Volume 7, Issue 3 (March, 2018) UGC APPROVED Online ISSN-2277-1166 Published by: Abhinav Publication Abhinav National Monthly Refereed Journal of Research in PERFORMANCE OF KARNATAKA VIKAS GRAMEENA BANK IN DEPOSIT MOBILISATION AN ANALYSIS Dr. Laxmisha A.S. Head of the Department of Commerce L.B. and S.B.S College, Sagar, Karnataka, India Email:drlaxmisha@rediff.com ABSTRACT The Regional Rural Banks are the specialized rural financial institutions created for developing the rural economy by inculcating the banking habits in the rural masses and to tap idle money by way of deposits. Deposit accretion is an important variable determining the path of growth of the banking institution. It is this variable which throws light on the contribution of a banking institution to the capital formation in the country. Mere numerical expansion of branches is not the ultimate aim of the RRBs. Taking the banking services to the door steps of the villagers is perhaps the first step to inculcate and promote the habit of thrift among people which is crucial for enhancing the rate of capital formation in the country. Keywords: RBI, Deposit mobilisation, Karnataka Vikas Grameena Bank INTRODUCTION The RRBs have been in existence from last 42 years in the Indian Financial Scene. The performance evaluation of RRBs in terms of deposit mobilization and financial inclusion had been studied by many researchers. Madhukar R.K., 1 in his study on mobilization of rural savings identified the challenges such as bringing rural India closer to the urban standards, accelerating the rate of savings, launching the schemes that will mobilize large volume of savings, intensifying the marketing schemes, extending the business hours, make staff more rural orientation etc. Hemalatha and Poonam Singh 2 in their paper on financial inclusion and mobilization of deposits across regions suggested the extension of services to unbanked areas. Adilakshmi P et.al., 3 in their empirical study on RRBs analyzed the performance in terms of number, deposit mobilization, investment etc. For long time the rural people used to depend on money lenders for their financial requirements and after the growth of organized banking system they started to go to either co-operative or commercial banks in the nearby vicinity. Now there is a competition for attracting deposits between commercial banks, RRBs and co-operative banks. There is also a feeling among the rural masses (gradually this trend is declining) that RRBs are meant only for advancing loans to the weaker sections of the rural community. All these factors have created many difficulties for the RRBs in mobilizing the deposits. Keeping the findings of the related research studies attempt to evaluate the deposit mobilization function of KVGB is made here. SCOPE AND METHODOLOGY The Universe : Karnataka Vikas Gramina Bank came into existence on 12 th September 2005 by amalgamating 4 RRBs functioning in 9 districts of Karnataka State. The secondary data prior to 2005-06 are not considered due to its non-existence. Available online on www.abhinavjournal.com 90
Data Source: The annual reports and other published statistics. The secondary information from 2005-06 to 2015-16 are analyzed by the paper. The field survey findings are incorporated to validate the secondary data findings. Tools for Analysis: Simple statistical tools such as percentage, growth rate, ratio and Geometric mean are used. ANALYSIS AND INTERPRETATION Deposit accretion is an important variable determining the path of growth of the banking institution. It is this variable which throws light on the contribution of a banking institution to the capital formation in the country. The role of RRBs in capital formation is vital which could be assessed with the help of deposit accretion variable. Mere numerical expansion of branches is not the ultimate aim of the RRBs. Taking the banking services to the door steps of the villagers is perhaps the first step to inculcate and promote the habit of thrift among people which is crucial for enhancing the rate of capital formation in the country. Deposits mobilized by KVGB take different forms, ranging from simple featured No Frill Accounts to long term deposit accounts. Since the RRBs in general and KVGB in particular are penetrating deep into the remote rural and unbanked areas, their clientele consists mainly of the rural poor. The RRBs also cannot offer the same facilities and privileges, which a commercial bank can afford to its depositors, due to low cost profile. As rich and well-to do farmers are not covered (comparatively) by the credit schemes of the RRBs, they have developed the attitude of indifference towards RRBs and are reluctant to deposit money with them. Karnataka Vikas Gramina Bank is making efforts to inculcate the habit of savings among the rural masses. The trend in the growth in number of deposit accounts of KVGB over the years is presented in below Table 1. Table 1 shows that the deposit has raised from 1917.14 crores in 2005-06 to Rs 11,644 crores in 2015-16 with a CAGR of 607.37 per cent. The year-wise growth against the relevant previous year shows that from the year 2006-07 to 2009-10, the rate of increase is encouraging while it is declining in subsequent years. Similarly the absolute increase in terms of amount since 2005-06 has shown continuous increase in the amount of deposits over the years (except 2010-11 and 2011-12 ). The analysis of deposit-mobilization by KVGB reveals that (no doubt, there is increase in number of accounts as well as amount of deposit), there is lack of consistency in growth over the years.the field survey revealed that the deposit drive of KVGB has many hurdles such as lower literacy rate, relatively low per capita income of target customers, connectivity issues in some of the branches, limited number of bigger bank accounts etc. In the wake of these, it is motivation and the personal human element which alone could generate larger savings from rural community. Emphasis, therefore, should be given to this human element and motivational aspect in mobilizing the deposits. Deposits(Rs in Crores) (X) TABLE 1 ANALYSIS OF DEPOSITS OF KVGB Increase in Absolute Terms (Rs) Growth Rate (%) Log X 2005-06 1917.14-22.27 3.2826 2006-07 2230.38 313.24 16.34 3.3483 2007-08 2756.74 526.36 23.60 3.4399 2008-09 3458.70 701.96 25.46 3.5388 VOL. 7, ISSUE 3 (March, 2018) 91
Target % of Target % of Target % of 2009-10 4455.86 997.16 28.83 3.6489 2010-11 5405.70 949.84 21.32 3.7328 2011-12 6186.50 780.80 14.44 3.7916 2012-13 7392.85 1206.35 19.49 3.8687 2013-14 8628.96 1236.11 16.72 3.9359 2014-15 9914.54 1285.58 14.90 3.9963 2015-16 11644.18 1729.64 17.45 4.0660 CAGR 607.37 logx=40.6498 Source: Compiled from Annual Reports, KVGB, 2005-06 to 2015-16 The geometric mean calculation shows that the mean amount of deposit is Rs 4,960. Working Note: Log x 40.6498 GM= AL ------------ AL = -------------- = 3.6954 GM = Rs 4,960 N 11 Target and s Analysis Annually, the KVGB is setting the deposit target for its branches, taking economic conditions, previous business and government policies in to consideration. Table 2 present the target and achievement analysis during the period under study. TABLE 2 TARGET AND ACHIEVEMENT ANALYSIS OF DEPOSITS-KVGB Deposits (Rs in Crores) Growth in Deposits (Rs in Crores) Ratio of Demand Deposit to Total Deposit 2005-06 1944 1917.14 98.62 23.98 22.26 92.83 45.16 52.08 115.32 2006-07 2300 2230.38 96.96 20.00 16.34 81.70 55.00 54.86 99.74 2007-08 2700 2756.74 102.10 21.00 23.60 112.38 50.00 48.50 97.00 2008-09 NA - - - - - - - - 2009-10 4200 4455.86 106.09 21.00 28.82 137.24 45.24 47.15 104.22 2010-11 5400 5405.70 100.94 21.00 21.32 101.52 47.00 50.56 107.57 2011-12 6400 6186.50 96.66 18.39 14.44 78.52 50.00 52.45 104.90 2012-13 7233 7392.85 102.21 16.92 19.49 115.19 53.92 49.97 92.67 VOL. 7, ISSUE 3 (March, 2018) 92
2013-14 8850 8628.96 97.50 14.57 12.36 84.83 50.28 51.71 102.84 2014-15 10,000 9914.55 99.14 13.71 12.86 93.80 50.00 50.60 101.20 2015-16 11,600 11644.18 100.38 16.85 17.29 102.61 50.00 31.68 63.36 Source: Compiled from Annual Reports KVGB, 2005-06 to 2015-16 The interplay of Table 2 reveals the following. 1) The year-wise percentage achievement shows that in 5 out of 11 years under study, the bank has crossed the target and in the remaining years it is nearer to the target. 2) The performance in the growth rate target in terms of percentage shows a positive sign in 5 out of 11 years. But the performance is not up to the mark in 2011-12 (78.52 perc ent), 2006-07 (81.70 per cent ) and 2013-14 (84.83 per cent). 3) Striking balance between liquidity preference of customers and meeting long-term financial requirement of the borrowers is a challenging issue to be addressed by the bankers. By taking stock of existing number of accounts, type of deposit account, amount of deposit and loan, periodicity of deposits and loan accounts etc., the annual target in terms of ratio of demand deposit to total deposit is fixed by the bank management. As such, the data shows that in 2005-06, 2009-10,2010-11 2011-12 and in 2013-14 the ratio of demand deposit is exceeding the target which increased the liquidity burden of the bank in short-run and affected the term lending. The reasons may be the poor financial holding of customers, PMJDY accounts etc. Break-up of Deposits To see the comparative growth rate of demand and term deposits the break-up analysis is made with the data in the below Table 3. Demand Deposits GR % TABLE 3 BREAK-UP OF DEPOSITS Term Deposits GR % TOTAL 2005-06 998.36 44.25 918.78 4.89 1917.14 - Combined GR % 2006-07 1223.79 22.58 1006.59 9.56 2230.38 16.34 2007-08 1337.14 9.26 1419.60 41.03 2756.74 23.60 2008-09 1592.13 19.06 1866.57 31.48 3458.70 25.46 2009-10 2101.01 31.96 2354.85 26.16 4455.86 28.83 2010-11 2731.35 29.98 2674.35 13.57 5405.70 21.32 2011-12 3245.01 18.8 0 2941.49 9.99 6186.50 14.44 2012-13 3694.92 13.86 3697.93 25.72 7392.85 19.49 2013-14 4462.13 20.76 4166.83 12.68 8628.96 16.72 2014-15 5016.36 12.42 4898.18 17.55 9914.54 14.90 2015-16 3688.71 17.97 7955.47 62.41 11644.18 17.45 Source: Annual Reports KVGB, 2005-06 to 2015-16. VOL. 7, ISSUE 3 (March, 2018) 93
Interpretation: The data presented in Table 3 shows that the growth rate in demand deposit against the relevant previous year is highest in 2009-10 followed by 2010-11,2006-07,2013-14 and so on. Similarly in case of term deposit, the growth rate is highest in 2007-08 followed by 2008-09, 2009-10, 2012-13 and so on. The comparision of deposit-wise growth rate with the combined growth rate shows that growth rate in deposit is more than the combined growth rate in 2006-07,2009-10,2010-11,2011-12 and 2013-14. The growth rate is more in case of term deposit in 2007-08, 2008-09, 2012-12, 2014-15 and 2015-16. The comparative rate of growth in demand and term deposits is made with geometric mean calculations shown below. TABLE 4 ANALYSIS OF GROWTH IN DEMAND AND TERM DEPOSITS Growth Rate of Demand Deposits Log X Growth Rate of Demand Deposits Log X 2005-06 44.25 1.6459 4.89 0.6893 2006-07 22.58 1.3537 9.56 0.9805 2007-08 9.26 0.9650 41.03 1.6131 2008-09 19.06 1.2801 31.48 1.4980 2009-10 31.96 1.5047 26.16 1.4176 2010-11 29.98 1.4769 13.57 1.1326 2011-12 18.80 1.2742 9.99 0.9996 2012-13 13.86 1.1418 25.72 1.41.2 2013-14 20.76 1.3173 12.68 1.1032 2014-15 12.42 1.0941 17.55 1.2442 2015-16 17.97 1.2546 62.41 1.7953 N=11 logx=14.3 083 Source: Growth rate calculations in Table 3. Working Note: Log x GM=AL -------------- N A) Demand Deposits B) Term Deposits 14.3083 13.8836 AL= ------------ = 1.3008 AL = ------------ = 1.2621 11 11 GM= 19.99 GM = 18.28 N=11 log X=13.8836 VOL. 7, ISSUE 3 (March, 2018) 94
The above calculation shows that the rate of growth in demand deposit is better than the rate of growth in term deposits. SUGGESTIONS Based on the study findings, the paper offers the following issue specific suggestions. 1. Exploring the potential centres for opening the bank branches. 2. Shifting the branches by looking into viability. 3. Introduction of new and innovative deposit schemes. 4. Organizing the banking awareness camps in unbanked and backward areas. 5. The government should bring more and more activities to the fold of Direct Benefit Transfer (DBT) scheme. 6. To regulate the operational cost of No Frill Accounts it is suggested to motivate the account holders to save more and more amount. 7. The government and sponsor banks should create room for RRBs by shifting their branches in rural branches. 8. Attracting the quality customers. 9. Extension of home banking and technology based banking services to increase the customer base of the bank. REFERENCES 1. Madhukar R.K., Mobilisation of Rural Savings: Opportunities and Challenges, cited in G.V. Joshi, P.A. Rego and Siman M., Banking for Rural Development in India: Progress, Problems and Prospects (Ed.Vol.) 2. Hemalatha and Poonam Singh., Financial Inclusion through RRBs. Role of Regional Rural Banks in India (Ed.) Meenu Agarwal, New Century Publications, New Delhi, 2009. 3. Adilakshmi P., Rajesh C. Jampala and Srinivasa Rao, Dokku. 4. Madhukar R.K., Op.cit. 5. Annual Reports, Karnataka Vikasa Grameena Bank, 2005-06 To 2015-16. 6. Gupta S.P., Statistical Methods, S.Chand & Company, New Delhi. (The support of ICSSR, New Delhi in pursuing the research project is duly acknowledged.) VOL. 7, ISSUE 3 (March, 2018) 95