International Journal for Research in Engineering Application & Management (IJREAM)

ISSN : 2454-9150 Vol-06, Issue-06, SEP 2020

A Study on Urban Co-Operative Banks:

Analysing, Strategizing and Planning for Bottom-
Line Profits
*
MAHADEVA K S, #Dr. T. ASWATHA NARAYANA
*
Research Scholar, #Research Guide, Department of Commerce, Tumkur University, Karnataka,
India. drhhramesh@gmail.com
ABSTRACT - Urban Co-operative Banks (UCBs) have by and large been ruing the poor credit offtake for quite some
time. Ditto commercial banks. The latter have been pruning the rate of interest on demand deposits like savings
deposits and time deposits like fixed deposits. This has led some well-informed retail depositors to switch their
allegiance to healthy UCBs since they offer a higher rate of interest on demand and time deposits. In the normal course,
healthy UCBs would have welcomed such addition to their deposit base but given the slack in demand for retail credit ,
they are scrambling to find lucrative ways of investing such deposits – lucrative enough to cover at least the servicing
cost associated with the said deposits. But the question is whether the UCBs are equipped to strategize and plan
towards this end. The researcher analysed the performance of the Nehrunagar Co-operative Bank Ltd,
Seshadripuram, Bangalore, a UCB, to ascertain whether the UCB had strategized and planned appropriately for the
purpose. Towards this end, the researcher vetted the financials of the UCB for the period FY 2011-15. He found that
the UCB had not grown its current accounts and saving accounts (CASA) base consistently. The UCB’s bottom-line too
mimicked the trend. The correlation between the UCB’s net profit and CASA base registered a negative 20 percent!
The sheer anomaly of this outcome testified to the inefficient exploitation of the cheap CASA base by the UCB. In the
normal course, one would expect the net profit to rise whenever the CASA base rose! The UCB was found wanting in
ensuring a consistent growth in respect of its overall deposit base too. The ratio of the CASA base of the UCB to its
overall deposit base had fluctuated, rather wildly.

Key words: Allegiance; anomaly; bottom-line; CASA; ditto; lucrative; rue; scramble; UCB.

I. INTRODUCTION a group, a force to contend with, in about half a dozen

states. On the other hand, as a class, co-operative banks are
India has been a capital starved country and in the hunt for structurally weak. Multiple collapses have been bringing
capital, small entrepreneurs, agriculturists and people who management inefficiencies to the fore frequently; most co-
can offer no collateral like artisans, petty traders, women operative banks are run like family-owned businesses with
and rural folks, typically lose out (Anand, 2016). a shabby corporate governance record. Political interference
Cooperative banks were conceptualized to cater to these and influence are rife, and the regulatory framework within
very segments. These segments represented the largest which they operate does not allow for effective supervision
section of people who were untouched by commercial by RBI.
banks since these banks could not venture into the remotest
corners of the country and remain viable there. In short, co- The structure of cooperative network in India can be
operative banks were envisioned as the original financial viewed at two levels, namely the urban cooperative banks
inclusion tool. They were expected to encourage savings at and rural cooperatives. Urban Cooperatives can be further
the grass roots level and make credit available to those divided into scheduled and non-scheduled. Both the
unserved by traditional banks. Being local in nature, they categories are further divided into multi-state and single
were also supposed to know the local business environment state. Most of these banks fall in the non-scheduled and
better and thus assist in the economic development of the single-state category. Banking activities of urban
community. However, the co-operative banking sector cooperative banks are monitored by RBI. Registration and
stands at a crossroads today. On the one hand, they have management activities are on the turf of the Registrar of
grown tremendously, albeit not in the desired fashion; they Cooperative Societies (RCS) concerned. These RCS
have grown a substantial deposit and credit base, and are, as

241 | IJREAMV06I0666049 DOI : 10.35291/2454-9150.2020.0618 © 2020, IJREAM All Rights Reserved.

 International Journal for Research in Engineering Application & Management (IJREAM)
ISSN : 2454-9150 Vol-06, Issue-06, SEP 2020

operate in a single state and Central RCS (CRCS) operate the years. However, their business growth has not been
in multiple states. commensurate with the growth of the banking sector.
Statement of the Problem 3. The Reserve Bank of India intends to constitute an
“umbrella organisation” for urban cooperative banks
The operational efficiency and the profitability of the urban
(UCBs) (Gayatri, 2019) . This will raise their
co-operative banks are influenced by several factors. While
operational and financial health to global levels. The
some factors may apply to all the banks, in some cases the
measure will render the UCB sector financially
factors may be specific to a bank or banks. While some
resilient and raise the depositors‟ faith in UCBs, asserts
may boast of inherent advantages in their area of
the RBI, citing that such an umbrella organisation is in
operations, some may boast of inherent advantages in the
operation in many countries. Apart from extending
profitability space. Some may have an upper hand in both
liquidity and capital support, the central bank would
the spaces and yet some may be weak in both the spaces.
establish the information and technology infrastructure.
These can be traced, in turn, to several micro-level factors
This would help the banks to broad-base their services
in respect of which the bank concerned may or may not
at a relatively low cost. It may also offer fund
have paid adequate attention for a variety of reasons either
management and other consultancy services. The
out of ignorance or out of intention. To identify these
structure, size, lack of avenues for raising capital funds
problems, an analysis of the growth of the banks as
and the limited area of operation of urban cooperative
revealed by important metrics is necessary. Lending being
banks escalate their financial vulnerabilities. This has
one of the major activities of the bank, such analysis must
also prompted the RBI to constitute the umbrella
begin with an analysis of the advances portfolio of the
organisation.
banks. The factors that have a bearing on the operational
efficiency and profitability of the banks will have to be 4. The urban co-operative banks (UCBs) are annoyed
identified and examined. Since in the process the banks with the Reserve Bank of India‟s draft guidelines on
may be exposed to credit risk, measures to de-risk the bank appointment of members to the Board of Management.
will have to be ascertained too. The guidelines warrant appointment of professionals or
people with exposure to functional areas like
II. REVIEW OF LITERATURE accountancy, economics, finance and information
1. The Reserve Bank of India raised the cash reserve ratio technology to the Board. According to the guidelines,
(CRR) for non-scheduled urban co-operative banks only such Boards can seek regulatory approval for
(UCBs) by 100 basis points to four percent. (100 bps expanding the area of operations of the bank and for
refers to one percent) (indiainfoline, 2017). This rise opening new branches (Ram, 2018). It is believed that
will come into effect from July 12. According to RBI, the mandate could hobble the growth of smaller UCBs
it had decided to raise the CRR for non-scheduled since they may not afford to put in place such a Board.
primary (urban) cooperative banks by 100 basis points With almost 69 per cent of the banks in the urban co-
from three percent to four percent of their total demand operative banking sector qualifying as Tier I banks (or
and time liabilities, on par with scheduled primary banks with less than INR 100 crores in deposits),
(urban) co-operative banks. veteran bankers from the sector feel the constitution of
such a Board of Management (BoM) will add to their
2. The importance of urban co-operative banks could be
costs given that they have to pay allowance / sitting fee
gauged from the fact that joint stock banks were not
to the members. There were 1,562 UCBs in the country
interested in providing credit on personal security to
as at March-end 2017. Not that these banks do not pay
the urban middle class (M. Muthumeena, 2017). They
allowance / sitting fee now – they do, but only to the
felt that it was not advantageous for them to issue small
board of directors (BoD). But it may prove too costly
loans given the cost associated with the disbursement
to appoint professionals or people with exposure to
of such loans. So, the urban co-operative banks were
functional areas like accountancy, economics, finance
opened mainly for accepting deposits of various sizes
and information technology to the BoM of banks
from people in urban and semi-urban areas and for
operating in smaller towns. According to Sahakar
providing them banking services like issuing loans on
Bharati, an umbrella body of co-operative banks and
personal security, discounting and collecting bills,
societies in the country, the mandate is unfair to many
issuing drafts, etc. These banks focused on serving the
UCBs which are by and large professionally managed.
communities and workplace groups in various
It cites that the RBI admits in its Report on Trend and
localities. Their primary intention was to lend to small
Progress of Banking in India that UCBs have
borrowers and businesses. As a result, their scope of
outperformed the commercial banks on many health
operations extended greatly. Because of this, UCBs
parameters, including bad debts and gross NPAs.
grew in terms of numbers and business volumes over

242 | IJREAMV06I0666049 DOI : 10.35291/2454-9150.2020.0618 © 2020, IJREAM All Rights Reserved.

 International Journal for Research in Engineering Application & Management (IJREAM)
ISSN : 2454-9150 Vol-06, Issue-06, SEP 2020

5. Karnataka occupies a special place in the Indian Scope of the Present Study
cooperative sector because it is one of the first states to
The study confines itself to the Nehrunagar Co-operative
have initiated the cooperative movement in India. An
Bank Ltd, Seshadripuram, Bangalore city.
Urban cooperative bank (UCB), as the name suggests,
is a bank that operates in urban pockets on the basis of IV. OBJECTIVES OF THE STUDY
cooperative principles (KSCUBF, 2017). According to
1. To Understand the ratio of net profit to all loans
the Banking Regulation Act 1949, an urban
cooperative bank is a primary non-agricultural credit 2. To Analyse the ratio of short-term loans to demand
society. It is a society registered under the Act and deposits of the respondent banks
doing the business of banking, as defined in clause (b)
3. To Analyse the growth of gold loans, unsecured
of section 5 of the Banking Regulation Act 1949. The
loans and mortgage loans vis-à-vis the net profit of
UCBs are generally viewed as the common man‟s bank
the banks.
because their objective it to promote thrift and
cooperation in the lower and middle strata of the V. RESEARCH DESIGN
society. UCBs have made their mark in the cooperative
1.5.1 Research Methodology
space.
The study is descriptive in nature and has used the „fact-
III. RESEARCH GAP finding‟ survey method
The reviewed literature has done well to imply that the
1.5.2 Sources of Data
UCBs have not exploited their potential to achieve financial
inclusion and clock a more broad-based growth. They need Data required for the research has been collected from the
to be reformed in terms of how they are regulated and in secondary sources alone, namely, the Annual Reports of the
terms of other parameters that can impact their bottom respondent bank. In addition, the researcher interacted
lines. However, the absence of focus on their operational extensively with other stakeholders associated with the
efficiency and profitability stands out in the reviewed country‟s UCBs.
literature. Operational efficiency and profitability are 1.5.3 Data Processing and Analysis Plan
determined, among other things, by the level of exploitation
of the resources they have on hand and the seriousness with Data has been processed and analysed by using statistical
which they pursue their operational efficiency. It is these tools like correlation coefficient and compounded annual
gaps that the present study proposes to plug. growth rate (CAGR).

VI. GROWTH OF NEHRUNAGAR CO-OPERATIVE BANK LTD ON VARIOUS METRICS

In the following paragraphs, the growth of the Nehrunagar Co-operative Bank Ltd, Seshadripuram, Bangalore, is analysed on
various metrics.
1.6.1 Growth in CASA deposits of the bank for the period FY 2011-FY 2015
Current accounts and savings accounts (CASA) represent the cheapest source of working capital for a bank. After all, the
interest paid by the bank on savings deposits is nominal and the bank pays no interest at all on current accounts. On the other
hand, the bank levies services charges on current accounts and thus earns an income from the current accounts. Hence the
bank‟s CASA growth is an important metric. The following Table and Figure compute the growth of the bank‟s CASA
deposits.
Table-1 Growth in CASA deposits of the bank for the period FY 2011-FY 2015 (in INR)

Year CASA deposit base (INR) Year-on-Year (YoY) growth (%)

--
2010-11 4,97,54,951.00
2011-12 29,85,24,287.00 499.99
2012-13 8,86,94,360.17 -70.29
2013-14 11,13,52,502.47 25.55
2014-15 11,21,25,141.72 0.69
CAGR (%) 22.52
(Source: Annual Reports of the bank)

243 | IJREAMV06I0666049 DOI : 10.35291/2454-9150.2020.0618 © 2020, IJREAM All Rights Reserved.

 International Journal for Research in Engineering Application & Management (IJREAM)
ISSN : 2454-9150 Vol-06, Issue-06, SEP 2020

Figure-1 Growth in CASA deposits of the bank for the period FY 2011-FY 2015 (in INR)

350000000
298524287
300000000

250000000

200000000

150000000 111352502 112125142

88694360
100000000
49754951
50000000

0
2010-11 2011-12 2012-13 2013-14 2014-15
CASA deposit base (INR)

(Source: Annual Reports of the bank)

During the period under review, the CASA deposits of the bank grew at a compounded annual growth rate (CAGR) of 22.52
percent. This is no mulish growth but the fluctuating YoY growth of the bank (at annual intervals) is not something the bank
can flaunt. From a YoY of 499.99 percent or 500 percent during a year and a negative 70.29 percent the very next year is
unfathomable to say the least. This does not augur well for the bank.
1.6.2 Growth in net profit of the bank for the period FY 2011-FY 2015
Like any business entity, the bank too should strive to maximise the wealth of its shareholders. One way to go about it is
through generation of net profit in a consistent and sustained manner. The following Table and Figure trace the growth of the
bank‟s net profit.
Table-2 Growth in net profit of the bank for the period FY 2011-FY 2015 (in INR)

Year Net profit (INR) Year-on-Year (YoY) growth (%)

2010-11 51,68,904.36 --
2011-12 55,24,277.06 6.88
2012-13 68,29,385.11 23.62
2013-14 75,46,776.54 10.50
2014-15 1,12,73,428.45 49.38
CAGR (%) 21.52
(Source: Annual Reports of the bank)
Figure-2 Growth in net profit of the bank for the period FY 2011-FY 2015 (in INR)

12,000,000 11,273,428

10,000,000
7,546,777
8,000,000 6,829,385
5,168,904 5,524,277
6,000,000

4,000,000

2,000,000

-
2010-11 2011-12 2012-13 2013-14 2014-15

Net profit (INR)

(Source: Annual Reports of the bank)

244 | IJREAMV06I0666049 DOI : 10.35291/2454-9150.2020.0618 © 2020, IJREAM All Rights Reserved.

 International Journal for Research in Engineering Application & Management (IJREAM)
ISSN : 2454-9150 Vol-06, Issue-06, SEP 2020

During the period under review, the net profit of the bank grew at a compounded annual growth rate (CAGR) of 21.52 percent.
However, the YoY growth in net profit saw a setback between FY 2013 and FY 2014. During the very next year, the bank
registered a quantum jump in net profit at 49.38 percent, thereby redeeming the situation somewhat.
1.6.3 Correlation between the CASA deposits and the net profit of the bank for the period FY 2011-FY 2015
One would expect the growth in CASA deposits of a bank and its net profit to be positively correlated. After all, CASA
deposits represent the cheapest source of working capital for the bank. The bank is expected exploit this advantage to improve
its bottom line. Hence it is worth examining whether the respondent bank has conformed to the trend or bucked the trend. The
following Table and Figure attempt the correlation.
Table-3 Correlation between the CASA deposits and the net profit of the bank for the period FY 2011-FY 2015 (in
INR)

Year Net profit (INR) CASA deposit base (INR)

2010-11 51,68,904.36 4,97,54,951.00
2011-12 55,24,277.06 29,85,24,287.00
2012-13 68,29,385.11 8,86,94,360.17
2013-14 75,46,776.54 11,13,52,502.47
2014-15 1,12,73,428.45 11,21,25,141.72
Correlation coefficient -0.20
(Source: Annual Reports of the bank)
Figure-3 Correlation between the CASA deposits and the net profit of the bank for FY 2011-2015
350000000 11273428 12000000
298524287
300000000 10000000

250000000 7546777
8000000
6829385
200000000
5524277
5168904 6000000
150000000
111352502 112125142
88694360 4000000
100000000
49754951
50000000 2000000

0 0
2010-11 2011-12 2012-13 2013-14 2014-15

CASA deposit base (INR) Net profit (INR)

(Source: Annual Reports of the bank)

During the period under review, the net profit of the bank and the CASA deposits of the bank have not moved unidirectionally.
Between FY 2012 and FY 2013, the net profit moved from INR 55,24,277.06 to INR 68,29,385.11 representing a rise of
approximately 25 percent. Unbelievably, the CASA base fell from INR 29,85,24,287.00 to INR 8,86,94,360.17. In the
circumstances, the correlation coefficient of -0.20 between net profit and CASA base does not come as a surprise.
1.6.4 Growth in the overall deposits of the bank for the period FY 2011-FY 2015
Over and above the CASA deposits of the bank, one should examine the overall deposits of the bank since deposits provide the
much-needed working capital for the banks at a relatively low cost. Term deposits or time deposits also represent a source of
cheap working capital for the bank though they are not as cheap as the CASA deposits. It is noteworthy that although term
deposits are relatively costly for the bank since the latter has to pay a higher rate of interest on them, the interest paid on them
is tax-deductible and hence can mitigate the interest burden for the bank. Hence it is worth examining whether the overall
deposits of the bank have grown at a healthy pace. The following Table and Figure attempt such an examination.

245 | IJREAMV06I0666049 DOI : 10.35291/2454-9150.2020.0618 © 2020, IJREAM All Rights Reserved.

 International Journal for Research in Engineering Application & Management (IJREAM)
ISSN : 2454-9150 Vol-06, Issue-06, SEP 2020

Table-4 Growth in the overall deposits of the bank for the period FY 2011-FY 2015 (in INR)
Year All deposits (INR) YoY growth (%)
2010-11 355664366 --
2011-12 418032741 17.54
2012-13 531108333 27.05
2013-14 632968721 19.18
2014-15 724629216 14.48
CAGR (%) 19.47
(Source: Annual Reports of the bank)
Figure-4 Growth in the overall deposits of the bank for the period FY 2011-FY 2015 (in INR)
800000000
724629216
700000000 632968721

600000000 531108333

500000000
418032741
400000000 355664366

300000000

200000000

100000000

0
2010-11 2011-12 2012-13 2013-14 2014-15

All deposits (INR)

(Source: Annual Reports of the bank)

The overall growth of deposits of the bank has grown at a CAGR of 19.47 percent. The YoY growth has been less
inconsistent, so to speak. Hopefully, the YoY growth of the overall deposits will not plateau off.
1.6.5 CASA deposits as a proportion of the overall deposits of the bank for the period FY 2011-FY 2015
As explained in a previous paragraph, banks should mobilise as much of CASA deposits as possible in order to improve their
bottom line. Higher the proportion of CASA deposits in the overall deposits, higher its below-the-line figures. Hence it is
worth examining this metric. The following Table and Figure attempt such an examination.
Table-5 CASA deposits as a proportion of overall deposits of the bank for the period FY 2011-FY 2015 (in INR)

Year CASA deposits All deposits (CASA deposits/All deposits) %

2010-11 4,97,54,951 35,56,64,366 13.99
2011-12 29,85,24,287 41,80,32,741 71.41
2012-13 8,86,94,360 53,11,08,333 16.70
2013-14 11,13,52,502 63,29,68,721 17.59
2014-15 11,21,25,142 72,46,29,216 15.47

(Source: Annual Reports of the bank)

246 | IJREAMV06I0666049 DOI : 10.35291/2454-9150.2020.0618 © 2020, IJREAM All Rights Reserved.

 International Journal for Research in Engineering Application & Management (IJREAM)
ISSN : 2454-9150 Vol-06, Issue-06, SEP 2020

Figure-5 CASA deposits as a proportion of overall deposits of the bank for the period FY 2011-FY 2015 (in INR)
900,000,000 724,629,216 80.00
71.41
800,000,000 632,968,721
418,032,741 70.00
700,000,000 531,108,333 60.00
600,000,000
50.00
500,000,000 355,664,366
40.00
400,000,000 298,524,287
30.00
300,000,000
16.70 17.59 15.47
13.99 20.00
200,000,000 111,352,502 112,125,142
88,694,360
100,000,000 49,754,951 10.00

- 0.00
2010-11 2011-12 2012-13 2013-14 2014-15

CASA deposits All deposits (Demand deposits/All deposits)%

(Source: Annual Reports of the bank)

The proportion of CASA deposits has hovered in the range of 13% - 15% save for FY 2012 when it registered 71.41 percent.
This can be ignored since it is a one-off event. Overall, this range is simply not good enough for the bank to raise its profit
margin. One would expect the proportion to be at least 25 percent. The bank had better focus on raising the CASA component
in their overall deposit portfolio.
1.6.6 Correlation between the proportion of CASA deposits and the net profit of the bank for the period FY 2011-FY
2015
One would expect the net profit of the bank to improve as the proportion of CASA deposits in the total deposit base of the
bank improves. Hence it is worth examining this metric. The following Table and Figure attempt such an examination.
Table-6 Correlation between the proportion of CASA deposits and the net profit of the bank for the period FY 2011-FY
2015 (in INR)
Year (CASA deposits/All deposits) % Net profit (INR)
2010-11 14 5168904.36
2011-12 71 5524277.06
2012-13 17 6829385.11
2013-14 18 7546776.54
2014-15 15 11273428.45
Correlation coefficient -0.38975825

(Source: Annual Reports of the bank)

Figure-6 Correlation between the proportion of CASA deposits and the net profit of the bank for the period FY 2011-
FY 2015 (in INR)
12,000,000 71 11,273,428 80
70
10,000,000
7,546,777 60
8,000,000 6,829,385
50
5,168,904 5,524,277
6,000,000 40
30
4,000,000 17 18
14 15
20
2,000,000
10
- -
2010-11 2011-12 2012-13 2013-14 2014-15

Net profit (INR) (CASA deposits/All deposits)%

(Source: Annual Reports of the bank)

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 International Journal for Research in Engineering Application & Management (IJREAM)
ISSN : 2454-9150 Vol-06, Issue-06, SEP 2020

The proportion of CASA deposits has hovered in the range would expect the proportion to be at least 25 percent.
of 13% - 15% save for FY 2012 when it registered 71.41 The bank had better focus on raising the CASA
percent. This can be ignored since it is a one-off event. The component in their overall deposit portfolio.
net profit in FY 2012 has risen by only INR 3,55,000
6. The proportion of CASA deposits has hovered in the
(5524277.06-5168904.36) approximately. Clearly this has
range of 13% - 15% save for FY 2012 when it
come about on account of window-dressing on the part of
registered 71.41 percent. This can be ignored since it is
the bank or on account of serendipitous developments.
a one-off event. The net profit in FY 2012 has risen by
Even this has not helped the bank raise the net profit – it
only INR 3,55,000 (5524277.06-5168904.36)
has only depressed the rise in net profit, a skewed outcome.
approximately. Clearly this has come about on
As a matter of fact, when the proportion of CASA deposits
account of window-dressing on the part of the bank or
was much lower than 71 percent in the other years, the rise
on account of serendipitous developments. Even this
in net profit has been at least INR 7,00,000.
has not helped the bank raise the net profit – it has
VII. SUMMARY OF FINDINGS only depressed the rise in net profit, a skewed
outcome. As a matter of fact, when the proportion of
In the following paragraphs, a summarised version of the CASA deposits was much lower than 71 percent in the
findings arrived at in respect of the three categories of other years, the rise in net profit has been at least INR
respondents is furnished: 7,00,000!
1. During the period under review, the CASA deposits of
VIII. RECOMMENDATIONS
the bank grew at a compounded annual growth rate
(CAGR) of 22.52 percent. This is no mulish growth a. The bank should chase a secular rise in the growth of
but the fluctuating YoY growth of the bank (at annual its CASA base. Presently its growth is rather erratic,
intervals) is not something the bank can flaunt. From a suggestive of attempts at window-dressing or ever-
YoY of 499.99 percent or 500 percent during a year greening. If the bank did follow such a strategy, it is
and a negative 70.29 percent the very next year is time the bank corrected itself. After all, the depositor
unfathomable to say the least. This does not augur well requires interest on the money she / he has parked and
for the bank. hence if the bank is unable to redeploy the mobilised
deposits in its advances portfolio, it will not be able to
2. During the period under review, the net profit of the
service the debt (which in this case is the deposit) . The
bank grew at a compounded annual growth rate
strategy will backfire and eat into the bottom-line of
(CAGR) of 21.52 percent. However, the YoY growth
the bank.
in net profit saw a setback between FY 2013 and FY
2014. During the very next year, the bank registered a b. Ditto the net profit of the bank. A quantum jump in net
quantum jump in net profit at 49.38 percent, thereby profit to 49.38 percent in FY 2015 smacks of
redeeming the situation somewhat. undesirable practices on the part of the bank to rectify
the setback it witnessed in the net profit zone in the
3. During the period under review, the net profit of the
previous year, namely, FY 2014. These strategies may
bank and the CASA deposits of the bank have not
work in the short term but in the medium term, they
moved unidirectionally. Between FY 2012 and FY
will rebound on the bank in the very next year thereby
2013, the net profit moved from INR 55,24,277.06 to
letting the cat out of the bag. The rebound could be so
INR 68,29,385.11 representing a rise of approximately
bad as to turn the situation from bad to worse.
25 percent. Unbelievably, the CASA base fell from
INR 29,85,24,287.00 to INR 8,86,94,360.17. In the c. It is rather surprising that the net profit of the bank and
circumstances, the correlation coefficient of -0.20 the CASA base of the bank have not moved
between net profit and CASA base does not come as a unidirectionally. This only implies that the bank has
surprise. not exploited its CASA base to the hilt. CASA funds
represent the cheapest source of working capital for the
4. The overall growth of deposits of the bank has grown
bank and if this advantage is not leveraged by the bank,
at a CAGR of 19.47 percent. The YoY growth has
it smacks of inefficient exploitation of working capital
been less inconsistent, so to speak. Hopefully, the
on the part of the bank. A distinct possibility is that the
YoY growth of the overall deposits will not plateau
bank has not been able to deploy its CASA funds in its
off.
lucrative advances portfolio for want of viable loan
5. The proportion of CASA deposits has hovered in the proposals or creditworthy borrowers. If this is the case,
range of 13% - 15% save for FY 2012 when it the bank should take steps to retard the growth of its
registered 71.41 percent. This can be ignored since it is CASA base. The suggestion may sound perverse, but
a one-off event. Overall, this range is simply not good the bank cannot afford to bite off more than what it can
enough for the bank to raise its profit margin. One chew. The bank can reduce the interest it pays on its

248 | IJREAMV06I0666049 DOI : 10.35291/2454-9150.2020.0618 © 2020, IJREAM All Rights Reserved.

 International Journal for Research in Engineering Application & Management (IJREAM)
ISSN : 2454-9150 Vol-06, Issue-06, SEP 2020

savings accounts to a level it is operationally and proportion of CASA deposits has hovered in the range
financially comfortable with. A rupee saved is more of 13% - 15% save for FY 2012 when it registered
than a rupee earned, in value terms because the earned 71.41 percent. This can be ignored since it is a one-off
rupee is subject to tax. The members of the UCB can event. The net profit in FY 2012 has risen by only INR
also be persuaded to acquiesce in this strategy given 3,55,000 (5524277.06-5168904.36) approximately.
the backdrop against which such interest rate reduction Clearly this has come about on account of window-
is sought and the consequences that could follow if the dressing on the part of the bank or on account of
interest rate reduction is not given effect to. serendipitous developments. Even this has not helped
the bank raise the net profit – it has only depressed the
d. The overall deposits of the bank have grown at a
rise in net profit, a skewed outcome. As a matter of
CAGR of 19.47 percent. The YoY growth has been
fact, when the proportion of CASA deposits was much
less inconsistent, so to speak. Hopefully, the YoY
lower than 71 percent in the other years, the rise in net
growth of the overall deposits will not plateau off. As a
profit has been at least INR 7,00,000! Window-
matter of fact, the deposits overall should grow steadily
dressing or evergreening (in the case of advances) will
and not in fits and starts. For example, deposits have
not help the UCB improve its bottom-line. Instead, the
grown at 27.05 percent in FY 2013 only to fall to 19.18
bank should chase a steady and incremental growth in
percent the next year and to 14.48 percent the year
all departments, including deposits, advances and other
next. There has been an inexplicable fall in FY 2015
financial / insurance services and products.
too. Such volatility in the growth of the deposit base
does not augur well for the bank, given that it will REFERENCES
make it difficult for the bank to project its advances
figures for the short term and medium term. Hence the [1] Gayatri, N. (2019, February 7). Home:The
bank should focus on steadying the pace at which its Economic Times. Retrieved from The Economic
deposit grows. Times Website:
https://economictimes.indiatimes.com/industry/ban
e. The of CASA deposit base hovering between 13% and king/finance/banking/indias-cooperative-banks-
15% is not good news. In a bank where the savings are-getting-a-brand-new-
deposits are mostly held by retail customers one would cover/articleshow/67881975.cms
expect the percentage to be at least 25. However, save
for the FY 2012 percentage which was 71.41, the [2] indiainfoline. (2017, May 26).
percentages for the rest of the period have hovered at Home:indiainfoline.com. Retrieved from
the sub-15 level. UCB‟s retail customers are from the indiainfoline website:
lower income class, middle income class and to a https://www.indiainfoline.com/article/news-sector-
certain extent, from the upper middle class. Most of others/rbi-hikes-crr-for-non-scheduled-urban-co-
them are not capital market savvy and hence do not operative-banks-114060600201_1.html
invest in securities like stocks and bonds. They find it [3] KSCUBF. (2017, June 7). Home:KSCUBF.
more comfortable to park their funds with banks and it Retrieved from KSCUBF Website:
is thus surprising that the proportion of CASA deposits http://kubfed.com/about-kscubf/
of the UCB has ruled at sub-25 percent levels. It is
[4] M. Muthumeena, M. J. (2017, August 4).
time the UCB focussed on improving its CASA base
Home:jardcs.org. Retrieved from jardcs website:
by promoting its savings deposits rather aggressively.
http://www.jardcs.org/abstract.php?archiveid=821
A focused campaign must be launched for the purpose,
highlighting the advantages the retail savers can reap, [5] Ram, K. K. (2018, November 21). Home:The
by parking their investible surplus in the bank‟s Hindu Business Line. Retrieved from The Hindu
savings accounts. After all, most of these banks have Business Line Website:
gone hi-tech, implemented the core banking solution https://www.thehindubusinessline.com/money-
(CBS) and installed ATMs, stand-alone as well as on- and-banking/urban-co-op-banks-irked-over-rbis-
branch. Their retail customers are a motley crowd – proposal-on-board-of-
from college students to corporate and public sector management/article25560105.ece
executives, bureaucrats, professional and self-
employed people, retail traders and transport operators.
Additionally, many UCBs offer online banking
facilities, financial and insurance products, making
sure that almost all the services are provided under the
same roof. These are carrots good enough to lure
potential investors in savings accounts. It is time the
bank took up this exercise seriously and promptly. The

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