International Journal of Research in Management, Economics & Commerce (Impact Factor: 4.604, ISSN 2250-057X, Volume 5 Issue 3, March 2015) Website: www.indusedu.org LENDING POLICIES OF DINDIGUL DISTRICT CENTRAL CO-OPERATIVE BANK LIMITED IN TAMILNADU, INDIA - A VIEW N. Selvaraj Assistant Professor of Commerce, Saraswathi Narayanan College, Madurai, Tamilnadu, India ABSTRACT Agriculture occupies a dominant position in the Indian economy. The well being of the people of India largely depends on the progress of agriculture. The co-operative credit has been recognised as the hope of the farmers to provide the basis of prosperity and the opportunity to meet the demand for funds. In the absence of adequate financial help, the farmers and agricultural labours are the ready victims of money lenders and indigenous bankers who charge exorbitant rates of interest. The Co-operative Banks are institutions established with the objectives to facilitate rural credit and to promote thrift and self help among the economically weaker sections of the society. So it is suggested to utilize the resources in more effective manner and also have a continuous profit planning to increase its profitability. To reduce overdues a large number of field staff is to be engaged for collection of dues. Keyword: co-operative credit, overdue, Co-efficient of variation, Co-operative Banks and lending. E-mail id:- [email protected] Page 1 International Journal of Research in Management, Economics & Commerce (Impact Factor: 4.604, ISSN 2250-057X, Volume 5 Issue 3, March 2015) Website: www.indusedu.org INTRODUCTION “Co-operative movement is one of the most fruitful ways of enlisting public co-operation on a mass scale in our planning and reconstruction activity” V.V. Giri The Co-operative credit structure in India is now a century old and happens to be the largest in the world. Efforts to build up the institutional financial system for agriculture commenced with the adoption of the Co-operative Societies Act in 1904. Several inquiries and studies such as Sri Malcolm Darlings Report (1935) and the preliminary and statutory reports of the Reserve Bank of India (1936 and 1937) emphasized the need for and suggested various measures to nurture the co-operative movement, institutionalized efforts to relieve the farmers from traditional burden of debt, promote thrift and gradually assume a more positive role for defense against exploitation by money lenders. Till 1947, the general thinking was in favour of promoting multi-purpose primary societies in the rural areas. However, during the period from 1947-1956, Co-operatives were organized so as to make them instruments of economic development, as the co-operative system was considered more suitable for dispensation of farm credit. The co-operative credit structure in Tamil Nadu, is a three tier one. It consists of one Tamil Nadu State Apex Co-operative Bank (TNSC Bank) at the State level, 22 Central Co-operative Banks (CCBs) at the district level (excluding the Chennai Central Co-operative Bank which does not undertake agricultural finance) and 4589 agricultural service co-operative societies, renamed as Primary Agricultural Co-operative Banks (PACBs) at the village level. The CCBs are federations of PACBs and other co-operative societies in their respective areas, while TNSC Bank is the federation of CCBs. The central co-operative banks are formed at the district level by federating the primary agricultural co-operative banks located in the same area. They collect funds from the co-operative institutions, which have surplus funds and distribute them to the co-operative institutions with depleted or reduced funds. They also fulfill the need for funds of the primary agricultural co- operative banks by borrowing from their respective state co-operative banks. These central co-operative banks also mobilise local deposits and lend them to their member societies at reasonable rates of interest. The District Central Co-operative Banks since their inception, have E-mail id:- [email protected] Page 2 International Journal of Research in Management, Economics & Commerce (Impact Factor: 4.604, ISSN 2250-057X, Volume 5 Issue 3, March 2015) Website: www.indusedu.org been playing a dominant role in mopping up small saving and providing credit facilities to farmers in the rural areas through the primary agricultural co-operative banks. Statement of the Problem The central co-operative banks by being at the middle order of three-tier structure have been playing a crucial role in promoting agricultural and allied activities by providing credit facilities through primary co-operative banks. They provide a strong linkage between rural based co- operative banks which do not have a close contact with money market and urban based apex co- operative banks which have a close connection with the money market. Thus the District Co- operative Banks act as a friend, philosopher and guide to the entire co-operative movement in the district, for they not only safeguard the interests of the primary credit societies but also the various other types of credit and non-credit societies in the respective districts. Hence, a consistent, firm and sound development of co-operative movement at the district levels warrants the existence of a strong and effective working of central co-operative banks. The sound working of the bank depends on good financial performance. The present study is an attempt to probe into the deposit mobilization, lending operations, repayment performance and utilization of funds of District Central Co-operative Bank. The findings of the study would pave the way for taking certain policy decisions for better financial performance of the Bank and hence the present study of,” Financial Performance of Dindigul Central Co-operative Bank Limited. Objectives of the present study The following are the objectives of the present study. 1. To analyse the lending and recovery performance of the study unit. 2. To offer suggestions to improve the performance of District Central Co-operative Banks on the basis of findings of the study. Scope of the Study The present study aims at studying the lending performance of the Dindigul District Central Co- operative Bank Limited. This study attempts to analyse its lending performance from the standpoint of the Central Co-operative Bank selected for the study. It does not include workers or members and other agencies that are either directly or indirectly connected with the study unit. This study becomes relevant as the co-operative sector in India, particularly in Dindigul District, has not been a total success, in spite of the Government efforts E-mail id:- [email protected] Page 3 International Journal of Research in Management, Economics & Commerce (Impact Factor: 4.604, ISSN 2250-057X, Volume 5 Issue 3, March 2015) Website: www.indusedu.org REVIEW OF LITERATURE N. Narayanasamy and S. Ramachandran in their study of performance evolution of South Arcot district Central Co-operative Bank assessed the performance of the bank with reference to key indicators like membership, share capital, deposits, borrowings, advances operating expense, establishment expenses and profit for a period of ten years from 1974-75 to 1983-84. D. Gorwala, in his study, “All India, Rural Credit Survey Committee Report” found that a large part of the country had not been covered by the co-operatives and even in the areas where it had been covered, a large section of the agricultural population remained outside the membership. Even in the areas where membership was there, the bulk of credit requirement had been met from other sources other than co-operatives. The boards of management in most of the central co-operative banks were unwieldy in size and had a disproportionate representation of individuals as distinguished from societies. The author pointed out that the formula, “one society to one village and one village to one society” had failed in India. B. Venkatappiah, in his study, “Report of the All India Rural Credit Review Committee”, traced the state contribution to the share capital of co-operative banks. It was not adequate to increase the internal resources of the banks. The primary agricultural credit societies were not under strict statutory control of Reserve Bank of India. Crop loan system was not effectively introduced in some parts of the country such as Bihar, Haryana and Assam. The loan policies and procedures in co-operative banks were too liberal to check overdues without taking any action against the defaulters. The societies were still undertaking action against defaulters, the societies were still undertaking financing of defaulters and due to the lack of proper verification and supervision by co-operative banks, credit was sanctioned on the basis of falsely reported acreage by the member- borrowers. Mehfoozur Rahman in his study, “Co-operative Credit and Agricultural Development”, – traced the development of agricultural co-operation in Jammu and Kashmir and analysed the working of the primary agricultural credit societies, central co-operative banks, state co-operative banks, land development banks and the role of nationalised banks in the provision of agricultural finance in Jammu and Kashmir. S.G.Saraiya, in his study, “Report of the Banking Commission” traced the organisational structure of banking institution in the rural sector which was not sound. The existence of paucity E-mail id:- [email protected] Page 4 International Journal of Research in Management, Economics & Commerce (Impact Factor: 4.604, ISSN 2250-057X, Volume 5 Issue 3, March 2015) Website: www.indusedu.org of funds in primary credit societies did not permit them to lend money adequately to agriculturist; the banking habit in the rural sector was not well developed due to the poor functioning of co-operative banks. The officials of central co-operative banks were not well- qualified and trained for effective implementation. The banking facilities in rural and semi- urban areas and the services rendered by the co-operative banks to rural people did not match with their needs.