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CHAPTER – VIII

SUMMARY AND SUGGESTIONS 8.1 INTRODUCTION

Cooperative movement in India owes its origin to agriculture

and allied sectors. Cooperative movement which originated in the

west, but the importance that such banks have assumed in India, is

rarely paralleled anywhere else in the world. In rural areas the supply

of credit particularly institutional credit was inadequate and farmers

for their financial requirements depend upon money lenders which in

return charge a very high rate of interest. Agriculturists had no

securities to offer for the guarantee of loan so they remain uncared by

the banking world. They had no credit because they were poor and

they remain poor because they had no credit. Then the need was felt

for an agency which could attract funds from towns and employ them

safely and profitably in villages. Then cooperative banks came in

existence to provide short term and long term credit at reasonable

rates of interest. The beginning of cooperative banking in India dates

back to about 1904 when official efforts were initiated to create a new

institution based on the principles of cooperation which were

considered to be suitable for solving the problems related to Indian

agricultural conditions. The role of cooperative banks in rural

financing continues to be important today and their role has also

increases in urban areas in the recent years. When national economic

planning started in independent India then cooperative banks were

given an important role. With the advent of planning process,

cooperatives became an integral part of the five year plans.

Cooperative Banks are Government sponsored, government supported

and government subsidized financial agency in India. They get

financial and other help from Reserve Bank of India, National Bank for

Agriculture and Rural Development (NABARD), Central Government

and State Governments. Cooperative Banks are subject to control and

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audit under the Cooperative Societies Act of the state and by the

Reserve Bank of India (RBI) under the Banking Regulation Act. RBI

and the State Government lay down the rules for the investment and

loans policies of cooperative banks. Cooperative banks have played a

pivotal role in the development of short term and long term rural

credit structure in India.

Cooperative banking structure in India comprises Urban

Cooperative Banks and Rural Cooperative credit institutions. Urban

Cooperative Banks consist of a single tier i.e. primary cooperative

bank referred as Urban Cooperative Banks (UCB). The rural

cooperative credit structure has been divided into short term and long

term. Short term cooperative credit institutions have a three tier

structure consisting of a large number of Primary Agricultural Credit

Societies (PACS) at the grass root level, Central Cooperative Banks

(CCB) at the district level and State Cooperative Banks (SCB) at the

state level. The smaller states and Union Territories have a two tier

structure i.e. SCB directly meeting the needs of PACS. The long term

rural cooperative structure has two tiers i.e. State Cooperative

Agriculture and Rural Development Banks (SCARDB) at the state level

and Primary Cooperative Agriculture and Rural Development Banks

(PCARDB) at the Tehsil level. Some states have a unitary structure

with the SCARDB operating through their own branches.

8.2 COOPERATIVE MOVEMENT IN PUNJAB All along its conquered history, Punjab has predominantly been

agricultural province, as an overwhelming percentage of its population

has been throughout the ages directly and indirectly dependent on

agriculture for its living. The cooperative movement in Punjab is as old

as it is in the rest of the country. When Cooperative Societies Act

1904, was passed, Punjab Government appointed a Registrar for

whole of the province with the duty of organizing Cooperative societies

for the promotion of thrift, self help and cooperation and to provide

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supervision and control. By the close of 1905, about a dozen societies

have been registered. In 1911, the number of cooperative societies

shot up to 1000. In 1912, another Cooperative Societies Act was

passed to remove deficiencies of the previous Act. The Act of 1912

recognized the establishment of non-credit societies and an era of

rapid expansion were ushered in, which lasted in 1928-29. In 1924,

Punjab Provincial Cooperative Bank was established at Lahore with a

view to control and regulate the over expanding inter lending between

Central Cooperative Banks. The great depression of thirties gave a

severe jolt to the cooperative movement. There was abnormal fall in

the price of the raw and manufactured goods which resulted in the

industrial fall and in the income of the cultivators and affected their

repaying capacity. All this meant a serious check to the expansion of

the movement. Such a state of affairs continued up to 31st July 1934,

and during this period consolidation rather than expansion was

followed. This was followed by a period of revival and expansion until

the partition of Province in 1947. Due to the depression many

societies were cancelled, so the task was to repair the damage. At the

end of the year 1946-47 the number of societies was 14882 with a

membership of 7.51 lacs with working capital of Rs. 1103.35 lac.

The partition of Punjab adversely affected the cooperative

banking and Punjab Provincial Bank at Lahore was taken over by

Pakistan and large sums of money belonging to cooperatives in east

Punjab were locked up with the Provincial Cooperative Bank at Lahore

and this hampered their progress for many years. After partition

efforts were made to find ways to repair the cracks that had appeared

in the movement. During the period 1947-50, the movement

attempted to recover itself and recorded a certain degree of positive

progress, as the number of societies, working capital and membership

increased.

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The Punjab State Cooperative Bank at the apex level was

registered on 31-8-1949 at Shimla. Its head quarters was shifted to

Jalandhar in 1951 and then to Chandigarh in 1963. With the efforts of

the Government the movement began to pulsate with a new life.

8.3 FINDINGS OF THE STUDY 8.3.1 GROWTH AND REGULATORY FRAMEWORK OF

COOPERATIVE BANKS IN INDIA

8.3.1(a) GROWTH OF COOPERATIVE BANKING IN INDIA Cooperative banks as component of Indian Banking System

originated in India with the enactment of Cooperative Credit Societies

Act of 1904. Cooperative movement has been initiated and supported

by the Government but in other countries cooperative movement grew

on the strength of peoples own will. During 107 years of the existence,

Cooperative movement passed through various stages. The movement

up to 1947 can be broadly divided into four stages. The first stage

covered the period of 1904-1912. In 1904, Cooperative Credit Societies

Act was passed and the passage of the Act was the first landmark in

the Cooperative Movement in India. It was a new experiment and

people were full of enthusiasm for it. The Act of 1904 provided for the

organization of primary credit societies and stress was on the

promotion of agricultural credit only. The condition of societies

however, could not said to be good. Loans were generally marked by

insufficiency and delay. Recoveries were far from satisfactory and loan

system was defective. The working of societies formed under the Act of

1904 showed a number of deficiencies, viz., it did not give legal

protection to cooperative societies for purposes other than credit. In

the second stage (1912-1919) a new Act was passed in 1912 to remove

the deficiencies of the previous Act. The important provisions of the

Act were that the Act provided for the registration of non credit

societies also. The Act of 1912 gave a great stimulus to the cooperative

movement. There was a rapid expansion in the registration of

cooperatives in the country, but without any tangible results. Under

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the reforms of 1919, cooperation was made a provincial transferred

subject, in each state in the third stage (1919-1939). Some provinces

enacted special legislation to suit their local requirements. After

cooperation became a transferred subject, the movement made very

rapid progress and all seemed to be going very well. Its success was,

however, more quantitative rather than qualitative in nature. The

rapid growth of the movement during 1919-1930 was characterized by

Mr. Ramdas Pantulu as the period of unplanned expansion. The world

wide economic depression in 1929 gave a severe blow to the

cooperative movement in India which was still in infancy. As a result

of slump in the market, prices of agricultural commodities came down,

overdues mounted up; liquidation of societies had to be resorted to in

a few cases. The creation of Reserve Bank of India in 1934, and setting

up of rural credit department in the bank gave a new life and vitality

to the cooperative movement. The provincial autonomy in 1937 further

strengthened the cooperative movement. The abnormal conditions

created by the World War II led to some far reaching developments in

the cooperative movement. As a result of high prices most of the over

dues were cleared off. Thus during the war, the societies gained in

strength and vigour. An important landmark of fourth stage (1939-

1947) was the setting up of Cooperative Planning Committee, which

drew up plans for the development of cooperative movement in various

spheres.

The attainment of independence in 1947 and the consequent

establishment of National Government in the country came in as a

fountain of inspiration for the movement. It was during the Five Year

Plans that cooperative credit was assigned to play significant role in

the economic development of the rural areas. The First Five Year Plan

(1951-56) emphasized the need for expanding the cooperative credit

system so as to bring 50 per cent of the villages and 30 per cent of the

rural population in the ambit of primary societies with in ten years.

The progress of cooperative movement in the First Plan was mixed. By

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1955-56, 70 per cent of the villages of the country were covered by

Primary Agricultural Credit Societies against the target of covering 50

per cent of the villages. As against the target of Rs. 100 crore to be

disbursed as short term credit, fresh advances increased from Rs.

24.21 crore in 1951-52 to Rs. 49.62 crore in 1955-56. The short term

loans outstanding increased from Rs. 33.66 crore to Rs. 59.84 crore

and the medium term loans advanced amounted to Rs. 15 crore in

1955-56 as against the target of Rs. 25 crore. Second Five Year Plan

(1956-61) observed that “the building up of a co-operative sector as

part of the scheme of planned development is, one of the central aims

of national policy”. The plan aimed that Credit is only the beginning of

co-operation. From credit, co-operation has to extend to a number of

other activities in the village, including cooperative farming. Short

term loan advanced were Rs. 182.82 crore in 1960-61 against the

target of Rs. 150 crore and medium term loan given was Rs. 19.93

crore in 1960-61 which was less than the target of Rs. 50 crore. In

the Third Five Year Plan (1961-66) the cooperatives were assigned a

vital role in implementing the programmes of agricultural production.

There was shortfall in achievement of short term and medium term

loans. With the nationalization of the major 14 commercial banks in

July, 1969 more or less the monopolistic position held by the

cooperatives in dispensation of agricultural credit came to an end. The

loans advanced increased from Rs. 203 crore in 1960-61 to Rs. 342

crore in 1965-66 as against the target of Rs. 530 crore. The Fourth

Five Year Plan (1969-1974) gave high priority to the re-organization of

cooperatives to make cooperative short-term and medium-term

structure viable. No increase in the number of societies was envisaged

but an additional increase in membership so as to cover about 60% of

agricultural families was provided. As against the target of disbursing

short term and medium term loans of Rs. 750 crore, the PACS issued

loans of Rs. 763 crore in 1973-74.

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In the strategy of cooperative development in the Fifth Five Year

Plan (1974-79), structural reformation receives special attention. A

major objective of credit policies in the Fifth Five Year Plan was to

ensure a substantial increase in the flow of institutional credit to the

small farmers, marginal farmers, tenants and share croppers. It has

also been decided that concessional finance provided by the Reserve

Bank will also be available to the non- agriculturist and agricultural

labourers who are members of primary credit societies for purchase of

milch cattle and poultry farming activities. The Fifth Five Year Plan

took note of the high level of over-dues. The Sixth Five Year Plan

(1979-85) document stated that while all round progress has been

made in the field of credit by cooperatives, the rate of growth of

agricultural credit advanced by the cooperatives has lately slowed

down. The National Bank for Agriculture and Rural Development

(NABARD) Act was passed in 1981 and NABARD was set up to provide

re-finance support to Cooperative Banks to enhance credit flow to the

agriculture and rural sector. The Seventh Five Year Plan (1985-1990)

pointed out that while there had been all round progress in credit,

poor recovery of loans and high level of overdues were matters of

concern. The Plan recommended the development of Primary

Agricultural Credit Societies as multiple viable units. The opening up

of the economy in 1990, and the liberalized economic policies followed

by the government since then, led to increasing pressures for various

governments, state and central, to bring about changes that would

provide cooperatives a level playing field to compete with the private

sector. The Eighth Five Year Plan (1992-97) laid emphasis on building

up the cooperative movement as a self-managed, self-regulated and

self-reliant institutional set-up, by giving it more autonomy and

democratizing the movement. It also spoke of enhancing the capability

of cooperatives for improving economic activity and creating

employment opportunities for small farmers and training of

cooperative functionaries in professional management. Under the

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Ninth Five Year Plan (1997-2002), the Government adopted the Kisan

Credit Card (KCC) Scheme formulated by NABARD which aims at

provision of adequate and timely credit support to the farmers for their

cultivation needs including purchase of inputs in a flexible and cost

effective manner. The scheme was being implemented through the

district central cooperative banks and the primary agricultural

cooperative banks. From the Ninth Plan onwards, there has been no

specific mention about cooperatives as a part of the Plan. A total of

249.07 lacs KCCs had been issued till 30 June 2002. In the Tenth

Five Year Plan (2002-07), the recapitalization and revamping of the

cooperative credit institutions is being considered. Credit growth by

the cooperatives to the agriculture sector has gradually picked up

during the course of the Tenth Five Year Plan. The number of loan

accounts however, declined from 224.6 lacs in 2004–05 to 192.8 lacs

in 2005–06. Continued emphasis will be placed on progressive

institutionalization for providing timely and adequate credit support to

farmers with particular focus on small / marginal farmers and weaker

sections of society to enable them to adopt modern technology and

improved practices for increasing agriculture production and

productivity. Eleventh Five Year Plan (2007-12) envisaged the

revitalization of the co-operative credit structure in order to transform

them into vibrant and viable democratic financial institutions. It was,

therefore, extremely important, that the restructuring of co-operative

credit now in progress are implemented speedily and rigorously.

8.3.1(b)REGULATION AND CONTROL The regulation and control of cooperative banking rests with the

Reserve Bank of India (RBI) and the State Government. The State

Government controls it under the Cooperative Societies Act through

the Department of Cooperation. Department of Cooperation is headed

by the Registrar, Cooperative Societies. Registrar has been entrusted

with the duties of promoting, sustaining as well as guiding the

Cooperative Societies in the state. Cooperative banks are registered

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under the Cooperative Societies Act of the states by the Registrar of

Cooperative Societies and are governed by the Acts and rules of the

State Government. In terms of the Cooperative Societies Act of the

State, the Registrar of Cooperative Societies have jurisdiction over the

incorporation, registration, management, amalgamation, merger and

liquidation.

The RBI exercises a promotional and regulatory control over

cooperative banking under the Banking Laws (Application to

Cooperative Societies) Act, 1965; extending the provisions of RBI Act,

1934; and Banking Regulation Act, 1949. The Banking Laws Act,

1965, in addition to the regulatory powers of the RBI, has extended its

statutory control to cooperative banks. The Act came into force on

March 1, 1966. It extends to State Cooperative Banks, Central

Cooperative Banks and PACSs. With the State Governments

committed to a policy of positive support to cooperative banks, it was

felt that the impact of cooperative credit institutions on the monetary

and credit policy was going to become more and more significant.

Hence, the RBI felt that it was a regulatory necessity to bring the

banking institutions operating in the cooperative sector within the

statutory control of RBI. After prolonged deliberations on the need for

RBI to have control over cooperative societies carrying on banking

business, the Banking Laws (Application to Cooperative Societies) Bill

was passed by the Parliament. It received the assent of the President

in September 1965 and the Act came into force from 1 March, 1966.

With amendments in the Banking Regulation Act, certain provisions of

the Banking Regulation Act became applicable to cooperative banks

carrying on banking business. The Reserve Bank is now the regulator

and supervisor of banking activities carried on by cooperative

societies. The Registrar of Cooperative Societies of the concerned state

continues to be the regulator and supervisor of cooperative

institutions.

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8.3.2 OPERATIONAL PERFORMANCE OF CENTRAL COOPERATIVE BANKS IN PUNJAB

The operational performance of Central Cooperative Banks in

Punjab has been analyzed with regard to branch expansion, deposits,

credit, working funds, owned funds, manpower, volume of business,

recovery as percentage to demand and Non Performing Assets (NPA) to

advances. The findings on operational performance of Central

Cooperative Banks are as follows:

BRANCH EXPANSION: Central Cooperative Banks in Punjab have

made a very slow progress as far as Branch expansion is concerned.

The number of branches increased from 777 in 1997-98 to 834 in

2001-02, then decreased to 804 in the year 2009-10, thus showing a

fluctuating trend in the case of branch expansion. The growth rate in

branch expansion by all the Central Cooperative Banks in Punjab is

0.41 per cent. At the end of the study period, Jalandhar Central

Cooperative Bank had the maximum number (72) of branches, while

Mansa Central Cooperative Bank and Muktsar Central Cooperative

Bank had the minimum number (22) of branches. The highest

exponential growth rate in branch expansion was recorded by

Kapurthala Central Cooperative Bank (2.25%). There was exponential

decline in branch expansion in case of Tarn Taran Central Cooperative

Bank, Ferozepur Central Cooperative Bank, Amritsar Central

Cooperative Bank and Ludhiana Central cooperative Bank. The degree

of variation was lowest in N. Shahr Central Cooperative Bank (C.V. =

2.14) and the variation was highest in Ferozepur Central Cooperative

Bank (C.V. = 16.63) during the period of study. The coefficient of

concentration ranges from 14 to 16 per cent. The analysis of

coefficient of concentration shows that there is no concentration of

branches in few districts. DEPOSIT MOBILIZATION: Central Cooperative Banks in Punjab have

been successful in deposit mobilization. Deposits of Central

Cooperative Banks in Punjab increased from Rs. 177243.32 lac in

1997-98 to Rs. 751261.51 lac in 2009-10 listing an exponential

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growth rate of 11.92 per cent during the period under study. The

share of fixed deposits in total deposits decreased from 56.94 per cent

to 49.40 per cent and the share of savings deposits increased from

39.19 per cent in 1997-98 to 47.28 per cent in 2009-10. The share of

current deposits remained almost the same. Savings deposits recorded

the highest exponential growth rate of 14.92 per cent whereas fixed

deposits recorded the lowest exponential growth rate of 9.33 per cent.

At the end of the year 2009-10, Jalandhar Central Cooperative Bank

contributed maximum Rs. 91478.56 lac to the total deposits (12.18

per cent of total deposits) and the contribution of Muktsar Central

Cooperative Bank to total deposit was minimum Rs. 10770.26 lac

(1.43 per cent). Coefficient of concentration ranged from 25 to 30 per

cent. The data of coefficient of concentration shows that there was no

concentration of deposits in few districts. The degree of variation in

the growth of deposits was highest for Mansa Central Cooperative

Bank (C.V. = 54.37) and the consistency in the growth of deposits was

highest in Jalandhar Central Cooperative Bank (C.V. = 34.04).

CREDIT DEPLOYMENT: The Central Cooperative Banks in Punjab

have shown a considerable success in the growth of advances.

Advances of Central Cooperative Banks in Punjab increased from Rs.

232396.10 lac in 1997-98 to Rs. 1126892.49 lac in 2009-10 with an

exponential growth rate of 12.71 per cent. There is about five-fold

increase in loans. The growth rate of advances is more than the

growth rate of deposits during the period under study. The share of

short-term advances increased from 61.17 per cent to 86.40 per cent

during the study period. The share of medium term advances

decreased from 30.45 per cent to 7.95 per cent while the share of long

term advances decreased from 8.38 per cent to 5.65 per cent. The

highest exponential growth rate in loans deployment was recorded by

Fatehgarh Sahib Central Cooperative Bank, whereas the lowest for

Jalandhar Central Cooperative Bank. Sangrur Central Cooperative

Bank had the maximum average advances while Mansa Central

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Cooperative Bank had the minimum average advances. The variation

in the growth of loans advanced was lowest in N.Shahr Central

Cooperative Bank (C.V =32.36) and the variation was highest in

Fatehgarh Sahib Central Cooperative Bank (C.V =62.93). The

Coefficient of concentration of loans advanced of all the Central

Cooperative Bank operating in Punjab ranges from 14 to 22 per cent

during the period under study. The coefficient of concentration shows

that there is no concentration of loans advanced in few districts.

VOLUME OF BUSINESS The volume of business presents the total of

deposits and advances. The volume of business of Central Cooperative

Banks operating in Punjab increased from Rs. 409639.40 lac in 1997-

98 to Rs. 1878154.01 lac in 2009-10 and indicated exponential

growth rate of 12.39 per cent during the period covered under study.

Fatehgarh Sahib Central Cooperative Bank recorded the highest

exponential growth rate, while Jalandhar Central Cooperative Bank

recorded the lowest exponential growth rate in volume of business.

Average volume of business was maximum in case of Jalandhar

Central Cooperative Bank and the minimum for Mansa Central

Cooperative Bank. Throughout the period of study, Jalandhar Central

Cooperative Bank contributed maximum in total Volume of Business.

Coefficient of concentration of volume of business ranged from 16 to

22 per cent during the study period. The data of coefficient of

concentration shows that there is no concentration of Volume of

Business in few districts. The variations in the growth of volume of

business was lowest in Jalandhar Central Cooperative Bank (C.V

=32.82), and was highest in Fatehgarh Sahib Central Cooperative

Bank (C.V =58.87).

WORKING FUNDS: The working funds of Central Cooperative Banks

operating in Punjab have increased from Rs. 277573.83 lac in 1997-

98 to Rs. 1195956.11 lac in 2009-10 listing an exponential growth

rate of 12.84 per cent. Patiala Central Cooperative Bank recorded the

highest exponential growth rate 16.45 per cent and Ferozpur Central

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Cooperative Bank registered the lowest exponential growth rate of 9.96

per cent. The overall coefficient of concentration ranges from 17 to 20

per cent and the data of coefficient of concentration show that there is

no concentration of working funds in few districts. The highest

average working funds were observed in the case of Jalandhar Central

Cooperative Bank and the lowest in Faridkot Central Cooperative

Bank. The variation in the growth of working funds was lowest in Tarn

Taran Central Cooperative Bank (C.V =38.32) and was highest in

Patiala Central Cooperative Bank (C.V = 55.50) during the study

period.

OWNED FUNDS: Owned funds of the bank represent share capital

and reserve funds. Owned funds are an indication of internal financial

soundness of the organization. The amount of owned funds increased

from Rs. 20747.63 lac in 1997-98 to Rs. 107020.17 lac in 2009-10 at

an exponential growth rate of 15.11 per cent. Ropar Central

Cooperative Bank recorded the highest exponential growth rate of

21.90 per cent while Ferozpur Central Cooperative Bank recorded the

lowest growth rate of 5.94 per cent. Average owned funds were found

maximum in case of N. Shahr Central Cooperative Bank whereas

minimum for Mansa Central Cooperative Bank. The variation in the

growth of owned funds was lowest in Ferozepur Central Cooperative

Bank (C.V =22.32) and was highest in Amritsar Central Cooperative

Bank (C.V =67.24) during the study period. . The overall coefficient of

concentration ranges from 22 per cent to 27 per cent during the study

period. The data of coefficient of concentration shows that there is no

concentration of owned funds in few districts.

MANPOWER: The effectiveness of an organization depends largely on

the quality of the manpower especially in service industry like

banking. The number of staff members of Central Cooperative Banks

in Punjab decreased during the study period. There is decline in the

number of staff members in each Central Cooperative Bank. The

exponential growth rate is negative for all the Central Cooperative

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Banks. At the end of March 2010 Jalandhar Central Cooperative Bank

has the maximum number of staff members, i.e., 444 (11.75 per cent

of the total staff members) and Muktsar Central Cooperative Bank has

the lowest number of staff members. The average staff members were

highest in Jalandhar Central Cooperative Bank and were lowest in

Mansa Central Cooperative Bank during the period of study. NON PERFORMING ASSETS (NPA) AS PERCENTAGE TO TOTAL

ADVANCES: Average non performing assets as percentage to advances

of all the Central Cooperative Banks in Punjab is 6.53 per cent. The

highest average percentage of NPA to total advances pertained to

Gurdaspur Central Cooperative Bank that is, 15.75 per cent during

the same period. The top rank in NPA as percentage to total advances

pertained to N.Shahr Central Cooperative Bank while Gurdaspur

Central Cooperative Bank appeared at the bottom.

RECOVERY AS PERCENTAGE TO DEMAND: The recovery performance

of Central Cooperative Banks in Punjab was quite satisfactory, as the

percentage of recovery against demand ranged from 85 per cent to 90

per cent. Average recovery performance of all the Central Cooperative

Banks in Punjab during the study period was 87.37 per cent. The top

rank in average recovery performance was in case of Jalandhar

Central Cooperative Bank and the lowest rank was for Gurdaspur

Central Cooperative Bank.

8.3.3 PROFITABILITY AND PRODUCTIVITY PERFORMANCE OF CENTRAL COOPERATIVE BANKS IN PUNJAB

8.3.3(a) PROFITABILITY ANALYSIS

(i) STRUCTURE OF INCOME The main sources of income of Central Cooperative Banks are

interest and discount income, commission, exchange and brokerage

and other receipts. Interest and discount income accounted for 98.45

per cent to 99.57 per cent of the total income, while non-interest

income constituted a very marginal portion. At the end of the study

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period, Jalandhar Central Cooperative Bank contributed the highest

share in total income (10.85 per cent) and Mansa Central Cooperative

Bank had the lowest share in total income (2.12 per cent). Total

income of all the Central Cooperative Banks recorded an exponential

growth rate of 8.65 per cent. The highest exponential growth rate in

total income was observed in the case of Patiala Central Cooperative

Bank (11.77 per cent) and the lowest in Tarn Taran Central

Cooperative Bank (4.49 per cent). Patiala Central Cooperative Bank

had the highest exponential growth rate in interest income (11.76 per

cent) and the exponential growth rate was lowest for Tarn Taran

Central Cooperative Bank (4.32 per cent). At the end of the study

period Jalandhar Central Cooperative Bank contributed maximum

share in interest income (10.87 per cent) while minimum share in

interest income pertained to Mansa Central Cooperative Bank (2.13

per cent). Income from other receipts grew at an exponential growth

rate of 13.07 per cent during the period of study. Gurdaspur Central

Cooperative Bank had the highest share in other income (12.42 per

cent) whereas Mansa Central Cooperative Bank had the lowest share

in other income (0.95 per cent).

(ii) STRUCTURE OF EXPENDITURE Interest paid on deposits and borrowings, manpower expenses,

i.e., establishment cost and other expenses constituted the three main

components of total expenditure of all the Central Cooperative Banks

in Punjab. Total expenditure of all the Central Cooperative Banks

recorded an exponential growth rate of 8.27 per cent. The highest

exponential growth rate in total expenditure was for Patiala Central

Cooperative Bank (10.94 per cent) and lowest for Tarn Taran Central

Cooperative Bank (4.63 per cent). At the end of March 2010,

Jalandhar Central Cooperative Bank had the highest share in total

expenditure (11.18 per cent) and the lowest share pertained to

Muktsar Central Cooperative Bank (1.98 per cent). Interest paid

contributed 63 per cent to 71 per cent of the total expenditure of all

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the Central Cooperative Banks in Punjab. At the end of the study

period, the contribution to interest paid was maximum for Jalandhar

Central Cooperative Bank (10.83 per cent) and minimum for Muktsar

Central Cooperative Bank (2.12 per cent). The exponential growth rate

in interest expanded was 8.27 per cent over the study period. Patiala

Central Cooperative Bank had the highest exponential growth rate

(12.40 per cent) and lowest exponential growth rate pertained to Tarn

Taran Central Cooperative Bank (3.23 per cent). Establishment cost

which includes cost of management, i.e., salaries, allowances, bonus

to staff, etc. contributed 21 per cent to 23 per cent to the total

expenditure of all the Central Cooperative Banks. At the end of the

study period Jalandhar Central Cooperative Bank had maximum

share in establishment cost (10.93 per cent) while minimum share

was observed in the case of Muktsar Central Cooperative Bank (1.15

per cent). Kapurthala Central Cooperative Bank recorded the highest

exponential growth rate (10.93 per cent) and the lowest was shown by

Muktsar Central Cooperative Bank (3.73 per cent). The third

component of total expenditure is other expenditure which includes

stationery, printing, taxes, etc. The share of other expenses in total

expenses was 4 per cent to 7 per cent during the period of study. The

highest percentage to total other expenses pertained to Jalandhar

Central Cooperative Bank (16.24 per cent) while the lowest was shown

by Mansa Central Cooperative Bank (2.05 per cent).

(iii) TREND IN NET PROFIT/LOSSES The total profits of all the Central Cooperative Banks in Punjab

exhibited an exponential decline of 2.75 per cent over the study

period. At the end of the study period N.Shahr Central Cooperative

Bank contributed the most, i.e., Rs. 882.24 lac (40.07 per cent share

in total net profit) followed by Kapurthala Central Cooperative Bank

with Rs. 508.98 lac (23.12 per cent share in total net profit). Faridkot

Central Cooperative Bank and Mansa Central Cooperative Bank

showed losses at the end of study period. The highest exponential

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growth rate in case of net profit was recorded by Fatehgarh Sahib

Central Cooperative Bank (13.58 per cent) followed by Patiala Central

Cooperative Bank with exponential growth rate of 11.89 per cent. The

analysis of coefficient of concentration brings out that at the end of

study period there was concentration of net profit in few districts. At

the end of study period, only two banks, viz. Jalandhar Central

Cooperative Bank and N. Shahr Central Cooperative Bank contributed

about 63 per cent of the total profits of all the Central Cooperative

Banks.

(iv) PROFITABILITY RATIOS The highest overall interest earned ratio and interest paid ratio

pertained to Tarn Taran Central Cooperative Bank, whereas the lowest

interest earned ratio and interest paid ratio were observed in the case

of Mansa Central Cooperative Bank and Ludhiana Central Cooperative

Bank respectively. There is no clear cut trend in the ratio of non

interest income to working funds. The special feature of non interest

income to working fund ratio was its very small magnitude during the

period of study. The ratio was highest for Gurdaspur Central

Cooperative Bank and lowest for N.Shahr Central Cooperative Bank.

The movement of establishment cost to working fund ratio showed no

set trend. At the end of March 2010, Amritsar Central Cooperative

Bank recorded the highest ratio followed by Faridkot Central

Cooperative Bank. However, the lowest ratio was recorded by Muktsar

Central Cooperative Bank at the end of study period. Moga Central

Cooperative Bank had the highest average other expense to working

fund ratio, while Kapurthala Central Cooperative Bank had the lowest

ratio. Total income ratio and total expense ratio did not indicate any

clear cut trend in their movement throughout the period of study. The

highest total income ratio was observed in the case of Kapurthala

Central Cooperative Bank, whereas the lowest in Mansa Central

Cooperative Bank. At the end of March 2010, Faridkot Central

Cooperative Bank recorded the highest total expense ratio while the

364

lowest in Muktsar Central Cooperative Bank. The ratio between total

spread to working fund of all the Central Cooperative Banks in Punjab

taken together during the study period showed no set trend. The

average total spread to working fund ratio was the highest for

Ludhiana Central Cooperative Bank, while Mansa Central Cooperative

Bank recorded the lowest ratio. The ratio between total burden to

working fund was the highest for Amritsar Central Cooperative Bank

followed by Faridkot Central Cooperative Bank, and the lowest was

recorded by Muktsar Central Cooperative Bank. The behaviour of net

profit/losses to working funds ratio indicated no set trend. The ratio

was positive for all the Central Cooperative Banks in Punjab during

the years 1998-99 and 2000-01 to 2005-06, but at the state level the

ratio was positive throughout the period of study. The highest ratio

was recorded by N.Shahr Central Cooperative Bank, while Amritsar

Central Cooperative Bank showed the lowest ratio. All the Central

Cooperative Banks in Punjab except Amritsar Central Cooperative

Bank showed a positive average ratio between net profit/losses to

working fund during the study period.

(v) STEP WISE MULTIPLE REGRESSION ANALYSIS Profitability is an important criterion to evaluate the overall

efficiency of bank groups. Profitability is a relative concept and

indicates net profit as percentage of working funds. The most widely

used measure of bank profitability i.e. net profit as a percentage of

working funds (Y) has been used as the dependent variable for

statistical analysis and ten variables has been taken as independent

variables. Multiple regression analysis has been done to look for

different combinations of variables that explain variation in

profitability of the Central Cooperative Banks in Punjab. The

correlation coefficient matrices explain that variable, namely, X1

(spread as percentage to working funds) has a significant positive

correlation with bank profitability. Other variable namely, X4 (total

loans as percentage to total deposits), X7 (short-term loans as

365

percentage to total loans) have a significant but negative correlation

with bank profitability. The correlation is also positive but

insignificant with two other variables, i.e., X5 (fixed deposits as

percentage to total deposits) and X6 (current deposits as percentage to

total deposits). The variables having insignificant and negative

correlation with bank profitability are X2 (burden as percentage to

working funds), X3 (total loans as percentage to working funds), X8

(other income as percentage to total income), X9 (total capital as

percentage to working funds) and X10 (establishment cost as

percentage to total expenses). The results of step-wise multiple

regression analysis for the study period explain that spread as

percentage to working funds (X1) entered in the regression model in

the first step, burden as percentage to working funds (X2) entered in

the second step, short-term loans as percentage to total loans (X7)

entered in the third step and in the fourth step, equity capital as

percentage to working funds (X9) entered the regression model. These

four variables collectively explain 73.30 per cent variations in

profitability. After the fourth step, no other variable was found to be

significantly affecting profitability of the banks.

8.3.3(b) PRODUCTIVITY ANALYSIS Productivity analysis shows that Kapurthala Central

Cooperative Bank remained the top performer for 9 years, i.e., 1997-

98 to 2005-06. Muktsar Central Cooperative Bank was the top

performer only during the year 2006-07. However, Gurdaspur Central

Cooperative Bank emerged as the top performer for 2007-08 and

2008-09, while N.Shahr Central Cooperative Bank was top performer

during the year 2009-10. Out of the total 19 Central Cooperative

Banks under study, only three Central Cooperative Banks, i.e.,

Kapurthala Central Cooperative Bank, Muktsar Central Cooperative

Bank and N.Shahr Central Cooperative Bank remained efficient

throughout the period of study from 1997-98 to 2009-10. Tarn Taran

366

Central Cooperative Bank, Jalandhar Central Cooperative Bank and

Ludhiana Central Cooperative Bank remained efficient throughout the

period of study except in the year 2008-09. The banks showing the

worst performance were Bathinda Central Cooperative Bank and

Fazilka Central Cooperative Bank which remained inefficient for 9

years throughout the study period, while Sangrur Central Cooperative

Bank remained inefficient for eight years out of 13 years of study

period. The performance of Ropar Central Cooperative Bank was found

to be inefficient for the initial two years of the study period, but after

that it showed good results. Similarly, Patiala Central Cooperative

Bank also started showing good results after 2001-02. The

performance of Fatehgarh Sahib Central Cooperative Bank, Mansa

Central Cooperative Bank and Moga Central Cooperative Bank was

found to be inefficient for four years throughout the period of study,

whereas Faridkot Central Cooperative Bank and Hoshiarpur Central

Cooperative Bank remained inefficient for five years. However,

Amritsar Central Cooperative Bank remained inefficient for six years.

The main reason of inefficiency of Amritsar Central Cooperative Bank,

Fatehgarh Sahib Central Cooperative Bank, Faridkot Central

Cooperative Bank, Ferozepur Central Cooperative Bank, Fazilka

Central Cooperative Bank, Gurdaspur Central Cooperative Bank,

Hoshiarpur Central Cooperative Bank, Jalandhar Central Cooperative

Bank was that these banks failed to use their inputs i.e. employees

and branches optimally. Other Central Cooperative Banks were found

to be not using their deposits and borrowings properly to raise their

level of output, i.e., investments and income. Year wise productivity

analysis brought out that minimum eleven banks were efficient in the

year 2008-09 and maximum seventeen banks were efficient in the

year 2006-07.

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8.3.4 PERCEPTION OF BENEFICIARIES AND BANK EMPLOYEES ABOUT THE PERFORMANCE OF COOPERATIVE BANKS IN PUNJAB

8.3.4(a) BENEFICIARIES PERCEPTION

Majority of the respondents (52.33 per cent) belong to the age

group of above 45 years followed by 20.33 per cent who belonged

to the age group of 25-35 years. About two third, i.e., 64.67 per

cent of the respondents are matriculates. Majority of the

respondents belonged to general category followed by schedule

caste and backward class. About two third of the respondents, i.e.,

68 per cent belonged to agriculture occupation including poultry

and farming followed by service and business category. Bank wise

also the same trend visible. Majority of the respondents, i.e., 30.33

percent have monthly income, in the income group of Rs. 5001-

10000 followed by 28 per cent respondents belonged to the income

group of Rs. 10001-15000, 22.7 per cent respondents belonged to

the income group of above Rs. 20000.

44.67 per cent of the respondents have availed loans for

agriculture purpose, 17.33 percent for consumption needs, 16.33

per cent for purchase of a vehicle, 11 per cent for their business

requirements and another 10.67 per cent for their home

requirements. Bank wise, majority of the respondents from each

bank have taken loan for the agriculture purpose. A good

proportion of respondents from Bathinda Central Cooperative

Bank (30 per cent), Faridkot Central Cooperative Bank (24 per

cent) and Tarn Taran Central Cooperative Bank (20 per cent) have

taken personal loan. 24 per cent respondent in Tarn Taran Central

Cooperative Bank, 22 per cent in Faridkot Central Cooperative

Bank and 18 per cent in Bathinda Central Cooperative Bank have

taken vehicle loan.

31 per cent of the respondents have availed loan for an amount of

Rs. up to 50000, 23.67 per cent respondents for an amount of Rs.

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50001 to 100000, 23.33 per cent respondents for an amount of

above Rs. 200000, 13.67 per cent respondents for an amount of

Rs. 100001 to 150000 and 8.33 per cent for an amount of Rs.

150001 to 200000. Bank wise analysis shows that large proportion

of respondents from Bathinda Central Cooperative Bank, Faridkot

Central Cooperative Bank and Tarn Taran Central Cooperative

Bank had taken loan for an amount up to Rs. 50000. In

Kapurthala Central Cooperative Bank and Patiala Central

Cooperative Bank majority of respondents had taken loan for above

Rs. 200000 and in Ludhiana Central Cooperative Bank had taken

loan for Rs. 50001 to 100000.

Three-fourth of the respondents, i.e., 74.33 per cent has not filled

the forms on their own, but they have to seek outside help for

filling of the forms. Out of total 300 respondents, 204 respondents

faced difficulties in filling the application forms and the major

difficulty faced is length of the form followed by form seeks

excessive information and the language of the form.

Majority of the respondents in all the Central Cooperative Banks

have been influenced by the bank officials for taking loans from the

cooperative banks. In Bathinda 100 per cent respondents have

been influenced by the bank officials.

37 per cent respondents opined that it takes 15-21 days to

sanction the loan, and in 21.33 per cent cases it takes 22-28 days.

In all the banks majority of the respondents opined that it takes

15-21 days to sanction the loan except the respondents from

Bathinda Central Cooperative Bank where it takes 22-28 days.

About one-third of the respondents, i.e., 33.67 per cent got their

loans disbursed in 15-21 days, 19.67 per cent in 8-14 days.

27.33 per cent of the respondents surveyed had to visit 5-6 times

for getting their loans sanctioned/disbursed, 26 per cent visited 7-

8 times, 18.67 per cent respondents visited 3-4 times. As many as

15 per cent had to visit more than 8 times while 13 per cent had

369

visited just once or twice. Bank wise, a large proportion of the

respondents from Bathinda Central Cooperative Bank, Faridkot

Central Cooperative Bank and Kapurthala Central Cooperative

Bank had visited 7-8 times. However, majority of the respondents

from Ludhiana Central Cooperative Bank, Patiala Central

Cooperative Bank and Tarn Taran Central Cooperative Bank had

visited 5-6 times to get their loans sanctioned/disbursed.

Maximum respondents who complained delay in

sanctioning/disbursement of loans belonged to Bathinda Central

Cooperative Bank followed by those from Faridkot Central

Cooperative Bank, Tarn Taran Central Cooperative Bank,

Kapurthala Central Cooperative Bank, Patiala Central Cooperative

Bank and Ludhiana Central Cooperative Bank. The main reasons

put forward for delays by the respondents are excessive

documentation followed by shortage of staff and unnecessary

queries made by the officials while sanctioning/disbursement of

loan.

Majority of the respondents, i.e., 55.33 per cent found that

inspection was made by the cooperative banks while granting of

loans. Majority of the respondents from Ludhiana Central

Cooperative Bank (72 per cent), Kapurthala Central Cooperative

Bank (64 per cent) and Patiala Central Cooperative Bank (62 per

cent) viewed that inspection was made by the bank officials.

61 per cent of the respondents pledged their immovable property

as security whereas the remaining 39 per cent took loan against

their movable asset. Bank wise also the same trend is visible

except Bathinda Central Cooperative Bank (52 per cent) and

Faridkot Central Cooperative Bank (54 per cent) where majority of

the respondents have provided movable property as security. In

Tarn Taran Central Cooperative Bank, 50 per cent respondents

have given immovable property and 50 per cent has given movable

property as security. In every Central Cooperative Bank majority of

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the respondents had given immovable property as security except

Bathinda Central Cooperative Bank and Faridkot Central

Cooperative Bank.

In majority of the cases, i.e., 70.67 per cent the repayment

schedule is half yearly. Bank wise also majority of the respondents

in all the Central Cooperative Banks under study repay their loans

half yearly except Faridkot Central Cooperative Bank where

majority repay their loan monthly.

Majority of the respondents expressed their satisfaction with

regard to repayment schedule (99.67 per cent), behaviour of staff

(94 per cent), knowledge of staff (92 per cent), presence of staff (79

per cent), and grievance handling (66.33 per cent). However the

majority of respondents have expressed their dissatisfaction

regarding interest rates (79.67 per cent), adequacy of staff (75.33

per cent) and security requirements (50 per cent). 32 per cent of

the respondents are indifferent with regard to grievance handling.

From Average Weighted Scores it was found that respondents are

highly satisfied with repayment schedule (1.79), behaviour of staff

(1.18) and knowledge of staff (1.05). Further, the respondents are

found to be satisfied with the factor, viz. presence of staff (0.84)

and grievance handling (0.80). But the respondents are dissatisfied

with the factors such as rate of interest (- 0.92), adequacy of staff (-

0.76) and security requirements (-0.17). The respondents belonging

to all the banks, occupations and income groups showed

dissatisfaction with the factors such as adequacy of staff, and rate

of interest charged on loan and showed satisfaction with factors

such as repayment schedule, behaviour of staff and knowledge of

staff. The mean value of Average Weighted Scores corresponding to

the degree of satisfaction expressed by the respondents regarding

various opinion/ perception statements bank-wise is highest for

Patiala Central Cooperative Bank (0.607) followed by Bathinda

Central Cooperative Bank (0.527), Kapurthala Central Cooperative

371

Bank (0.465), Ludhiana Central Cooperative Bank (0.465) Tarn

Taran Central Cooperative Bank (0.420) and Faridkot Central

Cooperative Bank (0.375); occupation-wise highest for business

category (0.69) followed by service (0.64) and agriculture & allied

(0.39); and income-wise highest for the monthly income group of

Rs.15001-20000 (0.55), followed by Rs.5001- 10000 (0.49), above

Rs.20000 (0.48), Rs.10001- Rs.15000 (0.43) and up to Rs.5000

(0.40). The Kendall’s coefficient of concordance shows that there

exists concurrence of ranking among the respondents from

different banks, different occupations and different income groups.

Majority of the respondents expressed their agreement with regard

to convenience regarding the timing of banks (96 per cent), staff of

cooperative banks is motivated (84.67 per cent) and cooperative

bank help in reducing dependence on money lenders (52.67 per

cent), increase in income after availing loan (49.67 per cent) and

customer satisfaction is assessed (43.33 per cent). Further 55.33

per cent of the respondents disagree with regard to training

facilities provided by the Central Cooperative banks and 41.67 per

cent of the respondents are indifferent towards the training

facilities provided by Central Cooperative Banks. However the

majority of the respondents expressed their disagreement

regarding Central Cooperative Banks advice on the choice of the

product (51.67 per cent). And 38 per cent of the respondents

disagreed that their income has increased after availing of loans.

Further 65.67 per cent of the respondents are indifferent toward

the cooperative banks provide more facilities than other banks and

40.33 per cent of the respondents are indifferent towards that

customer satisfaction is assessed by the Central Cooperative

Banks. The respondents from all the banks, occupation and

income groups are of the same opinion that they agreed with the

factor, i.e., convenience with regard to timing of banks and

372

disagreed with the factors that cooperatives provide training for the

use of the loan. The mean value of Average Weighted Scores

corresponding to the degree of agreement expressed by the

respondents regarding various opinion/perception statements

bank-wise is highest for Kapurthala Central Cooperative Bank

(0.572) followed by Ludhiana Central Cooperative Bank (0.477),

Bathinda Central Cooperative Bank (0.392), Patiala Central

Cooperative Bank (0.207), Faridkot Central Cooperative Bank

(0.067) and Tarn Taran Central Cooperative Bank (0.045);

occupation-wise is highest for agriculture and allied (0.330)

followed by business (0.300) and service(0.16); and income-wise

highest for the income group Rs.10001-15000 (0.39) followed by

the income group of Rs.15001-Rs.20000 (0.32), above Rs.20000

(0.27), Rs.5001- Rs.10000 (0.25) and below Rs. 5000 (0.02). The

Kendall’s coefficient of concordance shows that there exists

concurrence of ranking among the respondents from different

banks, different occupations and different income groups.

8.3.4(b) EMPLOYEES’ PERCEPTION All the respondent employees considered security as an important

variable while financing a project. However, the suitability of a

project needs to be judged keeping in view the factors like effect on

income after financing the project, capability and character of the

client, technical feasibility of the project, supporting facilities and

infrastructural facilities available.

One-fourth of the total respondent employees explained that

generally a loan is sanctioned with in a period of 15-21 days.

However, an equal; number of respondent employees, i.e. 23 per

cent each claimed that a loan is sanctioned with in 8-14 days and

22-28 days. As many as 17 per cent of the employees viewed that a

loan is sanctioned within a week’s time , while the remaining 12

per cent employees admitted that it takes more than 28 days to

sanction a loan.

373

About one-third of the respondents, i.e., 32 per cent that it takes

15-21 days to disburse a loan. However, 23 per cent respondents

claimed that a loan is disbursed with in 8-14 days. As many as 22

per cent employees viewed that it takes up to 7 days, while another

16 per cent and 7 per cent respondent employees admitted that a

loan is disbursed within a period of 22-28 days and more than 28

days respectively.

Majority of the respondent employees, i.e., 60 out of the total 100

admitted that generally there occurs delay in the

sanction/disbursement of loans mainly for the reason that the

beneficiaries provide incomplete information, followed by another

reason like inadequate staff, lack of authority with the employees

and inability of the staff.

The bank employees admitted that sometimes the customers are

not able to get the loans sanctioned for the reason mainly due to

defective land records followed by the other reasons like inability of

the borrower to provide guarantee and margin money and

competition from the money lenders.

Majority of the respondents, i.e., 68 per cent admitted that the

programme of branch expansion of cooperative banks is adequate.

48 per cent of the respondents found that the recovery position of

the banks is not adequate mainly due to the reason that willful

default is made by the beneficiaries followed by the other reasons

such as misutilisation of loan amount, risk in agriculture, and

defective supervision system of the banks. The bank employees

opined that to improve recovery legal action should be taken

against willful defaulters.

59 per cent respondents admitted that there is staff shortage in

Central Cooperative Banks which affect the quality of the work of

employees. 52 per cent bank employees showed satisfaction with

the existing loan monitoring system of the bank. About three-

fourth of the respondents, i.e., 77 per cent agreed that the fixed

targets are achieved by the bank.

374

Majority of the respondent employees of all the Central Cooperative

Banks found their jobs challenging, having growth potential and

provide satisfaction to them except Gurdaspur Central Cooperative

Bank, Hoshiarpur Central Cooperative Bank, Jalandhar Central

Cooperative Bank and Tarn Taran Central Cooperative Bank. The

designation of employees does not significantly influence their

opinion about their job and the same is in the case with the

experience of employees, as experience does not significantly

influence their opinion about their jobs.

8.4 PROBLEMS AFFECTING THE PERFORMANCE OF COOPERATIVE BANKS

Political interference in the functioning of cooperative banks has

been the biggest snag in the efficient functioning of Central

Cooperative Banks in the state.

Another difficulty is that there is no coordination between the

activities of Commercial banks, Regional Rural Banks and

Cooperative Banks. These institutions are working in the same

field, but they are not complementary but competitive.

There is shortage of staff in the branches of Central Cooperative

Banks in the state. Due to this work load per employee increases

and affects the quality of work adversely.

Another difficulty faced by the beneficiaries of the bank is the

length of the form and difficult language of the form. And there is

also delay in the sanctioning and disbursement of loan.

Poor infrastructural facilities like inadequate facilities of power,

drinking water, and seating arrangement are major difficulties

faced by the employees and beneficiaries of the bank.

No training is given to the employees of the cooperative banks to

adopt the changes in technology, which hampers the performance

of bank employees of Central Cooperative Banks in the state.

The new technologies are not used in the cooperative banks like

computer facilities, no facility of Automatic Teller Machine (ATM)

375

etc. also adversely affect the performance of Central Cooperative

Banks in the state.

The problem of mounting overdues in cooperatives is a matter of

serious concern to the policy makers. The mounting overdues

disrupt over time the flow of credit to the farmers from the

cooperatives and adversely affect the capacity of lending and to

provide adequate and timely credit to agriculture and thus hamper

the pace of economic development.

8.5 SUGGESTIONS The suggestions emerging out of the present study are given as

under:

The modern techniques of banking including the use of ATM

should also be extended to the cooperative banks so as to make

them more competitive in the financial market.

The main reason of inefficiency of the cooperative banks was that

the banks fail to use their inputs optimally. So to improve the

efficiency of banks, the banks should use their inputs, i.e.,

deposits, manpower, branches and borrowings optimally.

There is need to provide adequate staff in the banks under study.

The selection of staff should be made purely on the basis of merit

to improve the efficiency of these banks.

The employees of cooperative banks under study need to be

imparted extensive training from time to time. Appraisal of

employees’ work on regular basis can help to increase their

performance.

The process of advancing loans to the people should be made

simple. Unnecessary formalities followed by these banks need to be

curtailed.

Most of the branches of cooperative banks need to be computerized

for quick disposal of work and to survive in the competitive

environment.

376

It is necessary to stop political interference in the day-to-day

functioning of cooperative banks so as to make them more efficient

and profit-oriented.

It has been found that cooperative banks even fail to provide the

basic amenities like drinking water, clean surroundings, proper

sitting arrangement and inconvenience due to power cuts to their

customers and employees as well. Immediate attention is required

to improve such facilities.

It has been observed that in order to attain certain narrow political

ends the government has announced in the past certain relief

measures for the defaulters like waving off the loan up to a certain

limit; such decisions hinder the growth of banks, and hit hard

their recovery process.

To improve profitability, the banks should make efforts to increase

their income and reduce non-interest expenses i.e., establishment

cost and other expenses.

The dual control by the state government and the RBI over the

cooperative banks is against the functional autonomy of these

banks. The overlapping of control should end immediately in the

largest interest of these banks.

It has been observed that generally the cooperative banks remain

devoid of the services of rural credit experts and economists. It is

required that in order to have the benefit of their deep knowledge

and experience in the field, such people should be taken on the

board of these banks. Only merits and previous banking sector

experience should form the basis in the appointment of CEOs.

The banks should have an effective monitoring system over the use

of funds in order to prevent or minimize diversion of funds by the

borrowers.

Quick recovery of dues can lead to reduce the overdues of

cooperative banks in Punjab. This is possible only when the bank

authorities empowered by law to take action against the willful

377

defaulters. There is also need to strengthen the credit appraisal

and supervision mechanism for preventing the incidence of fresh

NPAs and overdues under all categories of loans and advances.

The share of other income in total income of cooperative banks

ranges from 0.5 per cent to 1.5 per cent. Hence, the Central

Cooperative Banks should make efforts to increase their income

from other sources.

8.6 SCOPE FOR FURTHER STUDY The present research work is limited in its attempt to explain

only the specific objectives formulated for the study. Time and cost

involved to carry out this research are the other constraints. However,

the important areas that can be taken up for further research are as

under:

The present study evaluates the performance of Central

Cooperative Banks in Punjab only. A comparative study by taking

more states can be done or the study of any other state may be

undertaken on the pattern of this study.

The socio-economic benefit analysis of cooperative banks can also

be another area for further research.

The present study examines the perception of beneficiaries on

certain attributes. Similar studies can be conducted by adding

some more attributes.

378

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