A PROJECT REPORT

ON
“MONEY LENDING BY CO-OPERATIVE BANK”

SUBMITTED TO

SAVITRIBAI PHULE PUNE UNIVERSITY

IN THE PARTIAL FULFILMENT OF TWO YEARS FULL TIME

MASTERS DEGREE IN BUSINESS ADMINISTRATION (MBA)

SUBMITTED BY

Prajakta Sudhir Mhaisane

(BATCH -2017-2019)

UNDER THE GUIDANCE OF

Dr. Shweta Jain

THROUGH

KES’s

PRATIBHA INSTITUTE OF BUSINESS MANAGEMENT

CHINCHWAD.411019

1
 STUDENT DECLARATION
This is to declare that I, Prajakta Sudhir Mhaisane, student of Management of
Business Administration (2017-2019) at Pratibha Institute of Business Management
Chinchwad, have given original data and information to the best of my knowledge in
the project report titled “MONEY LENDING BY CO-OPERATIVE BANK” under
the guidance of Dr. Shweta Jain and that, no part of this Information has been used for
any other assignment but for the partial fulfillment of the requirement towards the
completion of the said course.

I have prepared this report independently at The Akola District Central Co-
operative Bank. and I have gathered all the relevant information personally.

Place: Pune
Date: Prajakta Sudhir Mhaisane
(MBA Finance)

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ACKNOWLEDGMENT
Every project big or small is successful largely due to the effort of many
wonderful people who have always given their valuable advice or lent a helping hand.
I sincerely appreciated the inspiration; support and guidance of all those people who
have been instrumental in making this project a success.

I, PRAJAKTA MHAISANE, the student of PRATIBHA INSTITUTE OF

BUSINESS MANAGEMENT, CHINCHWAD, am extremely grateful to “CO-
OPERATIVE BANK” for the confidence bestowed in me and entrusting my project
entitled “CO-OPERATIVE BANKING SYSTEM” with special reference to “AKOLA
DISTRICT CENTRAL CO-OPERATIVE BANK LTD”.

At this juncture I feel deeply honored in expressing my sincere thanks to The

Chairman Dr. Santosh Kumar Wamanrao Korpe for making the resources available at
right time and providing valuable insights to my project. I am highly indebted to
Branch Manager of The Akola District Central Co-operative Bank Mr. Balkrushna D.
Kale for their guidance and constant supervision as well as for providing necessary
information regarding the project and for their support in completing the project.

I express my gratitude to College Director Dr. Sachin Borgave for arranging

the summer training in good schedule I also extend my gratitude to my Project Guide
Professor Dr. Shweta Jain, who assisted me in compiling the project.

I would also like to thank all the faculty members of PRATIBHA INSTITUTE
OF BUSINESS MANAGEMENT, CHINCHWAD, for their critical advice and
guidance without which this project would not have been possible.

Last but not the least I place sense of gratitude to my Parents and the members
of THE AKOLA DISTRICT CENTRAL CO-OPERATIVE BANK LTD for their kind
co-operation and encouragement during the preparation of this project.

NAME: PRAJAKTA MHAISANE

SIGN: DATE:

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EXCECUTIVE SUMMARY
Banking business has done wonders for the world economy. The simple looking
method of accepting money deposits from savers and then lending the same money to
borrowers, banking activity encourages the flow of money to productive use and
investments. This in turn allows the economy to grow. In the absence of banking
business, savings would sit idle in our homes, the entrepreneurs would not be in a
position to raise the money, ordinary people dreaming for a new car or house would
not be able to purchase cars or houses. The government of India started the
cooperative movement of India in 1904. Then the government therefore decided to
develop the cooperatives as the institutional agency to tackle the problem of usury and
rural indebtedness, which has become a curse for population. In such a situation,
cooperative banks operate as a balancing center. At present, there are several
cooperative banks which are performing multipurpose functions of financial,
administrative, supervisory and development in nature of expansion and development
of cooperative credit system. In brief, the cooperative banks have to act as a friend,
philosopher and guide to entire cooperative structure. T

he study is based on a successful co-operative bank. The study of the bank’s

performance along with the lending practices provided to the customers is herewith
undertaken. The customer has taken more than one type of loan from the banks.
Moreover, they suggested that the bank should adopt the latest technology of the
banking like ATMs, internet / online banking, credit cards etc. so as to bring the bank
at par with the private sector banks.

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Chapter Title Page Number
Number

Executive summary
1 Introduction
 Outline of the problem.
 Objectives, Scope & Limitation of the
study.

2 Industry Profile

3 Company Profile

4 Product Profile

5 Theoretical background.

5 Literature Review

6 Research Methodology

7 Data analysis

8 Observations and Findings

9 Learning through the project.

10 Conclusion of the project.

11 Bibliography

Annexure:
Questionnaire

Index

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 CHAPTER 1

INTRODUCTION TO THE PROJECT

CHAPTER 1

6
 INTRODUCTION TO THE PROJECT

1.1 MONEY LENDING BY CO-OPERATIVE BANK

Lending money is one of the two major activities of the Bank. Bank accept
deposit from public for safe-keeping and pay interest to them. They then lend this
money to earn interest on this money. In a way, the Bank act as intermediaries
between the people who have the money to lend and those who have the need for
money to carry out business transactions.

This bank is lending money in the form of loans:

 House loan
 Personal loan
 Consumer loan
 Educational loan
 Vehicle loan
 Gold loan

1.2 SCOPE OF STUDY:

The study would try to throw some insights into the existing money lending
service provided by bank, perceptions and actual service quality of the bank. The
results of the study would be able to recognize the lacunae in the system thus provide
key areas where improvement is required for better performance and success ratio. In
the days of intense competition, superior service is only differentiator left before the
bank to attract, retain and partner with the customers. Superior service quality enables
a firm to differentiate itself from its competition, gain a sustainable competitive
advantage, and enhance efficiency.

1.3 OBJECTIVES OF STUDY:

 To know the lending practices of cooperative bank.

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  To suggest the appropriate measures to improve the efficiency of the
Cooperative banks.
 To know different type of loans preferred by different sets of customers.
 To know the satisfaction level of the customers from Bank’s lending policies.

1.4 LIMITATIONS OF STUDY:

 The study is based on the data of past four years only.

 The data for study mainly based on a single bank.
 As majority of the customers are employees of the bank, they might be biased
in giving the information
 The time period of the research was limited therefore only 200 customers have
included for study.

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 CHAPTER 2

INDUSTRY PROFILE

CHAPTER 2

INDUSTRY PROFILE

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2.1 HISTORY OF CO-OPERATIVE BANKING:

The origins of the 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. Now, Co-operative movement is quite
well established in India. The first legislation on co-operation was passed in 1904. In
1914 the Maclagan 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. 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 20 th 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. The Anyonya Co-
operative Bank in India is considered to have been the first co-operative bank in Asia
which was formed nearly 100 years back in Baroda. It was established in 1889 with
the name AnyonyaSahayakariMandali Co-operative Bank Limited, with a primary
objective of providing an alternative to exploitation by moneylenders for Baroda's
residents. 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
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viz.self-employed, small businessmen / industries, house finance, consumer finance,
personal finance etc.

2.2 TYPES OF CO-OPERATIVE BANKS:

2.3 OPERATION OF CO-OPERATIVE BANKING:

 Establishments:

1. Co-operative bank performs all the main banking functions of deposit

mobilization, supply of credit and provision of remittance facilities.
2. Co-operative Banks belong to the money market as well as to the capital
market.
3. Co-operative Banks provide limited banking products and are functionally
specialists in agriculture related products. However, cooperative banks now
provide housing loans also.

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

 The chief functions of Co-operative banks are:

1. To attract deposit from non-agriculturist,

2. To use excess funds of some societies temporarily to make up for shortage in
another.
3. To supervise and guide affiliated societies.

 The basic principles on which a Co-operative bank works are:

1. A co-operative character of activities and trait of mutual aid of credit granted.

2. Catering for collective organizations and their members.
3. Restriction on the number of individual votes.
4. Aiming at high rates on deposits and low rates on lending.
5. Limitation of dividends out of profits and bonus to depositors and borrowers
or grants to cultural or co-operative endeavor. These banks are constituted of
voluntary association, self-help and mutual aid, one share one vote and non-
discrimination and equality of members. The co-operative banks are the
organizations of and for the people.

2.4 ROLE OF CO-OPERATIVE BANKING IN INDIA:

Co-operative Banks are much more important in India than anywhere else in
the world. The distinctive character of this bank is service at a lower cost and service
without exploitation. It has gained its importance by the role assigned to them, the
expectations they are supposed to fulfill, their number, and the number of offices they
operate. Co-operative banks role in rural financing continues to be important day by
day, 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.
In rural areas, as far as the agricultural and related activities are concerned, the supply
of credit was inadequate, and money lenders would exploit the poor people in rural
areas providing them loans at higher rates. So, Co-operative banks mobilize deposits
and purvey agricultural and rural credit with a wider outreach and provide
institutional credit to the farmers. Co-operative bank have also been an important
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instrument for various development schemes, particularly subsidy-based programs for
poor.

The Co-operative banks in rural areas mainly finance agricultural based activities
like:
 Farming
 Cattle
 Milk
 Hatchery
 Personal finance

The Co-operative banks in urban areas finance in activities like:

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

2.5 IMPORTANCE OF CO-OPERATIVE BANKING:

Co-operative bank forms an integral part of banking system in India.

This bank operates mainly for the benefit of rural area, particularly the agricultural
sector. Co-operative bank mobilizes deposits and supply agricultural and rural credit
with the wider outreach. They are the main source for the institutional credit to
farmers. They are chiefly responsible for breaking the monopoly of moneylenders in
providing credit to agriculturists.
Co-operative bank has also been an important instrument for various
development schemes, particularly subsidy-based programs for the poor. Co-operative
banks operate for non-agricultural sector also but their role is small. Though much
smaller as compared to scheduled commercial banks, co-operative banks constitute an
important segment of the Indian banking system. They have extensive branch network
and reach out to people in remote areas. They have traditionally played an important

13
role in creating banking habits among the lower and middle-income groups and in
strengthening the rural credit delivery system.

2.6 FEATURES OF CO-OPERATIVE BANKING:

1. Co-operative Banks are organized and managed on the principal of

cooperation, 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.
2. Co-operative bank performs all the main banking functions of deposit
mobilization, supply of credit and provision of remittance facilities.
3. Co-operative Banks provide limited banking products and are functionally
specialists in agriculture related products. However, co-operative banks now
provide housing loans also.
4. Co-operative banks are perhaps the first government sponsored, government-
supported, and government-subsidized 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 favored"
banking sector with risk of nationalization. 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.
5. 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.
6. Co-operative banks are financial intermediaries only partially. The sources of
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.
7. Some co-operative bank are scheduled banks, while others are nonscheduled
banks. Co-operative Banks are subject to CRR and liquidity requirements as

14
 other scheduled and non-scheduled banks are. However, their requirements are
less than commercial banks.
8. As said earlier, co-operative banks accept current, saving, and fixed or time
deposits from individuals and institutions including banks.
9. In the recent past, the RBI has introduced changes in interest rates of
cooperative banks also, along with changes in interest rates of commercial
banks. The interest rates structure of co-operative banks is quite complex. The
rates charged by them depend upon the type of bank, the type of loans, and
vary from state to state.
10. Since 1966 the lending and deposit rate of commercial banks have been
directly regulated by the Reserve Bank of India. Although the Reserve Bank of
India had power to regulate the rate co-operative bank but this have been
exercised only after 1979 in respect of non-agricultural advances they were
free to charge any rates at their discretion. Although the main aim of the
cooperative bank is to provide cheaper credit to their members and not to
maximize profits, they may access the money market to improve their income
so as to remain viable.
11. Co-operative banks (COBs), in short, have played a pivotal role in the
development of short-term and long-term rural credit structure in India over
the years. The co-operative credit effort is said to be the first ever attempt at
micro-credit dispensation in India.

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 CHAPTER 3

COMPANY PROFILE

CHAPTER 3

COMPANY PROFILE

3.1 INTRODUCTION TO THE AKOLA DISTRICT CENTRAL

CO-OPERATIVE BANK

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 The Akola district central co-operative bank, which was inherited the 108-year
service, is the only district cooperative bank in the entire country, not only in
Maharashtra. The initial name of this bank was the Akola central urban bank ltd,
Akola. In 1908, 12 major social activists from Akola district decided to get together
from the then central co-operative bank, Akola, to the 13 co-existing institution
Applying them for registration is very important. In those days, MM Hemingway was
the registrar of cooperative organization. He gave the certification of bank registration
on 5th February 1909.

After passing the law of cooperative credit to India in 1904. In Akola district,
13 different types of cooperative societies were set up till 1908-09. The government
appointed special campaigners to convince people about the importance of
cooperatives and the co-operatives. A lot of work was done by the officer of MPB
Bhatt who encouraged the people to support the cooperative and government officials
would be quick to look after establishment of such institution and to get the benefits
of course, the 13cooperative societies establishment in Akola district did not have any
relation with each other since the number of members of those organization was also
very large, they had to take money from the local lenders to fund their current needs.
As the expansion of these organization work increased, there was a great need for a
central bank to give money to the central bank. The drivers of these 13 cooperative
societies Started thinking that loans should be provided to all the affiliated
organization by adding such co-operatives to such a Kandra section. Accordingly, the
main people of the district gathered in January 1908 and decided to take the co-
operative central bank for Akola district. He sent an application to the registrar of the
bank to co-operate with bank’s chief secretary.

It was approved after scrutiny by the act and written on the official registration
certificate regarding that, as registrar on 5.2.1990, the registrar was certified as Akola
Co-op central bank. Accordingly, the main people of the district gathered in January
1908 and decided to take the co-operative central bank for Akola. He sent an
application to the registrar of bank to co-operate with the bank’s chief secretary. It
was approved after scrutiny by the act and written on the official registration
certificate regarding that, as registered on 5.2.1990 the registrar was certified as Akola
co-op central for Akola district. He sent an application to the Registrar of the bank to
co-operative with the bank’s chief secretary. It was approved after scrutiny by the act

17
and written on the official registration certificate regarding that as registered on
5.2.1990, the registrar was certified as Akola co-op Central Bank

In the last 108 years, there was a change as the office bearers changed the
function of the bank. By the beginning of the 1930, s those who started this bank and
strengthened it on a strong footing would have to call it a period. After that, in the
second period when the economic downturn was created in the country and the
inadequate market prices, many of the untested land acquired by the bank was unable
to repay loan.

3.2 VARIOUS SERVICE AND FACILITY OF THE BANK

 Various attractive schemes for deposits.

 Banking facility for any branch through courier banking.

 Online RTGS/FEFT facility form 104 Branches of the bank 3 rooms of living
rooms.

 Facility for accumulation of education by opening an account for the student.

 Lockers feature.

 Immediate clearing service.

 Draft facility for various cities.

 Timely payment to all teachers on same day of school pay bill.

 Benefit of higher interest concession in addition to prevailing interest rate on

senior citizen.

 Direct subsidy facility. (Gas Holder / Ratio card holder)

 Postcard for farmer’s members by Rupees KCC Debit card, Rupee KCC Debit
card.

3.3 SWOT ANALYSIS:

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Strength:

 The bank has an ethical policy which prevents it from investing in companies
involved in arms trade, genetic engineering, fossil fuel extraction. The ethical
policy is part of the banks constitution.
 Smile, the internet-only operation of the bank is among one of the top-rated
services in UK by consumers.
 The bank offers a variety of retail banking services such as current accounts,
mortgages, loans, credit cards, investments etc.
 The bank caters to a wide customer base including individuals, businessmen,
corporate customers etc.
 The bank provides its customers with latest facilities like internet banking
facility and mobile banking facility.

Weakness:

 The bank had to face a severe financial crisis which saw it being taken overby
US hedge funds.
 Moody’s downgraded its credit rating by 6 notches to junk category.
 The bank has recently closed a lot of its branches and terminated its offshore
activities.

Opportunity:

 The bank has come up with schemes such as the “Golden Hello” to win back
customers after its 2013 financial crisis.
 The bank should introduce new products and schemes to bring in new
customers. It should also build relationships with existing customers to retain
them.
 The bank should come up with better governance and be more transparent, in
order to restore customer confidence in the processes of the bank.

Threats:

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 A more robust accounting system needs to be put in place. It was found that
the bank had a hole in its finances. Such scandals can erode customer
confidence in the bank.
 Default risk which is the risk that the bank may run into losses due to the
counter party defaulting on their liabilities. A bad economic outlook can cause
severe damage to the financial situation of the bank.
 The bank faces threat of running out of capital to run its day to day business
due to the severe financial crisis it is going through.

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 CHAPTER 4

PRODUCT PROFILE

CHAPTER 4

PRODUCT PROFILE

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4.1 BANKING PRODUCT AND SERVICE:

SAVING ACCOUNT: -

Saving account opened encourages the people to save their money and get
interest on their deposited money. Money can be deposited at any time but the
maximum cannot go beyond a certain limit. There is a restriction on the amount that
can be withdrawn at a time or during a week. If the customer wishes to Bank Account
was fixed by RBI and it was fixed at 4.00% on daily balance basis. RBI has
deregulated saving fund account interest rates and now banks are free to decide the
same within conditions imposed by RBI

CURRENT ACCOUNT: -

A depositor can deposit his funds any number of times he like and can also
withdraw the same any number of times he wishes. Generally, businessmen use this
account for their day to day deposits and withdraw transaction. No interest is paid by
the bank on the CA. Cheque book facility is provided and the account holder can
deposit all types of the cheques and draft in their name or endorsed in their favor by
third parties. The main benefit of this account is that the account holder can get
overdraft facility against personal or other securities.

CONCEPT OF E- BANKING

One has to approach the branch in person, to withdraw cash or deposit a

cheque or request a statement of accounts. In true Internet Banking, any inquiry or
transaction is processed online without any reference to the branch (anywhere
banking) at any time. Providing Internet banking is increasingly becoming a “need to
have’’ than a “nice to have’’ service. The net banking, thus, now is more of a norm
rather than an exception in many developed countries due to the fact that it is the
cheapest way of providing banking services. Banks have traditionally been in the
forefront of harnessing technology to improve their products, services and efficiency.
They have, over a long time, been using electronic and telecommunication networks

22
for delivering a wide range of value added products and services. The delivery
channels included telephone, personal computers including the Automated Teller
Machines, ect. With the popularity of PCs, easy access to Internet and World Wide
Web (WWW), Internet is increasingly used by banks as a channel for receiving
instruction and delivering their product and services to their customers.

ACCOUNT STRUCTURE:

Bank accounts may have a positive, or credit balance, where the financial
institution owes money to the customer; or a negative, or debit balance, where the
customer owes the financial institution money.

Broadly, accounts opened with the purpose of holding credit balances are
referred to as deposit accounts; whilst accounts opened with the purpose of holding
debit balances are referred to as loan accounts. Some accounts can switch between
credit and debit balances. Some accounts are categorized by the function rather than
nature of the balance they hold, such as savings account, which routinely are in credit.

All financial institution has their own names for the various accounts which
they open for customers. Financial institutions have a variety of fees for the
maintaining of the various accounts and for processing certain transactions.

FEATURES:

 Customer-owned entities: In the Bank, the needs of the customers meet the
needs of the owners, as co-operative bank members are both. As 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: Bank is 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”
 Profit allocation: In a bank, a significant part of the yearly profit, benefits or
surplus is usually allocated to constitute reserves. A part of this profit can also

23
 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 products
and services by each member, or through an interest ora dividend, which is
related to the number of shares subscribed by each member.

TRANSACTIONS:

The transactions, which call for objective evaluation and the different time frames
required for evaluation, are given below:

 Withdrawal of cash
 Depositing cash in the account
 Getting a new cheque book
 Getting a new fixed deposit receipt or renewing the old one
 Getting payment on the fixed deposit receipt
 Purchasing a bank draft
 Enchasing of bank drafts, travelerscheques, gift cheques
 Getting accession of safe deposit lockers
 Getting the money credited to the account after submission of a local cheque
 Getting the money credited to the account after submission of
outstationCheque
 Getting the amount of a bill credited to the account after it is paid at the other
end
 Receipt of money through mail transfer
 Receipt of money through telegraphic transfer.

SUBJECTIVE CRITERIA:

 Speedy withdrawal of cash

 Speedy acceptance of cash for credit to your account
 Updating of pass books/writing of statements of account on time
 Legibility and accuracy of pass books/ statements of account
 Speedy collection of outstation cheques
 Speedy collection of local cheques
 Timeliness in sending credit/debit advice
 Intimation of maturity of fixed deposits
 Issue/renewal of fixed deposit receipts
 Quick issue of new cheque book
 Speedy purchase of bank draft

24
  Speedy encashment of bank draft
 Receipt of money through telegraphic transfer with minimum delay

Receipt of money through mail transfer with minimum delay

CHAPTER 5

THEROTICAL BACKGROUND

25
 CHAPTER 5

THEROTICAL BACKGROUND

5.1 PRINCIPLES OF CO-OPERATIVE BANK:

The international co-operative alliance has in 1925 adopted the beautiful

seven-color pattern of the rainbow horizontal strips as its international flag, the flag of
co-operation, progress and peace. The flag has seven colors. They are violet, indigo,
blue, green, yellow, orange and red. Rainbow is regarded as an auspicious omen,
Farmers see the rainbow and start ploughing their fields, they read in it the message
about rains to come, it is thus a symbol of hope a harbinger peace. Men see co-
operation in its multi-color patterned, each color blending with the other to make one
harmonious. Whole an ultimately all-pervading harmony & unity in diversity. The

26
seven hues of the rainbow when blended together reunite to present pure unstained
white effulgence. Thus, it stands for purity truth and righteousness.

It symbolizes the aims and idea of the co-operative movement like the rainbow
co-operation brings hope to the depressed achieves harmony among diverse interest
and offers the promise of an ultimate and
universe peace.

Co-operative by their own efforts inspired by a sense of fraternity, equity and

love of the past and creates a new economic system, a system in which capital plays
the role of servant instead of master, the object of production is organized self-help
instead of profit and human dignity is given the pride of place for achieving a more
equitable and efficient economy better social adjustment and a more balanced system
ofdemocracy.

Co-operatives are based on the values of self-responsibility, democracy,

equality and solidarity. In the tradition of their founders, co-operative members
believe in the ethical values of honesty, openness, social responsibility and carrying
for others.

Unlike commercial banks, which are occupied in the helping, the industrial
and commercial sectors of the economy, the co-operative Banks on the other hand
provides credit and other associated facilities to the rural and agricultural sectors.
In World, Co-operative activity was stated in December 1844 in Britan.Social
development is the sole aim of co-operative activity. Co-operative societies came in to
begin when the co-operative societies Act-1904, was enacted. A co-operative society
is the society of voluntary and organized group of individuals. The movement was
started with the aim of providing farmer funds with low rate of interest. So that,
exploitation by the village money lenders in hindered. Under the Banking Regulation
Act of 1904, co-operative banks havebeenbrought under the control of Reserve Bank
Of India (RBI). In India, co-operative activity was started in 1889.the noble ideals like
unity, similarity, honesty, loyalty and mutual co-operation etc. are the base of Co-
operative activity.

27
 In India, co-operative society Act was enacted in 1904. In1909, Jambusar
Urban Co-operative Bank was first established under this act. Then in 1925, new co-
operative society Act was come. Before then there was seven co- operative Banks in
the Gujarat.

The activity of urban co-operative Banking was to extraordinary developed in

the latter half 20th century. There is two reasons of this. Banking regulation Act 1949
was applying to the co-operative Bank in 1966. At that time, there was only 400
Urban co-operative Bank in the whole country. Then in 1969, nationalization of 14
large business banks was become in the country. Today in our country, there are about
1400urban co-operative Bank providing service in area of villages and cities.

The basic principles of co-operation are as follows:

1) Voluntary and open Membership:

Co-operatives Banks are voluntary organizations, open to all personable to use

their services and willing to accept the responsibilities of membership, without
gender, social, racial, political or religious discrimination.

2) Democratic Member Control:

Co-operative Banks are democratic organizations controlled by their members,

who actively participate in setting their policies and making decision, men and
women serving as elected. Member representatives are accountable to the
membership. In primary co-operatives members have equal voting right (one member,
one vote) and co-operative at other levels are organized in a democratic manner.

3) Member Economic Participation:

Members Contribute equitably to and democratically control the capital of

their co-operative. At least part of the capital is usually the common properly of the
co-operative. Members usually receive limited compensation, if any, on capital
subscribed as condition of membership. Members allocated surpluses for any of the
following purposes: developing their cooperative, possibly by setting up reserves, part
of which at least would be indivisible, benefiting members in proportions to their

28
transactions with the co- operative, and supporting other activities approved by the
membership.

4) Autonomy and Independence:

Co-operatives Banks are autonomous, self-help organizations controlled by

their members. If they either into agreements with other organizations, includes
governments to raise capital from external sources, they do so in terms that ensure
democratic control by their members and maintain their co-operative autonomy.

5) Education, Training and Information:

Co-operatives Banks provide Education and Training for their members,

elected representatives, managers and employees so that they can contribute
e4ffectively to the development of their Co-operatives. They inform the general
public–– particularly young people and opinion leaders–– about the nature and benefit
of Co-operation.

6) Co-operation among Co-operatives:

Co-operatives Banks serve their members most effectively and strengthen the
Co-operative movement by working together through local, national, regional and
international structures.

7) Concern for community:

Co-operative works for the sustainable development of their communities

through policies approved by their members.

5.2 ROLE OF APEX COOPERATIVE BANKS

The apex level cooperative credit institutions both in ST and LT structures are
expected to play a leading role in the development of the respective cooperative credit
structure. However, the Task Force observes that professionalization and development
of sound management system of the requisite level continue to take a back seat in
these banks. Also, inadequate role space and autonomy for decision making have led
to slow pace of changes in cooperatives incapacitating them to face the competition
and challenges from the emerging financial sector reforms.

29
 This highlights the need for the apex level banks to play an important role in
the development of different tiers in the system and necessarily achieve and inject into
their human resources, the managerial, organizational and financial capabilities to
face the future challenges. They have also to bestow greater attention on
specialization and diversification in loan business, non-fund business, efficient
financial intermediation, risk management and reduction in NPAs at each tier in the
structure. They should play a very important role as supervisors of the lower tiers.
They should also ensure that effective internal control system in each tier is in place
and the quality and timeliness in the internal inspections and external audit are
maintained.

In the short-term cooperative credit structure, the DCCBs are expected to play
a similar role so far as PACS are concerned. The ST credit structure obtaining in most
parts of the country has been a federal one with a three-tier system. As on 31st March
1999, ST structure had more than 92000 Primary Agricultural Credit Societies (PACS)
at the village level, 367 District Central Cooperative Banks (DCCBs) at intermediary
district level and 29 State Cooperative Banks (SCBs) at state level including newly
formed Sikkim State Cooperative Bank, meeting all types of credit needs of the rural
sector whose coverage extend to the remotest parts of the country. In smaller states
and Union Territories having two-tier structure, the credit requirements of the PACS
are being directly met by the SCBs.

The LT cooperative credit structure has only two tiers, one at the state level
and the other at the taluka/tehsil level. Some states have unitary structure with the
state level banks operating through their own branches.

As at the end of March 1999, the long-term credit structure consisted of

19State Cooperative Agriculture and Rural Development Banks (SCARDBs with 745
Primary Cooperative Agriculture and Rural Development Banks (PCARDBs) in
respect of federal structure and around 1500 branches in the unitary structure in eight
states. Three SCARDBs had, however, admixed structure incorporating both the
unitary and federal systems (Assam, Himachal Pradesh and West Bengal). An
integrated structure providing all types of agricultural credit (both short term and long
30
term)under ‘single window’ credit system is obtaining in Andhra Pradesh. Inthe
North-Eastern Region, only three states (Assam, Manipur and Tripura)are served by
the LT structure. Generally, in the states not having the LT structure, separate sections
of the State Cooperative Banks look after long term credit needs together with other
Rural Financial Institutions (RFIs) i.e. branches of Regional Rural Banks and
rural/semi-urban branches of Commercial Banks.

5.3 FINANCIAL PERFORMANCE OF COOPERATIVE BANKS

The cooperative banking has made significant strides in the field of rural
credit. From a meager credit share of 2.7 percent during the early fifties, the share of
agricultural credit purveyed by the cooperative banks has increased to as much as per
cent by 1999. Notwithstanding the massive expansion of rural branches by
commercial banks since their nationalization during 1969, the cooperative banking
sector continued to have the largest network of rural credit institutions. Their
significant role in increasing agricultural production through provision of both
production and investment credit needs no emphasis. Of late, their role in supporting
rural non-farm sector has also been growing. Despite impressive strides in
mobilization of deposits and channelization of rural credit, a large number of
cooperative credit institutions are far from being strong and self-sustaining business
enterprises. Low resource base and consequent heavy dependence on higher tier and
refinancing agencies, inadequate volume of business much below the break-even
level, poor recovery management with attendant afflictions such as increasing non-
performing assets and recurrent loss of assets have been some of the factors
contributing to their financial and operational weaknesses. Absence of professional
and business ethos and duality of control have been yet other important causes. Some
of these issues are discussed below.

Resource Base and Borrowings

Low resource base has been a major constraint in the effective functioning of
cooperative credit institutions, especially in the case of PACS in the ST structure and
both SCARDBs and PCARDBs in the LT structure. The SCBs and DCCBs are in a

31
comparatively better position as deposits constituted the major segment of their
resource base. In the long term cooperative credit system, the SCARDBs and
PCARDBs had negligible resources of their own as traditionally they were not being
permitted to accept deposits. The SCARDBs have since been allowed from 1997 to
mobilize term deposits for periods not less than 12 months subject to the condition
that aggregate deposits accepted and outstanding at any point of time are not to
exceed their net owned funds. The scheme, however, had virtually been a non-starter
in many of the states.

The SCBs and DCCBs which have high level of deposits as part of their
resource base, also have their own problems. These institutions continue to look to
borrowings from higher financing agency like NABARD. As the finance provided by
NABARD is at a concessional rate, borrowings from NABARD help these institutions
to cross-subsidize their loaning operations. However, refinance by the higher tier is
available only to current loans outstanding. Further, SCBs and DCCBs are required to
commit a certain minimum prescribed percentage of their internal lendable resources
for lending for ST (SAO) purposes to be eligible for drawing refinance at the
concessional rate.

5.4 LOANS OF CO-OPERATIVE BANK

Loans are major service provided by the banks. The major portion of the bank
deposits is employed by the way of loans, which is the most profitable employment of
its funds.

Loans may be provided for a short-term and medium term. The loans may be
provided against some security, guarantee ect. The borrower may use these funds for
starting a new venture, housing purpose, for expansion for personal purpose.
Normally these loans are paid in installment.

Therefore, the loan can be classified as:

 Home loan

 Vehicle loan

32
  Education loan

 Personal loan

 Agriculture loan

 Gold loan

Before grating a loan to any borrower bank has to scrutinize the project or the
various document. If this is not taken due care of the asset may turn into a bad
debt thus resulting into losses for the bank i.e. a default.

5.5 LEGAL FRAMEWORK:

The Banking Regulation Act, 1949

Preamble of regulatory Act:
• An Act to consolidate and amend the law relating to banking.

• Whereas it is expedient to consolidate and amend the law relating to banking.

Introduction:

The Banking Companies Act, presently known as Banking Regulation Act

was enacted owing to safeguard the interest of depositors, control abuse of power by
some bank personnel controlling the banks in particular and to the interest of Indian
economy in General.

The Banking Regulation Act was passed as The Banking Companies Act 1949
and come into force w.e.f.16.3.49. Subsequently it was changed to Banking
Regulation Act 1949 w.e.f.01.03.66. However, it should be remembered that this act
does not supersede the provision of companies act or any other law for the time being
in force in respect of banking business.

33
Different provisions of Banking Regulations Act:

Sr. No. Parts Topics Sections

covered
1 I Preliminary 1to 5A

2 II Business of Banking Companies 6 to 36A

3 IIA Control over management 36AA

36AC
4 IIB Prohibition of certain activities in relation to 36AD
Banking Companies
5 IIC Acquisition of the undertaking of Banking 36AE to
Companies in certain cases 36AJ
6 III Suspension of business and winding up of 36B to
Banking 45
Companies
7 IIIA Speedy provision for speedy disposal of winding 45A to
up proceeding 45X
8 IIIB Provision relating to certain operation of Banking 45Y to
Companies 45ZF
9 IV Miscellaneous 46 to
55A
10 V Application of the Act cooperative banks 56

Applicability of the Banking Regulation Act:

This Act applies to following categories of Banks:

• Nationalized Banks
• Non-Nationalized Banks
• Co-Operative Banks

Business of Banking Companies Section 6(1) and 6(2) r.w. 56(b):

• Borrowing, raising or taking of money
• Giving advance
• Bills business
• L/C, Bank Guarantee, Indemnity
• Foreign exchange

34
• Providing safe deposit vaults
• Collecting and transmitting money
• Managing, selling and realizing any property that may come into the possession of
the bank in satisfaction or part satisfaction of any of its dues
• Acquiring, holding and dealing with any property or any right, title or interest in
any such property that may form the security or part of the security for any loans
and advances or which may relate to such security
• Undertaking and executing trusts
• Acquiring, constructing, maintaining and altering of any building for the purpose of
the bank
• Acquiring and undertaking the whole part of the business of any person or bank if
its nature of business is as per the allowed business for the bank
• Doing all such other things as are incidental or conductive to promotion or
advancement of the business of the bank
• Any other business the Central Govt. may by notification specify an allowed
business
• Banks are prohibited to do any other business

Reserve (CRR) Section 18 r.w. 56(j):

Every bank is required to keep cash reserve, with itself or by way of balance in
the current account with RBI or Central / District Co-operative Bank or net balance in
all such way, of minimum prescribed % amount of its DTL as of last Friday off
fortnight return about this has to be submitted to RBI before 15th of each month about
alternate Friday

Statutory Liquidity Ratio (SLR) Section 18 r.w. 56(j):

Bank shall maintain unencumbered approved securities, valued not exceeding

the current market price or an amount which shall not be less than 24% of the total of
its demand and time liabilities (DTL)

Control over Management:

• 36AA Power of Reserve Bank to remove managerial and other persons from office

35
1. 36AAA. Supersession of Board of directors of a multi-state Co-Operative Banks

2. 36AAB. Order of winding up of multi-state Co-Operative Bank to be final in

certain cases

3. Reimbursement to Deposit Insurance Corporation by liquidator or transferee bank

• 36AB. Power of Reserve Bank to appoint additional directors

• 36AC. Part IIA to override other laws

36AD. Punishments for certain activities in relation to banking companies

5.6 CLASSIFICATION OF LOAN AT CO-OPERATIVE BANK

1. HOME LOAN

 Purpose:

 Purchase / construction of house/ flat

 Purchase of plot and construction of house thereon **

 Repairs/ improvement/ extension of the existing residential property

 Take–over of housing loan from another bank / FI

 Eligibility:

 Indian citizen above 21 years

 Individual, either singly or jointly with other family members viz.

father, mother, son and/ or spouse, who have regular sources of income
as co- application

 Quantum of loan:

36
  Depending on Repayment capacity of the borrower and value of
property

 Maximum Rs.25 lakh for district level, Rs.20 for Taluka level, 15 lakhs
for rural

 Moratorium period:

 Moratorium period of up to 18 months.

 Repayment:

 Repayment period up to10 years

 Flexible method of repayment

 Security:

 Equitable mortgage (E.M) of the residential property

 If the house proposed to be purchased is yet to be constructed or is

under construction, interim security may be required.

List of documents:

 Proof of identity (any of the following)

a. PAN Card

b. Employee identity card

c. Any other valid proof

 Proof of address (any of the following)

a. Electricity bill

b. Telephone bill

c. Ration card

37
 d. Any other valid proof

 PAN card

 Last 12 months bank statement

 Proof of income

o For Salaried class

a. Last one-year ITR

b. From-16/ letter from employer

c. Last 6-month salary slip

o For business Class

a. Last three-year ITR

b. P and L balance sheet

o Agriculturists

a. Income certificate from concerned revenue officer (Tahsildar)

b. Proof of land holding

 Property Papers

a. Allotment letter

b. Advance money receipt

c. Title deed

 3 photographs

 Proof of out-goes

a. Loan payment statement if any

b. LIC policies, if any

38
 c. Valid proof of any other out-go

2. VEHICLE LOAN

 Purpose:
Now you can fulfill your dream of owning a vehicle by availing Union Miles. You
can avail this special scheme to purchase of new or old (up to 3 years) Four-wheeler
and you also avail this loan to purchase a new two-wheeler.

 Eligibility:

 Indian citizen aged 18 years and above holding valid license

 Individual, either singly or jointly with spouse

 Quantum of loan:

VEHICLE MAXIMUM QUANTUM OF LOAN

New 4-wheeler Rs. 10 lakhs

New 2-wheeler Rs. 3 lakhs

 Margin i.e. your share:

 15% of on-road price (vehicle cost + registration charges + insurance + road

tax)

 Repayment:

 Repayments period of new 4-wheeler up to 7 years

 Repayments period of new 2-wheeler up to 5 years

 Flexible methods of repayment

 Security:

 Hypothecation of vehicle purchased out of bank’s finance

 Bank’s lien to be noted with road transport authorities

39
  Guarantee:

 Guaranty of the spouse in required

 In case borrower is unmarried, 3rd party guarantee of sufficient means

List of documents:
 Proof of identity (any of the following)

a. Pan card

b. Employee identity card

c. Any other valid proof

 Proof of address (any of the following)

a. Electricity bill

b. Telephone bill

c. Ration card

d. Any other valid proof

 Performa / Invoice

 Valuation report from approved automobile engineer for old vehicle

 Proof of income

o For salaries class

a. Last one-year ITR

b. Form 16 / letter from employer

c. Last 6 months salary slip

o For business class

a. ROLE Last three-year ITR

b. P& L, Balance sheet

40
  3 photographs

3. EDUCATION LOAN

 Purpose:

 Basic education

 To pursue graduation/ higher education

 To pursue technical/ professional/ management courses

 Eligibility:

 Indian citizen

 Secured admission to the concerned institute in india appropriate selection

process and cleared the qualifying examination, if any courses covered in india

 Graduation / post-graduation / diploma courses from recognized universities

 Technical / professional/ management courses

 Quantum of loan:

 For studies in india -maximum up to rs.5lakh. The quantum of loan is

higher for the institute covered under. Special education loan schemes.
Please check the special offers tab above for further details.

 Maratorium period:

 The moratorium period minimum of the following two.

o Course period +1 year

o Course period + 6 months after commencement of job

 Repayment:

Up to 2.5 lakh = 1-year minimum

Up to 2.5 lakh = 3-year maximum

41
 Insurance:

 Life insurance of the student is recommended to the tune of the loan

amount

 Other condition

 The loan shall be sanctioned / disbursed from the branch nearest to the
place of domicile of the student

 Loan would be disbursed directly to the institute

 Loan can be availed during subsequent years of the course

 Legal and valuation charges have to be borne by the borrowers.

 If the loan is take-over by other bank/ fi, then a charge of 2% on the

average loan outstanding for the past 12 months will be levied

List of documents

 Proof of identity (any of the following)

a. Pan card

b. Employee identity card

c. Any other valid proof

 Proof of address (any of the following)

a. Electricity bill

b. Telephone bill

c. Ration card

d. Any other valid proof

 PAN Card

 Last 12-month bank statement

 Admission papers

42
 a. Admission letter/ admit card

b. Schedule of expenses including fee structure and living expenses

c. Mark sheets – Class X or equivalent onward

 Proof of income, if any

o For salaried class

a. Last one-year ITR

b. From-16/ letter from Employer

c. Last 6 months salary slip

o For business class

a. Last three years ITR

b. P&L, balance sheet

o Agriculturists

a. Income certificate from concerned revenue officer (Tahsildar)

b. Proof of land holding

 3 photographs

 Proof of out-goes

a. Loan repayment, if any

b. LIC Policies, if any

c. Valid proof of any other out-get

4. PERSONAL LOAN

 Purpose:

43
 There are many among us who might be facing difficulty in purchasing
goods by paying a lump sum amount. But we would be comfortable paying
small installment monthly. It helps you avail loans to meet personal expenses
such as purchase of consumer durable.

 Eligibility:

 Should be from the salaried class, having regular source of income and having
salary account with our bank.

 The application has reasonable residual service to ensure that the entire loan is
repaid one year prior to retirement.

 Quantum of loan:

 Up to rs. 5 lakh

 Moratorium period:

 Nil

 Security:

 No security other than the guarantees and undertaking from employee.

 Guarantee:

 2 guarantees are required.

List of documents:

 Proof of identity (any of the following)

a. Pan card

b. Employee identity card

c. Any other valid proof

 Proof of address (any of the following)

a. Electricity bill

b. Telephone bill

44
 c. Ration card

d. Any other valid proof

 Pan card
 Proof of income

a. Last one-year itr

b. From -16/ letter from employer

c. Last 6 months salary slip

 3 photographs
 Proof of out-goes

a. Loan repayment statement, if any

b. Lic policies, if any

c. Valid proof of any other out-go

5. AGRICULTURE LOAN

 Purpose:

 Repayments of old loans to cultivators.

 Purchasing new land.

 Digging and construction of the well.

 Repairing the well

 Eligibility:

 Indian citizen above 21 years

 Individual, either singly or jointly with other family members viz. Father,
mother, son and/ or spouse, who have regular sources of income as co-
application

 They have land is required

45
  Quantum of loan

 Per hectare maximum up to rs. 50,000

 Repayment:

 Repayment in 1 year

 If after 1-year payment is not collect that time bank received the interest
and renew the loan case again

 Guarantee:

 Insurance:

 No insurance is required

List of documents:

 Proof of identity (any of the following)

a. Pan card

b. Employee identity card

c. Any other valid proof

 Proof of address (any of the following)

a. Electricity bill

b. Telephone bill

c. Ration card

d. Any other valid proof

 Pan card

 3 photographs

 Proof of out-goes

a. Loan repayment statement, if any

46
 b. Lic policies, if any

c. Valid proof of any other out-go

 RATE OF INTEREST BEING CHARGE BY CO-OPERATIVE BANK

(Table no.7.1)

Types of loan Rate of Interest

2016 2017 2018

Home loan 9.50% 9.85% 10.00%

Vehicle loan 12.50% 12.00% 12,50%

Education loan 12.00% 12.50% 13.00%

Personal loan 14.00% 14.00% 13.50%
Other loan 12.00% 12.50% 12.00%

CHAPTER 5

REVIEW OF LITERATURE

47
 CHAPTER 5

REVIEW OF LITERATURE

Various studies conducted and numerous suggestions were sought to bring

effectiveness in the working and operations of financial institutions.
 Narsimham Committee (1991) emphasized on capital adequacy and liquidity,
Padmanabhan Committee (1995) suggested CAMEL rating (in the form of
ratios) to evaluate financial and operational efficiency,
 Tarapore Committee (1997) talked about Non-performing assets and asset
quality, Kannan Committee (1998) opined about working capital and lending
methods, Basel committee (1998 and revised in 2001) recommended capital
adequacy norms and risk management measures.
 Kapoor Committee (1998) recommended for credit delivery system and credit
guarantee and
 Varma Committee (1999) recommended seven parameters (ratios) to judge
financial performance and several other committees constituted by Reserve
Bank of India to bring reforms in the banking sector by emphasizing on the
improvement in the financial health of the banks.

48
 Experts suggested various tools and techniques for effective analysis and
interpretation of the financial and operational aspects of the financial institutions
specifically banks. These have focus on the analysis of financial viability and credit
worthiness of money lending institutions with a view to predict corporate failures and
incipient incidence of bankruptcy among these institutions.

 Bhaskaran and Josh (2000) concluded that the recovery performance of co-
operative credit institutions continues to unsatisfactory which contributes to
the growth of NPA even after the introduction of prudential regulations. They
suggested legislative and policy prescriptions to make co-operative credit
institutions more efficient, productive and profitable organization in tune with
competitive commercial banking.
 Jain (2001) has done a comparative performance analysis of District Central
Co-operative Banks (DCCBs) of Western India, namely Maharashtra, Gujarat
and Rajasthan and found that DCCBs of Rajasthan have performed better in
profitability and liquidity as compared to Gujarat and Maharashtra.
 Singh and Singh (2006) studied the funds management in the District Central
Co-operative Banks (DCCBs) of Punjab with specific reference to the analysis
of financial margin. It noted that a higher proportion of own funds and the
recovery concerns have resulted in the increased margin of the Central Co-
operative Banks and thus had a larger provision for non-performing assets.
 Mavaluri, Boppana and Nagarjuna (2006) suggested that performance of
banking in terms of profitability, productivity, asset quality and financial
management has become important to stable the economy. They found that
public sector banks have been more efficient than other banks operating in
India.
 Pal and Malik (2007) investigated the differences in the financial
characteristics of 74 (public, private and foreign) banks in India based on
factors, such as profitability, liquidity, risk and efficiency. It is suggested that
foreign banks were better performers, as compared to other two categories of
banks, in general and in terms of utilization of resources in particular.
 Campbell (2007) focused on the relationship between nonperforming loans
(NPLs) and bank failure and argued for an effective bank insolvency law for

49
 the prevention and control of NPLs for developing and transitional economies
as these have been suffering severe problems due to NPLs.
 Singla (2008) emphasized on financial management and examined the
financial position of sixteen banks by considering profitability, capital
adequacy, debt-equity and NPA.
 Dutta and Basak (2008) suggested that Co-operative banks should improve
their recovery performance, adopt new system of computerized monitoring of
loans, implement proper prudential norms and organize regular workshops to
sustain in the competitive banking environment.
 Chander and Chandel (2010) analyzed the financial efficiency and viability
of HARCO Bank and found poor performance of the bank on capital
adequacy, liquidity, earning quality and the management efficiency
parameters.

CHAPTER 6

RESEARCH METHODOLOGY

50
 CHAPTER 6

RESEARCH METHODOLOGY

6.1 RESEARCH METHODOLOGY:

Research Methodology refers to search of knowledge one can also define

research Methodology as a scientific and systematic search for required information
on Specific topic. Research Methodology is the way in which research problems are
solved systematically.

6.2 METHOD OF DATA COLLECTION:

• Primary Data:

a. Observation Method

b. Structured Questionnaire

c. Manual of instructions on loans and advances

d. Books

e. Internet

51
6.3 SAMPLING UNIT:

The Study population includes the customers of bank and Sampling Unit for
Study was Individual Customer.

SAMPLE SIZE:

200 respondents

6.4 RESEARCH DESIGN:

For the proper analysis of data simple quantitative technique such as

percentage were used. It helps in generalization from the data available. The data
which was collected from a sample of population was assumed to be representing
entire population was interested.

6.5 LIMITATION:

 The study is based on the data of past four years only.

 The data for study mainly based on a single bank.
 As majority of the customers are employees of the bank, they might be biased
in giving the information
The time period of the research was limited therefore only 200 customers have
included for study.

52
 CHAPTER 7

DATA ANALYSIS

53
 CHAPTER 7

DATA ANALYSIS

1. Average time taken for the processing of loan

Average time for processing of loan No. of respondent Percentage (%)

Less than 7 days 34 68%
Between 7 to 14 days 13 26%
More than 14 days 3 6%
(Table no. 7.1)

54
 3
13

Less than 7 days

Between 7 to 14 days
More than 14 days

34

(Graph No.7.1)

Interpretation

Study reveals that 38% take loan because banks provide easy payment, 34% take
loans because of less formalities and other respondent take loan because of reasonable
rate of interest, more schemes.

2. Preferable term of loan

Term of loan No. of respondent Percentage (%)

Less than 1 year 6 12%
1 to 3 years 10 20%
More than 3 years 34 64%
(Table no. 7.2)

55
 12%

Less than 1 year

20%
1 to 3 years

More than 3 years

64%

(Graph No.7.2)

Interpretation

Study shows that 64% respondent take loan for more than 3 years, 20% take loan for
1 to 3 years and 12% take loan for the period of less than 1 year

3. Customers who would like to refer the co-operative bank to their friends and
relatives

Bank refer to other No, of respondent Percentage (%)

Always 39 78%
Sometimes 9 18%
Never 2 4%
(Table no. 6.3)

56
 Percentage (%)

4%

18%

Always

Sometimes

Never

78%

(Graph No. 7.3 )

Interpretation

78% of the respondent would like to refer the bank to their friends and relatives
which shows that they are satisfied from the services and lending practices of the
bank.

4. What prompted the customer to take loan from cooperative bank?

Reason for taking loan No. of Respondent Percentage (%)

Reasonable rate of interest 6 12%
More schemes 5 10%
Less formalities 17 34%
Easy repayment 19 38%
Any other 3 6%

57
 (Table no. 7.4)

6% 12%
10% Reasonable rate of intrest
38% more schemes
less formalities
34% easy repayment
any other

(Graph No.7.4)

Interpretation

Study reveals that 38% take loan because banks provide easy payment, 34% take
loan because of less formalities and other respondent take loan because of
reasonable rate of interest, more schemes.

7.2 PERFORMANCE OF THE CO-OPERATIVE BANK PROFIT AND LOSS

A/C (Rupees)

Particular 2016 2017 2018

Interest Income (Interest Received) 26630.32 27596.52 28309.61

Other Income (Other Income) 754.82 824.78 1079.85

Total Income 27385.14 28421.30 29389.46
Interest Expenditure 16589.77 18777.57 15406.45
Other expenditure 9330.30 7789.06 11961.79

58
Total expenditure 25920.07 26566.63 24368.24
Profit 1465.07 1854.67 2021.22

Other Working Result (Other

Important Information)
67.56 65.58 59.86
CD Ratio (%) (CD ratio)
Recovery performance (Recovery 63.33 61.35 55.94
DCB (30-6)%

10445.34 11304.15 7199.58

Gross NPAs (Gross NPAs)
Net NPAs N) 0.00 0.00 0.00
% of gross NPAs to total 6.60% 7.47% 4.66%
advances (gross NPA's Gross
State Loan Ratio)
% of net NPAs to net loans 0.00 0.00 0.00
(Net NPA's Net Debt Ratio)
13.40% 14.30% 16.43%
Capital adequacy (capital adequacy
ratio)
Net Worth (+)27630.05 (+)28304.01 (+)39652.32
(Table no. 7.5

7.3. RATIO INTERPRETATION FROM THE PROFIT AND LOSS

STATEMENT, AND BALANCE SHEET OF THE CO-OPERATIVE BANK

7.3.1. LOAN TO DEPOSITE RATIO:

Loan to deposit ratio is used to calculate a lending institution’s ability to cover

withdrawals made by its customers. Loans given to its customers are mostly
not considered liquid meaning that they are investment over a longer period
of time.

Loan to Deposit Ratio= Loan / Deposit * 100

59
 YEAR CALCULATIONS CD Ratio in (%)
2016 158235.56 / 67.56
234204.66*100
2017 162391.79 / 65.58
247632.45*100
2018 154549.71 / 59.86
258174.99*100
(Table no. 7.7)

Credit Deposit Ratio (%)

70

68 67.56

66 65.58

64

62 CD Ratio (%)

59.86
60

58

56
2016 2017 2018

(Graph No.7.5)

Present study shows the above graph and table Current Deposit Ratio in 2016
was 67.56, in 2017 was 65.58 and in 2018 is 59.86. There is decrease in the ratio
every year. Decrease in loan to deposit ratio is not beneficial for the bank.

60
7.3.2. GROSS NPA RATIO:

This ratio is used to check whether the bank’s gross NPA are increasing on
year. If it is, indicating that the bank is adding fresh stock of bad loans.

Gross NPA Ratio = Gross NPA / Total Loan* 100

YEAR CALCULATIONS NPA Ratio in (%)

2016 10445.34/ 158235.56*100 6.60

2017 11304.15/ 7.47

162391.79*100
2018 7199.58/ 4.44
154549.71*100
( Table no . 7 .8)

Gross NPA Ratio (%)

8 7.47

7 6.6

5 4.66

4 Gross NPA Ratio (%)

0
2016 2017 2018

(Graph No.7.6)

The above of graph and table it is seen that the gross NPA which was 6.6 in
2016 7.47 was in 2017, here 2017 this Bank NPA is increase means bank adding fresh
stock of bad loan, in 2018 bank NPA Ratio 4.66 is decrease. Decrease in Ratio is
beneficial for the bank.

61
7.3.3. CAPITAL ADEQUACY RATIO:

Capital adequacy ratio is also known as Capital to Risk Assets Ratio is the
ratio of a bank’s capital to risk. National regulation tracks a bank’s CAR to ensure
that it can absorb a reasonable amount of loss and complies with statutory capital
requirements. CAR = Tier 1 Capital + Tier 2 Capital/ Risk weighted Asset

YEAR CAR in (%)

2016 13.40

2017 14.30

2018 16.43

( Table no . 7 .9)

CAR in (%)
18 16.43
16
14.03
14 13.04

12
10
CAR in (%)
8
6
4
2
0
2016 2017 2018

(Graph No.7.7)

Presents of study the RBI has set the minimum capital adequacy Ratio at 9%
for all Banks this bank having 2016 was 13.4%, in 2017 was 14.3% and 2018 is
16.43% this Ratio is highest the compare RBI Ratio the Bank expand their business
having adequate capital.

62
7.3.4. TOTAL ADVANCES TO TOTAL ASSET RATIO:

This ratio indicates banks aggressiveness in lending which ultimately results

in better profitability. Higher ratio of advances of bank deposits (assets) is preferred
to a lower one.

Total Advances to Total Asset Ratio = Total Advances / Total Asset*100

YEAR CALULATIONS TATA Ratio in (%)

2016 158235.56/ 47.87
330578.55*100
2017 162391.79/ 46.23
351277.60*100
2018 154549.71/ 43.62
354340.28*100
(Table no . 7.10)

TATA Ratio in (%)

49
47.87
48
47 46.23
46
45
43.62 TATA Ratio in (%)
44
43
42
41
2016 2017 2018

(Graph No.7.8)

The above graph and table it is seen that Total of Advance to total of asset
Ratio which was 47.87 in 2016, in 2017 was 46.23 and 2018 is 43.62 reduced
every year.

63
7.3.5. INTEREST INCOME TO TOTAL INCOME RATIO:

Interest income is basis source of revenue for banks. The interest income total
income indicates the ability of the bank generating income from its lending.

Interest Income to Total Income Ratio = Interest income / Total income

*100

YEA4R CALCULATIONS RATIO in (%)

2016 26630.32/ 97.24

27385.14*100
2017 27596.52/ 97.10
28421.30*100
2018 28309.61/ 96.36
29389.46*100
(Table no. 7.11)

II to TI Ratio in (%)

97.4
97.24
97.2 97.1

97

96.8

96.6
Ratio in (%)
96.36
96.4

96.2

96

95.8
2016 2017 2018

(Graph No.7.9)

The present study of interest income to total income show the ability of
bank generating income from lending operation, 2016 is 97.24 and 2018 is 96. 36
this is higher ratio is better for the bank

64
7.3.6 OTHER INCOME TO TOTAL INCOME RATIO:
The bank generates higher fee income through innovative product and adapting the
technology for sustained service levels.

Other Income to Total Income Ratio= Other Income / Total Income*100

YEAR CALCULATIONS RATIO in (%)

2016 754.82/ 27385.14*100 2.76

2017 824.78/ 2.90

28421.30*100
2018 1079.85/ 3.67
29389.46*100
(Table no. 7.12)

OI to TI Ratio in (%)
4 3.67
3.5
2.9
3 2.76
2.5
2
Ratio in (%)
1.5
1
0.5
0
2016 2017 2018

(Graph No.7.10)

The present study shows lower the ratio of bank is better for the bank these bank is
2016 percentage is 2.76, 2017 percentage is 2.90 and 2018 percentage is 3.67

7.3.7 RETURN ON ASSET RATIO:

Net profit to total asset indicates the efficiency of the banks in utilizing their assets in
generating profits. A higher ratio indicates the better income generating capacity of
the assets and better efficiency of management in future.

65
Return on Asset Ratio = Net Profit / Total asset * 100

YEAR CALCULATIONS ROA Ratio in (%)

2016 27630.05 8.36
/330578.55*100
2017 28304.01 8.06
/351277.60*100
2018 39652.32/ 11.19
354340.28*100

( Table no . 7.14)

ROA Ratio in (%)

12 11.19

10
8.36 8.06
8

6
ROA Ratio in (%)

0
2016 2017 2018

( Graph No. 7.11 )

The above graph and table total

66
 CHAPTER 8

OBSERVATIONS AND FINDINGS

67
 CHAPTER 8

OBSERVATIONS AND FINDINGS

8.1 FINDING OF THE STUDY:

 Co-operative banks have different types of loan facility wherein eligibility

criteria are applicable for availing loan.

 It is observed this bank deals with agriculture loan.

 This bank does not provide loan of more than Rs. 10lakh.

 This bank charges highest rate of interest on personal loan.

 Loan to deposit ratio of the organization is above 60%

 Performance of the bank with respected to gross NPA Ratio for the year 2016
was 6.60 and 2018 is 4.44

 Capital adequacy Ratio improve from 13.40 to 16.43 in the 2016 to 2018
which much better than the norm of RBI is 9%.

 Total advance to total asset Ratio always more than 40%

 Interest income to total income is always more than 95% as it is banking

industry.

 ROA is increase to 8.36 to 11.19 over period of 2016 to 2018

68
8.2 SUGGESTION:

 This bank should try to increase there their deposits.

 This bank should change their loan polices.

 Cooperative bank should drop a scientific method to recover over dues and
must maintain records on delay basis.

 Introduce different types of deposit schemes and offer comparative rate of

interest.

69
 CHAPTER 9

LEARNING THROUGH THE PROJECT

70
 CHAPTER 9

LEARNING THROUGH THE PROJECT

• Communication skills – understanding communication as a two-way process,

listening skills, assertiveness. A building block for all co-operative skills. Vital for
good meetings and to negotiate with other members. Communication skills also
provide a boost to the day-to-day running of your co-operative in areas such as
customer care and marketing.

• Meeting and decision-making skills – different ways to reach decisions, how to

chair a meeting and how to participate. Speaking as chair of a co-operative, even the
best chairing techniques require all participants to share responsibility for helping the
meeting run smoothly.

• How to deal with conflict – not just conflict resolution but techniques such as
principled negotiation which encourage and value disagreement as a means to
producing the best outcome for your co-op.

• Team working – recognizing individual roles, behaviors and skills; techniques for
galvanizing your team around common goals.

I've had the pleasure of working with some well-established co-operatives

whose members developed these skills over time through trial and error or with the

71
assistance of other co-operatives and co-operative development bodies. However,
each time a new member joins the co-operative the newbie also needs these skills –
not only to thrive as an individual member but also for the whole co-operative to
continue to function effectively. I've noticed that in startup co-operatives, those with
good co-operative skills have progressed more quickly and been better equipped to
deal with the hardships that face any startup business.

I believe that for co-ops at all stages of development, investing in the co-
operative skills of their members pays dividends: time is spent running the business
effectively and generating profits, not dealing with internecine strife; the business is
managed more effectively; mutual needs of all members can be met, and members
who add to the co-op's diversity are retained by enabling them to participate.

Many co-operatives – including my own, Co-operatic – host ideas, tools and

tips on their websites to encourage co-ops to carry out a bit of DIY before calling in
the experts. I'd like to see a time when every co-operative has co-operative skills as a
standard item in their training or human resources development plan.

72
 CHAPTER 10

CONCLUSION AND SUGGESTION

73
 CHAPTER 10

CONCLUSION AND SUGGESTION

CONCLUSION:

It is concluded that the study brings about the areas which require urgent
attention of the employees, the management, and the policy makers of the bank. These
are areas in which customers are hugely dissatisfied with the services of the banks
against their expectation. This high degree of dissatisfaction resulting from the
services received clearly questions the design of services of the bank employees.
These limitations are too serious to be avoided as these questions the front-line people
dealing with the customers and the approach of the management in taking customers
seriously. To satisfy these customers, the management can make some attempts, noted
earlier as recommendation. The management should understand the benefits of service
quality. It includes increase customer’s satisfaction, improve customer’s retention,
increase profitability and improve financial performance. In the days of intense
competition, superior service is the only differentiator left before the bank to attract,
retain and partner with the customers. Superior service quality enables a firm to
differentiate itself from its competition, gain a sustainable competitive advantage and
enhance efficiency. Thus, improving service quality leads to the customer satisfaction
and, ultimately, to customer loyalty.

74
 REFRENCES

BOOKS:
 Cooperative Banking in India - Mittal Publications
 Co-operative Banking, Its Principles and Practice
 Dutta Uttam and Basak Amit (2008), “Appraisal of financial performance of
urban cooperative banks.”
 Jian (2001), “Comparative study of performance of District Central Co-op.
Banks (DCCBs).”
 Singh and Singh (2006) studied the funds management in the District Central
Co-op Banks (DCCBs).

WEBSITES:
 www.iibf.org.in
 www.iba.org.in
 en.wikipedia.org
 www.gktoday.in

75
 Annexure

BALANCE SHEET

(Rupees)

Particular 2016 2017 2018

Capital (revenue share) 11795.15 12184.94 12726.00

Reserve & Surplus 27281.67 33666.47

25667.89
234204.6
Deposit (Deposit) 247632.45 258174.99
6
Borrowings 61338.54 52570.03 41438.60

Other Liabilities 11608.51 8334.22

12348.52
334254.7
Total Liabilities 351277.60 354340.28
6

Cash & bank balance (cash balance and

20494.40 25117.34 15468.06
bank balance)
Investments (Investments) 125370.34 140418.58 169993.94

Loans & advances 158235.56 162391.79 154549.71

76
 Other assets 26478.25 23349.89 14328.57

Total Assets 330578.55 351277.60 354340.28

(Table no. 7.6)

Questionnaire

1. Are you a bank borrower through this branch?

(a) Yes (b) No

2. What type of facilities do you currently enjoy with this bank?

TYPE No.
(a) Loan
(b) Cash credit
(c) Overdraft
(d) Bills
(e) Any other

3. Do you avail Home Loan?

(a) Yes (b) No

4. Do you avail Educational Loan?

(a) Yes (b) No

5. Did you have to apply influence of any sort at any stage to facilitate availability
of credit?
(a) Yes (b) No

77
6. What’s average time taken for the processing of loan?
(a) Less than 7 days
(b) Between 7 to 14 days
(c) More than 14 days

7. Which is preferable term of loan?

(a) Less than 1 year
(b) 1 to 3 years
(c) More than 3 years

8. Is customers referring the co-operative bank to their friends and relatives?

(a) Always
(b) Sometimes
(c) Never

9. What prompted the customer to take loan from cooperative bank?

(a) Reasonable rate of interest
(b) Less formalities
(c) More schemes
(d) Easy repayment
(e) Any other

78