Financial Performance of Urban Cooperative Banks : A Study with Reference to Tamil Nadu

It is a common belief that in India, cooperative banks are not functioning well and will not be able to face competition from their counterparts. To confirm this statement, due to mismanagement in some of the urban cooperative banks in the states of Maharashtra, Gujarat and Andhra Pradesh, the public confidence in these banks has been adversely affected by failure of a few scheduled and unscheduled Urban Cooperative Banks (UCBs) during the years 2001 to 2004. However, these banks are now trying to regain public confidence and their deposits again have started showing improvement. Each bank needs to know its standing in the market so that it could formulate its business strategy. For this purpose, the bank also should be able to compare its performance with its peer group on on-going basis in an increasingly competitive and risky market place. Under such circumstances, only banks that perform well on all fronts will survive. The present study is an attempt to investigate intensively into the profitability performance of UCBs with reference to Tamil Nadu state using a RoE and RoA measure of overall profitability. Five UCBs in Tamil Nadu chosen as sample. This study covers a period of six years i.e. from 1998-99 to 2003-04. The study reveals that the sample banks shows satisfactory performance as regards RoE, RoA and NIM. The low percentage of establishment cost reflects the efficiency of the sample banks with regard to cost control. Though a spurt in the interest expenditure is evident, by curtailing the operating expenditure, banks were able to show higher net profit than before. The major income of the sample banks comes from lending operations and it is stable in all six years. It clearly indicates that the cooperative banks will able to face competition in the present business environment