cooperative banks

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Page 1: Cooperative Banks

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Co-operative Banks

NKGSB Co-op Bank LTD

2/7/2011

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PROJECT ON: CO-OPERATIVES & RURAL MARKETS

Submitted By:

Project Guide:

University of Mumbai

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Declaration

I, ____________ of______________________________________________________, hereby declare that I have completed the project titled Co-Operative Banks in the academic year _________. The information submitted is true and original to the best of my knowledge.

Signature

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Certificate of Project Completion

Certified that the project report titled Co-operative Bank has been completed satisfactorily in partial fulfillment of B.M.S course of the academic year _________by ____________a student of __________________________

PlaceDate:

Principal

Seen By

Internal Examiner

Signature

Date

External Examiner

Signature

Date

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Co-operative Banks

Overview

o-operative movement is quite well established in India. The first legislation on co-operation was passed in 1904. In 1914 the Maclagen committee

envisaged a three tier structure for co-operative banking viz. Primary Agricultural Credit Societies (PACs) at the grass root level, Central Co-operative Banks at the district level and State Co-operative Banks at state level or Apex Level. The first urban co-operative bank in India was formed nearly 100 years back in Baroda. 

Co-operative Institutions are engaged in all kinds of activities namely production, processing, marketing, distribution, servicing, and banking in India and have vast and powerful superstructure. Co-operative Banks are important cogs in this structure. 

In the beginning of 20th century, availability of credit in India, more particularly in rural areas, was almost absent. Agricultural and related activities were starved of organized, institutional credit. The rural folk had to depend entirely on the money lenders, who lent often at usurious rates of interest. 

The co-operative banks arrived in India in the beginning of 20th Century as an official effort to create a new type of institution based on the principles of co-operative organization and management, suitable for problems peculiar to Indian conditions. These banks were conceived as substitutes for money lenders, to provide timely and adequate short-term and long-term institutional credit at reasonable rates of interest. 

C

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In the formative stage Co-operative Banks were Urban Co-operative Societies run on community basis and their lending activities were restricted to meeting the credit requirements of their members. The concept of Urban Co-operative Bank was first spelt out by Mehta Bhansali Committee in 1939 which defined on Urban Co-operative Bank . Provisions of Section 5 (CCV) of Banking Regulation Act, 1949 (as applicable to Co-operative Societies) defined an Urban Co-operative Bank as a Primary Co-operative Bank other than a Primary Co-operative Society were made applicable in 1966. 

With gradual growth and also given Philip with the economic boom, urban banking sector received tremendous boost and started diversifying its credit portfolio. Besides giving traditional lending activity meeting the credit requirements of their customers they started catering to various sorts of customers viz.self-employed, small businessmen / industries, house finance, consumer finance, personal finance etc. 

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BANK PROFILE

NKGSB was founded by a great visionary Sheth Shantaram Mangesh Kulkarni on 26th September, 1917.

The Bank with a modest beginning in 1917, is now a Multi-State Bank having its area of operation in the States of Maharashtra, Karnataka, Goa, Gujarat and Union territories of Daman, Diu, Dadra and Nagar Haveli.

Today the Bank has 42 branches spread over in the state of Maharashtra, Goa & Karnataka.

Mumbai - 27 branches

Navi Mumbai – Vashi, CBD Belapur & Panvel (3 branches)

Maharashtra other than Mumbai - Pune – (Kothrud & Aund), Kolhapur – (Kolhapur Main & Uma talkies.

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These are takeover of Shahu Co-operative Bank) & Nashik

Goa- Ponda & Panaji

Karnataka – Karwar- Main. Karwar -Baad, Hubli, Belgaum & Sirsi.

Bank opened its 42nd branch, 5th in Karnataka at Sirsi on 13th November, 2010 and will shortly be opening branches at Thane, Kalayan and Goregaon (W) during the financial year 2010-11

Over the years, the Bank has consistently shown robust growth both quantitatively and qualitatively. The Bank has not only grown in size of deposits and advances, but has multiplied its net worth making the institution financially sound and fundamentally strong.

The Board of Directors of the Bank consists of well qualified professionals enriched with varied experience in the strategic fields of Finance, Technology, Business and Management. Being driven by the co-operative principles, management lays emphasis on profits but with focus on the welfare of our stakeholders.

As a part of good governance practice, the Bank has adopted code of good business principles and accepted the responsibility to ensure that they are observed down the line as a work culture in its true spirit. The business philosophy is based on four core values i.e. pillars of service excellence, customer focus, product innovation and resourceful people.

In terms of our commitment for harnessing the state of art technology, networking all 42 branches counter under ‘Core banking solution’, customers

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can access their accounts and perform banking operations ‘anywhere anytime’ with value added services.

The Bank has varied Deposit products to suit every needs of customers, so also the bank has occupied a place of pride with those who are financed for offering tailor-made complete credit solutions under one roof packaged at liberal, competitive and flexible terms, let it be personal finance or loan facilities for Short term as well Long term requirement of Small Businessman, Professionals, Small & Medium Enterprises and Corporates.

Financial Achievements of NKGSB CO-OP Bank LTD.

Financial achievements: Significant growth path during the Decade:2000-2010v/s 1990-2000

Introduction of Cooperative Bank

ooperative banking is retail and commercial banking organized on a cooperative basis. Cooperative banking institutions take deposits and C

Year

No. of Branches

No. of A/Cs‘000

No. of Members‘000

Owned Funds (Rs cr)

Deposits (Rs cr)

Advances (Rs cr)

Net Profit (Rs cr)

No. of Employees

1990

9 79 41 3.8 48 29 0.5 152

2000

18 203 55 37.2 438 229 5.1 310

2009

27 431 73 158.3 1,840 1,089 27.2*

541

2010

40 461 74 176.2 2,298 1,370 27.4*

641

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lend money in most parts of the world. Cooperative banking (for the purposes of this article), includes retail banking, as carried out by credit unions, mutual savings and loan associations, building societies and cooperatives, as well as commercial banking services provided by mutual organizations (such as cooperative federations) to cooperative businesses.

Co-operative banks differ from stockholder banks by their organization, their goals, their values and their governance. In most countries, they are supervised and controlled by banking authorities and have to respect prudential banking regulations, which put them at a level playing field with stockholder banks. Depending on countries, this control and supervision can be implemented directly by state entities or delegated to a co-operative federation or central body. Even if their organizational rules can vary according to their respective national legislations, co-operative banks share common features:

• Customer-owned entities: in a co-operative bank, the needs of the customers meet the needs of the owners, as co-operative bank members are both. As a consequence, the first aim of a co-operative bank is not to maximize profit but to provide the best possible products and services to its members. Some co-operative banks only operate with their members but most of them also admit non-member clients to benefit from their banking and financial services.

• Democratic member control: co-operative banks are owned and controlled by their members, who democratically elect the board of directors. Members usually have equal voting rights, according to the co-operative principle of “one person, one vote”.

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• Profit allocation: in a co-operative bank, a significant part of the yearly profit, benefits or surplus is usually allocated to constitute reserves. A part of this profit can also be distributed to the co-operative members, with legal or statutory limitations in most cases. Profit is usually allocated to members either through a patronage dividend, which is related to the use of the co-operative’s products and services by each member, or through an interest or a dividend, which is related to the number of shares subscribed by each member.

Co-operative banks are deeply rooted inside local areas and communities. They are involved in local development and contribute to the sustainable development of their communities, as their members and management board usually belong to the communities in which they exercise their activities. By increasing banking access in areas or markets where other banks are less present – SMEs, farmers in rural areas, middle or low income households in urban areas - co-operative banks reduce banking exclusion and foster the economic ability of millions of people. They play an influential role on the economic growth in the countries in which they work in and increase the efficiency of the international financial system. Their specific form of enterprise, relying on the above-mentioned principles of organization, has proven successful both in developed and developing countries.

The Co-operative banks have a history of almost 100 years. The Co-operative banks are an important constituent of the Indian Financial System, judging by the role assigned to them, the expectations they are supposed to fulfil, their number, and the number of offices they operate. The co-operative movement originated in the West, but the importance that such banks have assumed in India is rarely paralleled anywhere else in the world. Their role in rural financing continues to be important

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even today, and their business in the urban areas also has increased phenomenally in recent years mainly due to the sharp increase in the number of primary co-operative banks. 

While the co-operative banks in rural areas mainly finance agricultural based activities including farming, cattle, milk, hatchery, personal finance etc. along with some small scale industries and self-employment driven activities, the co-operative banks in urban areas mainly finance various categories of people for self-employment, industries, small scale units, home finance, consumer finance, personal finance, etc.

Some of the co-operative banks are quite forward looking and have developed sufficient core competencies to challenge state and private sector banks. 

According to NAFCUB the total deposits & lendings of Co-operative Banks is much more than Old Private Sector Banks & also the New Private Sector Banks. This exponential growth of Co-operative Banks is attributed mainly to their much better local reach, personal interaction with customers, their ability to catch the nerve of the local clientele.

The cooperative banks/credit institutions constitute the second segment of Indian banking system, comprising of about 14% of the total banking sector asset (March 2007).Bulk of the cooperative banks operates in the rural regions with rural coop banks accounting for 67% of the total asset and 67% of the total branches of all cooperative banks. Share of rural cooperatives in total institutional credit was 62% in 1992-93, 34% in 2002-03 and 53% in 2006-07. Cooperative banks have an impressive network of outlets for institutional credit in India, particularly in rural India (1 PACS per 7 villages). In

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March 2007, there were 97,224 PACS in rural India against 30,393 branches of commercial banks (more than 3 times of outlet of coop banks). In March 2007, there were 102 savings A/C and 113 cooperative bank members per 1000 rural in India. Cooperative banks (both rural and urban) cater to small and marginal clients. Financial health of the cooperative credit institutions, particularly the rural cooperatives, has been found to be poor by several Committees.

Though registered under the Co-operative Societies Act of the Respective States (where formed originally) the banking related activities of the co-operative banks are also regulated by the Reserve Bank of India. They are governed by the Banking Regulations Act 1949 and Banking Laws (Co-operative Societies) Act, 1965.

DEFINE

A co-operative bank is a financial entity which belongs to its members, who are at the same time the owners and the customers of their bank. Co-operative banks are often created by persons belonging to the same local or professional community or sharing a common interest. Co-operative banks generally provide their members with a wide range of banking and financial services (loans, deposits, banking accounts…).

History Cooperative Banks in India

Brief History of Urban Cooperative Banks in India

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he term Urban Co-operative Banks (UCBs), though not formally defined, refers to primary cooperative banks located in urban and semi-urban areas. These

banks, till 1996, were allowed to lend money only for non-agricultural purposes. This distinction does not hold today. These banks were traditionally centred around communities, localities work place groups. They essentially lent to small borrowers and businesses. Today, their scope of operations has widened considerably.

T

The origins of the urban cooperative banking movement in India can be traced to the close of nineteenth century when, inspired by the success of the experiments related to the cooperative movement in Britain and the cooperative credit movement in Germany such societies were set up in India. Cooperative societies are based on the principles of cooperation, - mutual help, democratic decision making and open membership. Cooperatives represented a new and alternative approach to organisaton as against proprietary firms, partnership firms and joint stock companies which represent the dominant form of commercial organisation.

The Beginnings

The first known mutual aid society in India was probably the ‘Anyonya Sahakari Mandali’ organised in the erstwhile princely State of Baroda in 1889 under the guidance of Vithal Laxman also known as Bhausaheb Kavthekar. Urban co-operative credit societies, in their formative phase came to be organised on a community basis to meet the consumption oriented credit needs of their members. Salary earners’ societies inculcating habits of thrift and self help played a significant role in popularising the movement, especially amongst the middle class as well as organized labour. From its origins then to today, the thrust of UCBs, historically, has been to mobilise savings from the middle and low income urban groups and purvey credit to their members - many of which belonged to weaker sections.

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The enactment of Cooperative Credit Societies Act, 1904, however, gave the real impetus to the movement. The first urban cooperative credit society was registered in Canjeevaram (Kanjivaram) in the erstwhile Madras province in October, 1904. Amongst the prominent credit societies were the Pioneer Urban in Bombay (November 11, 1905), the No.1 Military Accounts Mutual Help Co-operative Credit Society in Poona (January 9, 1906). Cosmos in Poona (January 18, 1906), Gokak Urban (February 15, 1906) and Belgaum Pioneer (February 23, 1906) in the Belgaum district, the Kanakavli-Math Co-operative Credit Society and the Varavade Weavers’ Urban Credit Society (March 13, 1906) in the South Ratnagiri (now Sindhudurg) district. The most prominent amongst the early credit societies was the Bombay Urban Co-operative Credit Society, sponsored by Vithaldas Thackersey and Lallubhai Samaldas established on January 23, 1906..

The Cooperative Credit Societies Act, 1904 was amended in 1912, with a view to broad basing it to enable organisation of non-credit societies. The Maclagan Committee of 1915 was appointed to review their performance and suggest measures for strengthening them. The committee observed that such institutions were eminently suited to cater to the needs of the lower and middle income strata of society and would inculcate the principles of banking amongst the middle classes. The committee also felt that the urban cooperative credit movement was more viable than agricultural credit societies. The recommendations of the Committee went a long way in establishing the urban cooperative credit movement in its own right.

In the present day context, it is of interest to recall that during the banking crisis of 1913-14, when no fewer than 57 joint stock banks collapsed, there was a there was a flight of deposits from joint stock banks to cooperative urban banks. Maclagan Committee chronicled this event thus:

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“As a matter of fact, the crisis had a contrary effect, and in most provinces, there was a movement to withdraw deposits from non-cooperatives and place them in cooperative institutions, the distinction between two classes of security being well appreciated and a preference being given to the latter owing partly to the local character and publicity of cooperative institutions but mainly, we think, to the connection of Government with Cooperative movement”.

Under State Purview

The constitutional reforms which led to the passing of the Government of India Act in 1919 transferred the subject of “Cooperation” from Government of India to the Provincial Governments. The Government of Bombay passed the first State Cooperative Societies Act in 1925 “which not only gave the movement its size and shape but was a pace setter of cooperative activities and stressed the basic concept of thrift, self help and mutual aid.” Other States followed. This marked the beginning of the second phase in the history of Cooperative Credit Institutions.

There was the general realization that urban banks have an important role to play in economic construction. This was asserted by a host of committees. The Indian Central Banking Enquiry Committee (1931) felt that urban banks have a duty to help the small business and middle class people. The Mehta-Bhansali Committee (1939), recommended that those societies which had fulfilled the criteria of banking should be allowed to work as banks and recommended an Association for these banks. The Co-operative Planning Committee (1946) went on record to say that urban banks have been the best agencies for small people in whom Joint stock banks are not generally interested. The Rural Banking Enquiry Committee (1950), impressed by the low cost of establishment and

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operations recommended the establishment of such banks even in places smaller than taluka towns.

The first study of Urban Co-operative Banks was taken up by RBI in the year 1958-59. The Report published in 1961 acknowledged the widespread and financially sound framework of urban co-operative banks; emphasized the need to establish primary urban cooperative banks in new centers and suggested that State Governments lend active support to their development. In 1963, Varde Committee recommended that such banks should be organised at all Urban Centres with a population of 1 lakh or more and not by any single community or caste. The committee introduced the concept of minimum capital requirement and the criteria of population for defining the urban centre where UCBs were incorporated.

Duality of Control

However, concerns regarding the professionalism of urban cooperative banks gave rise to the view that they should be better regulated. Large cooperative banks with paid-up share capital and reserves of Rs.1 lakh were brought under the perview of the Banking Regulation Act 1949 with effect from 1st March, 1966 and within the ambit of the Reserve Bank’s supervision. This marked the beginning of an era of duality of control over these banks. Banking related functions (viz. licensing, area of operations, interest rates etc.) were to be governed by RBI and registration, management, audit and liquidation, etc. governed by State Governments as per the provisions of respective State Acts. In 1968, UCBS were extended the benefits of Deposit Insurance.

Towards the late 1960s there was much debate regarding the promotion of the small scale industries. UCBs came to be seen as important players in this context. The Working Group on Industrial Financing through Co-operative Banks,

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(1968 known as Damry Group) attempted to broaden the scope of activities of urban co-operative banks by recommending that these banks should finance the small and cottage industries. This was reiterated by the Banking Commisssion (1969).

The Madhavdas Committee (1979) evaluated the role played by urban co-operative banks in greater details and drew a roadmap for their future role recommending support from RBI and Government in the establishment of such banks in backward areas and prescribing viability standards.

The Hate Working Group (1981) desired better utilisation of banks' surplus funds and that the percentage of the Cash Reserve Ratio (CRR) & the Statutory Liquidity Ratio (SLR) of these banks should be brought at par with commercial banks, in a phased manner. While the Marathe Committee (1992) redefined the viability norms and ushered in the era of liberalization, the Madhava Rao Committee (1999) focused on consolidation, control of sickness, better professional standards in urban co-operative banks and sought to align the urban banking movement with commercial banks.

A feature of the urban banking movement has been its heterogeneous character and its uneven geographical spread with most banks concentrated in the states of Gujarat, Karnataka, Maharashtra, and Tamil Nadu. While most banks are unit banks without any branch network, some of the large banks have established their presence in many states when at their behest multi-state banking was allowed in 1985. Some of these banks are also Authorised Dealers in Foreign Exchange

Recent Developments

Over the years, primary (urban) cooperative banks have registered a significant growth in number, size and volume of business handled. As on 31st March, 2003 there

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were 2,104 UCBs of which 56 were scheduled banks. About 79 percent of these are located in five states, - Andhra Pradesh, Gujarat, Karnataka, Maharashtra and Tamil Nadu. Recently the problems faced by a few large UCBs have highlighted some of the difficulties these banks face and policy endeavours are geared to consolidating and strengthening this sector and improving governance.

Issues facing the cooperative banking segment in India

• Governance Issues – Dual Control and Borrower driven structure

• Management and HR Issues

• Issues relating to Finance

Governance Issues – Dual Control and Borrower driven structure

• “Cooperation” is a State subject under the Indian Constitution; hence all cooperative societies are governed by the Cooperative Societies Act of the State. Registration, incorporation, management, amalgamation etc are governed by the RCS of the particular State.

• At the same time, certain provisions of the Banking Regulation (BR) Act, 1949, are applicable to the cooperative banks that accept public deposit. In the rural structure, StCBs and the DCCBs and in the urban structure, PCBs are covered by these provisions of the BR Act.

• This “duality” of control and regulation has given rise to serious problems in the governance structure (such as interference by the State Govt. due to its combined role as dominant shareholder, manager, regulator, supervisor and auditor; further the precise demarcation of the powers between the two regulators is ambiguous.)

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• The rural cooperative structure in India is focused mainly on credit. The upper tiers refinance the lower tiers hence the structure is driven by borrowers at all levels.

• Depositors are either non-members or “nominal” members without voting rights while the borrowers have full voting rights.

• This is inconsistent to the concept of mutuality (thrift and credit going hand in hand).

• This also prevents any incentive for good governance since the depositors, whose money is being intermediated, have no say in the management of their own money

Management and HR Issues

• Management problem arises due to the impairment of Governance. But following are also important

• Poor human capital leading

• Generally ageing staff profile characterized by inadequate qualification and training.

Issues relating to Finance

• The poor recovery of outstanding credit by the rural cooperative banks makes the whole system unsustainable.

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• Lack of standardised business model and risk management systems

• Over exposure to the agri sector and lack of diversification of the loan portfolios.

• For the LT structure, the loan portfolio consists of a single product – long terms agri loan of > 5 years term.

Categories of co-operative Banks

There are two main categories of the co-operative banks. 

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(a) Short term lending oriented co-operative Banks- within this category there are three subcategories of banks viz state co-operative banks, District co-operative banks and Primary Agricultural co-operative societies.

(b) Long term lending oriented co-operative Banks - within the second category there are land development banks at three levels state level, district level and village level. 

Cooperative Banking Structure

The co-operative banking structure in India is divided into following main 5 categories:

1. Primary Urban Co-op Banks

2. Primary Agricultural Credit Societies:

The Primary Co-operative Credit Society is an association of borrowers and non-borrowers residing in a particular locality. The funds of the society are derived from the share capital and deposits of members and loans from central co-operative banks. The borrowing powers of the members as well as of the society are fixed. The loans are given to members for the purchase of cattle, fodder, fertilizers, pesticides, implements, etc.

3. District Central Co-op Banks:

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These are the federations of primary credit societies in a district and are of two types – those having a membership of primary societies only and those having a membership of societies as well as individuals. The funds of the bank consist of share capital, deposits, loans and overdrafts from state co-operative banks and joint stocks. These banks finance member societies within the limits of the borrowing capacity of societies. They also conduct all the business of a joint stock bank.

4. State Co-operative Banks:

The state co-operative bank is a federation of central co-operative bank and acts as a watchdog of the co-operative banking structure in the state. Its funds are obtained from share capital, deposits, loans and overdrafts from the Reserve Bank of India.The state co-operative banks lend money to central co-operative banks and primary societies and not directly to farmers. 

5. Land Development Banks:

The land development banks are organized in 3 tiers namely, state, central and primary level and they meet the long term credit requirements of the farmers for developmental purposes. The state land development bank overseas the primary land development banks situated in the districts and tehsils in the state. They are governed both by the state

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government and Reserve Bank of India. Recently, the supervision of land development banks has been assumed by National Bank for Agriculture and 6. Rural Development (NABARD). The sources of funds for these banks are the debentures subscribed by both central and state government. These banks do not accept deposits from the general public.

Features of Cooperative Banks

1. Co-operative Banks are organized and managed on the principal of co-operation, self-help, and mutual help. They function with the rule of "one member, one vote". Function on "no profit, no loss" basis. Co-operative banks, as a principle, do not pursue the goal of profit maximization.  Co-operative bank performs all the main banking functions of deposit mobilization, supply of credit and provision of remittance facilities.

2. Co-operative Banks provide limited banking products and are functionally specialists in agriculture related products. However, co-operative banks now provide housing loans also.

3. UCBs provide working capital loans and term loan as well.

4. The State Co-operative Banks (SCBs), Central Co-operative Banks (CCBs) and Urban

5. Co-operative Banks (UCBs) can normally extend housing loans up to Rs 1 lakh to an individual. The scheduled UCBs, however, can lend up to Rs 3 lakh for housing purposes. The

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UCBs can provide advances against shares and debentures also. 6. Co-operative bank do banking business mainly in the agriculture and rural sector. However, UCBs, SCBs, and CCBs operate in semi urban, urban, and metropolitan areas also. The urban and non-agricultural business of these banks has grown over the years. The co-operative banks demonstrate a shift from rural to urban, while the commercial banks, from urban to rural. 

7. Co-operative banks are perhaps the first government sponsored, government-supported, and government-subsidised financial agency in India. They get financial and other help from the Reserve Bank of India NABARD, central government and state governments. They constitute the "most favoured" banking sector with risk of nationalisation. For commercial banks, the Reserve Bank of India is lender of last resort, but co-operative banks it is the lender of first resort which provides financial resources in the form of contribution to the initial capital (through state government), working capital, refinance. 8. Co-operative Banks belong to the money market as well as to the capital market. Primary agricultural credit societies provide short term and medium term loans. Land Development Banks (LDBs) provide long-term loans. SCBs and CCBs also provide both short term and term loans. 

9. Co-operative banks are financial intermediaries only partially. The sources of

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their funds (resources) are (a) central and state government, (b) the Reserve Bank of India and NABARD, (c) other co-operative institutions, (d) ownership funds and, (e) deposits or debenture issues. It is interesting to note that intra-sectoral flows of funds are much greater in co-operative banking than in commercial banking. Inter-bank deposits, borrowings, and credit from a significant part of assets and liabilities of co-operative banks. This means that intra-sectoral competition is absent and intra-sectoral integration is high for co-operative bank. 

10. Co-operative Banks are subject to CRR and liquidity requirements as other scheduled and non-scheduled banks are. However, their requirements are less than commercial banks. 

11. Specific corporate governance: member ownership Members, who are also customers, own the entire organisation and are able to influence its decision-making. Members have a more direct say in the local member bank’s policy, for instance on the branch location, opening hours, services and sponsoring activities. Member ownership entails a more consensus-driven approach and prevents a strong fixation on just one stakeholder. This is accompanied by a longer term and risk-averse view, which translates into a more conservative banking approach focused on retail banking. With their strong local ties and large networks, co-operative banks are in theory better equipped to assess the creditworthiness and risks of customers at a local level.

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12. Customers’ interest’s first Co-operative banks have an edge in portraying trustworthiness as they publicly state that they do not aim to maximise profits but rather to maximise customer value. They have a competitive advantage in establishing trust. An important factor is that co-operative banks are literally closer to their customers; their branch network density is higher than that of their competitors.

13. High capitalisation, high rating and low funding costs Co-operative banks barely distribute profit but add it to their reserves or the banks’ own funds. Consequently, co-operative banks are some of the more highly capitalised institutions in Europe as a result of their unique model and ownership structure. Co-operative banks accumulate capital by design, as their original purpose was to overcome a shortage of capital for their chosen activities. Co-operatives have a lower cost of capital, because they only need to remunerate the part of their equity that is represented by member shares, not the often much larger intergenerational endowment. In addition, mutual support mechanisms that exist in various countries contribute to high ratings. These collective guarantee schemes reduce or even exclude the risk of individual co-operative bank failure. Finally, high capital reserves and high ratings provide co-operative banks with opportunities to obtain relatively cheap capital market funding, because this entails less risks for other creditors and thus lower risk premiums.

14. Profit as a necessary condition Based on

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the long-term focus on customer value and member influence, co-operative banks claim that they do not aim to maximise short-term profit7 while healthy profitability is an important necessary condition for co-operative banks to safeguard their continuity, to finance growth and credit, and to provide a buffer for inclement times, profit is not a goal in itself.

15. Conservative business model: focus on retail banking Member ownership leads to a conservative business model, focused on sustainable retail banking. This leads to good liquidity and sound asset quality. The structure, knowledge of local customers and risk diversification all work in favour of co-operative banks. The knowledge that capital cannot be easily replaced by external sources after considerable losses stimulates co-operative bank managers to apply a relatively low risk appetite.

16. Proximity to customers: dense branch networks Co-operative banks have large branch networks, providing co-operatives with an important, albeit declining, comparative advantage in retail markets. Co-operative banks are literally and figuratively closer to their customers and know those customers well through participation in numerous social networks. This is because the co-operative banking model centres above all on ‘relationship banking’ via local presence. Proximity to their customers is reinforced by actively supporting local communities. Finally, large branch networks facilitate mobilising and retaining relatively cheap and important funding source, provided that their deposit

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rates are not much lower than those offered by competitors.

Products Offered by NKGSB CO-OP. Bank

1.Savings Deposit-

Savings Account is primarily meant to inculcate a sense of saving for your future financial requirements. The main objective is to save in small or large amount from time to time. Your savings remain liquid and safe, earning moderate interest. Our Savings Account comes with a host of convenient features and banking channels to transact through.

Types of Savings Deposit-

Regular Savings Account

Student Power- Savings account for younger generation with age above 14 years

Dignity Saving- Savings account for senior citizens above 60 age

Super Saving- Savings account for high net worth customers

No Frill Account- Savings account for people of small means

Non-Resident(External) NRE Saving Account- Savings account for NRE to maintain foreign

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currency earnings in Indian rupees

2. Current Deposits-

Current Account are ideal for carrying out everyday business transactions. You can access your account anytime and make unlimited payment with at Par Cheque, Deposit Cheque or Demand Draft, etc.

Types of current deposits-

Current account- A regular current account.

Gold Plus- Current account for high net worth customers

Platinum Plus-Current Account for preferred elite customers

3.Term Deposit-

Term Deposit scheme to suit your requirement and future plan. You can not only earn higher income on your surplus funds by investing in any of our term deposit schemes, but also avail loan against those funds. Thus fulfill your need, multiply your funds as well as keep your savings secure

Types of term Deposits

Short Term Deposit (SDR)- Easy liquidity still earn interest

Fixed Deposit (FDR)- Invest and earn interest quarterly or half yearly

Recurring Deposit (RD)- Regular savings leads

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to high investment

Monthly Income Plan (MIP)- Earn Monthly interest on your investment

Annapurna Tax Benefit Deposit Scheme- Save tax and maximize interest on your investment

Quarterly Interest Re-Investment Plan (QIRP)- Gain more by earning interest on interest

Automatic Renewal Certificate (ARC)- Automatic renewal of principal no need to visit for renewal process

Flexi Quarterly Interest Re-Investment Plan- Break Investment without loss of interest.

Automatic Renewal Certificate with Interest- No renewal hassle guarantees automatic renewal with interest

Non-Resident(External) NRE Term Deposit Account- Term Deposit account for NRE to maintain foreign currency earnings in Indian rupees

4. Retail Loan-

Offers a wide variety of Retail Loans. Whatever be your need, our range of retail loans will suit your requirement. The PLR of the bank is 13.5 %.

Types of retail loan-

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Home - A – Loan- Realize your dream with a complete package to meet all your housing finance needs

Life Cycle Banking Scheme- Enjoy additional loan anytime without additional security or guarantee

Profina- Fast track customized loan for professional

Medifina- A red carpet welcome for medical professionals

Vehicle Loan- Zoom ahead in your life

Mortgage Loan- Mortgage your property to payoff various expenses

Educational Loan- Fulfill your dream of higher education

Personal loan- Buy your dream today with quick finance

Consumer Loan- Acquire consumer durables, as your home is more than just four walls

Swayamsiddha- Loan for professional women

Stree Udyogika- Loan for women entrepreneurs

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Stree Sakhi- Loan for working women.

5.Corporate Finance-

Working Capital ( Cash Credit )- Working capital finance by way of cash credit to fund day to day business operations

Busifina- Funds meant to augment working capital for small and medium business enterprise

Over Draft Against Property- Overdraft against property, to increase business opportunity

SME Finance- Funds to bolster the working of a small and a medium business enterprise

Bank Guarantee- To satisfy your need of advance payment or performance guarantee.

Letter of Credit- To satisfy your need to procure raw material or acquire fixed assets

Term Loan- Finance for purchase of fixed assets

Bill Discounting- To meet your business requirement

LC Discounting- To meet your business requirement

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Rent Discounting- Discount your future income to multiply returns and investment in assets

Services Offered by NKGSB CO-OP. Bank

1. Any Branch Banking- Easy operational mobility in transacting business. Access account to withdraw money up to Rs. 25000/- across the counter or up to Rs. 15000 /- through ATM from any branches, round the clock.

2.Quick ATM- To give flexibility to access your account 24 hours 365 days, bank has established network of ATM across all our branches

3.Ancillary Business- Bank offers various Value Added Services

Demat- Our Bank has always been in the forefront to add on value to its products, to offer best of the services to customers with convenience. The bank has tied up with NSDL as a Depository Participant (DP) offering Demat services at all branches]

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Desk Drawing- Desk drawing facility through HDFC Bank across the country

Life Insurance / Non - Life Insurance- We have entered into strategic alliance, both for Life & Non-life insurance products. We are a Corporate agent of MAX New York Life a leader in life insurance industry and Oriental Insurance Company Pvt. Ltd. a very reliable and sound name in non- life insurance.

I-Connect- You can pay all your Direct taxes like Gift tax, Income tax, Wealth tax etc and Indirect taxes like Central Excise duty, Service tax etc through I Connect facility

Stamp Franking- Stamp Franking activities have become a credible mode, in the interest of general public at large. In its quest of adding new products , bank has obtained license and introduce this value added facility at its branches to frank impression of stamps on a variety of instruments on which stamp duty is payable, under the provision of Indian stamp Act 1899 and the Bombay Stamp Act 1958

Safe Deposit Locker- Just relax, we safeguard your valuables. No worries any more.

Forex- We are pleased to announce that the RBI has granted AD Category II licence to our bank to deal in foreign exchange.

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4. Remittances-

Real Time Gross Settlement System (RTGS)- RTGS is a more robust payment system enabling inter-bank fund transfers of above Rs.1 Lac. Transfer of funds is done by simple instruction to bank to transfer funds from your account to another bank account whereby settlement is done continuously.

National Electronic funds transfer (NEFT)- Presently all our branches are CBS enabled to offer NEFT facility to our customers. This system facilitates an efficient, secure, economical, reliable and expeditious system to transfer fund below Rs 1 Lac. and clearing throughout India.

5. SMS BANKING-

“SMS BANKING” is a service that enables you to access your bank accounts using a cellularmobile phone. Banking with a cellular mobile phone is like having a bank branch in your palm. You can access your bank any time, from any place.

6. Internet Banking-

Online banking (or Internet banking) allows customers to conduct financial transactions on a secure website operated by their retail or virtual bank, credit union or building

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society.

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