Cooperative Banks Performance

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Cooperative Banks Performance


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Objectives Of Establishment

A gricultural and related activities were starved of organised,institutional credit.

The rural folk had to depend entirely on the money lenders, who lentoften at usurious rates of interest.

The co-operative banks arrived in India in the beginning of 20thCentury as an official effort to create a new type of institution basedon the principles of co-operative organisation and management.

These banks were conceived as substitutes for money lenders


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S tructure of Cooperative Credit Institutions in India

Cooperative CreditInstitutions

Urban CooperativeBanks (1, 721)

Scheduled UCBs(53)

Non-ScheduledUCBs (1, 668)

Multi-State(25)

Single-State (28)

Multi-State (15)

Single-State

(1, 653)

Tier I(1, 429)

Tier II(224)

Unit UCB Non- Unit

UCB

Short term(95, 344)

Long term(717)

SCARDBs(20)

PCARDBs(697)

StateCooperative

Banks(31)

DistrictCentral

Cooperative Banks

(371)

PrimaryAgricultural

CreditSociety

(94, 942)

Rural CooperativeCredit Institutions

(96, 061)


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U rban Cooperative Banks


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erformance of U rban Cooperative Banks

N o of UCBs in 2009 172153 Scheduled + 1668 N on ScheduledClassified into 4 grades I , II , III , IV

Observations :-Total no of banks in Grade I and Grade II increased in last 3 years

(Improved numbers due to T AF CUBs consultative process)The no of banks in Grade III and IV has declined in last 3 years


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Changing Profile of the U CB S ector:

Year( asat end-March)

No of UCBs

No of banks in Grades Percentageof Banks in

Grade IIIand IV

I II III IV

1 2 3 4 5 6 7

2004 1,919* 880 307 529 203 38

2005 1,872 807 340 497 228 39

2006 1,853 716 460 407 270 37

2007 1,813 652 598 295 268 312008 1,770 748 526 258 238 28

2009 1,721 845 484 219 173 23

*Out of 1,926 UCBs.


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Operations Financial and Asset QualityPerformance of U CBs

Operational Performance :-

Balance sheet expanded by 9.5% in 2008-09

Deposits declined by 1.7%.Borrowings saw a decline at 4.7 %Capital grew by 10.3 %Other liabilities saw a declineLoans and advances saw a declined growth rate.


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Items As at end- March Percentage variation

2008 2009 2007-08 2008-09

1 2 3 4 5

Liabilities

1.Capital 4,769 (2.7) 5,261 (2.7) 20.2 10.3

2.Reserves 15,339 (8.5) 15,591 (7.9) 7.7 1.6

3.Deposits 1,39,871 (78.0) 1,58,733 (80.8) 15.2 13.5

4.Borrowings2,680 (1.5) 2,554 (1.3) 0.9 -4.7

5.Other Liabilities 16,752 (9.3) 14,256 (7.3) -12.7 -14.9

Assets

1. Cash in Hand 1,935 (1.1) 1,907 (1.0) 19.3 -1.4

2. Balance withBanks

17,555 (9.8) 18,193 (9.3) 97.1 3.6

3. Money at Call andShort notice 1,895 (1.1) 2,112 (1.1) 0.6 11.5

4. Investments 56,912 (31.7) 64,171 (32.7) 11.9 12.8

5. Loans andAdvances

90,444 (50.4) 97,918 (49.9) 13.4 8.3

6. Other Assets 10,671 (5.9) 12,095 (6.2) -42.2 13.3

TotalLiabilities/Assets

1,79,412 (100.0) 1,96,395 (100.0) 11.1 9.5

Liabilities and Assets of Urban Cooperative Banks(Amount in Rs. Cr)


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F inancial Performance :-

N et interest income of all UCBs increased marginally.N on interest income has increased but at a comparatively slower pace while non- interest expenditure has increased at aconsiderably higher pace.Operating profits of UCBs increased .Increase in provisions , contingencies and taxes resulted in a

decline in net profits.


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F inancial Performance of Urban Cooperative Banks


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Asset Quality and Capital Adequacy :-

The gross and net N PA s decreased.

The N PA ratios of UCBs were 13.3 %(gross) and 6.1 %(net).

Capital adequacy ratio of 1485 UCBs was 9%.


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D istribution of U rban Cooperative Banks byCRAR (A S at end-March 2009):

Range of CRAR

(percentage)

CRAR


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G ross Non-Performing Assets of U CBs:

As at end-March

No. of rep[orting

U CBs

G rossNPAs

G rossNPAs as

percentageof G ross

Advances

Net NPAs Net NPAsas

percentageof Net

Advances

1 2 3 4 5 6

2007 1,813 14,541 18.3 6,235 8.8

2008 1,770 14,037 15.5 6,083 7.7

2009P 1,721 13,043 13.3 5,318 6.1

(Amount in Rs. Cr)

P: Provisional


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Rural Cooperative BanksS tate Cooperative Banks:


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Performance of Rural Co operative Banks

S tate Cooperative Banks :- (31 in no)

Operational Performance :-Deposits continued to be the largest share of resources.

Decrease in borrowings.Capital and deposits witnessed higher growth.Investments increased at an accelerated pace, Loans and advancesincreased marginally by 1.8 %.Cash and bank balances registered a sharp decrease during theyear.


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Financial Performance

Income of StCBs increased by 9.7%

Despite increase in both interest expended and operating expenses ,total expenditure declined due to decline in provisions andcontingencies.

Banks operating profits declined significantly (28.3%)

Sharp reduction in provisions and contingencies constrained thedecline in net profits (32.8%)

27 StBCs earned a profit of Rs 319 Cr , 4 made losses amounting toRs 44 Cr


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F inancial Performance of State Cooperative Banks


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Asset Quality and Recovery Performance

The N PA s declined in both absolute and percentage terms.

The gross N PA s to total loans ratio was lower at 12.28% in2007-08 as compared to 2006-05.

Improvement in asset quality due to decline in loss assets .

Decrease in sub standard but increase in bad and doubtful

assets.

StBCs more than met the provisioning requirements during theyear.


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A sset Quality of S tate Cooperative Banks


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D istrict Cooperative Banks


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D istrict Co operative Banks :-(371)

Operational Performance :-A ssets of DCCBs grew by 1.9%Composition of liabilities / assets of DCCBs have changed withdecrease in borrowing, cash and bank balance and other assets.Deposits were the source of funds have shown an increase.Loans and advances and investment portfolio grew at slower pace.


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Liabilities and A ssets of District Central Cooperative Banks


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Financial Performance:

Interest income of DCCBs increased.

Interest expended increased while other income decreased.

Operating expenses increased marginally.

N et loss is of Rs 65 Cr during 2008.


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F inancial Performance of District Central Cooperative Banks


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Asset Quality and Recovery Performance

The N PA s to loan ratio of DCCBs improved to 20.5 % at march2008 mainly due to significant increase in the sub-standard assetscategory.

Substantial asset slippage was noticed in doubtful and loss assetscategory.

The recovery to demand ratio reduced.

Provisions made significantly exceeded the provisions required.


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Asset quality of D istrict CentralCooperative Banks


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D evelopments Initiatives

A t Urban Co operatives :-

Under Vision Document,2005 MoU was signed in 26 states with268 UCBs signing MoUs with RBITwo Tier regulatory system definition amendedF inancial restructuring of UCBs having negative net worth.Statutory policies for SLR/CRR A sset classification and provisioning normsRisk weights for capital adequacy Measures for fraud and suspicious transactions.Measures for improvement of customer service.


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D evelopment Initiatives

A t S tate Co operatives and District Cooperative

F armers Technology Transfer F und

Watershed DevelopmentF

undPilot Project for Integrated Development of Backward Blocks.Tribal Development F undF arm Innovation and Promotion F und:F armers ClubRural Innovation F undCluster Development ProgrammeRural Entrepreneurship Development ProgrammeSwarozgar Credit Cards


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S uggestions

A ugmenting CapitalShuttling Of PortfoliosReduction Of High Cost Deposits

End Of Dual ControlRemoval Of Political InterferenceIncreasing Income from other resourcesSystem Of Human ManagementA wareness Programmes F or employeesHigh operating cost


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Bibliography

www.rbi.org.inDevelopments in cooperative banks, RBI Bulletin 2010RBI Monthly Bulletin 2010, July 2010.

Cooperative Banks Performance

Documents

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