Major Project (Akhil.k)

8/19/2019 Major Project (Akhil.k)

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“A STUDY ON LOANS AND DEPOSITS IN CHERPALCHERY

SERVICE CO-OPERATIVE BANK LIMITED,

CHERPALCHERY”

MAJOR PROJECT REPORT

Submitted to

UNIVERSITY OF CALICUT

In partial fulfillment of the requirement for the award of degree ofMASTER OF BUSINESS ADMINISTRATION (MBA)

Submitted by

AKHIL K

4th semester MBA

(REG. NO. LCANMBA 013)

Under the guidance of

Dr. JESSY GEORGE

ASSOCIATE PROFESSOR

LEAD COLLEGE OF MANAGEMENT

(Affiliated to University of Calicut)Dhoni, Palakkad

JUNE 2015


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DECLARATION

I Akhil. K, hereby declare that this dissertation entitled “A STUDY ON LOANS AND

DEPOSITS IN CHERPALCHERY SERVICE CO-OPERATIVE BANK LIMITED,

CHERPALCHERY” submitted in partial Fulfillment of Master in Business Administration of

Calicut University is a record of independent research work carried out by me under the guidance

of Dr. Jessy George, Associate Professor, Lead College of Management, Dhoni, Palakkad.

I also declare that this dissertation is a result of my own effort and has not been submitted earlier

for the award of any degree/diploma from Calicut University or any other university.

Date: AKHIL.K

Place: Palakkad Reg No: LCANMBA013


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ACKNOWLEDGEMENT

This project work would not have been completed without expressing hearted gratitude

to all of them.

I wish to express my deep sense of gratitude to Dr. Jessy George, Associate Professor

at LEAD COLLEGE OF MANAGEMENT for her kind support, advice and encouragement from

the beginning of the project work till the completion of the project report and she has been very

co-operative and without her valuable advices and suggestions this report would not have been

successful.

My most sincere thanks to Mr. Muraleedaran, Secretary of Cherpalchery Service Co-

operative Bank, Palakkad, for their kind hearted co-operation, direction and assistance in spite of

their busy schedule which has helped me a lot in completing this report successfully.

My hearty thanks to our director Dr. K.V UNNINARAYANAN and all teaching and

non-teaching staffs for providing me with all the facilities in completing this report.

Finally, I am highly grateful to my beloved Parents, Friends and foremost, thanks to

God for helping me in successfully completing the project work and throughout my life.

AKHIL.K

LCANMBA013


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CONTENT

CHAPTER TITLE PAGE NO

1 1.1 INTRODUCTION

1.2 INDUSTRY PROFILE

1.3 COMPANY PROFILE

1.4 STATEMENT OF THE PROBLEM

1.5 OBJECTIVES OF THE STUDY

1.6 RESEARCH METHODOLOGY

1.6.1 RESEARCH DESIGN

1.6.2 SOURCE OF DATA

1.6.3 TOOLS AND TECHNIQUES USED FOR DATA

ANALYSIS

1.7 SCOPE OF THE STUDY

1.8 LIMITATION OF THE STUDY

1

2-10

11-21

21

21

21

21

22

22

22

22

2 LITERATURE REVIEW AND THEORETICALFRAME WORK

23-36

3 DATA ANALYSIS AND INTERPRETATION 37-80

4 4.1 SUMMARY

4.2 FINDINGS

4.3 SUGGESTIONS

4.4 CONCLUSION

81

82-86

86

87-88

BIBLIOGRAPHY

APPENDIX

89-92

93-102


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LIST OF TABLES

TABLE NO. PARTICULARS PAGE NO.

3.1 CREDIT DEPOSIT RATIO 40

3.2 TOTAL LOANS TO TOTAL ASSET RATIO 41

3.3 TOTAL BORROWINGS TO TOTAL DEPOSITS

RATIO

42

3.4 LIQUID ASSETS TO DEMAND AND TIME

LIABILITIES RATIO

43

3.5 DEPOSITS TO WORKING CAPITAL RATIO 44

3.6 TOTAL LOANS TO WORKING CAPITAL RATIO 45

3.7 DEMAND DEPOSIT TO TERM DEPOSIT RATIO 46

3.8 CASH DEPOSIT RATIO 47

3.9 COMPOSITION OF TOTAL LOAN 48

3.10 COMPOSITION OF SHORT TERM LOAN 49

3.11 COMPOSITION OF MEDIUM TERM LOAN 50

3.12 COMPOSITION OF ORDINARY TERM LOAN 51

3.13 TREND ANALYSIS OF TOTAL LOANS

DISBURSED BY CSCB

52

3.14 TREND ANALYSIS OF SHORT TERM LOANS 53

3.15 TREND ANALYSIS OF MEDIUM TERM LOANS 54

3.16 TREND ANALYSIS OF ORDINARY LOANS 55

3.17 TREND ANALYSIS OF GOLD LOAN 56

3.18 TREND ANALYSIS OF KISSAN CREDIT CARD 57

3.19 TREND ANALYSIS OF INTEREST FREE PADDY

LOAN

58

3.20 TREND ANALYSIS OF KUDUMBASREE

AGRICULTURE LOAN

59


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3.21 TREND ANALYSIS OF KUDUMBASREE BUSINESS

LOAN

60

3.22 TREND ANALYSIS OF BUSINESS LOAN 61

3.23 TREND ANALYSIS OF OTHER LOAN 62

3.24 TREND ANALYSIS OF PDCB NAMT 63

3.25 TREND ANALYSIS OF NAMT 64

3.26 TREND ANALYSIS OF CASH CREDIT LOAN 65

3.27 TREND ANALYSIS OF DEPOSIT LOAN 66

3.28 COMPOSITION OF DEPOSITS 67

3.29 TREND ANALYSIS OF TOTAL DEPOSITS 68

3.30 TREND ANALYSIS OF FIXED DEPOSIT 69

3.31 TREND ANALYSIS OF SAVINGS DEPOSIT 70

3.32 TREND ANALYSIS OF CURRENT DEPOSIT 71

3.33 TREND ANALYSIS OF RECCURING DEPOSIT 72

3.34 TREND ANALYSIS OF SEASON DEPOSIT 73

3.35 TREND ANALYSIS OF ATHULYA DEPOSIT 74

3.36 COMPARATIVE ANALYSIS OF LOANS AND

DEPOSIT IN THE YEAR 2009-10

75



76



77



78

3.40 COMPARATIVE ANALYSIS OF LOANS ANDDEPOSIT IN THE YEAR 2013-14

79


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LIST OF CHARTS

CHART NO. PARTICULARS PAGE NO.

3.1 CREDIT DEPOSIT RATIO3.2 TOTAL LOANS TO TOTAL ASSET RATIO 40

3.3 TOTAL BORROWINGS TO TOTAL DEPOSITS

RATIO

41

3.4 LIQUID ASSETS TO DEMAND AND TIME

LIABILITIES RATIO

42

3.5 DEPOSITS TO WORKING CAPITAL RATIO 43

3.6 TOTAL LOANS TO WORKING CAPITAL RATIO 44

3.7 DEMAND DEPOSIT TO TERM DEPOSIT RATIO 45

3.8 CASH DEPOSIT RATIO 46

3.13 TREND ANALYSIS OF TOTAL LOANS

DISBURSED BY CSCB

52

3.14 TREND ANALYSIS OF SHORT TERM LOANS 53

3.15 TREND ANALYSIS OF MEDIUM TERM LOANS 54

3.16 TREND ANALYSIS OF ORDINARY LOANS 55

3.17 TREND ANALYSIS OF GOLD LOAN 56

3.18 TREND ANALYSIS OF KISSAN CREDIT CARD 57

3.19 TREND ANALYSIS OF INTEREST FREE PADDY

LOAN

58

3.20 TREND ANALYSIS OF KUDUMBASREE

AGRICULTURE LOAN

59

3.21 TREND ANALYSIS OF KUDUMBASREE BUSINESSLOAN

60

3.22 TREND ANALYSIS OF BUSINESS LOAN 61

3.23 TREND ANALYSIS OF OTHER LOAN 62


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3.24 TREND ANALYSIS OF PDCB NAMT 63

3.25 TREND ANALYSIS OF NAMT 64

3.26 TREND ANALYSIS OF CASH CREDIT LOAN 65

3.27 TREND ANALYSIS OF DEPOSIT LOAN 66

3.29 TREND ANALYSIS OF TOTAL DEPOSITS 68

3.30 TREND ANALYSIS OF FIXED DEPOSIT 69

3.31 TREND ANALYSIS OF SAVINGS DEPOSIT 70

3.32 TREND ANALYSIS OF CURRENT DEPOSIT 71

3.33 TREND ANALYSIS OF RECCURING DEPOSIT 72

3.34 TREND ANALYSIS OF SEASON DEPOSIT 73

3.35 TREND ANALYSIS OF ATHULYA DEPOSIT 74


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CHAPTER 1

INTRODUCTION


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1.1 INTRODUCTION

The project entitled “A Study on Loans and Deposit in Cherpalchery Service Co-operative

Bank Ltd (CSCB), Cherpalchery” is focusing on the study of loans and deposits in

Cherpalchery Service Co-operative Bank Ltd. The areas of operation of the bank is confined

to the village of Karalmanna, Vellinezhy, Veeramangalam and Trikkaderi and also extending

better services to its members as well as to its customers. The bank was registered as a Co-

operative Society under Act VI Of 1932 (Madras Co-operative Society Act 1932) on 20th

November-1967. The promoters of the society were mainly agriculturists and business people.

The term ‘loan’ may be regarded as ‘credit’ granted where the money is disbursed and its

recovery is made on a later date. It is the debt for the borrower. While granting loans, credit

is given for a definite purpose and for a predetermined period. Interest is charged on the loan

at an agreed rate and intervals of payment. Bank deposits are made to deposit accounts at a

banking institution, such as savings accounts, checking accounts and money market accounts.

The account holder has the right to withdraw any deposited funds, as set forth in the terms and

conditions of the account. One of the primary functions of the bank is ‘lending’ through

lending banks meet their objective of making profits. The deposits collected from the public

cannot be kept idle. It has to be utilized in order to derive benefits out of it. The bank collects

deposits with the objective of lending and makes profit out of the interest received and paid.

In this project the researcher will be focusing on the deposits (fixed deposit, saving deposit,

current deposits, athulya deposit, recurring deposits and season deposit) and loans (short term

loan, medium term loan, ordinary loan and gold loan) of CSCB. Partly descriptive and partly

analytical research design will be used to achieve the objectives of the study. The study is

entirely based on the secondary data. The study is based on past five year financial data

collected from loans and deposit schedule issued by the Cherpalchery Service Co-operative

Bank Ltd.


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1.2 INDUSTRIAL PROFILE

HISTORY OF CO-OPERATIVE BANKS IN INDIA

The History of Banking begins with the first prototype banks of merchants of the ancient

world, which made grain loans to farmers and traders who carried goods between cities. This

began around 2000 BC Assyria and Babylonia. Later, in ancient Greece and during the Roman

Empire, lenders based in temples made loans and added two important innovations they

accepted deposits and changed money. Archaeology from this period in ancient China and

India also shows evidence of money lending activity.

Banking, in the modern sense of the word, can be traced to medieval and early Renaissance

Italy, to the rich cities in the north such as Florence, Venice and Genoa. The Bardi and Peruzzi

families dominated banking in 14th century Florence, established branches in many parts of

Europe. Perhaps the most famous Italian Bank was the Medici bank, established by Giovanni

Medici in 1397. The development of banking spread from northern Italy through Europe and

a number of important innovations took place in Amsterdam during the Dutch in the 16 th

century and in London in the 17th century. During the 20th century developments in the field

of telecommunications and computing caused major changes to banks operations and let banks

to dramatically increase in size and geographic spread.

Definition of Co-operative bank

Devine defines a Co-operative Bank as, ”a mutual society formed composed and governed

by the working people themselves for encouraging regular savings and granting small loans

on easy terms of interest and repayment”

FEATURES OF CO-OPERATIVE BANK

They are organized and managed on the principles of Co-operation-‘self -help and

mutual help’.

They function on “no profit no loss” basis.

Co-operative Bank performs all main banking functions of deposit mobilization,

supply of credit and provisions of remittance facilities.


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Co-operative Bank does banking business mainly in the agricultural and rural

sector.

Co-operative Banks belongs to money market as well as capital market.

The sources of their funds are:

o Central and State Government.

o The RBI and NABARD.

o Other Co-operative Institution.

o Ownership funds.

o Deposits and debenture issues.

Co-operative Banks have federal structure of three tier linkage.

Some Co-operative Banks are Scheduled Banks and while other non-Scheduled

Banks.

Co-operative Banks accept current saving and fixed or time deposits from

individuals and institution.

PRINCIPLES OF CO-OPERATIVE BANK

The basic principles followed by cooperative banks are as follows

Voluntary and open membership

Democratic member control

Self-help through mutual help

Member economic participation

Autonomy and independence

principle of unity

Education, training and information

Concern for community development

STRUCTURE OF CO-OPERATIVE BANKS IN INDIA

India’s co-operative banking structure consists of two main segments, viz., agricultural and

non-agricultural credit. There are two separate structures in the case of agricultural credit: -

One for short and medium term credit and the other for long term credit. The co-operative

credit structure for short and medium terms it’s a three tier one with primary agricultural credit


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societies at the base level, the central co-operative bank at the district level and state co-

operative bank at the apex level.

Over and above these institutions, grain banks are actively functioning as primary societies in

certain states. Though the organization of central and state co-operative banks was mainly forthe benefit of the agricultural credit sector, they serve non-agricultural societies too.

CO-OPERATIVE BANKS IN INDIA

The co-operative banks are small-sized units which operate both in urban and non-urban

centers. They finance small borrowers in industrial and trade sectors besides professional and

salary classes. Regulated by the Reserve Bank of India, they are governed by the Banking

Regulations Act 1949 and banking laws (co-operative societies) act, 1965. The co-operative

banking structure in India is divided into following 5 components:

1. Primary Co-operative Credit Society

The primary co-operative credit society is an association of borrowers and non-borrowers

residing in a particular locality. The funds of the society are derived from the share capital

and deposits of members and loans from central co-operative banks. The borrowing powers

of the members as well as of the society are fixed. The loans are given to members for the

purchase of cattle, fodder, fertilizers, pesticides, etc.

Example :- The Federation of Andhra Pradesh Cooperative Urban Banks & Credit Societies

Ltd, All India Dr. Babasaheb Ambedkar Cooperative Banks and Credit Societies Federation

Ltd., Nashik, Coop. Banks and Credit Societies Ltd., Nasik, Maharashtra etc.

2. Central co-operative banks

These are the federations of primary credit societies in a district and are of two types- those

having a membership of primary societies only and those having a membership of societies

as well as individuals. The funds of the bank consist of share capital, deposits, loans and

overdrafts from state co-operative banks and joint stocks. These banks provide finance to

member societies within the limits of the borrowing capacity of societies. They also conduct

all the business of a joint stock bank.


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Example: - The Adilabad District Central Co-operative Bank Ltd,. The Anantapur District

Central Co-operative Bank Ltd., Nalgaonda District Co-operative Central Bank Ltd. etc.

3. State co-operative banks

The state co-operative bank is a federation of central co-operative bank and acts as a watchdog

of the co-operative banking structure in the state. Its funds are obtained from share capital,

deposits, loans and overdrafts from the Reserve Bank of India. The state co- operative banks

lend money to central co-operative banks and primary societies and not directly to the farmers.

Example: - The Andaman and Nicobar State Co-operative Bank Ltd., The Arunachal Pradesh

State Co-operative Apex Bank Ltd., Kerala State Co-Operative Bank Ltd. etc.

4. Land development banks

The Land development banks are organized in 3 tiers namely; state, central, and primary level

and they meet the long term credit requirements of the farmers for developmental purposes.

The state land development banks oversee, the primary land development banks situated in

the districts and tehsil areas in the state. They are governed both by the state government and

Reserve Bank of India. Recently, the supervision of land development banks has been

assumed by National Bank for Agriculture and Rural development (NABARD). The sources

of funds for these banks are the debentures subscribed by both central and state government.

These banks do not accept deposits from the general public.

5. Urban Co-operative Banks

Definition of Urban Co-Operative Banks

The term Urban Co-operative Banks (UCBs), though not formally defined, refers to primary

co-operative banks located in urban and semi-urban areas. These banks, till 1996, were

allowed to lend money only for non-agricultural purposes. This distinction does not hold

today. These banks were traditionally centered on communities, localities, work place groups.

They essentially lend to small borrowers and businesses. Today, their scope of operations has

widened considerably.

The origins of the urban co-operative banking movement in India can be traced to the close

of nineteenth century. Inspired by the success of the experiments related to the co- operative


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movement in Britain and the co-operative credit movement in Germany, such societies were

set up in India. Co-operative societies are based on the principles of cooperation, mutual help,

democratic decision making, and open membership. Co- operatives represented a new and

alternative approach to organization as against proprietary firms, partnership firms, and joint

stock companies which represent the dominant form of commercial organization. They mainly

rely upon deposits from members and non-members and in case of need, they get finance from

either the district central co-operative bank to which they are affiliated or from the apex co-

operative bank if they work in big cities where the apex bank has its Head Office. They

provide credit to small scale industrialists, salaried employees, and other urban and semi-

urban residents.

Example: - Mehsana Urban Co-Op Bank, Goa Urban Co-operative Bank, Karad Urban Co-

operative Bank, Nagar Urban Co-operative Bank etc.

6. Rural Co-operative Banks

Rural Cooperative Banking and Credit Institutions play an important role in meeting the

growing credit needs of rural India. The volume of credit flowing through these institutions

has increased. The performance of these institutions, however (apparent in the share of total

institutional credit and the indicators of their financial health), has been less than satisfactory

and is deteriorating rapidly. Of late, a number of Committees have gone into the reasons for

this situation and suggested remedial measures, but there has been little progress in

implementing their recommendations.

The rural cooperatives are further divided into short-term and long-term structures. The short-

term cooperative banks are three tiered operating in different states. These are-

1. State Cooperative Banks- They operate at the apex level in states

2. District Central Cooperative Banks-They operate at the district levels

3.

Primary Agricultural Credit Societies-They operate at the village or grass-root level.

Likewise, the long-term structures are further divided into –

1. State Cooperative Agriculture and Rural Development Banks (SCARDS) - These

operate at state-level.


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2. Primary Cooperative Agriculture and Rural Development Banks (PCARDBS)-They

operate at district/block level.

The rural banking cooperatives have a complex monitoring structure as they have a dual

control which has led to many problems. A Forum called State Level Task Force on

Cooperative Urban Banks (TAFCUB) has been set-up to look into issues related to duality in

control.

1. All banking activities are regulated by a shared arrangement between RBI and

NABARD.

2. All management and registration activities are managed by RCS.

CO-OPERATIVE BANKS IN KERALA

AGRICULTURE CREDIT SOCIETIES

1. Primary Credit Societies

The organization of primary agricultural credit societies dates back to 1904 when the Indian

Co-operative society’s Act was passed. These societies were formed to provide cheap credit

to the agriculturists with a view to make them free from the clutches of moneylenders. The

primary agricultural credit society is the foundation stone on which the whole co-operative

edifice is built. These societies were intended to promote the economic interests of its

members especially, the poor in accordance with co-operative principles. It has to achieve its

aim by promoting savings among members, providing loans, supplying agricultural

implements and certain essential domestic requirements and arranging for the marketing of

their agricultural products. These societies are also called Rural Banks. As on March 2006,

there were 1587 primary agricultural credit societies in Kerala out of which 1565 are

functional, 22 are dormant and 26 are under liquidation. Out of 1565 functional PACS 828

societies were on loss and 721 were on profit.

Example: - The Neyyattinkara Primary Co-operative Agrl. Devp. Bank Ltd Neyyattinkara,

Thiruvananthapuram, Thonnakkal Agricultural Credit Co-operative Society Ltd, Thonnakkal,

Thiruvananthapuram etc.


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2. Central Co-operative Banks

The Central Co-operative banks were set up as a link between Primary Co-operative Societies

and the State Co-operative Bank. For providing medium term agricultural credit, the Central

Co-operative Bank plays a vital role. All India Rural Credit Survey Committee recommended

that there should be only one Central Bank in a district, so it is also called District Co-operative

Banks (DCB).At the end of March 2005 there were 365 Central Co-operative Banks in India

whereas in Kerala there were 14 Central Co-operatives Banks.16 Membership of a Central

Co-operative Bank generally consists of primary co-operative credit societies and other types

of primary societies working in the area of its operation. The government may also become

member of a Central Co-operative Bank by taking shares.

Example: - Alappuzha District Co-operative Central Bank Ltd., Ernakulam District Co-

operative Central Bank Ltd., Malappuram District Co-operative Central Bank Ltd., Palakkad

District Co-operative Central Bank Ltd., etc.

3. State Co-operative Bank

The State Co-operative Bank stand at the top of the co-operative credit structure in the state.

It is an apex co-operative society. The State Co-operative Bank is expected to co-ordinate and

control the working of the District Co- operative Banks in the state. It is a financing bank of

the Central co-operative Banks in the state and stands for the overall development of the co-

operative credit movement in the state. The state co-operative bank is a connecting link

between NABARD and the co-operative credit institutions in the state. It is also a connecting

link between the state government and the co-operative credit movement.

At the end of March 2005 there were 31 State Co-operative Banks in India 17. In kerala, this

bank was originally registered as ‘Trivandrum Central Co- operative Bank’ in 1915 under the

Travancore Central Co-operative Societies Act 1914.It was converted in to Kerala State co-

operative Bank and functions as the Apex Bank with effect from 1’st January 1956.The

membership of a state Co- operative Bank is open to all Central Co-operative Banks, and State

Government. State level co-operative federations may also be admitted as members.


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4. Primary Co-operative Agricultural and Rural Development Banks. (PCARDB)

(Land Development Banks)

A Primary Agricultural and Rural Development Bank is a co-operative institution advancing

long term loans to the agriculturists who were members, on the security of landed assets.

Before 1963 they were known as Land mortgage banks. It has a two-tier structure - Primary

Land Development Banks in each subdivision and State Co-operative Land Development

Bank at the State level. In Kerala, they are called Primary Co-operative Agricultural and Rural

Development Bank (PCARDB) and State Co-operative Agricultural and Rural Development

Bank (SCARDB) respectively.

In Kerala, there are 46 Primary Agricultural and Rural Development Banks at the end March

2005. The duration of long term loan is usually 5 to 15 years. The long term loans are granted

for making permanent improvement of land. The purpose of long term loans includes

reclamation of land, purchase of agricultural machinery etc.

5. Kerala State Co-operative Agricultural and Rural Development Bank (SCARDB).

(Central Land Development Bank)

The Kerala State Co-operative Agricultural and Rural Development Bank is a federation of

agricultural development banks in the state. It is an Apex Bank and also the financing bank of

the Primary Development Banks. The main aim of the bank is to raise long term funds by the

issue of debentures and to finance Primary Agricultural Development Banks affiliated to it

.The policy of the government is to establish one State Agricultural Development Bank for

every state. The area of operation of the bank extends to the whole of the state. The

membership of the bank is open to all Primary Agricultural Development Banks in the state.

Apart from these, the State Government and the Kerala State Electricity Board have also

become members in the bank.

NON-AGRICULTURAL CREDIT SOCIETIES

Credit is needed not only by rural agriculturists, but also by all urban poor also. They may be

labourers or workers having fixed income. For meeting their financial requirements, Co-

operative Non-agricultural Credit Societies are formed. Co-operative Urban Banks and

Employee’s Credit Societies come under non- agricultural credit societies.


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1. Urban Co-operative Banks

Urban Co-operative Banks are primary credit societies working in the urban areas. Non-

agriculturists such as small merchants, traders, artisans, wage earners and professionals are

admitted as members. An Urban Bank provides short term and medium term loans to its

members for non-agricultural purposes. They also accept deposits of various types and work

in the style of commercial banks. The Reserve Bank has the right to inspect and supervise

these banks as they come under the purview of the Banking Regulation Act of 1949. The

area of operation of an Urban Bank will be specified in the bye-laws of the bank. Usually the

area is restricted to a town, municipality, corporation or Taluk.

Example: - Adoor co-operative urban bank ltd., Calicut co-operative urban bank ltd.,

Cherpalcheri co-operative urban bank ltd, Guruvayur co-operative urban bank ltd., Urban co-

op. bank ltd. no.1758, Perintalmanna. Etc.

2. Employee’s Co-operative Credit Societies

Employee’s Co-operative Credit Societies also belong to the category of non- agricultural

credit societies. They are organized among the salaried employees of government departments

and semi-government institutions. Separate employee’s credit societies are organized for

separate categories of workers. Thus, there are credit societies for railway workers, post and

telegram employees, bank employees, teachers, and so on. The main object of such societies

is to promote thrift and savings among employees and to provide credit to the members. The

loans advanced to the members are deducted from their monthly salary. Hence there is no

problem of over dues in these type societies. Most of the employee’s credit societies are

financially sound and well managed. They are able to raise sizeable amount of deposits from

the members and non-members.

Example: - Accountant General Office Employees Co-operative Credit Society Ltd No. T 291,

Thiruvananthapuram, PWD Irrigation Dept. Employees Co-operative Society Ltd No. T 638,

Thiruvananthapuram, Ph: 325529, The Trivandrum District Co-operative Bank Employees

Co-operative Society Ltd No. T 327, Thiruvananthapuram. Etc.


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1.3 COMPANY POFILE

The Cherpalchery service Co-operative Bank Ltd.P.No.589 was registered as a Co-operative

Society under Act VI Of 1932 (Madras Co-operative Society Act 1932) on 20th November-

1967.Its address shall be Cherpalchery post in the taluk of Ottapalam in the Palakkad district.

The promoters of the society were mainly agriculturists and business people. The bank has

made substantial contribution in the socio-economic development of its members. Almost all

the sections of the bank are now computerized and have core banking facilities.

The bank will start in 1945, in the form of PCC society (Producers Cum Consumers Co-

operative Society) the work of PCC society is collecting paddy from farmers and agents and

sells to consumers. In 1956 the PCC society is changed in the form bank with two persons.

The first secretary was the Late Kizhapattu Rajagopalamenoen, first president was the Late

Panangat Kumaramenon. The bank has also opened branches within its areas of operations

for extending better services to its members, when its activities get enlarged with the sanction

of the co-operative registrar. This bank has really made substantial contribution in the socio-

economic development of its members. Almost all the sections of the bank are now

computerized.

The bank is situated very near to the Cherpalchery bus stand. It is housed in its own

double stored building. It has a moderately furnished sitting room which is great relief to the

customers. The bank has continuously been working profitably for the last 42 years. The

meritorious work and commendable service performed in the past made it possible for the

bank to win a most prestigious national award for the year 2004.

Management

General body is the ultimate authority and elects the board of directors consisting 13 members

of which on seat is reserved for SC/ST and one for women.

Authorised share capital

Authorised share capital of the bank is Rs. 107, 76, 23,932.16

A class members:-23329


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B class members:-95035

Here A class includes the members and shareholders of the bank. B class includes government

and nominal members of the bank.

Objectives of the bank

1. To improve the breeds of the domestic animals breeding bulls, breeding go puts, breeding

cows.

2. To do everything for implementing in part or in full any or all the above projects.

3. To borrow funds from members or others to be utilised for giving loans to members for

useful purpose.

4. To procure and the supply agricultural requirements like seeds, manure, implements and

cattle feed etc.

5. To arrange for the sale of agricultural products of members to the best advantage.

6. To own or hire processing planed like rice hullers, flow milks, oil crushers, decanters, gins

etc. And improved machinery like tractors, mechanized plough etc., for the benefit of the

members.

7.

To undertake collection of bills cheques on behalf of members and to discount cheques

and bills of approved members subject to the provision of bylaw 54C.

8. To owner hire go downs to provide facilities to members to store their products for sale at

advantage process.

9. To construct repair and maintain lift irrigation of any kind in the area of the bank as

contemplated in public work department (irrigation) notification no IR49673/57 P.W.D

dated 18/09/1957.

10. To sell the agricultural products and industrial products of the members in a beneficial

way through marketing societies or otherwise.

11. To frame agricultural plans for the members and to implement them end verify the details.


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12. To render assistance a co-operation to the members for the purpose of producing kind of

seeds.

13. To give help to members, individually or collectively for the undertaking steps for growing

green leafs manure and mixtures and composed.

Functions of Cherpalchery Service Co-Operative Bank

The banks performs banking as well as non-banking functions is just like a commercial bank,

the primary functions of the bank is receiving deposits and giving advances to meet the

growing requirements of the public. The deposits received from the members is the main

source of working capital. The various deposits received by the bank includes fixed deposits,

recurring deposits, current deposits, savings deposits etc. The bank provides loans and

advances of short period, medium term, long term and gold loans to members and non-

members.

Second important banking functions is the collection of cheques and discounting of bills. The

banks should prepare and maintain a list of banks approved for this purpose. The cheques

drawn by which alone can be discounted. A list approved members whose cheques alone can

be discounted should be maintained by the banks and revised from time to time. For this the

bank may charge a sum as commission. If the value of the cheque has not been realized by the

bank within 15 days suitable actions should be taken for the immediate recovery of the amount

paid from the person concerned. The bank is also extending safe deposits locker facilities to

its members and non-members.

Non-Banking Functions:-

Besides the banking function the bank also performs some trading activities. These

includes the sale of fertilizers, seeds, and cashew procurement and Onam market and vishu

market. One of the main trading activity of the bank is the sale of improved varieties of seeds,

fertilizers, pesticides and insecticides. The bank purchases fertilizers mainly from FACT and

Marketing Federations. The bank also provides ware housing facilities to the agriculturists at

reasonable rent. One person is employed in the bank for the sale of fertilizers.


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Distribution of consumer goods is another important trading activity. The bank

undertakes seasonal business of cashew procurement with the prior sanction from the

government.

Onam and vishu market is also a seasonal business of the bank. The society opens its onammarket 10 days prior to thiruvonam and vishu.

Deposits

One of the service rendered by the co-operative banks are accepting deposits. They accept

deposits from every class and every source. To attract serving from people the bank maintains

different types of deposits accounts.

The bank accepts deposits from members and non-members at any type at prescribed rates of

interests which varies from time to time. Major deposits accepted by the bank are:-

a) Savings Deposits

This is just like the Savings Bank Account in other banks. Amount can be deposited and

withdrawn as and when required subject to the terms and conditions of the bank. A Pass Book

will be issued to the depositor. Interest is calculated monthly on the minimum amount retained

in the account during the month. These accounts are mean for middle and low income group.

The current rate of interest is 4%. This deposit is suitable for all categories of people.

b) Fixed deposit

Under this, a fixed amount of money can be deposited for a fixed period beginning from 15

days. It can be withdraw after the expiry date. The interest given to fixed deposit is higher

than other types of deposits.

c) Current Deposit

This is suitable for business for men. Current account holders should keep a minimum balance

of Rs. 500/- to keep th account running. Amount can be deposited and withdrawn without any

restrictions as in the case of other banks. They are permitted to overdraw his account if he has

entered into a special arrangement with the bank in these respects. A Pass Book will be issued

to the depositor. Interest is calculated monthly on the minimum balance kept in the account

during the month.


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d) Day Deposit

Day deposit is collected through agents. An amount of Rs.10/- or its multiples can be deposited

daily for a period of 6 months. A Pass Book will be issued to the depositor. In case of default

in payment or closure before the term, the amount at credit can be repaid after deducting a

penalty at a rate of 5%.

e) Recurring deposit

This is also called Monthly Saving Scheme. An amount of Rs. 10/- or its multiples can be

deposited monthly for a period of 8 years. The depositors have paid at least 10 installments

without failure, it can be loan up to 75% of the amount at credit. This is suitable for persons

having regular income on monthly basis.

f) Home safe deposit account

This is other type of deposit account to encourage the saving habits of the people. Under this

scheme a small pot or box with an opening is supplied to the depositor. The depositor can

save the amount in the box. Periodically this box is taken to the bank and the amount in it is

credited with his or her deposit account.

Making Loans and Advances

Lending of money is the other major important function of the co-operative bank. After

keeping certain percentage of deposits as cash reserve the balance is given as loans and

advances. Co-operative banks gives loans and advances to the needy persons against personal

security of borrower or the security of movable and immovable properties.

Loans

A loan is granted by the banker in a separate account known as loan account. The amount

sanctioned is either paid or credited in the account of the customer. The interest is charged on

the whole amount of loan. The loan can be repaired in installments or in maturity.The main

utilization of fund by the bank is for providing loans to its members. The bank provides

various types of loans:-


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a) Non Agricultural Medium Term loans (NAMT)

NAMT loans are given for education purposes, repayment of sundry debts and such other

purpose as the registrar may declare from time to time. The maximum amount payable at a

time per member is Rs.25lakhs. The rate of interest in NAMT loan is 14.5%.

b) Gold Loans

Gold loan facility is enjoyed by the ‘A’ class and ‘C’ class members, maximum amount

payable is Rs.500000/- or 70% of the market value of the gold pledge whichever is less. The

amount should be repaid within 7 months. The rate of interest in gold loan is 12%.

c) Kissan Credit Card loans (KCC)

Kissan Credit Card scheme aims at providing need based timely credit support to the farmers

for their cultivation needs. The bank provides KCC up to 3 years at maximum amount of 1

lakh at 7% interest

d) Housing Loans to Employees

The bank may also provide housing loans to its employees having a continuous service of 5

years or more subject to a maximum of Rs.5 lakhs per employee as per the terms and

conditions insisted by the board of Directors and registrar.

e) Loan on Fixed Deposit

Loan up to 90% of the amount deposited with the bank as fixed deposit by a member or non-

member can be given as loan to such depositor

f) Vehicle loan

Loan up to 90% of the market value of the vehicle.

Overdraft

Under the facility the depositors are allowed to withdraw money more than their deposits. It

granted against collateral securities or on the personal security of the borrower. Interest is

charged on the amount which is over drawn by the depositor.

Departmentalization

The main aim of a co-operative bank is to provide service or assistance to their members and

not to maximize profit for providing better service to their customer’s bank delegate their

function in to various departments. Each service of co-operative bank is performed by each

department. They are shown below;


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a) Loan department

The main source of income of every bank is from the loan. Likewise co-operative bank

maintain loan department in their bank. 8 staff working in this department. Their main

functions are;

Analyse the details of borrower who reached the bank for loan with their collateral security.

After completing all the formalities for issuing loan to the borrower opened an account in the

borrowers name and interest is charged monthly. They are keeping the account very efficiently

till the account is closed, from the enquiry we can understand that compared to national banks

the formalities of co-operative bank is very simple related with issuing loan. Loan department

also provide facility for overdraft. But the customers are rarely used the overdraft facility.

They are providing loan mainly for agricultural purpose, small scale industries, housing loans

etc., and also charged less interest rate. The bank have some amount of non-performing asset

but they are sincerely trying to reduce it and find success.

b) Cash or deposit department

The existence of a bank is depends upon the efficiency of this department. Because the bank

provide loans from the certain percentage of deposits. So the main function of this department

is deposit mobilization. Co-operative banks are generally localized therefore they provide highrate of interest as compared to national banks. It help to attract more people. They provide

various deposit schemes to general public. These are;

Fixed deposit account

Current deposit

Saving deposit

Recurring deposit

Home safe deposit

Athulya deposit

Niravu deposits

Janatha deposits etc.


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SWOT analysis

Every organization has its own strength and weakness. Likewise the strength and weakness,

opportunities and threats of Service Co-operative Bank are as follows.

Strength

1. Service Co-operative Banks (SCBs) are self-reliant in financial with less risk in

operations.

2. Service Co-operative Banks (SCBs) account for nearly 10% of the resources of the entire

banking sector in India.

3. They have been filling the credit gap in the urban, sub urban and semi urban areas.

4. One hundred years of existence.

5.

Service Co-operative Banks (SCBs) have responsibility for the economic up liftmen of the

weaker section of the community.

6. Nondiscrimination against cast, class, creed, religion and gender.

7. The principle of member participation has resulted in unique system share capital linked

to borrowing in Service Co-operative Banks (SCBs) s.

8. Democratic management is the principle of co-operative sector.

9. The deposits in Service Co-operative Banks (SCBs) are protected by the Deposit Insurance

and Credit Guarantee Corporation of India (DICGC).

10. There were 55 scheduled urban co-operative banks in India as on 31 march 2004.

Weaknesses

1. Staff recruitment is not done properly in Service Co-operative Banks (SCBs). There is a

shortage of manpower.

2. A good number of miss fits and unfits are found occupying the chairs of administration.

Their inadequate knowledge leads to inefficiency.

3. The process of computerization of Service Co-operative Banks (SCBs) is rather slow

through computers have been installed, trained staff is not available.

4. Lack of professional management

5. Regional imbalance in the distribution and development of Service Co-operative Banks

(SCBs).


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6. Restrictions from the RBl and government is affected the autonomy power of Service Co-

operative Banks (SCBs).

7. Annual General Meeting (AGM) are not convened periodically and effectively.

8. Political factors play an adverse role and hamper the smooth functioning of banks.

Therefore, organizing loan means and campaigning for waiver of loans in the same breath.

9. In effective supervision over branches and poor inspections.

10. The dual control is creating a lot of confusion in the operation of Service Co-operative

Banks (SCBs).

Opportunities

1. Service Co-operative Banks (SCBs) are integrated into their local environment and their

role goes beyond that of provider of financial services.

2. On account of their proximity to their members and their firms Service Co-operative

Banks (SCBs) have a good scope for enlarging the membership.

3. Service Co-operative Banks (SCBs) are pioneers in the field of micro finance.

4. Collective efforts not only enhance the chances of success but also increase the economy

of scale by reducing the per capita coast operation and increase productivity.

5. Setting up of Service Bank Department (SBD) by the RBI recognition of this sector as an

important part of the banking system in 1984.

6. Registration of SCBs with institute presence under the Multi state co-operative societies

Act, 4/8/2002.

7. Permission granted by RBI to the financially strong scheduled Service Co-operative Banks

(SCBs) having minimum net worth of Rs. 100 crores to enter into insurance business from

4.8.2013.

8. The notification of the government of India no. S.O.E 105(e) (28th January 2003) that has

made applicable the provision of the Securitization and Reconstruction of Financial Assets

and Enforcement of Security Act to Service Co-operative Banks (SCBs).

Threats

1. The bank is focusing cut throat competition in the market with other banks.

2. Increasing incidence of fraud and misappropriation.


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3. Tightening of income recognition and asset classification norms had a direct bearing on

the balance sheet of the Service Co-operative Banks (SCBs).

4. The Service Co-operative Banks (SCBs) are facing higher cost of management especially

for interest on deposit and establishment cost.

5. Failure of the government to honor its guarantees when invoked.

6. Increasing litigation between management and employees.

1.3

RESEARCH PROBLEM STATEMENT

The study is basically aimed to know the loans and deposits of Cherpalchery service co-

operative bank. The study will help the bank to identify the loans and deposits which are

generating more income to the bank. The findings of the study will help the management of

Cherpalchery service co-operative bank to improve their performance and the proportion ofloans and deposits.

1.5 OBJECTIVES OF THE STUDY

1.5.1 Primary objective

To study different types of loans and deposits provided by Cherpalchery Service Co-

operative Banks (CSCB).

1.5.2 Secondary objectives

To study the growth in loans and deposits of Cherpalchery Service Co-operative Banks

(CSCB).

To suggest measures based on the findings to improve the performance of

Cherpalchery Service Co-operative Banks (CSCB).

1.6 RESEARCH METHODOLOGY

Research methodology is a way to systematically solve the research problem. It explains the

various steps that are generally adopted by a researcher in studying the research problem.

1.6.1 Research design

The research is partially analytical and partially descriptive in nature.


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1.6 2 Source of data

Secondary source of data will be used for study purpose. The secondary data will be collected

from the loans and deposits schedule, bank records, journals, annual reports, audit report,

websites of the company.

1.6.3 Tools & techniques used for data analysis

Trend analysis

Ratio analysis

1.7 SCOPE OF THE STUDY

The scope of the study is limited to the information obtained from the loans and depositsschedules provided by the bank. The study is conducted to know the loans issued and deposit

accepted by the Cherpalchery Service Co-operative Bank by using various ratios and trend

analysis. The study will helps to identify various types of loans and deposits generating more

income to the bank. The study will also help the bank in framing new policies related with

loans and deposits in the future.

1.8 LIMITATIONS OF THE STUDY

The study is limited to the period of five year data hence very difficult to get a clear picture

of the bank.

The study reveals the finding for the present situation and it will not reflect the future.

Some data related with study was difficult to access due to confidential in nature.

The study is based on published information provided by the bank hence accuracy and

reliability of the data is suspected.

In this chapter the researcher has given an introduction about the industry profile and the

organization in which the study will be undertaken, objectives of the study has been discussed

followed by the research methodology to be used scope of the study and limitations related

with the study has been discussed in this chapter. The next chapter will be focusing on the

review of the literature and theoretical concepts used in the study.


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CHAPTER 2

REVIEW LITERATURE AND THEORETICAL

FRAMEWORK


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In this chapter the researcher is highlighting the studies done by various scholars regarding

the topic “Loans and Deposits”. In this chapter an attempt has been made to provide an

overview about loans and deposit in various banks. This chapter will also discussing the

theoretical concept used in the study.

2.1 REVIEW OF LITERATURE

The Banking Commission (1972)1 viewed that proximity of institutions to the depositor and

availability of varying schemes tailored to suit the liquidity and other considerations, which

weigh with the depositors, the return on deposits appeared to be of some significance. The

effects of administered interest rates on bank deposits need to be studied carefully and a well

thought out comprehensive approach to the question of the structure of interest rates on

deposits has to be worked out. It is necessary for banks to take into account the motivation for

savings to attain a larger measure of success in deposit mobilization from small persons. While

the efforts that the banks have been taking to mobilize deposits have to continued, it is

important to see that the standard of services for the existing depositors is also maintained at

a high level. The availability of ancillary banking services also influence the choice of the

depositors, particularly in smaller towns. The Commission further stated that efficient service

and courteous and personalized attention have been found to be among the most important

considerations in depositor's choice of a bank and recommended waiting time of customers atthe cash counters be reduced by procedural adjustments and introduction of teller system.

C.L.Khemani and K.V.Balakrishnan (1981)2 in their study on the importance of

consumption credit to weaker sections stated that the target group under the sponsored

schemes should be granted consumption loans for their specific needs. While granting the

consumption loans, the capacity of the borrowers to repay the loans should be considered.

They also remark that the very objective of priority sector lending cannot be said to be

achieved if the beneficiaries under the sponsored schemes are approaching the money lendersfor their consumption credit.

K Dinkar Rao (1982)3 conducted a study on Lead Bank Scheme and stated that extension of

credit to priority sector is a social obligation. It is to be shared between the agencies, including

the government departments and the financial agencies who are involved in the


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implementation of the schemes for development of agriculture and other priority sectors. The

Lead Bank Scheme is the best alternative for sharing responsibility at the grass root level on

a mutual bass. The lead role is not merely confined to the Lead Bank shouldering the major

responsibility in branch expansion and credit extension. The stress is laid on the lead bank's

liaison role in integrating credit with complimentary inputs and services. The priority sector

lending involves considerable extension efforts. The credit agencies or the government

departments or both have to ensure the critical integration of credit with inputs and services.

This would require co-ordination among financial institutions and in many cases collective

action by them. These tasks would become immensely complex if individual agencies act

independently. In the short run the Lead Bank Scheme can only facilitate the flow of a given

quantum of credit to the priority sector, but may not be able to increase this quantum. The

Lead Bank Scheme can only be expected to reflect the local needs and genuine regional

grievances, the influence of which could be felt only in the long run.

Subha Rao (1982)4 A survey of two towns and ten villages in East Godavari and West

Godawari districts of Andhrapradesh to find out the influence of different forms of

advertisement and personal selling on deposit mobilization of banks. It was observed that

different media advertisements have limited influence on customers in opening current

account. Similarly personal selling was somewhat less powerful than advertisement in

motivating urban customers to open current accounts. But in rural areas personal selling was

more effective than advertisement fixed depositors in urban and rural areas are mostly

motivated by personal selling and advertising was not effective in mobilizing fixed deposits

from urban and rural areas. It was also found that among urban customers, their friends and

relatives had more influence than bank staff whereas rural customers were mostly induced by

branch managers and other staff of the bank. Illiteracy, ignorance and unawareness about

various deposits schemes on the part of small savers and their psychological inertia are

problems of deposit mobilization. Personal selling or contact is the best way of educating the

rural people.

A.R. Patel (1984)5 conducted a study on the performance of the public sector banks in lending

under the differential rate of interest scheme. The study revealed the banking progress in

lending to SC and ST borrowers under the scheme. The number of SC and ST borrowers and


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the amount advanced increased remarkably. But compared to the number of borrowers and

their demand for fund, the allocation by the banks under the scheme is very limited. Therefore

the banks are unable to finance all the eligible beneficiaries under the Differential Rate of

Interest Scheme (DRI). The study has thrown a light to the fact that a number of eligible

borrowers could not avail loan under the DRI scheme but at the same time a number of well

settled influential persons availed loans under the scheme.

American Bankers Association's (1984)6 the study revealed that though banks were by far

still the most popular financial service provider, particularly for traditional accounts like

checking, savings accounts and loans, brokers are often the preferred vendors of "newer" more

profitable services. The study highlighted a growing perpetual blurring of financial

institutions, with all institutions more likely to be perceived to offer "any service", compared

to the previous years. 62 percent customers were found confident of the safety of their own

money in banks.

Chakravarthy Committee (1985)7 While commenting on the operational efficiency of banks

the committee expressed their view that the concept of operational efficiency of commercial

banks in India is associated with such diverse aspects of its operations as cost effectiveness,

profitability, customer services, priority sector lending, mobilization of deposits and

deployment of credit. Operational efficiency in banks has attained a wider connotation. The

committee again observed that there is a need to introduce some element of price competition

among banks. The 'controlled competition' was recommended by the committee in this regard.

IR.N. Malhotra (1986)8 conducted a study on the role of banking in Rural Development and

opines that banks should actively participate in rural credit. They should provide financial

assistance against viable projects and exercise effective control over credit utilization. The

responsibility of the banks does not end with the disbursement of loans. They should see that

the borrower utilizes the amount of loan for the purpose for which it has been sanctioned.

Credit institutions with such responsibility alone can contribute to the rural development.

S.B.Dangat, S.R,Radkar and M.P.Dhongada (1986)9 conducted a micro level study on the

utilization of fund borrowed under medium and long terms loans. In the study they stated that

most of the borrowers use the medium and long term loans for their personal and unproductive

purposes. The funds are mainly used by the borrowers for conducting marriages and other


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functions, construction of buildings for residential purposes, repayment of earlier debts, etc.

Proper appraisal, guidance and supervision by the bank personnel are essential to ensure that

the borrowers utilize the amount borrowed by them for productive purposes.

B. Ramachandra Rao (1987)10

conducted a study on the evaluation and monitoring of priority sector advances. In the study he suggested that the priority sector advances should be

given at low rate of interest only to the deserving people. The object of the scheme cannot be

achieved if such loans are provided to the financially sound persons. Better monitoring and

supervision by the banks will be required to ensure that the funds are disbursed to the right

persons and it is utilized for the right purpose. This will in turn increase the profitability of

the banks.

Economic Research Department of the State Bank of India, Central Office, Bombay(1987)11 conducted a study on the impact of bank credit on the weaker sections in Kerala. The

study reveals that the financial assistance from the banks has helped many poor and efficient

workers to start self-employed business units. The study also reveal that the bank loans help

to generate employment opportunities and income of the people thereby increase the standard

of living of the poor.

Avadhani (1987)12 studied the factors influencing deposit mobilization in rural areas in

different states. They came out with the opinion that there existed sufficient relationship between the deposits of a rural branch and its age. The growth of deposits is at a faster rate in

the first six years and tapers off subsequently. The growth rate in deposits of commercial

banks cannot be explained in terms of price differentials as co-operatives offer high rates of

interest. Therefore product differentials would offer a better explanation of the disparate

growth rates in deposits. This relates to difference in customer services, liquidity, attitude of

the manager and the bank staff and their local involvement. It is to be noted that there was no

special schemes for deposit mobilization or any incentives given to bank staff. Yet each branch

management had evolved its own strategy to mobilize deposits in order to achieve the targets

fixed by the Head office.

Raddon Financial Ciroup in America (1987)13 in a nationwide survey conducted on

importance of quality of service criteria, consumers were asked to rate on a scale of 1 to 5 the

relative importance of numerous service quality criteria. It was found that generally pricing


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criteria formed the most important group of factors in consumer ratings. This category

included competitive deposit rates, loan rates and minimum balance requirements. Image was

the second criterion, which takes in to account stability, progressiveness, conservativeness

and management of the institution. 43 percent of consumers surveyed opined that they

considered switching financial institutions when a problem went unresolved. Over 42 percent

said that they have changed financial institutions because of service problems. The study

suggested that by understanding that service strategy is a low-cost profit strategy, financial

institutions should install a quality service orientation throughout the organization.

H C. Malhotra and Kulshrestha (1987)14 opined that bank loans will not improve the quality

of life of the poor unless the borrower utilizes the fund for productive purposes. To ensure

utilization of fund for productive purposes, proper monitoring and supervision by the lending

banks are essential. They suggest co-ordination between the lending agencies and minimizing

competition to improve the better utilization of fund by the borrowers.

P.D.Ojha (1987)15 the then Deputy Governor of RBI, made a comment on the Banking and

Economic Development in India while inaugurating a seminar at Sukhadai University,

Udaipur. He remarked the borrowers default in repayment of loans by the beneficiary is a

common feature of the bank loans under sponsored schemes like DRI, SSI. Self-employment

and other priority sector advances. The accumulation of such default affects the efficient

working of the banking system. Banks find it difficult in recycling the credit and they are

discouraged in lending under sponsored schemes. He requests the banks to make necessary

appraisal of the proposal and grant loans only against viable projects and that banks should

have effective supervision and control over the utilization of fund disbursed.

C.Rangarajan (1988)16 remarked that diversion of bank credit for productive purposes is

essential for economic development. Banks are more rigid in lending activities and therefore

the deserving and needy people are not getting financial assistance. New measures are

essential to ensure that the bank loans reach the deserving hands.

Muhammad Yunus (1988)17 opined that financial assistance provided by the banks to the

poor is not charity hence the banks should ensure that the loans granted to the weaker sections

are repaid in time. He adds that loans without strict control will lead to misutilization of fund


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and the result will be default in repayment of the loans for which the lending institution is

responsible and not the borrower.

R Munira] (1988)18 suggested that before granting loans, the beneficiaries should be properly

motivated to use the credit, adopt improved technology, keep up credit discipline, etc. Theyshould be inculcated to banking habits. Inadequate or lack of supervision and follow-up as

well as lack of inter- personal relationship between banker and borrowers - are the major

causes for the misutilization and diversion of loans, which lead to low income, low savings

and non-repayment If these factors are taken into consideration, the overdues can be

minimized to the extent of 60 to 70 per cent.

Archana Mathur (1988)19 in her study on the position of customer service of State Bank of

India and State Bank of Bikaner and Jaipur found that majority of the customers were takingadvantage of savings bank account. Nearly 57 percent respondents were dissatisfied regarding

passbook entries. The general environment of the banks were satisfying to the respondents.

More than 80 percent of the customers interviewed held the view that there was need for

improvement in bank services. The degree of consciousness about bank services among the

customers were as high as 57 percent and the behavior of the bank staff was found satisfactory.

Malayadri (1988)20 The overall reactions of customers towards the Syndicate Bank's dealing

with credit in Nellore district of AndraPradesh was examined and assessed the attitude ofcustomers towards bank credit in raising their living standards. It was revealed that majority

of the borrowers were satisfied with the bank personnel in understanding and helping to solve

their problems, providing advice and assisting in proper utilization of credit. But disbursal of

loan within reasonable time and supervising the field were lacking. Sixty-six percent of the

respondents were unable to follow bank rules and procedures and fifty four percent found the

working time unsuitable and suggested change of working hours. Forty percent of customers

considered bank credit as a risk in future and a few of them stated that taking loans eroded

their social prestige.

U.K. Sarma (1989)21 conducted a study on the role of bank in rural development and stated

that bank loans for the development of rural areas will increase the rural indebtedness unless

such loans are utilized for productive purposes. Banks should be more careful in dealing with

rural credit and they should ensure that loans are sanctioned against viable projects and


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amount is disbursed in time. Adequate and timely credit may help increased productivity and

profitability He added that loans utilized for productive purpose will be repaid on time.

Joseph (1990)22 in his study on Lead Bank Scheme in Kerala, analyzed the mobilization of

bank deposits in Kerala by commercial Banks since the introduction of lead bank scheme. Heobserved that competition from co-operative and other institutions was the main obstacles to

achieving the deposit mobilization target. The popularity of private financial institutions was

due to their personal relations with local people. 56.4 percent of the customers (self-employed)

surveyed had their first percentage dealing with banks for taking loans. Irrespective of the

borrowers income and education level, majority of the customers opined that their first dealing

with the bank was to take advances, 44 percent of self-employed borrowers reported that it

took 76 to 181 days for getting advances and bank officials rarely conducted inspection. The

study pointed out the need for adopting adequate marketing techniques to inform the rural

masses about the different schemes of the banks.

Nag and Shivaswamy (1990)23 observed that there was a distinct preference of bank

customers to bank with foreign banks notwithstanding the fact that foreign banks stipulate

relatively high levels of minimum amounts to be maintained as deposits and charge relatively

high interest rates and service costs. In respect of deposit supplies, their strategy had been to

procure from a segmented part of the total supplies of deposits of large size from a relatively

small number of depositors. Large accretion of non-resident deposits with foreign banks was

mainly because of the familiarity of the names of foreign banks operating in India to banks

abroad. Many foreign banks have assiduously built up the reputation of being sensitive to the

needs of non-resident. Indians by quick response to their queries through modem

communication systems. The study underlined the quality of customer service required for

mobilizing deposits of non-resident Indians.

Manmohah Singh Gill (1990)24 conducted a study on the problems of the borrowers in

obtaining bank loans and impact of bank loans on their economic and social status. The study

revealed that most of the loans under the sponsored schemes are sanctioned on the

recommendations of the political leaders and officials and the beneficiaries give bribe to these

leaders and officials for obtaining loans. The study also reveals that though there is no much


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progress in the social status, the loans have helped the beneficiaries to improve their income

status.

The Committee on Consortium Lending (1993)25 recognized the need to shift to market

driven banking from the present practices. The recommendations of the committee havetherefore been to ensure financial discipline on the part of borrowers together with

improvement in the services offered by banking system in the inter- report till the system

completely switches over to market driven banking. So they recommended the introduction

of syndication together with continuation of the existing consortium arrangement with

substantial modifications. In order to usher in market driven banking the committee

recommended enhancement of threshold limit to Rs. 25 crores for mandatory formation of

consortium when a borrower enjoys fund based credit limits from more than one bank.

Raju (1993)26 studied the levels of savings and the manner of their distribution among

different physical and financial assets of household sector in Kerala and identified the factors

influencing their savings behavior. He found that major portions of the savings of households

in Kerala was in the form of financial savings and that too in the form of bank deposits. Banks

still have an upper hand in mobilising the savings of households especially in the matter of

foreign remittances. Personal selling and exchange of ideas with friends and relatives were

the major influencing factors in spreading the information about financial savings schemes

among the households. He observed that the rate of growth in bank deposits did not match

with the rate of growth in domestic savings. The surplus generated in the economy was being

diverted to other forms of savings, some of which were non- productive. The study

recommended that the banks should chalk out suitable deposit promotion strategies to educate

and motivate different categories of households.

Subramanyam (1993)27 made by an empirical analysis on dis-intermediation from the

household sectors portfolio preferences point of view based on demand model of five assets

including bank deposits. The study revealed that the household sectors preferences between

bank deposits and lending to private corporate sector tended to be in favour of the latter and

against the former. Similarly, if investments in life insurance and pension funds were to

become more attractive in terms of new schemes, concessions etc., then these investments

were most likely to cut in to bank intermediation and deposit growth. The study suggested


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that bank's ability to market service oriented deposit accounts will have to be boosted to target

the urban salaried and business population for meeting their structured needs in the process of

which new deposit expansion opportunities are created.

Srivastava (1994)28

made an attempt to find out the extent of satisfaction with customerservice offered by four premier nationalized banks from northern and southern regions. The

study brought out some of the critical areas of customer dissatisfaction. He found that 32 part

of the respondents were unhappy and 16 percent respondents’ were neutrals after a visit to

their bank. The most frequently faced problems by depositors were categorized into

behavioral problems and procedural problems. Majority of customers surveyed opined that

the bank were not opening at the proper time and too much delay in opening accounts and

other transactions. The study strongly recommended marketing approach in the functioning

of these banks.

Rajagopala Nair (1994)29 studied the rural bank marketing in Kerala and evaluated the

products or services offered by banks in rural areas. He has also tried to examine the

diversified needs of rural customers in the state through a field survey of 250 rural bank

customers in Ernakulam district. The study showed that proximity, quick loan facility and

better services were the three major variables influencing the rural customer for selecting the

banks. Interest rate on deposit was not a criteria for rural depositors and they give preference

to security and liquidity. He observed that delay in sanctioning loans and inconvenience in

rural commercial banks have paved the way of flourishing business of money lenders.

Commercial banks in rural areas have not adopted any novel method to promote banking

activities in their operational areas. 89 percent of the customers were totally unaware of the

interest rate on any of the bank deposit schemes and 64 percent were unaware of rate of interest

on lending schemes. The faith of rural customers in nationalised bank was comparatively high.

So they should impart better services to improve their image. Personal selling was suggested

as the best marketing technique for rural branches.

Nalini (1996)30 studied the impact of mutual funds on the deposit mobilisation of commercial

banks, the researcher examined the awareness level and adoption level of mutual funds among

household investors in Thiruvananthaparam District and found that the advent of mutual funds

has brought in expected changes in the growth of bank deposits and their ownership pattern,


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but the changes were not of a significant magnitude. New capital issues and UTI units were

found influencing bank deposits adversely. The low interest on bank deposits and the

competition from other investments avenues like capital market and real estate created

difficulty for banks in their deposit mobilisation. The study revealed that a major portion of

the financial savings of the household sector was held in the form of provident fund, LIC and

Post office savings schemes. The location of residence influenced significantly the investors

preference to banks and mutual funds. The occupation of investors also exerted influence on

their decision of investment in mutual funds. The study recommended the introduction of

new deposit schemes tailored to suit the needs of household investors.

Das (2001)31 conducted a study titled, “A Study on the Repayment Behaviour of Sample

Borrowers of Arunachal Pradesh State Co-operative Apex Bank Limited”, examined the

repayment behaviour of loans, covering a period of 1994-95 to 1998-99. On the basis of

primary data collected, researcher concluded that incidence of default was highest among

borrowers for agriculture allied activities loans. Agriculture loans, horticulture loans, small

business loans and service sector loans were ranked 2nd, 3rd, 4th and 5th in a descending

order on the basis of percentage of defaulters. The study further revealed that the number of

defaulter loans were highest in government sponsored schemes.

Singh and Singh (2006)32 in their study titled, “Funds Management in Central Co- operative

Banks−Analysis of Financial Margin” made an attempt to estimate the impact of identified

variables on the financial margin of the central co-operative banks in Punjab with the help of

correlation and multiple step-wise regression approach. The ratio of own funds to working

funds and the ratio of recovery to demand were observed to be having positive significant

influence on financial margin, whereas overdues to total loans were found to be negatively

associated with the concerned parameter. A high percentage of own funds and timely recovery

of previous loans outstanding, as a source of funding new loans by the bank, increased the

financial margin in these bank.


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2.2 THEORETICAL FRAMEWORK

RATIO ANALYSIS

Ratio analysis involves an analysis of the inter relationships between various items in the

profit and loss account and balance sheet. It is a very useful tool in measuring the financial

performance and financial strength of any business organization. Comparison of financial

ratios of a concern for a given period with that of the past or with that of the other firms, or

with its own prescribed standards will not only measure its comparative financial position and

financial strength, but will also pin-point areas which require corrective measures. The

different ratios used by the researcher are as follows.

1. CREDIT TO DEPOSIT RATIO

Credit-Deposit ratio is proportion of loan created by banks from their deposits. Credit-Deposit

ratio measures the efficiency and ability of the banks management in converting the deposits

available with the banks into loans. The loan may be get high or low earnings depends up on

the head of the loan. This ratio commonly used as a statistic for assessing a bank's sit by

dividing the banks total loans by its total deposits. This ratio is also known as the Loan to

Deposit ratio, high ratio indicates that the banks might not have enough liquidity to cover any

unforeseen fund requirement, and the low ratio indicates that the banks may not be earnings

as much as they could be.

TOTAL LOANS

CREDIT TO DEPOSIT RATIO = *100

TOTAL DEPOSITS

2. TOTAL LOANS TO TOTAL ASSET RATIO

This is the ratio of the total loans credited by bank to total asset. This ratio indicates banks

aggressiveness in lending which ultimately results in better profitability. Higher ratio indicates

that loans to the total asset are high and the low ratio indicates that loans to the total asset are

low. The value of the total asset is excluding the revolution of all the assets.


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TOTAL LOANS

TOTAL LOANS TO TOTAL ASSET RATIO = *100

TOTAL ASSETS

3. TOTAL BORROWINGS TO TOTAL DEPOSITS RATIO

The ratio is used for analysing profitability is of the bank. The borrowings to deposits ratio is;

BORROWINGS

BORROWINGS TO TOTAL DEPOSITS RATIO = *100

TOTAL DEPOSITS

4. LIQUID ASSETS TO DEMAND AND TIME LIABILITIES RATIO

Liquid assets (cash in hand, cash at bank and money at call and short notice) to demand and

time liabilities (fixed deposit account, savings bank account, current account and money at

call and short notice account) ratio shows the liquidity position of the bank. The ratio is;

LIQUID ASSETS

LIQUID ASSETS TO DTL RATIO = *100

DEMAND AND TIME LIABILITIES

5. DEPOSITS TO WORKING CAPITAL RATIO

The ratio shows that the relationship between deposits and working capital of the bank. The

ratio is;


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TOTAL DEPOSITS

DEPOSITS TO WORKING CAPITAL RATIO = *100

WORKING CAPITAL

6. LOANS TO WORKING CAPITAL RATIO

This ratio shows the relationship between loans and advances to working capital of the bank.

The ratio is;

TOTAL LOANS

LOANS TO WORKING CAPITAL RATIO = *100

WORKING CAPITAL

7. DEMAND DEPOSITS TO TERM DEPOSITS RATIO

The ratio shows the relationship between demand deposits and term deposits. In demand

deposit includes savings and current deposit and term deposit includes fixed deposit of the

bank. The ratio is;

DEMAND DEPOSITS

DEMAND DEPOSITS TO TERM DEPOSITS RATIO = *100

TERM DEPOSITS

8. CASH DEPOSIT RATIO

The ratio shows the relationship between cash and bank balances and total deposits of the

bank. The ratio is;


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CASH AND BANK BALANCE

CASH DEPOSIT RATIO = *100

TOTAL DEPOSITS

TREND ANALYSIS

Trend analysis is the presentation of amounts as a percentage of a base year. Trend simply

means general tendency, analysis of these general tendency is called trend analysis. In the

context of financial analysis, trend analysis means analyzing general tendency of each item in

the financial statement on the basis of the base year data. In short, comparing the past data

over a period time with the base year called trend analysis.

Trend analysis is one of the tools for the analysis of the company’s monetary statements for

the investment purposes. Investors use this analysis tool a lot in order to determine the

financial position of the business. In a trend analysis, the financial statements of the company

are compared with each other for the several years after converting them in the percentage.

METHOD OF TREND ANALYSIS

1. Trend percentage

2. Trend ratio

3. Graphic method

STEPS IN COMPUTATION OF TREND ANALYSIS

1. Select base year, generally first year of the study is taken as base year.

2. Take figure of base year as 100.

3.

Calculate trend percentage in relation with base year, each year figure divided with

base year.

This chapter highlighted the reviews of different authors and theoretical concepts. The next

chapter will be focusing on the analysis of the data collected from the bank by using financial

tools.


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CHAPTER 3

DATA ANALYSIS AND INTERPRETATION


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This chapter is focusing on the analysis of loans and deposit issued by Cherpalchery Service

Co-operative Bank. The analysis will be done through loans schedule and annual reports of

the bank, semi descriptive and semi analytical research design was used for the study. The

ratios used for the analysis are as follows.

1. CREDIT TO DEPOSIT RATIO

TOTAL LOANS

CREDIT TO DEPOSIT RATIO = *100

TOTAL DEPOSITS

2.

TOTAL LOANS TO TOTAL ASSET RATIO

TOTAL LOANS

TOTAL LOANS TO TOTAL ASSET RATIO = *100

TOTAL ASSETS

3. TOTAL BORROWINGS TO TOTAL DEPOSITS RATIO

BORROWINGS

BORROWINGS TO TOTAL DEPOSITS RATIO = *100

TOTAL DEPOSITS

4. LIQUID ASSETS TO DEMAND AND TIME LIABILITIES RATIO

LIQUID ASSETS

LIQUID ASSETS TO DTL RATIO = *100

DEMAND AND TIME LIABILITIES


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5. DEPOSITS TO WORKING CAPITAL RATIO

TOTAL DEPOSITS

DEPOSITS TO WORKING CAPITAL RATIO = *100WORKING CAPITAL

6. LOANS TO WORKING CAPITAL RATIO

TOTAL LOANS

LOANS TO WORKING CAPITAL RATIO = *100WORKING CAPITAL

7. DEMAND DEPOSITS TO TERM DEPOSITS RATIO

DEMAND DEPOSITS

DEMAND DEPOSITS TO TERM DEPOSITS RATIO = *100

TERM DEPOSITS

8. CASH DEPOSIT RATIO

CASH AND BANK BALANCE

CASH DEPOSIT RATIO = *100

TOTAL DEPOSITS


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DATA COLLECTION

The data were collected from the following documents.

Loan Schedules

1. Loan schedule of Cherpalchery Service Co-operative Bank 2009-10 (Refer annexure 1)





Annual Reports

1. Annual report of Cherpalchery Service Co-operative Bank 2009-10 (Refer annexure 6

and 7 )


and 7 )


and 7 )

4. Annual report

Major Project (Akhil.k)

Documents