Chapter 4

Research Methodology

Rationale of the Study

Research Methodology

Problem of the Study

Objectives of the Study
Universe of the study
Period of Study, Data Collection, Sample for the Study and Analysis
Contribution of the Study

Overview of Chapter Plan

Limitations of the Study

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Rationale of the Study

The surfacing of the co-operative banks scam has once again, the financial
sector and its markets fell victim to the regulators failure to check malpractices
within the system. The new scam involving the co-operative sector points to a
crying need to have a speedier and better coordinated process for dealing with
financial frauds as well as an effective governance structure and settlement
system for efficient functioning of financial institutions.

The RBI found 25 urban co-operative banks spread across Gujarat,

Maharashtra and West Bengal to be in violation of the RBI norms. In all, these
banks are suspected to have run up losses of around Rs. 500 crores. As more
than one co-operative bank is involved, it is feared that this could be only the tip
of the iceberg. In November 2001, the RBI found that these banks had flouted
banking norms stipulated by it.

The National Bank for Agriculture and Rural Development (NABARD) is the
supervising body for all rural co-operative banks with the RBI as a regulator
making the rules for these banks. However, the day-to-day administration of
these banks is supervised by the RCS that come under State governments.
Urban co-operative banks are monitored by the RBI and the RCS.

The RBI appointed Madhav Rao Committee on Urban Co-operative Banks, the
Jagdish Capoor Report on Co-operative Credit and the Expert Committee on
Legal aspects of Bank Frauds 2001 were unanimous on the need for a
restructuring of co-operative banks and abolition of its dual management.

Eventhough the RBI made its representation to the Government on dual

management; the Union Government does not want to take a view on this. In the
Credit and Monetary Policy 2002-03, the RBI noted, The events in the last two

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years have made it abundantly clear that the present system of dual/triple
regulatory and supervisory control (involving Centre, States and the RBI) is not
conducive to efficient functioning of the co-operative banks in the interest of
their depositors. Several committees in the past have also recommended
elimination of multiple layers of supervision and regulation of this sector.

In view of the local interest involved, it is also clear that there is no consensus at
present in favour of removing supervisory and regulatory responsibilities at
Central/State government levels and for entrusting it exclusively to the RBI. As
a result, the managements and boards of several co-operative institutions
continue to reflect political interests rather than genuine co-operative spirit, and
are not always amenable to normal banking discipline in their operations. In
view of this, it would be best, in the interest of the public depositors, it the
situation is faced squarely and a separate supervisory authority is set up, with
representatives of Centre, State and other interested elements. Such a body can
then be exclusively made responsible for efficient functioning of the co-
operative institutions and also take responsibility for ensuring the safety of
public deposits.

While the Reserve Bank of India (RBI) is pointing fingers at political

interference and lack of professionalism in the state UCBs, the co-operative
banking sector feels a mixture of dual control between the RBI and the State
government is as much to blame, and has demanded more teeth on the recovery
front.

The State Government, for once, is playing it out in a rather subdued manner,
going easy on the rhetoric that one saw during the days of the Madhavpura
Mercantile Co-operative Bank (MMCB) debacle. Instead, it is taking out a
delegation this week to meet the RBI brass in Mumbai. Being conveniently

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swept under the carpet by all and sundry is that everybody saw it coming and no
evasive action was taken.

Research Methodology

Problem of the Study :

The Statement of the problem is A STUDY ON GOVERNANCE

PRACTICES IN CO-OPERATIVE BANKS.

Objectives of the Study :

The main aim of the study is to analyze the present status of Governance in
Urban Cooperative Banks (UCBs). The specific objectives of the study are:

1. To study and understand the concept and genesis of Cooperative Banks

in India in general and Gujarat in particular.

2. To understand and analyze the importance of Governance in Banks in

general and Cooperative banks in particular.

3. To evaluate the Compliance level of Governance in Urban Cooperative

banks and to evaluate their performance.

4. To identify and discuss various challenges faced by UCBs to implement

governance mechanism.

5. To suggest various means through which Governance practices can be

improved so as to increase the efficiency of Cooperative Banks.

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Universe of the study:

The study is carried out in among the various urban co-operative banks of
western part of India especially Gujarat. This includes some of the major UCBs
banks of Gujarat.

Period of Study, Data Collection, Sample for the Study and Analysis:

The present study is made on the basis of data collected from primary and
secondary sources. The primary data are collected through structured
questionnaire from different managers, Board of Directors of UCBs. Researcher
has sent the questionnaire to all the urban co-operatives chairman. From the
received questionnaire 22 questionnaire were filled up according to the
requirement of present research. The list of such bank presented in the
annexure. The structured interview method was employed for knowing the
governance practices adopted by their respective banks. The secondary data
collected from the journals, magazines, government publications and annual
reports of UCBs. The data collected were recorded, edited, classified and
analysed using relevant statistical techniques and employing appropriated test.
The data are presented through simple classification and with the help of
percentage, average, correlation and association.

Contribution from the Study:

The present study is intended to study the governance practices in Co-operative

Banks and identify the model of governance, which overall will allow UCBs to
respond to solicitations of the competitive environment. The elements of sound
governance and values of cooperative sectors UCBs should grapple the
challenges and convert them in opportunities.

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Overview of Chapter Plan

Chapter 1 - Overview of Banking Industry in India

This chapter will highlight the status of Indian Banking Sector in India. Which
includes current scenario of Indian Banking Industry, Aggregate performance of
Indian Banking Industry, Challenges faces by Indian Banking Industry, Bank
marketing in Indian Perspective, Challenges to Indian Banking Industry and
banking Industry vision 2020.

Chapter 2 - Overview of Co-operative Banks in India

This chapter will cover the Growth and Structure of the Indian Co-operative,
Urban Co-operative Banks - The Concept, Growth and Development of the
UCBs in India ,Growth and Development of the UCBs in Gujarat, Role of the
UCBs in Indian Banking System, Evaluation of the Role of UCBs, UCBs
Problems and Prospects, UCBS Recent Regulatory Measures, Future of
UCBs, Recent Developments and Facts about Cooperative banks in India

Chapter 3 Literature Review and Conceptual Framework

This chapter will include the review of existing literature available from several
journals, magazines, website and published data from several research agencies.
This chapter has highlights the status of Corporate Governance in Indian Banks
and the various recommendations required to comply by Cooperative Banks so
as to strengthen the governance mechanism.

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Chapter 4 - Research Methodology

The chapter will include comprehensive objectives of the study. The objectives
will be defined based on present status and future possible recommendations
given by the committees and central bank of India.
This chapter will include the methodology adopted for the research it will
include the universe of the study sampling design sampling unit -
Classification of samples period of study Data collection and analysis tolls
adopted for the study etc.

Chapter 5 - Analysis & Interpretation of Governance practices

The various statistical tools will be adopted for the data analysis and findings
will be represented in form of charts and graphs.

Chapter 6 - Summary of findings & Suggestions

The detailed findings of the research will be presented in this chapter and
appropriate suggestion would be made for implementing good governance
mechanism in UCBs

Limitation of the Study

All efforts have been made to ensure that the research is design and conducted
to optimize the ability to achieve the research objective. However there are
some constrains that do not validate the research but made to be acknowledge.
1. This study is restricted to the state of Gujarat only.
2. This evaluation is based on primary data generated through questionnaire
and collected from the respondents and as such its findings depend on
accuracy of data.

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3. The sample consists of more than 500 urban Indian consumers from
different cities of Gujarat State. The sample is selected conveniently and
in single phase so as the opinion suggested by the executives is situation
based. Also study is limited to the consumers who come to Malls and
does not delve the respondents who do not come to mall.
4. As the primary data and observational method of research has its own
limitations and based on the respondent the study is limited to Gujarat
state only and it cannot be applicable to the consumers of the other states
of India or at International Level.
5. The study is based on the response of the customer who is highly
subjective in nature and hence generalization made may not be totally
true.
6. During the course of personal interview the subjective nature of
interviewers might also have influence upon the response-received for the
present study.
7. Certain issues in the study concentrate on both perceptions and attitude of
respondents.
8. The major tool which is used for evolution, is 5 point, scale known as
liker scale and nominal scale and thus it has its own limitations.
9. Consistent data from secondary sources was available for last six years
only, moreover the data were processed to four years on an average basis
wherever required.
10.Researcher being an outsider, external analyst obviously has no access to
the internal information therefore it is hard to characterize inside view of
the Banks in the study.