CHAPTER 1: INTRODUCTION

MEANING

Co-operative is a way of socio-economic life. Mutual help or working together is the essence
of co-operative. Co-operative Movement in India is more than 100 years old. Co-operative
members believe in the ethical values of honesty, openness, social responsibility towards
others and caring for others. It is very sacred and based on the values of self-responsibility,
democracy and solidarity. Cooperation, a system and thought, plays an important role in the
economic development of the nation. Knowing the importance of Cooperation our leader like
Mahatma Gandhi paved way for the growth and development of Cooperative Sector in India.
Establishment of Cooperatives is regarded as one of the instruments for economic, cultural
and social developments as well as human advancement in developing nations.

Planning Commission, Ministry of Finance and Commerce have accepted the contribution of
Cooperative sector in the growth and development of Indian Economy. Former Prime
Minister said: "The idea of Cooperation is something much more efficient and economical
way of doing things. It is economic, it is fair, and it also equalises and prevents disparities
from growing. But it is something even deeper than that. It is really a way of life."

Debt recovery methods or technique is very essential component of the performance of

banking institutions as it plays a key role in ensuring that the major goal of the bank is to
issue loans that results in the preferred outcome of making a profit beyond the loans
advanced. The task of debt recovery involves compiling and accumulating a list of unpaid
loans and practically managing and organizing the loans by following up on defaulters. The
presence of debt recovery techniques ensures the loanee’s to pay up their debts. The debt
recovery unit interacts with lawyers in order to summarize demand letters to the loan debtors
and sending the same letter to the customers who are defaulting. Almost all over the globe the
financial institutions use various types of debt recovery techniques to finance and improve its
operations in order to enhance their performance.

HISTORY
Debt collection goes back to the ancient civilisations in 3000 BC. Debt collection has been
around as long as there has been debt and is older than the history of money itself, as it
existed within earlier systems based on barter system. In these civilisations if a debt was
owed that could not be paid back, the debtor and the debtor's spouse, children or servants
were forced into "debt slavery", until the creditor recouped losses by the means of their
physical labour. Under Babylonian Law, strict guidelines governed the repayment of debts
which included several basic debtor protections.

Both the Bible and Quran issue stern restrictions regarding how much interest to charge on a
loan. By the middle Ages, laws came into being to deal specifically with debtors.
The Abrahamic religions discouraged lending of money and prohibited creditors from
collecting interest on debts owed. If creditors were unable to collect a debt, they could take
the debtor to court and obtain a judgment against the debtor. This resulted in either
the bailiff of the court going to the house of debtor and collecting goods in lieu of the debt or
the debtor being remitted to debtor’s prison until the debtor's family could pay off the debt or
until the creditor forgave the debt amount.

In occupied territories of the Roman Empire, tax collectors were frequently associated with
extortion, greed, and abuse of power. In medieval England, a catchpole, formerly a freelance
tax collector, was a legal official, working for the bailiff, responsible for collecting debts,
using coercive methods. During the Great Depression of the 1930s in the United States, large
financial institutions relied heavily upon foreclosure to collect outstanding mortgage debts,
which gained a negative public perception.

SOURCES OF AGRICULTURAL CREDIT

The sources of agricultural finance are broadly classified into two categories:

(A) Non-institutional Credit Agencies or informal sources

(B) Institutional Credit Agencies or formal Sources.

A. Non-institutional Credit Agencies

i) Traders and Commission Agents: Traders and commission agents advance loans to
agriculturists for productive purposes against their crop without completing legal formalities.
It often becomes obligatory for farmers to buy inputs and sell output through them. They
charge very heavy rate of interest on the loan and a commission on all the sales and
purchases, making it exploitative in nature. It is an important source of finance in case of cash
crops like cotton, tobacco and groundnut.

ii) Landlords: Small farmers and tenants depend on landlords for meeting their financial
requirements.

iii) Money lenders: Despite of rapid development in rural branches of different

institutional credit agencies, village money lenders still dominate the scene. Money lenders
are of two types- agriculturist money lenders who combine their money lending job with
farming and professional money lenders whose sole job is to lend money.

A number of reasons have been attributed for the popularity of money lenders such as:

(a) They meet demand for productive as well as unproductive requirement

(b) They are easily approachable at odd hours

(c) They require very low paper work and advances are given against promissory notes or
land. Money lenders charge a very high rate of interest as they take advantage of the urgency
of the situation. Over the years a need for regulation of money lending has been felt. But lack
of institutional credit access to certain sections and areas had facilitated unhindered operation
of money lending. Cooperative credit and self-help groups can play a major role in control of
money lending procedures.

B. Institutional Credit Agencies

i) Government: These are both short term as well as long-term loans. These loans are
popularly known as “Taccavi loans” which are generally advanced in times of natural
calamities such as earthquakes, droughts etc. The rate of interest is low but it is not a major
source of agricultural finance.

ii) Cooperative Credit Societies: The history of cooperative movement in India dates
back to 1904 when first Cooperative Credit Societies Act was passed by the Government. The
scope of the Act was restricted for establishment of the primary credit societies and non-
credit societies were left out of its purview. The shortcomings of the Act were rectified
through passing another Act called Cooperative Societies Act 1912. This Act gave provision
for registration of all types of Cooperative Societies this made the emergence of rural
cooperatives both in the credit and non-credit areas with uneven spatial growth. In subsequent
years a number of Committees were appointed and recommendations were implemented to
improve the functioning of the cooperatives. Soon after the independence, the Government of
India following the recommendations of All India Rural Credit Survey Committee (1951) felt
that cooperatives were the only alternative to promote agricultural credit and development of
rural areas. The cooperatives received substantial help in the provision of credit from Reserve
Bank of India as a part of loan policy and large-scale assistance from Central and State
Governments for their development and strengthening. Many schemes involving subsidies
and concessions for the weaker sections were routed through cooperatives. As a result the
cooperative institutions registered a remarkable growth in the post-independence India.

iii) Commercial Banks: Previously commercial banks (CBs) were confined only to
urban areas serving mainly to trade, commerce and industry. Their role in rural credit was
meagre 0.9% in 1951- 52 and 0.7% in 1961-61. The insignificant participation of CBs in rural
lending was explained by the risky nature of agriculture due to its heavy dependence on
monsoon, unorganized nature and subsistence approach. A major change took place in the
form of nationalization of CBs in 1969 and CBs were made to play an active role in
agricultural credit. At present they are the largest source of institutional credit to agriculture.

iv) Regional Rural Banks (RRBs): RRBs were set up in those regions where
availability of institutional credit was found to be inadequate but potential for agricultural
development was very high. The main thrust of the RRBs is to provide loans to small and
marginal farmers, landless labourers and village artisans. These loans are mainly for
productive purposes. At present 196 RRBs are functioning in the country lending around Rs
9,000 crores to rural people, particularly to weaker sections.

v) Micro financing: Micro financing through Self Help Groups (SHG) has assumed
prominence in recent years. SHG is group of rural poor who volunteer to organize themselves
into a group for eradication of poverty of the members. They agree to save regularly and
convert their savings into a common fund known as the Group corpus. The members of the
group agree to use this common fund and such other funds that they may receive as a group
through a common management. A self-help group consists of 10 to 20 persons. In difficult
areas like deserts, hills and areas with scattered and sparse population and in case of minor
irrigation and disabled persons, this number may range from 5-20. As soon as the SHG is
formed and a couple of group meetings are held, an SHG can open a Savings Bank account
with the nearest Commercial or Regional Rural Bank or a Cooperative Bank. This is essential
to keep the thrift and other earnings of the SHG safely and also to improve the transparency
levels of SHG's transactions. Opening of SB account is the beginning of a relationship
between the bank and the SHG. The Reserve Bank of India has issued instructions to all
banks permitting them to open SB accounts in the name of registered or unregistered SHGs.
By initially managing their own common fund for some time, SHG members not only take
care of the financing needs of each other, but develop their skills of financial management
and intermediation also. Lending to members also enhances the knowledge of SHG members
in setting the interest rate and periodic loan instalments, recovering the loan, etc. The SHG-
bank linkage programme has emerged as the major micro-finance programme in the country.
NABARD has played a major role in development of SHG- bank linkages with involvement
of Non-Governmental Organizations [NGOs] in the process.

IMPORTANT POINTS FOR DEBT RECOVERY

On the basis of the foregoing procedure for normal recovery process, we may list the below
given Don’ts for the dent recovery, which are as follows:

 Don’t violate or breach the recovery policies and procedures etc, prescribed by the
principal.

 Don’t exceed the authority given in the recovery arrangement.

 Don’t make a call to the debtor before 700 hours or after 2100 hours.

 Don’t make anonymous calls or bunched calls to the debtor, which may be perceived
as harassment.

 Don’t conceal or misrepresent your identity during calls and visit or other interaction
with the debtor.

 Don’t show uncivil/indecent/dirty behaviour or use such language during calls and
visits to the debtor.

 Don’t harass/humiliate/intimidate/threaten the debtor-verbally or physically.

 Don’t intrude into the privacy of the debtor’s family members, friends/colleagues.
  Don’t disclose the customer’s debts/dues/account information to unauthorized person.

 Don’t forget that the debtor is a human being and deserves to be treated with fairness
and courtesy, despite the fact that he/she is a debtor for the time being.

NEED OF DEBT RECOVERY

 Low production/productivity level in the farms owned by small and marginal farmers
on account of inadequate finance, non-adoption of scientific agriculture practices, etc.

 Occurrence of natural calamities (droughts, floods, pest attack, etc.)

 A large number of small farmers/small units have been facing marketing problems.

 Crowding of activities leads to non-viability of large number small/tiny industrial

units.

 Lack of managerial expertise and technical competence.

 Imperfect rural markets-farmers/rural entrepreneurs not realising remunerative prices

and exploitation by middlemen

 Infrastructure constraints-absence of backward and forward linkage.

 The mortality rate is very high in case small borrowers who are not getting adequate
extension support at the appropriate time from various agencies.

 The recovery climate has been vitiated by waiver of loans and is a part of borrower
community, despite income generation, is unwilling to repay bank’s dues.

LEGISLATION RELATING TO DEBT RECOVERY IN INDIA

When borrowers cannot pay promised interest or principal on time, creditors can initiate steps
to recover the debt. Debt recovery laws determine the process by which recovery proceeds.
The Debts Recovery Tribunals [DRTs] were set up under the Recovery of Debts Due to
Banks and Financial Institutions [RDDBFI] Act 1993 to help banks and financial institutions
recover their dues speedily without being subject to the lengthy procedures of usual civil
courts. The Securitization and Reconstruction of Financial Assets and Enforcement of
Security Interests [SARFAESI] Act 2002 went a step further by enabling banks and some
financial institutions to enforce their security interest and recover dues even without
approaching the DRTs.

There are 2 crucial legislations which deal with the debt recovery by banks and financial
institutions from borrowers or people who have taken loans from these institutions and fail to
pay back the principal amount with interest or falter with the instalments.

1. RDDBFI Act- This piece of legislation is responsible for the creation of DRTs and
DRATs. These tribunals are the primary courts of law responsible for the management of
cases where debts are to be recovered and also provide a forum which in essence claims to be
much faster than the normal litigation route through civil courts.

2. SARFAESI Act- This Act provides for out of Court remedies that the banks and
financial institutions can undertake it also gives the mandate to these organisations to treat the
security provided for any loan which has now become a non-performing asset to be treated in
multiple ways thereby recovering their dues and releasing any extra money back to the
borrower (i.e. not making any profit but mitigating their rightful dues). The various ways in
which a Bank can deal with these securities are provided in the Act being taking over the
property and selling it off, taking over that part of the business of the borrower which has
been used to secure their loans and either taking control of the management or selling the
same to recover dues etc.

The RDDBFI Act provides for the framework or the specialised forums, and SARFAESI Act
provides for remedies or reliefs which the bank can undertake before taking up the matter
before the DRT [created by RDDBFI Act] to recover their rightful dues from borrowers.

PROCESS OF DEBT RECOVERY

1. Application Route- Directly Applying to DRT

The recovery procedure under this route is invoked by making an application to [and not
filing a suit with] the DRT and paying the prescribed fees. What DRT location is chosen
under this route is a good question. There are currently 32 DRTs in India in 22 unique
locations. Some cities have multiple DRTs to deal with the inflow of a large number of filings
of applications.
Section 19 of the RDDBFI Act specifies the conditions for a choice of DRT to make an
application. An application can be made by the bank or financial institution to a DRT that
has jurisdiction in the region where the defendant [one or more defendants] actually or
voluntarily resides or carries business. An application may also be filed to a particular DRT if
the cause of action wholly or in part arises within the limits of its jurisdiction.

 The recommended time for completion is 180 days from the receipt of the
application as per Sections 19(4) of RDDBFI.

 The submission of an application to the DRT triggers summons issued to the

defendant requiring him to show cause within 30 days as to why relief prayed for
should not be granted.

 The defendant must present a written statement and the tribunal may permit
additional time for submission of this statement.

 The defendant can plead a set-off against any ascertained sum of money legally
recoverable by him from the applicant at the first hearing and not afterwards unless
permitted by the Tribunal.

 A counter-claim against the claim of the applicant can be made by the applicant
before delivering his defence.

 On the basis of the DRT’s order, the Presiding Officer of the DRT issues a certificate
to the Recovery Officer for recovery of the amount of debt specified in the
certificate.

 The Recovery officer can recover dues by selling, attaching and appointing a
receiver for the management of the defendant’s property.

 The DRTs can also obtain police warrant to arrest the defendant

2. SARFAESI Route
 An application can also be made to the DRT under the Securitisation and
Reconstruction for Enforcement of Security Interest Act [SARFAESI] 2002.

 Under section 13 (2) of the SARFAESI Act, after a loan has been classified as
a non-performing asset (NPA) by the secured creditor and a notice to this effect is
sent to the relevant borrower.

 This notice must clearly mention the outstanding amount to be repaid in full
within a period of 60 days by the borrower, failing which the secured creditor is
entitled to exercise the rights in accordance with section 13 (4) of the Act, which
provides relief in the form of Attachment of property for the purpose of any future
sale, taking over of business, appointing manager for business etc.

 The opportunity was given to the defaulter to be heard by the bank- While the
initial versions of the Act gave borrowers no rights to appeal against this notice, a
later version introduced Sub-section 3A into SARFAESI Act to allow borrower
appeals against 13(2) notice. This appeal can be made to the secured creditor alone
and not to any Court.

 The bank is expected to respond to the appeal of the borrower within fifteen days.

 If the borrower is unable to discharge his liabilities, Section 13(4) of the Act
authorizes the secured creditor to take recourse to measures of recovery by taking
possession of the secured asset including the right to transfer by way of lease,
assignment or sale, take over management of the business or appointing any
person to manage the secured asset.

 The transition into DRTs occurs when collateral is insufficient to fulfil obligations
to creditors. In such instances where dues of the secured creditors are not purely
satisfied with the sale proceeds of the secured assets, the creditors may file an
application to the DRT for recovery of the remaining portion of the dues. The
borrower can also appeal to the DRT against the creditor’s findings.

 For applications made to DRT under the SARFAESI Act, DRTs are asked to dispose
cases within 60 days, with an outer limit of 4 months. If the period exceeds 4
months section 17(6) of the SARFAESI Act entitles either party to the application to
make an application to the DRAT to direct the DRT for disposal of the pending
application.
TRADITIONAL COLLECTION METHODS

Loan collection is usually a process which is highly regulated. As the creditor wants to get
back the loan with its interest, they usually offer the loan with either a mortgage or a
guarantor. The debtor enters into a legal agreement with the lender to repay the loan by a
particular time and date.

This is monitored by both the creditor and the rating agencies to track how prompt a debtor is
in order to pay back the loan. This is used to calculate the credit score of a debtor for future
loans.

The method to collect a loan follows the steps given below:

 Collect the money coinciding with the arrival of the debtor’s income cycles.

 Maintains a systematic follow-up on how the customer can handle the repayment.

 If the customer shows discrepancies in one or two instalments, then reach out to the
customer to find out the cause.

 If the customer is prompt and preserve goodwill then promote more offers to him.

PROBLEMS IN TRADITIONAL COLLECTION PROCESS

 Debt collection process is increasingly focused upon by regulators and is heavily

scrutinized by regulatory bodies who have laid down several stipulations for traders.

 The current debt collection system involves several legally mandated processes and
involve multiple layers of handling, they involve a huge amount of manpower to
maintain records and involve several repetitive functions with little integration
between them.

 Debt collection agencies do not segment the customers efficiently. As these processes
have been handed down for decades, these processes do not account for the change in
the mind-set of creditors and their earning patterns.

 Segmentation of customers based on their income bracket is still inefficient.

Collection agencies do not dedicate resources to analyse a customer and his income
 bucket. They have a broad category where they tend to bring all defaulters under the
same category.

 Some defaulters are capable of paying back their loans if they are motivated
appropriately and offer extended assistance. The collectors are not provided with
appropriate tools to accurately analyse borrowers, they are unable to provide flexible
payment arrangements.

 Collectors currently do not have right tools at their disposal to maintain borrowers as
their customers.

 There has been a lack of a consolidated borrower-centric approach, and the system
makes it increasingly difficult for debtors to get out of the interest trap. The current
system followed does not allow collectors to recover piecemeal segments of the owed
money from customers.

MODERN COLLECTION PROCESS

Where traditional collection processes have faltered, the techniques and practices adopted as
a part of the modern collection management systems have gone a long way to address several
pain points that were encountered in the earlier way/system.

The modern collection process follows several guidelines that aimed at streamlining the
operations and offer benefits to both collectors and their debtors. Augmenting the robustness
of the internet networks and a centralized financial system, the following aspects are of the
modern collection management software which go a long way in the ease of business.

 Auto-generation of Customer Statements:

Customer statements and payment notifications are sent to customers through a comfortable
medium such as SMS and emails. This is usually coupled with an UPI payment option where
customers get the luxury of paying their debt using credit or debit cards and thereby
circumvent a trip to the bank or the loan agency.

 Digitized Collection Strategies:

Using analytics, software can now automatically flag and score delinquencies based on
factors such as amount due, aging, credit limit etc. This can help with a more well-rounded
and efficient segregation of customers.

 Managing Collection Activities:

Once the segregation of customers is done, the database can be used to personalize the
collection strategy for each customer. This can be followed up with relevant course of actions
such as friendly reminders, phone calls, periodic dunning, etc. All of this is now tracked on a
dashboard where each customer gets a separate folder and all the interactions with the
customer are maintained with transparency.

 Managing Settlements:

The modern collection system also allows initiation of disputes on behalf of the customer for
review and helps receive approval within and across the departments. It streamlines the
process of grievance redressal and improves customer goodwill.

 Optimize Collection Efficiency:

The modern collection management software’s optimize the collection activity by ensuring
that specialized retrieval offers which are assigned to cases that require their expertise. They
can also monitor outstanding receivables.

 Analysing the collection team:

Software’s allow senior officers to manage collection team assignment based on the
performance metrics and key performance indicators [KPIs]. The software’s are also
programmed to automatically assign new account delinquencies to the agents.
 CHAPTER 2: INDUSTRY AND COMPANY PROFILE

INDUSTRY PROFILE

A bank is a financial institution that provides banking and other financial services to their
consumers. A bank is understood as an institution which provides fundamental banking
services such as accepting deposits and providing loans. There are also non-banking
institutions that provide certain banking services without meeting the legal Banks are a subset
of the financial services industry. A banking system also referred as a system provided by the
bank which offers cash management services for customers, reporting the transactions of their
accounts and portfolios, throughout the day. The banking system in India, should not only be
hassle free but it should be able to meet the new challenges posed by the technology and any
other external and internal factors. The Banks are the main participants of the financial
system in India. Before the establishment of banks, the financial activities were handled by
money lenders and individuals. At that time the interest rates were very high. Again, there
were no security of public savings and no uniformity regarding loans. So as to overcome such
problems the organized banking sector was established, which was fully regulated by the
government. The organized banking sector works within the financial system to provide
loans, accept deposits and provide other services to their customers. The Banking sector
offers several facilities and opportunities to their customers. As a variety of models for
cooperation and integration among finance industries have emerged, some of the traditional
distinctions between banks, insurance companies, and securities firms have diminished. In
spite of these changes, banks continue to maintain and perform their primary role—accepting
deposits and lending funds from these deposits.
The following are the major steps taken by the Government of India to Regulate Banking
institutions in the country: -

1949: Enactment of Banking Regulation Act.

1955: Nationalisation of State Bank of India.

1959: Nationalization of SBI subsidiaries.

1961: Insurance cover extended to deposits.

1969: Nationalisation of 14 major Banks.

1971: Creation of credit guarantee corporation.

1975: Creation of regional rural banks.

1980: Nationalisation of seven banks with deposits over 200 Crores.

CLASSIFICATION OF BANKING INDUSTRY IN INDIA

Indian banking industry has been divided into two parts, organized and unorganized sectors.
The organized sector consists of Reserve Bank of India, Commercial Banks and Co-operative
Banks, and Specialized Financial Institutions (IDBI, ICICI, IFC etc). The unorganized sector,
which is not homogeneous, is largely made up of money lenders and indigenous bankers.
 Ministry of Finance

Reserve Bank of India

Scheduled Banks

Commercial Banks Co-operative Banks

Public Sector Banks Primary credit societies

Private Sector Banks

Central Co-operative

Regional Rural Banks

State Co-operative

Foreign Banks

RECENT TRENDS IN BANKING INDUSTRY

1) Electronic Payment Services – E Cheques

Now-a-days we are hearing about e-governance, e-mail, e-commerce, e-tail etc. In the same
manner, a new technology is being developed in US for introduction of e-cheque, which will
replace the conventional paper cheque. India, as the introduction of e-cheque, the Negotiable
Instruments Act has already been amended to include; Truncated cheque and E-
cheque instruments.

2) Real Time Gross Settlement (RTGS)

Real Time Gross Settlement system, introduced in India since March 2004, is a system
through which electronics instructions can be given by banks to transfer funds from their
account to the account of another bank. The RTGS system is maintained and operated by the
RBI and provides a means of efficient and faster funds transfer among banks facilitating their
financial operations. As the name suggests, funds transfer between banks takes place on a
‘Real Time' basis. Therefore, money can reach the beneficiary instantaneously and the
beneficiary's bank has the responsibility to credit the beneficiary's account within two hours.

3) Electronic Funds Transfer (EFT)

Electronic Funds Transfer (EFT) is a system whereby anyone who wants to make payment to
another person/company etc. can approach his bank and make cash payment or give
instructions/authorization to transfer funds directly from his own account to the bank
account of the receiver/beneficiary. Complete details such as the receiver's name, bank
account number, account type (savings or current account), bank name, city, branch name etc.
should be furnished to the bank at the time of requesting for such transfers so that the amount
reaches the beneficiaries' account correctly and faster. RBI is the service provider of EFT.

4) Electronic Clearing Service (ECS)

Electronic Clearing Service is a retail payment system that can be used to make bulk
payments/receipts of a similar nature especially where each individual payment is of a
repetitive nature and of relatively smaller amount. This facility is meant for companies and
government departments to make/receive large volumes of payments instead of funds being
transferred by an individual.

5) Automatic Teller Machine (ATM)

Automatic Teller Machine is the most popular devise in India, which enables the customers to
withdraw their money 24 hours a day 7 days a week. It is a devise that allows customer who
has an ATM card to perform routine banking transactions without interacting with a human
teller. In addition to cash withdrawal, ATMs can be used for payment of utility bills, funds
transfer between accounts, deposit of cheques and cash into accounts, balance enquiry etc.
6) Point of Sale Terminal

Point of Sale Terminal is a computer terminal that is linked online to the computerized
customer information files in a bank and magnetically encoded plastic transaction card
that identifies the customer to the computer. During a transaction, the customer's account is
debited and the retailer's account is credited by the computer for the amount of purchase.

7) Tele Banking

Tele Banking facilitates the customer to do entire non-cash related banking on telephone.
Under this devise Automatic Voice Recorder is used for simpler queries and transactions. For
complicated queries and transactions, manned phone terminals are used.

8) Electronic Data Interchange (EDI)

Electronic Data Interchange is the electronic exchange of business documents like purchase
order, invoices, shipping notices, receiving advices etc. in a standard, computer processed,
universally accepted format between trading partners. EDI can also be used to transmit
financial information and payments in electronic form.

COMPANY PROFILE
Farmer’s service Co-Operative societies were organized in our country on the
recommendation made by the National Commission on Agriculture with a main
object of providing integrated credit and services to farmers. Syndicate Bank being
pioneers in agricultural lending took keen interest in sponsoring Farmer Service Co-
operative Societies in our state. RYTHARA SEVA SAHKARA SANGHA (N),
SINGANAYAKANAHALLI is one such societies sponsored by the Bank during
1976.

9 Weak Societies amalgamated to Singanayakanahalli Society. Weak Societies are not

in a position to cater the needs of Farming community. Singanayakanahalli society
commenced its Business in December, 1976.

The Financing Bank provided required managerial expertise by deputing one of their
officers to work as Managing Director of the society. Government of Karnataka
provided the Services of Agriculture Department by Deputing one Technical Officer
and two Agriculture Assistants to work in the Society.

The Society started its operation in December 1976; accordingly, a comprehensive

survey was done in 48 villages to identify the members and register them as members
of the society. The Society is covering 1710 Hectares of area the jurisdiction of the
society.

The small farmers, agricultural labours, village Artisans are enrolled as members of
the society. The farmers were engaged in agriculture only by rain water and tank
water. During Kharif they grew Ragi, Paddy and Vegetable crops. Most of the small
farmers had difficult economic conditions and they had to work as labours to sustain
themselves.

In 1976 the society opened one more branch in Yelahanka.

Programs carried out were: -

 Agricultural loans were provided

 Supply of inputs
 Field demonstrations were given, and
 Training programs were held

The society also had drawn the support of University of Agricultural Science, IIHR
Hesgaraghatta to create a revolution in agriculture. Especially all the small and
marginal farmers were provided with short term and medium-term loans. The
advanced technology was made available by digging Bore wells and open wells for
irrigation which helped conversion of dry land in to cultivatable land.

Today fully developed society has 6 full pledged branches, own

Buildings NCDC assisted Godowns and is carrying out banking activities. By
implementing different deposit schemes with own investments became self-sufficient.
The society has not taken any loan from the financing bank for the last 10 years.

On 26-07-2007 at the Centenary celebration of cooperative movement the society

awarded “Best Working Co-Operative Society” . The president and Chief Executive
were felicitated by Mr. G.T. Devegowda honourable minister for Co-Operation and Sri.
N.C. Nanaiah , one of the pioneering personalities of the Co-operative movement.
On 14-11-2007 at the 54th all India Co-operative Week Mrs. Vanishree Vishwanath our
president was recognized and felicitated as “Best Woman President” in Co-Operative
Societies.

On 19-11-2008 on the occasion of 55th All India Co-Operative week Mrs. Vanishree
Vishwanth our president has honoured “The Best Women President” and also Mr. K.
Krishna Bhat was honoured “The Best Secretary” award.

Every year the member loans are encouraged the repayment situation is also very
healthy for the last 3 decades the members of the society have become economically
strong able to give better education to their children and have constructed own houses
and living better livings, VIPs from different states and countries have visited the
societies. Now a days the society has been disbursing loan for different activities like
agricultural production loan horticulture, Sericulture, animal husbandry loans, jewel
loans, tractor and power tillers, education loan, SHG Loans, Farm House Loans, Self-
Employment Loans, Consumer Loans, Solar Loans etc. society has got a mini lorry
which helps farmers to avail cheap transport facility for their agriculture produce.

The society has financed poor farmer’s, agricultural labours especially SC/ST
Members by providing them subsidy loans under Govt. schemes like SJSY Subsidy,
SCP Subsidy, Udyogini and Asare scheme for woman members.

With the Cooperation of university of agriculture sciences, Bangalore Kakkehalli

village is adopted and all members were given agricultural loans and other support
also.

Recent developments as per the directions of Government of

Karnataka Department of Co-operation

 380 women self-help groups are organized from the society and loans are
disbursed Rs.3 to Rs.5 lakhs per group.
 Society has Financed Government Schemes like Udyogini & Asare, nearly 400
SHG Group women members financed with Government Subsidy for self-
employment.
  Society has provided 15 high-tech model Vegetable and fruit selling Cart
Department of Horticulture provided Rs.10000 subsidy for each Schedule Cast
Members.

Other activities set up by the society: -

 Women training programmers.

 Tailoring.
 Sericulture cocoons decorative art.
 Mushroom culture.

Society has also organized health check-up camps such as:-

 Heart check-up camps.

 Eye camps.
 Animal health check-up camps.

Society is engaged in honouring: -

 “Prathibha puraskara” for SSLC toppers,

 “Prathibha puraskara” for PUC toppers from among members children.

The head office building is constructed recently on latest designs.

The society is committed to realize Mahatma Gandhiji’s “Dream of empowering

villages and socio-economic upliftment of poor is possible only by the Cooperatives” .

At the beginning one share amounted to Rs.10 and the current share price is Rs.500.
Area of Operation: 48 Villages of Bangalore North Taluk.

Branches: -

 Singanayakanahalli
 Yelahanka
 Rajanukunte
 Chikkabettahalli
 Kogilu
 Marasandra

Sales Centre’s: -

 Singanayakanahalli
 Yelahanka
 Rajanukunte
 Chikkabettahalli
 Kogilu
 Marasandra
 Gantiganahalli
 Arakere
 Suradenapura
 Ramagondanahalli

Administration office – Singanayakanahalli

Board of Directors [BOD] – 11 elected members

 2 women members
 2 OBC reservations
 1 SC/ST reservations
 6 general members
The administration is run by the BOD [Board of Directors] and the rest are followed
according to the Cooperative Act 1959.

The shareholders in 48 villages elect the BOD. Once in 5 years the election is held.
One out of these 11 is placed as President and the other as Vice President. The period
of President is 2 and ½ years, he can continue being President else elect another
person through election or unanimously.

There are 3 types of shares ‘A’ ‘B’ ‘C’, recently ‘D’ is also introduced as the 4 th type.

Share ‘A’

Eligibility for Share ‘A’

 Should be a resident of a place out of those 48 villages

 Should have an agricultural land
 Else should be an agricultural labour
 Else should be an village artisans
 Else should somehow be dependent on agriculture

Value of this share is Rs.500. If these people opt for loans then these loans will be
kept as an additional share, and during the time of loan disbursement it is to be
adjusted else during the year end only the share value is been given and the dividend
is utilized as pay back of the loan.

Rights of ‘A’ type shareholders: -

 Can compete in the elections held

 Can vote in the elections
 All benefits available in society can be availed by them such as crop loans etc.,
 These shareholders and their children can avail 20% discount on marriage hall
provided by the society for any occasions such as marriages.
 If their children score more than 75% in SSLC and 70% in PUC then they are
rewarded with PRATHIBHA PURASKARA.
  Last year a scheme called yashaswini was there under which share ‘A’ holders
were given free Rs.300 premium per head.

The other type of shares such as ‘B’ ‘C’ ‘D’ cannot avail such benefits and facilities as
the share ‘A’ holders can avail. Majorly the holders of share ‘A’ are only known to be
shareholders.

Share ‘B’

 Only for Karnataka State Government and

 Sponsor bank [Syndicate Bank]

After the amalgamation, Syndicate bank is the sponsor. Before the amalgamation took
place the cooperative structure was as follows

NABARD [Central]

APEX BANK [State]

DCC BANK [District]

PACS [Cooperative society]

PACS are Primary agriculture cooperative society. These PACS are controlled by the
DCC banks and they are further controlled by APEX banks and these banks are
controlled by NABARD. After the amalgamation instead of DCC banks the
commercial banks act as sponsors and for the growth of this society Syndicate bank as
sponsors played a vital role.

Right now, the share type ‘B’ is returned back to the government and sponsors.

Share ‘C’

This type of share is called as nominal membership, these shareholders are known as
members only for name sake and no other facilities are provided to such shareholders.
The value of this share is Rs.30 only. They can only invest in shares, and avail some
other facilities such as pigme, fixed deposits, savings bank account.

Drawbacks of ‘C’ type shareholders: -

 They do not have any voting rights

 Cannot compete in the elections held
 Cannot attend the general board meetings
 No dividend is given

Share ‘D’

This is a new type of share which is specially made for members of these 48 villages
who do not own any agricultural land nor related or depending on agriculture, but stay
in the surroundings. As they shouldn’t feel injustice this is been introduced.

They too do not have any voting rights but dividends are being given and can avail
loans. The value of this share is Rs.500.

Types of deposits

 Savings Bank Account

A savings account is a basic type of bank account that allows you to deposit money, keep it
safe, and withdraw funds, all while earning interest. Annually 4% interest is given over
this type of deposits.

 Fixed Deposit

A fixed deposit account is an investment account and a type of savings account in which
money is deposited for a stated period of time and a fixed interest rate is paid at the end of
that period. It is a safer investment option when compared to other investment types such as
shares or the money market.
Fixed deposit starts from 46 days to ‘N’ number of years. The interest rate depends on the
period of deposit. The highest interest rate offered by the cooperative society is 7.75%.

The interest is paid monthly, quarterly, half yearly, yearly and during the time of
closing. Senior citizens are given an additional of 0.25% interest that equals to 8%.

 Recurring Deposit

It refers to a particular amount paid every month for a particular time period that is
from 1 year to ‘N’ number of years. These deposits are also given 7.75% interest rate
per year and depends on the number of years of the deposit.

 DCC

It is one type of fixed deposit and is called as Dhanalaxmi Cash Certificate. In this
type of deposit they pay interest only during the time of closure as the interest keeps
cumulating, the interest gets generated quarterly but is not given to the party and is
added to the principle amount and keeps cumulating. The interest rate is same, that is
7.75% and depends on the time period of the deposit.

 Pigmy

The account is for daily wage earners or tiny businessmen, who would like to put aside a little
of their days earnings and accumulate it for a year or two. An agent is kept for collecting the
money every day even if Rs.10/- is saved a day for 365 days, the saved amount together with
interest could reach a figure like Rs.4000/-.

This account is most useful to very small earners. They cannot command credit even from
banks as their earning capacity is lowest.

The interest paid to them per year in 2% and 4% for 2 years.

As of 31 st March 2018, the total deposits were Rs.136 crore.

Loans
2 types of loans are provided

 Agricultural loan

Further offered based on term

 Short term

Short term loans are also called as KKCC [KRUSHI KISAN CREDIT CARD]. First
for the development and growth of the crop this loan is given. The term for this kind
of loan is 3 years , once the loan is taken the party is given a period of 3 years in
which he can do regular transactions as done under an SB account. He can deposit any
amount of money and withdraw any amount of money.

 Medium term

Medium term loans are from 3 years to 12 years. It is usually taken for the
development of cultivated crop, and for drip irrigation purposes.

No interest is charged up to Rs.300000 but the actual interest rate is 12.5% and the
amount is claimed from the government. State government is giving it at 0% interest
rate, 1% interest rate is charged from Rs.300000 to Rs.500000, and 3% interest rate is
charged above Rs.500000.

One person is eligible to take loans up to Rs.2500000.

  Non-agricultural loan

Such provisions are not provided by a DCC bank, as the cooperative society shall
borrow from the DCC bank and then disperse to the members, as the cooperative
society itself does the funding activity it runs based on the decision of BOD.

Types of non-agricultural loans

 Gold loan

Rate of interest is 11.5% per annum and per gram Rs.1900 is given as loan to them.

 Education loan

 Vehicle loan (2 wheeler and 4-wheeler)

 Solar system installation loan

 Farm house construction loan

 Business loan

As of now a total of Rs.75 Crore is outstanding as of March 2018.

Trading

Fertilizers, pesticides and various other agricultural inputs are also sold by the
cooperative society. All the branches had a sales outlet but as of now sales outlets are
only in Singanayakanahalli branch, Rajanukunte branch and Marasandra branch and
these products are sold at a lower cost and not at the MRP rate. They also distribute
PDS (Public distribution service) where the ration / food is distributed to public.

Rythara Sahakara bhavana (Marriage hall)

This facility is been provided to the farmers and their family, the marriage hall is
given at Rs.1,00,000 to them on any occasions. ‘A’ shareholder get an additional of
20% discount which brings down the amount to Rs.80,000 plus the GST. Facilities
such as decoration, food, chairs, table, mantapa etc. are also been provided at the
Rs.1,00,000.

Mini hall

This hall is provided at Rs.15,000 for various purposes.

Other activities
Many activities such as health check-up camps which include heart check-up and eye
check-up and dental check-up camps, even animal health check-up camps are
organized.

Scientists from GKVK and IHR are invited in order to introduce farmers and other
villagers with the upgraded technology so that they can come forward and make good
use of this opportunity.

Self-help groups are introduced for women and up to Rs.5,00,000 is given to such
groups, tailoring classes are provided to them, doll making, drawing, makeup classes
etc are provided.

Future plans/aims

Is to make a cooperative school for kids and a cooperative petrol bunk in the future.

Some of the other social activities undertaken by the society which not only
helped the members but also helped the RSSN in its image building are
given below:-

 The Yashaswini insurance premium of the members is borne by the society.

 Arranged for free number of health check-up camps to the people of the village.
  Arranged for free health check-up camps for the dairy animals.
 Arranged for free computer programs to the children of the members.
 It has purchased a jeep and a van for delivery of goods and purchase of goods.
 Provides hiring service of trencher and disc for the members at cheaper rate.
 It owns a community hall which is available for celebrating marriages etc., which is
provided at 20% concession to its members.
 It has assisted the poor people to utilize the developmental programs of the State /
Central Government.
 It has donated Rs.60,000/- to the sufferers of the flood affected people of North
Karnataka.
 Arranged yoga camps to the members and the children of its area.

Main reasons for the success of the RSSN are: -

 As soon as the society was ceded to the Syndicate bank, the Syndicate bank posted
one of its experienced and dedicated officers as the MD / CEO of the society. He can
be called as the backbone for all its further development or the base on which a
healthy society was built up later.
 As a commercial banker, he followed the policy and principles of banking in the
functioning of the society rather than a political built up as other societies are
generally following.
 His developmental ideals and ideas impressed them and then Directors who also
followed the principals of banking and development of the area.
 Highest cooperation among the members and the Directors in the affairs of the society
and their honesty, integration, involvement is appreciable.
 All the developmental works undertaken by the society in increasing the membership,
building up the image of the society in the area by conducting training programs to
the agriculturists, workshops, social works etc., created a bondage between the society
and the members as well as non-members.
 The developmental circle created by the society that is building confidence, increasing
the membership, increasing the share capital, different types of banking and social
activities increased the confidence of the people in the area who could deposit their
money in the society, increase the loaning, increase the business, increasing the non-
agricultural and non-fund activities.
 The workshops / lectures arranged by the Society from the Agriculture and
Horticulture experts increased the scope for lending and also the agricultural activities
in the area. The ideas of the progressive farmers were followed by the other farmers
 also and there was overall development on the side of Agriculture, Horticulture and
growing of vegetables in the area which had good market for their products due to
nearness of Bangalore city.
 Good resources resulted in increased loaning and investments which is giving good
yield and the profit.
 The present CEO Sri. Krishna Bhat who is very active also worked for the welfare of
the society by his more involvement, more closeness with the members and non-
members by his friendly nature.
 The CEO and the Board worked as a team in the development of the society through
its social involvement. The workshops / training programs were conducted for the
benefit of women in the area which helped in increasing more number of SHGs and
also involving the women for taking up income generating activities and becoming
self-reliant. This led to more lending to SHGs, good recovery, more deposits resulting
in increase in the business of the society.
 The present President of the Society Smt. Vanishree Viswanath being the President of
ZP also helped the members of the society to utilize the benefits of various
developmental programs allotted to the area. She could bring more funds to the
society and also helped the members / non-members / women folk in the area to get
more opportunity to utilize the developmental programs of the State government and
also the financial help in the form of Subsidy.
 The society spread its tentacles by opening 6 branches, setting up of godowns for the
use of PDS, storing and dealing in fertilizers, pesticides, and general provisions etc.
 To motivate the involvement of the staff in the development of the RSSN, it has
provided the facility of medical insurance, ID cards, uniform, Provident fund, central
Gratuity and Pension schemes to its staff.

All the above were the reasons for the success of the RSSN Singanayakanahalli.
CHAPTER 3: RESEARCH METHODOLOGY
Methodology is the systematic, theoretical analysis of the methods applied to a field of study.
It comprises the theoretical analysis of the study of methods and principles associated with
the branch of knowledge. Typically, it encompasses concepts such as paradigm, theoretical
model, phases and quantitative and qualitative techniques. A methodology does not set out to
provide solutions – it is, therefore not the same thing as method. Instead, it offers the
theoretical underpinning for understanding which method, set of methods or best practices
which can be applied to specific case, for example, to calculate a specific result.

Research is the process came into being due to man’s quest to be at tune with his environment
and also understand nature. To achieve this, man uses the tool of experience and reasoning
available to him. Man, also makes use of experience and authoritative sources beyond his
immediate circle. Experience and authority are rich and major sources of hypothesis, which
are based mainly on common sense of knowledge and haphazard events, therefore it can be
unjustified for drawing conclusions on event. Hence research hypothesis formulation using
experience and authority is judged to be unscientific. Research anchors on scientific
reasoning; which could be inductive and deductive or both. Research is a combination of both
experience and reasoning and can be said to be most appropriate way of discovering the truth,
precisely in the natural sciences.

Research Design of the study is a conceptual structure a sketch or a plan laid out of
conducting the study. It is considered as a blue print of the final copy of the project where it
shows the activities undertaken while doing the study. It constitutes the steps taken beginning
with collection, clarifying, and analyzing, interpreting, processing and final putting it in an
actual form. According to Clair Sleets & other “A research design is arrangement for
collection and analysis of data in manner that aims to combine relevance to the research
purpose with economy in procedure”. Research is defined as “scientific and systematics
search for pertinent information on a specific topic”. Research is an art of scientific
investigation. Research is a systemized effort to gain new knowledge. Careful inquiry
especially through search for new facts in any branch of knowledge. The search for
knowledge through objectives and systematic method of finding solution to a problem is a
research.

REVIEW OF LITERATURE
The review of literature forms the main platform for the dissertation as the consequent
analysis and future result is based on it. A detailed review of literature has been made to find
out the research gap and to identify the relevant issues. It is essential for a researcher to
review the related literature in order to have a clear knowledge about the subject and
understand the research gap in order to draw the scope for the study.

Robin Thomas (2016)

Suggests in his article about the loan recovery in the bank. It framed the different loan
recovery methods adopted by the banks. It used two strategies one that pre-emptive strategy a
corrective strategy. Pre-emptive strategy to prevent the accretion in non-performing loans and
corrective strategy to recover the defaulted loans through legal, regulatory and non-legal
measures. The project was limited to one company so cannot be called as an overall effective.
The main important things taken into consideration in this are Loan Recovery Strategy,
Performance of recovery channels for loan recovery, non-performing assets

Bhawani (2011)
suggests i) Preventive Management and ii) Curative Management as strategies for
overcoming NPAs. Preventive actions or measures are to check the asset from slipping and
becoming a non-performing asset. These include Early Warning Signals (EWS). Author
further categorizes EWS into the Financial Warning Signals, Management Related Warning
Signals and Bank Related signals. The author also suggests keeping a close watch on
developing external factors so as to predict early warning signals comprehensively. The
curative measures are designed to maximize recoveries so that banks funds locked up in
NPAs are released for recycling. These include creating and fostering a legal and regulatory
environment to facilitate the recovery of existing NPAs of banks which include measure and
strategic tools such as, One-Time Settlements (OTS), Lok Adalat’s, and Debt Recovery
Tribunals, Securitization and SARFAESI Act, Special Mention Category Accounts (SMA),
Restructuring of Loans, use of credit information agencies and declaring and dealing with
Wilful Defaults.

Hajra Sheikh Mohamed (2017)

Outlined various factors affecting the debt recovery 1. To determine how reputational risk,
affect debt recovery and how it can be managed. 2. To determine how the level of
professional qualification and employee’s competency affect debt recovery in commercial
banks. 3. To determine to what extent lack of collateral or security affects debt recovery in
commercial banks. It articulates methodology for the research. It discusses the criterion that
was used for determining the appropriate methodology for the study. It presents the research
design, population, sampling frame and sample size, target population, instrumentation and
data analysis techniques. 1.Effect of Reputational Risk on Debt Recovery. 2.Effect of the
level of professional qualification and employee’s competency on debt recovery. 3.Effect of
lack of collateral or security on debt recovery. Care must be taken to generalize the results of
this study as there were some limitations involved. The study was limited on Equity; this
made the sample size to be very small. In addition, the study was conducted within a short
period of time within which the researcher had official work duties, social commitments as
well as personal. This involved qualitative and quantitative analysis. The data collected by
use of the various instruments was first edited to get the relevant data for the study. The
edited data was coded for easy classification in order to facilitate tabulation. Presentation of
data was in form of Tables, Pie charts and Bar graphs only where it provides successful
interpretation of the findings.

Gandhi (2015)
Asserts that managing asset quality is always very important and becomes a prominent
objective especially during a period of economic downturn. The author chalks out the basis of
NPA management being a mix of Preventive Management by banks, Regulatory Measures,
Rehabilitation or Restructuring and Recovery or Exit. The Preventive management according
to author lays emphasis on a) Measurement of risk through credit rating / scoring; b)
Quantifying the risk through estimating expected loan losses and unexpected loan losses c)
Risk pricing on a scientific basis; and d) Controlling the risk through effective Loan Review
Mechanism and portfolio management.

Mohan (2002)
Outlined various options available in the hands of the lenders in preventing culmination of
credit risk in the form of loan default. The author suggested that the Credit Information
Bureau (CIB) should help in improving credit decisions by providing institutional mechanism
for sharing of credit information on borrowers and potential borrowers among banks and
financial institutions. He further recaps about the Reserve Bank of India (RBI) guidelines for
compromise settlements of NPAs of the small sector to provide a simplified, non-
discretionary and non-discriminatory mechanism. He emphasizes that banks should work out
processes for settlement procedures and expedite quick recovery of NPAs and in this regard
The Securitisation and Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002 should help in cleansing the balance sheet of banks by facilitating
foreclosure. The constitution of an Asset Reconstruction Company (ARC) is another channel
to remove NPAs from the balance sheets of banks through the processes of securitisation of
assets.

Dr. Kadam Santosh Nagnath (2016)

The basic idea of the research work has been that the Effectiveness of Agriculture Loans
greatly influence of agriculture development and growth also farmers standard of living and
on closer examination, the agricultural development. hypotheses, as follows: “Marginal and
small farmers class size of land holding and effective utilization of amount of crop loan are
associated”. It ascertained it objectives on the basis of more irrigation and less irrigation
facilities available to the farmers. It was found that, the agricultural loans mean the crops
loans provided by commercial banks i.e. Bank of Maharashtra, Bank of India, State bank of
India, Union bank and central bank working in study area. Moreover, effectiveness of crop
loan measured on basis of before and after analysis method of aggregate level.

Chakrabarty (2013)
Argues that all unviable accounts should be put under time-bound asset recovery drive, sale
of assets to ARCs or under the SARFAESI Act, to protect the loss in economic value of the
assets. Another option which needs to be explored in such cases is management/ownership
restructuring and permitting banks to takeover units where promoters’ equity is low or non-
existent (and hence the promoters have little interest in rehabilitating the unit); running the
unit through an intermediary or agent and then disposing off the unit when it is sufficiently
rehabilitated.

Mundra (2014)
Outlines the regulatory measures taken for effective NPA Management and to enable speedier
and prompt recovery. Author submits that RBI has set out Guidelines on "Early Recognition
of Financial Distress, Prompt Steps for Resolution and Fair Recovery for Lenders:
Framework for Revitalizing Distressed Assets in the Economy. Detailed Guidelines on
formation of Joint Lenders’ Forum (JLF), Corrective Action Plan (CAP), ‘Refinancing of
Project Loans’, ‘Sale of NPAs by Banks’ and other regulatory measures were issued to banks,
emphasizing inter-alia, the need to ensure that the banking system recognizes financial
distress early, takes prompt steps to resolve it through rectification, restructuring or recovery
thereby ensuring that interests of lenders and investors are protected by setting in motion a
corrective action plan which incentivizes early identification of problem cases, timely
restructuring of accounts considered to be viable, and taking prompt steps for recovery or sale
of unviable accounts. At the same time, the guidelines provide for punitive actions on lenders
in the form of accelerated provisioning norms if they fail to report the status of distressed
accounts to Central Repository of Information on Large Credits (CRILC) or if JLFs are not
convened within the stipulated timeframe etc.

Cesar Escalante Minrong Song Charles Dodson (2016)

The purpose of this paper is to analyse the repayment records of Farm Service Agency (FSA)
borrowers in two distinct US farming regions that have been experienced serious drought
conditions even as the US economy was going through a recession. The analysis will identify
factors that significantly influence both the probability of FSA borrowers’ survival (capability
to remain in good credit standing) and temporal endurance (or length of period of good
standing with creditor). This analysis utilizes a data set of farm borrowers of the Farm
Service Agency that regular farm lenders have classified as “marginal” relative to other
borrowers. The research goal is addressed by confining this study’s regional focus to the
Southeast and Midwest that have both dealt with financial stress arising from abnormal
natural and economic conditions prevailing during the same time period. A split population
duration model is employed to separately identify determinants of the probability and
duration of survival (condition of good credit standing). This study’s results indicate that
larger loan balances, declining commodity prices, and the severity of drought conditions have
adversely affected both the borrowing farms’ probability of survival and temporal endurance
in terms of maintaining non-delinquent borrower standing. The main findings in the articles
are Drought, Economic recession, Probability of survival, Split population duration model,
Temporal endurance.

Jyoti Gupta, Suman Jain (2012)

Research over the cooperating lending practices prevailing the society. The types of Research
adopted are - Descriptive research which is used in this study in order to identify the lending
practices of bank and determining customer’s level of satisfaction. The method used was
questionnaire and interview of the experienced loan officers. Major of the respondent were
having housing loan from this bank. Most of the people prefer to take long term loan which is
more than 3 years. Easy repayment and less formalities are the main factors determining
customer’s selection of loans. Quality of services provided by the staff is satisfactory because
it caters to a small segment only and the customers are properly dealt with. Payments facility
needs to user friendly. It should not take much time to process the loans. The main limitations
are it was confined to one company and it took too long to get the data process the data into
information. The terms useful in the articles were Cooperative movement of India, Usury,
Rural Indebtedness, Cooperative Banks, Bank’s Performance, Lending Practices, Loan,
ATMs, Internet/Online Banking, Credit Cards, Private Sector Bank.

Jaclyn D. Kropp (2011)

States in his project about the effects of direct payments by the farmers and about the mode
they adopt to pay off their loans and advances. It also explains about the liquidity and
repayment capacity of the beginning farmers. The main purpose of this paper is to investigate
the effects of direct payments on liquidity and repayment capacity for experienced and
beginning farmers. Number of calculations were done to achieved the difference between the
effectiveness among the two beginning farmers and experienced farmers. After each and
everything administered, it is likely that direct payments affect beginning farmers and more
experienced farmers differently. hence the authors analyse the impacts of direct payments on
the current and term debt coverage ratios for these two groups separately. A positive
significant relationship was found between the level of direct payments (in Dollars) and the
term debt coverage ratio for experienced farmers, suggesting that direct payments improve
repayment capacity. However, this relationship is not significant for beginning farmers. The
main keywords for this were United States of America, Agricultural finance, Subsidies,
Beginning farmers, Creditworthiness, Decoupled payments, Liquidity, Repayment capacity.

Hellen Kamar (2016)

Stated in his article about the effect of debt recovery techniques on performance of selected
financial Institutions. The researcher used descriptive research design because the study
aimed at collecting information from respondents on their experiences and perceptions of
effect of debt recovery techniques on performance of financial institutions. He observed very
minute difference in his study. The main keywords used in the article are Collateral, Debt
recovery, Customer-Supplier, Credit monitoring.

Malimba Musafiri Papias P. Ganesan (2009)

Outlines the repayment behaviour in credit and savings cooperative societies. The purpose of
this paper is to examine the factors contributing to credit repayment behaviour among the
members of savings and credit cooperative societies in rural Rwanda. Both exploratory and
descriptive designs are used for primary data collection on variables contributing to the
repayment behaviour in savings and cooperative societies. Thereafter, a binary logistic
regression empirical model is employed to estimate the contribution of each variable to credit
repayment rate. The results from the tested empirical model show that age, gender and size of
the household, purpose for credit, interest rate charges and number of official visits to the
credit societies, have a strong effect on loan repayment performance. The primary limitation
of this study is the scope and size of its sample as well as absence of income factor as one of
important variable influencing repayment behaviour. These limitations may have an effect on
the lending policy of the cooperative banks. The main keywords used are Rural areas, Credit,
Co-operative societies, Loans, Rwanda.

Anayo D. Nkamnebe Ellis I. Idemobi (2011)

States about the recovering of micro credit in Nigeria. This paper aims to examine the factors
that are responsible for the poor credit recovery among micro-finance institutions (MFIs) that
disbursed a United Nations Development Program’s on micro credit in Anambra State,
Nigeria. A total of 97 MFIs was surveyed out of a total of 129 MFIs in Anambra State in
2007. A ten-item researcher developed questionnaire on a four-point Likert scale was used to
measure MFIs’ staff assessment of factors that were responsible for poor credit recovery.
From the findings of this study, it is evident that multidimensional factors contribute to low
credit recovering by the MFIs. These factors can be summarized under borrowers’ wrong
attitude to credit repayment, MFIs’ staff weak skill and corrupt tendency, and poor
infrastructural provision by the government. The paper offers fresh insight that would offer
better understanding of the informal sector of the financial system in Nigeria that has hitherto
received limited research attention. The main keywords used in this project are Credit,
Business development, Poverty, Small enterprises, Nigeria, Sub-Sahara Africa.

Jacinta Nwachukwu 2013

The purpose of this study is to identify the major characteristics of the Board’s beneficiaries
who completely failed to honour their repayment commitment as opposed to those who
partially repaid. Data on 36 potential causes of delinquency were collected through
questionnaires distributed to 182 defaulters across ISACLB’s three regional zones from 1987
to 1997; ISACLB’s only completed loan cycle. Descriptive statistics were obtained using the
odds ratio technique. Thereafter, a binary logistic regression estimated the marginal effect on
the outright default probabilities of each factor. ISACLB’s large overdue problem was
strongly linked to four key factors: age of borrowers, frequency of visits by loan officers-
cum-extension agents, amount of savings deposits with informal clubs and total annual
savings. The primary drawback is the small size of the sample study, as well as the failure to
correctly classify the partial defaulters in terms of the stage in the loan cycle at which they
actually ceased to repay.

STATEMENT OF THE PROBLEM

Recovery is the key to the stability of the banking sector there should be no hesitation in
stating that the cooperative banks have done a remarkable job in containment of Non-
performing Assets (NPA) considering the overall difficult environment. The areas of risks of
financial fraud when detected will help eliminate the problem posed to the public. The study
will help restore people’s mind to using the cooperative banks as some people are now having
the impression that banks are not actually what they are meant to be Our banks have in recent
times been exposed to greater risk of fraud. The attention of many have been drawn to the
banks either directly or indirectly. The cooperative banks have been really working very
fabulous works in the field of development of farmers and many others. Most workers look
up to the banks to rise up to their problem. People see banks as floating in money and
identification with banks as success. With such motives, some workers go to the banks
disappointed. Not getting so much as they thought most of them decide to make away with
what they can at the slightest opportunity. Since it is said that “opportunity comes but once”,
even the seemly elite may be or are involved in fraud. In this project the research has been
done by using the data of recovery techniques adopted by the Cooperative bank. The study
will be indispensable to the banks. Common areas of risks will be brought to light. Effective
ways of eliminating fraud will be examined. When providing the loans, the any person the
banks have to scrutinise that on what basis they should sanction loans to the person and when
it comes to repayment will he be able to abide by the rules and guidelines and timely payment
of the loans. As we know, fraud can never be completely eliminated as some people, no
matter the high security, will always beat the system to commit fraud.

TITLE OF THE STUDY

“STUDY ON DEBT RECOVERY TECHNIQUE OF THE RYTHARA SEVA
SAHAKARA SANGHA NIYAMITHA”

Rythara Seva Sahakara sangha Niyamitha is a cooperative society which helps

villagers/farmers by providing credit facility and other basic facilities which are essential for
them. Agricultural credit plays an important role in agricultural development.
Agricultural household models suggest that farm credit is not only necessitated by the
limitations of self-finance, but also by uncertainty pertaining to the level of output and
the time lag between inputs and output. Recent studies show the growth rate of
investment in agriculture is less than another economic sector. Agricultural financing
is one of the most important factors to develop rural areas in developing countries.
Payment of bank credit is a way of financing. The facilitation of access to credit can
raise amount of productive investment. Credit has a crucial role for elimination of
farmer`s financial constraints to invest in farm activities, increasing productivity and
improving technologies. credit accessibility is important for improvement of quality
and quantity of farm products so, that it can increase farmer`s income and avoid from
rural migration. On the other hand, some policy makers believe that payment of credit
with low interest rate to farmers can support them against some results of
development policies that threat their welfare. Limited access to credit, the budget
balance becomes a constraint, where expenditures have to remain less or equal to the
sum of revenues during the period, accumulated savings and credit availability. The
credit constraint limits the optimum production or consumption choices. If a producer

faces an infinite supply of liquidity at a given price, the production decisions will be
independent of consumption decisions. When credit is rationed, some borrowers
cannot obtain the amount of credit they desire at the prevailing interest rate, nor can
they secure more credit by offering to pay a higher interest rate. In such
circumstances, liquidity can become a binding constraint on many farmers`
operations. Facing such a situation, households have to choose how to invest and what

inputs to buy, depending on the level of credit they receive. One of the financial
institutes has an important role in financing agriculture sector is agricultural bank.
This bank can direct agricultural credit flow such that helps general economic policies
of government. Duty of agricultural bank is financing of farmers and related industries
and participation in activities that private sector can`t invest in it. The access to credit
for farmers is accompanied with some problems. Recent theoretical and empirical
study in economics has established that credit markets in developing countries work
inefficiently due to a number of market imperfections. The literature cites a number of
market imperfections which lead some potential borrowers to be rationed out of the
credit market.

OBJECTIVE OF THE STUDY

The study purpose is to examine the effect of debt recovery techniques on performance of
Cooperative Society.

The study was guided by the following specific objectives;

1. To establish the effect of guarantors on performance.

2. To determine the effect of auction on performance.

 3. To know the subsides or policies laid down by the government provided to the farmers
regarding loans and payback of loans.

4. To assess the effect of collateral retention on the organization.

RESEARCH DESIGN AND SAMPLING

The study is based on Secondary data, with the help of balance sheet and some of the data
provided by the banks are to be used. This data itself has the effectiveness in the companies
and it pure and true data provided to the company. Secondary data refers to data which is
collected by someone who is someone other than the user. Common sources of secondary
data for social science include censuses, information collected by government departments,
organizational records and data that was originally collected for other research
purposes. Primary data, by contrast, are collected by the investigator conducting the research.
Secondary data analysis can save time that would otherwise be spent collecting data and,
particularly in the case of quantitative data, can provide larger and higher-
quality databases that would be unfeasible for any individual researcher to collect on their
own. In addition, analysts of social and economic change consider secondary data essential,
since it is impossible to conduct a new survey that can adequately capture past change and/or
developments. However, secondary data analysis can be less useful in marketing research, as
data may be outdated or inaccurate.

While 'secondary data' is typically associated with quantitative databases, analysis focused on
verbal or visual materials created for another purpose, is a legitimate avenue for the
qualitative researcher. Actually, one could go as far as claim that qualitative secondary data
analysis can be understood, not so much as the analysis of pre-existing data; rather as
involving a process of re-contextualizing, and re-constructing, data.

Sources of secondary data

 Information collected through censuses or government departments like housing,

social security, electoral statistics, tax records

 internet searches or libraries

 progress reports
 Balance sheet and financial documents.

DEFINITIONS OF THE TERMS USED

Debtors

A debtor is a company or individual who owes money and to pay back the money on the date
fixed. If the debt is in the form of a loan from a financial institution, the debtor is referred to
as a borrower, and if the debt is in the form of securities, such as bonds, the debtor is referred
to as an issuer. Legally, someone who files a voluntary petition to declare bankruptcy is also
considered a debtor.

Creditors

A creditor is an entity that extends credit by giving another entity permission to borrow
money intended to be repaid in the future. A business who provides supplies or services to a
company or an individual and does not demand payment immediately is also considered a
creditor, based on the fact that the client owes the business money for services already
rendered.

Third Party Collector

Third-party agencies are separate companies contracted by a company to collect debts on

their behalf for a fee. Debt buyers purchase the debt at a percentage of its value, then attempt
to collect it.

Balance sheet

A financial statement that summarizes a company's assets, liabilities and shareholders' equity
at a specific point in time.

SCOPE OF THE STUDY

The project covered study on the effective debt recovery of the “RYTHARA SEVA
SAHAKARA SANGHA NIYAMITHA” in Bangalore. This Cooperative bank has a total of 6
branches. Out of which I have done the project from the Yelahanka branch. In order to attain
the objectives of this research the scope of the study was defined to embody all relevant
aspects of non-payment of debt of the cooperative society. Information was obtained on the
number of fraud cases perpetrated in the bank, the different types of fraud; the amount of loss
to banks and to customers; the persons involved in fraud; the period of concealment; the
incidence of collusion; the causes of fraud and the level of effectiveness of fraud prevention
measures. And the techniques adopted in the collection of the bad debts and even the legal
charges that have imposed by the bank have been observed. The study also focused on areas
relating to Non-performing assets, techniques of debt recovery, size of deposit, size of loans
and advances, means of fraud prevention and detection.

LIMITATION OF THE STUDY

 Mistrust when data was asked related to study.

 There is a possibility of some error to a limited extent.
 Availability of secondary data was difficult.

 Time, cost and location factors became major difficulties in completion of research.

 Time bound to collect data

CHAPTER SCHEME

Chapter 1: Introduction to “A Study on Debt Recovery Technique”

It gives a brief introduction of the topic which includes meaning and definitions, nature and
its scope, history of agricultural loans, its uses and benefits, documents required, sources of
finance, different schemes, etc.,

Chapter 2: Industry and Company profile

This chapter contains the industry and company profile of the cooperative society, it contains
the detailed information of the cooperative society and also contains the future aims and goals
of the cooperative society. It gives the full background information about the company and
tells the history of the company.

Chapter 3: Research Methodology

This chapter contains the review of literature, the tools and techniques used for the research
purpose, statement of the problem, title of the study, sample size, scope and limitations of the
study etc.,

Chapter 4: Data Analysis and Interpretation.

This chapter gives details regarding the analysis and interpretation of data after collection. It
consists of data in the form of graphs and chats along with its interpretation.

Chapter 5: Summary of Findings, Recommendations and Conclusion

This chapter concludes the project report it comprises of the findings and conclusions drawn
by the analysis and also includes suggestions.

Appendices

Bibliography
CHAPTER 4: DATA ANALYSIS AND INTERPRETATION
Introduction

Data analysis and interpretation have now taken centre stage with the advent of the digital
age and the sheer amount of data can be frightening. In fact, a Digital Universe study found
that the total data supply in 2012 was 2.8 trillion gigabytes! Based on that amount of data
alone, it is clear the calling card of any successful enterprise in today’s global world will be
the ability to analyse complex data, produce actionable insights and adapt to new market
needs and all at the speed of thought. Data interpretation refers to the implementation of
processes through which data is reviewed for the purpose of arriving at an informed
conclusion. The interpretation of data assigns a meaning to the information analysed and
determines its signification and implications. The importance of data interpretation is evident
and this is why it needs to be done properly. Data is very likely to arrive from multiple
sources and has a tendency to enter the analysis process with haphazard ordering. Data
analysis tends to be extremely subjective. That is to say, the nature and goal of interpretation
will vary from business to business, likely correlating to the type of data being analysed.
While there are several different types of processes that are implemented based on individual
data nature, the two broadest and most common categories are “quantitative analysis” and
“qualitative analysis”.

In this project I have mainly used the secondary data for the quantitative interpretation of the data.
Quantitative data interpretation could be summed up in one word that word would be “numerical.”
There are few certainties when it comes to data analysis, but you can be sure that if the research you
are engaging in has no numbers involved, it is not quantitative research. Quantitative analysis refers to
a set of processes by which numerical data is analyzed. More often than not, it involves the use of
statistical modeling such as standard deviation, mean and median. Using the quantitative techniques
and tools the data have been interpreted accordingly.

The purpose of collection and interpretation is to acquire useful and usable information and to make
the most informed decisions possible. From businesses, to newlyweds researching their first home,
data collection and interpretation provides limitless benefits for a wide range of institutions and
individuals. Data analysis and interpretation, regardless of method and qualitative/quantitative status,
may include the following characteristics:

 Data identification and explanation

 Comparing and contrasting of data

 Identification of data outliers

 Future predictions

The Main ratios that have been used in this project to interpret the data are as follows: -

1. Debt equity ratios

2. Interest coverage ratio
3. Total debt to total asset ratio
4. Collection period ratios
5. Debtors turnover ratios
6. Debt ratio
7. Equity ratio
8. Gross profit margin ratio
9. Operating margin ratio
10. Return on asset ratio
Debt to Equity Ratio

This ratio is calculated as Total Debt/Shareholders Equity where total debt includes short-term debt
like current liabilities, short-term bank loan, and overdraft as well as long term debts which include
items like debentures, bank loan. Ideally, a company will like to have a ratio less than 2 because
anything above this figure can put a strain on company’s balance sheet as the use of too much debt
would mean fixed monthly interest payment which company has to pay no matter whether it’s earning
the profit or making a loss.

Formula:

Debt/Equity = Total Liabilities

Total Shareholder’s Equity

Table 1

Year Total Liability Equity Debt/Equity

2013-2014 13647347 64245247 0.2124

2014-2015 23638996 50848274 0.4649

2015-2016 29009249 85240524 0.3403

2016-2017 31837337 96887879 0.3286

2017-2018 39898999 103039274 0.3872

Source: Researchers compilation

Analysis: Table 1 contain the details about the Debt/Equity ratio where he 5 years data have been
collected. 1st column contains the year, 2nd column contains the Total liability of the company, 3 rd
contains the Equity and the last give the result as Debt Equity Ratio of 5 years. After the calculation I
have found that the organisation has increased their Debt/Equity ratio in 2017-2018.
 Graph 1

0.5
0.45
0.4
0.35
0.3
0.25
0.2
0.15
0.1
0.05
0
Debt/Equi ty
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018

Source: Researchers compilation

Interpretation: Table 1 and graph 1 represent the debt/equity ratio. In the year 2013-14 the
debt/equity ratio was 0.2124%, 2014-15 it was 0.4649%, 2015-16 it was 0.3403%, 2016-17 it was
0.3286%, 2017-18 it was 0.3872. After all the calculation 2017-2018 Debt/Equity ratio is below
1% so it’s in good condition from the last year 2016-2017.
Interest Coverage Ratio

This ratio is calculated as EBIT/Interest Expense where EBIT refers to earnings before interest and
taxes and interest expense is total interest payable by the company during a financial year. A higher
ratio is considered as desirable because higher ratio implies that company has enough funds to pay
interest so for example if there are 2 firms while firm A has interest coverage ratio of 5 and firm B has
interest coverage ratio of 10 then firm B is more financially sound as far as interest coverage ratio is
concerned because earning are 10 times of interest paid by the firm.

Formula:

Interest Coverage Ratio = EBIT

Interest Expense

Table 2

Year EBIT Interest Expense Interest coverage

ratio

2013-2014 1005332 72833128 0.0138

2014-2015 -279546 70154916 -3.9847

2015-2016 2297887 80360967 0.0286

2016-2017 1972271 42155553 0.0468

2017-2018 -103160 49860500 -2.0689

Source: Researchers compilation

Analysis: Table 2 shows the Interest coverage ratio where the 1 st column contains year, 2nd column
contains EBIT (earnings before interest and taxes), 3 rd column shows the interest expenses and the 4rd
column gives the ultimate result as Interest coverage ratio. As per data the 2017-2018 figures are in
negative due to negative EBIT whereas as in the previous it has performed well which shows positive
data as 0.0468.
 Graph 2

Interest Coverage Ratio

0.5
0
-0.5
-1
-1.5
-2
-2.5
-3
-3.5
-4
-4.5
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018

Source: Researchers compilation

Interpretation: Table 2 and graph 2 represent the interest coverage ratio. In the year 2013-14 it was
0.0138, 2014-15 it was (-3.9847), 2015-16 it was 0.0286, 2016-17 it was 0.0468, 2017-18 it was (-
2.0689). Wherein in the year 2014-2015 the data is gone below the line which says it has drastically
failed in earning the interest. And the same had occurred in the year 2017-2018 which is not a good
sign for the organisation.
Debt Ratio

This ratio is calculated as Total Liabilities/Total assets where total liabilities includes all things which
company owes to outsiders whereas total assets include all items which company owns. Ideal debt
ratio depends on the industry in which company is operating, however, a ratio less than .30 is
considered well because it means the company has fewer liabilities in comparison to assets and it will
not have to sell all its assets to pay liabilities which is the case when the ratio is equal to 1.

Formula:

Debt Ratio = Total Debt

Total Assets

Table 3

Year Total debt Total Asset Debt ratio

2013-2014 1226082875 1378683261 0.89

2014-2015 1320592398 1505284735 0.88

2015-2016 1446912796 1655844091 0.87

2016-2017 1527843691 1774719282 0.86

2017-2018 1465530785 1733827513 0.85

Source: Researchers compilation

Analysis: Table 3 shows the debt ratio which is very important to know the performance of the
organisation. The 1st column shows the year, 2nd column shows the total debt of the organisation, 3 rd
column shows the Total Assets and the last gives the Debt Ratio. Analysis the whole table the Debt
Ratio has improved a lot from the previous years.
 Graph 3

0.9

0.89

0.88

0.87

0.86

0.85

0.84

0.83
Debt artio

2013-2014 2014-2015 2015-2016 2016-2017 2017-2018

Source: Researchers compilation

Interpretation: Table 3 and graph 3 represent debt ratio. In 2013-14 it was 0.89, 2014-15 it was
0.88, 2015-16 it was 0.87, 2016-17 it was 0.86, 2017-18 it was 0.85. The debt ratio has gradually
improved from the previous years.
Equity Ratio

This ratio is calculated as Total Equity/ Total assets where total equity includes capital invested by the
owner of the company. A higher ratio is indicative of strong commitment by the owners in the
company and also gives the company an option to raise debt whenever the company wants as banks
and financial companies while giving loans prefer companies which have low leverage or debt in
balance sheet.

Formula:

Equity Ratio = Total Equity

Total Asset

Table 4

Year Total equity Total asset Equity ratio

2013-2014 26058072 1378683261 0.0189

2014-2015 28249078 1505284735 0.0188

2015-2016 31372563 1655844091 0.0189

2016-2017 33712334 1774719282 0.0190

2017-2018 32388826 1733827513 0.0187

Source: Researchers compilation

Analysis: Table 4 contains the details about the Equity ratio where 5 years data have been collected.
1st column contains the year, 2nd column contains the Total equity of the company, 3 rd contains the
Total Asset and the last give the result as Equity Ratio of 5 years. After the calculation I have found
that the organisation Equity ratio has gone down drastically in 2017-2018.
 Graph 4

0.02
0.02
0.02
0.02
0.02
0.02
0.02
0.02
0.02
0.02
0.02
Equi ty ratio
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018

Source: Researchers compilation

Interpretation: Table 4 and graph 4 represent equity ratio. In the year 2013-14 it was 0.0189,
2014-15 it was 0.0188, 2015-16 it was 0.0189, 2016-17 it was 0.0190, 2017-18 it was 0.0187
Total Debt to Total Asset Ratio

Total debt to total assets is a leverage ratio that defines the total amount of debt relative to assets. This
metric enables comparisons of leverage to be made across different companies. The higher the ratio,
the higher the degree of leverage (DoL) and, consequently, financial risk. The total debt to total assets
is a broad ratio that analyses a company's balance sheet by including long-term and short-term debt
(borrowings maturing within one year), as well as all assets – both tangible and intangible, such as
goodwill.

Formula:

Capital gearing ratio = Short Term Debt + Long Term Debt

Total Assets

Table 5

Year Short Term + Long Total Asset Total Debt to Total

Term Debt Asset ratio

2013-2014 1226082875 1378683261 0.889 %

2014-2015 1320592398 1505284735 0.877 %

2015-2016 1446912796 1655844091 0.874 %

2016-2017 1527843691 1774719282 0.861 %

2017-2018 1465530785 1733827513 0.845 %

Source: Researchers compilation

Analysis: Table 5 contain the details about the Total Debt to Asset ratio where he 5 years data have
been collected. 1st column contains the year, 2nd column contains the Combination of Short
Term+Long Term Debt of the company, 3 rd contains the Total Asset and the last give the result as Total
Debt to Total Asset Ratio of 5 years. After the calculation I have found that the organisation has
decreased their Total Debt to Total Asset ratio in 2017-2018.
 Graph 5

0.9

0.89

0.88

0.87

0.86

0.85

0.84

0.83

0.82
Tota l Debt to Total As s et ratio
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018

Source: Researchers compilation

Interpretation: Table 5 and graph 5 represent total debt to total asset ratio. In the year 2013-14 it
was 0.889, 2014-15 it was 0.877, 2015-16 it was 0.874, 2016-17 it was 0.861, 2017-18 it was
0.845
Collection Period Ratio

The average collection period is the amount of time it takes for a business to receive payments owed
in terms of accounts receivable. The average collection period is calculated by dividing the average
balance of accounts receivable by total net credit sales for the period and multiplying the quotient by
the number of days in the period.

Formula:

Collection Period Ratio = 365

Accounts Receivables Turnover Ratio

Table 6

Year Accounts Receivables Collection Period Ratio

Turnover Ratio

2013-2014 44.3925 8.2221 days

2014-2015 53.4652 6.8268 days

2015-2016 45.8320 7.9638 days

2016-2017 43.2077 8.4475 days

2017-2018 34.6765 10.5258 days

Source: Researchers compilation

Analysis: Table 6 contain the details about the Collection Period Ratio where he 5 years data have
been collected. 1st column contains the year, 2nd column contains the Accounts Receivables Turnover
Ratio of the company and the last gives the result as Collection Period Ratio of 5 years. After the
calculation I have found that the organisation has developed very good progress in the 2017-2018
from comparing it from last year’s data.
 Graph 6

12

10

0
Col l ection Peri od Ratio
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018

Source: Researchers compilation

Interpretation: Table 6 and graph 6 represent collection period ratio. In the year 2013-14 it was
8.2221, 2014-15 it was 6.8268, 2015-16 it was 7.9638, 2016-17 it was 8.4475 and in 2017-18 it
was highest among all the year 10.5258.
Debtors Turnover Ratio

The accounts receivable turnover ratio is an accounting measure used to quantify a company's
effectiveness in collecting its receivables or money owed by clients. The ratio shows how well
a company uses and manages the credit it extends to customers and how quickly that short-term debt
is collected or is paid. The receivables turnover ratio is also called the accounts receivable turnover
ratio.

Formula:

Debtors Turnover ratio = Net Credit sales

Average Accounts Receivables

Table 7

Average Accounts Debtors Turnover

Year Net Credit Sales Receivables ratio
2013-2014 52446573 1181428 44.3925 Times

2014-2015 63165351 1181428 53.4652 Times

2015-2016 54147326 1181428 45.8320 Times

2016-2017 51046867 1181428 43.2077 Times

2017-2018 40967839 1181428 34.6765 Times

Source: Researchers compilation

Analysis: Table 7 tells about the Debtors Turnover Ratio. In the last 5 years data the organisation has
managed to gain best result in the year 2014-2015 which was 53.4652 where it has decreased badly
after those years which shows the organisations in ability to attract more customers. As in the year
2017-2018 the ratio is 34.6765 which is least in the 5 years data.
 Graph 7

60

50

40

30

20

10

0
Debtors Turnover Ratio
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018

Source: Researchers compilation

Interpretation: Table 7 and graph 7 represent debtor’s turnover ratio. In the year 2013-14 it was
44.3925, 2014-15 it was 53.4652, 2015-16 it was 45.8320, 2016-17 it was 43.2077 and in 2017-18
it was 34.6765.
Gross Profit Margin Ratio

Gross profit margin is a metric used to assess a company's financial health and business model by
revealing the amount of money left over from sales after deducting the cost of goods sold. The gross
profit margin is often expressed as a percentage of sales and may be called the gross margin ratio.

Formula:

Gross Profit Margin ratio = Net Sales -COGS

Net Sales

Table 8

Gross Profit Margin

Year Net Sales-COGS Net sales ratio

2013-2014 1796785 52446573 3.42 %

2014-2015 887457 63165351 1.40%

2015-2016 3526888 54147326 6.51%

2016-2017 3560383 51046867 6.97%

2017-2018 888149 40967839 2.17%

Source: Researchers compilation

Analysis: Table 8 tells about the Gross Profit Margin Ratio. In the last 5 years data the organisation
has managed to gain best result in the year 2016-2017 which was 6.97% where it has decreased badly
after those years which shows the organisations in ability to gain more profits in the coming years. As
in the year 2017-2018 the ratio is 2.17% which is very less.
 Graph 8

0
Gros s Profit Margi n Ratio
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018

Source: Researchers compilation

Interpretation: Table 8 and graph 8 represent gross profit margin ratio. In the year 2013-14 it was
3.42, 2014-15 it was 1.40, 2015-16 it was 6.51, 2016-17 it was 6.97, 2017-18 it was 2.17.
Operating Margin Ratio

The operating profit margin ratio how much profit a company makes after paying for variable costs of
production such as wages, raw materials, etc. It is also expressed as a percentage of sales and
the efficiency of a company controlling the cost and expenses are related to business transactions.

Formula:

Operating Margin Ratio = Operating Earnings

Revenue

Table 9

Operating Earnings Operating Margin

Year Revenue Ratio

2013-2014 1271869 52713110 0.0241 %

2014-2015 1032046 64476943 0.0160 %

2015-2016 3407059 55256498 0.0617 %

2016-2017 1972271 54169396 0.0364 %

2017-2018 1456519 42527518 0.0342 %

Source: Researchers compilation

Analysis: Table 9 tells about the Operating Margin Ratio. In the last 5 years data the organisation has
managed to gain best result in the year 2015-2016 which was 0.0617 wherein after that it has
decreased badly after those years which shows the organisations in ability to maintain the operating
margin in the coming years. As in the year 2017-2018 the ratio is 0.0342% which is very less.
 Graph 9

0.07

0.06

0.05

0.04

0.03

0.02

0.01

0
Operating Margi n Ratio
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018

Source: Researchers compilation

Interpretation: Table 9 and graph 9 represent operating margin ratio. In the year 2013-14 it was
0.0241%, 2014-15 it was 0.0160%, 2015-16 it was 0.0617%, 2016-17 it was 0.0364% and in year
2017-18 it was 0.0342%.
Return on Asset Ratio

The return on assets ratio, often called the return on total assets, is a profitability ratio that measures
the net income produced by total assets during a period by comparing net income to the average total
assets. Since company assets’ sole purpose is to generate revenues and produce profits, this ratio helps
both management and investors see how well the company can convert its investments in assets into
profits. In this case, the company invests money into capital assets and the return is measured in
profits. In short, this ratio measures how profitable a company’s assets are.

Formula:

Return on Assets = Net Income

Total Assets

Table 10

Year Net Income Total Assets Return on Asset

2013-2014 30496782 1378683261 0.0221

2014-2015 32008665 1505284735 0.0213

2015-2016 36157894 1655844091 0.0218

2016-2017 28807731 1774719282 0.0162

2017-2018 36258609 1733827513 0.0209

Source: Researchers compilation

Analysis: Table 10 tells about the organisations ability to get return on the assets of the organization
which is one of the most important part of the company. The 1 st column contains the year, 2 nd contains
the Net income, 3rd contains Total Assets of the organisation and the last gives the return on asset.
Wherein in the year 2017-2018 the organisation was able to comeback from the degradation point
which is 0.0209.
 Graph 10

0.03

0.02

0.02

0.01

0.01

0
Return on As s et
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018

Source: Researchers compilation

Interpretation: Table 10 and graph 10 represent the return on asset. In the year 2013-14 it
was 0.0221, 2014-15 it was 0.0213, 2015-16 it was 0.0218, 2016-17 it was 0.0162 and
2017-18 it was 0.0209.
CHAPTER 5: SUMMARY OF FINDINGS, RECOMMENDATIONS AND
CONCLUSION
Cooperative credit societies are predominant in the Indian Cooperative Movement. The
cooperative credit structure has two wings, one for the provision of short-term credit to
agriculture and the other for long term credit. The short-term cooperative credit structure has
a three-tier set up. At the village level, there are primary agricultural cooperative credit
societies disbursing loans direct to the farmers. The District Central Cooperative Banks are
operating at the district level channelling funds from the State Cooperative Banks to the
Primary Cooperative Credit Societies. The State Cooperative Banks are functioning at the
state level linking the cooperative credit movement with the national money market and
ensuring flow of funds to the farmers. The primary cooperative credit societies issue loans to
the farmers mainly for crop production. Such loans are called crop loans. The period of loan
is one crop season. After the harvest of the crop raising for which the loan was issued, the
farmer borrowers are expected to repay the crop loan. If they do not repay the crop loan
within the due date thus fixed, the amounts outstanding in their loan accounts are called
overdues and the members are called defaulters. There are a number of reasons, genuine and
otherwise, for the default. The borrowers unable to repay the loans for genuine reasons are no
wilful defaulters and the others are wilful defaulters.

FINDINGS

 The Cooperative Credit facility has progressed a lot using the online facilities and by
providing other services.

 As per the calculations the organisation has won the battle of recovery the loans from
debtors.

 Repayment Performance has also shown good sign of recovery.

 The organisation has developed their Debt/Equity ratio in 2017-2018 which shows
good sign of paying the debts.
  An interest coverage ratio of at least 2 is considered the minimum acceptable amount
for a company that has solid, consistent revenues. According to calculations the ratios
have gone negative so the organisation has to maintain their good revenues.

 The Debt ratio is around 1 which is very good for the organization because it means
the company has fewer liabilities in comparison to assets and it will not have to sell
all its assets to pay liabilities.

 Equity ratio is good as per the calculation they have maintained the proper ratio. From
a pure risk perspective, lower ratios (0.4 or lower) are considered better equity ratios.

 Long Term Debt to Total Asset Ratio is the ratio that represents the financial position
of the company and the company's ability to meet all its financial requirements.
According to the calculations the organization has maintained good % of financing
their assets.

 The organization was able to decrease their Debtors Turnover Ratio which is very
good from organisations point of view as there are able recover their debts easily.

SUGGESTIONS

In this section, suggestions are made to minimise the overdues at the level of primary
agricultural credit societies and to improve the repayment performance of member borrowers
of credit cooperatives based on the findings and conclusions arrived in the study.

 Members should be encouraged to increase their share capital contribution

 Efforts should be made for collection of deposits from members and non-members by
conducting deposit mobilisation campaigns. Members should be encouraged to
 deposit their surplus funds with their societies. Members depositing their surplus may
be suitably rewarded by offering half a per cent to one per cent interest concessions
for their borrowings from the societies. Such members may also be included in
committees constituted by the societies for some specific purposes such as
supervision committees.

 The organization can switch their facilities on online portals as it will be very easy
and user friendly.

 There are Modern techniques of providing loans and recovery techniques which can
be more helpful in attracting the customers and the repayment facility can be more
effective.

CONCLUSION

Based on the results, analysis and discussion of research on the effects of account
transactions, The study concluded that the credit department checks for active and dormant
accounts to facilitate the debt recovery technique, the bank ensures that the lender has
retained his account for a long period of time with the bank to be considered for a loan and
the increase in the number of transactions made influences the debt recovery hence increased
performance, this concurs with the supplier customer-supplier relationship theory which
implies that debt recovery techniques is a significant aspect of the performance of financial
institution whereby debt repayment is a matter of association between the creditor and debtor.
On the effect of guarantors on Performance of financial institutions, the study concluded that
account conduct of the guarantors is a significant factor affecting loan repayment and
performance, the collateral value of the guarantor influences the performance of the
institution, the institution checks the repayment history of the guarantor to offer loan to the
borrower and the character of the guarantor influences the shares of the institutions, this
concurs with the expected utility theory proposed by which postulates that in the presence of
risky outcomes, a lender could use the expected value criterion as a rule of choice to make
sure that their debts are recovered. Some people would be averse to risk enough preferring
the sure thing, although it has a less expected value, while other less risk averse people would
still choose the riskier, higher-mean lender to the borrower. Further the study of the assets
and lability ratio on performance of financial institutions concluded that, the value of the
goods and services provided influences the profitability of the institution, the availability of
goods from the borrower significantly influences the loan repayment and the type of goods
offered by the borrower affects the performance of the institution, these are supported by the
Customer-Supplier Relationship theory proposed, it postulated that debt recovery techniques
is a significant aspect of the performance of financial institution whereby debt repayment is a
matter of association between the creditor and debtor and the continuation of mutual interests
in terms of gains for both parties. Lastly on the effect of collateral retention on performance
of financial institutions in Eldoret Town , the study concluded that, the value of the collateral
retention greatly influence the performance of financial institutions, the type of collateral
influences the image of the institution, Ease of disposal of collateral greatly affects debt
recovery of the institution and the institution ensures that the owner of the collateral pay the
loan on time for improved performance, this is supported by value based portfolio theory
developed by which postulates that debt recovery techniques from the perspective of the
debtor, is determined by the value that the debt has added to the existing portfolio of
investments