The Co-operative banking system forms
an integral part of the Indian financial system. It comprises Urban
Co-operative Banks and Rural Co-operative Credit Institutions. Co-operative banks in India are more than 100
years old. These banks came into existence with the enactment of the Agricultural
Credit Co-operative societies Act in 1904. These banks operate mainly for the
benefit of rural areas particularly the agricultural sector.
Co-operative Banks(UCBs) also referred to as Primary Co-operative Banks – are
mostly located in towns and cities and cater the banking and credit requirements of the Urban clientele , e.g small trader or business man, the
artisan or factory workers, the salaried people with a limited fixed income in
urban or semi urban areas. The main functions of the bank are to promote thrift
and saving habits by attracting deposits from members and non-members and
advance loans to the members. Though some UCBs have performed creditably in the
recent years, a large number of them have shown discernible signs of weakness. The operational
efficiency is unsatisfactory and characterized by low profitably, ever growing
Non-Performing Assets (NPAs) and relatively low capital base. The large scale
sickness in the UCBs has shaken the public confidence in co-operative banks. In
this context, this paper makes an attempt to examine the working performance of
the Valparai Urban Co-operative Bank of Coimbatore District has been taken.
of Valparai Urban Co-operative Bank:
bank was originally organized as “Annamallais Estate Worker’s Cooperative Thrift Bank”. This is the only
Urban Cooperative Bank which came into being the Post-Independence era. The
bank was registered on 29th October 1948 and commenced its business
on 6th May 1949.The chief promoter of this bank was Dr. P.H.Daniel M.B.B.S, who served as
President from 1952 to 1965 for the period of 13 years continuously and then
* Assistant professor, Department of Co-operation,
Quaide Milleth College for Men, Medavakkam Chennai- 600 100 , Tamil
Mr.Ramasamy was appointed as the president of this
Bank. During the initial period, the State Government appointed a Senior
Inspector of Cooperative Societies to look over the affairs of the bank and
as subsidy to this bank.
During the initial stages, the bank provide
incentives for the deposit mobilization by granting advance increment to the
staff of the bank who collected deposits of Rs.10,000 and above for their
special efforts over a period of years.
This bank is the smallest Urban Coperative
Bank in Coimbatore District.
Objectives of the study:
main purpose of the study is to examine the performance of the bank in
To analyze the position of
loan and advances issued by the bank.
To identify the NPA position
and working result of the bank.
To find out ways and
means for improving the efficiency and effectiveness in the
operation of the bank.
present study is based on secondary data and other information provided by the
bank in its published annual reports and audit reports for the period from
2005-06 to 2014-15. The variables taken for analysis are share capital, reserve
fund, deposits, loans, working capital, NPA and working result of the bank.
Besides tabular analysis, the statistical tool Compound Average Growth Rate
(CAGR was worked out to draw inferences.
Analysis and Interpretations:
1 reflects the financial position of the Valaprai urban Co-operative Bank.
Share capital occupies an important
position among the owned funds. Share capital is the very foundation of any
business organization and in case of Urban Co-operative Bank which creates its
own power to build up its borrowing capacity. With the introduction of the
Banking Regulation Act, 1949 as applicable to co-operative societies from
UCBs are required to have at
least Rs.1Lakhas its paid up share
capital and reserves are being called as ” Banks”. The bye-laws of UCBs provide
that every borrowing member must contribute to the share capital of the bank in
the prescribed proportion, which is normally 10% of the amount borrowed.
is observed from the table that the share capital of the bank has decreased
from Rs.71.70 lakhs in 2005-06 to Rs. 60.07 in 2011-12 and thereafter it has
increased gradually. The growth rate of
share capital was negative i.e -7.34% in 2005-2006 further which has decreased to -0.55% in
2010-2011. It has shown positive growth from during 2011-2012 (0.10%) to
14.68% in 2014-2015.
The reserves are made out of
net profits of the bank. It consists of Statutory Reserves and other reserves
available for distribution of dividends to members. The position of reserve
fund which indicates the health of the bank which is presented in below Table.
The reserves of the bank remains constant from 2005-2006 to 2011-2012 which
stood at Rs.34.39 lakhs further which has increased to Rs.51.51 lakhs in
2014-2015. The growth rate of Reserve
fund had shown 0% over the study period except the year 2012-2013 (49.78%) and
The bank accepts various kinds of
deposits both from members and non-members such as current deposit, saving
deposit, fixed deposit, recurring deposit and other deposit schemes. The below
table reveals that the deposit position of the bank has decreased from Rs. 405.32 lakhs in 2005-2006 to Rs 214.92
lakhs in 2012-2013 further which has raised to Rs. 246.47 Lakhs in 2014-2015
and there is negative growth in year after year during the study period .The
positive growth in deposits are felt during the last two years (1% in 2013-2014
and 13.54 % in 2014-2015).
The selected sample
bank invests their surplus funds in Coimbatore District Central Co-operative bank, other trusted securities,
and other financial agencies in the form of share capital and deposits. The
investment position of the bank has decreased from Rs.
252.56 lakhs in 2005-2006 to Rs. 88.12 lakhs 2012-2013. There was a positive Compound Annual Growth
Rate in last two years of the study period i.e 9.66% in 2013-2014 and 0.48 % in
The UCBs are generally
borrowed from Central Co-operative Bank and other financing agencies. The
maximum borrowing power of the UCB may be fixed at 25 times of the owned fund. To
extend loans and advances to members and to maintain fluid resources and
liquidity, the UCB should ask for the higher financing agencies like Central
Co-operative Bank of state co-operative bank for its financial accommodation.
The borrowing position
of the sample bank have been heavily
increased from Rs.8.82 lakhs in 2005-2006 to Rs254.55
lakhs in 2012-2013 and the last two
years of the study period the borrowing position has gradually decreased
due to increasing trend position of share capital base and deposits. The compound annual rate had
depicted higher positive growth in the year 2009-2010 which stood at 889.58%.
The demands of the members and customers, the
bank has to maintain working capital. The working capital consists of share
capital, reserve fund, deposits, borrowings and undistributed profits. The working capital registered much
fluctuating trend during the study period. There was a higher positive growth
rate in 2009-2010 at 21.94 % and
there was a lower negative growth rate in 0.84% in 2013-2014.
Loans and Advances
The resources of the UCBs are invested in the form of loans and
advances. The lending policy of an UCB is laid down in its bye-laws. However,
it is also subjected to the directives of the RBI and policies of the
respective state governments and central government. The UCBs should observe
the norms of optimum level of advances as fixed by the RBI, which are 60% of
the deposits. Urban Co-operative Banks grant assistances
to small transport operation like handicrafts, rickshaws, Taxis, delivery van,
small vendors, dairyman, artisans, garment makers, Small Businessman and etc.
Loans may be given for starting small business venture like printing press,
saloons, and laundries and to professionals like doctors, engineers and
The loans outstanding position of
the bank shows wide fluctuations over the study period. There was a higher
positive annual compound growth rate in 2009-2010 (20.37%) and it revealed a
negative growth rate in 2013-2014 (0.77%) because the bank is suffering with
flood of deposits and unable to deploy it.
An Asset becomes
‘Non-Performing’ when it ceases to generate income for a bank. This happens
when interest or installment principal or both are not received on due dates
and the delay exceeds a ‘Stipulated Time’.
It is clearly understood from the table the provision of
NPA of the bank has increased from Rs.116.11 lakhs in 2005-2006 to Rs. 172.57
lakhs in 2008-2009 further which has reduced to Rs.92.32 lakhs in 2012-2013.
The NPA provision of the Bank was high recording
highest positive growth rate of 24.65
% and 18.97 % respectively. The
growth rates were negative in three years i.e 2008-2009 to 2010-2011 at 19.96 %,
22.14 % and 27.58 %
9. Business Result
of the Bank:
Profitability is an
indication of the efficiency with which the operations of the banks are carried
out. Poor operational efficiency results in poor profits. Members are
interested to know the profitability of the banks as it indicates the return
which they can get on their investments. Even though Cooperative Urban Banks are not profit-making institutions,
some amount of profit is to be earned in order to augment their own sources to
provide for statutory and other reserves and to pay a reasonable return on its
share capital. Besides, profit also helps in boosting public confidence. So an
evaluation of the profitability of the banks is dispensable which may indicate
the overall efficiency of the banks.
The profit and loss position of was
found negative in the years from 2005-06 to 2010-2011. Then, the bank has started to
earn profit, which was very low and stood at 0.17 lakhs in the year 2014-15.
of the study:
The share capital
position of the bank was recording negative growth rate in the
initial years afterwards it has shown positive
The reserves of the bank revealed a constant trend from 2005-2006 to 2011-2012 thereafter
which has been increasing in the study period.
The deposit position of the bank had shown a
decreasing trend in the initial period
and there is a positive trend in the last two years.
investment position of the bank had decreased from 2005-2006
to 2012-2013. There was a positive Compound Annual Growth
Rate in last two years of the study period.
of the sample bank had heavily increased except the last
years of the study period.
working capital registered much fluctuating growth rate during the study
7. The loans outstanding position of the
bank revealed the wide fluctuations over the
The provision allocated for the NPA of the bank depicted
decreasing trend up to
2012- 2013 further which showed an
The profit and loss position of the bank was found negative
from the year 2005-06 to 2010-11.
Then, the bank has started to earn profit.
The bank should
increase its share capital base for better financial position.
The bank should take steps to trap more number
of deposits from its members and public people.
The working capital
should be maintained sufficiently by the bank in order to meet the expenses.
The bank has to increase reserved fund adequately for
The bank must try to increase their lending activities which
in turn increase its learning income.
The bank should be
keen to improve the position of net profit in the forthcoming year .
The bank should consider their investment function as
important as loaning in order to get better yield on funds.
The overall analysis shows that the
bank is not progressing well during the study period. So, it must adopt all the
suggestions stated above to improve its overall financial health. The bank must
make all the possible measures to improve its profitability by way of attracting
deposits and extending loans and advances. The bank has to ensure greater transparency in
their overall working to rebuild the confidence of their business among it