Human Capital Management Practices in Higher Education : A Case Study of Addis Ababa University in Ethiopia
Worku Mekonnen Tadesse
Fitness among Organisational Strategy, Leadership Style and Followership Style, and its Contribution to Effective Strategy Implementation
Pulapa Subba Rao, Albert C. Mellam and Ponnusamy Manohar
Ethiopia
New Guinea
What Determines Dividend Policy: Evidence from Banking Sector in India
Ramachandran Azhagaiah
Analysing Business and Financial Risk of Select Companies under Indian Power Industry
Kartik Chandra Nandi
Marketing Strategy Formulation for the Introduction of Eukula Strato German Wood Finishes in Northern Kerala, India
Suraj Kushe Shekhar
Impact of Technology Improvements through Electronic Data Interchange: A Comparative Study of Japanese and Indian Automobile Industries
K.K. Patra
Producitve Employment Creation with Reasonable Earnings is the Main Solution for Inclusive Growth
K.Venkata Rao
Social Responsibility and its Impact on NPA Level of Selected Public and Private Sector Banks in India: A Comparative Study
Jayanta Kumar Nandi
COMMUNICATIONS
m II GITAM JOURNAL
OF
IIiI MANAGEMENT
Volume 13
January-March 2015
Number 1
RESEARCHPAPERS Human Capital Management Practices in Higher Education A Case Study of Addis Ababa University in Ethiopia,
1
Worku Mekonnen Tadesse
Fitness among Organisational Strategy, Leadership Style and Followership Style, and its Contribution to Effective Strategy Implementation
29
Pulapa Subba Rao, Albert C. MeHam and Ponnusamy Manohar
What Determines Dividend Policy: Evidence from Banking Sector in India
41
Ramachandran Azhagaiah
Analysing Business and Financial Risk of Select Companies under Indian Power Industry
52
Kartik Chandra Nandi
Marketing Strategy Formulation for the Introduction of Eukula Strato German Wood Finishes in Northern Kerala, India
68
Suraj Kushe Shekhar
Impact of Technology Improvements through Electronic Data Interchange: A Comparative Study of Japanese and Indian Automobile Industries
78
K.K. Patra
Producitve Employment Creation with Reasonable Earnings is the Main Solution for Inclusive Growth
92
K.Venkata Rao
Social Responsibility and its Impact on NPA Level of Selected Public and Private Sector Banks in India: A Comparative Study Jayanta Kumar Nandi
107
COMMUNICATIONS Sales Force Competency Mapping in Project Based Organisation R.Satish Kumar, Nagabhushana
R, and Silky Nanda
The Month-of-the-Year Effect in the Indian Stock Market: A Study on BSE SENSEX Som Sankar
142
Sen
Regional Rural Banks of Odisha: A Study on Amalgamation Impact Jitendra
130
153
Kumar Ram and Rabi N. Subudhi
Are the Private Sector Banks in India More Efficient than the Public Sector Banks?
166
Tagar Lal Khan and Abhijit Sinha
Celebrity Advertising S.Thiyagarajan
in Indian Visual Media
182
and P Shanthi
EVA : A Tool for Measuring Shareholders Value Creation - A Case Study of Maruti Udyog Limited
191
S.Vijayalakshmi
202
IFRS and Indian Scenario M. Yadagiri and P Rajender
Consumer's Attitude towards SMS Advertising in Nellore City, Andhra Pradesh A Factor Analysis Approach T.Ravindra
212
Reddy and N.Rajya Lakshmi
Innovative HRM Practices of Pharma Industry in India (A Case Study on NATCO Pharma Units of A.P) ); aga Raju Battu and V Srinivasa
Prasad
11
224
l Regional Rural Banks of Odisha: A Study on Amalgamation Impact JITE'iDRA
KC\lAR
RA\l
A'iD
R~BI
N.
SCBUDHl
After decades of struggle. post amalgamation. Regional Rural Banks (RRBs) are nOlI' reportedlv looking up. Attempts have been made by scholars to verify and measure the positive changes, as claimed bv manv. Has amalgamation of RRBs actuallv resulted in improving their performance? This paper looks atthe present status of banking sector and more particularly the RRBs of Odisha. It analvses the evolution and growth of RRBs. With the objective of inter and intra RRB analvsis. the paper uses both secondary and primary data to studv and check, whether there has been any significant improvement. in the of RRBs.
verv functioning
Introduction: In a world of increasing corporatization and privatization, emphasis is now more on how to improve efficiency through better governance. Good governance is one which is accountable, transparent, responsive, equitable and inclusive. effective and efficient and which follows the rule of law (Sinha, 2013). Many studies can be found on .good corporate governance' in literature. Studies are. also found on 'status of governance' in banking sector. Here we focus our discussion. on the state of affairs in the Indian banking sector, particularly in case of Regional Rural Banks (RRBs). In the following sections. we first summarize briet1y the development in banking industry and the reforms measures taken after liberalization. Then different financial indicators are analyzed to know if the governance-reforms have improved its operational efficiency. and also the customer perception. Operational efficiency is analyzed through secondary data, and customer perception is analyzed by a survey of customers of RRBs in Odisha. Amalgamation in RRBs in Odisha is taken as a major reform, aimed at improving governance. which includes operational efficiency.
Mr. J. Ram Bank Dr.
(OGB). RN
is Doctoral Head
Subudhi
Research Office.
is Professor.
Scholar
Bhubancswar School
and Senior
Manager
(Odi sha j, e-mail: of Management.
(Personnel
Adrnn.
Dept).
Odisha
Gramya
[email protected] KIlT
University.
Bhubaneswar-24
e-mail:
© 2015
GlTAM
[email protected]
GlTAM Journal of Management Vol.13 No.l 1'1'153-165
Jan-Mar
2015
GIM.
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JOURNAL OF MANAGEMENT
Let us first take a look at the evolutions of Indian
financial
and banking
and land-marks,
in the history
sector.
Growth of Indian Banking Sector The Indian financial system can be categorized into two distinct sectors: formal financial system and informal financial system. The formal financial system is regulated by Government of India, Reserve Bank of India, Securities Exchange Board of India, and other regulatory bodies, whereas the informal financial system consists of indigenous money lenders, landlords, traders, chit-funds. etc. In the last two decades. there has been a considerable expansion of the Indian financial system. both in terms of growth in infrastructures and the number of customers or clienteles. The extension of banking and other financial facilities to a large cross-section of people stands out as a significant achievement. The role played by the financial institutions and more particularly that of banking sector in the development and growth of a nation's economy has been widely acknowledged by the various researchers and policy makers at both international and national level. As finance has a significant role in economic development, financial intermediation has positive impact on the process of economic development. Researchers have analyzed the role of banks in the economic development of various nations.In the changing structure and requirement of the developing economy, the role of commercial banks is very significant and meaningful(Gupta, 1993 ).
To revitalize the ailing Indian banking sector, the Government of India in consultation with the monetary authority started various restructuring measures in the 1990s. The aims of those measures were to enhance the solvency and profitability of the banks. To make the banks efficient they prescribed various measures, like the end of quantitative control on loans, deregulation of interest rates. reduction in reserve ratios like eRR and SLR, implementation of prudential norms (N arasimham, 1991). Those reforms were set up with the main objective of improving efficiency in financial resources mobilization. Regional Rural Banks A new type of banking entity. in the name of Regional Rural Banks (RRBs). came into existence on 2nd October, 1975 as a set of regionally oriented rural banks. by promulgation of an ordinance on 26th September, 1975. It was later on replaced by the Regional Rural Banks Act, 1976 and it was enacted on the 9th February. 1976. The equity of RRBs is held by the central government. concerned state government and the sponsor bank in the ratio of 50: 15:35.
REGIONAL
RURAL
BANKS
OF
ODISHA:...
155
A modest beginning was made with the opening of 5 RRBs on October 2, 1975 and then by the end of 1987. there were 196 RRBs working in 363 districts with the help of 13353 branches. As on March 31, 2012, 82 RRBs with a network of 16909 branches were functioning in India. The deposits amounted Rs 1863.36 billion and advances outstanding were Rs 1163.85 billion (NABARD, 2012). The number of RRBs has come down because of first phase of amalgamation done at the instructions of Government of India. Growth after Nationalisation In the wake of nationalization. the growth and development of the Indian banking system was phenomenal. By the end of the second decade of nationalization. Indian banking was relatively sophisticated, with a wide network of branches. huge deposit resources and extensive credit operations. The outburst of banking activity during this period was such it may be described as banking explosion. Resource Mobilisation One of the objectives of branch expansion of banks was to mop up national savings to channelize them into investment. according to plan priorities. The magnitude of resources mobilized by the banks during 1969 to 199 I is indicated below. Deposits: Before Year
1969 Percent
1980 Percent
1991 Percent Source:
Balli:
:"I
ationalization[Deposit
Total Deposits
sIn 100 37988 100 230758 100 Quest: Dec"
figures are in Rs. in crore]
Term
Sayings
Deposits
Deposits
3280 63-11 19253 50.68 128768 55.80
152-1 29-16 10937 28.79 56902 2-1.66
Other Deposits
369 7.13 7798 20.53 -15088 19.5-1
2002
Between 1969 and 1980. total deposits increased six times and between 1980 and 1991 the increase was five times. The substantial increase in total deposits was because of the rise in the term deposits and saving deposits. which represents the savings of the community. These two categories of deposits recorded a six fold increase in each of the periods 1969-1980 and 1981-1991.
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Credit Operation One of the objectives of nationalization was to ensure adequate credit now to genuine productive sectors. To fulfill the plan priorities. banks went on extensive credit operation after nationalization. This was made possible by the enlarged resource base of banks during the period. The RBI's credit policy, over the years. emphasized on channeling bank credit to preferred sectors and borrowers of small means. Annual targets were laid down for lending to priority sectors as a whole with sub targets for weaker sections of the society. It was also stipulated that a major portion of the deposits mobilized in rural and semi-urban areas should be deployed in respective areas. The credit operations of banks during the period are summarized Advances: Before Nationalization[Credit Year
Bank Credit
1969
3729 25371
Percent
1991
Sector
125592
Percent
figures are in Rs in Crore] Out of Priority Sector SSI Agriculture 3.+7 52.66
258 3915 358.+ '+2.16 18157 39.97
659 17.67 8501 33.~ 1 .+5.+25 36.17
Percent
1980
Priority
below.
3229
37.98 18150 39.96
OPS 5.+ 8.19 1688 19.86 9198 20.07
Source: Bank Quest Dec. - 2002
Bank credit increased seven fold between 1969 and 1980 and by five times between 1980 -91. Within the priority group the share of agriculture was 39 percent in 1969, 42 percent in 1980 and it remained at that in 1991 by 40 percent. The share of SSI sector in total bank credit was 52.66 percent in 1969 showed a relative decline to 38 percent in 1980 and 40 percent in 1991. Classification
of Priority
I
__
1969-1980
1991
1980
1969
_-"
Sector Advances:
Sector-wise
.-_---------
classification -----
--
of advances ----------------------
i
REGIONAL
RURAL
BANKS
OF
OOISHA:...
157
The above mentioned statistics justifies the saying that nationalization transformed Indian banking from 'class banking' to 'mass banking'. Liberalization Period Banking sector reform was started by the Government of India in 1991. The regime of reforms began with a radical departure from "regulated banking' towards "market oriented banking". The objective of reform, at the macro-level, was removing the external constraints of the banking system as a whole and thereby creating a climate in tandem with liberalization. At the micro-level, the liberalization aimed at enabling the banking system to overcome the internal constraints on the functioning of banking organization. The foundation of banking reforms was laid by the Committee on Financial Reforms (Narasimham Committee) which published its recommendations in November, 1991. The Regional Rural Banks which came into existence on October 2, 1975. became popular as 'small man's bank'. The period 1975-1990, the first fifteen years can be termed as period of 'inception and expansion' in the history of RRBs. This period witnessed large scale increase in the number of banks, branches and districts covered. Many committees, instituted by authority (list given as an annexure), mainly aimed bringing in a better governance structure. Policy Measures to Strengthen RRBs Various policy measures were initiated to allow RRBs to lend for NonTarget Group (NTG) beneficiaries to the extent of 40 percent of their fresh advances with effect from September 1992. This limit was raised to 60 per cent in January 1994. Similarly RRBs were also allowed to lend to nonproductive purposes to the extent of 10 per cent of the fresh lending. RRBs were also permitted to engage into non-fund based activities like issuing guarantees, purchase/discount of demand drafts and cheques, and to install safe deposit lockers. As of March 2012 total deposits and advances of RRBs were Rs I.S7J51crores and1.20,551 crores respectively. The deposits were mobilised through over 11.57 crore accounts and the advances were outstanding to over 2.06 crore borrowers. Thus RRBS have expanded their reach in terms of spatial coverage. rural savings mobilisation and credit purveyance especially under the rural development programmes for amelioration of poverty. Development of commercial banks in Odisha during the post nationalization period (1970-1979) deserves a special mention. Firstly, the period succeeds implementation of Lead Bank Scheme on the recommendations of the National Credit Council set up by the Government of India in the
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year 1968. Under this scheme, the Lead Banks were required to concentrate on the banking business and resource development in the districts assigned to them in collaboration with other developmental agencies. Secondly, the period also witnessed nationalization of commercial banks on 19th July, 1969. Promoting banking habits among the people is one of the important objectives of branch expansion. An analysis of the data on branch expansion by commercial banks in Odisha revealed from secondary data that there has been significant growth. Amalgamation of RRBs in Odisha The Government of India initiated the process of amalgamation of the Regional Rural Banks sponsored by the same commercial bank and functioning in the same state. The objective of the amalgamation was to strengthen the RRBs. The process, in Odisha started in February, 2006 and ended in August, 2007. Performance of RRBs in Odisha There were five regional Rural Banks working in Odisha as on 31.03.2012. They were operating through 875 branches spread in 30 districts of the State. The Key indicators like number of branches, deposits and advances outstanding and Credit-deposit ratios from 1996 to 2012 have been provided in the following table. Performance
of RRBs in Odisha:
Year
No of RRB
No of branches
1 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
2 9 9 9 9 9 9 9 9 9 9 7 5 5 5 5 5 5
3 819 816 823 838 839 834 832 836 832 834 835 849 857 871 875 875 885
Key Indicators
Amount of Amount of Credit-Deposit Ratio deposits advances (in percent) (in Rs crore)(in Rs crore) 4 816 768 958 1194 1429 1770 2155 2455 2891 3196 3594 4151 5298 6557 7887 8823 9648
5 364 421 462 578 716 859 1124 1331 1616 1999 2328 2699 3080 3372 3913 4689 5645
6 44.61 54.82 48.25 48.41 50.10 48.53 52.16 54.21 55.90 62.55 64.77 65.02 58.13 51.42 49.61 53.14 58.55
REGIONAL
Significance-difference
RURAL
BANKS
OF
159
OOISHA:...
Test
We conduct hypothesis testing, to verify, if amalgamation has improved the situation. Among many other ratios, we have taken here Net interest margin (NIM) ratio, to study whether there is any significant improvement, postamalgamation. A bank earns interest on its loans and investment. At the same time it pays interest on the deposits mobilized by it and on the funds borrowed from other institutions. Net interest margin is the difference between the total interest income earned by a bank and total expenditure made in the interest head by the bank. It reflects the capacity of the management in generating surplus. Net Interest
Margin
Ratio=
(Interest
income
- Interest
expenditure)/
Assets
x 100 Null Hypothesis (HO):There is no significant difference in Net interest margin ratio of pre- and post amalgamated period of KalingaGramya Bank. Null Hypothesis (Hf j.There is significant difference in Net interest margin ratio of pre- and post amalgamated period of KalingaGramya Bank. Net Interest
Margin
Ratios of KalingaGramya
Pre-amalgamation
NIM
2000-01 2001-02 2002-03 2003-04 2004-05 Mean Std. Deviation
0.00
Ratio
o.or 0.00 0.03 (l.06 0.02 0.02 Mean
Std. Deviation
Bank, Odisha
Post- amalgamation
NIM
2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 0.282 0.308
0.010 0.050 0.062 0.098
Ratio
OAD
0.527 0.812
Two-Sample t-test Assuming Unequal Variances
Mean Variance Observations df t Stat P(T
