PH.D Thesis PDF

AN ASSESSMENT OF COOPERATIVE BANKING IN
INDIA WITH SPECIAL REFERENCE TO

UTTAR PRADESH
THESIS SUBMITTED TO THE UNIVERSITY OF LUCKNOW
FOR THE DEGREE OF
DOCTOR OF PHILOSOPHY
By
Samreen Naqvi
UNDER THE SUPERVISION OF

Dr. Archana Singh
Department of Applied Economics

University of Lucknow
Lucknow, India
2014
DECLARATION
I, the undersigned hereby declare that the Research Work presented in

this thesis on '' AN ASSESSMENT OF CO-OPERATIVE BANKING
IN INDIA WITH SPECIAL REFERENCE TO UTTAR PRADESH''
is my original work and being prepared as per the guidance given by my
guide.
I declared that the research work has not been previously submitted to
this or any other university for any Degree or Award.
Samreen Naqvi
Place: Lucknow Research Scholar

CERTIFICATE
I certify that the thesis “An assessment of Cooperative banking in

India with special reference to Uttar Pradesh” was written by Samreen
Naqvi under my guidance and supervision. I further certify that the thesis
is worth submitting for the award of the degree of Doctor of Philosophy
in Economics under the faculty of Commerce. The thesis has not
previously formed the basis for the award of any degree, diploma,
fellowship or other similar title of recognition.
Dr. Archana Singh

Associate Professor
Department of Applied Economics
Faculty of Commerce
University of Lucknow
CONTENTS
Preface i-ii
Acknowledgement iii-iv
List of Abbreviations v-vi
List of Charts and Figures vi
List of Tables vii-ix
CHAPTER PAGE
NO.
CHAPTER 1: Cooperative banking in India : an overview 1-35
CHAPTER 2: Research methodology 36-42
CHAPTER 3: Literature review 43-65
CHAPTER 4 : Trends and volume of sources and 66-101
applications of funds in DCBs
CHAPTER 5: Ratio analysis of financial performance of DCBs 102-124
in Uttar Pradesh
CHAPTER 6 : Summary, conclusions & scope for further work 125-146
Bibliography 147-153
Appendices 154-164
PREFACE
The present thesis on “An assessment of cooperative banking in India

with special reference to Uttar Pradesh”, presents the overall performance
of cooperative banks in India, particularly in Uttar Pradesh. The present
study has the objective of assessing and analyzing the performance with
regard to profit and efficiency of cooperative banks in India particularly
in Uttar Pradesh over the period from 2002-03 to 2010-11. The data as on
31st March 2002-03 has been considered as base year, while the
information on various parameters for the period ended as on 31st March
of 2010-11 has been incorporated in the study.
The study is based on secondary data. The DCBs in Uttar Pradesh

constituted the universe of the study. Uttar Pradesh is divided into four
regions namely Eastern, Western, Bundelkhand and Central. We have
selected ten sample banks on the basis of these regions. These sample
banks include Eta, Etawah, Ghaziabad and Moradabad DCBs from
Western region, Azamgarh and Allahabad DCBs from Eastern region,
Lucknow from Central region and Jalaun, Lalitpur and Hamirpur DCBs
from Bundelkhand region. This thesis is sub-divided into six chapters.
The first chapter traces the historical background and concentrates on
identifying the basic issues connected with cooperative banking in India
particularly in Uttar Pradesh.
The second chapter focuses upon the data sources, objectives of the
study, testable hypothesis and organization of the dissertation and will
explore the methodology to be followed by the researcher to test the
hypothesis.
The third chapter of the study examines the available literature related to
the topic.
Chapter four and five form the core of the study. While the fourth chapter
assesses the trends and patterns of sources and applications of funds of
cooperative banking in Uttar Pradesh, the fifth chapter analyzes the
efficiency and profitability of cooperative banking in Uttar Pradesh.
Finally chapter sixth incorporates the major findings and suggestions

drawn from this study.
ACKNOWLEDGEMENT
After all these years of hard work, it is necessary to express my gratitude

to those who in one way or another contributed and extended their
support and valuable assistance in the preparation and completion of this
academic work.
First and foremost, my utmost gratitude to the one above all of us, the
omnipresent only God, for giving me the strength to plod on despite my
desire to give up, thank you so much my Allah, (the) One.
I take immense pleasure in expressing my gratitude to my PhD

supervisor, Dr. Archana Singh, for all I have learned from her and for her
continuous help and support in all stages of this thesis. I would also like
to thank her for being an open person to ideas and for encouraging and
helping me to shape my interest and ideas. She has been a tremendous
mentor for me.
I owe special debt and profound gratitude to Dr. Nazia Jamal, Assistant
Professor, IMS, Lucknow for her grateful guidance, affection, friendly
discussions, suggestions and inspiration. Your advice on both research as
well as on my career have been priceless.
I express my sincere gratitude to Mr. Ashok Kumar Singh, Branch

Manager, NABARD and staff of the regional office of NABARD, who
provided the data regarding my research and gave valuable time from
their busy schedule.
I also want to thank Dr. Nagendra Maurya, Fellow, GIRI, Lucknow, for
his great support and guidance during my research.
I would also like to thank my closest friend, Anshul Srivastava, who was
always a great support in all my struggles in my life and studies. Thanks
to her for questioning me about my ideas, helping me think rationally and
even for hearing my problems.
I would also like to thank all of my friends who supported me in writing,

and incented me to strive towards my goal.
I wish to thank my in-laws for their valuable and unending support

without which it would have been very difficult for me to complete my
research.
Above all, I would like to thank my beloved husband Firoz Haider, the
guiding star of my life, who through his overzealous support and
indefatigable spirit pushed me beyond my comfort zone. He was always
my support in the moments when there was no one to answer my queries.
This project is because of him.
A special thanks to my family. My gratefulness to my parents, above all,

is beyond words. Your prayer for me was what sustained me thus far. It is
because of them that I could reach where I am. A special thanks to my
younger sister Nida and brother Zarik. Words cannot express how
grateful I am to my siblings for all of the sacrifices that they have made
on my behalf. My parents, brother and sister have given me their
unequivocal support throughout, as always, for which my mere
expression of thanks likewise does not suffice.
LIST OF ABBREVIATIONS
C.D. ratio Credit Deposit Ratio
CAGR Compound Annual Growth Rate
CASA ratio Current and Saving Accounts Ratio
CCBs Central Cooperative Banks
CEO Chief Executive Officer
CRR Cash Reserve Ratio
DCBs District Cooperative Banks
DCCBs District Central Co-operative Banks
DTL Demand and Time Liabilities
G.M Geometric Mean
GDP Gross Domestic Product
NABARD National Bank For Agriculture And Rural

Development
NAFSCOB National Federation of State Cooperative

Banks Limited
PACS Primary Agricultural Credit Cooperative

Societies
PCARDBs Primary Cooperative Agriculture &

Rural Development Banks
RBI Reserve Bank Of India
Rs. Rupees
S.D. Standard Deviation
SCARDBs State Cooperative Agriculture & Rural

Development Banks
SLR Statutory Liquidity Ratio
ST CCS Short-Term Cooperative Credit Structure
StCB State Cooperative Bank
TDCCB Tirunelveli District Central Co-Operative

Bank
U.P. Uttar Pradesh
w.e.f. With Effect From

LIST OF CHARTS AND FIGURES
Sl. Chart Page
Chart name
No. no. No.
1. 4.1 Share capital of selected DCBs 71
Compound annual growth rate (%) of share capital of
2. 4.2 73
selected DCBs
3. 4.3 Reserves & other funds of selected DCBs 75
Compound annual growth rate of Reserves and other funds
4. 4.4 76
(CAGR %)
5. 4.5 Current Deposits of selected DCBs 78
6. 4.6 Savings Deposits of selected DCBs 78
7. 4.7 Term Deposits of selected DCBs 79
8. 4.8 Total Deposits of selected DCBs 79
Compound annual growth rate (%) of deposits of selected
9. 4.9 81
DCBs
10. 4.10 Borrowings of selected DCBs 83
Compound annual growth rate (%) of borrowings of
11. 4.11 84
selected DCBs
12. 4.12 Cash in hand and at bank of selected DCBs 88
Compound annual growth rate (%) of Cash in hand and at
13. 4.13 89
bank of selected DCBs
14. 4.14 Loans and advances of selected DCBs 91
Compound annual growth rate (%) of Loans and advances
15. 4.15 93
of selected DCBs
Coefficient of correlation (r) between loans and advances
16. 4.16 94
and profits of selected DCBs
17. 4.17 Investments in securities of selected DCBs 96
Compound annual growth rate (%) of Investments in
18. 4.18 97
securities of selected DCBs
19. 4.19 Trend line Overdues to Loans of selected DCBs 99
Sl. Page
Figure name
No. No.
Structure of Cooperative Credit Institutions in India
1. 1.1 10
(as on 31st March 2011)
2. 1.2 Percentage decadal growth rate of population 34
LIST OF TABLES
Sl. Table Page

Table name
No. no. No.
20. 4.1 Progress Of District Cooperative Banks in India from
68
2002-03 to 2010-11
21. 4.2 Share capital of selected DCBs from 2002-2003 to
71
2010-2011
22. 4.3 Compound annual growth rate (%) of share capital of
72
selected DCBs from 2002-03 to 2010-11
23. 4.4 Reserves and other funds of selected DCBs from
74
2002-03 to 2010-11
24. 4.5 Compound annual growth rate (%) total reserves and
other funds of selected DCBs from 2002-03 to 2010- 76
11
25. 4.6 Deposits of selected DCBs from 2002-03 to 2010-11 77
26. 4.7 Compound annual growth rate (%) of total deposits of
81
27. 4.8 Total Borrowings of selected DCBs from 2002-03 to
82
2010-11
28. 4.9 Compound annual growth rate (%) of borrowings of
84
29. 4.10 Coefficient of correlation between borrowings and
86
profits
30. 4.11 Cash in hand and at bank of selected DCBs from
87
2002-03 to 2010-11
31. 4.12 Compound annual growth rate (%) of Cash in hand
and at bank of selected DCBs from 2002-03 to 2010- 89
11
32. 4.13 Loans and advances of selected DCBs from 2002-03
91
to 2010-11
33. 4.14 Compound annual growth rate (%) of Loans and
92
advances of selected DCBs from 2002-03 to 2010-11
34. 4.15 Coefficient of correlation between loans and advances
94
and profits
35. 4.16 Total Investments in securities of selected DCBs from
95
2002-03 to 2010-11
36. 4.17 Compound annual growth rate (%) of Investments in
97
securities of selected DCBs from 2002-03 to 2010-11
37. 4.18 Percentage of over dues to loans of selected DCBs
98
from 2002-03 to 2010-11
38. 4.19 Cost of Management of selected DCBs from 2002-
99
2003 to 2010-2011
39. 4.20 Cost Of Management Per Employee from 2002-2003
100
to 2010-2011
40. 5.1 Credit to Deposit ratio of selected DCBs from 2002-
104
03 to 2010-11
41. 5.2 Borrowings to deposits ratio of selected DCBs from
106
2002-03 to 2010-11
42. 5.3 Owned funds to borrowed funds ratio of selected
108
DCBs from 2002-03 to 2010-11
43. 5.4 Liquid assets to demand and time liabilities ratio of
111
44. 5.5 Current and savings deposit to total deposits ratio of
113
45. 5.6 Term or fixed deposit to total deposit ratio of selected
115
DCBs from 2002-03 to 2010-11
46. 5.7 Owned funds to working Funds ratio of selected
117
DCBs from 2002-03 to 2010-11
47. 5.8 Deposits to working funds ratio of selected DCBs
119
from 2002-03 to 2010-11
48. 5.9 Borrowings to loans ratio of selected DCBs from 121
2002-03 to 2010-11
49. 5.10 Investments to deposits ratio of selected DCBs from
123
2002-03 to 2010-11
CHAPTER- I
COOPERATIVE BANKING IN INDIA: AN OVERVIEW
1.1 The Co-operative Movement in India: an introduction
The co-operative movement in India was introduced with the main object
of helping the poor classes, especially the vast majority of agriculturists,
who were under the burdens of debts. Agriculture, like any other industry,
requires short term, medium term and long term credit. But it is small
scale, wide scattered and highly unorganized. Moreover agriculturists
don’t have enough property to offer as security for getting loans.
Therefore, they had to rely upon private agencies viz., the village
mahajan or sahukars, professional and non professional money lenders,
landlords, friends and relatives. Due to the lack of bargaining power and
risk of lending, these private agencies had been charging exorbitant rates
of interest, leading further indebtness of agriculturists and resulting after
generations to carry the burden of indebtness. It is no exaggeration to say
the “Indian farmer is born in debt, lives in debt and dies in debt.”
The agriculturalists and small farmers were ignored by the banking
system as they had no tangible property to offer as security. It is this void
in the banking system which co-operative banking seeks to fulfill. So
during that time the need was felt for such an agency which could provide
credit to agriculture sector at reasonably low rates of interest on easy
terms and conditions, so as to provide adequate agricultural finance both
for working as well as initial capital.
These problems of agriculturists attracted the attention of the
government and the Indian leaders. So Mr. F.A. Nicholson was deputed
on the task of finding the solution. After studying the agricultural credit
organizations of Europe & America, submitted his report (in 2 volumes),
in which he summed up his findings in the words “Every village must find
Raiffeisen”, that led to the establishment of co-operative societies and
banks in India.
The main objective of setting up of co-operative credit societies is to

promote thrift & mutual help amongst the members who primarily
owned these co-operative institutions. Co-operative credit societies
cater not only the credit requirements of the members but also various
services related with it like input supply, storage & marketing of produce
etc. Several committees, after considering the contribution of co-
operatives in the rural credit scenario, have emphasized their role in
dispensation of credit & allied services in the rural areas.
A cooperative is generally viewed as a social economic organization that

can fulfill both social and economic objectives of its members. A
cooperative is based on certain values and principles of its own, which
distinguish it from other forms of organizations. The very motto of
cooperation, 'each for all and all for each', signifies loyalty, trust, faith
and fellowship. A cooperative is a perfect democratic institution of the
members, for the members, and by the members, and is based on the
'one member, one vote' system of decision making. Indian economy is
rural in character. This is evident from the fact that a very high
proportion of the population is living in rural areas. Although agriculture,
including allied activities, accounted for only 14.1 per cent of the GDP at
constant (2004-5) prices in 2011-12, its role in the country's economy is
much bigger with its share in total employment according to the 2001
census, continuing to be as high as 58.2 per cent (economic survey 2011-
12).That means a higher level of achievement could be achieved with
the available natural, human, material and financial resources in the
country. If the goals of rural development are to be achieved it is
necessary that the rural people be organized within an institutional
structure that gives them access to the economic and social resources. In
India, cooperatives are the most commonly found form of people’s
organization.
1.2 Meaning and concept of co-operatives
“A cooperative is an autonomous association of persons united

voluntarily to meet their common economic, social and cultural needs
and aspirations through a jointly-owned and democratically controlled
enterprise”.
They are business entities where people work together to solve common
problems, seize exciting opportunities and provide themselves with
goods and services. A cooperative is managed on the basis that the
customers of a business are also the owners of the business. Each
customer is entitled to become a member of the cooperative society,
thereby receiving the benefit of success via a dividend payout.
The beginning of this great movement is dated back to 1844, when a

group of men known as the ‘Rochdale Pioneers’ began trade in grocery
produces in England, based on a ‘new’ principles of fair prices for reliable
quality goods. These organizations are better recognized worldwide, for
their non-profit character and root level social functioning on voluntary
basis. Voluntary and open membership, democratic member control,
member economic participation, autonomy and independence,
education, training and information, cooperation among cooperatives
and concern for community are the principles of cooperatives. Self help,
self responsibility, democracy, equality, equity and solidarity are the
values of cooperative organizations. In the tradition of its founders, the
movement also follows such ethical values as honesty, openness, social
responsibility and caring for others. Needless to say, it is a social
movement and its growth will unanimously result in the wholesome
growth of the society.
1.3 Definitions by eminent thinkers on co-operation
Dr. C. R. Fay from the socio-economic standpoint defines co-operative

society as “an association for the purpose of joint trading, organizing
among the weak & conducted always in an unselfish spirit, on such terms
that all who are prepared to assume the duties of membership may share
in its rewards in proportion to the degree in which they make use of their
association.”
According to Mr. Herrick “Co-operation is the act of persons

voluntarily united, of utilizing reciprocally their own forces, resources, or
both under their mutual management to their common profit or loss.”
The most recognized definition is that of Mr. H. Galvert, “Co-operation
is a form of organization wherein persons voluntarily associated together
as human beings, on a basis of equality for the promotion of economic
interest of themselves.”
Late Shri V. L. Mehta, veteran co-operator of India , looked upon co-

operation in wider context of voluntary improvement of economic
condition of the people by the people themselves, & as described it as :
“Co-operation is only one aspect of a vast movement which promotes
voluntary association of individuals having common needs who combine
towards the achievement of common economic need.”
According to the Co-operation Planning commission (1946), “Co-

operation is a form of organization in which persons voluntarily
associate together on a basis of their economic interest. Those who come
together have a common economic aim which they cannot achieve by
individual isolated action because of weakness of the economic position
of a larger majority of them. This element of individual weakness is
overcome by the pooling of their resources, by making self help group
effective through mutual aid, & by strengthening the bonds of moral
solidarity between them.”
I.L.O defines a co-operative society as “an association of persons
varying in number who are grappling with some economic difficulties &
who voluntarily associate on a basis of equal rights and obligations,
Endeavour to solve those difficulties, mainly by conducting at their own
risk an undertaking to which they have transferred one or more economic
functions as correspond to their common need and by utilizing this
undertaking in Joint Co-operation for their common material and moral
benefit.”
1.3.1 The Statutory definition of co-operative banks
The passing of the banking laws (application to co-operative societies)

Act 1965, was an epoch making event in the annals of the Co-operative
Banking System in India. This has enabled to extend some of the
important provisions of the former Banking Companies Act 1949 (now
Banking Regulation Act) and the Reserve Bank of India Act 1934 to the
Co-operative Bank as well.
For the 1st time in the banking history, a statutory definition of a Co-
operative Bank has been laid down in the act (clauses of section 2 of the
Reserve Bank of India Act 1934).
a) Central Co-operative Banks mean the principal co-operative society in

the district in a state, the primary object of which is the financing of other
co-operative societies in that district.
Provided that in addition to such principal society in the district, the state
government may declare any one or more co-operative societies carrying
on the business of financing other co-operative societies in that district to
be a central co-operative bank or banks within the meaning of this
definition.
b) Co-operative Bank means a state Co-operative Bank, a Central Co-

operative Bank and a Primary Co-operative Bank.
c) Primary Co-operative Bank means a co-operative society, other than a

primary agriculture credit society,
i.) The primary object or principal business of which is the

transaction of banking business;
ii.) The paid-up share capital & reserve of which are not less than
one lakh of rupees; &
iii.) The bye-laws of which do not permit admission of any other co-
operative society as a member.
d) State co-operative bank means the principal co-operative society in the

state, the primary object of which is the financing of other co-operative
societies in the state:
Provided that in addition to such principal society in a state or where

there is no such principal society in a state, the state government may
declare any one or more co-operative societies carrying business in that
state to be a state co-operative bank or banks within the meaning of this
definition.
1.4 Principles
The co-operative principles are guidelines by which co-operatives put
their values in to practice.
1.4.1 Voluntary and Open Membership
Co-operatives are democratic organizations controlled by their service

and willing to accept the responsibilities of membership, without gender,
social, racial, political and/or religious discrimination.
1.4.2 Democratic Member Control
Co-operative is democratic organization controlled by their members,

who actively participate in setting their policies and making decisions.
Men and women serving as elected representatives are accountable to the
membership. In primary co-operatives members have equal voting rights
(one member, one vote) and co-operatives at other levels at also
organized in a democratic manner.
1.4.3 Member Economic Participation
Members contribute equitable to, and democratically control, the capital

of their co-operative. At least part of that capital is usually the common
property of the co-operatives. Members usually receive limited
compensation, if any, on capital subscribed as a condition of membership.
Members allocate surpluses for any or all of the following purposes:
developing their cooperative, possibly by setting up reserves, part of
which at least would be indivisible; benefiting members in proportion to
their transactions with the co-operatives and supporting other activities
approved by the membership.
1.4.4 Autonomy and Independence
Co-operatives are autonomous, self-help organizations controlled by their

members. If they enter into agreements with other organizations,
including governments, Or else capital form external sources, they do so
on terms that ensure democratic control by their members and maintain
their co-operative autonomy.
1.4.5 Education, Training and Information
Co-operative provides education and training for their members, elected

representatives managers and employees so they can contribute
effectively to the development of their co-operatives. They inform the
general public – particularly young people ad opinion leaders – about the
nature and benefits of co-operation.
1.4.6 Co-operation among co-operative
Co-operatives serve their members most effectively and strengthen the

co-operative movement by working together through local, national,
regional and international structures.
1.4.7 Concern for Community
Co-operatives work for the sustainable development of their communities

through policies approved by their members.
1.5 The Structure of Cooperative Credit Institutions in India
The Cooperative Credit Structure in our country has two separate

structures. The short term credit structure and the long term credit
structure. Here we are concerned with the short term credit structure
only.
Figure-1.1 Structure of Cooperative Credit Institutions in India
(As on 31st March 2011)
Source: Developments in Cooperative Banking, RBI publication, 2011

The long term cooperative credit structure consists of the State
Cooperative Agriculture & Rural Development Banks (SCARDBs) and
Primary Cooperative Agriculture & Rural Development Banks (PCARDBs)
which are affiliated to the SCARDBs.
The cooperatives in India generally have three-tier structure in most of

the states with primary agricultural credit cooperative societies (PACS)
with farmers as their members at the base level, districts cooperative
banks (DCBs) as the intermediate federal structure with PACS as
principal affiliated members, and the state cooperative bank (SCB) at the
apex state level with DCBs and other cooperatives as its principal
members. This three-tier cooperative credit structure is popularly known
as the short-term cooperative credit structure (ST CCS). The ST CCS
functions as a three-tier structure in 16 states; while in 13 smaller states &
union territories, PACS are directly affiliated to the SCB and the ST CCS
functions as a two tier structure. In 3 states, a mixed structure, i.e., two
tier in some districts, and three-tier in the other districts operates. (RBI
Report 2012).
1.6 District Cooperative Banks
District Cooperative bank is a federation of primary societies and other

functional societies and for the SCB, the members are the affiliated
DCBs. The DCB serves as a link between State Cooperative Banks and
Primary Agricultural Societies. District Co-operative Banks finance
primary societies. In some cases, they attract the surplus funds of certain
primary societies, to supply the same to others. Thus, Central Co-
operative Banks Act as balancing centers to the primary societies. The
DCBs form an important part in the short-term structure of Co-operative
Credit Institutions.
As at March 2011 there were 371 district co-operative Banks with 13327
branches in various states in India. The total deposits of DCBs as at end
March 2011 amounted to Rs. 161308.8 crore as compared to Rs. 72394.4
crore in March 2003.
A District Co-operative Bank obtains its funds from share capital, reserve
funds, deposits (current, fixed, savings, recurring) and loans from the
State Co-operative Bank or other joint stock banks. The DCBs also
borrow money from NABARD for their operations.
Sometimes primary societies deposit their surplus funds with the District
Co-operative Banks to which they are affiliated and this forms another
source of funds for the District Co-operative Banks.
The Board of the DCB comprises elected Chairmen of PACS,

representative of the State Government and the State Cooperative Bank
apart from the CEO of the DCCB who would be the member secretary.
The board meets periodically to review the performance of the bank and
provide policy guidance.
All District Central Cooperative Banks are registered under the Banking
Regulations Act and are under the regulatory control of the Reserve Bank
of India. The banks are expected to follow the various relevant provisions
of the Banking Regulations Act and are subjected to periodical
supervision to ensure that they function as per the provisions of law and
with prudence. In case of DCBs, National Bank for Agriculture and Rural
Development has been designated as the supervisor along with Reserve
Bank of India. However, as a matter of convention, Reserve Bank usually
does not exercise its powers to inspect these banks.
The Central Co-operative Banks are considered as a nerve centre to

control all the co-operative activities in a particular area of operation,
usually a district. Central Co-operative Banks play a very important role
in the development of agriculture and the rural people.
1.7 History of Co-operative movement
The indebtness of the farmers, accompanied with illiteracy, has further

deteriorated their economic condition during British rule. The basic
approach of the British was to make maximum use of India’s natural
resources for the economic progress and prosperity of England.
In the absence of any institutional facility to finance agriculturists, the

individual money lenders were the main source of agricultural finance
and credit system for them, who used to charge exorbitant rate of
interest, leading further indebtness of farmers, resulting after
generations to carry the burden of indebtness. In short, the farmers
suffered the untold miseries and agony. They were helpless and restless.
The discontent among the farmers spread far and wide. There were
Deccan riots by the farmers. It was a warning to the then government.
The growing agitational environment forced the then government to
take relief measures to give an impression to the public that it was
aware of the sufferings of the peasantry. “Deccan agriculturists” Relief
Act of 1879 was the first legislation by the colonial government of
Deccan (south) for the regulation of long term co-operative credit to the
poor farmers or agriculturists at reasonable rates for the agricultural
purposes.
In 1882 Sir William Wedderburn suggested the establishment of an

agricultural bank for providing capital to the agricultural classes on
reasonable rates. Although the schemes fell through yet it helped in
arousing government’s interest in co-operative form of organization.
Along with that the government also enacted Land Improvement Loans
Act of 1883 and the agriculturalists loans act of 1884, relating to the
loans to farmers on short term credit. But in spite of all these efforts, the
government could not succeed in solving the problem and making
substantial improvement in the situation.
In 1891, a co-operative society was started in Punjab which functioned

until 1922, when the land was partitioned. Another co-operative society
started in that province in 1895 covered 22 villages and hamlets. In 1892
Sir F. A. Nicholson was deputed by the government of Madras to study
the working of co-operatives in Europe and suggest measures for
introduction of co-operative movement in India. In 1894 agricultural
banks were introduced in Mysore. By 1898, 64 banks had been started in
Mysore.
In 1899 Sir F. A. Nicholson submitted his report (in 2 volumes) to the

Madras government. In his report he emphasized on finding the
Raiffeisens who could organize and manage the co-operatives in India.
He summed up his report in two words “find Raiffeisens.”
By that time some 200 co-operative societies and Nidhis in Uttar

Pradesh and Madras had already come into existence. These societies
were registered under the ordinary company law which was unsuitable
for the operations and management of co-operative societies and the
very basic objects of co-operation. Therefore there was a need for the
registration of separate law, keeping in view the spirit and aims of co-
operation.
In 1901, Famine Commission recommended the establishment of rural

Agricultural Banks, so as to provide credit facilities to the farmers for the
agricultural purposes. However, the recommendation could not be
materialized to establish the agricultural bank.
Following the recommendation of Famine commission the government of

India appointed in 1901, a committee under the president ship of Sir
Edward Law to report on the steps to be taken on the establishment of co-
operative credit societies in the country. This committee recommended
the establishment of co-operative societies on the Raiffeisen Model. It
was on the basis of this report that the Co-operative Credit Societies Act
of 1904 was passed. The Co-operative Credit Societies Bill, based on the
recommendations of the Edward Law committee, was enacted on 25
March 1904. The Co-operative Credit Societies Act of 1904 was the first
attempt to institutionalize co-operatives. The Act of 1904 provided for the
organization of primary credit societies and stress was laid on the
promotion of agricultural credit only. This act was based on the principles
of “simplicity” and “elasticity”. This, perhaps, was the first attempt to
have an institutional arrangement for agricultural credit with a separate
legal status. Small and simple societies were to be organized under the
Act to meet the credit of the people both in rural and urban areas.
1.8 Evolution of Co-operative Movement in India
The history of the origin and growth of the co-operative movement in

India can be divided into following stages:
1.8.1 First stage (1904-11)
The first stage was essentially an experimental one. The Indian organizers
of the movement had little experience and scarce knowledge of the
imported idea of Co-operation. Their task was made more difficult by the
fact that they were required to spread a new idea among the uneducated
rural people.
The Act of 1904 provided for the organization of primary credit societies
and stress was laid on the promotion of agricultural credit only. Local
officers were also instructed that the organization of rural credit societies
should be their first concern. By 1912, 8177 societies with a membership
of over 4 lakhs and working capital of Rs. 335.7 lakhs had been
organized.
The characteristic feature of this period was the Act of 1904 and the legal
reorganization of the co-operative societies that were in existence.
The important features of the Co-operative Societies Act (1904) were as

follows:
1. Any ten persons living in the same village or town could form a co-
operative society for the encouragement of thrift and self-help among
the members.
2. The main subject of a society would be to raise funds by deposits

from members, and also loans from non members, Government and
other co-operative societies and to distribute these funds as loans to the
members or with the special permission of the Registrar to offer co-
operative credit societies.
3. The co-operative credit societies in each province would be under the

control and administration of a special Government officer called the
"Registrar of Co-operative Societies".
4. The accounts of every society were to be audited by the Registrar or

by a member of his staff free of charge.
5. The co-operative societies were classified as rural and urban, four
fifths of the members of rural societies were to be agriculturists and of
urban societies non agriculturists.
6. The members of a rural society were bound to have unlimited

liability, except with special sanction by local Government. In case of
urban society the liability of members might be either limited or
unlimited.
7. In case of rural societies dividends were not to be paid to 'the

members and the surplus funds were to be deposited in the reserve
fund, although when this fund had grown beyond certain limits fixed
under the Bye laws, a bonus might be distributed to members.
8. In urban societies, no dividend would be paid to the members, until

one-fourth of the profit in a year had been deposited into the reserve
fund.
9. The societies could advance loans only to the members on personal

as real security.
10. Anyone member's interest, in the societies share capital was strictly
limited. No member could hold shares for more than Rs. 1,000.
11. The societies which were formed under the Act were exempted
from payment of income-tax, stamp duties and registration fees.
1.8.2 Second stage (1912-18)
Though to begin with, the government was by no means sure of the

success of movement, early achievements outstripped all expectations.
The act of 1904 was found insufficient to cope with the expanding
movement. With the passing of this Act, the movement entered on the
second stage of its progress. The important changes brought about by
the new Act were as follows:
1. Any society (credit or otherwise) which aimed at the promotion of

the economic interest of its members in accordance with the co-
operative principles, could now he established.
2. The new Act enabled, for the first time, the registration of a federal
society like the Central Bank.
3. The liability of the central societies was to be limited while that of the
members of the rural credit societies was to be unlimited.
4. After carrying 1/4th of the annual profits to the reserve fund, 10 per
cent of the balance could be spent for charitable purposes.
5. Local Governments were permitted to use their discretion in moving
rules and Bye-laws of the societies.
6. The term 'co-operative' may not be used as a part of the title of any
business concern not registered under the Act, unless it was already
doing business under the same before the Act came into effect.
7. Shares or interest in co-operative societies are exempt from

attachment.
8. The other provisions of the Act of 1904 were retained as they were.
The new Act was thus a great improvement over the provision Act of
1904 and after its enactment, the movement started with a renewed
promise. It helped the growth of cooperative movement. New types of
societies of the sale or produce, purchase of silk and manure, cattle
insurance and milk supply etc. were created. The number of co-
operative societies, their membership and working capital grew rapidly.
Before fostering further growth, the government wanted to be sure that

the movement was developing on sound lines and appointed the
Maclagan Committee to review the movement.
1.8.2.1 Maclagan Committee

With a view to ensuring that the co-operative movement was
developing on sound lines, the Government of India appointed a
committee under the chairmanship of Sir Edward Maclagan, l.C.S., in
October, 1914. The task before committee was to review the progress of
the movement and report whether the movement was progressing
along the right lines.
The Maclagan Committee submitted its report in 1915. The committee,

in its report, made suggestions for constructive proposals for healthy
development of the co-operative movement.
The Committee observed that the impression of the people was that the
co-operative societies were Government agencies and therefore, the
committee emphasized that the urge for establishment of co-operative
societies should be, as far as possible, spontaneous. The Committee also
stressed the need for a thorough audit and supervision of the movement
for increasing confidence among the people. The Committee suggested
the following classification of societies:
(a) Primary societies;
(b) Co-operative unions;
(c) D.C.C. Banks; and .

(d) Provincial co-operative banks.
The Committee laid down the following conditions for the success of
rural credit societies:
1. Every member should have knowledge of the cooperative principles

and the members’ proper selection should be made, i.e. they should be
honest.
2. As regards the dealing of the society, it should lend to its members

only.
3. Careful scrutiny should be made before granting loans and it should

be given for productive purposes or for necessaries, as essential of daily
life. They can fairly be classed as productive.
4. The borrower should satisfy other members about repayment of his

loan through increased productive capacity.
5. Democratic Management.
6. Adopting 'one man one vote' principle.

7. Building of strong reserve fund.
8. The main object of the society should encouragement of thrift among

its members.
The valuable suggestions made by the Maclagan Committee remained

on paper. Most of the recommendations of the Committee are as valid
today as they were at the time they were first made. Failure of the co-
operative movement in many parts of the country was largely due to the
neglect of the wise suggestions advocated by Sir Edward and his
colleagues.
In 1919, there were 29,000 societies with 11 lakh members and Rs. 15
crore as working capital. This progress was said to be quite rapid but the
qualitative aspect was not very bright.
1.8.3 Third stage (1919-29)
After the conclusion of World War I, the Reforms Act of 1919 was
introduced. Under the Reforms of 1919, co-operation became a
provincial subject and was placed under the charge of minister in each
state. During the early years, progress was quite rapid in many states.
The provinces, where co-operative movement had made, considerable
progress found the Act of 1912 inadequate. For achieving many-sided
development several provinces appointed committees of enquiry and
co-operative acts were passed. Bombay gave a lead by passing a special
Act in 1925 incorporating amendments to suit local conditions. It was
followed by Madras in 1932, Bihar and Orissa in 1935, Coorg (Karnataka)
in 1937 and Bengal in 1940, Tripura in 1948, Mysore in 1948, United
States of Gwalior, Indore and Malwa in 1948, Assam in 1949, Vindhya
Pradesh in 1940, Orissa Co-operative Societies Act in 1951, Hyderabad
Act in 1952, Rajasthan Act in 1953, The Punjab Act in 1953, Himachal
Pradesh Act in 1956, then Bhopal, Jammu & Kashmir.
The post-war boom and rising prices improved the conditions of co-
operative societies during the decade ending 1929-30. The rapid
expansion in this period was characterized by the well known non-
official co-operator Mr. Ramdas Pantalu as "unplanned expansion".
During this period different kinds of cooperative societies in the field of
credit, supply, distribution, better farming, mortgage, and banking were
started.
In spite of this rapid expansion, the proportion of rural families brought

within co-operative fold was very small. The lowest percentage was 1.8
per cent in the United Provinces, 2.3 per cent in the Central Provinces,
2.3 percent Assam, 3.1 percent in Bihar and Orissa, 3.8 per cent in
Bengal. The highest percentage was between 8 to 10 percent in Bombay,
Madras and Punjab.
Working of the co-operative movement during this period was examined
by Royal Commission on Agriculture, the Central Provincial banking
Enquiry Committee and the Oakden Committee of the United Provinces
of Aglil and Oudh, the King Committee of the Central Provinces, the
Townsend Committee of Madras and the Calvert Committee of Burma.
Valuable contributions were made by these Committees to cooperative
thought and practice.
In 1927, the Royal Committee on agricultural, with Mr. Calvert as its

chairman, examined the problems relating to agriculture and stressed
the need of co-operation for implementing the programme of
agricultural development. The commission brought out strong as well as
weak points in the movement. According to the commission the main
cause of failure of the co-operative movement was "the lack of the
requisite education and of adequate supervision and guidance” Report
of the Royal Commission on Agriculture (1948). The Commission
sounded a note of warning in these words, "If co-operative fails, there
will fail the best hope of rural India".
To popularize the co-operative movement and to promote a sense of

responsibility among the members of the society, the Central Banking
Inquiry Committee recommended that the official control, that then
existed, was to be slackened. Expansion of the movement till 1929 was
quite satisfactory as is clear from the following table:
Year No. of Societies in Membership in lakhs Working Capital Rs in
thousands crores
1920 28.4 11.3 15
1929 94 37 75
1.8.4 Fourth stage (1929-38)
The most significant feature of this period was the Great Depression.
The Great Depression of the thirties gave a big jolt to co-operative
activity, and stalled further progress of the movement. The economic
crisis resulted in a catastrophic fall in prices, particularly of agricultural
commodities, which very adversely affected the economic conditions of
the farmers. Owing to the large percentage of credit societies; funds
with the movement were invested in loans to agriculturists. Recoveries
of loans became extremely difficult. There were heavy accumulations of
overdues and freezing of society’s assets, liquidation of societies had to
be resorted, in, certain areas. The proportion of overdues to loans
outstanding which was only 20 per cent in 1927-28 rose to 40 per cent in
1931-32, in Bombay.
In some provinces such as the Central Provinces, and Berar, Bihar,

Haryana, Orissa and Bengal the co-operative movement collapsed. Many
central co-operative banks had to be closed as they were unable to carry
on banking operations and many societies were liquidated. In Bombay,
as many as 15,000 cases were referred to arbitration. By 1937-38 the
percentage of overdues was about 93 per cent of loans. The number of
societies in the state which stood at 5,896 in 1930-31 came down to
4,837 in 1935-36. During this period 50 per cent of the societies were in
liquidation in Uttar Pradesh.
1.8.4.1 Land Mortgage Banks
Finding that the agriculturists were raising huge funds on the mortgage
security of their lands, land mortgage banks were started on co-
operative basis. The first central land mortgage banks was established in
Madras in 1929. Ten primary and one provincial land mortgage bank
were established in Bombay in 1935. These banks saved not a few
cultivators from the hands of money-lenders, by advancing loans for the
redemption of lands and for other long-term needs.
1.8.4.2 Reserve Bank of India
A rather very important event of this period was the establishment of

the Reserve Bank of India in 1935. The agricultural Credit Department
was also set up simultaneously, to study agricultural credit problems and
give financial accommodation to co-operative credit structure. In 1937,
statutory report on the co-operative movement was presented by
Reserve Bank of India in which it gave advice on various matters of co-
operative practice. It suggested re-organization of the movement on
viability basis. It also stressed the importance of organizing multi-
purpose co-operative societies which would embrace the whole life of
agriculturists.
By 1939, the signs of recovery began to appear, especially due to dose

supervision, better security scrutiny of loans proposals and effective
steps towards recovery of outstanding loans, e.g. the amount of
overdues in case of agricultural credit societies fell from 13.00 crore in
1932-33 to 11.36 crore in 1936-37 while the percentage of overdues to
the loans outstanding fell from 47 to 43 during the same period.
A beginning of participation of Reserve Bank of India in the development

of co-operative movement is, perhaps, a notable feature of this period.
1.8.5 Fifth stage (1939-46):
It is a well known fact that the Second World War, acted as a boon to
the agriculturist class as prices began to rise. It naturally improved their
repaying capacity. A special feature of this period is (in addition to credit
societies) the development of non-credit societies (till then, non-credit
activity was almost monopolized by the private sector). From 1939
onwards, prices began to rise as a result of which the movement got a
good fillip. As a result of high prices most of the overdues, which had
accumulated during the period of depression, were cleared off.
Overdues fell by 60% during this period. Demand for further loan also
decreased greatly. So much so that the co-operative banks, including the
land mortgage banks, were almost starving for want of business and
were faced with the problem of surplus funds. Deposits in primary
societies also increased from Rs. 25 crores in 1939-40 to Rs. 54 crores in
1945-46.
In 1944, the Government of India appointed a sub-committee under the

chairmanship of Mr. D.R. Gadgil. The object of this committee was to
suggest ways in which indebtedness could be reduced and finance, both
short-term and long-term, provided under the efficient control [or
agricultural and animal husbandry operations. The committee
recommended "We are in general agreement with the view that the
spread of co-operation would provide the best and the most lasting
solution for the problem of agricultural credit in particular and rural
economy in general".
It is interesting to note that by 1946, the proportion was: credit 77 per

cent and noncredit 23 per cent. The multi-purpose co-operative
Societies were also developed during this period, e.g. in the Bombay -
province. There were 264 multi-purpose societies as on December 1946.
In short, war period, provided incentives for consumer co-operatives,
industrial co-operative societies etc. and the cooperative movement
started having a broader base.
1.8.5.1 Control Period

Due to the imposition of controls on the distribution of commodities,
distributive co-operatives began to be organized all over the country.
There was a marked growth of marketing societies also. Thus the co-
operative movement, which was almost entirely a credit movement so
far, started diversifying its activities.
1.8.5.2 Advancement of co-operative though
An important landmark of this period of this period was the setting up of

the co-operative planning committee, which drew up plans for
development of co-operative movement in various spheres. It fixed
targets of bringing 50% of villages and 30 % of population into the fold of
co- operation in 10 years period. It also fixed the target of marketing
25% of agriculturalist marketable surplus through co-operative
marketing societies.
1.8.6 Observation on Co-operative Movement in Pre Independence

Period
At this stage, it is worthwhile to note some prominent characteristic

features of co-operative movement in pre-independence period.
1. Unplanned and uneven growth;
2. Official sponsorship of the movement;
3. Largely confined to credit;
4. Financial involvement of the Government was negligible (hardly 2
per cent of the total working funds).
Further, the following causes of the slow growth of cooperative

movement, noticed in the study, are mentioned below:
1. Lack of knowledge of co-operative principles;

2. Lack of careful selection of members;
3. Lack of effective supervision inspection
4. Lack of efficient management;
5. High over dues;
6. Lack of co-ordination between various co-operative Institutions;
7. Unlimited liability of societies;
8. Laissez faire policy of the state;
9. Other important factors
(a) Negligence in recovery;
(b) High rate of interest;
(c) Inadequacy of finance provided.
The co-operative movement could not achieve much success before

independence on account of the above mentioned reasons.
The 15th conference of Registrars of Co-operative Societies which met in
1947 approved many of the recommendations of the-Co-operative
Planning committee. In this conference, it was realized for be first time
that there should be effecting' linking of credit was Marketing,
assistance for construction of godowns and setting up processing plants
by grant of liberal loans and subsidies. The necessity for training of
expert staff was also stressed. The consensus was that provincial co-
operative banks should be recognized to give greater assistance through
central banks to primary societies.
By 1947, the co-operative movement had attained, at last in some areas,

certain significant dimensions. In fact, an official body, the Co-operative
Planning Committee referred to the role of the co-operatives. In their
terms, "The co-operative society has an important role to play as the
most suitable medium for the democratization of economic planning. It
provides the local unit which can fulfill the dual function of educating
public opinion in favour of a plan and executing it." This was a significant
pointer to the potential role of the co-operatives in an independent
India.
In due course political expediency also led to laxity in ensuring quality of

credit and its repayment. The Government of India's 1989 scheme for
writing off loans of farmers, greatly aggravated the already weak credit
discipline in the cooperative system and led to the erosion of its financial
health. It also set up an unhealthy precedent and spawned a series of
schemes by the State Governments, announcing waivers of various
magnitudes, ranging from interest write off to partial loan write-offs.
The competitive populism adopted by the political class has severely
impaired the credibility and health of the cooperative credit structure.
The State has used co-operatives to channel its development schemes,

particularly subsidy-based programmes for the poor. As these
institutions have a wide reach in the rural areas and also deal with
finances, the choice was natural. The trend, however, also made
cooperatives a conduit for distributing political patronage. This and the
sheer magnitude of resources and benefits channeled through the
societies, makes control of decision-making and management attractive
to parties in power, for accommodating their members, to influence
decisions through directives, and for individual politicians to be on the
management boards of the cooperatives.
Concerns about these trends and the need to overcome them began to
be voiced around this time. The Agriculture Credit Review Committee
(Khusro Committee, 1989) for the first time talked of the importance of
encouraging members' thrift and savings for the cooperatives. It also
emphasized the need for better business planning at the local level and
for strategies to enable cooperatives to be self sustaining. To this end,
the Committee was also in favour of serving non-members, if it made
business sense. In a sense, there were larger macro economic changes
on the anvil in the economy. The 1990s witnessed more concerted
attempts both by the government and by non-official organizations and
cooperators, to explore ways to revitalize the cooperatives.
1.8.7 1990s and onwards
During the last fifteen years, there has been an increasing realization of
the destructive effects of intrusive State patronage, politicization, and
the consequent impairment of the role of cooperatives in general, and of
credit cooperatives in particular, leading to a quest for reviving and
revitalizing the cooperative movement.
Several Committees (notably those headed by Chaudhry Brahm Prakash,

Jagdish Capoor, Vikhe Patil and V.S. Vyas) were set up to suggest
cooperative sector reforms during this period. The Brahm Prakash
Committee emphasized the need to make cooperatives self-reliant,
autonomous and fully democratic institutions and proposed a Model
Law. Subsequent Committees have all endorsed this recommendation
and strongly supported replacing existing laws with the proposed Model
Law. They have also recommended revamping and streamlining the
regulation and supervising mechanism, introducing prudential norms
and bringing cooperative banks fully under the ambit of the Banking
Regulation Act, 1949. To facilitate the implementation of these reforms,
they proposed that governments provide viable cooperative credit
institutions with financial assistance for recapitalization.
Progress in implementing these suggestions has been very tardy because
of the States' unwillingness to share in costs and their reluctance to
dilute their powers and to cede regulatory powers to the Reserve Bank
of India (RBI). The passage of the Mutually Aided Cooperative Societies
Act by the Andhra Pradesh government in 1995 however, marked a
significant step towards reform. Following the example of Andhra
Pradesh, eight other States (viz., Bihar, Chhattisgarh, Jammu and
Kashmir, Jharkhand, Karnataka, Madhya Pradesh, Orissa and
Uttaranchal) have passed similar legislation to govern and regulate
mutually aided cooperatives.
In all cases these new laws provide for cooperatives to be democratic,

self-reliant and member-centric, without any State involvement or
financial support. They provide for cooperatives registered under the old
law to migrate to the new Act. The old Acts were not repealed nor was
there any serious effort to encourage and facilitate the conversion of old
co-operatives to come within the purview of the new Act. Most existing
cooperatives, therefore, continued to adhere to the old law.
The new law, however did lead to the emergence of a “new generation
autonomous financial cooperatives”, albeit slowly and unevenly across
the country. While the number of cooperatives registered under the
new liberal Act is slowly picking up, the conversion from the old law to
the new Act has largely been in the arena of commodity cooperatives.
The reason for the slow pace at which both credit cooperatives and the
primary agricultural credit societies (PACS) are adopting the new law is
largely because they are not eligible for refinance under the existing
legal and structural arrangements.
These developments have not made much of an impact on the way

cooperatives function. The movement has continued to deteriorate and
reached the point that necessitated the appointment of the Task Force,
which has been entrusted with the task of coming up with an
implementable action plan for carrying the reforms forward which led to
the setting up of the Task Force on Revival of Cooperative Credit
Institutions, appointed by the Government of India in 2004
[Vaidyanathan 2004]. The committee recommended an action plan for
reviving and revitalizing the rural credit cooperative institutions through
legal measures necessary for facilitating this process. The task force
submitted its report in February 2005, and after extensive discussions
the revival package was implemented across the country in January
2006. The NABARD was made the implementing agency for the purpose.
The revival package was a combination of legal and institutional reforms,
capital infusion and technical support for capacity building. The
implementation of the action Plan [ADB 2010] of the revival package was
perceived to result in the emergence of a strong, self-reliant and well-
knit network of rural cooperative credit system.
In a developing country like India with huge deficits in terms of quality
and quantity, the state has to shoulder the primary responsibility of
providing credit through co-operatives. Considering the low living
standards of common man, incomplete and imperfect markets and
other socio political considerations it is the primary duty of the
government to ensure that its citizens have easy access to co-operative
credit. (Vinayagamoorthy A and Vijay Pithadia, 2007).
1.9 Present status of cooperative banks in Uttar Pradesh
Uttar Pradesh has a large population and a high population growth rate.
From 2001 to 2011 its population increased by 20.23%. Uttar Pradesh is
the most populous state in the country with 199,812,341 people as per
census 2011. The state contributes 16.16% of India’s population. The
population density is 829 people per square kilometer while the national
average is 382 per sq km, making it one of the densest states in the
country. This suggests that U.P. requires wide banking network as the
financial requirements of Uttar Pradesh are comparatively very high to
other states.
Figure 1.2 Percentage decadal growth rate of population
The present study has been taken up with an overall objective of

evaluating the performance of district co-operative banks operating in
Uttar Pradesh. The findings of the study may be of immense use both to
the policy makers for the district cooperative banks and to the general
public to learn about the working of district co-operative banks in Uttar
Pradesh.
There is a large network of district co-operative banks in Uttar Pradesh

with a total of 1373 branches functioning in the state as on 31.3.2011.
But, so far a comprehensive and detailed study on the workings of the
district co-operative banks in Uttar Pradesh has not been undertaken.
The District co-operative banks have occupied an important place in the
state's economy in terms of financing the major economic activities. It is
important to note that the state has a wide network of banking with a
total 13327 branch offices including the district co-operative banks both
in the rural and the urban areas and engaged in mobilizing savings and
distribution of mobilized resources to various economic activities. In
view of this large banking network, a study on the performance and
contribution of district co-operative banks to the economy assumes
more importance.
The district co-operative banks are a distinct form of organizations and

they cannot be matched with any other banks either private or public. It
has been very often heard that the performance of co-operatives has
been by and large not satisfactory and they are not financially viable.
The liberalized new economic policies have posed threat to the survival
and growth of co-operatives. In this context, the district co-operative
banking as one of the most significant segments of cooperatives attracts
an immediate attention.
The reform measures initiated in the Indian banking sector in general

and in the co-operative banking in particular have brought forward many
challenges before the district banks' management. This changing
operating environment in the banking sector necessitates examining the
working status of the district co-operative banks operating in the state.
The study focuses on conducting an in-depth analysis and assessment of
the various dimensions of DCBs in the state.
CHAPTER-II
RESEARCH METHODOLOGY
2.1 Brief introduction
Cooperative banks were the important constituent of the banking

structure of India as they bridged the gap between the deficit & surplus
units of the financial system of the country. Co-operative banks are
particularly important in Indian banking structure because of the fact that
India is basically a developing country with comparatively less developed
financial systems resulting in low level of banking and financial
activities. In such a scenario co-operative banks play a major role as they
follow a simple banking system and also offer loans and advances at
cheaper rates which make them attractive and lucrative for those investors
who are not motivated enough to go for complexed and advanced
banking and financial instruments. This is how it was assumed that
cooperative banks are very important for the growth and development of
Indian banking business. In the present years it has been observed that in
general the profitability and efficiency of the cooperative banks in India
is declining and their contribution in overall banking business is also
declining. Thus there is a need to assess and analyze the present status of
these banks, reasons for the decline in their profitability and efficiency
and further to give certain meaningful policy suggestions which will lead
to their improvement.
As there are thousands of cooperative banks in India of various types and

categories, which will be too large, a sample size to study effectively and
efficiently. Thus in the present study the researcher is particularly
focusing upon the present status of DCBs in India particularly in Uttar
Pradesh.
2.2 Need of the study
The District Co-operative Banks also known as Central Co-operative

Banks occupy a significant position in the cooperative credit structure.
They serve as an important link between the Apex Co-operative Bank and
the Primary Agricultural Credit Societies. District Co-operative Banks are
in fact a federation of Primary Agricultural Credit Societies and other
types of societies working within their jurisdiction. District Co-operative
Banks (DCBs) acts as the leader of the cooperative movement in a district
and plays an effective role in the all-round growth of the cooperative
movement. It has to undertake various promotional and developmental
activities also. Being the social banker, it has to take banking facilities to
the rural areas and unbanked centers. It is the spokesman for not only the
primary agricultural credit societies, but also for other kinds of co-
operative institutions in the district. The DCBs are also doing personal
banking along with the financing of primary credit societies.
The District Co-operative Banks (DCBs) are nodal centers of financial

institutions in the co-operative sector in a district. They have to mobilize
the available resources and utilize them in the most efficient and
profitable manner. The major objective of this analysis is to study the
historical development and analyze the trends in the progress of
cooperative banking in Uttar Pradesh. The researcher also aims at
examining the growth of business of cooperative banks in terms of
deposits mobilization and credit advanced and evaluating the overall
performance and financial performance of cooperative banks in Uttar
Pradesh during the study period. Other than these the researcher put
efforts to identify the prospects and constraints of district cooperative
banks in the region and also to forward some policy suggestions for
future projection of cooperative banks in Uttar Pradesh.
2.3 Objectives of the study
1. To study the historical development and analyze the trends in the

progress of cooperative banking in Uttar Pradesh.
2. To analyze the sources and uses of funds of DCBs in UP.
3. To examine the growth of business of cooperative banks in Uttar

Pradesh in terms of deposits mobilization and credit advanced during the
study period in particular and the overall growth and status of DCBs in
general with respect to both India and Uttar Pradesh.
4. To study the extent of progress in owned funds of cooperative banks

in Uttar Pradesh in terms of share capital and reserves during the study
period.
5. To evaluate the overall performance and financial performance of

cooperative banks in Uttar Pradesh with the help of some selected ratios.
6. To assess and analyze the status of employees in terms of their cost of

management.
7. To give policy suggestions for future projection of cooperative banks

in Uttar Pradesh.
8. Finally, efforts are taken to identify the prospects and constraints of
district cooperative banks in the region and also to forward some
suggestion in this regard.
2.4 Scope
In the present study an analysis and assessment of cooperative banks in

Uttar Pradesh with respect to their efficiency, profitability in comparison
to the cost of funds, further the sources from which they are acquiring
their funds and the manner and method in which they are utilizing their
funds has been explored. In order to ensure this various ratios have been
calculated by the researcher.
2.5 Hypothesis
1. Over the years the number of branches of DCBs in India is likely to

increase.
2. Cooperative banks have been playing an important role in

mobilization of deposit and extension of credit to influence the
distribution of credit to people.
3. In general, it is expected that all the banks in U.P will have an

increasing trend with regard to different types of deposits during the
study period.
4. There is an inverse relationship between borrowings and profits of

DCBs.
5. Loans and advances and profits of DCBs are directly related each
other.
6. There is an increasing trend of overdues to loans over the period of

study.
7. In general the DCBs had maintained very low liquid assets. (From
ratio analysis chapter).
8. It is assumed that the percentage of term deposits in comparison to

other kinds of deposits in DCBs would be comparatively less.
2.6 Research Methodology
2.6.1 Data sources
The present study has the objective of assessing and analyzing the
performance with regard to profit and efficiency of cooperative banks in
India particularly in Uttar Pradesh.
For this purpose the secondary data were collected from Annual reports
of cooperative banks published by NABARD and Basic Data on
Performance of DCBs published by NAFSCOB for the period from 2002-
03 to 2010-11. Data sources also include RBI bulletin (various issues),
Report on trend and progress of Banking in India (various issues),
published and unpublished dissertation works, books, periodicals and
research articles from various journals were also taken into consideration.
2.6.2 Sample selection
The DCBs in Uttar Pradesh constituted the universe of the study. Uttar
Pradesh is divided into four regions namely Eastern, Western,
Bundelkhand and Central. We have selected ten sample banks on the
basis of these regions. These sample banks include Eta, Etawah,
Ghaziabad and Moradabad DCBs from Western region, Azamgarh and
Allahabad DCBs from Eastern region, Lucknow from Central region and
Jalaun, Lalitpur and Hamirpur DCBs from Bundelkhand region. We have
used purposive random sampling while selecting the sample districts.
2.6.3 Tools for analysis
Consistent with the objectives of the study, simple statistical techniques

like mean, percentages, graphs, etc. along with advanced statistical tools
like compound growth rates, trend equations, Karl Pearson correlation
method, etc. will be applied to arrive at the logical outcome.
Analysis of financial statement of selected DCBs has been done by

applying the tools and techniques of accounting such as ratio analysis and
trend analysis. Compound Annual Growth Rate was used for the
comparison of growth rates of different financial variables like
borrowings, deposits, credit, profit etc. Various statistical measures like
geometric mean, standard deviation and correlation etc have been
calculated. For a more clear understanding of the data, some important
variables are presented through graphs.
2.7 Organization of the dissertation
The research work has been divided into six chapters.

The first chapter traces the historical background and concentrates on
identifying the basic issues connected with cooperative banking in India
particularly in Uttar Pradesh.
The second chapter focuses upon the data sources, objectives of the
study, testable hypothesis and organization of the dissertation and will
explore the methodology to be followed by the researcher to test the
hypothesis.
The third chapter of the study examines the available literature related to
the topic.
Chapter four and five form the core of the study. While the fourth chapter
assesses the trends and patterns of sources and applications of funds of
cooperative banking in Uttar Pradesh, the fifth chapter analyzes the
efficiency and profitability of cooperative banking in Uttar Pradesh.
Finally chapter sixth incorporates the major findings and suggestions

drawn from this study.
CHAPTER -III
LITERATURE REVIEW
Since the inception of cooperative banking, there has been an increasing

interest in performance study of these institutions. A number of studies
related to performance of co-operative banking sector in India have
been conducted. Here, an attempt is being made to provide an overview
of various aspects and issues of this study through the review of existing
literature. Some of the main studies selected for review have been
discussed below.
The All India Rural Credit Survey Committee (1954) noted that through
the restructuring of the co-operative credit in the Bombay state, with
the active support of the co-operators of the state, the system of crop
finance has assumed new significance by 1948-49. The committee found
that under the new provisions, the reorganized Bombay State Co-
operative bank and the central financing agencies along-with the
primary credit societies were expected to provide short-term finance to
all credit worthy agriculturists. The committee also suggested that short
term finance should be provided on the basis of crop acreages rather
than putting credit limits on the basis of landed securities and the time
of repayment should be on the basis of harvesting season.
The study team appointed by Reserve Bank of India (1972) studies the
problems of overdues of the co-operative credit institutions in the
country. The study revealed that particularly backward and undeveloped
districts were facing the problem of high overdues. The team also
observed that the members of the managing committee of societies and
the director of the central co-operative banks were being unconcerned
as far as recovery of loans is concerned.
John Winfred (1974) in his study observed that in order to have prompt
recovery of loans it was very essential that recoveries in DCB should be
arrange around harvest time with supervisory staff and non-official
leadership. For the proper understanding of the implications of prudent
use of credit, he further suggested a member education programme,
which was also supposed to generate additional income - through
subsidiary occupation to farmers. His recommendations also included
organizing the marketing activities by marketing societies to recover the
loans from sales proceeds.
Subhash Chandra Sarkar (1974) observed that the heavy overdues at the
level of DCBs in India are the major reason for reducing their capacity to
borrow from the higher financial institutions. In his view the reason for
the increasing overdues of DCBs was not the inability of the borrowers
to repay, rather their own incapability to recover loans. As per his
opinion the other reasons for the increasing overdues in co-operative
financial institutions include defective lending policy pursued by the
DCBs and Primary Agricultural Credit Societies, administrative
weaknesses, political patronage to defaulters and the failure of the
executives of the co-operative institutions to adopt appropriate
measures.
Kanakasabhai (1976) studied the credit planning and financial

management in co-operative banks in Orissa. He finds out that the
success of a co-operative society depends upon the way it manages its
funds, how it increases its profitability and thereby improves the image
of the institution.
Varkey (1976) observed that to raise resources was the major problem
faced by co-operative societies. The ratio of deposits between
commercial and co-operative banks has deteriorated from 88.19: 11.81
in 1970-71 to 89.05: 10.95 during 1973-74. He concluded that rather
than depending on government contribution co-operatives need to
focus on the mobilization of deposits.
Pandey and Muralidharan (1977) found that the major factors

influencing overdues in co-operative credit societies at farmers’ level
were the size of loan and consumption expenditures. The study revealed
that loans were issued without considering the repayment capacity of
the borrower and moreover lack of proper supervision of loans also
resulted in diversion of loan either for consumption purposes or for non-
stated capital investments.
Bhaskar Rao (1978) analyzed that investment growth both in DCBs and
Primary Agricultural Credit Societies is not properly supplemented by
satisfactory recovery performance.
Desai and Narayana Rao (1978) observed that in co-operative credit the
default rate is very high. In comparison to long term loans the rate is
quite high for short-term loans. The default rate in most of the states
was more that 30 to 35 per cent with a few exceptions like Tamil Nadu,
Andhra Pradesh, Kerala, Punjab and Haryana. The major reasons for this
were inappropriate loan terms and administration, which were found to
be interrelated. They concluded that in order to solve this problem there
was a need to reorient the credit projects along-with better economic
analysis.
Pancras (1978) examined the funds management of co-operative banks.

He found out that due to their far flung location from apex banks, the
co-operative banks are compelled to keep more cash/liquid assets. In his
views profitability in co-operative banks depends upon efficient
management of funds mobilization and deployment of funds. He also
emphasized that co-operative banks should aim at increasing
profitability by efficient cost control associated with funds management.
Jose, et al. (1984) studied the performance of Trichur District Co-

operative Bank in deposit mobilization scheme. They observed that the
total deposits of the Trichur DCB increased from Rs.635.19 lakhs in 1976-
77 to Rs.1763.63 lakhs in 1981-82, showing an annual average increase
of 35.53 per cent. On the other hand, the share of fixed deposits showed
a declining trend during 1976-77 to 1978-79, which increased
substantially in 1981-82 during the deposit mobilization campaign.
I Sharma (1985) analyzed the short-term agricultural credit of Rajasthan

Central Co-operative Bank. The study revealed that with regard to the
short-term credit, the loan policies and procedures of the central co-
operative banks should be on the basis of crop loan system. He also
observed that loans should be given in installments and there should be
a felicitously appropriate link between advancing and repayment of
loans with sowing and harvesting season.
Venkitesan (1984) discussed the achievement of Primary Agricultural

Credit Societies (PACS) regarding credit disbursement and also short-
term agricultural loans and its resultant impact on agricultural
production in Kerala. His findings revealed PACSs earning profits had a
strong resource base, high rate of deposit mobilization, low borrowings
and high distribution of agricultural advances and high rate of loan
recovery compared to those incurring losses. The study also recognized
the major factors adding to resources of the PACS like pattern of
cropping and occupation of the members, simplified loaning procedures
leading to the satisfaction of the beneficiaries and members’ active
participation in the affairs of the society.
Savaraiah and Thirupal (1984) made an attempt to compare the financial
performance of Prakasam District Central Co-operative Bank (DCCB) and
Nellore DCCBs on the basis of statistical tools and also evaluated the
financial soundness of these two banks. The study pointed out DCCBs
should procure the permanent capital of its own as quickly as possible
and should try to mobilize deposits from the public to the maximum
possible extent so as to make these operations possible.
Sharma (1985) discussed the short-term agricultural credit of Rajasthan

Central Co-operative bank (CCB) and concluded that the CCBs should
change their short term loan policies and procedures on the basis of
crop loan system and also observed that loans should be given in
installments and there should be a felicitously appropriate link between
advancing and repayment of loans with sowing and harvesting season.
Varma (1985) studied the overall performance of the Central Co-

operative banks in Maharashtra and opined that their major defects
were poor recoveries, overdues, poor deposits, insufficient
management, inadequate and untrained staff lack of supervision,
defective loan policies, defective book adjustments, inadequate bad and
doubtful reserves, etc.
Unnikrishnan (1985) studied the details of cash reserve management of

Trichur DCB and emphasized the need for reducing the cash reserves of
the bank. He also recommended that for better deployment of funds,
technologically feasible and economically viable schemes may be
undertaken.
Shah (1986), in his study observed that for the survival of co-operative
banks, especially after the competitive multi-agency banking concept in
the field of rural finance, there was the need for the establishment of
Research and Development cells in co-operative banks. According to him
the present profile of the functioning of the co-operative credit
institutions amply establish the rule of thumb as a modus operandi at all
levels of management. In his views, cooperative banks need to have
more systematic planning without compromising flexibility and
entrepreneurial flair. He suggested that the co-operative banks’
approach have to be more innovative in marketing and selling of banking
services.
John Winfred (1986) examined the funds management of Central Co-

operative Banks (CCBs) in India. The study revealed that mobilization of
resources is one of the core functions of CCBs. In his views, in order to
run the credit system efficiently and to reduce their dependence on
outside borrowings, there is a need to enhance and improve the rural
resources. According to him, co-operative capital should be utilized
prudently and in the most effective manner to minimize expenditure
and to gain maximum benefits. The efficient utilization of resources
implies diversified development without compromising the main
banking principles viz. liquidity, safety and profitability. He concluded
that better utilization of funds helps not only in improving the image and
income earning capacity of the banks but also in reducing the regional
and functional imbalances.
Narayana Swamy and Ramachandran (1987) discussed the impact of

income and expenditure on profitability through the key ratios
developed by Varsha S. Varda and Sampat P. Singh. The study pointed
out that the rise in the volume of business over a decade had resulted in
the increased profit of the bank and also due to a higher rate of decline
in spread ratio as a result of fall in interest received. In their opinion, the
profit and profitability would increase with the improvement in the
areas like recovery, mobilization of deposits, branch expansion,
reduction in manpower and operating expenses, building up of more
owned funds and scientific management of funds.
James Paul (1987) made an attempt to evaluate the operational

efficiency of Ernakulam DCB and opined that the bank’s owned funds to
borrowed funds ratio and the borrowed funds to working capital ratio
made it evident that the bank is efficient in the mobilization of funds.
However the deployment of funds was found to be inefficient. Because
of inefficient utilization of funds the ratio of net profit to own funds ratio
showed a declining trend. His study revealed sound liquidity position of
the bank. In his view the position of the bank can be improved by
exploring new avenues of investment, better cash management and
through the reduction of the overdues of the bank and by forming an
extension wing to study the problems of its member societies.
Naidu and Prasad (1987) examined the pattern of utilization of

production credit of cooperative short-term with the help of cross
tabular analysis and regression analysis. The study revealed that there is
an inverse relationship between short-term credits of co-operative used
for production purpose and the farm size. The marginal and small
farmers used the credit amount for the consumption purpose on the
other hand the medium and large farmers also used it for
nonagricultural purposes. They further suggested that to assure the use
of loan amount for stipulated purposes regular follow-up visits are
essential.
Rajeev Kumar Saxena (1987) in his study found out that Central
Cooperative Bank at district level serves as an important link between
the state co-operative bank and the primary agricultural credit societies
at the base. He observed that in order to make the central co-operative
banks financially and administratively strong and viable units, there was
an urgent need to solve its major problem of overdue and its recovery.
His recommendations also included effective supervision over the end
use and close contact of higher officials with the farmers.
Arulanandam and Namasivayam (1987) found out that the overall image
of the bank, the quality of the service offered, the type of deposit
schemes introduced, their attractiveness, branch network and the
efforts made by the bank to identify the savings potential of the target
group and their effective channelization into its system reflects the level
of deposits mobilized by any co-operative bank. They were of the view
comparison of the ratio of bank deposits to the national income of
various countries will help in analyzing the deposit mobilization better,
and for increasing this ratio, the motto of co-operative banks should be
"no place is too insignificant and no deposit is too small".
Vaikuntha (1988) did a survey of borrower households of Dharward DCB,

in Karnataka during 1984-85 and observed the reasons for non-recovery
of loans. According to him natural calamities, unsound lending policies,
inadequate supervision, unsatisfactory management and lack of right
type of leadership were some of the major reasons for increasing
overdues. He recommended that in order to control the overdue
problem there is a need to impose abnormal interest penalties and
effective recovery policies.
John Winfred (1988) conducted another study on the funds

management in DCBs in India. The study revealed that the sources of
funds consisted of both internal sources (share capital from banks,
members and reserves created by banks) and external sources (deposits
from individuals, co-operatives, other institutions and loans and
advances from apex financing banks, government and commercial
banks). He observed that in order to identify the margin available to a
bank in its resource mobilization and utilization effort, it is very essential
to ascertain the cost and returns of funds. According to him it was also
necessary to evaluate whether the margin available is adequate to run a
bank viably. He opined that the cost of deposits varied from bank to
bank depending upon their composition- the higher the level of current
and savings deposits (which are much less costlier) the lower will be the
average deposits rate and vice-versa.
Moorti et al. (1988) studied the membership, share capital, deposits,

loans and advances, pattern of utilization and problems of overdues of
the co-operative credit societies. They found out that the poor
management of societies, negligence on the part of management of
societies, the untimely release and inadequate amount of loan that
weakens the repayment capacity, were the major reasons for the
increasing overdues in credit societies.
Bhoslae and Dangat (1989) studied the cooperative societies in Kolhapur

district. They analyzed the extent of medium term borrowings of farmers
from cooperative societies, repayment position of the loan borrowed
and the factors responsible for overdues. The misutilization of loan was
the major reason for overdues. They observed that there is a direct
relationship between the total amount borrowed and the amount of
overdues therefore proper analysis of the loan application by the
financing institution is required. They recommended that there is a need
of a suitable policy with regard to supervision of credit at the farm level.
Bhatt et al. (1989), with the help of correlation coefficient and‘t’ test,
examined the credit-deposit ratio and its inter-relationship with other
components contributing towards credit of DCBs. They found out that
the real picture of management of deposits and credit is depicted by
effective credit-deposit ratio. The researchers emphasized performance
efficiency should be judged by using the effective credit-deposit ratio, in
relation to credit and deposits of banking sector function in rural area.
Cheriyakoya (1989) examined the extent and composition of the

additional deposits mobilized during deposit mobilization campaign and
its impact on the lending pattern of the Trichur DCB during 1978-79 to
1987-88. He analyzed that in comparison to the normal months, the
credit deposit ratio, which indicates banks' efficiency in the deployment
of funds, was lower during the deposit mobilization campaign. The
reason for this was said to be unwarranted concern of the staff for
deposits mobilization and the total negligence for lending during this
period. It was observed that during the April- May period in all years, the
deposits increased significantly, so this period was found to be more
suitable for the deposit mobilization campaign.
Ranga Reddy (1989) made an attempt to study the measures taken for
reducing farm co-operative overdues in the Guntur District Central Co-
operative Bank and the sample PACS. He observed that the stream-lining
of management, strengthening of the supervisory staff, restructuring of
the working capital by raising the share of owned resources and prompt
legal and executive action covering all delinquents were some of the
corrective and preventive measures taken for reducing farm co-
operative overdues.
Khusro Committee Report (1989) suggested that the DCBs, along-with its
supervisory functions over PACS, should help them in legal and other
related matters, whenever needed. The committee also recommended
that DCBs will continue to work as the liquidity reservoir and balancing
centre of PACS, simultaneously working as a bank for other co-operative
societies in the district. In committee’s view to retain a part of the share
capital received from their members the linking of share capital to
borrowings at DCB level for PACS may be fixed at 5 per cent. It was
advised to reduce the ratio of cash credit to PACS from 2.50 per cent to
1 per cent.
Abdul Majeed (1989) studied the credit operations of Malappuram DCB.

He analyzed the change in composition of loans on the basis of priority,
period, section wise classification and purpose of loans issued by
Malappuram DCB. He concluded that over the period under study (1980-
81 to 1987-88) loans recovery was low and declining.
Dhanarajan (1989) studied the profitability trend of Palakkad DCB (1977-

78 to 1986-87) and also assessed the impact of primary and secondary
factors on spread and burden of Palakkad DCB. The study revealed that
the burden of the bank increased continuously throughout the period
which was evident in its decreasing profitability trend.
Shaheena and Kannan (1989) in their study measured the excess

reserves kept and the opportunity cost of excess reserves for Palakkad
DCB for the period 1978-79 to 1987-88. They suggested that the bank
should aim at reducing the excess amount kept under CRR. They also
recommended that if in case bank is keeping an excess, it should in the
form SLR, so that it can be utilized by the bank for short-term
investments preferably in the Stock Exchange Market. This will help
them improve their liquidity position and they can rely for interbank
loans on a larger scale.
Rajan (1990) studied the reserve management of Kozhikode DCB to

assess the excess reserves kept by the bank to measure the opportunity
cost of excess reserves for the period 1979-80 to 1988-89. The study
revealed that the bank was keeping excess reserves under the
regulations of CRR and SLR. The non-availability of scientific portfolio
management techniques was the reason for the high magnitude of
excess reserves under CRR. However it was found that the bank was
efficient in SLR management. He also suggested that to minimize the loss
due to the practice of keeping excess reserves in the branches of the
bank there was a need to improve the branch information system. The
recommendations also included investment in call money market and
inter-bank deposits.
Mani and Letha (1990) observed that the Trichur DCB used to keep
excess reserves under cash reserve ratio (CRR) and statutory liquidity
ratio (SLR). The size of excess reserves under CRR was reported to be
high, the reason being lack of scientific portfolio management
techniques in the bank.
Salim Uddin (1990) analyzed the functioning and impact of various co-
operative financing institutions in Haryana State. In his views there is a
need for the professionalization of co-operative management and also
to define a proper code of conduct for managers. He suggested that a
balanced board of directors with diverse talents, sound policies and
commitment for proper implementation, are the key areas which can
help in success of the movement and improvement of the central co-
operative banks. He recommended that for the sound functioning of the
banks, reduction of administrative cost and introduction of the various
new practices is very necessary.
Satendra Pal Singh et al. (1990) conducted a study to identify the factors
affecting overdues of agricultural loans. Amount of loan borrowed,
amount of loan put under non-productive uses, size of holding and
repayment capacity were the four main factors identified by them.
According to the authors the test of technical feasibility and financial
viability should be the condition for providing loans to the farmers. They
recommended that suitable steps be taken for proving education to the
farmers regarding the proper utilization of loans and also to avoid excess
expenditure on the repayment of loans.
Obul Reddy and Malla Reddy (1990) tried to identify the socio-economic
factors which influence the repayment of co-operative dues by the
borrowers with the help of information collected from 150 borrowers
under the Bhongir DCB in Nalgonda district of Andhra Pradesh. They
found out that there is no significant relationship between socio -
economic factors and repayment of co-operative dues.
Mohandas and Indira (1991) analyzed that as per All India Debt and
Investment Survey (1971-72), the deposits of DCBs of Kerala had
increased from Rs.253.14 lakh in 1960-61 to Rs.3117.75 lakh in 1974-75
and they noted substantial increase since 1971-72. They also observed
that the co-operatives are still lagging behind the commercial banks
despite the substantial increase in their deposits.
Sukumaran and Shaheena (1991) examined the efficiency of the

Palakkad DCB with regard to the management of the interest, spread,
burden and profitability of the bank through the secondary data from
annual reports. They analyzed that the excess reserve kept by the bank
indicates ineffective management of funds within the bank.
Bobby C. John (1991) made an attempt to study the financial
performance of Kottayam DCB in detail to measure its profitability.
According to him, the operating profit ratio of the bank was not
satisfactory. The study revealed that in comparison to non-interest
expense which increased six fold, the non-interest income increased just
five fold. Due to the increase in the manpower expenses, not only the
non-interest expenses increased but it also resulted in the declining
trend in profitability. He recommended that the bank should make
efforts to reduce the management cost and plan its assets and liabilities
mix to reduce the cost of funds and increase the return on funds.
Viswanathan and Radhakrishnan (1991) analyzed the different sources

of funds, the costs associated with raising these funds, different
channels of flow of funds, revenue realized and their growth over the
years to examine the overall performance of DCBs in Kerala.
Reorganization of the various activities was recommended by them
through which DCBs can enhance their income. Lower level of fixed
deposits, higher level of savings bank and current deposits, subscription
of maximum reserve funds and a moderate level of borrowings were
some of the recommendations on the source of funds.
James Hadlant Gunther (1992) in his study examines the extent of

deposit mobilization, deployment and the profitability of Ernakulam
DCB. He observed that about 40% of total deposits consisted of fixed
deposits and short term loans contributed the major portion of loans in
the loan mix of the bank. Over the years the disbursement of loans and
advances were increasing. The author found that there is seasonality in
lending in the months of May and June. He also found that the
performance of Ernakulam DCB, with regards to mobilization of
resources, its deployment and profitability were quite good.
The performance and economic viability of PACS in Kerala were studied

by Suresh and Vinaikumar (1993). They also analyzed the performance
of PACS in general at the All India level and remarked that only a few
states satisfied the norms stipulated by the RBI and NABARD. However,
all the PACS in Kerala satisfied the five quantifiable norms of NABARD on
an average. On the basis of the index of viability constructed considering
eleven variables, the authors found that PACS in only five districts in
Kerala were viable, five potentially viable, while the remaining four less
viable. To promote economic viability of PACS it was suggested that
auditors should be trained, procedures should be streamlined to detect
misappropriations and effective actions should be taken to curb them
and loans and advances and business policies ought to be revamped to
suit member needs to increase the user members. They further
suggested the professionalization of co-operatives, in-service training to
inculcate managerial skill and the establishment of state level
Recruitment Board for co-operatives, and the transformation of the
present status of PACS as Government extension agencies to peoples'
organization.
Sivaprakasam (1993) made an attempt to analyze the personnel
management in DCBs and observed that the employee turnover ratio of
DCBs was low as compared to those in Regional Rural Banks. He found
that one of the important criterion for nearly 1/3of the employees to get
appointed is “influence”. He recommended that the DCBs should
develop such a promotion policy that the employees at the base level
are able to get at least two promotions in their entire career. As per his
views majority of the employees oppose deputation because of the
various reasons such as lack of knowledge, lack of commitment on the
part of the deputationist, lack of banking knowledge, blocking the
promotion of bank employees, delay in policy and decision making and
frequent transfer as they are government employees. He also found that
after undergoing training employees were able to improve their work.
Tucker (1993) emphasized the significance of Human resource

development (HRD) for the improvement of productivity of co-
operatives.
Indra Sena Reddy (1994) made an attempt to study the overall financial
position and performance of Multipurpose Co-operative Rural Bank and
found out that it was satisfactory. The author also suggested that the
bank should aim at improving its performance in respect of profitability
and turnover.
Ajjan (1994) made an attempt to study the performance of the three-tier
structure of cooperative credit institution in Tamil Nadu in terms of their
deposits, borrowing working capital, loans issued, loans outstanding for
a decade (1982-83 to 1991-92) and found out that in all the short-term
and medium term cooperative credit institutions, the deposits,
borrowing and working capital have increased more than 20 per cent.
The study noted a decline in the recovery of the overdues from 46 to
about 35 per cent during the study period depicting the poor recovery
performance, for which he recommended implication of appropriate
plans.
Muthupandian (1995) made an attempt to study on the overall

performance of Tirunelveli District Central Co-operative Bank (TDCCB).
According to him the development of primary societies and the growth
of the co-operative spirit among the members are responsible for the
success of TDCCB. The success of TDCCB also depends upon their ability
to mobilize deposits and savings and make recoveries of bad debts. He
suggested that for future growth bank will have to promote agricultural
development and have to set standard of supervision of the societies
under their charge.
Joy Joseph (1995) studied the funds management of the Agricultural and
Rural Development Banks in Kerala and observed that in comparison to
income factors the growth rates of cost components were high. He
observed that the banks’ profitability was adversely affected by the high
cost of management. In his views profitability was continuously declining
year by year due to the increasing overdues, and consequently the
operational efficiency and overall return in these institutions was very
low. The margins received by primary banks were inadequate for their
profitable operation. He opined that high family expenditure, willful
neglect, modification of subsidy system, misutilization of income from
the project and inappropriate Government policy were some of the
major reasons for the high and increasing overdues.
Shollapur (1995) examined the recovery performance of Karnataka state

cooperative apex bank. He observed that the performance in credit
collections was poor as the percentage of recovery to demand has
declined from 94 per cent to 55 per cent in total credit and from 95 per
cent to 54 per cent in agricultural credit. The total overdues have
increased 13 times from Rs. 401.26 crores to Rs. 5059.32 crores. His
recommendations include imparting training for recovery management
involving central cooperative banks and other constituents.
Shiyani and Sima (1999) studied the performance of credit institutions in

promoting agricultural development in Gujarat. He was of the view that
the total overdue of agriculture and allied activities in Gujarat was Rs
421.52 crore, which was quite high. The proportion of agriculture
overdues of co-operative banks in the total overdues of all banks in
Gujarat was more than 65 percent reflecting a situation that needed
immediate action. Moreover the cooperative banks’ share in the total
credit flows to the agricultural sectors was as low as 36 percent.
Patil (2000) found out in his study on the basis of opinion of beneficiaries
that the procedure of getting loans from primary co-operative
agricultural and rural development bank in Dharwad district was
cumbersome and most of the borrowers faced many problems such as
document requirement which consumed a lot of time and money, lack
of guidance on the part of bank officials, delayed sanction of loans etc.
However the staff treatment of bank officials was quite satisfactory.
Bhaskaran and Josh (2000) concluded that the recovery performance of

co-operative credit institutions continues to unsatisfactory which
contributes to the growth of NPA even after the introduction of
prudential regulations. They suggested legislative and policy
prescriptions to make co-operative credit institutions more efficient,
productive and profitable organization in tune with competitive
commercial banking.
Jain (2001) has done a comparative performance analysis of District

Central Co-operative Banks (DCCBs) of Western India, namely
Maharashtra, Gujarat and Rajasthan and found that DCCBs of Rajasthan
have performed better in profitability and liquidity as compared to
Gujarat and Maharashtra.
Zeratsion (2002) made an attempt to analyzed the performance of
primary agricultural credit societies in Karnataka and found out that
primary agricultural credit societies in the state shows a growth of 15.37
per cent with regard to the total loan recovery. The overdues showed an
insignificant growth of 3.15 per cent annually during the study period
from 1986-87 to 1997-98.
Gosh (2005) observed that the short term credit remained nearly
unaffected, considerably at about 14 per cent, while the long term credit
growth reduced from about 20 per cent in the 1970s to about 14 per
cent in the 1990s which was alarming. But this trend was a hurdle in the
way of growth and prosperity of the agricultural sector.
Thanarathnam (2006) examined the loan dispersion and the working of

primary agriculture co-operative bank. He observed that 24 percent of
the farmers confirmed easy accessibility and 76 per cent of the farmers
confirmed low rate of interest were the reasons for borrowing from co-
operatives, indicating the good performance of bank. The study revealed
that among the difficulties for getting loans, difficult procedures were
the reason for 22 percent, cost of availing loans for 16 per cent, security
required for 24 per cent, untimely loans availability for 18 per cent of
the farmers along with difficulties in providing documents for 20 per
cent of the farmers. He observed that short term loans were generally
provided on personal security; therefore this problem of providing
security could be easily remedied.
Singh and Singh (2006) studied the funds management in the District
Central Co-operative Banks (DCCBs) of Punjab with specific reference to
the analysis of financial margin. It noted that a higher proportion of own
funds and the recovery concerns have resulted in the increased margin
of the Central Co-operative Banks and thus had a larger provision for
non-performing assets.
Mavaluri, Boppana and Nagarjuna (2006) suggested that performance of

banking in terms of profitability, productivity, asset quality and financial
management has become important to stable the economy. They found
that public sector banks have been more efficient than other banks
operating in India.
Pal and Malik (2007) investigated the differences in the financial

characteristics of 74 (public, private and foreign) banks in India based on
factors, such as profitability, liquidity, risk and efficiency. It is suggested
that foreign banks were better performers, as compared to other two
categories of banks, in general and in terms of utilization of resources in
particular.
Ramappa and Sivasankaraiah (2007) observed that as overdues of the

Rayalseema Grameena bank in Andhra Pradesh declined from 34 per
cent in 2003 to 19 per cent in 2004 it reflects its better recovery
performance. He also found that the repayment performance of non
priority sector was better than that of priority sector. The study also
revealed that 95 per cent of total demanded loans had been repaid by
the members of the Self Help Groups which was quite remarkable.
Singh, Koshta, Chandrakar, (2007) in their study observe the

performance of District Central Cooperative Bank, Raipur and its Mandir
Hasaud Branch by estimating the growth rate performance indicators
with the help of time series data from 1991-92 to 1998-99. . In absolute
term, linear trend value of performance indicators have increased
considerably and overdue was increased by amount of Rs. 375.33 per
annum; is not a good sign for co-operative loans during the period of
study. The estimated compound growth rate for number of borrowers,
amount advanced as crop loan, recovery, outstanding and over dues was
noticed by 2%, 12.42%, 5.13%, 15.36 % and 16.12 %, respectively at 1
per cent level of significance. . It is an alarming situation for co-operative
bank because the increase in rate of over dues is quite high as compared
to the other indicators. It is recommended to improve the recovery
performance in order to check the over dues because it is not a good
indication for the healthy economy of co-operatives.
Singla (2008) emphasized on financial management and examined the

financial position of sixteen banks by considering profitability, capital
adequacy, debt-equity and NPA.
Dutta and Basak (2008) suggested that Co-operative banks should
improve their recovery performance, adopt new system of computerized
monitoring of loans, implement proper prudential norms and organize
regular workshops to sustain in the competitive banking environment.
Kumar, Rajiv, Jasmindeep, Kaur (2010) studied financial appraisal of

Haryana State Cooperative Apex Bank for the period of five years from
2002-03 to 2006-07. They analyzed the various parameters for the
appraisal of banks like number of offices, membership, paid up capital,
reserves and other funds, deposit mobilization, deposit type wise,
demand, collection, loans issued, loans outstanding, cost of
management and profit and loss and number of branches in profit and
loss.
Gandhimathi, Vanitha (2010) made an attempt to study the preference

of farmers for borrowing between commercial and co-operative banks.
They examined the distribution of institutional credit across various
categories of farmers and assessed the coverage and quantum of credit
and also the socio-economic factors which affect the borrowing behavior
of farmers towards commercial and co-operative banks. They gave some
suggestions for improving accessibility of institutional credit for farmers.
Chander and Chandel (2010) analyzed the financial efficiency and

viability of HARCO Bank and found poor performance of the bank on
capital adequacy, liquidity, earning quality and the management
efficiency parameters.
Singh and Singh (2010), in their study titled, “Technical and Scale
Efficiency in District Central Co-operative Banks of Punjab −A Non-
Parametric Analysis” had attempted to investigate the extent of
technical efficiency across 20 DCCBs of Punjab with the help of Data
Envelopment Analysis. They brought out that size of DCCBs and profits
had been affecting the measures of technical efficiency significantly. The
study further revealed that DCCBs of Punjab were suffering from the
problems of managerial irregularities and improper production scale.
Appropriate policy interventions by state government, RBI and NABARD
have been suggested by the authors.
CHAPTER-IV
TRENDS AND VOLUME OF SOURCES AND
APPLICATIONS OF FUNDS IN DCBS
4.1 Introduction
Rural credit cooperatives in India were born more than 100 years ago as a
state initiative with promulgation of the Cooperative Societies Act by the
then British Government. Cooperative Credit Societies were organized
with the only objective of providing credit to the farmer members at a
reasonable rate of interest to emancipate them from the clutches of money
lenders. After the amendment of the Cooperative Societies Act in 1912,
the Cooperative Credit Societies were federated into Central Cooperative
banks (CCBs) to mobilize resources to meet the credit requirement of its
farmer members.
The role of Co-operative banks is very important in meeting the credit

requirements of both the urban and rural India. Despite the fact that these
institutions account for small share in the total business undertaken by the
banking system in India, they occupy a significant and prominent place in
Indian financial system as they cater to different geographic locations and
demographic categories. Co-operative banks with their large banking
network have not only supplemented the commercial banks to strengthen
the financial intermediation by bringing a large number of depositors and
borrowers under the formal banking network, but have also enabled the
people from low and middle-income groups, both in rural and urban
areas, to have access to banking services.
The cooperatives in India generally have three-tier structure in most of

the states with primary agricultural credit cooperative societies (PACS)
with farmers as their members at the base level, districts cooperative
banks (DCBs) as the intermediate federal structure with PACS as
principal affiliated members, and the state cooperative bank (StCB) at the
apex state level with CCBs and other cooperatives as its principal
members. This three-tier cooperative credit structure is popularly known
as the short-term cooperative credit structure (ST CCS). The ST CCS
functions as a three-tier structure in 16 states; while in 13 smaller states &
union territories, PACS are directly affiliated to the StCB and the ST
CCS functions as a two tier structure. In 3 states, a mixed structure, i.e.,
two tier in some districts, and three-tier in the other districts operates.
(RBI Report 2012).
The financial performance of DCBs in India in general and Uttar Pradesh

in particular in terms of various sources and applicatons of funds for the
period of 2002-03 to 2010-11 are analysed in this chapter.
4.2 Trends In Financial Performance Of DCBs: The Key Indicators
Table 4.1 Progress Of District Cooperative Banks in India from

2002-03 to 2010-11
CAGR
Main Items 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11
%
No Of DCBs 366 368 368 370 371 372 373 372 371 0.17
Paid Up
Capital 3576.8 3810.0 4115.5 4511.5 5098.1 5829.2 6071.4 7776.5 7257.7 9.25
(Rs. In crore)
Reserves
9675.9 11208.2 12672.9 14082.9 15505.1 16435.7 17808.0 20133.0 20692.0 9.97
(Rs. In crore)
Deposits
72394.4 76884.5 80493.5 86652.2 92181.4 105993.7 123721.8 146303.1 161308.8 10.53
(Rs. In crore)
Borrowings
19238.5 21128.1 21557.1 23202.1 27940.6 30533.3 28477.6 30354.8 39101.2 9.27
(Rs. In crore)
Working
Capital 109092.4 118905.3 122632.9 131241.9 146083.6 168137.5 184037.9 206918.4 235430.7 10.09
(Rs. In crore)
Investments
31138.8 35677.3 34783.2 37127.4 40791.1 48246.6 61041.2 75624.5 75624.5 11.73
(Rs. In crore)
Loans Issued
49775.5 48899.7 55212.4 60418.5 76703.8 87229.1 88028.7 110529.3 137757.2 13.57
(Rs. In crore)
Cost Of
Mangt. 3237.0 3345.8 3680.1 3013.0 3779.8 3748.8 4227.2 4437.4 5307.5 5.6
(Rs. In crore)
Number Of
110078 110058 109124 105885 91768 90035 89259 87554 87928 -2.77
Employees
CoM/employee 2.93 3.04 3.37 2.85 4.12 4.16 4.74 5.07 6.04 8.37
Profits (+) /
Losses(-) 505.7 530.4 1230.4 1773.1 1067.3 -769.1 362.6 2654.8 658.4 3.35
(Rs. In crore)
% overdues to
37.43 36.90 32.86 31.69 32.93 37.15 32.69 26.73 27.37 -3.84
loans
Source: Basic data on performance of district central cooperative banks ( 2002-2003 to 2010-2011), NAFSCOB
The details of the growth in financial indicators of the DCBs in India are
shown in table 4.1.
During 2002-03 to 2010-11 among all the financial indicators, loans and
advances showed the highest growth rate of 13.57 percent. This was due
to the coverage of large area under lending programme and wide range of
advances to both agricultural and non-agricultural purposes. Investment
showed a positive growth pattern (11.73%).This was mainly due to the
increase in the profitable investment of the banks.
Deposit, profit and reserve and other funds, showed positive growth
(10.53%, 3.35% and 9.97% respectively) due to increase in advances both
for agricultural and non-agricultural purposes and improved recovery
percentage. The growth in deposit was mainly due to rapid increase in
deposit mobilization. There is negligible growth in number of DCBs over
the years(0.17%). Percentage of overdues to loans registered the negative
growth rate of (-3.84%) during the study period. The reason may be
intensive efforts made by the staff to recover loans.
We observed huge fluctuations in profits from Rs. 505.7 crores in 2002-

03 to Rs. (-)769.1 crores in 2007-08 and again Rs. 658.4 crores in 2010-
11.The overall growth rate of profit was 3.35%. The paid up capital
showed a considerable and high increase of 9.25% .
In general there is no significant change in the number of DCBs, we

observed considerable improvement in share capital, reserves, deposits,
borrowings, working capital, investments and loans and advances of
DCBs in India for the period of 2003-2011.
The growth and expansion in terms of the volume of business is

considered to be one of the important indicators which speaks about the
performance of any banking institution. In order to measure the
performance of the district cooperative banks, some of the financial
indicators were identified and the growth rates of those indicators were
computed for the selected sample banks. The computed growth rates of
each bank were analysed and discussed as under
4.3 Sources of funds
It is widely acceptable and recognized that no institution can surive

without adequate own resources. Financial health of any financial
institution is very important for continous improvement, making risky
cum profitable investment and meeting contingencies. The sources of
funds of cooperative banks consist of share capital, reserves and other
funds, deposits and borrowings which are discussed in detail in the
following paragraphs.
4.3.1 Share capital
For a banking institution to raise resources either as deposits or

borrowings would require that the institution have a capital base
consisting of equity and reserves. In a cooperative bank primarily driven
by providing credit to its members at a reasonable cost, maximizing
return on equity remains secondary. Further, raising capital from the
public at large may compromise its mandate. Hence, the equity of the
DCBs is raised from the affiliated member institutions. Normally, as per
statute, a borrowing member has to contribute equity in proportion to the
borrowings made by the institution from the bank. This does make it
difficult for the cooperative banks to have a large capital base and in the
present times when capital adequacy is becoming a major issue in banks,
cooperatives may in the conventional industry sense be undercapitalized.
To overcome this constraint of capital, State Governments have
contributed to the equity of DCBs to strengthen their capital base, but this
has its own pros and cons.
The position of share capital of the selected DCBs is exhibited in table

4.2
Table 4.2 Share capital of selected DCBs from 2002-2003 to 2010-
2011
(Rs. in lakhs)
Districts 2003 2004 2005 2006 2007 2008 2009 2010 2011
Allahabad 682 696 696 725 725 781 804 838 886
Azamgarh 497 512 521 532 532 543 543 584 584
Etah 558 606 698 678 678 743 776 800 809
Etawah 434 442 442 442 442 490 504 519 535
Ghaziabad 385 385 402 489 489 576 809 863 956
Hamirpur 380 391 391 421 421 459 526 565 616
Jalaun 427 432 432 464 464 503 537 537 600
Lalitpur 354 354 354 401 401 444 449 462 502
Moradabad 662 662 662 662 662 662 662 763 763
Lucknow 306 351 351 351 351 351 351 351 351
Average 469 483 495 517 517 555 596 628 660
Chart 4.1 Share capital of selected DCBs ( Rs. in lacs)

1200
1000 956
886
809
763
800
682 662 660
616 600
584
600 497
558 535
502 469
434 380 427
400 385 354 351 2003
306
2011
200
Districts
The chart 4.1 and Table 4.2 reveals that out of the ten selected DCBs,
total share capital of four DCBs were higher than the overall average in
2003. Allahabad DCB had the highest average (Rs 682 lakh) followed by
Moradabad DCB (Rs. 662 lakh), Etah (Rs. 558 lakh) and Azamgarh (Rs.
497 lakh). Lucknow DCB had the lowest average of Rs. 306 lakh. The
averages of Allahabad, Etah, Ghaziabad and Moradabad DCBs were
higher than the overall average in 2011. It was the highest in Ghaziabad
DCB (Rs.956 lakh) and the lowest in Lucknow DCB (Rs.351 lakh). It is
also clear from the table that, Ghaziabad DCB had the maximum increase
in share capital during this period which increased from Rs. 385 lakh in
2003 to Rs. 956 lakh in 2011. Allahabad DCB which topped the list in
2003 declined to forth position in 2011.
Generally there is an increasing trend in the share capital of almost all

selected sample DCBs during 2002-03 to 2010-11.
The compound growth rates worked out for comparing the overall growth
in share capital of the selected DCBs are presented in table 4.3
Table 4.3 Compound annual growth rate (%) of Share capital of

(Rs. in lakhs)
CAGR
Districts 2003 2004 2005 2006 2007 2008 2009 2010 2011
%
Allahabad 682 696 696 725 725 781 804 838 886 3.33
Azamgarh 497 512 521 532 532 543 543 584 584 2.04
Etah 558 606 698 678 678 743 776 800 809 4.75
Etawah 434 442 442 442 442 490 504 519 535 2.65
Ghaziabad 385 385 402 489 489 576 809 863 956 12.04
Hamirpur 380 391 391 421 421 459 526 565 616 6.22
Jalaun 427 432 432 464 464 503 537 537 600 4.34
Lalitpur 354 354 354 401 401 444 449 462 502 4.46
Moradabad 662 662 662 662 662 662 662 763 763 1.79
Lucknow 306 351 351 351 351 351 351 351 351 1.73
U.P. 26591 27377 28236 30100 31554 33974 34361 36206 38151 4.62
India 357680 381003 411547 451147 509813 582923 607141 777653 725768 9.25
Chart 4.2 Compound annual growth rate (%) of share capital of
selected DCBs
14
12.04
12
10 9.25
8
6.22
6 4.75 4.34 4.46 4.62
4 3.33
2.65
2.04 1.79 1.73
2
Districts
It is evident from chart 4.2 and table 4.3 that Ghaziabad DCB recorded
the highest growth (12.04%) which is even greater than the overall
growth of U.P. and India and Lucknow DCB the lowest (1.73%). With
respect to all the indicators it has been observed that there exists a state of
stagnancy in data for Lucknow DCB during 2002-03 to 2010-11. The
table also reveals that the CAGR of Hamirpur and Etah DCBs were
higher than the overall CAGR of Uttar Pradesh. The high increase in
share capital of Ghaziabad DCB may probably be due to its industrial and
commercial development as compared to other districts.
The overall growth of India (9.25%) is almost double in comparison to

the growth of Uttar Pradesh (4.62%) during 2002-03 to 2010-11.
In general the data of the selected sample districts of U.P.for the period
2003-2011 shows that the share capital of DCBs in U.P. is increasing
over the years.
4.3.2 Reserves and other funds
Another important component of sources of funds is reserves and other

funds created from operations. Reserves constitute of statutory reserve
fund, agricultural credit stabilization fund and other reserves. Table 4.4
presents the trend of total reserves funds of selected DCBs for the period
2002-03 to 2010-11.
Table 4.4 Reserves and other funds of selected DCBs from 2002-03 to
2010-11
(Rs. in lakhs)
Districts 2003 2004 2005 2006 2007 2008 2009 2010 2011
Allahabad 165 165 165 166 166 354 369 376 375
Azamgarh 2399 2803 2872 3134 3134 3619 3619 4750 4750
Etah 99 100 100 100 100 100 102 102 103
Etawah 1166 1283 1283 1283 1283 2224 3008 3316 4141
Ghaziabad 2670 2670 3403 2741 2741 2906 3590 3811 3866
Hamirpur 425 461 461 496 496 768 942 1085 1615
Jalaun 1687 1750 1750 1930 1930 2233 2455 2455 1955
Lalitpur 935 935 935 706 706 948 949 948 989
Moradabad 1569 1569 1569 1569 1569 1569 1569 8625 8625
Lucknow 216 96 96 96 96 96 96 96 96
Average 1133 1183 1263 1222 1222 1482 1670 2556 2652
Chart 4.3 Reserves & other funds (Rs. in lacs)
10000
9000 8625
8000
7000
6000
4750
5000
4141
3866 2003
4000
2670 2652 2011
3000 2399 1955
2000 1687 1569

1615 1133
1166
935 989
1000 425
165 375 99 103 216 96
0
Districts
A close examination of table 4.4 and chart 4.3 highlights an increasing

trend during the period 2002-03 to 2010-11. The table shows that out of
the ten selected DCBs, total reserves and other funds of five DCBs were
higher than the overall average (Rs. 1133) in 2003. Ghaziabad DCB had
the highest average (Rs 2670 lakh) followed by Azamgarh DCB (Rs.
2399 lakh), Jalaun (Rs. 1687 lakh), Moradabad (Rs. 1569 lakh) and
Etawah (Rs. 1166 lakh). Etah DCB had the lowest average of Rs. 99 lakh.
In 2011, the averages of Moradabad, Azamgarh, Etawah and Ghaziabad
DCBs were higher than the overall average. Moradabad DCB exhibited
the highest amount of reserves which increased from Rs. 1569 lakh in
2003 to Rs. 8625 lakh in 2011. Etawah DCB closely followed Moradabad
DCB in this respect. Lucknow DCB's position was at the bottom during
this period, which actually shown a decline in reserves and other funds
from Rs.216 lakh in 2003 to Rs.96 lakh in 2011. Hence, it is evident that
Moradabad DCB is generating more business and as a result creating high
reserve funds as compared to other districts.
Table 4.5 Compound annual growth rate (%) of total reserves and
other funds of selected DCBs from 2002-03 to 2010-11
(Rs. in lakhs)
CAGR
Districts 2003 2004 2005 2006 2007 2008 2009 2010 2011 %
Allahabad 165 165 165 166 166 354 369 376 375 10.81
Azamgarh 2399 2803 2872 3134 3134 3619 3619 4750 4750 8.91
Etah 99 100 100 100 100 100 102 102 103 0.50
Etawah 1166 1283 1283 1283 1283 2224 3008 3316 4141 17.17
Ghaziabad 2670 2670 3403 2741 2741 2906 3590 3811 3866 4.74
Hamirpur 425 461 461 496 496 768 942 1085 1615 18.16
Jalaun 1687 1750 1750 1930 1930 2233 2455 2455 1955 1.86
Lalitpur 935 935 935 706 706 948 949 948 989 0.70
Moradabad 1569 1569 1569 1569 1569 1569 1569 8625 8625 23.74
Lucknow 216 96 96 96 96 96 96 96 96 -9.64
U.P. 74172 83263 90200 106009 107489 113502 119828 149109 162748 10.32
India 967591 1120824 1267286 1408294 1550512 1643573 1780801 2013296 2069202 9.97
Chart 4.4 Compound annual growth rate (%)of Reserves and other
funds
30
23.74
25
20 17.17 18.16
15
10.81 10.32 9.97
8.91
10
4.74
5 1.86
0.5 0.7
0
-5
-10
-9.64
-15
Districts
The trends of reserves and other funds of selected DCBs are exhibited in
table 4.5and chart 4.4. It is observed from table that Moradabad DCB
(23.74%) was keeping sufficient reserves followed by Hamirpur DCB
(18.16%). The lowest growth rate was observed for Lucknow DCB which
is actually negative (-9.64%).We also observe that the growth rate of
reserves of Mordabad, Hamirpur, Etawah and Allahabad is infact greater
than that of state and nation. The rate of growth of India is lower than that
of Uttar Pradesh.
The table and chart revealed that in general the reserve and other funds
of the selected sample districts of U.P. for the period 2003-2011 shows an
increasing trend over the years.
4.3.3 Deposits
Yet another source of funds is deposits which include fixed deposits,

savings bank deposits, and current deposits. The growth of deposits of
selected DCBs from 2002-03 to2010-11 has been shown in table 4.6
Table 4.6 Deposits of selected DCBs from 2002-03 to 2010-11

(Rs. in lakhs)
Current Deposits Savings Term Deposits Total
Districts 2003 2011 2003 2011 2003 2011 2003 2011
Allahabad 1072 1965 7912 19376 8318 11624 17302 32965
Azamgarh 712 1093 3256 6736 3877 5020 7854 12855
Etah 472 918 3384 7018 3044 4150 7156 12693
Etawah 1021 1728 7215 20425 6239 9428 14740 31581
Ghaziabad 521 1306 7605 25758 6429 14591 14555 41655
Hamirpur 600 1143 3410 11636 3385 5882 7402 18661
Jalaun 322 449 4979 11314 5732 9042 11039 20805
Lalitpur 130 178 1347 4105 1745 3226 3222 7509
Moradabad 817 1604 8566 20399 6269 7576 15652 29579
Lucknow 270 490 1969 3959 2306 3871 4839 8457
Average 594 1087 4964 13073 4734 7441 10376 21676
Chart 4.5 Current Deposits (Rs. in Lacs)
2500
1965
2000
1728
1604
1500
Rs. in lacs
1306
1093 1021 1143 1087
1072
918
1000 817 2003
712
521 600 594 2011
472 449 490
500 178
322 270
130
Districts
Chart 4.6 Savings Deposits (Rs. in lacs)

30000
25758
25000
20425 20399
19376
20000
15000 13073
11636 11314
2003
10000 8566
7912 7018 7215 7605
6736 4964 2011
4979 4105
5000 3384 3959
3256 3410
1347 1969
Districts
Chart 4.7 Term Deposits(Rs. in Lacs)
16000 14591
14000
11624
12000
10000 9428
9042
8318
7576 7441
8000
6239 6429 5882 6269
6000 5020 5732 4734 2003
3877 4150 3871
4000 3385 3226 2011
3044
1745 2306
2000
Districts
Chart 4.8 Total Deposits (Rs. in Lacs)
45000 41655
40000
35000 32965
31581
29579
30000
25000 21676
20805
18661
20000 17302 2003
14740 15652
14555
15000 12855 12693 2011
11039 10376
8457
10000 7854
7156
7402 7509
3222 4839
5000
0
Districts
Table 4.6 and the above charts suggest that in general, all these banks
showed an increasing trend with regard to different types of deposits
during 2003 and 2011. Total deposits mobilized in 2003, with respect to
Allahabad, Moradabad, Etawah, Ghaziabad and Jalaun DCBs were higher
than the overall averages. In 2011 total deposits mobilized of Ghaziabad,
Allahabad, Etawah and Moradabad DCBs were higher than the overall
averages. In 2003 Allahabad DCB mobilized the maximum (Rs. 17302
lakh) and in 2011 Ghaziabad DCB (Rs. 41655) mobilized the most.
Lalitpur DCB mobilized the least in 2003 and also in 2011 (Rs. 10376
lakh and Rs 21676 lakh respectively).
It can therefore be inferred that Ghaziabad, Allahabad, Etawah and

Moradabad DCBs were mobilizing more deposits which they utilize for
their business operations for earning more profit.
As far as, current deposits are concerned Allahabad, Etawah, Moradabad,

Azamgarh and Hamirpur DCBs crossed the overall average of Rs. 594
lakh in 2003. In 2011, the averages of Allahabad, Etawah, Moradabad,
Ghaziabad, Hamirpur and Azamgarh DCBs were more than the overall
average of Rs. 1087 lakh. Allahabad DCB recorded the highest figure
(Rs. 1072 lakh and Rs. 1965 lakh) in 2003 and 2011 respectively.
Lalitpur DCB maintaining the lowest (Rs. 130 lakh and Rs. 178 lakh) in
2003 and 2011 respectively.
In terms of savings bank deposits, Moradabad, Allahabad, Ghaziabad,

Etawah and Jalaun DCBs deposits were higher than the overall average of
(Rs. 4964 lakh) in 2003. In 2011, except Jalaun, all those DCBs of
Moradabad, Allahabad, Ghaziabad and Etawah again had their saving
bank deposits higher than their overall average of Rs. 13073 lakh.
With regard to fixed deposits, total amount collected by Allahabad,

Ghaziabad, Moradabad, Etawah and Jalaun DCBs were higher than the
overall average of (Rs. 4734 lakh and Rs. 7441 lakh) in 2003 and 2011
respectively.
The trends of different types of deposits are exhibited in Table 4.7.
Table 4.7 Compound annual growth rate (%) of total deposits of

(Rs. in lakhs)
CAGR
Districts 2003 2004 2005 2006 2007 2008 2009 2010 2011 %
Allahabad 17302 17152 17152 18996 18996 22909 26037 29682 32965 8.39
Azamgarh 7854 8771 9597 9905 9905 9487 9487 12855 12855 6.35
Etah 7156 7406 7003 8347 8347 10279 10877 12372 12693 7.43
Etawah 14740 16287 16287 16287 16287 22222 24796 28461 31581 9.99
Ghaziabad 14555 14555 17368 20317 20317 22977 29712 34722 41655 14.05
Hamirpur 7402 7877 7877 8577 8577 11634 13730 16794 18661 12.25
Jalaun 11039 11415 11415 11985 11985 14563 18920 18920 20805 8.24
Lalitpur 3222 3222 3222 3619 3619 5102 5648 6719 7509 11.16
Moradabad 15652 15652 15652 15652 15652 15652 15652 29579 29579 8.28
Lucknow 4839 8457 8457 8457 8457 8457 8457 8457 8457 7.23
U.P. 491491 514287 533160 590158 632374 679472 762678 897209 963457 8.78
India 7239443 7688452 8049350 8665222 9218136 10599372 12372182 14630314 16130882 10.53
Chart 4.9 Compound annual growth rate (%) of deposits of

selected DCBs
16
14
12
10
8
6
4
2
0
Districts
It is evident from chart 4.9 and table 4.7 that maximum compound annual
growth rate (CAGR) of total deposits recorded was 14.05% for
Ghaziabad DCB and the minimum for Azamgarh (6.35%). The growth
rate of Etawah, Ghaziabad, Hamirpur and Lalitpur is higher than that of
Uttar Pradesh. This may be attributed to the high industrial development
of the districts coupled with the joint efforts of employees with regard to
deposit mobilization.
As is evident from the table that in general, the data of the selected
sample districts of U.P. and India for the period 2003-2011 shows that
the deposits is showing an increase over the years.
4.3.4 Borrowings
Borrowings constitute yet another source of funds. DCBs borrowings are

made from different sources like State Co-operative Bank, Government,
NABARD, RBI, National Housing Bank, Housing Development Finance
Corporation, Housing and Urban Development Corporation, and
Commercial Banks etc. Total borrowings of selected DCBs are exhibited
in table 4.8
Table 4.8 Total Borrowings of selected DCBs from 2002-03 to 2010-11

(Rs. in lakhs)
Districts 2003 2004 2005 2006 2007 2008 2009 2010 2011
Allahabad 242 1504 1504 1504 1504 1659 1346 1582 2303
Azamgarh 1755 2058 2538 2538 2538 2874 2874 1208 1208
Etah 2692 2931 3440 3440 3440 2251 1912 202 2306
Etawah 275 304 304 304 304 1765 1605 1767 2206
Ghaziabad 203 203 515 515 515 3642 5989 6915 12492
Hamirpur 415 1500 1500 1500 1500 1786 1795 2103 4698
Jalaun 1263 1487 1487 1487 1487 1574 1960 1960 4613
Lalitpur 1270 1270 1270 1270 1270 720 617 630 1101
Moradabad 4061 4061 4061 4061 4061 4061 4061 7414 7414
Lucknow 399 253 253 253 253 253 253 253 253
Average 1258 1557 1687 1687 1687 2059 2241 2403 3859
Chart 4.10 Borrowings of selected DCBs
14000
12492
12000
10000
8000 7414
2003
6000 4698 4613
4061 3859 2011
4000
2692
2303 2306 2206
1755 1270
2000 1263 1258
1208 1101 399
242 275 203 415 253
0
Districts
Table 4.8 and chart 4.10 depicts that there is no uniformity in the growth
of borrowings. In 2003, out of the ten selected DCBs, total borrowings of
five DCBs were higher than the overall average in 2003. Moradabad
DCB had the highest average (Rs 4061 lakh) followed by Etah DCB (Rs.
2692 lakh), Azamgarh (Rs. 1755 lakh), Lalitpur (Rs.1270 lakh) and
Jalaun (Rs. 1263 lakh). Ghaziabad DCB had the lowest average of Rs.203
lakh. In 2011 the averages of Ghaziabad, Moradabad, Hamirpur and
Jalaun DCBs were higher than the overall average. It was the highest in
Ghaziabad DCB (Rs 12492 lakh) and the lowest in Lucknow DCB
(Rs.253 lakh). It is also clear from the table that, Ghaziabad DCB had the
maximum increase in borrowings during this period which increased
from Rs. 203 lakh in 2003 to Rs. 12492 lakh in 2011. Moradabad DCB
which topped the list in 2003 declined to second position in 2011.
Table 4.9 Compound annual growth rate (%) of borrowings of
(Rs. in lakhs)
CAGR
Districts 2003 2004 2005 2006 2007 2008 2009 2010 2011 %
Allahabad 242 1504 1504 1504 1504 1659 1346 1582 2303 32.53
Azamgarh 1755 2058 2538 2538 2538 2874 2874 1208 1208 -4.56
Etah 2692 2931 3440 3440 3440 2251 1912 202 2306 -1.92
Etawah 275 304 304 304 304 1765 1605 1767 2206 29.73
Ghaziabad 203 203 515 515 515 3642 5989 6915 12492 67.36
Hamirpur 415 1500 1500 1500 1500 1786 1795 2103 4698 35.44
Jalaun 1263 1487 1487 1487 1487 1574 1960 1960 4613 17.58
Lalitpur 1270 1270 1270 1270 1270 720 617 630 1101 -1.77
Moradabad 4061 4061 4061 4061 4061 4061 4061 7414 7414 7.81
Lucknow 399 253 253 253 253 253 253 253 253 -5.54
U.P. 93303 98931 111766 127263 163204 176039 186468 189271 232343 12.08
India 1923847 2112810 2155710 2320213 2794060 3053334 2847764 3035483 3910116 9.27
Chart 4.11 Compound annual growth rate (%) of borrowings of selected

80 DCBs
67.36
70
60
50
40 35.44
32.53
29.73
30
17.58
20 12.08
7.81 9.27
10
0
-1.92 -1.77
-10 -4.56 -5.54
Districts
As mentioned earlier there is no uniformity in the growth pattern of

DCBs which is evident from above table and chart. Ghaziabad DCB
recorded the highest (67.36%) growth of borrowings and Lucknow DCB
the lowest (-5.54%). The table also reveals that the CAGR of Ghaziabad,
Hamirpur Allahabad, Etawah and Jalaun DCBs were higher than the
overall CAGR of Uttar Pradesh (12.08%). As mentioned earliar the high
increase in borrowings of Ghaziabad DCB may probably be due to the
commercial and industrial development of Ghaziabad district compared
to other districts.
On analyzing the above table and chart we observed an increasing trend

for borrowings of U.P. for the period 2003-2011. It has also been
observed that the growth of U.P. is greater than that of India. Although
the growth rate of borrowings of few sample districts like Azamgarh,
Etah, Lalitpur and Lucknow showed a decline but there is an overall
increase in the borrowings of U.P. over the years.
Correlation
The degree of relationship between the two variables under consideration

is measured through the correlation analysis. The measures of correlation
called the correlation coefficient or correlation index summarize in one
figure the direction and degree of correlation. The correlation analysis
refers to the techniques used in measuring the closeness of the
relationship between the variables.
The correlation is a statistical device which helps us in analyzing the

covariation of two or more variables. The problems of analyzing the
relation between different series should be tested whether it is significant
or not. The table clearly shows the relation between two variables.
Of the several mathematical methods of measuring correlation, the Karl

Pearson's method, popularly know as Pearson's coefficient of correlation,
is most widely used in practice. The Pearson coefficient of correlation is
denoted by the symbol r. The value of the coefficient of correlation as
obtained by this method shall always lie between +1 to -1.
The value of r is plus then correlation is positive and r is minus then

correlation is negative. It also describes high or low degree of correlation
between two variables.
Table 4.10 Coefficient of correlation between borrowings and profits

(Rs. In Lakhs)
Districts 2003 2004 2005 2006 2007 2008 2009 2010 2011 r
Allahabad -594 -637 -637 -1156 -1156 -646 -270 2 11 0.265
Azamgarh 303 -457 -376 -579 -579 -866 -866 285 285 -0.942
Etah 76 90 104 88 88 -572 626 495 35 -0.386
Etawah 182 149 149 149 149 158 125 522 246 0.463
Ghaziabad 133 133 145 172 172 254 302 343 149 0.393
Hamirpur 74 51 51 52 52 52 7 48 259 0.832
Jalaun 23 44 44 15 15 53 76 76 77 0.599
Lalitpur 84 84 84 100 100 -114 -114 76 63 0.752
Moradabad 311 311 311 311 311 311 311 31 31 -1.000
Lucknow -114 290 290 290 290 290 290 290 290 -1.000
U.P. -4723 -5565 -7024 -12430 -12430 -22981 -9127 -13512 -17284 -0.717
India 50572 53043 123038 177306 106734 -76906 36258 265476 65841 -0.072
The above table shows the correlation coefficient (r) between borrowings
and profits of DCBs of selected sample districts, Uttar Pradesh and of
India. The correlation coefficient between borrowings and profits is found
to be highly negative in case of Uttar Pradesh as well in case of
Azamgarh, Moradabad and Lucknow DCBs. In case of Hamirpur, Jalaun
and Lalitpur we observed a high degree of positive correlation. The
reason that can be traced is that it might be due to poor and inaccurate
data reporting in the Bundelkhand region (these three districts belong to
this region). The above finding is in line with our hypothesis that there is
an inverse relationship between borrowings and profits of DCBs.
4.4 Applications of funds
The funds so collected by the banks, through various sources, are utilized
for meeting the various reserve requirements, granting loans and
advances, purchase of fixed assets and investing in different types of
securities. Here we tried to analyze the trend and pattern of deployment
of funds for important purposes only.
4.4.1 Cash in hand and at bank
DCBs are required to keep 4 per cent and 23 per cent of their demand and
time liabilities as the cash reserve ratio and statutory liquidity ratio
respectively. Generally, banks keep more than their minimum
requirement. So over the years, though there were frequent changes in
these ratios, it showed an increasing trend due to increase in demand and
time liabilities. Cash in hand and at bank of selected DCBs for the period
2002-03 to 2010-11 is displayed in table 4.11
Table 4.11 Cash in hand and at bank of selected DCBs from 2002-03
to 2010-11
(Rs. in lakhs)
Districts 2003 2004 2005 2006 2007 2008 2009 2010 2011
Allahabad 666 344 344 458 458 998 1215 1264 1520
Azamgarh 484 270 732 605 605 554 554 1230 1230
Etah 507 387 517 665 665 668 418 1017 698
Etawah 626 560 560 560 560 1169 941 997 509
Ghaziabad 974 974 1897 1786 1786 1119 1113 1619 1832
Hamirpur 481 486 486 583 583 443 774 1089 1265
Jalaun 563 630 630 705 705 578 999 999 877
Lalitpur 172 172 172 308 308 435 309 428 382
Moradabad 6058 6058 6058 6058 6058 6058 6058 24009 24009
Lucknow 192 292 292 292 292 292 292 292 292
Average 1072 1017 1169 1202 1202 1231 1267 3294 3261
Chart 4.12 Cash in hand and at bank of selected DCBs
30000
25000 24009
20000
15000
2003
10000
6058 2011
5000 1520 1832 1265 877 3261
1230 698 626
974 292 1072
666 484 509 481 563 382 192
507 172
0
Districts
As exhibited in Table 4.10 and chart 4.12 cash in hand and at bank of
only Moradabad DCB was higher than the overall average in 2003 and
also in 2011 (Rs. 6058 lakh in 2003 & Rs. 24009 lakh in 2011). The
minimum amount of cash in hand and cash at bank was of Lalitpur DCB
(Rs. 172 lakh) in 2003 and Lucknow DCB (Rs. 292 lakh) in 2011.
The data of cash in hand and at banks shows that amongst all the selected
ten sample districts the figures for Moradabad for this indicator is
comparatively and significantly high. As in general as compared to other
districts Moradabad is managing high total reserve funds.
Computed growth rates of cash in hand and at bank is displayed in table

4.11
Table 4.12 Compound annual growth rate (%) of Cash in hand and
at bank of selected DCBs from 2002-03 to 2010-11
(Rs. in lakhs)
CAGR
Districts 2003 2004 2005 2006 2007 2008 2009 2010 2011 %
Allahabad 666 344 344 458 458 998 1215 1264 1520 10.87
Azamgarh 484 270 732 605 605 554 554 1230 1230 12.37
Etah 507 387 517 665 665 668 418 1017 698 4.08
Etawah 626 560 560 560 560 1169 941 997 509 -2.55
Ghaziabad 974 974 1897 1786 1786 1119 1113 1619 1832 8.22
Hamirpur 481 486 486 583 583 443 774 1089 1265 12.85
Jalaun 563 630 630 705 705 578 999 999 877 5.70
Lalitpur 172 172 172 308 308 435 309 428 382 10.49
Moradabad 6058 6058 6058 6058 6058 6058 6058 24009 24009 18.78
Lucknow 192 292 292 292 292 292 292 292 292 5.38
U.P. 33037 34515 36736 39439 42030 44157 73877 104762 106044 15.69
India 528133 692559 830000 835036 805139 819096 982594 1119726 11197231 46.49
Chart 4.13 Compound annual growth rate (%) of Cash in hand and
at bank of selected DCBs
50 46.49
40
30
18.78
20 15.69
12.37 12.85
10.87 10.49
8.22
10 5.7 5.38
4.08
0
-2.55
-10
Districts
Chart 4.13 and table 4.11 points out that the maximum CAGR (18.78%)
was recorded at Moradabad DCB which is indeed higher than that of U.P.
(15.69) and minimum (-2.55%) at Etawah DCB. As mentioned earlier
with respect to all the indicators it has been observed that there exists a
state of stagnancy in data for Lucknow DCB during 2002-03 to 2010-11.
We observed in the recent years Etawah DCB is managing the liquidity
with minimum amount of cash.
The above table and chart point out that there is increase in cash in hand
and cash at bank in the selected sample districts of Uttar Pradesh over the
period of 2003-2011 with the only exception of Etawah. Although the
overall growth of cash in hand and at bank in Uttar Pradesh has also
shown a considerable increase over the years, yet it is lower than that of
India.
4.4.2 Loans and advances
The major business of the cooperative banks is lending. For lendings, the
DCBs can obtain refinance from higher lending agencies like NABARD,
who channelise these funds through the State Cooperative Banks. Term
loans are extended for a wide range of purposes, from excavation of
wells, purchase of pump sets to horticulture, animal husbandry and even
rural transport like tractors and other farm equipments. The loan
requirement of the project is arrived at based on the aggregate of the cost
of various components of investments and then deducting the margin that
the borrower will have to provide. The repayment instalment and period
is fixed based on the incremental income that will be derived from the
asset and the life of the asset. Usually, for small and marginal farmers,
around half of the incremental income is taken for the servicing of the
bank loan.
A significant share of DCBs funds are used for granting different types of
loans and advances. Loans granted by the selected DCBs for the period
from 2003 to 2011 are shown in table 4.12
Table 4.13 Loans and advances of selected DCBs from 2002-03 to

2010-11
(Rs. in lakhs)
Districts 2003 2004 2005 2006 2007 2008 2009 2010 2011
Allahabad 5675 5432 5432 6611 6611 9109 9315 8980 11980
Azamgarh 2237 3008 3384 2361 2361 2793 2793 2290 2290
Etah 7636 7818 7580 6750 6750 7220 6936 6375 7572
Etawah 4599 5189 5189 5189 5189 6903 7150 7648 7555
Ghaziabad 8643 8643 11301 14357 14357 15501 26948 30105 36456
Hamirpur 3705 3587 3587 4694 4694 3516 4762 5243 7193
Jalaun 5082 5461 5461 7246 7246 11050 10723 10723 12657
Lalitpur 1617 1617 1617 2733 2733 1924 2811 2765 3761
Moradabad 15359 15359 15359 15359 15359 15359 15359 21419 21419
Lucknow 1047 3554 3554 3554 3554 3554 3554 3554 3554
Average 5560 5967 6246 6885 6885 7693 9035 9910 11444
Chart 4.14 Loans and advances of selected DCBs

40000 36456
35000
30000
25000
Rs. In lacs
21419
20000
15359
15000 12657 2003
11980 11444
7636 2011
8643
10000 7555 7193
5675 7572 5560
2290 4599 5082
3705 3761 3554
5000 2237 1617 1047
0
Districts
A close examination of chart 4.14 and table 4.12 shows that the overall
loan position has increased considerably from 2003 to 2011. In 2003,
Allahabad, Moradabad, Ghaziabad and Etah DCBs had averages above
the overall average of Rs.5560 lakh. The highest amount of loans was
granted by Allahabad DCB (Rs. 5675 lakh) and lowest amount by
Lucknow DCB (Rs. 1047 lakh. But in 2011, Ghaziabad DCB’s average
was Rs. 36456 lakh followed by Moradabad DCB (Rs. 21419 lakh).
Azamgarh DCB had the lowest average of Rs.2290 lakh in 2011.
The trends in loans and advances of selected DCBs from 20030to 2011
are exhibited in table 4.13.
Table 4.14 Compound annual growth rate (%) of Loans and

advances of selected DCBs from 2002-03 to 2010-11
(Rs. in lakhs)
CAGR
Districts 2003 2004 2005 2006 2007 2008 2009 2010 2011 %
Allahabad 5675 5432 5432 6611 6611 9109 9315 8980 11980 9.79
Azamgarh 2237 3008 3384 2361 2361 2793 2793 2290 2290 0.29
Etah 7636 7818 7580 6750 6750 7220 6936 6375 7572 -0.11
Etawah 4599 5189 5189 5189 5189 6903 7150 7648 7555 6.40
Ghaziabad 8643 8643 11301 14357 14357 15501 26948 30105 36456 19.71
Hamirpur 3705 3587 3587 4694 4694 3516 4762 5243 7193 8.65
Jalaun 5082 5461 5461 7246 7246 11050 10723 10723 12657 12.08
Lalitpur 1617 1617 1617 2733 2733 1924 2811 2765 3761 11.13
Moradabad 15359 15359 15359 15359 15359 15359 15359 21419 21419 4.24
Lucknow 1047 3554 3554 3554 3554 3554 3554 3554 3554 16.51
U.P. 333958 342933 383580 424251 459307 504480 546564 570140 648577 8.65
India 4977550 4889970 5521241 6041849 7670381 8722909 8802869 11052929 13775717 13.57
Chart 4.15 Compound annual growth rate (%) of Loans and
advances of selected DCBs
25
19.71
20
16.51
15 13.57
12.08
11.13
9.79
10 8.65 8.65
6.4
4.24
5
0.29
0
-0.11
-5
Districts
Table 4.14 and chart 4.15 reveal that the maximum CAGR for loans and
advances was recorded at Ghaziabad DCB (19.71%) and the minimum at
Etah DCB (-0.11%). We observed that the growth of loans and advances
of Ghaziabad and Lucknow is greater than not only that of U.P. (8.65%)
but than that of India (13.57%) too. The reason for such high growth of
Ghaziabad and Lucknow DCBs may be the efficient utilization of funds
mobilized.
The above table revealed an increase in the overall loans and advances of
Uttar Pradesh during the period of 2003-2011.
Table 4.15 Coefficient of correlation between loans and advances and
profits
Districts 2003 2004 2005 2006 2007 2008 2009 2010 2011 R
Allahabad -594 -637 -637 -1156 -1156 -646 -270 2 11 0.67
Azamgarh 303 -457 -376 -579 -579 -866 -866 285 285 -0.51
Etah 76 90 104 88 88 -572 626 495 35 -0.38
Etawah 182 149 149 149 149 158 125 522 246 0.55
Ghaziabad 133 133 145 172 172 254 302 343 149 0.53
Hamirpur 74 51 51 52 52 52 7 48 259 0.76
Jalaun 23 44 44 15 15 53 76 76 77 0.76
Lalitpur 84 84 84 100 100 -114 -114 76 63 -0.02
Moradabad 311 311 311 311 311 311 311 31 31 -1.00
Lucknow -114 290 290 290 290 290 290 290 290 1.00
U.P. -4723 -5565 -7024 -12430 -12430 -22981 -9127 -13512 -17284 -0.68
India 50572 53043 123038 177306 106734 -76906 36258 265476 65841 0.09
Chart 4.16 Coefficient of correlation (r) between loans and

advances and profts
1
0.8
0.6
0.4
0.2
0
-0.2
-0.4
-0.6
-0.8
-1
Axis Title
The above table and chart represent the correlation coefficient between
loans and advances and profits. The result of correlation coefficient
between these two indicators shows that there exists a high degree of
positive correlation between these indicators for six out of ten selected
districts. However, in case of Azamgarh and Moradabad, the correlation
is found to be highly negative. The reason for this might be the fact that
the banks in these districts might have high non performing assets
(NPAs). The similar reason can also be responsible in case of Uttar
Pradesh as a whole, as for U.P. we observed high degree of negative
correlation.
4.4.3 Investments in securities
Banks utilize a portion of their funds mobilized for investment in

Government securities, trustee securities, shares in co-operative societies
and other types of securities which are considered as near cash items in
terms of liquidity. The growth of total investments in securities of
selected DCBs is presented in table 4.16
Table 4.16 Total Investments in securities of selected DCBs from

2002-03 to 2010-11
(Rs. in lakhs)
Districts 2003 2004 2005 2006 2007 2008 2009 2010 2011
Allahabad 4777 5474 5474 4911 4911 8013 11035 16763 9225
Azamgarh 2255 2208 2633 2681 2681 2343 2343 5197 5197
Etah 2574 3005 3248 3430 3430 3938 5144 5315 8919
Etawah 11349 12819 12819 12819 12819 20034 23249 28447 31799
Ghaziabad 9638 9638 11095 16346 16346 21064 22743 24115 35070
Hamirpur 5678 7023 7023 8039 8039 9973 13216 16115 25371
Jalaun 8557 8862 8862 8946 8946 10112 14547 14574 17786
Lalitpur 1417 1417 1417 1344 1344 2050 2735 4418 5403
Moradabad 6169 6169 6169 6169 6169 6169 6169 8824 8824
Lucknow 2079 3577 3577 3577 3577 3577 3577 3577 3577
Average 5449 6019 6232 6826 6826 8727 10476 12735 15117
Chart 4.17 Investments in securities of selected DCBs
40000
35070
35000 31799
30000
25371
25000
20000 17786
15117
15000 2003
11349
9225 8919 9638 8557 8824 2011
10000 5403
5197 5678 5449
4777 6169
3577
5000 2574 2079
2255 1417
0
Districts
Table 4.16 shows that out of the ten selected banks, Etawah, Ghaziabad,
Jalaun, Moradabad and Hamirpur had averages above the overall average
of Rs. 5449 lakh in 2003. The highest amount (Rs.11349 lakh) was
recorded at Etawah DCB and the lowest amount (Rs .1417 lakh) at
Lalitpur DCB. In 2011, Ghaziabad, Etawah, Hamirpur and Jalaun DCBs
had an average higher than the overall average of Rs 15117 lakh. Etawah
DCB which secured the first position in 2003, slipped to second in 2011,
with Ghaziabad being on the top with Rs. 35070 lakh and Lucknow DCB
ranked the last with Rs.3577 lakh. Hence, it may be inferred that
preference for investments was higher in Ghaziabad DCB.
Table 4.17 Compound annual growth rate (%) of Investments in
securities of selected DCBs from 2002-03 to 2010-11
(Rs. in lakhs)
CAGR
Districts 2003 2004 2005 2006 2007 2008 2009 2010 2011 %
Allahabad 4777 5474 5474 4911 4911 8013 11035 16763 9225 8.57
Azamgarh 2255 2208 2633 2681 2681 2343 2343 5197 5197 11.00
Etah 2574 3005 3248 3430 3430 3938 5144 5315 8919 16.81
Etawah 11349 12819 12819 12819 12819 20034 23249 28447 31799 13.74
Ghaziabad 9638 9638 11095 16346 16346 21064 22743 24115 35070 17.52
Hamirpur 5678 7023 7023 8039 8039 9973 13216 16115 25371 20.58
Jalaun 8557 8862 8862 8946 8946 10112 14547 14574 17786 9.58
Lalitpur 1417 1417 1417 1344 1344 2050 2735 4418 5403 18.21
Moradabad 6169 6169 6169 6169 6169 6169 6169 8824 8824 4.58
Lucknow 2079 3577 3577 3577 3577 3577 3577 3577 3577 7.02
U.P. 217124 219333 236501 283194 332181 347645 444575 582934 641313 14.50
India 3113877 3567729 3478322 3712739 4079112 4824662 6104124 7562446 7562446 11.73
Chart 4.18 Compound annual growth rate (%) of Investments in

securities of selected DCBs
25
20.58
20 18.21
16.81 17.52
14.5
15 13.74
11.73
11
9.58
10 8.57
7.02
4.58
5
Districts
It is evident from table 4.17 that the CAGR of Hamirpur (20.58%),

Lalitpur (18.21%), Ghaziabad (17.52%) and Etah (16.81%) DCBs were
higher than the overall CAGR of Uttar Pradesh (14.50%) and that of
India (11.73%). The table also reveals that Hamirpur DCB recorded the
highest growth rate (20.58%) leading to the inference that preference for
investments is also increasing in Hamirpur DCB. The lowest growth rate
was recorded for Moradabad DCB (4.58%).
In general data of the selected sample districts of U.P.for the period 2003-
2011 shows that the investments of DCBs in U.P. is increasing over the
years.
4.5 Overdues To Loans
Long term solvency of a bank depends upon the credit management of a

bank. Over due to total advances ratio indicates the proportion of
advances which remain outstanding at the end of the period so that the
bank can have an idea about the solvency position.
A higher the ratio indicates poor recovery efforts from the bankers,
inadequate credit appraisal, mis-utilization of loan and willful default. It's
affects adversely on the morel of non defaulting members. While lower
the ratio indicates good recovery efforts and good credit management of
the bank
Table 4.18 Percentage of overdues to loans of selected DCBs from

2002-03 to 2010-11
Districts 2003 2004 2005 2006 2007 2008 2009 2010 2011
Allahabad 42.48 45.62 45.62 44.97 44.97 43.12 36.72 35.77 32.83
Azamgarh 55.96 60.88 50.03 54.78 54.78 53.39 53.39 36.73 36.73
Etah 60.46 60.39 36.30 43.42 43.42 47.45 43.92 36.32 40.40
Etawah 38.83 34.85 34.85 34.85 34.85 34.96 33.57 26.90 31.63
Ghaziabad 24.13 24.13 17.52 6.73 6.73 5.97 3.79 2.99 2.11
Hamirpur 18.54 16.12 16.12 14.01 14.01 18.69 -20.17 8.84 -1.24
Jalaun 37.43 30.63 30.63 31.07 31.07 20.15 30.32 30.32 29.45
Lalitpur 57.82 57.82 57.82 41.89 41.89 63.78 51.46 38.10 43.35
Moradabad 23.02 23.02 23.02 23.02 23.02 23.02 23.02 17.69 17.69
Lucknow 31.29 38.00 38.00 38.00 38.00 38.00 38.00 38.00 38.00
U.P. 34.00 34.59 32.65 30.21 30.21 35.02 21.78 23.12 22.74
India 37.43 36.90 32.86 31.69 32.93 37.15 32.69 26.73 27.37
Chart 4.19 Trend line of Overdues to Loans
40 37.43 36.90 37.15
35 32.86 32.93 32.69

31.69
34.00 34.59 35.02
30 26.73 27.37
32.65
30.21 30.21
25
20 23.12 22.74
21.78
15 y = -0.1687x2 + 0.0805x + 34.308
R² = 0.7009
10
0
2003 2004 2005 2006 2007 2008 2009 2010 2011
UP India Poly. (UP)
The data in the table and the trend line in the chart shows a declining
trend in percentage of overdues to loans. The percentage of overdues to
loans which was 34 percent in 2002-03 had reduced to 22.74% in 2010-
11. This decling trend in this ratio is a positive sign as it helps in
increasing the profitability of the banks.
4.6 Cost Of Management per employee
Table 4.19 Cost Of Management of selected DCBs from 2002-2003 to

2010-2011
CAGR
Districts 2003 2004 2005 2006 2007 2008 2009 2010 2011 %
Allahabad 515 514 514 2214 2214 1811 1854 770 860 5.86
Azamgarh 277 290 293 321 321 339 339 494 494 6.64
Etah 214 216 242 273 273 293 330 562 405 7.35
Etawah 285 465 465 465 465 543 489 609 780 11.84
Ghaziabad 362 362 453 522 522 610 754 862 2214 22.29
Hamirpur 193 155 155 191 191 281 359 381 384 7.94
Jalaun 203 220 220 253 253 318 402 402 645 13.71
Lalitpur 120 120 120 113 113 164 180 214 310 11.12
Moradabad 423 423 423 423 423 423 423 815 815 7.56
Lucknow 181 244 244 244 244 244 244 244 244 3.37
U.P. 14949 16417 16873 20947 21862 22802 23350 27188 36948 10.58
India 325104 334579 368012 602688 755968 374876 422724 443737 530745 5.60
Table 4.20 Cost of management per employee of selected DCBs from

2002-2003 to 2010-2011
CAGR
Districts 2003 2004 2005 2006 2007 2008 2009 2010 2011 %
Allahabad 1.75 1.84 1.81 8.26 8.26 6.91 7.36 3.13 3.69 8.64
Azamgarh 1.74 1.86 1.94 2.14 2.14 2.26 2.26 3.55 3.55 8.25
Etah 1.75 1.82 2.03 2.26 2.26 2.44 2.87 5.11 4.26 10.39
Etawah 1.98 3.23 3.23 3.23 3.23 3.27 2.93 3.85 5.31 11.58
Ghaziabad 2.28 2.28 2.63 2.88 2.88 3.37 3.95 4.42 9.71 17.47
Hamirpur 1.74 1.37 1.37 1.77 1.77 2.36 2.92 3.31 3.34 7.51
Jalaun 2.07 2.06 2.06 2.46 2.46 2.81 2.91 2.91 5.12 10.59
Lalitpur 1.71 1.71 1.71 1.74 1.74 2.45 2.54 2.97 3.92 9.66
Moradaba
1.93 1.93 1.93 1.93 1.93 1.93 1.93 3.09 3.09 5.37
d
Lucknow 1.31 2.02 2.02 2.02 2.02 2.02 2.02 2.02 2.02 4.93
U.P. 2.01 2.22 2.24 2.76 2.76 3.02 3.1 3.61 4.93 10.48
India 2.93 3.04 3.37 2.85 4.12 4.16 4.74 5.07 6.04 8.37
It is evident from table that Ghaziabad DCB recorded the highest growth
rate (22.29%) and Lucknow DCB the lowest (3.37%). The table also
reveals that the growth rate of cost of management of Ghaziabad, Jalaun,
Etawah and Lalitpur DCBs were higher than the overall CAGR of Uttar
Pradesh (10.58%). The high increase in cost of management of
Ghaziabad DCB may probably be due to compared to other districts.
In the above paragraphs, the trend and pattern in the growth of important
funds management variables, viz., share capital, reserves and other funds,
deposits, borrowings, cash in hand and at bank, loans and advances,
investments in securities, were analyzed.
The analysis revealed that in almost all the variables we observed an
increasing trend from 2002-03 to 2010-11 with few exceptions like
Lucknow DCBs where we observed stagnancy in almost all the financial
indicators over the years. The probable reason may be the poor data
reporting of DCBs in Lucknow.
CHAPTER-V
RATIO ANALYSIS OF FINANCIAL
PERFORMANCE OF DCBS IN UTTAR PRADESH
The major objective of this chapter is to analyze the efficiency of selected

DCBs in Uttar Pradesh with regard to mobilization and deployment of
funds. The main aim of all the organizations, whether public and private,
is to achieve and maintain efficiency. However, there have been different
views regarding the meaning, methods and measurement of efficiency. In
case of cooperative banks, it is all the more difficult because a
cooperative institution has to meet dual objectives, viz., financial
objectives as a financial enterprise and social objectives as a co-operative
enterprise. The social objectives have been kept out the ambit of this
study as they require measurement of non-economic parameters and
involve a distinct mode of analysis.
The efficiency of a DCB is generally assessed on the basis of five major

norms namely, performance in mobilizing adequate internal resources,
performance in meeting the credit needs of the area, performance in
ensuring the recovery of loans, ability in regard to efficient management
of funds and the role played as a federal body of primary credit societies
(Government of Kerala, 1980).
For the purpose of the study, efficiency is measured primarily from the
financial angle. For financial analysis, the researcher computed credit to
deposit ratio, borrowings to deposits ratio, owned funds to borrowed
funds ratio, liquid assets to demand and time liabilities ratio, current and
savings deposit to total deposits ratio, term deposits to total deposit ratio,
owned funds to working funds ratio, deposits to working funds ratio,
borrowings to loans ratio, investments to deposits ratio.
5.1 Ratio analysis
Ratio analysis is a concept or technique, which is as old as accounting

concept. Financial analysis is an important tool. It has assumed important
role as a tool for appraising the real worth of an enterprise, its
performance during a period of time, its pitfalls. Financial analysis is vital
apparatus for the interpretation of financial statistics. It also helps to find
out any cross sectional and time series linkages between various ratios.
Ratio analysis means the process of computing, determining and

presenting the relationship of related items and groups of items of
financial statements. They provide, in a summarized and concise form,
good idea about the financial position of a unit. They are important tools
for financial analysis.
For the assessment of the efficiency of cooperative banks various ratios

have been used viz., credit to deposit ratio, borrowings to deposits ratio,
owned funds to borrowed funds ratio, liquid assets to demand and time
liabilities ratio, current and savings deposit to total deposits ratio, term
deposits to total deposit ratio, owned funds to working funds ratio,
deposits to working funds ratio, borrowings to loans ratio, investments to
deposits ratio.
5.1.1 Credit to deposit ratio
It is the ratio of how much a bank lends out of the deposits it has
mobilized and indicates how much of a bank's core funds are being used
for lending, the main banking activity. A higher ratio indicates more
reliance on deposits for lending and vice-versa.
The regulator does not stipulate a minimum or maximum level for the
ratio. However, a very low ratio indicates banks are not making full use
of their resources. Moreover, if the ratio is above a certain level, it
indicates a pressure on resources. Generally, C.D. ratio over and above
60% is considered good and banks may maintain this level. A higher
credit deposit ratio indicates efficiency of management in advancing
loans against deposits and lower credit- deposits ratio indicates credit
creation incapability of the bank in relation to deposits, which
considerably affect the profitability of bank.
The status of credit deposit ratio is presented in table 5.1
Table 5.1 Credit to deposit ratio of selected DCBs from 2002-03 to

2010-11
Districts 2003 2004 2005 2006 2007 2008 2009 2010 2011 G.M S.D
Allahabad 33 32 32 35 35 40 36 30 36 34 3
Azamgarh 28 34 35 24 24 29 29 18 18 26 6
Etah 107 106 108 81 81 70 64 52 60 78 22
Etawah 31 32 32 32 32 31 29 27 24 30 3
Ghaziabad 59 59 65 71 71 67 91 87 88 72 12
Hamirpur 50 46 46 55 55 30 35 31 39 42 10
Jalaun 46 48 48 60 60 76 57 57 61 56 9
Lalitpur 50 50 50 76 76 38 50 41 50 52 13
Moradabad 98 98 98 98 98 98 98 72 72 92 11
Lucknow 22 42 42 42 42 42 42 42 42 39 7
U.P. 68 67 72 72 73 74 72 64 67 70 4
India 69 64 69 70 83 82 71 76 85 74 8
Source: Basic data on performance of district central cooperative banks (2002-2003 to 2010-2011), NAFSCOB
The proportion of the Credit deployed to the deposit mobilized is one of
the parameter to assess the performance of a bank. The credit to deposit
ratio manifested the bank's efficiency in channelizing its mobilized
resources for the various economic activities.
Table 5.1 presents the credit deposit ratio of selected sample DCBs for
the period 2002-03 to 2010-11. The CD ratio of DCBs has shown a
fluctuating trend during the study period. It is evident from the table
under consideration that on an average the proportion of credit to deposit
was highest in Moradabad DCB (G.M. = 92) and lowest in Azamgarh
DCB (G.M. = 26) which was lower than the desired level i.e. > 60 %. The
percentage of credit disbursement in relation to the mobilized deposits
was observed to be sluggishing in the later years as compared to the
former years. An unfavorable credit-deposit ratio in the later years could
be ascribed to the mounting NPAs in the former years of the study period.
The condition of Allahabad, Etawah, Hamirpur, Jalaun, Lalitpur and
Lucknow was no better. On an average the ratio of all DCBs except Etah,
Ghaziabad and Moradabad were lower than the overall average of state
(G.M. = 70) and nation as a whole (G.M. = 74).
The CD ratio of Uttar Pradesh initially increases between 2003 and 2008
and then decreases. The descriptive statistics in table suggest that the
credit deposit ratio of banks in Uttar Pradesh is lowest (64) for the year
2010 and highest (74) for the year 2008.
When we observe the standard deviation of the selected sample DCBs,

we found the highest variability in Etah DCB (S.D. = 22) indicating low
degree of homogeneity i.e. heterogeneity of the credit to deposit ratio and
lowest variability was observed in case of Allahabad and Etawah (S.D. =
3 for both). The S.D for Uttar Pradesh is 4 and that of India are 8 which is
less as compared to variability observed in case of selected sample DCBs.
It indicates high degree of uniformity of observations as well as
homogeneity of the credit to deposit ratio.
5.1.2 Borrowings to deposits Ratio
Another ratio used for analyzing profitability is borrowings to deposits

ratio. Borrowings to deposits ratio indicates the level of dependence of a
bank on borrowings. This ratio should not be very high because then it
will reflect high level of dependence on borrowings. If it is so, the bank
may reduce its dependence on borrowings by mobilizing more deposits.
Table 5.2 Borrowings to deposits ratio of selected DCBs from 2002-03

to 2010-11
Districts 2003 2004 2005 2006 2007 2008 2009 2010 2011 G.M. S.D
Allahabad 1 9 9 8 8 7 5 5 7 6 2
Azamgarh 22 23 26 26 26 30 30 9 9 21 8
Etah 38 40 49 41 41 22 18 2 18 22 16
Etawah 2 2 2 2 2 8 6 6 7 3 3
Ghaziabad 1 1 3 3 3 16 20 20 30 6 11
Hamirpur 6 19 19 17 17 15 13 13 25 15 5
Jalaun 11 13 13 12 12 11 10 10 22 13 4
Lalitpur 39 39 39 35 35 14 11 9 15 23 14
Moradabad 26 26 26 26 26 26 26 25 25 26 0
Lucknow 8 3 3 3 3 3 3 3 3 3 2
U.P. 19 19 21 22 26 26 24 21 24 22 3
India 27 27 27 27 30 29 23 21 24 26 3
Table 5.2 presents the borrowings to deposits ratio of selected sample

DCBs for the period 2002-03 to 2010-11. The borrowings to deposits
ratio of DCBs has shown a fluctuating trend during the study period. It is
evident from the table under consideration that on an average the
proportion of borrowings to deposits was highest in Moradabad DCB
(G.M. = 26) indicating a high level of dependence of bank on borrowings.
The bank may try to reduce its dependence on borrowings by mobilizing
more deposits. The ratio was observed to be lowest in Lucknow DCB
(G.M. = 3).
Low borrowings to deposits ratio is a positive sign for banks as it is one

of the highest cost items of funds. The reason for proportionately reduced
dependence of banks on borrowings might be its increased deposit
mobilization. The standard deviation of Moradabad district is coming out
to be zero that shows the consistency of Moradabad district in terms of
high borrowings. It is also evident from the data as the ratio of
borrowings to deposits for this district is almost the same for every
selected year.
On an average, the borrowings to deposits ratio of Uttar Pradesh showed

an increase over the period of study. The descriptive statistics in table
suggest that the borrowings to deposits ratio of banks in Uttar Pradesh is
lowest (19) for the years 2003 and 2004 and highest (26) for the years
2007 and 2008. However, for India, the proportion of borrowings in
relation to the deposits showed a mixed trend, which remains stagnant
from 2003 to 2006 then, showed an increase in 2007, again decreases,
and finally showed an increase from 21 in 2010 to 24 in 2011. The S.D
for Uttar Pradesh and India is 3 which is comparatively low. It indicates
high degree of uniformity of observations as well as homogeneity of the
borrowings in relation to the deposits ratio.
we found wide deviations in this ratio amongst the sample DCBs. The
S.D is as low as zero for Moradabad DCB and as high as 16 for Etah
DCB which is comparatively high indicating low degree of homogeneity
i.e. heterogeneity of the owned fund to borrowed funds ratio.
5.1.3 Owned funds to borrowed funds ratio
The proportion of owned funds comprising of paid up share capital,

reserves and surplus, overdue interest reserve and undistributed profits, in
relation to the borrowed funds plays an important role in building the
confidence of the depositors. This ratio indicates as to how many times of
its owned funds the bank is borrowing. Higher the ratio better it is for
banks. DCBs mainly depend on external funds for their operation and its
relation with owned funds is exhibited in table 5.3
Table 5.3 Owned funds to borrowed funds ratio of selected DCBs

from 2002-03 to 2010-11
Districts 2003 2004 2005 2006 2007 2008 2009 2010 2011 G. M S.D
Allahabad 5 5 5 4 4 5 4 4 4 4 0
Azamgarh 30 31 28 29 29 34 34 38 38 32 4
Etah 7 7 8 7 7 7 7 7 6 7 0
Etawah 11 10 10 10 10 11 13 13 14 11 1
Ghaziabad 21 21 21 16 16 13 12 11 9 15 5
Hamirpur 10 9 9 9 9 9 9 9 10 9 0
Jalaun 17 17 17 18 18 17 14 14 10 16 3
Lalitpur 29 29 29 23 23 24 22 19 17 23 4
Moradabad 11 11 11 11 11 11 11 25 25 14 6
Lucknow 10 5 5 5 5 5 5 5 5 6 2
Uttar Pradesh 17 18 18 19 17 17 16 17 17 17 1
India 14 15 16 17 17 16 16 16 14 16 1
Table 5.3 shows the ratio of owned funds (share capital and reserves) to
borrowed funds (deposits and borrowings) of all the DCBs from 2002-03
to 2010-11.
The proportion of owned funds in relation to the borrowed funds was

noticed to be comparatively low in case of most of the sample DCBs
except Azamgarh and Lalitpur, revealing a weak equity base in the total
capital structure of the bank. However, the percentage of owned funds to
borrowed funds in Lalitpur was observed to have sluggishing trend in
later years as compared to former years. One of the key reasons for this
weak share of owned funds could be attributed to the changing attitude of
the members to become a member just by buying the entry share capital
to avail the facilities. In case of Azamgarh owned funds in relation to the
borrowed funds was noticed to be comparatively better and the pace of
owned funds was almost stable during the whole period of the study,
highlighting a good share of owned funds in the total working capital.
The owned fund to borrowed funds ratio of Uttar Pradesh remains almost
stagnant throughout the period of study. The descriptive statistics in table
suggest that the owned fund to borrowed fund ratio of banks in Uttar
Pradesh is lowest (16) for the year 2009 and highest (19) for the year
2006. The S.D for Uttar Pradesh and India is 1 which is comparatively
low. It indicates high degree of uniformity of observations as well as
homogeneity of the owned funds in relation to the borrowed funds ratio.

we found wide deviations in this ratio amongst the sample DCBs. The
S.D is as low as zero for Etah DCB and as high as six for Moradabad
DCB, which is comparatively high indicating low degree of homogeneity,
i.e. heterogeneity of the owned fund to borrowed funds ratio.
5.1.4 Liquid assets to demand and time liabilities ratio
The ratio of liquid assets to demand and time liabilities is known as

statutory liquidity ratio (SLR). Apart from CRR, every bank is required to
maintain in India at the close of business every day, a minimum
proportion of their Net Demand and Time Liabilities as liquid assets in
the form of cash, gold and un-encumbered approved securities. The ratio
of liquid assets to demand and time liabilities is known as Statutory
Liquidity Ratio (SLR). Present SLR is 23%. (Reduced w.e.f. 11/08/2012
from earlier 24%). RBI is empowered to increase this ratio up to 40%. An
increase in SLR also restricts the bank’s leverage position to pump more
money into the economy.
Liquid assets (cash in hand, cash at bank and money at call and short
notice) to demand and time liabilities (fixed deposit account, savings
bank account, current account and money at call and short notice account)
ratio shows the liquidity position of the bank. This ratio shows the
financial soundness of the bank. The concept of liquidity is highly
relevant for a financial institution as it indicates the ability of the bank to
meet its obligations out of its own resources.
As per statutory provisions, DCBs are expected to maintain 23 per cent of

demand and time liabilities (DTL) as the statutory liquidity ratio (SLR)
and 3-6 per cent of DTL as the cash reserve ratio (CRR). In addition to
this, 3-4 per cent of DTL may be required for meeting contingencies and
expenses. Therefore, liquid assets to demand and time liabilities ratio of
around 30-32 percent may be sufficient.
The liquidity position of the selected DCBs is exhibited in table 5.4
Table 5.4 Liquid assets to demand and time liabilities ratio of

Districts 2003 2004 2005 2006 2007 2008 2009 2010 2011 G.M S.D
Allahabad 9 5 5 7 7 4 5 4 34 7 10
Azamgarh 6 3 8 6 6 6 6 10 10 6 2
Etah 13 12 11 12 12 11 8 43 10 13 11
Etawah 4 3 3 3 3 5 4 4 2 4 1
Ghaziabad 7 7 11 9 9 6 4 5 7 7 2
Hamirpur 7 9 9 10 10 7 6 6 11 8 2
Jalaun 5 6 6 6 6 4 5 5 7 5 1
Lalitpur 14 14 14 17 17 9 5 6 9 11 4
Moradabad 39 39 39 39 39 39 39 81 81 46 19
Lucknow 50 4 4 4 4 4 4 4 4 5 15
U.P. 10 12 11 13 13 12 15 18 17 13 3
India 11 12 13 13 12 10 11 10 76 14 21
Table 5.4 points out that during the study period except Moradabad (G.M.
= 46) all the DCBs were unable to maintain the required level of
liquidity. It indicates that these have to take steps to increase the quantum
of liquid assets maintained. This can be achieved by decreasing the
volume of loans and advances. The lowest ratio was observed for Jalaun
and Lucknow ( G.M. = 5, for both). This weak liquidity position would
certainly cause an inconvenience to the banks in case of meeting
immediate liabilities and the pace of liquid assets to the total deposits was
also found to be far below than the laid down (23%) under Banking
Regulation Act.
The liquid assets to demand and time liabilities ratio of Uttar Pradesh
showed that on an average only 13 percent of its demand and time
liabilities was kept in the form of liquid assets. It indicates weak liquidity
position of the bank as 13 percent liquid assets to demand and time
liabilities is considered to be obviously inadequate to meet its immediate
liabilities, with comparatively low variability (S.D. = 3).
The position of India is also no better (G.M. = 14). The liquid assets to
total deposits ratio was found to be unstable and not satisfactory which
could be accredited to a wide deviation in the liquid ratio. The ratio was
noticed as low as 10 percent during 2008 and 2010 and which has
increased as high as to 76 percent during 2011 indicating the excess
liquid assets over the prescribed limit reflecting an unbalanced resource
management. The variability in case of India is comparatively high (S.D.
= 21). The descriptive statistics in the table shows a mixed trend for the
standard deviation of selected sample DCBs. The variability is as low as
one for Etawah and Jalaun and as high as 19 for Lalitpur. Such high level
of variability with regard to selected sample DCBs and also for India
indicates low degree of homogeneity i.e. the heterogeneity of the liquid
assets to demand and time liabilities ratio.
5.1.5 Current and savings deposit to total deposits ratio
Current and Saving Accounts are demand deposits and therefore pay
lower interest rates compared to term deposits where the rates are higher.
Thus higher CASA ratio means that more of the deposited money in the
bank is in the demand deposits i.e. the CASA, thus bank is getting the
money at lower cost. Higher the CASA ratio, better the net interest
margin, which means better operating efficiency of the bank.
As this ratio indicates the proportion of low cost deposits to the total
deposits, a higher ratio is better for banks. This would help in keeping
down the financial cost. Generally, a 30 to 40 percent is assumed
reasonable.
The relationship between current and saving deposits and total deposits is
displayed in table 5.5.
Table 5.5 Current and savings deposit to total deposits ratio of

Districts 2003 2004 2005 2006 2007 2008 2009 2010 2011 G.M S.D
Allahabad 52 54 54 65 65 65 65 65 65 61 6
Azamgarh 51 53 57 59 59 61 61 61 61 58 4
Etah 56 62 59 64 64 67 63 62 66 62 3
Etawah 57 61 61 61 61 67 93 67 70 66 11
Ghaziabad 56 56 66 68 68 68 56 60 65 62 5
Hamirpur 54 57 57 61 61 65 64 68 68 62 5
Jalaun 48 53 53 55 55 54 56 56 57 54 3
Lalitpur 46 46 46 53 53 61 57 59 57 53 6
Moradabad 60 60 60 60 60 60 60 74 74 63 6
Lucknow 49 53 53 53 53 53 53 53 53 53 1
U.P. 52 53 56 61 63 62 61 62 64 59 4
India 34 36 39 43 45 44 43 43 45 41 4
It is clear from the table 5.5 that all selected sample DCBs have current
and saving deposits to total deposits ratio higher than the minimum
required level (30% to 40%). In terms of geomean for the selected sample
districts, the highest value was observed for Etawah DCB (G.M. = 66)
along with a comparatively high variability (S.D. = 11) which further
shows that there is high variation in CASA to total deposit figures for this
district over the selected period. The DCBs in Etawah region showed its
competency in raising resources at a cheaper cost as current and saving
deposits constituted the major portion of banks’ total deposits, which is
generally a cheaper source of fund.
We observed the same for Uttar Pradesh (G.M. = 59) as well as for India
(G.M. = 41). The ratio is higher than minimum required level (30% to
40%). As far as standard deviation is concerned we noticed
comparatively low variability (S.D. = 4, for both). The low variability
amongst almost all selected districts (other than Etawah), Uttar Pradesh
and India indicates high degree of uniformity of observations as well
homogeneity of the current and saving deposits to total deposits ratio.
5.1.6 Term or fixed deposit to total deposit ratio
Term deposit to total deposit ratio indicates proportion of high cost

deposits in the total deposits. Higher ratio indicates higher cost of funds.
Banks should maintain proper portion of low cost and high cost deposits
to maintain the financial cost. This ratio should not be blindly interpreted
and it has to be seen keeping in view the area of operations and the
clientele of the bank.
As this ratio indicates the proportion of high cost deposits in the total
deposits, usually, a 60 to 70 percent is assumed reasonable.
A higher ratio indicates higher proportion of long-term deposits in total

deposits, which is not good from profitability point of view, as the bank
has to pay high rate of interest on these types of deposits. Higher it is
good from the long term solvency point of view as the bank has to keep
less margin as idle cash for maintaining liquidity and cash invest for long
term purpose earning higher returns. An increasing ratio also indicates the
increasing faith of the public towards the bank. While lower, the ratio
indicates lesser proportion of long-term deposits as it decreases the
procurement cost.
The relationship between Term deposit and total deposit is displayed in

table 5.5
Table 5.6 Term deposit to total deposit ratio of selected DCBs from
2002-03 to 2010-11
Districts 2003 2004 2005 2006 2007 2008 2009 2010 2011 G.M S.D
Allahabad 48 46 46 35 35 35 35 35 35 39 6
Azamgarh 49 47 43 41 41 39 39 39 39 42 4
Etah 44 38 41 36 36 33 37 38 34 37 3
Etawah 43 39 39 39 39 33 7 33 30 30 11
Ghaziabad 44 44 34 32 32 32 44 40 35 37 5
Hamirpur 46 43 43 39 39 35 36 32 32 38 5
Jalaun 52 47 47 45 45 46 44 44 43 46 3
Lalitpur 54 54 54 47 47 39 43 41 43 47 6
Moradabad 40 40 40 40 40 40 40 26 26 36 6
Lucknow 51 47 47 47 47 47 47 47 47 47 1
U.P. 48 47 44 39 37 38 39 38 36 40 4
India 66 64 61 57 55 56 57 57 55 59 4
The table 5.6 reveals that the term deposits to total deposits ratio of all
selected sample DCBs were lower than the minimum required level. The
term deposits held by banks for a specified term, gives bank the ability to
invest it in a higher gain financial product class. The highest term
deposits to total deposits ratio was observed for Lalitpur and Lucknow
(G.M. = 47 for both) even that was lower than the required minimum
level to be maintained (60% to 70%). Despite the fact that the cooperative
banks provide a little higher rate of interest on deposits as compared to
commercial banks, we observed low term deposit to total deposit ratio.
The probable reason might be that people prefer commercial banks to
cooperatives because commercial banks enjoy greater reliability among
people as their size of business and accordingly their profits are much
higher than that of cooperatives.
As far as standard deviation is concerned we observed the highest value

for Etawah (G.M. = 11) and for other districts the variability is
comparatively low, indicating high degree of uniformity of observations
as well homogeneity of the term deposits to total deposits ratio.
We observed the same for Uttar Pradesh (G.M. = 40) as the ratio is lower
than minimum required level whereas in case of India (G.M. = 59) it is
almost reasonable. As far as standard deviation is concerned we noticed
comparatively low variability (S.D. = 4, for both). It indicates high degree
of uniformity of observations as well homogeneity of the term deposits to
total deposits ratio.
5.1.7 Owned funds to working funds ratio
This ratio indicates the share of owned funds to the total working funds
and indicates the borrowing ability of the bank to augment its working
funds. Higher the ratio, better it is for the bank. Generally, if the
percentage of ratio is greater than 10 percent it is considered reasonable.
Table 5.7 Owned funds to working funds ratio of selected DCBs from
2002-03 to 2010-11
Districts 2003 2004 2005 2006 2007 2008 2009 2010 2011 G.M. S.D
Allahabad 4 4 4 3 3 3 3 3 3 3 0
Azamgarh 23 23 21 22 22 25 25 26 26 24 2
Etah 6 6 6 6 6 6 6 5 5 5 0
Etawah 9 9 9 9 9 10 11 10 12 10 1
Ghaziabad 17 17 17 12 12 11 11 10 8 12 3
Hamirpur 9 8 8 7 7 8 8 10 8 8 1
Jalaun 15 14 14 15 15 14 12 12 9 13 2
Lalitpur 22 22 22 19 19 19 18 16 14 19 3
Moradabad 9 9 9 9 9 9 9 20 20 11 5
Lucknow 9 4 4 4 4 4 4 4 4 4 2
U.P. 14 15 15 15 16 14 13 14 14 14 1
India 12 13 14 14 14 13 13 13 12 13 1
Table 5.7 shows the ratio of owned funds (share capital and reserves) to
working funds of all the DCBs from 2002-03 to 2010-11.
The proportion of owned funds in relation to the working funds showed a

mixed trend for the selected sample DCBs. The ratio was noticed to be
low and not even close to the accepted ideal proportion in case of
Allahabad, Etah and Lucknow DCBs indicating the low borrowing ability
of the banks to augment its working funds. One of the key reasons for this
weak share of owned funds could be attributed to the changing attitude of
the members to become a member just by buying the entry share capital
to avail the facilities. However, Azamgarh, Etawah, Ghaziabad, Jalaun,
Lalitpur and Moradabad DCBs were successful in managing on an
average more than 10 percent of owned funds to working funds ratio. So
in case of these DCBs we can say that the ratio of owned funds in relation
to the working funds was reasonably adequate and the pace of owned
funds was almost stable during the whole period of the study,
highlighting a good share of owned funds in the total working capital.
The descriptive statistics in table suggest that Uttar Pradesh (G.M. = 14)
as well as India (G.M. = 13) were successful in maintaining the adequate
level of owned funds to working funds ratio. The ratio of both, Uttar
Pradesh and India, remains almost stagnant throughout the period of
study indicating comparatively very low variability (S.D. = 1). When we
observe the standard deviation of the selected sample DCBs, we found
there is also comparatively low variability amongst almost all the sample
DCBs. The highest variability was observed in Moradabad DCB (S.D. =
5). The low degree of variability of this ratio amongst selected sample
DCBs, Uttar Pradesh and India indicates high degree of uniformity of
observations as well as homogeneity of the owned funds to working
funds ratio.
5.1.8 Deposits to working funds ratio
With regard to the working capital, an adequate amount of working

capital is of paramount importance for the cooperative banks as the
growth and expansion of any organization, usually depends on the
availability of working capital. Higher the availability of working funds
better would be the prospects for future growth and expansion of an
organization, similar is the case for cooperative banks.
Table 5.8 Deposits to working funds ratio of selected DCBs from
2002-03 to 2010-11
Districts 2003 2004 2005 2006 2007 2008 2009 2010 2011 G.M. S.D
Allahabad 79 73 73 69 69 71 74 72 73 73 3
Azamgarh 61 61 60 61 61 56 56 64 64 60 3
Etah 60 58 54 59 59 69 69 66 68 62 5
Etawah 85 85 85 85 85 78 78 78 78 82 4
Ghaziabad 79 79 77 78 78 75 73 73 69 76 4
Hamirpur 80 72 72 69 69 74 75 100 70 75 10
Jalaun 76 75 75 73 73 76 77 77 73 75 2
Lalitpur 55 55 55 61 61 69 72 75 73 64 8
Moradabad 62 62 62 62 62 62 62 64 64 62 1
Lucknow 84 73 73 73 73 73 73 73 73 74 4
U.P. 67 70 66 66 71 64 66 68 68 67 2
India 66 65 66 66 63 63 67 71 69 66 2
Table 5.8 shows the ratio of deposits to working funds of all the DCBs
from 2002-03 to 2010-11.
The proportion of deposits in relation to the working funds showed a

mixed trend for the selected sample DCBs. This ratio is considered very
well if it is greater than 80 percent and if CASA ratio is greater than 30
percent. Therefore, the bank may try to maintain this level in order to
keep its cost low and to maintain the liquidity. However, if this ratio is
less than 50 percent, it is considered low and therefore the bank should
take steps to increase the level of deposits to at least 50 percent of
working fund within the specified period.
The descriptive statistics in table suggest that all the banks were
successful in maintaining the adequate level of deposits in relation to the
working funds ratio. We observed that all the banks were successful in
managing more than 50 percent of their working funds in the form of
deposits indicating its competency in raising its resources at a cheaper
cost as current and saving deposits constituted the major portion of
banks’ total deposits, which is generally a cheaper source of fund.
Moreover, we noticed an upward trend in this ratio over the years. The
general increase in this ratio in some of the sample banks may attribute to
their success in deposit mobilization policy.
In terms of geometric mean the highest value was observed for Etawah
DCB (G.M. = 82) with a comparatively low variability (S.D. = 4). We
observed the same for Uttar Pradesh (G.M. = 67) as well as for India
(G.M. = 66). The ratio is higher than minimum required level (> 50
percentage). As far as standard deviation is concerned we noticed
comparatively low variability (S.D. = two for both).
The low degree of variation of this ratio amongst selected sample DCBs,
Uttar Pradesh and India indicates high degree of uniformity of
observations as well as homogeneity of the deposits in relation to the
working funds ratio.
5.1.9 Borrowings to loans ratio
As borrowings are one of the highest cost items of sources of funds, a

lower borrowing to loans ratio is better for banks. This would help in
keeping down the financial cost. Generally, a ratio of less than 30 percent
is considered reasonable.
Table 5.9 Borrowings to loans ratio of selected DCBs from 2002-03 to
2010-11
Districts 2003 2004 2005 2006 2007 2008 2009 2010 2011 G.M S.D
Allahabad 4 28 28 23 23 18 14 18 19 17 7
Azamgarh 78 68 75 107 107 103 103 53 53 80 23
Etah 35 37 45 51 51 31 28 3 30 29 15
Etawah 6 6 6 6 6 26 22 23 29 11 10
Ghaziabad 2 2 5 4 4 23 22 23 34 8 12
Hamirpur 11 42 42 32 32 51 38 40 65 36 15
Jalaun 25 27 27 21 21 14 18 18 36 22 7
Lalitpur 79 79 79 46 46 37 22 23 29 44 24
Moradabad 26 26 26 26 26 26 26 35 35 28 4
Lucknow 38 7 7 7 7 7 7 7 7 9 10
U.P. 28 29 29 30 36 35 34 33 36 32 3
India 39 43 39 38 36 35 32 27 28 35 5
The borrowings to loans ratio manifested the bank's efficiency in

channelizing its mobilized resources for the various economic activities.
Table 5.9 presents the borrowings to loans ratio of selected sample DCBs
for the period 2002-03 to 2010-11. The borrowings to loans ratio of
DCBs has shown a fluctuating trend during the study period. It is evident
from the table under consideration that on an average the proportion of
borrowings to loans was higher than the required level (30%) in
Azamgarh (G.M.= 80), Hamirpur (G.M.= 36) and Lalitpur (G.M. = 44)
indicating a very high level of dependence of banks on borrowings. These
banks may try to reduce its dependence on borrowings by mobilizing
more deposits. The ratio was observed to be lowest in Ghaziabad DCB
(G.M. = 8). The reduction in borrowings is a positive sign for banks as it
is one of the highest cost items of funds. This trend might have resulted
from the proportionately reduced dependence of banks on borrowings due
to increased deposit mobilization.
We observed an increase in borrowings to loans ratio of Uttar Pradesh
throughout the study period reflecting the increasing dependency of
banks on borrowings. The descriptive statistics in table suggest that the
ratio of banks in Uttar Pradesh was slightly higher than the required level
(G.M. = 32). We observed the same for India (G.M. = 35). The level of
variability for Uttar Pradesh is three and that of India is five which
comparatively less. It indicates high degree of uniformity of observations
as well as homogeneity of the borrowings to loans ratio.

we found the highest variability in Lalitpur DCB (S.D. = 24) indicating
low degree of homogeneity i.e. the heterogeneity of the borrowings to
loans ratio. The lowest variability was observed in Moradabad DCB (S.D.
= 4) reflecting high degree of uniformity of observations as well as
homogeneity of the borrowings to loans ratio.
5.3.10 Investments to deposits ratio
In banking business, the main task of the bank is to obtain deposits at low
cost and advances at highest cost and earn good returns on it. A bank,
which is efficient in obtaining funds through short-term sources and
advancing for long-term purpose, can earn good returns. It shows how
much funds is invested from total deposited funds.
Total Investment to Total deposits Ratio indicates that banks are using
their funds rather than keeping them ideal. A higher ratio indicates higher
efficiency and lesser liquidity. However, this ratio has to be interpreted
keeping in view the funds position of the bank and must be compared
with their respective credit deposit ratio.
Table 5.10 Investments to deposits ratio of selected DCBs from 2002-
03 to 2010-11
Districts 2003 2004 2005 2006 2007 2008 2009 2010 2011 G.M. S.D
Allahabad 28 32 32 26 26 35 42 56 28 33 10
Azamgarh 29 25 27 27 27 25 25 40 40 29 6
Etah 36 41 46 41 41 38 47 43 70 44 10
Etawah 77 79 79 79 79 90 94 100 101 86 10
Ghaziabad 66 66 64 80 80 92 77 69 84 75 10
Hamirpur 77 89 89 94 94 86 96 96 136 94 16
Jalaun 78 78 78 75 75 69 77 77 85 77 4
Lalitpur 44 44 44 37 37 40 48 66 72 47 12
Moradabad 39 39 39 39 39 39 39 30 30 37 4
Lucknow 43 42 42 42 42 42 42 42 42 42 0
U.P. 44 43 44 48 53 51 58 65 67 52 9
India 43 46 43 43 44 46 49 52 47 46 3
Table 5.10 presents the investments to deposits ratio of selected sample

DCBs for the period 2002-03 to 2010-11. The investments to deposits
ratio of DCBs has shown a fluctuating trend during the study period. It is
evident from the table under consideration that on an average the
proportion of investments to deposits was very high as compared to CD
ratio (see table 5.1) of Etawah (G.M.= 86) and Hamirpur DCBs (G.M.=
94). These banks may try to explore avenues for increasing CD ratio and
may avoid excessive investments in order to improve its income and
profitability. The investments to deposits ratio (G. M. = 29) and the CD
ratio (G.M. = 26) was found to be lowest in Azamgarh DCB, indicating
the inefficiency in channelizing its mobilized resources for the various
economic activities. This suggests that a very small proportion of the
funds utilization and low amount of interest.

we found fluctuating trend during the study period. The degree of
variability is nil for Lucknow DCB (S.D. = 0). The highest variability
was observed in Hamirpur DCB (S.D. = 16) which is comparatively high.
It indicates low degree of homogeneity i.e. heterogeneity of investment to
deposit ratio.
We noticed an increase in investments to deposits ratio of Uttar Pradesh

throughout the study period. The descriptive statistics in table suggest
that the investments to deposits ratio of banks in Uttar Pradesh is lowest
(43) for the year 2004 and highest (67) for the year 2011. The S.D for
Uttar Pradesh is high (G.M. = 9) as compared to India (G.M. = 3)
indicating low degree of homogeneity i.e. heterogeneity of investment to
deposit ratio.
CHAPTER VI
SUMMARY, CONCLUSIONS AND SCOPE FOR
FURTHER WORK
Banks occupy a unique position in the economy of any nation and they
have a long history in India, as in other countries, though the form and
character of their operations have been changed in consonance with the
changing times.
The co-operative banks in Indian banking 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 development programmes, augmentation of the productive
resources, liquidation of unemployment and poverty, and relieving the
people from indebtedness to money lenders (Vijayalakshmi, 2010).
In independent India, the co-operative banks shoulder the responsibility

as institutions to purvey credit for agricultural and rural development.
The network of co-operative banks, with 31 state co-operative banks, 371
District central co-operative banks with around 94647 primary level
institutions, covers almost all villages in India (as on 31st march 2011).
A strong network of district cooperative banks is a pre-requisite for sound

performance of the cooperative credit structure. District cooperative
banks not only provide the much-needed financial support to PACS, but
also ensure the smooth flow of credit to various sectors in the district.
They also ensure the strict implementation of the developmental schemes
in the cooperative sector of the state and avoid the misuse of the funds by
PACS or the select affluent sections of the rural society (Harshitha,
2007).
6.1 Summary of the study
The first chapter of this study deals majorly with the historical
background and traces the evolution of cooperative banks in India. The
origin of Cooperative Credit Societies in India can be traced to the close
of 19th century. The co-operative credit societies got legal status in 1904,
with a view to encourage thrift, eradicate rural indebtedness and provide
credit to the needy and weaker sections of society in rural areas. This
1904 Act was later on modified in 1912 and 1919, which has widened the
scope of co-operative enterprise in India. The Co-operative Societies Act
of 1912 permitted the registration of DCBs in India. The DCBs were
formed mainly with the objective of meeting the credit requirements of
member societies.
The subject of the present study is '' An assessment of cooperative

banking in India with special reference to Uttar Pradesh'' which covers
the period from 2002-03 to 2010-11. This study covers the Districts
Cooperative Banks in India in general and Uttar Pradesh in particular.
The study is based on secondary data. The data has been collected from
the published annual reports of cooperative banks published by
NABARD and Basic Data on Performance of DCBs published by
NAFSCOB for the period from 2002-03 to 2010-11. Data sources also
include RBI bulletin (various issues), Report on trend and progress of
Banking in India (various issues), published and unpublished dissertation
works, books, periodicals and research articles from various journals
were also taken into consideration. To examine the fund management
practices and to evaluate the operational efficiency, ratio analysis has
been used. Compound Annual Growth Rate was used for the comparison
of growth rates of different financial variables like borrowings, deposits,
credit, profit etc. For a more clear understanding of the data, all ratios
calculated for the purpose of study and some important items of balance
sheets and profit and loss account are presented through graphs.
This is followed by the statement of the problem, need, scope, objectives,

hypotheses, methodology, scope and limitations of the study in the
second chapter.
In the third chapter, a review of past research works in the field has been
compiled to enable better understanding of the research in various
regions, method of analysis on the research subject. The review made in
this chapter brought out that there were a number of general studies
relating to financial analysis of DCBs in India. But very few studies have
attempted a detailed analysis of mobilization, deployment and other
aspects of funds management limited in their scope.
In the fourth chapter an attempt is made to analyze the trend and pattern
of sources and uses of funds in Uttar Pradesh. Here we tried to examine
the trend in the components of sources and uses of funds in selected
DCBs using the data for the period from 2002-03 to 2010-11. For
computing the overall growth, averages and Compound annual growth
rate method was found suitable and comparisons were made on that basis.
The major objective of the fifth chapter is to analyze the efficiency of
selected DCBs in Uttar Pradesh with regard to mobilization and
deployment of funds. For the assessment of the efficiency of cooperative
banks various ratios like credit to deposit ratio, borrowings to deposit
ratio, borrowed funds to owned funds ratio, liquid assets to demand and
time liabilities ratio, demand deposits to term deposits ratio, deposits to
working capital ratio, borrowings to working capital ratio, liquid assets to
working capital ratio, loans and advances to working capital ratio and
investments to working capital ratio have been used.
6.2 Conclusions
6.2.1 Chapter 4 - Trends and volume of sources and applications of

funds in DCBs
For better insight into the working of the organization, analysis of its
growth, development and other basic features becomes a pre-requisite
step. The performance and financial indicators of the district cooperative
banks were subjected to compound growth rate analysis for the period
2002-03 to 2010-11 in order to assess the performance of district
cooperative banks.
The financial variables viz., Share capital, reserves and surplus, total
deposits and each of fixed, saving and other deposits, total working
capital and each component of borrowed and owned funds, investments,
the total advances and each of the short, medium and the long term
advances of all the districts cooperative banks were found to have
recorded an impressive annual growth rate over the years.
It was further revealed that the share capital, reserves and surplus, the
total deposits, borrowings, loans and advances of Ghaziabad DCB, cash
in hand and cash at bank of Moradabad DCB and Investment in securities
of Hamirpur DCB were observed to have registered a highest and
spectacular annual growth rate over the years. The major conclusions are
as follows
1. During 2002-03 to 2010-11 there is negligible growth in number of

DCBs over the years (0.17%).
2. We found that in case of share capital, Ghaziabad DCB recorded

the highest growth which is even greater than the overall growth of Uttar
Pradesh and of India as well. The lowest growth was observed for
Lucknow DCB. However, in general, the data of the selected sample
districts of Uttar Pradesh for the period 2003-2011 shows that the share
capital of DCBs in Uttar Pradesh is increasing over the years.
3. In case of reserves and other funds, Moradabad DCB was keeping

sufficient reserves followed by Hamirpur DCB. The lowest growth rate
was observed for Lucknow DCB which is actually negative. The reason
being that the share capital and the number of branches are also stagnant
in case of Lucknow district. As a result of which the profits and
subsequently the reserves and surpluses are also going down. However, in
general, the reserve and other funds of the major selected sample districts
of Uttar Pradesh for the period 2003-2011 shows an increasing trend over
the years.
4. In general, the district co-operative banks have succeeded in

mobilizing deposits which is evident from the study. Total deposits
mobilized by Allahabad, Etawah, Ghaziabad and Moradabad DCBs were
higher than the overall averages during 2003 and 2011. We observed that
Ghaziabad DCB mobilized the maximum deposits while Azamgarh DCB
the least. In general, the data of the selected sample districts of Uttar
Pradesh and India for the period 2003-2011 shows that the total deposits
is showing an increase over the years. These favorable trends may be
attributed to the relatively better industrial activities of the districts
coupled with the joint efforts of employees and management.
5. In case of current deposits Allahabad DCB recorded the highest

figure in 2003 and 2011 whereas Lalitpur DCB is maintaining the lowest
in 2003 and 2011.
6. In terms of savings bank deposits Moradabad and Ghaziabad DCBs

recorded the highest figure in 2003 and 2011 respectively. Lowest was
observed for Lalitpur in 2003 and Lucknow DCB in 2011.
7. With regard to fixed deposits Allahabad and Ghaziabad DCBs

recorded the highest figure in 2003 and 2011 respectively. Lowest was
observed for Lucknow DCB in 2003 and 2011.
8. In general, all the banks in U.P showed an increasing trend with

regard to different types of deposits during 2003 and 2011.
9. Regarding borrowings, Ghaziabad DCB recorded the highest

growth and Lucknow DCB the lowest. The CAGR of borrowings of
Ghaziabad, Hamirpur Allahabad, Etawah and Jalaun DCBs were higher
than the overall CAGR of Uttar Pradesh. We observed an increasing trend
for borrowings of Uttar Pradesh for the period 2003-2011. It has also
been observed that the growth of Uttar Pradesh is greater than that of
India. Although the growth rate of borrowings of few sample districts like
Azamgarh, Etah, Lalitpur and Lucknow showed a decline but there is an
overall increase in the borrowings of major sample DCBs of Uttar
Pradesh over the years.
10. The correlation coefficient between borrowings and profits is

found to be negative and significant in case of Uttar Pradesh as well in
case of major selected sample districts except for few such as Hamirpur,
Jalaun and Lalitpur, where the correlation is found to be positive and
significant.
11. The maximum CAGR of cash in hand and at bank was recorded at
Moradabad DCB which is indeed higher than that of Uttar Pradesh and
minimum for Etawah DCB. In general there is increase in cash in hand
and cash at bank in the selected sample districts of Uttar Pradesh over the
period of 2003-2011 with the only exception of Etawah. Although the
overall growth of cash in hand and at bank in Uttar Pradesh has also
shown a considerable increase over the years, yet it is lower than that of
India.
12. The maximum CAGR for loans and advances was recorded at
Ghaziabad DCB and the minimum for Etah DCB. We observed an
increase in the overall loans and advances of Uttar Pradesh during the
period of 2003-2011.
13. The correlation coefficient between loans and advances and profits
shows that there exists a high degree of positive correlation between these
indicators for six out of ten selected districts. However, in case of Uttar
Pradesh as a whole and Azamgarh and Moradabad DCBs the correlation
is found to be negative and significant.
14. We observed the highest growth rate of investment for Hamirpur
DCB, leading to the inference that preference for investments is
increasing in Hamirpur DCB. The lowest growth rate was recorded for
Moradabad DCB. In general, data of the selected sample districts of Uttar
Pradesh for the period 2003-2011 shows that the investments of DCBs in
Uttar Pradesh is increasing over the years.
15. We observed a declining trend in percentage of over dues to loans

of DCBs in Uttar Pradesh during the period of study.
6.2.2 Chapter 5 - Ratio Analysis of Financial Performance of DCBs in

Uttar Pradesh
For financial analysis, the researcher computed credit to deposit ratio,

borrowings to deposits ratio, owned funds to borrowed funds ratio, liquid
assets to demand and time liabilities ratio, current and savings deposit to
total deposits ratio, term deposits to total deposit ratio, owned funds to
working funds ratio, deposits to working funds ratio, borrowings to loans
ratio, investments to deposits ratio.
1) Credit to deposit ratio
Credit Deposit Ratio indicates the relationship between advances and

deposits. A higher credit deposits ratio indicates efficiency of
management. The average yearly total credit disbursement in relation to
the total deposit mobilized ratio (C.D. Ratio) of Etah, Ghaziabad and
Moradabad DCB was found to be excellent. While in case of Allahabad,
Azamgarh, Etawah, Hamirpur, Jalaun, Lalitpur and Lucknow DCB, the
ratio was found to be rather poor. Further, the C/D ratio of Moradabad
DCB was observed to be the highest among the banks. As far as the CD
ratio of Uttar Pradesh and India is concerned, it was found to be
satisfactory.
2) Borrowings to Deposits Ratio
Borrowings to deposits ratio indicates the level of dependence of a bank

on borrowings. This ratio should not be very high because then it will
reflect high level of dependence on borrowings. On an average the
proportion of borrowings to deposits was highest in Moradabad DCB.
The ratio was observed to be lowest in Lucknow DCB.
On an average, the borrowings to deposits ratio of Uttar Pradesh showed

an increase over the period of study. The descriptive statistics in table
suggest that the borrowings to deposits ratio of banks in Uttar Pradesh is
lowest for the years 2003 and 2004 and highest for the years 2007 and
2008. However, for India, the proportion of borrowings in relation to the
deposits showed a mixed trend, which remains stagnant from 2003 to
2006 then, showed an increase in 2007, again decreases, and finally
showed an increase from 21 in 2010 to 24 in 2011.
3) Owned funds to borrowed funds ratio
The proportion of owned funds in relation to the borrowed funds was

noticed to be comparatively low in case of most of the sample DCBs
except Azamgarh and Lalitpur, revealing a weak equity base in the total
capital structure of the bank. However, the percentage of owned funds to
borrowed funds in Lalitpur was observed to have sluggishing trend in
later years as compared to former years.
The owned fund to the borrowed funds ratio of Uttar Pradesh and India
was also comparatively low.
4) Liquid assets to demand and time liabilities ratio
The liquid assets to demand and time liabilities ratio was found to be far
below than required, under Sec 18 of the Banking Regulation Act, in case
of all DCBs except Moradabad, where it was observed to be more than
the required ratio, indicating excess funds in the form of liquid assets. As
far as Uttar Pradesh and India are concerned, the case is no different, as
we observed the Liquid assets to demand and time liabilities ratio is far
below than required.
5) Current and savings deposit to total deposits ratio
All selected sample DCBs have current and saving deposits to total
deposits ratio higher than the minimum required level (30% to 40%). In
terms of geometric mean for the selected sample districts, the highest
value was observed for Etawah DCB. The DCBs in Etawah region
showed its competency in raising resources at a cheaper cost as current
and saving deposits constituted the major portion of banks’ total deposits,
which is generally a cheaper source of fund. We observed the same for
Uttar Pradesh as well as for India.
6) Term or fixed deposit to total deposit ratio
Long Term Deposits to Total Deposits Ratio indicates the proportion of

long term deposits in total deposits. The term deposits held by banks for a
specified term, gives bank the ability to invest it in a higher gain financial
product class. We found that the term deposits to total deposits ratio of all
selected sample DCBs were lower than the minimum required level. The
highest term deposits to total deposits ratio was observed for Lalitpur and
Lucknow even that was lower than the required minimum level to be
maintained (60% to 70%).
We observed the same for Uttar Pradesh as the ratio is lower than
minimum required level whereas in case of India it is almost reasonable.
7) Owned funds to working Funds ratio
The owned funds in relation to the working funds ratio was noticed to be
low and not even close to the accepted ideal proportion in case of
Allahabad, Etah and Lucknow DCBs indicating the low borrowing ability
of the banks to augment its working funds. However, Azamgarh, Etawah,
Ghaziabad, Jalaun, Lalitpur and Moradabad DCBs were successful in
managing on an average more than 10 percent of owned funds to working
funds ratio. So in case of these DCBs we can say that the ratio of owned
funds in relation to the working funds was reasonably adequate and the
pace of owned funds was almost stable during the whole period of the
study, highlighting a good share of owned funds in the total working
capital.
The analysis showed that Uttar Pradesh as well as India was successful in
maintaining the adequate level of owned funds to working funds ratio.
8) Deposits to working funds ratio
A detailed examination of the observations showed all the banks were

successful in maintaining the adequate level of deposits in relation to the
working funds ratio. We observed that all the banks were successful in
managing more than 50 percent of their working funds in the form of
deposits indicating its competency in raising resources at a cheaper cost
as current and saving deposits constituted the major portion of banks’
total deposits, which is generally a cheaper source of fund. Moreover, we
noticed an upward trend in this ratio over the years. The general increase
in this ratio in some of the sample banks may attribute to their success in
deposit mobilization policy. In terms of geometric mean the highest value
was observed for Etawah DCB indicating the high liquidity position of
the banks.
We observed the same for Uttar Pradesh as well as for India. The ratio is
higher than minimum required level (> 50 %).
9) Borrowings to loans ratio
The proportion of borrowings to loans was higher than the required level
(30%) in Azamgarh, Hamirpur and Lalitpur indicating a very high level
of dependence of banks on borrowings. The lowest ratio was observed for
Ghaziabad DCB.
We observed an increase in borrowings to loans ratio of Uttar Pradesh

throughout the study period reflecting the increasing dependency of
banks on borrowings. The descriptive statistics in table suggest that the
ratio of banks in Uttar Pradesh was slightly higher than the required level.
We observed the same for India.
10) Investments to deposits ratio
Total investment to total deposits ratio indicates that banks are using their
funds rather than keeping them ideal. A higher ratio indicates higher
efficiency and lesser liquidity. However this ratio has to be interpreted
keeping in view the funds position of the bank and must be compared
with their respective credit deposit ratio. The average ratio was the
highest in Hamirpur DCB which was 94 percent and maintained almost
same level during the study period. It was followed by Etawah, Jalaun,
Ghaziabad, Lalitpur, Etah, Lucknow, Moradabad, and Allahabad DCBs.
The average ratio was the lowest in Azamgarh DCB.
We noticed an increase in investments to deposits ratio of Uttar Pradesh

throughout the study period i.e. from 2002-03 to 2010-10. The
investments to deposits ratio of DCBs in India has shown a fluctuating
trend during the study period. We observed that on average investments
to deposits ratio of DCBs in India increases till 2010 and decreases in
2011.
6.3 Major findings
1. While analyzing the historical trends of DCBs in U.P. it was found

that in general the DCBs are having a stagnant growth with respect to
different indicators.
2. During 2002-03 to 2010-11 there is negligible growth in number of
DCBs over the years (0.17%). Hence the hypothesis that over the years
the number of branches of DCBs in India is likely to increase has been
rejected.
3. One of the major objectives of this study is to examine the growth

of business of cooperative banks in Uttar Pradesh in terms of deposits
mobilization and credit advanced during the study period. In general, the
district co-operative banks have succeeded in mobilizing deposits which
is evident from the study. In general, the data of the selected sample
districts of Uttar Pradesh and India for the period 2003-2011 shows that
the total deposits is showing an increase over the years. These favorable
trends may be attributed to the relatively better industrial activities of the
districts coupled with the joint efforts of employees and management.
Thus the hypothesis that Cooperative banks have been playing an
important role in mobilization of deposit and extension of credit to
influence the distribution of credit to people, has been accepted.
4. In general, all the banks in U.P showed an increasing trend with

regard to different types of deposits during 2003 and 2011. The
hypothesis, that in general, it is expected that all the banks in U.P will
have an increasing trend with regard to different types of deposits during
the study period has also been established because we observed that
current deposits, saving deposits and fixed deposits have increased in all
the banks as the growth rate of deposits is positive in case of selected
sample banks, Uttar Pradesh as a whole and also in case of India.
5. The correlation coefficient between borrowings and profits is

found to be negative and significant as well, in case of Uttar Pradesh and
also for major selected sample districts except for few such as Hamirpur,
Jalaun and Lalitpur, where the correlation is found to be positive and
significant. The reason that can be traced is that it might be due to poor
and inaccurate data reporting in the Bundelkhand region (these three
districts belong to this region). These inferences were establishing an
inverse relationship between borrowings and profits of DCBs.
6. The correlation coefficient between loans and advances and profits

shows that there exists a high degree of positive correlation between these
indicators for six out of ten selected districts. However, in case of Uttar
Pradesh as a whole and Azamgarh and Moradabad DCBs the correlation
is found to be negative and significant. In case of U.P. as well as
Azamgarh the reason for the negative correlation may be high NPAs. For
Moradabad the two probable reasons can be cited for the negative
correlation between these indicators. Firstly, the DCBs in Moradabad
district are having high NPAs and secondly the data reported by these
banks is also not appropriate. Hence the hypothesis that Loans and
advances and profits of DCBs are directly related to each other may be
accepted.
7. We observed a declining trend in percentage of over dues to loans

of DCBs in Uttar Pradesh during the period of study. Thus the hypothesis
that there is an increasing trend of over dues to loans over the period of
study has been rejected.
8. The liquid assets to demand and time liabilities ratio was found to
be far below than requirements under Sec 18 of the Banking Regulation
Act, in case of all DCBs except Moradabad, where it was observed to be
more than the required ratio, indicating excess funds in the form of liquid
assets. As far as Uttar Pradesh and India are concerned, the case is no
different, as we observed the Liquid assets to demand and time liabilities
ratio is far below than required. Thus the hypothesis that in general the
DCBs had maintained very low liquid assets may be accepted.
Long Term Deposits to Total Deposits Ratio indicates the proportion of

long term deposits in total deposits. The term deposits held by banks for a
specified term, gives bank the ability to invest it in other profitable
avenues but it was found that the term deposits to total deposits ratio of
all selected sample DCBs were lower than the minimum required level.
The highest term deposits to total deposits ratio was observed for Lalitpur
and Lucknow even that was lower than the required minimum level to be
maintained (60% to 70%). The same is also observed for Uttar Pradesh as
the ratio is lower than minimum required level whereas in case of India it
is just reasonable. Despite the fact that the cooperative banks provide a
little higher rate of interest on deposits as compared to commercial banks,
we observed low term deposit to total deposit ratio. The probable reason
might be that people prefer commercial banks to cooperatives because
commercial banks enjoy greater reliability among people as their size of
business and accordingly their profits are much higher than that of
cooperatives. Hence the hypothesis that the percentage of term deposits
in comparison to other kinds of deposits in DCBs would be
comparatively less may be accepted.
9. One of the objectives of this study is to analyze the various sources

and uses of funds of DCBs in U.P. The analysis shows that the share
capital, reserves and other funds, deposits and borrowings are the
different sources of funds of DCBs. The funds so collected by the banks
are utilized for meeting the various purposes, but in this study we
analyzed only the important purposes namely cash in hand and at bank,
for granting loans & advances and investment in securities.
10. The overall growth of share capital of DCBs in India is almost

double in comparison to the growth of Uttar Pradesh during 2002-03 to
2010-11. In general the data of the selected sample districts of U.P. for
the period 2003-2011 shows that the share capital of DCBs in U.P. is
increasing over the years. The rate of growth of India is lower than that of
Uttar Pradesh. The table revealed that in general the reserve and other
funds of the selected sample districts of U.P. for the period 2003-2011
shows an increasing trend over the years.
11. To assess and analyze the status of employees in terms of their cost
of management is also one of the objectives of this study. In general, it
was observed that for all the selected districts there has been on an
average 10% growth of cost of management per employee as the
compound annual growth rate for all the major districts for the selected
time period is in general 10%.
12. One of the objectives of this study was to evaluate the overall
performance and financial performance of cooperative banks in Uttar
Pradesh with the help of some selected ratios. After analyzing the ratios
we found that all the selected ratios viz. credit to deposit ratio,
borrowings to deposits ratio, current and savings deposit to total deposits
ratio, owned funds to working funds ratio, deposits to working funds
ratio, borrowings to loans ratio, investments to deposits ratio were as per
the required standards except owned funds to borrowed funds ratio, liquid
asset to demand and time liabilities ratio and term deposits to total
deposits ratio.
6.4 Policy suggestions
1. It is necessary for Allahabad, Azamgarh, Etawah, Hamirpur,

Jalaun, Lalitpur and Lucknow DCBs to increase their credit deposit ratio
to channelize their excess funds than the required, by increasing their
lending activity so as to earn a justifiable return on the mobilized
resources.
2. The proportion of borrowings to deposits needs to be reduced in

case of DCBs in Uttar Pradesh and more specifically in Azamgarh, Etah,
Lalitpur and Moradabad DCBs, by mobilizing more deposits as to reduce
the level of dependence on borrowings which is one of the highest cost
items of funds.
3. The proportion of owned funds in relation to the borrowed funds

needs to be strengthened in case of DCBs of Uttar Pradesh and India as a
whole and for most of the sample DCBs except Azamgarh and Lalitpur,
for a strong equity base. This can be achieved by two ways: i) by
increasing the membership strength so as to raise share capital. For this, a
region wise committee comprising of local members may be constituted
to persuade the people to become the members of the banks; ii) the
present minimum face value of the shares may be fixed at such rate which
would not restrict the persons of small means to become the members of
the banks. Further, a suitable linkage of shareholdings to the borrowings
should be encouraged.
4. The owned fund position of the districts banks can also be

improved by capital contribution of the apex bank and State Government.
5. The percentage of liquid assets in relation to the total deposits
needs to be enlarged in case of all selected sample DCBs, Uttar Pradesh
and India, in order to widen the safety base to the deposit holders on the
one hand and satisfy the statutory norms prescribed by the RBI, on the
other as the liquid assets to the total deposits ratio was found to be far
below than the required in these banks. Thus it needs to be improved.
6. Moradabad DCB needs to channelize their excess funds than the

required blocked in the form of either liquid assets or in the form of cash
assets, to the profitable outlets. The investment can be made either in
approved securities or by increasing their lending activity extending even
to the rural area as well as to the agricultural activity so as to earn a
justifiable return on the mobilized resources.
7. The ratio of owned funds to working funds needs to be increased in

case of Allahabad, Etah and Lucknow DCBs by raising its share capital
and also increasing its membership.
8. As far as the borrowings to loans ratio is concerned, Azamgarh,

Hamirpur and Lalitpur DCBs may try to reduce their dependence on
borrowings by mobilizing more deposits.
9. The proportion of investments to deposits was very high as

compared to CD ratio of Etawah and Hamirpur DCBs. These banks may
try to explore avenues for increasing CD ratio and may avoid excessive
investments in order to improve its income and profitability.
10. Management should ensure that important matters having
significant bearing on the proper functioning and working of the banks
such as mobilization of deposits targets, advance specially priority sector
advance, liquid assets, investment, over dues and recoveries etc. should
be reviewed periodically in order to achieve better functioning.
11. It is suggested to that annual recovery must be fixed and a

Recovery Committee should be setup to speed up recovery by close
monitoring over recovery.
12. To improve profitability of the DCBs, it is suggested that the

management of the DCBs should try to reduce operating cost by
exercising efficient control over their cost of external funds and
increasing operating income by utilizing funds to their full capacity. To
exercise efficient control over their cost of external funds, they should try
to obtain more low cost funds. For the reduction and control of cost,
techniques like budgetary control, standard costing and value analysis
should be implemented.
13. To improve return on total funds it is suggested hereby to increase

the portfolio of advances, simplification of the procedure of advancing
and to provide door to door services to customer. Similarly they should
go for beneficial and safe investment of funds. But they should be
simultaneously aware about the quality and quantity of advances and
advance which do not convert in NPA.
14. Management audit is to be introduced as a tool for an objective

evaluation of the management performance of the nationalized banks in
the overall functioning of the organization. Such an audit should clearly
reveal the lapses in the organization structure, systems and procedures so
that corrective actions can be taken.
15. It was observed during the study certain shortcomings relating to

the disclosure of information, accuracy of facts and figures displayed in
the annual reports and maintenance of proper records with regard to the
various components of income, expenditure, non-performing assets,
number of employees, liabilities etc. which naturally causes
inconvenience to the members as well as to the general public in
understanding clearly the real status of the banks. Hence, it is very
essential for the banks to improve their disclosure standards, accuracy of
the information disclosed in their annual reports and maintaining the
proper records containing detailed information about all the components
of the financial statements.
6.5 Scope for further research
1. The present analysis studies only a few parameters. The other

parameters can also be evaluated.
2. The data is secondary in nature.
3. As the data are collected from the records, the analysis is based on
the information provided by the concerned institutions alone.
4. The detailed analysis is restricted to a limited period of study i.e.

from 2002-03 to 2010-11.
5. The analysis is based on the quantitative aspects and the social
objectives of DCBs are not taken into considerations for the purpose of
study because qualitative aspects required a totally different mode of
study.
6. The structure of cooperative banks in Uttar Pradesh consists of

three tier system – the primary credit societies at the base/ village level,
the DCBs at the district level & the StCBs / apex bank at the state level.
The scope of this study is restricted to the selected DCBs in Uttar
Pradesh.
7. The present study is based on the selected 10 sample DCBs. As the

size of the sample selected is very small, the limitations of a small sample
are applicable to this study.
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Appendices
Deposits
Districts 2003 2004 2005 2006 2007 2008 2009 2010 2011
Allahabad 17302 17152 17152 18996 18996 22909 26037 29682 32965
Azamgarh 7854 8771 9597 9905 9905 9487 9487 12855 12855
Etah 7156 7406 7003 8347 8347 10279 10877 12372 12693
Etawah 14740 16287 16287 16287 16287 22222 24796 28461 31581
Ghaziabad 14555 14555 17368 20317 20317 22977 29712 34722 41655
Hamirpur 7402 7877 7877 8577 8577 11634 13730 16794 18661
Jalaun 11039 11415 11415 11985 11985 14563 18920 18920 20805
Lalitpur 3222 3222 3222 3619 3619 5102 5648 6719 7509
Moradaba
15652 15652 15652 15652 15652 15652 15652 29579 29579
d
Lucknow 4839 8457 8457 8457 8457 8457 8457 8457 8457
U.P. 491491 514287 533160 590158 632374 679472 762678 897209 963457
India 7239443 7688452 8049350 8665222 9218136 10599372 12372182 14630314 16130882
Term Deposits
Districts 2003 2004 2005 2006 2007 2008 2009 2010 2011
Allahabad 8318 7828 7828 6647 6647 7915 9230 10536 11624
Azamgarh 3877 4118 4100 4043 4043 3688 3688 5020 5020
Etah 3044 2737 2713 2861 2861 3219 3817 4478 4150
Etawah 6239 6298 6298 6298 6298 7292 1797 9451 9428
Ghaziabad 6429 6429 5925 6283 6283 7078 12984 13837 14591
Hamirpur 3385 3391 3391 3301 3301 4097 4937 5383 5882
Jalaun 5732 5394 5394 5345 5345 6637 8359 8359 9042
Lalitpur 1745 1745 1745 1714 1714 2001 2444 2773 3226
Moradaba
6269 6269 6269 6269 6269 6269 6269 7576 7576
d
Lucknow 2306 3871 3871 3871 3871 3871 3871 3871 3871
U.P. 231818 238955 231484 225647 230332 257982 284646 339726 341949
446164 462149 459827 477510 550109 665986 788297 839188

India 4641115
3 8 0 1 4 3 9 8
Savings
Districts 2003 2004 2005 2006 2007 2008 2009 2010 2011
Allahabad 7912 8085 8085 10790 10790 13287 15144 17271 19376
Azamgarh 3256 3672 4332 4906 4906 4891 4891 6736 6736
Etah 3384 3620 3281 4119 4119 5564 5391 6266 7018
Etawah 7215 8809 8809 8809 8809 13393 14244 16972 20425
Ghaziabad 7605 7605 10753 12258 12258 13990 15847 19569 25758
Hamirpur 3410 3819 3819 4540 4540 6510 7548 9890 11636
Jalaun 4979 5693 5693 6210 6210 7246 10079 10079 11314
Lalitpur 1347 1347 1347 1801 1801 2732 3069 3699 4105
Moradaba
8566 8566 8566 8566 8566 8566 8566 20399 20399
d
Lucknow 1969 3959 3959 3959 3959 3959 3959 3959 3959
U.P. 224255 237654 263968 318741 357973 378403 400497 503858 557353
179953 200891 226037 273547 304580 344132 393294 473257 553713

India
1 8 1 5 4 3 5 4 7
Current Deposits
Districts 2003 2004 2005 2006 2007 2008 2009 2010 2011
Allahabad 1072 1239 1239 1559 1559 1707 1663 1875 1965
Azamgarh 712 972 1156 946 946 898 898 1093 1093
Etah 472 765 688 968 968 986 1122 1092 918
Etawah 1021 1180 1180 1180 1180 1537 8755 2038 1728
Ghaziabad 521 521 690 1014 1014 991 881 1316 1306
Hamirpur 600 660 660 733 733 1027 1245 1521 1143
Jalaun 322 321 321 423 423 673 474 474 449
Lalitpur 130 130 130 104 104 369 135 247 178
Moradaba
817 817 817 817 817 817 817 1604 1604
d
Lucknow 270 490 490 490 490 490 490 490 490
U.P. 31358 35613 35114 41699 41297 40408 52675 49355 58483
50121 57908 67725 75439 80231 90090 113629 123355 139561

India
2 5 5 6 8 6 3 2 1
Liquid Assets
Districts 2003 2004 2005 2006 2007 2008 2009 2010 2011
Allahabad 1603 833 833 1284 1284 998 1215 1264 11190
Azamgarh 484 270 732 605 605 554 554 1230 1230
Etah 907 887 717 965 965 1107 808 5049 1175
Etawah 626 560 560 560 560 1169 941 997 733
Ghaziabad 974 974 1897 1786 1786 1261 1113 1619 2871
Hamirpur 481 704 704 858 858 808 774 1089 2082
Jalaun 563 630 630 705 705 578 999 999 1409
Lalitpur 444 444 444 608 608 435 309 428 690
Moradabad 6058 6058 6058 6058 6058 6058 6058 24009 24009
Lucknow 2271 292 292 292 292 292 292 292 292
U.P. 51039 60963 60819 75358 80335 78887 112069 156778 163200
90017 100464 101938 102886 101461 129318 144970 1164514

India 715012
4 6 3 6 6 8 8 9
Borrowings
Districts 2003 2004 2005 2006 2007 2008 2009 2010 2011
Allahabad 242 1504 1504 1504 1504 1659 1346 1582 2303
Azamgarh 1755 2058 2538 2538 2538 2874 2874 1208 1208
Etah 2692 2931 3440 3440 3440 2251 1912 202 2306
Etawah 275 304 304 304 304 1765 1605 1767 2206
Ghaziabad 203 203 515 515 515 3642 5989 6915 12492
Hamirpur 415 1500 1500 1500 1500 1786 1795 2103 4698
Jalaun 1263 1487 1487 1487 1487 1574 1960 1960 4613
Lalitpur 1270 1270 1270 1270 1270 720 617 630 1101
Moradabad 4061 4061 4061 4061 4061 4061 4061 7414 7414
Lucknow 399 253 253 253 253 253 253 253 253
U.P. 93303 98931 111766 127263 163204 176039 186468 189271 232343
India 1923847 2112810 2155710 2320213 2794060 3053334 2847764 3035483 3910116
Current and savings account
Districts 2003 2004 2005 2006 2007 2008 2009 2010 2011
Allahabad 8984 9324 9324 12349 12349 14994 16807 19146 21341
Azamgarh 3968 4644 5488 5852 5852 5789 5789 7829 7829
Etah 3856 4385 3969 5087 5087 6550 6513 7358 7936
Etawah 8236 9989 9989 9989 9989 14930 22999 19010 22153
Ghaziabad 8126 8126 11443 13272 13272 14981 16728 20885 27064
Hamirpur 4010 4479 4479 5273 5273 7537 8793 11411 12779
Jalaun 5301 6014 6014 6633 6633 7919 10553 10553 11763
Lalitpur 1477 1477 1477 1905 1905 3101 3204 3946 4283
Moradaba
9383 9383 9383 9383 9383 9383 9383 22003 22003
d
Lucknow 2239 4449 4449 4449 4449 4449 4449 4449 4449
U.P. 255613 273267 299082 360440 399270 418811 453172 553213 615836
230074 258800 293762 348987 384812 434222 506923 596612 693274

India
3 3 6 1 2 9 8 6 8
Owned Funds
Districts 2003 2004 2005 2006 2007 2008 2009 2010 2011
Allahabad 847 861 861 891 891 1135 1173 1214 1261
Azamgarh 2896 3315 3393 3666 3666 4162 4162 5334 5334
Etah 657 706 798 778 778 843 878 902 912
Etawah 1600 1725 1725 1725 1725 2714 3512 3835 4676
Ghaziabad 3055 3055 3805 3230 3230 3482 4399 4674 4822
Hamirpur 805 852 852 917 917 1227 1468 1650 2231
Jalaun 2114 2182 2182 2394 2394 2736 2992 2992 2555
Lalitpur 1289 1289 1289 1107 1107 1392 1398 1410 1491
Moradaba
2231 2231 2231 2231 2231 2231 2231 9388 9388
d
Lucknow 522 447 447 447 447 447 447 447 447
U.P. 100763 110640 118436 136109 139043 147476 154189 185315 200899
132527 150182 167883 185944 206032 222649 238794 279094 279497
India 1 7 3 1 5 6 2 9 0
Working funds
Districts 2003 2004 2005 2006 2007 2008 2009 2010 2011
Allahabad 21767 23379 23379 27477 27477 32482 35342 40946 44930
Azamgarh 12774 14437 15892 16364 16364 16828 16828 20195 20195
Etah 11896 12690 13005 14038 14038 14993 15828 18814 18672
Etawah 17310 19258 19258 19258 19258 28325 31819 36675 40357
Ghaziabad 18355 18355 22490 26055 26055 30753 40980 47256 60419
Hamirpur 9304 10950 10950 12520 12520 15682 18247 16794 26608
Jalaun 14577 15284 15284 16436 16436 19207 24553 24553 28330
Lalitpur 5861 5861 5861 5890 5890 7375 7854 8917 10357
Moradaba
25352 25352 25352 25352 25352 25352 25352 46435 46435
d
Lucknow 5760 11632 11632 11632 11632 11632 11632 11632 11632
U.P 730812 732925 808645 896058 896058 1063991 1159617 1310253 1407633
1090923 1189053 1226328 1312418 1460836 1681375 1840378 2069184 2354307

India
9 1 9 5 3 2 7 4 0
Demand Deposits
Districts 2003 2004 2005 2006 2007 2008 2009 2010 2011
Allahabad 8984 9324 9324 12349 12349 14994 16807 19146 21341
Azamgarh 3968 4644 5488 5852 5852 5789 5789 7829 7829
Etah 3856 4385 3969 5087 5087 6550 6513 7358 7936
Etawah 8236 9989 9989 9989 9989 14930 22999 19010 22153
Ghaziabad 8126 8126 11443 13272 13272 14981 16728 20885 27064
Hamirpur 4010 4479 4479 5273 5273 7537 8793 11411 12779
Jalaun 5301 6014 6014 6633 6633 7919 10553 10553 11763
Lalitpur 1477 1477 1477 1905 1905 3101 3204 3946 4283
Moradaba
9383 9383 9383 9383 9383 9383 9383 22003 22003
d
Lucknow 2239 4449 4449 4449 4449 4449 4449 4449 4449
U.P. 255613 273267 299082 360440 399270 418811 453172 553213 615836
230074 258800 293762 348987 384812 434222 506923 596612 693274

India
3 3 6 1 2 9 8 6 8

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AN ASSESSMENT OF COOPERATIVE BANKING IN

INDIA WITH SPECIAL REFERENCE TO

THESIS SUBMITTED TO THE UNIVERSITY OF LUCKNOW

FOR THE DEGREE OF

UNDER THE SUPERVISION OF

Department of Applied Economics

I, the undersigned hereby declare that the Research Work presented in

Place: Lucknow Research Scholar

I certify that the thesis “An assessment of Cooperative banking in

Dr. Archana Singh

Department of Applied Economics

List of Abbreviations v-vi

List of Charts and Figures vi

List of Tables vii-ix

CHAPTER 1: Cooperative banking in India : an overview 1-35

CHAPTER 2: Research methodology 36-42

CHAPTER 3: Literature review 43-65

CHAPTER 4 : Trends and volume of sources and 66-101

applications of funds in DCBs

CHAPTER 5: Ratio analysis of financial performance of DCBs 102-124

CHAPTER 6 : Summary, conclusions & scope for further work 125-146

The present thesis on “An assessment of cooperative banking in India

The study is based on secondary data. The DCBs in Uttar Pradesh

Finally chapter sixth incorporates the major findings and suggestions

After all these years of hard work, it is necessary to express my gratitude

I take immense pleasure in expressing my gratitude to my PhD

I express my sincere gratitude to Mr. Ashok Kumar Singh, Branch

I would also like to thank all of my friends who supported me in writing,

I wish to thank my in-laws for their valuable and unending support

A special thanks to my family. My gratefulness to my parents, above all,

C.D. ratio Credit Deposit Ratio

CAGR Compound Annual Growth Rate

CASA ratio Current and Saving Accounts Ratio

CCBs Central Cooperative Banks

CEO Chief Executive Officer

CRR Cash Reserve Ratio

DCBs District Cooperative Banks

DCCBs District Central Co-operative Banks

DTL Demand and Time Liabilities

G.M Geometric Mean

GDP Gross Domestic Product

NABARD National Bank For Agriculture And Rural

NAFSCOB National Federation of State Cooperative

PACS Primary Agricultural Credit Cooperative

PCARDBs Primary Cooperative Agriculture &

S.D. Standard Deviation

SCARDBs State Cooperative Agriculture & Rural

SLR Statutory Liquidity Ratio

ST CCS Short-Term Cooperative Credit Structure

StCB State Cooperative Bank

TDCCB Tirunelveli District Central Co-Operative

U.P. Uttar Pradesh

w.e.f. With Effect From

Sl. Table Page

COOPERATIVE BANKING IN INDIA: AN OVERVIEW

1.1 The Co-operative Movement in India: an introduction

The main objective of setting up of co-operative credit societies is to

A cooperative is generally viewed as a social economic organization that

1.2 Meaning and concept of co-operatives

“A cooperative is an autonomous association of persons united

The beginning of this great movement is dated back to 1844, when a

1.3 Definitions by eminent thinkers on co-operation

Dr. C. R. Fay from the socio-economic standpoint defines co-operative