Resource management in urban co-operative banks in Thrissur district

Abstract

Study on resource management in urban cooperative banks in thirssur district was conducted with the objective of examining the resource management practices of urban cooperative banks with special reference to the management of sources and use of funds, to identify problems and to suggest remedial measures thereof. Study observed that deposits constituted the lions share of total sources of funds of banks. The borrowings of the banks were negligible. Thre strong capital base of the banks helped to retain the credibility of the depositors, Reserves which contribute the major chunk of the owned funds, increased the total source of funds. The high proportion of fixed deposits in the funds mobilized caused to rise the interest liability of the banks. Since there are limits to control the interest cost, banks have to bring down their manpower and other expenses, improve revenue by the profitable deployment of funds, besides enhancing the mobilization of deposits for short periods.

Among the three types of loans and advances, short term loans and advances occupied highest place. However, banks may further improve the share of short term loans in the funds deployment, which can ensure frequent recycling of funds, maximize profit and keep the liquidity needs met. The major part of investment in short term loans and advances were financed through fixed deposit mobilization. Funds were not rationally allocated from the view point of periodicity. Yielding lesser income to the banks, the investments increased enormously. The disproportionate growth of equity and debts of the banks intensified the risk exposure of funds portfolio. There had no direct relationship between risk and return of the banks and a proper risk return trade off is lacking in majority of the banks. Banks had kept excess liquid assets and liquid cash over and above the statutory requirements. This necessitated scientific evaluation of the liquidity needs to identify the funds blocked as idle and utilize the excess fund kept for profitable deployment. Credit deposit ration of the banks was below the desirable level and this affected the profitability adversely. The lending efficiency of the banks had also affected by the poor recycling of funds. Therefore, steps may be taken to improve, the credit deposit ratio, reduce mounting over dues, and ensure efficient management of risk and return which in turn calls for the scientific management of funds.