Financial Performance of Co-operative Banks: An Efficiency Analysis

Banking sector is considered as one of the fastest growing sectors in India. Therefore, a sound financial health of a bank is the guarantee not only to its depositors but is equally significant for the shareholders, employees and whole economy of a country as well. Uniform Financial Institution Rating system, commonly referred to the acronym CAMEL rating, was adopted by the Federal Financial Institution Examination Council on November 13th 1979, and then adopted by the National Credit Union Administration in October 1987 which is also adopted in India by RBI in 1996. The CAMEL model measures the performance of banks from each of the important parameter like Capital Adequacy, Assets Quality, Management Efficiency, Earning Quality and Liquidity. This method has been resorted from time to time, to measure the financial position of each bank and manage it efficiently and effectively. In this study, an attempt has been made to evaluate the financial performance of the two Urban Co-operative Banks (Kannur Co-operative Urban Bank Ltd. (KCUB) and Payyannur Co-operative Town bank Ltd. (PCTB) operating in Kannur District by employing CAMEL rating technique. The study found that the position of the Kannur Co-operative Urban bank is sound and satisfactory only with respect to spread to total income and non-interest income to total income while with respect to CRAR and liquid assets to demand deposits, Payyannur Co-operative Town bank out performed Kannur Co-operative Urban Bank. With respect to all the other parameters concerned there is no significant difference between the two banks.