercial
banks, as much as the threats they face from the growth of Self Help Groups
(SHGs) and numerous Non-banking Financial Institutions. The Self Help Groups
and Non-banking Financial Institutions such as Chit Funds are getting a poor hold
in the market, where the presence of UCBs should have been strong and wide
spread. If the UCBs sector had catered to the financial needs of the middle class
urban population, there would have been no need for chit funds and self help
groups to enter the institutional finance sector. However, the UCBs sector on
account of various weaknesses allowed the entry of these players into the market
and in many ways competes for the business. The urban co-operative banking
sector can still overcome competition by reaching out to the masses that need low
cost and efficient financial services. The UCBs sector needs to build up a mass
cooperative banking structure which will provide financial services to the
common people in the urban areas.
1.2 Historical Perspective of Urban Cooperative Banks.
The Urban Cooperative Credit Bank movement originated in Germany
when Harman Schultz started such societies for the benefit of artisans in the cities.
Mr. Schultz found a friendly society to provide credit for relief in sickness
founded in his native town the first loan society in 1850 and Dr. Hog established
Dairy Cooperative Banking for the development of dairy enterprise. Dr. Hog’s
bank improved dairymen’s like in the rural and sub-urban parts of Germany and
Schultz model was designed to improve the social and economic life of urban part
of Germany. The attractive business of cooperative banks of Germany created an
ideal situation for the growth of cooperative banking at an international level in
the year 1849 to 1890.
1.3 Definitions of Urban Cooperative Banks. The definitions of Urban Cooperative Banks given by different
individuals and committees are given below.
In general Urban Cooperative Bank can be defined as, “A voluntary
association of individuals with unrestricted membership and collectively owned
resources formed by small businessman, professionals and / or wage earners,
conducted on a democratic basis under joint management and for mutual service
by accumulating the savings of the members and granting them credit on easy
terms of interest and repayment, surpluses being placed to reserves or distributed
between depositors and shareholders, the association also using the joint
responsibility of its members as a security for loans obtained for its members from
outside sources”
The Mehta Bhansali Committee (1939) defined Urban Cooperative
Banks, as “All Urban Credit Societies having paid-up share capital of Rupees
20000/- and over and accepting deposits of money on current account or otherwise
subject to withdrawal by cheque, draft or order, come within the category of urban
cooperative banks”.
Madhav Das Committee has defined urban cooperative banks as “a
Primary Cooperative Bank and is defined a cooperative society other than the
Primary Agricultural Credit Society”, having:-
a. The paid-up share capital and reserves of which are not less than Rs. One Lakh
and
b. The bye-laws which do not permit admission of any other cooperative society as
a member.
The category of Primary Cooperative Banks also includes salary earner’s
societies having paid-up share capital and reserves of Rs. 1/- Lakh or more and the
bye-laws of which provide for acceptance of deposits from non-members”.
The Cooperative Planning Committee (1946) has defined Urban
Cooperative Banks
“Urban banks receiving deposits on current account should have-
i) Paid –up share capital of at least Rs. 20000/-
ii) Maintain fluid resources on the scale prescribed by the Registrar of
Cooperative Societies; and
iii) Carry to the reserve fund at least one third (1/3) of their net profits till it equals
the paid-up capital and thereafter one fourth (1/4) of the net profits. The
reserve fund should be invested in gilt-edged securities or deposited in banks
approved by the Registrar and should not be used for the business of the
bank”.
1.4 Salient Features of Urban Cooperative Banks:
It is quiet difficult to project a clear picture of urban cooperative banks
in India, when we go through the above taken definitions of urban banks. So to
solve this difficulty, some important features of these urban cooperative banks are
listed below:-
1. Voluntary Association and Open Membership:
Membership of Urban Cooperative Banks shall be voluntary and
available throughout the life of it without artificial restriction or any social,
political, racial or religious discrimination to all persons who can make use of its
services and are willing to all persons who can make use of its services and are
willing to accept the responsibilities of membership.
2. Formation, Registration and Licensing:
Urban Cooperative Banks are formed according to cooperative societies
act on filing bye-laws and registered with registrar of cooperatives. To
cooperative banking business in India, it has to obtain license from RBI under
section 22 of Banking Regulation Act, 1949.
3. Domestic Control:
The members elect the Managing Committee by exercising ‘One man,
one vote’ in general meeting. Managing Committee consisting of honorary
service minded people to carry on banking operations on domestic principles.
4. Mutual Benefit:
Urban Cooperative Banks are formed to carry on banking business,
with a view to provide mutual benefit to their members at low cost to uplift
economically weaker sections of society without any outside aid.
5. Privileges:
They enjoy privileges like higher rate of interest on deposit, lower
lending rates, exemption from payment of interest tax and tax on profits, lesser
cash reserve ratios and statutory liquidity ratios etc.
6. Initial Share Capital and Membership:
To establish new Urban Cooperative Bank it should have minimum
Rs.5/- Lakh to 30/- Lakhs of share capital and minimum 500 to 2000 members
depending on the place of its establishment.
7. Dual Control:
They are subject to dual control of the Registrar of Cooperative
Societies at the level and RBI at the national level.
8. Area of Operation:
Their area of operation is urban and semi-urban area. They are not
allowed to operate in rural area wherein the population is below 2000.
1.5 The Need for Urban Cooperative Banks.
The Urban Cooperative Banks occupy a significant place in the urban
credit movement. The need for organization of Urban Cooperative Banks is to
provide helping hand to the weaker section of urban community viz, small traders,
artisans, salaried people, professionals and other people of small means. These
banks were expected to spread banking habits among the people in the cities, town
and semi-urban areas.21 The Urban Cooperative Credit Movement, started in India
with the chief object of catering to the banking and credit requirements of the
urban middle class. Besides protecting the middle classes and men of modest
means from the clutches of the moneylenders, the movement is also expected to
include the habit of thrift and saving amongst them. The movement provides the
frugal section of the community an opportunity of investing their savings and thus
helps the hard pressed people tide over the period of stress and strain. It is also
needed to provide financial and technical assistance to small scale, cotton
industries and to help self employed persons.
1.6 Objectives and Functions of Urban Cooperative Banks.
The main objectives of Urban Cooperative Banks are:-
1. To attract deposits from members and non-members.
2. To advance loans to members.
3. To collect bills, cheques, issue drafts and provide banking services.
4. To provide safe custody of valuables.
5. To promote thrift, saving and self and mutual help among the members.
In Scheduled Urban Cooperative Banks like, Bombay Mercantile
Cooperative Bank and Cosmos Cooperative Bank, the following objects are also
included in their byelaws:
1. To buy and to sell foreign exchange including foreign bank notes.
2. To grant and issue letters of credit.
3. To carry on and to transact every kind of guarantee and indemnity business on
behalf of constituents.
4. To enter into consortium finance arrangements with any other bank or
financial institutions with the object of marketing loans and advances.
1.7 Organization Structure of Urban Cooperative Banks.
The management of Urban, Cooperative Banks is vested with the Board of
Directors elected by the general body. According to the State Cooperatives
Societies Act, the ultimate authority of cooperative society is general body. Even
urban banks have to convene the general body once in a year to take major
decisions for amendment of bye-laws, approval of net profit etc. The elected
directors of general body form the board of management. The day-to-day
administration of the bank is vested in the hands of Board of Management such as
sanction of loan is taken care by the board with the support of general manager
assistant general manager, managers, senior officers and other staff.
The directors are expected to posse’s qualities of leadership and ability to
guide the bank on sound lines. They are represented by all sections of urban elite.
Enlightened persons like Lawyers, Doctors, Engineers, Chartered Accountants and
Business Experts find place in the board of management of the urban banks.
Cordial relations should exist among staff and management members in the
cooperatives.
A Chairman and Vice chairman are to be elected from elected directors. The
representatives for women and SC/ST are also elected by creating reservation
system as per the Act and by laws. The members of an urban bank are composed
of traders, artisans and salary earners. The liability of the member is limited to the
share capital subscribed by him.
The following Chart 1.1 shows the organizational set-up of urban banks.
CHART 1.1
The below mentioned organization set-up indicates both the elected
board and paid staff of big urban banks. Small urban banks situated in small town,
urban and semi urban areas normally have general manager, managers,
accountants, cashier, senior clerks and junior clerks. A few assistant managers are
also appointed both in head office and branches
Elected Board
Chairman
Vice - Chairman
Director with Technical know – how, Women, SC/ST, etc.
CHART 1.2
OFFICE MANAGEMENT
Managing Director
General Manager
Deputy General Manager
Manager
Training
Legal Status
Foreign exchan
ge
Advance Staff (Personal
)
Inspection & Audit
Clerks Sub-staff
1.8 Progress of the Urban Cooperative Banks in Post-liberalization Period i.e. from 1991 onwards: (1991 to 2011)
Table 1.1 Deposit Growth of UCBs (1991 to 2011)
(Amount in Corers of Rupees)
Year Number of
UCBs
Deposits
(Rs)
Percentage of growth
over Base year
1990-91 1307 10107
(100) -
1991-92 1311 11108
(109.36) 9.36
1992-93 1306 13531
(133.21) 33.21
1993-94 1305 16769
(165.09) 65.09
1994-95 1300 20101
(197.90) 97.90
1195-96 1327 24165
(237.91) 137.91
1996-97 1355 30714
(302.39) 202.39
1997-98 1502 40692
(400.63) 300.63
1998-99 1590 52681
(418.66) 418.66
1999-00 1645 71189
(700.88) 600.88
2000-01 1618 80840
(795.90) 695.90
2001-02
1854
93069
(916.30)
816.30
2002-03 1941 10154
(999.76) 899.76
2003-04
1926
110256
(1085.51)
985.51
2004-05 1872 105021
(1033.97) 933.97
2005-06 1853 114060
(1122.96) 1022.96
2006-07 1813 121391
(1195.14) 1095.14
2007-08 1770 138496
(1363.55) 1263.55
2008-09 1721 158733
(1562.79) 1462.79
2009-10 1674 182862
(1800.35) 1700.35
2010-11 1645 212031
(2087.53) 1987.53
Source: Reserve Bank of India, Urban Banks Department, Central Office, Mumbai. Note: 1.Figures in the Bracket indicates percentage of Increase/ Decrease over base year 1990-91.
Table No. 1.2 Growth of Advances of UCBs (1991 to 2011) (Amount in Corers of Rupees)
Year Number of UCBs Advances (Rs)
Percentage of growth over Base
year
1990-91 1307 8003
(100) -
1991-92 1311 8713
(108.87) 8.87
1992-93 1306 10132
(126.60) 26.60
1993-94 1305 12172
(152.09) 52.09
1994-95 1300 14795
(184.86) 84.86
1195-96 1327 17908
(223.76) 123.76
1996-97 1355 21550
(269.27) 169.27
1997-98 1502 27807
(347.45) 247.45
1998-99 1590 34214
(427.51) 327.51
1999-00 1645 45995
(574.72) 474.72
2000-01 1618 54389
(679.60) 579.60
2001-02 1854 62060
(775.45) 675.45
2002-03 1941 64880
(810.69) 710.69
2003-04 1926 67930
(848.80) 748.80
2004-05 1872 66874
(835.61) 735.61
2005-06 1853 71641
(895.17) 795.17
2006-07 1813 79733
(996.28) 896.28
2007-08 1770 88981
(1111.84) 1011.84
2008-09 1721 97918
(1223.51) 1123.51
2009-10 1674 110304
(1378.24) 1278.24
2010-11 1645 136341
(1703.62) 1603.62
Source: Reserve Bank of India, Urban Banks Department, Central Office, Mumbai. Note: 1.Figures in the Bracket indicates percentage of Increase/Decrease over base year 1990-91. In the year 1966, when the Banking Regulation Act, 1949 was made
applicable to UCBs, there were about 1100 UCBs with deposits and advances of Rs.
167/- crore and Rs. 153crore respectively. The UCBs continued to grow at a fast pace
till 2003, when their number increased to 1941 and their deposits and advances
increased to Rs. 101546/- crore and Rs. 64880/- crore respectively. The liberal
licensing policy followed by the Reserve Bank pursuant to the recommendations of
the Marathe Committee (1992) led to the proliferation in the sector. However, the ban
on licensing of new UCBs since 2004 and encouragement to voluntary amalgamation
and consolidation in the sector has resulted in decline in the number of UCBs to 1645
in 2011 with total deposits of Rs. 212031/- crore and advances of Rs. 136341/- crore.
Tier-wise Distribution of Urban Cooperative Banks:
There were 1,194 Tier I UCBs (74.34 percent of total UCBs) which
accounted for 15.7 percent of deposits, 15 percent of advances and 16.2 percent of
assets. On the other hand, 412 banks classified as Tier II accounted for 25.7 percent of
deposits, 84.3 percent of advances and 83.8 percent of assets of the sector. The tier-
wise distribution is shown in Table 1.3 which is given below.
Table 1.3 Tier-wise Distribution of Urban Cooperative Banks and their Deposits, Advances
and Assets at the end March 2013 (Amount in Rs. Billion) Tier
Type Number of Banks Deposits Advances Assets
Number % to
Total
Amount
(Rs)
% to
Total
Amount
(Rs)
% to
Total
Amount
(Rs)
% to
Total
1 2 3 4 5 6 7 8 9
Tier I
UCBS 1194 74.3 434 1537 272 15.0 545 16.2
Tier II
UCBs 412 25.7 2335 84.3 1538 85.0 2827 83.8
All
UCBs 1606 100 2769 100 1810 100 3372 100
Source: Urban Credit, Nov-Dec, 2013, Vol. XXXIV.
CRAR Distribution:
The majority of UCBs (about 91 Percent) reported capital to Risk-weighted
Assets Ratio (CRAR) above the statutory minimum of 9 percent at 2012 (Table1.4).
However, the capital position of Scheduled UCBs was much weaker than that of Non-
Scheduled UCBs. Moreover, it was a disquieting feature that most of the Scheduled
UCBs with CRAR below the regulatory minimum had a negative CRAR.
Table 1.4 Distribution of UCBs by CRAR (As at end-March 2012)
CRAR (In Percent) Scheduled UCBs Non-scheduled
UCBs All UCBs
1 2 3 4
CRAR < 3 08 79 87
3< CRAR < 6 01 14 15
6< CRAR < 9 - 50 50
9< CRAR <12 08 197 205
12< CRAR 35 1,226 1,261
Total 52 1,566 1,618
Source: Urban Credit, Nov-Dec, 2012, Vol. XXXIV.
It is observed that out of 1,618 UCBs, 152 (9 percent) UCBs had lower CRAR
than the prescribed CRAR of 9 percent. Out of these 152 UCBs, 87 UCBs had CRAR
less than 3 percent.
Financial Performance of Urban Cooperative Banks:
The Financial Performance of Urban Cooperative Banks at the end of March,
2012 is to be shown in Table 1.5 given below. From the table it is observed that
Interest Income of Non-scheduled UCBs was greater than the Scheduled UCBs in
both the year i.e. 2010-11 and 2011-12. Not only Interest Income but Total Income
was also greater than the Scheduled UCBs.
In case of expenditure, the Total Expenditure of Scheduled UCBs is less than
the Non-scheduled UCBs in both the years. The net profit of Scheduled UCBs was
also higher in 2010-11 and it was equal in 2011-12.
Table 1.5 Financial Performance of Scheduled and Non-scheduled Urban Cooperative Banks (As at the end of March 2012) (Amount in Rs. Billion)
Item Scheduled UCBs Non-scheduled
UCBs All UCBs
Percentage
variation
(All UCBs)
2010-11 2011-
12
2010-
11 2011-12
2010-
11
2011-
12
2010-
11 2011-12
1 2 3 4 5 6 7 8 9
A. Total Income
(I+II)
98
(100)
124
(100)
125
(100)
158
(100)
224
(100)
281
(100) 13.4 25.9
I. Interest
Income
90
(91.3)
113
(91.7)
119
(95)
148
(93.9)
209
(93.4)
261
(100) 14.2 25.2
II. Non-interest
Income
9
(8.7)
10
(8.3)
6
(5)
10
(6.1)
15
(6.6)
20
(7.1) 2.4 35.4
B. Total
Expenditure(I+I
I
78
(100)
100
(100)
107
(100)
131
(100)
185
(100)
230
(100) 9.6 24.9
I. Interest
Expenditure
55
(70.9)
74
(74.3)
75
(70.6)
92
(70.5)
131
(70.8)
166
(72.1) 8.8 27.2
II. Non-interest
Expenditure
23
(29.1)
26
(25.7)
31
(29.4)
39
(29.5)
54
(29.2)
64
(27.9) 11.4 19.1
III. of which
staff expenses 12 13 16 19 28 32 -0.3 15
C. Profits
I. Amount of
Operating
profits.
20 24 19 27 39 51 35.7 3.7
II. Provisions,
Contingencies,
Taxes.
08 10 09 13 17 23 2.6 37
III. Amount of
Net Profits. 12 14 10 14 22 28 78 26.1
Source: Urban Credit, Nov-Dec, 2012, Vol. XXXIV. Note: 1. Figures in parentheses are percentages to total income / expenditure.
2. Percentage variation could be slightly different as absolute numbers have been rounded off to Rs. Billion. 3. Components may not add up to the whole due to rounding off.
Liabilities and Assets of Urban Cooperative Banks:
The assets of UCBs increased by 11.4 percent in 2012-13, there was some
moderation in their credit growth owing to sluggish demand in the economy. On the
other hand investments of these institutions showed relatively higher growth in 2012-
13 on account of a sharp increase in SLR investments. In this context, it needs to be
noted that UCBs deposits with SCBs and DCCBs were reckoned to maintain a
uniform SLR of 25 percent on their NDTL in India. (Table 1.6)
UCBs with a deposit base of over Rs. 10 billion accounted for 47 percent of
the total deposits as at end March, 2013. These institutions with a credit size of over
Rs. 10/- billion also accounted for about 40 percent of total UCBs advances.
Table 1.6
Liabilities and Assets of Urban Cooperative Banks (As at end-March 2013)
(Amount in Rs. Billion)
Assets/ Liability Scheduled UCBs Non-scheduled UCBs
2012 2013 2012 2013
1 2 3 4 5
Liabilities
1.Capital 23
(1.6)
27
(1.8)
50
(3.1)
67
(3.6)
2.Reserves 126
(8.9)
132
(8.7)
143
(8.9)
155
(8.4)
3.Deposits 1104
(77.6)
1263
(82.9)
1282
(80.0)
1506
(81.4)
4.Borrowings 21
(1.5)
23
(1.5)
15
(0.9)
8
(0.4)
5.Other Liabilities 148
(10.4)
79
(5.2)
113
(7.0)
112
(6.1)
Assets
1.Cash 8
(0.6)
11
(0.7)
23
(1.4)
26
(1.4)
2.Balances with
Banks
122
(8.6)
105
(6.9)
142
(8.9)
139
(7.5)
3.Money at call
and Short notices
9
(0.6)
5
(0.3)
7
(0.4)
9
(0.5)
4.Investmets 370
(26.0)
448
(29.4)
510
(31.8)
631
(34.1)
5.Loans &
Advances
744
(52.3)
839
(55.1)
834
(52.0)
970
(52.5)
6.Other Assets 171
(12.0)
115
(7.5)
88
(5.5)
74
(4.0)
Total
Assets/Liabilities
1423
(100.00)
1524
(100.00)
1603
(100.00)
1849
(100.00)
Source: Urban Credit, Nov-Dec, 2013, Vol. XXXIV. Note: 1. Figures in parentheses are percentages to total assets/liabilities. 2. Percentage variation could be slightly different as absolute numbers have been rounded off to Rs. Billion. 3. Components may not add up to the whole due to rounding off.
Consolidation of UCBs through Mergers/Acquisitions:
As part of the process of strengthening the sector a process of
consolidation was set in motion by RBI and issued objective guidelines in February,
2005 in this regard. Another set of guidelines was issued by RBI in January, 2009 for
the Merger/Acquisition of UCBs having negative net worth. In February, 2010
guidelines for transfer of assets and liabilities of UCBs to commercial banks were
issued. Pursuant to issuance of guidelines on merger, RBI received 177 proposals for
mergers by respective RCS/CRCS. The year wise details of mergers as on 31 March,
2013 is given in Table 1.7.
Table 1.7 Year wise Progress in Mergers/Acquisitions as on 31 March, 2013.
Financial Year
Proposals received
in the Reserve
Bank
NOCs issued by
the Reserve Bank
Merger effected
(Notified by RCS)
1 2 3 4
2005-06 24 13 04
5006-07 32 17 16
2007-08 42 26 26
2008-09 16 26 22
2009-10 26 17 13
2010-11 17 15 13
2011-12 10 11 14
2012-13 10 05 03
Total 177 130 111
Source: Urban Credit, July-Aug, 2013, Vol. XXXIV. Investment by Urban Cooperative Banks:
Table 1.8 Investments by UCBS (Amount in Rs. Billion)
Item As at end-March Percentage Variation
2010-11 2011-12 2010-11 2011-12
Rs Rs Rs Rs
Total
Investments
850
(100)
880
(100) 7.4 3.5
A.SLR Investments
(i+ii)
785 (92.3)
814 (92.5) 10.7 3.8
i. Central Govt.
Securities
513
(60.4)
564
(64.1) 25.7 10
ii. State Govt.
Securities
93
(10.9)
108
(12.3) 18.8 17.2
iii. Other
Approved
Securities
5
(0.6)
03
(0.4) 29.4 -38.4
iv. Term
Deposits with
SCBs
53
(6.2)
42
(4.8) -16.6 -20.8
v. Term
Deposits with
DCCBs
107
(12.6)
76
(8.6) -22.9 -28.9
vi. Others, if
any
14
(1.7)
21
(2.3) -18.3 44.7
B. Non SLR
Investments
65.5
(7.7)
65.7
(7.5) -20.5 0.4
Source: Urban Credit, Nov-Dec, 2012, Vol. XXXIV.
Note. 1. Figures in parentheses are percentages to total. 2. Percentage Variation could be slightly different as absolute numbers have been rounded off to Rs. Billion. 3. Components may not add up to the whole due to rounding off. The Table 1.8 depicts about investments made by UCBs as at March, 2012. In
this table we can see that total investments made by UCB include SLR investments
and Non SLR Investments. The SLR investments were greater than the Non SLR
investments.
Selected Indicators of Profitability of UCBs:
There has been a continuous improvement in the major indicators of
profitability of UCBs in 2011-12 (Table 1.9). Both the Return on Assets (ROA),
defined as net profits as percent of average assets, as well as Return on Equity (ROE),
defined as net profits as percent of average equity, showed a perceptible rise during
the year. Further, the rise in ROA could be seen not just at the aggregate or system-
wide level but also at the disaggregated level, there was an upward shift in ROA
among all scheduled UCBs in 2011-12. No scheduled UCBs reported a negative ROA
in this year.
Table 1.9 Selected Indicators of Profitability of Urban Cooperative Banks
Indicator Scheduled UCBs Non-scheduled UCBs All UCBs
2010-11 2011-12 2010-11 2011-12 2010-11 2011-12
1 2 3 4 5 6 7
ROA 1.07 1.08 0.7 0.9 0.9 1.0
ROE 9.6 10.1 5.5 7.3 7.1 8.4
NIM 3.1 3.0 3.1 3.6 3.1 3.3
Source: Urban Credit, Nov-Dec, 2012, Vol. XXXIV.
Graph 1.1 Selected Indicators of Profitability of Urban Cooperative Banks
Source: Urban Credit, Nov-Dec, 2012, Vol. XXXIV.
Banking Business per Branch for UCBs by Region:
However, it is noteworthy that the degree of concentration of banking business
of UCBs showed some signs of decline over time. The coefficient of variation in the
banking business of UCBs across regions showed a mild but steady fall between 2009
and 2012 (Table 1.10) Table 1.10
Banking Business per Branch for UCBs by Region
Region
Volume of Banking Business Per Branch
( in Rs. Millions)
2009 2011 2012
1 2 3 4
Northern Region 290 320 367
North-Eastern Region 151 262 313
Eastern Region 342 403 445
Central Region 234 285 290
Western Region 395 490 557
Southern Region 214 289 332
All Indian 341 426 481
Co-efficient of Variation 0.33 0.26 0.25
Source: Urban Credit, Nov-Dec, 2012, Vol. XXXIV.
Improvement in the Asset Quality of UCBs was sustained:
UCBs have shown a steady improvement in their asset quality over recent
years. There has been a decline in Gross Non-performing Assets (NPAs), both in
absolute and ratio terms. In continuation of this trend, UCBs reported negative growth
in gross NPAs and also showed a fall in their gross NPAs ratio in 2011-12-13. (Table
1.11) Table 1.11 Non-performing Assets of Urban Cooperative Banks (Amount in Rs. Billion)
Item 2011(Amount) 2012(Amount) 2013(Amount)
1 2 3 4
1.Gross NPAs (Rs) 115 111 109
2.Net NPAs (Rs) 27 29 25
3.Gross NPA Ratio
(Percent) 8.4 7.0 6.0
4.Net NPA Ratio
(Percent) 2.1 2.0 1.4
5.Provisioning (1-2) 88 82 84
6.Provisioning Coverage
Ratio (percent) (5/1) 76.6 73.6 77.3
Source: Urban Credit, Nov-Dec, 2012, Vol. XXXIV.
Graph 1.2
Non-performing Assets of Urban Cooperative Banks
(Amount in Rs. Billion)
Source: Urban Credit, Nov-Dec, 2012, Vol. XXXIV.
CHAPTER II RESEARCH METHODOLOGY
_____________________________________________________________
2.1 Introduction: Performance evaluation is an essential pre-requisite for smooth functioning as
well as sustained growth and development of Urban Cooperative Banks. This study is
an empirical analysis of the functioning and performance evaluation of Urban
Cooperative Banks in Latur District. For this the researcher has analyzed and studied
the secondary data collected from the annual reports, audit reports, financial
statements and the official websites of the sample banks, State and National
Government institutions etc. Moreover, the State and National level organizations
publications were also used for the study. The data collected were scrutinized and
tables were constructed according to the various financial indicators and ratios with
respect to financial performance in the analysis of this study. Also the data is analyzed
with the help of simple statistical tools like: Arithmetic Mean, Standard Deviation and
Correlation Analysis, Ratios, Percentages, etc.. The hypotheses are tested with the
help of X2 – test (Chi Square Test) and F-test.
2.2 Formation of the Research Problem: The Urban Cooperative Banks seek to mobilize the limited and scanty resources of the middle and working classes and harness it with the cooperative mechanism thereby mobilizing public deposits and serving the varied needs of the urban and semi-urban population. As a result of this, the Urban Cooperative has emerged as “the shield of the weak rather than the sword for the strong”. It has greatly and substantially contributed in economic liberation and empowerment of the ‘have-nots’, thereby providing accessible and reasonable credit facilities, ample investment opportunities, and banking facilities for people with small means thereby ensuring their economic empowerment. With the adoption of the LPG policy, Indian economy is extended its scope thereby becoming global, open market-driven, and more liberal opening new avenues and prospect of opportunities not only for expected international and national trade and industrial progress. So, Urban Cooperative Banks as a unique model of economic empowerment
in urban and semi-urban area has its own unique features, significance and place in
urban economy of the country. So, the present study tries in diagnosing and defining
the true contribution of the Urban Cooperative Banks in the economic development of
urban areas as well as its problems due to the higher expectations of various stake
holders.
2.3 Selection of Topic:
Performance Evaluation of Urban Cooperative Banks in Latur District has
been selected for the present study, because it is considered that the Urban
Cooperative Banks have a great contribution in satisfying the financial needs of urban
and semi-urban people like Latur and many other areas.
One of the reasons for the selection of this topic is that urban banks have
greatly and substantially contributed in economic liberation and empowerment of the
urban and semi-urban population. However, the question is whether these banks are
able to meet various needs of the customers, can adopt the modern communication
and information technology and can compete with public as well as private
commercial banks. By considering the role played by the Urban Cooperative Banks
in providing various services to lower and middle income groups in the urban and
semi urban areas and the challenges faced by them in the modern era of banking, the
topic “A Study Performance Evaluation of Urban Cooperative Banks in Latur
District” has been selected for the research study.
2.4 Need and Significance of the Study: The Cooperative Banks in the country are facing a lot of problems due
to government policies, weaker management, inherent structural weaknesses, lack of
adoption of information and communication technology, poor customer service,
competition with well organized commercial banks and above all growing needs of
the customers. Among the cooperative banks, Urban Cooperative Banks are the least
protected banks and the success of these banks is entirely in the hands of the
management. But with the limited resources and local management, these banks are
trying their level best to serve the needs of the growing urban middle and lower
income groups.
The study entitled “A Study of Performance Evaluation of Urban Cooperative
Banks in Latur District” is undertaken in order to evaluate the performance of the
Urban Cooperative Banks in Latur District of Maharashtra. In this study, the
researcher has evaluated the various initiatives and efforts undertaken by these banks
in fulfilling the needs of its customers and also studied the strengths and weaknesses
of these banks. Similarly, the researcher tried to evaluate how far these banks have
adapted to the new business environment and the models and the products offered by
commercial banks. The Urban Cooperative Banks are facing a lot of problems due to
its inherent structural limitations. Hence, the present study is undertaken to evaluate
the performance of the urban cooperative banks, its lending practices, and
mobilization of savings, financial strength, non performing assets, and adoption of
modern technology and customer satisfaction and attitude towards these banks.
The study would also help to understand the functioning of Urban Co-
operative Banks, its problems and challenges in the era of economic liberalization. It
may also help to make suggestions for improving the performance of these banks.
2.5 Title of the Study: The title of present study is “A Study of Performance Evaluation of Urban
Cooperative Banks in Latur District”.
2.6 Objectives of the Study: Following are the objectives of the study:-
1. To evaluate the performance of various activities of Urban Co-operative
Banks of Latur District.
2. To study the various schemes launched by these banks for mobilization of
savings.
3. To evaluate lending activities of the Urban Co-operative Banks.
4. To study the Non-performing Assets (NPAs) of the Urban Cooperative Banks.
5. To study financial strength of the Urban Cooperative Banks.
6. To study the adoption of modern banking facilities in meeting the various
needs of the customers.
7. To study the problems of Urban Co-operative Banks in Latur District.
8. To make suggestions for improving the performance and credibility of the
banks.
2.7 Hypotheses: Following are the hypotheses of the study.
1. The Bad Debts of Urban Cooperative Banks show increasing trends.
2. The NPAs of Urban Cooperative Banks show increasing trends.
3. The major proportion of Loans was given to Small Business Units.
4. The Deposits and Loans show increasing trends.
5. The Rate of Return on Share Holders’ Investment shows increasing trends.
2.8 Scope of the Study: The scope of the study has following dimensions:-
1. Geographical:
The Urban Co-operative Banks operating in Latur are taken under this
study. So the study is confined to the working area of Latur District only.
2. Operational:
From the operational point of view, the scope of the study includes
mobilization of savings, lending, bad debts and non-performing assets of the
banks, capital raising, creation and maintenance of various statutory reserves
for self-sufficiency and in general problems faced by the banks.
3. Periodical:
The period of study is limited to 6 years i.e. from 2007-08 to 2012-13.
2.9 Research Methodology: A) Sample Size:
There are nineteen (19) Urban Cooperative Banks in the Latur District,
out of these; five (05) banks were selected for study due to constraint of time,
money and efforts required for the research. The names of the Urban
Cooperative Banks selected for the study are given in Table 2.1 Table 2.1
Number of Banks Selected for the Study Sr.No. Name of Bank Head Office
1 Laxmi Urban Co-operative Bank Ltd. Latur Latur
2 Siddheshwar Urban Co-operative Bank Ltd. Latur Latur
3 Saibaba Urban Co-operative Bank Ltd. Latur Latur
4 Udgir Urban Co-operative Bank Ltd. Udgir Udgir
5 Mahesh Urban Co-operative Bank Ltd. Ahemadpur Ahemadpur
B) Data Used:
The study is primarily based on Secondary Data collected from the
annual reports of selected banks. In addition to this, relevant data is collected
from published sources like, RBI Bulletin, Journals, Magazines, News Papers,
Ph. D and M. Phil theses.
Primary Data is used only to supplement the study and collected with
the help of Questionnaires, Personal Interviews and Discussions with bank
management, employees, customers, etc.
C) Statistical Tools:
The data is analyzed and interpreted with the help of simple statistical
tools like; Arithmetic Mean, Standard Deviation, Correlation Analysis, Ratios,
Percentages, etc. The hypotheses are tested with the help of X2 - test (Chi
Square Test) and F-test.
D) Presentation of Data:
The statistical data is represented in the form of Tables, Graphs, Charts
and Diagrams for evaluation and interpretation.
2.10 Limitations of the Study: The study is constrained by the following limitations:-
1. The study is limited to performance evaluation of selected Urban Cooperative
Banks in Latur District.
2. The conclusions drawn from the study need not necessarily be applicable to
the performance indication of urban banks in other districts.
3. The study was primarily based on secondary data and supplemented with
primary data.
4. Generalizations drawn from the study may not be 100% percent accurate.
5. In the present study, only the quantitative aspects of efficiency, productivity
and profitability have been examined.
6. The Qualitative aspects such as professional management, motivation level of
employees, quality of physical infrastructure, customer satisfaction etc have
not been studied thoroughly but only supplemented with the help of primary
data due to resource constraint.
2.11 Chapter Scheme: The thesis is organized in Seven Chapters. A brief description of each of the
chapter is given below.
Chapter - I Introduction
The First Chapter, being introductory in nature reviews the history and growth
of Urban Cooperative Banks (UCBs) in India, objectives and functions of UCBs, and
importance and roles of UCBs etc. An analysis of the growth of UCBs in pre-
liberalization period and post-liberalization period is also included in this chapter.
Chapter – II Research Methodology
In the Second Chapter, the Research Methodology and Review of Literature
are presented. It includes formulation of research problem, need and significance of
the study, objectives, scope and limitations of the study. It also includes the
formulation of hypotheses, the data used and statistical tools employed in collection
and analysis of the data.
Chapter– III Profile of the Latur District
The Third Chapter presents a brief history of Latur, its economy, industry,
trade, MIDC, banking and other financial services in Latur District.
Chapter – IV Government Policy towards Urban Cooperative Banks
The Fourth Chapter reviews Government Policies towards Urban Cooperative
Banks, such as Regulatory Policy, Duality of Control, Licensing Policy, Prudential
Regulations, Banking Regulation Act, 1949.
Chapter – V Performance Evaluation of UCBs in Latur District
In the Fifth Chapter, the analysis and discussion of the performance evaluation
of the Urban Cooperative Banks is made. The data is evaluated and interpreted in the
light of the objectives of the study and hypotheses. The data is evaluated to study
deposit mobilization, loan sanctioning, investments, paid-up capital, membership,
profit and loss, bad debts, NPAs, expenditure and income pattern, lending to business,
financial strengths, etc.
Chapter – VI Limitations/Problems of UCBs in Latur District
In the Sixth Chapter, the common problems being faced by the Urban
Cooperative Banks are analyzed in the light of economic liberalization, adoption of
new technology in banking transactions, modern banking facilities like, ATMs, NIFT,
RTGS, International Debit and Credit Cards, Customer Assistance, SMS services,
Professional Management, Capital Base, Prejudiced attitude of the public, growing
needs of the urban middle class and so on.
Chapter– VII Summary of Conclusions and Suggestions
The last Chapter provides the summary of findings, conclusions and
suggestions to improve the performance of Urban Cooperative Banks in Latur
District.
CHAPTER III Profile of Latur District
_____________________________________________________________ 3.1 Brief History of the Region:-
Latur District lies to the South-East of Maharashtra on the border of
Maharashtra and Karnataka. It was a part of Osmanabad District till 15th August,
1982. Latur the Head quarter of the District is an ancient town and the home of Ratta
or Rashtrakutas. The Rashtrakutas king Amoghvarsal is described as the Lord of
Lattalura i.e. the best of towns (Lattalura puravavadhisa). The Rattas of Saudatti
declare in their records that they had emigrated from the town of Lattalura. The
Rashtrakutas seem have originally belonged to this place.
Reference to this district since Puranas, Epics, Ramayana and Mahabharata
suggest that it was situated in the Deccan known as Dandakaranya. In the historical
times this territory was included in the Empire of Ashoka. After the death of Ashoka,
Satvahana rose to power and his capital was at Pratisthana (Paithan in Aurangabad
District). During the age of Satvahna the District seems to have been very prosperous
contemporary with the Vakataka of Vidarbha and the early Rashtrakuta of Kuntala
there was a Saka family ruling over the territory in which Latur District was
comprised. The Chalukya and then Yadavas of Deogiri ruled over the territory.
In the beginning of 14th Century in 1317, the Kingdom of Yadavas passed into
hands of the Sultan of Delhi. The territory of Latur District for the first time passed
under Mohammedans. From 1351 to 1518 dynasty of Brahmins ruled the territory
after which it came under Adilshaha. In 1724 A.D. after a century of direct rule of
Mughals, Latur District passed under the Nizam of Hyderabad Sovereignty.
The District was temporarily ceded to the British Government in 1853 and it
was reverted to Hyderabad State in 1860 with its Headquarters at Naldurga. The
District was known as Naldurga District. In 1904, Naldurga District was abolished
and a new district of Osmanabad was carved out with headquarter at Osmanabad in
1905 and two tahsils with their headquarters at Washi and Naldurga were abolished.
Washi was merged in Kalamb and Naldurga in Tuljapur Headquarter of Ausa Tahsil
were shifted to Latur and Tahsil was named as Latur Tahsil.
Among the Marathwada region Osmanabad had the biggest area under the
Nizam’s own state called ‘Sarf-e-khas’. The ‘Sarf-e-khas’ was merged with
government area under the ‘Sarf-e-khas’ (merge) regulation in the year 1949. In the
same year all the jagirs were abolished and put under direct Government
Administration. Consequent upon the abolition of ‘Sarf-e-khas’ and jagirs, the
boundaries at all the tahsils were reconstituted in 1950. Two new tahsils with
headquarters at Ausa and Omerga and a new Mahal with headquarters at Bhoom were
created. In 1950, again 11 enclave villages were transferred from Solapur to the
Osamanabad District in return of 52 villages from the Osamanabad District to
Solapur. With the reorganization of States the Osmanabad District became a part of
Bombay State in 1956. Three tahsils viz. Ahmadpur, Nilanga and Udgir were
transferred from the neighboring Bidar District (Karnataka) to Osmabad District.
In 1960, Bombay State was divided into Maharashtra and Gujarat and
Osmanabad became an integral part of Maharashtra State. Due to administrative
reasons Osmanabad District was bifurcated into two Districts, on 16th August, 1982.
The newly formed Latur District has 10 tahsils, 10 towns and 850 villages including
53 villages transferred from Ambejogai tahsil belonged to Beed District. However the
total list of villages goes to 946 as the same villages are granted by Latur District
Administration.
3.2 Location The Latur District lies between 17025’ and 18050 North Latitudes and 76012’
and 77018 East Longitudes. It is surrounded by Beed and Parbhani District in the
North, Nanded District in the North- East, Karantaka State in the South-East and
Osmanabad District in the North West and West.
Latur District has an area of 7372 (7371.9) sq. km. and Population of 20,
78,237 as per 2001 Census. Latur is the head quarter of the District to which it gives
its name. Latur city is connected to Pune and Bombay by broad gauge railway and has
a population of 24, 54,196 as per the 2011 census. It accounts for 2.39 percent of the
area of the State and 2.15 percent of the population.
Graph No. 3.1
3.1
3.3 Administrative Set up: Administratively the district is divided into 3 Sub-divisions namely Latur,
Nilanga and Udgir. Latur district has 10 Tehsils viz. Latur, Udgir, Ahmedpur, Ausa,
Nilanga, Renapur, Chakur, Deoni, Shrirur and Jalkot. At the District Level, Collector
is the Administrative Chief and at Tehsil level, Tehsildars are looking after the
administration as per Collector’s instructions. For Rural Development, Chief
Executive Officer of Zilla Parishad and at Block level, Block Development Officers
are in charge of the administration. Muncipal Councils for other Tehsils are
responsible for urban development of all the Tehsils. There are 10 Panchayat Samities
and 6 Nagar Parishads.
There are 6 Vidhan Sabha Constituencies in this district. These are Latur city,
Lautr Rural, Udgir, Ausa, Nilanga, and Ahmedpur. The Latur District is divided into 2
Lok Sabha Constituencies Latur and Osmanabad.
3.4 Industrial Profile: The District is a major producer of Sugarcane and Edible Oils, Soybean,
Grapes and Mangos. Till 1990, Latur was considered as an industrially backward city.
In 1960 region of Marathwada was merged with Maharashtra. This was the time when
the industrial development of the Marathwada region began, propelled through
designated backward area benefits. And it was only when the MIDC (Maharashtra
Industrial Development Corporation) began acquiring land and setting up industrial
estates that it began to grow. Latur is now classic example of efforts of State
Government towards balanced industrialization of State. Latur city is now home to
some best known brands. There are Tinna Oils, Kirti Gold and Kalantry Groups Agro
Processing and Dal Manufacturing Units to name a few. Many players have their
consumer durables, plastic processing, aluminum processing, agriculture and biotech.
The Latur, Additional Latur, and Khandapur MIDC Industrial Areas are
prominent industrial zones on the outskirts of the city, with various major
multinational groups having set up manufacturing or processing plants in and around
the city. There is one Special Economic zone (SEZ) called Agro processing SEZ.
3.5 Existing Status of Industrial Areas in Latur District: The existing status of Industrial areas in Latur District was shown in Table 3.1
Table 3.1
The Existing Status of Industrial Areas in Latur District
Sr.
No.
Name of Inds.
Area
Land
Acquired
(in Hect)
No. of
Plots
No. of
Allotted
Plots
Industrial
Rate per sq.
Mter (in
Rs.)
No. of
Vacant
Plots
1 MIDC Latur 263.26 748 748
Not
Available
Subject to
change
-
2 Addl.MIDC Latur 1076.83 483 480 3
3 MIDC Ausa 82.55 141 141 -
4 MIDC
Ahemadpur
20.00 15 14 1
5 MIDC Nilanga 17.95 64 60 4
Total 1460.59 1451 1443 8
Source: Ministry of MSME, Government of India.
3.6 Industries at a Glance: The detailed information of Industries in Latur District was shown in Table 3.2
Table 3.2
Industries at a Glance
Sr. No Category
Cumulative figures up to March 2012
Number of Enterprises
Employment generation
Investment (P &M) Rs. In Lakh
Production capacity (Rs. In Lakh)
Mfg Service Total Mfg. Service Total Mfg. Service Total Mfg. Service Total
1 Micro 1473 87 1560 14005 315
2 Small 490 1 491 7569 20 7589 31081 40 31121 61833 210 62043
3 Medium - - - - - - - - - - - -
4 Large 21 - 21 5727 - 5727 41295 0 41295 7047 - 7047
Source: Ministry of MSME, Government of India.
3.7 Urban Cooperative Banks in Latur District:
The following is the list of number of Urban Cooperative Banks in Latur
District.
Table 3.3
Urban Cooperative Banks in Latur District
Sr. No. Name of the Bank Place
1. Bhimashankar UCB Ausa
2. Dr. Shivjirao Patil Nilangekar UCB Nilanga
3. Indira Mahila Sahakari Bank Latur
4. Jijamata Mahila Sahakari Bank Latur
5. Kedarnath UCB Latur
6. Latur UCB Latur
7. Laxmi UCB Latur
8. Mahesh UCB Ahmedpur
9. Maharashtra Nagari Sahakari Bank Latur
10. Priyadarshani Mahila Sahakari Bank Latur
11. Rajiv Gandhi Sahakari Bank Latur
12. Sahyog UCB Udgir
13. Saibaba Janta Sahakari Bank Latur
14. Siddheshwar Sahakari Bank Latur
15. Udgir UCB Udgir
16. Vitthal Nagari Sahakari Bank Latur
17. Vikas Nagari Sahakari Bank Latur
18. Yashwant Nagari Sahakari Bank Latur
19. Yashwant UCB Udgir
Source: Maharashtra Gazetteer, Latur District-2011.
3.8 Number of Commercial, Cooperative and other Banks in Latur
District: The following is the list of number of Commercial, Cooperative and other
banks in Latur District.
Table 3.4 Commercial, Cooperative and other Banks in Latur District
Sr. No. Type of Bank Numbers
1 Commercial Bank 75
2 Rural Bank Products 41
3 Cooperative Bank Products 38
4 PLDB Branches 10
Source: Ministry of MSME, Government of India
CHAPTER IV
GOVERNMENT POLICY TOWARDS URBAN COOPERATIVE BANKS
___________________________________________________________ 4.1 New Economic Policy for Reconstruction of Cooperatives:
The New Economic Policy is concerned with the restructuring of the Indian
Economy. Cooperation is an important sector of the Indian economy and yet it finds
no place in the New Economic Policy. The New Economic Policy that has now been
introduced seeks to move the economy in a different direction. The key note of the
new economic policy is ushering in a competitive economy. It is only the competitive
economy without any state interference and control which could ensure a rational
allocation of resources based on the calculation of cost, prices and profits. The
cooperatives will now, therefore, have to all in line with logic of the competitive
economy which it is the objectives of the New Economic Policy introduced in 1991,
popularly known as Liberalization, Privatization and Globalization (i.e. LPG regime).
LPG with the primary goal of “growth maximization” has almost become a universal
economic phenomenon.
4.2 Liberalization, Globalization and Cooperatives:
The era of liberalistic trend started with the recommendations of
Arthanareeswaran Committee, which called for policy initiatives for
professionalization and democratization of the cooperative system and the subsequent
recommendation of Brahm Prakash Committee to adopt a liberalized model
Cooperative Societies Act, 1991, throughout the country. The challenge of
liberalization in the cooperatives coincided with the New Economic Policy initiated in
1991, popularly known as LPG regime. Deregulation of industrial licensing,
liberalization of trade and removable of trade business are the core components sector
needs to gear itself to face the economic reform competitive environment in July
1991.
Globalization has resulted in increased competition in every sphere of
economic activity. Cooperative is no exception to this matter. The biggest challenge
before cooperatives all over the world is to “both survive and thrive” in an era of
economic reforms. New investment opportunities are being created. Old business
models are under pressure. Increasingly, the goods and services produced by
cooperatives have to compete with those coming from other sector. Inputs of science
and technology have to be used to the fullest to boost productivity in the cooperatives.
One of the major steps will be to delink these from state control and deregulations. In
the light of the liberalization process initiated in the country, it is necessary that the
cooperatives be delinked from the state control and allowed to function freely based
on their professional.
Due to the regulations by the State Government in their operations,
professional approach to the business activities has been given the pass by many and
the process; they have ceased to be cost and quality conscious in their operations.
They also to compete successfully with the private sector, the cooperatives have to
function as business units and have to be conscious of cost and quality. The success of
cooperatives in other countries could be traced to the “value addition”. The
cooperatives have a crucial role to play in investing in activities that facilitated value
addition.
4.3 Government Policy in Regard to Urban Cooperative Banks: 4.3.1 Regulation and Supervision of UCBs:
Urban Cooperative Banks play an important role in meeting the growing credit
needs of metropolitan, urban and semi-urban areas of the country. As a significant
contributor towards the financial inclusion objectives of the nation, UCBs mobilize
savings from the middle and lower income groups and lend credit to small borrowers,
including weaker sections of the society. The regulation and supervision of the Urban
Cooperative Banks was brought within the ambit of the RBI’s statutory control under
the Banking Laws (as Applicable to Cooperative Societies Act) which came into force
from March 1, 1966 by extending certain provisions of Banking Regulation Act,
1949. Further, deposit insurance under the provisions of the DICGC Act, 1961 was
extended to the Cooperative Societies Acts empowering Reserve Bank of India in the
matters of control of the Board of Managements, amalgamation and winding up of
cooperative banks. The regulatory powers conferred on the RBI with regard to
cooperative banks are limited. While the principles of supervision with regard to
cooperative banks have been formulated and implemented by the RBI in respect of
UCBs under the Banking Regulation Act, 1949, the Act does not apply to Primary
Agricultural Credit Societies and Land Development Banks, thus leaving them under
the regulatory purview of the State.
Instances such as the Madhavpura Mercantile Cooperative Bank’s failure
brought to the fore the need to have stringent regulatory control over the cooperative
banking system. In order to strengthen the supervisory mechanism, the RBI extended
the Off-site Surveillance System (OSS) to all Non-scheduled UCBs having deposit
size of Rs. 100/- crore and above. A supervisory reporting system was introduced for
the Scheduled UCBs from March, 2001 as a first step towards setting up of OSS for
all UCBs. The Capital Adequacy norms were introduced in a phased manner from
March, 2002. Better risk management through avoidance of concentration of credit
risk, Off-Site Surveillance for Non-scheduled UCBs and following up of Know Your
Customer (KYC) guidelines have also been introduced to strengthen the UCBs.
A total ban has been imposed since October, 2003 on grant of loans and
advances to directors of UCBs, their relatives and concerns in which they have
interest with a view to preventing certain irregularities. The RBI has also directed that
UCBs should undertake usual due diligence in respect of investments in non-SLR
securities. The RBI introduced a new system of grading of UCBs in April, 2003,
which is based on their CRAR, level of net NPAs, record of losses and compliance
with regulatory environment. Similarly, a system of supervisory rating for UCBs
under the CAMELS model has also been introduced. Initially, it was implemented for
scheduled UCBs but subsequently its simplified version was extended to non-
scheduled UCBs in March, 2004.
Despite the structural and cultural differences between UCBs and commercial
banks, the above measures suggest that the RBI has been exercising its regulatory and
supervisory powers to ensure that the cooperative credit structure is strengthened on
the lines similar to the regulation and supervision of commercial banks.
The RBI is entrusted with the responsibility of regulation and supervision of
the banking-related activities of UCBs under the Banking Regulation Act, 1949 as
Applicable to Cooperative Societies (AACS). Other aspects such as incorporation,
registration, administration, management and winding-up of UCBs are supervised and
regulated by the respective State Governments through Registrars of Cooperative
Societies (RCS) under the Cooperative Societies Acts of the respective States. UCBs
with a multi-state presence are registered under the Multi-State Cooperative Societies
Act, 2002 and are regulated and supervised jointly by the Central Government
through Central Registrar of Cooperative Societies and the RBI.
4.3.2 Duality of Control:
Ideally, credit institutions should be under the oversight of a single regulator.
However, due to historical reasons and the federal character of our Constitution,
cooperation falls under State Laws. As per the existing constitutional provisions, the
subjects “Banking” and “Cooperative Societies” come under Union and State List
respectively and therefore, duality of control over the cooperative banks is inevitable.
While the State Cooperative Societies Acts/Multi State Cooperative Societies Act
contained provisions relating to Incorporation, Registration, Membership,
Management, Statutory Audit, Amalgamation, Reconstruction or Liquidation, the
banking activities such as issue of license to start new banks/branches, capital and
liquidity requirements, matters relating to interest rates, loan policies, investments, etc
are governed by the Banking Regulation Act, 1949 (as Applicable to Cooperative
Societies). The powers under the State Cooperative Societies Act and Multi State
Cooperative Societies Act are vested in the Registrar of Cooperative Societies of the
State concerned and Central Registrar of Cooperative Societies respectively, Banking
Regulation Act, 1949 (AACS) empowers the Reserve Bank to regulate and supervise
the banking related matters. The applicability of banking laws to UCBs resulted in
‘Duality of Control’ between the Reserve Bank and the Registrar of Cooperative
Societies/Central Registrar of Cooperative Societies.
However, concerns regarding the professionalism of Urban Cooperative Banks
gave rise to the view that they should be better regulated. Large Cooperative Banks
with paid-up share capital and reserves of Rs. 1/- lakh were brought under the
purview of the Banking Regulation Act, 1949 with effect from 1st March, 1966 and
within the ambit of the Reserve Bank’s supervision. This marked the beginning of an
era of duality of control over these banks. Banking related functions (viz. Licensing,
area of operations, interest rates etc.) were to be governed by RBI and registration,
management, audit and liquidation, etc. governed by State Governments as per the
provisions of respective State Acts. In 1968, UCBs were extended the benefits of
Deposit Insurance.
The Madhavdas Committee (1979) evaluated the role played by Urban
Cooperative Banks in greater details and drew a roadmap for their future role
recommending support from RBI and Government in the establishment of such banks
in backward areas and prescribing viability standards.
The Hate Working Group (1981) desired better utilization of bank’s surplus
funds and that the percentage of the Cash Reserve Ratio (CRR) and the Statutory
Liquidity Ratio (SLR) of these banks should be brought at par with commercial
banks, in a phased manner. While the Marathe Committee (1992) redefined the
viability norms and ushered in the era of liberalization, the Madhava Rao Committee
(1999) focused on consolidation, control of sickness, better professional standards in
urban cooperative banks and sought to align the urban banking movement with
commercial banks.
4.3.3. Licensing Policy of New Urban Cooperative Banks:
Present Licensing Policy:
The existing licensing policy of RBI is broadly based on the recommendations
of the Marathe Committee. At present, organization of a new UCB is allowed on the
basis of the need and future potential for mobilization of deposits and purveying of
credit, so that the new institution becomes a viable proposition and satisfies the felt
banking needs of local people. To determine the need and potential for UCBs, only
the presence of urban cooperative banks functioning at a given centre is taken into
account and presence of all other banking network is excluded. This is done as the
clientele of UCBs are supposed to be distinct from those of commercial banks.
Another criterion for determine the adequacy of banking network is to take into
account the average population served by the existing UCBs. The present policy also
prohibits organization of UCBs in the rural centers on account of distinct credit
delivery system already in place for rural centers.
4.4. Prudential Regulations: 4.4.1 Income Recognition and Asset Classification (IRAC) Norms:-
Based on the recommendations of the Committee on Financial System
(Narasimham Committee) and in line with the norms applicable to commercial banks,
Income Recognition, Asset Classification and Provisioning Norms (IRAC) have been
introduced to UCBs from 1st April, 1992 onwards. UCBs are required to take income
to their Profit and Loss Account only when it is realized and not on accrual basis in
case of Non Performing Assets (NPAs). Further, while the assets are required to be
classified into standard, sub standard, doubtful and loss depending upon their
delinquency period, banks are required to make graded provision depending upon the
categorization of assets with incidence of provisioning increasing from the sub
standard to loss category. Provision ranging from 0.25% to 0.40% is also made on the
standard advances as a prudential measure. As per the present instructions, a loan asset
is considered NPAs if the principal and /or the interest is overdue for more than 90
days. The requirements of the State Co-operative Societies Acts and /or Rules made
there under or other statutory enactment may however, continue to be followed, if they
are more stringent than those prescribed by Reserve Bank.
4.4.2 Capital Adequacy:
As per the recommendations of the High Power Committee (Madhavrao Committee)
1999, Reserve Bank has introduced CRAR norms (1998 Basel Accord) to Urban
Cooperative Banks in a phased manner with effect from 31 March, 2002. At present
banks are required to maintain capital fund (Tier I and II) to the tune of 9% of the total
risk weighted assets. Further, surrogate capital charge on market risk has been
introduced through an additional risk weight of 2.5%.
4.4.3 Investments in Government securities:
With effect from April 19, 2001, UCBs are required to achieve certain
minimum level of their SLR holdings in the form of government and other approved
securities as percentage of their Net Demand and Time Liabilities (NDTL). The
present position in this regard is as indicated below:
Table 4.1
Minimum SLR Investment by UCBs Sr. No.
Category of bank Minimum SLR holding in government and other approved securities as percentage of Net
Demand and Time Liabilities 1 Scheduled banks 25%
2 Non-Scheduled banks September 30,
2009
March 31,
2010
March 31, 2011
Tier I 7.5% 15% 25%
Tier II 15% 15% 25%
Source: Reserve Bank of India, Urban Banks Department, Central Office Mumbai-2011
4.4.4 Exposure Norms:
Exposure limits (both credit and investment (non SLR)) in relation to bank’s
capital funds (Tier I and Tier II) has been prescribed for UCBs. The exposure to an
individual borrower and to a group of borrowers should not exceed 15 per cent and 40
exposure to share/commodity brokers.
4.5 Maintenance of Statutory Reserves-Cash Reserve Ratio (CRR) and
Statutory Liquidity Ratios (SLR): All Primary (Urban) Cooperative Banks (Scheduled as well as Non-
scheduled) are required to maintain stipulated level of Cash Reserve Ratio (CRR) and
SLR. In regard to Cash Reserve, the provisions of Section 42 (1) of the RBI Act, 1934
governs Scheduled UCBs whereas; Non-scheduled Urban Cooperative Banks are
governed by the provisions of section 18 of the Banking Regulation Act, 1949 (As
Applicable to Cooperative Societies). The provisions of Section 24 of the Act ibid
govern maintenance of SLR for all banks.
4.5.1 General: 1.1 In order to monitor the day-to-day position of liquidity of the bank, all UCBs
are required to maintain a Register, as per given format showing the daily
position of cash reserve and liquid assets maintained under Sections 18 and 24
of the BR Act, 1949 (AACS)
1.2 The work of maintaining the Register on daily basis may be entrusted to a
responsible official and it should be put up daily to the Chief Executive
Officer, who is responsible for ensuring compliance with the statutory
liquidity requirements at the close of business every day.
1.3 To facilitate compilation of figures under various heads of the Register, the
explanations in respect of each item which form part of the rules. However, it
may be noted that Scheduled UCBs are required to compute CRR
requirements as per Section 42 of RBI Act, 1934.
4.5.2 Cash Reserves for Scheduled UCBs: 4.5.2.1 Statutory CRR Requirements:
Earlier, in terms of Section 42(1) of the RBI Act, 1934, the Scheduled UCBs
were required to maintain with the RBI during the fortnight, a minimum average daily
balance of 3% of their Total Demand and Time Liabilities (DTL) in India obtaining
on the last Friday of the second preceding fortnight. Further, RBI was empowered to
increase, through Gazette notification, the said rate up to 15% of the DTL. The RBI
Act, 1934 was amended by Parliament in June, 2006 and the RBI (Amendment) Bill,
2006 came into force with effect from April, 1, 2007. As per the amendment,
Subsection (1) of Section 42 of the RBI, having regard to the needs of securing
monetary stability in the country , to prescribe CRR for scheduled banks without any
floor or ceiling rate. Accordingly, with effect from April 1, 2007, Reserve Bank
having regard to the needs have securing the monetary stability in the country,
prescribes the CRR for scheduled UCBs without any floor or ceiling rate.
4.5.2.2 Incremental CRR:
In terms of Section 42(1) (A) of the RBI Act, 1934, the Scheduled UCBs are
required to maintain, in addition to the balances prescribed under Section 42(1) of the
Act, an additional average daily balance, the amount of which shall not be less than
the rate specified by the RBI in the notification published in the Gazette of India from
time to time. Such additional balance will be calculated with reference to the excess
of the total of Demand and Time Liabilities (DTL) of the bank as shown in the return
referred to in Section 42(2) of the RBI Act, 1934 over the total of its DTL at the close
of the business on the date specified in the notification. Currently Reserve Bank has
not prescribed any incremental CRR.
4.5.2.3Multiple Prescriptions for CRR:
For the purpose of maintenance of CRR and SLR the RBI may specify from
time-to-time with reference to any transaction or class of transactions that such
transaction or transactions shall be treated as liability in India of a Scheduled Urban
Cooperative Bank.
4.5.2.4 Maintenance of CRR:
At present with effect from the fortnight beginning from February 9, 2013, the
CRR prescribed by the Reserve Bank is 4% of bank’s Total of Demand and Time
Liabilities adjusted for the exemptions discussed in Section 3.11. The schedule of
changes brought about in the CRR prescription has been detailed in the Table 4.2. Table 4.2 Maintenance of CRR
Effective Date (From the Fortnight Beginning)
CRR on Net Demand and Time Liabilities (%)
April 24, 2010 6.00
January 28, 2012 5.50
March 10, 2012 4.75
September 22, 2012 4.50
November 3, 2012 4.25
February 9, 2013 4.00
Source: Cooperative Bankers Handbook cum Diary-2014.
4.5.2.5 Maintenance of CRR on a Daily Basis:
In order to provide flexibility to banks and enable them to choose an optimum
strategy of holding reserves depending upon their intra period cash flow, Scheduled
UCBs are presently required to maintain on average daily balance, a minimum of 70%
of the prescribed CRR balance based on their NDTL, as on the last Friday of the
second preceding fortnight.
Note: Change in Daily Minimum Cash Reserve Maintenance Requirement- RBI
reduced the minimum daily maintenance of the CRR from 99% to 95% effective
from the fortnight beginning 21st September, 2013.
4.5.2.6 Calculation of CRR:
In order to improve the cash management by banks, as a measure of
simplification, a lag of two weeks has been CRR by the Scheduled banks. Thus, with
effect from the fortnight beginning from November 6, 1999, the prescribed CRR
during a fortnight has to be maintained by every bank based on its NDTL as on the
last Friday of the second preceding fortnight i.e. based on the NDTL as on reporting
Friday, October 22, 1999 and so on.
4.5.2.7 Computation of NDTL for CRR:
Liabilities of a bank may be in the form of demand or time deposits or
borrowings or other miscellaneous items of liabilities. As defined under Section 42 of
RBI Act, 1934, liabilities of a bank may be towards banking system or towards others.
‘Demand Liabilities’ include all liabilities which are payable on demand. ‘Time
Liabilities’ are those which are payable otherwise than on demand. Reserve Bank of
India has been authorized in terms of Section 42 (1) (C) of RBI Act, 1934 to classify
any particular liability and hence for any doubt regarding classification of a particular
liability, banks are advised to approach RBI for necessary clarification.
4.6 Cash Reserves for Non-scheduled UCBs: In terms of Section 18 of the BR Act, 1949, (AACS), every Urban
Cooperative Bank (being a Non-scheduled Bank) is required to maintain on daily basis
a cash reserve, an amount not less than 3% of its DTL as obtaining on the last Friday
of the second preceding fortnight and shall submit to the RBI before fifteenth day of
every month a return showing the amount so held on alternate Fridays during a month
with particulars of DTL in India on such Fridays and if any such Friday is a public
holiday under Negotiable Instrument Act, 1981, at the close of business on the
preceding working day. This balance may be maintained by way of cash resources with
itself or by way of balance in a current account with the RBI or the State Cooperative
Bank of the State concerned or by way or net balance in current accounts, or with the
Central Cooperative Bank of the district concerned or in one or more of the aforesaid
ways.
The net balance in current accounts shall in relation to a cooperative bank
mean the excess, if any of the aggregate of the credit balances in current account
maintained by that cooperative bank with the State Bank of India or a subsidiary bank
or a corresponding new bank, over the aggregate of the credit balances in current
accounts held by the said banks with such Cooperative Bank with effect from January
29, 2009, UCBs are exempted, till further orders, from the obligation of maintenance
of CRR under Section 18 of the BR Act, 1949 (AACS) to the extent of the amounts of
deposits maintained by them with IDBI Bank Ltd. in current accounts.
4.7 Liquidity Reserves: (Scheduled and Non-scheduled Banks): In term of Section 24 (1) and 24 (2A) (a) of the BR Act, 1949 (AACS), every
bank (Scheduled and Non-scheduled), is required to maintain, on daily basis, liquid
assets, the amount of which shall not be less than 25% or such other percentage not
exceeding 40% as may be notified by RBI, of its DTL in India as on the last Friday of
the second preceding fortnight.
4.7.1 Current Prescription for SLR: Presently the both the Scheduled and Non-scheduled Urban Cooperative
Banks are required to maintain a uniform SLR of 25% on their DTL in India.
4.7.2 Manner of Maintaining Statutory Liquidity Reserves: The liquid assets may be maintained –
i) In cash or ii) In gold valued at a price not exceeding the current market price or iii) In unencumbered approved securities valued at a price determined in
accordance with such one or more of, or combination of the methods of valuation, namely, valuation with reference to cost price, market price, book value or face value, as may be specified by the RBI from time to time.
4.8 Banking Regulation Act, 1949: (Act No. 10 of 1949) (As Applicable to Cooperative Societies)
The Banking Regulation Act, 1949 (AACS), which had come into force from
1st March, 1966, has vested the Reserve Bank with various statutory powers of control
and supervision over the Cooperative Banks. The powers in regard to incorporation,
management etc. of these banks however, continues to vest in the Registrar of
Cooperative Societies of the states concerned. Further the provisions of the BR Act,
1949 (AACS) shall be in addition to and not save as expressly provided in the Act, in
derogation of any other law or for the time being in force. This means that the
Cooperative Banks are required not only to comply with the provisions of the BR Act,
but also other laws applicable to them. In respect of matters specifically provided for
in the BR Act, the provisions of the said Act will prevail over the provisions of the
Cooperative Societies Acts.
The salient features of some of the important Sections of the Act and Rules are
as under:
Section 5 (CCV): In terms of this Section, a “Primary Cooperative Bank” means a
cooperative society other than a Primary Agricultural Credit Society.
i) Primary object or Principal Business of which is the transaction of banking
business.
ii) The paid-up share capital and reserves of which are not less than Rs. 1/- lakh
and
iii) The bye-laws of which do not permit admission of any other cooperative
society as a member.
Provided that this Sub-clause shall not apply to the admission of a
Cooperative Bank as a member by reason of a Cooperative Bank subscribing to the
share capital of such cooperative society out of funds provided by the State
Government for the purpose.
Section 6: The forms of business in which the cooperative bank may engage have
been specified in Section6. A bank can, however, undertake such other business in
which the Central Government may by a notification in the official gazette specify
under clause (0) of Sub-section (1) of Section 6 of the Act, as a form of business in
which it is lawful for a cooperative bank to engage itself.
a) The Government of India by a Notification dated 12-12-1995, has
specified, “hire purchase’ and “equipment leasing” as forms of business in which
it is lawful for a Primary Cooperative Bank to engage.
b) The Government of India by a Notification has notified Insurance as a
form of business, which may be undertaken by the Cooperative Banks.
1. A reference is invited to Section 6 (1) (f) of the BR Act, 1949 (AACS),
in terms of which banks may also engage in managing, selling and realizing
property which may come into its possession to satisfaction, or part
satisfaction, of any of its claims.
2. The RBI hereby directs UCBs not to acquire any property which is not
meant for their won identifiable/justifiable use. Further, non-banking assets
acquired by UCBs in satisfaction of claims are to be disposed of within the
period stipulated under Section 9 of the BR Act, 1949 (AACS). These
instructions and directions must be noted for meticulous compliance.
Section 8: A Cooperative Bank can not undertake trading activities. Section 9: A Cooperative Bank is prohibited from holding any immovable property
howsoever acquired except such as is required for its own use, for any period
exceeding seven years from the acquisition thereof or from the commencement of the
Act, i.e. 1st March, 1966, whichever is late. If a bank cannot dispose of the property
within the stipulated period, it has to seek extension of time.
In case of a Primary Credit Society, which becomes a Primary Cooperative
Bank, after the commencement of the Banking Laws (Amendment) Act, 1983, the
period of 7 years for holding the non-banking assets acquired by it shall commence
from the day it becomes a Primary Cooperative Bank. Further, the RBI can extend the
aforesaid period of 7 years by such further period, as it may consider necessary to do
so, in cases where it is satisfied that such extension would be in the interest of the
depositor of the cooperative bank.
Section 11: No Cooperative Bank shall commence or carry on the business of
Banking in India unless the aggregate value of its paid-up capital and reserves is not
less than Rs. 1 Lakh. For the purpose of this section, “Value” means the real or
exchangeable value and not the nominal value shown in the books of the bank. A
determination by the RBI of aggregate value of the paid-up capital and reserves of a
Cooperative Bank shall be final for the purpose of the Act.
Section 14 A: No Cooperative Bank shall create a floating charge on the undertaking
or on any of its property or on any part thereof, unless the creation of such floating
charge is certified in writing by the Reserve Bank as not being detrimental to the
interests of the depositors of such Cooperative Bank.
Section 18: A Cooperative Bank other than a Scheduled State Cooperative
Bank/Primary Cooperative Bank is required to maintain cash reserve with itself or in
Current Account (Net Balance) opened with the Reserve Bank or State Bank of India
or State Cooperative Bank of the State concerned or with any other Bank notified by
the Central Government not less than 3% of DTL as on the last Friday of the second
preceding fortnight and shall submit in prescribed form, a return to the Reserve Bank
on or before the 15th of the subsequent month showing the amount so held on alternate
Fridays of the month. The banks notified under this Section are the RBI, the State
Associated Banks and the/Nationalized Banks. In the case of a Primary Cooperative
Bank, the cash reserve can be maintained in the Central Cooperative Bank of the
District concerned or in Central Cooperative Bank outside the District provided the
Urban Bank has its branch in the said District.
The balance held by the cooperative bank in current account with the State
Bank of India or a subsidiary bank or the nationalized banks shall be set off by the
balances held by the said banks with such cooperative bank and only the net balance
in the current account shall be regarded as Cash Reserve.
Section 20: Prohibits sanction of loans or advances on the security of its own shares
and also unsecured loans and advances to directors or the firms or private companies in
which they are interested in the case of Primary Cooperative Banks unsecured loans
directors are subject to the directives issued by the Reserve Bank from time to time.
Section 20 A: Cooperative Banks would have to obtain prior approval of the Reserve
Bank to remit in whole or in part any debt due to it by any of its past or present
directors.
Section 21: Empowers the Reserve Bank to determine the policy in relation to
advances to be followed by Cooperative Banks generally or by any Cooperative Bank
in particular. Under this Section, the Reserve Bank may issue directive to Cooperative
Banks generally, or to any Cooperative Bank in particular as to:
a) The purpose for which advances may or may not be made.
b) The margin to be maintained in respect of secured advances.
c) The maximum amount of advances or other financial accommodation, which may
be made by a Cooperative Bank to any one party.
d) The maximum amount, which guarantees may be given by a Cooperative Bank on
behalf of any one party.
e) The rate of interest and other terms and conditions on which advances or other
financial accommodation may be made.
Section 21 A: Notwithstanding anything contained in the Usurious Loans Act, 1918
or any other law relating to indebtedness in force in any state, transactions between a
Cooperative Bank and its debtor shall not be reopened by any court on the ground that
the rate of interest charged by the Cooperative Bank in respect of any such transaction
in excessive.
Section 22: The Cooperative Banks, which existed as on 1-3-1966, were required to
apply to the Reserve Bank for a license within a period of three months from the
commencement of the Act. Such banks were permitted to carry on banking business if
licenses were granted to them or until they were informed that license couldn’t be
granted to them. New banks should invariably obtain a license before commencing
banking business.
A Cooperative Bank which comes into existence as a result of the division of
any other cooperative society carrying on business, shall before the expiry of three
months from it so coming into existence, apply in writing for carrying on banking
business under this section.
Section 23: State Cooperative Banks and the Primary Cooperative Banks are required
to obtain prior permission of the RBI for opening new branches. Central Cooperative
Banks need not obtain such permission for opening branches within their areas of
operation with an advance copy of the application directly to the Reserve Bank. Urban
Cooperative Bank can however submit their application directly to the Reserve Bank.
Section 24: Every Cooperative Bank shall maintain in cash or unencumbered
approved securities an amount which shall not, at the close of business on any day, be
less than 25% or such other % not exceeding 40% of the total of its Demand and Time
Liabilities in India or as the Reserve Bank may specify from time to time.
Section 24 A: This new section empowers the RBI without prejudice to the
provisions of Section 53, to exempt by issue of notification in the official gazette any
Cooperative Bank or Class of Cooperative Banks with reference to all or any of the
offices of such bank or banks or with references to the whole or any part of the assets
and liabilities of such Cooperative Bank or Banks from the application of whole or
any part of the provisions of Section 18 and Section 24 for such period and on such
conditions as may be specified in such notification.
Section 27: Every bank is required to submit to the Reserve Bank of India a return in
the prescribed form and manner showing its assets and liabilities as at the close of the
business on the last Friday of every month or if that Friday is a public holiday at the
close of the business on the preceding working day before the close of the month
succeeding that to which it relates.
Section 29 and 31: In terms of the notification issued under amended Section 29, the
banks are now required to prepare their Profit and Loss Account and Balance Sheet as
at 31st March, of each year. The banks will have to submit to the RBI, three typed
copies of profit and loss account and balance sheet together with the statutory
auditor’s report signed by the principal officer of the bank and at least three directors,
before 30th September of each year. The published balance sheet should also contain
Statutory Auditors Report. The RBI has reiterated that if the audited profit and loss
account along with Auditors Report is not submitted before 30th September, every
year it will invite penalties under Sections 46 and 47 A of Banking Regulation Act,
1949. The balance sheet is also required to be published as required under ‘Rule 10’
in one of the local newspapers within a period of 9 months from the end of the period
to which they relate i.e. before 31st December. For valid reasons, extension of time
may be allowed by RBI, for a further period not exceeding 3 months. An application
giving reasons for the delay, accompanied by supporting Board Resolution and
information, should be submitted before 30th September of the year. In terms of ‘Rule
10’ three copies of the newspaper in which Accounts and Balance Sheet together with
Statutory Auditors Certificate have been published should be sent to the RBI, latest by
31st December of the year.
Section 35: This Section empowers the RBI, to authorize its officers, to inspect
Cooperative Banks and supply to the Cooperative Banks so inspected, a copy of its
report. In case of Primary Cooperative Banks, the Reserve Bank may authorize the
SCB of the state concerned, to carry out the inspection on behalf of the Reserve Bank.
In addition to the conducting regular, inspection under this section, the RBI is
also empowered to carry out a scrutiny of the affairs of the Cooperative Bank, at any
time it is considered necessary to do so.
Note: NABARD has also been statutorily empowered to carry out the inspection of
Cooperative Banks (excluding Primary Cooperative Banks)
Section 35 A: The RBI to issue directions, to Cooperative Banks in general and to
any cooperative bank in particular regarding any aspect of the working of the
Cooperative Banks/Bank Concerned. While Section 21 referred to earlier confer
powers to issue directions in regard to advances by Cooperative Banks, Section 35 A
covers all aspects of the functions of Cooperative Banks. These two sections together
give powers to.
In terms of new Sub-section (4-A), any Cooperative Bank other than a
Primary Cooperative Bank requiring permission, shall submit the application for
opening of a new place of business or changing the location of an existing place of
business, to the RBI through the National Bank for Agriculture and Rural
Development, the RBI to issue directions on all matters concerning the operations of a
Cooperative Bank in particular, or all Cooperative Banks, or a group of Cooperative
Banks, in general.
Section 36: The Reserve Bank is empowered to depute, in case it is considered
essential to do so, for the reorganization or expansion of Cooperative Credit on sound
lines, one or more of its officers to watch the proceedings at any meeting of the Board
of Directors of any Cooperative Banks or any other body constituted by it and require
such bank to give an opportunity to the officers, so deputed, to be heard at such
meeting(s). The RBI may appoint one or more of its officers to observe the manner in
which the affairs of the Cooperative Bank or its offices or branches are being
conducted, requiring such officers to make a report thereon.
Section 45: The RBI can recommend to the Central Government, to order a
moratorium in respect of a Cooperative Bank. The power to issue such a moratorium
however rests with the Central Government.
Section 45 Y: The Central Government to make rules, in consultation with the RBI,
specifying the periods for which a Cooperative Bank shall (a) preserve its books of
account and other documents and (b) keep with itself different instruments paid by it.
Section 45 Z: The Cooperative Bank to return at the request of the Customer
(including Government and Statutory Corporations), a paid instrument before the
prescribed period of preservation, only after making and keeping in its possession a
true copy thereof, made by mechanical process or other process which in itself
ensures the accuracy of the copy. The bank is also entitled to recover from the
customer the cost of making such copies of the instruments.
Section 45 Z A: Enables depositors of a bank to nominate one person to whom, in the
event of the death of the sole depositor or the death of all the depositors, the amount
of deposit may be returned by the bank. In pursuance of the provisions of this Section,
the Cooperative Banks (Nomination) Rules, 1985, have been framed and the
nomination forms in deposits, safe custody, lockers have been prescribe.
Section 45 Z B: Gives protection to a Cooperative Bank in respect of claims made by
persons, other than persons in whose names a deposit is held with it. However, if a
notice /order is issued by a court of competent jurisdiction, then the bank should take
due notice of it.
Section 45 Z C: Enables a Cooperative Bank to return the articles kept by a person
with, it, in safe custody, to his nominee in the event of his death.
Section 45 Z D: Gives protection to a Cooperative Bank in respect of any claim to
any article made by any person other than the person who placed the article in safe
custody with it.
Section 45 Z E: Enables an individual locker holder to nominate one person to
whom, in the event of his death, the Cooperative Bank may give access to the locker
and liberty to remove the contents of the locker.
Section 46: The various penalties that may be imposed on Cooperative Banks, for non
compliance with the various provisions of the BR Act, have been specified.
Section 46 (4): “If any other provision of this Act is contravened or if any default is
made in complying with any requirement of this Act, or of any order, or direction
made or such person shall be punishable with fine which may extend to fifty thousand
rupees or twice the amount involved in such contravention or default, where such
amount is quantifiable, whichever is more, and where a contravention or default is a
continuing one, with a further fine which may extend to two thousand and five
hundred rupees for every day, during which a contravention or default continues”.
Section 47 A: Under this Section the Reserve Bank is empowered to impose penalties
on a Bank for contravention and defaults of the nature referred to in Sub-section (3)
and (4) of Section 46 of the Act, without recourse to the court of law. An enquiry is to
be conducted and a reasonable opportunity of being heard should be given to the
bank. The procedure for conducting the enquiry is laid down in ‘Rule 11” of the
Banking Regulation Rules, 1966.
The procedure stipulated the appointment of an Enquiry Officer by the
Reserve Bank for holding the enquiry. The Enquiry Officer is required to send a
statement giving sufficient particulars of the contravention or default of the nature
referred to in Sub-section (3) or Sub-section (4) of Section 46 of the Act, and to give
30 days’ time for sending the reply. The Enquiry Officer shall fix the date for
conducting the enquiry, which should be on a day to day basis. The bank is entitled to
be represented at the enquiry by its authorized representation, who may be a Director
of Officer but not by a legal practitioner. The procedure also provides for cross
examination of the witness both by the representative of the RBI or of the Cooperative
Bank. After completion of enquiry the said officer shall call record his findings and
submit the entire report to the Reserve Bank.
Section 47 A (1) (b): “Where the contravention or default is of the nature referred to
in Sub-section (4) of Section 46, a penalty not exceeding five lakh rupees or twice the
amount involved in such contravention or default where such amount is quantifiable,
whichever is more, and where such contravention or default is a continuing one, a
further penalty which may extend to twenty-five thousand rupees for every day, after
the first, during which the contravention or default continues”.
Section 47 A (2): For the purpose of adjudging the penalty under Sub-section (1), the
Reserve Bank shall serve notice on the banking company, requiring it to show cause
why the amount specified in the notice should not be imposed and a reasonable
opportunity of being heard shall also be given to such banking company”.
CHAPTER V Performance Evaluation of Urban Cooperative Banks in Latur
District ___________________________________________________________
5.1 Performance Evaluation of Selected Urban Cooperative Banks in
Latur District The performance evaluation of the Urban Cooperative Banks has been done
with the help of analysis of following factors:-
1. Analysis of Total Deposits
2. Analysis of Total Loans:
3. Analysis of Bad Debts and Non-performing Assets of the banks.
4. Analysis of Membership, Paid-up Capital, Investments, Profit.
5. Analysis of Interest on Deposits and Interest on Loans and Advances.
6. Analysis of Total Income and Total Expenditure.
5.1.1 Analysis of Deposits:
Table 5.1 Total Deposits of Urban Cooperative Banks in Latur District (Rs. In Lakh)
Year L.U.C.B M.U.C.B S.U.C.B U.U.C.B S.U.C.B Grand Total
2007-08 1901.66 (100)
2901.51 (100)
4944.85 (100)
1549.76 (100)
737.79 (100)
12035.57 (100)
2008-09 1955.88 (102.85)
3286.85 (113.28)
5391.87 (109.04)
1943.41 (125.40)
810.64 (109.87)
13388.65 (111.24)
2009-10 2604.84 (136.98)
4116.49 (141.87)
6213.02 (125.65)
1281.44 (82.69)
1087.90 (147.45)
15303.69 (127.15)
2010-11 3220.31
(169.34)
5610.61
(193.37)
8158.09
(164.98)
2161.29
(139.46)
1322.42
(179.24)
20472.72
(170.10)
2011-12 3674.36
(193.22)
5352.87
(184.49)
9119.08
(184.42)
2363.18
(152.49)
1471.45
(199.44)
21980.94
(182.63)
2012-13 5229.53
(274.99)
6495.12
(223.85)
10770.47
(217.81)
1807.22
(116.61)
1609.71
(218.18)
25912.05
(215.30)
Mean 3097.76 4627.24 7432.90 1851.05 1173.32 18182.27
SD 1254.547 1415.499 2295.769 396.0325 354.984 5449.266
CV 40.49853 30.59057 30.88659 21.39502 30.25466 29.97022
Source: Annual Reports of the respective Urban Cooperative Banks i.e. 07-08 to 12- 13.
Note: Figures in brackets indicate percentage of increase/decrease over the base year.
Graph 5.1 Total Deposit Mobilization of Urban Cooperative Banks in Latur District
Source: Annual Reports of the respective Urban Cooperative Banks i.e.07-08to12- 13.
1. The Total Deposits Mobilization of the Urban Cooperative Banks in Latur
District shows an increasing trend during the study period. In the year 2007-08
the Total Deposits was Rs: 12035.57/- lakh which rose to Rs: 25912.05/- lakh in
the year 2012-13, showing a growth of 215.30% over the base year.
2. Among the Urban Cooperative Banks, the Laxmi Urban Cooperative Bank has
the highest percentage of increase in Total Deposits i.e. 274.99% over the base
year, whereas the lowest percentage of increase in Total Deposits belongs to
Udgir Urban Cooperative Bank i.e. 116.61%.
3. The average Deposits of the Urban Cooperative Banks in the Latur District was
Rs: 18,182.27/- lakh. During the study period, the Siddheshwar Urban
Cooperative Bank has raised the highest amount of average Total Deposits of Rs.
7432.90/- lakh, where as the lowest average Total Deposits was raised by
Saibaba Urban Cooperative Bank i.e. Rs: 1173.32/- lakh.
4. The Siddheshwar Urban Cooperative Bank shows highest Standard Deviation of
2295.769 in Total Deposits as compared to other banks, where as the lowest
Standard Deviation of 354.984 in Total Deposit mobilization belongs to Saibaba
UCB. The average Coefficient of Variation in Total Deposit mobilization during
the study period was 29.97. The highest variation of 40.49 in Total Deposit
mobilization belongs to Laxmi UCB where as the lowest variation of 21.39 in
Total Deposit mobilization belongs to Udgir UCB.
5. From the above analysis, it is evident that the Urban Cooperative Banks in Latur
District show an increasing trend in Total Deposit mobilization during the study
period.
5.1.2. Analysis of Loans:
Table 5.2
Total Loans of Urban Cooperative Banks in Latur District (Rs. In Lakh)
Year L.U.C.B M.U.C.B S.U.C.B U.U.C.B S.U.C.B Grand
Total
2007-
08
1281.33
(100)
3771.96
(100)
3623.28
(100)
1197.37
(100)
391.44
(100)
10265.38
(100)
2008-
09
1384.49
(108.05)
4548.96
(120.60)
3844.46
(106.10)
1321.80
(110.80)
820.21
(209.54)
11919.92
(116.18)
2009-
10
1689.18
(131.83)
5608.53
(148.70)
4753.60
(131.20)
1630.56
(136.18)
706.68
(180.53)
14388.55
(140.17)
2010-
11
2222.35
(173.44)
6434.55
(170.59)
5564.46
(153.58)
2090.20
(174.57)
852.59
(217.81)
17164.15
(167.20)
2011-
12
2563.92
(200.10)
7229.60
(191.67)
6629.34
(182.97)
2370.19
(197.95)
748.21
(191.14)
19541.26
(190.36)
2012-
13
3429.49
(267.65)
7532.01
(199.68)
7010.06
(193.47)
2746.28
(229.36)
814.86
(208.17)
21532.70
(209.76)
Mean 2095.13 5854.27 5237.53 1892.73 722.33 15801.99
SD 818.357 1492.87 1411.844 612.165 170.5948 4390.922
CV 39.05996 25.50053 26.95629 32.34296 23.61729 27.78715
Source: Annual Reports of the respective Urban Cooperative Banks i.e. 07-08 to 12- 13.
Note: Figures in brackets indicate percentage of increase/decrease over the base year
Graph No. 5.2
Total Loans of Urban Cooperative Banks in Latur District
Source: Annual Reports of the respective Urban Cooperative Banks i.e.07-08to12- 13.
1. The Total Loans (Secured Loans and Unsecured Loans) sanctioned by the Urban
Cooperative Banks during the study period i.e. 2007-08 to 2012-13 indicate that
banks lent their maximum proportion of loans through secured loans followed by
unsecured loans (Table 5.2). In the year 2007-08 the Total Loans disbursed was
Rs: 10265.38/- lakh, which rose to Rs: 21532.70/- lakh in the year 2012-13,
showing a growth of 209.76% over the base year.
2. Among the Urban Cooperative Banks, the Laxmi UCB has the highest
percentage of increase in Total Loans disbursement i.e. 267.65% over the base
year, whereas the lowest percentage of increase in Total Loans was shown by
Mahesh UCB i.e. 199.68%.
3. The average amount of Total Loans disbursement of the Urban Cooperative
Banks in the Latur District was Rs: 15801.99/- lakh during the study period.
Among the Urban Cooperative Banks, Mahesh Urban Cooperative Bank has
disbursed the highest amount of average Total Loans of Rs. 5854.27/- lakh,
where as the lowest average Total Loans was disbursed by Saibaba Urban
Cooperative Bank i.e. Rs: 722.33/- lakh.
4. The Mahesh Urban Cooperative Bank shows highest Standard Deviation of
1492.87 in Total Loans disbursement as compared to other banks and the lowest
Standard Deviation of 170.59 belongs to Saibaba UCB. The Coefficient of
Variation in Total Loans during the study period was 27.78. The highest variation
of 39.05 in lending can be seen in Mahesh UCB where as the lowest variation of
23.61 was seen in Saibaba UCB.
5. The notable thing in Loan Disbursement is that the percentage of increase in
Secured Loans is very high as compared to Unsecured Loans. The percentage of
Unsecured Loan was only 1.59% of Total Loans and remaining amount of
98.41% belongs to Secured Loans.
5.1.3 Analysis of Membership and other financial variables:
The analysis of Membership, Paid-up Capital, Investment and Profit of the
Urban Cooperative Banks in Latur District was shown with the help of following
tables: Table 5.3 Membership of Urban Cooperative Banks in Latur District
(Members in Thousands) Year L.U.C.B M.U.C.B S.U.C.B U.U.C.B S.U.C.B Grand Total
2007-08 3456 (100)
5798 (100)
16361 (100)
2754 (100)
2484 (100)
30853 (100)
2008-09 3746 (108.39)
6531 (112.64)
16726 (102.23)
2911 (105.70)
2757 (111.00)
32671 (105.89)
2009-10 3940 (114.00)
7347 (126.72)
17342 (106.00)
3062 (111.18)
2823 (113.65)
34514 (111.87)
2010-11 4251 (123.00)
8117 (140.00)
17757 (108.53)
3292 (119.54)
2922 (117.63)
36339 (117.78)
2011-12 4512 (130.56)
8966 (154.64)
18138 (110.86)
3442 (124.98)
2931 (118.00)
37989 (123.13)
2012-13 4738 (137.09)
9619 (165.90)
18453 (112.79)
3614 (131.23)
2940 (118.36)
39364 (127.59)
Mean 4109 7730 17463 3179 2810 35288 SD 482.6868 1453.458 811.7111 327.8112 175.1214 3228.955 CV 11.74706 18.80282 4.648177 10.31177 6.232078 9.150293
Source: Annual Reports of the respective Urban Cooperative Banks i.e. 07-08 to 12- 13.
Note: Figures in brackets indicate percentage of increase/decrease over the base year.
1. The Table 5.3 shows the demographic progress with the Number of Members by the
Urban Cooperative Banks during the study period i.e. 2007-08 to 2012-13. In the year
2007-08 the total Number of Member were 30853 was increased to 39364 in the year
2012-13, showing a growth of 127.59% over the base year.
2. Among the Urban Cooperative Banks, the Mahesh UCB has the highest percentage of
increase in Number of Members i.e. 165.90% over the base year, whereas the lowest
percentage of increase in Number of Members was shown by Siddheshwar UCB i.e.
112.79%.
3. The average Number of Members of the Urban Cooperative Banks in the Latur District
was 35288. During the study period the Siddheshwar Urban Cooperative Bank has
obtained the highest Number of Members i.e. 17463, where as the lowest average
Number of Members obtained by Saibaba Urban Cooperative Bank i.e. 2810.
4. The Mahesh Urban Cooperative Bank shows highest Standard Deviation of 1453.45 in
number of members as compared to other banks. The lowest Standard Deviation of
175.12 was seen in Saibaba UCB. The Coefficient of Variation in Number of Members
during the study period was 9.15. The highest variation of 18.80 in Number of
Members belongs to Mahesh UCB were as the lowest variation of 4.64 was visible in
Siddheshwar UCB.
5. This continuous growth of Membership indicates that the people have shown interest
in membership of Urban Cooperative Banks. This increase also indicates the
fulfillment of UCBs objective of promoting and developing banking habits in urban
and semi-urban areas with good faith. From the Table 5.19 we can conclude that urban
banks are gaining popularity in Latur District and in other districts where they have
their branches.
Table 5.4
Paid-up Capital of Urban Cooperative Banks in Latur District (Rs. In Lakh)
Year L.U.C.B M.U.C.B S.U.C.B U.U.C.B S.U.C.B Grand Total
2007-08
78.07 (100)
257.86 (100)
215.28 (100)_
75.68 (100)
47.19 (100)
674.08 (100)
2008-09
83.79 (107.33)
301.28 (116.84)
232.90 (108.18)
86.75 (114.63)
57.32 (121.47)
762.04 (113.05)
2009-10
90.43 (115.83)
352.59 (136.74)
276.18 (128.29)
104.57 (138.17)
58.94 (124.90)
882.71 (130.95)
2010-11
111.01 (142.19)
401.53 (155.72)
314.96 (146.30)
126.45 (167.09)
65.53 (138.86)
1019.48 (151.24)
2011-12
128.19 (164.20)
477.23 (185.07)
357.07 (165.86)
146.92 (194.13)
65.83 (139.50)
1175.24 (174.35)
2012-13
157.94 (202.31)
534.96 (207.46)
387.01 (179.77)
168.27 (222.34)
67.70 (143.46)
1315.88 (195.21)
Mean 108.24 387.58 297.23 118.11 60.42 971.57 SD 30.6626577 105.311 68.1951 35.7287 7.6839 246.018 CV 28.3283977 27.1714 22.9436 30.2503 12.7175 25.3217
Source: Annual Reports of the respective Urban Cooperative Banks i.e. 07-08 to 12- 13. Note: Figures in brackets indicate percentage of increase/decrease over the base year.
Graph 5.3
Paid-up Capital of Urban Cooperative Banks in Latur District
Source: Annual Reports of the respective Urban Cooperative Banks i.e.07-08to12- 13.
1. The Paid –up Capital of the Urban Cooperative Banks during the study period rose to
Rs: 1315.88/- lakh from Rs: 674.08/- lakh in 2012-13 which was equal to 195.21%
over the base year.
1. Among the Urban Cooperative Banks, the Udgir UCB has the highest percentage of
222.34% increase in Paid-up Capital over the base year, whereas the lowest
percentage of increase in Paid-up Capital was shown by Saibaba UCB i.e. 143.46%.
2. The average Paid-up Capital of the Urban Cooperative Banks in the Latur District was
Rs: 971.57/- lakh during the study period. Mahesh Urban Cooperative Bank raised the
highest amount of average Paid-up Capital of Rs. 387.58/- lakh, where as the lowest
amount of Rs: 60.42 lakh was raised by Saibaba Urban Cooperative Bank.
3. The Standard Deviation in Paid-up Capital during the study period was 246.018.
Mahesh Urban Cooperative Bank shows highest Standard Deviation of 105.31 as
compared to other banks. The lowest Standard Deviation of 7.68 was visible in
Saibaba UCB.
4. The Coefficient of Variation in Paid-up Capital during the study period was 25.32.
The highest variation of 30.25 in Paid-up Capital belongs to Udgir UCB where as the
lowest variation of 12.71 in Paid-up Capital was seen by Saibaba UCB.
5. It is evident from the study that in spite of the poor images among the public the
Urban Cooperative Banks in Latur District were able to raise the Paid-up Capital by
admitting new members to the banks.
Table 5.5
Investments of Urban Cooperative Banks in Latur District (Rs. In Lakh) Year L.U.C.B M.U.C.B S.U.C.B U.U.C.B S.U.C.B Grand Total
2007-08 614.45
(100)
2185.98
(100)
2469.63
(100)
550.81
(100)
384.77
(100)
6205.64
(100)
2008-09 851.01
(138.50)
2409.78
(110.24)
2843.66
(115.15)
738.64
(134.10)
306.38
(79.63)
7149.47
(115.21)
2009-10 1108.10
(180.34)
2741.45
(125.41)
3155.54
(127.77)
928.61
(168.59)
362.17
(94.13)
8295.87
(133.68)
2010-11 1098.38
(478.76)
3787.61
(173.27)
4125.69
(167.06)
1128.34
(204.85)
546.75
(142.10)
10686.77
(172.21)
2011-12 1121.68
(182.55)
3783.57
(173.08)
4319.01
(174.88)
1196.51
(217.23)
450.38
(117.05)
10871.15
(175.18)
2012-13 1650.62
(268.63)
5105.17
(233.54)
5894.02
(238.66)
1508.83
(273.93)
485.92
(126.29)
14644.56
(235.99)
Mean 1074.04 3335.59 3801.38 1008.62 422.73 9642.24
SD 345.668 1101.649 1253.807 343.1403 88.07299 3080.951
CV 32.18391 33.02711 32.98293 34.02077 20.83434 31.95265
Source: Annual Reports of the respective Urban Cooperative Banks i.e. 07-08 to 12- 13.
Note: Figures in brackets indicate percentage of increase/decrease over the base year.
Graph 5.4 Investments of Urban Cooperative Banks in Latur District
Source: Annual Reports of the respective Urban Cooperative Banks i.e.07-08to12- 13.
1. The Investments made by the Urban Cooperative Banks rose to Rs: 14644.56/- lakh in
2012-13 from Rs: 6205.64/- lakh in 2007-08, was equal to 235.99% over the base
year.
2. Among the Urban Cooperative Banks, the Udgir UCB has the highest percentage of
increase in Investments i.e. 273.93% over the base year, whereas the lowest
percentage of increase in Investments was shown by Saibaba UCB i.e. 126.29%.
3. The average Investments of the Urban Cooperative Banks in the Latur stood at Rs:
9642.24/- lakh during the study period. Siddheshwar Urban Cooperative Bank has
made the highest average Investments of Rs. 3801.38/- lakh, where as the lowest
Investments Rs: 422.73/- lakh, was made by Saibaba Urban Cooperative Bank.
4. The Standard Deviation in Investments during the study period was 3080.951.
Siddheshwar Urban Cooperative Bank shows highest Standard Deviation of 1253.81
as compared to other banks. The lowest Standard Deviation of 88.07 was visible in
Saibaba UCB.
5. The Coefficient of Variation in Investments during the study period was 31.95. The
highest variation of 34.02 in Investments belongs to Udgir UCB where as the lowest
variation of 20.83 in Investments was seen by Saibaba UCB.
6. It is evident from the study that the Urban Cooperative Banks in Latur District has the
positive attitude towards Investments which indirectly protects the interest of various
stake holders as well as a source of income to the banks.
Table 5.6 Profit of Urban Cooperative Banks in Latur District (Rs. In Lakh)
Year L.U.C.B M.U.C.B S.U.C.B U.U.C.B S.U.C.B Grand Total
2007-08 27.60
(100)
63.85
(100)
67.52
(100)
20.29
(100)
11.20
(100)
190.46
(100)
2008-09 24.54
(88.91)
91.31
(143.00)
76.70
(113.60)
17.64
(86.94)
9.21
(82.23)
219.40
(115.19)
2009-10 46.07
(166.92)
115.14
(180.33)
77.42
(114.66)
26.32
(129.72)
14.40
(128.57)
279.35
(146.67)
2010-11 53.56
(194.06)
115.44
(180.80)
102.80
(152.25)
30.52
(150.42)
15.53
(138.66)
317.85
(166.89)
2011-12 65.30
(236.59)
127.00
(198.90)
118.12
(174.94)
37.23
(183.49)
12.82
(114.46)
360.47
(189.26)
2012-13 72.78
(263.70)
98.61
(154.44)
147.68
(218.72)
44.52
(219.42)
31.14
(278.04)
394.73
(207.25)
Mean 48.31 101.89 98.37 29.42 15.72 293.71
SD 19.56496 22.62482 30.66391 10.21716 7.883848 79.54046
CV 40.49878 22.20515 31.17202 34.72861 50.15171 27.08129
Source: Annual Reports of the respective Urban Cooperative Banks i.e. 07-08 to 12- 13.
Note: Figures in brackets indicate percentage of increase/decrease over the base year.
Graph 5.5 Profit of Urban Cooperative Banks in Latur District
Source: Annual Reports of the respective Urban Cooperative Banks i.e.07-08to12- 13.
1. The position of Profit of the Urban Cooperative Banks during the study period i.e.
2007-08 to 2012-13 shows that, in the year 2007-08 the Total Profits was Rs: 190.46
lakh which rose to Rs: 394.73 lakh in the year 2012-13, showing a growth of 207.25%
over the base year.
2. Among the Urban Cooperative Banks, the Saibaba UCB has the highest percentage
of increase in Profits i.e. 278.05% over the base year, whereas the lowest percentage
of increase in Profit was shown by Mahesh UCB i.e. 154.44%.
3. The average Profits of the Urban Cooperative Banks in the Latur District were Rs:
293.71 lakh during the study period. Mahesh Urban Cooperative Bank has earned the
highest average Profit of Rs. 101.89 lakh, where as the lowest average Profit of Rs:
15.72 lakh was made by Saibaba Urban Cooperative Bank.
4. The Standard Deviation in Profit during the study period was 79.54. Siddheshwar
Urban Cooperative Bank shows highest Standard Deviation of 30.66 as compared to
other banks. The lowest Standard Deviation of 7.88 belongs to Saibaba UCB.
5. The Coefficient of Variation in Profit during the study period was 27.08. The highest
variation of 50.15 in Profit was belongs to Saibaba UCB where as the lowest variation
of 22.21 in Profit was seen in Mahesh UCB.
6. The analysis of the Profit made by the Urban Cooperative Banks shows increase of
107% over and above the base year during the study period. None of the banks
recorded a loss in its operation during the study period.
5.1.4 Analysis of Interest on Deposits and Loans and Advances:
The Interest charged on Loans and Advances as well as interest paid on the
Deposits of customers by the Urban Cooperative Banks in Latur District were
analyzed in the following tables: Table 5.7
Interest on Deposits of Urban Cooperative Banks in Latur District (Rs. In Lakh) Year L.U.C.B M.U.C.B S.U.C.B U.U.C.B S.U.C.B Grand
Total 2007-
08
140.59
(100)
410.92
(100)
361.88
(100)
127.95
(100)
55.12
(100)
1096.46
(100)
2008-
09
165.06
(117.41)
475.88
(115.81)
359.25
(99.27)
162.62
(127.10)
70.51
(127.92)
1233.32
(112.48)
2009-
10
177.39
(126.18)
528.20
(128.54)
408.51
(112.89)
165.27
(129.17)
71.73
(130.13)
1351.10
(123.22)
2010-
11
218.92
(155.72)
635.52
(154.66)
473.74
(130.91)
219.51
(171.56)
100.31
(181.98)
1648.00
(150.30)
2011-
12
259.32
(184.45)
740.70
(180.25)
627.46
(173.39)
286.16
(223.65)
102.93
(186.74)
2016.57
(183.92)
2012-
13
285.00
(202.72)
940.98
(229.00)
831.31
(229.72)
358.23
(279.98)
130.10
(236.03)
2545.62
(232.17)
Mean 207.71 622.03 510.36 219.96 88.45 1648.51
SD 56.57989 195.3074 186.1807 87.45965 27.55846 548.7931
CV 27.23985 31.3984 36.48027 39.76161 31.1571 33.29025
Source: Annual Reports of the respective Urban Cooperative Banks i.e. 07-08 to 12- 13.
Note: Figures in brackets indicate percentage of increase/decrease over the base year.
1. The Table 5.7 shows the position of Interest on Deposits paid by the Urban
Cooperative Banks during the study period i.e. 2007-08 to 2012-13. In the year 2007-
08 the total Interest on Deposits was Rs: 1096.46/- lakh which increased to Rs:
2545.62/- lakh in the year 2012-13, showing a growth of 232.17% over the base year.
2. Among the Urban Cooperative Banks, the Udgir UCB has the highest percentage of
increase in the amount of Interest on Deposits i.e. 279.98% over the base year,
whereas the lowest percentage of increase in Interest on Deposits was shown by
Laxmi UCB i.e. 202.72%.
3. The average of Interest on Deposits of the Urban Cooperative Banks in the Latur
District was Rs: 1648.51/- lakh. During the study period the Mahesh Urban
Cooperative Bank has paid the highest amount of average Interest on Deposits of Rs.
622.03/- lakh, where as the lowest amount of average Interest on Deposits was paid
by Saibaba Urban Cooperative Bank i.e. Rs: 88.45/- lakh.
4. The Standard Deviation in amount of Interest on Deposits paid during the study
period was 548.79. Mahesh Urban Cooperative Bank shows highest Standard
Deviation of 195.30 as compared to other banks. The lowest Standard Deviation of
27.55 was visible in Saibaba UCB. The Coefficient of Variation in Interest on
Deposits during the study period was 33.29. The highest variation of 39.76 was
belongs to Udgir UCB where as the lowest variation of 27.23 was shown by Laxmi
UCB.
5. From the above analysis it is evident that the Urban Cooperative Banks in Latur
District show an increasing trend in the payment of Interest on Deposits during the
study period. Not a single bank has shown a negative increasing trend during the
study period. The regular payment of Interest on Deposits to customers will help to
procure other customers or it divers the attention of public towards UCBs.
Table 5.8 Interest on Loans and Advances of Urban Cooperative Banks in Latur District (Rs. In Lakh) Year L.U.C.B M.U.C.B S.U.C.B U.U.C.B S.U.C.B Grand Total
2007-08 157.63 (100)
469.86 (100)
535.17 (100)
160.91 (100)
108.19 (100)
1431.76 (100)
2008-09 169.63 (107.61)
563.67 (119.97)
529.72 (98.98)
193.71 (120.38)
121.72 (112.51)
1578.45 (110.25)
2009-10 207.89 (131.88)
659.42 (140.34)
569.06 (106.33)
200.14 (124.38)
138.80 (128.29)
1775.31 (123.99)
2010-11 261.07 (165.62)
764.69 (162.75)
723.47 (135.19)
277.96 (172.74)
166.04 (153.47)
2193.23 (153.18)
2011-12 364.93 (231.51)
949.66 (202.12)
910.64 (170.16)
361.84 (224.87)
169.96 (157.09)
2757.03 (192.56)
2012-13 490.00 (310.85)
1089.57 (231.89)
1059.00 (197.88)
419.19 (260.51)
225.88 (208.78)
3283.64 (229.34)
Mean 275.19 749.48 721.18 268.96 150.10 2169.90 SD 129.5288 235.282 221.0972 103.296 42.26292 726.092 CV 47.06886 31.3927 30.6577 38.40571 28.15651 33.462
Source: Annual Reports of the respective Urban Cooperative Banks i.e. 07-08 to 12- 13. Note: Figures in brackets indicate percentage of increase/decrease over the base year.
1. The Table 5.8 shows the position of Interest on Loans and Advances charged by the
Urban Cooperative Banks during the study period i.e. 2007-08 to 2012-13. In the year
2007-08 the total Interest on Loans and Advances was Rs: 1431.76/- lakh which
increased to Rs: 3283.64/- lakh in the year 2012-13, showing a growth of 229.34%
over the base year.
2. Among the Urban Cooperative Banks, the Laxmi UCB has the highest percentage of
increase in the amount of Interest on Loans and Advances i.e. 310.85% over the base
year, whereas the lowest percentage of increase in Interest on Loans and Advances
was shown by Siddheshwar UCB i.e. 197.88%.
3. The average amount of Interest on Loans and Advances of the Urban Cooperative
Banks in the Latur District was Rs: 2169.90/- lakh. During the study period the
Mahesh Urban Cooperative Bank has raised the highest amount of average Interest on
Loans and Advances of Rs. 749.48/- lakh, where as the lowest amount of average
Interest on Loans and Advances was charged by Saibaba Urban Cooperative Bank i.e.
Rs: 150.10/- lakh.
4. The Standard Deviation in amount of Interest on Loans and Advances charged during
the study period was 726.09. Mahesh Urban Cooperative Bank shows highest
Standard Deviation of 235.28 as compared to other banks. The lowest Standard
Deviation of 42.26 was visible in Saibaba UCB. The Coefficient of Variation in
Interest on Loans and Advances during the study period was 33.46. The highest
variation of 47.06 belongs to Laxmi UCB where as the lowest variation of 28.15 was
seen in Saibaba UCB.
5. The notable thing is that in each year of the study the amount of interest collected on
loans and advances is always greater than the interest paid on the deposits (average
interest collected was Rs: 275.19/- lakh and average interest paid was Rs: 207.71/-
lakh), which indicates about the maintenance of liquidity by all the banks. This
happen because the rates of lending funds are more than the rates of collection of
deposits. So, this increase in the collection of interest on loans and advances is
remarkable one for the growth and progress of the bank.
Table 5.9 Percentage of Total Expenditure to Total Income of Urban Cooperative Banks in Latur District (Rs.In Lakh) Year L.U.C.B M.U.C.B S.U.C.B U.U.C.B S.U.C.B Grand
Total 2007-
08 195.57* 233.17** (83.87)
566.79* 630.64** (89.88)
677.92* 745.14** (90.98)
201.92* 222.21** (90.87)
97.63* 108.83** (89.71)
1739.53* 1929.99**
(90.13) 2008-
09 230.80* 255.34** (90.38)
684.83* 776.14** (88.24)
731.41* 808.11** (90.50)
249.18* 266.82** (93.39)
117.99* 127.20** (92.76)
2014.21* 2233.61**
(90.18) 2009-
10 245.28* 291.35** (84.19)
784.91* 900.05** (87.21)
812.65* 890.07** (91.30)
271.42* 297.74** (91.16)
130.56* 144.96** (90.07)
2244.82* 2524.17**
(88.93) 2010-
11 306.77* 360.33** (85.14)
913.11* 1028.55** (88.78)
931.12* 1033.92** (90.06)
349.78* 380.30** (91.97)
159.50* 175.03** (91.13)
2660.28* 2978.13**
(89.33) 2011-
12 388.90* 454.20** (85.62)
1142.25* 1269.25**
(89.99)
1167.70* 1285.82**
(90.81)
423.38* 460.61** (91.92)
167.95* 180.77** (92.91)
3290.18* 3650.65**
(90.13) 2012-
13 428.22* 501.00** (85.47)
1351.09* 1449.70**
(93.20)
1387.93* 1535.61**
(90.38)
500.78* 545.30** (91.84)
196.30* 227.44** (86.31)
3864.32* 4259.05**
(90.73) Mean 85.77% 89.55% 90.67% 91.86% 90.48% 89.91%
Source: Annual Reports of the respective Urban Cooperative Banks i.e. 07-08 to 12- 13.
Note: 1. Figures in brackets indicate percentage of Total Expenditure to Total Income.
2.* It indicates Total Expenditure. ** It indicates Total Incomes.
1. The Table 5.9 shows the proportion of Total Expenditure to Total Incomes made by the Urban Cooperative Banks during the study period i.e. 2007-08 to 2012-13. In the year 2007-08 the proportion of Total Expenditure to Total Income was 90.13% which rose to 90.73% in the year 2012-13.
2. The average Proportion of Total Expenditure to Total Incomes was 89.91%. The Udgir UCB has raised the highest average proportion of Total Expenditure to Total Incomes of 91.86%, where as the lowest average proportion belongs to Laxmi UCB i.e. 85.77%.
3. The figures in Table 5.30 indicates that, percentage of Total Expenditure to Total Income was never less than 85%, which means that all banks were spending their incomes on development activities and extension programmes.
4. The important thing is that the percentage of total expenditure was never more than
the total incomes. This is the sign of continuous progress and proper control
techniques of banks for reducing expenditure or using it for extension and
development activities.
5.2 Financial Ratio Analysis of the Urban Cooperative Banks: The study of Financial Ratio Analysis is related with the process of financial
analysis of the all Urban Cooperative Banks in the present study. The Financial Ratio
Analysis is helpful to know the liquidity, profitability, efficiency and solvency of the
banks. The study of individual financial variable is not so important; hence we have
to study them in groups or in the form of ratios to know about their effects on each
other. In other words, we have to give them scientific view to the study of financial
variables to draw the right conclusions.
The term financial ratio is defined as “a quantitative relationship between any
two or more than two variables of financial statements”. When we show the
quantitative relationship between two variables in certain rules and regulations then
it is called as ratio. In order to draw the financial ratios between two variables one
variable is considered as base and the change in that variable causes the change in
another variable. These financial ratios are useful to analyze the financial statements
of the banks. The notable thing is that we have to set the ‘standard ratio’ for
calculating financial ratios of different variables of financial statements. Then after,
we have to compare the actual ratio with that of standard ratio to draw the effective
conclusions of financial statements.
In the study the following Financial Ratios are considered for the Financial
Ratio Analysis of the Urban Cooperative Banks-
1. Liquidity Ratios.
2. Solvency Ratios.
3. Profitability Ratios.
These ratios are explained and calculated in the following manner.
A) Liquidity Ratios:
The liquidity ratios of all Urban Cooperative Banks are shown with the help of
Current Ratio, Credit Deposit Ratio and Current Assets to Fixed Assets Ratio. These
liquidity ratios are helpful to check the liquidity of the banks or to decide the
remittance capacity of the banks.
1. Current Ratio:
The Current Ratio is calculated to know the capacity of banks to meet out its
current liabilities from its current assets. This ratio is calculated by using the
following formula
Current Assets Current Ratio = _________________________________ Current Liabilities
The current assets are those assets of the banks which can be easily converted
into cash, which includes cash, cash in bank, bills receivable, short term loans and
advances, sundry debtors, interest received etc. on the other hand, the current
liabilities are those liabilities which we have to repay within a very short period of
time. It includes, creditors, current deposits, interest allowed, bank overdraft etc.
The Standard Norm set for Current Ratio is 2:1 which means the current assets
must be two times than the current liabilities. If this ratio is 2:1 then it is considered
as satisfactory or we can say the banks are able to meet its current liabilities from its
current assets. This ratio must be at least 1:1, which means current assets are equal
to the current liabilities. The Table 5.10 is helpful to study the Current Ratios of all
the Urban Cooperative Banks in the study.
Table 5.10 Current Ratio’s of Urban Cooperative Banks in Latur District
Sr. No.
Bank Name 2007-08 2008-09 2009-
10 2010-11 2011-12 2012-13 Mean
01 L.U.C.B. 1.13:1 0.75:1 0.90:1 1.20:1 1.79:1 1.47:1 1.21:1
02 S.U.C.B. 3.86:1 4.22:1 3.93:1 4.47:1 2.88:1 2.85:1 3.70:1
03 U.U.C.B. 1.63:1 1.51:1 1.62:1 0.97:1 2.06:1 1.73:1 1.59:1
04 S.U.C.B. 1.05:1 3.48:1 5.57:1 5.78:1 4.76:1 4:1 4.11:1
05 M.U.C.B. 2.07:1 3.36:1 4.46:1 3.72:1 4.02:1 5.23:1 3.81:1
Source: Annual Reports of the respective Urban Cooperative Banks i.e. 07-08 to 12-13.
From the Table 5.10, it is evident that three Urban Cooperative Banks,
namely, Siddheshwar UCB, Saibaba UCB and Mahesh UCB maintained a higher
current ratio than the standard norm of 2:1 which were 3.70:1, 4.11:1 and 3.81:1
respectively, whereas LUCB and UUCB had a lower current ratio of 1.21:1 and
1.59:1 respectively which were lower than the standard norm, but within the safe
zone i.e. above 1:1 norm. Amongst the Urban Cooperative Banks Saibaba Urban
Cooperative Bank has the highest average Current Ratio of 4.11:1 whereas the
lowest average Current Ratio of 1.21:1 belongs to Laxmi Urban Cooperative Bank.
It is concluded from the above analysis that three of the Urban Cooperative Banks
were able to maintain high liquidity in their day to day transactions whereas the two
banks were able to maintain their liquidity position within the safe zone even though
they were unable to maintain the standard norm. In general, we can say that the
Urban Cooperative Banks in Latur District were able to meet their current liabilities
from their current assets during the study period.
2. Credit Deposit Ratio:
The Credit Deposit Ratio shows the quantitative relationship between the total
deposits and total loans of the banks. As per the regulations of Cooperative
Registrar, Cooperative Society, Maharashtra State, Pune, the minimum Credit
Deposit Ratio is 60% to 70%. The Credit Deposit Ratio is calculated as follows-
Total Loans and Advances Credit Deposit Ratio =----------------------------------------------X 100 Total Deposits
Table 5.11 Credit Deposit Ratio’s of Urban Cooperative Banks in Latur District
Sr.
No.
Bank
Name
2007-
08
2008-
09
2009-
10
2010-
11
2011-
12
2012-
13
Mean
01 L.U.C.B. 67.38 70.79 64.85 69.01 69.78 65.68 67.89%
02 S.U.C.B. 68.58 66.46 68.75 63.79 68.03 61.06 66.11%
03 U.U.C.B. 68.45 63.55 63.49 69.29 66.24 64.80 65.97%
04 S.U.C.B. 46.07 87.15 56.58 58.08 45.93 46.12 56.65%
05 M.U.C.B. 71.23 74.02 73.99 66.55 71.97 63.06 70.14%
Source: Annual Reports of the respective Urban Cooperative Banks i.e. 07-08 to 12-13.
As per the regulations of Cooperative Registrar, Cooperative Society, the
minimum Credit Deposit Ratio is 60% to 70%. From the Table 5.37, it is evident
that four Urban Cooperative Banks namely Mahesh UCB, Laxmi UCB,
Siddheshwar UCB and Udgir UCB maintained the minimum Credit Deposit Ratio
of 60% to 70%, which were 70.14%, 67.89%, 66.11%, and 65.97% respectively,
whereas Saibaba UCB had lower Credit Deposit ratio of 56.65% which was lower
than the minimum Standard Norm of 60% to 70%. Among the Urban Cooperative
Banks Mahesh Urban Cooperative Bank has the highest average Credit Deposit
Ratio of 70.14%. It is concluded from the above analysis that the four of the Urban
Cooperative Banks were able to maintain high creditability in their business
transactions whereas one bank was unable to maintain its creditability position.
Finally, the researcher concludes that, the Urban Cooperative Banks in Latur
District were able to maintain the positive relationship between their Total Deposits
and Total Loans.
3. Current Assets to Fixed Assets Ratio:
The Current Assets to Fixed Assets Ratio is calculated to know the proportion
of Current Assets to Fixed Assets. This ratio is calculated by using following
formula.
Current Assets Current Assets to Fixed Assets Ratio = ______________________ Fixed Assets
Table 5.12
Current Assets to Fixed Assets Ratio’s of Urban Cooperative Banks in Latur
District
Sr. No
Bank Name
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
Mean
01 L.U.C.B. 0.30:1 0.15:1 0.14:1 0.15:1 0.20:1 0.17:1 0.19:1
02 S.U.C.B. 0.91:1 0.94:1 0.77:1 0.70:1 0.39:1 0.38:1 0.68:1
03 U.U.C.B. 0.14:1 0.16:1 0.16:1 0.12:1 0.12:1 0.12:1 0.14:1
04 S.U.C.B. 1.15:1 0.58:1 0.94:1 0.67:1 1.30:1 1.04:1 0.95:1
05 M.U.C.B. 0.43:1 0.45:1 0.44:1 0.41:1 0.37:1 0.80:1 0.48:1
Source: Annual Reports of the respective Urban Cooperative Banks i.e. 07-08 to 12-13.
The Table 5.12 shows that, the Saibaba UCB has the highest average Current
Assets to the Fixed Assets Ratio i.e. 0.95:1, followed by the Siddheshwar UCB i.e.
0.68:1 during the study period. The lowest average Current Assets to the Fixed
Assets Ratio is maintained by the Udgir UCB i.e. 0.14:1. In order to keep more
liquidity in the business the banks have to maintain a higher ratio of Current Assets
to Fixed Assets. It means the more is the proportion of Current Assets to Fixed
Assets the higher is the liquidity in the business. Here the Udgir and Laxmi UCB
reported very less liquidity during the study period. So these two banks have to take
necessary steps to increase the proportion of Current Assets to Fixed Assets.
B) Solvency Ratios:
The Solvency Ratios are calculated to know about the medium and long term
loan repayment capacity of Urban Cooperative Banks. The Solvency Ratio includes
Indebtedness Ratio and Fixed Assets to Net Worth Ratio.
1. Indebtedness Ratio: The Indebtedness Ratio is calculated to know the proportion of net
worth in the total liabilities. It is calculated with the help of Net Worth and Total
Liabilities. The Net Worth includes Reserve and other funds, Profit and Share
Capital and the Total Liabilities includes all the liabilities of the banks. The standard
Indebtedness Ratio is 25% or it is 3:1. The following formula is used to calculate
the Indebtedness Ratio
Net Worth Indebtedness Ratio =--------------------------------------X 100 Total Liabilities
Table 5.13
Indebtedness Ratio’s of Urban Cooperative Banks in Latur District Sr.
No
Bank
Name
2007-
08
2008-
09
2009-
10
2010-
11
2011-
12
2012-
13
Mean
01 L.U.C.B. 10.77 12.13 11.70 11.57 12.22 10.25 11.44%
02 S.U.C.B. 13.69 13.77 12.97 11.85 11.76 11.27 12.55%
03 U.U.C.B. 7.24 6.97 7.22 7.34 7.41 7.20 7.23%
04 S.U.C.B. 18.35 17.17 14.79 14.46 13.85 14.46 15.5%
05 M.U.C.B
.
13.07 13.81 13.64 12.78 13.91 13.11 13.39%
Source: Annual Reports of the respective Urban Cooperative Banks i.e. 07-08 to 12-13.
The Standard Indebtedness Ratio is 25% or 3:1. From the study, it is evident
that no bank has maintained a standard Indebtedness Ratio. Among the Urban
Cooperative Banks, Saibaba Urban Cooperative Bank has the highest average
Indebtedness Ratio of 15.51%, was less than the standard ratio of 25%. The Mahesh
UCB has maintained the average Indebtedness Ratio of 13.39% whereas the Udgir
UCB has maintained the lowest average Indebtedness Ratio of 7.23%. The non-
maintenance of Standard Indebtedness Ratio indicates that the Urban Cooperative
Banks in Latur District were unable to maintain adequate Net Worth in the Total
Liabilities. So, the Urban Cooperative Banks in the Latur District has to take certain
necessary steps to enhance the proportion of Net Worth in the Total Liabilities.
2. Fixed Assets to Net Worth Ratio:
With the help of this ratio investment of banks in fixed assets is shown. This
ratio is calculated with the help of Fixed Assets and Net Worth. The Fixed Assets
includes, investments, medium and long term loans, land and other assets where as
Net Worth includes reserves and other funds, profit and share capital.
Fixed Assets Fixed Assets to Net Worth Ratio =---------------------------------------- Net Worth
Table 5.14
Fixed Assets to Net worth Ratio’s of Urban Cooperative Banks in Latur
District
Sr.
No.
Bank
Name
2007-08 2008-09 2009-10 2010-11 2011-12 2012-
13
Mean
01 L.U.C.B. 7.14 7.19 7.52 7.51 6.83 8.36 7.43
02 S.U.C.B. 3.83 3.75 4.35 4.96 6.11 6.44 4.91
03 U.U.C.B. 11.97 12.34 11.99 12.19 11.99 12.50 12.16
04 S.U.C.B. 2.54 3.70 3.48 4.14 3.14 3.39 3.40
05 M.U.C.B
.
5.36 5.00 5.10 5.55 5.23 4.23 5.08
Source: Annual Reports of the respective Urban Cooperative Banks i.e. 07-08 to 12-13.
During the study period, the Fixed Assets to Net Worth Ratio of Udgir bank
was 12.16 which are higher than all other banks, followed by Laxmi bank with the
ratio 7.43 and the Saibaba bank with the lowest ratio i.e. 3.40 than other banks. The
second lowest average Fixed Assets to Net Worth was maintained by Siddheshwar
UCB i.e. 4.91. Actually there is no Standard Norm of Fixed Assets to Net Worth
Ratio. So, from the above analysis it is clear that the Saibaba bank has very less
proportion of Fixed Assets to Net Worth which is a positive sign for maintaining
strong liquidity in current assets.
C) Profitability Ratios:
The Profitability Ratios are calculated to know the profit earning capacity of
the banks. The following ratios are calculated to know the profit earning capacity of
the banks.
1. Net Profit to Total Assets Ratio:
This ratio is calculated to know the profit earning capacity of the banks by
employing total assets of the banks. This ratio is calculated with the help of total
assets and net profit earned by the banks in the respective year. This ratio is
calculated by using following formula.
Net Profit Net Profit to Total Assets Ratio =------------------------------------X100 Total Assets
Table 5.15
Net Profit to Total Assets Ratio’s of Urban Cooperative Banks in Latur
District
Sr. No.
Bank Name
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
Mean
01 L.U.C.B. 1.11 0.95 1.43 1.39 1.44 1.20 1.25% 02 S.U.C.B. 1.00 1.04 0.89 0.97 0.99 1.06 0.99% 03 U.U.C.B. 0.99 0.72 0.88 0.83 0.91 0.91 0.86% 04 S.U.C.B. 1.04 0.73 0.94 0.87 0.65 1.47 0.95% 05 M.U.C.B. 0.92 1.16 1.22 1.00 1.02 0.67 1.00%
Source: Annual Reports of the respective Urban Cooperative Banks i.e. 07-08 to 12-13.
The Table 5.15 shows that, the Laxmi UCB has maintained highest average
Net Profit to Total Assets Ratio i.e. 1.25%, followed by the Mahesh UCB i.e.
1.00%. The lowest average Net Profit to Total Assets Ratio was maintained by the
Udgir UCB i.e. 0.86%. This ratio is calculated to know the profit earning capacity
of the banks by employing total assets of the banks. The more the Net Profit to
Total Assets Ratio the more the earning capacity. From this, it is clear that the
Laxmi bank has a very good earning capacity than other banks. The notable thing
is that during the study period, none of the above banks has shown negative Net
Profit to Total Assets Ratio in any year.
2. Net Profit to Fixed Assets Ratio:
This ratio is calculated to know the profit earning capacity of the banks by
employing fixed assets of the banks. This ratio is calculated with the help of fixed
assets (Investments, Medium and Long Term Loans, Land, other Assets) and net
profit earned by the banks in the respective year. This ratio is calculated by using
following formula.
Net Profit Net Profit to Fixed Assets Ratio =-----------------------------------X 100 Fixed Assets
Table 5.16
Net Profit to Fixed Assets Ratio’s of Urban Cooperative Banks in Latur District
Sr. No.
Bank Name
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 Mean
01 L.U.C.B. 1.44 1.08 1.63 1.60 1.73 1.40 1.48%
02 S.U.C.B. 1.90 2.02 1.58 1.64 1.37 1.46 1.66%
03 U.U.C.B. 1.14 0.84 1.01 0.92 1.02 1.03 0.99%
04 S.U.C.B. 2.24 1.14 1.82 1.45 1.49 3.00 1.86%
05 M.U.C.B 1.32 1.68 1.75 1.41 1.41 1.20 1.46%
Source: Annual Reports of the respective Urban Cooperative Banks i.e. 07-08 to 12-13.
The Saibaba UCB has maintained the highest average Net Profit to Fixed
Assets Ratio i.e. 1.86%, followed by the Siddheshwar UCB with 1.66%. The lowest
average Net Profit to Fixed Assets Ratio was maintained by the Udgir UCB i.e.
0.99%. The more the net profit to fixed assets ratio the higher the earning capacity.
From this it is clear that the Saibaba bank has a very good earning capacity than
other banks. The profit earned by all these banks was increasing but it is not
increasing as per the increase in the amount of fixed assets of the banks.
3. Net Profit to Capital Employed Ratio:
The Net Profit to Capital Employed Ratio is calculated to know the percentage
of profit for the total capital employed by the banks. This ratio is calculated with the
help of Net Profit and Capital Employed by the banks (Total Assets – Current
Liability). The formula for calculating this ratio is as follows-
Net Profit Net Profit to Capital Employed Ratio =-----------------------------------X 100 Capital Employed Table 5.17
Net Profit to Capital Employed Ratio’s of Urban Cooperative Banks in Latur District
Sr. No.
Bank Name
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
Mean
01 L.U.C.B. 1.39 1.14 1.66 1.56 1.59 1.33 1.45%
02 S.U.C.B. 1.14 1.17 1.00 1.06 1.09 1.17 1.11% 03 U.U.C.B. 1.08 0.80 0.95 0.93 0.96 0.97 0.95
% 04 S.U.C.B. 2.12 0.81 1.03 0.93 0.74 1.69 1.22% 05 M.U.C.B 1.08 1.27 1.44 1.08 1.10 0.73 1.12%
Source: Annual Reports of the respective Urban Cooperative Banks i.e. 07-08 to 12-13.
The Latur UCB has maintained the highest average Net Profit to Capital
Employed Ratio i.e. 1.45%, followed by the Saibaba UCB with 1.22%. The lowest
average Net Profit to Capital Employed Ratio was maintained by the Udgir UCB
i.e. 0.95%. Every bank employs its capital to earn good returns on it, but here the
ratio of Net Profit to Capital Employed is not adequately satisfactory during the
study period. So, the Urban Cooperative Banks in Latur District has to take
initiatives to enhance the percentage of Net Profit to Capital Employed.
4. Share of PAT (Profit after Tax) to Share Holders Fund Ratio:
The Return on Share Holders Fund is to be calculated to know the percentage
of return on the investments made by the share holders. This ratio is calculated by
using the following formula.
Net Profit after Tax and Interest Return on Share Holders Fund = ____________________________ X 100 Share Holders Fund
Table 5.18
Return on Share Holders Fund Ratio’s of Urban Cooperative Banks in Latur District
Sr.
No
.
Bank
Name
2007-
08
2008-
09
2009-
10
2010-
11
2011-
12
2012-
13
Mean
01 L.U.C.B. 35.35 29.29 50.95 48.25 50.94 46.08 43.48% 02 S.U.C.B. 31.36 32.93 28.03 32.64 33.08 38.16 32.70% 03 U.U.C.B. 26.81 20.33 25.17 24.14 25.34 26.46 24.71% 04 S.U.C.B. 23.73 16.08 24.43 23.70 19.47 46.00 25.57% 05 M.U.C.B
. 24.76 30.30 32.66 28.75 26.61 18.43 26.92%
Source: Annual Reports of the respective Urban Cooperative Banks i.e. 07-08 to 12-13.
During the study period i.e. 2007-08 to 2012-13, the Laxmi UCB has
distributed the highest average of share of profit after tax to share holders during
the study period i.e. 43.38%, followed by the Siddheshwar UCB with 32.70%. The
lowest average return on Share Holders fund was distributed by the Udgir UCB i.e.
24.71%. Every Urban Cooperative Bank, in fact must try to attract more and more
investors by distributing more returns to its Share Holders.
5.3 Testing of Hypotheses: The Hypotheses which are formulated under the study are tested here with the
help of numerical data as well as the statistical tests by Chi-square and F-test. The
Hypotheses and the brief description of the tests are given below:-
1. The Bad Debts of Urban Cooperative Banks show increasing trends.
2. The NPA of Urban Cooperative Banks show increasing trends.
3. The major proportion of Loans was given to Small Business Units.
4. The Deposits and Loans show increasing trends.
5. The Rate of Return on Share Holders’ Investment shows increasing trends.
A) X2 –test (Chi-Square Test):
The X2 test is one of the simplest and most widely used non-parametric tests in
statistical works. The symbol X2 is the Greek letter Chi. The reason for the selection
of X2 test is that, it is computationally easier to handle and understand than
parametric tests. It is also suitable for testing single variable hypothesis. In the
present study the following formula of X2 test was used to test first two hypotheses.
Where,
x2 = Chi-Square Value. xi = Value of Sample variables x = Mean of the Sample variables
= Square of the Standard Deviation of the sample.
B) F-test/ The Variance Ratio Test:
The object of the F-test is to find out whether the two samples may be
regarded as drawn from the normal populations having the same variance. For
carrying out the test of significance, we calculate the ratio ‘F’. The following
formula of F-test was used to test the third, fourth and fifth hypotheses of the study.
It should be noted that, S1
2 is always the Larger estimate of variance i.e. S12 > S2
2
Hence, Larger estimate of variance F= -------------------------------------------- Smaller estimate of variance
Hypothesis: 1. The Bad Debts of Urban Cooperative Banks show increasing trend.
The hypothesis is tested with the help of X2test. It is evident from the
Table 5.19 that the bad debts of Urban Cooperative Banks show increasing trends and
the X2test proves it true
Table 5.19 Bad Debts of Urban Cooperative Banks in Latur District (2007-08 to 2012-13)
(Rs. In Lakh) Year L.U.C.B M.U.C.B S.U.C.B U.U.C.B S.U.C.B Grand
Total 2007-08 60.00
(100) 168.20 (100)
264.38 (100)
22.14 (100)
84.32 (100)
599.04 (100)
2008-09 78.25 (130.42)
223.22 (132.71)
292.88 (110.78)
27.60 (124.66)
86.32 (102.37)
708.27 (118.23)
2009-10 82.05 (136.75)
284.80 (169.32)
306.88 (116.08)
27.77 (125.43)
87.32 (103.56)
788.82 (131.68)
2010-11 86.38 (143.97)
340.89 (202.67)
321.88 (121.75)
32.84 (148.33)
89.98 (106.71)
871.97 (145.56)
2011-12 92.89 (154.82)
406.16 (241.47)
341.88 (129.31)
38.23 (172.67)
91.98 (109.08)
971.14 (162.12)
2012-13 100.94 (168.23)
456.99 (271.69)
357.88 (135.37)
46.49 (209.98)
91.98 (109.98)
1054.28 (175.99)
Mean 83.42 313.38 314.30 32.51 88.65 832.25
SD 14.0178 109.5551 33.8325 8.7451 3.1589 168.4099
CV 16.80390 34.95920 10.76441 26.89960 3.56334 20.23550
CGR 9.47 22.05 5.96 14.88 1.89 11.70
X2-
Value
4.99 4.99 4.99 4.99 4.99 4.99
Source: Annual Reports of the respective Urban Cooperative Banks i.e. 2007-08 to 2012-13.
Note: Figures in brackets indicate percentage of increase/decrease over the base year.
Table Value 11.1
Degree of Freedom 5
Significance level 0.05 (95% Level of Significance)
X2-Value 4.99
The calculated X2-value (4.99) at the 5 degree of freedom is less than the Table value (i.e. 11.1) Hence, the hypothesis Bad Debts of Urban Cooperative Banks show increasing trend is Accepted.
Hypothesis: 2. The NPAs of Urban Cooperative Banks show increasing trend.
The hypothesis is tested with the help of X2test. It is evident from the Table
5.20 that the NPAs of Urban Cooperative Banks show increasing trends and the X2test
proves it true
Table 5.20 NPAs of Urban Cooperative Banks in Latur District (2007-8 to 2012-13)
(Rs. In Lakh)
Year L.U.C.B M.U.C.B S.U.C.B U.U.C.B S.U.C.B Grand Total
2007-08 147.74 (100)
134.17 (100)
297.47 (100)
55.32 (100)
81.42 (100)
716.12 (100)
2008-09 136.07 (92.10)
151.40 (112.84)
274.11 (92.15)
80.50 (145.52)
127.54 (156.64)
769.62 (107.47)
2009-10 107.63 (72.85)
190.11 (141.69)
320.86 (107.86)
83.32 (150.61)
125.35 (153.95)
827.27 (115.52)
2010-11 84.17 (56.97)
192.76 (143.67)
261.53 (87.92)
69.39 (125.43)
153.31 (188.30)
761.16 (106.29)
2011-12 86.13 (58.30)
280.76 (209.26)
330.14 (110.98)
68.26 (123.39)
157.71 (193.70)
923.00 (128.89)
2012-13 97.14 (65.75)
248.63 (185.31)
332.28 (111.70)
66.46 (120.14)
103.80 (127.49)
848.31 (118.46)
Mean 109.81 199.64 302.73 70.54 124.86 807.58
SD 26.50172 56.09287 29.9914 10.17198 29.07 73.9312
CV 24.13416 28.09701 9.906979 14.42016 23.59 9.15466
CGR -10.0686 15.19465 2.624797 0.686872 6.04 3.810526
X2-Value 5.00 5.00 5.00 5.00 5.00 5.00
Source: Annual Reports of the respective Urban Cooperative Banks i.e. 2007-08 to 2012-13.
Note: Figures in brackets indicate percentage of increase/decrease over the base year.
Table Value 11.1
Degree of Freedom 5
Significance level 0.05 (95% Level of Significance)
X2-Value 5.00
The calculated X2-Value (5.00) at the 5 degree of freedom is less than the Table value (i.e. 11.1). Hence, the hypothesis NPAs of Urban Cooperative Banks show increasing trend is Accepted.
Hypothesis: 3. The Major proportion of Loans was given to Small Business Units. Table 5.21
Loans to Small Business Units of Urban Cooperative Banks in Latur District (2007-08 to 2012-13) (Rs. In Lakh)
Year L.U.C.B. M.U.C.B. S.U.C.B-1 U.U.C.B. S.U.C.B. Grand Total TL SBU TL SBU TL SBU TL SBU TL SBU TL SBU
2007-08 1281.33 145.29 3771.96 8.58 3623.28 978.29 1197.37 395.13 391.44 73.39 10265.38 1600.68 (100)* (100)* (100)* (100)* (100)* (100)* (100)* (100)* (100)* (100)* (100)* (100)*
(100)** (11.34)** (100)** (0.23)** (100)** (27)** (100)** (33)** (100)** (18.75)** (100)** (15.59)**
2008-09 1384.49 268.02 4548.96 5.64 3844.46 1038.00 1321.80 185.05 820.21 125.17 11919.92 1621.88
(108.05)* (184.47)* (120.60)* (65.73)* (106.10)* (106.10)* (110.80)* (46.83)* (209.54)* (170.55)* (116.18)* (101.32)* (100)** (19.36)** (100)** (0.12)** (100)** (27)** (100)** (14)** (100)** (15.26)** (100)** (13.61)**
2009-10 1689.18 339.92 5608.53 25.07 4753.60 1235.94 1630.56 603.31 706.68 145.08 14388.55 2349.32
(131.83)* (233.96)* (148.70)* (292.19)* ( 131.20)* (126.34)* ( 136.18)* (152.69)* (180.53)* (197.68)* (140.17)* (146.77)* (100)** (20.12)** (100)** (0.45)** (100)** (26)** (100)** (37)** (100)** (20.53)** (100)** (16.33)**
2010-11 2222.35 448.65 6434.55 24.17 5564.46 1391.12 2090.20 940.59 852.59 147.62 17164.15 2952.15
(173.44)* (308.80)* (170.59)* (281.70)* ( 153.58)* (142.20)* (174.57)* (238.05)* ( 217.81)* (201.14)* (167.20)* (184.43)* (100)** (20.19)** (100)** (0.38)** (100)** (25)** (100)** (45)** (100)** (17.08)** (100)** (17.20)**
2011-12 2563.92 523.33 7229.60 23.71 6629.34 1723.63 2370.19 876.97 748.21 105.42 19541.26 3253.06
(200.10)* (360.20)* (191.67)* (276.34)* (182.97)* (176.19)* (197.95)* (221.94)* (191.14)* (143.64)* (190.36)* (203.23)* (100)** (20.41)** (100)** (0.33)** (100)** (26)** (100)** (37)** (100)** (14.09)** (100)** (16.65)**
2012-13 3429.49 1010.51 7532.01 20.83 7010.06 1752.51 2746.28 768.96 814.86 72.49 21532.70 3625.30
(267.65)* (695.51)* (199.68)* (242.77)* (193.47)* (179.14)* (229.36)* (194.61)* (208.17)* (98.77)* (209.76)* (226.48)* (100)** (29.47)** (100)** (0.28)** (100)** (25)** (100)** (28)** (100)** (8.90)** (100)** (16.84)**
Mean 2095.13 455.9533 5854.27 18.00 5237.53 1353.25 1892.73 628.34 722.33 111.53 15802 2567.07 S.D. 818.357 302.46 1492.87 8.60 1411.84 332.19 412.17 293.47 170.59 33.56 4390.92 850.11 C.V. 39.059 66.34 25.50 47.80 26.96 24.55 32.34 46.71 23.62 30.09 27.79 33.12 ‘r’ 0.97 0.78 0.99 0.80 0.50 0.99
CGR 22.29 40.83 15.31 28.24 15.66 13.90 19.21 27.27 10.76 -1.58 16.56 20.08 F-Value 7.32 30.10 18.06 5.34 25.84 26.68
Source: Annual Reports of the respective Urban Cooperative Banks i.e. from 2007-08 to 2012-13. * It indicates growth rate. ** It indicates percentage of loans to SBUs to Total Loans.
Hypothesis: 3. The Major proportion of Loans was given to Small Business Units.
The hypothesis is tested with the help of F- test. It is evident from the
Table 5.21 that the Major proportion of loans was not given to Small Business Units.
Hence, the hypothesis Major proportion of Loans was given to Small Business Units is
Rejected by the F-test.
Table Value 5.05
Degree of Freedom 5
Significance level 0.05 (95% Level of Significance)
F- Value 26.68
The calculated F value (26.68) at the 5 degree of freedom is more than the Table value (5.05).
Hence, the hypothesis Major proportion of Loans was given to Small Business Units is
Rejected.
Hypothesis: 4.The Deposits and Loans Show Increasing Trends.
The hypothesis is tested with the help of F-test. It is evident from the Table 5.22 that
the Deposits and Loans of Urban Cooperative Banks show increasing trends and the F-test
proves it true.
Table Value 5.05
Degree of Freedom 5
Significance level 0.05 (95% Level of Significance)
F- Value 2.25
The calculated F value (2.25) at the 5 degree of freedom is less than the Table value (5.05).
Hence, the hypothesis Deposits and Loans show increasing trends is Accepted.
Table 5.22 Deposits and Loans Show Increasing Trends of Urban Cooperative Banks in Latur District (2007-08 to 2012-13) (Rs. In Lakh)
Year L.U.C.B. M.U.C.B. S.U.C.B-1 U.U.C.B. S.U.C.B. Grand Total
Total Deposits
Total Loans TD TL TD TL TD TL TD TL TD TL
2007-08 1901.66 1281.633 5295.56 3771.96 4944.85 3623.28 1549.76 1197.37 737.79 391.44 14429.62 10265.40 (100)* (100)* (100)* (100)* (100)* (100)* (100)* (100)* (100)* (100)* (100)* (100)*
(100)** (67.38)** (100)** (71.23)** (100)** (73.27)** (100)** (77.26)** (100)** (53.06)** (100)** (71.14)** 2008-09 1955.88 1384.49 6145.83 4548.96 5391.87 3844.46 1943.41 1321.80 810.64 820.21 16247.63 11919.90
(102.85)* (108.05)* (116.05)* (120.60)* (109.04)* (106.10)* (125.40)* (110.80)* (109.87)* (209.54)* (112.60)* (116.18)* (100)** (70.80)** (100)** (74.00)** (100)** (71.30)** (100)** (68.01)** (100)** (101.18)** (100)** (73.36)**
2009-10 2604.84 1689.18 7580.31 5608.53 6213.02 4753.60 1281.44 1630.56 1087.90 706.68 18767.51 14388.60 (136.98)* (131.83)* (143.14)* (148.70)* (125.65)* (131.20)* (82.69)* (136.18)* (147.45)* (180.53)* (130.06)* (140.17)* (100)** (64.85)** (100)** (73.99)** (100)** (76.51)** (100)** (127.24)** (100)** (64.96)** (100)** (76.67)**
2010-11 3220.31 2222.35 9669.13` 6434.55 8158.09 5564.46 2161.29 2090.20 1322.42 852.59 24531.24 17164.20 (169.34)* (173.44)* (182.59)* (170.59)* (164.98)* (153.58)* (139.46)* (174.57)* (179.24)* (217.81)* (170.00)* (167.20)* (100)** (69.01)** (100)** (66.55)** (100)** (68.20)** (100)** (96.71)** (100)** (64.47)** (100)** (69.97)**
2011-12 3674.36 2563.92 10045.70 7229.60 9119.08 6629.34 2363.18 2370.19 1471.45 748.21 26673.77 19541.30 (193.22)* (200.10)* (189.70)* (191.67)* (184.42)* (182.97)* (152.49)* (197.95)* (199.44)* (191.14)* (184.85)* (190.36)* (100)** (69.78)** (100)** (71.97)** (100)** (72.70)** (100)** (100.30)** (100)** (50.85)** (100)** (73.26)**
2012-13 5229.53 3429.49 11945.14 7532.01 10770.50 7010.06 1807.22 2746.28 1609.71 814.86 31362.10 21532.70 (274.99)* (267.65)* (225.57)* (199.68)* (217.81)* (193.47)* (116.61)* (229.36)* (218.18)* (208.17)* (217.35)* (209.76)* (100)** (65.98)** (100)** (63.06)** (100)** (65.09)** (100)** ( 151.96)** (100)** (50.62)** (100)** (68.66)**
Mean 3097.76 2095.13 8446.91 5854.27 7432.90 5237.53 1851.05 1892.73 1173.32 722.33 22001.98 15802 S.D. 1254.55 818.357 2540.31 1492.87 2295.77 1411.844 396.03 612.17 354.984 170.59 6584.07 4390.92 C.V. 40.49 39.06 30.07 25.50 30.89 26.96 21.39 32.34 30.25 23.62 29.92 27.79 ‘r’ 0.99 0.98 0.98 0.47 0.59 0.99
CGR 22.71 22.29 17.97 15.31 17.83 15.66 5.51 19.21 18.31 10.76 17.47 16.56 F-Value 2.35 2.90 2.64 2.39 4.39 2.25 Source: Annual Reports of respective Urban Cooperative Banks i.e. from 2007-08 to 2012-13. * It indicates growth rate. **It indicates percentage of Total Loans to Total Deposits.
Hypothesis: 5. Rate of Return on Share Holder’s Investment show increasing trend. Table 5.23
Rate of Return on Share Holder’s Investment of Urban Cooperative Banks in Latur District (2007-08 to 2012-13) (Rs. In Lakh)
Year L.U.C.B. M.U.C.B. S.U.C.B-1 U.U.C.B. S.U.C.B. Grand Total
Paid-up Capital Dividend P.C. Dividend P.C. Dividend P.C. Dividend P.C. Dividend P.C. Dividend
2007-08 78.07 6.50 257.86 23.46 215.28 19.00 75.68 6.81 47.19 4.00 674.08 59.77 (100)* (100)* (100)* (100)* (100)* (100)* (100)* (100)* (100)* (100)* (100)* (100)*
(100)** (8.33)** (100)** (9.10)** (100)** (8.83)** (100)** (9.00)** (100)** (8.48)** (100)** (8.87)** 2008-09 83.79 7.54 301.28 27.24 232.90 23.00 86.75 8.68 57.32 5.00 762.04 71.46
(107.33)* (116)* (116.84)* (116.11)* (108.18)* (121.05)* (114.63)* (127.46)* (121.47)* (125)* (113.05)* (119.56)* (100)** (9.00)** (100)** (9.04)** (100)** (9.88)** (100)** (10.00)** (100)** (8.72)** (100)** (9.38)**
2009-10 90.43 10.85 352.59 32.45 276.18 27.00 104.57 10.46 58.94 2.27 882.71 83.03 (115.83)* (166.92)* (136.74)* (138.32)* (128.29)* (112.11)* (138.17)* (153.60)* (124.90)* (56.75)* (130.95)* (138.92)* (100)** (12.00)** (100)** (9.20)** (100)** (9.78)** (100)** (10.00)** (100)** (3.85)** (100)** (9.41)**
2010-11 111.01 13.32 401.53 37.30 314.96 34.65 126.45 11.38 65.53 2.22 1019.48 98.87 (142.19)* (204.92)* (155.72)* (159)* (146.30)* (182.37)* (167.09)* (167.11)* (138.86)* (55.50)* (151.24)* (165.42)* (100)** (12.00)** (100)** (9.29)** (100)** (11.00)** (100)** (9.00)** (100)** (3.39)** (100)** (9.70)**
2011-12 128.19 15.38 477.23 44.22 357.07 39.40 146.92 13.22 65.83 2.20 1175.24 114.42 (164.20)* (236.62)* (185.07)* (188.49)* (165.86)* (207.37)* (194.13)* (194.13)* (139.50)* (55.00)* (174.35)* (191.43)* (100)** (12.00)** (100)** (9.27)** (100)** (11.03)** (100)** (9.00)** (100)** (3.34)** (100)** (9.74)**
2012-13 157.94 18.90 534.96 50.12 387.01 42.58 168.27 13.00 67.70 2.19 1315.88 126.79 (202.31)* (290.77)* (207.46)* (213.64)* (179.77)* (224.11)* (222.34)* (190.90)* (143.46)* (54.75)* (195.21)* (212.13)* (100)** (11.97)** (100)** (9.37)** (100)** (11.00)** (100)** (7.73)** (100)** (3.23)** (100)** (9.64)**
Mean 108.24 12.08 387.58 35.79 297.23 30.94 118.11 10.59 60.42 2.98 971.57 92.39 S.D. 30.66 4.74 105.31 10.15 68.19 9.40 35.73 2.50 7.68 1.22 246.02 25.69 C.V. 28.33 39.21 27.17 28.35 22.94 30.39 30.25 23.62 12.72 40.92 25.32 27.81 ‘r’ 0.98 1.00 0.99 0.95 -0.69 0.99
CGR 15.37 24.54 15.88 16.64 13.22 18.36 17.91 13.98 6.87 -14.53 14.66 16.51 F-Value 41.88 107.67 52.61 203.92 39.62 92.41
Source: Annual Reports of respective Urban Cooperative Banks i.e. from 2007-08 to 2012-13. * It indicates growth rate. ** It indicates percentage of Dividend to Paid-up Capital.
Hypothesis: 5. Rate of Return on Share Holder’s Investment show increasing trend.
The hypothesis is tested with the help of F-test. It is evident from the Table
5.23 that the rate of return on share holders’ investment is not showing increasing trends.
Hence, the hypothesis Rate of Return on Share Holder’s Investment show increasing trend
is Rejected by the F-test.
Table Value 5.05
Degree of Freedom 5
Significance level 0.05 (95% Level of Significance)
F- Value 92.41
The calculated F value (92.41) at the 5 degree of freedom is much more than the Table
value (5.05). Hence, the hypothesis Rate of Return on Share Holder’s Investment shows
increasing trend is Rejected.
CHAPTER VI Limitations and Problems of Urban Cooperative Banks in Latur District ___________________________________________________________ 6.1 Introduction:
In the Sixth Chapter, the common problems being faced by the Urban
Cooperative Banks are analyzed in the light of economic liberalization, adoption of
new technology in banking transactions, modern banking facilities like, ATMs, NIFT,
RTGS, and International Debit and Credit Cards, Customer Assistance, SMS services,
Professional Management, Capital Base, Prejudiced attitude of the public, Growing
needs of the urban middle class and so on.
In order to know the various problems faced by the Urban Cooperative
Banks, the researcher has interacted with the Chairman, Board of Directors and
Managers of each bank. Also the interaction with Staff Members and Customers of
banks was done by the researcher. The Staff Members includes Senior Clerk, Junior
Clerk, Cashier, Field Officer and Public Relation Officers. The Customers selected for
interaction includes deposit holders as well as borrowers of the banks. The Table 6.1
shows the sample size of respondents selected for the interaction.
Table 6.1
Number of Respondents for Interaction Category of Respondent Name of the Bank Total Number of
Respondents LUCB MUCB SUCB UUCB SUCB
Chairman/BOD/Managers 10 10 10 10 10 50
Employees/Staff Members 15 15 15 15 15 75
Customers 25 25 25 25 25 125
Due to the constraint of time, money and efforts required for the research,
the Fifty (50) respondents from the category of Chairman/Board of
Directors/Managers, Seventy Five (75) respondents from the category of Staff
Members and One Twenty Five (125) respondents from the category of Customers of
the Banks selected for interaction by the researcher.
The interaction with Chairman, Board of Directors and Managers as well as
Staff Members and Customers was done with the help of questionnaire. In order to
collect the information one separate questionnaire was constructed by the researcher for
each category of respondents. After collecting information from the respondents of the
banks, the researcher found that the Urban Cooperative Banks in Latur District suffers
from the following problems and challenges. These problems and challenges are
discussed and analyzed by the researcher in the following sections:-
6.2 Opinions and Views of the Chairman/Board of Directors and
Managers During the study period, the researcher has observed that, the Urban
Cooperative Banks in Latur District face various problems like, lack of professional
management, conflict of interest, recovery problem, poor monitoring mechanism, poor
profitability, poor infrastructure, rigid structure of management, poor marketing
research, etc. These problems are discussed with the Chairman/ Board of Directors/
Managers of the Urban Cooperative Banks. The opinions and views expressed by the
Chairman/Board of Directors and Managers of the banks are presented here:-
6.2.1 Lack of Professional Management:
The professional management is very much essential for effective management. But, Urban Cooperative Banks are lagging behind in professional management due to unwillingness of professionally qualified people to work in the urban cooperative banks with low pay structure. This problem arises in Urban Cooperative Banks because of high expenditure required for appointing professionally qualified people like in private and commercial banks. Moreover, the rigid and conservative attitude of Board of Directors towards the professional management is also one of the reasons of lack of professional management in the urban cooperative banks. This question was put before the respondents and their answers are given in Table 6.2
Table 6.2 Lack of Professional Management
Responses Number of Respondents % to Total
LUCB
(10)
MUCB
(10)
SUCB
(10)
UUCB
(10)
SUCB
(10)
Total
(50)
Yes 08 09 09 08 07 41 82%
No 02 01 01 02 03 09 18%
Total 10 10 10 10 10 50 100%
Source: Questionnaire for Chairman/Board of Directors/Managers of UCBs.
The Table 6.2 depicts about the responses given by the managers and
administrative staff members about the problem of lack of professional management.
Out of 50 respondents 41 (82%) respondents have agreed that the urban cooperative
banks are suffering from the problem of professional management. The respondents
from Mahesh and Siddheshwar Urban Cooperative Banks have given maximum
response (90%) for the problem of lack of professional management where as the
respondents from the Saibaba Urban Cooperative Bank have comparatively given the
lower responses (70%) as compared to other banks.
6.2.2 Conflict of Interest in Following Prudential Norms in Sanctioning Loans
and Advances:
The interest of bank is more important than the individual interest or
collective interest of the Board of Directors. The fulfillment of the various prudential
norms while sanctioning the loans and advances are also required. While sanctioning
loans and advances to friends and relatives it is alleged that they compromise on
prudential norms. This attitude of Board of Directors creates the problem of potential
conflict of interest. So, the Board of Directors of the banks should try to avoid the
problem of conflict of interest and do not compromise the interest of the banks. This
issue was raised before the Chairman’s and Board of Directors and their responses are
given in Table 6.3
Table 6.3 Conflict of Interest in Following Prudential Norms in Sanctioning Loans and
Advances Responses Number of Respondents % to Total
LUCB
(10)
MUCB
(10)
SUCB
(10)
UUCB
(10)
SUCB
(10)
Total
(50)
Yes 02 03 02 02 02 11 22%
No 05 07 06 05 07 30 60%
Can’t Say 03 01 02 01 02 09 18%
Total 10 10 10 10 10 50 100%
Source: Questionnaire for Chairman/Board of Directors/Managers of UCBs. The Table 6.3 shows the responses given by the Chairman/Board of
Directors/Managers about the conflict of interest. The Eleven (22%) respondents have
agreed that the Urban Cooperative Banks in Latur District face the problem of conflict
of interest, where as the 60% of the respondents opinioned that they do not face the
problem of conflict of interest. Out of 50 respondents 09 respondents (18%) have
expressed that, they can’t say about the problem of conflict of interest.
6.2.3 Problem of Recovery:
As we have seen in the performance evaluation of the Urban Cooperative
Banks in Latur District, the Bad Debts and Non-performing Assets have shown an
increasing trend during the study period. This rising Bad Debts and NPAs of the Urban
Cooperative Banks remain one of the major hurdles in the path of smooth and effective
functioning of banks. The problem of rising Bad Debts and NPAs arises due to not
following the Know Your Customers (KYC) norms and prudential norms while
sanctioning the loans. One more reason for rising Bad Debts was poor recovery
mechanism and inefficient debt recovery teams as well as unconscientiously recovery
agents. The issue was placed before the Management and they have agreed that the
banks face the twin problem of Bad Debts and NPAs. Their responses are given below.
Table 6.4 Problem of Recovery
Nature of Problem
Number of Respondents % to Total
LUCB
(10)
MUCB
(10)
SUCB
(10)
UUCB
(10)
SUCB
(10)
Total
(50)
Bad Debts 06 07 05 06 08 32 64%
NPAs 08 06 07 07 08 36 72%
Source: Questionnaire for Chairman/Board of Directors/Managers of UCBs.
6.2.3.1 Bad Debts Recovery Problem:
The Table 6.4 speaks about the opinions and views expressed by the
respondents about the recovery problem of Bad Debts. The respondents of Saibaba
Urban Cooperative Bank show the highest percentage of responses about the
recovery problem of Bad Debts, followed by the respondents of the Mahesh Urban
Cooperative Bank. The lowest percentage of responses was seen in Siddheshwar
Urban Cooperative Bank. Overall, the 64% of the respondents agreed that, during
the study period, the Urban Cooperative Banks in Latur District were struggling
with the problem of increasing Bad Debts.
6.2.3.2 NPAs Recovery Problem:
As like, Bad Debts, the problem of recovery of NPAs was also found in the
Urban Cooperative Banks of Latur District, during the study period. The Table 6.4
shows that, out of 50 respondents, 36 (72%) respondents agreed that the problem of
rising NPAs exists in the Urban Cooperative Banks of Latur District. The
respondents of, Saibaba and Laxmi Urban Cooperative Banks shows, the highest
responses about the recovery problem of NPAs, followed by the, respondents of the
Sddheshwar and Udgir Urban Cooperative banks. The lower response was seen in
Mahesh Urban Cooperative Bank.
6.2.4 Poor Monitoring Mechanism of Loans and Advances:
During the study period, the problem of poor monitoring mechanism of
loans and advances was also seen in Urban Cooperative Banks of Latur District.
The poor monitoring of loans and advances leads to the problem of timely recovery
of loans and advances and increase in the Bad Debts and NPAs of the banks. The
poor monitoring mechanism may arise due to appointing inefficient recovery agents
and teams, non fulfillment of Know Your Customer (KYC) norms and prudential
norms while sanctioning loans and advances. Moreover, the poor follow-up system
and not making proper field visits are the reasons of poor monitoring mechanism of
loans and advances. This question was put before the Chairmen’s and Supervisory
Staff and their answers are given in Table 6.5
Table 6.5 Poor Monitoring Mechanism of Loans and Advances
Reasons of Poor Monitoring
Mechanism
Number of Respondents % to Total
LUCB
(10)
MUCB
(10)
SUCB
(10)
UUCB
(10)
SUCB
(10)
Total
(50)
Inefficient Recovery Teams
07 08 08 06 07 36 72%
Lack of KYC Norms
05 05 05 07 08 30 60%
Inadequate Field Visits
08 06 07 07 06 34 68%
Poor Follow-up System
08 08 07 07 09 39 78%
Source: Questionnaire for Chairman/Board of Directors/Managers of UCBs.
6.2.4.1 Problem of Recovery Teams:
The non appointment of efficient and conscientious recovery teams or
agents to collect the loans either on daily basis or monthly basis create the problem
of poor monitoring mechanism. The Table 6.5 shows that, 36 respondents (72%)
expressed that poor recovery teams was one of the reasons of poor monitoring
mechanism of Urban Cooperative Banks in Latur District. The respondents of the
Mahesh and Siddheshwar Urban Cooperative Banks have given highest responses
for problem of poor recovery teams, followed by respondents of Laxmi and
Saibaba Urban Cooperative Banks. The lowest response was visible in Udgir Urban
Cooperative Bank.
6.2.4.2 Non Fulfillment of KYC Norms:
To keep control over the timely recovery of loans and advances the
fulfillment of KYC norms is much essential. During the study period, the
researcher found that, the urban cooperative banks were unable to fulfill the KYC
norms. The Table 6.5 depicts the, responses given by the respondents about the non
fulfillment of KYC norms. The highest response was seen in Udgir Urban
Cooperative Bank, whereas, the lowest responses was shown by the respondents of
Laxmi Urban Cooperative Bank. Overall, 60% of the respondents have agreed that,
they have to compromise on strictly following KYC norms while sanctioning loans
and advances.
6.2.4.3 Field Visits:
The field visits and surprise visits play essential role in avoiding the misuse
and diversion of loans by the borrowers. In the Table 6.5 it was noticed that, the
respondents have agreed that, the Urban Cooperative Banks in Latur District was
unable to arrange field visits and surprise visits. The highest response was visible in
Laxmi bank, followed by the Siddheswar and Udgir bank. The lowest responses
were seen in Mahesh and Saibaba Urban Cooperative Banks. It is evident from the
Table 6.5 that, 68% of the respondents agree that they are lagging behind in
arranging field visits in order to ensure the proper utilization of loans and advances.
6.2.4.4 Poor Follow-up System:
During the study period, the researcher found that the poor follow-up
system is being one of the problems of Urban Cooperative Banks in Latur District.
The Table 6.5 shows that, the respondents of Saibaba Urban Cooperative Bank
have given higher response for poor follow-up system of the bank. The lowest
response was seen in Siddheshwar and Udgir Urban Cooperative Banks. The 78%
of the respondents agreed that, the poor follow-up system is one of the problems of
Urban Cooperative Banks in Latur District.
6.2.5 Poor Profitability:
After analyzing the profitability as well as expenditures incurred by the
Urban Cooperative Banks during the study period, the researcher found that the
profits earned by the urban cooperative banks were not satisfactory. The failure of
urban cooperative banks to reduce the level of expenditure up to an adequate
position is one of the reasons of earning poor profits.
Table 6.6
Poor Profitability
Responses Number of Respondents % to Total
LUCB
(10)
MUCB
(10)
SUCB
(10)
UUCB
(10)
SUCB
(10)
Total
(50)
Yes 07 08 06 07 08 36 72%
No 03 02 04 03 02 14 28%
Total 10 10 10 10 10 10 100%
Source: Questionnaire for Chairman/Board of Directors/Managers of UCBs.
It is evident from the Table 6.6 that, among the five urban cooperative
banks the respondents of the Mahesh and Saibaba Urban Cooperative Banks have
given higher response about the poor profitability of banks. The lowest responses
were seen in Siddheshwar Urban Cooperative Bank. The 72% of the respondents
agreed that, poor profitability is one of the problems of the Urban Cooperative
Banks in Latur District, due to growing expenditure.
6.2.6 Unable to Attract Fresh Investment and Deposits from Higher Income Groups:
The lower or non attraction of higher income groups is also a major hurdle
in the progress of Urban Cooperative Banks. During the study period researcher has
observed that the membership of the urban cooperative banks are vested with lower
and middle income groups of the society. Hence, banks face the problem of shortage
of capital for expansion and modernization. Moreover, the lower returns on
investments and poor public image are also the reasons of inability of urban
cooperative banks to attract fresh investments and large deposits from higher income
group.
Table 6.7
Inability to Attract Fresh Investment and Deposits from Higher Income Groups
Responses Number of Respondents % to Total
LUCB
(10)
MUCB
(10)
SUCB
(10)
UUCB
(10)
SUCB
(10)
Total
(50)
Yes 07 07 06 08 09 37 74%
No 03 03 04 02 01 13 26%
Total 10 10 10 10 10 50 100%
Source: Questionnaire for Chairman/Board of Directors/Managers of UCBs.
The Table 6.7 shows the responses of the Managers and Administrative
Staff of Urban Cooperative Banks about their inability to attract fresh deposits from
higher income groups. Out of 50 respondents 37 (74%) respondents have agreed that,
due to lower returns on investments and poor public image, the Urban Cooperative
Banks are unable to attract fresh deposits from higher income groups. The
respondents of Saibaba Urban Cooperative Bank have given higher responses,
whereas the lower responses were seen in Siddheshwar Urban Cooperative Bank.
6.2.7 Poor Infrastructure:
The poor infrastructure is also a problem of Urban Cooperative Banks in Latur
District. Even some of the banks lagging behind in sufficient furniture, building and
seating arrangements for customers. Due to the, lop sided capital structure urban
cooperative banks are unable to provide sufficient infrastructure required for modern
banking facilities as is provided by commercial banks.
Table 6.8 Poor Infrastructure
Do you suffer
from Poor
Infrastructure?
Number of Respondents % to
Total LUCB
(10)
MUCB
(10)
SUCB
(10)
UUCB
(10)
SUCB
(10)
Total
(50)
Yes 07 07 08 08 09 39 78%
No 03 03 02 02 01 11 22%
Total 10 10 10 10 10 50 100%
Source: Questionnaire for Chairman/Board of Directors/Managers of UCBs.
It is evident from the Table 6.8 that, 78% of the Managers and Board of
Directors of the banks have agreed that they are lagging behind in providing
sufficient infrastructure required for effective banking business. The respondents of
the Saibaba Urban Cooperative Bank have given higher responses, whereas, the
lower response was seen in Laxmi and Siddheshwar Urban Cooperative Banks.
6.2.8 No Change in the Top Management:
It is found by the researcher, that since the establishment of the banks, 80%
of the Board of Directors are more or less remained the same and there was no
change in the top management at all. This also leads to increasing administrative
interference in day to day management of the banks. The rigid structure of the
management affects progress of the Urban Cooperative Banks. This issue was put
before the Management of the banks and their responses are given in Table 6.9
Table 6.9 No Change in the Top Management
Responses Number of Respondents % to Total
LUCB
(10)
MUCB
(10)
SUCB
(10)
UUCB
(10)
SUCB
(10)
Total
(50)
Yes 10 - 10 - 10 30 60%
No - 10 - 10 - 20 40%
Total 10 10 10 10 10 50 100%
Source: Questionnaire for Chairman/Board of Directors/Managers of UCBs.
The Table 6.9 shows that all the Urban Cooperative Banks are controlled
and managed by one family or other, since the establishment. Out of 50 respondents 30
(60%) respondents have agreed that the present Board of Directors are not interested to
appoint and elect new faces in the management due to the fear of insecurity and losing
power. The respondents from Laxmi, Saibaba and Siddheshwar Urban Cooperative
Banks were agreed that, there was no change in the top management of their banks.
6.2.9 Less Disbursement of Loans to Small Business Units and Agricultural Purpose :
In the performance evaluation of banks, we have seen that the maximum
proportion of loans was disbursed to individual customers and less proportion was
disbursed to Small Business Units. The Agricultural Sector was the most neglected
area of the Urban Cooperative Banks in Latur District. Traditionally, the Urban
Cooperative Banks deals only with the individual customers and not with the industrial
customers. This also affects on the relationship with business concerns and creation of
good public image in the urban areas. Small Business Units are the source of collecting
large deposits as well as earning more interests on loans disbursed to them. This issue
was raised before the Chairman/Board of Directors and their responses are given in the
Table 6.10
Table 6.10
Disbursement of Loans
Reasons for Less Disbursement
Number of Respondents % to Total
LUCB
(10)
MUCB
(10)
SUCB
(10)
UUCB
(10)
SUCB
(10)
Total
(50)
More Risky 07 08 08 06 07 36 72%
Problem of Recovery
06 07 07 09 08 37 76%
Misuse/Diversion of Funds
08 06 07 07 06 34 68%
Source: Questionnaire for Chairman/Board of Directors/Managers of UCBs.
The Table 6.10 speaks about the reasons of less disbursement of loans to
Small Business Units and Agricultural Sector. The Urban Cooperative Banks in the
Latur District lent very less proportion of loans for Small Business Units and the
exposure to agricultural sector was negligible. The most likely areas of loan
disbursement are Vehicle Loan, Personal Loan and House Loan. The Table 6.10 shows
that, 72% respondents said that disbursement of loans to Small Business Units and
Agriculture Sector are more risky, where as 76% said that, there is a problem of
recovery and 68% opinioned that there is a problem of misuse or diversion of funds for
other purposes.
6.2.10 Poor Marketing Research/ Field Survey:
One of the major obstacles of Urban Cooperative Banks in Latur District is
that they are lagging behind in marketing research and field survey. Due to the
conservative attitude and rigid policies of top management, urban cooperative banks
failed to conduct proper marketing research. The poor marketing research affects on
number of customers, quantum of deposits and opportunities of investments. The
researcher found that the, poor customer relation and retention, poor growth and poor
performances of Urban Cooperative Banks in Latur District are the results of poor
marketing research and field survey. The problem of poor Marketing Research was
discussed with the Management and their responses was shown below.
Table 6.11 Poor Marketing Research/ Field Survey
Responses Number of Respondents % to Total
LUCB
(10)
MUCB
(10)
SUCB
(10)
UUCB
(10)
SUCB
(10)
Total
(50)
Yes 07 08 06 07 09 37 74%
No 03 04 02 03 01 13 26%
Total 10 10 10 10 10 50 100%
Source: Questionnaire for Chairman/Board of Directors/Managers of UCBs.
The Table 6.11 explains about the poor marketing research and field
surveys of Urban Cooperative Banks in Latur District. The 37 (74%) respondents have
agreed that the Urban Cooperative Banks in Latur District are unable to conduct
effective marketing research and field survey which causes to poor customer relation
and retention, poor growth and poor exploitation of investment opportunities. Among
the five Urban Cooperative Banks, the respondents of Saibaba Urban Cooperative
Bank have given higher responses, whereas, the lower responses were seen in
Siddheshwar Urban Cooperative Bank.
6.2.11 Problem of Adoption of Modern Banking Facilities:
Due to their lower spending capacity and lop sided capital structure, the
Urban Cooperative Banks are unable to offer Modern Banking facilities to their
customers. The income level as well as poor earning capacity of the urban cooperative
banks also affects on the application of modern banking services in the urban
cooperative banks. In today’s world of Information Technology, the modern banking
services like, NEFT, RTGS, Debit Card, Credit Card, NET Banking, ATM and Core
Banking Solutions are the basic needs of banking business but Urban Cooperative
Banks in Latur District failed to offer these facilities to their customers during the study
period. This question was put before the respondents and their answers are given in
Table 6.12
Table 6.12
Modern Banking Facilities
Nature of Service
Number of Respondents % to Total
LUCB
(10)
MUCB
(10)
SUCB
(10)
UUCB
(10)
SUCB
(10)
Total
(50)
NEFT Yes No Yes No No 30 40%
RTGS Yes No Yes No No 30 40%
NET Banking No No No No No 50 Nil
CBS No No No No No 50 Nil
ATM No No Yes No No 50 20%
Source: Questionnaire for Chairman/Board of Directors/Managers of UCBs.
The following conclusions are drawn on the basis of Table 6.12:
1. The facility of NEFT banking is available only in Laxmi and Siddheshwar Urban
Cooperative Banks. The remaining three banks are not offering the service of
NEFT to their customers. The researcher found that, the 60% respondents are
agreed that Urban Cooperative Banks in Latur District face the problem of
providing NEFT service.
2. The opinions of the respondents about the service of RTGS were same as like, the
responses about the NEFT service. Only, the Laxmi and Siddheshwar Urban
Cooperative Banks provide the service of RTGS.
3. The responses about the non adoption of NET Banking service and CBS facility of
all the urban cooperative banks in the study are same. All the Urban Cooperative
Banks selected for the study are unable to provide these services to their customers.
4. Except one Urban Cooperative Bank, remaining banks of Latur District are unable
to provide the service of ATM.
6.3 Opinions and Views of the Employees: The various problems associated with the employees of the Urban
Cooperative Banks in Latur District are also discussed with the employees of these
banks, these problems include, lack of training and orientation facility, poor pay
structure, lack of incentives, inadequate working staff, poor attitude and values, etc.
The opinions and views expressed by the employees of the banks are presented in the
following section:-
6.3.1 Poor Work Culture and Lower Morale:
During the study, the researcher found that, poor work culture is one more
obstacle in the smooth functioning of the banks. As like, commercial banks the work
culture of the Urban Cooperative Banks is not effective and efficient. The reasons
for the poor work culture and lower morale of the staff may be lack of training and
orientation facility, poor pay structure, poor incentives, inadequate working staff,
poor attitudes and values, etc.
Table 6.13 Reasons for Poor Work Culture and Lower Morale
Reasons for Poor Work Culture and
Lower Morale
Number of Respondents % to Total
LUCB
(15)
MUCB
(15)
SUCB
(15)
UUCB
(15)
SUCB
(15)
Total
(75)
Lack of Training 08 10 09 11 12 50 67%
Poor Pay Structure 12 10 10 11 13 56 75%
Poor Incentives 10 09 08 12 10 49 65%
Inadequate Working Staff
10 11 12 10 11 54 72%
Poor Attitudes and Values
09 10 10 11 12 52 69%
Source: Questionnaire for Employees of UCBs.
6.3.1.1 Lack of Training/Orientation Facilities to Staff Members:
The Urban Cooperative Banks are unable to provide training and other
facilities to their staff members due to their low spending capacity. Moreover, these
banks couldn’t manage to appoint skilled and trained staff members. The problem of
inconvenience in the training facility affects on the work environment of banks,
which causes to develop negative attitude about urban cooperative banks in the mind
of staff members. The Table 6.13 shows that, the responses given by staff members
of the urban cooperative banks about non-availability of training and orientation
facilities to staff members. The 75 staff members interviewed with questionnaire and
asked about the training facilities. Out of them 50 staff members (67%) have replied
that they have not provided with training and orientation facilities. The staff
members of Saibaba and Udgir Urban Cooperative Banks are more dissatisfied,
where as the staff members of Laxmi Urban Cooperative Bank are less dissatisfied
with the Training and Orientation Facility.
6.3.1.2 Poor Pay Structure:
The poor pay structure is also creating problems in the smooth functioning
of the Urban Cooperative Banks. The pay structure offered by the urban cooperative
banks to their employees is not satisfactory. Moreover, the pay structure offered by
the banks is very less as compared to the employees of commercial banks. Due to the
poor economic conditions of the Urban Cooperative Banks they are unable to offer
high salaries to their employees.
From the figures of Table 6.13 it is clear that urban cooperative banks are
really struggling with the problem of poor pay structure. The 75% respondents have
agreed that, they are getting poor pay from urban cooperative banks. Among the five
urban cooperative banks the respondents of Saibaba Urban Cooperative Bank have
shown highest responses and they agreed that as compared to employees of private
and commercial banks they are getting very poor pay scales from their banks. It
seems that, employees of Mahesh and Siddheshwar banks are less dissatisfied with
the pay structure.
6.3.1.3 Lack of Incentives to the Working Staff:
The study also underlines the fact that most of the employees of Urban
Cooperative Banks are not happy with the incentives offered by the Urban
Cooperative Banks. Likewise, the employees of Private and Commercial Banks, the
employees of Urban Cooperative Banks are not getting Tour Allowances, Festival
Allowances, and Career Advancement Opportunities etc. This problem affects on the
work efficiency as well as morale of the working staff.
The Table 6.13 depicts that, out of 75 staff members 49 (65%) staff
members have agreed that they are getting very less incentives as compared to
incentives provided by the Private and Commercial Banks to their staff members.
The staff members of Udgir Urban Cooperative Banks are more dissatisfied with the
incentives, whereas the respondents of Siddheshwar Urban Cooperative Bank are
less dissatisfied with the incentives provided to them.
6.3.1.4 Inadequate Working Staff:
Inadequate working staff is another reason for poor working conditions of
the present working staff of the Urban Cooperative Banks. Inadequate working staff
imposes more burden of work on the present working staff members as well as it also
leads to shouldering extra responsibilities with minimum authority and poor working
material. Inadequate working staff also leads to inefficiency in the banking services
of the Urban Cooperative Banks in Latur District.
The Urban Cooperative Banks in Latur District are affected by inadequate
staff members as it is evident from the Table 6.13 that, 72% of the staff members are
of the opinion that they are working with less number of staff members. The
researcher found that the Urban Cooperative Banks in the Latur District are less
interested to appoint adequate staff. The respondents of Siddheshwar Urban
Cooperative Bank are more dissatisfied with the inadequate working staff.
6.3.1.5 Poor Attitude and Values:
The researcher found that the employees of the Urban Cooperative Banks
are not only lack in possessing strong attitudes but also they failed to follow values
and principles of cooperation. Moreover, the employees of Urban Cooperative Banks
are unable to posses’ strong beliefs, attitudes and they are not confident about their
work as well as performance.
The Table 6.13 speaks about poor attitude and values possessed by the
employees of the Urban Cooperative Banks. Out of 75 respondents 52 (69%)
respondents have agreed that they are lagging behind in possessing strong attitudes
and values about their work. The respondents of Saibaba Urban Cooperative Banks
are more dissatisfied with the poor attitude and values, whereas the respondents of
the Laxmi Urban Cooperative Bank are less dissatisfied with the poor attitude and
values.
6.4 Opinions and Views of the Customers: The problems face by the Urban Cooperative Banks in Latur District,
regarding the dissatisfaction of customers includes lack of modern banking facilities,
non availability of customer grievance redressal cell, poor investor base, poor public
image, poor customer relation and retention, etc. The opinions and views expressed
by the customers of the banks were presented in the following section:-
6.4.1 Dissatisfied Customers:
Due to their poor relation and retention of customers and inability to pay
timely returns to their customers the Urban Cooperative Banks are facing the
problem of Dissatisfied Customers. Moreover, the customers are dissatisfied about
the non adoption of new technological services by the Urban Cooperative Banks. The
poor profit earning capacity of Urban Cooperative Banks is also a reason of
Dissatisfied Customers. This issue was put before the customers of urban cooperative
banks and their response are shown in the Table 6.14.
Table 6.14
Reasons for Dissatisfaction of Customers Reasons for
Dissatisfaction of Customers
Number of Respondents % to Total
LUCB
(25)
MUCB
(25)
SUCB
(25)
UUCB
(25)
SUCB
(25)
Total
(125)
Non availability of Customer Grievance
Redressal Cell
16 18 14 16 20 84 67%
Lack of Modern Banking Facilities
18 20 17 21 22 98 79%
Lack of Trust on Management
14 15 12 16 18 75 60%
Poor Public Image 18 22 21 20 23 104 83%
Poor Customer Relations and
Retention
16 17 16 18 20 89 71%
Source: Questionnaire for Customers of UCBs.
6.4.1.1 Non- availability of Customer Grievance Redressal Cell:
During the study period the researcher found that, none of the Urban
Cooperative Banks have a Customer Grievance Redressal Cell. It means that, the
customers are unable to lodge their complaints as well as their grievances about their
inconvenience or suggestions to improve the functioning of urban cooperative banks.
As a result, many of the customers are dissatisfied with the services of the banks.
The Table 6.14 depicts about the responses provided by the customers of
urban cooperative banks regarding non-availability of Customers Grievance
Redressal Cell. Out of 125 customers 84 (67%) customers have agreed that they do
not have the facility of Customer Grievance Redressal Cell to lodge their complaints.
Among the five Urban Cooperative Banks, the customers of Saibaba bank are more
dissatisfied with the facility of Customer Grievance Redressal Cell, whereas, the
customers of Siddheshwar Urban Cooperative Bank are less dissatisfied.
6.4.1.2 Lack of Modern Banking Facilities:
During the study period the researcher found that, majority of the Urban
Cooperative Banks suffer from not providing new modern technological services
like, SMS Service, Debit Card, Credit card, ATM, NET Banking, CBS etc. At
present these facilities are considered as the fundamental banking facilities, but the
majority of the Urban Cooperative Banks in Latur District are failed to provide these
banking facilities to their customers.
The Table 6.14 shows that, the 79% of the customers of Urban Cooperative
Banks have opinioned that they are not getting the modern banking facilities from the
Urban Cooperative Banks. During the study period, the researcher found that, among
the five Urban Cooperative Banks selected for the study only one bank provides the
facility of ATM. The customers of Saibaba Urban Cooperative Bank are more
dissatisfied with the modern banking facility, whereas the customers of Siddheshwar
Urban Cooperative Bank are less dissatisfied.
6.4.1.3 Poor Investor Base due to Lack of Trust on Management:
Due to the lack of trust on management the investors are not ready to invest
in the Urban Cooperative Banks. The one more reason for poor investor base is that
Urban Cooperative Banks are unable to provide attractive returns as like commercial
banks. The Urban Cooperative Banks are also failed to properly utilize the
investments of the investors which causes to the lower returns on the investments
made by the Urban Cooperative Banks as well as to the investors of the Urban
Cooperative Banks. This also causes to failure of Urban Cooperative Banks to attract
higher and upper middle income groups of the society to invest in Urban Cooperative
Banks.
The Table 6.14 shows that, the responses of customers of Urban
Cooperative Banks in Latur district about the lack of Trust on Management. The
60% customers have agreed that, due to lack of trust on management the investor
base of urban cooperative banks is poor. The customers of the Saibaba Urban
Cooperative Banks are more dissatisfied with the trust on management whereas, the
customers of Siddheshwar Urban Cooperative Bank are less dissatisfied with the
trust on management.
6.4.1.4 Poor Public Image as Compared to Commercial Banks:
Poor public image is also one of the major hurdles in the progress of urban
cooperative banks. The image of the Urban Cooperative Banks in the Latur District
is very poor because they have contributed less in the economic development of
Latur District as well as failed to attract customers in large numbers. Moreover, the
Urban Cooperative Banks are also unable to solve the problems of their customers
which causes to poor public image as compared to commercial banks.
The Table 6.14 shows that responses provided by the customers about the
public image of the Urban Cooperative Banks in Latur District. The 84% customers
have agreed that the Urban Cooperative Banks have very poor public image as
compared to commercial banks. The customers of the Saibaba Urban Cooperative
Bank are more dissatisfied, whereas the customers of Laxmi Urban Cooperative
Bank are less dissatisfied with the public image of the Urban Cooperative Banks in
Latur Distrcit.
6.4.1.5 Poor Customer Relation and Retention:
The dissatisfaction of customers, non-availability of Customer Grievance
Redressal Cell and Customer Care Center are the reasons for poor customer relations
and retentions. The improper communication with the customers also leads to poor
retentions and relations.
The figures in the Table 6.14 shows that, the 71% customers have agreed
that Urban Cooperative Banks in Latur District failed to maintain strong relations
with their customers as well as they have the poor customer retention capacity. The
customers of the Saibaba Urban Cooperative Bank are more dissatisfied, whereas the
customers of Laxmi and Siddheshwar Urban Cooperative Banks are less dissatisfied
with the Customer Relation and Retention capacity of the banks.
CHAPTER VII SUMMARY OF CONCLUSIONS AND SUGGESTIONS ____________________________________________________
7.1 Introduction: In the present study the last chapter provides the summary of conclusions
and suggestions to improve the performance of Urban Cooperative Banks in Latur
District. In order to draw the various conclusions and to give some suggestions to
the Urban Cooperative Banks operating in the Latur District, the researcher has
gone through the exhaustive analysis of the performance evaluation of the banks.
Also the researcher has evaluated the various initiatives and efforts undertaken by
these banks in fulfilling the needs of its customers and also studied the strengths
and weaknesses of these banks. Similarly, the researcher tried to evaluate how far
these banks have adapted to the new business environment and the models and the
products offered by commercial banks. The Urban Cooperative Banks are facing a
lot of problems due to its inherent structural limitations. Hence, the present study is
undertaken to evaluate the performance of the urban cooperative banks, its lending
practices, and mobilization of savings, financial strength, non performing assets,
and adoption of modern technology and customer satisfaction and attitude towards
these banks.
7.2 Conclusions: Following are the various conclusions drawn from the study:-
7.2.1 Origin of Urban Cooperative Banks:
The idea of Cooperative Bank was first originated in Great Britain in the
year 1870 at conference on Banking at Bury, and in the year 1872 the Cooperative
Wholesale Society established a separate business of banking which was named as
the Loan and Deposit Department as a banking business unit. The first Urban Credit
Society was established in the year 1889 in India as a mutual aid society at Baroda.
This was the first cooperative bank.
The origin of the Urban Credit Movement in India can be traced to the close
of the Nineteenth Century. Inspired by the success of the urban credit institutions
organized by Hermann Schultz in Germany, Luigi Luzzatti in Italy during the
period 1855-1885 and the Cooperative Movement in Britain, some middle class
Maharashtrian families settled in the erstwhile Baroda state, started a mutual aid
society in Baroda on 5th February, 1889 under the guidance of Shri Vithal Laxman
Kavthekar. When the Cooperative Credit Societies Act of 1904, conferred legal
status on credit societies, the first Urban Cooperative Credit Society was registered
in October, 1904 at Canjeevaram in Madras province. Subsequently, the Betegiri
Cooperative Credit Society in Dharwar District in the undivided Bombay province
and Bangalore city Cooperative Credit Society in the erstwhile Mysore State were
registered in October, 1905 and December, 1905 respectively.
7.2.2 The Growth of Urban Co-operative Banks:-
In the First Chapter of this study i.e. Introduction, the growth of Urban Co-
operative Banks was mentioned. In this study we can see that how Urban Co-
operative banks have enhanced their numbers from 1307 in the year 1991 to 1645
in the year 2011. There are so many up and downs from 1991 to 2011. The number
of Urban Co-operative Banks rose continuously and gradually up to 2000 and then
after in the year 2001, their number falls down. Immediately in the next year i.e.
2002 this number was raised up to 1854 from 1618. Then it was reached to 1941 in
2003, immediately it was reduced to 1926, in the year 2004. After the year 2004
there was a continuous and rapid decrease in number of banks up to 2011. In these
eight years Urban Co-operative Banks decreased from 1926 to 1645. So here we
can conclude that this continuous decrease in the number of Urban Co-operative
Banks will be harmful for the progress as well as to the future of Urban Co-
operative Banks.
7.2.3 The market share of Urban Co-operative Banks:-
As we know that the Urban Co-operative Banks are important purveyors of
credit to socially underprivileged and deprived sections of the urban and Semi-
urban populace. The Urban Bank sector has 79/- lakh borrowers and 5.36/- crore
depositors. The market share of the Urban Co-operative Banks was given in the
first chapter. It may however be observed that the market share of UCBs have
reduced from peak of 6.6% in the end of march, 2000 to 3.7% in the end of march,
2008. Apart from this there were too many fluctuations in the market share of
Urban Co-operative Banks.
7.2.4 Government Policy towards UCBs:
The RBI is entrusted with the responsibility of regulation and supervision of
the banking-related activities of UCBs under the Banking Regulation Act, 1949 as
Applicable to Cooperative Societies (AACS). Other aspects such as incorporation,
registration, administration, management and winding-up of UCBs are supervised
and regulated by the respective State Governments through Registrars of
Cooperative Societies (RCS) under the Cooperative Societies Acts of the respective
States. UCBs with a multi-state presence are registered under the Multi-State
Cooperative Societies Act, 2002 and are regulated and supervised jointly by the
Central Government through Central Registrar of Cooperative Societies and the
RBI.
Ideally, credit institutions should be under the oversight of a single
regulator. However, due to historical reasons and the federal character of our
Constitution, cooperation falls under State Laws. As per the existing constitutional
provisions, the subjects “Banking” and “Cooperative Societies” come under Union
and State List respectively and therefore, duality of control over the cooperative
banks is inevitable. While the State Cooperative Societies Acts/Multi State
Cooperative Societies Act contained provisions relating to Incorporation,
Registration, Membership, Management, Statutory Audit, Amalgamation,
Reconstruction or Liquidation, the banking activities such as issue of license to start
new banks/branches, capital and liquidity requirements, matters relating to interest
rates, loan policies, investments, etc are governed by the Banking Regulation Act,
1949 (as Applicable to Cooperative Societies). The powers under the State
Cooperative Societies Act and Multi State Cooperative Societies Act are vested in
the Registrar of Cooperative Societies of the State concerned and Central Registrar
of Cooperative Societies respectively, Banking Regulation Act, 1949 (AACS)
empowers the Reserve Bank to regulate and supervise the banking related matters.
The applicability of banking laws to UCBs resulted in ‘Duality of Control’ between
the Reserve Bank and the Registrar of Cooperative Societies/Central Registrar of
Cooperative Societies.
7.2.5 Licensing Policy of New Urban Cooperative Banks:
The existing Licensing Policy of RBI is broadly based on the
recommendations of the Marathe Committee. At present, organization of a new
UCB is allowed on the basis of the need and future potential for mobilization of
deposits and purveying of credit, so that the new institution becomes a viable
proposition and satisfies the felt banking needs of local people. To determine the
need and potential for UCBs, only the presence of Urban Cooperative Banks
functioning at a given centre is taken into account and presence of all other banking
network is excluded. This is done as the clientele of UCBs are supposed to be
distinct from those of commercial banks. Another criterion for determine the
adequacy of banking network is to take into account the average population served
by the existing UCBs. The present policy also prohibits organization of UCBs in
the rural centers on account of distinct credit delivery system already in place for
rural centers.
7.2.6 Strengths and Weakness of UCBs in Latur District:
In order to know the strengths and weaknesses of the banks the researcher
has assessed the internal and external environment of the banks. The internal
environment consist factors like, organization structure of the banks, number of
employees and plans and policies of the banks, etc. On the other hand, the external
environment includes factors like, social, economical, political, legal and
technological factors, etc. After, going through all these internal and external
factors, the researcher found that, the following strengths and weaknesses of the
Urban Cooperative Banks in Latur District:-
A) Strengths: 1. Local Management. 2. Speedy Disbursement of Loans. 3. Quick Decision Making. 4. Low exposure to high risk industries. 5. Growing and needy customer base. 6. Support of lower and middle income group. 7. Low rate of NPAs and Bad Debts as compared to Nationalized and
Commercial Banks. B) Weaknesses:
1. Lack of professional management. 2. Inefficient and untrained staff members. 3. Poor Capital Base. 4. Poor infrastructure. 5. Non-adoption of modern technology. 6. Lack of patronage. 7. No special efforts for mobilizing deposits through small savings. 8. Poor customer relations.
7.2.7 Deposits Mobilization:
1. The Total Deposit Mobilization of the Urban Cooperative Banks in Latur
District shows an increasing trend during the study period. In the year 2007-08
the Total Deposits was Rs: 12035.57/- lakh which rose to Rs: 25912.05/- lakh
in the year 2012-13, showing a growth of 215.30% over the base year.
2. Among the Urban Cooperative Banks, the Laxmi Urban Cooperative Bank has
the highest percentage of increase in Total Deposits i.e. 274.99% over the base
year, whereas the lowest percentage of increase in Total Deposits was shown
by Udgir Urban Cooperative Bank i.e. 116.61%.
3. The average Deposits of the Urban Cooperative Banks in the Latur District was
Rs: 18182.27/- lakh. During the study period, the Siddheshwar Urban
Cooperative Bank has raised the highest amount of average Total Deposit of
Rs. 7432.90/- lakh, where as the lowest average Total Deposit belongs to
Saibaba Urban Cooperative Bank i.e. Rs: 1173.32/- lakh.
4. From the above analysis it is evident that the Urban Cooperative Banks in
Latur District show an increasing trend in Total Deposit mobilization during
the study period.
7.2.8 Loans:-
1. The Total Loans (Secured Loans and Unsecured Loans) sanctioned by the Urban
Cooperative Banks during the study period i.e. 2007-08 to 2012-13 indicate that
banks lent their maximum proportion of loans through Secured Loans followed
by Unsecured Loans. In the year 2007-08 the Total Loans disbursed was Rs:
10265.38/- lakh, which rose to Rs: 21532.70/- lakh in the year 2012-13, showing
a growth of 209.76% over the base year.
2. Among the Urban Cooperative Banks, the Laxmi UCB has the highest
percentage of increase in Total Loans disbursement i.e. 267.65% over the base
year, whereas the lowest percentage of increase in Total Loans was shown by
Mahesh UCB i.e. 199.68%.
3. The average amount of Total Loans disbursement of the Urban Cooperative
Banks in the Latur District was Rs: 15801.99/- lakh during the study period.
Among the Urban Cooperative Banks, Mahesh Urban Cooperative Bank has
disbursed the highest amount of average Total Loans of Rs. 5854.27/- lakh,
where as the lowest average Total Loans was disbursed by Saibaba Urban
Cooperative Bank i.e. Rs: 722.33/-lakh.
4. The notable thing in loan disbursement is that the percentage of increase in
secured loans is very high as compared to unsecured loans. The percentage of
Unsecured Loan was only 1.59% of Total Loans and the remaining 98.41%
belongs to Secured Loans.
7.2.9 Lending to Small Business Units:-
1. Out of the Total Loans disbursed by the Urban Cooperative Banks Rs: 1600.68/-
lakh, was equal to 15.59% of the Total Loans during the 2007-08, which rose to
Rs: 3625.30/- lakh, equaling to 16.84% of the loans disbursed in the year 2012-
13,showing an increase of 226.48% over the base year. The proportion of loans
to Small Business Units as compared to the Total Loans remains more or less the
same during the study period.
2. Among the Urban Cooperative Banks, the highest percentage of increase in
lending to Small Business Units of Laxmi UCB is higher as compared to other
banks i.e. 695.51%, where as the lowest percentage of increase in lending to
Small Business Units belongs to Saibaba UCB i.e. 98.77%.
3. The average amount of loans to Small Business Units by the Urban Cooperative
Banks in the Latur District during the study period was Rs: 2567.07/- lakh. The
highest amount of average loans to SBU of Rs. 1353.25/- lakh, was by the
Siddheshwar Urban Cooperative Bank where as the lowest average amount of
loans to SBU was shown by Mahesh Urban Cooperative Bank i.e. Rs: 18.00
lakh.
7.2.10 Paid-up Capital:-
1. The Paid –up Capital of the Urban Cooperative Banks during the study period
rose to Rs: 1315.88/- lakh from Rs: 674.08/- lakh, in 2012-13 which was equal
to 195.21% over the base year.
2. Among the Urban Cooperative Banks, the Udgir UCB has the highest
percentage of 222.34%increase in Paid-up Capital over the base year, whereas
the lowest percentage of increase in Paid-up Capital was shown by Saibaba UCB
i.e. 143.46%.
3. The average Paid-up Capital of the Urban Cooperative Banks in the Latur
District was Rs: 971.57/- lakh during the study period. Mahesh Urban
Cooperative Bank raised the highest amount of average Paid-up Capital of Rs.
387.58/- lakh, where as the lowest amount of Rs: 60.42 lakh was raised by
Saibaba Urban Cooperative Bank.
4. It is evident from the study that in spite of the poor images among the public the
Urban Cooperative Banks in Latur District were able to raise the paid-up capital
by admitting new members to the banks.
7.2.11 Bad debts:-
1. The position of Bad Debts of the Urban Cooperative Banks during the study
period shows an increasing trend of 175.99% over the base year. The total
amount of Bad Debts was Rs: 599.04/- lakh in the year 2007-08, which rose to
Rs: 1054.28/- lakh.
2. Among the Urban Cooperative Banks, the Mahesh UCB has the highest
percentage271.69% of increase in Bad Debts over the base year, whereas the
lowest percentage 109.98%of increase in Bad Debts was shown by Saibaba
UCB.
3. The average Bad Debts of the Urban Cooperative Banks in the Latur District
was Rs: 832.25/- lakh, during the study period. The highest amount of average
Bad Debts of Rs. 314.30/- lakh belongs to Siddheshwar Urban Cooperative Bank
where as the lowest amount of Rs: 32.51/- lakh of average Bad Debts was shown
in Udgir Urban Cooperative Bank lending.
7.2.12 Investment:-
1. The Investments made by the Urban Cooperative Banks rose to Rs: 14644.56/- lakh
in 2012-13 from Rs: 6205.64/- lakh in 2007-08, was equal to 235.99% over the
base year.
2. Among the Urban Cooperative Banks, the Udgir UCB has the highest percentage of
increase in Investments i.e. 273.93% over the base year, whereas the lowest
percentage of increase in Investments was shown by Saibaba UCB i.e.
126.29%.
3. The average Investments of the Urban Cooperative Banks in the Latur stood at Rs:
9642.24/- lakh during the study period. Siddheshwar Urban Cooperative Bank
has made the highest average Investments of Rs. 3801.38 lakh, where as the
lowest Investments Rs: 422.73 lakh, was made by Saibaba Urban Cooperative
Bank.
4. It is evident from the study that the Urban Cooperative Banks in Latur District has
positive attitude towards Investments which indirectly protects the interest of
various stake holders as well as a source of income to the banks.
7.2.13 Number of Members:-
1. The Total Number of Members of the Urban Cooperative Banks rose to 39364 in
2012-13 from 30853 in 2007-08, showing a growth of 127.59% over the base
year.
2. Among the Urban Cooperative Banks, the Mahesh UCB has the highest
percentage of increase in Number of Members i.e. 165.90% over the base year,
whereas the lowest percentage of increase in Number of Members was shown by
Siddheshwar UCB i.e. 112.79%.
3. The average Number of Members of the Urban Cooperative Banks in the Latur
District was 35288 during the study period.
7.2.14 Non-Performing Assets:-
1. The position of NPAs of the Urban Cooperative Banks during the study period
i.e. 2007-08 to 2012-13 shows that, in the year 2007-08 the total NPAs was Rs:
716.12/- lakh which rose to Rs: 848.31/- lakh in the year 2012-13, showing a
growth of 118.46% over the base year. Among the Urban Cooperative Banks,
the Mahesh UCB has the highest percentage of increase in NPAs i.e. 185.31%
over the base year, whereas the lowest percentage of increase in NPAs was
shown by Laxmi UCB i.e. 65.75%.
2. The average NPAs of the Urban Cooperative Banks in the Latur District was Rs:
807.58/- lakh during the study period. Siddheshwar Urban Cooperative Bank has
the highest average NPAs of Rs. 302.73/- lakh, where as the lowest average
NPAs of Rs: 70.54/- lakh, was belongs Udgir Urban Cooperative Bank.
3. The analysis of NPAs of Urban Cooperative Banks in Latur District shows an
18.46% growth over the base year, which is not in alarming position as
compared to the enormous growth of NPAs of Commercial Banks. In terms of
percentage of NPAs to Total Loans, it was equal to 3.75% during the study
period.
7.2.15 Profitability of the Urban Cooperative Banks:-
7. The position of Profit of the Urban Cooperative Banks during the study period
i.e. 2007-08 to 2012-13 shows that, in the year 2007-08 the total Profits was Rs:
190.46/- lakh which rose to Rs: 394.73/- lakh in the year 2012-13, showing a
growth of 207.25% over the base year. Among the Urban Cooperative Banks,
the Saibaba UCB has the highest percentage of increase in Profits i.e. 278.05%
over the base year, whereas the lowest percentage of increase in Profit was
shown by Mahesh UCB i.e. 154.44%.
8. The average Profit of the Urban Cooperative Banks in the Latur District was Rs:
293.71/- lakh during the study period. Mahesh Urban Cooperative Bank has
earned the highest average Profit of Rs. 101.89/- lakh, whereas the lowest
average Profit of Rs: 15.72/- lakh, was made by Saibaba Urban Cooperative
Bank.
9. The analysis of the profit made by the Urban Cooperative Banks shows a growth
of 107% over and above the base year during the study period. None of the
banks recorded a loss in its operation during the study period.
7.2.16 Total Income of Urban Cooperative Banks:-
1. The position of Total Income earned by the Urban Cooperative Banks during the
study period i.e. 2007-08 to 2012-13 shows that, in the year 2007-08 the Total
Income was Rs: 1929.99/- lakh which rose to Rs: 4259.05/- lakh in the year
2012-13, showing a growth of 220.68% over the base year. Among the Urban
Cooperative Banks, the Udgir UCB has the highest percentage of increase in the
amount of Total Income i.e. 245.40% over the base year, whereas the lowest
percentage of increase in Total Income was shown by Siddheshwar UCB i.e.
206.08%.
2. The average amount of Total Income of the Urban Cooperative Banks in the
Latur District was Rs: 2929.27/- lakh during the study period. Siddheshwar
Urban Cooperative Bank has earned the highest amount of average Total Income
of Rs. 1049.78/- lakh, whereas the lowest amount of average Total Incomes was
earned by Saibaba Urban Cooperative Bank i.e. Rs: 160.71/- lakh.
3. The Total Income of the Urban Cooperative Banks shows increasing trends
which was equal to 120.68% over and above the base year.
7.2.17 Total Expenditure of Urban Cooperative Banks:-
1. The position of Total Expenditure incurred by the Urban Cooperative Banks
during the study period i.e. 2007-08 to 2012-13 shows that, in the year 2007-08
the Total Expenditure incurred was Rs: 1739.53/- lakh which was rose to Rs:
3846.32/- lakh in the year 2012-13, showing a growth of 222.15% over the base
year. Among the Urban Cooperative Banks, the Udgir UCB has the highest
percentage of increase in Total Expenditure i.e. 248.00% over the base year,
whereas the lowest percentage of increase in Total Expenditure was shown by
Siddheshwar UCB i.e. 201.07%.
2. The average amount of Total expenditure of the Urban Cooperative Banks in the
Latur District was Rs: 2635.56/- lakh during the study period. The highest
amount of average Total Expenditure of Rs. 951.41 lakh/- was spent by
Siddheshwar Urban Cooperative Bank, whereas the lowest amount of average
Total Expenditure of Rs: 144.99/- lakh, was spent by Saibaba Urban Cooperative
Bank.
3. From the analysis of Income and Expenditure it is evident that both the income
and expenditure show an increasing trend but the growth in income and
expenditure remained proportionately same that is 222.86% and 222.15%
respectively over the base year.
7.2.18 Percentage of Total Loans to Total Deposits:-
1. The comparison of Deposits and Loans of the Urban Cooperative Banks during
the study period i.e. 2007-08 to 2012-13 shows that, in the year 2007-08 the
proportion of loan was Rs: 10265.40/- lakh which was 71.14% of the Total
Deposits, which rose to Rs: 21532.70/- lakh, was equal to 68.66% amount of the
Total Deposits in the year 2012-13, showing an increase of 209.76% over the
base year.
2. Among the Urban Cooperative Banks, the percentage of increase in loan of
Udgir UCB was higher as compared to other banks i.e. 151.96% (more than the
lending capacity), where as the lowest percentage of increase in lending belongs
to Saibaba UCB i.e. 50.62%.
3. The average amount of loans of the Urban Cooperative Banks in the Latur
District was Rs: 15802 lakh. During the study period the Mahesh Urban
Cooperative Bank has lent the highest amount of average loan of Rs. 5854.27
lakh, where as the lowest amount of average loan belongs to Saibaba Urban
Cooperative Bank i.e. Rs: 722.33 lakh.
7.3 Suggestions:
Urban Cooperative Banks in Latur have to face competition from nationalized as
well as private commercial banks. These banks have the financial clout, professional
management, modern banking facilities, highly qualified staff, positive work culture,
attractive salary, incentives and other facilities and above all patronage of the
government/corporate. These banks are opening their branches in every nook and
corner of urban areas in order to expand their business and attract new customers by
offering modern banking facilities and services. However, the Urban Cooperative
Banks are plagued with inherent problems such as poor capital base, poor
management, lack of professional staff, poor infrastructure, poor investor base, poor
public image and failure to adopt modern information and communication technology
in banking services.
In spite of the above limitations and weaknesses, the Urban Cooperative Banks
serve the lower and middle income group of the society by giving loans and advances
as well as encouraging saving habits. However, in order to survive and grow in a
rapidly changing business environment and to meet the growing needs of the
customers, the Urban Cooperative Banks should have to take initiatives for accepting
the challenges of modern banking.
After evaluating the performance as well as other issues related with the working of Urban Cooperative Banks, the researcher has given the following suggestions in order to improve the efficiency and solve the problems of the banks. These suggestions are made by considering the ground realities and the practicability of implementing the suggestions.
1. Adoption of professional management:
The management of the Urban Cooperative Banks should adopt
professional management practices. Along with existing Board of Directors
independent and professionally qualified people like, Chartered Accountants,
Lawyers, MBA’s and other qualified people should be nominated to the board. This
will help the management to professionalism in policy decision making as well as
in adopting lending norms and other prudential norms in banking services.
2. Increasing the Capital Base of the Bank:
Traditionally the memberships of the banks are vested with lower and
middle income segment of the urban population. They became members because of
their financial compulsions and in order to avail loans and advances through their
membership. As a result, the quantum of the ownership capital cannot go beyond a
certain limit. Hence, banks face shortage of capital and liquidity problems. It can be
changed only when the higher and upper middle income groups invest in Urban
Cooperative Banks. This is possible only when the public image of the banks get
improved.
3. Adoption of Prudential Norms in Lending:
In order to reduce the growing NPA’s and Bad Debts of Urban Cooperative
Banks, the banks should strictly follow the prudential norms in lending and
adopting the policy of KYC norms. This will avoid the conflict of interest while
giving loans and advances especially to members of the banks.
4. Change in Top Management is the Need of the Time:
It is found by the researcher that since the establishment of the banks 80%
of the Board of Directors more or less remained the same and there was no change
in the Top Management at all. Unless and until new faces are elected to the
management, it will be difficult for the banks to adopt professionalism,
accountability and transparency in management practices. Transition from
traditional to modern banking is possible only through change in management
personnel at the top level.
5. Recruitment, Training and Placement of Administrative and Office Staff
should be done through Professional Agencies:
Administrative and other staff members of the banks are selected locally as
per the whims and personnel choice of the management. As a result, the efficiency
of the banking services get affected due to lack of professionalism, training and
attitudes among the employees. Hence, the researcher feels that the recruitment,
training and placement of administrative and office staff should be done through
professional agencies. This will definitely improve the work culture and attitude of
the employees.
6. Improving the Work Environment:
In order to improve the efficiency and moral of the employees, the working
conditions should be improved by overhauling the office set up such as furnishing,
air-conditioning, computerization, uniforms, and refreshment facilities etc,
according to the modern banking facilities offered by the commercial banks.
7. Establishment of Customer Grievance Redressal Cell:
None of the Urban Cooperative Banks have a Customer Grievance
Redressal Cell. As a result, many of the customers are dissatisfied with the services
of the banks. So, in order to improve the customer satisfaction and communication
with the customers, banks should have to set up a customer care centre in the bank.
It will improve the relationship between customers and the bank.
8. Adoption of Modern Communication and Banking Technology:
Except one Urban Cooperative Bank, none of the other banks offer facilities
like, ATM, SMS service, Debit card, Credit Card, Net Banking, NEFT, RTGS,
Core Banking Solutions etc. to the customers. At present these facilities are
considered as the basic banking facilities. The Urban Cooperative Banks failed to
provide these facilities. Hence, it is high time to adopt the modern banking services
to customers.
9. Public Image of the Bank should be Changed:
The public perception about the cooperative banks in relation to safety of
their deposits and lending practices are not satisfactory as compared to commercial
banks. This is because of the poor image of the management as well as the other
general perceptions about the Urban Cooperative Banks. In order to attract more
depositors and investors, the banks adopt should professionalism in management
and other banking practices. So through advertisement and publicity, they should
assure the public that they are following all the norms of the RBI and have
sufficient reserves to meet any eventuality. They can do it by voluntarily publishing
their annual reports in local news papers. This may create transparency and positive
image among the general public about the financial health of the Urban
Cooperative Banks.
10. Management of NPAs:
Rising NPAs of the Urban Cooperative Banks remain one of the major
hurdles in the path of smooth and effective running of banks. To face this problem,
researcher suggests that banks should adopt well- thought out NPA policy and to
follow Sound Credit Appraisal on well settled banking norms. Also banks should
review irregular accounts regularly and recovery efforts should be started right
from the first default made by the borrower.
11. To Minimize Bad Debts:
The exhaustive analysis of the data reveals that increasing bad debts, being
one of the important obstacles in the financial performance of the banks, needs to
be seriously minimized. To control the bad debts, the banks must follow the KYC
(Know Your Customer) norms and prudential norms while sanctioning the loans.
Moreover, the banks should undertake certain steps like constituting the debts
recovery teams, appointing conscientious recovery agents to collect the loans either
on daily basis or monthly basis from the borrowers like small traders, etc. The
banks should prefer OTS (One Time Settlement) initiative than recovering through
legal suits.
12. Field Visits:
In order to avoid the diversion and misuse of loans, the banks should make
field visits to ensure that the loans sanctioned are utilized for the purpose for what
they are granted. It should also make surprise visits to ensure that the assets remain
with the borrowers.
13. Expenditure Control and Maximization of Profits:
The in-depth interpretations of the data also reveal that there is considerable
increase in the expenditure of the banks, as it is evident in Gross Ratio (Table 5.45
Page No. 275). The rising expenditure is likely to defeat the very purpose of these
banks. So, there is an urgent need of well chalked out expenditure budgets for the
banks to curb the extravagance expenditure. The budgets should be meticulous,
specific, realistic, economical, practicable and achievable.
14. Deposits:
During the study period, it was found that the Deposits of all the Urban
Cooperative Banks have shown increasing trend. However, it is not satisfactory as
compared to commercial banks. So, there is an urgent requirement to increase the
Deposits of Urban Cooperative Banks. And to enhance their Deposits, these banks
must go for maximizing the membership and customers along with a smart increase
in interest rates on their Deposits. Moreover, these banks should promote
people/customers to deposit their money in saving and fixed deposits by inculcating
the habit of monthly, half yearly and annual monetary savings. They should also
offer monetary and non monetary rewards to their employees for collecting more
Deposits.
15. Incentives to Employees:
The study also underlines the fact that most of the employees of Urban
Cooperative Banks are not happy with their pay structure and are unsatisfied with
their work environment. So, to address this problem and retain these employees, the
banks should undertake innovative employee welfare schemes like, Tour
Allowances, Festival Allowances, Scholarship and Education Loans to the
children’s education, Career Advancement Opportunities, Home Loans, Personal
Loans with minimum interest rate, etc.
16. Promotional Campaigns:
To attract more and more customers and stakeholders, the Urban
Cooperative Banks should organize promotional campaigns. As a part of this move,
these banks should attract the customers and stakeholders by offering attractive
interest rates on their deposits and charging affordable and competitively less
interest rates on loans. Moreover, these banks can launch novel festival and new-
year smart saving schemes. In addition to this, to lure the customers, banks should
offer gold loans at attractive rate of interest.
17. Performance Appraisal of Employees:
Of late, the SWOC analysis of every organization is a must for effective
management. So, these banks should undertake timely performance based appraisal
of their employees seeking the SWOC analysis of the banks. Performance appraisal
of the employees will ensure effectiveness, efficiency and target centric approach,
etc, among the employees there by rendering their service qualitative and valuable
to the banks.
18. Start Lending of Loans and Advances to Agriculture Sector:
During the study, the researcher found that, except one Urban Cooperative
Bank, none of the other banks lends to Agricultural Sector. As we know that,
Agricultural sector is the backbone of our economy and urban cooperative banks
are located in the semi-urban and urban areas, in this area most of the people carry
farming as the primary occupation. So, lending to Agricultural Sector will help to
enhance the public image as well as to attract more number of members to the
urban cooperative banks in Latur District.
19. To Enhance the Proportion of Lending to Small Business Units:
In the performance evaluation of the Urban Cooperative Banks, we have
seen that, the Urban Cooperative Banks of Latur District have disbursed very less
proportion of loans to Small Business Units. This will lead to loosing of industrial
customers and affects on public relations and retentions, public image and earning
capacity of the banks. So, the urban cooperative banks in Latur District should start
lending of loans with high priority to Small Business Units.
20. To Enhance the Public Relation and Retention Capacity:
The Urban Cooperative Banks in Latur District are unable to maintain
strong public relations with the customers. As compare to Private Banks and
Commercial Banks the customers of the UCBs are limited, so there is great chance
for the Urban Cooperative Banks to maintain strong relations and to enhance the
customer retention capacity. It also helps to improve the public image of the Urban
Cooperative Banks in Latur District.
21. To Provide Education Loan:
During the study period, the researcher found that except one bank majority
of the other Urban Cooperative Banks does not provide education loan. The Private
Banks and Commercial Banks provides education loan on regular basis. So, this
will be a new area for the progress as well as development of Urban Cooperative
Banks in Latur District.
22. UCBs should be Allowed to Operate on Commercial Basis:
In order to face the strong competition from Commercial Banks and Private
Banks, the Urban Cooperative Banks should be allowed to work on commercial
basis. It is very difficult for the UCBs to compete with other banks with various
limitations imposed by the State Government and RBI. The UCBs have to offer the
financial products as like, Commercial Banks, without losing the spirit of
cooperation.
23. To Strengthen the Monitoring Mechanism of Loans and Advances:
During the study period, the problem of poor Monitoring Mechanism of
Loans and Advances was also seen in Urban Cooperative Banks of Latur District.
The poor monitoring of Loans and Advances leads to the problem of timely
recovery of loans and advances and increase in the Bad Debts and NPAs of the
banks. The poor monitoring mechanism may arise due to appointing inefficient
recovery agents and teams, non fulfillment of Know Your Customer (KYC) Norms
and Prudential Norms while sanctioning loans and advances. Moreover, the poor
follow-up system and not making proper field visits are the reasons of poor
monitoring mechanism of Loans and Advances. So, strong monitoring mechanism
of Loans and Advances is the need of time and Urban Cooperative Banks in Latur
District should take note of this.
24. To Improve the Strong Infrastructural Facilities:
The poor infrastructure is also a problem of Urban Cooperative Banks
in Latur District. Even some of the bank branches, lagging behind in sufficient
Furniture’s, Buildings and Seating Arrangements for customers. Due to the,
lop sided capital structure urban cooperative banks are unable to provide
sufficient infrastructure required for modern banking facilities as is provided
by Commercial Banks.
25. To Introduce Special Savings Schemes with attractive interest rates:
It is found by the researcher, that none of the Urban Cooperative Banks has
initiated any efforts to launch Special Savings Schemes to attract for mobilization
of Small Savings except through ‘Piggmi’ agents. Hence, the researcher strongly
feels that Urban Cooperative Banks should introduce innovative Small Savings
Schemes to mobilize savings from sundry and regular income sources by offering
attractive interest rates.
26. Maintaining Current Assets to Fixed Assets Ratio:
Udgir and Laxmi Urban Cooperative Banks, have to take necessary steps to
increase the proportion of Current Assets to Fixed Assets Ratio. So that, the banks
can maintains liquidity in their financial operations.
27. Maintaining Solvency Indebtedness Ratio:
None of the Urban Cooperative Banks during the study period was able to
maintain the Standard Indebtedness Ratio – 25% (3:1). It indicates that the Urban
Cooperative Banks in Latur District were unable to maintain adequate Net Worth in
the Total Loans. Hence, the banks should have to take necessary steps to enhance
the proportion of Net Worth to Total Liabilities as
per the Standard Indebtedness Ratio.
28. Social Commitment:
To achieve the prime goal of ‘one for all and all for one’ the banks should
undertake social extension activities as its social responsibility. So the bank could
evolve and launch novel social activities like, Water Harvesting, Blood Donation,
and Interest free Education to poor and needy students, Tree Plantation Schemes, to
ensure their social commitment. This will have positive impact on the reputation
and performance of the banks. Moreover, it also helps to enhance the public image
of the Urban Cooperative Banks.
The researcher personally feels that, if the above suggestions are
implemented, then the Urban Cooperative Banks in Latur District can effectively
compete with the well established commercial banks and can serve its customers
who belong to lower and middle income groups in a better and effective way.
BIBLIOGRAPHY
A) BOOKS:-
1) Agrawal N.P. Analysis of Financial Statements, National Publishing House, New
Delhi, 1981
2) Bhatnagar B.G., Co-operative organization in British India, Ram Narain Lal
Publisher Allahabad – 1927.
3) Baron N. Co-operative Banking, P.S. King and Sons, Orchard House, West
Minister, 1937.
4) B.N. Choubey Principles and Practices of Co-operative Banking in India.
5) Choube B.N. Principles and Practices of Co-operative Banking in India, Asia
publishing House, London, 1968.
6) C.V. Nair, Co-operative Credit in India Problems and Challenges
7) Dubhashi P.R., Principles and Philosophy of Co-operation, Vaikuntbhai Mehta
National Institute of Co-operative Management, Pune, 1970.
8) Dr. Partho Pritam Roy, Management of Urban Co-operative Banks, Himalaya
Publication House, First Edition, 2001
9) Foulke, Practical Financial Statement Analysis, Tata MCGraw Hill, 1990.
10) Gibson C.H. and Bayer P.A., Financial Statement Analysis CBI Publication INC,
Boston, 1979.
11) Hajela T.N., Principles, Problems and Practice of Co-operation Agrawal and
Company, Agra, 1978
12) Helfert E.A., Techniques of Financial Analysis, Richard D. Irwin Inc., Home wood,
1957.
13) Kamat G.S., New Dimensions of Co-operative Management, Himalaya Publishing
House, Bombay, 1978
14) K.A. Abdul Kuddus and A.K. Zakir Hussian, Co-operative Credit and Banking
First Edition 2007, Limra Publication, Chennai
15) Laud G.M., Co-operative Banking in India, Co-operative Book Depot, Bombay,
1956.
16) Maheshwari S.N., Banking Law and Practice, Kalyani Publisher, New Delhi, 1985.
17) M.B. Patil, Development Banking and Urban, Co-operative Banks
18) M.B. Patil, Strategy for Development of Urban Co-operative Banks
19) Nadkarni D.M., Co-operative Maharashtra (News and Views yearly). Ajit and sons,
Bombay, 1961
20) Oswald D.B., Financial Analysis, MCGraw Hill Publishing Company, New York,
1990.
21) Paranjothi T., Committees and Commissions on Co-operatives, Rainbow
Publications, Coimbatore, 1984.
22) Reddy B.R., Financial Management in Co-operatives, Printwell Publishers, Jaipur,
1992.
23) Subbarao P., Principles and Practice of Bank Management, Himalaya Publishing
House, Bombay, 1988.
24) Tyagi R.B., Recent Trends in the Co-operative Movement in India, Asia Publishing
House, Bombay 1915
25) V.V. Ravikumar – New Trends in Banking, The ICFAI University Press, Pune.
B) Journals, Periodicals, Articles and Magazines :-
1) Anandan L., Approach to Profit Planning in Urban Banks, The Maharashtra Co-
operative Quarterly, Vol. III, No. 4, January-March, 1995.
2) Article – RTGS, The Gateway of Banking, The ICFAI University Press, Pune.
3) Article – G. Rama Moorthy – Recovery Machanisms in UCBs and Recent Court
Pronouncements – Urban Credit – April – June – 2008.
4) Article –D. Krishna, Urban Co-operative Banking Sector: Achievements and
Challenges Urban Credit – June 2005.
5) Article – S.K. Banerji – Co-operative Banking Sector in the Changing Scenario,
Challenges and Prospects, Urban Credit, June 2005.
6) Article – Dr. H.N. Kunden – Role of Chief Executive Banks – The Maharashtra
Co-operative Quarterly.
7) Article – Mr. Jeur Rajendra Dhanappa – Disproportionate Progress of Urban Co-
operative Banks in India – The Maharashtra Co-operative Quarterly.
8) Co-operative Perspective, Volume 37, No. 4, Jan. – March – 2003.
9) Vivek, 15 March – 2009.
10) Co-operative Perspective, Volume – 37, No. 2, July – September, 2002.
C) Reports:-
1) Annual Reports of Urban Co-operative Banks in Latur District from 1995-96 to
2001-2002.
2) Narsimham Committee Report (1991)
3) Shri Marathe Committee Report (1992)
4) Shri. K. Madhav Rao Committee Report (1999)
5) Report on Trend and Progress of Banking in India (RBI)
6) Report of the Working Group on Umbrella Organization and Constitution of
Revival Fund for Primary (Urban) Co-operative Banks- Reserve Bank of India,
Urban Banks Department Central Office, Mumbai-2010.
7) Prudential Norms for Urban Co-operative Banks, National Federation of Urban Co-
operative Banks and Credit Societies Ltd. New Delhi- 1997
D) Ph. D. Thesis
1) “Deposit Mobilization by the Urban Co-operative Bank “A case study of
Suvarnayog Co-operative Bank Ltd. Pune – Gade A.V.
2) “Industrial Financing by the Urban Co-operative Banks in Maharashtra.” – B.P.
Wani.
3) “Deposit Mobilization by the Urban Co-operative Bank” “A case study of Karmala
Urban Co-operative Bank”. – Thorat A.B.
4) “Lending operations of the UCB in Maharashtra, before and after the application of
the Banking Regulation Act, 1949 – Shaligram A.U.
5) “Study of effectiveness of executive development programmes UCB” – Nair R.V.
(The data collected in the Questionnaire will be used for research purpose only)
QUESTIONNAIRE
“A STUDY OF PERFORMANCE EVALUATION OF URBAN COOPERATIVE BANKS IN LATUR DISTRICT”
Dear respondent, The purpose of the questionnaire is to know how effectively the Urban Cooperative Banks are performing in the Latur District. The information shared by you will be the great insight for me to suggest modification in present functioning of the Urban Cooperative Banks. Kindly support and fill this questionnaire without any prejudice. Thanks…
A) QUESTIONNAIRE FOR CHAIRMAN/BOD/MANAGERS
(Name of the Bank: ____________________________) A) General Information:
1) Name : - ………………………………………………. Age :- ……………………………………… ………. Address : - ………………………………………………. Mobile No : - ………………………………………………. Phone No : - ………………………………………………. E-mail ID : - ………………………………………………. 2) Sex a) Male b) Female 3) Designation : - ____________________________________
4) Department : - ____________________________________
5) Residential Status – A) Rural B) Urban
6) Education : - ______________________________
7) Date of Appointment
Date Month Year
B) Subject Specific Information: 8) What are the different sources available for raising funds? 1__________2________ 3_________4_______5 ______ 9) Whether Committees are framed for effective management of bank? If yes Please
name the Committees. Yes/No 1.______________________ 2._________________________ 3._______________________ 4._________________________ 10) Do you face the problem of Conflict of Interest in Following Prudential Norms in
Sanctioning Loans and Advances? Yes/ No 11) Do you face any problem in the day to day management of the bank? Which are
these problems? Yes/No 1.______________________ 2._________________________
12) Are all the branches of your bank computerized? Yes/No 13) Have you provided the computer training facility to your employees? Yes/No 14) Do you follow the Performance Appraisal of the employees regularly?
Yes/No 15) Do you witness any changes in the members of the Top Management?
Yes/No 16) Do you have the IFSC code? Yes /No 17) Do you conduct any Field visit or Surprise visit? Yes /No 18) Have you adopted Professional Management in your bank Yes/ No 19) What are the difficulties in following rules and regulations of the government? ______________________________________________________________ 20) What are the major initiatives taken by the bank to reduce N. P. As.? ______________________________________________________________ 21) What are the special plans and policies adopted for improving customer relations
and retentions? ___________________________________________________________ ___________________________________________________________ 22) What are the Monitoring Mechanisms adopted for Monitoring Loans and
Advances? A) Recovery Teams B) Follow-up System C) KYC Norms D) Any other 23) What are the expectations from your customers and government? A. Customers__________________________________________________ ___________________________________________________ B. Government _________________________________________________ __________________________________________________
Signature of Respondent
The Researcher is grateful to you
(The data collected in the Questionnaire will be used for research purpose only)
“A STUDY OF PERFORMANCE EVALUATION OF URBAN COOPERATIVE BANKS IN LATUR DISTRICT”
Dear respondent, The purpose of the questionnaire is to know how effectively the Urban Cooperative Bank are performing in the Latur District. The information shared by you will be the great insight for me to suggest modification in present functioning of the Urban Cooperative Banks. Kindly support and fill this questionnaire without any prejudice. Thanks…
B) QUESTIONNAIRE FOR STAFF / EMPLOYEES (Name of the Bank: ____________________________) A) General Information:
1) Name of Employee : - ………………………………………………. Age :- ………………………………………………. Address : - ………………………………………………. Mobile No : - ………………………………………………. Phone No : - ………………………………………………. E-mail ID : - ………………………………………………. 2) Sex a) Male b) Female 3) Designation : - ____________________________________
4) Department : - ____________________________________
5) Residential Status – A) Rural B) Urban
6) Education: A) Graduate B) Post Graduate C) Any other
7) Date of Appointment:
Date Month Year
B) Subject Specific Information:
8) Monthly Income (Pay Scale): A) More than 10000/- B) Less than 20000/-
9) Nature of Job: -
A)……………………… B)……………… C) ---------------------
10) Who does appoint Staff / Employees:-
A. Senior Officer
B. Agencies
C. Other
11) What kind of Training facilities are available?
________________________________________________________
_________________________________________________________
12) Who does bear the training cost?
a) Bank b) Employees
c) Union d) Any other.
13) Are you satisfied with the pay structure of the bank? Yes/ No.
14) Do you get any kind of Incentives/ Allowances as an employee? (Please specify by
marking the sign (√))
a. Medical b. Residential c. Canteen
d. Petrol e. Target Allowance f. Fixed Allowance
g. Education h. Other
15) Are you satisfied with the Incentives provided by the bank? Yes/ No
16) Have you completed the course of MSCIT for effective handling of modern
technological devices? Yes / No
17) Do you face the problem of Inadequate Working Staff? Yes/ No
18) Do you find that the employees face the problem of poor attitudes and values?
Yes/ No
19) Please give in brief the highlights of your bank
_____________________________________________________________
_____________________________________________________________
Signature of Respondent
The Researcher is grateful to you
(The data collected in the Questionnaire will be used for research purpose only)
“A STUDY OF PERFORMANCE EVALUATION OF URBAN COOPERATIVE BANKS IN LATUR DISTRICT”
Dear respondent, The purpose of the questionnaire is to know how effectively the Urban Cooperative Banks are performing in the Latur District. The information shared by you will be the great insight for me to suggest modification in present functioning of the Urban Cooperative Banks. Kindly support and fill this questionnaire without any prejudice. Thanks…
C) QUESTIONNAIRE FOR CUSTOMERS
(Name of the Bank: _____________________________)
A) General Information:
1) Name of Customer : - ………………………………………..............
Age : - ……………………………………………….
Address : - ……………………………………………….
Mobile No : - ……………………………………………….
Phone No : - ……………………………………………….
E-mail ID : - ……………………………………………….
2) Occupation:
1) Farmer -
2) Businessmen -
3) Serviceman -
4) Other -
3) Education: A) Graduate B) Post Graduate C) Any other
4) Sex: A) Male B) Female
5) Monthly Income A) More than 10000/- B) Less than 20000/-
B) Subject Specific Information:
6) What kind of Deposit Account you have maintained in the bank?
A) Savings B) Current C) Fixed
7) Have you ever deposited any amount in the Fixed Deposits? Yes / No
8) What kind of Loan you have demanded?
A) Personal B) Salary C) Educational D) Vehicle E) Any other
9) How much loan was sanctioned? A) Rs: 25000/- B) Rs: 50000/- C) Rs: 1, 00,000/- D) More than Rs: 1/-Lakh 10) Do you use the loan for actual purpose? Yes/ No
11) Do you pay Loan installments regularly? Yes /No 12) Which documents do you submit to the bank while seeking loan? Please specify ------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------ 13) Do you satisfied with the services of the bank? Yes/No
14) Do you satisfied with the physical facilities in the bank? Yes/No
15) What is the rate of interest charged?
a) 10-12% b) 12-14% c) 14-16% d) 16-18%
16) Are you satisfied with the attitude of branch staff? Yes/No
17) Are you satisfied with the modern technological services provided by the bank?
Yes/No
18) Do you have the facility of Customer Grievance Redressal Cell? Yes/ No
19) Do you agree with the view that the Public Image of the bank is Poor?
Yes/ No
20) Do you agree with the opinion that the Customer Relation and Retention Capacity
of the bank is poor? Yes/ No
21) Give suggestions for solving the problems of the UCBs and for better working of
the banks.
___________________________________________________________________
_________________________________________________________
22) Suggest measures for improvement in the functioning of the UCBs.
___________________________________________________________________
_________________________________________________________
Signature of Respondent
The Researcher is grateful to you
