CHAPTER-1

Introduction to Banking Industry

While walking in the streets of any town or city you might have seen some signboards on buildings with names-Canara Bank, Punjab National Bank, State Bank of India, United Commercial Bank, etc. What do these names stand for? Did you ever try to know about them? If you enter any such building you will find some kind of a business office. You will see some employees sitting behind counters dealing with visitors standing in front of them. You will find that some are depositing money at one counter while some are receiving money at another counter. Behind the counters in the office you will see tables and chairs occupied by officers. On one side of the office you will also see a chamber (small partitioned room) where the manager is sitting with papers on his table. This is the office of a Bank.

Bank, as we know people earn money to meet their day-to-day expenses on food,
clothing, education of children, housing, etc. They also need money to meet future expenses on marriage, higher education of children, house building and other social functions. These are heavy expenses, which can be met if some money is saved out of the present income. Saving of money is also necessary for old age and ill health when it may not be possible for people to work and earn their living. The necessity of saving money was felt by people even in olden days. They used to hoard money in their homes. With this practice, savings were available for use whenever needed, but it also involved the risk of loss by theft, robbery and other accidents. Thus, people were in need of a place where money could be saved safely and would be available when required. Banks are such places where people can deposit their savings with the assurance that they will be able to withdraw money from the deposits whenever required. People who wish to borrow money for business and other purposes can also get loans from the banks at reasonable rate of interest. Bank is a lawful organization, which accepts deposits that can be withdrawn on
1

demand. It also lends money to individuals and business houses that need it. Banks also render many other useful services like collection of bills, payment of foreign bills, safe-keeping of jewellery and other valuable items, certifying the credit-worthiness of business, and so on. Banks accept deposits from the general public as well as from the business community. Any one who saves money for future can deposit his savings in a bank. Businessmen have income from sales out of which they have to make payment for expenses. They can keep their earnings from sales safely deposited in banks to meet their expenses from time to time. Banks give two assurances to the depositors
a. Safety of deposit, and b. Withdrawal of deposit, whenever needed

On deposits, banks give interest, which adds to the original amount of deposit. It is a great incentive to the depositor. It promotes saving habits among the public. On the basis of deposits banks also grant loans and advances to farmers, traders and businessmen for productive purposes. Thereby banks contribute to the economic development of the country and well being of the people in general. Banks also charge interest on loans. The rate of interest is generally higher than the rate of interest allowed on deposits. Banks also charge fees for the various other services, which they render to the business community and public in general. Interest received on loan sand fees charged for services which exceed the interest allowed on deposits are the main sources of income for banks from which they meet their administrative expenses. The activities carried on by banks are called banking activity. Banking as an activity involves acceptance of deposits and lending or investment of money. It facilitates business activities by providing money and certain services that help in exchange of goods and services. Therefore, banking is an important auxiliary to trade. It not only provides money for the production of goods and services but also facilitates their exchange between the buyer and seller. As we may be aware that there are laws which regulate the banking activities in our country. Depositing money in banks and borrowing from banks are legal transactions.
2

Banks are also under the control of government. Hence they enjoy the trust and confidence of people. Also banks depend a great deal on public confidence. Without public confidence banks cannot survive.

History of Banking
Banking industry in India originated in the last decades of the 18th century. The oldest bank in existence in India is the State Bank of India, a government-owned bank that traces its origins back to June 1806 and that is the largest commercial bank in the country. Central banking is the responsibility of the Reserve Bank of India, which in 1935 formally took over these responsibilities from the then Imperial Bank of India, relegating it to commercial banking functions. After India's independence in 1947, the Reserve Bank was nationalized and given broader powers. In 1969 the government nationalized the 14 largest commercial banks; the government nationalized the six next largest in 1980 . Phase-1 The General Bank of India was set up in the year 1786. Next came Bank of Hindustan and Bengal Bank. The East India Company established Bank of Bengal (1809), Bank of Bombay (1840) and Bank of Madras (1843) as independent units and called it Presidency Banks. These three banks were amalgamated in 1920 and Imperial Bank of India was established which started as private shareholders banks, mostly Europeans shareholders. In 1865 Allahabad Bank was established and first time exclusively by Indians, Punjab National Bank Ltd. was set up in 1894 with headquarters at Lahore. Between 1906 and 1913, Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank, and Bank of Mysore were set up. Reserve Bank of India came in 1935. During the first phase the growth was very slow and banks also experienced periodic failures between 1913 and 1948. There were approximately 1100 banks, mostly small. To streamline the functioning and activities of commercial banks, the Government of India came up with The Banking Companies Act, 1949 which was later changed to Banking Regulation Act 1949 as per amending Act of 1965 (Act No. 23 of 1965). Reserve Bank of
3

India was vested with extensive powers for the supervision of banking in India as the Central Banking Authority. During those days public has lesser confidence in the banks. As an aftermath deposit mobilization was slow. Abreast of it the savings bank facility provided by the Postal department was comparatively safer. Moreover, funds were largely given to traders. Phase II Government took major steps in this Indian Banking Sector Reform after independence. In 1955, it nationalized Imperial Bank of India with extensive banking facilities on a large scale especially in rural and semi-urban areas. It formed State Bank of India to act as the principal agent of RBI and to handle banking transactions of the Union and State Governments all over the country. Seven banks forming subsidiary of State Bank of India was nationalized in 1960 on 19th July, 1969, major process of nationalizations was carried out. It was the effort of the then Prime Minister of India, Mrs. Indira Gandhi. 14 major commercial banks in the country was nationalised. Second phase of nationalisation Indian Banking Sector Reform was carried out in 1980 with seven more banks. This step brought 80% of the banking segment in India under Government ownership. The following are the steps taken by the Government of India to Regulate Banking Institutions in the Country:
y y y y y y y y

1949 : Enactment of Banking Regulation Act. 1955 : Nationalisation of State Bank of India. 1959 : Nationalisation of SBI subsidiaries. 1961 : Insurance cover extended to deposits. 1969 : Nationalisation of 14 major banks. 1971 : Creation of credit guarantee corporation. 1975 : Creation of regional rural banks. 1980 : Nationalisation of seven banks with deposits over 200 crore.

After the nationalisation of banks, the branches of the public sector bank India rose to approximately 800% in deposits and advances took a huge jump by 11,000%. Banking in the sunshine of Government ownership gave the public implicit faith and immense Phase III This phase has introduced many more products and facilities in the banking sector in its reforms measure. In 1991, under the chairmanship of M Narasimham, a committee was set up by his name which worked for the liberalisation of banking practices. The country is flooded with foreign banks and their ATM stations. Efforts are being put to give a satisfactory service to customers. Phone banking and net is introduced. The entire system became more convenient and swift. Time is given more importance than money. Currently, India has 88 scheduled commercial banks - 27 public sector banks (that is with the Government of India holding a stake), 31 private banks (these do not have government stake; they may be publicly listed and traded on stock exchanges) and 38 foreign banks. They have a combined network of over 53,000 branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency, the public sector banks hold over 75 percent of total assets of the banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively. With the growth in the Indian economy expected to be strong for quite some timeespecially in its services sector-the demand for banking services, especially retail banking, mortgages and investment services are expected to be strong. One may also expect M & As, takeovers, and asset sales. The growth in the Indian Banking Industry has been more qualitative than quantitative and it is expected to remain the same in the coming years. Based on the projections made in the "India Vision 2020" prepared by the Planning Commission and the Draft 10th Plan, the report forecasts that the pace of expansion in the balance-sheets of banks is likely to decelerate. The total assets of all scheduled commercial banks by end-March 2010 is confidence about the sustainability of these institutions.

estimated at Rs 40, 90, 000/- crores. That will comprise about 65 per cent of GDP at current market prices as compared to 67 per cent in 2002-03. Bank assets are expected to grow at an annual composite rate of 13.4 per cent during the rest of the decade as against the growth rate of 16.7 per cent that existed between 1994-95 and 2002-03. It is expected that there will be large additions to the capital base and reserves on the liability side. .

Banking Institution

Functioning of a Bank
Functioning of a Bank is among the more complicated of corporate operations. Since Banking involves dealing directly with money, governments in most countries regulate this sector rather stringently. In India, the regulation traditionally has been very strict and in the opinion of certain quarters, responsible for the present condition of banks, where NPAs are of a very high order. The process of financial reforms, which started in 1991 has cleared the cobwebs somewhat but a lot remains to be done. The multiplicity of policy and regulations that a Bank has to work with, makes its operations even more complicated, sometimes bordering on illogical. This section, which is also intended for banking professional, attempts to give an overview of the functions in as simple manner as possible. Banking Regulation Act of India, 1949 defines Banking as "accepting, for the purpose of lending or investment of deposits of money from the public, repayable on demand or otherwise and withdrawal by cheques, draft, order or otherwise." Deriving from this definition and viewed solely from the point of view of the customers, Banks essentially perform the following functions:
1. Accepting Deposits from public/others (Deposits) 2. Lending money to public (Loans) 3. Transferring money from one place to another (Remittances) 4. Acting as trustees 5. Keeping valuables in safe custody 6. Government business .

Banks are organized in a linear structure to performed these activities at the base of which lies a Branch. The corporate office of a bank is normally called Head Office.

Accepting deposits is one of the two major activities of the Banks

7

Banks are also called custodians of public money. Basically, the money is accepted as deposit for safe keeping. But since the Banks use this money to earn interest from people who need money, Banks share a part of this interest with the depositors. However, accepting deposits and keeping track of the money involves a lot of book-keeping and other operations. Let us see what the Banks must maintain to provide this service
y y y y y y

An effective branch network to reach the targeted customer base A system of Intra branch accounting with separate account(s) for each customer A system of reconciliation at the end of the day Availability of adequate funds at each branch Trained staff for effective customer service Infrastructural inputs like space, stationery, comfortable environment etc.

Lending money to the public Lending money is one of the two major activities of any Bank. In a way, the Bank acts as an intermediary between the people who have the money to lend and those who have the need for money to carry out business transactions. This activity places its own requirements on the resources of the Bank. For effective functioning of this, a bank must possess:
y y y y y y y

Sufficient deposits. Skills to appraise the potential borrowers and the activity. Legal skills for documentation. Legal skills for recovery of its dues through the courts. Skills to follow up and monitor the end-use of money lent by it. An effective credit delivery system. Review of credit portfolio.

Remittance Apart from accepting deposits and lending money, Banks also carry out, on behalf of their customers the act of transfer of money - both domestic and foreign.- from one place to another. This activity is known as "remittance business" . Banks issue Demand Drafts, Banker's Cheques, Money Orders etc. for transferring the money. Banks also have the facility of quick transfer of money also know as Telegraphic Transfer or Tele Cash Orders. To deliver this service, a Bank must have:
y y y y

An effective branch network or correspondent relationships. A system of Inter branch reconciliation A system of reconciliation with the correspondents Availability of funds at all the centers

Trustee Business Banks also act as trustees for various purposes. For example, whenever a company wishes to issue secured debentures, it has to appoint a financial intermediary as trustee who takes charge of the security for the debenture and looks after the interests of the debenture holders. Such entity necessarily have to have expertise in financial matters and also be of sufficient standing in the market/society to generate confidence in the minds of potential subscribers to the debenture. While Banks are the natural choice for the customers, Banks must possess the following to be effective and retain that:
y y y

A track record of sufficient length. Facilities for safe keeping. Legal skills to take necessary steps for the trusteeship

Safe Keeping Bankers are in the business of providing security to the money and valuables of the general public. While security of money is taken care of through offering various type of
9

deposit schemes, security of valuables is provided through making secured space available to general public for keeping these valuables. These spaces are available in the shape of LOCKERS. The latter are small compartments with dual locking facility built into strong cupboards. These are stored in the Bank's Strong Room and are fully secure. Lockers can neither be opened by the hirer or the Bank individually. Both must come together and use their respective keys to open the locker. To make this facility available to its customers, the Bank must provide:
y y y y

Physical structures to house the lockers Locker cabinets Security arrangements Record of access to lockers

Government Business Earlier Government business used to be exclusively carried out by Government Treasuries where all type of transactions took place. However, now Banks act on behalf of the Government to accept its tax and non tax receipts. Most of the Government disbursements like pension payments and tax refunds also take place through banks. While the Banks carry out this business for a fee to be paid by the Government, providing this service requires a lot of effort and organisation. The Banks must provide:
y y y y

Interface with the public Liaison with local government departments and government treasury Arrangement for reconciliation with the Government Accounts Department Necessary infrastructure, stationery etc. to cater to the numbers

Role of Banking
Banks provide funds for business as well as personal needs of individuals. They play a significant role in the economy of a nation. Let us know about the role of banking.
y

It encourages savings habit amongst people and thereby makes funds available for productive use. 10

It acts as an intermediary between people having surplus money and those requiring money for various business activities.

It facilitates business transactions through receipts and payments by cheques instead of currency.

y y y

It provides loans and advances to businessmen for short term and long-term purposes. It also facilitates import export transactions. It helps in national development by providing credit to farmers, small-scale industries and self-employed people as well as to large business houses which lead to balanced economic development in the country.

It helps in raising the standard of living of people in general by providing loans for purchase of consumer durable goods, houses, automobiles, etc.

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Introduction to Cooperative Banks

Co-operative banks are small-sized units organised in the co-operative sector which operate both in urban and non-urban centers. In India, co-operative banks finance small borrowers in industrial and trade sectors, besides professional and salary classes. Cooperative banks perform the main banking functions of deposit mobilisation, supply of credit and provision of remittance facilities. They provide limited banking products and are specialists in agriculture-related products. Co-operative banks are regulated by the Reserve Bank of India and governed by the Banking Regulations Act, 1949, and Banking Laws (Co-operative Societies) Act, 1965. Rural co-operative banks are regulated by state registrar of co-operatives. The sources of funds for co-operative banks are: central and state government, Reserve Bank of India and NABARD, other co-operative institutions, ownership funds and deposits or debenture issues. Intra-sect oral flows of funds are much greater in cooperative banking than in commercial banking. Inter-bank deposits, borrowings and credit also form a significant part of assets and liabilities of co-operative banks

Features of Cooperative Banks

y

Co-operative Banks are organised and managed on the principal of co-operation, selfhelp, and mutual help. They function with the rule 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 maximisation.

Co-operative bank performs all the main banking functions 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.

UCBs

provide

working

capital

loans

and

term

loan

as

well

The State Co-operative Banks (SCBs), Central Co-operative Banks (CCBs) and Urban Cooperative Banks (UCBs) can normally extend housing loans upto Rs 1 lakh to an 12

individual. The scheduled UCBs, however, can lend upto Rs 3 lakh for housing purposes. The UCBs can provide advances against shares and debentures also.
y

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. The urban and non-agricultural business of these banks has grown over the years. The co-operative banks demonstrate a shift from rural to urban, while the commercial banks, from urban to rural.

Co-operative banks are perhaps the first government sponsored, governmentsupported, and government-subsidized financial agency in India. They get financial and other help from the Reserve Bank of India NABARD, central government and state governments. They constitute the "most favored" banking sector with risk of nationalization. For commercial banks, the Reserve Bank of India is lender of last

Cooperative Movement in India . A Historical Perspective

The Indian cooperative movement, like its counterparts in other countries of the world has been essentially a child of distress. Based on the recommendations of Sir Frederick Nicholson (1899) and Sir Edward Law (1901), the Cooperative Credit Societies Act was passed in 1904, paving the way for the establishment of cooperative credit societies in rural and urban areas on the patterns of .Raiffeisen. and Schulze Delitzch. respectively. The Cooperative Societies Act of 1912 recognized the formation of non-credit societies and the central cooperative organizations/federations. The state patronage to the

cooperative movement continued even after 1947, the year in which India attained freedom. The independent India accepted the concept of planned economy and

cooperative organizations were assigned an important role. The policy of the Government towards the cooperative movement was guided by the recommendations of the
13

Saraiya

Committee

The Rural Credit Survey Committee (1954), the first comprehensive enquiry into problems of rural credit, after a detailed examination of the entire gamut of issues including the social ethos of rural society, summed up its findings in the celebrated dictum that .cooperation has failed, but cooperation must succeed.. Since 1950s, the cooperatives in India have made remarkable progress in the various segments of Indian economy. During the last century, the cooperative movement has entered several sectors like credit, banking, production, processing,

distribution/marketing, housing, warehousing, irrigation, transport, textiles and even industries. In fact, dairy and sugar cooperatives have made India a major nation in the world with regard to milk and sugar production. Today, India can claim to have the largest network of cooperatives in the world numbering more than half a million, with a membership of more than 200 million. Of the primary (village) level cooperatives, around 28 percent with 137 million memberships are agricultural cooperatives, dealing directly or indirectly with agricultural sector. The cooperative network in the country is rather

strong covering all the villages in the country and more than 67 percent of the households have been brought under the cooperative hold. Cooperatives supply about 46 percent of the total rural credit (including agricultural credit), account for 36 percent of the total distribution of fertilizers, produce about 55 percent of the total sugar and constitute for 28 percent of the rural fair shops (distributing consumer articles). Though cooperative movement has made remarkable progress in several areas, certain glaring defects have also developed in the movement, which have been, in a way, defeating the very objectives of these institutions. The following are the unique

features of Indian cooperative movement:1. Historically, Governments and policy makers have paid more attention to agricultural cooperatives and thus, the growth and development of the Indian cooperative movement is heavily tilted in favour agricultural cooperatives in general and in particular, credit cooperatives. In some areas like dairy, urban

14

banking and sugar, the cooperatives have achieved success to an extent but there are larger areas where they have not been so successful. 2. The cooperative credit movement in modern India, curiously, is a state initiated movement. The state partnership is, perhaps, the unique feature of the Indian cooperative movement. As of today, Government contribution to the share capital

of primary agricultural cooperatives accounts for about 7.5 percent of the total . 3. Paradoxically, the state partnership which was conceived as a measure for strengthening the cooperative institutions had paved the way for ever-increasing state control over cooperatives, their increasing officialization and politicization

culminating in virtually depriving the cooperatives of their vitality as well as their democratic and autonomous character. 4. Dormant membership, lack of active participation of the members in the management, lack of professionalism (and absence of corporate governance), undue political and bureaucratic intervention, have made majority of the

cooperatives at the primary level almost moribund.

Understandably, this has

resulted in weakening of the cooperative edifice. The upwardly transmission of the weaknesses of the primary societies have affected the capabilities of the higher level cooperative federations in so far as their usefulness to the former is concerned. 5. With regard to agricultural cooperative credit structure, although the quantitative expansion has been somewhat satisfactory, the movement continues to suffer from structural defects and operational deficiencies. The acknowledged

operational deficiencies of the cooperative credit structure have been (I) weak recycling of credit, (ii) poor resource mobilization, (iii) ineffective lending and (iv) poor recovery. 6. The agricultural credit cooperative system in general has become rather over dependent on external support in terms of participation in share capital by Government and refinance from Government owned Financial Institutions.

15

Cooperative Banking in India

Credit cooperatives are the oldest and most numerous of all the types of cooperatives in India. The cooperative credit institutions in the country may be broadly classified into urban credit cooperatives and rural credit cooperatives. There are about 2090 urban credit cooperatives and these societies together constitute for about 10 percent of the aggregate banking business and therefore regarded as an important segment of the banking system. The urban credit cooperatives are also popularly known as Urban Cooperative Banks. The rural credit cooperatives may be further divided into short-

term credit cooperatives and long-term credit cooperatives. With regard to short-term credit cooperatives, at the grass root level there are around 92,000 Primary Agricultural Credit Societies (PACS) dealing directly with the individual borrowers. At the central level (district level) District Central Cooperative Banks (DCCB) function as a link between primary societies and State Cooperative Apex Banks (SCB). It may be mentioned that DCCB and SCB are the federal cooperatives and thus the objective is to serve the member cooperatives. As against three-tier structure of short-term credit cooperatives, the long-term cooperative credit structure has two tiers in many states with Primary Cooperative Agriculture and Rural Development Banks (PCARDB) at the primary level and State Cooperative Agriculture and Rural Development Bank at the state level. However, some states in the

country have unitary structure with state level cooperative operating with through their own branches and in one state an integrated structure prevails. .

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Types of a Co-operative Bank

There are two types of co-operative banks in India. The first is the short term lending oriented Co-operative Banks. In this category there are again three sub categories of banks which are the State Co-operative banks, District Co-operative banks and the Primary Agricultural Co-operative societies. The second is the long term lending oriented Co-operative banks. In this second category there are land developments banks which are at three levels. First is the state level, the second is district level, and the third is the village level. Again the Co-operative banking structure in India is divided into five main categories and these categories are: 1. Primary Urban Co-operative Banks. 2. Primary Agricultural Credit Societies. 3. District Central Co-operative Banks. 4. State Co-operative Banks. 5. Land Development Banks. It is very much clear that co-operative banks have very much importance in national development. Without the help of co-operative banks, millions of people in India would be lacking the much needed financial support

17

Financial Sector Reforms and Credit Cooperatives:

The process of economic and financial sector reforms were initiated in 1991, as a step towards a broader process of international economic integration and globalization financial markets. The objectives of the reform program have been to remove the

structural constraints in the factor and product markets, allowing market forces to improve efficiency and ensuring outward orientation to the economy for bringing about a higher degree of integration of the Indian economy with the rest of the world. It may be mentioned that the structural reforms in the trade regime and industrial and financ ial policies have been given utmost priority in order to ensure macro-economic stability. A healthy financial system being the principal pre-requisite for the

globalization process, the banking sector being an important component thereof came into sharper focus. The financial system in India has built up a vast network of financial institutions and markets over time, and the sector is dominated by the banking sector which accounts for about two-thirds of the assets of the organized financial sector. The first phase .

current reform of the financial sector was initiated in 1992 based on the recommendations of the Committee on Financial System (CFS, 1992). The progress

that has been made in a substantial, yet non-disruptive manner has given the confidence to launch what has been described as the second generation or second phase of reforms especially for the banking sector. The report of the Committee on Banking Sector Reforms (CBSR, 1998) provides a framework for the second phase of reforms in

the banking system. The broad features of the on going banking reforms have bee n; gradual removal of pre-emptions (reduction in CRR and SLR), deregulation of interest rates, tightening competition and transparency, improving the quality of

prudential standards,

supervision, partial removal of selective credit controls, assistance to banks in debt recovery and reforms in money and forex markets. This apart, needless to

mention, the succinct objective of the banking sector reforms has been to improve the efficiency in the system by introducing an element of competition. The extension of reforms, particularly prudential standards
18

to

cooperative

banking

institutions,

an

important

component

of

the

banking

system

was

a natural corollary as the weaknesses in cooperative segment could pose systemic risks. Though cooperative banks operate at the district and state level, the urgency and importance for extension of the reforms need hardly be emphasized keeping in view of their reach and scale of operations. Therefore, the banking sector reforms could be treated as complete only if it encompasses the cooperative segment, enabling the latter to function on sound lines at

par with other banking institutions. Accordingly, prudential standards covering cap ital adequacy, income recognition, asset classification and provisioning norms were made applicable to cooperative banks in a phased manner. However,

cooperative reforms encompassing legal and administrative aspects have not taken place in India. This is on account of multiplicity of controls (administrative aspects including registration are under State Cooperative Acts whereas financial supervision and regulation is with the Central Bank of the country). The impact of the extension of prudential standards to cooperative banks has resulted in an increased intervention by the regulator and the Government in the name of the financial regulation/supervision.

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Thematic Framework for Analysis:

The literature relating to the economic reforms, impact of reforms on cooperative sector, banking reforms and its impact on credit cooperatives and so on are rather opulent. In so far as the impact of reforms on the cooperative character of the cooperatives i s concerned, be it in credit or non

credit segment, one may safely say that neither the policy makers nor the researchers have shown any serious interest. And this is

particularly true in India.

It seems the cooperative researchers, particularly doctor

al students are more concerned with the assessment and measurement of the impact of reforms on the performance of cooperatives using a definite and quantifiable parameters. While the difficulties in examining the impact of reforms on the cooperative character of cooperatives are quite understandable, it does not mean the same can not be attempted meaningfully. What is required perhaps is a normative analytical

framework, which is different from the one usually used for capturing the impact of reforms on cooperatives. Using this normative analytical framework, Ramesha (1996) in his empirical study points out that Self Help Groups (SHGs) which are not registered as cooperatives are, in practice, much more closer to cooperative principles than cooperatives themselves. Given the diversity that prevails today in the cooperative sector and the levels of reforms thereof, a general discussion on the impact of reforms (economic or banking sector) on cooperative character would be almost impossible. For the sake of research, even if one attempts, the conclusions could be abstruse. Thus, in the present paper an attempt is

made to evolve a conceptual framework for further research concerning Urban Cooperative Banks (UCBs) in India against the backdrop of banking sector reforms. However, all through the discussion, it is attempted to maintain a special thrust on the cooperative character of UCBs. The analytical framework for the aforesaid purpose rests on three basic assumptions; a) Banking sector reforms essentially refers to the guidelines/directions from the regulator (central bank of the country) and the Government during the last ten years.
20

b) Urban Cooperative Banks (falling under Banking Regulation Act of 1949) are more influenced by banking sector reforms in the short-run than other credit cooperatives. c) Cooperative character of urban cooperative banks can be captured in terms of the adherence to cooperative principles.

Urban Cooperative Banks in India

Inspired by the success of urban cooperative movement in Germany

and Italy, in theearly part of the last century, urban cooperative credit societies w ere organized on community basis and their lending operations were confined to meeting the consumption oriented credit needs of their members. Many urban

cooperative banks, which were organized initially, were essentially credit societies but later converted themselves into urban cooperative banks. Interestingly, many urban cooperative credit societies, which were not engaged in any banking functions, also used the word .bank. There was no well-defined concept of urban cooperative bank till 1996, when banking laws (provisions of section 5(CCV) of Banking Regulation Act 1949) were made applicable to cooperative banks. Accordingly, an urban cooperative bank was defined as a Primary Cooperative Bank other than a primary agricultural credit society; (i) the primary object of which is the transaction of banking business, (ii) the paid up share capital and reserves of which are not less than Rs.1 lakh (0.1 Mn) and (iii) the bylaws of which do not permit admission of any other cooperative society as a member. The word .primary. is used to denote that the urban cooperative banks perform the role of a primary unit in a 3-tier cooperative credit structure. Over a century old urban co-operative credit movement today, has a network of 2,084 urban cooperative banks with 7,368 branch outlets spread all over the country. The deposits and advances of urban cooperative banks constitute for about 9 and 8 percents of the aggregate deposits and advances of the banking system respectively. In so far as the growth and performance are concerned, it may be mentioned that the urban cooperative banks were a shade better than the scheduled commercial banks and public sector banks till 1999 (Ramesha K, 2001). However, it has to be recognized that the prudential standards and regulatory system prescribed for urban cooperative banks were relatively soft in comparison with those of commercial banks. This is partly on account of historical reasons and partly due to the preferential treatment of cooperative structure
21

in general. If one benchmarks the growth and performance of urban cooperative banks with that of the banking industry (which is dominated by public sector banks) after 2000 and onwards, then the scenario undergoes a complete change. For instance, between 2001 and 2002, although owned fund, deposits and advances of urban cooperative banks increased somewhat impressively, i.e., by 27, 15 and 14

percents respectively, the gross Non Performing Assets (NPAs % to total advances) during the same period The percentage of the profit making urban

went up from 16 to 22 percent (3).

cooperative banks to the total stood at 87 percent as at the end of March 31, 2002. On the whole, the performance of the urban cooperative banks particularly after 2000 has been on the decline, and a host of factors may be responsible for this which may include increasing competition, tightening prudential standards

and supervision and regulatory standards, multiple control, etc. Following are the features of urban cooperative credit banks in India. 1) Urban cooperative banks are registered under Cooperative Societies Act of the respective state Governments. The Reserve Bank of India (Central Bank of the country) is the regulatory and supervisory authority for UCBs for their banking

related operations.

Managerial/Administrative aspects of UCBs continue to remain

with the state Governments. The Union Government regulates the UCBs having multistate presence and such banks are registered under Multi-state Cooperative Societies Act. Controlling of UCBs by state Government and the Central Bank of the country is generally known as .duality of control.. 2) The discernible characteristic feature of UCB structure is its heterogeneity. Nearly 50 percent of the banks are unitary in nature (with single branch banking). Heterogeneity in their size is another facet of the UCB structure. The larger UCBs (scheduled UCBs) numbering just 51 accounts for more than 40 percent of the business from UCB sector as against 800 UCBs accounting for just 6 percent.

22

3) UCB structure is exemplified by its pronounced focus on the needs of small men and micro credit sector. The average size of the loan also works out to be

relatively low and an overwhelming segment of UCBs have been able to comply with the priority sector lending targets (directive from central bank to lend to certain sectors like small enterprises, trade & business, housing etc) set by the central bank of the country. 4) Urban cooperative credit movement in general, and the number of UCBs in particular is concentrated in few states. Five states account for 80 percent of the total UCBs in the country and one of them accounts for as high as 32 percent of the total UCBs. 5) A noticeable feature of urban banking sector is its financial independence. Unlike the agricultural cooperative credit structure, the urban cooperative banks In fact,

are not surviving on external assistance such as refinance support.

UCBs have been supporting federal units (District Central Cooperative Banks and State Cooperative Banks) by keeping their surplus resources in the form of deposits.

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Banking Sector Reforms and Urban Cooperative Banks:

The reform measures as applicable to UCB sector may be classified into three broad categories. First, while recognizing the differences between commercial and urban

cooperative banks, a majority of the prudential norms introduced for commercial banks are being extended to UCBs, albeit in a phased manner. Second, policy initiatives have been introduced (through Monetary & Credit Policies) to contain the systemic risk emanating from cooperative sector, in particular from UCB sector. Lastly,

duality/multiplicity of control has been recognized as an irritant to their effective regulation and supervision. Although, the focal point of the reforms has been prudential norms, steps are also being initiated to professionalize the management and manpower of UCBs. The influence of the reforms on the functioning as well as the cooperative

character of UCBs is discussed below. Prudential Standards: To begin with, in 1993, RBI introduced Income Recognition and Asset Classificati 1995, the prudential exposure norms to single/group borrowers were also made applicable to them. Subsequently, in a phased time frame, the capital

adequacy norms (capital to risk weighted asset ratio) were also made applicable to UCBs. While the promotion of prudent financial practices has become a sine quo non in the highly competitive (for globalize the financial health of

environment

safeguarding

the system, in particular of the UCB sector), it should not be forgotten that such standards were contrived essentially for commercial banks. Although, the notion of a code of good practices is intuitively appealing, the temptation to prescribe univers valid model codes which do not allow for differences in institutional development, legislative frame work and more broadly, different stages of development must be avoided. To put it differently, while there is no dispute that UCBs should be subjected to prudential standards (capital adequacy, asset classification, income recognition and provisioning norms), it is not yet clear, whether the prudential standards prescribed for commercial banks would work without distorting the cooperative character of UCBs.

24

For instance, capital is widely regarded as a measure of the risk taking ability of a financial intermediary and therefore, prescription of a minimum capital the urban cooperative bank (to conduct banking business) may seem to be justified from the viewpoint of ensuring stability in the financial system. If one looks at a cooperative credit society/bank, as a typical cooperative created on the basis self help and mutual help, then possibly the members (generally with limited means) may not be able to raise the required capital. If capital base is to be strengthened, as it is happening in India, these banks will have to start dealing with non-members (or nominal members) on a large scale and perhaps may have to shift from .surplus. to .profit..The need to increase the deposit base as also to gainfully employ the funds generated have made it necessary to have a large number of customers who are not the members. It is worth mentioning that in India, urban cooperative banks though on par with commercial banks with regard to prudential standards, like the latter, are not permitted to boost their capital base through sub-ordinate debts. Further, there are ceilings on the value individual share holdings have not been revised since long. Secondly, in order to ensure the adherence to the prudential standards by cooperative credit societies/banks, the regulators frequency (as also scope) of intervention increases thereby affecting the cooperative character. In this regard, in India regulators intervention has indirectly infringed upon the functional autonomy covering areas like share-linkage, credit, investment, deposit and so on. Thirdly, in the name of protecting the interests of the depositors (majority

of whom are not the members of cooperative banks), not only prudential standards are extended but even the professional content in

the management committee of the urban cooperative credit societies/banks is also stipulated in India by the regulator/Government. While one can not remain ignorant of the role of the Government in the promotion of and development of cooperation in India, prescribing the number and qualification of the nominee directors would no doubt impair the cooperative character. Fourthly, the strict entry norms in terms of minimum capital, membership prescription as it prevails in India, prevents the birth of new credit

25

cooperatives and constrain the existing societies in so far as the expansion is concerned. Fifthly, with the introduction of same prudential standards the difference

between urban credit cooperatives/banks and commercial banks get blurred and possibly, the former may have to progressively imbibe the character of the latter (identity crisis?). There could be several such dimensions as discussed above. Nonetheless, it appears that the benefits of the prudential standards to urban credit cooperatives/banks come at a cost. The cost, needless to mention, is the dilution in the cooperative

character (in terms of adherence to the principles). Professional Management and Governance: Good corporate governance is critical to efficient functioning of an entity and more so for a banking entity. Thus the need for professional management and healthy governance practices in urban credit cooperative societies/banks in the present competitive environment needs no emphasis. Thus, for managing a financial intermediary, whether a cooperative or a commercial bank (irrespective of its size), the human resource comprising of paid staff and elected management has to be highly competent. Th

framework for good governance and professional management in cooperative sector should essentially emanate from the guiding principles and the given legal framework in different countries/states. However, in India it is not uncommon that the cooperat

ive banks are superseded and Government officials are posted to head or nominated on the board and unfortunately this trend is increasing in the post reform period. Quite the reason quoted is that there is lack of qualified and competent directors and th e protection of depositors. interests (majority of them are not the members) in the case of urban cooperative banks. While this is to some extent true, the solution to this problem certainly is not Government intervention as it would seriously impair the cooperati ve character. It is disheartening to note that the elected management of 41 %

cooperative Banks, 37 % of State Cooperative Agricultural and Rural Development Banks, 21 % of the District Central Cooperative Banks and 8% of Primary Cooperative Agricultural and Rural Development Banks stood superseded as on March 2000. More

26

than 200 urban cooperative banks are identified as weak/sick banks by the regulator as at the end of March 2002. As per the prevailing act (and according to the cooperative philosophy/principles) any individual member can get himself/herself elected to the management committee of a cooperative bank. It is this management committee which is entrusted with the

responsibilities like risk management - policy/strategy, credit and NPA management, investment management, marketing plan/strategy, Asset-Liability Management and so on. It should also be noted that the very concept of banking (financial inter-mediation) is undergoing change in the present competitive environment and the conventional framework for management with which cooperative banks are comfortable may not be sufficient. Given this, it is doubtful whether the elected management (as per the existing provisions of cooperative act and principles the individuals without sufficient knowledge/experience in financial markets or management can be at the helm of affairs of a cooperative bank) would be able to take on the emerging challenges. Perhaps, the need of the hour is to ensure that in cooperative organizations, the system of governance including the size and composition of the board of directors (or elected management) is driven by the purpose and objectives of the business. In this regard, the following issues/areas may be of some interest to the cooperative researchers. Supervision and Regulation: At present in India, urban credit cooperatives/banks are subjected to duality of control, meaning that the administration related aspects are being supervised and regulated by State Government and the banking operations are supervised and regulated by the central bank of the country. This has, understandably resulted in overlapping jurisdiction of the state Government and the central bank of the country. Moreover, a clear-

cut demarcation of the financial and administrative areas for regulation is almost impossible and even if it is possible it surely acts as an impediment in effective supervision. While the central bank of the country has the wherewithal under the dealing with crucial aspects of functioning of commercial banks, in the case of co operative banks it requires the intervention of the Registrar of Cooperative Societi

27

es (state Government). Given the number of urban credit cooperatives/banks, the central bank of the country is not in a position to effectively supervising them. Thus, the duality of control not only affects the quality of supervision and regulations, but also the functioning of the urban cooperative banking sector. Needless to

mention, regime of duality of control the urban cooperative banks may turn out to be neither cooperative nor commercial banks. There are some areas

of concern, some of them may be good for research as well. While the progress of the cooperative movement in India in general, and the cooperative banking in particular has been rather appreciable, the movement can not be termed as a vibrant one in regard to cooperative values and philosophy as enunciated in cooperative principles. With regard to the extension of reforms to cooperative banking segment, it is yet not clear as to whether the same would ensure soundness and stability in the cooperative banking segment. Although the promotion of prudent financial practices in

urban cooperative banks has become a sine quo non in the present competitive environment, one can not afford to ignore that such practices were contrived essentially for commercial banks. It must not be forgotten that the notion of a code of go

od practices though intuitively appealing, the temptation to prescribe universally valid codes which do not allow for differences in institutional development, legislative framework and more broadly, different stages of development must be avoided. It

seems the extension of reforms/prudential standards to urban cooperative banking has provided substantial scope for the external intervention and in the process, affecting the cooperative character in terms of adherence to the cooperative principles. Logically, if the prudential standards, and supervision and regulation for cooperative banks were same as that of commercial banks, then there would not be any difference worth mentioning between these entities. There are several areas that need the intervention of researchers and perhaps, more important amongst them are prudential standards, professional management & governance and supervision & regulation. The framework for such research should essentially be within the guiding principles of cooperation . However, in the long run, if cooperative character of credit cooperatives is to b e preserved, the prudent practices, system of governance and supervision & regulation all

28

should emanate from the guiding principles of cooperation.

29

CHAPTER II INTRODUCTION TO THE AMRITSAR CENTRAL COOPERATIVE BANK LIMITED

Expectation of the bank from the public for enhancing its effectiveness and Efficiency:The Bank expects that the general public should take maximum benefits of the services offered by it. The bank expects from the public that they should keep their surplus money in the shape of deposits with the Bank and take maximum benefits of various loan schemes of the Bank. The bank also expects that public should repay the loans taken by it timely so that the bank may be able to channelize the same. It will be in the interest of the public also. Arrangements and methods made for seeking public participation/contribution:The Bank has an elected Board of Directors which is the main governing body of the bank. District and State level Technical Committees are established to fix the scales of finance of various crops. Customer meets Annual General Body meeting, Annual Cooperative Week celebrations during the month of November every year. Mechanism available for monitoring the services delivery and public grievances resolution:-

30

The Bank is governed by an elected Board of Directors which regularly monitors the services delivery system. The Bank is regulated and inspected by Reserve Bank of India, NABARD and State Govt. There is a statutory audit system in the Bank by the Auditors, under the control of Chief Auditor, Cooperative Societies, Punjab. To properly handle the public grievances/complaints, a separate Vigilance Cell has been created at the Head Office of the Bank.

Name of Departments
There are various sections / departments which are working in the Bank. Here we tell us about those departments / sections which play important role in Banking. We tell about his Head of Department, its functions & number of members working in the departments.

Functions of Various Departments

y y y y y y y y y y y y y

To maintain monthly statements etc; like as LIC, Income Tax, GSLI Grievance of public & branches. Yearly statements. Master policy of holder such as EDLT, GI, and House Loan. Statements of NABARD. House Loan To issue charge sheets of employees & maintain it. To maintain Misc. files. To maintain several records (with service book of employees) Transfer of employees. Increment concerned with employees. Pass T.A. D.A. bill of employees Salary of employees maintained.

Fuctions of Account Section

y y

The Misc. department reconciled the A/c of all the branches. That department issues the drafts of local, state level /aims. 31

y y y y y y y

Furniture fixture. This department keeps up the current A/C related with commercial bank. It helps to maintain sundry A/C. Maintain the current A/C with A.C.C.B. Passing the M.C.L. of societies. Sanctioned of cash credit limits of societies. Maintenance of receipt and dispatch register.

Number of Persons Working Under above Section

y y y y y

In this section number of persons working is ten. 1 Senior Manager 2 Manager 2 Assistant Manager 5 Clerks

Functions of Loan Department

y

Sanction all types of loans; like as Consumer Composite /integrated Vehicle Loan Computer loan only for staff member Sanction all types of limits; like as cash credit trader

Cash credit farmers Loan against property Rural godown Mini dairy Mai Bhago scheme

32

Renewal of cash credit limits. Physical verification done before sanctions the limits or Vehicle loan two wheeler, three wheeler, & S.R.T.O.
y

Maintain statements for refinance &send to NABARD.

Functions of State Section

y y y y y

Planning Renewing Compiling Achievements (for net result of the bank) Next year forecasting

Number of Persons Working Under are There are seven persons working in stat section
y y y y y y

1 Senior Manager 1 Manager 2 Assistant Manager 1 Accountant 1 Clerk 1 Typist

Account and Finance Department Keeping of account and maintaining books of accounts, preparing profits and loss accounts, preparing budgets, pay rolls, recording receipts and payments, preparing statement of assets and liabilities etc. are office activities of specialized nature. All these are office work and performed by this special office.

33

Miscellaneous Activities
y

Office Time: - The A.C.C.B. has fixed the timing for all the employees the timing of this company is 10a.m. To 5p.m. The recorded of the arrival & departure was recorded through Attendance register company maintenance the attendance registers. All the employees come at 10a.m. Entered the time in the Attendance register in the first column and at time of lunch. The entire employee entered. The departure time for lunch at 2p.m. When they come after lunch they will entered the arrival time 2.30p.m. Than duty was complete they will entered the departure time 5.00p.m. And also entered the total working hours in the full day. There is no extra system for recording the time.

Log Book : -All the vehicles of the company having logbook. Each vehicle has own separate logbook. All the records of this vehicle were kept in this logbook. The perform shows that, how much kilometer are to be used by this log book the person who used the vehicle fill this log book and signed on also fill that for what purpose. The vehicle was used.

FACILITIES FOR STAFF The following facility is available to staff members.

y y y y y y y

House Loan facility at subsidiary rate. Scooter loan/ motorcycle/ car loan at subsidiary rate. Festival loan. Medical loan LTC Loan (Loan Traveling Concession) DA (daily allowance) TA (traveling allowance)

34

Mission of the Bank:

Promotion and sustenance of economic interest and providing easy finance, cost effectives and quality banking services to customers

Objectives of the Bank:

The objects for which the Bank is established are as under:1. To serve as a balancing center for cooperative societies (hereinafter called the society/societies) in the State of Punjab registered under the Act for the time being in force. 2. To promote the economic interest of the members of the Bank and Cooperative Societies in the State in accordance with cooperative principles and to facilitate the development and funding of any Cooperative Society registered under the said Act. 3. To establish and support or aid in the establishment of and support to association, institutions, funds, trusts and convenience designed to benefit the employees or exemployees of the Bank or the dependents or connections of such persons to grant pensions and allowances and make payment toward insurance. 4. To provide long term loan for the maximum period of 15 years to the individuals, Coop. House Building Societies, Federation of Coop. House Building Societies and members of Group Housing Societies for purchase of house or construction thereof by enrolling member/nominal members. To carry on banking and credit business not repugnant to the provisions of the Act and the Rules framed there under for the time being in force and in particular to provide credit facilities to the members. Providing Long Term Loan for the maximum period of 15 years to individuals, Coop. House Building Societies and members of Group Housing Societies for purchase of house or construction thereof by enrolling members/nominal members. 5. To adopt such measures as are conducive to the spread of cooperative education and training.
35

6. To promote and develop Cooperative Societies in the State. 7. To do all such other things as are incidental or conducive to the promotion or advancement or objects of the Bank. 8. To solicit or procure insurance business as a Corporate Agent

36

CHAPTER III RESEARCH METHODOLOGY

Research methodology
Research is composed of two syllables, a prefix re and a verb search. Re means again, anew, over again. Search means to examine closely and carefully, to test and try, to probe. The two words form a noun to describe a careful and systematic study in some field of knowledge, undertaken to establish facts or principles. Research is an organized and systematic way of finding answers to questions. Redman and Mory defines research as a Systematized effort to gain new knowledge. It may be noted, in the planning and development, that the significance of research lies in its quality and not in quantity. Research methodology is the specification of method of accruing the information needed to structure or solve at hand. It is not concerned to decision of the fact, but also building up to data knowledge and to discover the new facts involved through the process of dynamic change in the society.

Research Design
Research design is a pattern or an outline of research project working. It is a statement of essentials elements of a study, those that provide the basic guidelines for the details of the project. Further a research design is an arrangement of condition for collection and analysis of data in manner that aims to combine relevance to the research purpose with economy in procedure. Research design stands for advance planning of the methods to be adopted for collecting the relevant data and the techniques to be used in their analysis, keeping in view of the objectives of the research. Under this project, Research design carried out was exploratory in nature

37

Objective of Study
y y

To get information about a cooperative bank & its functions etc. To know the structure and various schemes of loans provided by The Amritsar Central

Cooperative Bank
y

To know the purpose of granting various types of loans by the bank according to

the various categories of customers.

y

To know the process of granting loans by the bank.

Collection of Data
Collection of data is most significant stage of every research. There are two types sources from where data is collected . These are : I) Primary Sources II) Secondary sources Data has been collected both primary as well as secondary sources as described below:
y

Primary Sources

The primary sources of data were circulars relating to the bank and personal observation.
y

Secondary Sources

The secondary sources of the data were the information about the PATIALA CENTRAL CO-OPERATIVE BANK LTD. and the banks profile which includes functions of bank and various schemes of granting loans etc. These helped in gaining knowledge about the Bank.

Limitations of Study
y y

Lack of personal interest of employees to provide information and adequate time. Some employees were hesitant in providing complete information. 38

CHAPTER IV ANALYSIS OF LOAN PROCEDURE AND LOAN SCHEMES

Definition of Loan
An arrangement in which a lender gives money or property to a borrower, and the borrower agrees to return the property or repay the money, usually along with interest, at some future point(s) in time. Usually, there is a predetermined time for repaying a loan, and generally the lender has to bear the risk that the borrower may not repay a loan (though modern capital markets have developed many ways of managing this risk).

Importance of Loans in Today's Life

Everyone needs money at every stage of their life. Sometimes it so happens that they have keen desire to purchase their favorite stuff but they are incapable to purchase due to shortage of money. Here lies a question that a person who does not have a good amount of money at particular time has no right to see dreams? Is he not authorized to fulfill his desires on time? Should he stop dreaming? No, because there is solution for these queries. Loans are available for these purposes only.

39

Loans are provided to people for such critical circumstances which may occur at any time. In anyone's life a situation may come when all of sudden you require cash. A moment when you do not want to borrow cash from your relatives. There may occur any kind of emergency when you need huge amount of money. There are various types of loans like home loans, personal loans, student loan, business loan etc. You can take any type of loan you need. For each and every kind of need, loans are available. Home loans are available for general home purposes like buying a luxurious car, going for a holiday trip, educational purpose, home improvement etc. Many of your desires can be fulfilled by this loan. Personal loans are available for personal requirements like wedding ceremony, purchasing a home etc. Student loan as it itself suggest is that it is provided basically to students for higher education. Students who want to study more but can not afford can get apply for such loans and continue their studies. To start a new business you require a huge amount of money. A person willing to setup a business may not have that much cash which can meet out his requirements. For this business loans are available. You can get business loans to start and well establish a new business in market. Whatever may be the kind of loan, all have full fledged facilities. All kind of loans have their own importance. Above all, need of money explains the importance of loan. Appling for loan is very easy. Apply for that loan whichever is needed to you. But before applying you should go through different lender's policies and apply for that lender which is beneficial for you. Different lenders have different policies. If you get loan for long term with low rate of interest then it is beneficial for you. Due to competition, lenders are trying their best to attract people by providing different schemes which in turn is good for people. And cooperative bank is also one of them.
40

What is a Procedure?
A procedure is a specified series of actions or operations which have to be executed in the same manner in order to always obtain the same result under the same circumstances (for example, emergency procedures). Less precisely speaking, this word can indicate a sequence of tasks, steps, decisions, calculations and processes, that when undertaken in the sequence laid down produces the described result, product or outcome. A procedure usually induces a change.

Importance of Procedure Manuals

One of the worst case scenarios of office problems involves a very important job that cannot be completed by the support staff because of a lack of information on procedures. Nearly every company prepares job descriptions, but most neglect efficient, exact and up-to-date procedures manuals. A job description entails. A procedures manual gives a detailed and informative guide to how the job is done and enables someone to do the job in an emergency. Henrik Ibsen once said, "A community is like a ship; everyone ought to be prepared to take the helm." Likewise, an office - people should be able to pitch in and get the job done. This is possible only if they are provided with the proper instructions and materials. Every job entails a certain sequence of paperwork, routine tasks and contacts. For example, someone might be in charge of travel arrangements. A job description would state that the job entails making both domestic and foreign travel arrangements and processing invoices for this. A procedures manual would give the names and phone numbers of various travel agencies used for the firm, the best people to contact, how to process the invoices by explaining the forms and what department handles them. If the person in charge of travel arrangements is out of the office, someone else can open the procedures manual and follow the directions to do the job. Managers should see that every support staff employee in his or her department prepares a procedures manual for each job. At the beginning, the manager should meet with each
41

employee individually and discuss the preparation of the manual so that its function is fully understood. An outline of what is expected should be prepared and given to each employee to follow. The outline should cover: 1. What - A description of the task. 2. When - How often it is done. 3. Who - What people are involved in completing the task. 4. How To - Sequence of steps to complete the job. Phone numbers, addresses, chain of command, forms or materials needed (and where they are kept), potential problems and solutions based on experience. If office machines are involved (computers or word processors), a description of how they are operated for this particular job (i.e. if disks are used, where information is stored, how to retrieve the information, electronic mail, etc.). If a computer sequence is followed to complete forms or reports for the task, copies of each screen used should be made and placed in the procedures manual in the proper order. A "dummy" of each page should be filled out so that it can be easily followed.

y y

Important details One of the most important aspects of a procedures manual is that it is detailed and gives all the necessary information to get the job done in the quickest way possible. If persons, agencies or companies outside your company have to be contacted to complete a job, the procedures manual should give specific names, departments, addresses and phone numbers as well as a brief description of what each does, how long it will take, what you need from them and what they need from you.

Another important part of the manual is making sure that it is up to date. Outdated information will only confuse someone and will not get the job done. All employees should be instructed to check the procedures manual they have prepared at least once a month to see if phone numbers, names or directions need updating. Both the employee and manager should have copies that are accessible to others. 42

One of the problems in every office involves employees who are reluctant to, or refuse to, share information because they feel it will diminish their importance. Keeping the job "complicated" and being the only one able to do it gives this type of person a sense of job security and self-esteem. They do not want someone else to do their job at all, no less do it well. Unfortunately, this type of thinking does much more harm than good. A good manager must be able to communicate to these employees that a procedures manual is vital and must closely monitor the employee to see that a manual is prepared and is viable. Employee resistance to the idea of doing a procedures manual is to be expected. Some people will be afraid that their writing skills are inadequate and they will be unable to do their part properly. These employees should be helped as much as possible and encouraged to do the best they can. Their contributions can be polished later on. Usually, resistance is greatest among those who know they have more time on their hands than the job entails. These people will usually denigrate the whole idea of writing down what they do in detail, knowing that keeping the details vague makes the job sound a lot busier than it really is. Some tasks can take 10 to 15 minutes if you know exactly what to do and might take most of the day for the uninitiated to muddle through and try to get it right when the usual person in charge is out. People do get sick, quit or leave for a variety of reasons - often quite suddenly. A procedures manual is not a panacea for all office management problems, but it certainly helps.

A procedures manual also allows a manager to see what people are doing and estimate how long certain duties take. What is vaguely written in a job description as "handle board room reservations" could take from five minutes to hours depending on what is involved. A procedures manual would indicate whether the person in charge simply keeps a reservation book noting the names, dates and times or arranges for audio/video equipment, extra seating, coffee or other beverages and refreshments, provides writing tablets and pens or takes minutes as part of the job, including contacting maintenance people to see that the room is cleaned before and after and arranging with the receptionist to make sure the names of all outsiders are given to her and guests are properly directed to the location of the meeting. Obviously, there is a big difference in the amount of time expended, depending on what steps are involved. Detailing the steps involved would enable anyone to take care of the job without confusion and problems. 43

y y

Hiring decisions Managers can, therefore, make decisions about consolidating certain jobs when there is an obvious lack of work in some jobs and too much in others, can make hiring decisions as to whether or not extra staffing is required or whether people can be let go. If you ask an employee what a job entails and she or he says, "I do this, this and this," you have very little idea of what time and effort is involved unless you have done the job yourself (probably unlikely), or have it written down in a procedures manual.

Another advantage of the procedures manual is that a manager can see whether or not an employee is suited to a certain position. If the employee seems to go about tasks in the most complicated, difficult manner, obviously retraining is necessary or the employee should not be in the job. A manager should be able to see, by the step outlined in the manual, whether the job is being done as efficiently as possible.

A procedures manual can help avoid confusion when someone has to step in and do a task that is not normally part of his or her job. This enables the office to run much more smoothly and gives managers a "feel" for what is going on in their departments. It also enables the manager to feel more confident about being in charge because he or she knows precisely what is going on in the department. Most employees will welcome the manual when they are called upon to fill in or help out because they will at least have some idea of what is to be done and how to do it. A procedures manual is a simple office tool that can save a lot of time and avoid a lot of problems.

44

Loan Procedure
Procedure for getting a loan

I.

Customer

Under the above procedure customer means the per who wants to take a loan. Custer may be a farmer , student, employee of govt. or semi govt. or any institution approved by the board of directors of the bank, individuals , companies, trust, firm, cooperative Societies etc.
II. Reception

Here a person (customer) inquires about the loan rates and other prerequisites that are to be submitted. He is provided this information by the clerk at the reception. For example a person want to take a vehicle loan . At this step he is get the information about the amount sanction criteria, interest rate, period of time, mode of loan disbursement, mode of repayment, perquisite documents etc.
III. Submission of documents:

After getting the information customer submit the required document to bank facility. For example: to take a House Loan he submitted various types of documents like:
1. Demand Pronote note (D.P.. note) 2. Two latest attested passport size photographs of borrower 3. Proof of Residence 4. Source of Finance for own contribution 5. Copy of approved drawing of the proposed dwelling unit to be constructed/purchased from Sarpanch/Numberdar. 6. Agreement of sale deed. 45

7. Details of cost/estimate from approved Architecture/valuer/Engineer of the house to be purchased/constructed/ renovated/addition to made. 8. Non encumbrance certificate. 9. Latest jamabandi and girdawri. 10. Certificate of ownership of land/property situated within Red Line of the village from the Sarpanch/Numberdar/Patwari 11. The borrower shall be also required to submit collateral security @100%of loan amount etc. 12. To take a loan borrower firstly required to take nominal member ship of bank.

Only after fulfillment and submission of all documents which are required according to take various types of loans, the process is started actually. VI. Credit rating: Based on the documents submitted by the customer, the credit rating of the customer is done i.e. how much the loan amount should be granted to the customer is calculated. This is done as follows. 1. First the total value of the customers assets is calculated. For example if loan is on a stock plus if he has provided the papers of his business land, then in this case his credit will be calculated as a sum of the value of both these assets. i.e. total value = value of stock + value of land 2. Now, according to the rules of bank some percentage of the value of these assets can only be given as loan. This percentage varies for different types of loans and based on it the sanctioned loan amount is calculated. V. Inspection: After having calculated the credit and the amount that can be sanctioned for loan, the file is forwarded for inspection. Here, the officer verifies the work done by the clerk at the credit rating desk. Moreover, he checks the banks database to see if
46

the loan taker has any previous obligations which are remaining to be met (if he is an old customer). After the satisfaction with all the parameters, he hands over the file to the loan manager. VI. Loan Manager: At this step , the file of customer reexamined by the loan manager. If the loan is consumer loan then it is directly granted by branch manager . But if the loan is personal loan or vehicle loan or any other type of loan then it is granted by senior manager or district manager. The powers of granting different types loans of different mangers are as under:
y

Branch Manager: Branch Manager has power only to grant the consumer loan. The maximum amount is granted up to 100000 Rs./-.

Senior Manager: Senior Manger has power to grant a loan up to amount 200000 Rs./only.

District Manager : District Manager can grant a loan from 200000 Rs./- to 500000 Rs./only

Board of Directors: If the loan amount is greater than 500000 Rs./- then it is granted by the board of directors of the Patiala Central Cooperative Bank.

So according to different types and different amounts of loans, these are granted by above parties. At this stage loan granting manager recheck all the documents. Loan manager pass the loan if customer fulfill all requirements. But if there is any thing which is unclear or insufficiency in the documents, he has power to reject the loan application. But he is also liable to give specific reason to the customer about the rejection of loan. VII. Meeting: If the amount of loan is grater than 5 laces then a meeting is conducted between board of Directors of the bank After having examined the file, the file is then put
47

forward before the Chairman and Managing Director (MD) in a meeting. This file is then cross examined. If all the members of top management are mutually consent then the application of loan is ready for disbursement of loan amount. VIII. Insurance: Before issuing the loan amount or opening of a/c for loan, the customer is required to get insurance on the thing on which he wishes to take loan. This is done by bank with the help of United India (UI) Insurance Company. Moreover, if any other thing is mortgage for taking loan, then the insurance is taken on that particular thing also. This is explained in detail in the coming sections. IX. Giving away of Loan: After paying the insurance amount, the loan amount or account is handed over to the customer. Before the disbursement of loan amount to customer firstly bank require becoming a nominal member of bank, then loan amount is paid to the customer. In some type of loan schemes the amount of loan is paid into installments. Like in case of Rural Housing Loan amount is paid into two installments:a. 1st installment at the time of starting 50%

construction up to plinth level.

b. 2nd installment after completion up to 50%

roof level. In case Urban Housing Loan amount of loan is disbursed into three installments:
a. For purchase of plot 50% b. Up to roof level c. After roof level 25% 25% 48

So above are the various stages into loan procedure adopted The Patiala Central Cooperative Bank. Any customer can easily get a loan to fulfill his/her various requirements and get it fastly as per as possible.

Loan Schemes
* Scheme for Financing Rural Housing *
Preamble:- With a view to provide housing facilities to the masses which is a basic need of human beings, the GOI and State Govt. are attaching utmost importance to the financing of housing sector. Several housing schemes for this are in operation. With a view to supplement these schemes, it has been decided by the Coop. Bank to start housing finance for acquisition, construction, repair/alteration etc. This scheme has particularly been designed for rural people, where other financing institutions are reluctant to advance. The scheme shall be called the Scheme for Financing Rural Housing and is applicable to individual/members of house building cooperative societies in the state of Punjab and Chandigarh (U.T.) Eligible Borrower: - 1) Individuals 2) Cooperative Housing Societies Purpose of Loan: - Loan shall be advanced under the scheme for purchase of built up house, construction of a new house or repair/ renovation/addition/alteration of existing house in rural areas. Ceiling on the cost: - The loan for a dwelling unit may not exceed Rs.15.00 lacs. In case land is being acquired the cost of land may be reckoned as margin money, otherwise cost of land should not be included in the project cost

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Quantum of Bank loan for Individual: - The quantum of loan shall depend upon repaying capacity of the borrowers, subject to 85% of cost of construction or value of property to be purchased. For construction/purchase of new House
a. Maximum loan Rs.15.00 lacs b. Margin Money 15%

Repayment period Up to 15 years in monthly/half yearly installments. Due date shall be 30th June and 31st December every year. For Renovation/Repair/Addition/Alteration:
a. Maximum loan Rs.5 lacs (for repair/ addition /alteration of House) b. Margin money 15% c. Repayment period 10 years in monthly/half yearly installments.

Loan eligibility shall be calculated on the basis of repayment capacity of the borrower. The repaying capacity shall be determined on the basis of land holding and other known sources of income and commitments/subsistence towards his family. A reasonable installment to income ratio i.e. normally upto 35% of the gross income can be taken as repayment capacity of the borrower. Income of the co-applicant can also be considered for loan eligibility. Period of Loans: - The maximum period of loan shall be upto 15 years and loan shall be repayable in equated monthly/half yearly installments. The first installment shall become due after expiry of 9 months from the date of drawl of first installment in case of construction and whereas in case of purchase of built up house, it shall start after expiry of 3 months from the date of purchase. Rate of Interest: - At present rate of Rural Housing is 11% and further it shall be determined by financing bank from time to time and debited to loan account. Interest

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Is charged as contract made with the loanee. Penal interest @ 2% over and above the normal rate shall be charged in case of default, on the default amount for the default period. 0.5% concession is allowed to women. Security: - The security of the loan shall be first mortgage charge on the house property to be financed by the bank by way of registered regular mortgage. In addition to it collateral security shall be taken @ 100% of the loan amount in the form of agriculture land. Value of agriculture land as per norms fixed by the District Collector from time to time should be taken into consideration. In case of employees of the Govt., semi govt., Boards, Corporation, etc., constructing house within rural areas, loan can be advanced on primary security i.e. mortgage of house to be financed, along with two good sureties and undertaking under section 39 of Punjab Cooperative Societies Act., 1961. Sanction and disbursement of Loan: - The loan shall be sanctioned after it is ascertained that the applicant fulfils all the requirements and enjoys reputation as a good pay master. For construction loan, the borrower should be in possession of plot with unquestionable and indisputable title. In case of built up house, the payment shall be made @ 75% of total value of the house/Loan sanctioned. Payment shall, however, be made to third party in lump sum after getting margin money from the borrower and remaining 25% shall be released after obtaining Mortgage Deed in favour of the Bank. For construction of house, loan shall be disbursed in 2 installments, which is as under:c. 1st installment at the time of starting 50%

construction up to plinth level.

d. 2nd installment after completion up to 50%

roof level. 2nd installment shall be disbursed after ensuring proper utilization of previous installment. Processing Fee & Other Charges: - Processing Fees and other charges @ 0.25% of loan amount shall be charged
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Documentation & general requirements: - Following documents are required for financing under Rural Housing Scheme
1. Application form 2. Loan agreement 3. D. P. Note 4. Two latest attested passport size photographs of the borrowers. 5. Proof of residence. 6. Source of Finance for own contribution. 7. Copy of approved drawing of the proposed dwelling unit to be constructed/purchased from Sarpanch / Numberdar. 8. Agreement of sale deed. 9. Details of cost/estimate from approved Architecture/ Valuer/ Engineer of the house to be purchased/ constructed /renovated /addition to be made. 10. Non-encumbrance certificate. 11. Latest Jamabandi and Girdawari. 12. Certificate of ownership of land/property situated within Red Line (i.e. Phirni) of the village from the Sarpanch/Numberdar/Partwari. 13. The borrower shall mortgage his existing property : to be constructed/purchased in favour of the bank for the full value of loan. 14. The borrower shall be required to submit collateral security @ 100% amount. of the loan

Additional Documents from Employees:

i. ii. iii. iv. Salary Certificate. Undertaking U/S 39. Post dated Cheques. Completion certificate.

* Scheme for Urban Housing Loan *

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Short title Extent and Commencement

a. This scheme may be called Urban Housing Loan Scheme to individual and members of house Building Societies by The Punjab State Cooperative Bank/Central Coop .Bank (s) in the State of Punjab. b. The scheme shall be implemented through the branches of the PSCB/Central Cooperative banks concerned and shall be limited to urban areas falling in the area of operation of the lending Bank.

It shall come into force from the date as the Registrar Coop. Societies, Punjab Chandigarh decides. Purpose: - Loan shall be advanced for the purchase of plot, purchase of built up house, construction of house or repair, renovation, additions, alteration, etc. in the existing house. Loans shall also be given for acquiring a plot, flat, house in an existing or proposed Cooperative House Building Society and approved scheme of PUDA, House fed, Improvement Trust or any other Govt. Agency. Loan can also be advanced for take over of an existing loan advanced by any other bank/financial institution subject to the condition that the loan account should have remained in the standard category of assets for at least last 2 years in the previous financial institution Eligibility: - An individual residing in the area of operation of the Bank may apply for the loan in his individual name or along with another person being joint owner of the land/property as co-applicant. The applicant and co-applicant, if any will be enrolled as nominal members of the bank under the Act, Rules and Bye Laws. Note: The Borrower should not have defaulted in any other loan. The applicant shall be eligible for a total house building loan not exceeding 75% of the total cost of house (cost of construction + cost of plot, if plot is to be purchased) and the loan out of it for purchase of plot will not exceed 50% of the total loan sanctioned. The remaining, exceeding or up to 50% shall be utilized for construction of house thereon.
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The employees of the Punjab State Cooperative Bank or Central Cooperative Banks who have already availed house loan under Govt. or Bank Scheme from the Punjab State Coop. Bank or Central Cooperative Banks can also get loan under the scheme subject to maximum of Rs.25 lacks under both house loan scheme. It will be further subject to the repaying capacity of the employee in accordance with their last salary statement. Further this loan to employee will be against second charge on the said property. Quantum of Loan: - The quantum of loan will depend upon the repayment capacity of applicant to be calculated by the bank as under : 21 yrs. To 45 yrs of age. 48 times of the net monthly income (NMI) or 4 times of Net Annual Income (NAI) Above 45 years 36 times of Net Monthly Income (NMI) or 3 Times of Net Annual Income of the spouse or family member can be considered if spouse or family member is co-applicant or guarantor. Maximum loan amount for construction of house or purchase of house/flat, purchase of plot + construction thereon under this scheme is Rs.25 lacks or 75% of total cost of construction, purchase of house (cost of construction + cost of plot, if plot is to be purchased), whichever is less. The loan for purchase of plot will not exceed 50% of the total loan sanctioned. For repair/renovation maximum amount of loan shall be Rs.5 lacks. For addition/alterations in existing house, maximum loan amount shall be Rs.10 lacks. Interest: - At present rate of Urban Housing is 11% and further it shall be determined by financing bank from time to time and debited to loan account. Interest

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Is charged as contract made with the loanee. Penal interest @ 2% over and above the normal rate shall be charged in case of default, on the default amount for the default period. 0.5% concession is allowed to women. Period of Loan/ Repayment of Loan: - Maximum period (including moratorium period) shall be 15 years or attaining the age of 65 years whichever is earlier. In case of repair/renovation /addition/alteration loan cases maximum period shall be 10 years. Repayment of the loan shall, however, be in monthly equated installment to be started from 9 months after the first installment of loan disbursed. In case of the farmers availing loan under this scheme, repayment of loan may be in half yearly installments i.e. 30th June and 31st December every year. Security: - Security for the loan is a first mortgage of the property to be financed normally by way of deposit of original title deeds. Disbursal of Loan: - The loan shall be disbursed after the property is technically appraised, all legal documentation completed and borrower having invested own contribution in full (own contribution is the total cost of proposed property Bank loan). In case of purchase of plot + construction, the disbursement shall be in 3 installments as follows:For purchase of plot 50% Up to roof level After roof level 25% 25%

Loan will be disbursed at one go for purchase of a built up house. However, for construction on pre-owned plot, the disbursement shall be in two installments. 1st Installment for construction after plinth level 50% 2nd Installment for construction of the building after roof level 50%
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Loan for repair, additions, alterations and renovation shall be disbursed in two equal installments. The second and subsequent installment of loan shall be disbursed only after ensuring the utilization of previous installment to Banks satisfaction. Bank shall not be bound to accept progress construction as assessed by builder. Fee & Other Charges: - A processing fee @0.25% of the loan amount sanctioned will be charged. Documentation - Pre-sanction stage: 1. Identify proof. 2. Residential Proof. 3. Self attested recent passport size photographs of the applicant and co-applicant (two). 4. Copy of Income-tax Return for the three years duly acknowledged by ITO concerned. 5. Sources of Finance for own contribution. 6. Non-encumbrance certificate. 7. Search report & legal opinion along with photograph of the property. 8. Original title deed. 9. Spot Physical verification. 10. Purchase agreement of property. 11. Income Proof/J-Form. 12. Loan application Form

Post Sanction Stage

1. Loan agreement. 2. Demand Promissory Note. 3. Mortgage Deed 4. Letter of Lien and Set Off 5. Letter of Waiver 6. Letter of Guarantee

Employed applicants: - Undertaking from the employee under section 39 of Punjab Cooperative Societies Act, 1961.
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Insurance: - Comprehensive insurance in the joint names of the borrower and the bank shall be made of the property mortgaged against fire, riots earthquake lighting floods etc. Incase of default bank will be at liberty to get a policy renewed by debit to house loan account of the borrower Additional Documents in construction cases: a. Construction Plan approved by a competent authority. b. Detailed Cost estimate from Registered Architect/ Civil Engineer. c. A photocopy of registered title deeds or allotment letter (in case of member of Cooperative House Building Societies

In purchase ofBuilt Up House cases.

a. Agreement of sale/sale deed/detailed cost estimate from approved engineer. b. In case of allotment of flat/houses, photocopy of allotment letter and details of balance payment, if any.

Disputes If at any stage any dispute arises, it will be settled/referred under the Punjab Cooperative Societies Act 1961.

* Personal Loan *
The Bank offers Personal Loan for various purposes such as meeting medical expenses, renovation of residential accommodation, traveling, marriage etc. Eligibility : - salaried employees of Punjab government, PSUs, Boards, Corporations, Aided Schools/Colleges, Universities, Public Sector Banks, Premier Medical

Institutions, General Insurance Companies, Co-operative organizations in the state of Punjab or any other organizations as approved by the Board of Directors of the respective Bank etc.
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Age: - Minimum 21 years and Maximum 57 years. Service Tenure: - 1 year after the confirmation/regularization. Loan Amount: - 12 Times of gross monthly salary or Rs. 2,00,000/- only , whichever is less. Period of Loan: - Maximum- 5 years. Loan may be repaid in 36/48/60 Equated Monthly Installments (EMI). Rate of Interest: - 14% p.a. Income: - Net income of the person should not be less than Rs.5,000/- p.m. in case of salaried persons and Annual Income of not be less than Rs.60,000/- in case of others. Repayment of Loan: - Loan is repayable in equated monthly installments in the form of post-dated cheques. The 1st installment will start after one month. The Loan will be repaid before retirement. Security : - No collateral security is required, only two guarantor know to the bank. Option to repay loan: - Borrower can make the part pre-payment of loan. No penalty will be charged. General: - No employee will be given this loan facility, which has defaulted in repayment of loan under any other scheme. * Consumer Durable Loan ( salary / Non Salary Earners) * Scheme for Granting Loans to Individual Salary and non-salary earners by the state and central cooperative banks for socio-economic needs 1. The bank may grant loans to individual salary earners and non-salary earners holding

saving bank account or current account with the bank for purchase of consumer durables and

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meeting other socio-economic needs. 2. The loan should be repayable in monthly installments but the total duration of loan should not exceed three years in any case. 3. The borrower should be enrolled as a nominal member of the Bank. The Borrower should be required to produce 2 sureties who should also be nominal members of the Bank. 4. In case of SALARY EARNERS, the amount of loan should not exceed Rs.1.00 lac per borrower or 75% of the cost of article to be purchased whichever is less, in accordance with the slabs fixed hereunder:Total net emoluments upto Rs.5000/Total net emoluments from Rs.5001/- to Rs.7500/Total net emoluments from Rs.7501/- to Rs.10000/- Loan Amount = Rs.25000/- Loan Amount = Rs.40000/- Loan amount = Rs.50000/-

Total net emoluments from Rs.10001/- to Rs.15000/- - Loan amount = Rs.75000/Total net emoluments above Rs.15001/- Loan amount = Rs.100000/-

In case of NON-SALARY EARNERS, the amount of loan should not exceed Rs.50000/- per borrower or 75% of the cost of article to be purchased in accordance with the

slabs fixed hereunder:Half Yearly Income a) Upto Rs.18000/a. From Rs.18001/- to Rs.27000/b. From Rs.27001/- to Rs.40000/c. More than Rs.40001/-

Amount Loan Rs.15000/Rs.25000/Rs.30000/Rs.50000/-

5. The loan should be advanced for acquiring new assets only. Purchase of second hand articles should not be financed in any case.

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6. The bank should obtain salary certificate from the borrower. The borrower himself should be responsible for the repayment of his loan. However he should also produce a copy of authority letter addressed to the bank and also an undertaking to the effect that in case borrower commits default in repayment of his loan installments, then his salary or loan amount due will be credited to his loan account till the bank directs to do so. The bank shall inform the employer immediately after the sanction of loan. 7. In case of default by the borrower, the bank will ask the employer of the borrower to deposit the due amount by deducting from the salary of the employee. 8. The borrower should give standing instruction to debit the amount of installments or

overdue installments together with interest due on that loan every month to his saving bank account or current account as the case may be. 9. The bank should also obtain the following documents from the borrower :a. Salary certificate/proof of income b. Loan agreement. c. Demand Promissory Note d. An authority letter from the borrower under Section 39 of Punjab Cooperative Societies Act, 1961 for repayment of loan in case the borrower fails o repay the loan. e. An authority letter from the borrower to recovery the installment/interest by debiting to saving/current account. f. Letter of waiver.

g. Post dated cheques equal to number of installments should be obtained from the borrower.

10.

The bank should take original invoice from the dealer and then the loan amount

together with margin money should be paid through Bank Draft directly to the dealer to avoid misutilisation of the loan. 11. The loan should be advanced against hypothecation of the asset/assets acquired/to be acquired, if any. 12. At present rate of consumer loan is 14% and further it shall be determined by financing

bank from time to time and debited to loan account. Interest is charged as contract made with
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the loanee. Penal interest @ 2% over and above the normal rate shall be charged in case of default, on the default amount for the default period. 0.5%concession is allowed to women.

* Sehkari Education Loan scheme *

Education loan is granted for higher studies in colleges in India and abroad in any educational field in college affiliated with recognized universities, medical colleges, technical institutions, pharmaceutical colleges, Information Technology and professional courses, Management etc, so that students from poor & middle classes as well as brilliant and needy students can take advantages of the scheme. [The scheme will not cover any correspondence course]. Eligibility: Age of student- An Indian National with minimum of 17 years and maximum 35 years of age can apply for this loan. Age of Father- The age of Father/Guardian should not be more than 65 years till full recovery of loan amount. Education Qualification- Minimum Qualification for co-operative education loan (CEL) is plus two (+2) and the applicant must have secured at least 50% marks in the last examination passed. Admission to Course: - The applicant must secured admission or has got the consent of the institution to admit to any one of the above-mentioned courses. Duration Of Course: - The course should not be more than 5 years. Purpose of Loan
I. Admission Fee 61

II. III. IV. V. VI. VII. VIII. IX. X. XI. XII. XIII.

Purchase of books and stationary Purchase of instrument required for course undertaken by applicant. Laboratory charges if any. Monthly/quarterly tuition fee. Library charges. Caution deposit/Building Fund. Refundable deposits, if any. Expenses on projects if any. Boarding and Lodging expenses Computer purchase if required. Air fare for joining the course (for study abroad) Examination Fee.

Amount of loan: For Studies in India For Studies Abroad Rs. 5.00 lacs Rs. 10.00 lacs

Rate of interest: - The rate of interest on Cooperative Education Loan Facility(CEL) shall be 7.25% per annum. This rate is however subject to change from time to time. Processing Charges: - No processing charges shall be charged under CEL. Insurance of student: - Life Insurance Policy will be taken on the life of the student borrower for an amount equal to the loan amount and should be assigned in favour of Bank. Security: - No collateral security is required up to a loan of 25000/-. This loan shall be advanced against two good sureties. The loan above Rs.25000/- will be advanced against collateral security by the applicant/guardian. The collateral security can be in the form of land/building NSC/KVP/LIC Policy/bank
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deposits

in

the

name

of

student/parents/guardian. The valuation of the collateral security shall be equivalent to the loan amount. Disbursement of Loan: - The branch will get sanction of whole loan amount from competent authority but will disburse the amount based on yearly expenses of course. In the first year disbursement will be equivalent to the expenses of first yearly only. Subsequently the loan amount for the next year will be disbursed after successful completion of previous year. The disbursement of loan should be by Demand Draft/bank cheque in favour of concerned university /college. In case of purchase of equipment/books/computer the payment shall be made to the applicant. Recovery of Loan: - The recovery of principle amount will start after one year of total duration of course or after 6 months of getting the job/employment by the applicant, which ever is earlier. Basic Requirements: 1. Admission Letter. 2. Mark Sheet / Certificate for passing last Board / University examination. 3. Students going abroad for study will have to submit the necessary documents such as copy of Passport, copy of Admission Letter, copy of Form I-20 (for U.S), Visa, etc. 4. Applicant should produce year-wise estimated total expenditure which is to be incurred such as Tuition Fees, Term Fees, Living Expenses, Traveling, Cost of Books, Examination Fees, etc. Hypothecation of stocks and book debts. 5. Progress Report of the studies of the student from time to time. 6. Disbursement of loan will be made at stages during the duration of the course of the study as per the requirement as mentioned in the schedule of year wise estimated expenditure. 7. Any scholarship received during the course of study must be intimated to the bank and as far as possible such amount received should be adjusted in loan account. 8. If study is discontinued for whatsoever reason, Bank must be informed and loan amount must be paid immediately.

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9. All other documents and information to be provided as per checklist provided with the Application Form. 10. The loan documents should be executed by both the student and the Parent / Guardian as C o-applicant.

* Vehicle Loan *
Rule No.1 These rules are called the rules for granting of Vehicle Loan to individuals, firms, HUF, Companies, Trust and Cooperative Societies.

Rule No.2 Rule No.3 Rule No.4

Purpose of loan is to provide financial assistance to purchase new vehicles for business and personal use. The maximum amount that can be sanctioned under the scheme is limited to Rs.10.00 lac or 80% of value of the vehicle whichever is less. The cost of the vehicle shall be paid directly by the Bank to the suppliers or authorized dealers on receipt of intimation from the dealer and instructions from the applicant.

Rule No.5 Rule No.6

The application for loans should be made in the form prescribed by the Bank. Wherever sanctioning authority is satisfied, loans upto 60% of the cost of vehicle shall be granted against the comprehensive insurance and lien in the registration certificate. In case loan is above 60% of the cost of vehicle (subject to 80% of the cost as stipulated in the rules), two good sureties shall also be taken in addition to the insurance and lien in registration certificate in case of buses and trucks for commercial use.

Rule No.7

At present rate of vehicle loan is 13% and further it shall be determined by financing bank from time to time and debited to loan account. Interest is charged as contract made with the loanee. Penal interest @ 2% over and above the normal rate shall be charged in case of default, on the default amount for the default period. 0.5% concession is allowed to
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women Rule No.8 The vehicle should be comprehensively insured for the full value covering all risks and the policy should be in the joint names of borrower and the bank with agreed bank clause. Rule The charge of the bank on the vehicle in the form of registration should

No. 9 be registered with the registering authority within 90 days of purchase of vehicle, failing which additional interest at the rate of 3% shall be charged. Rule The repayment of loan should be in the form of monthly installments to installments due on 30th June and 31st December. One month moratorium period shall be allowed under the scheme. Rule The Bank reserves the right to proceed against the borrower and sureties

No.10 be repaid within 5 years. However farmers may opt for half-yearly

No.11 in the event of default in the repayment of loan installment/s. Rule The borrower should agree to produce the vehicle for periodical

No.12 inspection to ensure that it is maintained in satisfactory condition. Rule The borrower should agree to be bound by arbitration provisions in the

No.13 Punjab Cooperative Societies Act 1961 and the Rules framed there under. Rule The borrower should give an undertaking stating that all the terms and

No.14 conditions stipulated by the Bank while sanctioning the loan and those conditions that may be stipulated in future by the bank are acceptable to him.

* Second Hand Vehicle Loan Scheme *

In the modern era there is a heavy demand for purchase of second hand vehicles and the banks have surplus loan-able funds to diversify the loan portfolio and to provide financial

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assistance to the borrowers for purchase of second hand vehicle, this scheme has been diversified. Short title, extent and commencement:a. This scheme may be called Second Hand Vehicle Loan Scheme to individual sole proprietor professional and partnership concern residing in the area of operation of the lending bank by the State and Central Banks as the case may be. b. The scheme shall be implemented through the branches of the State and Central Coop. Banks in UT and in the State of Punjab. c. It shall come into force from the date of approval by the Registrar Coop. Societies Punjab Chandigarh. d. The vehicle to be purchased by the loanee should not be more than 3 years old, should be accident free, one time road tax paid, bearing Registration Number of U.T. Chandigarh or the State of Punjab.

Purpose: - Loan shall be advanced for the purchase of second hand vehicle such as car, jeep, sumo, qualis, etc. for personal/public use. Eligibility: - An individual, sole proprietor, professional and partnership concern residing in the area of operation having permanent account number provided by the Income Tax authority in urban areas and in case of rural area having at least 5 acres of agriculture land and should not be defaulter. The applicant will be enrolled as nominal member of the bank under the Act, Rules and Bye-laws. Quantum of Loan : - The quantum of loan shall depend upon the model and present value of the vehicle. Present value shall be the value as provided by Sah & Sanghi in the current price Index and also available on Website htpp.wwwautomartindia.com/Sah & Sanghi price index. asp or the value approved by the registered surveyor of any GIC with the condition that the insurer has to get insurance cover from the concerned Insurance Company on whose list the name of the surveyor appears, which is lowest shall be the quantum of loan. The maximum loan amount shall be Rs.5 lacs or 75% of the assessed price of the vehicle whichever is less.
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Interest: - At present rate of second hand vehicle loan is 13% and further it shall be determined by financing bank from time to time and debited to loan account. Interest is charged as contract made with the loanee. Penal interest @ 2% over and above the normal rate shall be charged in case of default, on the default amount for the default period. 0.5% concession is allowed to women Period of Loan/Repayment of Loan: - Maximum period of loan shall be five years. Repayment of the loan shall, be in monthly equated installment. In case of urban borrowers and half yearly equated in case of rural borrowers due on 30th June and 31st December. Moratorium period of one month shall be allowed under the scheme. Security: - The security for the loan is 1st Hypothecation of the Vehicle in the name of the bank entered in RC of the vehicle. Two good sureties residing in area of operation of the bank and having a PAN Card in case of urban areas and two sureties of the status of borrower in case of rural area. The sureties shall be enrolled as nominal member of the bank under the Act. OR A collateral security to the extent of 100% of loan in the shape of assignment of life insurance policy, pledge of NSCs, KVPs, Term Deposits of own bank, in case the borrower is not willing to give sureties. Disbursal of Loan: - The loan will be disbursed after the appraisal of all legal documentation completed and borrower having deposited his share of margin in the SB account. The disbursement will be third party payment by way of banker cheque/Demand Draft in the name of the seller (owner of the vehicle) delivered through and under receipt from borrower. Fee and Other Charges : - A processing fee of 0.25% of the loan amount sanctioned shall be charged. Documentation : -

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1. Identity proof 2. Residential proof 3. Two self attested recent passport size photographs of the applicant and sureties each. 4. Photocopy of the PAN 5. Copy of Income Tax Return for last three years duly acknowledged by ITO 6. Photocopy of the Driving License 7. A photocopy of the RC of the Vehicle and case of rural people copy of Fard, Jamabandi. 8. Loan application form 9. Loan agreement 10. DP Note 11. Hypothecation deed/Collateral Security/Agreement Bond from 12. Agreement of Sale. 13. Certificate of present value of car assessed by Surveyor of company guide or as determined on the basis of guidelines of the Punjab Govt. on the Subject. Sureties.

Insurance: - Comprehensive insurance in the joint names of the borrower and the bank shall be made at the cost of the borrower. In case of default bank will be at liberty to get a policy renewed by debiting to loan account of the borrower. Dispute: - If at any stage any dispute raised, it shall be settled/referred for arbitration under the provisions of Punjab Coop. Societies Act. 1961 and rules frames there under and bye-laws of the bank

* Scheme of granting Loan against Property *

Short title, extent and commencement: - This scheme may be called Scheme of LOAN AGAINST PROPERTY(LAP). The scheme shall be implemented through the branches of the Punjab State Cooperative Bank Limited & Central Cooperative Banks only through an urban branch in the State of Punjab and shall be available to Individuals. Beneficiaries should be enrolled as Nominal Member of the bank. It shall come into force from the date as the Registrar, Coop. Societies, Punjab, Chandigarh decides.

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Purpose: - The scheme is for providing finance against mortgage of immovable property situated at Chandigarh, U.T. Periphery by Punjab State Cooperative bank and at urban areas (within Municipal Limit) by Central Cooperative bank through its urban branches, and is designed to offer instant solutions relating to socio-economic needs such as childrens higher education, travel, daughters marriage, medical emergencies, etc. The loan will, however be not avail for speculative purpose. Eligibility: a. An individual residing in and having a self occupied immovable property in the area mentioned in the Purpose Clause no.3 may apply for the loan in his individual name or along with another person being joint owner of the land/property as co-applicant. The applicant and co-applicant, if any, will be enrolled as nominal members of the bank under the Act, Rules and Bye-laws. The age of borrower should not exceed 65 years at the time of applying for the loan. b. Employees of the PSCB/DCCB can avail this loan against property already mortgaged with the bank by creating second charge of property subject to the repaying capacity of the employee as per the scheme of loan.

Type and Quantum of Loan: - The loan can be given in the shape of Term Loan or Credit Limit. Loan can also be given for both purposes i.e. partly for term loan and partly for credit limit subject to quantum of loan for both the loan and limit will not exceed from Rs.25.00 lacs. Quantum of loan will be three times of net annual income or 50% of value of property, whichever is less. However maximum loan amount will be Rs.25 lacs. Income of family member can be considered for the purpose of eligibility of loan. Interest: - Interest shall be charged @ 15% p.a. compounded quarterly or as may be revised by the bank from time to time. In case of defaults a penal interest @18% p.a. over. Security: -

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I.

Security for the loan is a first mortgage of the property, against which loan/limit is granted, by way of deposit of title deeds. The valuation of the property will be based on the basis of last reserve price of the auction fixed by the Chandigarh Administration. For the properties situated out side the Chandigarh, it will be the official rates of registration fixed for the same by respective Municipal or Registration Authority or current market value whichever is lower.

II.

Suitable one guarantee acceptable to the bank. The guarantor should have its net worth equal to or more than the loan amount to advanced. In case the income of family member is taken while calculating loan eligibility, he/she must be taken as guarantor.

III.

Post dated cheques for the months for which repayment of term loan option is due.

Repayment of Loan:
a. Loan together with interest is repayable in maximum 72 equal monthly installments. b. Overdraft facility is to be renewed/reviewed annually.

Processing Fees: - 0.5% of the sanctioned amount shall be charged. In case of limit of 0.25% will be levied every year on the credit limit. Documentation:
1. Loan application Form. 2. Loan Agreement. 3. D.P. Note. 4. Mortgage Deed. 5. Non-Encumbrance Certificate. 6. Letter of lien and set off. 7. Map and Current Valuation Report of the property from Govt. Approved Architect. 8. Search report and legal opinion along with the photo. 9. Letter of continuity 10. Original Title Deed.

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Insurance: - Comprehensive Insurance in the joint names of the borrower and the bank shall be made of the property mortgaged against fire, riots, earthquake, lightning, floods, etc. In case of default bank will be at liberty to get a policy renewed by debit to loan account of the borrower. Documents required from applicants: Documents required from Salaried Individuals
1. Proof of Residence Any one of Ration Card/Telephone Bill/Electricity Bill/Voters Card. 2. Proof of Identity Any one of Voters Card/Drivers License/Employer Card/Passport/PAN Card. 3. Latest Bank Statement/Passbook (where salary/Income is credited for past 6 months). 4. Latest 3 months Salary Slip with all deductions & Form 16 for last 2 years. 5. Copies of all Property Documents. 6. Self attested recent passport size photographs of the applicant and co-applicant (two). 7. Copy of Income-tax Returns for last two years.

Documents required from the non-salaried individuals

1. Income proof. 2. Proof of Residence Any one of Ration Card/Telephone Bill/Electricity Bill/Voters Card. 3. Proof of Identity Any one of Voters Card/Drivers License/Employer Card/PAN Card. 4. Latest Bank Statement/Passbook (where salary/Income is credited for past 6 months). 5. Copies of all Property Documents. 6. Copy of Income Tax Returns for last two years.

Disputes: - If at any stage any dispute arises, it will be settled/referred under the Punjab Cooperative Societies Act 1961 or any other relevant act at the sole discretion of the Bank. Purpose: - To meet the financial requirements towards Earnest Money deposit to book residential plots/ built up house/ flats being sold by Govt. housing agencies, urban

71

Development Authorities like PUDA, HUDA and Housing Boars, cooperative Housing Building societies, House fed and Improvement Trust. Beneficiaries: - Individuals of 21 years of age and above. Agreement with Housing Agencies : - The Bank shall enter into agreement with the concerned housing agencies for collection of applications on behalf of the agencies and to get direct refund of unsuccessful applicants financed by the bank within specified time. Margin: - No margin required. Security : - No security required. Maximum Loan : - As per scheme of the agency. Interest rate : - As fixed by bank from time to time. Interest will be charged initially for a period as stipulated by the concerned DCCB and will be non refundable. In case of delay in allotment, repayment, refund of money beyond stipulated period , bak will charge interest as fixed by it. Processing Fee :- As fixed by ACCB/ concerned DCCB. Disbursement: - The loan would be disbursed by the issuance of draft/bankers cheque favoring the concerned agency. Repayment of Loan
y

In case of unsuccessful candidates on receipt of refund from the housing board/Urban development authority etc.

In case of successful applicants

lump sum repayment. In case applicant avails housing

loan from the bank, earnest money can be adjusted from the same.
y y

No prepayment penalty will be levied. Bank may extent the period at its discretion by getting the amount of interest in advance.

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In case of delay of allotment as per scheme, borrower shall repay amount in lump sum on demand, otherwise bank will charge penalty. Documents
1. Two latest Photographs. 2. Proof of residence in the form of copy of Passport, Driving License Voter s ID Card etc. 3. Two Post Dated Cheques in favour of the bank. 4. Signature Proof. 5. Borrower to give an authority that the representative of the bank is to collect refund order/letter of intent/ allotment letter on his behalf from the agency. 6. Loan agreement. 7. Power of Attorney. 8. Declaration for signing in vernacular language.

* Coop Rent Loan Against Rental Incomes Scheme *

Introducing a new scheme for property owners having their property situated in are of operation of the bank and who have let or proposes to et out such properties to PSUs, reputed Govt./Semi-Govt. corporate, banks, financial institution, insurance companies, cooperative societies, trust and MNCs. Eligibility: - Owners of the property who have or propose to let out the same companies/commercial/industrial/software companies, MNcs, Bank, PSUs/Reputed Govt.Semi-Govt. Institution/Organization, Financial Institution, Insurance companies. Owner of properties who have rented out their premises to cooperative bank are also eligible. In case of residential flats/house leased out to Cooperative Bank Officers. Note: - The facility is available only to resident customers and not NRIs.

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Purpose: - For meeting business/personal needs. Loan Amount: - Maximum to the extent of 75% of post TDS rent receivable for a period not exceeding 120 months or unexpired period of lease, whichever is less. (The rent receivable is calculated as per rental/lease agreement and if there is any inbuilt provision for increase in rentals during next 120 months or unexpired period of least/tenancy the same is considered for calculation of loan amount). The minimum loan amount under the scheme is Rs. 1.00 lacs. There is no upper limit but it must be within prudential exposure norms. Security : Primary : - Assignment of lease Rentals. Collateral: - Equitable Mortage of relative immoveable property to the extent of 150% of the proposed loan (For any reason if the relative property cannot be given as security any other commercial or residential property is acceptable. OR Other chargeable securities such as NSCs, IVPs, Banks deposits to the extent of 100% of loan amount. OR 150% cover partly by immoveable property and partly by securities such as NSCs, IVPs, Banks deposits. In case the property/security is in the name of third party, personal guarantee of the owner of assets proposed to be taken as collateral security. Rate of Interest: - As decided by the bank from time to time. Period of Loan: - Maximum period of loan shall be 10 years or unexpired period of lease, whichever is earlier.

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Repayment of Loan: - By way of equated monthly installments from the proceeds of monthly rentals, to be repaid within 120 months or unexpired period of lease, which is less. Margin: - Minimum 25% Processing Charges: - 0.50% of the loan amount. These are changed time to time. Insurance: - Insurance for full market value of properties in the name of borrower(s) to be mortgaged to bank with bank clause. Insurance to cover risk such as fire, riot, earthquake etc. Documents: 1. Loan application. 2. Certified Copy of Less Deed. 3. Proof of income for applicant and lessee. 4. Copy of IT return. 5. Certificate copies of title deeds of the properties leased out and mortgaged along with latest tax receipts. 6. Copy of approved building plan. 7. Authority letter by the borrower to the bank for receiving rent directly from the tenant/lessee and letter of undertaking from tenants/lessee to pay rent directly to bank. 8. Tripartite Agreement between borrower, lessee and the bank. 9. Copy of partnership deed/memorandum and articles of Association (not for individual applicant). 10. Copy of lease/tenancy agreement. 11. Copy of latest tax receipt of the property. 12. Latest IT/WT Assessment, if available. 13. Audited Balance Sheets of Firm/Company. 14. Certificate of outstanding balance in loan a/c against the property. 15. Copy of latest rent receipts ( in case existing tenant/lessee).

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* Cash Credit Facility to Traders and Others *

Name the Scheme Rule No.1 These Rules shall be called The Punjab State Coop. Bank / Central Coop. Bank rules for granting Cash Credit Facility to Traders and others. Rule No.2
1. The bank means The Punjab State Coop. Bank Ltd., or Central Coop. Banks of Punjab. 2. The Board of Directors and the Executive Committee means the Board of Directors and Executive Committee constituted under the Bye-laws of the Bank. 3. Authorized Officer means the Officer authorized by the BOD/Executive Committee of the Bank to receive and take appropriate action on the applications for loans under the scheme. 4. Borrower means and individual, sole proprietor, firm, cooperative society or a company doing manufacturing/ trading business/providing services having an assured income. 5. Cooperative Societies Act means The Punjab Cooperative Societies Act,1961 as amended from time to time. 6. Cooperative Societies Rules means the Punjab Cooperative Societies Rule, 1963, as amended from time to time. 7. Registration means the Registration under the Shops Act or under Company s Act.

of Cash Credit Facility to Traders and Others

Rule No.3 Cash Credit Facility under the Scheme shall be granted for meeting working capital requirements. Rule No.4 The applicant should not have availed cash credit facility from any other financial institution for the purpose. Rule No.5 The maximum amount of Cash Credit Limit under these Rules shall be Rs.25 lac. Rule No.6 The application for cash credit limit shall be made by the borrower on the prescribed form of the bank.

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Rule No.7 The sanctioning of the Cash-Credit by the Bank shall be made only in case it is satisfied of the viability of the Project /proposal. Rule No.8 The borrower shall hypothecate in favour of the bank the entire current assets created besides collateral security of the value of 150% of the Cash Credit Limit sanctioned. Limit upto Rs.50,000/- may be granted with two good sureties only and hypothecation of stock/assets with the Bank. Rule No.9 The borrower shall produce clear marketable title to the property to be mortgaged in favour of the bank to the satisfaction of the bank. Rule No.10 The licensed contractors approaching the Bank for Cash-Credit Facility should give a power of Attorney in favour of the Bank to receive the cheque from Government/ Quassi Govt. Institutions and to encase the same. Rule No.11 Rule No.12 Rule No.13 The Bank shall be at liberty to call for additional/collateral security/securities at any time. The legal expenses, fee, registration charges and other incidental charges incurred in connection with the financing shall be borne by the borrower. At present rate of cash credit traders is 12% and further it shall be determined by financing bank from time to time and debited to loan account. Interest is charged as contract made with the loanee. Penal interest @ 2% over and above the normal rate shall be charged in case of default, on the default amount for the default period. 0.5% concession is allowed to women Rule No.14 The borrower shall maintain the books of account as prescribed by the bank. Borrower shall furnish stock statement as per following periodicity indicating the opening stock, purchases, sales and closing stock. Amount of limit upto Rs.1 lac Quarterly Above Rs.1 lac Monthly

Failure to furnish stock statements will attract penal interest @ 2% p.a. on upstanding amount for period of non-submission of statements.
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Rule No.15

The Cash Credit Limit sanctioned should be kept current by regular drawls and repayments. In other words, the business transaction of the unit should be deposited in the Cash Credit Account.

Rule No.16

The Cash Credit Limit shall be sanctioned for a period of one year. Renewal of the Cash Credit Limit will be allowed by the bank at its discretion based on the performance of the unit and also the operation in the cash credit limit account. Aggregate credits during the year in the limit account should be two times of the sanctioned limit or highest availed limit.

Rule No.17 Rule No.18 Rule No.19 Rule No.20 Rule No.21 Rule No.22

The borrower should insure the assets created out of loan and the policy should be in the joint name of the borrower and the bank with agreed bank clause. The Borrower shall execute all the loan documents prescribed by the bank.

Deleted.

The borrower shall agree to be bound by the provisions regarding arbitration in the cooperative Societies Act and Cooperative Societies Rules. The Borrower should become the nominal member of the bank by paying necessary membership fee as fixed by the Bank. Whenever the borrower fails to discharge the loan as agreed upon the Bank should take legal action against him to recover the loan outstanding with interest and cost. The borrower shall be liable to make good of the expenses and legal charges that has been incurred by the Bank in this regard.

Rule No.23 Rule No.24

Processing fee @ 0.25% shall be charged at the time of sanctioning of the C.C. limit. These charges of 0.25% shall be levied every year. Margin at the rate of 25% shall be maintained on the present value of stock.

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* Various Agriculture Loan Schemes *

Agriculture loan provided in various forms for various agriculture purposes. The various types of agriculture loans are as under: -

A) Short term agriculture loan

Purpose: - Financial assistance to meet cultivation expenses for various crops. Eligibility: - Agriculturists, Tenant farmers and Share Croppers who actually cultivate the lands are eligible for these loans. All categories of farmers - Small/Marginal (SF/MF) and others are included. The borrower should be member of co-operative societies Loan Amount: - Loan amount is worked based on the cost of cultivation incurred for each crop per acre of crop cultivated and 75 % of the cost of cultivation (Scale of Finance) is given as loan. Documents needed to provide:
1. Land records to ascertain cultivation rights. 2. Acreage under different crop. 3. Sources of other borrowings e.g. Co-operative Societies and Banks.

Disbursement of the loan: - As per the cultivation requirements of the crop the loan amount is disbursed in cash and kind (for fertilizer, pesticides etc)

B) Medium Term Agriculture Loan

Purpose: - To purchase Trali and which are helpful in agriculture Eligibility: - He has his own land. The borrower should be member of co-operative societies. Loan Amount: - 75 % of the cost of product (Scale of Finance) is given as loan.

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Nature of Loan: - Cash Credit and Drafts. Repayment of Loan: - After 6 months.

C) Two Wheeler Loan for Farmers

Financing of Two Wheelers to farmers is considered as direct finance to agriculture. The acquisition of Two Wheelers by farmers increases their mobility, saves their valuable time on travel, reduces the cost of traveling, helps in arranging inputs in time and facilitates access to the markets. Bank has drawn a special scheme for financing of Two Wheelers to farmers. The salient features of the scheme are as under Eligibility: - Borrower should be an agriculturist and own agricultural land either in his own name or in the name of his family members. The Age of the borrower should not be less than 21 years at the time of application and not more than 60 years at the time of maturity (repayment of loan). The borrower should be member of co-operative societies Repayment: - The repayment period should not exceed 5 years. The borrower's repayment capacity is to be considered on the basis of crop grown, income from other sources and income of spouse Security: - Hypothecation of vehicle to be purchased with bank loan. In case the sanctioned loan/limit exceeds Rs.25, 000 security of agricultural land also to be taken. The value of security including the value of vehicle should be at least double the value of loan. Limit: - Cost of two wheeler to be purchased should not exceed Rs.50, 000/-

D) Cash Credit Fertilizers

Purpose: - To provide fertilizer to Farmers for production of crops.

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Eligibility: - The Age of the borrower should not be less than 21 years at the time of application and not more than 60 years at the time of maturity (repayment of loan). The borrower should be member of co-operative societies. Nature of Loan: - Cash credit and Cheque. Extent of Loan: - Need based Maximum Rs.24, 000/- per hector only Repayment of Loan: - The loan shall be repayable in 3 years depending upon the activity.

E) Cash Credit Limit to Cooperative Sugar Mills

This is Scheme for Financing Farmers Growing Sugar Cane Crop in Tie up Arrangement with Sugar Mill Acting as Business Facilitator Purpose: To provide Crop Loans for cultivation of sugar Cane under tie up arrangement with Sugar Mills acting as Business Facilitator. Eligibility: Farmers growing and supplying Sugar Cane . Nature of Loan: Cash Credit Extent Of Loan: Need based Maximum Rs.3.00 Lakh Repayment of Loan: 12/18 months. To be synchronized with harvesting of crop

F) Tractor loan
In order to mechanize farming and improve the output of the farmers, the Bank has been giving loans for the Purchase of Tractors.

Terms & Conditions: - :

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The work load with the owner of the tractor should be so that he has to use the tractor for at least 1000 hrs/year.

For the Purchase of the Tractor, the beneficiary availing loan should own or purchase a minimum of 3 Agricultural Implements (including Trailor) to be used with the Tractor.

In the purchase of the first Tractor the loanee has to spend 15% of the total cost of the Tractor (including shares - 10% margin money & 5% shares) & with the second purchase30% of the total cost is to be payment out of his own pocket. spared by the loanee as down

Loan is given only for those Tractors which are Budhni tested and are ISI approved. The payment of the tractor is given to the Supplier Firm, as third party payment.

y y y

The tractor should be registered by the Transport Authority. The insurance of the tractor is must. The repayment period for Tractor Loan is 9 years.

G) Tube well Loan

To bring the Barani unirrigated agricultural lands under irrigation, the bank has been giving loans for installation of shallow Tubewells to the farmers in the State. For the purpose of exploitation of underground water, the State has been divided into 138 blocks which are further earmarked as White, Grey and Dark. Presently, 84 blocks are Dark, where tubewells to the full capacity have since been installed; 16 blocks are Grey where there is some more scope for installation of new tubewells; and 38 blocks are White, where there is greater scope for installing new tubewells. The Bank is a major financier in the installation of tubewells in the Punjab State. Every 3rd Tubewell running in the field in the State is installed with the Credit help of this Bank. Terms & Conditions
y y

Area should not be Dark, but should be White or Grey for installation of new tube well. Unit cost varies from area to area according to the depth of underground water and credit is given up to the actual cost of tube well installation. 82

Repayment period is 9 years, with Grace period of 1 year. Diesel Engine / Electric Motor should be ISI marked. Insurance of Tube well is necessary.

H) Soil cultivation and water management

Under this scheme, the loan is provided for the following purposes :
y y y y y

Land Leveling Sand scraping Under-ground Pipe-lines Reclamation of Alkaline soils Reclamation of Shallow Ravine

Details : Purpose Sand Scrapping (1 hectare) Underground Pipeline (1 ha) If water source is within the field Alkali Soil Reclamation (1 ha) Shallow Ravine Reclamation (1 ha) Units cost (in Rs.) 14,500 11,250 13,400 9,000 10,000

Terms & Conditions: y

Loan Applications under the above scheme Conservation Department, Punjab.

be recommended by the Soil

Applications should be accompanied by the lay-

out plan and estimate cost approved by the Soil Conservation Department. The loanee should have the proper irrigational facilities with him.
y

The loanee is advanced 85% of the total loan. 83

The loan is to be returned within 9 yearly equal installments which includes 1 Grace year. Only ISI marked pipes and other material should be used

Resources: - The Bank raises its resources with the collection of share capital strengthening on its owned funds by taking deposits and borrowings from the NABARD, Punjab State Co-operative Bank Ltd., Chandigarh or from Punjab Government.

* Dairy Development Loan *

Dairy business has been very successful in Punjab. The bank also has a greater role in the success of Dairy Farming in Punjab. The bank's schemes have proved very beneficial for the rural areas of Punjab. Under the Dairy Development Scheme, loans are provided to Individual/Milk Unions for the establishment of two, three, five and ten milch animals units as under: Objectives: a. To increase the income of members of Cooperative Milk Societies helping them to purchase higher yielding cattle. b. To increase the income and supply of milk to Cooperative Milk Producers societies.

Minimum Economic Size: - The Central Cooperative Bank through its branches shall extend loan facility for the purchase of one cow. Eligibility Criteria: I. II. The applicant should be a member of cooperative milk producer s society. He should have cattle shed arrangements enough to house the existing animals and also proposed to be purchased. III. IV. He should be the supplier of milk to the society during at least past one year. He should be the cultivating green fodder or should have definite arrangements for its supply. 84

V. VI.

He should have sufficient experience/knowledge in dairy farming. He should be the nominal member of the Central Cooperative bank.

Amount of Finance: - The bank shall provide loan for one cow with ceiling of rs. 35000/- or the animal whichever is less. Margin Money: - The applicant contributes minimum 15% of the total cost of animal as margin money. However margin for scheduled caste, Backward Class and Economically backward members shall be 10%. Rate of Interest: - The bank shall charge interest @ 10.5 % per annum from the member of the Milk Producers Cooperative Societies which will be subject to change as per prevalent market rates from time to time. Repayment of Loan: - The loan shall be repay\able in 5 years in equal monthly installments along with interest. Securities/documents: - The members shall furnish the following security/document to the Central Cooperative bank.
a. Time pronote b. Guarantee by two persons who should be nominal members of the bank and who should be the owner of at least 2 acre of agriculture land. c. Hypothecation of milk animal to financed by the bank. d. He shall sign and get signed tripartite agreement between the borrower the Cooperative Milk Producer s society and the bank.

Application Form: - The application form for dairy loan will be submitted by the member on prescribed from as per annexure a through the Cooperative Milk Producers Society.

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Appraisal : - The branch Manager of the central Coop. Bank shall visit the farm to appraisal the technical feasibility and economic viability of the proposal. He shall apprise project as per Performa annexed as Annexure B. Procedure to be followed: - An eligible person shall apply for the loan prescribed Performa attached as annexure A to the Branch Manager of central cooperative bank through the Village Milk producer Cooperative society. The President of the milk producer cooperative society shall place the application before the managing committee of the society for consideration of the application for its recommendation to the bank. If the managing committee approves the application then the president shall forward it to the branch manager of the branch of the central cooperative bank in whose area of operation the society falls. After the application along with resolution of the society is received in the branch of the bank the branch manager shall apprise the loan case as the appraisal from (attached at Annexure B). After the appraisal of the loan case the branch manger will sanction the loan and get the necessary documents executed from the borrower. After the execution of documents the manager shall get margin money deposits from the applicant in his saving bank account. The manager shall disburse the loan through draft/pay order/cheque in favor of third party from whom the borrower has purchase cow by debiting the loan account for the amount of loan and saving account for margin money.

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CHAPTER V FINDINGS AND CONCLUSION

Findings of the study

o

Amritsar Central Cooperative Bank is the district level bank and it has 55 branches in rural and urban areas to serve the all types of customers.

o o

ACCB is aided by NABARD and Punjab Govt. bear 50% share of the bank Most of the branches of ACCB are still non-computerized and employees are doing their work manually.

o o o o

Under ACCB most of the staff is old aged and there is a lack skills of new blood. The main purpose of ACCB is to serving the people in both rural and urban area. The procedure getting a loan is very simple and understood able under A.C.C.B. The service of loan granting is very fast under A.C.C. B. A loan can be passed into 3 or 4 days.

The Amritsar Central Cooperative Bank also provide some non collateral loan schemes only on the basis of guarantee like personal loan scheme which benefited to a normal person.

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Conclusion
The repaid changes in the banking sector are creating opportunities and challenges. Increasing size, Breadth, complexity and geographic scope of banking have increased challenges of managing, regulating and supervising banks. Also it has become quite difficult for a bank to a gain a unique market share. Still the bank is old one, and according to market requirements bank increase and develop its products time to time like initially bank provide most of the agricultural loan schemes but now it also preferred to other types of loan schemes which really help to general people. But to meet the competition of market in proper manner Amritsar Central Cooperative Bank Ltd. Need some more hard work and management should pay more attention.

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CHAPTER VI RECOMMENDATIONS
Recommendations
1. If the interest rate has been reduced or has become disfavourable to the customer, bank should inform him. 2. The bank should explain clearly all the terms and conditions of loans that the customer wants to avail in the local language and nothing should be concealed. 3. The bank should act as per the standing instructions of the customers, and thus avoid inconvenience. 4. The bank should keep the information of the Account s of the customer confidential. 5. The sanction of rejection of the loan applied by the customer should be conveyed in writing. 6. The loan documents should be filled in the presence of the customer. 7. There should be complaint boxes installed in the bank that are opened weekly and proper redressal of complaints is done. 8. All the counter staff should be thoroughly trained with all the schemes/rules and regulations of the bank, so that the customer gets one window service. 9. ACCB should open new branches in the Rural and Urban Areas to achieve the targets. 10. Branches should be computerized. 11. Rate of interest should be reviewed periodically. 12. 11 Single men Branches are functioning so, there is a great operation risk in the Bank and management should pay attention about it. 13. In today s world most of the banks provides ATM facility . So to meet competition in the market aCCB should also provide the ATM facility. the

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BIBLIOGRAPHY
Bibliography
I) Documents and Circulars 1. Previous years Reports are analyzed. 2. Documents and Circular II) List of Websites
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. http://www.nios.ac.in/Secbuscour/15.pdf http://finance.indiamart.com/investment_in_india/banking_in_india.html http://en.wikipedia.org/wiki/Banking_in_India http://www.banknetindia.com/banking/bfunc.html http://www.capitalmarket.com/CMEdit/SFArtDis.asp?SFSNO=356&SFESNO=19 http://www.banknetindia.com/banking/ucb.htm http://www.moneyguideindia.com/what-are-co-operative-banks/ http://pbcooperatives.gov.in/PSCB.htm http://www.ecommercejournal.com/news/punjab_state_co_operative_bank_enhance_ its_efficiency_by_means_of_flexcube http://www.punjabcooperation.gov.in/html/pscb_history1.html http://www.scribd.com/doc/17319280/CoOperative-Bank-Mgt http://www.investorwords.com/2858/loan.html http://www.articlesbase.com/loans-articles/importance-of-loans-in-todays-life184411.html http://digilib.petra.ac.id/viewer.php?page=1&submit.x=0&submit.y=0&qual=high&fna me=/jiunkpe/s1/hotl/2008/jiunkpe-ns-s1-2008-33403003-9666-food_luckychapter4.pdf http://www.allbusiness.com/management/125039-1.html http://en.wikipedia.org/wiki/Procedure_(term)

15. 16.

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