Appraisal of financial performance of urban co-operative banks of West Bengal

Urban co-operative banks are one of the vital segments of the banking industry of the country. They essentially cater to the credit needs of persons of small means. These banks take active part in local communities and local development with a stronger commitment and social responsibilities. Urban co-operative banks are the best vehicles for taking banking to the doorsteps of common men, unbanked people in urban and semi-urban areas in particular. There were 1645 urban co-operative banks in the country at the end of March 31, 2011 with a total deposits and advances of Rs.212031 crore and Rs.136341 crore respectively. Statistical distribution of UCBs shows that around 80% of UCBs are concentrated in 5 states viz. Maharastra, Gujrat, Karnataka, Andhra Pradesh and Tamil Nadu. On the other hand, 46 UCBs are found functioning in West Bengal at the end of March, 2011 with a deposit of Rs.2161 crore and loans and advances of Rs. 1611 crore

Though some UCBs have shown credible performance in recent years, a large number of banks have shown discernible signs of weakness. The operational efficiency is unsatisfactory and characterised by low profitability, ever growing non-performing assets (NPA) and relatively low capital base. Their situation gradually worsened due to heavy overdue and non-collection of loans advanced by them. The large-scale sickness in the UCBs has shaken the public confidence in co-operative banks. In this context, the present research work makes an attempt to examine the working and financial performance of the urban co-operative banks of West Bengal. The objective of the study is to identify and analyse the trend, progress and problems of this sector and to throw light on the problems of swelling NPAs and to offer some meaningful suggestions for improving the efficiency and effectiveness in the operation of these banks.

The study is based on secondary data, which have been colleted from the published annual report of the banks for the period from 2001–02 to 2010–11. This data have been analysed with the help of the statistical tools like ratios, percentages, averages, Correlation Coefficient(r), Multiple Correlation and Regression Analysis, Coefficient of Determination (R²), Linear Regression Equations, Test of Significance (such as ‘t’ test, Chi-square test Sandler's ‘A’ test) etc.