SIKKIM STATE COOPERATIVE BANK (SISCO)

Annual REPORT ANALYSIS 2022-2023

By – Samminav Raj Gajmer

TABLE OF CONTENT

Executive Summaryx

Introduction to SISCO BANKx

Financial Performance Analysisx

Operational Performance Analysis

Sectoral Analysisx

Asset Quality and Loan Portfolio

Technological and Digital Transformation

Corporate Social Responsibility (CSR) and Community

Impact

Risk Management Framework

Future outlook and strategic Focus

Strength, Weakness, Opportunities and Threats

Analysis

Conclusion and Recommendations

EXECUTIVE SUMMARY:

This annual report analysis provides a comprehensive analysis

of Sikkim State Co-Operative Bank Ltd (SISCO) Banks financial
and operational performance for the fiscal year 2022-23
focusing on key financial metrics, strategic initiatives and
market positioning . The purpose of this analysis is to assess
the banks current standing and to highlight its strategic path to
future growth and stating its strengths and weaknesses.

In this fiscal year SISCO Bank demonstrated stable growth

achieving a revenue of over INR 91 Crore approx. to previous
INR 57.1 Crore . That is a 55% increase in a year and also
managed to get over 14 % growth in total deposits compared
to previous year. The banks Return on Assets ROA and roe
levels of The banks NPA ratio reflects sound loan
management and low VaR of 1.26% shows long term growth
with minimum risk exposure.

SISCOs strategic investment in sustainable finance and green

banking align it with national trends and strengthen its market
position. Going forward the bank plans to further its digital
reach support and promote sustainable finance initiatives
reinforcing its foundation for continued growth in a shifting
economic environment.
INTRODUCTION TO SISCO BANK
Sikkim Stake Co-operative bank has established itself as a
trusted financial institution with over 24 years of service to the
community building trust and financial awareness in the
community .With a vision rooted in supporting the community
with financial inclusion , creating awareness about importance
about financial literacy and helping the community with help of
modern technological driven products and services.

SISCO is also the first cooperatives bank to be registered in the

State of Sikkim in the year 1998. It was founded under the
Sikkim State Cooperative Bank act to act as an apex
organization for cooperative societies in Sikkim, it aimed at
supporting rural banking and financial inclusion across the
states communities. SISCOs primary role includes raising
deposits from members and providing a range of banking
services in alignment with the Banking Act of 1949.

SISCO bank has multiple branches throughout Sikkim, serving

both urban and rural areas. The bank has played a crucial role
in providing accessible banking services to traditional
underrepresented parts of the community such as farmers and
low income group communities helping them integrate in the
brooder economy the banks efforts in expanding financial
inclusion reflects its goals . SISCO is often in partnership with
initiatives like NABARD which supports refinancing and other
cooperative activities.
BANKING AND FINANCIAL SERVICE SECTOR

The banking and Finance sector is valued at approx. 27 trillion

USD in 2023 (source S&P Global). The Indian banking sector
also reached approx. 2.1 trillion USD (source Deloitte USA)
2023 which equates to approximately 7.4% of the global sector
value.

Global Scenarios
Financial technology, digital banking and AI driven services are
expanding rapidly expected to continue growing at a
compounded annual growth rate of (CAGR) of 22% by 2025
( source Allianz Commercial),
Cybersecurity & Regulatory Compliance With a rise in Cyber
attacks on financial institutions ( 30% increase in 20220) this
issue has been a key concern ( source Allianz commercial).
Interest Rates & Inflation In 2023 higher interest rates in
developed countries has positively impacted net interest
margins for banks but let to slower loan demands

Indian Scenarios

Government Initiatives especially UPI system in India has

transformed the payment landscape handling more than 70
billion transactions in FY2020_2023, contributing greatly to
financial inclusion ( source Deloitte USA).
India’s Digital market is growing at a CAGR of 19.5% driven by
mobile payments , eWallets and the adoption of blockchain
technologies ( Deloitte USA, Allianz commercial)
Inflation in India is at a constant rate of 6%-7% and high
regulation which makes it difficult for easy flow of Foreign
capital in the Indian markets( Deloitte USA).

Cooperative Banking Sector

Global Cooperative Banking sector represents a impressive size

of 2.5 trillion USD . Cooperative banking sector is the generally
considered the strongest in Europe especially in countries like
Germany, France and Italy with Volksbanken Raiffesenbanken in
Germany being one of the largest cooperative banking
networks serving over 30 million members.
In India the Cooperative banking sector consists of 33 state
cooperative banks SCBs, 328 district/ central cooperative banks
DCCBs and 88891 primary agricultural credit societies PACSs in
India(Source Digital Sansad). The total assets size of Indian
cooperative is over 120 billion INR( Source CEIC Data).
This contributes to approx. 10%-12% of the total banking assets
in the country of India.Cooperative banks are normally
governed by the Reserve Bank of India and regulated by
NABARD(National Bank for Agricultural and Rural
Development ).

The main factor for growth in this sector both in India and in the
international scenario has been due to financial inclusion
especially in rural areas. The mutual membership model and
focus on customer centric banking have attracted millions if
new members. In India initiativers like PMGDISHA and Jan Dhan
Yojana have enabled further inclusion through cooperative
banking models. The focus on digitalization and shift towards
mobile banking and online banking been another great factor in
the growth of this sector.
The major hurdle for this sector globally has been the complex
challenges with the changing regulatory compliances and a
pressure to practice more sustainable investment practices. In
India, Indian Cooperative sector faces challenges with NPAs. In
2023 the NPA ratio of cooperative banks in India stood art
11.4% higher than the national average of commercial banks
largely due to agricultural loan defaults. It also faces effective
supervision due to its shear size and weak internal control in
some areas. The capital adequacy ratio for the Indian banks
stand approx. 11.5%.
FINANCIAL PERFORMANCE ANALYSIS
Financial performance analysis focuses on the financial health ,
profitability and value creation for shareholders. It reflects
outcomes of past operations typically quarterly or annual basis.
It normally uses monetary and financial ratios. This analysis
normally shows weather a company is making money and
staying financially healthy.

Ratio Formula Purpos Industr Indus Source SISC

e y try s O
Bench Avera Bank
mark ge Figur
Ideal es
(Sour
ce-
Annu
al
Repo
rt
2022
-23)
Risk Total Measur <2% 0.5%/ RBI 1.12
Cost Provisions/ es the 2% Report %
Gross cost of on
Loans Risk Cooper
associa ative
ted Banks
with &
 lending NABAR
D
Gross Revenue - Indicat TBD - - 2.87
Margin COGS/Rev es the %
enue financi
al
health
of the
Bank
Credit Total Indicat 60- 40- RBI & 51.2
Deposit Credit/Tota es the 70% 50% NABAR 7%
Ratio l Deposits Lendin D
g
capabil
ity of
the
Bank

Transact Total Measur

ional Transactio es Can - - 1.12
Cost nal Operati differ %
Cost onal for
/Number Effenci bank
of ency to
Transactio bank
ns
Net NPA Net Measur <1% 3.6% RBI & 0.88
to Loan NPAs/Total es the NABAR %
Outstan Loans quality D
ding of the
Ratio loan
Book

Capital Tire 1+ Tire 2 Assesses >12 13 RBI, INDIA 44.03

to Risk capital/ Risk the % %- RATINGS,2 %
Weight Weighted banks 14 023 ICRA
ed Assets ability to % Financial
Assets cover risk Stability
Ratio with its Report
capita.
Return Net Profit/ Measures >0.5 0.5 ICRA
on Total Assets profitabili %- %-
Assets ty 1% 0.8
relative %
to assets
Return Net Profit/ Indicates >5% 6%- ICRA
on Shareholders profitabili - 10
Equity Equity ty in 10% %
relations
hip to
sharehol
ders
equity
Net Interest Shows >3% 3.2 RBI Annual
Interes Income- how well -4% % report
t Interest a bank is 2023
Margin Expenses/Av managin
erage Assets g its
interest
income
and
expenses

Operational Performance Analysis

Operational performance analysis assesses how efficiently and
effectively a company utilizes its resources to produce goods
and services and meet its strategic objectives. It focuses on
internal process , resource utilization and overall efficiency in
delivering products or services, it relies more on non financial
metrics related to productivity, processing and customer
satisfaction. It focuses on ongoing improvements and
efficiencies in day to day operations.

Operatio Formul Purpos Indust Indust Source SISCO

nal a e ry ry s BANK
Metric Ideal Avera Source
ge Annual
Report
2022_20
23