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In recent years, financial institutions, especially banks, have had to operate in an
increasingly competitive environment under financial sector reforms, due to open and global economy.This trend is expected to continue in India too as competition from the private and
foreign picks up, the number of nonbank competitors and private banks increase. The Indian
banking sector reforms involve twin stands of stricter prudential norms and deregulation of the
operating environment. Weak banks, strong banks and potentially weak banks are identified by the
Verma Committee-1999 on the basis of seven financial performance parameters viz.,
capital adequacy ratio, coverage ratio, return to assets, net interest margin, operating profits to
average working funds, cost to income and staff cost to interest income plus other income.
Analyzing productive efficiency in the Indian banking industry, especially cooperative banking segment
is interesting after the implementation of deregulatory policies. However, there has been no
or very less number of studies in analyzing the productive efficiency in the cooperative
banking industry.
The banking system in India comprises commercial and cooperative banks, of which the
latter accounts for around 3% of the banking system assets. The Indian Cooperative Movement
has been essentially a child of distress. On the recommendations of Sir Frederick Nicholson
(1899) and Sir Edward Law (1901), the Cooperative Credit Societies Act was passed in 1904,
paving the way for the establishment of Cooperative Credit Societies in India. The credit
cooperatives are the oldest and the most numerous of all types of cooperatives
in India. The cooperative credit movement in modern India is a state-initiated
and state-dependent movement. The credit cooperatives lead to the formation of cooperative
banks. |
