Nandha Chap 1

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    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


    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


    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


    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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    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



    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



    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


    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-


    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


    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.


    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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    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.


    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.


    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


    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.


    the study confined to District Central Co-operative Bank situated

    at Salem District.


    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.


    The researcher has collected the necessary informations from the

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


    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



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    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



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

    liability to the share capital subscribed them


    The Maclagan committee had expressed the view that A Central

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


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

    supervising unions and to secure for them financial help where


    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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    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.



    Years GovtCo-operative


    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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    Years Individual Govt Other


    Total Growth


    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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    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.,



    (Rs in lakhs)

    Year Statutory


    Other Fund Total Growth


    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.


    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


    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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    (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


    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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    (Rs in lakhs)

    Years Share




    Deposits Borrowing Total Growth


    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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    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.


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

    govt,industry and other co-operative.


    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


    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.


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

    govt security.

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


    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.


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

    class from 1939 to till the year.

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    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




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