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CHAPTER-I

THE DESIGN EXECUTION OF THE STUDY

INTROUDUCTION

The District Central Co-operative Banks occupy a position of co-

ordinal importance in the credit structure. They form an important link

between the apex co-operative bank and them primary agriculture

credit societies. The success of the co-operative on their financial

strength.

The co-operative societys act of 1912 permitted the organization

of higher federal societies. The primary co-operative credit societies in

compact areas federated themselves in to banking organized central

banks to collect funds from the urban areas and divert to the village

societies. Thus every district in a state got one or two banks in central

banks.

Central co-operative banks are leaders in their district in guiding

the banking activities for their members. They admit all types of

primary co-operative societies and provide banking and financial

services.

They compute with commercial in mobilizing deposits have

opened branches in all important contents of a district of late their

operational have been modernized with inducting efficient personal

trained in various financing operations

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HISTORICAL GROWTH OF DCCB

The district central co-operative banks are one of the strongest

unit co-operative credits banking structure. Co-operative credit

societys act was passed in 1904. There was no provision for the

formation of central banks.

Central banks are supervious intermediaries in between the apex

bank. The actual tender of funds and the ultimate borrower which may

help in making credit costlier by adding their own margin. Therefore

they advocate that the central banks should substitute to the former.

The sponsor of the co-operative movement expected that the

rural credit societies would be able to attract substantial deposit form

the members well-to-do sections of the village community and their

saving would be available to meet the needs of needy in villages.

As the movement gained popularity the society started increasing

in number by leaps and bounds. But the financial arrangement

envisages did not yield enough money to meet their growingrequirement.

The co-operative societies act was passed in 1912 with a view to

permitting registration of central societies. It may be interested to note

that even before the amendment. So central bank had been

established to later to the financial needs of the primary societies.

In many areas which are relatively under developed in the

economic and co-operative aspects the proper course in likely in many

cases to be to establish branches of the apex banks with such financial

assistance from the state government as may be necessary.

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The first central co-operative bank was registered in Uttarpradesh

in 1906 as a primary society. But the first perfect central bank in the

modern sense saw the light of the day in the former central provinces

and bearer in Rajasthen the first central co-operative bank was started

in 1910 at Ajmer origin of the central banks in various parts of the

country.

STRUCTURE OF DCCB IN TAMILNADU

Co-operative credit and banking in Tamilnadu consist of two parts.

One dealing with short term, medium term and other with long term

credit. The farmer in Tamilnadu state is a type of federal in character

based on a three tier system with primary co-operative credit societies

at the bottom. The DCCB constituting the middle level and state co-

operative bank covering the entire state at the upper leverl.

State co-operative Bank

District central co-operative Bank

Primary co-operative credit societe

The DCCB hold a position of great importance as they from the

bank bone of the three tier system. They are the strongest limits in the

co-operative credit and banking. The DCCB also play a initial role in the

development of the co-operative movement in the entire district. They

are also helpful in extending banking facilities both in rural and urban

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areas incubate thrift and saving habit among the people. There are 23

DCCBS with 708 branches with employee strength of 6934 operating in

Tamilnadu.

ORIGIN AND GROWTH OF DCCB IN INDIA

When the Co-operative Societies Act was passed in the credit year

1904, the first central bank was registered in Uttra Pradesh in 1906 as a

primary society. The first central co-operative bank was started in 1910

Ajmer.

The period from 1906 to 1918 may be caused the period of origin

the central banks 1919 to 1929 which was roughly the period between

the ends of the First World War. Sinking the number of central banks

off increasing between 1919 to 1929.

The membership of the individuals declined from 0.9 Lakhs in

1929-1930 to 0.85 lakhs in 1936 to 1937, the whole structure of central

financing Agency was haphazard in most states which needed re-

organization.

The central co-operative bank acts as a balancing center to its

member societies, the position of central crucial importance in the co-

operative credit structure.

1.The unit must be viable in nature. Hence found financial setupis necessary.

2.The unit must have a common over it is nothing but regulatoryand corrective functions.

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3.To act as a balancing center, the unit must have optimum areof operation.

4.Secondly central bank is very much needed to help themember societys especially primary agricultural credit

societies.

The third important aspect is related to the raising of resources.

At the present village primary societies are not equipped to raise

resources by way of deposits.

The central co-operative are the federation of primary agricultural

co-operative banks and co-operative of their respective area, there

were 18 central co-operative banks in Tamil Nadu as on 31.3.92

subsequently more central co-operative banks have been started on

02.09.93 at the ended of they year 1999-2000.

There were 367 central co-operative banks in India having 13030

branches out of which 731 branches were in Tamil Nadu. The central

co-operative banks finance the PACB from their own resources ofshares, reserves and deposits, from the credit limit sanctioned by the

NABARD though the TN SACB. The CCBS advance loans and financial

assistance to all types of co-operatives. Functioning in their respective

areas circle.

STATEMENT OF THE PROBLEM

The DCCBs are facing several problems in our country. The

problems are mainly related with the management and organization

investment policy of finance load policy. The DCCBs have mostly

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dominated financial problems. These banks do not ser sufficient

deposits from their members and the profit ability is also very low. The

mounting over dues of the banks and increase expenses is running the

banks have let to in sufficient funds. The efficient funds. The efficientworking operations and credit expansion of these banks cannot be

improved in such conditions. Private Capital of these banks is and they

have to depend upon their own fund. Delay and insufficient financial

assistance from the government, these banks are helpless in providing

sufficient loans to their members.

The DCCB are faced with problems related with the loans and

advances. Board of directors do not meeting time and several

formalities are completed before sanctioning which lead to delay in

sanction and distribution of such amounts. Crop loan are not given to

the societies and an account of the practice the over dues of loans are

mounting in many cases records and accounts are not well prepared

and maintained and the book keeping adjustments do not reflect the

real position of these banks.

The World Bank in its publication (1978) mentioned to difficulties

faced in presenting a clear cut classification on farm on noon-farm

sector activities on rural, urban categories because of lack of well-

established and consistent set of definitions.

The overlapping is partly due to the existence of a continuum

between rural areas and cities and therefore, a full range of farm andNFs activities Viz., Agricultural processing and non-house had

manufacturing, construction, transport,trade and all kinds of services in

rural areas and rural towns.

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OBJECTIVE OF THE STUDY

The objective of the study was to evaluate the operative

performance of the Salem District Central Co-operative Banks with

reference to

1.To study the deposit mobilization of the Salem District CentralCo-operative Bank.

2.To study farm and non-farm sector loans providing SalemDistrict Central Co-operative Bank.

METHODOLOGY

Case study method was adopted for this study. Secondary data

were collected about the origin, working and progress of the bank from

audit reports, annual reports and various books and registers

maintained by the selected bank. Detailed schedules was prepared and

administrated to collect data relating to capital structure, lending

operations and NPA.

DEFINITION OF CONCEPTS

a)BankingSection 5 of the banking regulation act, 1949 defined banking

as accepting for the purpose of lending of investment of a deposits

of memory from the public, repayable on demand or otherwise and

withdrawal by cheques, drafts, order or otherwise.

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b)District Central Co-operative Bank (DCCB)District Central Co-operative Bank refers to a financing bank

whose area of operations extends to the whole of the district and

which has its principle object of the promotion of the economic

upliftment provision of facilities by landing of money for the operation

of the primary Agriculture Co-operative Banks and other Affiliated

Societies.

c)Owned FundOwned funds refers to the funds that included the paid up

share capital and reserve fund.

d)Borrowing FundBorrowing fund refers to the funds that include the borrowed

capital and deposits.

e)CapitalizationCapitalization means such portion of reserve fund, paid up

share capital, loans and deposits received by the bank as have not

been invested in building and other fixed assets.

f) OverdueAny amount because overdue from the next day after the due

date of the loan period.

g)Non-Farm SectorNon-farm sector is defined as all economic activities of Indian

economy other than Agriculture credit.

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h)Small Scale IndustryA small scale industry is one which the capital investment on

plant, and machinery does not exceed.

i) Farm SectorFarm Sector is defined as all economic activities of Indian

economy based on natural production of Agricultural activities.

PERIOD COVERED BY THE STUDY

the study confined to District Central Co-operative Bank situated

at Salem District.

TOOLS USED FOR DATA COLLECTION

The data were collected by means of detailed schedule

administered at the head office. The schedule includes questions to

elicit information regarding area of operation, share capital, reserve

fund, deposit, borrowings and loans of the bank.

FIELD WORK

The researcher has collected the necessary informations from the

bank with the help of a preplanned schedule from March to 2010.

FRAME WORK OF ANALYSIS

The collected data was codified and transcribed, edited,

scrutinized and tabulated. Simple tables were prepare before the actual

commencement of analysis and inter-predation. CHAPTER-II

GENERAL WORKING PROFILE OF SALEM DISTRICT CENTRAL

CO-OPERATIVE BANK LTD

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INTRODUCATION

The Salem district central co-operative bank Ltd was started by

British Government as Salem Urban Co-operating Bank in 26.01.1999 in

year 1942. The bank was registered as Salem Central Bank and in 1987

the Salem Bank has renamed Salem District central co-operative bank.

The DCCB has 380 PACBS which are functioning around the area

operation. Mr.Nachiyappa Gounder and Mr.Subramani Gounder were

played very important role in the development of Salem Central co-

operative Bank. Now this bank has 59 branches covering entire area of

operation of District Central co-operative Bank in Tamil Nadu. The

individual members were removed from the bank and affiliated co-

operative societies alone were admitted as A class Member of the

bank.

LIABILITY

The Salem District Central Co-operative Bank Ltd shall be limited

liability to the share capital subscribed them

AREA OF OPERATION

The Maclagan committee had expressed the view that A Central

Bank should cover as large an area as compatible with convenience and

efficiency.

The area of operation of the Salem District Central Co-operative

Bank have consist Salem and Namakkal district the bank have 59

branches the Salem and Namakkal Districts.

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OBJECTIVES

1. To develop assist and co-ordinate the work of the affiliated

supervising unions and to secure for them financial help where

necessary.

2. to organize special types of societies in case where is not under

taken by the unions.

3. To serve as the recognized exponent of non-official co-

operative opinion in the area.

4. To convene co-operative conference area served by the bank.

5. To control the expenditure relating to the surplus funds of

liquidated societies.

6. To undertake such other work as will promote the cause of co-

operation in general and to carry out the above objects particular.

7. To start branches in the operative jurisdiction of the bank

where over necessary to appoint necessary staff and incur expenditure

for the conduct of meeting.

8. the guarantee the loans advanced or credit granted to any

affiliated society by the government state bank of India or any other

agencies within such limits as may be agreed to between the guarantor

and guarantee and charge commission thereon.

9. To issue guarantee for the deposit mobilized by the primary

agricultural co-operative banks.

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MEMBERSHIP

The Membership of the central co-operative bank generally

consists of primary societies registered within area of co-operation of

the bank. Individuals are admitted as a associated member for the

purpose of Jewel loans and other loans.

The following table shows A class membership position of the bank.

Table-1

POSITION OF MEMBERSHIP

Years GovtCo-operative

InstitutionTotal

2000-01 1 1958 1959

2001-02 1 1965 1966

2002-03 1 1972 1973

2003-04 1 1972 1973

2004-05 1 1967 1968

2005-06 1 1962 1963

2006-07 1 1962 1963

2007-08 1 1962 1963

2008-09 1 1962 1963

2009-10 1 1962 1963

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Table-2

POSITION OF SHARE CAPITAL

Years Individual Govt Other

Institution

Total Growth

Index

2000-01 0.42 100 1474.43 1574.85 ---

2001-02 0.42 100 1543.56 1643.98 104.38

2002-03 0.42 100 1772.25 1872.66 118.91

2003-04 0.42 100 1913.73 2014.14 127.89

2004-05 0.42 100 2253.87 2354.27 149.49

2005-06 0.42 100 2359.58 2459.99 156.20

2006-07 0.42 100 2485.64 2586.05 164.20

2007-08 0.42 100 2576.56 2676.97 169.98

2008-09 0.42 100 2630.41 2730.82 173.40

2009-10 0.42 100 2789.87 2890.28 183.52

Source: Annual and Audit Report of SDCCB

The above table reveals that the amount of share capital in the 2000-01 the

value of share capital was Rs.1574.85 lakhs it was increased year by year and

reaches to Rs.2890.28 lakhs in the year 2009-10.

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RESERVE FUND

Reserves are the important constituted of the owned fund. They are the

funds which are set of a side to meet difficult situation in future. All co-operative

institutions according to the act and bye-laws must distribute their profits everyyears and must set a portion of their profits to reserve funds and other reserves

like credit stabilization fund, bad debt reserves etc.,

Table-3

POSITION OF RESERVE FUND

(Rs in lakhs)

Year Statutory

Fund

Other Fund Total Growth

Index

2000-01 592.71 2721.31 3314.01 ---

2001-02 662.52 3587.41 4249.67 128.23

2002-03 748.63 4103.24 4854.87 146.40

2003-04 835.72 6830.42 7666.14 231.32

2004-05 924.52 8047.00 8971.52 270.71

2005-06 924.52 8744.88 9669.40 291.17

2006-07 1028.52 9045.00 11436.42 345.09

2007-08 1137.85 10844.14 11786.11 355.64

2008-09 1607.17 11532.21 13139.38 396.47

2009-10 1888.06 11921.85 13809.27 416.69

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Source: Annual and Audit Report of SDCCB

The above table reveals that the reserve fund of the constituted as

statutory fund and other funds was Rs.3314.01 lakhs I the year 2000-01. It will be

increase Rs.13809.27 lakhs in the year 2009-10.

DEPOSITS

A bank deposit is simply on the book of a bank recording its obligation to a

customer which it may arise out of a bank transfer of cash organization other

assets to the bank. It is not itself and asset but a liability of the bank.

The Salem district central co-operative bank accepts deposit various from

members and non-members such as.

1. Current deposits2. Saving deposits3. Fixed deposits4. Recurring deposits

BORROWINGS

Borrowing constituted a vital source of working capital funds of DCCBs.

The borrowings from agencies such as loans from SCBs, RBI,NABARD commercial

banks and other financing agencies constitute on important source of working

capital of DCCBs. The Salem DCCB Maximum capacity of Borrowing power is 30

times of share capital and reserve funds.

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Table-4

POSITION OF BORROWINGS

(Rs in lakhs)

Years Borrowings Growth Index

2000-01 1161.81 -----

2001-02 7317.06 627.46

2002-03 9929.17 85.14

2003-04 18812.24 161.31

2004-05 17709.17 151.85

2005-06 17139.46 46.97

2006-07 12543.23 107.55

2007-08 8564.64 73.44

2008-09 9532.97 81.74

2009-10 15059.29 129.13

Source: Annual and Audit Report of SDCCB

The above table reveals the position of Borrowing from various sources

during 2000-01 the borrowings was Rs 11661.81 lakhs this amount was decreased

year by year in the 2009-10 the position was Rs 15059.29 lakh

WORKING CAPITAL

The sources of working capital of the Salem District Central Co-operative

Bank consist of share capital, Reserve fund, Deposits and Borrowings have

important contribution for working capital of the bank.

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Table-5

POSITION OF WORKING CAPITAL

(Rs in lakhs)

Years Share

Capital

Reserve

Fund

Deposits Borrowing Total Growth

Index

2000-01 1574.86 592.86 76470.56 11661.82 90299.95 100

2001-02 1643.98 662.53 83237.15 7317.07 92860.73 102.83

2002-03 1072.66 748.63 87905.20 8347.39 98603.88 109.19

2003-04 2014.14 835.72 80851.80 18812.24 102513.9 113.52

2004-05 2354.28 924.52 78628.17 17709.24 99616.21 110.64

2005-06 2459.99 924.52 79392.18 17139.46 99915.99 110.64

2006-07 2426.05 1028.52 84849.32 12543.24 85234.44 94.39

2007-08 2554.33 1137.85 107587.18 8564.64 83896.60 92.90

2008-09 2794.66 1607.11 127865.57 9532.97 90925.06 100.69

2009-10 3066.79 1888.06 151752.72. 15059.29 109044.51 120.75

Source:Annual and Audit Report of SDCCB

The above table reveals that the amount of Working Capital in the 2000-01

the values of Share capital was Rs.90,299.95 lakhs. It was increased year by year

and reaches to Rs.109044.51 lakhs in the year 2009-10.

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FUNCTIONS

1. The Salem District Central Co-operative Bank provides short term

Agricultural loans to all affiliated primary co-operative credit societies.

2. The bank collects various deposits from members and non-members.

3. The bank provides medium term loans for developing allied occupation

of agriculture. The bank provides loan for

a. Purpose of Milk animal

b. Sheep rearing

c. Bullock carts and Bulls for ploughing.

d. small dairy poultry and agriculture.

4. The bank has sanctioned cash credit for various purposes like.

a. Fertilizer case credit

b. Public distribution system

c. Non-PDS cash credit

d. Jewel cash credit

5. The bank has conducts meeting; conference and seminars for the

purpose of motivate the co-operative though for the members.

SUB-FUNCTION

a. The lends safety locker facilities to its members

b. To give loan for transformed

c. The bank lends mahalier micro credit loan

d. The promote cottage industries.

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MANAGEMENT ADMINISTRATION

General body is the supreme authority of a co-operative organization. All

powers regarding policies and strategies are vested with the board of director

elected by the general body.

GENERAL BODY

General body consists of all the members of the institutions viz., members,

govt,industry and other co-operative.

MANAGING COMMITTEE

The committee is elected by the general body, the strength of the board

various from institution to institution depending on their level in co-operative

structure.

The Government has appointed special officer in place of the board of

director. The officer is in charge of the management of the bank. The bank is

under the control of special officer from 25.05.01 on wards.

INVESTMENT

The bank invested it is funds in various co-operative institutions shares and

govt security.

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Table-6

POSITION OF INVESTMENT

(Rs in lakhs)

Year Investments Growth index

2000-01 54636.67 -----

2001-02 56937.00 102.56

2002-03 52599.47 96.27

2003-04 49773.27 91.09

2004-05 43639.73 0.79

2005-06 33617.76 61.52

2006-07 33617.76 61.52

2007-08 34543.70 63.22

2008-09 41848.45 76.59

2009-10 72202.92 132.15

Source: Annual and Audit Report of SDCCB

The above tables shows the position on Investment of samples bank during

the year 2000-01 value of investment Rs.54636.67 lakhs, it has increased years by

years in the period of 2009-10 was Rs.72202.92 lakhs.

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NET PROFIT

The Salem District Central Co-operative b\Bank has been earning profit

continuously.

Table-7

POSITION OF NET PROFIT

(Rs in lakhs)

Years Net Profit Growth Index

2000-01 349.07 -----

2001-02 427.84 122.56

2002-03 435.44 124.74

2003-04 443.99 127.19

2004-05 504.10 144.41

2005-06 5.30 1.51

2006-07 546.67 156.60

2007-08 1143.90 327.69

2008-09 901.93 258.38

2009-10 1475.67 422.74

Source: Annual and Audit Report of SDCCB

The above tables show the position of Net Profit in the year 2000-01 wasRs.349.07 lakhs. This position has been increased year by year and reaches to

Rs.1475.67 lakhs but 2005-06 year was decreased to Rs.5.30 lakhs.

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NET PROFIT DISTRIBUTION

The bank distribute their net profit based on Tamilnadu Co-operative

Societies Act 1983 Rules 88 and Bank buy law No.25 as following.

1. Co-operative research and Development fund -31%2. Co-operative Educational Fund -21%3. Reserve Fund -20%4. Agriculture Credit stabilization fund -15%5. Dividend -12.5%6. PACB Development fund -5%7. Balance Building fund -10%

SAETY LOCKER FACILITY

The bank collects required amount of deposits from the people who wish to

keep their goods in safety lockers provided in the bank. To set this facility the

borrower should open a new account in his name.

AUDIT CLASSIFICATION

The Salem District Central Co-operative bank Ltd, has been placed under A

class from 1939 to till the year.

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2.13. EMPLOYEES DETAILS

The Salem District Central Co-operative Bank has been number of

employees is one 31.03.2010 is Rs.348 details of the employees are as follows.

General Manger 1

Assistant General Manager 2

Managers 39

Assistant Managers 98

Assistants and Typist 149

Sub staff and Drivers 59

------------------------

348

------------------------

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