A Study of Co-operative Banks and Some Challenges

(A Case of the Varachha Co-operative Bank)

The origins of the urban co-operative banking movement in India can be traced to the close of nineteenth century. After getting inspired by the success of the experiments of the co-operative movement in Britain and the co-operative credit movement in Germany, such Societies were set up in India. These co-operative societies are based on the principles of cooperation, mutual help, cooperative decision making and open membership. Mr. Henry C. Devine (1908) defined a co-operative bank as a mutual society that was formed, composed and governed by working people themselves for encouraging regular saving and granting small loans on easy terms of interest and repayment. N. Barou (1930) defined a co-operative bank as a firm that is run by co-operative and labour organization for the purpose of accumulating their collective fund and the savings of their individual members. It manages their financial interests, grants credit to co-operative and labour enterprises, and helps to satisfy the needs for personal credit of their individual members, the banks surpluses are distributed between shareholders, depositors and borrowers or reserved. The term co-operative Banks, though non-formally defined, refers to primary cooperative banks located in urban and semi-urban areas. These banks till 1996, were allowed to lend money only for non-agricultural purposes. This distinction does not exist today. These banks were traditionally centred around communities, localities workplace groups. They initially lent to small borrowers and business. Today, their scope of operations has widened considerably. Co-operatives represented a new and alternative approach to organization as against proprietary firms, partnership firms and joint stock companies which represent the dominant forms of commercial organization. Co-operative organizations have developed in full swing in India, especially in Gujarat. Initially the Urban Co-operative Bank was established just to provide financial support to small scale industries. Then it flourished like wild fire in jungle and is providing all kinds of support to small scale industries in urban areas. The Co-operative movement in Gujarat has earned the prestige of developing state from its backward roots. The movement also received an honest trust from all over the world. The wisdom, courageous nature, sensibilities and good governance have always been praiseworthy in Gujarat. Gujarat has confidently achieved the prestigious status in this regard. There is a qualitative richness, peace and harmony in Gujarat. The Co-operative nature, culture and spirit of Gujaratians have been responsible for this status.

The first known mutual aid society in India was probably the Anyonya Sahakari Mandali organized in the erstwhile princely state of Baroda in 1889 under the guidance of Vithal Laxman also known as Bhausaheb Kavthekar Urban Co-operative Credit Societies in their formative phase. Then it came to be organized on a community bases to meet the consumption oriented credit needs of their members. The co-operative banking sector has been developed in the country to supplement the village folk who are in need. Co-operative banks are also known as State Co-operative Banks, Central Co-operative Banks and Urban Co-operative Banks. The first study of urban co-operative banks was taken up by RBI in the year 1958-59. The report published in 1961 acknowledged the widespread and financially sound framework of urban co-operative banks, emphasized the need to establish primary urban co-operative banks are new centres and suggested that State Government lend active support to their development. In 1963, Varde Committee recommended that such banks should be organized at all Urban Centres with a population of 1 lakh or more covering all communities and Casts. Co-operative Banks are organized and managed on the principle of Co-operation, inter-personal help and mutual help. They function with the rule of one member, one vote function on no profit no loss basis. The Co-Operative banks do not follow the principle of maximising the profit. Co-operative banks perform all the main banking functions of deposit, mobilization supply of credit and provision of remittance facilities. They provide limited banking products and are functionally specialist in agriculture banks and now also provide housing loan. Gujarat holds second position in the development of the UCBs in India and is known as the mother land of the co-operative as the first co-operative body of India was formed in 1989 in Baroda named ANYONYA SAHAKARI MANDALI. Similarly the first registered UCBs of india named The Surat Peoples Co-operative Bank Ltd. It was established in Surat City of Gujarat in March 1922. That was the dawn of co-operative banking inspired by the success of this bank, similar UCBs developed very fast in other parts of Gujarat State. History of The Varachha Co-operative Bank The people of Saurashtra, located in western part of Gujarat, are always depending upon the rain-fed cultivation. For the purpose of generating income sources in an alternate way for their survival, they have chosen Surat city, where there is a good scope for trade in Diamond and Textile sector. Many of them have entered into the trading sector and the rest of them on labour front. In fact, most of them are involved in diamond trade particularly in Varachha area. Sincere efforts were made by a well known philanthropist, short-story writer and columnist in local dailies, Mr. P.B.Dhankecha founder chairman of Varachha bank. The Varachha Co-operative Bank has its license No.UBD GUJ: 1153 p Dt. 1-7-95 and register
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No. SA 2914 Date 27-1-95 and started 16-10-1995. Now-a-days Mr. Kanjibhai Bhalala has been the Chairman of this bank. At the end of the first financial year the number of shareholders was 4484, share capital 57.44 lacs, deposits Rs. 2.70 Crores, advance Rs. 2.07 Crores and profit stood at 4.77 lacs. During the March month of the year 2012, Varachha Bank has increased 18,837 (320%) Shareholders, Rs. 7.90 (1275%) Crores Share Capitals, Rs. 289.70 (10629%) Crores deposits, Rs.155.88 (7430%) Crores advances and Net Profit stood at Rs. 5.05 (10554%) Crores. Now-a-days there are 11 branches like head office (Eifel Tower), Lambe Hanuman Road branch, Kamrej branch, Ring Road branch, Kadodara branch, Katargam branch, Punagam branch, Sachin branch, Navsari branch, Ahmedabad branch and Ankleshwar branch. The financial strength of the Varachha bank has been mentioned as following: The Varachha Banks Financial Strenth Profitability Ratio & Leverage / Capital Structure Ratio The researcher tries to count Profitability Ratio and Leverage / Capital Structure Ratio of the Six Banks are as following: The Varachha Co-operative Bank, The Surat Peoples Co-operative Bank, Surat National Co-operative Bank, The Sutex Co-operative Bank, The Prime Cooperative Bank and The Sarvodaya Co-operative Bank. The profitability Ratio of these banks are (1) Operating Profit Margin Ratio (2) Cost of External Funds Ratio (3) Interest Earned to Total Funds Ratio (4) Interest Paid to Total Funds Ratio (5) Return on Total Funds Ratio (6) Net Profit to Total Assets Ratio and Leverage/Capital Structure ratio of these banks are (1) Deft. Equity Ratio (2) Dividend Coverage Ratio. Profitability Ratio 1. Operating Profit Margin Ratio :Operating Profit Margin Ratio is an important ratio measuring the profitability of the UCBs. This ratio reflects the operating efficiency of the UCBs. It also indicates the efficiency of the management to earn a higher margin per income. Operating Profit Margin Ratio = Operating Profit Operating Income 100

Table No.1 (In Percentage)

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Name of the Bank 2007-08 The Surat peoples Bank Surat National Bank The Sutex Bank The Prime Bank The Varachha Bank The Sarvodaya Bank 26.15 21.59 12.65 25.97 33.31 14.37 2008-09 21.88 25.02 12.04 22.37 20.08 18.64

Year 2009-10 18.31 22.85 11.97 16.48 18.33 14.00 2010-11 26.82 20.41 14.31 13.11 23.06 15.80 2011-12 22.36 17.76 12.53 18.14 24.21 24.53 Average

Average 23.10 21.53 12.70 19.21 23.80 17.47 19.63

Rank II III VI IV I V

The total average is 19.63%. It indicates good development of funds as well as efficient assets-liability management. This table shows that the operating profit margin of the Varachha Bank is the highest ratio of 23.80% in compared to the average of the ratio of other Banks. The table and chart indicated above shows that a high operating profit margin ratio indicates healthy development of Bank. 2. Cost of External Fund Ratio Cost of External Fund Ratio is an important measure of evaluating the cost of obtaining external funds. Higher percent of this ratio indicates the inefficiency of management and lower percentage of this ratio indicate the efficiency of management in obtaining fund. Cost of External Funds Ratio = Interest Paid External Funds Table No.2 (In Percentage) Name of the Bank
4

100

Year

Average

Rank

The Surat peoples Bank The Surat National Bank The Sutex Bank The Prime Bank The Varachha Bank The Sarvodaya Bank

200708 5.63 5.91 5.08 4.91 4.75 6.46

200809 6.61 6.08 5.35 5.50 4.88 6.29

200910 6.36 5.87 5.67 5.84 4.49 6.16

201011 6.43 5.40 5.41 5.89 4.66 5.95

201112 6.36 6.10 6.03 6.23 4.45 6.14 Average

6.28 5.87 5.51 5.68 4.64 6.20 5.70

VI IV II III I V

The total average of UCBs in study reaches up to 5.70% that is ideal. The Varachha Bank has its lowest ratio is 4.64% in compared to other banks. This is indication of good efficiency in the management of bank.

3.

Interest Earned to Total Funds ratio

Interest Earned to Total Funds is an important ratio of measuring the efficiency of management regarding employing its funds in an optimum manner. An interest earned has direct effect on profitability of the UCBs. Banks maximum returns can be earned as well as liquidity position can be maintained. Interest Earned to Total Fund Ratio = Interest Earned Total Funds 100

Table No.3 Name of the Bank

5

Year

(In percentage) Average

Rank

2007-08 The Surat peoples Bank Surat National Bank The Sutex Bank The Prime Bank The Varachha Bank The Sarvodaya Bank 8.16 7.93 8.06 7.49 7.59 8.07

2008-09 8.62 8.25 8.32 7.42 7.97 8.06

2009-10 8.05 7.86 8.35 7.46 6.75 7.84

2010-11 8.67 7.24 8.58 7.53 7.46 8.36

2011-12 8.64 8.40 9.19 8.25 8.09 9.07 Average 8.43 7.94 8.50 7.63 7.57 8.28 8.06 II IV I V VI III

It is observed that the total average ratio of UCBs is 8.06%. It is preferable. The highest average ratio of The Sutex Bank is 8.50%. But the average ratio Varachha bank is 7.57% that is the lowest in compared to the rest of the banks. It indicates that The Varachha Bank is inefficient in compared to other banks.

4.

Interest Paid to Total Funds Ratio

Interest Paid to Total Funds Ratio is an important ratio for measuring the profitability of the UCBs. It judges the efficiency of management in obtaining funds. In the banking business, interest paid occupies an important place in total operating cost and thus it affects profitability. Interest Paid to Total Funds Ratio = Interest Paid Total Funds 100

Table No.4 (In Percentage)

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Name of the Bank 2007-08 The Surat peoples Bank Surat National Bank The Sutex Bank The Prime Bank The Varachha Bank The Sarvodaya Bank 4.12 4.49 4.29 4.01 3.38 5.21 2008-09 4.84 4.59 4.54 4.44 3.46 4.98

Year 2009-10 4.82 4.58 4.92 4.82 3.28 4.96 2010-11 4.68 4.29 4.75 4.99 3.51 4.90 2011-12 4.72 4.93 5.21 5.24 3.47 5.03 Average

Average 4.64 4.58 4.74 4.70 3.42 5.02 4.52

Rank III II V IV I VI

This ratio indicates the interest paid per rupee of total funds obtained and also shows obligation of banks towards their depositors. The total average ratio is 4.52%. The lowest ratio of Varachha Bank is 3.42%. This ratio indicates that the Varachha Bank has been successful and efficient in obtaining low cost deposits from the customers.

5.

Return on Total Funds Ratio

Return on Total Funds Ratio is also one of the important measures of profitability. It measures the profitability of all financial resources invested in the assets of a bank. It also indicates efficiency of the management in advancing loans and investing funds in the most profitable manner so that the bank can earn handsome amount of interest. Return on Total Funds Ratio = Operating Profit Total Funds Year 2007-08 2008-09
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100

Table No. 5
Name of the Bank

(In Percentage)
Average 2010-11 2011-12 Rank 2009-10

The Surat peoples Bank Surat National Bank The Sutex Bank The Prime Bank The Varachha Bank The Sarvodaya Bank

8.16 7.93 8.06 7.49 7.59 8.07

8.62 8.25 8.32 7.42 7.97 8.06

8.05 7.86 8.35 7.46 6.75 7.84

8.67 7.24 8.58 7.53 7.46 8.36

8.64 8.40 9.19 8.25 8.09 9.07 Average

8.43 7.94 8.50 7.63 7.57 8.28 8.06

II IV I V VI III

This ratio measures the operating efficiency of the management of the UCBs in utilizing funds. This Table No.-5 shows that Varachha Banks average ratio is 7.57%. It is also the lowest one in compared to all other banks that shows the inefficiency of the bank.

6. Net Profit to Total Assets Ratio

Net Profit to Total Assets Ratio measures overall profitability of UCBs. This ratio is an advancement of Return on Total Funds Ratio. This ratio reveals net earnings of the UCBs by utilizing fund. It gives profit according to the investment of the fund in it. Net Profit to Total Assets Ratio = Net Profit Total Assets 100

Table No.6 Name of the Bank The Surat peoples Bank 2007-08 0.78 2008-09 0.87 Year 2009-10 0.55 (In Percentage) Average Rank 2011-12 0.53 0.71 VI

2010-11 0.80

Surat National Bank The Sutex Bank The Prime Bank The Varachha Bank The Sarvodaya Bank

0.98 0.99 1.02 1.29 0.49

1.27 1.03 0.99 1.33 1.33

1.01 1.04 0.70 1.09 0.85

0.73 1.03 0.50 1.18 0.65

0.72 1.01 0.63 1.36 1.59 Average

0.94 1.02 0.77 1.25 0.98 0.95

IV II V I III

A higher ratio indicates handsome return on funds employed and the banks ability to maintain reserves and provide dividend to its members. This Table No.-6 shows that among all other banks, the Varachha Bank has maintained a good average of 1.25% and is highest among all the banks. It means that the bank is efficient in maintaining good reserves and provide maximum dividend to its members.

Important Parameter of the Generalization of Urban Co-operative Banks (2007-08 to 2011-12)

The researcher tries to show the important parameter of the generalisation of UCBs. The following table shows the overall average ratio and rank according to their performance of operating profit margin ratio.
Name of the Bank OPM Ratio
Ave. Rank

CEF Ratio
Ave. Rank

IETF Ratio
Ave. Rank

IPEF Ratio
Ave. Rank

RTF Ratio
Ave. Rank

NPTA Ratio
Ave. Rank

The Surat peoples Bank Surat National Bank

23.10 21.53

II III

6.28 5.87

VI IV

8.43 7.94

II IV

4.64 4.58

III II

8.43 7.94

II IV

0.71 0.94

VI IV

The Sutex Bank The Prime Bank The Varachha Bank The Sarvodaya Bank

12.70 19.21 23.80 17.47

VI IV I V

5.51 5.68 4.64 6.20

II III I V

8.50 7.63 7.57 8.28

I V VI III

4.74 4.70 3.42 5.02

V IV I VI

8.50 7.63 7.57 8.28

I V VI III

1.02 0.77 1.25 0.98

II V I III

Leverage / Capital Structure Ratio 7. Debt-Equity Ratio

The relationship between borrowed fund and owners capital is a popular measure of the long term financial solvency of a bank. This relationship is shown by the debt equity ratio. This ratio reflects the relative of creditors and shareholders against the assets of the bank. This ratio indicates the relative proportions of Debt and equity in financing the assets of a bank. Dept. Equity Ratio = Total Debts_____ Share Holders Equity

Table No.7 (Ratio)

Name of the Bank The Surat peoples Bank Surat National Bank The Sutex Bank The Prime Bank The Varachha Bank The Sarvodaya Bank 2007-08 3.35 3.92 7.22 8.27 3.92 5.31 2008-09 3.31 5.27 7.62 10.19 3.73 5.59 Year 2009-10 3.67 5.89 8.59 10.87 4.49 5.82 Average Rank 2010-11 3.32 6.18 9.28 13.05 4.92 5.99 2011-12 3.71 6.40 9.51 12.67 4.92 6.13 Average 3.47 5.53 8.45 11.01 4.40 5.77 6.44 VI IV II I V III

This figure indicates that Varachha Banks D/E ratio is 4.40%. It shows that bank has good liquidity position. Bank is capable to collect good amount of funds from depositors and other creditors.

8.

Dividend Coverage Ratio

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This ratio measures the ability of a bank to pay dividend on equity share which carry a stated rate of return. This ratio counts net profits after taxes and the amount of equity dividend. This ratio reveals the safety margin available to the equity shareholders. Dividend Coverage Ratio = EAT (Earn After Tax) Equity Dividend

Table No. 8 (Ratio)

Name of the Bank 2007-08 The Surat peoples Bank Surat National Bank The Sutex Bank The Prime Bank The Varachha Bank The Sarvodaya Bank 3.46 4.13 2.66 5.60 5.21 2.20 2008-09 3.11 4.79 2.70 5.66 5.47 6.19 Year 2009-10 1.83 3.77 2.67 3.48 4.83 3.65 2010-11 2.09 2.86 2.67 2.31 4.27 2.66 2011-12 1.51 2.42 2.66 2.44 4.60 5.96 Average 2.40 3.59 2.67 3.90 4.87 4.13 3.59 VI IV V III I II Average Rank

The highest average of the dividend coverage ratio is 4.87 of Varachha Bank. But the Co-operative Society Act 1961 cannot permit to give dividend more than 15% to the share holder. So the amount of the dividend generally is fixed, but the equity capital could be increased. But the banks are giving maximum dividend as per Co-operative Society Act.

Challenges
From the deep study of these six banks, it is observed that the UCBs are generally facing so many problems of maintaining business like low capital base, high maintenance cost of branches, keen competition, changing policies of government, political influence, lack of professional skill, low level of customer satisfaction, inadequate credit planning and loan
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appraisal, poor recovery performance, mounting overdue and high level of non performing assets, etc. These problems are confronted by the bank on local level, but there are some new challenges also for their growth like reliability of the UCBs. Services like multinational banks are not met with. Other problems like licensing policy, dual control, corporate governance, capital adequacy, legislative reforms, unlicensed and weak banks, agenda of future reforms are also a great concern.

Suggestions :1. Improvement of return on funds should be increased. The portfolio to advance, simplified procedure of advancing and customers should be provided. 2. The profitability of UCBs can still be reformed. The management of the UCBs should try to reduce their operating cost by exercising efficient control over their cost of external funds and increasing operating income by utilizing funds to their full capacity. 3. Management should ensure that important matters having significant bearing on the proper functioning and working of the bank such as mobilization of deposits targets, investment, liquidity assets, advances specially priority sector advances, over dues and recoveries etc. should be reviewed periodically in order to achieve better functioning. 4. All UCBs should introduce other innovative deposit schemes for saving and current deposits suited mainly to the habits and needs of the people of the area in order to attract a larger quantum of deposits from both members and non members. 5. For collecting low cost deposits, they should implement daily collection schemes in areas where small vendors, shop keepers, daily wages earners should be concentrated. 6. They should introduce mobile saving vans so that maximum amount can be collected. 7. Fully computerization, prompt and courteous customer services by the Banks will naturally attract potential depositors. 8. The UCBs should continue to hold NPAs on their books even after marking provisions, due to the lack of time in recovery. providing door to door services to the

References :1. Annual Report of March-2007 to March-2012, All the UCBs under study. 2. Barou, N. (1930). Co-operative Banking, P.S. King & Sons, London. 3. Bedi, R.D. (1983), Theory, History and Practice of Co-operation, Twelfth Edition Revised, Internation Publishing Houses. P.No.-169-172.
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4. Devine , Henry C. (1908) Peoples Co-operative Banks, Cassell & Company, Limited, London. 5. http:// forbesindia.com/article/isb/the role of urban cooperative banks-in-financialindusion/ 28382 Date: 15/2/13 6. http://www.varachhabank.com/index.php?pgid 11/02/13 7. Patel, Ajaybhai H., Sahakari Bank Karmachari Pathdarsika GSC Bank, Sahakarbhavan, Ahemedabad. 8. Prof. Vyas, J.C. (2013), Apani Vaat, Sahakar Chetana Monthly Magazine, (February-2013), Ahemedabad. 9. Report on Trend and Progress of Banking in India 2000-2001 & 2008-2009. (Website) 10. Sheth, Ketul (March-2010) Financial Statement Analysis, A Study of Urban Cooperative Bank in Surat City- Unpublished M.Phil., Dissertation, Veer Narmad South Gujarat University, Surat. 11. Shodhganga.inflibnet.ac.in/bitstreen/10603/2543/9109/-chepter-1-2 Date: 27/02/2013 12. Siva Shanmugam, D. (2011) Urban Co-operative Banks, Problems and Prospects, Department of MCA, Bhavnagar University, Coimbatore. Date: 21/12/11.

Appendix 1. Progress of UCBs in India, Gujarat and South Gujarat

Level All India Year March-2000 No. of Banks 1784 Deposits Crores (Rs.) 71189
13

% Increased -

Advances Crores (Rs.) 45995

% Increased -

Gujarat South Gujarat

March-2009 March-2000 March-2009 March-2000 March-2009

1721 341 260 42 33

158733 16703 25564 2401 3199

123% 53% 33%

97918 10468 14091 1278 1914

113% 35% 50%

(Ref. :- Report on Trend and Progress of Banking in India 2000-01 & 2008-09)

2. Financial Strength of Varachha Co-operative Bank

S R N O YEAR SHAR E HOLD ERS CAPIT AL DEPOSI TS ADVANC ES NET PROF IT WORKI NG CAPITA L No. of A/Cs. AUDI T CLA SS DIV.RA TE

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

31-MAR-96 31-MAR-97 31-MAR-98 31-MAR-99 31-MAR-00 31-MAR-01 31-MAR-02 31-MAR-03 31-MAR-04 31-MAR-05 31-MAR-06 31-MAR-07 31-MAR-08 31-MAR-09 31-MAR-10 31-MAR-11 31-MAR-12

4484 5275 5566 5955 6429 6887 7342 8148 8348 9170 9569 10717 11569 12669 13566 18766 18837

0.57 0.77 0.95 1.31 1.82 2.51 3.11 3.44 3.64 3.95 4.04 4.31 4.63 5.24 5.91 7.29 7.90

2.70 10.72 17.02 37.54 62.45 101.03 123.04 129.79 139.19 136.27 158.24 162.97 168.27 171.57 224.16 273.95 289.70

2.07 6.69 10.39 22.53 39.94 55.21 67.32 67.25 61.64 64.55 59.67 73.26 80.23 92.03 94.89 115.88 155.88

0.05 0.51 1.11 1.34 2.09 3.67 4.70 4.73 5.67 3.24 2.38 1.51 2.81 3.02 3.15 4.06 5.05

3.57 13.02 23.33 44.60 72.43 115.83 146.41 159.35 175.50 175.07 197.49 208.38 221.15 226.96 279.11 374.50 374.31

3318 8638 15912 26398 44229 63320 71836 80490 90940 95512 98501 102317 108906 105674 123260 128516 140248

A A A A A A A A A A A A A A A A A

15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 15.00% 12.00% 12.00% 12.00% 12.00% 12.00% 12.00% 15.00% 15.00%

Website: http://www.varachhabank.com/index.php?pgid 11/02/13

3. Facilities Provided by The Varachha Bank

Vehicle loan ( 80% loan of quotation) Loan against gold ornaments ( till Rs. 5 lacs) Loan on personal guarantees (surety loan) Retail trade business Professional and self employed Loan against banks own deposits/NSC
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Cash credit- hypothecation on stocks on trade Technology Upgradation Finance (TUF) loan with subsidy Housing loan for period of 10 years Apart from this, the bank has entered into the insurance business arrangement with

IFFCO-TOKIO. The bank has covered with accident insurance cover for the shareholders, depositors and borrowers.

4. Other facilities Provided by the Bank:

CC TV system has been installed all the branches Bank has started E- payment facility Personalized cheque book are issued to all the customers of the Bank RTGS/NEFT facility is also available Mobile Banking system to customers for getting various details about their accounts like current balance, saving balance Cheques return status, FD rates, loan rates, various loan schemes etc. through SMS Display/ Provision of VAT Machine in banking hall for Customers approach Strong working Capital, Deposit base and their investment assets are profit oriented NET NPA Continuously at zero percent No default in CRR/SLR, Concurrent audit System, Implementation to Know Your Customer (KYC) policy, Teller system for payment up to Rs.20,000 in CA and Rs.10,000 in SB, Franking of adhesive stamp duty-arranged by Revenue Dept. of Gujarat State. ATM cards valid in National Banks are provided to the customers Insurance for accidents is provided to the shareholders and customers up to Rs. 50000 to 300000.

The origins of the urban co-operative banking movement in India can be traced to the close of nineteenth century. These co-operative societies are based on the principles of co-operation, mutual help, cooperative decision making and open membership. The term co-operative Banks, though non-formally defined, refers to primary cooperative banks located in urban and semi-urban areas. These banks till 1996, were allowed to lend money only for non-agricultural purposes.

15

Co-operatives represented a new and alternative approach to organization as against proprietary firms, partnership firms and joint stock companies which represent the dominant forms of commercial organization. Co-operative organizations have developed in full swing in India, especially in Gujarat. Initially the Urban Co-operative Bank was established just to provide financial support to small scale home-industries. The Co-operative nature, culture and spirit of Gujaratians have been responsible for this status. Co-operative Banks are organized and managed on the principle of Co-operation, inter-personal help and mutual help. They function with the rule of one member, one vote function on no profit no loss basis. The financial strength of the Varachha bank has been mentioned as following: The researcher tries to count Profitability Ratio and Leverage / Capital Structure Ratio of the Six Banks Operating Profit Margin Ratio (2) Cost of External Funds Ratio (3) Interest Earned to Total Funds Ratio (4) Interest Paid to Total Funds Ratio (5) Return on Total Funds Ratio (6) Net Profit to Total Assets Ratio and Leverage/Capital Structure ratio of these banks are (1) Deft. Equity Ratio (2) Dividend Coverage Ratio. The researcher tries to show the important parameter of the generalisation of UCBs.

Challenges

Suggestions

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