A Training report On Analysis of various financial aspects Related to The Patiala central cooperative bank Branch Samana

Submitted in the partial fulfillment of the award of Degree in Master of Business Administration (2011-2013) Submitted to: Dr. Janardhanan K.P. Senior Professor and Director of BGIMT

Submitted by: Raman Mittal Rollno-1172682 Class-MBA 3rd (B)

BHAI GURDAS INSTITUTE OF

MANAGEMENT AND TECHNOLOGY

ACKNOWLEDGEMENT
The research study conducted to analyze the loans and advances in Patiala central cooperative bank branch samana has given me the opportunity to enhance my knowledge in practical application. It has given me a great insight into tough challenges of banking at the same time enhanced my knowledge of basic banking system. I would like to express my sincere gratitude to those persons who were responsible for it. I would like to express my special regards towards the Manager Mr. Subhash Garg for his ideological contribution and valuable suggestions during the Course of summer training. I am thankful to Mr.Kuljinder Singh and Mr. Jaswant Singh, Staff of The
Punjab State Cooperative Bank Samana for his valuable guidance and information about functioning of bank. I sincerely acknowledge him for helping me conceptualize and

ultimately bring to fruition, the project and for guiding me when so ever any help was needed. Without his guidance this work could not have been a success. I would like to thank all those people who have been directly or indirectly helpful towards completion of this Project Report. Any accomplishment requires the effort of many people and this work is not different. This work is the outcome of constant encouragement and invaluable guidance of all these people. 2

Raman Mittal

TABLE OF CONTENTS 1. Introduction to Indian banking sector............................04 2. Co-operative banks05

Definition........06 Establishments......06 Functions.......06

3. The Punjab state cooperative bank08

History........08 Mission and awards........................................................................09 Achievements.................................................................................10 Structure.........................................................................................12 Schemes.........................................................................................13 Advances........................................................................................17 Loans and deposits.........................................................................19

4. Need for the study...............................................................31 5. Review of literature............................................................40

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6. Scope of the study...............................................................40 7. Objectives of the study.......................................................40 8. Research methodology........................................................40

Research design.............................................................................41 Sampling........................................................................................42 Data collection...............................................................................42 Tools of analysis............................................................................42

9. Analysis of data...................................................................42 10. Limitations of the study....................................................52 11. Conclusion.........................................................................52 12. Suggestions and recommendations.................................53

Indian banking sector:Banking in India has its origin as early as the Vedic period. It is believed that the transaction from money lending to money banking must have occurred even before Manu, the great Hindu Jurist, who has devoted a section of his work to deposits and advances and laid down the rules relating to rate of interest. During Mogul Period, the indigenous bankers played a very important role in lending money and finance foreign trade and commerce. During the days of the east- India Company, it was the turn of the agency house to carry on the banking business the general bank of India was the first joint stock bank to be established in the year 1786. The others that followed were the Bank of Hindustan and the Bengal Bank. The Bank of Hindustan is reported to have continued till 1906 while the other two failed in the meantime. In the first half of the 19th century the east-India company established three banks, the Bank of Bengal in 1809, the Bank of Bombay in 1840 and the banks of Madras in 1843. These three banks are also known as the presidency banks were amalgamated in 1920 and a new Bank the imperial bank of India established ion 27th January 1921. With the passing of the state bank act 1955 the under taking of the imperial Bank of India is taken over by the newly constituted the state bank of India 4

What is banking:The term bank derived from that Italian word Banka and the banking refers to the companies that provides banking products and services such as checking and saving, deposits , Loans, leases, Mortgages credit cards ATM network , securities brokerage investment banking, insurance , mutual funds and pensions( Kamath, 2005).Banking means accepting for the purpose of landing or investment of deposits of money from the public repayable on demand or otherwise one withdraw able by cheque, draft or otherwise Banks in India were started on the British Pattern in the beginning of the 19th century. in those days, all the. At the time of Second World War about 1500 joint stock banks were operating in undivided India, out of which over 1400 were non- scheduled banks. These banks were managed by bad and dishonest management and naturally there were number of bank failures. Hence the government has to step in and the banking companies act 1949 was enacted which led to gradual elimination of weak banks who were not in position of fulfill the various requirements of the Act. In order to strengthen the weak banks and receive public confidence in banking system , a new section 45 was inserted in the Banking Regulation Act in September 1960, Empowering the Government of India to compulsory amalgamate weak unit with stronger ones on the recommendations of RBI.

Co-operative banks
The word cooperative stands for willing to work together in the production and marketing of goods, it is profitable to both producer and consumer to avoid middlemen. If, for instance, farmers can set up their own markets instead of sending their produce to a wholesaler, they can sell at a price that includes only their costs and a fair profit: Additional wholesale and retail costs are avoided, and prices to the consumer are kept relatively low. In order to take part in this kind of direct productionmarketing enterprise, people have formed cooperatives these are voluntary associations of either producers or consumers who band together for the group members' benefits. Cooperative organizations formed for financial benefits exist in most countries of the world. The cooperative way of doing business takes many forms, ranging from local to regional and federated organizations and from highly specialized to multipurpose societies. The cooperative 5

banks have a three tier structure. At the top level there are state cooperative banks, At the district level there are central cooperative bank, At local level there are Rural primary cooperative banks and Urban primary cooperative banks Cooperative banking structure has unique position in the rural credit delivery system of India. The cooperative banking sector which is now a century old has a significant role in the field of credit to the rural through the short term and long term structure from many years the cooperative banks are the prime institutional agencies with a vast network, wide coverage and reach up to the remote areas. Co-operative banks in this country are a part of vast and powerful structure of cooperative institutions which are engaged in tasks of production, processing, marketing, distribution, servicing and banking in India. The beginning co-operative banking in this country dates back to about 1904, when official efforts were made to create a new type of institution based on principles of co-operative organization & management, which were considered to be suitable for solving the problems peculiar to Indian conditions. In rural areas, as far as the agricultural and related activities are concerned, the supply of credit was inadequate, and money lenders would exploit the poor people in rural areas providing them loans at higher rates. Co operative Banks in India are registered under the Co-operative Societies Act. The cooperative bank is also regulated by the RBI. They are governed by the Banking Regulations Act 1949 and Banking Laws (Co-operative Societies) Act, 1965. Definition: A co-operative bank is a financial entity which belongs to its members, who are at the same time the owners and the customers of their bank. Co-operative banks are often created by persons belonging to the same local or professional community or sharing a common interest. Co-operative banks generally provide their members with a wide range of banking and financial services. Initiatives towards development of co-operative banks: 1. Reorganisation of PACSs (a scheme by NABARD). 2. Licensing of new USBs liberalised. 6

3. National Co-operative Bank of India (NCBI) was registered in 1993.(Multi-state co-operative society)-it has no regulatory functions. 4. Co-operative development bank (set up by NABARD). 5. Lending and borrowing rates of all co-operative have been more or less completely freed or deregulated. 6. Allowing all PCBs to undertake equipment leasing and hire-purchase financing. Establishments:

Co-operative bank performs all the main banking functions of deposit mobilisation, supply of credit and provision of remittance facilities. Co-operative Banks belong to the money market as well as to the capital market. Co-operative Banks provide limited banking products and are functionally specialists in agriculture related products. However, co-operative banks now provide housing loans also.

UCBs provide working capital loans and term loan as well.

Functions:

Co-operative Banks are organised and managed on the principal of co-operation, self-help, and mutual help. They work on the basis of no profit no loss. Profit maximization is not their goal.

Co-operative banks do banking business mainly in the agriculture and rural sector. However, UCBs, SCBs, and CCBs operate in semi-urban, urban, and metropolitan areas also.

The State Co-operative Banks (SCBs), Central Cooperative Banks (CCBs) and Urban Co-operative Banks (UCBs) can normally extend housing loans up to Rs 1 lakh to an individual. The scheduled UCBs, however, can lend up to Rs 3 lakh for housing purposes. The UCBs can provide advances against shares and debentures

Cooperative banks in India finance rural areas under:

Farming Cattle Milk

Hatchery Personal finance

Cooperative banks in India finance urban areas under:

Self-employment Small scale units Home finance Consumer finance Personal finance

Some facts about Cooperative banks in India

Some cooperative banks in India are more forward than many of the state and private sector banks. According to NAFCUB the total deposits & lending of Cooperative Banks in India is much more than Old Private Sector Banks & also the New Private Sector Banks.

This exponential growth of Co operative Banks in India is attributed mainly to their much better local reach, personal interaction with customers, and their ability to catch the nerve of the local clientele.

History
The Punjab State Cooperative Bank was established on 31st August, 1949 at Shimla vide registration No. 720 has a principle financing institutionof the cooperative movement in Punjab. In 1951 its Head Office was shifted to Jalandhar from where it moved in 1963 to its present building at Chandigarh. In the cooperative 8

Banking structure, the position of the Punjab State Cooperative Bank is extremely important as the whole credit system revolves around it. It has 18 branches and 3 extension counter in Chandigarh . There are 19 District Central Cooperative Banks having 813 branches all over Punjab, mostly in rural areas of the State. One new Central Cooperative Bank and 110 new bank branches have been opened during the four years, 1997-2001.

Mission
Promotion and sustainance of economic interest & providing easy finance, cost effective and quality banking services ot customer & PACs.

Awards
The deposits of Central Cooperative Banks have touched Rs.2759.80 crore as on 31.12.2000, showing an increase of Rs.326.26 crore over the last year upto this date. The deposits of the State Coop. Bank have increased from Rs.810.00 crore as on 31.3.2000 to Rs.844.18 crore upto 31.12.2000, showing a net increase of Rs.34.18 crore. The Punjab State Cooperative Bank has been awarded First Prize for its execlent performance for the year 1997-98 by NABARD, in All India ranking under the best performance awards scheme. The Fazilka Central Cooperative Bank and the Nawanshahr Central Cooperative Bank have also been adjudged as the best central cooperative banks in India for the years 1997-98 and 1998-99 respectively.

The

Punjab

State

Cooperative

Bank

has

already

been

awarded

BEST

PERFORMANCE AWARD from NABARD and NAFSCOB. For the year 2003-04, Punjab Cooperative Bank has been selected for NABARD\'s Best Performance Award " which is based on performance of all the SCBs in the country. Similarly our Jalandhar DCCB has also been selected for NABARDs Best Performance Award out of all the DCCBs in the country for the year 2003-04.

ACHIEVEMENTS
1. S.T. AGRI. LOAN

The Cooperative Banks in the State have advanced Rs.5894.28 Crores as ST Agri. Loan during the year 2010-11 as compared to Rs.5828.28 crore during 2008-09. Similarly during 2009-10, Rs 7538.33 crores stand disbursed against the target of Rs.6800.00 Crores. The home plans to disbursed Rs. 8300.00 crore during 2011-12. 2. R.C.C. LIMIT

During 2010-11 the Central Coop. Banks in Punjab have sanctioned R.C.C limits worth Rs.2091.75 crores as compared to Rs.1919.55 crore of 2008-09. During the year 2011-12 the bank has sanctioned RCC limits worth Rs.2296.62 crore against the target of Rs.2300.00 crores during 2011-12.

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3.

TWO WHEELER LOANS TO AGRICULTURISTS

Under Two Wheeler Loan Scheme the farmers can take loan up to 75% of two-wheelers cost or Rs.50,000/- whichever is lower from the Central Cooperative Banks. During the year 2010-11, the Bank has advanced a sum of Rs.34.42 crore. Similarly, during 2011-12, Rs..30.90 crore has been advanced against the target of Rs.40.00 crore during 2011-12. 4. HOUSING LOANS

During the year 2009-10 Central Cooperative Banks in the State have advanced Rs.101.38 Crores against the target of Rs.80.00 crores. During 2010-11, Rs.88.32 crores has been disbursed against the target of Rs.100.00 crore. During 2011-12 Rs..86.97 crore has been disbursed during 2011-12. 5. NON FARM SECTOR LOANS

During 2009-10 Rs 49.50 crores were advanced under the scheme by DCCBs in the State of Punjab. During the year 2010-11, Rs.42.32 crores has been advanced. Similarly during 2011-12, Rs.39.42 crore has been advanced against the target of Rs.50.00 crore during 2010-11.

6. LOAN FOR CONSUMER DURABLES Under Consumer Durables Loan Scheme, Rs.68.58 crores has been advanced during 2010-11 against the target of Rs.72.00 crore. Similarly, during 2010-11, Rs.71.46 crore has been advanced during 2010-11. 7. PERSONAL LOAN SCHEME

Under Personal Loan Scheme, the Bank has advanced Rs.133.89 crore during the year 2010-11 against the target of Rs.120.00 crore. During 2011-12, Rs.133.02 crore have been disbursed during 2011-12 against the target of Rs.125.00 crore. 8. DEPOSIT MOBILIZATION

The deposit of Punjab State Coop. Bank and Central Cooperative Banks were Rs.7343.49 crores during the year 2009-10 whereas during 2010-11, the deposits were Rs. 8668.59

11

crores. During the year 2011-12 the deposits are Rs.8864.21 crore.During the year 20112012 the deposit of PSCB+CCBS are Rs 9672.50 crore 9. loss. 10. PROFITS During 2011-12 the profit of PSCB DCCB\'s is Rs. 49.20 Crore

In 2011-12, there was a profit Rs.44.42 crore whereas 1 DCCB, namely; Amritsar was in

REDUCTION IN THE RATE OF INTEREST

Rate of Interest on Crop Loan has been reduced to 7.00% w.e.f. 01-04-2008.

Organization structure

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SCHEMES Special Settlement Scheme-2000

Objectives

Opportunity to borrower defaulters for more than five years to clear.

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Opportunity to clear Non Performing Assets (NPA). Reduction in cost and time for recovery. To encourage and assist genuine defaulters. To facilitate mutually accepted reconciliation and settlement of dormant loan accounts.

To provide Buy Back facility for decreed property. Defaulters for short, medium and long term loans for more than five years. Defaulters for medium term loans for purchase of assets for more than five years. Defaulters for consumption loan to weaker section for more than five years. Members/Ex-employees involved in embezzlements. Members whose land has been purchased. Short term loans converted into medium term loan due to natural calamities.

Duration & Eligibility

Duration: The special settlement scheme is valid from 1st February to June 2001. Eligibility: All overdue cases for more than five years in case of CCBS/PACS and six years in case of PADBS as on 31.01.2000 even if arbitration, awards have been obtained and execution of proceedings have been initiated.

Operational Guidelines
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Preparation and submission of list of eligible borrowers to block and District Level Review Comities. Eligible borrowers or legal heirs (in case of death) can apply on prescribed form for the scheme.

After review block level, Default Review Comities (BLRC) recommends to district Level Default Review Committee (DLRC)

After hearing the applicant DLRC recommends the case. DLRC recommends to Provisional Authority (RA) and copy to applicant. BLRC would meet on every 1st and 3rd Tuesday whereas DLRC would meet on 2nd and 4th Monday.

RA after considering the recommendations of DLRC and facts, pass specific order of settlement amount and amount to be written off.

RA should seek a priif of payment of settlement amount before passing final order.

CCB/PSCB would debit the difference amount as per RA's order without further sanctions from RCS and also liquidate outstanding amount from records.

The above procedure shall be followed for buy back facility of land purchased by the PACS/CCBS/PADBS, no relief of interest to the farmers under buy back facility.

The above procedure shall be followed for embezzlement cases even after taking legal measures for cases older than six years.

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Relief
DLRC, on merits, decide about the charging of simple interest from date of account turned bad, provided that:

Amount reclaimed shall not be less than the principal amount plus 100% there of. Amount received is principal amount plus 50% where the borrower has no asset or source of income.

In case of buy back facility, the original owner shall pay the total outstanding amount.

Any other action initiated earlier under IPC shall continue unabated, also the proceedings under the scheme shall not be prejudiced to on longing legal proceedings.

The amount of net loss to PACs/CCBs/PADBs shall be charged to reserve for Bad Doubtful Debts available with CCBs PADBs. There are no such reserves with PACs.

Revolving Cash Credit

In 1998, the cooperative banks launched a new scheme of revolving cash credit for the farmers. The scheme envisages to provide Cash credit limit to the farmers against the mortgage of their land for all credit requirements of the farmers. It aims at freeing them from the clutches of traditional money lenders. A cash credit limit of Rs.1,50,000/- is sanctioned to farmers having 5 acres of land and Rs.3 lacs for those having 10 acres of land. So far Rs.655.00 crores have been sanctioned under the scheme. The scheme has been evaluated by experts from the department of economics and sociology, PAU, Ludhiana. 16

Key Observations made by the Experts

The Revolving cash credit scheme has proved beneficial to the farmers its contribution has been multi directional. It has helps the farmers in the purchase of production inputs, farm investments, consumptions and social requirements and reduced their dependence on high interest loans.

The recovery under the scheme has been execellent and more than 70% of the credit availed under the scheme has been spent for productive purposes, whereas remaining was provided for consumption and other purposes.

Nabard should has no hesitation in providing refinance facility for the scheme. The scheme has so far covered medium and large farmers and it should be extended to cover small and marginal farmers as well.

The rate of interest on credit facility under the scheme should be reduced. Revolving cash credit has supplemented inadequate availability of production credits besides creating provisions for consumption credit. Therefore, its role is complementary to the institutions credit available to farmers from different sources. Revolving cash credit scheme should be strengthen and expanded.

Sehkari Bima Yojna

The Cooperative Banks in Punjab are pioneers of starting the Sehkari bima Yojna w.e.f. 01.06.1999 in the country. Under this scheme, every depositor who opens a Saving Bank Account with Rs.1100/- or more is provided Personal Accidental Insurance cover for Rs. 1 lakh, during the period he keep s the account with the bank, at a very nominal premium. The scheme has benefited the undreprivlelaged. rural masseds, particularly those who have no access to the insurance companies. More than 12,05,000 depositors have been covered under the scheme.

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Kisan Credit Card Scheme

A new scheme namely Kisan Credit Card Scheme has been implemented by the bank for the benefit of farmers. The Scheme improves upon existing scheme of Crop Loans by allowing the farmers flexibility and freedom of choice to avail and repay loans as per their requirements. Under the scheme, 1,87,000 cards have been issued to the farmers upto 31.3.2001. Maximum Credit Limit of the farmers has been raised from Rs. 70,000 per crop to Rs. 85,000 per crop.

Jeevan Raksha Pension-cum-Gratuity Scheme

A new scheme namely, Jeevan Raksha Pension-cum-Gratuity Scheme has been started by the bank particularly for the benefit of rural old farmers who can enjoy pension facility in their old age by depositing Rs. 500/- per month for 10 years and will get pension Rs. 650/- per month. If the depositor dies before 10 years, the nominee of the deceased is allowed to continue to deposit the money in the scheme and for the pension after 10 years.

Advances
Agricultural advances Short Term Agricultural advances During the year 2000-2001, the Punjab State Cooperative Bank has advanced loans of Rs.1950.49 crore upto 31.12..2000 against the target of Rs.1550.00 crore for financing agro-inputs for crop production. Medium Term Agricultural advances The Central Cooperative Banks have advanced Rs.6.80 crore as Medium-term Agricultural advances in the State upto 31.10.2000. This loan is given to farmers 18

for undertaking activities allied to agriculture Revolving Cash Credit Under the scheme, the Central Cooperative Banks have sanctioned credit limits of Rs.655.55 crore to 69620 farmers upto 31 January 2001. The rate of interest is 15 15.5%. The Bank proposes to reduce the rate of interest to 14.5% w.e.f. 01.4.2001. Non-Farm Sector loans The most important feature of the cooperative banks in the State is that they started advances of Non-Farm Sector during the year 1993. The Central Cooperative Banks have advanced Rs.31.53 crore from 1.4.2000 to January, 2001 to 6180 beneficiaries. These loans are mainly given to rural youth for self-employment. The rate of interest is 15% and is proposed to be reduced to 14% w.e.f. 01.4.2001.The Punjab State Cooperative Bank is providing nonagricultural loans to Sugar Mills, Spinning Mills, HOUSEFED, MARKFED, MILKFED and Central Cooperative Banks. Rs.321.65 crore have been sanctioned to these institutions. Loans for consumer durables to salary earners With a view to provide credit facilities to their customers, the Cooperative Banks introduced a scheme of loans for purchase of consumer durables. Under the scheme, every Government/semiGovernment employee is provided loan upto Rs.50000/- repayable in 3-5 years in easy monthly installments. The loan can be utilized for purchase of TV, Refrigerator, Scooter, Furniture etc. A significant section of the salaried class has benefited from the scheme. More than Rs.121 crore have been advanced under the scheme upto 28-2-2001. Cash Credit to Businessmen and traders With a view to diversify and benefit the small retail traders/ businessmen, the Cooperative Banks started a cash credit scheme in the year 1997. Under this scheme, a Cash Credit Limit is sanctioned upto Rs.10.00 lakh to small businessmen and traders, depending upon their business turnover on easy terms at a normal rate of interest. Small shopkeepers and petty traders who were earlier deprived of institutional finance, are covered under the scheme, particularly, in rural and semi-urban areas where other banks are not advancing such type of loans. During the current year, more than Rs.50.00 crore have been advanced under the scheme.Collection of Electricity Bills Keeping in 19

view the difficulty faced by rural people in paying of electricity bills at far off places and Cities, it has been decided that from 1 February 2001, all branches of CCBs in the State will accept payment of Electricity Bills on behalf of Punjab State Electricity Board.

Deposits and loans

DIFFERENT TYPES OF DEPOSIT ACCOUNTS

A Saving Bank A/c

A Saving Bank A/c can be opened with an initial deposit of Rs.1500/- without Cheque Book facility and Rs.2500/-with Cheque Book facility. Eligible categories to open SB A/c 1. Any individuals 2. Joint A/c with others in the form of 'either or Survivor', 'Former or Survivor', and 'joint' etc. 3. Minors 4. Illiterate persons. 5. Blind Persons. 6. Joint Hindu family(HUF) 7. Coop Societies, Clubs, Societies, Associations etc.

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The intending customer should visit the bank to fill in A/c opening forms with complete particulars such as parentage, occupation, address, latest two passport size photographs, residence such as copies of Voter card, Passport, Telephone/Electricity bill etc. and PAN or form No.60. The accounts are required to be introduced properly by the existing account holder of the bank or any person known to the bank. Only 30 withdrawals are allowed per half year for a saving Bank A/c exceeding which service charges are levied by the bank. A minimum balance of Rs.1500/- (without Cheque Book) and Rs.2500/- (with Cheque Book) has to be maintained in the account, otherwise services charges are levied on monthly Basis. At the time of opening the account, pass book is issued to the customer, which needs to be accompanied every time when payment is drawn through a withdrawals form. Maximum limit of withdrawl form is Rs. 40000/- with passbook. Nomination facility is also in these accounts. A depositor or depositors can nominate one Person only.

Current A/c
A Current A/c can be opened with the initial deposit of Rs.5100/-. It can be opened in the name of individual, a Sole Proprietary Concern partnership firm, club, Religious Institution, Association Govt/ Semi Govt. Deptt., Local Bodies. As usual, all prospective applicants need to fill in the Account opening forms wherein following documents are required to be attached 1. Sole Proprietary Concern - Declaration of Sole Proprietorship 2. Partnership firm - Partnership Deed duly attested 3. Clubs, Schools, Societies, Association. 4. 1. Certificate of Registration 2. Copy of Bye Laws. 3. Memorandum of Association, if any. 4. Resolution of Board of Directors. 5. Limited Companies, Pvt. Ltd. Companies a. Certificate of incorporation 21

b. Certificate of commencement of business c. Memorandum & article of Association d. Resolution of board. e. Latest Audited Balance Sheet & P&L Account 2. Trusts a. Instrument or Document of Trust b. Resolution c. Certification of registration.

Introduction All Current A/c need to be introduced properly from another current account A/c holder only. Staff members are not allowed to introduce a Current A/c. Minimum Balance A minimum balance of Rs.5100/- has to be maintained. Photographs :Recent Passport size photographs of the operator/s need to be affixed on the AOF. All payment is made by Cheques only. There is no restriction on the number of withdrawals unlike that in SB A/c Pass Book is issued at the time of opening of account. Statement of account can also be got issued.

Recurring Deposit A/c

A Recurring Deposit A/c can be opened with a certain initial deposit wherein a Depositor needs to deposit money by way of monthly installments over stipulated period. The period may be 2, 24, 36, 48, 60 month etc. On the expiry of the period, the accumulated amount along with interest is paid in lump sum. All individuals, jointly with others minors, blind/illiterate person etc. can open the A/c. Rate of interest on Recurring Deposits for various period will be the rate applicable on term deposit for that period. 22

Minimum monthly installment- Minimum monthly installment of the A/c is Rs.100/Maximum period is 10 years. The intending customer should fill in A/c opening form with complete particulars such as parentage, occupation, address etc. Two passport size photographs are required to be affixed along with furnishing of residence proof such as copies of ration card, Voter card, Passport, Telephone/Electricity bill etc. and PAN or Form No.60. The account is required to be introduce properly by the existing A/c holder of the bank of any person know to the bank. On the expiry of the stipulated period, accumulated amount is paid to the customer.

Term Deposit A/c

Term Deposit is a deposit received by the bank for a specific fixed period which is withdraw able after expiry of said period. Eligible categories to open Term Deposit A/c

Individual Joint A/c with other in the form of Either or Survivor , Former or Survivor, any one or survivor jointly etc. Minors Illiterate persons Joint Hindu Family (HUF) Coop. Deptt, Clubs, Societies, Associations etc.

The intending customer should fill A/c opening form with complete particulars such as parentage, occupation, address etc. Two passport size photographs are required to be affixed along with furnishing of residence proof such as copies of Voter Card, Passport, Telephone/ Electricity bill etc and PAN or Form No.60. The account is required to be introduced properly by the existing A/c holder of the bank or any person known to the bank. 23

Minimum Amount A minimum of Rs. 1000/- can be placed in a term deposit. Period Minimum & maximum period for which the amount is place in a term deposit are fixed by the bank from time to time. In a fixed deposit A/c, it usually ranges from 7 days to 120 months whereas in Long Term Deposit,The minimum period is 12months.

Rate of Interest As fixed by the bank from time to time, keeping in viewthemarkettrends. Mode of Payment of Interest Interest on Fixed Deposit can be fixed quarterly, half yearly or yearly etc. But in Long term deposit it is cumulative with quarterly rests with the result that is paid only on maturity.After opening the account in Computer, FDR is issued to the customer. A TDS is to be deducted at source as per Income Tax Act; The mode of operation should be clearly mentioned while opening the A/c. Term deposit A/c can also be opened with Cheques drawn on the same branch or other banks.

Payments of FDR on due date After getting proper discharge on the back side of the FDR from the depositor payment can be made on due date. Payment before due date For payment before due date, The FDR has to be discharged on the backside by all the operators. Renewal of FDR FDRs can be got renewed on due date by mentioning the period for which they are to be renewed on the back side.

TDS is deducted if interest is Rs.10000/- and more in a financial year prohibition for payment in cash The payment of FDR is prohibited to be made in each if the amount of the FDR along with interest exceeds Rs.20,000/- . So usually thepayment of FDR should be made either by way of Bank Draft/ Pay order or through an a/c.

Saving Bank-No frill A/c

The No Frill A/c can be opened by any person without furnishing any resident proof or any proper introduction. The A/c Can be opened with a minimum amount of Rs.10 /only. In such accounts, the Balance should not exceed Rs. 50000/- otherwise, it will 24

become an ordinary SB A/c. No cheque book is allowed to be issued to the customer. The condition of maintaining any minimum balance in this A/c is waived off.

DIFFERENT LOANS SCHEMES OF COOPERATIVE BANK FOR PUNJAB

Revolving Cash Credit to Farmers (RCC) Beneficiary Purpose Loan Limit Margin Rate of Intt Repayment Period Collateral Security : : : : : : : Any individual farmer holding the agricultural land. Credit facility for meeting out socio-economic needs. Maximum amount Rs.6.00 Lac. Subject to Rs.1.00 Lac per acre No margin money required 11% Renewable on annual basis Agriculture Land valuing at 150% of the loan amount.

Non Farm Sector Loan Scheme (NFS) Beneficiary Purpose Loan Limit Rate of Intt Margin Repayment Period Collateral Security Installment : : : : : : : : Individual, Sole Prop., Firm, Coop. Societies or a Company. For the establishment of cottage, tiny and SSI unit. Maximum amount up-to Rs. 25.00 Lac at CCB Level. Up to Rs.0.50 Lac 11.50% Above Rs.0.50 Lac 12.00% Minimum 10% Maximum 5 to 7 Years. Immovable Properties for the value of 150% of the amount. Rs. 2225.00 for 5 years.

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Personal Loan Scheme Beneficiary Purpose Loan Limit Rate of Intt Margin Repayment Period Collateral Security Installment : : : : : : : : Employees of Punjab Govt., PSU, Boards, Corporations etc. Credit Facility for meeting out socio-economic needs. 12 times of gross monthly salary or Rs. 2.00, whichever is less. 13% No Margin required. Maximum 5 years. Two Good Sureties as per satisfaction of the bank. Rs. 2276.00 for 5 years.

Consumer Durable Loan Beneficiary Purpose Loan Limit Rate of Intt Margin Repayment Period Collateral Security Installment : : : : : : : : Individual salary earners and non salary earners. For the purchase of consumer durables. Maximum amount up-to Rs. 1.00 Lac. 13% 25% Maximum 5 years. Two Good Sureties as per satisfaction of the bank. Rs. 2276.00 for 5 years.

Two Wheeler Loan to Farmers Beneficiary Purpose Loan Limit Rate of Intt Margin Repayment Period Collateral Security Installment : : : : : : : : An agriculturist having land in his own name or his family member. For the purchase of new two wheelers. Maximum amount up-to Rs. 0.50 Lac. 11.00% 15% Maximum 5 years. Two Good Sureties as per satisfaction of the bank. Rs. 1087.00 for 5 years.

Cash Credit Facility to Traders Beneficiary Purpose Loan Limit Rate of Intt Margin 26 : : : : : Individual, Sole Prop., Firm, Coop. Societies or a Company. For meeting working capital requirement of business. Maximum amount up-to Rs. 25.00 Lac. 13% 25%

Repayment Period Collateral Security

: :

Renewable on annual basis. Immovable Properties for the value of 150% of the amount.

Vehicle Loan Scheme Beneficiary Purpose Loan Limit Rate of Intt Margin Repayment Period : : : : : : Individual, Firm, HUF, Trust, Coop. Societies or a Company. For the purchase of new vehicle for business and personal use. Maximum amount up-to Rs. 10.00 Lac or 80% of cost of vehicle. 11% 20% Maximum 5 years. Two Good Sureties as per satisfaction of the bank besides the hypothecation of the vehicle. Rs. 2174.00 for 5 years

Collateral Security : Installment :

Second hand Vehicle Loan Scheme Beneficiary Purpose Loan Limit Rate of Intt Margin Repayment Period Collateral Security Installment : Individual, Sole Prop., Professionals and Partnership Firm. For the purchase of second hand vehicle should be not more : than 3 years. : Maximum amount up-to Rs. 5.00 Lac or 75% of cost of vehicle. : 12% : 25% : Maximum 5 years. Two Good Sureties as per satisfaction of the bank besides the : Hypothecation of the vehicle. : Rs.2225.00 for 5 years.

Rural Housing Scheme Beneficiary : Individual and Members of Coop. Housing Societies. Purchase of built up house, construction of new house, repairs / Purpose : Renovation and addition of existing house in rural areas. Loan Limit : Maximum amount up-to Rs. 15.00 Lac. Rate of Intt : 10% Margin : 15% Repayment Period : Maximum 15 years. Agricultural land for the value of 100% of the loan amount besides Collateral Security : the Mort - gage of house to be financed by the bank. Installment : Rs. 1074.00 for 15 years. Urban Housing Scheme 27

Beneficiary Purpose Loan Limit Rate of Intt Margin Repayment Period Collateral Security Installment Mini Dairy Scheme Beneficiary Purpose Loan Limit Rate of Intt Margin Repayment Period Collateral Security Installment

: Individual and Members of Coop. Housing Societies. Purchase of built up house or flat, construction of new house, : repairs/Renovation and addition of existing house in urban areas. : Maximum amount up-to Rs. 25.00 Lac. : 10% : 25% : Maximum 15 years. : First mortgage of House Property to be financed by the bank. : Rs. 1074.00 for 5 years.

: : : : : : : :

Members of Coop. Milk Producers Society/ PACS. Purchase of up to 25 milch cattle. Maximum amount up-to Rs. 5.00 Lac. 10.50% 15% Maximum 5 years. Mortgage of landed property value of 150% of the loan amount. Rs. 2150.00 for 5 years.

Commercial Dairy Development Scheme Beneficiary Purpose Loan Limit Rate of Intt Margin Repayment Period Collateral Security : : : : : : : Any Individual, Partnership Firm, corporate body and any other Co - operative organization. To increase the income of milk producers by helping them to purchase High yielding milch cattle and to purchase of equipments. Maximum amount up-to Rs. 25.00 Lac. 10% 15% Maximum 5 years. Mortgage of landed property value of 150% of the loan amount. Rs. 2125.00 for 5 years.

Installment : Education Loan Scheme Beneficiary Purpose Loan Limit Rate of Intt 28 :

Salaried employees of Coop. banks, Punjab Govt / Chandigarh Administration and its boards & Corporation To provide financial assistance to deserving and meritorious student : for Pursuing higher studies in India or abroad. : Maximum amount up-to Rs. 10.00 Lac. : 9%

Margin

: No Margin required. The installment will start after completion of course. Maximum 5 Repayment Period : years. Mortgage of landed property value of 150% of the loan amount. For Collateral : the loan up to Rs. 5.00 lac, no Immovable security is required. If the Security loanee is the employee of Punjab Govt.or Coop.Deptt. Installment : Rs. 2076.00 for 5 years. Cooperative Education Loan Scheme children of poor farmers, Dalits, BC, Beneficiary Purpose Loan Limit Rate of Intt Margin Repayment Period Collateral Security Installment : Children of poor farmers, Dalits, BC, and other poor sections. To provide financial assistance to deserving and meritorious : students for Pursuing higher studies in India or abroad. : Maximum amount up-to Rs. 10.00 Lac. : 7.25% : No Margin required. The installment will start after completion of course. Maximum 5 : years. : Mortgage of landed property value of 100% of the loan amount. : Rs. 1992.00 for 5 years.

Loan against Rental Income Scheme Owners of the Property who have let out or proposed to be let out the same to reputed company. For meeting business/ personal needs. Maximum to the extent of 75% of post TDS Rent Receivable for period Not exceeding 120 months or un- expired period of lease 13% 25%

Beneficiary Purpose Loan Limit Rate of Intt Margin 29

: : : : :

Repayment Period Collateral Security Installment

: : :

Maximum 10 years. Mortgage of landed property value of 150% of the loan amount. 1493.00 for 10 years.

Dairy Loan Scheme to purchase a Cow Beneficiary Purpose Loan Limit Rate of Intt Margin Repayment Period Collateral Security Installment : : : : : : : : Members of Coop. Milk Producers Society. Purchase of a cow. Maximum amount up-to Rs. 0.50 Lac. 10.5% 10% Maximum 5 years. Two Good Sureties as per satisfaction of the bank. Rs. 1075.00 for 5 years.

Loan against Property Beneficiary Purpose Loan Limit Rate of Intt Margin Repayment Period Collateral Security Installment 30 : Any Individual. To offer instant solutions relating to socio-economic needs and business : Needs such as childrens higher education, Travel, daughters marriage Medical emergencies etc. : Maximum amount up-to Rs. 25.00 Lac. : 14% : No Margin required. : Maximum 6 years. : Mortgage of landed property value of 200% of the loan amount. : Rs. 2061.00 for 6 years.

Loan scheme for Earnest Money Beneficiary Purpose Loan Limit Rate of Intt Margin Repayment Period Collateral Security : Any Individual. To meet the financial requirement towards earnest money deposit to : book residential plot/ built house or flat by Govt. Approved Agency. : As per scheme of the Agency. : As fixed by the bank. : No margin money required. : On Receipt of Refund from Housing Board. No Immovable Security is required. Only two post dated Cheque : req.

Mai Bhago Istri Shakti Scheme Beneficiary Purpose Loan Limit Rate of Intt Repayment Period Collateral Security Installment : : : : : : : Any women beneficiaries member of the PACS. To establish the micro or small business in rural areas. Rs. 25,000 through PACS. PACS to members 10.75% CCB to PACS 9.25% Maximum 5 years. One good Surety having landed property. Rs. 541.00 for 5 years.

Need for the study

The study needs to be conducted because in the recent years the performance of cooperative banks has not been well. There is a need to check on the factors which contributes to the performance of cooperative banks. Financial aspects need to be reviewed to understand the role of cooperative banks. There is also a need to know the problems faced by cooperative banks and solutions provided by Government.

Review of literature
Studies Relating to Mobilisation of Funds, Deployment of Funds, Cost of Banking, Recovery and Overdues An early study in this area was made by the Study Team appointed by Reserve bank of India (1972). They went into the problems of overdues of the co-operative credit institutions in the country. The team found that the position of overdues in backward and undeveloped districts were quite high. It was also reported that 31

the members of the managing committee of societies and the director of the central cooperative banks were showing a general apathy in the matter of recovery of loans. John Winfred (1974), while analysing overdues in co-operatives in India noted that for prompt recovery of loans, a well co-ordinated and energetic drive for recoveries in each DCB around harvest time with supervisory staff and non-official leadership should be mobilised. He also recommended a member education programme to make them understand the implications of prudent use of credit, a programme to generate additional income - through subsidiary occupation to farmers and to organise marketing through marketing societies which can recover the loans from sales proceeds. Subhash Chandra Sarkar (1974), examined the overdues of co-operative banks in India and found that the heavy overdues at the level of DCBs are said to impair their capacity to borrow from the higher financial institutions. He was of the opinion that the reasons for the rise in the level of overdues were the failure of the DBCs to recover their dues and not due to any inherent inability of the borrowers to repay. The failure of the executives of the co-operative institutions to adopt appropriate measures, political patronage to agricultural Credit Societies and administrative weaknesses were the other reasons cited for higher overdues in co-operative financial institutions. Kanakasabhai (1976), made an attempt to study the credit planning and financial management in co-operative banks and observed that the success of a co-operative society will be judged from the way it deals with the management of funds, increases the profitability and thereby improves the image of the institution. Varkey (1976) found that the main problem faced by co-operative societies is in the raising of resources. The ratio of deposits between commercial and co-operative banks was 88.19: 11.81 in 1970-71 and the same has deteriorated to 89.05: 10.95 during 197374. The author noted that the co-operatives have to concentrate more on the deposit mobilisation aspect instead of depending on government contribution. Pandey and Muralidharan (1977), observed that the size of loan and consumption expenditures were the major factors influencing overdues in co-operative credit societies 32

at the farmers level irrespective of the categories. They reported that the loans issued were without keeping the repayment capacity of the borrower in mind and were not properly supervised resulting into diversion of loan either for consumption purposes or for non-stated capital investments. According to the Report prepared by the Co-operative Training College, Trivandrum (1977), an all-out effort was made in 1976 by the Kerala State Co-operative bank, DCBs, PACS and urban banks for mobilising deposits. It noted that the results of the programme had surpassed even the best expectations of its sponsors with an additional amount of 85 per cent of mobilisation and most of the districts exceeding their targets. Bhaskar Rao (1978), observed that the growth in investment is not adequately supplemented by satisfactory recovery performance both in DCBs and Primary agricultural Credit Societies. Desai and Narayana Rao (1978), are of the view that the default rate in co-operative credit is very high. It is relatively high for short term loan than for long term loans. Excepting a few states like Tamil Nadu, Andhra Pradesh, Kerala, Punjab and Haryana all the other states have more than 30 to 35 per cent default rate. The analysis revealed that inappropriate loan terms and administration were the most important reasons. It also revealed that these factors were interrelated. For solving these problems, the study emphasised the need for reorientation of the credit projects with better economic analysis. Pancras (1978),studied the funds management in co-operative banks and came to the conclusion that the co-operative banks in the far flung areas are forced to keep more cash/liquid assets due to their far away location from apex banks. He opined that profitability in co-operative banks is a factor of efficient management of fundsmobilisation and deployment of funds. Further, he stressed that it should be the objective of a Punjab to increase profitability by efficient control of costs associated with funds management. A study on the performance of Trichur District Co-operative bank in deposit mobilisation scheme by Jose, (1984), revealed that the total deposits of the Trichur DCB increased 33

from Rs.635.19 lakhs in 1976-77 to Rs.1763.63 lakhs in 1981-82, making an annual average increase of 35.53 per cent. The share of fixed deposits was reported to show a decline during the period 1976-77 to 1978-79, and to increase considerably during the deposit mobilisation campaign in 1981-82. Sharma (1985), conducted a case study of short term agricultural credit of Central Cooperativebanks . The study brought out the case that, with regard to short term credit, the central co-operative banks should re-orient their loan policies and procedures on the basis of crop loan system. He suggested that loans should be given in instalments and there should be a proper linkage between advancing and repayment of loans in the sowing and harvesting seasons. John Winfred (1986), made an attempt to discuss the funds management of Central Cooperative Banks (CCBs) in India and found that mobilisation of resources is one of the core functions of CCBs. He noted that they have to tap the rural resources not only to keep the credit system in an efficient order but also to reduce their dependence on outside borrowings. He opined that co-operative capital should be employed judiciously and in the most economical and fruitful manner so as to derive maximum benefits with minimum expenditure . Again, the efficient utilisation of resources calls for a developmental approach in the diversified direction without sacrificing the main principles of banking, namely liquidity, safety and profitability. Lastly, he reported that better deployment of funds not only improves the image and income earning capacity of the banks but also reduces regional and functional imbalances. Naidu and Prasad (1987), analysed the utilisation pattern of cooperative short term production credit with the help of cross tabular analysis and regression analysis. They found that, the proportion of co-operative short term credit used for production purpose was inversely related to farm size and the amount diverted was mostly used for consumption purpose by marginal and small farmers while it was used for other nonagricpurpose by medium and large farmers. They further opined that regular follow-up visits are necessary to assure the use of loan amount for stipulated purposes.

34

According to Rajeev Kumar Saxena (1987), Central Co- operative bank at district level form an important link between the state co-operative bank and the primary agricultural credit societies at the base. He noted that in the case of central co-operative banks, overdue was the main problem, and the recovery of the same was urgently needed to make the central co-operative banks financially and administratively strong and viable units. Effective supervision over the end use and close contact of higher officials with the farmers was further highlighted by the author. Arulanandam and Namasivayam (1987 ), were of the opinion that the level of deposits mobilised by any co-operative bank depends on the efforts made by the bank to identify the savings potential of the target group and their effective channelisation into its system, the overall image of the bank, the quality of the service offered, the type of deposit schemes introduced and their attractiveness and branch network. They mentioned that deposit mobilizations can be very well understood by comparing the ratio of bank deposits to the national income of various countries, and to increase this ratio, the motto of co-operative banks should be "no place is too insignificant and no deposit is too small". Vaikuntha (1988), made an attempt to study the reasons for non-recovery of loans of DCBs, with the help of a survey of 180 borrower households belonging to big (60), medium (60) and small farmers (60) during 1984-85. He opined that the causes of overdues were natural calamities, unsound lending policies, inadequate supervision, unsatisfactory management and lack of right type of leadership. He suggested that the overdue problem can be checked by imposing abnormal interest penalties and effective recovery policies. John Winfred (1988 ), made another attempt to study the funds management in DCBs in India and found that the sources of funds consisted of internal sources (share capital from banks, members and reserves created by banks) and external sources ( deposits from individuals, co-operatives, other institutions and loans and advances from apex financing banks, government and commercial banks) . He also noted that there is an imperative need to analyse the cost and returns of funds to understand the margin available to a bank in its resource mobilisation and utilisation effort. He further highlighted the necessity to 35

know whether the margin available is adequate to run a bank viably. The author pointed out that the cost of deposits varied from bank to bank depending upon their composition the higher the level of current and savings deposits (which are much less costlier) the lower will be the average deposits rate and vice-versa. Moorti et al. (1988), made an attempt to study the growth of co-operative credit societies in respect of their membership, share capital, deposits, advances, pattern of utilisation and problems of overdues. They observed that the main reasons for the large amount of overdues in credit societies were slackness on the part of management of societies, poor management of societies and the untimely release and inadequate amount of loan that weakens the repayment capacity. Bhoslae and Dangat (1989), conducted a study on co-operative societies in. The study probed the extent of medium term borrowings of farmers from co-operative societies, repayment position of the loan borrowed and the factors responsible for overdues. The main reason for overdues stated was misutilisation of loan. The authors noted that the total amount borrowed had a direct relationship with the amount of overdues and it calls for a very careful scrutiny of the loan application by the financing institution. This study suggested an appropriate policy with regard to supervision of credit at the farm level. Bhatt (1989), analyzed credit-deposit ratio and its inter-relationship with other components contributing towards credit of DCBs with the help of correlation co-efficient andt test. The study revealed that effective credit-deposit ratio reflects the real picture of management of deposits and credit. The researchers stressed that the effective creditdeposit ratio should be used for judging performance efficiency, in relation to credit and deposits of banking sector function in rural area. Ranga Reddy (1989), studied the working of corrective and preventive measures taken for reducing farm co-operative overdues in the District Central Co-operative bank PACS. Measures taken for reducing overdues noted in the study are the stream-lining of management , strengthening of the supervisory staff, restructuring of the working capital by raising the share of owned resources and prompt legal and executive action covering all delinquents. 36

Mohandas (1990), tried to examine the effect of additional deposits on the resource base of DCBs in terms of the extent of incremental deposits, proportion of various types of deposits, share of deposits to working capital and ratio of deposits to loans and advances. Further, the effect of resources on lending is examined in terms of the composition of loans, credit-deposit ratio, incremental credit-deposit ratio and relative efficiency in resource management. The study revealed that deposit mobilization campaigns have helped the bank to increase appreciably the quantum of working capital as well as the proportion of deposits in the working capital. The main weakness of the programme noted was the obsession of the staff with the targets and achievement in deposit mobilisation and the neglect of corresponding expansion in lending activities. Another problem noted was the lower incremental credit-deposit ratio because of the tendency of the depositors to withdraw a sizeable part of the new deposits immediately. Notwithstanding these weaknesses , the study noted that the state patronage deposit mobilization campaigns have enhanced the credibility and social acceptance of the working of co-operative credit institutions in Kerala, eventhough the security of their deposits is not yet guaranteed by any form of deposit insurance. It concluded that there is still scope for refinement of the scheme in the DCBs with a 'project approach' which can ensure better results from the campaigns- both quantitatively and qualitatively. John Winfred (1990),made an attempt to measure the extent of overdues and causes of overdues of 16 DCBs for a period of (1970-1971 to 1981-1982) based on both primary and secondary data. He found that there had been slackness in recovery of loans resulting in mounting overdues and suggested that the directors of PACS should play an active and effective role in periodically reviewing the recovery performance of the societies followed by strict measures for recovery against the defaulters and launching of regular and timely recovery action. He also recommended that the tempo of recovery drive should be maintained by the societies through out the year instead of initiating it towards the close of the year. The author suggested that the interest rate structure of the central banks may be so devised as to provide for interest rate rebate as a reward for prompt repayment of loans on scheduled dates and for improving recovery performance, the rate of interest should be initially fixed at somewhat higher level and a rebate of two or three per cent to the borrowers on repayment of loans on the scheduled dates. He further 37

pointed out that the state Government should ensure that there is strict observance of financial discipline by all concerned for sound and sustained growth of co-operative credit system.

Satendra Pal Singh (1990), made an attempt to identify the factors affecting overdues of agricultural loans. The four major variables identified by them were amount of loan borrowed, amount of loan put under non-productive uses, size of holding and repayment capacity. The authors noted that loans must be provided only to those farmers who satisfy the test of technical feasibility and financial viability. They also suggested that appropriate steps be taken to educate farmers for proper utilisation of loans and avoiding excess expenditure at the cost of repayment of loans. Lakshminarayana and Adinarayana (1990), conducted a study on borrowers of crop loans. They analysed the nature and pattern of overdues and factors influencing overdues both under co-operatives and commercial banks and by farm size with the help of two stage stratified sampling. They observed that the repayment capacity of a borrower is a measure of his ability to ensure the return of funds acquired for purposes of investment and consumption. It was based on the analysis of productivity, ie., the additional returns that would accrue due to borrowed funds and the anticipated income from all sources of the borrower during the year. Repayment capacity was worked out as a residual after meeting the requirements of family consumption needs, payment of other dues, debts outstanding and payments . Accordingly, the authors found that the repayment capacity of farmers who borrowed from co-operatives was less per farm for small, large and pooled farmers, compared to those who borrowed from commercial banks. Irrespective of farm size, all borrowers from commercial banks enjoyed better repayment capacity, particularly in the case of small farms. They found that the inadequacy of loan amount from co-operative banks has resulted in mounting overdues and suggested that the scale of finance and individual maximum borrowing power should be increased keeping in view the present day costs of cultivation. Abdul Noorbasha et al.(1990), studied the impact of certain selected variables on the mobilisation of deposits, deployment of funds as advances and net profits of Vijayawada 38

DCB in order to identify factors of growth. It was found that the selected cogent variables explained more than 98 per cent of variability in respect of deposits and advances. While time and share capital of societies were positively related to deposits of the bank, the number of shareholders was also found to have significant influence on the advances of the bank. However , the selected variables for identifying the impact on net profits, could not explain any significant influence . In short, this study showed that the deposits and advances of the banks have been influenced by certain well identified factors. Mohandas and Indira (1991), observed that according to All India Debt and Investment Survey (1971-72), the deposits of DCBs of Kerala had increased from Rs.253.14 lakh in 1960-61 to Rs.3117.75 lakh by 1974-75. The increase was appreciable since 1971-72. In spite of the appreciable increase in the deposits of the co-operatives they noted that the co-operatives are still far behind the commercial banks. Sivaprakasam (1993), discussed the personnel management in DCBs and found that the employee turn over ratio of DCBs was low when compared to those in Regional Rural Banks. He found that 'influence' was an important criterion for nearly 1/3 of the employees in getting appointment. The author suggested that the DCBs should evolve a promotion policy in such a way that the base level employees are able to get at least two promotions in their entire career. According to him majority of the employees oppose deputation because of such reasons as lack of knowledge, lack of commitment on the part of the deputationist, lack of banking knowledge, blocking the promotion of bank employees, delay in policy and decision making and frequent transfer since they are from the Government. The study also revealed that the employees were able to improve their work after undergoing training. Toomkuzhy (1995), made a review of the changing environment of co-operativies and examined the need for professionalisation of management in co-operatives. He noted that the environment in which co-operatives operate has been changing very fast and it has been characterised by rapidly growing size , complexity and ambiguity . To cope with the new tasks, he suggested that professional management has become an absolute necessity. Now it is apparent from the review of literature that quite a lot of studies have been made on various aspects of funds management in DCBs in different parts of the country. But 39

only a very few studies have attempted a detailed analysis of mobilisation, deployment and other aspects of funds management . Even such studies have limited themselves to either individual DCBs or were limited to their scope. This was quite true of the few typical studies made in Kerala on the DCBs of Ernakulam , Trichur, Palakkad, etc. They were lacking in depth as well as in coverage. The present study is suggested in this background.

Scope of the study

The study includes employees working in the bank on different designations. It includes analysis of financial statements of cooperative bank Samana. Study also includes analyzing the problems faced by cooperative banks. The study is confined to area of samana and sample size is 5 as the number of employees working is only 5.

Objectives of the study

To know financial position of the bank. To know about contributions of various loans and advances. To know allocations of profits. To know the issues related to finance and solution provided by Government. To know the recent changes made.

Research methodology
What Is Research: Research in common parlance refers to a search for knowledge. One can also define search as a scientific and systematic search for pertinent information on a 40

specific topic. Research is thus an original contribution to the existing stock of knowledge making for its advancement. It id the pursuit of truth with the help of study, observation, comparison and experiment. In short the search for knowledge through objective and systematic method of finding solution to a problem in research. The systematic approach concerning generalization and the formulation of a theory is also research. As such the term research refers to the systematic method consisting of enunciating the problem. Formulating a hypothesis, collecting the facts or data, analysis of the facts and reaching certain conclusions either in the form of solutions towards the concerned problem or in certain generalizations for some theoretical formulation. Research Methodology: Research methodology is a way to systematically solve the research problem. The research methodology includes the various methods and techniques for conducting a research. Marketing research is a systematic design, collection, analysis and reporting of data and finding relevant solution to a specific marketing situation or problem. It includes the following: I. Research Design A research design is a framework or blue print for conducting the marketing research project. It details the procedures necessary for obtaining the information needed to structure and/or solve marketing research problems. This research is exploratory research in nature because it is regarding the study of various factors contributing to the performance of the bank and discovering the factors responsible for such and defining different problems faced by the bank and the way they invest in stock market. II. Sampling Design Sample Universe: All those who work in cooperative bank samana and few customers. Sampling technique: Non probability- judgmental sampling is used. Sample unit: employees Sample Size: respondents from Samana 41

Sample frame: employees of the bank. III. Data Collection: There are two methods of data collection-primary data and secondary data. Primary data are originated by researcher for the specific purpose of addressing the problem at hand. Not much primary data has been collected in this research. Secondary data are data that have already been collected for purposes other than problem at hand. Financial reports of the bank and balance sheet has been used for this research. Sources of data collection A. Primary Sources: 1. Personal Interview B. Secondary Sources 1. Internet sites 2. Books III. Tools of Analysis: The current analysis has been undertaken using following non statistical tools. These are: 1. Percentages (ratio analysis). 2. Charts (trend analysis).

Analysis of Survey
(a) Ratio analysis SN 1 42 Ratio Current and saving Interpretation The ratio indicates the As on 31.3.2012 50593646.26/124507757.6

deposit to total deposits

proportion of low cost Deposits in the total deposits. Higher the ratio, Better it is for the institution. This would help in keeping down the Financial Cost (FC) Customer deposit to Higher ratio helps in total assets(deposits reducing the liquidity of individuals only) risk substantially. Non-earning Assets This ratio indicates to proportion of nonTotal Assets earning (Nonearning assets to total assets. assets to cash, Higher the ratio, lower current account will balances, interest be earning ability of the receivable, other banks. Normally, banks fixed should attempt to asset etc.) maintain non-earning assets at the minimum. Lower the ratio, better it for the bank. These ratios indicate Short term loans what proportion of loans outstanding to and advances are of Total loans short-term and long term outstanding in nature. These ratios have to be compared with the ratios of ST and LT liabilities to total liabilities to understand whether there is any unduly large asset liability mismatch which may lead to liquidity crunch.

8 = 40.63 %

26325961.55/42957447.32 = 6.1 % 2461424.46/42957447.32 = 4.96 %

227979548.20/417102566. 43 = 54 %

43

Ratio of Volatile Liabilities to Total Assets (Volatile Liabilities refer to all liabilities which are likely to be withdrawn even if slightly higher rate is paid by other market players. Ex: Institutional deposits, govt. deposits etc.) Interest Cost (on deposits and borrowings ) to average Working Funds Interest Cost (on loans and advances plus investments ) to average Working Funds Current ratio Acid test ratio

Lower the ratio, better the liquidity

2131942.60/42957447.32 = 4.96 %

This ratio gives the average cost of funds

184696.38/4819326.94 = 3.8%

This ratio gives the average yield on WF

305403.02/4819326.94 = 8.33%

8 9

Short term liquidity Short term liquidity

21094586.89/5464472.50 = 3.86 % 12169611.39/5464472.50 = 2.2 % 4819326.94/5464472.50 = . 88 % 20190010.15/429574471.32 = 4.7 % 6600000/184696.38= 35 times

10

Absolute ratio

liquid Short term liquidity

11

Solvency ratio

Long term liquidity

12

Debt service ratio Long term liquidity or interest coverage ratio

44

Trend analysis
(1) Advances and outstanding loans Financial year 2009-10 2010-11 2011-12 Amt. in thousands 237960.26 300305.52 411339.65 %age 100 126.20 172.86

450000 400000 350000 300000 250000 200000 150000 100000 50000 0 2009-10 2010-11 2011-12

Amt. in thousands %age

Inference = the advances and outstanding loans has increased by 26.20 % in the year 2010-11 and it has increased by 72.86 % in the year 2010-11 from the base year 2009-10

(2) Different type of deposits Financial year 2009-10 2010-11 2011-12 Fixed deposit 51113.10 63891.38 73899.33 %age 100 111 144.58 Saving bank 32524.25 38219.24 48246.46 %age 100 117.51 148.34 Current deposit 1445.50 2521.82 2361.95 %age 100 174.46 163.40

45

80500 75500 70500 65500 60500 55500 50500 45500 40500 35500 30500 25500 20500 15500 10500 5500 500
% C ag ur re e nt de po si t % ag e de po si t % ag e ba nk

2009-10 2010-11 2011-12

Inference = fixed deposits of the bank has increased by 11% and 44.58% in the year 2009-10 and 2010-11 respectively. Whereas saving bank deposits have increased by 17.51% and 48.34 % in 2010-11 and 2011-12 respectively. On the other hand current deposits are showing increase of 74.46 % increase in the year 2010-11 but have decreased in the year 2011-12.

(3) Other assets and liabilities Financial year 2009-10 2010-11 2011-12 46 Other assets 5467.14 8435.79 12472.20 % age 100 154.30 228.13 Other liabilities 232573.54 395491.30 305066.71 % ge 100 170.05 131.17

Fi xe d

Sa vi

ng

Other assets 14000 12000 10000 8000 6000 4000 2000 0 2009-10 2010-11 2011-12 Other assets

Inference = there has been an increase of 54.30% and 128.13% in the year 2010-11 and
2011-12 respectively in the amount of other assets.

Allocation of profits
SN 1 2 3 47 Allocation Reserve fund Agricultural stab. Fund Co-op education fund %age 35 % 15 % 2% Amt. 2310000 990000 132000

4 5 6 7

Bad &doubtful debts Pension fund Primary vikas fund Building fund (bal. fig.) Total

35 % 3% 5% 5%

2310000 198000 330000 330000 6600000

2500000

2000000

1500000

1000000

500000

0 Reserv e fund

Agricul Co-op Bad Primar Buildin Pensio tural educati &doubt y vik as g fund n fund stab. on fund ful fund (bal.

Series1 231000 990000 132000 231000 198000 330000 330000

Related Issues of cooperative banks and solutions provided

Governance Issues Dual Control and Borrower driven structure Management and HR Issues Issues relating to Finance

(1) Governance Issues - Dual Control 48

Cooperation is a State subject under the Indian Constitution; hence all cooperative societies are governed by the Cooperative Societies Act of the State. Registration, incorporation, management, amalgamation etc are governed by the RCS of the particular State. At the same time, certain provisions of the Banking Regulation (BR) Act, 1949, are applicable to the cooperative banks that accept public deposit. In the rural structure, StCBs and the DCCBs and in the urban structure, PCBs are covered by these provisions of the BR Act. This duality of control and regulation has given rise to serious problems in the governance structure (such as interference by the State Govt. due to its combined role as dominant shareholder, manager, regulator, supervisor and auditor; further the precise demarcation of the powers between the two regulators is ambiguous.) Governance Issues - Borrower Driven Structure The rural cooperative structure in India is focused mainly on credit. The upper tiers refinance the lower tiers hence the structure is driven by borrowers at all levels. Depositors are either non-members or nominal members without voting rights while the borrowers have full voting rights. This is inconsistent to the concept of mutuality (thrift and credit going hand in hand). This also prevents any incentive for good governance since the depositors, whose money is being intermediated, have no say in the management of their own money.

Management and HR Issues Management problem arises due to the impairment of Governance. But are also important Poor human capital leading Generally ageing staff profile characterised by inadequate qualification and training. following

49

Issues relating to finance (Rural structure) The poor recovery of outstanding credit by the rural cooperative banks makes the whole system unsustainable. Lack of standardised business model and risk management systems Over exposure to the agri sector and lack of diversification of the loan portfolios. For the LT structure, the loan portfolio consists of a single product long terms agri loan of > 5 years term.

Solutions planned
Revival and Reform initiatives Revival package (2008) for Rural Short Term Coop Credit Structure (RSTCCS) RBIs vision document (2007) for Urban Cooperative Banks. Draft revival package (2010) for Rural Long Term Coop Credit Structure Revival Package for RSTCCS 1. Financial Revival: Assistance by Govt. of India to eligible credit societies for (i) wiping out accumulated losses;(ii) Bring a minimum CRAR of 7%; (iii) refund of share capital to the State Govt; and (iv) cost of special audit 2. Capacity Building and Technical Assistance: For capacity upgradation, training, installing common accounting and monitoring systems and for computerization. The estimated budget for these 2 components is Rs. 13,596 Crore; to be shared by Central Govt., State Govts and RSTCCS units in the proportion 68:28:4 3. Institutional, legal and regulatory reforms: Amendments in the State Cooperative Societies Act; in some provisions of the BR Act (1949) and in the NABARD Act to enable to refinance PACS remove State intervention in financial and administrative matters give voting rights to depositors pave way to regulatory control by RBI bring coop banks on par with the commercial banks in terms of regulatory norms (RLTCCS).

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Revival Package for RSTCCS: the status so far As of Sept 2010, 25 out of 29 States have executed MoU with GoI and NABARD

As of March 2010, special audit was completed in 59294 PACS in the country As of Sept 2010, governments of 8 States have passed bills to amend their coop societies Acts. Common Accounting System (CAS) and Management Information System (MIS) have been introduced along with human resources development initiatives willing to participate. Oracle real Application Clusters, Punjab State Co-operative bank (PSCB) is about to conduct an operation on deployment of the core banking system across its all 800 branches of the 19 district central co-operative banks, according to Indian fintech vendor I-flex . I-flex subsidiary Flexcel will deploy, host and manage the core banking system. At present, the technology has been successfully deployed in about 40 branches, and the next 200 locations are awaiting their turn. The program of deployment was worked out to improve transaction processing and to provide online, real-time banking to accounts from any of the 800 bank branches in the network . Plus it will help PSCB to set the fixed standardization of products and services to customers. PS Sidhu, MD, Punjab State Co-operative Bank, says: "We selected Flexcube, Oracle Database and Oracle Financial Services On Demand to enhance our efficiency by replacing manual processes, maintain the customer intimacy we have created over the years, and develop competitive differentiation because we expect the market to be increasingly demanding." in the States

Launch of debt swap scheme

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Chairing the meeting, PNB, executive director, Nagesh Pydah said, In order to save the farmers from the clutches of money lenders, Bankers should sensitise the market committee. Farmers Club can also play an important role in disseminating information to the farmers. He also asked the lead district managers of the Banks to report in next SLBC meeting. The progress of the scheme is not satisfactory in the state. According to the SLBC (state level bankers committee) data, compiled by Punjab National Bank, during the financial year 2011-12, the total disbursement target was Rs 28045.63 crore. Further, the target for the scheme(on the basis of 3 per cent of agriculture credit) was Rs 841.4 crore. However, against the target, the Bank in Punjab achieved only 10.52 per cent of the target. Banks in Punjab has disbursed only Rs88.5 crore in the financial year 2011-12, against the designated target of RS 841.4 crore. None of the private sector and cooperative banks in Punjab have provided assistance to farmers under the Debt Swap Scheme. Only regional rural banks and public sector banks (barring a few) have assisted farmers under the scheme. Banks in Punjab have decided to adopt a block in each district of the state to implement debt swap scheme. Punjab farmers are highly debt ridden. Of the total debt of over Rs 30, 000 crore, the share of the non institutional loan in the state is about Rs14,000 crore. So, banks can play a proactive role in saving the farming community from distress under the debt swap scheme. Also, PNB has recently revised some of the stipulation of the Debt Swap Scheme to popularise it. Since majority of money lenders are not registered as per the provision of Punjab and they are lending to farmers privately without any documentary proof, consequently they are reluctant to give any certificate to the farmers. To remove this hurdle, PNB has decided to allow financing under this scheme on the basis of affidavits of the farmers.

Limitations of the study

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Sufficient amount of information was not available. The members were less cooperative. No proper records were maintained. No use of computers was the biggest constraint. No proper information was available on the web site of the bank. Less time was there for proper study

Conclusion
Bank has a good amount of flow cost deposits which helps it to keep down the financial cost. Liquidity risk is moderate as the amount of deposits of individuals deposits is quite good. The amount of NPA (non performing assets) is also less. Amount of short term loans is quite higher which thus shows mismatch of liquidity crunch between short term assets and liabilities. Amount of volatile liabilities is satisfactory. Earnings in form of interest are more than the cost paid in form of interest. Short term liquidity is quite good but is not ideal whereas long term liquidity is satisfactory. Amount of loans and deposits both have increased and amount of assets have increased more as compared to liabilities. Most of the share out of profits is kept for reserves and bad & doubtful debts. There have been a lot of issues regarding finance and management but the solution to it has not yet been implemented completely. 53

Bank has a very satisfactory interest coverage ratio which shows the ability of bank to meet the expenditure

SUGGESTIONS AND RECOMMENDATIONS

To run any organization successfully the management needs to think always for the betterment of their service and product, every time there is a chance of improvement in the functioning of every organization specially when we talk about the banking sector in past there is very less or no competition in the market and the banks has no pressure to provide better facilities to the peoples but in recent years the competition is increased due to the entry of the public banks and other money lending units . Considering this the state cooperative banks need to be more careful and needs to take such steps which favors hem to stay ahead in the market. Some of the suggestions and recommendation are given here which may help the Cooperative Bank to stay in the competitive market if they adopt these. 54 More mass awareness campaigns should be organized in order to enhance market share of bank. Customers satisfaction must be the top priority of the bank Maximum practical exposure should be provided to the job trainees so that they may handle the various enquiries of customer effectively. Bank can provide the facility of ZERO BALANCE ACCOUNT to the students or the employees. Loaning procedure should be simple; less documentation should be involved in the loan sanctioning procedure. Functioning should be fast i.e. the time taken to do any work should be reduced efficiently. Online banking should be provided to customers for their batter service. Customers care center should be established. A.T.M. machines should be installed at the faster rate so that maximum customers can take advantage of this facility in wide spread area. Staff should be more cooperative.

Bank should provide appropriate knowledge about their products. All branches should be online. No inter branch charges should be deduced Proper use of machinery and the infrastructure, assets should do. Special line of credit may be extended to rural credit cooperative financing rural women entrepreneurs at lesser interest rate Today the commercial banks are taking to the correspondent or agency model to increase their outreach and to meet their financial inclusion goals. They are associating with MFs in a big way to finance large no. of SHGs. Cooperative bank should be aggressive in this direction as they are not aggressive in this direction.

Bank should adopt the essential feature of good corporate governance i.e. efficiency, professionalism, transparency and accountability. In order to compete at the market place, brand image is of great significance in public acceptance of product and services. Cooperative bank has fewer resources than required which should be overcome. Proper posting of the staff should be done. It is generally seen the branch has requirement of 5 employees but there are only 3-4 employees working in that branch.

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Policies should be made for the less chances of the NPA. Proper channel for the recovery of the loans should be established by telephonic conversation. Market status of the bank should be informed to the customers periodically. Seminars on the working of the bank should be held time to time. Refresher training to the employees should be given time to time. Staff should be more supportive with the customers. Supporting environment should be provided to the employees. Mobile banking should be included in the future plane of the bank. Website should be updated regularly and the details of the different policies and Interest rates must be posted properly. More and more information pamphlets should be provided to the customers. Bank should upgrade the technological infrastructure of the financial system.

Bank may provide consumer goods, especially essential commodities under P.D.S program at reasonable prices. Bank may work on the updating of skill of the Artisans, Craftsmen and weaker sections of the society engaged in Industrial activities and help them to market their produce.

Bank should work to enable to all persons to come together and gainfully employ themselves in diverse field such as Horticulture, Floriculture, Fisheries, Housing, Wool, Poultry, Labor & Construction, Dairy and Tourism etc.

Bank should encourage the un-employed educated youth, for organize tourism Cooperative.

Bibliography
Jain, Pramod Lata (1990), cooperative credit in rural India, mittal publications, New Delhi.

Singh kainth, Gursharan (1998), Indias rural cooperatives, daya books.

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Bhole, Laxman Madhoo (2002), financial institutions and markets, Tata McGrawHill, New Delhi. http://www.expressindia.com/--bank cooperative-banks...Punjab http://www.indiancooperative.com http://www.informationweek.in http://www.nafscob.org http://www.punjabrevenue.nic.in/coopsocact61(1).html http://www.pbcooperatives.gov.in/pscb.html http://www.pscb.in/index.php

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