future of co

7/31/2019 Future of Co

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iii

ABBREVIATION

PACs Primary Agricultural Credit Societies

UCBs Urban Co-operative Banks

CRR Cash Reserve Ratio

BSRBs Banking Service Recruitment Boards

RCSRegistrar of Cooperative Societies

CRCS Central Registrar of Cooperative Societies


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EXECUTIVE SUMMARY

This project will initially focus on the development of a number of co-

operative banks that can serve as examples to the entire cooperative sector.

The proposed activities will focus on helping selected cooperative banks to

make a successful transition to the private sector, by restructuring their

operations and by acquiring new business skills and capacities. In addition, as

the sector evolves, there will be a focus on encouraging and assisting the

emergence of new cooperative bank to function as viable private sector banks.

Both the existing and the new cooperative bank will need a period of time inwhich to acquire the knowledge and skills required to develop and manage

their business activities and to be able to function effectively in a competitive

market economy.

In principle, the cooperatives were to be member-owned and member-

controlled. Agricultural cooperatives were the central focus of governmentefforts because they served as channels for the provision of subsidized inputs

and credit to the country's farmers.

Looking at the sector as a whole, the studies have identified as a priority need

the creation of a conducive policy and regulatory environment in which the

cooperative banks can become fully self-reliant and viable business entities.

Based on the field investigations, I concluded that effective cooperatives can

make a significant contribution to the economic and social development of the

country. In addition, because of their relatively simple legal structure and

flexibility, for many people, particularly those on the lower rungs of the

economic ladder, cooperatives are often the most effective way to organize

and achieve common economic and social interests

Chapter: I


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Introduction

Introduction Of Bank Definition Origin of the word Bank History of banking in India Traditional Banking Modern Banking Objective of the study


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Chapter: I

INTRODUCTION

Introduction Of BankA bank is an institution that deals with money and credit. Difference

people understand the meaning of a bank in different ways. For a common

man bank means storehouse where money is stored; for a businessman it is a

financial and for a day to day customer it is an institution where he can deposit

his saving.

In reality banks are service organization selling banking services. Banksplay an important role in the economy of any country as they hold the saving

of the public. Provide means of payments for goods and services and provide

necessary finance for the development of business and trade.

Thus bank is a link in the flow of funds from savers to the users. Hence

they should render an efficient customer service in order to retain the present

customer and also to attract the potential customers.

In the past the banks did not find any attraction in the Indian economy

because of the low level of economic activities and little business prospects.

Today we find positive changes in the national business development policy.

Earlier, the money lenders had a strong hold over the rural population. This

resulted in exploitation of small and marginal savers. The private sector banks

failed in serving the society. This resulted in the nationalization of 14

commercial banks in 1969.

Nationalization of commercial banks paved ways for the development of

Indian economy and channel zed financial resources for the enlistment of

weaker section of the society. In 1980, the government was induced to

nationalize more commercial banks. There was a basic change in the banking

concept with a beginning in the nationalization of big commercial banks.


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The involvement of public sector bank transformed the Indian economy. It

was felt that bankers review their services not only as financial intermediary

but also a pacesetter. Adequate financial resources are required for completing

welfare project the entrepreneurs need large scale credit facilities on liberal

terms and conditions , and individual has developed new hopes and aspirations

from banks and the rural and backwards regions strongly claims their right for

a sound and balanced development. For the accomplishment of this entire task

a rational approach is essential.

Definition of bankingAccording to section 5(B) of the banking company Act 1949, define

banking as, The accepting for the purpose of landing and investing of deposit

of money from the public repayable on demand or otherwise withdrawal by

cheque, drafts or order or otherwise.

Origin of the word Bank

Most of the authors are of the opinion that wordbank has been derived from

Italian word banco or banca or French word banque, meaning a bench, other

writers opine that the origin of the wordbank is the German wordbank,

which means a heap of anything or joint stock fund.

Some of the authors opine that the origin of the word banklies in the city of

Italy , where the Lombard Jews were used to keep benches in the market place

to transact the business. Italian word for the bench is banco. Such banco

arrangements were used to be made for smooth exchange of money and other

bills of the business. From those banco arrangements, people used to call them

as the banco personnel or the banco area or some specific banco.
http://www.ourinvesting.com/2011/04/bank-origin-of-word.htmlhttp://www.ourinvesting.com/2011/04/bank-origin-of-word.htmlhttp://zonepoliticon.blogspot.com/2011/03/about-forex-foreign-exchange-market.htmlhttp://zonepoliticon.blogspot.com/2011/03/about-forex-foreign-exchange-market.htmlhttp://www.ourinvesting.com/2011/04/bank-origin-of-word.html


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Gradually, with the mix up of the population and spreading the banco styled

business, same banco word started giving rise to the bank.

Today the word bank is used as a comprehensive term for a number of

institutions carrying on certain kinds of financial business. In practice, the

word 'Bank' means which borrows money from one class of people and again

lends money to another class of people for interest or profit.

History of Banking in India

Without a sound and effective banking system in India it cannot have a

healthy economy. The banking system of India should not only be hassle free

but it should be able to meet new challenges posed by the technology and any

other external and internal factors.

For the past three decades India's banking system has several outstanding

achievements to its credit. The most striking is its extensive reach. It is no

longer confined to only metropolitans or cosmopolitans in India. In fact,

Indian banking system has reached even to the remote corners of the country.

This is one of the main reasons of India's growth process.

The government's regular policy for Indian bank since 1969 has paid richdividends with the nationalisation of 14 major private banks of India.

Not long ago, an account holder had to wait for hours at the bank counters for

getting a draft or for withdrawing his own money. Today, he has a choice.

Gone are days when the most efficient bank transferred money from one

branch to other in two days. Now it is simple as instant messaging or dial a


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pizza. Money have

become the order of the day.

The first bank in India, though conservative, was established in 1786. From

1786 till today, the journey of Indian Banking System can be segregated into

three distinct phases. They are as mentioned below:

Early phase from 1786 to 1969 of Indian Banks Nationalisation of Indian Banks and up to 1991 prior to Indian banking sector

Reforms.

New phase of Indian Banking System with the advent of Indian Financial &Banking Sector Reforms after 1991.

Traditional Banking

Traditional banking is the normal bank accounts we have. Like, put your

money in the bank and they act as a security and you will get only the normal

interests (decided by RBI in our case, FED bank in US).

Modern Banking

Since the early 1990s, the key objective of reforms in the banking sector in

India has been to enhance the stability and efficiency of banks. The enactment

of the Securitisation, Reconstruction of Financial Assets and Enforcement of

Security Interest (SARFAESI) Act, 2002 was an important landmark in the

ongoing reforms in the financial sector. The Act enables the setting up of asset

management companies, addressing the problem of non-performing assets of


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banks and financial institutions, and enhancing creditor rights. India's financial

sector, especially the banking sector, has been a major beneficiary from the

inroads made by information technology. However, technical characteristics

of internet technology have raised new concerns for both bankers and

supervisors. Bankers have identified security risk as a primary concern

relating to E-banking. External threats, such as "hacking," "sniffing,"

"spoofing," and "denial of service" attacks, expose banks to new security risks.

This book of well-researched papers deals with different aspects of current

banking practices in India. The contributions explain and evaluate Indian

banking system in the liberalized regime and offer policy recommendations

for improving efficiency of banks to achieve standards comparable to the best

international practices.

In the recent years, banking sectors have made several changes. Today, most

of the banks all over the world are earning lots of money. One of the

significant facilities which is offered by banks is the usage of plastic money.

The plastic money refers to the credit cards and debit cards. If a person uses

his or her credit or debit card, then he or she earns more discounts or saves

money on the overall purchase. It means that if one is spending then he is also

earning simultaneously. From my point of view what I feel that, this plastic

money is the new innovation of modern banking services.

Apart from the plastic money, the advent of ATM machines into our present

world has bought a drastic change in the banking sector. These banking

machines let an account holder check his account balance, withdraw money

and as well as allow to accomplish other essential banking services. Most of

the basic banking facilities almost come at free of cost.

These banking equipments have made people free from standing in a long

queue. These are even helping the bankers, as now they have to manage a less


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number of walk-in customers. If you have got the debit card then you can get

access to all banking facilities through any ATM from any parts on the world.

In the current scenario, technology has moved much ahead and is providing

excellent services to us. The next most visible innovation in the banking

industry is the Internet banking. These days, one can do banking transactions

through the help of personal computer and mobile phone. Lots of thanks

should go to the modern people who are widely utilising these new

innovations.

OBJECTIVES

1. To know the meaning and features of co-operative bank.2. To know about the importance of co-operative bank.3. To know the weaknesses of co-operative bank4. To know the future of co-operative bank.5. To know where the co-operative banks, actually stand in competition

with commercial banks in India.


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Chapter: II

Co-Operative Bank

Introduction Features of co-operative bank Origin of co-operative bank History of co-operative bank Importance of co-operative bank Role of co-operative bank Main weaknesses of co-operative bank


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Chapter II

CO-OPERATIVE BANK

An Introduction

Co-operative banks are small-sized units organized in the co-operative sector

which operate both in urban and non-urban centers. These banks are

traditionally centered on communities, localities and work place groups and

they essentially lend to small borrowers and businesses.

The term Urban Co-operative Banks (UCBs), though not formally defined,

refers to primary cooperative banks located in urban and semi-urban areas.

These banks, until 1996, could only lend for non-agricultural purposes.

However, today this limitation is no longer prevalent. While the co-operative

banks in rural areas mainly finance agricultural based activities including

farming, cattle, milk, hatchery, personal finance, et cetera, along with some

small scale industries and self-employment driven activities, the co-operative

banks in urban areas mainly finance various categories of people for self-

employment, industries, small scale units and home finance.

Co operative Banks in India are registered under the Co-operative Societies

Act. The cooperative bank is also regulated by the RBI. They are governed by

the Banking Regulations Act 1949 and Banking Laws (Co-operativeSocieties) Act, 1965.

These banks provide most services such as savings and current accounts, safe

deposit lockers, loan or mortgages to private and business customers.

The co-operative banking structure in India is divided into following main 5

categories:

Primary Urban Co-op Banks Primary Agricultural Credit Societies District Central Co-op Banks State Co-operative Banks Land Development Banks

Co-operative banks function on the basis of 'no-profit no-loss'. Co-operative

banks, as a principle, do not pursue the goal of profit maximization.

Therefore, these banks do not focus on offering more than the basic banking


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services. So, co-operative banks finance small borrowers in industrial and

trade sectors, besides professional and salary classes.

Definition:

A Co-operative bank, as its name indicates is an institution consisting

of a number of individuals who join together to pool their surplus savings for

the purpose of eliminating the profits of the bankers or moneylenders with a

view to distributing the same amongst the depositors and borrowers.

Cooperative banks in India finance rural areas under:

Farming Cattle Milk Hatchery Personal finance

Cooperative banks in India finance urban areas under:

Self-employment

Industries Small scale units Home finance Consumer finance Personal finance

Features of co-operative bank

1. Co-operative Banks are organized and managed on the principal of co-

operation, self-help, 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 maximization.

2. Co-operative bank performs all the main banking functions of deposit

mobilization, supply of credit and provision of remittance facilities.


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3. Co-operative Banks provide limited banking products and are functionally

specialists in agriculture related products. However, co-operative banks now

provide housing loans also.

4. Co-operative banks are perhaps the first government sponsored,

Government-supported and government-subsidized financial agency in India.

They get financial and other help from the Reserve Bank of India, NABARD,

central government and state governments. They constitute the most favored"

banking sector with risk of nationalization. For commercial banks, the Reserve

Bank of India is lender of last resort, but co-operative banks it is the lender of

first resort which provides financial resources in the form of contribution to

the initial capital (through state government), working capital, refinance.

5. Co-operative Banks belong to the money market as well as to the capital

market. Primary agricultural credit societies provide short term and mediumterm loans.

6. Co-operative banks are financial intermediaries only partially.

The sources of their funds (resources) are

(a) Central and state government,

(b) The Reserve Bank of India and NABARD,(c) Other co-operative institutions,

(d) Ownership funds and,

(e) Deposits or debenture issues.

7. Some co-operative bank is scheduled banks, while others are non-scheduled

banks. Co-operative Banks are subject to CRR and liquidity requirements as


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other scheduled and non-scheduled banks are. However, their requirements are

less than commercial banks.

8. As said earlier, co-operative banks accept current, saving, and fixed or time

deposits from individuals and institutions including banks.

9. In the recent past, the RBI has introduced changes in interest rates of co-

operative banks also, along with changes in interest rates of commercial

banks. The interest rates structure of co-operative banks is quite complex. The

rates charged by them depend upon the type of bank, the type of loans.

Origin of Co-Operative Bank

The beginning co-operative banking in India dates back to about1904,

when official efforts were made to create a new type of institution based on

principles of co-operative organization & management, which were

considered to be suitable for solving the problems peculiar to

Indian conditions.


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The philosophy of equality, equity and self help gave way to the

thoughts of self responsibility and self administration which resulted in giving

birth of co-operative. The origin on co-operative movement was one such

event-arising out of a situation of crisis, exploitation and sufferings.

Co-operative banks in India came into existence with the enactment of

the Agricultural Credit Co-operative Societies Act in 1904. Co-operative bank

form an integral part of banking system in India. Under the act of 1904, a

number of co-operative credit societies were started. Owing to the increasing

demand of co-operative credit, anew act was passed in 1912, which was

provided for establishment of co-operative central banks by a union of primary

credit societies and individuals.


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History of Co-Operative Bank

The origins of the cooperative banking movement in India can be traced

to the close of nineteenth century when, inspired by the success of the

experiments related to the cooperative movement in Britain and the

cooperative credit movement in Germany, such societies were set up in India.

Now, Co-operative movement is quite well established in India. The

first legislation on co-operation was passed in 1904. In 1914 the

Maclagencommittee envisaged a three tier structure for co-operative banking

viz.Primary Agricultural Credit Societies (PACs) at the grass root level,

Central Co-operative Banks at the district level and State Co-operative Banks

at state level or Apex Level.

In the beginning of 20th century, availability of credit in India, more

particularly in rural areas, was almost absent. Agricultural and related

activities were starved of organized, institutional credit. The rural folk had to

depend entirely on the money lenders, who lent often at usurious rates of

interest.

The co-operative banks arrived in India in the beginning of 20thCentury as an

official effort to create a new type of institution based on the principles of co-

operative organization and management, suitable for problems peculiar to

Indian conditions. These banks were conceived as substitutes for money

lenders, to provide timely and adequate short-term and long-term institutional

credit at reasonable rates of interest.

The Anyonya Co-operative Bank in India is considered to have been the

first co-operative bank in Asia which was formed nearly 100 years back in

Baroda. It was established in 1889 with the name Anyonya Sahayakari

Mandali Co-operative Bank Limited, with a primary objective ofproviding

an alternative to exploitation by moneylenders for Baroda'sresidents.


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In the formative stage Co-operative Banks were Urban Co-operative

Societies run on community basis and their lending activities were restricted to

meeting the credit requirements of their members. The concept of Urban Co-

operative Bank was first spelt out by Mehta Bhansali Committee in

1939which defined on Urban Co-operative Bank. Provisions of Section 5

(CCV) of Banking Regulation Act, 1949 (as applicable to Co-operative

Societies)defined an Urban Co-operative Bank as a Primary Co-operative

Bank other than a Primary Co-operative Society were made applicable in

1966.

With gradual growth and also given Philip with the economic boom, urban

banking sector received tremendous boost and started diversifying its credit

portfolio. Besides giving traditional lending activity meeting the credit

requirements of their customers they started catering to various sorts of

customers viz.self-employed, small businessmen / industries, house finance,

consumer finance, personal finance etc.

Importance of Co-Operative Bank

Co-operative bank forms an integral part of banking system in India.

This bank operates mainly for the benefit of rural area, particularly the

agricultural sector. Co-operative bank mobilize deposits and supply

agricultural and rural credit with the wider outreach. They are the main sourcefor the institutional credit to farmers. They are chiefly responsible for breaking

the monopoly of moneylenders in providing credit to agriculturists. Co-

operative bank has also been an important instrument for various development

schemes, particularly subsidy-based programmers for the poor. Co-operative

banks operate for non-agricultural sector also but their role is small.

Though much smaller as compared to scheduled commercial banks, co-

operative banks constitute an important segment of the Indian banking system.


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They have extensive branch network and reach out to people in remote areas.

They have traditionally played an important role in creating banking habits

among the lower and middle income groups and in strengthening the rural

credit delivery system.

Role of Co-Operative Bank

Co-operative Banks are much more important in India than anywhere

else in the world. The distinctive character of this bank is service at a lower

cost and service without exploitation. It has gained its importance by the role

assigned to them, the expectations they are supposed to fulfill, their number,

and the number of offices they operate. Co-operative banks role in rural

financing continues to be important day by day, and their business in the urban

areas also has increased phenomenally in recent years mainly due to the sharp

increase in the number of primary co-operative banks. In rural areas, as far as

the agricultural and related activities are concerned, the supply of credit wasinadequate, and money lenders would exploit the poor people in rural areas

providing them loans at higher rates. So, Co-operative banks mobilize deposits

and purvey agricultural and rural credit with a wider outreach and provide

institutional credit to the farmers. Co-operative bank have also been an

important instrument for various development schemes, particularly subsidy-

based programmers for poor.

Main Weakness of Co-Operative Bank

The main weaknesses of co-operative banks are as follows:


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1. The vital link in the co-operative credit system namely, the Primary

Agricultural Co-operative Societies, themselves remain very weak. They are

too small in size to be economical and viable; besides too many of them are

dormant, existing only on paper.

2. With the expanding credit needs of the rural sector, the commercial banks

have come in actively to meet the credit requirements of this sector, and this

has aggravated the difficulties of co-operative banks. The theory that co-

operative banks would be buoyed up by the competition from other financial

institutions does not appear to have worked.

3. Co-operative banks are not doing well in all the states; only a few account

for a major part of their business. For example, 75 per cent of total deposits

mobilized by State Co-operative Banks were from only seven states in 1987-

Andhra Pradesh, Gujarat, Karnataka, Madhya Pradesh, Maharashtra,

TamilNadu, and Uttar Pradesh.

4. These banks still rely very heavily on refinancing facilities from the

government, the RBI, and NABARD. They have yet not been able to become

self-reliant in respect of resources through deposit mobilization.

5. They suffer from dangerously low or weak quality of loan assets, and from

highly unsatisfactory recovery of loans. They suffer from infrastructural

weaknesses and structural flaws. They do not look like banks and do not

inspire confidence in the potential members, depositors and borrowers.

6. Poor resource base is main constraint of these banks. Relatively low

percapitabase and less equity base due to non-participations of the members

in the financial activities and limited area of operation is becoming a

permanent obstacle in the progress of this sector.


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7. Poor profit position and burden of huge accumulated losses of several co-

operative banks has threatened the very survival of these banks. The amount

of cost of management of this sector has adversely affected its profitability.

8. Most of the Co-operative banks are suffering from the lack of professional

management. In the deregulated environment and stiff competition in the

banking sector, do to lack of the professionalism in carrying out banking

activities, the weakness of these banks has become more prominent.

9. Many co-operative banks even now continue to follow age-old system and

procedures, which are not conductive in the present technologically driven

banking environment. Except some Co-operative banks, technological

development in Information Technology or computerized data managementis

conspicuously absent.

10. There is a lack of proper governance. Corporate Governance has great

relevance in the present environment. As there is no formal system of

corporate governance in co-operative banks, many banks have become the

hot bed of political patronage, unscrupulous financial practice and gross

mis-management.

11. Another problem arises out of the duality of control over them i.e. thesebanks are organized under dual control of RBI and as well as respective state

government. Apart from the intervention of the apex bodies, the Government

is also found to exercise control in various ways on these banks. Government

intervention in the management, administration and business operation of co-

operative banks has made the institution lose his own distinct character.


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12. They suffer from too much officialisation and politicization. Undue

governmental interventions have prevented them from developing steadily as

a self-reliant and resilient credit system. Most of them are headed by

politicians.

13. They unduly depend on government capital rather than member capital.

There is no active participation of their members in their working, which can

come about if they work with members' money rather than government

largesse.


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Chapter: III

Future of Co-Operative Bank

Technology improvements in co-operative bank Employee recruitment Customer Merger Commercial bank v/s co-operative bank


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CHAPTER III

FUTURE OF CO-OPERATIVE BANK

1.Technology Improvements in Co-Operative BankThe bank faced challenges of Automation and timely reconciliation of

inter-branch transactions. Automation of the existing loan process. Preparation

of specific manually intensive Reserve Bank of India reports. Obtaining a

clear view of activities at each of Banks branches. And obtaining details of

the non-performing assets at all the branches.

With the implementation of BIBAS on Microsoft Windows 2000 Server,

they are able to handle customer queries and transactions far more efficiently.

There has been a definite improvement in the service levels of all our

branches.

Cooperative Bank sought to accelerate its growth by increasing the range and

efficiency of its services, expanding its customer base, attracting larger

deposits, and minimizing cost of operations. With the implementation of

Nelito Systems Cooperative Bank has been able to provide multi-lingual

solutions for the convenience of its customers, improved and more efficient

customer services, as well as increased staff productivity.

Their requirements of automated branch banking and support automatic

teller machine transactions. They can also plan to incorporate the ability for

customers to bank at any branchnot just the one where their account was


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locatedinto its existing branch automation system, for the further

convenience of its customers. By adopting such latest technology bank will

able to get cost-to-benefit and increase its product capability.

http://www.spiritofchennai.com/careerguide/banking.htm

nelito.com/08_01_Contai%20Bank_Comprehensive%20Banking%20Solutio

n%20Ushers%20in%20New...

2. Employee Recruitment

Banking has emerged as one of the most challenging sectors in the country.

Openings are available at various levels, from Bank Clerical to Probationary

Officers (PO). There is great job security and the salary is very good, besides

the perquisites of loans for employees. It is a lucrative career: till recently

careers existed only in nationalized banks, but with liberalization, a host of

private banks have been set up. As a result, demand for trained professionals

has increased substantially. The co-op banks offer better salaries but then the

job security is also less.

Recruitment for the sector banks is done through the Banking Service

Recruitment Boards (BSRBs). The advertisements for recruitment appear in

newspapers as well as the Employment News. Recruitment is done on the

basis of a written test.

It is held on Sundays. All other sections contain objective-type questions. The

descriptive paper can be answered in English or Hindi.

It is sure that in future, the opening would be available at various levels, there

would be great job security and the salary would also be very good, besides

the perquisites of loans for employee, empowerment, and profit sharing to the
http://www.spiritofchennai.com/careerguide/banking.htmhttp://www.spiritofchennai.com/careerguide/banking.htmhttp://www.spiritofchennai.com/careerguide/banking.htm


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employee and proper working conditions. Motivation factor are very

important for employee as well as organization. The advertisement for

recruitment would appear in newspapers and the job portals. Bank will also

conduct online test for people who wish to acquire job in a bank. Employee

recruitments in co-operative banks will develop in at par level with other

commercial banks and financial companies.

If the co-operative banks apply all the things, it could surly reach to a very

high level in the market and the main benefit is that they will get the best

employees along with their skills. So, that best employees should be retained

and they can do best possible work.

3. Customer

A Customer is a person who is using any or all of the services offered by thebank. For example:

A Person who has deposited 10,000 in the bank in a CD

A Person who has taken a Loan of 100,000 from the bank A Person who has a checking account with the bank. etc.

The co-operative bank should maintain inter-personal relationship with itscustomers. They should adopt Customer Relationship Management (CRM)tool that help bank to manage customer relationships in an organized way.

Customer relationship management includes:

- CRM processes that help identify and target their best customers, generate

quality sales leads, and plan and implement marketing campaigns with clear

goals and objectives;

- CRM processes that help co-operative bank to improve customer satisfaction

and provide the highest level of customer service to the most profitable

customers


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- CRM processes that provide employees with the information co-operativebank need to know their customers' wants and needs, and build relationshipsbetween the bank and its customers.

Customer relationship management tools include software and browser-basedapplications that collect and organize information about customers. Forinstance, as part of their CRM strategy, a business might use a database ofcustomer information to help construct a customer satisfaction survey, ordecide which new product their customers might be interested in.

In India overall 50% age group people are youths from 20-25 age so, already

the middle age people are retained customers of them but, today the banks

must concentrate on the needs of youth and provide them the required facility

like debit card, credit card, educational loan, etc.

To be successful, you need to add value for your customer, by distinguishing

between what banks are selling and what their customer is buying. Take a

broad view of banks customer's needs and deliver something that goes beyond

the basic product purchase.

http://wiki.answers.com/Q/Who_is_a_customer_of_a_bank#ixzz1XPOxm3yV4. Merger

The combination of one or more corporations, or other business entities

into a single business entity; the joining of two or more companies to achieve

greater efficiencies of scale and productivity

Mergers can be broadly classified into three types.

vertical mergers, horizontal mergers, And conglomerate mergers.

Let us understand each of these types here under-

Vertical mergers: Merger between nationalized or commercial bank with co-

operative bank.

E.g. sangali co-operative bank had merged with ICICI bank
http://wiki.answers.com/Q/Who_is_a_customer_of_a_bank#ixzz1XPOxm3yVhttp://wiki.answers.com/Q/Who_is_a_customer_of_a_bank#ixzz1XPOxm3yVhttp://wiki.answers.com/Q/Who_is_a_customer_of_a_bank#ixzz1XPOxm3yV


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Horizontal mergers: Co-operative bank merging with co-operative bank

only.

Conglomerate mergers: Co-operative merging with NBFCS

In India, there are many co-operative banks with limited amount of

capital. If these co-operative banks come together and merger with one

another, so they will become strong and can compete with other commercial

banks.

E.g. there are 27 nationalized banks in India and they all together have a

comprehensive share in Indian banking Industry. In Contradictory to this

approximately in India there 9000 co-operative banks existing in India but

there share in Banking Industry is not satisfactory. There is a firm possibility

that if this big quantum of cooperative banks get merged themselves to

function together and form a big bank then they will too have strong stand in

Banking Industry.

In accordance with the RBI guidelines, a cooperative bank can merge

only with another cooperative bank located in the same state or with a

cooperative bank registered under Multi State Cooperative Societies Act.

Mergers and acquisition will be permitted only if the acquirer bank

assures protection of deposits said the RBI in its guidelines. In case of

acquired bank having a negative net worth, the acquirer should on its

own or with the support of state government assure protection of

deposits.

The support from the state government should be upfront as part of the

process of merger.


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The Reserve Bank has further stated that in all cases of merger and

amalgamation, the financial parameters of the acquirer bank post merger

will have to conform to the prescribed minimum prudential and

regulatory requirement for urban co-operative banks.

The realisable value of assets will have to be assessed through a process of

due diligence. The application for mergers would have to submit to the

Registrar of Cooperative Societies/Central Registrar of Cooperative

Societies (RCS/CRCS).

In addition to this the acquirer bank will have to forward a copy of thescheme to the Reserve Bank along with the draft scheme, valuation report

and other information relevant for consideration of the scheme of merger.

The Reserve Bank will examine the scheme with reference to the financial

aspects and the interests of depositors based on the criteria and convey its

decision to the concerned State RCS and in case the acquirer is a multi-

state cooperative bank, to the CRCS and the RCS of the State in which

the acquired bank is situated.

www.livemint.com/articles/.../Cooperative-banks-back-in-busi.html...

5. Commercial bank v/s co-operative bank:

Although there is a stiff completion between co operative banks themselves

but the point to focus for co operative is to give a strong competition to

commercial banks. Even though commercial banks are way ahead than the co


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operative banks, but co operative banks are growing faster than the

commercial banks which itself indicates that they are nearing the phase to

compete commercial banks.

The following are the points through which we can understand the

comparison between commercial banks & co-operative banks:

RegistrationIn India, the Commercial Banks are required to be registered under Banking

Regulation Act, 1949.

In India, the Co-operative Banks are required to be registered under the Co-operative

Societies Act, of the concerned state.

Main ObjectiveThe main objective of a Commercial Bank is to accept deposits from public for the

purpose of lending to industry and commerce.

The main objective of a Co-operative Bank is to accept deposits from the members

and the public for the purpose of providing loans to farmers and small businessmen

with a motto of service.

Availability of FundsMassive funds are available at the disposal of Commercial Banks.Limited funds are

available at the disposal of Co-operative Banks.

Area of OperationCommercial banks operate over a larger area. Some commercial banks even have

branches in foreign countries.

The area of operations of Co-operative Banks is limited and mostly confined to

State.

They do not operate at national level or international level.


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NationalisationAt present 20 Commercial Banks have been nationalized in India. In India Co-

operative Banks are not nationalised.

Merchant Banking ServicesCommercial Banks provide merchant banking services such as advising the

companies regarding the public issue of shares.Co-operative Banks do not provide

merchant banking services.

Mutual FundsCommercial Banks in India such as Canara Bank, Bank of India, State Bank of

India, do operate mutual funds.

At present co-operative banks in India do not operate mutual funds.

Basis of operationCommercial banks operate on the commercial principles. They operate to earn a

profit.

The basis of operations is on co-operative lines, i.e. service to its members and the

society.

Rate of InterestThe Commercial Banks provide a lesser rate of interest as compared to co-operative

banks.The Co-operative Banks provide a little higher rate of interest on deposits as

compared to commercial banks.


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Chapter: IV

Bank Profile

Dombivli Nagrik Sahakari Bank Profile

Way back in 60s Dombivli was a town with a population of 2 to 3 lacs. The

traditional houses, chawl type structures, small bunglows (popularly known as"wadas") muddy roads was the introduction of the town. The population

mainly comprised of office goers and small traders at that time

Few enthusiastic persons gathered together with a common goal to make

available the banking facility to the common man of the commonest. They had

an aim that any person in need of genuine financial difficulty should have a

source for raising loan and such person should not be a prey of traditional

moneylenders. The dream of these persons came into existence by bearing a

name i.e. Dombivli Nagari Sahakari Bank Ltd. on 6th September 1970

Now, in retrospection, it is really incredible to note that the Dombivli town has

grown up as city with population of 10 to 12 lacs. "Wadas" and "chawls" lost

their existence and numberless new multi storied buildings have occupied

their floors over a period of last 25 to 30 years. The outlook of Dombivli town

has entirely undergone change


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Of course, Dombivli Nagari Sahakari Bank did not lag behind. Its roots spread

all over the Dombivli land and blossomed in the form of ten branches, not to

mention that the bank which is now known as "Dombivli Bank" opened its

branches at Kulgaon (Badlapur), Ambernath, Shahapur, Bhiwandi, Titwala,

and in most rural and backward area like Talasari

The bank, which had a deposit base of some Hundreds of rupees in the initial

years, has registered a deposit figure of Rs. 1002.65 crores. The same progress

applies so far as loan and advances are concerned. It has so far assisted

thousands of people from all walks of life by lending Rs. 662.79 crores.

The ownership of Dombivli Bank is being trusted upon the shoulders of

almost 46,601 shareholders who are the respected members of bank

The "Scheduled Bank" status was conferred upon Dombilvli Bank by Reserve

Bank of India in 1996a recognition in the entire banking industry

Today Dombivli bank has not restrained itself only to banking services, but is

also committed for extending financial help for noble causes to many of the

social, educational, and cultural institutions of the community at large. Bank

passes on 1% of its net profit to such deserving institutions for their inherent

growth and development.

The Board of Directors of today is desirable combination of well educated and

positioned persons having vast experience in various fields including banking.

They have a good part to play in many of the social activities of Dombivli and

country

The hands of the members of the Board of Directors are further strengthened

by four hundred and odd numbers of employees who are the real chariotpullers


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Dombivli Nagari Sahakari Bank Ltd. is a Bank, which has gained the

confidence of millions of customers is functioning for the customers and will

be devoting its life for the customer for may many years to come.

D.N.S.B. offers a wide range of Corporate products for Corporate & Small

Businesses

Bank Guarantee:

D.N.S.B offers non-fund facilities of providing performance & financial

guarantees to its constituents. Financial guarantees are issued in lieu of earnest

money/ tender deposit /retention money. Performance guarantees are normally

issued for guaranteeing the performance of machinery/ goods supplied or for

satisfactory completion of contracts

Bill Discounting:

Demand Bills

Usance Bills

Documentary Bills

Purchase Bill Discounting

Letter of Credit Backed Bill discounting

Letter of Credit:

D.N.S.B. offers letter of credit for transactions. The basic objective of letter

of credit is to facilitate orderly movement of trade. Letter of credit can be on

demand basis or Usance basis

Term Loan

Cash Credit


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Priroty Sector Lending


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ICICI Bank Profile

ICICI Bank is India's second-largest bank with total assets of Rs. 3,997.95

billion (US$ 100 billion) and profit after tax of Rs. 41.58 billion for the year

ended. ICICI Bank is second amongst all the companies listed on the Indian

stock exchanges in terms of free float market capitalization. They also

increased their ATM network from 4,713 ATMs to 5,219 ATMs and

presence in 18 countries. ICICI Bank offers a wide range of banking products

and financial services to corporate and retail customers through a variety of

delivery channels and through its specialized subsidiaries and affiliates in the

areas of investment banking, life and non-life insurance, venture capital and

asset management. The Bank currently has subsidiaries in the United

Kingdom, Russia and Canada, branches in Unites States, Singapore, Bahrain,

Hong Kong, Sri Lanka, Qatar and Dubai International Finance Centre and

representative offices in United Arab Emirates, China, South Africa,

Bangladesh, Thailand, Malaysia and Indonesia.

Background

ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian

financial institution, and was its wholly-owned subsidiary. ICICI's

shareholding in ICICI Bank was reduced to 46% through a public offering of

shares in India in fiscal 1998, an equity offering in the form ofADRs listed on

the NYSE in fiscal 2000, ICICI Bank's acquisition of Bank of Madura Limited

in an all-stock amalgamation in fiscal 2001, and secondary market sales by


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ICICI to institutional investors in fiscal 2001 and fiscal 2002. ICICI was

formed in 1955 at the initiative of the World Bank, the Government of India

and representatives of Indian industry. The principal objective was to create a

development financial institution for providing medium-term and long-term

project financing to Indian businesses. In the 1990s, ICICI transformed its

business from a development financial institution offering only project finance

to a diversified financial services group offering a wide variety of products

and services, both directly and through a number of subsidiaries and affiliates

like ICICI Bank. In 1999, ICICI become the first Indian company and the first

bank or financial institution from non-Japan Asia to be listed on the NYSE.

In October 2001, the Boards of Directors of ICICI and ICICI Bank approved

the merger of ICICI and two of its wholly-owned retail finance subsidiaries,

ICICI Personal Financial Services Limited and ICICI Capital Services

Limited, with ICICI Bank. The merger was approved by shareholders of ICICI

and ICICI Bank in January 2002, by the High Court of Gujarat at Ahmedabad

in March 2002, and by the High Court of Judicature at Mumbai and the

Reserve Bank of India in April 2002. Consequent to the merger, the ICICI

group's financing and banking operations, both wholesale and retail, have been

integrated in a single entity.

Products and services of ICICI Bank Ltd

Given below is an all-inclusive list of products and services of ICICI BankLtd:

Personal Banking

Accounts and Deposits1. Salary Account2. Savings Account3. Recurring Deposit4. Fixed Deposit


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5. Special Savings Account6. Privilege Banking7. Security Deposits8. Life Plus Senior Citizen Services9. [email protected] Education Plan11.Resident Foreign Currency (Domestic) Account12.EEFC Account13.No Frills Account14.Advantage Woman Savings Account15.Rural Savings Account

Outward Remittance1. Tax Saver FD2. Freedom Savings Account3. Young Star Account

Loans1. Personal Loans2. Home Loans3. Two wheeler Loans4. Car Loans5. Loan Against Securities6. Commercial Vehicle Loans7. Construction Equipment Loans8. Loan Against Gold Ornaments9. Retail Assets Branches10.Pre-approved Loans11.Flexi Cash12.Loan@Click

Cards1. Commercial cards2. Debit Card

Investments1. GOI Bonds2. ICICI Bank Bonds3. IPO4. Mutual Funds5. Forex Services6. ICICI Bank Pure Gold


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7. Senior Citizens Savings Scheme, 2004Insurance

1. Life Insurance2. General Insurance

Online Services1. Funds Transfer2. Bill Payment3. Ticket Booking4. Special Promotions & Offers5. Receive Funds6. iMobile7. Online Tax Calculation8. Shopping9. Smart Money Order10.Prepaid Mobile Recharge11.Share Trading12.Account-2-CardFT13.Online Loans and Credit Cards14.Charity

Wealth Management

Demat Services

NRI Banking

Money Transfer1. Web Based Cheque Transfer2. NetBanking Transfers/Hong Kong3. Donate2India4. Web Based Wire Transfer5. Wire Transfer/SWIFT details6. Banks/Exchange Houses7. Foreign Currency Cheque

Accounts

1) Savings1. NRE Savings


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2. NRO Savings3. RFC Savings

2) Fixed

1. NRO Fixed Deposit2. NRE Fixed Deposit3. RFC Fixed Deposit4. FCNR Fixed Deposit5. NRO Recurring Deposit6. NRE Recurring Deposit

3) Special Accounts1. Rupee Plus Plan2. NRI Edge3. Student's Accounts4. Seafarer's Accounts

Insurance1. Life Insurance2. General Insurance

Investments1. Online Share Trading2. Offshore Bank Deposits

Corporate Banking

Commercial Banking1. Global Trade Services2. General Banking3. Corporate Internet Banking4. Cash Management Services

Custodial Services1. Derivatives clearing2. Equities and Fixed Income Instruments3. Fund Accounting4. Custodians for ADR/ GDR issues

Investment Banking1. Advisory Group (MAAG)2. Mergers and Acquisitions3. International Syndication Group


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International Banking1. VOSTRO Accounts2. Automated INR Payment Services3. Cross Border Trade Services

Technology Finance1. Technology Development and Commercialisation (TDC) programme2. TI Programme3. SPREAD Programme

Business Banking

Transaction Banking & CMS1. Prepaid Current Account2. Roaming Current Account3. Exchange Earners' Foreign Currency Account4. Made2Order Account5. Local Current Account6. Elite Current Account7. Collections8. Trade Current Account9. Payments

Financing Your Business1. Vendor Bill Discounting2. Business Advantage Loan3. Vendor / Dealer Finance

Trade Services1. Bank Guarantee2. Letter of Credit3. Bullion Consignment Business4. Export Bill Negotiation Escrow Account5. Import Finance6. Forex Services7. Export Finance

Agri & Rural Banking

Agri Corporates1. Factoring


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2. Forex & Derivatives3. Agri Investment Banking Solutions4. Mid Cap Credit

Agri Traders & Processors1. Long Term Loans2. Working Capital Loans3. Loan against warehouse receipt

Microbanking1. Micro Savings2. Micro Credit


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Chapter V

Research Methodology, Limitations & Data Analysis

Research Methodology:

1) The research has been based on the collection & analysis of primary &secondary data.

Primary Data The primary data was collected by preparingstructured questionnaire and schedule the questionnaire were filed in

by customers and schedule was filled in by taking interviews. The

data collected is on the basis of Sampling Method and not on

Census Method

Secondary DataThe secondary data was collected from publisheddata & report, viz, circulars, annual reports & websites.

Data AnalysisData processing & analysis was done classification& tabulation, bar diagrams were prepared by taking into

consideration the data collected.

Limitations:

1) Analysis is based from data collected from Dombivli & kalyan areaonly.

2) Time limited of the study is 3 months.3) The data is collected from 2 bankers i.e. from each bank it is collected

from 2 bankers.

4) The data collected is based on the Sampling Method and not on CensusMethod; hence it may not be completely appropriate.

5) The study covers DNSB & ICICI.


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Data Analysis

Data Analysis form Bank office Staff1. Employee Loyalty

EMPLOYEE

LOYALTY

DNSB ICICI

YES (%) NO (%) YES (%) NO (%)

50 50 100 NIL

Table no.5.1

Career opportunity

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

DNSB ICICI

YES NO


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GROWTH DNSB (%) ICICI (%)

Fast 66 100

Slow 34 NIL

Stagnant NIL NIL

Table no.5.2

Technology improvement

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

DNSB ICICI

FAST SLOW STAGNANT


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TECHNOLOGY

IMPROVEMENT

DNSB ICICI

YES (%) NO (%) YES (%) NO (%)

90 10 100 NIL

Table no.5.3

Product and services provided by the bank

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

DNSB ICICI

YES NO


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PRODUCT AND

SERVICES

DNSB ICICI

Debit Card 100 % 100%

Internet Banking 100% 100%

RTGS & NEFT 100% 100%

Flexi Deposit NIL 50%

Bancassurance 50% 50%

Table no.5.4

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

DNSB ICICI

DEBIT CARD INTERNET BANKING RTGS $ NEFT FLEXI DEPOSITE BANCASSURANCE


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Data Analysis form customers

1. Customers Loyalty

CUSTOMER

LOYALTY

DNSB ICICI

YES (%) NO (%) YES (%) NO (%)

36.67 63.33 53.33 46.67

Table no. 5.5


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2.Customer satisfaction towards servicesSERVICES PROVIDE

BY THE BANK

DNSB ICICI

YES (%) NO (%) YES (%) NO (%)

Electronic Services 76.67 23.33 100 NIL

Lending Facility 66.67 33.33 63.33 36.67

Depository Services 80 20 56.67 43.33

Infrastructure 50 50 73.33 26.67

Employee Behavior 86.67 13.33 43.33 56.67

Working Hour 93.33 6.67 73.33 26.67

Table no.5.6

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

DNSB ICICI

YES NO


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3. Intimating customer regarding new product and scheme

Table no.5.7

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Category 1 Category 2 Category 3 Category 4

Column1

Series 2

YES

INTIMATING

CUSTOMER

REGARDING

NEW PRODUCT

AND SERVICES

DNSB ICICI

YES (%) NO (%) YES (%) NO (%)

40 60 53.33 46.67


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4. Customer interested in advance technology

ADVANCE

TECHNOLOGY

PRODUCT

AND SERVICES

DNSB ICICI

YES (%) NO (%) YES (%) NO (%)

Debit Card 70 30 56.67 43.33

Internet Banking 40 60 76.67 23.33

RTGS & NEFT 46.67 53.33 56.67 46.33

Flexi Deposit 33.33 66.67 63.33 36.67

Bancassurance 66.67 33.33 60 40

TABLE NO.5.8

0%

10%

20%

30%

40%

50%

60%

DNSB ICICI

YES NO


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55/58


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Suggestions:

1.

DNSB should try to employ young freshers for employment in their banks. This may bedone through campus interview & placement from Colleges, etc

2. India is having best I.T service providing companies in the world. Hence Indian Banksshould try to avail & develop their I.T implementation from these reputed I.T service

providing companies

3. To cope up with the current competitive market DNSB should try to provide services likeMutual Funds.

4. Orientation Program of the staff should be organized frequently by the Banks.

5. Customers must be made known the technical knowledge in banking. For e.g. Plastic cardsi s common name for biometric ATM, Debit card RTGS, & e-cheque, etc. This should be

made known to the customers by the banks.

6. Both the banks should attract customers of senior & learning age group, By this the spreadof banking activity amongst the society wil increase. DNSB is providing a special scheme

for student but they should do proper marketing of it in order to gain more learning group

customers.


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Conclusion

Cooperative banking is retail and commercial banking organized on a

cooperative basis. Cooperative banking institutions take deposits and lend

money in most parts of the world.

Cooperative banking, as discussed here, includes retail banking carried out by

credit unions, mutual savings banks, building societies and cooperatives, as

well as commercial banking services provided by mutual organizations (such

as cooperative federations) to cooperative businesses. The cooperative bank in

India plays an important role even today in rural financing.

In India, the Co-operative Banks are required to be registered under the Co-

operative Societies Act, of the concerned state. The main objective of a Co-

operative Bank is to accept deposits from the members and the public for the

purpose of providing loans to farmers and small businessmen with a motto of

service. The area of operations of Co-operative Banks is limited and mostlyconfined to state.

They do not operate at national level or international level. The basis of

operations is on co-operative lines, i.e. service to its members and the society.

The Co-operative Banks provide a little higher rate of interest on deposits as

compared to commercial banks.

The Cooperative bank should provide business advisory and training servicesdirectly to the cooperatives in their place of operations. And also provide On-

the-job training for managers and their employee.

future of co

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