In India, cooperative banks are extremely relevant to the financial sector especially in promoting local and small-scale economic activities. Nonetheless, numerous such institutions still struggle with persistent issues concerning a decrease in the quality of assets and low levels of profitability. This paper puts forward an optimization-based structure utilizing the conventional CAMEL (Capital Adequacy, Asset Quality, Management Efficiency, Earnings Ability, and Liquidity) framework in a purely diagnostic fashion and examines its application as a decision support tool. This research paper will rely on six years of audited financial information (2019-2024) of an urban cooperative bank to calculate and rank CAMEL indicators according to the provisions of the Reserve Bank of India. The findings of this evaluation show that Net Non-Performing Assets (Net NPA) and Return on Assets (ROA) are persistently weak indicators and therefore require targeted intervention. Goal Programming is used to solve these problems by modifying the NPA generation rate, recovery rate, and provisioning rate to come within realistic operation constraints to reduce Net NPA. Simultaneously, the ROA is optimized with the help of NSGA-II (Non-dominated Sorting Genetic Algorithm II) that optimizes two values, which are income level and asset level. It is implied that Net NPA can be decreased to 1.97% instead of 7.46% and ROA may increase to 0.90% instead of 0.72%, which would lead to a decrease in the total CAMEL score 14 (Moderate Risk) to 10 (Low Risk). All in all, the framework offers a realistic and reproducible method for small cooperative banks in need of increased regulatory compliance and financial sustainability because of systematic optimization.

Keywords

CAMEL Framework, Cooperative Banking, Goal Programming, NSGA-II, Net NPA, ROA, Financial Optimization, Risk Management