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PERFORMANCE OF KUMBAKONAM CENTRAL CO-OPERATIVE BANK LTD KUMBAKONAM THANJAVUR DISTRICCT – A MULTI DIMENSIONAL ANALYSIS

A Thesis submitted to the

BHARATHIDASAN UNIVERSITY, TIRUCHIRAPALLI, In partial fulfilment of the requirements for the award of the degree of

DOCTOR OF PHILOSOPHY IN COMMERCE

Submitted by R.ILAMATHI. M.Com.,M.Phil., Ref. No.22575/Commerce/Part-time/Jan.2011.

Under the Guidance of Dr. N.UDAYAKUMARI, M.Com, MBA., M.Phil., Ph.D., Associate Professor in Commerce, A.D.M College for Women (Autonomous) Nagapattinam – 611 001

PG AND RESERCH DEPARTMENT OF COMMERACE A.D.M. COLLEGE FOR WOMEN (AUTONOMOUS) NAGGAPATTINAM. (AFFLIATED TO BHARATHIDASAN UNIVERSITY) JULY- 2014 Dr. N.UDAYAKUMARI,I M.Com, MBA. M.Phil., Ph.D., Associate Professor in Commerce, A.D.M College for Women (Autonomous) Nagapattinam-611 001.

July- 2014

CERTIFICATE

This is to certify that the Thesis entitled “PERFORMANCE OF KUMBAKONAM CENTRAL CO-OPERATIVE BANK LTD., KUMBAKONAM, THANJAVUR DISTRICT - A MULTI DIMENSIONAL ANALIYSIS” submitted to the Bharathidasan University, Thiruchirappalli, is a bonafide record of the research work done by Mrs. R. ILAMATHI, during the period of her study in fulfilment of the requirement of the Ph.D., in Commerce and the thesis has not previously formed the basis for the award of any degree, diploma, associateship, fellowship or any other similar title. Also certified that the thesis represents independent work on the part of the candidate.

Place : Nagappttinam Research Advisor.

Date : (Dr.N.UDAYAKUMARI)

R.ILAMATHI, M.Com, MPhil., Guest Lecturer in Commerce. M.R.Govt. Arts. College. Mannargudi-614 001.

DECLARATION

I R.ILAMATHI, hereby declare that the thesis entitled

“PERFORMANCE OF KUMBAKONAM CENTRAL CO-OPERATIVE

BANK LTD, KUMBAKONAM, THANJAVUR DISTRICT - A MULTI

DIMENSIONAL ANALIYSIS” is my original work and that it has not previously formed the basis for the award of any degree, diploma, associate ship, fellowship or other similar title. This work has been done under the guidance and supervision of Dr. N.UDAYAKUMARI, Associate Professor,

Department of Commerce, and A.D.M. College for Women (Autonomous),

Nagapattinam.

Research Scholar.

(R.ILAMATHI)

Place : Nagappttinam

Date :

ACKNOWLEDGEMENT

I am conscious of my indebtedness to each and every individual, who helped me in many ways in the preparation of this thesis entitled “PERFORMANCE OF KUMBAKONAM CENTRAL CO-OPERATIVE BANK LTD., KUMBAKONAM, AND THANJAVUR DISTRICT - A MULTI DIMENSIONAL ANALIYSIS”

I am grateful to the authorities of BHARATHIDASAN UNIVERSITY for having given me an opportunity to undergo Ph.D., programme.

I sincerely record my thanks to the President, Vice –President, Secretary, and members of the management committee of A.D.M College for women (Autonomous), Nagapattinam, for giving me an opportunity to do this part-time research work and for providing necessary infrastructure and resources to accomplish my research work. My heartfelt thanks are due to Dr. S.MYTHILI, Principal, A.D.M College for women (Autonomous), Nagapattinam. She not only permitted me to pursue the study but also rendered support in the completion of this research work.

I deem to great pleasure and privilege to have an opportunity to take up this thesis work under guidance of Dr. N.UDAYAKUMARI., MCom., MBA., MPhil., Ph,D., there is no enough words to thank her devotion to this task. She is intelligence, extensive and penetrative knowledge, simple and elegant expressions are highly commendable. Her guidance helped me in all the time of research and writing of this thesis. I could not have imagined having a better advisor and mentor for my Ph.D. study. Dr. M.SELVA CHANDRA, Head, Department of Commerce, A.D.M College for women (Autonomous), Nagapattinam for having permitted me to undergo the course.

I extend my heartfelt thanks to our Dr. D.CHIRSTY SELVARANI, Associate Professor in Department of commerce, Urumu Dhanalakshmi College, Thiruchirappalli and Dr. P.HEMALATHA, Associate Professor in Department of Commerce, Govt. Art. College, Kombakkonam for their association with Doctoral committee and also for their valuable suggestions at different stages of the study.

I gratefully acknowledge Dr. N PALANIVELU, Sri Venkateswara college of Arts and science peravurani for his understanding, encouragement and personal attention which have provided good and smooth basis for my Ph.D. thesis.

I extend my sincere thanks to J.KANNAN Head of the department M.R.G.Arts college mannargudi, Dr.M.PALANI, K.GANDHI, T.R.MURALITHARAN, and other colleagues have always inspired me with his expansive knowledge and progressive thoughts. I warmly thank Dr. R RENUGA., SASTRA UVIVERSITY THANJAVUR., for her valuable advice, constructive criticism and his extensive discussions around my work.

I wish to record my thanks to Mr. S.SATHIKUMAR, Manager of District Central Co-operative Bank of Kumbakkonam. I am very thanking full to Mr. K.JAYAKANTHAN, District Police Co-operative society, Thiruvarur. My sincere thanks to Mr.KARMEGAM District Central Co-operative Bank of Kumbakkonam.I would like to put on record the inputs provided by the Librarian of various universities in tamilnadu and special thanks to District central Library in Thiruvarur District.I dedicate this work to my spouse Mr. S.CHINNAPPAN, my children C.E.SRIDHARSINI , C.E.SURTHIDHARSINI and my Parents.

Last but not least, I would like to pay high regards to my, brothers R.INDHIYARAJA AND R.ELAYARAJA for their sincere encouragement and inspiration throughout my research work and lifting me uphill this phase of life. I owe everything to them. Besides this, several people have knowingly and unknowingly helped me in the successful completion of this project.

(R.ILAMATHI) PERFORMANCE OF KUMBAKONAM CENTRAL CO-OPERATIVE BANK LTD KUMBAKONAM THANJAVUR DISTRICT – A MULTI DIMENSIONAL ANALYSIS

Researcher : R.ILAMATHI

Guide : Dr. N.UDAYAKUMARI

ABSTRACT

A co-operative bank is a financial entity which belongs to its members,

who are at the same time the owners and the members of their bank. The

organization of the kumbakonam central co-operative bank ltd kumbakonam

consists of two wings, deliberative and executive. The deliberative wing

consists of the General Body, the Board of Management and the Chairman. The

executive wing at the headquarters is further divided into two: the Banking

Wing and Administrative Wing. The branch (32 branches) organizations at the

taluk and village level constitute an important link between the KCCB and the

primary agricultural co-operative bank. Its main functions are to create the

habit of savings among the people: mobilize deposits, scrutinise loan

applications and recover the loans in its area of operations. Analyse the present

agricultural credit system in the Bank and to reveal the different schemes

provided by the bank for agricultural sector, to make members to be aware of

benefits of co-operative banks and to avail these services rendered by the bank. MŒÎ jiy¥ò

“F«gnfhz« k¤Âa T£LwÎ t§»æ‹ brašãiy g‰¿a gy gçkhz mQFKiw” jŠrhñ® kht£l«, jäœehL.

MŒths® bga® : uh. ÏskÂ MŒÎ nk‰gh®itahs® : e. cjaFkhç

T£LwÎ t§»fŸ j« cW¥Ãd®fë‹ bghUshjhu ãiyia ca®¤JtÂš bgU« g§F t»¡»‹wJ. F«gnfhz« k¤Âa T£LwÎ t§» Ïu©L ãiyfëš ã®thf« brŒ»‹wJ. Kjš ãiyæš t§»æ‹ jiyt® k‰W« bghJ¡FG cW¥Ãd®fŸ 32 nk‰g£l t§» »isfis ã®thf« brŒ»‹wd®. k‰bwhU ãiyæš 32 t§» »isfS« gšntW jhY¡fh k‰W« »uhk mséš ÏU¡f¡Toa T£LwÎ t§»fis ã®thf« brŒ»‹wd®. nkY« Ï›t§», it¥ò bjhif Mjhu¤ij bgU¡» j‹Dila cW¥Ãd®fS¡F fl‹ tH§F»‹wd®. cW¥Ãd®fŸ th§F« flid v›thW ÂU¥Ã brY¤J»‹wd®. nkY« cW¥Ãd®fS¡F t§»æ‹ gâahš cŸs kdãiwit MŒÎ brŒa¥g£LŸsJ.

CHAPTER ARRANGEMENT

Chapter No. Contents Page No.

I Introduction and Design of the Study 1

II Review of Literature 24

III District Central Co-operative Banks – An overview 42

Analysis of Financial Performance of IV 67 KCC Bank Ltd. and Interpretation

Analysis of Members Satisfaction of V 177 KCC Bank Ltd.

VI Summary of Findings, Suggestions and Conclusions 210

Bibliography 230

Appendices 238

LIST OF TABLES

Table No. TITLE Page No. 4.1 Membership 88 4.2 Total Deposits 93 4.3 Agricultural Credit to Total Loans & Advances 98 4.4 Agricultural Credit Stabilization Fund 100 4.5 Total Loans and Advances 102 4.6 Jewel Loans 106 4.7 percentage of NPAs to total loans & Advances 121 4.8 percentage of NPAs to Assets 123 4.9 Calls, Collection and Outstanding 125 4.10 Reserve fund 127 4.11 Total Investment 129 4.12 Balance with other banks 131 4.13 Bad & doubtful debt reserve 133 4.14 Current Ratio 137 4.15 Quick ratio 140 4.16 Debt.-equity Ratio 143 4.17 Debt to Total funds 146 4.18 Capital Gearing Ratio 148 4.19 Return on capital employed 151 4.20 Return on Equity 153 4.21 Net profit to working capital 155 4.22 Interest Earned Ratio 157 4.23 Interest Paid Ratio 159 4.24 Total income to volume of Business 161 4.25 Man power expenses ratio 163 4.26 Establishment Expenses Ratio 165 4.27 Non-Interest Income Ratio 167 4.28 Spread Ratio 169 4.29 Burden Ratio 171 4.30 Profitability Ratio 173 5.1 Age Wise Classification of Respondents 178 5.2 Sex wise classification of the respondents 179 5.3 Educational status of the respondents 180 5.4 Occupation of the respondents 181 5.5 Annual income of the respondents 181 5.6 Purpose of the loan of the respondents 182 5.7 Nature of land of the respondents 183 5.8 Types of loan offered by PCCB Ltd 183 5.9 Irrigation Facility 184 5.10 Reason for Non-repayment of loan 185 5.11 Time allowed for repayment of loan 186 5.12 Reason for having deposits in PCCB Ltd 187 5.13 Types of Deposit 188 5.14 Quantum of savings of the respondents 189 5.15 Awareness of various loan schemes offered by 190 PCCB Ltd 5.16 Satisfactory level of the respondents towards borrowings 191 5.17 Satisfactory level of the respondents towards deposits 194 5.18 Class A&B members attitude towards their kumbakonam 197 central cooperative banks 5.19 Association between Demographic Variables of the 199 Respondents and their Attitude towards the Bank 5.20 Class a and b customer’s attitude towards the performance 201 variables of kumbakonam central cooperative bank 5.21 Impact of Attitude towards Performance Variables of banks 204 on Overall Attitude 5.22 Impact of Demographic Variables on an Overall Attitude 207 towards the banks

LIST OF CHARTS

Table No. TITLE Page No. 4.2 Total Deposits 94 4.3 Agricultural Credit to Total Loans & Advances 99 4.4 Agricultural Credit Stabilisation Fund 101 4.5 Total Loans and Advances 103 4.6 Jewel Loans 107 4.7 percentage of NPAs to total loans & Advances 122 4.8 percentage of NPAs to Assets 124 4.9 Calls, Collection and Outstanding 126 4.10 Reserve fund 128 4.11 Total Investment 130 4.12 Balance with other banks 132 4.13 Bad & doubtful debt reserve 134 4.14 Current Ratio 138 4.15 Quick ratio 141 4.16 Debt.-equity Ratio 144 4.17 Debt to Total funds 147 4.18 Capital Gearing Ratio 149 4.19 Return on capital employed 152 4.20 Return on Equity 154 4.21 Net profit to working capital 156 4.22 Interest Earned Ratio 158 4.23 Interest Paid Ratio 160 4.24 Total income to volume of Business 162 4.25 Man power expenses ratio 164 4.26 Establishment Expenses Ratio 166 4.27 Non-Interest Income Ratio 168 4.28 Spread Ratio 170 4.29 Burden Ratio 172 4.30 Profitability Ratio 174

LIST OF ABBREVIATIONS

ALLOW Allowances ARDC Agricultural Refinance and Development Corporation ATM Automatic Teller Machine BRA Banking Regulation Act BOD Board of Directors CRR Capital Reserve Ratio CAR Capital Adequacy Ratio DCCB District Central Co-operative Bank Govt. Government Ltd Limited NABARD National Bank for Agricultural and Rural Development NPAs Non Performing Assets OTS One Time Settlement PACS Primary Agricultural Credit Society PACB Primary Agricultural Credit Bank KCCB Kumbakonam Central Co-operative Bank PF Provident Fund RBI Reserve Bank of India SCB State Co-operative Bank SLR Statutory Liquidity Reserve SWOT Strength Weakness Opportunities Threats W.e.f With effect from ROE Return on equity NII Non- interest income

CHAPTER – I

INTRODUCTION AND DESIGN OF THE STUDY

INTRODUCTION

A co-operative bank is a financial entity which belongs to its members, who are at the same time the owners and the members of their bank. Co- operative banks are often created by persons belonging to the same local or professional community or sharing common interest. Co-operative banks generally provide their members with wide range of banking and financial services (loans, deposits, banking accounts etc.). Co-operative banks differ from stockholder banks by their organization, their goals, and their values and their governance. In most countries, they are supervised and controlled by banking authorities and have to respect prudential banking regulations, which put them at a level playing field with stockholder banks. Depending on countries, this control and supervision can be implemented directly by state entities or delegated to a co-operative federation or central body.

Co-operative movement was introduced in India, with the enactment of Co-operative Societies Act in the year 1904. Under this Act, Co-operative credit Societies were registered. Since the Indian economy has been predominantly an agrarian economy. Co-operative societies were established to ameliorate the economic condition of farmers by way of providing cheap and adequate finance to them and uplifting them from the clutches of moneylenders, who are blood-sucking vampires of rural economy.

Indian banking sector is divided into different components from which co-operative banking sector is one. Co-operative banking is retail and commercial banking organized on a co-operative basis. Co-operative banking institutions take deposits and lend money in most parts of the world. Co- operative banks have completed 100 years of existence in India. They play a

very important role in the financial system. Banks goes back to the year 1904. In 1904, the co-operative credit society act was enacted to encourage co- operative movement in India. But the development of co-operative banks from 1904 to 1951 was most disappointing one. The structure of co-operative bank consists:

Primary co-operative credit society

 Central co-operative banks  State co-operative banks  Land development banks  Urban co-operative banks

The Government realized the deficiencies of Co-operative credit societies Act, 1904, and to overcome these defects passed a comprehensive Co- operative societies Act in 1912. The new Act saves a great stimulus to co- operative movement.

It legalized many co-operative societies which had to hither to no legal recognition. It was more rapid in Bombay, Madras and Punjab. A large number of non – credit societies for common necessities were developed. In 1909, Government of India appointed a committee under the chairmanship of Sri Edward Maclaghan to examine the soundness of co-operative movement, which submitted its report in 1915.

The movement witnessed a set back with onset of the great economic depression (1929 – 1936) when agricultural prices began to fall at a great speed. Recovery of loans became extremely difficult. There was very heavy accumulation of overdues and freezing of societies were inevitable. Normal working of co-operatives was in many cases almost completely paralyzed and in several others most adversely affected. There was a serious contraction of co-operative credit. The Royal commission on agriculture and the central Banking Enquiring committee indirectly made recommendation for their

improvement. The Royal commission on Agriculture (1927) remarked that “if co-operation fails there will fail the best hopes of rural India”.

During this period, the primary aim of the co-operative departments was to rectify and rehabilitate the societies rather than to expand them.

The collapse of the co-operative movement in some provinces led to the appointment of special expert and enquiry committees in different provinces to examine the position of co-operative movement with a view to reconstruction. Among these committees, the major were,

 Ragavacharya Committee in Madras (1940), Devadhar Enquiry Committee on Co-operation in Travancore (1935)

 KL. Iyer Committee in Mysore (1935)

 Kala Committee in Gwalior (1937)

 Meh ta and Bhansali Committee in Bombay (1937)

 Deivasikhamani Committee in Orissa (1938)

 Wace Committee in Punjab (1939) and Ramadas Pantulu Committee for co-operatives rehabilitation (1939).

The abnormal conditions created by world was II led to some far reaching developments in co-operative movement. This period was broadened the functional range of the corporative movement and it brought about a shift in the lop sided emphasis from credit aspect to the productive and distributive functions or to its multipurpose potentialities a long felt need for imparting that richness and balance which is necessary for the proper development of the movement.

An important development during the period was the appointment of the co-operative planning committee under the chairmanship of Saraya in 1945, which recommended that primary societies should be converted into

multipurpose societies and efforts should be made to bring 30percentage of the rural population and 50percentage of the villages within the ambit of reorganized societies within a period of ten year. It also urged that the RBI should provide greater assistance to co-operatives.

The Rural Banking Enquiry Committee (1949 – 50) suggested the formation of rural co-operative banks and expanding urban banks, central banks and provincial banks to serve the needs of the rural areas. Since independence, the appointment of All India Rural Credit Surrey committee (AIRCSC) under the Chairmanship of A.D. Garwala in 1951 by the RBI was the most important development in the co-operative movement. The committee submitted its reports in 1954 and concluded that co-operation has failed but it must succeed. The co-operative movement since then passed through a number of amendments and led to the appointment of number of committees to reach the present position.

The AIRCSC working group on co-operation (1958), National Development Council Resolution (1959), Mysore conference of state ministers (1959) Jaipur conference of state ministers (1960), committee on co-operative credit (1960) working group on panchayats and co-operation (1961), committee on co-operation Administration (1963) committee on co-operation (1969). All India Rural Credit Review committee (1969), New Co-Operative Policy Resolution (1977) and Agricultural Credit Review committee (1989) (Khusru committee) were the major committees / conferences / working groups pertaining to co-operative movement with special reference to agricultural credit. In this way, co-operative movement drew the attention of policy makers from time to time and reached the present position.

Co-operatives are people’s organizations for ameliorating their economic condition through thrift and mutual help. They are borrowers’ own organisation having a democratic set up. In may be mentioned here that committee after committee which have gone into the problem of rural credit

have been unanimous in their observation that co-operatives are the best suited agency to cater to the credit and non-credit needs of the rural sector. It is obvious that co-operative credit system has made considerable progress in the field of agricultural finance but its performance could not come up to the expectation. It has been accepted all round that rural co-operative movement has not been successful as was anticipated by its sponsors. One of the important causes for the failure of the movement may perhaps be due to lack of spontaneity of the movement. The people rarely come forward to organize co- operative societies. On the other hand, the movement took the form of a Government department. Further co-operative banks didn’t meet all the cash requirements of the farmers.

The co-operatives were once visualized to take away completely the business of money lenders as far as short-term needs for agriculturists were concerned. They were expected to attract deposits just as other commercial banks do and borrow from other members of the money market and make loans and advances to the agriculturist through primary co-operatives. But these expectations have not been fulfilled. This is due to the fact that co-operative credit system suffers from certain serious weakness at present.

The co-operatives have great potential but invariably they have not been allowed to function free of government intervention and interference. A large number of PACBs functioning at the base level are either weak or not viable. There PACBs are not in a position to cater effectively to the needs of the members.

The continuous existence of weak central co-operative banks (CCBs) has also been retarding the progress of the co-operative credit movement in the country. The weak CCB will not be able to provide the required refinance lucidities to PACBs.

One of the objectives of the co-operative banks in the country is to promote thrift and savings among their members. But Poor mobilization of

deposits by PACBs implies that they have not been able to inculcate the habit of thrift and savings among their members. It may be noted that poor and inadequate mobilization of deposits make PACBs highly depend on the CCBs for the resources required for meeting the credit needs of their members.

The problem of mounting overdue in co-operatives is causing serious concern to the policy-makers. The soundness of the whole co-operative credit system to a large extent depends on the timely recovery of loan advanced to farmers and the resulting overdue increasing year after year. The mounting overdue disrupt the flow of credit to the farmers from the co-operatives and adversely affect the capacity of lending institution to provide adequate and timely credit to agriculture and thus hampers the pace of economic development. It may be pointed our here that big farmers are responsible for a large proportion of overdue. This is a matter of serious concern to all those interested in the progress of co-operative movement.

There has not been effective solution to the problem of overdue in the case of co-operative. But the possibilities of credit squeeze in the agricultural sector would become all the more real, as co-operatives are faced with resource crunch. The Narasimam committee has recommended a drastic cut in the share of credit to priority sector including agriculture from 40percentage to 10percentage in 1991. The commercial banks have not shouldered the responsibility of supplier’s credit to agricultural sector to any substantial extent; obviously the responsibilities have to be shouldered by the co- operatives. In other words, the very institution plagued with the problem of overdues, faces the challenge of financing agriculture on a substantially larger scale.

STATEMENT OF THE PROBLEM

India is predominantly an agricultural country. The main sectors of the economy i.e. agricultural and industrial sectors depend on each other. This signifies the role of agriculture in economic development. Agriculture has to be

developed not only from the point of view of economic development but also from the point of the well being of the people. For the proper development of agriculture, modern inputs and scientific equipments should be used in performing the agricultural operations. All these need increased finance.

Among the various financing Institutions, co-operatives have been recognized as the most appropriate Institutions for supplying sound and dynamic credit to the agriculturists. It is because of the fact that the habit of thrift and savings among the rural people, mutual aid and reduced cost of administrations, proximity and firsthand knowledge about borrower’s security are essential factors. Keeping these factors in view, the planning commission has emphasized that the co-operatives are eminently suited to achieve the desired social and economic changes in the context of existing conditions in villages.

In Tamil Nadu, three – tier federal system has come into existence for short and medium term co-operative credit structure. It consists of state co- operative bank at an apex level, PACs at village level, with central co-operative bank in between at the district level. In this structure, the CCBs play a significant role in the disbursement of co-operative credit.

The soundness of whole co-operative credit structure, to a large extent, depends on the prompt recovery of loans but there has been a tendency with the farmers not to repay their loans, thereby, increasing overdues year after year. As a result of mounting or over sues, the flow of short and medium term agricultural credit to the farmers from co-operative institution is likely to be adversely affected because overdues bring down the efficiency of lending institution. Moreover its capacity to canalize large credit to agriculture is also affected. The co-operative movement cannot sustain too long, unless measures are introduced to control overdues. These distressing trends deserve to be probed its detail for determining the precise reasons thereof and for introducing stringent corrective measures.

Many studies were made in this respect, but no study has been made pertaining to financial performance of central co-operative Banks, located in Kumbakonam Thanjavur District. One such bank is Kumbakonam Central Co-operative Bank. Hence the researcher has made a sincere attempt to assess the performance of the ‘Kumbakonam Central Co-operative Bank and the study unit with respect to financial status, recovery position of agricultural credit, human resource and to suggest measures for improving its mode of operations.

RESEARCH OBJECTIVES

This study mainly aims at assessing the Performance of Kumbakonam Central Co-operative Bank Ltd., Tamil Nadu from the year 2001 – 2002 to 2010 – 2011. The other objectives are outlined below:

 To examine the position of this bank in mobilizing the savings.

 To study the liquidity, solvency and profitability position of the bank during the study period.

 To analyse the present agricultural credit system in the Bank.

 To reveal the different schemes provided by the bank for agricultural sector.

 To make members to be aware of benefits of co-operative banks and to avail these services rendered by the bank.

 To analyse the lending operation and the overdues of the bank.

 To know the customer satisfaction towards the services of the bank.

RESEARCH QUESTIONS

The following research questions are quite relevant to the crucial purpose of the study and seeking to understand and analyse the financial

performance of Kumbakonam Central Co-operative Bank Limited, Tamil Nadu (KCCB LTD.)

1. What are the present agricultural credit systems in the district?

2. What are the different schemes provided by the bank for agricultural sector?

3. How many of the persons are aware of benefits of co-operative Banks and to avail these services rendered by the bank.

4. What are the lending operation and the overdue of the bank?

5. What are the various loan schemes offered by the bank?

6. What are the different types of deposits schemes implemented by the bank?

7. What are the parameters used for evaluating the liquidity, solvency and profitability position of the bank.

SIGNIFICANCE OF THE STUDY

In the field of co-operative sector, several studies are available focusing on the general problems. But the present study concentrates on the specific area focusing on the financial performance in the co-operative banking field. Through the study which covers KCCB Ltd. One of DCCBs in Tamil Nadu, the decision makers in the Co-operative banking business, the Government officials, similar Co-operative organizations and researcher will have the help for their future development in their respective fields of interest by the way of fairly considering the measures suggested in this study for further improvement and overcoming the financial problem.

IMPORTANCE OF THE STUDY

As a significant part of multi-agency approach to the credit delivery to the agriculturists in India, co-operative banks both in short term and long term structure, hold an important position. Especially in the rural credit scenario, the co-operative banks have played a pivotal role in the development of rural credit over the years. The geographical spread of entire co-operative credit system covers over 74percentage of rural credit outlets and it has a market share of about 46 percentage of total rural credit in the country. The co-operative banks have more than 10 corers of members across the country.

According to All India Rural Credit Survey Committee; 1969, “The position of central co-operative bank is very important in the structure of co- operative credit. It works as a link between the state co-operative bank and primary credit societies at the lowest level”.

For any banking industry, if the overall performance is found good, then the members are the most beneficiaries, because the performance leads to an increase in profit. But in general, now a day, co-operative banks are facing bulging of nonperforming assets, which yield lower profit or lower revenue. The banks are proving more reserves against NPAs, which is being made dent in a profit figures. In order to protect the interest of the shareholders and depositors, the banks are taking necessary steps to reduce NPAs. In this study an attempt is made to evaluate the overall performance and the factors, which affects the profit. In view of this the present study is considered as very important.

SCOPE OF THE STUDY

In the process of studying the financial performance of Kumbakonam Central Co-operative Bank Limited. The operational and financial analysis of Kumbakonam Central Co-operative Bank Limited would be evaluated from the financial statements. The overall managerial and financial efficiency of the

banks would be ascertained through these financial indicators. It is believed that this study will help to suggest ways and means to review the banks performance and to adopt professional approach in operations and to ensure effective financial performance.

PERIOD OF THE STUDY

The period of study has been restricted to 10 years from 2001 – 2002 to 2010 – 2011.

METHODOLOGY

In order to carry out the research work both primary and secondary sources have been used to collect necessary data. The primary data have been collected from the beneficiaries of KCCB Ltd, Kumbakonam by questionnaire method. A pilot study has been conducted by collecting necessary information and based on this experience, questionnaire has been developed and the research has been designed. Among the borrowers, 200 persons have been selected on random basis.

The secondary data have been obtained from the official records, files and published statements of the audit reports

Further the secondary data have been compiled from leading journals like Co-operative perspective, Indian Co-operative review, and Tamil Nadu journal of Co-operation, RBI bulletin, Kurushetra and finance of India etc.

The study is descriptive and analytical in nature. To analyse both primary and secondary data, statistical hypotheses have been framed. In addition to these, financial ratios have been used to analyse the performance of the study unit.

PROCEDURE FOR ANALYSIS OF DATA

To analyze primary and secondary data, the various frequency tables and cross tables were formed. Many of the calculations have been carried out with the help of MS-Excel package. Tables, charts, etc, have been interspersed whenever necessary to visualize the observation and inferences. The customer satisfaction has been analyzed Chi-square, T-test and multiple linear regression and regression tools were analyzed above the sample. The data collected were analyzed for the entire sample.

LIMITATIONS OF THE STUDY

In view of paucity of resources and limitation of time, the study has been restricted to financial performance, especially agricultural lending.

 Due to time factor, 200 members were selected as samples.

 Primary data were collected only in the head office.

 Only related information could be collected at Tamil Nadu level from the year 2001 – 02 onwards.

 Only qualitative data as opined by users of banking services are used and quantitative data like business volume, quantum of transactions are not considered.

Area of the study

INTRODUCTION

Thanjavur, is a city which is the headquarters of the Thanjavur District in the south Indian state of Tamil Nadu. Scholars believe the name Thanjavur is derived from Tanjan, a legendary demon in Hindu

mythology. While the early history of Thanjavur remains unclear, the city first rose to prominence during the reign of Medieval Cholas when it served as the capital of the empire. After the fall of Cholas, the city was ruled by various dynasties like Pandyas, Vijayanagar Empire, Madurai Nayaks, Thanjavur Nayaks, Thanjavur Marathas and the British Empire. It has been a part of independent India since 1947.

Kumbakonam, also spelt as Coombaconum in the records of British India, is a town and a special grade municipality in the Thanjavur district in the southeast Indian state of Tamil Nadu. It is located 40 km (25 mi) from Thanjavur and 273 km (170 mi) from Chennai and is the headquarters of theKumbakonam taluk of Thanjavur district. The town is bounded by two rivers, the Kaveri River to the north and Arasalar River to the south. According to the 2011 census, Kumbakonam has a population of 140,113 and has a strong Hindu majority but it also sizeable Muslim and Christian populations.

GEOGRAPHY

Kumbakonam is located at 10.97°N 79.42°E. It is situated 273 km (170 mi) south of Chennai, 96 km (60 mi) east ofTiruchirappalli, and about 40 km (25 mi) north-east of Thanjavur. It lies in the region called the "Old delta" which comprises the north-western taluks of Thanjavur district that have been naturally irrigated by the waters of the Cauvery and its tributaries for centuries in contrast to the "New Delta" comprising the southern taluks that were brought under irrigation by the construction of the Grand Anicut canal and the Vadavar canal in 1934. It has an average elevation of 26 metres (85 ft). The town is bounded by two rivers, the Cauvery River on the north and Arasalar River on the south.

Although the Cauvery delta is usually hot, the climate of Kumbakonam and other surrounding towns is generally healthy and moderate. Kumbakonam is cooler than Chennai, the capital of Tamil Nadu. The maximum temperature in summer is about 40 °C (104 °F) while the minimum temperature is about

20 °C (68 °F). Kumbakonam receives an annual rainfall of 114.78 cm (45.19 in) every year. The region is covered with mainly alluvial or black soil which is conducive for ricecultivation. Other crops grown in Kumbakonam include mulberry, cereals and sugarcane.

DEMOGRAPHY

According to 2011 census, Kumbakonam had a population of 140,156 with a sex-ratio of 1,021 females for every 1,000 males, much above the national average of 929.[67] A total of 12,791 were under the age of six, constituting 6,495 males and 6,296 females. Tribes accounted for 6.46percentage and .06percentage of the population respectively. The average literacy of the city was 83.21percentage, compared to the national average of 72.99percentage.There were a total of 9,519 workers, comprising 32 cultivators, 83 main agricultural labourers, 1,206 in house hold industries, 7,169 other workers, 1,029 marginal workers, 24 marginal cultivators, 45 marginal agricultural labourers, 212 marginal workers in household industries and 0 other marginal workers

TOURISM

Brihadeeswara Temple, built by the Cholas and a UNESCO World Heritage Site is located at Thanjavur. The green paddy fields and the Kaveri River provide for picturesque spots in the district. Airavateswara temple near Kumbakonam is also a UNESCO declared World Heritage site and another major tourist attraction in the district.Kumbakonam is known for its temples and mathas (monasteries). There are around 188 Hindu temples within the municipal limits of Kumbakonam. Apart from these, there several thousand temples around the town thereby giving the town the sobriquets "Temple Town" and "City of temples".

Adi Kumbeswarar Temple is considered to be the oldest Shaiva (the sect of the god Shiva) shrine in the town, believed to be constructed by the Cholas

in the 7th century The Nageswaraswamy Temple has a separate shrine for the Sun god Surya who is believed to have worshipped Shiva at this place. Adi Kumbeswarar temple, Nageswaraswamy temple and Kasi Viswanathar temple are Shiva temples in the town revered in the Tevaram, a Tamil Shaiva canonical work of the 7th–8th century Kumbakonam has one of the few temples dedicated to the god Brahma

Sarangapani temple is the largest Vaishnava (the sect of the god Vishnu) shrine present in Kumbakonam. The present structure of the temple having a twelve storey high tower was constructed by Nayak kings in the 15th century. It is one of the "Divya Desams", the 108 temples of Vishnu revered by the 12 Alvar saint-poets. The Ramaswamy temple, which has scenes from the Hindu epic Ramayana depicted on its walls, was constructed byGovinda Dikshitar, the minister of successive Nayak rulers, Achuthappa Nayak (1560– 1614) and Raghunatha Nayak (1600–34). He added a commercial corridor between the temple and the older Chakrapani temple, which in modern times is called Chinna Kadai Veethi, a commercial street in the town

AGRICULTURE

This district lies at the Kaveri delta region, the most fertile region in the state.[5] The district is the main rice producing region in the state and hence known as the Rice Bowl of Tamil Nadu.[6] Kaveri River and its tributaries irrigate the district. Apart from paddy, farmers here grow coconut and sugarcane and it is the largest producer of coconut in Tamil Nadu.

ECONOMY

The important products of Kumbakonam include brass, bronze, copper and lead vessels, silk and cotton cloths, sugar, indigo and pottery. Kumbakonam is considered to be the chief commercial centre for the Thanjavur region. In 1991, around 30percentage of the population was engaged in economic activity. Rice production is an important activity in

Kumbakonam. Of 194 industrial units in Kumbakonam, 57 are rice and flour mills. Kumbakonam is also a leading producer of betel leaves and nuts; the betel leaves produced in Kumbakonam are ranked amongst the best in the world in terms of quality. The A. R. R. Agencies, a leading manufacturer of arecanut slices has its factory in Kumbakonam.

The main administrative offices of T. S. R. & Co., a cosmetic company, are also based in Kumbakonam. Kumbakonam is also famous for its metal works. The Tamil Nadu Handicraft Development Corporation had been established in the nearby town of Swamimalai in order to train bronze artisans. Kumbakonam is an important silk-weaving centre and more than 5,000 families were employed either directly or indirectly in silk weaving. Silk weaved in Kumbakonam is regarded as one of the finest in the subcontinent. They are largely used in the manufacture of Thirubuvanam silk sarees. Kumbakonam was also an important salt-manufacturing area during British rule. The town lends its name to the Kumbakonam Degree Coffee, a blend of coffee prepared using undiluted pure milk. In recent times, Kumbakonam has emerged as an important manufacturer of fertilizers.

LOCATION

Thanjavur District lies as the East Coast of Tamil Nadu. It is situated between 9 50’ and 11 25’ of the northern latitude and 78 45’ and 70 25’ of the Eastern longitude. It extends to an area of 3396.57 sq.kms. The District is bounded on the north by the Coloroon which separate it from Perambalur and Tiruchirappalli district, and on the East it is bounded by the Thiruvarur and Nagapattinam districts, and on the South by the Palk Strait and Pudukottai district and on the West by Pudukkottai and Thiruchirappalli districts.

CHAPTERISATION

Chapter I Introduction and Design of the study tracing the introduction of banking Industry. Besides this, the chapter gives a brief account of the

regulatory framework within which the firms are operating at present. It also presents the significance of the study, statement of problem of the study, limitations of the present study, and finally outlines the structure of the study.

Chapter II reviews the literature with respect to the regulatory framework of Banking Industry. It also presents various important factors affecting the performance of the sector contained in works of several researchers, identifies the gap in the earlier research, outlines the objectives of the study, the previous empirical findings and models developed to analyze the efficiency and performance parameters are thoroughly examined.

Chapter III deals with the Overview of Kumbakonam Central Co-operative Bank (KCCB).

Chapter IV titled “Performance Analysis of KCCB Ltd.,” presents a detailed discussion of research design, the research hypotheses analysed, and the methodology used to test the critical factors affecting performance and working pattern of KCCB Ltd.,

Chapter V deals with the members and primary data collected from 200 respondents’, analysed satisfaction of Kumbakonam Central Co-operative Bank Limited

Chapter VI Identifies the findings of the study pertaining to the hypothesis, the implications, for the sector as a whole and individually, drawn from the findings of the research, recommendations for future research, and conclusion of the study.

Definitions and meanings of certain terms used in the study

KCC Bank LTD.

KCCB LTD. refers to the Kumbakonam Central Co-operative bank limited operating in Thanjavur district.

Co-operative Year

The Co-operative year, up to 1991, signifies the year commencing from 1st July and ending with 30th June. From 1991, it commences from 1st April and ends with 31st March falling in line with the financial year.

Cash reserve Ratio (CRR)

According to the banking regulation Act, 1949, under section 18, “a co- operative bank, other than a scheduled state co-operative bank or primary co- operative bank is required to maintain cash reserve with the current account opened with the RBI or SBI or SCB of the state concerned or with any other bank notified by the central government, not less than three percent (varies as per RBI direction) of demand and time liabilities of the bank on the last Friday of the second proceeding fortnight. This is treated as cash reserve ratio of the bank.

Statutory liquidity ratio (SLR)

According to BRA 1949, under section 24, every co-operative bank in a state maintains liquid assets like cash, gold and un-encumbered securities. They are equal to not less than 25percentage or such other percentage not exceeding to 40percentage of their demand and time liabilities.

‘A’ class members

Those who have voting right in the bank and holding shares of Rs. 50 each are ‘A’ class members.

‘B’ class members

Those members who have no voting rights but holding shares of Rs. 5

each are ‘B’ class members.

Development action plan

It is an action plan prepared for revamping the CCBs and the PACBs in

the state.It aims at analyzing the strength and weakness of co-operative banks

so as to increase their viability. The Government of India has emphasised the

need for such action plans to make co-operative banks as viable units. The

NABARD has to prepare a plan of action for the period of five years from 1994

– 1995 to 1998 – 1999. After this, the period has also been extended to the year

1999 – 2000. The plan envisaged sustainable viability of all PACBs.

Short-term credit

It is credit made available for a period of 12 to 15 months for meeting the cost of seasonal agricultural operations such as expenditure on seeds, employment and marketing.

Medium – term credit

It is granted for a period of 15 months to five years. It is granted for

consolidation of holdings, reclamation of land, sinking of ordinary wells and

repairing old ones, constructing dams in the fields and purchase of carts,

bullocks, milk animals and the like.

Long – term credit

It is granted for a period between five years to 20 years. These loans are given for the purpose of the development of land, repayment of debts, sinking of wells, and reclamation of jungle lands etc.

Minimum involvement

It is a condition laid down by the NABARD from the year 1985-86. The NABARD introduced the scheme of minimum involvement for compulsory investment of own resources of the bank.

Capital adequacy ratio

` It is the ratio of capital to risk – weighted assets. Capital adequacy norms need to move in the direction of strengthening capital base of the Co- operative banks and conform to the applicable norms prescribed by RBI over a period of time.

Interest spread

It refers to the total interest income earned and receivable minus the interest amount paid and payable.

Bank

It means Co-operative Bank.

Officers

Officers of CCBs include Managing Director / Special Officer, General Manager / Secretary, Assistant General Manager / Assistant secretaries.

Act

It means Tamil Nadu Co-operative Societies Act 1983.

Rules

It refers to Tamil Nadu Co-operative Society’s rules, 1988.

Owned funds

It means the sum of paid up share capital and reserves.

Administrators

It means the persons who manage the affairs of the CCBs, specifically may be either the elected board of directors or the special officer.

Board of directors

They are the elected persons who manage the CCBs. The Directors are elected directly by the members and don’t mean otherwise as in Grammatical sense further

Non – borrower / borrowed member

Non – borrower members are of the CCBs who have not borrowed any loan from the concerned banks. It has no reference to their personal borrowings from the same or other institutions.

Defaulters

It means the member borrowers who do not repay the loan within stipulated and or extended period as fixed by the CCBs.

Non – defaulters

It refers to the member borrower who is prompt in repaying the loan within stipulated period or within the extended period as fixed by the CCBs.

Non – willful Defaulters

Those borrowers who have failed to repay the loan with in the stipulated period or extended time as fixed by CCBs, due to their inability to repay but with genuine reasons for default.

Willful Defaulters

It refers to the borrowers who have not repaid the loans within the stipulated or extended time as fixed by CCBs and one who has the capacity to repay the loan but willfully not repaying the loan for some reason or other.

Special officers

They are the officers of the Co-operative departments, Govt of Tamil Nadu and they are appointed to manage the affairs of the CCBs in the absence of the elected board of Directors.

Central Co-operative Banks (CCBs)

The CCBs coming under the jurisdiction of the Co-operative act are recognized as “Banks” by the Central Government notification and as per the provisions of the RBI regulations.

Financial analysis

Performance of the Bank

Financial statement

AICPA (American Institute of certified public Accounts) says financial statements are prepared for the purpose of presenting a periodical review or report on the progress by the management and deal with i) the states of investments in the business and ii) the results retrieved during the period under review.

Liquidity

Generally it refers to “the ability of the firm to meet its short term obligations when they become due for payment and main stances of a precise amount of liquidity has now become an important aspect in financial management.”

Non – Performing Assets (NPAs)

An asset becomes non-performing when it ceases to generate income for the bank. A NPA is generally defined as a credit facility in respect of which interest and or instalment of principal has remained ‘past – due’ for two quarters or more. An amount due under any credit facility is treated as ‘past due’ when it has not been paid within 30 days from the due date. It is however decided to dispense with past due concept with effect from 31st March, 2001. Accordingly as from that date, a NPA shall be an advance where.

i) Interest and or instalment of principal remain overdue for more than 180 days in respect of term loan.

ii) The account remains out of order for more than 180 days, in respect of over draft / cash credit.

iii) The bills remain overdues for more than 180 days in the case of bill purchased and discounted.

iv) Any amount to be received remains overdues for more than 180 days in respect of other accounts.

v) Interest / instalment of principal remains overdue for two harvest seasons, but for a period not exceeding two and half year in the case of an advance granted for agricultural purposes.

CHAPTER – II

REVIEW OF LITERATURE

In this chapter, valuable and most related previous literature is taken for review. The understanding of any subject depends upon a good knowledge of related literature. Good knowledge of the concerned literature helps out to find out the scope of the subject and helps establishes how the present study is different from previous studies. The knowledge of the researcher on the topic depends upon the good review of the previous studies concerned.

“Job satisfaction among Co-operative Bank Employees.” – by Satish kumar soni. It has been found out from the above work that:

 59percentage of respondents are found dissatisfied, whereas 41percentage are found satisfied with their job.

 Educational qualification and professional qualification are found insignificantly associated with promotion. No weightage of education and professional qualification is given to the employees for getting promotion.

 Ignoring the merit of short – service employees at the time of promotion is found the causes of job are dissatisfaction among the employees of Co – operative banks.

 Length of service has found a significant relationship with promotion.

 The attitude of management with regard to promotion in the employee’s proportion was found slightly negative which causes dissatisfaction among employees.

It has been suggested that the promotion is one of the incentives which motivate the employees to improve their efficiency. Co-operative banks must

have clear cut promotion policy, so that the base level employees could get at least three promotions. Merit – cum seniority should be made as the bases for promotion.

Educational and professional qualification must be given weightage while granting promotion. Management must have positive – attitude towards promotion, so that the level of satisfaction among employees regarding to their job could be enriched.

A study on overdues in co-operative a case study in Andhra Pradesh by Dr. B.R. Reddy and Dr. Laximinarayana was published in 1996. The viability and self-reliance in co-operative can be brought about only through a more professional approach adopted by co-operatives in the sanction and recovery of various loans. The authors have stated that co-operatives should function as efficient business units, motivated by a sense of social purpose based on the fundamental principal of co-operatives.

The Report of all India Debt and Investment Survey (1981) revealed that non – institutional agencies accounted for 38.8percentage of the total credit to agriculture, moneylenders, traders, landlords and other sources including relatives and friends provided 16.9percentage, 3.4percentage, 4.0percentage and 14.5percentage of the total agricultural credit respectively. The institutional agencies provided 61.2percentage of the total credit needs of agriculture. Co- operatives are the leaders providing 28.6percentage of total credit to agriculture. The share of Government in providing loans was only 4.6percentage.

Vipin Bihari (1975) found that the amount of borrowed capital in closed with the increase in fallen sizes, which varied from Rs. 273.54 in lower size group to Rs. 313.34 in the large group. The proportion of borrowed credit to the total inputs per hectare was found to be higher in big farmers. Per hectare credit was found to be positively correlated to the size of holdings. The availability of credit indicated that 62.29percentage of total credit (short – term) was met by co-operatives followed by relatives and money lenders in

case of small farmers. The medium and long – term credit was met by land development banks (LDBs) to the extent of 97.08percentage only a few cultivations were banished by commercial banks.

The study made by Bhatia (1975) revealed that perform borrowing was higher on the large forms overall, the investment per hectare of operated land was higher in small forms. Borrowed fund accounted for 46.6percentage of the total investment on the small forms and 20.9percentage in large forms. Overall, the investment per hectare of operated land was higher on large forms. Co-operative societies were active and provided 40percentage of the credit to both types of farms. However the commercial banks concentrated on large farms only.

Ghar and Gangwar (1975) have made a study in two blocks (Gurgaon and paled) of Gurgaon district of Haryana. They found that on an average, in the two blocks under study, 54.31percentage of the short – term credit was used for unproductive purpose whereas it worked out to 20.37percentage in respect of medium and long – term credit. Thus short – term credit was more misutilised than medium and long term credit by the small farmers.

Pandey (1977) in his study found that loans were issued mostly without keeping in the mind, the repaying capacity of the borrowers and were not properly supervised by the co-operative supervisors resulting in the diversion of loans for unproductive purpose and accumulation of overdues.

Swidha and Chand (1981) analyzing the pattern of credit distribution and overdues, have found that there was inverse relationship between the overdues and credit advanced to different farm categories. They have further found that most of the small farmers were non – useful defaulters whereas most of the medium and large farmers were useful defaulters. They have suggested that in order to reduce the overdue of small farmers, their income should be increased through additional investment by the way of adoption of improved

method of cultivation white the overdues of large farm categories could be reduced by taking strict action against them.

Dawal (1989) analysed the magnitude of overdues of the agricultural loans given by various institutional agencies to the farmers, in the state of Andhra Pradesh. Improper appraisal, ineffective supervision, occurrence of natural calamities, mystification of loans for unproductive purpose, diversion of income to other traders, and over financing were the major causes of loan overdues. The study suggested, sanction of loans to deserving applicants. Co- ordination, between different institutional agencies, strict monitoring on utilization of loans, development of suitable repayment of schedule, provision of crop insurance to all crops and delegation of adequate powers to take corrective action against the wilful defaulters.

“A case study on advances and recovery of the Sangrur Central Co- operative bank Ltd, Sangrur and Punjab” was done by Dr. N. Ganeshan.

An attempt was made to find out the reasons for these gaps and solutions to fill up the gaps.

It has been found out that the gap between the advances and recovery has been reduced due to the following.

 Contacting the persons who are advanced I a proper time such as non – festival seasons, harvesting, etc.

 Sanctioning more advances to the able and trained persons.

 Advancing the really required amount for the purpose for which it is applied.

 Making the advances in kind form rather than in cash.

 Efficient work of the employees.

“Profitability of Andhra Pradesh State Co-operative Bank” By Dr. M. Shrinivash. This study reveals that the return on deployment of funds by way of loans and advances and investment has shown downward trend during the study period indicating lower profitability. But when compared to the cost of obtaining funds by ways of borrowings and deposits, the returns earned for all the years during the study period is higher. This means that the bank is employing its borrowed funds more profitably. This can be seen by the difference between the ratio of interest earned to working funds and the ratio of interest paid to working funds which has increased from 0.87percentage in 1985 – 86 to 1.43percentage in the year 1991 – 1992.

Both gross profit ratio and net profit ratio have shown an increasing tendency indicating increasing profitability. It can be concluded that profitability of the bank has gone up gradually over the period under study, 1985 – 86 to 1991 – 92.

“A Study on Cost of Management, Productivity and Profitability of Central Co-operative banks in Tamil Nadu,” by Dr. Puyal vannan.

This study reveals that the operating efficiency of the banks relates to the utilization of resource at minimum costs. The bank will be effectively contributing to its working capital if it is efficient in controlling operating costs. Better utilization of resource improves profitability and thus helps in releasing the pressure on working capital.

The work is extended to find out profitability of the bank also.

It has been concluded that all Central Co-operative banks are functioning effectively by keeping the cost of management lower. The ratio of cost of management to gross income shows the efficiency and economic way with which Central Co-operative banks operate. The cost of management to working capital of DCCB is within 2 to 3percentage the cost of management at DCCB level is kept of under the control. The cost of management of deposits is

kept at low ebb by CCBs. Most of CCBs have kept cost of loaning operations much less enabling them to have high margin of profit. The cost of management per employee at all CCBs shows progressively increasing trend. The profitability ratio of CCBs depicts favourable position.

“Impact of Multi-Agency Approach on Agricultural Finance”. By S. Balakrishman, Annamalai University Chidambaram, 1988.

In his study he has observed that the percentage of borrower members to total members was hardly 10percentage in the Thanjavur District and about 14percentage in the Kumbakonam CCB area. He evaluated the performance of various institutional agencies providing agricultural credit, particularly by the co-operatives. Also, willful default was the prime factor for the growth of overdues.

“Problems and Strategies of Co-operative Development,” U.M. Shah, the Co-operator, National Co-operative Union of India, New Delhi – Sept. 1996.

In his study he has suggested that to improve the co-operative; properly trained and committed managers should be recruited as per the norms and qualifications, the educative and legal – efforts will have to be strengthened to avoid politicization of the movement. Elected management is needed for establishing healthy conventions, mandatory provisions for elections and co- operative need to be placed in proper ideological perspective so that entire impels is internally generated and not imposed from outside.

“Report of the Rural Credit Follow-up Surveys” by RBI; Bombay, 1956 – 57, 1957 – 58, 1958 – 59 and 1959 – 60.

Four rural credit follow up surveys were conducted by the RBI in selected districts on systematic lines. These surveys had covered the short term co-operative credit societies. They highlighted the following drawbacks in the Co-operative credit structure.

Uneven growth of co-operative institutions by the big land – lords and money lenders and Inadequate flow of farm finance due to the defective lending policy.

“Committee to Review Arrangements for Institutional Credit for Agriculture and Rural Development”, Report of the RBI, Bombay, 1981.

It was headed by B. Sivaraman and he had reviewed the existing arrangements for institutional credit for agriculture and rural development. It specifically examined the structure and operations of the Agricultural Refinance and Development Corporation (ARDC), the feasibility of integrating short term and medium – term credit structure with long term credit structure at national, state, district and village levels and merits of three tier and two ties structure for co-operative financing institutions.

Report of the All India Rural Credit Review Committee-1969

It was appointed by the governor of the RBI in July 1966 under the chairmanship of B. Venkatappiah. The committee submitted its report in July 1969.

The committee observed that co-operative credit had not yet been oriented adequately to productive credit needs. More over the co-operative system had remained relatively statement in respect of coverage of credit needs and memberships. It also pointed out that overdues were not only heavy but they were rising from year to year. Another point height lighted was that the small cultivators were still unable to get their share of credit from the co-operatives. More numbers of PACs were found to be unable and hence were unsatisfactory agencies for disbursement of production credit. Besides these, there was lack of co-ordination between co-operatives and the existing agencies. The report made several specific recommendations’ for the promotion of viable units and rehabilitation of weak Co-operatives.

The committee has found that the co-operatives by themselves may not be able to meet the challenge and consequently it was recommended that the commercial banks, especially the nationalised banks should come to the resurge for the provision of agricultural credit.

The committee made the following suggestions to improve the existing co-operatives.

 Re-organization of the functioning of the RBI including the establishment of agricultural credit board.

 Establishment of Small Farmer’s Development agency (SFDA) to identify the problems of small but potentially viable farmers and to ensure that agricultural inputs, services and credit are made available.

 Creation of rural electrification corporation for financing rural electrification schemes through electricity boards and the rural electric Co-operatives.

 Expansion of agricultural refinance co – operative.

 Advisory committee may be set up it each branch of a central co-operative bank and limited powers of sanction of loans to societies covered by the branch.

 Selected agricultural credit societies which have a fair record of efficient operation and satisfactory repayment performance may be.

A study on “Management of District Central Co-operative Banks” by Dr. Kutumba Rao was published by Asian Publishing House, New Delhi in 1985. This study was undertaken to examine the performance and management of selected Central Co-operative Banks in Andhra Pradesh in relation to the objectives and tasks set for them. Apart from analysing the organizational structures, the study endeavoured to evaluate capital structure, its lending policies and procedures and personnel practices etc. This work is

considered as an important issue viz, whether democratic setup is compatible with co-operative efficiency. The study covered one district in Andhra Pradesh, which has two Central Co-operative Banks. This study concluded that bureaucratic leadership is no substitute for to the effective elected leadership. The leadership has a positive role to play in responding to the local needs of agriculture, branch expansion, deposit mobilization and recovery of loans. The role of RBI in guiding and controlling central co-operative banks has a healthy effect on their operational efficiency.

A study carried out by Dr. Panda on “Agricultural indebtedness and institutional finance” in Orissa, 1985 revealed that the farmers of irrigated region were benefited more from institutional sources of credit and the farmers of non irrigated region relied more on private sources of credit.

A study undertaken by Singh on “Role of Institutional finance in Agriculture” in Cuttack District of Orissa 1986 revealed that the farmers who availed the credit facilities were economically better off than the non credit recipient farmers in the area under the study.

Jyothi S.S. “Human Resources Management in co-operative sector. A Study of Selected Units in Visakapatnam District”. Inter India Publication, New Delhi 1986.

The study made an attempt to personnel management practices and Industrial relation in selected co-operatives in Visakapatnam District. The objectives of the study were

(1) To review personnel policies and practices in the selected co- operative sector units.

(2) To study the economic background and attitudes of the employees towards their work, management and organization.

(3) To analyse the union – management relationship in the selected units.

(4) To suggest a framework for the effective utilization of human resources and creation of desirable work environment.

This study was based on both primary and secondary data. Primary data was collected from 407 employees selected on the basis of a stratified random sampling. Various techniques such (I) questionnaires, (II) Interviews, (III) Discussions and observations were adopted by the researcher for the collection of primary data.

NABARD Regional Office Chandigarh, “Poultry Farming in Punjab” 1987.

The study reveals that poultry farming is an income generated activity. This activity has given an employment opportunity to the youths and has relieved the borrowers from the clutches of the money leaders. It provides self employment opportunity to the educated youths and improves their economical and social status of the youths.

A case study entitled “Influence of Socio Economic Factor of Borrowers in Co-operative overdues” carried by Ramachandran Reddy 1988 in Cuddapah District of Andhra Pradesh reveals that there is no relationship between family size, occupation and default. On the other hand there is a relationship between land, caste and education amount which was borrowed from the bank and different attributes of the borrowers.

Vadivelu, S. “Personnel Administration Policies and Practices in Central Co-operative Banks in Tamil Nadu” Madurai Kamaraj University, 1989.

The researcher made an attempt to study the personnel management policies and practices in selected Central Co-operative Banks in Tamil Nadu.

The objectives of the study are to examine the existing personnel policies followed by the central co-operative banks and to assess their adequacy or otherwise in relation to the objectives set forth and jobs prescribed actual performance; to examine their personnel administration practices and to suggest ways for a more rationalised approach towards personnel organisation and management of the Central Co-operative Banks. The researcher adopted both descriptive and exploratory methods. Three District Central Co-operative Banks, each representing A, B, C audit classification, were selected for the study. Both primary and secondary data were collected for the study.

Shaheena. P. “Reserve Management and Profitability of Co-operative Banks. A Case Study of Trichur District Central Co-operative Bank Ltd., Commerce and Business Researcher” Vol. 1 No. 3 July 1990.

The researcher made an attempt to show the impact of the excess reserves maintained by Trichur District Central Co-operative Bank in Kerala by way of CRR and SLR over and above the statutory requirements on its profitability. In the study, the opportunity cost of excess reserves are computed on the basis of differential interest rates and included in the interest earned. It increased the spread ratio of the bank. The study concluded that the average profitability of the working funds increased after the inclusion of the opportunity cost of excess reserves and thus he suggested that the banks should avoid maintenance of excess reserved. The above study analysed the working progress and the credit management by the DCCBs in various states.

Srinivas, M. “Organisation and Management of Co-operative Bank, Printwell Publishers, Jaipur, 1990. The researcher conducted a micro level study to examine the selected weak central co-operative banks in Andhra Pradesh. The main objectives of his study were to examine the problems involved in the organisation structure and to evaluate the performance of

management of the bank in relation to its objectives and goals. The study confined to 13 years period from 1968-69 to 1980-81.

Negi Bhupal Singh; “Co-operative Credit and Regional Development”, Deep and Deep Publication, New Delhi, 1990

The researcher examined the operations of the DCCBs in the light of recovery performance. Both primary and secondary data were collected for the study and district wise regression analysis was used in the study. A survey was also conducted to determine the causes for slow recovery. Correlation co efficient is used to establish relation between co-operative credit and recovery performance. The problems that block the progress of co-operative credit institutions in Garhwal are non-payment of loans; inefficient management and inadequate supervision over the working of primaries and lack of co-ordination among the lending agencies. The study revealed that the inefficiency of the bank management and the misuse of co-operative credit as the major causes for poor recovery. To improve the situation the study suggested that the co- ordination needed between the DCCBs and District Land Development Bank.

Shaheena et al “Assessing the Utilisation Pattern and Repayment Performance of Crop Loan by Co-operatives” 1990. This study reveals that the various reasons for the poor recovery and overdue of co-operatives in Wyanad District of Kerala. The reasons for the poor recovery were the expectation of write-off loans, illiteracy, lack of irrigation facilities, dearth of modern implements of production, and inadequate supervision and follow up on the part of the bank.

Sahoo. S.K, and Sahoo. S.C., “Management of Co-operative Banks in India, Anmol publication, New Delhi, 1991

The study examined the workings of the Central Co-operative bank in the state of Orissa. The researchers evaluated the growth and development of the banks and their performance in the field of deposit mobilization, lending to

the field of both agricultural and non agricultural sectors, and their recovery performance. The study revealed that the growth in the deposit mobilisation has not been consistent. The deposits from the affiliated societies were satisfactory than the deposits from the individuals. The profitability of the bank has been very low. The suggestions were given by the researchers to increase the profit (i) the working management has to be improved. An improvement of managerial efficiency will definitely lead to a better utilisation of working capital. The bank, its branches and societies are equipped with adequate trained man power they would be able to handle effectively the various banking functions such as deposit mobilisation sound financing and effective collections of overdue.

Frank Ratna Kumar “Co-operative laws and Democratic Management”. (A Study of Changes in the Co-operative Societies Act and their Impact on the Co-operative Movement in the State of Tamil Nadu 1992)

This study is basically descriptive in nature. It is mainly concerned with the analysis of changes in the co-operative laws in the state of Tamil Nadu in the context of co-operative autonomy and Democratic central. However, in order to understand the impact of the abolition of the board in the short term credit structure, a survey is undertaken among the members of PACBs. The study used both primary and secondary data. Among the various blocks in Thanjavur District, 4 blocks were selected on random basis. The absence of democratic management in the helm is reflected in the movement of overdue. “The CCBs are acting more as agents of government than as federation of its constituent units. This should change and the DCCBs should actively involve themselves to develop them as real centres of growth in rural areas.

Jungle “A study on the Socio Economics and Technological Impact of Co-operative Credit in Indian Agriculture”. In Kolhapur District of Maharashtra, 1992

The study revealed that the average yield for sugarcane increased due to the kind and cash portion of loan from the PACBs. The study pointed out that the rich farmers are more benefited and earned more income from tractors by way of getting loan assistance. Majority of the farmers had reported that they borrowed long term credit for irrigation purposes and about 22.40 hectares of additional land area under irrigation by way of the long term credit from the co- operative societies.

Lal et al, “Misutilisation of Co-operative Credit in Agriculture” in Two Blocks in Agra District, 1993

These study shows that the utilisation of Loan amount for productive purposes according to their land holding pattern. The loan amount is, used for unproductive purposes by the marginal and small farmers. The loan amount utilized for productive purpose increased with increase in the size of the farm and the other hand the loan is used for unproductive purpose increased with decrease in the size of the farm. The maximum percentage of loan amount was misutilised by marginal farmers and small farmers.

NABARD, Regional Office Pune, An expose Evaluation Study on Grape Gardens in Nasic District of Maharastra District 1993. The study revealed that there was no instance of misutilisation of loan amount among 51 sample beneficiaries. The net income generated out to Rs. 18,500 per acre. Financial rate of returns to investment in grape garden worked out to 26percentage besides the scheme generated sizeable additional employment opportunities.

Mahalingam. Evaluating “The Role of Institutional Credit in Developing Tribal Economy in the Andaman and Nicobar Islands and Lakshdweep Islands”, 1933

The study reveals that the economical conditions and social status of the tribes were increased by way of getting loan assistance from the co-operative societies. 78 per cent of tribal people in the Andaman and Nicobar Island and 71 per cent of Lakshadweep Islands improved their status by way of getting loan assistance from the co-operative organisation. Delay in getting NABARD refinance and implementation of crop insurance scheme and growing overdue are some of the constraints faced by the banks in providing loans and subsides to the tribal borrowers.

Reddy. S., and Reddy, R.C., “Performance Appraisal of Co-operative Banks – A case study in Bharia, Verma and Garg (cd) Encyclopaedia of Co-operative management” Vol. 3., Deep and Deep Publications 1994.

The researchers attempted to appraise the performance of a District Central Co-operative Bank in Andhar Pradesh. Both primary and secondary data were used to know the performance of the bank. The performance of the bank was verified with the help of the secondary data such as membership position, share capital, branch expansion, deposits, borrowing advances and recovery position of the bank. There had been a considerable increase in the external borrowings due to the poor deposit mobilisation. In many years the target fixed for the deposit mobilisation had not been achieved. The lending performance was not satisfactory. The growth rate of overdue is far higher than the loan outstanding.

Rudra Pratap Singh. “Assessing the role of NABARD in the rural development” 1994.

The study highlights the function and organisational set up, resources structure and financial analysis of NABARD, its refinance operations, development and promotional activities in India.

Nazer. M. Management of CCBs – A study in the Indian Banking Context 1995.

This study is descriptive in nature. It covers the operations of all DCCBs at all India level. Hence no sampling has been followed. Information needed for the study has been collected from the RBI’s and NABARD’s statistical statements relating to the co-operative movement in India of various years. The conclusion of the study is that though central co-operative banks are weaker in certain respects, their importance in the three tier credit system and in Indian Banking structure would always be recognised and felt much.

Puhazendi, “Evaluating the performance of rural credit delivery systems through various financial institutions” 1998

The researchers observed that the bank credit is more helpful to the farmers to cross the poverty line. According to the research, the net areas irrigated are increased from 38.1 per cent to 52.9 per cent in 1970-71 to 1992- 93 respectively. The bank credit is helpful to 14.8 per cent beneficiaries assisted under the programme that could cross the poverty line of Rs. 11,000 while 50.4 per cent of the families are able to cross the earlier poverty line of Rs. 6,400.

Sankaranarayanan. R. “A study on the problems of Overdues and Recovery Management in Pandyan Grama Bank in Tamil Nadu – 1998

The micro level study was made on Pandyan Grama Bank in the State of Tamil Nadu operating with 6 branches in its five operational districts.

(1) V.O.C. District (2) Thirunelveli Kattabomman (3) Kamarajar District (4) Ramanathapuram and (5) Pasumpon Muthuramalingam Thevar Thirumanagan District.

The analytical tools used in the study include simple average, percentage, ratio analysis, compound growth rate, repayment index and multiple regression analysis.

The bank should be able to identify early warning signals and take action to prevent them from becoming maintaining the overdues and non performing assets.

Gopalakrishnan, B.K., Institutional Farm Credit Recovery Issues in Tiruchy District 1990-91 to 94-95, a Multi Dimensional Analysis, 1999.

This study focused on institutional farm credit recovery issues in commercial co-operative and land development bank branches operating in Tiruchy in Tamil Nadu. The study aimed to find out reasons for prompt repayment or default by the borrowers and good/poor recovery by the banks with regard to political, social and economical dimensions during the period of 5 years. This study revealed that the extending efforts on awareness regarding scheme details, particulars regarding operative guidelines, marketing intelligence, alternate scheme to get over temporary overdue problem desirable repayment behaviour etc., Banks, NGOs, Government extension departments should undertake this work effectively with all sincerity Promotion of recovery camps should be arranged in all the villages by the banks to convince the borrowers to repay their debts promptly is the researchers conclusion.

Sumathi. K.B., “A study on the Operational Efficiency of Thiruchirappalli District Central Co-operative Bank Ltd” 1999

Both primary and secondary data were collected for her study. The study reveals that the assets of the bank do not have the same level of liquidity. Hence an attempt is being made to analyse the liquidity of the bank with the help of certain ratios, which ascertain satisfactory position.

Solvency alone determines the credit worthiness of a bank. The bank should maintain higher solvency ratio to infuse confidence of the creditors to meet any unforeseen losses and to compensate any fall in value of assets. The lower the solvency the lesser will be the cushion for creditors. The solvency position of the study unit is found to be good.

The profitability indicates the efficiency and effectiveness with which the operations of the business, is carried on. To analyse the profitability of the bank income and volume of business are ascertained. Besides these ratios, profitability position of the bank has been found out. Thus the analysis proves the bank’s profitability to be commendable and it is concluded that the overall operational efficiency is found to be appreciable.

Namasivayam et al., “A Study on End use of Credit and Repayment Performance of Institutional Borrowers in Chengalpattu District’ 2000.

The study reveals that the end use of credit was for productive purposes by all the three groups viz defaulter, non-defaulter and control groups. The crop loan tended to be more often misused than the term loans.

Conclusion

In the above review, it is observed that most of the studies analysed the performance of DCCBs, and each has its own limitations. (1) Majority of the studies covered only financial aspects of DCCBs. (2) Majority of the studies carried out farm sector loans and some of them carried out the Non-farm sector loans. (3) Some studies related only to the personnel management of DCCBs.

The present study removes these differences and bridges the research gap by providing

(1) Scope for studying the financial performance of KCC Bank Ltd.

(2) Scope for studying entire management of KCC Bank Ltd.

CHAPTER – III

DISTRICT CENTRAL CO-OPERATIVE BANK - AN OVER VIEW

Co-operative is as old as human society. Great philosopher, Aristotle rightly said that Man is a social Animal and this statement will hold good as long as human civilization existing in the world. Today no country in the world is completely self – reliant. Both developed and developing countries are economically interdependent. That is why the interdependent countries, however powerful they might be, are striving hard to establish constructive relations with other countries.

Charles Gide, a French economist, quotes that competition is essentially a field of warfare which means that triumph of the strong and ruin of the weak. Therefore it is co-operative and not conflict which motivates and directs human life towards the pursuit of peace and prosperity. It brings together people and nations and facilitates peaceful coexistence.

History of Co-operative movement in India

Before the introduction of the official co-operative movement in India (1904), many steps were taken by the Government to alleviate the sufferings of the farmers by the provisions of loans. The main reason for the introduction of the co-operative movement in India was the failure of Taccavi loans. The first step towards the introduction of the co-operative movement was undertaken by the Government of Madras. “In 1882, the Governor of Madras, Lord Winlock placed Mr. Sir Fredrick Nicholson on special duty to study the operation of agricultural and other banks of Europe especially that of Germany and to suggest measures by which a similar movement could be organized in India. Mr. Nicholson submitted his reports of two volumes in 1985 and 1987. His reports were reviewed in 1899 by the Madras Government and the opinions of local government were invited. Their answers were considered in June 1901 by a committee appointed by Lord Curzon under the presidency of Sir. Edward

Law. The committee headed by Sir. Edward Law felt that to register the co- operative societies, company act was unsuitable. It also reported on the legislation needed to secure the privileges of credit societies, and to provide for their working and supervision. They concluded that co-operative societies were worthy of every encouragement and prolonged trial. Quickness in farming, a co-operative legislation was felt and the committee draped a bill and them it was passed as the co-operative societies Act of 1904”.1

The introduction of the co-operative credit societies Act in 1904 marked the beginning of the co-operative movement in India. The measure was as “a turning point in economic and social history”. by Henry W. Wolff.2

Co-operative

Honey bees collect honey from the flowers and store it in honey comb for common benefit among them. Similarly co-operative teaches mankind to improve their standard of living by means of self – help through mutual help. It makes an economically weak man in to a strong man by helping him to avail the gains of a powerful man. It eradicates the evils of capitalism, socialism and communism. The evils of capitalism are to extract more work from the workers by paying the low wages, selling the inferior quality goods and incorrect weighted to goods at higher prices to the consumers, Socialism controls overall resources of the country and curtails the freedom of the people to have the property of their own. In communism, the mankind lives only for the state and its principle i.e., “each for all and all for each”. To eradicate the above evils, a distinct form of organization comes in to existence which is known as Co- operation.

1 Report regarding the possibility of introducing Land & Agricultural Bank in to the Madras presidency (2004 Vol. I, p.3. 2 Henry. W. Wolff. Co-operation in India-1927, p. 129.

Definition

Today co-operatives are the most important types of voluntary organization throughout the world. In some countries, they are the principal form of organization in agriculture, marketing and supply, provision of credit and distribution of consumer goods.

According to Dr. R. Philips, “the co-operative association is an association of firms or households for business purposes – an economic institution through which economic activity is conducted in the pursuit of economic objectives.” 3

Other than individuals, committees and organizations have also defined co-operative to suit the purposes for which it has been formed. The co- operative planning committee defined it as “Co-operative is a form of organization in which persons voluntarily associate together on the basis of equality for the promotion of their economic interest.4

The Indian co-operative societies Act of 1912 has not given any definition for co-operative. But section 4(c) considers a Co-operative society as, “a society which has its object, the promotion of the economic interests of its members in accordance with the Co-operative principles”.5

The fundamentals of a Co-operative organization are:

i. “Service not profit”

ii. “Co-operative not competition”

iii. “Self-help not dependence on the profit crazy businessmen” and

iv. “Moral solidarity – not unscrupulous under cutting”.

3 Philips, Economic Nature of Co-operation Association, p. 74, quoted by Yehuda Don, Year Book of Agricultural Co-operation-1960. 4 Report of the Co-operative Planning Committee (1946) 5 Recent Trends in the Co-operative Movement in India, P. 4-5.

The co-operative societies also undertake banking activities. These societies are commonly known as co-operative banks. As per the section 7(1) of co-operative societies Act, a Co-operative bank has to use the word ‘Bank’ or ‘Banker’ as a part of its name and a society not carrying banking business cannot use any of the said words as a part of its name. The exceptions to this provision are as follow:

a) Primary credit societies, b) a co-operative society formed for the protection of the mutual interests of co-operative banks or co-operative land mortgage banks, and c) “any co-operative society not being a primary credit society formed by the employees of a banking institution notified by the central government under sec 51 or the employees of a subsidiary of such banking company or the State Bank of India or, as the case may be, such banking institution”. (Section 7 (2) (c) is introduced by the Act of (1968)

Structure of co-operative banking

There are diffluent types of Co-operative credit institutions working in India. These institutions can be classified into two broad categories: Agricultural and Non – agricultural.

The structure of co-operative credit institutions is shown in the chart given below:

Co-operative Credit Institutions

Agricultural Non – Agricultural

Credit institutions Credit Institutions

Short term Credit Long term Credit institutions

Institution (Land Development Bank)

State Co-operative Central Primary Agricultural

Bank Co-operative Credit Societies

Bank

Agricultural credit intuitions dominate the entire co-operative credit structure. Agricultural credit institutions are further divided into short term agricultural credit institutions and long term agricultural credit institutions.

The short term agricultural credit institution which cater to the short term financial needs of agriculturists, have three-tier federal structure:

a) State Co-operative banks

b) Central Co-operative banks and

c) Primary agricultural credit societies.

a) State Co-operative banks

State co-operative banks means the principal co-operative society in a state, the primary object of which is the financing of other co-operative societies in the state. State co-operative banks are called as “apex” banks which form the apex of the Co-operative credit structure in each state. A state co- operative bank (SCB) is the federation of central co-operative bank. It is the vertex of the pyramidal structure in a state for the provision of short term and medium term credit to the agriculturists on co-operative basis.

It is the “Key stone of the co-operative movement in the state. It links the movement not only with the commercial money market, but also with RBI as potential sources of credit for seasonal and emergent needs.” 6 There is only SCB in each state. The chief functions of SCB are:

 They act as banker’s bank to the KCCB.

 They form the connecting link between the market and the co- operative movement.

 They co – ordinate the co-operative policy at the state level.

 They supervise and guide the activities of the central banks.

 They act as the friend, philosopher and guide of the co-operative movement.

The memberships of the SCB are open to all CCB, PACS and individuals. The supreme authority of SCB vests in the hands of general body. The day to day affairs of the SCB are in the hands of the board of directors.

The sources of the working capital of the SCB are share capital, reserve find, deposits from members and non – members and borrowings from RBI and state Government.

6 Review of Co-operative Movement in India, 1950-52, RBI

b. Central Co-Operative Banks

The Central co-operative banks (CCBs) are one of the strongest units in co-operative banking structure. Though originally there was no provision for the organization of such banks under 1904 Act, the 1912 Act paved the way for the organization of Central co-operative banks throughout the country. This act was enacted as per the guidelines of the Maclagan committee.

 Banks of which the membership is confined to individual.

 Banks of which the membership is confined to societies also, and

 Banks which include both individuals and societies as their members.

DCCB occupy a strategic place not only in the co-operative banking structure but also in the three tier agricultural co-operative credit structure. They are one of the strongest units with greater responsibilities entrusted to them. They operate in a district by opening many branches, raise its resources through deposits and lend to agriculturists through the PACs. They are the powerful intermediaries of PACs and apex co-operative banks. So many committees have pointed out that importance of the CCB. The All India rural credit survey committee has pointed out that “in many ways, this position of CCB is of crucial importance in the co-operative credit structure. They form an important link between the SCB and PACs at the base”. 7 c) Primary agricultural credit societies

These societies were started in India after the passing of the co-operative societies Act 1904. The PACs were started with the object of providing cheap and timely credit to the farmer. These societies operate at the village and farmers are its members. The membership is open for all the residents of locality or village where it operates.

7 RBI, Report of All India Rural Credit Survey Committee, Vol. II, 1954, p. 445.

PACs have a restricted area of operation to ensure mutual supervision and watchfulness among the members.

The resources of the PACs consist of share capital received from its members, entrance fees, reserve fund, deposits from members and non – members and loans from DCCB, government, etc.

The affairs of the society are managed by BOD. The supreme authority of the society rests in the hands of a general body.

PACs provide medium and short-term loans to farmers. These banks are financed by NABARD and state apex Co-operative bank through DCCBs.

Long-Term Agricultural Credit Provided by the Land Development Bank

Besides short term credit, the agriculturists also need long term credit for making permanent improvements in land, for repaying old debts for purchasing agricultural machinery and other implements. Traditionally, the long term requirements of agriculturists were mainly met by money lenders and some other agencies. But this source of credit was found defective and has been responsible for the exploitation of farmers. Co-operative banks and commercial banks by their very nature are not in a position to provide long – term loans because their deposits are mainly demand deposits. Thus there was a great need for a specialized institution for supplying long term credit to agriculturists. The establishment of land development banks is an effort in this direction.

Thus land development banks (or land mortgage banks as they were previously called) were organized for the purpose of providing long – term credit to farmers. The progress of land development banking has been very slow and also uneven. During the great depression, land development bank received some formulas as agricultural prices fell considerably and the agriculturists needed assistance. But with in starting of World War II in 1939 conditions were changed. The agriculturists experience a great measure of property and were in a position to repay their debts to the land development

banks. After independence, land development banks have been enjoying a greater degree of prosperity, through confined to only a few states viz, Andhra Pradesh, Tamil Nadu, Karnataka, Maharashtra and Gujarat.

Co-operative banks are expected to raise their own resources by way of deposits and providing banking facilities in rural areas. The all India rural credit review committee has pointed out that though the co-operatives have been in the field longer than any other agency, their success in attracting rural savings has, at best, been modest. In recent years, the stress in their operation has been on lending rather than on thrift which is a major objective of co- operative organizations. But it has now disappeared even from the nomenclature of the societies.”8 The committee was very clear that the CCBs and their branches are the most suitable agencies for the job.“It is obvious that the unit in the co-operative credit structure, which has the best prospects of success in attracting rural deposits, is, at present and in the immediate future, the branch of CCB. Both from the point of view of the quality of its management and its success in providing minimum banking service, the average PACS is yet far from the type of rural banking unit into which it will grow. At the other extreme, the SCB is not generally expected to open branches except in the metropolitan city where it is located. Almost the entire field of rural saving is, therefore open to branches of the CCB”.9 But the progress made by the CCB in deposit mobilization is not satisfactory. Agricultural credit review committee (Khusru) 1989, is of the opinion that, “The CCB in general do not appear to have made all the possible efforts for mobilization of larger deposits”10.

The success of short term agricultural credit to a greater extent is credited to the efforts of CCB. They have streamlined the old system of lending and crop loan system is popularly introduced. The central co-operative banks are responsible for the success of the crop loan as they have to raise the finance

8 RBI-Report of the AIRRC, 1969, p. 671. 9 Ibid, p. 675 10 RBI, Report of Agricultural Credit Review Committee-20007, p. 208.

and route them through the PACS. Even non – agricultural co-operatives are financed by the CCB. Along with the CCB, the commercial banks and RRB also finance for agriculture.

A CCB undertaking as a form of an organisation is marked by the following distinguishing features:

 The membership is open to all primary level societies, such as Co- operative credit societies, marketing societies and consumers’ stores etc. individuals are not accepted as members of CCB.

 The area of operation is usually confined to one revenue district. The general policy is that, there should be only one CCB for each district. However the area of operation of CCB varies from one state to another.

 The CCB advances short and medium term loans to PACS for production, supply and marketing purposes for agricultural products.

 The expanding area and scale of Co-operative activity and growing diversification have made it necessary for the Co-operative banks to build larger resources to meet the demand. The CCB raises funds by way of share capital, deposits from member societies and individuals, loans from SCB and grants from government.

 Loans for agricultural purposes are generally granted against the societies. But other loans are granted against security of land property, hired deposits receipts, life insurance policies, and Government promissory notes etc, exerted by borrowing societies.

The rate of interest on loans and advance charged by these banks varies from 5.5 percentage to 20percentage according to the nature and purpose of loans. The importance of CCB which is a part of three tier credit system occupies a strategic place of the mid – tier.

 It has to undertake various promotional and development activities for the welfare of the Co-operative movement in a district.

 The leadership for the Co-operative movement necessarily comes through CCB.

 It is the spokesman not only for the PACs in a district but also for other kinds of Co-operative institution in a district as well.

 It acts as a balancing centre to its affiliated societies. By this process the surplus resources of primaries are pooled by the central bank and disbursed to the needy societies.

 As a vast majority of the primary societies do not have surplus resources, the balancing centre function is executed in the form of distributing credit to them.

 It is very much needed to help the member societies especially PACS.

 The CCB takes steps to help PACS to raise their own resources by way of deposits, opening more branches and by improving banking facilities.

 The bank provides the link between the lower and higher units.

 They are stronger in terms of financial organization and managerial aspects.

 They have created stability and variability.

Economic growth and social justice have been accepted as the principal objectives of planning process in our country. However, in reality, the growth aspects were kept more in prominence with social justice relegated to the background. As a result of this, the rural poor who occupy a pivotal place have suffered a lot. Their number is already large and raising at an alarming proportion year after year.

Agriculture being the main occupation in India is not able to sustain the living of rural population. One of the perennial evils prevailing in the Indian agricultural economy is rural indebtedness. The Indian farmers, especially a small, marginal and landless farmers has been traditionally a poor lot who takes loans not only for investments in seeds, fertilisers etc, but also for his dare subsistence and for the fulfilment of his social obligation. Once he borrows, he finds himself unable to repay the loan. As a consequence, his burden of debt accumulates till he breathes his last and relinquished the debt to be repaid by his successor. That is why, it has been critically remarked that “The Indian farmer is born in debt, lives in debt and dies in debt”.

The credit needs of the rural people can be taken to be the same as the credit needs of agriculturists as the latter constitute the majority of the rural population. The estimates of credit requirements of the rural sector at the macro level have been worked out by various agencies.

The CCB which occupies an important position in the Co-operative credit structure is expected to discharge certain duties and to play the leading role in the growth and development of the Co-operative movement. It is expected to play the following roles.

 Raising resources and attaining self-sufficiency is one of the important Goals of CCB.

 The CCB is expected to guide the PACS and other member societies in all respects. By being the guardian in the financing agency. They have the responsibility to supervise the working of primary societies.

 Development of rural banking is one of the important tasks of CCB. Rural banking should be the prime activity of Co-operatives and that too of CCBs.

 In performing and popularizing the crop loan system, the role of CCB needs no emphasis. The crop loan system with decades of service to the farmers needs certain modifications and dynamisms.

Agricultural Development through CCBs

The CCBs are important link between the state apex Co-operative bank and the PACs. It is necessary to have CCBs from administrative point of view and for economic viability of PACS. Due to the presence of CCB, effective supervision over the proper utilization of loans advanced to primary Co- operative banks is carried out. The RBI has observed that continuous and effective supervision over the PACS is one of the effective ways of ensuring the efficiency and growth of the CCB. The CCBs mostly at the district level are approachable by their constituent’s i.e., the primary credit and service societies. In view of increasing agricultural credit and implementing, the notification of rural credit by the commercial banks, it is more imperative rather compelling for the CCB to be more effective and liberal in financing agriculturists through primary societies for various purposes including the consumption and non – farming activities, e.g. agro based small and cottage industries, animal husbandries and processing of agricultural produces etc.

The CCB has assumed greater importance in developing rural economy. DCCB has to finance agricultural credit and rural industrialization in the years to come.

The concept of central financing agency, at the district level, under the Co-operative sector existed in India long ago in the form of Co-operative banking unions, but they were ill – equipped and badly organised.

The Rural Credit Survey report has pointed out that only one CCB in the district should be allowed under co-operative sector, the numerous banks including the banking unions should be replaced by CCB.

The Reserve Banks standing advisory committee has also advised that there should be only one CCB for each district. They survey committee agreed to the opinion expressed by the standing advisory committee. The CCBs have to be viable as they have to perform continuously as the nodal financing agency in the entire district.

The All India Rural Survey Committee had recommended that the CCB should posses share capital and reserves to the extent of rupees 3 lakhs and working capital to the tune of Rs. 20.25 lakhs besides loans business of at least rupees one crore. The above criteria were necessary for a viable bank at the time; these have necessarily to be many more times at present.

“The reason for establishment of DCCB is that there should be an intermediary agency between the primary credit societies with rural bias run by agriculturists having no touch with the money market and provincial co- operative banks run mainly by city men with urban bias and having no close association with the country side”.11

DCCBS are able to function well and provide finance to other co-operative societies for rural development in an efficient manner, mainly because of their high financial position, which is due to, borrowing from NABARD through SCB.

The first CCB was registered in Uttar Pradesh in 1906 as a primary society.

In Rajasthan, the first CCB was started in 1910 at Ajmir. But the revised Act stimulated the growth of the central financing agencies and within a few years, a large number of such banks were established. The period from 1906 to 1918 might be called the period of origin of the CCB in various parts of the country.

11 G.M. Laud-Co-operative Banking in India, p. 336. The Co-operation Book depot. Bombay 1956.

“The decade from 1919 to 1929 which was roughly the period between the end of the First World War and onset of the world depression, was marked by the expansion of Co-operative banking system. The number of CCB increased from 223 in 1919 – 1920 to 588 in 1929 – 1930, when their membership increased from 1.22 lakhs to 1.91 lakhs. The total working capital increased from Rs. 6.43 crores to Rs. 30.90 crores.”12

The onslaught of depression in the thirties adversely affected the working of the CCB. There was a significant increase in the Overdues of these banks. There was also a marked decline in the membership of these banks. The membership of the individuals declined from 90 lakhs in 1929 – 1930 to 85 lakhs in 1936 – 1937 while that of the societies from 1.01 lakhs to 0.91 lakhs. The number of these banks however increased from 588 in 1929 – 1930 to 611 in 1936 – 1937 because of the registration of new banking union in the former princely states in Uttar Pradesh and Bihar.13 The war period provided a greater special to CCB in India. There was a substantial increase in the owned funds and working capital of these banks.

Since the structure of the central financing suggested that each state should draw up plans for the rationalization and strengthening of CCB in several of their aspects including finance and administration, during the first plan period therefore, the states began to follow the process of reorganization and amalgamation of the CCBs. This process was rigorously followed during the second plan period also. The basic principle of one CCB for each district began to be followed in all the states and whereas more than one bank or banking union existed in the district, the same was amalgamated so as to form one strong and viable unit. When the CCB was serving more than one district its area was curtailed and new banks were registered in such districts.

12 Ibid, p. 207. 13 Ibid, p. 207

As a result of this reorganization and amalgamations, the number of CCB fell from 505 in 1950 – 1951 to 478 in 1955 – 1956 and 380 in 1960 – 1961. In some of the states like Bihar, Punjab, Rajasthan and West Bengal, this phased programme had to be carried on during the third plan also. In Bihar the number of CCB which stood at 35 in 1960 – 1961 were brought down to 28 by 1965 – 1966, in Punjab from 34 – 31, in Rajasthan from 28 to 20 and in West Bengal from 29 to 21. On account of this amalgamation and reorganization the number of these banks fell from 380 in 1960 – 1961 to 346 in 1965 – 1966.14 The accepted policy is to have only one CCB in each district. In some areas / states notably Andhra Pradesh, Assam, Tamil Nadu, Bihar and West Bengal have more than one bank, however still continue to exist in the same district in certain areas.

The function of DCCB has been undergoing a lot of changes, since its inception, to meet the requirements of the on going day to day activities. The changes are phenomenal since 1980. Especially, during later part of 1980’s a review of the performance of DCCB in 1980 shows the extent to which the functions of DCCB have undergone changes.

There are two main types of Co-operative credit institutions in our country viz, land mortgage or land development Banks which long term or investment credit and short-term Co-operative credit institution which purvey by and large short term credit or working capital. The LDBs have two tiers viz, state land Development banks at the state level and the primary land development banks at the district, Taluk or even block level in some states like Uttar Pradesh and Maharashtra, the land development banks unitary in character and operate through their branches. The short – term Co-operative credit structure on the other hand is federal with three tier viz, SCBs, DCCBs and PACS at the base level.

14 Ibid, p. 209

The short term co-operative credit structure has often been criticized for operating through 3 tiers. The charge levelled against it, is that such a system makes credit cost heavy, due to the existence of three institutions one at the third at the village level, each claiming a margin for its functioning. There is a feeling in certain quarters that the three tier system can as well do without the assistance of the middle tier, viz DCCB. Studies have shown however that the increases in cost are routing credit though a DCCB is only by a quarter percent. On the other hand, the gain to the system in making it democratic and more effective outweighs the nominal increase in cost. It is therefore necessary to understand in all its fullness, the significance of the role played by the DCCBs in supplying credit for agriculture and rural development.

Functions of DCCB

The main functions of DCCBs are as follows:

Mobilization of deposits

There were 353 DCCBs in the country at the end of the year 1986 – 1987 and their total deposits amounted to Rs. 5928 corers.15 The growth rates of deposits during the year were of the order of 20.2percentage as compared to a growth rate of 14.1percentage during the previous year. The percentage of deposits to working capital of the DCCBs has risen from 55 in 1984 – 1985 to 57 in 1985 – 1986 and to 59 in 1986 – 1987.

During 94 – 95, there were 360 DCCBs in the country and their total deposit amounted to Rs. 20320 crores. After the year 1986 – 1987 the deposits have increased by 29percentage and also the percentage of deposits to working capital of the DCCB have risen to 61percentage in 94 – 95. This shows a gradually lower reliance or refinance from the NABARD. Incidentally of the deposits of DCCBs, about 38percentage were from Co-operative societies and the balance from the public, including individuals.

15 Report on trend progress of Banking in India, Published by RBI, p. 154.

Extending credit support for Agriculture

The loan issued by the DCCBs amounted to Rs. 6476 crores in 1984 – 1985, Rs. 7317 crores in 85 – 86 and Rs. 6810 crores in 86 – 87 and the loan outstanding during these years were Rs. 0.075 crores, Rs. 5444 crores and Rs. 6717 crores respectively. Refinance from NABARA supplemented the deposit resources of the banks to enable them to reach this level of advances, most of which were to their member societies. The DCCBs have however yet a long way to go in meeting the short – term credit needs of the farmer for which there is considerable potential. It is precisely because the co-operatives were weak than the commercial banks were urged to fill in the credit gaps. The commercial banks were expected to lend to the agricultural sector 17percentage of their total advances which target has now been stepped up to 18percentage.

The DCCBs are weak and particularly against their background will have to strengthen their financial position and improve on their working to be able to supply credit effectively. A DCCB is considered as weak when it’s estimated bad and doubtful debts, overdues. Over 3 years and accumulated losses exceeded 50percentage of its paid up capital and reserve.

As on 30.06.86, 173 DCCBs have been identified as weak and placed under a scheme of rehabilitation. From the year 1975 – 76 the numbers of such banks have been more or less constant year after year and as many as 58 DCCBs were under rehabilitation continuously for more than 10 years.

In the year 1994 – 95 the loan issued was Rs. 32042 crores, and the loan outstanding was Rs. 1799 crores.

Recovery of Dues

The DCCBs functions are not only to give the loans and advances but also to see that they are put to good use, but to ensure prompt and full recovery from the farmer when the crop is harvested and sold in the market. It is only then the credit cycle is complete. The objective of achieved is not only

benefiting the farmer but also maintaining the strength and integrity of the financial institutions for a smoother flow of a larger volume of credit and thus safe guarding the interest of depositors. The reserve flow of funds in the DCCB will enable the depositor to withdraw his savings as and when necessary and maintain his confidence in the bank. Unfortunately, the DCCBs in the country have not been playing an aggressive role in the recovery of loans as in the financing of societies. The Overdues of the 353 DCCBs in the country amounted to as much as Rs. 183 crores at the close of the year 86 – 87 as against loans issued amounting to Rs. 6343 crores and loans outstanding of Rs. 6217 crores. The proportion of Overdues to demand, in fact increased over the years from 36.9percentage in 1984 – 1985 to 37.8percentage in 85 – 86 and then to 39.0percentage in 86 – 87. this indeed is a sad commentary on the working of the DCCBs. It is no consolation to point out that the recovery of performances of commercial bankers and RRBs are as unsatisfactory as that of the DCCBs.

During 1994 –1995 the percentage of overdues to demand stood at 31.69percentage and from the one can understand the recovery of heavy overdues in condition not conducive to recovery but not in state and District which are relatively free from natural calamities.

Leadership Role

The DCCBs are required to set the tone of the working of the societies in its area of operation. The DCCB differs from many of the other banking institutions in the nature of its set up viz, that it is federal in character with primary societies as its clientele. It has therefore, to assure overall responsibility in guiding the societies in this business. It is not enough for instance for the DCCB to mobilize deposits but it has also to urge all the societies to do so in their respective village. The stronger the resources based on the societies, the lesser would be their reliance on the funds of the DCCB and hence the greater chances of this functioning on a viable basis. The base

level primary societies are the key stories in the overall system of the co- operative movement and stronger the societies, the greater the soundness and the image of the DCCBs. In fact, the village level societies are so crucial to the success of the co-operative spirit and ideology that it is more important to strengthen them than even the district or apex bank. In states like Maharashtra and Gujarat some of DCCBs retain a larger margin of profits than necessary for this workings, a part of this could be passed on to the primaries which would shape better with more income in as much as, among other things, they would be able to bear the cost and appoint well qualified and trained paid secretaries to look after their business. Thus the DCCB is not only a vital bank between the state level and apex bank and primary societies but has a place of its own in the co-operative set up. The closer the contact of the DCCBs with the primaries, the better it will be able to foster. Co-operative principles and ideology and assist them in their overall working.

Much depends, however; on the competence and earnestness with which it plays its role in financing the primaries and bring about the farmers uplift and development.

DCCBs and impacts of disciplines imposed by NABARD

The relation between the RBI and co-operative banks has always been very close. The latter can get direct accommodation from the RBI by discounting agricultural and other eligible bills at confessional rate of interest. Special privileges are also provided in the matter of repayment, the duration of the loans etc, the RBI has floated two special funds to help the agricultural credit movement to grant long-term loans to state Government to enable the latter to participate in the share capital of co-operative societies and to grant medium term loans on special occasions, besides, the RBI has been responsible for the establishment of the SCBs in all states and for the change in the structure of the co-operative movement in the country. The funds of the bank are increasingly entering the rural sector thought the medium of the co-

operative movement. After the setting up of NABARD in 1982, the RBI has passed on its rural credit function to NABARD.

The setting up of the NABARD

RBI felt that there was need for a new organizational device for providing undivided attention, forceful direction and pointed focus to the credit problem arising out of integrated rural development. For this purpose, RBI recommended the setting up of the NABARD to operate as an apex bank for agriculture and rural development. The NABARD was accordingly set up in July 1982 by an Act of parliament. It has taken over from the RBI, the overseeing of the entire rural credit system, including credit for rural artisans and village industries and the statutory inspection of co-operative banks and RRBs. At the same time, it has taken over the refinance functions of ARDC.

The NABARD has undertaken the following functions

 NABARD serves as a refinancing institution for all kinds of production and investment credit to agriculture, SSI, handicrafts and rural crafts and other allied economic activities with a view to promoting integrated rural development. NABARD has taken over the functions of refinancing from the ARDC.

 It provides short term, medium – term and long term credits to SCBs, RRBs, and LDBs and other financial institutions approved by RBI.

 It gives long term loans up to 20 years to state government to enable them to subscribe to the share capital of Co-operative credit societies.

 It gives long term loans to any institutions approved by the central government or contribute to the share capital or invest in securities in any institution connected with agriculture and rural development.

 It maintains a research and development fund to promote research in agriculture and rural development to formulate and design projects and

programmers to suit the needs of different areas and to cover special activities.

 It has the responsibility of Coordinating the activities of central and state government, the planning commission and other all – India and state level institutions, entrusted with the development of SSI, village and cottage industries, rural erupts, sectors, etc.

NABARD is thus an apex organization with respect to all matters relating to policy. Planning and operation aspects in the flow of credit for the promotion of agriculture, SSI, cottage and village industries, handicrafts and other rural crafts and other allied economic activities in rural areas. The bank is a single integrated agency for meeting the credit needs of all types of agricultural and rural developmental activities.

NABARD has started playing an energetic role in strengthening and reorganizing the co-operative structure in the country. The programme of reorganizing the PACS aimed at building up a strong and viable base level structure in the co-operative credit systems and is more or less complete in all states except Gujarat, Maharashtra and Jammu & Kashmir. NABARD has formulated a set of guidelines for planning the future development of reorganized co-operative societies in a phased manner. During 1982 – 83, as many as 5000 (approx) societies were covered. NABARD is also working towards an effective integration of co-operative credit institutions. Under an original suggestion made by RBI, state Government have been asked to take steps to ensure functional co-ordination between short – term and long – term credit. NABARD has set up a cell to monitor implementation of this programme. NABARA is constantly reviewing the rehabilitation programme of those CCBs which have been identified as weak and which are being helped to rehabilitate themselves.

NABARD has thus taken over the functions of ARDC and of the responsibilities of RBI, to oversee the entire rural credit system. Much is

expected from it to give a tremendous push to agricultural credit and thus promote agriculture and rural development.

Co-operative credit policy in eighth Five year plan (1992 – 1997)

Appraisal of past performance

The eigth plan has reviewed the past performance of the Co-operative credit in the following ways:

 The co-operative movement aims at a) building the strength of the people with limited means and b) saving the rural poor small farmers, marginal farmers, agricultural labourers and small artisans from exploitation by money lenders.

 Today, India has a wide network of primary agricultural credit societies (PACS) at village level. At district and state level. Co- operative federations have been set up in almost all states.

 Co-operatives have, over the years, significantly diversified their activities to include credit, banking input distribution, agro – based processing, storage and warehousing.

 The function of thrift has not been given de importance by co- operatives, thus leading to resource and ultimately to their inability to save the poor.

 Growth of co-operative sector has not been uniform in all parts of the country. The main reasons for this situation are: a) Control of co- operatives by vested interest groups, b) poor management c) dependence of Co-operative on higher tier and d) Limited range of the business activities.

Eighth plan strategy:

The strategy for co-operative credit development in 8th plan would be as follows:

Building up the co-operative movement as a self-managed, self regulated and self-reliant institutional set-up by giving more autonomy to co- operatives and by democratizing the movement

Enhancing the capabilities of co-operatives for enabling them to play a significant role in improving the productivity of the economy and in creating employment opportunities for the rural people

Strengthening co-operative credit and organized structure in accordance with modes leaves and to make it competitive and viable

Extending adequate credit support to the programmes of National poverty alleviation

Appropriate linking of consumer co-operative for implementing Public Distribution System (PDS) for the benefit and protection of consumers

Development and training of co-operative functions, professional management and introduction to suitable personal management policy

Review of co-operatives with a view to liberate the working of co-operative institutions and freeing term from bureaucratic control.

Central Co-operative banks in Tamil Nadu

At first 12 Central co-operative banks CBs were set up in Tamil Nadu in the year 1912 under the co-operative societies Act. The total number of CCBs was increased to 17 in the year 1986.16

There is one CCB for each district except Thanjavur, where there are two CCBs. Consequently on the trifurcation of Ramanathapuram district into three districts namely, Ramanathapuram, Pasumpon Muthuramalingam and Kamarajar districts and bifurcation of Madurai district into Madurai and Anna district. It is proposed to form a new CCB for each of the above districts. Steps are being taken for the formation of new CCBs.

There are nearly about 4655 PACS at the village level, 17 CCBs at district level (excluding the Madras CCB which does not undertake agricultural financing, otherwise 21) and the TN state SCB at the state level constituting the co-operative credit structure of TN state for the provision of short - term credit for cultivation operation and medium – term credit for subsidiary occupation allied to agriculture.

The CCBs finance the agricultural credit societies of the respective areas from their own resources consisting of share capital, reserves and deposits and from the credit limits of NABARD routed through the TNSCB. Besides passing on the NABARD credit limits, the SCBs also lend to the CCBs from its own resources. The weavers of Co-operative societies and financed similarly supplementing the credit limits provided by the NABARD. The CCBs are federation of agricultural credit Co-operative and Co-operative banks of other types in their respective areas, while the Tamil Nadu SCB is the federation of the DCCBs.

The researcher has selected the study unit to know the financial performance of “KCCB Ltd”, Kumbakonam.

16 The CCBs in Tamil Nadu, Publication No. 124, Tamil Nadu, Co-operation Union-Madras-March, 2009, p. 1.

CHAPTER IV

PERFORMANCE ANALYSIS OF KCC BANK LTD, AND INTERPRETATION

In this chapter an analysis is made about the performance and working pattern of KCCB Ltd.,

Introduction

Institutionalizing credit in the villages is a recent twentieth century phenomenon in the country. Co-operative management with its credit component has been launched in India for nine decades ago but with a very limited effect. After independence and introduction of welfare concept of administration, these efforts have continued but not as vigorously as might have been. And then for various reasons an unhealthy dominance of the privileged classes on the co-operative has prevents them from doing anything really substantially for the poor.17

Among the institutional agencies functioning in rural areas, Co-operative institutions including banks occupy a dominant place. They have been recognized as the most ideal agencies and an excellent means in bringing the benefits to the people. There is therefore an urgent need for the co-operative banks to build-up adequate resources to meet the increasing need of the people.

Present chapter deals with profile, origin and growth of KCCB Ltd., in Tamil Nadu.

17 Gyan Singh (Ed) Rural Banking – Kurushetra, New Delhi, 16 October, 1977, p. 3.

Origin and Growth of the Kumbakonam Central Co-operative Bank Ltd.

According to By-Law 1 of the Bank, the Central Co-operative Bank Ltd, Kumbakonam, was registered and established on 08.02.1913 as a limited liability society under the Act of 08.02.1913 (D.R’s Rc.16359/73 c dt. 31.10.73). Its registered office is at Kumbakonam.

Objectives of the KCCB

In addition to the general objectives of a Central Co-operative Bank Mentioned in Chapter-II previously, the By-Law No.1 of the Central Cooperative Bank Ltd., Kumbakonam, herein after called the KCCB or the Bank furnished the following objectives:

1. To collect funds for financing co-operative societies registered under Act II of 08.02.1913 (India) or Madras Act VI of 1932. 2. To develop, assist and co-ordinate the work of affiliated supervising Unions and secure for them financial help whenever necessary and to Arrange for the supervision of societies not affiliated to any Supervising union and for inspection of all societies and union. 3. To organise special type of societies in cases where this is not Undertaken by the union. 4. To arrange for holding periodical co-operative conferences and for taking necessary action on the resolution passed at such conference. 5. To serve as the recognised exponent of non-official co-operate opinion in the area. 6. To take the surplus funds of liquidated societies. 7. To promote cottage industries in the district. 8. To undertake such other works as will promote the cause of cooperation and

9. (DR’S R.C. 1065/77 C. dt.22.6.77) To guarantee the loans and advances or credit granted to any affiliated society by the

Government, State Bank of India or any other agency within such limits and such terms as may be agreed to between the guarantor and guarantee and charge commission thereon. The Bank may also carry on general business of banking not repugnant to the provisions of the co-operative societies Act and the rules framed there under.

ORGANIZATION OF THE KCCB

The organization of the KCCB consists of two wings, deliberative and executive. The deliberative wing consists of the General Body, the Board of Management and the Chairman. The executive wing at the headquarters is further divided into two: the Banking Wing and Administrative Wing. The chart-I gives a clear picture of the organization of the KCCB.

The General Body is the highest authority in all matters relating to the policy and administration of the KCCB. It meets at least once in a cooperative year. The day-to-day administration of the KCCB is entrusted tothe Board of Management. It decides policies and supervises their implementation. The chairman who is the political head of the KCCB is the most important functionary. He, apart from presiding over the meeting of the General Body and the Board, exercises general control and supervision over the affairs of the KCCB.

The Banking Wing on the executive side deals with all banking functions like any other commercial bank. It is headed by the Secretary who is assisted in his duties by an Assistant Secretary. The wing is divided intofive sections each under the control of an independent manager viz. Manager Central Office, Manager Accounts, Manager Loans and Advances, and Manager Branches. These five managers are assisted by accountants and cashiers. The administrative wing deals with the general administration,

supervision and control. It is responsible for the recovery of loans advanced by the bank. Its other functions include all those matters connected with the board and its committees like the preparation and circulation of agenda, maintenance of minute’s book, etc. It is headed by the Chief Executive Officer, who is assisted in his duties by the Development Officer or Liaison Officer. These two heads are assisted by the Manager Administration. This wing is divided into about 17 sections viz. establishment, plans and schemes, loans, paid-secretary, advances and recovery, inward and onward, fair copy, statistical section, societies, supervisors circles, execution and liquidation, legal reviews, dispatch recovery, inward and onward, fair copy, statistical section, societies, supervisors circles, execution and liquidation, legal reviews, dispatch records, typing, provident fund, etc.

The branch organizations at the taluk and village level constitute an important link between the KCCB and the primary agricultural co-operative bank. Its main functions are to create the habit of savings among the people: mobilize deposits, scrutinise loan applications and recover the loans in its area of operations. The branch is headed by the Branch Manager who is assisted in his duties by one cashier and one or more clerks. Larger branches have one accountant in addition to cashier and clerks. Both secretary and the Chief Executive officer exercise control over the branches. The total number of branches and the number affiliated society’s are clearly shown in the table 3.1.

TABLE 3.1

Branch wise Registration and Number of Affiliated Societies

Number Date of of S. No Name of Branches District Registration and Societies Commencement Affiliated 1 Head office Thanjavur 08.02.1913 594 2 Aduthurai Thanjavur 27.09.1969 18 3 Ammapet Thanjavur 06.05.1971 25 4 Keelvalur Nagai 30.12.1986 9 5 Kodavasal Thiruvarur 14.02.1970 26 6 Kollidam Nagai 30.03.1970 29 7 Koradachery Thiruvarur 25.03.1972 18 8 Kumbakonam Town Thanjavur 24.03.1973 32 9 Kutthalam Nagai 19.02.1973 17 10 Magalir Koranadu Nagai 15.09.1994 - 11 Manalmedu Nagai 01.10.1990 2 12 Mayiladuthurai Nagai 25.10.1962 23 13 Muthupet Thiruvarur 27.09.1969 23 14 Nagapattinam Nagai 04.02.1967 29 15 Nagoor Nagai 09.10.1990 3 16 Nannilam Thiruvarur 02.03.1967 22 17 Pandanallur Thanjavur 22.03.1974 20 18 Papanasam Thanjavur 02.03.1967 25 19 Peralam Thiruvarur 08.09.1977 26 20 Poompuhar Melaiyur Nagai 10.04.1999 - 21 Poraiyar Nagai 09.10.1990 4 22 Sembanarkovil Nagai 04.09.1971 30 23 Sirkazhi Nagai 30.03.1969 20 24 Sugar Mill Branch Nagai 13.12.1984 13 25 Thalainayar Nagai 07.10.1977 21 26 Thirubhuvanam Thanjavur 12.08.1982 16 27 Thirupananthal Thanjavur 13.12.1973 19 28 Thiruthuraipoondi Thiruvarur 15.08.1971 32 29 Thiruvarur Thiruvarur 04.08.1962 26 30 Thiruvarur-Town Thiruvarur 24.04.1996 2 31 Thittacheri Nagai 24.04.1996 5 32 Valangaimang Thiruvarur 12.07.1974 27 33 Vedaranyam Nagai 25.08.1971 32 Source: The Official records of The Kumbakonam Central Co-operative Bank

Functions of the KCCB

The by-law 3 deals with the share capital of the KCCB The share capital of the bank shall for the present be (2001-2002) Rs.1326/- lakhs made up of 13, 25,75,950 `A` -class share 50/- each and `B` -class share of Rs.10/- each. The `B` class shareholders shall be eligible only for obtaining loan. As per the by- law No.4, any person over 18 years of age, and of sound mind residing within the state of Tamil Nadu and every cooperative society within the area of operation of the Bank, the Tamil Nadu State Co-operative Bank and the State government, shall be eligible for admission provided that not more than 1500 ‘A’ class shares shall at any time be allotted to individuals. Every member joining the bank must take up at least one share but no individual member may at any time hold more than twenty shares and at no times shall the members of individual ‘A’ class shareholder exceed the number of share owning society members.

The bank ordinarily obtains funds from the following sources:

1. Share subscription 2. Deposits

3. Miscellaneous fees 4. Other borrowings

The value of each `A` class share of Rs.50/- and `B` class share of Rs.10/- is payable in full with the application for allotment. The Board of Management receive deposits either from members or others on such terms as per the directives of RBI issued from time to time.

The by-law 15(a) to 15(g) deals with loans, conditions of the loans, securities for the loan of share capital ratio of the loan, and the procedures for applying loan. Granting of loan and repayment of loan are dealt with by the by- law No.16. The by-law No.17(a),(b) and (c) deals with the rate of interest charged by the Central Bank of loans to credit societies, noncredit societies and other types of societies. The By-Law No.27 (a) to 2(i) deals with the manner of disposal of the net profits of the bank.

According to the By-Law No.32, the KCCB prepares annually in such form as is prescribed by the Registrar,

a) A statement showing the receipts and disbursements for the years.

b) A profit and loss account.

c) A balance sheet.

d) An evaluation report and

e) Such other statements as prescribed by the Registrar.

The following are the Functions and Objectives of the Bank Functions

 To induce primary societies to involve themselves in money market dealings.

 To induce the habit of savings among rural people through primary Co- operative societies.

 To keep the reserves of primary societies (PACS)

 To provide loan and advances to members.

 To supervise and guide control the working of members and societies.

 To provide a safe place for the investment of the resources of PACS.

 To create banking awareness in the minds of rural and urban people.

 To issue, purchase, sell shares and discount the bill of exchange.

Apart from these functions, there are other functions they are as follow:

The chief function of the KCC Bank is to receive the surplus funds from the primary credit societies and make them available to other societies. They play a useful role in attracting funds from the general public and using them for

lending operation. In addition to the above functions, the KCC Bank Ltd. carries on commercial banking activities also.

KCC Bank Ltd. (Head Office) and its branches accept the deposits from individuals and its members.

They also render the services of granting loans to its members.

They also offer ½ per cent higher interest for their deposits, than the commercial banks.

They offer ½ per cent higher interest for deposits of senior citizen.

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

Collection Charges

D.D. Commission (W.E.F 23.02.03)

Up to Rs. 500 Rs. 15.00(service tax2percentage)

Rs.501 to Rs. 1000 Rs. 15.00(service tax2percentage)

Rs. 1001 to Rs.10000 Rs. 25.00(service tax2percentage)

Rs. 10001 to Rs. 1 lakh Rs. 3.50 per thousand

II- Bill Collection

Amount in Rs. Commission 10,000 50 Above 10,001 100 Above-1,00,001 150

Source: Primary data

III - NET Banking

Amount Commission Service Tax Up to One lakh 5percentage 1percentage Above One lakh to Two lakhs 15percentage 2percentage Above Two lakhs to Five lakhs 25percentage 3percentage Above Five lakhs 50percentage 6percentage

Source: Annual Report KCCB Ltd.

IV - Interest Rate(Fixed Deposit)

Interest Rate Common Senior citizen percentage percentage 30 Days to 45 Days 6.50 6.50 46 Days to 90 Days 7.50 8.50 91 Days to 120 Days 8.50 8.50 121 Days to 180 Days 9.50 9.50 181 Days to 300 Days 9.50 9.50 301 Days to 364 Days 9.50 9.50 1 Year to 2 Years 10.50 11.00 Above 2 years 10.75 11.00

Source: Annual Report KCCB Ltd.

V - Loan interest Rate

Loan details Percentage 1. Individual Lone 15percentage 2. Self help group 13 ½ percentage 3. PACS 11percentage 4. PACS to members 13 ½ percentage 5. Employee Credit Societies 12 ½ percentage 6. Societies to Members 14 ½ percentage

Source: Annual Report KCCB Ltd.

The bank can cancel the drafts and pay orders with lower rate of commission.

The banker can issue duplicate drafts and pay orders with lower commission

PCC Bank Ltd. provides at par facility to its regular members like Kothari sugars, EID Parry etc., The banker does not charge any commission for issuing as well as collecting charges to these concerns.To deal with the government orders, the banker does not charge any commission.

Locker facilities are provided by the banker to members at a lower rent.

The head quarters of the bank is situated in the heart of the city. The bank occupies an advantageous position of easy accessibility to all by train or by bus from different places.

OBJECTIVES OF THE BANK

The Chief objects of KCC Bank Ltd. was to meet the credit requirements of member societies. KCC Bank Ltd. has to finance both for agricultural credit societies, for non agriculture credit societies for production purposes, marketing and supply operations and to meet the working capital requirements of the member’s societies. KCC Bank Ltd. acts as a balancing centre for adjusting the surplus and deficiency of the working capital of the primary credit societies. According to G.M. Laud “The reason for the establishment of district central co-operative banks is that there should be an intermediary agency between the primary credit society with rural bias run by agriculturists having no touch with the money market and the provincial co- operative bank run mainly by city men with urban bias and having no close association with the country side’’.

THE MAJOR OBJECTIVES OF KCC BANK LTD.

 Issue of short –term agricultural loan

 Issue of medium term agricultural loan

 Jewel loan through branches

 Jewel loan through primary agricultural co-operative banks

 Nonfarm sectors through branches

 Nonfarm sectors through primary agricultural bank

 Produce Loan

 Housing loan through branches and head office

 Housing loan through PACs

 Professional loan through head office and its branches

 Professional loan through PACs

 Deposit mobilization by head office and its branches

 Deposit mobilization through PACs.

 The KCCB commenced its operators with following objectives.

 To act as a balancing centre of finance for the PACs in the district by providing them funds when they face shortage of funds and by serving as a clearing house for their surplus funds.

 To promote agricultural activities.

 To collect deposits from the public.

 To provide loans and advances to members.

 To finance the affiliated co–operative societies in Thanjavur district, registered under Act X of 1904; (India), under Act II of 112, India / under the Madras co–operative societies Act VI of 1932.

 To develop, assist and coordinate the workings of affiliated co–operative societies, supervising the co–operative unions and secure them for financial help when necessary. Also to arrange for the supervision of societies unaffiliated any.

 To organize supervising of credit co-operative union.

 To arrange for the supply of things such as stationary, books, forms and furniture required by co-operative unions and societies affiliated to them.

 To arrange for the initial and periodical training for the staffs on service and non – financial workers in the Co-operative field.

 To organize a co-operative service for the benefit of unions and societies.

 To propagate the principles of co-operation by publishing pamphlets, leaflets, circulars and periodicals of co-operative subsidies from time to time

 To arrange propagandist tours by paid and honorary declares.

 To arrange for holding periodical co-operative conferences and for taking necessary action on the resolution passed at such conferences.

 To arrange for exhibition of articles produced by co-operators.

 To maintain the co-operative literature among people and members.

 To arrange for the inspection of co-operative unions and societies.

 To serve as a recognized exponent of non – official co-operative union in the district.

 To control the expenditure through surplus funds of liquidated societies.

 To act as an agent of one of the insurance companies from among those approved by Madras provincial co-operative bank for the insurance to produce pledge by members to the affiliated societies, provided that by doing so, the central bank shall not incur any financial / other responsibility.

 To carry on general business banking not repugnant to the provision of the co-operative societies acts and rules framed there under.

 To arrange for the promotion and development of cottage and small scale industries in tune with the co - operative principles.

 To guarantee loans advanced and credit granted to any affiliated societies, by the Government SBI terms as may be agreed between the guarantee and guarantee and charge commission thereon.

ADMINISTRATIVE STRUCTURE OF THE BANK

The efficiency of any organization depends on the way in which it is organized and managed. Hence, every organization should have an effective control on its structure. It varies from institution to institution. The KCCB Ltd. has been organized in such a way that each officer is made responsible for his sphere of activity. Both accountability and decision making is decentralized. Delegation of function and authority is practiced to the utmost extent.

ADMINISTRATIVE STRUCTURE OF KCCB LTD.

Special Officer / Chairman

General Manager / Secretary Executive Officer

Assist G.M AGM AGM AGM AGM

(Administration) (Banking) Department (Banking)

(Development)

Manager Manager Manager Manger Manager

Ass. Man. Ass. Man. Ass. Man. Ass. Man. Ass. Man.

Senior

Assistant Sr. Ass. Sr. Ass. Sr. Ass. Sr. Ass.

Junior

Assistant Ju. Ass. Ju. Ass. Ju. Ass. Ju. Ass.

It is understood from the above chart that the boss of the bank is the special officer (S/o) in the absence of chairman representing the elected body. The decisions on the policy of bank are taken by the board under the head of chairman, duly approved by general body and then implemented through administrative.

DUTIES AND RESPONSIBILITIES OF THE BANK STAFF

GENERAL MANAGER: (GM)

GM shall be the top officer controlling all the wings of the bank, like administration, banking and development wings inclusive of branch administration, agricultural and non – agricultural. He shall work under the

administrative control of special officer. He will assist the special officer of the bank in discharging his duties.

He shall be the administrative and the executive head of the staff of the bank and shall be responsible for the working of the bank as a whole in proper lines according to Tamil Nadu Co-operative societies Act.

CHIEF EXECUTIVE OFFICER (CEO)

The CEO shall be the officer controlling the agricultural credit and non – agricultural credit wing in the head office and also the field staff. He shall work under the control of special officer of the bank. He shall perform the duties and excursive powers as enjoyed upon or conferred on him under the provisions of act. He will assist the special officer of the bank in discharging the statutory functions and duties. The assistant general managers shall work under his control and report him. He shall review their work periodically and submit copies of reviews to the special officer.

He shall be responsible for the achievement of various targets fixed by registrar of co-operative societies, under credit, non – agricultural credit, housing loans and jewel loans by primary agricultural banks.

ASSISTANT GENERAL MANAGER (ADMINISTRATION)

The Assistant General Manager shall manage the administrative wing under the control of the General Manager. He shall be the General Manager on all matters relating to the administrative wing. The establishment matter of the staff working under the control of the General Manager and executive officer may be put up to them by the Assistant General Manager. He shall have control over the staff dealing in matters relating to general administration, establishment, stationery Board meeting, miscellaneous items etc. All papers and files relating to the above matters shall be routed through him. He shall be responsible for drawing of salaries and allowances for all staff in the Head

office, branches, field staff department staff on deputation, common cadre strength and driver engaged on contract basis.

ASSISTANT GENERAL MANAGER (BANKING)

The Assistant General Manager shall manage the banking wing under the control of the General Manager. He shall have control over the staff in dealing matters connected with banking, deposit accounts, borrowings and repayments, rates of interest on deposits and advances and maintenance and balancing of books of both head office as well as the branches and responsible for the maintenance of lockers and collection of rent for the lockers.

ASSISTANT GENERAL MANAGER (DEVELOPMENT)

He shall work under the direct control of the General Manager. He shall be responsible for mobilization of deposits in branches, implementation of deposit schemes, development and expansion of branches, publicity, fixation and review of deposit targets for branches and inspection of branches. He shall have both office work and field work.

ASSISTANT GENERAL MANAGER (AGRICULTURAL CREDIT)

The Assistant General Manager shall manage the agricultural credit using under the control of General Manager and Chief Executive Officer. He shall assist chief executive officer on all matters relating to this wing. He shall have control over the staff dealing in matters connected with agricultural credit, agricultural loans, plan of issue, recovery of agricultural loans, review of collection and coercive action, technical committee, review of verification, utilization of agricultural loans, short term and medium term loans and kissan credit card. He shall have control over the field managers and field supervisors and sections relating to agriculture credit in the Head Office. He shall issue

loan sanction orders immediately after sanction. He shall inspect at least 5 PACs in a month.

ASSISTANT GENERAL MANAGER (NON AGRICULTURAL CREDIT)

He shall work under the control of the General Manager. He shall assist the chief executive officer on all matters relating to non – agricultural co- operative sections. He shall have control over the staff dealing in matters connected with non agricultural loan policy, limits of stock statement, exception of district level societies, spinning mills, sugar mills, advances to small scale industries, weavers finance and marketing societies. He shall arrange for the annual development plans for the non – agricultural societies.

MANAGER (ADMINISTRATION)

He shall work under the direct control of the Assistant General Manager (Credit). He shall have all control over the establishment section. All the papers relating to establishment matters such as appointment, transfer, promotion, increment, privilege loan, surrender to leave withholding of annual increment will be routed through him. He is responsible for proper scrutiny of the educational loan, housing loan, festival advance, vehicle loan, marriage loan, consumer’s loan of employees and arrange for the sanction. He should also work as a reception officer of the bank when higher officers from RBI, TNSC bank, NABARD and other visitors visiting the bank. He is responsible for the timely remittance of property tax, vehicle tax, water tax and profession tax.

MANAGER (BANKING)

He shall work under the direct control of Assistant General Manager of Banking. All the staffs working in the banking section is under his direct

control. He is responsible for passing of all cheques and vouchers and issue of receipts and signing of chalans etc. He shall be responsible for the proper customer service in the banking department.

MANAGER (ACCOUNTS)

The manager shall work under the direct control of the Assistant General Manager (Banking). He shall be responsible for the maintenance of accounts. He shall arrange to get the sundry debtors and creditors statement from the Head Office and branches every month and review and arrange for the collection of the accounts.

MANAGER (CASH)

He shall have the overall control of cash department. He should attend

the payment side and maintain cash scroll. He is responsible for the correctness

of the cash in the safe. He should keep one set of safe and locker keys under his

custody.

MANAGER (AGRICULTURE)

He shall work under the control of the Executive Officer and General

Manager. He shall assist the Executive Officer and General Manager on all

matters relating to Agricultural Co-operatives.

MANAGER (NON AGRICULTURE)

He shall work and assist the Assistant General Manager (Non-

Agricultural credit) on all matters relating to non-agricultural

co-operative societies. He shall be in charge of the section in the administrative

wing dealing with all non agricultural societies.

MANAGER (INTERNAL)

He shall work and assist the Assistant General Manager (Development) on all matters relating to internal activities of the bank. He shall be responsible for activities which are all related to the internal activities of the bank.

MANAGER (WOMEN DEVELOPMENT CELL)

He shall work under the Assistant General Manager (Development). He shall be in charge of the section of women development.

MANAGER (WOMEN DEVELOPMENT CELL)

He shall assist the Assistant General Manager (Credit) in all matters relating to the statistics. He shall be responsible for dealings related to statistical works.

FIELD MANAGER

He should supervise and control the work of the supervisors and paid secretaries in the area of the jurisdiction.

BRANCH MANAGER

Branch Manager works under the immediate supervision and control of the A.G.M and GM. Branch Manager is the principal administrative officer and he is, assisted by cashier, clerks, jewel appraiser and manager. He will recommend the loan and cash credit applications to the Head Officer for sanctions. He has the right to issue the loan to S.H.G up to Rs. 25000, jewel loan, micro credit, pensioner loan, etc.

MANAGEMENT OF THE BANK

As per the provision of Co-operative societies in TN there are three tiers, which control the working of the central Co-operative banks. The

representatives from the affiliated societies and individual members constitute the general body. Since, it is large in size, it is impossible for them to meet often. So, they elect certain members who from the Board of directors. In order to carry on the day to day activities, an Executive committee is formed. There will be a paid general manager / secretary who is responsible for all the activities of the bank. He is the officer competent to sue and to be sued on behalf of the bank.

The general body is the supreme authority and it meets at least once a year. Extraordinary general body meetings may be convened by the registrar of Co-operatives or by the managing committee of the bank. Usually the G.B. meets for following purposes.

TO ELECT THE DIRECTORS

To examine the statement of accounts, inspection and audit reports and to declare the dividend

The executive committee consists of president, vice president, treasurer and a paid secretary. Usually the registrar deputes one of his subordinate officers to serve as the special officer and administrative net work to function properly.

Unfortunately in Tamil Nadu no election has been conducted for several

years to elect the chairman and other members of the board in the CCBs

including KCCB Ltd. Hence the entire administration of the KCCB Ltd. is

handled and controlled by the special officer, who is appointed by the

Government of TN on deputation basis.

MEMBERSHIP OF THE BANK

The KCCB Ltd. has three kinds of members namely credit co-operative societies, non – credit co-operative societies and Individuals.

Apart from the three categories of members of the bank, the Government of tamilnadu also has its own membership and actively participates in the affairs of the bank nominating its representatives.

In order to become a member in KCCB Ltd, a person should have at least one share. There are two classes of shareholders, namely, ‘A’ class and

‘B’ class. Generally the affiliated societies of institutional members are admitted to ‘A’ class category, but in extraordinary cases, individuals are also permitted to become members in this category. Only ‘A’ class share holders are eligible to elect the board of directors and to receive the dividend. Only individual members are permitted in the ‘B’ class category. The ‘A’ class share holders should pay Rs. 50 towards per share capital and ‘B’ class shareholders must pay Rs. 5 per share to the capital of the bank.

The membership position of the bank can be understood from the following table.

TABLE – 4.1

Membership

Years A Class Members B Class Members 2001 –2002 255 -- 2002 – 2003 294 -- 2003– 2004 326 -- 2004 – 2005 335 -- 2005– 2006 349 -- 2006 – 2007 392 -- 2007 – 2008 441 -- 2008– 2009 489 -- 2009– 2010 534 -- 2010 – 2011 594 -- Source: Annual Report of KCCB Ltd.

Interpretation

Table 4.1 shows that the total number of A class members during the study period is not fluctuating. From 2001-2002, B class members have been renamed as associate members and they only can have the right to claim the loan from the bank.

Human Resource Management

It is a matter of common knowledge that the success of every business organization depends on its effective function of human resource management. All the activities of an organization are initiated and completed by persons who work for the organization. According to flippo, “HRM is,” the planning, organizing, directing and controlling of the recruitment, development, compensation, integration, maintenance and reproduction of human resources to the end those individual organizational and social objectives are accomplished.

Recruitment

The success of an organization depends largely on quantity and quality of its human resources. It is a process to discover the sources of manpower to meet the requirements of an organization. A properly planned and systematic recruitment policy is vital to minimize the distribution of work due to changes in employees and to secure equitable distribution of employment opportunities. The methods and sources include transfer, promotion, fresh advertisement, campus interview, employment exchanges etc.

The study unit viz. KCCB Ltd, is recruiting its manpower through district employment exchange controlled by the Government of Tamil Nadu. Generally the bank makes direct recruitment through employment exchanges only for the lower grade staff, i,e Junior assistant, clerk and sub staff. Sometimes staffs are appointed on compassionate grounds based on their qualification and capabilities. All other higher grade staff is filled only through the internal promotion.

Training

Training is the process of increasing the knowledge and skills for doing a particular job. The purpose of training is basically to fill up the gap between job requirement and present competence of an employee.

As per the regulations of the state Government every co-operative unit should recruitthepeoplewhohaveundergonetrainingintheco-operativeinstitute of Government of Tamil Nadu.The study unit, KCCB Ltd is also adopting the same method while recruiting its employees, since the bank has selected only trained persons as its employees, no additional training is given to the employees in the subsequent periods. The staff appointed on compassionate grounds would be given training after the appointment is made. Special short – term training is being given to the staff in banking. Accountancy and Funds

Management as and when sponsored by the National Co-operative Development council (NCDC) of Co-operative unions.

The staffs of KCCB Ltd are sent to such colleges / centers like RBI College of training, college of NABARD,Chennai, college of Co-operative management, Madurai and college of training of SCB, Chennai and they are being well trained.

Promotion

Promotion refers to advancement of an employee to a higher post carrying greater responsibilities, status and better salaries. It is the upward movement of an employee in the organization all hierarchy to another job commanding greater authority and better working conditions.

The study unit, PCCB Ltd has adopted a systematic and regular promotion policy for the benefits of its employees. Except the posts of special officer, clerks and sub staff, all other posts (Supervisory cadre) are filled up through promotion, from the lower cadre to higher cadre. The bank gives promotion to the employees when the vacancy arises either through retirement or internal promotion.

Monetary Benefits

The bank has given various financial benefits to its employees. The financial benefits include regular monthly pay, bonus, exgratia payment, festival advance, encashment of earned leave; leave travel concession, medical re-imbursement at the rate of 75percentage. The bank has not offered any non – financial benefits such as canteen, dispensary, transport facilities and children’s education facilities to the employees.

DEPOSITS

The most important source of Working Capital of CCBs is deposits. PCCB accepts it from public institutions sources of deposits and other registered societies.

 Fixed deposits (F.D)

 Savings Bank Account (S.B A/C)

 Currents A/C

 Recurring deposits (R.D)

 Karpaga Tharu reinvestment plan

 Call option deposits

Fixed Deposits (F.D)

KCCB allows, F.D for minimum period of 14 days. In urgent need, it allows premature closure of F.D at reduced rate of interest. F.D receipts cannot be transferred to any other persons (endorsement not allowed). Depositors can also avail the loan against at a maximum of 70percentage of the face value of F.D. Renewal after 14 days of maturity period will yield savings deposits rate of interest. At the same time if the savings account does not operate for more than 14 days, it will be treated as fixed deposit and the amount carries interest for F.D.

Savings A/C

Individuals and non - profit organisation can operate the savings a/c with KCCB ltd. Its holders get the advantage of liquidity and small income in the form of interest. KCC Bank offers interest of 4.5percentage on their savings a/c. It is lower than F.D. If it does not operate more than 14 days, it yields fixed

deposit income. There are some restrictions on withdrawals. RBI fixes interest for it.

Current A/C

Generally business firms and Co-operative bodies open this account. Those who want liquid balance may maintain this account. No interest rate is paid on it. There are no restrictions on withdrawals from current account. It has overdraft facility. Any individual can open current account.

Recurring Deposits (R.D)

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

Karapaga Tharu Reinvestment Plan (CRP)

PCC Bank Ltd introduced CRP deposit in 1976. it is reinvestment scheme. Interest had been provided under compounded interest basic. Maximum of 75percentage of the face value of deposit receipt can be availed as loan by its depositors. It was cancelled after 1985.

CALL OPTION DEPOSIT

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

DEPOSIT INSURANCE SCHEME (DIS)

The Deposits Corporation of India was setup with an initial capital of Rs. 1 crore on 1.1.1962 under deposit insurance Act 1961. The main objective of the scheme is to inspire public confidence in the banking system. It was extended to co –operation of India (CGCI) was merged with the Deposit insurance Corporation and it was renamed as “Deposit insurance and Credit Corporation” with effect from 15th July 1978. It protects small depositors by

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

TABLE – 4.2

Total Deposits (Rs. In lakhs)

Deposits Total Ratio Year Fixed Current Savings Deposits (percentage) 2001- 02 8402.05 741.02 1867.71 11035.27 --- 2002 – 03 9195.14 1020.93 1993.98 12210.05 10.89 2003 – 04 10677.41 1271.85 2279.24 14228.72 29.22 2004 – 05 11536.43 1544.28 2642.99 15683.12 42.43 2005– 06 12902.83 1181.16 2903.81 16988.03 54.28 2006 – 07 12167.79 1285.66 3365.82 16816.49 52.72 2007– 08 11578.62 1112.31 3654.67 16345.82 48.45 2008 – 09 11096.97 1154.70 4043.64 16295.54 47.99 2009 – 10 11612.71 1361.21 4427.60 17401.75 58.04 2010 - 11 14418.50 1486.91 4922.61 20828.24 89.16 Average 48.131 Source : Annual Report KCCB Ltd.

Interpretation

From table 4.2 it is observed that the head office and branches are mobilising different types of deposits. It has increasing trend continuously throughout the study period. In the year 2010-2011, the total deposits have been registered more than other years i.e 89.16percentage.

Reasons for growth of deposits

KCCB Ltd has become one of the safe places for the deposits for the public both from rural and urban areas 0.5 percent of interest is allowed higher than commercial banks, by co-operative bank and 0.5 percent higher rate of interest is also allowed for senior citizens. They are collected from the public, non-profit organisation, self help groups, other co-operative sector and PACs. Out of these, Head office collects nearly 20 percent and 80 percent by

branches. Rural and urban people find safe investment destination for their deposits that in KCCB Ltd., even though the bank instructed the deposit holders to renew all their deposits due to reduction in the rate of interest in 2002.

CHART – 4.2

Total Deposits

25000

20000

15000 Deposits Fixed 8402.05 Deposits Current 741.02 Deposits Savings 1867.71 10000 Total Deposits 11035.27 Ratio (%) ---

5000

0 2002 – 2003 – 2004 – 2005– 2006 – 2007– 2008 – 2009 – 2010 - 03 04 05 06 07 08 09 10 11

LOAN DISBURSED BY KCC BANK LTD

The KCCB Ltd was started with the main object to collect the deposits and extend the credit to agricultural sector. But now the rolee and scope of co- operative banks as well as the schemes offered by them have undergone a wide change due to globalization, liberalization and privatization policy. To enter into the competitive market and increase their market share, KCCBs introduced

different types of loan schemes. The KCCB’s should maintain C.R.R. and S.L.R. out of their time and demand liabilities.

Cash Reserve Ratio, (C.R.R.)

According to the section 18 of the Banking Regulation Act every bank whether it is a co-operative bank or commercial bank has to maintain by way of cash reserve to meet immediate requirement. The reserve should not be less than 3percentage of their total time and demand liabilities in case of co- operative banks. The reserve should be maintained with nationalised banks or with Sate Bank of India in the form of current account. The reserve amount does not generate any interest. To meet the immediate requirements the bank can withdraw that amount.

The minimum CRR is 3percentage of their total demand and time liabilities and the optimum level is 6percentage of their total demand and time liabilities. If the minimum level is less than 3percentage the RBI levied penalty to the concerned bank. The aggregate total time and demand liabilities for this purpose shall not include.

 The paid up share capital, reserves or any credit balance in the profit and loss account.

 Any advances taken from a state government, Reserve Bank of India, Industrial Development Bank of India, The Export and Import Bank of India, The National Housing Bank, Small Industries Bank, The National Co-operative Development Corporation etc.

 Any deposit of money with it representing the reserve fund investment made by other affiliated co-operative societies.

 Any advance taken from the State Co-operative Bank.

 Any advance of loan granted by the bank against term deposits, such deposit to the extent of outstanding of advance.

 Amount of any advance or credit arrangement drawn and availed of against approved securities.

The aggregate total time and demand liabilities as commuted under section 18 should be divided into two groups.

(i) Liabilities to Banking System and

(ii) Liabilities to others

Liabilities to Banking System

Any advance taken from the State Bank of India and its subsidiary Bank, all Commercial and Nationalised Banks, all Private Commercial Banks, Foreign Banks, Regional Rural Banks and any Co-operative Bank other than the State Co-operative Bank is known as liability from Banking System and any balance maintained in current account with such banks is a cash balance maintained in the banking system.

Statutory Liquid Ratio (SLR)

In terms of section 24 of Banking Regulation Act, the co-operative banks have to maintain statutory liquid asset. SLR should not be less than 25percentage of their other demand and time liabilities. The banker must invest the amount in the form of term deposits with their higher financing agencies like Tamil Nadu State Co-operative Bank, NABARD and IDBI. The banker can invest the amount in approved Government Securities include Government promissory notes issued by State or Central Government, bonds issued by the Quasi Government undertakings repayment of which is guaranteed by the government or the bonds issued by IDBI. (58, 48 series).

The minimum level of the SLR is 25percentage of their total time and demand liabilities and the optimum level is 28percentage. This reserve earns some interest. The co-operative banks have to maintain the SLR on daily basis. If the co-operative bank invests more than 25percentage the balanced amount

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

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

(1) Loan to agricultural sector

(2) Loan to Industries

(3) Loan to individuals

Loan to Agricultural Sector

KCC Bank Ltd. provides these types of loans to the cultivators through primary Agricultural Co-operative Bank. The agricultural loans are given to the member in three ways.

Short term loans

Medium term loans

Massive loans

Agricultural loan made by KCC Bank Ltd to the members are

1. Short term loans

Short-term loan is also called as crop loan. The duration of the repayment is within one year. The cultivators are allowed to repay the loan during the harvesting period. The loan is provided both in cash and in kind. The cash portion is for the purpose of meeting the expenses of wages and kind portion includes fertilizers, seeds and other products for cultivation. PCC Bank charges 9percentage interest to PACBS.

2. Medium term loans

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

(a) Conversion loan

(b) Cash credit

(d) Crop loan cash credit

TABLE – 4.3

Agricultural Credit to Total Loans & Advances

(Rs. in lakhs)

Agricultural Ratios Year Loans & Advances Credit (percentage) 2001- 02 12972.19 2573.82 --- 2002 – 03 13846.33 2910.56 20.85 2003 – 04 1410.48 4231.99 27.46 2004 – 05 18058.87 4494.82 24.88 2005– 06 25298.48 4415.11 17.45 2006 – 07 23279.40 2968.63 12.75 2007– 08 24803.35 3356.07 13.81 2008 – 09 24658.81 3243.18 13.15 2009 – 10 18474.47 3531.52 19.11 2010 - 11 19559.09 3119.51 15.95 Average 18.38

Source: Annual Report KCCB Ltd.

Interpretation

It is inferred from table 4.3 that the ratio of agricultural credit to total loans and advances is fluctuatinng over the study period. Onlyy in the year 2003- 04, the agricultural credit has been given more than other year’s i.e. 27 percent. The main reason for the bank to reduce the agricultural credit is the heavy overdues of earlier assistance. It is understood from the table that only 18.38 percentages of the total loanss and advances have been given as agricultural credit during the study period.

Chart – 4.3

Agricultural Credit to Total Loans & Advances

30000

25000

20000

15000 Loan & Advance 12972.19 Agrii. Credit 2573.82 Ratiio (%) --- 10000

5000

Agricultural Credit Stabilisation Fund

Agricultural credit stabilisation fund is allotted every year by KCCBS as per the norms of NABARD in order to face the risk and bear the loss arising out of overdues.

TABLE – 4.4

Agricultural Credit Stabilisation Fund

(Rs. in lakhs)

Year Amount Ratio (percentage) 2001- 02 95.24 --- 2002 – 03 98.10 3.00 2003 – 04 101.04 6.08 2004 – 05 104.07 9.27 2005– 06 107.19 12.54 2006 – 07 110.41 15.92 2007– 08 113.72 19.40 2008 – 09 118.83 24.76 2009 – 10 122.40 28.55 2010 - 11 126.07 32.37 Average 16.88 Source: Annual Report KCCB Ltd.

Interpretation

Table 4.4 indicates the ratio of agricultural credit stabilisation fund. The main reason for this increasing trend is the study unit has to allot the funds more due to there is unrecovered position in the bank. It is intended that overdues of agricultural credit increases by willful defaulter also. So it is better and safe to the bank to take necessary steps to recover the debt duly. During the year 2002 – 2003, the entire amount of this fund was utilised for medium term loans.

100

Chart – 4.4

Agricultural Credit Stabilisation Fund

140

120

100

Amount 95.24 60 Ratio (%) ---

0 2002 – 2003 – 2004 – 2005– 2006 – 2007– 2008 – 2009 – 2010 - 03 04 05 06 07 08 09 10 11

Total Loans and Advances

KCCB Ltd provides loans and advances to its member societies, members of KCCB Ltd and individual. As per Tamil Nadu Government policies, KCCB Ltd is helping by sanctioning various types of loans and advances for various purposes such as loan to small business,, agriculture small road transport organizations, mortgaged loans on Houses.

101

Table – 4.5

Total Loans and Advances

(Rs. in lakhs)

Short Medium Long Ratios Year Total term term term (percentage) 2001- 02 9023.87 3856.75 91.57 12972.19 --- 2002 – 03 10071.56 3659.72 115.05 13846.33 6.73 2003 – 04 11820.97 3449.06 140.45 15410.48 8.79 2004 – 05 14820.29 3100.34 138.24 18058.87 39.21 2005– 06 16797.58 8308.88 192.02 25298.48 95.02 2006 – 07 17364.99 5735.41 179.00 23279.40 79.45 2007– 08 12445.60 11673.61 184.14 24303.35 87.34 2008 – 09 13294.83 11194.18 169.80 24658.81 90.08 2009 – 10 13582.76 4754.93 136.78 18474.47 42.41 2010 - 11 15548.13 3882.52 128.44 19559.09 50.78 Average 55.53 Source : Annual Report KCCB Ltd.

Interpretation

Table 4.5 shows the various types of loans and advances provided by the bank for various purposes. During the year 2002 – 2003, loans and advances provided by the bank utilised from the borrowings from Tamil Nadu State Co- operative and Government (TN). The amount of loan sanctioning has fluctuating trend throughout the study In the 2005-2006, the bank has provided more amount of loan than other years i.e. 95.02 percent. On an average during the study period 55.53 percentage of loan has been given to individuals, member societies and members.

102

Chart – 4.5

Total Loans and Advances

30000

25000

20000 Shhort term 9023.87 15000 Meedium term 3856.75 10000 Loong term 91.57 Total 12972.19 5000 Ratio (%) ---

Loans to individuals

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

 Cash credit

 Jewel loan

Housing loan

 House mortgage loan

 House construction loan

103

Loans to professionals

 Consumer loan

Small scale industries loan

 Loans to small traders

 Computer loan

 Pensioner loan

 Small road transport operators loan (SRTO)

 Loans against pay slip

 Loans against government securities

 Educationl loan

 Swarnajaynthi Grama Swarrojkar Yojana (SGSY)

Loans under government sponsored scheme

 Gas loan

 Rain water harvesting loan

 Loans to physically handicapped

 Loans to government employees

 Self employment loan

Loans through women development cell

 Micro credit

 Working women Development loan

104

 Loans to self-help groups

 Women entrepreneurs loan

 Maternity loan

Loans to bank Employees

 Consumer loan

 Vehicles loan

 Housing loan

 Marriage loan

 Jewel Loan

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

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

To whom loans are to be granted

a. Loans may be granted to the members of integrity

b. Person who possess undisputed ownership of Gold ornaments or jewels.

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

d. Borrower should be an Associate Member

105

To whom loans should not be granted

a. Minors and Lunatics

b. Loans against third party gold ornaments

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

d. The Gold ornaments less than 22 carats fineness

e. Re-pledging of Jewels

Disbursement of Jewel Loan

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

TABLE – 4.6

Jewel Loans

(Rs. in lakhs)

Year Amount Ratios (percentage) 2001- 02 1746.38 --- 2002 – 03 1778.70 01.85 2003 – 04 2325.29 33.14 2004 – 05 2741.72 56.99 2005– 06 3431.95 96.52 2006 – 07 4421.91 153.20 2007– 08 4921.09 181.78 2008 – 09 6314.45 261.51 2009 – 10 9470.85 342.31 2010 - 11 11512.45 559.22 Average 187.391

Source: Annual Report KCCB Ltd.

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Interpretation

Table 4.6 shows the position of jewel loans of KCCB Ltd during the study period. The percentage of jewel loans has gradually witnessed an inversing trend. During the last year of the study period, it has highly increased that is Rs. 11512.45 (59.22perrccentage). The main reason for speedy growth of Jewel Loan is due to prompt disbursement and low interest rate. For the part of money needy people, they arre highly satisfied. That is why most of needy people believe and reach the study unit than all other banking institutions.

Chart– 4.6

Jewel Loan

12000 10000 8000 6000 4000 Amount 1746.38 2000 Ratio (%) --- 0 Amount 1746.38

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Computer Loan

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

Loans to Professionals

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

SRTO Loan

This type of loan is given for the purpose of purchasing a new vehicle. The maximum amount provided by the bank is Rs. 10,00,000. The rate of interest charged by the bank is 15percentage which is repayable within 48 months.

Small Scale Industry Loan

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

Housing Loan

KCC Bank Ltd grants the following types of loans

(1) House Mortgage Loan

(2) House Construction Loan

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House Mortgage Loan

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

Objectives of advancing the loans

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

a) For marriage of their children

b) For education of their children

c) To meet medical expenses of their family members

d) For renovation works of the house

e) To discharge their prior debts

f) To develop or enlarge their business

To whom the Loans are to be granted:

1. The borrower shall become an Associate member of the bank by paying the prescribed associate membership fee.

2. Shall have sufficient monthly income and capacity to repay the loan instalment without committing any default.

3. The borrower shall satisfy the bank that the proposed loan is going to be utilised only for the purpose to which it is to be sanctioned.

4. Loans shall be granted to individuals or group of individuals who owe a house within the area of operation the Bank.

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Period of Loan

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

The loans shall be repaid in equal monthly instalments. The interest on the outstanding balance of the loan shall be paid along with the instalment every month. For the defaulted payment of principal, they have to pay penal interest at 3 per cent per annum.

The borrower shall at the time of applying for the loan pay 1 per cent of the loan with a minimum of Rs. 500 and a maximum of Rs. 1500 towards processing fee which shall not be refunded.

. Rate of interest 15 per cent.

. Maximum amount of loan: Maximum of Rs. 10 Lakhs.

. Enclosures along with Application

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

. Income certificate

. Xerox copy of ration card

. A Photograph of the house

. Plan of the house

. Valuation report of the House

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

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

House construction loan

In order to construct a house the KCC Bank Ltd grants loan to individuals. The maximum amount of loan is Rs. 10,00,000 at a rate of 15 per cent interest which is repayable within 8 years.

Educational Loan Scheme

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

The borrowers are working in the government office, banks, government enterprises, public sectors and the private institutions, which are all running in a profitable manner.

The student should be a full time graduate or post graduate or professional graduate in recognised institution.

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

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

Repayment period: The repayment period is varying from 36 months to 60 months depending upon the age of retirement of the applicant.

Assessing the Loan Amount

When advancing the loan the fees of the institution, hostel fees, mess fees, examination fees and the laboratory fees are also taken into account.

The maximum amount of the loan limit is Rs. 50,000 or 15 per cent of the above fees whichever less is.

The monthly instalment should not be more than 1/3 of the monthly income of the applicant.

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A person should give guarantee for the repayment for the borrower and the guarantor should be a permanent employee in the government of any other private sector enterprises.

. Enclosures along with Application

. Pay bill of the borrower.

. No objection certificate from the higher authority that is responsible for the borrower’s payment.

. Nativity certificate

. Proof for the age of the borrower

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

. Admission intimation from the recognised institution.

. Details regarding the course that the admission is sought and the particulars regarding the period, payment, and the last date of fees from the institution.

Loan against the Government Security and National Savings Certificate

Loans are granted against the National Savings Certificate VI, VII and VIII th, Indra Vikas and Kissan Vikas certificates.

Period of Investment Maximum Loan Amount as Face value of the Securities

Within one year, 60 per cent of the value of the certificates

Within two years, 65percentage

Within three years, 70percentage

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More than 3 years, 75percentage

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

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

Loan against Pay Bill

KCC Bank Ltd grants loans against the pay slip of the employees those who are working in the government institutions, banks and other private concerns. The borrower should work within the limit of the area of the operation of the bank.

Loan amount

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

Repayment period

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

Pensioner Loan

The borrower should reside within the area of operation of the bank. The borrower should get pension through the KCC Bank Ltd. The loans are granted mainly to the pensioners to meet their medical expenses.

Maximum amount of loan is Rs. 5000 (Two months pension or Rs. 5000 whichever is less). The repayment period is 14 months; and the rate of interest is 15percentage.

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Enclosures along with application

 Medical certificate from the recognised medical practitioner.

 Guarantee to repay the debt from the borrower’s legal heir.

 Acceptance from the borrower to transfer their debt from the pension amount.

 Acceptances from the borrower not to transfer his pension account to any other bank up to their debt are repaid fully.

 Pension passbook should be handed over to the bank.

Loans through Government Schemes

The different types of loans available under this scheme are

 Self employment loan

 Loans to government employees

 Rain water harvesting loan

Loans to physically challenged persons

 Gas loan

 Self employment loan

In order to start a small business, the bank offers this loan. The maximum amount of loan under this scheme is Rs. 5,000, which is repayable in 36 monthly instalments and the rate of interest, is 15percentage.

Loans to government employees

KCC Bank Ltd grants a sum of Rs. 2,000 at a rate of interest of 15 percent, which is repayable within one year to meet their festival expenses.

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Gas loan

KCC Bank Ltd grants loan to purchase LPG gas connection for its own use. The maximum of is Rs. 2000, which is repayable within one year at the rate of interest of 10 percent.

Loans to physically disabled persons

KCC Bank Ltd grants loans to the physically disabled persons to start business or for agricultural purposes both for male member and for female member. The maximum amount of loan is Rs. 7, 50,000 which is repayable within a period of 8 years. The rate of interest for female members is 5percentage and male members 6percentage.

Rainwater harvesting loan

The loan granted by KCCB Ltd to the individuals for the purpose of constructing the rainwater harvesting plant in their houses. The maximum amount of loan is Rs. 2000 at a rate of interest of 11 per cent, repayable within one year.

Loans through Women Development Cell

In KCC Bank Ltd the women development cell was started on 27.10.2001. The different types of loan schemes are

 Revamped Micro credit.

 Working women Development Scheme.

 Women Entrepreneur Schemes

 Loan to Self Help Groups (SHG)

 Maternity loan.

 Revamped micro credit

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This scheme was started and functioning since 1994. Under this scheme, KCC Bank Ltd is providing loan up to 2000, at a rate of 11percentage interest and the repayable period is 147 days for selling vegetables and eatables. If there is prompt payment, a portion of their amount is credited as deposit in their account.

Working women development scheme

Under this scheme, the Bank is providing to loan up to a maximum of Rs. 1, 00,000 to purchase T.V, Fridge and other household articles. The rate of interest charged for this type of loan is 12percentage, which is repayable in 36 monthly instalments.

Women entrepreneur loan scheme

Under this scheme, KCC Bank Ltd is providing loan up to Rs. 10 lakhs, which is repayable in 60 monthly instalments. The rate of interest charged by the bank is 12percentage to start small industries and service centres.

Loan to self help groups

Under this scheme the maximum amount of the loan is Rs. 5 lakhs at the rate of 11percentage interest which is repayable in 36 monthly instalments. KCC Bank Ltd provides Credit facilities to SHG to save them from the clutches of the moneylenders. But nowadays they obtain loan for production purpose. Some S.H.Gs get loan for making bags, bags out of tape materials, greeting cards, plastic wall hangings, jute bags, food products, oil and glass painting to start super markets etc.

Maternity loan

A maternity loan of Rs. 20000 at 10percentage interest is introduced to help poor women to meet their medical expenses during their delivery time. The amount would be given either at the time of delivery or in two instalment from the eighth month of their pregnancy. The loan could be repaid in 12 easy

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monthly instalments from the third month of delivery. Women SHG have involved in identifying the beneficiaries.

Loans to Bank Employees

The bank also lends loans to their employees

 Marriage loan  Consumer loan  Vehicle loan  Housing loan

Marriage loan

Loan assessment from the bank to the employees for their children’s marriage, the maximum amount of the loan is Rs. 1, 00,000 which is repayable within 36 monthly instalments at a rate of 13 per cent interest.

Consumer loan

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

Vehicle loan

For the purpose of vehicle loans the employee should produce the followings

 The license  Quotations from the dealers  Their pay slip

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 75percentage of the value of the vehicle is being lent as a loan. The duration for the repayment is 36 months. The rate of interest for this type of loan is 13percentage.

Housing loan

The ground is in the name of the applicant. The area should not be in the industrial area. The maximum amount of the loan is Rs. 6, 00,000 which is repayable in 15 years. The rate of interest for this type of loan is 13percentage.

Cash Credit

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

 Business cash credit  Business cash credit renovations  Cash credit against the government securities to individuals  Crop cash credit

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

Swarnajayanthi Grama Swarojkar Yojana (SGSY)

The bank issues these type of loans to the people who are living below the poverty line. These loans are advanced for the purpose of purchasing milch animals, for setting up of a mini diary, sericulture, purchase of bullock and bullock carts and all for other self – employment opportunities. The recent innovation for rural development programme in the place of IRDP programme is Swarnajayanthi Grama Swarojkar Yojana (SGSY).

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Non Performing Assets

Co-operative Banks are the most important component of rural development. Co-operative banks provide banking facilities and services to the concern. Nowadays non – performing assets are one of the major problematic areas, which require attention. The Co-operative banks are facing bulging of NPAs, which will yield lower income to the banks. The banks are in a position to provide more reserves against NPA. Nonperforming assets mean, “Credit facilities in respect of which interest or instalment of principal are in arrear for two quarters or more”. (Prudential norms – Application to SCBs and DCCBs)

Assets Classification and provisioning Norms Assets are classified as a. Standard Assets b. Sub – standard Assets c. Doubtful Assets a. Standard Assets

Standard Asset is one, which does not disclose any problem and which does not carry more than the normal risk attached to business. Loans and advance, which are not under the category of substandard, doubtful, loss assets, are classified as standard assets. Provision required for standard assets is 0.25 per cent. b. Sub – Standard Assets (overdue up to 3 years)

Staff loan overdue less than 3 years,

Short term loans whether it is agricultural loan or non – agricultural loan overdue from 12 months to 3 years.

Instalments for medium term and long-term loans overdue from 6 months to 3 years,

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Agricultural cash credit out of order from 6 months to 3 years c. Doubtful assets

(1) Secured loan

All agricultural loans, loans and cash credits sanctioned against the mortgage of immovable properties and other loans and cash credits covered by reasonable value of securities are classified as secured loans.

Category

Overdue for 3 years to 4 years, Provision for this category is 20 percent.

Overdue for 4 years to 6 years, Provision for this category is 30 percent.

Overdue for above 6 years, Provision for this category is required 50 percent.

(2) Unsecured overdue

100 percent provision is required for unsecured loans.

Loss Assets

Overdues are more than 6 years and 100 per cent provision is required for loss assets.

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Table – 4.7

Percentage of NPAs to total loans & Advances

(Rs. in lakhs)

Year Loan & Advance Of which NPA Ratio (percentage)

2001- 02 12972.19 ------

2002 – 03 13846.33 ------

2003 – 04 15410.48 3762.00 24.41

2004 – 05 18058.87 3881.55 21.49

2005– 06 25298.48 4467.91 17.66

2006 – 07 23279.40 6650.30 28.56

2007– 08 24303.35 4417.15 18.17

2008 – 09 24658.81 7740.93 31.39

2009 – 10 18474.47 4697.80 25.42

2010 - 11 19559.09 4655.69 23.80

Average 23.862

Source: Annual Report KCCB Ltd.

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Interpretation

The above table reveals the percentage of nonperforming assets during the study period. It has greater increase in the year 2008 – 2009. I.e. 31.39 percent to total loans and advances. When it is compared to base year it has a steadily increasing trend. However, the bank has NPA only from the year 2003- 04. The main reason for increasing trend is overdues. It will reduce the profitability of the bank. To increase the profitability, the bank should try to reduce the provision of NPAs.

Chart – 4.7

Percentage of NPAs to total loans & Advances

30000

25000

20000 Loann & Advance 12972.19 13846.33 15000 Of which NPA ------

10000 Ratio (%) ------

5000

0 2003 – 2004 – 2005– 2006 – 20007– 2008 – 2009 – 2010 - 04 05 06 07 08 09 10 11

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Table – 4.8

Ratio of NPAs to Total Assets

(Rs. in lakhs)

Percentage of NPA to Year Total Assets Outstanding Loan outstanding

2001- 02 17812.99 ------

2002 – 03 19286.99 ------

2003 – 04 22034.97 3762.00 17.07

2004 – 05 25173.61 3881.55 15.42

2005– 06 28042.44 4467.91 15.93

2006 – 07 30727.68 6650.30 21.64

2007– 08 31219.10 4417.15 14.14

2008 – 09 34296.33 7740.93 22.57

2009 – 10 30756.91 4697.80 15.27

2010 - 11 33096.72 4655.69 14.06

Average 17.012

Source: Annual Report KCCB Ltd.

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Interpretation

From the above table, It is understood that each and every year, it has fluctuating trend. In the year 2008-09 it is higher than other years. Increase in provision of NPAs is danger to the bank. As per the norms of RBI, the bank should reduce to 5 percent to the total assets of the bank. Thhe bank provides a huge amount for provision against NPAs and it faces withh bulging of NPA resulting in lower income and hhigher provisioning making a dent in their profit figures. To say precisely, NPAs affect the profitability and financial strength of the bank. Mostly the percentage of poor recovery items are of loans to weavers society, loans to wholesale store, spinning mills and agricultural sectors.

Chart – 4.8

Ratio of NPAs to Total Assets

35000

30000

25000

20000 Total Assets 17812.99 19286.99 15000 Outstanding Loan ------10000 % of NPA to outstanding -- 5000 - ---

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Table – 4.9

Calls, Collection and Outstanding

(Rs. in lakhs)

Percentage of Year Calls Collection Out standing outstanding

2001- 02 10166.03 6449.47 3716.56 36.55

2002 – 03 11310.08 6254.91 5055.17 44.70

2003 – 04 12517.41 7729.67 4787.74 38.25

2004 – 05 13344.93 8356.15 4988.78 37.38

2005– 06 15617.92 10032.78 5585.14 35.76

2006 – 07 17147.26 9697.78 7449.48 43.44

2007– 08 19800.26 16525.18 3275.08 16.54

2008 – 09 14779.36 8704.08 6075.28 41.11

2009 – 10 12765.42 10219.58 2545.84 19.34

2010 - 11 17157.93 13666.34 3491.59 20.35

Average 33.342

Source: Annual Report KCCB Ltd.

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Interpretation

Table 4.9 shows the position of calls, collection and outstanding of loans and advances given by the bannk during the study period. In the year 2001-2002 the percentage of outstanding oof loans is 36.55 percent and in the year 2002 – 2003, it is 44.70 percent. After these year it has fluctuating trend rather than decreasing. By this informatioon it is clear that the bank is able to recover the debt by taking necessary steps.

Chart – 4.9

Calls, Collection and Outstanding

20000

15000

10000 Calls Collection 5000 Out standing 0 % of outstanding Out standing Calls 2002 – 03 2003 – 04 2001- 02 2001- 2004 – 05 2005– 06 2006 – 07 2007– 08 2008 – 09 2009 – 10 2010 - 11 - 2010

126

Reserve Fund

In order to meet the long-term requirement each and every organization has to retain more money after meeting all the provisions. The policy to retain the earnings varies from one organization to another. As banking company KCCB Ltd maintained a sufficient amount of reserves after meeting its own requirements and also as per the provision of RBI.

Table – 4.10

Reserve Fund

(Rs. in lakhs)

Year Reserve fund

2001- 02 71.04

2002 – 03 71.57

2003 – 04 71.57

2004 – 05 71.57

2005– 06 71.42

2006 – 07 71.42

2007– 08 71.42

2008 – 09 74.62

2009 – 10 74.62

2010 - 11 74.62

Source: Annual Report of KCCB Ltd

127

Interpretation

The above table shows the reserve fund allotted as per the RBI norms by the study unit. It almost remains constant till the year 2007-2008 and it has slightly increased from the year 2008-2009.

Chart – 4.10

Reserve Fund

Reserve fund 75

72 Reserve fund 71

69 2002 – 2003 – 2004 – 2005– 2006 – 2007– 2008 – 2009 – 2010 - 2001- 03 04 05 06 07 08 09 10 11 02

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Total Investment

KCCB Ltd also invests some of their surplus funds in the share of others co-operative societies and recognised financial institutions. It invests in the debentures shares or securities government bonds issued by central land development banks. Interest on investment is also the sources of its income.

Table – 4.11

Total Investment

(Rs. in lakhs)

Year Amount Ratio (percentage)

2001- 02 2807.37 ---

2002 – 03 3226.97 14.94

2003 – 04 3903.61 39.04

2004 – 05 4233.35 50.79

2005– 06 4678.92 66.67

2006 – 07 4535.37 61.55

2007– 08 4384.18 56.16

2008 – 09 4126.04 46.97

2009 – 10 4676.14 66.56

2010 - 11 5920.30 110.88

Average 57.062

Source: Annual Report of KCCB Ltd

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Interpretation

Table 4.11 reveals that the position of investments of the study unit. In the year 2002-2003, it has increased to 3226.97 lakhs (14.94percentage). But it has heavily increased is 5920.30 lakhs (110.88percentage) inn the year 2010-11 the growth of investments indicates its sound financial streenngth and that the bank is being run with good and sound principles of management.

Chart – 4.11

TTotal Investment

6000

5000 4000 3000 2000 Amount 2807.37 1000 Ratio (%) --- 0 Amount 2807.37

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Table – 4.12

Balance with other Banks

(Rs. in lakhs)

Ratio Year Amount (percentage)

2001- 02 2576.70 -

2002 – 03 2827.64 9.73

2003 – 04 3421.86 32.80

2004 – 05 3862.11 49.88

2005– 06 4137.15 60.56

2006 – 07 4097.59 59.02

2007– 08 3889.61 50.95

2008 – 09 3444.10 33.66

2009 – 10 3994.49 55.02

2010 - 11 5238.55 103.30

Average 50.546

Source: Annual Report of KCCB Ltd

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Interpretation

From the above table, it is known that the KCCB Ltd has the cash balance with other banking institution (Commercial banks and Government fellows) it has fluctuating trend. In the year 2005 – 06, this amount is Rs. 4137.15 lakhs (i.e. 60 56percentage) and in the last year of sstudy period, it is Rs. 5238.55 lakhs i.e. (103.30. During the study period, it has an average of 50.54 percentage to meet its expenditure. So it is clear that the bank has sound financial position to meet its expenditure.

Chart – 4.12

Balance with other Banks

Amount 2576.7

2002 – 03 2003 – 04 2004 – 05 2005– 06 2006 – 07 2007– 08 2008 – 09 2009 – 10 2010 - 11

132

Table – 4.13

Bad & Doubtful Debt Reserve

(Rs. in lakhs)

Year Amount Ratio (percentage)

2001- 02 527.79 -

2002 – 03 579.47 9.79

2003 – 04 823.01 55.93

2004 – 05 1074.69 103.62

2005– 06 1470.56 178.62

2006 – 07 2101.40 298.15

2007– 08 2360.14 347.17

2008 – 09 3144.07 495.70

2009 – 10 4187.68 693.43

2010 - 11 5378.65 919.08

Average 344.61

Source: Annual Report of KCCB Ltd

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Interpretation

The above table indicates the funds allotted for bad and doubtful debt of the KCCB Ltd. The amount is reserved each and every year by bank. At the beginning of the study period, its reserve was Rs. 537.79 lakhs. During year 2010-11, the amount was Rs. 5378.65 lakhs (919.08perceentage) which is higher than other years. It shows its strong financial capacity to sustain the banking transactions against losses / risks due to bad debts and overdues.

Chart - 4.13

Bad & Doubtful Debt Reserve

6000 5000 4000 3000 2000 Amount 527.79 1000 Ratio (%) - 0 Amount 527.79

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LIQUIDITY, SOLVENCY AND PROFITABILITY RATIOS OF PCCB LTD

Ratio Analysis

Ratio analysis is one of the techniques of financial analysis where ratios are used as a yardstick for evaluating the financial condition and performance of a firm. Analysis and interpretation of various accounting ratios gives a skilled and experienced analyst a better understanding of the financial condition and performance of the firm than what he could have obtained only through a perusal of financial statements.

Ratios are relationship expressed in mathematical terms between figures which are connected with each others in some manner obviously of purpose will be served by comparing two sets of figures which are not at all connected with each other. Moreover, absolute figures are also unfit for comparison.

Ratios can be expressed in two ways:

Times: when one value is divided by another the unit used to express the quotient is termed as “Times”.

Percentage: If the quotient obtained is multiplied by 100, the unit of expression is termed as “Percentage”.

Thus, ratio analysis acts as a tool in the hands of management and other. This is a technique which will enable different interest parties to achieve their aim and get the desired results. It helps to trace and locate the weak spots of business, to find out and compare operational efficiency, to formulate plans and programmes for future and helps in analysing financial statement of concern.

In this chapter an attempt is being made to analyse the liquidity, solvency and profitability positions of KCCB Ltd., by applying certain ratios, namely

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 Liquidity ratios  Solvency ratios  Profitability ratios and  Other ratios

A. Liquidity

Bank management is generally interested in deploying its funds fully and to increase its earnings. But at the same time, it would also be cautious in meeting its obligations for banks, investment position bears lour risk which the credit position bears high risk further in case of investment, liquidity can be higher and profitability will be lower whereas loan and advances (credit), the liquidity can be lower and in general and profitability will be higher. Hence trading off between liquidity and profitability is very tricky in case of banking industry.

The importance of adequate liquidity in the sense of the ability of a firm to meet current or short-term obligation when they become due for payment can hardly by over-stressed. So liquidity implies, from the lieu point of utilisation of the funds of the firm that funds are idle of they earn very little. The liquidity ratios measure the ability of a firm to meet its short term obligations and reflect the short term financial strength / solvency of a firm.

Some of the liquidity ratios are discussed below.

a. Current ratio

This ratio is an indicator of the firm’s commitment to meet its short term liabilities. It is expressed as follows. Current Assets Current Liability =

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Current assets mean assets that will either be used up or converted in to cash within a year’s time or normal operating cycle of the business whichever is longer. Current liabilities mean liabilities payable within a year of operating cycle whichever is longer, out of the existing current assets or by creations of current liabilities.

Table – 4.14 Current Ratio

(Rs. in lakhs)

Year Current Assets Current Liabilities Ratio in Times

1998 – 99 12325.19 5756.27 2.14

1999 – 00 13394.27 5797.34 2.31

2000 – 01 16257.49 5925.48 2.74

2001 – 02 17423.06 5967.31 2.91

2002 – 03 16726.78 7003.16 2.39

2003 – 04 19378.32 7242.16 2.68

2004 – 05 23508.73 9375.29 2.51

2005 – 06 24901.36 11296.30 2.20

2006 – 07 25763.18 12429.07 2.07

2007 – 08 28429.96 13558.90 2.10

Average 2.405

Source: Annual Report of PCCB Ltd

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Interpretation

Table 4.14 shows that the current ratio is fluctuating over the study period. The year 2004-05, the ratio has been increasing trend from the year 2005 -06, the current ratio is fluctuating. So it is observed that the proportions of current assets to current liabilities are not uniform. The thumb rule of 2: 1 is maintained by the bank throughout the study period. Hence it is inferred that the short term solvency position of the bank is satisfactory.

Chart – 4.14 Current Ratio

35000

30000

25000

20000 1998 – 99 2000 – 01 15000 2002 – 03 2004 – 05 10000 2006 – 07

5000

0 0 0.5 1 1.5 22.5 3 3.5 -5000

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Quick ratio

The quick ratio for any financial institution is calculated to know its ability to meet its liability. A concern is said to be ideal, if the ratio is equal to 1. But, in most of the cases the ratio will be either less than one or more than one. If the ratio is less than 1.0, it means that the concern is struggling to meet its financial obligations and consequently losses its reputation among public. When the ratio is more than 1.0, it may be viewed that the concern has more ability to meet its financial obligations. But, at the same time it might be inferred that the management is not fully utilising its resources to mobilize more revenue. This is also not good for a financial concern.

The quick ratio is computed by using the formula as follows: Quick Assets

= Quick Liability

Where quick liability is taken as the current liability and quick assets is current assets minus short investments.

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Table – 4.15

Quick ratio

(Rs. in lakhs)

Quick Ratio Year Quick Asset Quick liabilities (in times)

1998 – 99 10435.22 5756.27 1.81

1999 – 00 10900.16 5797.34 1.88

2000 – 01 19357.20 5925.48 1.57

2001 – 02 11100.33 5967.31 1.86

2002 – 03 13285.76 7003.16 1.89

2003 – 04 13190.37 7242.16 1.82

2004 – 05 16568.24 9375.29 1.76

2005 – 06 19376.50 11296.30 1.71

2006 – 07 21774.66 12429.07 1.75

2007 – 08 23769.35 13558.90 1.75

Average 1.78

Source: Annual Report of PCCB Ltd

Interpretation

Table 4.15 shows that the study unit has more ability to meet its short term financial obligations throughout the study period. Because this ratio is more than one over the study period, it shows that the bank does not fully utilize its resources to mobilize more revenue. In the year 2005 – 2006 the ratio is 1.89 times which is higher than other years of the study period but the ratio almost remains constant. It is understood that the short term financial position of the bank is satisfactory one.

140

Chart – 4.15

Quick ratios

100%

90%

80% 70% 60%

50% Quick Ratio (in times) 40% Quick lbs 30% Quick Asset 20% 10% 0% 19981999 20002001 – 99 – 00 2002 2003 – 01 – 02 2004 2005 – 03 – 04 2006 2007 – 05 – 06 – 07 – 08

B. Solvency

In general, solvency refers to the capacity or ability of the firm to meet the short term and long term obligations. The long term creditors like state government, state co-operative bank, CCBs, financial institutiions etc. are more concerned with the banks long term financial strength. Solvency alone determines the creditworthiness of a bank. A bank should maintain higher solvency ratio to infuse confidence in the creditors, to meet any unforeseen losses and to compensate any decline in value of assets. The lower the solvency, lesser will be the credit worthiness and smaller wiill be the cushion for creditors.

141

Solvency Ratios

In fact, a bank should have a strong short term as well as long term financial strength. The purpose of these ratio is to ascertain the state of business condition viz, the creditors. If the owned funds of the company are a small part, the maximum risk has to be borne by the creditors. The ratio will indicate the pattern of financing whether long term requirements have been met out of long term funds or not. In case of bank, the owned funds will form small percentage of current liabilities and long term liabilities will be considered to arrive at solvency ratios. It is more relevant to the banking institutions. The solvency position of PCCB is analysed by using following few solvency ratios.

i. Debt-equity ratio

ii. Debt to total funds ratio

iii. Capital gearing ratio

The fund of equity may be obtained either from internal sources by way of share capital or by external sources by way of borrowed capital. The study unit raises its funds by way of safe money accepting deposits and borrowings. For the purpose of calculating ratio, equity is taken as the share capital of the member soul ties only and individuals are not considered since there was no individual contribution from 1989 – 90. The relationship of borrowed capital to owner’s equity indicates the debt-equity ratio.

“The division of equities among current liabilities long term liabilities and owners’ equity has an important bearing on solvency.” 18 More the funds that are obtained from outsiders, the more the bank can trade on equity. The bank can use funds obtained at relatively low interest rates with the hope of earning more on these funds for the shareholders. A bank with a high proportion of long term debt is considered to have high leverage. The ratio is

18 Gopal M.K. “Application of debt equity ratio to Co-operative Banks” India Co-operative Review – No. 3, Jan., 1985, P. 309.

142

computed by dividing the debt by equity. If the ratio works out to 1: 1, it indicates that the long term funds have been contributed equally by the long term creditors and share holders.

This ratio can be computed as follows:

Debt = Equity

Table – 4.16

Debt.-Equity Ratios

(Rs. in lakhs)

Year Debt Equity Ratio in Times

1998 – 99 3519.49 747.05 4.71

1999 – 00 3746.34 810.56 4.62

2000 – 01 3874.00 814.99 4.75

2001 – 02 5103.40 872.20 5.85

2002 – 03 5842.38 943.00 6.19

2003 – 04 8057.06 1007.51 7.99

2004 – 05 8989.99 1068.29 8.41

2005 – 06 9703.95 1069.38 9.07

2006 – 07 3724.95 2187.34 1.70

2007 – 08 2437.31 2868.39 0.84

Average 5.413

Source: Annual Report of KCCB Ltd.

143

Interpretation

The above table shows that debt-equity position of KCCB Ltd. It has number of long-term debt proportion as standard norms. In the year 2007 – 2008, the ratio is less than one. So we can conclude that the study unit does not have equal long term debts to its equity. During 2005 – 2006 the bank has high leverage due to debt equity ratio is 9.07. So it may reduce its external sources / borrowings.

Chart– 4.16

Debt.-Equity Ratio

1998 – 99 1999 – 00 2000 – 01 2001 – 02 2002 – 03 2003 – 04 2004 – 05 2005 – 06 2006 – 07 2007 – 08

144

Debt to Total Funds

Debt can also be compared in response to the total funds (debt plus equity). This ratio is important for long term creditors (depositors) of the bank as much as for the owners of the bank also. The debt carries the obligation of payment of interest. It is therefore imperative to keep it within manageable limits. In India the acceptable ratio of debt to total fund is 0.67. It indicates the manner in which the funds have been raised.

It is important to ensure that the funds are efficiently and profitably used. It is calculated as follows.

Debt Ratio of debt to Total Funds = Total Funds

145

Table – 4.17

Debt to Total Funds

(Rs. in lakhs)

Year Debt Total Funds Ratio (in times)

2001- 02 3519.49 4266.54 .8249049

2002 – 03 3746.34 4556.90 .8221246

2003 – 04 3874.00 4688.99 .8261907

2004 – 05 5103.40 5975.6 .8540397

2005– 06 5842.38 6785.38 .8610247

2006 – 07 8057.06 9064.57 .8888518

2007– 08 8989.99 10058.37 .8937819

2008 – 09 9703.95 10773.33 .9007382

2009 – 10 3724.95 5912.29 .630035

2010 - 11 2437.31 5305.70 .4593757

Average .796107

Source: Annual Report of KCCB Ltd

Interpretation

Table No. 4.17 shows that the ratio of debt to total funds remains almost constant during the study period except in few years. The average debt to total funds ratio of the study period is more than the acceptable ratio in India. So it is inferred that the proportion of debt is said to be high which indicates high leverage of study unit.

146

Chart – 4.17

Debt to Total Funds

12000

10000

8000

6000 Debt Total Funds Ratio (in times) 4000

2000

0 20001- 2002 2003 2004 2005– 2006 2007– 2008 2009 2010 - 02 – 03 – 04 – 05 06 – 07 08 – 09 – 10 11

Capital Gearing Ratios

The capital gearing ratio is another ratio closely rellated to solvency. This is mainly used to analysee the capital structure of a firm.. It establishes the relationship between owners’ funds and fixed interest bearing funds. This ratio is computed as

Funds bearing fixed interrest Capital Gearing Ratio = Owned funds

But in the case of the KCC Bank Ltd, the term Capital Gearing Ratio refers to the relationship between the share capital (Net wworth) and fixed interest bearing funds. Fixed innterest bearing funds include Medium term and Long term borrowings and term deposits.

147

Own funds are taken as it is from the annual reports. Fixed interest bearing funds include medium term, long term borrowers and term deposits. If the fixed dividend bearing funds is more than the equity shareholders fund, the capital structure is said to be high geared. If the amount of equity shareholders’ funds is more than the fixed dividend bearing funds, the capital structure is said to be low geared. In case the two are equal, it is said to be even geared.

Table – 4.18

Capital Gearing Ratios

(Rs. in lakhs)

Funds bearing Year Owned Funds Fixed cost / Interest Ratio (in times) / Dividend

2001- 02 1561.67 15301.81 9.79

2002 – 03 1699.55 16766.95 9.86

2003 – 04 1960.55 18917.71 9.65

2004 – 05 2281.73 21658.72 9.49

2005– 06 2760.45 23773.41 8.61

2006 – 07 3472.06 25881.06 7.45

2007– 08 3795.40 26404.10 6.96

2008 – 09 4596.28 27068.87 5.89

2009 – 10 6768.45 23314.04 3.44

2010 - 11 7299.10 26133.94 3.58

Average 7.472

Source: Annual Report of KCCB Ltd.

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+Interpretation

The above table indicates the capital gearing ratio of the bank. Funds bearing fixed interest are more than the equity shareholders funds (owned funds) throughout the study period. So it is observed that the capital storyline of PCCB Ltd. is said to be highly geared. This ratio is higher in the year 2002 – 2003. (i, e 9.86percentage)

Chart – 4.18

Capital Gearing Ratios

100%

90%

80%

70%

60% Ratioo (in times) 50% Funds bearing Fixed cost / 40% Interest / Dividend 30% Owned Funds

20%

10%

Profitability of KCC Bank Ltd

The profitability of any firm indicates the effificiency of fund management or effectiveness with which the operations of the business are carried on. The profif tability is the main base for liquidity as well as solvency.

149

Bankers, financial institutions, and creditors use the profitability ratio as an indicator to know whether or not the bank earns substantially more than it pays as interest for the borrowed funds and whether the ultimate repayment of their debt appeared reasonably certain. The shareholders will be interested to know the profitability as it is the indicator of return for their investments. Few profitability ratios are computed. They are as follows:

(i) Return on Capital Employed

(ii) Return on Equity

(iii) Net Profit to Working Capital

Return on Capital Employed

This ratio relates to profit and capital employed in the firm. Capital employed is the investment made in the business. That is, it reflects the overall profitability of business in terms of the investment therein. Profit, being an indicator of the surplus, generated on money invested, the ratio measures the productivity of investment. Here, total income is taken as the return and capital employed is taken as the sum of share capital, borrowings and deposits.

= Return x 100 Capital Employed

150

Table – 4.19

Return on capital employed

(Rs. in lakhs)

Year Return Capital employed Ratio (percentage)

2001- 02 1894.63 15372.86 12.32

2002 – 03 1953.65 16838.34 11.60

2003 – 04 2247.88 18989.28 11.83

2004 – 05 2422.83 21730.29 11.14

2005– 06 2614.64 23844.83 10.96

2006 – 07 3115.92 25952.48 12.00

2007– 08 3013.38 26475.52 11.38

2008 – 09 4502.16 27140.49 16.58

2009 – 10 3695.55 23385.66 15.80

2010 - 11 2043.78 26205.56 7.79

Average 12.13

Source: Annual Report of KCCB Ltd.

Interpretation

It is inferred from the above table that the return on capital employed of KCCB Ltd, varies between 10.96percentage and 16.58percentage which is higher than other years of study period. Its average i.e, 12.13percentage indicates that the bank has earned a profit of Rs. 12.10 on every hundred rupees invested.

151

Chart – 4.19

Return on capital employed

2010 - 11 2009 – 10 2008 – 09 2007– 08 2006 – 07 Ratio (%) Capital employed 2005– 06 Return 2004 – 05 2003 – 04 2002 – 03 2001- 02

05000 10000 15000 20000 25000 30000

Return on Equity (ROE)

The ROE is the expression of profit in comparison to the owned funds. It indicates the reward availabble for the owners after meeting all the expenses and discharging the income fofor liability. The owners are responsible for all losses and are entitled to alll profits. This ratio shows the ability of the management to earn a profit on the owner’s funds. It is also referred to as the productivity of owner’s funds. This is a measure to indicate whether the owners have a return adequate enough to invest further in the firm.

This ratio may be calculated as follows

Net Profit = x 100 Equity / Owners funds

So it will be seen in percentage.

152

Table – 4.20

Return on Equity

(Rs. in lakhs)

Year Equity Net Profit ROE (percentage)

2001- 02 818.10 -45.40 -5.55

2002 – 03 881.95 -13.84 1.57

2003 – 04 886.56 -114.18 -12.88

2004 – 05 943.77 -23.21 -2.46

2005– 06 1014.42 -138.15 -13.62

2006 – 07 1078.93 126.48 11.72

2007– 08 1139.71 426.44 37.42

2008 – 09 1144.00 1765.01 -154.28

2009 – 10 2261.96 -854.47 -37.78

2010 - 11 2945.01 -899.81 -30.55

Average -20.641

Source: Annual Report of KCCB Ltd

Interpretation

The Table No. 4.20 shows the ratio of ROE. In the year 2004-05, It was more than other years i,e 37.42percentage. The average ratio of ROE is -20.641. There is almost net loss in all year of study period except few years. It is because; the bank is more dependent on the debt than owned funds. So the bank has to immediately take remedial measures to bear the loss and make profitability.

153

Chart – 4.20

Return on Equity

3000

2000

Equity 1000 Net Profit

0 ROE (%)

Equity -1000

Ratio of Net profit to working capital

This ratio indicates the relationship between net prrofit and working capital. It is of great significance for finding out as to how effectively, efficiently and profitably the net current assets have been used. Higher ratio indicates efficient use of net woorking capital and lower ratio shows that there is still scope for better use of working capital. The standard range of this ratio is between 1 and 2percentage. It acts as a supplementary meaassure to determine the profitability of the business.

This ratio may be calculated as follows.

Net Profit = x 100 Working Capital

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Table – 4.21

Net profit to Working Capital

(Rs. in lakhs)

Year Net Profit Working Capital Ratio (percentage)

2001- 02 -45.40 17785.26 -0.26

2002 – 03 +13.84 19246.64 0.07

2003 – 04 -114.18 21979.93 0.52

2004 – 05 -23.21 25137.04 -0.09

2005– 06 -138.15 28009.05 -0.49

2006 – 07 126.48 30706.03 0.41

2007– 08 426.44 31219.10 1.37

2008 – 09 -1765.01 31465.80 -5.61

2009 – 10 -854.47 30705.72 -2.78

2010 - 11 -899.81 33082.42 -2.72

Average -0.958

Source: Annual Report of KCCB Ltd

Interpretation

The Table No. 4.21 reveals that the ratio of net profit to working capital throughout the study period, the study unit has just lower ratio. It indicates the improper use of net current assets. These ratios do not lie in the standard range except few years. Since the ratios are lower, the bank has got the scope for better use of working capital. Only in the year 2010– 2011, the ratio is as per standard norms i.e. 1.37percentage. The average ratio of net profit to working capital is -0.958.

155

Table – 4.21

Net proofit to Working Capital

Net Profit

2001- 02 2002 – 03 2003 – 04 2004 – 05 2005– 06 2006 – 07 2007– 08 2008 – 09 2009 – 10 2010 - 11

Other Profitability Ratios

To analyse the profitability in depth of the study unit the ratios may be computed by following other profitability ratios.

1. Interest earned Ratio 2. Interest Paid Ratio 3. Total income to Volume of business Ratio 4. Manpower expenses Ratio 5. Establishment expenses Ratio 6. Non-interest income Ratio 7. Spread Ratio 8. Burden Ratio 9. Profitability Ratio

156

Interest Earned Ratios

This ratio reflects the efficiency with which bank has given the loan. A high interest earned ratio is a sign of good operation in loans and higher profitability. A low interest earned ratio may reflect the banks inability to collect not only the interest on loans but also loan amount. A low ratio shows lower profitability of the banks.

This ratio may be calculated as follows:

Interest Earned = x 100 Volume of Business

Table – 4.22 Interest Earned Ratios (Rs. in lakhs) Year Interest Earned Volume of Business Ratio (percentage)

2001- 02 758.49 17812.99 4.25

2002 – 03 781.09 19286.99 4.05

2003 – 04 936.02 22034.97 4.25

2004 – 05 1250.96 25173.61 4.96

2005– 06 1602.51 28042.44 5.71

2006 – 07 1549.86 30727.68 5.04

2007– 08 1803.86 31219.10 5.78

2008 – 09 2710.2 34296.33 7.90 2009 – 10 1774.53 30756.91 5.77 2010 - 11 1223.46 33096.72 3.70 Average 5.41

Source: Annual Report of KCCB Ltd

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Interpretation

From the above table, it is known that the interest earned ratio of the selected bank is fluctuating over the study period. In 2008 – 09, this ratio is higher than all other years of study period. But the total interest earned ratio shows an increasing trend. The average of this ratio is 5.41percentage. It is below the bank rate and it shows the inability of the bankk in collecting the loans and interest. Such situation may lead the bank to high overdue position and to difficulty to meet its expenditure. So it is suggested that the bank should take appropriate measure to gear up the collection of overdues.

Interest Earned x 100 = Volume of Business

Chart – 4.22

Interest Earned Ratios

Interest Earned

2001- 02 2002 – 03 2003 – 04 2004 – 05 2005– 06 2006 – 07 2007– 08 2008 – 09 2009 – 10 2010 - 11

158

Interest Paid Ratios

This ratio establishes a relationship between the interest paid and volume of business. It is the overall measure of the bank’s ability to turn each rupee of business into interest paid. It can be calculated as follows:

= Interest Paid x 100 Volume of Business

Table – 4.23

Interest Paid Ratios

(Rs. in lakhs)

Year Interest Paid Volume of Business Ratio (percentage)

2001- 02 779.73 17812.99 4.38

2002 – 03 962.33 19286.99 4.99

2003 – 04 1124.24 22034.97 5.10

2004 – 05 1162.26 25173.61 4.62

2005– 06 1272.23 28042.44 4.54

2006 – 07 1010.09 30727.68 3.29

2007– 08 731.53 31219.10 2.34

2008 – 09 633.28 34296.33 1.85

2009 – 10 600.19 30756.91 1.95

2010 - 11 688.74 33096.72 2.08

Average 3.514

Source: Annual Report of KCCB Ltd

159

Interpretation

The above table indicates the interest paid ratio of study unit is fluctuating from the beginning. Its fluctuation ranges between 1.85percentage and 5.10peercentage. The averagge ratio of Interest paid ratio is 3.514percentage. It shows that the bank’s deposit mobilisation and interest paid position are satisfactory.

Chart – 4.23

Interest Paid Ratios

40000

35000

30000

25000

20000 Interest Paid Volume of Business 15000 Ratio (%)

10000

5000

0 2001- 2002 – 2003 – 2004 – 22005– 2006 – 2007– 2008 – 2009 – 2010 - 02 03 04 05 06 07 08 09 10 11

Total Income to Volume of Business

This ratio is considered to be more relevant to evaluate the operational efficiency of the bank. It is norrmally expected that each bank should make the reasonable revenue on the total volume of business whichh consists of total deposits and advances. In this context, the ratio is a useful indicator to determine the ability to earn on business. It indicates the operational efficiency of the bank in making adequate revenue. It is calculated as folllows:

160

Total Income = x 100

Volume of Business

Table – 4.24 Total Income to Volume of Business (Rs. in lakhs) Year Interest Earned Volume of Business Ratio (percentage)

2001- 02 1894.63 17812.99 10.63

2002 – 03 1953.65 19286.99 10.13

2003 – 04 2247.88 22034.97 10.20

2004 – 05 2422.83 25173.61 9.62

2005– 06 2614.64 28042.44 9.32

2006 – 07 3145.92 30727.68 11.12

2007– 08 3013.38 31219.10 9.65

2008 – 09 4502.16 34296.33 13.13

2009 – 10 3695.55 30756.91 12.02

2010 - 11 2043.78 33096.72 6.18

Average 10.2

Source: Annual Report of KCCB Ltd

Interpretation

The table no. 4.24 depicts the relationship between total income and volume of business of the study unit. In the year 2004 – 05, the total income as well as volume of business is more than all years of study Ratio. So its ratio is high (13.13percentage). Totally it reveals the operational efficiency of the bank in making adequate revenue, because both volume of business and total income

161

have the increasing trend except two or three years. During the year 2010 – 2011 the total income has decrreased, and its ratio is lower than 6.18percentage. The Average ratio of is 10.2peercentage. Hence the bank should take necessary steps to increase its total income resulting by overall operational efficiency.

Chart – 4.24

Total Income to Volume of Business

40000

35000

30000

25000

Interest Earned 20000 Volume of Business Ratio (%) 15000

10000

5000

0 2001- 2002 02 –2003 03 –2004 04 –2005– 05 206006 –2007– 07 2 00808 –2009 09 –20 1010 - 11

Manpower Expenses Ratio

It reveals the relationship between the amount of man power expenses and volume of the business. It provided a measure of the manpower efficiency of the bank. The manpower expenses include salaries, provident find and allowances. It can be calculated as follows: Total Manpower expenses Volume of Business x 100 =

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Table – 4.25 Man Power Expenses Ratio (Rs. in lakhs) Man power exp Volume of Year Manpower exp Ratio business (percentage) 2001- 02 17812.99 261.74 1.47

2002 – 03 19286.99 263.30 1.37

2003 – 04 22034.97 307.02 1.39

2004 – 05 25173.61 300.78 1.19

2005– 06 28042.44 313.86 1.12

2006 – 07 30727.68 346.14 1.13

2007– 08 31219.10 339.74 1.09

2008 – 09 34296.33 384.91 1.12

2009 – 10 30756.91 352.80 1.15

2010 - 11 33096.72 429.41 1.30

Average 1.233

Source: Annual Report of KCCB

Interpretation

From the table No: 4.25, it is understandable that the manpower expenses ratio. These have the fluctuating trend over the study period. As for as, the manpower expenses ratio is concerned, It is higher than all others years of study period. In the year 2001 – 2002 i.e. 1.147percentage and establishment expenses ratio is 10.16percentage which is higher than all other years of study period. The average ratio of it, is 1.233percentage.

163

Chart – 4.25

Man PPower Expenses Ratio

100%

99%

Man power exp Ratio (%)

99% Manpower exp Volume of business

98%

Establishment Expenses Ratiio

It brings out the relaattionship between establishment expenses and volume of business. The establishment expenses are taken as total expenses less manpower expenses and interest paid. It indicates the reelative amount of establishment expenses used to generate the volume of business. It provides a measure of the operational effficiency of the bank. It can be calculated as follows:

= Total Establishment expenses x 100 Volume of Business

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Table – 4.26 Establishment Expenses Ratio (Rs. in lakhs) Volume of Establishment Establishment exp Year business expenses Ratio (percentage)

2001- 02 17812.99 590.11 3.31

2002 – 03 19286.99 668.99 3.47

2003 – 04 22034.97 816.62 3.71

2004 – 05 25173.61 959.79 3.81

2005– 06 28042.44 1028.55 3.67

2006 – 07 30727.68 1789.69 5.82

2007– 08 31219.10 1942.11 6.22

2008 – 09 34296.33 3483.97 10.16

2009 – 10 30756.91 2742.55 8.92

2010 - 11 33096.72 925.63 2.80

Average 5.189

Source: Annual Report of KCCB Ltd

Interpretation

The table no. 4.26 it is understandable that the establishment expenses ratio. These have the fluctuating trend over the study period. 5.18 is for establishment expenses, amount is spent by way of manpower expenses and establishment expenses when compared to volume of the business. The average ratio of it is 5.189percentage.

165

It is clear that the study unit meets out the establishment expenses out of its interest earned income. So it is suggested that the bank should either reduce the establishment expenses or increases its Non-interest inccome in order to meet establishment expenses out of non-interest income.

Chart – 4.26

Establishment Expenses Ratio

35000

30000

25000

20000 Vollume of business 15000 Esttablishment expenses Esttablishment exp Ratio (%) 10000

5000

Non-Interest Income (NII) Ratio

It is the total income minus interest received. It indicates the bank’s operational efficiency and the relative amount of non-interest income used to generate the volume of business. It can be calculated as follows:

Non Interest income Volume of Business = x 100

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Table – 4.27 Non-Interest Income Ratio (Rs. in lakhs) Volume of Year NII Ratio (percentage) business

2001- 02 17812.99 873.09 4.90

2002 – 03 19286.99 1113.53 5.78

2003 – 04 22034.97 1311.86 5.95

2004 – 05 25173.61 1171.87 4.66

2005– 06 28042.44 1012.13 3.61

2006 – 07 30727.68 1596.06 5.19

2007– 08 31219.10 1209.52 3.87

2008 – 09 34296.33 1792.14 5.22

2009 – 10 30756.91 1921.01 6.25

2010 - 11 33096.72 820.32 2.48

Average 4.791

Source: Annual Report of KCCB Ltd

Interpretation

The the table No:4.27 indicates that Non Interest Income ratio varies between 2.48percentage in 2010-2011 and 6.25percentage in 2009 – 10. There is no much variation in the NII ratio for all the years of study period except in 2010 – 11. It is concluded that the bank gets non-interest income at an average of 4.791percentage annually which is 0.38 times less than the establishment expenses. So it is suggested that the bank should earn more non-interest income to meet the establishment expenses.

167

Chart – 4.27 Non-Interest Income Ratio

2010 - 11

2009 – 10

2008 – 09

2007– 08

2006 – 07 Volume of business 2005– 06 NII 2004 – 05 Ratio (%) 2003 – 04

2002 – 03 2001- 02

90% 92% 94% 96% 98% 100%

Spread Ratio

It is calculated as interest earned ratio minus interest paid ratio. A high ratio is an indicator of efficient operation of the bank and low ratio indicates inefficient operation. It is apparent from the definition that for improving profitability performance, a baank has to aim at increasing the magnitude of spread ratio. It can be achieved by increasing interest earned ratio which should be more than interest paid ratio. It can be calculated as follows:

Interest earned Ratio

= Interes t paid rati o x 100

168

Table No4.28 Spread Ratio (Rs. in lakhs) Interest earned Spread Ratio Year Interest paid Ratio Ratio (percentage)

2001- 02 4.26 4.38 -0.12

2002 – 03 4.05 4.99 -0.94

2003 – 04 4.25 5.10 -0.85

2004 – 05 4.97 4.62 0.35

2005– 06 5.71 4.53 0.18

2006 – 07 5.04 3.29 1.75

2007– 08 5.78 2.34 3.44

2008 – 09 7.91 1.85 6.06

2009 – 10 5.77 1.95 3.82

2010 - 11 3.70 2.08 1.78

Average 1.547

Source: Annual Report of KCCB Ltd

Interpretation

The table No.4. 28 show that the interest earned ratio and interest paid ratio fluctuating over the study period. The average of interest earned ratio is 5.14percentage and interest paid ratio is 3.51percentage. The average spread ratio is 1.547percentage. The interest earned ratio is more than the interest paid ratio since the spread ratio is greater than zero. It is so considered that the bank’s operation is good.

169

Chart – 4.28

Spread Ratio

8 7 6 5 4 Interest earned Ratio 3 Interest paid Ratio 2 Spread Ratio (%) 1 0

03 03 Interest earned Ratio -1 –

10 10 – 2001- 02 2001- 2002 2002 2003 – 04 2005– 06 2004 – 05 2007– 08 2006 – 07 2008 – 09 2010 - 11 - 2010 2009 2009

Burden Ratio

It reflects the efficiency with which the bank uses noniinterest income to meet the manpower expenses and establishment expenses. It also indicates the average spread between the manpower expenses establishment expenses and other non-interest income. The bank has to aim at lowering the magnitude of burden in order to earn more profit. The lowering of the burden ratio can be achieved by lowering the maannpower expenses ratio, establiishment expenses ratio and increasing the non-interest income ratio.

It can be calculated as follows:

Burden ratio = Manpower expenses ratio + Establishment exppenses ratio

_ NII Ratio

170

Table – 4.29

Burden Ratio

Year M.P exp. Establishment NII Ratio Burden Ratio

Ratio exp. Ratio (in times)

2001- 02 1.47 3.31 4.90 0.12

2002 – 03 1.37 3.47 5.78 0.94

2003 – 04 1.39 3.71 5.95 0.85

2004 – 05 1.19 3.81 4.66 0.34

2005– 06 1.12 3.67 3.61 1.1

2006 – 07 1.13 5.82 5.19 1.76

2007– 08 1.09 6.22 3.87 3.44

2008 – 09 1.12 10.15 5.22 6.05

2009 – 10 1.15 8.92 6.25 2.67

2010 - 11 1.30 2.80 2.48 0.32

Average 1.759

Source: Annual Report of KCCB Ltd

Interpretation

The table no. 4.29 shows that the interest earned ratio an interest paid ratio fluctuating over the study period. The average of interest earned ratio is 5.14percentage and interest paid ratio is 3.51percentage. The average speed ratio is 1.55percentage. The interest earned ratio is more than the interest paid ratio since the spread ratio is greater than zero. It is so calculated that the bank’s operation is good.

171

Chart – 4.29 Burden Ratio

6 M.P exp. Ratio

4 Establishment exp. Ratio NIII Ratio 2 Burden Ratio (in times) 0 NII Ratio

M.P exp. Ratio 06 06 09 09 –

– –

2002 – 03 2003 – 04 2001- 02 2001- 2005 2005 2004 – 05 2007– 08 2006 – 07 2008 2008 2009 – 10 2010 - 11 - 2010

Profitability Ratio

This ratio establishes a relationship between the net profit and volume business. It reveals also the bank’s efficiency in deposit mobilisation, borrowing capacity, lending operation and financial strength. It has a substantial impact on the bank’s growth and long run competitive posture, It can be computed as follows.

Profitability ratio = Spread ratio – Burden ratio

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Table – 4.30

Profitability Ratio

Profitability Ratio (in Year Spread Ratio Burden Ratio times)

2001- 02 -0.12 0.12 -0.24

2002 – 03 -0.94 0.94 -1.88

2003 – 04 -0.85 0.85 -1.70

2004 – 05 0.35 0.34 0.01

2005– 06 0.18 1.1 -0.92

2006 – 07 1.75 1.76 -0.01

2007– 08 3.44 3.44 -0.00

2008 – 09 6.06 6.05 0.01

2009 – 10 3.82 2.67 1.15

2010 - 11 1.78 0.32 1.46

Average -0.212

Source: Annual Report of KCCB Ltd

Interpretation

From the table No:4.30, it is seen that the profitability ratio of the study unit shows the negative result in 7 years. The average ratio of it is -0.212. It may be safe for the bank that to make a break-through by turning up its performance to have a good profitability ratio.

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Chart – 4.30

Profitability Ratio

3 Spread Ratio 2 Burden Ratio Profitability Ratio (in times) 1

-1

-2

-3

SWOT ANALYSIS OF KCC BANK LTD.

An analysis of Strengths, Opportunities and threats (SWOT) of financial operations of KCCB Ltd. helps to identify the areas where the bank management can concentrate its attention to ensure an integrated progress of the bank. A detailed study of the organization of KCCB Ltd. enables the researcher to arrive at the following SWOT of financial operation of KCCB Ltd.

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Strengths

i. KCCB Ltd. improved its total business three fold in ten years in spite of many odds and threats of competition in the modern banking scenario.

ii. The paid up capital and reserves have grown to a comfortable position so as to comply with the capital adequacy norms proposed by RBI.

iii. The deposit mobilization in KCCB Ltd. gains momentum. The deposit growth in KCCB Ltd. is good and continuous.

iv. KCCB Ltd. has brought down its dependence on the borrowings to a very large extent during the later part of the decade chosen for the study.

v. Loans and advances are at an increasing trend. KCCB Ltd. employs its working funds more profitably in the disbursement of loans and advances.

Weaknesses

i. Slow transformation at snail’s speed over shadows the hard – earned goodwill of the bank. Transformation, here, refers to the adherence of the bank to the provisions of new prudential norms.

ii. The reluctant or hesitant attitude to accept the changes introduced in banking through the implementation of new prudential norms in co- operative banks with effect from 1966 – 67.

iii. Accumulating loss due to increased NPA menace and inefficient credit management.

iv. No scientific planning to augment income and to contain expenditure. Non – interest income concept is ignored and non – interest expenditure is not under control.

Inadequate knowledge in credit management and not giving proper weight age to risk factors in credit portfolio results in creation of more NPAs.

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Opportunities

i. The compromise and OTS (One – Time Settlement) Schemes announced by RBI and Government may be utilized to recover the bad debts including decreed debts.

ii. The demand for credit is increasing and KCCB Ltd can make good lending taking adequate precautions besides necessary securities.

iii. In this liberalized regime, KCCB Ltd can fix competitive rates of interest on deposits to mobilize more deposits. It can also fix appropriate lending rates to have a comfortable spread to ensure profit.

iv. Computerization of branches and installation of ATMs will bring in more members to KCCB Ltd, besides helping to retain the existing members. The present day members are lured by sophisticated banking services offered by new private banks, foreign banks and other commercial banks.

Threats

i. Accumulated loss and accumulation of NPAs are the major threats to the growth of KCCB Ltd.

ii. Delay in decision making in credit proposals and in developmental activities due to various tiers of control stains the quality of service to the clientele.

iii. Political intervention in the administration of the bank proves to be obstacles on the path of progress of the bank.

iv. The interest spread due to low income and high expenditure causes concern to the management as it is a threat to its profitability. The fewer avenues to boost other income are another threat to profitability.

v. Slow growth of loans and advances does not help to increase interest income. For the fear of creation of new NPAs, the bank exhibits reluctance in the increase of loans and advances.

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CHAPTER – V

ANALYSIS OF MEMBERS SATISFACTION OF KCC BANK LTD.

Introduction

In this chapter the customer (Borrowers only who are having deposits in the study unit) satisfaction of KCCB Ltd. has been analysed by the researcher.

We will feel satisfied when a service is done carefully. When a banker does what he should normally do, it may not make the customer particularly happy. He just takes it for granted. But when the banker would not do what he should normally do, the customer would be unhappy.

Similarly, when a customer goes to a bank, to cash a cheque, when the clerk at the counter or an officer greets him, he is particularly happy. If they do not greet him, he is not particularly unhappy. They are not normally expected by the customer to greet him or smile at him; hence he is not happy. But, if the banker does what he is not normally expected to do, like greeting him, the customer is particularly happy.

The above theory is called the dual factor theory of satisfaction and dissatisfaction. Hertzberg developed the with respect to job satisfaction. He called factors like pay as dissatisfies; poor pay causes dissatisfaction but good pay alone will not cause job satisfaction. On the other hand, factors like job enrichment may cause satisfaction and an enriched job causes job satisfaction, but a non – enriched job does not cause dissatisfaction.

In this context, the researcher has analysed the customer satisfaction of the study unit, by applying the above dual factor.

A sample of 200 respondents were selected at random, they were asked to give details of their pleasant experience with the bank and their unpleasant experience with the Bank.

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The opinion survey was conducted by the researcher among the members of the study unit through a structured questionnaire which for studying the opinion of the member was designed to obtain information like age, sex, education, credit availed, problem faced in getting loans, time taken for various transaction and general opinions about the bank. The results of the survey have been analysed and interpreted in the followings pages.

TABLE – 5.1

Age Wise Classification of Respondents

Table No. 5.1 shows he classification of the age group of the sample respondents of study. The respondents have been divided into five groups. At every 10 years of interval ranging from 20 – 60.

SI. No. Age in years No. of Respondents Percentage 1. 20 – 30 22 11.00 2. 31 – 40 34 17.00 3. 41 – 50 88 44.00 4. 51 – 60 43 21.50 5. Above 60 13 6.50 Total 200 100

Source: Primary Data

Interpretation

It was clear that a majority of the respondents were in between the age group of 20 – 50 years which can be treated as young and middle aged group. It points out that there was a predominance of the members who fall in the broad age group of 41 – 50 years.

The explanation of this predominance may be due to the fact that the development of KCCB Ltd has been significant which attracts the younger generation to become the customer of the co operative banks.

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TABLE – 5.2

Sex wise Classification of the Respondents

SI. No. Sex No. of Respondents Percentage 1. Male 178 89 2. Female 22 11 Total 200 100

Source: Primary Data

Interpretation

The table No: 5.2 depicts the number of male and female respondents. Here, 178 of them were male and rest of the total sample borrowers were Female. Due to this indication, it cannot be inferred that most of the people dealing with the study unit, are male. The researcher could face the male customer of the KCCB LTD. in large number. But in reality, perhaps number of female customer / borrowers will also be in equal numbers.

Marital status

Out of 200 sample borrowers 191 were married (i.e 95.5percentage) and 9 were (i.e. 4.5percentage) unmarried. So it is clear by this information that all the members who borrow from the KCCB Ltd are married.

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TABLE – 5.3

Educational Status of the Respondents

The success of any Co operative organization is dependent upon the educational level of members. In this connection, it will be appropriate, if an analysis is made on the educational level of the customer of the banks, and it has been depicted as follows.

SI. No. Level of Education No. of Respondents Percentage 1. Illiterates 33 16.50 2. SSLC 56 28.00 3. Higher Secondary level 78 39.00 4. Graduates 27 13.50 5. Post Graduates 6 3.00 Total 200 100

Source: Primary Data

Interpretation

It is apparent from the table No:5.3 that the illiterates were 16.5 percent but upto SSLC were 28 percent. Most of the respondents were educated up to higher secondary level which accounted for 39 percent. So the respondents who are at secondary level are more attracted by the bank. The level of education is an important factor from the point of view of participation of customer in the management.

Borrowing of money depends upon the occupation of the individuals. So it is vital to analyse, the different types of occupation of the respondents classified as follows.

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TABLE – 5.4

Occupation of the Respondents

SI. No. Occupation No. of Respondents Percentage 1. Business 9 4.5 2. Govt. Employees 7 3.5 3. Private Employees 22 11.0 4. Agriculture 159 79.5 5. Professionals 3 1.5 Total 200 100

Source: Primary Data

Interpretation

Table No: 5.4 it is clear that most of the members approaching KCCBs are dependent on agriculture. As far as KCCB Ltd., is concerned, majority of the respondents are involved in agriculture as their occupation. I.e. 79.5 percent. And 11 percent of the respondents are private employees. Only less than 2 percent of the respondents are in profession. Generally agriculturists are always in need of money. So, this may be the prime reason of increasing loans and advances sanctioned by KCCB Ltd.

Table - 5.5

Annual Income of the respondents

SI. No. Annual income No. of Respondents Percentage 1. Up to 12000 109 54.5 2. Rs. 12001 – Rs 20000 46 23.0 3. Rs. 20001 – Rs. 30000 29 14.5 4. Above 30000 16 8.0 Total 200 100

Source: Primary Data

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Interpretation

The table No 5.5 reveals that 54.5 percent of the respondents earn an annual income of Rs. 12000. Only 14.5 percent of them are getting Rs. 20,001 to 30,000. Only 8 percent of the respondents are earning above Rs.30, 000.

TABLE – 5.6

Purpose of the Loan of the Respondents

SI. No. Purpose No. of Respondents Percentage 1. Business 38 19 2. Agriculture 159 79.5 3. Education 3 1.5 Total 200 100

Source: Primary Data

Interpretation

Table No: 5.6 indicates the purpose of loan availed by the sample borrowers. Out of 200 borrowers, 159 availed loan for their agriculture, which is 79.5 percent whereas 38 of them borrowed loan for business purpose and only 3 borrowers obtained loan for educational purpose.

So it is clear from the above information that the KCCB Ltd. issues the agricultural credits more than any other loans. The annual income of the respondents is very important to know their financial capacity to repay the debts to the bank.

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TABLE – 5.7

Nature of Land of the Respondents

SI. No. Nature No. of Respondents Percentage 1. Own Land 24 12 2. Rented 91 45.5 3. Lease 45 22.5 4. No Land 40 20 Total 200 100

Source: Primary Data

Interpretation

The table No:5.7 shows the nature of land of the respondents. Out of 200 borrowers, 40 of them (20percentage) did not have any type of land Property. But at the same time, it is found that 91 agriculturists (45.5percentage) have land for rent, 24 (12percentage) have own land and 45 agriculturists (22.5percentage) are doing 5.8cultivation in leased lands.

TABLE - 5.8

Types of loan offered by KCCB Ltd.,

SI. No. Type / Scheme No. of Respondents Percentage 1. Deposit Loan 91 45.50 2. Jewel Loan 57 28.50 3. Cash credit 13 6.50 4. Housing Loan 22 11.00 5. Others 17 8.50 Total 200 100

Source: Primary Data

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Interpretation

The table No:5.8 indicates that 91,Majerity ie 45.5 Percentage borrowed loan amount on their deposit loan; 57 of them (i.e. 28.50percentage) have availed jewel loan: 22 (11percentage) of them availed housing loan, and 17 of them borrowed amount on other schemes. Hence it is clear that the borrowers who avail cash credit are lower than all other types. Thus, it is understandable that the bank need not bother about the loss / risk against the overdues excepting cash credit which is the major part of the loan schemes.

Table – 5.9

Irrigation Facility

SI. No. Nature No. of Percentage Percentage Respondents to the total sample size

1. Canals 118 59.00 74.21

2. Tanks 17 8.50 10.69

3. Well with Pump set 24 12.00 15.09

Total 159 79.50 100

Source: Primary Data

Interpretation

The table No: 5.9 shows the irrigation facility of the respondents. The sample farmers were doing cultivation by utilising different sources of irrigation. Among the 159 borrowers farmers (79.5percentage for total

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respondents i.e. 200), 118 of them use canals (74.21percentage); 17 of them (10.69percentage) use tanks and 24 (15.09percentage) of them use well with pump set for irrigation.

Sanctioning of Loan

Among 200 sample borrowers 132 (i.e.66percentage) expressed that it would take more than a month for sanctioning of loan however only 68 of them (34percentage) told that the loan is sanctioned within a month.

Disbursement of Loan

Borrowers also reveal the opinion about the disbursement of loan. Out of 200 sample borrowers, 189 told that the loan would be disbursed more than a week. But only 11 borrowers said they could avail the loan within a week after getting sanction order. However, none of the sample borrowers told that loan could be obtained within a day after sanctioning.

Table – 5.10

Reason for Non-Repayment of Loan

Percentage to Percentage to No. of Sl. No. Reason the total the total Borrowers sample size defaulter

1 Failure of monsoon 11 5.50 8.33

2 Inadequate income 74 37.00 56.06

3 Waiver of loan 15 7.50 11.36

4 Rate of interest 29 14.50 21.96

5 Diversification of loan 3 1.50 2.27

Total 132 66 100

Source: Primary Data

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Interpretation

The table No:5.10 indicates that 74 sample borrowers out of 132 who could not repay the loan amount in time due to inadequate income which is 56percentage among defaulters. Next comes the category of people who could not repay promptly as a result of feeling rate of interest as burden only 11 respondents revealed that failure of monsoon is the reason for non-repayment of loan in time. (Out of the respondents only 68 (34percentage) expressed that they repaid debt amount to the bank duly).

Table – 5.11 Time allowed for repayment of loan

No. of Sl. No. Years Percentage Respondents

1. 1 141 70.5

2. 3 38 19.0

3. 5 17 8.5

4. Above 10 years 4 2.0

Total 200 100

Source: Primary Data

Interpretation

The table No:5.11 indicates that the time allowed for the borrowers to repay the debt amount. Out of 200 sample borrowers 141 ( 70.50percentage) have to repay the loan after six months from the date of availing of loan.

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However it should not exceed one year. since their loan is short-term and 38 (i.e. 19percentage) of them have to repay the debt amount within 3 years (their debt amount might be medium term) 17 of them had to repay the debt within 5 years as their loan is long-term. But only 4 of them have to repay the debt amount after 10 years. (They have availed housing loans). So it is clear that the borrowers who obtain short term loans are more than other credit availed.

Table – 5.12

Reason for having deposits in KCCB LTD.

SI. No. Reason No. of Respondents Percentage

More interest than other 1. 142 71.10 bank

2. Nearness 8 4.0

3. Attractive schemes 27 13.5

Services more than other 4. 23 11.5 bank

No other bank in 5. 0 0 concerned area

Total 200 100

Source: Primary Data

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Interpretation

From the table No:5.12, it is clear that KCCB LTD. have the deposits from the public due to many reasons as enumerated below. Out of 200 sample borrowers 142 (i.e. 71percentage) have expressed that they deposited in the study unit because of the bank gives interest for the deposits more than other banks or financial institutions. 27 (13.5percentage) said that they invest their surplus money in this bank due to availing attractive schemes. 23 of them have expressed that KCCB LTD renders more services than any other banks and only 8 of them told the proximity is the main reason. So the bank may try to increase the rate of interest for deposits by which it can develop the banking business and consequently most of the people living in Thanjavur district can be attracted by various new schemes for deposit.

Table – 5.13

Types of Deposit

SI. No. Type of A/c No. of Respondents Percentage

1. Savings bank a/c 76 38.0

2. F.D 52 26.0

3. Current A/c 4 2.0

4. R.D 35 17.5

5. F.D & Others 33 16.5

Total 200 100

Source: Primary Data

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Interpretation

From the table No:5.13 it is inferred that 38 percentage of the deposit holders have SB account, whereas 26percentage of them have fixed deposits only and another 12percentage of them have some deposits along with F.D account. Thus, 38percentage of them have F.D with the bank but only 2percentage of them have invested their money in the current account.

Table – 5.14

Quantum of Savings of the Respondents

SI.No. Amount of deposits (Rs) No. of Respondents Percentage

1. Below Rs. 5000 70 35.10

2. Rs. 5001 – Rs. 10000 93 46.5

3. Rs. 10001 – Rs. 15000 12 11

4. Rs. & above 1,5000 15 7.5

Total 200 100

Source: Primary Data

Interpretation

The table No:5.14 reveals that 35percentage of the respondents have below Rs. 5000 with the bank whereas 46percentage of them have between Rs. 5001 – Rs. 10000. But only 7.5percentage of them have above 15000. Among the members dealing with the study unit most of the members have strong feeling that rate of interest is higher for their deposits in the bank than other banks for deposits. That is why, though the members are mostly borrowers, they have also fair level of deposits in this bank.

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Table – 5.15

Awareness of various loan schemes offered by KCCB Ltd.

SI. No. Type No. of Respondents Percentage

1. Aware of the loan schemes 61 30.50

2. Un aware of the loan 139 69.50 scheme

Total 200 100

Source: Primary Data

Interpretation

From the table No:5.15, it can be observed that 69.5 percent of the sample borrowed was unaware of various loan schemes offered by the bank. Only 30.5percentage of them were aware of the schemes.

The KCCB Ltd offers different schemes of loans to the sample respondent have borrowed on only on few schemes. It is because of members of the study unit are unaware of transactions of the same.

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Table – 5.16Satisfactory Level of the Respondents towards Borrowings

Satisfactory Level

Neither Highly Highly Dissatisfied Satisfied nor Satisfied Total Dissatisfied satisfied Sl. dissatisfied No Particulars . pe pe per pe No. of per No. of perc No. of rce No. of No. of rc No. of cen rce Respon cent Respon enta Respon nt Respon Respon en Respon tag nta d age d ge d ag d d ta d e ge e ge

Document to be 15. 1. 10 1 70 35 94 47 2 1 31 3 200 attached for loan 5 5 0

Procedure for 10 2 93 46.5 55 27.5 18 9 34 17 -- -- 200 getting loan 0

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Rate of interest for 32. 10 3 42 21 86 43 7 3.5 65 -- -- 200 loan 5 0

Amount of 10 4 189 94.5 -- -- 4 2 7 3.5 -- -- 200 sanctioning 0

Time factor to 10 5 172 86 15 7.5 -- -- 13 6.5 -- -- 200 sanctioning 0

Time factor to 10 6 109 54.5 88 44 3 1.5 ------200 disbursement 0

43. 1. 10 7 Repayment facility 63 31.5 44 22 3 1.5 87 3 200 5 5 0

Loan facility for 10 8 9 4.5 27 13.5 2 1 156 78 6 3 200 depositors 0

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Securities insisted 10 9 130 65 21 10.5 7 3.5 24 12 18 9 200 on loan 0

Lender – borrower 10 10 15 7.5 30 15 13 6.5 78 39 64 32 200 relationship 0

Guidance for 10 11 9 4.5 -- -- 11 5.5 172 86 8 4 200 Repayment 0

4. 10 12 Penalty amount 56 28 101 50.5 2 1 32 16 9 200 5 0

Source: Primary Data

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Table – 5.17

Satisfactory Level of the Respondents towards Deposits

Satisfactory Level

Neither Highly Highly Dissatisfied Satisfied nor Satisfied Total Sl. Dissatisfied satisfied dissatisfied No Particulars per pe . No. of per No. of per No. of No. of per No. of perc No. of cen rce Respon cent Respon cent Respon Respon cent Respon enta Respon tag nta dents age dents age dents dents age dents ge dents e ge

Rate of interest 10 1 4 2 41 20.5 28 14 126 63 1 0.5 200 for Deposits 0

Collection 10 2 -- -- 37 18.5 -- -- 21 10.5 142 71 200 Charges 0

3 Flexibility to 57 28.5 50 25 9 4.5 70 35 14 7 200 10

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Rules 0

10 4 Various schemes -- -- 27 13.5 -- -- 14 7 159 79.5 200 0

Motivation of 10 5 -- -- 7 3.5 -- -- 11 5.5 182 91 200 bankers 0

Services rendered 10 6 -- -- 12 6 5 2.5 159 79.5 24 12 200 by the bank 0

10 7 Amenities -- -- 21 10.5 -- -- 179 89.5 -- -- 200 0

Comprehensivene 10 8 -- -- 13 6.5 11 5.5 176 88 -- -- 200 ss 0

Source: Primary Data

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Interpretation

The table No. 5.16 and 5.17 shows the members satisfaction towards the borrowings and deposits at various level of the study unit respectively the research mostly found positive response (satisfaction) from all except some of them for various things mentioned. Hence, considering these information, it is sure that the KCCB Ltd renders services to their members efficiently. Consequently the bank can achieve its target successfully.

ATTITUDE OF CLASS A & B MEMBERS TOWARDS THEIR BANKERS

An individual’s behaviour is a function of attitudes. An attitude is also a cognitive element that always remains inside a person. A person’s attitude comprises three components, namely affective, cognitive and overt. The attitude of class A members towards their societies is very important to promote the societies as a viable unit. Hence, an attempt has been made presently on the measurement of attitude towards their Banks, association of profile variable and attitude the factors influence their attitude and the factors discriminating satisfiers and dissatisfies.

The attitude in the present study shows the level of satisfaction towards their societies. The attitude towards their societies is measured by using a five points scale namely highly satisfied, satisfied, moderate, and dissatisfied and highly dissatisfied which carries 5, 4, 3, 2 and 1 score respectively. The distribution of class A members according to their level of attitude towards their societies is shown in Table No: 5.18.

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TABLE 5.18

CLASS A&B MEMBERS ATTITUDE TOWARDS THEIR KUMBAKONAM CENTRAL COOPERATIVE BANKS

Sl. Attitude Class A members Class B members No Number of Percentage Number of Percentage Respondents Respondents

1. Highly 27 13.64 7 13.46 satisfied

2. Satisfied 58 29.29 12 23.08

3. Moderate 46 23.23 14 26.92

4. Dissatisfied 45 22.73 10 19.23

5. Highly 22 11.11 9 17.31 Dissatisfied

Total 198 100.00 52 100.00

Source: Primary data.

Table No: 5.18 shows that around 42.93 per cent (13.64 + 29.29) of the class A members and 36.54 per cent (13.46+23.08) of the class B members are either satisfied or highly satisfied with the Banks. In total 23.23 per cent and 26.92 per cent of class A members and respectively are moderately viewing about their societies. The class A members and class B members have been

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classified into two groups namely the satisfied and the dissatisfied. The satisfied include highly satisfied, satisfied and moderate, whereas the dissatisfied consist of dissatisfied 41.96 (22.73+19.23) and highly dissatisfied (28.42) (11.11+17.31).

ASSOCIATION BETWEEN DEMOGRAPHIC VARIABLES OF THE RESPONDENTS AND THEIR ATTITUDE TOWARDS THE BANKS

An attempt has been made to analyse the association between the demographic factors of the respondents and their attitude towards the societies with the help of Chi-square analysis. It is calculated by adopting the following formula:

(O – E) 2

Chi-square =  ------with (r-1) (c-1) degrees of freedom.

Where

O = Observed frequency,

E = Expected frequency,

Row total E = ------x Column total Grand total

c = Number of columns.

r = Number of rows.

The Chi-square value and its significance are calculated for each variable separately. The results are given in Table No: 5.19.

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that around 42.93 per cent (13.64 + 29.29) of the class A members and 36.54 per cent (13.46+23.08) of the class B members are either satisfied or highly satisfied with the Banks. In total 23.23 per cent and 26.92 per cent of class A members and respectively are moderately viewing about their societies. Whereas in the case of class B members, the variables namely, age, education, occupational income and monthly income have influenced the attitude of the class B members towards their societies, since the Chi-square values are statistically significant at 5 per cent level.

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Class A&B members’ Attitude towards the Performance of kumbakonam central cooperative banks

The attitude of a customer’s towards his bank is evaluated by analysing the factors such as age, education, sex, caste, nature of family, marital status, family size, earning class A members per family, material possession, monthly income and family Income. The main objective of a co-operative bank is to improve the economic conditions of its class A members. The aforesaid objective can be achieved if the performance of the bank is up to the expectation of the class A members. In the present study, the attitude of the respondents is measured through some relative variables namely profit, marketing, cash flow, bad debts, competition, future scope, expansion of capital base, creditability, financial assistance and management. The attitude towards the above said performance variables is measured by using at 5 point scale as highly satisfied, satisfied, moderate, dissatisfied and highly dissatisfied which carries 5, 4, 3, 2, and 1 score respectively.

The mean score on the attitude towards the performance variables is measured among the satisfied and dissatisfied separately for class A members and class B members. The t-test has been applied to find out the significant difference between the means of each performance variable. The resultant mean and its respective t-statistic are shown in Table 5.20

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TABLE 5.5.20

. CLASS A AND B CUSTOMER’S ATTITUDE TOWARDS THE PERFORMANCE VARIABLES OF KUMBAKONAM CENTRL COOPERATIVE BANK

Average Score Average Score

Societies’ (Class A members) (Class B members) Sl. No Variables Dis- Dis- Satisfiers t-test Satisfiers t-test satisfiers satisfiers

1. Profit 3.7841 1.4271 2.9516* 3.8721 2.9421 2.6412*

2. Marketing 3.1741 2.9867 1.1012* 2.4721 2.1671 1.0621*

3. Cash flow 3.0721 1.2617 3.1167* 3.0738 2.9671 1.2712*

4. Bad debts 2.6742 2.4781 1.3214* 2.6761 2.0147 0.9421*

5. Competition 2.2711 1.9371 1.6211* 2.7216 2.6740 1.1021*

6. Future scope 3.6711 1.9371 2.6712* 3.6742 2.4721 2.6714*

7. Expansion 3.7869 2.1472 3.0421* 3.7421 2.1421 3.1021*

of capital

base

8. Creditability 3.5721 3.1124 1.1431* 3.9271 2.6671 2.9214*

9. Financial 3.6431 2.0471 2.0672* 2.6721 2.4720 1.1021*

assistance

10. Management 2.7061 1.2321 3.9214* 2.9631 1.8972 2.9371*

Source: Primary data.

Note : * indicates the t-value

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The highly satisfied aspects of the performance in the case of class A members among the satisfied are expansion of capital base, profit, future scope, financial assistance and cash flow, whereas among the dissatisfied, are creditability and marketing since the mean scores are high. The highly dissatisfied aspects among satisfied are bad debts and management, whereas among the dissatisfied they are management and cash flow. The significant difference among the satisfied and dissatisfied is found in profit, cash flow, and future scope, expansion of capital base, financial assistance and management.

In the case of class B members, the highly satisfied aspects of the performance of banks among the satisfied are creditability, profit, expansion of capital base and future scope. The highly dissatisfied aspects among dissatisfied are management and marketing. The significant difference among the satisfied and dissatisfied is found in profit, future scope, and expansion of capital base, creditability and management.

Impact of Attitude on Performance Variables of Bank on the Overall Attitude

In this section, an attempt has been made to find out the influence of the attitude on performance variables on the overall satisfaction among the respondents. The following form of multiple linear regression models was taken.

Log Y = b0 + b1 log X1 + b2 log X2 + …. b10 log X10 + u

Where,

Y = Overall satisfaction (score value),

X1 = Attitude towards profit (score value),

X2 = Attitude towards marketing (score value),

X3 = Attitude towards cash flow (score value),

X4 = Attitude towards bad debts (score value),

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X5 = Attitude towards competition (score value),

X6 = Attitude towards future scope (score value),

X7 = Attitude towards expansion of capital base (score value),

X8 = Attitude towards creditability (score value),

X9 = Attitude towards financial assistance (score value),

X10 = Attitude towards management (score value),

U = Error term.

b0, b1, b2, …. b10 are the parameters to be estimated.

The above model was estimated by the method of the least square and results are given in Table 6.16.

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TABLE 5.21 Impact of Attitude towards Performance Variables of banks on Overall Attitude Sl. Attitude Towards Regression Coefficients No. Performance Variables Class A Class B members members 1. Profit 0.2182* 0.2432* (3.7932) (3.6212) 2. Marketing 0.1016* 0.0948* (1.0421) (0.1062) 3. Cash flow 0.1341* 0.1472* (2.0671) (3.1211) 4. Bad debts -0.0963* -0.0746* (-0.9421) (-0.0672) 5. Competition 0.0462* -0.0341* (0.0091) (-0.1072) 6. Future scope 0.2762* 0.2942* (3.0721) (2.6732) 7. Expansion of capital base 0.1042* 0.0942* (0.4127) (0.0098) 8. Creditability -0.0341* -0.0421* (-0.0632) (-1.0216) 9. Financial assistance 0.1362* 0.1042* (1.0127) (0.7421) 10. Management 0.1262* 0.1368* (1.0427) (2.7942) Constant 0.7243 0.8432 R2 0.5762 0.5914 F-Statistics 21.4671* 18.6374* Source: Primary data. Note : * Significant at 5 per cent level.

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The attitude towards profit, cash flow and future scope of the class A members are significantly influencing the overall satisfaction. One per cent increase in these variables augments the overall attitudes by 0.2182, 0.1341 and 0.2762 per cent respectively. In the case of class B members, the co-efficient of the variables namely profit, cash flow, future scope and management are statistically significant at 5 per cent level. An additional percentage increase in these variables, leads to increase in the overall attitudes by 0.2432, 0.1472, 0.2942 and 0.1368 per cent respectively. The co-efficient of determination (R2) conveys that the change in overall attitude is influenced jointly by all the independent variables to the extent of 57.62 percent and 59.14 per cent for class A members and class B members respectively.

Impact of Performance Variables on the Overall Attitudes towards the banks

The demographic variables may influence the overall attitude towards the bank. In the present study, an attempt has been made to analyse each profile variables on the overall attitudes towards the bank. The score on overall attitude is treated as the dependent variable whereas the profile variables are taken as the independent variables. The taken regression model is:

Log Y = b0 + b1 logX1 + b2 logX2 + ….. + b12 logX12 + u

Where

Y - Overall attitude

X1 -Age

X2 -Education

X3 – Sex

X4 – Caste

X5 – Nature of family

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X6 – Marital status

X7 – Family size

X8 – Earning class A members per family

X9 – Occupational background

X10 – Material possession

X11 – Monthly income

X12 – Family income

U – Error term.

The above said regression model is computed by the method of the least squares and the results are shown in Table 5.22

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TABLE 5.22

Impact of Demographic Variables on an Overall Attitude towards the banks

Sl Profile variables Regression Co-efficient

No. Class A members Class B members

Satisfiers Dissatisfiers Satisfiers Dissatisfiers

1 Age -0.1263* -0.1963* -0.1062* 0.1327*

(1.1213) (2.9713) (-0.0671) (-0.1011)

2 Education 0.2816* 0.0963* 0.3017* 0.1872*

(3.7214) (0.0671) (2.9742) (3.0721)

3 Sex 0.1011* 0.0068* 0.1121* 0.0972*

(0.0941) (0.0031) (0.1021) (0.0671)

4 Caste 0.0941* 0.1021* 0.1071* 0.0872*

(0.0872) (0.0671) (0.0710) (0.0472)

5 Nature of family 0.0671* 0.0718* 0.0712* 0.1067*

(0.8213) (1.0167) (0.0068) (0.0941)

6 Marital status 0.1016* 0.0942* 0.0871* 0.1071*

(0.0967) (0.0673) (1.0017) (0.0671)

7 Family size 0.0671* 0.0476* 0.1231* 0.1162*

(0.0312) (0.0046) (0.0921) (0.1012)

8 Earning class A 0.0712* 0.1017* 0.0801* 0.0721*

members in a (0.0631) (0.1012) (0.0711) (0.0603)

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family

9 Occupational 0.2438* 0.2131* 0.2612* 0.2472*

background (2.7112) (3.1671) (2.7631) (3.0116)

10 Occupational 0.0631* 0.0048* 0.0512* 0.0614*

income (0.0911) (0.0067) (0.1012) (0.0178)

11 Monthly income 0.1884* 0.1763* 0.2142* 0.1937*

(3.1017) (2.1167) (2.3841) (2.9671)

12 Family income 0.1663* 0.1012* 0.1972* 0.1471*

(2.4713) (0.4712) (2.6136) (3.1671)

Constant 0.5891 0.4321 0.7101 0.6948

R2 0.5671 0.5811 0.6071 0.5871

F - Statistic 18.61* 21.42* 30.16* 26.34*

Source: Primary data. Note :* Significant at 5 per cent level.

Among the satisfied class A members, the significantly influencing profiles on the overall attitude towards the bank are education, occupational background, monthly income and family income. An additional percentage increase in these variables results in an increase of overall attitude by 0.2816 per cent, 0.2438 per cent, 0.1884 per cent and 0.1663 per cent respectively. The significant influencing profile variables among the dissatisfied class A members are age, occupational background and monthly income. One per cent increase in age results in decline of 0.1963 per cent in overall attitude. An additional percentage increase in the variables occupational background and monthly income result in an increase of overall attitudes by 0.2131 per cent and 0.1763 per cent respectively.

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In the case of class B members, the significantly influencing demographic variables among the satisfied are education, occupational background, monthly income and family income. An additional percentage increase in these variables results in an increase of overall attitude towards the bank by 0.3017 per cent, 0.2612 per cent, 0.2142 per cent and 0.1972 per cent respectively. Among the dissatisfied class B members, the significantly influencing variables on the overall attitude are education, occupational background, monthly income and family income. One per cent increase in these variables augments the overall attitudes by 0.1872 per cent, 0.2472 per cent, 0.1937 per cent and 0.1471 per cent respectively. The co-efficient of determination (R2) conveys that the change in overall attitude towards the bank is explained by the independent variables jointly to the extent of 60 per cent (0.0671).

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CHAPTER – VI

SUMMARYS OF FINDINGS, SUGGESTIONS & CONCLUSION

This thesis report is the outcome of descriptive and analytical study of the Kumbakonam central Co-operative Bank Ltd. during the study period. The response of 200 deposit holders and borrowers have been compiled and analysed in the previous chapters. The data collected from the records of the KCCB Ltd from journals and from other records have been analysed scientifically. The findings from the analysis of these primary and secondary data are summarized and presented below. Conclusion has also been given along with findings. A list of suggestions based on the interview and analysis of data are given at the end of this chapter.

FINDINGS

The findings of this research work are given in three sections. Based on the secondary data collected from annual reports of KCCB Ltd and by the response of 200 deposit holders and the borrowers of KCCB Ltd finding have been given.

Based on secondary data:

 The head office and branches are mobilising different types of deposits. It has increasing trend, continuously throughout the study period. In the year 2007-2008, total deposits have been registered more than other year’s i.e. 89.16percentage for base year.

 The ratio of agricultural credit to total loans and advances, it is fluctuating over the study period. Only in the year 2000-01, the agricultural credit has been given more than other year’s i.e 27percentage. The main reason for the bank to reduce the agricultural credit is due to the heavy overdues of earlier assistance.

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 The main reason for increasing the trend of Agricultural stabilization fund, the study unit has to allot the funds more due to there is unrecovered position in the bank. It is intended that overdues of agricultural credit increases by wilful defaulter also. So it is better and safe to the bank to take necessary steps to recover the debt duly. During the year 2002-2003, the entire amount of this fund was utilised for medium term loans.

 During the year 2003-2004, the loans and advances provided by the bank were utilised from the borrowings from Tamil Nadu State Co- operative and Government (TN). The amount of loan sanctioned has increasing trend throughout the study period except one or two years.

 The percentage of jewel loans has gradually witnessed an inversing trend. During the last year of the study period, it has highly increased that is Rs. 11512.45 (59.22percentage). The main reason for speedy growth of Jewel Loan is due to the banks prompt disbursement. For the part of money needy people, they are highly satisfied. That is why most of needy people believe and reach the study unit than all other banking institutions.

 The percentage of NPA during the study period it has greater increase in the year 2008 – 2009. i.e. 31.39percentage to total loans & advances. When it is compared to base year it has a steadily increasing trend. However, NPA has been provided by study unit only from the year 2000-01.

 In the year 2008-09 it is higher than other years. Increase in provision of NPAs is danger to the bank. As per the norms of RBI, the bank should reduce to 5percentage to the total assets of the bank. The bank provides a huge amount for provision against NPAs and it faces with bulging of NPA resulting in lower income and higher provisioning making a dent in their profit figures. To say precisely, NPAs affect the

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profitability and financial strength of the bank. Mostly the percentage of poor recovery items are of loans to weavers society, loans to wholesale store, spinning mills and agricultural sectors.

 In the year 2001 - 2002, the percentage of outstanding of loans is 36.55percentage and in the year 2002 – 2003, it is 44.70percentage. After these year it has fluctuating trend rather than decreasing. By this information it is clear that the bank is able to recover the debt by taking necessary steps.

 The reserve fund is allotted as per the RBI norms by the study unit. It almost remains constant till the year 2007-2008 but it registered slight increase in the year 2008-2009.

 The growth of investments indicates its sound financial strength and that the bank is being run with good and sound principles of management.

 The KCCB Ltd has the cash balance with other banking institution (Commercial banks and Government fellows) it has increasing trend rather than fluctuating trend. In the year 2005 – 06, this amount is Rs. 4137.15 lakhs (i.e. 60 56percentage) and in the last year of study period, it is Rs. 5238.55 lakhs i.e. 103.30percentage have increased in which these are maximum over the study period. So it is clear that the bank has sound financial position to meet its expenditure.

 The amount of bad and doubtful debt is reserved each and every year by bank. At the beginning of the study period, its reserve was Rs. 537.79 lakhs.Duringyear2010 11, theamountwas Rs.5278.65lakhs (i.e.919.08 percentage) in which it is higher than other years. It shows its strong financial capacity to sustain the banking transactions against losses / risks due to bad debts and overdues.

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 From the year 2004 – 2005 the current ratio has increased up to the year 2005 – 06 in which it is higher than other years i.e. so it is observed that the proportions of A to current liabilities are not uniform. The thumb rule of 2: 1 is maintained throughout the study period. The bank is neither superfluous in liquid fund nor below the danger line. It is just maintaining a safe strategy.

 It is understood that the study unit has more ability to meet its short term financial obligations throughout the study period. Because, this ratio is more than one over the study period. It shows that the bank does not fully utilize its resources to mobilize more revenue. In the year 2005 – 2006 the ratio is 1.89 times which is higher than other years of the study period but the ratio almost remains constant.

 The debt-equity position of KCCB Ltd. has no long-term debt proportion as standard norms. In the year 2007 – 2008, the ratio is less than one. So we can conclude that the study unit does not have equal long term debts to its equity. During 2005 – 2006 the bank has high leverage due to debt equity ratio is 9.07. So it may reduce its external sources / borrowings.

 The ratio of debt to total funds remains almost constant during the study period except in few years. The average debt to total funds ratio of the study period is more than the acceptable ratio in India. So it is inferred that the proportion of debt is said to be high which indicates high leverage of study unit.

 Funds bearing fixed interest are more than the equity shareholders funds (owned funds) throughout the study period. So it is observed that the capital storyline of KCCB Ltd. is said to be highly geared. This ratio is higher in the year 2002 – 2003. (i, e 9.86percentage)

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 The return on capital employed of KCCB Ltd, varies between 10.96percentage and 16.58percentage which is higher than other years of study period. Its average i.e, 12.13percentage indicates that the bank has earned a profit of Rs. 12.10 on every hundred rupees invested.

 In the year 2004-05, the ratio of ROE(Return on equity) was more than other years i,e 37.42percentage. The average ratio of ROE is -20.641. There is almost net loss in all year of study period except few years. It is because, the bank is more dependent on the debt than owned funds. So the bank has to immediately take remedial measures to bear the loss and make profitability.

 The study unit has just lower net profit to working capital ratio. It indicates the improper use of net current assets. These ratio do not lie in the standard range except few years. Since the ratios are lower, the bank has got the scope for better use of working capital. Only in the year 2010 – 2011, the ratio is as per standard norms i.e. 1.37percentage. The average ratio of net profit to working capital is - 0.958.

 The interest earned ratio of the selected bank is fluctuating over the study period. In 2008 – 09, this ratio is higher than all other years of study period. But the total interest earned ratio shows an increasing trend. The average of this ratio is 5.41percentage. It is below the bank rate and it shows the inability of the bank in collecting the loans and interest. Such situation may lead the bank to high overdue position and to difficulty to meet its expenditure. So it is suggested that the bank should take appropriate measure to gear up the collection of overdues.

 The interest paid ratio of study unit is fluctuating from the beginning. Its fluctuation ranges between 1.85 percentage and 5.10percentage. The average ratio of Interest paid ratio is 3.514percentage. It shows

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that the bank’s deposit mobilisation and interest paid position are satisfactory.

 The Table No. 4.24 depicts the relationship between total income and volume of business of the study unit. In the year 2004 – 05, the total income as well as volume of business is more than all years of study Ratio. So its ratio is high (13.13percentage). Totally it reveals the operational efficiency of the bank in making adequate revenue, because both volume of business and total income have the increasing trend except two or three years. During the year 2010-2011 the total income has decreased, and its ratio is lower than 6.18percentage. The Average ratio of is 10.2percentage. Hence the bank should take necessary steps to increase its total income resulting by overall operational efficiency.

 It is understandable that the manpower expenses ratio has the fluctuating trend over the study period. As for as, the manpower expenses ratio is concerned, It is higher than all others years of study period. In the year 2001 – 2002 i.e. 1.147percentage and establishment expenses ratio is 10.16percentage which is higher than all other years of study period. The average ratio of it is 1.233percentage.

 It is understandable that the establishment expenses ratio has the fluctuating trend over the study period. 5.18 are for establishment expenses, amount is spent by way of manpower expenses and establishment expenses when compared to volume of the business. The average ratio of it is 5.189percentage.

 It is clear that the study unit meets out the establishment expenses out of its interest earned income. So it is suggested the bank should either reduce the establishment expenses or increases it.

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 The NII (Non- interest income) ratio varies between 2.48percentage in 2010-11 and 6.25percentage in 2009 – 2010. There is no much variation in the NII ratio for all the years of study period except in 2010 – 2011. It is concluded that the bank gets non-interest income at an average of 4.791percentage annually which is 0.38 times less than the establishment expenses. So it is suggested that the bank should earn more non-interest income to meet the establishment expenses.

 The interest earned ratio and interest paid ratio fluctuating over the study period. The average of interest earned ratio is 5.14percentage and interest paid ratio is 3.51percentage. The average spread ratio is 1.547percentage. The interest earned ratio is more than the interest paid ratio since the spread ratio is greater than zero. It is so considered that the bank’s operation is good.

 It is seen that the interest earned ratio an interest paid ratio fluctuating over the study period. The average of interest earned ratio is 5.14percentage and interest paid ratio is 3.51percentage. The average speed ratio is 1.55percentage. The interest earned ratio is more than the interest paid ratio since the spread ratio is greater than zero. It is so calculated that the bank’s operation is good.

 It is seen that the profitability ratio of the study unit shows the negative result in 7 years. The average of it is -0.212. It may be safe for the bank that to make a break-through by turning up its performance to have a good profitability ratio

Primary Data

 It was clear that a majority of the respondents were between the age group of 20 – 50 years which can be treated as young and middle age group. It points out that there was a predominance of the members who fall in the broad age group of 20 – 50 years.

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 The explanation of this predominance may be due to the fact that the development of KCCBs has been significant which attracts the younger generation to become the customer of the co operative banks.

 The table no. 5.2 depicts the number of male and female respondents. Here, 178 of them were male and rest of the total sample borrowers were Female. Due to this indication, it cannot be inferred that most of the people dealing with the study unit, are male. The researcher could face the male customer of the KCCB Ltd in large number. But in reality, perhaps number of female customer / borrowers will also be in equal numbers.

 The illiterates were 16.5percentage but below SSLC were 28percentage. Most of the respondents were educated up to secondary level which accounted for 39percentage. So the respondents who are at secondary level are more attracted by the bank. The level of education is an important factor from the point of view of participation of customer in the management and overall.

 It is clear that most of the members approaching KCCBs are dependent on agriculture. As far as KCCB Ltd is concerned, majority of the respondents are involved in agriculture as their occupation. i.e. 79.5percentage. And 11percentage of the respondents are private employees. Only less than 2percentage of the respondents are in profession. Generally agriculturists are always in need of money. So, this may be the prime reason of increasing loans and advances sanctioned by KCCB Ltd.

 .More than 54percentage of respondents earn an annual income of Rs. 12000 and less. Only 14percentage of them are getting more than Rs. 2000 annually. The remaining respondents are in the range of Rs. 10000 – 20000. It is the less number of respondents earn more than Rs. 30000 annually i.e. a lesser no. i.e. 23percentage.

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 Out of 200 borrowers, 159 availed loans for their agriculture, which is 79.5percentage whereas 38 of them borrowed and only 3 borrowers obtained loan for education.

 So it is clear from the above information that the KCCB Ltd issues the agricultural credits more than any other loans. The annual income of the respondents is very important to know their financial capacity to repay the debits to the bank duly.

 Out of 200 borrowers, 40 of them did not have any type of land Property. But at the same time, it is found that 91 agriculturists have land for rent, 24 have own land and 45 agriculturists are doing cultivation in leased lands.

 It is understood that indicates that 91 (i.e. 45.5percentage) sample borrowers borrowed loan amount on their deposit receipts; 57 of them (i.e. 28.50percentage) have availed jewel loan: 22 (11percentage) of them availed housing loan, and 17 of them borrowed amount on other schemes. Hence it is clear that the borrowers who avail cash credit are lower than all other types. Thus, it is understandable that the bank need not bother about the loss / risk against the overdues excepting cash credit which is very major part of the loan schemes.

 The sample farmers were doing cultivation by utilising different sources of irrigation. Among the 159 borrowers (farmers) 118 of them use canals (74.21percentage); 17 of them (10.69percentage) use tanks and 24 (15.09percentage) of them use well with pump set for irrigation.

 Among 200 sample borrowers, 132 (i.e.66percentage) expressed that it would take more than a month for sanctioning of loan; However only 68 of them told that the loan is sanctioned within a month.

 Borrowers also reveal the opinion about the disbursement of loan. Out of 200 sample borrowers, 189 told that the loan would be disbursed

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more than a week. But only 11 borrowers said they could avail the loan within a week after getting sanction order. However, none of the sample borrowers told that loan could be obtained within a day after sanctioning.

 The 74 sample borrowers out of 132 who could not repay the loan amount in time due to inadequate income which is 56percentage among defaulters. Next comes the category of people who could not repay promptly as a result of feeling rate of interest as burden only 11 respondents revealed that failure of monsoon is the reason for non-repayment of loan in time.

 Out of 200 sample borrowers 141 (i.e. 70.50percentage) have to repay the loan after six months from the date of availing of loan. However it should not exceed one year. Since their loan is short-term and 38 (i.e. 19percentage) of them have to repay the debt amount within 3 years (their debt amount might be medium term 17 of them had to repay the debt with in 5 years as their loan is long-term. But only 4 of them have to repay the debt amount after 10 years. They have availed housing loans. So it is clear that the borrowers who obtain short term loans are more than other credit availed.

 It is clear that KCCB Ltd have the deposits from the public due to many reasons as enumerated below. Out of 200 sample borrowers 142 (i.e. 71percentage) have expressed that they deposited in the study unit because of the bank gives interest for the deposits more than other banks or financial institutions. 27 (13.5percentage) said that they invest their surplus money in this bank due to availing attractive schemes. 23 of them have expressed that KCCB Ltd renders more services than any other banks and only 8 of them told the proximity is the main reason. So the bank may try to increase the rate of interest for deposits by which it can develop the banking business and consequently most of

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the people living in Thanjavur district can be attracted by various new schemes for deposit.

 It is inferred that 38percentage of the deposit holders have SB account, whereas 26percentage of them have fixed deposits only and another 12percentage of them have some deposits along with F.D account. Thus, 38percentage of them have F.D with the bank but only 2percentage of them have invested their money in the current accuont.

 The 35percentage of the respondents have below Rs. 5000 with the bank whereas 46percentage of them have between Rs. 5001 – Rs. 10000. But only 7.5percentage of them have above 15000. Among the members dealing with the study unit most of the members have strong feeling that rate of interest is higher for their deposits in the bank than other banks for deposits. That is why, though the members are mostly borrowers, they have also fair level of deposits in this bank.

 The KCCB Ltd offers different schemes of loans to the sample respondent have borrowed on only on few schemes. It is because of members of the study unit are unaware of transactions of the same.

 ClassA&Bmembers attitude towards their kumbakonam central cooperative banks are that around 42.93 per cent (13.64 + 29.29) of the class A members and 36.54 per cent (13.46+23.08) of the class B members are either satisfied or highly satisfied with the Banks. In total 23.23 per cent and 26.92 per cent of class A members and respectively are moderately viewing about their Banks.

 That around 42.93 per cent (13.64 + 29.29) of the class A members and 36.54 per cent (13.46+23.08) of the class B members are either satisfied or highly satisfied with the Banks. In total 23.23 per cent and 26.92 per cent of class A members and respectively are moderately viewing about their Banks

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 The highly satisfied aspects of the performance in the case of class A members among the satisfied are expansion of capital base, profit, future scope, financial assistance and cash flow, whereas among the dissatisfied, are creditability and marketing since the mean scores are high, In the case of class B members, the highly satisfied aspects of the performance of banks among the satisfied are creditability, profit, expansion of capital base and future scope.

 The attitude towards profit, cash flow and future scope of the class A members are significantly influencing the overall satisfaction, In the case of class B members, the co-efficient of the variables namely profit, cash flow, future scope and management are statistically significant at 5 per cent level.

 Among the satisfied class A members, the significantly influencing profiles on the overall attitude towards the bank are education, occupational background, monthly income and family income, In the case of class B members, the significantly influencing demographic variables among the satisfied are education, occupational background, monthly income and family income. An additional percentage increase in these variables results in an increase of overall attitude towards the bank by 0.3017 per cent, 0.2612 per cent, 0.2142 per cent and 0.1972 per cent respectively.

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SUGGESTIONS

 The Tamil Nadu Government has withdrawn its share amount Rs. 55 crores from the KCCB Ltd share capital in 2002 – 2003. This makes a dent in a share capital position of KCC Bank Ltd. So, the government should increase their share amount.

 Many of members of KCCB Ltd expressed that out of 22 branches only some branches are computerized. So it is necessary that the remaining branches have to be computerised. This will enable the members to operate their account through any branch of the bank after they become the account holder of a branch.

 The interest income of KCCB Ltd must be increased at a faster rate. It can be done by recovering the interest periodically on the loans and advances without allowing becoming overdue. The interest rate fixed and charged on the funds disbursed under credit portfolio has to be fixed scientifically to earn more interest. Competitive and at the same time a reasonable interest rates will attract more good members.

 The investments portfolio gives a modulate interest income to KCCB Ltd It has to choose the profitable investment areas to park its funds. The financial manager can study the financial market and s per the co- operative laws the permitted funds may be invested to earn a guaranteed income.

 KCCB Ltd has good opportunities to improve its low cost deposits. So that it can minimize its interest expenditure.

 KCCB Ltd must review periodically the transactions under “interest paid” on the borrowings and minimize the interest expenditure. It can resort to the low cost refinance instead of loans from other sources so that the cost of borrowed funds can be reduced.

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 The bank must do its budget exercise with a committed vision to make profits. It has to plan and implement with a chosen mission to realize the budget projections. KCCB Ltd has to re-engineer its financial functions immediately to correct its past mistakes in order to ensure positive profit & loss account and a healthy balance sheet in future years.

 KCCB Ltd has more than 50percentage of its total assets as NPA.

 Total automation of the bank will enable the members to do their banking transaction through a single counter instead of going to each and every counter within the premises.

 Most of the members are having accounts with other commercial and other branches of KCCB Ltd for their business purpose. If the KCCB Ltd provides ATM to its members, it will be easier for them to with draw their amount wherever they needed.

 Many rich people do not come to KCCB Ltd for transaction. If the bank provides on line facility and tele-banking facility for their non – cash transaction it may attract most of the rich people as their members.

 Out of 32 branches only 8 branches are providing locker facilities to their members. It is necessary that the remaining branches should offer it to their members.

 The kissan credit cards which are issued by KCCB Ltd to the agriculturists through PACBs are very useful to them. The bank may issue credit card facility to its members.

 The bank may further offer different types of deposits schemes.

 The bank requires immovable properties for granting the loan to its members for most of the loan schemes provided by them. The value of

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the immovable property should be twice than of the loan amount. The bank may provide up to 75percentage of the value of property grant as a loan to the members.

 The bank charges 15percentage interest for many loan schemes. The bank must try to reduce their rate of interest.

 The bank follows the fixed rate of interest for their loans. The bank may adopt the flexible rate of interest three times within the last five years of the study period. This may be more helpful to those who got loans before 2003 – 2004.

 Nowadays car loans are available at market at the rate of 8 per cent to 10 per cent. But the loan for agricultural sectors is higher due to the farmers are the fourth buyers.

 KCCB Ltd. must make arrangements through a special squad of talented staff to handle the doubtful assets in stages. Priority may be given to secure the loan assets fully without leaving any uncovered portion so as to minimize provisioning, experienced staff in legal procedure may be empowered by KCCB Ltd to handle chronic doubtful assets and recover through legal steps and compromise for settlement.

 The spread between income and expenditure of KCCB Ltd should be increased and should be sustained continuously in order to meet the expenditure, mainly the establishment expenditure. The spread may be hiked by improving the interest income by reducing NPAs. It can be hiked by mobilizing more low costs deposits and resorting to low cost borrowings so that the interest paid may be reduced. KCCB Ltd has to analyse the market potentials and trends and with the help of information technology, the rate of interest on deposits and rate of interest on advances may be fixed scientifically.

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 Gradual shift from traditional to modern banking, from bank based to market based systems and from routine-based to technology based sound credit risk management skill are needed for KCCB Ltd to march ahead in the banking field. KCCB Ltd has more than 25percentage of its total assets as NPA and it crosses 30percentage when calculated against total advances. Such a large size of NPAs cripples the function of KCCB Ltd and its presence directly affects the profitability KCCB Ltd has to attack seriously on the NPAs menace speeding up its efforts towards recovery of interest and instalment of principal from each and every loan account.

 The bank is affected in many ways by growing NPA level. The total NPA denotes the outstanding position of NPA in the work of bank without taking in to account the provisions made.

 The ratio of total NPAs to total assets provides the level of threat. This ratio helps the bank’s administrators to take appropriate steps to make provisions and to take easy steps to reduce the level of gross NPAs to minimize the future provisions.

 The management of KCCB Ltd should have sound financial knowledge and separate financial management courses may be conducted to the BODs, as well as special officers (SOs) for improving their knowledge in financial management. The Central and State Government should, in no certain terms should declare that there can never be waiver of loan and interest in any cares to specific group of borrowers. However individual cases like insolvency of borrowers may be considered as a special case with suitable credit insurance facilities.

 Reduction of NPAs improves the position of standard assets performing assets of KCCB Ltd and its income goes up. The following are the benefits by reduction of NPAs.

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 Saves the income earned as it reduces the quantum of provisioning.

 Strengthen the funds position and helps KCCB Ltd to recycle for the good lending.

 Highlights the managerial skill and maintaining the quality of assets in KCCB Ltd.

 Facilitates the release of funds from the provisions made.

 Boosts the moral of the staff and management of KCCB Ltd besides encouraging the members to continue their support.

 Therefore most urgent, important task management is to reduce NPAs for management of KCCB Ltd.

 The main reasons for bulging NPAs of KCCB Ltd are poor recovery from weaver's societies, loans from wholesale stores, spinning mills and agricultural sectors. The financial position of societies, wholesale stores and spinning mills are very weak. So, the government should take necessary steps to reduce the NPAs of KCCB Ltd. These units are giving loans on the recommendations and guarantees of the government. So to ease the burden of loans on these units, the government has to step down to reduce the rate of interest.

 For standard assets the norms insists the bank provide 0.25 per cent provision for NPAs. It may be reconsidered and provision for NPA only for genuine bad debts can be made. Even for the loans provided with securities there is a provision of 20 to 30 per cent for NPAs. It may be also reconsidered. It may be either abolished or reduced.

 Each and every year the provision made by KCCB Ltd against NPAs has increased. This makes a dent in the profit figures of KCCB Ltd. This may lead the public to lose their confidence even though their financial position is higher to repay their debts. So, the government

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must take necessary steps to modify the norms for the provision against NPAs.

 KCC Bank Ltd depends upon the non – interest income also for their revenue. For government transactions KCCB Ltd does not charge any commission. The government may utilize this facility and it may increase the revenue of KCCB Ltd may give concessions for their deposit holders for collecting the DDs and purchasing the DDs. This may lead to increase in their revenue.

 The bank has to be allowed greater freedom to deploy its funds in other type of loan schemes to the individuals.

 KCCB Ltd has well utilized the opportunities which are available due to liberalization and has development of their banking business with possible innovations. The bank also has the intensive contact with members and providing them quality of services with high operational efficiency. Profit may not be a motive of Co-operative banks. But the co-operative banks get a reasonable profit for the purpose of giving good quality services to their members. In order to get a reasonable profit and to survive in their competitive environment the KCCB Ltd well planned each of their activities, well planned in their funds utilization and effectively utilized their workforce. Though KCCB Ltd has made tremendous improvement in its operational portfolio, its effective recovery is not taking place, leaving to maintaining of overdues. The bank had to incur losses for the last four years of the study period due to poor recovery in loans and advances.

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CONCLUSION

In a developing country like India with huge deficits in terms of quality and quantity, the states have to shoulder the primary responsibilities of providing co-operative credit, considering the low living standard of common man, incomplete and imperfect markets, and other social-political consideration. It is the primary duty of the country's government to ensure that its citizens have easy access to co-operative credit.

More than a century old, Indian Banking Industry has faced many challenges. The commercial banks with their profit maximization concept and the co-operative banks with their service motto have grown together in India. Both in Commercial Banks and in co-operative banks, there were failures resulting in closure of banks till the last decade. Government of India introduced many regulatory measures through Reserve Bank of India to arrest the failure of banks. Similarly RBI and the State Governments have taken adequate measures to protect the co-operative banks when they face financial as well as managerial problems.

Though both commercial and co-operative banks serve the people at large in meeting their financial requirements through their various credit programmes, co-operative banks essentially contribute more towards the priority sector and rural / semi – urban population of India. A democratic administration can go deep into the real problems of the people, especially rural people who dominate more than three fourth of Indian Population. Being a part of federal set up of co-operative bank, Kumbakonam Central Co-operative Bank (KCCBs) provides a healthy linkage between Urban and Rural people.

The surplus in the urban economy is being mobilized by KCCB and the same is used for the development of the rural economy through PACBs. KCCB plays the pivotal role and financial management is the vital function of KCCB to accomplish its progressive objectives.

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To survive in the banking field, the reform era of banking urges all banks including co-operative banks to strengthen their capital base through their internal accumulated surplus. For co-operative banks, Government assists to take care of disaster by infusing the required capital. For KCCB Ltd also, the support of the Government exists and continues.

In future, the co-operative banks have to stand on their own capital base and therefore the researcher has focused on the financial performance of KCCB Ltd in her study. Being a co-operative bank, KCCB Ltd cannot deviate from the objectives of the co-operative principles and objectives, KCCB Ltd may not make profits, but in the present day circumstances, it should at least break – even. To break – even the income has to be augmented and expenditure has to be contained.

The researcher has penetrated into the various financial statements with the tools of different ratios, satisfaction of the members, and highlighted valid findings. The suggestions given are practical and the implementation of these suggestions will ensure a glorious future and lay down a strong progressive path for KCCB Ltd.

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Report  Annual Report of KCC Bank Ltd.  Special Officers Demi Official Narrative Reports  Report of the All India Rural Credit Review Committee.  RBI, Report on Trend and Progress of Banking in India.  RBI, Report Co operative Movement in India.  Central Banking Enquiry Committee Report. Directory  District central Co – operative Banks in India Directory 1994 - 95, National Federation of State Co operative banks Ltd., Mumbai.  District central Co – operative Banks in India Directory 1997 - 98, National Federation of State Co operative banks Ltd., Mumbai. Journals  RBI Bulletin  Yojana  The Co-operator  Tamil Nadu Jubal of Co-operation  Kurukshetra  Journal of social & marketing science  Indian Co-operative review Web site Addresses  www.censesindia.com  www.rbi.org.in  www.tn.gov.in  www.pdktonlinet  www.tn.policy.com  www.tn.govt.coop.policy.2002-2003  www.tn.govt.coop.policy.2003-2004  www.tn.govt.coop.policy.2004-2005  www.tn.govt.coop.policy.2005-2006  www.tn.govt.coop.policy.2006-2007

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1. Questionnaire for Members

PERFORMANCE OF KUMBAKONAM CENTRAL CO-OPERATIVE BANK LTD, KUMBAKONAM, THANJAVUR DISTRICT – A MULTI DIMENSIONAL ANALYSIS

Research Scholar : R.ILAMATHI, M.Com. M.B.A., M.Phil.

Research Adviser : Dr. N.UDAYAKUMARI., M.Com., M.B.A., M.Phil Ph.D.,Associate Prof in commerce, A.D.M.college for women (Autonomous) Nagappattinam.

This questionnaire seeks your perceptions on performance of Kumbakonam Central Co-operative Bank Ltd. Tamilnadu. Thank you for your Assistance as this survey will allow us to understand the services rendered by the bank and the satisfactory level of its beneficiaries. The questionnaire is voluntarily. All replies are confidential and anonymous.

1. Purpose of loan i) Business ( ) ii) Agriculture ( ) iii) Education ( )

2. Nature of land holding i) Own Land ( ) ii) Rented ( ) iii) Leased ( )

3. What type of loan did you get from the bank? i) Deposit Loan ( ) ii) Jewel Loan ( ) iii) Cash Credit ( ) iv) Housing Loan ( )

4. Irrigation facility i) Yes ( ) ii) No ( )

5. Time taken for sanction of loan i) With in a month ( ) ii) More than a month ( )

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6. Time taken for disbursement of loan. i) With in a day ( ) ii) With in a week ( ) iii) More than a week. ( )

7. Any supervision is made by bank for proper utilization of loan amount? i) Yes ( ) ii) No ( )

8. Do you repay the loan duly? a. i) Yes ( ) ii) No ( ) b. if no, Specify the reason. i) Failure of monsoon ( ) ii) Inadequate income to repay the debt ( ) iii) Diversification of loan ( ) iv) Waiver of loan ( ) v) Rate of interest ( )

9. Do you know various schemes available in this bank? i) Yes ( ) ii) No ( )

10. Do you want to extent the repayment period? i) Yes ( ) ii) No ( )

b. If yes give the reason for the extension of repayment period

11. Did you face any legal action taken by the bank for non-repayment? i) Yes ( ) ii) No ( ) 12. How long are you allowed to repay the debt? i) 3 years ( ) ii) 5 years ( ) iii) 10years ( ) iv) Above 10years ( )

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13. Is there any problem for obtaining loan?

if yes give the reason i) In sufficiently of mortgages ( ) ii) Lack of proper guarantor ( ) iii) Delay ( ) v) Political interference ( ) vi) No problem. ( )

Please indicate by circling the appropriate level of satisfaction for the matters mentioned below. 1) Highly dissatisfied 2) Dissatisfied 3) Neither satisfied nor satisfied 4) Satisfied 5) Highly satisfied

Sl. No. Particulars 1 2 3 4 5 Document be attached for 1 loan 2 Procedure for getting loan 3 Rate of interest for loan 4 Amount of sanctioning 5 Time factor to sanctioning Time factor to 6 disbursement 7 Repayment facility Loan facility for 8 depositors 9 Securities insisted on loan Lender – borrower 10 relationship 11 Guidance for Repayment 12 Penalty amount Rate of interest for 13 Deposits 14 Collection Charges 15 Flexibility to Rules

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16 Various schemes 17 Motivation of bankers Services rendered by the 18 bank 19 Amenities 20 Comprehensiveness

Personal Data 1. Name : 2. Address : 3. Age : i) 20 - 30 ( ) ii) 31 - 40 ( ) iii) 41 - 50 ( ) iv) 51 – 60 ( ) v) Above 60 ( ) 4. Sex i) Male ( ) ii) Female ( ) 5. Educational status i) illiterates ( ) ii) SSLC ( ) iii) Higher Secondary level ( ) iv) Graduates ( ) v) Post Graduates ( ) 6. Occupation i) Business ( ) ii) Govt Employees ( ) iii) PVT employees ( ) iv) Agriculture ( ) v) Professionals ( ) 7. Annual income i) Up to Rs 12,000 ( ) ii) Rs 12,001 – Rs 20,000 ( ) iii) 20,001 - Rs 30,000 ( ) iv) Above 30,000 ( )

8. Marital status i) Married ( ) ii) Unmarried ( )

Signature of the Respondent

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