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Identification and analysis of causative factors driving

the failure of cooperative society banks in Karnataka


(Reg. No - 04VWCM6021)

This dissertation report is submitted in partial fulfillment of the

requirements of the
MBA program of Bangalore University

Under the guidance of

Professor. Ray Titus

Alliance Business Academy

Alliance Business Academy

19th cross, 7th main,
N.S.Palya, BTM 2nd Stage,
Bangalore – 560076
(2004 – 2006)

I, DHANANJAYA.C., MBA IV SEMESTER student of Alliance Business

Academy, Bangalore do hereby declare that this dissertation titled
“Identification and analysis of causative factors driving the failure of
cooperative society banks in Karnataka” has been prepared by me, under
the guidance of Professor Ray Titus, in the partial fulfillment of the award
University during session
I further declare that this dissertation report has not been submitted earlier to
any other University or Institute for the award of any Degree or Diploma.

Place: Bangalore


The satiation and euphoric that accompany the successful completion of task would be
incomplete without the mention of the people who made it possible. So with immense
gratitude I acknowledge all those whose guidance and encouragement crowned my
efforts with success.

I would like to thank Prof. Sudhir G Angur, President, Alliance Business Academy,
and Dr. B.V.Krishnamurthy, Executive Vice President, Alliance Business Academy for
providing the support to do this study.

With deep sense of gratitude and indebtedness I sincerely thank Professor Ray Titus,
my dissertation guide for giving me valuable suggestions and advice throughout the
execution of the dissertation.

I would like to thank all the faculty members of Alliance Business Academy.

I would like to thank Mr. Ravi kiran, Lab Co-coordinator, Alliance Business Academy
for his co-operation and support.

Last but not the least I would like to thank my parents, friends without whose co-
operation this dissertation wouldn’t have possible.



















1 1.a. Growth in Loans Outstanding 35
1.b. Recovery Percentage of SCB’s and DCCB’s


2 2.a. SCB 36
2.b. DCCB




5 48









Executive Summary




This is a study to understand the causes for success or failure of co-operative societies
banks. The Co-Operative Societies Banks are mainly divided into rural cooperative
societies banks and urban cooperative societies banks. Here we are studying the entire
structure of co-operative societies banks giving much emphasis on rural CSBs. We are
evaluating the strategies of CSBs with regards to their success and failure and attempting
to implement the strategies of successful CSBs to those, who that are a failure CSB to
minimize the problems faced by them. Based on the survey-conducted by us, we assume
that the main reasons for the failure of rural co-operative societies banks.
 Inefficient fund management
 Poor recovery methods
 Political interferences
 Lack of control & Supervision
By analyzing these causes we will be able to locate the loopholes in the CSBs, which
will help in eliminating the problems faced by these banks. Although the cooperative
banks established on the patterns of Raiffeisen and Schulze Delitzch patterns have made
substantial progress in India, the movement can not be termed as a vibrant one in regard
to cooperative values and philosophy as enunciated in cooperative principles. While the
extension of financial sector reforms programme mainly the prudential standards to
cooperative banking segment on par with commercial banks may be justified on several
counts, it can not be ignored that such standards were essentially contrived for the latter.
Logically, if the prudential standards, and supervision and regulation for cooperative
banks were same as that of commercial banks, then there would not be any difference
worth mentioning between these entities other than the holding pattern. The notion of a

code of good practices though intuitively appealing, the temptation to prescribe
universally valid model codes which do not allow for differences in institutional
development, legislative framework and more broadly, different stages of development
must be avoided. The increasing external intervention in the era of reforms, many a
times beyond the functional aspects of cooperative banks has resulted in the dilution of
cooperative character in terms of their adherence to cooperative principles. The paper
identifies several broad areas for the intervention of researchers under three categories,
i.e., prudential standards, professional management and governance and supervision &
regulation against the backdrop of financial sector reforms. While maintaining the
thrust on cooperative character throughout the discussions, it is argued that if cooperative
character of credit cooperatives is to be preserved or promoted, then the prudential
norms, system of governance and supervision & regulation, all should emanate from the
guiding principles of cooperation.

Chapter 1



Is it possible to imagine a world without banks? Impossible! Banks today for several
reasons have become cornerstones of our economy. They transfer risk, provide liquidity,
facilitate both major and minor transactions, and provide financial information for both
individuals and businesses.


1786: Establishment of the General Bank of India, the first Joint Stock bank.

1860: Three presidency banks were set up in Calcutta, Bombay and Madras.

1921: Three presidency banks were amalgamated to form the Imperial Bank of India,
which took on the role of a commercial bank, a bankers’ bank and a banker to the

1935: The establishment of RBI as the central bank of the country ended the quasi-
central banking role of the Imperial Bank of India.

1955: The State Bank of India (“SBI”) was constituted in order to take over the Imperial
Bank of India and integrating with it, the former state-owned and state-associate banks.

1959: the State Bank of India (Subsidiary Bank) Act was passed, enabling the SBI to
take over eight former state-associate banks as its subsidiaries.

1969: 14 private banks were nationalized followed by six private banks in 1980.

Since 1991 many financial reforms have been introduced substantially transforming the
banking industry in India.


SUPPLY: Liquidity is controlled by the Reserve Bank of India (RBI).

DEMAND: India is a growing economy and demand for credit is high thought it could
be cyclical.

1. Threat of New Entrants –

 The average person can't come along and start up a bank, but there are
services, such as internet bill payment, on which entrepreneurs can capitalize.
 Banks are fearful of being squeezed out of the payments business,
especially since it is a good source of fee-based revenue.
 Another trend that poses a threat is companies offering other financial
services. It would not take much for an insurance company to start offering
mortgage and loan service.
 Barriers to entry: licensing requirements, investment in technology and
branch network.

2. Power of Suppliers-
 High during periods of tight liquidity.
 Trade unions in public sector banks can be anti reforms.
 Depositors may invest elsewhere if interest rates fall.

3. Power of Buyers –
 The individual doesn't pose much of a threat to the banking industry, but one
major factor affecting the power of buyers is relatively high switching costs. If a
person has their mortgage, car loan, credit card, checking account, and mutual
funds with one particular bank, it can make it extremely tough for them to switch.
In an attempt to lure-in customers, banks try to lower the price of switching, but
many people would still rather stick with their current bank.
 For good creditworthy borrowers (both individuals and corporate) bargaining
power is high due to the availability of large number of banks.

4. Availability of Substitutes –
 There are plenty of substitutes in the banking industry. Banks offer a suite of
services over and above taking deposits and lending money, but whether it is
insurance, mutual funds, or fixed income securities, chances are there is a non-
banking financial services company who can offer similar services.
 In the lending side of the business, banks are seeing competition rise from
unconventional companies. Sony, General Motors, and Microsoft all offer
preferred financing to customers who buy big ticket items. If car companies are
offering 0% financing, why would anyone want to get a car loan from the bank
and pay 5-10% interest?

5. Competitive Rivalry -
 The banking industry is highly competitive. There are public sector banks, private
sector and foreign banks along with non banking finance companies competing in
similar business lines. Each one is trying to out beat the other by offering lower
financing, preferred rates, and investment services.
 The banking sector is in a race to see who can offer the better and faster services,
but this also causes banks to experience a lower ROA. They then have an
incentive to take- on high risk projects.
 In the long run, we're likely to see more consolidation in the banking industry.
Larger banks would prefer to takeover or merge with another bank rather than
spend the money to market and advertise to people.

The Indian banking sector can be broadly classified as organised and unorganized
banking system. The unorganized system comprises of moneylenders, indigenous
bankers, lending pawnbrokers, landlords, traders, etc. whereas the organised banking
system comprises of Scheduled bank(which are included in the second schedule of RBI
Act 1934) and Non Scheduled banks that are permitted by RBI to undertake banking
business. The Scheduled banks comprises of Scheduled commercial Banks and
Scheduled Co-operative Banks.

Reserve Bank of India

RBI is the central banking and monetary authority in India. RBI manages the
country’s money supply and foreign exchange and also serves as a bank for the GoI and
for the country’s commercial banks. In addition to these traditional central banking roles,
RBI undertakes certain developmental and promotional activities.

RBI issues guidelines, notifications and circulars on various areas like exposure
standards, income recognition, asset classification, provisioning for non-performing
assets, investment valuation and capital adequacy standards for commercial banks, long-
term lending institutions and non-banking finance companies. RBI requires these
institutions to furnish information relating to their businesses to RBI on a regular basis.

Public Sector Banks

Public sector banks make up the largest category of banks in the Indian banking
system. There are 27 public sector banks in India. They include the SBI and its 7
associate banks and 19 nationalized banks. Nationalized banks are governed by the
Banking Companies (Acquisition and Transfer of Undertakings) Act 1970 and 1980. At
the end of September 2004, public sector banks had 46,782 branches and accounted for
74.9% of the aggregate deposits and 70.5% of the outstanding gross bank credit of the
scheduled commercial banks.
Commercial Banks

Commercial banks in India have traditionally focused on meeting the short-term

financial needs of industry, trade and agriculture. At the end of September 2004 there

were 291 scheduled commercial banks in the country, with a network of 67,221

Commercial Banks at a glance

Particulars Jun-2003 Jun-2002
No. of Commercial Banks 295 298
All Scheduled Commercial Banks 291 294
of which, Regional Rural Banks 196 196
Non-Scheduled Commercial Banks 4 4
No. of Bank Offices 66692 66355
Rural 32231 32394
Semi-Urban 14875 14727
Urban 10841 10578
Metropolitan 8745 8656
Source: Reserve Bank of India

Regional Rural Banks

Regional rural banks were established from 1976 to 1987 jointly by the Central
Government, State Governments and sponsoring public sector commercial banks with a
view to develop the rural economy. Regional rural banks provide credit to small farmers,
artisans, small entrepreneurs and agricultural laborers. There were 196 regional rural
banks at the end of September 2004 with 14,430 branches, accounting for 3.6% of
aggregate deposits and 3.0% of gross bank credit outstanding of scheduled commercial

Private Sector Banks

In July 1993, as part of the banking reform process and as a measure to induce
competition in the banking sector, RBI permitted entry by the private sector into the
banking system. This resulted in the introduction of nine private sector banks. These
banks are collectively known as the ‘‘new’’ private sector banks. In addition, 21 private
sector banks existing prior to July 1993 were operating at year-end Fiscal 2004.

Foreign Banks

At the end of June 2004 there were around 32 foreign banks with 217 branches
operating in India, accounting for 4.6% of aggregate deposits and 7.0% of outstanding
gross bank credit of scheduled commercial banks. The primary activity of most foreign
banks in India has been in the corporate segment. However, some of the larger foreign
banks have made consumer financing a significant part of their portfolios. These banks
offer products such as automobile finance, home loans, credit cards and household
consumer finance.

Cooperative Banks

Cooperative banks cater to the financing needs of agriculture, small industry and self-
employed businessmen in urban and semi-urban areas of India. The state land
development banks and the primary land development banks provide long-term credit for

Term Lending Institutions

Term lending institutions were established to provide medium-term and long-term

financial assistance to various industries for setting up new projects and for the
expansion and modernization of existing facilities. These institutions provide fund-based
and non-fund based assistance to industry in the form of loans, underwriting, and direct
subscription to shares, debentures and guarantees.

Non-Banking Finance Companies

There are over 13,671 non-banking finance companies in India as of June 2004,
mostly in the private sector. The non-banking finance companies, on the basis of their
principal activities are broadly classified into four categories namely

• Equipment Leasing (EL),

• Hire Purchase (HP),
• Loan and Investment Companies and
• Deposits and business activities of Residuary Non-Banking Companies (RNBCs).

Housing Finance Companies

Housing finance companies form a distinct sub-group of the non-bank finance

companies and are regulated by National Housing Bank (NHB). Until recently, Housing
Development Finance Corporation Limited was the premier institution providing housing
finance in India. In recent years, several other players including banks have entered the
housing finance industry. The National Housing Bank Act provides for refinancing and
securitization of housing loans, foreclosure of mortgages and setting up of the Mortgage
Credit Guarantee Scheme.
Other Financial Institutions

Specialized Financial Institutions

In addition to the long-term lending institutions, there are various specialized

financial institutions that cater to the specific needs of different sectors. They include the
National Bank for Agricultural and Rural Development, Export Import Bank of India,
Small Industries Development Bank of India, Risk Capital and Technology Finance
Corporation Limited, Tourism Finance Corporation of India Limited, National Housing
Bank, Power Finance Corporation Limited and the Infrastructure Development Finance
Corporation Limited.

State Level Financial Institutions

State financial corporations operate at the state level and form an integral part of the
institutional financing system. State financial corporations were set up to finance and
promote small and medium-sized enterprises. At the state level, there are also state
industrial development corporations, which provide finance primarily to medium- sized
and large-sized enterprises.

Insurance Companies

Currently, there are 27 insurance companies in India, of which 13 are life insurance
companies, 13 are general insurance companies and one is a reinsurance company. Life
Insurance Corporation of India, General Insurance Corporation of India and public sector
general insurance companies also provide long-term financial assistance to the industrial

Mutual Funds

From 1963 to 1987, Unit Trust of India was the only mutual fund operating in India.
From 1987 onwards; several other public sector mutual funds entered this sector. These
mutual funds were established by public sector banks, the Life Insurance Corporation of
India and General Insurance Corporation of India. The industry is regulated by the SEBI
(Mutual Fund) Regulation 1996.

Chapter 2
Co-Operative Society

A Cooperative society is an autonomous association of persons of persons united

voluntarily to meet common economic, social and cultural needs and aspiration through
jointly owned and democratically controlled enterprises.


Cooperation in older days was an integral part of human life; today it is a distinct form of
business, which affects the pattern of production and distribution within the economy. It
has undergone enormous changes from ancient times to till date. Industrialization
brought about drastic change in the society. Labour, as a factor of production, started
losing its importance. There was a shift in emphasis from farm to the factory; from
labour- intensive technology to capital- intensive methods; from rural to urban areas.

Society became divide in to two classes- the capitalist class and the working class.
Exploitation enveloped the society. In their anxiety to accumulate wealth, the capitalist
started exploiting the working class. Exploitation led to frustration and the working class
soon realized that they were quite weak and totally incapable of protesting individually
against the actions of the capitalist. It was during this time that social reformers like
Owen and Dr. William gave thought to the formulation of a new policy. The outcome
was co-operative movement with a new dimension and a wider scope.
If weak persons come together and formed an association of themselves, there was no
scope for exploitation and humiliation.
As stated, the evils of the capitalist system made social thinkers like Robert Owen and
Dr. William King of England think of an alternative and better economic system.
They visualized an ideal form of society based on cooperation and mutual help. By
1830’s, their dreams of creating a new world based co-operation did not become a
reality. A number of co-operatives were organized, but almost all of them failed. Finally
a group of 28 workers of Rochdale, an industrial town of England, organized a society,
which proved to be successful. The single factor that was responsible for the success of
this venture was that this society had absorbed the lessons of the previous failures.
These pioneers registered their society- “The Rochdale Society of Equitable Pioneers”-
on the 24th of October 1844 and began business on 21st of December 1844. This is said to
be true beginning of the modern co-operative movement.
The Co-operative movement is an alternative to capitalism, wherein it provides fair profit
to its members and better service to improve their quality of life. It aims at bringing
about welfare of not a particular individual but also of the whole community. It also aims
to transform the weak to strong and make them fit for a better life.
In 1904, the British government promulgated the Cooperative Societies Act, thereby
encouraging the formation of cooperative societies, especially agricultural cooperative
credit societies all over India. An amended cooperative societies law was enacted in
1912 to make the Cooperative Movement stronger. It was further amended in 1940 by
the Bengal Legislative Council to enact the Bengal Cooperative Societies Act to make
movement more effective. This law was in force in Bangladesh until 1984, when
Cooperative Societies Ordinance replaced it. At present, this law and the cooperative
rules of 1987 regulate all cooperative societies.

About cooperative societies

Cooperative Societies are Organizations that are registered under one of the Cooperative
Societies Acts. They work as independent economic enterprises. They extend various
services that include Finance to its members and member organizations. The Cooperative
Societies are expected to function on certain cooperative principles and cooperative
identity based on certain values of the Societies as a whole, within the framework of the
Cooperative Societies Acts and Rules.
Its objective was to make life better for the poor people, farmers, rural folks and urban
middle-class people.
Some of the Cooperative Societies existing and functioning in India are Housing
Societies, Industrial Societies, Labour Contract Societies, Salary Earners Societies,
Credit Societies, Primary Agricultural Credit Societies, Farmers Service Societies,
Adivasi Service Societies, Primary Cooperative Banks, Marketing Societies, Primary
Dairy Societies and Consumer Societies etc.

Cooperative Principles

 Voluntary and open membership

 Democratic member control
 Member economic participation
 Autonomy and independence
 Education and training of the members
 Cooperation among cooperatives
 Concern for community

Cooperative Values

 Self –help
 Self- responsibility
 Democracy

 Equity
 Solidarity
 Honesty
 Openness
 Social responsibility and care for others

DIAGRAM1: Organisation Structure (Operation):

Minister for Co-Operation

Secretary to Government

Commissioner for Co-


Additional Registrar Chief Auditor

Joint Registrar, Joint Registrar, Joint Registrar, Joint Registrar, Joint Registrar,
Accounts Legal
PMC, P&T Admn & ICDP Urban Banks

Dy.Registrar Dy.Registrar Dy.Registrar Dy.Registrar Dy.Registrar

Dy.Registrar Dy.Registrar Dy.Registrar Dy.Registrar Dy.Registrar

PMC-Performance Monitoring Cell
P&T – Planning & Training

 Minister for cooperation

 Secretary to government
 Commissioner for cooperation & Registrar of Cooperative Societies

Additional Registrars and Chief Auditor in the Cadre of Additional Registrar assist
the commissioner. The entire State is divided into zones. Each Additional Registrar
will be in charge of zones.

The commissioner is also assisted by the following Joint Registrars:

 Joint Registrar, Accounts

 Joint Registrar, Performance Monitoring Cell, Planning and Training
 Joint Registrar, Legal
 Joint Registrar, Administration and ICDP
 Joint Registrar, Urban Banks.
In every District one DISTRICT COOPERATIVE OFFICE is set up. An officer
of the cadre of Jt.Registrar heads the District Cooperative Office.
There are Divisional Cooperative Offices in the district. The District Cooperative
Office is controlling these offices. In each District there are 2-4 Divisional
Cooperative Offices. An officer of the cadre of Dy.Registrar heads these offices.
There are sub divisional Cooperative Offices workings under Divisional
Cooperative Office.

The basic guidelines for the formation of Co-operative society in state are as

 There should be at least ten persons or more as the Registrar may determine from
time to time.
 These persons should be from different families.
 These persons should be competent to enter in to contract under the Indian
contracts Act 1872.
 He should reside in the area of operation of the society.

 He should be eligible as per the bye-laws of the proposed society.
 Any individual, firm, company or any other body corporate can become member
of the society.
 The object of the society should be promotion of economic interest or general
welfare of the members or the public, in accordance with the cooperative
 It should be economically sound, its registration should not affect adversely on
the development of the cooperative movement.
 Its registration should not be contrary to the policy directives of the state

Procedure of Formation of a co-operative Society

Willing, eligible persons should come together and conduct a meeting. This meeting will
decide the name of the proposed Society, its object and bye-laws and then elect a Chief
Promoter authorizing him to sign the necessary documents on behalf of the promoter
members and open a bank account in the name of the proposed Society after obtaining
the necessary permission from the Registrar.
The Chief Promoter will apply to the Registrar for the reservation of name of the society
of the proposed society and permission to collect share-capital. He will then deposit the
collected share money in the bank account of the proposed Society.
The application for the registration has to be made in FORM-A. The promoters have to
give four copies of FORM-A to the Registrar along with copies of the byelaws and
necessary documents depending on the type of the Society. This has to be done after
receiving the name reservation from the Registrar and after collection of the necessary
share capital.
The application for registration should be accompanied with the scheme showing
economic feasibility of the proposed Society, bank balance certificate, list of the persons
who have contributed to the share capital and the entrance fee of the proposed Society.
The prescribed Registration fee has to be paid in to the Government Treasury.


DIAGRAM2: Co-Operative Societies Structure







NABARD: The National Bank for Agriculture and Rural Development
SCB: State Co-Operative Bank
DCCB: District or Central Co-Operative Banks
PACS : Primary Agricultural Co-Operative Societies

National Level Co-Operation Institutions:

National Federation of the State Co-Operation Bank

The committee on co-operative credit 1963 observed the absence of a national body that
would provide a positive leadership at the national level in developing the strength and
soundness of the co-operative credit system.
Up to that point the surplus deposits generated by a state co-operative bank could not be
utilized in a deficit state. So these banks having surplus funds trend to invest in other
avenues leading to funds going out of the co-operative system. So the committee
recommended the establishment of a national federation for both short term and long
term credit.
The National Federation of State Co-Operation Bank was established in 1964.

National Federation of Co-Operative Agriculture and Rural Development

In addition to their short term requirements, farmers also required long term credit for
various purposes. To carter to their requirements, long term credit co-operatives have
been set up. These are organized at two levels
At State Level:
State Co-Operative Agriculture and Rural Development Banks (SCARDB)
At Village/Local Level:
Primary Co-Operative Agriculture and Rural Development Banks [PCARDB]
The All India Rural Credit Review Committee recommended the necessity to have
national level federation to co-ordinate the functioning of the state level banks.
Accordingly the National Federation of Co-operative Agriculture and Rural
Development Bank came into existence. This was mainly to help the state level banks to
substantially increase their lending capacity, generate sufficient income in order to
increase their grip over the co-operative movement in the long term credit structure.

National Bank for Agriculture and Rural Development [NABARD]

The RBI of India took an active role in the field of agriculture credit ever since its
nationalization in 1949, for this purpose the RBI set up separate agricultural credit
development, which extended short term seasonal credit to agriculture through state
Co-operative banks and Land development Banks.
The RBI also had Rural Planning Credit Cell to promote rural economic planning and
development at the same time the RBI had also setup the agriculture refinance and
development co-operation [ARDC] to provide refinance support to the banks in their
development activities.
In 1981 the committee to Review Arrangement for Institutional Credit for agricultural
credit development recommended the establishment of the NATIONAL BANK FOR
AGRICULURE AND RURAL DEVELOPMENT. The government approved this
recommendation and consequently NABARD came into existence on 12th of July 1982.
These three institutes namely the Agriculture credit department and Rural Development
Credit Cell of the RBI and the Agriculture Refinance and Development Corporation
were amalgamated into NABARD, thus the NABARD was established to perform the
function of the RBI, as an Apex institute and the function of the ARCD as a refinancing
An Act of Parliament set up both the RBI the NABARD and the Government have
contributed equally to the share capital of NABARD.

NABARD linked organically with the RBI, which has three directors in the central

Apex Banks or State Co-operative Banks (SCBs)

The State Co-operative Bank is an institution, which works as the final link in the chain
between the primary societies and the money market. It is the vertex of the
pyramidal structure in a state for the provision of short and medium term credit on
a co-operative basis.

Objectives and Functions

 They act as banker’s bank to the central banks in the district. They not only
mobilize financial resources needed by the societies, but also deploy them
properly among the various sectors of the cooperative credit structure.
 They coordinate with their own policies with those of the cooperative movement
and the government.
 They formulate and execute uniform credit policies for the cooperative
movement as a whole.
 The cause of cooperation in general by granting subsidies to the central Co-
operative Banks for the development of cooperative activities.
 They act as a clearinghouse for the flow of money from the Apex bank to the
Central Banks and from the Central Banks to the rural societies and from them to
individual borrowers.
 They help the state Governments in drawing up co-operative development plans
and in their implementation.

District or Central Co-operative Banks (DCCBs)

The central banks work as an intermediary to link the primary credit societies with
money market. They serve as the “balancing center” for adjusting the surplus and
deficiency of working capital the primary credit societies.

Functions of DCCBs Banks

 To meet the credit requirement for primary member societies for production,
marketing and supply operation by arranging a regular flow of credit to them
 To undertake ordinary commercial banking business in rural areas
 To act as balancing centers for the primary societies by making them available
the surplus funds of some societies to those which face shortage of funds. They
thus equalize the flow of the capital at the primary level.
 To undertake non-credit activity, Surcharge the supply of seeds, manures,
foodstuffs and consumer goods.
 To maintain close and continuous contact with primary societies and provide
leadership to them.
 To supervise and inspect the primary societies ensure the satisfactory working of
recognized credit societies.
 To provide a safe place for the investment of resources of primary societies.

Primary Credit Societies (PCS)

The primary credit society is that operational level at the base of the co-operative credit
structure. They constitute the largest number of co-operative institutions in India. The
organization of these societies’ dates back to 1904 when first co-operative societies act
was passed. These societies were started with aim of providing micro credit to
agriculturists and free then from clutches of unscrupulous money lenders.

Functions of Primary Credit Societies

 To associate itself with the programmes of production
 To lend adequate amount to members for their agricultural and consumption
purposes limited to their repaying capacity

 To borrow adequate funds from central financial agencies for helping the
members adequately for the above purposes.
 To local savings for share capital and fixed deposits
 To supervise the use of loans and to see that they are paid punctually
 To distribute fertilizers, seeds, agricultural implements etc. either on its own
or on behalf of as an agent
 To store produce of its member till it sold

Primary Agricultural Credit Societies (PACS)

This is most important Primary Agriculture Credit Society or PACS.

Membership to a PACS is open for agriculturists, artisans and small traders in the
villages. The minimum initial membership is 10 with no upper limit regarding the
number of members. The value of each share is generally nominal so as to enable even
the poorest farmer to become a member. The members have unlimited liability, which
means that each member is fully responsible for the entire loss of the society in the event
of the failure. This will mean that all the members should know each other intimately.
Diagram 3: Organisation Structure

General Body Consist of all members

Managing Committee Elects the President,

Secretary & Treasurer


Are Paid Monthly Salary


The ultimate authority in affairs of a society is the General Body consisting of all the
members. To carry out the day-to-day administration General Body elects a small

managing committee, which consists of 5-9 members. Committee elects the president,
Secretary and Treasurer. All the office bearers render honorary service. In cases where
the society is large a clerk or / and accountant may be appointed to maintain the accounts
and who may be paid a monthly salary.
As per the constitution guiding functioning of PACS, universal membership has been
accepted by the standard policy. This is to enable the poorest of the poor to become
members and avail of its services.
Co-operative societies are classified on the basis of credit as follows
 Credit Societies
 Non-Credit Societies
Types of Credit:
 Short term
 Medium term
 Long term

Diagram 4: Credit Structure




PCS: Primary Credit Societies
DCCS: District or Central Co-Operative Societies
SCBs : State Co-Operative Banks
LDBs: Land Development Banks

Credit Societies

The Co-operative structure in the country consists of different types of co-operative

societies. At the base of this structure are primary societies, which render various types
of services. In India 80% of these societies are concerned with agriculture and 60% deal
with credit. Thus a larger proportion of primary societies are agricultural credit societies.
These societies were established to provide loan (short term) to farmers in order to save
the farmers from clutches of moneylenders. These institutions give loans only for
productive purposes. The repaying capacity of the individual will have to be taken in to
account while advancing such loans. These loans are called short term loan because
there period of repayment ranges from 1 year to 5 years. Farmers to purchase better
quality seeds, fertilizers, insecticides and pesticides, normally use short-term credit.

Non Credit Societies

They begin as marketing Societies, which we were set up to help the poor former in
marketing their products. The agrarian sector was characterized by the existence of
middle men who appropriated a major share of prices paid the consumer so the credit
societies which had been establish to save the poor farmers from clutches of money
lenders, started taking up work of helping them to market the products.

Financial Sector Reforms and Credit Cooperatives:

The process of economic and financial sector reforms were initiated in 1991, as a step
towards a broader process of international economic integration and globalization of
financial markets. The objectives of the reform program have been to remove the
structural constraints in the factor and product markets, allowing market forces to
improve efficiency and ensuring outward orientation to the economy for bringing about a
higher degree of integration of the Indian economy with the rest of the world. It may be
mentioned that the structural reforms in the trade regime and industrial and financial
policies have been given utmost priority in order to ensure macro-economic stability. A
healthy financial system being the principal pre-requisite for the globalization process,
the banking sector being an important component thereof came into sharper focus. The
financial system in India has built up a vast network of financial institutions and markets
over time, and the sector is dominated by the banking sector which accounts for about
two-thirds of the assets of the organized financial sector. The first phase of the current
reform of the financial sector was initiated in 1992 based on the recommendations of the
Committee on Financial System (CFS, 1992).
The progress that has been made in a substantial, yet non-disruptive manner has given
the confidence to launch what has been described as the second generation or second
phase of reforms especially for the banking sector. The report of the Committee on
Banking Sector Reforms (CBSR, 1998) provides a framework for the second phase of
reforms in the banking system. The broad features of the on going banking reforms have
been; gradual removal of pre-emptions (reduction in CRR and SLR), deregulation of
interest rates, tightening of prudential standards, competition and transparency,
improving the quality of supervision, partial removal of selective credit controls,
assistance to banks in debt recovery and reforms in money and forex markets. This apart,
needless to mention, the succinct objective of the banking sector reforms has been to
improve the efficiency in the system by introducing an element of competition. The
extension of reforms, particularly prudential standards to cooperative banking
institutions, an important component of the banking system was a natural corollary as the
weaknesses in cooperative segment could pose systemic risks.
Though cooperative banks operate at the district and state level, the urgency and
importance for extension of the reforms need hardly be emphasized keeping in view of

their reach and scale of operations. Therefore, the banking sector reforms could be
treated as complete only if it encompasses the cooperative segment, enabling the latter to
function on sound lines at par with other banking institutions. Accordingly, prudential
standards covering capital adequacy, income recognition, asset classification and
provisioning norms were made applicable to cooperative banks in a phased manner.
However, cooperative reforms encompassing legal and administrative aspects have not
taken place in India. This is on account of multiplicity of controls (administrative aspects
including registration are under State Cooperative Acts whereas financial supervision
and regulation is with the Central Bank of the country). The impact of the extension of
prudential standards to cooperative banks has resulted in an increased intervention by the
regulator and the Government in the name of the financial regulation/supervision.


Co-Operative Banks that are seen primarily in the urban areas of the country are given
the name “urban Co-Operative Banks”. Urban areas imply those areas, which are
recognized as town & cities. They are similar to commercial banks in their operations
with the promulgation of the Banking Regulation Act of 1949, any credit society which
has a paid up share capital of not less than Rs.20, 000/- and which does banking business
as specified under section 5(b) of the Banking Regulation Act of 1949 can use the word
“Bank” in its name. In either word the urban co-operative banks all functioned initially
as co-operative credit societies, which cratered to the requirements of the urbanites of the
country. The minimum requirement of paid up capital for a society to assume the status
of a bank differs from state to state. In certain states this is only Rs10, 000/-, which in
certain others it is even Rs.50, 000/- but it is mandatory that an urban-co-operative Bank
confirms its operations to the municipal area of a town.

An urban co-op Bank has to function within the precincts of its byelaws. Most co-
operative Banks began then operation as co-operative societies. Each society councils of
a large number of share holders, each holding a minimum of five shares, persons living
in urban areas alone could become members, generally traders, merchants, professionals
and salaried classes are members of urban co-operative banks. Some urban co-op banks
also admit firms and local bodies as members to a limited extent.

The management of these banks is in the hands of a Board of Directors who are elected
at the Annual General Body of the shareholders. The Board is normally elected for a
period between three years and five years. There are instances of the Board being
constituted once in two years. It is mandatory that these banks undertake both internal as
well as statutory audit. The Director Board elects from among its members the President,
the Secretary and the Treasurer. All three have joint financial responsibility. They shall
work without receiving any remuneration, i.e., their services shall be honorary. However,
the director board has the authority to appoint the necessary staff for the day to day
working of the bank. All employees should have the necessary qualifications in Co-
operation for being appointed in such banks.

Resources of the urban Co-operative Bank

 Main source of funds is deposits from the public in many forms. Their Banks
accept current, savings & Fixed deposits.
 Fixed deposits constitute a major portion of these total deposits.

 The RBI has permitted them to fix a rate of Interest, which is at least one percent,
more than the rate of Interest offered by the banking system.

 In recent times these banks have been given the permission to determine their
own interest rates.

 They get financial assistance from State Co-operative Banks in times of


 Increased involvement of the NABARD in urban credit.

 The RBI is also taking a lot of interest in the functioning of such banks; RBI is
subjecting these banks to frequent inspection since they perform regular banking
business like other commercial Banks.

 An urban Co-operative bank tends to focus its attention on particular groups on
professions to increase its resources as well as to cater the credit requirements.

Types of Loans

 Productive Purposes
 Consumption Purposes

Productive Loans:

 Business firms demand loans because of the time consuming nature of the
productive and distributive processes. So the loans taken by business
firms earn reasonable returns

Consumption Purposes: Consumer demand credit to acquire goods in advance for

which they pay in future. They are taken with the primary aim of buying durable
consumer goods. Normally such loans do not provide a return for the loanees.

Forms of lending for productive loans:

 Demand loans
 Term loans
 Gold Loans
 Export credit through the purchase and discounting of bills

Terms & Conditions:

 Purpose of Advance
 Capacity to Repay
 Nature of Business
 Security
 Liquidity

Terms & Conditions for Consumption loans:

 The bank assumes that the applicant is not enjoying similar facilities with other
banks. As far as possible, it tries to restrict the borrower to rely one bank
 The bank should obtain from the borrower a written application accompanied by
a declaration that in the event of non-payment, the bank may confiscate the
consumer good. At least two other shareholders should stand guarantee if the loan
is to be sanctioned.
 Generally short-term loans are sanctioned for such purposes. The rate of interest
charged is also normally higher than that of productive loans. The repayment is in
the form of equated monthly installments and interest is charged on a diminishing
basis. That means the interest is charged on amounts that remain of the principle

Consumption requirements to meet:

 Loans are granted to meet the medical needs of its members or depositors
 Loans are sanctioned to meet educational expenses of either the shareholders
themselves or that of their children
 Loans are also given to meet expenses related to marriages and other social
ceremonies of its members.
 Purchase of durable consumer goods, in such cases the durable goods purchased
are under hypothecation to the banks till the loan is repaid. A hypothecation is
also called are “open loan”

Chapter 3
Problem Statement
The CSBs were formed with an objective of an improving the standard of life by
eliminating the uneven distribution of wealth in rural areas. But the purpose was not
served, as many CSBs did not function properly due to inefficient management. The
reason behind this research is to understand the causes for the failure of CSBs
Research objective

The purpose of this research is to study Co-operative Societies banks especially in

Karnataka in depth, evaluation of their methodologies problems faced by this banks both

internal and external and providing solutions to minimize this problems.

Research methodology

This study is based on exploratory research method.

Sources of data: Primary and Secondary.

Primary data is collected by using Exploratory research method from Cooperative bank

For both primary and secondary data following methods were also adopted

 The participant observation.

 Interview techniques.

 Informal discussion with various functionaries.

 Historical methods.

 Study of literature like books, reports and journal articles on the CSBs.

 Study was also made of the Cooperative Societies ACT, RULES,

REGULATIONS and other published literatures.

 Visited branches and discussed officially and non- officially.

 Informal unstructured interview techniques

Sampling method:

Non random (convenience and judgmental sampling) methods was used due to
constraints of time and cost.

Sampling unit:

Cooperative banks management and employees.

Sampling size:

10 Cooperative banks.

Method of contact:

Personal Interview.

Research instrument:

Interview technique was used to collect the primary data.

Profile of the respondents

Respondents were the employees of cooperative society bank the list of the respondents
as framed on the basis of convenience and judgmental sampling. The respondents were
knowledgeable and were giving the true information.

Thematic Framework for Analysis:

The literature relating to the economic reforms, impact of reforms on cooperative sector,
Banking reforms and its impact on credit cooperatives and so on are rather opulent. In so
far as the impact of reforms on the cooperative character of the cooperatives is
concerned, be it in credit or non-credit segment, one may safely say that neither the

policy makers nor the researchers have shown any serious interest. And this is
particularly true in India. It seems the cooperative researchers, particularly doctoral
students are more concerned with the assessment and measurement of the impact of
reforms on the performance of cooperatives using a definite and quantifiable parameters.
While the difficulties in examining the impact of reforms on the cooperative character of
cooperatives are quite understandable, it does not mean the same can not be attempted
meaningfully. What is required perhaps is a normative analytical framework, which is
different from the one usually used for capturing the impact of reforms on cooperatives.
Using this normative analytical framework, Ramesha (1996) in his empirical study
points out that Self Help Groups (SHGs) which are not registered as cooperatives are, in
practice, much closer to cooperative principles than cooperatives themselves. Given the
diversity that prevails today in the cooperative sector and the levels of reforms
Thereof, a general discussion on the impact of reforms (economic or banking sector) on
cooperative character would be almost impossible. For the sake of research, even if one
attempts, the conclusions could be abstruse. Thus, in the present paper an attempt is
made to evolve a conceptual framework for further research concerning Urban
Cooperative Banks (UCBs) in India against the backdrop of banking sector reforms.
However, all through the discussion, it is attempted to maintain a special thrust on the
cooperative character of UCBs. The analytical framework for the aforesaid purpose rests
on three basic assumptions;
(i) Banking sector reforms essentially refers to the guidelines/directions from the
regulator (central bank of the country) and the Government during the last ten years.
(ii) Urban Cooperative Banks (falling under Banking Regulation Act of 1949) are more
influenced by banking sector reforms in the short-run than other credit cooperatives.
(iii) Cooperative character of urban cooperative banks can be captured in terms of the
adherence to cooperative principles.

Secondary Data Analysis
Graphical Analysis of SCBs Vs DCCBs:


Chart 1.a:

50000 43997
40000 36853
28354 25698
30000 24606
19588 21902
16585 18312
31.3.1996 31.3.1997 31.3.1998 31.3.1999 21.3.2000

The above graph depicts the growth in loans outstanding for SCBs as well as for DCCBs.
from the above shown graph it is clear that the rate of outstanding loans is more in CBs
when compared to SCBs .


Chart 1.b:

Recovery Percentage

100% 90% 86% 84% 83%

80% 69% 70% 70% 70% 69%
1995-96 1996-97 1997-98 1998-99 1999-00


The above graph depicts recovery percentage of SCBs and DCCBs.From the graph it is
clear that SCBs are able to recover their loans far better than DCCBs.




400 271 244

134 135
1997-98 1998-99 1999-2000

Profit Loss Accumulated Loss


Profitability -DCCBs

3000 2817
2143 2483
(Rs Crore)


303 358
1997-98 1998-99 1999-2000
Profit Loss Acccumulated Loss

The above charts show the profitability position of SCBs and DCCBs
Profit: The profit earned by SCBs is increasing steeply when compare to profits earned
by DCCB’s.

Loss: The loss incurred by SCBs has been reduced drastically over the period of 1997-
2000, when compared to the losses incurred DCCB’s has been almost the same over the
period of 1997-2000.
Accumulated Loss (AL): The AL of SCBs had increased in the period 1998-99 which
was later controlled and reduced in 1999-2000, but when compared to AL of 1997-98 the
AL of 1999-2000 has increased.

Information Source (From books on):

Dossier on Co-Operatives, Edition-March 2000
National Bank for Agriculture and Rural Development (NABARD)

Cooperative Banking in Karnataka

Cooperative Banking is a concept arising out of cooperative efforts for group welfare. It
provides for the collective savings of small amounts of money by a group of people
belonging to the same profession or class and utilization of that capital to try to enhance
their income. Cooperative Banking essentially tries to collect the savings of the
cooperative societies and attempts to invest them among the members. The cooperative
banking sector caters to the varied needs of small investors and small business. Role
played by Government of Karnataka in Cooperative Societies

The State Government has participated in the cooperative movement actively by

providing adequate share capital, loans, grants and subsidies to the cooperative
institutions, for the upliftment of downtrodden and fro the purpose of bringing social and
economic changes in the life of members of the society I particular and that of common
public in general. Cooperative societies have been established in several sectors like
credit, banking, processing, production, housing, warehousing, transport and many other
spheres related with agriculture and industries. These cooperatives are being engaged as
effective tools for ensuring equal distribution of state wealth among all sections of the
society by providing them with Governments loans, subsidies and grants.
In order to protect the interest of public funds and to ensure that the administrative and
executive authorities use this fund, in the best interest of the organization, government
engaged cooperative audit as a main weapon. Government of Karnataka established the

Directorate of Cooperative Audit in the year 1977 conferring all required statutory
powers and responsibilities to perform its function like a guide to the cooperative
societies in particular and the cooperative movement as a whole, in general.
The Directorate of Cooperative Audit and its personnel are striving hard to conduct the
audit of all cooperative societies in Karnataka at least once in a year as by Karnataka
Societies Act 1959. A Director at the state level heads the department. In each district, a
Deputy Director is heading the district level office. At the subdivision level, an Assistant
Director is heading the office and at taluka level Senior Auditor is heading the office.
Along with this setup, hundreds of Auditors, and other supporting staff are striving hard
to reach, Audit, and guide all categories of societies, scattered over every nook and
corner of the state Cooperative society has also setup a website called SAHAKARA
DARPANA. This website is like a mirror reflecting the true and correct financial
position of all the cooperatives in the state. In pursuit of bringing higher degree of
transparency in the Government, the State Government is implementing the e-
governance strategy throughout the state in all departments. In keeping with the policy
the department of Cooperative Audit is also striving hard not only to bring in
transparency in highlighting the financial position, strength and weaknesses of
cooperative institutions by hosting on the web the abridged audit report. This website
being citizen friendly, it helps every individual who is interested to participate in the
business of a particular cooperative society as it provides comprehensive information
about the financial position, its liability and irregularities if any in the institution. The
website also provides information required by the members of the society, the common
citizen and also to the government.


 Short-term cooperative credit structure in Karnataka consists of the

Karnataka State Cooperative Bank (KSCAB) at the apex level, 19
Structure District Central Cooperative Banks (DCCB’s) at the district level and
4339 Primary Agricultural Cooperative Societies (PACS) at the
bottom of the three tier structure.

 Apex bank functions through a network of 28 branches and the

DCCB’s purvey credit through its 626 branches.

 4339 PACS cater to the needs of 29193 villages located in 27 districts

in the ratio of 1 PACS for 6-7 villages.

Membership  PACS had a membership of 57, 21,250 and the borrowing members at
18, 50,750 constituted a mere 32.35%.

Resources  During 1999-2000, the share capital of KSCAB declined by Rs.0.05

lakh to Rs.24.25 crore and the state government contribution remained
unchanged at Rs.1.21 crore.

 DCCB’s registered a growth of 9% in share capital during 1999-2000

over the previous year. Govt. contribution in the share capital of
DCCB’s increased by 3% during 1999-2000. The share capital of
PACS increased by 17% during 1998-99 with an increase of around
46% in Govt. share capital contribution.

 Deposits of KSCAB increased by 28% during 1999-2000 as compared

to 16% during 1997-98 and 26% during 1998-99.

 Deposits of DCCB are increased by 25% during 1999-2000 over the

previous year.

 Deposits constituted 63.22% & 71.33% of the total resources of

KSCAB & DCCB’s respectively as on 31 March 2000.

 Borrowings outstanding of KSCAB increased by 19% from Rs.506.53

crore in 1998-99 to 603.93 crore in 1999-2000. Respect of DCCB’s,
the growth was 17% from Rs. 640.54 crore to Rs. 748.60 crore during
the same period. At the PACS level, it increased by about 31% from
Rs.583.92 crore during 1997-98 to Rs.766.52 crore during 1998-99.

 Overall resources (owned funds+deposits+borrowings) of apex bank
and DCCB’s increased by 24% and 22% respectively during 1999-
2000 over the previous year.

 During 1999-2000, the investment made by KSCAB increased by

29.58% from Rs.717.59 crore in 1998-99 to Rs.929.86 crore in 1999-
Investments 2000. Out of the total investments of KSCAB, Rs.345.28 crore and
Rs.54.58 crore were invested for SLR and non-SLR purposes

 Investments of DCCB’s increased from Rs.831.01 crore in 1998-99 to

Rs. 1012.39 crore in 1999-2000 registering a growth of 21.83%.

Outreach  Overall Loans issued during 1999-2000 increased by 6% and 15%

over the previous year in case of apex bank and DCCB’s respectively.

 Loans issued by PACS during 1998-99 at Rs.1258.35 crore registered

a substantial growth of 52% (Rs.829.34 crore in 1997-98). During
1997-98 there was a decline of 5% in the amount of loans issued.

 At the apex bank and DCCB’s level, 60% and 54% of the total loans
outstanding as on 31 March 2000 were for agricultural purposes.

Management  As at the end of 1998-99, the KSCAB and all 19 DCCB’s had elected

 The KSCAB has been awarded “A” class audit classification during
the last three years.

 During 1999-2000, 9 DCCB’s were awarded “A” class, 3 were

awarded “B”, 3 were awarded “C” and 2 DCCB’s was awarded “D”
class classification.

Profitability  KSCAB earned a profit of Rs.16.21 crore during 1999-2000.

 For 1999-2000, 16 DCCB’s were in profit (Rs.27.11 crore) and 3

DCCB’s in loss (Rs.30.15 crore) as against 17 in profit (Rs.21.98
crore) and 2 in loss (Rs.6.83 crore)during 1998-99.

 Cost of management as % to working capital decreased from 0.72%
(1997-98) to o.69% (1998-99) and further to 0.58 in 1999-2000 in
respect of KSCAB. The same in respect of DCCB’s during the year
1998-99 and 1999-2000 stood at 2.23%.

 Out of the 19 DCCB’s, 2 DCCB’s viz., Bangalore and Gulbarga were

not complying with the provisions of Sec.11(1) of B.R. Act, 1949
(AACS) as on 30 September 2000.

Classification  Impaired assets of KSCAB decreased by 21.33% from Rs.34.04 crore

Of Assets as on 31 March 1999 to Rs.26.78 crore as on 31 March 2000. impaired
(NPAs) assets of DCCB’s increased by 19.36% from Rs.304.83 crore as on 31
March 1999 to Rs.363.84 crore as on 31 March 2000, NPAs as on 31
March 2000 constituted 2% (KSCAB) and 14% (DCCBs) of their total
outstanding loans and advances as on that date.

Erosion in  There was no erosion in asses at the apex level accumulated loss at
Assets Rs.110.13 crore and imbalances at Rs.92.59 crore together with
unprovided bad debts of Rs. 133 crore eroded the owner funds to the
extent of 58% at the DCCBs level as on 31 March 2000.

Remedial Following remedial measures are recommended to strengthen the cooperative

measures credit structure.

 Diversification of advances and investments portfolio to improve

financial margin.

 Revision of interest rates on deposits/loans to take advantage of


 Building up of sizeable owned funds

 Intensification of deposit mobilization efforts and proper deposit mix.

 Liquidation/amalgamation of non-viable PACS

 Recovery drives at the level of DCCBs/PACS/PACS during harvesting


season, extension of assistance and necessary support from State

Structure  TheGovt./RCS
long-term and case by case
cooperative creditanalysis of in
structure chronic overdue
the State accounts.
is Federal
comprising of Karnataka State Cooperative Agriculture and Rural
Arresting imbalances
Development amongst different
Bank (KSCARDB) tiers
at the apex of the
level andstructure.
177 Primary Co-
operative agriculture and Rural Development Banks (PCARDBs)
affiliated to it. should clear all co-operative dues.
State Govt.

 Control over cost of management, non-earning assets.

Membership  The total membership of the 177 PLDBs stood at 10.02,242 of which, at
fundsmembers were 6,66,889 forming 66.54%.

Resources  The contribution of the State Govt. to the share capital of KSCARDB
remained static at Rs. 4.45 crore during the last three years, whereas the
State Govt’s share in respect of PCARDBs increased to Rs.5.68 crore in
1999-2000 from Rs.4.70 crore in 1998-99.

 The deposits of the SCARDS stood at Rs.29.63 crore in 1999-2000 as

compared to Rs.18.28 crore during 1998-99, a growth of 62%. The
growth in deposits at PCARDBs level was 41% from Rs.38.50 crore
(1998-99) to Rs.54.40 crore (1998-99).

 The borrowings (outstanding) as on 31 March 2000 registered a growth

of 5% and 7% at the apex and PCARDBs level respectively over the
previous year.
Information Source (From books on):
 The total resources of SCARDB & PCARDBs at Rs.1343.61 crore and
Rs.1402.22 crore (1999-2000) registered improvement of around 7% &
10% respectively over the 1998-99 level.

 86% and 82% of the total resources of the SCARDB & PCARDBs
respectively were in the form of borrowings. This is indicative of the fact
that L.T. Structure in Karnataka was highly dependent on other external
financial agencies for augmenting its resources.

Investments  The total investment of KSCARDB as at the end of March 2000 stood at
Rs.170.59 crore as against Rs.151.33 crore as at the end of March 1999.

 The sinking fund investment recorded a growth of 19% during 1999-2000

over the previous year and fully matched with the requirement in respect
of ordinary debentures redemption.

 There was no deficit in the maintenance of sinking fund investments


 the last three years.

 The loans issued during 1999-2000 at Rs.164.67 crore (apex level) and
Rs.208.70 crore (PCARDBs) showed a growth of 10% &15% 43
Outreach respectively over the preceding year.
Dossier on Co-Operatives, Edition-March 2000
National Bank for Agriculture and Rural Development (NABARD)

Analysis of Comparison of Cooperative banks with commercial banks

Capital is widely regarded as a measure of the risk taking ability of a financial

intermediary and therefore, prescription of a minimum capital the urban Cooperative
bank (to conduct banking business) may seem to be justified from the viewpoint of
ensuring stability in the financial system. If one looks at a cooperative credit
society/bank, as a typical cooperative created on the basis self help and mutual help, then
possibly the members (generally with limited means) may not be able to raise the
required capital. If capital base is to be strengthened, as it is happening in India, these
banks will have to start dealing with non-members (or nominal members) on a large
scale and perhaps may have to shift from .surplus. to .profit.. The need to increase the
deposit base as also to gainfully employ the funds generated have made it necessary to
have a large number of customers who are not the members. It is worth mentioning that
in India, urban cooperative banks though on par with commercial banks with regard to
prudential standards, like the latter, are not permitted to boost their capital base through
sub-ordinate debts. Further, there are ceilings on the value individual share holdings have
not been revised since long.

Chart 3:
Comparison of NetProfit between cooperative
banks and commercial banks

Net Profit

4000 Private sector banks

2000 Cooperative banks
Public Sector banks
-2000 1 5 9 13 17 21 25 29

From the above graph it is shown that profitability of cooperative bank with respect to
other commercial bank is very less. Totally there are 2084 Urban cooperative banks with
7368 branch outlets in that more than 200 urban cooperative banks are identified as
eak/sick banks by the regulator.

Chart 4: Profit per Employee of Cooperative Banks

Profit per Employee Chart of Profit per employee of Cooperative banks

in Percentage

0 Series1
-5 1 6 11 16 21 26 31 36 41 46 51



From the above chart it is shown profit per employee of cooperative banks from this
inference it is clearly shows the cooperative banks are still in same old policy that
cooperative society is not for profit it is for service oriented it is difficult to follow in this
competitive world.

Deposit Size-Wise Distribution of Urban Cooperative Banks(UCB’s) in

India(as on March 31, 2003)

UCB’s are generally small-sized banks. About 44 percent of UCB’s in 2002-03 were
with deposits of less than 10 crore; another 24 percent were with deposits of about Rs 10
to 25 crore. The UCB’s normally confine their area of operations to localized
geographical regions i.e they are mostly local banks,, but some of them have expanded
their network beyond a district or stste in which they are registered. Their client profile
primarily comprises small business units, small-scale industries, retailers, professionals,
self-employed, transport operators, etc. some of them have been permitted to undertake
forex and merchant banking operations

Chart 5:
Size-Wise Distribution of UCB's in
Percentage of UCB's India

Less than

Rs 25-50

RS 100-

Rs 500-
Rs 10


Deposit Size

Source: financial Institutions and Markets by LM BHOLE page:9.13

Chart 6: Analysis of Primary research data:

Sample Cooperative banks NPAlevel













From the above chart it is clearly shown that the average NPA of sample cooperative
banks is above 10% which is not a healthy sign.

Percentage of Commercial bank Customers transactions by various


14% 3% ATM
40% Branches

43% Internet & Mobile

Chart 7.b

7% Branches
53% Telephone
Internet & Mobile


The above chart shows the change in commercial bank customer’s transaction from 2001
to 2005. Here it is clearly shown that technology plays a vital role in retail banking that
cooperative banks are not providing for there customers like other commercial banks.

Chapter 4

Summary of Findings, Suggestions and Conclusion


1. No competent and qualified man power in the visited banks.

There is no good leadership majority of cooperative banks are headed by politicians
who don’t have required qualification and competency level and as cooperative is not
able to pay according to industry standards they fail to attract competent young talent
2. Majority of visited banks are of unitary type i.e with only one branch.
More than 50% of cooperative banks in India are unitary type, therefore cooperative
banks are like local banks catering to small geographical.
3. Cooperative banks are suffering from high percentage of NPA.
As there is no quality lending and also recovery system is very weak the average
NPA of cooperative bank is somewhere between 16%-22% majority cooperative
banks are suffering from consequences of high NPA rate.
4. Net profits of cooperative banks are very less compare commercial banks.
The main reason is cooperative banks is doing business with the surplus amount not
with investments like commercial banks that will not be sufficient to reap profit and
also they have constraints to raise funds like commercial banks.
5. Profit per employee is very low.
In so many cases it is running under loss as shown in above graph.


1. Cooperative banks has to diversify there business according to the change in

requirements of its customers/members.
2. Cooperative banks both urban/rural has to concentrate more on SME’s because
it’s growing at more than 10% per annum.
3. Competent and professionally trained board of directors and employees has to be
selected for cooperative society bank.
4. Good governance has to be setup in cooperative society bank within the guiding
principles of cooperation.

5. In cooperative banks main driver should be profit oriented in addition to service

While the progress of the cooperative movement in India in general, and the cooperative
banking in particular has been rather appreciable, the movement can not be termed as a
vibrant one in regard to cooperative values and philosophy as enunciated in cooperative
principles. With regard to the extension of reforms to cooperative banking segment, it is
yet not clear as to whether the same would ensure soundness and stability in the
cooperative banking segment. Although the promotion of prudent financial practices in
urban cooperative banks has become a sine quo non in the present competitive
environment, one can not afford to ignore that such practices were contrived essentially
for commercial banks. It must not be forgotten that the notion of a code of good practices
though intuitively appealing, the temptation to prescribe universally valid model codes
which do not allow for differences in institutional development, legislative framework
and more broadly, different stages of development must be avoided. It seems the
extension of reforms/prudential standards to urban cooperative banking has provided
substantial scope for the external intervention and in the process, affecting the
cooperative character in terms of adherence to the cooperative principles. Logically, if
the prudential standards, and supervision and regulation for cooperative banks were same
as that of commercial banks, then there would not be any difference worth mentioning
between these entities. There are several areas that need the intervention of researchers
and perhaps, more important amongst them are prudential standards, professional
management & governance and supervision & regulation. The framework for such
research should essentially be within the guiding principles of cooperation. However, in
the long run, if cooperative character of credit cooperatives is to be preserved, the
prudent practices, system of governance and supervision & regulation all should emanate
from the guiding principles of cooperation.


Books Referred

1. The Karnataka Co-Operative Societies Act, 1959 & Rules 1960, by

Prof V.Narayana Swamy, High court Advocate.

2. Co-Operation by Dr.N.Ajith Kumar MA, Ph.D.

3. Business Research Methods by Donald R. Cooper Pamela S.Schindler.

4. Co-Operative Banks and The Banking Regulation Act, 1949.

5. District central Co-Operative Banks in India, Directory 2002-2003.

6. Reading Materials: Agricultural Co-Operative Staff Training Institute.

7. Dossier on Co-Operatives, March 2000 NABARD.

8. Ramesha K (1996): Self-Help Groups: Emerging Cooperatives, paper presented
at the National Seminar on Rediscovering Cooperation, November 19-21, 1996.
Paper subsequently published in Rajagopalan R edited Rediscovering
Cooperation (Volume II), Institute of Rural Management Anand, 1996.
9. Reserve Bank of India (2002): Report on Trend and Progress of Banking in India
2001-2002, RBI, Mumbai.
10. Government of India (1998): Report of the Committee on Banking Sector
Reforms, RBI, Mumbai.

Websites Referred

Appendix Table IV.5: Select Financial Parameters of Scheduled

Urban Co-operative Banks(As on March 31, 2005)

Average Business
Net Non
Operating Cost of per Profit
Interest Interest Return
Sr. Profit/ Deposits Employee per
Name of the Bank CRAR Income/ Income/ on
No. Working (per cent Employee
Working Working Assets
Funds per (Rs. in (Per cent)
Funds Funds
annum) Lakhs)
1 2 3 4 5 6 7 8 9 10

Abhyudaya Co-operative
1 41.74 1.2 0.15 0.68 0.05 5.4 187.99 0.1
Bank Ltd.
Ahmedabad Mercantile
2 62.65 3.78 0.26 2 0.52 6.4 137.68 0.93
Co-operative Bank Ltd.
Amanath Co-operative
3 6.75 -0.25 0.47 -3.11 -6.94 6.9 130.61 -7.99
Bank Ltd.
Andhra Pradesh Mahesh
4 Co-operative Urban Bank 44.48 3.38 0.84 1.41 0.78 7.44 107.32 0.86
Bassein Catholic Co-
5 29.13 3.73 0.46 2.55 2.06 6.53 321.79 5.26
operative Bank Ltd.
Bharat Co-operative Bank
6 16.5 4.22 0.56 2.03 1.06 5.91 271.49 2.12
(Mumbai) Ltd.
Bharati Sahakari Bank
7 12.36 2.02 0.97 1.26 0.26 8 177.68 0.36
Bombay Mercantile Co-
8 -16.66 1.7 2.78 1.04 0.08 4.87 94.39 0.09
operative Bank Ltd.
Citizencredit Co-operative
9 17.35 2.93 0.48 1.61 1.49 5.14 295.24 3.86
Bank Ltd.
Co-operative Bank of
10 -36.89 3.87 0.23 0.63 0.53 5.84 130.18 0.66
Ahmedabad Ltd.
Cosmos Co-operative
11 17.19 2.76 0.66 1.64 1.1 6.84 349.29 3.14
Urban Bank Ltd.
Dombivli Nagari Sahakari
12 14.53 3.62 0.7 2.43 0.88 5.92 255.15 1.79
Bank Ltd.
Goa Urban Co-operative
13 14.87 3.59 0.47 0.68 0.6 5.76 169.68 0.87
Bank Ltd.
Greater Bombay Co-
14 12.54 2.55 1.42 1.5 0.6 7.12 252.2 1.48
operative Bank Ltd.
Ichalkaranji Janata
15 12.32 1.95 1 0.73 0.28 8.03 175.51 0.36
Sahakari Bank Ltd.
Indian Mercantile Co-
16 20.72 4.72 1.09 3.62 2.96 5.57 111.09 2.53
operative Bank Ltd.
Jalgaon Janata Sahakari
17 10.06 2.79 0.58 0.27 0.03 7.71 160.33 0.05
Bank Ltd.
Janakalyan Sahakari
18 6.96 0.29 0.95 -0.98 -2.87 7.47 396.89 -7.58
Bank Ltd.
Janalaxmi Co-operative
19 14.11 5.61 0.88 4.86 0.74 7.92 105.28 0.73
Bank Ltd.
Janata Sahakari Bank
20 -11.94 1.49 1.6 1.16 0.02 6.63 244.82 0.03
Kalupur Commercial Co-
21 45.02 2.3 1.7 1.42 1.08 7.01 343.62 4.14
operative Bank Ltd.
Kalyan Janata Sahakari
22 12.8 2.86 0.88 1.78 0.85 5.92 235.64 1.55
Bank Ltd.
Kapole Co-operative
23 14.43 2.18 4.19 3 0.32 6.05 143.87 0.44
Bank Ltd.
Karad Urban Co-
24 13.08 2.73 0.38 0.28 0.07 6.81 122.04 0.07
operative Bank Ltd.
Madhavpura Mercantile
25 1,141.4 N.A. N.A. N.A. N.A. N.A. N.A. N.A.
Co-operative Bank Ltd.
26 Mahanagar Co-operative 16.46 4.24 0.47 0.92 0.59 6.26 160.97 0.77

Bank Ltd.
Mandvi Co-operative
27 12.3 2.52 0.62 0.73 0.27 6.72 334.32 0.71
Bank Ltd.
Mapusa Urban Co-
28 operative Bank of Goa -51.42 -3.49 0.45 -6.38 -4.95 6.46 116.31 -4.88
Mehsana Urban Co-
29 14.46 1.52 0.54 1.07 0.92 9.33 269.59 2.15
operative Bank Ltd.
Nagar Urban Co-
30 10.65 2.69 0.47 0.93 0.23 7.74 186.57 0.33
operative Bank Ltd.
Nagpur Nagrik Sahakari
31 12.44 2.1 1.45 0.53 0.21 6.37 153.74 0.25
Bank Ltd.
Nasik Merchant’s Co-
32 31.71 4.47 1.26 3.35 1.09 6.76 99.62 1.04
operative Bank Ltd.
New India Co-operative
33 42.07 4.28 0.41 1.55 1.37 4.9 194.31 2.42
Bank Ltd.
North Kanara GSB Co-
34 13.8 3.08 0.62 2.05 1.06 6.08 351.14 2.88
operative Bank Ltd.
Nutan Nagarik Sahakari
35 46.53 2.91 1.31 1.54 0.91 6.26 153.39 1.36
Bank Ltd.
Parsik Janata Sahakari
36 27.15 3.89 0.45 2.28 1.13 5.06 191.98 1.95
Bank Ltd.
Pravara Sahakari Bank
37 8.39 2.67 0.45 1.04 0 8.8 147.76 0
Punjab and Maharashtra
38 13.45 2.98 0.78 1.37 0.96 7.31 283.45 1.96
Co-operative Bank Ltd.
Rajkot Nagrik Sahakari
39 30.35 2.05 0.01 0.75 0.57 6.75 256.48 1.66
Bank Ltd.
Rupee Co-operative Bank
40 -54.14 -0.88 0.31 -2.63 -2.34 7.49 215.37 -4.6
Sangli Urban Co-
41 9.74 1.79 0.42 -1.01 -1.06 7.8 73.68 -0.64
operative Bank Ltd.
Saraswat Co-operative
42 15.23 0.63 0.57 0.52 0.07 5.75 456.65 0.28
Bank Ltd.
Sardar Bhiladwala Pardi
43 Peoples’ Co-operative 45.91 4.14 1.02 2.86 0.63 7.17 154.14 1.02
Bank Ltd.
Shamrao Vithal Co-
44 12.77 3.63 0.73 1.67 0.84 6.79 435.77 2.69
operative Bank Ltd.
Shikshak Sahakari Bank
45 5.7 2.13 0.42 0.72 -0.77 7.49 226.81 -1.31
Solapur Janata Sahakari
46 10.59 2.48 0.34 0.75 0.33 8.51 174.49 0.45
Bank Ltd.
Surat Peoples Co-
47 28 4.53 0.54 2.57 0.94 6.08 212.24 1.82
operative Bank Ltd.
Thane Bharat Sahakari
48 13.78 3.59 0.44 1.88 0.84 6.62 205.72 1.33
Bank Ltd.
Thane Janata Sahakari
49 20.29 3.79 0.39 2.01 1.35 5.87 353.79 3.71
Bank Ltd.
The Akola Janata
50 Commercial Co-operative 11.21 2.05 1.15 1.36 0.34 8.01 151.04 0.39
Bank Ltd.
The Akola Urban Co-
51 10.84 1.47 0.39 0.47 0.27 8.18 233.03 0.43
operative Bank Ltd.
The Khamgaon Urban
52 9.14 2.1 0.51 0.92 -0.3 13.43 154.98 -0.35
Co-operative Bank Ltd.
Zoroastrian Co-operative
53 19.94 3.72 0.18 2.35 1.02 5.86 332.66 2.67
Bank Ltd.

N.A. : Not Available.

Note :Out of 55 Scheduled UCBs, data in respect of two UCBs, viz., Charminar Co-operative
Urban Bank Ltd. and Vasavi Co-operative Urban Bank Ltd. Are not available.

INDUSTRY >> FACT SHEET >> Services >> Banks & Finance >> Banks >>
Private Sector [No. of Cos: 90]

Full Year (Rs Cr.)

Company Name Year End y Gr. Blk Sales NP

Abhyudaya Bank 200503 20.21 17.69 208.26 22.17

ABN Amro Bank NV 200503 169.02 254.65 1414.63 195.22
Amer. Exp. Bank 200503 25.41 152.14 526.42 16.41
Antwerp Diamond 200503 114.71 5.01 32.4 6.68
Apna Sahak. Bank 200503 5.28 10.77 53.65 5.05
Bank Muscat 200203 44 7.47 27.51 0.66
Bank of America 200503 0.2 66.22 394.08 79.96
Bank of Ceylon 200503 38.09 1.55 14.29 2.15
Bank of Rajasth. 200503 107.57 189.58 650.29 35.1
Bank of Tokyo-Mi 200503 99.78 38.1 116.64 10.65
Bharat Coop Bank 200503 22.4 42.01 121.87 14.07
Bharat Over.Bank 200503 15.75 75.4 245.22 19.99
Bombay Mercant 200503 10.9 133.19 161.36 2.33
Catholic Bank 200503 10.88 81.33 429.63 10.68
Centurion BnkP 200603 140.83 670.4 1114.57 25.29
Chase Manhattan 200203 167.82 4.85 64.33 11.97
Chinatrust C Bk 200303 35.46 6.98 18.06 2.71
Cho Hung Bnk 200503 34.54 3.63 18.07 6.14
Citibank N. A. 200503 167.46 885.48 3257.1 599.53
CitizenCred. Cop 200503 9.87 21.08 61.27 8.22
City Co-op Bank 200503 2.23 5.25 15.43 0.61
City Union Bank 200603 24 55.76 370.75 56.37
Cosmos Cp Bank 200303 34.37 32.81 272.83 30.06
DBS Bank 200503 49.54 8.76 39.44 9.19
Deccan Merc. Co. 200203 1.66 2.07 18.17 2.21
Deutsche Bank 200503 392.68 172.83 812.67 75.51
Dhanalaksh.Bank 200603 32.06 68.44 236.94 9.51
Federal Bank 200603 85.6 366.36 1653.48 225.21
Friends Cp Bank 199503 0.4 0 1.5 0.04
Fuji Bank 200503 70.86 5.5 28.55 9.69
Greater Bombay 200503 10.23 24.97 98.02 7.01
HDFC Bank 200603 313.69 1589.47 5688.98 870.59
Hindusthan Merca 199703 1 0 0.18 0.1
Hongkong & Shang 200403 715.03 725.82 2119.34 255.78
ICICI Bank 200603 891.69 5525.65 18767.63 2540.07
IndusInd Bank 200503 290.32 571.49 1391.47 215.26
ING Vysya Bank 200603 90.72 629.22 1412.75 9.06
J & K Bank 200603 48.49 381.44 1839.43 176.84
Jai Hind Cp Bank 200203 0.98 0.07 6.62 0.82
Jain Sahak. Bank 200303 1.99 2.44 6.48 0.22
Janakalyan Bank 200403 24.49 15.8 158.69 6.16
K B C Bank 200103 58.76 3.63 60.09 1.29
Kapol Co-op Bank 200503 6.37 6.92 63.42 1.81
Karnataka Bank 200603 121.28 219.52 1184.98 176.12

Karur Vysya Bank 200603 18 199.11 794.05 135.42
Kotak Mah. Bank 200603 324.3 168.58 936.95 118.23
Krung Thai Bank 200503 35.84 1.69 4 0.02
Lak. Vilas Bank 200603 19.57 92.2 368.13 22.47
Mandvi Bank 200503 6.78 9.56 52.77 1.68
Mangal Coop Bank 200503 0.89 1.06 2.42 0.22
Mashreqbank PSC 200503 48.38 5.56 32.5 3.71
Memon Co-op Bank 200303 1.87 13.75 30.58 4.63
Model Co-op Bank 200503 3.1 1.27 14.75 1.12
Mogaveera Co-op 200403 4.83 11.56 29.12 0.4
Mumbai Dist.Bank 200503 38.86 17.76 417.84 11.09
Nainital Bank 200203 5 4.04 66.66 5.73
Natl. Co-op.Bank 199503 1.3 0 2.82 0.44
New India Co-op 200503 11.09 20.13 64.74 10.51
North Kan. GSB 200503 10.43 30.91 93.02 12.08
Oversea-Ch. Bank 200303 37.76 0.63 2.48 -0.09
Patan Co-op Bank 200503 1.99 0.7 5.46 0.82
Pun. & Mah. Bank 200503 12.69 20.46 125.43 12.57
Raghu.Co-op Bank 199603 0.8 0 3.5 0.7
Ratnakar Bank 200503 19.38 27.96 70.55 -9.45
Safe Co-op. Bank 200203 0.94 1.18 8.9 2.27
Samasta Nag.Co 200203 0.89 0.62 5.03 -1.27
Sangli Bank 199803 8.76 0 135.86 4.02
Sanwa Bank 200103 56.8 7.14 34.56 0.78
Saraswat Bank 200503 34.58 81.76 504.59 70.34
SBI Comm. & Intl 200303 100 63.47 59.03 -8.55
Shamrao Vithal 200603 29.27 131.4 246.61 21
Siam Comm. Bank 200203 33.59 1.93 8.31 -51.77
Soc. Generale 200403 60.93 60.46 49.74 15.01
South Ind.Bank 200603 70.41 156.89 851.82 50.59
South Ind.Co-op 200403 4.13 9.58 24.03 -35.84
St Bk of Mauriti 200503 83.39 24.35 38.54 5.48
Standard Charter 200503 373.8 631.46 3276.08 596.86
Sumitomo Mitsui 200403 140.37 16.62 51.38 -72.67
T N Merc. Bank 200503 0.28 117.14 580.65 82.34
Toronto Dom Bank 200303 41.04 1.3 4.62 0.78
UFJ Bank 200503 186.8 6.92 21.43 6.82
United West.Bank 200503 53.8 194.02 564.96 -98.58
UTI Bank 200603 279.99 898.68 3620.52 486.09
Yes Bank 200603 270 17.59 289.92 55.32
Zoroas. Co-op. 200503 5.29 9.48 29 7.85

INDUSTRY >> FACT SHEET >> Services >> Banks & Finance >> Banks >>
Public Sector [No. of Cos: 31]

Full Year (Rs Cr.)

Company Name Year End Equity Gr. Blk Sales NP

Allahabad Bank 200603 446.7 1052.95 4383.39 696.47

Andhra Bank 200603 485 450.85 3132.44 485.5
Bank of Baroda 200603 367 1873.17 8390.33 827.24
Bank of India 200603 488.58 1673.99 8213.08 701.23
Bank of Mah. 200603 430.52 493.59 2679.32 50.87
Canara Bank 200603 410 1718.6 10173.97 1342.88
Central Bank 200603 1124.14 1369.11 5942.02 257.5
Corporation Bank 200603 143.44 619.75 3197.97 444.48
Dena Bank 200603 286.82 753.67 2221.05 21.17
E X I M Bank 200603 849.99 58.79 1457.52 270.74
IDBI 200603 723.79 2414.81 6661.17 560.89
Indian Bank 200603 4573.96 885.99 3972.06 505.63
Indian Overseas 200603 544.8 865.34 5134.49 748.75
NABARD 200503 2000 424.21 3938.74 1033.42
Oriental Bank 200603 250.54 848.28 4676.09 803.15
Pun. & Sind Bank 200603 743.06 194.29 1450.55 108.32
Pun. Natl. Bank 200603 315.3 2158.12 11092.86 1437.42
St Bk of Bikaner 200603 50 451.81 2328.94 145.02
St Bk of Hyderab 200603 17.25 506.63 3407.68 427.21
St Bk of India 200603 526.3 6691.09 43183.62 4406.67
St Bk of Indore 200603 17.5 183.79 1598.41 139.11
St Bk of Mysore 200603 36 344.14 1807.61 216.74
St Bk of Patiala 200603 24.75 409.55 2844.42 303.09
St Bk of Saurash 200603 314 108.01 1312.27 60.12
St Bk of Travanc 200603 50 384.89 2649.79 258.63
Syndicate Bank 200603 521.97 678.98 4642 536.5
UCO Bank 200603 799.36 987.35 4821.69 194.33
Union Bank (I) 200603 505.12 1403.89 6488.81 674.47
United Bank (I) 200603 1532.43 384.72 2826.8 204.58
Veerashiva Bk 200503 2.28 7.1 14.9 0.55
Vijaya Bank 200603 433.52 554.51 2684.44 126.92

Interview Questions

Name : Name of the Organisation :

Age :

1. Since how long you have been in this organisation?

2. Total no of years of experience in this industry?
3. What are the services provided by your bank to its members?
4. Total no. of members in your bank?
5. Which is the most demanded service from the members?
6. Do you think, in co-operative banks there is more stress for subsidized loans?
Strongly Disagree Disagree Agree

Strongly Agree Don’t Know

7. How far the improper fund management style at bank contributes to the failure of
co-operative banks? Rate between 1 to 5 , 1 being Not at all contributes and 5
showing Very much contributes. ---------------
8. ‘The lack of talent pool is the main reason for failure of Co-operative banks.’
How do you rate this sentence between 1 to 5 , 1 being Not at all contributes and
5 showing Very much contributes. ---------------
9. Do you think Government should be much more helpful for development of co-
operative banks?
Strongly Disagree Disagree Agree

Strongly Agree Don’t Know

10. How far its true that competition from commercial banks is the main reason for
failure of co-operative banks? Rate between 1 to 5 , 1 being Not at all True and 5
showing Very much True. ---------------

11. Are Co-operative banks suffering from the problem of too much of NPA (Non
Performing Assets) ? Rate between 1 to 5 , 1 being Not at all True and 5 showing
Very much True. ---------------

12. How important are the loan recovery systems in Co-operative banks for their success
or failure?
Very Important Important Less Important

Not at all Important Don’t Know

13. Do you think lack of ‘value added services’ is the main reason for not attracting
or retaining the members?
Strongly Disagree Disagree Agree

Strongly Agree Don’t Know

14. Are co-operative banks spending too much on establishment and non business
activities? Rate between 1 to 5 , 1 being Not at all True and 5 showing Very much
True. ---------------

15. Do you think in India, the failure of Monsoon will affect the performance of co-
operative banks?
Strongly Disagree Disagree Agree

Strongly Agree Don’t Know

16. Are co-operative banks resistant to change with the industry?