Urban Cooperative Banks (UCBs) figure among the vital segments of the banking
industry of the country. They essentially cater to the credit needs of persons of small
means. 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 profitability, ever-growing Non-Performing Assets (NPAs)
and relatively low capital base. The large-scale sickness in the UCBs has shaken the
public confidence in cooperative banks. In this context, this paper makes an attempt to
examine the working and financial performance of the UCBs. To make the analysis simpler
and presentable, the author takes up the Contai Co-operative Bank Ltd., one of the
leading UCBs in West Bengal for a case study. The objective of the study is to identify and
analyze the trend, progress and problems of this bank, to throw light on the problems of
swelling NPAs and to offer some meaningful suggestions for improving the efficiency
and effectiveness of this bank. The study is based on secondary data and other
information provided by the bank in its published annual reports. The relevant data have
been collected for the period from 1995-96 to 2006-07. This data have been analyzed with
the help of statistical tools like ratios, percentages, averages and trend analysis,
chi-square test, and multiple regression analysis.
Cooperative movement owes its origin to England, where
the noted philosopher, Robert Owen (1771-1858) gave the idea of `self help through mutual help' to mitigate the
sufferings of the exploited class of society. The first ever effort towards the formation of a
cooperative organization was made by 28 flannel weavers, at Rochdale near Manchester in England
in the year 1844. Between 1855 and 1885, the urban cooperative movement
in the global horizon received a filip following the
success of the Urban Credit Institutions organized
by Herman Schulze and Luigi Luzzatti of Germany and
Italy, respectively. Likewise, the origin of urban credit movement in India dates back to
February 5, 1889 when, under the guidance of Vithal Laxman Kavthekar, a
mutual aid society was formed by some middle class
Maharashtrian families in the State of Baroda. The cooperative movement in India
gained momentum with the enactment of the Cooperative Credit Society Act, 1904.
Thereafter, primary cooperative credit societies, called the Urban
Cooperative Banks (UCBs), were set up in the urban areas
with the objective of promoting sustainable banking practices
among the lower- and middle-income strata of the urban population.
Today, the UCBs are vital components of the banking industry of the country.
They essentially cater to the credit needs of people of small means. The spatial
distribution of the UCBs across the country is skewed with significant concentration in
the southern and western regions. Most of the UCBs
(almost 80%) are concentrated in five states,
namely, Maharashtra, Gujarat, Karnataka, Tamil Nadu and Andhra Pradesh. Operations
of UCBs have expanded rapidly since 1966, when they were brought under the purview
of the Banking Regulation Act, 1949. In 1966, there were about 1100 UCBs with
deposits and advances of Rs. 167 cr and Rs. 153 cr respectively. At the end of 1996, the number
of banks increased to 1,501 and their deposits and advances rose significantly to Rs.
24,161 cr and Rs. 17,927 cr respectively. The UCBs continued to grow at a fast pace till
2003, when their number increased to 1941 and their deposits and advances to Rs. 101,546
cr and Rs. 64,880 cr respectively. Subsequently, in
2007, the number of UCBs decreased to 1813 with total deposits of Rs. 120,983 cr and advances of Rs. 78,660 cr.
At the end of March 2007, there were 51 UCBs in West Bengal with
total deposits of Rs. 1,861 cr and total loans and advances of Rs. 1,211 cr.