CCHHAAPPTTEERR IIII

RREEVVIIEEWW OOFF LLIITTEERRAATTUURREE

34

REVIEW OF LITERATURE

Views and Reviews of different scholars and critics help the

researcher to obtain broad awareness and acquire comprehensive

understanding of the subject under study. Hence a survey of literature

has been carried out here of which a few reviews are presented in this

chapter. Besides, the objectives and methodology of the study are also

presented.

2.1 Objectives and Methodology:

2.1.1 Objectives of the Study:

The specific objectives of the study are

1. to examine the trends in the financial status, growth and

overall performance of DCCBs in India and Andhra Pradesh.

2. to analyze the profile and operational trends of the Guntur

District Central Co-operative Bank (GDCCB), the selected

Bank;

3. to appraise the financial performance of the Guntur District

Central Co-operative Bank (GDCCB) with the help of CAMEL

Analysis.

4. to examine the position of the credit risk and NPAs

management in the Guntur District Central Co-operative

Bank (GDCC Bank); and

5. to suggest measures, ways and means for the healthy growth

of DCCBs in India as well as the selected GDCCB.

2.1.2 Sources of Data:

The data were collected both from primary and secondary

sources. Primary data were collected from sample bank officials

through a structural survey schedule. Information was gathered

35

personally and through interaction with the officials of the GDCCB for

the period 2000-01 to 2008-09. The secondary data were collected

from various books, journals, the annual audit reports of the GDCCB

during the same period.

2.1.3 Scope of the Study:

This study covers a time period of nine years ranging between

2000-01 and 2008-09, to study the trends in the DCCB of Guntur

district, the study Bank. However, a time period of only five years was

considered for an appraisal of the DCCBs at the All India and Andhra

Pradesh level.

This study has a major focus only on the financial performance

of the GDCCB. Other functional and operational transactions like

deposit mobilization and credit expansion were not considered for

analysis purpose.

2.1.4 Analytical Tools Used:

The data was interpreted with correlation matrix from the ratios

of selected variables during the same period in GDCC Bank. The data

was tested with simple regression model to analyze the impact of gross

NPAs on different financial variables (Net Profit, Investments and

Spread) during the same period.

Regression analysis is used when two or more variables are

thought to be systematically connected by a linear relationship. In

simple regression, the variables are designated as X and Y and they

are related by an expression of the form

36

y = b0 + b1 x + e. It leaves aside for a moment the nature of the

variable e and focus on the x - y relationship. y = b0 + b1 x is the

equation of a straight line; b0 is the intercept (or constant) and b1 is

the x coefficient, which represents the slope of the straight line as the

equation describes.

2.1.5 Limitations of the Study:

1. This study basically is secondary data based. Broadly the

statistics and information supplied by the GDCCB through its

Annual Reports were considered for analysis. Qualitative

information for cross checking of the results, however, was not

collected from the executives.

2. Information pertaining to provisioning norms being adopted by

the GDCCB was not sufficiently and properly maintained by the

study bank. Hence the analysis was undertaken with the

available data only.

3. Pertaining to the time period for analysis, data were collected for

two different periods for the national level and the level of

GDCCB, based on the availability of such data.

4. Regression analysis technique is prominently adopted for the

purpose of analysis, though there is a scope for adopting other

advanced models, due to non availability of assistance.

2.2 Review of Literature:

Reviews always reflect the previous facts theoretically which

reinforce the intellect of the scholars and broaden the thinking to

obtain comprehensive and perceptive understanding of the study

which help a new researcher. To a researcher who desires to organize

the study systematically and to expose the existing effects of an issue,

37

related reviews worked out by researchers previously, help the

researcher to find a way to design his study perpetually, giving broadly

comprehensive presentation.

For a convenient presentation, all the reviews discussed in this

chapter, are divided into two categories under two sections. The

Section-I deals with the performance of the Co-operative Credit

Institutions in India and Section-II deals the distinguished reviews on

performance of the DCCBs in India.

SECTION-I 2.2.1 Studies on Performance of Co-operative Credit Institutions in

India: Kulwant Pathania and Sabina Batra (2009) 1 examined the NPA

management in co-operative banks. It was observed that the main

factor responsible for NPAs was willful default i.e. able, but not willing

to pay followed by inadequacy of loans, ineffective management and

supervision, utilization of loans for unproductive purposes, political

support, redemption of post debts, inadequate infrastructure facilities

and field staff for recoveries and poor socio economic conditions. They

have concluded that the poor recovery position of the banks concerned

has adversely affected the image of the bank among other banks and

also in the public.

Jayalakshmi,G and Sumathy,M (2009) 2 in their study on NPAs

Management in Co-operative Banks in India, viewed that a good

management of NPAs requires pro-active actions to be taken by banks

at the time of taking decisions for granting advances by making proper

assessment of risk involved and strict adherence to the prudential

1 Kulwant Pathania and Sabina Batra, “NPA Management in Co-operative Banks: Perception of Bank

Officials”, Indian Co-operative Review, Vol.46, No.3, Jan, 2009, PP.161-175. 2 Jayalakshmi,G and Sumathy,M, “NPA Management in Co-operative Banks in India”, Tamilnadu Journal of

Cooperation, Vol.9, No.12, Oct, 2009, PP.41-44.

38

norms. They concluded that following prudential norms for NPAs

management is compulsory for survival of co-operative banks along

with the confidence of the customer.

Richa Verma Bajaj (2009) 3 in his article entitled “Capital

Adequacy Regime in Scheduled Commercial Banks: A Case Study”,

attempted CAMEL Analysis. In 1998 Narasimham Committee report

made several important recommendations like introduction of

internationally accepted prudential norms relating to income

recognition, asset classification, provisioning and capital adequacy.

According, a framework of the evaluation of current strength of the

system and of the operations and performance of banks has been

provided by reserve bank measuring through “CAMELS”.

Deepak Shah (2008) 4 analyzes the impact of financial sector

reforms in case of co-operative credit institutions in India. He has

observed that credit flows through the co-operatives in rural India and

their sustainability, viability and operational efficiency have become

major focus of attention of various policymakers in the era of financial

sector reforms. He concludes that financial sector reforms have

accorded greater flexibility to the co-operatives to invest in non-target

avenues like shares and debentures of corporate, units of mutual

funds, bonds of public sector undertakings, etc.

Mandira Sarma and Rajiv Kumar (2008) 5 carried out primary

studies on the rural short-term co-operative credit structure. They

observed that the Non-Performing Assets (NPAs) level in the Rural

3 Richa Verma Bajaj, “Capital Adequacy Regime in Scheduled Commercial Banks: A Case of India”,

The Asian Economic Review, Vol.51, No.2, Aug, 2009, PP.353-371. 4 Deepak Shah, “Banking Sector Reforms and Co-operative Credit Institutions in India”, http://mpra.ub.uni-

muenchen.de/7149/1/MPRA-paper_7149.pdf, Feb, 2008, PP.1-19. 5 Mandira Sarma and Rajiv Kumar, “Rural Short-Term Co-operative Credit Structure”, Economic & Political

Weekly, Vol.XLIII, No.9, March 1-7, 2008, PP.13-18.

39

Short-term Co-operative Credit Structure (RSTCCS) was very high

compared to that in the commercial banking system in India. They

concluded that in spite of significant development in India’s financial

sector over the last decade, a large number of poor, particularly large

and marginal communities remained “financially excluded” even

today.

Mayilsamy,R (2007) 6 examines the Non-Performing Assets

(NPAs) in short term co-operative credit structure. He observed that

the banks have to evolve recovery strategies and plan for recovery

management. He concluded that if they fail to improve the recovery,

the huge burden of NPAs is really breaking the backbone of the short

term co-operative credit structure in India.

Vinayagamoorthy, A and Vijay Pithadia (2007) 7 in their work

entitled “Globalization and Co-operative Sector in India”, have

observed that considering the low living standard 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. They have

concluded that the future vision of co-operative movement will have to

be based on efficiency parameters relating to promotion of excellence,

improvement of operational efficiency and strengthening of financial

resource base.

Deepak Shah (2007) 8 in his work entitled, “The Adequacy of

Institutional Credit through Co-operatives in Maharashtra”, observes

that in order to rejuvenate rural credit delivery system through

6 Mayilsamy,R, “Non-Performing Assets in Short Term Co-operative Credit Structure –An Overview”,

Tamilnadu Journal of Co-operation, Vol.7, No.12, Oct, 2007, PP.62-66. 7 Vinayagamoorthy,A and Vijay Pithadia, “Globalization and Co-operative Sector in India”,

http://www.indiamba.com/Faculty_Column/FC585/Fc585.html, May, 2007, PP.1-6. 8 Deepak Shah, “Adequacy of Institutional Credit through Co-operatives in Maharashtra-A Region Wise

Analysis”, The Indian Journal of Agricultural Economics, Vol.62, No.3, July-Sep, 2007, PP.328-339.

40

co-operatives, the major problems facing the system were, high

transaction cost, poor repayment performance, mounting NPAs,

distribution aspects of credit, coverage of Scheduled Castes

(SCs)/Scheduled Tribes (STs) members, etc. He concludes that as far

as the rural credit delivery system is concerned, the focus should be

on strategies that are required for tackling issues such as

sustainability and viability, operational efficiency, recovery

performance, small farmer coverage and balanced sectoral

development.

Mani,K.P (2007) 9 has examined the trend and concerns of

investment in agriculture since the launching of reforms. He observed

that medium term and long-term credit is not getting the required

priority, which is one of the problems of the agricultural credit delivery

mechanism. He concludes that it is high time to revamp the

institutional credit for agriculture particularly the investment credit so

as to meet the global and domestic challenges.

Banishree Das, Nirod Kumar Palai and Kumar Das (2006) 10 in

their study on the problems and prospects of the co-operative

movement in India under the globalization regime. They have observed

that the co-operative system in India has the capacity and potentiality

to neutralize the adverse effects emerging from the process of

globalization. They have concluded that co-operatives have immense

potential to deliver goods and services in areas where both the state

and the private sectors have failed.

9 Mani,K.P, “Institutional Credit for Agriculture-Reflections Since Reforms”, Financing Agriculture,

Vol.39,No.3, May-June, 2007, PP.33-37. 10 Banishree Das, Nirod Kumar Palai and Kumar Das, “Problems and Prospects of the Co-operative Movement

in India Under the Globalization Regime”, http://www.helsiniki.fi/iehc2006/papers2/Das72.pdf, 2006, PP.1-14.

41

Hanumantha Rao,K and Jayasree,K (2006) 11 examined the

banking sector reforms and credit flow to agriculture. They found that

about 12 per cent of the farmers debt was from traders at the all-India

level and in states like Jammu & Kashmir (J&K) it was very high (88%)

due to lack of Scheduled Commercial Banks (SCBs) and co-operative

banking network. They concluded that the debt and investment

surveys had shown that the farmer’s access had gone up considerably

across states as a result of the banking and agricultural sector

reforms.

Avinash V.Raikar (2006) 12 has analyzed the issues, problems

and prospects of co-operative credit institutions (CCIs) in India. He

has found that the major problems of the CCIs are dual control, high

overdues and low resource base. He concludes that the future survival

of these institutions would be determined by its ability to

technologically modernize themselves, innovation of new products and

its reach among the urban and rural population.

Gagan Bihari Sahu and Rajasekhar,D (2005) 13 found that the

credit in both nominal and real terms had grown at a much faster rate

during the period 1981-91 as compared to the reform period of

1992-2000. They concluded that credit flow to agriculture was

negatively associated with investment in government securities,

Credit Subsidy (CS) and proportion of credit provided by the

co-operatives. But credit supply to agriculture was positively

associated with the incidence of rural bank branches.

11 Hanumantha Rao,K and Jayasree,K, “Banking Sector Reforms and Credit Flow to Agriculture”,

IASSI Quarterly, Vol.25, No.2, Oct-Dec, 2006, PP.33-50. 12 Avinash.V Raikar, “Co-operative Credit Institutions in India:An Overview”, Indian Co-operative Review,

Vol.44, No.1, July, 2006, PP.1-20. 13 Gangan Bihari Sahu and Rajasekhar,D, “Banking Sector Reforms and Credit Flow to Indian Agriculture”,

Economic & Political Weekly, Vol.XL, No.53, Dec31 2005- Jan6 2006, PP.5550-5559.

42

Bhole,L.M (2005) 14 in his work entitled “The Role of

Co-operatives in Socio-Economic Development in India”, has observed

that the co-operatives are often riddled with a host of problems such

as concentration, state-dependence, top-to-bottom approach, lack of

spontaneity, commercialization, power politics, corruption, etc. He

concludes that the institutionalization of the principle of cooperation

has perhaps tended to result into the ideology of co-operativism.

Jain,N.K (2005) 15 observes that the new disciplines are imposed

on co-operatives for the first time as they are required to be followed

by all banking institutions. He concludes that the co-operatives will

have to take conscious view of their own functioning to survive in the

present context of competition by ensuring efficiency.

Samwel K.Lopoyetum (2004) 16 examines the problems and

prospects of co-operative banking. He observes that globalization has

unquestionably opened up new challenges, prospects, opportunities

and potentialities in the economic system. He concludes that the

co-operative banking system must respond and strengthen its

infrastructural facilities to compete in the globalized financial system.

Joel Edvinraj,D (2004) 17 examined the challenges before Indian

co-operatives. He has observed that co-operatives have to face

competition from private and multinational sectors on the one side

and on the other side they have to rectify their losses. He has

suggested that governments help and support should be continued

14 Bhole,L.M, “The Role of Co-operatives in Socio-Economic Development in India-A Review”,

IASSI Quarterly, Vol.23, No.3, Jan-Mar, 2005, PP.107-126. 15 Jain, N.K, “Co-operatives at Cross Roads”, Indian Co-operative Review,Vol.42,No.3,Jan,2005,PP.272-279.

16 Samwel.K Lopoyetum, “Problems and Prospects of Co-operative Banking”, Kurukshetra, Vol.52, No.12,

Oct, 2004, PP.25-31. 17 Joel Edwinraj,D, “Challenges Before Indian Co-operatives”, Kisan World, Vol.31, No.10, Oct, 2004,

PP.21-22.

43

until co-operatives can meet challenges and stand and survive by

themselves.

Amrit Patel (2004) 18 examines the achievements and challenges

of co-operative banking. He observes that during the

post-independence era rural co-operatives have indeed contributed

quite significantly in achieving self sufficiency in agriculture and

making it rather export oriented. He has concluded that co-operative

institutions have been facing serious problems constraining their

smooth operations in rural areas. They need to be reorganized,

restructured and revitalized so as to make them effective instruments

of rural banking for rural development.

Ansari,A.A and Amir Ullah Khan (2004) 19 have examined the

agricultural sector reforms and role of co-operatives. They have

observed that the economic reforms, which have been introduced

since 1991, have given new dimensions to precepts and practices of

economic development. They have concluded that the co-operatives

have not been able to take the fullest advantage of the economic

reforms, as they have been bypassed in the reform process.

Ashok Bandyopadhyay (2004) 20 in his work entitled “The

Hundred Years of Co-operative Movement”, has stated that

co-operative movement with its tremendous strength and age-old

weaknesses are in the crossroads now in the present area of

liberalization, privatization and globalization in a market oriented

economy. He has concluded that all stake holders of the movement,

including cooperators, RBI, NABARD, central and state governments,

18 Amrit Patel, “Co-operative Banking-Achievements and Challenges”, Kurukshetra, Vol.52, No.12, Oct,

2004, PP.18-24. 19 Ansari,A.A and Amir Ullah Khan, “Agricultural Sector Reforms and the Role of Co-operatives”,

Indian Co-operative Review, Vol.42, No.2, Oct, 2004, PP.143-169. 20 Ashok Bandyopadhyay, “Hundred Years of Co-operative Movement-Vision and Mission 2020”,

Indian Co-operative Review, Vol.42, No.1, July, 2004, PP.1-25.

44

co-operative organizations, etc. shall have to play their respective roles

to strengthen the co-operative movement.

Ramesha,K (2003) 21 in his work entitled “Co-operative Banking

and Financial Sector Reforms in India”, has found that with regard to

the extension of reforms to co-operative banking segment, it has not

yet cleared as to whether the same would ensure soundness and

stability in the co-operative banking segment. He has concluded that

in the long run, if co-operative character of credit co-operatives is to be

preserved, the prudent practices, system of governance and

supervision and regulation all should emanate from the guiding

principles of co-operatives.

Katar Singh (2003) 22 observes that the co-operatives frantically

looking for new direction for their survival in the changing economic

scenario which would find new strategies for their rejuvenation in

policy. He has concluded that the new policy to be implemented

faithfully and its commitment to action translate into reality.

Subburaj,B, Samwel Kakuko Lopoyetum and Selvam,K.G (2003) 23

have observed that in spite of significant contribution made by the

primary level co-operatives in servicing various sectors of the national

economy, they are the weakest link in its organizational structure.

They have concluded that the growth and development of co-operative

institutions would be reflected in the better socio-economic planning

and its positive changes, better standard of living and community at

large.

21 Ramesha,K, “Co-operative Banking and Financial Sector Reforms in India – Agenda for Future Reserarch”,

http://web.uvic.ca/bcics/pdf/mapconf/ramesha.pdf, May, 2003, PP.1-12. 22 Katar Singh, “The National Policy on Co-operatives- A Critical Appraisal”, Kurukshetra, Vol.51, No.6,

April, 2003, PP.4-9. 23 Subburaj,B, Samwel Kakuko Lopoyetum and Selam,K.G, “An Insight of the Major Operational and Technical

Problems Impinging on Gowth of Primary Agricultural Co-operative Banks(PACBs)- An Application of TWOS

Matrix Analysis to Formulate Strategies”, Indian Co-operative Review, Vol.40, No.3, Jan, 2003, PP.203-215.

45

Agro-Economic Research Centre (2002) 24 examined the role of

co-operative credit in the development of different size groups of

farmers in Gujarat and found that out of total loan amount, over 21

per cent was borrowed from private traders who charged exorbitant

rates of interest might be because they were the ultimate source of

credit and that too at door step. They concluded that increase in

current prices of agricultural goods, there was no parallel increase in

loan limits.

Nainta,R.P (2001) 25 has viewed that the deregulation of interest

rate may affect the financial viability of co-operative banks. He opines

that the government must prepare a new national policy on

co-operatives with the help of academicians and thinkers.

Katar Singh (2000) 26 examined the performance of credit

co-operatives in India. He opines that to enable credit co-operatives to

survive and prosper in the years to come, several organizational and

management reforms are needed. He concludes that the credit

co-operatives must be free to carry on their operations purely on

commercial lines and matters such as fixation of interest rates,

determination of unit costs and scales of finance, modus operandi of

recoveries, hiring and firing employees and so on should be completely

left to them.

24 Agro-Economic Research Centre, “The Role of Co-operative Credit in the Development of Different Size

Groups of Farmers in Gujarat”, Agricultural Situation in India, Vol.LVIII, No.II, Feb, 2002, PP.531-534. 25 Nainta,R.P, “Co-operatives in the New Millennium Challenges & Opportunities”, Kurukshetra, Vol.49,

No.10, July, 2001, PP.8-11. 26 Katar Singh, “Reforms in Credit Co-opeatives”, Kurukshetra, Vol.49, No.1, Oct, 2000, PP.16-22.

46

Verma,S.K (1999) 27 examined the rural development through

co-operatives. He has observed that the co-operative institutions have

been tremendously contributing in accelerating the economic

development of rural and urban areas of the country specially the

economically weak people. He has concluded that it is the best

instrument to promote social justice and prevention of exploitation at

the gross root level.

Ramachandra Reddy (1998) 28 examined the management of

overdues of co-operative sector in Andhra Pradesh. He observes that

Andhra Pradesh government has proposed a new co-operative

structure called the “single window system”. Under this new system

the farmers get the credit facilities and other non-credit services

through a single window. He concludes that the main reason for this

is the mounting overdues which are clogging the process of credit

recycling.

Satyasai,K.J.S and Viswanathan,K.U (1998) 29 examined the

impact of integration in the light of the experience of the state of

Andhra Pradesh and observed the ratio between short-term and

long-term loans which averaged at 1.3 per cent during the

pre-integration period and increased to 1.77 per cent during the

post-integration period. They have concluded that co-operative system

in the country needed to be restructuring in view of the changing

demand pattern for rural credit, higher expectations from the

co-operatives which are expected to provide quick and quality service

and to enable them to be viable and vibrant.

27 Verma,S.K, “Rural Development through Co-operatives”, Kurukshetra, Vol.47, No.8, May, 1999,

PP.29-32 & 38. 28 Ramachandra Reddy,B, “Management of Overdues of Co-operative Sector in Andhra Pradesh”,

The Indian Journal of Commerce, Vol.51, No.4, Oct-Dec, 1998. 29 Satyasai,K.J.S and Viswanathan, K.U, “Restructuring the Co-operative Credit System through Integraion of

Short Term and Long Term Structures”, Indian Journal of Agricultural Economics, Vol.53, No.3, July-Sep,

1998, PP.478-487.

47

Joseph,M and Tamilmani,B (1998) 30 in their work entitled “The

State and Co-operation”, have stated that the retrospective scenario of

co-operative movement has proved that without the active and able

support of government, an orderly growth and development cannot be

expected. They have concluded that it will take some more time for the

co-operative movement in India to function as an autonomous

movement.

Kumari Pushpa (1997)31 examines the retrospective and

prospective analysis into the co-operative credit institutions since

independence. She observes that co-operative credit institutions have

achieved a lot quantitatively over the period of about forty five years

since independence. She concluded that the demand of time and

circumstances also desire that these co-operative credit institutions

may stand by the race of change.

SECTION II

2.2.2 Studies on Performance of District Central Co-operative

Banks in India:

Mayil Murugan,A (2009) 32 made an empirical analysis on capital

adequacy ratio in central co-operative banks. He observed that capital

adequacy has reduced the likelihood of failure and increases liquidity

of the bank. He has concluded that fulfilling the capital adequacy

norm is not at all the problem for the bank for ever.

30 Joseph,M and Tamilmani,B, “The State of Cooperation: A Retrospective Scenario”,

Indian Co-operative Review, Vol.XXXV, No.3, Jan,1998, PP.211-216. 31 Kumari Pushpa, “Co-operative Credit Institutions Since Independence: Retrospect and Prospect”,

Indian Co-operative Review, Vol.XXXV, No.2, Oct, 1997, PP.151-162. 32 Mayil Murugan,A, “An Empirial Analysis of Capital Adequacy Ratio in Central Co-operative Banks”,

Tamilnadu Journal of Cooperation, Vol.9, No.10, Aug, 2009, PP.57-62.

48

Mayilsamy,R and Revathi Bala,M (2009) 33 in their work entitled

“Management of Non Performing Assets (NPAs) in District Central

Co-operative Banks (DCCBs) in India”, felt that the Narasimham

Committee Report-1998, rightly pointed out that ‘NPAs constitute a

real economic cause to the nation in that they reflected the application

of scarce capital and credit funds to unproductive uses. They have

concluded that high NPAs in the banks have devastating efforts not

only on the banks but also on the economy as a whole. They have

suggested that the formation of the good policy will be no use unless it

is implemented in true spirit.

Mohan,S (2008) 34 has examined the factors determining the

profitability of central co-operative bank. He observes that profitability

ratios invite the serious attention of the management to put an

integrated effort to correct the financial performance. He suggests that

the bank should expand its banking operations in such a way that the

non-interest income increases substantially in the near future.

Darling Selvi,V (2008) 35 examines the lending performance of

Kanyakumari District Central Co-operative Bank (KDCCB). He

observed that the overall growth rate of loan disbursement on short

term credit shows a positive growth of 25%. The credit facilities

extended by KDCCB are high for services, medium for industries and

low for agriculture. He concludes that the overall performance of the

KDCCB is good. If the benefits are properly toiled and utilized there

will be a bright future for both to the community and to the nation.

33 Mayilsamy, R and Revathi Bala, M, “Management of Non Performing Assets in District Central Co-operative

Banks in India”, Indian Co-operative Review, Vol.46, No.3, Jan, 2009, PP.198-204. 34 Mohan,S, “Factors Determining the Profitability of Central Co-operative Bank”, Tamilnadu Journal of

Cooperation, Vol.8, No.4, Feb, 2008, PP.63-69. 35 Darling Selvi,V, “Lending Performance of Kanyakumari District Central Co-operatives”,

Indian Co-operative Review, Vol.45, No.3, Jan, 2008, PP.176-187.

49

Mayilsamy,R (2008) 36 examined the loan operations in district

central co-operative banks in India. He has observed that any financial

institutions’ including DCCBs carries on business out of funds, which

are collected as deposits or borrowings from higher financial agencies.

He concluded that the efficiency of banking institutions as a financial

intermediary depends to a great extent on timely recovery of loans.

Jadhav,K.L, Yadav,D.B and Shendage,P.N (2007) 37 examined

credit disbursement of District Central Co-operative Banks (DCCBs) in

Maharashtra. The gross cropped area, average rainfall and deposits

with the DCCBs were observed to be the most important factors

influencing the regional inequality in the disbursement of per hectare

short term credit in all the regions as well as the state as a whole.

They have suggested that due to importance given to borrower

members, which will lead to increase in loan disbursement.

Lakshmanan,C and Dharmendran,A (2007) 38 studied the impact

of Non Performing Assets (NPAs) on performance variables in Chennai

Central Co-operative Bank. They examined performance variables

namely, net profit, investment, legal expenses and spread. They

observed that the results of NPAs on all the above performance

variables were negative and insignificant at 5 percent level in all the

equation. They concluded that the effective management of NPAs is

essential to strengthen the financial position of the bank.

36 Mayilsamy,R, “Loan Operations in District Central Co-operative Banks in India”, Tamilnadu Journal of

Cooperation, Vol.8, No.3, Jan, 2008, PP.61-65. 37 Jadhav,K.L, Yadav,D.B and Shendage,P.N, “Rural Finance and Inequality in Credit Flow through DCCBs in

Maharashtra”, Indian Journal of Agricultural Economics, Vol.62, No.3, July-Sep, 2007, P.357. 38 Lakshmanan,C and Dharmendran,A, “Impact of NPAs on the Performance variables in Chennai Central

Co-operative Bank”, Indian Co-operative Review, Vol.44, No.4, April, 2007, PP.291-297.

50

Namasivayam,N (2006) 39 has observed the working performance

of the Madurai District Central Co-operative Bank Ltd., and states

that it has been impressive in terms of deposit mobilization and credit

deployment. He has concluded that the success of the co-operative

bank depends on effective manpower planning and management.

Fulbag Singh and Balwinder Singh (2006) 40 examined the funds

management in the Central Co-operative Banks in Punjab. They

observed that higher proportion of own funds in the working funds of

the bank and the concerned shown by the bank in the timely recovery

of loans resulted in an increased financial margin of the central

co-operative banks in Punjab. They concluded that less dependence

on the new outside resources helped these banks in increasing their

financial margin.

Ramachandran,T and Seilan,A (2006) 41 examined the role of

Kanyakumari District Central Co-operative Bank (KDCCB) in

promoting Self-Help Groups(SHGs). They have observed that the

DCCB makes PACSs to play the role of NGOs in the promotion and

financing SHGs and PACSs have also realized the advantages in SHGs

promotion and linkage. They have concluded that the KDCCB is

playing an important and pivotal role in social transformation, welfare

activities and has served the cause of woman empowerment and

socio-economic betterment of the poor.

39 Namasivayam,N, “A Study on Employees Opinion on the Performance of MDCC Bank.Ltd., Madurai”,

Indian Co-operative Review, Vol.44, No.2, Oct, 2006, PP.87-92. 40 Fulbag Singh and Balwinder Singh, “Funds Management in the Central Co-operative Banks of Punjab-An

Analysis of Financial Margin”, The ICFAI Journal of Bank Management, Vol.V, No.3, Aug, 2006, PP.74-80. 41 Ramachandran,T and Seilan,A, “Role of Kanyakumari District Central Co-operative Bank in Promoting Self-

Help Groups”, Indian Co-operative Review, Vol.44, No.1, July, 2006, PP.36-40.

51

Yadav,B.S and Kaynat Tabassum (2006) 42 examined deposit

mobilization by central co-operative banks in Haryana state. The

sources of total assets or working capital of central co-operative banks

consist of the paid-up share capital, reserves and other funds,

deposits from co-operative societies, individuals and others,

borrowings from State Co-operative Bank (SCB) and Reserve Bank of

India (RBI)/NABARD through State Co-operative Bank and grants

from government. But of all this total assets, it was found that the

total deposit mobilization in all the central co-operative banks was not

much satisfactory during the period under study because the deposits

registered a less increasing trend in comparison to owned funds and

total assets.

Fulbag Singh and Balwinder Singh (2006) 43 examined the

profitability of the central co-operative banks in Punjab. They have

observed that the implementation of prudential norms from 1996-97

on wards, have helped to generate an awareness for adverse effects of

overdues/non performing assets in these banks. They have concluded

that the co-operative banks in Punjab have responded to the ongoing

financial reforms in a positive manner.

Sudipta Ghosh (2006) 44 observed that DCCBs were not

successful in restricting the level of Non Performing Assets (NPAs) and

the alarming factor was that the quantum of doubtful assets of the

banks increased continuously during the study period. She has

suggested that banks have to manage their NPAs more efficiently and

42 Yadav,B.S and Kaynat Tabassum, “Deposit Mobilization by Central Co-operative Banks in Haryana State”,

Indian Co-operative Review, Vol.44, No.1, July, 2006, PP.80-86. 43 Fulbag Singh and Balwinder Singh, “Profitability of the Central Co-operative Banks in Punjab – A

Decomposition Analysis”, Indian Co-operative Review, Vol.44, No.I, July, 2006, PP.41-55. 44 Sudipta Ghosh, “NPA Management in District Central Co-operative Banks-A Comparative Study of MCCBL

and TGCCBL”, The Management Account, Vol.41, No.2, Feb, 2006, PP.154-158.

52

effectively so that they can change their character from

non performing assets to performing assets.

Thanikodi,R (2005) 45 carried out a study on Central

Co-operative Banks in India: Problems and Remedies. He observes

that the CCBs act as a depository and balancing centres between

surplus and deficit societies. He concludes that to have strong CCB,

the internal and external defects of the CCBs should be removed with

a collective effort from the government, management, employees and

public.

Jadhav,K.L and Kasar.D.V (2005) 46 examined the performance

of District Central Co-operative Banks in Maharashtra. They have

found that there is need to pay attention to the borrower members,

which will lead to increase in the share capital and loan disbursement

of agricultural purposes. They have suggested that efforts should be

made to enhance deposit mobilization and investment of funds in

government securities and fixed deposits for transparency in financial

management.

Oliver Bright,A (2005) 47 has analyzed the role of Kanyakumari

District Central Co-operative Bank (KDCCB) in Tsunami Credit. He

has observed that DCCBs grant loans and advances to the rural

dwellers both for agricultural and non agricultural purposes. But the

infrastructure aids are totally neglected by them. He has suggested

that the DCCBs must identify the investment portfolios for credit

plans.

45 Thanikodi,R, “Central Co-operative Banks in India: Problems and Remedies”, Coop.Banking, Vol.42, No.12,

June, 2005, PP.521-524. 46 Jadhav,K.L and Kasar, D.V, “Performance of District Central Co-operative Banks in Maharashtra: A Model

of Quantitative Analysis”, Indian Journal of Agricultural Economics, Vol.60, No.3, July-Sep, 2005, P.411. 47 Oliver Bright,A, “Role of Kanyakumari District Central Co-operative Bank(KDCCB) in Tsunami Credit”,

Kisan World, Vol.32, No.9, Sep, 2005, PP.33-34.

53

Hulas Pathak (2005) 48 in his work entitled that “Agricultural

Credit Financing in District Central Co-operative Bank (DCCB),

Raipur, Chattisgarh”, observed that the DCCB (Raipur) played an

important role in financing agricultural credit needs of the farmers of

Chattisgarh, in particular Raipur district by way of short term,

medium-term and long-term loans for a variety of credit purposes

including crop husbandry, purchase of milch and draught animals,

agri-inputs, farm machinery and equipment, wells and tube wells,

housing and consumption expenditure. He concluded that efforts

should also be made to step up deposit mobilization especially in the

rural sector by introducing innovative schemes and incentives based

on specific credit needs of the people.

Vaikunthe,L.D (2005) 49 in his work entitled that “Institutional

Credit to Agriculture in Shimoga District Central Co-operative Bank

(SDCCB), Karnataka”, takes four talukas namely, Shimoga, Sagar,

Thirthahalli and Hosanagar in Shimoga district for observation. He

has found that the average utilization of crop loan is higher in the

non-irrigated areas in Sagar, Hosanagar and Thirthahalli talukas

compared to the utilization of loan in the other categories of

cultivation for farm operations. He finds that the incremental income

of the crop loan beneficiaries in the four talukas has been positive in

the post-investment period as compared to pre-investment period.

48 Hulas Pathak, “Agricultural Credit Financing: A Case Study of District Co-operative Central Bank, Raipur,

Chattisgarh”, Indian Journal of Agricultural Economics, Vol.60, No.3, July-Sep, 2005, P.389. 49 Vaikunthe,L.D, “Institutional Credit to Agriculture: A Case Study of District Central Co-operative Bank in

Shimoga District in Karnataka”, Indian Journal of Agricultural Economics, Vol.60, No.3, July-Sep, 2005,

P.405.

54

Raja,S (2005) 50 carried out a study on Madurai District Central

Co-operative Bank (MDCC Bank) Ltd. He viewed as far as banks are

concerned; there are several factors that determine the operating

efficiency and profitability. They are: Level of deposits, level of

advances, number of branches operating, level of capital and reserves,

level of customer service and the like. He concluded that the burden

rate should be reduced and spread rate be increased so that

profitability can be at higher rate.

Ramesh,D (2004) 51 has analyzed the economic viability of DCCB

in Mahabubnagar district of Andhra Pradesh. He has come to a

conclusion that the mounting overdues can jeopardize the country’s

agricultural credit structure designed to accelerate agricultural

development. He has further stated that co-operatives can’t survive in

the present commercial and economic war front, if it fails to make full

use of mass media.

Rais Ahmad and Nasrullah Bhat (2004) 52 examined the recovery

performance of District Co-operative Banks in Jammu and Kashmir.

They found that during all the years under study i.e. from 1994-95 to

2000-01; overdues were greater than the owned funds of central

co-operative banks. They have observed that the main reason for the

accumulation of overdues is the defective lending policies and

procedures, unrealistic scales of finance and untimely due date for

repayment of loans, poor supervision over societies, absence of a

proper climate for recovery including excessive and growing patronage

of defaulters by the management authorities.

50 Raja,S, “Performance Evaluation of MDCC Bank Ltd-An Applicaion of Structural and Growth Analysis”,

Indian Co-operative Review, Vol.42, No.3, Jan, 2005, PP.237-244. 51 Ramesh,D , “An Analysis of Economic Viability of DCCB in Mahabubnagar District of Andhra Pradesh”,

The Indian Journal of Commerce, Vol.57, No.3, July-Sep, 2004, PP.120-121. 52 Rais Ahmad and Nasurllah Bhat, “Recovery Performance of District Co-operative Banks in J&K State”,

Monthly Public Opinion Survey, Vol.XLIX, No.11, Aug, 2004, PP.10-14.

55

Dinabandu Mahal (2002) 53 highlighted the impact of

Development Action Plan (DAP) study of the Pune District Central

Co-operative Bank (PDCCB). He observed that DAPs impact on the

growth rate of share capital, reserve fund and the owned fund of the

bank were found to be more in all the years during the post DAP

period than the pre-DAP period. He has found that the affiliated

societies are not well aware of the DAP and so proper efforts have to be

made in this direction to make the DAP a more successful one.

Adinew Abate, Keshava Reddy,T.R, Mahesh,N and Lalit

Achoth (2002) 54 examined the magnitude and growth of institutional

credit flow to agricultural sector in Karnataka. They observed that

recovery performance of agricultural advances especially in the

post-reform period had significantly improved in commercial banks,

RRBs and DCCBs lending. Only the recovery performance of PCARDBs

continued to decline. They suggested that the government and lending

institutions should take strict measures on willful and deliberate

defaulters and then only the problem could be solved.

Namboodiri,N.V (2001) 55 examined the economies of scale and

scope of District Central Co-operative Banks(DCCBs). He has observed

that DCCBs at present are not trap in scale of diseconomy because of

relatively cheap funds made available by the national, apex and

commercial banks. He has concluded that the concentration on loan

portfolio and tapping the other sources of borrowings are two

strategies open to DCCBs to reduce their costs.

53 Dinabandu Mahal, “Impact of Development Action Plan”, Indian Co-operative Review, Vol.40, No.I, July,

2002, PP.42-51. 54 Adinew Abate, Keshava Reddy,T.R, Mahesh,N and Lalith Achoth, “Magnitude and Growth of Institutional

Credit Flow to Agriculture in Karnataka”, Indian Co-operative Review, Vol.XXXIX, No.3, Jan, 2002,

PP.194-212. 55 Namboodiri,N.V, “Economies of Scale and Scope of District Central Co-operative Banks”, Indian Journal of

Agricultural Economics, Vol.56, No.2, April-June, 2001, PP.198-210.

56

Ravi Varma,S and Bhagavan Reddy,B (1997) 56 examined the

performance of Single Window Co-operative Credit Delivery

System(SWCCDS) in Andhra Pradesh. They have observed that the

inception of SWCCDS, the efficiency of DCCBs (District Central

Co-operative Banks) in relation to share capital, reserve fund,

deposits, borrowings and outstanding advances has become

noteworthy. They have found that there is remarkable improvement in

performance of PACSs (Primary Agricultural Credit Societies) and

DCCBs after the inception of SWCCDS as compared to earlier one.

Puyalvannan,P (1997) 57 examined the cost of management,

productivity and profitability of Central Co-operative Banks (CCBs) in

Tamilnadu. He has observed that all CCBs are functioning effectively

by keeping the cost of management lower. He has concluded that the

cost of management per employee at all CCBs in Tamilnadu shows

progressively increasing trend.

Sambari Kokuriah (1995) 58 in his work entitled “Co-operative

banking for rural development in Karimnagar District Central

Co-operative Bank (KDCCB), Andhra Pradesh”, had observed that the

economic position of the respondents improved after availing loan from

co-operative bank. He found that the majority of respondents revealed

that, they had to make unauthorized payments for getting the loans

sanctioned.

56 Ravi Varma,S and Bhagavan Reddy,B, “An Evaluation of Single Window Co-operative Credit Delivery

System in Andhra Pradesh”, Indian Co-operative Review, Vol.XXXV, No.I, July, 1997, PP.1-19. 57 Puyalvannan,P, “A Study on Cost of Management, Productivity and Profitability of Central Co-operative

Banks in Tamilnadu”, Indian Co-operative Review, Vol.XXXIV, No.3, Jan, 1997, PP.235-240. 58 Sambari Kokuriah, “Co-operative Banking for Rural Development- A Case Study of Karimnagar District

Central Co-operative Bank”, Finance India, Vol.IX, No.1, Mar, 1995, PP.127-131.

57

Suhag.K.S, Goyal.S.K and Groer,R.K (1998) 59 observed the

performance of co-operative credit institutions in Haryana. They

observed that amongst, three-tier co-operative credit institutions,

Central Co-operative Banks (CCBs) had made the greatest

contributions in deposit mobilization but at gross root level the

societies had yet to make dent. They have concluded that for designing

the appropriate financial policies and/or revitalizing the existing

organizational structure, it is extremely essential to assess the past

performance of co-operative credit structure in the state.

Gayithri,K (1993) 60 studied the credit delivery in rural

Karnataka. She has found that the societies which are not faring well

in recovery and where there are charges of corruption against the

secretaries do not get any refinance benefits from the District Central

Co-operative Bank (DCCB). She has concluded that refinance from

NABARD for agriculture schemes is mainly based on the recovery

performance of the banks.

2.3 Conclusion:

The progress, performance and the problems of the co-operative

banks were reviewed by various scholars and researchers in various

states at various periods of time. However, an apparent research gap

exists as far as the appraisal of the financial position and performance

of the co-operative banks is concerned. The present study thus

undertakes to appraise the financial performance of the DCCB of

Guntur (A.P.), as a case study.

59 Suhag,K.S, Goyal.S.K and Groer,R.K, “The Performance of Co-operative Credit Institutions in Haryana”,

Indian Co-operative Review, Vol.XXXV, No.4, April, 1998. 60 Gayithri,K, “Credit Delivery in Rural Karnataka: A Case Study of Chikmagalur District”, Journal of Rural

Development, Vol.12, No.3, May, 1993, PP.301-317.