SUMMER PROJECT REPORT

“STUDY OF BANKING OPERATIONS WITH REFERENCE TO SHIKSHAK

SAHAKARI BANK”

Bachelor of Commerce (Banking & Insurance)

Semester (VI) (2022-2023)

Submitted to:

University of Mumbai

Submitted by:

Mr. AKSHAY SHIVAJI KARUNGALIKAR

Faculty Guide:

Prof. Mrs. LIORA ANUP NITRA

MARCH – 2023

RSPMs Satyagraha Collage Of Commerce & Management & Science,

Supparak Bhavan, Plot No. - 52, Sector -19, Kharghar . 410210.

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 CERTIFICATE

This is to certify that Mr. AKSHAY SHIVAJI KARUNGALIKAR , of Third Year

B.B.I., Semester VI (2022-2023) has successfully completed the project on

STUDY OF BANKING OPERATIONS WITH REFERENCE TO SHIKSHAK

SAHAKARI BANK.

Under the guidance of .PROF. ILORA ARUP MITRA

Project Guide Principal

( PROF. ILORA ARUP MITRA) (DR. G.K. DONGARGAONKAR)

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 ACKNOWLEDGEMENT

To list who all have helped me is difficult because they are so numerous, and the
depth is so enormous.

I would like to acknowledge the following as being idealistic channels and fresh
dimensions in the completion of this project.

I take this opportunity to thank RSPMs Satyagraha Collage Of Commerce &

Management & Science, for giving me chance to do this project.

I would like to thank my Principal, DR. G.K. DONGARGAONKAR for providing

the necessary facilities required for completion of this project.

I would also like to express my sincere gratitude towards my project guide

PROF. ILORA ARUP MITRA whose guidance and care made the project
successful

Lastly, I would like to thank every person who directly or indirectly helped me in the
completion of the project especially my Parents and Peers who supported me
throughout my project.

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 INDEX

PART 1

Sr. no Contents Page No.

A] Company Profile
01 Brief History 07-10
02 Management Structure 10-11
03 Achievements and Awards 12
04 Products and Services Offered 12-13
05 SWOT Analysis 14-18
B] Sector Overview
01 Regulations and Regulatory Authority 19-20
02 Sectors contribution on the economy 21-23
03 Problems faced by the sector 23-29

PART 2

Actual Work Done

01 Weekwise Details of the work done 29-54
02 Findings and Suggestions 73
03 Conclusions 74
04 Appendix 75

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 COMPANY PROFILE

Co-operative Banks

A co-operative bank is a 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. Co-operative bank generally provide their members with a wide range
of banking and financial services (loans, deposits, banking accounts). They are registerd
under the Cooperative Societies Act-1912, and governed by the banking regulations act
1949 and banking laws (cooperative societies) act, 1965.

Anyonya sahakari mandala, established in 1889 in the province of Baroda, is the earliest
know co-operative credit union in India.

BRIEF HISTORY

Shikshak Sahakari Bank Ltd. was established in the year 1979 with the aim to help
teachers to meet their financial needs. The thought of establishing a bank had cropped
up in the minds of its founders in the year 1976. However, it saw its realisation in
January 1979. The Bank was started with a share capital of Rs. 3.50 lacs only. The
founders of the Bank were teachers by profession. It can be said that Shikshak Bank is
a bank founded by teachers for teachers. However, later the Bank did not keep itself
limited to teachers but opened its membership to all. It also started financing for
commercial purposes from the year 1987. The Bank achieved the deposit target of Rs.
100.00 crores in the year 1996-97. Consequently, it was awarded the Scheduled Status
on May 22, 1999. Shikshak Bank is the first bank to get this status within twenty years

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of its inception, which is obviously a very short time-period. However, the bank’s
accomplishments don’t end here. In the year 1999-2000, the Bank secured 20th rank
amongst other banks with regard to deposits and was placed first in Vidarbha. In the
year 2000-2001, it rose to the 19th position amongst the banks with regard to deposits
while maintaining its top position among the banks of Vidarbha. The Bank presently
has 19 branches functioning in Nagpur and Chandrapur districts. It has plans to open
more branches in the near future. The area of operation of the Bank includes Nagpur,
Chandrapur, Wardha, Yavatmal, Bhandara and Gadchiroli districts.

Commitment

The Bank has advanced loans extensively to various industries at MIDC, Hingna,
Nagpur, Butibori, Kalmeshwar, Chandrapur, etc. and also for commercial purposes.
Besides, it has also given advances to traders, transporters, etc. 70 % of the Bank’s
advances have been made for business and industrial purposes. The Bank has also made
60 % of its advances in the priority sector.

The Bank has always been contributing for various social causes including relief for
victims of natural calamities. Apart from this, the Bank regularly makes donations from
its Member Welfare Fund for the benefit of its members.

The Growth

Increasing deposits is not sufficient. Bank also needed to increase its advances to
achieve the required CD ratio. For this, Bank has launched new, attractive loan
schemes like Sobati, SSB Suvidha, SSB Aadhaar, SSB Sathi, SSB Sarthi, SSB
Sahyog, etc., which are sure to boost its credit portfolio.

Bank had obtained permission from the Reserve Bank of India and the Govt. of
Maharashtra’s Dept. of Cooperation to launch a scheme for long-term deposits.
Shikshak Bank is probably the first one in Vidharbha to introduce such a scheme. As
per this scheme, which has been named ‘SSB-Sahabhaag’, depositors can keep their
deposits with the Bank for a period of minimum 5 years to maximum 10 years and
earn an interest @ 11 % on them. The scheme has been made open to public on 13th

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February 2009 and closed on 31st March 2009. The scheme received a huge response
. Through the scheme, Bank mobilized deposits to the tune of 2.00 crores on day one
itself. The RBI had set a target of Rs.20.00 crores for the Bank to achieve under this
scheme till 25th March 2009. These deposits are included in Tier-I Capital of the
Bank.

The Bank, maintained the CRAR well above the minimum prescribed regulatory level
of 9% and the same was 14.76% as on March 2016, which shows the healthy position
of the bank.

Our Mission

Mahatma Gandhi has said that strength does not come from physical capacity, it
comes from an indomitable will. Shikshak Bank has proved this time and again and,
thus, set an example for others. It has survived all odds and is now on the path of
well-being and will soon be prosperous, thanks to the hard work, indomitable spirit
and perseverance of its Management and Staff. It is said that God helps them who
help themselves. Same has happened with Shikshak Bank. The Management and the
staff of the Bank are working hard together and with their customers’ faith with them,
the Bank is sure to reach new heights.

MANAGEMENT STRUCUTURE

Structure of Cooperative Banking in India

The structure of cooperative network in India can be divided into 2 broad segments-

• Urban Cooperative Banks

• Rural Cooperatives

Urban Cooperatives

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Urban Cooperatives can be further divided into scheduled and non-scheduled. Both the
categories are further divided into multi-state and single-state. Majority of these banks
fall in the non-scheduled and single-state category. Banking activities of Urban
Cooperative Banks are monitored by RBI. Registration and Management activities are
managed by Registrar of Cooperative Societies (RCS). These RCS operate in single-
state and Central RCS (CRCS) operate in multiple state.

Rural Cooperatives

The rural cooperatives are further divided into short-term and long-term structures. The
short-term cooperative banks are three tiered operating in different states. These are-
State Cooperative Banks- They operate at the apex level in states District Central
Cooperative Banks-They operate at the district levels Primary Agricultural Credit
Societies-They operate at the village or grass-root level. Likewise, the long-term
structures are further divided into – State Cooperative Agriculture and Rural
Development Banks (SCARDS)- These operate at state-level. Primary Cooperative
Agriculture and Rural Development Banks (PCARDBS)-They operate at district/block
level. The rural banking cooperatives have a complex monitoring structure as they have
a dual control which has led to many problems. A Forum called State Level Task Force
on Cooperative Urban Banks (TAFCUB) has been set-up to look into issues related to
duality in control. All banking activities are regulated by a shared arrangement between
RBI and NABARD. All management and registration activities are managed by RCS.

ACHIEVEMENTS AWARDS AND LATEST DEVELOPMENTS

• The Bank achieved the deposit target of Rs. 100.00 crores in the year 1996-97.

• Bank was awarded the Scheduled Status on May 22, 1999. Shikshak Bank is the first
bank to get this status within twenty years of its inception, which is obviously a very
short time-period.

• In the year 1999-2000, the Bank secured 20th rank amongst other banks with regard
to deposits and was placed first in Vidarbha.

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• The year 2000-2001, it rose to the 19th position amongst the banks with regard to
deposits while maintaining its top position among the banks of Vidarbha.

• The Bank presently has 19 branches functioning in Nagpur and Chandrapur districts.

• The Bank, maintained the CRAR well above the minimum prescribed regulatory level
of 9% and the same was 14.76% as on March 2016, which shows the healthy position
of the bank.

• The bank has a total business mix of Rs.1500.00 crores as on March 2016 and is
amongst the Top cooperative banks in Vidarbha and has a good recognition in
Maharashtra.

PRODUCTS AND SERVICES OFFERED

Products offered are:

● Current account
● Savings account
● Cash credit limit
● Overdraft
● Pigmy deposits
● Recurring deposits
● Long term loans
● Short term loans
● Fixed Deposit Receipt
● Deposits
● Different types of Schemes

Services offered are:

● Locker
● ATMs
● RTGS & NEFT
● Cheque

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● Intra bank deposit portability
● Debit card
● Online trading facility to DEMAT account holder
● ECS
● Internet Banking

SWOT ANALYSIS

STRENGTHS:

1. UCBs are self–reliant in financial with less risk in operations.

2. UCBs account for nearly 10% of the resources of the entire banking sector
in India.

3. They have been filling the credit gap in the urban, sub- urban and semi-
urban areas.

4. One hundred years of existence.

5. UCBs have responsibility for the economic upliftment of the weaker

sections of the community.

6. Non-discrimination against caste, class, creed, religion, and gender.

7. The principle of member’s participation has resulted in a unique system of

share capital linked to borrowing in UCBs.

8. Democratic management is the principle of cooperative sector.

9. The deposits of UCBs are protected by the Deposit Insurance and Credit
Guarantee Corporation of India (DICGC).

10. There were 55 scheduled urban cooperative banks in India as on 31st March
2004.

11. There is a good network of UCBs organized at grassroots levels.

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 12. Leaders are elected by the members of the cooperative society who work
alongside the employed professionals.

13. Employees of UCBs are from local areas, well versed with their clientele,
their needs and psychology.

14. Cooperatives are required to maintain lower reserve requirements i.e. 3%

and 25% of their time and demand liabilities towards CRR and SLR
respectively. This provides a greater liquidity to cooperatives.

WEAKNESSES:

1) Staff recruitment is not done properly in UCBs. There is a shortage of

manpower.

2) A good number of miss-fits and un-fits are found occupying the chairs of
administration. Their inadequate knowledge leads to inefficiency.

3) The process of computerization of UCBs is rather slow. Though computers

have been installed, trained staff is not available.

4) Lack of professional management.

5) Regional imbalance in the distribution and development of UCBs.

6) As a result of the deputation of Government Officers by the State

Government, the autonomy of UCBs is affected.

7) Annual General Meetings (AGM) are not convened periodically and

effectively.

8) Political factors play an adverse role and hamper the smooth functioning of
banks i.e. organizing loan melas and campaigning for waiver of loan in the
same breath.

9) Ineffective supervision over branches and poor inspection.

10) The dual control is creating a lot of confusion in the operation of UCBs.

11) Most of the members are not well educated and are neither vigilant nor
aware of their rights and duties towards society.

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 12) Ineffective supervisory mechanism and internal control system.

13) The low business level is one of the major reasons for non- viability of
UCBs.

14) Financial margin of UCBs is inadequate to meet transaction and risk costs.

15) A large number of UCBs are functioning at rented premises with poor
layouts.

16) Absence of job rotation and transfer of employees from one branch to
another.

17) Poor image in the minds of people about cooperative institutions.

18) Lack of initiative and innovation among the staff and members.

19) Even the financially strong UCBs cannot normally pay dividend more than
14% on capital in view of the legal restrictions and cooperative policy.

20) Borrowers obtaining second and subsequent loans may have to take up
additional shares only marginally.

OPPORTUNITIES:

1) UCBs are integrated into their local environment and their role goes beyond
that of provider of financial services.

2) On account of their proximity to their members and their firms, UCBs have
a good scope for enlarging the membership.

3) UCBs are pioneers in the field of micro finance.

4) Collective efforts not only enhance the chances of success but also increase
the economy of scale by reducing the per capita cost of operation and
increase productivity.

5) Setting up of Urban Banks Department (UBD) by the RBI as recognition of

this sector as an important part of the banking system in 1984.

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 6) Registration of UCBs with multistate presence under the Multistate
Cooperative Societies Act, 2002.

7) Permission granted by RBI to the financially strong Scheduled UCBs having

a minimum net worth of Rs.100 crores to enter into insurance business from
4.8.2003.

8) The notification of the Government of India (No.S.O.E. 105 (e) dated 28th
January 2003) that has made applicable the provisions of the Securitization
and Reconstruction of Financial Assets and Enforcement of Security Act to
UCBs.

9) With the amalgamation for urban banks as per the guidance issued by the
RBI on February 2, 2005, the ground has been cleared for consolidation of
the cooperative banking sector.

10) RBI regulatory arrangement with the State Government through a

Memorandum of Understanding to facilitate proper and coordinated
regulation and supervision of UCBs.

11) The RBI’s Draft Vision Document for UCBs on its website for eliciting
comments in 2005.

THREATS:

1. Acute competition in the market.

2. Increasing incidence of frauds and misappropriation.

3. Tightening of Income Recognition and Asset Classification Norms had a

direct bearing on the balance sheet of the UCBs.

4. Higher cost of management especially for interest on deposits and

establishment cost.

5. Failure of the Government to honor its guarantees when invoked.

6. Increasing litigation between management and employees.

7. External pressure to finance ineligible borrowers.

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 8. Loan waiver announcement of government then and there.

9. Departmental interference in financial matters in various forms.

SECTOR PROFILE

REGULATIONS AND REGULATORY BODIES

Primary Cooperative Banks, popularly known as Urban Cooperative Banks (UCBs) are
registered as cooperative societies under the provisions of, either the State Cooperative
Societies Act of the State concerned or the Multi State Cooperative Societies Act, 2002.
They are regulated and supervised by the Registrar of Cooperative Societies (RCS) of
State concerned or by the Central Registrar of Cooperative Societies (CRCS), as the
case may be. The applicability of banking laws to cooperatives societies since March
1, 1966 ushered in ‘duality of control’ over UCBs between the Registrar of Cooperative
Societies/Central Registrar of Cooperative Societies and the Reserve Bank of India.
The Reserve Bank regulates and supervises the banking functions of UCBs under the
provisions of Banking regulation Act, 1949(AACS). Within the Reserve Bank, a
separate department, viz. Urban Banks Department, has been entrusted with these
functions. Urban Banks Department functions in close coordination with other
regulators viz., RCSs and CRCS.

The functions of the department can be broadly divided into

(i) Regulatory

(ii) Supervisory and

(iii) Developmental.

The Reserve Bank has been vested powers to issues license to UCBs under Section 22
and 23 Banking Regulation Act, 1949 (AACS) to carry on banking business and to
open new places of business(branches, extension counters, etc.) respectively. For this
purpose, guidelines on the eligibility criteria for issue of banking license / branch

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license are issued to UCBs from time to time. As a regulator, the Reserve Bank has
prescribed prudential norms in various areas, e.g. capital adequacy, income
recognition, asset classification and provisioning, exposure to single/group borrowers,
exposures to sensitive sectors, loans and advances, investments, liquidity requirements,
etc. Considering the heterogeneity in the sector, a differentiated regulatory regime is
being adopted by Reserve Bank in certain aspects by grouping the UCBs under two
Tiers (Tier I and II) based on their branch network, area of operation and the level of
deposits. The Banking Regulation Act, 1949(AACS) provides for submission of
periodical returns by UCBs to the Reserve Bank of India. Further, under the powers
vested in the Reserve Bank, it has prescribed various other periodical returns to be
submitted by UCBs. The Reserve Bank carries out on-site inspections and off-site
surveillance of UCBs. It also issues directions and operational instructions to UCBs,
wherever necessary to streamline the functioning and to protect the interests of the
depositors. As a part of developmental functions, the Reserve Bank imparts training to
the officials of UCBs to upscale their knowledge, skill and expertise. The Reserve Bank
has entered into memorandum of understanding (MOU) with Central Government and
various State Governments for harmonization of regulation and supervision. The
circular instructions issued to UCBs from time to time are placed in the Reserve Bank’s
website. Further, for discharge of its functions, the Bank has prepared operation
manual, Job Cards, manual for on-site inspection of UCBs, manual of instructions for
UCBs, etc. and issues internal circulars/instructions from time to time.

SECTORS CONTRIBUTION TO THE ECONOMY

India is mainly an agrarian society with more than half of its population still residing in
the villages. Rural sector is the major contributor to the overall GDP of the nation and
hence lack of development in villages means lack of development in India. Cooperative
societies are playing significant role in this and share a major credit in the growth of
rural sector which along with government and private sectors contribute to the overall
economy of India. Cooperatives cover more than 97%of Indian villages, some run by
its members and some by the government
Needs of rural people are served by different forms of private and government
organizations including partnership firms, co-operatives, companies and charitable

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 trust. Government each year spends lakhs to crores of rupees on rural development. But
co-operatives working in rural areas are playing noteworthy role in this. Gujarat’s Dairy
co-operative and Maharashtra’s sugar co-operative prove their contribution.
Cooperatives originated in the West during the middle of the last century and from there
these came to India. Formally co-operatives were introduced to India in 1904 when the
Indian Co-operative Societies Act was promulgated. Moreover rural indebtedness was
the major force behind the initiation of chit funds and cooperatives in India. Initially
these were just to provide credits to the farmers in the form of credit societies and
gradually these start working in other fields such as banking, processing and marketing.
The meager funds of farmers were pooled in to run cooperative and it was an attractive
way to solve their financial problems. After independence role of cooperative societies
grew to encompass socio-economic development and eradication of poverty in rural
India. It became an integral part of five year plan. With this co-operative societies
became a fundamental part of our economy.
Non-credit societies came in 1912. Importance of co-operative was also highlighted in
the Royal Commission on Agriculture in 1928. With the formation of the Reserve Bank
of India (RBI) in 1935, developing more cooperative societies was given due
importance.
Main aim of the cooperative was to get the poor and indebted farmers out of poverty
and out from the clutches of money lenders. Within short span of time, role of
cooperatives extended beyond agricultural credit. It started covering activities such as
production, farming, marketing and processing. Cooperatives are now playing a very
significant role in the socio-economic development of our country especially the rural
India.
In 1951 there were 1, 81,000 cooperatives of all kinds in India and this number
increased to manifold within short span of time. During 2007-08 there were 1, 50,000
primary credit cooperatives and some 2, 60,000 non-credit primary societies of all
types. In India there are four major types of cooperatives –

● The Primary agricultural credit or service societies

● Agricultural non-credit societies
● Agricultural co-operative marketing societies
● Co-operative farming societies

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Though the expansion and reach of cooperatives is highly impressive but their way of
working is not Except for few co-operative societies most of these lack motivation.
These are merely run by the government without motivation and enthusiasm of their
members. Some of these even lacks in the required funds. Other factors that lead to the
slow progress of these societies are – mismanagement, manipulation, restricted
coverage, lack of awareness, and political interference. But this does not mean the
downfall of the massive projects. Despite all this, cooperatives are really helping poor
in becoming self-reliant. Scope of cooperative societies in rural India can improve
further with women participation. Cooperatives provide credit to the farmers, the most
needed thing in the farming. Apart from this cooperatives help farmers by providing
top quality fertilizers, seeds, insecticides, pesticides etc at reasonable price. Farmers
also get marketing, warehousing facility and transportation support from the
cooperatives. Service cooperative societies help the poor and marginal farmers with
tractors, threshers etc on rent. Rural cooperative societies are now entering into real
estate, power, insurance, and healthcare and communication sector. If these keep on
working with an objective of development then days are not far when quality of rural
life would be far better than urban India.

PROBLEMS FACED BY THE SECTOR IN GENERAL AND THE COMPANY

IN PARTICULAR

1. The vital link in cooperative finance system i.e. cooperative banks itself remains
very poor. They are too small to operate property and some of them are existing
only on the paper.

2. The NPAs of the cooperative banks are higher than those of commercial banks
in NPAs to asset ratios.

3. They are performing the unethical practices by the bodies of chairman.

4. They are largely depends upon govt. capital than the shareholders contributions.

5. The workers participation in the working is much lesser than expected.

6. They are facing infrastructural weakness and structural laws. They do not have
potentials in members, deposits and borrowers.

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 7. Cooperative banks till now have to depend heavily on refinancing facilities from
the govt., RBI and NABARD. They are not able to become self reliant through
their own resources of deposits.

8. They are facing from harmfully low or weak quality of loan assets and from
highly bad recovery of loans.

9. They are having much political and official intervention in their work. Besides
that government interventions also coming in their way of progress and
preventing them to become self reliant. Large of the banks are governed or
directed by Politicians.

10. Different regulations have been put on them besides that they are weak in their
working. In fact the existence of multiple regulatory authorities has come in the
way of effective regulations, control and monitoring of cooperative banks.

11. The areas of operation of the cooperative banks are restricted and limited.

12. They are not having the modern practices of banking in there working viz. net
banking, mobile banking, online banking, e-banking, ATM banking and all
other modern banking practices. Due to which they have been eliminated and
remained back foot in the modern era of marketing.

Features of co-operative banks:-

• They are organized and managed on the principal of co-operation, self-help, and
mutual help. They function with the rules of one member, one vote.

• Function on “no profit, no loss” basis. Co-operative banks, as a principle, do not

pursue the goal of profit maximization.

• Co-operative bank perform all the main banking function of deposit

mobilization, supply of credit and provision of remittance facilities. Co-
operative banks provide limited banking products and are functionally
specialists in agriculture related products. However, co-operative banks now
provide housing loans also.

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 • UCB provides working capital loans and term loan as well.

• Co-operative bank do banking business mainly in the agriculture and rural

sector. However, UCBs, SCBs, and CCBs, operate in semi urban, urban, and
metropolitan areas also.

• Co-operative banks are perhaps the first government sponsored, government-

supported, and government subsidized financial agency in India. They get
financial and other help from the reserve bank of India NABARD, central
government and state government.

Functions:-

Cooperative Banks also perform the basic functions of banking but they differ from
commercial banks in the following respects:

1. Commercial banks are joint-stock companies under the companies’ act of 1956,
or public sector bank under a separate act of parliament whereas cooperative
banks were established under the cooperative society’s acts of different states.
2. Commercial bank structure is branch banking structure whereas co-operative
bank at apex level, central/ district cooperative bank at district level, and
primary cooperative societies at rural level.
3. Only some of the societies of banking regulation act of 1949 (fully applicable
to commercial banks), are applicable to cooperative banks resulting only in
partial control by RBI of cooperative banks.
4. Cooperative banks function on the principle of cooperation and not entirely on
commercial parameters.

Types of Cooperative Banks in India:

The cooperative banks are small-sized units which operate both in urban and non-
urban centers. They finance small borrowers in industrial and trade sectors besides
professional and salary classes. Regulated by the Reserve Bank of India, they are
governed by the Banking Regulations Act 1949 and banking laws (cooperative

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societies) act, 1965. The cooperative banking structure in India is divided into
following categories:

Primary Cooperative Credit Society

The primary cooperative credit society is an association of borrowers and non-

borrowers residing in a particular locality. The funds of society are derived from
the share capital and deposits of members and loan from central cooperative banks.
The borrowing powers of the members as well as of the society are fixed. The loans
are given given to members for the purchase of cattle, fodder, fertilizers, pesticides,
etc.

Central Cooperative Banks

These are the federations of primary credit societies in a district and are of two
types-those having a membership of primary societies only and those point stocks.
These having a membership of societies as well as individuals. The funds of the
bank consist of share capital, deposits, loans and overdrafts from state cooperative
banks and joint stocks. These banks provide finance to member societies within the
limits of borrowing capacity of societies. They also conduct all the business of a
joint stock bank.

State Cooperative Banks

The state cooperative bank is a federation of central cooperative bank and acts as a
watchdog of the cooperative banking structure in the state. Its funds are obtained
from share capital, deposits, loans and overdrafts from Reserve Bank of India. The
state cooperative banks lend money to central cooperative banks and primary
societies and not directly to the farmers.

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
development 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

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 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 general public.

Urban Cooperative Banks

The term Urban Cooperative Bank (UCBs), though not formally defined, refers to
primary cooperative 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, workplace groups. They essentially lend to small borrowers
and businesses. Today, their scope of operations has widened considerably.

WEEKWISE DETAILS

WEEK 1

(Reading of cooperative dairy)

• Banking regulation Act 1949 applicable to co-operative society form 1st march
Co-operative society.

• Paid up share capital and reserve not less than Rs.One lakh.

• Government of India dated 12/12/1995 specified equipment leasing and hire

purchase insurance.

• UCBs what is primary credit society.

• Primary credit society becomes primary co-operative society after

commencement of banking law act 1983.

• Co-operative bank required to maintain cash reserve opened with RBI or SBI or
state co-operative bank not less than 3% of DTL as last Friday of the second of
the second of the subsequent month.

• Co-operative bank and only the net balance in the current account shall be
registered as cash reserve.

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 • As per government of India only such primary co-operative banks which are
licensed and whose demand & time liability are not less than 250crore capacity
treated as financial institution.

• Government of India effect from 01.2013, only such of the primary co-operative
bank as are demand and time liability are not less than 750crore would treated
as financial institution for the purpose of sub closure.

Advantages in induced in the schedule are:-

i. Bank can avail refinance facility.

ii. Remittance facility scheme.

iii. Bank can accept deposit form local bodies.

iv. The guarantee issued by schedule.

v. Primary co-operative bank will accept by the state / central department /public
service co-operation.

vi. The cheque issued by drawn on schedule primary co-operative bank will
accepted by central / state government

Responsibility:-

i. Bank were allowed to keep statutory cash reserve or in current account with the
state /central co-operative bank.

ii. Bank was required to maintain statutory cash reserve with RBI.

iii. Presently bank are required to submit the return inform indicatly the demand &
time liability on the last Friday.

Credit Limit of RBI

Scheme of finance: - limit restricted 1-1 of DTL; declaration of each drawl will be
restricted 3 working days

Document:-

a) Application for sanction credit limit.

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 b) Resolution of managing committee it avail the activity.

c) Latest audited balance sheet.

d) Statement of maximum borrowing power.

SEC 24

Every co-operative bank shall maintain in cash approved securities an amount which
shall not be less than 25%or sum of other percentage not exceeding 40% of total
demand & time liability of India.

SEC 27

Every bank is required to submit to the RBI return transacted from and manner showing
it asset and liability as the close of the business on the preceding working day before
the close of month.

SEC 29 & 31

1. Amendment of 29 banks now required to prepare profit and loss account on 31st
march each year.

2. The bank has to submit three typed copy of profit and loss account & balance
sheet together with the statutory auditor report managed by the principle officer
of the bank and almost director before 30th each year.

3. Publish balance sheet also contain statutory auditor report.

4. The balance sheet also required to be published as required under rule 18 local
newspapers.

Statutory requirement

3% of DTL

RBI Act 1934 empower to increase up to 15%

The RBI Act 1934 was amended by parliament in June 2006

Page | 23
For having regard to the need of monetary stability in the country

Schedule co-operative bank

The government of India ministry of finance department economic offer dated 15 April
1988 notified that the primary co-operative bank which are license and whose demand
and time liability are not less than 50crore.

Only such of the primary co-operative bank which are licensed include in schedule and
demand and time liability are not less than 100crore shall quality to be induced in the
second schedule to be RBI act, 1934.

• RTGS / NEFT The acronym 'RTGS' stands for Real Time Gross Settlement, which
can be defined as the continuous (real-time) settlement of funds transfers individually
on an order by order basis (without netting).'Real Time' means the processing of
instructions at the time they are received rather than at some later time.’ Gross
Settlement' means the settlement of funds transfer instructions occurs individually (on
an instruction by instruction basis). Considering that the funds settlement takes place in
the books of the Reserve Bank of India, the payments are final and irrevocable.

TYPES OF DEPOSIT

• Fixed Deposit: - A fixed deposit is a financial instrument provided by banks

which provides investor with higher rate of interest than regular saving account,
until the given maturity date. It May or may not require the creation of a separate
account. It is known as term deposit or time deposit in Canada, Australia, New
Zealand, and the US and as bond in the United Kingdom and India. They are
considered to be very safe investment. Term deposit in India and Pakistan is
used to denote a larger class of investment with verifying levels of liquidity.
The defining criteria for fixed deposit are that the money cannot be withdrawn
from the FD as compared to a recurring deposit or a demand deposit before
maturity. Some banks may offers additional services to FD holder such as loan
against FD certificate at competitive interest rates. It’s important to note that
banks may offer lesser interest rates under uncertain condition. The interest rate
varies between 4 and 11 percent. The tenure of an FD can vary from 7, 15 or 45
days to 1.5 years and can be as high as 10 years.

Page | 24
 • Recurring Deposit: - Recurring deposit is a special kind of term deposit offered
by banks in India which help people with regular incomes to deposit a fixed
amount every month into recurring deposit account and earn interest at the rate
applicable to fixed deposit. It is similar to making FD of certain amount in
monthly installment, for example Rs 1000 every month. Thus deposit mature
on specific date in the future along with all the deposit made every month. Thus
recurring deposit scheme allow customers with an opportunity to build up their
saving through regular monthly deposit of fixed sum over a fixed period of time.
Minimum period of RD is 6 months and maximum is 10 years. Recurring
deposit can be funded by standing instruction by the customer to the bank to
withdraw a certain sum of money from his saving / current account and credit
to recurring deposit account.

When the RD account is opened, the maturity value is indicated to the customer
assuming that the monthly installment will be paid regularly on due dates. if any
installment is delayed , the interest payable in the account will not be sufficient to reach
maturity value as a penalty. One can avail loan against the collateral of recurring deposit
up to 80 to 90% of the deposit value.TDS applicable on RDs.

TYPES OF ACCOUNTS

• Saving Account: - saving account are account maintained by retail financial

institution that pay interest but cannot be used directly as money in the narrow
sense of a medium of exchange (for example by writing a cheque). These
account let customers set aside a portion of their liquid assets while earning a
monetary return. For the bank, money in saving a/c may not be callable
immediately and, in some jurisdictions, does not incur a reserve requirement.
Cash in the bank’s vaults may thus be used, for example, to fund interest paying
loans.

• The Bank achieved the deposit target of Rs. 100.00 crores in the year 1996-97.

• Bank was awarded the Scheduled Status on May 22, 1999. Shikshak Bank is
the first bank to get this status within twenty years of its inception, which is
obviously a very short time-period.

Page | 25
 • In the year 1999-2000, the Bank secured 20th rank amongst other banks with
regard to deposits and was placed first in Vidarbha.

• The year 2000-2001, it rose to the 19th position amongst the banks with regard
to deposits while maintaining its top position among the banks of Vidarbha.

• The Bank presently has 19 branches functioning in Nagpur and Chandrapur

districts.

• The Bank, maintained the CRAR well above the minimum prescribed
regulatory level of 9% and the same was 14.76% as on March 2016, which
shows the healthy position of the bank.

• The bank has a total business mix of 1500.00 crores as on March 2016 and is
amongst the Top cooperative banks in Vidarbha and has a good recognition in
Maharashtra.

• Current Account :- An acount with a bankor building society from which money
may be withdrawn without notice,typicallyan active account catering for
frequent deposits and withdrawals by cheque.

• It is defined as the sum of the balance of trade (goods and services exports less
imports), net income from abroad and net current transfers. The current account
and the capital account are the two main components of a nation's balance of
payments. An overvalued currency makes.

B. WEEK 2

Loans and Advances

• Loan given to only and only to their shareholder.

• Unsecured loan: - Member assets should not exceeds 10% of its total assets as
per balance sheet 31st march of preceding.

• Always check credit facility.

• UCB should have assessed CRAR of 9%.

Page | 26
 • The gross NPA of UCBs should be less 10% of gross loan.

• Unsecured loan by the bank should not exceed 15% of the total risk.

TYPES OF LOAN

1. Personal Unsecured Loan: An unsecured loan is a loan that is issued and supported
only by the borrower's creditworthiness, rather than by any type of collateral.
An unsecured loan is one that is obtained without the use of property as collateral
for the loan, and it is also called a signature loan or a personal loan.

Features:

• The amount of loan should be less

• Interest should be very low

• 2 guarantor is compulsory in the case of loan

• All identity proof should be require

• Payment history check

• Customer verification

Documentation: Guarantee letter, Pan card, Adhaar card, Voting card, Light bill
Xerox, Certificate of business, Income tax return verification, Authority letter, Pay
sleep of 6 month, Salary sheet, Income tax statement.

2. Home Equity Loan: A home equity loan is a type of loan in which the borrower
uses the equity of his or her home as collateral. The loan amount is determined by
the value of the property, and the value of the property is determined by an
appraiser from the lending institution.

Features:

• Plays important role in housing sector.

• Plays important role in housing sector in providing credit.

Page | 27
 • Urban co-operative bank play positive role for schemes particularly
for
weaker section of the society. These bank permits grant loan.

• Need for providing credit to priority sector.

• House can be used as mortgage security for the purpose of taking

commercial or other loan.

• It requires special permission from registrar for financing housing

societies.

TERMS AND CONDITION

• Approval from Board of Directors.

• Permit loan urban co-operative bank 30 to 70 lakh.

• Maximum loan in case of individual should not extent 15% of capital

fund of bank.

• 40% of capital fund in case of group borrowers.

• Maximum period of repayment is 20 year. Moratorium repayment

holiday granted.

• They must be shareholders of the co-operative bank.

• Principal and collateral security is required.

• 2 guarantors are must in this case.

Process Note (include all detail information about borrower) Name of

Applicant, contact no, qualification,religion,membership status, pan no,
adhar card no, present activity , firm address, name of present banker,
type of loan, applied amount, name of guarantor 1 and2, all detail info
of guarantor)

Page | 28
 Document:- ITR, A/c statement, Pan card, Sale deed, Tax receipt,
Akhive Pratrika, Title Report, Valuation Report

3. Home Loan: Loan acquired from a financial institution to purchase a home.

Home loans consist of an adjustable or fixed interest rate and payment terms.
Home loans may also be referred to as mortgage loans.

Features:

• Minimum 2 gurantor is must in the case of the home loan.

• Housing loan for residential purpose of land, construction.

• Collateral security are their.

• Disbursement in the time of work done.

• 75% loan amount will be sanctioned.

• Wealth of the guarantor and customer it should be more than loan

amount

4. Vehicle Loan: A short-term loan in which the borrower's car title is used as
collateral. The borrower must be the lien holder.

Features:

• Valuation of property

• Prime security (mortgage that vehicle purchased)

Process Note (include all detail information about borrower)Name of

Applicant, contact no, qualification,religion,membership status, pan no,
adhar card no, present activity , firm address, name of present banker,
type of loan, applied amount, name of guarantor 1 and2, all detail info
of guarantor)

Page | 29
 Documentation: (Process fee, statement of finance , application for
vehicle loan, form k, agreement letter, promissory note, loan agreement,
quotation, adhar card, election card , driving licence, electricity bill)

5. Education Loan: ' Money borrowed to finance education or school related

expenses. Payments are often deferred while in school and for a six-month grace
period after graduation.

Features:

• The interest should be less.

• The repayment will be the applier.

• Family should be co-borrower.

• After completed education the party will pay the loan amount with interest
at situated installment

• If the student fail to earn job or repayment installment in that time the co-
borrower should have to pay the loan amount.

Process note:- (Name of Applicant, contact no,

qualification,religion,membership status, pan no, adhar card no, present
activity , firm address, name of present banker, type of loan, applied amount,
name of guarantor 1 and2, all detail info of guarantor).

Documentation: Collateral security, Principal security, Passport, Pan card,

Offer or admission, Student agreement, Corse fee detail, Consultant letter,
Mark sheet Xerox, Establishment certificate, Degree, Student letter,
Applicant letter( pan card, aadhar card,ITR consent), Bank statement.

6. Mortgage Loan: A mortgage is a loan in which property or real estate is used as

collateral. The borrower enters into an agreement with the lender (usually a bank)
wherein the borrower receives cash upfront then makes payments over a set time
span until he pays back the lender in full.

Features:

Page | 30
 • No objection order

• Hypothecation of stock(collateral security)

• Mortgage commercial property or take loan for commercial purpose

• Minimum 2 guarantors are must

• Computation of total income tax:-

• Deduction u/s 24(a)

• Interest u/s 44AD

Process Note (include all detail information about borrower) Name of

Applicant, contact no, qualification,religion,membership status, pan no,
adhar card no, present activity , firm address, name of present banker, type
of loan, applied amount, name of guarantor 1 and2, all detail info of
guarantor), Hypothecation of stock in case of business , collateral security,
principal security.

Documentation: Pan card, Aadhar card, Grampanchyayat Receipt, Tax

Receipt, Electricity bill, Hamipatra, ITR ( 3 years)bank statement.

7. Cash Credit: Cash credit is a short-term cash loan to a company. A bank provides
this type of funding, but only after the required security is given to secure the loan.
Once a security for repayment has been given, the business that receives
the loan can continuously draw from the bank up to a certain specified amount.

Features:

• Co-borrower link with us

• Loan only for the business should be registered

• Prime security (hypothecation of raw material, WIP, finished goods, debtor)

• Collateral security (mortgage of immovable property)

Process note:- (Name of Applicant, contact no, qualification, religion,

membership status, pan no, adhar card no, present activity , firm address,

Page | 31
 name of present banker, type of loan, applied amount, name of guarantor 1
and2, all detail info of guarantor)

Analysis

• Financial position

• Performance analysis

• Working capital requirement

• Manager recommendation

Documentation:-Detail of bank guarantee, Financial position statement,

Financial highlight for 3 years, Personal information form, Income tax return,
Depreciation allowance, Form “k” & C.A report.

C. WEEK 3

RECOVERY AND AUCTION

If first installment is not recovered at that time recovery process start. Where 90 days
completed at that time this a/c known as NPA and legal procedure start.

Recovery made as per Maharashtra state sahkari law

❖ For specific period of time loan is given, if the instalment not recovered on
specific date then such called overdue.

❖ In case of cash credit if rate of interest not recovered and stock statement not
received every month at that time it’s called overdue.

Precaution should be taken care at the time of recovery:-

❖ Normal communication with borrower

❖ Provide reminder to borrower before 2 nd instalment

❖ Wait for 2nd instalment

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 ❖ After reminder also if borrower not paid 2nd instalment then 2 nd letter from
bank should be send

❖ Then finally send notice from court.

Legal procedure:-

After completing 90 days one legal notice send by court. It may be possible legal notice
should be before 90 days.

• (Sec91) for the borrower who is death.

• (Sec101) for the borrower who is alive.

Bank has to submit each and every document. After accepting by ragistar.the demand
note will be send to borrower. Demand note duration is 30 days. At the time of sending
demand note should also include interest and penal interest.

At the time of completing the demand note period, court sends possession notice.

For auction bank should give advertisement on 2 newspaper one regional language and
one in English. For call tender from public. By the advertisement everyone know about
auction and interested candidate who want purchase these asset can send tender.
Interested candidate have to send tender with 25% of asset by cash, DD, cheque with
tender.

After that on specific date all bidder who send tender are invited and bank
declared about the bidder who win the bidding or sometimes bank are ask to raise more
bidding for property then bank give tender to the person eho bid more then others.

The bidder has to submit all amount of property within 1 month. After cash
received sale certificate issue. By selling asset bank recover due amount and balance
will be give to the borrower.

Standard asset:- standard asset are those which paying regular interest and installment.
Account is regular in nature. There is no need to make any provision. But as per RBI
for standard asset 10% provision should be made from bank profit.

Page | 33
Sub standard asset:- Sub-standard asset is an asset class drawn within the broader and
much-known non-performance asset category of banks on the basis of term for which
the asset class has not performed and extent of dues realization from collateral security
with banks. In general, NPAs are the assets that have ceased to generate income for the
banks. Further, on the basis of some other criterion stipulated for different kind of
accounts, assets of the bank are classified as NPAs. More specifically, according to RBI
circular, sub-standard asset is an asset that has continued to remain an NPA for a period
less than or equal to 1 year.

Doubtful asset:- Doubtful asset are those whose interest is not received. bank has to
make provision for these asset from bank profit.doubtful asset means the asset which
irregular or completely not paid interest.

Key learning :-NPA

Standard, sub standard, doubtful asset

Concept of overdue.

NPA

• Standard assets :- An assets which is generating regular income to the bank.

• Sub-standard assets :- An asset which is overdue for a period of more than 90

days but less than 12 months.

• Doubtful assets :- An asset which is overdue for a period of more than 12

months.

Loss assets: - Assets which are doubtful and considered as non-recoverable by bank,
internal or external auditor or central bank inspectors
Sub-standard assets, Doubtful assets and Loss assets are NPA.
Causes

Default: - One of the main reason behind NPA is default by borrowers.

Economic conditions:- Economic condition of a region effected by natural calamities

or any other reason may cause NPA.

Page | 34
No more proper risk management - Speculation is one of the major reason reason
behind default. Sometimes banks provide loans to borrowers with bad credit history.
There is high probability of default in these cases.

Miss-management - Often ill-minded borrowers bribe bank officials to get loans with
an intention of default.

Diversion of funds - Many times borrowers divert the borrowed funds to purposes other
than mentioned in loan documents. It is very hard to recover from these kind of
borrowers.

In case you have any query or you want to add anything then comment below. If I find
any comment is adding value to the post then I will add that comment to the post.

AUCTION PROCESS

a) National bank - securitization act notice 60days demand if not paid attached
proper possession then auction after 2month immovable symbolic property or
possession firstly valuate the property.

b) Before 1 month in news paper tender price DD

c) 25% same day 75% amount in 1 month

d) Debt recovery tribunal

e) 2002 auction act

f) Securitization and reconstruction of financial assets and enforcement of

securities interest act 2002

D. WEEK 4

ACCOUNT DEPARTMENT

Page | 35
1) INVESTMENTS:

• Total investment of a co-operative bank in the shares of co-operative

institution, shall not exceed 2% of its owned funds(paid up share capital
and reserves).

• The investment of a bank in the shares of any one co-operative shall not
exceed 5% of the subscribed capital of that institution.

2) SLR and Non-SLR Investments:

SLR INVESTMENTS

As part of prudential guidelines, central banks require lenders to maintain a

portion of their deposits in liquid assets. These liquid assets can be cash, gold
or government securities. The ratio of prescribed liquid investments to deposits
is termed as statutory liquidity ratio. In India, banks invest in bonds issued by
the government and notified by the Reserve Bank of India as qualifying for SLR
to meet the prescribed ratio. Currently, the prescribed statutory liquidity ratio
for banks is 25% of their deposits. SLR is occasionally used as monetary policy
tool and the stipulation is made by authorities, keeping in mind the monetary
policy objectives.

NON-SLR INVESTMENTS

Besides giving loans to businesses and individuals, RBI has also allowed banks
to invest in various capital market instruments such as stocks and bonds issued
by public and private sector companies and commercial papers. In addition,
banks are also allowed to invest in various mutual fund schemes. Unlike SLR
investments, there is no compulsion on banks to invest in these instruments.
Investments are entirely guided by commercial considerations and many such
investments are in accordance with the prescribed guidelines.

DIFFERENCE BETWEEN SLR AND NON-SLR INVESTMENTS

Since SLR investments in bonds are issued by the government or its bodies,
these enjoy a sovereign protection, and hence, are perceived to be risk-free.

Page | 36
However, in case of non-SLR investments, the central bank attaches risk
weights, depending on the industry and the state of the perceived risk on that
sector as a prudential measure.

• Maintain liquid asset should not be less than 20% but not exceeding 40%
of total demand and liabilities.

• Co-operative bank has been reduced by 250 points from 25% to 22.50%
of their total demand & time liabilities.

• With affect from Feb. 7, 2015 the SLR of all UCB is 21.50% of NDTL.

• SLR in 3 forms i.e. cash, gold & approved securities were given time up
to March 31, 2015.

SLR, CRR, Bank Rate, Repo Rate, Reverse Repo Rate and MSF:

SLR- Statutory liquidity ratio (SLR) is the Indian government term for
reserve requirement that the commercial banks in India require to maintain in
the form of gold, government approved securities before providing credit to the
customers. Rate: 21.25%

CRR- Cash Reserve Ratio (CRR) is a specified minimum fraction of the total
deposits of customers, which commercial banks have to hold as reserves either
in cash or as deposits with the central bank. CRR is set according to the
guidelines of the central bank of a country. Rate: 4%

Bank Rate- Bank rate is the rate charged by the central bank for lending funds
to commercial banks. Bank rates influence lending rates of commercial banks.
Higher bank rate will translate to higher lending rates by the banks. In order to
curb liquidity, the central bank can resort to raising the bank rate and vice
versa. Rate: 9.3%-9.7%

Repo Rate- Repo rate is the rate at which the central bank of a country (Reserve
Bank of India in case of India) lends money to commercial banks in the event
of any shortfall of funds. Repo rate is used by monetary authorities to control
inflation. Rate: 6.5%

Page | 37
 Reverse Repo Rate- Reverse Repo rate is the short term borrowing rate at
which RBI borrows money from banks. The Reserve bank uses this tool when
it feels there is too much money floating in the banking system. An increase in
the reverse repo rate means that the banks will get a higher rate of interest from
RBI. Rate: 6%

MSF- Marginal Standing Facility is a new Liquidity Adjustment Facility

(LAF) window created by Reserve Bank of India in its credit policy of May
2011. MSF is the rate at which the banks are able to borrow overnight funds
from RBI against the approved government securities. Rate: 7%

OTHERS:

• In a dematerialized account with depositors (NSDL \CSDL\NSCCL) account

open with own name directly with the reserve bank or in with the reserve bank
or in a constituent SGL account opened with any scheduled commercial bank
/state co-operative bank / primary dealer or stock holding corporation of india
ltd.(SHCIL)

• All UCB are required to maintain investment in government securities only in

SGL account with reserve bank or in CSGL account with PD's scheduled
commercial bank, state co-operative bank, scheduled UCB with net worth
rs.200.00crore or more having CRAR of 10% of above are eligible to open &
maintain constituent.(CSGL)

• Bank should not undertake any transaction on behalf of (PMS) portfolio

management scheme clients in their fiduciary capacity, on behalf of other
clients, either as custodian of their investment or agent.

• The bank investment policy should be clearly define the authority to put through
deals procedures to followed for obtain sanction of the appropriate authority
putting through deals, fixing various exposure limits, and reporting system.

General Guidelines.

• UCB should not undertake any purchase /sale transaction with broking firms or
other intermediary on principal to principal basis.

Page | 38
 • No sale transaction should be through by bank without actually holding the
security in its investment account i.e. under no circumstances bank should hold
on oversold position in any security.

i. The purchase contract is confirmed prior to the sale

ii. The purchase contract is guaranteed by CCIL or security is contracted

for purchase form

• The sale transaction settles either in the same settlement cycle or as per the
preceding purchase contract or in a subsequent settlement cycle so that the
delivery obligation under sale contract is met by securities acquired under the
contract.

• Sale of government section allotted to successful bidders in primary issues on

the day of allotment with & between CSGL is permitted.

• For securities from the reserve bank open market operation, no sale transaction
should be contracted prior to receiving the confirm deal of allotment from the
reserve bank,

• Under the co-operative bidding facility in the auction of government of India

dated securities provided by rbi under the scheme bank may bid up to rs.2 crore
(face value).

Broker limit

• A disproportionate of the business should not be transacted through only one or

a few broker

• A limit of 5% of total transaction entered into by the banks during a year should
be treated as the upper contract limit.

E. WEEK 5

SERVICE TAX AND TDS

Service tax (15%)

Page | 39
This includes: 14%-Service Tax, 0.5% Swach Bharat Cess, 0.5% Krushi Kalyan Cess

Banks get the rebate on service tax (does not include cess) of 50%, when the pay the
total tax on the banks total income.

• Service Tax is not calculated on:

A. Interest of all type of loan

B. Penal interest (If any installment is not paid, then extra 2% interest is charged as a
penalty: i.e. Penal Interest)

C. Sale of forms

D. Sale of scrap

E. Profit on sale of security

F. Profit on sale of fixed asset

G. Interest earned on investment

H. Insurance

• Exchange & commercial:-

Discounting

• Charges fees :-

Charges for solvency certificate

• Entry to be passed :-

1. Dr. to concern account

2. Cr.to income account

3. Cr. to service tax payable account

4. Penal interest 2% (if due)

A. TDS

Page | 40
 For quick and efficient collection of taxes, the income-tax has incorporated a system of
deduction of law at point of generation of income. This system is called TDS (Tax
Deducted at Source).

- Collection of Revenue.
- Indirect method of collecting tax which combines the concepts of “pay as you
earn” and “collect as it is being earned”.

How is TDS Deducted?

Income and expenditure such as salary, lotteries, interests from banks, payment of
commissions, rent payment, payments to freelancers, etc. fall under the ambit of TDS.
When making payments under these segments, a percentage of the overall payment is
withheld by the source that is making the payments. This source, which can be a person
or an organization, is known as the Deductor. The person whose payment is getting
deducted is called the Deductee. For instance, a deductor is the employer paying salary
to an employee (the deductee).

Advantages of TDS:

TDS is based on the principle of ‘pay as and when you earn’. TDS is a win-win scenario
for both the taxpayers and the government. Tax is deducted when making payments
through cash, credit or cheque, which is then deposited with the central agencies.

● Responsibility sharing for deductor and tax collection agencies.

● Prevents tax evasion.
● Widens the tax collection base.
● Steady source of revenue for the government.
● Easier for a deducted as tax gets automatically collected and deposited to the credit
of the central government.

Types and Rates of TDS:

TDS is calculated on the basis of a threshold limit, which is the maximum level of
income after which TDS will be deducted from future income/payments. TDS is
deducted as a percentage of overall payment, and may range from 1% to 30% of actual
payable amount.

Major sections of the Income Tax Act that outline TDS deductions are:

Page | 41
IT Section TDS Rate Threshold limit*

Section According to
According to income slab
192 income slab

Section
10% of income from interests on securities. NIL
193

Section
10% of income from deemed dividends NIL
194

Section 10% of income from interests other than those on

Rs.5,000
194A securities

Section
30% of lottery or game-related winnings Rs.10,000
194B

Section
30% of income from horse racing Rs.5,000
194BB

1% of earning from contracts or sub contracts for

Section
individuals and HUF (Hindu Unified Families) 2% for Rs.30,000
194C
corporate

Section
10% of income from insurance commissions Rs.20,000
194D

Section
20% of payment in NSS deposits Rs.2,500
194EE

Page | 42
 Section 20% of payment made for repurchase of UTI or MF
NIL
194F units

Section
10% of commission earned from selling lottery tickets Rs.1,000
194G

Section
10% of commission or brokerage earnings Rs.5,000
194H

Section 2% of rent of plant and machinery 10% of rent of land,

Rs.1.8 lakhs
194I building, fitting, or furniture

Section
10% of fees for technical or professional services NIL
194J

Section 10% of compensation payment made to a resident when

Rs.1 lakh
194L acquisitioning some immovable property

*Threshold limit denotes the amount of income/profit up to which TDS will not be
deducted. TDS will be calculated on value of income up and over threshold limit only.

TDS on income from salaries. are deducted on an estimation made at the start of the
financial year. The employer is responsible for deducting taxes every month in equal
instalments. In case the deductee has switched jobs during the fiscal year, the employer
will deduct taxes on the basis of all accrued income in the fiscal year. Deductees should
be very careful when mentioning their overall income as tax avoidance will be penalised
by relevant authorities.

• For quick and efficient collection of taxes, the income tax law has incorporated
a system if deduction of tax at the point of generation of income. this system is
called "tax deducted at source" commonly know tax.

Page | 43
 • Tax deducted at source (TDS),as the very name imples aims at collection of
revenue at the very source of income.

• It is essentially as indirect method of collecting tax whichcombine the concept

of "pay as you earn" and "collect as it is being earned".

• The concept of TDS requires that the person on whom responsibility has been
cast, is to deduct tax at the appropriate rate, from payments of specific nature
which are being made to a specified recepient.

• The provision of tax deducted at source presently apply to several payments like
salary. interest, commission,brokrage,professional fees, rayalty,etc. in this part
we would be following TDS on interest on deposits.

F. WEEK 6

SHARES AND AUDIT DEPARTMENT

Shares of cooperative bank do not do the trading of shares. The person who wants to
take loan have to mandatorily purchase the shares.

Holding of shares: Minimum holding – Rs1000

For loan of Rs 100000-Rs5000 shares

● These shares are not transferable. They are just withdrawn.

● Yearly dividend is paid on these shares.
● In AGM (Annual General Meeting), it is decided that how much % dividend is
to be paid to the shareholders.
● Face Value of these shares is constant.
● Shares include only Preference Shares.
● If bank suffer from any losses, it is not mandatory for the bank to give dividend.
But if the bank is in profit, then it becomes mandatory to pay the dividend.
● Shareholders share limit can be increased but it cannot be reduced.

AUDIT

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 Definition of Audit. -The concept of audit, however, has undergone
considerable change during the course of time and audit has now come to
mean “such a close and careful examination of the account books, documents
and other records of a business or other organization as shall enable the
auditor to satisfy himself whether or not the balance sheet and the profit and
loss account have been properly drawn up, so as to exhibit a true and fair view
of its financial operations.” An audit may, therefore, be described as a “critical
examination by an auditor, of the documentary and other evidence from which
the profit and loss and the balance sheet of an organization have been drawn
up, in order to enable him to report that they present a true and fair view of the
summarized transactions for the period under review and of the financial
position of the organization as at the end of the period.” From the above
definitions, it will appear that the auditor examines the evidence, mainly
consisting of account books, registers, vouchers, statements, minutes, etc. and
some times, he has to go even behind the books of account and inspect the
actual assets themselves and call for confirmations from clients. It has,
however, to be remembered that the examination of the accounts must be such
as to enable the auditor to report thereon.

Types of Audit:

Concurrent Audit: Concurrent audit is a systematic and timely examination of

financial transaction on a regular basis to ensure accuracy, authenticity, compliance
with procedures and guidelines.

-Statutory Audit: Statutory auditor refers to an external auditor whose appointment is

mandated by law. A "statutory audit" is a legally required review of the accuracy of a
company's or government's financial records. Government here indicates Reserve Bank
of India.

Internal Audit: Internal auditing is an independent, objective assurance and consulting

activity designed to add value and improve an organization's operations.

-Interim Audit: Interim Audit is an audit conducted during the fiscal year usually as a
means of minimizing the work and time involved in concluding the audit after the fiscal
year.

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NEFT and RTGS:

NEFT(National Electronic Fund Transfer): NEFT is a nation wide payment system

facilitating one-to-one funds transfer. Under this system, individuals, firms and
corporate can electronically transfer funds from any bank branch to any individual, firm
or corporate having an account with any other bank branch in the country participating
in the system.

RTGS (Real Time Gross Settlement): RTGS can be defined as “the continous (real-
time) settlement of funds transfers individually on an order by order basis(without
netting)”. These are specialist funds transfer systems where the transfer of money or
securities takes place from one bank to another on a "real time" and on a "gross" basis.
Here the words ‘Real Time’ refers to the process of instruction that are execueted at
the time they are received, rather than at some later time. On the other hand, ‘Gross
Settlement’ means the settlement of funds transfer instruction occurs individually. The
settlement of funds actually takes place in the books of RBI and thus payments are
considered final and irrevocable.

RTGS NEFT
Minimum Amount Rs. 2 lakhs No minimum limit
Maximum Amount No upper ceiling No upper ceiling
(However, maximum amount per transaction is limited to Rs50000/- for cash-
based remittances.)

Processing/ Services Charges:

RTGS

▪ Inward Transactions : Free, nocharge to be levied;

▪ Outward Transaction: Rs 2 lakh to 5 lakh- Not exceeding Ra 30/ per transaction;

Above Rs 5 lakh not exceeding Rs55/- transactions.

NEFT

▪ Inward transactions at destination bank branches (for credit to beneficiary

accounts) – Free, no charges to be levied from benificiaries

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 ▪ Outward transactions at originating bank branches- charges applicable for the
remitter

1. For transactions up to Rs10, 000: not exceeding Rs 2.50(+Service Tax)

2. for transactions above Rs10, 000 up to Rs 1 lakh: not exceeding Rs 5(+Service Tax)

3. for transactions above Rs1 lakh and up to Rs 1 lakh: not exceeding Rs 15(+Service
Tax)

4. For transactions above Rs2 lakh: not exceeding Rs 25(+Service Tax)

G. WEEK 7

POLICIES AND BRANCH VISIT:

Policies:-

● Principal Accounting Policy:

(A) –General policy: Preparation of financial statements by going concern
concept on historical cost convention under accrual system.
(B) Investment Policy: Category and Classification-

Category:

1.HTM: Held Till Maturity

2. HFT: Held For Trading

3. AFS: Available For Sale

Classification:

Government securities, other approved securities, shares, debentures and

bonds, subsidiaries/ joint ventures, others(commercial papers, mutual funds,
units, etc)

B) ALM policy (Asset Liability Management)

1. ALM Information System: Availability of data related to asset and

liability. Accuracy and timeliness in generating information.

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 2. ALM Organization: Structure and responsibility. Top management is
involved.

3. ALM Process: Risk parameters, identification, measurement,

management, policies and procedures, prudential limits and auditing
reporting.

“BRANCH”

CREDIT APPRAISAL

● Main Functions of bank:

1. Accepting Deposits and pay on Demand.
2. Extend Credit (Lending Loans)
● When giving loan or credit appraisal, things to be checked:
1. Person (Character, Capacity, Capital, Collateral Securities, Condition)
2. Prospects (Income)
3. Purpose
4. Profitability
o Personal Information
o Income Details
o Documentation
o Property Details

After verifiying all the above things loan is given by the bank.

-Broad requirements of bankers:

Safety and Profitability
-Main Source:
Interest received on Loan And Advances.
-While apprasing the credit work, calculated risk is taken as the money which
bank has is of public. Neither high nor low risk is taken.

Product and service offered by branch

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 • Products :-

i. Saving account: A savings account is an account provided by a bank for

individuals to save money and earn interest on the cash held in the account. A
savings account can be used to save money for specific expenses or for longer-term
undefined goals, all while earning interest on the money in the account.

ii. Current account: In current account amount can be deposited and withdrawn at
anytime without giving any notice. It is also suitable for making creditors by using
cheques. Cheques received from customer can be deposited in this account for
collection.

iii. Cash credit facility: Cash credit is a type of short term loan provided to
companies to fulfill their working capital requirement. Overdraft is a facility given
by the bank to companies, to withdraw money "more" than the balance available in
their respective accounts. Security. Pledge or hypothecation of inventory.

iv. Overdraft facility: An overdraft is an extension of credit from a lending

institution when an account reaches zero. An overdraft allows the individual to
continue withdrawing money even if the account has no funds in it or not enough
to cover the withdrawal.

v. Pigmy deposit: Pigmy Deposit Scheme is a monetary deposit scheme introduced

by Syndicate Bank, India. Money can be deposited into an account on daily basis.
The amount may be as small as Rupees five. It can be called a
recurring deposit scheme, as the money is deposited almost daily.

vi. Recurring deposit: Recurring Deposit is a special kind of Term Deposit offered
by banks in India which help people with regular incomes to deposit a fixed amount
every month into theirRecurring Deposit account and earn interest at the rate
applicable to FixedDeposits.

vii.Long term loan: A loan for equipment, real estate and working capital that's paid
off like a mortgage for between one year and ten years . Term loans are your basic
vanilla commercial loan. They typically carry fixed interest rates, and monthly or
quarterly repayment schedules and include a set maturity date.

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viii.Short term loan: A loan scheduled to be repaid in less than a year . When your
business doesn't qualify for a line of credit from a bank, you might still have success
in obtaining money from then in the form of a one-time, short-term loan (less than
a year) to finance your temporary working capital needs.

ix. Different types of scheme

x. Fixed deposit: A fixed deposit (FD) is a financial instrument provided by banks

which provides investors with a higher rate of interest than a regular savings
account, until the given maturity date. It may or may not require the creation of a
separate account.

• Services offered:-

i. Safe deposit locker facility at extension counter

ii. Up gradation of extension counter

iii. ATMs

iv. Confidentiality

v. RTGS & NEFT

vi. Demand cheque

vii.ECS

viii.Internet banking

ix. Intra bank deposit portability

x. Debit card

xi. Online trading facility to demat account

xii.Credit card

Schemes :-

● SSB Aadhaar – This loan scheme of the Bank is based on micro financing.
Under this scheme, poor people, who do not have anything to offer as security,

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 would be given loan upto Rs.5000/- maximum. This loan can be availed of for
starting any small business. The interest on this loan would be charged @ 12 %
and its repayment period will be 1 year. A group of 5 needy persons would be
formed, each would be given loan while the other four would stand as
guarantors for him / her. Each of them will has to open a Saving A/c and a Daily
Deposit A/c with the Bank. Each will deposit Rs.25/- daily in his/her Daily
Deposit A/c. At the end of the month, amount equal to the monthly loan
installment would be transferred to his/her loan A/c while interest would be
given on the remaining amount. At the end of 12 months, total amount deposited
in the Daily Deposit A/c would be transferred to Saving A/c. This scheme is a
novel concept among the cooperative Banks of Vidarbha and has been
introduced for a twofold noble cause, one it will give financial assistance to the
poor to stand on their own fee and two, it will inculcate in them the habit of
saving.
● SSB Swayamsiddha – It is a scheme for women self-help groups. A loan upto
Rs.5,00,000/- maximum can be granted to such groups for starting any small
scale business. The loan can be a overdraft, cash credit or a term loan as per the
requirement of the group. The rate of interest will be 12 % and the repayment
period will be 12 months. This will be a secured loan and hence, the group will
have to offer security for the loan. The group will be collectively responsible
for the repayment of the loan. Similarly, two guarantors other than the members
of the group will be required.
● SSB Sahyog – It is a short-term loan scheme for our pigmy depositors available
for purchasing goods, material, etc. Under this scheme it is necessary that the
account holder opens pigmy deposit account of one year and after completion
of operations of three months of deposit in pigmy deposit account, the
depositor’s request for loan may be considered. The rate of interest will be 12
% p.a. The maximum amount of loan that can be sanctioned is four times of the
balance of pigmy deposit account at the end of three months period or maximum
Rs.50000/- whichever is less. The repayment period will be maximum 9
months. Two guarantors including one pigmy agent needed.
● SSB Suvidha – SSB Suvidha is an educational loan scheme, under which
finance is available for higher studies either in India or abroad. A loan of
Rs.20.00 lacs maximum can be availed of for studies in India and for studies

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 abroad Rs.25.00 lacs maximum can be availed of. Very few and simple terms
and conditions have to be fulfilled for availing this loan. In addition to this, the
mode of repayment is also very convenient. Repayment of the loan is to be
made through equated monthly installments. If moratorium period is
considered then on completion of course additional 6 months or additional 3
months on securing job, whichever is earlier, will be available for repayment.
The above facilities and less documentation have made SSB Suvidha a good
option for those aspiring to study further.
● SSB Sathi – It is a loan scheme for pensioners. Loan can be sanctioned for
meeting domestic or recurring expenses under this scheme. The maximum loan
amount that can be sanctioned under this scheme is four times of the monthly
pension or four times of average pension of last six months whichever is less.
The rate of interest is 15 % p.a. Loan is to be repaid within maximum 24
months. Atleast two guarantors required one of which would be a legal heir of
the borrower.
● SSB Sarthi – It is an overdraft scheme for salary earners, who are having salary
accounts with our bank. The permissible overdraft amount is four times of net
monthly salary or four times of net average salary of last six months whichever
is less. However, the amount should not exceed the maximum limit of
Rs.50000/-. The rate of interest will be 15 % p.a. Atleast one guarantor
required.
● SSB Bhuswami – It is a term loan scheme for purchase of residential /
residential-cum-commercial plots. Loan available for purchase of maximum
four plots, subject to maximum loan amount of Rs.25.00 lacs per beneficiary.
The rate of interest will be 14 to 14.50 %. The margin will be 30 %. For security
plots purchased will be registered mortgaged. No additional / collateral security
required.
● SSB Sobati – It is a loan scheme for the existing borrowers. Under this scheme,
small commercial loans would be granted to Bank’s good, existing borrowers.
A maximum amount of Rs.5.00 lacs can be granted under this scheme. The
margin will be 25 %. The tenure of loan will be 5 years and only one guarantor
with sufficient net worth required.

• Types of cheque:

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1) Open cheque: A cheque is called open when it is possible to get cash over the counter
at the bank. The holder of an open cheque can receive payment over the counter at the
bank, deposit the cheque in his own account or pass it to someone else by signing on
the back of a cheque.

2) Bearer cheque: A cheque which is payable to any person who presents it for payment
at the bank counter is called ‘Bearer cheque’. A bearer cheque can be transferred by
mere delivery and requires no endorsement.

3) Order cheque: It is the one which is payable to a particular person. In such a cheque
the word ‘bearer’ may be cut out or cancelled and the word ‘order’ may be written. The
payee can transfer an order cheque to someone else by signing his or her name on the
back of it.
4) Crossed cheque: When a cheque is crossed, the holder cannot encash it at the counter
of the bank. The payment of such cheque is only credited to the bank account of the
payee. Crossed cheque is done by drawing two parallel lines across top left corner of
the cheque, with or without writing ‘Account payee’ in the space between the lines.

Banks also offer various cheques which guarantee payments.

5) Self cheque: Self Cheque is written by the account holder as pay self to receive
money in physical form from the branch where he holds his account. This can be
alternated by using an ATM card.

6)Post-dated cheque (PDC): A PDC is a form of a crossed or account payee bearer

cheque but post-dated to meet the said financial payment at a future date. The cheque
is valid from the date of issue to three months.

7) Banker’s cheque: A banker’s cheque is issued by a bank drawing money from its
own funds rather than that from an account holder’s. Banker’s cheque is issued after
the bank verifies the account status of the requestor and the amount is immediately
deducted from the customer’s account. A banker’s cheque cannot be dishonored as in
the case of a normal cheque, when an account holder has insufficient funds in his/her
account. Though different from a normal cheque it requires clearing too.

8)Traveller’s cheque:It is a printed open type cheque issued as an alternate for carrying
around cash while travelling abroad or on a vacation to a foreign country as they come

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with a replacement guarantee and lifelong validity. Traveler’s cheques are widely
accepted by merchants, restaurants and other recreational organizations. The unused
cheques from the recent trip can be used for your next trip.

CHEQUE CLEARING MECHANISM:

The clearing process Starts with the deposit of a cheque/other clearing instruments in
bank 1. The bank 1 arranges the cheques submitted to it for clearing bank wise and
presents it in the clearing house. Upon receipt of the cheques/other instruments, they
are passed for payment if the funds are available and the banker is satisfied about the
genuineness of the instrument. The said cheque/other clearing instruments is then
passed for payment to the beneficiary customer in bank.

In India, the clearing system is local and confined to a defined jurisdiction covering all
the banks and branches situated in the area under a particular zone. The clearing house
is a voluntary association of banks under the management of a bank where the
settlement accounts are maintained. Wherever Reserve Bank of India has its office (and
a banking department), the clearing house is managed by it. In the absence of an office
of the Reserve Bank, the clearing house is managed by the State Bank of India, its
associate banks and in a few cases by public sector banks.

In India there are about 1050 cheques clearing houses. These clearing houses clear and
settle transactions relating to various types of paper based instruments like cheques,
drafts, payment orders, interest / dividend warrants, etc. In 40 of these clearing houses,
cheque processing centers (CPCs) using MICR (Magnetic Ink Character Recognition)
technology have been set up. At 14 more clearing houses, MICR cheque processing
systems are proposed to be set up. The Reserve Bank has issued the Uniform
Regulations and Rules for Bankers’ Clearing Houses (URRBCH) which have been
adopted by all the clearing houses. These regulations and rules relate to the criteria for
membership / sub-membership, withdrawal / removal / suspension from membership

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and the procedures for conducting of clearing as well as settlement of claims between
members.

The cheques that are unpaid are returned to the presenting bank through another
clearing called the Return Clearing.

Central Clearing House: The clearing house is a voluntary association of banks under
the management of a bank where the settlement accounts are maintained. Wherever
Reserve Bank of India has its office (and a banking department), the clearing house is
managed by it. In the absence of an office of the Reserve Bank, the clearing house is
managed by the State Bank of India, its associate banks and in a few cases by public
sector banks.

Settlement Bank: The aggregate amount or value of cheques presented by a bank 1 on

bank 2 represents the claim by that bank 1 on bank 2. Similar claims are made by all
the banks on every other bank in the clearing. A net settlement is arrived at the clearing
house and the debit or credit position of the bank is determined. These are booked in
their current accounts maintained by the settling bank.

A typical cheque is credit to the beneficiry’s bank account on the 3 working day, here
1st day would be the day of deposit of cheque, 2nd day clearing and 3rd day for
crediting the same.

FINDINGS:

1. To examine the trend and pattern of the sources and uses of funds.

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2. To analyze the efficiency in funds management.
3. Lack of use of technology.
4. To evaluate the management practices adopted.
5. Interference of Government and political issues.
6. Long procedure for approval of loan.

SUGGESTIONS:

1. Minimise and simplify the formalities to be followed by customers for getting

the loans sanctioned and for its disbursal.
2. Banks should manage their increased business professionally with utmost care,
so that profitability of these banks should increase in consonance with their
productivity.
3. Internal control systems, inspection and internal audit systems should be
strengthened and strongly implemented.
4. Need based computerization should be immediately introduced.
5. The agricultural sector as well as the industrial sector must be intensely
monitored by the urban cooperative banks and help those sectors by disbursing
the loans as per the direction of RBI, State and Central Governments without
any delay.
6. The innovative operations like computerization, online banking and net
banking must be organized by all the urban cooperative banks immediately to
pave the way for the customers for their easy bank dealing and this would help
both customers and bank staff to avoid the loss of valuable time.

CONCLUSION:

The urban cooperative sector has to face the twin challenges of meeting the
competition at the domestic level and at international level. The UCBs instead of
bowing to the challenges should bounce back and take up the challenges and utilize
the new opportunities. The stage is now set for all the stake holders of the urban
cooperative movement in India, that is the Government, policy makers, cooperators
and the supervisory authorities to undertake collective action for review and
recognize the activities of the century-old movement and record the achievements

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and failures during this long journey to make necessary alterations and strategies to
cope with the changing socio-economic, political and business environment.

APPENDIX

✔ http://www.shikshakbank.com
✔ http://indiancooperative.com
✔ http://timesofindia.indiatimes.com
✔ http://economictimes.indiatimes.com
✔ http://www.allbankingsolutions.com

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