ANALYSIS OF FINANCIAL POSITION AND PERFORMANCE OF DISTRICT CENTRAL CO-OPERATIVE LTD

Dissertation submitted to BHARATHIDASAN UNIVERSITY in fulfillment for the award of degree of DOCTOR OF PHILOSOPHY IN COMMERCE

Submitted by

M.POORNIMA, M.Com. M.Phil.

Research Guide

Dr. K.MURUGADOSS, M.Com, M.Phil, M.S., (Edu), M.B.A, Ph.D., Assistant Professor and Head, Department of Commerce, Periyar Government Arts College, Cuddalore

DEPARTMENT OF COMMERCE BHARATHIDASAN UNIVERSITY CONSTITUENT COLLEGE Perambalur District.

MAY 2014 Dr. K. MURUGADOSS, M.Com, MPhil, M.S., (Edu), M.B.A, Ph.D., Assistant Professor and Head & Research Advisor, Department of Commerce, Periyar Government Arts College, Cuddalore- 607 001.

CERTIFICATE

This is to certify that the dissertation entitled “ANALYSIS OF

FINANCIAL POSITION AND PERFORMANCE OF TIRUCHIRAPPALLI

DISTRICT CENTRAL CO-OPERATIVE BANK LTD” is based on the original work done by Mrs. M. POORNIMA, Lecturer, Department of Commerce,

Bharathidasan University Constituent College, Perambalur, during the academic years 2010-2013, and that the research work has not previously formed the basis for the award of any Degree, Diploma, Associateship, Fellowship or similar title and that it represents entirely an independent work on the part of the candidate.

Place: Perambalur

Date:

(Dr.K.MURUGADOSS)

Dr. T. UNNAMALAI., Ph.D Principal i/c and Head, Department of Commerce, Bharathidasan University College, Inamkulathur, , Trichy Dist.

CERTIFICATE

This is to certify that the dissertation entitled “ANALYSIS OF

FINANCIAL POSITION AND PERFORMANCE OF TIRUCHIRAPPALLI

DISTRICT CENTRAL CO-OPERATIVE BANK LTD” is based on the original work done by Mrs. M. POORNIMA, Lecturer, Department of Commerce,

Bharathidasan University Constituent College, Perambalur, under my co-guidance during the academic years 2010-2013, and that the research work has not previously formed the basis for the award of any Degree, Diploma,

Associateship, Fellowship or similar title and that it represents entirely an independent work on the part of the candidate.

Place: Trichy.

Date:

(Dr.T. UNNAMALAI)

M.POORNIMA, M.Com. M.Phil. Lecturer, Department of Commerce, Bharathidasan University College, Perambalur -621 107

DECLARATION

I hereby declare that the dissertation entitled ANALYSIS OF FINANCIAL

POSITION AND PERFORMANCE OF TIRUCHIRAPPALLI DISTRICT

CENTRAL CO-OPERATIVE BANK LTD” for the award of Ph.D Degree in

Commerce is my original work and that it has not previously formed the basis for the award of any Degree, Diploma, Associateship, Fellowship or any other similar title.

Place: Perambalur

Date:

(M.POORNIMA)

ACKNOWLEDGEMENT

I gratefully acknowledge the co-operation and help extended to me by many people in various fields for the successful completion of this research work. First of all I thank them all. I am deeply indebted to and owe a great deal to my guide and supervisor, Dr.K.Murugadoss, M.com, MPhil, M.S., (Edu),M.B.A, Ph.D., Assistant Professor and Head & Research Advisor, Department of Commerce, Periyar Government Arts College, Cuddalore- 607 001 for his valuable guidance made the study possible. In spite of his extremely busy academic pursuits, he spared so much of time for me. In fact, he has motivated me by his unstained kindness, affectionate guidance and noble generosity during the course of my study period.

It is my duty to thank my Co-guide Dr. T.Unnamalai., Ph.D Principal i/c and Head of the Department of Commerce, Bharathidasan University College, Inamkulathur, Srirangam for her encouragement and selfless help in the successful completion of this research work in time.

I express my sincere thanks to my Doctoral Committee Members, Dr. V. Selvaraj, Ph.D., Associate Professor and Head, Department of Commerce, Nehru Memorial College, Puthanampatti and Dr. N. Subramani, Ph.D., Associate Professor and Head, Department of Commerce, Urumu Danalakshmi College, Trichy.

I express my gratitude to Dr. V. Rajagopalan, syndicate member of Bharathidasan University and Principal of Sri Venkateswara College, Peravurani, who helped me in all ways for the research work.

I wish to place on record my sincere thanks and humble gratitude to Thiru. O.Kasinathan, Principal i/c and Bharathidasan university college, Perambalur for his encouragement in the completion of this Research Degree.

I express my deep sense of gratitude to Dr. R. Saminathan, Head of the Department of Commerce, Bharathidasan university college, Perambalur for his kind support in during the period of study.

I don’t find words to express my thanks in words to my affectionate father Mr. P .Mohanraj and my mother Mrs.M.Malathi and it is a pleasure to me to thank my husband Dr. K. Gunasekaran and my sweetest loving child G.Anirudh my brother M. Ranjith, my sister-in-law K. Anitha and their children R. Aswanth and R. Asmitha and my sister M. Deepa and brother-in-law S.Suresh Kumar and their son S. Rudhradeepan who helped me in all ways to the research work and for their understanding.

I express my sincere thanks with immense pleasure and heartfelt gratitude to my affectionate father-in-law Mr.A.Karuppiah B.A.,B.Ed.,(Head Master Rtd.), mother-in-law Mrs. K. Mariammal , my elder brother-in-law Mr. K. Senthilkumar M.Sc., M.Phil., B.Ed., co-sister A. Deiva and their children S. Prasheetha and S.Hanshika and younger brother-in-law Mr. K. Ravikumar., M.A., B.Ed., motivation and encouragement in the completion of this degree.

I am very much grateful for the co-operation and help extended to me by the staff members of all the and customers in a special way.

I extend my sincere thanks to my colleagues, friends, students, and well-wishers for their help and encouragement during the period of my study.

Mrs.M.Poornima CONTENTS

Chapters Particulars Page No.

Acknowledgement i

List of Tables

List of Charts

I Introduction 1 – 32

II Perspective features and development of 33 – 60 TDCCB Ltd and profile of the study area

III Functions and Financial position of TDCCB Ltd 61 – 113

IV Analysis of Performance of TDCCB Ltd 114 – 229

V Findings, Suggestion and Conclusion 230 – 247

Bibliography 248 – 256

LIST OF TABLES

Table Description Page no. no.

2.1 Growth Of DCCBs In 45

2.2 Trend of Capital, Reserves and Borrowings of DCCBS in 47 India

2.3 Growth of investments by Indian DCCBS 49

3.1 Deposit Interest Rate 69

3.2 DD Commission charges 70

3.3 Types of loan and rate of Interest with repayment period 71

3.4 Agricultural and Non-Agricultural Interest rates 73

3.5 Locker size and rent 75

3.6 Capital Structure of the TDCC Bank during the period 81 from 2001-02 to 2010-11

3.7 Deposit accepted by TDCC Bank during the period from 83 2001-02 to 2010-11

3.8 Deposit accepted by TDCC Bank during the period from 88 2001-02 to 2010-11

3.9 Total Loans to Agricultural Sectors by TDCC Bank 94

3.10 Loans to Industries 95

3.11 Jewel Loan 97

3.12 Loan against Government Securities 103

3.13 Loans to individuals 105

3.14 Non- performing assets of TDCC bank 112 3.15 Percentage of NPA in the total loans and advances 113

4.1 Collection of Share Capital from 2001-02 to 2010-11 115

4.2 Membership and share capital 118

4.3 Net Profit Earned and Dividend Declared 120

4.4 Net Profit Earned and progress over the period 122

4.5 Comparison of Net Profit with Bonus paid & Dividend 124 Declared

4.6 Analysis of Deposits of TDCCB Ltd 126

4.7 Contribution of Term, Current and Saving Deposit on Total 129 Deposit in terms of Percentage

4.8 Result of One-Sample and Chi-Square Test- Hypothesis test 130 summary

4.9 Relationship between the deposits (Spearman Rank 132 Correlations)

4.10 Forecasting Total Deposit using 3 months moving average, 135 mean absolute deviation, Mean squared error, and mean absolute percentage error

4.11 Exponents’ analysis of Moving Average (risk reduction for 136 accurate decision)

4.12 Result of Regression Analysis 137

4.13 Fund allocation for Co-operative Education, Development 139 and Research Fund

4.14 Amount of Loan Approved and Total outstanding Debt 142

4.15 Multiple-Sample Comparison Loan paid and Unpaid 143

4.16 ANOVA Table for Loan paid and Unpaid 144

4.17 Multiple Range Tests Method 144

4.18 Statistical Result on Multiple Range Tests 145 4.19 Kruskal-Wallis Test on Loan paid and Unpaid 147

4.20 Mood's Median Test on loan 148

4.21 Total Deposits Forecast Summary 149

4.22 Forecast Table for Total Deposit (actual & forecast) 151

4.23 Forecast Table for Total Deposit 152

4.24 Model Value to Estimation Period 155

4.25 Results of fitting different models to the data 156

4.26 Fixed Deposit Forecast Summary 157

4.27 Forecast Table for Fixed Deposit (Actual & Forecast) 159

4.28 Forecast Table for Total Fixed Deposit 160

4.29 Model Value used to calculate the Forecast for Estimate 162 Period

4.30 Results of fitting different models to the data 163

4.31 Forecasting Total Amount of Current Account Deposit- 164 Forecast Summary

4.32 Forecast Table for Total Current Account Deposit(Actual & 166 forecast)

4.33 Forecast Table for Total Current Account Deposit 167

4.34 Models used to Value the forecasting total current deposit 169 Estimation Period

4.35 Results of fitting different models to the data 170

4.36 Forecast summary -Total Saving account amount 171

4.37 Forecast Table for Savings Account Deposit (Actual & 172 forecast)

4.38 Forecast Table for Total Saving Account Deposit 173 4.39 Model Value used to calculate the Forecast for Estimate 176 Period

4.40 Results of fitting different models to the data 177

4.41 Multiple Linear Regressions – Impact of Deposit Received 178 & Loan Received on Loan Sanctioned

4.42 Analysis of Variance Deposit received and Loan received 178

4.43 Multivariate correlation on Loan Paid and Unpaid Loan 180

4.44 Result of Multivariate Simple Statistics 181

4.45 Amount of agricultural loan granted 184

4.46 Multiple Linear Regression on Agricultural Loan Short term 186

4.47 Analysis of Variance 186

4.48 Multiple Linear Regression - Agricultural Loan Medium 189 Term

4.49 Analysis of Variance 189

4.50 Multiple Linear Regression - Agricultural Loan Long Term 192

4.51 Analysis of Variance 192

4.52 Multivariate Correlations 195

4.53 Hypothesis Test using Chi-square and one sample to analyze 196 the equal probabilities of Short, Medium and Long- term on Agricultural loan

4.54 Loans From NABARD, TNCCB & 199 Government

4.55 Total Amounts of Investments 202

4.56 Total outstanding loan amount beginning and end of the year 204

4.57 Amount of Capital and Working capital 207

4.58 Investment and owned fund of TDCCB Ltd 209 4.59 Total Debt, Recovered and unrecovered 211

4.60 Total interest on Debt, Recovered and unrecovered 212

4.61 Total Deposit Received and Total Amount Loan paid 214

4.62 Simple Regression - Deposit Received vs. Total loan paid 215

4.63 Analysis of Variance 215

4.64 Number of staff members Amount of Salary paid 218

4.65 Capital Expenditure of TDCCB Ltd 219

4.66 Deposit and received 221

4.67 Comparison of Net profit earned and expenditure incurred 223

4.68 Correlation between independent variables (Expenditure and 224 Profit)

4.69 Expenditure of Establishment and contingencies – Salary & 226 Allowances and Electricity

4.70 Establishment and contingencies 228

LIST OF CHARTS

Chart Description Page No. No.

3.1 Deposits by Individuals and institution and 84 co-operative societies.

3.2 Distribution of Total deposit as current, savings and 89 Fixed Deposit of TDCCB

4.1 Share Capital – Government vs Co-operative 117 contribution

4.2 Enrolement of membership vs Share capital 119

4.3 Net profit/loss earned during the period of 2001-02 to 123 2010-11

4.4 Bonus and Dividend Percentage 125

4.5 Composition of term, saving and Current deposit 128

4.6 Sequential figure showing position of different 131 deposit

4.7 Scatter plot Matrix shows the relationship between 134 various deposits

4.8 Total Deposit of Actual and Forecast 138

4.9 Distribution of Co-operative education, Development 141 and Research Fund

4.10 Box and Whisker Plot for Loan paid and Unpaid 146

4.11 Time sequence Plot for Total deposit 151

4.12 Forecast plot for Total deposit 154

4.13 Time Sequence Plot for Fixed Deposit 158

4.14 Forecast Plot for Total Fixed Deposit 161

4.15 Time Sequence Plot for Total Current Deposit 165 4.16 Forecast plot for total current deposit 168

4.17 Time Sequence Plot for Total Saving Account 172 Deposit

4.18 Forecast Plot for Total Savings Deposit 175

4.19 Plot of Total loan Paid 180

4.20 Scatter plot Matrix 181

4.21 Plot of Agricultural Loan short term loan 188

4.22 Plot of Agricultural Loan short term with predicted 188 values

4.23 Plot of Agricultural Loan Medium term 192

4.24 Plot of Agricultural Loan Medium term with 192 predicted values

4.25 Plot of Agricultural Loan Long term 194

4.26 Plot of Agricultural Loan Long term with predicted 194 values

4.27 Scatter plot Matrix 196

4.28 Short term agricultural loan 197

4.29 Medium term agricultural loan 197

4.30 Long term agricultural loan 197

4.31 Loans From NABARD, TNCCB & Tamil Nadu 201 Government

4.32 Total amount of Investment 202

4.33 Fissure of Balance of Loan amount at the beginning 205 and end of the year

4.34 Position of Loan amount paid, recovered and balance 206

4.35 Capital vs Working capital 210 4.36 Investment vs Own fund 210

4.37 Debt recovered and unrecovered 213

4.38 Interest recovered and unrecovered 213

4.39 Plot of Fitted model for Deposit Received and Total 217 loan paid

4.40 Amount of Capital Expenditure incurred 220

4.41 Receipt of Deposit and credit 222

4.42 Histogram showing profit/loss and Expenditure 225

4.43 Expenditure on Salary and Electricity 227

4.44 Expenditure on Building Maintenance and Printing, 229 Stationary

Chapter I

Introduction

CHAPTER 1

INTRODUCTION

1.1 INTRODUCTION

"Every branch of knowledge has its fundamental discovery lies in mechanics of its wheel, in science the fire, and in politics the vote, similarly, in economics money is the essential invention, on which all the rest is based”.

Co-operation was established during the last century to protect the weaker and poorer from the strong and rich. It is the panacea for all economic and social evils, so, Smith Louis had correctly remarked that Co-operation is one of the economic miracles of the country. It is not only a form of business organisation but also one of the systems of economics. There is an imperative need for the success of Co-operation in India in the context of the present social and economic situation. Among other things, the following may be considered as the reasons for the need.

The economic policy of independent India is to establish a socialistic pattern of society. This concept is a manifestation of the new social order envisaged in the Directive Principles of our Constitution. This social order is based on liberty, justice, equality and fraternity. The pertinent issue which arises here is to decide the nature of the organisation that will be able to achieve its goal. The organisation which is based the principles of democracy, liberty, fraternity, social and economic justice the system of the country the organisation renders service to the needy can deliver the goods.

1 "No organisation other than Co-operation is considered eminently suitable for achieving a socialistic pattern of society taking into view the criteria stated above.

Therefore, Pandit Jawaharlal Nehru had aptly stated, "In the economic structure of India, Co-operation is not even a free choice, it is necessary.

"Co-operation is a philosophy, a religion and a way of life.” The idea of

Co-operation is something larger than merely an efficient and economical way of doing things, it is economics, it is fair, it equalizes and prevents disparities.

But it is something even deeper than that: it is really a way of life." Hence the success of Co-operation is inevitable in the human life. Democratic management is one of the most important principles of Co-operation. It is neutral to political, religious and linguistic variances. The constitution of India is structured on the principles of the Co-operation which inculcates the values of human beings and provides a training ground for the democratic way of life.

"Co-operation serves as a field of evolution and cultivation of these faculties and capacities which are essential to run the greatest democratic institution, the

Government. “As an economic system, Co-operatives assume great significance in terms of number of members, paid up share capital, working capital, number of persons employed and their market share.

The Co-operatives sectors are organized group of people jointly managed and democratically controlled the same. They exist to serve their members and depositors and produce better benefits and services to them. Co-operative banks have completed hundred years of existence in India. They played an eminent role in the Indian financial system. The Co-operative bank in India forms an

2 integral part in growth of money market today. Therefore, a brief account of their development should be taken into the same. The first phase of Co-operative bank’s development was the formation and regulation of Co-operative Society.

The constitutional reforms which led to the passing of the Government of India

Act in 1919 transferred the subject of “Co-operation” from Government of India to the Provincial Governments. The Government of Bombay passed the first

State Co-operative Societies Act in 1925 “which not only gave the movement, its size and shape but was a space setter of Co-operative activities and stressed the basic concept of thrift, self-help and mutual aid.”

1.2 Major Developments in Banking and Financial Sector in India

The BPLR system has been replaced by the Base Rate for commercial banks, effective from July 2010 and this concept has now been family set in the

Banking Industry. For further strengthening the capital base of the banks, RBI has issued various guidelines-

(i) Advanced Measurement Approach for calculation of capital charge for

operational risk,

(ii) Classification of regulator capital instruments in their balance sheets,

(iii) Use of internal models for calculation of capital charge for market risk

RBI has expanded the activity of priority sector by means the categorize the activities of ‘priority sector’ for lending targets. RBI has notified relaxation in branch licensing policy regarding, Regional Rural Banks, RBI has asked all banks to put in place additional security measures for credit card transactions,

RBI has issued penalties for banks in case of overcharging the credit card

3 customers, RBI has also constituted a Committee for customer service in banks under the Chairmanship of Shri M. Damodaran, former Chairman, Securities

Exchange Board of India (SEBI) which has constituted a Working Group for the implementation of International Financial Reporting Standards (IFRS). Besides imposing a monetary penalty for bouncing of SGL transfer forms, RBI has asked banks to make additional disclosures to enhance transparency in their operations:-

(i) Reporting of repo trades in corporate bonds to various clearing

corporations,

(ii) Reporting of OTC transactions in certificate of Deposits &

commercial Paper on the FIMMDA platform, with regard to the debt

market, RBI has introduced steps for further deepening the markets as

follows:-

(i) Stripping / reconstitution of Government securities for trading

on receipt of interest coupon,

(ii) Allowing more participants in the currency futures and

exchange-traded currency options market,

1.3 Co-operative Movement in India

Based on the recommendations of Sir Frederick Nicholson (1899) and Sir

Edward Law (1901), the Co-operative Credit Societies Act was passed in 1904 paves the way to establish Co-operative credit societies in rural and urban areas on the patterns of Raiffeisen and Schulze Delitzch respectively. The

Co-operative Societies Act of 1912 recognized the formation of non-credit

4 societies and the central Co-operative organizations/federations. The state patronage to the Co-operative movement continued even after 1947, the year in which India attained freedom. The independent India accepted the concept of planned economy and Co-operative organizations that were assigned an important role.

The policy of the Government towards the Co-operative movement was guided by the recommendations of the Saraya Committee (1945) that stated the

Co-operative society has an important role in the democratization of economic planning. Various expert committees that examined the problem of rural credit subsequently have come to the same conclusion, without exception, that in the

Indian context, there is no alternative structural appropriateness, to

Co-operatives at the village level. The Rural Credit Survey Committee (1954), the first comprehensive enquiry about problems of rural credit, after a detailed examination of the entire gamut of issues including the social ethos of rural society, summed up its findings in the celebrated dictum that Co-operation has failed, but the Co-operation forum must succeed.

Since 1950s, the Co-operatives in India have made remarkable progress in the various segments of Indian Economy. During the last century, the

Co-operative movement has entered several sectors like credit, banking, production, processing, distributing/marketing, housing, warehousing, irrigation, transport, textiles and even industries. In fact, dairy and sugar Co-operatives have brought to the Indian nation, a major nation in the world scenario with regard to milk and sugar production. Today, India can claim to have the largest network of Co-operatives in the world numbering more than half-a million, with

5 a membership of more than 200 million. Of the primary (village) level

Co-operatives, around 28 percent with 137 million memberships are agricultural

Co-operatives, dealing directly or indirectly with agricultural sector. The

Co-operative network in the country is strong in covering all the villages in the country, more than 67 per cent of the households have been brought under the

Co-operative hold. Co-operatives supply 46 per cent of the rural credit

(including agricultural credit), account to farmers, amidst 36 per cent of the total distribution of fertilizers, produce 55 per cent of the total sugar that constitutes

28 percent of the rural fair shops (distributing consumer articles). Though

Co-operative movement has made remarkable progress in several areas, certain glaring defects have also so far been developed in the movement, which may defeat the objectives of these institutions.

1.4 Development of Co-operative Banks

Co-operative bank is a financial entity which belongs to its members, who are the owners and the customers of their bank as well. 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 namely lending, accepting Deposits, and maintaining accounts. Co-operative banks differ from stakeholders’ banks by their organization, goals, values and governance. In most countries, they are supervised and controlled by banking authorities and it is their responsibility to respect prudential banking regulations, which put them at a level of playing field with stockholder banks. Co-operative movement was introduced in India, with the enactment of Co-operative Societies

6 Act in the year 1904. Under this Act, Co-operative credit Societies were also registered, since the Indian economy has been predominantly an agrarian economy.

Co-operative societies were established to ameliorate the economic condition of farmers by way of providing cheap and adequate finance to them and uplifting them from the clutches of moneylenders, who are blood-sucking vampires of rural economy. The Government realized the deficiencies of

Co-operative credit societies Act, 1904, to overcome these defects passed a comprehensive Co-operative societies Act in 1912. The new Act saves a great stimulus to Co-operative movement. It legalized many Co-operative societies which had to hitherto no legal recognition. It was more rapid in Bombay, Madras and Punjab. A large number of non – credit societies for common necessities were developed. In 1909, Govt. of India (GOI) appointed a committee under the chairmanship of Sri Edward Maclaghan to examine the soundness of

Co-operative movement, which submitted its report in 1915. On the promulgation of the Govt. of India Act of 1919, Co-operative became a provincial subject and was administered by provincial Government. In a democratic system of India, some Government passed their own Acts, to undertake many-sided developments. Mumbai took the effort to lead enact the

Co-operative societies Act, 1925. This was followed by Madras in 1932, Bihar and Orissa in 1935 and Bengal in 1941. Other States also adopted the central Act of 1912. The Act of 1919 gave great stimulus to the Co-operative movements and its success was measured by its quantity rather than quality. The movement witnessed a set back with onset of the great economic depression (1929 – 1936)

7 when agricultural prices began to fall at a great speed. Recovery of loans became extremely difficult. There was very heavy accumulation of over dues and freezing of societies were inevitable.

Normal working system of Co-operatives was almost paralyzed and in several others adversely affected. There was a serious contradiction of

Co-operative credit. The Royal commission on agriculture and the central

Banking Enquiring committee indirectly made recommendation for their improvement. The Royal commission on agriculture (1927) remarked that “if

Co-operation fails there will be failure in the best hopes of rural India”. During this period, the primary aim of the Co-operative departments was to rectify and rehabilitate the societies rather than to expand them. The collapse of the

Co-operative movement in some provinces led to the appointment of special expert and enquiry committees in different provinces to examine the position of

Co-operative movement with a view for reconstruction. Among these committees, the major were, Ragavacharya Committee in Madras (1940),

Devadhar Enquiry Committee on Co-operation in Travancore (1935), KL. Iyer

Committee in Mysore (1935), Kala Committee in Gwalior (1937), Mehta and

Bhansali Committee in Bombay (1937), Deivasikhamani Committee in Orissa

(1938), Wace Committee in Punjab (1939) and Ramadas Pantulu Committee for

Co-operatives rehabilitation (1939).

The abnormal conditions created by the World War II, led to some far reaching developments in Co-operative movement. The war period broadened the functional range of the co-operative movement and it brought about a shift in the lop sided emphasis from credit aspect to the productive and distributive

8 functions or to its multipurpose potentialities. The need for imparting richness and balance is necessary to the proper development of the movement.

An important development occurred during the period, when the appointment of the Co-operative planning committee the chairmanship of Saraya in 1945. The committee, which recommended primary societies, should be converted into multipurpose societies. Efforts should also be made to bring

30 per cent of the rural population and 50 per cent of the villages within the ambition of re-organized societies in a period of ten years. It also urged the RBI should provide greater assistance to Co-operatives. The rural Banking Enquiry

Committee (1949 – 50) suggested the formation of rural Co-operative banks and expanding urban banks, central banks and provincial banks to serve the needs of the rural areas. Since independence, the appointment of All India Rural Credit

Survey Committee (AIRCSC) under the Chairmanship of A.D. Garwala in 1951 by the RBI was its reason for the most important development in the

Co-operative movement.

The committee submitted its reports in 1954 and concluded that

Co-operation has failed but it must succeed. The Co-operative movement since then passed through a number of amendments and led to the appointment of number of committees to reach the present position. The All India Rural Credit

Survey Committee(AIRCSC) working group on Co-operation (1958), National

Development Council Resolution (1959), Mysore Conference of State Ministers

(1959) Jaipur Conference of State Ministers (1960), Committee on Co-operative

Credit (1960) working group on Panchayats and Co-operation (1961),

9 Committee on Co-operation Administration (1963) Committee on Co-operation

(1969).

All India Rural Credit Review Committee (1969), New Co-operative

Policy Resolution (1977) and Agricultural Credit Review Committee (1989)

(Khusru Committee) were the major committees / conferences / working groups in pertaining to Co-operative movement to agree with its agricultural credit. In this way, Co-operative movement drew the attention of policy makers from time to time and reached the present position.

1.5 Structure of Co-operative Bank

The Co-operative banking structure is a three- tier federal one.

 A State Co-operative Bank works at the state level.

 A Central Co-operate Bank works at the District level, i.e. District

Co-operative Banks Ltd.

 Primary Co-operative Credit societies at village level.

1.5.1 Growth of District Co-operative Bank

The Co-operative Societies Act was amended in 1912 with a view of permitting registration of central societies. It may be of interest to note that even before the established to cater to the financial needs of the primary societies. The first was registered in U.P. in 1906 as primary society. But the first perfect central bank in the modern since saw the light of the day in the former central provinces. In Rajasthan, the first central Co-operative bank was started on 1910 in Ajmer. The revised Act stimulated the growth of the central financial agencies and within a few years a large numbers of such banks were established.

10 The period from 1906 to 1918 may be called the period of origin of the central banks in various parts of the country. In the annals of its history the decade from

1919 to 1929 was roughly ends of the First World War and the onset of the world depression, was marked by the expansion of Co-operative banking system.

The number of DCCBs went on increasing between 1919 and 1929. This bank increased from 233 to 588, while their membership increased from 9.22 lakhs to

19.1 lakhs. The working capital moved from Rs. 6.43 crore to Rs.30.90 crore.

1.6 Major Developments in the Co-operative Banking Sector

Specific measures undertaken by RBI for the Co-operative Banking sector during the financial year 2010-11 are listed below;

1. RBI has allowed well-managed Co-operative Banks to set up off-site

ATMs without seeking approval through the annual business plans

2. RBI has issued revised norms for Co-operative Banks on exposure to the

real estate and commercial real estate sectors.

3. RBI has issued norms regarding submission of data by Co-operative

Banks to credit information companies.

4. RBI has enhanced the existing limits for Co-operative Banks which are

compliant with the regulatory CRAR, on individual unsecured loans and

advances, subject to overall ceiling of 10 per cent of total assets.

5. RBI has exempted CBs maintaining a CRAR of 12 per cent or above on a

continuous basis, from the extent mandatory share linkage norms.

6. RBI has limited the exposure of Co-operative Banks to housing, real

estate and commercial real estate loans to 10 per cent of their total assets,

instead of the existing 15 per cent of deposits.

11 7. RBI has notified liberalization in the norms regarding the extension of

area of operation and opening of branches and extension counters by

Co-operative Banks

8. RBI has allowed well-managed and financially sound Co-operative Banks

to engage Business Correspondents (BCs)/ Business Facilitators (BFs)

using Information and Communications Technology (ICT) solutions.

1.7 Statement of the problem

In the Co-operative Banking structure the District Co-operative Banks

(DCBs) are nodal centres of the Co-operative financial institutions. They have to mobilize the available resources and utilize them in the most efficient and profitable manner. The District Central Co-operative Banks constitute an important link between the Apex Co-operative Bank and the Primary

Agricultural Credit Societies. In general the DCCBs act as a federation of all

Primary Agricultural and non-agricultural Co-operative societies functioning their jurisdiction.

In evaluating the success of the Co-operative movement in general depends on the effective functioning of Co-operative banking business.

Therefore the DCCBs can be referred as a leader of the Co-operative movement and they undertake various developmental and promotional activities. DCCB are considered as a social banker because they take banking facility to the rural areas and brings lower segment people under the principle of financial inclusion through their member societies. The most important aspect of the DCCBs is providing personal banking service to the people who are living in the particular district along with financing to the member societies. Tiruchirappalli District

12 Central Co-operative Bank Ltd., occupy a pivotal position in providing financial support to people of the District and to the member society.

In general a significant problem is observed in the functioning of DCCBs there is no remarkable change in the mobilization of deposits due to stiff competition from new generation banks and public sector banks in the recent past. As a consequence of this situation, it is the right time to assess the financial position of DCCBs.

1.8 Need for the Study

Economic Development of any nation depends on it is the effective functioning of financial institutions like banks, because the mobilization of banks’ deposits and allocation of available resources in the form of loans and resources the role of banks is significant. The efficient management of resources not only in mobilization but also in effective and optimum usage. At the present context the fund management argument considered more relevant by analyzing the financial performance of a Co-operative bank.

The reforms in financial sector started, when the concept of LPG is introduced the Co-operative banks also started to reform their activity at par with other banks since Co-operative banks are not free from global challenge. Out of many research projects only few of them analyzed the impacts relating to business performance of Co-operative banks in different aspects. As stated above there are many research projects have been conducted to assess and evaluate the financial and business performance of the Co-operative banks in general and more specifically on particular functional aspects of DCCBs. But

13 soon after introducing the technological advancement and e-banking facilities in the functioning of DCCBs, limited studies were made to evaluate the financial and business performance of the DCCBs in general. So the present study is an

Endeavour to examine the financial performance of Tiruchirappalli District

Central Co-operative Bank Ltd

1.9 Scope of the study

Thus, the present study is limited to the financial position and performance of the TDCCB. Though the financial position and performance is a broad concept, it explores only the Sources and utilization of funds and their managerial efficiency. However, the concept of efficiency is relative and hence precise and direct measurement is difficult.

1.10 Objectives of the Study

The present study is proposed to examine the financial position and performance of the Tiruchirappalli District Co-operative Banks. The major objectives of the study are:

1. To examine the sources of funds in the form of Deposits and pattern of

application of such funds by the TDCCB in the form of Loans and

Advances.

2. To evaluate the methods adopted by the bank in harnessing the

mobilization and deployment of funds.

3. To analyze the efficiency of the bank in reducing and controlling

Non-Performing Assets (NPAs) and enhancing the profitability of the

bank.

14 4. To study the Income and Expenditures of the bank to find the ways and

means for enhance the profits.

5. To summarize the key findings of the study and to provide useful

suggestions to arrive at valid conclusion.

1.11 Hypotheses

1. H0 – The Fixed Deposit occur with equal probabilities

2. H0 – The Current Deposit occur with equal probabilities

3. H0 – The Savings Deposit occur with equal probabilities

4. H0 – The Short term Agricultural Loan occurred with equal probabilities.

5. H0 – The Medium term Agricultural Loan occurred with equal probabilities.

6. H0 – The Long term Agricultural Loan occurred with equal probabilities.

1.12 Period of the study

The analysis is confined to 10 years, from 2001-02 to 2010-11.

1.13. RESEARCH METHODOLOGY

1.13.1 Selection of bank and Study area

This study analyses the financial performances of Co-operative banks. In this study financial sector brought many reforms and huge competition from

Public sector, Private and foreign banks, the Co-operative banks have to face stiff competition in the market. Co-operative banks have to redefine their business model and strategy. In this regarding the roles of Co-operative banks, have to dedicate themselves in many ways. So, Central Co-operative bank of

Tiruchirappalli was selected for the field of this Research. The TDCCB Ltd has

15 rendered its service to Tiruchirappalli District since Pre-Independence. Its services to this area are remarkable and valuable.

1.13.2 Sampling Size:

In the state of Tamilnadu there are 23 District Central Co-operative Banks with 717 branches mostly in rural areas to serve the Primary Agricultural Co- operative Banks and the rural public. In addition, they meet the credit needs of dairy, handlooms, sugar and such other affiliated Co-operatives. They also lend directly to the public for non-agricultural purposes within the area of operation of their branches. A Case study method is finalized to execute the study. The

TDCCB is one of the oldest among the 23 banks and it is possible to collect all the necessary data for analyzing the financial performance of the TDCCB is selected for the Research.

1.13.3 Collection of data:

The study made use of secondary data to analyses the financial performance of the bank trend and pattern of funds including have been 10 years data have been collected from the annual reports of the Bank for the study starting from 2001-02 to 2010-11. The data for analyzing the efficiency in funds management both collection and deployment, were taken from the records of the bank for the period of study. The detailed study was confined to ten years because the bank employees are busy with computerization and modernization of bank, so the ledger wise details are collected with the help of Managers and

Accounts superintendents.

16 1.13.4 Analysis of the data/Tools of analysis

In order to achieve the objective of the study, the income and expenditure, assets and liability of TDCCB Ltd have been analyzed with the help of

MS-Excel and SPSS Version 17 in a detailed way with pictorial representation.

To analyze the secondary data, the various frequency tables and cross tables have been framed. Many of the calculations have been carried out with the help of MS-Excel package with Tables, charts, etc., have been interpreted wherever necessary to visualize the observation and inferences. Correlation, chi-square test, t-test, multiple regression and prediction techniques have been used with the help of SPSS. Correlations and Chi-Square test have been used to evaluate the relationship between various income and expenditure. The Multiple regression analyses have also been used to check the impact of various types of deposits on the overall total deposits.

1.14 REVIEW OF LITERATURE

In Indian banking and financial scenario there have been, a number of studies related to performance of Co-operative banking sectors are being conducted. Views and Reviews of different scholars and critics help the researcher to obtain broad awareness and acquire comprehensive understanding of the subject to study. Hence, an attempt is being so far made to provide an overview of various aspects and issues of this study through the review of existing literature. Besides, the objectives and methodology of the area of study and the main area study selected for review have been presented herewith -

17 Namboodiri, N.V (2001)1 examined the economies of scale and scope of

District Central Co-operative Banks(DCCBs). He has observed that DCCBs at present are not trap in scale of diseconomy because of relatively cheap funds made available by the national, apex and commercial banks. He has concluded that the concentration on loan portfolio and tapping the other sources of borrowings are two strategies open to DCCBs to reduce their costs.

Adinew Abate, Keshava Reddy,T.R, Mahesh,N and Lalit Achoth

(2002)2 examined the magnitude and growth of institutional credit flow to agricultural sector in Karnataka. They observed that recovery performance of agricultural advances especially in the post-reform period had significantly improved in commercial banks, RRBs and DCCBs lending. Only the recovery performance of PCARDBs continued to decline. They suggested that the government and lending institutions should take strict measures on their will deliberately on the defaulters then only the problem could be solved.

Dinabandu Mahal (2002)3highlighted the impact of Development Action

Plan (DAP) study of the Pune District Central Co-operative Bank (PDCCB). He observed that DAPs impact on the growth rate of share capital, reserve fund and the owned fund of the bank were found to be more in all the years during the post DAP period than the pre-DAP period. He has found that the affiliated

1 Namboodiri,N.V, “Economies of Scale and Scope of District Central Co-operative Banks”, Indian Journal of Agricultural Economics, Vol.56, No.2, April-June, 2001, PP.198-210. 2 Adinew Abate, Keshava Reddy,T.R, Mahesh,N and Lalith Achoth (2002), “Magnitude and Growth of Institutional Credit Flow to Agriculture in Karnataka”, Indian Co-operative Review, Vol.XXXIX, No.3, Jan, PP.194-212. 3 Dinabandu Mahal, “Impact of Development Action Plan”, Indian Co-operative Review, Vol.40, No.I, July,2002, PP.42-51

18 societies are not well aware of the DAP and so proper efforts have to be made in this direction to make the DAP a more successful one.

Rais Ahmad and Nasrullah Bhat (2004)4examined the recovery performance of District Co-operative Banks in Jammu and Kashmir. They found that during all the years under study i.e. from 1994-95 to 2000-01; over dues were greater than the owned funds of central Co-operative banks. They have observed that the main reason for the accumulation of over dues is the defective lending policies and procedures, unrealistic scales of finance and untimely due date for repayment of loans, poor supervision over societies, absence of a proper climate for recovery including excessive and growing patronage of defaulters by the management authorities.

Ramesh,D (2004)5has analyzed the economic viability of DCCB in

Mahabubnagar district of Andhra Pradesh. He has come to a conclusion that the mounting over dues can jeopardize the country’s agricultural credit structure designed to accelerate agricultural development. He has further stated that

Co-operatives can’t survive in the present commercial and economic war front, if it fails to make full use of mass media.

Raja,S (2005)6 carried out a study on District Central

Co-operative Bank (MDCC Bank) Ltd. He viewed as far as banks are concerned; there are several factors that determine the operating efficiency and profitability.

4 Rais Ahmad and Nasurllah Bhat, “Recovery Performance of District Co-operative Banks in J&K State”, Monthly Public Opinion Survey, Vol.XLIX, No.11, Aug, 2004, PP.10-14. 5 Ramesh,D , “An Analysis of Economic Viability of DCCB in Mahabubnagar District of Andhra Pradesh”, The Indian Journal of Commerce, Vol.57, No.3, July-Sep, 2004, PP.120-121. 6 Raja,S, “Performance Evaluation of MDCC Bank Ltd-An Applicaion of Structural and Growth Analysis”, Indian Co-operative Review, Vol.42, No.3, Jan, 2005, PP.237-244.

19 They are: Level of deposits, level of advances, number of branches operating, level of capital and reserves, level of customer service and the like. He concluded that the burden rate should be reduced and spread rate be increased so that profitability can be at higher rate.

Vaikunthe,L.D (2005)7 in his work entitled that “Institutional Credit to

Agriculture in Shimoga District Central Co-operative Bank (SDCCB),

Karnataka”, takes four taluks namely, Shimoga, Sagar, Thirthahalli and

Hosanagar in Shimoga district for the observation. He has found that the average utilization of crop loan is higher in the non-irrigated areas in Sagar, Hosanagar and Thirthahalli taluks compared to the utilization of loan in the other categories of cultivation for farm operations. He finds that the incremental income of the crop loan beneficiaries in the four taluks has been positive in the post-investment period as compared to pre-investment period.

Hulas Pathak (2005)8 in his work entitled that “Agricultural Credit

Financing in District Central Co-operative Bank (DCCB), Raipur, Chattisgarh”, observed that the DCCB (Raipur) played an important role in financing agricultural credit needs of the farmers of Chattisgarh, in particular Raipur district by way of short term, medium-term and long-term loans for a variety of credit purposes including crop husbandry, purchase of milk and draught animals, agri-inputs, farm machinery and equipment, wells and tube wells, housing and consumption expenditure. He concluded that efforts should also be made to step

7 Vaikunthe,L.D, “Institutional Credit to Agriculture: A Case Study of District Central Co-operative Bank in Shimoga District in Karnataka”, Indian Journal of Agricultural Economics, Vol.60, No.3, July- Sep, 2005, P.405. 8 Hulas Pathak, “Agricultural Credit Financing: A Case Study of District Co-operative Central Bank, Raipur, Chattisgarh”, Indian Journal of Agricultural Economics, Vol.60, No.3, July-Sep, 2005, P.389.

20 up deposit mobilization especially in the rural sector by introducing innovative schemes and incentives based on specific credit needs of the people.

Thanikodi,R (2005)9 carried out a study on Central Co-operative Banks in India: Problems and Remedies. He observes that the CCBs act as a depository and balancing centres between surplus and deficit societies. He concludes that to have strong CCB, the internal and external defects of the CCBs should be removed with a collective effort from the government, management, employees and public.

Jadhav,K.L and Kasar.D.V (2005)10 examined the performance of

District Central Co-operative Banks in Maharashtra. They have found that there is need to pay attention to the borrower members, which will lead to increase in the share capital and loan disbursement of agricultural purposes. They have suggested that efforts should be made to enhance deposit mobilization and investment of funds in government securities and fixed deposits for transparency in financial management.

Oliver Bright,A (2005)11 has analyzed the role of Kanyakumari District

Central Co-operative Bank (KDCCB) in Tsunami Credit. He has observed that

DCCBs grant loans and advances to the rural dwellers both for agricultural and non- agricultural purposes. But the infrastructure aids are totally neglected by

9 Thanikodi,R, “Central Co-operative Banks in India: Problems and Remedies”, Coop.Banking, Vol.42, No.12, June, 2005, PP.521-524. 10 Jadhav,K.L and Kasar, D.V, “Performance of District Central Co-operative Banks in Maharashtra: A Modelof Quantitative Analysis”, Indian Journal of Agricultural Economics, Vol.60, No.3, July-Sep, 2005, P.411. 11 Oliver Bright,A, “Role of Kanyakumari District Central Co-operative Bank(KDCCB) in Tsunami Credit”,Kisan World, Vol.32, No.9, Sep, 2005, PP.33-34.

21 them. He has suggested that the DCCBs must identify the investment portfolios for credit plans.

Yadav,B.S and Kaynat Tabassum (2006)12 examined deposit mobilization by central Co-operative banks in Haryana state. The sources of total assets or working capital of central Co-operative banks consist of the paid-up share capital, reserves and other funds, deposits from Co-operative societies, individuals and others, borrowings from State Co-operative Bank (SCB) and

Reserve (RBI)/NABARD through State Co-operative Bank and grants from the Government. But of all this total assets, it was found that the total deposit mobilization in all the central Co-operative banks were not much satisfied during the period of study because the deposits registered a less increasing trend in comparison to owned funds and total assets.

Fulbag Singh and Balwinder Singh (2006)13 examined the profitability of the central Co-operative banks in Punjab. They have observed that the implementation of prudential norms from 1996-97 onwards, have helped to generate an awareness for adverse effects of over dues/non -performing assets in these banks. They have concluded that the Co-operative banks in Punjab have responded to the ongoing financial reforms in a positive manner.

12 Yadav,B.S and Kaynat Tabassum, “Deposit Mobilization by Central Co-operative Banks in Haryana State”, Indian Co-operative Review, Vol.44, No.1, July, 2006, PP.80-86. 13 Fulbag Singh and Balwinder Singh, “Profitability of the Central Co-operative Banks in Punjab – ADecomposition Analysis”, Indian Co-operative Review, Vol.44, No.I, July, 2006, PP.41-55.

22 Sudipta Ghosh (2006)14 observed that DCCBs were not successful in restricting the level of Non-Performing Assets (NPAs) and the alarming factor was that the quantum of doubtful assets of the banks increased continuously during the study period. She has suggested that banks have to manage their

NPAs more efficiently and effectively so that they can change their character from non-performing assets to performing assets.

Ramachandran,T and Seilan,A (2006)15 examined the role of

Kanyakumari District Central Co-operative Bank (KDCCB) in promoting Self-

Help Groups(SHGs). They have observed that the DCCB makes PACSs to play the role of NGOs in the promotion and financing SHGs and PACSs have also realized the advantages in SHGs promotion and linkage. They have concluded that the KDCCB is playing an important and pivotal role in social transformation, welfare activities and has served the cause of woman empowerment and socio-economic betterment of the poor.

Fulbag Singh and Balwinder Singh (2006)16 examined the funds management in the Central Co-operative Banks in Punjab. They observed that higher proportion of own funds in the working funds of the bank and the concerned shown by the bank in the timely recovery of loans resulted in an increased financial margin of the central Co-operative banks in Punjab. They

14 Sudipta Ghosh, “NPA Management in District Central Co-operative Banks-A Comparative Study of MCCBL and TGCCBL”, The Management Account, Vol.41, No.2, Feb, 2006, PP.154-158. 15 Ramachandran,T and Seilan,A, “Role of Kanyakumari District Central Co-operative Bank in Promoting Self- Help Groups”, Indian Co-operative Review, Vol.44, No.1, July, 2006, PP.36-40. 16 Fulbag Singh and Balwinder Singh, “Funds Management in the Central Co-operative Banks of Punjab-An Analysis of Financial Margin”, The ICFAI Journal of Bank Management, Vol.V, No.3, Aug, 2006, PP.74-80.

23 concluded that less dependence on the new outside resources helped these banks in increasing their financial margin.

Namasivayam,N (2006)17 has observed the working performance of the

Madurai District Central Co-operative Bank Ltd., and states that it has been impressive in terms of deposit mobilization and credit deployment. He has concluded that the success of the Co-operative bank depends on effective manpower planning and management.

Jadhav,K.L, Yadav,D.B and Shendage,P.N (2007)18 examined credit disbursement of District Central Co-operative Banks (DCCBs) in Maharashtra.

The gross cropped area, average rainfall and deposits with the DCCBs were observed to be the most important factors influencing the regional inequality in the disbursement of per hectare short term credit in all the regions as well as the state as a whole. They have suggested that due to importance given to borrower members, which will lead to increase the loan disbursement.

Lakshmanan,C and Dharmendran,A (2007)19 studied the impact of

Non- Performing Assets (NPAs) on performance variables in Central

Co-operative Bank. They examined performance variables namely, net profit, investment, legal expenses and spread. They observed that the results of NPAs of all the above performance variables were negative and insignificant at 5

17 Namasivayam,N, “A Study on Employees Opinion on the Performance of MDCC Bank.Ltd., Madurai”, Indian Co-operative Review, Vol.44, No.2, Oct, 2006, PP.87-92. 18 Jadhav,K.L, Yadav,D.B and Shendage,P.N, “Rural Finance and Inequality in Credit Flow through DCCBs in Maharashtra”, Indian Journal of Agricultural Economics, Vol.62, No.3, July-Sep, 2007, P.357. 19 Lakshmanan,C and Dharmendran,A, “Impact of NPAs on the Performance variables in Chennai Central Co-operative Bank”, Indian Co-operative Review, Vol.44, No.4, April, 2007, PP.291-297.

24 percent level in all the equation. They concluded that the effective management of NPAs is essential to strengthen the financial position of the bank.

Mohan,S (2008)20 has examined the factors determining the profitability of central Co-operative bank. He observes that profitability ratios invite the serious attention of the management to put an integrated effort to correct the financial performance. He suggests that the bank should expand its operations in such a way that the non-interest income increases substantially in the near future.

Darling Selvi,V (2008)21 examines the lending performance of

Kanyakumari District Central Co-operative Bank (KDCCB). He observed that the overall growth rate of loan disbursement on short term credit shows a positive growth of 25 per cent. The credit facilities extended by KDCCB are high for services, medium for industries and low for agriculture. He concludes that the overall performance of the KDCCB is good. If the benefits are properly toiled and utilized there will be a bright future for both to the community and to the nation.

Mayilsamy,R (2008)22 examined the loan operations in district central

Co-operative banks in India. He has observed that any financial institutions’ including DCCBs carries on business out of funds, which are collected as deposits or borrowings from higher financial agencies. He concluded that the

20 Mohan,S, “Factors Determining the Profitability of Central Co-operative Bank”, Tamilnadu Journal of Co-operation, Vol.8, No.4, Feb, 2008, PP.63-69. 21 Darling Selvi,V, “Lending Performance of Kanyakumari District Central Co-operatives”, Indian Co- operative Review, Vol.45, No.3, Jan, 2008, PP.176-187. 22 Mayilsamy,R, “Loan Operations in District Central Co-operative Banks in India”, Tamilnadu Journal of Co-operation, Vol.8, No.3, Jan, 2008, PP.61-65.

25 efficiency of banking institutions as a financial intermediary depends to a great extent on timely recovery of loans.

Mayil Murugan,A (2009)23 made an empirical analysis on capital adequacy ratio in central Co-operative banks. He observed that capital adequacy has reduced the likelihood of failure and increases liquidity of the bank. He has concluded that fulfilling the capital adequacy norm is not at all the problem for the bank for ever.

Mayilsamy,R and Revathi Bala,M (2009)24 in their work entitled

“Management of Non-Performing Assets (NPAs) in District Central

Co-operative Banks (DCCBs) in India”, felt that the

Report-1998, rightly pointed out that ‘NPAs constitute a real economic cause to the nation in that they reflected the application of scarce capital and credit funds to unproductive uses. They have concluded that high NPAs in the banks have devastating efforts not only on the banks but also on the economy as a whole.

They have suggested that the formation of the good policy will be no use unless it is implemented in true spirit.

Dhanappa (2009)25 in his study titled, “Performance Evaluation of

UCBs: A Case Study of Kallappanna Awade Ichalkaranji Janata Sahakari Bank

Ltd. Ichalkaranji” made an attempt to examine the working and financial

23 Mayil Murugan,A, “An Empirial Analysis of Capital Adequacy Ratio in Central Co-operative Banks”, Tamilnadu Journal of Co-operation, Vol.9, No.10, Aug, 2009, PP.57-62. 24 Mayilsamy, R and Revathi Bala, M, “Management of Non-Performing Assets in District Central Co- operative Banks in India”, Indian Co-operative Review, Vol.46, No.3, Jan, 2009, PP.198-204. 25 Dhanappa (2009), “Performance Evaluation of UCBs: A Case Study of Kallappanna Awade Ichalkaranji Janata Sahakari Bank Ltd., Ichalkaranji”, Indian Co-operative Review, Vol-XXXXVII, No- 2, (Oct.), NCUI – New Delhi.

26 performance of UCBs. The objective of the study was to examine and analyze the trend, progress and problems of this bank, and to offer some important suggestions for improving the competency and efficiency of the bank. The related data had been collected for the period from 1995- 96 to 2007-08. He used various statistical tools such as ratios, percentages, averages, and chi-square test to analyze the data, to know the performance of the UCBs in respect of share capital, deposits, reserve funds, loans and advances, investment, profit, and

NPAs. He observed that the bank had maintained NPAs under control at the best stipulated level of RBI norms. There was immense instability in net profit. The bank should focus on non- interest income sources (commission based services) to increase the profit level and reduce the NPAs. CD ratio of the bank was declining continuously which was not a good signal. The economic health of the bank was sound and the Bank was able to compete with other banks. He further suggested that loans should be provided (at least to regular borrowers) on competitive rates of interest.

The European Association of Co-operative Banks (2009)26, in its article titled, "European Co-operative Banks in Financial and Economic

Turmoil" was of the view that despite extensive interest rate cuts, liquidity injections and support measures the financial markets were not stable. Figures showed that global economy will experience a deep recession in 2009 and perhaps also 2010. But as has been demonstrated, most Co-operative bank groups had fortunately been able to weather the financial crisis relatively well so

26 European Association of Co-operative Banks (April 2009),"European Co-operative Banks in Financial and Economic Turmoil", Co-operatives in a world in Crisis (Contribution of EACB to the Experts Group meeting) United Nations – New York.

27 far without any state support. This was due to the fact that they generally had limited exposure to toxic assets, a predominant focus on domestic retail banking with stable results, strong capital buffers and principally conservative risk management. The Co-operative banks that did report losses due to the subprime crisis were affected primarily at the level of subsidiaries and at the level of apex institutions. The local banks were not affected directly by the financial crisis.

Moreover, they continue to lend money to SMEs and retail customers.

Co-operative banks were consequently solid and robust at the local level and accordingly demonstrated stability of the retail banking industry in Europe.

Jayaraman and Srinivasan (2009)27 in their study titled, “Relative

Efficiency of Scheduled Commercial Banks in India (2001-08): A DEA

Approach” attempted to measure the scale efficiency of scheduled commercial banks in India using Data Envelopment Analysis. The study listed out the number of efficient banks on the basis of relative performances using efficiency scores. It was found that the general performance of scheduled commercial banks under study was relatively high during the study period 2001-08 and the average efficiency score was ranging between 0.9195 and 1. More than 60 per cent of the scheduled commercial banks were above the average efficiency score for each study period except for the year 2006, where it was around 53 per cent.

The results show that ICICI Bank, IndusInd Bank, ABN Amro Bank, Calyon

Bank and Citibank were efficient during the period of study of research. In addition to above banks, efficiency scores of , Vijaya

27 Jayaraman and Srinivasan (2009), “Relative Efficiency of Scheduled Commercial Banks in India (2001-08): A DEA Approach”, Prajnan, Vol. XXXVIII, No.2 (July- Sept.), Pune.

28 Bank, , and Oriental Bank of Commerce, ,

Federal Bank and were above the average efficiency scores in all the years.

Rajamohan and Pasupathy (2009)28 in their study titled, “Performance

Evaluation of TAICO (Tamil Nadu Industrial Co-operative Bank Ltd.) − An

Application of Structural and Growth Analysis” stated that there were several factors that determined the operating efficiency and profitability of the bank. In this context, the general performance of a bank can be analyzed more meaningfully and objectively for a period of time through structural and growth analysis. Through structural analysis the figures reported in the profit and loss account and balance- sheet are converted into percentages for each period to ensure uniformity for the purpose of comparison with those of other periods.

Macro mean had been used to exhibit the strength and weakness of each factor considered. The results were summarized in capsule form. Macro mean in respect of interest received constituted 96.8 per cent of the total income; it was

81.2 per cent for interest paid, 18.8 per cent for operating expenses, 91 per cent in the case of spread and 83 per cent for burden. It was found that the net profit recorded a negative growth of 27.8 per cent. Growth rate of operating expenses was at 44 per cent, spread at 15 per cent, burden at 29 per cent and advances at

49 per cent. Therefore, it was recommended that the burden rate should be reduced by effecting cost control measures, and the spread rate be increased so that the profitability may be at a higher rate.

28 Rajamohan and Pasupathy (2009), “Performance Evaluation of TAICO (Tamil Nadu Industrial Co- operative Bank Ltd.) − An Application of Structural and Growth Analysis”, Indian Co-operative Review, Vol.XXXXVII (Oct.), No.2, New Delhi.

29 Alamelu and Devamohan (2010)29, in their study titled, “Efficiency of

Commercial Banks in India” calculated the business ratios, such as interest income to average working funds, non-interest income to average working funds, operating profit to average working funds, return on assets, business per employee and profit per employee for public sector banks, private sector banks and foreign banks for the period 2004-05 to 2008-09. It was observed that the foreign banks and new generation private banks have superior business ratios.

They effectively leverage technology, outsourcing and workforce professionalism which helped them to protect their bottom line. On the other hand, the public sector banks are yet to exploit fully the advantages of vast branch network and large workforce. That’s why they have unimpressive business ratios. Old generation private banks do not have impressive business ratios, as they are constrained by small size and conservatism.

Singh and Singh (2010)30, in their study titled, “Technical and Scale

Efficiency in District Central Co-operative Banks of Punjab −A Non- Parametric

Analysis” had attempted to investigate the extent of technical efficiency across

20 DCCBs of Punjab with the help of Data Envelopment Analysis. They brought out that size of DCCBs and profits had been affecting the measures of technical efficiency significantly. The study further revealed that DCCBs of Punjab were suffering from the problems of managerial irregularities and improper

29 Alamelu and Devamohan (2010), “Efficiency of Commercial Banks in India”, Professional Banker,(Jan.) ICFAI University Press, Hyderabad 30 Singh, Amarjit; and Singh, Parminder (2010), “Technical and Scale Efficiency in District Central Co- operative Banks of Punjab - A Non Parametric Analysis”, Indian Co-operative Review, Vol. XXXXVII, No.1, (Jan.), New Delhi.

30 production scale. Appropriate policy interventions by state government, RBI and

NABARD have been suggested by the authors.

Conclusion:

The progress, performance and the problems of the Co-operative banks were reviewed by various scholars and researchers in various states at various periods of time. However, an apparent research gap exists as far as the appraisal of the financial position and performance of the Co-operative banks is concerned. Thus, the present study undertakes to appraise the financial position and performance of the DCCB of Tiruchirappalli (Tamilnadu) as a case study.

1.15 Limitations of the Study

The present study has some limitations considering the objectives of the study and the coverage in terms of the formidable time span. Some of the unavoidable limitations of the present study are:

1. Financial information collected for the study which is secondary data

based carry all the limitations inherent with the secondary data.

2. As the study is restricted to only the Tiruchirappalli District Central

Co-operative Bank, Tiruchirappalli head office and its findings may not

be generalized for other districts Co-operative banks of the state.

1.16 Chapter Scheme

Chapter 1 Introduction: This chapter deals with the general introduction and background of the study tracing the introduction of banking industry. It includes in the significance of the study, statement of problem of the study, review of

31 literature, limitations of the present study, and finally outlines the structure of the study.

Chapter 2 Perspective features and development of TDCCB Ltd and profile of the study area: This chapter concentrates the important features and development of TDCCB which includes the history and development, administrative position, growth of the bank; general services to the society are analyzed. It also includes the profile of the Tiruchirappalli district.

Chapter 3 Functions and Financial position of TDCCB Ltd: This chapter analyses the financial functions rendered by the TDCCB in Tiruchirappalli

District. It also states the financial position of TDCCB from the year 2001-02 to

2010-11 for the study period.

Chapter 4 Analysis of Performance of TDCCB Ltd: This chapter analyses the financial performance of TDCCB of the ten years data with relevant statistical tools in order to achieve the objective of the study.

Chapter 5 Findings, Suggestion and Conclusion: Based on the previous chapters and the analyses of data, the researcher uniformly organizes and gives the findings, conclusion and suggestions.

32 Chapter II

Perspective features and development of TDCCB Ltd and profile of the study area

CHAPTER 2

PERSPECTIVE FEATURES AND DEVELOPMENT OF DCCBS IN AND PROFILE OF STUDY AREA

In the previous chapter, major developments in banking and financial sector in India, Co-operative Movement in India, Development of Co-operative

Banks, Structure of Co-operative Bank, major developments in the Urban

Co-operative Banking sector, need for the study, statement of the problem, scope of the study, objectives of the study, methodology, analysis of the data/tools of analysis, review of literature etc., have been stated and in this chapter an attempt is made to study the perspective features and development and profile of the

TDCC Bank Ltd.

2.1 History of Co-operative Movement in India

Before the introduction of the official Co-operative Movement in India

(1904), many steps were taken by the Government to alleviate the sufferings of the farmers by the provisions of loans. The main reason for the introduction of the Co-operative Movement in India was the failure of Taccavi loans. The first step towards the introduction of the Co-operative Movement was undertaken by the Government of Madras. “In 1882, the Governor of Madras, Lord Winlock placed Mr. Sir Fredrick Nicholson on a special duty to study the operation of agricultural and other banks of Europe especially those of Germany and to suggest measures by which a similar movement could be organized in India.

Mr. Nicholson submitted his reports of two volumes. His reports were reviewed in 1899 by the Madras Government and the opinions of local government were also invited for the review. Their answers were considered in June 1901 by a committee appointed by Lord Curzon under the presidency of Sir. Edward Law.

33 The committee headed by Sir. Edward Law felt that to register the Co-operative societies, company act was unsuitable. It also reported on the legislation needed to secure the privileges of credit societies, and to provide for their working and supervision. They concluded that Co-operative societies were worthy of every encouragement and prolonged trial. Quickness in farming, a Co-operative legislation was felt and the committee draped a bill and it was passed as the

Co-operative societies Act of 1904”. The introduction of the Co-operative Credit

Societies Act in 1904 marked the beginning of the Co-operative movement in

India. The measure was as “a turning point in economic and social history” by

Henry W. Wolff.

2.2 Functions and Types of Co-operative Banks

The Co-operative banks are small-sized units which operate both in urban and non-urban centers. They finance with small borrowers in industrial and trade sectors besides professional and salary classes. Regulated by the , they are governed by the Banking Regulations Act 1949 and Banking

Laws (Co-operative societies) Act, 1965. The Co-operative banking structure in

India is divided into following five categories:

1. Primary Co-operative Credit Society

A primary society is an association of borrowers and non-borrowers residing in a particular locality and taking interest in the business affairs of one another. 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, etc., as

34 membership is practically open to all inhabitants of a locality; people of different status are brought together into the common organization.

The affairs of those organisation are managed by honorary secretaries and presidents assisted by boards of directors, all these officials being elected from amongst the shareholders on the principle 'of one man, one vote'. Most of the societies are organized and they are working on the principle of unlimited liability. The society may be started with ten or more persons of a village. In

March 2001, nearly 1, 00,000 PACs were operating in various states in India.

They had a total membership of nearly 10, 00, 00,000 (Ten Crore) as on that date. Their deposit base is very poor at Rs. 13,481 crores as at end March 2001.

Total outstanding loans of all PACs are totally depending on CCBs for their financial needs. NABARD has also been extending funds to develop the infrastructure of PACs. The primary society derives its funds from entrance fees, share capital, reserve funds deposit or loans from non-members, from central and provincial Co-operative banks and from the Government. The deposits of the society may be either fixed, savings or recurring. Unfortunately, the deposits of primary societies are not sufficiently large. The society provides short-term credit to its members ordinarily on the personal security of the borrower with the personal surety or sureties of other members. It may also lend on mortgages.

2. 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

35 Reserve Bank of India. The State Co-operative Banks lend money to the Central

Co-operative Banks and primary societies and not directly to the farmers.

3. Land Development Banks

The Land development banks are organized in three 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 banks oversee the Primary Land Development Banks situated in the districts and tehsil areas in the state. They are governed both by the state government and Reserve Bank of

India. Recently, the supervision of land development banks has been assumed by

National Bank for Agriculture and 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.

4. Urban Co-operative Banks

The term Urban Co-operative Banks (UCBs), though not formally defined, refers to Primary Co-operative 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 centered on communities, localities, work place groups. They essentially lend to small borrowers and businesses. Today, their scope of operations has widened considerably. The origins of the Urban Co-operative

Banking movement in India can be traced to the close of nineteenth century.

Inspired by the success of the experiments related to the Co-operative movement in Britain and the Co-operative credit movement in Germany, such societies were set up in India. Co-operative societies are based on the principles of

36 Co-operation, mutual help, democratic decision making, and open membership.

Co-operatives represented a new and alternative approach to organization as against proprietary firms, partnership firms, and joint stock companies which represent the dominant form of commercial organization. They mainly rely upon deposits from members and non-members and in case of need, they get finance from either the district central Co-operative bank to which they are affiliated or from the apex Co-operative bank if they work in big cities where the apex bank has its Head Office. They provide credit to small scale industrialists, salaried employees, and other urban and semi-urban residents.

5. Central Co-operative Banks

These are the federations of primary credit societies in a district and are of two types-those which have a membership of primary societies alone and those which have a membership of societies and individuals as well. The funds of the bank consist of share capital, deposits, loans and overdrafts from state

Co-operative banks and joint stocks. These banks provide finance to member societies within the limits of the borrowing capacity of societies. They also conduct all the business of a joint stock bank. At first Twelve CCBs were set up in Tamilnadu in the year 1912 under the Co-operative Societies Act. The total number of CCBs was increased to seventeen in the year 1986.

There is one CCB for each district except Thanjavur, where there are two

CCBs. Consequently on the trifurcation of Ramanathapuram district into three districts namely, Ramanathapuram, Pasumpon Muthuramalingam and Kamarajar districts and bifurcation of Madurai district into Madurai and Aringar Anna

37 district. It is proposed to form a new CCB for each of the above districts. Steps are being taken for the formation of new CCBs.

There are nearly about 4655 PACS at the village level, seventeen CCBs at district level (excluding the Madras CCB which does not undertake agricultural financing, otherwise 21) and the Tamilnadu state SCB at the state level constituting the Co-operative credit structure of Tamilnadu state for the provision of short - term credit for cultivation operation and medium – term credit for subsidiary occupation allied to agriculture.

The CCBs finance the agricultural credit societies of the respective areas from their own resources consisting of share capital, reserves and deposits and from the credit limits of NABARD routed through the Tamilnadu State

Co-operative Bank (TNSCB). Besides passing on the NABARD credit limits, the SCBs also lend to the CCBs from its own resources.

2.3 FUNCTIONS OF A DCCB

The District Central Co-operative Banks play multiple roles. Some of these are discussed below:

1. Banking Entity

The DCCBs are banking entities recognized by the Reserve Bank of India under the Banking Regulations Act. They accept deposits from general public and provide loans to individuals and institutions including primary Co-operative societies. They are governed by the various regulations stipulated by the Reserve

Bank of India from time to time. Special provisions have been incorporated in

38 the Banking Regulations Act of 1949 considering the special nature of their ownership, development role etc.

2. Leader of Co-operative Movement

One of the most important functions of the District Central Co-operative

Banks is to provide financial support to the Primary Co-operative Societies that are affiliated to it in the district. These societies belong to highly diverse categories like the primary agricultural credit societies, the producers’

Co-operative societies, handloom and handicrafts Co-operative societies, salary earners' Co-operative societies, consumers' Co-operative societies, Primary

Urban Co-operative banks, etc.

3. Leader in Agricultural Lending

Historically, the DCCBs have been considered as the most important financial institution to support the short term credit requirements of the agricultural sector. These loans include both production loans and marketing loans provided to the members. Usually the production loans are provided on the basis of the "Scale of finance" which is fixed for each major agricultural crop in the district. The scale of finance is computed by taking the total cost of production of the crop based on average price of inputs, including labour. The yield and market value of the output are also computed and the credit required per hectare for raising the crop is determined. The scale of finance is fixed by a committee called the "District Level Technical Committee" and the DCCB is the convener of this committee. The members of the DLTC include the representatives of the agricultural department, banks, NABARD etc.

39 2.4 Board of the DCCB

The Board of the DCCB comprises elected Chairman of PACS, representative of the State Government and the State Co-operative Bank apart from the CEO of the DCCB who would be the Member Secretary. The board meets periodically to review the performance of the bank and provide policy guidance. The board of the DCCB represents the interests of the major stakeholders in the bank. The Directors from the PACS take care of the PACS who are major borrowers from DCCBs. The representative of the State

Co-operative Bank protects the interest of the major provider of funds to the

DCCB. The Government is an important stakeholder as the DCCBs functions under the administrative control of the registrar of Co-operative societies.

Moreover the bye-laws of the DCCBs are framed under the Co-operative Act of the respective states in which they function. In terms of competencies the

Directors from PACS bring in are empathetic understanding of the needs of the members of the Co-operative sector in the district. The State Co-operative Bank representative provides mainly banking and regulatory competency while the

State Government representative adds administrative skills to the board.

2.5 Resource Mobilization

Any banking institution performs two primary functions; raising resources from those who have financial surpluses and deploying them by providing those to persons who can utilize them productively. Mobilizing deposits If raising resources is the key, then from whom are they raised, at what rates are they raised and for what period they are raised become relevant. DCCB being local district level banks, their catchment is the local population. But their own clientele are farmers whose credit needs may exceed the resources

40 available. Beyond their own clients, the bank has to compete in the market with the other institutions for mobilizations. Usually the Co-operatives offer a small premium over the rates offered by other banks to attract deposits. But apart from this other methods need to be explored to make Co-operative deposits attractive.

One of the most neglected areas in Co-operatives is that of deposit mobilization.

Because of the easy availability of resources from higher-tier institution, the

Co-operatives have not adequately paid attention to deposits. However, deposits are the backbone of any banking institution and are a more stable resource for lending.

2.6 Profitability

Even though Co-operatives in comparison to their peers, deploy money for development in their own area, that in it would not be reason enough for a depositor to opt to save with the DCCB. The rate of interest offered should be competitive, without being a burden to the bank. Most Co-operatives offer a slightly higher interest rate than commercial banks, but unless the rates are fixed after examining the yield on assets, could do more harm than good. The rates of interest should be constantly monitored and periodically reviewed.

2.7 Liquidity

Another major factor that depositors look at is the capacity to draw on their money in times of need, irrespective of the maturity period of their deposits. This involves the capacity of the bank to convert the deposit to cash on demand. This becomes a major issue for DCCB branches with low branch level cash limits and no cash/currency chest arrangements. Requesting depositors to wait to get their cash even for a day could adversely impact the reputation of the

41 institution and result in loss of customers and more significantly, word-of-mouth publicity for the bank. The ways to plan for such situations include undertaking data analysis of past trends of cash inflow and outflows and finding patterns, periodically reviewing retention limits of branches and maintaining a "hub and spoke model" with key branches as hubs where cash can be aggregated for transfer in the shortest possible time to the smaller branches, within the day of demand.

2.8 Borrowings

The second source of resources for DCCBs is borrowings from higher tier institutions. DCCBs have borrowing facilities from their apex level state

Co-operative banks and from institutions like NABARD. Usually, credit facilities are provided for a specific purpose and with a fixed tenure. Hence, unlike deposits which in normal course would have a rising trend, while deploying borrowings it is essential to match the tenure of the loan to that of the borrowing so that by the time the borrowings become due for repayment, the loan has come back. The borrowing arrangements of DCCBs are called refinance. DCCBs get refinance from NABARD through the SCBs.

2.9 Capital and Reserves

For a banking institution to raise resources either as deposits or borrowings would require that the institution have a capital base consisting of equity and reserves. In a Co-operative bank primarily driven by providing credit to its members at a reasonable cost, maximizing return on equity remains secondary. Further, raising capital from the public at large may compromise its mandate. Hence, the equity of the DCCBs is raised from the affiliated member

42 institutions. Normally, as per statute, a borrowing member has to contribute equity in proportion to the borrowings made by the institution from the bank. It does make it difficult for the Co-operative banks to have a large capital base and in the present times when capital adequacy is becoming a major issue in banks,

Co-operatives may in the conventional industry sense be undercapitalized.

2.10 Loans and Advances

The major business of the Co-operative banks is lending. One way of classification of loans is according to the tenure for which the loans are made out.

2.11 Short Term Production Loans

Short term production loans are extended for raising crops. These are routed through the Primary Agricultural Credit Societies (PACS). For the purpose of extending short-term credit, each PACS is required to make an assessment of credit need of its members and forward the same to the DCCB.

The DCCB based on the past performance of the society and the resources available with it the sanction of funds to the society for disbursement of crop loans to the members. A large portion of the crop loans disbursed by DCCBs is with refinance support from NABARD. The Government of India has introduced an interest subvention scheme whereby loans up to Rs.3 lakhs are extended to farmers at the interest rate of 7 per cent and Government of India provides a interest subsidy of 2 per cent to the all banks. Short Term Agricultural Credit is a key area of the DCCBs operations and could be considered a mandate of the bank. The needs for short term credit or crop loans have an overriding priority in

DCCB loans. Because of the overriding priority that the segment of the lending

43 portfolio of banks attracts, it receives attention from the State Co-operative

Bank, NABARD and the Governments of both State and Central. The result is that the portfolio is directed and has limited flexibility.

2.12 Term Loans

The Co-operatives also offer term loans to farmers subject to the terms of condition. This can be delivered either through the PACs or directly to the farmers by the DCCBs. For such financing, the DCCBs can obtain refinance from higher lending agencies like NABARD that channelize these funds through the State Co-operative Banks. Term loans are extended to a wide range of purposes, from excavation of wells, purchase of pump sets to horticulture, animal husbandry and even rural transport like tractors, Paddy Harvest Machine,

Plough, etc., for other farm equipment.

2.13 Sundry and Suspense Account

Another major area to be monitored and managed very carefully is the sundry and suspense account. This is a temporary head of account where debits and are made when the transaction has not been concluded. For example, an advance provided to an officer for undertaking an official tour. In such cases it is expected that the bills are submitted and settled within reasonable time.

Often, many entries remain unresolved and get carried into the balance sheet as an item of asset. At the beginning of the next accounting year, the aggregate amount gets reflected as an opening balance, and unless closely monitored may become loss assets of the bank. A periodic review of Sundry/Suspense balances at every accounting unit is a must.

44 In examining the role of DCCBs in India in providing banking services through their branches to its member is year by year increasing is evidenced by the following data presented in table 2.1 on the basis of the NAFSCOB Reports.

Table – 2.1

GROWTH OF DCCBS IN INDIA

Year Number of Number of Total DCCBs Branches Membership 2001-02 371 13,068 18,37,433

366 12,956 21,83,731 2002-03 (-1.35) (0.86) (18.85)

368 12,933 21,49,071 2003-04 (-0.81) (-1.03) (16.96)

368 12,858 21,458,76 2004-05 (-0.81) (-1.61) (16.78)

370 12,991 22,67,850 2005-06 (-0.27) (-0.59) (23.42)

371 12,928 32,64,849 2006-07 (0.00) (-1.07) (77.68)

372 13,151 33,96,881 2007-08 (0.27) (0.63) (84.87)

373 13,233 35,28,802 2008-09 (0.54) (1.26) (92.05)

372 13,181 39,75,660 2009-10 (0.27) (0.86) (116.37)

371 13,327 31,46,070 2010-11 (0.00) (1.98) (71.22)

Source; NAFSCOB Reports,

45 From the table it is found, that in India there were 371 DCCBs, which played a vital role in the promotion of Banking Service to the general public in a soft and useful manner in the year 2001-02 and branch offices were 13,068, which accounts a total enrollment of 18,37,433 members. The position of number of branch offices and total members in all the years stated above got improved with the small ups and downs during the period included in the above table. By the end of 2010-11 there is no change in number of banks but number of branch offices went up to 13,327 with the improved membership rate of 71.22 per cent than that of 2001-02.

2.14 Operation of the Central Co-operative Banks:

The primary business of Central Co-operative Banks consists of financing primary societies. In some cases, they attract the surplus funds of certain primary societies, to supply the same to others. Thus, Central Co-operative Banks Act as balancing centres to the primary societies. The deposits of urban areas are made available to the rural areas through the agency of these banks. Although normally Central Co-operative Banks do not transact many banking business as such, they do that in Mumbai and Chennai.

The deposits with Central Banks have recently grown at greater level that

Central Banks are not able to employ them within the Co-operative movement.

They do not, as a rule, lend for commercial purposes and therefore are compelled to invest their funds in government securities. However, with the growth of other types of Co-operative movement these funds may be absorbed by the various types of Co-operative societies.

46 Table – 2.2

TREND OF CAPITAL, RESERVES AND BORROWINGS OF DCCBS IN

INDIA

(Rs. in lakhs)

Capital Reserves Borrowings Year Amount Trend Amount Trend Amount Trend percentage percentage percentage 2001-02 338800 100.00 792982 100.00 1827605 100.00 2002-03 357680 105.57 967591 122.02 1923847 105.27 2003-04 381003 112.46 1120824 141.34 2112810 115.60 2004-05 411547 121.47 1267286 159.81 2155710 117.95 2005-06 451147 133.16 1408294 177.59 2320213 128.36 2006-07 509813 150.47 1550512 195.52 2794060 152.88 2007-08 582923 172.05 1643573 207.26 3053334 167.07 2008-09 607141 179.20 1780801 224.57 2847764 155.82 2009-10 777653 229.53 2013296 253.88 3035483 166.09 2010-11 725768 214.22 2069202 260.94 3910116 213.95 Source: NAFSCOB Reports.

With regard to capital, Reserves and Borrowing positions of CDCCBs in

India is disclosed in Table 2.2 that the capital in the year 2001-02 was

Rs.338800 lakhs which was increased to 214.22 per cent in the year 2010-11 it

shows the growing performance of the banks. The profitability position of the

banks also improved considerably is evidenced by the increase in the level of

Reserves maintained by the banks in the years shown in the table. To strength

the financial position the banks used external source of finance i.e., borrowing,

that also shows increasing trend from the year 2001-02 to2010-11.

47 Co-operative banks also perform the basic banking functions of banking but they differ from commercial banks in the following respects

1. Commercial banks are joint-stock companies under the Companies Act of

1956, or public sector bank under a separate act of a Parliament whereas

Co-operative banks were established under the Co-operative societies’

acts of different states.

2. Commercial bank structure is branch banking structure whereas

Co-operative banks have a three- tier setup, with state Co-operative bank

at apex level, central / district Co-operative bank at district level, and

primary Co-operative societies at rural level.

3. Only some of the sections of Banking Regulation Act of 1949 (fully

applicable to commercial banks), are applicable to Co-operative banks,

resulting only in partial control by RBI of Co-operative banks and

4. Co-operative banks function on the principle of Co-operation and not

entirely on commercial parameters.

48 TABLE – 2.3

GROWTH OF INVESTMENTS BY INDIAN DCCBS (RS.IN LAKHS)

Year Investment Percentage of Growth 2001-02 2831959 100.00 2002-03 3113877 109.95 2003-04 3567729 125.98 2004-05 3478322 122.82 2005-06 3712739 131.10 2006-07 4079112 144.04 2007-08 4824662 170.36 2008-09 6104124 215.54 2009-10 7562446 267.03 2010-11 7562446 267.03 Source; NAFSCOB Reports

From the above table, it can be found that the amount of investment of

DCCBs and percentage of growth over the base year 2001-02 were showing increasing trend in all the years of the period stated in NAFSCOB reports. It shows that the financial soundness of the DCCBs in India and that is increasing every year due to acceptance of service provided by the DCCBs by the public and member societies positive way.

2.15 Responsibility of DCCB Ltd

DCCB has not only responsible for its customer and employees but also towards the society it belongs. Let some of the reasonability that TDCCB have done have been listed below:

49 A. Service on Behalf of Customers:-

1. Provide facility regarding opening current, saving and fixed deposit

accounts and collect deposits.

2. Issue draft, letter of credit and discount bill on a low rate of commission.

3. Provide services of automatic teller machine mobile banking and

depository participants and do immediate transfer of money.

4. Computerized bank passbook issued to customers.

5. Received complaint of customers and solve it as early as possible.

6. Provide self-deposit vault facilities.

7. Advances are given to small scale and medium enterprise and cottage

industries.

8. Advances against properties, jewelry, govt. securities, life policy and new

or old vehicles.

B. Service on Behalf of Employees:-

1. Provide medical facilities and educational facilities.

2. Provide various types of allowances.

3. Maintain various types of funds like staff provident fund bonus fund etc.

4. Conduct training programs for new employees and refresher programme

for old employees and organize a seminar and the conferences to update

their knowledge.

5. Special education reward is given to employees children for highest

percentage.

50 C. On Behalf of Society:-

1. Provide donation to Educational Institutions, Charitable Institutions and

Hospitals etc.

2. Advances to the weaker sections of the societies to their up-lift.

3. Helping the people at the time of natural calamity like earthquake, flood,

and drought.

4. Sustain and generate self-employment like Self- Help Groups (SHGs)

5. Equal distribution of credit structure by branch expansion particularly in

areas which are not covered by the banking system.

2.16 Problems Faced by Co-operative Banks

1. The Co-operative financial institution is facing severe problems which have restricted their ability to ensure smooth flow of credit

 Limited ability to mobilize resources.

 Low Level of recovery.

 High transaction of cost.

 Administered rate of interest structure for a long time.

2. Due to Co-operative legislation and administration, Govt. interference has become a regular feature in the day–to-day administration of the Co-operative institution. Some of the problem area that arises out of the applicability of the

Co-operatives legislative is:

 Deliberate control of Co-operatives by the government.

 Nomination of board of director by the government.

 Participation of the nominated director by the government.

 Deputation of government officials to Co-operative institution etc.

51 3. The State Co-operative Banks are not able to formulate their respective policies for investment of their funds that include their surplus resources because of certain restrictions.

4. Prior approval of RBI is mandatory for opening of new branches of

SCBs. The SCBs are required to submit the proposal for opening of new branches to RBI through NABARD, whose recommendation is primarily taken into consideration while according permission.

2.17 PROFILE OF THE STUDY AREA

Tiruchirappalli is an important Industrial and Education hub of central

Tamilnadu factories of Bharat Heavy Electricals Limited (BHEL), Heavy Alloy

Penetrator Project (HAPP) and Golden Rock Railway Workshop are located in the same city. The National Institute of Technology (NIT), Indian Institute of

Management, Bharathidasan University and Anna University of Technology,

Tamilnadu Agricultural University Centre for Banana Research, International

Institute of Information Technology, National Law School and Tamilnadu News

Print and Papers Limited (TNPL) have their campuses in the city.

1. Demographics

According to the 2001 Census, Tiruchirappalli had a population of

752,066 with in the corporation limits at a density of 5,127 persons per Two kms, with 376,125 men (50.01 Per cent) and 375,941 women (49.99 Per cent).

The Urban agglomeration had a population of 866,354. Tiruchirappalli metropolitan area constitutes the fourth largest metropolitan area in Tamilnadu and the 47th in India. 11.41 percent of the population was under six years of age.

Tiruchirappalli had a literacy rate of 79.62 percent with a male literacy rate of 83

52 percent and a female literacy rate of 75.46 percent. The metropolitan area had an estimated population of 829,537 in 2009.

2. Economy

The economy of Tiruchirappalli is mainly industrial. Since British rule,

Pre and Post- Independence of India the city had been known for its tanneries, cigar-manufacturing units and oil presses. At its peak, over 12 million cigars were manufactured and exported annually. Tanned hides and skins from

Tiruchirappalli had been exported to the United Kingdom and other countries too.

The city has a number of retail and whole sale markets, the chief among them being the 128 year old which is an great source of vegetables for the whole region and of income to the farmers, merchants, vendors,etc.,Other notable markets in the city are the flower bazaar in Srirangam and the mango marker at Mambazhasalai.

Tiruchirappalli is a major engineering equipment manufacturing hub in

Tamilnadu. The Golden Rock locomotive workshops, move to Tiruchirappalli from Nagapattinam in 1928, is one of the three railway locomotive manufacturing units in Tamilnadu. The workshops produced 650 conventional and low-container flat wagons during the year 2007-08. The chief workshop manager’s office at Golden Rock was awarded a star rating by the Bureau of

Energy Efficiency for the proper and regulated usage of electricity in its offices.

A High pressure Boiler manufacturing plant was set up by the Bharat

Heavy Electrical Limited (BHEL) India’s largest public sector engineering

53 company, in May 1965. This was followed by a Seamless Steel Plant set up at a cost of Rs.58 crore (US$13 million) and a Boiler Auxiliaries Plant. The Three manufacturing units constitute the BHEL industrial complex and cover a total area of about 22,927.4 square meters (246,788 sqft). The plant can generate up to 6.2 MW of electricity using coal as a resource. Other important industries in

Tiruchirappalli include the Trichy Distilleries and Chemicals Limited (TDCL) which was established at in Golden Rock municipality in the year 1966. And the Trichy Steel Rolling Mills which was started as a private limited company on June 27, 1961. The Trichy Distilleries and Chemicals

Limited manufactures Rectified spirit, acetaldehyde, acetic acid, acetic anhydride and ethyl acetate. It is one of the biggest private sector distilleries in

Tamilnadu and produced 13.5 million litres of spirit alcohol between December

2005 and November 2006. A weapon manufacturing unit and a Heavy Alloy

Penetrator Project (HAPP) facility are run by the Ordnance Factory Board of the

Government of India. The HAPP unit, set up in the late 1980’s, comprises a

Flexible Manufacturing System (FMS), the first of its kind in India.

3. Transport

Tiruchirappalli is well connected by road, rail and air with most cities and towns in India even to other Asian, European and Gulf countries too. The

National Highways NH45, NH45B, NH67, NH210 and NH227 pass through the city. Tiruchirappalli forms a part of the division number one of the Tamilnadu state transport corporation which is head quartered at Kumbakonam. There regular services to all places in Tamilnadu like Thanjavur, Pudukkottai,

Kanniyakumari, Chennai, Madurai, Palani, Puducherry, , Kodaikanal and Tirupathi etc., Buses are also available to destinations in Karanataka and

54 Kerala. The Karnataka State Road Transport Corporation (KSRTC) operates special bus services between Bangalore and Tiruchirappalli during weekends.

There are two major bus terminals the Chathram bus station and the central bus station both situated close to each other. The bus terminals are situated at a distance of one kilometer from the main railway station. The city has an efficient local bus transportation system – both governments operated as well as private.

The Great Southern of India Railway Company was established in 1853 with its headquarters in Tiruchirappalli. In 1859, the company constructed its first railway line connecting Tiruchirappalli and Nagapattinam. Currently,

Tiruchirappalli is an important railway junction in central Tamilnadu and constitutes a separate division of the Southern Railway. There are frequent trains to Chennai, Madurai, Chidambaram, Bangalore, Rameswaram, Mangalore,

Tirupathi, Kolkata, Guwahati, Cochin, Orissa,Bhuvaneshwar, Jammu,even

North Eastern parts of India. There are many daily express trains operating via the Chennai-Tiruchirappalli Guard line, important among which are Vaigai

Express, Pallavan Express and Rockfort Expressand the new arrivals. The

Mysore Express plies between Tiruchirappalli and Mysore on a daily basis, stopping at Bangalore on the way. Tiruchirappalli has railway connectivity with the most important cities and towns in India.

The Tiruchirappalli International Airport is the second biggest airport in

Tamilnadu in terms of passenger traffic, cargo traffic as well as aircraft movement. It was first used to handle air traffic in 1938 when Tata Airlines commercial flights stopped at Tiruchirappalli on the Karachi-Colombo route. In

1948, Air Ceylon commenced daily passenger flights between Tiruchirappalli

55 and Colombo via Jaffna. There are regular flights to Chennai, Kochi, Kozhikode,

Sri Lanka, Sharjah and Kuwait.

4. Administration

The municipality of Tiruchirappalli was inaugurated under the Town

Improvements Act 1865 on November 1, 1866 covering an area of 18 square kilometers (6.9sq mi) and originally consisted of two ex-officio and nine nominated members. Elections to the council were introduced in 1877 and the first chairman was elected in 1889. The municipality was upgraded to a municipal corporation as per the Tiruchirppalli City Municipal Corporation Act

1994 by inclusion of the Srirangam and Golden Rock municipalities. The municipal corporation currently covers an area of 146.7 square kilometers (56.6 sq.mi) and comprises sixty wards and four administrative zones: Srirangam,

Ariyamangalam, Golden Rock and .

The Tiruchirappalli City Municipal Corporation Council, the legislative body, comprises sixty councilors elected from each of the 60 wards and is headed by a mayor assisted by a Deputy Mayor. The executive wing is made up of seven departments: general administration, revenue, town planning, engineering, public health, information technology and personnel and is headed by City Commissioner. The Commissioner is assisted by two executive engineers for the east and west sections, and Assistant Commissioners for personnel, accounts and revenue departments, a public relations officer, a city engineer, a city health officer and an Assistant Commissioner for each of the four zones.

56 5. Education

Even during the British rule, Tiruchirappalli was recognized as an important Educational centre in India. St.Joseph’s College, was inaugurated in

Nagapattinam on 1846 and transferred to Tiruchirappalli in 1883, is one of the oldest pioneering educational institutions in South India. The Society for the

Propagation of the Gospel (SPG) College, established in 1883, is another premium missionary institution in the city.

Tiruchirappalli has a total of 27 Arts, Science and law colleges, notably

National College, , , and

Government Law College. There are also 35 engineering colleges in the city.

The National Institutes of Technology has a campus at on the outskirts of the city and Anna University of Tiruchirappalli branch was established following the bifurcation of AnnaUniversity in 2007. A Total number of 64 self-financing colleges offering courses on Engineering,

Architecture, Management and Computer Applications in the districts of

Ariyalur, Cuddalore, Nagapattanam, Perambalur, Pudukkottai, Thanjavur and

Tiruvarur are affiliated to this University. The SRM Group of Colleges, Medical colleges, Hospital established the SRM Institute of Science and Technology at irungalur near Tiruchirappalli followed by Chennai Medical College and

Hospital in 2007. A proposal by the group to include the institutions in the SRM

University is under review of the Ministry of Human Resources Development of the Government of India.

57 The Bharathidasan University is based on Tiruchirappalli and which exercises its jurisdiction over colleges in Tiruchirappalli district and seven neighbouring districts.. The university runs a management school, Bharathidasan

Institute of Management (BIM) in Tiruchirappalli in collaboration with BHEL.

The Government of India’s Ministry for Human Resources Development (HRD) has approved a proposal for the setting up of a campus of the Indian Institute of

Management in Tiruchirappalli and the campus in expected to start functioning from the 2011-12 academic season.

There are more than 100 government and private schools in

Tiruchirappalli. The National High School was established in 1886 to counter

Christian propaganda at schools run by missionaries. The RSK Higher

Secondary school. Campion Anglo-Indian Higher Secondary School and

St.Johns Vestry Anglo-Indian Higher Secondary School are some of the notable schools in the city.

6. Sports and Recreation

Hockey and cricket are the most popular sports in Tiruchirappalli. Former

Indian goalkeepers Charles Cornelius and Leslie Fernandez hail from the city. At present complex which is the city’s principal hockey ground, apart from the Hockey ground, the stadium complex also includes a Football ground, an athletic track, a Swimming pool, a gymnasium, court and sports hostel. Tiruchirappalli District Cricket Association (TDCA) is one of the constituents of the Tamilnadu Cricket Association and regulates school, college and club cricket in the district. World class cricket matches National levels are held at Jawaharlal Nehru stadium (previously, Stadium). At the

58 golden jubilee celebrations of the association in 2008-09, plans have been mooted for the setting up of another cricket stadium and an academy in the outskirts of Triuchirappalli city. Cricket Academy is one of the noted cricket coaching academies in Tiruchirappalli. Domestic football, and tournaments are held in and around the city. International chess tournaments have also been held in Tiruchirappalli.

7. Media

According to the Registrar of newspapers in India, a total of one hundred eleven newspapers have been registered in Triuchirappalli. Among the major newspapers in English-language published from Tiruchirappalli editions are The

Hindu, New Indian Express, Some of the important Tamil-language newspapers that published as a Tiruchirappalli edition are Dina Thanthi ,Dina Mani,

Dinamalar, The Hindu Tamil, Malai Malar, Dinakaran, Tamil Murasu and Tamil

Sudar, Popular Tamil Weekly Anandavikatan launched a local supplement for

Tiruchirappalli on the occasion of the 85th anniversary of its founding.

The Educational institutions in Tiruchirappalli contribute the discriminating lines of interest to its people. They have all kinds of business places, temples, churches, mosques, government offices, modern hospitals, five star and three star, deluxe luxurious hotels, banking and financial institutions.

Thus, on the whole, the role of DCCBs is satisfactory and encouraging and they occupy very important place in the development of district economy by providing fair banking service to the public and to the member societies. At last, a large amount of investment made by DCCBs will enable them to face any form of financial calamity. DCCBs are compelled to fulfill their twin objectives i.e.

59 service motive and profit motive, though they are sometimes running at loss they never fail to help the customers and member societies who get fair return for their deposits compared to other banks both public and private sector. They also provide loans at cheap rate interest for various purposes including Government schemes in time than others in this field. So the role played by DCCBs is vital in the development of the economy. As for as the study area of Tiruchirappalli concerned, the potentiality for the profitable contact any bank in general and that too under the Co-operative sector is found to be opt place and it is essential for the betterment of all section of people living in this area in a homogeneous manner. By understanding the Government of Tamilnadu established District

Central Co-operative bank in this district in the 19th century at Kulithalai. The profile and its general financial position are discussed in the next chapter.

60 Chapter III

Functions and Financial position of TDCCB Ltd

CHAPTER 3

GENERAL FINANCIAL POSITION OF TDCCB LTD

Co-operative Banks are functioning well and in this chapter the research analysis has been made on the general financial position of Tiruchirappalli

District Central Co-operative Bank Limited, taking into consideration that the general aspects like Organization Structure, Objectives of the Bank, Deposit

Interest Rate, Demand Draft and Bill Commission, Commission Rates, Interest on various types of loans provided by the bank, Achievements and Appreciation gained by the bank, and specific areas like Share capital, Reserves, Deposits,

Borrowings, Loan Issued, Loan Outstanding, Investments, Working Capital,

Total Volume of Business, Non-Performing Assets, Capital Adequacy Ratio, Net

Worth etc., during the period of study.

The chief function of the T.D.C.C Bank Ltd is to receive the surplus funds from the primary credit societies and make them available to other societies. They play a vital role in transferring the funds from the persons who have it abundantly for the needy people. In addition to the above functions the

T.D.C.C. Bank Ltd carries on commercial banking activities also.

3.1 The primary functions of the bank are listed below:

1. To accept deposits from the general public.

2. To engage in lending or financing with or without security.

3. To draw, accept, discount, buy, sell, collect and deal in bills of exchange,

hundies, promissory notes, coupons, drafts, railway receipts, warrants,

debentures certificates, scrip etc.

61 4. To deal in stocks, shares, debentures, securities, investment of all kinds.

5. To carry and transact every kind of guarantee and indemnity business.

6. To establish or support the establishment of any association, fund, trust

etc., for the benefit of employees of Co-operative banks, or their

dependents etc.

Have been discussed the main functions of the bank, the features of the

bank are explained in the succeeding section.

3.2 Tiruchirappalli District Co-operative Bank Ltd.

Tiruchirappalli District Central Co-operative Bank Ltd (T.D.C.C.) is the federation of Primary Credit Societies functioning in Trichy District and it is located in the heart of the city. T.D.C.C Bank Ltd. dedicates itself to provide the best possible financial services to the people of Trichy district. It has been offering broad range of services such as accepting deposits, collecting bills, issuing drafts, safe custody of valuables, advancing loans to the needy against proper securities etc. In addition to these functions, they supervise the workings and management of the affiliated Primary Agricultural Co-operative Societies and train their members in the principles of Co-operation. It has been functioning for more than a century and reaching the business transaction of Rs.

2000 crores.

3.3 Origin of T.D.C.C Bank Ltd

Tiruchirappalli District Central Co-operative Bank Ltd is the second

District Central Co-operative Bank in Tamil Nadu registered under the rule of

Co-operative Society’s Act of 1904. The bank was registered as “Kulithalai

District Urban Co-operative Bank “ on 25th March 1909 with headquarters at

62 Kulithalai and commenced its business on 17th April 1909. The name of the bank was changed into “Tiruchirappalli District Urban Bank Ltd “and the head quarter was also shifted from Kulithalai to Tiruchirappalli in 1910. In the year

1932, again the name of the bank was changed as “Tiruchirappalli District

Co-operative central bank Limited” which continued to be till 19th August 1977.

In 1977 the name of the bank was again changed for the third time as

“Tiruchirappalli Central Co-operative Bank” by removing the word “District”.

Once again the name of the bank was changed as “Tiruchirappalli District

Co-operative Central bank Limited” during the year 1987 which is continued to be the present name of the bank still.

The Tiruchirapalli District Central Co-operative Bank was registered under Tamilnadu Co-operative Societies Act, on 25.03.1909 and commenced its business on 17.04.1909. TDCC Bank provides a range of banking products through its network of branches in the Tiruchirapalli, Karur, Perambalur and

Ariyalur Districts to the Urban and Rural Population. It has obtained license from the RBI-in License No - RPCD (Che)/4/03.00.109/2009.10 dated April

06.2010.

TDCC Bank consists of fifty seven branches with its Head office located at No.1, Fort Station Road, Tiruchirappalli - 620 002. To provide on lending credit and other facilities for the development of rural public, TDCC Bank obtains Loans from NABARD through TNSC Bank. It also obtains funds from

TABCEDCO, TAMCO and other agencies.

In the year 1909-10 the Bank was initiated with 24 'A' class members with a Share capital of Rs. 0.12 Lakhs and its Deposits was Rs. 0.65 Lakhs and

63 Loans issued was Rs.0.70 Lakhs and at the end of the year the Loan outstanding was Rs. 0.67 Lakhs. It has earned a Net Profit of Rs.0.01 Lakh and Dividend declared was at 9.00 per cent to its members. At the end of the year 2011-12 the

Bank had 981 'A' class members with a Share capital of Rs. 4278 Lakhs and its

Deposits was Rs. 115482 Lakhs and Loans issued was Rs.188459 Lakhs and at the end of the year the Loan outstanding was Rs. 172459 Lakhs. It has earned a

Net Profit of Rs.1485 Lakhs. The Reserves at the end of 31-3-2012 was

Rs.25713 Lakhs. The Borrowings outstanding at the end of the year was

Rs. 41014 Lakhs. The Gross NPA at the end of the year was 6.30 per cent, whereas the Net NPA was Nil. The CRAR per cent was 8.66. The Net Worth was Rs.16542 Lakhs. At the end of the year as on 31-3-2012, Total Deposit with all DCCB's in Tamilnadu was Rs.1542980 lakhs and the Loan outstanding was

Rs.2060986 Lakhs and the Trichy DCCB's share of deposit was 7.5 per cent and in Loans outstanding was 8.4per cent. This bank so far has completed 100 years of its service for the public especially for the agriculturists and weaker sections of the society. It is the leader of all Co-operative societies functioning in this district. The TDCC Bank is regulated by Registrar of Co-operative Societies

Chennai and NABARD. The TDCC Bank is placed in the 'A' class throughout all the years in Audit.

3.4 Objectives of the bank

The chief object of T.D.C.C Bank is, to meet the credit requirements of member societies. T.D.C.C Bank extends finance for agricultural credit societies, non-agricultural credit societies, production purposes, marketing and supply operations and to meet the working capital requirements of the societies of the

64 members. T.D.C.C. Bank acts as a balancing centre for adjusting the surplus and deficiency of the working capital of the primary credit societies.

3.4.1 The major objectives of T.D.C.C Bank are

1. To develop socio-economic conditions of the weaker sections of the

society.

2. To develop the saving habit among the rural people.

3. To raise its resources to attain self-sufficiency of resources.

4. To lend money to their affiliated societies and to the individuals

borrowers.

5. To assist, develop, supervise and co-ordinate the work of primary

agricultural and non-agricultural societies which are affiliated to it.

6. To provide financial aid for the development and promotion of Small

Scale Industries.

7. To develop the agricultural income of farmers by lending and

popularizing the crop loans facilities.

8. To implement government policies by providing assistance to priority

sectors.

9. To develop Co-operative movement in the district and extending banking

facilities in rural areas.

3.5 Organization Structure of T.D.C.C. Bank Ltd

Well-designed organizational structure is very important for the efficient functioning. It explains the way in which the chain of works in the organization. The organizational structure of Tiruchirappalli District Central

Co-operative Bank Ltd has been well designed in such a manner to perform its

65 functions effectively. It is observed that the chairman is the authority of the

Bank and is responsible for conducting activities delegated by the board of directors. The decisions of the policy of the bank are usually taken by the Board of Directors and are implemented by the Chairman through the Managing

Director or Special Officer of the bank. The General Manager and other employees of the bank are elevated by promotion and they look after the entire activities of the bank under the supervision of the Special Officer.

3.5.1 Management and Administration

The Management of the Central Co-operative Banks generally vests with the Board of Directors consisting of 12 to 15 members. Accordingly, since the bank’s inception to 09.06.1976, the bank was managed by the “selected board” consisted of elected representatives of various types of societies and nominees of the state government. From 10.07.1976 onwards, the Board of Management of

Central Co-operative Bank was superseded by the state government through a separate legislation, and since that date, the Special Officer who has been appointed by the state government manages the affairs of the bank. During the period 1998-2001, the affair of the bank was again conducted by the selected

Board of Directors. Again, from 2001 to the date, the affairs of the bank are being conducted by the Special Officer.

3.6. Membership

The T.D.C.C. Bank Ltd is constituted as mixed type of central bank which admits both the primary societies and the individuals as members. The membership of the T.D.C.C. Bank Ltd constitutes “A” class members and “B” class members. “A “class members are representatives of Co-operative

66 Institutions and the Government and they are entitled to receive dividend. They can also execute their votes, pass amendments relating to the working of the bank and also take part in the management of the bank by due process of election or nomination. “B” class members are individuals. These members are nominal members and they are not entitled to participate in the General Body

Meeting and to vote at the meeting. But, at the instance of the All India Rural

Credit Survey Committee the process of gradual elimination of the individual shareholders has been introduced in most of the banks in a bid to make them fully Co-operative in character. As a result of it, this bank has also stopped the enrolment of individuals as members from the year 1992-93 to till now.

3.7 Functions of T.D.C.C. Bank Ltd

1. It offers, half per cent interest than what the commercial banks pay on their deposits.

2. It offers an additional interest of half per cent on deposits by senior citizens.

3. The interest rate offered by the bank on deposits as on 31st march 2009 is presented below.

Cheques, drafts and pay orders are issued and collected for a low commission.

 It provides three sizes of safety locker facility to customer at low rent.

 It gives loan against National Saving Certificate

 It provides guarantee at low commission.

 Up to a maximum of Rs.1 lakh bills are discounted by the bank.

 Up to a maximum of Rs.4, 00,000 jewel loans are issued to an individual.

 Loans are given up to Rs. 20 lakhs for the construction of houses

 It provides Kisan credit card with cheque facility.

67  It implemented various schemes like,

a. Deposit insurance scheme.

b. Comprehensive crop insurance scheme

c. Integrated Rural Development Programme/ Swarnjayanti Gram

Swarozgar Yojana (SGSY)

3.8 Deposits

The TDCCB has accepted the deposit from public and from other

Co-operative banks. One of the important highlights is to offer 0.5per cent more of interest rate for its senior citizen of the interest. It offers saving deposit, current deposit and fixed deposit. The interest rate for this type of deposit was given below the table 3.1

68 Table 3.1

Deposit Interest Rate

Nature of Deposit Rate of Interest & Period Others Senior citizen For Saving Deposit 4.00per cent For Fixed Deposits: 11.00 per cent 11.50 per cent 15 days to 45 days 6.50 per cent 6.50 per cent 46 to 90 days 7.50 per cent 7.50 per cent 91 to 180 days 8.50 per cent 8.50 per cent 181 to 364 days 9.50 per cent 10 per cent 1 year &Above 10.50 per cent 11 per cent 4 years and above 10.75 per cent 11 per cent Source: Internal Records of the TDCCB

3.9 Demand Draft and Bill Commission

Another important services done by the TDCCB is issuing a demand draft

according to the customer on request of any bank. The bank has fixed

commission for this service the rate of commission charges is stated in Table

3.2.

3.10 Loan and Advances

To achieve the object of banking business the TDCCB lend the amount to

the needed persons out of the deposits collected. This activity may be through

branches established in various parts of the district called Direct Loans and

through its Primary Agricultural Credit Societies (PACS) to rural people to

encourage agriculture activities is termed as indirect loans. The rates of Interest

charged on such activities are discussed below.

69

Table 3.2

DD Commission charges

Above Sl.No. Details Upto 501 - 1001 - Above 10,000/- 1,00,000/- Rs.500/- 1000/- 10,000/- per every 1000 per every 1000

a. DD / Pay order 15.00 25.00 30.00 2.25 2.50

DD Commission b. for Students 10.00 10.00 20.00 ------(in Rs)

Cheque c. Collection 15.00 20.00 25.00 3.50 4.00 (in Rs)

Postage d. 30.00 30.00 30.00 60.00 60.00 (in Rs) Source: Internal Records of the TDCCB

3.10.1 Direct Loan (through branches)

TDCCB Ltd Provides Jewel Loan, Consumer Loan, Loan to small scale

industries, Loan on Pay certificate, Loan for House construction, House

, Professional Loan, Loan against National Saving Certificate and

Pensioner loan apart from this which also provides Education Loan, Working

Women Loan, Women Entrepreneur, SHG, Maternity Loan, Rain Water

Harvesting, Petty Traders, Computer Loan, Differently abled person, Joint

Liability Groups, Hospital and Nursing Home Loan and Salary Loan.

70 Table 3.3

Types of loan and rate of Interest with repayment period

Rate of Penal Maximum Re- Types of Interest Interest Sl.No. Loan Security payment Loan ( in per (in per Amount Period cent) cent) Gold 1. Jewel Loan Rs.800000 14.50 3.00 12 months Ornaments 2 SSI Rs.1000000 Building 15.00 1.00 120 months Building 3 SRTO Rs.1000000 15.00 1.00 48 months Vehicle Govt. Consumer 4 Rs.30000 Employee 15.00 1.00 36 months Loan Security 2 Govt. Pay 5 Rs.300000 Staff 15.00 1.00 60 months Certificate Security 174 months, House Land & 6 Rs.3000000 15.00 1.00 moratorium Construction Building period - 6months. House 7 Mortgage Rs.1000000 Building 15.00 1.00 60 months Loan Profession Land & 8. Rs.500000 15.00 1.00 72 months Loan Building National 70 per cent N.S.C. 9. Saving of Face 15.00 1.00 Cash Credit Bond Certificate Value Moratorium Male period of Diploma Students study + 1 Rs.5000 15per year or 6 Education per year Land & cent months 10. 1.00 Loan UG & PG Building Female after Rs.100000 Students getting job per year 14per whichever cent is earlier - 60 months Pensioner Land & 11. Rs.50000 15.00 1.00 24 months Loan Building

71 Revamped 1 person 12. Micro Credit Rs.5000 12.00 1.00 147 days Surety Loan Working 2 working 13. Women Rs.100000 women 15.00 1.00 36 months Loan Surety Women Land & 14. Rs.1000000 15.00 1.00 60 months Entrepreneur Building 15. SHG Rs.500000 --- 14.00 1.00 36 months Maternity 16. Rs.2000 --- 12.00 1.00 10 months Loan Land & Building Rain Water Below 11.00 1.00 36 months 17. Rs.100000 Harvesting Rs.25000 Above 11.75 1.00 Rs.25000 Petty 2 persons 18. Rs.10000 15.00 1.00 147 days Traders Surety 2 Govt. Computer 19. Rs.50000 employee 15.00 1.00 60 months Loan Surety Upto Personal 20 5.00 1.00 Rs.50000 Surety quarterly Rs.50001- Collateral 20 6.00 1.00 500000 Surety quarterly Differently 20. Above abled person Rs.500000 20 (for 8.00 1.00 quarterly Education & Training) Joint Per 147 days 21. Liability member --- 15.00 1.00 weekly Groups Rs.10000 remittance Hospital and 22. Nursing Rs.5000000 --- 15.00 1.00 72 months Home Loan 22. Salary Loan Rs.300000 --- 15.00 1.00 EMI Source: Internal Records of the TDCCB

72 The rate of interest charged on such loans and other related details are stated in table 3.3 and it may be noted that the bank charges less per cent on the usual rate of interest charged on loans to encourage women beneficiaries.

3.10.2 In Direct Loan - (on-lending through PACS)

In India, traditionally banks used to provide short-term finance to trade and industry. The quantum of advance was linked to assets owned by borrower.

But, nationalization of commercial banks had radically changed the concept of bank lending in India.

Table 3.4

Agricultural and Non-Agricultural Interest rates

DCCB to PACS to PACS Borrowing Sl.No. Agricultural and Non-Agricultural Loans (in per Members cent) (in per cent)

Minor Irrigation, Dry land farming, Land 1. Development, Waste Land Development and 11.00 14.00 SC/ST Action Plan

Organic Farming, Contract, Farming Under 2. Agri. Export Zone, Aromatic and Medical 11.00 14.00 plants, Farm Mechanization

Agri Clinics and Agri Business Centre, Cold 3. Storage, Agri and other activities, Rural 11.00 14.00 Godowns

4. SHG & SGSY Under Farm sector 11.00 14.00

Rural Housing, NFS, SHG, SGSY under 5. 11.00 14.00 Non-Farm sector

Source: Internal Records of the TDCCB

73 India has perhaps the world’s largest network of rural financial institutions, boasting about 175000 credit outlets which cater to the credit requirements of the agricultural and related sectors. Banks offer crop loans for agriculture and generally repayable at the time of harvesting.

Table 3.4 indicates the interest rate applicable for agricultural and non-agricultural activities. At present, banks are formulating Special

Agricultural Credit Plans under which they fix for themselves targets for disbursement of agricultural credit during a year. In India, considering the importance of agriculture, credit procedures have been simplified, thus paving way for small/marginal farmers to be able to access credit.

3.11 Locker Facility

At par with other commercial banks functioning in the district of Trichy the Central Co-operative Bank also provide locker facility to all its customer on certain terms and conditions followed by all other commercial banks like the rental period is one year from January to December and the customer one who wants to avail this facility must have a savings bank account.

The amount of rent charged by the bank is specified in table 3.5. The amount of rent differs on the basis of size and the place where the Branch is located. The rent charged by the bank is Rs.100 to Rs.200 less if the customer availed the facility in the branches located outside the Trichy city limit.

74 Table 3.5

Locker size and rent

Rent - Trichy City Other Branches Sl.No. Locker Size (in Rs) (in Rs)

1. Small 500 400

2. Medium 900 800

3. Big 1500 1300 Source: Internal Records of the TDCCB

3.12 Achievements and Appreciation of TDCCB:

1. Overall Best Performance Award at the National Level for the Year 2011-

2012 from NAFSCOB at New Delhi on 20-12-2012.

2. The Bank has received the Best Performance Award from TNSC Bank for

financing more number of Joint Liability Groups during the year 2008-09.

3. State level second prize for the issues of loans to SHGs in the year 2009-

10 by TNSC Bank.

4. The bank received the Best Performance Award from TNSC Bank for

financing Physically Disabled persons from TNSC Bank under NHDFC

scheme during the 2007-08, 2008-09 and 2009-10.

5. In the year 2009-10 State Level and District Level prizes for the sanction

of loan to JLGs and SHGs.

6. In the year 1995-96 State Level Best Bank Award and Cash Prize for Rs.

5.00 Lakhs by NABARD.

7. In the year 2000-01 State Level Best Bank Award and reward for Rs.

30,000 by TNSC.

8. First Prize for the issue of SHG loans for three consecutive years

2001-02, 2002-03 and 2003-04 by NABARD.

75 Capital structure, which is known as financial plan or financial structure, determines the long-term financial strength as well as the profitability of a concern. The financial structure refers to the composition of long-term debt, preference share capital and equity share capital including reserves and surpluses i.e., retained earnings. The capital structure decision is a significant managerial decision as it influences the shareholders’ return and risk. Consequently, the market value of the share is affected by the capital structure.

The financial structure and source of capital is available on the liability side of the balance sheet of any enterprises. Traditionally, short-term borrowings are excluded from the list of methods of financing the firm’s capital expenditure, and therefore, the long-term claims are said to be the capital structure of the enterprise. Therefore, the composition or proportion of usage of long-term sources of capital is called the capital structure31.

3.13 FEATURES OF AN APPROPRIATE CAPITAL STRUCTURE:

A sound or appropriate capital structure should have the following features32.

 Profitability

 Solvency

 Flexibility

 Capacity and

 Control

31 Joy, O.M. Introduction to Financial Management, Richard D. Irwin Inc., Illinois, 1977.p.4 32 Johnson, R.L., Financial Decision Making, Goodyear, 1973. D.Van Nostrand Co. 1966.

76 3.14 THE COMBINATION OF LONG-TERM AND SHORT-TERM

FUNDS IN CAPITAL STRUCTURE:

The capital structure of a business consists of three elements33:

a. Shareholders Fund

b. Long Term Loan Fund

c. Short Term Loan Fund.

The long-term sources of funds of the bank under study include the Net

Worth – Share capital, Reserves and surpluses and long-term borrowings.

3.15 SHARE CAPITAL

The total capital of the District Central Co-operative Bank is generally collected from the member societies and state government. The capital contribution by the shareholders are permanent in nature, which is not under the contractual obligation to refund during the life time of the bank but the return of capital arise only when claims on debt are fully met.

3.16 RESERVES AND SURPLUS:

Plough back profit is an important source of capital of all the business enterprises, so it is also applicable to the banks The initial fund requirements of the business concern are met by using different form of external financial sources, but to meet the subsequent requirements for expansion, modernization and replacement of assets they resort to internal financing34. This includes

33 The Institute of Chartered Accountants of India, Advanced Accounting. Study material for C.A students.p.1053 34 P. Krishnamachary, Investment Management in public Enterprises, Print well publishers, Jaipur, 1990, p.27

77 a. Retained earnings: It is a kind of low cost source of funds as they do not

involve any fixed cost obligation like debt capital. Unfortunately some of

the DCCB running at a loss due to many reasons and hence ploughing

back of earnings for the expansion and connected works is not possible. b. Depreciation fund: It is a kind of non-monetary charges and does not

involve any outflow of cash. Usually depreciation fund is created out of

earned profit during the active life of the assets, to replace the assets

without financial constraint.

3.17 GOVERNMENT CAPITAL CONTRIBUTION:

In all the DCCB the capital contribution by the state government is getting much importance and the amount is invested in the long-term activities only.

3.18 RESERVES

The Co-operative societies Acts in every state prescribes that a certain percentage of net surpluses to be contributed to the statutory reserve fund. In

Tamilnadu 20 per cent of net profit should be contributed to statutory reserve fund. The reserve is created to meet unforeseen losses and debts of the TDCCB.

The reserves of TDCCB composed of statutory reserve, special bad debts reserve fund and other reserves. The Tiruchirappalli District Central Co-operative Bank maintains reserves in the following forms.

3.19 LONG TERM LOANS AND ADVANCES:

The banks normally raise loans from the state Co-operative banks, state government and RBI. The normal repayment schedule of the long term bank finance is 10 to 15 years, but in case of government loans, the period of

78 repayment differs from nature and purpose of the loan borrowed. For repayment of government loans, time extension is generally, obtained but no moratorium is ordinarily allowed in respect of interest payments. The loans borrowed may be secured or unsecured and for the overdue balances, the banks are liable to pay a penal interest at the rate of two per cent above the normal rate of interest on the overdue installment of principal and interest.

79 Table 3.6

Capital Structure of the TDCC Bank from 2001-02 to 2010-11

(Rupees in lakhs)

per per per Share cent cent cent Year Reserves Borrowings Total capital to to to total total total 2001-02 1460.64 12.29 6353 53.47 4068.34 34.24 11881.98 2002-03 1627.2 11.29 8031 55.73 4753.6 32.98 14411.8 2003-04 1796.12 9.34 9695 50.42 7738.64 40.24 19229.76 2004-05 2114.78 8.77 11211 46.52 10774.53 44.71 24100.31 2005-06 2313.91 9.28 12112 48.59 10501.73 42.13 24927.64 2006-07 6545.99 21.32 14238 46.36 9925.44 32.32 30709.43 2007-08 9791.13 26.56 16663 45.20 10413.83 28.25 36867.96 2008-09 13440.87 31.79 18193 43.03 10642.45 25.17 42276.32 2009-10 16442.8 33.08 17182 34.56 16086.14 32.36 49710.94 2010-11 19051.42 30.32 17586 27.99 26188.82 41.68 62826.24 MEAN 7458.49 23.53 13126.40 41.42 11109.35 35.05 31694.24 SD 6784.29 4269.58 6290.00 16273.86 CV 90.96 32.53 56.62 51.35 CAGR 33.02 11.98 22.99 20.33 Correlation 0.9708 0.9102 0.9224 1.0000

Source: Compiled from Financial Statements. SD – Standard Deviation; CV – Coefficient of Variation; CAGR – Compounded Annualized Growth Rate, Correlation of each component to Total Capital.

The tale 3.6 shows that capital structure of the TDCCB mainly consists of

Share capital, Reserves and Borrowings. It is seen from the Table 3.6, which

portrays the results of the analysis of capital structure of the TDCCB, that the

values of share capital, reserves and surplus and long term borrowings have been

Rs. 1348.46 lakhs, Rs.6353 lakhs, and Rs. 4068.34 lakhs in 2002-03,

respectively the base year of the study and have grown up to Rs. 19051.42 lakhs,

80 Rs. 17586 lakhs, and Rs. 26188.82 lakhs respectively in 2010-11, the end year of the study. However, the percentage share of reserves has declined from 67.42 per cent to 27.99 per cent in the end year. On the other hand, share of share capital and borrowings to total capital has increase from 8.11 per cent and 24.47 per cent to 30.32 per cent and 41.68 per cent respectively at the end of the year of the study period. Bank generally borrows from State Co-operative Bank,

State Bank of India and other Commercial Banks. The maximum borrowing limit of the bank is usually linked with its owned funds. Normally, any central

Co-operative bank opt borrowings from various sources like government and state Co-operative bank when the owned funds and deposits are not sufficient to meet the credit needs of the area of operation, the bank resorts to borrowing.

Borrowing is a costly source of fund, compared with owned funds and deposits.

The results also show that, on an average, 35.05 per cent of total capital employed in the banking business by the TDCC Bank was borrowed from the external sources. In the same period, reserves and surplus formed 42.42 per cent of the total capital while the remaining 23.53 per cent has been shareholders contribution. Further the results indicate that the borrowings have not been consistent during the period of study as the coefficient of variation is very high

(CV = 56.52). At the same time, the borrowings have significantly grown at the compound rate of 22.99 per cent annually. Equity share capital and reserves have also grown significantly at the rate of 33.02 per cent, which is more than the growth rate of borrowings and 11.98 per cent respectively, but the very less compared to borrowings.

81 3.20 DEPOSITS

Mobilization of Deposit has been one of the important objectives of any banking company from the inception; the Co-operative banks are not exempt to this. Deposits constitute one of the important components of working capital of

Co-operative banks. The Maclagan Committee (1915) observed that “unless, as the movement progresses, there is substantial increase in deposits, it will have to be confessed that Co-operation has failed in one of its main objectives”.

TDCCB accepts it from public, institutions and from its member societies. Table 3.7 depicts the total amount of deposit and the amount of deposit from individuals and member societies.

With regard to the deposits of the TDCCB an examination of the Table

3.7 envisages that there has been a continuous increase in both deposits from individuals and member societies in absolute terms in all the years of the period of study. But the percentage of deposit by member society to total deposit has exhibited a declining trend in the years 2009-10 and 2010-11 (from 29.95 per cent in 2009-10 to 24.49 per cent in 2010-11).

82 Table 3.7

Deposit accepted by TDCC Bank during the period from 2001-02 to 2010-11

(Rupees in lakhs) per cent to Co- per cent Year Individuals total operatives to total TOTAL

2001-02 29477 66.63 14765 33.37 44242

2002-03 33782 73.15 12401 26.85 46183

2003-04 33802 73.13 12418 26.87 46220

2004-05 33961 74.71 11496 25.29 45457

2005-06 35814 72.12 13847 27.88 49661

2006-07 39200 73.33 14260 26.67 53460

2007-08 45379 72.07 17589 27.93 62968

2008-09 54997 69.37 24288 30.63 79285

2009-10 63603 70.05 27195 29.95 90798

2010-11 75536 75.51 24496 24.49 100032

MEAN 44555.1 72.1 17275.5 27.9 61830.6

SD 15306.89 5847.27 20786.12

CV 34.35 33.85 33.62

CAGR 11.02 5.79 9.49

Correlation 0.9934 0.9542 1.0000

Source: Compiled from Financial Statements. SD – Standard Deviation; CV – Coefficient of Variation; CAGR – Compounded Annualized Growth Rate, Correlation of each component to Total Capital.

83 At the same time, the deposits from individuals and institutions have shown an upward movement throughout the period under study. In general the total amount of deposits collected by the bank during the period of study shows increasing its trend in all the years except 2004-05. The percentage share of individual and instructions is 72.1 per cent of the total during the period of the study. The result further show that both source of deposits i.e. from individuals and institutions (CV= 34.35) and from member societies (CV= 33.85) have been less homogenous (consistent). That is, both have been highly volatile during the study period. In sum, the results of the analysis of sources of the deposits of the

TDCCB have revealed that the bank has managed to enhance the deposit level throughout the period under study. Chart 3.1 has also strengthened the above results

Chart - 3.1

Deposits by Individuals and institution and Co-operative Societies.

by individuals and Institutions 28%

72% by Co- operative societies

84 Further the deposits can be classified in to different categories as stated below:

 Fixed Deposit  Savings Account  Current Account  Recurring Deposit  Cauvery Reinvestment Plan  Call option deposit

3.20.1 Fixed Deposits (F.D)

TDCCB allows, Fixed Deposit for a minimum period of 14 days. If it is urgent, it allows premature closure of Fixed Deposit at reduced rate of interest.

Fixed Deposit receipts cannot be transferred to any other persons (endorsement not allowed). Depositors can also avail the loan against at a maximum of 70 per cent of the face value of Fixed Deposit. Renewal after 14 days of maturity period will yield savings deposits rate of interest. At the same time if the savings account does not operate for more than 14 days, it will be treated as Fixed

Deposit and the amount carries interest for Fixed Deposit.

3.20.2 Savings A/C

Individuals and non - profit organisation can operate the savings a/c with

TDCCB ltd. Its holders get the advantage of liquidity and small income in the form of interest. PCC Bank offers interest of 4.5 per cent on their savings a/c. It is lower than F.D. If it does not operate more than 14 days, it yields fixed deposit income. There are some restrictions on withdrawals that RBI fixes interest for it.

85 3.20.3 Current A/C

Generally business firms and Co-operative bodies open this account.

Those who want liquid balance may maintain this account. No interest rate is paid on it. There are no restrictions on withdrawals from current account. It has overdraft facility. Any individual can open current a/c.

3.20.4 Recurring Deposits (R.D)

Any individuals can open R.D for a minimum period of one year, and maximum period of 5 years. It is helpful for the middle class people.

3.20.5 Cauvery Reinvestment Plan

TDCCB introduces Cauvery reinvestment deposit since 1976. It is a

Reinvestment scheme. Interest had been provided under compound interest basis. Maximum of 75 per cent of the face value of deposit receipt can be availed as loan by the deposit holders.

3.20.6 Call option deposit

In order to cultivate the habits of savings, TDCCB Ltd. started this type of deposits.

3.21 Deposit insurance scheme (DIS)

The Deposits Corporation of India was setup with an initial capital of Rs. one crore on 1.1.1962 under deposit insurance Act 1961. The main objective of the scheme is to inspire public confidence in the banking system. It was extended to Co-operation of India (CGCI) was merged with the Deposit

Insurance Corporation and it was renamed as “Deposit Insurance and Credit

Corporation” with effect from 15th July 1978. It protects small depositors by

86 insurance and provides guarantee to the banks for loans extended to small borrowers.

The results presented in Table 3.8 indicates that there is significant increase in savings deposits (CAGR = 10.74), study increase in the fixed deposits (CAGR = 9.39), and the current account has exhibited an upward trend with CAGR of 7.03 per cent during the period from 2001-02 to 2010-11. It is observed that the TDCCB Ltd has become one of the safe places for the deposits for the public both from rural and urban areas half per cent of interest is allowed higher than commercial banks, by Co-operative bank and half per cent higher rate of interest is also allowed for senior citizens.

They are collected from the public, non-profit organisation, self-help groups, other Co-operative sector and PACs. Out of these, Head office collects nearly 20 per cent to 80 per cent by the branches. Rural and urban people find safe investment destination for their deposits that is TDCCB Ltd., even though the bank instructed the deposit holders to renew all their deposits due to reduction in the rate of interest in 2002. It is depicted by the figure 3.2

3.22 Loan Disbursed by TDDC Bank

The DCCBs were started with the main object to collect the deposits and extend the credit to agricultural sector. But now the role and scope of

Co-operative banks as well as the schemes offered by them have undergone a wide change due to globalization, liberalization and privatization policy. To enter into the competitive market and increase their market share DCCBs introduced a different types of loan schemes.

87 Table 3.8

Deposit accepted by TDCC Bank during the period from 2001-02 to 2010-11

(Rupees in lakhs)

per per per Current cent Savings cent cent Year FD A/c Total A/c to A/c to to total total total 2001-02 2936.85 6.64 7625.14 17.24 33679.94 76.13 44242

2002-03 2775.60 6.01 8894.85 19.26 34512.56 74.73 46183

2003-04 3069.01 6.64 10108.31 21.87 33042.68 71.49 46220

2004-05 3044.37 6.70 9538.99 20.98 32873.76 72.32 45457

2005-06 3036.75 6.11 10981.86 22.11 35642.53 71.77 49661

2006-07 3305.95 6.18 12535.68 23.45 37618.12 70.37 53460

2007-08 3284.82 5.22 13295.01 21.11 46388.41 73.67 62968

2008-09 4288.37 5.41 14639.58 18.46 60357.19 76.13 79285

2009-10 5349.14 5.89 16132.13 17.77 69317.12 76.34 90798

2010-11 5415.18 5.41 19101.87 19.10 75515.22 75.49 100032

MEAN 3650.60 12285.34 45894.75 61830.60

SD 1000.87 3575.86 16406.21 20786.12

CV 27.42 29.11 35.75 33.62

CAGR 7.03 10.74 9.39 9.49

Correlation 0.98 0.96 1.00 1.00

Source: Compiled from Financial Statements. SD – Standard Deviation; CV – Coefficient of Variation; CAGR – Compounded Annualized Growth Rate, Correlation of each component to Total Capital.

88 Chart- 3.2 Distribution of Total deposit as current, savings and Fixed

Deposit of TDCCB

Current Account 6% Savings Account 20%

Fixed deposit 74%

The DCCBs should maintain C.R.R and S.L.R out of their time and demand liabilities. They are also providing credit to small scale industries and industrial loans to weaker sections under differential rate of interest scheme. All these credit schemes are intended to assist the small and marginal farmers and landless agricultural labourers to benefit from the economic growth and development in the rural sector by maximizing the production in their small holdings through intensive cultivation and undertaking subsidiary occupation which will generate large income. Now the bank has diversified its activities into the house loan, professional loan, and consumer loan and so on.

89 3.23 Cash Reserve Ratio (C.R.R)

According to the section 18 of the Banking Regulation Act, Every bank irrespective of Co-operative or commercial bank, has to be maintained by way of cash reserve to meet immediate requirement. The reserve should not be less than

3per cent of their total time and demand liabilities in case of Co-operative banks.

The reserve should be maintained with nationalized banks or with State Bank of

India in the form of current account. The reserve amount does not generate any interest. To meet the immediate requirements the bank can withdraw that amount.

The minimum CRR is 3 per cent of their total demand and time liabilities and the optimum level is 6 per cent of their total demand and time liabilities. If the minimum level is less than 3 per cent the RBI levied penalty to the concerned bank. The aggregate total time and demand liabilities for this purpose shall not include, The paid up share capital, reserves or any credit balance in the profit and loss account Any advances taken from a state government, Reserve

Bank of India, Industrial Development Bank of India, The Export and Import

Bank of India, The , Small Industries Bank, The National

Co-operative Development Corporation etc., Any deposit of money with it representing the reserve fund investment made by other affiliated Co-operative societies. Any advance taken from the State Co-operative Bank any advance or loan granted by the bank against term deposits, such deposit to the extent of outstanding of advance. Amount of any advance or credit arrangement drawn and availed of against approved securities. The aggregate total time and demand liabilities as commuted under section 18 should be divided into two groups.

90

(i) Liabilities to Banking System and

(ii) Liabilities to others.

3.24 Liabilities to Banking System

Any advances taken from the and its subsidiary

Banks, all Commercial and Nationalized Banks, all Private Commercial Banks,

Foreign Banks, Regional Rural Banks and any Co-operative Bank other than the

State Co-operative Bank is known as liability from Banking System and any balance maintained in current account with such banks is a cash balance maintained in the banking system.

3.25 Statutory Liquid Ratio (SLR)

In terms of section 24 of Banking Regulation Act, the Co-operative banks have to maintain statutory liquid asset. SLR should not be less than 25 per cent of their total demand and time liabilities. The banker must invest the amount in the form of term deposits with their higher financing agencies like Tamilnadu

State Co-operative Bank, NABARD and IDBI. The banker can invest the amount in approved government securities include government promissory notes issued by State or Central Government, bonds issued by the Quasi-government undertakings repayment of which is guaranteed by the government, or the bonds issued by IDBI. (58, 48 series).

The minimum level of the SLR is 25 per cent of their total time and demand liabilities and the optimum level is 28 per cent. This reserve earns some interest. The Co-operative banks have to maintain the SLR on daily basis. If the

Co-operative banks invested more than 25 per cent the balanced amount any

91 time they can be withdrawn or the bank can trade securities at any time when it is necessary.

TDCC Bank maintains 3 per cent as C.R.R, 25 to 28 per cent of S.L.R. and lends 40 per cent to the farm sectors and remaining to the nonfarm sectors out of their total time and demand liabilities. To enter into the competitive market TDCC Bank introduced different types of loan schemes. The types of loans can be divided into three major sections

(1) Loan to agricultural sector.

(2) Loan to Industries

(3) Loan to individuals

3.26 Loan to agricultural sector

TDCC Bank Provides this type of loan to the cultivators through primary

Agricultural Co-operative Bank. The agricultural loans are given to the member in three ways.

. Short term loans

. Medium term loans.

. Massive loans

Agricultural loan made by TDCC Bank to the members are.

3.26.1. Short term loans

Short-term loan is also called as crop loan. The duration of the repayment is within one year. The cultivators are allowed to repay the loan during the harvesting period. The loan is provided both in cash and in kind. The cash portion is for the purpose of meeting the expenses of wages and kind portion

92 includes fertilizers, seeds and other products for cultivation. TDCC Bank charges 9 per cent interest to PACBS.

3.26.2. Medium term loans

The main purpose of Medium term loans granted by the banks for purchase of pump sets, preparation of land for orchards, purchase of cattle, minor improvement to land for other agricultural purposes. The repayment period of these types of loan vary from 3to 5 years. The different types of loans offered under the medium term loans are

(a) Conversion loan. (b) Cash credit.

(c) Loans through credit card scheme (d) Crop loan cash credit

3.26.3. Massive loans

These loans are advanced for more than five years for purchase of agricultural equipment and improving the fertility of the land. These types of loans are granted from the TDCC bank to farmers through the Primary

Co-operative Agriculture and Rural Development Banks. Table 3.9 shows loans granted by TDCC Bank for the purpose of agriculture.

93 Table 3.9: Total Loans to Agricultural Sectors by TDCC Bank

(Rupees in lakhs) Changes over the Year Amount Previous year % of + or (-) 2001-02 6045.35 2002-03 6065.65 20.3 0.34 2003-04 7356.25 1290.6 21.28 2004-05 8703.2 1346.95 18.31 2005-06 9845.47 1142.27 13.12 2006-07 11655.33 1809.86 18.38 2007-08 10192.72 -1462.61 -12.55 2008-09 7192.55 -3000.17 -29.43 2009-10 8389.21 1196.66 16.64 2010-11 10513.5 2124.29 25.32 Source: Annual reports of TDCC bank

With the above table it is observed that the loan to agricultural sectors is steadily increasing with some fluctuations. The fluctuations are due to the monsoon failure in Tiruchirappalli district since 2007-08 and 2008-09, again there is an increase in the loan disbursed by the TDCC Bank.

3.27 Loans to Industries

These types of loans are advanced to the industries to carry out their productions, to meet the working capital requirement etc. TDCC bank advances loans for public distributions services, to carry out the general business, to employee’s Co-operative societies, weavers’ societies, to export handloom products and to the sugar mills. Table 3.10 shows that, the net amount granted by TDCC Bank to the different types of industries.

94 Table 3.10

Loans to Industries

(Rupees in lakhs)

Changes over the Year Amount % of + or (-) Previous year 2001-02 5788.94 2002-03 6153.93 364.99 6.30 2003-04 7416.19 1262.26 20.51 2004-05 6998.43 -417.76 -5.63 2005-06 8041.81 1043.38 14.91 2006-07 10978.75 2936.94 36.52 2007-08 17517.06 6538.31 59.55 2008-09 21726.06 4209 24.03 2009-10 22204.84 478.78 2.20 2010-11 22261.27 56.43 0.25 Source: Annual reports of TDCC bank

3.28 Loans to individuals

TDCC Bank advances loans to the individuals for starting industries, to meet their credit expenses, to form a diary, to develop the status of the women, and for other purposes. TDCC Bank introduced different types of loan schemes since 1998. The different types of loan offered by the TDCC Bank are -

3.28.1 Cash Credit

Cash credit is a form of working capital given to the individuals for their business undertakings. Under this arrangement the customer opens an account and the sanctioned amount is credited with that account. The main advantages of this facility, is that the bank charges interest only on the amount utilised by the applicant and not on the total amount. The cash credit is given in different forms

95 a. Business cash credit

b. Business cash credit renovations

c. Cash credit against the government securities to individuals

d. Crop cash credit

The rate of interest for the cash credit is 15 per cent. Which, the amount is repayable within, 60 monthly instalments.

3.29 Jewel Loan

The Jewel loans are secured loans. In the event of default in repayment of loans by the borrower, the bank has the legal right to dispose the jewels by public auction and recover the loan amount together with interest there on from the sale proceeds.

The issue of jewel loans by the DCCBs can be done either through direct finance or on lending process. In both the ways the revenue will go up and collection of dues is not a constraint to the bankers.

To whom loans are to be granted:

a. Loans may be granted to the customers of integrity.

b. Person who possess undisputed ownership of Gold ornaments or

jewels.

c. Persons who are residing within the area of operation of the Bank or

Branches.

d. Borrower should be an Associate Member

96 To whom loans should not be granted:

a. Minors and Lunatics

b. Loans against third party Gold ornaments

c. Loans against primary gold, gold bars (or) coins

d. The Gold ornaments less than 22 carats fineness

e. Re-pledging of Jewels.

3.29.1 Disbursement of Jewel Loan

After sanctioning of the loan, the amount of loan should be disbursed to the borrower after obtaining his signature in the debit voucher. Normally the bankers will collect the Associate Membership fee, Appraiser’s fee, Entrance fee and miscellaneous charges etc., as fixed. Maximum amount of loan 1, 00,000.

Table 3.11

Jewel Loan (Rupees in lakhs) Changes over Year Rs. In lakhs the Previous % of + or (-) year 2001-02 6657.9 2002-03 6478.98 -178.92 -2.69 2003-04 7374.35 895.37 13.82 2004-05 7705.74 331.39 4.49 2005-06 6759.11 -946.63 -12.28 2006-07 6728.57 -30.54 -0.45 2007-08 8275.9 1547.33 23.00 2008-09 9545.55 1269.65 15.34 2009-10 12411.31 2865.76 30.02 2010-11 16096.29 3684.98 29.69 Source: Annual reports of TDCC bank

97 With the above table, it is observed that a loan sanctioned through Jewel loan schemes has some fluctuations. Jewel loan sanctioned by TDCC Bank for both agricultural purposes and non-agricultural purposes.

3.30 Housing Loan

TDCC Bank grants the following types of loans

(1) House Mortgage Loan

(2) House Construction Loan

3.30.1 House Mortgage Loan

Loans shall be granted to individuals or group of individuals who are own a house within the area of operation of the bank.

3.30.2 Objectives of advancing the loans

Loans on the mortgage of house property shall be granted for all or any of the purpose mentioned below:

a) For Marriages of their children

b) For Education of their children

c) To meet Medical expenses of their family members

d) For Renovation works of the house

e) To discharge their prior Debts

f) To develop or enlarge their Business.

3.30.3 To Whom the Loans are to be granted:

1. The borrower shall become an associate member of the bank by paying

the prescribed Associate Membership fee.

98 2. Shall have sufficient monthly income and capacity to repay the loan

instalments without committing any default.

3. The borrower shall satisfy the bank that the proposed loan is going to be

utilised only for the purpose to which it is to be sanctioned.

4. Loans shall be granted to individuals or group of individuals who owe a

house within the area of operation of the bank.

3.30.4 Period of Loan

1. The period of repayment of the loan shall not exceed 5 years.

2. The loans shall be repaid in equal monthly instalments. The interest on

the outstanding balance of the loan shall be paid along with the instalment

every month. For the defaulted payment of principal, they have to pay

penal interest at 3 per cent per annum.

3. The borrower shall pay 1 per cent of the loan with a minimum of Rs.500

and a maximum of Rs.1500 towards processing fee at the time of

applying for the loan, which shall not be refunded.

4. Rate of interest 15 per cent.

5. Maximum amount of loan: Maximum of Rs.10 lakhs.

3.30.5 Enclosures along with Application

The borrower shall furnish necessary building permit, plan, estimate of construction etc. approved certificate by the competent authorities along with the loan application for extension, repair, renovation of the building.

. Income certificate

. Xerox copy of ration card

. A Photograph of the house

99 . Plan of the house

. Valuation report of the house

All the necessary taxes in pertaining to the property should have been paid up to the date of the application for availing the loan. Besides the borrower shall pay all the taxes pertaining to the property as and when they are due without any default.

The borrower shall furnish encumbrance certificate of the property for such period as may be required by the bank.

3.30.6 House construction loan

In order to construct a house, the TDCC Bank grants loan to individuals.

The maximum amount of loan is Rs.10, 00,000, at a rate of 15 per cent interest which is repayable within 8 years.

3.31 Loans to Professionals

TDCC Bank advances loans to engineers and doctors to do a business and to construct a hospital. The maximum amount of loan is Rs. 1 crore. The repayment period is 8 years. The rate of interest for this type of loan is 15 per cent.

3.32 Consumer loan

This type of loan grants to the employees for the purposes of purchasing the consumer durables like T.V, washing machine, etc. with maximum amount of Rs. 1,00,000 which is repayable within 36 monthly instalments at a rate of 13 per cent interest.

100 3.33 Small Scale Industry Loan

This type of loan is advanced to the individuals for starting small industries. The type of business should be certified by SSI schemes. The maximum amount of loan is Rs 1 crore which is repayable within 8 years. The rate of interest is 15per cent.

3.34 Computer Loan

TDCC Bank grants loan to purchase a new Computer for the personal use of the members. The maximum amount of loan is Rs.50, 000 at a rate of 15 per cent which is repayable within 60 months.

3.35 Pensioner Loan

The borrower should be resides within the area of operation of the bank.

The borrower should get pension through the TDCC Bank. The loans are granted mainly to the pensioners to meet their medical expenses.

3.35.1 Maximum amount of loan

Maximum amount of loan is Rs.5000 (Two months pension or Rs.5000 whichever is less). The repayment period is 14 months; at a rate of interest 15 per cent.

3.35.2 Enclosures along with application

. Medical certificate from the recognized medical practitioner.

. Guarantee to repay the debt from the borrower’s legal heirs.

. Acceptance from the borrower to transfer their debt from the

pension amount.

101 . Acceptances from the borrower not to transfer his pension account

to any other bank up to their debt are repaid fully.

. Pension passbook should be handed over to the bank

3.36 Small Road Transport Operators (SRTO) Loan

This type of loan advances for the purpose of purchasing a new vehicle.

The maximum amount provided by the bank is Rs. 10, 00,000. The rate of interest charged by the bank is 15 per cent, which is repayable within 48 months.

3.37 Loan against Pay bill

TDCC Bank grants loans against the pay slip of the employees those who are working in the government institutions, banks and other private concerns.

The borrower should work within the limit of the area of the operation of the bank.

3.37.1 Loan amount

Maximum amount of loan is Rs.5000 or the double of the basic pay dearness allowance whichever is less. Rate of interest charged for this purpose of loan is 15per cent.

3.37.2 Repayment period

Within 20 months, the principal and the interest amount should be repaid.

3.38 Loan against the Government Security and National Savings

Certificate

Loans are granted against the National Savings Certificate VI, VII and

VIII th, Indra Vikas and Kissan Vikas Certificates.

102 Table 3.12

Loan against Government Securities

Period of Investment Maximum Loan Amount as face value of the securities Within one year 60 per cent Within two years 65 per cent Within three year 70 per cent More than 3 years 75 per cent

Rate of interest charged for this purpose of loan is 15 per cent

Loans are granted just like the cash credit method. Minimum of Rs.1000 and the maximum loan amount is according to the per cent of value of the certificate is granted as loan. Every year the amount is collected within the end of the month December or the loan should be renewed..

3.39 Education Loan Scheme

 The loan is advanced to the individuals for their children’s education.

 The borrowers are working in the government office, banks, government

enterprises, public sectors and the private institutions, which are all

running in a profitable manner.

 The student should be a full time graduate or post graduate or

professional graduate in recognised institution.

 Maximum amount of loan: The maximum loan limit is Rs. 50,000

 Rate of Interest: The rate of interest of the loan is 12 per cent.

 Repayment period: The repayment period is varying from 36 months to

60 months depending upon the age of retirement of the applicant.

103 3.39.1 Assessing the Loan Amount

 The term fees of the institution, hostel fees, mess fees, examination fees

and the laboratory fees are issued as loans.

 The maximum amount of the loan limit is Rs. 50,000 or 15 per cent of the

above fees whichever is less.

 The monthly instalment should not be more than 1/3 of the monthly

income of the applicant.

 A person should give guarantee for the repayment for the borrower and

the guarantor should be a permanent employee in the government or any

other private sector enterprises.

3.39.2 Enclosures along with Application

. Pay bill of the borrower.

. No objection certificate from the higher authority who is responsible for

the borrower’s payment.

. Nativity certificate.

. Proof for the age of the borrower.

. Pay bill, nativity certificate and the proof for the age of the guarantor.

. Admission intimation from the recognised institution.

. Details regarding the course that the admission is sought and the

particulars regarding the period, payment, and the last date of fees from

the institution.

3.40 Swarnajayanthi Grama Swarojkar Yojana (SGSY)

The bank issues these types of loans to the people who are living below the poverty line. These loans are advanced for the purpose of purchasing milk

104 animals, for setting up of a mini diary, sericulture, purchase of bullock and bullock carts and all for other self-employment opportunities. The recent innovation for rural development programme in the place of IRDP programme is Swarnajayanthi Grama Swarojkar Yojana (SGSY) since 1999. Table 3.13 shows that the loans granted to individuals.

Table 3.13

Loans to individuals

(Rupees in lakhs)

Changes over Year Amount the Previous % of + or (-) year 2001-02 707.12 2002-03 770.28 63.16 8.93 2003-04 816.54 46.26 6.01 2004-05 1029.31 212.77 26.06 2005-06 1565.99 536.68 52.14 2006-07 1534.26 -31.73 -2.03 2007-08 2531.53 997.27 65.00 2008-09 2220.85 -310.68 -12.27 2009-10 2908.62 687.77 30.97 2010-11 2491.69 -416.93 -14.33 Source: Annual reports of TDCC Bank

With the above analysis, it is observed that the loans granted to the individuals have increased gradually except same fluctuations. The fluctuations due to the loans are granted by the bank to the individuals are due to the following facts

 In 2008-09 loans for purchasing small Road Transports are nil due to the

availability of these vehicles at 0 per cent interest at the markets.

105  In 2009-10 there is an increase in the loans, because there was reduction

in the interest rate.

 In 2010-11 loans are again reduced because household articles like T.V.,

two wheelers, computers, etc., are available at zero per cent interest in the

local market itself.

3.41 Loans through Government Schemes

The different types of loans available under this scheme are

3.41.1 Gas loan

TDCC bank grants loan to purchase LPG gas connection for their use.

The maximum of is Rs.2000, which is repayable within one year at a rate of interest of 10 per cent.

3.41.2 Rainwater harvesting loan

The loan granted by TDCCB to the individuals for the purpose of constructing the rainwater harvesting plant in their houses. The maximum amount of loan is Rs. 2000 at a rate of interest of 11 per cent repayable within one year.

3.41.3Loans to physically disabled persons

TDCCB grants loans to the physically disabled persons to start business or for agricultural purposes both for male members and for female members.

The maximum amount of loan is Rs.7, 50,000 which is repayable within a period of 8 years. The rate of interest for female members is 5 per cent and male members 6 per cent

106 3.41.4 Loans to government employees

TDCC Bank grants a sum of Rs. 2,000 at a rate of interest of 15 percent, which is repayable within one year to meet their festival expenses.

3.41.5 Self-employment loan

In order to start a small business the bank offers this loan. The maximum amount of loan under this scheme is Rs. 5,000, which is repayable in 36 monthly instalments at a rate of interest, is 15per cent.

3.42 Loans through women development cell.

The different types of loans available to the women under this scheme are

3.42.1 Revamped micro credit

This scheme was started and functioning since 1994. Under this scheme,

TDCC Bank is providing loan up to 2000, at a rate of 11per cent interest and the repayable period is 147 days for selling vegetables and eatables. If there is a prompt payment, a portion of their amount is credited as a deposit in their account.

3.42.2 Working women development scheme

Under this scheme, the bank provides to loan up to a maximum of

Rs.1, 00,000 to purchase T.V, Fridge and other household articles. The rate of interest charged for this type of loan is 12 per cent, which is repayable in 36 monthly instalments.

3.42.3 Loan to self-help groups

Under this scheme the maximum amount of the loan is Rs5 lakhs at the rate of interest 11. Which is repayable 36 monthly installments. TDCC Bank

107 provides Credit facilities to SHG to save them from the clutches of the moneylenders. But now a day they obtain loan for production purposes. Some

SHGs get loan for making bags, bags out of tape materials, greeting cards, plastic wall hangings, jute bags, food products, oil and glass painting, to start super markets etc.

3.42.4 Women entrepreneur loan scheme

Under this scheme, TDCC bank provides loan up to Rs10 lakhs, which is repayable in 60 monthly installments. The rate of interest charged by the bank is

12 per cent to start small industries and service centres.

3.42.5 Maternity loan

A maternity loan of Rs. 2000 at 10 per cent interest is introduced to help poor women to meet their medical expenses during their delivery time. The amount would be given either at the time of delivery or in two instalments from the eighth month of their pregnancy. The loan could be repaid in 12 easy monthly instalments from the third month of delivery. Women SHG has involved in identify the beneficiaries.

3.43 Loans to Bank Employees

The bank also lends loans to their employees

3.43.1 Marriage loan

Loan assessment from the bank to the employee for their children’s marriage. The maximum amount of the loan is Rs. 1, 00,000 which is repayable within 36 monthly instalments at a rate of 13 per cent interest.

108 3.43.2 Vehicle loan

For the purpose of vehicle loans the employee should produce the followings

. The license

. Quotations from the dealers

. Their pay slip

75 per cent of the value of the vehicle is being lent as a loan. The duration for the repayment is 36 months. The rate of interest for this type of loan is 13 per cent

3.43.3 Housing loan

The ground is in the name of the applicant. The area should not be in the industrial area. The maximum amount of the loan is Rs. 6, 00,000 which is repayable in 15 years. The rate of interest for this type of loan is 13per cent

3.44 Non- Performing Assets (NPA)

Co-operative Banks are the most important component of rural development. Co-operative banks provide banking facilities and services to the concern. Nowadays non-performing assets are one of the major problematic areas, which require attention. The Co-operative banks are facing bulging of

NPAs, which will yield lower income to the banks. The banks are in a position to provide more reserves against NPA. Non - performing assets mean, “Credit facilities in respect of which interest or instalment of principal is in arrear for two quarters or more”. (Prudential norms - Application to SCB and DCCBS)

109 3.44.1 Assets Classification and Provisioning Norms

Assets are classified as

a. Standard Assets

b. Sub-standard Assets

c. Doubtful Assets

3.44.2 Standard Assets

Standard asset is one, which does not disclose any problem and which does not carry more than the normal risk attached to business. Loans and advance, which are not under the category of substandard, doubtful, loss assets, are classified as standard assets. Provision required for standard assets is 0.25 per cent.

3.44.3 Sub-standard Assets (overdue up to 3 years) a) Staff loan overdue less than 3 years. b) Short term loans whether it is agricultural loan or non-agricultural loan

overdue from 12 months to 3 years. c) Instalments for medium term and long-term loans overdue from 6 months

to 3 years. d) Agricultural cash credit out of order from 6 months to 3 years e) All other cash credits out of order from 6 months to 3 years provision is

required for sub-standard asset 10 percent.

110 3.44.4 Doubtful assets

(1) Secured loan

All agricultural loans, loans and cash credits sanctioned against the mortgage of immovable properties and other loans and cash credits covered by reasonable value of securities are classified as secured loans.

Category a. Overdue for 3 years to 4 years. Provision for this category is 20 percent b. Overdue for 4 years to 6 years. Provision for this category is 30 percent c. Overdue for above 6 years. Provision for this category is required 50

percent

(2) Unsecured overdue

100 per cent provision is required for unsecured loans.

3.45 Loss Assets

Overdue are more than 6 years and 100 per cent provision is required for loss assets. Table 3.14 shows that the non- performing assets of the TDCC Bank.

111 Table 3.14

Non- performing assets of TDCC bank

(Rupees in lakhs)

NPA Changes over Year % of +or (-) Amount the PY 2001-02 8450 -- -- 2002-03 9197 747 8.84 2003-04 12652 3455 37.57 2004-05 9635 -3017 -23.85 2005-06 4921 -4714 -48.93 2006-07 1528 -3393 -68.95 2007-08 1303 -225 -14.73 2008-09 981 -322 -24.71 2009-10 759 -222 -22.63 2010-11 630 -129 -17.00 Source: Special officer Demi-official narrative report

The above analysis shows that every year the non-performing assets of

TDCCB have increased. During 2001-02 the non-performing assets amounted to Rs.8450 lakhs and it has increased by 8.84 per cent during 2002-03. During

2003-04 the non-performing assets of the bank was Rs.12, 652 lakhs which is the highest amount NPA recorded during the period of study but next year on words the trend is changed and the bank took steps to recover the NPAs and the level got reduced year by year and at the end of the period it was 630 lakhs which 17 per cent less than that of the immediate previous year. The bank officials challenged that this level will come to zero percent within next five years for which they taking policy measures to recover the dues by taking effective legal steps.

112 Table 3.15

Percentage of NPA in the total loans and advances

(Rupees in lakhs)

NPA Percentage of year Amount O/s Loan NPA 2001-02 8450 40682.84 20.77 2002-03 9197 45913.98 20.03 2003-04 12652 51260.05 24.68 2004-05 9635 57291.45 16.82 2005-06 4921 60794.17 8.09 2006-07 1528 70866.57 2.16 2007-08 1303 81968.04 1.59 2008-09 981 98750.67 0.99 2009-10 759 114292.93 0.66 2010-11 630 142737.91 0.44 Source: Special officer demi-official narrative report.

The above table reveals, the percentage of non-performing assets during the year 2001-02 on the total loans and advances outstanding was 20.77 per cent, and it was 20 per cent during 2002-2003 and it was 0.66 per cent during 2009-

2010. During 2010-2011 the percentage of non-performing assets in the total loans and advances outstanding was only 0.44 per cent. The above table it can be identified that the percentage of NPA out of total loans and advances outstanding coming down due to effective recovery steps taken by the bank.

In this chapter the different types of deposit schemes as well as the loan schemes offered by the TDCC Bank and NPA levels are discussed along with necessary data. In the next chapter the data relating to various other financial aspects are discussed with the help of necessary and appropriate statistical tool.

113 Chapter IV

Analysis of Performance of TDCCB Ltd

CHAPTER IV

FINANCIAL PERFORMANCE OF TDCCB

4.1 Introduction

In the previous chapter, the general financial position of the TDCC bank has been analyzed with the help of various basic information like share capital, reserves, borrowing, deposits, loans and NPA and in this chapter the financial performance of the bank is analyzed with the help of statistical tools. Generally, the financial institutions are more concerned with the firms’ long-term financial position; therefore the financial analyst should not be interested in short span of time only. Rather, his interest extends mainly beyond that. Indeed, a business enterprise, which is financially sound today, may eventually lose its strength in the long period if it fails to sustain the long series of risks and losses35.

Capital structure, which is known as financial plan or financial structure, determines the long-term financial strength as well as the profitability of a concern. The financial structure refers to the composition of long-term debt, preference share capital and equity share capital including reserves and surpluses i.e., retained earnings. The capital structure decision is a significant managerial decision as it influences the shareholders’ return and risk. Consequently, the market value of the share is affected by the capital structure. The financial structure and source of capital is available on the liability side of the balance sheet of any enterprises. Traditionally, short–term borrowings are excluded from the list of methods of financing the firm’s capital expenditure, and therefore, the

35 Mohan .S. Financial management of Co-operative Spinning Mills, Chaitanaya Publishing House, p.57

114 long-term claims are said to be the capital structure of the enterprise. Therefore,

the composition or proportion of usage of long-term sources of capital is called

the capital structure36. In case of Co-operative banks the share capital is

collected from its members and from the state government. The amount of share

capital collected during the period of study has been analyzed in the table 4.1

Table.4.1

Collection of Share capital from 2001-02 to 2010-11

(Rupees in lakhs)

Year Co- Government Total Co- Government Total operative Share Share operative Share Share Share Capital Share ( per cent) Capital ( per cent) ( per cent) 2001-02 11307300 0 11307300 100 0 100 2002-03 13265840 0 13265840 100 0 100 2003-04 17620850 0 17620850 100 0 100 2004-05 32055500 0 32055500 100 0 100 2005-06 19954250 0 19954250 100 0 100 2006-07 38237250 385100000 423337250 090 91 100 2007-08 3316900 382941000 386257900 0.86 99.14 100 2008-09 16617250 353554200 370171450 0.04 96 100 2009-10 41244000 265753250 306997250 13.44 86.56 100 2010-11 67147450 198463000 265610450 25 75 100

Sources: Secondary sources from TDCCB Ltd

The above table 4.1 shows the share capital income and their proportion

of government and the contribution of Tiruchirappalli Central Co-operative

Bank. It is clearly shows that the TDCCB run on their own share capital from the

36 Joy, O.M. Introduction to Financial Management, Richard D. Irwin Inc., Illinois, 1977.p.4

115 year 2001-02 to 2005-06. This situation has changed from the year 2006-07 to

2010-11. The government has contributed their share in functioning of

Co-operative Bank. The percentage has clearly indicates that the government share has in large in the period of the year 2006-07 to 2008-09, however their share has slowly declined in the remaining study period (2009-10 and 2010-

11).The Central Co-operative Banks issue shares to their members. The value of shares generally ranges from Rs.50 to Rs.100. Since the liability of the members is limited to the share capital subscribed by them, it is essential for the Central

Co-operative Banks to have substantial paid-up share capital to attract and serve as a guarantee for the depositors and other creditors. The authorized share capital of the bank is 15 crores consisting of 3000000 “A” Group shares of Rs.50 each.

The Bank has only “A” Group shares, with voting rights. As per the Government policy since 1991-92, individuals are not eligible to become members but instead of Co-operative institutions and the State Government can become members.

The share capital collection is also present in figure 4.1.

The table 4.2 shows that the enrolment of members in the bank and subscription received from them. In the ten years report of the bank, it is clearly shows that the enrolment of members over the ten years of the study period has not much increase. It is moderate throughout the period from 2001-02 to 2010-

11. However the subscription money has increased in high ratio over the period.

During the period between 2001-02 to 2005-06 the subscription money has not much increased. It shows a very little growth.

116 Chart 4.1 - Share Capital Govt vs Co-operative contribution

Co-operative Share Government Share

100% 100% 100% 100% 100% 99.14% 96% 91% 86.56% 75%

25% 13.43% 9% 4% 00000 0.86%

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

Whereas during the period from 2006-07 to 2010-11, the growth of subscription money has increased. Particularly from the financial period from

2005-06 to 2006-07 there was 182.89 per cent has increase from the previous period. The period from 2007-08 onwards the collection of subcription money has showed an decreased stage that is from 49.5 per cent to 15.86 per cent. This result confirms that the subscription money has slowed down from the period from 2005-06 to 2006-07. At the same time there will be no progress in the enrolement of members in the Co-operative Bank. Share capital mobilization is also linked with borrowings. The position of share capital and members ship is also presnted in chart 4.2.

117 Table.4.2

Membership and share capital

(Rupees in lakhs)

Percentage Subrscription Differences Membership increase Year Money from Registred From previous Received Previous Year year 2001-02 988 1460.64 - - - - 2002-03 1002 1627.2 166.56 11.4 2003-04 998 1796.12 168.92 10.38 2004-05 996 2114.78 318.66 17.74 2005-06 995 2313.91 199.13 9.41 2006-07 993 6545.99 4232.08 182.89 2007-08 995 9791.13 3245.14 49.57 2008-09 985 13440.87 3649.74 37.27 2009-10 986 16442.8 3001.93 22.33 2010-11 986 19051.42 2608.62 15.86 Sources: Secondary sources from TDCCB Ltd

As per the recommendations of the All India Rural Credit Survey

Committee(AIRSC), the State Government also subscribes to the share capital of the bank. The committee on Co-operative credit desired that even societies that did not borrow from the bank should be required to contribute to the share capital in recognition of its role as a balancing centre of all Co-operative organisations in the district. The above table shows the growth of share capital over a period under study.

118 Chart 4.2-Enrolment of Membership vs Share capital 25000

20000

15000

10000

Share capital in Lakhs 5000

0

year

The efficiency of a business is concerned measured by the amount of profit is earned. A business cannot continue to exist if it loses money, or if the money it makes is not sufficient to meet the normal risk to be taken. Profits are useful intermediate beacon towards which a firm’s capital should be directed.

The Table 4.3 has reflected the profit earned by the Co-operative Bank and total dividend paid during the period from 2001-02 to 2010-2011.

119 Table 4.3

Net Profit Earned and Dividend Declared

(Rupees in lakhs)

Year Net Profit Total amount of Percentage of (Loss) Dividend Paid Dividend declared

2001-02 -62518858.6 Nil - -

2002-03 -72878253.19 Nil - -

2003-04 -72776043.2 Nil - -

2004-05 8536263.2 Nil - -

2005-06 2622487.5 13112.4375 0.5 per cent

2006-07 14956892.6 149568.926 1 per cent

2007-08 32825261.3 787806.271 2.4 per cent

2008-09 70709426.6 3535471.33 5 per cent

2009-10 75033258.3 3826696.173 5.1 per cent

2010-11 126254297.2 24197704 7 per cent Sources: Secondary sources from TDCCB Ltd

From the above table shows that no dividend shall be declared or paid except out of net profits left after making the contribution towards reserve fund required to be made under the provisions of section 46 and sub rule (3). In no

Co-operative Society, the dividend shall exceed 18 percent per annum on paid- up share capital. Dividend shall be payable at such rate not exceeding this limit to the registered shareholders, as may be approved by the general body and not otherwise. Shareholders/members will have no right to the dividend unless declared and approved by general body. The dividend shall be paid to all

120 members within three months of the approval by the general body. No dividend shall be paid by the Co-operative society while any claim due from the

Co-operative Society to a depositor or lender remains unsatisfied. (Amended on

8.8.97, Delhi Co-operative Act 1973) The profit over the period of time has increased. The above table clearly indicates that in the first three years of the study period the Co-operative Bank make loss. However the Co-operative Bank shows a better performance from 2004-05 to 2010-11. The profit has slowly increased from the year 2004-05 onwards. The Co-operative Banks had done a better performance from the period of 2005-06 onwards and consequently performed well. However their progress in terms of earning profit is not satisfactory, because of earnings is not steady but several ups and downs during the period.

The dividend is an important to the shareholders who bought share in the

TDCCB Ltd. All the Co-operative Banks are considered to declare dividend every year. Any Co-operative Society that pays dividend may give incentive/gift to its members, with the approval of the general body, not exceeding five per cent of its net profit subject to a maximum of two hundred rupees per member.

The above clearly shows that dividend was not declared during the period

2001-02 to 2004-05. From the period 2005-06 onwards the TDCCB has declared a dividend. The percentage declared as a dividend has shown in the above table.

There is a satisfactory level could see in the percentage of dividend declared. In the year 2005-06 only 0.5 per cent has declared where as in the year 2010-11 it was 7 per cent.

121 Table 4.4

Net Profit Earned and progress over the period

(Rupees in lakhs)

Year Net Profit (Loss) Difference from Percentage previous year increase

2001-02 -62518858.6 Nil ----

2002-03 -72878253.19 Nil 16.57

2003-04 -72776043.2 Nil -0.14

2004-05 8536263.2 Nil -111.73

2005-06 2622487.5 -5913775.7 -69.28

2006-07 14956892.6 12334405.1 470.33

2007-08 32825261.3 17868368.7 119.46

2008-09 70709426.6 37884165.3 115.41

2009-10 75033258.3 4323831.7 6.11

2010-11 126254297.2 51221038.86 68.26

Sources: Secondary sources from TDCCB Ltd

Table 4.4 shows that there is an argument that Co-operatives being service organizations, they should not aim at maximizing the profit, but it should be remembered that they are also economic organizations. All economic organizations whether Co-operatives, joint-stock companies, private or partnership firms need profit. Co-operative bank must earn profit to effectively serve its members. In this world of competition, a Co-operative organization without profit may not be able to have strong financial base and withstand

122 competition. The Table 4.4 indicates the profit earned by the TDCCB Ltd., during the period 2001-02 to 2010-11.

The TDCCB Ltd., had made loss during the financial period of 2001-02 to 2005-06. During the period, particularly 2004-05 the bank had a huge loss. In the year 2005-06 the loss amount had slowly decreased, during the year it was

69.28 per cent. The Co-operative authorities and Government had given a financial support and guidance to recover from this huge loss and help the

Co-operative Banks to return to make a profit from the financial period 2006-07 onwards it clearly showed that there was no steady progress over the profit earned by the bank. However there was considerable profit earned by banks had begun from the year 2006-07 onwards.

Chart- 4.3

Net profit/loss earned during the period of 2001-02 to 2010-11

Net Profit 150000000

100000000

50000000

Net Profit 0

-50000000 Profit / loss amount in Lakhs

-1E+08 year

123 Table 4.5

Comparison of Net Profit with Bonus paid & Dividend Declared

(Rupees in lakhs)

Percentage of Net Net Profit profit Dividend Bonus Year (Loss) compared with Percentage Percentage previous year 2001-02 -62518858.6 - - Nil 8.33

2002-03 -72878253.19 16.57 Nil 8.33

2003-04 -72776043.2 -0.14 Nil 8.33

2004-05 8536263.2 -111.73 Nil 8.33

2005-06 2622487.5 -69.28 0.5 8.33

2006-07 14956892.6 470.33 1 8.33

2007-08 32825261.3 119.46 2.4 20

2008-09 70709426.6 115.41 5 20

2009-10 75033258.3 6.11 5.1 20

2010-11 126254297.2 68.26 7.1 20 Sources: Secondary sources from TDCCB Ltd

The declaration of Dividend and Bonus mainly depend upon the profit earned by the bank during the period. 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 members of Co-operative

Banks, 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

124 interest or a dividend, which is related to the number of shares subscribed by each member.

The above table 4.5 shows the percentage of dividend declared and bonus paid. The bonus percentage has shown a big progress. There was 8.33 per cent of bonus declared during the period from 2001-02 to 2006-07 and paid 20 per cent of bonus from 2007-08 to 2010-11. During the loss period, 2001-02 to 2005-06 the bonus was declared at 8.33 per cent regularly. It was observed from the above data that the so far the bonus had declared in two slaps. 8.33 per cent of bonus declared during the financial period between 2001-02 and 2006-07 and 20 per cent of bonus from 2007-08 to 2010-11.

Chart 4.4

Bonus and Dividend Percentage

25

20 20 20 20 20

15 Percenta ge of Divident 10 8.33 8.33 8.33 8.33 8.33 8.33 7 Bonus 5 5 5.1 Paid 2.4 1 0 0.5

125 Table 4.6

Analysis of Deposits of TDCCB Ltd

(Rupees in lakhs)

Year Total Deposit Term Deposit Saving Current Deposit Deposit 2001-02 26267.37 15705.38 7625.14 2936.37

2002-03 23384.2 14502.32 6525.36 2384.2 (-10.98) (-7.66) (-14.42) (-19.76) 2003-04 27997.43 16756.37 8828.69 2412.37 (19.73) (15.54) (35.30) (2.37) 2004-05 28035.02 15451.66 9538.99 3044.37 (0.13) (-7.79) (8.05) (26.20) 2005-06 31565.22 17546.61 10981.86 3036.75 (12.56) (13.56) (15.13) (-0.25) 2006-07 48536.1 32694.47 12535.68 3305.95 (53.76) (86.33) (14.15) (8.86) 2007-08 62968.24 46388.41 13295.01 3284.82 (29.73) (41.88) (6.06) (-0.64) 2008-09 79285.14 60357.19 14639.58 4288.37 (25.91) (30.11) (10.11) (30.55) 2009-10 90798.39 69317.12 16132.13 5349.14 (14.52) (14.84) (10.20) (24.74) 2010-11 100032.27 75515.22 19101.87 5415.18 (10.17) (8.94) (18.41) (1.23) Sources: Secondary sources from TDCCB Ltd

Figures shown in brackets per cent percentage of increase/decrease over the previous year

126 The declaration of dividend was fully observed the rules and regulation of

Co-operative Society Act the TDCCB had not declared any dividend during its critical position, which was from 2001-02 to 2005-06 and from the year 2006-07 onwards a considerable amount declared as a dividend. The above table clearly indicates that the percentage of dividend paid shows the considerable progress from the financial period 2006-07 onwards. It is conclude that irrespective of profit/loss the bonus was declared, whereas dividend declaration is highly- strung.

Accepting deposit is one of the important services rendered by

Co-operative banks to the members and non-members belong to the society.

The Co-operative banks concentrate three things while mobilizing deposit.

Deposit amount should be increased every year while compare to previous years.

Secondly, there should be an additional percentage of increase over the previous year and steadily increase the deposit year by year. The Co-operative banks always fix high rate of interest on all the deposit when compare with other nationalized and private banks. However there are some difficulties they are facing in mobilizing deposit. TDCCB has no more exception in this scenario.

The above tables clearly reflect that all the deposits had failed to show any steady progress over the during the study period. While comparing with previous year there was a high variability. In some year, it shows a negative percentage.

Deposits constitute one of the important components of working capital.

Mobilization of deposits locally by the TDCCB is considered to be an ideal method of raising sufficient capital for lending. Deposits raised locally form an ideal method because they imply thrift among the villagers. The above table

127 shows the total deposit collected in the form of Term deposit, saving deposit and

Current deposit. The total deposit column clearly indicates that there is stable progress over the total deposit, especially during the period of 2005-06. In this period the total deposit has increased 53.76 per cent over the previous years.

This was a result of improvement of term deposit and saving, current deposit.

During that period (2005-06), the term deposit had increased in to 86.33 per cent over the previous year. Saving deposit and current deposit had a same performance. Current deposit has shown negative growth during the period

2007-08, and good performance during the financial period 2008-09. It was concluded that the contribution of term deposit on total deposit is strong and growth of term deposit stable during the finical period 2001-02 to 2010-11.

Chart 4.5

Composition of term, saving and Current deposit

Deposit

80000 75515.22 70000 69317.12 60000 60357.19 50000 46388.41 40000 30000 32694.47 15705.38 20000 14502.3216756.37 7625.14 15451.6617546.61 6525.368828.699538.99 10000 2936.852356.52 10981.8612535.6813295.0114639.58 19101.87 2412.373044.37 16132.13 0 3036.753305.95 3284.824288.37 5349.145415.18

Term Deposit Saving Deposit Current Deposit

128 Table.4.7

Contribution of Term, Current and Saving Deposit on Total Deposit in

terms of Percentage

Year Percentage of Term Percentage of Percentage of Deposit on Total Current Deposit Saving Deposit on Deposit on Total Deposit Total Deposit 2001-02 59.79 29.03 11.18 2002-03 62.02 27.90 10.08 2003-04 59.85 31.53 8.62 2004-05 55.12 34.03 10.86 2005-06 55.59 34.79 9.62 2006-07 67.36 25.83 6.81 2007-08 73.67 21.11 5.22 2008-09 76.13 18.46 5.41 2009-10 76.34 17.77 5.89 2010-11 75.49 19.10 5.41 Source: calcluated on the basis of secondary values.

The Table 4.7 indicated the percentage of Term, current and saving deposit on total deposit also its growth of each deposit. It was clearly reflect that the contribution of term deposit on total deposit is large, at the same time the contribution of saving deposit on total deposit is very low. The current account deposit on total deposit is moderate. The tables are also indicating the progression of these deposits during the period of study. The contribution of saving and current deposit on total deposit was in falling trend. The saving deposit was deteriorating then current deposit. The positive factor was fixed deposit and it was steady on their progress, also showed in increasing trend. The contribution of fixed deposit over the total deposit is above 75 per cent.

129 Table.4.8

Result of One-Sample and Chi-Square Test- Hypothesis test summary

Null Hypothesis Test Conducted Sig Decision

The categories of Fixed Deposit One-Sample Test 1.00 Retain the null Occur With equal probabilities Chi-Square Test hypothesis

The categories of Current Deposit One-Sample Test 1.00 Retain the null Occur With equal probabilities Chi-Square Test hypothesis

The categories of Saving Deposit One-Sample Test 1.00 Retain the null Occur With equal probabilities Chi-Square Test hypothesis

One sample test and Chi-Square test was conducted to verify whether there was any difference in each deposit over the ten years of the period of study.

In order to test these objectives, null and alternative hypothesis was framed. The result has shown in table 4.8 above. This is clearly reflects that the categories of all the deposit occur with equal probabilities. To verity the significant of the ten years information regarding fixed deposit, current deposit and saving account money one sample test was also conducted. The chi-square test is used to predict the variance prevailing in collection of fixed deposit, current deposit and saving account deposit money mobilized during the study period. The result clearly indicates that over the period of ten years of various deposit collections are not different from one year to next preceding years. Therefore, it is concluded that the mobilization of fixed deposit, current account deposit and saving account deposits occur evenly.

130 Chart 4.6

SEQUENTIAL FIGURE SHOWING POSITION OF DIFFERENT

DEPOSIT

131 Table.4.9

Relationship between the deposits (Spearman Rank Correlations)

Type of Fixed Current Saving TOTAL Deposit 0.9636* 0.9030 0.9636 Fixed (10)** (10) (10) 0.0038*** 0.0067 0.0038 0.9636 0.9636 1.0000 Current (10) (10) (10) 0.0038 0.0038 0.0000 0.9030 0.9636 0.9636 Saving (10) (10) (10) 0.0067 0.0038 0.0038 0.9636 1.0000 0.9636 TOTAL (10) (10) (10) 0.0038 0.0000 0.0038 *Correlation, ** (Sample Size), ***P-Value.

The above table clearly indicates that the relationship between fixed, current and saving deposit are analyzed with the help of correlation. The correlation test shows how strong one type of deposit with other deposit. The table 4.9 clearly indicates that the fixed deposit and current deposit have a strong relationship by 96.36 per cent. It is concluded that whenever one type of deposit increases (either fixed or current), the other has also increased. In that way, the saving deposit and current deposit have a strong relation by 96.36 per cent.

Whenever, either current or saving deposit has increased, the other deposit has also increased spontaneously.

132 Table 4.9 shows Spearman rank correlations between each pair of variables. These correlation coefficients range between -1 and +1 and measure the strength of the association between the variables. In contrast to the more common Pearson correlations, the Spearman coefficients are computed from the ranks of the data values rather than from the values themselves. Consequently, they are less sensitive to outliers than the Pearson coefficients. Also shown in parentheses is the number of pairs of data values used to compute each coefficient. The third number in each location of the table is a P-value which tests the statistical significance of the estimated correlations. P-values below

0.05 indicate statistically significant non-zero correlations at the 95.0 per cent confidence level. The following pairs of variables have P-values below 0.05:

Fixed and Current, Fixed and Saving, Fixed and Total, Current and Saving,

Current and Total, Saving and Total.

133 Chart 4.7

Scatter plot Matrix shows the relationship between various deposits

Fixed r=0.9484 r=0.9430 70000 60000 50000 40000 30000 20000 10000 r=0.9484 current r=0.9264 17500 15000 12500 10000 7500 5000 r=0.9430 r=0.9264 saving 5000 4500 4000 3500 3000 2500 2000 10000 40000 60000 5000 10000 15000 2000 3000 4000 5000

134 Table.4.10

Forecasting Total Deposit using 3 months moving average, mean absolute deviation, Mean squared error, and mean absolute percentage error

(Rupees in lakhs)

Total Deposit Total Deposit Moving Deviation Month/Year Actual Squared Error Percentage Error Estimated Rs. Average From actual Rs. 2001-2002 22000 26267.37 - - 4267.37 18210446.72 16.25 per cent 2002-2003 25000 23384.2 - - 1615.8 2610809.64 6.91 per cent 2003-2004 27000 27997.43 - - 997.43 994866.6049 3.56 per cent 2004-2005 30000 28035.02 25883 1964.98 3861146.4 7.01 per cent 2005-2006 31000 31565.22 26472.21667 565.22 319473.6484 1.79 per cent 2006-2007 45000 48536.1 29199.22333 3536.1 12504003.21 7.29 per cent 2007-2008 60000 62968.24 36045.44667 2968.24 8810448.698 4.71 per cent 2008-2009 100000 79285.14 47689.85333 20714.86 429105424.8 26.13 per cent 2009-2010 100000 90798.39 63596.49333 9201.61 84669626.59 10.13 per cent 2010-2011 120000 100032.27 77683.92333 19967.73 398710241.4 19.96 per cent 2011-2012 90038.6 6579.934 95979648.77 10.37 per cent MAD MSE MAPE Sources: Secondary sources from TDCCB Ltd

135 Table: 4.11

Exponents’ analysis of Moving Average (risk reduction for accurate decision)

(Rupees in lakhs)

Total Month/ Deposit MAD at alpha = MAD at alpha = 0.1 0.5 0.9 MAD at alpha = .9 Year Actual .1 .5 Rs. Mar-02 26267.37 26267.37 26267.37 26267.4 689974726.7 689974726.7 689974726.7 Mar-03 23384.20 25979.05 24825.79 23672.52 674911194.8 616319600.9 560388061.1 Mar-04 27997.43 26180.89 26411.61 27564.94 685439037.8 697573010.7 759825845.5 Mar-05 28035.02 26366.30 27223.31 27988.01 695181967.1 741108811.5 783328808.4 Mar-06 31565.22 26886.20 29394.27 31207.50 722867495.9 864022925.1 973908005.5 Mar-07 48536.10 29051.19 38965.18 46803.24 843971392.9 1518285520 2190543267 Mar-08 62968.24 32442.89 50966.71 61351.74 1052541187 2597605703 3764036000 Mar-09 79285.14 37127.12 65125.93 77491.80 1378422746 4241386219 6004979067 Mar-10 90798.39 42494.24 77962.16 89467.73 1805760726 6078098069 8004474890 Mar-11 100032.27 48248.05 88997.21 98975.82 2327873952 7920504094 9796212173 Mar-12 927156.19 136138.86 508076.70 844338.15 18533789336 2.58142E+11 7.12907E+11 41562.01 87656.02 123193.53 2673703069 25827892162 67857689709 Sources: Secondary sources from TDCCB Ltd

136 Table 4.12

Result of Regression Analysis Regression Statistics Multiple R 0.947420767 R Square 0.897606109 Adjusted R Square 0.884806873 Standard Error 9951.987398 Observations 10 years

Result of Anova ANOVA df SS MS F Significance F Regression 1 6945785652 6945785652 70.12966 3.13737E-05 Residual 8 792336425.4 99042053.2 Total 9 7738122078

Result of Test Statistics

Coefficients Standard t Stat P-value Lower 95 Upper 95 Lower 95.0 Upper 95.0 Error per cent per cent per cent per cent Intercept -926854.7496 116916.1774 -7.927515 4.66E-05 - - -1196463.94 - 1196463.938 657245.5611 657245.5611 X Variable 1 25.1219 2.999864313 8.37434543 3.14E-05 18.20420049 32.03959952 18.20420049 32.03959952

137 Chart 4.8

Total Deposit of Actual and Forecast

Total Deposit Actual 120000

100032.27 100000 90798.39

79285.14 80000 y = 9175.7x + 1420.5 R² = 0.8976 62968.24 60000 48536.1

40000 31565.22 26267.37 27997.43 28035.02 23384.2 20000

0 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011

Total Deposit Actual Linear ( Total Deposit Actual)

138 The actual total deposit (Fixed, current and saving) mobilized are

compared with the forecasting total deposit collection. The bar diagram shown in

the (Chart 4.8) in the graph represent the actual total deposit mobilized. The

exponents’ analysis of moving average is conducted to predict the total deposit

during the ten years the period of study. The liner line shown in the graph (Chart

4.8) represents the forecast amount of total deposit. During the decade of study,

2001-02, 2002-03, 2003-04, 2008-09, 2009-10 and 2010-11 financial period the

total deposit collection is above or at the level of expected or forecast level.

Table 4.13

Fund allocation for Co-operative Education, Development

and Research Fund

(Rupees in lakhs)

Year Education Research Development Total Fund Fund Fund Fund

170719 426979 201541 2005-06 799239 (21.36 per cent) (53.42 per cent) (25.22 per cent) 252433 565050 232149 2006-07 1049632 (24.05 per cent) (53.53 per cent) (22.12 per cent) 299126 248560 220500 2007-08 768186 (38.94 per cent) (32.36 per cent) (28.70 per cent) 656494 484741 504260 2008-09 1645495 (39.90 per cent) (29.46 per cent) (30.64 per cent) 1414183 2121275 3535458 2009-10 7070916 (20 per cent) (30 per cent) (50 per cent) 2251000 3751667 2552977 2010-11 8555644 (26.31 per cent) (43.85 per cent) (29.84 per cent)

139 However during the period of 2004-05, 2005-06, and 2006-07 the deposit collection is below the level of forecast level. During this financial period the performance of TDCCB has been below the expected level. The fund allocation of Co-operative bank was an important factor in any Co-operative banks. The above Table 4.11 showed the fund allocated for Education, research and development. The Co-operative Research and Development Fund (CRDF) at

3 per cent and Co-operative Education Fund (CEF) at 2 per cent contributed by the profit earning Co-operative societies out of its net profit as per section 72 of the Tamilnadu Co-operative Societies Act, 1983 is administered by a Committee in accordance with Rules 90 and 91 of Tamilnadu Co-operative Societies Rules,

1988. These funds are maintained by the Tamilnadu Co-operative Union. As per the above mentioned rules, 29 District Co-operative Unions retain 10 per cent of the total collection of Co-operative Research and Development Fund and

Co-operative Education Fund every month and remit the 90 per cent collection to Co-operative Research and Development Fund. Co-operative Research and

Development Fund Committee is constituted to administer the statutory funds consists of Registrar of Co-operative Societies as its Chairman, Special Officer of Tamilnadu Co-operative Union as its Secretary and the Functional Registrars as members. The table clearly indicates that the proportion of allocation of fund on education, research and development had varied.

140 Chart 4.9

Distribution of Co-operative education, Development and Research Fund

(Rupees in lakhs)

Distribution of Co-operative Education, Development and Research Fund

Co-op Education Fund Co-op Research Fund Co-op Development Fund

2552977

3535458

3751667

2121275 232149 504260 426979 220500 484741 565050 248560 201541 2251000 1414183 656494 170719 252433 299126

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

141 Table 4.14

Amount of Loan Approved and Total outstanding Debt

(Rupees in lakhs)

Years Total Amount of Loan Unpaid Loan Loan Approved Unpaid beyond the time limit 2001-02 48824.68 40682.84 12394.83

2002-03 62642.52 45913.98 8877.99 2003-04 62646.52 51260.05 8534.66 2004-05 74287.56 57291.45 16226.56

2005-06 71462.41 60794.17 10670.79 2006-07 103381.93 70866.57 15266.21

2007-08 79223.81 81968.04 4996.87 2008-09 104302.91 98750.67 9136.3

2009-10 129070 114292.23 8768.58 2010-11 160852.14 142737.91 19081.98 Sources: Secondary sources from TDCCB Ltd

The above table shows the information about the loan approved by the

TDCCB ltd and total loan amount unsettled by the customer and loan unsettled by the customer beyond the actual loan period. Granting loan to the customer is an objective of Co-operative Banks. There was a very limited amount was approved as a loan to the customer in the financial period 2001-02 to 2005-06.

This climate had changed during the financial period 2006-07 to 2010-11. The above table indicates the high growth of total amount granted as loan during the period. The second column in the above table shows amount of loan unpaid by the customer. The customer failed to repay the loan amount what they received

142 from the bank has increased moderately every year. However the bank authorities had succeeded in collecting long term debt from customers. In order to verify, the relationship has exceeded between the loan amounts approved, loan unpaid and unpaid loan beyond the time limit, the researcher conducted the

Multiple Sample Comparison between these three samples which was collected during the financial period of 2001-02 to 2010-11.

Table.4.15

Multiple-Sample Comparison Loan paid and Unpaid

Sample Range value (amount in Lakhs) Loan Unpaid beyond the time (Unpaid loan beyond Sample 1 the duration)10 years sample values ranging from 4996.87 to 19082.0 Loan Unpaid (Unpaid loan)10 years sample values Sample 2 ranging from 40682.8 to 142738 Total loan paid (Loan approved)10 years sample Sample 3 values ranging from 48824.7 to 160852.

This procedure compares the data in 3 columns of the current data file.

It constructs various statistical tests and graphs to compare the samples. The

F-test in the ANOVA table will test whether there are any significant differences amongst the means. The Multiple Range Tests will tell which means are significantly different from which others.

143 Table. 4.16

ANOVA Table for Loan paid and Unpaid

Source Sum of Squares Df Mean Square F-Ratio P-Value

Between groups 3.51142E10 2 1.75571E10 22.75 0.0000

Within groups 2.08376E10 27 7.71764E8

Total (Corr.) 5.59518E10 29

The ANOVA table decomposes the variance of the data into two components: a between-group component and a within-group component. The

F-ratio, which in this case equals 22.7493, is a ratio of the between-group estimate to the within-group estimate. Since the P-value of the F-test is less than

0.05, there is a statistically significant difference between the means of the 3 variables at the 95.0 per cent confidence level. A Multiple Range Tests was conducted to determine which means are significantly different from which others.

Table. 4.17

Multiple Range Tests Method: 95.0 per cent Least Significant Difference (LSD)

Homogeneous Range Count Mean Groups

Loan Unpaid beyond the time 10 years 11395.5 X

Loan Unpaid 10 years 76455.8 X

Total loan paid 10 years 89669.4 X

144 Table 4.18

Statistical Result on Multiple Range Tests

Contrast Sig. Difference +/- Limits

Loan Unpaid beyond the time - Loan Unpaid * -65060.3 25491.8

Loan Unpaid beyond the time - Total loan paid * -78274.0 25491.8

Loan Unpaid - Total loan paid -13213.7 25491.8 * denotes a statistically 5 % significant difference.

This table applies a multiple comparison procedure to determine which means are significantly different from which others. The bottom half of the output shows the estimated difference between each pair of means. An asterisk has been placed next to 2 pairs, indicating that these pairs show statistically significant differences at the 95.0 per cent confidence level. At the top of the page, Two homogenous groups are identified using columns of X's. Within each column, the levels containing X's form a group of means within which there are no statistically significant differences. The method currently being used to discriminate among the means is Fisher's least significant difference (LSD) procedure. With this method, there is a 5.0 per cent risk of calling each pair of means significantly different when the actual difference equals zero.

145 Chart 4.10

Box and Whisker Plot on Loan paid and Unpaid

Box-and-Whisker Plot

Loan Unpaid beyond the time

Loan Unpaid

Total loan paid

0369121518 (X 10000) response

In order to see very accurate result on the multiple sample comparison, the researcher adopted Kruskal-Wallis Test which compares medians instead of means. The various plots will help you judge the practical significance of the results, as well as allow looking for possible violations of the assumptions underlying the analysis of variance. The one way ANOVA is conducted for a purpose of finding any significance relationship between the average amounts of loan paid, loan repaid and loan unpaid. This test is conducted for a purpose of taking decision to handle the loan evenly or differently in the term of collection.

The result of ANOVA table 4.16 confirmed that the relationship between loan paid, loan unpaid and loan sanctioned are the same. However there is slight difference is exists between loan unpaid beyond the time and loan unpaid, loan unpaid beyond the time and total loan paid. This is shown in the multiple range tests table 4.18. It is concluding that the management of TDCCB has handled the debtor evenly irrespective of loan paid and duration of loan sanctioned.

146 Table. 4.19

Kruskal-Wallis Test on Loan paid and Unpaid

Loan paid/ unpaid Sample Size Average Rank

Loan Unpaid beyond the time 10 5.5

Loan Unpaid 10 19.0

Total loan paid 10 22.0 Test statistic = 19.9355 P-Value = 0.0000468883

The Kruskal-Wallis test tests the null hypothesis that the median within

each of the 3 columns is the same. The data from all the columns is first

combined and ranked from smallest to largest. The average rank is then

computed for the data in each column. Since the P-value is less than 0.05, there

is a statistically significant difference amongst the medians at the 95.0 per cent

confidence level. The Box-and-Whisker Plot shows that whether the medians are

significantly different from each other’s,

147 Table.4.20

Mood's Median Test on loan

95.0 per cent 95.0 per cent Sample lower upper Sample n<= n> Median Size Confidence Confidence Level Level Loan Unpaid beyond 10 10 0 9903.55 6144.69 18155.6 the time Loan Unpaid 10 4 6 65830.4 42380.1 133509. Total loan paid 10 1 9 76755.7 53307.8 150541.

Test statistic = 16.8 P-Value = 0.000224867, Total n = 30

Grand median = 59042.8

Mood's median test testifies the hypothesis that the medians of all 3 samples are equal. It does so by counting the number of observations in each sample on either side of the grand median, which equals 59042.8. Since the

P-value for the chi-square test is less than 0.05, the medians of the samples are significantly different at the 95.0 per cent confidence level. Also included (if available) are 95.0 per cent confidence intervals for each median based on the order statistics of each sample.

148 4.2 Deposit Forecasting

The main function of banking business is mobilization of deposit which constitutes an important source of working fund for the bank. In order to serve efficiently and effectively, the District Central Co-operative Banks has to increase its financial resources by way of deposit mobilization. Every bank is trying to explore the possibilities of collecting maximum deposits from the public by way of special campaign, advertisement and so on. It is, therefore, the

Central Co-operative Banks must tap deposits from urban and rural areas hence, they able to provide funds necessary for the effective functioning of primary societies for farm and non-farm developments.

The Review Committee on Co-operatives emphasized that the most important organizational step, which the Co-operative banks have to take, was to mobilize rural savings.

Table 4.21

Total Deposits Forecast Summary

Estimation Validation Statistic Period

RMSE 6207.36 Number of Observations: 10 years. MAE 5063.98 Start index = 2001-2002 MAPE 11.9789 Sampling Interval = one ME 1514.63 year MPE 4.99842

Forecast model selected: ARIMA (0, 2, 0), Number of forecasts generated: 12

149 This procedure will forecast future values of total deposit. The data cover

10 time periods. Currently, an Autoregressive Integrated Moving Average

(ARIMA) model has been selected. This model assumes that the best forecast for future data is given by a parametric model relating the most recent data value to previous data values and previous noise. The output summarizes the statistical significance of the terms in the forecasting model. Terms with

P-values less than 0.05 are statistically significantly different from zero at the

95.0 per cent confidence level. The estimated standard deviation of the input white noise equals 6207.36. The Table 4.21 also summarizes the performance of the currently selected model in fitting the historical data. It displays: (1) the root mean squared error (RMSE) (2) the mean absolute error (MAE) (3) the mean absolute percentage error (MAPE) (4) the mean error (ME) (5) the mean percentage error (MPE)

Each of the statistics is based on the one-ahead forecast errors, which are the differences between the data value at time t and the forecast of that value made at time t-1. The first three statistics measure the magnitude of the errors.

A better model will give a smaller value. The last two statistics measure bias.

A better model will give a value close to zero.

150 Chart – 4.11

TIME SEQUENCE PLOT FOR TOTAL DEPOSIT

Time Sequence Plot for TOTAL ARIMA(0,2,0) (X 10000) 64 actual forecast 95.0% limits 44

24 TOTAL

4

-16 2000 2004 2008 2012 2016 2020 2024

Table 4.22

FORECAST TABLE FOR TOTAL DEPOSIT

(Actual & forecast)

(Rupees in lakhs)

Period Data Forecast Residual 2001-02 26267.4 ------2002-03 23384.2 ------2003-04 27997.4 20501.0 7496.4 2004-05 28035.0 32610.7 -4575.64 2005-06 31565.2 28072.6 3492.61 2006-07 48536.1 35095.4 13440.7 2007-08 62968.2 65507.0 -2538.74 2008-09 79285.1 77400.4 1884.76 2009-10 90798.4 95602.0 -4803.65 2010-11 100032. 102312. -2279.37

Model: ARIMA(0,2,0)

151 Table 4.23

FORECAST TABLE FOR TOTAL DEPOSIT

(Rupees in lakhs)

Period Forecast Lower 95.0 per cent Upper 95.0 per cent Limit Limit

2011-12 109266. 94951.9 123580.

2012-13 118500. 86492.4 150508.

2013-14 127734. 74174.9 181293.

2014-15 136968. 58565.5 215370.

2015-16 146202. 40044.4 252359.

2016-17 155436. 18886.4 291985.

2017-18 164669. -4698.92 334038.

2018-19 173903. -30544.9 378352.

2019-20 183137. -58515.0 424789.

2020-21 192371. -88494.6 473237.

2021-22 201605. -120386. 523596.

2022-23 210839. -154104. 575782.

152 The table 4.23 shows the forecasted values of Total Deposit. During the period where actual data is available, it also displays the predicted values from the fitted model and the residuals (data-forecast). For time periods beyond the end of the series, it shows 95.0 per cent prediction limits for the forecasts. These limits show where the true data value at a selected future time is likely to be with

95.0 per cent confidence, assuming the fitted model is appropriate for the data.

In order to predict the total amount of deposit mobilized in the period of study period (between 2000-01 to 2010-11) and forecast the total amount of deposits expected and predicted to be collected are analyzed with the help of autoregressive integrated moving average model. The test result shows that

(table 4.22) all the financial years the total deposit are above the predicted level except the period of 2004, 2007, 2009. The above said years the performance of collecting the total deposit is below the predicted level. The table 4.23 predicted the total deposit collection during the next ten years (2011 to 2022). It is suggested to the management of TDCCB have to gear up to make a strategy to be collected the predicted amount.

153 Chart-4.12

Forecast Plot for Total Deposit

Forecast Plot for TOTAL ARIMA(0,2,0) (X 10000) 64 actual forecast 95.0% limits 44

24 TOTAL

4

-16 2010 2012 2014 2016 2018 2020 2022

Models used to test the forecast Total Deposit

(A) Random walk

(B) Random walk with drift = 8196.1

(C) Constant mean = 51886.9

(D) Linear trend = -1.835E7 + 9175.71 t

(E) Simple moving average of 2 terms

(F) Simple exponential smoothing with alpha = 0.9999

(G) Brown's linear exp. smoothing with alpha = 0.8829

(H) Holt's linear exp. smoothing with alpha = 0.1994 and beta = 0.0004

(I) ARIMA (0,2,0)

(J) ARIMA (1,1,0)

(K) ARIMA (2,0,0)

(L) ARIMA (1,2,0)

154 Table 4.24

Model Value to Estimation Period

Model RMSE MAE MAPE ME MPE AIC HQC SBIC

(A) 10658.4 8836.8 15.6112 8196.1 12.8713 18.5482 18.5482 18.5482

(B) 7226.96 6108.12 16.3306 3.63798 -6.79375 17.9711 17.938 18.0014

(C) 29322.2 25107.3 60.4252 -1.45519 -31.7974 20.7722 20.739 20.8025

(D) 9950.77 7478.68 20.4909 -1.01318 -1.47713 18.8108 18.7444 18.8713

(E) 17195.9 13614.2 21.5329 13614.2 21.5329 19.7049 19.6717 19.7351

(F) 10659.3 7953.8 14.0511 7377.16 11.5852 18.7484 18.7152 18.7786

(G) 5844.6 4137.75 10.2826 1095.03 2.7718 17.5465 17.5134 17.5768

(H) 10536.1 7958.63 21.5407 -417.108 -5.50281 18.9251 18.8587 18.9856

(I) 6207.36 5063.98 11.9789 1514.63 4.99842 17.467 17.467 17.467

(J) 6066.48 4123.42 10.1979 2119.97 5.29354 17.6211 17.5879 17.6513

(K) 5807.56 3868.66 9.55742 1138.38 2.55093 17.7338 17.6674 17.7943

(L) 6546.87 4564.45 10.6613 1799.62 5.65573 17.7735 17.7403 17.8037

155 Table 4.25

Results of fitting different models to the data

Model RMSE RUNS RUNM AUTO MEAN VAR (A) 10658.4 OK OK OK * OK (B) 7226.96 OK OK OK * OK (C) 29322.2 ** * OK *** ** (D) 9950.77 ** OK * OK OK (E) 17195.9 OK OK OK * OK (F) 10659.3 OK * OK *** OK (G) 5844.6 OK OK OK OK OK (H) 10536.1 * OK * OK OK (I) 6207.36 OK OK OK OK OK (J) 6066.48 OK OK OK OK OK (K) 5807.56 OK OK OK OK OK (L) 6546.87 OK OK OK OK OK

RMSE = Root Mean Squared Error, RUNS = Test for excessive runs up and down, RUNM = Test for excessive runs above and below median, AUTO = Box-Pierce test for excessive autocorrelation, MEAN = Test for difference in mean 1st half to 2nd half, VAR = Test for difference in variance 1st half to 2nd half.

OK = not significant (p >= 0.05), * = marginally significant (0.01 < p <= 0.05) ** = significant (0.001 < p <= 0.01), *** = highly significant (p <= 0.001)

The table 4.25 compares the results of fitting different models to the data.

The model with the lowest value of the Akaike Information Criterion (AIC) is

model, which has been used to generate the forecasts. The table also

summarizes the results of five tests run on the residuals to determine whether

each model is adequate for the data. An OK means that the model passes the

test. One * means that it fails at the 95 per cent confidence level. Two *'s

means that it fails at the 99 per cent confidence level. Three *'s means that it

fails at the 99.9 per cent confidence level. Note that the currently selected

156 model, model I, passes 5 tests. Since no tests are statistically significant at the

95 per cent or higher confidence level, the current model is probably adequate

for the data.

Table.4.26 Fixed Deposit Forecast Summary

Statistic Estimation Validation Period Period RMSE 5493.84 Number of Observations: 10 years. Start index = MAE 4120.98 2001-2002 MAPE 14.6794 Sampling Interval = one year ME 925.145 MPE 5.4171

Forecast model selected: ARIMA (0,2,0), Number of forecasts generated: 12

This procedure will forecast future values of fixed deposit. The data

cover 10 time periods. Currently, an Auto Regressive Integrated Moving

Average (ARIMA) model has been selected. This model assumes that the best

forecast for future data is given by a parametric model relating the most recent

data value to previous data values and previous noise. The output summarizes

the statistical significance of the terms in the forecasting model. Terms with

P-values less than 0.05 are statistically significantly different from zero at the

95.0 per cent confidence level. The estimated standard deviation of the input

white noise equals 5493.84. The table 4.26 also summarizes the performance of

the currently selected model in fitting the historical data. It displays: (1) the

Root Mean Squared Error (RMSE) (2) the Mean Absolute Error (MAE) (3)

the Mean Absolute Percentage Error (MAPE) (4) the Mean Error (ME) (5) the

Mean Percentage Error (MPE)

157 Each of the statistics is based on the one-ahead forecast errors, which are the differences between the data value at time t and the forecast of that value made at time t-1. The first three statistics measure the magnitude of the errors.

A better model will give a smaller value. The last two statistics measure bias.

A better model will give a value close to zero.

Chart – 4.13

TIME SEQUENCE PLOT FOR FIXED DEPOSIT

Time Sequence Plot for Fixed ARIMA(0,2,0) (X 10000) 62 actual forecast 95.0% limits 42

22 Fixed

2

-18 2000 2004 2008 2012 2016 2020 2024

158 Table- 4.27

FORECAST TABLE FOR FIXED DEPOSIT (Actual & forecast)

(Rupees in lakhs) Period Data Forecast Residual 2001-02 15705.4 2002-03 14502.3 2003-04 16756.4 13299.3 3457.11 2004-05 15451.7 19010.4 -3558.76 2005-06 17546.6 14147.0 3399.66 2006-07 32694.5 19641.6 13052.9 2007-08 46388.4 47842.3 -1453.92 2008-09 60357.2 60082.4 274.84 2009-10 69317.1 74326.0 -5008.85 2010-11 75515.2 78277.0 -2761.83

Model: ARIMA(0,2,0)

The table 4.27 shows the forecasted values for Fixed. During the period where actual data is available, it also displays the predicted values from the fitted model and the residuals (data-forecast). For time periods beyond the end of the series, it shows 95.0 per cent prediction limits for the forecasts. These limits show where the true data value at a selected future time is likely to be with 95.0 per cent confidence, assuming the fitted model is appropriate for the data.

In order to predict the total amount of fixed deposit mobilized for the period of study (between 2000-01 and 2010-11) and forecast the total amount of fixed deposits expected and predicted to be collected are analyzed with the help of autoregressive integrated moving average model. The test result shows that

(table 4.27) all the financial years the total fixed deposits are above the predicted level except the period of 2004, 2007, 2009 and 2010.

159 Table 4.28

FORECAST TABLE FOR TOTAL FIXED DEPOSIT

(Rupees in lakhs)

Lower 95.0 per cent Upper 95.0 per cent Period Forecast Limit Limit

2011-12 81713.3 69044.5 94382.2 2012-13 87911.4 59583.0 116240. 2013-14 94109.5 46707.0 141512. 2014-15 100308. 30917.5 169698. 2015-16 106506. 12551.0 200460. 2016-17 112704. -8149.29 233557. 2017-18 118902. -30997.9 268802. 2018-19 125100. -55847.3 306047. 2019-20 131298. -82576.7 345173. 2020-21 137496. -111085. 386077. 2021-22 143694. -141284. 428673. 2022-23 149892. -173101. 472886.

The above said years the performance of collecting the total fixed deposit is below the predicted level. The table 4.28 predicted the total fixed deposit collection for the next ten years (2011 to 2022). It is suggested to the management of TDCCB have to gear up to make a strategy to collected the predicted amount.

160 Chart- 4.14

Forecast Plot for Total Fixed Deposit

Forecast Plot for Fixed ARIMA(0,2,0) (X 10000) 62 actual forecast 95.0% limits 42

22 Fixed

2

-18 2010 2012 2014 2016 2018 2020 2022

Models used to test the forecast Fixed Deposit

(A) Random walk

(B) Random walk with drift = 6645.54

(C) Constant mean = 36423.5

(D) Linear trend = -1.51319E7 + 7563.36 t

(E) Simple moving average of 2 terms

(F) Simple exponential smoothing with alpha = 0.9999

(G) Brown's linear exp. smoothing with alpha = 0.998

(H) Holt's linear exp. smoothing with alpha = 0.4512 and beta = 0.0002

(I) ARIMA(0,2,0)

(J) ARIMA(1,1,0)

(K) ARIMA(0,2,2)

(L) ARIMA(2,0,0)

161 Table 4.29

Model Value used to calculate the Forecast for Estimate Period

Model RMSE MAE MAPE ME MPE AIC HQC SBIC

(A) 9088.6 7202.82 18.0289 6645.54 14.309 18.2296 18.2296 18.2296

(B) 6576.05 5597.41 23.8865 4.0422 -11.2928 17.7824 17.7492 17.8126

(C) 24469.7 21176.8 81.5512 -1.45519 -49.4801 20.4104 20.3772 20.4406

(D) 9148.4 6874.29 31.9265 -1.86265 -3.83491 18.6427 18.5763 18.7032

(E) 14740.6 11021.8 23.2808 10977.3 22.9933 19.3967 19.3635 19.427

(F) 9089.34 6483.04 16.2267 5981.53 12.8791 18.4297 18.3965 18.46

(G) 5211.16 3530.67 13.3081 504.005 2.75353 17.3171 17.2839 17.3474

(H) 9383.32 7824.97 30.5004 1579.48 -8.08283 18.6934 18.627 18.7539

(I) 5493.84 4120.98 14.6794 925.145 5.4171 17.2228 17.2228 17.2228

(J) 5323.7 3427.46 12.6061 1642.41 6.0656 17.3598 17.3267 17.3901

(K) 5146.44 3732.17 13.536 1237.38 -0.15312 17.4921 17.4257 17.5526

(L) 5280.18 3245.31 11.7025 1186.27 4.0946 17.5434 17.477 17.6039

162 Table 4.30

Results of fitting different models to the data

Model RMSE RUNS RUNM AUTO MEAN VAR (A) 9088.6 OK OK OK * OK (B) 6576.05 OK OK OK * OK (C) 24469.7 OK * OK *** *** (D) 9148.4 * OK * OK OK (E) 14740.6 OK OK OK * OK (F) 9089.34 OK * OK *** OK (G) 5211.16 OK OK OK OK OK (H) 9383.32 * OK * ** OK (I) 5493.84 OK OK OK OK OK (J) 5323.7 OK OK OK OK OK (K) 5146.44 OK OK OK OK OK (L) 5280.18 OK OK OK OK OK

RMSE = Root Mean Squared Error, RUNS = Test for excessive runs up and down, RUNM = Test for excessive runs above and below median, AUTO = Box-Pierce test for excessive autocorrelation, MEAN = Test for difference in mean 1st half to 2nd half VAR = Test for difference in variance 1st half to 2nd half, OK = not significant (p >= 0.05), * = marginally significant (0.01 < p <= 0.05), ** = significant (0.001 < p <= 0.01), *** = highly significant (p <= 0.001)

The table 4.30 compares the results of fitting different models to the data.

The model with the lowest value of the Akaike Information Criterion (AIC) is model I, which has been used to generate the forecasts. The table also summarizes the results of five tests run on the residuals to determine whether each model is adequate for the data. An OK means that the model passes the test. One * means that it fails at the 95 per cent confidence level. Two *'s means that it fails at the 99 per cent confidence level. Three *'s means that it fails at the 99.9 per cent confidence level. Note that the currently selected

163 model I, passes 5 tests. Since no tests are statistically significant at the 95 per cent or higher confidence level, the current model is probably adequate for the data.

Table – 4.31

Forecasting Total Amount of Current Account Deposit- Forecast Summary

Forecast Summary - Number of periods withheld for validation: 0

Statistic Estimation Validation Period Period RMSE 949.334 Number of Observations: MAE 695.318 10 years. Start index = MAPE 5.62149 2001-2002 ME 499.658 Sampling Interval = one MPE 3.88056 year

Forecast model selected: ARIMA(0,2,1), Number of forecasts generated: 12

This procedure will forecast future values of Current. The data cover 10 time periods. Currently, an Autoregressive Integrated Moving Average

(ARIMA) model has been selected. This model assumes that the best forecast for future data is given by a parametric model relating the most recent data value to previous data values and previous noise. The output summarizes the statistical significance of the terms in the forecasting model. Terms with P- values less than 0.05 are statistically significantly different from zero at the 95.0 per cent confidence level. The P-value for the MA (1) term is less than 0.05, so it is significantly different from 0. The estimated standard deviation of the input white noise equals 1294.72. The table 4.31 also summarizes the performance of the currently selected model in fitting the historical data. It displays: (1) the

164 Root Mean Squared Error (RMSE) (2) the Mean Absolute Error (MAE) (3) the Mean Absolute Percentage Error (MAPE) (4) the Mean Error (ME) (5) the

Mean Percentage Error (MPE). Each of the statistics is based on the one-ahead forecast errors, which are the differences between the data value at time t and the forecast of that value made at time t-1. The first three statistics measure the magnitude of the errors. A better model will give a smaller value. The last two statistics measure bias. A better model will give a value close to zero.

Chart- 4.15

TIME SEQUENCE PLOT FOR TOTAL CURRENT DEPOSIT

Time Sequence Plot for Current ARIMA(0,2,1) (X 10000) 8 actual forecast 95.0% limits 6

4 Current

2

0 2000 2004 2008 2012 2016 2020 2024

165 Table- 4.32

FORECAST TABLE FOR TOTAL CURRENT ACCOUNT DEPOSIT

(Actual & forecast)

(Rupees in lakhs)

Period Data Forecast Residual

2001-02 7625.14 ------

2002-03 6525.36 ------

2003-04 8828.69 7305.26 1523.43

2004-05 9538.99 9902.64 -363.646

2005-06 10981.9 10542.7 439.113

2006-07 12535.7 12070.4 465.307

2007-08 13295.0 13714.0 -418.994

2008-09 14639.6 14392.5 247.118

2009-10 16132.1 15784.7 347.401

2010-11 19101.9 17344.3 1757.54

Model: ARIMA(0,2,1)

166 Table 4.33

FORECAST TABLE FOR TOTAL CURRENT ACCOUNT DEPOSIT

(Rupees in lakhs)

Lower 95.0 per cent Upper 95.0 per cent Period Forecast Limit Limit 2011-12 20653.3 17591.8 23714.8 2012-13 22204.7 17438.9 26970.6 2013-14 23756.2 17375.0 30137.4 2014-15 25307.6 17302.0 33313.3 2015-16 26859.0 17188.3 36529.8 2016-17 28410.5 17021.1 39799.8 2017-18 29961.9 16794.9 43129.0 2018-19 31513.3 16507.3 46519.4 2019-20 33064.8 16157.7 49971.9 2020-21 34616.2 15746.4 53486.1 2021-22 36167.7 15274.0 57061.3 2022-23 37719.1 14741.4 60696.7

The table 4.33 shows the forecasted values for current deposits during the period where the actual data are available; it also displays the predicted values from the fit model and the residuals (data-forecast). For time periods beyond the end of the series, it shows 95.0 per cent prediction limits for the forecasts. These limits show where the true data value at a selected future time is likely to be with

95.0 per cent confidence, assuming the fit model is appropriate for the data and in order to predict the total amount of current deposit mobilized for the period of study (between 2000-01 and 2010-11) and forecast the total amount of current deposits expected and predicted to be collected are analyzed with the help of autoregressive integrated moving average model. The test result shows that table

4.32 all the financial years the total deposits are above the predicted level except

167 the period of 2004, 2007. The above said years the performance of collecting the total current deposit is below the predicted level. The table 4.33 predicted the total deposit collection during the next ten years (2011 to 2022). It is suggested to the management of TDCCB which has to gear up to make a strategy to mobilize the current account deposit.

Chart - 4.16 Forecast plot for total current deposit

Forecast Plot for Current ARIMA(0,2,1) (X 10000) 8 actual forecast 95.0% limits 6

4 Current

2

0 2010 2012 2014 2016 2018 2020 2022

Models used to test the forecast Total current Deposit

(A) Random walk (B) Random walk with drift = 1275.19 (C) Constant mean = 11920.4 (D) Linear trend = -2.56988E6 + 1287.36 t (E) Simple moving average of 2 terms (F) Simple exponential smoothing with alpha = 0.9999 (G) Brown's linear exp. smoothing with alpha = 0.6984 (H) Holt's linear exp. smoothing with alpha = 0.4108 and beta = 0.304 (I) ARIMA(0,2,1) (J) ARIMA(0,2,2) (K) ARIMA(1,2,0)(L) ARIMA(2,2,0) (M) ARIMA(2,1,0)

168 Table 4.34

Models used to Value the forecasting total current deposit Estimation

Period

Model RMSE MAE MAPE ME MPE AIC HQC SBIC

(A) 1664.9 1519.59 12.8464 1275.19 9.10112 14.835 14.835 14.835

(B) 1135.35 767.939 8.03171 0.0 -2.23453 14.2694 14.2362 14.2996

(C) 3981.07 3220.42 30.5064 -5.45697 -11.0016 16.7786 16.7454 16.8089

(D) 859.785 602.561 5.90267 3.6689 0.233503 13.9134 13.847 13.9739

(E) 2353.7 2103.75 16.2636 2103.75 16.2636 15.7275 15.6943 15.7577

(F) 1664.98 1367.73 11.5626 1147.77 8.19178 15.0351 15.0019 15.0654

(G) 1186.96 826.022 8.08583 514.247 4.21092 14.3583 14.3251 14.3886

(H) 1056.73 693.611 6.9326 379.926 2.29977 14.3259 14.2595 14.3864

(I) 949.334 695.318 5.62149 499.658 3.88056 13.9115 13.8783 13.9418

(J) 862.074 546.453 4.25462 512.567 4.02587 13.9187 13.8523 13.9792

(K) 1010.07 835.685 6.75363 460.639 3.6829 14.0355 14.0023 14.0658

(L) 1013.26 656.966 4.81317 403.509 2.72125 14.2418 14.1755 14.3024

(M) 1018.41 793.705 6.80173 187.554 0.982368 14.252 14.1856 14.3125

169 Table-4.35

Results of fitting different models to the data

Model RMSE RUNS RUNM AUTO MEAN VAR (A) 1664.9 OK OK OK OK OK (B) 1135.35 OK OK OK OK OK (C) 3981.07 ** * OK ** OK (D) 859.785 OK OK OK OK OK (E) 2353.7 OK OK OK OK OK (F) 1664.98 OK OK OK OK OK (G) 1186.96 OK OK OK OK OK (H) 1056.73 OK OK OK OK OK (I) 949.334 OK OK OK OK OK (J) 862.074 OK OK OK OK OK (K) 1010.07 OK OK OK OK OK (L) 1013.26 OK OK OK OK OK (M) 1018.41 OK OK OK OK OK

RMSE = Root Mean Squared Error, RUNS = Test for excessive runs up and down, RUNM = Test for excessive runs above and below median, AUTO = Box-Pierce test for excessive autocorrelation, MEAN = Test for difference in mean 1st half to 2nd half

VAR = Test for difference in variance 1st half to 2nd half, OK = not significant (p >= 0.05), * = marginally significant (0.01 < p <= 0.05), ** = significant (0.001 < p <= 0.01), *** = highly significant (p <= 0.001)

This table compares the results of fitting different models to the data. The model with the lowest value of the Akaike Information Criterion (AIC) is model

I, which has been used to generate the forecasts. The table also summarizes the results of five tests run on the residuals to determine whether each model is adequate for the data. An OK means that the model passes the test. One * means that it fails at the 95 per cent confidence level. Two *'s means that it fails at the 99 per cent confidence level. Three *'s means that it fails at the 99.9 per

170 cent confidence level. Note that the currently selected model I, passes 5 tests.

Since no tests are statistically significant at the 95 per cent or higher confidence level, the current model is probably adequate for the data.

Table 4.36 Forecast summary -Total Saving account amount

Statistic Estimation Validation Period Period RMSE 569.092 Number of Observations: MAE 404.517 10 years. Start index = MAPE 10.9529 2001-2002 ME 275.423 Sampling Interval = one year MPE 5.6076

Forecast model selected: Random walk

This procedure will forecast future values of saving. The data cover 10 time periods. Currently, a random walk model has been selected. This model assumes that the best forecast for future data is given by the last available data value. The table also summarizes the performance of the currently selected model in fitting the historical data. It displays: (1) the Root Mean Squared Error

(RMSE) (2) the Mean Absolute Error (MAE) (3) the Mean Absolute Percentage

Error (MAPE) (4) the Mean Error (ME) (5) the Mean Percentage Error (MPE)

Each of the statistics is based on the one-ahead forecast errors, which are the differences between the data value at time t and the forecast of that value made at time t-1. The first three statistics measure the magnitude of the errors.

A better model will give a smaller value. The last two statistics measure bias.

A better model will give a value close to zero.

171 Chart-4.17

TIME SEQUENCE PLOT FOR TOTAL SAVING ACCOUNT DEPOSIT

Time Sequence Plot for Saving Random walk (X 1000) 10 actual forecast 8 95.0% limits

6

Saving 4

2

0 2000 2004 2008 2012 2016 2020 2024

Table 4.37

FORECAST TABLE FOR SAVINGS ACCOUNT DEPOSIT (Actual & forecast)

(Rupees in lakhs)

Period Data Forecast Residual 2001-02 2936.37 ------2002-03 2384.2 2936.37 -552.17 2003-04 2412.37 2384.2 28.17 2004-05 3044.37 2412.37 632.0 2005-06 3036.75 3044.37 -7.62 2006-07 3305.95 3036.75 269.2 2007-08 3284.82 3305.95 -21.13 2008-09 4288.37 3284.82 1003.55 2009-10 5349.14 4288.37 1060.77 2010-11 5415.18 5349.14 66.04

Model: Random walk

172 Table 4.38

FORECAST TABLE FOR TOTAL SAVING ACCOUNT DEPOSIT

(Rupees in lakhs)

Period Forecast Lower 95.0 per cent Upper 95.0 per cent Limit Limit

2011-12 5415.18 4127.8 6702.56

2012-13 5415.18 3594.55 7235.81

2013-14 5415.18 3185.38 7644.98

2014-15 5415.18 2840.42 7989.94

2015-16 5415.18 2536.51 8293.85

2016-17 5415.18 2261.76 8568.6

2017-18 5415.18 2009.1 8821.26

2018-19 5415.18 1773.92 9056.44

2019-20 5415.18 1553.05 9277.31

2020-21 5415.18 1344.13 9486.23

2021-22 5415.18 1145.43 9684.93

2022-23 5415.18 955.571 9874.79

The table 4.38 shows the forecasted values for saving. During the period where actual data are available, it also displays the predicted values from the fit model and the residuals (data-forecast). For time periods beyond the end of the series, it shows 95.0 per cent prediction limits for the forecasts. These limits show where the true data value at a selected future time is likely to be with 95.0 per cent confidence, assuming the fit model is appropriate for the data

173 In order to predict the total amount of saving account deposit mobilized during the period of study (between 2000-01 to 2010-11) and forecast the total amount of Saving account deposits expected and predicted to be collected are analyzed with the help of autoregressive integrated moving average model. The test result shows that (table 4.37) all the financial years the total saving account deposit are above the predicted level except the period of 2002 and 2007. The above said years the performance of collecting the total current deposit is below the predicted level. The table 4.38 predicted the total saving account deposit collection for the next ten years (2011 to 2022). It is suggested to the management of TDCCB have to gear up to make a strategy to mobilize the predicted saving account deposit.

174 Chart- 4.18 Forecast Plot for Total Savings Deposit

Forecast Plot for Saving Random walk 1000) 10 actual forecast 8 95.0% limi

6

Saving 4

2

0 2010 2012 2014 2016 2018 2020 2022

Models used to test the forecast Fixed Deposit

(A) Random walk

(B) Random walk with drift = 275.423

(C) Constant mean = 3545.75

(D) Linear trend = -645925. + 323.845 t

(E) Simple moving average of 2 terms

(F) Simple exponential smoothing with alpha = 0.9999

(G) Brown's linear exp. smoothing with alpha = 0.5455

(H) Holt's linear exp. smoothing with alpha = 0.9999 and beta = 0.0832

(I) ARIMA(0,1,0)

(J) ARIMA(1,0,0)

(K) ARIMA(0,2,1)

(L) ARIMA(0,1,1)

(M) ARIMA(1,1,0)

175 Table 4.39

Model Value used to calculate the Forecast for Estimate Period

Model RMSE MAE MAPE ME MPE AIC HQC SBIC

(A) 569.092 404.517 10.9529 275.423 5.6076 12.6881 12.6881 12.6881

(B) 528.212 415.567 12.3042 1.51582 -2.66566 12.739 12.7058 12.7693

(C) 1102.5 883.087 25.0434 4.54747 -7.93289 14.2107 14.1775 14.2409

(D) 534.717 385.995 11.1999 -2.51475 -1.39763 12.9635 12.8971 13.024

(E) 796.473 591.649 14.5646 529.671 11.9954 13.5604 13.5272 13.5906

(F) 569.113 364.077 9.85764 247.911 5.04747 12.8882 12.855 12.9184

(G) 534.832 396.64 10.9268 174.731 3.79904 12.7639 12.7307 12.7942

(H) 552.096 369.859 10.3997 121.965 1.5233 13.0274 12.9611 13.088

(I) 569.092 404.517 10.9529 275.423 5.6076 12.6881 12.6881 12.6881

(J) 515.75 392.686 11.2699 76.9207 0.0477452 12.6912 12.658 12.7215

(K) 528.074 375.297 9.34575 239.419 5.55906 12.7385 12.7053 12.7687

(L) 539.939 433.276 12.4919 184.228 4.09517 12.7829 12.7497 12.8132

(M) 547.903 451.045 12.7264 170.84 3.94088 12.8122 12.779 12.8425

176 Table- 4.40

Results of fitting different models to the data

Model RMSE RUNS RUNM AUTO MEAN VAR (A) 569.092 OK OK OK OK OK (B) 528.212 OK OK OK OK OK (C) 1102.5 OK * OK * * (D) 534.717 OK OK OK OK OK (E) 796.473 OK OK OK OK OK (F) 569.113 OK OK OK OK OK (G) 534.832 OK OK OK OK OK (H) 552.096 OK OK OK OK OK (I) 569.092 OK OK OK OK OK (J) 515.75 OK OK OK OK OK (K) 528.074 OK OK OK OK OK (L) 539.939 OK OK OK OK OK (M) 547.903 OK OK OK OK OK

RMSE = Root Mean Squared Error, RUNS = Test for excessive runs up and down, RUNM = Test for excessive runs above and below median, AUTO = Box-Pierce test for excessive autocorrelation, MEAN = Test for difference in mean 1st half to 2nd half

VAR = Test for difference in variance 1st half to 2nd half, OK = not significant (p >= 0.05), * = marginally significant (0.01 < p <= 0.05), ** = significant (0.001 < p <= 0.01), *** = highly significant (p <= 0.001)

The table 4.40 compares the results of fitting different models to the data.

The model with the lowest value of the Akaike Information Criterion (AIC) is model A, which has been used to generate the forecasts. The table also summarizes the results of five tests run on the residuals to determine whether each model is adequate for the data. An OK means that the model passes the test. One* means that it fails at the 95 per cent confidence level. Two *'s means that it fails at the 99 per cent confidence level. Three *'s means that it fails at the

99.9 per cent confidence level. Note that the currently selected model, model A,

177 passes 5 tests. Since no tests are statistically significant at the 95 per cent or higher confidence level, the current model is probably adequate for the data.

Table 4.41

Multiple Linear Regressions – Impact of Deposit Received &Loan Received

on Loan Sanctioned

Parameter Estimate Standard T Statistic P-Value Error CONSTANT 7328.89 12355.4 0.593173 0.5717

Deposit Received 0.842584 0.333013 2.53018 0.0392

Loan Received 2.7223 1.10049 2.47371 0.0426

Dependent variable: Total loan paid (Loan granted) Independent variables: Deposit Received (Deposit), Loan Received (Loan)

Table 4.42

Analysis of Variance

Source Sum of Squares Df Mean Square F-Ratio P-Value

Model 1.00329 2 5.01647E9 44.18 0.0001

Residual 7.94807 7 1.13544E8

Total (Corr.) 1.08277 9

R-squared = 92.6595 percent, R-squared (adjusted for d.f.) = 90.5623 percent

Standard Error of Est. = 10655.7, Mean absolute error = 6018.13, Durbin- Watson statistic = 3.00355 (P=0.8570), Lag 1 residual autocorrelation = - 0.534012

178 The output shows the results of fitting a multiple linear regression model to describe the relationship between Total loan paid and two independent variables.

The equation of the fit model is Total Loan Paid = 7328.89 +

0.842584*Deposit Received + 2.7223*Loan Received. Since the P-value in the

ANOVA table is less than 0.05, there is a statistically significant relationship between the variables at the 95.0 per cent confidence level. The R-Squared statistic indicates that the model as fit explains 92.6595 per cent of the variability in Total Loan Paid. The adjusted R-squared statistic, which is more suitable for comparing models with different numbers of independent variables, is 90.5623 per cent. The standard error of the estimate shows the standard deviation of the residuals to be 10655.7. This value can be used to construct prediction limits for new observations by selecting the Reports option from the data. The Mean

Absolute Error (MAE) of 6018.13 is the average value of the residuals. The

Durbin-Watson (DW) statistic tests the residuals to determine if there is any significant correlation based on the order in which they occur on the basis of data. Since the P-value is greater than 0.05, there is no indication of serial autocorrelation in the residuals at the 95.0 per cent confidence level. In determining whether the model can be simplified, notice that the highest P-value on the independent variables is 0.0426, belonging to Loan Received. Since the

P-value is less than 0.05, that term is statistically significant at the 95.0 per cent confidence level.

179

Chart- 4.19 - Plot of Total loan Paid

Plot of Total loan paid

(X 10000) 18

15

12

9 observed 6

3

0 0 3 6 9 12 15 18 (X 10000) predicted

Table 4.43 - Multivariate correlation on Loan Paid and Unpaid Loan

Total amount of Unpaid Loan Loan unpaid Loan granted beyond the time limit Total amount of 1.0000 0.9636 0.4276 Loan granted

Unpaid Loan 0.9636 1.0000 0.2616

Loan unpaid 0.4276 0.2616 1.0000 beyond the time limit

180

Chart- 4.20 Scatter plot Matrix

Table 4.44

Result of Multivariate Simple Statistics

Column DF Mean SD Sum Minimum Maximum Total amount of 9.00 89669.4 34685.5 896694 48824.7 160852 Loan granted Unpaid Loan 9.00 76455.8 33071.5 764558 40682.8 142738 Loan unpaid 9.00 11395.5 4299.83 113955 4996.87 19082.0 beyond the time limit

The multiple regression tests is conducted in order to predict the impact

of loan paid on total deposit received and loan received from NABARD and

Tamilnadu Central Co-operative Banks and through the government. The result

indicates that a received loan amount increased the loan paid is also increased

181 (2.72) whereas the contribution of deposit amount received on loan paid is very low (0.842).

4.3 Agricultural Credit

With one of the largest acres of cropland in the World and 11 per cent of world’s land under Agriculture, India continues to occupy its prominent role in the agricultural Economies in the world agricultural scenario. There is a huge untapped potential in the Indian market for food and agribusiness, both in mature sectors such as agri-inputs, edible oil and sugar, as well as the emerging sectors like dairy, poultry, fruits and vegetables and Biotechnology. Credit is one of the crucial inputs for propelling the growth of agriculture. For the past few decades, institutional finance is coming in a big way to help the Indian farmer in increasing the productivity and production. All Rural Financial Institutions have played a crucial role and the roles of Co-operatives were laudable till the end of

20th century as the largest purveyor of agricultural credit. However, with the liberalization and the reforms that had swept the banking industry in the past decade and half had diminished their leadership position and made the way for the new players to fill the gap. The share of the Co-operatives in agriculture which used to be around 70 per cent even in late 1990s had slipped down to less than 30 per cent due mainly to inertia to keep pace with the changes and efforts not matching with those of competitors especially from Commercial Banks of

Public and Private sectors.

182

4.4 Existing Business of Co-operative Banks:

Generally Co-operative Banks’ loan portfolio consists of more than 80 per cent lending to crop loans and remaining to small, petty business and cash credit lending. Some of the banks have the following loan products in their portfolio.

 Crops loans to PACS through Kisan Credit Card (KCC) System  Advances against fixed deposits  Consortium financing long with State Co-operative Bank for loans & advances to Co-operative sugar mills  Cash Credit to PACS for dealing in agricultural inputs, PDS items, consumer goods etc.  Cash Credit to Co-operative Sugar Mills for working capital requirements  Cash Credit to Co-operative Marketing Societies for working capital requirements  Advance against pledge of sugar to Co-operative Sugar Mills  Cash Credit to Co-operative Processing Societies for working capital requirements  Cash Credit to Co-operative Consumer Stores for working capital requirements  Cash Credit to Primary Weaver Co-operative Societies for working capital requirements  Cash Credit to Industrial Co-operative Societies for their working capital requirements  Medium Term Loans to Salary Earners’ Societies  Medium Term (Conversion) Loans to PACS  Medium Term Investment Credit to individual farmers for taking agriculture and allied activities.

183

It may be seen from the above that the Co-operative Banks are mostly

financing units within the Co-operative system with the implementation of

Prof. Vaidynathan Committee recommendations and Agricultural Debt Waiver

and Debt Relief Scheme and the cleansing of the balance sheet of the PACS,

most of the PACS would be eligible to borrow a higher quantum of credit from

DCCBs. The Co-operative banks would also have substantial funds which could

be profitably deployed.

Table 4.45

Amount of agricultural loan granted

(Rs.in lakhs)

Year Short term Medium term Long term Total 2001-02 4524.28 12559.76 26.37 17110.41 2002-03 4594.13 13697.6 32.55 18324.28 2003-04 4262.62 21328.24 98.25 25689.11 2004-05 1425.18 29758.37 221.35 31404.9 2005-06 1260.26 27633.7 229.78 29123.74 2006-07 41174.92 29090.87 600.78 70866.57 2007-08 50982.29 30458.18 527.57 81968.04 2008-09 62614.62 35661.16 474.89 98750.67 2009-10 72233.65 41680.39 378.19 114292.23 2010-11 91656.06 50641.33 440.52 142737.91

Sources: Secondary sources from TDCCB Ltd

The table 4.45 reflects the total amount of loan granted for a agricultural

purpose. The total amount of loan amount has increased considerable during the

years between 2001-02 and 2010-11. Out of total amount of agricultural loan,

the short term loan has contributed majority, whereas medium term loan had

184 contributed very low. The short term agricultural loan has increased drastically during the year 2005-06 onwards until the year 2010-11 of the study period. The long term agricultural credit lending had not showed any considerable improvement. The long term credit had increased every year in less proportion.

185 Table 4.46

Multiple Linear Regression on Agricultural Loan Short -term

Standard T Parameter Estimate P-Value Error Statistic CONSTANT 105087. 31046.3 3.38486 0.0117 Deposit Received -1.05413 0.836787 -1.25973 0.2481

Loan Received -0.579444 2.76529 -0.209542 0.8400

Dependent variable: Agricultural Loan Short term, Independent variables: Deposit Received (Deposit) Loan Received (Loan)

Table 4.47 Analysis of Variance

Source Sum of Squares Df Mean Square F-Ratio P-Value Model 5.67434E9 2 2.83717E9 3.96 0.0708 Residual 5.01844E9 7 7.16919E8 Total (Corr.) 1.06928E10 9

R-squared = 53.067 percent R-squared (adjusted for d.f.) = 39.6576 percent Standard Error of Est. = 26775.4 Mean absolute error = 17906.7 Durbin-Watson statistic = 0.559842 (P=0.0003) Lag 1 residual autocorrelation = 0.553987

The output shows the results of fitting a multiple linear regression model to describe the relationship between Agricultural Loan Short-term and two independent variables. The equation of the fitted model is Agricultural Loan

Short-term = 105087. - 1.05413*Deposit Received - 0.579444*Loan Received.

Since the P-value in the ANOVA table is greater or equal to 0.05, there is no statistically significant relationship between the variables at the 95.0 per cent or higher confidence level. The R-Squared statistic indicates that the model as fitted explains 53.067 per cent of the variability in Agricultural Loan Short-term. The

186 adjusted R-squared statistic, which is more suitable for comparing models with different numbers of independent variables, is 39.6576 per cent. The standard error of the estimate shows the standard deviation of the residuals to be 26775.4.

This value can be used to construct prediction limits for new observations by selecting the Reports option from the data. The mean absolute error (MAE) of

17906.7 is the average value of the residuals. The Durbin-Watson (DW) statistic tests the residuals to determine if there is any significant correlation based on the order in which they occur in data file. Since the P-value is less than 0.05, there is an indication of possible serial correlation at the 95.0 per cent confidence level. Plot the residuals versus row order to see if there is any pattern that can be seen. In determining whether the model can be simplified, notice that the highest P-value on the independent variables is 0.8400, belonging to Loan

Received. Since the P-value is greater or equal to 0.05, that term is not statistically significant at the 95.0 per cent or higher confidence level.

Consequently, you should consider removing Loan Received from the model.

The multiple regression tests is conducted in order to predict the impact of deposit received and loan received by the TDCCB Ltd., from NABARD and

Tamilnadu Central Co-operative Banks and from the government on total short-term agricultural loan paid. The result indicate that there is a negative impact of deposit received and loan received on total short term agricultural loan paid. The result indicates that when a received loan amount increased the short term agricultural loan is not increased (-0.579) whereas the contribution of deposit amount received on loan paid is also negative (-1.054). It is concluded that the deposit received and loan received do not create any impact on increasing or decreasing short term agricultural loan.

187

Chart 4.21 – Plot of Agricultural Loan short term loan

(X 100000) 1

0.8 Observed 0.6

0.4

0.2

0

-0.2 -0.2 0 0.2 0.4 0.6 0.8 1 Predicted (X 100000)

Chart 4.22 – Plot of Agricultural Loan short term with predicted values

(X 10000) 10

8 Agricultural Loan Short 6 term 4

2

0 44 54 64 74 84 94 104 Deposit Received (X 1000)

188 Table 4.48

Multiple Linear Regression - Agricultural Loan Medium Term

Standard T Parameter P-Value Estimate Error Statistic CONSTANT 55167.3 6795.1 8.11868 0.0001 Deposit Received -0.262714 0.183147 -1.43444 0.1946 Loan Received -0.870664 0.605239 -1.43855 0.1934

Dependent variable: Agricultural Loan Medium Term Independent variables: Deposit Received, Loan Received

Table 4.49

Analysis of Variance

Source Sum of Squares Df Mean Square F-Ratio P-Value Model 1.00036E9 2 5.00178E8 14.56 0.0032 Residual 2.40403E8 7 3.43433E7 Total (Corr.) 1.24076E9 9

R-squared = 80.6245 percent R-squared (adjusted for d.f.) = 75.0887 percent Standard Error of Est. = 5860.31 Mean absolute error = 4019.76 Durbin-Watson statistic = 0.935352 (P=0.0053) Lag 1 residual autocorrelation = 0.209728

The output shows the results of fitting a multiple linear regression model to describe the relationship between Agricultural Loan Medium Term and two independent variables. The equation of the fit model is Agricultural Loan

Medium Term = 55167.3 - 0.262714*Deposit Received - 0.870664 *Loan

Received. Since the P-value in the ANOVA table is less than 0.05, there is a statistically significant relationship between the variables at the 95.0 per cent confidence level.

189 The R-Squared statistic indicates that the model as fit explains 80.6245 per cent of the variability in Agricultural Loan Medium Term. The adjusted R- squared statistic, which is more suitable for comparing models with different numbers of independent variables, is 75.0887 per cent. The standard error of the estimate shows the standard deviation of the residuals to be 5860.31. This value can be used to construct prediction limits for new observations by selecting the reports option from the data. The Mean Absolute Error (MAE) of 4019.76 is the average value of the residuals. The Durbin-Watson (DW) statistic tests the residuals to determine if there is any significant correlation based on the order in which they occur in data. Since the P-value is less than 0.05, there is an indication of possible serial correlation at the 95.0 per cent confidence level.

Plot the residuals versus row order to see if there is any pattern that can be seen.

In determining whether the model can be simplified, notice that the highest P- value on the independent variables is 0.1946, belonging to Deposit Received.

Since the P-value is greater or equal to 0.05, that term is not statistically significant at the 95.0 per cent or higher confidence level. Consequently, it should consider removing Deposit Received from the model.

The multiple regression tests is conducted in order to predict the impact of deposit received and loan received by the TDCCB Ltd from NABARD and

Tamilnadu Central Co-operative Banks and from government on total medium term agricultural loan paid. The results indicate that there is a negative impact of deposit received and loan received on total medium term agricultural loan paid. The result indicates that when a received loan amount increased the medium term agricultural loan is not increased (-0.87) whereas the contribution of deposit amount received on loan paid is also negative (-0.262).it is concluded

190 that the deposit received and loan received do not create any impact on increasing or decreasing medium term agricultural loan.

Chart 4.23

Plot of Agricultural Loan Medium term

(X 10000) 6

5 Observed 4

3

2

1

0 0123456 Predicted (X 10000)

Chart 4.24

Plot of Agricultural Loan Medium term with predicted values

Plot of Agricultural Loan Medium Term with Predicted Values

(X 10000) 6

5

4

3

2

1 Agricultural Loan Medium Term 0 44 54 64 74 84 94 104 Deposit Received (X 1000)

191 Table 4.50

Multiple Linear Regression - Agricultural Loan Long Term

Parameter Standard T Estimate Error Statistic P-Value CONSTANT 941.391 103.608 9.0861 0.0000 Deposit Received -0.0132751 0.00279253 -4.75381 0.0021 Loan Received 0.0164226 0.00922834 1.77959 0.1184

Dependent variable: Agricultural Loan Long Term Independent variables: Deposit Received (Deposit) Loan Received (Loan)

Table 4.51

Analysis of Variance

Source Sum of Squares Df Mean Square F-Ratio P-Value Model 340944. 2 170472. 21.35 0.0010 Residual 55889.8 7 7984.26 Total (Corr.) 396834. 9

R-squared = 85.9161 percent R-squared (adjusted for d.f.) = 81.8921 percent Standard Error of Est. = 89.3547 Mean absolute error = 53.0856 Durbin-Watson statistic = 2.53773 (P=0.5871) Lag 1 residual autocorrelation = -0.274952

The output shows the results of fitting a multiple linear regression model

to describe the relationship between Agricultural Loan Long Term and two

independent variables. The equation of the fit model is Agricultural Loan Long

Term = 941.391 - 0.0132751*Deposit Received + 0.0164226*Loan Received.

Since the P-value in the ANOVA table is less than 0.05, there is a statistically

significant relationship between the variables at the 95.0 per cent confidence

level.

192 The R-Squared statistic indicates that the model as fit explains 85.9161 per cent of the variability in Agricultural Loan Long Term. The adjusted

R-squared statistic, which is more suitable for comparing models with different numbers of independent variables, is 81.8921 per cent. The standard error of the estimate shows the standard deviation of the residuals to be 89.3547. This value can be used to construct prediction limits for new observations by selecting the

Reports option from the data. The Mean Absolute Error (MAE) of 53.0856 is the average value of the residuals. The Durbin-Watson (DW) statistic tests the residuals to determine if there is any significant correlation based on the order in which they occur in data file. Since the P-value is greater than 0.05, there is no indication of serial auto correlation in the residuals at the 95.0 per cent confidence level.

In determining whether the model can be simplified, notice that the highest P-value on the independent variables is 0.1184, belonging to Loan

Received. Since the P-value is greater or equal to 0.05, that term is not statistically significant at the 95.0 per cent or higher confidence level.

Consequently, it should consider removing Loan Received from the model.

The multiple regression tests is conducted in order to predict the impact of deposit received and loan received by the TDCCB Ltd from NABARD and

Tamilnadu Central Co-operative Banks and from government on total long- term agricultural loan paid. The results indicate that there is a negative impact of deposit received and loan received on total long-term agricultural loan paid. The result indicates that whenever a received loan amount increases, the Long- term agricultural loan is also increased. Both have a positive relationship (0.0164)

193 whereas the contribution of deposit amount received on loan paid is also negative (-0.013). It is concluded that the deposit received do not create any impact on increasing or decreasing long term agricultural loan. However, whenever the loan received has increased, ultimately the loan paid for long term agricultural loan has also increased.

Chart 4.25 – Plot of Agricultural Loan Long term

Plot of Agricultural Loan Long Term

800

600

400 observed

200

0 0 200 400 600 800 predicted

Chart 4.26 – Plot of Agricultural Loan Long term with predicted values

Plot of Agricultural Loan Long Term with Predicted Values

800

600

400

200 Agricultural Loan Long Term

0 44 54 64 74 84 94 104 (X 1000) Deposit Received

194 Correlation between Short, Medium and long term agricultural credit

The correlation between short term, medium and long term agricultural credit is calculated and presented in the Table. The correlation between short term and medium term agricultural credit is positive and statistically significant

(r = 0.860, p< .001) in the second set of relationship between short term agricultural credit and long term agricultural credit is positive and statistically significant (r = 0.751, p<.001) the correlation between medium term agricultural credit and long term agricultural credit is less positive while compare with short term and medium term agricultural credit. There is significant relationship between long term and medium term agricultural credit (r = 0.708, p< .001). among the short, medium and long term agricultural credit, long term and medium term agricultural credit has less relationship that is dependency between this two term is very low while compare with others whereas Medium and Short- term is strong relation and their dependence is stronger than other terms.

Table 4.52

Multivariate Correlations

Agricultural Agricultural Agricultural Term Loan Loan Loan Short- Term Medium-Term Long -Term Agri Loan Short Term 1.0000 0.8600 0.7511 Agri Loan Medium term 0.8600 1.0000 0.7086 Agri Loan Long Term 0.7511 0.7086 1.0000

195 Chart 4.27

Scatter plot Matrix

Table 4.53

Hypothesis Test using Chi-square and one sample to analyze the equal

probabilities of Short, Medium and Long- term on Agricultural loan

Null Hypothesis Test Sig Decision The Categories of Short-term Retain the Null Agricultural Loan occurred with Chi-Square 1.000 Hypothesis equal Probabilities The Categories of Medium-term Retain the Null Agricultural Loan occurred with Chi-Square 1.000 Hypothesis equal Probabilities The Categories of Long-term Retain the Null Agricultural Loan occurred with Chi-Square 1.000 Hypothesis equal Probabilities

196 Chart 4.28 Short -Term Agricultural loan

100000

80000

60000 91656.06 40000 72233.65 62614.62 50982.29 20000 41174.92

0 1260.261425.184262.624594.134524.28

Rs.in lakhs

Chart 4.29 Medium -Term Agricultural Loan

60000 50000 40000 30000 50641.33 41680.39 20000 35661.1630458.1829090.87 29758.37 27633.7 21328.24 10000 13697.612559.76 0

Rs.in lakhs

Chart 4.30 Long -Term Agricultural Loan

700 600 600.78 500 440.52 474.89 400 300 527.57 378.19 229.78 221.35 200 98.25 100 32.55 26.37 0

Rs.in lakhs

197 The relationship between short-term, medium-term and long-term agricultural loan has been analyzed with a help of correlation statistical test. The result shows that 86 per cent dependency between medium-term and short-term agricultural loan whereas long- term and medium-term agricultural loan has only

70 per cent of dependency. It is confirmed that medium-term and short-term agricultural loan has similar character and to grand this type of loan to the farmers, whereas long-term loan has differs small in value from short term and medium-term. Moreover the chi-square test is conducted to verify whether the granting loan during the study period (2000-01 to 2010-11) is occurred evenly or any huge variation from one year to another year. The management of TDCCB

Ltd., has to take suitable action, if it is found that huge variation between one year to another year of amount granted for medium, short-term and long-term agricultural loan. The result of chi-square test shown that the amount sanctioned for agricultural loan is equal during the study period. The values of all types of agricultural loan viz., short, medium and long-term are also given in the form of chart in figures 4.28, 4.29 and 4.30. It is concluded that the management can adopt a uniformity policy to grand a long-term, medium-term and short-term agricultural loan.

198 Table 4.54

LOANS FROM NABARD, TNCCB &

TAMIL NADU GOVERNMENT

(Rs.in lakhs)

Year Loan from Percentage NABARD, increase/Decrease TNCCB & TN Govt. 2001-02 3000 ------2002-03 4756.6 58.55 2003-04 7738.64 62.69 2004-05 10774.53 39.23 2005-06 10501.73 -2.53 2006-07 9925.44 -5.49 2007-08 10413.83 4.92 2008-09 10642.45 2.20 2009-10 16086.14 51.15 2010-11 26188.82 62.80 Sources: annual report of TDCCB ltd.

The Table 4.54 shows that the loan received by Tiruchirappalli District

Central Co-operative Bank (TDCCB) from Tamilnadu Government, Tamilnadu

Central Co-operative Bank and National Agricultural Bank for Rural

Development (NABARD). The Co-operative Bank receives the required financial assistance from State Government, Apex body State Co-operative

Banks and other agencies like NABARD. The capital contribution of member society and deposit collected from the customers are not sufficient for any

Co-operative banks to run their regular business activities in an effective

199 manner, so to meet their financial additional requirement they borrow money from the above bodies. From the data it is identified that the amount of loan granted or the banking lending function is supported by the funds borrowed by the bank from its apex bodies.

The contribution of NABARD and Tamilnadu Government and other

Central Co-operative agencies in the total amount of loan to the Tiruchirappali

District Central Co-operative Bank Ltd has shows in the above table. It indicates that there is high fluctuation in the lending of these agencies. During the period, from 2001-02 to 2004-05 there was a huge contribution by these supporting agencies. However during the period of 2005-06 and 2006-07 the support of the agencies has shown a negative result when compare with the previous years financial support to the TDCCB Ltd. From the year 2007-08 and 2008-09 the assistance has marginally increased. Once agin from the year 2009-10 to

2010-11 had increased. The support of NABARD and other Co-operative ageies has considered as important to develop the Co-operative movement.

The general opinion of competition from public sector banks and new generation banks affects the perfomance of TDCC bank and because of this the performance in the years 2006-07 and 2010-11 has been affected to certain extend is one reason stated by the officials of the bank during the period of data collection. But it cannot be taken as reason for ineffective performance, the authorities have to take steps to compete with them to retain their own service among the customers is need of the hour, otherwise the purpose of Co-operative bank cannot be fulfilled. In general, the successs of Co-opeative lending has mainly depend upon the assistacies provided to them and that too in case of

200 TDCC bank is considered must because the Financial shortage is met out of the financial assistance extended by the Tamilnadu State Central Coopertive Banks

And Government and NABARD.

(Rs.in lakhs)

Chart - 4.31 Loan from NABARD, TNCCB & TN Govt.

2010-11 26188.82

2009-10 16086.14

2008-09 10642.45

2007-08 10413.83

2006-07 9925.44

2005-06 10501.73

2004-05 10774.53

2003-04 7738.64

2002-03 4756.6

2001-02 3000

201 Chart - 4.32 Total amount of investment

35000

30000

25000

20000

15000 30391.77Total capital 24857.826029.82 10000 19782.9 16258.1215240.1 13406.913074.1114319.31 14694.31 5000

0

Table 4.55

Total Amounts of Investments

(Rs.in lakhs)

Year Investments Percentage increase 2001-02 16258.12 2002-03 15240.1 -6.26% 2003-04 13406.9 -12.03% 2004-05 13074.11 -2.48% 2005-06 14319.31 9.52% 2006-07 19782.9 38.16% 2007-08 14694.31 -25.72% 2008-09 24857.8 69.17% 2009-10 26029.82 4.71% 2010-11 30391.77 16.76% Sources: annual report of TDCCB Ltd.

202 The table 4.55 shows that keeping in view the various regulatory/statutory and the bank's own internal requirements, primary (urban) Co-operative Banks should lay down, with the approval of their Board of Directors, the broad

Investment Policy and objectives to be achieved while undertaking investment transactions. The investment policy should be reviewed each year. The

Board/Committee/Top Management should actively oversee investment transactions. Banks should not undertake any transactions on behalf of Portfolio

Management Scheme (PMS) clients in their fiduciary capacity, and on behalf of other clients, either as custodians of their investments or purely as their agents.

The investment policy of the bank should include guidelines on the quantity

(ceiling) and quality of each type of security to be held on its own investment account. Bank should clearly indicate the authority to put through investment deals and the reporting system to be adopted. It should be prepared strictly observing the instructions issued by the Registrar of Co-operative Societies and the Reserve Bank of India from time to time and clearly spell out the internal control mechanism, accounting standards, audit, and review and reporting system to be evolved. Co-operative societies and banks are not allowed to invest their money in mutual funds and also in fixed deposit with the private companies. They can in invest in schedule banks, government securities and in the securities as prescribed under sec.20 of Indian trust act, 1882. RBI has allowed the Co-operative banks to invest 5 per cent of their incremental deposits in mutual funds. They can only invest in securities prescribed under sec. 20 of

Trust Act. The investment of TDCCB Ltd has shown in the above table 4.53. It has been seen that there was highly floated. During the year 2005 to 2010 the investment has highly floated. There was 38.36 per cent increase in the year

203 2006-07 which was compared to previous year. In the year 2007-08 the total amount of investment has decreased 27.52 per cent. 69.17 per cent of investment has increased in the year 2008-09 when compared with previous year. It was concluded that the percentage of increase or decrease in total investment when compared with previous year was highly fluctuated.

Table 4.56

Total Outstanding loan amount beginning and end of the year

(Rs.in lakhs)

Total Balance at the Total amount of amount of Balance at the Year beginning of the loan paid during loan end of the year year the period recovered 2010-11 114292.23 160852.14 132406.46 142737.91 2009-10 98750.67 129070.46 113528.90 114292.23 2008-09 81968.04 104302.91 87520.28 98750.67 2007-08 70866.57 79223.81 68122.34 81968.04 2006-07 60794.17 104066.22 93993.81 70866.57 2005-06 57291.45 71462.41 67959.69 60794.17 2004-05 52000.48 74287.66 68996.69 57291.45 2003-04 45913.98 62646.52 57200.45 52000.48 2002-03 40682.84 48824.68 48325.23 45913.98 2001-02 38507.21 58824.68 56649.05 40682.84

Sources: Secondary data

From the above table, it indicates that Tiruchirappalli District

Co-operative Bank Ltd provides loans and advances to its member societies, members of Tiruchirappalli District Central Co-operative Bank Ltd and

204 individual. As per Tamilnadu Government policies, Tiruchirappalli District

Central Co-operative Bank Ltd is helping by sanctioning various types of loans and advances for various purposes such as loan to small business, agriculture small road transport organizations, and mortgaged loans on Houses.

Tiruchirappalli District Central Co-operative Bank Ltd., advances loans to the individuals for starting industries, to meet their credit expenses, to form a diary, to develop the status of the women, and for the purposes.

Chart 4.33

Fissure of Balance of Loan amount at the beginning and end of the year

(Rs.in lakhs)

300000.00

250000.00

200000.00 142737.91

114292.23 150000.00

98750.67

81968.04 100000.00 70866.57 60794.17 57291.45 52000.48 45913.98 114292.23 40682.84 50000.00 98750.67 81968.04 70866.57 60794.17 57291.45 52000.48 45913.98 40682.84 38507.21

0.00 2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02 Balance at the beginning of the year Balance at the end of the year

205 Tiruchirappalli District Central Co-operative Bank introduced different types of loan schemes since 1998. Basically there are two types of credit namely- Cash credit and Jewel loan. The bank also provides Housing loan, Loan against mortgage and House construction loan. The Co-operative bank provides small scale industries loan, Loans under government sponsored scheme, Loans through women development cell and Loans to bank employees.

The Jewel loans are secured loans. In the event of default in repayment of loans by the borrower, the bank has the legal right to dispose of the jewels by public auction and recover the loan amount together with interest there on from the sale proceeds. The issue of jewel loans by the TDCCB Ltd can be done either through direct finance or on lending process. In both the ways the revenue will go up and collection of dues is not a constraint to the bankers.

Chart 4.34

Position of Loan amount paid, recovered and balance

(Rs.in lakhs)

180000

160000 Total amount 140000 of loan paid during the 120000 period 100000 total amount 80000 of loan 60000 recovered

40000

20000 Balance at the 0 end of the year

206 Table 4.57

Amount of Capital and Working capital

(Rs.in lakhs)

Year Capital Percentage Working Percentage Increase/Decrease Capital Increase/Decrease 2001-02 16258 64040 2002-03 15240 -6.26% 68801 7.43% 2003-04 13406 -12.03% 73905 7.42% 2004-05 13074 -2.48% 79376 7.40% 2005-06 14319 9.52% 85904 8.22% 2006-07 19782 38.16% 98525 14.69% 2007-08 14694 -25.72% 111372 13.04% 2008-09 24857 69.17% 134927 21.15% 2009-10 26029 4.71% 156651 16.10% 2010-11 30391 16.76% 180762 15.39%

Sources: Secondary data

Table 4.57 clearly indicates that working capital management policies have a great effect on a firm’s profitability, liquidity and its financial health.

A financial manager should chalk out appropriate working capital management policies in respect of each of the components of the working capital so as to ensure higher profitability, proper liquidity and sound financial health of the organisation. Working capital should be adequate, neither excessive nor deficit.

Excessive working capital may impair profitability, whereas inadequate working capital can threaten the solvency of the bank.

207 A Central Co-operative Bank like any other banking organisation needs funds to lend to its members. Total funds needed by a central Co-operative bank depends on such factors as volume of business, type of services it provides, kinds of physical facilities it needs, nature of competition it faces and degree of risk it takes in the day-to-day conduct of its business. The size of the working capital and its proper management has a positive effect on the volume of business and thereby it contributes to overall profitability.

The need of the working capital of Tiruchirappalli District Co-operative

Bank ltd., has slowly increased from the year 2001-02 to 2008-09. (7.43 Per cent to 21.15 Per cent). In the year 2007-08 and 2008-09 it was drastically increased the need of working capital which had showed that the working capital had increased from 13.04 Per cent to 21.15 Per cent. During that financial period the

TDCCB had spent large amount of money on the activity of expansion and modernization. The working capital amount had decreased again the financial period 2009-10 and 2010-11

208 Table 4.58

Investment and owned fund of TDCCB Ltd

(Rs.in lakhs)

Year Investment Percentage Own Percentage Increase/Decrease Fund Increase/Decrease 2001-02 16258 9456 2002-03 15240 -6.26% 12387 31.00% 2003-04 13407 -12.03% 15514 25.24% 2004-05 13074 -2.48% 18162 17.07% 2005-06 14319 9.52% 21414 17.91% 2006-07 14694 2.62% 29615 38.30% 2007-08 19783 34.63% 32420 9.47% 2008-09 24858 25.65% 36728 13.29% 2009-10 30892 24.27% 38027 3.54% 2010-11 26030 -15.74% 40797 7.28%

Sources: Secondary data

The above table shows that after the introduction of the Banking

Regulation Act, the investment policies of the CCBs have been rationalized. In order to keep liquidity, they were asked to keep 28 per cent of their demand and time liabilities in approved securities or as deposits with State Co-operative

Banks. CCBs are required to invest their funds in State Co-operative Banks to which they are affiliated. For investing in State Co-operative Banks, no permission is required from the Registrar. The Owned fund of TDCCB has slowed down during the study period. The owned fund has increased 31 per cent in 2002-03 when compared with the previous year 2001-02. It was then

209 slowdown from the year onwards. It was concluded that the owned fund of

TDCCB had in falling trend.

Chart - 4.35 Capital vs Working Capital 200000 Working Capital, 180000 180762 160000 140000 120000 100000 80000 60000 amount in Lakhs 40000 Capital, 30392 20000 0

Chart - 4.36 Investment & Own fund

Own fund Investment

40797 2010-11 26030 38027 2009-10 30892 36728 2008-09 24858 32420 2007-08 19783 29615 2006-07 14694 21414 2005-06 14319 18162 2004-05 13074 15514 2003-04 13407 12387 2002-03 15240 9456 2001-02 16258

210 Table 4.59

Total Debt, Recovered and unrecovered

(Rs.in lakhs)

Year Total Debt Debt Recovered Debt Unrecovered

2001-02 31640.2 19245.37 (39.17%) 12394.83(60.83%)

2002-03 25886 17008.01(34.3%) 8877.99(65.7%)

2003-04 28630.86 20096.2(29.81%) 8534.66(70.19%)

2004-05 51577.38 35350.82(31.46%) 16226.56(68.54%)

2005-06 42224.31 31553.52(25.27%) 10670.79(74.73%)

2006-07 16484.46 14154.26(14.13%) 2330.2(85.87%)

2007-08 33717.3 28720.43(85.18%) 4996.87(14.82%)

2008-09 45264.26 36127.96(79.81%) 9136.3(20.19%)

2009-10 62244.75 53717.6(86.3%) 8527.15(13.7%)

2010-11 72078.79 61088.48(84.75%) 10990.31(15.25%)

Sources: Annul reports of TDCCB Ltd

The above table shows the total amount of debt in each financial period and amount recovered and amount unrecovered. The amount of debt recovered during the study period shows good progress. 80% to 85% of loan paid is recovered. This is confirmed that the authorities step forward to recover the debt amount gives a positive result. However the unrecovered amount of debt has maintained a ratio between13 per cent to 15 per cent in the last five years the period of study. From the year 2001-02 to 2006-07 there is a negative result shown in collecting debt paid. During this period, 14 per cent to 39 per cent of

211 loan amount has been recovered, however from the year 2008-09 to 2010-11 shows a good progress in collecting the debt. During this period 80 per cent to

85 per cent of the loan is paid.

Table 4.60

Total interest on Debt, Recovered and unrecovered

(Rs.in lakhs)

Year Total Interest Interest Recovered Interest on Debt Unrecovered 2001-02 8413.2 6750.14(19.77%) 1663.06(80.23%) 2002-03 10563.92 7756.54(26.58%) 2807.38(73.42%) 2003-04 11590.86 7545.14(34.9%) 4045.72(65.1%) 2004-05 12249 7387.23(39.695) 4861.77(60.31%) 2005-06 14372.19 7358.14(48.85) 7014.05(51.2%) 2006-07 13405.08 7201.44(46.28%) 6203.64(53.72%) 2007-08 15701 8684.24(55.31%) 7017.75(44.69%) 2008-09 19730.32 13389.88(67.86%) 6340.44( 32.14%) 2009-10 17515.81 9967.23(56.9%) 7548.58(43.1%) 2010-11 12000.24 11023.06(91.86%) 977.18(8.14%)

The above table shows the collection interest on debt and the outstanding interest amount. The above table clearly indicates that in the year 2001-02 the interest recovered was only 19.77 per cent on the total outstanding interest. The outstanding interest in the during the period was 80.23 per cent, in the year

2010-11 that was 91.86 per cent of interest amount has been recovered from the outstanding amount. During that period only 8.14 per cent of interest on total interest amount has still to be recovered. It was concluded that the total amount outstanding interest has shown in declining trend.

212 Chart - 4.37 Debt recovered & Unrecovered 80000

70000

60000

50000

40000

30000

20000

10000

0 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

Total Debt Debt Recovered Debt Unrecovered

Chart - 4.38 Interest Recovered & Unrecovered 25000

20000

15000

10000

5000

0 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

Total Interest Interest Recovered Unrecovered Intrest

213 Table 4.61

Total Deposit Received and Total Amount Loan paid

(Rs.in lakhs)

Year Total Deposit Total Amount of Loan Paid

2001-02 26267.37 48824.68

2002-03 23384.2 62642.52

2003-04 27997.43 62646.52 2004-05 28035.02 74287.56 2005-06 31565.22 71462.41 2006-07 48536.1 103381.93 2007-08 62968.24 79223.81 2008-09 79285.14 104302.91 2009-10 90798.39 129070 2010-11 100032.27 160852.14

The Above table shows the amount of loan paid and total amount received as a deposit from its customer. The bank must concentrate both in deposit receipt and loan paid. The table also shows the trend of increasing and decreasing

214

Table 4.62

Simple Regression - Deposit Received vs. Total loan paid

Coefficients

Least Squares Standard T Parameter Estimate Error Statistic P-Value Intercept 11926.8 7506.35 1.58889 0.1507 Slope 0.556532 0.078587 7.08173 0.0001

Dependent variable: Deposit Received (Deposit),

Independent variable: Total loan paid (Loan granted)

Linear model: Y = a + b*X

Table 4.63

Analysis of Variance

Source Sum of Squares Df Mean Square F-Ratio P-Value Model 3.35365E9 1 3.35365E9 50.15 0.0001 Residual 5.34971E8 8 6.68713E7 Total (Corr.) 3.88862E9 9

Correlation Coefficient = 0.928669, R-squared = 86.2427 percent, R-squared (adjusted for d.f.) = 84.523 percent, Standard Error of Est. = 8177.49, Mean absolute error = 5688.83, Durbin-Watson statistic = 1.72521 (P=0.1990)Lag 1 residual autocorrelation = 0.11081

The output shows the results of fitting a linear model to describe the relationship between Deposit Received and Total Loan Paid. The equation of the fit model is: Deposit Received = 11926.8 + 0.556532* Total Loan Paid.

215 Since the P-value in the ANOVA table is less than 0.05, there is a statistically significant relationship between Deposit Received and Total Loan Paid at the

95.0 per cent confidence level.

The R-Squared statistic indicates that the model as fit explains 86.2427 per cent of the variability in Deposit Received. The correlation co-efficient equals 0.928669, indicating a relatively strong relationship between the variables. The standard error of the estimate shows the standard deviation of the residuals to be 8177.49. This value can be used to construct prediction limits for new observations by selecting the Forecasts option from the data.

The Mean Absolute Error (MAE) of 5688.83 is the average value of the residuals. The Durbin-Watson (DW) statistic tests the residuals to determine if there is of any significant correlation based on the order in which they occur in data. Since the P-value is greater than 0.05, there is no indication of serial autocorrelation in the residuals at the 95.0 per cent confidence level.

216 Chart - 4.39

Plot of Fitted model for Deposit Received and Total loan paid

Plot of Fitted Model Deposit Received = 11926.8 + 0.556532*Total loan paid (X 1000) 104

94

84

74

64 Deposit Received 54

44 0369121518 (X 10000) Total loan paid

The simple linear regression analysis is conducted to check the impact of deposit received by the TDCCB on total amount of loan paid. The banks basis functions to accept the deposit from public and granting loan. Those banks have a huge amount as a deposit have a lot of opportunity to grant a loan. The table

4.61 shows the amount of deposit collected and loan paid during the study period. The result of analysis of variance has showed that the average amount of deposit received is equal to average amount of loan paid. However a little impact of (0.556) deposit received and loan paid (11926.8).

217 HUMAN RESOURCES DEVELOPMENT (HRD)

Behind the success of the Bank its, the most important asset is the human capital. It is the people who make an organization. The quality of human resources determines the quality of the service at the bank. The researcher had elaborated the main tenets on which the Banks’ HRD Philosophy is based upon the last year’s Annual Report. The Bank does everything possible to build a sense of belonging in the employees, where they are trained and a strong sense of commitment to their work is developed, with opportunities to discover and use their potential to the fullest, in a healthy motivating work environment. The top management pays special attention to the needs, facilities and infrastructure for the emotional and intellectual development of all its personnel. The unmatched growth of the Bank since last ten years was possible only because the vision of the top management was fully supported by the total conviction, commitment and capabilities of employees of your Bank at all levels.

Table 4.64

Number of staff members Amount of Salary paid (Rs.in lakhs)

Year Number of Staff Salary paid members 2001-02 275 465256985.3 2002-03 286 498365521.02 2003-04 301 50523650.36 2004-05 322 56256698.25 2005-06 380 68716604.31 2006-07 349 768931550.00 2007-08 328 99048525.16 2008-09 336 74957257.9 2009-10 310 82244531.46 2010-11 370 64211271.66

218 Table 4.65

Capital Expenditure of TDCCB Ltd

(Rs.in lakhs)

Year Capital Percentage Expenditure increase/decrease 2001-02 1217924.75

2002-03 1292548.32 6.13%

2003-04 2288873.62 77.08% 2004-05 1969071.32 -13.97% 2005-06 3696202 87.71% 2006-07 990460 -73.20% 2007-08 2343027.4 136.56%

2008-09 1314606 -43.89%

2009-10 2663287 102.59%

2010-11 2096810 -21.27%

Sources: Annual report of TDCCB Ltd

The table 4.66 shows the capital expenditure incurred by TDCCB during the financial period 2001-02 to 2010-11. A capital expenditure is an amount spent to acquire or improve a long-term asset such as equipment or buildings.

Usually the cost is recorded in an account classified as Property, Plant and

Equipment. The cost (except for the cost of land) will then be charged to depreciation expense over the useful life of the asset. The Co-operative banks spend a considerable amount spent to acquire or upgrade productive assets (such as buildings, machinery and equipment, vehicles, computer & machinery) in order to increase the capacity or efficiency of a company for more than one

219 accounting period. From the above table it was clear that percentage of capital expenditure incurred has varied during the period of study. In the year 2003-04 and 2006-07 the capital expenditure increased to 77.8 per cent and 87.71 per cent respectively. The computerization of accounting process was undertaken during the period of study. In the year 2006-07modernisation of office began. In the year 2007-08 and 2009-10 the capital expenditure was increased to 136.57 per cent and 102.56 per cent respectively. The bank acquired additional land for its branches and construction work had a reason for huge increases of capital expenditure during this period.

Chart - 4.40

Amount of Capital Expenditure incurred

220 Table 4.66

Deposit and Credit received

(Rs.in lakhs)

Received loan Total Year Deposit Received Receipt 44241.93 4068.34 2001-02 48310.27 (91.58%) (8.42%)

46182.96 4753.6 2002-03 50936.56 (90.67%) (9.33%) 46219.68 7738.64 2003-04 53958.32 (85.66%) (14.34%) 45457.12 10774.53 2004-05 56231.65 (80.84%) (19.16%)

49661.14 10501.73 2005-06 60162.87 (82.54%) (17.46%)

53459.75 9925.44 2006-07 63385.19 (84.34%) (15.66%) 62968.26 10413.83 2007-08 73382.09 (85.81%) (14.19%) 79285.14 10642.45 2008-09 89927.59 (88.17%) (11.83%)

90798.39 16086.14 2009-10 106884.53 (84.95%) (15.05%)

100032.27 26188.82 2010-11 126221.09 (79.25%) (20.75%) Sources: Annual Report of TDCCB Ltd.

The above table reveals that total receipt of TDCCB depends upon the receipt of deposit from member and non- members and the credit received from

221 NABARD, Tamilnadu Government, and other Co-operative societies. The above table clearly indicates that the total deposit was always a major receipt of

TDCCB, the credit receipt was lower. The TDCCB mainly depended upon the deposit receipt from its members and non-members. In the year 2001-02 and

2002-03 the total deposit receipt was more than 90 per cent of the total receipt.

The year mentioned above, the credit receipt was below 10 per cent. In the year

2003-04 onwards the receipt of deposit began to decline. One of the reasons to explain the decline of the deposit receipt was both current deposit and saving deposit amount was declined during this period. Therefore the government and other society supported in necessary for uplifting the Co-operative movement during the financial difficulties.

(Rs.in. lakhs)

Chart - 4.41 Receipt of Deposit & Credit

Deposit Received Credit Received

2010-11 100032.27 26188.82

2009-10 90798.39 16086.14

2008-09 79285.14 10642.45

2007-08 62968.26 10413.83

2006-07 53459.75 9925.44

2005-06 49661.14 10501.73

2004-05 45457.12 10774.53

2003-04 46219.68 7738.64

2002-03 46182.96 4753.6

2001-02 44241.93 4068.34

222 Table 4.67

Comparison of Net profit earned and expenditure incurred

(Rs.in lakhs)

Year Net Profit Percentage Expenditure Percentage increase/decrease (Loss) increase

2001-02 -62518858.6 - 262999479.7 -

2002-03 -72878253.19 16.57% 569587452.2 116.57%

2003-04 -72776043.2 -0.14% 98104940.97 -82.78%

2004-05 8536263.2 -111.73% 113448793.9 15.64%

2005-06 2622487.5 -69.28% 109328767 -3.63%

2006-07 14956892.6 470.33% 106214128.1 -2.85%

2007-08 32825261.3 119.46% 119146758.1 12.18%

2008-09 70709426.6 115.41% 108264530.6 -9.13%

2009-10 75033258.3 6.11% 124969891.8 15.43%

2010-11 126254297.2 68.26% 218736112.1 75.03% Sources: Annual report of TDCCB Ltd.

The above table indicates the profit earned and expenditure incurred by the Co-operative Banks during the ten years of the study. The table also showed the percentage increase /decrease over the previous year. The profit has increased over the financial period, especially during the financial period 2006-

07 the profit was increased by 470 per cent over the previous year. In the year

2007-08 it was increased by 119.46 per cent and 115.41 per cent in 2008-09.

223 Thereafter the increasing percentage slowed down. It was about 6.11 per cent in the year 2009-10 and 68.26 per cent in the year 2010-11. In the year 2002-03, the expenditure has increased by 116.57 per cent. In the year from 2003-04 to

2006-07 the percentage of expenditure declined over the previous year. During this period the profit also increased. It was concluded that the table clearly reflects the relationship between profit earned and expenditure incurred during the period. It was correlated because whenever the percentage of expenditure decreased that year the profit was also increased.

Table 4.68

Correlation between independent variables (Expenditure and Profit)

Variables Result

Expenditure and Profit -0.4062* (10)**

0.2441***

*Correlation **(Sample Size) ***P-Value

This table shows Pearson product moment correlations between each pair of variables. These correlation co-efficient ranges between -1 and +1 and measure the strength of the linear relationship between the variables. What is shown in the parentheses is the number of pairs of data values used to compute each coefficient. The third number in each location of the table is a P-value which tests the statistical significance of the estimated correlations. P-values below 0.05 indicate statistically significant non-zero correlations at the 95.0 per

224 cent confidence level. There is no relationship as expected between Profit earned and expenditure incurred.

Chart - 4.42

Histogram showing profit/loss and Expenditure

225 Table 4.69

Expenditure of Establishment and contingencies – Salary & Allowances and Electricity (Rs.in lakhs)

Salary & Electricity Total Year Allowances Expenditure Expenditure 73977064.64 5996333.31 2001-02 262999479.7 (0.28%) (0.0228%) 70255824.03 5554321.02 2002-03 569587452.2 (0.12%) (0.0098%) 75542313.63 6142779.97 2003-04 98104940.97 (0.77%) (0.0626%) 85465978.22 5908637.42 2004-05 113448793.9 (0.75%) (0.0521%) 76793489.5 7918231.79 2005-06 109328767 (0.70%) (0.0724%) 76839550 6130387.47 2006-07 106214128.1 (0.72%) (0.0577%) 81656667.86 4835038.16 2007-08 119146758.1 (0.69%) (0.0406%) 74957257.9 9342500.25 2008-09 108264530.6 (0.69%) (0.0863%) 82244531.46 8345835.93 2009-10 124969891.8 (0.66%) (0.0668%) 64211271.66 4643146.43 2010-11 218736112.1 (0.28%) (0.0212%)

Sources: Annual Report of TDCCB Ltd.

The above table shows that expenditure and contingency had an important factor for any Co-operative Banks. The above table shows the expenditure and contingencies of employee salary and electricity charges of Co-operative banks.

The percentage of salary on total expenditure shows that in the year 2001-02

226 and 2002-03 the percentage is below 0.20 per cent on total expenditure. That percentage gradually increased by above 60 per cent from the year 2003-04 to

2009-10. Like salary and allowances the percentage of electricity expenditure incurred on total expenditure shown in the above table. It is clearly indicated that the electricity expense was well controlled by the Co-operative banks. The percentage of electricity was between 0.022 per cent to 0.086 per cent. In the year 2008-09 and the percentage of electricity to the total expenditure was the highest in the ten-year study. During that period, new buildings and computerization were established. This is the reason during the period 2008-09 electricity expenditure increased.

Chart - 4.43

Expenditure on Salary and Electricity

Expenditure on Salary and Electricity

Ellectricity Salary & Allowances

4643146.43 2010-11 64211271.66 8345835.93 2009-10 82244531.46 9342500.25 2008-09 74957257.9 4835038.16 2007-08 81656667.86 6130387.47 2006-07 76839550 7918231.79 2005-06 76793489.5 5908637.42 2004-05 85465978.22 6142779.97 2003-04 75542313.63 5554321.02 2002-03 70255824.03 5996333.31 2001-02 73977064.64

227

Table 4.70

Establishment and contingencies

(Building Maintenance & Printing, Stationary)

(Rs.in lakhs)

Building Printing Year Total Expenditure Maintenance Stationary 1770033.22 2994362.7 2001-02 262999479.7 (0.007%) (0.011%) 1612500.12 4002153.23 2002-03 569587452.2 (0.003%) (0.007%) 2229567.75 1067231.35 2003-04 98104940.97 (0.023%) (0.011%) 3899134.65 2313541.38 2004-05 113448793.9 (0.034%) (0.020%) 2838720.55 2764511.41 2005-06 109328767 (0.026%) (0.025%) 4402188.72 1383104.14 2006-07 106214128.1 (0.041%) (0.013%) 3633112.16 2837738.29 2007-08 119146758.1 (0.030%) (0.024%) 4428750.74 2806903.16 2008-09 108264530.6 (0.041%) (0.026%) 5648726.33 4596348.73 2009-10 124969891.8 (0.045%) (0.037%) 10208099.14 1252068.9 2010-11 218736112.1 (0.047%) (0.006%) Sources: Annual report of TDCCB Ltd

The above table reflects the percentage of building and maintenance expenditure on total expenditure has been shown. From the year 2001-02 to

2005-06 the expenditure was under 0.025 per cent whereas from 2006-07

228 onwards maintains expenditure increased. It was above 0.040 per cent. During that period, printing and expenditure showed mixed response. It was concluded that the printing and stationary expenditure had well been controlled against building and expenditure of maintenance.

Chart - 4.44

Expenditure on Building Maintenance and Printing, Stationary

(Rs.in lakhs)

Expenditure on Building maintenance and Printing, Stationary

Building Maintance Printing & Stationary

10208099.14 2010-… 1252068.9 5648726.33 2009-… 4596348.73 4428750.74 2008-… 2806903.16

2007-… 3633112.16 2837738.29 4402188.72 2006-… 1383104.14 2838720.55 2005-… 2764511.41 3899134.65 2004-… 2313541.38 2229567.75 2003-… 1067231.35 1612500.12 2002-… 4002153.23 1770033.22 2001-… 2994362.7

229 Chapter V

Findings, Suggestion and Conclusion

CHAPTER V

SUMMARY OF FINDINGS, SUGGESTION AND CONCLUSION

5.1 Introduction

The data collected from the records of banks, journals and other reports were duly considered for scientific analysis and based on which the following findings were identified. Based on the findings some imported suggestion and conclusions are drawn in this chapter. Before listing the findings of the study based on the analysis made in the previous chapters the following general findings are made.

All the Co-operative Banks facing painstaking problems which have restricted their ability to ensure smooth flow of financial service to the needed public viz., Limited ability to mobilize resources, low level of recovery, high transaction of cost and administered rate of interest structure for a long period of time.

The Co-operative legislation and administrative set up made a gateway to regular interference of the Government in the routine administration of the

Co-operative banks and institutions is unavoidable. Because of this some of the administrative problems are faced by the banks are:

• Deliberate control of Co-operatives by the government.

• Nomination of the board of director by the government.

• Participation of the nominated director by the government.

• Deputation of government officials to Co-operative institution etc.

230 5.2 Summary of Findings based on analysis:

1. The authorized share capital of the bank is 15 crores consisting of

3000000 “A” Group shares of Rs. 50 each. The Bank has only “A” Group

shares, with voting rights.

2. It clearly shows that the TDCCB was run on their own share capital from

the year 2001-02 to 2005-06. This situation had changed from the year

2006-07 to 2010-11. The government had contributed its share in

functioning of the Co-operative bank. The percentage has clearly

indicated that the share of the government had larger in number from year

2006-07 to 2008-09.

3. It clearly shows that the enrolment of members over the decade of in the

period of study has not much increased. It is moderate throughout the

period from 2001-02 to 2010-11.

4. In the first three years of the study period the TDCCB Co-operative Bank

faced loss. However the Co-operative banks showed a better performance

from 2004-05 to 2010-11. The profit slowly increased from the year

2004-05 onwards.

5. The Co-operative Banks had done better performance from the period of

2005-06 on wards and consequently performed well.

6. From the period 2005-06 onwards the TDCCB had declared a dividend.

There was a satisfactory level which could be seen in the percentage of

dividend declared. In the year 2005-06 only 0.5 per cent was declared

where as in the year 2010-11 it was 7 per cent.

231 7. The TDCCB Ltd faced loss during the financial period of 2001-02 to

2005-06. During that period, particularly 2004-05 the bank met a huge

loss. In the year 2005-06 the loss amount slowly decreased and in that

year it was 69.28 per cent.

8. The Co-operative authorities and government had given a financial

support and guidance to recover from this huge loss and help the

Co-operative Banks to return to increase a profit from the financial period

2006-07 onwards.

9. It is clearly shown that there was no steady progress over the profit earned

by the bank.

10. There was 8.33 per cent of bonus declared during the period from 2001-

02 to 2006-07 and paid 20 per cent of bonus from 2007-08 to 2010-11.

11. 8.33 per cent of bonus declared during the financial period between

2001-02 and 2006-07 and 20 per cent of bonus from 2007-08 to 2010-11.

12. During that period 2005-06 the term deposit had increased 86.33 per cent

over the previous year. Current deposit has shown negative growth during

the period 2007-08, and good performance during the financial period

2008-09.

13. During the period 2005-06 the total deposit increased 53.76 per cent over

the previous years. This was the result of the improvement of term

deposit and saving, current deposit.

14. The contribution of saving and current deposit on Total deposit was in

falling trend. The saving deposit was deteriorating than current deposit.

The positive factor fixed deposit was steady on their progress, also

232 showed in increasing trend. Fixed deposit contribution over the total

deposit was above 75 per cent.

15. The correlation between Fixed deposit amount and Current deposit

amount shows 94.84 per cent ,whereas the relationship between saving

deposit and current deposit shows only 92.64 per cent

16. Exponent’s analysis of Moving Average has been used to forecast the

fixed deposit trend in future. The regression analysis was used to predict

the fixed deposit. The result of regression analysis shows that the adjusted

R Square shows 88.44 per cent on total deposit. This is confirmed that the

contribution of fixed deposit on total deposit is higher and important to

increase the total deposit amount.

17. The educational fund has steadily increased from the year 2005-06 to

2008-09. It was high in all the time in the year 2008-09 at 39.4 per cent

on the total fund allotted.

18. During the period 2005-06 the research fund was high at 53.2 per cent on

total fund allotted. The research fund was varied during the period of

study between minimum 29.46 per cent to maximum 53.42 per cent.

19. The development fund for improving the infrastructure and other physical

facilities is in between minimum 22.12 per cent to maximum 50 per cent

in total fund during the study period. In the year 2009-10 it was 50 per

cent where as in the year 2006-07 it was 22.2 per cent.

20. A limited amount was approved as a loan to the customer in the financial

period 2001-02 to 2005-06. This climate changed during the financial

period from 2006-07 to 2010-11.

233 21. Regarding loan amount, the TDCCB provided loan for various purposes,

every year it was increased. However the repayment was very slow and

the outstanding amount was slowly increased during the period of study

2001-02 to 2010-2011.

22. There was a very limited amount that was approved as loan to the

customer from the financial period 2001-02 to 2005-06. This climate

changed during the financial period from 2006-07 to 2010-11. It indicates

the high growth of total amount granted as loan during the period.

23. The Multiple Comparison procedure to determine which means are

significantly different from each other’s. The two pairs which are Loan

Unpaid beyond the time - Total Loan Paid and Loan Unpaid beyond the

time - Loan Unpaid indicating that these pairs show statistically

significant differences at the 95.0 per cent confidence level.

24. The (ARIMA) Autoregressive Integrated Moving Average (ARIMA)

model has been selected for the purpose of forecast the future values of

Total Deposit and data cover the periods of next ten years of the study

period. Currently, it is concluded that the forecasting shows that all

deposit has a bright opportunity to increase trend.

25. The contribution of NABARD and Tamilnadu Government and other

central Co-operative agencies in the total amount of loan to the

Tiruchirappali District Central Co-operative Bank, Ltd has shows

increasing trend.

26. It indicates that there is high fluctuation in the lending of these agencies.

During the period from 2001-02 to 2004-05 there was a huge contribution

234 by these supporting agencies. However during the period of 2005-06 and

2006-07 the support of the agencies showednegative result when it was

compared with financial support of previous years to the TDCCB Ltd.

27. The successs of Co-opeative lending depends upon the assistance

provided to them. In the time of financial difficulties the Co-operative

Banks are mainly depend upon the Central Co-opertive Banks and

government and other co-opertatives.

28. During the year from 2005 to 2010 the investment highly floated. There

was 38.36 per cent increase in the year 2006-07 when it is compared to

the previous year. In the year 2007-08 the total amount of investment

decreased 27.52 per cent.

29. 69.17 per cent of investment increased in the year 2008-09 when it is

compared with the previous year. It is concluded that the percentage of

increase or decrease of total investment was highly fluctuated, when it is

compared with the previous year.

30. The data clearly indicate that the gap between outstanding loan amount at

the beginning of the year and amount recovered during the period has

widened.

31. The recovered loan amount during the year 2001-02 was 58824.68 lakhs,

where as in the year 2010-11 it was 160852 lakhs. The data clearly shows

that every year from 2001-02 onwards the outstanding loan amount has

increased.

32. The need of the working capital of Tiruchirappalli District Co-operative

Bank Ltd increased from the year 2001-02 to 2008-09 (7.43 per cent to

235 21.15 per cent). In the year 2007-08 and 2008-09 there was a drastic

increase in the need of working capital which shows that the working

capital increased from 13.04 per cent to 21.15 per cent.

33. During the period from 2001-02 to 2008-09 the TDCCB spent large

amount of money on expansion and modernization activity. The working

capital amount decreased again in the financial period from 2009-10 to

2010-11

34. The investment of TDCCB highly varies when it is compared with the

previous year. From the year 2002-03 to 2004-05 the available data

showed a decrease trend. From the year 2005-06 on wards there was an

increasing trend. It is concluded that in the year 2007-08 the investment

grew 34.63 per cent when it is compared with previous year 2006-07.

35. The owned fund of TDCCB slowed down during the study period. The

owned fund increased 31 per cent in 2002-03 when it is compared with

previous year 2001-02and then it slowed down from the year onwards. It

is concluded that the owned fund of TDCCB was in falling trend.

36. The available financial information indicates that in the year 2001-02 the

interest recovered was only 19.77 per cent on the total outstanding

interest. The outstanding interest was during that period was 80.23 per

cent. In the year 2010-11 that was 91.86 per cent of the interest recovered

from the outstanding amount. During that period only 8.14 per cent of

interest on the total interest amount recovered. It is concluded that the

total amount outstanding interest showed in the declining trend.

236 37. The number of employees working in the TDCCB in the period 2001-02

was 275, whereas in the period 2010-11 it was 370. The salary paid was

also increased in two folds.

38. The total amount of loan paid for the various purposes of agriculture

increased considerably during the years between from 2001-02 to 2010-

11. Out of total amount of agricultural loan, the short term loan was the

major contribution, whereas the contribution of medium-term loan

was very low.

39. The short-term agricultural loan increased drastically during the year

2005-06 onwards until the year 2010-11 which was the study period. The

long-term agricultural credit lending did not show any considerable

improvement, but on the contrary the long term credit showed increase in

every year in less proportion.

40. A multiple linear regression model to describe the relationship between

Agricultural Short-term Loan and two independent variables.

The equation of the fit model is Agricultural Loan Short-term =

105087.0- 1.05413*Deposit Received - 0.579444*Loan Received. Since

the P-value in the ANOVA table is greater or equal to 0.05, there is no

statistically significant relationship between the variables at the 95.0 per

cent or higher confident level.

41. A multiple linear regression model to describe the relationship between

Agricultural Medium- Term Loan and two independent variables. The

equation of the fit model is Agricultural Medium-Term Loan = 55167.3 -

0.262714*Deposit Received - 0.870664*Loan Received. Since the

237 P-value in the ANOVA table is less than 0.05, there is a statistically

significant relationship between the variables at the 95.0 per cent

confidence level.

42. A multiple linear regression model to describe the relationship between

Agricultural Long Term Loan and two independent variables. The

equation of the fitted model is Agricultural Loan Long Term = 941.391 -

0.0132751*Deposit Received + 0.0164226*Loan Received. Since the P-

value in the ANOVA table is less than 0.05, there is a statistically

significant relationship between the variables at the 95.0 per cent

confidence level. The R-Squared statistic indicates that the model as fitted

explains 85.9161 per cent of the variability in Agricultural Long Term

Loan.

43. The correlation between short-term and medium-term agricultural credit

is positive and statistically significant in the first set (r = 0.860, p< .001).

In the second set of relationship between short-term agricultural credit

and long-term agricultural credit is positive and statistically significant

(r = 0.751, p<.001).

44. The correlation between medium-term agricultural credit and long-term

agricultural credit is less positive while comparing with short-term and

medium term agricultural credit. There is significant relationship between

long term and medium term agricultural credit (r = 0.708, p< .001).

45. Among the short, medium and long-term agricultural credits, long-term

and medium-term agricultural credits have less relationship are between

these two terms which are compared with others, whereas medium and

238 short-term are strong relation and their dependency is stronger than other

terms.

46. The independent sample test and Chi-square test confirm that all the

categories of Short-term, Medium-term and Long-term agricultural loans

occur with equal probabilities.

47. The Co-operative Banks spend a considerable amount spent to acquire or

upgrade productive assets (such as buildings, machinery and equipment,

vehicles, computer and machinery) in order to increase the capacity or

efficiency of a company for more than one accounting period.

48. In the year 2003-04 and 2006-07 the capital expenditure has increased

77.8 per cent and 87.71 per cent respectively. The computerization of

accounting process had undertaken during this period.

49. In the year 2006-07 modernization of office began. In the year 2007-08

and 2009-10 the capital expenditure increased136.57 per cent and 102.56

per cent respectively. The banks acquired additional land for their

branches construction works increased of capital expenditure during this

period.

50. The total receipt of TDCCB depends upon the receipt of deposit from

Member and Non-Members, and the credit received from NABARD,

Tamilnadu Government and other Co-operative societies. It clearly

indicates that the total deposit is always a major receipt of TDCCB, while

the credit receipt is lower.

51. The TDCCB mainly depends upon the deposit receipt from its members

and non-members. During the year 2001-02 and 2002-03 the total deposit

239 receipt was more than 90 per cent of total receipt. In year mentioned

above, the credit receipt was below 10 per cent. Similarly, in the year

2003-04 onwards the receipt of deposit has started to decline.

52. The profit increased over the financial period, especially during the

financial period 2006-07 the profit increased by 470 per cent over the

previous year. The profit increased by 119.46 per cent and 115.41 per

cent respectively in the years 2007-08 and 2008-09. Thereafter the

increasing percentage has slowed down. It was about 6.11 per cent in the

year 2009-10 and 68.26 per cent in the year 2010-11.

53. During period of time 2002-03, the expenditure increased by 116.57 per

cent and the year from 2003-04 to 2006-07 the percentage of expenditure

declined over the previous year. During this period the profit also

increased. It is concluded that the relationship between profit earned and

expenditure was incurred during the period. It was correlated because

whenever the percentage of expenditure decreased in the year the profit

also increased.

54. According to the expenditure and contingencies of employee salary and

electricity charges of Co-operative banks the percentage of salary on total

expenditure shows that in the year2001-02 and 2002-03 the percentage

was below 0.20 per cent on total expenditure. That percentage slowly

increased by above 60 per cent from the year 2003-04 to 2009-10.

55. Like salary and allowances the percentage of electricity expenditure

incurred on total expenditure. It clearly indicates that the electricity

240 expense was well controlled by Co-operative banks. The percentage of

electricity expenditure was between 0.022 per cent and 0.086 per cent.

56. During the year 2008-09 the percentage of electricity expenditure to the

total expenditure was highest in the study of ten years. In the period, there

were new buildings and establishment of computerization.

57. The percentage of building and maintenance expenditure on total

expenditure shown in the year from 2001-02 to 2005-06 was under 0.025

per cent whereas from 2006-07 on wards maintenance expenditure

increased. It was above 0.040 per cent. During that period 2006-07,

printing expenditure showed mixed response. It is concluded that the

printing and stationary expenditure had been controlled as against

building and maintenance expenditure.

5.3 Suggestions:

Tiruchirappalli District Co-operative Bank has rendered its service to the society more than hundred years. It provides more beneficial services to its members and non-members. Based on the analysis made in the previous chapters and on that basis the following recommendations are made to the TDCCB authorities. The recommendations may be useful for the efficient and effective functioning of TDCC bank to achieve the aim of 100 per cent financial inclusion in the district of Trichy.

1. More number of branches can be opened in the area were the possibilities

of mobilising funds and rendering financial services. In the study all the

new generation banks have established branches by covering all the areas.

But the TDCC bank has limited branches and that too they are

241 functioning before opening as new banks. No steps were taken by the

TDCC bank authorities to establish a new branch to expend the service. .

2. Branches of TDCC bank in some areas are out of the commercial area.

Most of the people hesitate to operate their accounts with TDCC bank due

to the distance. The bank therefore should open branches in the

commercial area in future.

3. With the above analysis, it is observed that most of the branches are not

yet computerised. It is necessary to computerise such branches to serve

the public in a friendly way and this will enable the customers to operate

their account through any branch of the bank once they become the

account holder of any branch.

4. If this be possible the TDCC bank can take steps to establish service

branches or extension counters in leading educational and other large size

commercial institutions by entering agreement with them.

5. The computerization of TDCCB was launched in 2005-2006. The

authorities must understand the competition prevailing in the services

marketing especially in the banking sector, the modernization is

inevitable. The first priority should be in providing the quick and

convenient services to its customer. The computerization is inevitable in

the modern era. The analysis shows that the computerization was in slow

progress. It should be speeded up for the purpose of computerization as

DCCBs are registered under the Banking Regulations Act and it should

be converted its ordinary Banking Business into core or Internet Banking.

6. The study shows that nearly 75 per cent of the deposits constitute fixed

deposit. It indicates that the bank has been spending more on interest

payment. Therefore, the bank should mobilize funds through low cost

242 deposit schemes like savings and current deposit accounts. However, the

Bank should also mobilize funds under low cost deposit schemes of fixed

deposit to the maximum extent. The SDCCB should concentrate on low

cost Savings, Current Account and Term Deposits of lower tenure.

7. Lending loan depends upon the requirement of customer’s need. It is not

in the hands of bankers limit. In the present scenario all the private and

commercial banks are more competing with each other’s in granting loan

to customers in order to fulfill all the needs of customers. Granting a

required loan is not alone the factor to get loyalty of customer, on the

other hand simplifying the procedure of loan including numerous paper

works, with in the stipulated period, as easy as possible. The TDCCB has

followed lot of own principles for granting loan. Here the findings show

the growth of lending loan is not satisfactory. In order to speed up the

granting loans by the bank authorities take some feasible steps for

simplifying the procedure and grading more loan for various purposes.

8. Computerization was introduced slowly in TDCCB, but at the same time

there was no proper training provided for the employees of the bank. In

order to attract more customers, first priority should be given to train their

employee to answer the specific questions raised by the customer,

understand the customer’s need, answering politely and handling the

work as soon as possible to consider the customer-centered in banking

business.

9. All the branches of TDCCB should be modernized with latest

infrastructure. It is necessary to attract customers. It should be

modernized on par with new age banks, public and private sector banks.

The pamphlets and forms are kept in the proper place as per the

243 convenience of customer. Helping desk must be created to extend services

for the needy customer. Proper lighting and ventilation should be created.

10. Standard should be maintained for the customer services, quick and

reliable services help the bank to retain the customer for long period,

based on the customer’s request.

5.4 General Suggestions:

1. Total automation of the bank will enable the customers to do their

banking transactions through a single counter instead of going to each

counter within the premises.

2. It is observed that most of the customers have accounts with other

commercial banks and other branches of TDCC Bank for their business

purposes. If the TDCC Bank provides ATM to its customers, it is easier

for them to withdraw amount wherever they need.

3. It is observed that not many rich people come to TDCC Bank Ltd for any

transaction. If the bank provides on-line facility and tele-banking facility

for their non-cash transactions, it may attract most of the rich people as

their customers.

4. NPA is a double edged sword, which results in loss in interest income and

provisioning which affects profitability, so the NPA is quite grave

problem for all the banks in general, but in case of TDCCB the main

reason for bulging of NPA is poor recovery performance of member

societies like Weavers’ societies, spinning mills, Agricultural societies,

because of the policy of the Government and Government interference in

the activity of the member societies. To overcome this problem member

244 society has to take proper steps to recover the dues in time by arranging

frequent review meetings and touch with the borrowers. Apart from all

before sanctioning loan the repaying capacity of the borrower should be

assessed in a scientific manner. Government has to support the member

societies reduce the NPA level and to enhance the profitability of the

Co-operatives to maximum possible extend.

5. Each year the provision made by TDCC Bank against NPAs has

increased. This makes a dent in the profit figures of TDCC Bank. This

may lead the public to lose their confidence even though their financial

position is higher to repay their debts. The government due to which must

take necessary steps to modify the norms for the provision against NPAs.

6. TDCC Bank depends upon the non-interest income also for their revenue.

For the transactions of the government TDCCB does not charge any

commission. The government may utilise this facility and it may increase

the revenue of TDCC Bank. TDCC Bank may give concessions for their

deposit holders for collecting of the Demand Drafts and purchasing the

Demand Drafts. This may leads to increase their revenue.

7. The bank has to be allowed greater freedom to deploy its funds in other

types of loan schemes to individuals.

8. It is identified that the actual strength is lesser than the required strength

of the employees. The volume of business per an employee is increased

throughout the period of study. If there is full strength the volume

business per employee may increase further. This leads to increase in the

income of the bank.

245 5.5 CONCLUSION

Banking business has done wonders for the world economy and that too in case of India the habit of savings and investment of people was properly channelized by the banking sector which made the gateway for economic growth even in the period of financial crisis. The role of Co-operatives in mobilizing deposits from the rural mass is a notable one. Co-operatives established separate societies for agricultural and financial assistance and they only permitted to lend loans for agricultural purposes but DCC Banks are not lending directly any money for agricultural purpose for example Jewel loans for agricultural purpose is not provided by DCC Banks even the farmer is living in town area. This situation on the contrary is not in other commercial banks functioning in the same area but DCC banks provide car loan at a reduced rate of 8 to 10 per cent.

Loans for agricultural purpose at a higher rate shows that the farmers are not considered as prime borrowers.

The TDCC Bank has to take innovative steps to evade the opportunities of liberations to harvest funds from the possible sources for the betterment of banking business to the maximum extend at par with other new-generation banks and public sector banks. For this purpose the bank has to be equipped with necessary technical support service in the years to come. If the bank fails to take steps to face the hectic competition from its competitor with improved technology the survival of Co-operative banks in urban areas will become lesser.

In simple, the bank has to improve the intensive contact with customers by providing a quality of financial services with high operational efficiency. Profit may not be a motive of Co-operative banks, but the Co-operative bank has to earn reasonable profit for the purpose of providing improved quality of modern

246 financial services to their customers. In order to get a reasonable profit and to survive in the competitive environment the TDCC Bank has to plan in each activity. Finally, present study leads to the conclusion that though the financial position is at a satisfactory level is maintained by TDCCB, sufficient attention is not given for enhancing the position. Lack of professionalization and delay in implementation of technology in the automation of banking services are seems to be responsible for this situation.

5.6 TOPICS FOR FURTHER RESEARCH:

The following are the topics in which further research can be carried out by taking facts and figures after automation of Co-operative banks fully at par with new generation banks and public sector banks:

1. A Comparative study on Performance Evaluation of a private sector

banks and a Co-operative Sector Bank.

2. Challenges of Co-operative Banks and marketing their financial

products at par with international standard.

3. Role of Co-operative Institutions in providing credit facilities to the

SSI units and to the women entrepreneurs.

4. A Study on Costing Practices with special reference for mobilization

and collection of deposits.

5. A Study on Accounting Standards and Practices followed by the

Co-operative Banks in Tamilnadu.

6. A Study on Management Information System in the Co-operative

banks.

7. Human Resource Management in Co-operative Banks in Tamilnadu.

247

Bibliography

BIBLIOGRAPHY

BOOKS

Agarwal A.N. Indian Economy Problems of Development and Planning Vishwa Prakasham (A Division of New Age International Pvt ltd. Publishers) New Delhi, Twenty Sixth Edition – 2000.

Ansari A.A. Co-operative Management Patterns, Anmol Publication, New Delhi, 1990.

Bedi R.D.Theory, History and Practice of Co-operation. Loyal Book Depot, Meerut, 1977.

Bhatnagar K.P. Co-operation in India and Abroad, Kishore Publishing House, Kanpur 1954.

Chaudhay C.M. Theory and Practice of Co-operation, Printwell, Jaipur 302 004, 1991.

Choubey B.N. Principles and Practices of Co-operative , Asia Publishing House, New Delhi 1968.

Choubey B.N. Institutional Finance for Agricultural Development Shubhada Saraswat, Pune, 1977.

Deonathram. Applied Co-operative Banking, Shankar Printing Press, Chandigarh 1985.

Desai S.S.M. Agriculture and Rural Banking in India, Himalaya Publishing House, 3rd Edition, Bombay. 1990.

Devadas Bhorali. Co-operative Banking and Economic development, Deep & Deep Publications, D-1/24 Rajouri Garden, New Delhi. 1987.

Dhingra I.C. Rural Banking in India, Sultan Chand & Sons, New Delhi, 1987.

248 Franz.C. Helm. The Economic of Co-operative Enterprise, The Co-operative College, Tanzania in association with University of London Press Ltd, 1968.

Gariyali C.K., Vettivel. S.K. Women’s Own (The self help group Movement of Tamilnadu) Vetri Publishers, New Delhi, 2004.

Garden.E., Natarajan.K. Banking Theory, Law and Practice, Himalaya Publishing House, Mumbai – 1999.

Ghosal S.N.Agriculture Financing in India, Asia Publishing House Bombay 1966.

Hajela T.N. Principles, Problems, and Practice of Co-operatives, Shivlal, Agarwal and Company, Agra 1973.

Haugh E.M.Co-operative Movement in India, Oxford University Press, Bombay 1960.

Hiralallallubhai Kaji.M.A., B.Sc., I.E.S., J.P., Co-operation in India, All India Co-operative Institutes Association, Bombay.

Hussain. The Co-operative Movement in India, Oxford University Press, Calcutta – 1966.

Jagale V.B. Co-operative Creidt in Indian Agricutlure (Its Socio Economic and Technological Impact). Mittal Publications, New Delhi 1992.

Jalal. Rural Co-operative in India, Anmol Publications Pvt., Ltd. New Delhi, 1996.

Joy, O.M. Introduction to Financial Management, Richard D. Irwin Inc., Illinois, 1977

Johnson, R.L., Financial Decision Making, Goodyear, 1973. D.Van Nostrand Co. 1966.

249 Jyothi.S.S. “Human Resources management in Co-operative Sector”. A study of selected units in Visakapatnam District. Inter India Publications; New Delhi, 1986.

Krishnamachary. P Investment Management in public Enterprises, Print well publishers, Jaipur, 1990.

Krishna Swami O.R. Co-operative Account Keeping, Oxford & I.B.H. Publishing Pvt., Ltd. New Delhi, 1986.

Krishna Swami O.R. Fundamentals of Co-operation, Sultan Chand & Co., Ram Nagar, New Delhi, 1978.

Krishna Swami O.R.and Kulandaiswami.V. Theory of Co-operation, (An Indepth Analysis),. Shnam Publicaions, Coimbatore. 1992.

Krishnaswami O.R. Co-operative Democracy in Action, Somaiya Publications Pvt., Ltd., Bombay. 1976.

Kulkarni.P.V.. Theory and Practice of Co-operation in India and Abroad, Vol I & II. Co-operator’s Book Depot, Bombay. 1955.

Kutumba Rao,” Management of District Central Co-operative Banks”, 1985.

Laud G.M.Co-operative Banking in India, Co-operators Book Depot, Bombay. 1956.

Madhav Das. Manual an Advances by Co-operatives Banks, Reserve Bank of India, Agricultural Credit Department, Bombay. 1977.

Maheswari S.N. Financial Management Principles and Practice, Sultan Chand & Sons, New Delhi. 2002.

Manohar Singh Gill. Agricultural Co-operatives, Vikas Publishing Hausing Pvt., Ltd, New Delhi. 1983.

Mathur B.S. Co-operation in India, Duthiya Bhawan, Agra. 1984.

250 Memoria C.B. Rural Credit and Agricultural Co-operation in India, Kitab Mahal, Allahabad. 1st Edition 1983.

Memoria C.B. Personnel Management, Himalaya Publishing House, Mumbai. 1997.

Memoria C.B. Rural Credit and Co-operation in India, Kitab Mahal Publishers, Allahabad. 1983.

Mohan .S. Financial management of Co-operative Spinning Mills, Chaitanaya Publishing House, 1992.

Nakkiran and John Winfred. A Co-operative Banking in India, Rainbow Publications, Coimbatore. 1988.

Negi Bhupal Singh; “ Co-operative credit and Regional development, Deep and Deep Publication; New Delhi, 1990.

Parameswaran .P and Natarajan.S. Indian Banking, Sultan Chand & Co., Ltd., Delhi. 2001.

Patil. M.B., Strategy for Development of urban Co-operative Bank Rainbow Publication, Coimbatore,1987.

Pranab Kuma Chakrabarti. Problems of Co-operative Development in India, Sultan Chand & Co., New Delhi. 1983.

Puttaswamaigh. Poverty and Rural Development, Oxford and IBH Publishing Co.Pvt., Ltd., New Delhi. 1989

Radhaswami .M. and Vasudewan S.V. Banking Law, Practice and Theory of Banking, S. Chand & C Ltd, New Delhi. 1984.

Raymand, Goldsmith. The Financial Development of India 1860-1977. Oxford University Press, Delhi. 1983

Reddy C.R. Co-operative Agricultural Finance, Cahugh Publications, Allahabad. 1998.

251 Ruddar Datt and Sundaram K.P.M Indian Economy, S.Chand & Co Ltd,. New Delhi. 1999.

Reddy.S and Reddy.R.C. “Performance Appraisal of Co-operative Banks” – A case study, Deep and Deep Publications, 1994.

Sankaran .S. Indian Economy Problems, Policies and Development, Marghan Publications, Chennai. 2002.

Sheheena, “Reserve Management and Profitability of Co-operative Banks”. Vol. 1 No3. 1990. A case study of Trichur District Central Co-operative Bank Ltd.” Commerce and Business Researcher”.

Sahoo.S.K. and Sahoo.S.C. “Management of Co-operative Banks in India” Anmol Publications, New Delhi 1991.

Suresh K.A. and Modley Joseph. Co-operatives and Rural Development in India, Ashish Publishing House, New Delhi. 1990.

Thirunarayanan. Co-operative Banking in India (With Special reference to south Arcot and Kanpur Central Co-operative Banks)Mitta Publications, New Delhi. 1996.

The Institute of Chartered Accountants of India, Advanced Accounting. Study material for C.A students.p.1053

Tokhi M.R. and Sharma D.P. Rural Banking in India, Oxford - IBH Publishing Co., New Delhi. 1983.

Verma M.L. Rural Banking in India, Rawat Publications, Jaipur. 1988.

252 JOURNALS Adinew Abate, Keshava Reddy,T.R, Mahesh,N and Lalith Achoth (2002), “Magnitude and Growth of Institutional Credit Flow to Agriculture in Karnataka”, Indian Co-operative Review, Vol.XXXIX, No.3, Jan, PP.194-212.

Alamelu and Devamohan (2010), “Efficiency of Commercial Banks in India”, Professional Banker,(Jan.) ICFAI University Press, Hyderabad

Darling Selvi,V, “Lending Performance of Kanyakumari District Central Co-operatives”, Indian Co-operative Review, Vol.45, No.3, Jan, 2008, PP.176-187.

Dinabandu Mahal, “Impact of Development Action Plan”, Indian Co-operative Review, Vol.40, No.I, July,2002, PP.42-51

Dhanappa (2009), “Performance Evaluation of UCBs: A Case Study of Kallappanna Awade Ichalkaranji Janata Sahakari Bank Ltd., Ichalkaranji”, Indian Co-operative Review, Vol-XXXXVII, No-2, (Oct.), NCUI – New Delhi.

European Association of Co-operative Banks (April 2009),"European Co-operative Banks in Financial and Economic Turmoil", Co-operatives in a world in Crisis (Contribution of EACB to the Experts Group meeting) United Nations – New York.

Fulbag Singh and Balwinder Singh, “Profitability of the Central Co-operative Banks in Punjab – A Decomposition Analysis”, Indian Co-operative Review, Vol.44, No.I, July, 2006, PP.41-55.

Fulbag Singh and Balwinder Singh, “Funds Management in the Central Co-operative Banks of Punjab-An Analysis of Financial Margin”, The ICFAI Journal of Bank Management, Vol.V, No.3, Aug, 2006, PP.74-80.

Hulas Pathak, “Agricultural Credit Financing: A Case Study of District Co- operative Central Bank, Raipur, Chattisgarh”, Indian Journal of Agricultural Economics, Vol.60, No.3, July-Sep, 2005, P.389.

253 Jadhav,K.L and Kasar, D.V, “Performance of District Central Co-operative Banks in Maharashtra: A Modelof Quantitative Analysis”, Indian Journal of Agricultural Economics, Vol.60, No.3, July-Sep, 2005, P.411.

Jadhav,K.L, Yadav,D.B and Shendage,P.N, “Rural Finance and Inequality in Credit Flow through DCCBs in Maharashtra”, Indian Journal of Agricultural Economics, Vol.62, No.3, July-Sep, 2007, P.357

Jayaraman and Srinivasan (2009), “Relative Efficiency of Scheduled Commercial Banks in India (2001-08): A DEA Approach”, Prajnan, Vol. XXXVIII, No.2 (July- Sept.), Pune.

Lakshmanan,C and Dharmendran,A, “Impact of NPAs on the Performance variables in Chennai Central Co-operative Bank”, Indian Co-operative Review, Vol.44, No.4, April, 2007, PP.291

Mayilsamy,R, “Loan Operations in District Central Co-operative Banks in India”, Tamilnadu Journal of Co-operation, Vol.8, No.3, Jan, 2008, PP.61-65.

Mayilsamy, R and Revathi Bala, M, “Management of Non Performing Assets in District Central Co-operative Banks in India”, Indian Co-operative Review, Vol.46, No.3, Jan, 2009, PP.198-204.

Mayil Murugan,A, “An Empirial Analysis of Capital Adequacy Ratio in Central Co-operative Banks”, Tamilnadu Journal of Co-operation, Vol.9, No.10, Aug, 2009, PP.57-62.

Mohan,S, “Factors Determining the Profitability of Central Co-operative Bank”, Tamilnadu Journal of Co-operation, Vol.8, No.4, Feb, 2008, PP.63-69

Namasivayam,N, “A Study on Employees Opinion on the Performance of MDCC Bank.Ltd., Madurai”, Indian Co-operative Review, Vol.44, No.2, Oct, 2006, PP.87-92.

Namboodiri,N.V, “Economies of Scale and Scope of District Central Co-operative Banks”, Indian Journal of Agricultural Economics, Vol.56, No.2, April-June, 2001, PP.198-210.

254 Oliver Bright,A, “Role of Kanyakumari District Central Co-operative Bank(KDCCB) in Tsunami Credit”,Kisan World, Vol.32, No.9, Sep, 2005, PP.33-34.

Rais Ahmad and Nasurllah Bhat, “Recovery Performance of District Co-operative Banks in J&K State”, Monthly Public Opinion Survey, Vol.XLIX, No.11, Aug, 2004, PP.10-14

Ramesh,D , “An Analysis of Economic Viability of DCCB in Mahabubnagar District of Andhra Pradesh”, The Indian Journal of Commerce, Vol.57, No.3, July-Sep, 2004, PP.120-121.

Ramachandran,T and Seilan,A, “Role of Kanyakumari District Central Co-operative Bank in Promoting Self- Help Groups”, Indian Co-operative Review, Vol.44, No.1, July, 2006, PP.36-40.

Raja,S, “Performance Evaluation of MDCC Bank Ltd-An Applicaion of Structural and Growth Analysis”, Indian Co-operative Review, Vol.42, No.3, Jan, 2005, PP.237-244.

Rajamohan and Pasupathy, “Performance Evaluation of TAICO (Tamil Nadu Industrial Co-operative Bank Ltd.) − An Application of Structural and Growth Analysis”, Indian Co-operative Review, Vol.XXXXVII , No.2 Oct -2009, New Delhi.

Singh, Amarjit; and Singh, Parminder (2010), “Technical and Scale Efficiency in District Central Co-operative Banks of Punjab - A Non Parametric Analysis”, Indian Co-operative Review, Vol. XXXXVII, No.1, (Jan.), New Delhi.

Sudipta Ghosh, “NPA Management in District Central Co-operative Banks-A Comparative Study of MCCBL and TGCCBL”, The Management Account, Vol.41, No.2, Feb, 2006, PP.154-158.

Thanikodi,R, “Central Co-operative Banks in India: Problems and Remedies”, Coop.Banking, Vol.42, No.12, June, 2005, PP.521-524.

Vaikunthe,L.D, “Institutional Credit to Agriculture: A Case Study of District Central Co-operative Bank in Shimoga District in Karnataka”, Indian Journal of Agricultural Economics, Vol.60, No.3, July-Sep, 2005, P.405.

255 Yadav,B.S and Kaynat Tabassum, “Deposit Mobilization by Central Co-operative Banks in Haryana State”, Indian Co-operative Review, Vol.44, No.1, July, 2006, PP.80-86.

Reports  Annual Report of TDCC Bank Ltd.  Special Officers Demi Official Narrative Reports  Report of the All India Rural Credit Review Committee.  RBI, Report on Trend and Progress of Banking in India.  RBI, Report Co-operative Movement in India.  Central Banking Enquiry Committee Report.

Directory  District central Co-operative Banks in India Directory National Federation of State Co-operative Banks Ltd., Mumbai.

Web site Addresses  www.censesindia.com  www.rbi.org.in  www.tn.gov.in  www.tn.policy.com

256