Performance Analysis of Ballary district Cooperative Bank in Karnataka

 

Dr. S. Maheswari

Asst. Prof. in Commerce, G.F.G.C., Siruguppa,

 

ABSTRACT:

A century ago the cooperative movement had dawned in India to eradicate the indebtedness of the people and to accelerate the pace of agricultural production. The cooperative credit system is eminently suited to achieve the desired social, economic changes in rural India. Several committees and commissions as a part of improving the economy of rural sector were constituted to examine the working of cooperative banks with sound business operations including financial performance by evolving various means continuously as well as innovative thoughts to achieve the economic viability as well as commercial feasibility. An important pre-requisite for sound operations of a banking institution majorly lies on the effective mobilization and management of resources. District Central Cooperative banks play a pivotal role in the growth of farming and allied sectors. The quality of services rendered by the cooperative banks can be directly attributed to their capacity in mobilization of resources through various means. The role of cooperative banks is imperative in Indian financial system with broad network in the arena of deploying credit to the productive economic activities as well as employment oriented programmes. The cooperative banks have been rendering yeoman services by adopting an effective funds management approach with inbuilt mechanism based on the principles of cooperation, self help and mutual help. A sound financial management of any institution always depends upon its well developed provisions under by-laws and operative mechanisam being adopted strategically. Procuring the need resources under everchanging competitive environment for optimum business operations is the onerous task for DCCBS. An attempt is made to analyse the performance of various aspects of Ballari DCCB viz membership, branches, share capital, reserves, borrowings, deposits, deployment of credit, working capital, overdues and NPAs by comparing the same with per DCCB in the state of Karnataka.

 

 

 

 

 

 

INTRODUCTION:

A century ago the cooperative movement had dawned in India to eradicate the indebtedness of the people and to accelerate the pace of agricultural production. The cooperative credit system is eminently suited to achieve the desired social, economic changes in rural India. Several committees and commissions as a part of improving the economy of rural sector were constituted to examine the working of cooperative banks with sound business operations including financial performance by evolving various means continuously as well as innovative thoughts to achieve the economic viability as well as commercial feasibility.

 

Banks are becoming important in India because of the numerous services, which they perform. He cooperative credit societies at the grassroots level are intended not only to cater to the credit requirements of member but also to; provide several credit linked services like input supply, storage and marketing of produce. Keeping in view of the importance of cooperative banks and credit societies, several committees, from the All India rural Credit Survey committee to the latest Vaidyanathan Committee, have stressed the need for major role of cooperatives in providing credit and allied services in the rural sector.

 

The District Central Cooperative Banks as the name suggests have an area of operation covering a single district. In any district the banking system would comprise commercial banks, cooperative banks and other agencies like State Financial Corporation, MFIs, non formal agencies. Even in such scenario the DCCBs are maintaining their identity and providing he much needed credit to the farming sector. The quality of services rendered by the cooperative banks can be directly attributed to their capacity in mobilization of resources through various means. The role of cooperative banks is imperative in Indian financial system with broad network in the arena of deploying credit to the productive economic activities as well as employment oriented programmes.

 

An important pre-requisite for sound operations of a banking institution majorly lies on the effective mobilization and management of resources. District Central Cooperative banks play a pivotal role in the growth of farming and allied sectors. The quality of services rendered by the cooperative banks can be directly attributed to their capacity in mobilization of resources through various means. The role of cooperative banks is imperative in Indian financial system with broad network in the arena of deploying credit to the productive economic activities as well as employment oriented programmes. The cooperative banks have been rendering yeoman services by adopting an effective funds management approach with inbuilt mechanism based on the principles of cooperation, self help and mutual help. A sound financial management of any institution always depends upon its well developed provisions under by-laws and operative mechanism being adopted strategically. Procuring the need resources under ever changing competitive environment for optimum business operations is the onerous task for DCCBs. An attempt is made to analyze the performance of various aspects of Ballary DCCB viz membership, branches, share capital, reserves, borrowings, deposits, deployment of credit, working capital, over dues and NPAs by comparing the same with per DCCB in the state of Karnataka.

 

REVIEW OF LITERATRE:

Some of the studies relevant on the topic are hereunder reviewed to appraise the operational performance of DCCBs.

 

Dr. Mariappan in his article titled as Indian Cooperative Banking Need for a Clear Road Map, had concluded that “Though there is increasing number of players in the financial system with every passing day, there cannot be any replacement to the role of rural credit disbursement of cooperative banks. Their presence in the banking industry is paramount now in the new economic order. But to ensure their continued presence, some course correction is required by adopting the new market realities and negotiating the changing support of the Government and regulators.”¹

 

Dayanandan and Sasikumar evaluated the performance of Central Cooperative Banks in Kerala on the basis of their progress in membership, share capital, deposits, reserve funds, over dues and net profit earned. The stated findings of study are “the cooperative banks have achieved better performance in share capital, membership, deposits and reserve fund but there is no achievement in profit because of steady increase in over dues.”²

 

Lakshmanan and Dharmendra had examined the financial performance of all DCCBSs in Tamilnadu and observed indicators as: “Deposits and loan of the banks has positive growth rate but the over dues of them are increasing due to poor recovery and suggested that the banks should mobilize more deposits from the untapped sources and extend loan to uncovered sectors, banks should also take proper recovery action and the level of NPAs should be brought down to maintain liquidity.”³

 

OBJECTIVES:

·       To study the membership and branch expansion

·       To study the deposits mobilization and credit deployment

·       TO study the working capital

·       To study the over dues and NPAs

·       To compare each parameter with a State average

 

METHODOLOGY:

The scope of present study is confined to the performance analysis of the Bellary District Cooperative Bank (hereafter called BDCCB). The aspects covered in the study are to analyze the membership, branch expansion, share capital, reserve fund, borrowings, deposits, working capital, credit deployment, over dues, and NPAs. A period of 6 years from 2010-11 to 2015-16 is covered. The performance of the sample cooperative banks is compared with per cooperative bank in the state of Karnataka.

DATA SOURCE AND COLLECTION:

Information from published annual reports of Bellary DCCB, NAFSCOB and other published journals.

 

ANALYSIS OF DATA:

The collected data is presented in tables further used the tools of percentage analysis, mean and trend analysis

 

BALLARY DISTRICT PROFILE:

The Ballary DCCB was founded in December 1920. It was first registered as a cooperative society under the Madras Cooperative Societies act 1912. But after independence on the formation of the Karnataka State it is functioning under Karnataka Cooperative Societies Act 1959. Being the first District having maximum irrigation potential under Tunga Bhadra Dam it is rendering yeoman services for the cause of well being of farmers in the District.

 

Source: Annual NAFSCOB reports:

Equity is the best security of members in the cooperative. A member can withdraw his membership after the loan amount is repaid completely. Members of cooperatives are like passengers of a train using it when it becomes necessary but the running of train is not their business. A cooperative bank which is a financial entity is an association of members, who are the owners as well as customers of it.

 

Table 1 shows the membership and branches. Throughout the study period the membership of BDCCB is less to that of per DCCB in the State of Karnataka and it was decreasing. This trend was opposite in the case of per DCCB. Number of branches are constant throughout the study period, but in case of per DCCB in the State of Karnataka there is slight increase.

 

TABLE 1. MEMBERSHIP AND BRANCHES

YEAR	MEMBERSHIP		BRANCHES
	BDCCB	PER DCCB	BDCCB	PER DCCB
2010-11	663	3316	25	28
2011-12	668	4101	25	28
2012-13	668	3931	25	28
2013-14	528	4268	25	29
2014-15	533	5950	25	33
2015-16	524	6319	25	34
MEAN	598.67	3964	25	30
GROWTH	-19.46	90.56	0	7.14

 

 

TABLE 2. SHARE CAPITAL, RESERVES, DEPOSITS, BORROWINGS AND WORKING CAPITAL                             Rs. In Crores

year	Share capital		Reserves		Deposits		Borrowings		Working capital
	BDCCB	PER DCCB	BDCCB	PER DCCB	BDCCB	PER DCCB	BDCCB	PER DCCB	BDCCB	PER DCCB
2010-11	9.62	18.76	23.36	38.76	302.37	334.19	97.93	115.59	466.71	530.78
2011-12	10.43	21.02	25.01	40.58	350.40	394.27	80.59	163.61	486.62	647.46
2012-13	11.24	22.24	30.16	45.39	413.40	468.70	94.00	192.33	573.01	768.63
2013-14	12.87	23.76	35.54	45.10	478.20	519.31	138.64	212.71	685.42	800.88
2014-15	17.30	38.60	31.71	61.11	581.08	729.34	181.69	334.49	839.13	1163.54
2015-16	23.67	46.16	45.23	66.09	650.73	814.99	255.13	346.95	974.76	1274.19
MEAN	14.19	28.42	33.16	49.50	462.70	543.48	141.31	227.61	670.94	864.25
GROWTH	146.04	146.02	93.57	70.53	115.20	143.87	160.52	200.16	108.86	140.06

Source: Annual NAFSCOB Reports:

 

Mobilization of resources from internally as well as externally is a pre-requisite on the part of cooperative banks to be said effective. The former is essentially mobilized from individual members and primary societies including from state Government which normally participate. The latter is provided by the external agencies like NABARD, Apex Bank, Commercial banks, various types of deposits.

 

Table 2 shows the share capital, reserves, borrowings, deposits and working capital of BDCCB and per DCCB in Karnataka. During the study period share capital of BDCCB is less compared to per DCCB. In both the cases the share capital is increasing continuously but it was more in the case of per DCCB.

 

The owned capital consists share capital and reserves, the former being the contribution of members and the latter is being contribution of the cooperative bank. Reserve fund is prerequisite from the point of confidence of members and creditors. The amount of reserves in both the cases was increasing in was more in per DCCB than BDDCB. But the percentage of increase is more in BDCCB.

 

Deposits and borrowings are two key components of external funds of cooperative banks, of which the former is more important source as their strength depends upon it. Mobilization of deposits is major function of the cooperative banks. Deposits are also increasing in both the cases during the study period. The deposits growth rate is less in BDCCB when compared to per DCCB.

 

The second source of resources the cooperative bank is borrowings also called refinance from the higher tier institution or the apex bank at the State level and the NABARD. During the study period the borrowings are increasing in both the cases. The amount of borrowing and growth rate is less in case of BDCCB when compared to per DCCB.

 

The functional meaning of working capital of the cooperative banks consists of share capital, reserves, deposits and borrowings. The working capital of both has increased. The growth rate in both the cases is more than 100 per cent but it is less in the case of BDDCB.

The cooperative banks deploy their funds for farm and non farm operations so as to improve the position of economy as they have very much shifted from the former to latter. In the words of Majumdar. N., it is time that “the role of cooperative banks has been widened to such an extent that it has transcended the conventional concept to more financial intermediation.”

 

 

TABLE 3. DEPLOYMENT OF CREDIT, OVERDUES, NPAs.                                                                                             Rs. In Crores

YEAR	CREDIT DEPLOYMENT		OVERDUES		NPAs
	BDCCB	PER DCCB	BDCCB	PER DCCB	BDCCB	PER DCCB
2010-11	210.44	356.30	28.78	29.01	15.54	24.94
2011-12	254.15	472.83	19.46	22.36	11.36	20.76
2012-13	267.79	550.18	27.05	33.58	19.49	26.46
2013-14	344.74	605.24	41.21	31.43	23.01	26.00
2014-15	453.26	858.49	25.24	27.97	27.34	30.58
2015-16	569.02	895.20	23.55	29.93	27.93	39.95
MEAN	349.90	623.04	27.54	29.05	23.08	28.11
GROWTH	170.38	151.24	-18.17	3.19	79.71	60.18

Source: Annual NAFSCOB Reports:

 

Table 3 shows the credit deployment, over dues and NPAs. In the area of credit deployment also BDCCB is lagging when compared to per DCCB though the growth rate of the same is more for BDCCB.

 

Improvement of the financial position of cooperative banks mainly depends upon efficient recovery of loans lent leaving no scar of over dues. Efficient recovery of funds act as a cushion to the external borrowings and the increasing trend funds quantifies as good financial performance of cooperative banks. The over dues of BDCCB is less throughout the period of study than that of per DCCB. The indication of negative growth rate in over dues of BDCCB is quite appreciable whereas it is positive in the case of per DCCB.

 

Managing the non performing assets in banks is major critical function of the management. Installment of the principal amount together interest is overdue for a specified period of 90 days is referred to as NPAs. In the case of NPAs it interesting to not that though the NPAs of BDCCB is less than that of per DCCB during the entire study period the growth rate of NPAs is more than per DCCB.

 

CONCLUSIONS:

From the above observations it can be concluded that the BDDCB is a bit behind per DCCB in the State of Karnataka in all parameters. But the positive aspect in study is the BDCCB has less over dues and NPAs as compared to per DCCB in the state of Karnataka. The BDCCB must intensify in decreasing its NPAs growth rate which will result in the accumulation more funds at its disposal for credit deployment. Thus there is a possibility for expanding its sphere of activities for BDCCB if it increases its working capital and there by increase its outreach.

REFERENCES:

1         Dr. V. Mariappan–Indian Cooperative Banking; The Indian Banker; Vol .70 No. 8 Aug 2009 Page 43.

2         Dayanandan .R.and Sasi Kumar K. A Study on the performance evolution of cooperative central banks. ”Indian Cooperative Review, Vol. XXXI. No. 2 October 1993 pp 196-201.

3         Lakshmanan .C and Dharmendra .A. “Financial Performance of DCCBs in Tamil Nadu. Indian Cooperative Review, Vol. XXXV No. 2 OCTOBER 2007, PP 135-143.

 

 

 

 

 

 

 

 

 

Received on 23.03.2018          Modified on 25.04.2018

Accepted on 03.05.2018       ©AandV Publications All right reserved