“Role of Meenachil Service Co-operative Bank Edamattom

in Rural Development with special reference to Deposits &

Lending Practices”

Dissertation submitted to the Mahatma Gandhi University, Kottayam

In partial fulfillment of the requirements for the award of

BACHELOR OF COMMERCE

By

LAKSHMI PRIYA S (REG NO: 150021013859)

RAHUL JAYACHANDRAN (REG NO: 150021013864)

SRUTHY SAJAN (REG NO: 150021013872)

UNDER THE SUPERVISION AND GUIDANCE OF

Mr. BONEY BOSE, M.Phil, M.Com, MBA

(Assistant Professor, Department of Commerce)

DEPARTMENT OF COMMERCE – SF
ST. THOMAS COLLEGE PALAI
MARCH 2018

i
 DECLARATION

We hereby declare that the project titled “Role of Meenachil

Service Co-operative Bank Edamattom in Rural
Development with special reference to Deposits & Lending
Practices” submitted in partial fulfillment of the Bachelor of
Commerce in Mahatma Gandhi University is a record of
bonafide research work carried out by us under the guidance
and supervision of Mr. Boney Bose, and no part of it has been
submitted for any other degree or diploma.

Lakshmi Priya S

Rahul Jayachandran

Sruthy Sajan

Pala

April 2018

ii
 CERTIFICATE

I hereby declare that the project titled “Role of Meenachil

Service Co-operative Bank Edamattom in Rural
Development with special reference to Deposits & Lending
Practices” is a bonafide piece of research work done by Ms.
Lakshmi Priya S, Mr. Rahul Jayachandran, and Ms. Sruthy
Sajan in partial fulfillment of the Bachelor of Commerce in
Mahatma Gandhi University under my supervision.

Mr. Boney Bose

Assistant Professor
Department of Commerce
St. Thomas College, Palai

Counter Signed by:

Dr. Joy Jacob
Head, Department of Commerce
St. Thomas College, Palai

Pala
April 2018

iii
 ACKNOWLEDGEMENT

First of all, words are inadequate to express our whole hearted thankfulness to God
Almighty, the source of all wisdom and powerful for leading us kindly in each and
every association of this project endeavour.

We proudly utilise this opportunity to express our thanks and sincere

gratitude to our esteemed guide, Mr. Boney Bose, (Assistant Professor, Department
of Commerce), St. Thomas College, Pala without whose valuable guidance and
encouragement, it would not have been possible for us to bring out the project work.

We acknowledge our sincere thanks to Dr. Joy George, (Principal, St.

Thomas College, Pala) for his encouragement and help in making this project
fruitful.

Our sincere thanks also go to the Course Coordinator and Head of the
Department, Dr. Joy Jacob for his prompt helpfulness and guidance.

We make this opportunity to express our thanks to all the Teachers of

Department of Commerce - SF, St. Thomas College, Pala for their valuable
suggestions.

It is a pleasure to record our sincere thanks to our Parents and Friends who
have been constantly helping us to complete this project.

Lakshmi Priya S

Rahul Jayachandran

Sruthy Sajan

Pala

April 2018

iv
 CONTENTS

CHAPTER TITLE PAGE NO

CERTIFICATE

DECLARATION

ACKNOWLEDGEMENT

CONTENTS

LIST OF TABLES

LIST OF FIGURES

1 INTRODUCTION 1-5

2 LITERATURE REVIEW 6-17

3 THEORETICAL FRAMEWORK 18-35

DATA ANALYSIS AND

4 36-50
INTERPRETATION

FINDINGS, SUGGESTIONS &

5 51-54
CONCLUSIONS

BIBLIOGRAPHY 55-57

APPENDIX 58-64

v
 LIST OF TABLES

Table No. Title Page No.

4.1 Total deposit 37

4.2 Amount of increase in deposit 38

4.3 Total Loans 39

4.4 Amount of increase in loans 40

Relationship between total deposits and

4.5 41
total loans

4.6 Preference of customers for the deposit 42

4.7 Purpose of visiting a bank 43

4.8 Preference of customer for the loans 44

4.9 Range of the amount of loans 45

4.10 Preferable term of loan 46

What prompted customers to take loans

4.11 47
from cooperative banks?

Ranking of facilities provided by co-

4.12 48
operative banks

4.13 Customer Satisfaction 49

vi
 LIST OF FIGURES

Figure No. Figure Name Page No.

3.1 Structure of NCUI 22

Structure of Cooperative Credit

3.2 25
Institutions in India

3.3 Customer Satisfaction 34

4.1 Total deposit 37

4.2 Amount of increase in deposit 38

4.3 Total Loans 39

4.4 Amount of increase in loans 40

Relationship between total deposits and

4.5 41
total loans

4.6 Preference of customers for the deposit 42

4.7 Purpose of visiting a bank 43

4.8 Preference of customer for the loans 44

4.9 Range of the amount of loans 45

4.10 Preferable term of loan 46

What prompted customers to take loans

4.11 47
from cooperative banks?

Ranking of facilities provided by co-

4.12 48
operative banks

vii
 CHAPTER I
INTRODUCTION

1
1.1 INTRODUCTION

The basic idea behind Co-operation is ―Self Help and Mutual Help‖ and ―Mutual
Aid‖ and ―Each for all and all for each‖. A Co-operative Bank is a financial entity
which belongs to its member, who is the same time owners and the customers of the
bank. Co-operative bank generally provide their members with a wide range of
banking and financial services (loans, deposits, banking accounts).

Co-operative has been aptly described as ―the poor people joint stock company‖. Co-
operatives have been created to meet the essential need of a poor people, to pool
their resources and to strength third position in the market where the individual
member of such group would have little or no chance of becoming equal partners in
the economic process.

Today, co-operative banks operate across the country side-by-side with commercial
banks and play a crucial role in providing need-based finance, especially for people
engaged in agricultural and agriculture-based operations including farming, cattle,
milk, personal finance, etc., along with some small industries and self-employment
driven activities. However despite all their socio-economic advantages, co-operative
banks in India still have miles to go to catch up with the commercial banks, which
are swift to adopt changes in an increasingly globalised and connected world. Taking
measures to transform systems and operations of co-operative banks is important as
they hold key to making financial inclusion a reality.

1.2 OBJECTIVES OF THE STUDY

1. To know the lending practices of Meenachil Service Co-operative Bank.

2. To know different types of loans preferred by different sets of customers.
3. To analyze the trend of deposits received by the bank during the period.
4. To analyze the relationship between deposits accepted from the public and
loans and advances granted by the bank.
5. To know the satisfaction level of the customers from Bank‘s lending policies.

2
 6. To make suitable suggestions for improvement in the future functioning of
the bank.

1.3 SCOPE OF THE STUDY

In an agricultural economy like India, the economy is rural oriented. The people
depend mainly on agriculture for their livelihood. A study on rural economy has its
root in our taluks. Co-operative banks are the primary findings agency for rural
credit in every taluks. Thus study on the efficiency of co-operative banks would
definitely reflect the ability of such institutions to finance rural development
particularly agricultural operations.

It‘s in this background that the need felt to assess the functioning of a co-operative
bank and to understand as to what extent the banks activities has promoted rural
development. The present study is confined to Meenachil taluk only.

1.4 SIGNIFICANCE OF THE STUDY

Now days a lot of cooperative banks are entered in to our service sector. Cooperative
societies provide a number of services but with different qualities. Quality is an
important factor for surviving in the competitive market. Customers are entering into
cooperative banks with lot of expectations especially customers in rural areas.
Sometimes the expectations are fulfilled otherwise it is not possible. So this study is
an attempt to analyse the expectation and actual perseverance of different customers
and also for understanding is there any gap or mismatch between the expectations
and actual perseverance of customers of cooperative banks at Edamattom.

1.5 METHODOLOGY

1.5.1 Primary data collection:

i. Schedule Method
ii. Interview Method

3
 1.5.2 Secondary data collection:
i. Annual reports of Meenachil Service Co-operative bank
ii. Statistical report related to banking published by RBI
iii. Unpublished theses
iv. Other journals

1.6 SAMPLE DESIGN

1. Sample size: 50 respondents

2. Sampling Location: Meenachil Taluk
3. Sampling Method: Simple Random Sampling
4. Type of Research: Descriptive
5. Population: Customers of Meenachil Service Co-operative Bank
6. Tables are incorporated.
7. Ratios are calculated.
8. Footnotes are given wherever secondary data are used.

1.7 PERIOD OF THE STUDY

The study covers a period of 5 years from 2012-2017.

1.8 STATMENTS OF THE PROBLEM

The rural poor-men and women, landless people, agricultural labourers, peasants in
particular, who rely on wages as a means of livelihood, find considerable
fluctuations in their earnings from month to month. Credit is required for such
people to smooth consumption over time to cover their needs in period of low
income by borrowing. In such a situation the importance of co-operative credit
institutions arises.

Nationalized banks are not accessible for the rural people. In this situation, the co-
operative banks provide banking facilities mainly to the rural people. Other than this,

4
to sanction a loan in commercial bank, we need to submit collateral security for
taking credit. But there is no such high formality in co-operative bank to assess a
loan. Hence, the study is relevant.

1.9 CHAPTER SCHEME

Chapter 1: Introduction
Chapter 2: Literature Review
Chapter 3: Theoretical Framework
Chapter 4: Data Analysis & Interpretation
Chapter 5: Findings, Suggestion and Conclusion

1.10 LIMITATIONS OF THE STUDY

1. Some data which may be confidential in nature may not be available.

2. The data for study mainly based on a single bank.
3. The study is done for a limited period.
4. The analysis is based on annual report of the bank.
5. The study is based on the data of past 3 years‘ only.

5
 CHAPTER II
LITERATURE REVIEW

6
Dr. Balwindersigh and Ruchika Sonsi (2015) study is genuine attempt to
understudy the construct of customer satisfaction and the factor affecting customer
satisfaction in the urban co-operative banking sector in the states of Punjab, Haryana,
and Himachal Pradesh through a qualitative approach. The very widely
representation profile of respondents to helps us to reply and appropriately weight
the above outcomes.

Barwal and Kumar (2015) in their study entitled ―Comparative Performance

Evaluation of Himachal Pradesh Cooperative Bank And Kangra Central Cooperative
Bank‖ has analysed the position of shareholder fund, deposits mobilization and
advances of Himachal Pradesh State Cooperative Bank & Kangra Central
Cooperative Bank and to study the financial & operational of these two banks. They
suggested that present study made an attempt to evaluate the both the banks from
different angles so their relative performance can be gauged. After going through all
the parameters it is concluded that Himachal Pradesh State Cooperative Bank had
been able to increase the shareholders wealth during the period under study, as
shareholder funds had increased at a good rate during this period. Kangra Central
Cooperative Bank is almost consistent in these parameters. In terms of deposit
Kangra Central Cooperative Bank had performed very well its average growth
during the period under study is almost 15% which is commendable.

Sambath (2014) attempted in his study entitled ―Growth and Progress of the Urban
Cooperatives Banks in India‖ to analyse the growth and development of Urban
Cooperatives Banks in India. He revealed in his study that the future of cooperatives
banks in India is challenging because of cut throat competition from Public and
Private sector banks. Public and Private sector banks concentrating on major
expansion activities both are vertically and horizontally. The growth of cooperative
banks depends on transparency in operation and control, governance, customer
centric policies, technology up gradation and efficiency.

Ravi C.S. & Kundan Basavaraj (2013) investigated the preference and satisfaction
level of customers towards loans, deposit schemes, insurances and value-added
services rendered by private and public banks in Shivamogga district. Business and
vehicle loans are fast moving than other services and overall satisfaction resulted at

7
50%. Further, overall satisfaction on bank deposit schemes resulted positively while
other services of banking still need to be given attention by focusing on customer
issues. New innovative schemes, strategies to cater to non users other services have
to be adopted.

G.C. Pande and S. Priyakumar (2013) in their study found that agricultural sector
in India is facing several critical challenges like increasing pressures on land,
diminishing soil fertility, water scarcity and adverse environmental conditions etc.
They suggest these critical issues can largely be countered by use of emerging
technologies having high growth potential. The study also suggest that financing to
contract farming by banks is a boon to farmers who can access institutional credit
easily for crop production arranged by the companies.

Dr. Snehalkumar H Mistry (2013) focused on the factors that affecting customer
satisfaction in banks and analyzes their effects. It is revealed that customer
satisfaction is the key for many banks to survive competition. Customer gives third
preference to assurance factor, it include criteria like safety of transaction,
consistency in service, etc. So banks, whether they are private sector bank or public
sector bank they should give more focus on increasing reliability, responsiveness and
assurance. For that they can give training to their employee which will help them to
give personalized service.

Veerpaul Kaur Maan and Amritpal Singh (2013) a study titled ―Role of
NABARD and RBI in agricultural sector growth‖ analyzes NABARD has taken over
refinancing functions from the Reserve Bank of India with respect of State
Cooperative Banks and Regional Rural banks. This study reveals NABARD is
involved in the implementation of projects assisted by World Bank and its affiliate,
the International Development Association (IDA). NABARD has been associated
with implementation of 42 projects with external credit out of which 38 projects are
assisted by IBRD.

Jyothi Gupta and Suman Jain (2012) analyzed the lending practices of co-
operative banks in India, comparison of efficiency of co-operative banks in India,

8
impact of size on the efficiency of the co-operative banks and different types of loans
preferred by different set of customer from these banks.

Dr. S. Gandhimathi (2012) has made an attempt to analyze the impact of economic
reform on the distribution of agricultural credit in India. The study titled
―Distribution of agricultural credit in the pre and post reform period‖ shows that the
co-operative banks dominated in the total agricultural credit disbursement in the pre
reform period. The study revealed that the rural banking system in India made
tremendous quantitative achievement by neglecting the qualitative aspects of the
credit delivery system.

Dr. A.H.Sequeira (2012) made an attempt to address the issues related to customer
satisfaction and quickness of transactions in co-operative banks. It is clear from the
results that the customer services are reasonably satisfactory.

S.Sivesan (2012) found the impact of service quality on customer‘s satisfaction in

banking sectors. Service quality is inter-related with customer satisfaction. Manager
of the bank or administrative body needs to identify the primary quality
determinants, clearly managing the customer expectation, educating the knowledge
to customer regarding the service for improving the service quality in the banking
sectors.

Singh and Kaur (2011) determined the factors that have an impact on customer
satisfaction as regards the working of select Indian universal banks. The study was
conducted using the survey method. Data were collected through a well-structured
questionnaire from a sample of respondents. The major findings of the study show
that customer satisfaction is influenced by seven factors – employee responsiveness,
appearance of tangibles, social responsibility, services innovation, positive word-of-
mouth, competence, and reliability. The results of multiple regressions showed that
three variables: social responsibility, positive word-of-mouth, and reliability have
major influences on the overall satisfaction of the customer.

Ganguli and Roy (2011) studied the factors affecting customer satisfaction in the
Indian retail banking sector. Online structured questionnaire developed to determine

9
the factors for customer satisfaction was distributed among the respondents. The
dimensions were identified using a factor analysis. Next the reliability and validity of
the factors for customer satisfaction were established. The paper identifies four
generic dimensions in the technology-based banking services – customer service,
technology security and information quality, technology convenience, and
technology usage easiness and reliability. It was found that customer service and
technology usage easiness and reliability have positive and significant impact on
customer satisfaction.

Reddy and Prasad (2011) compared the performance of Regional Rural banks in
Andhra Pradesh to check the viability of the banks. The concluded that Andhra
Pragathi Gramin Bank is performing better than the other co-operative banks.

Biswas (2010), according to him, to boost micro financing initiatives and financial
inclusion program banks are deploying Biometric ATM solutions to its rural
customers helping illiterate or barely literate folks to become part of the banking user
community.

Kumar, Rajiv, Jasmindeep, Kaur (2010) studied financial appraisal of Haryana

State Cooperative Apex Bank for the period of five years from 2002-03 to 2006-07.
They analyzed the various parameters for the appraisal of banks like number of
offices, membership, paid up capital, reserves and other funds, deposit mobilization,
deposit type wise, demand, collection, loans issued, loans outstanding, cost of
management and profit and loss and number of branches in profit and loss.

Gandhimathi, Vanitha (2010) made an attempt to study the preference of farmers

for borrowing between commercial and co-operative banks. They examined the
distribution of institutional credit across various categories of farmers and assessed
the coverage and quantum of credit and also the socio-economic factors which affect
the borrowing behaviour of farmers towards commercial and co-operative banks.
They gave some suggestions for improving accessibility of institutional credit for
farmers.

10
Reddy (2010) suggested a new approach to banks to reach wider population in rural
areas by establishing mobile-banks/representatives/agents who operate on
commercial basis rather than just by self-help groups. These agents/representatives
work on commission basis and hence self-motivated and cost effective in assisting
banks in service provision/deposit mobilization.

Singh and Singh (2010), in their study titled, ―Technical and Scale Efficiency in
District Central Co-operative Banks of Punjab −A Non- Parametric Analysis‖ had
attempted to investigate the extent of technical efficiency across 20 DCCBs of
Punjab with the help of Data Envelopment Analysis. They brought out that size of
DCCBs and profits had been affecting the measures of technical efficiency
significantly. The study further revealed that DCCBs of Punjab were suffering from
the problems of managerial irregularities and improper production scale. Appropriate
policy interventions by state government, RBI and NABARD have been suggested
by the authors.

Mohi-ud-Din and Nazir (2010) stated that sound financial health of a bank is the
guarantee not only to its depositors but is equally significant for the shareholders,
employees and whole economy as well. In this paper, an effort has been made to
evaluate the financial performance of the two major banks in northern India. This
evaluation has been done by using CAMEL Parameters, the latest model of financial
analysis. Through this model, it is highlighted that the position of the banks, under
study is satisfactory so far as their Capital adequacy, Assets quality, Management
capabilities and Liquidity is concerned.

Ravichandran and Alkhathlan (2009), according to him, very few people have
access to banking services. There are number of factors affecting access to financial
services by weaker section of society in India. The lack of awareness, low incomes
and assets, social exclusion, illiteracy are the barriers from demand side. The
distance from bank branch, branch timings, cumbersome banking procedure, over
requirement of documents for opening bank accounts, unsuitable banking
products/schemes, language, high transaction costs and attitudes of bank officials are
the barriers from supply side. Bank-SHG, bank-MFI, MFI-NBFC and bank- post

11
office linkage models were discussed and new models like rural students banking
model, RBI-Education institute linkage models were proposed.

Cole et al. (2009) concluded that financial literacy program has no effect on the
likelihood of opening a bank savings account, but do find modest effects for
uneducated and financially illiterate households. In contrast, small subsidy payments
have a large effect on the likelihood of opening a savings account. These payments
are more than two times more cost-effective than the financial literacy training.

Gupta and Gupta (2008), says increasing proliferation of mobile services and
ATMs in rural areas of India has created a new opportunity to attain financial
inclusion and thus an effective tool to provide financial services to the un-banked
areas with reduced overheads with providing access to banking services in remote
rural destinations of India.

Murthy (2008), in his paper titled, ―Rural Finance: A Remedial Measure for Rural
Poor‖ focused on the role of financial services as key to enhancing economic
development and reducing poverty in rural areas. Rural finance has often led the way
in addressing social, gender and ethnic equity issues which hold families in poverty.
He, however, observed that the access was limited for poor households and for
micro, small and medium enterprises. Despite rapid economic development in India
the number of people living below the poverty line has decreased only slightly.
While there was a numerically strong infrastructure of formal financial institutions in
rural India, they often lacked the capacity to provide adequate demand oriented
services. He recommended that the major constraint of such important rural finance
agencies, i.e., lack of resources should be removed, by facilitating them to mobilize
resources from capital market and other newer sources.

Amin G.H. (2008) in his article has emphasised that the future vision of cooperative
credit institutions should be focused on moving on to the fast tracts of efficiency and
productivity through promotion of professionalism, strengthening their financial
resources base and at the same time upgrading their technological parameters
including computerization of their operations coupled with the creation of good
environment for the clientele and depositors. Such a scenario would enable the rural

12
credit cooperatives to develop their competitive edge and to exploit the emerging
opportunities emerging from the processes of globalization and liberalization.

Darling Selvi, V (2008) examines the lending performance of Kanyakumari District

Central Co-operative Bank (KDCCB). He observed that the overall growth rate of
loan disbursement on short term credit shows a positive growth of 25%. The credit
facilities extended by KDCCB are high for services, medium for industries and low
for agriculture. He concludes that the overall performance of the KDCCB is good. If
the benefits are properly toiled and utilized there will be a bright future for both to
the community and to the nation.

Dutta and Basak (2008) Studied and suggested that co-operative banks should
improve their recovery performance adopt new system of computerized monitoring
of loans, implement proper prudential norms and organize regular workshops to
sustain in the competitive banking environment.

Ghosh (2007) suggests that the Post Office Saving Bank (POSB) can be used to
cater the financial need of rural India where Microfinance Institutions (MFIs) have
very little presence in total demand of finance.

Ramesh Golait (2007) has made an attempt to study the current issues in
agricultural credit in India. The Researcher observed that the credit delivery to the
agriculture sector continues to be inadequate. The study has identified crop losses,
consecutive failure of monsoon, recurrent drought, mounting debts and land tenancy,
as some of the main causes which led many distressed farmers to commit suicide. He
suggests merging and revamping of RRBs that are predominantly located in tribal
/backward regions is seen as a potentially significant institution arrangement for
financing the hitherto unreached population.

Vinayagamoorthy, A and Vijay Pithadia (2007) in their work entitled

―Globalization and Co-operative Sector in India‖, have observed that considering the
low living standard of common man, incomplete and imperfect markets and other
socio political considerations, it is the primary duty of the government to ensure that
its citizens have easy access to co-operative credit. They have concluded that the

13
future vision of co-operative movement will have to be based on efficiency
parameters relating to promotion of excellence, improvement of operational
efficiency and strengthening of financial resource base.

Singh and Singh (2006) studied the funds management in the District Central Co-
operative Banks (DCCBs) of Punjab with specific reference to the analysis of
financial margin. It noted that a higher proportion of own funds and the recovery
concerns have resulted in the increased margin of the Central Co-operative Banks
and thus had a larger provision for non-performing assets.

Vannirajan (2006) conducted a study to examine the impact of service quality

dimensions on customer satisfaction. It revealed that the important services offered
by banks are traditional services, non-traditional services, tangibles, reliability,
responsiveness, assurance and empathy. It also found that reliability and non-
traditional services affect more on the customer satisfaction level. The study
concluded that the private sector banks and associates of State Bank of India are
better in providing services to the customers than the nationalist banks and co-
operative banks.

Banishree Das, Nirod Kumar Palai and Kumar Das (2006) in their study on the
problems and prospects of the co-operative movement in India under the
globalization regime. They have observed that the co-operative system in India has
the capacity and potentiality to neutralize the adverse effects emerging from the
process of globalization. They have concluded that co-operatives have immense
potential to deliver goods and services in areas where both the state and the private
sectors have failed.

Namasivayam, N (2006) has observed the working performance of the Madurai

District Central Co-operative Bank Ltd., and states that it has been impressive in
terms of deposit mobilization and credit deployment. He has concluded that the
success of the co-operative bank depends on effective manpower planning and
management.

14
Appa Rao, B and K.B.D. Sobha Rani (2006) in their article Consumer Protection
Act: Applications to Banking Services conclude that the Consumer Protection Act is
intended not only to protect the interests of the consumers and against their
exploitation but also to provide speedier justice. However, the number of District
Forum is being insufficient; it is necessary to increase the number of courts and also
cut down on the procedural delays.

D.S.Sangwan (2006) in his article Customer‘s Pride-A Business Development

Mantra reiterates the words of Mahatma Gandhi, ―considering a customer God in our
premises‖. He further says that we could either continue with business, which leads
us to disaster, or we could review the entire system/ policies that had been framed/
made long back in seventies or eighties and build a more effective organization of
st
21 century. The need of the hour is to attract high level of initiative and innovation
by implementing pro-active human resource management policies.

Carlos Cuevas & Klaus Fischer (2006) … there are topics related to organization,
governance, legislation, regulation, and supervision of cooperative financial
institutions over which there is no agreement but over which one is needed if we are
to facilitate the growth of these institutions and realize their potential for serving the
poor… Producing a set of principles…would be a giant step that would give the
international (cooperative financial institution) movement a new jolt. The
experiences and errors of the past aided by the sharp insights that modern economic
and finance theory and research methods provide, should allow us to arrive at a
consensus...

Oliver Bright. A (2005) has analyzed the role of Kanyakumari District Central Co-
operative Bank (KDCCB) in Tsunami Credit. He has observed that DCCBs grant
loans and advances to the rural dwellers both for agricultural and non-agricultural
purposes. But the infrastructure aids are totally neglected by them. He has suggested
that the DCCBs must identify the investment portfolios for credit plans.

Archit B. Panchal. (2005) in his article Co-operative Banks: Challenges in the

Competitive Era, finds that the co-operative banks have played big role in the Indian

15
economy. Co-operatives made easy to fund (loan) to the poor farmers and other rural
areas, that is seventy five percent in India. So, the most needful thing for banking
sector is another reform in the co-operative banking system to compete in the new
financial reform era.

Ranjana Kumar (2005) in her article Consolidation - Future of Co- operative

Banks, points out that Co-operatives have a unique place in the rural credit scenario.
There is a need to revamp them through reforms and revitalization. Success of
consolidation will also depend on the willingness of the state government to let go
the controls they have on the co-operatives.

Subah Singh Yadav (2005) in his article opines that efforts are on to ensure
availability of more bank branches in areas having high population. Further, banks
should organize village meets for creating awareness about the facilities available
with the banks, such as safety, liquidity of funds etc and should familiarize the
various deposits and advances schemes in a bid to fine-tuning the rural finance.

Rajagopala Rao studied the strengths and weaknesses of customer's services in

urban cooperative banks and made several suggestions. He examined the experience
and expectations of the member of an urban cooperative bank, the current facilities
availed by the members and the reasons for their happiness and unhappiness of the
services provided by the bank.

Strength of urban cooperative banks included effective board of management,

efficient employees, cordial personalized services, proper guidance, and provision of
loan facilities, computerization, prompt services, good work culture and convenient
timings. Among the important weakness absence of enquiry counter, absence of
computerized services, absence of display boards, cumber some procedure,
inefficient employees, indifferent attitude of employees, inconvenient timings,
insufficient bank branches, delay in services, lack of new schemes were found.

He concluded by stating that with the competition in banks becoming fierce, not only
winning new customers, but also retaining the existing customers assumes great
significance. So urban cooperative banks should equip themselves to meet the

16
challenges and their future depends on their capability to provide better services in
terms of variety, quality and cost. So their success lays in democratic management,
dedicated, enlightened and committed leadership, adoption of new technology and
devotion of employees.

A.Rajagopala Rao suggested that urban cooperative banks have a prestigious place
in the cooperative credit structure. Urban Cooperative Banks in our country have
been started and promoted by the co-operators without government assistance. Right
from the dawn of the twentieth century, the urban cooperative banks have been
playing a pivotal role in the economic upliftment of people, particularly weaker
sections of the society and mostly in the urban areas. Their predominant role in
mopping up small savings and providing credit to small entrepreneurs in urban areas
has come a long way in fulfilling their socioeconomic objectives of providing a face
lift to the financially challenged mass of urban area.

Man Mohan Singh, the then Governor of Reserve Bank of India expressed the
motive role of the urban cooperative banks in India as: ―The urban cooperative banks
play a very useful and purposeful role in promoting the habit of thrift and savings;
and a major portion of their advances was to help the persons of small means as
well.‖10 On the study of urban cooperative banks, Rage has categorically observed
that ―the urban cooperative banks have made satisfactory progress only after they
came under the control of Reserve Bank of India. They banks are progressing on the
strength of their own funds.‖

C.L. Dadhichi – says on wilful default on co-operative credit in Rajasthan has

thought to light some important relative‘s, wilful defaulters are generally those have
large holdings of higher castes of a higher level of education and re large borrowers
and members or ex-members of the managing committees. Reason for such a
situation are re-lending of co-operative credit to make profit out of it, harassing
present managing committees uncertainty in availing of fresh credit and an element
of fear about the future financial position of the society.

17
CHAPTER III
THEORETICAL
FRAMEWORK

18
3.1 CO- OPERATIVE BANKS IN KERALA – AN OVERVIEW

In Kerala, the Co-operative movement has spread its wings in almost all walks of
life. The spread and growth of co-operatives in different sectors were nurtured under
development plans with government initiative and government finance.

The word ―Co-Operation‖ is derived from the Latin word ‗Co-operaie‘, which means
‗work together‘. In the ordinary sense, co-operation means ‗working together
jointly‘. The term co-operation implies a common endeavour with a common end.
Those who join together should have some economic aim, which they cannot
normally achieve by individual isolated action. Union is ‗strength‘ and hence they
associate together to achieve the common end through self-help and mutual help.
They are guided by the principle ―each for all and all for each‖

3.2 Co-operation - A product of the civilized society

Co-operation as is understood today, as an economic system, was born as a peaceful

reaction against the mercantile economy and Industrial Revolution which had
resulted in the concentration of wealth, mass poverty and degradation; in a word,
―decay of men‖. Co-operation was conceived as the answer to the injustice of
capitalism and was developed as its antidote. Poorer men saw in it a price advantage,
economists a new incentive to efficiency, and the utopian socialists a method of
developing a complete new society. ―The herd found that by showing a common
front they were a match for the economic carnivores‖.

3.2.1 Definitions of Co-operation

The term co-operation, as generally understood today, is a term, which like
philosophy and religion defies exact definition and description. The concept and
meaning of co-operation has been given by utopian socialists, religious thinkers,
sociologists, economists and reformists in their own way in their respective
countries. Some of the important definitions of co-operation are given below:

Mr. Henry Calvert, an authority of Indian co-operation, defined co-operation as ―a

form of organization, where in persons voluntarily associate together as human

19
beings, on the basis of equality, for the promotion of economic interests of
themselves‖. The essentials of this definition are:-
1. A co-operative society is a voluntary form of organization.
2. It is an association of human beings.
3. It is organized on the basis of equality and
4. Its objective is the economic interest of members.

The Indian Co-operative Societies Act of 1912 has not given any definition of co-
operation. Section 4(c) considers a co-operative society as ―a society which has the
object, the promotion of the economic interests of its members in accordance with
co-operative principles‖.

3.3 Co-operative Week

ICA proposed to celebrate the International Co-operative Day on the 1st Saturday of
July every year. But in India, it is celebrated for a week. It was decided to celebrate
the co-operative week from 14th November every year, since it being the birthday of
the first prime minister of our country Jawaharlal Nehru, who was an ardent
promoter of co-operation in India.

3.4 Co-operative Flag

ICA designed a co-operative flag and presented to the world. The flag has seven
rainbow colours. The executive committee of ICA agreed the suggestion of Mr.
Charles Gide, a French co-operator and adopted a spectrum of seven colours. The
seven colours represent prosperity, harmony, peace, and welfare of the people.

3.5 COOPERATIVES MOST SUITED FOR LOCAL

DEVELOPMENT
1. Cooperatives since respect the local culture & values and understand local
way of living, are thus in an advantageous position to understand the local
needs. Therefore, can have a focussed approach on local development.
2. Cooperative enterprises organize the local people and improve their skills to
optimise the local resources. Thus cooperatives are the main tool for the local
development.

20
3. Cooperatives involve and enthuse every section of the society irrespective of
caste, creed and religion and ensure their active participation in local
development.
4. Cooperatives provide platform for interaction among the members that builds
trust which helps in planning local development efficiently and also fosters
social cohesion.
5. Cooperatives settle conflicts for the resources within and between
communities and can also resolve conflicts with outside forces that threaten
to exploit local ecosystems and undermine local development.
6. Cooperatives having concern for community, have concerns for the natural
resources of that area, do not over-exploit thus maintain local eco-system.
7. Cooperatives can work in close coordination with its members can act as best
instrument for knowledge multiplication. Thus, they can better prepare their
members especially for: - nursing and first aid, natural disaster, climate
change, global warming.
8. Cooperatives identify the new opportunities and technologies and realign it
locally that ultimately leads to local development.
9. Cooperatives are based on the principle of cooperation and cam coordinate
with cooperatives/other agencies in the same area to facilitate the local
development.
10. Cooperative generate local employment maintain the balance in rural and
urban habitat & control the fallouts of exodus from villages to cities.
11. Cooperative can make value addition to the local products/services that
improve the quality & life of the product and provide better return to the local
producer.
12. Cooperatives can encourage the scaling up of local successes and can connect
local efforts to national and international level making the local efforts
global.

21
3.6 ROLE OF CO-OPERATIVES IN INDIA

1. Indian cooperative movement is one of the largest cooperative movements in

the world with about 0.6 million cooperative societies involving 249 million
members and covering almost 100% of the villages.

2. Cooperatives in India promote inclusive growth and community

development.

3. Cooperatives in India are working in almost every field of business,

particularly related to agriculture.

4. Have diversified in different sectors according to the emerging economic

opportunities and needs of its members.

3.7 CO-OPERATIVE EDUCATION AND TRAINING IN INDIA

Co-operatives provide education and training for their members, elected

representatives, managers and employees so they can contribute effectively to the
development of their co-operative. They inform the general public, particularly
young people and opinion leaders, about the nature and benefits of co-operation.

This is the fifth co-operative principle, as published by the International Co-

operative Alliance. Education was and remains the lifeblood of all co-operatives. It is
a driver of co-operative development, and is important across all areas of co-
operation.
The term Co-operative Education refers to the programme which seeks to add to the
knowledge and understanding of the members and office bearer of co-operative
institution alike.
Co-operative Training implies the programme for the training of paid employees of
Co-operative Departments and Institutions.
The Centres for the Training of Junior and Intermediate workers are looked after by
the State Co-operative Unions while at the Central level, the programme has been
entrusted to the National Council for Co-operative Training (NCCT) under the
National Co-operative Union of India (NCUI).

22
3.8 STRUCTURE

Member Education
Education (Educating
Committee)

Training
Propaganda
(NCCT)

NCUI
Figure 3.1

3.9 CO-OPERATIVE BANKS

A Co-operative bank is a financial entity which belongs to its financial entity which
belongs to its members, who are at the same time the owners and the customers of
their bank. Co-operative banks are often created by persons belonging to the same
local or professional community or sharing a common interest and provide their
members with a wide range of banking and financial services like loans, deposits,
banking account etc. For the improvement of their performance or quality of service,
the banks should measure how their products and services met or exceed customer
expectations. Thus the customer satisfaction acts as a key performance indicator
within the organizations and which have powerful effects. They give awareness to
employees about the importance of fulfilling customer‘s expectations. Thus,
expectations are a key factor behind satisfaction. When customer have high
expectations and the reality fall short, they will be disappointed and will likely rate
their experience as less than satisfying.

Co-operative banks are now an important element of Indian financial system and are
much more important in India than anywhere else in the world. It has gained its

23
importance by the role assigned to them, the expectations they are supposed to fulfil,
their number, and the number of offices they operate. Their role in rural financing
continues to be important even today. Following are the some common features of
co-operative banks:

Customer’s owned entities: The needs of the customer meet the needs of the
owners, as co-operative bank members are both. As a result, the first aim of a co-
operative bank is not to maximize profit but to provide the best possible products
and services to its members. Some co-operative banks only operate with their
members but most of them also admit non-member clients to benefit from their
banking and financial services.

Profit allocation: A significant part of the yearly profit, benefit or surplus is usually
allocated to constitute reserves. A part of this profit can also be distributed to the co-
operative members, with legal or statutory limitation in most cases. Profit is usually
allocated to members either through a patronage dividend, which is related to the use
of the co-operatives products and services by each member, or through an interest or
a dividend, which is related to the number of shares subscribed by each member.

Democratic member control: Co-operative banks are owned and controlled by their
members, who democratically elect the board of directors. Members usually have
equal voting rights, according to the co-operative principle of ―one person, one
vote‖.

Co-operative banks are deeply rooted inside local areas and communities: They
are involved in local development and contribute to the sustainable development of
their communities, as their members and management board usually belong to the
communities in which they exercise their activities. By increasing banking access in
areas or markets like SMEs, farmers in rural areas and middle or low income
households in urban areas etc. Where other banks are less present and they reduce
banking exclusion and promote the economic ability of millions of people.

Leads to economic growth of the country: They play a significant role on the
economic growth in the countries in which they work in and increase the efficiency

24
of the international financial system. Their specific from of enterprise, relying on the
above –mentioned principles of organization, has proven successful both in
developed and developing countries.

3.10 STRUCTURE OF CO-OPERATIVE CREDIT

INSTITUTIONS IN INDIA

Cooperative
Credit
Institutions

Rural
Urban
Cooperative
Cooperative
Credit
Banks
Institutions

Short Term Long Term

Structure Structure

State
Cooperative State Cooperative Agriculture
Bank and Rural Development Bank

District
Cooperative Primary Cooperative
Bank Agricultural and Rural
Development Bank

Primary
Agricultural
Credit
Societies
Figure 3.2

The Co-operative Credit Institutions in India can be classified as under:

25
From the chart, it can be seen that the organization of the Co-operative Credit
Societies is pyramidal in nature. It has a three-tier structure.

(i) Primary Credit Societies at the bottom.

(ii) District Co-operative Bank at the middle,
(iii) State Co-operative Bank at the top.

(i) The Primary Agricultural Credit Societies:

A primary society is an association of borrowers and non-borrowers residing in a

particular locality and taking interest in the business affairs of one another. As
membership is practically open to all inhabitants of a locality, people of different
status are brought together into the common organization.

The affairs of those organisation are managed by honorary secretaries and presidents
assisted by boards of directors, all these officials being elected from amongst the
shareholders on the principle 'of one man, one vote'. Most of the societies are
organised and working on the principle of unlimited liability.

The society may be started with ten or more persons of a village. NABARD has also
been extending funds to develop the infrastructure of PACs.

The primary society derives its funds from entrance fees, share capital, reserve funds
deposit or loans from non-members, from central and provincial co-operative banks
and from the Government. The deposits of the society may be either fixed, savings or
recurring.

Unfortunately, the deposits of primary societies are not sufficiently large. The
society provides short-term credit to its members ordinarily on the personal security
of the borrower with the personal surety or sureties of other members. It may also
lend on mortgages.

(ii) Central Co-operative Banks:

A Central Co-operative Bank is a federation of primary societies in a specified area.

Where membership of a Central Co-operative Bank is restricted to primary societies

26
only, it is known as a 'banking union'. Nowadays, individuals are also admitted as
members of almost all Central Co-operative Banks.

Central Co-operative Banks are generally situated at the headquarters of district and
have on their boards of management, individuals of sufficient influence and business
capacity in addition to representatives of primary societies. The CCBs form an
important part in the short-term structure of Co-operative Credit Institutions.

The CCBs also borrow money from NABARD for their operations. A Central Co-
operative Bank obtains its funds from share capital, reserve funds, deposits (current,
fixed, savings, recurring) and loans from the State Co-operative Bank or other joint
stock banks.

Sometimes primary societies deposit their surplus funds with the Central Co-
operative Banks to which they are affiliated and this forms another source of funds
for the Central Co-operative Banks.

(iii) State Co-operative Banks:

At the top of the co-operative banking, there are State Cooperative Banks, organized
with the object of attracting deposits from the rich urban classes. These Banks are
also more suitably equipped to serve as channel between the co-operative movement
and the joint stock banks.

There are at present 30 such banks. The constitution of these banks differs from one
another, but generally speaking, their membership comprises representatives of
Central Banks as well as individual shareholders. A logical development of these
banks would have been the establishment of all-India Co-operative bank.

But there is no such institution, although the Indian State Co-operative Banks
Association has been coordinating their activities and performing certain services to
all these Banks. NABARD maintains contact with the State Co-operative Banks.

In addition to offering them rediscount facilities, collect and disseminate useful

information regarding co-operative movement.

27
Capital and Operation of the Bank

The State Co-operative Banks attract deposits from the richer urban classes and grant
financial accommodation to Central Co-operative Banks and through them to
primary societies. They form the only link between the co-operative organizations on
the one hand and the money market and joint stock banks on the other.

They are the balancing factors as between Central Co-operative Banks; for the
transfer the surplus funds available with some Central Banks to the needy ones.

The State Co-operative Banks derive their funds from share capital, reserve fund,
deposit from the public, loans from the State Bank, joint stock banks and deposits of
surplus funds from some of the Central Banks affiliated to them.

Generally speaking, it may be stated that the organization of the State Co-operative
Banks is very efficient and, in spite of competition from joint stock banks, they do
very good business.

They are prohibited from transacting all types of commercial banking business and
so their funds are not at present being fully employed. With the growth of Co-
operative movement these funds may in due course be more effectively and
efficiently employed within the movement.

3.10.1 District Co-operative Banks

District Cooperative Central Bank means ―a central society, the principal object of
which is to raise funds from to be lending to its members, with jurisdiction over one
revenue district and having as its members any type of primary societies and federal
and central societies having headquarters in such district.‖

The Banking model consists of a district central bank for each District in every state
of India known with a name as a respective District Central Cooperative Bank. The
members and their elected directors who represent a multitude of professional
cooperative bodies like Milk Unions, Urban cooperatives, Rural cooperatives,
agricultural and non agricultural cooperatives and various others, in turn would elect
the bank's President. These banks are collectively represented by a State Apex
Central Cooperative bank for each state and it acts as the ultimate bank and apex
body for the DCCs under each state. It has been widely observed all over the country
28
that the local politicians who hold the sway over the cooperatives get elected the
president post of the DCC bank and a president post would mean nurturing for their
future political ambitions. However, this trend, which has become a national
phenomenon, carries its own advantages and disadvantages.

3.10.2 Land Development Banks

The Land development banks are organized in 3 tiers namely; state, central, and
primary level and they meet the long term credit requirements of the farmers for
developmental purposes. The state land development banks oversee, the primary
land development banks situated in the districts and tehsil areas in the state. They are
governed both by the state government and Reserve Bank of India. Recently, the
supervision of land development banks has been assumed by National Bank for
Agriculture and Rural development (NABARD). The sources of funds for these
banks are the debentures subscribed by both central and state government. These
banks do not accept deposits from the general public.

3.10.3 Urban Co-operative Banks

The term Urban Co-operative Banks (UCBs), though not formally defined, refers to
primary co-operative banks located in urban and semi-urban areas. These banks, till
1996, were allowed to lend money only for non-agricultural purposes. This
distinction does not hold today. These banks were traditionally centered on
communities, localities, work place groups. They essentially lend to small borrowers
and businesses. Today, their scope of operations has widened considerably.

3.11 COMPANY PROFILE

Meenachil Service Co-operative Bank was registered on 1966 with Reg. No. K271.
It started functioning on 07-05-1966. The registered address of the bank is ―The
Meenachil Service Co-operative Bank Ltd No. K271, Kottayam District, Meenachil
Taluk, Poovarani Village, Edamattom P.O. The Ex President of India Sri V.V.GIRI
has solicited his presence on inauguration. The bank has 5 branches: Edamattom,
Poovarani, Paika, Kizhaparayar, and Vilakumadam. The bank‘s facilities include
accepting deposit, loans, chitty fund, and other business.

29
3.11.1 STAFF
The society has 13 workers at present including the Secretary.

3.11.2 ADMINISTRATION
Advocate Jose Tom acts as President and deals the administrative matters of the
society.

3.11.3 GROUP DEPOSIT AND CREDIT SCHEME

We have 41 deposit schemes functioning successfully worth Rs. 25000, Rs. 50000,
Rs. 100000, Rs. 200000, and Rs. 500000.

3.11.4 BANKING SERVICES

1. Locker facilities
2. Additional interest of 0.5% to senior citizen
3. Saving and current account facilities
4. Jewel loan facilities
5. House mortgage loan
6. Overdraft to individual and execution
7. Self Help Group finance
8. Vehicle loan – women (2 wheeler)
9. Loans to Kudumbasree members
10. RTGS & NEFT facilities
11. CORE Banking
12. Net Banking
13. Loans through DCB‘s

3.11.5 OTHER SERVICES

1. Coffee House
2. DTP Centre
3. Consumer fed

30
3.12 CUSTOMER SATISFACTION

In today‘s competitive environment relationship marketing is critical to banking

corporate success. Banking is a customer oriented services industry and Indian banks
have started realising that business depends on client service and the satisfaction of
the customer. This is compelling them to improve customer service and build
relationships with customers.

This study is based on a single bank, aims at identifying customer satisfaction

variables which lead to relationship building, and developing a conceptual
framework of relationship marketing practices in Indian banks by capturing the
perspectives of customers with respect to their satisfaction with various services. It
also sought to identify whether demographics have a role to play in customer
satisfaction. A questionnaire designed from a literature review and in-depth
interviews were utilised to arrive at the factors which determined the satisfaction of
50 customers of the bank.

The results from this study could provide managerial lessons on assessment of
strengths and improvement of services and in evolving a research strategy that will
benefit the management of banks.

3.12.1 The Need to Measure Customer Satisfaction

Satisfied customers are central to optimal performance and financial

returns. Customers are viewed as a group whose satisfaction with the enterprise must
be incorporated in strategic planning efforts. Forward – looking companies are
finding value in directly measuring and tracking customer
satisfaction (CS) as an important strategic success indicator.

With better understanding of customers' perceptions, companies can determine the

actions required to meet the customers' needs. They can identify their own strengths
and weaknesses, where they stand in comparison to their competitors, chart out path
future progress and improvement. Customer satisfaction measurement
helps to promote an increased focus on customer outcomes and stimulate
improvements in the work practices and processes used within the company. When

31
buyers are powerful, the health and strength of the company's relationship with its
customers – its most critical economic asset – is its best predictor of the future.
Assets on the balance sheet – basically assets of production – are good predictors
only when buyers are weak. So it is no wonder that the relationship between those
assets and future income is becoming more and more tenuous. As buyers become
empowered, sellers have no choice but to adapt. Focusing on competition has its
place, but with buyer power on the rise, it is more important to pay attention to the
customer. Customer satisfaction is quite a complex issue and there is a lot of debate
and confusion about what exactly is required and how to go about it. This article is
an attempt to review the necessary requirements, and discuss the steps that need to
be taken in order to measure and track customer satisfaction.

3.12.2 What constitutes Satisfaction? The meaning of satisfaction

"Satisfied" has a range of meanings to individuals, but it generally seems to be a
positive assessment of the service.

The word "satisfied" itself had a number of different meanings for respondents,
which can be split into the broad themes of contentment/happiness, relief, achieving
aims, and achieving aims and happy with outcome and the fact that they did not
encounter any hassle:

Happy
- Content
- Happy, pretty happy, quite happy
- Pleased
- Walked out of there feeling good
- Walk out of there chuffed
- Grateful the service has been OK

Relieved
- Thank God for that
- Phew
- At ease

32
- Can relax
- Stress reduction
- Secure
- Safe
- Go to the bank with a troubled mind and they sort it out for you
- Sleep at night without worrying what's going to go on
- Everything is sorted out in your mind and you're happy
- Secure, you know the money has been sorted out
- Knowing the money's going to be there

Achieving aims
- Achieving your aim or goal
- Getting what you went in for
- Achieve whatever it is you wanted to achieve
- Come away with a proportion of what you want
- Got what wanted in the end
- Got what you went down for
- Everything went according to plan, the way it should have done
- Met expectations
- To be unsatisfied is when you come out and you are still on the same level as you
were before

Achieving aims, and happy with outcome

- Happy with the results
- Happy with what you've got
- When you walk out you're happy they've sorted everything out and quickly
- Happy with outcome
- Pleased with what's happened
- Content with what's been done for you
- A feeling of happiness having achieved your goal
- You go in there feeling down and the only way you are going to come out satisfied
is if they have been good to you

33
No hassle
- Not frustrated
- Everything goes smooth
- No hassle
- No problems
- No hassle getting there
- Straightforward

3.12.3 Expectations in Customer Satisfaction

Expectations have a central role in influencing satisfaction with services, and these
in turn are determined by a very wide range of factors lower expectations will result
in higher satisfaction ratings for any given level of service quality. This would seem
sensible; for poor previous experience with the service or other similar services is
likely to result in it being easier to pleasantly surprise customers. However, there are
clearly circumstances where negative preconceptions of a service provider will lead
to lower expectations, but will also make it harder to achieve high satisfaction ratings
– and where positive preconceptions and high expectations make positive ratings
more likely.

Customer Customer
Focus Grievance

Customer Customer Property

Feedback

Special Timely
CUSTOMER
Requirement SATISFACTION
of Customer Supply

Figure 3.3

34
3.12.4 ROLE OF COOPERATIVE BANKS IN RURAL
DEVELOPMENT
Someone has said that the cooperatives are like the island of prosperity in, ‘the
ocean of poverty’.

Co-operative banks are an integral part of the Indian financial system. They
comprise urban co-operative banks and rural co-operative credit institutions. Co-
operative banks in India are more than 100 years old. Urban Co-operative Banks
(UCBs) also referred to as primary cooperative banks play an important role in
meeting the growing credit needs of urban and semi-urban areas of the country.
UCBs mobilise savings from the middle and lower income groups and purvey credit
to small borrowers, including weaker sections of the society. Scheduled UCBs are
under closer regulatory and supervisory framework of the RBI. Rural cooperative
banks operate mainly for the benefit of rural areas, particularly the agricultural
sector. Though much smaller as compared to scheduled commercial banks, co-
operative banks constitute an important segment of the Indian banking system. They
have an extensive branch network and reach out to people in remote areas. They
have traditionally played an important role in creating banking habits among the
lower and middle-income groups and in strengthening the rural credit delivery
system.

35
 CHAPTER IV
DATA ANALYSIS &
INTERPRETATION

36
The deposit earned by Meenachil Service Cooperative Bank is sanctioned the year
follows. Total deposit collected by providing loans and advances are shown below:

Table showing the total deposit

Table 4.1
Period Amount of Deposit Growth Index
2012-2013 186667214 100%
2013-2014 212767166 114%
2014-2015 245693417 131%
2015-2016 313381255 167%
2016-2017 335411779 180%
Source – Annual Report of the Bank

Graph showing the growth index of deposit

Figure 4.1

Total Deposits
200
180
160
140
120
100
80
60
40
20
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017

Source – Table 4.1

INFERENCE:-
In 2012-13 the amount deposit was Rs. 186667214 increased to 335411779 after 5
years. 2012-13 was taken as base year and growth index was 100. The total deposit
of the bank was increasing during the period.

37
 Table showing the amount of increase in Deposit
Table 4.2
Period Total Deposit Amount of deposit Amount of
during last period increase in
deposit
2012-2013 186667214 162453476 24213738
2013-2014 212767166 186667214 26099952
2014-2015 245693417 212767166 32926251
2015-2016 313381255 245693417 67687838
2016-2017 335411779 313381255 22030524
Source: Annual Income Report of the Bank

Graph showing the Amount of Increase in Deposit

Figure 4.2

22030524 24213738
2012-2013
2013-2014
26099952
2014-2015
2015-2016
67687838
2016-2017
32926251

Source: Table 4.2

INFERENCE:-
From the above table it‘s clear that in each year the amount of total deposit is
increasing when compared with previous year‘s total deposits.

38
 Table showing the total loans of the bank
Table 4.3
Period Amount of Loans Growth Index
2012-2013 227699766 100%
2013-2014 233174039 102%
2014-2015 246528068 108%
2015-2016 213906161 94%
2016-2017 245221746 107%
Source: Annual Report of the Bank

Graph showing the Growth Index of Deposit

Figure 4.3

Total Loans
110

105

100

95

90

85
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017

Source: Table 4.3

INFERENCE:-
The above table depict the amount of loan is increasing. The 2012-2013 was taken as
the base year and the growth index was 100%.

39
 Table showing the amount of increase in loans
Table 4.4
Period Total Loans Amount of loan Amount of
during last period increase in loans
2012-2013 227699766 156469936 71229830
2013-2014 233174039 227699766 5474273
2014-2015 246528068 233174039 13354029
2015-2016 213906161 246528068 (32621907)
2016-2017 245221746 213906161 31315585
Source: Annual Report of the Bank

Graph showing the amount of increase in loans

Graph 4.4

AMOUNT OF INCREASE IN LOANS

80000000

60000000

40000000

20000000

0
1 2 3 4 5
-2000000

-4000000

Source: Table 4.4

INFERENCE:-
From the above table it‘s clear that in each year the amount of total loan was
increasing when compared with previous year‘s total loan. The rate of increment of
loan is almost the same as that total deposit but it was at a diminishing rate.

40
 Table showing the relationship between total deposit and loan

Table 4.5

Period Total Deposit Total Loan % of the total loans

to total deposit

2012-2013 186667214 227699766 121%

2013-2014 212767166 233174039 110%

2014-2015 245693417 246528068 100%

2015-2016 313381255 213906161 68%

2016-2017 335411779 245221746 73%

Source: Annual Report of Bank

Graph showing the relationship between total deposit and total loan

Figure 4.5

140

120

100

80

60 121
110
100
40
68 73

20

0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017

Source: Table 3.5

INFERENCE:-
In 2012-13, the ratio of total loan to total deposit was 121% and it tends to decrease
in the following years for the period of 2013-2016. There was a slight increase in the
ratio during the year 2016-17.

41
 Preference of the customers for the deposit

Table 4.6

Type of Deposit Number of respondents %

Current Deposit 15 30

Saving Deposit 20 40

Fixed Deposit 10 20

Recurring Deposit 5 10

Source: Data Collection

Graph showing the preference of the customers for the deposit

Figure 4.6

Preference of customers for the

deposit

10
30 Current deposit
20
Saving deposit
Fixed deposit
Recurring deposit

40

Source: Table 4.6

INFERENCE:-
Majority of the customers visit the bank to deposit money. Among them, 40% is the
share of saving deposit. 30% takes current deposit only. 20% and 10% takes fixed
deposit and recurring deposit respectively.

42
 Purpose of visiting a Bank

Table 4.7

Basis Number of respondents %

Deposits 30 60%

Loans 15 30%

Transfer Funds 3 6%

Locker facility 2 4%

Source: Data Collection

Graph showing customer’s purpose of visiting a bank

Figure 4.7

Purpose of visiting a bank

2

40
60

Deposits Loans Transfer funds Locker facility

Source: Table 4.7

INFERENCE:-
Majority of the people visit co-operative bank to deposit their money. 30% visit to
take loan and remaining customers visit to use locker and to transfer funds.
43
 Preference of Customers for the Loans
Table 4.8

Kind of Loan No. of Respondents %

House Loan 16 32%

Personal Loan 15 30%

Consumer Loan 6 12%

Educational Loan 8 16%

Vehicle Loan 3 9%

Other 2 4%

Source – Data Collection

Graph showing customers’ preference for the loans

Figure 4.8

Customer's Preference for the Loans

35
30
25
20
15
10
5
0
House Loan Personal Loan Consumer Educational Vehicle Loan Other
Loan Loan

Source- Table 4.8

INFERENCE:-

Present study reveals that majority of the respondents have taken house loans &
personal loans and fewer respondents prefer consumer, educational and vehicle
loans.

44
 Range of the amount of Loans
Table 4.9

Loan Amount No of respondents %

Less than 20000 5 10%

20000-50000 5 10%

50000-1 lakh 10 20%

More than 1 lakh 30 60%

Source – Data Collection

Graph showing range of amount of loans

Figure 4.9

Range of the amount of loans

10

10
less than 20000
20000-50000
50000-1 lakh
60 20
more than 1 lakh

Source – Table 4.9

INFERENCE:-
Present Study reveals that 10 % people prefer loan less than 20,000, another 10 %
respondents prefer 20,000 to 50,000, 20 % prefer more than 50000 and 60% of the
respondents prefer more than 1 lakh.

45
 Preferable term of loan
Table 4.10

Term of Loan No of respondents %

Less than 1 year 6 12%
1 to 3 years 10 20%
More than 3 years 32 64%
Source- Data Collection

Graph showing the preferable term of a loan

Figure 4.10

Preferable Term of Loan

12

Less than 1 year

20
1 to 3 years
more than 3 years
64

Source-Table 4.10

INFERENCE:-
Study shows that 64 % of respondents take loan for more than 3 years, 20 % take
loan for 1 to 3 years and 12% take loan for the period of less than 1 year.

46
 What prompted customers to take loans from co-operative banks?
Table 4.11

Reason for taking loan No of respondents %

Reasonable rate of 6 12%

interest

More Schemes 5 10%

Less formalities 17 34%

Easy repayment 19 38%

Any other 3 9%

Figure 4.11

What prompted customers to take

loans from cooperative banks
Reasonable rate of
interest
6 12
More Schemes
10
Less formalities
38

Easy repayment
34
Any other

INFERENCE:-
Study reveals that 38 % take loan because banks provide easy payment, 34% take
loans because of fewer formalities and other respondents take loan because of
reasonable rate of interest, more schemes.

47
 Ranking of the facilities provided by the co-op. banks
Table 4.12

Rank the facility No of respondents %

Above Average 16 32%

Average 30 60%

Below Average 4 8%

Source – Data Collection

Figure 4.12

Ranking of Facilities

32
Above Average
Average
Below Average

60

Source - Table 4.12

INFERENCE:-

Study shows that 60% of the respondent says that facility provided by the bank are
average, 32% say that its above average and 8% says that its below average.

48
 Customer Satisfaction

The opinions of customers are shown under different heads which give the
information that if the customers were satisfied with the services of Meenachil
Service Cooperative Bank or not. Customer‘s opinion about the services of the Bank
was summarized in the table below:

Table 4.13

HS=Highly Satisfied, S=Satisfied, A=Average, D=Dissatisfied, HD=Highly

Dissatisfied

Factors HS S A D HD
Document formalities of the bank 4 32 12 2 -

Interest rate of loans 20 10 13 5 2

Convenience to reach the bank 19 15 14 2 -

Relationship of Employees 8 28 10 4 -

Overall Services 20 25 5 - -

Employees attitude and behaviour 10 12 28 - -

Banks Interest in solving customers - 13 31 6 -

problems

Reliability - 30 15 5 -

Performs services at the right time 28 12 6 4 -

Security on transactions 17 26 5 2 -

Responsiveness 16 13 13 8 -

Always willing to help 4 36 7 3 -

Fast and efficient counter services 20 10 13 7 -

Have the knowledge to answer 20 11 11 6 2

49
Politeness and friendly staff - 15 30 5 -

Ease of access to account information - 5 38 4 3

Convenient operating hours - 16 29 4 1

Speed and efficiency in transactions 7 17 17 8 1

Understand specific needs 19 13 15 3 -

Confidentiality of bank - 25 25 - -

INFERENCE:-
The above table indicates that the customers are highly satisfied with the services of
the cooperative bank and the relationship of employee with their customers. The
study showed that the customers have positive attitude towards the services. The
study shows that the bank performs services at the right time. It also understands
certain specific needs of the customers. The employees are always willing to help the
customers and there is a good customer relationship management.

50
 CHAPTER V
FINDINGS,
SUGGESTIONS &
CONCLUSIONS

51
 5.1 FINDINGS

 It is clear that 75% of customers of the bank are satisfied with the services.
 40% of customers prefer savings deposit over other deposits.
 2012-13 was taken as the base year and the growth index was 100%. The
growth index was varying in next 5 years and it was increasing to 114% in
2013-14.
 The project depicts that the amount of loan is increasing in 2012-13, 2013-14
and 2014-15. But in 2015-16, it shows a negative trend and the growth index
show 94%.
 The ratio of total loans to total deposits shows a varying trend. It was 121%
in 2012-13 and after 4 years it has become 73%.
 30% visit to take loan and remaining customers visit to use locker and to
transfer funds.
 Majority of the respondents have taken house loans & personal loans.
 60% of the respondents prefer more than 1 lakh.
 The bank gives a very good interest rate as compared to other banks.
 64 % of respondents take loan for more than 3 years.
 38 % of respondents take loan because banks provide easy payment, 34%
take loans because of fewer formalities and other respondents take loan
because of reasonable rate of interest, more schemes.
 60% of the respondent says that facility provided by the bank are average,
32% say that its above average and 8% says that its below average.
 Cooperative banks are playing extraordinary role for agriculture credit and
rural development.
 Easy repayment and fewer formalities are the main factors determining
customer‘s selection of loans.
 Customers are satisfied with the mode of repayment of instalments.
 Average time for the processing of loan is less i.e. approx 7 days.
 The amount of money deposited in various schemes is increasing yearly.
There is a steady growth.

52
 5.2 SUGGESTIONS

 Co-operative education should be conducted in order to promote the

cooperative sector to poor people.
 The cooperative banks must maintain adequate liquid resources, margin,
properly scrutiny of loans and should try to the qualitative improvement of the
staff.
 Cooperative banks should try to coordinate between the Board of
Management, Members, Depositors and Employees of the bank.
 Banks should try to implement and adapt to technological changes and start
services like Internet Banking, Mobile Banking through apps.
 Installation of ATM machines in and around Meenachil Taluk should be
considered immediately as people always regret extra charges paid for using
ATM cards in different ATM machines.
 Target housewives through self-help groups as women are the actual drivers
of the family, and influencing them would result in converting prospects into
customers.
 Focus on comfort of the customers, irrespective of their age, gender, status.
Improve the bank atmosphere. Installation of air conditioners, new display
screens for the token number and announcements, focusing on the safety and
security aspects will improve customer‘s confidence and will help in retaining
them.
 To reduce the waiting queue for most common purpose of updating of pass
book, install kiosk and even keep the traditional technique of updating over
the counter for the unfamiliar ones.
 The banks should improve the customer services of the bank to a better extent.
 In order to resolve customer issues and grievances, have a manager in charge
having good banking and financial knowledge to ease their transactions.

53
 5.3 CONCLUSION

Banking business has done wonders for the world economy. The simple looking
method of accepting money deposits from savers and then lending the same money
to borrowers, banking activity encourages the flow of money to productive use and
investments. This in turn allows the economy to grow. In the absence of banking
business, savings would sit idle in our homes, the entrepreneurs would not be in a
position to raise the money, ordinary people dreaming for a new car or house would
not be able to purchase cars or houses. At present there are several cooperative banks
which are performing multipurpose functions of financial, administrative,
supervisory and development in nature of expansion and development of cooperative
credit system. In brief, the cooperative banks have to act as a friend, philosopher and
guide to entire cooperative structure. The study is based on Meenachil Service
Cooperative Bank, Edamattom. The study of the bank‘s performance along with the
deposits and lending practices provided to the customers is herewith undertaken. The
customer has taken more than one type of loan from the banks. Moreover they
suggested that the bank should adopt the latest technology of the banking like
ATMs, internet / online banking, credit cards etc. so as to bring the bank at par with
the private sector banks.

Cooperative banks are a feasible option for inclusive growth through rural
development by creating opportunity for employment and income generation.
Cooperatives play a major self-help role in rural areas, particularly where private
businesses hesitate to go and public authorities do not provide basic services. They
are instrumental in providing opportunities for productive employment, as well as
offering health care, education, potable water, improved sanitation, roads, and
market access, while giving a stronger ―voice‖ to rural groups.

54
BIBLIOGRAPHY

55
1. Dutta Uttam and Basak Amit (2008), ―Appraisal of financial performance of
urban cooperative banks – a case study.‖ The Management Accountant, case
study, March 2008, 170-174.

2. Gandhimathi, V. S. (2010). Determinants of Borrowing Behaviour of

Farmers - A Comparative Study of Commercial and Cooperative Banks.
Agricultural Economics Research Review, 23 (1), 157-164.

3. Desai, Dhaval S. (2013). Performance Evaluation of Indian Banking

Analysis. International Journal of Research in Humanities and Social
Sciences Vol. 1, Issue:6, August:13 (IJRHS) ISSN:2320-771X, Pp.30-
36.www.raijmr.com

4. Sharma, Rajiv G. (2013). A Study of World Role and the World Bank‘s Plan
of Action in India. International Journal of Research in Humanities and
Social Sciences Vol. 1, Issue: 5, July: 13 (IJRHS) ISSN: 2320-771X, Pp. 47-
51.

5. Barot, Himashu K. & Nilesh B. Gajjar (2013). Role and Growth of Financial
Derivative in the Indian Capital Market. International Journal of Research in
Humanities and Social Sciences Vol. 2, Issue: 6, June: 13. (IJRHS) ISSN:
2320-771X, Pp. 47-51.

6. Balwinder Sigh, Ruchika Soni,‖ customer satisfaction on urban co-operative

banks, IJRFM, vol.5issues 8 Aug. 2015.

7. Ravi C.S. Kundan Basavaraj. ―Customer preference and satisfaction towards

banking services with special reference to Shivamogga district in Karnataka.
Trans Asian journal of marketing & management research vol.2 issues 1, Jan
2013.

8. A.H.Sequeria, Customer services in co-operative banks: A case study,‖

science research network, research paper, 2012.

9. Jyothi Gupta Suman Jain (2012) ―A study on co-operative banks in India

with special reference to lending practice‖ International journal of scientific
and research publication.

10. Ghosh, A. (2007), ―Financial Inclusion through Micro Finance in India and
Emerging Role of POSB: An Analysis‖, http://ssrn.com/abstract=1655737.

11. Ravichandran, K. & Alkhathlan, K. (2009), ―Financial Inclusion - A Path

towards India's Future Economic Growth‖, http://ssrn.com/abstract=1353125.

12. Reddy, A. (2010), ―Rural Banking Strategies for Inclusive Growth‖,

http://ssrn.com/abstract=1532226.

13. Dr. Snehalkumar H Mistry, ―Measuring Customer Satisfaction in Banking

Sector: With Special Reference to Banks of Surat City‖, Asia Pacific Journal

56
 of Marketing & Management Review, Vol. 2(7), July 2013. Online available
at indianresearchjournals.com

14. Rajagopala Rao — "Strength, weakness and suggestions of customers

services in Urban Cooperative Banks — a study" Indian Co-operative
Review XXXVI(1) July 1998 —pp 20-27.

15. A.Rajagopala Rao, "Nefarious virtues of managers in Urban Cooperative

Banks: An empirical study Cooperative perspective" April-June 2004,
Vol. 39 No. 1. pp. 33-40.

16. Singh, J., & Kaur, G. (2011). Customer satisfaction and universal banks: An
empirical study. International Journal of Commerce and Management, 21(4),
327-348.

17. Ganguli, S., & Roy, S. K. (2011). Generic technology-based service quality
dimensions in banking: Impact on customer satisfaction and loyalty.
International Journal of Bank Marketing, 29(2), 168-189.

18. Amin.G.H, ―Some Reflections on Cooperative Credit Institutions‖ The Co-

operator, July2008 p.40.

19. Kalidas. M.G ―Financial services marketing: A study on marketing practices

of banks in Kerala on service quality dimensions‖ Thesis. Department of
Commerce and Management Studies, University of Calicut, 2007.

20. Fathima Adeela Beevi. TKS ―Customer Satisfaction and perception towards
the services of Cooperative Banks‖ ―ERPA International Journal of
Economic and Business Review‖ Vol 2, Issue 11, Nov 2014, pp. 62-66.

21. Soyelia Usha L. ―A Study on Co-operative Banks in India‖ ―International

Journal of Research in Humanities and Social Sciences‖ Vol 1, Issue 7, Sept
2013, pp. 26-30.

22. N. A. Kavitha and M. Muthumeenakshi. ―A Study of Customer Satisfaction

and Perception towards the Services of Co-Operative Banks‖ ―International
Journal of Engineering Technology, Management and Applied Sciences‖ Vol
4, Issue 10, Oct 2016, pp. 127-130.

23. T.V.G. Shastry. ―Role of Cooperative Banks in Rural Development through

Agricultural Credit – A Study of Warangal District Central Cooperative
Bank‖ ―International Journal & Magazine of Engineering, Technology,
Management & Research‖ Vol 4, Issue 2, Feb 2017, pp. 525-530

24. www.yourarticlelibrary.com

57
APPENDIX

58
 QUESTIONNAIRE FOR BANKERS

This questionnaire is prepared to study the role of Meenachil Service Co-

operative Bank in rural development with special reference to deposits and
lending practices.

Name of the Bank : Meenachil Service Co-operative Bank

Place : Edamattom

1. Do you follow the co-operative principles strictly?

2. What are the different types of loans provided by the bank?
3. What are the legal procedures for getting a loan?
4. How many loans do you provide per annum?
5. The maximum number of loans provided to one person at a time
__________
6. The maximum amount which can be granted on self surety to customers
__________
7. The necessary actions taken for loan defaulters.
8. Does every customer repay the loan correctly?
9. Is there any political interference on granting loans and other services?
10. How do you consider customer to write off bad debts?
11. How do you meet the liability due to bad debts?
12. What are the different deposit schemes provided by your bank?
13. Which is the main document needed to open an account in your bank?
14. What is the interest rate given to senior citizens?
15. Is nominal facility available for all your deposit schemes?
16. Which deposit schemes is more demanded by the public in your bank?
Why?
17. If people have any complaints regarding your service, what should they
do?

59
18. From a broader perspective, according to you what is the relevance of
deposit schemes today?
19. What are the value-added services provided by your bank along with
deposit schemes?
20. How the customers are updated relating to any change in interest charges,
fines, etc.?
21. What are the services other than loans and deposits provided by the bank?
22. What are the new technologies adopted in banking services?
23. What is your opinion regarding the bank frauds that are currently on a
rise?
24. What is your view regarding bank failures?

60
 QUESTIONNAIRE FOR CUSTOMERS

This questionnaire is prepared to study the role of Meenachil Service Co-

operative Bank in rural development with special reference to deposits and
lending practices.

GENERAL
1. Name : _______________________________
2. Address : _______________________________
3. Gender:- Male Female
4. Age
a. Below 25
b. Above 25 and below 50
c. Above 50
5. Occupation : _______________________________
6. What is the primary purpose for which you visit a bank?
a) To deposit
b) To take loan
c) To get a DD
d) To transfer funds
e) To use locker
f) Others

DEPOSITS
1. What type of account do you hold?

Savings Current Fixed Recurring

2. Have you felt any difficulty in opening an account?

Yes No
3. Have you given any standing instructions to the bank?

61
 Yes No

4. Are these standing instructions properly executed?

Yes No

LOANS AND ADVANCES

1. Are you a bank borrower through this bank?

Yes No
2. What type of facilities do you currently enjoy with this bank?

Type No.
a) Loan
b) Cash Credit
c) Overdraft
d) Bills
e) Any Other
3. Do you avail Home Loan?

Yes No
4. Do you avail Educational Loan?

Yes No
5. Do you have to apply influence of any sort at any stage to facilitate
availability of credit?

Yes No
6. If yes, please indicate Yes / No

a) Using intermediary/consultancy service

b) Applying political influence
c) Approaching through bank staff or executive

62
7. What is the preferable term for a loan?
a) Less than 1 year
b) 1 to 3 years
c) 3 years

8. Do you fully understand the implications of the documents executed by

you with the bank in respect of credit facility?

Yes No
9. What prompted the customers to take loans from co-operative banks?
a) Reasonable rate of interest
b) More schemes
c) Less formalities
d) Easy repayment
e) Any other
10. Regarding the Bank Services Satisfaction(Yes/No) and give your
opinion on bank services:
a) Are you satisfied with the loan disbursement methods of the bank?
Yes/No
b) Time required for sanctioning bank loan Yes/No
c) Is loan pass book issued? Yes/No
d) Is loan application form easy? Yes/No
e) Is documentation procedure simple? Yes/No
f) Is staff behaviour satisfactory? Yes/No
g) Method of Recovery of loan Yes/No

OTHERS
1. What makes you the customer of a co-operative bank?
a) High interest rate on deposits
b) Easy accessibility
c) Others

63
2. Do you find the absence of e-banking facility as a matter of serious
concern?

Yes No
3. Do you get all the incentives provided by the bank?

Yes No
4. Are you satisfied with the facilities provided by co-operative banks?
a) Above average
b) Average
c) Below average
5. How do you rank the service of the bank?
a) Excellent
b) Good
c) Average
d) Poor
6. Do you think the service provided by co-operative banks is suitable for
rural development?

Yes No
If yes, then reason
_____________________________________________

7. Give your opinion regarding improvement of the bank.

a)
b)
c)
d)
e)

64