ISSN 2348 - 8891

A COMPARITIVE STUDY OF COOPERATIVE BANKS AND

NATIONALISED BANKS ON VARIOUS SERVICE PARAMETRES

Dr.Ashish Pathak * Prof. Manish Soni* * Prof.Sonal Bhati***

ABSTRACT

With the advent of Cooperative movement in India, there has been a sharp rise in No. of

cooperative banks in India. Although small in their size & CASA deposits, cooperative banks

have played an important role in spreading banking services to cities & towns across India. The

present study is an attempt to compare cooperative banks with nationalized banks on five

parameters, viz ease of deposit, ease of withdrawal, customer relations, reliability of bank, and

ease of location. A sample size of 100 customers is chosen as respondents. Respondents included

those who have accounts both in a nationalized bank and a cooperative bank. It has been found

that cooperative banks fared better in ease of deposit & customer relations. On the other hand

nationalized banks fared better in ease of withdrawal & reliability. While on location advantage,

no significant difference has been found.

Keyword – RBI, Cooperative bank, T-test, Random Sampling, level of Significance, Degree of
Freedom, Service Parameter

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INTRODUCTION

According to the International Co-operative Alliance Statement of co-operative identity, a co-

operative 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. Co-operatives are based on the values of self-help, self-responsibility, democracy, equality,
equity and solidarity. In the tradition of their founders, co-operative members believe in the ethical
values of honesty, openness, social responsibility and caring for others. Co-operative banks share
common features:

 Customer’s owned entities: in a co-operative bank, the needs of the customers meet the needs
of the owners, as co-operative bank members are both. As a consequence, the first aim of a co-
operative bank is not to maximize profit but to provide the best possible products and services to
its members.

 Democratic member control: co-operative banks are owned and controlled by their members,
who democratically elect the board of directors. Members usually have equal voting rights,
according to the co-operative principle of”one person, one vote”.

 Profit allocation: in a co-operative bank, a significant part of the yearly profit, benefits or surplus
is usually allocated to constitute reserves. A part of this profit can also be distributed to the co-
operative members, with legal or statutory limitations in most cases.

BENEFITS OF COOPERATIVE BANKS

Co-operative banks are deeply rooted inside local areas and communities. They are involved in local
development and contribute to the sustainable development of their communities, as their members and
management board usually belong to the communities in which they exercise their activities. By increasing
banking access in areas or markets where other banks are less present - SMEs, farmers in rural areas,
middle or low income households in urban areas - co-operative banks reduce banking exclusion and
foster the economic ability of millions of people. They play an influential role on the economic growth in
the countries in which they work in and increase the efficiency of the international financial system. Their
specific form of enterprise, relying on the above-mentioned principles of organization, has proven successful
both in developed and developing countries. (Source: ICBA, International cooperative bank association)

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COOPERATIVE BANKS IN ASIA

In Asia-Pacific, 22 cooperative banking groups or networks have been listed, 13 of which are members
of the International Cooperative Banking Association. Efforts are being made for exampling membership
from following countries: Bangladesh, Nepal, Singapore, Japan, Republic of Korea, Australia and
New Zealand. (Source: ICBA, International cooperative bank association)

URBAN COOPERATIVE BANKS

The term Urban Co-operative Banks (UCBs), though not formally defined, refers to primary cooperative
banks located in urban and semi-urban areas. These banks, till 1996, were allowed to lend money only
for non-agricultural purposes. This distinction does not hold today. These banks were traditionally
centered on communities, localities work place groups. They essentially lent to small borrowers and
businesses. Today, their scope of operations has widened considerably. (Source: RBI.org.in)

HISTORY OF URBAN COOPERATIVE BANKS

The enactment of Cooperative Credit Societies Act, 1904, however, gave the real impetus to the
movement. The first urban cooperative credit society was registered in Canjeevaram (Kanjivaram) in
the erstwhile Madras province in October, 1904. Amongst the prominent credit societies were the
Pioneer Urban in Bombay (November 11, 1905), the No.1 Military Accounts Mutual Help Co-operative
Credit Society in Poona (January 9, 1906). Cosmos in Poona (January 18, 1906), Gokak Urban
(February 15, 1906) and Belgaum Pioneer (February 23, 1906) in the Belgaum district, the Kanakavli-
Math Co-operative Credit Society and the Varavade Weavers’ Urban Credit Society (March 13,
1906) in the South Ratnagiri (now Sindhudurg) district. The most prominent amongst the early credit
societies was the Bombay Urban Co-operative Credit Society, sponsored by Vithaldas Thackersey
and Lallubhai Samaldas established on January 23, 1906. (Source: RBI.org.in)

The Cooperative Credit Societies Act, 1904 was amended in 1912, with a view to broad basing it to
enable organization of non-credit societies. The Maclagan Committee of 1915 was appointed to review
their performance and suggest measures for strengthening them. The committee observed that such
institutions were eminently suited to cater to the needs of the lower and middle income strata of society
and would inculcate the principles of banking amongst the middle classes. The committee also felt that
the urban cooperative credit movement was more viable than agricultural credit societies. The
recommendations of the Committee went a long way in establishing the urban cooperative credit
movement in its own right.

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Over the years, primary (urban) cooperative banks have registered a significant growth in number, size
and volume of business handled. As on 31st March, 2003 there were 2,104 UCBs of which 56 were
scheduled banks. About 79 percent of these are located in five states, - Andhra Pradesh, Gujarat,
Karnataka, Maharashtra and Tamil Nadu. Recently the problems faced by a few large UCBs have
highlighted some of the difficulties these banks face and policy endeavors are geared to consolidating
and strengthening this sector and improving governance. (Source: RBI.org.in)

REVIEW OF LITERATURE

1) Madhavdas Committee (1979) report evaluated the role played by urban co-operative banks
in greater details and drew a roadmap for their future role recommending support from RBI and
Government in the establishment of such banks in backward areas and prescribing viability
standards.

2) Madhava Rao Committee (1999) report focused on consolidation, control of sickness, better
professional standards in urban co-operative banks and sought to align the urban banking
movement with commercial banks.

3) 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.

4) Jyoti Gupta, Suman Jain (2002) found that Cooperative banks operate as a balancing centre.
The loan procedure followed by cooperative banks is very simple, Quality of services provided
by the staff is satisfactory because bank is catering to a small segment only and the customers are
properly dealt with and Customers are satisfied with the mode of repayment of installments.

5) Jyoti Gupta, Suman Jain (2002) also found that the branch network of cooperatives, though
widespread across the country, continued to be concentrated in certain regions. Moreover, the
network of cooperatives was not broad based in the north-eastern region of the country. This
suggests that efforts need to be taken to improve banking penetration in the north-eastern part of
the country along with improving the financial health of the ground level cooperative institutions.

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6) Jyoti Gupta, Suman Jain (2002) suggested some measures for development of cooperative
banks. The banks should adopt the modern methods of banking like internet banking, credit
cards, ATM, etc. The banks should plan to introduce new schemes for attracting new customers
and satisfying the present ones.

7) 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.

8) 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.

9) 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.

10) 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.

RESEARCH METHODOLOGY

In order to identify the main characteristics on the basis of which performance of cooperative banks
can be compared with that of public banks, a brainstorming session as been organized with experts and
6 characteristics has been finalized. After which 15 respondents were chosen who have accounts in
both cooperative & nationalized bank. Using questionnaire method, these 15 respondents have been
asked to score both the banks on the above 5 parameters on a scale of 1 to

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COLLECTION OF DATA

1). Primary data has been collected by taking an interview of 15 respondents who had current account
in both cooperative & public sector banks. Respondents were asked to rate both the banks on 6
parameters on a scale of 1 to 5

PERFORMAN
SCORE
CE
5 Excellent
4 Very good
3 Good
2 Fair
1 Poor

HYPOTHESIS FORMATION

A total of 6 pairs of hypothesis were formed to compare the performance of cooperative banks with
that of nationalized banks. These hypotheses are given below.

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NULL ALTERNATE
HYPOTHESI HYPOTHESI
SL NO. FACTOR S S

(H0) (H 1)

H 01:
Depositing
money is easier
H01: Both the
in a
Ease of deposit banks perform
1 cooperative
of money same in ease of
bank as
deposits
compare to a
nationalized
bank.

H 12:
H02: Both the
Cooperative
banks perform
Maintaining banks maintain
same in
2 customer better customer
maintaining
relations relations than
Customer
nationalized
relations
banks

H13 : Obtaining
loan from a
H03: Both the cooperative
Hassle free banks perform bank is more
3
loan process same in their hassle free as
loan process compare to a
nationalized
bank

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H 14:
H04: Both the
Nationalized
banks perform
banks are more
4 Reliability same in
reliable than
reliability
cooperative
factor
banks

H 15:
H05: Both the Withdrawing
banks perform money is easier
Ease of
same in the in a
5 withdrawal of
ease of nationalized
money
withdrawal of bank than a
money cooperative
bank.

H16: Interbank
H06: Both the transactions are
banks perform easier in a
Inter bank
6 same in nationalized
transactions.
interbank bank than a
transactions cooperative
bank

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RESULTS & CONCLUSION

SL. NO. Value of t Result Conclusion

H01 rejected Depositing money is easier in a cooperative
1 2.6
H11 accepted bank as compare to a nationalized bank.
H02 rejected
Cooperative banks maintain better customer
2 2.58
H12 accepted relations than nationalized banks

H03 rejected Obtaining loan from a cooperative bank is

3 2.8 more hassle free as compare to a nationalized
H13 accepted
bank
H04 rejected
Nationalized banks are more reliable than
4 2.62
H14 accepted cooperative banks

H05 rejected
Withdrawing money is easier in a nationalized
5 2.56
H15 accepted bank than a cooperative bank.

H06 rejected
Interbank transactions are easier in a
6 2.84
H16 accepted nationalized bank than a cooperative bank

Note: The value of t has been compared with standard value t* = 2.5 (at degree of freedom 28 , at 5
% level of significance)

From the above table we can conclude that out of 6 parameters cooperative banks fare better than
nationalized banks in 3 parameters viz- Ease of deposit of money, Customer relations & Hassle free
loan process. On the other hands nationalized banks fare better than cooperative banks in 3 parameters
viz Reliability, Ease of withdrawal of money & Interbank transactions

REFERENCES

1. Bhaskaran R and Praful Josh P (2000), “Non Performing Assets (NPAs) in Co-operative Rural
Financial System: A major challenge to rural development”, BIRD’s Eye View Dec.2000.

2. Chander Ramesh and Chandel Jai Kishan (2010), “Financial Viability of an Apex Cooperative
Credit Institution- A Case Study of the HARCO Bank”, Asia-Pacific Business Review Vol. VI,
No.2, April-June 2010, pp 61-70.

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3. Jyoti Gupta, Suman Jain (2002), “ A study on Cooperative Banks in India with special reference
to Lending Practices” International Journal of Scientific and Research Publications, Volume 2,
Issue 10, October 2012 1 ISSN 2250-3153.

4. Uttam Dutta and Basak, Amit (2008), “Appraisal of financial performance of urban cooperative
banks- a case study.” The Management Accountant, case study, March 2008, 170-174.

5. Vijay Mavaluri, Pradeep Boppana and Nagarjuna (2006), “Measurement of efficiency of banks
in India” University Library of Munich, Germany, MPRA Paper 17350, Aug 2006.

6. Ved Pal & N S Malik (2007), “A multivariate analysis of the financial characteristics of commercial
banks in India”, The ICFAI Journal of Management, Vol. 6, Issue 3.

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