A STUDY OF FINANCIAL PERFORMANCE OF SELECTED CO-OPERATIVE BANKS IN KARNATAKA

Co-operative institutions are playing a pivotal role in the overall economic development of the country. This is true even in the case of banking institutions in the co-operative sector. Co-operative banks are established, organized and managed on the principles of co-operation, mutual and self help. The Co-operative Banks have been performing well in mobilizing small rural savings and using the same, besides the funds mobilized from other sources, to finance the requirements of different growth sectors including agricultural sector.

The whole banking system in India is under the supervision and control of the Reserve Bank of India. Co-operative banks are important constituents of Indian banking system. The co-operative banks originated in the West but they have assumed importance in India because of their vast network which is rarely paralleled anywhere else in the world. Their role in rural financing continues to be important even today and their business in urban areas has also increased in recent years mainly due to the sharp increase in the number of primary co-operative banks.

Co-operative banks are parts of vast and powerful super structure of co-operative institutions which are engaged in the tasks of rural and urban banking, agriculture and agro-processing including sugar products, dairy products, and production of fertilizers, marketing of agricultural commodities, and distribution of consumer articles through retail outlets. Co-operative banks promote employment opportunities and additional income generation, thus helping in promoting quality of life of the common masses. The co-operative banks in Indian were started with the objectives of prevention of concentration of economic power, achieving wide dispersal of ownership of productive resources, active involvement of people in the development programmes, augmentation of productive resources, reduction of unemployment and poverty, and relieving the people from indebtedness to private money-lenders.

DCBs and UCBs have been playing an important role in providing finance to agriculture, rural and urban development. These banks have expanded their activities and scope of their activities. There has been a substantial increase in their size over the years. A comparative study of these banks enables to understand the areas of their strength and weakness so that areas of strength can be used as benchmark performance for other co-operative banks and suitable suggestions can be offered to overcome their weakness. Though the co-operative organizations are service oriented, they have to earn a reasonable rate/amount of profit by continuing their service to the members. Therefore, the present study is an attempt for an in depth analysis of some of the important components of financial statements as a part of evaluation of their financial performance and to examine the management of their NPAs.

This book is the result of a study that started approximately seven years ago, (2008-09 to 2012-13) which enables to identify the trends in their performance.