1

1.1 ABOUT THE STUDY

Profit is the pivot on which the entire business activities rotate. Banking is
essentially a business dealing with money and credit like every other business activity,
banks are profit oriented. The bank invests its funds in many ways to earn income. The
bulk of its income is derived from loans and advances.

Banks make loan and advances to traders, businessmen and industrialist against
the security of some assets or on the basis of the personal security of the borrower. In
either case, the bank run the risk of repayment. Therefore the banks have to follow a
cautious policy and sound lending principles in matter of lending. Banks in India have to
consider the national interest along with their own interest while determining the lending
policy.

One of the important functions of every bank is providing loans to its members
and customers. Commercial banks advances money to the customers when they approach
the banks for the same. The credit needs of the business world are partly met by
commercial banks. They offer credit in different form to suit the needs of the customers
on the basis of their capacity to repay the loan.

PRINCIPLES OF SOUND LENDING

• Safety
• Liquidity
• Profitability
• Security
• Purpose of the loan
• Sources of repayment
• Diversification of risks
• Recent concept of sound lending
 2

This project study is focused to the “Loans & Advances of “The Nilambur Co-
operative Urban Bank Ltd between 2003-04 to 2008-09.The bank grants loans and
advances in various types. They are as follows;

TYPES OF LOANS AND ADVANCES

The system of granting loans and advances to the parties may be of several types.
The most prevalent methods are,
1) Cash credit
2) Over Drafts
3) Loans
4) Discounting Bills of Exchange

Urban Co-operative banks with their role as a mobilizer of the communities

savings and channeliser of these savings in to productive outlets play a crucial role in the
economic development of a country. As a matter of fact ,economical and industrial
development of a country depends, mainly, on how efficiently funds are managed by
banks.

Rural finance plays an important role in Indian economy .Rural finance is one of
the most important economic problem of India. On account of appalling poverty and
extremely low standard of living of rural population. urban Co-operative Banks help in
providing rural finance in India.

The study focuses on the impact of Loans and Advances in the performance of
Nilambur Co-operative Urban Bank Ltd during period of 2003-2009.
 3

1.2 ABOUT THE INDUSTRY

BANKING INDUSTRY

India is having a well organized banking system divided mainly into three
categories namely. The commercial banks and Co-operative banks and regional rural
banks.

Reserve Bank of India is the central bank of India. It is the apex monetary
institution which supervises, regulates controls and develops the monetary and financial
system of the country. It was established on April 1st 1935 under the Reserve Bank of
India Act.1934. In short, all the banking activities are under the control of Reserve Bank
of India. Reserve Bank of India rendors proper advice, to the Central government and
State governments.

ORIGIN OF BANKING IN INDIA

A money economy existed in India since the day of Buddha, but banking in
India flourished in the ancient Vedic times. Even in the Rig-Veda, there was a mention
about indebtedness and the earliest dharma Shasta lay down rate of interest and
regulations governing debts and mortgages. Reference to money lending business is
found in Manusmriti too. The literature of Buddhist period, the Jatakas and
archeological discoveries contain evidences of existence of ‘Sreshthis’ or bankers.

The emergence of Vaishyas as indigenous bankers and hundi (at the earliest
form of Indian bill of exchange) were two important land marks.The history of Indian
banking Indigenous bankers played a very important role in lending money for trade
and commerce.

JOURNEY OF INDIAN BANKING SYSTEM

The first bank in India, though conservative, was established in 1786. From
1786 till today, the journey of Indian banking system can be segregated into three
distinct phases. They are as follows:
 4

PHASE 1 (1786 -1949)

The General Bank of India was set up in the year 1786. Next came Bank of
Hindustan and Bengal Bank. The East India Company established Bank of Bengal
(1809), Bank of Bombay (1840), and Bank of Madras (1843) as independent units and
called it Presidency Banks. These 3 banks were amalgamated in 1920 and Imperial
Bank of India was established which was started as Private shareholders bank,which
mostly had European shareholders.

In 1865 Allahabad Bank was established and first time exclusively by Indians,
Punjab National Bank was set in 1894 with headquarters at Lahore. Between 1906 and
1913, Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian
Bank and Bank of Mysore were set up. Reserve Bank of India was established in 1935.

During the first phase the growth was very slow and banks also experienced
periodical failures between 1913 and 1948. There were approximately 1100 banks,
mostly small. To stream line the functioning and activities of commercial banks, the
Government of India came up with The Banking Companies Act, 1949 which was
later changed to Banking Regulation Act of 1965. RBI was vested with extensive
powers for the supervision of banking in India as the Central Banking Authority.
During these days public had lesser confidence in the banks. As an aftermath deposit
mobilization was slow. Abreast of it the savings bank facility provided by the Postal
Department was comparatively safer. Moreover, Funds were largely given to traders.

PHASE 2 (1949 -1990)

Government took major steps in this Indian Banking Sector Reform after
independence. In 1955, it nationalized Imperial Bank of India with extensive banking
facilities on a large scale especially in rural and semi-urban areas.

It established State Bank of India to act as the principal agent of Reserve Bank
of India and to handle banking transactions of the Union and state governments all
over the country. Seven banks forming subsidiary of State Bank of India was
nationalized in 1960. On 19th July, 1969, major process of nationalization was carried
 5

out. It was the effort of the Prime Minister of India, Mrs. Indira Gandhi. Fourteen
major commercial banks in the country were nationalized.

Second phase of nationalization in Indian Banking Sector Reforms was carried

out in 1980 with 7 more banks. This step brought 80% of the banking segment in India
under Government ownership. The following are the important steps taken by the
Government of India to Regulate Banking Institutions in the country:

1949 - Enactment of Banking Regulation Act

1955 - Nationalization of State Bank of India
1959 - Nationalization of SBI subsidiaries
1961 - Insurance cover extended to deposits
1969 - Nationalization of 14 major banks
1971 - Creation of credit Guarantee Corporation
1975 - Creation of Regional Rural Banks
1980 - Nationalization of 7 banks with deposits over 200 crore
1982 - Establishment of NABARD

Banking in the sunshine of government ownership gave the public implicit

faith and immense confidence about the sustainability of these institutions.

PHASE 3 (1991 ONWARDS)

This phase introduced many more products and facilities in the banking sector
as its reform measure. In 1991, under the Chairmanship of M. Narasimham, a
committee was set by his name which worked for the liberalization of banking
practices. The country is flooded with foreign banks and their ATM stations. Efforts
are being put to give a satisfactory service to customers. Phone banking and net
banking is introduced. The entire system became more convenient and swift. Time was
given more importance than money.

The financial system of India has shown a great deal of resilience. It is

sheltered from any crisis triggered by any external macroeconomic shock as other East
Asian Countries suffered. This is all due to a flexible exchange rate regime, the foreign
 6

reserves are high, the capital account is not yet fully convertible, and banks and their
customers have limited foreign exchange exposure.

STRUCTURE OF INDIAN BANKING SYSTEM

The banking system in India has three tiers. There are Scheduled Commercial
Banks; the Regional Rural Banks; which operate in rural areas, not covered by the
scheduled banks; and the cooperative and special purpose rural banks. There are
approximately 88 scheduled commercial banks, 27 public sector banks, 29 private
banks, 31 foreign banks. There are almost 200 RRB: more than 350 Central
Cooperative Banks; 20 Land Development Banks; and a number of primary
agricultural credit societies. They have a combined net work over 53000 branches and
17000 ATMs. According to ICRA, a rating agency, the public sector banks holds over
75% of total assets of the banking industry, with private and foreign banks holding
18.2% and 6.5% respectively.
 7

The following chart indicates the structure of banking system in India

Reserve Bank of India

Commercial Banks

Regional Rural Banks Co-operative Banks

Public sector Banks Private sector Banks

State co-operative
Banks

State Bank Nationalized Domestic Foreign

District Co-op. Banks
Group Banks Banks Banks

State Bank Associates

UCB PACB
of India
 8

The Regional Rural Banks (RRBs) are also part and parcel of the banking system.
At present, there are 196 RRBs functioning all over the country.

The Co-operative Banks include the State Co-operative Banks, District Co-
operative Banks, Primary Agricultural Co-operative Bank and Urban Co-operative Banks.

BANKING IN KERALA

Kerala boasts of a well-developed banking infrastructure. With progressing

time Kerala banking system has attained a high benchmark. Commercial, Nationalized
a large number of Grameen banks have sprung up within the state. In fact there was a
surge of Banks in the state following the nationalization of the banks in 1969.

The State Bank of India (S.B.I.), Canara Bank and Syndicate Bank are the
principal nationalized banks. Apart from these, commercial banks like Vijaya Bank,
Dhanlakshmi Bank, South Indian Bank, Catholic Syrian Bank and the Federal Bank
also offer commendable finance and banking facilities. The Grameen Banks like South
Malabar Grameen Bank and North Malabar Grameen Bank provide loans at low
interest rates, special, subsidized lands and relief facilities to the local farmers and
plays a great role in enhancing the agrarian productivity of the state.

According to a survey conducted in the year 2001, there were

 2 Regional Rural banks (RRBs)
 49 Commercial Banks
 14 District Co-operative Banks
 1 State Cooperative Bank

All these banks altogether had 3813 branches in the rural as well as the urban
areas and among them 2956 branches belonged to the Commercial Banks. Besides,
there are also 1593 Primary Agriculture Credits Co-operatives in Kerala. The
commercial banks of Kerala have also witnessed an increased flow of non-resident
deposits toward the end of 2005. Kerala is done experiencing better growth of
economy in the banking sector. Besides the banks, the other financial institutions
which boost to the economy of Kerala are.
 9

GOVERNMENT INSTITUTIONS

• Kerala Financial Corporation (KFC)

• Kerala State Financial Enterprises (KSFE)
• Kerala Transport Development Finance Corporation (KTDFC)
• Reserve Bank of India

PRIVATE INSTITUTIONS

• HDFC (Housing Development Finance Corporation Limited)

• Muthoot Pappachan Grroup.
• Indescend Bank
• ICICI

URBAN CO-OPERATIVE BANKS

The Co-operative movement in India was started as a suitable credit agency, with
the main aim of providing credit to agriculturists in rural areas. Later it is felt the need for
non-agricultural credit societies for providing cheap credit to small merchants, traders,
artisans and middle-class people in urban areas. The main reasons for starting urban co-
operative banks were that the joint stock banks at that time were reluctant to provide
credits to the people of small means. They were interested only in giving credit to those
who could offer adequate and tangible securities. It was in 1912 that the urban co-
operative bank made its first appearance. The Mac lagan Committee on Co-operation in
1915 recommended for the starting of urban co-operative banks.

The working of the urban co-operative banks shows that some of them have
established a good reputation and standing in their areas and they compete successfully
both in the provision of efficient banking services and tapping deposits with
commercial banks.
 10

URBAN BANKS IN KERALA

In Kerala there are 71 co-operative urban banks of which the majority of members
are non agriculturists. The Reserve Bank has the right for inspection and supervision of
urban banks. Urban banks are becoming more and more important in recent years.

OBJECTIVES OF CO-OPERATIVE URBAN BANKS

The main objectives of the co-operative urban banks are as follows:

1. To attract deposits from members and non-members.
2. To provide non agricultural loans to members.
3. To provide other banking facilities to members and to the general
4. public.
5. To encourage thrift and savings among the members.
6. To conduct chitties with the permission of the Registrar.
7. To provide gold loans to members.
 11

1.3 COMPANY PROFILE

The bank selected for the study namely “THE NILAMBUR CO-OPERATIVE
URBAN BANK LIMITED (NCUB LTD),is situated in the heart of the Nilambur town, at
Nilambur Municipality , at Malappuram Dist in Kerala. The bank had a humble beginning
with 50 members and a capital of Rs500/ each. The founder member was late Sri.
T.N.Manavedan Thirumulpad of Nilambur kovilakam. The formost presidents of the bank
were Sri. T.N. Veerarayan Raj, Sri. Manvikraman Raj, Sri. T.N. kochunni Thirumulpad.
With their outstanding performance they were able to get the strong belief from the
people. At present the bank has 14 branches, and has developed as one of the most
prestigious urban banks in the state, having 31,161 members and RS.360,26,400/- as
capital.

The bank has also to its credit the guidance of dedicated, popular and influential
personalities, who have served on the board as chairman and other vital office bearers.

REGISTRATION

The Bank was registered on 10th April 1939, under the name Nilambur Co-
operative Urban Bank Limited .Its registered office was situated at Nilambur.

OBJECTIVE

The main objective of the Nilambur Co-operative Urban Bank LTD is to collect
deposits from members and non-members and to provide loans to members.

The other objectives of the bank are as follow.

1. To encourage thrift, self help and co-operation among members.
2. To accept deposits from the public, repayable on demand or otherwise with drawable
by cheque, draft, order or otherwise for the purpose of lending on investment.
3. To borrow, to raise money.
4. To lend or to advance money either upon or without security to members and others
as permitted by the Registrar.
 12

5. To draw, make, accept ,discount ,buy, sell, collect and deal in bills of
exchange ,drafts, bills of ladding, railway receipts, warrants, certificates, scripts and
other instruments and other securities whether transferable or negotiable or not .
6. To grant and to issue letters of credit, travellers cheque and circular notes.
7. To buy and to sell foreign exchange including foreign bank notes.
8. To acquire, to hold , to issue on commission to underwrite and to deal in stock, funds,
shares, debentures, bonds, obligations, securities and investment of all kinds.
9. To receive all kinds of bonds, scripts and valuables on deposits or for safe custody or
otherwise.
10. To purchase and to sell bonds, scripts or other forms of securities on behalf of
constituents.

OPERATIONAL AREA

The area of operation is to permit adequate business and at the same time,
effective supervision and control. The area of operation of the Nilambur Co-operative
Urban Bank LTD, is confined to the present Wandoor-Nilambur block areas consisting of
Nilambur, Mambad, Edavanna, Thiruvali, Wandoor, Porur, Pandikkad, Thuvoor,
Karuvarakundu, Kalikavu, Amarambalam, Karulai, Chungathara, Edakkara,Chaliyar
Vazhikkadavu, and Moothedam Panchayaths.

BRANCHES

The bank has 11ordinary branches at Manjeri ,Wandoor , Kalikavu, Chungathara,

Karuvarakundu, Pookkottumpadam, Edakkara, Pandikkad, Akampadam, Edavanna and
Karulai and 3 evening branches at Nilambur, Wandoor and Edakkara covering all the
above Panchayath areas.
The head office is situated at Manjeri.

AWARDS

a) During the year 1989-90 and 1990-91 the bank was the recipient of awards from the
State Government for its outstanding performance in Deposit Mobilization.
 13

b) The Nilambur Co-operative Urban Bank LTD got the 1st place in Kerala and the 10th
place in India as the ‘Best performing Co-operative Bank Award’ which was
conducted by Indian achiever’s Forum in 2008-09.

MANAGEMENT

The management of Nilambur Urban Co-operative Bank LTD is vested in the

Board of Directors elected by its General Body.

Subject to the provision of the Act and Rules of the final authority of the bank
shall vest in the General Body. 5 members or 1/5th of the total number of share holders
which ever is less, shall constitute a quorum for a general meeting.

Board of Directors shall consists of not more than 9 directors of whom one shall
be a woman member and another one shall be from SC/ST. Five directors shall from the
Quorum. The Board shall consist of one chairman, one vice chairman and 9 directors.

The present board was elected at 18-10-2004 .In the year 2008-2009 they
conducted 54 board meeting.

EMPLOYEE PATTERN

Banking is an area in which the quality of service depends up on the quality of the
staff and employees. The Nilambur Co-operative Urban Bank LTD has 99 permanent
staff including a General Manager who is the chief executive of the bank, 15 part time
staff and 13 daily deposit collectors on commission basis. The pattern is as follows.
 14

EMPLOYEE PATTERN

General Manager

Deputy General Manager

Manager

Senior Accountant

Junior Accountant

Clerk/ Cashier

Peons Daily Deposit Collector

 15

MEMBERSHIP

Membership in Nilambur Co-operative Urban Bank LTD is restricted only to the

persons residing in the area of operation of the bank and who are competent to enter in to
contract. Non –agriculturists such as small merchants, traders, artisans, wage earners and
professional are admitted as well as the government have taken shares.

The total ‘A’ classes members of the Nilambur Co-operative Urban Bank LTD, at
the time of its inception was only 50 and gradually it increased to 8,279 during 1992-93,
14,370 during 1997-98 and further to 31,137 during 2008-09.
This increase in number itself is a clear indication of the utility of the Co-operative credit
facilities of this bank.

SOURCES OF WORKING CAPITAL

The working capital represent as the fund used for the lending purpose of the bank.
The working capital of the Nilambur Co-operative Urban Bank LTD is raised from the
following sources:-

a) Share capital
b) Reserves
c) Deposits

Types of Deposits of Nilambur Co-operative Urban Bank Limited

The Nilambur Co-operative Urban Bank LTD is receiving deposits in the form of
Fixed deposits, Saving Bank Account Deposits and Current Account Deposits. The
amounts of deposits at the beginning and at the period 2007-08 are as follows;-

Deposits as on Deposits as on
Types
31-03-2008 31-03-2009
Fixed deposit 12588.92 13667.19

Savings deposit 3530.09 4083.82

Current Deposit 199.56 266.30

Total 16318.57 18017.31

16
 17

Interest on Deposits

The Nilambur Co-operative Urban Bank LTD provides higher rate of interest for
attracting pubic. The current interest rates of fixed deposits are follows.

Period Rate of interest

15 days to 45 days 5%
46 days to 90 days 6%
91 days to 179 days 7.5%
180 days to 1 year 8.5%
1 year to 2 year 9.5%
2 year to 3 year 10%
Above 3 year 10.5%

The interest paid on Fixed Deposits to senior citizens is 1% more than the above
rate. The interest rate for the Saving Bank Deposits is 3.5% and no interest rate for
current deposits.

FUNCTIONS

Like any other bank, the functions of Nilambur Co-operative Urban Bank LTD
are grouped as follows;
(i) Primary Function
(ii) Secondary Function

(i) Primary Functions

The main functions of the Nilambur Co-operative Urban Bank LTD are deposit
mobilization and providing loans and advances.

Deposit Mobilization: - Deposits are of the main sources of finance of the bank and
provides high rate of interest for these deposits. Deposits maybe received at any time
within the limits sanctioned under the Co-operative Societies Act and Rules on such rate
of interest and subject to such rules and regulations as may be fixed by the Board of
Director and also subject to the directives issued by the RBI in this behalf from time to
time.
 18

Providing Loans and Advances: - The Nilambur Co-operative Urban Bank LTD
usually provides short term and medium term loans for non agriculture purpose. The
loans are paid in cash for periods ranging from 6 months to 3 years. The bank usually
gives business loans, consumption loans, self employment loans, housing loans and
industrial loans.

(ii) Secondary Functions

The Secondary functions of the bank are Agency services and General Utility
Services. The secondary functions of Nilambur Co-operative Urban Bank LTD are as
follows;
a) It provides banking facilities such as collecting bills, discounting bills,
providing remittance facilities and draft facilities etc.
b) The bank conducts Chitties and Kuries with the permission of the Registrar.
c) The bank now has the facility to issue Demand Draft to any part of the
country.
d) The bank provides safe deposit locker facility.
e) NRE/NRO Account facility is available in all branches.

BORROWINGS

The Nilambur Co-operative Urban Bank LTD did not receive any loan of advance
from its Apex banks. The bank is functioning very well and profitable without the
borrowings from District Co-operative Bank and State Co-operative Bank.

AUDIT CERTIFICATE

The accounts of the Nilambur Co-operative Urban Bank LTD are verified and
approved by the joint Register of Co-operative societies in Malappuram. He provides
audit certificate to the bank, is an indication of approval to the bank.

1.4 REVIEW OF LITERATURE

 19

• Ontario Study Grant (OSOG)Beginning in the 1998/99 academic year, Ontario

has implemente the new Ontario Student Opportunity Grant (OSOG) which will
replace the Loan Forgiveness Program.

• Chaudhary and Sarmah (1970) ' studied the nature and the working of crop
loan system with a view to examine the adequacy of crop loans, and the extent and
the nature of extension guidance to borrowers.

• Desai and Tambad (1970)2 evaluated the procedures of sanction, disbursement

and repayment of loans adopted by the Syndicate Bank with special emphasis on
time involved. Six branches of the Syndicate Bank in the district of Ahmedabad
were purposively selected for the study. For each branch, 12 borrowers and a
matching sample of 12 non-borrowers were selected a t random from the
jurisdiction of the selected branch.

• Krishnaswami. and Palaamthan (1970) 3 studied the working of the new

simplified procedure adopted by the Land Development Bank for granting loans.

• Cesai and Desai (1971) studied the existing policies and arrangements for
supply of institutional credit , and adequacy of production credit. Baroda was
selected for the study.

• V.H. Naidu (1999) As many as nearly 91 per cent of the borrowers in Andhra
Pradesh and 3 per cent of the borrowers in Punjab favored the implementation
of scheme (crop loan) through some agencies, other than co-operatives.

• Rajiv K.Seth (1993) highlights the features of a credit system and also its utility for the
Indian banking particularly for small loans. However, he does not develop or mention
any credit scoring models.

• Beaver - Altman's significant ratios the study identified 8 ratios which were
efficient in forecasting sickness and revival without misclassification. The
Industrial Credit and Investment Corporation of India (1978) attempted to build a
model to devise an early warning system for industrial loans using the ratios.
 20

• C.A.S. Naidu and R. Bandhopadhyay (1976) attempted to develop a credit

scoring model for agricultural loans. They highlighted the utility of the loan
scoring model for evaluation of outstanding loans; training of the loan officer; and
for studying inter-branch and inter-regional difference in credit worthiness and for
market research for business planning. They stated that banks should develop a
credit scoring model as they have easy applicability and cost efficiency.

• Macleod’s view that the Allahabad Bank(1993) highlights the need for
improving the credit assessment of loans granted by the banks under the Service
Area Approach of the Lead Bank Scheme.

• Sapp, Gregg; Brunswick, John R.(2002) surveys literature from 1995 to 2002
related to interlibrary loan and document delivery services in libraries. Topics
addressed include reference sources ;national and international initiatives;
theory ,management ,practices; document delivery; resource sharing ;and
copyright and licensing.

2.1 OBJECTIVES OF THE STUDY

 21

PRIMARY OBJECTIVES

• The primary objectives is to analyse the utilistion of “Loans & Advances” of

Nilambur co-operative urban bank ltd from 2003-04 to 2008-09.

SECONDARY OBJECTIVES

• To identify whether attractive interest rate are provided by the bank to deposits by
depositors.
• To identify whether loans are provided for agricultural purposes.
• To identify whether better schemes are provided for depositing gold.
 22

2.2 SCOPE OF THE STUDY

• This study attempts to portray the ‘Impact of Loans & Advances’ on the
Performance of Nilambur Co-operative Urban bank.
• The researcher tries to depict the present condition of the loans & advances of the
bank and suggests certain means with which the best can be extracted.
• The scope of the study is confined to the “Loans & Advances” of “The Nilambur
Co-operative Urban Bank LTD”. The data under investigation relates to the
financial year 2003-04 to 2008-09..

To the Researcher

The researcher can gain practical knowledge and experience in the functions of
the organization. It helps the researcher to observe and realize the hindrances in the
functioning of the organization.

To the Orgainsation

The employees can know the impact of loans & advances in the performance of
the bank and they can take up the measures for the betterment of the organization.
 23

LIMITATIONS OF THE STUDY

• The major limitations of the study is that the impact of each factor is not analyzed,
because the study is conducted with in limited time period. The data is available
only for a short period from 2003-04 to 2008-09.
• The study is limited to the secondary data available from various
records of Co-operative Bank. Therefore it suffers from all the limitations of
secondary data.
• The study is entirely based on quantitative data involving numerical
figures and no qualitative factors are taken into consideration for the purpose
of the study.
 24

2.3 RESEARCH METHODOLOGY

Research is defined as “systematized effort to gain new knowledge”

Research inculcates scientific and inductive thinking and it promotes the
development logical habits of thinking and organisation. Research methology is a way to
systematically solved the research problem.

RESEARCH DESIGN

The method adopted is historical, descriptive, analytical and predictive. Historical

to study the bygone performance, descriptive to trace the historical growth and trends,
analytical to analyze and interpret the data and finally predictive to peep in to the future.

PERIOD OF STUDY

The period of the study is for six years viz ,2003-04 to 2008-09.

SOURCES OF DATA

The data used for the study is secondary data. The data collected by way of
Annual reports, loan scheme reports, policy and program reports statement of Their
Nilambur Co-operative Urban Bank LTD, has been made use for collecting secondary
data.

TOOLS USED

For presenting the data in to an easily understandable manner, various tools are
used. The tools used by their Nilambur Co-operative Urban Bank LTD for analysis the
data are as followers:

1. Trend Analysis
2. Ratio Analysis
 25

1. Trend Analysis

Comparing the past data over a period of time with a base year is called trend
Analysis. Under this technique information for a number of years is taken up and one year
usually the first year is taken as base year. Each item of the base year is taken as ‘100’.

For the study of Nilambur Co-operative Urban Bank LTD, trend percentage is
calculated for the period 2003 -04 to 2008- 09 and taken 2003-04 as base year.

2. Ratio Analysis

Ratio is simply one number expressed in terms of another number. It refers to

numerical relationship between two figures. It is obtained by dividing one figure by the
other. Ratios are expressed in 3 ways i.e., in times as percentage and in terms of
proportion.

Various ratios were used for conducting the study in Nilambur Co-operative
Urban Bank LTD and these ratios are expressed as percentage of deposits, interest earned
as percentage of loans and advances etc.
 26

2.4 ANALYSIS AND INTERPRETATION

ANALYSIS

Analysis consists of breaking down a complex set of facts or figures in to simple

elements and arranging them in such a form as to increase their reliability and presenting
them in an easily understandable manner.

INTERPRETATION

Interpretation is the process of explaining the real significance of the simplified

data. Both analysis and interpretation are complimentary to each other. Analysis is useless
without interpretation and interpretation becomes difficult without analysis.

TREND ANALYSIS

SHARE CAPITAL

Share capital comprises of paid up share capital. The NCUB LTD raises
share capital through the allotment of “A Class” shares to the principal borrowers or
individuals and “B” Class shares to the State Government. The paid up share capital of
the bank from 2003-04 to 2008-09 is given in the following table.
 27

TABLE 2.4.1
SHARE CAPITAL OF NILAMBUR CO-OPERATIVE URBAN
BANK LTD

Year Annual paid Annual Trend (in

up Share Increase/Decrease(In percentage)
Capital (Rs. Lakhs)
In Lakhs)
2003-04 181.02 ---- 100
2004-05 219.27 38.25 121.13
2005-06 265.18 45.91 146.49
2006-07 312.48 47.30 172.62
2007-08 360.26 47.78 199.02
2008-09 486.28 126.02 268.63

Interpretation:

The above table showing the increasing trend of share capital from 2003-04 to
2008-09. The share capital was 181.02 lakhs in 2003-04 and it end 486.28 in 2008-09.

In the above table it is understood that the share capital of the bank is increasing
from year to year. It shows the financial strength of the bank.
 28

CHART 2.4.1
SHARE CAPITAL OF NCUB
29
 30

RESERVES
The profit retained separately as is termed reserve. In co-operative banks, there are
two types of reserves. Statutory reserve and non statutory reserve. The law insists to
transfer an amount not less than 25% of the profit to the reserve fund, which constitutes
the statutory reserve. The non statutory reserves are depreciation reserve, bad debts
reserve etc, which are created before arriving at the net profit. The following table shows
the reserves of Nilambur Co-operative Urban Bank LTD from 2003-04 to 2008-09.

TABLE 2.4.2
RESERVES OF NCUB
Annual
Amount of reserve
Year Increase/Decrease(In Trend( in percentage)
(Rs.In lakhs)
Lakhs)

2003-04 1415.37 ---- 100

2004-05 1624.76 209.36 114.79

2005-06 1810.88 186.12 127.94
2006-07 2128.23 317.75 150.37
2007-08 2387.71 259.48 168.7

2008-09 2489.08 101.37 175.87

Interpretation:-

It can be seen from the above reserves of Nilambur Co-operative Urban Bank
LTD, has an increasing trend and its annual accretion registered a fluctuating trend.

The reserves of the bank is increasing year by year because the profit of the bank
is also increasing.
 31

CHART 2.4.2
RESERVES OF NCUB
 32

DEPOSITS

Deposits are one of the main sources of fund of the bank. Bank receives idle
saving from the people in the form of deposits. It borrows money in the form of deposits.
The deposits of the bank 2003-04 to 2008-09 is given in the following table.

TABLE 2.4.3
DEPOSITS OF NCUB

Amount of Deposits Annual Increase or Trend( in

Year
(In Lakhs) Decrease(In Lakhs) percentage)

2003-04 8718.38 ---- 100

2004-05 9871.89 1153.57 113.23
2005-06 12272.90 2401.01 140.77
2006-07 13978.17 1705.27 160.33
2007-08 16318.57 2340.40 187.17
2008-09 19888.19 3569.62 228.12

Interpretation:

Here we can see that the amount of deposit is increasing year by year, in
Nilambur Co-operative Urban Bank LTD, the deposit having an increasing trend in 2003-
04 was 8718.38 lakhs and in 2008-09 it reached to 19888.19 lakhs, it increased 228.12
percentage of the base year (2003-04).

The deposits of the bank shows an increasing trend year by year which shows the
fund raising capacity of the bank.
 33

CHART 2.4.3
DEPOSITS OF NCUB
 34

PROFIT

Profitability is an important index of the performance of an organization. An

analysis of the profitability of the banks provides an insight in to its effectiveness in the
utilization of funds and its managerial efficiency. The profits of the banks from 2003-04
to 2008-09 given in the following table .

TABLE 2.4.4
THE PROFIT OF NCUB

Annual
Net Profit Trend in
Year Increase/Decrease(In
(Rs in lakhs) percentage
Lakhs)
2003-04 94.19 ---- 100
2004-05 146.19 52 155.20
2005-06 147.98 1,79 157.11
2006-07 148.97 0.99 158.16
2007-08 157.30 8.33 167
2008-09 200.49 43.19 212.86

Interpretation:

The above table shows an increase in the profits of the Nilambur Co-operative
Urban Bank LTD for 2003-04 to 2008-09. In 2008-09 shows high profit as compared to
other years.

The profit of the bank shows an increasing trend year by year which depicits the
operational efficiency of the bank.
 35

CHART 2.4.4
THE PROFIT OF NCUB
 36

TABLE 2.4.5
THE LOANS AND ADVANCES

Amount of Loans Annual

Trend In
Year and Advances(In Increase/Decrease(In
(Percentage)
Lakhs) Lakhs)

2003-04 5779.39 ---- 100

2004-05 6899.39 1119.92 119.38

2005-06 7881.03 981.72 136.36

2006-07 8906.79 1025.76 154.11

2007-08 9949.92 1043.13 172.16

2008-09 12460.70 2513.78 215.61

Interpretation:

It can see from the above table, the loans and advances of Nilambur Co-operative
Urban Bank Ltd has an increasing trend and its annual accretion registered a fluctuating
trend.

The loans and advances showing an increasing trend which means the bank
provides an additional amount of loans and advances year by year for satisfying the
customers needs.
 37

CHART 2.4.5
LOANS AND ADVANCES OF NCUB
 38

LOANS OVERDUE

Loans overdue is the most important problem affecting the successful working of
NCUB Ltd. Loan overdue means a part of the outstanding loan was not realized within
certain definite time. Delay in refund of loans will affect smooth functioning of the bank
and there will be arising difficulties in sanctioning fresh loans. The loans overdue from
the year 2003-04 to 2008-09 are as follows.

TABLE 2.4.6
THE LOANS OVERDUE OF THE NCUB

Annual
Amount of
increase/decreas Trend (in
Year over due( in
e percentage)
lakhs)
(in lakhs)
2003-04 508.12 ---- 100

2004-05 546.38 38.26 107.53

2005-06 741.29 194.91 145.89

2006-07 811.49 70.20 159.7

2007-08 683.79 -127.70 134.57

2008-09 559.01 -124.78 110.01

Interpretation:

The above table shows an increasing trend from 2003-04 to 2008-09.Later it

reduced to 559.01 in the year 2008-09 from 811.49 in the year of 2006-07. In the 2007-08
amount of overdue 683.79 lakhs.

Loans overdue is increasing year by year which shows the inefficiency of the bank
in collecting loan .within certain definite time.
 39

CHART 2.4.6
LOANS OVERDUE OF THE NCUB LTD
 40

RATIO ANALYSIS

Loans and Advances to Deposits

This ratio establishes the relationship between loans and advances provided by the
Bank and total deposits collected. This will indicated the number of times the deposits are
turned to loans and advances.
Loans and Advances to Deposits = Loans and Advances / Deposits X 100

TABLE 2.4.7
LOANS AND ADVANCES AS PERCENTAGE OF DEPOSITS
Loans and Advances(in Ratio(in
Deposits(in lakhs)
Year lakhs) percentage)
2003-04 5779.39 8718.8 66.29
2004-05 6899.39 9871.89 69.89
2005-06 7881.03 12272.90 64.21
2006-07 8906.79 13978.18 63.72
2007-08 9949.92 16318.58 60.97
2008-09 12460.70 19888.19 62.65

Interpretation:

It is not worthy that it was 66.29% as on 2003-04 and increased to 69.89% in

2004-05 and the following 3 years (2005-06, 2006-07, 2007-08,2008-09) it reduced to
64.21%, and 63.72% , 60.97% and 62.65%.

From the above table it is understood that the deposits and loans and advances
shows an increasing trend which shows the operational efficiency of the bank.
 41

CHART 2.4.7
LOANS & ADVANCES AS PERCENTAGE TO DEPOSITS
 42

Interest Earned as Percentage of Loans & Advances

This ratio shows the relationship between total interest earned by the bank by
providing loans and advances. As interest is the main source of income of the Bank, this
ratio indicates they are rearing capacity and effective utilization of funds of the bank.

Interest Earned as Percentage of = Interest Earned for the Year / Loans

Loans and Advances and Advances X 100

Interest Earned is the total interest and discount realized by the bank in each year
on loans and advances. Loans and advances are the amount provided by the bank to the
public for a fixed rate on interest. The loans and advance are provided for different
purpose for different periods like short term, medium term and long term.

TABLE 2.4.8
INTEREST EARNED AS PERCENTAGE OF
LOANS AND ADVANCE
Interest earned Loans and Advances
Year Ratio(in percentage)
(Rs in lakhs) (Rs in lakhs)
2003-04 1127.80 5779.39 19.51
2004-05 1061.10 6899.31 15.38
2005-06 1223.00 7881.03 15.52
2006-07 1474.20 8906.79 16.55
2007-08 1705.94 9949.92 17.15
2008-09 2058.07 12460.70 16.52

Interpretation:

The above table shows the amount of interest earned by the bank as against loans
and advances during the years form 2003-04 to 2008-09. The ratio of interest earned
shows an increasing trend in the year from 2003-04 to 2008.But the bank earned
maximum interest of 19.51% as against loans and advances in the base.

The amount of interest earned is increasing year by year which indicates the
rearing capacity and effective utilization of funds of the bank.
 43

CHART 2.4.8
INTEREST EARNED AS PERCENTAGE OF
LOANS AND ADVANCES
 44

INTEREST PAID AS PERCENTAGE OF DEPOSITS

This ratio provides information about interest paid on different types of deposits.

Interest paid as percentage of deposits = interest paid for the year/deposit X 100.

TABLE 2.4.9
INTEREST PAID AS PERCENTAGE OF DEPOSIT
Interest paid Amount of deposit
Year Ratio
(Rs in lakhs) (Rs in lakhs)
2003-04 659.40 8718.38 7.56
2004-05 603.04 9871.89 6.11
2005-06 725.98 12272.90 5.92
2006-07 858.34 13975.18 6.14
2007-08 1083.40 16318.58 6.64
2008-09 1530.1 19888.19 7.69

Interpretation:

The above table shows that the ratio of interest paid to deposits is less during the
year 2007-08 when compared to the base year 2003-04. The ratio in 2008-09 is 7.69, it is
the highest ratio compared to other years.

The ratio of interest paid on deposits shows a fluctuating trend and the amount of
interest paid is higher in the year 2008-09.
 45

CHART 2.4.9
INTEREST PAID AS PERCENTAGE OF DEPOSIT
 46

INTEREST PAID AS PERCENTAGE OF INTEREST EARNED

This ratio establishes the relationship between the total interests earned and total
interest paid by the bank. Interest paid as percentage of interest earned = Interest paid
during the year/interest earned for the year X 100

TABLE 2.4.10
INTEREST PAID AS PERCENTAGE OF INTEREST EARNED
Interest earned Interest paid Ratio(in
Year
(Rs. In lakhs) (Rs. In lakhs) percentage)
2003-04 1127.80 659.4 58.45
2004-05 1061.10 603.04 56.83
2005-06 1223.00 725.98 59.36
2006-07 1474.20 858.34 58.22
2007-08 1705.94 1083.40 63.51
2008-09 2058.07 1530.1 74.34

Interpretation:

The above table shows the amount of interest paid as percentage of interest
earned by the bank during the year from 2003-04 to 2008-09. In the year 2008-09 the
bank paid high rate of interest as against interest earned i.e (74.34) when compared to
other years.

Both the interest earned and interest paid by the bank shows a fluctuating trend
year by year.
 47

CHART 2.4.10
INTEREST PAID AS PERCENTAGE OF INTEREST EARNED
 48

LOANS OVERDUE AS PERCENTAGE OF LOANS AND

ADVANCES

This ratio establishes the relationship between loans overdue and loan and
advances.
Loan overdue as percentage of loans and advances = Loans overdue / loans
and advances X 100.

TABLE 2.4.11
LOANS OVERDUE AS PERCENTAGE AGE OF LOANS AND
ADVANCES

Loans Overdues Loans and Ratio(in

Year
(in lakhs) advances(in lakhs) percentage)

2003-04 508.12 5779.39 8.79

2004-05 546.38 6899.31 7.92

2005-06 741.29 7881.03 9.41

2006-07 811.49 8906.79 9.11

2007-08 683.79 9949.92 6.87

2008-09 559.01 12460.70 4.49

Interpretation:

The above table shows the amount of loans overdue by the bank as against loans
and advances from 2003-04 to 2008-09. During the year 2005-06 they have high rate
overdue as compared to other years. Then it reduced to 6.87 in 2007-08 and finally it
reduced to 4.49 in 2008-09.

The loans overdue shows an increasing trend from the base year and finally it
decreases which shows the efficiency in collecting the loans of the bank.
 49

CHART 2.4.11
LOANS OVERDUE AS PERCENTAGE OF LOANS AND
ADVANCES
 50

NON PERFORMING ASSETS AS PERCENTAGE OF LOANS AND ADVANCES

The ratio establishes relationship between non performing assets and loans and advances.
Non performing Assets as Percentage = Non performing Assets /Loans and
of Loans and Advances Advances X 100

TABLE 2.4.12
NON PERFORMING ASSETS AS PERCENTAGE OF LOANS AND
ADVANCES
Loans and
Non-performing Ratio(in
Year Advances(in
assets(in lakhs) percentage)
lakhs)
2003-04 406.87 5779.39 7.04

2004-05 689.93 6899.31 10.00

2005-06 918.93 7881.03 11.66

2006-07 809.53 8906.79 9.09
2007-08 905.44 9949.92 9.10
2008-09 1117.66 12460.70 8.97

Interpretation:

During the year 2003-04 the ratio of Non Performing Assets against loans is 7.04
% ,then it increases to 10% in 2004-05 and ,11.66% in 2005-06.In the next following
years it shows a decrease trend and reached 9.09%,in 2007-08 and 9.10% and later it
reduced to 8.97 in 2008-09.

Te Non performing assets of the bank is increasing year by year because the loans
and advances of the bank is also increasing.
 51

CHART 2.4.12
NON PERFORMING ASSETS AS PERCENTAGE OF LOANS AND
ADVANCES
 52

3.1 FINDINGS

The important finding which have seen from the study of Nilambur Co-
operative Urban Bank LTD are as follows
 It was found that the share capital of the bank has a significant increase in the year
2008-09 as compared to the previous years.
 There was an increase in the amount of reserves and surplus of the bank.
 The bank is successful in collecting deposits, the bank collected almost twenty
thousand lakhs of rupees as deposits in 2008-09, the trend is 228.12 in 2008-09.
 The bank obtained 200.49 lakhs of rupees as profit in 2008-09.In the base year it
was Rs. 94.19 lakh only.
 The amount of loans and advances shows an increasing trend and the amount of
loans overdue shows an increasing in trend till the year of 2006-07 and then after
it started to decrease .
 Its founded that the bank is providing other banking facilities to members and to
the general public.
 In case of gold loan the bank is providing good schemes.
 The bank is not providing any kind of agricultural loans.
 When we compare loans overdue with loans and advances we can see that the year
of 2005-06 and the year 2008-09 has a small ratio, which means that has
witnessed a high ratio with the amount of loans overdue.
 Non performing assets had decreased thereafter which implies that the bank have
given much concentration on non performing assets .
 When compare to loans and advances regarding to the deposits the high ratio is
found to be in the year of 2004-05 and low ratio is in 2007-08.
 Interest earned as percentage of loans and advances and interest paid as
percentage of deposits displays a fluctuating trend.
 When compare to interest paid with interest earned we can see that in the year
2008-09 having higher ratio than in the year 2005-06 having lower ratio.
 53

3.2 SUGGESTIONS

The main problem faced by Nilambur Co-operative Urban Bank LTD as the problem of
overdue. Some suggestions for reducing the problem of overdue are as follows.
 The quality of the loan assets of the bank can be improved.
 Collect all the credit information of the borrower. If the borrower of the loan is a
business man, collect the financial data relating to his business it reveals the
financial position of the borrower.
 To identify the purpose of loan granted and to ensure that the loans are utilized for
productive purpose.
 Introduction of profit planning and cost control techniques with in built advantage
of perpetual performance evaluation.
 New branches can be opened only after through survey about the potentialities of
the area and viability of the branch.
 Bank need to take the corrective measure for the minimization of Non Performing
Assets.
 The agriculture loan can be provided to the farmers where they can have their
growth.
 The bank must concentrates more on non performing assets.
 The bank need to take measures for minimizing bad debt.
 54

3.3 CONCLUSIONS

The present study related to Nilambur Co-operative Urban Bank LTD, mainly
relates to Loans and Advances. Nilambur Co-operative Urban Bank LTD gives loans to
members on personal securities and on the securities of immovable properties and charge
a moderate rate of interest on these loans.

Loans are sanctioned with the prior approval of the Board. The bank’s recovery of
loans from the borrower is not satisfactory. So the amount of overdue is increasing year
after year.

The bank is functioning well in terms of deposit mobilization and net profit. They
accept deposits from public as well as its members. The bank provides high rates of
interests to deposits and attracts large number of depositors. The bank has no restrictions
for mobilizing the deposits and they provide many types of incentives to their account
holders for attracting other also.

Non Performing Assets of the Nilambur Co-operative Urban Bank LTD slow a
decreasing trend in last two years. If the bank gave much importance to the reduction of
NPAs.

Nilambur Co-operative Urban Bank LTD did not receive any type of borrowing
from its Apex bank and functioning of the bank depends up on the rate of repayment of
loan by its borrowers.
 55

REFERENCES

BOOKS:

1. Prof: T.S Balan (2003) “Principles and Practice of Co-operation”.

2. “Himalaya Publishing House, New Delhi” pp : 38.2.

3. C.B Mamoria & R.D. Saksena (1988)“Co-operation In India” “Kitab Mahal,

Allahabad”pp:21

4. R.K Sharma & Sashi. K. Gupta(2006)“Management Accounting” “kalyani

Publishers, Ludhiana”pp:95.

5. Gordon, Natarajan (2004)“Banking Theory, aw and Practice”, “Himalaya

publishing house Pvt. Ltd. New Delhi” pp:176-183.

6. C R Kothari, (2000) Research Methodology, New age International publication .

JOURNAL:

Bernnan Clarke , “loan ranger”, BC Business, Jan 1,2008.

ANNUAL REPORTS OF MCUB LTD.

INTERNET:

WEBSITE : www.ncub.com.