A Study of Financial Working and Operational Performance of Urban

Indian Streams Research Journal
Vol.1,Issue.V/June; 12pp.1-4
Dr.R.S.Shirasi Research Papers
ISSN:-2230-7850
A Study of Financial Working and Operational Performance of Urban Co-operative Banks in Pune District
Dr.R.S.Shirasi Hutatma Rajguru Mahavidyalaya Rajgurunagar, Tal.Khed, Dist.Pune- 410505
ABSTRACT
Due to liberalization and globalization the UCBs are facing the problems of competition from public sector banks, private banks, foreign banks and other UCBs as well. To study the financial working and operational performance of UCBs in Pune district is the main purpose of the research work.
OBJECTIVES : 1. To examine the financial working of the UCBs in Pune district with regards to banking parameters viz., membership, paid up capital, deposits, advances, NPAs and CD ratio. 2. To analyze the operational performance with regards to cost efficiency parameters viz, income analysis, expenses analysis and profit analysis. 3. To examine the experiences and expectations of the customers of the UCBs. 4. To analyze the strength of the customer service of selected UCBs. 5. To analyze the conditions of selected UCBs and identify their problems. 6. On the basis of analysis of financial working and operational performance, to suggest some preventive and remedial measures to UCBs in Pune district. HYPOTHESIS : Due to liberalization and globalization the financial and operational performance of UCBs are adversely affected. However, in a competition environment the UCBs have to increase their efficiency. SCOPE OF THE STUDY : 60 Urban Co-operative banks registered in Pune district Out of 60 UCBs, 10% UCBs i.e. 6 UCBs were selected by the random sampling procedure
Please cite this Article as : Dr.R.S.Shirasi, A STUDY OF FINANCIAL WORKING AND OPERATIONAL PERFORMANCE OF (1), ISRJ URBAN CO-OPERATIVE BANKS IN PUNE DISTRICT : Indian Streams Research Journal (June ; 2012)
A Study of Financial Working and Operational Performance of Urban
Vol.1,Issue.V/June; 2012
Sr. No. 1 2 3 4 5 6
Name of UCBs Baramati Sahakari Bank Ltd. Janaseva Sahakari Bank Ltd. Jijamata Mahila Sahakari Bank Ltd. Rajgurunagar Sahakari Bank Ltd. Sharad Sahakari Bank Ltd. Sopankaka Sahakari Bank Ltd.
Date of Registration 23/09/1961 24/10/1972 25/04/1974 19/06/1931 25/04/1974 08/04/1997
SELECTION OF CUSTOMERS : To examine the experiences and expectations of the customers of UCBs, 20 customers in each bank were selected by following the simple random procedure. In all 120 customers from 6 UCBs were selected for the study PERIOD OF STUDY : The study covers a period of 10 years as from 1998-99 to 2007-08. The accounting year of the bank commences on 1st April of every year and ends on 31st March of next year. METHODOLOGY : The present research study is an imperical research based on survey method. The data required for this study has been both from primary and secondary sources. PRIMARY DATA : The questionnaire, interviews, observations techniques are adopted for the research. Detailed and comprehensive questionnaire of two types were prepared. Questionnaire for CEO/Manager of UCBs. Questionnaire for customers of UCBs. SECONDARY DATA The secondary data and other relevant particulars were collected from the annual reports of these banks, journals, periodicals and published books. CONCLUSIONS : 1.It is observed that there is regional imbalance in the growth of UCBs in India. Five states viz. Maharashtra, Gujarat, Karanataka, Andhra Pradesh and Tamil Nadu account for 1661 UCBs out of 2104 in the country as at end March 2003. In 2008, out of total UCBs; 603 UCBs were registered in Maharashtra state. 2.It is observed that there is regional imbalance in the growth of UCBs in Maharashtra and in Pune district as well. There are 14 blocks in Pune district. The total number of UCBs registered in Pune district was 60 as on 31/03/2008. Out of these 60 UCBs, 47 UCBs were concentrated in Pune city, whereas 13 UCBs were scattered in 13 blocks of the district as on 31/03/2008. The number of UCBs registered in Velhe and Mulshi blocks was nil. 3.The UCBs are regulated and supervised by State Registrars of Co-operative Societies, Central Registrar of Co-operative societies in case of multi-state co-operative banks and by the RBI. The registrars of co-operative societies of the states exercise powers under the respective co-operative societies act of the states in regard to incorporation, registration, management, amalgamation, reconstruction or liquidation. In case of the UCBs having multi-state presence, the Central Registrar of
Co-operative societies, New Delhi, exercises such powers. All UCBs are required to maintain the minimum 9% CRAR akin to commercial banks. The sample UCBs maintained the minimum CRAR. 4.It is observed that number of branches of the sample UCBs increased from 32 to 59 during the period of 1998-99 to 2003-04. But later on the number of branches increased by just 01. The average growth of branch expansion of these sample UCBs shows 1.69% in 2008 over 2004. 5.It is observed that the membership of these banks increased from 41566 to 80009 during the period of 1998-99 to 2007-08, registering a growth rate of 92.49%. It is observed that out of the total sample UCBs, the highest membership of 20968 was of Janaseva Sahakari Bank Ltd. as on 31/03/2008. The lowest membership of 6697 was Sopankaka Sahakari Bank Ltd. as on 31/03/2008. 6.It may be observed that the share capital of these UCBs increased from Rs. 1015.12 lakhs in 1999-2000 to Rs. 4666 lakhs in 2007-08. Out of the total sample UCBs the highest paid up capital of Rs. 1444 lakhs was of Janaseva Sahakari Bank Ltd., while the lowest paid up capital o Rs. 405 lakhs was of Sopankaka Sahakari Bank Ltd. as on 31/03/2008. However, the highest growth rate of share capital of 1483% was of Sopankaka Sahakari Bank Ltd. and the lowest growth rate of share capital of 203% was of Sharad Sahakari Bank Ltd. in 2008 over 2000. 7.It is observed that out of the total sample UCBs, the highest share capital per member of Rs. 7300 was of Baramati Sahakari Bank Ltd. and the lowest share capital per of Rs. 4300 was of Jijamata Mahila Sahakari Bank Ltd. as on 31/03/2008. 8.It is observed that the total deposits of the sample UCBs increased from Rs. 33107 lakhs to Rs. 152675 lakhs in 2008 over 1999, showing the growth rate of 361%. Out of these sample UCBs, the highest deposits of Rs. 59169 lakhs was of Janaseva Sahakari Bank Ltd. and the lowest deposits of Rs. 9997 lakhs was of Sopankaka Sahakari Bank Ltd. as on 31/03/2008. 9.It may be observed that out of these sample UCBs, the highest amount of loans and advances granted of Rs. 37787 lakhs was of Janaseva Sahakari Bank Ltd. and the lowest amount of Rs. 6812 lakhs of Sopankaka Sahakari Bank Ltd. as on 31/03/2008. 10.It may be observed that the deposits of these sample UCBs increased by 361% from Rs. 33107 lakhs to Rs. 152675 lakhs during the period of study, but the loans and advances increased by 218% only from Rs. 31346 lakhs to Rs. 99931 lakhs. 11.The total Credit-Deposit Ratio of all these sample UCBs was between 60% and 70% during the period of 1999-2000 to 2007-08. Out of the total sample UCBs Jijamata Mahila Sahakari Bank Ltd. and Sharad Sahakari Bank Ltd. was unable to maintain an ideal CD Ratio i.e. 60% to 70% as on 31/03/2008.It is also observed that the CD Ratio of all these sample UCBs was maximum in the year 1998-99 and was minimum in 2003-04. 12.The RBI has developed a rating model for UCBs based on 'CAMELS' factors. Performance of a bank will be rated on a scale of 1 to 100 in ascending order of performance. This will be done for each of the six component of the CAMELS factors viz, Capital adequacy, Asset quality, Management, Earnings, Liquidity and System and controls. 13.Co-operatives are organized not with profit motive but with service motive. It does not mean that cooperative run on 'No Profit No Loss basis'. Efficiently managed co-operative will run on profits. Though all these sample UCBs were running with net profit, there were fluctuations in the growth rate of net profit of these sample UCBs. 14. At present all UCBs are required to comply with 9% Capital to Risk Asset Ratio (CRAR) akin to commercial banks. It is observed that all these sample UCBs were able to maintain minimum CRAR. Out of these sample UCBs; Rajgurunagar Sahakari Bank Ltd. maintain the maximum CRAR; while Baramati Sahakari Bank Ltd. maintain the minimum CRAR during the period of 2005-06 to 2007-08. 15.The productivity of employees is the most common productivity indicators used by the banks. For this analysis the researcher has used, Business Volume (Deposits + Advances)/No. of Employees as a measure of the productivity of employees. 16.The productivity of branches is also the important indicators used by the banks. For this analysis Business Volume (Deposits + Advances)/No. of Branches used as a measure of the productivity of branches. 17.For the analysis of profitability per employee, Net Profit/No. of Employee used as a measure. The profitability per employee of Sharad Sahakari Bank Ltd. was the maximum of Rs. 3.09 lakhs during the
period of 2007-08. The profitability per employee of Baramati Sahakari Bank Ltd. decreased from Rs. 1.26 lakhs to Rs. 0.62 lakhs during the period of 1999-2000 to 2007-08. 18. For the analysis of profitability per branch, Net Profit/No. of the Branches used as a measure. 19.For the analysis of Business per Employee, the researcher has used The amount of deposits mobilized per employee as a measure.It can be observed that out of the total sample UCBs, the business per employee of Sharad Sahakari Bank Ltd. was the maximum of Rs. 242.77 lakhs as on 31/03/2008. It was followed by Sopankaka Sahakari Bank Ltd. with Rs. 199.94 lakhs and Rajgurunagar Sahakari Bank Ltd. Rs. 167.76 lakhs during the period of 2007-08.The business per employee of Jijamata Mahila Sahakari Bank Ltd. was the minimum of Rs. 130.01 lakhs as on 31/03/2008. 20.For the analysis of Business per Branch the researcher has used Deposits mobilization per Branch as a measure. 21.It is observed that out of the total sample customers, 92.5% customers (111) expressed that time required to deposits cash was less than 10 minutes, while 7.2% customers (09) replied that time required to deposits cash was between 10 and 20 minutes. 22.It is observed that out of the total sample customers 35.83% customers (43) replied that time required to withdraw cash was less than 10 minutes, while 58.33% customers (70) expressed that time required to withdraw was between 10 and 20 minutes. It can also observed that out of these customers, 5.84% customers (07) replied that time required to withdraw was between 20 and 30 minutes. 23.Out of the total sample customers, 73.33% customers (88) replied that time required for the collection of local cheques was less than 2 days, while 20% customers (24) expressed that time required for the collection of local cheques was between 3 and 4 days. It can be observed that 6.67% customers (08) replied that time required for the collection of local cheques was between 5 to 6 days. 24.Out of the total sample customers, 3.33% customers (04) expressed that time required for the collection of outstation cheques was less than 4 days, while 60% customers (72) opined that time required for the collection of outstation cheques was between 5 and 7 days. It is also observed that 26.67% customers (32) expressed that time required for these purpose was between 8 to 12 days, whereas 10% customers (12) replied that time required these reasons was over 12 days. 25.It is observed that out of the total sample customers, 70% customers (84) expressed that they received polite treatment from the bank employees.It is also observed that out of these customers, 26.67% customers (32) stated that they received impersonal but helpful treatment, while 3.33% customers (04) expressed that they received impersonal but not helpful treatment from the bank employees. 26.The present study reveals that depositing of cash, collection of local cheques, treatment of bank employees are the area of customers satisfaction, while withdrawal of cash, collection of outstation cheques can be identified as the areas of customer dissatisfaction as the time taken was much more than the customer expectations. It is observed that these sample UCBs have their inter alia following weakness as compared to other commercial banks. Meager resources High level percentage of NPAs Absence of Modern Technology in banking business Poor professional management Narrow spread of interest and thereby unsatisfactory level of profits Inefficient services to the customers as compared to their competitors Due to liberalization and globalization, the UCBs are unable to improve their efficiency as they failed to compete successfully with their competitors. RECOMMENDATIONS : 1.In terms of geographical spread, UCBs are unevenly distributed across the country. There is need for extending the banking facilities in different regions of the country. As yet the spread of UCBs is found only in a few states, other states, in particular those in the North Eastern Region, are lagging far behind. It is necessary to accelerate the pace of its growth especially in the backward regions. In Pune district itself, there is a great need for extending banking facilities to the semi Urban areas like Velhe and Mulshi blocks. It is suggested that a few more UCBs can be organized in these semi Urban areas. 2.The UCBs are under the dual control of the RBI and co-operative departments. This duality of
command is largely responsible for most of the difficulties in implementing regulatory measures with the required speed and urgency and impedes effective supervision. 3.The state and central Governments could recognize that the UCBs are not just co-operative societies but they are essentially banking entities whose management structure is based on co-operative principles. They should support, facilitate and empower the RBI to put in place mechanisms and systems that enable these UCBs to perform their banking functions. Paid up share capital and reserve funds constitute owned funds of the UCBs. Though these sample UCBs had satisfactory minimum owned funds, these funds ought to be increased to maintain CRAR. In order to increase the owned funds, these UCBs must increase their share capital by increasing the value of shares and by attracting more members. 4. The present study reveals that all these sample UCBs have shown more dependence on deposits as compared to other sources. Since deposits involve interest cost, it is therefore, suggested that all these sample UCBs should make concerted efforts to augment their owned funds component, particularly share capital base at a faster pace by enrolling more and more members in their folds. 5.Shares of UCBs should be treated at par with the shares of the joint stock companies and their shares should be allowed to be traded. 6.The present research study reveals that these sample UCBs were largely satisfied with the deposits that were made with banks out of the individual efforts of the customers. In other words, the banks were satisfied with their limited operation. In a highly competitive field of banking, this approach may ultimately land the UCBs in stagnation and in the long run the banks may face serious problems. 7.The UCBs have been collecting and accumulating more deposits than the deployment and dispensation of the funds which have led to an increase idle resources. Hence, it is suggested that CD ratio of these sample UCBs should be increased to desired level of 70%. 8.The NPAs may be high on account of defective loan policies and procedures of the bank. The NPAs may also be high on account of lack of timely action and adequate efforts for recovery. 9.In the era of the competition, the UCBs are unable to expand the volume of the business. To improve the productivity of employees the UCBs should increase the volume of deposits and advances on the one hand and to curtail the number of employees at the optimum level on the other hand. 10.The study reveals that the UCBs are unable to expand the business as they expanded their branches. Hence, the productivity of branches of the UCBs is much lower as compared to other commercial banks. To improve the productivity of branches the UCBs has to raise the volume of deposits and loans and advances. 11.Under the new economic policy and also for the deregulation of interest rates, there is an urgent need for the UCBs to have a review and examination of the resources and uses of funds to optimize returns. Hence, a faster rotation of funds, modified lending policies and procedures and selection of proper clientele are the needs of the day for efficient fund management to make the UCBs more and more successful. 12.The success of a bank depends upon the range and quality of services offered to its customers. The range of service covers: Mobilization of deposits, Remittances and Transfers, Collections NRI Account operations, Safety locker facility, Teller system, ATM etc. 13.In order to take advantages of new opportunities created by liberalization and globalization, the UCBs should work towards improving their position. For this purpose, the UCBs have to formulate a strategy. The following would be the main elements in the strategic plan:Introduction of professionalization in the management. Introduction of modern technology. A continuous process of human resource development. Toning up the customer service Review of the income and expenditure pattern.

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Indian Streams Research Journal

Dr.R.S.Shirasi Research Papers

Dr.R.S.Shirasi Hutatma Rajguru Mahavidyalaya Rajgurunagar, Tal.Khed, Dist.Pune- 410505