An analytical study of productivity and profitability of district central cooperative banks in Punjab

Banks and police are two universal organisations. One will find them in every corner of the world. Police is to control and maintain social order. Banks perform the functions of economic police i.e they control, direct and stimulate economic development. Banks are vehicles to channelize the savings of masses in national production. Liberalization, privatisation and globalisation have compelled financial organisations world over to change their working environment, strategies, policies, structures and product lines. Cooperative credit structure which is an integral and important part of Indian Banking system is not immune to winds of economic change. Agriculture, the main sector of Indian economy, is prone to natural calamities. As a result of uncertainty in production, low income generation and high transaction cost, agriculture financing is very risky business for banks. Therefore commercial banking system was avoiding to finance agriculture operations and to fill this gap cooperative banks were organised as a tool of state policy. Agriculture being prime sector of Indian economy needs a very strong, efficient and effective institutional credit support even today. Therefore it has been repeatedly stressed that the vitality and viability of the cooperative credit institutes must be preserved to enable them to function efficiently, as they are and will be, prime institutional agencies for agriculture and rural credit with their vast net work, wider coverage and out-reach extending to remotest part of the country. In the context of the same, the present study focuses on evaluation of the performance of cooperative banks in the state of Punjab. Six District Central Cooperation Bank (DCCBs) from the state of Punjab has been selected for the study. Their productivity and profitability have been studied for a period of nine years (1999–2000). It is found that profitability in all selected DCCBs of Punjab had shown a negative trend whereas the productivity improved significantly over the period of study.