cooperative

Identification and analysis of causative factors driving

the failure of cooperative society banks in Karnataka

By

DHANANJAYA.C.

(Reg. No - 04VWCM6021)

This dissertation report is submitted in partial fulfillment of the

requirements of the

MBA program of Bangalore University

Under the guidance of

Professor. Ray TitusAlliance Business Academy

Alliance Business Academy19th cross, 7th main,

N.S.Palya, BTM 2nd Stage,Bangalore – 560076

(2004 – 2006)

DECLARATION

I, DHANANJAYA.C., MBA IV SEMESTER student of Alliance Business

Academy, Bangalore do hereby declare that this dissertation titled

“Identification and analysis of causative factors driving the failure of

cooperative society banks in Karnataka” has been prepared by me, under

the guidance of Professor Ray Titus, in the partial fulfillment of the award

of MASTER OF BUSINESS ADMINISTRATION under Bangalore

University during session

2004-06.

I further declare that this dissertation report has not been submitted earlier to

any other University or Institute for the award of any Degree or Diploma.

Date:

Place: Bangalore

DHANANJAYA.C.

(04VWCM6021)

ACKNOWLEDGEMENT

The satiation and euphoric that accompany the successful completion of task would be

incomplete without the mention of the people who made it possible. So with immense

gratitude I acknowledge all those whose guidance and encouragement crowned my

efforts with success.

I would like to thank Prof. Sudhir G Angur, President, Alliance Business Academy,

and Dr. B.V.Krishnamurthy, Executive Vice President, Alliance Business Academy for

providing the support to do this study.

With deep sense of gratitude and indebtedness I sincerely thank Professor Ray Titus,

my dissertation guide for giving me valuable suggestions and advice throughout the

execution of the dissertation.

I would like to thank all the faculty members of Alliance Business Academy.

I would like to thank Mr. Ravi kiran, Lab Co-coordinator, Alliance Business Academy

for his co-operation and support.

Last but not the least I would like to thank my parents, friends without whose co-

operation this dissertation wouldn’t have possible.

1

TABLE OF CONTENTS

SL NO. CONTENTS PAGE NO.

EXECUTIVE SUMMARY

CHAPTER 1 LITERATURE REVIEW 6-12

CHAPTER 2 INDUSTRY PROFILES 13-31

CHAPTER 3 RESEARCH DESIGN

STATEMENT OF PROBLEM

OBJECTIVES OF THE STUDY

RESEARCH METHODOLOGY

THEMATIC FRAMEWORK FOR ANALYSIS

32-34

CHAPTER 4 ANALYSIS AND INTERPRETATION 35-48

CHAPTER 5 SUMMARY OF FINDINGS, CONCLUSIONS AND SUGGESTIONS

49-51

BIBILIOGRAPHY

ANNEXURE

2

LIST OF GRAPHS

TABLE NO.

TITLE OF THE GRAPHS/CHARTSPAGE

NO.

1GRAPHICAL ANALYSIS OF SCB’s V/s DCCB’s1.a. Growth in Loans Outstanding1.b. Recovery Percentage of SCB’s and DCCB’s

35

2PROFITABILITY POSITION OF SCB’s V/s DCB’s2.a. SCB2.b. DCCB

36

3 COMPARISION OF NET PROFIT BETWEEN COOPERATIVE BANKS AND COMMERCIAL BANKS 46

4 PROFIT PER EMPLOYEE OF COOPERATIVE BANKS 47

5SAMPLE COOPERATIVE BANKS NPA LEVEL

48

6 SIZE-WISE DISTRIBUTION OF UCBs IN INDIA48

7 PERCENTAGE OF CUSTOMER TRANSACTIONS BY VARIOUS CHANNNELS 49

LIST OF DIAGRAMS

TABLE NO.

TITLE OF THE DIAGRAMSPAGE

NO.

1 ORGANISATON STRUCTURE (OPERATION) 16

2 COOPERATIVE SOCIETIES STRUCTURE 19

3 ORGANISATION STRUCTURE 24

4 CREDIT STRUCTURE 25

3

Executive Summary

“ENSURE ME A GOOD PANCHAYAT, A GOOD SCHOOL AND A GOOD

CO-OPERATIVE SOCIETY: I WILL ENSURE YOU THE RAMRAJYA”

PANDIT JAWAHARLAL NEHRU

This is a study to understand the causes for success or failure of co-operative societies

banks. The Co-Operative Societies Banks are mainly divided into rural cooperative

societies banks and urban cooperative societies banks. Here we are studying the entire

structure of co-operative societies banks giving much emphasis on rural CSBs. We are

evaluating the strategies of CSBs with regards to their success and failure and attempting

to implement the strategies of successful CSBs to those, who that are a failure CSB to

minimize the problems faced by them. Based on the survey-conducted by us, we assume

that the main reasons for the failure of rural co-operative societies banks.

Inefficient fund management

Poor recovery methods

Political interferences

Lack of control & Supervision

By analyzing these causes we will be able to locate the loopholes in the CSBs, which

will help in eliminating the problems faced by these banks. Although the cooperative

banks established on the patterns of Raiffeisen and Schulze Delitzch patterns have made

substantial progress in India, the movement can not be termed as a vibrant one in regard

to cooperative values and philosophy as enunciated in cooperative principles. While the

extension of financial sector reforms programme mainly the prudential standards to

cooperative banking segment on par with commercial banks may be justified on several

counts, it can not be ignored that such standards were essentially contrived for the latter.

Logically, if the prudential standards, and supervision and regulation for cooperative

banks were same as that of commercial banks, then there would not be any difference

worth mentioning between these entities other than the holding pattern. The notion of a

4

code of good practices though intuitively appealing, the temptation to prescribe

universally valid model codes which do not allow for differences in institutional

development, legislative framework and more broadly, different stages of development

must be avoided. The increasing external intervention in the era of reforms, many a

times beyond the functional aspects of cooperative banks has resulted in the dilution of

cooperative character in terms of their adherence to cooperative principles. The paper

identifies several broad areas for the intervention of researchers under three categories,

i.e., prudential standards, professional management and governance and supervision &

regulation against the backdrop of financial sector reforms. While maintaining the

thrust on cooperative character throughout the discussions, it is argued that if cooperative

character of credit cooperatives is to be preserved or promoted, then the prudential

norms, system of governance and supervision & regulation, all should emanate from the

guiding principles of cooperation.

5

Chapter 1

LITERATURE REVIEW

THE INDIAN BANKING SECTOR

Is it possible to imagine a world without banks? Impossible! Banks today for several

reasons have become cornerstones of our economy. They transfer risk, provide liquidity,

facilitate both major and minor transactions, and provide financial information for both

individuals and businesses.

HISTORY

1786: Establishment of the General Bank of India, the first Joint Stock bank.

1860: Three presidency banks were set up in Calcutta, Bombay and Madras.

1921: Three presidency banks were amalgamated to form the Imperial Bank of India,

which took on the role of a commercial bank, a bankers’ bank and a banker to the

Government

1935: The establishment of RBI as the central bank of the country ended the quasi-

central banking role of the Imperial Bank of India.

1955: The State Bank of India (“SBI”) was constituted in order to take over the Imperial

Bank of India and integrating with it, the former state-owned and state-associate banks.

1959: the State Bank of India (Subsidiary Bank) Act was passed, enabling the SBI to

take over eight former state-associate banks as its subsidiaries.

1969: 14 private banks were nationalized followed by six private banks in 1980.

Since 1991 many financial reforms have been introduced substantially transforming the

banking industry in India.

6

THE BANKING INDUSTRY - PORTER'S 5 FORCES ANALYSIS

SUPPLY: Liquidity is controlled by the Reserve Bank of India (RBI).

DEMAND: India is a growing economy and demand for credit is high thought it could

be cyclical.

1. Threat of New Entrants –

The average person can't come along and start up a bank, but there are

services, such as internet bill payment, on which entrepreneurs can capitalize.

Banks are fearful of being squeezed out of the payments business,

especially since it is a good source of fee-based revenue.

Another trend that poses a threat is companies offering other financial

services. It would not take much for an insurance company to start offering

mortgage and loan service.

Barriers to entry: licensing requirements, investment in technology and

branch network.

2. Power of Suppliers-

High during periods of tight liquidity.

Trade unions in public sector banks can be anti reforms.

Depositors may invest elsewhere if interest rates fall.

3. Power of Buyers –

7

The individual doesn't pose much of a threat to the banking industry, but one

major factor affecting the power of buyers is relatively high switching costs. If a

person has their mortgage, car loan, credit card, checking account, and mutual

funds with one particular bank, it can make it extremely tough for them to switch.

In an attempt to lure-in customers, banks try to lower the price of switching, but

many people would still rather stick with their current bank.

For good creditworthy borrowers (both individuals and corporate) bargaining

power is high due to the availability of large number of banks.

4. Availability of Substitutes –

There are plenty of substitutes in the banking industry. Banks offer a suite of

services over and above taking deposits and lending money, but whether it is

insurance, mutual funds, or fixed income securities, chances are there is a non-

banking financial services company who can offer similar services.

In the lending side of the business, banks are seeing competition rise from

unconventional companies. Sony, General Motors, and Microsoft all offer

preferred financing to customers who buy big ticket items. If car companies are

offering 0% financing, why would anyone want to get a car loan from the bank

and pay 5-10% interest?

5. Competitive Rivalry -

The banking industry is highly competitive. There are public sector banks, private

sector and foreign banks along with non banking finance companies competing in

similar business lines. Each one is trying to out beat the other by offering lower

financing, preferred rates, and investment services.

The banking sector is in a race to see who can offer the better and faster services,

but this also causes banks to experience a lower ROA. They then have an

incentive to take- on high risk projects.

In the long run, we're likely to see more consolidation in the banking industry.

Larger banks would prefer to takeover or merge with another bank rather than

spend the money to market and advertise to people.The Indian banking sector can

be broadly classified as organised and unorganized banking system. The

unorganized system comprises of moneylenders, indigenous bankers, lending

pawnbrokers, landlords, traders, etc. whereas the organised banking system

8

comprises of Scheduled bank(which are included in the second schedule of RBI

Act 1934) and Non Scheduled banks that are permitted by RBI to undertake

banking business. The Scheduled banks comprises of Scheduled commercial

Banks and Scheduled Co-operative Banks.Reserve Bank of IndiaRBI is the

central banking and monetary authority in India. RBI manages the country’s

money supply and foreign exchange and also serves as a bank for the GoI and for

the country’s commercial banks. In addition to these traditional central banking

roles, RBI undertakes certain developmental and promotional activities.RBI

issues guidelines, notifications and circulars on various areas like exposure

standards, income recognition, asset classification, provisioning for non-

performing assets, investment valuation and capital adequacy standards for

commercial banks, long-term lending institutions and non-banking finance

companies. RBI requires these institutions to furnish information relating to their

businesses to RBI on a regular basis.Public Sector BanksPublic sector banks

make up the largest category of banks in the Indian banking system. There are 27

public sector banks in India. They include the SBI and its 7 associate banks and

19 nationalized banks. Nationalized banks are governed by the Banking

Companies (Acquisition and Transfer of Undertakings) Act 1970 and 1980. At

the end of September 2004, public sector banks had 46,782 branches and

accounted for 74.9% of the aggregate deposits and 70.5% of the outstanding

gross bank credit of the scheduled commercial banks.Commercial

BanksCommercial banks in India have traditionally focused on meeting the

short-term financial needs of industry, trade and agriculture. At the end of

September 2004 there were 291 scheduled commercial banks in the country, with

a network of 67,221 branches. Regional Rural BanksRegional rural banks were

established from 1976 to 1987 jointly by the Central Government, State

Governments and sponsoring public sector commercial banks with a view to

develop the rural economy. Regional rural banks provide credit to small farmers,

artisans, small entrepreneurs and agricultural laborers. There were 196 regional

rural banks at the end of September 2004 with 14,430 branches, accounting for

3.6% of aggregate deposits and 3.0% of gross bank credit outstanding of

scheduled commercial banks.Private Sector BanksIn July 1993, as part of the

banking reform process and as a measure to induce competition in the banking

9

sector, RBI permitted entry by the private sector into the banking system. This

resulted in the introduction of nine private sector banks. These banks are

collectively known as the ‘‘new’’ private sector banks. In addition, 21 private

sector banks existing prior to July 1993 were operating at year-end Fiscal

2004.Foreign BanksAt the end of June 2004 there were around 32 foreign banks

with 217 branches operating in India, accounting for 4.6% of aggregate deposits

and 7.0% of outstanding gross bank credit of scheduled commercial banks. The

primary activity of most foreign banks in India has been in the corporate

segment. However, some of the larger foreign banks have made consumer

financing a significant part of their portfolios. These banks offer products such as

automobile finance, home loans, credit cards and household consumer

finance.Cooperative BanksCooperative banks cater to the financing needs of

agriculture, small industry and self-employed businessmen in urban and semi-

urban areas of India. The state land development banks and the primary land

development banks provide long-term credit for agriculture. Term Lending

InstitutionsTerm lending institutions were established to provide medium-term

and long-term financial assistance to various industries for setting up new

projects and for the expansion and modernization of existing facilities. These

institutions provide fund-based and non-fund based assistance to industry in the

form of loans, underwriting, and direct subscription to shares, debentures and

guarantees. Non-Banking Finance CompaniesThere are over 13,671 non-

banking finance companies in India as of June 2004, mostly in the private sector.

The non-banking finance companies, on the basis of their principal activities are

broadly classified into four categories namely Equipment Leasing (EL),

Hire Purchase (HP),

Loan and Investment Companies and

Deposits and business activities of Residuary Non-Banking Companies (RNBCs).

Housing Finance Companies

Housing finance companies form a distinct sub-group of the non-bank finance

companies and are regulated by National Housing Bank (NHB). Until recently, Housing

Development Finance Corporation Limited was the premier institution providing housing

finance in India. In recent years, several other players including banks have entered the

10

housing finance industry. The National Housing Bank Act provides for refinancing and

securitization of housing loans, foreclosure of mortgages and setting up of the Mortgage

Credit Guarantee Scheme.

Other Financial Institutions

Specialized Financial Institutions

In addition to the long-term lending institutions, there are various specialized

financial institutions that cater to the specific needs of different sectors. They include the

National Bank for Agricultural and Rural Development, Export Import Bank of India,

Small Industries Development Bank of India, Risk Capital and Technology Finance

Corporation Limited, Tourism Finance Corporation of India Limited, National Housing

Bank, Power Finance Corporation Limited and the Infrastructure Development Finance

Corporation Limited.

State Level Financial Institutions

State financial corporations operate at the state level and form an integral part of the

institutional financing system. State financial corporations were set up to finance and

promote small and medium-sized enterprises. At the state level, there are also state

industrial development corporations, which provide finance primarily to medium- sized

and large-sized enterprises.

Insurance Companies

Currently, there are 27 insurance companies in India, of which 13 are life insurance

companies, 13 are general insurance companies and one is a reinsurance company. Life

Insurance Corporation of India, General Insurance Corporation of India and public sector

general insurance companies also provide long-term financial assistance to the industrial

sector.

Mutual Funds

From 1963 to 1987, Unit Trust of India was the only mutual fund operating in India.

From 1987 onwards; several other public sector mutual funds entered this sector. These

mutual funds were established by public sector banks, the Life Insurance Corporation of

11

India and General Insurance Corporation of India. The industry is regulated by the SEBI

(Mutual Fund) Regulation 1996.

Chapter 2

INDUSTRY PROFILE

Co-Operative Society

A Cooperative society is an autonomous association of persons of persons united

voluntarily to meet common economic, social and cultural needs and aspiration through

jointly owned and democratically controlled enterprises.

History

Cooperation in older days was an integral part of human life; today it is a distinct form of

business, which affects the pattern of production and distribution within the economy. It

has undergone enormous changes from ancient times to till date. Industrialization

brought about drastic change in the society. Labour, as a factor of production, started

losing its importance. There was a shift in emphasis from farm to the factory; from

labour- intensive technology to capital- intensive methods; from rural to urban areas.

Society became divide in to two classes- the capitalist class and the working class.

Exploitation enveloped the society. In their anxiety to accumulate wealth, the capitalist

started exploiting the working class. Exploitation led to frustration and the working class

soon realized that they were quite weak and totally incapable of protesting individually

against the actions of the capitalist. It was during this time that social reformers like

Robert

Owen and Dr. William gave thought to the formulation of a new policy. The outcome

was co-operative movement with a new dimension and a wider scope.

If weak persons come together and formed an association of themselves, there was no

scope for exploitation and humiliation.

As stated, the evils of the capitalist system made social thinkers like Robert Owen and

Dr. William King of England think of an alternative and better economic system.

12

They visualized an ideal form of society based on cooperation and mutual help. By

1830’s, their dreams of creating a new world based co-operation did not become a

reality. A number of co-operatives were organized, but almost all of them failed. Finally

a group of 28 workers of Rochdale, an industrial town of England, organized a society,

which proved to be successful. The single factor that was responsible for the success of

this venture was that this society had absorbed the lessons of the previous failures.

These pioneers registered their society- “The Rochdale Society of Equitable Pioneers”-

on the 24th of October 1844 and began business on 21st of December 1844. This is said to

be true beginning of the modern co-operative movement.

The Co-operative movement is an alternative to capitalism, wherein it provides fair profit

to its members and better service to improve their quality of life. It aims at bringing

about welfare of not a particular individual but also of the whole community. It also aims

to transform the weak to strong and make them fit for a better life.

In 1904, the British government promulgated the Cooperative Societies Act, thereby

encouraging the formation of cooperative societies, especially agricultural cooperative

credit societies all over India. An amended cooperative societies law was enacted in

1912 to make the Cooperative Movement stronger. It was further amended in 1940 by

the Bengal Legislative Council to enact the Bengal Cooperative Societies Act to make

movement more effective. This law was in force in Bangladesh until 1984, when

Cooperative Societies Ordinance replaced it. At present, this law and the cooperative

rules of 1987 regulate all cooperative societies.

About cooperative societies

Cooperative Societies are Organizations that are registered under one of the Cooperative

Societies Acts. They work as independent economic enterprises. They extend various

services that include Finance to its members and member organizations. The Cooperative

Societies are expected to function on certain cooperative principles and cooperative

identity based on certain values of the Societies as a whole, within the framework of the

Cooperative Societies Acts and Rules.

Its objective was to make life better for the poor people, farmers, rural folks and urban

middle-class people.

13

Some of the Cooperative Societies existing and functioning in India are Housing

Societies, Industrial Societies, Labour Contract Societies, Salary Earners Societies,

Credit Societies, Primary Agricultural Credit Societies, Farmers Service Societies,

Adivasi Service Societies, Primary Cooperative Banks, Marketing Societies, Primary

Dairy Societies and Consumer Societies etc.

Cooperative Principles

Voluntary and open membership

Democratic member control

Member economic participation

Autonomy and independence

Education and training of the members

Cooperation among cooperatives

Concern for community

Cooperative Values

Self –help

Self- responsibility

Democracy

Equity

Solidarity

Honesty

Openness

Social responsibility and care for others

14

DIAGRAM1: Organisation Structure (Operation):

Where-

PMC-Performance Monitoring Cell

P&T – Planning & Training

Minister for cooperation

15

Minister for Co-Operation

Commissioner for Co-

Operation

Secretary to Government

Additional Registrar Chief Auditor

Joint Registrar, Accounts

Joint Registrar,

Urban Banks

Joint Registrar,

Admn & ICDP

Joint Registrar, Legal

Joint Registrar,

PMC, P&T

Dy.Registrar

Dy.Registrar Dy.Registrar

Dy.Registrar

Dy.Registrar

Dy.Registrar

Dy.Registrar

Dy.Registrar

Dy.Registrar

Dy.Registrar

Secretary to government

Commissioner for cooperation & Registrar of Cooperative Societies

Additional Registrars and Chief Auditor in the Cadre of Additional Registrar assist

the commissioner. The entire State is divided into zones. Each Additional Registrar

will be in charge of zones.

The commissioner is also assisted by the following Joint Registrars:

Joint Registrar, Accounts

Joint Registrar, Performance Monitoring Cell, Planning and Training

Joint Registrar, Legal

Joint Registrar, Administration and ICDP

Joint Registrar, Urban Banks.

In every District one DISTRICT COOPERATIVE OFFICE is set up. An officer

of the cadre of Jt.Registrar heads the District Cooperative Office.

There are Divisional Cooperative Offices in the district. The District Cooperative

Office is controlling these offices. In each District there are 2-4 Divisional

Cooperative Offices. An officer of the cadre of Dy.Registrar heads these offices.

There are sub divisional Cooperative Offices workings under Divisional

Cooperative Office.

The basic guidelines for the formation of Co-operative society in state are as

follows

There should be at least ten persons or more as the Registrar may determine from

time to time.

These persons should be from different families.

These persons should be competent to enter in to contract under the Indian

contracts Act 1872.

He should reside in the area of operation of the society.

He should be eligible as per the bye-laws of the proposed society.

16

Any individual, firm, company or any other body corporate can become member

of the society.

The object of the society should be promotion of economic interest or general

welfare of the members or the public, in accordance with the cooperative

principles.

It should be economically sound, its registration should not affect adversely on

the development of the cooperative movement.

Its registration should not be contrary to the policy directives of the state

government.

Procedure of Formation of a co-operative Society

Willing, eligible persons should come together and conduct a meeting. This meeting will

decide the name of the proposed Society, its object and bye-laws and then elect a Chief

Promoter authorizing him to sign the necessary documents on behalf of the promoter

members and open a bank account in the name of the proposed Society after obtaining

the necessary permission from the Registrar.

The Chief Promoter will apply to the Registrar for the reservation of name of the society

of the proposed society and permission to collect share-capital. He will then deposit the

collected share money in the bank account of the proposed Society.

The application for the registration has to be made in FORM-A. The promoters have to

give four copies of FORM-A to the Registrar along with copies of the byelaws and

necessary documents depending on the type of the Society. This has to be done after

receiving the name reservation from the Registrar and after collection of the necessary

share capital.

The application for registration should be accompanied with the scheme showing

economic feasibility of the proposed Society, bank balance certificate, list of the persons

who have contributed to the share capital and the entrance fee of the proposed Society.

The prescribed Registration fee has to be paid in to the Government Treasury.

17

INDUSTRY PROFILES

DIAGRAM2: Co-Operative Societies Structure

Where…

NABARD: The National Bank for Agriculture and Rural Development

SCB: State Co-Operative Bank

DCCB: District or Central Co-Operative Banks

PACS : Primary Agricultural Co-Operative Societies

18

RBI GOVT OF INDIA

NABARD

APEX BANK (STATE CO-OPERATIVE BANK)(29)

URBAN BANKS(2090)

DCCB(367)LAND DEVELOPMENT BANKS

AGRICULTURE &RURALDEVELOPMENTBANKDS

INDUSTRIAL BANKS

PACS(92000)

National Level Co-Operation Institutions:

National Federation of the State Co-Operation Bank

The committee on co-operative credit 1963 observed the absence of a national body that

would provide a positive leadership at the national level in developing the strength and

soundness of the co-operative credit system.

Up to that point the surplus deposits generated by a state co-operative bank could not be

utilized in a deficit state. So these banks having surplus funds trend to invest in other

avenues leading to funds going out of the co-operative system. So the committee

recommended the establishment of a national federation for both short term and long

term credit.

The National Federation of State Co-Operation Bank was established in 1964.

National Federation of Co-Operative Agriculture and Rural Development

Bank:

In addition to their short term requirements, farmers also required long term credit for

various purposes. To carter to their requirements, long term credit co-operatives have

been set up. These are organized at two levels

At State Level:

State Co-Operative Agriculture and Rural Development Banks (SCARDB)

At Village/Local Level:

Primary Co-Operative Agriculture and Rural Development Banks [PCARDB]

The All India Rural Credit Review Committee recommended the necessity to have

national level federation to co-ordinate the functioning of the state level banks.

Accordingly the National Federation of Co-operative Agriculture and Rural

Development Bank came into existence. This was mainly to help the state level banks to

substantially increase their lending capacity, generate sufficient income in order to

increase their grip over the co-operative movement in the long term credit structure.

19

National Bank for Agriculture and Rural Development [NABARD]

The RBI of India took an active role in the field of agriculture credit ever since its

nationalization in 1949, for this purpose the RBI set up separate agricultural credit

development, which extended short term seasonal credit to agriculture through state

Co-operative banks and Land development Banks.

The RBI also had Rural Planning Credit Cell to promote rural economic planning and

development at the same time the RBI had also setup the agriculture refinance and

development co-operation [ARDC] to provide refinance support to the banks in their

development activities.

In 1981 the committee to Review Arrangement for Institutional Credit for agricultural

credit development recommended the establishment of the NATIONAL BANK FOR

AGRICULURE AND RURAL DEVELOPMENT. The government approved this

recommendation and consequently NABARD came into existence on 12 th of July 1982.

These three institutes namely the Agriculture credit department and Rural Development

Credit Cell of the RBI and the Agriculture Refinance and Development Corporation

were amalgamated into NABARD, thus the NABARD was established to perform the

function of the RBI, as an Apex institute and the function of the ARCD as a refinancing

institute.

An Act of Parliament set up both the RBI the NABARD and the Government have

contributed equally to the share capital of NABARD.

NABARD linked organically with the RBI, which has three directors in the central

BOD of NABARD.

20

Apex Banks or State Co-operative Banks (SCBs)

The State Co-operative Bank is an institution, which works as the final link in the chain

between the primary societies and the money market. It is the vertex of the pyramidal

structure in a state for the provision of short and medium term credit on a co-operative

basis.

Objectives and Functions

They act as banker’s bank to the central banks in the district. They not only

mobilize financial resources needed by the societies, but also deploy them

properly among the various sectors of the cooperative credit structure.

They coordinate with their own policies with those of the cooperative movement

and the government.

They formulate and execute uniform credit policies for the cooperative

movement as a whole.

The cause of cooperation in general by granting subsidies to the central Co-

operative Banks for the development of cooperative activities.

They act as a clearinghouse for the flow of money from the Apex bank to the

Central Banks and from the Central Banks to the rural societies and from them to

individual borrowers.

They help the state Governments in drawing up co-operative development plans

and in their implementation.

District or Central Co-operative Banks (DCCBs)

The central banks work as an intermediary to link the primary credit societies with

money market. They serve as the “balancing center” for adjusting the surplus and

deficiency of working capital the primary credit societies.

21

Functions of DCCBs Banks

To meet the credit requirement for primary member societies for production,

marketing and supply operation by arranging a regular flow of credit to them

To undertake ordinary commercial banking business in rural areas

To act as balancing centers for the primary societies by making them available

the surplus funds of some societies to those which face shortage of funds. They

thus equalize the flow of the capital at the primary level.

To undertake non-credit activity, Surcharge the supply of seeds, manures,

foodstuffs and consumer goods.

To maintain close and continuous contact with primary societies and provide

leadership to them.

To supervise and inspect the primary societies ensure the satisfactory working of

recognized credit societies.

To provide a safe place for the investment of resources of primary societies.

Primary Credit Societies (PCS)

The primary credit society is that operational level at the base of the co-operative credit

structure. They constitute the largest number of co-operative institutions in India. The

organization of these societies’ dates back to 1904 when first co-operative societies act

was passed. These societies were started with aim of providing micro credit to

agriculturists and free then from clutches of unscrupulous money lenders.

Functions of Primary Credit Societies

To associate itself with the programmes of production

To lend adequate amount to members for their agricultural and consumption

purposes limited to their repaying capacity

To borrow adequate funds from central financial agencies for helping the

members adequately for the above purposes.

22

To local savings for share capital and fixed deposits

To supervise the use of loans and to see that they are paid punctually

To distribute fertilizers, seeds, agricultural implements etc. either on its own

or on behalf of as an agent

To store produce of its member till it sold

Primary Agricultural Credit Societies (PACS)

This is most important Primary Agriculture Credit Society or PACS.

Constitution

Membership to a PACS is open for agriculturists, artisans and small traders in the

villages. The minimum initial membership is 10 with no upper limit regarding the

number of members. The value of each share is generally nominal so as to enable even

the poorest farmer to become a member. The members have unlimited liability, which

means that each member is fully responsible for the entire loss of the society in the event

of the failure. This will mean that all the members should know each other intimately.

Diagram 3: Organisation Structure

Consist of all members

Elects the President,

Secretary & Treasurer

Are Paid Monthly Salary

The ultimate authority in affairs of a society is the General Body consisting of all the

members. To carry out the day-to-day administration General Body elects a small

managing committee, which consists of 5-9 members. Committee elects the president,

Secretary and Treasurer. All the office bearers render honorary service. In cases where

23

General Body

Accountant

Managing Committee

Clerk

the society is large a clerk or / and accountant may be appointed to maintain the accounts

and who may be paid a monthly salary.

As per the constitution guiding functioning of PACS, universal membership has been

accepted by the standard policy. This is to enable the poorest of the poor to become

members and avail of its services.

Co-operative societies are classified on the basis of credit as follows

Credit Societies

Non-Credit Societies

Types of Credit:

Short term

Medium term

Long term

Diagram 4: Credit Structure

PCS

DCCS

SCB

LDB URBAN BANKS

SCB INDUSTRIAL

BANKS

DCCB

PCS

Where,

24

LONG TERMSHORT& MEDIUM TERM

NON-CREDIT SOCIETITES CREDIT SOCIETIIES

CREDIT STRUCTURE

PCS: Primary Credit Societies

DCCS: District or Central Co-Operative Societies

SCBs : State Co-Operative Banks

LDBs: Land Development Banks

Credit Societies

The Co-operative structure in the country consists of different types of co-operative

societies. At the base of this structure are primary societies, which render various types

of services. In India 80% of these societies are concerned with agriculture and 60% deal

with credit. Thus a larger proportion of primary societies are agricultural credit societies.

These societies were established to provide loan (short term) to farmers in order to save

the farmers from clutches of moneylenders. These institutions give loans only for

productive purposes. The repaying capacity of the individual will have to be taken in to

account while advancing such loans. These loans are called short term loan because

there period of repayment ranges from 1 year to 5 years. Farmers to purchase better

quality seeds, fertilizers, insecticides and pesticides, normally use short-term credit.

Non Credit Societies

They begin as marketing Societies, which we were set up to help the poor former in

marketing their products. The agrarian sector was characterized by the existence of

middle men who appropriated a major share of prices paid the consumer so the credit

societies which had been establish to save the poor farmers from clutches of money

lenders, started taking up work of helping them to market the products.

25

Financial Sector Reforms and Credit Cooperatives:

The process of economic and financial sector reforms were initiated in 1991, as a step

towards a broader process of international economic integration and globalization of

financial markets. The objectives of the reform program have been to remove the

structural constraints in the factor and product markets, allowing market forces to

improve efficiency and ensuring outward orientation to the economy for bringing about a

higher degree of integration of the Indian economy with the rest of the world. It may be

mentioned that the structural reforms in the trade regime and industrial and financial

policies have been given utmost priority in order to ensure macro-economic stability. A

healthy financial system being the principal pre-requisite for the globalization process,

the banking sector being an important component thereof came into sharper focus. The

financial system in India has built up a vast network of financial institutions and markets

over time, and the sector is dominated by the banking sector which accounts for about

two-thirds of the assets of the organized financial sector. The first phase of the current

reform of the financial sector was initiated in 1992 based on the recommendations of the

Committee on Financial System (CFS, 1992).

The progress that has been made in a substantial, yet non-disruptive manner has given

the confidence to launch what has been described as the second generation or second

phase of reforms especially for the banking sector. The report of the Committee on

Banking Sector Reforms (CBSR, 1998) provides a framework for the second phase of

reforms in the banking system. The broad features of the on going banking reforms have

been; gradual removal of pre-emptions (reduction in CRR and SLR), deregulation of

interest rates, tightening of prudential standards, competition and transparency,

improving the quality of supervision, partial removal of selective credit controls,

assistance to banks in debt recovery and reforms in money and forex markets. This apart,

needless to mention, the succinct objective of the banking sector reforms has been to

improve the efficiency in the system by introducing an element of competition. The

extension of reforms, particularly prudential standards to cooperative banking

institutions, an important component of the banking system was a natural corollary as the

weaknesses in cooperative segment could pose systemic risks.

Though cooperative banks operate at the district and state level, the urgency and

importance for extension of the reforms need hardly be emphasized keeping in view of

26

their reach and scale of operations. Therefore, the banking sector reforms could be

treated as complete only if it encompasses the cooperative segment, enabling the latter to

function on sound lines at par with other banking institutions. Accordingly, prudential

standards covering capital adequacy, income recognition, asset classification and

provisioning norms were made applicable to cooperative banks in a phased manner.

However, cooperative reforms encompassing legal and administrative aspects have not

taken place in India. This is on account of multiplicity of controls (administrative aspects

including registration are under State Cooperative Acts whereas financial supervision

and regulation is with the Central Bank of the country). The impact of the extension of

prudential standards to cooperative banks has resulted in an increased intervention by the

regulator and the Government in the name of the financial regulation/supervision.

URBAN CO-OPERATIVE BANKS

Co-Operative Banks that are seen primarily in the urban areas of the country are given

the name “urban Co-Operative Banks”. Urban areas imply those areas, which are

recognized as town & cities. They are similar to commercial banks in their operations

with the promulgation of the Banking Regulation Act of 1949, any credit society which

has a paid up share capital of not less than Rs.20, 000/- and which does banking business

as specified under section 5(b) of the Banking Regulation Act of 1949 can use the word

“Bank” in its name. In either word the urban co-operative banks all functioned initially

as co-operative credit societies, which cratered to the requirements of the urbanites of the

country. The minimum requirement of paid up capital for a society to assume the status

of a bank differs from state to state. In certain states this is only Rs10, 000/-, which in

certain others it is even Rs.50, 000/- but it is mandatory that an urban-co-operative Bank

confirms its operations to the municipal area of a town.

An urban co-op Bank has to function within the precincts of its byelaws. Most co-

operative Banks began then operation as co-operative societies. Each society councils of

a large number of share holders, each holding a minimum of five shares, persons living

in urban areas alone could become members, generally traders, merchants, professionals

and salaried classes are members of urban co-operative banks. Some urban co-op banks

also admit firms and local bodies as members to a limited extent.

27

The management of these banks is in the hands of a Board of Directors who are elected

at the Annual General Body of the shareholders. The Board is normally elected for a

period between three years and five years. There are instances of the Board being

constituted once in two years. It is mandatory that these banks undertake both internal as

well as statutory audit. The Director Board elects from among its members the President,

the Secretary and the Treasurer. All three have joint financial responsibility. They shall

work without receiving any remuneration, i.e., their services shall be honorary. However,

the director board has the authority to appoint the necessary staff for the day to day

working of the bank. All employees should have the necessary qualifications in Co-

operation for being appointed in such banks.

Resources of the urban Co-operative Bank

Main source of funds is deposits from the public in many forms. Their Banks

accept current, savings & Fixed deposits.

Fixed deposits constitute a major portion of these total deposits.

The RBI has permitted them to fix a rate of Interest, which is at least one percent,

more than the rate of Interest offered by the banking system.

In recent times these banks have been given the permission to determine their

own interest rates.

They get financial assistance from State Co-operative Banks in times of

difficulty.

Increased involvement of the NABARD in urban credit.

The RBI is also taking a lot of interest in the functioning of such banks; RBI is

subjecting these banks to frequent inspection since they perform regular banking

business like other commercial Banks.

28

An urban Co-operative bank tends to focus its attention on particular groups on

professions to increase its resources as well as to cater the credit requirements.

Types of Loans

Productive Purposes

Consumption Purposes

Productive Loans:

Business firms demand loans because of the time consuming nature of the

productive and distributive processes. So the loans taken by business

firms earn reasonable returns

Consumption Purposes: Consumer demand credit to acquire goods in advance for

which they pay in future. They are taken with the primary aim of buying durable

consumer goods. Normally such loans do not provide a return for the loanees.

Forms of lending for productive loans:

Demand loans

Term loans

Gold Loans

Export credit through the purchase and discounting of bills

Terms & Conditions:

Purpose of Advance

Capacity to Repay

Nature of Business

Security

Liquidity

29

Terms & Conditions for Consumption loans:

The bank assumes that the applicant is not enjoying similar facilities with other

banks. As far as possible, it tries to restrict the borrower to rely one bank

The bank should obtain from the borrower a written application accompanied by

a declaration that in the event of non-payment, the bank may confiscate the

consumer good. At least two other shareholders should stand guarantee if the loan

is to be sanctioned.

Generally short-term loans are sanctioned for such purposes. The rate of interest

charged is also normally higher than that of productive loans. The repayment is in

the form of equated monthly installments and interest is charged on a diminishing

basis. That means the interest is charged on amounts that remain of the principle

amount.

Consumption requirements to meet:

Loans are granted to meet the medical needs of its members or depositors

Loans are sanctioned to meet educational expenses of either the shareholders

themselves or that of their children

Loans are also given to meet expenses related to marriages and other social

ceremonies of its members.

Purchase of durable consumer goods, in such cases the durable goods purchased

are under hypothecation to the banks till the loan is repaid. A hypothecation is

also called are “open loan”

30

Chapter 3

Problem Statement

The CSBs were formed with an objective of an improving the standard of life by

eliminating the uneven distribution of wealth in rural areas. But the purpose was not

served, as many CSBs did not function properly due to inefficient management. The

reason behind this research is to understand the causes for the failure of CSBs

Research objective

The purpose of this research is to study Co-operative Societies banks especially in

Karnataka in depth, evaluation of their methodologies problems faced by this banks both

internal and external and providing solutions to minimize this problems.

Research methodology

This study is based on exploratory research method.

Sources of data: Primary and Secondary.

Primary data is collected by using Exploratory research method from Cooperative bank

managers.,

For both primary and secondary data following methods were also adopted

The participant observation.

Interview techniques.

Informal discussion with various functionaries.

Historical methods.

Study of literature like books, reports and journal articles on the CSBs.

Study was also made of the Cooperative Societies ACT, RULES, REGULATIONS and other published literatures.

Visited branches and discussed officially and non- officially.

31

Informal unstructured interview techniques

Sampling method:

Non random (convenience and judgmental sampling) methods was used due to

constraints of time and cost.

Sampling unit:

Cooperative banks management and employees.

Sampling size:

10 Cooperative banks.

Method of contact:

Personal Interview.

Research instrument:

Interview technique was used to collect the primary data.

Profile of the respondents

Respondents were the employees of cooperative society bank the list of the respondents

as framed on the basis of convenience and judgmental sampling. The respondents were

knowledgeable and were giving the true information.

Thematic Framework for Analysis:

The literature relating to the economic reforms, impact of reforms on cooperative sector,

Banking reforms and its impact on credit cooperatives and so on are rather opulent. In so

far as the impact of reforms on the cooperative character of the cooperatives is

concerned, be it in credit or non-credit segment, one may safely say that neither the

policy makers nor the researchers have shown any serious interest. And this is

particularly true in India. It seems the cooperative researchers, particularly doctoral

students are more concerned with the assessment and measurement of the impact of

32

reforms on the performance of cooperatives using a definite and quantifiable parameters.

While the difficulties in examining the impact of reforms on the cooperative character of

cooperatives are quite understandable, it does not mean the same can not be attempted

meaningfully. What is required perhaps is a normative analytical framework, which is

different from the one usually used for capturing the impact of reforms on cooperatives.

Using this normative analytical framework, Ramesha (1996) in his empirical study

points out that Self Help Groups (SHGs) which are not registered as cooperatives are, in

practice, much closer to cooperative principles than cooperatives themselves. Given the

diversity that prevails today in the cooperative sector and the levels of reforms

Thereof, a general discussion on the impact of reforms (economic or banking sector) on

cooperative character would be almost impossible. For the sake of research, even if one

attempts, the conclusions could be abstruse. Thus, in the present paper an attempt is

made to evolve a conceptual framework for further research concerning Urban

Cooperative Banks (UCBs) in India against the backdrop of banking sector reforms.

However, all through the discussion, it is attempted to maintain a special thrust on the

cooperative character of UCBs. The analytical framework for the aforesaid purpose rests

on three basic assumptions;

(i) Banking sector reforms essentially refers to the guidelines/directions from the

regulator (central bank of the country) and the Government during the last ten years.

(ii) Urban Cooperative Banks (falling under Banking Regulation Act of 1949) are more

influenced by banking sector reforms in the short-run than other credit cooperatives.

(iii) Cooperative character of urban cooperative banks can be captured in terms of the

adherence to cooperative principles.

33

Secondary Data Analysis

Graphical Analysis of SCBs Vs DCCBs:

GROWTH IN LOANS OUTSTANDING

Chart 1.a:

The above graph depicts the growth in loans outstanding for SCBs as well as for DCCBs.

from the above shown graph it is clear that the rate of outstanding loans is more in CBs

when compared to SCBs .

RECOVERY PERCENTAGE OF SCBS & DCCBSChart 1.b:

The above graph depicts recovery percentage of SCBs and DCCBs.From the graph it is

clear that SCBs are able to recover their loans far better than DCCBs.

34

PROFITABILITY POSITION OF SCBs Vs DCCBs

Chart 2.a: STATE CO-OPERATIVE BANKS:

Chart 2.b: DISTRICT CO-OPERATIVE BANKS

The above charts show the profitability position of SCBs and DCCBs

Profit: The profit earned by SCBs is increasing steeply when compare to profits earned

by DCCB’s.

Loss: The loss incurred by SCBs has been reduced drastically over the period of 1997-

2000, when compared to the losses incurred DCCB’s has been almost the same over the

period of 1997-2000.

35

Accumulated Loss (AL): The AL of SCBs had increased in the period 1998-99 which

was later controlled and reduced in 1999-2000, but when compared to AL of 1997-98 the

AL of 1999-2000 has increased.

Information Source (From books on):

Dossier on Co-Operatives, Edition-March 2000

National Bank for Agriculture and Rural Development (NABARD)

Cooperative Banking in Karnataka

Cooperative Banking is a concept arising out of cooperative efforts for group welfare. It

provides for the collective savings of small amounts of money by a group of people

belonging to the same profession or class and utilization of that capital to try to enhance

their income. Cooperative Banking essentially tries to collect the savings of the

cooperative societies and attempts to invest them among the members. The cooperative

banking sector caters to the varied needs of small investors and small business. Role

played by Government of Karnataka in Cooperative Societies

The State Government has participated in the cooperative movement actively by

providing adequate share capital, loans, grants and subsidies to the cooperative

institutions, for the upliftment of downtrodden and fro the purpose of bringing social and

economic changes in the life of members of the society I particular and that of common

public in general. Cooperative societies have been established in several sectors like

credit, banking, processing, production, housing, warehousing, transport and many other

spheres related with agriculture and industries. These cooperatives are being engaged as

effective tools for ensuring equal distribution of state wealth among all sections of the

society by providing them with Governments loans, subsidies and grants.

In order to protect the interest of public funds and to ensure that the administrative and

executive authorities use this fund, in the best interest of the organization, government

engaged cooperative audit as a main weapon. Government of Karnataka established the

Directorate of Cooperative Audit in the year 1977 conferring all required statutory

powers and responsibilities to perform its function like a guide to the cooperative

societies in particular and the cooperative movement as a whole, in general.

36

The Directorate of Cooperative Audit and its personnel are striving hard to conduct the

audit of all cooperative societies in Karnataka at least once in a year as by Karnataka

Societies Act 1959. A Director at the state level heads the department. In each district, a

Deputy Director is heading the district level office. At the subdivision level, an Assistant

Director is heading the office and at taluka level Senior Auditor is heading the office.

Along with this setup, hundreds of Auditors, and other supporting staff are striving hard

to reach, Audit, and guide all categories of societies, scattered over every nook and

corner of the state Cooperative society has also setup a website called SAHAKARA

DARPANA. This website is like a mirror reflecting the true and correct financial

position of all the cooperatives in the state. In pursuit of bringing higher degree of

transparency in the Government, the State Government is implementing the e-

governance strategy throughout the state in all departments. In keeping with the policy

the department of Cooperative Audit is also striving hard not only to bring in

transparency in highlighting the financial position, strength and weaknesses of

cooperative institutions by hosting on the web the abridged audit report. This website

being citizen friendly, it helps every individual who is interested to participate in the

business of a particular cooperative society as it provides comprehensive information

about the financial position, its liability and irregularities if any in the institution. The

website also provides information required by the members of the society, the common

citizen and also to the government.

KARNATAKA – SHORT CO-OPERATIVE CREDIT STRUCTUREIMPORTANT OBSERVATIONS – 1999-2000

37

Structure

Short-term cooperative credit structure in Karnataka consists of the Karnataka State Cooperative Bank (KSCAB) at the apex level, 19 District Central Cooperative Banks (DCCB’s) at the district level and 4339 Primary Agricultural Cooperative Societies (PACS) at the bottom of the three tier structure.

Apex bank functions through a network of 28 branches and the DCCB’s purvey credit through its 626 branches.

4339 PACS cater to the needs of 29193 villages located in 27 districts in the ratio of 1 PACS for 6-7 villages.

Membership PACS had a membership of 57, 21,250 and the borrowing members at 18, 50,750 constituted a mere 32.35%.

Resources During 1999-2000, the share capital of KSCAB declined by Rs.0.05 lakh to Rs.24.25 crore and the state government contribution remained unchanged at Rs.1.21 crore.

DCCB’s registered a growth of 9% in share capital during 1999-2000 over the previous year. Govt. contribution in the share capital of DCCB’s increased by 3% during 1999-2000. The share capital of PACS increased by 17% during 1998-99 with an increase of around 46% in Govt. share capital contribution.

Deposits of KSCAB increased by 28% during 1999-2000 as compared to 16% during 1997-98 and 26% during 1998-99.

Deposits of DCCB are increased by 25% during 1999-2000 over the previous year.

Deposits constituted 63.22% & 71.33% of the total resources of KSCAB & DCCB’s respectively as on 31 March 2000.

Borrowings outstanding of KSCAB increased by 19% from Rs.506.53 crore in 1998-99 to 603.93 crore in 1999-2000. Respect of DCCB’s, the growth was 17% from Rs. 640.54 crore to Rs. 748.60 crore during the same period. At the PACS level, it increased by about 31% from Rs.583.92 crore during 1997-98 to Rs.766.52 crore during 1998-99.

Overall resources (owned funds+deposits+borrowings) of apex bank and DCCB’s increased by 24% and 22% respectively during 1999-2000 over the previous year.

38

Investments

During 1999-2000, the investment made by KSCAB increased by 29.58% from Rs.717.59 crore in 1998-99 to Rs.929.86 crore in 1999-2000. Out of the total investments of KSCAB, Rs.345.28 crore and Rs.54.58 crore were invested for SLR and non-SLR purposes respectively.

Investments of DCCB’s increased from Rs.831.01 crore in 1998-99 to Rs. 1012.39 crore in 1999-2000 registering a growth of 21.83%.

Outreach Overall Loans issued during 1999-2000 increased by 6% and 15% over the previous year in case of apex bank and DCCB’s respectively.

Loans issued by PACS during 1998-99 at Rs.1258.35 crore registered a substantial growth of 52% (Rs.829.34 crore in 1997-98). During 1997-98 there was a decline of 5% in the amount of loans issued.

At the apex bank and DCCB’s level, 60% and 54% of the total loans outstanding as on 31 March 2000 were for agricultural purposes.

Management As at the end of 1998-99, the KSCAB and all 19 DCCB’s had elected board.

The KSCAB has been awarded “A” class audit classification during the last three years.

During 1999-2000, 9 DCCB’s were awarded “A” class, 3 were awarded “B”, 3 were awarded “C” and 2 DCCB’s was awarded “D” class classification.

Profitability KSCAB earned a profit of Rs.16.21 crore during 1999-2000.

For 1999-2000, 16 DCCB’s were in profit (Rs.27.11 crore) and 3 DCCB’s in loss (Rs.30.15 crore) as against 17 in profit (Rs.21.98 crore) and 2 in loss (Rs.6.83 crore)during 1998-99.

Cost of management as % to working capital decreased from 0.72% (1997-98) to o.69% (1998-99) and further to 0.58 in 1999-2000 in respect of KSCAB. The same in respect of DCCB’s during the year 1998-99 and 1999-2000 stood at 2.23%.

Out of the 19 DCCB’s, 2 DCCB’s viz., Bangalore and Gulbarga were

39

not complying with the provisions of Sec.11(1) of B.R. Act, 1949 (AACS) as on 30 September 2000.

ClassificationOf Assets(NPAs)

Impaired assets of KSCAB decreased by 21.33% from Rs.34.04 crore as on 31 March 1999 to Rs.26.78 crore as on 31 March 2000. impaired assets of DCCB’s increased by 19.36% from Rs.304.83 crore as on 31 March 1999 to Rs.363.84 crore as on 31 March 2000, NPAs as on 31 March 2000 constituted 2% (KSCAB) and 14% (DCCBs) of their total outstanding loans and advances as on that date.

Erosion in Assets

There was no erosion in asses at the apex level accumulated loss at Rs.110.13 crore and imbalances at Rs.92.59 crore together with unprovided bad debts of Rs. 133 crore eroded the owner funds to the extent of 58% at the DCCBs level as on 31 March 2000.

Remedialmeasures

Following remedial measures are recommended to strengthen the cooperative credit structure.

Diversification of advances and investments portfolio to improve financial margin.

Revision of interest rates on deposits/loans to take advantage of deregulation.

Building up of sizeable owned funds

Intensification of deposit mobilization efforts and proper deposit mix.

Liquidation/amalgamation of non-viable PACS

Recovery drives at the level of DCCBs/PACS/PACS during harvesting season, extension of assistance and necessary support from State Govt./RCS and case by case analysis of chronic overdue accounts.

Arresting imbalances amongst different tiers of the structure.

State Govt. should clear all co-operative dues.

Control over cost of management, non-earning assets.

40

Proper funds management.

KARNATAKA LONG-TERM CO-OPERATIVE CREDIT STRUCTURE

IMPORTANT OBSERVATIONS – 1999-2000

Structure The long-term cooperative credit structure in the State is Federal comprising of Karnataka State Cooperative Agriculture and Rural Development Bank (KSCARDB) at the apex level and 177 Primary Co-operative agriculture and Rural Development Banks (PCARDBs) affiliated to it.

Membership The total membership of the 177 PLDBs stood at 10.02,242 of which, at the borrowing members were 6,66,889 forming 66.54%.

Resources The contribution of the State Govt. to the share capital of KSCARDB remained static at Rs. 4.45 crore during the last three years, whereas the State Govt’s share in respect of PCARDBs increased to Rs.5.68 crore in 1999-2000 from Rs.4.70 crore in 1998-99.

The deposits of the SCARDS stood at Rs.29.63 crore in 1999-2000 as compared to Rs.18.28 crore during 1998-99, a growth of 62%. The growth in deposits at PCARDBs level was 41% from Rs.38.50 crore (1998-99) to Rs.54.40 crore (1998-99).

The borrowings (outstanding) as on 31 March 2000 registered a growth of 5% and 7% at the apex and PCARDBs level respectively over the previous year.

The total resources of SCARDB & PCARDBs at Rs.1343.61 crore and Rs.1402.22 crore (1999-2000) registered improvement of around 7% & 10% respectively over the 1998-99 level.

86% and 82% of the total resources of the SCARDB & PCARDBs respectively were in the form of borrowings. This is indicative of the fact that L.T. Structure in Karnataka was highly dependent on other external financial agencies for augmenting its resources.

Investments The total investment of KSCARDB as at the end of March 2000 stood at Rs.170.59 crore as against Rs.151.33 crore as at the end of March 1999.

41

The sinking fund investment recorded a growth of 19% during 1999-2000 over the previous year and fully matched with the requirement in respect of ordinary debentures redemption.

There was no deficit in the maintenance of sinking fund investments during

the last three years.

Outreach

The loans issued during 1999-2000 at Rs.164.67 crore (apex level) and Rs.208.70 crore (PCARDBs) showed a growth of 10% &15% respectively over the preceding year.

The loans outstanding at the SCARDB level increased by 7% from Rs.1076.38 crore as on 31.03.1999 to Rs.1150.43 crore as on 31.03.2000. At the PCARDBs level, the increase was 7% from Rs.1010.82 crore to Rs.1086.41 crore during the same period.

Agriculture constituted almost 84% of the total loans outstanding at both the levels during 1999-2000.

RecoveryPerformance

The recovery performance of the apex bank improved from 33% (1998-99) to 36% during 1999-2000. The recovery percentage at PCARDBs level remained constant at 34% during the last 2 years.

Overdues in absolute terms registered an increasing trend in respect of both SCARDB & PCARDBs. The overdues increased by Rs.47.01 crore at the SCARDB level while the increase was of the order of Rs41.88 crore at the PCARDBs level as compared to the position as on 30 June 1999.

Overdues constituted 30% of the total loans and advances outstanding at SCARDB level, while the same at the PCARDBs level were to the tune of 35%.

Chronic overdues (over three years) at the apex and PCARDBs level stood at Rs.119.79 crore & Rs.177.12 crore forming 35% & 47% of the total overdues respectively.

Management The board of 11 PCARDBs remained superseded as on 31 March 2000.

4 PCARDBs are under liquidation as on 31.03.2000.

42

The board of KSCARDB was superseded on 08.06.1998 & was re-constituted on 22.05.1999.

Profitability During 1999-2000 KSCARDB registered a net loss of Rs.23.98 crore on account of application of provisioning norms. For the year 1998-99, the bank had incurred a loss of Rs.34.25 crore.

During 1999-2000, both the SCARDB & the PCARDBs had to make substantial provisions. The risk cost as a percent to working funds stood at 1.93 & 2.29 respectively.

Of the 177 PCARDBs, only 47 recorded profit during 1999-2000 and remaining 130 incurred loss as against 33 in profit and 144 in loss during 1998-99.

The KSCARDB and PCARDBs had a negative net margin of 1.64% &1.86% respectively in 1999-2000.

ClassificationOf assets(NPAs)

The NPAs pf KSCARDB as on 31 March 2000 constituted 35% of its total outstanding loans and advances as on that date.

The impaired assets of KSCARDB in absolute term increase from Rs.396.30 crore as on 31.3.99 to Rs.406.94 crore as on 31.03.2000 registering an increase of 3%.

The NPAs of PCARDBd as on 31 March 2000 constituted 33% of their total loans and advances outstanding as on that date.

The impaired assets of PCARDBs increase from Rs.337.34 crore as on 31.03.1999 to Rs.357.16 crore as on 31.03.2000 registering an increase of 6%.

Erosion ofassets

The accumulated losses of Rs.69.81 crore at the apex level have eroded 44% of the owned funds.

At the primary level the accumulated losses 0f Rs.288.59 crore combined with an imbalance of Rs.52.38 crore not only eroded the owned funds but also deposits. The erosion was more than 170% of the owned funds.

Remedial Improvement in level of business

43

Measures Diversification of lending portfolio

Intensification of recovery efforts - Active participation of higher level management, case by case analysis of all overdue accounts more so in

respect of districts with heavy concentration of overdues, staff motivation etc.

Restoration of elected boards in respect of superseded boards of PCARDBs.

Additional share capital contribution by state government to weak PCARDBs.

Mechanism for merger or to deal with otherwise, in respect of non-viable PCARDBs; Rehabilitation of weak PCARDBS.

State Govt. to consider exempting/reducing the loss making PCARDBs from payment of audit fee.

Implementation of HRD study recommendations.

Information Source (From books on):

Dossier on Co-Operatives, Edition-March 2000

National Bank for Agriculture and Rural Development (NABARD)

44

Analysis of Comparison of Cooperative banks with commercial banks

Capital is widely regarded as a measure of the risk taking ability of a financial

intermediary and therefore, prescription of a minimum capital the urban Cooperative

bank (to conduct banking business) may seem to be justified from the viewpoint of

ensuring stability in the financial system. If one looks at a cooperative credit

society/bank, as a typical cooperative created on the basis self help and mutual help, then

possibly the members (generally with limited means) may not be able to raise the

required capital. If capital base is to be strengthened, as it is happening in India, these

banks will have to start dealing with non-members (or nominal members) on a large

scale and perhaps may have to shift from .surplus. to .profit.. The need to increase the

deposit base as also to gainfully employ the funds generated have made it necessary to

have a large number of customers who are not the members. It is worth mentioning that

in India, urban cooperative banks though on par with commercial banks with regard to

prudential standards, like the latter, are not permitted to boost their capital base through

sub-ordinate debts. Further, there are ceilings on the value individual share holdings have

not been revised since long.

Chart 3:

Comparison of NetProfit between cooperative banks and commercial banks

-2000

0

2000

4000

6000

1 5 9 13 17 21 25 29

Banks

Net

Pro

fit

Private sector banks

Cooperative banks

Public Sector banks

Interpretation:

From the above graph it is shown that profitability of cooperative bank with respect to

other commercial bank is very less. Totally there are 2084 Urban cooperative banks with

7368 branch outlets in that more than 200 urban cooperative banks are identified as

eak/sick banks by the regulator.

45

Chart 4: Profit per Employee of Cooperative Banks

Chart of Profit per employee of Cooperative banks

-10

-5

0

5

10

1 6 11 16 21 26 31 36 41 46 51

Banks

Pro

fit

per

Em

plo

yee

in P

erc

en

tag

e

Series1

Interpretation

From the above chart it is shown profit per employee of cooperative banks from this

inference it is clearly shows the cooperative banks are still in same old policy that

cooperative society is not for profit it is for service oriented it is difficult to follow in this

competitive world.

Deposit Size-Wise Distribution of Urban Cooperative Banks(UCB’s) in India(as on March 31, 2003)

UCB’s are generally small-sized banks. About 44 percent of UCB’s in 2002-03 were

with deposits of less than 10 crore; another 24 percent were with deposits of about Rs 10

to 25 crore. The UCB’s normally confine their area of operations to localized

geographical regions i.e they are mostly local banks,, but some of them have expanded

their network beyond a district or stste in which they are registered. Their client profile

primarily comprises small business units, small-scale industries, retailers, professionals,

self-employed, transport operators, etc. some of them have been permitted to undertake

forex and merchant banking operations

46

Chart 5:

Size-Wise Distribution of UCB's in India

01020304050

Less t

han

Rs 1

0

Rs 2

5-5

0

cro

re

RS

100-

250cro

re

Rs 5

00-

1000cro

re

Deposit Size

Perc

en

tag

e o

f U

CB

's

Series1

Source: financial Institutions and Markets by LM BHOLE page:9.13

Chart 6: Analysis of Primary research data:

Sample Cooperative banks NPA level

0

5

10

15

20

25

B1

B2

B3

B4

B5

B6

B7

B8

B9

B10

Banks

NP

A's

Series1

Interpretation:

From the above chart it is clearly shown that the average NPA of sample cooperative

banks is above 10% which is not a healthy sign.

47

2001

40%

43%

14% 3%ATM

Branches

Telephone

Internet & Mobile

2005

53%

27%

7%

13%ATM

Branches

Telephone

Internet & Mobile

Percentage of Commercial bank Customers transactions by various Channels

Chart 7.b

Interpretation:

The above chart shows the change in commercial bank customer’s transaction from 2001

to 2005. Here it is clearly shown that technology plays a vital role in retail banking that

cooperative banks are not providing for there customers like other commercial banks.

Chapter 4

48

Summary of Findings, Suggestions and Conclusion

Findings:

1. No competent and qualified man power in the visited banks.

There is no good leadership majority of cooperative banks are headed by politicians

who don’t have required qualification and competency level and as cooperative is not

able to pay according to industry standards they fail to attract competent young talent

pool.

2. Majority of visited banks are of unitary type i.e with only one branch.

More than 50% of cooperative banks in India are unitary type, therefore cooperative

banks are like local banks catering to small geographical.

3. Cooperative banks are suffering from high percentage of NPA.

As there is no quality lending and also recovery system is very weak the average

NPA of cooperative bank is somewhere between 16%-22% majority cooperative

banks are suffering from consequences of high NPA rate.

4. Net profits of cooperative banks are very less compare commercial banks.

The main reason is cooperative banks is doing business with the surplus amount not

with investments like commercial banks that will not be sufficient to reap profit and

also they have constraints to raise funds like commercial banks.

5. Profit per employee is very low.

In so many cases it is running under loss as shown in above graph.

Suggestion:

1. Cooperative banks has to diversify there business according to the change in

requirements of its customers/members.

2. Cooperative banks both urban/rural has to concentrate more on SME’s because

it’s growing at more than 10% per annum.

3. Competent and professionally trained board of directors and employees has to be

selected for cooperative society bank.

4. Good governance has to be setup in cooperative society bank within the guiding

principles of cooperation.

49

5. In cooperative banks main driver should be profit oriented in addition to service

oriented.

Conclusion

While the progress of the cooperative movement in India in general, and the cooperative

banking in particular has been rather appreciable, the movement can not be termed as a

vibrant one in regard to cooperative values and philosophy as enunciated in cooperative

principles. With regard to the extension of reforms to cooperative banking segment, it is

yet not clear as to whether the same would ensure soundness and stability in the

cooperative banking segment. Although the promotion of prudent financial practices in

urban cooperative banks has become a sine quo non in the present competitive

environment, one can not afford to ignore that such practices were contrived essentially

for commercial banks. It must not be forgotten that the notion of a code of good practices

though intuitively appealing, the temptation to prescribe universally valid model codes

which do not allow for differences in institutional development, legislative framework

and more broadly, different stages of development must be avoided. It seems the

extension of reforms/prudential standards to urban cooperative banking has provided

substantial scope for the external intervention and in the process, affecting the

cooperative character in terms of adherence to the cooperative principles. Logically, if

the prudential standards, and supervision and regulation for cooperative banks were same

as that of commercial banks, then there would not be any difference worth mentioning

between these entities. There are several areas that need the intervention of researchers

and perhaps, more important amongst them are prudential standards, professional

management & governance and supervision & regulation. The framework for such

research should essentially be within the guiding principles of cooperation. However, in

the long run, if cooperative character of credit cooperatives is to be preserved, the

prudent practices, system of governance and supervision & regulation all should emanate

from the guiding principles of cooperation.

50

BIBLOGRAPHY

Books Referred

1. The Karnataka Co-Operative Societies Act, 1959 & Rules 1960, by Prof V.Narayana Swamy, High court Advocate.

2. Co-Operation by Dr.N.Ajith Kumar MA, Ph.D.

3. Business Research Methods by Donald R. Cooper Pamela S.Schindler.

4. Co-Operative Banks and The Banking Regulation Act, 1949.

5. District central Co-Operative Banks in India, Directory 2002-2003.

6. Reading Materials: Agricultural Co-Operative Staff Training Institute.

7. Dossier on Co-Operatives, March 2000 NABARD.

8. Ramesha K (1996): Self-Help Groups: Emerging Cooperatives, paper presented

at the National Seminar on Rediscovering Cooperation, November 19-21, 1996.

Paper subsequently published in Rajagopalan R edited Rediscovering

Cooperation (Volume II), Institute of Rural Management Anand, 1996.

9. Reserve Bank of India (2002): Report on Trend and Progress of Banking in India

2001-2002, RBI, Mumbai.

10. Government of India (1998): Report of the Committee on Banking Sector

Reforms, RBI, Mumbai.

Websites Referred

www.dateyvs.comwww.sahakaradarpana.kar.nic.in

www.iffco.nic.in

www.fcamin.nic.in

www.ncui.net

http://www.rbi.org.in/scripts/AnnualPublications.aspx?head=Trend

%20and%20Progress%20of%20Banking%20in%20India

www.nabard.org/whats/nlnov2004

http://www.business-today.com/btoday/20060226/index.html


51



http://www.nabard.org/whats/nlnov2004

http://www.rbi.org.in/scripts/AnnualPublications.aspx?head=Trend%20and%20Progress%20of%20Banking%20in%20India

http://www.rbi.org.in/scripts/AnnualPublications.aspx?head=Trend%20and%20Progress%20of%20Banking%20in%20India

http://www.ncui.net/

http://www.fcamin.nic.in/

http://www.iffco.nic.in/

http://www.sahakaradarpana.kar.nic.in/

http://www.dateyvs.com/

AnnexureAppendix Table IV.5: Select Financial Parameters of Scheduled

Urban Co-operative Banks(As on March 31, 2005)

Sr.No.

Name of the Bank CRAR

NetInterestIncome/WorkingFunds

NonInterestIncome/WorkingFunds

OperatingProfit/

WorkingFunds

Returnon

Assets

AverageCost of

Deposits(per cent

perannum)

Businessper

Employee

(Rs. in Lakhs)

Profitper

Employee(Per cent)

1 2 3 4 5 6 7 8 9 10

1Abhyudaya Co-operative Bank Ltd.

41.74 1.2 0.15 0.68 0.05 5.4 187.99 0.1

2Ahmedabad Mercantile Co-operative Bank Ltd.

62.65 3.78 0.26 2 0.52 6.4 137.68 0.93

3Amanath Co-operative Bank Ltd.

6.75 -0.25 0.47 -3.11 -6.94 6.9 130.61 -7.99

4Andhra Pradesh Mahesh Co-operative Urban Bank Ltd.

44.48 3.38 0.84 1.41 0.78 7.44 107.32 0.86

5Bassein Catholic Co-operative Bank Ltd.

29.13 3.73 0.46 2.55 2.06 6.53 321.79 5.26

6Bharat Co-operative Bank (Mumbai) Ltd.

16.5 4.22 0.56 2.03 1.06 5.91 271.49 2.12

7Bharati Sahakari Bank Limited.

12.36 2.02 0.97 1.26 0.26 8 177.68 0.36

8Bombay Mercantile Co-operative Bank Ltd.

-16.66 1.7 2.78 1.04 0.08 4.87 94.39 0.09

9Citizencredit Co-operative Bank Ltd.

17.35 2.93 0.48 1.61 1.49 5.14 295.24 3.86

10Co-operative Bank of Ahmedabad Ltd.

-36.89 3.87 0.23 0.63 0.53 5.84 130.18 0.66

11Cosmos Co-operative Urban Bank Ltd.

17.19 2.76 0.66 1.64 1.1 6.84 349.29 3.14

12Dombivli Nagari Sahakari Bank Ltd.

14.53 3.62 0.7 2.43 0.88 5.92 255.15 1.79

13Goa Urban Co-operative Bank Ltd.

14.87 3.59 0.47 0.68 0.6 5.76 169.68 0.87

14Greater Bombay Co-operative Bank Ltd.

12.54 2.55 1.42 1.5 0.6 7.12 252.2 1.48

15Ichalkaranji Janata Sahakari Bank Ltd.

12.32 1.95 1 0.73 0.28 8.03 175.51 0.36

16Indian Mercantile Co-operative Bank Ltd.

20.72 4.72 1.09 3.62 2.96 5.57 111.09 2.53

17Jalgaon Janata Sahakari Bank Ltd.

10.06 2.79 0.58 0.27 0.03 7.71 160.33 0.05

18Janakalyan Sahakari Bank Ltd.

6.96 0.29 0.95 -0.98 -2.87 7.47 396.89 -7.58

19Janalaxmi Co-operative Bank Ltd.

14.11 5.61 0.88 4.86 0.74 7.92 105.28 0.73

20Janata Sahakari Bank Ltd.

-11.94 1.49 1.6 1.16 0.02 6.63 244.82 0.03

21Kalupur Commercial Co-operative Bank Ltd.

45.02 2.3 1.7 1.42 1.08 7.01 343.62 4.14

22Kalyan Janata Sahakari Bank Ltd.

12.8 2.86 0.88 1.78 0.85 5.92 235.64 1.55

23Kapole Co-operative Bank Ltd.

14.43 2.18 4.19 3 0.32 6.05 143.87 0.44

24Karad Urban Co-operative Bank Ltd.

13.08 2.73 0.38 0.28 0.07 6.81 122.04 0.07

25Madhavpura Mercantile Co-operative Bank Ltd.

-1,141.43

N.A. N.A. N.A. N.A. N.A. N.A. N.A.

26 Mahanagar Co-operative 16.46 4.24 0.47 0.92 0.59 6.26 160.97 0.77

52

Bank Ltd.

27Mandvi Co-operative Bank Ltd.

12.3 2.52 0.62 0.73 0.27 6.72 334.32 0.71

28Mapusa Urban Co-operative Bank of Goa Ltd.

-51.42 -3.49 0.45 -6.38 -4.95 6.46 116.31 -4.88

29Mehsana Urban Co-operative Bank Ltd.

14.46 1.52 0.54 1.07 0.92 9.33 269.59 2.15

30Nagar Urban Co-operative Bank Ltd.

10.65 2.69 0.47 0.93 0.23 7.74 186.57 0.33

31Nagpur Nagrik Sahakari Bank Ltd.

12.44 2.1 1.45 0.53 0.21 6.37 153.74 0.25

32Nasik Merchant’s Co-operative Bank Ltd.

31.71 4.47 1.26 3.35 1.09 6.76 99.62 1.04

33New India Co-operative Bank Ltd.

42.07 4.28 0.41 1.55 1.37 4.9 194.31 2.42

34North Kanara GSB Co-operative Bank Ltd.

13.8 3.08 0.62 2.05 1.06 6.08 351.14 2.88

35Nutan Nagarik Sahakari Bank Ltd.

46.53 2.91 1.31 1.54 0.91 6.26 153.39 1.36

36Parsik Janata Sahakari Bank Ltd.

27.15 3.89 0.45 2.28 1.13 5.06 191.98 1.95

37Pravara Sahakari Bank Ltd.

8.39 2.67 0.45 1.04 0 8.8 147.76 0

38Punjab and Maharashtra Co-operative Bank Ltd.

13.45 2.98 0.78 1.37 0.96 7.31 283.45 1.96

39Rajkot Nagrik Sahakari Bank Ltd.

30.35 2.05 0.01 0.75 0.57 6.75 256.48 1.66

40Rupee Co-operative Bank Ltd.

-54.14 -0.88 0.31 -2.63 -2.34 7.49 215.37 -4.6

41Sangli Urban Co-operative Bank Ltd.

9.74 1.79 0.42 -1.01 -1.06 7.8 73.68 -0.64

42Saraswat Co-operative Bank Ltd.

15.23 0.63 0.57 0.52 0.07 5.75 456.65 0.28

43Sardar Bhiladwala Pardi Peoples’ Co-operative Bank Ltd.

45.91 4.14 1.02 2.86 0.63 7.17 154.14 1.02

44Shamrao Vithal Co-operative Bank Ltd.

12.77 3.63 0.73 1.67 0.84 6.79 435.77 2.69

45Shikshak Sahakari Bank Ltd.

5.7 2.13 0.42 0.72 -0.77 7.49 226.81 -1.31

46Solapur Janata Sahakari Bank Ltd.

10.59 2.48 0.34 0.75 0.33 8.51 174.49 0.45

47Surat Peoples Co-operative Bank Ltd.

28 4.53 0.54 2.57 0.94 6.08 212.24 1.82

48Thane Bharat Sahakari Bank Ltd.

13.78 3.59 0.44 1.88 0.84 6.62 205.72 1.33

49Thane Janata Sahakari Bank Ltd.

20.29 3.79 0.39 2.01 1.35 5.87 353.79 3.71

50The Akola Janata Commercial Co-operative Bank Ltd.

11.21 2.05 1.15 1.36 0.34 8.01 151.04 0.39

51The Akola Urban Co-operative Bank Ltd.

10.84 1.47 0.39 0.47 0.27 8.18 233.03 0.43

52The Khamgaon Urban Co-operative Bank Ltd.

9.14 2.1 0.51 0.92 -0.3 13.43 154.98 -0.35

53Zoroastrian Co-operative Bank Ltd.

19.94 3.72 0.18 2.35 1.02 5.86 332.66 2.67

N.A. : Not Available.

Note :Out of 55 Scheduled UCBs, data in respect of two UCBs, viz., Charminar Co-operative

Urban Bank Ltd. and Vasavi Co-operative Urban Bank Ltd. Are not available.

53

INDUSTRY >> FACT SHEET >> Services >> Banks & Finance >> Banks >> Private Sector [No. of Cos: 90]

Full Year (Rs Cr.)

Company Name Year End Equit

y Gr. Blk Sales NP

Abhyudaya Bank 200503 20.21 17.69 208.26 22.17ABN Amro Bank NV 200503 169.02 254.65 1414.63 195.22Amer. Exp. Bank 200503 25.41 152.14 526.42 16.41Antwerp Diamond 200503 114.71 5.01 32.4 6.68Apna Sahak. Bank 200503 5.28 10.77 53.65 5.05Bank Muscat 200203 44 7.47 27.51 0.66Bank of America 200503 0.2 66.22 394.08 79.96Bank of Ceylon 200503 38.09 1.55 14.29 2.15Bank of Rajasth. 200503 107.57 189.58 650.29 35.1Bank of Tokyo-Mi 200503 99.78 38.1 116.64 10.65Bharat Coop Bank 200503 22.4 42.01 121.87 14.07Bharat Over.Bank 200503 15.75 75.4 245.22 19.99Bombay Mercant 200503 10.9 133.19 161.36 2.33Catholic Bank 200503 10.88 81.33 429.63 10.68Centurion BnkP 200603 140.83 670.4 1114.57 25.29Chase Manhattan 200203 167.82 4.85 64.33 11.97Chinatrust C Bk 200303 35.46 6.98 18.06 2.71Cho Hung Bnk 200503 34.54 3.63 18.07 6.14Citibank N. A. 200503 167.46 885.48 3257.1 599.53CitizenCred. Cop 200503 9.87 21.08 61.27 8.22City Co-op Bank 200503 2.23 5.25 15.43 0.61City Union Bank 200603 24 55.76 370.75 56.37Cosmos Cp Bank 200303 34.37 32.81 272.83 30.06DBS Bank 200503 49.54 8.76 39.44 9.19Deccan Merc. Co. 200203 1.66 2.07 18.17 2.21Deutsche Bank 200503 392.68 172.83 812.67 75.51Dhanalaksh.Bank 200603 32.06 68.44 236.94 9.51Federal Bank 200603 85.6 366.36 1653.48 225.21Friends Cp Bank 199503 0.4 0 1.5 0.04Fuji Bank 200503 70.86 5.5 28.55 9.69Greater Bombay 200503 10.23 24.97 98.02 7.01HDFC Bank 200603 313.69 1589.47 5688.98 870.59Hindusthan Merca 199703 1 0 0.18 0.1Hongkong & Shang 200403 715.03 725.82 2119.34 255.78ICICI Bank 200603 891.69 5525.65 18767.63 2540.07IndusInd Bank 200503 290.32 571.49 1391.47 215.26ING Vysya Bank 200603 90.72 629.22 1412.75 9.06J & K Bank 200603 48.49 381.44 1839.43 176.84Jai Hind Cp Bank 200203 0.98 0.07 6.62 0.82Jain Sahak. Bank 200303 1.99 2.44 6.48 0.22Janakalyan Bank 200403 24.49 15.8 158.69 6.16K B C Bank 200103 58.76 3.63 60.09 1.29Kapol Co-op Bank 200503 6.37 6.92 63.42 1.81Karnataka Bank 200603 121.28 219.52 1184.98 176.12

54

Karur Vysya Bank 200603 18 199.11 794.05 135.42Kotak Mah. Bank 200603 324.3 168.58 936.95 118.23Krung Thai Bank 200503 35.84 1.69 4 0.02Lak. Vilas Bank 200603 19.57 92.2 368.13 22.47Mandvi Bank 200503 6.78 9.56 52.77 1.68Mangal Coop Bank 200503 0.89 1.06 2.42 0.22Mashreqbank PSC 200503 48.38 5.56 32.5 3.71Memon Co-op Bank 200303 1.87 13.75 30.58 4.63Model Co-op Bank 200503 3.1 1.27 14.75 1.12Mogaveera Co-op 200403 4.83 11.56 29.12 0.4Mumbai Dist.Bank 200503 38.86 17.76 417.84 11.09Nainital Bank 200203 5 4.04 66.66 5.73Natl. Co-op.Bank 199503 1.3 0 2.82 0.44New India Co-op 200503 11.09 20.13 64.74 10.51North Kan. GSB 200503 10.43 30.91 93.02 12.08Oversea-Ch. Bank 200303 37.76 0.63 2.48 -0.09Patan Co-op Bank 200503 1.99 0.7 5.46 0.82Pun. & Mah. Bank 200503 12.69 20.46 125.43 12.57Raghu.Co-op Bank 199603 0.8 0 3.5 0.7Ratnakar Bank 200503 19.38 27.96 70.55 -9.45Safe Co-op. Bank 200203 0.94 1.18 8.9 2.27Samasta Nag.Co 200203 0.89 0.62 5.03 -1.27Sangli Bank 199803 8.76 0 135.86 4.02Sanwa Bank 200103 56.8 7.14 34.56 0.78Saraswat Bank 200503 34.58 81.76 504.59 70.34SBI Comm. & Intl 200303 100 63.47 59.03 -8.55Shamrao Vithal 200603 29.27 131.4 246.61 21Siam Comm. Bank 200203 33.59 1.93 8.31 -51.77Soc. Generale 200403 60.93 60.46 49.74 15.01South Ind.Bank 200603 70.41 156.89 851.82 50.59South Ind.Co-op 200403 4.13 9.58 24.03 -35.84St Bk of Mauriti 200503 83.39 24.35 38.54 5.48Standard Charter 200503 373.8 631.46 3276.08 596.86Sumitomo Mitsui 200403 140.37 16.62 51.38 -72.67T N Merc. Bank 200503 0.28 117.14 580.65 82.34Toronto Dom Bank 200303 41.04 1.3 4.62 0.78UFJ Bank 200503 186.8 6.92 21.43 6.82United West.Bank 200503 53.8 194.02 564.96 -98.58UTI Bank 200603 279.99 898.68 3620.52 486.09Yes Bank 200603 270 17.59 289.92 55.32Zoroas. Co-op. 200503 5.29 9.48 29 7.85

55

INDUSTRY >> FACT SHEET >> Services >> Banks & Finance >> Banks >> Public Sector [No. of Cos: 31]

Full Year (Rs Cr.)Company Name Year End Equity Gr. Blk Sales NP

Allahabad Bank 200603 446.7 1052.95 4383.39 696.47Andhra Bank 200603 485 450.85 3132.44 485.5Bank of Baroda 200603 367 1873.17 8390.33 827.24Bank of India 200603 488.58 1673.99 8213.08 701.23Bank of Mah. 200603 430.52 493.59 2679.32 50.87Canara Bank 200603 410 1718.6 10173.97 1342.88Central Bank 200603 1124.14 1369.11 5942.02 257.5Corporation Bank 200603 143.44 619.75 3197.97 444.48Dena Bank 200603 286.82 753.67 2221.05 21.17E X I M Bank 200603 849.99 58.79 1457.52 270.74I D B I 200603 723.79 2414.81 6661.17 560.89Indian Bank 200603 4573.96 885.99 3972.06 505.63Indian Overseas 200603 544.8 865.34 5134.49 748.75N A B A R D 200503 2000 424.21 3938.74 1033.42Oriental Bank 200603 250.54 848.28 4676.09 803.15Pun. & Sind Bank 200603 743.06 194.29 1450.55 108.32Pun. Natl. Bank 200603 315.3 2158.12 11092.86 1437.42St Bk of Bikaner 200603 50 451.81 2328.94 145.02St Bk of Hyderab 200603 17.25 506.63 3407.68 427.21St Bk of India 200603 526.3 6691.09 43183.62 4406.67St Bk of Indore 200603 17.5 183.79 1598.41 139.11St Bk of Mysore 200603 36 344.14 1807.61 216.74St Bk of Patiala 200603 24.75 409.55 2844.42 303.09St Bk of Saurash 200603 314 108.01 1312.27 60.12St Bk of Travanc 200603 50 384.89 2649.79 258.63Syndicate Bank 200603 521.97 678.98 4642 536.5UCO Bank 200603 799.36 987.35 4821.69 194.33Union Bank (I) 200603 505.12 1403.89 6488.81 674.47United Bank (I) 200603 1532.43 384.72 2826.8 204.58Veerashiva Bk 200503 2.28 7.1 14.9 0.55Vijaya Bank 200603 433.52 554.51 2684.44 126.92

56

Interview Questions

Name : Name of the Organisation :

Age :

1. Since how long you have been in this organisation?

2. Total no of years of experience in this industry?

3. What are the services provided by your bank to its members?

--------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------

--

4. Total no. of members in your bank?

5. Which is the most demanded service from the members?

6. Do you think, in co-operative banks there is more stress for subsidized loans?

Strongly Disagree Disagree Agree

Strongly Agree Don’t Know

7. How far the improper fund management style at bank contributes to the failure of

co-operative banks? Rate between 1 to 5 , 1 being Not at all contributes and 5

showing Very much contributes. ---------------

8. ‘The lack of talent pool is the main reason for failure of Co-operative banks.’

How do you rate this sentence between 1 to 5 , 1 being Not at all contributes and

5 showing Very much contributes. ---------------

9. Do you think Government should be much more helpful for development of co-

operative banks?



57

10. How far its true that competition from commercial banks is the main reason for

failure of co-operative banks? Rate between 1 to 5 , 1 being Not at all True and 5

showing Very much True. ---------------

11. Are Co-operative banks suffering from the problem of too much of NPA (Non

Performing Assets) ? Rate between 1 to 5 , 1 being Not at all True and 5 showing

Very much True. ---------------

12. How important are the loan recovery systems in Co-operative banks for their success

or failure?

Very Important Important Less Important

Not at all Important Don’t Know

13. Do you think lack of ‘value added services’ is the main reason for not attracting or

retaining the members?



14. Are co-operative banks spending too much on establishment and non business

activities? Rate between 1 to 5 , 1 being Not at all True and 5 showing Very much

True. ---------------

15. Do you think in India, the failure of Monsoon will affect the performance of co-

operative banks?



16. Are co-operative banks resistant to change with the industry?

58

cooperative

Documents

commercial banks profit

cooperative values

cooperative principles

cooperative banking

business administration

bangalore dhananjaya

failure csb

dissertation guide