URBAN CO-OPERATIVE BANKS IN KARNATAKA - A STUDY ON GOVERNANCE AND BUSINESS EFFICIENCY

Abstract

Governance challenges in cooperative banking are the major issues in banking system. For the long run of cooperative banks it is needful of exploring the variables to uphold the governance of UCBs. This study provides an opportunity to understand the governance practices and mechanism in enhancing Cooperative Banking Business Efficiency. The extensive reviews addressed the governance in various sectors and its importance in industries. Several reviews identified concentrating on public, private and commercial banks governance implication and bank performance, board diversity, structure and size in banking performance. Only few states of India covered for cooperative bank governance research like Maharashtra and Tamilnadu, a very few studies have been found in Karnataka on Urban Cooperative Banking Sector. The present study focus on exploring governance mechanism and practices adopted by the UCBs of Karnataka and to analyse factors leading to achieve business efficiency. The study selected internal stakeholders (UCBs Directors, Managers, Employees and staff) for inspecting cooperative governance. Internal stakeholders such as CEOs, BODs, Audit Committee and employees are considered as Respondents to analyse and measure the cooperative governance. Transparency, Accountability, Responsibility, Fair practices, Risk Management, Management Efficiency, Fund Management, HRM, Change Management, Policies and Procedures, Ethical Practices and Governance Challenges are the independent variables used to study the governance mechanism of internal stakeholders. Secondary data has been collected for a period of five years from 2014-2018 from RBI (Urban Cooperative Bank Department) and Karnataka State Urban Cooperative Bank Federation, to analyse the Financial position of the UCBs of Karnataka. It has been found from the financial analysis that UCBs need to address the sensitive areas where they can increase their financial growth for long run sustainability and need to introduce competitive products and services where stakeholder’s retention possible. Stake holders (Member’s Empowerment) always prefers the innovated products and services, this makes them to loyal towards cooperative banking system (Business Efficiency). The primary data collected to analyse the Governance practices and mechanism on the business efficiency of urban cooperative banking. For this study Urban Cooperative Banks of Karnataka categorized as four divisions into Bangalore, Mysore, Belgaum and Gulbarga. There were 262 UCBs in Karnataka excluding its branches, Out of which 158 UCBs taken for the study. To measure the financial performance, percentage growth analysis, growth by division, per branch and per employee has been carried out. Primary analysis carried out with the usage of SPSS to find out the compliance level from both Member’s and officers analysis. To find out the variations of governance practices and mechanism based on demographical study Kruskal- Wallies test administered. To analyse the relationship between the governance mechanism and practices correlation study carried out, to find out the influence of dimensions of governance mechanism and practices on business efficiency of the UCBs regression analysis administered. To find out the contribution of governance challenges in model between governance mechanisms, practices, quality of the board and business efficiency regression model analysis adopted for the study. Findings of the study reveal that along with innovative products, there is need of maintaining the sound internal control system to enhance managerial effectiveness and managerial efficiencies. Adopting governance pillars for fulfilling cooperative banking objective should be prioritised. Transparency, Accountability, Responsibility, Fairness, Managerial Efficiency, Human resource management, Policies and Procedures, Ethical Practices, Change Management and Fund Management are crucial variables to resolve the governance issues. Business efficiency leads to Excellency of business and even helps member’s to enhance and create their investment values. The cooperative area and cooperative banking sector is the future scope of research, it is suggested to implement BODs assessment, 360O performance assessment sheet and governance index to circulation to strengthen the cooperative governance. Keywords: Corporate Governance, Governance practices and mechanism, UCBs, Transparency, Accountability, Responsibility, Fairness, Risk Management, Ethical Practices, Fund and Change Management, Policies and Procedures, Member’s Empowerment, Business Efficiency and Governance Challenges.