chapter-ii an overview of co-operative...
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CHAPTER-II
AN OVERVIEW OF CO-OPERATIVE MOVEMENT
There has been a conflict in several sections of the society, namely
the rich and the poor, the haves and have-nots, the exploiter’s and exploited,
powerful and powerless, producer and consumers, irrespective of any
country. In this situation weaker section of the society always struggle for
fairness, justice, freedom and equality. Thus, the origin of the co-operative
movement was emerged because of situation of crisis, exploitations and
sufferings. The history of modern civilization is, in fact, the history of
co-operation, for without it social and economic progress would have been
unthinkable.
Co-operative movement owes its origin to Europe especially to
England, where economic challenges and deprivation large swathes of the
population faced. The great philosopher, Robert Owes (1771-1856) who
have given the idea of “self help through mutual help”, Hermann Schulze
(1808-83) and Friderich Withelm Raiffesien (1818-88), based on these
philosopher’s idea, many co-operative banks have been started in Europe.
To mitigate the sufferings of the exploited class of the society co-operative
concept had become an advantage. The movement which started in England
has given direction to the whole world, to overcome
exploitation by other class of society. The first ever effort towards the
formation of the co-operative organisation was made by 28 artisans working
in the cotton mills, popularly called the Rochdale Pioneers, at the Rochedale
near Manchester in England in the year 1844.
In consequence of the unprecedented depression of textile trade, some
of the workers were thrown out of employment. They struggled for living.
Here after, according to the suggestion by one of the members Charles
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Howarth, the co-operators decided to start a store by pooling their scare
resources and working together they could access basic goods at a lower
price. Initially, there were only four items for sale: flour, oatmeal, sugar and
butter. The Pioneers decided it was time shoppers were treated with honesty,
openness and respect, that they should be able to share in the profit that their
custom contributed to and that they should have a democratic right to have a
say in the business, these 28 persons saved one pound each in one year and
started “The Rochdale Equitable Pioneers Society” registered under the
Friendly Society established with an intention of carrying business. So, the
Rochdale Pioneers become the founders of world wide self help movement,
namely, the co-operative movement.
The co-operative movement was spreaded slowly consumer
co-operative to the other field of the economy in the England. Later on
movement of self help crossed the boundaries of the England. In France
workers co-operative, in Germany and Denmark agricultural credit
co-operatives were constituted to fight against the exploitations and in the
other industrialised European countries service co-operatives were started.
In Germany Von Raiffeisen and Herman Schulze boosted
co-operative movement by organising co-operative for the farmers which
was popularly known as the “Raiffeisen Union”. And Herman Schulze
organised co-operative in Germany with the objective of providing financial
relief to sick industries and purchases of raw materials to small artisans.
During the same period Luigi Luzzatti organised “Peoples Bank” in Italy.
The co-operative organisations which were led by Raiffeisen, Schulze
and Luzzatti formed the core of a credit movement in the sphere of rural and
urban. These societies were able to compete effectively with economically
more powerful moneylenders and traders. Further more, in the area of
co-operative movement the establishment of Robo Bank in Netherlands and
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D.G. Bank in Germany contributed significantly in protecting the men with
modest means from the clutches of the money lenders and as well as
inculcating the habit of thrift and savings amongst them. Today co-operative
movement has spread all the countries of the world and co-operative
principles were adopted for economic activity1.
CO-OPERATIVE MOVEMENT IN INDIA
The principle of co-operation is part and parcel of Indian culture. In
India, co-operative movement was officially started after passing of the
Co-operative Societies Act 1904 by the Imperial Legislative Council. But
the co-operative in India exist even before passing Co-operative Societies
Act 1904. The co-operation can traced in ancient Vedas, Upanishads,
Bhagawat Purana, Kautilya’s Arthshastra etc, in the form of various social
and economic activities. Perhaps no other country in the world has the
co-operative movement as large and as diverse as it is in India. There is
almost no sector left untouched by the co-operative movement.
The co-operative movement can see in Arthashastra of Kautilaya’s
which provides, “whoever stays away from any kind of co-operative
undertaking shall send his servants to carry on the work, shall have a share
in the expenditure but none in the profit. The laws of Manu too reveal that
ancient Indians had craft guilds. Co-operation is the foundation of Hindu
Joint Family System. The Hindu joint family set up is the best example of
co-operative endeavours and philosophy.
Even before formal co-operation structures come into being through
the passing of a law the proactive of the concept of co-operation and co-
operative activities were prevalent in several parts of India. In village assets
like water tank, village road, village forest etc. were built by the village
communities, for their mutual benefit.
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In south India collecting small contributions in cash at regular
intervals to lend to members of the group known as “chit fund” and “Nidhi”.
The same is called “Bunda” in Vidarbha, “Phad” in Kolhapur, “Gonchi” in
Andra Pradesh. Such are instances of mutual help and co-operation.
During the beginning of the 20th century, officials of the colonial
government perceived the Indian farmer’s dependence on usurious
moneylenders to be major causes of their indebtedness and poverty. At that
time the co-operative movement had become well established in Europe and
achieved remarkable success there. This convinced that co-operative
movement offered the best means of liberating Indian farmers from the
crushing burden of debt and the tyranny of money lenders.
With all this background, Government of India has taken several
initiatives such as enactment of the Taccavi legislation, Northern India
Taccavi Loan Act, 1875, Land Improvement Loans Act 1883, Agriculturist
Loans Act 1884 to mitigate the problems of the farmers and to make credit
at reasonable cost available to farmers.
Another initiative was taken by the Madras government when
Frederick Nicholson was appointed in 1895 to study the possibilities of
starting land banks so as to help combat rural indebtedness. During the
contemporary period, the Famine Commission in 1898 and Dupernex in his
book “People’s Bank for Northern India” in 1900 argued for co-operation
among Indian farmers to insulate them from many of their problems. Lord
Curzon followed the famine commission’s recommendations and appointed
the Edward Law Committee in 1901 and the first Co-operative Societies Act
was passed in 1904 which began the era of co-operation in the Indian
Economy.
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The Indian Co-operative Societies Act 1904 provided for constitution
of societies, eligibility for membership, registration, liabilities on members,
disposal of profits, shares and interests of members, privileges of societies,
claims against members, audit, inspection and enquiry, dissolution,
exemption from taxation and rule making power. All other operational and
managerial issues were left to the local governments namely to formulate
suitable rules and model bye-laws of the co-operative societies. The
institution of the Registrar, visualized as a special official mechanism to be
manned by officers with special training and appropriate attitudinal traits to
prompt and catalyse co-operative development was the result of the
Co-operative Societies Act of 1904. Under this Act, several non credit
initiatives also came up such as the Triplicane Society in Madras which ran
a consumer store, Weaver Credit Co-operatives in Dharwar and Hubli,
which gave credit in the form of yarn etc. However, these were registered as
Urban Credit Societies2.
The Co-operative Credit Societies Act 1904 was followed by a
number of supporting legislations including the Co-operative Societies Act
1912 which provided for the formation of non credit societies and federal
co-operative organisations. Provisions like Bombay, Madras, Bihar, Orissa
and Bengal enacted their own co-operative laws on the lines of the 1912 Act.
This gave a fresh imprtus to the growth of the movement in all directions.
The Maclagan Committee was appointed in 1914 to review the growth of the
movement. It made far reaching proposals for the future development of
co-operative creation. The committee recommended three tier structure of
co-operative credit.
Under the Reforms Act 1919, co-operation became a Provincial
subject under a minister with whose zeal and guidance, the movement made
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rapid progress. Bombay gave a lead to other provinces by passing a separate
Co-operative Societies Act in 1925.
The agricultural credit scenario was a matter of concern and various
committees looked into the problems of co-operative banks in various
provinces. In 1928, the Royal Commission on Agriculture submitted a report
emphasising the importance of co-operative sector and observed that “if
co-operation fails, there will be failure of the best hope of rural India”. In
1934, the setting up of RBI was a major development in the thrust for
agricultural credit. It had agriculture credit as part of its basic mandate. By
extending refinance facilities to the co-operative credit system it played an
important role in spreading the co-operative movement to far corners of the
country.
In 1942, the government enacted the Multi Unit Co-operative Act
which was an enabling instrument for incorporation and winding up of
co-operative societies.
In post-independence, co-operatives were considered to be the part of
the strategy of planned economic development. Pandit Nehru visualized
India in which each village would have a panchayat, a co-operative and a
school. Rapid and equitable economic development became the focus of the
state policy. In the early 1960s, co-operative legislation all over the country
underwent a major change on the basis of the findings of the All India Rural
Credit Survey Committee (1951-54) formed under the Chairmanship of Shri
A.D. Gorwala. The crux of the Committee’s recommendations was that the
state should play an active role for the spread of the co-operative movement.
Based on these recommendations, States enacted new laws / amended the
existing ones of the Constitution. The new legislations gave them a major
role in the functioning of the co-operative institutions. Co-operative societies
having jurisdiction over more than one state had to encounter different laws
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and therefore a need was felt to introduce a separate consolidated legislation
for them. Parliament accordingly enacted a Multi-State Co-operative
Societies Act in 1984. The NABARD Act was passed in 1981 and
NABARD was set up to provide refinance support to co-operative banks and
to supplement the resources of commercial banks and Regional Rural Banks
to enhance credit flow to the agriculture and rural sector.
Over the years, there has been a growing realisation that undue
interference from the State Government, lack of autonomy and widespread
politicisation has severely impaired the functioning of the co-operative
institutions. As a consequence, a number of Committees were appointed to
go into various issues of co-operatives. The committees such as Choudhary
Brahm Prakash Committee (which proposed a model law) (1990),Mirdha
Committee (1996), Jagdish Kapoor Committee (2000), Vikhe Patil
Committee (2001), V. S. Vyas Committee (2001 and 2004), Vaidynatha
Committee (2004), Prakash Bakshi (2012) went for a complete dissection of
the sector and made a number of valuable suggestions to turn co-operatives
into self-reliant, autonomous and democratised institutions. These
Committees strongly advocated the need to replace the existing government
dominated co-operative laws by a new people centric legislation.
As a consequence of these recommendations and on support of a
sizable section of the co-operative community, two major events took place
on the co-operative scene of the country.
a) The Government of Andhra Pradesh passed the A.P. Mutually Aided
Co-operative Societies Act 1995. This was followed by similar
enactments in eight other States; Bihar, Jharkhand, Madhya Pradesh,
Chhattisgarh, Jammu and Kashmir, Karnataka, Orissa and
Uttarakhand.
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b) The Union Government replaced the existing Multi-State
Co-operative Law by a fresh statute – the Multi-State Co-operative
Societies (MSCS) Act 20023.
And the success is evident. Almost 50 percent of the total sugar
production in India is contributed by sugar co-operatives and over 60
percent of the total fertilizer distribution in the country is handled by the co-
operatives. The consumer co-operatives are slowly becoming the backbone
of the public distribution system and the marketing co-operatives are
handling agricultural produce with an outstanding growth rate.
The National Co-operative Development Corporation (NCDC), a
statutory body was set up in 1963 by the Union Ministry of Civil Supplies
and Co-operation, to promote the co-operative movement in India.
Further there is the Indian Farmers Fertilizer Co-operative Ltd.
(IFFCO), which has been successful in setting up an effective marketing
network in most of the states for selling modern farming technology instead
of fertilizers alone. The operations of IFFCO are handled through its more
than 30,000 member co-operatives.
The National Agricultural Co-operative Marketing Federation
(NAFED) has over 5000 marketing societies. These societies operate at the
local wholesale market level and handle agricultural produce. Thus the
farmers have a market for their produce right at their door-step. A market
which assures them reasonable returns and guaranteed payments.
In 2002 Government of India announced a National Policy on
Co-operatives. The ultimate objective of the National Policy is to provide
support for promotion and development of co-operatives as autonomous,
independent and democratic organisations so that they can play their due
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role in the socio-economic development of the country. The policy further
aims at reduction of regional imbalances and strengthening of co-operative
education, training and human resource development for professionalisation
of co-operative management. It recognises the distinct identity of
co-operatives and seeks to support their values and principles by catalysing
states to provide them an appropriate administrative and legislative
environment.
In India it finds that the states like Maharashtra and Gujarat are well
developed. Whereas the states like Andhra Pradesh, Rajasthan and
Karnataka have shown remarkable progress in the co-operative movement
and there is a vast potential for the development of co-operative in the
remaining states. Today co-operatives are committed to securing an
improvement in the quality of life of a vast majority of Indian.
In a net shell it can be concluded that co-operatives in India have had
a diversified history. During the first few decades after independence, this
sector played a pivotal role in the economy by making significant
contribution to our primary sector production. It had an important role in
bringing food sufficiency through the green revolution, in building up a
network for distribution of new varieties of seeds, fertilizers and cash credit
and in creating an environment of participation and hope among the people.
Development of Co-operatives during the Five Year Plan Period
After independence, the Constitution came into operation on 26th
January 1950. The blueprint for the growth and development of the country
was being formulated. In this blueprint, the co-operatives held an extremely
important position in the development of the rural and agricultural economy
of the country. Mahatama Gandhi and Jawaharlal Nehru encouraged the
development of the co-operative sector for the rural prosperity. Jawaharlal
Nehru provided a fillip to the movement and made special provisions in the
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five year plans. The successive five year plans looked upon the co-operation
movement as the balancing sector between public sector and the private
sector.
The First Five Year Plan, (1951-56)
The first five year plan was launched in 1950-51. The plan focused
on the credit aspect of the co-operatives or it described the co-operative
movement as an instrument of planned economic action in democracy. In
this plan period RBI constituted a committee named as Rural Credit
Committee. The committee observed that the poorer and weaker section
could not get loans mainly because of their poor credit worthiness. In order
to have an all round improvement, it was felt necessary that these sections
were also lifted up and provided credit to perform better.
The plan emphasised the adoption of the co-operative method of
organisation to cover all aspects of community development. It provided for
setting up of urban co-operative banks, industrial co-operative of workers,
consumer co-operatives and housing co-operatives.
However, the plan did not contribute significantly to the co-operative
movement. The plan failed to achieve the objectives for which it was
formed. This was mainly due to the weak base of the existing co-operatives.
The co-operatives formed were very small and the members were also
socially very weak. Thus, the amount of credit availability was also small.
Hence, many people were still dependent on the moneylenders for credit.
Also, as the movement was carried on to the state level, the development
was taken as a state issue and not a national one. Thus, the co-operatives in
certain states have prospered, while in other states not much success could
be achieved. Thus, the plan failed to deliver the much-needed results.
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The Second Five Year Plan, (1956-61)
The focus of the second five year plan was organising the
co-operative at the village and primary level. This was done mainly to make
it a movement at the grass roots level and create self-awareness among the
people. The plan drew up programs of co-operative development based on
the recommendations of the All India Rural Credit Survey Committee. The
committee considered that the role of co-operative development is very
important in increasing the agricultural production and making the rural
economy stronger.
The plan set object was every family in a village should be a member
of at least one co-operative society and to provide better service to the
farmer linking of credit and non credit societies, with state partnership
co-operative institutions at various levels. The essential basis of which was
to assist and not interference or control. This was recommended and for
facilitating state partnership in co-operatives. The plan also recommended
the establishment of a National Agricultural Credit Long-term Operations
Fund. The National Co-operative Development Fund was also established by
the Central Government, to enable states to borrow for the purpose of
subscribing share capital of non credit co-operative institutions in the
country during this plan.
The Third Five Year Plan (1961-1969)
In this plan, various objectives were set up to bring the entire country
under the fold of the co-operative movement. It was noticed that about
Rs. 30 crores should be made available for short term loans which was
successfully done. The state governments also provided excellent support
and assistance to the societies for creating reserves against bad debts. The
co-operative movement was again boosted with a large number of primary
and wholesale societies coming up during the plan period. Various
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panchayat working groups and societies came together for the development
of the co-operatives.
The Mirdha Committee on co-operation recommended that the
principle of open membership should be continued in order to encourage
higher level of membership and to make more amounts of loans available for
the purpose of eliminating the ‘taccavi’ loans though the co-operative
movement was in right direction but still it faced certain problems such as
lack of trained personnel, improper management etc. Thus many
co-operatives were not functioning properly and leading to losses. There was
an urgent need of trained professionals and dedicated members who could
give the co-operatives the right direction.
The Fourth Five Year Plan (1969-1974)
Growth and stability was expected to be the key note of the co-
operative movement during the fourth plan. The plan stated, “It is important
for a planned development to bring out growth of co-operative in all the
parts of the county to ensure the co-ordinate operation of various types of
co-operative organisations”. The plan aimed at ensuring the services which a
farmer requires are institutionalised to the greatest extent possible.
It was observed in fourth plan period that co-operatives faced the
problem of management and internal rivalry, considering these problems,
the plan was mainly focused to eliminate all negative elements which were
used the co-operative for their own interest. The plan gave high priority to
re-organisation of co-operatives to make co-operative short term and
medium term structure viable. The plan also made necessary provisions to
provide co-operatives with management subsidy and store capital
contribution, as well as for the rehabilitation of central co-operative banks. It
also emphasised the need to orient policies in favor of small cultivators.
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The Fifth Five Year Plan (1974-1979)
During this period, the focus was towards consolidating and unifying
all the efforts taken towards co-operatives. The aim was to popularise the
co-operatives and present it as an alternative towards solving the problems
of the farmers and the people as a whole. The consumer co-operatives were
encouraged to control the price line of various commodities and strengthen
the network of agricultural co-operatives.
During this period, co-operatives received special attention and
identified as an effective tool for improving the economy. This was noticed
during the state of emergency in 1975, when the co-operatives played a
pivotal role in serving the needs of the people. The co-operative societies
were strengthened and ensured to make them economically viable. A
network of rural banks was set up to help the people in the rural areas. It is
encouraging to note that RBI regularly published the statistical statements
related to the co-operative movement in India, and review of committee’s
movement. This consolidated review is greatly used as a source of
information for study.
The Sixth Five Year Plan (1980-1985)
The focus of this plan was to provide the co-operatives with trained
and professional staff and strengthen the primary and secondary co-
operatives, to serve as multipurpose service providers. The plan envisaged
the facts that if trained managers are appointed and management practices
are improved, it will help to face competition and use the resources more
effectively. Also, attention was to be paid to the poorer sections of the
society and the people who were living below the poverty line. It was also
emphasised that loans should be made available to the poorer sections in
order to lift them above the poverty line. State and district level federations
were formed and strengthened to provide leadership and support to the
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primary and secondary societies to expand and spread their business over
large areas. Consumer co-operatives were given special importance as it was
understood as a viable alternative for Public Distribution System (PDS).
The major development in the field of credit during the sixth plan was
the setting up of National Bank for Agriculture and Rural Development
(NABARD) in July 1982. NABARD now has emerged as an apex national
institution accredited with all matters concerning policy, planning and
operations in the field of credit for agriculture and economic activities in the
rural areas.
The Seventh Five Year Plan (1985-1990)
During this period, it was noticed that while considerable success was
achieved in the field of co-operatives, certain regions still lagged behind.
Like in the states of the north – eastern region, the co-operatives were not so
popular and the economy was still weak. The Seventh Plan thus laid down
the following objectives:
I. Initiating special co-operative programmers in the underdeveloped
regions for development.
II. Providing training facilities for better management, and educating
them regarding the importance and benefits of co-operatives.
III. Development of primary agricultural credit societies and to provide
various other facilities to the members.
IV. Enacting policies and procedure to increase the flow of credit and
resources to the weaker sections.
V. Encouragement to consumer co-operatives to substitute public
distribution system, special emphasis was laid on the plan, for
training and development for better management of co-operatives.
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The Eighth Five Year Plan (1992-1997)
The eighth plan document stated that the development of
co-operatives has been envisaged as a significant strategy to strengthen the
people with limited means. The co-operative movement aims at saving rural
poor, small farmers, marginal farmers, agricultural labourers and artisans
from exploitation by money lenders.
One of the major issues concerning the co-operative sector is the
professionalisation of management. If the co-operatives have to complete in
a more open economic regime the state governments will have to
professionalise the management of co-operatives. This is crucial for overall
co-operative development. For achieving this, it will be necessary to
convince the state governments of the need for granting functional autonomy
to the co-operatives. Institutional finance has to be ensured for the thrust
areas, activities have to be undertaken in the eighth plan.
The eight plan document further stated that “the growth of
co-operative sector has not been uniform in all parts of the country. The
primary reason for this situation is control of co-operative by dominant
vested interests groups, poor management and dependence of co-operative
on higher tiers and government for financial assistance and limited range of
activities. The function of thrift has not been given due importance by
co-operatives leading to resource crunch and ultimately to serve the poor the
Agricultural Credit Review Committee stressed on a program of business
development planning in respect of PACS, with a view to diversifying loan
operations, generation of internal resources through deposit mobilisation and
enlarging package of profitable non- credit service. The working groups on
promotion of self help groups as sub system in primary agricultural
co-operatives have made important recommendations relating to strengthen
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the resource base of PACS to enable the group member to undertake
investment necessary for expanding their production levels.”
The Ninth Five Year Plan (1997-2002)
The approach paper to the ninth five year plan approved by the
National Development Council has interalia laid emphasis on,
I) To identify new opportunities for the co-operative sector to develop
sunrise industries like insurance, food processing, animal husbandry
etc.
II) Make them more competent by providing marketing support.
III) Developing the rural co-operatives into agents of change to meet the
global competitions4.
The planning commissions setup a working group on Agricultural
Credit and Co-operation in Dec. 1995 for formulation of the ninth plan
under the chairmanship of Shri. P. Kotaih, Chairman, NABARD. The broad
terms of reference of the working group are included among others, review
of the credit flow to the agricultural sector, estimation of agricultural credit
during ninth plan period, measures for development of small farmers,
marginal farmers. SCs, STs, other weaker sections and backward regions,
analysis of the health of co-operatives and suggestions for making them
viable/self sustainable, evaluation of the impact of economic reforms,
recommendation for the development of non credit co-operatives evolving
risk management measures etc.
The working group recommended interalia enhanced credit flow for
agriculture particularly small and marginal farmers, reduction of regional
and sectoral imbalances by exploiting the potential with appropriate
development and credit package like NGOs, SHGs, Constitution of the risks
fund for taking care of risk in agricultural financing, strengthening the co-
operatives through DAP and MOUs, with central and state governments
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supports and operationlisation of certainly sponsored schemes for
rehabilitation of PACS.
There has been no specification mention about co-operatives as a part
of the Plan after ninth plan onward.
CONCEPT AND PRINCIPLES OF CO-OPERATION
Co-operation has been defined for different purposes and in different
ways by cooperators, economists, lawmakers and others. It is enough to say
here that the co-operative is an association of persons usually of limited
means who have voluntarily joined together to fulfill a common economic
need through the formation of a democratically controlled business
organisation making equitable contributions to the capital required and
accepting a fair share of the risks and benefits of the undertaking. It denotes
a special method of doing business.
Co-operation is a form of organisation wherein persons voluntarily
associate together as human beings, on the basis of equality for promotion of
economic interest of themselves.
Hough, E.M., defines co-operation into broadest sense that co-
operation means simply as voluntary association in a joint undertaking for
mutual benefits According to Herrick, co-operation is the act of poor persons
voluntarily united for utilising reciprocally their own forces, resources or
both under mutual management for their common profit or loss5.
According to C.R Fay, “A co-operative society is an association for
the purpose of joint trading originating among the weak and conducts
always in an unselfish spirit, on such terms that all who are prepared to
assume the duties of membership may share its rewards in proportion to the
degree in which they make use of their association.” 6
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According to International Co-operative Alliance defined Co-
operative as “A Co-operative is an autonomous association of persons united
voluntarily to meet their common economic social and cultural needs and
aspirations through a jointly owned and democratically controlled
enterprise.” 7
The definition brings forth the following characteristic of a co-
operative organisation -
• A Co-operative is an autonomous body, independent of government
or any other body.
• It is an association of persons.
• It is a body formed to meet common economic, social and cultural
needs and aspirations of the members.
• It is a voluntary organisation jointly owned and controlled by the
members in a democratic way. It emphasises that within co-
operatives, control is distributed among members on democratic
basis.
Statutory Definition:
For the first time in the banking history a statutory definition of a co-
operative bank has been laid down in the Act (clauses of section 2 of the
Reserve Bank of India, Act 1934) Co-operative Bank means a State Co-
operative Bank, a Central Co-operative Bank and a Primary Co-operative
Bank.
(I) State Co-operation Bank means the principal co-operative society in a
state, the primary object of which is the financing of other co-
operative societies in the state: provided that in addition to such
principal society in a state or where there is no such principal society
in a state, the State Government may declare any one or more co-
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operative societies carrying business in that state to be a State Co-
operative Bank or banks within the meaning of this definition.
(II) Central Co-operation Bank means the principal co-operative society
in a district of a state, the primary object of which is the financing of
their co-operative societies in that district: Provided that in addition to
such principal society in a district or where there is no such principal
society in a district, the State Government may declare any one or
more co-operative societies carrying business in that district to be a
Central Co-operative Bank or banks within the meaning of this
definition.
(III) Primary Co-operation Bank means a co-operative society, other than
a primary agricultural credit society and it should have the following
features:
1) The primary object or principal business of which is the
transaction of banking business.
2) The paid up share capital and reserves which are not less than
one lakhs of rupees.
3) The bye-laws of which do not permit admission of any other
co-operative society as a manner.8
Co-operative Principles
The principles of co-operation may be considered as broad guidelines
for co-operative societies in the conduct of their various activities. They
direct the movement and indicate the follow-up action to be pursued by the
society in future. They determine the mode and manner of co-operative
action for the attainment of pre-determined goals. It views that the
co-operative principles as " the way of organising and conducting co-
operative activities which are an inherent and independent corollary of the
ideal or the objective of the co- operative movement. A co-operative society
should for its object of economic and social betterment of its members by
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means of the exploitation of an enterprise based upon mutual aid, conform to
the following co-operative principles as formulated by the International Co-
operative Alliance.
1) Voluntary and Open Membership
Co-operatives are voluntary organisations, open to all persons able to
use their services and willing to accept the responsibilities of membership,
without gender, social, racil, political or religious discrimination.
2) Democratic Control by Members
Co-operatives are democratic organisations controlled by their
members, who actively participate in setting their policies and making
decisions. Men and women serving as elected representatives are
accountable to the membership. In primary co-operatives, members have
equal voting rights (one member, one vote) and co-operatives at other levels
are organised in a democratic manner.
3) Member Economic Participation
Members contribute equitably to, and democratically control the
capital of their co-operative. At least part of that capital is usually the
common property of the co-operative. They usually receive limited
compensation, if any, on the capital subscribed as a condition of
membership. Members allocate surpluses for any or all of the following
purposes, developing the co-operative possibly by setting up reserves part of
which would be indivisible, benefitting members in proportion to their
transactions with the co-operative, and supporting other activities approved
by the membership.
4) Autonomy and Independence
Co-operatives are autonomous, selfhelp organisations controlled by
their members. If they enter into agreements with other organisations
including Government or raise capital from external sources, they do so on
66
terms that ensure democratic control by their members and maintain their
co-operative autonomy.
5) Education, Training and Information
Co-operatives provide education and training for their members,
elected representatives, managers, and employees so that they can contribute
effectively for the development of their co-operatives. They inform the
general public particularly young people and leaders about the nature and
benefits of co-operation.
6) Co-operation among Co-operatives
Co-operatives serve their members most effectively and strengthen
the co-operative movement by working together through local, regional,
national and international structures.
7) Concern for the Community
While focusing on member needs, cooperatives work for the
sustainable development of their communities through policies accepted by
their members.
Distinguish between Commercial Banks and Co-operative Banks
Co-operative banks perform the basic banking functions of banking
but they differ from commercial banks in the following respects
• Commercial banks are joint-stock companies under the Company Act
of 1956, or public sector bank under a separate Act of the parliament
whereas co-operative banks were established under the Co-operative
Societies Act of different states.
• Commercial bank structure is a branch banking structure whereas
co-operative banks have a three tier setup, with state co-operative
bank at Apex level, District Central Co-operative Bank at district
level, and Primary Co-operative Societies at rural level.
67
• Only some of the sections of banking regulation Act of 1949 (fully
applicable to commercial banks), are applicable to co-operative
banks, resulting only in partial control by RBI of co-operative banks
and
• Co-operative banks function on the principle of co-operation and not
entirely on commercial parameters.
Importance of Co-operative Banking
• It is a superior institutional arrangement for financing agricultural
operations. Co-operative banks offer loans to farmers for increasing
agricultural production and raising their standard of living. In a
country where the farm population is composed of small farmers who
have small lands, co-operative banking is most advantageous. As the
society consists of farmers themselves, it knows at first hand the
credit problems of the rural poor and strives to find out suitable
solutions for them.
• Co-operative Banking teaches the farming community to borrow at
the right time, the right amount for the right purpose and repay the
loan on the due dates. Therefore, co-operative banks assist in
developing a healthy attitude among farmers, which enables them to
speed up agricultural production.
• A strong and stable co-operative banks in rural areas helps a large
number of borrowers to be free from the clutches of money-lenders
and constrains the latter to reduce their rate of interest if they want to
continue in business. Consequently, the profit margin of
moneylenders has been greatly reduced.
• Co-operative banks are capable of setting into motion the various
factors leading to prosperity in rural areas. This effect can be brought
about by co-operative banks in two ways. First by providing easy
credit facilities to farmers which stimulates economic activity.
68
Secondly, the habit of saving is inculcated among farmers so that they
may not have to borrow in future. The savings of the people promote
investment activity, which ultimately results in prosperity.
• The co-operative banks advance credit for agriculture and allied
activities. They supplement the income of the farming community by
enabling them to engage in dairy farming, sheep rearing, vegetables
growing etc.
• Co-operative banks not only stimulate several economic activities but
also help in bringing about rural reorientation by changing the
thinking and behavior of the people for their own advantage and for
the benefit of the nation.10
ROLE OF SHORT TERM CREDIT CO-OPERATIVE SOCIETIES IN
PROVIDING AGRICULTURAL CREDIT
Credit is one of the crucial inputs for propelling the growth of
agriculture. For the past few decades, institutional finance is coming in a big
way to help the Indian farmer increasing the productivity and production.
All Rural Financial Institutions have played a crucial role and the role of co-
operatives was laudable till the end of 20th century as the largest purveyor of
agricultural credit. However, with the liberalisation and the reforms that had
swept the banking industry in the past decade and half had diminished their
leadership position and made the way for the new players to fill the gap. The
share of the co-operatives in agriculture credit provider to farmer in the
entire banking system which was to be around 70 percent even up to late 90s
further it had slipped down to 17 percent due mainly to inertia to keep pace
with the changes and efforts are not matching with those of competitors
especially from Commercial Banks of Public and Private Sectors. A table
illustrating the present scenario is given below:
69
TABLE : 2.1
AGRICULTURAL LOANS DISBURSED DURING 2006 TO 2011
(Amount in Crores)
Agency 2006 2007 2008 2009 2010 2011
Coops 42,480
(18)
48,258
(19)
46,192
(15)
63,497
(17)
78,121
(17)
87,963
(17)
RRBs 20,435
(9)
25,312
(10)
26,765
(9)
35,217
(9)
44,293
(9)
54,450
(11)
CBs 1,66,485
(73)
1,81,088
(71)
2,28,951
(76)
2,85,800
(74)
3,45,877
(74)
3,68,616
(72)
Total 2,29,400 2,54,658 3,01,908 3,84,514 4,68,291 5,11,029
Source: Report of the expert committee to examine three tier short term co-operative credit structures. Figures in brackets indicate percentage share of different agencies to total agricultural credit. The above table indicates that the co-operative banks are facing tough
competition mainly by the commercial banks. 2001 onwards commercial
banks step into the agriculture finance and started campaign of “doubling the
agriculture credit” which was much affected to co-operative banks. At
present commercial banks shared almost three fourth of the total agricultural
credit in the country and RRBs nearly 10 percent. Having a rural penetration
of over 93,000 PACS as against 50,000 rural and semi-urban branches of
CBs and RRBs, the share of the co-operatives in agricultural credit has
fallen to about 17 percent.
70
TABLE : 2.2 NUMBER OF AGRICULTURAL LOAN ACCOUNTS FINANCED
FROM 2006 TO 2011 (Figures in lakhs)
Agency 2006 2007 2008 2009 2010 2011 Coops 189 202 178 204 242 309 RRBs 62 62 76 73 73 82 CBs 172 175 202 205 234 255 Total 423 439 456 482 549 646
Source: Report of the expert committee to examine three tier short term co-operative credit structures. Although co-operatives are providing only 17 % of agriculture credit,
the share of co-operatives in total number of agricultural accounts held by
the banking system is substantial. Co-operatives provided agricultural credit
to 309 lakhs farmers in 2011 compared to 255 lakhs farmers only by
commercial banks and 82 lakhs by the RRBs. In fact, co-operatives financed
67 lakhs new farmers during in 2011 compared to 21 lakhs new farmers by
commercial banks and only 9 lakhs new farmers by RRBs.
Chart 2.1 : Structure of Co-operative Credit Institutions in India
(As on March 2011)
Source: Report on trend and progress of banking in India by RBI in 2011.
Co-operative Banks (97410)
UCBs ( 1645)
Non Scheduled (1592)
Rural Co-operatives (94531)
Scheduled
Multi State (25) Single State (28)
Multi State (25) Single State (28)
Short Term
PACS (94,647)
DCCBs (370)
StCBs (31)
Long Term
PCARDBs
SCARDBs (20)
71
The co-operative banking structure in India which shown in above
chart comprises two main components, viz, urban co-operative banks and
rural co-operative credit institutions.
A.) Urban Co-operative Banks (UCBs): The urban areas of the country
are served by the urban co-operative banks, which are further
sub-divided into scheduled and non scheduled UCBs. Scheduled
UCBs form a small proportion of the total number of UCBs. The
operations of both scheduled and non-scheduled USBs are limited to
either one state or multi state. Most of the non-scheduled UCBs are
primary single state UCBs having single tier structure.
B.) Rural Co-operative Credit Institutions: UCBs have a single tier
structure, while rural co-operatives have a complex structure. Rural
co-operatives credit institutions have two distinct structure viz, the
Short Term Co-operative Credit Structure (STCCS) and Long Term
Co-operative Credit Structure (LTCCS).
The Short Term Co-Operative Credit Structure (STCCS): It provides
crop and other working capital loans primarily for a short period to farmers
and rural artisans. The Short Term Co-operative Credit Structure is a three
tier structure having State Co-operative Banks, Districts Central
Co-operative Banks and Primary Agricultural Credit Societies.
In this section an attempt is made to present the short term
co-operative credit structure in India. It also includes analysis of the
performance of State Co-operative Banks, Districts Central Co-operative
Banks and Primary Agricultural Credit Societies.
72
STATE CO-OPERATIVE BANKS IN INDIA
State Co-operative Bank (StCB) means the principle society in a state
which is registered or deemed to be registered under the Co-operative
Societies Act, 1912, or any other law for the time being in force in India
related to co-operative societies. StCBs are formed by federating all District
Central Co-Operative Banks (DCCBs) in a particular state. If there is no
such society in a state, the State Government may declare one or more
co-operative societies carrying on business in that state to be a State
Co-operative Bank (or Banks).
As in the case of central co-operative banks in StCB may be pure in
which case, it will be a federation of central state co-operative banks only, or
mixed in such case it will be a federation of both central co-operative banks
as well as individual members.
The StCB is also called as Apex Bank which stands at the top of the
credit structure in each State. It furnishes finance to the central co-operative
banks in order to enable them to help in promoting the leading activities of
the primary credit societies. Thus, StCBs serve as the final link between the
money market and the co-operative sector. The StCBs not only finances but
also controls and regulates the working of central co-operative banks in each
State.
The StCB is interested in helping the co-operative credit movement
and also in promoting other co-operative ventures and in extending the
principles of co-operation. In the absence of DCCBs in a state, StCB may
give direct financial assistance to the primary credit societies. The main
features of StCBs are they serves as the balancing centre in the state,
organise provision of credit for credit worthy farmers, carry out banking
business and leads the co-operative movement as a leader of the
co-operatives in the state.
73
All apex banks have been given the status of a “Scheduled Bank”. It
acts as a link between central co-operative banks, primary co-operative
societies and RBI from which it borrows. They accept deposit from member
societies, non members, individuals and institutions for their working
capital. Special deposits are accepted from local boards, educational
institutions and municipalities. Borrowings constitute the major source of
working fund for StCBs and it is borrowed from Reserve Bank of India, the
state Government, the State Bank of India and subsidiaries. The state
co-operative bank enjoys an overdraft facility with the State Bank of India.
Sometimes, StCBs borrow from one another. But borrowings from the
Reserve Bank of India are the main source of loans to StCBs. State
Co-operative Banks do not lend fund directly to farmers. Funds are
sanctioned to Central Co-operative Banks and they further distribute to
primary credit societies. All these societies, in turn, lend the fund to
borrowers. The lending operations of StCBs cover loans, cash credit and
Overdraft facilities made available to member banks. A certain limit is fixed
for each central co-operative bank, up to which it can borrow from State
Co-operative Banks. Short-term loans are given for a period of less than 12
months and medium-term loans for less than three year.
The main source of working fund of StCB is the share capital, reserve
fund, deposits from members, surplus fund of the affiliated central
co-operative bank’s, loans from state bank of India, other commercial banks,
National Bank for Agriculture and Rural Development, inter bank
borrowings and borrowings from the RBI.
In the following section, an attempt has been made to study the
performance of State Co-operative Banks at national level.
74
TABLE: 2.3
PROGRESS OF STATE CO-OPERATIVE BANKS IN INDIA (Amount in Crore)
Particulars 2005 -
06 2006 -
07 2007 -
08 2008 -
09 2009 -
10 2010 -
11
No. of Co-operative Banks
31 31 31 31 31 31
Owned fund 10545 10549 10718 11726 11871 11200
Deposits 45405 48560 52973 68659 79150 78300
Borrowings 16989 22256 22164 20874 23559 31900
Loans and Advances issued
48260 52777 57455 64883 53588 70818
Loans and Advances Outstanding
39684 47354 48228 48079 49629 64213
Working Fund 72939 81365 85855 101259 114580 121400
Total Liabilities/ Assets
76481 85756 94977 108116 120662 130200
C-D Ratio 87.40 97.52 91.04 70.02 62.70 82.00
Source: Report on trend and progress of banking in India of RBI The above table shows that there were 31 StCBs in 2005-06 and then
it remained same during the study period from 2005-06 to 2010-11.
The StCBs owned fund in India increased in all the years of the study
period except in 2011. StCBs funds were increased from Rs.10545 crores in
2005-06 to Rs.11871 crores in 2009-10. It indicates the improved efficiency
of generating internal resources of finance which helps StCBs to get self
reliance of fund for fund mobilisation. There was a noticeable decrease in
the amount of owned fund of StCBs during 2010-11 which was declined to
Rs.11200 compared to 2009-10. The reason for this decline was due to
decrease in the amount of reserves.
75
The deposits in StCBs stood at Rs.45405 crores in 2005-06 and
increased to 79150 crores in 2009-10, it shows that progress made by StCBs
in deposit mobilisation and it was slightly declined to 78300 crores in 2010-
11. The average growth in deposits was found 12 percent during the study
period from 2005-06 to 20010-11.
The total borrowings of StCBs found fluctuating during the study
period. It stood around Rs.16989 crores during 2005-06 which increased to
Rs.31900 crores during 2010-11. The average borrowings increased by
14.63 percent during the study period. The increase in borrowings shows
that StCBs dependency on borrowings along with the deposits for their
lending operation.
As a major part of the loans from StCBs being apex level institutions
go towards the lower tier institutions in short-term credit structure, a decline
in the growth of loans from StCBs implies reduced lending to the lower tier
institutions and increased in the growth of loans and advances indicates
increased lending to the lower tier institutions.
During six years period loans and advances constitute more than half
of the total assets of these institutions every year. During 2005-06 the loans
issued of StCBs were Rs.48260 crores which increased to Rs.70818 crores
in 2010-11. The average growth of loans and advances issued was found
7.80 percent during the study period from 2005-06 to 20010-11. The
increase in loans and advance shows that increased efficiencies of bank in
distribution of loan and advances.
Outstanding loans and advances were found increased every year
except for the year 2008-09. The amount of outstanding loans were
Rs.39684 crores in 2005-06 which was increased to Rs.70818 crores during
2010-11 indicating average increase of 13 percent.
76
The working fund with StCBs stood at Rs.72939 crores in 2005-06
and increased to Rs.121400 crores in 2010-11. The average increase in
working fund registered 11 percent during the study period. The increased
working fund shows sufficient financial resources for lending operations
The CD ratio which expresses the relationship between advances and
deposits was found fluctuating during the study period. The maximum ratio
found was 97.52 percent during 2006-07 and minimum ratio found was
62.70 percent in 2009-10.
TABLE : 2.4
LIABILITIES AND ASSETS OF STATE CO-OPERATIVE BANKS (Amount in Crores)
Liabilities 2005 -06
2006 -07
2007 -08
2008 -09
2009 -10
2010 -11
Capital 1114 (1.5)
1246 (1.5)
1534 (1.6)
1569 (1.5)
1631 (1.4)
2100 (1.6)
Reserves 9431 (12.3)
9303 (10.8)
9905 (10.4)
10325 (9.5)
10240 (8.5)
9100 (7.0)
Deposits 45405 (59.4)
48560 (56.6)
56325 (59.3)
70312 (65)
79150 (65.6)
78300 (60.2)
Borrowings 16989 (22.2)
22256 (26)
22577 (23.8)
20913 (19.3)
23559 (19.5)
31900 (24.5)
Other Liabilities 3542 (4.6)
4392 (5.1)
4637 (4.9)
4997 (4.6)
6083 (5.0)
8800 (6.8)
Total Liabilities/ Assets
76481 (100)
85756 (100)
94977 (100)
108116 (100)
120662 (100)
130200 (100)
Cash & Bank Balance
4323 (5.7)
9290 (10.8)
8312 (8.8)
7960 (7.4)
9367 (7.8)
8400 (6.4)
Investments 27694 (36.2)
24140 (28.1)
31541 (33.2)
46567 (43.1)
54334 (45)
50200 (38.6)
Loans & Advances
39684 (36.2)
47354 (55.2)
50028 (52.7)
48400 (44.8)
49629 (41.1)
64000 (49.1)
Other Assets 4781 (6.2)
4971 (5.8)
5095 (5.4)
5188 (4.8)
7333 (6.1)
7680 (5.9)
Capital & reserve to Investment & advances ratio
13.79 12.30 12.04 11.00 9.83 9.80
Leverage Ratio 8.73 9.75 12.04 13.86 15.52 8.60 Source: Report on trend and progress of banking in India of RBI.
77
The above table shows the financial position of StCBs during
2005-06 to 2010-2011. The StCB being the apex bank of co-operative sector
in the state has registered a healthy growth in 2005-06. The total liabilities
and assets found was Rs.76481 crores. Out of the composition of the
liabilities (viz., capital, reserves, deposits, borrowings and other liabilities)
of StCBs, deposits constituent major share to total liabilities i.e. 59.4
percent. Apart from deposits, another major share of total liabilities was
borrowings with 22.2 percent. Deposits and borrowings being major share in
total liabilities reflect their dependency on outside sources for expansion. On
the assets side loans & advances constituted major share to total assets and
investment was the second highest.
The balance sheet of StCBs expanded significantly during 2006-07.
The total assets and liabilities of StCBs were Rs.85756 crores during
2006-07 which was increased by 12 percent comparing to total assets and
liabilities of Rs.76481 crores of the year 2005-06. On the liabilities side,
deposits continued to constitute the largest share of the resources of StCBs,
despite the modest decline in the share during the year. However, the share
of borrowings increased during the year. High growth in borrowings, which
outpaced the growth of other components during the year indicates that
StCBs continued to rely heavily on outside sources for their expansion.
Capital and deposits also witnessed a higher growth during the year. On the
asset side, the loans and advances grew at an accelerated pace, investments
which was Rs.27694 crores during 2005-06 declined to Rs.24140 crores
during 2006-07 indicating average decline by 12.8 percent. Cash and bank
balances registered a sharp increase during the year.
The growth in the balance sheets of StCBs slowed down during
2007-08. The total assets/liabilities which was Rs.85756 crores increased to
Rs.94977 during 2006-07 registering an average increase of 10.75 percent,
78
which below compared to previous year. This slowdown came about mainly
from a sharp fall in the growth of loans and advances of StCBs on the assets
side. This fall in growth resulted in bringing down the share of loans and
advances in the total assets of StCBs a bit marginally. Loans and advances
continued to constitute more than half of the total assets of these institutions.
As a major part of the loans from StCBs being apex level institutions go
towards the lower tier institutions in short-term credit structure, a decline in
the growth of loans from StCBs implied reduced lending to the lower tier
institutions. The StCBs made investments for compensating a fall in the
share of loans and advances, which grew at high average rate of 30.7 percent
in 2007-08 comparing Rs.24140 crores during 2006-07 to Rs. Rs.31541 of
2007-08.
During 2008-09, balance sheets of StCBs witnessed a higher growth
as compared with the previous year, which can be attributed to deposits on
the liabilities side and investments on the assets side. The amount of
liabilities and assets were Rs.108116 during 2008-09 which was increased
by 13.83 percent, comparing total assets and liabilities of Rs.94977 crores of
the year 2007-08. However, loans and advances declined during 2008-09
compare to previous year. While the share of deposits in liabilities moved up
during 2008-09 compared to the previous year, the share of borrowings also
declined. However, the increase in deposits was used for building up
investments rather than providing loans, may be because of the increased
risk awareness of these banks in the wake of the general economic meltdown
during the year on the one hand and for reaping treasury gains on the other.
The balance sheet of StCBs expanded at a rate close to 11.60 per cent
during 2009-10, which was lower than the growth of 13.83 percent observed
during 2008-09. The growth in StCB’s balance sheet was mainly due to
increase in borrowings and other liabilities on the liabilities side, and cash
79
and bank balances, and other assets on the assets side. On the liabilities side,
deposits continued to account for the largest share of the resources of StCBs,
while investment accounted for 45 percent of the total assets. During
2009-10, investments increased at a higher rate than loans and advances.
Also, the percentage share of investments and total assets increased with a
decline in the share of loans and advances as compared to the previous year.
During 2010-11 there was a decline in the growth of the balance sheet
of State StCBs. The amount of liabilities and assets were Rs.130200 crores
during 2010-11 which was an average increase by 7.90 percent compare to
total assets and liabilities of Rs.120662 crores of the year 2009-10. On the
liabilities side, the growth in the balance sheet of StCBs in 2010-11
emanated from high growth in borrowings, while on the assets side, the
growth was attributed to loans and advances.
In total StCBs during the period 2005-06 to 2010-11 the balance
sheet of StCBs expanded every year at the average rate between 10 to 15
percent. The growth in StCB’s balance sheet was mainly due to increase in
deposits on the liabilities side, and investments at assets side. On the
liabilities side, deposits continued to account for the largest share of the
resources of StCBs, while investment and loans and advances accounted for
almost 35 to 45 per cent of total assets. During 2009-10, investments
increased at a higher rate than loans and advances. The percentage share of
investments in total assets also increased with a decline in the share of loans
and advances as 2009-10 as compared to the previous year.
Since data on risk weighted asset is not available for rural
co-operatives, it was not possible to measure the capital to risk weighted
asset ratio (CRAR) for StCBs. However, a rough measure of capital
adequacy for StCBs has been taken as ratio of capital and reserves to
80
investments and advances. This ratio stood at a range of 12-15 per cent in
recent years, but showed some amount of decrease in last two years.
However, the leverage ratio for StCBs was found to be very high in
recent years. The high leverage ratio of StCBs remains as a cause of concern
for rural co-operative sector and also limits their ability to provide further
assistance to ground level institutions.
Leverage ratio which is calculated dividing the owned fund by total
assets of StCB during the study period showed increasing trend except in
2010-11. Increasing leverage ratio indicates that the total assets of StCB
shareholders fund increased where as outsiders fund decreased.
TABLE -2.5
FINANCIAL PERFORMANCE OF STATE CO-OPERATIVE BANKS (Amount in Crores)
Particulars 2005 -
06 2006 -
07 2007-
08 2008 -
09 2009 -
10 2010 -
11
Income 5656 (100)
5242 (100)
6194 (100)
7590 (100)
8239 (100)
8700 (100)
a) Interest Income 5320 (94.1)
4974 (94.9)
5980 (96.5)
7281 (95.9)
7822 (94.9)
8300 (95.5)
b) Other Income 336 (5.9)
269 (5.1)
214 (3.5)
309 (4.1)
417 (5.1)
390 (4.5)
Expenditure 5278 (100)
4967 (100)
5973 (100)
7272 (100)
7985 (100)
8300 (100)
Interest Expended 3658 (69.3)
3708 (74.7)
4586 (76.8)
5729 (78.8)
6595 (82.6)
6800 (82)
Provisions & Contingencies
1039 (19.7)
502 (10.1)
543 (9.1)
451 (6.2)
393 (4.9)
405 (4.9)
Operating Expenses Of which wage bill
581 (11) 381 (7.2)
757 (15.2) 398 (8.0)
844 (14.1) 458 (7.7)
1092 (15) 512 (7)
997 (12.5) 581 (7.3)
1100 (13.1) 700 (8.3)
Net Profit 378 275 221 318 253 460
81
Particulars 2005 -
06 2006 -
07 2007-
08 2008 -
09 2009 -
10 2010 -
11 a) Institutions in Profit
No. of Institutions 27 27 26 26 29 30 Amount of Profit 408 319 234 385 462 520
b) Institutions in loss No. of Institutions 4 4 5 5 2 1
Amount of loss 30 44 49 71 209 60 Operating Profit 1417 777 764 768 647 870 Accumulated loss 274 389 429 459 575 480 Return on Assets (%) 0.50 0.32 0.23 0.33 0.23 0.35 Return on Equity (%) 3.58 2.60 2.06 2.71 2.13 4.10 Net Interest Margin (%) 2.30 1.65 1.60 1.55 1.10 1.23
Source: Report on trend and progress of banking in India of RBI.
The table shows that during 2005-06 out of 31 reporting StCBs, 27
earned profits aggregating Rs.408 crore, while 4 made losses amounting to
Rs.30 crore. The income of income contributed was almost 94 percent of
total income of StCBs as they had very limited sources of non-interest
income. On the other hand, interest expenditure accounted more than
two-third of total expenditure.
During 2006-07 the net profit of StCB showed Rs.275 crores which
was lesser than the net profit Rs.378 crores of the previous year. The
average decline registered was 27 percent. The increase in both interest
expenditure and operating expenditure coupled with the decline in income
which led StCBs operating profits to decline significantly to 45.2 percent.
However, sharp reduction in provisions and contingencies constrained the
decline in the net profits during 2006-07 compared to 2005-06.
During 2007-08 StCBs sources of non-interest income are relatively
weak. Interest income constituted the largest component having a share of
96.5 percent in the total income of StCBs. Moreover, the growth as well as
82
share of interest income was on a rise for these institutions. Similarly, on the
expenditure side, the most important component was interest expended by
StCBs. Like interest earned, interest expended too posted an increase in
terms of growth and share during the year. In the entire short-term structure,
StCBs were the only institutions that made net profits during the year. About
82 percent of the total numbers of reporting StCBs were in profit in 2007-08.
Although StCBs booked net profits of Rs.221 crores during the year, there
was a decline in the rate of growth of their profits by 19.65 percent
comparing previous year profit of Rs.275 crores.
Higher net profit of StCBs in 2008-09 indicates improved financial
performance compared to 2007-08. The net profit of Rs.318 crores was
made by StCBs during the year was registered average increase 43.90
percent compared to net profit of Rs.221 crores during the previous year
2007-08. Not only profitability indicators of StCBs improved, but the
number of institutions in profit also increased as compared to the previous
year. However, operating profits of StCBs declined during the year over the
previous year mainly on account of higher growth in interest expenses and
operating expenses as compared with growth in income.
The net profits of StCBs decreased in 2009-10 as compared to the
previous year. This fall in profit was mainly attributed to a slower growth of
income during 2009-10 as compared to the previous year. There was also a
change discernable in the composition of total income of StCBs in the last
two years with the share of their non-interest income in total income
increased continuously. The trend continued in 2009-10 with non-interest
income growing at a significantly higher rate than interest income.
Nonetheless, interest income accounted for almost 95 per cent of StCBs total
income in 2009-10. On the expenditure side, interest expenditure continued
to account for more than three fourth of total expenses. The total wage bill
83
increased substantially though there was a fall in total operating expenses in
2009-10 as compared to the previous year. Provisions and contingencies also
declined in 2009-10.
Higher net profit during 2010-11 indicates improved financial
performance of StCBs over the previous year. The net profit of Rs.460
crores was made by StCBs during the year. It was registered an average
increase of 81.81 percent compared to net profit of Rs.253 crores during the
previous year 2009-10. There was almost double of net profits of StCBs,
suggesting a complete turnaround from the decline growth in profits shown
by these institutions in 2009-10. The increased profitability of StCBs was on
account of the growth in income outpacing that of expenditure. The growth
in income was primarily attributable to a higher growth of interest income.
There was an increased growth in provisions and contingencies within the
total expenditure, necessitated partly by the increased growth in the NPA of
these institutions in 2010-11.
During the six years study period from 2005-06 to 2010-11, the
interest income was found increased every year except in 2006-07 and it
constituted major part of the income which was around 94 - 97 percent
during the study period. The other income of StCBs was not constant in the
first three years and showed decline trend and again later two years showed
upward trend. The total expenditure of StBCs was increasing year by year
and it caused total expenditure mainly due to increase in interest
expenditure. Provisions and contingences which was declining initially
compared to the declining trend in the later period.
During the study period operating profit found fluctuating from
Rs.1417 crores to Rs.647 crores. The institutions loss figures indicates
increased trend and maximum loss of Rs.209 crores was found during 2009-
10. Due to the loss of few StCBs, the accumulated loss increased every year
84
except during 2010-11 where only one StCB made loss of Rs.60 crores. The
return on assets was less than half percent and return on equity found
between 2 to 4 percent and Net Interest Margin found was 1 to 2 percent
during the study period. It indicates need of more effort to increase and
maintain stability to earn the profit.
TABLE:2.6
ASSETS QUALITY OF STATE CO-OPERATIVE BANKS (Amount in Crores)
Assets Classification
2005 -06
2006 -07
2007-08
2008 -09
2009 -10
2010 – 11
Total NPA 6735 (100)
6704 (100)
6191 (100)
5725 (100)
4353 (100)
5700 (100)
Sub Standard 2763 (39.3)
2957 (44.10)
2801 (45.24)
1627 (28.42)
1332 (30.6)
1700 (29.83)
Doubtful 2292 (35.1)
2625 (39.15)
2653 (42.85)
3822 (66.76)
2219 (50.98)
2500 (43.86)
Loss Assets 1680 (25.6)
1122 (16.75)
737 (12)
276 (4.82)
802 (18.42)
1500 (26.31)
NPA to Loans Ratio (%)
16 14.2 12.4 11.2 8.8 8.9
i) Recovery to Demand (%)
87 85.8 84.6 91.8 91.8 91.8
ii) Provisions Required
3354 2820 2657 2883 2861 3523.99
iii) Provisions Made
3600 3200 3000 3310 4438 3997.93
Source: Report on trend and progress of banking in India of RBI
During the year 2005-06 the total NPA stood at Rs.6735 crores of
which Sub standard loans were the major category followed by doubtful
loans and loss of loans. During the year provisions were made more than
what is actually required. Percentage of NPA to loans was 17 percent which
was very high and recovery percentage was 87 percent.
85
During the year 2006-07, the NPA of StCBs declined in both absolute
and percentage. The gross NPA to total loans ratio was at 14.2 percent
which was lower than that of 17 percent in 2005-06. The improvement in
asset quality was also discernible from the decline in ‘loss’ assets and partly
due to migration from the lower categories. Thus, there was an increase in
the 'sub-standard' and 'doubtful' assets categories. The recovery
performance, which has remained similar to that in the previous year, needs
to improve further to reduce the NPA in future. During the year provisions
were made more than what is actually required.
During 2007-08, NPA of StCBs posted a decline in absolute terms.
The ratio of NPA to loans outstanding also stood at a lower level of 12.4
percent during 2007-08 as compared to its corresponding level of 14.2 per
cent 2006-07. Of the various categories of NPA, ‘substandard’ and
‘doubtful’ assets each constituted over 40 percent of the total NPA of StCBs.
The third category of ‘loss’ assets had a share of 12 percent during 2007-08.
There was a fall in terms of both growth and share of ‘loss’ assets between
2006-07 and 2007-08.
The asset quality of StCBs improved during 2008-09 over the
previous year both in absolute and percentage terms. Category-wise details
of non-performing loans showed that highest decline was in the loss
category. Thus, the share of loss assets in the total non performing loans
declined in 2008-09 over 2007-08. Similarly, sub-standard assets also
witnessed a decline during the year over the previous year bringing down its
share in total non-performing loans in 2008-09 as compared with the
previous year. The decline in substandard assets indicates that fresh
additions to non-performing loans were comparatively less in 2008-09 as
compared with the previous year.
86
The asset quality of StCBs improved during 2009-10 over the
previous year with their NPA declining both in absolute as well as in
percentage. During the year total NPA was decreased to Rs.4353 crores
from Rs.5725 crores in 2008-09 and showed average decrease of 24 percent.
Analysis of various categories of NPA further revealed that the decline in
NPA was mainly on account of decline in sub-standard and doubtful assets
while there was a steep increase in loss assets in 2009-10 as compared to
previous year. The percentage share of ‘sub-standard’ and ‘loss’ categories
of NPA in total NPA increased in 2009-10 as compared to the previous year
though there was a decline in the percentage share of ‘doubtful’ NPA during
the same period.
There was deterioration in the NPA position of StCBs in 2010-11.
However, on account of high growth in credit from StCBs, the NPA ratio
was largely maintained at around 8.9 per cent in 2010-11. The high growth
in NPA in 2010-11 emanated from sub-standard assets, since the growth in
doubtful and loss assets showed a slight moderation over the previous year.
Like the NPA ratio, the recovery-to-demand ratio suggesting the extent of
recovery of loans as a proportion of the expected recovery, was maintained
at 92 per cent in 2010-11.
During 2005-06 to 2010-11, there has been a continuous decline in
the NPA of StCBs, both at absolute as well as in percentage terms. Another
important trend observed in the composition of NPA of StCBs during the
study period is that while share of ‘sub-standard’ NPA in total NPA came
down, there was an increase in percentage share of ‘doubtful’ NPA in total
NPA, though the same again decreased in 2009-10. The increase in
percentage share of ‘doubtful’ NPA in total NPA during 2005-06 to 2010-11
indicated that NPA of StCBs has become stickier in recent years. The
provision coverage ratio for StCBs exhibited an increasing trend from
87
2006-07 onwards. More importantly, there was a steep increase in the
provision coverage ratio of StCBs in the year 2009-10 as compared to the
previous year. During the period of 2010-11 the total NPA and its various
categories were increased in terms of amount as well as in terms proportion
to total NPA but there was no increase in the NPA ratio of StCBs. The ratio
either showed a decline or was, at best, maintained at the previous year’s
level. There was a similar trend for the recovery ratio, with the ratio either
showing rise or no change.
Weaknesses and Shortcomings of StCBs
The working of state co-operative banks is not free fromweaknesses
and shortcomings. The most important weaknesses and shortcomings of
StCBs are:
• The undesirability of linking commercial banking activities with co-
operative banking
• Boosting recovery by book adjustment without making genuine
recoveries from DCCBs
• Undertaking unsound and improper investment thereby causing
substantial financial loss leading to the threatening the very existence
of the institute
• Extending financial support to individuals much against the
guidelines and direction of RBI
• Mounting over dues created due to improper loan appraisal,
evaluation, monitoring and supervision
• Adoption of defective loaning methods and procedure thereby adding
to the problems of recovery
• Prone to high level political interference mostly in banking activities.
• The very existence of the insufficient share capital, utilisation of
reserve fund as working capital.
88
DISTRICT CENTRAL CO-OPERATIVE BANKS
In the beginning of the formation of Primary Co-operative Credit
Societies (PACS), they could not function effectively without gaining
financial support from an outside agency. Apart from this, they were in need
of technical guidance and administrative support. At the same time, there
were some societies which have gained strength and posses surplus fund as
well as talents. As a precondition to get mutual help it became necessary that
all these primary societies form a federation for ensuring rational use of their
fund and provide a common place to meet and exchange of ideas and get
co-operative experience. Thus the formation of DCCBs was in need for
mutual help and it occupied middle level position in the three tier
co-operative credit structure of the country.
PACS functioning in specified areas federated themselves into
collective banking activities, giving birth to central co-operative banks with
the prime objective to mobilise fund from urban outlets and divert the same
to the village societies.
The Co-operative Societies Act of 1912 permitted the registration of
DCCBs. Even before the enactment of this Act, some DCCBs were
established to cater to the needs of primary societies. In 1906, forerunner of
the first DCCB was established as a primary society in Uttar Pradesh. At
Ajmer in Rajasthan the first DCCB was established in 1910. But the first full
fledged DCCB as per the provisions of the Act of 1912 was started in
Jabalpur District of the Central Province.
DCCBs are formed mainly with the objective of meeting the credit
requirements of member societies. As an institution for helping the societies
in times of need, they finance agricultural credit societies for production
purposes, marketing societies for marketing operations, industrial societies
89
for supply operations and other societies for working expenses. In short, the
major objectives of DCCBs are to provide loans to affiliated societies, to act
as a balancing centre of finance for primary societies, to arrange for the
supervision and control of the affiliated societies, to raise deposits from
members and non-members, to convene conferences of the member societies
and also prescribe uniform procedure for the working of primary societies,
to open branches of the bank at important places with the permission of the
Registrar of Co-operative Societies and to maintain and utilise state
partnership.
The area of operation of a DCCB is limited to one district. For the
successful working of DCCB, it is important to have a suitable area of
operation so as to attain adequate business turnover so that the bank may
employ adequate staff, meet the overheads and build up a strong reserve
fund. Reserve Bank Standing Advisory Committee on Agricultural Credit
and All India Rural Credit Survey Committee have expressed their view that
there should be one district as an area of operation for DCCB. The norm for
the area of operation of a DCCB would be most convenient to enable the
bank to become a strong and powerful unit and to discharge its
responsibilities towards the lower tiers in the co-operative credit structure
sufficiently.
The main source of working fund is the share capital, reserve fund,
deposits from members and public, surplus fund of the affiliated
co-operative banks, loans from state bank of India, other commercial banks,
National Bank for Agriculture and Rural Development, other co-operative
banks and borrowings from the RBI, State Co-operative Bank,
Government,
90
Classifications of DCCBs
As recommended by Maclagan Committee (1915) DCCBs in India
were classified into:
• Banks whose membership is confined to individuals – These are
banks where in membership consists entirely of individuals or in
which societies are admitted as shareholders on exactly the same
footings as individuals, without any special provision for their
adequate representation on the board of management. The Maclagan
Committee was of the opinion that these type of banks should not be
given registration under the Co-operative Societies Act. Hence, no
such banks exist in our country at present.
• Banks whose membership is confined to societies only – The
banks whose membership is confined to only primary societies
situated in the area of operation are permitted to become members of
DCCB’s. The Maclagan Committee was in favor of admitting
societies only as members. Under this type of bank, the primary
societies are the members who are also the borrowers of the bank. As
the shareholders, lenders and borrowers are the same, the clash of
interest between the shareholders and borrowing societies can be
eliminated. By doing so, these types of banks preserve the
co-operative character.
• Banks whose membership consists of both individuals and
societies – This is mixed type having both individuals and societies
as members. Certain proportion of representation of individual
members in the board of management is given under this type. There
is a possibility to get experts with adequate knowledge and
experience in management from both rural and urban areas under this
type. At present, many DCCBs in India, primary societies and
individuals are found as members. However, the Co-operative
91
Societies Act in many States does not permit individuals to become
‘A’ class members. The All India Rural Credit Survey Committee
approved the admission of individual agriculturist as purely
transitional arrangements pending establishment of co-operative
societies in the area concern. Majority of DCCBs in India are of this
type.11
In the following part, an attempt has been made to study the
performance of DCCBs at national level.
TABLE : 2.7 PROGRESS OF DISTRICT CENTRAL CO-OPERATIVE BANKS IN
INDIA (Amount in Crore)
Particulars 2005 -
06 2006 -
07 2007 -
08 2008 -
09 2009 -
10 2010 -
11
No. of Co-operative Banks
366 371 371 370 370 370
Owned fund 23450 26180 28406 29792 31370 32990
Deposits 87532 94529 102986 127623 146404 165100
Borrowings 24217 29912 26096 27664 28735 33610
Loans and Advances issued
73583 82963 93162 90105 118393 159859
Loans and Advances Outstanding
79202 89038 91374 99429 107466 130800
Total Liabilities/ Assets
143090 158894 178881 195684 218676 254100
Working Fund 135199 150621 153836 185079 206509 231700
C-D Ratio 90.48 94.20 88.72 77.90 73.40 79.22
Source: Report on trend and progress of banking in India of RBI & annual reports of NABARD.
92
The above table indicates that the number of DCCBs during the study
period slightly improved. The number of DCCBs found during the year
2005-06 was 366. This number increased to 371 during 2006-07 and
maintained same number during 2007-08. Further number of DCCBs found
declined to 370 and maintained same during the rest of the study period.
Owned fund of DCCBs in India increased every year during the study
period. More than 40 percent increase in owned fund can be traced out by
comparing DCCBs owned fund Rs.32990 crores of the year 2010-11 with
the owned fund of Rs.23450 crores for the year 2005-06. Increased owned
fund indicates the improved efficiency of generating internal resources of
finance which helps DCCBs to get self reliance of fund for fund
mobilisation.
The deposits mobilised by DCCBs in India showed Rs.87532 crores
in 2005-06 which was increased to Rs.165100 crores in 20010-11. Increased
amount of deposits were found almost double during the study period which
indicates DCCBs is able to attract various kinds of deposits from individuals
and institutions.
The amount of borrowings of DCCBs in India showed increasing
trend during the study period except 2008-09. Borrowings of DCCBs which
were around Rs.24217 crores during 2005-06 increased to Rs.33610 crores
during 2010-11 registering an average growth near to 6.50 percent. During
2010-11 amount of borrowings recorded highest compared to other years of
the study period. The increase in borrowings show that DCCBs dependency
on borrowings along with the deposits for their lending operation.
Releasing loans and advances increased every year in the study
period except during 2008-09. During the year 2008-09 release of loans and
93
advances was Rs.90105 crores decrease from Rs.93162 crores from the year
2007-08. The annual decrease found by 3.4 percent between these two years.
Loans and advance issued which were around Rs.73583 crores during 2005-
06 increased to Rs.159859 crores during 2010-11 registering average growth
19.54 percent. Increase in loans and advance shows increased efficiencies of
DCCBs distribution of loan and advances.
But outstanding loans and advance figure shows that DCCBs
inefficiency in recovery of loans and advance. During the study period
outstanding loans and advances were increased every year and most of the
years the amount of outstanding loans and advance were more compared to
amount of issued loans and advance. The amount of outstanding loans which
were Rs.79202 crores during 2005-06 increased to Rs.130800 crores during
2010-11 indicating average growth of near to 11 percent. Increased amount
of outstanding loans and advances was the signal for more NPA.
Working fund of DCCBs in India increased every year during the
study period, which indicates that DCCBs efficiency of working fund
management and enhanced financial resources for its lending operations.
Working fund includes Capital, Reserves, Deposits and Borrowings. The
total working fund which was Rs. 135199 crores during 2005-06 increased
to Rs.231700 crores during 2010-11 indicating increased average near to 12
percent.
The credit deposit ratio indicates the general expansion of banking
business of these institutions. The ratio which expresses the relationship
between advances and deposits was fluctuated during the study period. The
ratio 73.40 percent was found minimum in 2009-10 and maximum 94.20
percent in 2007-08. The decrease in this ratio indicates inefficiency of
DCCBs management in advancing loans against deposits.
94
TABLE : 2.8
LIABILITIES AND ASSETS OF DISTRICT CENTRAL
CO-OPERATIVE BANKS IN INDIA
(Amounts in crore)
Liabilities 2005 -06
2006 -07
2007 -08
2008 -09
2009 -10
2010 -11
Capital 4748 (3.3)
5458 (3.4)
5939 (3.3)
6578 (3.4)
7309 (3.3)
7950 (3.1)
Reserves 18702 (13.1)
20722 (13)
22467 (12.6)
23227 (11.9)
24061 (11)
25040 (9.85)
Deposits 87532 (61.2)
94529 (59.5)
109597 (61.3)
127623 (65.2)
146404 (67)
165100 (65)
Borrowings 24217 (16.9)
29912 (18.8)
32130 (18)
27663 (14.1)
28735 (13.1)
33610 (13.33)
Other Liabilities 7891 (5.5)
8273 (5.2)
8749 (4.9)
10593 (5.4)
12168 (5.6)
22400 (8.8)
Total Liabilities/Assets
143090 (100)
158894 (100)
178881 (100)
195684 (100)
218676 (100)
254100 (100)
Cash & Bank Balance
10695 (7.5)
11274 (7.1)
10609 (5.9)
12917 (6.6)
14797 (6.8)
17100 (6.7)
Investments 36628 (25.6)
41006 (25.8)
48228 (27.4)
64709 (33.1)
75913 (34.7)
85400 (33.6)
Loans & Advances
79202 (55.3)
89038 (56)
101221 (56.6)
99429 (50.8)
107466 (49.1)
130800 (51.5)
Other Assets 16565 (11.6)
17576 (11.1)
18823 (10.5)
18629 (9.5)
20500 (9.4)
20800 (8.2)
Capital & reserve to Investment & advances ratio
20.24 20.13 19.00 18.15 17.10 15.26
Leverage Ratio 16.39 16.48 15.88 15.23 14.34 12.98
Source: Report on trend and progress of banking in India of RBI Figure in brackets shows percentage to total liabilities and assets.
95
The above table exhibits the financial position of the rural short-term
co-operative credit structure i.e. DCCBs. During 2005-06 the business
operations of DCCBs in India registered a healthy growth. On the liability
side, the share of deposits is the major source of funding and retained
earnings is good compared to rest of the years. On the asset side, loans and
advances and investments are the major proportion of assets i.e. 55.3 percent
and 25.6 percent respectively of the total assets.
The business operations of DCCBs continued to expand during
2006-07. Total assets and liabilities of DCCBs were Rs.158894 crores
during 2006-07 which was increased by 11 percent compare to total assets
and liabilities of Rs.143090 crores in the year 2005-06. The composition of
the liabilities and assets of DCCBs remained broadly unchanged between
2005-06 and 2006-07. Deposits continued to be the principal source of fund
for DCCBs, although their share declined to 59.5 percent from 61.2 percent
of 2005-06. Borrowings, however, increased sharply, implying growing
reliance by DCCBs on outside sources for expansion. On the asset side, both
the loans and advances and investment portfolio grew at higher rates as
compared with the previous year.
The total assets and liabilities of DCCBs continued to expand during
the year 2007-08. The amount of liabilities and assets were Rs.178881
during 2007-08 which was increased by 12.58 percent by compare to total
assets and liabilities of Rs.158894 crores of the year 2006-07. Loans and
advances in balance sheet constituted the most important form of assets for
DCCBs, the share of loans and advances worked out to 56.6 percent.
Investments were next in line with a share of 27.4 percent. Similarly,
deposits made up the largest portion of the total liabilities of DCCBs, the
share of deposits during 2007-2008 was about 61.3 percent. Borrowings are
variable component of the liabilities of DCCBs showed declining trend.
96
During 2008-09, balance sheets of DCCBs witnessed a lower growth
as compared with the previous year. The total liabilities and assets which
were Rs.178881 crores increased to Rs.195684 crores during 2008-09
indicating increased average growth of 9.40 percent which was lower
compared to average growth of 12.58 of 2007-08. The growth in balance
sheets of DCCBs can be attributed to deposits on the liabilities side and
investments on the assets side. On the liabilities side, borrowings of DCCBs
witnessed a decline in amount as well as in percentage in 2008-09 over the
previous year indicating a lower dependence on borrowings for resources by
DCCBs. In contrast, deposit mobilisation picked up during the year
increasing its share in total liabilities of DCCBs.
Total assets and liabilities of DCCBs continued to expand during the
year 2009-10. The total liabilities and assets which were Rs.195684 crores
during 2008-09 increased to Rs.218676 crores during 2009-10 indicating
increases average growth 12 percent. This growth was attributable to growth
in deposits and ‘other’ liabilities on the liabilities side and investments on
the assets side. Deposits accounted for almost two third of total liabilities of
DCCBs in 2009-10, indicating their heavy dependence on deposits for
working fund. Alongside, there was a decline in the percentage share of
capital and reserves in total liabilities.
On the assets side, loans and advances constituted almost half of the
total assets whereas investments accounted for almost one third of the same.
During 2009-10, loans and advances increased as compared to a decline in
2008-09. However, the higher growth in investments as compared with the
growth of loans and advances during 2009-10 indicated DCCBs continued
preference for investments rather than lending due to reduction in risk.
97
The business operations of DCCBs continued to expand during 2010-
11. Total assets and liabilities of DCCBs were Rs.254100 crores during
2010-11 which was increased by 16.20 percent, comparing total assets and
liabilities of Rs.218676 crores of the year 2009-10. The attributable to this
growth was mainly growth in other liabilities at liabilities side and loans and
advances at assets side.
In overall DCCBs capital and reserves during 2005-06 to 2010-11 in
terms of amount increased every year but there was no change in its
proportion to total liabilities. Borrowings of DCCBs in terms amount
increased every year except 2008-09, where as borrowings proportion to
total liabilities of the every year witnessed a declining trend, indicating a
lower dependence on borrowings for resources. In contrast, deposit
mobilisation picked up during the years, increasing amount of deposits share
in total liabilities. DCCBs deposit mobilisation was reflected in an increased
investments rather than an increase in loans and advances. This may either
be due to the risk awareness of these banks or may be intended to reap
treasury gains.
The capital adequacy of DCCBs witnessed a decline during the study
period. As data on risk weighted assets were not available for DCCBs, the
ratio of capital and reserves to investments and advances was taken as the
rough indicator of capital adequacy. The decline in capital adequacy was
mainly on account of a higher increase in investments of DCCBs as against
a marginal increase in capital and reserves. Loans and advances of DCCBs
declined during 2008-09, 2009-10 and 2010-11 compared to 2005-06,
2006-07 and 2007-08.
Leverage ratio of DCCBs during the study period shows decreasing
trend, which indicated total assets of DCCBs shareholders fund decreasing
where as outsider i.e. interest bearing fund increasing.
98
TABLE : 2.9
FINANCIAL PERFORMANCE OF DCCBs IN INDIA (Amounts in Crore)
Particulars 2005 -
06 2006 -
07 2007 -
08 2008 -
09 2009 -
10 2010 -
11
Income 11688 (100)
11562 (100)
13135 (100)
16302 (100)
17713 (100)
18800 (100)
a) Interest Income 10688 (91.4)
10597 (90.9)
11980 (91.2)
14817 (90.9)
15936 (90)
17600 (93.7)
Other Income 1000 (8.6)
1055 (9.1)
1155 (8.8)
1485 (9.1)
1777 (10)
1200 (6.3)
Expenditure 11481 (100)
11622 (100)
11767 (100)
14949 (100)
16576 (100)
17900 (100)
Interest Expended 6577 (57.3)
6668 (57.3)
7038 (59.8)
9413 (63)
10330 (62.3)
11100 (61.9)
Provisions & Contingencies
2563 (22.3)
2284 (19.7)
1934 (16.4)
2119 (14.2)
2228 (13.4)
2190 (12.2)
Operating Expenses of which wage bill
2341 (20.4) 1648 (14.4)
2670 (23) 1837 (15.8)
2795 (23.7) 1865
(15.09)
3417 (22.9) 2255 (15.1)
4018 (24.2) 2618 (15.8)
4600 (25.9) 3100 (17.3)
ii) Net Profit 207 31 -139 1353 1136 900 a) Institutions in Profit
No. of Institutions 278 271 234 320 322 318 Amount of Profit 1116 754 760 1603 1659 1400 b) Institutions in loss
No. of Institutions 88 97 88 50 47 52 Amount of loss -913 -724 -825 -287 -523 -500 Operating Profit 2769 2314 2284 3473 3363 3100 Accumulated loss 5275 5712 6106 5213 4757 4188 Return on Assets (%)
0.14 0.02 -0.08 0.7 0.52 0.35
Return on Equity (%)
0.88 0.12 -0.49 4.5 3.62 3.72
Net Interest on Margin (%)
3.10 2.66 2.4 2.9 2.75 2.74
Source: Report on trend and progress of banking in India of RBI. Figure in brackets shows percentage to total incomes and expenses.
99
The above table illustrates the financial performance of DCCBs in
India during 2005-06 to 2010-11.
During 2005-06 interest income accounted for nearly 92 percent of
the total income, while interest expenditure accounted for nearly two-third
of total expenditure. During the year, provisions and contingencies made by
DCCBs was more in terms of percentage as well as in terms of amount
compared to other periods of the study. Out of the 366 DCCBs 278 DCCBs
showed profit of Rs.1116 crores and remaining 88 DCCBs showed loss of
Rs.913 corers and resulted in over all profit of Rs.207 crores.
Interest income of DCCBs declined marginally to 90.9 percent during
2006-07 as compared to 91.4 percent of the previous year, while interest
expended increased in terms of amount compared to pervious year but
maintained same percentage 57.4 in the previous year 2005-06. But the other
income increased marginally. Operating expenses also increased sharply due
to increase in wage bill. As a result, operating profits and net profit declined
significantly. Provisions and contingencies declined significantly, which
allowed DCCBs to earn a meager net profit of Rs.31 crore during 2006-07.
DCCBs recorded overall losses of Rs.139 crores during 2007-08 as
against profits in 2006-07. One of the reasons for the deterioration in the
overall profitability of DCCBs during 2007-08 was a steep fall in their other
income. The total income of DCCBs was increased during the year because
of increase in interest income despite major decrease in other income
compare to pervious year. As the total income increased even total
expenditure was also increased. Due to increase in interest expenditure and
operating expenses total expenses increased and operating profit declined,
overall profit was in negative. Because of decline in provisions and
contingencies the negative profit of DCCBs was restricted to 139 crores.
100
There was an overall improvement in the financial performance of
DCCBs during 2008-09 over the previous year. Importantly, DCCBs
reported overall net profits of Rs.1353 crores during 2008-09 which was
highest during the study period as compared with the reported net losses
during the previous year, thus, witnessing a turnaround in their financial
position. The number of profit making DCCBs also increased during the
same period. Accordingly, profitability indicators such as ROA and ROE
also witnessed improvement during the year as compared to 2007-08.
DCCBs reported higher operating profits during 2008-09 mainly due to
higher net interest income. However, the increase in the net profits was more
than the operating profit owing to a decline in provisions and contingencies.
The overall financial performance of DCCBs deteriorated during
2009-10 with their net profits declining substantially from 1353 crores of
2008-09 to 1136 crores of 2009-10. This is in contrast with the improved
financial performance of these institutions in the previous year when DCCBs
started reporting overall profits as compared to losses prior to that. An
analysis of different components of the profit and loss account of DCCBs
indicated that the decrease of profits was mainly due to of increase in
operating expenses. During the year interest expended continued as a major
share of total expenses of DCCBs and it found increasing at higher rate than
the interest income. Interest income, which is the major component of
income for DCCBs, increased at slower rate in 2009-10 as compared to
2008-09.
Although DCCBs as a whole reported profits of Rs.900 crores in
2010-11, there was a decline in the quantum of profits reported by these
institutions by comparing profit of Rs.1136 crores of pervious year. The
decline in profitability is mainly emanated from a high growth of operating
expenses, which outpaced the growth of income of these institutions.
101
The overall study from 2005-06 to 2010-11, DCCBs showed bad
performance in 2007-08 where its net loss was 139 crores and its ROA, ROE
showed negative returns compared to other years of the study period. One of
the reasons for this bad performance was due to fall in other income
category of income groups and even found expensive compared to its
previous year.
During 2009 DCCBs showed a good performance compared to other
years as its overall profit was 1353 crore with highest ROA 0.7 percent,
ROE 0.52 percent. The reason for this improvement was mainly due to
increase in net interest income and reduction in provisions and contingents.
The overall study of ROA and ROE found inconsistency in profitability. The
study shows that there is a need of more attention towards improvement of
DCCBs financial performance.
TABLE : 2.10
ASSETS QUALITY OF DCCBs IN INDIA (Amount in Crores)
Assets Classification
2005 -06
2006 -07
2007 -08
2008 -09
2009 -10
2010 -11
Total NPA’s 15709 (100)
16495 (100)
18754 (100)
17989 (100)
16234 (100)
15300 (100)
Sub Standard 6905 (44)
6375 (38.65)
7880 (42.01)
8110 (45.1)
7229 (44.5)
6000 (39.6)
Doubtful 6699 (42.6)
7648 (46.36)
8214 (43.78)
7202 (40)
6394 (39.4)
6500 (42.6)
Loss Assets 2106 (13.4)
2471 (14.98)
2660 (14.18)
2677 (14.9)
2611 (16.1)
2700 (17.8)
Percentage of NPA’s to Loans
19.8 18.5 18.5 17.9 12.9 11.6
i) Recovery to Demand (%)
69 71 55.6 72.7 75.7 78.8
ii) Provisions Required
8713 10222 10394 10225 10984 NA
iii) Provisions Made 10360 12163 12079 11463 12393 NA Source: Report on trend and progress of banking in India of RBI.
102
The above table indicates that the assets quality of DCCBs is good
during 2006 in terms of amount when compared with the rest of the years.
During the 2005-06 the total NPA stood at Rs.15709 crores of which Sub
standard loans were the major category followed by doubtful loans and loss
loans. During the year provisions were made more than what is actually
required. Percentage of NPA to loans was high and recovery percentage
indicates need attention to reduce total NPA.
During 2006-07 the total NPA was increased to Rs.16495 crores from
Rs.15709 crores in 2005-06 and it showed average increase of 5 percent.
During the year the NPA to loans ratio of DCCBs decreased to 18.5 percent
which shows improved NPA management. The main reasons for
improvement were decline in the ‘substandard’ category of NPA. It was also
noticed that NPA in the ‘doubtful’ and ‘loss assets’ category increased from
previous year. The recovery demand ratio was also improved. Provisions
made significantly exceeded the provisions required.
During 2007-08 total NPA was increased to Rs.18754 crores from the
Rs.16495 crores of the 2006-07 and showed average increase of 17.70
percent comparatively more than the previous year. However, the increased
NPA were primarily in the ‘sub-standard’ category, while there was a
reduction in the NPA in the ‘doubtful’ and ‘loss’ category in terms of
percentage. Percentage NPA to Loan recovery was same as during 2006-07.
There was a migration of loan assets towards sub-standard category during
2007-08. This was a positive development with regards to the NPA profile
of DCCBs. Further, provisions were made more than what was required for
their NPA levels during 2007-08.
The asset quality of DCCBs was improved as in 2008-09 over the
previous year both in absolute and percentage terms. The absolute decline in
103
total non-performing loans was due to an absolute decline in doubtful loans
during 2008-09 over the previous year. The average improvement showed
9.75 percent due to decrease in the amount of NPA from 17989 crores to
Rs.16234 crores during 2008-09 to 2009-10 respectively. However,
substandard loans and loss loans increased during 2008-09 over the previous
year. During 2008-09, sub-standard loans were the major category in the
total non-performing loans followed by doubtful loans and loss loans
The asset quality of DCCBs improved as on end-March 2010
continuing the trend of the previous year. The amount of total NPA as well
as the percentage of NPA to loan ratio declined as on end of March 2010 as
compared to the previous year. There was an increase in the percentage
share of loss assets in total NPA with a subsequent decline in percentage of
shares of doubtful and sub-standard assets. Substandard assets continued to
account for major part of total NPA followed by doubtful assets. The
recovery performance of DCCBs also improved at March 2010 compared to
previous year.
The assets quality of DCCBs improved continuously during 2010-11
with a decline in the NPA ratio of 11.6 percent in 2010-11 from 12.9 percent
of the 2009-10. The average improvement 5.75 percent was registered
compared to NPA amount of Rs.15300 crores of 20010-11 with NPA
amount of Rs.16234 crores of 2009-10. The recovery ratio of DCCBs
showed a consistent increase, while the NPA ratio posted a decline.
In a net cell during the study period of 2005-06 to 2010-11. It was
observed that, the increased trend of NPA in initial period like 2005-06,
2006-07 and 2007-08 but latter it was started declining in the year 2008-09,
2009-10 and2010-11. This is a positive sign which indicates DCCBs
concern about the NPA management. The reason for this improvement was
104
decline in one of the category of NPA i.e “doubtful debt” in terms of amount
as well as in terms of percentage.
Sub standard category of NPA was found fluctuating in terms of
amount and percentage through out the study period. However it was
observed that during 2007 substandard asset was lowest with 38.65 percent
as compared to other study period but during 2008-09 it was found highest
with 45.1 percent.
During 2005-06 and 2006-07 regarding doubtful debt category of
NPA were increased in terms amount as well as in terms of percentage. In
2007-08, doubtful asset was increased in terms of amount but declined terms
of percentage as compared to the previous years. During the rest of the study
period doubtful asset was found declining in terms of percentage as well as
amount which shows positive improvement in it.
Loss category of NPA increased in terms of amount every year
except during 2009-10 where as in terms of percentage it was fluctuated
during the study period. In the initial year i.e during 2005-06 it was found
13.4 percent of the NPA which was less as compared to the other years.
During 2009-10 the amount of loss category was less in terms of amount but
it was more in terms of percentage compared to any other year of study.
The percentage of recovery of loan increased during the study period
except during 2007-08. It shows the efficiency of recovery increased year by
year which is a good sign for DCCBs. Due to increase in recovery of loan
percentage, percentage of NPA to loan decreased to 12.9 percent during
2009-10 compared to 19.8 percent of 2005-06. During the study period
provisions made were significantly exceeded the provisions required.
105
Weaknesses and Shortcomings of DCCBs
The working of District Central Co-operative Banks is not free from
complaints. The most important weaknesses and shortcomings of DCCBs
are:
• They violate the principle of co-operatives by working on the lines of
commercial banks.
• They do not appoint experts to examine the creditworthiness of the
primary societies. Hence, there has been a problem of recovery and
over dues.
• They combine financing and supervisory work together. As a result,
supervisory work has been a failure in many cases.
• Some CCBs have been utilising their reserve fund as working capital.
This is not a very sound practice.
• Many CCBs are financially and organisationally weak.
• Defect in investment policy.
• Inadequate and improper planning for medium term financing
• High level politicisation in the management of DCCBs.
106
PRIMARY AGRICULTURE CREDIT SOCIETIES (PACS)
PACS lie at the root of the co-operative credit structure of the
country. They are at the local or base level. In rural areas, they cater to short
and medium term credit needs of the farmers. They directly deal with the
farmers. PACS is linked to a Central Co-operative Bank for its own
requirements of finance, which in turn is linked to a State Co-operative
Bank. Now in India PACS exist on an average one for six villages, this
ensures mutual knowledge of the members who can exercise mutual control.
PACS operates at the village level and maintains direct contact with
the farmers. The main functions PACS are to provide short and medium
term credit to its members. It may supply agricultural and other production
inputs and undertake marketing of agricultural produce. In addition to these,
the co-operative may help in formulating and implementing a plan for
agricultural production for the village and undertake such educative,
advisory and welfare functions as the members might be willing to take up.
According to the committee on co-operative credit (1959), the credit
society should undertake the following functions;
1) To associate itself with program of production
2) To lend adequate amount to its members for consumption purposes
limited to their paying capacity.
3) To barrow adequate fund from the central financial agencies for
helping the members adequately for the above purposes;
4) To protect the farmers from the clutches of money lenders and from
the alienation of land and help them in effecting permanent
improvement in their lands.
5) To attract local savings for share capital and fixed deposits.
6) To supervise use of loans (especially medium-term loans) and to see
that they are paid punctually.
107
7) To distribute fertilizers, seeds, insecticides, agricultural implements
etc., either on its own behalf or through agent;
8) To supply certain consumer goods in common demand such as
kerosene; sugar etc.
9) To store the produce of the members till it is sold; to collect or
purchase produce, where necessary on behalf of a consumer’s
society, marketing society or government.
10) To associate itself with programmers of economic and social welfare,
for the village.
PACS are generally organised on the Raiffeison Model. Their
members have unlimited liabilities. However, the co-operative planning
committee (1996) and the All India Rural Credit Survey Committee (1954)
were of the view that, the unlimited liability has not been very helpful to the
progress of co-operative credit. Thus, in view of this observation, there has
been a shift from unlimited liability or conversion of existing unlimited
liability societies into limited liability.
PACS raise their fund by way of share capital, membership fees,
deposits of members and non members, and loans from DCCBs and the
government. The members who contributed to capital elect the president,
chairman, secretary and other members of the managing committee among
themselves. All elected bodies work on an honorary basis.
In the following part, an attempt has been made to study the
performance of PACS at national level.
108
TABLE : 2.11
PROGRESS OF PRIMARY AGRICULTURE CREDIT SOCIETIES
IN INDIA
(Amount in Crores)
Particulars 2005-
06 2006-
07 2007-
08 2008-
09 2009-
10 2010-
11 No. of PACS 106384 93225 94950 95633 94647 93413 Total Members
125197 125792 131530 132350 126419 121225
Capital 5644 6138 6596 7007 7148 7551 Reserve 3647 4900 4387 4888 5330 6904 Owned Fund 9292 1103 10983 11805 12478 14455 Deposits 19562 23484 25449 26245 35286 37238 Borrowings 41017 43714 47847 48938 51763 54000 Working Fund
73386 79958 88106 94584 135191 144221
Loans & Advances Issued
42919 49612 57642 58786 74937 91303
Loans & Advances Outstanding
51778 58620 6566 64044 76479 87767
Demand 50979 54112 67292 84633 95496 90240 Collection 35503 38360 43289 46697 55972 67543 Balance of Overdue
15476 15752 24003 37936 39524 22697
% of Over Due to Loan Outstanding
29.90 26.87 36.55 59.23 51.68 25.86
Over All Profit
-856 -1653 -5711 -1072 -1215 -200
No. of PACS at Profit
44321 33983 38307 37291 40936 44554
No. of PACS at Loss
53050 48078 48520 45869 41679 38065
% of Profit Making PACS
45.51 414.41 44.11 44.84 49.55 53.93
109
Particulars 2005-
06 2006-
07 2007-
08 2008-
09 2009-
10 2010-
11 % of Loss Making PACS
54.49 58.59 55.89 55.16 50.45 46.07
Total No. of Employees
241609 229007 278842 222173 215529 290540
No.of Borrowers
46076 47910 51074 46219 59800 52388
Deposits per PACS
18.39 25.19 26.80 27.44 37.28 39.86
Ratio of Membership to Borrowers
36.8 36.08 38.83 34.92 47.3 43.72
CRAR 17.95 18.83 16.73 18.43 16.31 19.05 Source: NAFSCOB
The above table reveals that number of PACS stood at 106384 at the
end of the March 2006 declined to 93413 at the end of the March 2011.
During the six years period, figures of number of PACS shows declining
trendexcept during 2008 and 2009 where number of PACS found slightly
increased. The reasons for decline in number of PACS during the period
were due to implementation of reorgansation programme of strengthening
and future development of co-operative structure.
Capital and Reserve which constitutes as owned fund increased in all
the years of the study period. PACS owned fund which was Rs.9292 Crores
during 2005-09 increased to Rs.14455 Crores during 2010-11, it seems that
it increased to 56 percent and with an average growth of 9.33 percent. The
increased figure indicates PACS are moving towards self reliance of the
fund.
Total deposits of PACS which were around Rs.19562 Crores as on 31
March 2006 increased to Rs.37238 Crores as on 31 March 2011 registering
an average growth of 15 percent.
110
The average deposits per PACS registered a modest growth during
the period of 2005-06 to 2010-11. It works out to Rs.0.18 crores during
2005-06 and increased to Rs.0.40 crores during 2010-11. The deposits per
PACS are more than double in the study period. The increased performance
in deposits indicates that PACS have increased trends in mobilising the
deposits.
The borrowing of PACS constitutes more than half of the total
resources (working fund) of PACS during the period of the study. The total
borrowings of PACS stood at Rs.41017 crores during 2005-06 and increased
to Rs.54000 crores registering an average growth of 5.28 percent. It shows
PACS dependency and importance on external funding along with the
internal sources.
The amount of working fund of PACS doubled from 2005-06 to
2010-11. The amount which was Rs.73386 crores during 2005-06 increased
to Rs.144221 crores during 2010-11. This sharp enhancement in the working
fund was taken mainly from financed by borrowings and contributions from
owned fund.
The loans and advances issued by PACS stood at Rs.42919 crores
during 2005-06 and it increased to Rs.91303 crores during 2010-11. Loans
and advances issued by PACS shows an average annual growth of 112
percent during the study period.
The percentage of over due to total loans outstanding, which is a
rough indicator of the non-performing assets of PACS, witnesses a
fluctuating trend in the study. During 2006-07 the percentage of over due to
total outstanding loan declined to 26.87 from the 29.90 percent in the year
2005-06, reflecting the improved recovery performance. The percentage
111
increased to 36.55 percent and 59.23 percent respectively during 2007-08
and 2008-09 which indicates failure in the performance of recovery. During
2010-11 the percentage of over due to total outstanding loan declined to
25.86 percent. It reflects the improvement in recovery performance.
During the period of 2005-06 to 2010-11 total demand and total
collections increased significantly. Collection improved every year during
the study period but it is always lesser than loans issued and loans
outstanding and demand.
PACS showed negative profit during all the years of the study period.
The maximum negative profit found was Rs.5711 crores during 2007-08 and
minimum was Rs.200 crores during 2010-11.
The above table reveals slow decline in the percentage of loss-making
PACS over recent years, particularly from 2008-09. Despite the decline, the
percentage of loss-making PACS competed closely with the percentage of
profit-making PACS. Still more than fifty percentage of PACS are
functioning under loss in the country, which indicated need of urgency for
its improvement for long term sustainability. The reasons for negative
financial performance of PACS were high operating cost and non
performing assets.
The borrower to member ratio of PACS provides an insight into
whether PACS are able to cater to the credit needs of the vulnerable sections
of the rural population or not. It is thus a reflection of the role of PACS in
the financial inclusion process. The ratio of borrowers to members during
the study period varied between 36.08 percent and 47.3 percent. The ratio
found remained below fifty percent in all the years under study, which
indicates that only about less than half of the members of PACS access
credit.
112
Capital adequacy of PACS witnessed an improvement in 2006-07,
2008-09 and 2010-11 over the others periods. As data on risk weighted
assets for PACS were not available, the ratio of total capital and reserves to
total loans outstanding was taken as a rough indicator of capital adequacy.
Weaknesses of PACS
i) Many of PACS are non-viable due to inadequate membership and
low capital base.
ii) The financial assistance and support provided by PACS are grossly
inadequate as a result the farming population continue to be exploited
by money lenders even today.
iii) Inordinate delay caused in the sanction and disbursement of loans
results the farmers not getting the required financial help in time that
gives adverse impact over agricultural produce.
iv) Prevalence of ineffective and inefficient supervisory mechanism over
members and borrowers.
v) The operational efficiency of PACS is often very low due to
operation of personal and vested interest.
vi) The lack of professional management coupled with political and
bureaucratic interference which affected the very survival and
existence of PACS.
vii) Favoritism adopted by the management bodies while dealing with
loan proposals kept the genuine and needy farmers outside the
purview, whereas, unwanted and undesirable elements are being
extended undue advantages.
The Long Term Co-operative Credit Structure (LTCCS): The long term
credit co-operatives provides typically medium and long-term (LT) loans for
making investments in agriculture, rural industries and, in the recent period
for housing also. The LT co-operative credit structure has only two tiers, one
113
at the state level and the other at the taluka/tehsil level. Some states have
unitary structure with the state level banks operating through their own
branches.
The long term co-operative credit structure consists of the State
Co-operative Agriculture and Rural Development Banks (SCARDBs) and
Primary Co-operative Agriculture and Rural Development Banks
(PCARDBs) which are affiliated to SCARDBs. There are total 19
SCARDBs of which 10 have Federal Structure, 7 have Unitary Structure and
2 have Mixed Structure incorporating both the unitary and federal systems
(Himachal Pradesh and West Bengal). An integrated structure providing all
types of agricultural credit (both short term and long term) under ‘single
window’ credit system is present in Andhra Pradesh. In the North-Eastern
Region, only three states (Assam, Manipur and Tripura) have LT structure.
Generally, the states which do not have the LT structure, separate sections of
the State Co-operative Banks look after long term credit needs together with
other Rural Financial Institutions (RFIs) i.e. branches of Regional Rural
Banks and rural/semi-urban branches of Commercial Banks.
TABLE : 2.12
The Long Term Co-operative Credit Structure at a Glance -31st Mar
2011
No. of SCARDBs 19
No. of PCARDBs 714
No. of Branches of PCARDBs 1,056
No. of Branches of Unitary SCARDBs 761
Annual Lending Rs. 17,603.42 Cr
Total Membership 13.65 Million
Source: Report on trend and progress of banking in India of RBI.
114
CO-OPERATIVE MOVEMENT IN KARNATAKA
Karnataka has a fascinating history of Co-operative Movement.
Co-operative culture in various economic activities in the state is clearly
evident. It is deep-rooted, as it has been launched in 1904. The first Primary
Agricultural Credit Society established in the country was at Kanaginhal
(Gadag tq) of Gadag district. It was established on 8th May 1905, and it has
been still functioning. Similarly, the first Urban Co-operative Credit Society
was organised on 18th October 1905 in the state. It is at Betageri of Gadag
district now it is defunct. The Swadeshi Movement of 1905 inspired many
local leaders and social workers to start the co-operatives to cater to their
local needs. Bangalore City Consumers Co-operative Society started in
December 1905 is said to be the first Co-operative institution in princely
Mysore state. Such societies were started in Belgaum, Gokak, Hubli,
Dharwad and Sira by 1906.
The erstwhile princely Mysore State had promoted a unique breed of
financial institutions called “Agricultural Banks” in 1894, a decade earlier to
the official launching of the Co-operative Movement by the Government.
The modus operandi of agricultural banks was such that they had imbibed
co-operative principles though their constitution was of public company,
limited by guarantee.
The diversification of Co-operative Movement was started in 1912. In
the course of time, non-agricultural and non-credit societies emerged in
large number throughout the state. In the early years, the Governments of
Princely Mysore and the Bombay Presidency earnestly encouraged the
spread of the movement in rural areas by extending special incentives and
appointment of honorary co-operative supervisors to guide the co-operative
institutions.
115
It is interesting to know that in order to cater to the needs of the local
people, special economic activities like fencing, hunting, cattle breeding,
insurance, farming, grain banks, fisheries, forest labour, special marketing,
education, sugar, dairy, silk industry, irrigation, house building, construction
of godowns, consumer goods selling etc., were undertaken under
co-operative sector much earlier.
It was a regular feature in Bombay-Karnataka between 1920-1930 to
hold the taluk and district level co-operative conferences to review the
progress of the movement. In order to propagate the principles of
co-operation in the rural areas and to have a mass appeal there was a special
drama troupe to propagate the idea of Co-operation at Amminabhavi of
Dharwad district. Many of the District Central Co-operative banks, specially
the banks working at Dharwad, Madikeri, Sirsi, etc., came to the help of
suffering farmers, during the economic depression of 1929-30. During the
same period due to drought the movement had received a setback. Many
farmers could not pay their overdue to the banks. Though these Co-operative
banks purchased the pledged properties of the debtors, the same was
returned to them without any profit when the debt was cleared. This spirit of
co-operation helped the co-operative banks to grow further when the
economic conditions improved. Many banks arranged debt reconciliation
boards for settlement of loans.
Karnataka has many firsts in the co-operative ventures in the country.
The Hubli Cotton Sales Society Ltd., Hubli, organised in 1915 is considered
to be the first Indian co-operative marketing society. The Farmers Service
Society (FSS) sponsored by Canara Bank in 1973 at Bidadi in Bangalore
district is such first society in the country. Similarly, the Sports Promotion
and Development Society at Chandargi of Belgaum district is a unique
organisation of all-India importance established in 1984. Hulkoti
116
Co-operative Education Society (1921), J.G. Co-operative Hospital at
Ghataprabha (1951, Belgaum district) and Rural Electricity Society at
Hukkeri of Belgaum district (1969) are some of the earliest special types of
co-operatives in the State. The Hiranyakeshi Co-operative Sugar Factory of
Sankeswar of Belgaum district which was in 1956 is considered as one of
the best co-operative sugar factories in the State.
Karnataka is one of the leading States in the country where the Urban
Co-operative Bank movement has emerged strong. Karnataka ranked 3rd in
the country next to Gujarat and Maharashtra. Karnataka is the first State in
the country to have the Federation of Urban banks (1965). It is conspicuous
that after the reorganisation of the State, the orbit of the co-operative
movement has been expanded in all its spheres. Some of the apex
institutions in the district and the State level have established their record
growth vertically and horizontally. Increased financial participation in the
form of share capital, subsidy, grants etc. by the Central and State
Government, N.C.D.C. etc., have facilitated the increase in the number of
co-operatives. Many major industries like spinning, cotton processing,
textile, sugar, tiles, food processing etc., have been started in the State in the
co-operative sector.
During 1976-77, most of the economically non-viable, weak primary
societies were amalgamated. This process of amalgamation on large scale,
strengthened the base of primary societies and their number was reduced
considerably.
The Institute of Co-operative Management was founded in Bangalore
1962 recognising the prominent position of the State in the co-operative
sector. In 1990, the National Agricultural and Rural Development Training
Institute was started in Bangalore to train the bank and co-operative sector
officials.12
117
TABLE : 2.13
GROWTH OF CO-OPERATIVE MOVEMENT IN KARNATAKA
(Rs. in crores)
Year No. of
Co-operatives Membership
societies Share
Capital Working
Fund
2008-09 34025 18788741 2786 32693
2009-10 34863 19904730 3171 38249
2010-11 35502 21533651 3479 41355
2011-12 36481 26399074 3022 51864
Source : Annual reports of the department of co-operation Govt. of Karnataka. From 2008-09 to 2011-12. The State of Karnataka is the 8th biggest State in the Country with a
population of 6.11 crores of which 61.43 percent is rural population. There
are 36481 Co-operative Societies with more than 2 crores membership, of
which 32029 societies are working. The total working fund is Rs. 51,864
crores. The number of Co-operative Societies under profit are 19,963 and
number of societies under loss are 16518.
The Short-term and Medium-term loans are provided in Karnataka to
the farmers through Karnataka Sate Co-operative Apex Bank, 21 DCCBs
and 4,697 PACS. Similarly, the long-term loans are made available from
Karnataka State Co-operative Agricultural and Rural Development Bank
(KSCARDB) through Primary Co-operative Agricultural and Rural
Development Bank. The loans are being provided from their own fund and
refinance from NABARD.
The non-agricultural finance is made available by the Urban Banks
Credit Co-operative Societies in the State. The Urban Co-operative Banking
Sector in the State has achieved a tremendous progress in the banking sector
and acquired third place.
118
The Co-operatives in Karnataka have the following fundamental
objectives and principles
1) To inculcate the spirit of cooperators among the people in the State.
2) To encourage people to promote co-operatives on a voluntary basis
3) To ensure that the co-operatives are formed and function on
democratic principles.
4) To ensure that the co-operatives in the state enjoy maximum
autonomy.
5) To ensure that the co-operatives are accountable to members.
6) To ensure that the co-operatives function as useful instruments to
bring about sustained improvement in the quality of life of their
members.
7) To ensure that the co-operatives function as instruments for poverty
alleviation and for the uplift of weaker sections of the society in order
to pave way for establishing an equalitarian society.
8) To encourage co-operatives to emerge as self supporting, economic
service- oriented business concerns.
9) To encourage co-operatives serve as multifunctional units.
10) To encourage efficient deposit mobilisation.
11) To encourage efficient deployment of human resources.
12) To achieve financial gains and to put mutual aim ahead of private
interest.
13) To provide equal opportunities to all the members.
14) To encourage co-operatives to emerge as peoples bank.
15) To prevent misuse by cooperators.
16) To ensure independent audit
17) To infuse professionalism in the management
18) To serve towards national objectives
19) To have Cooperators among the Co-operatives12
119
PROGRESS OF DCCBs IN KARNATAKA AND THEIR SHARE IN
ALL INDIA LEVEL
The origin of the co-operative Credit Movement in Karnataka and in
India started in the year 1904 after passing the first Co-operative Societies
Act, 1904. Since then the co-operative movement in Karnataka has achieved
noticeable progress in its various activities like the disbursement of loans,
distribution of fertilizers, creation of employment opportunities to weaker-
sections and construction of houses in urban as well as rural areas.
At present Karnataka state has 21 DCCBs and 4697 PACS to look
after the credit needs of agricultural sector in different parts of the state.
These District Central Co-operative Banks have 608 branches in Karnataka
providing employment nearly to 4300 people.
With this backdrop in this section an attempt is made to bring out the
growth of DCCBs in Karnataka and its share in All India level.
TABLE: 2.14 PER DCC BANK MEMBERSHIP IN KARNATAKA AND INDIA
(Figures in Nos.)
Total Membership No. of DCCBs Per Bank Membership Year
Karnataka India Karnataka India Karnataka India
2005-06
29942 2267850 21 366 1425.81 6196.31
2006-07
71620 (139.20)
3264849 (43.96)
21 371 3410.48 8800.13
2007-08
78163 (9.14)
3396881 (4.04)
21 371 3722.05 9156.01
2008-09
82866 (6.02)
3528802 (3.88)
21 370 3946.00 9537.30
2009-10
64032 (-22.73)
3975660 (12.66)
21 370 3049.14 10745.03
2010-11
69630 (8.74)
3146070 (-20.87)
21 370 3315.71 8502.89
AAG 28.07 8.74 Avg. 3145 8823 Source: National Federation of State Co-operative Banks Ltd. Per Bank Membership=Total Membership/No of DCCBs. Note: Figures in brackets show the average annual growth rates.
120
Table 2.14 shows the growth in the membership of DCCBs in
Karnataka and in all India level during 2005-06 to 2010-11. The number of
DCCBs at India level found were 366 in 2005-06 which has gone up very
marginally to 371 and later declined to 370. At the same time number of
DCCBs in Karnataka stagnated to 21 in all the years of the study.
However, there was an impressive growth rate with regard to the total
membership of DCCBs of Karnataka and India noticed during the study
period. Membership of DCCBs in Karnataka found highest in 2006-07 with
AAG rate of 139.20 percent compared to its previous year. During 2009-10
AAG rate in membership found negative 22.73 percent due to
implementation of reorgansation programme of strengthening and future
development of Co-operative structure.
At India level total membership of DCCBs showed 43.96 percent
AAG rate in 2006-07 but later this trend decreased drastically even in
membership trend in Karnataka. The negative AAG rate of 20.87 percent
showed by the end of the study period. It was the lowest growth observed in
six years.
The AAG rate of 28.07 percent of membership to DCCBs in
Karnataka found much better than the India level AAG rate with 8.74
percent. This status provides a positive impression that the co-operative
movement in Karnataka has been absorbing more number of members into
its fold. But the membership per DCCBs showed in Karnataka is 3145
which is lower compare to 8823 membership per bank at India level.
121
TABLE : 2.15 TRENDS OF DCCBs OWNED FUND IN KARNATAKA AND INDIA
(Rs. in Crores)
Capital Reserves Owned Fund
Year India Karnataka
Share in all India
Level (%) Karnataka India
Share in all India Level
(%) Karnataka India
2005-06 4748 236.88 4.99 76.31 18702 0.41 313.19 23450
2006-07 5458
(14.95) 267.13 (12.77)
4.89 66.21
(-13.24) 20722 (10.80)
0.32 333.34 (6.43)
26180 (11.64)
2007-08 5939 (8.81)
290.87 (8.89)
4.90 225.24
(240.19) 22467 (8.42)
1.00 516.11 (54.83)
28406 (8.50)
2008-09 6578
(10.76) 321.77 (10.62)
4.89 257.39 (14.27)
23227 (3.38)
1.11 579.16 (12.22)
29792 (4.88)
2009-10 7309
(11.11) 397.37 (23.50)
5.44 344.78 (33.95)
24061 (3.59)
1.43 742.15 (28.14)
31370 (5.30)
2010-11 7950 (8.77)
451.73 (13.68)
5.68 355.22 (3.03)
25040 (4.07)
1.42 806.95 (8.73)
32990 (5.16)
AAG 10.88 13.89 55.64 6.05 22.07 7.10 Source: Report on Trend and Progress of Banking in India and Annual Reports of the Karnataka State Co-operative Apex Bank Ltd. Note: Owned Fund= Total Share Capital +Total Reserves. Note: Figures in brackets show the average annual growth rates.
122
Table 2.15 explains with the growth in the capital, reserve and its
combined amount called as owned fund of DCCBs in Karnataka and all
India level during 2005-06 to 2010-11.
The above table explains that the amount of capital of Karnataka and
India showed increasing trend during the period of study. Karnataka’s share
of capital in India level found between 4.89 to 5.68 percent. The AAG rate
of Karnataka regarding capital stood at 13.89 percent which is slightly more
than AAG rate of 10.88 percent at India level capital. The reserves which is
one of the components of the owned fund showed more fluctuation in
Karnataka’s DCCBs compared to India level. The AAG rate in reserve fund
of Karnataka varied -13.24 percent to 240.19 percent where as India level it
was noticed 3.38 to 10.80 percent. The AAG rate of 55.64 percent of
Karnataka’s reserve showed higher due to heavy reserve creation made in
2007-08 compared to India level AAG rate of 6.05 percent.
The above table clearly shows DCCBs in Karnataka have registered a
significant growth in the owned fund. In 2005-06, the owned fund of all
DCCBs in Karnataka amounted to Rs.313.19 crores. This figure has gone up
considerably and it reached to Rs.806.95 crores in 2010-11. The growth of
owned fund has growned to double during the study period. In other words
there was 157.66 percent rise in these fund with AAG rate of 22.07 percent.
It reveals that the growth in the total reserves has mainly contributed to the
strength of its own fund. The owned fund at India level showed progress at
AAG rate of 7.10 percent which is lower than Karnataka’s AAG rate 22.07
percent. The amount of owned fund observed increasing trend which was
Rs.23450 crores in 2005-06 has gone up to Rs.32990 crores in 2010-11
resulting 40.69 percent raise in owned fund. In overall, performance relating
to owned fund of Karnataka’s growth showed much better than the India
level DCCB’s growth.
123
TABLE : 2.16 CREDIT DEPOSIT RATIO OF DCCBs IN KARNATAKA AND INDI A
(Rs. in Crores)
Total Deposits Total Loans Outstanding CD Ratio
Year Karnataka India
Share in All India Level (%)
Karnataka India Share in All India Level (%)
Karnataka India
2005-06 4090.31 87532 4.67 4099.56 79202 5.18 100.23 90.48
2006-07 4396.91 (7.50)
94529 (7.99)
4.65 4210.00 (2.69)
89038 (12.42)
4.73 95.75 94.19
2007-08 5141.93 (16.94)
109597 (15.94)
4.69 5184.46 (23.15)
101221 (13.68)
5.12 100.83 92.36
2008-09 5837.36 (13.52)
127623 (16.45)
4.57 5882.98 (13.47)
99729 (-1.47)
5.90 100.78 78.14
2009-10 7088.51 (21.43)
153585 (20.34)
4.62 6822.66 (15.97)
110665 (10.97)
6.17 96.25 72.05
2010-11 7906.8 (11.54)
166489 (8.40)
4.75 7672.73 (12.46)
131280 (18.63)
5.84 97.04 78.85
AAG 14.19 13.83 13.55 10.84 Avg. 98.48 84.35 Source: Report on Trend and Progress of Banking in India and Annual Reports of the Karnataka State Co-operative Apex Bank ltd. Note: C-D Ratio is calculated as Ratio of Loans Outstanding to Deposits. Note: Figures in brackets show the average annual growth rates.
124
Table 2.16 explains with the growth in total deposits and total
outstanding advances of DCCBs in Karnataka and the all India level during
2005-06 to 2010-11.
The above table explains that the amount of deposits of Karnataka
and India showed increasing trend during the period of study. The
Karnataka’s share of deposits in India level found significantly constant and
it found in between 4.57 to 4.75 percent. The AAG rate of Karnataka
regarding Deposits stood at 14.19 percent which is slightly more than AAG
rate of 13.83 percent of India level deposits.
Outstanding loan of Karnataka in relation to India level moved almost
opposite direction in most of the year. The share of Karnataka in India level
varied in between 4.73 to 6.17 percent during six year period. The AAG rate
of outstanding loan of Karnataka found higher with 13.55 percent than the
India level with 10.84 percent. The higher AAG rate speaks about
inefficiency of recovery management and needs attention for immediate
action to improve in recovery.
The size of lending of any financial institution is justified through its
CD ratio. The CD ratios of DCCBs in Karnataka and India have shown
fluctuating trend during the study period. CD ratio of the Karnataka found
higher in every year compared to CD ratio of India level. The average CD
ratio of 98.48 percent of Karnataka indicates higher than the India level
average CD ratio of 84.35 percent. The higher CD ratio of Karnataka
indicates better lending performance than India level.
125
TABLE : 2.17
TRENDS OF BORROWINGS AND WORKING FUND OF DCCBs IN K ARNATAKA AND INDIA (Rs. in Crores)
Borrowings Working Fund Share of Borrowings in
Working Fund Year
Karnataka India Share in all India Level
Karnataka India Share in all India Level
Karnataka India
2005-06 1388.77 24217 5.73 6637.18 135199 4.91 20.92 17.91
2006-07 1559.94 (12.33)
29912 (23.52)
5.22 7565.65 (13.99)
150621 (11.41)
5.02 20.62 19.86
2007-08 2076.83 (33.14)
26096 (-12.76)
7.96 8834.24 (16.77)
153836 (2.13)
5.74 23.51 16.96
2008-09 2533.15 (21.97)
27664 (6.01)
9.16 10343.28 (17.08)
185079 (20.31)
5.59 24.49 14.95
2009-10 2160.70 (-14.70)
28735 (3.87)
7.52 11207.47
(8.36) 206509 (11.58)
5.43 19.28 13.91
2010-11 2426.42 (12.30)
42400 (47.56)
5.72 12638.82 (12.77)
231700 (12.20)
5.45 19.20 18.30
AAG 13.01 13.64 13.79 11.53 21.34 16.98 Source: Report on Trend and Progress of Banking in India and Annual Reports of the Karnataka State Co-operative Apex Bank Ltd. Note: Figures in brackets show the average annual growth rates.
126
Table 2.17 illustrates about borrowings and working fund of DCCB’s
in Karnataka and India level and share of Karnataka DCCB’s in India level.
It also shows the portion of borrowings in the total working fund during
2005-06 to 2010-11.
From the above table it is noticed that the borrowings share of
Karnataka’s in India level found fluctuating trend. The minimum share
found in 2006-07 was 5.22 and maximum was 9.16 percent in 2008-09. The
AAG rate of Karnataka found was 13.01 which was slightly lesser than the
India level of 13.64 percent which indicates dependency on borrowing
amount is leaser than the India level.
The term working fund represents the total finance available for
lending operations. The share of Karnataka’s working fund in India level
varied in between 4.91 to 5.74 percent. The AAG rate of 13.79 percent of
Karnataka’s found higher than the India level of 11.53 percent during the
study period.
The share of borrowings in total working fund of Karnataka’s found
higher each year of the study period compared to India level. It is not
welcoming trend from the point of Karnataka’s DCCBs. Because the
percentage of borrowings in the working fund of the bank should be brought
down to a minimum level. It has to minimise the interest commitment to
borrowers. Even the AAG rate of borrowings to working fund was found
higher with 21.34 percent compare to 16.98 percent of India level.
127
TABLE : 2.18 TRENDS OF LOANS ISSUED AND OVERDUES OF DCCBs IN
INDIA AND KARNATAKA (Rs. in Crores)
Loans Issued Overdues Share of Overdues in Loans Issued Year
Karnataka India Karnataka India Karnataka India
2005-06 3892.50 69317.61 777.82 18136.07 19.98 26.16
2006-07 3620.67 (-6.98)
76703.81 (10.66)
983.24 (26.41)
21385.82 (17.92)
27.16 27.88
2007-08 4742.02 (30.97)
87229.09 (13.72)
916.07 (-6.83)
27535.78 (28.76)
19.32 31.57
2008-09 5350.93 (12.84)
88028.69 (0.92)
839.05 (-8.41)
26443.51 (-3.97)
15.68 30.04
2009-10 6464.18 (20.80)
110529.29 (25.56)
872.79 (4.02)
23763.32 (-10.14)
13.50 21.50
2010-11 7482.38 (15.75)
137757.17 (24.63)
609.24 (-30.20)
29049.42 (22.24)
8.14 21.09
AAG 14.68 15.10 -3.00 10.96 17.30 26.37 Source: National Federation of State Co-operative Banks Ltd. Share of Overdues in Loans Issued = Overdues/ Loans Issued. Note: Figures in brackets shows the annual growth rates. Table 2.18 exhibits about the loan issued and overdues of DCCBs in
Karnataka and India level and share of overdues to loan issued during 2005-
06 to 2010-11. The above table indicates that loan issued by Karnataka DCCBs
increased every year except in 2006-07 where it issued loans of Rs 3620.67
crores lesser than Rs.3892.50 crores of 2005-06 indicating decline of annual
average of 6.98 percent. In other side, the loan issued by India level DCCBs found increasing
trend. Both Karnataka and India level DCCBs issued loans almost double at
the end of the study period compared to beginning of the study period. The
AAG rate of 15.10 at India level found little higher than the Karnataka’s
AAG rate of 14.68 percent.
128
The overdues which represent non recovery of the principal and
interest amount on due date showed fluctuating trend of both Karnataka as
well as India level. But it is interesting to note that AAG rate of overdues
showed negative, indicating good performance of the recovery management
and prompt payment of loan borrowers. The share of overdues to loans issued observed higher in all India
level each year of the study period. The overall average share of overdues to
loans issued found higher with 26.37 percent at all India level which is
higher than the 17.30 percent of Karnataka’s DCCBs.
TABLE : 2.19
TRENDS OF INVESTMENTS OF DCCBs IN INDIA AND KARNATAKA
(Rs. in Crores) Year Karnataka India Share
2005-06 1532.02 36628 4.18
2006-07 1757.41 (14.71)
41006 (11.95)
4.29
2007-08 2570.27 (46.25)
48228 (17.61)
5.33
2008-09 3375.77 (31.34)
64709 (34.17)
5.22
2009-10 3394.85 (0.57)
78913 (21.95)
4.30
2010-11 3921.03 (15.50)
85400 (8.22)
4.59
AAG 21.67 18.78 Source: Report on Trend and Progress of Banking in India and Annual Reports of the Karnataka State Co-operative Apex Bank ltd. The data in table 2.19 indicates the investment trends of DCCBs in
Karnataka and India. The data reveals that the amount of investments both
Karnataka’s DCCBs and India level DCCB’s increased every year. The
amount of DCCB’s investment in Karnataka is Rs.1532.02 crores in 2005-06
has gone up to Rs.3921.03 crores indicating raise of 155.94 percent during
the study period. Where as all India level total investment found Rs.36628
129
crores in 2005-06 increased to Rs.85400 during 2010-11 registering raise of
annual average of 133.15 percent. The investment share of Karnataka in all India level varied in
between 4.18 to 5.33 percent. The AAG rate of 21.67 percent observed in
investment of DCCB’s in Karnataka which is higher than the AAG rate of
18.78 percent of all India level.
TABLE : 2.20 TREND OF RECOVERY OF DCCBs IN KARNATAKA AND INDIA
(Rs. in Crores) Year Karnataka (%) India (%)
2005-06 69.96 69 2006-07 58.3 71.1 2007-08 73.49 55.6 2008-09 74.52 72 2009-10 81.42 75.7 2010-11 84.87 78.8
Avg. 73.76 70.37 Source: Report on Trend and Progress of Banking in India and Annual Reports of the Karnataka State Co-operative Apex Bank ltd. The above table exhibits the trend of recovery in Karnataka and India
level of DCCBs. During the study period Karnataka’s recovery found
increasing trend except in 2006-07 where the percentage of recovery gone
down to 58.3 percent from 69.96 percent of 2005-06. The over all recovery
performance found varied from 69.96 percent to 84.87 percent during the
study period. The recovery performance of India level also found increasing trend
except in 2007-08 where performance declined to 55.6 percent from its
previous year’s performance 71.1 percent. The recovery performance of
India level DCCBs found varied between 69 to 78.8 percent during the study
period.
130
The inference get from the above table is that the average recovery
performance of Karnataka’s DCCBs is 73.76 percent comparatively higher
than the average recovery of 70.37 percent at India level.
Hypothesis
For the comparison, the following null hypotheses were formed and
tested with the help of one of the Statistical tool i.e independent ‘t’ test: H01 There is no significant difference between the growth rates of
membership per bank of DCC banks in India and the growth rates of
membership per bank of DCC banks in Karnataka during the study period. H02 There is no significant difference between the growth rates of owned
fund of DCC banks in India and the growth rates of owned fund of DCC
banks in Karnataka during the study period. H03 There is no significant difference between the growth rates of total
deposits of DCC banks in India and the growth rates of total deposits of
DCC banks in Karnataka during the study period. H04 There is no significant difference between the growth rates of
outstanding loans of DCC banks in India and the growth rates of outstanding
loan of DCC banks in Karnataka during the study period. H05 There is no significant difference between the growth rates of
borrowings of DCC banks in India and the growth rates of borrowings of
DCC banks in Karnataka during the study period. H06 There is no significant difference between the growth rates of
working fund of DCC banks in India and the growth rates of working fund
of DCC banks in Karnataka during the study period. H07 There is no significant difference between the growth rates of loan
issued from DCC banks in India and the growth rates of loan issued from
DCC banks in Karnataka during the study period.
131
H08 There is no significant difference between the growth rates of
overdues of DCC banks in India and the growth rates of overdues of DCC
banks in Karnataka during the study period. H09 There is no significant difference between the growth rates of
investments of DCC banks in India and the growth rates of investments of
DCC banks in Karnataka during the study period.
Results
After applying independent ‘t’ test to AAG rate of various parameters
of India level and Karnataka level DCC banks, the results are shown in the
following table:
TABLE : 2.21 SUMMARY OF THE HYPOTHESES TEST RESULTS
Tabulated Value Sl. No Hypothesis
0.01 0.05 Calculated Value
DF 8 Results
1 H01 3.355 2.306 -.652 Reject 2 H02 3.355 2.306 1.642 Reject 3 H03 3.355 2.306 -.107 Reject 4 H04 3.355 2.306 -.576 Reject 5 H05 3.355 2.306 .049 Reject 6 H06 3.355 2.306 -.690 Reject 7 H07 3.355 2.306 .054 Reject 8 H08 3.355 2.306 1.168 Reject 9 H09 3.355 2.306 -.320 Reject
Source: Computed
H01 is rejected, So, it concludes that during the study period, there is
significant difference between the growth rates of membership per bank of
DCC banks in India and the growth rates of membership per bank of DCC
banks in Karnataka. H02 is rejected, So, it concludes that during the study period, there is
significant difference between the growth rates of owned fund of DCC
banks in India and the growth rates of owned fund of DCC banks in
Karnataka.
132
H03 is rejected, So, it concludes that during the study period, there is
significant difference between the growth rates of total deposits of DCC
banks in India and the growth rates of total deposits of DCC banks in
Karnataka. H04 is rejected, So, it concludes that during the study period, there is
significant difference between the growth rates of outstanding fund of DCC
banks in India and the growth rates of outstanding fund of DCC banks in
Karnataka. H05 is rejected, So, it concludes that during the study period, there is
significant difference between the growth rates of borrowings of DCC banks
in India and the growth rates of borrowings of DCC banks in Karnataka. H06 is rejected, So, it concludes that during the study period, there is a
significant difference between the growth rates of working fund of DCC
banks in India and the growth rates of working fund of DCC banks in
Karnataka. H07 is rejected, So, it concludes that during the study period, there is
significant difference between the growth rates of loan issued of DCC banks
in India and the growth rates of loan issued of DCC banks in Karnataka. H08 is rejected, So, it concludes that during the study period, there is
significant difference between the growth rates of overdues of DCC banks in
India and the growth rates of overdues of DCC banks in Karnataka. H09 is rejected, So, it concludes that during the study period, there is
significant difference between the growth rates of investments of DCC
banks in India and the growth rates of membership per bank of DCC banks
in Karnataka.
133
References
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13 www.karnatakaapex.com retrieved on 15-06-2012.