International Journal Of

ISSN-2277-5811

IJTC International Journals of Trade and Commerce

International Journal of

Trade and Commerce-IIARTC

Volume-I | Number-I | January-June 2012

I I A R T C Indian Institute of Advanced Research in Trade and Commerce Indian Institute of Advanced Research in Trade and Commerce INTERNATIONAL JOURNAL OF TRADE AND COMMERCE-IIARTC CHIEF PATRON  DR N.P.SINGH, Principal, Meerut College, Meerut, U.P. India

CHIEF EDITOR  DR. S.K.S. YADAV, Associate Professor, Faculty of Commerce & Business Administration, Meerut College, Meerut, U.P., India.

REFEREED PANEL  Prof. RADHEY SHYAM, Former Pro Vice Chancellor, Lucknow University, India  Dr. K.D. GAUR, Ex Director & Consultant, I.C.S.S.R., New Delhi, India  Prof. NAWAB ALI KHAN, Salman Bin Abdul Aziz University, Al-Khraj, Kingdom of Saudi Arabia  Prof. K. M. PANDEY, Ex Head & Dean of Faculty of Commerce, Former Registrar, Banaras Hindu University, Varanasi, India.  Prof. MOHD. ALI Ex Head, Commerce Department, Aligarh Muslim University, Aligarh, India  Prof. M.B. SHUKLA, Commerce Department, Kashi Vidyapeeth, Varanasi, India  Dr. N.L.SHARMA, Ex HOD & Dean of Faculty of Commerce, MJP, Rohilkhand University, Bareilly, India  Prof. D.N. YADAV Department of Philosophy, PDD Gorakhpur University, Gorakhpur, India

ADVISORY BOARD  Prof. ABBAS J. ALI , Editor In Chief, International Journal of Commerce & Management, Indiana, USA.  Prof. KAMAL NAYAN AGARWAL, Dept. of Information Systems and Decision Sciences, School of Business, Howard University, Washington- DC , U.S.A.  Ms. VASSILIKI BAMIATZI, Leeds University Business School, Leeds, United Kingdom  Ms. JULIETTE OVERLAND, The University of Sydney Business School, Sydney, Australia  Mr. ASHOK MISHRA, Senior Research Scientist, BASF, Singapore  Dr. NGBOAWAJI DANIEL NTE, Associate Professor, Novena University, Ogume, Nigeria  Dr. NASSER S. AL-KAHTANI, Dean, College of Business Administration, Salman Bin Abdulaziz University, Al-Khraj, Kingdom of Saudi Arabia  Dr. S . SARANGAPANI, Sr Faculty In Business Studies, Ibra College of Technology, Ibra, Sultanate of Oman  IVO KUZMANOV, Beogradska, Bitola, Macedonia  Prof. NAWAB ALI KHAN, Salman Bin Abdul Aziz University, Al-Kharj, Kingdom of Saudi Arabia  HON’ABLE SHRI RAM NARESH YADAV, Governor of Madhya Pradesh, M.P. India  HON’ABLE JUSTICE RAVINDRA SINGH YADAV, Judge, Allahabad High Court, Allahabad U.P. India  HON’ABLE JUSTICE RAM SURAT SINGH, Former Judge, Allahabad High Court and Ex- Chairman Of State Obc Commission, U.P. India  Prof. P.K.YADAV HOD, Department of Business Administration, Faculty of Management, MJP Rohilkhand University Bareilly, U.P. India  Prof. Y.P. SINGH, Former HOD, Commerce Department, Delhi School of Economics, Delhi University, Delhi, India  Prof. R D SHARMA, Dean Academic Affairs, And Dean Business Studies, University of Jammu, Jammu;Ex- Visiting Fulbright Professor of Business Administration Uri, Kingston (USA)  Prof. MANIVANNAN SETHURAMAN CEO, TJPRC PVT LTD., Chennai, India  Dr. D.R.DANDAPAT, Professor, Department of Commerce, University of Calcutta, Secretary, Indian Accounting Association, Research Foundation, Best Bengal, India  Prof. VIJAYA LAXMI CHARI SETH, Damoderdas School of Commerce, Gujarat University, Ahmedabad, Gujrat, India  Dr. PATTHIRA PHON-NGARM, Chairman of Ph.D. Program In Regional Development Strategies, Loei Rajabhat University ,Thailand  Prof. P. N. MISHRA, Core Faculty Team of The National Management Programme at Management Development Institute, Gurgaon and Fellow in the Department of Economics & Accounting, University of Liverpool, Liverpool, UK.  Dr. KRIPA SHANKER GUPTA, Chief Facilitator, KSG Center for Learning and Development (Ksg-Clnd), Bangalore, India  Prof. PRAMOD KUMAR GUPTA , Institute of Management Studies, Devi Ahilya University, Indore, India,  Dr. SAMEER PINGLE, Institute of Management, Nirma University, Ahmedabad (Gujarat), India  Prof. ANUPAM BASU, IBS, Kolkata, India

ISSN-2277-5811 INTERNATIONAL JOURNAL OF TRADE AND COMMERCE-IIARTC (Refereed Research Journal of Social Science & Humanities) Volume-I | Number - I |January-June 2012

Dr. S.K.S. Yadav Editor-in-Chief Associate Professor Faculty of Commerce & Business Administration Meerut College, Meerut, U.P., India (C.C.S. University, Meerut, India)

INDIAN INSTITUTE OF ADVANCE RESEARCH IN TRADE AND COMMERCE (IIARTC) Faculty of Commerce & Business Administration Meerut College, Meerut, U.P., India

ANUPAM MITRA, Symbiosis Institute of Business Management (SIBM), Bangalore, India  Dr. MURUGESAN, Vice-Chairman of the Indian Institution of Plant Engineers, TNC, Chennai, India  Prof. RAMESH CHANDRA MISHRA, Director, Institute of Professional Studies, Nainital , U.K. India  Dr. MANAS PANDEY, Dean Faculty of Management Studies, VBS Purvanchal University, Jaunpur, U.P. India  Dr. V.M. SAXENA, Ex-HOD Commerce Deptt, D.N. College & Hony. Secretary, Mangt. Committee, CPE, Meerut, India  Dr. A.P. SINGH, Associate Professor, Department of Commerce, Meerut College, Meerut, India  Dr. KANCHAN SINGH, HOD, Geography Department, Meerut College, Meerut, India.  Dr. S.N.MITTAL, HOD, Ex-Dean, Ex-Convener of R.D.C., Faculty of Commerce, CCS University, Meerut, India  Dr. A.B. LAL, HOD, Ex-Dean, Ex-Convener of R.D.C., Faculty oF Commerce, CCS University, Meerut, India  Dr. P.K.SINGH, Associate Professor, Department of Commerce, Meerut College, Meerut, India  Dr. D.R. YADAV, Associate Professor, Department of Commerce, Meerut College, Meerut India  Sri RAJESH YADAV, Commissioner Food & Supply, Bareilly, U.P., India  Dr. GOVIND RAM GUPTA, Principal, Vardhaman [P.G.] College, Bijnor, U.P. India  Dr. MAUKAM SINGH YADAV, Principal, K.K. P G College, Etawah, U.P. India  Dr. AJAB SINGH YADAV, principal, National P.G. College, Bhogaon, Distt. Mainpuri, U.P. India  Dr. W.A. QUERESHI, Former Associate Professor, Dept. of Commerce, Meerut College, Meerut, India. DEPUTY CHIEF EDITOR  Dr. RAJIV KUMAR,HOD, Faculty of Management Studies, Manav Rachna International University, Faridabad, India. EDITORS  Dr. S.K.GUPTA, Associate Professor, Department of Commerce, Meerut College, Meerut, India  Dr. RAKESH KUMAR, Associate Professor, Department of Commerce, Meerut College, Meerut, India  Dr. SUBHASH CHAND, Associate Professor, Department of Chemistry, Meerut College, Meerut, India  Dr. ASHOK KUMAR, Head of Mathematics Department, Meerut College, Meerut, India  Dr. SANJAY KUMAR, Assist. Prof. Dept. of Defense Study, Meerut College, Meerut & Professorial Fellow India Studies Centre, Bangkok, Thailand  Dr. M.P. VERMA, Assistant Professor, Law Department, Meerut College, Meerut, India  Mr. DHARMENDRA YADAV, M.Sc. (Math), M.Phil., NET, JRF, Keshav Mahavidyalaya, Delhi University, Delhi, India MANAGING EDITORS  Dr. ANIL YADAV, Department of Commerce, D.D.U. University, Gorakhpur, U.P., India  Dr. M.K. SIRAS, Associate Professor, Department of Commerce, Meerut College, Meerut, U.P., India  Dr. IJRAIL MIYA, Head of Psychology Department, Meerut College, Meerut U.P., India  Dr. MRIDULA SHARMA, Associate Professor, Psychology Deptt., Meerut College, Meerut U.P., India  Dr. H.P. MALONIA, Associate Professor, Dept. of Commerce, S.R.K. P.G. College, Firozabad, U.P., India  Dr. NISHANT KUMAR, Assistant Professor, Department of Business Administration, University of Lucknow, India  Dr. RAJIV SINGH, Assistant Professor, Department of Geography, Meerut College, Meerut India ASSISTANT EDITORS  Dr. PREETY SINGH, Assistant Professor, Jagan Institute of Management Studies, Rohini, Delhi, India  Dr. ANUJ KUMAR, Assistant Professor, B. L. Academy of Higher Education, Lawar, Meerut, India  Dr. MEENAKSHI YADAV, Assistant Professor, Department of Chemistry, Meerut College, Meerut, India  Dr. GULAB CHNDRA LALIT, Fellow, I.C.S.S.R., Political Science, C.C.U. University, Meerut, India  KUMKUM CHAUDHARY, Faculty of Mangt. Studies, Sir Chotu Ram Institute of Engineering &Technology, Meerut  Dr. PRABHAT KUMAR, Dr MEENAKSHI, & Ms. SHILZA, Research Fellows, Dept. of Commerce, Meerut College, Meerut, India ADMINISTRATION (HONORARY) General Manager Mr. R.D.YADAV, Ex-Senior Superintendent Engineer, ONGC, Dehradun, U.K., India Circulation Manager Dr. PRATIBHA SINGH YADAV Legal Advisors Mr. R.D. RATHORE, Advocate, Supreme Court of India Mr. HIMANSHU TYAGI, Associate Company Secretary, India Financial Advisor Mr. RAKESH GOYAL, Fellow Chartered Accountant, India Mr. RAJVEER SINGH YADAV, Ex-Principal GIC, Meerut, India EDITORIAL I feel immense pleasure in presenting the first issue of International Journal of Trade and Commerce-IIARTC - A Journal of Social Science and Humanities. The basic aim of this Journal is both to sharpen the intellectual field of research and to present fruitful and relevant material of common interest and concern. It provides a basic platform to the new, bonafide and genuine researches in the field of Commerce, Economics, Law, Management and Trade. Research Papers, Articles, Case-studies, Discussions, Opinions, Commentary, Book Reviews and Biographies of the legends of bonafide and genuine nature are given place in the journal. It was found that the researchers in the aforesaid fields were not having a suitable platform to put forward their thoughts and interact with experts in the relative fields. This Journal gives them opportunities to communicate their views to a broad listeners' group. It also throws the light on the contemporary issues of global interests. We invite theoretical and applied research papers concerning areas including global, regional, business/trade, commerce, primary and secondary market issues, business ethics, corporate governance, social aspects and international trade, H.R.M.& Personnel Management, Marketing, Finance, Accounting Aspects, ISO, Quality Management, Time Management, etc.. We aspire for your valuable comments and suggestions in order to improve the journal. We are hopeful that our humble efforts and your kind cooperation will make this journal a successful endeavor. We express our sincere gratitude to all the eminent authors who have sent their research papers or given their consent to join in the advisory board or penal of referee or made their valuable contribution to the Journal in any respect. We hope International Journal of Trade and Commerce-IIARTC will receive its due response. We again invite your research paper, book review, contribution and expression of all shade of opinions.

Meerut, INDIA Dr. S.K.S. YADAV Dated: June 30, 2012 (Editor-in-Chief)

ISSN-2277-5811 INTERNATION JOURNAL OF TRADE AND COMMERCE-IIARTC (Refereed Research Journal of Social Science & Humanities) CONTENTS S. Title Authors Page No. No. 1. An Empirical Presentation of HRD Climate and Nawab Ali Khan, 1-10 Employee Development In Telecommunication Sheema Tarab Industry 2. A Study of Relationship Between Demographical Nasser S. Al-Kahtani 11-22 Variables, Organizational Structure and Social Interaction with Organizational Commitment among Employees of Saudi Arabia 3. A Camel Model Analysis of Nationalized Banks in K.V.N.Prasad, G. 23-33 India Ravinder 4. Information Sharing and Communication in Small Vipul Chalotra 34-44 Scale Industries 5. Role of Securities and Exchanges Board of India Rajiv Kumar Singh 45-59 (SEBI) in Regulating Mutual Funds 6. Rural Marketing – Potentials and Strategies for Manmeet Kumar Siras 60-69 Durables A Study in Ghaziabad District 7. A Critical Analysis of Agricultural Regulated Narender Kumar 70-89 Markets A Case Study of Western Uttar Pradesh 8. Customer Satisfaction in Commercial Banks A Case Deepti Kanojia, D.R. 90-99 Study of Punjab National Bank Yadav 9. Forensic Accounting Concept in India Preeti Singh 100-105 10. Issues and Reforms in Indian Railways S.K.S. Yadav, Kum Kum 106-125 Chaudhary and Somnath Kisan Khatal 11. Depreciation Reserve & Provisions Under Price V. P. Singh and A. P. 126-141 Level Changes [An Overview of Legal & Accounting Singh Aspects of Small Scale Industries] 12. Impact of Human Resource Practices on Employees Ms. Neetu Pathak 142-148 Productivity A Comparative Study between Public and Private Banks in India 13. Customers’ Attitude towards Online Retail A.B. Thapliyal and 149-161 Shopping - An Empirical Study Vikas Gairola 14. Book Review Juliette Overland 162

An Empirical Presentation of HRD Climate and Employee Development in Telecommunication Industry A Case Study of Indian Private Sector

Nawab Ali Khana*, Sheema Tarabb aDepartment of Human Resource Management, College of Business Administration, Salman Bin Abdulaziz University, Al-Kharj (Kingdom of Saudi Arabia) bDepartment of Commerce, Aligarh Muslim University, Aligarh, India Email Id: [email protected]

Abstract

Constantly changing technology and intensive competition have led the community to signify the vitality of human resource. Today, the PAPER/ARTICLE INFO organizations are searching for the most competent human resource in RECEIVED ON: 25/02/2012 order to recruit and retain them for the growth and development of their ACCEPTED ON:15/05/2012 organization. Presently, the organizations and the top level management has understood the vigor of the human skills and accepted the fact that to survive, they have to retain the most fittest and finest talent in their midst. This concept emphasizes the need for every organization to continuously develop its employee's competencies in a planned way and it Reference to this paper brings into sharp focus the importance of roles, which employees plays should be made as follows: and occupies in their respective organizations. The authors have undertaken the present study to analyze the HRD Climate in the private Khan, Nawab Ali and Tarab, sector telecommunication Industry of India and also to study the Sheema (2012) “An Empirical relationship of HRD Climate and Employee Development. A Presentation of HRD Climate questionnaire survey has been conducted among 100 employees of and Employee Development Reliance Communications Ltd. from three different cities of Uttar- in Telecommunication Pradesh. Statistical measures like mean, standard deviation and Industry: A Case Study of correlation have been employed to test the hypotheses of the present Indian Private Sector” Int. J. construct. The study reveals that there exists a positive relationship of Trade and Commerce- between the climate of the organization and the development of employees. IIARTC, Key Words: Organizational culture, Climate, Motivation, Pride. Vol. 1, No. 1, pp. 1–10

*Corresponding Author

An Empirical Presentation of HRD Climate and Employee Development In Telecommunication Industry Nawab Ali Khan, Sheema Tarab 1. INTRODUCTION Human Resource plays an active role in the modern economic scenario of any country and their development in the organizational context is a process by which the employees of an organization are helped in a continuous and a planned way to: (a) acquire or sharpen capabilities required to perform various functions associated with their present or expected future roles; (b) develop their general capabilities as individuals and discover and exploit their own inner potentials for their own and/or organizational development processes; and (c) develop an organizational culture in which supervisor-subordinate relationships, team work and collaboration among sub-units are strong and contribute to the professional well-being, motivation and pride of employees (Rao and Abraham:1986). Climate is helpful in the fulfillment of committed goals of an individual, organization and society. It increases the capabilities and efficiency of an individual which is likely to reflect itself in the long run in the well-being of the individual good reputation of the institution and ultimately the well-being of the society. However, the nature of efforts and investments in developing human resources may vary from organization to organization depending on its need, nature of capabilities the organization wants to build up, the change process, size of the organization etc.

2. REVIEW OF LITERATURE Recognizing the importance of HRD climate, Center for HRD, Xavier Labor Relations Institute (XLRI, India) developed a 38-item HRD climate questionnaire to survey the extent to which development climate exists in organizations. The 38 items included in the questionnaire can be grouped into three categories such as general climate, OCTAPAC culture and HRD mechanisms. The general climate items deal with the importance given to human resources development in general by the top management and line managers. The OCTAPAC items deal with the extent to which openness, confrontation, trust, autonomy, pro-activity, authenticity and collaboration are valued and promoted in the organization. The items dealing with HRD mechanisms measure the extent to which HRD mechanisms are implemented seriously. Using this instrument the first survey of HRD climate in Indian organizations was carried out by Rao and Abraham (1986) among 41 organizations in India. The study found that the general HRD climate in the organizations appears to be at an average level. The most important factor contributing to this seems to be a general indifference on the part of the employees on their own development. Rohmetra (1998) studied HRD climate and satisfaction in State Bank of India (SBI) and The Jammu and Kashmir Bank Ltd. (JKB) and found that HRD climate was much higher in SBI than in JKB. Comparative analysis of the attitudes of employees towards the prevailing development climate revealed that employees in SBI held a much favorable attitude towards the development practices than that in JKB. Consequently, the satisfaction level of employees in SBI is higher than that in JKB. Jain et al.(1997) conducted a study, HRD Climate in Indian Industry, in two public sector organizations i.e., BHEL and NFL and concluded that the HRD climate is mainly a function of the effectiveness variables including individual efficiency, organizational efficiency and productivity, and the HRD variables including management policy on HRD, organization development, role analysis and training. Agarwala (2002) in her study observed that the HRD Climate was significantly more developmental in IT Sector when compared to the automobile industry.

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An Empirical Presentation of HRD Climate and Employee Development In Telecommunication Industry Nawab Ali Khan, Sheema Tarab Rodrigues (2005) opined in his article entitled “Industry-Institute correlates of HRD Climate- Empirical study based implications” that a well-trained and a well-educated human resource contributes directly to the development of a country and to improve the knowledge, abilities, aptitude and values of human beings organized HRD practices should be followed. Srimannarayana (2008) carried out a study to assess the extent of HRD climate prevailing in Indian organizations. He derives the conclusion that a moderate climate prevails in organizations understudy (59.61%) and more favorable HRD climate was in manufacturing sector (62.39%) than in service & IT sectors. A favorable climate influences directly the behavior of managers in an organization which creates a sense of belongingness in them and also enables them to perform well as suggested by Purang (2008). Hyde et al. (2008) conducted an exploratory survey of HRD Climate in private sector banks. The authors suggested developing and maintaining the dyadic relations at work and supportive guidance should be provided by seniors to their juniors in creating a congenial working atmosphere which will also help in developing human resource in an organized manner. Rao (2009) carried out a study on HRD climate in the thermal Power Station of Vijayawada in Andhra Pradesh and stated through his study that HRD is a process which helps to develop and identify the keen potential of human force. He further suggested that the management in an organization should be generous and should also support their work force emotionally so that it will help the employees to work better and enable them to exhibit their knowledge and skills in a cohesive manner. Impact of HRD Climate over Job satisfaction measures to improve the Organizational Performance has been studied by Solkhe and Chaudhary (2010). Sample size chosen for the study was 100 managers out of which only 71 responded through a 38 items model questionnaire developed by Rao and Abraham for analyzing the trends in HRD Climate. Subramani and Jan (2011) discussed the importance of the efficiency of human resource in the success of any organization in their published research paper. The authors emphasized their work over the study of organizational climate in IT industries of Chennai, authors suggested to improve the organizational climatic conditions to match the requirements of the organizational development.

3. OBJECTIVES OF THE STUDY The study has been undertaken to:  To analyze the HRD Climate prevailing in Reliance Communications Ltd.  To study the relationship of Employee Development and HRD Climate in Reliance Communications Ltd.

4. HYPOTHESES OF THE STUDY In view of the objectives set for the study the following null and alternative hypothesis has been formulated respectively: H0 : There exists no significant relationship between HRDC and Employee Development in Reliance Communications Ltd. Hα : There exists significant relationship between HRDC and Employee Development in Reliance Communications Ltd.

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An Empirical Presentation of HRD Climate and Employee Development In Telecommunication Industry Nawab Ali Khan, Sheema Tarab 5. MEASUREMENT OF THE PRESENT CONSTRUCT Human Resource Development (HRD) Climate is a concept proposed by Rao and Abraham (1986) to explain the environment provided by organizations for the learning and development of its employees. This includes both the policies and practices for HRD in an organization. He developed an instrument to measure the HRD Climate consisting of 38 items by dividing them into three categories i.e., the first category is General Climate, second one is OCTAPAC Culture comprising seven factors namely, Openness, Confrontation, Trust, Autonomy, Pro-activity, Authenticity and Collaboration and the third category is HRD mechanism such as training, performance appraisal, potential appraisal, organization development, feedback, and performance coaching, career planning, rewards, employee welfare, quality of work life and human resource information systems. Employee development is the process of encouraging employees to acquire new or advanced skills, knowledge, and view points by providing learning and training facilities. Employee development is the ongoing process between an employee and a manager. Companies need rising stars to fill new positions and one of important role of a manager is to foster employee development to meet these needs. Therefore, to measure the level of employee development a self-administered questionnaire consisting of 10 items have been conducted among the sample respondents to retrieve their perceptions.

6. STATISTICAL MEASURES To analyze the results, various statistical measures such as Mean, Standard Deviation, and Correlation were performed through SPSS 16 and MS Excel 2007. 6.1. Present Study 6.1(a) HRD Climate Analysis: The item wise mean scores of the total sample of 100 employees are presented in the Table 1. Since the questionnaire used 5 point scale, average mean score of 3 around indicates a moderate tendency on that dimension. Scores around 4 indicate a fairly good degree of existence. Here, the overall HRD Climate is 3.64 which indicate the existence of a just above average degree of HRD Climate. Examining the three major components of HRD Climate i.e., General Climate, HRD Mechanisms and OCTAPAC Culture the results indicates:  In the first category of general climate, most of the items have shown an above average response, but interestingly (item no.6), with a mean score of 4.01 has shown a good state of seniors helping their juniors and item no.11 shows with a mean score of 3.93, that the psychological climate in the organization is good. The overall general climate mean score counts to be 3.66, and the standard deviation 0.652, which reveals an average but good existence of general climate in the organization.  The overall OCTAPAC Culture existence is good with a mean score of 3.58. and the standard deviation of 0.727  HRD mechanism overall stands at 3.68 mean score revealing a positive picture of its working among the employees. Item no. 12 individual mean score is 4.08, indicating a very good and supportive role of seniors towards their juniors. Item no.24 also highlights the sincerity and

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An Empirical Presentation of HRD Climate and Employee Development In Telecommunication Industry Nawab Ali Khan, Sheema Tarab dedication of employees towards their up gradation of new techniques and training with a mean score of 4.12 in Reliance Communications ltd.  Hence, the overall HRD Climate mean score stands at 3.64 and the standard deviation of the same at 0.69, which highlights that the climate in the sample organization is above average and the employees are being treated in a friendly and cooperative manner. There exists a good level of team-spirit and there is a desired level of autonomy in working of employees which provides them ample space of working and exposing their creativity and talent. 6.1(b) Employee Development Analysis: The item wise mean score and the standard deviation of the responses collected from the 100 employees of Reliance Communications Ltd. (Table: 2) revealed that the organization is keen to take interest regarding their employee development issues, as the overall mean score of 3.59 on a 5-point scale indicates the positive and above average status of employee development in Reliance Communications Ltd. Table-1: Showing overall Mean and Standard Deviation of HRD Climate and Employee Development in Reliance Communications Ltd. Variables Mean Std. Dev. General Climate 3.66 0.652 OCTAPAC Culture 3.58 0.727 HRD Mechanism 3.68 0.689 Overall HRD Climate 3.64 0.69 Overall Employee Development 3.59 0.67 Sample size (N) = 100 Source: Primary data collected and compiled by the researchers. 6.2 Relationship between HRDC and Employee Development: Mean score analysis of HRD climate and employee development in the organization discloses that a positive relationship exists between them. Correlation analysis was carried out to statistically test their relationship. The result shows a correlation of .014 which signifies that there is a positive relationship between HRD Climate and employee development in the organization. Therefore, the null hypothesis is rejected and the alternative one is accepted which says that there exists a significant relationship between the HRD Climate (HRDC) and employee development in Reliance Communications Ltd. After having observed that a positive correlation exists between the HRD Climate and employee development, a further analysis was conducted to find the relationship between the sub factors or dimensions of HRD Climate with employee development (Table: 2). The correlation analysis performed to analyze the relationship between HRD Climate Dimensions i.e., General Climate, OCTAPAC Culture and HRD Mechanisms along with employee development.

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An Empirical Presentation of HRD Climate and Employee Development In Telecommunication Industry Nawab Ali Khan, Sheema Tarab Table-2: Showing Descriptive Statistics showing correlation between HRDC and ED HRDC ED GC OC HRDM Pearson Correlation 1 .014 .858** .842** .896** HRDC Sig. (2-tailed) .893 .000 .000 .000 N 100 100 100 100 100 Pearson Correlation .014 1 -.120 -.007 .178 ED Sig. (2-tailed) .893 .234 .944 .077 N 100 100 100 100 100 Pearson Correlation .858** -.120 1 .518** .730** GC Sig. (2-tailed) .000 .234 .000 .000 N 100 100 100 100 100 Pearson Correlation .842** -.007 .518** 1 .626** OC Sig. (2-tailed) .000 .944 .000 .000 N 100 100 100 100 100 **. Correlation is significant at the 0.01 level (2-tailed). Source: Data Analyzed by the researchers The results highlight that the overall HRD Climate and the different components of HRD Climate are positively and significantly correlated with each other. The descriptive statistic shows that the correlation between the general climate and the overall HRD Climate is .858, which is considered to be a good correlation. While the OCTAPAC Culture rate of correlation with the climate counts to be .842 and the correlation coefficient of HRD mechanism with the HRD climate is .896. Among the three broad dimensions of the HRD Climate (i.e. General Climate, OCTAPAC Culture and HRD Mechanism), the highest correlation is between HRD mechanism and overall HRD Climate. Consequently, these results show that the HRD Climate in Reliance Communications is influential and contributing satisfactorily to increase the level of development among its employees.

7. CONCLUSION AND SUGGESTIONS HRD climate is an integral part of the organizational climate. It contributes to the overall health and self-renewing capabilities of the individuals, dyads and team of the entire organization. However, the researchers feel that there still lies a scope for further improvement in the implementation of policies and practices in the said organization. Some suggestions have also been forwarded by the authors in this regard.  The top management of the company must emphasize on the quality of work life and welfare measures for employees, which can infuse in them the team spirit and sense of belongingness.  The elements in a typical QWL program should include - open communications, equitable reward systems, a concern for employees’ job security and satisfying careers and participation in decision making.

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An Empirical Presentation of HRD Climate and Employee Development In Telecommunication Industry Nawab Ali Khan, Sheema Tarab

 Employees at non-managerial level should also be give importance for the overall development of the organization.  Management of the organization must ensure healthy and friendly working climate and fine welfare measures for the employees at all levels.  Innovative techniques should be introduced in the organization on a regular basis and proper guidance relevant to utilize such techniques must have been organized by the managers in the organization. Consequently, in Reliance Communications Ltd., there exists a good HRD climate which is ideally synchronized with the development of its employees. Further, the employees have responded in a positive and favorable manner, and more significantly, the researchers’ findings support the existing literature of tracing the relationship of HRD Climate and employee development among the employees of an organization in Indian context.

8. RESEARCH LIMITATIONS AND FUTURE DIRECTIONS The present study has certain limitations that offer opportunities for future research. The data is based on individual opinion, which may bring in some bias. In this study, the survey has been conducted among 100 employees of only one company in private sector. Since this study was carried out in a private sector organization; the findings of the study are not applicable to other types of organizations. Further, the sample consisted only of managerial personnel; the findings may be further conducted among other categories of employees, i.e., supervisors and workers, with caution. To establish the generalization of the results, within the context of Indian telecommunication Industry, it needs to be surveyed among other employees and other organizations of both public and private sector of telecom industry.

REFERENCES [1]. Agarwala, T (2002). Innovative Human Resource Practices and HRD Climate: A Comparison of Automobile and IT Industries in the Book entitled Human Resource Development in Asia edited by Pareek, U, Osman, G., Ramnarayan and T.V. Rao, New Delhi, Oxford & IBH , pp.3-10. [2]. Hyde, A.M., Deshpande, S. and Mishra, P.D (2008). Aura and Ambience in Human Relations: Private Banks Scene. SCMS Journal of Indian Management, Vol.12, Jan-Mar, pp.72-79. [3]. Jain, V.K, Singhal, K.C. and Singh, V.C. (1997). HRD Climate in Indian Industry. Productivity, 37(4), pp.628-639. [4]. Purang, P. (2008). Dimensions of HRD Climate Enhancing Organizational Commitment in Indian Organizations. Indian Journal of Industrial Relations, Vol.43, No.4, pp. 324-333. [5]. Rao, Nageshwara, B.C. (2009). Study on HRD Climate in Vijayawada Thermal Power Station, Ibrahimpatnam, A.P. Gitam Journal of Management, Vol.7, No.1, pp.248-255. [6]. Rao, T.V. and Abraham, S.J. (1986). Recent Experiences in HRD. Oxford & IBH Publishing Co. Pvt. Ltd. New Delhi, pp. 23-34. [7]. Rodrigues, L.L.R. (2005). Industry-Institute Correlates of HRD Climate: Empirical Study based Implications. Indian Journal of Industrial Relations, Vol-41, No.2, pp. 87-99.

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An Empirical Presentation of HRD Climate and Employee Development In Telecommunication Industry Nawab Ali Khan, Sheema Tarab [8]. Rohmetra, N. (1998). Towards creating a learning organization-the HRD Climate Focus. Pradigm, Vol.2, No.1, pp. 56-63. [9]. Solkhe, A. and Chaudhary, N. (2010). HRD Climate and Organizational Performance with focus on Job Satisfaction as a Correlate: Exploratory Analysis. Technia Journal of Management Studies, Vol. 5, No.1, April-September, pp.47-63. [10]. Srimannarayana, M. (2008). Human Resource development climate in India. Indian Journal of Industrial Relations, Vol. 44, No.2, pp. 73-84. [11]. Subramani, A.K. and Akbar Jan, N. (2011). Organizational Climate Changes in IT Industry. International Journal of Commerce, Vol.III, Issue. 28, pp.40-41.

APPENDIX-I Results of Mean and Standard Deviation for HRD Climate Questionnaire No. Items Mean Std. Dev. The top management of this organization goes out of its way to make 1. 3.83 .604 sure that employees enjoy their work. The top management believes that human resources are an extremely 2. 3.71 .686 important resource and that they have to be treated more humanly. Development of the subordinates is seen as an important part of their 3. 3.45 .702 job by the managers/officers herein. The personnel policies in this organization facilitate employees’ 4. 3.84 .545 development. The top management is willing to invest their time and energy 5. including other organizational resources to ensure employees’ 3.80 .651 development. Senior officers/executive in this organization takes active interest in 6. 4.01 .611 their juniors and helps them learn their job. People lacking competence in doing their jobs are helped to acquire 7. 3.33 .620 competence rather than being left unattended. Managers in this organization believe that employees’ behavior can be 8. 3.54 .731 changed and people can be developed at any stage of their life. The psychological climate in this organization is very conducive to 11. any employee interested in developing oneself by acquiring new 3.93 .640 knowledge and skills. The top management of this organization makes efforts to identify 13. 3.53 .643 and utilize employees’ potential. The organization’s future plans are made known to managerial staff 36. 3.27 .737 to help them develop their juniors and prepare them for future. Overall General Climate 3.66 0.652 No. Items Mean Std. Dev. 9. People in this organization are helpful to each other. 3.27 .737 Employees in this organization are very informal and do not hesitate 10. 3.12 .856 to discuss their personal problems with their supervisors.

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An Empirical Presentation of HRD Climate and Employee Development In Telecommunication Industry Nawab Ali Khan, Sheema Tarab

People in this organization do not have any fixed mental impressions 18. 3.44 .656 about each other. Employees are encouraged to experiment with new methods and try 19. 3.22 .746 out creative ideas. When any employee makes a mistake his supervisors treat it with 20. understanding and help him to learn from such mistakes rather than 3.14 .865 punishing him or discouraging him. When behavior feedback is given to employees they take it seriously 22. 3.95 .730 and use it for development. Employees in this organization take pains to find out their strengths 23. 4.09 .683 and weaknesses from their supervising officers or colleagues Employees returning from training programmes are given 25. 3.82 .783 opportunities to try out what they have learnt. 27. People trust each other in this organization. 3.79 .743 Employees are not afraid to express or discuss their feelings with their 28. 3.43 .742 superiors. Employees are not afraid to express or discuss their feelings with their 29. 3.76 .740 subordinates. Employees are encouraged to take initiative and do things on their 30. 3.54 .610 own without having to wait for instructions from supervisors. Delegation of authority to encourage juniors to develop handling 31. 3.59 .668 higher responsibilities is quite common in this organization. When seniors delegate authority to juniors, the juniors use it as an 32. 3.91 .621 opportunity for development. Overall OCTAPAC Culture 3.58 0.727 No. Items Mean Std. Dev. Seniors guide their juniors and prepare them for future 12. 4.08 .646 responsibilities/roles they are likely to take up. Promotion decisions are based on the suitability of the promotee 14. 3.96 .549 rather than based on any favoritism or partiality. There are mechanisms in this organization to reward any good work 15. 3.54 .784 done or any contribution made by employees. When an employee does good work his supervising officers take 16. 3.55 .642 special care to appreciate it. Performance appraisal reports in this organization are based on 17. objective assessment and adequate information and not on favoritism 3.56 .625 or partiality. Weaknesses of employees are communicated to them in a non- 21. 3.69 .662 threatening way. When employees are sponsored for training, they take it seriously and 24. 4.12 .640 try to learn from the programmes they attend.

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An Empirical Presentation of HRD Climate and Employee Development In Telecommunication Industry Nawab Ali Khan, Sheema Tarab Employees are sponsored for training programmes on the basis of 26. 3.74 .733 genuine training needs. 33. Team spirit is of high order in this organization. 3.62 .826 When problems arise people discuss these problems openly and try to 34. 3.33 .620 solve them rather than keep accusing each other behind the back. Career opportunities are pointed out to juniors by senior officers in 35. 3.54 .731 the organization. This organization ensures employees’ welfare to such an extent that 37. the employees can save a lot of their mental energy for work 3.12 .856 purposes. 38. Job-rotation in this organization facilitates employee development. 3.93 .640 Overall HRD Mechanism 3.68 0.689 Overall HRD Climate 3.64 0.69

APPENDIX-II Results of Mean and Standard Deviation for Employee Development Questionnaire No. Items Mean Std. Dev. 1. Your company is a catalyst of change and innovation. 3.84 0.61 2. Managers in your company have a clear sense of direction. 3.71 0.69 To perform your job without any hassle, required information and 3. 3.45 0.70 guidance is provided. 4. You have been given ample freedom to work in your organization. 3.84 0.54 5. You are rewarded /appreciated for your good work. 3.81 0.65 Staff meetings are open and have honest participation in your 6. 4.01 0.61 organization. Training programs are organized on a regular basis for the up 7. 3.33 0.62 gradation and enhancement of your knowledge and skills. 8. Company offers real opportunities to improve and utilize your skills. 3.53 0.73 Seniors/ Superiors have friendly relations with their subordinates 9. 3.28 0.74 and juniors. Delegation of authority is practiced by the top level managers in 10. 3.13 0.86 your company. Overall Employee Development 3.59 0.67

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A Study of Relationship between Demographical Variables, Organizational Structure and Social Interaction with Organizational Commitment among Employees of Saudi Arabia

Nasser S. Al-Kahtani* Dean, College of Business Administration, Al-Kharj, Salman Bin Abdulaziz University, Kingdom of Saudi Arabia Email Id: [email protected]

Abstract

The purpose of the present research paper is to investigate the relationship between demographical variables, organizational structure and social ARTICLE INFO interaction with organizational commitment among public sectors RECEIVED ON: 28/02/2012 employees working in Saudi Arabia. The sample consisted of 1,022 ACCEPTED ON: 19/05/2012 employees from different fifteen ministries of Saudi Arabia located at Riyadh. Research questions and a set of tools containing demographical variables, organizational commitment, organizational structure variables and social interaction variables were used to gather the information about the employees. Multiple regression and product moment correlation Reference to this paper methods were used to test the hypotheses and research questions in the should be made as follows : study. The results reveal that (i) demographical variables such as age, Al-Kahtani, Nasser S.(2012) marital status and number of dependents were found significantly related “A Study of Relationship with organizational commitment while, education was found significant Between Demographical but inversely related with organizational commitment. (ii) Organizational Variables, Organizational structure dimensions such as centralization and formalization were found Structure And Social significantly related with organizational commitment (iii) social Interaction with interaction facets such as supervisory behavior and relationship with co- Organizational Commitment workers were found significantly related with organizational among Employees of Saudi commitment. The implications of these findings suggest for the Arabia” Int. J. of Trade and improvement of organizational commitment by using several human Commerce-IIARTC, Vol. 1, resource aspects to motive them for better performances. No. 1, pp.11-22 Keywords: Commitment, demographical variables, organizational structure, social interaction.

*Corresponding Author

A Study of Relationship Between Demographical Variables, Organizational Structure and Social Interaction... Nasser S. Al-Kahtani 1. INTRODUCTION The age of predictability is over and the age of uncertainty has begun. In today’s fast changing environment the future depend upon employees’ level of commitment in all types of organizations in the society. Hence, organizational commitment becomes an important and useful construct in addressing and explaining such dilemmas in organizational research and management practices. Both public and private organizations started paying more attention to the concept of organizational commitment especially when they began facing serious behavior problems, such as absenteeism, tardiness, turnover and low level of production and effectiveness. In general, the concept of organizational commitment has received a great deal of attention in western countries. In Saudi Arabia, the concept of organizational commitment has been ignored, especially in the public sector; therefore, conducting such research seems significant and worthwhile. In the proposed research, the concept of organizational commitment would be treated as dependent variable in attempting to account for the causes or antecedents of organizational commitment. An understanding of the antecedents of commitment would lead to identifying organizational practices which influence the level of commitment as experienced by members of the organization.

2. REVIEW OF LITERATURE The concept of organizational commitment varies in the literature and there was little consensus about the meaning of organizational commitment (Balfour and Wechsler, 1990; Beckeri et al. 1995; Meyer and Allen, 1991; Dunham et al. 1994). Mowday et al. (1982) found ten distinct definitions in different studies on organizational commitment. Weiner (1992) refers the word commitment as the ‘sense of being bound emotionally or intellectually to some course of action’. However, organizational commitment has varied in organizational context and most commonly defined the term organizational commitment by Porter et al. (2004) is ‘the identification with an organization and acceptance of its goals and values as one’s own’. Much of the researches concerning the causes of commitment have dealt with the personal characteristics such as age, education, number of dependents and marital status. An employee’s age for instance was found to be positively related to commitment (Angle and Perry,1981;Faerman, 1987; Morris and Sherman,1981;Mathieu and Zajac, 1990; Dockel, 2003; Dodd-McCue and Wright, 1996; Salami, 2008; Azeem, 2010; Allen and Meyer, 1993; Padala, 2011).As an employee gets older his level of commitment to that organization increases. In contrast to age, education has been found to be inversely related to commitment (Angle and Perry, 1981; Faerman, 1987; Morris and Sherman, 1981; Glisson and Durick, 1988; Padala, 2011). Another demographic factor, marital status has been found to be significantly related to organizational commitment (Dodd- McCue and Wright, 1996; Mannheim et al. 1997 and Morrow, 1993). It was found that married and separated persons were committed to organizations more than were single persons (Kawakubo, 1987).Researchers found that married persons must support their families and usually have more responsibilities than single persons, therefore, the former are committed (Faerrman ,1987; Ismail, 1990; Lincoln and Kalleberg, 1990; Oliver, 1990; John and Taylor, 1999; Tsui et al.,1994; Bowen et al.,1994; Qiao, et al., 2009 and Salami, 2008).Very few studies have been initiated to see the relationship between number of

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A Study of Relationship Between Demographical Variables, Organizational Structure and Social Interaction... Nasser S. Al-Kahtani dependents and organizational commitment. Davis (1981) and Kawakubo (1987) indicate that a positive correlation exists between number of dependents and organizational commitment. In decentralization, employee participation in decision making is encouraged at more levels in the organization. Decentralization helped innovations and improves democratic decision-making and enhances the ability of lower organizational levels to influence senior management increased the level of job satisfaction, therefore, job satisfaction lead to commitment (Vedamanickam, 2001; Kanter, 2004; McNulty and Ferlie, 2004; Khandwalla and Mehta, 2004; Samaratunge, 2003 and George and Jones, 2008). Decentralization has been shown to have positive relationships with organizational commitment (Scott-Ladd et al., 2006 and Badr and Nour, 2011). Formalization is typically defined as the degree to which rules and procedures within a system are specified and followed (Pough et al., 1968). It has been found that employees with more written rules and procedures felt more committed to the organization than employee who had fewer written guidelines (Morris and Sherman, 1981; Reyes, 1990 and Hoy et al. 2001). Faerrman (1987) states that although it is logical to assume that position in the organizational hierarchy would be positively related to organizational commitment, research results in this area have been inconsistent. On one hand, Wesch and LaVan (1981) and Lincoln and Kalleberg (1990) and Loui (1995) found significant relationships between the two variables. Loui (1995) reported positive relationships with organizational commitment. It is noted that co-workers relationship with organizational commitment has been lessen studied by researchers. Study conducted by Kawakubo (1987) and Hsu (2000) found positive relationship between co-workers and commitment. Moreover, the participative and reward behaviors of supervisor will reduce the levels of role conflict and role ambiguity among subordinates, therefore, will increase the employees level of commitment (Jackson, 1983; Ismail, 1990; Dunham et al., 1994). Research in these areas has involved top management (Becker and Billings, 1993; Hunt and Morgan, 1994), participatory management (Dunham et al., 1994), supervisors (Becker, 1992; Becker et al., 1996).Trust in the leaders and co-workers affect the rate of job satisfaction, while the relationship between the leaders and the subordinates reveals the level of confidence, trust, and respect from the subordinates to the leaders (Robbins, 2003; Kristin, 2005; Liao et al., 2008 and Weng et al., 2010). Most recently Lin and Lin (2011) observed that job satisfaction is indeed an intervening variable to the relationship between co-workers’ relationship and organizational commitment.

3. OBJECTIVES Based on the retrospection of the literature, the researcher found that the concept of organizational commitment has been rarely investigated among the employees working in Saudi public sectors .Thereby, the primary goal of the proposed study would be to concentrate on identifying significant factors that may influence the commitment of public employees in the Saudi bureaucracy. To achieve the objective, the researcher has grouped antecedents of organizational commitment with demographical variables, organizational structure variables and social interaction dimension in the present study. This research study was developed to answer the following questions: 1. To what extent do demographic variables influence employees’ commitment to their relationship?

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A Study of Relationship Between Demographical Variables, Organizational Structure and Social Interaction... Nasser S. Al-Kahtani 2. To what extent do organizational structure variables influence employees’ commitment to their relationship? 3. To what extent do relationships in the workplace influence employees’ commitment to their relationship?

4. HYPOTHESES On the basis of retrospection of the literature reviewed and objectives of the present study the following three null hypotheses has been formulated: HO1.There is no significant relationship between organizational commitment and demographical variables (i.e., age, education, marital status and number of dependents). HO2.There is no significant relationship between organizational commitment and organizational structure variables (e.g., centralization and formalization). HO3.There is no significant relationship between organizational commitment and social interaction variables (e.g., supervisory behavior and relationships with co-workers).

5. RESEARCH METHODOLOGY 5.1. Sample The sample of the present study was 1022 employees from different fifteen ministries of Kingdom of Saudi Arabia located at Riyadh. 5.2. Tools Used The following tools were used to gather the information from participants in addition to research questions: 5.2.1. Organizational commitment The most widely used instrument to measure organizational commitment questionnaire (OCQ) developed by Mowday et al. (1979).The OCQ is a 14 statement instrument which uses a 7 –pint scale ‘strongly disagree to strongly agree’. The OCQ has had high reliabilities when used with non English speaking respondents. Luthans et al. (1985) reported that the OCQ versions in Japanese and Korean have high reliabilities of .94 and .87 respectively. 5.2.2 Demographic variables The demographic data information sheet was used to collect information on the participant’s age, education, marital status and number of dependents. 5.2.3. Centralization The Centralization Scale developed by Hage and Aiken (1969) (cited in Price, 1972) was used to measure this variable. The scale consists of two sub scales known as ‘Hierarchy of Authority’ containing five items and ‘Participation in Decision Making’ which is comprised of four items. In their studies the authors reported an alpha coefficient of .86 (cited in Cook et al., 1981). 5.2.4. Formalization Formalization Scale developed by Hage and Aiken (1969) were used to measure formalization. The Formalization Scale consists of five sub-scales which define the following sub-constructs: job codification, rule observation, rule manual, job description and specificity of job description. The scale in general, has an acceptable level of reliability ranging from .76 to .85.

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A Study of Relationship Between Demographical Variables, Organizational Structure and Social Interaction... Nasser S. Al-Kahtani

5.2.5. Supervisory Behavior The Supervisory Behavior Description Questionnaire (SBDQ) developed by Fleishman (cited in Cook et al., 1981) was used to measure supervisory behavior. The scale consist of two sub-scales ‘Consideration’ and ‘Initiating Structure’ and contains forty eight items designed to measure ‘ Individuals’ leadership behavior through the descriptions from those who they supervise.’ The internal reliability coefficient for consideration and structure were found .92 and .68 among supervisor whereas, for non supervisor internal reliability coefficient for both sub-scale were .98 and .78 respectively. 5.2.6. Relations with co-workers The variable, relations with co-workers was intended to measure the degree to which employees are friendly and supportive of one another. Seven items were used in this study; three items were adopted from the ‘Relations with Co-workers’ sub scale of the facet Specific Job Satisfaction Scale (cited in Cook et al., 1981), and four items were introduced by the researcher to measure the level of support among employees. The relation with co-workers sub-scale has a relatively adequate level of reliability (alpha .61) and a high level of reliability for the complete scale (alpha .92). 5.3. Statistics By keeping in mind the present study objectives multiple regression and product moment correlation methods were used to test the hypotheses and research questions in the study.

6. ANALYSIS AND INTERPRETATION The total 1600 questionnaires were sent to the employees of fifteen ministries of Kingdom of Saudi Arabia and finally researcher received 1022 filled questionnaires from the respondents. To maintain ethics of research, permission has been taken from higher official by providing detail about the nature of the study and assured of confidentiality and informed them that this study will be used for academic purpose. The participants were allowed to take their own time to complete the questionnaires. The collected data put into statistical analyses for concrete results which has been presented in different tables for results and discussion. Table -1: Showing Relationship between Demographic Factors and Organizational Commitment Sr.No. Variables r-value 1. Age .15** 2. Education -.12** 3. Marital Status .07* 4. Number of dependents .15** Significances are two tailed: *p<.05, **p < .01 It is evident from Table-1 that demographic factors such as age(r=.15, p< .01), marital status ( r=.07, p< .05 ) and number of dependents (r=.15, p< .01), were found positively related with organizational commitment. While education (r=-.12, p< .01) was found to be inversely related to commitment though significant. Further, probing the research question it was observed that demographic factors were tested together using multiple regression to determine their influence on commitment as a group, R2 =.07 indicating that 7% of the variation in organizational commitment is explained by the set of

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A Study of Relationship Between Demographical Variables, Organizational Structure and Social Interaction... Nasser S. Al-Kahtani Socio-demographic factors. Analysis also showed F=19.05 and the significance F=.000.Because significance F is less than .05, and then R2 is significantly different from 0. Thus, the set of demographical variables is significantly related to organizational commitment. Multiple R=.26 R2=.07 F=19.05* * p < .01 However, the above findings supported the research question related to demographic factors that relationship existed in most of the cases are positively but education found to be significantly negatively related with commitment. Therefore, the proposed null hypotheses HO1 have been rejected based on the findings. Table-2: Showing Relationship between Organizational Structure Variables and Organizational Commitment S. No. Variables r-value 1. Centralization .25** 2. Formalization .33** ** Significances are two tailed p < .01 The result shown in Table-2 reveals the relationship between organizational structure variables and organizational commitment. The facets of organizational variables such as centralization (r=- .25, p< .01) and formalization (r=.33, p< .01) were found to be significantly related with organizational commitment. To investigate the research question, multiple regression test indicates that R2 =.20 indicating that 20% of the variation in organizational commitment is explained by the set of organizational structure variables. Result also revealed F=123.57 and the significance F=.000.Because significance F is less than .05, and then R2 is significant different from 0.As a result the set of organizational structure variables are significantly related to organizational commitment. Multiple R=.44 R2=.20 F=123.57* * p < .01 However, these findings supported the research question related to organizational structure variables that relationship subsisted in both the cases were found positively and significantly related with organizational commitment. Therefore, the proposed null hypotheses HO2 have been rejected in the present study. Table-3: Showing Relationship between Social Interaction Dimension and Organizational Commitment S. No. Variables r-value 1. Supervisory behavior .35** 2. Relationships with co-workers .27** ** Significances are two tailed p < .01 It has been observed from Table-3 shows the relationship between social interaction dimension and organizational commitment. The dimensions of social interaction such as supervisory

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A Study of Relationship Between Demographical Variables, Organizational Structure and Social Interaction... Nasser S. Al-Kahtani behavior (r=-.35, p< .01) and relationships with co-workers (r=.27, p< .01) were found to be significantly related with organizational commitment. By keeping our objective to test hypotheses with the help of research question, multiple regression test indicates that R2 =.39 indicating that 39% of the variation in organizational commitment is explained by the set of social interaction variables. Results also revealed F=91.60 and the significance F=.000.Because significance F is less than .05, and then R2 is significantly different from 0 establishing the social interaction variables are significantly related to organizational commitment. Multiple R=.39 R2=.15 F=91.60* * p < .01 However, the above findings supported the research question related to social interaction variables that relationship existed in both the cases were found positively and significantly related with organizational commitment. Therefore, the proposed null hypotheses HO3 have been rejected based on the findings.

7. DISCUSSION Demographic variables as whole was found to have a significant relationship with organizational commitment (R2=.07).On the basis of results demographical variable age was found significantly related with organizational commitment (Angle and Perry, 1981; Morris and Sherman, 1981; Dodd-McCue and Wright, 1996; Dornstein and Matalon, 1998; Salami, 2008 and Azeem, 2010) supported the findings. As age increased individual opportunities for alternate employment become more limited. This decrease in options value of the present employer, thereby, leading to increased psychological attachment Mowday et al. (1982). Another reason may be that more education can spell less commitment to work, because of greater opportunities to find fulfillment outside the work role. They add that it may be caused by higher expectations leading to feelings of frustration and non-fulfillment of outside the work role. On the other hand, education has been found to be inversely related to organizational commitment (Angle and Perry, 1981; Padala, 2011) .The result indicates that more educated people may often have higher expectation which organizations may be unable to meet. Marital status is also significantly related to organizational commitment. It was found that married and separated persons were committed to organizations more than were single persons (Kawakubo, 1987; Lincoln and Kalleberg, 1990; Oliver, 1990; Tsui et al., 1994 and Salami, 2008).The result may be attributed that married persons need to support families member and usually have more responsibilities than a single person might lead to have higher level of commitment. Even though, research has been limited regarding the relationship between numbers of dependents and organizational commitments indicate that there is a positive correlation between them. The organizational structure dimension was found to account for 20% of the organizational commitment (R2=.20) among respondents of this study. Both centralization and formalization contributed to this significant positive relationship with organizational commitment .These results are consistent with the findings of Klenke (1982), Morris and Sherman (1981) and Reyes

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A Study of Relationship Between Demographical Variables, Organizational Structure and Social Interaction... Nasser S. Al-Kahtani (1990). In decentralization, employee participation in decision-making is encouraged and foster employees awareness, will feel more involved and satisfied with their job leading to organizational commitment (Ugboro, 2006; Kanter, 2004 and Badr and Nour, 2011). Morris and Sherman (1981) indicate that increased formalization may influence of organizational commitment by facilitating both job and role clarity. Reyes (1990) suggests that since highly commitment employees, by definition work hard to accomplish organizational goals, the presence of written rules and procedures may help to ameliorate otherwise ambiguous situations and thereby, provide means to achieve those goals. In this study, social interaction dimension accounted for 15% of organization commitment of respondents. Both variables of this dimension, supervisory behavior and co-workers’ relationships have significant positive relationships with organizational commitment. These results are agreement with Fink (1992), Ismail (1990), Kawabuko (1987) and Morris and Sherman (1981). The positive relationship between supervisory behavior and organizational commitment in this study indicates that the participation and reward behaviors directly affect the employees of organizational commitment. Ismail (1990) indicates that supervisory behavior plays a significant role influencing the work group’s job environment (e.g., high cooperation, harmonious working relationships). Work experience (e.g., motivating pleasant), as an important factor affecting organizational commitment is to large extent influenced by the work environment. Decotiis and Summers (1987) indicated that supervisory behavior could allow for increased interaction and communication between supervisors and subordinates. The positive correlation between co-workers’ relationships and organizational commitment, in this study is supported by Kawabuko (1987) and Lin and Lin (2011).The study indicates that one may leave an organization because of an uncomfortable relationship with others. Fink (1992) suggested that friendly co- workers tend to be one of the most important sources of satisfaction and as a result of commitment to the organization.

8. CONCLUSION On the basis of results obtained the following conclusions have been drawn:  Demographical variables such as age, marital status and number of dependents were found positive and significantly related with organizational commitment.  Education as a demographical variable was found significant but inversely related with organizational commitment.  Centralization and formalization as the organizational structure variables were found significantly related with organizational commitment.  The facets of social interaction variables, supervisory behavior and relationships with co- workers were found significantly related with organizational commitment.

9. SUGGESTIONS FOR FUTURE RESEARCH The present research finding has contributed to contemporary areas of organizational behavior & development and is valued for researchers, academicians, consultants and management practitioners. By keeping several aspects of research in mind, the researcher has also given some suggestion for future research. This study has been widely investigated with male and in Riyadh area only, so it is suggested to study with other sample and cities of Saudi Arabia to determine

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A Study of Relationship Between Demographical Variables, Organizational Structure and Social Interaction... Nasser S. Al-Kahtani research to probe whether the result are applicable to Saudi public sector employees. On the basis of findings it is necessary to design policies for greater level of organizational commitment. Orientation, training, participation in decision making process, fairness, clarity of roles and responsibilities, timely promotion, intrinsic and extrinsic rewards and other human resource aspects must be taken into consideration to enhance the level of organizational commitment of the employees in the organization.

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A Camel Model Analysis of Nationalized Banks in India

K.V.N. Prasada*, G. Ravinderb a ITM Business School, Warangal, Andhra Pradesh, email-id: [email protected] b ITM Business School, Warangal, Andhra Pradesh, email-id: [email protected]

Abstract

Banking sector is one of the fastest growing sectors in India. Today’s banking sector becoming more complex. Evaluating Indian banking sector ARTICLE INFO is not an easy task. There are so many factors, which need to be taken care RECEIVED ON: 25/02/2012 ACCEPTED ON: 30/05/2012 while differentiating good banks from bad ones. To evaluate the performance of banking sector we have chosen the CAMEL model which measures the performance of banks from each of the important parameter like Capital Adequacy, Assets Quality, Management Efficiency, Earning Quality and Liquidity. After deciding the model we have chosen twenty nationalized banks. According to the importance of study each parameter is given equal weights. Results shown that on an average Andhra bank was at the top most position followed by bank of Baroda and Punjab & Reference to this paper Sindh Bank. It is also observed that Central Bank of India was at the should be made as follows : Prasad, K.V.N. and bottom most position. Ravinder, G.(2012) ”A Keywords: Nationalized Banks, Performance Evaluation, CAMEL Camel Model Analysis of Model and Ranking Method. Nationalized Banks In India” Int. J. of Trade and Commerce-IIARTC, Vol. 1, No. 1, pp.23–33

*Corresponding Author

A Camel Model Analysis of Nationalized Banks in India K.V.N.Prasad, G. Ravinder 1. INTRODUCTION During the 20th century in most of the nations, domestic banking was generally subjected to heavy regulations and financial repression. The growth and financial stability of the country depends on the financial soundness of its banking sector. The Indian banking sector has been working in a more open and globalize environment for two decades since liberalization. The liberalization process of Indian Economy has made the entry of new private sector banks possible and allowed the foreign sector banks to increase their branches in the banking sector. Besides, following India’s commitment to the WTO, foreign banks have been permitted to open more branches with effect from 1998-99. With the increased competition and the emphatic on profitability, the public sector banks are now moving towards on economic- oriented model departing from the social approach followed for decades. Thus, the restructuring of public sector banks and the emergence of new banks in the private sector as well as the increased competition from foreign banks, have improved the professionalism in the banking sector. The increased presence of the private and foreign banks during the past decade has made the market structure of the banking sector in terms of competitive pricing of services, narrow spreads, and improving the quality of the services. The public sector banks, which had dominated the banking sector for decades, are now feeling the heat of the competition from private and foreign sector banks. In the above back drop the present study is necessitated to examine the performance of nationalized banks during the period 2006-10. The study is based on twenty ratios of the variables relating to capital adequacy, assets quality, management efficiency, earnings quality and liquidity.

2. REVIEW OF LITERATURE In the process of continuous evaluation of the bank’s financial performance both in public sector and private sector, the academicians, scholars and administrators have made several studies on the CAMEL model but in different perspectives and in different periods. Cole et al. (1995) conducted a study on “A CAMEL Rating's Shelf Life” and their findings suggest that, if a bank has not been examined for more than two quarters, off-site monitoring systems usually provide a more accurate indication of survivability than its CAMEL rating. Godlewski (2003) tested the validity of the CAMEL rating typology for bank's default modelisation in emerging markets. He focused explicitly on using a logical model applied to a database of defaulted banks in emerging markets. Said and Saucier (2003) examined the liquidity, solvency and efficiency of Japanese Banks using CAMEL rating methodology, for a representative sample of Japanese banks for the period 1993- 1999, they evaluated capital adequacy, assets and management quality, earnings ability and liquidity position. Prasuna (2003) analyzed the performance of Indian banks by adopting the CAMEL Model. The performance of 65 banks was studied for the period 2003-04. The author concluded that the competition was tough and consumers benefited from better services quality, innovative products and better bargains. Derviz et al. (2008) investigated the determinants of the movements in the long term Standard & Poor’s and CAMEL bank ratings in the Czech Republic during the period when the three biggest

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A Camel Model Analysis of Nationalized Banks in India K.V.N.Prasad, G. Ravinder banks, representing approximately 60% of the Czech banking sector's total assets, were privatized (i.e., the time span 1998-2001). Bhayani (2006) analyzed the performance of new private sector banks through the help of the CAMEL model. Four leading private sector banks – Industrial Credit & Investment Corporation of India, Housing Development Finance Corporation, Unit Trust of India and Industrial Development Bank of India - had been taken as a sample. Gupta and Kaur (2008) conducted the study with the main objective to assess the performance of Indian Private Sector Banks on the basis of Camel Model and gave rating to top five and bottom five banks. They ranked 20 old and 10 new private sector banks on the basis of CAMEL model. They considered the financial data for the period of five years i.e., from 2003-07.

3. METHODOLOGY CAMEL is basically ratio based model for evaluating the performance of banks. It is a management tool that measures capital adequacy, assets quality, and efficiency of management, earnings’ quality and liquidity of financial institutions. The period for evaluating performance through CAMEL in this study ranges from 2005-06 to 2009-10, i.e., for 5 years. The absolute data for twenty nationalized banks on capital adequacy, asset quality, management efficiency, earning quality and liquidity ratios is collected from various sources such as annual reports of the banks, Prowess, Ace Analyzer, Analyst journal and average of each ratio calculated for the period 2006- 10. All the banks were first individually ranked based on the sub-parameters of each parameter. The sum of these ranks was then taken to arrive at the group average of individual banks for each parameter. Finally the composite rankings for the banks were arrived at after computing the average of these group averages. Banks were ranked in the ascending/descending order based on the individual sub-parameter.

4. DATA & ANALYSIS CAMEL is basically ratio based model for evaluating the performance of banks. It is a management tool that measures capital adequacy, assets quality, and efficiency of management, quality of earnings and liquidity of financial institutions.

5. CAPITAL ADEQUACY It is important for a bank to maintain depositors’ confidence and preventing the bank from going bankrupt. It reflects the overall financial condition of banks and also the ability of management to meet the need of additional capital. The following ratios measure capital adequacy:  Capital Adequacy Ratio (CAR): The capital adequacy ratio is developed to ensure that banks can absorb a reasonable level of losses occurred due to operational losses and determine the capacity of the bank in meeting the losses. As per the latest RBI norms, the banks should have a CAR of 9 per cent.  Debt-Equity Ratio (D/E): This ratio indicates the degree of leverage of a bank. It indicates how much of the bank business is financed through debt and how much through equity.  Advance to Assets Ratio (Adv/Ast): This is the ratio indicates a bank’s aggressiveness in lending which ultimately results in better profitability.

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A Camel Model Analysis of Nationalized Banks in India K.V.N.Prasad, G. Ravinder  Government Securities to Total Investments (G-sec/Inv): It is an important indicator showing the risk-taking ability of the bank. It is a bank’s strategy to have high profits, high risk or low profits, low risk. The various ratios measuring capital adequacy of sample banks are depicted in Table I. Table 1 : Camel Ratings (2006-10) : Capital Adequacy. CAR(%) D/E(times) Adv/Ast(%) G-sec/Inv Group Bank Avg Rank Avg Rank Avg Rank Avg Rank Avg Rank Allahabad Bank 12.93 7 0.68 3 58.28 14 76.84 19 10.75 10 Andhra Bank 12.82 8 0.73 5 59.39 8 87.39 2 5.75 2 Bank of Baroda 13.35 3 0.81 7 58.49 13 77.53 17 10 8 Bank of India 12.29 13 1.67 17 59.94 5 79.99 14 12.25 13 Bank of 11.68 18 1.12 13 57 15 85.45 7 13.25 16 Maharashtra Canara Bank 13.1 5 0.91 9 60.39 3 85.88 5 5.5 1 Central Bank of 11.44 19 0.93 10 55.77 18 83.73 8 13.75 20 India Corporation Bank 13.56 1 0.93 10 56.93 16 78.31 16 10.75 10 Dena Bank 11.86 17 0.69 4 59.74 6 82.29 12 9.75 7 IDBI Bank 12.67 9 6.81 20 60.11 4 72.4 20 13.25 16 Indian bank 13.38 2 0.42 1 55.39 19 83.16 9 7.75 4 Indian Overseas 13.15 4 1.17 14 58.74 12 87.22 3 8.25 5 Bank Oriental Bank of 12.52 11 0.48 2 59.24 9 85.83 6 7 3 Commerce Punjab & Sindh 12.18 14 2.03 19 58.79 11 86.52 4 12 12 Bank Punjab National 13.08 6 0.95 12 58.83 10 83.05 10 9.5 6 Bank Syndicate Bank 12.01 16 1.3 15 60.76 1 88.62 1 8.25 5 UCO Bank 11.38 20 1.72 18 60.47 2 82.21 13 13.25 16 Union Bank of India 12.5 12 1.41 16 59.7 7 79.62 15 12.5 14 United Bank of 12.62 10 0.77 6 52.04 20 77.25 18 13.5 19 India Vijaya Bank 12.03 15 0.87 8 56.18 17 82.92 11 12.75 15 Source: Secondary data available in Ace analyzer and Prowess data base compiled by Ms-Excel It is clear that all banks are maintained higher CAR than the prescribed level. It is found that Corporation bank secured the top position with highest average CAR of 13.56 followed by Indian Bank (13.38), Bank of Baroda (13.35). UCO bank was at the bottom most position with a least average CAR of 11.38. In terms of Debt equity ratio Indian bank is at the top position with least average of 0.42 followed by Oriental Bank of Commerce (0.48) and Allahabad Bank (0.68). In case

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A Camel Model Analysis of Nationalized Banks in India K.V.N.Prasad, G. Ravinder of Advances to assets, Syndicate Bank was at the first position with highest average of 60.76 followed by UCO Bank (60.47) and Canara Bank (60.39). United Bank of India was at the bottom most position with least average of 52.04. Its again Syndicate Bank was at the top most position in Government securities to Investments with highest average of 88.62, followed by Andhra bank and Indian Overseas Bank. IDBI Bank was at the last position with the least average of 72.4. On the basis of group averages of four sub-parameters of capital adequacy Canara Bank was at the top position with group average of 5.5, followed by Andhra Bank (5.75) and Oriental Bank of Commerce (7). Central Bank of India stood at the last position due to its poor performance in CAR and Adv/Ast.

6. ASSETS QUALITY The quality of assets is an important parameter to gauge the strength of bank. The prime motto behind measuring the assets quality is to ascertain the component of non-performing assets as a percentage of the total assets. The ratios necessary to assess the assets quality are:  Net NPAs to Total Assets (NNPAs/TA): This ratio discloses the efficiency of bank in assessing the credit risk and, to an extent, recovering the debts.  Net NPAs to Net Advances (NNPAs/NA): It is the most standard measure of assets quality measuring the net non-performing assets as a percentage to net advances.  Total Investments to Total Assets (TI/TA): It indicates the extent of deployment of assets in investment as against advances.  Percentage Change in NPAs: This measure tracks the movement in Net NPAs over previous year. The higher the reduction in the Net NPA level, the better it for the bank

Table-2: Represents Asset Quality position of sample banks during 2006-10 Table II : Camel Ratings (2006-10) : Assets Quality NNPAs/TA NNPAs/NA Ch.in.NPAs TI/TA (%) Group Bank (%) (%) (%) Avg Rank Avg Rank Avg Rank Avg Rank Avg Rank Allahabad Bank 0.56 10 0.734 9 30.17 16 15.5 9 11 12 Andhra Bank 0.12 1 0.122 1 26.49 4 15.8 10 4 1 Bank of Baroda 0.35 5 0.466 6 25.05 2 0.87 3 4 1 Bank of India 0.61 11 0.84 12 24.96 1 31.6 15 9.75 9 Bank of Maharashtra 0.84 15 1.208 17 30.43 18 28.9 14 16 20 Canara Bank 0.7 13 0.934 13 27.08 7 13.5 8 10.25 11 Central Bank of 1 18 1.382 19 30.15 15 -4.05 2 13.5 14 India Corporation Bank 0.23 4 0.366 4 27.67 9 1.53 4 5.25 3 Dena Bank 0.99 17 1.1 16 27.24 8 6.31 7 12 13 IDBI Bank 22.9 20 0.994 14 27.93 11 16.1 11 14 16 Indian bank 0.22 3 0.324 2 32.69 19 -4.93 1 6.25 4 Indian Overseas 0.73 14 1.084 15 28.72 13 60.2 19 15.25 19 Bank

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A Camel Model Analysis of Nationalized Banks in India K.V.N.Prasad, G. Ravinder Oriental Bank of 0.46 8 0.658 7 26.65 5 35.5 16 9 6 Commerce Punjab & Sindh 0.21 2 0.35 3 29.83 14 17.6 12 7.75 5 Bank Punjab National 0.35 5 0.414 5 27.05 6 106 20 9 6 Bank Syndicate Bank 0.61 11 0.822 11 26.04 3 22.3 13 9.5 8 UCO Bank 1.21 19 1.554 20 28.6 12 5.37 6 14.25 17 Union Bank of India 0.35 5 0.692 8 27.71 10 49 17 10 10 United Bank of India 0.97 16 1.274 18 34.83 20 4.24 5 14.75 18 Vijaya Bank 0.53 9 0.796 10 30.33 17 51.1 18 13.5 14 Source: Secondary data available in Ace analyzer and Prowess data base compiled by Ms-Excel Andhra Bank was at the top position with an average NNPAs/TA of 0.12, followed by Punjab & Sindh Bank (0.21) Indian Bank (0.22). IDBI was at the last position with an average of 22.9. In case of NNPAs/NA it’s again Andhra Bank was at the top position with a least average of 0.12 followed by Indian Bank (0.324), Punjab & Sindh Bank (0.35). In terms of TI/TA, Bank of India was at the first position with an average of 24.96 followed by BOB (25.05), Syndicate bank (26.04). United Bank of India was at the last position with highest average of 34.83. Indian bank was at the first position in percentage change in NPAs with an average of -4.93, followed by Central Bank of India, Bank of Baroda while Bank of Maharashtra stood at last position. On the basis of group averages of sub-parameters of assets quality, Andhra Bank and Bank of Baroda was at the top position with group average 4 , followed by Corporation Bank (5.25 ), Indian Bank (6.25 ). Its again Bank of Maharashtra positioned at last.

7. MANAGEMENT EFFICIENCY Management efficiency is another important element of the CAMEL Model. The ratio in this segment involves subjective analysis to measure the efficiency and effectiveness of management. The ratios used to evaluate management efficiency are described as:  Total Advances to Total Deposits (TA/TD): This ratio measures the efficiency and ability of the bank’s management in converting the deposits available with the bank excluding other funds like equity capital, etc. into high earning advances.  Profit per Employee (PPE): This shows the surplus earned per employee. It is known by dividing the profit after tax earned by the bank by the total number of employees.  Business per Employee (BPE): Business per employee shows the productivity of human force of bank. It is used as a tool to measure the efficiency of employees of a bank in generating business for the bank.  Return on Net worth (RONW): It is a measure of the profitability of a bank. Here, PAT is expressed as a percentage of Average Net Worth. Table III exhibits the various ratios representing the level of Management Efficiency of sample banks. IDBI was at the top most position with an average TA/TD of 125.1 followed by Bank of India (71.24 ), Punjab & Sindh Bank ( 70.42 ). In terms of profit per employee United Bank of India

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A Camel Model Analysis of Nationalized Banks in India K.V.N.Prasad, G. Ravinder secured the top position with 0.33 followed by IDBI (0.088), Corporation Bank (0.068). At the front of Business per employee, IDBI was at the first place with an average 18.72, followed by Oriental Bank of Commerce (9.42), Corporation Bank (8.642). Indian Bank was at the bottom most position. Indian Overseas Bank was at the top position in RONW with the highest average 22.96 followed by Union Bank of India (20.84), Punjab & Sindh Bank (20.53). IDBI excels well in TA/TD, PPE and BPE but was not good at RONW. Table-III: Camel Ratings (2006-10): Management Efficiency TA/TD (%) PPE( crores) BPE(crores) RONW (%) Group Bank Avg Rank Avg Rank Avg Rank Avg Rank Avg Rank Allahabad Bank 66.65 15 0.046 9 5.894 13 20.31 5 10.5 12 Andhra Bank 68.87 9 0.048 7 6.514 8 19.67 7 7.75 6 Bank of Baroda 68.49 11 0.046 9 7.112 4 14.89 14 9.5 10 Bank of India 71.24 2 0.042 13 6.75 6 19.58 8 7.25 4 Bank of 65.1 16 0.02 18 5.25 17 13.38 15 16.5 19 Maharashtra Canara Bank 69.74 6 0.044 11 6.726 7 18.76 9 8.25 7 Central Bank of 62.67 19 0.018 20 4.434 19 9.828 18 19 20 India Corporation Bank 68.82 10 0.068 3 8.642 3 14.93 13 7.25 4 Dena Bank 67.52 14 0.0375 15 6.395 9 15.28 11 12.25 14 IDBI Bank 125.1 1 0.088 2 18.72 1 1.77 20 6 3 Indian bank 64.37 17 0.05 5 4.084 20 18.28 10 13 15 Indian Overseas 70.15 4 0.04 14 5.612 15 22.96 1 8.5 8 Bank Oriental Bank of 68.39 12 0.06 4 9.42 2 10.47 17 8.75 9 Commerce Punjab & Sindh 70.42 3 0.05 5 6.953 5 20.53 3 4 1 Bank Punjab National 69.74 6 0.044 11 5.412 16 20.23 6 9.75 11 Bank Syndicate Bank 69.33 8 0.03 16 5.844 14 20.5 4 10.5 12 UCO Bank 68.25 13 0.02 18 6.128 11 15.06 12 13.5 16 Union Bank of 70.42 4 0.048 7 6.382 10 20.84 2 5.75 2 India United Bank of 59.22 20 0.33 1 4.732 18 8.73 19 14.5 17 India Vijaya Bank 64.09 18 0.026 17 6.058 12 11.78 16 15.75 18 Source: Secondary data available in Ace analyzer and Prowess data base compiled by Ms-Excel On the basis of group averages of sub-parameters, Punjab & Sindh Bank was at the top most position with group average 4, followed by Union Bank of India(5.75), IDBI (6). Central Bank of

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A Camel Model Analysis of Nationalized Banks in India K.V.N.Prasad, G. Ravinder India positioned at last due to its poor performance in all sub parameters of management efficiency.

8. EARNING QUALITY The quality of earnings is a very important criterion that determines the ability of a bank to earn consistently. It basically determines the profitability of bank and explains its sustainability and growth in earnings in future. The following ratios explain the quality of income generation.  Operating Profit to Average Working Funds (OP/AWF): This ratio indicates how much a bank can earn profit from its operations for every rupee spent in the form of working fund.  Percentage Growth in Net Profit (PAT Growth): It is the percentage change in net profit over the previous year.  Net Profit to Average Assets (PAT/AA): This ratio measures return on assets employed or the efficiency in utilization of assets. Table IV presents the earning quality positions of sample banks in terms of operating profit by average working funds, percentage growth in net profit, and net profit to average assets. Table -IV: Camel Ratings (2006-10): Earnings Quality OP/AWF PAT Growth (%) PAT/AA (%) Group Bank Avg. Rank Avg. Rank Avg. Rank Avg. Rank Allahabad Bank 2.11 7 20.03 15 1.042 5 9 10 Andhra Bank 2.23 5 17.46 17 1.062 4 8.67 8 Bank of Baroda 2.01 10 51.71 3 0.876 11 8 6 Bank of India 2.08 8 49.6 4 0.914 10 7.33 5 Bank of Maharashtra 1.44 17 141.5 1 0.516 15 11 13 Canara Bank 2.03 9 24.48 13 0.956 9 10.3 12 Central Bank of India 1.4 18 20.62 14 0.432 20 17.3 20 Corporation Bank 2.48 2 25.16 12 1.002 7 7 4 Dena Bank 1.92 12 58.67 2 0.74 12 8.67 8 IDBI Bank 1.1 20 34.76 8 0.51 17 15 15 Indian bank 2.64 1 43.55 7 1.214 2 3.33 1 Indian Overseas Bank 2.28 4 5.112 20 1.02 6 10 11 Oriental Bank of Commerce 1.8 13 16.85 18 0.696 14 15 15 Punjab & Sindh Bank 2.01 10 49 5 1.27 1 5.33 2 Punjab National Bank 2.37 3 28.82 10 1.132 3 5.33 2 Syndicate Bank 1.6 15 15.67 19 0.726 13 15.7 19 UCO Bank 1.37 19 30.21 9 0.48 18 15.3 17 Union Bank of India 2.21 6 26.22 11 0.974 8 8.33 7 United Bank of India 1.5 16 45.61 6 0.462 19 13.7 14 Vijaya Bank 1.77 14 19.39 16 0.514 16 15.3 17 Source: Secondary data available in Ace analyzer and Prowess data base compiled by Ms-Excel Indian Bank rated top in case of OP/AWF with an average of 2.64 followed by Corporation Bank (2.48), Punjab National Bank (2.37). IDBI was at the bottom most position with least average of

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A Camel Model Analysis of Nationalized Banks in India K.V.N.Prasad, G. Ravinder

1.1. In case of PAT growth Bank of Maharastra was at the first position with an average of 141.5, followed by Dena Bank, Bank of Baroda. Indian Overseas Bank was at the last place. In case of PAT/AA, Punjab & Sindh Bank stood at the top place with an average of 1.27, followed by Indian Bank (1.214), Punjab National Bank. Central Bank of India was at bottom most position. On the basis of group averages, Indian Bank was at the top position with group average (3.33) followed by Punjab National Bank & Punjab & Sindh Bank (5.33). Central Bank of India failed in all sub-parameters and stood at last place.

9. LIQUIDITY Risk of liquidity is curse to the image of bank. Bank has to take a proper care to hedge the liquidity risk; at the same time ensuring good percentage of funds are invested in high return generating securities, so that it is in a position to generate profit with provision liquidity to the depositors. The following ratios are used to measure the liquidity:  Liquid Assets to Demand Deposits (LA/DD): This ratio measures the ability of bank to meet the demand from depositors in a particular year. To offer higher liquidity for them, bank has to invest these funds in highly liquid form.  Liquid Assets to Total Deposits (LA/TD): This ratio measures the liquidity available to the total deposits of the bank.  Liquid Assets to Total Assets (LA/TA): It measures the overall liquidity position of the bank. The liquid asset includes cash in hand, balance with institutions and money at call and short notice. The total assets include the revaluation of all the assets.  G-Sec to Total Assets (G-Sec/TA): It measures the risk involved in the assets. This ratio measures the Government securities as proportionate to total assets.  Approved Securities to Total Assets (AS/TA): This is arrived by dividing the total amount invested in Approved securities by Total Assets. Table V presents liquidity position of sample banks. Table-V: Camel Ratings (2006-10) : Liquidity LA/DD (%) LA/TD (%) LA/TA (%) G-Sec/TA (%) AS/TA (%) Group Bank Avg. Rank Avg. Rank Avg. Rank Avg. Rank Avg. Rank Avg. Rank Allahabad 119.51 17 9.802 20 8.566 19 23.2 10 0.5 4 14 18 Bank Andhra Bank 152.33 4 13.502 6 11.618 6 23.02 12 0.22 15 8.6 7 Bank of Baroda 196.35 1 15.582 3 13.3 1 19.34 20 0.68 1 5.2 1 Bank of India 192.11 2 14.27 4 12.002 3 19.88 19 0.43 6 6.8 2 Bank of 105.69 19 11.402 16 9.99 14 26.1 3 0.21 16 13.6 17 Maharashtra Canara Bank 136.07 9 11.33 18 9.804 16 23.24 9 0.31 11 12.6 15 Central Bank of 133.11 10 12.246 12 10.884 11 25.18 5 0.56 3 8.2 4 India Corporation 97.552 20 15.994 1 13.25 2 21.55 17 0.17 17 11.4 12 Bank Dena Bank 136.52 8 12.635 10 11.175 9 22.43 15 0.28 12 10.8 11 IDBI Bank 128.52 13 15.914 2 7.99 20 20.35 18 0.01 20 14.6 19

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A Camel Model Analysis of Nationalized Banks in India K.V.N.Prasad, G. Ravinder Indian bank 150.71 5 11.492 15 9.892 15 27.14 1 0.67 2 7.6 3 Indian 126.03 15 11.968 14 10.004 12 25.02 7 0.26 14 12.4 14 Overseas Bank Oriental Bank 145.42 6 13.226 8 11.462 7 22.84 13 0.27 13 9.4 9 of Commerce Punjab & Sindh 171.63 3 12 13 10 13 25.79 4 0.37 8 8.2 4 Bank Punjab 127.06 14 13.99 5 11.768 4 22.44 14 0.46 5 8.4 6 National Bank Syndicate Bank 131.33 12 12.91 9 11.332 8 23.09 11 0.15 18 11.6 13 UCO Bank 131.48 11 9.846 19 8.73 18 23.47 8 0.4 7 12.6 15 Union Bank of 116.52 18 11.332 17 9.618 17 22.04 16 0.33 10 15.6 20 India United Bank of 120.4 16 12.432 11 10.916 10 27.03 2 0.34 9 9.6 10 India Vijaya Bank 145.35 7 13.322 7 11.666 5 25.18 5 0.11 19 8.6 7 source: secondary data available in Ace analyzer and Prowess data base compiled by Ms-Excel Bank of Baroda was at the first place in LA/DD with highest average of 196.35, followed by bank of India (192.11), Punjab & Sindh Bank (171.63). Corporation Bank availed 20th position. In case of LA/TD, corporation bank got first position with highest average of 15.994, followed by IDBI (15.914), Bank of Baroda (15.582). Allahabad Bank was at the bottom most position with least average 9.082. In contest of LA/TA, BOB was at top with the average 13.3 followed by Corporation Bank (13.25), and Bank of India (12.002). IDBI was at the last position. Indian bank was at the top position in G-Sec/TA with an average 27.142, followed by United Bank (27.03), Bank of Maharashtra (26.1). Bank of Baroda was at the bottom most position with least average 19.34. In terms of AS/TA, Bank of Baroda (0.68) was at the top most position followed by Indian Bank (0.672), Central bank of India (0.558). On the basis of group averages of the sub- parameters, BOB stood at the top position with group average5.2 followed by Bank of India (6.8), Indian Bank(7.6) . Union Bank of India placed at last.

10. OVERALL RANKING As stated in initial part of this paper, CAMEL model is used to rating the banks according to their performance. Table-VI: Composite ranking: Overall Performance C A M E L AVG RANK Allahabad Bank 10.75 11 10.5 9 14 11.05 13 Andhra Bank 5.75 4 7.75 8.67 8.6 6.954 1 Bank of Baroda 10 4 9.5 8 5.2 7.34 2 Bank of India 12.25 9.75 7.25 7.33 6.8 8.676 7 Bank of Maharashtra 13.25 16 16.5 11 13.6 14.07 19 Canara Bank 5.5 10.25 8.25 10.3 12.6 9.38 8 Central Bank of India 13.75 13.5 19 17.3 8.2 14.35 20 Corporation Bank 10.75 5.25 7.25 7 11.4 8.33 5 Dena Bank 9.75 12 12.25 8.67 10.8 10.694 11

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A Camel Model Analysis of Nationalized Banks in India K.V.N.Prasad, G. Ravinder

IDBI Bank 13.25 14 6 15 14.6 12.57 15 Indian bank 7.75 6.25 13 3.33 7.6 7.586 4 Indian Overseas Bank 8.25 15.25 8.5 10 12.4 10.88 12 Oriental Bank of Commerce 7 9 8.75 15 9.4 9.83 9 Punjab & Sindh Bank 12 7.75 4 5.33 8.2 7.456 3 Punjab National Bank 9.5 9 9.75 5.33 8.4 8.396 6 Syndicate Bank 8.25 9.5 10.5 15.7 11.6 11.11 14 UCO Bank 13.25 14.25 13.5 15.3 12.6 13.78 18 Union Bank of India 12.5 10 5.75 8.33 15.6 10.436 10 United Bank of India 13.5 14.75 14.5 13.7 9.6 13.21 17 Vijaya Bank 12.75 13.5 15.75 15.3 8.6 13.18 16 It is clear from table VI that Andhra bank is ranked at top position with composite average 6.954, followed by Bank of Baroda (7.34), Punjab and Sindh Bank (7.456), Indian Bank (7.586), Corporation Bank (8.33). Central bank of India was at the bottom most position.

11. CONCLUSION Economic development of any country is mainly influenced by the growth of the banking industry in that country. The current study has been conducted to examine the economic sustainability of a sample of thirty nine banks in India using CAMEL model during the period 2006-10. The study revealed that  Canara Bank stood at top position in terms of capital adequacy.  In front of asset quality, Andhra Bank& Bank of Baroda was at top most position.  In context of management efficiency, Punjab & Sindh bank positioned at first.  In terms of earnings quality Indian Bank sustained the top position.  Bank of Baroda rated top in case of liquidity position.  Overall performance table shows that, Andhra Bank is ranked first followed by Bank of Baroda, Punjab & Sindh Bank, Indian bank , Corporation Bank  In bottom five, Central Bank of India was on the last position, following the other banks i.e. Bank of Maharashtra, UCO Bank, United Bank of India, and Vijaya Bank.

REFERENCES [1]. Bhayani, S. (2006). Performance of the New Indian Private Sector Banks: A Comparative Study. Journal of Management Research, Vol. 5, No.11, pp. 53-70. [2]. Cole, Rebel A. and Gunther, Jeffery, (1995). A CAMEL Rating's Shelf Life. Available at SSRN: http://ssrn.com/abstract=1293504 [3]. Derviz, A., & Podpiera, J. (2008). Predicting Bank CAMEL and S&P Ratings: The Case of the Czech Republic. Emerging Markets, Finance & Trade, 44(1), 117. Retrieved April 13, 2010, from ABI/INFORM Global. (Document ID: 1454963901). [4]. Godlewski, C. (2003). Bank’s Default Modelisation: An Application to Banks from Emerging Market Economies. Journal of Social Science Research Network, Vol.4, No.3, pp. 150-155. [5]. Gupta, R. (2008). A CAMEL Model Analysis of Private Sector Banks in India. Journal of Gyan Management, Vol.2, No.1, pp. 3-8. [6]. Prasuna D G (2003).Performance Snapshot 2003-04. Chartered Financial Analyst, Vol. 10, No.11, pp.6-13. [7]. Said, M (2003). Liquidity, solvency, and efficiency: An empirical analysis of the Japanese banks’ distress. Journal of Oxford, Vol. 5, No.3, pp. 354-358. -33-

Information Sharing and Communication in Small Scale Industries

Vipul Chalotra* Department of Commerce, University of Jammu, Udhampur Campus

Email id: [email protected]

Abstract

Information sharing and communication play a vital role now-a-days as the present world is corporate world and information sharing in this PAPER/ARTICLE INFO world is of immense utility. Information sharing in supply chain improves RECEIVED ON:17/02/2012 ACCEPTED ON: 21/5/2012 profitability, competitive strength, ensures promotion and distribution of products & services, enhances operational efficiency by reducing logistics costs, augmenting financial structure and functioning and promotes customer service. The paper analyses information sharing and communication in 44 small scale industrial units in district Udhampur of J&K State. The data after purification and validation through factor analysis was subjected to multivariate tools. The results of correlation, matrix test, hierarchical regression model and ANOVA revealed positive Reference to this paper association between information sharing and channel relationships, should be made as follows : operational performance depends upon information shared and Chalotra, Vipul(2012) communicated and perceptions regarding information sharing do not “Information Sharing And Communication In Small differ with regard to age difference. Scale Industries” Int. J. of Key Words: Information Sharing, Supply Chain Management, Channel Trade and Commerce- Relationships. IIARTC, Vol. 1, No. 1, pp. 34-44

*Corresponding Author

Information Sharing and Communication in Small Scale Industries

Vipul Chalotra

1. I NTRODUCTION Information sharing and communication acknowledge the true disclosure of facts and figures regarding business working within the channel members. Channel members are the intermediaries, partners, parties (suppliers, manufacturers, wholesalers, retailers, customers) who assists in smooth and amicable functioning of the business. Increasing level of information sharing and communication in a channel network provides rapid access to the required information, more sensitivity towards the needs of the customers and improves operational efficiency resulting in short development time (Dyer, 1996), enhanced design quality (Takeishi, 2001), reduction in uncertainty (Daft and Lengel, 1986), improvement in development performance and delivery schedule compliance (Brown and Eisenhardt, 1995). Past studies report positive relationships between information sharing and improved performance at market place (Armistead and Mapes, 1993; Cousins and Menguc, 2006; Kim, 2006; Zailani and Rajagopal, 2005 and Li et al., 2002). Suppliers’ share sensitive information such as the cost of each process and market information (Helper, 1991 and Humphreys et al., 2004). The competitive value of information sharing is widely heralded – it substitutes for inventory, speeds new product design, shortens order fulfillment cycles, drives process reengineering and coordinates supply chain activities (Cachon and Fisher, 2000; Clark and Hammond, 1997; Hult et al., 2004; Kulp et al., 2004 and Lee et al., 2000). The other benefits of information sharing in supply chain management are fewer inventories, shorter cash flow cycle times, reduced logistics and material purchasing costs (Lee, 2000), increased workforce efficiency and improved customer responsiveness (Lummus and Vokurka, 1999).

2. REVIEW OF LITERATURE Existing literature portrays information sharing and communication among supply chain intermediaries and is vitally significant as it assists in handling market diversity, reflects competitive pricing and strategies, maintains optimum product life cycles (Stank et al., 1999 and Barrat and Oliveira, 2001), resources, rewards (Phillips et al., 2000) and responsibilities as well as jointly make decisions and solve problems. In fact effective relationship is based on timely sharing of right information which in lieu develops mutual trust, openness, shared risk and shared rewards that yield a competitive advantage resulting in better performance (Bowersox et al., 2000) The literature regarding information sharing and communication, has been overwhelmingly framed along efficiency criteria and its benefits (Gal-Or and Ghose, 2005). Li and Ye (1999) included logistics coordination and organizational relationship linkages, incentive alignment, collaborative performance systems, process improvements by imparting operational efficiency. A firm can inculcate operational efficiency in performing business activities with the help of proper information sharing and communication (Medori and Steeple, 2000) resulting in reduced cost, delivery speed and reliability, quality and flexibility, overall efficiency and ability to provide and differentiated customer services. The nature of information exchange encompasses diverse areas such as product, customer, supplier, manufacturing procedure, transportation, inventory, competitive, sales and markets etc. The paper focuses on information sharing and communication existence in small manufacturing firms of district Udhampur, J&K State.

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Information Sharing and Communication in Small Scale Industries

Vipul Chalotra

3. T ESTABLE HYPOTHESES Information sharing enhances operational efficiency and refers to cost control in performing business activities. It acts as a competitive tool (Eccles and Pyburn, 1992; Neely, 1998; Beamon, 1999 and Medori and Steeple, 2000). Operational efficiency with the aid of information sharing focuses on distribution initiatives, enhanced transactional profitability, achievement in company goals & strategies, timely availability of information for ensuring market flexibility (Medori and Steeple, 2000 and Waller et al., 1999). It also improves competencies in specific areas of supply chain including cost, delivery, speed, quality & flexibility and ability to provide a differentiated customer service at a lowest possible cost (Fawcett and Clinton, 1996). Past studies report positive relationships between the level of supply chain information sharing on collaborative performance at market place (Cousins and Menguc, 2006 and Kim et al., 2006). Perceptions regarding information sharing differs between superiors-subordinates supply chain channel members/intermediaries (Zailani and Rajagopal, 2005) and size of the firms. Partners in supply chain that are embedded in the rich and meaningful information network are likely to trust each other and consequently engage in collaborative relationships. Partners that are embedded in rich and meaningful information network are likely to share information and consequently engage in collaborative joint efforts. Collaborative relationships among supply chain partners depends upon effective two-way frequent, open, accurate, timeliness and credible communication and evolving personal contacts between buying and selling personnel (Krause and Ellram, 1997). On the basis of above literature, the following hypotheses had been framed: H1 : There exists positive relationship between information sharing and channel relationships H2 : Operational performance is dependent upon information shared and communicated H3 : Perception regarding information sharing do not differs with regard to age difference

4. RESEARCH METHODOLOGY The primary data for the study was collected from 44 functional manufacturing SSIs units registered under District Industries Centre (DIC), Udhampur of J&K State sub-divided into ten lines of operation comprising cement (8), pesticide (3), steel (3), battery/lead/alloy (5), menthol (2), guns (2), conduit pipes (2), gates/grills/varnish (5), maize/atta/dal mills (3) and miscellaneous (11). Census method was used to elicit response from owners/managers of the SSIs. Information was collected by administering self developed questionnaire prepared after consulting experts and extensive review of literature which comprised of general information and 48 items of information sharing were included in the questionnaire. Items in the questionnaire were in descriptive form, ranking, dichotomous, open ended and five -point Likert scale, where 1 stands for strongly disagree and 5 for strongly agree. The data collected was further analysed with the help of SPSS (Version 16.00) for data purification, checking validity and reliability. Multivariate tools such as correlation, hierarchical linear regression model and ANOVA were used to test hypotheses and drawing meaningful inferences.

5. DATA ANALYSIS AND INTERPRETATION The suitability of raw data for factor analysis obtained from SSI managers was examined through Anti-image, KMO value, Bartlett’s Test of Sphercity (p-value = 0.000), indicating sufficient common variance and correlation matrix (Dess et al., 1997 and Field, 2000). The process of R-

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Information Sharing and Communication in Small Scale Industries

Vipul Chalotra

Mode Principal Component Analysis (PSA) with Varimax Rotation brought the construct to the level of 29 statements out of 48 statements originally kept in the domain of information sharing. The KMO value (0.701) and Bartlett Test of Sphercity (742.94) indicates acceptable and significant values. Therefore, factor loadings in the final factorial design, are consistent with conservative criteria, thereby resulting into six-factor solution using Kaiser Criteria (i.e., eigen value ≥1) with 71.71% of the total variance explained. The communality for 29 items ranges from 0.63 to 0.90, indicating moderate to high degree of linear association among the variables. The factor loadings range from 0.546 to 0.890 and the cumulative variance extracted ranges from 17.60 to 71.71 percent. The communalities and % of variance explained by each factor is displayed in the Table 1.1. A brief description of factors emerged are as under: 5.1. Factor 1 (Improvement in production capacity) It comprises of six items of information sharing: “Information sharing enhances production process”, “Results in effective organisational purchasing”, “information sharing enhances profitability”, “Information is exchanged regarding material handling techniques”, “IT assists in speedy communication” and “Information sharing enhances production capacity”. The items attained mean values between 3.95 – 4.18, significant factor loadings and commonalities. The factor acknowledges the importance of information sharing among managers of SSI’s for promoting supply chain management relationships. 5.2. Factor 2 (Competitive strength) This factor proclaims five items namely “Share operations, logistic & strategic planning data”, “Inaccurate information results in inventory positioning problems”, “ICT (Information Communication Technology) acts as a tool for enhanced communication”, “SCMIS (Supply Chain Management Information System) strengthens SC linkages” and “Information sharing is vital for competitive strength” which connotes average mean values fluctuating between 3.81 – 4.18 but identifies significant factor loadings and communalities. “SCMIS (Supply Chain Management Information System) strengthens SC linkages” educed with highest communality depicting attention of supply chain managers that its need of the hour to maintain strong relationships. 5.3. Factor 3 (Distribution & promotion) Items underlying this factor includes “Information of delivery dates & time in transit promotes business”, “Information is exchanged regarding price level & services”, “Information sharing improves promotional effectiveness” and “Diverse markets can be reached by proper information sharing”, representing significant mean values ranging between 4.00 – 4.13, good factor loadings and high communalities. “Information of delivery dates & time in transit promotes business” gushed to be strongest among all with high mean value (4.13), factor loading (.791) and communality (.831). 5.4. Factor 4 (Profitability) This factor concentrated on three items namely, “Information sharing assists in fixing contract items, discounts & margins”, “Information sharing maximises warehousing usage” and “ IT enhances idea sharing process” which it speaks significant mean values ranging between 4.02 – 4.18, factor loadings between .546 - .840 and communalities .652 - .848. Information sharing assists a lot to managers of SSI’s in different forms.

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Information Sharing and Communication in Small Scale Industries

Vipul Chalotra

5.5. Factor 5 (Customer service) The items “Needed information is assessable & compatible” and “Qualitative information improves SC decisions” are taken into consideration by this factor which supports the items with significant mean values 4.13 & 4.13, high factor loadings values .890 & .874 and communalities with values .866 & .863 respectively. This factor clearly demonstrates that information sharing improves supply chain decisions. 5.6. Factor 6 (Optimum inventory control) The final factor of information sharing envisages three items, “Information sharing helps in target marketing”, “Reduces buffer inventory stocks” and “Assists in planning and improved implementation” with significant mean values (4.02 – 4.20), factor loadings (.666 - .860) and commonalities (.715 - .787). This indicates that information sharing positively assists the business in achieving target markets and inventory turns. 5.7. Reliability Six factors were obtained after scale purification falling within the domain of information sharing and communication in supply chain management. As evident from the Table 1.1, the Cronbach’s reliability coefficients for all 29 scale items underlying six factors ranges from 0.60 to 0.81. The alpha reliability coefficients for F1 (0.81), F2 (0.78), F5 (0.80) and F6 (0.77) is higher than the criteria of 0.77 obtained by Gordon and Narayanan (1984) indicating high consistency. F3 (0.70) and F4 (0.60) are also at a minimum acceptable level of 0.50 as recommended by Brown et al. (2001) and Kakati and Dhar (2002) thereby obtaining satisfactory internal consistency. However, the overall alpha reliability score for all factors is very much satisfactory at 0.74. Adequacy and reliability of sample size to yield distinct and reliable factors is further demonstrated through Kaiser-Meyer-Olkin Measure of Sampling Adequacy that is 0.701 and all factor loadings between items and their respective constructs being greater than equal to 0.55. 5.8. Validity The six factors obtained alpha reliability higher and equal to 0.50 and satisfactory KMO value at 0.701, indicating significant construct validity of the construct (Hair et al., 1995). In Tables 1.2, the single metric dependent variable information sharing and communication and channel relationships sub – divided into six dimensions (factors) namely, optimum inventory control and finance function, enhancement in production capacity, optimum distribution and promotion, customer service, competitive strength and profitability was examined. The significant correlation coefficients emerged were “Competitive strength” (.743), “Optimum inventory control” (.629), “Distribution & promotion” (0.300) and “Production capacity” (.285). The insignificant correlation coefficient values in descending order were 0.230 (Customer service) and 0.229 (Profitability). Thus, the hypothesis “There exists positive relationship between information sharing and channel relationships” is accepted for four dimensions and rejected for two dimensions. Tables 1.3 shows output from regression analysis. The result of step-wise linear regression analysis enticed four independent factors as significant in predicting the dependent variable. These were: “Competitive strength”, “Distribution and promotion”, “Customer service” and “Profitability”. The correlation between predictor and outcome is positive with values of R as .638, .730, .763, and .798, which signifies high correlation between predictor and the outcome. In -38-

Information Sharing and Communication in Small Scale Industries

Vipul Chalotra model 1, R is .638 which indicates 63% association between dependent and independent variables. R-Square for this model is .410 which means that 41% of variation in information sharing and communication can be explained from the four independent variables. Adjusted R square (.403) indicates that if anytime another independent variable is added to model, the R-square will increase. Further beta values reveal significant relationship of independent variables with dependent variable. “Competitive strength” has emerged as the strongest predictor whereas “Profitability” is found to be the weakest as represented by relative t-values. Change in R square is also found to be significant with F-values significant at 5% confidence level. Errors in regression are independent as indicated by Durbin-Watson value (2.213). The aforesaid findings support the hypothesis “Operational performance is dependent upon information shared and communicated”. To test third and final hypothesis, age of the respondents was taken into consideration and the respondents age had been classified into six categories viz., upto 20 years, 21-30 years, 31-40 years, 41-50 years, 51-60 years and above 60 years. The result of ANOVA (Table 1.4) depicted that manufacturers belonging to different age group have same level of perception regarding information sharing as the p value is more than .05 (Sig. .266). Therefore, the results support the hypothesis “Perception regarding information sharing does not differ with regard to age difference”.

6. CONCLUSION Information sharing and communication among channel partners create relational advantages. Information sharing in channel relationships represents one medium through which partners in supply chain can improve operational efficiency by reducing logistics costs, augments financial structure & functioning, reduction in behavior uncertainty leading to overall competitive strength. The study provides fresh insights into multiple dimensions of information sharing. Positive association between information sharing and channel relationships educates mangers to design information sharing hub wherein information regarding order processing, purchasing, inventory, warehousing & stocking, transportation, customer service etc., is available to channel partners all times. Collaborative activities such as joint goal-setting, problem solving, long range planning covering potential markets to be reached, technology acquisition, product development, profit sharing would strengthen collaborative relationships. Frequent sharing of business information in cordial & friendly environment would enables the parties to solve any problem tactically without jeopardizing the interest of others. The findings of the study are limited to small-scale industries registered under DIC Udhampur of J&K State, so results drawn cannot be generalized for medium or large- scale industries functioning in other parts of country having dissimilar business environment.

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Information Sharing and Communication in Small Scale Industries

Vipul Chalotra

Table -1.1: Results Showing Factor Loadings and Variance Explained After Scale Purification (Rotated Component Method) for Information Sharing and communication Factor-wise Dimensions Mean S.D F.L Eigen Variance Cumulative Comm- α Value Explained % Variance % unality F1 Improvement in production capacity 4.06 .398 7.184 17.606 17.606 .8180 Enhances production process 4.04 .370 .854 .811 Effective organisational purchasing 4.04 .301 .822 .886 Enhances profitability 4.09 .362 .812 .743 Material handling techniques 4.06 .255 .791 .909 Assists in speedy communication 3.95 .608 .563 .728 Enhances production capacity 4.18 .495 .510 .675 F2 Competitive strength 4.01 .524 3.205 12.090 29.696 .7800 Share operations & logistic data 3.97 .590 .765 .686 Inaccurate information creates problems 4.04 .568 .741 .788 ICT works as enhanced communication 3.81 .620 .729 .749 Strengthens SC linkages 4.06 .397 .585 .825 Vital for competitive strength 4.18 .445 .562 .814 F3 Distribution and promotion 4.09 .439 2.649 11.447 41.143 .7051 Promotes business 4.13 .462 .791 .831 Price level and services 4.00 .528 .690 .727 Improves promotional effectiveness 4.13 .347 .586 .758 Diverse markets can be reached 4.09 .421 .555 .633 F4 Profitability 4.08 .658 1.809 10.664 51.787 .6050 Assists in fixing contract items 4.04 .713 .840 .766 Maximises warehousing usage 4.02 .762 .826 .848 Enhances idea sharing process 4.18 .498 .546 .632 F5 Customer service 4.13 .377 1.523 10.128 61.915 .8070 Assessable and compatible 4.13 .408 .890 .866 Improves SC decisions 4.13 .347 .874 .863 F6 Optimum inventory control 4.09 .420 1.286 9.795 71.710 .7706 Helps in target marketing 4.86 .397 .860 .787 Reduces buffer inventory stocks 4.02 .456 .692 .776 Assists in planning and improved 4.20 .408 .666 .715 implementation Footnotes: KMO Value =.701; Bartlett’s Test of Sphercity = 742.94, df = 276, Sig. =.000; Extraction Method Principal Component Analysis; Varimax with Kaiser Normalisation; Rotation converged in 8 iterations; ‘FL’ stands for Factor Loadings, ‘S.D’ for Standard Deviation and ‘α’ for Alpha.

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Information Sharing and Communication in Small Scale Industries

Vipul Chalotra

Table -1.2: Correlation Matrix of Information Sharing and Communication with channel relationships Variables Optimum Production Distribution Customer Competitive Profita Inf. Sharing has inventory capacity & service strength bility positive impact on control promotion operational performance Optimum Pearson inventory 1 Correlation Control Production Pearson .307(*) 1 Capacity Correlation Distribution Pearson and .328(*) .431(**) 1 Correlation Promotion Customer Pearson .111 .513(**) .164 1 Service Correlation Competitive Pearson .215 .526(**) .363(*) .373(*) 1 Strength Correlation Pearson Profitability .465(**) .508(**) .210 .203 .598(**) 1 Correlation Inf sharing has positive Pearson impact on .629(**) .285(*) .300(*) .230 .743(**) .229 1 Correlation operational performance ** Correlation is significant at the 0.01 level (2-tailed). * Correlation is significant at the 0.05 level (2-tailed).

Table-1.3: Regression Model Summary Model R R2 AdjustedR2 Std. Error F value Sig. β t Sig. Durbin- of ANOVA level level Watson Estimate 1. .638 .410 .403 .3412 68.128 .000 .653 8.431 .000 2. .730 .534 .521 .3023 55.423 .000 .384 5.073 .000 2.213 3. .763 .596 .574 .2764 45.109 .000 .267 3.876 .003 4. .798 .634 .618 .2608 41.234 .000 .196 2.230 .009 a) Predictors: (Constant), Competitive strength b) Predictors: (Constant), Competitive strength, Distribution and Promotion c) Predictors: (Constant), Competitive strength, Distribution and Promotion, Customer service d) Predictors: (Constant), Competitive strength, Distribution and Promotion, Customer Service, Profitability e) Dependent variable: Information sharing and communication enhances operational performance

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Information Sharing and Communication in Small Scale Industries

Vipul Chalotra

Table-1.4: Age -wise ANOVA Age Description Mean Nature of Sum of df Mean F Sig. of Variable Variable Squares Square Upto 20 yrs 4.3556 Between Groups 2.161 2 1.081 1.368 .266 21 – 30 yrs 4.5703 Within Groups 32.384 41 .790 31 – 40 yrs 4.4586 Total 34.545 43

41 – 50 yrs 4.3276 51 – 60 yrs 4.1433 Above 60 yrs 4.2133

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[14]. Fawcett, S.E., and Clinton S.R. (1996). Enhancing Logistics Performance to Improve the Competitiveness of Manufacturing Organizations. Production and Inventory Management Journal, Vol. 37, pp. 40-46. [15]. Field, A.P. (2004). Discovering Statistics Using SPSS for Windows. London Sage Publications, pp. 619-672. [16]. Gal-Or, E., and Ghose A. (2005). The Economic Incentives for Sharing Security Information. Information Systems Research, Vol. 16, No. 2, p. 186-208. [17]. Gordon, L.A., and Narayanan, (1984). Management Accounting Systems, Perceived Environmental Uncertainty and Organizational Structure: An Empirical Investigation. Accounting, Organisations and Society, Vol. 19, No. 1, pp. 330-348. [18]. Hair, J.F., Anderson, R.E., Tatham, R.L., and Black, W.C. (1995). Multivariate Data Analysis. New Jersey: Prentice Hall, pp. 87-115. [19]. Helper, S. (1991). How Much Has Really Changed Between US Automakers and Their Suppliers. Sloan Management Review, Vol. 32, No. 1, pp. 15-28. [20]. Hult, G.M., Hurley, R.F., and Knight, G.A. (2004). Innovativeness: Its Antecedents and Impact on Business Performance,” Industrial Marketing Management, Vol. 33, No. 5, pp. 429-438. [21]. Humphreys, P., Li, W.L., and Chan, L.Y. (2004). The Impact of Supplier Development on Buyer-supplier Performance. Omega, Vol. 32, No. 2, pp. 131-143. [22]. Kakati, R.P., and Dhar, U.R. (2002). Competitive Strategies and New Venture Performance. Vikalpa, Vol. 27, No. 3 (July-September), pp. 13-24. [23]. Kim, D., Cavusgil, S.T., and Calantone, R.J. (2006). Information System Innovations and Supply Chain Management: Channel Relationships and Firm Performance. Journal of Academy of Marketing Science, Vol. 34, No. 1, pp. 40-54. [24]. Krause, D., and Ellram L. (1997). Success Factors in Supplier Development. International Journal of Physical Distribution and Logistics Management, Vol. 27, No. 1, pp. 39-52. [25]. Kulp, S.C., Lee, H.L., and Ofek, E. (2004). Manufacturer Benefits from Information Integration with Retail Customers. Management Science, Vol. 50, No. 4, pp. 431-444. [26]. Lee, H.L., and Whang, S. (2000). Information Sharing in Supply Chain. International Journal of Technology Management, Vol. 20, Nos. 3/4, pp. 373-387. [27]. Li, H., Brenner, E., Cornelissen, F.W., and Kim, E. (2002). Systematic Distortion of Perceived 2D Shape During Smooth Pursuit Eye Movements. Vision Research, Vol. 42, pp. 2569–2575. [28]. Li, M., and Ye L.R. (1999). Information Technology and Firm Performance: Linking With Environment, Strategic and Management Concerns. Information and Management, Vol. 35, No. 1, p. 43-51. [29]. Lummus, R., and Vokurka, R. (1999). Defining Supply Chain Management: A Historical Perspective and Practical Guidelines. Industrial Management & Data Systems, Vol. 99, pp. 11-17. [30]. Malhotra, N.K. (2004). Marketing Research-An Applied Orientation. Delhi: Pearson Education Asia, pp. 560-573.

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[31]. Medori, D., and Steeple D. (2000). A Framework for Auditing and Enhancing Performance Measurement Systems. International Journal of Operations and Production Management, Vol. 20, p. 520-533. [32]. Neely, A.D. (1998). Measuring Business Performance: Why, What and How. The Economist Books, London. [33]. Phillips, N., Lawrence, T.B., and Hardy C. (2000). Interorganisational Collaboration and the Dynamics of Institutional Fields. Journal of Management Studies, Vol. 37, p. 23-43. [34]. Stank, T., Michael, C. and Miren, A. (1999). Benefits of Inter-firm Coordination in Food Industry Supply Chains. Journal of Business Logistics, Vol. 20, No. 2, p. 21–41. [35]. Takeishi, A. (2001). Bridging Inter and Intra-firm Boundaries: Management of Supplier Involvement in Automobile Product Development. Strategic Management Journal, Vol. 21, No. 5, pp. 403-433. [36]. Waller, M., Johnson, M.E., and Davis, T. (1999). Vendor-Managed Inventory in the Retail Supply Chain. Journal of Business Logistics, Vol. 20, No. 1, pp. 183-203. [37]. Zailani, S. and Rajagopal, P. (2005). Supply Chain Integration and Performance: US Versus East Asian Companies. Supply Chain Management: An International Journal, Vol. 10, No. 5, pp. 379-393.

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Role of Securities & Exchange Board of India (SEBI) in Regulating Mutual Funds

Rajiv Kumar Singh* Department of Business Administration, Manav Rachna International University, Faridabad, Email Id: [email protected]

ABSTRACT

Mutual funds are financial intermediaries which collect the savings of investors and invest them in a large and well diversified portfolio of PAPER/ARTICLE INFO securities. The advantages for the investors are reduction in risk, expert RECEIVED ON:16/02/2012 professional management, diversified portfolio, liquidity of investment ACCEPTED ON: 29/05/2012 and tax benefit. This fast grown industry is regulated by the Securities and Exchange Board of India (SEBI). Today there are around 40 mutual funds and over 300 schemes with total assets of around Rs. 6.4 lacs crores. Since the mutual funds involve a huge amount of retail investors, therefore, this paper attempts to analyse whether SEBI is able to regulate the activities in Mutual Fund Market and whether its regulatory role is capable to protect the interest of huge investors. This study also attempts to analyse the shortcomings (if any) in the regulatory regime and suggest some measure to increase its effectiveness. Reference to this paper Keywords: SEBI, Mutual Fund, Retail Investors, Regulatory Regime should be made as follows: Singh, Rajiv Kumar (2012) “Role of Securities & Exchange Board of India (SEBI) in regulating Mutual Funds” Int. J. of Trade and Commerce-IIARTC, Vol. 1, No. 1, pp. 45-59.

*Corresponding Author

Role of Securities & Exchange Board of India (SEBI) in regulating Mutual Funds Rajiv Kumar Singh

1. INTRODUCTION 1.1 SEBI’s Background Capital market was growing at a very fast pace in India particularly after liberalization in Industrial Policy in 1991. Controller of Capital Issues (CCI) was looking after new issues. Department of company affairs was also looking after some aspects. However, need was felt to have a single authority to regulate and administer the securities law. With this in mind, SEBI (Securities and Exchange Board of India), which was earlier established as an administrative body in April 1988, was given a statutory status under section 3 of Securities are Exchange Board of India Act, 1992 on 30th January 1992. Controller of Capital Issue (CCI) was abolished with a view to have SEBI as a single agency to look after over capital market. 1.2 Mutual Funds Mutual funds are financial intermediaries which collect the savings of investors and invest them in a large and well diversified portfolio of securities. The major advantages for the investors are reduction in risk, expert professional management, diversified portfolio and tax benefit. By pooling of their assets through Mutual Funds, Investors achieve economies of scale. Mutual Funds are to be established in the form of Trust under Indian Trust Act, and are to be operated by Asset Management Company (AMC). Mutual Funds dealing exclusively with Money Market Instruments are to be regulated by RBI. Mutual Funds dealing primarily with capital market and also partly in Money Market Instruments are to be regulated by SEBI. All schemes floated by Mutual Funds are to be registered with SEBI. 1.3 SEBI Regulation on Mutual Funds: Securities & Exchange Board of India had issued a set of regulations and code of conduct as SEBI (Mutual Fund) Regulations, 1996 on 9th December 1996 for the smooth conduct and regulation of mutual funds. Recently, SEBI has issued updated regulations as SEBI (Mutual fund) Regulations 2011 on 07 Jan 2012 covering all amendments up to Dec 2011. These guidelines lay down certain criteria for investment, disclosure, accountability and distribution of profits to its members. The salient features of these regulations include various aspects relating to Registration of Mutual Fund, Constitution and management of mutual fund & rights and obligations of trustees, Constitution and management of Asset Management Company and custodian, Restrictions on business activities of AMC and its obligations, Schemes of mutual fund, Investment objectives and valuation policies, Advertisement code, Code of conduct, Restrictions on investments, Investment valuation norms, Accounts and Offer documents.

2. LITERATURE REVIEW There are some Indian studies which viewed UTI as a developmental financial institution and critically examined the role of UTI in providing industrial finance but not attempted to evaluate the performance of UTI Schemes in terms of returns and risk. Hence, these studies cannot be considered as research work on the Indian Mutual Funds. Since 1986, a number of articles and brief essays have been published in financial dailies, periodicals, and a few in the professional and research journals. The available literature can be divided into three categories; (i) Informative and descriptive, (ii) regulatory issues, (iii) Managerial aspects and Performance evaluation. A brief review of the literature is presented here:

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Role of Securities & Exchange Board of India (SEBI) in regulating Mutual Funds Rajiv Kumar Singh i) A number of academics, professionals, and journalists have written articles explaining the basic concept of mutual funds, their characteristics and reviewed the trends in the growth of mutual funds. They also emphasised the importance of mutual funds in the development of the capital market in India. A few under this category are: Sudeep Ghosh, Madan Gopal, Vidyashanker, Batra, Sunil Garodia, Sarkar, Agrawal, and Sadhak, Verma’s book on mutual funds covers the conceptual and regulatory aspects to the Indian Mutual Fund with some informational data and guidelines to the investors in selection of mutual funds. Gupta made a Household investor Survey in April 1992. The main objective of the survey is to provide data on the investor preferences on mutual funds and other financial assets. The findings are more appropriate to the policy makers who design the financial products (Fund Schemes) Seema Vaid’s study covers conceptual and the regulatory framework, review of the growth of mutual funds, and primary information about mutual fund schemes. Kulashreshta offers certain guidelines to the investors in selecting the mutual fund schemes. ii) A few articles highlighted the importance and issues for the regulation of mutual funds. Among them the notable are: Barua, Narayan Bhatt, Bhanu, and Bhatt. Finally, in 1996, SEBI framed regulations for mutual funds. iii) A few articles touched upon certain aspect of portfolio management and other issues involved in the management of mutual funds. The notable among them are Sengupta, Lal and Sharma, and Saha and Murthy. Barua and other (1991), made a pioneering attempt to evaluate the performance of ‘Master Share’ scheme of UTI from the investor point of view. Sharad Shukla (1991) evaluated the Sharpe, Jensen, Treynor ratios for the period January1988 to June 1991. Ajay Shah and Susan Thomas studied the performance evaluation of 11 mutual fund schemes, on the basis of market price data. Jaideep and Sudip Majumdar (1994) evaluated the performance of five growth-oriented schemes for the period of February 1991 to August 1993. Kaura and Jayadev (1995) evaluated the performance of five growth oriented schemes in the year 1993-94. Later on, a number of studies were undertaken but most of the studies are related the performance of the schemes. On the basis of review of available literature it can be concluded that the work on the role of SEBI in regulating mutual fund has not been done yet. Therefore, in this research project we will try to go in deep whether SEBI is regulating mutual funds in proper way or not.

3. SIGNIFICANCE & OBJECTIVES OF THE STUDY Today there are around 40 mutual funds and over 300 schemes with total assets of around Rs. 6.64 lacs crores. This fast grown industry is regulated by the Securities and Exchange Board of India (SEBI). Today the investor is being offered service standard (daily NAV, reduced transaction time, on the query answering etc.) comparable to that of western countries. And has a choice of a diverse range of products, with Internet being widely used, mutual funds minimise the costs and improve turnaround time in transactions in future. Since the mutual funds involve a huge amount of investors, therefore, it has been tried and analysed whether SEBI regulatory role is up to the mark or have some shortcomings.

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Role of Securities & Exchange Board of India (SEBI) in regulating Mutual Funds Rajiv Kumar Singh

The main objectives of this study are as under: -  To appraise different rules and regulation laid down in India to regulate the Mutual Funds.  To analyze the working of SEBI in regulating Mutual Fund Markets.  To examine the effectiveness of SEBI’s functioning in this regard and to suggest suitable measures for the effective regulation of Mutual Funds.  To study the difficulties experienced by the Mutual Funds.  To study the role & effectiveness of SEBI in protection of Investors in Mutual Funds.

4. HYPOTHESIS In this research the following hypothesis have been tested; 1. There is no significant effect of SEBI regulations in facilitating the Mutual Funds to channelising the savings of Investors. 2. Most of the Investors are not aware about the SEBI (Mutual Fund) regulations. There is no significant effect of these regulations in protection of Investor’s interest. 3. There is no significant effect of these regulations in regulating Mutual funds. 4. There is no significant effect of these regulations on fund managers to innovate and implement the investment strategies to optimize the returns (NAV of a scheme).

5. RESEARCH METHODOLOGY The study is based on primary and secondary data. The main sources of secondary data are various journals, periodicals, News Papers, Newsletters of MF Companies and SEBI’s documents, Mutual Fund Companies report etc. The relevant data pertaining to Mutual Funds have been obtained from the investors, intermediaries and professionals associated with Mutual Fund market and 30 leading Mutual Funds operating companies such as ICICI Mutual fund, HDFC Mutual fund, Can Bank Mutual Fund, SBI Mutual Fund, Tata Mutual Funds, Birla Mutual Funds etc. A sample survey technique is adopted to elicit the opinions of various respondents. Out of 400 approached individuals, 296 responded to our inquiries made. For reaching on the conclusion various relevant statistical tools like average, ratio, percentage, z test, t-test…etc are used. Period under this study have taken from the year 2000 and onwards. A suitable questionnaire is prepared for collecting primary data from professionals and investors. The areas covered for sampling are Delhi, Noida, Ghaziabad, Faridabad, and Gurgaon, five leading cities of three states of India.

6. SEBI’S ROLE TO REGULATE MUTUAL FUNDS The role of SEBI can be understood from the following points:

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Role of Securities & Exchange Board of India (SEBI) in regulating Mutual Funds Rajiv Kumar Singh

6.1 Securities Market Awareness Campaign SEBI believes that ‘An Educated Investor is a Protected Investor.’ A comprehensive Securities Market Awareness Campaign was launched on January 17, 2003. The campaign includes workshops, audio-visual clippings, distribution of educative materials in English, Hindi and local languages, a dedicated investor website with inventory of booklets/pamphlets/FAQ’s and periodic advertisements in All India Radio (AIR) and print media. Till Mar’12, 3217 workshops were conducted covering around 493 cities/towns in India. 6.2 Recognition to Investor Associations: SEBI recognises investor associations, extends financial support for conducting investor education programmes, and also addresses various issues raised by them to protect the interest of the investors. SEBI has so far recognised 10 Investors’ Associations. 6.3 Portfolio Disclosure Transparency is essential for corporate governance and portfolio disclosure is an important means of keeping the investors informed about the way their moneys are being used to create financial assets. Therefore, SEBI has made it mandatory for mutual funds to disclose the entire portfolio of any scheme. 6.4 Transparency in Investment Decisions SEBI has taken a far-reaching step towards ensuring due diligence and transparency in all investment decisions by advising all mutual funds ‘to maintain records in support of each investment decision which will indicate the date, facts and opinion leading to that decision’. 6.5 Screening of mutual funds at the entry level: Every mutual fund shall be registered with SEBI and the registration is granted on the fulfillment of certain conditions laid down in the regulations for ‘efficient and orderly conduct of the affairs of a mutual fund’. 6.6 SEBI has outlined the advertisement code too: All mutual funds are bound to publish a scheme-wise annual report or an abridged summary through an advertisement within six months of the closure of the financial year. The trustees of a mutual fund are bound to convey to the investors any information that has an adverse impact. A mutual fund is also to publish half-yearly unaudited financial results through an advertisement. 6.7 Prescribed Norms for Investment SEBI has prescribed norms for investment management with a view to minimising/reducing undue investment risks. There are also certain restrictions, which are aimed at ensuring transparency and prohibiting mutual funds from excessive risk exposure. These restrictions and limitations have strong similarities with those imposed in the US and the UK. 6.8 Inspection & Penalties SEBI inspects the books of accounts, records and documents of a mutual fund, the trustees, AMC and custodian. SEBI also imposes a monetary penalty in case of violations of regulations specified. The regulatory framework indicates that SEBI is a highly powerful regulator. There is strong emphasis on ex-post investigation and disciplining of mutual funds through financial penalties.

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Role of Securities & Exchange Board of India (SEBI) in regulating Mutual Funds Rajiv Kumar Singh

6.9 As financial journalists play a critical role for investors’ education, SEBI decided to conduct a one-day workshop on capital market for the financial journalists at different centers.

7. ANALYSIS & FINDINGS On the basis of the data collected and analysed, the followings are the findings of the study: 7.1 Awareness of SEBI regulations & its role to channelise the savings Out of the investors responded, only 38% of the investors are aware about the SEBI regulations while 98.4% of the professionals associated with MF Industry are aware about the updated regulations and appreciate the regulations in building the investors’ confidence to invest in Mutual Funds. Investors do not acknowledge the role of SEBI regulations. Table-1: Awareness about SEBI regulations and its role

Respondents Yes No Total Professionals associated 90 02 92 Investors (MF unit holders) 77 127 204

7.1.1 Null Hypothesis There is no significant effect of SEBI regulations in channelising the savings of Investors to Mutual fund. The results of the test show that at 5 % level of significance, null hypothesis is rejected. (Using z test) There is a significant role of SEBI regulations in channelising the savings of Investors to Mutual fund. Although, there is a significant difference between investor’s and associated professional’s view about the role of SEBI. (Using t test) 7.1.2 Null Hypothesis Most of the Investors are not aware about the SEBI (Mutual Fund) regulations. There is no significant effect of these regulations in protection of Investor’s interest. The results of the test at 5 % level of significance accept the null hypothesis. (Using z test) Large numbers of investors are not aware about these regulations. Although, there is a significant difference between investor’s and associated professional’s view about the role of SEBI in protecting the investor’s interest. (Using t test) Professionals do admire the role of SEBI while Investors do not give any credit to SEBI. 7.2 Effect of SEBI regulation on Investment decision-making by Fund Managers: The respondents associated with Mutual Fund Industry reveals that SEBI regulations do affect the decision making process by fund Managers. They have to consider first these regulations before

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Role of Securities & Exchange Board of India (SEBI) in regulating Mutual Funds Rajiv Kumar Singh taking any decision regarding investment. These often demotivate the fund managers to innovate the investment strategies that may optimize the unit holder’s wealth. Most of fund managers are reluctant to innovate new strategies on account of strict investment norms specified by SEBI.

Table 2: Effect of SEBI regulations on investment decision making and innovative investment strategies

Investment Innovation of investment Effect decision making strategies as hurdles 63 58 as facilitator 12 21 No effect 17 23

7.2.1 Null Hypothesis There is no significant effect of the regulations on fund managers to innovate and implement the investment strategies to optimize the returns (NAV of a scheme). The results of the test show that at 5 % level of significance, null hypothesis is rejected. (Using z test) Significant numbers of professionals do consider these regulations first before implementing any innovative investment strategies. 7.2.2 Null Hypothesis There is no significant effect of the regulations on fund managers to innovate and implement the investment strategies to optimize the returns (NAV of a scheme). The results of the test show that at 5 % level of significance, null hypothesis is rejected. (Using z test) Significant numbers of professionals do consider these regulations first before implementing any innovative investment strategies. 7.3 Effect of SEBI regulations on the participant players and on controlling malpractices (fraudulent, unscrupulous…etc) in Mutual Fund Market The results of this study reflect that SEBI has so far not been able to control the market players and their activities in an effective manner. The SEBI regulations often are reactive rather than proactive. To some extent, these regulations are able to regulate the operations of Mutual fund market but not able to curb the malpractices (fraudulent, unscrupulous, etc) effectively.

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Role of Securities & Exchange Board of India (SEBI) in regulating Mutual Funds Rajiv Kumar Singh

Table-3: Effect of SEBI regulations on Mutual Fund Table 4: SEBI Regulations: market activities Proactive or Reactive ? Strict No To some Respondents Proactive Reactive Neutral Control Control extent Professionals 61 26 5 34 51 7 Investors (unit holders) 58 94 52 58 94 52 Total 119 125 57 92 145 59

7.3.1 Null Hypothesis There is no significant effect of these regulations in regulating Mutual funds. The results of the test show that at 5 % level of significance, null hypothesis is rejected. (Using z test) Although, there is a significant difference between investor’s and associated professional’s response about the effectiveness of SEBI regulations. (Using t test) Professionals do accept the effective role of SEBI while Investors do not. 7.4 Role of SEBI: Proactive or Reactive? The results of this study indicate that SEBI regulations often are reactive rather than proactive. 7.5 SEBI Investor Awareness Campaign: The results of this study indicate that SEBI Investor education initiatives are not known to investors. A large proportion of Investors are not familiar with Investor Awareness Campaign 7.6 Effect of SEBI Grievance Redressal Mechanism: The Analysis of data collected indicates that SEBI grievance redressal mechanism is very effective. More than 80% of complainant got their grievances resolved. The respondents who had never complained about their grievances could not comment anything on its grievance redressal but those who had approached SEBI consider it to be very effective.

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Role of Securities & Exchange Board of India (SEBI) in regulating Mutual Funds Rajiv Kumar Singh

Table 5: Familiarity of SEBI Awareness Campaign Table 6: SEBI Grievance Redressal Mechanism Not Limited No. of Respondents Familiar Effective Ineffective Can’t say familiar Information Number of Investors (MF unit 39 09 156 24 116 64 respondents holders)

7.7 SEBI’s Functioning: A Critical Review Since March 1991, SEBI has supervised all the Mutual Funds (excluding UTI) several times. SEBI has conducted certain special investigations from time to time. Though the reports are confidential (according to SEBI officials) the financial press has reported certain important points. They are as follows: (i) In the case of BOI Mutual Fund it is found that the pages of the investment registers containing the details of the transactions in equity shares of Reliance Industries had been torn off. Further, in the case of Festival Bonanza Growth Scheme, BOI Mutual Fund has handed over Rs. 20.50 Crores to stockbrokers. BOI Mutual Fund apparently bought the shares of Karnataka Ball Bearings, a firm deep in the red, at a price higher than warranted. (ii) Can Bank Mutual Fund has entered in transactions with its sponsor, Canara Bank, to give the benefit of Fund resources. In one single transaction fund has acquired Rs. 300 Cr worth shares. Highlighting the irregularities in securities transactions, The Janaki Raman Committee appointed by RBI found that, some Mutual Fund have misappropriated the funds by indulging in irregularities. To inquire about irregularities in securities transactions, the Government of India has appointed a Joint Parliamentary Committee [JPC], the committee also probed about involvement of Mutual funds in these irregularities. The following comments made by the committee are worth noting: “The committee regrets to note that Some Mutual Fund has violated almost all the guidelines and regulations of the Ministry of Finance, RBI and SEBI. In many cases, the sponsor and its subsidiary have derived benefit through the operations of fund at the cost of investors.” “The manner in which Mutual funds had invested the funds indicates that it had not exercised sufficient care, prudence and diligence in the interest of investors and in several instances exposed the investors to high degree of risks without disclosure of it to the investors. This is in the view of the committee is a serious breach of trust”

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Role of Securities & Exchange Board of India (SEBI) in regulating Mutual Funds Rajiv Kumar Singh

The committee regrets to note that several funds indulged in serious malpractices/irregularities detrimental to the interest of investors. Failure to exercise adequate control by the authorities concerned resulted in recurrence of the same and regrettably, the irregularities came to be regarded as market practice. It is systematic failure of this order that set the stage for the scam. The system is as much in need of rectification as culpable individuals are in need of punishment”. In August 2003, SEBI barred Samir Arora, the famed fund manager of Alliance Capital Mutual Fund, and the FII/sub-accounts of US-based Alliance Capital Management, from trading directly or indirectly in the capital market with allegations of insider trading. SEBI also critically scrutinized the rallies in the stock market and estimated that of substantial part of FII investment came through participatory notes (P-notes). During various investigations, it was revealed that nearly $3 bn was invested by the Overseas Corporate Bodies (OCBs) registered in Mauritius, whose beneficiaries were resident Indians. The OCB’s funds were largely unregulated and caused a lot of volatility and a subsequent rash in the markets. Therefore, SEBI further tightened the FII regulations to ensure that P-notes are not misused. The SEBI board has restricted the issue of P-notes by FII to only regulated entities.

8. PROBLEMATIC ASPECTS FOR FURTHER REGULATION An analytical view of crucial issues for further regulations is presented here. 8.1 Voting Right to Mutual Funds: As per Companies Act, trust cannot exercise any voting power, but it can be exercised by a public trustee who is a government official, which is as good as not exercising at all. The recently formed AMFI has urged for voting rights to mutual funds so as to have a say in decision-making. Mutual Funds sponsors like bank and Financial Institutions, in their role as merchant bankers and lenders have access to inside information which coupled with voting rights encourage the fund managers to indulge in unscrupulous practices, such as insider trading where regulations are weak. Undoubtedly, firm’s wealth would improve, but it may be at the cost of the corporate health. 8.2 Ceiling on Corpus Amount: SEBI regulations have not stipulated any maximum amount to be collected under each scheme. Retention of over subscribed amount creates difficulty not only in management of the fund but eventual problems may crop up at the time of redemption also. Therefore, there should be a limit on the retention of over subscribed amount. The other viewpoint is, if limitation on corpus amount is imposed, the entry for more and more investors into the mutual fund would be closed and the objective of mutual funds gets defeated. However, in the present situation where the mutual fund industry is in the nascent stage and not fully professionalised. 8.3 Capital Adequacy: Safety of the principal amount can be achieved by guarantee offered by the Government, like post-office saving deposits. Alternatively, safety can be assured through capital adequacy, which is presently applicable to bank deposits, debentures and equity shares. Mutual Funds, whose main activity is to invest in marketable securities, are put to risk of default. The collapse of market may affect the interest of investors and safety of depression, the investor, and the AMCs should have capital adequacy norms. The norms are to be formulated after a though study of the issue.

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Role of Securities & Exchange Board of India (SEBI) in regulating Mutual Funds Rajiv Kumar Singh

8.4 Borrowing powers: SEBI regulations have not specified about borrowing powers. The basic feature of open- ended Mutual Funds is to provide liquidity by continuous repurchase and resale. On repurchase requisition, the fund will sell some of its securities and meet the investor requirement. But if the fund invests in securities-which are not liquidable at optimum/fair price or the encashment may be delayed because of various reasons. In this context, SEBI regulations may have to permit open- ended fund to borrow in order to accommodate the liquidity interest of the investor. 8.5 Insurance coverage for Mutual Fund Investors: Deposit Insurance Corporation of India provides an insurance coverage to some extent to deposit holders of banks. Similarly, Mutual Fund investors should also have such coverage against the risks associated. In the UK, Securities and Investments Board organises a compensation fund- which is contributed by financial services companies including unit trusts. 8.6 Norms for Portfolio Turnover Rate: Portfolio turnover rate indicates the extent of portfolio activity and depends on the investment objective of the scheme. The turnover rate also influences the stock market price level, investment costs and the level of risk associated. SEBI regulations do not specify norms for portfolio turnover rate for different schemes. Portfolio turnover rate should to be disclosed in the annual report. 8.7 Nomination Facility: To facilitate easy transmission of the units, mutual funds should be permitted to provide the service of nomination facility to the unit holders. Presently UTI is offering such facility to its unit holders. The same should be extended to other mutual funds by amending the SEBI regulations. 8.8 Shared Trustees: The trustee has the power of superintendence and direction over AMCs. They monitor the performance and compliance of SEBI regulation. Many trustees are associates with more than one mutual fund that may diversify the attention of a trustee and can not fully entertain the interest of a particular mutual fund.

9. SEBI (MUTUAL FUND) REGULATIONS, 2011 SEBI has now reviewed all old regulations and introduced modifications, wherever necessary. It has issued revised set of regulations on Jan 7, 2012. It includes all amendments to previous regulation (1996) up to Dec 30, 2011. Some of the above-suggested changes have been incorporated by SEBI by issuing the new regulation in 2011. There is an expansion of the derivatives segment, the Corporatisation and demutualization of the bourses, the central listing authority, sweat equity norms, delisting norms etc. It has already amended the takeover code and modified the portfolio management service guidelines. Disclosure standards have been improved; initial public offer documents have become more streamlined with more information on business and revenue models.

10. SUGGESTIONS FOR EFFECTIVE REGULATIONS The following suggestions can be given on the basis of this study:

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Role of Securities & Exchange Board of India (SEBI) in regulating Mutual Funds Rajiv Kumar Singh

10.1 To empower investor to make informed decisions & achieve fair deals: SEBI should ensure that the checks and balances in the surveillance system work well to curb manipulations, which should be backed by prompt scrutiny, investigations and punitive actions. SEBI has to exercise due diligence to ensure timely crackdown on price manipulation, and impose stringent penal action and have a close tab on fund flows to protect investor interests. 10.2 Suggestions for consumers and participants to think that markets are efficient, orderly and clean: SEBI can encourage more market players. It can reconsider the participation of OCBs by making it mandatory for them to announce their beneficiaries rather than completely banning them. It should proactively examine issues of contentious nature. In most cases, It has taken action only when there is a referral from a court or investor forum or the government (e.g., UTI’s assured return schemes). SEBI should make all disclosures available freely to everyone. It has taken the first step towards it through its website EDIFAR.nic.in. 10.3 To further establish an appropriate, proportionate and effective regulatory regime in which all the ‘stakeholders’ have confidence: SEBI has done a commendable job in terms of stringent regulation. However, the penalties must be more severe and appropriate, so that they deter the market participants from indulging in malpractices. It must ensure that new norms for corporate disclosures have more depth and are implemented over a shorter time period. The SAT dismissals of major SEBI orders show a poor rate of conviction. SEBI needs to ensure that it exercises its penal powers (up to Rs. 25 cr three times the ill-gotten profits) on proper grounds and leaves no room for reversals, as happened in cases of BPL,Videocon, UB group..etc. It must also ensure that skilled staff to make its case and decisions stronger, handles major violations of markets and investors’ interests. e.g., Sterlite, BPL, Videocon, Anand Rathi and Associates, Hindustan Lever etc. 10.4 About cautious investment in unlisted securities, privately placed securities, unrated debt securities, and Non-Performing Assets All the AMCs are advised to observe specific attention on investments in unlisted, privately placed, unrated debt securities, non-performing assets (NPAs), and transactions where associates are involved as these investment are highly risky. SEBI should include some specific provisions in its regulations to ensure the proper safeguard against the risk associated with these investments (securities). 10.5 Suggestion Regarding Compliance Certificate The compliance certificate to be submitted by the AMC on a half-yearly basis should contain specific comments on the followings:  If the AMC is carrying on other activities, whether as per the regulations, and whether it continues to meet the capital adequacy requirements for each of the activities.  If the investments have been made in accordance with the regulations, trust deed and investment objectives of the scheme.  If the utilization of the services of the sponsor or any of the AMC’s associates, employees or their relatives for any securities transaction is in accordance with the offer document and the brokerage and commission paid to such affiliates. -56-

Role of Securities & Exchange Board of India (SEBI) in regulating Mutual Funds Rajiv Kumar Singh

 Details of any changes in the interests of the directors on the AMC’s board of directors.  Investments/Redemption by the AMC or sponsor in any of the schemes and inter-scheme investments, giving details, date, price, value and charges levied.  Transactions in securities by the key personnel of the AMC, whether in their own name or on behalf of the AMC, giving details of the names of the personnel, name of the security, and purchase/sale details like the quantity, rate, value and name of the broker; whether the transaction is on personal account or conducted by the immediate family or fiduciary.  The identification and appropriation of expenses to individual schemes and whether the expenses are in conformity with the limits laid down by SEBI.  Deficiency/Warning letters, if any, received from SEBI and the corrective action taken. 10.6 Suggestions Regarding Transparency in Investment Decisions SEBI has taken a far-reaching step towards ensuring due diligence and transparency in all investment decisions. While the AMC boards can prescribe the broad parameters of investment, it is important that the basis for the decision to invest in individual security-equity or debt—should be recorded. The AMC should report on the matter of compliance to the trustees and the trustees shall report to the SEBI in their bi-annual report. 10.7 Suggestions to Provide More Power to Self Regulatory (SRO) Association of Mutual Fund Industry (AMFI) needs to be given the status of SRO through legislative measures, and to be declared a ‘juridical person’. 10.7.1 SEBI should delegate certain supervisory powers to AMFI so that it can function as the first-line supervisor such as Screening of applications for licenses and the ‘fit and proper test’ for AMC, intermediaries, registrars and transfer agents, fund managers..etc, routine audit matters, investigation relating to investors’ complaints, implementation of the advertisement code, etc.., valuation of the portfolio, routine disclosure of portfolio assets; and Periodic investigations to uncover any possibility of moral hazards, fraud, etc. 10.7.2 AMFI must set up an appellate body, which could act as an arbitrator between members and AMCs, between investors and AMCs, between AMFI and AMCs. 10.8 Suggestions Regarding Risk Management Function It is recommended that all funds should have an independent risk management function responsible for identifying, evaluating or measuring all risks inherent in a mutual fund organisation, as well as establishing controls to mitigate such risks. This function should be separate from fund management. A Risk Management Framework manual detailing the policies & procedures, systems, organisation controls and specific risk management measures for the above risks should be mandated by SEBI, with an implementation time frame. 10.9 Suggestion to Provide Insurance Cover It is recommended that funds should be required to buy insurance cover against third party losses arising from errors and omissions. The level and type of cover should be determined by the Trustees, subject to a minimum level of Rs. 5 crores. However, Mutual Funds with assets of less than Rs. 100 crores may take insurance cover for an amount of less than Rs. 5 crore as determined by their trustees. The premium for this cover may be paid for in accordance with Chapter VII,

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Role of Securities & Exchange Board of India (SEBI) in regulating Mutual Funds Rajiv Kumar Singh

Section 52 (4) (b) (x) of the SEBI (Mutual Fund) Regulations, 1996. R&T agents and custodians should also be required to take separate cover for errors and omissions.

REFERENCES [1]. Agarwal, G.D. (1992). Mutual Fund and Investors’ Interest. Chartered Secretary, Vol. XXII, No.1, pp.14-27. [2]. Annual Reports and Offer Documents of Mutual Funds, Currency and Finance, Reserve Bank of India, 1987-88 to 2005-06. G.S. Patel Committee Recommendations, Centre for Monitoring India [3]. Bansal, L.K. (1995). Signals from Annual Reports of Mutual Fund. Chartered Secretary, Vol. XXV, No.9, (September). [4]. Barua, Samir K., and Varma, Jayant R. (1990). Master Shares: Enigmatic Performance. Working Paper No. 906, Indian Institute of Management, Ahmedabad, December. [5]. Barua, Samir K., Varma, Jayant R., Venkiteswaran, N. (1991). A Regulatory Framework for Mutual Funds. Economic and Political Weekly, May 25. [6]. Bhatt, R.S. (1992). Mutual Funds—Stepping Up the Act. The Economic Times, Apr 7, Bangalore ed. [7]. Boudreaux, Kenneth J. (1973). Discounts and Premiums on Closed end Mutual Fund: A study on Valuation. The Journal of Finance, 28. [8]. Franks, Julian, Mayer, Colin, Risk, Regulation & Investor Protection, Oxford: Clarendon Press, 1999. [9]. Friend, Irwin and Brown, F.E. (1995). Impact if Investment Funds on the Stock Market. reprinted in Hsiu-Kwangwer, Alan Jzakon (ed.) Elements of Investments, Holt, Rinehart and Winston, NY. [10]. Friend, Irwin and Vickers, Douglas. (1995). Portfolio Selection and Investment Performance. The Journal of Financial, Vol. XX, No.3, 114-119. [11]. Friend, Irwin, Bicksler, James L. (2007). Risk & Return in Finance, Cambridge: Ballinger Publishing. [12]. Friend, Irwin, Blume, Marshall, Crockett, Jean. (1970). Mutual Funds and Other Institutional Investors: A Twentieth Century Fund Study, New York: McGraw Hill Book Company. [13]. Friend, Irwin, Brown, F.E., Herman, Edwards, Vickers Douglas. (2003). A Study of Mutual Funds: Investment Policy and Investment Company Performance. Reprinted in Hsiu- Kwangwer, Alan Jzakon (ed.) op. cit. [14]. Garodia, Sunil. (1991). Mutual Funds and Overview. Financial Express, January 20. [15]. Graham, Dodd D.L, Cottle, C. (1962). Security Analysis: Principles and Techniques, New York: McGraw-Hill. [16]. Haslem, John. (1988). Investors Guide to Mutual Funds, New Jersey: Prentice Hall, Englewood Cliff. [17]. Hazard, John W., and Christie, Milon. The Investment Business (A Condensation of the SEC report), New York: Harper and Row Publishers. [18]. Ippolito, Richard A. (1999). Efficiency with Costly Information: A Study of Mutual Fund Performance 1965-1994. The Quarterly Journal of Economics, Vol. CIV Isset, February.

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[19]. IMRO Rule Book: An Overview, Investment Management Regulatory Organisation, London, Nov 2001 [20]. James, Ang S., Jess, Chau H. (1992). Mutual Funds: Different Strokes for Different Folks” Journal of Portfolio Management, 8, Winter. [21]. Jayadev, M. (2005). Valuation of Mutual Fund Units”, Chartered Secretary, Vol. XXVC, No. 10, (Oct). [22]. Joint Parliamentary Committee Report on Irregularities in Securities Transactions, GOI, 1994 [23]. Kaura, Mohinder N., Jayadev, M. (2005). Performance of Growth Oriented Mutual Funds: An Evaluation. The ICFAI Journal of Applied Finance, Vol. 1, No. 1, (January). [24]. Lall C., Sharma, S. Mutual Funds—How to Keep Them on Right Track. Yojana, Vol.35, No.23, pp.211-220. [25]. Madan Gopal. (2000). Mutual Funds in India—The Future is Bright. The Banker, December. [26]. Manali, R., and Ranjeet, S. (1991). Are Mutual Funds Trapped”? Dalal Street, February 11- 24. [27]. Management of Investment Companies. Investment Company Institute, USA, A monograph prepared for the Commission on Money and Credit, Investment Company Institute, USA, 1962. [28]. Mulraj, J. (2002). Master Shares—A Critical Evaluation. The Economic Times, September 28. [29]. Ponkshe, V.R. (2001). Mutual Funds: An Overview. Financial Express, August 14. [30]. Reilly, Frank K. (1992). Investments New York: The Dryden Press. [31]. Report of the Committee on the Financial System, Government of India, 2001. [32]. Report of the Expert Committee on the Accounting Policies, Net Asset Values and Pricing of Mutual Funds, Securities and Exchange Board of India, January, 1996. [33]. Report of the Social Audit Committee, Unit Trust of India, October, 1994 [34]. Sarkar, A.K. (2001). Mutual Funds in India-Emerging trends. The Management Accountant, Vol 26, No.3. [35]. Satyajit, Dhar. Mutual Funds in India: A Close Look. Finance India, Vol. VIII, No.3. [36]. Seemavaid. (1994). Mutual Fund Operations in India, Varanasi: Rishi Pubications. [37]. Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 [38]. Securities and Exchange Board of India, Annual Report, 2005-06. [39]. Sharpe, W. F. (1999). Mutual Fund Performance. Journal of Business, Vol. 39, No. 1, 109-121. [40]. The Financial Services (Regulated Schemes) Regulations, 1991, Securities& Investments Board, UK. [41]. The PIA’s Approach to Regulation, Personal Investment Authority, London. The Budget Papers, Government of India, 1985-86 to 1996-97. [42]. Thiripal, Raju M., “Do Shareholders Benefit by Rights & Bonus Issues of Mutual Funds,” Prajnan, Vol XXIII, No.3. [43]. Verma, J.C., Mutual Funds, New Delhi: Bharat Law House Pvt. Ltd., 1992. [44]. William, Baumol J., Stephen, Goldfeld M., Lilli, Gordan A., Michael, Kohen F. (1999). The Economics of Mutual Fund Markets: Competition Versus Regulation, Boston: Kluwer Academic Publishers.

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Rural Marketing – Potentials and Strategies for Durables A Study in Ghaziabad District

Manmeet Kumar Siras* Department of Commerce & Business Administration, Meerut College, Meerut, India Email Id: [email protected]

Abstract

The Indian rural market has a huge demand base and offers great opportunities to marketers. Two-thirds of Indian consumers live in rural PAPER/ARTICLE INFO areas and almost half of the national income is generated from there. From RECEIVED ON: 04 – 03 - 2012 ACCEPTED ON: 22 – 05 - 2012 the point of view of rural marketing, Ghaziabad district is an ideal district because it is very much near to the capital of the country. In the present paper Ghaziabad District’s four segments have been selected, By the detailed analysis of the results of 40 villages from the sectors “Murad Nagar, Loni, Hapur and Dadri”, it can be observed that the results are almost same in the villages of these sectors. There certainly is a place for premium products, but consumers in rural market for those products are Reference to this paper scattered and difficult to reach. Therefore, such products can be left to be should be made as follows : Siras, Manmeet Kumar bought from the nearest urban centre. The attraction of rural market is in (2012) “Rural Marketing – their size as mass markets. Those who design products for such mass Potentials And Strategies markets will prosper and grow rapidly. For Durables: A Study In Ghaziabad District” Int. J. of Key Words: Rural Marketing, Durables, Consumers’ attitude, Whole Trade and Commerce- Sellers & Retailers, Buying Motives, Potentials, Strategies IIARTC, Vol. 1, No. 1, pp. 60-69.

*Corresponding Author

Rural Marketing – Potentials and Strategies for Durables Manmeet Kumar Siras

1. I NTRODUCTION Present research paper entitled “Rural Marketing -- Potentials and Strategies for Durables – A Study in Ghaziabad District” is mainly based on the hypothesis that, there is a vast potential of marketing of durable goods in rural areas of the country which is increasing day by day. In India where about 70% population resides in the rural areas and nearly half of the national income is generated by the rural population, hence it become necessary to understand the psyche of the rural population, their needs, aspirations and also their behavior to be success in the marketing in rural areas. The villagers have accepted the modern way of agriculture as a business but also have accepted modern living. Apart from the food items, they are interested in buying durable products. This change in the attitude of rural consumers is sweeping across the countryside. The expanding rural market is important to growth of economic development of India. Rural markets have proved to be very attractive for corporate and the size of market is increasing year by year. The increased income/purchasing power of the rural consumer and the improved income distribution have enhanced rural demand for several products. With a population already in excess of one billion people, India has caught the eye of multinational corporations across the globe as a place of opportunity for exploring new markets. The Indian rural market has a huge demand base and offers great opportunities to marketers. Two-thirds of Indian consumers live in rural areas and almost half of the national income is generated from here. The reasons for heading into the rural areas are fairly clear. The urban consumer durable market for products like colour TVs, washing machines, refrigerators and air conditioners is growing annually at between 7 per cent and 10 per cent. The rural market is zooming ahead at around 25 per cent annually. "The rural market is growing faster than urban India now," says Venugopal Dhoot, chairman of the Rs 1900 -crore Videocon Appliances. "The urban market is a replacement and up gradation market today," adds Samsung's director, marketing, Ravinder Zutshi.

2. CONSUMER DURABLE PRODUCTS Radios, transistors, Clocks and wrist watch, Room coolers and room heaters, Television -- Color and B&W television, Table fans, Ceiling fans, Inverters and batteries, Mopeds and motor cycles / Car, Cassette / recorders/ VCD / VCR / DVD player, Mixer / Grinders/ Sewing machines, Electric irons, heaters, Washing machines, Refrigerators, Computer / laptop and mobile Phones and Other households’ equipments.

3. OBJECTIVES OF THE STUDY The main objectives of the study are: (1) To understand the environment in which the rural market operates. (2) To find out the inherent problems associated with rural market. (3) The market strategies which can be successfully adopted to exploit properly to the potentials of the rural market. (4) To find out the opinion of the rural consumers about the consumer goods. (5) To know the psyche of the rural consumers.

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4. R ESEARCH METHODOLOGY 4.1. Area of the Study “Ghaziabad” district had been selected for the sample study because district has comparatively better infrastructure and a wide rural area, which is very essential for the development of rural market than another district of this region of Western Uttar Pradesh. There are four markets: (Hapur, Dadri, Loni and Murad Nagar) in all over the district. These markets are much near to the rural areas of the district and these markets are main place from where rural consumers use to buy the Durable Products. The people of these areas have greater opportunities of employment and have more disposable income than other remote rural areas; hence, there is a lot of potential of rural marketing for Consumable and Durable products. From the point of view of rural marketing, Ghaziabad district is an ideal district because it is very much near to the capital of the country. Thus, it has a better infrastructure and communication facilities which are also available in rural areas of the district. The selection of sample villages has done by stratified sampling methods, although, selection is random. Out of the 50 villages 40 villages have been selected which are well distributed in four sectors of Ghaziabad district and each sector consist 10 villages of the different size of population. 4.2. Sampling Technique Universe: Consumer respondents in the rural areas. Sampling Unit: Sampling unit is limited to the Ghaziabad district of U.P. Sample Size: 200 consumer respondents from the rural areas ( 50 from each sector of Ghaziabad district). Sampling Design: Simple random sampling is adopted on the ground of availability, convenience to access and level of participation. Almost equal no. of respondents have been taken in the age group of 15-25, 25-35, 35-45 and above 45 years across the different income levels and education. The respondents selected were media literate people who had an exposure to the television. 4.3. Data Collection Since the primary objective of this study is to know the potentials of marketing of durable products in rural areas. The present study is mainly based on the primary data collected with the help of structured questionnaire and interview. The necessary data for this study had been collected through an interview schedule by directly approaching the respondents and other relevant data from some secondary sources also. All the data for the purpose of the study and deep analysis had been collected during the field work. Preliminary data had been collected for 40 villages. During the survey in rural areas, the researcher has taken interviews on the basis of prepared standard questionnaire of about 5-6 persons in every village. 4.4. Research Tools for Data Collection and their Analysis Primary Data: The structured questionnaire was used to collect the primary data. The questionnaire has both open-end and closed-end questions. Secondary Data: Books, Journals, Magazines, Newsletters and Internet.

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Rural Marketing – Potentials and Strategies for Durables Manmeet Kumar Siras

5. F INDINGS OF THE RESEARCH WORK Table-1: Showing results of the sector “LONI”. Name of Village No. Of No. Of No. Of No. Of No. Of No. Of Families Radios / Tape-Rec/ B & W Color Refrig. / W. M. Transister VCD/ DVD T. V. T. V. / R. C. BAGHOUR 235 220 175 50 120 67 BEHRA PUR 216 190 140 60 92 43 BANTHALA 1,223 1,200 950 300 710 363 CHIRORI 1,376 1,320 1100 1,060 768 442 DHIKOLI 336 310 250 320 125 114 KATIYABAD 608 570 430 70 340 227 RATOUL 692 650 490 175 365 241 SIROHI 746 712 610 160 385 354 SEHBAZ PUR 218 200 140 205 122 114 VINAY PUR 192 175 110 70 118 87 TOTAL 5,842 5,547 4,395 1,450 3,145 2,052 5842 5842 Ave. No. Of families per prod =No.of 5842/ 5547 5842/ 4395 5842/ 2052 /1450 /3145 Families/ No. Of products = 1.05 = 1.33 = 2.85 = 4.03 = 1.86 % = No. of prod./ No. of Families 95% 75.23% 24.82% 53.83% 35.12% Source : Primary Data. Table-2: Showing results of the sector “Hapur”. Name of Village No. Of No. Of No. Of No. Of No. Of No. Of Families Radios / Tape-Rec/ B & W T. V. Color T. V. Refrig. / W. Transister VCD/ DVD M. / R. C. ACHHEJA 326 320 225 69 142 118 GHARI 135 135 106 30 72 48 GALAND 408 400 364 90 228 156 HARSAANW 1,509 1,500 1,150 328 790 832 KAZIM PUR 526 520 375 115 264 170 NIZAM PUR 529 500 385 142 224 160 SEKERA 468 450 370 112 242 124 DATIYANA 766 750 532 164 392 233 TODAL OUR 869 850 650 196 448 262 NOOR PUR 1,382 1,350 960 288 870 530 TOTAL 6,918 6,775 5,117 1,534 3,672 2633 Ave. No. Of families per prod. = 6918 /6775 6918 /5117 6918 /1534 6918 /3672 6918 /2633 No. of Families/ No. Of products = 1.02 = 1.35 = 4.51 = 1.88 = 2.67 % = No. of prod./ No. of Families 98% 74% 22.2% 53% 38% Source : Primary Data.

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Rural Marketing – Potentials and Strategies for Durables Manmeet Kumar Siras

Table-3: Showing results of the sector “Dadri”. Name of No. Of No. Of No. Of No. Of No. Of No. Of Village Families Radios / Tape-Rec/ B & W Color Refrig. / W. Transister VCD/ DVD T. V. T. V. M. / R. C. ACHHEJARPU 356 340 282 68 176 130 DEVLA 208 200 156 48 118 65 MANIK PUR 1,268 1,200 996 254 712 417 GULISTA PUR 259 250 187 63 117 72 KHERA 825 800 725 216 498 342 MALAK PUR 526 500 362 128 246 178 MAKODA 456 410 336 122 227 162 SAKI PUR 852 820 628 192 439 296 SADOW PUR 268 250 216 79 147 86 TILAPTA 1,368 1,300 1107 326 782 628 TOTAL 6,386 6,070 4991 1496 3462 2376 Ave. No. Of families per prod 6386 / 6070 6386 / 4991 6386 6386/ 6386 / 2376 =No. of Families/ No. of products = 1.05 = 1.28 /1469 3462 = 2.68 = 4.27 = 1.85 % = No. ofprod. / No.of Families 95% 78.2% 23.43% 54.2% 37.2% Source: Primary Data.

Table -4: Showing results of the sector “MURAD NAGAR”. Name of Village No. Of No. Of No. Of No. Of No. Of No. Of Families Radios / Tape-Rec/ B & W Color Refrig. / Transister VCD/ DVD T. V. T. V. W. M. / R. C. DUHAI 2,088 2,050 1,680 514 1268 816 ASALAT PUR 220 200 156 42 92 58 ABU PUR 175 160 132 44 72 48 JEET PUR 856 840 630 189 375 320 KAZIM PUR 406 380 312 218 209 156 MANOTA 526 500 370 259 252 213 MORTA 1,658 1,620 1264 385 1260 714 RAVLI 926 900 678 462 422 423 SAINTLI 289 250 228 122 132 56 SIKRI KALA 827 800 682 375 406 236 TOTAL 7,971 7,700 6132 2610 4488 3040 Ave. No. Of families per prod. =No. 7971/ 7700 7971/ 6132 7971/2610 7971 /4488 7971 /3040 of Families/ No. Of products = 1.04 = 1.30 = 3.05 = 1.78 = 2.62 % = No.of prod. / No. of Families 96.6% 76.9% 32.74% 56.30% 38.14% Source : Primary Data.

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6. I NFERENCE It reveals from the above tables (Table 1 to 4) that about 95% families have Radio, 76% families have Tape-Recorders, 23% families have B&W Television sets, 53% Families have color television sets and only 36% families have Refrigerators. It also appears that results of all sectors showing very minor difference from the results of the other sectors. By the detailed analysis of the results of 40 villages from the sectors “Murad Nagar, Loni, Hapur and Dadri” it can be observed that the results are almost same in the villages of these sectors. On the basis of deep analysis we have found out overall results regarding Durable products with the help of statistical averages methods

7. RURAL CONSUMERS’ ATTITUDE TOWARDS DURABLES: Rural consumers play a significant role in this research work. We have incorporated all the information received during the field work and personal interviews taken on the basis of already prepared questionnaire in this research work. We have taken interviews of about 200 rural consumers with the help of questionnaire for Durable products respectively, and the information received is presented here. Durable products include Radios, Tape-Recorders, Television, Refrigerators, Washing machines, Room coolers and heaters, Clocks and Wrist watches, BI-cycles and mopeds. According to rural consumers the demand of these products is growing day by day continuously. But the demand for other products similar to these standard branded products is also very high because the prices of these products are very low in the comparison of standard branded products. That is why the customers are more inclined towards these products because the difference of the cost between these products sometime is 20% to 30%, meaning thereby these products are much cheaper than the original branded products. These products do thrive in the rural market and it can ordinarily be found in village shops. Imitation products apart, these are also locally manufactured branded and unbranded products which are quite popular. These products also have sufficient demand in rural areas to sustain such manufacturers. These products are not only similar in their names, but in features and functions also, and so similar that it is very difficult to recognize it. Most of the rural consumers are of the view that if the supply of original products can be made proper and the prices and quality of these products can be made in accordance with the rural consumers then the demand of these products can be enhanced. The reason behind such a wide range of products sold in rural areas seems to be the heterogeneous nature of the rural market. The wide disparities in income level and the consequent life styles warrant such variety. Hence, there is reason enough for the manufacturers and marketing men to think in terms of products specifically designed or modified for the rural segment.

8. ATTITUDE OF RETAIL SHOP KEEPERS TOWARDS RURAL CONSUMERS: By retailers, we mean which work like a centre for all the villagers of that particular area and from where a large number of rural consumers buy durable products. In this research, we have chosen these kinds of shopkeepers and all the information’s furnished by them have been given here. The first and foremost motive of the retailers is to earn higher profits. Therefore, they sell only those products which yield the maximum profit to them. For this they sell the products of those

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Rural Marketing – Potentials and Strategies for Durables Manmeet Kumar Siras brands on which the percentage of profit is more. They do not give much attention on the quality of the product. That is why they are least interested in selling the product of those companies where the rate of profit is low. In villages beyond the reach of distribution system the shop-keeper make their own arrangement for procurement. The retail shop-keepers have to purchase their stock from wholesalers or authorized dealers who generally are in the nearby cities or towns. Thus, the cost for these retailers goes up by 10% to 15% of the actual cost of products because they have to spend some amount on transportation etc. Because of the transportation and other expenses their profits automatically go down equivalent to the cost incurred on the transportation etc. Therefore, these retailers are more interested in selling the products of local brands, rather than the products of standard brand. According to these retailers, the rural consumers are also more interested in buying and consuming the products of local brands, because they have to spend fewer amounts to fulfill their needs and requirements. Even rural consumers do not show great enthusiasm in the product of standard brands, as they do not have much information about these product and they are solely dependent on the retailers.  It is, thus, revealed in the study that retailers are the main link between the producer and consumer as far as the rural market is concerned. Normally, they buy products from the nearby towns; deal in wide variety of products, purchasing the products from suppliers mostly based on customer requirement. The retailers in the rural market buy mostly from wholesalers and, in some cases, from the manufacturers. The credit facility enjoyed by them from wholesalers makes them dependent on the wholesalers and big retailers. The mode of transportation adopted by them in most cases is by bus. A majority of them buy on a weekly basis. As they get credit facility, they also extend the same benefit to their customers in the villages. It may, thus, be concluded that the effectiveness of rural marketing by marketers heavily depends on the understanding of behavior, attitudes and functioning of retailers.

9. ATTITUDE OF THE WHOLESALERS AND DEALERS TOWARDS RURAL CONSUMERS We have tried to know the opinion of the wholesalers in reference to rural consumers and markets on the basis of interview of the wholesalers and authorized dealers during the field work. We have incorporated all these information in this research paper. It is very difficult for them to provide or make available their product directly in rural areas. The main reason for this is the vastness and uneven spread of rural population. In rural areas people live in very small villages and at a great distance and even in these villages demand for these products are minimal but the cost incurred on to satisfy these demands are much higher than the profit. Therefore, the wholesalers suffer losses instead of profit. Firstly, the demand of Durable product is very low in rural areas and it is seasonal also which are generally demanded on some special occasions or festivals or marriages. So the demand comes down automatically once these occasions are over. That is why to meet the demand of these rural areas the wholesalers do not want to make a permanent distribution system because the cost incurred on these system are much higher. Inspite of distribution system they give some incentives or discount to the retailers to encourage them to sell their products in rural areas. Thus, they get their product reached or accessed to the rural people according to their demand without higher distribution costs and wholesalers have not to do many efforts for this.

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Rural Marketing – Potentials and Strategies for Durables Manmeet Kumar Siras

10. B UYING MOTIVES Marketers have been using buying motives to handle the consumers. ‘Buying Motive’ provides the psychological justification for the acceptance of a product. This tool has proved a success with urban consumers. It is necessary for the marketer first to identify the psychological characteristics, which can act as the ‘Buying Motives’. Though the sources of information are many, it is likely that the consumers use the information from only one or two source for decision-making. Rural consumers are influenced by information received and opinions formed from various sources in making their buying decisions. The other sources in order of importance are -- opinions of family members, advice of friends and neighbors, and shopkeepers’ advice. It may be noted that advertisements have been considered as major influences in purchase decisions. In case of consumer durables, advice of friends and neighbors is found to be a major source, while family members, opinion leaders and shopkeepers are other important source influencing the buying decisions. Self experience is not a major influence, because consumer durables are not purchased repeatedly. Even in this case advertisements were an important influencing source.

11. STRATEGIES Consumer durables face many marketing problems and are not able to penetrate the rural market like non-durables. Several roadblocks make it difficult to progress in the rural market. Marketers encounter a number of problems like dealing with physical distribution, logistics, proper and effective deployment of sales force and effective marketing communication when they enter rural markets. Where the rural market does offer a vast untapped potential, it should also be recognized that it is not that easy to operate in rural market because of several attendant problems. Rural marketing is, thus, a time consuming affair and requires considerable investment in term of evolving appropriate strategies with a view to tackle the problems. The major problems faced by manufacturing and marketing men in rural areas are described below: 1. Breaking of bulk into small volume not possible; 2. Requires more investment by consumer during purchase; 3. Requires installation/after sales service; 4. Higher repurchase cycle; 5. Difficult to do cross promotions; 6. Requires separate retailer for the products; 7. Transportation problems due to bulkiness of products; 8. Dependent on other factors like Electricity, Fuel etc; 9. Banking and Credit problems: Inadequate banking and credit facilities; 10. Problems regarding Handling, Storage and Transportation; 11. Seasonal demand; 12. Stress on unbranded and cheap items; 13. Problems regarding Marketing research and development: (A) Unpopularity of marketing research in India and (B) Lack of research data. Durables are sold to rural areas by the retailers operating from nearby towns. Very less effort are done to promote the products in rural areas except some road shows and advertising in cinema

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Rural Marketing – Potentials and Strategies for Durables Manmeet Kumar Siras halls. Few companies have made efforts to promote the products in rural gatherings like Shandies and haats. Hence, rural marketing requires separate marketing strategies for the marketing mix elements viz, Product, Price, Place and Promotions, which could be formulated after studying the market carefully. Multi—Branding: A company may introduce several brands in a product—line with different features to appeal to different categories in the same customer group. Many FMCG companies follow this strategy. Co—Branding: Today, we find offers with two or more brands of the same company or different companies. When a marketer offers one brand with another brand of the same company or another company it is called co-branding. Such offers may take two different forms: (i) Ingredient co-branding (ii) Product co-branding Products at low end: A range of products targeted for the rural consumer could be launched with low price and low quality to counter the spurious products. This can be done by developing franchisee units to manufacture low-end products with a highly localized Affordability: The income of rural consumers is unsteady. The sources of income as well as the size of income earned per day vary. They cannot hence make planned purchases and large purchases. Small pack sizes help the rural consumer pick the product at a price that he can afford. Combo-packs: Another packaging innovation is ‘combo-packs’. When related products are packed together and sold at economy prices, the consumer finds it a better option to buy. The Combo-Pack may become an ‘assortment’ when more than two products are packed together. Marketing Strategy is affected by various factors like Type of product (Durable or non-durable), profile of target market, internal strengths’ of company, competitor’s strategies, stage of product in its life cycle, facilities available for using marketing mix etc. Moreover, strategy can be formulated at various levels; generic strategy for all firms, Corporate Strategy at corporate level of a firm, Business Strategy for a particular Strategic Business Unit of the Company, marketing mix strategy at marketing Department of a particular Strategic Business Unit etc. This research is focused on generic marketing mix strategies for various types of products in the rural gatherings.

12. CONCLUSION The present discussion on some aspect of rural marketing should not give the impression that rural markets have not been exploited at all. Its purpose is only to highlight the growing importance of rural markets in the fast changing economic situation. Already, substantial penetration has been made by the producers of most consumer goods. Though the cost of distribution and promotion is bound to be high and producers even may sustain losses in the initial stages, this should not deter them from entering the market the potentialities of the rural market are great indeed. With the changing economic conditions in the country, and with better purchasing power, among the rural population, the newly emerging rural markets are bound to yield rich dividends. -68-

Rural Marketing – Potentials and Strategies for Durables Manmeet Kumar Siras

In rural marketing, the vast spectrum of courses to be followed require special care and attention with respect to the product, its quality, packaging, brand, pricing, advertisement, personal selling and channel of distribution. The strategy of rural marketing has to be appropriate appreciating fully the scattered character of rural markets, and the need for a different communication mix on account of the lower level of education and environmental differences. All this calls for concerted and co-coordinated action on the part of both the government and the industry. The government role lies primarily in developing the infrastructure, e.g. A good network of roads in the interiors of rural India, speedy arrangement for better light, water and irrigation facilities, financial and technical assistance in setting up the industries in villages, and distribution of their products. The government’s role will be equally important in conducting rural market surveys and compilation of vital statistics and their publication for the benefit of business and industry. There certainly is a place for premium products, but consumers in rural market for those products are scattered and difficult to reach. Therefore, such products can be left to be bought from the nearest urban centre. The attraction of rural market is in their size as mass markets. Those who design products for such mass markets will prosper and grow rapidly.

REFERENCES [1]. Bedi, R. V., and Badi, N. V. (1999). Rural Marketing. Himalya Publishing house, New Delhi. [2]. Boyd, Jr., and Westfall, S. (2003). Marketing Research. Richard D. Irwin A I T B S N. Delhi. [3]. Chunawala, S. A., and Kumar, K. J. Advertising Theory and Practice. Himalya Publishing house, Delhi. [4]. Davar and Davar. Salesmanship and Publicity. Vikas Publishing N. Delhi. [5]. Gupta, S. L. Rural Marketing – Text and Cases. Wisdom Publications Delhi. [6]. Gopalaswamy, T. P. Rural Marketing—Environment, Problems and Strategies. Wheeler Publishing, New Delhi. [7]. Jain, P. K, and Bhatt, M. Consumer Behaviour. S Chand & Company Ltd. New Delhi. [8]. Rural sales drive growth. Business Standard, April 12, 2004. [9]. Jha and Mithleshwar (1999). Rural Marketing: Some Conceptual Issues. Rural Scan, Vol.I, Issue2, April, 1999 [10]. Michea, V.P. Research Methodology in Management. Himalya Publishing house Mumbai. [11]. Mark, S., Phillip, L., and Thorhill, A. Research Methods for Business Students. Pearson Education Limited. [12]. Saxena, A., Samiuddin, R. Rural Marketing –Thrust and Challenges. National Publishing House, Jaipur. [13]. Saxena, H. M. Rural Markets and Development. Rawat Publ. Jaipur. [14]. Shiffman, L. G, and kanuk, L. L. Consumer Behaviour. Prentice-Hall of India. [15]. Sontakki, C.N. Advertising and Sales Management Marketing Management. Kalyani publishers, Ludhiyana. [16]. www.nacer.org [17]. www.apastyle.org/style.htm

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A Critical Analysis of Agricultural Regulated Markets A Case Study of Western Uttar Pradesh

Narender Kumar* Delhi Global Institute of Management, Faridabad, Haryana, India Email Id: [email protected]

Abstract

The regulated Mandis working in Uttar Pradesh are supposed to have benefited to producers to a large extent by way of providing proper PAPER/ARTICLE INFO marketing `facilities, reducing marketing cost and margins, consequently RECEIVED ON: 18/02/2012 ACCEPTED ON: 30/5/2012 providing them higher share in the price paid by the consumers. The marketable surplus of food grains was higher on large farms as compared to marginal and small farms. This trend was due to higher production and comparatively more area under food grain crops on large farms. Amongst different channels of distribution, the bulk of the marketable surplus i.e., more than 52 percent in case of wheat and more than 70 percent in case of paddy passed through the channel having village traders in the marketing Reference to this paper should be made as follows: system. This channel included producer-village trader- Kumar, Narender. (2012), wholesaler/commission agent-miller (in paddy) - retailer-consumer. “A Critical Analysis of Agricultural Regulated Key words: Mandi Samiti Price spread, Marginal farms, Market Markets: A Case Study of surplus, Multiple intermediaries Western Uttar Pradesh” Int. J. Trade and Commerce- IIARTC, Vol. 1, No. 1, pp.70-89

*Corresponding Author

A Critical Analysis of Agricultural Regulated Markets Narender Kumar

1. I NTRODUCTION The regulated markets are considered as the responsible institutions in discharging all the functions connected with the sale of the output, keeping in view the overall interests of the farming community, and the ultimate consumers. In order to regulate the marketing practices of agricultural commodities various state in the country passed legislations in early sixties and thereafter. However, this measure has brought little success in some states due to the lack of market infrastructural facilities Ghose (1988). This fact necessitated a big boost in the improvement of agricultural marketing system. The development activities are supposed to influence the performance of the regulated market with regard to their structure conduct and performance. The little success of the regulatory measures introduced in the sixties brought to light the fact that it is very difficult to improve the marketing system of the agricultural produce without adequate infrastructural facilities. This was the main reason to give a big boost for the improvement of agricultural markets that has taken place under development of agricultural wholesale projects with the financial help from the International Development Agency (IDA) of the World Bank. Now, the regulated Mandis working in Uttar Pradesh are supposed to have benefited to producers to a large extent by way of providing proper marketing `facilities, reducing marketing cost and margins, consequently providing them higher share in the price paid by the consumers. Over the year, several institutional reforms and policy formulations have been tried to ensure an orderly marketing system and to mitigate the marketing problems of farmers. Among the institutional innovation, regulated market, open operations by the state, procurement through levy and support prices etc. have partially successful. Among these measures, regulated market deserves special mention. The building up of such market complexes would ensure more and more bulk arrivals in the market due to prevalence of pricing effectiveness and efficiency in the marketing of agricultural produce. Efficient agricultural marketing is being increasingly recognized as a powerful force for agricultural development. An efficient form of marketing system is an important means for raising the income levels of farmers and for promoting development. The farmers allocate their resources according to their comparative advantage and invest in modern farm inputs to obtain enhanced production. This in turn contributes to increased market surplus to farm products and increased inter- regional trade, which increases demand for increase in market facilities. Hence, policies to improve the efficiency of agricultural marketing would have a self accelerating effect on productivity. Considering above points in view, this study has been undertaken in four district of Western Uttar Pradesh.

2. OBJECTIVES OF MANDI SAMITI / REGULATED MARKETS For every Mandi Area, one Mandi Samiti is established. Main objectives of Mandi Samiti are given below:- 1. To ensure not to have impartial behavior between Farmers & Traders. 2. To categorize saleable agricultural produces and to sell the produces by Auction. 3. To get weighing of the produces as per Metric scale & to pay for the produces immediately. 4. To gather information regarding market prices and other useful trends and to publicize them. -71-

A Critical Analysis of Agricultural Regulated Markets Narender Kumar

5. To ensure the availability of the necessary stuff in Mandi areas. 6. To play the role of negotiator in case of disputes between Farmers & Traders & to resolve their problems.

3. FUNCTIONS OF MANDI SAMITI/ REGULATED MARKETS : In addition to the functions, duties and power specified in the Act and the bye-laws, the market committee shall also be responsible for: 1. The supply of all such information which the Director or any other Officer not below the rank of Senior Agricultural Marketing Inspector authorized by the State government in this behalf may require; 2. The maintenance of proper checks on all receipts and payments by its officers and servants; 3. The proper execution of all works chargeable to the market committee fund; 4. Keeping a minute book of its proceedings; 5. Maintaining an account for each cart, truck, consignment or load brought into the market yards; 6. Maintaining a register of fees collected; 7. Taking security from its officers & servants; 8. Providing persons authorized to collect fees, a cash box and counterfoil receipts books; 9. Keeping accounts in such forms as may be specified in its bye-laws; 10. Regulating expenditure according to budget; 11. Preparing and adopting budget for the ensuing agricultural year; 12. Arranging for temporary storage or stocking of the specified agricultural produce; 13. Arranging for temporary storage or stocking of the specified agricultural produce; 14. Keeping a copy of the Act and the Rules and notifications issued there under and its bye- laws open to inspection, free of charge, at its office; 15. Doing such other things as may for the efficient working of the market committee, be considered necessary by the market committee or be specified from time to time by the Director or any other officer not below the rank of Senior Agricultural Marketing Inspector authorized by the State government in this behalf.

4. OBJECTIVES OF THE STUDY The objectives of this research are as follows:  To study the structure and functions of regulated markets in the study area.  To examine the flow of marketable surplus of important foodgrain crops marketed through regulated markets.  To workout the price spread of important channel of foodgrain crops marketed through regulated marketing system.  To study the attitudes of farmers, traders/wholesalers towards the benefits provided by the marketing system.

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A Critical Analysis of Agricultural Regulated Markets Narender Kumar

 To analyse the problems/constraints of regulated marketing system in the study area and to suggest suitable measures.

5. LIMITATIONS OF THE STUDY The limitations of the study are as follows: Though all attempts were made to extract as correct information as possible, the ignorance, illiteracy and keeping not any record by the cultivators were found and the main problems in getting correct information from them. They hesitated in giving the correct information particularly regarding their consumption, marketable surplus etc. However, the data were verified by making cross questions with them. The supplied information hence is based on the memory of the respondents.

6. PLAN OF THE STUDY The paper has been divided in seven sub-areas. The first area deals with introduction, importance of the study, objectives, and limitations of data. The second area deals with the review of literature. The third area comprises methodology adopted in the study. The fourth area deals with the growth and development of regulated markets in India and Uttar Pradesh. The fifth area discusses with the results and discussion with respondents. The sixth area comprises price spread of selected commodities the finding of the investigation and a brief discussion on them are delt. The seventh area is fully devoted with summary and conclusion.

7. HYPOTHESES The hypotheses of the study are as under: 1. In the study area Regulated Market Committee has not so far succeeded in building up a suitable infrastructure in relation to marketing of agricultural produce. 2. The marketable surplus is higher on large farms as compared to marginal and small farms. 3. The price spread for agricultural commodities vary from channel to channel. The price spread is low when crops are sold direct to wholesalers and maximum when they sold through the village merchants. 4. The producer’s share is higher when the produce is sold in regulated markets as compared to unregulated markets.

8. RESEARCH METHODOLOGY AND ANALYTICAL TECHNIQUES ADOPTED More specifically the procedure of the selection of the study area, market, villages, respondents, collection of data, analytical techniques are discussed here under: 8.1. Sampling Technique A multistage stratified random sampling technique was used to select the markets, villages, farmers and functionaries for the present study. 8.1(a) Selection of Mandis/markets: A list of the regulated markets working in U. P. was obtained from Rajya Krishi Utpadan Mandi Parishad, Uttar Pradesh, Lucknow. From this list four regulated markets, one each from Muzaffarnagar, Meerut, Ghaziabad and Bulandshahre districts were selected randomly. The lists of the selected regulated Mandis are given below:

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A Critical Analysis of Agricultural Regulated Markets Narender Kumar

Table-1: Showing the Name of the Selected Regulated Mandies under Study S. No Name of the District Name of the Selected Mandi 1 Muzaffarnagar Shamli 2 Meerut Sardhana 3 Ghaziabad Muradnagar 4 Bulandshahr Gulaothi Total 4 4 8.1(b) Selection of villages A list of all the villages falling under the jurisdiction of the selected regulated Mandis was prepared and a random sample of 20 populated villages five from each of the selected Mandi service area was drawn. 8.1(c) Selection of farmers/ producers A list of all producers/farmers for each selected villages was prepared. The farmers were sub- grouped into three size groups i.e., (1) Marginal (0-1 ha), (2) Small (1-2 ha), and (3) Large farmers (2 ha and above). Then 25 farmers from each of the selected Mandis were selected on the basis of the proportion of the farmers falling under each village and size groups. Thus, in all 100 farmers (under three size groups) were selected from 20 villages, falling under four selected Mandis. For analyzing the marketing cost and producer’s share in consumer’s price in detail, 10 producer/sellers, bringing their produce in the regulated markets, under study, were selected purposively, considering their co-operation and the crops i.e., wheat and paddy/rice under the study. The number of farmers/producers selected under different size group of farms in each selected regulated Mandi has been given in the following Table 2. Table – 2: Number of Farmers in each Selected Mandi under Study. No of farmers selected (Size group in hectare) S. No. Reguated Mandi Total 0-1 hac 1-2 hac 2 and above hactare 1 Shamli 7 8 10 25 2 Sardhana 5 7 13 25 3 Murad- nagar 5 8 12 25 4 Gulaothi 8 9 8 25 Total 25 32 43 100 8.1(d) Selection of market functionaries The traders, wholesale dealers, brokers, commission agents, millers, pleaders, weigh men and retailers were in chain of market functionaries operating in the regulated Mandis. A random sample of 10 percent market functionaries, from each category of market functionary was drawn from the universe of whole market functionaries.

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A Critical Analysis of Agricultural Regulated Markets Narender Kumar

8.2. Methods of Enquiry and Collection of Data The study was conducted by survey method. The primary data were collected from the respondents’ viz., farmers, market functionaries etc., through direct personal interview on well prepared schedules and questionnaires. The convenience of respondents was considered to be of prime importance for collecting the correct information. During the course of study several visits were made for the collection of information and every possible care was taken to ensure the accuracy and reliability of the data. The schedules and questionnaire used for the data collection of the study covered all the aspect of required information like production, marketable and marketed surplus of wheat and paddy, marketing charges, middlemen margins, prices, attitudes of farmers/producers and market functionaries etc. The secondary data were obtained from Agricultural Marketing Offices, Rajya Krishi Utpadan Mandi Parishad, U.P., Lucknow, Krishi Utpadan Mandi Samitis Office of the respective selected Regulated Markets, published books, reports and journals etc. 8.3. Period of Enquiry The present study is related to the agricultural year 2004-2011. The study covered all the marketing activities of Regulated Market for two important food grains, i.e., wheat and paddy. 8.4. Analytical Tools The data collected by personal interview with the respondents were analyzed and treated with certain statistical tool to the desired results. The various tools used in the present study were as follows: 8.4(a) Tabular Analysis The collected data were classified and tabulated to compare the production, marketable and marketed surplus of wheat and paddy, marketing charges and margins, arrivals and prices and the attitudes of the farmers and market functionaries etc. towards the regulated marketing system in the study area. 8.4(b) Producer’s share in consumer’s rupee The producer’s share in consumer’s rupee was worked out by the following formula: The producer’s share in consumer’s rupee(P): CM P 100 M Where, P = Producer’s share in consumer’ rupee. C = Consumer’s rupee M = Marketing costs and margins 8.4(c) Shepherd Formula To judge the efficiency of the markets, shepherd Formula was used. Shepherd has suggested that the ratio of total value of good marketed to the marketing cost may be used as a measure of efficiency. The higher ratio, higher efficiency and vice-versa A better expression for shepherd’s idea is:

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A Critical Analysis of Agricultural Regulated Markets Narender Kumar

V ME  1  100 l Where, ME = Index of marketing efficiency. V = Value of the good sold or price paid by the consumer (Retail price). I = Total marketing cost of input of Marketing 8.4(d) Fisher’s test ‘t’ – test was used to compare the marketing the efficiency of regulated markets over unregulated markets in terms of producer’s share in the consumer’s price. The significance is tested by the following formula: XX t  12 2  e 1/nn12 1/  22 2 n111 s 1  n 2   s 2  e  nn1211    Where, 2 2 s1 and s2 are the estimated variances 2 e = pooled estimate

(n1-1) + (n2-1) = Degree of freedom

X12 and X = Sample mean. 8.4(e) Multiple regression analysis General linear regression model involving the dependent variable producer’s share (Y) and explanatory variables X 1, X 2and X 3 .e. price marketing margin and marketing cost, respectively. The equation can be written as:

YXXXXi1 1 i   2 2 i   3 3 i   4 4 i The equation can be set out compactly in matrix notation as: Y XB U

Where YYYYY (1 , 2 , 3 ,...... ,n ) , UUUUU (1 , 2 , 3 ,...... ,n ) , B  (1 ,  2 ,  3 ,...... , n ) Where,

XXXX11 21 31...... n 1  XXXX...... X  12 22 32n 1 ......  XXXX1n 2 n 3 n...... nn 8.4(f) Coefficient of range It was calculated to present the variability with in producer’s share, price, marketing margins and marketing costs by following formula.

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A Critical Analysis of Agricultural Regulated Markets Narender Kumar HighestValue LowestValue CR  HighestValue LowestValue The percentage of variability was calculated as: Coefficient of range × 100 8.4(g) Average The weighted average was used for the interpretation of facts. It was worked out as follows:

X Weighted Average W

Where, X = Variables W = Weight of X. 9. RESULTS The available statistics in respect of total arrival, mandi fee and total income during the period 2004-2011 for regulated mandies in U.P., as a whole, indicated that there has been an increasing trend in total arrivals, mandi fees and total income. The total arrivals reached from 106.48 lakh metric tonnes to 273.95 lakh metric tons and total income from Rs. 18.67 crores to 273.33 crores in the above two Periods. To provide storage facilities to the producers/ sellers along with against pledging of their produce, rural godowns of various capacities are also being constructed in the various regulated market yards by the U.P. Rajya Krishi Utpadan Mandi Parishad. Initially the programme of advancing loans to the farmers has been launched in 92 rural Godowns of the 80 regulated market committees in the state. In case of construction of mandi Yard till June, 2000, 196 main mandi yards and 75 sub mandi yards along with 59 fruit & vegetable market yards, 168 rural haat/painth markets and 5 fish markets have been constructed in U.P. in addition, 8 main mandi yards, 3 sub mandi Yards, 3 fruit & vegetable market yards, 3 rural/painth markets and 2 fish markets were under construction. The Krishi Utpadan Mandi, Shamli and Muradnagar are in operation since 20th September and 27th October, 1965 respectively, whereas Sardhana and Gulaothi regulated mandi are in operation since 28th January, 1969. The elected regulated market committees comprising the representing of various groups were not in power in the mandies. The markets committees have been dissolved and all the power of market committees is presently vested with district magistrates of the respective districts. Mandi secretaries, accountants, mandi inspectors, cashiers, mandi assistants, auction clerks, chaukidars, sweepers etc., were on the working staff of the regulated mandies. The main market functionaries engaged in the marketing of agricultural produce in the selected regulated mandies were commission agents, commission agent-cum wholesalers, traders, retailers, millers, weigh men, palledars etc. All transactions were conducted in the market yards under the rules and regulation framed by the market committees. In case of regulatory measures, they included licenses to all the market functionaries, checking adulteration and arbitrary deductions, correct weighment and settlement of disputes. The market charge, allowances and deductions levied were fixed and any one charging more is likely to have his license cancelled. To promote the regulatory measures for the use of standard weights,

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A Critical Analysis of Agricultural Regulated Markets Narender Kumar the regulate market committee officials of these mandies were providing iron weighing seals at the rate of Rs. 1.50 Per quintal as nominal charges. In case of any dispute, the buyers and sellers can make use of this scale. It was found storage facilities were available in these mandies, but the farmers could not avail opportunity because of their ignorance about the terms and conditions of storage. The storage facilities were mostly utilized by the wholesalers and traders. Similarly, grading and standardization of agricultural produces were not done in the mandi yards. It was noticed that the open auction system of sale was seldom used. It was also observed that there was no organized system for dissemination of market news pertaining to prices and arrivals of agricultural commodities. On the basis of these observations, it may be concluded that the regulated mandies generally did not provide necessary infrastructural facilities for the benefits of the farmers. Hence, the first hypothesis of the present investigation that the regulated market committee has not so far succeeded in building a suitable infrastructure in relation to marketing of agricultural produce was proved. This hypothesis was also supported by the finding of Datta (1988), Bharthwal (1988) and Ali (1988). This analysis of the data regarding marketing surplus of food grains i.e., wheat and paddy showed that marketable surplus of wheat ranged between 62.76 to 66.39 percent in Shamli, Sardhana, Muradnagar and Gulaothi mandi areas, respectively. The higher marketable surplus, particularly, in Sardhana and Gulaothi may be due to higher production, inadequate storage facilities and cash needs of the farmers. In case of paddy the marketable surplus varied from 72.02 percent to 72.98 percent in Shamli and Gulaothi mandi and 74.63 to 75.62 percent in Muradnagar and Sardhana mandi areas, respectively. The higher marketable surplus of paddy in Sardhana mandi area may be due to change in food habits consuming less of rice as compared to wheat against other selected districts i.e., Muzaffarnagar, Ghaziabad and Bulandshahre, where rice is consumed in greater quantities. It was also observed that the marketable surplus showed an increasing trend with the increase in farm size in all the selected mandies/ districts. This increasing trend was due to higher production and more under wheat and paddy on large farms as compared to marginal and small farmers. The Second hypothesis developed for the present study, that the marketable surplus is higher on large farms as compared to marginal and small farms was proved according to the finding. The hypothesis was also supported by the findings of Mishra, et al. (1988). An examination of the marketed surplus showed that in case of wheat it varied from 79.82 percent to 88.43 percent in different mandi areas. As regards paddy, it varied from 82.92 percent to 95.86 percent in Shamli, Sardhana, Muradnagar and Gulaothi mandies, respectively. It was also observed that marketed surplus of wheat and paddy was almost 100 percent in case of marginal and small farms as compared to large farms. It may be due to immediate cash needs and inadequate storage facilities on small and marginal farms as compared to large farms. So far as disposal pattern of different crops under study was concerned it was done through various marketing channel. It was found that channel II in case of wheat and channel I in case of

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A Critical Analysis of Agricultural Regulated Markets Narender Kumar paddy were highly accepted by the farmers, as the major portion of their produce i.e., more than 52 percent in case of wheat and more than 70 percent in case of paddy was marketed through the respective channels almost in all the mandies under study. This channel consisted of producers – village beopari--wholesaler/commission agent–-miller (in paddy)--retailer--consumer. From these observations, it may be concluded that as small and marginal farmers constituted about 80 percent of the total farmers, the bulk of the marketed surplus they have (though in small quantity) was sold in the village market, where village beopari played a dominant role. Apparently being well wisher of the farmers, the village beopari collected the produce from them and then either sold it to the wholesaler/miller directly or brought it to the regulated markets. The farmers being illiterate and unaware about the regulated marketing process were kept themselves away from the botherations like transportation charges, octroi, mandi fees, time, price variations etc. An analysis of the price spread for different commodities under study showed that the producer’s share in consumers’ price was different on different channels. The producer’s share in channel I for wheat and paddy/rice was worked out at 77.94 and 65.72 percent, respectively, while in channel II the figures for the respective commodities came to 84.43 and 70.91 percent. The lower producer’s share in channel I was due to the presence of trader in this channel, who used to purchase food grains at presence of trader in this channel, who used to purchase food grains at village/ village market and obtained higher profit margins. As regards wholesaler’s margin, miller’s margin, retailer’s margin and costs of marketing, these were almost equal in both channels. The producer’s share in channel II was higher because of absence of trader’s margin. In this case the producer himself brought the producer in the regulated market yard and obtained higher prices than the village markets. To judge the efficiency of regulated mandies in terms of producer’s share’, marketing margins’ and marketing costs; the respective figures were compared with the figures worked out during pre-regulated period or unregulated mandies. It may be reported that the producer’s share for both the commodities was found to be higher in regulated mandies under study as compared to pre-regulated period/unregulated mandies. However, marketing cost did not show much variation. Thus, it may be concluded that regulated mandies were more efficient and beneficial to the producers as compared to unregulated mandies. The marketing efficiency of regulated mandi was also judged by using shepherd’s formula. The results showed that channel II was more efficient than channel I because of short chain of middlemen. The efficiency in case of rice was observed to be lesser due to higher margin of the millers, whereas, it was more in wheat.

10. CHANNELS OF MARKETING 1 Producer/seller-village beopari--commission agent--wholesaler-- miller ( in paddy)–-retailer-- consumer. 2 Producer/seller--wholesaler--cum-commission agent--miller (in paddy)--retailer--consumer. When the marketing efficiency indices of regulated mandies were compared with marketing efficiency indices of unregulated mandies, it was found higher for the regulated mandies in the study areas. It indicates that regulated mandies are more efficient than unregulated mandies. Besides, Index of marketing efficiency, ‘t’ test was also worked out to compare the marketing efficiency of regulated markets over unregulated markets in terms of producer’s share in consumer’s price. ‘t’ values for wheat and paddy were worked out at 18.35 and 19.54 -79-

A Critical Analysis of Agricultural Regulated Markets Narender Kumar respectively, which were highly significant at 1 percent level of significance for 20 degrees of freedom. The multiple regression modes were also fitted, taking producer’s share (Y) as depended variable and price (X1), marketing margin (X2) and marketing cost (X3) as independent variable. In case of wheat, X1, X2, X3 independent variables were fixed at zero value, the average value of producer’s share came to Rs. 51.92. The partial regression coefficient of 0.8599 indicated that keeping all the other variables constant an increase in price say, a rupee, was accompanied by an increase in the producer’s share of Rs. 0.8599. Against this, if the marketing margin increases by one unit, the producer’s share will decrease by Rs 1.93. Similarly, in case of marketing cost, a unit change in marketing cost will decrease Rs. 1.06 in the producer’s share. As regards paddy, the tolerance level for X1 (price)/variable was insufficient, so it was not included in the regression equation. Now, if the X2 and X3 variable were fixed at zero value, the average producer’s share came to Rs. 158.10. The partial regression coefficient of -0.4809 indicated that keeping other variable constant, an increase in the marketing margin, say a rupee, is accompanied by a decrease in the producer’s share of Rs. 0.4809. Similarly, an increase in the marketing cost by one unit, decrease the producer’s share by Rs. 0.6905. The coefficient of range with in producer’s share, price, marketing margin and marketing cost was also worked out to judge the variability. The variability among crops revealed that producer’s share variability had been minimum in case of paddy (4.1 percent), while in case of wheat it was 4.22 percent. The variability in price of paddy was 2.34 percent and for wheat 3.37 percent. The marketing margin remained around 10 percent for both the crops, but the value of variability in case of paddy pertaining to margin remained highest. This highlighted fact may be overcame if the market structure under study is reviewed and the ratio between market and population covered by it brought down so that the marketing margin can be lessened considerably for the benefit of the producers. As already pointed out, the main economic objective of the introduction of regulated marketing system was to protect the interest of the producers by way of providing maximum share in the price paid by the consumers, through regulation of various functions of market functionaries and reducing marketing cost and marketing cost and marketing margin of the intermediaries. In this context, it will be worth to refer the finding of the study, which revealed that the producer’s share in the price paid by the consumer was higher in both the crops under study marketed through different regulated mandis in comparison to those marketed through traditional/local markets. The third hypothesis of the present investigation, that the price spread is minimum when crops are sold through the wholesaler and maximum when it is sold through the village merchants was proved. The hypothesis was also supported by the finding of Hiranandani et al., (1968), Acharya (1985) and Mishra et al., (1987). The fourth hypothesis, that the producer’s share is higher when the producer is marketed through regulated markets as compared to unregulated markets was also proved. This hypothesis was also supported by the finding of Chatterjee (1969), Sinha (1979), Ghosh (1988) and Sahay (1988).

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The finding of the opinion survey revealed that about 80 percent producers were having their opinions in favour of regulated mandies. They were of the opinions that there was correct weighment of the produce, fixed and reasonable marketing charges and prompt payment of their produce. Their opinions varied from 90.18 to 99.00 percent and 58.58 to 90.28 percent in these respective cases. In relation to infrastructural facilities, i.e., Post office and police chauki etc. These were established in all the four selected regulated markets. The open and shaded platforms were also present in all the markets but were in use only 80 to 90 percent in these markets 45 percent farmers gave their opinions about availability of civic amenities in Shamli and Gulaothi mandi, whereas it was 56 and 60 percent in Muradnagar and Sardhana mandi. About 62.00 to 71.00 percent producers/farmers gave their opinions in favour of better and fair prices in regulated mandies. They were also of the opinions that there was fair competition in purchase of produce and lower middlemen margins. In spite of the above favorable opinions towards regulated mandies the farmers did not show much response in marketing of their produce through regulated mandies. The major problems associated with them were unawareness about the functions of RMC and its working procedure and inadequate and higher transportation cost. About 60.00 to 74.00 percent farmers were of the opinions that they did not know the function of RMC and its working procedures. Whereas 60.00 to 85.00 percent farmers were of the opinions that transportation facilities were not easily available and were costlier. Except that of Sardhana regulated mandi area, the farmers of the other mandies area were not happy with the location of main mandi yards on the outskirts of the urban area. About 70 to 85 percent of the farmers gave their adverse opinions about the location of the main market yards. About 88.00 to 96.00 percent of the farmers were of the opinions that their existed no organized system for disseminating price and arrival information and other news about the mandi. Further, almost all the farmers reported that there existed no storage facilities for them. Similarly, there were no input centers in the mandi yards. About 85.00 percent farmers reported that they have to pay higher marketing cost in the market yards. Against this situation, it was found that traders/wholesalers were much benefited by the regulated mandi. About 81.83 to 88.29 percent traders/wholesalers were of the opinion that collecting the produce in the village and selling it in the regulated mandies provided them higher income because of prices differences. They were of the opinion that there existed higher prices in the regulated mandies as compared to villages. They also reported that they can easily get licenses, marketing information, trading shops and facilities like storage etc. Almost all the traders/wholesalers reported that no extra charges were to be paid and they availed all the facilities provided by the mandi Samiti. In their opinion, there is still need to provide grading and standardization more storage and civic amenities etc. in the mandi yards. Except for Sardhana main market yard, the traders/wholesalers were not happy with the location of the market yard, of other mandies. Therefore, they are still hesitating in shifting their entire trade in these markets. But in spite of getting higher producer’s share in the consumer’s price, majority of the producers/farmers, particularly small and marginal farmers, did not prefer to sell their produce through regulated mandis. The main reasons in this connection may be mentioned as their small marketable surplus, a long distance of mandi from their villages, ignorance about the advantage of regulate markets, unawareness about the price and arrivals of the mandi yards, failure of

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A Critical Analysis of Agricultural Regulated Markets Narender Kumar auction sale, lack of storage facilities, higher marketing cost, forced sales etc. Thus, farmers still prefer to sale their produce in the village markets. The findings revealed that about 70 percent of their marketable surplus was marketed through the marketing channel consisting of producer-- village trader--wholesaler--/commission agent--miller (in paddy)--retailer-- consumer, while about 30 percent was marketed through producer--wholesaler/commission agent/ miller (in paddy)--retailer--consumer. Coming to the main problems associated with the farmers in marketing of their produce through regulated mandies, these included long distance of mandies from their villages, lack of publicity about the advantages and function of regulated mandies, lack of supervision and vigilance in market, lesser attention paid to farmers having small marketed surplus, failure of auction sale, lack of grading and standardization, lack of storage facilities, lack of input centers, higher marketing cost, forced sale, problem of shifting transaction in new mandi yards etc. In other words, Indian Agricultural Regulated Market is having the following Constraints:  Indian farmers are predominantly marginal or small – have small quantities of marketable surplus and limited bargaining power;  Restriction on sale of produce outside regulated market yards Neglected rural markets, poor availability of regulated markets, long distances from production areas and inadequate infrastructure;  Multiple intermediaries and exploitation by monopolistic licensees. High cost of transport/ high market fee in regulated markets;  Fragmented supply chain, poor cold chain and high post-harvest losses;  Lack of cleaning, grading, packaging and quality certification facilities, and  Limited access to information on domestic and overseas markets and available marketing opportunities.

11. CORE FACILITIES 11.1 SUPPORT INFRASTRUCTURE Platforms for Automatic weighing Water Supply Auction Platforms Power Packaging & Labeling Equipments Veterinary Services Drying Yards Sanitary Facilities Loading, Unloading & Dispatch Facilities Posts & Telephones Grading Facilities Banking Standardization Facilities Input supply and DailyNecessity Outlet Price Display Mechanism POL Information Centres Repair/Maintenance Service Storage/Cold Rooms Office Ripening Chambers Computerized Systems Public Address System Rain Proofing Extension and Training to Farmers

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11.2. Service Infrastructure Maintenance Infrastructure Rest Rooms Cleaning and Sanitation Parking Garbage Collection & Disposal Sheds for Animals Waste Utilization Market Education Vermi-Composting Soil Testing Facilities Bio-gas Production/Power Drainage 11.3. Inadequacy of Facilities in the Regulated Agricultural Markets The following inadequacies were found during survey:  Covered or open auction platforms exist in only 2/3rd of regulated markets;  Only 1/4th of markets have drying yards;  Trader modules, viz. shop, godown & platform in front of shops exist in only 63% of markets;  Cold storage units exist only in 9% of markets;  Grading facilities in less than 1/3rd of markets;  Farmers’ resting facilities only in half the markets and  Basic facilities like internal roads, boundary walls, electric lights, loading and unloading facilities, weighing equipments etc. not available in nearly 20% markets. 11.4. Why Market Reforms are necessary? The reasons for which reforms required are as follows:  For increasing diversification into higher value crops for better returns;  Greater farmer-market linkage needed for demand-driven cropping;  Dynamism & efficiency in markets needed for better price discovery;  Policies required to facilitate reduction of intermediaries and promotion of direct purchase of agro-commodities/ provide alternative marketing opportunities to farmers;  Large investments required for development of value addition, marketing and cold chain infrastructure;  Major portion of investment expected from private sector;  Appropriate regulatory and policy environment/ fiscal incentives are necessary to facilitate required private investment. 11.5 Various Reform Measures Initiated: The following Reform measures are initiated: 11.5(a) Reform Measures Initiated  Suitable amendments in the State APMC Acts to facilitate efficient and alternative marketing channels for farm produce;  Progressive dismantling of controls and regulations under EC Act;  Law for implementing Negotiable Warehouse Receipts System passed by the Parliament;  Enactment of an Integrated Food Law to promote quality and single window regulatory system and

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 Allowing futures trading in agricultural commodities for better price risk management and price discovery. 11.5(b) Reforms done through Model APMC Act:  Setting up of special commodity markets;  PPP in management & extension activities/ Promotion of e-trading;  Encouraging professional management in APMCs;  Provisions for Contract Farming;  Single point levy of market fee/ Single point registration of Functionaries;  Establishment of Private markets/ Farmer-consumer markets/Direct marketing;  Powers to State Government for exemption of market fee;  Setting up of State Marketing Extension Cells/ State Agricultural and  Produce Standards Bureaus.

12. SUGGESTIONS TO OVERCOME THE ABOVE PROBLEMS \ CONSTRAINTS To overcome the above problems/constraints, following suggestions may be put forth: 1 It is necessary to open more regulated markets and sub/feeder market yards, preferably a yard for every five village Panchayats. There is an urgent need to link the hinter land village with the regulated mandies. 2 The election of RMC should be conducted on democratic lines and there should not be any nominated members. A major share of seats should go to the farmer’s representatives. 3 A drink link between producers and RMC should be developed to resolve various problems relating to marketing of agricultural commodities. 4 There is need to develop marketing information system and provide news regarding various services available in regulated markets and their usefulness to the farmers 5 If possible the commission agent may be eliminated to remove commission charges in Mandis, which help in shortening the price spread. 6 Entire business transaction related to agricultural produced should be shifted to the new mandi yards. 7 The grading and standardization facilities needed to be improved and strengthened. 8 The storage facilities should be provided to the farmers in mandi area and proper security of their produce is needed. 9 Regulated mandies should function throughout the day, at least in the busy agricultural harvesting season, irrespective of holidays. 10 The market committee should provide quality services and adequate facilities to all farmers and equal response to small, marginal and large farms producers should be given. 11 RMC should open input centers in mandi yards and provide inputs at subsidized rates to the farmers, particularly to small and marginal farmers, who marketed their produce through regulated mandies. Provision should also be made for domestic necessities in the same

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market area for easy purchase by farmers. It will facilitate and attract the farmers to bring their produce in mandi yard. 12 RMC should develop rural marketing centers for post harvest technologies, so that farmers may attract to the regulated market. 13 Inter-village and intra-village road communication in the market area should be developed. 14 An agency should be developed which should take charge of the farmer’s produce, advance money for his immediate needs, processed the produce, particularly in case of paddy, arrange for further marketing at the next point and make final payment. 15 Proper coordination among the various central and state agencies operating in the regulated markets should be made. These agencies can provide a strong market intervention mechanism which would save the farmers from exploitation. 16 Adequate extension efforts should be made in rural area to educate the farmers about improved marketing facilities available at regulated market. In nut shell, it can be concluded that regulated mandies have still struggling for their efficient working with regards to provision of necessary infrastructural facilities and benefits to the Producers/farmers, for the purpose they were introduced in the state.

13. CONCLUSIONS From the preset study, the following conclusions may be drawn 1 All the four mandies under study were having own newly constructed market yards with various infrastructural facilities. The entire market yard of these mandies is surrounded by walls with separate gates for entrance and exit. 2 Though, all the mandies under study have godowns in the market yards but the farmers could not avail benefit of storage due to unawareness about the terms and condition of storage. 3 Similarly, the grading and standardization facilities were present in the mandi yards but no grading and standardization was done in the mandies. 4 The marketable surplus of food grains was higher on large farms as compared to marginal and small farms. This trend was due to higher production and comparatively more area under food grain crops on large farms. 5 Amongst different channels of distribution, the bulk of the marketable surplus i.e., more than 52 percent in case of wheat and more than 70 percent in case of paddy passed through the channel having village traders in the marketing system. This channel included producer-- village trader-- wholesaler/commission agent--miller (in paddy)-- retailer-consumer. 6 The sale of produce in regulated mandies yielded higher share to the producer, because of higher price and lower marketing margins in comparison to unregulated mandies. 7 In spite of the higher benefits of producer’s share and higher price per unit of the produce obtained in regulated mandies, the sale of produce in regulated mandies was noted to be much lower being about 48 percent in case of wheat and about 30 percent in case of paddy on the sample farms. It was due to higher transportation cost, small marketable surplus with the bulk of the farmers, forced sale, location of mandies at a long distance, unawareness about the marketing procedures and several other botherations.

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8 About 80 percent farmers/producers gave their opinions in favour of regulated mandies. They were of the opinions that there was correct weighment of the produce, fixed and reasonable marketing charges and prompt payment of their produce. They were also reported that the facilities regarding dissemination of marketing information, provision of godown and storage, grading and standardization, input centers, construction of more auction platforms need to be provided for making regulated mandies more beneficial to them. 9 Though, the mandies provided necessary infrastructural facilities to the producers/farmers but they were highly availed by the traders as compared to producers/farmers.

REFERENCE [1]. Abbott, J.C. (1962). The Role of Marketing in The Development of Backward Agricultural Economic. Journal of Farm Economic, Vol. 44, 1962. pp. 349-362. [2]. Acharya S.S. (1985). Price Structure for Pulse Crops. Indian Journal of Agri. Econ., Vol. Xl, No. 3, 400-405. [3]. Ali, S.A. (1988). A Study of the Market Structure, Conduct, Performance and Infrastructural Facilities. Indian Journal of Agriculture Marketing, Vol.2, No. 1, pp.71-83. [4]. Atibudhi, H.N. (1998). An Operational and Organizational Structure of Regulated Markets In Orissa: Impact of Market Regulation on The Farmers. Indian Journal of Agriculture Economics, Vol. 53, No. 3, pp.407-411. [5]. Bhartwal, V.V. (1988). A Critical Evaluation of Working and Management of Krishi Upaj Mandi Samiti, Jaipur (Rajasthan). Indian Journal of Agricultural Marketing, Vol2, No.1, pp.37-44. [6]. Chhikara, O.P., Kuldeep Kumar and Himmat S. (1998). Agricultural Regulated Markets In Haryana : Problems And Prospects. Indian Journal of Agricultural Economics, Vol. 53, No. 3, pp. 420-430. [7]. Chauhan, K.K.S., Krishna, P.V., Singh N.P., and Mohanan, N. (1974). An Agricultural Business Study of The Rapeseed- Mustard System. Monograph No. 52, Center For Management In Agriculture, Indian Institute of Management, Ahmedabad. [8]. Chatterjee, N.P. (1969). Agricultural Marketing in India. Agricultural Marketing Jublee, Jan.-March, pp.7-18. [9]. Dantwala, M.L. (1937). Marketing of Raw Cotton In India. Longmans Green And Co., Ltd., Bombay. [10]. Datta, T.K. (1988). Regulated Marketin West Bengal: A Study of Impact of Market Regulationon Farmers. Indian Journal of Agricultural Marketing, Vol2, No.1, pp.40-46. [11]. Duddy, A., Edward, R., David, A. (1964). Marketing: An Institutional Approach. Mc Graw Hill, New Delhi. [12]. Ghosh, M.M. (1988). Impact of Regulations of Market on Price Spread of Important Food Grains: A Case Study in Bihar. Indian Journal of Agricultural Marketing, Vol. 2, No.1, pp.60-80.

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[13]. Gupta, L.C. (1967). Price Behavior of Maize in Some Markets of Madhya Pradesh, 1952-53 To 1964-65. Agro-Economic Research Centre, Jabalpur. [14]. Hiranandani, G.J., and Balakrishna, S. (1968). Regulated Market-Monetary Benefits to the Producers-Sellers. Indian Journal of Agricultural Marketing, Vol.2, No. 1, pp.14-30. [15]. Jain, B. C. (1998). Market Structure and Performance of Regulated Market. Indian Journal of Agricultural Economics, Vol. 53, No. 3, pp.400-420. [16]. Joshi, P.K. and Sharma, K.V. (1979). Retail Farm Price Spread Of Rice In Selected States Of India. Indian Journal of Agricultural Economics, Vol. Xxxiv, No. 4, pp. 130-135. [17]. Kumar, R. and Husain, N. (1998). Marketing Efficiency and Price Spread In Marketing of Gram-A Case Study of Hamirpur District, U.P. Indian Journal of Agricultural Economics, Vol. 53, No. 3, pp.390-412. [18]. Lele, U. J. (1971). Food Grain Marketing In India, Private Performance and Public Policy. Cornell University Press, New York. [19]. Mishra, J.P., Fahimuddin, and Bajpai, B.K. (1987). Wheat Marketing in Eastern Uttar Pradesh-Evidence And Implications. Indian Journal of Agricultural. Marketing, Seminar Special Issue, July: pp.66-77. [20]. Narasimhan, M.K., and Rampur, N.B. (1988). Elimination of Commission Agent in Agricultural. Marketing. A Case Study of Hubali Market (Karnataka). Indian Journal of Agricultural Marketing, Vol. 2, No. 1, pp.35-43. [21]. Rao, C.H., Hanumantha and Subharao, K. (1976). Marketing of Rice In India, Analysis of The Impact of The Producer’s Price On Small Farms. Indian Journal of Agricultural Economics, Vol. XXXI, No.2, pp.1-15. [22]. Shiyani, R.L., and Pandya, H.R. (1998). Performance Evaluation of Selected Regulated Markets in Saurashtra Reguion. Indian Journal of Agricultural Economics, Vol. 53, No. 3, pp.378-389. [23]. Singh, L.R. and Tewari, S.C. (1995). Price Spread In Relation To The Agricultural Commodities. Proceedings of The IX National Conference of Indian Society of Agricultural Marketing, 22nd-24th December. [24]. Sinha, S.P. (1979). A Study of Price Spread of Important Food Grains in two Agricultural markets of Bihar. Indian Journal of Agricultural Economics, Vol. XXXIV, No. 4, pp.136-142. [25]. Shay, S.N. (1988). Regulated Markets and Producer’s Share. Indian Journal of Agricultural Marketing, Vol.2 No.1, pp.38-47. [26]. Shukla, R.K. (1997). New Perspective In Marketing, Rural Marketing: Thrust And Challenges. National Publishing House, New Delhi. [27]. Uttar Pradesh Krishi Utpadan Mandi Adhiniyam 1986 (As Amended Upto U.P. Act No. 19 Of 1979), Eastern Book Company, Lucknow, 1982.

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Appendix-1 Analysis of Attitudes of Farmers towards Regulated Mandis through questionnaire (In percentages) Respondent’s opinions S.No. Particulars Shamli Sardhana Muradnagar Gulaothi 1 2 3 4 5 1. Awareness about the existence of 100.00 100.00 100.00 100.00 Mandi 2. Convenience of the location of 45.00 85.00 30.00 25.00 main Mandi Yard 3. Awareness about the function and working procedure of Mandis 80.00 60.00 62.00 70.00 4. Transportation facilities adequate and at lower cost 5 Opinion about the 40.00 35.00 30.00 25.00 functions of Regulated Market Committee (a) Correct weighment & measures (b) Presence of grading and standardization 99.00 95.00 96.00 90.18 (c) Fixed and reasonable marketing charges NA NA NA NA (d) Awareness about prevailing prices in Mandi 90.00 85.00 86.50 85.00 (e) Easy transaction and Payment 8.25 05.00 12.00 04.00 (f) Provision of godowns & storage facilities (g) Settlement of disputes 80.00 85.00 90.28 58.58 6. Infrastructural facilities (a) Existence of Bank, Post office and 12.00 05.00 08.00 10.00 police chauki in Mandi Yards (b) Existence of auction on open 22.00 18.00 24.00 21.00 platform (c) Auction platform is in use 100.00 100.00 100.00 100.00 (d) Facilities of civic amenities 7. Comparatively better and fair prices in Mandi 100.00 100.00 100.00 100.00 8. Fair competition in purchase of produce 85.00 90.00 82.00 80.00 9. Availability of input centers 45.00 60.00 56.00 45.00 10. Lesser number of middle men 62.00 71.00 70.00 68.00 11. Lower middlemen margin

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12. P roper control on middlemen’s 85.00 60.00 78.42 66.00 working 13. Higher producer ‘s share NA NA NA NA 14. Proper place for cart halting and 20.00 25.00 35.00 30.00 cattle shed 62.00 75.00 63.00 52.00 40.00 25.00 45.00 30.00

65.00 80.50 72.60 62.23 50.00 80.00 65.00 50.00

N.A.  Not available Source: An examination of the opinion survey through questionnaire.

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Customer Satisfaction in Commercial Banks A Case Study of Punjab National Bank

Deepti Kanojia*a, D.R. Yadav b aDepartment of Self Finance Courses, Multanimal Modi College, Modinagar, Uttar Pradesh, India. bFaculty of Commerce & Business Administration, Meerut College Meerut U.P., India Email Id: [email protected],

Abstract

The Indian Banking Industry has undergone radical changes due to liberalization and globalization measures undertaken since 1991. Today, PAPER/ARTICAL INFO Indian Banking Industry is one of the largest industry in the world. There RECEIVED ON: 12/02/2012 ACCEPTED ON: 24/4/2012 has been a great surge in efficient customer services. A highly satisfied and delighted customer is a very vita qndl non-financial asset for the banks in the emerging IT era. The curtsey, accuracy and speed are like a crown factors for a bank. Based on the responses of 100 customers of Punjab National Bank operating in the Meerut district of Uttar Pradesh has been taken into consideration. The survey was conducted in Meerut district. Reference to this paper Key Words: Organized Segment, Customer satisfaction, Retail Banking, should be made as follows : Universal Banking. Kanojia, Deepti & Yadav, Dr D.R.(2012), “Customer Satisfaction In Commercial Banks – A Case Study of Punjab National Bank” Int. J. Trade and Commerce- IIARTC, Vol. 1, No. 1, pp. 90-99.

*Corresponding Author

Customer Satisfaction in Commercial Banks Deepti Kanojia and D.R. Yadav

1. I NTRODUCTION In the organized segment of Indian economy, the banking sector occupies an important place in nation’s economy. It plays a pivotal role in the economic development of a country and forms the core of the money market in developed country. Banks have to deal with many customers every day and render various types of services to its customer. It's a well known fact that no business can exist without customers. Not so long ago, accessing our own money was about setting aside a couple of hours, getting to the bank before closing time, standing in a queue to get a token and then in another to collect the cash. The banking industry like many other financial service industries is facing a rapidly changing market, new technologies, economic uncertainties, fierce competition and more demanding customers and the changing climate has presented an unprecedented set of challenges. Banking is a customer oriented service industry, therefore, the customer is the focus and customer service is the differentiating factor. The banking industry in India has undergone sea changes since post independence. The business depends upon client services and the satisfaction of the customer and this is compelling them to improve customer services and build up relationship with customers. The main driver of this change is changing customer needs and expectations. Customers in urban India no longer want to wait in long queues and spend hours in banking transactions. This change in customer attitude has gone hand in hand with the development of ATMs, phone and net banking along with availability of service right at the customer's doorstep. With the emergence of universal banking, banks aim to provide all banking product and service offering under one roof and their endeavor is to be customer centric. With the emergence of economic reforms in world in general and in India in particular, today’s banks have come up in a big way with prime emphasis on technical and customer focused issues. Customer satisfaction, a business term, is a measure of how products and services supplied by a company meet or surpass customer expectation. It is seen as a key performance indicator within business. In a competitive marketplace where businesses compete for customers, customer satisfaction is seen as a key differentiator and increasingly has become a key element of business strategy. Customer satisfaction is an ambiguous and abstract concept and the actual manifestation of the state of satisfaction will vary from person to person and service to service. The state of satisfaction depends on a number of both psychological and physical variables.

2. LITERATURE REVIEW Indian banking system has undergone a drastic change after the independence of the country. There has been a significant change in the structure, composition, management objectives and the mode of working of the banking institutions over the last three decades or so. Cut to the present day and the nature of banking has changed beyond recognition. With ATM cards, simple banking transactions like withdrawing and depositing money are easier than ever before. For the tech- savvy, there is the option of banking online. The next medium may just be your mobile. Even when it comes to products, the changes have been many. Graduating from simple saving accounts and fixed and recurring deposits, banks now offer a host of products like special saving accounts and sweep-in-account, no frills accounts and easy receive accounts.

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Customer Satisfaction in Commercial Banks Deepti Kanojia , D.R. Yadav

Satisfaction is basically a psychological state; care should be taken in the effort of quantitative measurement, although a large quantity of research in this area has recently been developed. Work done by Berry (Bart Allen) and Brodeur between 1990 and 1998 defined ten 'Quality Values' which influence satisfaction behavior, further expanded by Berry in 2002 and known as the ten domains of satisfaction. These ten domains of satisfaction include: Quality, Value, Timeliness, Efficiency, Ease of Access, Environment, Inter-departmental Teamwork, Front line Service Behaviors, Commitment to the Customer and Innovation. These factors are emphasized for continuous improvement and organizational change measurement and are most often utilized to develop the architecture for satisfaction measurement as an integrated model. Work done by Parasuraman, Zeithaml and Berry (Leonard L) between 1985 and 1988 provides the basis for the measurement of customer satisfaction with a service by using the gap between the customer's expectation of performance and their perceived experience of performance. This provides the measurers with a satisfaction "gap" which is objective and quantitative in nature. Work done by Cronin and Taylor propose the "confirmation/disconfirmation" theory of combining the "gap" described by Parasuraman, Zeithaml and Berry as two different measures (perception and expectation of performance) into a single measurement of performance according to expectation. According to Garbrand, customer satisfaction equals perception of performance divided by expectation of performance. The usual measures of customer satisfaction involve a survey with a set of statements using a Likert Technique or scale. The customer is asked to evaluate each statement and in terms of their perception and expectation of performance of the organization being measured. The working of the customer's mind is a mystery which is difficult to solve and understanding the nuances of what customer satisfaction is, a challenging task. This exercise in the context of the banking industry will give us an insight into the parameters of customer satisfaction and their measurement. This vital information will help us to build satisfaction amongst the customers and customer loyalty in the long run which is an integral part of any business. The customer's requirements must be translated and quantified into measurable targets. This provides an easy way to monitor improvements, and deciding upon the attributes that need to be concentrated on in order to improve customer satisfaction. We can recognize where we need to make changes to create improvements and determine if these changes, after implemented, have led to increased customer satisfaction.

3. MEASURING CUSTOMER SATISFACTION IN THE BANKING INDUSTRY Banking operations are becoming increasingly customer oriented. The demand for 'banking supermalls' offering one-stop integrated financial services is well on the rise. The ability of banks to offer clients access to several markets for different classes of financial instruments has become a valuable competitive edge. Convergence in the industry to cater to the changing demographic expectations is now more than evident. Bank assurance and other forms of cross selling and strategic alliances will soon alter the business dynamics of banks and fuel the process of consolidation for increased scope of business and revenue. The thrust on farm sector, health sector and services offers several investment linkages. In short, the domestic economy is an increasing pie which offers extensive economies of scale that only large banks will be in a position to tap. -92-

Customer Satisfaction in Commercial Banks Deepti Kanojia and D.R. Yadav

With the phenomenal increase in the country's population and the increased demand for banking services; speed, service quality and customer satisfaction are going to be key differentiators for each bank's future success. Thus, it is imperative for banks to get useful feedback on their actual response time and customer service quality aspects of retail banking, which in turn will help them take positive steps to maintain a competitive edge.

4. THE NEED TO MEASURE CUSTOMER SATISFACTION Satisfied customers are central to optimal performance and financial returns. In many places of the world, business organizations have been elevating the role of the customer to that of a key stakeholder over the past twenty years. Customers are viewed as a group whose satisfaction with the enterprise must be incorporated in strategic planning efforts. Forward-looking companies are finding value in directly measuring and tracking customer satisfaction as an important strategic success indicator. Evidence is mounting that placing a high priority on customer satisfaction is critical to improved organizational performance in a global market place. With better understanding of customers' perceptions, companies can determine the actions required to meet the customers' needs. They can identify their own strengths and weaknesses, where they stand in comparison to their competitors, chart out the path of future progress and improvement. Customer satisfaction measurement helps to promote an increased focus on customer outcomes and stimulate improvements in the work practices and processes used within the company. When buyers are powerful, the health and strength of the company's relationship with its customers – its most critical economic asset – is its best predictor of the future. Assets on the balance sheet – basically assets of production – are good predictors only when buyers are weak. So it is no wonder that the relationship between those assets and future income is becoming more and more tenuous. As buyers become empowered, sellers have no choice but to adapt. Focusing on competition has its place, but with buyer power on the rise, it is more important to pay attention to the customer. Customer satisfaction is quite a complex issue and there is a lot of debate and confusion about what exactly is required and how to go about it. This article is an attempt to review the necessary requirements, and discuss the steps that need to be taken in order to measure and track customer satisfaction. 4.1. What constitutes Satisfaction? The meaning of satisfaction: "Satisfied" has a range of meanings to individuals, but it generally seems to be a positive assessment of the services. The word "satisfied" itself had a number of different meanings for respondents, which can be split into the broad themes of contentment/happiness, relief, achieving aims and happy with outcome and the fact that they did not encounter any hassle: 4.2. Happy  Content  Happy, pretty happy, quite happy  Pleased  Walked out of there feeling good  Walk out of there chuffed

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Customer Satisfaction in Commercial Banks Deepti Kanojia , D.R. Yadav

 Grateful the service has been OK 4.3. Relieved  Thank God for that:  Phew  At ease  Can relax  Stress reduction  Secure  Safe  Go to the bank with a troubled mind and they sort it out for you  Sleep at night without worrying what's going to go on  Everything is sorted out in your mind and you're happy  Secure, you know the money has been sorted out  Knowing the money's going to be there 4.4. Achieving aims  Achieving your aim or goal  Getting what you went in for  Achieve whatever it is you wanted to achieve  Come away with a proportion of what you want  Got what wanted in the end  Got what you went down for  Everything went according to plan, the way it should have done  Met expectations  To be unsatisfied is when you come out and you are still on the same level as you were before 4.5. Achieving aims, and happy with outcome  Happy with the results  Happy with what you've got  When you walk out you're happy they've sorted everything out and quickly  Happy with outcome  Pleased with what has happened  Content with what has been done for you  A feeling of happiness having achieved your goal  You go there feeling down and the only way you are going to come out satisfied is that if they have been good to you 4.6. No hassle  Not frustrated  Everything goes smooth  No hassle  No problem

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Customer Satisfaction in Commercial Banks Deepti Kanojia and D.R. Yadav

 No hassle getting there  Straight forward Clearly then there is some variation in understanding of the term. Some of the interpretations fit with the definition used in much of the service quality and satisfaction literature, where satisfaction is viewed as a zero state, merely an assessment that the service is adequate, as opposed to “delight” which reflects a service that exceeds expectations. However, most respondents have more positive interpretations of the term. These questions allow us to identify priorities for improvement by customer satisfaction with stated (overt) importance, comparing satisfaction with modeled (covert) importance (from identifying key drivers of overall satisfaction), as well as respondents’ own stated priorities. 4.7. Service Quality and Customer Satisfaction There is a great deal of discussion and disagreement in the literature about the distinction between service quality and satisfaction. The service quality school view satisfaction as an antecedent of service quality – satisfaction with a number of individual transactions “decay” into an overall attitude towards service quality. The satisfaction school holds the opposite view that assessments of service quality lead to an overall attitude towards the service they call satisfaction and customer retention – customer’s perception of Service and Quality of product will determine the success of the product or service in the market. If experience of the client from the previous services, greatly exceeds the expectations then satisfaction will be high, and vice versa. In the service quality literature, perceptions of the service delivery are measured separately from customer expectations, and the gap between the two provides a measure of service quality. 4.8. Expectations and Customer Satisfaction Expectations have a central role in influencing satisfaction with services, and these in turn are determined by a very wide range of factors lower expectations will result in higher satisfaction ratings for any given level of service quality. This would seen sensible; e.g., poor previous experience with the service or other similar service is likely to result in it being easier to pleasantly surprise customers. However, there are clearly circumstance where negative preconceptions of a service provider will lead to lower expectations, but will also make it harder to achieve high satisfaction ratings – and where positive preconception and high expectations make positive rating more likely. The expectations theory in much of the literature, therefore, seems to be an over simplification.

5. BANKING INDUSTRY: AN OVERVIEW For centuries banks have played an important role in financial system of the country. The vital role continues even today although the form of banking has changed today with changing need of the economy and individuals. With expansion of trade and commerce, the concept of banking gained importance. The banking transcended from individuals to groups and later to companies. During the Mughal period the indigenous bankers played a very important role in lending money and financing foreign trade in India. During British rule the agency houses carried on the banking business. The Banking system in India has three tiers. There are scheduled commercial banks, the

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Customer Satisfaction in Commercial Banks Deepti Kanojia , D.R. Yadav regional rural banks; and the cooperative banks. The scheduled commercial banks constitute those banks which are included in the second schedule of RBI Act, 1934. In the organized segment, banking system occupies an important place in nation’s economy. It plays a pivotal role in the economic development of a country and forms the core of the money market in developed country. The commercial banks in India comprise of both Public sector as well as private sector banks. There are total 28 Public sector and 27 private sector banks functioning in the country presently. Banks have to deal with many customers everyday and render various types of services to its customer. It's a well known fact that no business can exist without customers.

6. PUNJAB NATIONAL BANK Since its humble beginning in 1895 with the distinction of being the first Indian Bank to have been started with Indian capital, PNB has achieved significant growth in business which at the end of March 2011 amounted to 5,55,005 crore. PNB is ranked as the 2nd largest bank in the country after SBI in terms of branch network, business and many other parameters. With over 60 million satisfied customers and more than 5100 offices including 5 overseas branches, PNB has continued to retain its leadership position amongst the nationalized banks. The bank enjoys strong fundamentals, large franchise value and good brand image. Apart from offering banking products, the bank has also entered the credit card, debit card; bullion business; life and non-life insurance; Gold coins & asset management business, etc. PNB has earned many awards and accolades during the year in appreciation of excellence in services, Corporate Social Responsibility (CSR) practices, transparent governance structure, best use of technology and good human resource management.

7. OBJECTIVES OF THE STUDY Analyzing what is relevant to a successful banking relationship, so that Punjab National Bank can achieve and maintain customer satisfaction in the new climate; and identifying and commenting on what we see as the key actions that bank must take to retain and expand their customer base in this challenging and increasingly sophisticated market.

8. SCOPE OF THE STUDY The scope of the study is confined to the Punjab National Bank in terms of customer satisfaction. The study has been undertaken on the basis of sample survey.

9. RESEARCH METHODOLOGY 9.1. Sample and data collection This survey was conducted in the context of banking services. The data were collected in face-to- face interviews of customers coming to banks. The study provides a representative sample of various branches of Punjab National Bank’s customers in Meerut only. 9.2. Research design The research design is relating to the collection and analysis of data. There is Qualitative and Quantitative Research design.

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Customer Satisfaction in Commercial Banks Deepti Kanojia and D.R. Yadav

9.3. Data collection In qualitative research design, for the collection of data Depth Interviews, Focus groups and Projective techniques have been used. In quantitative research design the data have been collected from primary source through observations, experimentation and questionnaires. 9.4. Sample size: The samples have been selected on random basis. A sample of 100 respondents was be used in the research. 9.5. Data sources: Both secondary and primary sources of data have been used. The major type of information used is primary data. This is done through primary survey. The literature review contains a secondary data type. The sources include books, periodicals websites, printed literature etc.

10. DATA ANALYSIS Table-1: Statement showing different level of customer satisfaction in Punjab National Bank Very Very Highly Not Using Dissatisfied Satisfied Dissatisfied Satisfied Satisfied Service Mobile Banking 0% 0% 20% 4% 0% 76% Branch Banking 4% 8% 60% 28% 0% 0% Internet Banking 0% 0% 16% 12% 0% 72% ATM Banking 6% 8% 49% 14% 0% 23%  76% of the customers are not using mobile banking whereas only 20% of the customers are satisfied with the service.  60% of the customers are satisfied with the behavior of the staff and 28% are very satisfied and no one is highly satisfied.  28% of the customers are using internet banking out of which only 12% are very satisfied with the service whereas 72% of customers are not using the internet banking  23% of the customers are not using ATM banking, whereas only 14% are very satisfied with this service.  Reasons of Dissatisfaction in Public sector banks: Behavior and attitude of the staff in the bank is the first reason of customer dissatisfaction.  Time taken to process the transaction is the second reason of customer dissatisfaction.  Many customers are unaware with the services provided by the bank e.g., Mobile Banking.  Continuous services are not provided by ATM machines installed by the bank.

11. RECOMMENDATIONS  The staff should be adequately trained to deal with the customer on one to one basis.  Banks need to revive their infrastructure to have pace with the competing environment.  Many of the services needs improvement e.g., ATM facilities.  Staff should be adequately trained to encourage face to face dealing.  Staff should be friendly and approachable.  Clearly defined customer policy should be adopted by the banks.

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Customer Satisfaction in Commercial Banks Deepti Kanojia , D.R. Yadav

 Customer’s needs should be anticipated in advance so that they can be helped out in a better way.  Treat your customers like your friends and they'll always come back.  Honour your promises

12. LIMITATIONS  The study is geographically restricted to Meerut city, U.P. (India) only.  Findings are based on sample survey through questionnaire method.  Hence there is a scope for the respondents to be biased.

13. EMERGING ISSUES The emerging competition and information technology has enhanced the expectations of bank’s customers. Many banks are unable to meet the expectations of the customers and gap between the available facilities and expectations is widened. It is the utmost important to fulfill this widening gap. The new competition has raised many issues like, awareness regarding new technology, high cost in e-banks, customer’s confidence in e-channels, capturing rural and semi-urban population, marketing with e-channels, changing customer profile, proper location of ATMs, lack of IT experts and IT related infrastructure for the Indian banking industry. These issues must be tackled very carefully and wisely to compete in the global market.

14. CONCLUSION In the emerging competitive environment and IT era, with little or no distinction in the product offerings, it is the speed of rendering service that sets apart one bank from another. Prompt service is equated with quality service. Time is a major factor which affects the quality and reputation of the bank. E-banks are providing quick service and that is why they are becoming more popular. Hence it is very essential that the bank should put in place the right kind of systems to further cut down on service time and render instantaneous services to the customer. Only such banks will tend to survive in the rat race for market shares in the days to come.

REFERENCES [1]. Agarwal, B.P. (1981). Commercial Banking in Indian after Nationalisation– A study of Their Policies and Progress, Classical Publishing Company, New Delhi. [2]. Bhagawati, P. and Agarwal, D. (1981). Commercial Banking in India after nationalisation – A study of Their Policies and Progress. Classical Publishing Company, New Delhi. Vol. 272p. 22cm. pp. 332. [3]. Bhaskar, P.V. (2004). Customer Service in Banks. IBA Bulletin ,Vol. XXVI, No. 8 (August), pp.9-13 [4]. Brodeur, M. (1998). Satisfaction, dissatisfaction and complaining behaviour with consumer services and intangible products. Indiana University Graduate School of Business, DBA dissertation. [5]. Customer Satisfaction a Key Growth to Banks: An Article from ‘The Hindu’, 7 August, 2006. [6]. Customer Satisfaction in Indian Banking: A case study of Yamuna Nagar District in Haryana. Political Economy Journal of India, Jan-June, 2008.

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[7]. Desai, V. (1991). Indian Banking, Nature and Problems, Himalaya Publishing House, Bombay. [8]. Hasanbanu, S. (2004). Customer Service in Rural Banks: An Analytical Study of Attitude of Different types of Customers towards Banking Services. IBA Bulletin, Vol. XXVI, No. 8 (August), pp. 21-25 [9]. Moutinha, L.,Curry, B. (1994). Consumer perceptions of ATMs: An application of neural network. Journal of Marketing Management, Vol.10 No.1,pp.191-206. [10]. Moutinho, L., and Meidan, A. (1989). Bank customers’ perceptions innovation and new technology. International Journal of Bank Marketing, Vol.7No.2, pp.22-7. [11]. Narasimham. (2008). Efficiency, Productivity and Customer Service in Banks. PNB Monthly Review, February. [12]. Parasuraman, A., Zeithaml, A., and Berry L.L. (1988). SERVQUAL: A multi-item scale for measuring consumer perceptions of service quality. Journal of Retailing, Vol. 64(1), 12-40. [13]. Report of the Committee on Customer Service in Banks, Goiporia, M.N., R.B.I., December, 2003 [14]. Report of the Committee on the Financial System, Narasimham M., November, 2002.

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Forensic Accounting Concept in India

Preeti Singh* Department of Management Studies, Jagan Institute of Management Studies, Rohini, Delhi. Email Id:[email protected]

Abstract

Forensic accountants are currently in great demand, with the public need for honesty, fairness and transparency in reporting increasing PAPER/ARTICLE INFO exponentially. These forensic accountants need accounting, finance, law, RECEIVED ON: 19/02/2012 ACCEPTED ON: 25/05/2012 investigative and research skills to identify, interpret, communicate and prevent fraud. As more and more companies look for forensic accountants and professional organizations offer certifications in the area, it is becoming evident that the forensic accountant has a skill set that is very different from an auditor or a financial accountant. Forensic accounting is hardly a new field, but in recent years, banks, insurance companies and even police agencies have increased the use of these experts. Forensic accounting in India has come to limelight only recently due to rapid Reference to this paper increase in white-collar crimes and the belief that our law enforcement should be made as follows : agencies do not have sufficient expertise or the time needed to uncover Singh, Preeti (2012), frauds. A large global accounting firm believes the market is sufficiently “Forensic Accounting concept in India ” Int. J. large to support an independent unit devoted strictly to 'forensic' Trade and Commerce- accounting. IIARTC, Vol. 1, No. 1, pp. 100-105 Key Words: Forensic Accountant, Law, Investigative Auditing,

Criminology, Fraud, and Evidence.

*Corresponding Author

Forensic Accounting Concept in India Preeti Singh

1. I NTRODUCTION The forensic Accountant is a bloodhound of Bookkeeping. These bloodhounds sniff out fraud and criminal transactions in bank, corporate entity or from any other organization’s financial records. They hound for the conclusive evidences. External Auditors find out the deliberate mis- statements only but the Forensic Accountants find out the mis-statements deliberately. External auditors look at the numbers but the forensic auditors look beyond the numbers. Forensic Accounting (F.A.) is a specialized area of accounting practice that describes engagements which result from actual or anticipated disputes or litigation. The word "forensic" means "suitable for use in court". The forensic accountants have to keep in mind this statement while they have to work or chalk out their programme. The F.A. work is tailor made according to the situation and need. Forensic accounting has come into limelight due to rapid increase in financial frauds and white-collar crimes. But it is largely untraded area in India. The integration of accounting, auditing and investigative skills creates the specialty know as F.A. The opportunities for the Forensic Accountants are growing fast; they are being engaged in public practice and are being employed by insurance companies, banks, police forces, government agencies etc. Forensic accounting is hardly a new field, but in recent years, banks, insurance companies and even police agencies have increased the use of these experts. Forensic accounting in India has come to limelight only recently due to rapid increase in white-collar crimes and the belief that our law enforcement agencies do not have sufficient expertise or the time needed to uncover frauds. A large global accounting firm believes the market is sufficiently large to support an independent unit devoted strictly to 'forensic' accounting. There are two major aspects within forensic accounting practice; litigation services that recognize the role of a Certified Public Accountant (CPA) as an expert or consultant and investigative services that make use of the CPA's skills, which may or may not lead to courtroom testimony. According to the Webster’s Dictionary, Forensic Accounting mean, “Belonging to, used in or suitable to court, of judicature or to public discussions, debate and ultimately dispute resolutions, it is also defined as an accounting analysis that is suitable to the court which will form the basis for discussion, debate and ultimately dispute resolution.” Forensic accounting has been defined as "accounting analysis that can uncover possible fraud that is suitable for presentation in court. Such analysis will form the basis for discussion, debate and dispute resolution." A forensic accountant uses his knowledge of accounting, law, investigative auditing and criminology to uncover fraud, find evidence and present such evidence in court if required to.

2. HISTORICAL BACKGROUND Forensic accountants have been around for nearly 200 years. The earliest reference was found in 1824 in an accountant’s advertising circular in Glasgow, Scotland. These special accountants gave testimony in court and in arbitration proceedings. Interest in forensic accounting spread through the United States and England early in the twentieth century. One of the first institutions to use the services of such investigative accountants was the IRS. The story of Al Capone the famous mobster being caught on a tax evasion scheme is well-known. The FBI decided to use forensic accountants and employed nearly 500 such agents during World War II. As a profession, forensic

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Forensic Accounting Concept in India

Preeti Singh accounting continued to grow during the latter half of the century, as GAAP and tax laws became widespread and mandatory. The following are a few major milestones in forensic accounting: • 1942: Maurice E. Peloubet published “Forensic Accounting: its place in today’s economy.” • 1982: Francis C. Dykman wrote “Forensic Accounting: The Accountant as an Expert Witness.” • 1986: The AICPA issued Practice Aid # 7, outlining six areas of litigation services – damages, antitrust analysis, accounting, valuation, general consulting and analyses. • 1988: Association of Certified Fraud Examiners established • 1988: A new genre of detective novels where the forensic accountant was the star. • 1992: The American College of Forensic Examiners was established. • 1997: The American Board of Forensic Accountants was started. • 2000: The Journal of Forensic Accounting, Auditing, Fraud and Taxation were started. Sherlock Holmes, the artificial character created by Sir Arthur Conan Doyle is considered the pioneer of forensic accounting. In fact, the concept of forensic accounting is not new in India. Kautilya, the first economist and Birbal, one of the nine gems of King Akbar have widely discussed the fraud examination methods. While the forensic accounting and auditing practices started in the US as early as 1995, it is yet to come into limelight in India. Collapse of the Enron Corporation and World Trade Centre's twin towers have given lots of good opportunities to American forensic accountants. The infamous scams of Harshad Mehta, Ketan Parekh, Sanjay Seth and the recent India bulls scam and ‘Kingfisher Airlines' credit card fraud’ are still fresh in our minds. Whether it is stock market fraud or bank fraud or cyber fraud, forensic accounting has become an indispensable tool for investigation.

3. OBJECTIVES 1. To know the use of Forensic Accounting. 2. To know that, how to control Financial frauds in companies.

4. HYPOTHESIS Forensic Accounting method is the effective tool to control the financial frauds, corruption, misappropriation and use of e- Accounting and taxation in the corporate world.

5. RESEARCH METHODOLOGY The paper is based on secondary data and some discussion with eminent persons in the corporate sector. Forensic Accounting is investigation accounting which involves analyzing, testing, inquiring and examining the civil and criminal matters and finally giving an unbiased and true report. Just as forensic investigations and lab reports are needed in the court to solve the murder and dacoit mysteries. Similarly forensic accounting plays a key role in tracing the financial frauds and white-collar crimes. However, forensic accounting covers a wide range of operations of which fraud examination is a small part where it is most prevalent.

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Forensic Accounting Concept in India Preeti Singh

6. FORENSIC ACCOUNTING: A STUDY 6.1. Introduction If we are concerned about financial discrepancies and financial fraud, we need more than an accountant. Forensic accounting is the combination of the Accounting, Auditing and Investigation skills. Forensic accounting is the specialty practice area of accounting that describes engagements, which result from real or anticipated litigation. Broadly speaking, these engagements fall into one of three categories: economic damages, assurance as to fraud in accounts or inventories or the presentation thereof, and business valuation. However, forensic accounting is a gross area of operations of which fraud examination is a small part. External Audit is compulsory by company Act, 1956 for every company. The main object of audit is to find out after going through the books of accounts, whether the Balance Sheet and Profit & Loss A/c are properly drawn up according to company’s Act and whether they represent true & fair view of the state of affairs of the concern. But forensic auditing is a new concept of investigation. It involves analyzing, testing, inquiry and examining the civil and criminal matters and finally giving an unbiased and true report. 6.2 Difference between External Auditor and Forensic Auditor External Auditor Forensic Auditor External Auditor is an examination of books of The forensic Accountant is a bloodhound accounts and other records such as documents, of Bookkeeping. These bloodhounds find vouchers etc. which confirms or support the out fraud and criminal transactions in correctness of the entries in the books of a business bank, corporate entity or from any other or concern to enable an auditor to satisfy himself as organization’s financial records. They to whether the P & L A/c and Balance Sheet exhibit hound for the conclusive evidences. true and fair view of state of affairs of the concerns. External Auditors find out the deliberate mis- The Forensic Accountants find out the statements only. mis-statements deliberately. External auditors look at the numbers. The forensic auditors look beyond the numbers. 6.3 Use of Forensic Accounting The services rendered by the forensic accountants are in great demand in the following areas: 1. Fraud detection where employees commit Fraud: Where the employee indulges in fraudulent activities and are caught to have committed fraud, the forensic accountant tries to locate any assets created by them out of the funds defalcated, then try interrogating them and trying to find out the hidden truth. 2. Criminal Investigation: Matters relating to financial implications the services of the forensic accountants are availed of. The report of the accountants is considered in preparing and presentation as evidence. 3. Outgoing Partner's settlement: If the outgoing partner is not happy about his settlement he can employ a forensic accountant who will correctly assess his dues (assets) as well as his liabilities.

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Forensic Accounting Concept in India

Preeti Singh

4. Cases relating to professional negligence: Professional negligence cases are taken up by the forensic accountants. Non-conformation to Generally Accepted Accounting Standards (GAAS) or non compliance to auditing practices or ethical codes of any profession they are needed to measure the loss due to such professional negligence or shortage in services. 5. Arbitration service: Forensic accountants render arbitration and mediation services for the business community, since they undergo special training in the area of alternative dispute resolution. 6. Facilitating settlement regarding motor vehicle accident: As the forensic accountant is well acquainted with intricacies of laws relating to motor vehicles, and other relevant laws in force, his services become indispensable in measuring economic loss when a vehicle meets with an accident. 7. Settlement of insurance claims: Insurance companies engage forensic accountants to have an accurate assessment of claims to be settled. Similarly, policyholders seek the help of a forensic accountant when they need to challenge the claim settlement as worked out by the insurance companies. A forensic accountant handles the claims relating to consequential loss policy, property loss due to various risks, fidelity insurance and other types of insurance claims. 8. Dispute settlement: Business firms engage forensic accountants to handle contract disputes, construction claims, product liability claims, infringement of patent and trade marks cases, liability arising from breach of contracts and so on. 9. Matrimonial dispute cases: Forensic accountants entertain cases pertaining to matrimonial disputes wherein their role is merely confined to tracing, locating and evaluating any form of asset involved. Apart from knowledge of accounting, law and criminology, a forensic accountant also needs to be familiar with corporate financial planning and management. He also needs to have computer skills, good communication and interview skills. 6.4. Why is forensic accounting so popular? According to some experts, this increased interest is because of the struggling stock market and lack of investor confidence which has forced many organizations to take a long, hard look at their financial statements. A sluggish economy with its attendant problems might also be an incentive to commit fraudulent acts, thus requiring the services of an expert. The increase in white- collar crime and the difficulties faced by law enforcement agencies in uncovering fraud have also contributed to the growth of the profession. Many accounting firms believe that the market is sufficiently large to support an independent unit devoted strictly to forensic accounting. Whatever the reasoning may be, more and more forensic accountants are being called upon to use their investigative skills to seek out irregularities in their companies’ financial statements. 7. CONCLUSION Forensic accountants are currently in great demand, with the public need for honesty, fairness and transparency in reporting increasing exponentially. These forensic accountants need accounting, finance, law, investigative and research skills to identify, interpret, communicate and prevent fraud. As more and more companies look for forensic accountants and professional organizations offer certifications in the area, it is becoming evident that the forensic accountant has a skill set that is very different from an auditor or a financial accountant.

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Forensic Accounting Concept in India Preeti Singh

Considering above mentioned points, it is proved that the set hypothesis, “Forensic accounting method is the effective tool to control the financial frauds, corruption, misappropriation and use of e- accounting and taxation in the corporate world” has proved. Hereafter, all corporate sector units should use Forensic Accounting for minimization of frauds.

REFERENCES Books 1. Tandon, B. N. (1991). Practical Auditing. S. Chand and Co. Ltd., New Delhi, reprint edition. 2. Satyanarayan, T. (2005). Forensic Accounting and Corporate III. The Chartered Accountant Vol. 53, No. 8.

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Issues and Reforms in Indian Railways

S.K.S. Yadava*, Kum Kum Chaudharyb and Somnath Kisan Khatalc aFaculty of Commerce & Business Administration, Meerut College, U.P. India. bSir Chhotu Ram Institute of Engineering and Technology, (C.C.S. University, Meerut), U.P. India. cShivaji University, Kolhapur, Maharashtra, India email id: [email protected] . Abstract

Indian Railways is a department owned and controlled by the Government of India, via the Ministry of Railways. Indian Railways is PAPER/ARTICLE INFO the world's second largest employer. Indian Railway Finance Corporation RECEIVED ON: 11/12/2011 Ltd. (IRFC) is a dedicated financing arm of the Ministry of Railways. Its ACCEPTED ON: 14/03/2012 sole objective is to raise money from the market to part finance the plan outlay of Indian Railways. The Railtel Corporation of India was established in September 2000 as a public sector undertaking (PSU) and a 100 per cent subsidiary under the Ministry of Railways. It has been set up primarily to commercially utilize IR’s communication assets, which often have idle capacity. Many railway stations are in a state of disrepair, especially when compared to stations in developed countries. Sometimes passengers are seen on trains hanging out windows and even on the roof creating safety problems. The interior of many train compartments are poorly maintained. Although accidents such as derailment and collisions are less common in recent times, many are run over by trains, especially in crowded areas. Outdated communication, safety and signaling equipment, which used to contribute to failures in the system, is being updated with the latest technology. A number of train accidents happened on account of a system of manual signals between stations, so automated signaling is getting a boost at considerable expense. It is felt that this would be required given the gradual increase in train speeds and lengths, that would tend to make accidents more dangerous. In the latest instances Reference to this paper of signaling control by means of interlinked stations, failure-detection should be made as follows : circuits are provided for each track circuit and signal circuit with Yadav, S.K.S, Chaudhary, notification to the signal control centres in case of problems. Though Kum Kum and Khatal, currently available only in a small subset of the overall IR system, anti- Somnath Kisan(2012), collision devices are to be extended to the entire system. Aging colonial- “Issues And Reforms in era bridges and century-old tracks also require regular maintenance and Indian Railways” Int. J. upgrading. Trade and Commerce- Key Words: IRFC, Railtel Corporation of India, Traction, Suburban rail, IIARTC, Vol. 1, No. 1, pp. and Dedicated Freight Corridor. 106-125

*Corresponding Author

Issues and Reforms in Indian Railways S.K.S. Yadav, Kum Kum Chaudhary and Somnath Kisan Khatal

1. I NTRODUCTION Indian Railways is a departmental undertaking of Government of India, which owns and operates Indian Railways, was founded on 16th April, 1853. 1 It generates revenue Rs. 98,000 crore (US$18.62 billion) (2010–11)2 It has 114,500 kilometres (71,147 mi).3 of total track over a route of 65,000 kilometres (40,389 mi)3 and 7,500 stations. It has the world's fourth largest railway network after those of the United States, Russia and China.4 The railways carry over 30 million passengers and 2.8 million tons of freight daily.3 5 It is the world's second largest commercial or utility employer, by number of employees, with more than 1.36 million employees3 As for rolling stock, IR owns over 240,000 (freight) wagons, 60,000 coaches and 9,000 locomotives.3 Railways were first introduced to India in 1853. By 1947, the year of India's independence, there were forty-two rail systems. In 1951 the systems were nationalised as one unit, the Indian Railways, becoming one of the largest networks in the world. IR operates both long distance and suburban rail systems on a multi-gauge network of broad, and narrow gauges. It also owns locomotive and coach production facilities. 1.1. Organisational Structure Indian Railways is a department owned and controlled by the Government of India, via the Ministry of Railways. As of May 2011, the Railway Ministry is headed by Dinesh Trivedi, the Union Minister for Railways, and assisted by two ministers of State for Railways. Indian Railways is administered by the Railway Board, which has a chairman, five members and a financial commissioner.6 1.2. Railway Zones Indian Railways is divided into zones, which are further sub-divided into divisions. The number of zones in Indian Railways increased from six to eight in 1951, nine in 1952, sixteen in 20037 and finally 17 in 2010. Each zonal railway is made up of a certain number of divisions, each having a divisional headquarters. There are a total of sixty-eight divisions.3 8 Each of the seventeen zones, including Kolkata Metro, is headed by a General Manager (GM) who reports directly to the Railway Board. The zones are further divided into divisions under the control of Divisional Railway Managers (DRM). The divisional officers of engineering, mechanical, electrical, signal and telecommunication, accounts, personnel, operating, commercial and safety branches report to the respective Divisional Manager and are in charge of operation and maintenance of assets. Further down the hierarchy tree are the Station Masters who control individual stations and the train movement through the track territory under their stations' administration. Delhi Metro Rail Corporation Limited (DMRC), that has constructed and operates Delhi Metro network, is an independent organization not connected to the Indian Railways. Similarly, Bangalore Metro, Hyderabad Metro, Mumbai Metro and Chennai Metro are also independent organizations. 1.3. Recruitment and Training With approximately 1.36 million employees, Indian Railways is the world's second largest employer. Staff are classified into gazetted (Group 'A' and 'B') and non-gazetted (Group 'C' and 'D') employees.9 The recruitment of Group 'A' gazetted employees is carried out by the Union Public Service Commission through exams conducted by it.10 The recruitment to Group 'C' and 'D' employees on the Indian Railways is done through 19 Railway Recruitment Boards which are -107-

Issues and Reforms in Indian Railways S.K.S. Yadav, Kum Kum Chaudhary and Somnath Kisan Khatal controlled by the Railway Recruitment Control Board (RRCB).11 The training of all cadres is entrusted and shared between six centralised training institutes. 1.4. Production Units Indian Railways manufactures much of its rolling stock and heavy engineering components at its six manufacturing plants, called Production Units, which are managed directly by the Ministry. Popular rolling stock builders such as CLW and DLW for electric and diesel locomotives; ICF and RCF for passenger coaches are Production Units of Indian Railways. Over the years, Indian Railways has not only achieved self-sufficiency in production of rolling stock in the country but also exported rolling stock to other countries. Each of these six production units is headed by a General Manager, who also reports directly to the Railway Board. The six Production Units are: S. No. Name Abbr. Year Established Location Main products 1. Chittaranjan Locomotive CLW 1947 Chittaranjan Electric Locomotives Works 2. Diesel Locomotive Works DLW 1961 Varanasi Diesel-electric Locomotives 3. Diesel-Loco DMW 1981 Patiala Diesel-electric Modernisation Works Locomotives 4. Integral Coach Factory ICF 1952 Chennai Passenger coaches 5. Rail Coach Factory RCF 1986 Kapurthala Passenger coaches 6. Rail Wheel Factory RWF 1984 Bangalore Railway wheels and axles 1.5. Other Subsidiaries There also exist independent organisations under the control of the Railway Board for electrification, modernisation, research and design and training of officers, each of which is headed by an officer of the rank of General Manager. A number of Public Sector Undertakings, which perform railway-related functions ranging from consultancy to ticketing, are also under the administrative control of the Ministry of railways. There are eleven public undertakings under the administrative control of the Ministry of Railways,12 viz.  Rail India Technical and Economic Services Limited (RITES);  Indian Railway Construction (IRCON) International Limited;  Indian Railway Finance Corporation Limited (IRFC);  Container Corporation of India Limited (CONCOR);  Konkan Railway Corporation Limited (KRCL);  Indian Railway Catering and Tourism Corporation Limited (IRCTC);  Railtel Corporation of India Limited (Rail Tel);  Mumbai Rail Vikas Nigam Limited (MRVNL);  Rail Vikas Nigam Limited (RVNL); and  Dedicated Freight Corridor Corporation of India Limited (DFCCIL); and  Bharat Wagon and Engineering Co. Ltd. (BWFL). The Centre for Railway Information Systems (CRIS) was set up as a registered society to design and implement various railway computerization projects. -108-

Issues and Reforms in Indian Railways S.K.S. Yadav, Kum Kum Chaudhary and Somnath Kisan Khatal

1.6 Locomotives Indian railways use a number of different diesel-electric, diesel-hydraulic and electric locomotives. Steam locomotives were once very common but are now only used on heritage routes.

2. TECHNICAL DETAILS 2.1 Track and gauge Indian railways uses four gauges, the 1,676 mm (5 ft 6 inch) broad gauge which is wider than the 1 3 1,435 mm (4 ft 8 ⁄2 inch) standard gauge; the 1,000 mm (3 ft 3 ⁄8 inch) metre gauge; and two narrow gauges, 762 mm (2 ft 6 inch) and 610 mm (2 ft) . Track sections are rated for speeds ranging from 75 to 160 km/h (47 to 99 mph). The total length of track used by Indian Railways was about 114,000 km (71,000 mi) while the total route length of the network was 64,215 km (39,901 mi) on 31 March 2011.13 About 33% of the route-kilometre and 44% of the total track kilometre was electrified on 31 March 2011.13 Broad gauge is the predominant gauge used by Indian Railways. Indian broad gauge— 1,676 mm (5 ft 6 inch)—is the most widely used gauge in India with 102,000 km (63,000 mi) of track length (90% of entire track length of all the gauges) and 54,600 km of route-kilometre (85% of entire route-kilometre of all the gauges) on 31 March 2011. 3 In some regions with less traffic, the metre gauge (1,000 mm/3 ft 3 ⁄8 inch) is common, although the Unigauge project is in progress to convert all tracks to broad gauge. The metre gauge had about 9,000 km (5,600 mi) of track length (7.9% of entire track length of all the gauges) and 7,500 km of route-kilometre (11.6% of entire route-kilometre of all the gauges) on 31 March 2011. The Narrow gauges are present on a few routes, lying in hilly terrains and in some erstwhile private railways (on cost considerations), which are usually difficult to convert to broad gauge. Narrow gauges had a total of 2,400 route-kilometre on 31 March 2011. The Kalka-Shimla Railway, the Kangra Valley Railway and the Darjeeling Himalayan Railway are three notable hill lines that use narrow gauge, but the Nilgiri Mountain Railway is a metre gauge track.[14] These four rail lines will not be converted under the Unigauge project The share of broad gauge in the total route-kilometre has been steadily rising, increasing from 47% (25,258 route-km) in 1951 to 85% in 2011 whereas the share of metre gauge has declined from 45% (24,185 route-km) to less than 12% in the same period and the share of narrow gauges has decreased from 8% to 3%. However, the total route-kilometre has increased by only 18% (by just 10,000 km from 53,596 route-km in 1951) in the last sixty years. This compares very poorly with Chinese railways, which increased from about 27,000 route-km at the end of second world war to about 100,000 route-km in 2011, an increase of more than threefold. More than 28,000 route-km (34% of the total route-km) of Chinese railway is electrified compared to only about 21,000 route- km of Indian railways. Double decker AC trains have been introduced in India. The first double decker train was Flying Rani introduced in 2005 while the first double decker AC train in the Indian Railways was introduced in November 2010, running between the Dhanbad and Howrah stations having 10 coaches and 2 power cars.15 Sleepers (ties) coaches are made up of prestressed concrete, or steel or cast iron posts, though teak sleepers are still in use on few older lines. The prestressed concrete sleeper is in wide use today. -109-

Issues and Reforms in Indian Railways S.K.S. Yadav, Kum Kum Chaudhary and Somnath Kisan Khatal

Metal sleepers were extensively used before the advent of concrete sleepers. Indian Railways divides the country into four zones on the basis of the range of track temperature. The greatest temperature variations occur in Rajasthan. 2.3 Traction As of 31 March 2011, 21,014 km of the total 64,215 km route length is electrified.16 Since 1960, almost all electrified sections on IR use 25,000 V AC traction through overhead catenary delivery.17] 18 A major exception is the entire Mumbai section, which uses 1,500 V DC.18 and is currently undergoing change to the 25,000 V AC system. Another exception is the Kolkata Metro, which uses 750 V DC delivered through a third rail. Traction voltages are changed at two places close to Mumbai. Central Railway trains passing through Kasara and Karjat switch from AC to DC using a neutral section near Kalyan. Western Railway trains switch power on the fly, in a section near Dahisar, where the train continues with its own momentum for about 30 m through an unelectrified section of catenary called a dead zone.18 All electric engines and EMUs operating in this section are the necessary AC/DC dual system type (classified "WCAM" by IndianRailways). 2.4 Railway Links to Adjacent Countries  Bhutan – railways under construction – Same gauge  Nepal – Break-of-gauge – Gauge conversion under unigauge project  Pakistan – same Broad Gauge. Thar Express to Karachi and the more famous Samjhauta Express international train from Lahore, Pakistan to Amritsar (Attari).  Bangladesh – Same Broad Gauge. The Maitri Express between Dhaka and Kolkata started in April 2008 using the Gede-Darsana route.  Myanmar – Manipur to Myanmar (under construction)  Vietnam – On 9 April 2010, Former Union Minister of India, Shashi Tharoor announced that the central government is considering a rail link from Manipur to Vietnam via Myanmar.19  China – Indian Railways and rail authorities in People's Republic of China are interested in constructing a high-speed rail link that would link New Delhi with Kunming, China via Myanmar.20 2.5 Services The Indian Railways serves every major populated region in the country 2.6 Passenger Indian Railways transports 30 million passengers daily21 across twenty-eight states and two union territories. Sikkim and Meghalaya are the only states not connected by rail.3 A standard passenger train consists of eighteen coaches, but popular trains can have 26 coaches or even more. Coaches are designed to accommodate anywhere from 18 to 108 passengers, but during the holiday seasons and/or on busy routes, many more passengers may travel in unreserved coaches. Most regular trains have coaches connected through vestibules. However, 'unreserved coaches' are not connected with the rest of the train via any vestibule. Reservation against cancellation service is a provision for shared berth in case the travel ticket is not confirmed.22

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Issues and Reforms in Indian Railways S.K.S. Yadav, Kum Kum Chaudhary and Somnath Kisan Khatal

The last timetabled passenger service running under steam locomotive power ended in 2000, in Gujarat.23 All current passenger service is provided using electric or diesel locomotives, except for the rack section of the Nilgiri Mountain Railway (NMR) which still relies on Swiss-built X class steamers to do the job. a. Types of b. Passenger Services Trains are classified by their average speed.24 A faster train has fewer stops ("halts") than a slower one and usually caters to long-distance travel. The types of passenger services are shown in the following Table Rank Train Description 1 Duronto These are the non-stop point to point rail services (except for operational

Express stops) introduced for the first time in 2009 . These trains connect the metros and major state capitals of India and are faster than Rajdhani Express.These trains are now of the Highest Priority to the Indian Railways. The Duronto services consists of classes of accommodation namely first AC, two-tier AC, three-tier AC, AC 3 Tier Economy, Sleeper Class, General Class. 2 Rajdhani These are all air-conditioned trains linking major cities to New Delhi. The

Express Rajdhanis have high priority and are one of the fastest trains in India, travelling at about 140 km/h (87 mph). There are only a few stops on a Rajdhani route. 3 Shatabdi and The Shatabdi trains are AC intercity seater-type trains for travel during Jan Shatabdi day. Jan-Shatabdi trains consists of both AC and non-AC classes.

Express

4 Garib Rath Fully air conditioned trains, designed for those who cannot afford to travel in the expensive Shatabti and Rajdhani Express. Garib Rath means "Chariot of the Poor". The maximum speed is 130 km/h. 5 Superfast These are trains that have an average speed greater than 55 km/h

Mail/Express (34 mph). Tickets for these trains have an additional super-fast surcharge.

6 Mail/Express These are the most common kind of trains in India. They have more stops than their super-fast counterparts, but they stop only at relatively important intermediate stations. 7 Rajya Rani These are a series of express trains operated by Indian Railways to

Express connect state capitals with other cities important for tourism, pilgrimage or business. 8 Passenger These are slow trains that stop at most stations along the route and are and Fast the cheapest trains. The trains generally have unreserved seating Passenger accommodation but some night trains have sleeper and 3A Compartments. 9 Suburban These trains operate in urban areas, usually stop at all stations and have

trains unreserved seating Accommodation.

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Issues and Reforms in Indian Railways S.K.S. Yadav, Kum Kum Chaudhary and Somnath Kisan Khatal

2.8 Sub -urban Rail Many cities have their own dedicated sub-urban networks to cater to commuters. The sub-urban networks in Mumbai, Chennai (Chennai MRTS and Chennai sub-urban railway), Kolkata, Delhi, Hyderabad, Ahmadabad, Pune and Lucknow-Kanpur are part of the Indian Railways. Hyderabad, Pune and Lucknow-Kanpur do not have dedicated sub-urban tracks but share the tracks with long distance trains. Delhi, Kolkata and Bangalore have their own metro networks (which are not part of the Indian Railways), namely the Delhi Metro( also runs in the cities of Gurgaon and Noida), the Kolkata Metro, and the Bangalore Metro, with dedicated tracks mostly laid on a flyover. Mumbai's suburban trains handle 6.3 million commuters daily.25 Sub-urban trains that handle commuter traffic are mostly electric multiple units. They usually have nine coaches or sometimes twelve to handle rush hour traffic. One unit of an EMU train consists of one power car and two general coaches. Thus, a nine coach EMU is made up of three units having one power car at each end and one at the middle. The rakes in Mumbai run on direct current, while those elsewhere use alternating current.26 A standard coach is designed to accommodate 96 seated passengers, but the actual number of passengers can easily double or triple with standees during rush hour. Metros are being planned and implemented in many Indian cities. Except for the Kolkata Metro, which is run by the Indian Railways, all the new metros (including the Delhi Metro, Bangalore Metro and Jaipur Metro) are being operated under the provisions of the Delhi Metro Railways (Operation and Maintenance) Act 2002, under the Ministry of Urban Development (including their safety certification). 2.9 Accommodation Classes Several long trains are composed of two to three classes of travel, such as a 1st and 2nd classes which have different pricing systems for various amenities. The 1st Class refers to coaches with separate cabins, coaches can be air-conditioned or non air-conditioned. Further, other AC classes can have 2 or 3 tier berths, with higher prices for the former, 3-tier non- AC coaches or 2nd class seating coaches, which are popular among passengers going on shorter journeys. In air-conditioned sleeper classes passengers are provided with sheets, pillows and blankets. Meals and refreshments are provided, to all the passengers of reserved classes, either through the on-board pantry service or through special catering arrangements in trains without pantry car. Unreserved coach passengers have options of purchasing from licensed vendors either on board or on the platform of intermediate stops. The amenities depend on the popularity and length of the route. Lavatories are communal and feature both the Indian style as well as the Western style. 27 28 At the rear of the train is a special compartment known as the guard's cabin. It is fitted with a transceiver and is where the guard usually gives the all clear signal before the train departs. A standard passenger rake generally has four general compartments, two at the front and two behind, of which one is exclusively for ladies. The exact number varies according to the demand and the route. A luggage compartment can also exist at the front or the back. In some trains a

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Issues and Reforms in Indian Railways S.K.S. Yadav, Kum Kum Chaudhary and Somnath Kisan Khatal separate mail compartment is present. In long-distance trains a pantry car is usually included in the centre. 2.10 Train Numbering Effective 20 December 2010, the railways have deployed a 5 digit numbering system instead of the 4 digit system. The need is due to the fact that the Indian Railways runs 10,000 trains daily.29 Only a prefix of the digit 1 was done to the four-digit numbers of the existing trains to make the transition smoother. The special trains run to clear festivals and holiday rush shall have the prefix of 0 (zero) 2.11 Notable Trains and Achievements There are two UNESCO World Heritage Sites on IR – the Chatrapati Shivaji Terminul30 and the Mountain railways of India. The latter is not contiguous, but actually consists of three separate railway lines located in different parts of India:31  The Darjeeling Himalayan Railway, a narrow gauge railway in West Bengal.  The Nilgiri Mountain Railway, a metre gauge railway in the Nilgiri Hills in Tamil Nadu  The Kalka-Shimla Railway, a narrow gauge railway in the Shivalik mountains in Himachal Pradesh. In 2003 the Kalka Shimla Railway was featured in the Guinness Book of World Records for offering the steepest rise in altitude in the space of 96 kilometre.32  The Maharaja Railways (Gwalior Light Railway), a narrow gauge line of just 0.6m width from Gwalior to Sheopur of 198 km. in length is world's longest narrow gauge railway line is in the UNESCO world heritage tentative list.  The Neral-Matheran Railway, a narrow gauge railway connecting Matheran is also a historic line.  The Palace on Wheels is a specially designed train, frequently hauled by a steam locomotive, for promoting tourism in Rajasthan. On the same lines, the Maharashtra government introduced the Deccan Odyssey covering various tourist destinations in Maharashtra and Goa, and was followed by the Government of Karnataka which introduced the Golden Chariot train connecting popular tourist destinations in Karnataka and Goa. However, neither of them has been able to enjoy the popular success of the Palace on Wheels.  The Samjhauta Express is a train that runs between India and Pakistan. However, hostilities between the two nations in 2001 saw the line being closed. It was reopened when the hostilities subsided in 2004. Another train connecting Khokhrapar (Pakistan) and Munabao (India) is the Thar Express that restarted operations on 18 February 2006; it was earlier closed down after the 1965 Indo-Pak war.  The Lifeline Express is a special train popularly known as the "Hospital-on-Wheels" which provides healthcare to the rural areas. This train has a carriage that serves as an operating room, a second one which serves as a storeroom and an additional two that serve as a patient ward. The train travels around the country, staying at a location for about two months before moving elsewhere.  Among the famous locomotives, the Fairy Queen is the oldest operating locomotive in the world today, though it is operated only for specials between Delhi and Alwar. John Bull, a locomotive older than Fairy Queen, operated in 1981 commemorating its 150th anniversary.

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Issues and Reforms in Indian Railways S.K.S. Yadav, Kum Kum Chaudhary and Somnath Kisan Khatal

Kharagpur railway station also has the distinction of being the world's longest railway platform at 1,072 m (3,517 ft). The Ghum station along the Darjeeling Toy Train route is the second highest railway station in the world to be reached by a steam locomotive.33 The Mumbai–Pune Deccan Queen has the oldest running dining car in IR.  The Vivek Express, between Dibrugarh and Kanyakumari, has the longest run in terms of distance and time on Indian Railways network. It covers 4,286 km (2,663 mi) in about 82 hours and 30 minutes.  The Himsagar Express, between Kanyakumari and Jammu Tawi, has the second longest run in terms of distance and time on Indian Railways network. It covers 3,715 km (2,308 mi) in about 69 hours and 30 minutes. The Bhopal Shatabdi Express is the fastest train in India today having a maximum speed of 150 km/h (93 mph) on the Faridabad–Agra section. The fastest speed attained by any train is 184 km/h (114 mph) in 2000 during test runs.  The third longest train in terms of distance on Indian Railways network is Dibrugarh - Yeshvantapur (Bangalore) Express covering 3,352 km (2,083 mi) in about 68 hours and 15 minutes.  Trivandrum Rajdhani is the longest non-stop train in on Indian Railways network covering 528 kms in 6.5 hours.  Howrah - Amritsar express has maximum number of halts (115 halts) on Indian Railways network.  The Rajdhani Express and Shatabdi Express are the superfast, fully air-conditioned trains that give the unique opportunity of experiencing Indian Railways at its best. In July 2009, a new non-stop train service called Duronto Express was announced by the railway minister Mamata Banerjee.34 2.12 Tourism IRCTC takes care of the tourism operations of the Indian Railways. The Indian Railways operates several luxury trains such as Palace on Wheels, Golden Chariot, Royal Orient Express and Deccan Odyssey,((Maharaja Express)); that cater mostly to foreign tourists. For domestic tourists too, there are several packages available that cover various important tourist and pilgrimage destinations across India. 2.13 Freight IR carries a huge variety of goods ranging from mineral ores, fertilizers and petro-chemicals, agricultural produce, iron & steel, multimodal traffic and others. Ports and major urban areas have their own dedicated freight lines and yards. Many important freight stops have dedicated platforms and independent lines. Indian Railways makes 70% of its revenues and most of its profits from the freight sector and uses these profits to cross-subsidise the loss-making passenger sector. However, competition from trucks which offer cheaper rates has seen a decrease in the proportion of freight traffic carried by rail in recent years. Since the 1980s, Indian Railways has switched from small consignments to larger bulk a goods which has helped speed up its operations. Most of its freight earnings come from such rakes carrying bulk goods such as coal, cement, food grains and iron ore. Indian Railways also transports vehicles over long distances. Trucks that carry goods to a particular location are hauled back by trains saving the trucking company on unnecessary fuel -114-

Issues and Reforms in Indian Railways S.K.S. Yadav, Kum Kum Chaudhary and Somnath Kisan Khatal expenses. Refrigerated vans are also available in many areas. The "Green Van" is a special type used to transport fresh food and vegetables. Recently Indian Railways introduced the special 'Container Rajdhani' or CONRAJ, for high priority freight. The highest speed notched up for a freight train is 120 kilometres per hour (75 mph) for a 5,500 metric tonne load. Recent changes have sought to boost the earnings from freight. A privatization scheme was introduced recently to improve the performance of freight trains. Companies are being allowed to run their own container trains. The first length of an 11,000-kilometre (6,800 mi) freight corridor linking India's biggest cities has recently been approved. The railways has increased load limits for the system's 230,000 freight wagons by 11%, legalizing something that was already happening. Due to increase in manufacturing transport in India that was augmented by the increase in fuel cost, transportation by rail became advantageous financially. New measures such as speeding up the turnaround times have added some 24% to freight revenues. 2.14 Dedicated Freight Corridor Under the Eleventh Five Year Plan of India(2007–2012), Ministry of Railways is constructing a new Dedicated Freight Corridor (DFC) covering about 2762 route km long two routes – the Eastern Corridor from Ludhiana to Dankuni and the Western Corridor from Jawaharlal Nehru Port at Nhava Sheva, Navi Mumbai to Tughlakabad/Dadri along with interlinking of two corridors at Dadri. Upgrading of transportation technology, increase in productivity and reduction in unit transportation cost are the focus areas for the project.35 According to initial estimates, the project would cost 20,500 crore (US$3.9 billion).36 A new company, "Dedicated Freight Corridor Corporation of India Limited(DFCCIL)", designated as a `special purpose vehicle`, has been created to undertake planning & development, mobilization of financial resources and construction, maintenance and operation of the Dedicated Freight Corridors. DFCCIL has been registered as a company under the Companies Act 1956 on 30 October 2006.37 New rolling stock would be acquired to meet the demands of the corridor which are: 1. 1000 electric locomotives of 12000 and 9000 hp 2. 1000 diesel locomotives of 4500 and 6000 hp 3. 2,00,000 freight wagons of high capacity and 32 ton axle load 2.15 Rail Budget and Finances The Railway Budget deals with planned infrastructure expenditure on the railways as well as with the operating revenue and expenditure for the upcoming fiscal years, the public elements of which are usually the induction and improvement of existing trains and routes, planned investment in new and existing infrastructure elements, and the tariff for freight and passenger travel. The Parliament discusses the policies and allocations proposed in the budget. The budget needs to be passed by a simple majority in the Lok Sabha (Lower House). The comments of the Rajya Sabha (Upper House) are non-binding. Indian Railways is subject to the same audit control as other government revenue and expenditures. Based on anticipated traffic and the projected tariff, requirement of resources for capital and revenue expenditure of railways is worked out. While the revenue expenditure is met entirely by railways itself, the shortfall in the capital (plan) expenditure is met partly from borrowings (raised by Indian Railway Finance Corporation) and

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Issues and Reforms in Indian Railways S.K.S. Yadav, Kum Kum Chaudhary and Somnath Kisan Khatal the rest from Budgetary support from the Central Government. Indian Railways pays dividend to the Central Government for the capital invested by the Central Government. As per the Separation Convention (on the recommendations of the Acworth Committee), 1924, the Railway Budget is presented to the Parliament by the Union Railway Minister, two days prior to the General Budget, usually around 26 February. Though the Railway Budget is separately presented to the Parliament, the figures relating to the receipt and expenditure of the Railways are also shown in the General Budget, since they are a part and parcel of the total receipts and expenditure of the Government of India. This document serves as a balance sheet of operations of the Railways during the previous year and lists out plans for expansion for the current year. The formation of policy and overall control of the railways is vested in Railway Board, comprising the Chairman, the Financial Commissioner and other functional members of Traffic, Engineering, Mechanical, Electrical and Staff departments. Indian Railways, which a few years ago was operating at a loss, has, in recent years, been generating positive cash flows and been meeting its dividend obligations to the government, with (unaudited) operating profits going up substantially.38 The railway reported a cash surplus of 900 crore (US$171 million) in 2005, 14,000 crore (US$2.7 billion) in 2006, 20,000 crore (US$3.8 billion) in 2007 and 25,000 crore (US$4.8 billion) for the 2007–2008 fiscal year. Its operating ratio improved to 76% while, in the last four years, its plan size increased from 13,000 crore (US$2.5 billion) to 30,000 crore (US$5.7 billion). The proposed investment for the 2008–2009 fiscal year is 37,500 crore (US$7.1 billion), 21% more than for the previous fiscal year.2 Budget Estimates-2008 for Freight, Passenger, Sundry other Earnings and other Coaching Earnings have been kept at 52,700 crore (US$10 billion), 21,681 crore (US$4.1 billion), 5,000 crore (US$950 million) and 2,420 crore (US$459.8 million) respectively. Maintaining an overall double digit growth, Gross Traffic Earnings have been projected as 93,159 crore in 2009–10 (19.1 billion USD at current rate), exceeding the revised estimates for the current fiscal by 10,766 crore (US$2 billion). Around 20% of the passenger revenue is earned from the upper class segments of the passenger segment (the air-conditioned classes).39 The Sixth Pay Commission was constituted by the Government of India in 2005 to review the pay structure of government employees, and submitted its recommendations in April, 2008. Based on its recommendations, the salaries of all Railways officers and staff were to be revised with retrospective effect w.e.f. 1 January, 2006, resulting in an expenditure of over 13,000 crore (US$2.5 billion) in 2008–09 and 14,000 crore (US$2.7 billion) in 2009–10. Consequently, staff costs have risen from 44% of ordinary working expenses to 52%.40

3. INDIAN RAILWAY FINANCE CORPORATION LTD Indian Railway Finance Corporation Ltd. (IRFC) is a dedicated financing arm of the Ministry of Railways. Its sole objective is to raise money from the market to part finance the plan outlay of Indian Railways. The money so made available is used for acquisition of rolling stock assets and for meeting other developmental needs of the Indian Railways. The borrowing programme of IRFC is guided by the requirements projected by Ministry of Railways. The company has successfully met the targeted borrowings year after year, through issue of both taxable and tax-free Bonds, term loans from banks/financial institutions and through off shore borrowings. IRFC also makes use of innovative financial instruments to

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Issues and Reforms in Indian Railways S.K.S. Yadav, Kum Kum Chaudhary and Somnath Kisan Khatal diversify the debt portfolio and to minimize the cost. Its contribution to infrastructure build-up in Railways is very significant. Till 31st March, 2010, Rolling Stock assets - Locomotives, Coaches and Wagons - valued at Rs. 60,163 crore have been added to the asset base of the Indian Railways with funding assistance from IRFC. IRFC’s funding has support technology infusion in the Railways and has enabled Ministry of Railways to purchase new generation Locomotives from General Motors (USA) alongwith transfer of technology and new generation Coaches from Germany for use in high speed/Shatabdi trains. IRFC’s share in funding of the most productive high capacity wagons and high horse power locomotives is very significant. Acquisition of high capacity & efficient assets with IRFC funding has gone a long way in increasing traffic output and revenue growth over the years. Around 50% of the revenue earning rolling stock assets operating on the Indian Railways network is funded by IRFC. Since its inception, IRFC has consistently earned profits and paid dividend adding upto Rs. 1468 crore till 2009-10 on a paid up capital of Rs. 500 crore which has been increased to Rs. 800 crore from 2nd June, 2009. Dividend payments for the year 2005-06, 2006-07, 2007-08, 2008-09 and 2009-10 are Rs. 150 crore, Rs. 160 crore, Rs. 100 crore, Rs. 100 crore and Rs. 100 crore respectively and are the highest ever paid by a Railway PSU.The networth of IRFC as on 31st March, 2010 is Rs. 3405.48 crore. Rolling Stock assets funded by IRFC are leased to Ministry of Railways, which pays lease rentals to the company every half year. The Ministry has already made repayments in respect of assets valued at Rs 21,065.68 crore. It is also a constant endeavour of the company to reduce cost to the Ministry. Under the guidance of its dynamic and proactive leadership, IRFC has successfully brought down cost of incremental borrowings to Ministry of Railways from 14.97% p.a. in 1996-97 to 8.21% in 2009-10. The Company’s performance has been rated excellent for eleven years in a row by the Department of Public Enterprises. Specially worth mentioning is the ranking of IRFC among the top ten Government Undertakings for the last four years in succession. For the years 2001-02, 2002-03 and 2003-04, Company has received Award from the President of India, Prime Minister of India and Vice President of India respectively. For the year 2005-06, 2006-07, 2007-08 and 2009-10. the Company has achieved the Perfect Score of 1. International: For the financial year 2009-10, three international credit rating agencies - Standard & Poor’s, Fitch and Moody’s - assigned to IRFC "BBB-"(Stable)", "BBB-(Negative)" and "Baa3(stable)" rating. Besides, the Company obtained credit rating of "BBB+(Stable)" from Japanese Credit Rating Agency in respect of its Samurai Bond issuance of March 2007. Future direction/plans of the Company: To focus on its existing business and further consolidate its position as a low-cost funding source for MOR. Credit Ratings: Domestic: During the financial year 2009-10, the Company was awarded the highest rating of "AAA/Stable", "LAAA" and "AAA" by CRISIL, INCRA and CARE respectively for domestic borrowing. 3.1 Role played by IRFC so far Till the end of 2008-09, IRFC would have funded acquisition of rolling stock assets valued at Rs.51,061 crore (US$10.21billion). In numerical terms, IRFC’s share in the rolling stock fleet of

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Indian Railways(IR) is about 53%. In terms of physical capacity generated, IRFC’s ownership is more than 60%. By virtue of assuming responsibility for almost one-fourth of IR’s funding of infrastructure over the two decades of its existence, IRFC’s contribution to consolidation & growth of Railways in India has been very significant in deed. Besides funding rolling stock acquisition, IRFC has also selectively assisted a few other MOR owned entities with financing support. Through successful execution of its mandate to arrange lease finance for MOR year-after-year, IRFC has been able to establish are spectacle niche franchise and has managed to sustain a strong financial performance track record.

4. GROWTH OF IRFC’S BUSINESS From a modest Rs.770 crore in the first year of IRFC’s operation (1987-88), size of IRFC’s business in the current year has increased to Rs.7,200 crore(US$1.44billion) Growth has been steeper in recent years. From Rs.2510 crore in 2002-03, the annual borrowing target has gone upto Rs.8030 crore for 2009-10, a CAGR of 18%. Through the core competencies established, IRFC has come to be regarded as a Public Finance Institution of high repute and standing. Its operations are carried out entirely on the strength of its own financials, without a Government guarantee. MOR views IRFC as its sole market borrowing arm. Role played by IRFC in lending funding assistance to entities such as KRCL, RCIL, RVNL, RLDA and PRCL at MOR’s instance supports such a conclusion 4.1 Efficiency of Operations Not only has IRFC succeeded in meeting the increasingly growing targets assigned to it from year to year, the Company has also been able to do so at competitive cost. IRFC’s cost of borrowing has generally compared well with cost of borrowing by Government of India. Amongst corporate entities, IRFC’s cost of borrowing has been generally over 0.50% lower than best of others in the domestic market. Similar debt-pricing edge exists for IRFC’s overseas borrowings as well. IRFC’s transactions invariably set industry benchmarks in terms of tight pricing attained. The Company has been accorded the highest possible credit rating by all the three domestic credit rating agencies-CRISIL, ICRA and CARE. It has also been accorded rating equivalent to rating of India Sovereign by the four major International Credit Rating Agencies-Standard & Poor’s, Moody’s, FITCH Ratings and Japanese Credit Rating Agency IRFC has been rated “Excellent” by the Government of India based on its performance in the last eleven years. It ranked amongst Top Ten PSUs based on its performance during 2001-02, 2002-03, 2003-04 and 2004-05. It has achieved perfect score of 1.00 for its performance during 2005-06, 2006-07 and2007-08. Despite its asset base of over Rs.50,000 crore and balance sheet size of over Rs.30,000, IRFC is a unique organization in term so fits size. Its operations are run by as mall team of 20 personnel only. Its overheads – to - turnover ratio stands at merely 0.11%, which is amongst the lowest the worldover. 4.2 Future direction/plans of the Company To focus on its existing business and further consolidate its position as a low-cost funding source for MOR.

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To establ ish its pre-eminence as the only market borrowing arm of MoR by providing funding support to Ministry of Railways (MOR) for induction of new technologies in areas of rolling stock, etc. Selectively to diversify its activities through funding financially viable and remunerative railway projects involving port connectivity or specific industry based new lines/gauge conversion projects. To engage in advisory services in financial structuring.

5. RAILTEL CORPORATION OF INDIA The Railtel Corporation of India was established in September 2000 as a public sector undertaking (PSU) and a 100 per cent subsidiary under the Ministry of Railways. It has been set up primarily to commercially utilize IR’s communication assets, which often have idle capacity. Vision: is to become the preferred telecom solutions and services provider for knowledge economy. Mission: To attain leadership in providing premier telecom infrastructure service by offering the cost-effective state of the art communication solutions. 5.1 Objectives RailTel  To facilitate Railways in expeditious modernizing of their operation and safety systems and network providing by state of art communication infrastructure.  To plan, build, develop, operate and maintain a nationwide broadband telecom and multimedia network to supplement national telecom infrastructure to spur growth of telecom, broadband and IT enabled value added services in all parts of country specially rural, remote and backward areas.  To generate revenue through commercial exploitation of its telecom network.

6. SERVICES PERFORMED BY RAIL TEL 6.1 Managed Lease Line RailTel has established countrywide telecom transmission network on SDH & DWDM platform. The transmission media is more reliable as the OFC runs along the Railways exclusive Right of Way (RoW). The SDH network deploys self healing ring architecture with multipath protection for inter city links. Presently 100 G DWDM upgradable to 400 G is available in Southern/Western & Eastern part of country. This network shall be extended to Northern part of India in current year. The SDH backbone is multiple layers of 2.5 G STM-16 capacity. The capacity is scalable from 2 Mbps to DS3, STM-1, STM-4 or above on TDM & 10 Mbps, 100 Mbps & 1 Gbps or above on ETH. RailTel facilitates planning of network requirement for the enterprise customer. Its qualified & trained engineers shall be more than willing to understand business requirement & suggest appropriate cost effective solution. 6.2 MPLS and VPN RailTel MPLS (Multiprotocal Label Switching) data network provides connectivity that meets the industry standards for consistent, secure and reliable data delivery. IP services are extended through carrier Ethernet access networks at all the RailTel locations, inter-connected to MPLS-IP CORE network. RailTel provides port speeds of all granularity, and managed customer traffic.

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All the offices, factories & business locations of an enterprise can be networked to provide seamless connectivity for managed data & voice services exclusively for the organizations. This saves considerable revenue on telecom over & above virtually owning a telecom network. The VPN is available with port speeds of all granularity, and managed customer traffic as under-. GOLD Guaranteed SILVER Standard BRONZE Best Effort

RailTel provides connectivity that meets the industry standards for consistent, secure and reliable data delivery. IP services are extended through carrier Ethernet networks at all the locations, inter-connected to MPLS –IP CORE network at the 36 important cities. RailTel aims to build an OFC-based broad-band telecom and multimedia network by utilizing the railways’ unique and seamless 63,000 route km right of way. It also aims to modernize the railways’ communication network, and to generate revenue by the commercial exploitation of surplus capacities. It is already providing bandwidth capacity to a large number of telecom players including Tata Teleservices, Bharti Telesonic, Bharti Cellular, Hughes Telecom, Aircel and Dishnet DSL. RailTel Plans to build a high speed OFC-based network using DWDM/SDH technologies on 40,000 route km covering more than 3,500 railway stations, where a minimum of STM-1, bandwidth will be available, in a phased manner by March 31,2007. RailTel has laid OFC on up to 25,000 km connecting the four metros as well as four other important cities. RailTel is also building another network to offer IP VPNs and other value-added services. It is also venturing into areas such as providing cyber cafes at railway stations through franchisees on a revenue-sharing basis. One cyber café has been commissioned at New Delhi Railway Station as a pilot project. It is planned to provide cyber cafes at 51 stations in Phase-1. RailTel has ambitious plans to enter national long distance (NLD) services. RailTel also aims to provide internet kiosks at railway stations, where minimum STM-1 band-width will be available. The STM equipment is equipped with Ethernet interfaces, whereby high speed internet bandwidth can be made available at each such station. Internet kiosks would be installed at these stations with high speed connectivity.

7. ISSUES OF INDIAN RAILWAYS Many railway stations are in a state of disrepair, especially when compared to stations in developed countries. Sometimes passengers are seen on trains hanging out windows and even on the roof creating safety problems. 41 The interior of many train compartments are poorly maintained and dirty. Although accidents such as derailment and collisions are less common in recent times,42 many are run over by trains, especially in crowded areas. Indian Railways have accepted the fact that given the size of operations, eliminating accidents is an unrealistic goal, and at best they can only minimize the accident rate. Human error is the primary cause, leading to 83% of all train accidents in India.43 While accident rates are low – 0.55 accidents per million train kilometre,43 the absolute number of people killed is high because of the large number of people making use of the network.44 While strengthening and modernisation of railway infrastructure is

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Issues and Reforms in Indian Railways S.K.S. Yadav, Kum Kum Chaudhary and Somnath Kisan Khatal in progress, much of the network still uses old signalling and has antiquated bridges.43 Lack of funds is a major constraint for speedy modernisation of the network, which is further hampered by diversion of funds meant for infrastructure to lower-prioritised purposes due to political compulsions.44 In order to solve this problem, the Ministry of Railways in 2001 created a non- lapsible safety fund of 17,000 crore (US$3.2 billion) exclusively for the renewal of overaged tracks, bridges, rolling stock and signalling gear.45 In 2003, the Ministry also prepared a Corporate Safety Plan for the next ten years with the objective of realising a vision of an accident-free and casualty-free railway system. The plan, with an outlay of 31,835 crore (US$6 billion), also envisaged development of appropriate technology for higher level of safety in train operation.46

8. REFORMS AND UPGRADES IN INDIAN RAILWAYS Outdated communication, safety and signaling equipment, which used to contribute to failures in the system, is being updated with the latest technology. A number of train accidents happened on account of a system of manual signals between stations, so automated signaling is getting a boost at considerable expense. It is felt that this would be required given the gradual increase in train speeds and lengths, that would tend to make accidents more dangerous. In the latest instances of signaling control by means of interlinked stations, failure-detection circuits are provided for each track circuit and signal circuit with notification to the signal control centres in case of problems.47 Though currently available only in a small subset of the overall IR system, anti-collision devices are to be extended to the entire system.[48] Aging colonial-era bridges and century-old tracks also require regular maintenance and upgrading. The fastest trains of Indian Railways, Rajdhani Express and Shatabadi Express face competition from low-cost airlines since they run at a maximum speed of only 150 kilometres per hour (93 mph).49 At least six corridors are under consideration for the introduction of high speed trains to India with expert assistance from France and Japan. IR is in the process of upgrading stations, coaches, tracks, services, safety, and security, and streamlining its various software management systems including crew scheduling, freight, and passenger ticketing. Crew members will be able to log in using biometric scanners at kiosks while passengers can avail themselves of online booking.[50] Initially, various upgrade and overhaul work will be performed at more than five hundred stations, some of it by private contract. All metre gauge lines in the country will be converted to broad gauge (see Project Unigauge). New LHB stainless steel coaches, manufactured in India, have been installed in Rajdhani and Shatabdi express trains.48 These coaches enhance the safety and riding comfort of passengers besides having more carrying capacity, and in time will replace thousands of old model coaches throughout Indian Railways. More durable and conforming polyurethane paint is now being used to enhance the quality of rakes and significantly reduce the cost of repainting. Improved ventilation and illumination are part of the new scheme of things, along with the decision to install air brake systems on all coaches. New manufacturing units are being set up to produce state-of-the-art locomotives and coaches.48 IR is also expanding its telemedicine network facilities to further give its employees in far-flung and remote areas access to specialized medicine. IR has also piloted Internet connectivity on the Mumbai-Ahmedabad Shatabdi Express,51 It is estimated that modernisation of IR and bringing it up to international standards would require US$280 billion in new upgrades and investment from 2010 to 2020.52

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Sanitation in trains and stations throughout the system is getting more attention with the introduction of eco-friendly, discharge-free, green (or bio-) toilets. Updated eco-friendly refrigerant is being used in AC systems while fire detection systems will be installed on trains in a phased manner. New rodent-control and cleanliness procedures are working their way into the many zones of IR. Central Railway's 'Operation Saturday' is gradually making progress, station by station, in the cleanup of its Mumbai division. Augmentation of capacity has also been carried out in order to meet increasing demand. The number of coaches on each train has been increased to 24, from 16, which increased costs by 28% but increased revenues by 78%. The railways were permitted to carry 68 tons per wagon, up from the earlier limit of 54 tons per wagon, thereby cutting costs. The turnaround time for freight wagons was reduced from 7 days to 5 by operating the goods shed 24X7, electrifying every feeder line (this reduced time spent switching the engine from diesel to electric or from electric to diesel). Reducing the turnaround time meant that the Railways could now load 800 trains daily, instead of 550 trains daily. The minimum tonnage requirements were reduced allowing companies to unload their cargo at multiple stops.53 On 19 October 2011, The Real Time Train Information System (RTIS) project, GPS-based SIMRAN technology, was introduced by railway minister Dinesh Trivedi. RTIS will enable rail travelers to access train running information real-time on their laptops and mobile phones. It intends to provide passengers with latest information about train movement and other details. The RTIS project has been jointly developed by IIT Kanpur and Research Design and Standards Organization (RDSO), with support from the HRD ministry. Initially, RTIS will provide information only on Rajdhani and Shatabdi trains, their speed, delays, approaching station, coach position and other details. Presently Indian Railways starts RTIS in five pair of Rajdhani Express (12301/02,12305/06,12313/13,12951/52 and 12953/54) and one pair of Shatabdi Express (12303/04) on Pilot basis. Passengers can obtain train information by visiting http://www.simran.in, SMS by sending the train number to the mobile number 09415139139. Railways had earlier decided to implement RTIS to track all passenger and freight trains. The work was approved in Railway Budget 2011 at a cost of 110 crore. The project is likely to be completed by December 2012.

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[24]. "Overview Of the existing Mumbai Suburban Railway". Official webpage of Mumbai Railway Vikas Corporation. Archived from the original on 20 June 2008. http://web.archive.org/web/20080620033027/http://www.mrvc.indianrail.gov.in/overvi ew.htm. Retrieved 11 December 2008. [25]. "[IRFCA] Indian Railways FAQ: Electric Traction — I". Irfca.org. http://www.irfca.org/faq/faq-elec.html#volt. Retrieved 11 November 2008. [26]. "General Information on travelling by IR". IRFCA.org. Indian Railways Fan Club. http://www.irfca.org/faq/faq-travel.html. Retrieved 3 June 2007. [27]. "Class of Travel". indiarail.co.uk. S.D.Enterprises Ltd. http://www.indiarail.co.uk/indrail.htm. Retrieved 3 June 2007. [28]. The Times of India, 4th April, 2006. [29]. "Chhatrapati Shivaji Terminul (formerly Victoria Terminus)". World Heritage List. World Heritage Committee. 2004. http://whc.unesco.org/en/list/945. Retrieved 5 January 2009. [30]. "Mountain Railways of India". World Heritage List. World Heritage Committee. 1999. http://whc.unesco.org/en/list/944/. Retrieved 5 January 2009. [31]. "100 years of pine-scented travel". http://www.tribuneindia.com/2003/20031108/windows/main1.htm. Retrieved 14 February 2009. [32]. "Hill trains". Archived from the original on 22 August 2008. http://web.archive.org/web/20080822150546/http://www.indianrail.gov.in/dm_hill.htm l. Retrieved 14 February 2009. [33]. "'Duronto' trains will be faster than Rajdhani". The Indian Express (India). 3 July 2009. http://www.indianexpress.com/news/duronto-train-services-for-major-cities/484594/. Retrieved 3 July 2009. [34]. "Strategy of Indian Railways During the Eleventh Five Year Plan". Government of India. 2007–2008. http://indiabudget.nic.in/es2007-08/chapt2008/chap93.pdf. Retrieved 18 September 2010. [35]. "Report of the Task Force: The Delhi-Mumbai & Delhi-Howrah Freight Corridors". Planning Commission, Government of India. 2007–2008. http:// infrastructure.gov.in/ pdf/ Freight_ Corridor . pdf. Retrieved 18 September 2010. [36]. "Dedicated Freight Corridor Corporation of India Ltd.". Ministry of Railways, Government of India. 2009. http://dfccil.org/wps/portal/DFCCPortal. Retrieved 18 September 2010. [37]. "Statistical Summary-Indian Railways". 23 February 2006. Archived from the original on 28 March 2008. http://web.archive.org/web/20080328185125/http://www.indianrail.gov.in/summary06. htm. Retrieved 8 April 2008. [38]. Arun Kumar Das (19 June 2005). "Indian Railway takes the E-route". Online edition of the Times of India, dated 2005-06-19. http:// timesofindia.indiatimes.com/ articleshow/ 1146548.cms. Retrieved 10 December 2008. [39]. "Pay panel award to cost Rlys 13,600 crore (US$2.6 billion)". The Hindu Business Line. 14 February 2009. http:// www.thehindubusinessline.com/ 2009/02/14/ stories/ 2009021451801500.htm. Retrieved 2 September 2009.

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[40]. Paul Theroux, Ghost Train to the Eastern Star: On the Tracks of the Great Railway Bazaar, P.156 (First Mariner Books 2008). [41]. "Railways take measures to prevent accidents". Press Information Bureau. 6 August 2009. http://pib.nic.in/release/release.asp?relid=51548. Retrieved 8 August 2009. [42]. Amulya Gopalakrishnan (19 July 2003). "A poor track record". Frontline. http://www.frontlineonnet.com/fl2015/stories/20030801006911900.htm. Retrieved 10 December 2008. [43]. Sanjeev Srivastava (16 April 2002). "Indian rail marks 150th anniversary". BBC. http://news.bbc.co.uk/2/hi/south_asia/1931229.stm. [44]. "PM clears 17,000 cr. fund to modernise Rlys.". The Hindu (Chennai, India). 3 July 2001. http://www.hindu.com/2001/07/03/stories/0203000j.htm. Retrieved 3 September 2009. [45]. "10-year Corporate Safety Plan for rlys.". The Hindu. India. 20 August 2003. http://www.hinduonnet.com/2003/08/20/stories/2003082003231300.htm. Retrieved 3 September 2009. [46]. "Indian Railways Signalling Systems". http://www.irfca.org/faq/faq-signal.html. Retrieved 14 February 2009. [47]. "HIGHLIGHTS OF RAILWAY BUDGET 2008–09". Official webpage of Indian Railways. http://www.indianrailways.gov.in/budget-0809/HIGHLIGHTS-0809-ENG.PDF. Retrieved 13 December 2008. [48]. "Business Travel Still On Track – Cover Story – FE Business Traveller". Businesstravellerindia.com. http:// www.businesstravellerindia.com/ 200603/ coverstory01. shtml. Retrieved 11 November 2008. [49]. "Railways to modernise six stations". The Economic Times (India). 4 September 2007. http://economictimes.indiatimes.com/Railways/Railways_to_modernise_six_stations/arti cleshow/2336488.cms. Retrieved 2 September 2009. [50]. "WiFi In Trains Piloted On Shatabdi Express; Music Downloads, Movies On Demand?". MediaNama.com. http://www.medianama.com/2009/01/223-wifi-in-trains-piloted-on- shatabdi-express-music-downloads-movies-on-demand/. Retrieved 13 November 2009. [51]. Dinesh Trivedi (27 February 2007). "It's a great waste of potential & possibilities". The Telegraph. http://www.telegraphindia.com/1070227/asp/business/story_7446475.asp. Retrieved 2 September 2009. [52]. Bahree, Megha (27 October 2008). "On the right track". Forbes. [53]. http://timesofindia.indiatimes.com/india/Real-time-info-on-trains- soon/articleshow/10422190.cmshttp://timesofindia.indiatimes.com/india/Real-time-info- on-trains-soon/articleshow/10422190.cms Other References:  Aguiar, M. (2011). Tracking Modernity: India's Railway and the Culture of Mobility  Bear, Laura.(2007) Lines of the Nation: Indian Railway Workers, Bureaucracy, and the Intimate Historical Self (Columbia University Press,); 360 pp. ISBN 978-0-231-14002-7.  Tiwari, R. D. (1941), Railways In Modern India, excerpt and text search Krishnan, V.M. Govind, Nilgiri Mountain Railway (NMR)- From Lifeline to Oblivion.

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Depreciation Reserve & Provisions Under Price Level Changes [An Overview of Legal & Accounting Aspects of Small Scale Industries]

V. P. Singha* and A. P. Singhb aDepartment of Provident Fund, Meerut, India. bFaculty of Commerce & Business Administration, Meerut College, Meerut, India. Email Id: [email protected]

Abstract

Depreciation is the deterioration of the physical and functional utility of a fixed asset due to its usage and passage of time. Accounting for PAPER/ARTICLE INFO depreciation is a way of writing off the investment on fixed assets by RECEIVED ON: 08/02/2012 prorating over a certain period of time of its usage. Ordinarily, ACCEPTED ON: 12/04/2012 depreciation accounting is designed, to recover simply the number of monetary units originally committed to the asset irrespective of differences in their purchasing power. This is quite satisfactory in periods of relative price stability but can be seriously, and even ruinously inadequate during period of relentless inflationary pressures with sharp drop in the purchasing power of the monetary unit. Valuation of fixed assets in real prices is very important for the following: economic analysis and forecasting of the development and use of the economic potential; identification of parameters of investments, and setting depreciation policies at the macro level and micro level. The value of fixed assets Reference to this paper determines the size of property tax, depreciation charges, profit tax, etc. should be made as follows : While going over to a market economy, India has been facing high Singh, V.P. & Singh, A.P. inflation, which is typical of a transition period, and reevaluations had to (2012), “Depreciation be made more frequently than during the earlier period. Reserve & Provisions Under Price Level Changes [An Key Words: Financial Statements, Purchasing Power, Economic Overview Of Legal & Potential, Economic Analysis, Consumer Price Index, Capital Accounting Aspects of Small Conservation Reserve. Scale Industries” Int. J. Trade and Commerce- IIARTC, Vol. 1, No. 1, pp 126-141

*Corresponding Author

Issues and Reforms in Indian Railways V. P. Singh and A. P. Singh

1. I NTRODUCTION The present paper endeavours to seek the following specific objectives- (i) To identify the present status, strata, and accounting practices being followed by SSI units under study; (ii) To evaluate the present provisions of law relating to depreciation with reference to price level changes (iii) To asses and measure the price level changes during the period of study and their impact on the management of fixed assets and depreciation accounting in sample SSI units; (iv) To identify the growth pattern of the SSI sector and identify the reasons for success/failure; (v) To identify the barriers and constraints that SSIs are facing. The present study has been done with the following hypotheses- (i) That sufficient provision for depreciation on fixed assets on the basis of historical costs renders it difficult for small scale units to replace the fixed assets at current prices; (ii) That the present relevant provisions of law for providing depreciation on fixed assets are not conducive for protection of investment in fixed assets; (iii) That the present accounting standards and contemporary accounting practices fail to accommodate price level changes and its impact on management of fixed assets especially in the small scale sector; (iv) That the study of sample SSI units on the subject will provide sufficient inputs for developing accounting and mathematical models for universal application. The study has been undertaken in two phases. Phase-1: Qualitative Research with Policy makers and Institutions and Phase-2: Structured Survey. There is immense potential to be tapped towards ancillarisation that needs proper networking systems to be developed for exchange of information, database, assignments and projects between bigger companies and SSIs. The Government could take a lead on developing these kinds of systems. The policy makers feel that the SSIs should be driven by market forces rather than reservation of items. At times, somewhat larger industries have been hindered in their growth plans because of the reservation of the product under small scale. Keeping this in mind, the barriers have been removed and about 160 items have been de-reserved from SSI sector. This would also make them more competitive. The inputs from the qualitative research were used to frame the structured questionnaire in more detail. A sample of 1000 companies in the SSI sector had been used for the quantitative survey. The final number on which the analysis has been conducted is 872. The companies in the Eastern region and the Northern region were not enthusiastic about the survey; therefore the required sample size could not be achieved. The survey work was completed in a span of three months from April 2011 to June 2011. 31% of the sample comprises of companies in the Northern region, 31% in the Southern region, 23.5% in the Western region and 14% in the Eastern region. The cities which were covered in each region were: (1) Northern region- Dehradun, Delhi and NCR, Kanpur, Lucknow, and Meerut; (2) Western region- Ahmedabad, Baroda, and Jaipur; (3) Eastern region-Bhubaneshwar and Guwahati; (4) Southern region- Bangalore, Chennai, and Hyderabad. The sample comprised of 81% companies in the manufacturing sector and 19% companies in the services sector. The ownership pattern of the companies in the sample was as follows: (1) Sole Proprietorship- 53%; (2) Partnership Firms- 22%; (3) Private Ltd Co- 22%; and (4) Public Ltd Co- 3%. The sample comprised of 45% companies belonging to the pre liberalization era (pre 1991)

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Depreciation Reserve & Provisions Under Price Level Changes V. P. Singh and A. P. Singh and 55% of companies belonging to the post liberalization era (post 1991). Among manufacturing companies the industry sectors which were covered are- Textiles, Leather and Garments; Printing, Packaging and Paper, Plastic and Rubber, Machinery and Mechanical Products, Electrical and Electronic products, Chemical Industry and Products and Automobile and Auto Products/Services. The kind of companies which were covered in the Services sector are office automation, computer products and IT services; consulting, architecture, interior decoration, retailing and insurance services and beauty and health services etc. Management of fixed assets includes gamut of activities. Acquire, maintain, safeguard, distribute, and administer the fixed assets needed to support the entity's mission, goals, and objectives. The ultimate object is to minimize the cost and maximize the utility of fixed assets acquired. Depreciation is the deterioration of the physical and functional utility of a fixed asset due to its usage and passage of time. Accounting for depreciation is a way of writing off the investment on fixed assets by prorating over a certain period of time of its usage. Ordinarily, depreciation accounting is designed, to recover simply the number of monetary units originally committed to the asset irrespective of differences in their purchasing power. This is quite satisfactory in periods of relative price stability but can be seriously, and even ruinously inadequate during period of relentless inflationary pressures with sharp drop in the purchasing power of the monetary unit. The point has been forcefully emphasized by Mr. J. R. D. Tata, chairman of Tata Iron and Steel Company Limited in his statement for 1971-72 at the annual general meeting of the Company. “...By a healthy and productive plant we mean one maintained at a peak of efficiency by continuously replacing worn out or obsolete parts and incorporating improvements in equipment, processes and techniques as they become available. All this costs far more money that available from allocations to depreciation in view of the enormous increase in the cost of new equipment over the historical cost of the equipment it replaces” The present research has been able to identify certain problems related to the sickness of SSIs due to the faulty depreciation policies and practices which occur at the ground level and are faced by the SSIs in their day to day working and progress. The policy makers and institutions require addressing these issues for optimising the potential of the SSI sector. The basic objective of Accounting is the preparation of financial statements is a way that they give a true and fair view of the operating results and the financial position of the business to its various users, namely investors, creditors, management, Government, trade unions, research institutions etc. These financial statements are prepared based on certain accounting concepts and conventions. The money measurement concept is a basic attribute of accounting. The money measurement concept states that only those business transactions that are capable of being expressed in terms of money can be recovered in the books of account. It also assumes that the monetary unit used for recording the transaction is stable in nature. However, this is not true in practice as many countries, developed as well as developing, have been experiencing inflation of high magnitude in recent times. Inflation refers to state of continuous rise in prices. It brings downward changes in the purchasing power of monetary unit. Thus, financial statements prepared without taking into account the change in purchasing power of the monetary unit lose their significance. There is a demand that business enterprises should prepare inflation adjusted financial statements. The different ways through which financial accounts can be adjusted for

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Issues and Reforms in Indian Railways V. P. Singh and A. P. Singh changing prices is studied under the subject “Inflation Accounting”. Given that price changes can also be downward, it is more appropriately called “Accounting for price level changes”. Depreciation is an annual deduction out of the annual revenue that a business firm can claim for the cost of usage and value erosion in the assets with the passage of time; such assets are as vehicles, buildings, machinery and other equipment. In the contemporary tax laws, depreciation is defined as a reasonable deduction for the wearing down and/or obsolescence of the fixed assets. It is included on income statements as an expense for accounting purposes. The cost of assets that are totally consumed within an accounting period will be recognized as an expense within that period. When an asset is not totally consumed within a single accounting period—as is typically the case with fixed assets—the cost of the asset must be allocated as an expense over the periods in which the asset is consumed. Depreciation arises from this attempt to assign asset cost to the period of asset consumption. The depreciation for an asset in a period is simply an estimate of the portion of the original cost to be assigned as an expense to the period. A similar concept is depletion, which is applied to the extraction of natural resources in recognition of the fact that a certain part of the natural resource has been consumed during a given period. Since depreciation is an allocation of cost over several accounting periods, it is not directly connected to market value—or the amount that the asset would be worth, if it was sold. The book value of an asset, computed as the actual cost minus the accumulated depreciation, is simply the unallocated cost of the item. The pattern of depreciation is fixed and does not respond to changing market conditions. Depreciation does not involve any cash flow. This is clear in the simple case of an asset acquired entirely by cash payment. Although the initial purchase is a cash flow, the subsequent allocation of part of the cost as a periodic expenditure involves only an accounting entry. Depreciation is not intended as a mechanism to provide for replacement of the asset. There are no cash flows associated with depreciation, and there is no connection with any cash accumulated for replacement of the asset. The asset may or may not be replaced—this is a capital budgeting decision that is immaterial to the recognition of depreciation as an item of expense. Because depreciation is an expense but there is no associated cash flow, it is sometimes described as being "added back" to arrive at cash flow for the firm. This gives the impression that depreciation is somehow a source of cash flow. The adding back, however, is simply recognition of the fact that no cash flow occurred and depreciation cannot supply cash.

2. AREAS WHERE PRICE LEVEL CHANGE INFLUENCE ACCOUNTING PRACTICES The accounting practices influenced by the price level changes are mainly in the following areas- 2.1 Value Erosion of Cash and Near Cash Items: Cash and bank balances or any other near cash items are possessed by almost every business firm to meet day-to-day need of payment of expenses and currently maturing liabilities due for payment. However, the purchasing power or value of cash and near cash items goes on reducing with the every bit of passage of time during the period of rising prices. The dormant cash in hand, bank balances or cash equivalent earns nothing but its value erodes during inflation or rising price levels. In the period of price rises or during inflation, holding the cash and its equivalent purchasing power of money will normally be subjected to the money value erosion. Therefore, it would be a suggestive accounting practice to

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Depreciation Reserve & Provisions Under Price Level Changes V. P. Singh and A. P. Singh hold cash and cash equivalents just sufficient to meet requirement of a few days only i.e., the minimum period to get funds generated from the other sources. 2.2 Value Erosion in Debts and Receivables: Selling on credit is the most common practice in almost every business for the purpose of improving market share. Credit sales generate debts and accounts receivables as an item of current assets in a business firm. The size and the length of time of holding debts and accounts receivable depends on the credit policy of the firm or the industry. Larger the size or lengthier the period of debts and account receivables in a business firm, greater is the probability of money value losses during the period of inflation or rising prices. Therefore, sound accounting practices call for a trade-off between the benefit generated by added sales by adoption of a credit sale policy and the money value loss of bad debts money value erosion during the pendency of debts and accounts receivables. 2.3 Value erosion due to Dormant Inventory: Investment in current assets includes variety of inventory items such as (i) stock of raw-materials waiting to be consumed in production, (ii) stock of finished goods waiting to be delivered to the customers/consumers, (iii) in process inventory or work-in-progress i.e., the goods in semi-finished form in the pipelines well within the process of production, and (iv) lastly, sometimes the stock like loose tools, lubricants, nuts and bolts, rugs etc., needed for repair and maintenance of machinery and plant. Every industrial unit small or large is obliged to maintain stock of such inventories. Hence the capital investment therein such stock of inventory is inevitable. But sound accounting practices does not permit dormancy in such investment because of the loss of opportunity of earning some profits by the alternative use of such capital on the one hand and losses incurred due to the value erosion with the quality loss in such stock of goods with the passage of time as moisture, hot and cold weather and other natural phenomenon may wear and tear, rusting out. Pilferages and other cost maintaining such stocks may also be high at times. Scientifically decided minimum and maximum stock levels, Procurement under EOQ systems, ABC analysis etc are the well tested accounting techniques to solve such problems of dormancy of stock of inventory. On the contrary, in case of rising prices of such goods and commodities, even the higher levels of inventory are permissible as sound accounting practice. But one must be cautious about using the best alternative method valuation of issues and inventory. LIFO- [last in first out], NIFO- replacement value method or market value method would be most useful techniques for conserving capital investment in inventory during the period of inflationary prices.

2.4. Impact of price level changes on current liabilities: Current liabilities in a business firm are generated due the time lag in the payments of accounts payables and expenses. The sound accounting practices call for availing of the maximum benefits of the credit policies of the suppliers without impairing the creditworthiness and losing confidence of the suppliers. In competitive supply market such an opportunity is always easily available to the buying firms; however, in case of monopoly supply market or under the imperfect supply market conditions even the shortest credit period may be denied by the supplying firms. On the contrary, large number of items of expenses is contractual in character and the payments for them are due periodically on raising bills; hence, an opportunity of maneuvering the payment period in case of expense items is rarely available to a business firm. Therefore, the firms must use creditors’ funds

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Issues and Reforms in Indian Railways V. P. Singh and A. P. Singh with almost precaution as a means of financing the core investment in current assets. But one must always bear in mind that during the period of high rising prices, the technique of delaying payments towards current liabilities would definitely benefit the buying firms and the firms availing services without current cash payments. 2.5. Impact on money value changes on Long Term Capital: Long term capital includes owners’ funds and long-term borrowed funds usually utilized by the business firms for long- term purposes such as: (i) Procurement of fixed assets; (ii) Redemption of currently measuring term loans; (iii) Investment in core current assets etc. Outsiders’ funds invested in a business firms by way of long-term loans or advances creates a contractual liability on the firm to make payment of interest periodically. Until the EBI i.e., earnings before Interest but after tax of a business firm is larger than the cost of such capital i.e., the obligatory liability of payment of interest after adjustment of tax rebate available, the use borrowed funds as long-term investment in the business is always profitable preposition. Furthermore, the perpetuity of maintenance of borrowed funds during the period of rising prices gives the borrowing firm an added advantage, as the value of money at the time of repayment or redemption of borrowings at a future date on maturity would always be less than the value of money borrowed in past. On the contrary, owners’ fund in the business enterprise goes on fluctuating with the net results of business operations. Profits increase it and losses reduce the total quantum of owners’ funds in the business. The drawings for personal use or dividend payments reduce the quantum of owners’ fund. However, the intrinsic value of owners’ investment in a firm remains protected until the earning per rupee of investment minus dividend payouts is greater than the fund even during the period of rising prices. Whatever the impact of money value erosion due to rising prices may be on different items of assets or liabilities, the accounting practices need certain adjustments for price level changes. The mathematical technique of deflating values through the general price index or according to current prices adjustment accordingly will be able to reflect their true current values of assets and liabilities in accounts. Therefore, distortion caused by the basic accounting data can be made good to a larger extent. Thus, the historical cost based accounting fails to conserve real net asset value of a firm. The net assets of business owners in the enterprise i.e., owners’ equity or funds or capital goes on depleting during the period of price hikes or inflation. Though the book value of the capital input of the owners may be constant, the real present value of the same may be much less that. However, under continuous operating conditions, the net asset value is measured in phases, while the monetary value of each accounting period and the value of the assets they own may be much different. Therefore, in the historical cost accounting model, whether it is from the 'financial capital' point of view, or from the 'physical capital' i.e., production capability point of view, net value of owned capital is difficult to conserve during the period of rising prices. As the Historical Cost based Accounting Model does not react the changes of price or money value in accounting, the assets, liabilities and owners’ equity and income, expenditures, costs and benefits can never be properly measured. When the general price rises, the historical cost measurement of assets presents the book value of assets at a lower value than their actual current value. The inflated book profits are inadvertently divided amongst the owners and similarly, in

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Depreciation Reserve & Provisions Under Price Level Changes V. P. Singh and A. P. Singh accordance with virtual rupees in revenue, the income tax is paid to the exchequer. As a result, the capital of enterprises due to the different levels of price changes, which are subject to different degrees of erosion, thus, reducing the strength of enterprises by way of capital erosion. The historical cost accounting principles cannot react to price changes, resulting in the assets, liabilities, equity; revenue, expenses and profit function of the correct measurement, so that a corresponding decline in the quality of accounting information, therefore, it is necessary to the impact of price changes, to take corresponding countermeasures. The larger portion of long-term capital (both the owned capital and long-term borrowed funds) of an industrial unit is used in acquiring fixed assets and remainder of it is used to finance the core portion of working capital, including inventories, account and bills receivable or balances of liquid funds i.e., cash, bank balance or short-term marketable securities. The erosion in capital is caused by insufficient provision of depreciation on the fixed assets on one hand and reducing quantum of inventory even though a firm tries to maintain its monetary value on the other hand. Similarly, the erosion in value of liquid assets including debtors, cash and bank balance and marketable securities is a feature which may be visible by the negative impact of inflation on money value invested in fixed assets and in current assets too.

3. INSUFFICIENT PROVISION OF DEPRECIATION ON FIXED ASSETS Insufficient depreciation provision on fixed assets results into plough back of lesser amount of capital than invested in the assets leaving insufficient sinking fund to replace the assts. The capital so eroded increases the taxable profit and, therefore, it raises the tax liability on one hand and the rest of the eroded capital bulges the divisible profits. Thus, the capital funds drain out. Therefore, to conserve capital it is imperative to provide depreciation on fixed assets at an appropriate rate to plough back the funds equal to the amount of capital investments in the fixed assets.

4. IMPACT OF INFLATION ON MONEY VALUE The money value erosion due to the inflation is yet another reason of capital drain out. Even the sufficient rate of depreciation charge on fixed assets does not guarantee the capital conservation. Under inflationary conditions, the present value of money is always higher than its future value. Hence, it becomes necessary to protect the worth of the capital rather than its quantum which can be done by creating special funds entitled “Capital Conservation Reserve (CCR)” out of divisible profits.

5. COMPUTATION OF CCR The accounting mechanism for creating such funds would be as follows: Computation of Annual Contribution /amount of CCR: The amount of annual contribution can be computed either of the following ways: 5.1. ‘Wholesale Price Index’ basis- The whole price indices are representative of change in purchasing power of money. Therefore, WWI can be used to compute the amount of annual contribution required for creation of CCR. The following mathematical module may be useful- X = (In/In-1 x Co) - Co 5.2. ‘Market Value basis’- The capital can be conserved also by creating CCR annually equal to the amount of difference of the present ‘Replacement Value of Fixed Assets’ in use and the WDV of the Fixed Assets plus Accumulated Depreciation thereon till date for the capital investment in

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Issues and Reforms in Indian Railways V. P. Singh and A. P. Singh fixed assets. Further, the investment of long-term capital in Current assts has two different facets- (a) Investment in core inventory and (b) Investment in minimum maintainable level of debtors and liquid asset balances including cash, bank balance and marketable securities. The proposition can also be understood other way round also i.e., the long term capital investment in current asset is the net working capital. The conservation of this part of capital investment is also necessary. The following mathematical module may be used: X = {RVfa- (WDV + AD)} + {In/In-1 x (CA-CL)} 5.3. Tax Adjustment for CCR: The tax on income is charged on ‘Net Profits’ calculated as per tax rules whereas, CCR can only be charged as an appropriation of profits against divisible profits after tax. Hence an amount of capital is also drain out by way of tax. Therefore, tax adjustment is needed in the calculated amount of annual contribution for CCR. The mathematical module for the same may be: Tax Adjusted contribution for CRR = X (I + t) Whereas, t= tax rate 5.4. Accounting for CCR: The CCR may be maintained like any other capital reserve to avoid drain out by way of drawings, dividends of cash payments of bonus to the shareholders. For the purpose of replacement of assets after the expiry of their usable life, the treatment of the reserve may be on the pattern of Sinking Fund Investment Account. The genesis of creating ‘Capital Conservation Reserve’ at least during the period of profit making by SSI units may work as an effective and early safeguard against the menace of sickness. The standard service for the valuation of machinery and equipment is a rare exception in today’s market. Standard service begins with planning the study and includes a site visit, an inventory of assets to the level of item control necessary for planning, and a valuation of the controllable units and property groupings. Today’s market demands lower-priced alternatives to arrive at the value of tangible personal property. Two practices in use within the appraisal profession that have responded to this demand are 1) net book value (NBV) equals fair market value (FMV) and 2) trend and depreciate historical property records. The question is whether these lower-cost practices can still provide a reasonable grasp of the asset values in question. Net Book Value Equals Fair Market Value: The provisions of both SFAS i.e., 141, Business Combinations, and 142, Goodwill and Other Intangible Assets, have led to an acceptance of the reported NBV as evidence of the FMV of the tangible assets. Net Book Value [NBV] is the net result of a variety of accounting decisions related to whether expenditures are capitalized or expensed. NBV is a function of the property classification of the asset, the application of a depreciable life and method, the recognition of a salvage value, and the application of a depreciation convention. NBV is further influenced by the accounting system’s ability to keep up with asset transfers and partial or complete retirement of the asset itself. In addition, there is the impact of fully reserved assets that have zero NBV or that may even be removed from the record when they become fully reserved. The presence of reported goodwill is the result of a company’s having applied purchase accounting to an acquisition sometime in its past. Thus, the NBV of tangible assets is further subject to SFAS 141 purchase price allocation treatment and the application of depreciable lives and methods to what is essentially a collection of used assets.

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Depreciation Reserve & Provisions Under Price Level Changes V. P. Singh and A. P. Singh

FMV is dependent upon the cost of new assets, the market prices of similar assets being bought and sold in the used market, and the impact of age, wear, technology, and market conditions as they may be quantified in physical, functional, and economic obsolescence. What is the likelihood that NBV will equal FMV? Mathematically, it can and does happen. But those incidents are far fewer than proponents suggest. The following are some of the events that drive FMV to be different than NBV. The existence of fully depreciated assets on the books and in use with NBV is equal to zero. For example, consider the valuation of a large developer of computer software for an SFAS 141 allocation. The company used an 18-month life for depreciation of its computer equipment. Thus, all computer equipment more than 18 months old had zero NBV. The company, however, had tens of millions of dollars of computer equipment more than 18 months old that was still in use. The equipment represented millions of dollars to the buyer of the business that would not be recognized if it were assumed that NBV equals FMV. The capital-versus-expense policy may influence the magnitude of the difference between NBV and FMV. Many companies have high dollar cutoffs, meaning some longer-lived assets below the dollar cutoff may not be reported on the books at all. Other companies capitalize large expenditures because of the magnitude of the expenditure, but the result may not be a long-lived asset with value. Such costs include relocating equipment, repairs, cleaning, and painting. The effects of the capital-versus-expense policy can be compounded over time. The company may be more aggressive in expense treatment in good years, while capitalizing costs more in bad years. NBV is based on the historical property record. Most companies’ historical property records lack the communication and policies to capture and reflect all asset retirements. Many companies’ property records have one or more “group” entries, such as “1997 equipment, Rs.2,749,635” or “1998 improvements, Rs.44,898,000,” that do not describe any specific assets. Under the trend-and-depreciate approach, price adjustment factors are developed to trend the original costs reported in the property record to estimates of cost of reproduction-new (CRN) as of the purchase date. Then, depreciation factors are applied to the CRN to arrive at an estimate of FMV. The accuracy of the resulting value opinion is often dubious due to a variety of factors, some of which are explored as- (i) Trend factors must be developed for the specific type and age of the equipment. The type of equipment makes a difference, since the price changes of equipment vary over time. For example, prices of computer equipment may decrease while general machine tool prices increase over the same period. Thus, the property record must reflect sufficient detail to develop trend factors to reflect a company’s unique mix of asset types. Examples of records that would not be specific enough to be trended might include plant addition, machinery and equipment, warehouse equipment, and addition to the printing line. Such records lack the specific nature of the asset to properly develop a trend factor. (ii) The application of trend-and-depreciation factors depends upon the asset records reflecting the acquisition date and cost when purchased new. Property records that reflect prior purchase accounting have the acquisition dates reset to the date of the business purchase, and cost is allocated. An allocated record is not a proper base for trending and depreciation. Trend factors are developed based on price changes of the asset type over time. The base is always the cost of the asset when new in its year of manufacture. When either piece of information is lost through

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Issues and Reforms in Indian Railways V. P. Singh and A. P. Singh purchase accounting, trend-and-depreciate methodology cannot be applied. NBV will equal FMV only by accident. (iii) The trend-and-depreciate exercise largely depends upon the quality of the historical property record. If asset retirements have not been properly removed from the record over the years, costs will be overstated and the resulting value will be too high. If the record is missing costs due to capitalization issues or write-offs of fully reserved assets, the value indicated by trending will understate the true asset value. The standard service outlined earlier is the best means of determining what assets are present, their location, age, condition, and FMV. The standard service is costlier than some other services, but is the best approach when documented and fully supportable values are needed for the IRS, an accounting review, or the courtroom. In the name of cost savings there are many abuses in the application of the NBV-equals-FMV theory and the trend-and-depreciate routine. Consumers of valuation services should be aware of other cost-effective means to determine FMV when records are suspect. Through the use of trained and experienced machinery and equipment valuation experts, valuation consultants are able to opine on supportable values in a cost-effective manner. Some of these alternatives include the following:  If there are multiple properties that are similar in nature, such as retail stores, the appraiser can inspect and model typical facilities. Value indications of base models can then be applied to the universe of properties.  If the requirements are simply to have values without much documentation, the experienced machinery and equipment appraiser can do a walk-through on a facility. Equipped with years of experience and knowledge of machinery and equipment values, the appraiser can create a short-form, line-item listing of what physically exists in the facility and its respective value.  The trend-and-depreciate method can be combined with on-site verification. During the on- site verification, the appraiser can accomplish a number of things to enhance the reliability of the value conclusion. First, the appraiser can verify the existence of major assets and remove recorded assets which are no longer in existence. The appraiser can also spot major assets that may not be on the existing record, value them, and include them in the conclusion. By being on site, the appraiser can also note the use of assets and maintenance policies to develop depreciation factors representative of the actual property.  Sometimes the sheer size of a project intimidates the parties. An acquisition may include tens or even hundreds of domestic locations and a similar number of international properties. The fear of large appraisal fees may influence the appraisal decision, resulting in minimal valuation work and unreliable value conclusions. One alternative is to stratify the project into modules; a valuation plan can be developed for each module depending on the size, relative value, and location of owned property. Depending upon the company’s needs, major facilities may have walk-through and other locations may be trended, while some minor locations default to NBV. The result will be more supportable than a valuation based solely on trending or NBV equals FMV. What are the implications of asset valuations that are completed hastily and result in poor and perhaps unsupportable values? First, overstating asset values will overstate property tax bills for years to come. When records are used for insurance placement, overstating values means paying

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Depreciation Reserve & Provisions Under Price Level Changes V. P. Singh and A. P. Singh excessive insurance premiums. Understating values exposes the company to inadequate coverage in the event of disaster. In addition, there is the excessive cost of labor to try and track and report the investment in fixed assets while using an asset record that is inaccurate and unreliable. The most important reason, however, is that management and boards of directors have an ethical, legal, and fiduciary responsibility to properly maintain records that accurately report a company’s financial position. Management and directors have an obligation to shareholders, the SEC, the IRS, taxing authorities, and others relying on their financial statements to supply records that fairly reflect reported assets. Indian Accountants have gained some experience of drawing up balances of fixed assets at their full and/or residual values, as well as in constant prices and in their average annual prices for appropriate years. Indian Accountants use continuous monitoring to generate data concerning the fixed assets of large and medium-sized businesses and agencies that is required for drawing up these balances. In 2010 data on small businesses may be generated through selective inspections. Data concerning the age structure of fixed assets that is not found in reporting documents is received through the use of mathematical/statistical methods based on perpetual inventory methods. Mathematical/statistical methods are also used to appraise what influence current and projected volumes of investments in capital assets make on the age parameters of equipment. A major problem in the field of accounting for fixed assets that was addressed during recent years with the participation of the Indian Chartered Accountants Summit was the problem of reappraisal of fixed assets to keep track of inflation. As is known, revaluations of fixed assets are needed because the value of fixed assets is reported in accounting and statistical records in acquisition prices that change because of inflation. Revaluations make it possible to address periodically the mixed character of appraisal and to express the replacement value of fixed assets in prices that are common on the dates of such revaluations. Valuation of fixed assets in real prices is very important for the following: economic analysis and forecasting of the development and use of the economic potential; identification of parameters of investments, and setting depreciation policies at the macro level and micro level. The value of fixed assets determines the size of property tax, depreciation charges, profit tax, etc. While going over to a market economy, India has been facing high inflation, which is typical of a transition period, and revaluations had to be made more frequently than during the earlier period: they were made on 01.04.2006, 01.04.2008 and from then on at the beginning of every year. Re-evaluations of fixed assets registered an increase in prices for products manufactured by the industries that create fixed assets. During 1991 through 2010 manufacturing prices rose 11,000 times over and prices of construction materials, 14,000 times over. Re-evaluations of fixed assets took into account the fact that the replacement value of the older plant and equipment and buildings had increased more slowly than that of new facilities. This is why in the course of reevaluations the growth of the book value of fixed assets was behind the increase in prices of products used for building fixed assets.

6. INTERPRETATION OF RESULT DRAWN FROM RESPONDENTS  Normally Installed Capacity of Plant was responded by respondents was 100 percent.  On an average 72% Capacity was being utilized by the SSIs.

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 The Capital Investment in Fixed Assets was on an average was as follows- (i) Pre- establishment Capital Costs - 32%; (ii) Land & Building- 40%; (iii) Plant & Machinery - 30%; Furniture, Fixtures and Fittings- 15%; Office Equipments- 10%; and Loose Tools 8%.  Foreign Technology Used: 28% uses foreign technology while 72% do not use foreign technology.  Product Supply in Local market/ Inter-state Market/ Foreign Market: 80% supply their product in Local Market; 45% supply their product in Inter-state Market; and 9% supply their product in Foreign Market.  Nature of Competition: 18% feel very high competition; 56% feel high competition; 26% feel less completion.  Fixed Assets especially Plant & Machines purchased from Country Market/ Foreign Market: 84% purchased Machines from Country Market; 16% purchased Machines from Foreign Market.  All of the respondents use specific Depreciation Policy.  Method of Depreciation followed is as- 46% follow SLM; 6% follow Sum of Digit method; 44% follow Diminishing Balance Method; 4% follow Annuity Method; No body follow any other Method of Depreciation.  When asked that do you think that the depreciation being provided by you on fixed assets is enough to replace the asset at current cost, 28% respondents supported favorably while 72% told that depreciation provided by them on fixed assets is not enough to replace the asset at current cost.  When asked that do you think that present provisions of law for providing depreciation of fixed assets are not conductive for protection of investments in fixed assets, the response was that the present provisions of law for providing depreciation of fixed assets are not conductive for protection of investments in fixed assets- 70% respondents supported this statement while 30% respondent did not support the above statement.  Awareness of the present International Accounting Standard and Accounting Standard framed by ICAI- 65% were aware of the present International Accounting Standard and Accounting Standard framed by ICAI while 35% were not aware of the present International Accounting Standard and Accounting Standard framed by ICAI.  When asked that do you think that present accounting standards and Contemporary Accounting Practices fail to accommodate price level challenges, 79% supported that present accounting standards and Contemporary Accounting Practices fail to accommodate price level challenges; while 21 opined that present accounting standards and Contemporary Accounting Practices do not fail to accommodate price level challenges.  Price index mechanism being followed- (a) 42% follow Whole sale Price Index; (b) 58% follow Consumer Price Index.  60% know about the changes in relevant provisions for charging depreciation on fixed assets in Companies Act and in Income Tax Act during the last decade while 40% do not know about the changes in relevant provisions for charging depreciation on fixed assets in Companies Act and in Income Tax Act during the last decade.

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 Understanding as to the impact of such changes of legal provisions relating Depreciation on Fixed Assets Management, 20% feel difficulty to understand; 40% feel difficulty to calculate Depreciation; 22% feel difficulty in accounting treatment; 18% feel difficulty to maintain records of fixed assets.  When asked whether you are having deficiency for covering up replacement cost of Depreciated Fixed cost, 72% say yes while 28% say no.  When asked that do you think that depreciation on fixed assets on historical cost is one of the causes of sickness of SSI units, 87% say yes while 13% say no.  While asked for their opinion about simple system of providing for Depreciation during price level changes, 82% say yes while 20% say no.  Their suggestions to make simplification of Depreciation accounting policy were- (i) To make the provision simple it is desirable that for low value items of any plant or machinery including books the proviso to section 32 may be re-inserted to allow full cost in the year of acquisition without any condition. Considering the inflation the limit may be kept at Rs. 10000/- per piece. Any item of plant or machinery including books exceeding in cost of Rs. 10000/- may be made eligible for depreciation at normal rates. (ii) To avoid disputes, e-books may be included in definition of plant or 'book' may be defined to include e-book. Before such amendment the board may issue a circular. (iii) The provisions relating to depreciation should be modified to provide more impetus to the economy besides they should be made more clear and unambiguous. (iv)Accelerated depreciation of 33.33 % should be reintroduced. In fact in view of globalization of economy and more frequent changes in technology depreciation @ 50% is desirable because there is higher obsolescence. (v) At present under companies Act items costing up to Rs. 5000 are to be depreciated in first year. However, in the I.T. Act, such provision was omitted and need reintroduction with higher limit of Rs. 10000/-. The policy can be so devised that the assessee may be given an option to claim depreciation equal to 'actual cost' of any asset at any time. (vi)All depreciable assets including buildings and furniture may be considered as 'plant' and number of blocks and rates may be reduced. There is no purpose in indulging in lot of litigation about claim for depreciation, because higher depreciation only defers tax payment on account of income tax. Higher deprecation allowance can bring into more revenue by way of indirect taxes and more employments. 7. OPINION SURVEY OF EXECUTIVES OF SSI UNITS The questionnaire was sent to about 150 executives of SSI units out of which 122 executives of SSI units responds as follows: 1. The background of the knowledge of Accounting & Finance of Executives of SSI Units a. Academic knowledge 62% b. Experience 85% c. Both Academic & Experience 62% d. None 11% 2. Type of fixed assets especially ‘Plant and Machinery’ is being used in the units surveyed? a. Brand New 76% b. Purchased second hand 18%

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c. Old & Depreciated 6% 3. Do you see any future threat for your unit to become sick? a. Yes 34% b. No 66% 4. If yes! What are the probable reasons for such threats?

Power crisis, Labour problem, Short availability of Raw Materials, Payment recovery Problem, Financing Problem, Seasonal demand of Products, Tax burden, Heavy Duty charges, etc 5. Are you satisfied with the productivity of fixed assets being used in your unit? a. Yes 68% b. No 32% 6. If Yes! How long you feel that the fixed assets in your control would give output at the targeted levels? a. From 1 – 2 years 21% b. From 2 – 5 years 5% c. More than 5 years 2% 7. If No! Have you ever suggested the managing owners to replace such assets? a. Yes 22% b. No 6% 8. What was the reaction of managing owner on your suggestion of replacement? a. ready to replace the assets in most of the cases; b. denied for want of funds in few cases c. any other reaction i.e., shortage of fund, no good machine available, new machine are very costly, No familiarity about technology etc. 9. Do you feel that the method of depreciation on fixed assets being used in your unit is correct enough to provide funds of replacement of assets after these are fully used? a. yes 43% b. No 57% 10. If no! What are your suggestions to improve the system? The method should be such that can make proper adjustment of price level change so that sufficient funds can be made available at the time of purchase of new plant & machinery. 11. Do you know about the impact of price level changes on creation of funds for replacement of fixed assets through depreciation mechanism? a. Yes 39% b. No 61% 12. If yes! What are your ideas or suggestions to beat the negative impact of price level changes on insufficient creation of funds for timely replacement of fixed assets? By a healthy and productive plant we mean one maintained at a peak of efficiency by continuously replacing worn out or obsolete parts and incorporating improvements in equipment, processes and techniques as they become available. All this costs for more money

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Depreciation Reserve & Provisions Under Price Level Changes V. P. Singh and A. P. Singh

that available from allocations to depreciation in view of the enormous increase in the cost of new equipment over the historical cost of the equipment it replaces.”

8. SPECIFIC CONTRIBUTIONS OF SMALL SCALE SECTOR: a. The contribution of Small scale sector to the manufacturing sector and GDP as a whole is significant in terms of its share in total value added. b. Small scale sector performs a very significant role in generating employment opportunities in a sustainable manner. c. Small scale sector can play a role in mitigating the problem of imbalance in the balance of payment accounts through its export promotion. d. While the large scale industries are expected to increases the inequalities of income and concentration of wealth, Small scale sector is expected to help widespread equal distribution of income and wealth. e. Small scale sector may provide opportunities to a large number of capable and potential entrepreneurs who are deprived of appropriate opportunities f. It can help to release scarce capital towards productive use. g. SSI can reap the benefits of lean production and can find new cost-efficient techniques of lean production. h. As small units can use resources more efficiently to the full capacity without any wastage, they may have higher allocative efficiency. i. As the element of risk is minimum in small scale sectors, more resources will be employed by large number of labour force.

9. PROBLEMS FACED BY SMALL SCALE SECTOR Small scale sector are facing many problems. The following are some of their major problems- (i) Scarcity of inputs; (ii) Inadequate capital; (iii) Marketing; (iv) Under-utilization of capacity; (v) High cost of production; (vi) Small and insecure markets, due to low rural incomes, seasonality, poor access to large markets, and severe competition; (vii) Raw material shortages, often compounded by wasteful processing, restrictive regulations, poor distribution, and lack of working capital; (viii) Shortage of finance, in particular working capital, worsened by problems of access to what is available and by its cost; (ix) Non-availability of appropriate technology in the form of suitable tools and equipment; (x) Managerial weaknesses, which serve to worsen all the other problems since FB-SSI entrepreneurs often lack capacity to analysis situations and chart ways to minimize adverse impacts of problems; and (xi) Lack of organization of the enterprises in a manner which enables them to make effective use of available support services.

10. INCENTIVES OF SMALL SCALE SECTOR Small Scale industry play an important role as less capital-intensive producers of consumer goods and providers of employment to labour there by addressing the problems of reducing the poverty and unemployment. According to rough estimates of 2003-04 there are about 113.95 lakh small scale industry units (registered and unregistered) in the country accounting for more than 40 percent of gross value of output in the manufacture sector and about 35 percent of the total export of the country. It provides employment to about 271.36 lakhs persons, which is second only to agriculture.

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One of the measures of the policy support for promoting SSI’s is the policy of reservation of economically viable and technically feasible items for exclusive manufacture in small scale industry sector. The policy of reservation initiated in 1967 primarily as promotional and protective measure vis-à-vis the large and medium scale sector, grant protection to small scale industry units by preventing fresh capacities being created in the large scale sector in areas which are techno-economically highly suitable for being taken up in the SSI. The only exception, being the case of large-scale units, is to undertake minimum level of exports as 75% of their total production. The IDR act was amended in 03/ 1984 empowering Government to reserve items for small scale industry sector. Reservation of items for manufacture in small scale industry sector is a continuing process monitored by an advisory Committee on Reservation constituted under IDR Act. The total number of items reserved for SSI is 675 as on 3rd June 2003 and 605 as on 20th October 2004. The Small Scale Sector has acquired a prominent place in the socio-economic development of the country during the past five decades, contributing to the overall growth of the gross domestic product towards employment generation and exports.

REFERENCE [1]. Balasubrahmanya, M.H. (1995). Reservation Policy for Small-Scale Industry: Has It Delivered the Goods?. Economic and Political Weekly, 30, no.21. [2]. Bhavani, T.A. (2002). Small-scale Units in the Era of Globalization: Problems and Prospects. Economic and Political Weekly, July 20-26. [3]. Corbin, D. A. (1955). A case study of price-level adjustments. The Accounting Review (April): 268-281. [4]. Das, K. (2008). Indian Small Firms Under Globalization: Has Policy Helped?. In Small Firms, Global Markets: Competitive Challenges in the New Economy, ed [5]. Das, K. (2006). Micro and Small Enterprises in Alternative Survey Group: Disempowering Masses, Daanish Books, Delhi. [6]. Lyberg, L. (1997). Survey measurement and process quality. New York: Wiley. [7]. Mangione, T.W. (1995). Mail surveys: improving the quality. Thousand Oaks, CA: Sage. [8]. Mischler, E.G. (1986). Research interviewing: context and narrative. Cambridge, MA: Harvard University Press. [9]. Hamman, W. D., and Lambrechts, I J. (1985). Depreciation based replacement value: Ratio to historical depreciation (title translated). Accountancy SA, December, pp. 455-457. [10]. Financial Accounting Standards Board (U.S.) Accounting Standards Codification 360-10-35. Available for free browsing access with registration. [11]. Katz, Arnold J. and Shelby W. Herman (1997) "Improved Estimates of Fixed Reproducible Tangible Wealth, 1929-95," Survey of Current Business, 77, May, pp. 69-92, http://www.bea.doc.gov/bea/an1.htm.

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Impact of Human Resource Practices on Employees Productivity A Comparative Study between Public and Private Banks in India

Neetu Pathak* SHEAT Institute of Management and Technology, Varanasi (UP), Email Id: [email protected].

Abstract

The success of any organization depends on the ability of its human resource to utilize other resources such as capital, equipment and land for PAPER/ARTICLE INFO the achievement of organizational objectives. Human resource thus RECEIVED ON: 19/03/2012 ACCEPTED ON: 20/05/2012 requires the necessary attention in order to achieve corporate objectives. Over recent years there has been an increasing interest in the field of human resource management. Currently, the literature encourages the consideration of human resources as strategic factors, not only because Reference to this paper they play important role in strategy implementation, also because they are should be made as follows: Pathak,N (2012), “Impact of beginning to be reckoned as sources of sustainable competitive advantage. Human Resource Practices Relationships between human resource management and productivity on Employees Productivity have been studied from different perspectives. This study is an attempt to A Comparative Study investigate the extent to which Banks differ on aspects of human resource between Public and Private management practices and their contribution in employees productivity. Banks in India” Int. J. Trade Key words: Employees productivity, employees’ performance, employees’ and Commerce-IIARTC, creativity, organizational effectiveness. Vol. 1, No. 1, pp 142-148

*Corresponding Author

Impact of Human Resource Practices on Employees Productivity Neetu Pathak

1. I NTRODUCTION An organization is made up of a number of people who strive to achieve the organization’s goals. Human resources have a significant bearing on the profitability, efficiency and overall organizational effectiveness. Human beings differ from one another in their basic mental abilities, skills, approaches, qualifications and also behaviour which account for their complex behavior patterns and psychological makeup. Such difference gets multiplied when they interact with one another in a group or in an organization. This generates different styles of management, values, feelings, beliefs and opinions of the employees. They must be groomed in order to take risks, think innovatively, and handle new problems. In the competitive environment, employees of any business organization are the key factor for deciding the success of the firm. It is understood that cooperative banks approach human resource management (HRM) from the wrong perspective and their financial performance suffers as a result. Instead of focusing on how to execute strategy through the performance of the employees in banks, the first priority is cost control and the focus often begins with the HR function. No organization can exist unless the human capital is of a quality capable of properly exploiting the material resources to generate surplus for survival, growth and diversification into new fields keeping in view the environment in which it operates. This is true of banking and marketing organizations, where physical capital is only a fraction of the total resources mobilized by the organization. These are service organizations where human capital makes the difference between success and failure. World over, the technology driven channels such as, ATM, net banking and mobile banking have reduced walk-in-customers at the bank branches. However, in India, it is observed that the customers still find it difficult to use these technology based channels and they are more comfortable in traditional banking over the counter personally to ensure error - free and risk –free banking service. While struggling to provide better and efficient service at the counters, the staff is also confronted with various regulatory norms to mitigate risks in operations. This clearly establishes that employees of cooperative banks play a vital role in managing not only the ‘transaction’ of a customer but also future long-term relationship with them. There are several reasons for the new approaches to the management of staff. Firstly, infrastructural problems with growth in the bank and over staffing, secondly, the increasing competitive pressure in banking had led to greater attention to controlling labour costs and increasing labour productivity. Thirdly, the nature of change had moved the emphasis towards being a market-driven rather than an administratively driven organization and the importance of staff quality was being emphasized.

2. LITERATURE REVIEW Since the beginning of the 1980s, a vast literature has been developed calling for a more strategic role for human resources (Guest, 1987; Miller, 1987; Armstrong, 1991). A research is available on the impact of HR practices on perceived employee performance. Huselid (1995) took eleven human resource management practices which are personnel selection, labor management participation, incentive compensation, performance appraisal, grievance procedures, information sharing, job design, attitude assessment, recruitment efforts, promotion criteria and employee training. He found a significant relationship between high work practices such as compensation and employees outcomes.

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Barney (1991) felt that firms could develop strategic capability and for attaining this, the strategic goal will be to create firms, which are more intelligent and flexible than their competitors. Aurora and Malhotra (1997) tried to give some idea about factors determining customer satisfaction, the level of customer satisfaction and some marketing strategies in both private and public sector banks in India. They have found six factors of customer satisfaction in public sector banks, viz., routine operations, price, situational, environmental, technology, and interactive. But in private sector banks, there exists seven factors in total, having staff factor as the first ranked and situational factor as the lowest ranked items. As compared to public sector, private sector bank customers’ level of satisfaction is comparatively more. Proper training and development of bank staff, regular market survey, personalizing the service, efforts to avoid long queues in bank, and attractive environment in public sector bank. The uniqueness of HR requires a totally different type of attention from management. The HR function has the characteristics that provide the greatest challenges as well as opportunities. The increased probability of having to manage in an international situation demands the conduct of more comparative HRM research (Boxall, 1995; Brewster et al., 1996; Budhwar and Debrah, 2001; Budhwar and Sparrow, 2002).

3. OBJECTIVES OF THE STUDY 1. To identify the needs of employee through which they can work effectively. 2. To examine and compare the human resource practices followed by the banks in India. 3. To find out human resource practices contributing to employee productivity in these banks. 4. To find out the HR needs of Bank employee.

4. RESEARCH DESIGN The present study is based on primary data. The survey was carried out in the banks working in Purvanchal region of UP. For this purpose, various HR practices, which are perceived to affect the employee productivity has been identified and selected on the basis of their relevance to the banking sector. 4.1. Sample For conducting this study 50 sample were drawn from each public & private sector banks, located in Purvanchal region of UP. 1. HDFC Bank 2. ICICI Bank 3. Punjab National Bank 4. Oriental Bank of Commerce. 4.2. Procedure for data collection Each subject was approached individually and was assigned the questionnaire it was emphasized that the results of the study would be utilized only for research purpose. The 12 HR practices have been included and the employee productivity has been taken as dependent variable. The questions have been designed to facilitate the respondents to identify major strength and weakness of the banks. They were requested to answer all the statements honestly & truthfully & not to leave any questions or statement unanswered.

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4.3. Research Instrument Questionnaire is used as a research instrument. The respondents have been requested to use their best judgment on a 5 point Likert scale. 5 point scale indicated as 1. Strongly disagree, 2. Disagree 3. Neither agree nor disagree 4.Agree 5. Strongly agree. These points show the opinions of employees in regard to each question. 4.4. Tools The data were analyzed through statistical package for social sciences (SPSS). The main tests conducted for the data analysis are mean, standard deviation, T- test and multiple regression tests is applied to test the significance of the results wherever it is considered to be necessary. 4.5. Hypothesis Keeping in mind the above discussion this research or study is designed to test the following hypothesis: H1: Employee’s productivity affects organizational effectiveness. H2: Employee’s productivity leads to organizational effectiveness. H3: Employee’s performance factor affects organizational effectiveness. 4.6. Data Analysis and Results In order to compare various Human Resource Practices among the respondents of two banks, various tests have been carried out in the present study. The following tables show all the factors statistically. Table-1: Comparison of Various Factors among the Respondents of Banks Factors Bank 1 (N=50) (Private) Bank 2 (N=50) (Public) t Value Mean SD Mean SD Manpower Planning 4.2 0.80 3.8 1.12 1.64 Recruitment and Selection 3.8 1.03 3.6 1.16 0.81 Motivation 4.1 0.80 3.6 0.89 2.78 Reward System 3.9 0.76 3.4 1.09 2.57 Training and Development 4.3 0.66 3.8 1.18 2.30 Team Building 3.8 0.91 3.9 0.89 -0.88 Employee Participation 4.2 0.94 3.5 0.99 3.81 Employee Behavior 4.4 0.50 3.1 0.94 8.61 Incentives 3.8 0.82 3.3 0.84 3.23 Employee Productivity 4.4 0.73 3.1 1.05 6.35 Creativity 3.7 0.90 3.4 1.16 1.07 Promotion 4.4 0.64 2.9 0.93 9.00 Table 1 provides the descriptive statistical information like mean, standard deviations and comparative analysis followed by both types of banks. It discusses that there is a significant difference between the banks. Both the public and private sector banks differ from each other in providing incentives, reward system and promotion. Employee motivation will ultimately increase the employee performance, employee participation, employee behavior and the employee productivity. Most important ingredient of Human Resource practices is reward system

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Impact of Human Resource Practices on Employees Productivity Neetu Pathak and incentives, which at present does not have any linkage to skills and performance. Incentives are provided for motivation in some of the organizations. From the table it is clear that employee performance is directly influenced by their motivation. The outcomes of the training and development to any type of organization are increased productivity of employees. Promotion is also directly related to the employee productivity. And in the end all these factors will lead to make a positive affect over the organization. Table-2: Multiple Regression Analysis Private Sector Bank [N = 50] Dependent Variables: Employee Productivity Independent Variables Beta R square t- value Motivation -.074 .006 -.51 Employee Participation -.088 .008 -.61 Creativity .180 .033 1.27 Promotion .123 .089 .84 Training and Development .072 .005 .50 Incentives -.042 .002 -.29 Team Building -.162 .026 -1.13 Employee Behavior .053 .003 .36 Results of multiple regression analysis and independent variables (HR factors) with the dependent variables (Employee Productivity) for private banks are shown in table 2. From the table (private sector bank) we observe that all independent variables are positively related with employee productivity. Beta of several factors in the regression equation is statistically significant. Employee creativity ( Beta value = .180, t- value = 1.27 ) is highly significant contributor to the employee productivity and the second largest contributor is promotion ( Beta value = .123, t- value = .84 ) to the employee productivity and other Human Resource Practices shows negative sign like motivation ( Beta value = -.074, t- value = -.51), employee participation (Beta value = - .088, t- value = -.61), incentives (Beta value = -.042, t- value = -.29), team building (Beta value = - .162, t- value = -1.13) are affecting employees productivity. Table-3: Multiple Regression Analysis Public Sector Bank [N = 50]. Dependent Variables: Employee Productivity Independent Variables Beta R square t- value Motivation -.153 .023 -1.07 Employee Participation -.272 .074 -1.95 Creativity .138 .019 .96 Promotion -.203 .041 -1.43 Training and Development -.098 .010 -.68 Incentives .303 .092 2.19 Team Building -.235 .055 -1.67 Employee Behavior -.145 .021 -1.01 Table 3 shows the results for multiple regression analysis of the relationship between human resource practices and employee productivity of public sector bank. Results of multiple regression -146-

Impact of Human Resource Practices on Employees Productivity Neetu Pathak analysis of Bank in the table indicate that out of eight HR practices affecting employee productivity like incentives (Beta value = .303, t- value = 2.19) has come as highly significant contributor and creativity (Beta value =.138, t- value = .96 ) has the second largest contributor to employee productivity. The other contributors to employee productivity in Bank are motivation (Beta value = -.153, t- value = -1.07), employee participation (Beta value = -.272, t- value = -1.95), promotion (Beta value = -.203, t- value = -1.43), training and development (Beta value = -.098, t- value = -.68), team building (Beta value = -.235, t- value = -1.67), employee behavior (Beta value = -.145, t- value = -1.01) shows the negative sign. The results signify that the employee participation necessary for the high performance of the firm.

5. CONCLUSION Human resource management in cooperative banks is more sensitive, personalized and cannot be managed through a set of predefined techniques. The HRM performance link that has been demonstrated in the Western hemisphere also exists in the Indian context. Five critical motivational issues in banking today are: (1) performance management, (2) equal pay demands for comparable worth, (3) training and development, (4) how to best motivate individuals, and (5) providing competitive compensation beyond the bounds of one’s own industry. This study focused on employee productivity, HR practices and organizational effectiveness. The result of this study indicates significant relation of employee productivity with human resource practices including motivation, selection, training and development, promotion and incentives. Effective organization depends on having the right system of HR policies and practices in place to recruit, select, motivate, training and development, promote or send away employees. In private sector banks employee productivity is highly dependent on high motivating environment in the bank. In public sector banks, it perceives that all independent variables are essential for employee productivity. Banks are among the many organizations experimenting with alternative reward and benefit programs, including several innovative compensation plans. This paper concludes that HR practices implemented successfully, they could achieve the maximum contribution of their employees.

REFERENCES [1]. Barney, J.B. (1991). Firm Resources and Sustainable Competitive Advantage. Journal of Management, Vol.17, pp.99-120. [2]. Sparrow, P.R., and Budhwar, P. (1997) .Competition and Change: Mapping the Indian HRM Recipe against World Wide Patterns. Journal of World Business, Vol.32, No.3, pp.224-42. [3]. Paauwe, J. and Boselie, P. (2003) .Challenging Strategic HRM and the Relevance of the Institutional Setting. Human Resource Management Journal, Vol.13, No.3, pp.56-70. [4]. Huselid, M.A. (1995) .The Impact of Human Resource Management Practices on Turnover, Productivity, and Corporate Financial Performance. Academy of Management Journal, Vol.38, No.3, pp.635-672. [5]. Budhwar, P. and Sparrow, P. (2002). An Integrative Framework for Determining Cross- National Human Resource Management Practices. Human Resource Management Review, Vol.12, No.3, pp.377-403.

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Impact of Human Resource Practices on Employees Productivity Neetu Pathak

[6]. Khera, S. N. (2010). Human Resource Practices and their Impact on Employee Productivity: A Perceptual Analysis of Private. Public and Foreign Bank Employees in India DSM Business Review, Vol. 2(1), 45-78. [7]. Malik, E., Ghafoor, M., Naseer, S. (2011). Organizational Effectiveness: A case study of Telecommunication and banking sector of Pakistan. Far East Journal of Psychology and Business Vol. 2(1), 93-109. [8]. Ramu, N. (2008). Human Resource Management in Cooperative Banks in India: Issues and Challenges, July-September. [9]. Herzberg, F., Mausner, B., and Snyderman, B. B. (1959). The motivation to work. New York: john Wiley & Sons. [10]. Yukl, G. (1999). An evaluation essay on current conceptions of effective leadership. European Journal of Work & Organizational Psychology, Vol.8(1), pp.81-102. [11]. Bedeian, A. G. (1993). Management, 3rd Edition, New York, Dryden Press.

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Customers’ Attitude towards Online Retail Shopping - An Empirical Study

A.B. Thapliyala* and Vikas Gairolab aDepartment of Commerce, HNB Garhwal University, SRT Campus, Badshahi Thaul, Tehri. bDepartment of Management Studies, Dehradun Institute of Technology, Dehradun Eemail Id: [email protected].

Abstract

Business organizations re-orient their businesses to the new market paradigm. Internet usage in different parts of our country is rapidly PAPER/ARTICLE INFO increasing. But the growth of e-business in the country is not that much RECEIVED ON:14/03/2012 ACCEPTED ON: 30/05/2012 encouraging. The reasons behind this are credibility in the payment system, timely delivery of products and lack of trust in online media. In this empirical research performance, convenience, information, personalization, interaction, reliability and trust, security, aesthetics, post sales services, continuous improvement were studied to know about the attitude of customer towards on line shopping. The research found that reliability and trust, security and continuous improvement are the most important factors influence customers’ attitude to go for online shopping. The findings help to understand the perception, and attitude of people on Reference to this paper online shopping. should be made as follows : Thapliyal, A.B. and Gairola, Keywords: Online shopping, customer attitude, personalization, V. (2012), “Customer reliability, aesthetics, access to foreign goods. Attitude Towards Online Retail Shopping - An Empirical Study” Int. J. Trade and Commerce- IIARTC, Vol. 1, No. 1, pp. 149-161

*Corresponding Author

Customers’ Attitude towards Online Retail Shopping - An Empirical Study A.B. Thapliyal and Vikas Gairola

1. I NTRODUCTION The retail shopping culture has been transformed across the globe with the rapid growth of e- commerce. Internet is becoming an essential part of human life as it is being used as a medium of getting information and business. The trend of electronic means in business transaction has become an indispensable part of services in order to get competitive advantage. To start an online business marketer need to understand the dynamics of consumer behavior which leads to a study of behavioral aspects of consumers in online shopping. The internet represents a huge marketing opportunity, as the use of technology as a means of conducting business continues to rise. Liu and Arnett (2000), define it as “a way of conducting business by companies and customers performing electronic transaction through computer networks”. Meuter et al, (2000) have defined e-retailing in the terms of the internet market as a virtual realm where products and services exist as digital information and can be delivered through information based channels”. Online technological advancements have provided opportunities to fulfill several consumer needs such as convenience of shopping at home more effectively and efficiently than conventional shopping especially in the highly competitive environment (Chen and Leteney, 2000). Therefore the present empirical study aims at investigating customers’ attitude towards online shopping with special reference to consumers of Uttarakhand, the factors that affect the development of attitudes toward online shopping are measured and hypothesis tested through correlation and regression analysis.

2. LITERATURE REVIEW Consumers’ attitude is a directly influenced factor that affects the consumers’ buying willingness. Fishbein and Ajzen (1975) described attitude towards behaviour as a person’s evaluation of a specified behaviour involving an object or outcome. For example, a person may hate to use a computer to play an online game where using the computer to play the online game is the behaviour and the individual’s feeling is the attitude. Attitude towards behaviour has been found to be strongly related to a particular behaviour (Ajzen and Fishbein, 1980). There is a model of attitudes and shopping intention towards online shopping that was developed by Jarvenpaa and Todd (1997). This model includes numerous indicators that can be categorized into four classifications: the value of the product, the shopping experience, the quality of service provided by e-shop and the risk perceptions of online retail shopping. Vellido et al., (2000) summarized quite a few factors relating to consumers’ perception of online shopping. The factors of risk perception of users, convenience of online shopping, control over, affordability of goods, ease to use of the shopping site, and customer service were included. Salisbury et al., (2001) defined perceived security on the Web as "the extent to which one believes that the World Wide Web is secure for transmitting sensitive information". According to their studies, they believed that purchase intention online was influenced by the security of e- transactions. They also found that perceived security was positively associated with online purchase intention. A similar finding from the research of Elliot and Fowell (2000) showed that the consumers’ perception of security-related issues was one of the most important factors in purchasing from a website. As a result, security has become one of the most important reasons

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Customers’ Attitude towards Online Retail Shopping - An Empirical Study A.B. Thapliyal and Vikas Gairola that cause consumers to hesitate or fear using e-purchase and it has played a dominant role in influencing their attitude towards online shopping. Online privacy concerns often arise through a website operator's collection and dissemination of personally identifiable information about an individual consumer who has visited a particular website (Hatch, 2000). Smith et al., (1996) identified four factors of online privacy: unauthorized secondary use of personal information, improper access of digitally stored personal information, collection of personal information, and errors in collected personal information. Metzger and Docter (2003) considered online privacy concerns to include anonymity, intrusion, surveillance, and autonomy. In sum, there are many factors that are hard to control in protecting consumers’ privacy in the virtual environment. Thus, in comparing with traditional offline privacy, online privacy is more difficult to protect. That is the reason why many consumers still refuse to accept online shopping. ‘After-sales Service’ is the delivery service for sending products to a customer after payment, technical support after sales, etc. (Cao and Gruca, 2004). Sparks and Legault (1993) summarized two types of services after the sale: anticipated services and unanticipated services. Anticipated services are those that the customer plans for, such as installation, training, written instructions, maintenance, and upgrading. The maintenance of the sold-out products such as repairs, returns, and replacements are the service that is categorized as unanticipated service (Sparks and Legault, 1993). Posselt and Gerstner (2005) assessed the impact of the pre-sale and post-sale stages on online satisfaction.

3. OBJECTIVES The present study has been taken up to pursue the following objectives:  To determine the general opinion of customers towards online retail shopping;  To find the reasons why most of the customers are apprehensive about online retail shopping;  To determine the relative importance of each of the attributes that is critical to the success of online retail shopping with respect to the customer;  To identify attributes which could act as a critical factors towards the success of an online shopping site;  To establish the relationship between the attributes or factors relating to online shopping; and  To establish attitudinal differences across demographics, gender-wise with respect to online retail shopping.

4. RESEARCH METHODOLOGY The study adopted reliable and validated scale used by Sangeeta et al., (2008).The structured questionnaire was developed and administered across customers of Dehradun District of Uttarakhand. A total of 120 questionnaires were distributed out of which only 98 questionnaires could be collected. Finally, only 80 questionnaires were deemed suitable for the purpose of analysis. 4.1 Data Analysis and Interpretation The first part of study was aimed at knowing the demographic profile of the respondents. Next was to find out the general opinion of the customers regarding online shopping, It was observed

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Customers’ Attitude towards Online Retail Shopping - An Empirical Study A.B. Thapliyal and Vikas Gairola that the customer rates reliability and trust as the most important aspects of online retail shopping. This is followed by information, continuous improvement, post sales service and security. Performance is important but is correlated to the above mentioned constructs. When it comes to interaction with the sales person or the product, customers prefer traditional retailing to the online retailing as there is very less interaction with the shopper in online retailing. Most person feels that aesthetically well arranged site will motivate them in making online purchases. When it comes to gender differences males are motivated more towards online retailing as compared to females as online retail. A majority of respondents are apprehensive as there is a possibility of online credit fraud or no confidentiality. The statistical analysis was descriptive as well as inferential. Univariate, Bivariate, and multivariate techniques were used for testing hypotheses and arriving at a conclusion and the research findings. The factor analysis has grouped the items into 11 constructs with 41 items, for analytical purpose, descriptive statistics were used through measures of central tendency and dispersion. The consumers were asked to rate the parameter based statements on the scale of 5, based on the level of agreement and disagreement to the statement. The means and standard deviation were calculated for both items and constructs. The various constructs were correlated with each other so as to get a linear relationship among them, the strength of correlation between them, and to get the hypothesis tested. A series of multiple regression analysis was conducted to test the hypothesis in order to assess the structural relationships between the various constructs, by taking one variable as the dependent variable and other as the independent variables. 4.2 Demographic Profile of the Respondents: Table-1: Demographic Profile of the Respondents: Demographic Profile Categories Frequency Percentage Male 60 75% Gender Female 20 25% Below 30 36 45% Age Above 30 44 55% Undergraduates 1 1.3% Graduates 19 23.8% Education Post graduates 43 53.8% Others 17 21.3% Students 6 7.5% Service 40 50% Occupation Business person 14 17.5% Professional 13 16.3% House wives 7 8.8% Demographic profile or the sample profile includes the demographic details of the population. It is very important to know the demographic profile of the respondents included gender, age, education and occupation before interpreting the results.

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Customers’ Attitude towards Online Retail Shopping - An Empirical Study A.B. Thapliyal and Vikas Gairola

4.3 Mean and Standard Deviation of Constructions: Table-2: Mean and Standard Deviation of Constructs Constructs No. of items X(mean) Standard deviation Performance 6 4.2 0.47 Convenience 3 4.01 0.768 Information 4 4.21 0.463 Personalization 3 4.08 0.666 Interaction 3 4.09 0.561 Reliability and Trust 10 4.32 0.445 Security 4 4.2 0.57 Aesthetics 3 3.82 0.662 Access to foreign goods 2 3.16 1.206 Post sales service 2 4.24 0.574 Continuous improvement 2 4.31 0.628 4.3.1 Inference: Table 2 represents the means and standard deviation of the various items and constructs. The means and standard deviation were calculated both the item wise and construct wise. The mean scores for the various constructs ranged between 3.16 and 4.32. Reliability and trust scored the highest while access to foreign goods scored the least. This clearly indicates that in India, access to foreign goods via the internet is not a factor that will develop a positive attitude in the people towards online shopping. On the other hand reliability and trust impacts people greatly and act as a positive motivator that makes people to go for online shopping.

4.4 Hypothesis N01: There is a positive customer attitude towards online shopping. 4.4.1 Inferential Analysis of Customer Attitude towards on Line Shopping Through Hypothesis Testing: Table-3: One Way ANOVA Sum of Mean Constructs df F Sig. Squares Square Between 1.695 1 1.695 8.389 0.005 Performance Groups Within Groups 15.755 78 0.202

Total 17.45 79

Between 0.634 1 0.634 1.077 0.303 convenience Groups Within Groups 45.909 78 0.589

Total 46.543 79

Between 0.732 1 0.732 3.522 0.064 information Groups Within Groups 16.199 78 0.208

Total 16.93 79

Personalization Between 0.817 1 0.817 1.861 0.176 -153-

Customers’ Attitude towards Online Retail Shopping - An Empirical Study A.B. Thapliyal and Vikas Gairola Sum of Mean Constructs df F Sig. Squares Square Groups Within Groups 34.233 78 0.439

Total 35.05 79

Between 0.669 1 0.669 2.153 0.146 Groups Interaction Within Groups 24.215 78 0.31

Total 24.883 79

Between 1.162 1 1.162 6.265 0.014 Reliability and Groups Trust (R T) Within Groups 14.467 78 0.185

Total 15.629 79

Between 1.24 1 1.24 3.952 0.051 Groups Security Within Groups 24.472 78 0.314

Total 25.712 79

Between 1.896 1 1.896 4.517 0.037 Groups Aesthetics Within Groups 32.748 78 0.42

Total 34.644 79

Between 10.41 Access to 13.538 1 13.538 0.002 Groups 9 Foreign Goods Within Groups 101.35 78 1.299 (A F G) Total 114.888 79

Between Post Sales 2.109 1 2.109 6.888 0.01 Groups Services Within Groups 23.888 78 0.306 (P S S) Total 25.997 79

Between Continuous 1.838 1 1.838 4.883 0.03 Groups Improvement Within Groups 29.35 78 0.376 (C I) Total 31.188 79

4.4.2 Inference: The significance value of performance construct is .005 which is less than .05. Hence the null hypothesis is rejected, so there is significant difference in the importance assigned to performance construct that affect the development of attitude towards online retail shopping. The significance value of convenience construct is .303 which is more than .05. Hence the null hypothesis is accepted, so there is no significant differences in the importance assigned to convenience construct that affect the development of attitude towards online retail shopping.

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Customers’ Attitude towards Online Retail Shopping - An Empirical Study A.B. Thapliyal and Vikas Gairola

The significance value of information construct is .064 which is more than .05. Hence the null hypothesis is accepted, so there is no significant differences in the importance assigned to information construct that affect the development of attitude towards online retail shopping. The significance value of personalization construct is .176 which is more than .05. Hence the null hypothesis is accepted, so there is no significant differences in the importance assigned to personalization construct that affect the development of attitude towards online retail shopping. The significance value of interaction construct is .146 which is more than .05. Hence the null hypothesis is accepted, so there is no significant differences in the importance assigned to interaction construct that affect the development of attitude towards online retail shopping. The significance value of reliability and trust construct is .014 which is less than .05. Hence the null hypothesis is rejected, so there is significant difference in the importance assigned to reliability and trust construct that affect the development of attitude towards online retail shopping. The significance value of security construct is .051 which is more than .05. Hence the null hypothesis is accepted, so there is no significant differences in the importance assigned to security construct that affect the development of attitude towards online retail shopping. The significance value of aesthetics construct is .037 which is less than .05. Hence the null hypothesis is rejected, so there is significant difference in the importance assigned to aesthetics construct that affect the development of attitude towards online retail shopping. The significance value of access to foreign goods construct is .002 which is less than .05. Hence the null hypothesis is rejected, so there is significant difference in the importance assigned to access to foreign goods construct that affect the development of attitude towards online retail shopping. The significance value of post-sales service construct is .010 which is less than .05. Hence the null hypothesis is rejected, so there is significant difference in the importance assigned to post-sales service construct that affect the development of attitude towards online retail shopping. The significance value of continuous improvement construct is .030 which is less than .05. Hence the null hypothesis is rejected, so there is significant difference in the importance assigned to continuous improvement construct that affect the development of attitude towards online retail shopping. 4.5 Hypothesis No. 2 There is a positive correlation between the various constructs that impact consumer’s attitude towards online shopping. 4.5.1 Testing of Hypothesis No. 2 The various constructs of the customer requirements were subjected to a correlation analysis. The constructs were found to correlate with each other. Here the various constructs were correlated with each other to find out the correlation between them. The value of correlation ranges from -1 to +1. The sign of the values show the nature of correlation positive or negative. The significance of each correlation coefficient is also displayed in the table which shows linear relationship between the variables. The significance or the (p-value) indicates the probability of obtaining the results as extreme as one can observe. The significance value less than 0.05 indicates linear relationship between the variables. The smaller the value of significance the more positive the correlation between two constructs. A value of 0.000 represents very low level of significance. A

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Customers’ Attitude towards Online Retail Shopping - An Empirical Study A.B. Thapliyal and Vikas Gairola positive correlation indicates that the variables are dependent on each other. Here correlation is significant at 0.01 levels (2-tailed). Table-4: Hypothesis no.2 (a) - 2 (j) Constructs Performance Information Personalization Interaction Security Convenience .167(**) .696(**)

Information .408(**)

Interaction .437(**) .591(**) .642(**)

Reliability & Trust .539(**) .701(**)

Post Sales Service .374(**) .539(**)

** Significance at 5% level 4.5.2 Hypothesis No. 2 (a) Performance by an online retailer & the information provided are positively correlated Inference: The hypothesis was accepted. There is a positive correlation that exists between performance and information provided. The Pearson correlation coefficient value .408 shows positive correlation. The significance value of 0.000 indicates low level of significance. This low level of significance indicates that the performance and information provided are positively correlated. 4.5.3 Hypothesis No. 2(b) Performance by an online retailer and interaction are positively correlated. Inference: The hypothesis was accepted. There exists a positive correlation between the performance by an online retailer and interaction. The Pearson correlation coefficient value is .437 which shows positive correlation. The significance value of 0.000 indicates low level of significance. This low level of significance indicates that the performance provided by the online retailer and interaction are positively correlated. 4.5.4 Hypothesis No. 2(c) Performance by an online retailer and post-sales service are positively correlated. Inference: The hypothesis was accepted. There exists a positive correlation between performance by an online retailer and the post- sales service. The Pearson correlation value of .374 shows positive correlation. The significance value of 0.001 indicates low level of significance. This low level of significance indicates that the performance provided by the online retailer and post-sales service are positively correlated. 4.5.5 Hypothesis No. 2(d) Performance by an online retailer and reliability and trust are positively correlated. Inference: The hypothesis was accepted. There exists a positive correlation between performance by an online retailer and the reliability and trust. The Pearson correlation value of .539 shows positive correlation. The significance value of 0.000 indicates low level of significance. This low level of significance indicates that the performance provided by the online retailer and reliability and trust are positively correlated.

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Customers’ Attitude towards Online Retail Shopping - An Empirical Study A.B. Thapliyal and Vikas Gairola

4.5.6 Hypothesis No. 2(e) Performance by an online retailer and convenience are positively correlated Inference: The hypothesis was accepted. There exists a positive correlation between performance by an online retailer and the convenience. The Pearson correlation value of .167 shows positive correlation. The correlation between these two is not that much strong. The significance value of .140 indicates high level of significance. This high level of significance indicates that the performance provided by the online retailer and reliability and trust are positively correlated, but they are not linearly related. 4.5.7 Hypothesis No. 2(f) Security and reliability and trust are positively correlated. Inference: The hypothesis was accepted. There exists a positive correlation between security and reliability and trust. The Pearson correlation coefficient value of.701 shows strong positive correlation. The low significance value of 0.000 indicates low level of significance and shows positive correlation and linear relationship between security and correlation. 4.5.8 Hypothesis No. 2(g) Information provided by an online retailer and interaction are positively correlated. Inference: The hypothesis was accepted. Information provided by an online retailer and interaction are positively correlated. The Pearson correlation coefficient value of 0.591 shows positive correlation between them. The low value (0.000) of significance shows low level of significance and linear relationship between information provided and interaction. 4.5.9 Hypothesis No. 2(h) Information provided and conveniences are positively correlated. Inference: The hypothesis was accepted. Information provided by an online retailer and conveniences are positively correlated. The Pearson correlation coefficient value of 0.696 shows strong positive correlation between them. The low significance values of 0.000 shows low significance level and linear relationship them. 4.5.10 Hypothesis No. 2(i) Interaction between the retailer and personalization are positively correlated. Inference: The hypothesis was accepted. Interaction between the retailer and the personalization are positively correlated. The Pearson correlation coefficient of 0.642 shows positive correlation between interaction and personalization. The low value of significance (0.000) shows low level of significance and linear relationship between them. 4.5.11 Hypothesis No. 2(j) Interaction between the retailer and post sales service are positively correlated. Inference: The hypothesis was accepted. Interaction between the retailer and the personalization are positively correlated. The Pearson correlation coefficient of 0.642 shows positive correlation between interaction and personalization. The low value of significance (0.000) shows low level of significance and linear relationship between them.

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Customers’ Attitude towards Online Retail Shopping - An Empirical Study A.B. Thapliyal and Vikas Gairola

4.6 Hypothesis No. 3 Reliability and trust of an online retail store is considered as one of the most important issues that an Indian consumer takes into consideration while thinking of online shopping. Regression analysis was performed, with the reliability and trust dimension as the dependent variable and performance, convenience, information, personalization, interaction, security, aesthetics, access to foreign goods, post sales service and continuous improvement as the independent variable. On entering the variables in a single block as shown in the table 5, it was found that 60.3% of the variance in reliability and trust is explained by all the constructs. (F- value= 10.474, p<0.05). Of the ten dimensions two offered significant contribution (security, t=3.152, p<0.05) and information (t=2.558.p<.013) Table-5: Hypothesis testing- Hypothesis no.3. R R Square F Sig Beta t Sig. .776 .603 10.474 0.000 (Constant) 1.762 .083 Performance .172 1.819 .073 Convenience -.113 -.898 .372 Information .342 2.558 .013 Personalization .082 .700 .486 Interaction -.080 -.676 .501 Sec .387 3.152 .002 Aesthetics .033 .328 .744 AFG -.098 -.864 .390 PSS .141 1.333 .187 CI .037 .301 .764 Independent variables: Performance, Convenience, Information, Personalization, Interaction, Security, Aesthetics, Access to Foreign goods, Post sales service and Continuous improvement. Dependent Variable: Reliability and trust. Inference: The hypothesis was accepted. Reliability and trust of online retail can be improved by improving factors such as security; information etc., so that the customer will feel that online store is reliable and trustworthy. 4.7 Hypothesis No. 4 Continuous Improvement is necessary to retain old online customers and create new ones. Regression analysis was performed, with the continuous improvement dimension as the dependent variable, and performance, convenience, information, personalization, interaction, reliability and trust, security, aesthetics, access to foreign goods, and post sales service as independent variables. On entering the variables in a single block, as shown in table 6, it was found that 61.1% of the variance in continuous improvement is explained by all the other constructs.(R square =61.1%, F-value=10.847,p<0.05) of the ten dimensions two offered significant contributions (security, t=2.558,p=.013) & (access to foreign goods t=2.302, p=.024).

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Customers’ Attitude towards Online Retail Shopping - An Empirical Study A.B. Thapliyal and Vikas Gairola

Table-6: Hypothesis testing- Hypothesis no.4 R R F Sig Beta t Sig. Square .782 .611 10.84 0.00 (Constant) .811 .420 Performance .101 -1.067 .0290 Convenience .027 .216 .829 Information .232 1.713 .091 Personalization -.053 -.454 .651 Interaction .043 .368 .714 Sec .318 2.558 .013 Aesthetics .084 .858 .394 AFG .249 2.302 .024 PSS .126 1.201 .234 RT .036 .301 .764 Independent variables: Performance, Convenience, Information, Personalization, Interaction, Security, Aesthetics, Access to Foreign goods, Post sales service and Reliability and trust. Dependent Variable: Continuous improvement. Inference: The hypothesis was accepted. Continuous improvement can be made in the online stores through increasing security and providing access to foreign goods, so that the customers can feel that a store is improving itself continuously. 5. FINDINGS  Majority (53.8%) of the respondents that were aware of online retailing were postgraduates.  The service class people are more interested in the online shopping experience.  Reliability and trust and continuous improvement are the most important factors influence online buying behavior of the people.  The various factors that affect consumer behavior to buy online are positively correlated.  There exists significant difference in the values assigned to different factors by male and female (performance, reliability and trust, aesthetics, access to foreign goods, post sales- service, continuous improvement), while for the factors such as (convenience, interaction, personalization, information, security), there exists no differences.  It was found that reliability and trust and continuous improvement factors are influenced greatly by other factors such as security, information, access to foreign goods etc. 6. CONCLUSIONS The study is relevant in the present context as there is great boom in the e-business. Marketing trends all over the world show a shift from a purely traditional store format to a mix of both physical and virtual stores. Today, access to products and services is facilitated through global technological networks which affect purchase decisions favorably. This paper looks into critical success factors in online retailing from a customer’s perspective. Ease of navigation, quick loading times, and an accurate product/service delivery system were identified as drivers of the online retail system.

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Customers’ Attitude towards Online Retail Shopping - An Empirical Study A.B. Thapliyal and Vikas Gairola

Clear transaction policies, online interactivity between buyer and seller, transaction safety and privacy, were identified as facilitators/enablers of the online retail system. The retailer's Web site acts as a platform for interaction between an online retailer and a buyer. The audiovisual impact of the web site and its products or services is crucial for effective performance, both for functional and hedonic benefits. The retailer should provide details about the product/service alternatives available, features, and price, as well as information about delivery schedules, warranty services, return and exchange policies, post-sales service, and related technical support. Establishing, communicating, and maintaining customer trust and confidence on issues of personal information are critical to an online retail business. The retailer should strive to cultivate customer feelings of safety, security, and trust in the system. The retailer, for example, may encourage customers to make a trial purchase initially, with the goal of securing a repeat purchase if the customer is satisfied. Customers are often apprehensive and wary of shopping online because of computer illiteracy, technological complexity, or a lack of understanding of the buying/transaction process via the Internet.

REFERENCES [1]. Jarvenpaa, S.L., and Todd, P.A. (1997). Consumer reactions to electronic shopping on the World Wide Web. International Journal of Electronic Commerce, Vol. 1, No. 2, 59-88. [2]. Posselt, T., and Gerstner, E. (2005). Pre-sale vs. post-sale e-satisfaction: impact on repurchase intention and overall satisfaction. Journal of Interactive Marketing, Vol. 19 No. 9, pp. 35-47. [3]. Sparks, R.E., and Legault, R.D. (1993). A definition of quality for total customer satisfaction: the bridge between manufacturer and customer. Sam Advanced Management Journal, Vol. 58(1), pp.16-27. [4]. Hatch O. G. (2000). Privacy in the digital age: A resource for internet users. U.S. Senate Judiciary Committee, http://judiciary.senate.gov/privacy.htm [5]. Metzger, M., and Docter, S. (2003). Public opinion and policy initiatives for online privacy protection. Journal of Broadcasting and Electronic Media, Vol.47(3), pp.350–374. [6]. Smith, H.J., Milberg, S.J., and Burke, S.J. (1996). Information privacy: Measuring individuals. concerns about organizational practices, MIS Quarterly, Vol.20(2), pp.167–196. [7]. Salisbury, W.D., Pearson, R.A., Pearson, A.W. and Miller, D.W. (2001). Perceived security and worldwide web purchase intention, Industrial Management & Data Systems, Vol.101(4), pp.165-177. [8]. Vellido, A., Lisboa, P.J.G. and Meehan, K. (2000). Quantitative characterization and prediction of on-line purchasing behavior: A latent variable approach. International Journal of Electronic Commerce, Vol. 4, No. 4, 83-104. [9]. Ajzen, I., and Fishbein, M (1980). Understanding attitudes and predicting social behavior. Englewood Cliffs, NJ: Prentice-Hall. [10]. Chen, S., and Leteney, F. (2000). Get Real! Managing the Next Stage of Internet Retail. European Management Journal, Vol. 18, No. 5, pp. 519-528. [11]. Liu, C., and Arnett, P. K. (2000). Exploring the Factors Associated with Web Site Success in the Context of Electronic Commerce. Information & Management , Vol. 38, pp. 23-33

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Customers’ Attitude towards Online Retail Shopping - An Empirical Study A.B. Thapliyal and Vikas Gairola

[12]. Sahney, S., Shrivastava, A., and Bhimalingam, R. (2008). Consumer-Attitude-Towards- Online-Retail-Shopping-in-India. The Icfai UniversityJournal of Consumer Behaviour, Vol. III, No.4. [13]. Meuter, M.L., Ostrom, A.L., Roundtree, R.I., and Bitner, M.J. (2000). Self-service technologies: Understanding customer satisfaction with technology based service encounters. Journal of Marketing, Vol.64, pp.50–64. [14]. Fishbein, M., and Ajzen, I. (1975). Belief, attitude, intention, and behavior: an introduction to theory and research. Reading, Mass.: Addison-Wesley Pub.

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BOOK REVIEW

Book Reviewed by: JULIETTE OVERLAND Business Law, University of Sydney Business School E-mail: [email protected]

Title of the Book: The Global Financial Crisis: Triggers, Responses and Aftermath By Tony Ciro Ashgate Publishing Limited, 2012 266 pages (hardcover). Price £65. ISBN: 978-1-4094-1139-0

By its very nature, the Global Financial Crisis is an extremely wide-ranging and diverse subject, and this book addresses a variety of pertinent topics – the triggers of the crisis, the impact on financial markets, the reasons the crisis became global, the various rescue packages and responses, resulting inquiries and proposals for reform, and the imposition of new financial market regulation. The triggers of the Global Financial Crisis – a topic which has confounded many – are explained simply and accessibly, but with an appropriate level of detail. However, one of the most interesting parts of the book is the discussion in the first chapter of previous financial crises – the Great Depression, the OEPC Oil Crisis, the 1987 Stock Market Crash, and the Asian Currency Crisis. It reminds the reader that events do not happen in a vacuum and that the Global Financial Crisis will almost certainly not be the last of its kind, and allows the reader to draw some interesting comparisons. For this reason, the final chapter on “The Way Forward” is also worthy of particular mention, particularly in light of the current Greek Debt Crisis. This book is not a lengthy read, but the topics are addressed comprehensively, and presented in a well-ordered and thoughtful style. The language used in the book is very lucid. It provides a clear and concise information about the Global Financial Crisis which will assist all those who are not intimately familiar with the relevant events, but also discusses the more complex aspects of the crisis in significant detail for more demanding readers. Academics, students, business professionals and regulators alike will no doubt find this book extremely useful.

-162- AUTHOR GUIDELINES

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Books: [1] Yadav, S.K.S. (2008), Principles of Economic Development, Arvind Prakashan, Meerut, India. Business Magazine: [2] "Three Letter Acronyms That Mean Business", (April 2007) Benef of Business- IT Magazine, SFY Group Vol-1 Issue 4 News Paper: [3] Times of India, New Delhi Edition, Column 3, Page-7, Date 08/07/08 Chapters in Edited Books: [4] Gupta, S.K. (2008), 'Development of Financial Services'. In R. Prasad (Ed.) Framework of Financial Services (pp. 45-70). New York: Free press Journals & Periodicals: [5] Gupta, S. and Sharma, T.P. (2010), 'Stock Market and Indian Economy', International Journal of Trade & Commerce- IIARTC, Vol.1, No.1, pp.08-24. Reports: [6] National Stock Exchange (2010), Report of NSEI Committee on Delisting of Shares-Chakarvarty Committee. Electronic/Internet Information  WEBSITES: Pearson, R. (2010) Online Development study guide, http:\\www.dev.ac.usa\schools\skills\refern.htm, Date accessed 10/07/2010.  CD ROMS: Lewis, D. (2009) A Guide to Financial Literature, CD-ROM, USA: Sunshine Publishers.  Use (ed.) for one editor, and (ed.s) for multiple editors.  When listing two or more works by one author, use XXXX (YYYY,YYYY), such as after Agarwal (1997, 2001) etc, in chronologically ascending order...  Indicate (opening and closing) page numbers for articles in journals and for chapters in books.  Note that italics are used only for titles of books and names of journals. Double quotation marks are used for titles of journal articles, book chapters, dissertations, reports, working papers, unpublished material, etc. NOTE:  Manuscripts will be accepted with the understanding that they have not been submitted, accepted or published elsewhere. If copyrighted material is used, the author should give prior information to the editor-in-chief and submit the necessary copyright release along with the manuscript. IJTC-IIARTC will not be responsible for any charges for obtaining the necessary copyright release, if any.  All the manuscripts will be peer-reviewed and only the recommended manuscripts by reviewers will be published. Authors may be asked for revision of the manuscript within a stipulated time period. The revised manuscript should be submitted along with cover-page outlining the changes introduced to the manuscript.  After the submission of the revised manuscript, proofs will be sent to the corresponding author. Authors should check their proofs very carefully and return within three days of receipt. No interim requests will be entertained. International Journal of Trade and Commerce- IIARTC is a Journal of Social Science and Humanities. It is biannual (Jan-June & July-Dec.) and bilingual Journal of Indian Institute of Advance Research in Trade and Commerce. Copyright of the published research papers vest in the editors. The objective is to ensure full copyright protection and to disseminate the research papers, and the Journal, to the widest possible readership. Authors may use the research paper elsewhere after obtaining prior permission from chief editor. Research Papers related to humanities and Social Sciences are invited for Publication in the Journal. Research Papers, Book Review, Subscription and other query should be sent to Dr. S. K. S. Yadav, 121/1A, Gali No.-2, Pragati Nagar, Meerut, Pin-250001, Mob. 09411023524, you may also e-mail your research paper and suggestions at [email protected] All the articles are published only after the proper approval of the Board of Editorial Advisors and the Blind Review Committee. The editors cannot be held responsible for errors and any consequences arising for the use of information contained in this Journal. Website: www.sgsrjournals.com

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INTERNATIONAL JOURNAL OF TRADE AND COMMERCE Refereed Research Journal of Humanities & Social Science ISSN 2277- 5811 INDIAN INSTITUTE OF ADVANCE RESEARCH IN TRADE AND COMMERCE (IIARTC), 121/1A, SCHOOL LANE, PRAGATI NAGAR, MEERUT PIN: 250001 Faculty of Commerce & Business Administration, Meerut College, Meerut, U.P. INDIA.

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ABOUT THE AUTHORS  Professor Nawab Ali Khan, Department of Human Resource Management, College of Business Administration, Salman Bin Abdulaziz University, Al-Kharj, Kingdom of Saudi Arabia.  Ms. Sheema Tarab, UGC Research Scholar, Department of Commerce, Aligarh Muslim University, Aligarh, U.P., India  Dr. Nasser S. Al-Kahtani, Dean, College of Business Administration, Al-Kharj, Salman Bin Abdulaziz University, Kingdom of Saudi Arabia.  K.V.N.Prasad, Associate Professor, ITM Business School, Warangal, Andhra Pradesh, India  G. Ravinder, Assistant Professor, ITM Business School, Warangal, Andhra Pradesh, India  Vipul Chalotra, Assistant Professor, Department of Commerce, University of Jammu, Udhampur Campus, India  Rajiv Kumar Singh, Associate Professor & Head, Department of Management Studies, Manav Rachna International University, Faridabad, India  Dr. Manmeet Kumar Siras, M. Com., NET, Ph.D., Associate Professor, Faculty of Commerce & Business Administration, Meerut College, Meerut, (C.C.S. UNIVERSITY, MEERUT), India  Dr. Narender Kumar, Chairman & M.D. , Delhi Global Institute of Management, Faridabad, India  Deepti Kanojia, Lecturer, Department of Self Finance Courses, Multanimal Modi College, Modinagar, Uttar Pradesh, India  Dr. D.R. Yadav, Associate Professor, Faculty of Commerce & Business Administration, Meerut College, Meerut, India  Dr. Preeti Singh, Assistant Professor, Jagan Institute of Management Studies, Rohini, Delhi, India  Dr. S.K.S. Yadav, Associate Professor, Faculty of Commerce & Business Administration, Meerut College, Meerut, India  Ms. Kum Kum Chaudhary, Assistant Professor, Department of Engineering, Sir Chotu Ram Institute of Engineering & Technology, CCS University, Meerut, India,  Somnath Kisan Khatal, Assistant Professor, Shivaji University, Kolhapur, Maharashtra, India,  V.P. Singh, Commissioner Provident Fund, Meerut, U.P., India  Dr. A.P. Singh, Associate Professor, Faculty of Commerce & Business Administration, Meerut College, Meerut, India  Ms. Neetu Pathak, Lecturer, SHEAT Institute of Management and Technology, Varanasi (UP), India  Dr. A.B. Thapaliyal, Department of Commerce, HNB Garhwal University, SRT Campus, Badshahi Thaul, Tehri, U.K. India  Mr. Vikas Gairola, Department of Management Studies, Dehradun Institute of Technology, Dehradun, U.K., India  Juliette Overland, Senior Lecturer, Business Law, University of Sydney Business School, Sydney, Australia

International Journal of

IIARTC IJTC Trade and Commerce- International Journals of Trade and Commerce Volume-I | Number-I | January-June 2012 ISSN-2277-5811

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INTERNATIONAL JOURNAL OF TRADE AND COMMERCE-IIARTC [ISSN: 2277-5811, E-mail: [email protected]]

INTERNATIONAL JOURNAL OF TRADE & COMMERCE-IIARTC is a double blind reviewed refereed multi-disciplinary journal devoted to the rapid publication and dissemination of current research. It publishes thoughtful contributions that offer insights and perspectives extending knowledge and understanding of inter-disciplinary management related phenomena. Especially welcome are manuscripts that integrate research and theory from various disciplines mentioned in scope of IJTC-IIARTC.

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