Co-operative banking and rural development in Punjab – An examination of interdependencies through canonical correlation approach

This paper examines the extent of interdependencies between some indicators of co-operative banking and rural development in Punjab, so as to make an assessment of the role being played by the banks in rural development of the state. For this purpose, unbalanced panel information (for 24 years from 1986–87 to 2009–10) compiled on 9 indicators of Co-operative Banks and 26 indicators of Rural Development in respect of 18 districts of the state was used. The indicators were suitably transformed so as to ensure comparability. Interdependencies among the two groups of indicators (with optimum dimensionality) were gauged through step-down canonical correlation approach. Through the computation of Wilks’λ, as many as four of the canonical correlates were observed to be statistically significant. As per redundancy measure, there was a fairly high degree of overlap between the two groups of indicators; given the information on the indicators of Co-operative Banking, nearly 45 per cent of the information on the conventional indicators of Rural Development was redundant. This might be taken to imply that the indicators of Co-operative Banking were capable of providing fairly useful input in revealing the picture regarding status of rural development among the districts of Punjab state.