FINANCIAL SERVICES

Financial services refer to services provided by the

finance industry. The finance industry encompasses a
broad range of organizations that deal with the
management of money. Among these organizations
are banks, credit
card companies, insurance companies, consumer
finance companies, stock brokerages, investment
funds and some government sponsored enterprises.
As of 2004, the financial services industry
represented 20% of the market capitalization of
the S&P 500 in the United States.

The growth of financial sector in India at

present is nearly 8.5% per year. The rise in
the growth rate suggests the growth of the
economy. The financial policies and the
monetary policies are able to sustain a stable
growth rate. The reforms pertaining to the
monetary policies and the macro economic
policies over the last few years have
influenced the Indian economy to the core.
The major step towards opening up of the
financial market further was the nullification
of the regulations restricting the growth of

1
 the financial sector in India. To maintain such
a growth for a long term the inflation has to
come down further.

The growth of financial sector in India was due to the

development in sectors

Growth of the banking sector in India

The banking system in India is the most extensive. The total

asset value of the entire banking sector in India is nearly
US$ 270 billion. The total deposits is nearly US$ 220 billion.
Banking sector in India has been transformed completely.
Presently the latest inclusions such as Internet banking and
Core banking have made banking operations more user
friendly and easy.

Growth of the Capital Market in India

• The ratio of the transaction was increased with the

share ratio and deposit system
• The removal of the pliable but ill-used forward trading
mechanism
• The introduction of InfoTech systems in the National
Stock Exchange (NSE) in order to cater to the various
investors in different locations
• Privatization of stock exchanges

2
Growth in the Insurance sector in India

• With the opening of the market, foreign and private

Indian players are keen to convert untapped market
potential into opportunities by providing tailor-made
products:
• The insurance market is filled up with new players
which has led to the introduction of several innovative
insurance based products, value add-ons, and services.
Many foreign companies have also entered the arena
such as Tokio Marine, Aviva, Allianz, Lombard General,
AMP, New York Life, Standard Life, AIG, and Sun Life
• The competition among the companies has led to
aggressive marketing, and distribution techniques
• The active part of the Insurance Regulatory and
Development Authority (IRDA) as a
• regulatory body has provided to the development of
the sector

Growth of the Venture Capital market in India

• The venture capital sector in India is one of the most

active in the financial sector inspite of the hindrances
by the external set up
• Presently in India there are around 34 national and 2
international SEBI registered venture capital funds

3
 BANKING IN INDIA

Early history
Banking in India originated in the last decades of the 18th
century. The first banks were The General Bank of India
which started in 1786, and the Bank of Hindustan, both of
which are now defunct. The oldest bank in existence in India
is the State Bank of India, which originated in the Bank of
Calcutta in June 1806, which almost immediately became
the Bank of Bengal. This was one of the three presidency
banks, the other two being the Bank of Bombay and
the Bank of Madras, all three of which were established
under charters from the British East India Company. For
many years the Presidency banks acted as quasi-central
banks, as did their successors. The three banks merged in
1921 to form the Imperial Bank of India, which, upon India's
independence, became the State Bank of India.

Foreign banks too started to arrive, NT.to the trade of

the British Empire, and so became a banking center.

4
The Bank of Bengal, which later became the State Bank of
India.
The first entirely Indian joint stock bank was the Ouch
Commercial Bank, established in 1881 in Faizabad. It failed
in 1958. The next was the Punjab National Bank, established
in Lahore in 1895, which has survived to the present and is
now one of the largest banks in India.

Around the turn of the 20th Century, the Indian economy

was passing through a relative period of stability. Around
five decades had elapsed since the Indian, and the social,
industrial and other infrastructure had improved. Indians had
established small banks, most of which served particular
ethnic and religious communities.

The presidency banks dominated banking in India but there

were also some exchange banks and a number of
Indian joint stock banks. All these banks operated in
different segments of the economy. The exchange banks,
mostly owned by Europeans, concentrated on financing
foreign trade. Indian joint stock banks were generally under
capitalized and lacked the experience and maturity to
compete with the presidency and exchange banks. This
segmentation let Lord Curzon to observe, "In respect of

5
banking it seems we are behind the times. We are like some
old fashioned sailing ship, divided by solid wooden
bulkheads into separate and cumbersome compartments."

The period between 1906 and 1911, saw the establishment

of banks inspired by the Swadeshi movement. The Swadeshi
movement inspired local businessmen and political figures
to found banks of and for the Indian community. A number
of banks established then have survived to the present such
as Bank of India, Corporation Bank, Indian Bank, Bank of
Baroda, Canara Bank and Central Bank of India.

The fervour of Swadeshi movement lead to establishing of

many private banks in Dakshina Kannada and Udupi
district which were unified earlier and known by the
name South Canara ( South Kanara ) district. Four
nationalized banks started in this district and also a leading
private sector bank. Hence undivided Dakshina Kannada
district is known as "Cradle of Indian Banking".

From World War I to Independence

The period during the First World War (1914-1918) through

the end of the Second World War (1939-1945), and two
years thereafter until the independence of India were
challenging for Indian banking. The years of the First World
War were turbulent, and it took its toll with banks simply
collapsing despite the Indian economy gaining indirect boost

6
due to war-related economic activities. At least 94 banks in
India failed between 1913 and 1918 as indicated in the
following table:

Year Number of banks Authorised capital Paid-up Capital

s that failed (Rs. Lakhs) (Rs. Lakhs)

1913 12 274 35
1914 42 710 109
1915 11 56 5
1916 13 231 4
1917 9 76 25
1918 7 209 1

Post-independence
The partition of India in 1947 adversely impacted the
economies of Punjab and West Bengal, paralyzing banking
activities for months. India's independence marked the end
of a regime of the Laissez-faire for the Indian banking.
The Government of India initiated measures to play an
active role in the economic life of the nation, and the
Industrial Policy Resolution adopted by the government in
1948 envisaged a mixed economy. This resulted into greater
involvement of the state in different segments of the
economy including banking and finance. The major steps to
regulate banking included:

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 • In 1948, the Reserve Bank of India, India's central
banking authority, was nationalized, and it became an
institution owned by the Government of India.
• In 1949, the Banking Regulation Act was enacted which
empowered the Reserve Bank of India (RBI) "to
regulate, control, and inspect the banks in India."
• The Banking Regulation Act also provided that no new
bank or branch of an existing bank could be opened
without a license from the RBI, and no two banks could
have common directors.

However, despite these provisions, control and regulations,

banks in India except the State Bank of India, continued to
be owned and operated by private persons. This changed
with the nationalization of major banks in India on 19 July
1969.

Nationalization
By the 1960s, the Indian banking industry had become an
important tool to facilitate the development of the Indian
economy. At the same time, it had emerged as a large
employer, and a debate had ensued about the possibility to
nationalise the banking industry. Indira Gandhi, the-
then Prime Minister of India expressed the intention of
the GOI in the annual conference of the All India Congress
Meeting in a paper entitled "Stray thoughts on Bank

8
Nationalisation." The paper was received with positive
enthusiasm. Thereafter, her move was swift and sudden,
and the GOI issued an ordinance and nationalised the 14
largest commercial banks with effect from the midnight of
July 19, 1969. Jayaprakash Narayan, a national leader of
India, described the step as a "masterstroke of political
sagacity.” Within two weeks of the issue of the ordinance,
the Parliament passed the Banking Companies (Acquisition
and Transfer of Undertaking) Bill, and it received
the presidential approval on 9 August 1969.

A second dose of nationalization of 6 more commercial

banks followed in 1980. The stated reason for the
nationalization was to give the government more control of
credit delivery. With the second dose of nationalization, the
GOI controlled around 91% of the banking business of India.
Later on, in the year 1993, the government merged New
Bank of India with Punjab National Bank. It was the only
merger between nationalized banks and resulted in the
reduction of the number of nationalised banks from 20 to 19.
After this, until the 1990s, the nationalised banks grew at a
pace of around 4%, closer to the average growth rate of the
Indian economy.

The nationalised banks were credited by some;

including Home minister P. Chidambaram, to have helped
the Indian economy withstand the global financial crisis of
2007-2009.

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Liberalisation
In the early 1990s, the then Narsimha Rao government
embarked on a policy of liberalization, licensing a small
number of private banks. These came to be known as New
Generation tech-savvy banks, and included Global Trust
Bank (the first of such new generation banks to be set up),
which later amalgamated with Oriental Bank of
Commerce, Axis Bank(earlier as UTI Bank), ICICI
Bank and HDFC Bank. This move, along with the rapid
growth in the economy of India, revitalized the banking
sector in India, which has seen rapid growth with strong
contribution from all the three sectors of banks, namely,
government banks, private banks and foreign banks.

The next stage for the Indian banking has been setup with
the proposed relaxation in the norms for Foreign Direct
Investment, where all Foreign Investors in banks may be
given voting rights which could exceed the present cap of
10%,at present it has gone up to 74% with some restrictions.

The new policy shook the Banking sector in India completely.

Bankers, till this time, were used to the 4-6-4 method
(Borrow at 4%; Lend at 6%; Go home at 4) of functioning.
The new wave ushered in a modern outlook and tech-savvy
methods of working for traditional banks .All this led to the
retail boom in India. People not just demanded more from
their banks but also received more.

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Currently (2007), banking in India is generally fairly mature
in terms of supply, product range and reach-even though
reach in rural India still remains a challenge for the private
sector and foreign banks. In terms of quality of assets and
capital adequacy, Indian banks are considered to have
clean, strong and transparent balance sheets relative to
other banks in comparable economies in its region. The
Reserve Bank of India is an autonomous body, with minimal
pressure from the government. The stated policy of the Bank
on the Indian Rupee is to manage volatility but without any
fixed exchange rate-and this has mostly been true.

With the growth in the Indian economy expected to be

strong for quite some time-especially in its services sector-
the demand for banking services, especially retail banking,
mortgages and investment services are expected to be
strong. One may also expect M&As, takeovers, and asset
sales.

In March 2006, the Reserve Bank of India allowed Warburg

Pincus to increase its stake in Kotak Mahindra Bank (a
private sector bank) to 10%. This is the first time an investor
has been allowed to hold more than 5% in a private sector
bank since the RBI announced norms in 2005 that any stake
exceeding 5% in the private sector banks would need to be
vetted by them.

In recent years critics have charged that the non-

government owned banks are too aggressive in their loan

11
recovery efforts in connection with housing, vehicle and
personal loans. There are press reports that the banks' loan
recovery efforts have driven defaulting borrowers

CLASSIFICATION OF BANKS

The importance of banks in the modern economy cannot be

denied. Banks play a significant role in the economic
development of a country. It is very difficult to have a
classification of banks that can be applied to all countries,
because the economic conditions and financial needs vary
from country to country and, consequently, the banks that
are developed to meet the financial needs also differ from
one country to another.
Generally, banks are classified on the basis of their
functions. Such classification of banks is called ‘functional
classification of banks’. On the basis of the functions, banks
are classified into the following categories:

1. Commercial Banks

Commercial banks are those financial institutions which

accept deposits from the public, repayable on demand

12
and lend them for short periods. They borrow money in
the form of deposits at a lower rate of interest and lend
it at a higher rate and thereby make a profit for
themselves. They lend to traders and manufacturers for
short periods. They provide the working capital to the
business in the form of overdraft and cash credit.
Besides, the banks render a number of agency services
such as collection of cheques and bills and subsidiary
services such as discounting bills of exchange, safe
keeping the valuables, issue of letters of credit,
remittance of funds etc. The services of banks are ever
expanding with the change. in the needs and
requirements of the society.

2. Industrial Banks or Investment Banks

Industrial banks are banks which provide block or fixed

capital (i.e., long term finance) to industries. As they
finance industries, they are called industrial banks.
They are also called investment banks, as they invest
their funds in subscribing to the shares and debentures
of industrial concerns with the object of providing long
term finance to industries. Therefore, an industrial bank
is an institution established to provide long-term
financial requirements of industry.

13
The main functions of industrial banks are:
1) They grant long term loans to industries. Loans
are given to industries for periods ranging from 5
to 15 years for the construction or acquisition of
factory buildings, purchases of machinery etc.
2) They subscribe to the share capital and
debentures of industrial concerns.
3) They underwrite the shares and debentures issued
by industrial concerns, and thereby assure the
industrial undertakings of sufficient long term
capital.
4) They provide technical assistance to industries.
5) They participate in the management of industrial
concerns by having their representatives on the
Board of Directors of the industries.
6) They advise the government on matters relating
to industries.
Today almost all leading countries of the world have
industrial banks to provide industrial finance. In India
we have a number of financial institutions to finance
industries.

3. Agricultural Banks
Agricultural banks are the specialised institutions
which are intended to provide agricultural credit.
Agriculturists require both short term and long term
loans for agricultural operations. Short term loans are

14
required for the purposes of purchasing seeds, manure
etc. and also for harvesting and marketing of
agricultural products. Long term loans are needed to
make permanent improvement to land and for the
purchase of costly agricultural implements like pump-
sets, tractors etc.
Agricultural banks are found in many countries, like
India, England, Germany, France, U.S.A etc. In most of
the countries, agricultural banks are organised on co-
operative basis. Agricultural banks organised in India
on the co-operative basis are of 2 types. They are:
1) Agricultural co-operative banks.
2) Land mortgage or land development banks.
Agricultural co-operative banks provide short-term
finance to the agriculturists. Land development banks
provide long term finance to the farmers for the
purchase of agricultural machinery, construction of
minor irrigation works etc.

4. Exchange Banks

Exchange banks are banks which finance mainly the

foreign exchange business (i.e., the export and import
trade) of a country. As they finance mainly the foreign
exchange business of a country, they are called
exchange banks.

15
 Special exchange banks are found only in some
countries. In many countries, commercial banks
themselves perform exchange business of a country.
In India, the major part of foreign exchange business is
done by foreign exchange banks (i.e., foreign banks
conducting the foreign exchange business of India
through their branches in India) A small portion of
India’s foreign exchange business is done by Indian
commercial bank.
The chief functions of exchange banks are:

a. They purchase or discount export and import bills and

thereby finance the foreign trade of a country.
b. They collect export bills of exchange on behalf of
exporters. They accept bills of exchange on behalf of
importers.
c. They provide necessary trade information to exporters
and importers. They provide facilities for remittance of
money from one country to another.
d. They issue letters of credit, circular notes, travelers,

cheques etc. to travelers who wish to go to foreign

countries on business or private tours.
e. They purchase and sell foreign currencies.
f. Besides the above foreign exchange business, they also
undertake ordinary commercial bankers business, such

16
as the acceptance of deposits from the public and the
financing of internal trade, commerce and industry.

5. Savings Banks

Savings banks are specialized institutions to collect

savings from the poor and middle income people of the
society. These banks primarily intended to encourage
habits of thrift and savings among people with small
incomes. The depositors are allowed to withdraw the
amount in tiI1,1es of need. But there are restrictions on
the number of withdrawals to be made. Separate
savings banks are organised in various countries. In
India there are no special savings banks. The savings
bank business is performed by commercial banks and
post offices.
The principal functions of savings bank are:

1. They mobilize the small and scattered savings of

the people.
2. By mobilizing the small savings of the people, they
promote the habit of thrift and saving among the
poor sections of the community.

3. They keep only a small portion of their deposits in

hand for meeting the withdrawals of the
depositors and invest the major part of their

17
 deposits on government securities. Generally they
do not lend their funds to the general public.

6. Central Banks
Today, every country in the world has a Central Bank. A
Central Bank is the highest banking and monetary
institution of a country. In other words: it is the leader
of all other banking and monetary institutions found in
country. As it occupies a central position in the banking
structure of a country it is called the Central Bank. The
Central Bank works for the promotion 0 the monetary
and economic stability of the country. Unlike other
banks does not work for profits.
The chief functions of a central bank are:
• It has the monopoly of issuing currency notes. It issues
currency not in accordance with the requirements of
commerce, industry and other economic activities of
the country.
• It acts as a banker to the government.
• It serves as a banker’s bank.
• It acts as the controller of credit. It controls the credit
created by commercial banks, with the help of various
weapons of credit control with a view to direct the flow
of credit to desirable economic activities.
• It is the custodian of a nation’s gold and foreign
exchange reserves.

18
7. Indigenous Bankers
The indigenous bankers are professional dealers in
hundis and they are the true financial intermediaries,
as they accept deposits or avail themselves of credit.
They operate mainly in small towns, semi-urban areas
and rural areas, though they are also found in bigger
commercial and industrial centres. Though money
lending is carried on by people belonging to all castes,
indigenous banking is continued to certain castes which
are known as banking castes. The important among
them are Jains, Marwaris and Chettiars. It is purely a
family business and it is hereditary, in nature.
The Central Banking Enquiry Committee of 1931
defines an indigenous banker as, “an individual or firm
accepting deposits and dealing in hundis or lending
money to the needy”. According to this definition,
acceptance of deposits and dealing in hundis are the
essential conditions for an indigenous banker. The
Bengal Provincial Banking Enquiry Committee defined
indigenous bankers as, “individuals or firms who deal in
hundis, whether they accept deposits or not”‘.

8. Co-operative Banks

Co-operative banks are formed on the principle of co-

operation to extend credit facilities to farmers and
small-scale industrial concerns. Banks promote in

19
 general the habit of thrift and self help among the low
and middle income groups of the society. The
distinguishing feature of a co-operative bank is the
absence of profit motive. Co-operative banks are very
helpful to meet the requirements of small farmers,
artisans etc. In India, co-operative banks have been the
pioneers in mobilising rural deposits. Today, however,
the cooperatives have been putting more weight on
their lending activities than on deposit mobilization.
Co-operative banking has three-tier structure. At the
state level, there is State Co-operative Bank. This is the
apex bank which governs all the co operative banks in
the state. At the intermediate level, there are Central
Co operative Banks. There is generally one central co-
operative bank for each district. At the base of pyramid,
there are primary credit societies at the village level.

Origin and Growth of Co-operative Banks in

India

Co-operative banks are a part of the vast and powerful

superstructure of co-operative institutions which are
engaged in the tasks of production, processing, marketing,
distribution, servicing, and banking in India. The beginning
of co-operative banking in this country dates back to about
1904. Official efforts were initiated to create a new type of
institution based on the principles of co-operative

20
organisation and management, which were considered to be
suitable f0r solving the problems peculiar to Indian
conditions. In rural areas, as far as agricultural and related
activities were concerned the supply of credit, particularly
institutional credit, was inadequate, and unorganised money
market agencies, such as money lenders, were providing
credit often at high rates of interest. The co-operative banks
were conceived in order to substitute such agencies, provide
adequate short term and long term institutional credit at
reasonable rates of interest, and to bring about integration
of the unorganised and organised segments of the Indian
money market.

When the national economic planning began in India, co-

operative banks were made an integral part of the
institutional framework of community development and
extension services, which was assigned the important role of
delivering the fruits of economic planning at the grass root
levels. In other words, they became a part of the
arrangements for decentralised plan formulation and
implementation for the purpose of rural development in
general and agricultural development in particular. Today
co-operative banks continue to be a part of a set of
institutions which are engaged in” financing rural and
agricultural development. This set-up comprises the REI,
NABARD, Commercial Banks, Regional Rural Banks, and Co-
operative Banks. The relative importance of co-operative in

21
financing agricultural and rural development has undergone
some changes over the years. Till 1969, they increasingly
substituted the informal sector lenders. After the
nationalisation of and the creation of RRBs and NABARD,
however, their relative share has somewhat declined. All the
institutional sources contributed about 4 per cent of the total
rural credit till 1954. This contribution increased to 62 per
cent by 1990. The share of co-operative banks in this
institutional lending has declined from 80 per cent in 1969
to about 42 per cent at present. The percentage of rural
population covered by the Agricultural Credit Co-operatives
was 7.8 in 1951, 36 in 1961 and about 65 per cent at
present.

Features of Co-operative Banks

Some distinguishing characteristics of the nature of co-
operative banks are as follows:

1. They are organised and managed, on the principles of

co-operation, self-help, and mutual help: They function
with the rule of one member, one vote

2. They function on “no’ profit, no loss” basis: For

commercial banks also, profitability is no longer the
main objective, but in their case this change has been
brought about as a result of social or public policy,
while co-operative banks, by their very nature, do not
pursue the goal of profit maximisation.

22
3. Co-operative banks perform all the main banking
functions of deposit mobilisation, supply of credit and
provision of remittance facilities. However, it is said
that the range of services offered is narrower and the
degree of product differentiation in each main type of
service is much less in the case of co-operative banks,
compared to commercial banks. In other words, co-
operative banks are characterised by functional
specialisation. It should be added that this is true with
much less force now, because many changes have
taken place in the co-operative banking system since
the Banking Commission arrived at the above-
mentioned conclusion. For example, co-operative banks
now provide housing loans also. The UCBs provide
working capital loans and term loans as well. The State
Co-operative Banks (SCBs), Central Co-operative Banks
(CCBs) and Urban Co-operative Banks (UCBs) can
normally extend housing loans up to Rs one lakh to an
individual. The scheduled UCBs, however, can lend up
to Rs three lakh for housing purposes. The UCBs can
provide advances against shares and debentures also.

4. Co-operative banks do banking business mainly in the

agricultural and rural sector: However, certain types of
Banks viz., UCBs, SCBs and CCBs operate in semi-
urban, urban and metropolitan areas also. The urban
and non-agricultural business of these banks has grown

23
 over the years. The co-operative banks demonstrate a
shift from rural to urban, while the commercial banks,
from urban to rural.

5. Co-operative banks are perhaps the first government-

sponsored, government-supported, and government
subsidise Financial agency in India. They get financial
and other help from the REI, NABARD, Central
Government and State Governments. They constitute
the “most favoured” banking sector with no risk of
nationalisation. For commercial banks, the RBI is a
lender of last resort, but for co-operative banks, it is the
lender of first resort which provides financial resources
in the form of contribution to the initial capital (through
state governments), working capital, and re-finance.
The promotional role of the RBI can be seen in respect
of co-operative banks, and this role supersedes its
regulatory role, in respect of these banks.

6. Co-operative banks belong to the money market as well

as to the capital market. Primary agricultural credit
societies provide short term and medium term loans.
Land Development Banks (LDBs) provide long term
loans, UCBs meet working capital as well as fixed
capital requirements, and SCBs and CCBs also provide
both short term and long term loans. Similarly, they
accept short-term and long term deposits and some of

24
 them mobilise resources through the issue of
debentures.

7. Co-operative banks are financial intermediaries only

partially. The sources of their funds resources are: (a)
Central and state governments, (b) the REI and
NABARD, (c) other co-operative institutions, (d)
ownership funds, and (e) deposits or debenture issues.
It is interesting to note that intra-sectored flows of
funds are much greater in co-operative banking than in
commercial banking. Inter-bank deposits, borrowings,
and credit form a significant part of assets and
liabilities of co-operative banks. This means that intra-
sectoral competition is absent and intra sectoral
interaction is high for co-operative banks.

8. Co-operative banks have a federal structure of three-

tier linkages. Further, their operation of mixed banking
type. Primary credit societies are unit banks; many
UCBs also are unit banks. But SCBs, DCBs (CCBs), and
SLDBs, PLDBs and many UCBs have a number of
branches, subject to this, it can be said that each co-
operative institution in each tier is a separate entity
with definite jurisdiction and has an independent board
of management.

9. Some co-operative banks are scheduled banks, while

others are non-scheduled banks. For instance, SCBs

25
 and some UCBs are scheduled banks but other co-
operative banks are non-scheduled banks. At present,
28 SCBs and 11 UCBs with Demand and Time Liabilities
over Rs 50 crores are included in the Second Schedule
of the RBI Act.

10. Co-operative banks accept current, saving, and fixed or

time deposits from individuals and institutions including
banks. Some UCBs numbering about 40 in 1989 are
allowed to open and maintain NRI accounts in rupees
but not in foreign currency. Deposits mobilized by them
in a given area are used for financing activities in that
locality.

11. The co-operative banks are subject to CRR and liquidity

requirements as other scheduled and non-scheduled
banks are.

12. Since 1966, the lending and deposit rates of

commercial banks have been directly regulated by the
RBI. In the recent past, the RBI has introduced changes
in interest rates of co-operative banks also, along with
changes in interest rates of commercial banks. The
interest rates structure of co-operative banks is quite
complex. The rates charged by them depend upon the
type of bank, the type of loans, and vary from state to
state.

26
13. Although the main aim of the co-operative banks is to
provide cheaper credit to their members, and not to
maximize profits, they may access the money market
to improve their income so that they remain viable.

14. Co-operative banks (COBs). In short,have played a

pivotal role in the development of short term and long
term rural credit structure in India over the years. The
co-operative credit endeavour is said to be the first
ever attempt at micro-credit dispensation in India. The
entire cooperative credit system covers more than 74
per cent of rural credit outlets, and it has a market
share of about 46 per cent of total rural credit in the
country. From being the providers of loans for
redemption of debt, COBs have gone on to meet the
investment requirements of all activities in rural areas.
The co-operative credit structure had a membership of
1.3 crores, net owned funds of Rs 3191 crores, and
outstanding loans and advances of Rs 17261 crores in
2001. However, too much intervention by the State in
day-to-day arrangement has ‘contributed to the lack of
involvement and ownership of people in their
functioning. The COBs need to become member-driven
banks. There is also a need to do away with the duality
of control over them by the RBI and state government.
They need support in respect of infrastructure, resource
base, professional management, etc.

27
Main Weaknesses of Co-operative Banks
The main weaknesses of co-operative banks are as follows:

a) The vital link in the co-operative credit system

namely, the PACSs, themselves remain very weak.
They are too small in size to be economical and viable;
besides too many of them are dormant, existing only
on paper.

b) With the expanding credit needs of the rural sector,

the commercial banks have come in actively to meet
the credit requirements of this sector, and this has
aggravated the difficulties of co-operative banks. The
theory that co-operative banks would be buoyed up by
the competition from other financial institutions does
not appear to have worked.

c) Co-operative banks are not doing well in all the

states; only a few account for a major part of their
business. For example, 75 per cent of total deposits
mobilised by SCBs was only from seven states in 1987
Andhra Pradesh, Gujarat, Karnataka, Madhya Pradesh,
Maharashtra, Tamil Nadu, and Uttar Pradesh.

d) These banks still rely very heavily on refinancing

facilities from the government, the RBI, and NABARD.
They have yet not been able to become self-reliant in
respect of resources through deposit mobilisation.

28
e) They suffer from dangerously low or weak quality of
loan assets, and from highly unsatisfactory recovery of
loans.

f) They suffer from infrastructural weaknesses and

structural flows. They do not look like banks and do not
inspire confidence in the potential members, depositors
and borrowers.

g) They suffer from top much officialisation and

politicisation. Undue governmental interventions have
prevented them from developing steadily as a self-
reliant credit system. Most of them are headed by
politicians.

h) They unduly depend on government capital rather

than member capital.

j) They have been resorting to unethical practices

k) There are many regulators for them, but still there

are many lacunae in their regulation. In fact, the
existence of multiple regulatory authorities has come in
the way of effective regulation, control, and monitoring
of COBs. The RBI had suggested a creation of a single
regulatory body, but the proposal has not been
accepted so far due to considerations of powerful
politics, which afflicts the co-operative sector perhaps
more than other sectors in India.

29
Cooperative Banks in Jammu & Kashmir

T h er e a r e 9 b a n k s a r e t h e C o o p e r a t i v e S e c t o r
in the J&K State. Of these 4 are Non-Urban
Banks and 4 Urban Banks. J&K State Cooperative
Bank for Agriculture and Rural Development
(SCARDB) is the 9th Bank. The 4 Urban and Non-
Urban Cooperative Banks are as follows

Non Urban Cooperative Bank

1. J&K cooperative Bank

2. Jammu Central Cooperative Bank

3. Baramulla Central Cooperative Bank

4 . A n a n t n a g C e n t r a l C o o p er a t i v e B a n k

Urban Cooperative Bank

1. Jammu citizens Cooperative Bank

2 . U r b a n C o o p e r a t i v e B a n k, A n a n t n a g

3. Devika Urban Cooperative Bank,Udhampur.

4. Kashmir M er c h a n t i l e Cooperative
Bank,Sopore

30
 JAMMU CENTRAL COOPERATIVE BANK

BAHU PLAZA BRANCH

PARADE BRANCH

31
 Brief History of the Bank:

The Jammu Central Co-operative Bank Limited was

registered in the year 1914 as a District Central Co-operative
Bank with its area of operation confined to Jammu District
only. However, with the partition of the Country some of the
other similar type of Central Co-operative Banks were
merged with the Jammu Central Co-operative Bank Limited
Jammu. These Banks were of Districts Rajouri, Poonch, Doda,
Kathua, Udhampur and thus the area of operation of the
bank got extended to whole of the Jammu region
comprising of Six districts Viz. Jammu, Kathua,
Udhampur,Doda, Rajouri and Poonch.There are 63 Branches
and 3 Extension Counters of the Bank. Formerly, the Bank
was having a nominated Board but after 3rd September
2001 there is duly elected Board of Directors of the Bank.

FINANCIAL INDICATORS (Amt. in Lakh)

Position as on 31st March

Parameter
2001 2002 2003 2004 2005

Share Capital 427.55 455.08 479.56 505.68 537.66

Of Which from Govt. 150.50 150.50 150.50 150.50 150.50
Deposits 40378.83 47114.06 50704.68 53595.69 55401.25
Borrowings 650.49 409.61 229.33 111.52 39.73
Loans Issued 4366.84 4494.87 4893.09 5245.92 6736.50
Short Term 1841.06 2148.61 2097.23 2248.79 2583.03
Medium Term 2319.73 2030.11 2372.96 2565.49 3317.43
Long Term 206.05 316.15 422.90 431.64 836.04
Loans Outstanding 11708.26 13176.80 14625.65 15804.89 17730.69
Short Term 4434.39 4844.96 5111.56 5570.96 5511.16

32
Medium Term 6801.16 7652.99 8567.38 9092.79 10604.41
Long Term 472.71 678.85 946.71 1141.14 1615.12
Investments 21768.06 25764.30 27691.91 29066.59 28440.59
Recovery
Demand 5706.77 5681.00 6459.00 6867.00 7781.03
Collection 1671.98 1480.55 2081.00 2308.00 2833.52
Percentage of recovery. 29% 26% 32% 34% 36%
Non-Performing Assets 3543.03 3945.78 4098.82 4516.73 4626.13
Of Which from
JAKFED 2177.47 2177.47 2177.47 2177.47 2177.47
C.D. Ratio 29% 28% 29% 29% 32%
Business Per Branch 801.34 927.55 1037.00 1101.60 1160.82
Business Per Employees 77.74 91.00 100.00 106.77 113.03
Net Worth -4802.99 -5172.31 -5335.67 -5484.19 (-) 5734.28
Net Loss 1745.40 483.89 228.14 194.56 284.77

Board of Management:
The Board is the Governing Body of the Bank to whom the
management of the affairs of the Bank is entrusted. The
strength of the elected members of the Board does not
exceed sixteen members.

The Board is elected as follow:

• Members representing Individual Share Holders not

exceeding one.

33
 • Members representing the share holding Primary Agri.
Credit Societies not exceeding twelve, elected @ two
from each district by his class of member societies from
his District.
• Members representing share holding non-agriculture
Credit Societies not exceeding one.
• Members representing share holding Marketing
Societies not exceeding one.
• Members representing other share holding societies not
falling in any of the above category not exceeding one.

Of the above two seats are reserved for the members who
belong to the Scheduled Castes and other Backward classes
and one for a women representative. If no such persons are
elected the elected members may coopt the required
number of persons entitled to such representation with the
approval of the Registrar.

Chief Executive is the Ex-Office Member Secretary of the

Board.

Besides Govt. nominees as may be nominated in

accordance with the provision of Act, one seat each shall be
reserved for the nominees of J&K State Coop. Bank and
National Coop. Development Corporation.

The term of office of all the elected members of the Board

is three years from the date of election. Should the election

34
be not conducted by the Competent Authority before the
expiry of the term, the term of the Board shall be deemed to
have been extended until such time within which the
Competent Authority as prescribed under the Act and Rules,
gets the elections conducted.

Future Outlook and Strategies: Looking at the Financial

indicators and the working of the Bank, a specific course of
action is planned for:

• Reduction in cost of funds

• Reduction in risk cost
• Reduction in transaction cost
• Increase in yield

Reduction in Cost of Funds: Aggregate deposits of the

Jammu Central Coop. Bank Ltd, are growing at all times
though the rate of growth during certain periods in the past
was more and during certain other periods it was less.But
the concern of our bank is not growth rate perse but the
changing composition of deposits portfolio. The volume of
time deposits was growing at a faster rate then the
demand deposits. One of the implications - the most
significant one - is higher outgo in the form of interest on
these deposits. This alongwith the decrease in the lending
rates, squeezes the margin available.

35
To reduce the cost of funds, there is no other alternative but
to alter the mix of deposits.The Bank has to mobilise more
and more of savings and current account deposits.During
the last two years Bank's Board has taken a policy decision
not to encourage term deposits under reinvestment
1/2
plan(under Money Multiple Deposit Scheme).Besides %
extra interest incentive which the Bank was providing to its
clients for the last many years stands withdrawn.Both
these decisions checked the growth of Term
Deposits.Whereas percentage of Term deposits (high cost
deposits) was 66.85% as on 31st March 2002, it came down
to 56.88% as on 31stMarch 2005.This changed composition
of deposit portfolio decreased the interest cost of deposits
as Rs.5.64 per hundred rupees during 2004-05 as against
Rs.7.21 per hundred rupees during 2001-02.

Bank has planned to further bring down the cost of

deposits at Rs.4.88 per hundred rupees by the end of
31st March 2007 as against Rs.5.64 per hundred rupees as
on 31st March 2005.

Reduction in Transaction/Risk Cost: A major part of

transaction cost is related to payments to be made to staff.
It may not be possible to reduce these costs in absolute
terms.Some of the costs like Stationery, Telephones,
Travelling expenditure may be brought down in absolute
terms. But then the reduction may not be very significant.

36
Bank has to ensure that at least the increased business does
not carry proportionate increase in transaction
cost.Transaction cost as a percentage of working funds
would be brought down. In the Development Action Plan for
the year 2005-06 & 2006-07, COM is projected at Rs.2.33
and Rs.2.03 respectively as against Rs.2.49 per hundred
rupees ending 31st March 2005. Keeping in view the past
experience and freezing of fresh appointments in the Bank,
it would not be difficult to achieve the target.

Transaction costs have also a relationship with risk cost.To

minimise the risk cost in future, the Bank staff is advised to
maintain the quality of loan assets, to have sound systems
of borrower selection, appraisal, monitoring and recovery so
that non-performing assets are reduced in absolute as well
as in percentage terms.

Increase in Yield :

• In view of the stagnant credit absorption capacity of

Primary Agricultural Co-operative Societies, the Bank
has to diversify its loan portfolio and to search for high

37
 yield loans to increase the proportion of such assets in
the total portfolio. Two possible courses of action are :-
o To give larger loans by meeting the credit
requirements of customers in full and
o to build a loan portfolio which consists of both
long term and short term loans.
• Managerial talent in the JCCB is more synonymous with
deposit mobilisation capacity instead of "COMPLETE
BANKERS" with ability of asset liability management
skills.The emerging scenario shall be changed.The
talent shall be nurtured and recognised more on the
lines of raising resources for profitable deployment,
Training infrastructure alongwith technology support
shall be geared up.
• Recovery of interest income is another factor that affects
the yield.Bank shall pay greater attention
towards monitoring of regular payment of interest by
the borrowers. This would be achieved by reducing the
NPAs of the Bank. Process of recovery of JAKFED's
default is in the pipeline and likely to be finalised
during the current financial year.This would not only
reduce the accumulated losses of the bank but
recycling of funds( Rs.62.04 Crores) would further
generate interest income for the Bank. In view of this,
the Bank is likely to comply with the provision of

38
 Section 11(i) of the B.R. Act.1949(AACS) by the end of
March 2007.
• Another area of concern is "judicious cash
management and management of funds".Opportunities
for earning income are lost by lack of proper MIS,
insufficient cash handling procedures, ineffective
remittance mechanism and irregular monitoring
system.By focusing attention on improving the funds
management system bank would be in a position to
maximise the returns from investments with negligible
incremental transaction cost.

Vision 2005-2010:

Any vision statement refers to a complete set of

dispositions that evolve entire trend of futuristic view.
Vision is a combination of vista (V) of any imaginary (I)
situation based on impulses, synthesised and synergised
(S) with intuition (I), optimism (O) and novel (N) ideas for
FUTURE.

The life of every individual is guided by the vision he has for

the future and the mission for him is to achieve the same.
It is more pertinent for an institution as well as any
structure to have a clearly defined vision and determined
mission to reach the goal.

39
Vision

The Jammu Central Co-operative Bank dedicates itself to all

round of growth of PACS by providing required credit to
them. It also swears to serve the general public by
extending improved banking services and enhanced credit
dispersal better than any other banking channel.

Mission

The Jammu Central Co-operative Bank shall have the

visionary look and missionary zeal to achieve its awarded
objectives. The Bank shall fine tune its functioning to
challenge the competitive on slaught from the commercial
Banks and Regional Rural Banks. For developing a mission,
there shall be a two step process :-

Corporate Mission

As a corporate process, the uniqueness and distinct culture

of the Jammu Central Co-operative Bank is our experience
specialization in the field of agricultural credit and vast
clientele base. Therefore, as a corporate mission, our focus
would be agricultural finance and needs of the rural people.
In light of above, the corporate mission would be to double
the flow of Agriculture Credit during the next three years.

40
Organisation Mission

The organisational mission would be to inculcate sense of

belongingness by bringing professionalisation in true sense
to introduce and upgrade technology based skill with human
face and strengthen its resource base by broadening its
customer base.

SERVICES OFFERED BY JCC BANK

41
The JCC Bank strives to offer the best quality of
services to its customers with uncompromising
levels of dedication and commitment. The bank
operates in a 24x7 environment offering multi-
c h a n n e l b a n k i n g a n d c o s t e f f e c t i v e s er v i c e s . S o m e
of these services are listed below:-

• D e b i t & C r ed i t C a r d s

• Merchant Acquiring

• Saving Bank Deposit

• Term Bank Deposit

• Value Added Schemes

• Gift Cheque Scheme

• Current Account

• Support Services

• Depository Services

42
 Various loans provided by bank

HOUSING LOAN SCHEMES

Quantum of loan

• For Construction /Purchase 60 months net salary or

75.00 Lacs whichever is lower.
• For repairs/renovation 20 months net salary, subject
to a maximum of Rs.10.00 Lacs.
• For purchase of land: 20 months net salary/income
subject to maximum of Rs.5 Lacs within J&K and
Rs10.00 Lacs outside J&K.
• Also as an incentive for small borrowers, the loans
upto Rs. 1.5 Lacs granted for repairs/renovations of
existing houses would now be secured by third party
guarantee of two persons or such other security as
is deemed appropriate by the Bank.

Eligibility

• Employees of Govt. , Semi-Govt. Dept., Civic Bodies,

PSU's with minimum 5 years service.
• Reputed Businessmen with minimum 5 years
standing.
• Professionals & Self employed like Doctors
,Engineers , CA's , Advocates with minimum 5 years
standing

43
Security

• Primary: Mortgage of the house Property to be

purchased / constructed.
• Collateral : Third party Guarantee of one person, or
assignment of LIC Policies , pledge of Govt.
securities etc.

Interest rates

Repayment Floating Rate of Fixed Rate of

Period of Interest(% p. a.) for Interest(% p. a.) for
loans loans loans
Up to Above Up to Above
Rs.20.00 Rs.20.00 Rs.20.00 Rs.20.00
lacs lacs lacs lacs
Repayment PLR-3.25 PLR-2.50 10.25 11.00
up to 5
years.
Above 5 PLR-2.75 PLR-2.00 11.00 11.75
years & up
to 10 years
Above 10 PLR-2.00 PLR-1.25 XXX XXX
years & up
to 15 years
Above 15 PLR-1.25 PLR-0.50 XXX XXX
years & up
to 20 years

Repayment

• For construction of new house 20 years including 9

months moratorium in equal monthly installments.
(Applicable to new loans and disbursements only)
• For addition / Renovation 7 years Including 2 months
moratorium in equal monthly Installments.

44
Margin

• 15% for construction/purchase of built house flat.

• 20% for renovation/purchase of land.

Processing charges
• 0.25% of loan amount

AUTOMOBILE LOANS

45
 • Car loan
• Commercial vehicle finance
• Two wheeler finance

CAR LOAN SCHEMES

Eligibility

• Permanent Employees of State / Central Government, Employees

of Government / Semi-Government Undertakings & Autonomous
Bodies
• Employees of Private Limited Companies, Private Organizations,
Reputed Establishments & Employees on contractual basis with
Central/State Govt, Government/ Semi-Government
Undertakings& Autonomous bodies*
• Businessmen, Professionals and self employed individuals.

Security

• Primary
Hypothecation of vehicle to be purchased & Bank’s charge to be
registered with RTO.
• Collateral
o No third party guarantee required in respect of permanent
employees of State and Central Government, employees of
State / Central Government Undertakings & Autonomous
bodies drawing salary through our Bank and where letter of
undertaking from employer is available.
o Guarantee of one person for all other applicants of the
bank.

Margin

46
 • 10% of the Sales Invoice Value for employees of State / Central
Government, State / Central Government Undertakings,
Autonomous bodies, Platinum / Gold Current Account
holders.10% margin shall also apply to Businessmen,
Professionals & Self-Employed persons with yearly income of Rs
2,50,000/- & above.
• 20% of the sales invoice value in case of all the other cases.
• 100% finance shall be available to applicants if they keep a fixed
deposit with the bank for amount equal or more than the margin
money & for duration not less than the repayment period of the
loan. This deposit shall be kept under lien to the Bank.

Repayment

• Flexible repayment options ranging from 12 to 84 months in

equal monthly installments.

Rate of Interest (Subject to Change)

Car Loans Rate of Interest (% p. a.)w. e. f. 01.05.2009

(Fresh Fixed Floating
Cars)
a) Up to 3 years 11.00 XXX
with
repaymen b) Above 3 years and up to 5 11.50 PLR -1.75
t years
c) Above 5 years 12.00 PLR -1.25

Minimum Loan Amount

Rs 75,000/- (Rupees Seventy Five Thousand Only)

Maximum Loan Amount

• 30 months net monthly salary of the applicant or 2.5 times net

annual income. However, in case of employees of private

47
 organizations & employees on contract basis as mentioned
above, the maximum finance shall be limited to 18 times net
monthly salary or 1.5 times net annual income.
• In case of married individuals, certified income of spouse can
also be considered provided the spouse guarantees the loan.
• The upper ceiling on the loan amount shall be Rs 25 lacs.
• The number of Vehicles to be sanctioned to a single borrower
under Car Finance (New Cars) at any point of time should not
exceed more than 2 vehicles subject to maximum prescribed
limit of Rs 25.00 lac.

Processing Charges
0.25% of Loan amount to be paid upfront subject to a minimum of Rs.
500/-.

COMMERCIAL VEHICLE LOANS

Purpose

48
 T h e f i n a n c e u n d er t h i s s c h e m e s h a l l b e a v a i l a b l e
f o r p u r c h a s e o f fr e s h c o m m e r c i a l v e h i c l e s o r n ew
chassis and/or fabrication for commercial purpose
o r fo r c a p t i v e u s e . T h e c o m m e r c i a l v e h i c l e s w i l l
include passenger buses, trucks, tippers, oil and
gas tankers taxis, mini buses, light commercial
vehicles, tempo, auto rickshaws and any other
mode of transportation under public Carrier
permit. The v eh i c l e s should be of approved
Models/makes.

Eligibility

• Individuals / Proprietorship/partnership
f i r m s & L i m i t e d c o m p a n i e s o w n i n g / o p er a t i n g
or proposing to own / o p er a t e transport
vehicles for carrying passengers or goods on
h i r e.
• The borrower should have sufficient net worth
to pay for the margin and initial recurring
expenses. In case where a borrower does not
meet this requirement, a co-borrower having
s u f f i c i e n t n et w o r t h c a n b e i n c l u d e d .
• O w n er s h i p of a pre-owned v eh i c l e is not
mandatory.
• M i n i m u m a g e o f A p p l i c a n t : 2 1 y ea r s

49
 • Maximum age of Applicant at loan maturity:
65 years
• Minimum period of existence in case of firms
& companies: 2 years in business.
Loan Limit Upto
Commercial
(Amount in Margin
Vehicle Loans
lacs)
Under priority Micro (Service) 8.50 15%
sector Enterprises
Upto and inclusive
15%
of Rs 10.00 lacs
Small (Service)
Above Rs 10.00 20%
Enterprises
Under 200.00 25%
Non –priority sector Above 200.00 30%

Note:-Margin will be calculated on the project cost of vehicle

(chassis, body building & initial insurance) excluding registration
charges. The borrower will be required to deposit the entire margin
upfront with the bank to be released subsequently along with the
loan component directly in favour of the supplier/fabricator to
ensure proper end use of funds

• C o m m e r c i a l D r i v i n g L i c en s e ( f o r s e l f- o p e r a t i n g
by individuals)

Margin

50
Quantum of Loans

Maximum repayment period of 72 months including a initial

moratorium of 2 months. The repayment shall be in Equal
Monthly Installments

Repayment

Maximum repayment period of 72 months including a initial

moratorium of 2 months. The repayment shall be in Equal
Monthly Installments.

Security

• Primary:

• Hypothecation of vehicle to be purchased. Banks name

as hypothecate to be got noted in the books of the RTO
and also the Registration Certificate.
• Collateral:

Upto 30 lacs 3rd party guarantee of 2 persons

51
 Above 30 lacs Mortgage of immovable property of
value equal to at least 50% of the
loan amount.

Upfront fee

• 0.20% upto an amount of Rs 50.00 lacs. Minimum Rs

500/-
0.50% above Rs 50.00 lacs to Rs 100.00 lacs.
• 1.00% above Rs 100.00 lacs Maximum Rs 10.00 lacs.

Rate of Interest

Rate of Repayment Repayment 3 to

Interest upto 3 years 6 years
Under Micro (Service) PLR-1.50% PLR-1%
priority Enterprises
sector PLR –1.50% PLR-1%

Small (Service)
PLR-1% PLR-0.50%
Enterprises
Above Rs 10.00
PLR PLR+1.25%
lacs

Note:-Interest to be charged monthly on daily outstanding

balances. Penal Interest @ 2% p.a. over and above the contract
rate where the installment is overdue beyond 2 months. The penal
interest will be charged on the overdue amount for the overdue
period. No interest repayment will be allowed for pre-payment
before three years for loan of original tenure of three to six years.

52
 TWO WHEELER LOANS

Purpose

For purchase of new two wheelers viz. Scooters,

Motor cycles, Mopeds, etc. (Any make or model)

Eligibility

• Employees of G o v er n m e n t / S e m i - G o v e r n m e n t
Undertakings, Autonomous bodies, Public
Sector Undertakings, Private Companies or
Reputed Establishments, Professionals or self
employed individuals / Businessmen.
• Students, aged 18 yrs & above, with parent as
co-borrower.
• M i n i m u m a g e o f A p p l i c a n t : 1 8 y ea r s
• Maximum age of Applicant at loan maturity:
5 8 y e a r s o r a g e o f r et i r e m e n t , w h i c h e v e r i s
h i g h er f o r G o v e r n m e n t e m p l o y e e s & 6 5 y e a r s
f o r o t h er s .

53
 • Minimum employment: The applicant must
h a v e b e e n i n c u r r e n t e m p l o y m e n t f o r a p er i o d
not less than 1 year or must have a business
standing of at least 2 years.
• M i n i m u m N e t A n n u a l I n c o m e : R s 5 0 , 0 0 0.
• Employees on Adhoc basis shall not be
e l i g i b l e. H o w e v e r , e m p l o y e e s o n c o n t r a c t u a l
basis in Government/Semi-Government
Undertakings, Autonomous bodies & Public
Sector Undertakings shall also be eligible, if
t h e y h a v e b e en i n c u r r e n t c o n t r a c t u a l j o b f o r
a p er i o d not less than I year and the
remaining contract period is longer than the
chosen repayment period.

Margin

• 10% of the Sales Invoice Value for employees

of state/central Government/State /Central
Government Undertakings, Autonomous
bodies, Multinational companies/Public Sector
Undertakings/Platinum /Gold current account
holders. 10% margin shall also apply to
Professionals & self employed persons with
yearly income of Rs 2,50,000 & above.
• 20% of the sales invoice value in case of all
the other eligible individuals/entities except

54
 employees of private sector organizations &
employees on contractual basis.
• 25% of the sales invoice value in case of
employees of private sector organizations &
employees on contractual basis.

Maximum Loan Amount

1 2 t i m e s n e t m o n t h l y s a l a r y / i n c o m e , i . e. e q u a l t o
net annual income subject to a maximum of Rs 1
lac. Certified income of spouse, children or
p a r en t s can also be considered provided they
guarantee the loan.

Repayment Period

Flexible repayment options from 12 months to 60

Fixed Option Floating Option
Upto & 13.50% PLR
including 1
year.
Above 1 yr to 3 14.50 PLR+1
yr.
Above 3 yr. 15.00 PLR + 1.25%
months.

Rate of Interest

Security

55
 • Primary

Hypothecation of Two-Wheeler to be
purchased.

• Collateral
o No third party guarantee required in
respect of p er m a n e n t employees of
Government/Semi-Government
Undertakings, Autonomous bodies, Public
Sector Undertakings drawing salary
through our Ba n k & w h er e l e t t er of
c o n f i r m a t i o n f r o m e m p l o y er f o r d e d u c t i o n
of monthly instalments is a v a i l a b l e.
Guarantee of one p er s o n in case of
employees drawing salary through our
branches but where letter of confirmation
f r o m e m p l o y er i s n o t a v a i l a b l e .
o Guarantee of one person for loans upto Rs
5 0 , 0 0 0 & G u a r a n t e e o f t w o p er s o n s f o r
l o a n s a b o v e R s 5 0, 0 0 0 f o r a l l o t h er c a s e s .
H o w e v er , Branch Heads shall have the
discretionary powers of r el a x i n g the
G u a r a n t e e r eq u i r e m e n t i n c a s e o f s e l e c t
borrowers.

Processing Charges
0.50% of Loan amount to be paid upfront subject
to a minimum of Rs. 300/-.

56
 CONSUMER LOANS
Purpose
Loan is granted for purchase of durable consumer goods like

• Desktop Computer ( P.C )/ Laptop

• Motor Cycle / Scooter / Air Conditioner
• Color TV / DVD Player/ VCR / Generator/ Washing
Machine (automatic) / Cooking range.
• Refrigerator / Dish Antenna/DTH Equipment/ Kerosene
Room Heater/ Washing machine
• Water Filter cum purifier / CD Players /Cassette
Players / Geyser / Cooler, etc.

Scale of Finance
• Rs.3000 to Rs.40,000 per Article

Maximum Finance
• Rs.75000 subject to 12 times net monthly Salary. (More
than one article/Durable)

Eligibility
• Employees of Govt., Semi-Govt., Civic Bodies, Self
employed (with assured income).

Security

• Primary: Hypothecation of article financed .

• Collateral: Third party Guarantee of one person.

57
Rate of Interest (subject to change)

Consumer Loans 14.00

Processing Charges
• Nil

Repayment
• 60 months
Margin
• 20%

RESEARCH METHODOLOGY

Objective of the study

Project study which is being conducted by me for the 15

days is not only a formality for the fulfillment of the
three year full time Graduation in Business Management.
But being a management student and a good employee I
tried my best to extract best of the information available
in the market for the use of society and people. The
objectives have been classified by me in this project
form personal to professional, but here I am not
disclosing my personal objective which have been
achieved by me while doing the project. Only
professional objectives which are being covered by me in
this project are as following-
• To know about the various loans provided by banks.
• To know the perception and conception of customers
towards banking products and specially focused for
JCC Bank’s product.

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 • To explore the potential areas for the new bank
branches which will provide both price and people
to the bank with constant promotion and placing
strategy.

Scope of the Study

Each and every project study along with its certain

objectives also have scope for future. And this scope in
future gives to new researches a new need to research a
new project with a new scope. Scope of the study not
only consist one or two future business plan but
sometime it also gives idea about a new business which
becomes much more profitable for the researches then
the older one.
Scope of the study could give the projected scenario for
a new successful strategy with a proper implementation
plan. Whatever scope I observed in my project are not
exactly having all the features of the scope which I
described above but also not lacking all the features.
• Research study could give an idea of network
expansion for capturing more market and customer
with better services and lower cost, with out
compromising with quality.

59
 • In future customer requirements could be added
with the product and services for getting an edge
over competitors.
• Consumer behavior could also be used for the
purpose of launching a new product with extra
benefits which are required by customers for their
account (saving or current) and/or for their
investments.
• Factors which are responsible for the performance
for bank can also be used for the modification of the
strategy and product for being more profitable.
• Factors which I observed while doing project study
are following-
• Competitors
• Customer Behavior
• Advertisement/promotional activities
• Attitude of manpower and
• Economic conditions
• These all could also be interchanged with each
other for each other in banks strategies for making
a final business plan to effect the market with a
positive way without disturbing a lot to market,
customers and competitors with disturbance in
market shares.

Sources of Primary and Secondary data:

For the purpose of project data is very much required which works as a
food for process which will ultimately give output in the form of
information. So before mentioning the source of data for the project I

60
would like to mention that what type of data I have collected for the
purpose of project and what it is exactly.
1. Primary Data:

Primary data is basically the live data which I collected on field

while doing cold calls with the customers and I shown them list of
question for which I had required their responses. In some cases I
got no response form their side and than on the basis of my
previous experiences I filled those fields.
Source: Main source for the primary data for the project was
questionnaires which I got filled by the customers or some times
filled myself on the basis of discussion with the customers.

2. Secondary Data:

Secondary data for the base of the project I collected from intranet
of the Bank and from internet, RBI Bulletin, Journal by ICFAI
University.

STATISTICAL ANALYSIS

In this segment I will show my findings in the form of graphs and

charts. All the data which I got form the market will not be disclosed

over here but extract of that in the form of information will definitely

be here.

Detail:

Size of Data : 180

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Area : JAMMU

Type of Data : 1. Primary 2. Secondary

Industry : Banking

Respondent : Customers

Table1:

CORRELATION BETWEEN AWAREMESS OF CUSTOMERS ABOUT

JCC BANK & THEIR AGE

AGE NO. OF RESPONSE

20-25 10
25-30 15
30-35 20
35-40 18
40-45 21
45-50 28
50-60 33

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 60-ABOVE 35

35
30
25
20
RESPONSE
15
10
5
0
25-30 30-35 35-40 40-45 45-50 50-60 60-
ABOVE
AGE

TABLE 2:

PERCEPTION OF JCC AS A BANK

TYPE OF BANK RESPONSES

PRIVATE 50
PUBLIC 45
PRIVATE/PUBLIC 100
DON'T KNOW 55

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 RESPONSES

p riva t e
p u b lic
c o o p e ra t ive
d o n ’t k n o w

TABLE 3:

RATING OF CUSTOMERS FOR JCC BANK AS A GOOD BANK

PARAMETER RESPONSES
EFFICIENCY 75%
INTERNET BANKING/ATMs 0%
PRODUCT RANGE 75%
NETWORK 33%
PHONE BANKING 15%

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 EFFICIENCY

INTERNET
BANKING
PRODUCT
RANGE
NETWORK

PHONE
BANKING

TABLE 4:

MARKET SHARES IN JAMMU IN COMPARISION TO

COMPETITORS

BANK NAME % OF SHARE

SBI 30%
ICICI 15%
J&k 25%
JCCB 10%

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 HDFC 5%
HSBC 5%
OTHERS 10%

M A RK E T S HA RE

30

20
S e rie s 1
10

0
SBI J& K HDFC O TH E R S

TABLE 5:

FACTORS RESPONSIBLE FOR PERFORMANCE OF JCC BANK IN

JAMMU

PARAMETERS % OF SHARE
PRODUCT 50%
ADVERTISMENT 2%
MANPOWER 25%
NET-BANKING 2%

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 PHONE BANKING 3%
INVESTMENT SCHEME 10%
NETWORK 10%

60

50

PRODUT
40
ADVERTISEMENT
MANPOWER
30 NET BANKING
PHONE BANKING
INVESTMENT SCHEMES
20
NETWORK

10

0
1

TABLE 6:

COMPARATIVE STUDY WITH MAJOR COMPETITORS ON BASIC

PARAMETERS

CANAR
PARAMETERS/BANKS JCCB ICICI SBI PNB HSBC
A BANK
PRODUCT 20% 15% 30% 15% 10% 10%
ADVERTISMENT 2% 45% 15% 20% 7% 10%
MANPOWER 10% 50% 2% 3% 25% 10%
NET-BANKING 2% 50% 10% 12% 8% 17%

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 PHONE BANKING 5% 40% 5% 5% 30% 10%
INVESTMENT SCHEME 5% 25% 50% 10% 5% 5%
NETWORK 25% 40% 40% 5% 3% 10%
CREDIBILITY 20% 10% 40% 20% 5% 5%

50%

45%

40%

35%

30%

25%

20%

15%

10%

5%

0%
JCCB ICICI SBI PNB HSBC CANARA
BANK

PRODUCT ADVERTISMENT MANPOWER

NET-BANKING PHONE BANKING INVESTMENT SCHEME
NETWORK CREDIBILITY

TABLE 7:

TYPES OF LOANS GIVEN BY JCC BANK

AGRICULTURAL LOANS 48%

HOUSING LOANS 30%
Transport loans 15%
Consumer loans 7%

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 typ e s o f lo a n s

a g ricu ltu ra l lo a n s
h o u s in g lo a n s
tra n s p o rt lo a n s
co n s u m e r lo a n s

TABLE 8: LEVEL OF SATISFACTION FOR JCCB

LEVEL OF PERCENTAGE OF
SATISFACTION RESPONDENTS

VERY SATISFIED 23
SATISFIED 45
DISSATISFIED 18

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 VERY DISSATISFIED 14

LEVEL OF SATISFACTION

VERY
SATISFIED
SATISFIED

DISSATISFIED

VERY
DISSATISFIED

TABLE 9: JCC BANK IS GOOD FOR WHICH SEGMENT

SEGMENT RESPONSES

BUSSINES 28

SERVICE MAN 14

FARMER 48

ALL OF THEM 10

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 BUSSINES
SERVICE MAN
FARMERS
ALL OF ABOVE

LEARNING IN BRANCH OF JCC BANK IN BAHU PLAZA

Different schemes provided by the JCC Bank to their

customers.banks in this world of competition provides
the various schemes to attract the customers.
In the branch ,I have learned about how the working
is done in the bank at the ground level.about the the
daily transactions happening at the bank.

71
How the bank employees deal with different
customers.there are always the good and the bad
times for the customers in the bank.this is the time
when the customers need to be handeled very
carefully in this world of competition.
What are the different services provided by the bank?
in this world of competition,the banks need to widene
their offerings to the customers.that is they need to
increase their range of offerings.

Findings

1. The credibility of JCC bank is good in comparison

to its competitors as GOI (Government Of
India) is a major share holder in the company.

72
2. JCC bank has potential a tapped market in JAMMU
in region and hence has an opportunities for
growth.

3. The products of JCC bank has good credibility in

the region compare to its competitors.

4. The advertisement of the bank not effective and

properly done

Conclusions and Recommendations

Conclusions

1. There are 65 branches in JCC n 12 extensions…thus the network

is very vast
2. Consumers of Jammu have not good awareness about jcc bank
as well as about its services and products.

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3. The advertising campaign hasn’t successfully been able to
increase the market share of jcc bank in jammu
4. The modern days technology like internet banking, phone
banking, used by competitor banks for providing banking
services has sent negative signals in the mind of consumes.
5. The network of JCC bank is lagging behind a little than its
competitors like ICICI bank and HDFC bank.
6. It can be distilled from data that JCC bank has good market share
as compared to its competitors considering the amount of
resources deployed by them in the market.

Recommendations

1. Since there is no ATM’s of JCC bank in Jammu, so it is necessary

for jcc bank to open and install more ATMs to serve the vast

market of jammu especially.

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 2. JCC bank doesn’t provide educational loans in this highly

educative era….thus it has not so much awareness among

student n young population of JAMMU

3. More resources should be allocated in the market of Jammu as

there is big untapped market in Jammu, so it becomes necessary

for JCC bank for taking an edge over the competitors.

4. there is no advertisement campaign run by JCC bank in Jammu,

and thus the market awareness is less in comparison to other

competitors in state

5. Besides opening more branches it should also look for

computerization of existing branches.

6 As JCC bank provides loans especially to agricultural sector. And

thus

it serves the farmers of state.It can be used as a positive aspect

to

make aware most of farmers about the bank.

QUESTIONAIRRE

NAME………………………………………………………………………………

AGE……………………………………. SEX: MALE/FEMALE

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ADDRESS:……………………………………………………………………………...

………………………………………………………………

CITY………………………………………PIN

CODE………………………………....

CONTACT NO. …………………………………………………………………………

1. DO YOU KNOW ABOUT JCC BANK LTD.?

YES NO

2. JCC BANK IS A –

PRIVATE BANK COOPERATIVE

PUBLIC BANK DON’T KNOW

3. RANK THE JCC BANK ON THE FOLLOWEING FEATURES –(RANK 1 FOR

BEST AND 5 FOR WORSE ON 1 TO 5 SCALE)

EFFICENCY MANPOWER

INTERNET BANKING/ATMs NETWORK

PRODUCT RANGE PHONE BANKING

4. YOU WOULD LIKE TO BE A CUSTOMER OF BANK BECAUSE –

……………………………………………………………………………………………

5. YOU WOULD NOT LIKE TO BE A CUSTOMER BANK BECAUSE-

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……………………………………………………………………………………………

6. NAME THE BANK WHICH COMES IN YOUR MIND AT VERY FIRST AND

WHY?

……………………………………………………………………………………………

7. DO YOU THINK JCC BANK IS A SAFE PLACE FOR YOUR MONEY?

YES NO

8. DO YOU THINK JCC BANK NEED MORE ADVERTISMENT?

YES NO

9. YOUR LEVEL OF SATISFACTION WITH JCC BANK-

o VERY SATISFIED

o SATISFIED NORMAL

o DISSATISFIED

o VERY DISAT.

10. IF YOU WILL HAVE OPTION AGAINEST JCC BANK YOU WILL GO FOR

J&K PNB

ICICI OTHER

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11. DO YOU KNOW WHERE IS THE BRANCH OF JCCB LOCATED IN

JAMMU CITY?

……………………………………………………………………………………………

12. JCC BANK LTD. IN JAMMU IS EFFECTIVE BECAUSE-

……………………………………………………………………………………………

13 JCC BANK LTD. IN JAMMU IS NOT EFFECTIVE BECAUSE-

……………………………………………………………………………………………

14. JCC BANK LTD. IS A GOOD BANK FOR-

SERVICE PEOPLE BUSINESS

FARMERS GENERAL PUBLIC

ALL OF ABOVE

15. NAME JCCBANK LTD. GIVE BLUE-PRINT IN YOUR MIND OF-

HIGH NETWORK FINANCIAL EFFICIENCY

HI-TECH BANK CUSTOMER FRIENDLY

OTHER (PLEASE SPECIFY)…………………………………………………

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BIBLIOGRAPHY

• www.jkcooperativebank.com

• www.google.com

• R.S. Sharma, Business statistics, First India Print, India, 2004,

• ICFAI Journal of Banking

• DAILY EXCELSIOR

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