PERFORMANCE EVALUATION OF K-427. COIMBATORE DISTRICT CENTRAL CO-OPERATIVE BANK LTD.

A PROJECT REPORT Submitted in Partial Fulfillment of the Course of

Higher Diploma in Co-operative Management

By K. S. NANDAKUMAR Deputy Registrar of Co-op. Societies May 2011 under the guidance of Dr. R. GOPALSAMY, Vice Principal

NATESAN INSTITUTE OF CO-OPERATIVE MANAGEMENT,

ANNA NAGAR, CHENNAI 600 040.

K.S. Nandakumar, Deputy Registrar of Co-op. Societies HDCM Correspondence I Batch DECLARATION I hereby declare that this project report entitled Performance Evaluation of K-427 The Coimbatore District Central Co-operative Bank Ltd., is bonafide record of work done by me during the course of project work and that it has not previously formed the basis for the award to me for any degree / diploma, associateship, fellowship, or other similar title of any other Institution.

Place : Chennai Candidate Date : 25.05.2011

Signature of the (K. S. NANDAKUMAR)

Dr. R. Gopalsamy, Vice Principal / Project Guide, Natesan Institute of Co-op. Management, Chennai

CERTIFICATE

Certified that this project report entitled Performance Evaluation of K-427 The Coimbatore District Central Co-operative Bank Ltd., is a record of project work done independently by Thiru. K.S. NANDAKUMAR, under my guidance and supervision and that it has not previously formed the basis for the award of any degree, fellowship, or associateship to him.

Place : Chennai Guide Date : 25.05.2011

Signature

of

the

ACKNOWLEDGEMENT
I wish to express my thanks to Dr. P. Jegannathan, Principal, Natesan Institute of Co-operative Management for providing me an opportunity to take up this study in partial fulfillment of the Higher Diploma in Co-operative Management course. I am also my extremely grateful to Dr. R. Gopalsamy, Vice Principal, Natesan Institute of Co-operative Management for his sincere interest and excellent guidance in the preparation of this project report. I would like to extend my sincere thanks to Thiru. I. Venkatesh, Faculty / Co-ordinator, Natesan Institute of Cooperative Management for his kindly help in completing this project. I also extend my heartiest thanks to Ms. R. Indhoomathi, Joint Registrar of Co-operative Societies/ Special Officer, Coimbatore District Central Co-operative Bank Ltd., and other staff members for their kind cooperation and necessary help to prepare this report.

Station: Chennai

Date

: 25.05.2011

(K.S. NANDAKUMAR)

CHAPTERISATION SCHEME The report begins with an Introduction and Design of the Study in Chapter I, which includes a brief history of the Cooperative credit movement in India, the need for credit, Coop. Banking structure and also includes objectives, methodology, period of study and methods of data collection and analysis. Chapter II details the profile of the bank including its objectives, area of operation, management, organizational structure, membership and share capital position. Chapter III details the business performance like sources of funds, deposits, borrowings, investments, outstanding position of loans, recovery performance, NPA management, profits earned, CRAR and CD Ratio analysis. Chapter IV includes findings of the study, suggestions and conclusion.

CONTENTS Chapt er I II Title Introduction and Design of Study Profile of The Coimbatore District III Central Co-op. Bank Ltd. Business performance of The Coimbatore District IV Central Co-op. Bank Ltd. Findings & Conclusion Bibliography 35 to 39 40 21 to 34 Page No. 7 to 13 14 to 20

CHAPTER I
7

INTRODUCTION AND DESIGN OF THE STUDY

Co-operation is the very basis of human civilization - Sir Horace Plunkett. This is the basic philosophy which made the pioneers to conceive the idea of cooperative way of living, because of the sufferings they had undergone to meet their requirements. The history of the cooperative movement of various countries confirms this basis and thus, the cooperative movement emerged and spread throughout the world.

DEFINITION OF CO-OPERATION

According to Mr. H. Calvert co-operation can be defined as a form of organization, wherein persons voluntarily associate together as human beings, on a basis of equality, for the promotion of the economic interests of themselves. CO-OPERATION A MIDDLE WAY The cooperative enterprises are distinct from public and private enterprises. The co-operatives took the advantages of the two enterprises and is a middle way. It is in fact a synthesis of capitalism and socialism, which are the basis for the private enterprises and public enterprises respectively. It is pertinent to quote the wordings of Mr. V.S. Bhide, the former Registrar of Cooperative Societies of Bombay State:

Co-operation

represents

happy

mean

between the forces of extreme individualism on the one hand and socialism and communism on the other. It stands for individual rights tempered by consideration of justice, equity and fair dealing as between man and man and its one great aim is to prevent the exploitation of the weaker by the stronger party.

COOPERATIVE PRINCIPLES
9

The cooperative principles are fundamental characteristic features which determine the character of co-operation as a form of association. They are the guidelines and ground rules for co-operative enterprises. These principles, in the words of ICA Commission are . Those practices which are essential, that is, absolutely indispensable to the achievement of the co-operative movements purpose. The Principles of Co-operation are as follows: Open and voluntary membership Democratic Member control Member Economic Participation Autonomy and Independence Education, Training and Information Co-operation among co-operatives Concern for Community

BRIEF

HISTORY

OF

THE

CO-OPERATIVE

CREDIT

MOVEMENT IN INDIA In India, the cooperative movement was planted,

brought up and being brought up by the Government. The idea of using co-operation as a means to solve the rural
10

problems, was first conceived by the Government of Madras. Sir Frederick Nicholson was sent to Europe to study the practice of agricultural banking and suggest suitable measures for adoption. During his tour in German, he was impressed by the functioning of the Raiffeisen type of village banks. His reports in two parts were published in 1885 and 1897 and his summarized conclusion was organization of rural credit society on the model started by Raiffeisen. He stressed that people of enthusiasm were needed to launch the movement make it a success. A committee appointed under the Chairmanship of Sir Edward Law suggested legislation for formation of the societies. On the basis of the recommendations, the cooperative societies Act of X of 1904, was passed. NEED FOR CREDIT About 70% of the people of our country depend on agriculture for their livelihood, moreover, agriculture is considered as the backbone of Indian economy. Agriculture is very often affected by drought, flood and other natural calamities; farmers have to borrow necessarily to meet their cultivation and other expenses. Therefore Institutional finance for farmers becomes inevitable.

11

CO-OPERATIVE BANKING STRUCTURE The Co-operative banking system in India has wide spread and elaborate organizational structure. organization, the co-operative banking Since short was term and long term credit cannot be supplied by the same system developed with two arms. The short term structure

extending production credit has PACCS at the grass root level, DCCBs at the district level and SCBs at the state level.

The Co-operative credit structure in the country is as follows: National Bank for Agricultural and Rural Development

State Apex Co-operative Banks ( 31 )

Central Co-operative Banks at the District Level ( 370 )

Primary Credit Society at the Village Level ( 92000 )

OBJECTIVES OF THE STUDY

12

To assess and evaluate the performance of the Bank To analyze the Membership position To analyze the deposit position
To study the loan performance of the Bank To study the recovery performance of the Bank To study the non-business activities of the Bank

METHODOLOGY Primary data for the study were collected by the unstructured schedule. The Secondary data for the study were collected from the Records of the Bank, Audit Reports, Balance Sheets, Annual Reports and Byelaws of the Bank.

PERIOD OF STUDY The data were collected for the last five years period starting from 2005-2006 to 2009-2010 and hence the period of study is 5 years.

DATA COLLECTION AND ANALYSIS

13

The data for the study were collected for five years and the membership, share capital, deposit collection, issue of various loans to members and recovery of loans performances are analyzed.

CHAPTER II
14

PROFILE OF THE COIMBATORE DISTRICT CENTRAL CO-OPERATIVE BANK LTD.

ORIGIN K.427 The Coimbatore District Central Co-operative Bank Ltd., No.80, Bank Road, (Opp. Railway Junction), Coimbatore 641018 is registered as a Co-operative Society under India Act X of 1904 Date of Registration
: 30.09.1910

Date of Commencement of Business : 16.10.1910 Registration Number RBI License issued on Branch Offices : K.427 : 06.04.2010 : 27 including Head Office

15

OBJECTIVES OF THE BANK Collection of funds for financing Co-op. societies

To develop, assist and coordinate the work of affiliated

supervising unions and secure for them financial help whenever necessary and to arrange for the supervision of societies not affiliated and for inspection of all societies and unions To arrange for holding periodical co-operative conferences and for taking necessary action on the resolutions passed at such conferences
To

carry on the general business of banking, not

repugnant to the provisions of the Tamil Nadu Co-op. Societies Act and the rules framed there under.
To undertake such other work as will promote the cause

of Co-operation. To encourage thrift and self-help and spread the principles of co-operation
To guarantee the deposits mobilized by the PAACS in

accordance regulations

with

the

provisions

contained time.

the

from

AREA OF OPERATION

16

Its area of operation extends to the entire Revenue district of Coimbatore and taluks of Tiruppur, Avinashi, Udumalaipettai and Madathukulam of Tiruppur district.

MANAGEMENT The Bank is managed by a Special Officer in the cadre of Joint Registrar of Co-operative Societies since there is no elected Board.

PRESENT ORGANISATION STRUCTURE

Special Officer

Chief General Manager

Chief Revenue Officer

General Manager

AGM Agricultural Credit

AGM Non Agricultural Credit

AGM Establishment

AGM Banking

AGM Development

CREDIT ACTIVITIES
17

The banks credit activities are of the following types: Production credit for Short Term Seasonal Agricultural operations where maximum due period is one year. These are of two types, Kisan Credit Card and

Agricultural Jewel Loan. The interest for these loans if repaid on time is paid by the Govt. Investment credit for agricultural and allied agricultural purposes like purchase of Milch animals, precision farming, drip irrigation etc
Cash credit to primary societies for Public Distribution

system, Non Agricultural Jewel Loans, Manures, Seeds etc.

Besides, it also issues direct loans to individuals through its branches like Jewel loan House Mortgage/Construction loan Consumer loan Loan on Deposits

18

Loan to Self Help Groups Loans through TABCEDCO and TAMCO Loans through NHFDC to differently abled persons Staff loans Loans to Petty Traders Joint Liability Groups Loans to Working women

MEMBERSHIP The bank was started by 20 members (approx.) in the year 1910 and the total membership, at present is 1067. The details of membership are given below:
TABLE 2.1 MEMBERSHIP DETAILS

Sl. No. 1 2 3 4 5 Year 2005-06 2006-07 2007-08 2008-09 2009-10 No. of Members 1056 1051 1051 1065 1067

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Membership Position
1070 Members 1065 1060 1055 1050 1045 1040 200506 200607 200708 Year 200809 200910 Series1

The

membership is gradually increased over the above five years period can easily be observed from the table and graph.

SHARE CAPITAL The Share Capital of the bank has been obtained in the following three ways: Members Share Capital Government Share Capital

TABLE 2.2 SHARE CAPITAL PERFORMANCE (Rs. in lakhs) Member Year Govt. Total s

20

2005-06 2006-07 2007-08 2008-09 2009-10

1690.01 217.10 1907.11 1865.75 217.10 2082.85 1935.98 217.10 2153.08 2018.17 177.10 2195.27 2278.10 117.10 2455.25

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CHAPTER III

BUSINESS PERFORMANCE OF COIMBATORE DISTRICT CENTRAL CO-OPERATIVE BANK LTD.

INTRODUCTION The Bank accepts deposits from the members and nonmembers and borrows money from Tamil Nadu State Apex Co-operative Bank Ltd and National Bank for Agriculture and Rural Development (NABARD) and lend them indirectly to farmers, purposes. employees and weavers through its member societies and also lends directly to individuals for useful

22

SOURCE OF FUNDS The source of funds required for the working capital for the last 5 years are furnished below:
TABLE 3.1 SOURCES OF FUNDS (Rs. In lakhs)
Sources Year r 200506 200607 200708 200809 200910 1690.01 1865.75 1935.98 2018.17 2278.10 Share Capital Membe Govt. 117.1 0 117.1 0 117.1 0 117.1 0 117.1 0 ICDP 100.0 0 100.0 0 100.0 0 60.00 60.00 Borrowings SCB 11968.60 7989.60 3862.15 3577.95 6332.31 NABAR D --3033 3373 4355 36637.3 4 38260.6 1 42944.8 7 49622.2 1 62423.3 7 Deposit Reserve s 13011.85 14782.04 15751.28 17911.55 17930.54 63524.90 63115.10 67744.38 76679.98 93496.42 Total

It is observed from the table that the Governments share capital has been constant and the share capital of ICDP has gone down. The bank has managed to raise the share capital of the members. The other sources for the working capital are the borrowings from Tamil Nadu State Apex Cooperative Bank and from NABARD and deposits from the members and non-members.

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DEPOSITS The Bank accepts deposits from the members and nonmembers and lends to others. The rate of interest to the deposits of the bank is as detailed below: 45 days to 90 days 91 days to 180 days 181 days to 364 days 555 days - 6.50 % - 7.50 % - 8.50 %

365 days and above - 9.50 % - 10.50 %

The bank has mobilized deposits as detailed below in the last five years :

TABLE 3.2 DEPOSIT POSITION (Rs. in lakhs) Year 200506 200607 200708 2008Saving s 46.70 59.35 60.88 62.81 Curre nt 16.76 19.94 23.31 17.93 Fixed 271.94 259.82 290.15 347.34 RD 18.58 20.98 21.43 23.81 Others 12.36 22.49 21.43 23.81 Total 366.37 382.60 429.44 496.22

24

09 200910

88.38

37.79

410.14

26.38

26.38

624.23

Deposit Position
450 400 350 300 250 200 150 100 50 0 2005- 2006- 2007- 2008- 200906 07 08 09 2010 Year

Amt. in Crore

Savings Current Fixed RD Others

LOW COST DEPOSITS The bank has mobilized low cost deposits like Savings Account, Recurring deposits and Current accounts as detailed below.
TABLE 3.3 LOW COST DEPOSIT POSITION (Rs. in lakhs) Year 2005SB 46.70 CA RD Total % to total deposits 22.59

16.76 18.58 82.04

25

06 200607 200708 200809 200910

59.35 60.88 62.81 88.38

19.94 20.98 100.27 23.31 21.43 105.62 17.93 23.81 104.55 37.79 26.38 152.55

26.20 24.59 21.06 24.43

The percentage of Low cost deposits to total deposits is hovering around 21 % to 26 %.

BORROWING The bank has made borrowings in the last five years as shown in the table below
TABLE 3.4 BORROWINGS POSITION (Rs. In lakhs) Year
2005-06

TNSC Bank
11968.60

NABARD
--

Total 11968.6

Increase/ decrease in % --

26

2006-07 2007-08 2008-09 2009-10

7989.60 3862.15 3577.95 6332.31

-3033 3373 4355

0 7989.60 6895.15 6950.95 10687.3 1

-33.24 % -13.69 % 0.80 % 53.75 %

Borrowings 12000 10000 Amt. in Lakh 8000 6000 4000 2000 0 2005-06 2006-07 2007-08 2008-09 2009-10 Year NABARD TNSC Bank

The bank

borrows only from two sources, TNSAC Bank and National Bank for Agriculture and Rural Development (NABARD), The borrowings have been made only from TNSC Bank during 2005-06 and 2006-07, but from 2007-08 it has more or less borrowed equally from TNSC and NABARD.

INVESTMENTS The bank has made investments in the last five years as detailed below :
TABLE 3.5 INVESTMENTS (Rs. in crores) 27

Year 200506 200607 200708 200809 200910

TNSC Bank 135.46 123.44 114.44 114.44 259.44

Governme nt 35.13 34.08 34.08 29.64 5.92

Trust Securitie s 9.75 4.75 4.65 14.40 9.00

Cooperative Institutions 2.26 2.30 2.30 2.30 2.30

Total 182.60 164.58 155.48 160.79 276.66

Investments 300 250 Amt. in Crore 200 150 100 50 0 200506 200607 200708 Year 200809 200910 TNSC Bank Government Trust Securities Co-operative Institutions

The investments made by the bank has increased from 182.60 crores in 2005-06 to 276.66 crores in 2009-10. But the investments in Govt. and securities has decreased and the bank has made more than 90 % of its investments in TNSC in 2009-10.

OUTSTANDING POSITION OF ALL LOANS

28

The loans outstanding details for the last 5 years is given below
TABLE 3.6 LOAN OUTSTANDING Year 2005-06 2006-07 2007-08 2008-09 2009-10 (Rs. in crores) Loans outstanding position Total Short term Medium term 255.46 133.11 388.57 253.09 143.83 396.92 379.95 115.25 495.21 397.46 186.67 584.12 464.20 212.88 677.09

Loan outstanding
500 450 400 350 300 250 200 150 100 50 0 200506 200607 200708 200809 200910

Rs. in crore

Loans outstanding position Short term Loans outstanding position M edium term

Year

The loan

29

outstanding position has gone up from 388.07 crores in 200506 to 677.09 crores in 2009-10.

RECOVERY PERFORMANCE

RECOVERY OF AGRICULTURE SHORT TERM LOANS Issuing loan is not a vital one but the recovery of issued loan is the prime importance to run a bank profitably. The issue of Short Term agriculture loans has gradually increased over the years. The recovery performance in the agriculture short term loans can easily be identified from the following table:
TABLE 3.7 RECOVERY PERFORMANCE IN AGRI. SHORT TERM LOANS (Rs. in lakhs) Year 200506 200607 200708 200809 2009Loan issue 27631.82 28897.02 38830.05 47084.40 53464.41 % of growth 8.88 4.58 34.37 21.25 13.55 Recovery 15388.16 20571.78 29790.41 42305.33 47583.32 % of recovery 55.69 71.19 76.72 89.85 89.00

30

10

Issu e & R eco very o f S T Ag ri L o an s

60000 Rs. in lakhs 50000 40000 30000 20000 10000 0 2005-06 2006-07 2007-08 2008-09 2009-10 Ye a r S eries 1 S eries 2

The recovery of short-term agriculture loan is generally going on smoothly. However, default occurs in repayment of the loan due to various reasons such as drought and willful default.
TABLE 3.8 OVERALL RECOVERY POSITION

31

Recovery position
100 90 80 70 60 50 40 30 20 10 0 200506 200607 200708 Year 200809 200910

Recovery in %

Agri. ST Agri. MT All loans

There has been a

steady increase in the recovery percentage especially in Agricultural production credit which forms bulk of all Short term loans issued by the bank through Primary Agricultural Co-op. Credit Societies. The massive jump in the recovery position of Short Term production credit from 26.92 % in 2006-07 to 71.22 % in 2007-08 can be attributed to the waiver package of the Central and State Governments as per the recommendations of the task force head by Prof. Vaidyanathan for the revival and restructuring of the Short term Co-operative credit structure.

NPA MANAGEMENT The NPA and the provisioning for the last five years is provided in the table below
TABLE 3.9 NPA POSITION

32

Year 200506 200607 200708 200809 200910

Total NPA (Rs. in Cr.) 88.59 52.15 45.66 100.39 63.65

Gross NPA % 22.80 13.14 9.22 17.19 9.40

Net NPA % 12.80 0.57 ----

Non Performing Assets

25 NPA in % 20 15 10 5 0 20 0506 20 0607 20 0708 Year 20 0809 20 0910 Gross NPA % Net NPA %

The percentage of Gross Non performing assets to total assets has come down drastically from 22.80 % in 2005-06 to 9.4 % in 2009-10, while Net NPA has come down from 12.8 % in 2005-06 to 0 % in 2009-10.
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TABLE 3.10 PROFIT & LOSS POSITION AND AUDIT CLASSIFICATION (Rs. Year 2005-06 2006-07 2007-08 2008-09 2009-10 in lakhs) Profit / Loss (+) 148.66 (+) 768.81 (+)1312.86 (+) 533.72 (+) 682.46 Dividend issued 7% 7% 12% 7% 8% Audit classification B B B B A

The bank has registered continuous profit from 2003-04 and has paid dividend to its members every year. The sudden jump in profit from Rs.768.81 lakhs to Rs.1312.86 lakhs can be attributed to the waiver package of the Central and State
Profit Earned
1400 1200 1000 800 600 400 200 0 2005- 2006- 2007- 2008- 200906 07 08 09 10 Year

Rs. in lakhs

Profit / Loss

34

The profit of the bank has seen a drastic increase in 200708 due to the waiver package announced by the Central and State Governments as per the recommendations of the task force head by Prof. Vaidyanathan for the revival and restructuring of the Short term Co-operative credit structure. CD RATIO and CRAR ANALYSIS The Credit to Deposits ratio and the Credit to Risk Weighted Assets Ratio of the bank is detailed below
TABLE 3.11 CD RATIO AND CRAR POSITION

Year 2005-06 2006-07 2007-08 2008-09 2009-10

CD Ratio 72.39 71.50 86.59 92.86 88.73

CRAR 8.45 10.18 10.53 10.32 10.03

CD Ratio & CRAR performance

100 Percentage 80 60 40 20 0 2005- 2006- 2007- 2008- 200906 07 08 09 10 Year Series1 Series2

35

The CD ratio has shown a consistent upward trend from 72.39 in 2005-06 to 92.86 and falling slightly to 88.73 in 2009-10. The CRAR has raised from 8.45 in 2005-06 and has been consistently hovering above the 10 percent mark from 2006-07 to till date.

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CHAPTER IV

FINDINGS AND SUGGESTIONS The Coimbatore District Central Co-operative Bank Ltd., is functioning in an effective manner so as to satisfy the needs of its members and non-members. However, the bank has to focus its attention in some areas of operation to improve its performance. The following findings on the bank are identified from this study:

37

The share capital from Government has been constant while that of ICDP has come down. The share capital from members has risen but not to the extent of rise in business The time deposits have seen appreciable growth but the percentage of low cost deposits like SB, RD and CA has been constant at around 22 to 24 % of the total deposits The borrowings were made only from TNSC Bank between 2005-06 and 2006-07 and from TNSC Bank and NABARD from 2007-08 onwards. Investments in TNSC Bank has nearly doubled in the last five years, whereas investments in other sectors account like for Government less that 5 and % Co-operative of the total institutions investments. Short Term Agricultural loans issue has nearly doubled in the last five years from 276.31 cr. to 534.64 cr. The recovery percentage has also improved from 55.69 % to 89 % in 2009-10. But the recovery of MT loans is below 50 %.
The targets set for achievement of deposits has

have come down and currently

not been reached in any of the last five years.

38

The gross NPA has decreased from 22.80 % in 2005-06 to 9.4 % in 2009-10, while Net NPA has come down to Nil which is appreciable. The CD Ratio has increased from 72.39 % to 88.73 % and CRAR from 8.45 % in 2005-06 to 10.03 % in 2009-10 which is appreciable.

SUGGESTIONS In order to improve the functions of the bank, the following suggestions are made on the basis of the findings of the study:
The bank has to take steps to increase the share

capital position.

from

members

as

well

as

deposit

The bank should show more interest in the non

fund business activities such as issue of DD and other transferable Insurance to instruments and sell Bajaj their as well as Life on promote the insurance products of IFFCO Tokio General an Allianz products Insurance with which the bank has entered into agreement commission basis.
The percentage of low cost deposits which is at

present around 20 % should be increased to

39

minimum of 40 % as stipulated by the RBI, so that the financial margin of the business turnover is increased.
The rate of interest for various loans should be

on par with the other commercial banks for healthy competition in loan activities. The loan procedures should also be simplified for speedy sanction of the loan and to satisfy the customers.
The bank should move towards Core Banking

Solutions system and connect all the branches, so that value added services like ATMs, Debit cards, Net banking and Tele banking facilities can be provided so as to attract new customers and retain existing customers.
The recovery of all types of loans especially Mid

term agricultural loans should be improved so that these assets dont become NPAs. The society should take steps to prevent the over due interests and pave the way for prompt recovery of loans.

CONCLUSION The performance evaluation of the Coimbatore District Central Co-operative Bank reveals that the performance of
40

the bank is going in a healthy road and it has to evolve new strategies to strengthen its business activities to compete with other commercial banks. In the same way, the fruits of co-operation should reach the baskets of each member.

BIBLIOGRAPHY 1. The Practice of Co-operative Banking - A. P. Sivasubramanian 2. Co-operative Credit and Banking - Kuddus and Kunsro

41

3. Annual reports of Coimbatore District Central Co-op. Bank Ltd 4. Audit reports of Coimbatore District Central Co-op. Bank Ltd. 5. Other relevant records and registers

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