AN ECONOMIC ANALYSIS OF VISVESVARYA URBAN COOPERATIVE BANK

62 AN ECONOMIC ANALYSIS OF VISVESVARYA URBAN COOPERATIVE BANK K. Ravichadra, Deputy Director, Istitute of Cooperative Maagemet, Thiruvaathapuram. V. Alagu Padia, Faculty Member, Istitute of Cooperative Maagemet, Rajpur, Dehradu ABSTRACT The urba cooperative baks are the offshoots of the cooperative movemet i Idia which gaied mometum with the passage of the Cooperative Societies Act, 1904. The first urba cooperative society was registered i Cajeevaram tow i the the Madras Provice i October 1904. However, the urba cooperative movemet did ot pick up till Maclaga committee got fillip whe the bakig laws were made applicable to cooperative societies i 1966 i order to protect the iterest of the depositors ad to provide isurace cover uder the provisios of the Deposit Isurace ad Credit Guaratee Corporatio Act, 1961. This study o Visvesvarya Urba Cooperative Bak makes a attempt to aalyze the fiacial performace ad the growth potetial ad it is certaily learig for the other urba cooperative baks fuctioig i the coutry The Visvesvarya Urba Cooperative bak is oe leadig urba cooperative bak i Karataka ad got best urba cooperative bak award i Karataka cotiuously for four years from 2004 to 2007. The share capital ad reserve fud has made positive growth ad the owed ad the workig capital held by the bak have made steady progress. Net profits of Visvesvarya urba co-operative bak durig the year 2006-07 to 2010-11. The result shows that except durig the year 2009-10 remaiig four years positive e t profit growth could be observed. Amog the five year period highest per cet could observed durig the year 2010-11 i.e., 39.79 per cet. Keywords: Visvesvarya Urba Cooperative Bak, Share Capital, Deposits, Total Assets, Net Profit INTRODUCTION The urba cooperative baks are the offshoots of the cooperative movemet i Idia which gaied mometum with the passage of the Cooperative Societies Act, 1904. The first urba cooperative society was registered i Cajeevaram tow i the the Madras Provice i October 1904. However, the urba cooperative movemet did ot pick up till Maclaga committee got fillip whe the bakig laws were made applicable to cooperative societies i 1966 i order to protect the iterest of the depositors ad to provide isurace cover uder the provisios of the Deposit Isurace ad Credit Guaratee Corporatio Act, 1961. I the year 1966, whe the Bakig Regulatio Act, 1949 was made applicable to UCBs, there were about 1,100 UCBs with a deposit ad advaces of Rs. 167 crore ad 153 crore respectively. The UCBs cotiued to grow at a fast pace till 2003 whe the umber icreased to 1941 ad their deposits ad advaces icreased to Rs. 1, 01,546 crore ad Rs. 64,880 crore respectively. The liberal licesig policy followed by the Reserve Bak pursuat to the recommedatios of the Marathe Committee (1992) led to the proliferatio i the sector. However, the ba o licesig of ew UCBs sice 2004 ad ecouragemet to volutary amalgamatio ad cosolidatio i the sector has resulted i declie i the umber of UCBs to 1645 i 2011 with total deposit of Rs. 209949 crore ad advace of Rs. 135104. This study o Visvesvarya Urba Cooperative Bak makes a attempt to aalyze the fiacial performace ad the growth potetial ad it is certaily learig for the other urba cooperative baks fuctioig i the coutry as o 31.03.2011 there are about 272 urba cooperative baks are fuctioig i Karataka ad it have 233 geeral urba cooperative baks, 25 Mahila urba cooperative baks ad 14 salary earers cooperative baks. The Visvesvaraya Urba Cooperative bak is oe leadig urba cooperative bak i Karataka ad got best urba cooperative bak award i Karataka cotiuously for four years from 2004 to 2007. The bak is at preset is fuctioig with 9 brach ad have aroud 20,000 members. All the ie baks are computerized ad it has the distictio of beig the first CBS compliat bak i the State. The brach fuctioig at Baashakari III stage has got ISO 9002 certificatio. The bak s two quality circles (Bharatha Ratha ad Moksha Gudam) have wo meritorious performace award i Natioal Quality Circle Completio held at Hyderabad ad II prize i the chapter level competitio coducted by Quality Circle Forum of Idia, Bagalore. The bak has fulfilled all the parameters set by the RBI to become Scheduled Bak ad it has applied for Scheduled Bak statues ad awaitig for RBI approval. OBJECTIVES OF THE STUDY: The followig are the major objectives of the study: 1. To study the growth ad performace of the urba co-operative bak

63 2. To suggest suitable measures to improve the fiacial health of the bak METHODOLOGY AND DATA SOURCE: The case study is the deep ad itesive of a particular uit the mai objective of the study ad i order to achieve the objectives of the study the Case Study Method has bee adopted. The study maily depeds o secodary data ad it has bee collected from the books ad records of the society Period of the study: The study covers a period of Five years commecig from 2006-07 to 2010-11. Tools used for the study: The study has used simple percetage, Mea, Stadard Deviatio Co-efficiet of variatio ad Co-efficiet of Correlatio as a toll to aalyses the fiacial performace of the bak ad based o the aalysis it has made suitable suggestios to improve the fiacial health of the bak. Share Capital: Share capital i oe the importat compoud of owed fud ad every bak should make a attempt to improve share capital positio i every year. The urba cooperative baks follow the cocept share likage to the loa ad it also provides additioal share to the members at the time of ledig. The details of share capital positio has preseted i table No: 1 Table: 1 Growth of Share Capital i Visvesvarya Urba Cooperative Bak Share Capital (Rupees i Lakhs) Aual Growth Rate (% age) 2006-07 919.61 --- 2007-08 1074.61 16.85 2008-09 1251.78 16.48 2009-10 1373.29 9.70 2010-11 1747.23 27.23 Mea 1273.3 SD 316.09 CV 24.82 The above table reveals the share capital positio ad it has show a positive growth durig the period uder study. RESERVE FUND: Reserve fud is the aother importat compoet of owed fud ad all urba cooperative baks as per the Karataka Cooperative societies Act earmarks 25% as statutory reserve ad apart from statutory reserves ad makes other reserves ad it icludes buildig fud, educatio fud, members death relief fud staff welfare fud etc. A icrease the share capital ad reserve fud positio will eable the baks i achievig the task of CRAR very easily. The reserve fud held with the bak has bee give i table: 2 Table: 2 Growth of Reserve Fud i Visvesvarya Urba Cooperative Bak Reserve Fud Aual Growth Rate (% age) 2006-07 3231.06 ------ 2007-08 3534.23 9.38 2008-09 3833.09 8.45 2009-10 4125.25 7.62 2010-11 4480.94 8.62 Mea 3840.91 SD 489.01 CV 12.73

64 The above table shows the reserve fud positio of the bak ad it has made a costat progress durig the period of study. DEPOSITS: The deposits mobilized by the baks may be classified as low cost deposit (savigs bak deposit), o cost deposit (curret deposit) ad high cost deposits are called term deposits. I order to improve the profit ad profitability the CASA deposit should costitute 30% of the total deposits ad the term deposit should ot exceed 50% of the total deposits. The total deposit held by the bak is give i the table No: 3 Table: 3 Growth of Deposits i Visvesvarya Urba Cooperative Bak Deposits (Rupees i Lakhs) Aual Growth Rate (% age) 2006-07 35488.90 ---- 2007-08 42288.13 19.15 2008-09 47986.99 13.47 2009-10 57165.08 19.12 2010-11 60561.72 5.94 Mea 48698.16 SD 10350.26 CV 21.25 The above table highlights the total deposits mobilized b the bak ad it has made steady progress durig the period uder study. OWNED FUND Owed fud cosist of share capital ad reserve. More owed fuds helps to improve the fiacial health of the bak. The details of owed fud held by the bak have bee preseted i table No: 4 Table: 4 Growth of Owed Fud i Visvesvarya Urba Cooperative Bak Owed Fud (Rupees i Lakhs) Aual Growth Rate (% age) 2006-07 4150.67 ---- 2007-08 4608.84 11,03 2008-09 5084.87 10.32 2009-10 5498.54 8.13 2010-11 6228.17 13.26 Mea 5114.22 SD 802.07 CV 15.68 WORKING CAPITAL The workig capital is cosidered as life blood of ay orgaizatio ad the urba cooperative bakig sector are ot a exceptio to this. The urba cooperative baks adopt differet methods to determie the workig capital. Some baks calculated workig capital by takig the total of the balace sheet mius cotra ad some baks calculates workig capital by takig share capital plus reserve plus deposits ad et profit. Here, the secod method has used for determiig the workig capital. The workig capital positio of the bak has show i the table No: 5.

65 Table: 5 Growth of Workig Capital i Visvesvarya Urba Cooperative Bak Workig Capital Aual Growth Rate (% age) 2006-07 39975.57 ----- 2007-08 47265.97 18.23 2008-09 53485.86 13.15 2009-10 62957.62 17.70 2010-11 67200.89 6.73 Mea 54177.18 SD 11142.73 CV 20.57 ADVANCES: The advaces made by the bak ca be classified three categories ad it icludes: a. Short term loas, cash credits, overdrafts, ad bill discouted(demad loa, secured draft, usecured cash credit etc)l cash credit, over b. Medium term loa ( Gold loa, vehicle loa, trade loa, equipmet loa etc) c. Log term loa (immovable property loa, mortgage loa ad educatioal loa). The details of loas advaced by the baks is give i table No:6 Table: 6 Growth of Advaces i Visvesvarya Urba Cooperative Bak Advaces Aual Growth Rate (% age) 2006-07 17499.61 --- 2007-08 21588.80 23.36 2008-09 26231.36 21.50 2009-10 30734.32 17.16 2010-11 40154.37 30.64 Mea 27241.69 SD 8758.14 CV 32.15 The above table shows advaces made by the customer ad it has made costat progress durig the period of study. FIXED ASSETS: The figure show i the fixed assets covers oly amout ivested i the premises ad furiture ad fixture. The details of amout ivested i the premises ad furiture ad fixture i give i the table No: 7 Table: 7 Growth of Fixed Assets i Visvesvarya Urba Cooperative Bak Aual Growth Fixed Assets (Rupees Rate (% age) i Lakhs) 2006-07 455.35 ---- 2007-08 468.03 2.78 2008-09 559.26 19.48 2009-10 613.33 9.66 2010-11 668.17 8.94 Mea 552.83 SD 91.79 CV 16.60

66 Other Assets The figure show i the other assets icludes plat ad machiery, office equipmets, computers, dead stock etc. The details of amout ivested by the bak i the fixed assets are give i the table No: 8 Table: 8 Growth of Other Assets i Visvesvarya Urba Cooperative Bak Aual Growth Other Assets Rate (% age) 2006-07 460.81 ---- 2007-08 571.74 24.07 2008-09 902.52 57.85 2009-10 916.83 1.58 2010-11 620.44-32.32 Mea 694.47 SD 204.86 CV 29.50 CREDIT DEPOSIT RATIO AND INVESTMENT DEPOSIT RATIO As per the RBI orms the urba cooperative baks should maitai a CD ratio 0f 70%. If the bak maitais more CD ratio it will improve the profit ad profitability positio of the urba cooperative ba. The credit deposit ratio ad ivestmet deposit ratio are iversely proportioate. The CD ratio ad ivestmet deposit ratio of the bak has bee preseted i the table Table: 9 Credit Deposit ratio ad ivestmet deposit ratio (Figures i percetage) Credit deposit ratio Ivestmet deposit ratio 2006-07 49.33 33.99 2007-08 51.05 30.16 2008-09 54.66 43.56 2009-10 53.76 26.58 2010-11 66.30 26.16 The above table shows the credit deposit ratio ad ivestmet deposit ratio. The bak i the iitial period has maitaied less CD ratio ad thereafter it has gradually icreased the CD ratio ad icrease i the CD ratio will certaily icrease the profit ad profitability positio INVESTMENTS As per the RBI orms the urba cooperative baks should maitai 3% CRR ad 25% as SLR ad these is 25% ivestmet i SLR is oly i Govermet Securities. This ivestmet is called as SLR ivestmet ad the rest of the ivestmet is called o SLR ivestmet. The details of both SLR ad No SLR ivestmets made by the bak are give i table No: 10

67 Table: 10 Growth of Ivestmets i Visvesvarya Urba Cooperative Bak SLR ivestmet No-SLR Ivestmets Total Aual Growth Rate for total (% age) 2006-07 11833.37 230.10 12063.47 ----- 2007-08 12273,17 485.00 12758.17 5.75 2008-09 11386.42 9521.24 20907.66 63.87 2009-10 14271.73 924.95 15196.68-27.31 2010-11 15118.41 724.95 15843.36 4.25 Mea 13152.48 2377.25 15353.87 SD 1823.61 4002.08 3488.31 CV 13.87 168.35 22.72 The reveals the SLR ad No SLR ivestmets ad the total ivestmets held by the bak durig the period uder study. The total ivestmet made by the bak varies d oe period to aother. NET PROFIT: Profit is a yardstick to measure the maagerial efficiecy of the bak. The bak is cotiuously earig profit ad the details of et profit eared by the bak have bee preseted i table No.11. Table: 11 Growth of Net profit i Visvesvarya Urba Cooperative Bak Net profit Aual Growth Rate (% age) 2006-07 336 ----- 2007-08 369 9.82 2008-09 414 12.19 2009-10 294-28.98 2010-11 411 39.79 Mea 364.80 SD 51.03 CV 13.99 The table 11 reflects et profit of Visvesvarya urba cooperative bak durig the year 2006-07 to 2010-11. The result shows that except durig the year 2009-10 remaiig four years positive et profit growth could be observed. Amog the five year period highest per cet could observed durig the year 2010-11 i.e., 39.79 per cet. NET PROFIT ON TOTAL ASSETS The total assets of Visvesvarya Urba Cooperative Bak are broadly categorized ito fiacial assets comprisig of cash ad bak balace, debtors ad other curret assets ad the fixed assets cosistig of premises, furiture ad so o. The et profit o total assets of Visvesvarya Urba Cooperative Bak is elucidated i Table 12 Table12 Net Profit As Percetage Of Total Assets Net Profit Total Assets % to Total Assets 2006-07 336 916.16 36.67 2007-08 369 1039.77 35.49 2008-09 414 1461.78 28.32 2009-10 294 1530.16 19.21 2010-11 411 1288.61 31.89

68 QUANTATIVE VARIABLES AND PROFITABILITY OF THE VISVESYARYA UCB I the preset study, a attempt has bee made to aalyze the extet of ifluece of the various ecoomic variables o the profitability of visvesyarya UCB by usig the techique of Co-efficiet of correlatio Table13 Shows that all the the variables ad profits were i a icreasig tred durig the study period except profit for the year 2009-10. Table13 QUANTATIVE VARIABLES AND PROFITABILITY OF THE VISVESYARYA UCB Iterest Eared Iterest Paid Operatig Other Expeses Net Profit Expeses 2006-07 3184.00 2088.84 922.59 163.43 336 2007-08 3845.75 2611.03 1044.65 178.93 369 2008-09 4922.16 3493.63 1215.60 201.07 414 2009-10 5307.77 4093.21 1158.19 237.63 294 2010-11 5898.70 4209.44 1662.98 387.72 411 CORRELATION Correlatio is the relatioship betwee the two variables. The ecoomic quatitave Variables preseted ad are compared to the profitability of the visvesyarya UCB over the years uderstudy. The formula for the techique of correlatio Co-efficiet is dxdy ( dx) ( dy) r =. dx 2 ( dx)2 dy 2 ( dy)2 Correlatio Techique is used by the researcher i this study to ascertai the Iterest eared ad Profitability. Iterest Eared ad Profitability The term iterest eared meas the icome derived by advacig the sources of fuds prudetly. Iterest earig is the mai source of icome as for as the visevaraya UCB is cocered. Table 14 shows the Correlatio betwee iterest eared ad Profit of Visevaraya UCB Table 14 Correlatio betwee Iterest Eared ad Profit Iterest Profits Dx Dx 2 dy Dy 2 dxdy Eared 2006 2007 3184.00 336-1738.16 3021200.19-78 6084 135576.48 2007-2008 3845.75 369-1076.41 1158658.49-45 2025 48438.45 2008-2009 4922.16 414 0 0 0 0 0 2009-2010 5307.77 294 385.61 148695.07-120 14400-46273.2 2010-2011 5898.70 411 976.54 953630.37 3 9 2929.62 ± 1362.15 2814.57 dx=1452.42 = 5282184.12 dx 2-243 + 3 240 = 22518 - = dy 2 186944.55 +46273.2 140671.35 r = dxdy ( dx) ( dy) dx 2 ( dx )2 dy 2 ( dy )2 r = -0.90 It could be see from the above calculatio that there is a egative Correlatio betwee iterest eared ad profitability.

69 FINDINGS OF THE STUDY 1. The share capital ad reserve fud has made positive growth 2. The owed ad the workig capital held by the bak have made steady progress. 3. The advaces made by the bak has made positive tred ad it will pave way 4. The amout earmarked by the bak i stregtheig the fixed assets ad other assets are showig positive growth. 5. The CD ratio i the iitial period is less ad it has made pheomeal growth i the subsequet years. 6. The bak maitai adequate amout SLR ivestmets ad the o the other had the ivestmet i No SLR is slightly more. 7. The result shows that except durig the year 2009-10 remaiig four years positive et profit growth could be observed. Amog the five year period highest per cet could observed durig the year 2010-11 i.e., 39.79 per cet. 8. The total assets of Visvesvarya Urba Cooperative Bak are broadly categorized ito fiacial assets comprisig of cash ad bak balace, debtors ad other curret assets ad the fixed assets cosistig of premises, furiture ad so o. 9. There is a egative Correlatio betwee iterest eared ad profitability. SUGGESTIONS 1. Steps may be take to improve share capital positio. 2. The bak should take ecessary iitiative to reduce the term deposits ad icrease low cost deposit like savigs bak deposit ad curret deposits. 3. As a part of fiacial iclusio steps may be take by the bak to ope No Frills Accout. 4. I order to do CASA deposit steps may be take to attract more istitutioal deposits. 5. The bak should make ecessary attempts to brig iovatio ad creativity particularly wome ad seior citizes. 6. Steps may be take by the bak to reduce the No SLR ivestmet ad it may be diverted for loaig operatios. This process may help the bak to improve the CD ratio. CONCLUSION The Visvesvarya Urba Cooperative bak is oe leadig urba cooperative bak i Karataka ad got best urba cooperative bak award i Karataka cotiuously for four years from 2004 to 2007. The share capital ad reserve fud has made positive growth ad the owed ad the workig capital held by the bak have made steady progress. Net profits of Visvesvarya urba co-operative bak durig the year 2006-07 to 2010-11. The result shows that except durig the year 2009-10 remaiig four years positive e t profit growth could be observed. Amog the five year period highest per cet could observed durig the year 2010-11 i.e., 39.79 per cet. REFERENCES [1] Aual Reports Of Visvesvarya Urba Cooperative bak [2] Raikar, A.V. (2006), Cooperative Credit Istitutios i Idia-A Overview, Idia Cooperative Review, Vol. 44, No.1, pp.1-20. [3] Reserve Bak of Idia (2000), Report of the Task Force to Study the Cooperative Credit System ad Suggest Measures for its Stregtheig, Chairma: Jagdish Kapoor. [4] Jalal RS (1992), The Performace Behavior Log term Credit, Co-operative Movemet i Idia, Amol publicatio, New Delhi, 92-112.