BANKING

Co-operative Bank Turning to Private : A Case Study

on Saraswat Co-operative Bank

Anupam Mitra
M. Com., ACMA, Ph.D
Assistant Professor (Finance)
Symbiosis Institute of Business Management, Bangalore

Introduction as weddings of dependent members of the family,

U
rban Co-operative Banks (UCBs) are an repayment of debt, and expenses of medical treatment
important part of the financial system in India. etc. The Society was converted into a full-fledged
It is, therefore, necessary that the UCBs emerge Urban Co-operative Bank in 1933. The Bank has the
as a sound and healthy network of jointly owned, unique distinction of being a witness to History. The
democratically controlled, and ethically managed Bank, which was originally founded in 1918, i.e. close
banking institutions providing need based quality on the heels of the Russian Revolution, also witnessed
banking services, essentially to the middle and lower as a Society and as Bank-the First World War, the
middle classes and marginalized sections of the society. Second World War, India’s Freedom Movement and
The scene of urban cooperative banks in the country is the glorious chapter of post-independence India.
a mixed lot with some of them capable of taking on During the late fifties, the Bank grew from strength to
corporate banks while others struggling to be in the strength. The Bank had established five branches within
business. While cooperative banks like Saraswat and the city of Mumbai and one each at Pune and Belgaum. In
Cosmos with turnovers in the range of Rs 20,000-30,000 its 50th year, the Bank chose a bee motif to symbolize the
crore are everybody’s envy, many of UCBs are hot-bed Bank’s emblem—a fitting and appropriate characteristic
of mismanagement and bad business practices. And of a Bank that believed in hard work, a search for all that
while those which are successful could be counted on
is good, a team spirit to achieve its objectives and a selfless
fingers the list of those in sorry mess runs into hundreds.
service to its members and customers. The Bank has grown
They are simply not able to make any profitable
business. in stature, progressed in its social and economic objectives
and produced an image of what an ideal bank should be.
Objective Resultantly, in 1977-78, the Bank’s gross income crossed
Last two decades the Bank has witnessed a steady the Rs. 3.00 crore marks for the first time. In 2008, the Bank
growth in the business and also taken several Strategic launched the Branding Initiative. The purpose of such an
Business Initiatives like undertaking Business Process exercise was to reconfirm the thrust of the Bank on its core
Reengineering initiative. Besides being the largest values, which can be summed up as ‘‘Sense of Belonging’’.
Urban Co-operative Bank in India, Saraswat Bank has The name of the Bank should always inspire the Sense of
now become the largest in Asia. Belonging in all its stakeholders and that the Bank
Here an attempt has been made to highlight the continues to fulfill the changing needs and expectations
performance of the bank, comparison with other banks of the customers with unflinching gusto and aplomb.
and to search possible reasons of success which has
Different Credit Schemes
caused for the turn from the status of a cooperative
towards private bank having wider scope. Saraswat Bank has introduced a wide range of credit
schemes at attractive interest rates, which has become
About Saraswat Bank
very popular, especially among the middle-class, in view
The Bank has a very humble but a very inspiring
of the easy repayment plans. Bank offers attractive
beginning. On 14th September 1918, ‘‘The Saraswat
interest rates on deposits and also various add-on features
Co-operative Banking Society’’ was founded. J. K.
at very market competitive rates. A few are :
Parulkar became its first Chairman, N. B. Thakur, the
first Vice-Chairman, P. N. Warde, the first Secretary Udyogini
and Shivram Gopal Rajadhyaksha, the first Treasurer. Saraswat Bank introduces a scheme for women
The Society was initially set up to help families in entrepreneurs of today which takes care of their
distress. Its objective was to provide temporary financial requirements allowing them to concentrate
accommodation to its members in eventualities such on their business growth. With lot of incentives/

944 The Management Accountant |August 2012

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discount being offered and minimum processing Small & Medium Enterprises (SMEs)
charges which are enumerated :
For a business on the growth phase with a wide
1. Micro Enterprises — Here the finance provided range of opportunities to explore, timely availability
will be up to Rs 2.00 lacs. of credit is essential to scale new heights. Saraswat
2.Small Scale Enterprises — Here the finance Bank always enables SME sectors’ business needs.
provided will be above Rs 2.00 lacs up to Rs. 50.00 lacs.
3. Medium Enterprises — Here the finance provided Performance
will be above Rs. 50.00 lacs up to a maximum limit of In 1988 the bank was conferred ‘‘Scheduled’’ status
Rs 100.00 lacs. by Reserve Bank of India. The Bank is the first
The following are/discounts offered to women cooperative bank to provide Merchant Banking
under the scheme Udyogini : services. The Bank got a permanent license to deal in
Micro Enterprises SSI Enterprises Medium Enterprises
Amount Up to Rs 2.00 lacs Above Rs 2.00 lacs up to Rs. 50.00 lacs Above Rs 50.00 lacs up to Rs 100.00 lacs
Margin Nil 10%-15%lower than the Bank’s norm 10% - 15% lower than the Bank’s norm
ROI PLR — 0.5% PLR—0.5% PLR
Repayment 6 yrs 6 yrs 7 yrs
Security Hypothecation + Guarantee of (spouse Hypothecation + 2 Guarantors + Hypothecation + 2 Guarantors +
/ a family member wherever required) Collateral Security (25%) Collateral Security (30%)
Processing Fees Rs. 500/- Rs. 750/- 0.1% of finance limit
Micro Finance : Self Help Groups (Bachat Ghat) foreign exchange in 1978. Presently the Bank is having
Since inception the cause of the Small Man lay at correspondent relationship in 45 countries covering
the core of the Bank’s heart. The Bank has grown 9 currencies with over 125 banks.
manifold but its basic values have remained the same. In 1992, the Bank completed 75 years. Platinum
Saraswat Bank has, therefore, launched a scheme for Jubilee celebrations were inaugurated on 14th
self help groups so as to help them raise the income September 1992. The Bank also crossed the business
levels and improve living standards of their members’.
level of Rs 700 crores. The beginning of the 21st century
The Bank aims at teaching the members of these groups
to save and to borrow responsibly. has been a giant leap forward for the Bank. The Bank
chose a path of organic/inorganic growth and its pace
The Bank caters to the self help groups who are
of growth accelerated. Bank’s total business which
involved in the following activities :
was around Rs. 4,000 crore in 2,000 almost tripled to
1. Selling fruits, vegetables, milk, fish, etc.
Rs. 15.295 crore in 2007.
2. Making of brooms, basket weavers, and other
bamboo products, etc. Saraswat Bank has now 226 fully computerized
3. Any other activities viz. plumbing, hairdressing, branches, 15 Zonal Offices and departments located
electrician, including flowers/vegetable growers, across 6 States—Maharashtra, Goa, Gujarat, Madhya
spices and papad making, etc. Pradesh, Karnataka, and Delhi. It has merged seven
coop Banks and is consciously nurturing them. Bank
Maximum amt of Loan Rs 2.00 lakhs
tied up with VISA international for issuance of Debit
Interest Rate PLR—1% Card. The Bank is providing 24- hour service through
Security Guarantee of Group Members ATM at 147 locations. As on 31st March 2012 Bank
Repayment Period Not more than 36 months business had surpassed Rs. 33,000 crores. Bank has
Processing Fees Reasonable retained its coveted position as ZERO NET NPA Bank
Shareholding Nominal Membership for the eighth successive year.
Table : Few financial indicators of the Saraswat bank for the last 5 years :
Year Deposit Loans & Advances Credit Deposit Invest ment Gross Net Prorit
(Rs in Cr) (Rs. in cr) Ratio in (cr) NPA (Rs in crore)
2006-07 89,24.94 6,370.46 71% 2,609.90 5.32% 155.18
2007-08 11,430.82(28%) 7,448.31(17%) 65% 4,350.06 4.78% 202.26
2008-09 12,918.85(13%) 8,110.41(9%) 62% 4,791.51 4.5% 241.29
2009-10 14266.73(10%) 9,250.35(14%) 65% 5,321.39 3.92% 139.16
2010-11 15,800(10%) 11,511.99(24%) 73% 5,253.77 3.25% 213.57
Note : Figures in parenthesis indicate yearly growth Source : Saraswat Bank

The Management Accountant |August 2012 945

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The yearly average growth of deposit is 15% and Findings

that of Loans and Advances 16%. The possible causes for the success story of the
In order to see the net profit of Saraswat Bank in Saraswat Co-operative as well as the reasons for
proper perspective, a comparative chart giving profits applying to RBI for getting the status of Private Bank
and total business of some Private Banks as on 31st are :
March 2008 are highlighted : (i) The bank always focused on Customer Centric
Table : Comparison on Total Business and Banking i,e., the policy of the bank is related and
Net Profit after Tax as on 31.03.2008 inclined towards the customer.
Name of the bank Total Business Net Profit (ii) Higher credit deposit ratio than the RBI norms
after Tax (in cr) of 66% but with proper monitoring and Recovery
Dhanalakshmi Bank Ltd. 5,772.15 28.46 schedule.
Catholic Syrian Bank Ltd. 10,067.00 36.56 (iii) Loan appraisal at the pre and post sanction
Bank of Rajasthan Ltd. 21,000.00 115.20 stage to minimize Gross NPA.
South Indian Bank Ltd. 25,910.00 151.62 (iv) Leveraged on technology to offer many
ING Vysya Bank Ltd. 35,148.00 156.93 ultramodem technology enabled products like
Saraswat Co-operative 18,879.13 202.26 SMS banking, Debit card in tie up with VISA, net
Bank Ltd. banking.
Source : RBI website (v) Core banking among all the branches of the
Return on average assets—which is a testimony to bank.
insightful and efficient deployment of funds— (vi)Provided employment to kith and kin of
increased from 1.67% in F.Y. 2007 to 1.71% as of 31st individuals who have suffered or gave up their lives
March 2008. This is considered to be very satisfactory for saving the honor and integrity of the country.
and is well above the industry performance. It may be
(vii) The Bank also provides different services like
noted that the return on assets is well above the returns
Merchant Banking, Foreign Exchange etc.
earned by all the leading private and public sector
banks as on 31st March 2008 as shown : (viii) Competitive net profit than quite a few private
banks over the years.
Table : Comparative Return on Average Assets
on 31.03.2008 (ix) Well-trained courteous staffs and employees.
Name of the Bank Return on Average Assets (x) Finally, highly qualified, dedicated and vastly
Yes Bank 1.42 experienced Board of Directors has lead to proper
Corporation Bank 1.38 Corporate governance.
HDFC 1.30 Conclusion
PNB 1.15 ‘‘Service to the Common Man’’ has been the motto
BOI 1.22 of Saraswat Bank for the last 91 years. The Bank, in
ICICI 1.12 spite of its growth in size, has been able to offer to the
BOB 0.89 customers the dual advantage of ‘‘Ability of Big Banks
SBI 1.01 and Agility of Small Banks’’. Saraswat Bank attributes
Saraswat Co-operative 1.71 this success to its undying spirit to serve the common
man and to the sharpening of its competitive edge by
If we compare with SBI in certain parameters like constantly upgrading technology to match interna-
Capital Adequacy Ratio or CRAR (which is the indicator tional standards. The Bank is fully computerized and
of risk absorbing capacity) and Return on Average Asset, offers convenient working hours.
the findings are depicted through following table :
In 2011, the Bank was granted permission for All
Table : Comparison with SBI India Area of Operation by Reserve Bank of India. The
Year Capital Adequacy or Return on bank has applied to RBI for getting a status of private
CRAR (%) Average bank and has an ambitious business expansion plan
Asset (%) in place to have a presence in all major cities of the
SBI Saraswat SBI Saraswat country, reach a business level of Rs 50,000 crores by
2006-07 12 11.37 0.84 1.67 2016 and Rs 100,000 crores by 2018. ❐
2007-08 14 10.85 1.01 1.71
References
2008-09 13 10.92 1.04 1.46
■ www.rbi.org.in
2009-10 12 14.63 0.88 0.74 ■ www.saraswatbank.com
2010-11 10.69 12.74 0.71 1.16 ■ www.sbi.co.in

946 The Management Accountant |August 2012