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1.1 INTRODUCTION
In an organization there will be a normal of activities carried on like production, Marketing, planning, financier etc., among all these faineances plays a major role, Which made to study on this. Finance came to studied as a part of Economics before the turn of the present category formation of large sized undertakings by consolidating the smaller ones brought before the Managements the problem of financing to these enterprises. The study of potentiality of different securities as a source of procuring funds from outside world & the role & function of institutional agencies continue to be emphasized during 1921. The problem of financing ensured a new dimension in the IInd world war. In 1940s financial wizards continued to be concern with the necessity for choosing sells a financial structure as would be able to with stand stress & strains of the part war adjustments. In 1960s & 70s period was marked by a very faithful & exciting Era for a nor of alternative developments. The financial manager started thinking on such important issues. As aggregate stock prices, business sale & etc. The dimension of Business financial that was earlier limited to period but in recent years broadened according today-to-day operations. Finance is regarded as lifeblood of an Enterprise. This is because in the modern money oriented of all Economy finance is one of the basic foundations of all kinds of economic activities. It is the master key. Which provides accedes to all sources for being employed in manufacturing activities. It has been rightly said that business needs money to make more money, however, it also true that money begets more money only when it is properly managed: therefore efficient management of every business enterprise is closely linked with efficient management of its finance.

1.1.1 Meaning of Business finance: Business finance explains the two terms. They are Business & Finance . In common speaking the word Business is used to denote merchandising the operation of some sort of a shop or store. Large or small. It is however giving too narrow. Definitions: According to Bonneville & Dewey = Financing consists in the raising providing & managing of all the money or funds of any kind used in connection with the business. According to Prather & wert, Business Finance deals primarily with raising administrating & distributing funds by privately owned business units operating in Non financial fields of Industry. Function of Business Finance: Recurring finance function Non- Recurring finance function

A. Recurring function: Recurring finance functions Encompassed all such Financial activities as are carried out regularly for the efficient conduct of a firm planning of funds. Placing of funds, allocation of funds, income & controlling the uses of funds are the contents of recurring finance function. Planning for funds Rising of funds Allocation of funds Allocation of income Control of funds

B. Non-recurring functions: It refers to the use of functional activities that a functional activity has to prefer very infrequently, preparation of financial plant at the time of promotion of the company. The Financial readjustment in time of liquidity crisis, valuation of the firm at the time of merger Success full handles of such problems.The financial sector plays a major role in the Mobilization & allocation of financial savings. Financial institutions. Instruments & markets & which constitute the financial resources from the net savers to net borrowers, the gains to the real sector of the economy. 3

Therefore, depend on how efficiently the financial sector performs this basic function of intermediation so that the transaction cost is kept minimum. The banks form the most important segment of the financial sector. Deregulation of the banking industry through the abolition of the administrated rates for the deposits & loans gave the banks the freedom in fixing prices for their products to compete effectively with Non bank intermediaries, the banks were permitted to undertake newer activities live investment banking. Securities trading & insurance business through on selective basis. The banks were forced to pay maximum attention on to operational efficiency so that their transactions costs remained at the Minimum. A) Origin of Banks & Banking Business Banking as kind of business is of recent origin but traces of banking & banking institution can be right seen from the ancient past. However its form scope & function went on changing through time. Banking system occupies an important place in a nations economy. A banking institution is indispensable in a modern society. It plays a pivotal role in the economic development of a country and forms the core of the money market in an advance country. The definition of business of banking is given in the Banking Regulation Act, 1949. According to section 5(b) of the Act, banking means The accepting, for the purpose of lending or investment, of deposit of money from the public, repayable on demand or otherwise, and withdraw able by cheque, draft or otherwise. In outline of money, crow her maintains that the present day banker shows traces of each of 3 ancestors. Like the merchant, he still makes a specialty of financing foreign trade, like the money lender, he still collects the saving of one set of persons lends them to another set of persons but the unique function of the banker is the provision of a convenient mechanism by which people can make payments to each other without having to walk around each others houses with bags of coins. The origin of word bank is shoved in mystery according to one viewpoint; its derived from Italian word banchi banchari. According to another viewpoint its derived from German word banco. 4

B) Meaning & Definition of Bank Precisely speaking a bank is the one which accepts deposits from the public &lends money. The views of some eminent scholars are quoted below: In the words of Prof. Sayers, A bank is an institution whose debts are widely accepted in settlement of other peoples debts to each other. According to Findlay Shiras, A bank is a person firm or company having a place of business where credits are opened by deposits or collection of money or currency or where money is advanced or loaned. Section 7 of banking regulation act 1949 makes it essential for every company carrying on the business of banking in India to use as past of its name at least one of the words banks, banker, banking or banking company. C) Indian Banking System Reserve Bank of India

Banking Institutions

Commercial Banks

Regional Rural Banks

Cooperative Bank

Among the banking institution in the organized sector, the commercial banks are the oldest institutions having a wide network of branches. For financing agriculture and allied activities in the rural areas, co-operative credit societies and central co-operative banks have been participating since long. Commercial banks began their active participation after the nationalization of major banks in 1969.

Since, the study focuses on co-operative banks,(based on case study conducted in the Kapurthala central cooperative bank ltd. Kapurthala). Therefore cooperative banks are discussed in detail forth with. Classification of bank: Commercial bank Investment or Industrial Bank Exchange Bank Co-operative Banks Land development Banks Saving Bank Central Bank Commercial banks perform all the business transactions of They accept these deposits, which are

A. Commercial Bank:

a typical bank Commercial banks accept three types of deposits. The savings Bank deposits, fixed deposits & current deposits. repayable on demand or on short notice. As such, they send or invest only for shoot durations. They provide funds only short term funds of trade & commerce. The commercial banks confine their activities to day to-day functions of trade & industry. Since the commercial banks are expected to meet immediate requirement of depositors, they cannot invest creditors & our drafts. The commercial banks render an important service by providing to its customers a simple means of exchange B. Industrial banks or investment banks: Investment Banks are provides fixed capital or long term loan to industries. As they finance industries they are called industrial banks. They are also called investment banks as they invest their funds in subscribing to the shares & debenture of industries. The main functions of industrial Banks are : They grant long term loan to industries. They subscribe to the share capital & dentures of industries. 6

They under write shares & debentures Provide technical assistance Participating in the management by having their representatives in the board of Advice the type of industry to be set up

industry C. Agricultural Banks: These are the banks provide finance to agriculture. As they finance agriculture mainly they are called agricultural Bank. Agricultural Banks are in our country based on co-operation system They are of 2 types. 1. Agricultural co operative banks 2. Land development banks. Agricultural co-operative banks land development banks. The farmer, provides shooter finance to purchase fertilizers, pesticides, seed & the payment of cages where as the later provided long term finance to the farmers to purchase agricultural machinery installing pump set, improving plants, repayment of old debts, construction of Irrigation work else. Land development banks: LDB's are those banks which provide finance to the poor people who are having no land , who are willing to take land's by providing some finance. D.Exchange Banks: These are the banks finance mainly the foreign Exchange business of a country they are called exchange banks because they finance mainly for the foreign exchange business the main functions are: Purchasing discounting, export & import of bills Collecting exports Bill of exchange on behalf exporters accepting Bill of exchange on behalf of Importers Provides necessary trade information to both Provide remittance facility not only to the business men but also to the tourists

E.Savings bank: These are special banks specialize on the Mobile Station of small savings of middle & low-income groups they are called savings bank because they are concocted as mobilization of small savings. In our country the business of selling banks 7

is formed by commercial banks & post office the principle function are: Mobilizing small & scattered savings of people promoting the habit of thrift [loess spending expenses & savings.,

F. Central Bank: A central bank is the highest bank & monetary Institution of a
country it operates under the control of state & works for the promotion of monetary & Economic stability of the country the main functions . foreign Serving as bankers bank & Acting all controller of credit. G. Mixed banking: Mixed banking is the system under with the commercial banks provide shorterm & long-term finance to industrial concern Here the commercial banks mix or combine the commercial banking & industrial or investment banking functions. H .Commercial Banks: Commercial banks are banks, which accept deposits from the public & lend them mainly to commerce for short periods. As they finance mainly commerce, they are called commercial banks Commercial banks are found all over the world & they dominate the banking system in every country. Functions of commercial banks: The functions of commercial banks are Numerous they can be broadly divided into two types Primary function Secondary function. It has monopoly in issuing currency notes Acting as a banker to government custodian of nations gold &

The primary function of commercial bank are : a) Receiving of deposits b) Lending of funds c) Investment of funds on securities d) Creation of Money Receiving Deposits: Deposits constitute the main source of funds for Commercial Banks. Commercial bank receives deposits from the public on various accounts. 8

The main types are: a. b. c. d. Current Accounts Savings deposit Account Fixed deposit account Recovering deposit account

Lending of funds: Lending of funds constitutes the main business commercial bank. The major portion of the funds of commercial bank is employed by way of advances. As advances from the chief source of profit for banks. Bank lends funds to the public by way of: Loans Occur drafts Cash credit Discounting of bills

Investment of funds on securities: They invest considerable amount of their funds in government & industrial securities. In India commercial banks are required by statute to invest a good portion of their funds in government & other approved securities. Creation of Money: Commercial banks not only receive deposits from the public & lend them to needy. But also create money. In the process of lending funds they lend many times more than the cash deposits. They receive from public Secondary Function: A part from performing the main fictional of accepting deposits & granting advances a banker performs a number of subsidiary services banker will be able to earn the good will of his customer & attract fresh customers.

ORIGIN The origin of the cooperation credit movement can be traced to the plight of the masses in Germany and Italy in the middle of the 19th century owing to financial incapacity of people, Hermann Schulz, in 1850, started a loan society with 10 members all artisans and later developed it as a self supporting institution with its own capital. 12 years later, Raiffeisen founded at a co-operative credit society for the benefits of farmers. In small and undeveloped countries, co-operative credit has been found to be an ideal agency for canalizing agricultural finance. Its serving the masses by bringing banking facilities at their doors and enabling them to pursue their productive activities. In Europe, only one third of co-operative societies are credit co-operatives but in Asia the cooperative movement is dominated by credit co-operation and half of the credit societies of the world are located in this one continent. The origin of co-operative banking in India dates back to 1904 with enactment of Cooperative Societies Act 1912 for facilitating the establishment of new organizations for supervision, auditing and supply of co-operative credit. The co-operative banks were conceived in order to substitute unorganized money market agencies, such as money lenders that were providing credit often at exploitative high rates of interest. MEANING A co-operative bank is an organization established in accordance with the provisions of the co-operative acts. They are an important constituent of Indian financial system. Cooperative banks are a part of the vast and powerful superstructure of co-operative institutions which are engaged in the tasks of production, pressing, marketing, distribution, servicing and banking in India. DEFINITION To quote` Devine,Co-operative bank is a mutual society formed, composed and governed by working people themselves for encouraging regular saving and granting small loans on easy term of interest and repayment.

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1.1.1.2 COMMERCIAL BANKS & CO-OPERATIVE BANKS Co-operative banks similar to commercial banks in the methods of business but differ vastly in matters of organization and management. Establishment: Co-operative banks are established under the co-operative societys acts of different states. Commercial banks are organized either as joint stock companies under the companies act 1956 or as a public co-operative under separate acts of parliament. Structure: Co-operative banks have a three tier set up. Commercial banks are organized on a initiatory basis. Access to bereave bank of India: RBI is lender of first resort for co-operative banks RBI is lender of 19th resort for commercial banks. Area of operations: Co-operative banks function with in a given area. Their operations restricted to a particular state in case of a state bank. Commercial banks function over a wide area which not limited to geographical boundaries. Focus of financing: Co-operative banks have been basically rural oriented and engaged in financing agricultural allied activities. Commercial banks, till 1969 were urban oriented and financed organized trade and industry. Principles of working: Co-operative banks proceed on the principle of co-operative. Commercial banks function on sound business principles. Extent of liability: Shares of co-operative banks carry unlimited liability. Shares of commercial banks carry limited liability. Voting power: Co-operative banks share holders cast only one vote one person, irrespective of number of shares held by a person. Commercial banks share holders cast votes according to number of shares held by them. 11

1.1.1.3 COOPERATIVE BANK IN INDIA The co-operative banks in India started functioning almost 100 years ago. The cooperative bank is an important constitute of the Indian financial system, judging by the role assigned to co-operative banks the expectations they are supposed to fulfill their number and the number of offices they operate. The co-operative movement originated in the west, but the importance that such banks have assumed in India is rarely paralleled anywhere else in the world. They play a very important role in rural financing even today. The business of co-operative banks in the urban areas also has increased number of primary banks. Co-operative banks in India are registered under the Co-operative Societies Act. They are also regulated by the RBI. They are governed by the Banking Regulations Act 1949 and Banking Laws Act, 1965. A) Features of co-operative banks: Today co-operative banks continue to be a part of as set of institutions which are engaged in financing rural and agricultural development some distinguishing characteristics of cooperative banks are given below Principles: Co-operative banks are organized and managed on the principles of co-operative self help and mutual help. They function with the rule of one member one vote. Objectives: They function on basis co-operative banks by their very nature do not pursue the goal of profit minimizations. Range of functions: Co-operative banks perform all the main banking function of deposit mobilizations supply of credit and provision of remittance facilities. Functional specialization: Co-operative banks provide limited banking products and are functionally specialized in agriculture related products. However co-operative bank now provide housing loans also. State co-operative banks and central co-operative banks can normally extend housing 12

loans up to Rs. One lack to an individual and urban co-operative bank can extend such loan Rs 3 lack. UCBs can provide advances against shares and debentures also. Area of operation: Cooperative banks do banking business mainly in the agriculture and rural sector. However, UCBs, SCBs and CCBs operate in semi urban, urban and metropolitan areas as well. The cooperative banks demonstrate a shift from rural to urban while the commercial banks, from urban to rural Extent of government cooperation: Cooperative banks are perhaps the first government sponsored, government supported and government subsidized financial agency in India. They get financial and other help from the RBI, NABARD, central government and state governments. They constitute the most favored banking sector with no risk of nationalization for cooperative banks; RBI is lender of first resort which provides financial resources in the form of contribution to the initial capital (through state government) working capital and finance. The promotional role of RBI supersedes its regulatory role in respect of cooperative banks. Government intervention: Theres a lot of government intervention in the working of cooperative banks. They are subject to the control audit, supervision and periodic inspection of the cooperative department of the state government under the cooperative societies act, but less rigorously by the RBI under the banking regulation Act. The RBI & state government lays down rules for investment of surplus resources reserves and the loan policy of cooperative banks. Hence they have less freedom &flexibility in conducting their operations. Partial financial intermediaries: Cooperative banks are financial intermediaries only partially the sources of their finds are central & state government, the RBI and NABARD, ownership finds, deposits or debenture issue, other cooperative institutions. CRR &SLR requirements: They are subject to CRR & SLR requirements of 4.25% and 24% respectively.

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b) Areas of financing: Cooperative banks finance both rural & urban areas. Rural Areas of financing Farming Cattle Milk Hatchery Personal finance Urban Areas of financing Self employment Industries Small scale units Home finance Consumer finance Personal finance c) Some facts about cooperative banks in India: Some cooperative banks are more forward than many of the state and private sector banks. According to NAFWB the total deposits & lending of cooperative banks in India is much more than old private sector banks and also the new private sector banks. This exponential growth of cooperative banks in India is attributed mainly to their much better local reach, personal interaction with customers and their ability to catch the nerve of the local clientele.

1.1.1.4 Management
CCBs may have 10-20 members. They are managed by a board of directors who are elected by its members. Every members has one vote, directors are elected on the basis of democracy. Functions: They provide credit to the primary agricultural credit societies without any security. They accept deposits from the public. They grant credit to their customers. 14

They provide remittance facilities. They keep an eye on primary societies and progress of recovery of loans. Limitations: The loans are granted on the basis of political consideration due to intervention of political leaders. They pack proper coordinates. They have low level of deposits and high level of over dies i.e. recovery rate is very low. They lack efficient and trained staff.

Primary agricultural credit societies:

These societies work at village level and from the base of the cooperative banking. These societies provide short term facilities to agricultural sector. Minimum 10 persons of a village (or area) can form a primary credit society. These societies grant short term loans (generally for one year) for productive purpose, but this period can be extends to 3 years under special circumstances. PACSs have to disburse 60% of their total advance to primary sector and at least 25% to weaker sections of society. Management: PACs are managed on the principles of democracy. All the members of the society collective from the general body of PACs. The members elected the managing committee of the society each year, which consists of president or chairman, secretary and its members. Functions: Encourages saving habits among rural masses. Provides short term loans. Distributes fertilizers and seeds to the members. Short falls: They fail adequately fulfill the credit needs of the small farmers and tenants. A large number of them lack potential liability. PACSs have failed to mobilize deposits from non members. Has insufficient funds to finance advances to the members.

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1.6 THE MAJOR CO-OPERATIVES WORKING IN THE PUNJAB ARE:A) Punjab state co-operative bank: Its a premier financing institution of the state which has played a vital role in the development of short term credit structure. It has 19 branches and 3 extension counters in Chandigarh and 20 central co-operative banks along with affiliation of 800 branches which provide agriculture loan to farmers. The bank has bagged national best performance award and its central co-operative banks kapurthala, Nawanshahar have also won the best performance awards time to time. PSCB awarded first prize twice for excellent performance by NABRAND. B) Punjab state co-operative agricultural development bank: It gives long term loans for all around development of agricultural and allied activities including the improvement of land and methods of cultivation. C) Markfed: Markfed is the Asia biggest co-operative venture that helps farmers in marketing of their agriculture produce through co-operative marketing societies. Markfed is acting as a price support agency in the field of food grain, oilseeds and other agricultural products and ensures that the market rates dont fall beyond the support price. It runs which have a status of mandiyard. D). Milk fed: Milk fed is an apex federation of milk producers. It has promoted dairy farming at village level in a big way. E). House fed: Its playing a gigantic role to mitigate the problem of shortage of houses. Its contributing for the better civilization and life style of the society. It extends loans for the construction of houses in rural as well as urban. 1.7 Services Provide By Cooperative Bank A new scheme namely Kisan Credit Card Scheme has been implemented by the bank for the benefit of farmers. The Scheme improves upon existing scheme of Crop Loans by allowing the farmers flexibility and freedom of choice to avail and repay loans as per their requirements. Under the scheme, Total Limits worth Rs. 5997.50 crore have been sanctioned to 887173 KCC holders in the state.

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a) Non Farm Sector Loan With a view to diversify and benefit the small industrialists & businessman, the cooperative bank has started non-farm sector loan depending upon the requirements of the projects. These loans are given to the rural youth for selfemployment. The Central Cooperative Banks have advanced Rs.4950.81 lacks from 1-42007 to 31-3-2008 to 8013 beneficiaries. During 2008-12(up to Jan.) Rs. 3498.00 Lacks have been disbursed under this scheme. b) Cash Credit to Traders & Businessmen With a view to provide the cash credit facility to traders and others for meeting the working capital requirements of the business, a cash credit limit up to Rs.25.00 Lacks can be sanctioned to small businessman and traders depending upon their business turnover on easy terms at a normal rate of interest. During the year 2007-08, the central cooperative banks have sanctioned Rs.29091.28 lacks under the scheme up to Jan. 2012, limits worth Rs. 30426.00 lacks have been sanctioned under this scheme since inception. c) Personal Loan A specially designed personal loan scheme has been framed which aims at providing credit facility for meeting out social needs of employees, such as children education, furnishing home, buying a computer, sons/ daughter marriage, holiday tour with family or any other basic requirement without giving any purpose for the loan. Under the scheme, every govt / semi govt employees is provided loan up to Rs.2.00 Lac repayable in 5 years in easy monthly installment. During the year 2007-08, the Central Coop. Banks have advanced Rs.12164.46 Lacks under the scheme. During 2008-12 (up to Jan), Rs.10227.00 Lac have been disbursed in the state. d) Consumer Durable Loan With a view to provide credit facility to their customers, the cooperative banks have introduced a scheme of loan for purchase of consumer durable. Under the scheme, every employee is provided loan up to Rs.1.00 lack and nonsalary person is provided loan up to Rs.50000 repayable in 5 years in easy monthly installments. The loan can be utilized for purchase of T.V., refrigerator, scooter, furniture etc. A significant section of the salary class has benefited from the scheme. During the year 2007-08, the Central Coop. Banks have advanced Rs.7695.31 lacks under the scheme. During 2008-12(up to Jan.) Rs. 6031.00 Lacks. 17

e) Urban Housing Loan Scheme With a view to provide the housing loan to individual and members of house building society the Bank can advance a loan up to Rs.25.00 Lacks for the purchase of plot, purchase of built up house, construction of house, repair, addition, alteration etc. in the existing house. Loan shall also be given for acquiring a plot, flat, house in an existing cooperative house building society and approved scheme of PUDA, HOUSEFED, Improvement Trust or any other govt. agency. . During the year 2007-08, the Central Coop. Banks have advanced Rs.3961.62 Lacks under the scheme. During 2008-12(up to Jan.) Rs. 3176.97 Lacks have been disbursed under this scheme. f) Rural Housing Loan Scheme With a view to provide housing facility to the masses which is a basic need of human need the Central Coop. Banks has designed a scheme particularly for rural people, where other financial institutions are reluctant to advance. Under the scheme, maximum loan up to Rs.15.00 Lacks can be advanced for purchase of built up house, construction of a new house or repair/ renovation / addition/ alteration of existing house in rural areas. During the year 2007-08, the Central Coop. Banks have advanced Rs.5959.08 Lacks under the scheme. During 2008-09, Rs. 4133.25 lack have been disbursed under this scheme upto Jan. 12. g) Mini Dairy Loan Scheme The Central Coop. Banks through its branches are extending loan facility to the farmers for dairy development/ mini dairy for purchasing 25 cattle. Under the scheme, a maximum loan up to 5 Lacks can be advanced with a ceiling of Rs.25000 for each animal. During 2007-08 Rs. 275.54 Lacks have disbursed by CCBs in the state. During 2008-12(up to Jan.) Rs. 217.78 Lacks have since been disbursed. h) Vehicle Loan Scheme With a view to provide the vehicle loan to individuals, firms, HUF, companies, trust and cooperative societies etc. a financial assistance up to Rs.10 Lacks is provided for the purchase of new vehicle. During the year 2007-08, the Central Coop. Banks have advanced Rs.6128.29 under the scheme. During 2008-12(up to Jan.) Rs. 6809.00 Lacks have been disbursed under this scheme. i) Two Wheeler Loan to farmers Under the scheme the bank can grant loan to the farmers for purchase of two wheeler up to Rs.50000/-. During the year 2007-08, the 18

Central Coop. Banks have advanced Rs.3962.62 Lacks under the scheme. Similarly, during 2008-12 (up to Jan.) Rs. 1885.59 Lac have been disbursed under this scheme. j) Second hand vehicle loan scheme In the modern era there is a heavy demand of second hand vehicles and the banks have surplus loan-able funds to diversify the loan portfolio and to provide financial assistance to the borrowers for purchase of second hand vehicle, this scheme has been devised. Under the scheme loan upto Rs 5 Lacs can be sanctioned for purchase of second hand vehicle. . k) Education loan schemeWith a view to provide the education facility to the children of the employees a loan up to Rs. 10 Lacks can be sanctioned under the scheme. . During the year 2007-08, the Central Coop. Banks have advanced Rs.234.73 Lacks under the scheme. Similarly, during 2008-12(up to Jan.) Rs.399.51 Lac have been disbursed under this scheme.

1.1.1.5 New schemes launched by the Bank

Loan against property The scheme is for providing finance against mortgage of immoveable property & is designed to offer instant solutions relating to socio economic and business needs such as children higher education travel / daughter marriage, medical emergencies etc. Under the scheme maximum loan up to Rs.25 Lacks can be advanced. During 2007-08, CCBs have disbursed Rs. 325.14 Lacks in the state. During 2008-12(up to Jan.) Rs.1459.68 Lac have been disbursed. Loan scheme for earnest money In order to meet the requirements of the public the bank has launched a loan scheme known as Loan scheme for earnest money to meet the financial requirements towards the earnest money deposit to book residential plot/ built up house, flats being sold by govt. housing agency, urban development authority like; PUDA, HUDA and Housing Board etc. Loan against rental income scheme For meeting business/ personal needs a new scheme for property owners having their property situated it the area of operation of the bank and who have let out or proposal to let out such property to PSUs, reputed govt/ semi govt/ corporate, banks, financial institutions, cooperative societies, 19

insurance companies etc. is launched. The minimum amount under the scheme is Rs.1 lack, there is no upper limit but it must be within prudential exposure norms. During 2008-12(up to Jan.) Rs.77.50 Lac have been sanctioned under this scheme.

1.1.1.6 Future Prospective

Cooperatives are not unaffected by structural adjustments and globalization of commodity market. As a result, Cooperative Banks are required to redesign their strategies for sustainability and growth. The economic reforms initiated by the government of India in 1991 have affected the Financial Institutions including the Cooperative Financial Institutions. These reforms aim at liberalization and deregulation of Indian economy. The Cooperative Banks of Punjab have accepted the reforms in Indian economy, especially, the financial reforms in right spirit. Since these Banks have mainly been providing credit to agriculture sector, changes in agricultural economy affect them more closely. The Banks envisage following scenario as a result of liberalized agricultural policy : Liberalization of agricultural policy would result in greater capital intensity and borrowed capital requirements of agriculturists. In order to induce diversification and produce quality products for international market. For this purpose, Punjab farmers would need greater credit support for improved technology, seeds and agro-inputs. Liberalized agricultural policy would reverse the process of fragmentation of land holdings and would result in exodus of employment opportunities from agricultural sector to other sectors of economy. Such as small business enterprises, services and industrial sector. Liberalization of agriculture would professionalize and modernize agriculture, thereby earning a status of industry attracting high skilled professionals in agriculture

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1.1.1.7

PROFILE

OF

THE

KAPURTHALA

CENTRAL

CO-

OPERATIVE BANK
Establishment& location: The Kapurthala central co-operative bank ltd. Kapurthala was registered on July 16, 1920. The area of operation of the bank extends to Kapurthala district. Population covered as per 2011 census is 8.15 lack out of which 70% is living in rural areas. Its situated at kanjli road, near octroi, Kapurthala. The district is bounded by distt. Hoshiarpur, Gurdaspur, Amritsar and Kapurthala. The Phagwara tehsil of the district is surrounded from all sides by Kapurthala district. The district also touches river beas and Sutlej. The normal working hours of bank are from 10.00 a.m. to 5.00 p.m during both seasons summer as well as winter. Network of branches:38 branches operate under the bank out of which 5 are extension counters transacting every type of banking business, being situated at khassan, khallu, kamalpur, dalla and shahwala and risha. 8 branches of the bank accept NRE/NRD deposits. The district has 4 tehsils, 5 blocks and 693 villages. The branches cover under the blocks are;Kapurthala block Model Town, Kapurthala (Head Office) City branch, Kapurthala Baler Kanpur Kala Sanghian Wadala Kalain Shekhupur Sidhwan Dona Phagwara block Phagwara (Head Office) Ranipur Jagatpu Jattan Rawalpindi Wahad at Monak Rihana Jattan Panchttan Kajurla Palahi Sultanpur lodhi Block Sultan pur lodhi (Head Office) Tibba Dudwindi Kabirpur Talwandi Chaudhrian Dhilwan (Head Office) Srukhpur Bhandal Bet Lakhan ke padde Dhaliwal bet Dhilwan block

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Distinguishing features of the bank

The Kapurthala central co-operative bank is the first bank in Punjab that has been issued banking license by the RBI under the banking regulation act, 1949. The bank has its own 7 buildings 8 branches of the bank accept NRE/NRD deposits. Audit classification of the bank is A class. The bank is maintaining this status since 1980. The bank has obtained ISO 9000:2000 certificates. Total no of 493 societies are affiliated with the bank out of which 101 are PACCs. BODs (9) District manager (1) Senior manager (5) Manager (45) Assistant manager (60) Accountants (40) Clerks (58) Management: The affairs of the bank are regulated, supervised, managed and controlled by the board of directors. Constitution of BODs: 1 Chairman BODs 1 Vice Chairman 1 Managing Director 6 Executive Members

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APPOINTMENT AND TENURE: a) Chairman: Appointment by: Tenure: Elected members 5 years from the date of election

b)

Vice Chairman: Appointment by: Tenure: Elected member 5 years form the date of election

c)

Managing Director: Appointment by: Tenure: Elected member 5 years form the date of election

d)

Executive member: Appointment by: Tenure: Elected member 5 years from the date of election

Objective: The objectives of the bank are:To provide the best banking services to its customers. To be wedded to quick service. To provide services with a smile To achieve customer satisfaction To provide quality service To build and maintain cordial relations with the customers

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1.2 Deposit: Referring to banks, professor Sayers have said that bank is a not only
dealer in money but also manufacture of credit money. money. But they can create money through deposit creation. Deposit creation is an important function of commercial banks without deposits. They cannot lend at all. Deposit creation is by two types. When the bank receive cash from the customers. Deposits are created. This deposit may be savings bank deposit or current deposit any amount deposited in these accounts could be withdrawn by issue of cheques. If there is no limit for with drawl. Then that deposit is called current account. If there is any restriction for withdrawal. Then it is called saving bank account savings deposits may be of several types such as fixed deposit, recurring deposits etc current deposit are used for payments that may arise in future. In the case of current deposits the depositor wants the bank to offer facilities to withdraw in the form of cheques as many times as possible. In the savings bank account, the depositor does not expect these facility, but expert compensation in the form of interest. The Bank attracts deposits from the people either by means offering interest or other facilities. Business people want facilities with drawl more than interest. Non-business people opiate savings account. A customer may open any type of account. If he opens a current accounts & if there is substantial money in that account. He may transfer money from current account to the savings account & vice versa. The bank has nothing to do with this behaviors of the customer. Meaning of Deposit: Deposits represents the amounts accepts by a bank from deposits. It is the most important intern on the liability side because 1. They are major portion of the funds received by a bank 2. The capacity of a bank to earn profits depends on the volume of deposits 3. The efficiency of a bank is judged by its ability to attract deposits. Primary and Derivative Deposits: Deposits may be created in two ways. When the customer tenders cash into the bank, then the deposit account is opened & the amount is credited to his account. It is called primary deposit. Using this cash the bank buys various assets in the form of short term 24 the It is in the sense of manufacturing that the concept of credit creation is used. The banks cannot create any

bills of exchange securities. Share & stocks or it may lend in the form of cash credit to the industries. While buying these assets or lending money to the business people, cash is not given to them but demand deposit are opened, these deposits are called secondary deposits or derived deposits. If the banks have to create demand deposits. Existence of primary deposit is essential. The initiative of creating such deposits lies with the banking system. The banks may either create of May not create such deposits. If the banks find that there are sufficient short term bills of exchange. Then they may show interest in creating these deposits. The cash received in the form of savings deposits will be used by the banking system to create derived deposit They are called derived deposits because they originate from the primary deposits. deposits also add to money supply. Deposit: Deposit creation is an important function of commercial bank. The bank attracts deposits from the people either by means offering interest or other facilities business people want facilities with draw more then investment. Meaning: Deposits represents the amounts accepted by a bank from the deposits it is the most important item on the liability side because o They are major portion of the funds received by a Bank o The capacity of a bank to earn profits depends on the volume of depos These derived

Types of deposits Deposits

Term Deposits

Demand Deposits

Fixed Deposit

Recurring Deposit

Current Account Deposit

Saving Bank A/c Deposits

Types of Accounts, which are Held in Bank 25

A.

Current deposit account: [Current or Running account} A current account is an account, which is generally opened by business people for

their convenience. Money can be deposited & withdrawn at any time. Money can be withdrawn by means cheques. Usually, a banker does not allow any interest on this account. Even then, people come forward to deposit money on current account because of two important privileges, which they can enjoy in a current account namely: Over draft facility Other facilities like collection of cheques. Transfer of money & rendering agency & general utility services. That is why current account holder do not mind banker chagrin some commission for services rendered & incidental charges for maintaining the account whether it is in debit or in credit. Even though a banker does not allow any interest, he charges interest on overdraft on a day to day basis. In bank of Maharashtra US. United constructions co & others, it was held that when a customer over-draw the account with or without express current Account holders should keep a minimum balance of Rest 500/- to keep account running. In a mechanized branch, a minimum balance of Rs 5000 has to be maintained. If this minimum is not kept, a minimum charge of Rs 11/- per operation will be debited to the account. The bank sends a statement of account to the customer every month. As these deposits are repayable on demand. The banker should keep a large cash reserve. This may be one of the reasons why a banker does not pay any interest on the current deposit. B. Fixed Deposit Account: A fixed deposit is one, which is repayable after the expiry of a predetermined period fixed by the customer himself. The period varies from 15 days to 3 years. A deposit account can be opened for a period of more than 3 years & in that case the rate of interest remains the same level. In England these deposits are not repayable on demand but they are with draw able subject to a period of notice. Hence, it is popularly known as Time Deposit or time liabilities. In India also, the banks have began to call it term Deposit Normally the money on a fixed deposit is not repayable before the expiry of a fixed period.

26

C. Saving Deposit: This deposit is intended primarily for small-scale savers. The main object of this account is promotion of thrift. Hence there is restriction on with drawls in a month. Heavy with drawls are permitted only against prior notice, generally, the number of with drawls permitted is 30 per half year. This account can be opened with a minimum of Rs500/ Generally, overdraft facility is not available in the savings Bank Account, However, instant credit facility unto Rs 2500/- only is available to savings bank customers for their outstation cheques provided such cheques do not arise out of trade transactions.

D. Recurring Deposit: It is one form of savings deposits depositors save & deposit regularly every month a fixed installment so that they are assured of the sizeable amount at a later period. This will enable the depositors to meet contingent expenses. Banks have found this deposit popular. Many people would not have saved If these deposits had not been introduced. This deposit works on the maximum little drops of water make a big ocean. Any person can open this deposit account. He can even have than one account at a time. This account can be opened in joint name also. For deposit of higher installment, the maturity can be Calculated as multiples of maturity amount for an installment of Rs5/- .

Saving Bank Deposit scheme:

These are opened by middle & low income groups who save then part of present income for future needs proper introduction is necessary when accounts are operated by cheques. A low rate of interest provided on the deposited money.

Terms and conditions in the savings bank deposit scheme:

Conditions which are required for opening Saving Bank Account Savings Bank

Account may be opened by the following, who are known at the bank or are properly introduced by other. An individual in His / Her own name

27

By more than one person in their joint names payable to all of them jointly or any By natural guardian of a minor on behalf of the minor or by a person in the name

one of them or more than one or survivors of any minor of whom he or she is a guardian appointed by a competent court. The guardian on behalf of a minor should furnish a declaration as t the date of the birth of the minor. By a minor over the age of 12 years in his own name in which case the maximum balance in the minors account shall be restricted to Rs 10000 / - only, provided the minor produces satisfactory proof of his / her date of birth such as school certificate etc. By secretaries, Treasurers, managers or other duly constituted or authorized officers of any club, school, orphanage, Temple, Mosque, church or other religious / charitable institutions of like nature provided the rules & by laws governing such institutions is acceptable to the bank. Companies licensed by the central government under section 25 of the companies Act 1956, & institutions, which are not liable to pay income tax under income tax act 1961.

1.2.1 How to open savings Bank Deposit Account:

Persons desiring to open savings Bank Accounts are required to fill in & sign application form [11-394] along with the usual specimen signature cards, producing two pass port size photographs, details of PAN / GIR numbers or declaration in form No 60161 as the case may be & an introduction from a person acceptable to the bank .

Minimum Balance Amount Required to open An Savings Bank Account: A savings Bank A / C may be opened with a minimum balance of Rs 500/ in fully computerized branches & Rs 500/- in other branches to keep the account running. The same minimum balance should always be maintained. If a cheque book is issued, the account shall have a minimum balance of Rs 1000/28

The details are specific in a chart i.e. minimum balance / Amount required

Minimum balance to be maintained

Fully computerized branches

Other branches Rs 500/Rs 1000/-

For opening / maintaining SB Account [ Rs 500 /without cheque book] For opening / maintaining savings bank a/c s [ with cheque book facilities] Rs 1000 /-

Opening an savings bank account If the savings bank account shows balance below the minimum for a continuous period of one year or above, the branch may at its discretion close such Accounts. Cheque Books: Cheque books shall be issued only against production of duly signed requisition slip from the previous cheque book issued . Restriction, conditions for with drawls in the Savings Bank Deposit Account: In the Savings Bank Deposit Account. The total number of with drawls debit in Savings Bank Account should not exceed 30 every half year. It is the obligation of the account holder to take care of the cheque books issued to him or her.

1.2.2 Table showing % & Increase / Decrease of saving s Bank deposit Account Years Total amount of Deposit 29 % to the Base % of Increase

year 2007 08 2008-09 2009-10 2010-11 2011-12 38,11,9410 42,35,4900 47,06,1000 52,29,0000 58,10,0000 100% 112% 124% 137% 152%

/ decrease 0 12% 24% 37% 52%

1.2.2 Graph showing % & Increase / Decrease of saving s Bank deposit Account

INTERPRETATION: -From the above graph, we can observe that the amount deposited in Saving Bank Account has been increased gradually from 2000-01 to 2004-05 . That is in the base year 2007-08 the % of deposit is 100% then it has been increased to 112 % in the year 200809, 137% in 2010-11, & 152% in the year 2011-12

1.2.3 Table showing New Account opened in Savings Bank Account.

30

Years

Total no. of persons Deposited

% to the Base year

% of Increase / decrease

2007 08 2008-09 2009-10 2010-11 2011-12

3500 3650 3980 4390 4630

100% 104% 114% 125% 132%

0 4% 14% 25% 32%

1.2.3 Graph showing New Account opened in Savings Bank Account. INTER
0.35 0.3 0.25 0.2

32%

25%

14%
0.15 0.1

4%
0.05 0 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012

% of Increase/ decrease

PRETATION:-From the above graph, we can observe, that the no. of persons deposited in saving Bank A/c has been increased gradually from 2007-08 to 2011-12 . That is in the base year 2007-08 the % of Deposit is 100% ,then it has been increased to 104% in the year 2008-09, 114 % in the year 2009-10 125% in 2010 11 , & 132% in the year 201112

31

1.2.4 Table showing total interest amount paid by the bank to savings Bank Deposit holders. Years 2007 08 2008-09 2009-10 2010-11 2011-12 Total amount Rate of interest 3.5% 3.5% 3.5% 3.5% 3.5% Interest 13,34,179.35 14,82,421.5 16,47,135.0 18,30,150.0 20,33,500.0 amount

deposited 3,81,19410 4,23,54900 4,70,61000 5,22,90000 5,81,00000

paid by the bank

1.2.4.Chart showing total interest amount paid by the bank to savings Bank Deposit holders.

2033500

1334179

1482421 1830150 1647135

2007 2008

2008 2009

2009 2010

2010 2011

2011 2012

INTERPRETATION:- The interest amount paid by Bank to Saving Bank A/c holders it has been increased gradually from 2007-08 to 2011-12 that is in the base year 2007-08 the amount of interest is 13,34,179.35 .Then it has been increased to 14,82,421 in the year 2008-09, in the year 2009-2010 the amount of interest is Rs 16,47,135 & in the year 2010-11 the amount is 18,30,150 & in the year 2011-12 the amount paid is Rs 20,33,500 1.2.5Current Account: A Current A/c can be opened with the initial deposit of Rs.5000/-. It can be opened in the name of individual, a Sole Proprietary Concern 32

partnership firm, club, Religious Institution, Association Govt/ Semi Govt. Deptt., Local Bodies. As usual, all prospective applicants need to fill in the Account opening forms wherein following documents are required to be attached Sole Proprietary Concern Declaration of Sole Proprietorship Partnership firm - Partnership Deed duly attested Clubs, Schools, Societies, Association. Certificate of Registration Copy of Bye Laws. Memorandum of Association, if any. Resolution of Board of Directors. Limited Companies, Pvt. Ltd. Companies Certificate of incorporation Certificate of commencement of business Memorandum & article of Association Resolution of board. Latest Audited Balance Sheet & P&L Account Trusts Instrument or Document of Trust Resolution Certification of registration. Introduction All Current A/c need to be introduced properly from another current account A/c holder only. Staff members are not allowed to introduce a Current A/c. Minimum Balance A minimum balance of Rs.5000/has to be maintained. . Conditions required for opening current Account : The following persons, firms etc who are properly introduced, may open current account by singing the prescribed account opening form [s] along with PAN / GIR numbers or declaration in form No. 60/61 Obtaining of photographs: a) In terms of reserve Bank of Indias guidelines, photograph should be given at the

of opening of all categories of deposit of opening of all categories of deposit accounts includes current account of both resident & Non resident account holders inclusive of persons authorized open / operate the accounts as application. Minimum Balance Amount Required to open an Current Account: b) A current Account may be opened with a minimum of Rs 5000/- Staff members

are not allowed to introduce a Current A/c. Minimum Balance A minimum balance of Rs.5000/- has to be maintained. Interest is not allowed on the credit balance maintained in current accounts. 1.2.6 Fixed Deposit Account: [ Term Deposits]

33

These are operated by small investments by depositing fixed amount fixed periods fixed rate of interest. The deposited money is with drawn after the expiry of fixed receipt issued by the bank at the time of opening account. A fixed deposit is one which is repayable after the expiry of a predator mined period fixed by the customer himself. The period varies from 15 days to 3 years. A deposit account can be opened fro a period of more than 3 years & in that case the rate of interest remains the same level. These deposits are not payable on demand but they are withdrawal subject to a period of notice. Hence it is called as term deposits. Terms & conditions to the fixed deposit account: Opening Account:The fixed deposit holder is expected to fill up an application form prescribed fro the purpose, stating the amount & the period of deposit. The application itself contains the rules & regulations of the deposit in addition to the space for specimen signature. As in opening a correct account, a banker does not insist upon a letter of introduction or reference for fixed deposit account because of the absence of frequent transaction on the account. Interest: The interest rate offered on the fixed deposit is so attractive that it has

resulted in a change in the composition of bank deposits. Till recently, most of the deposits of commercial banks has been demand deposits & new fixed deposits occupies more than 70% of bank deposits. The rate of interest varies according to the period of deposit. In Indian banking history the first ever highest interest rate of 9.5% was offered on term deposits for 1-2-2007 onwards, However, in recent times, the RBI, has deregulated the interest rates on fixed deposit. The banks are given the freedom to fix their own rates for different periods. However the special rates have been fixed for deposits of senior citizens of 60 years of age or above giving them some schemes. The present rates applicable to the fixed deposits in case of senior citizens. 1.2.6.1 Table showings the present interest paid by the bank to fixed deposit holder for different periods .

34

Serial No. 1 2 3 4. 5. 6.

Term of deposit 1 years Interest per Annum to less than 2 years 1 day to 14 days 15 days to 45 days 46 days to 179 days 139 days to 1 years 1 years to 3 years 3 years & above Nil 5% 7% 8% 9% 9.25%

Period of the deposit; The minimum period has been fixed as low as 7 days, A per the guidance of the Indian banks Association , banks should not accept deposits for a period longer than 10 years. If the maturity date of fixed deposit falls on a holiday, it should be paid only on the succeeding working day, since a fixed deposit not be claimed before the maturity date as per the terms of original contract. Fixed deposit receipt; At the time of opening the deposit account, the banker issued a receipt acknowledging the receipt of money on deposit account. It is popularly known as F.D.R [Fixed Deposit Receipt]. It contains the amount of deposit, the name of the holder of the deposit, the rate of interest, due date etc. On the reverse side of the F.D.R separate columns are provided for making entries regarding interest.

1.2.7 Table showing % of increase / decrease of savings Bank deposit account Total amount deposited Years 2007 08 2008-09 2009-10 2010-11 2011-12 7995000 9225000 10086000 10455000 12300000 100% 115% 35 126% 130% 154% % to the Basic year % of Increase / decrease 0 15% 26% 30% 54%

1.2.7 Chart showing % of increase / decrease of savings Bank deposit account

60% 50% 40%

54%

30%
30% 20% 10% 0%

26% 15%

0%
2007 2008 2008 2009 2009 2010 2010 2011 2011 2012

% of Increase/ decrease

INTERPRETATION:-From the above chart, we can observe that the amount deposited in fixed deposit account has been increased gradually from 2007-08 to 2011-12 that is in the base year 2007-08 % of deposit is 100% . Then it has been increased to 115% . 126% in 2009-10 , 130% in 2010-11 , 154% in 2011-12.. 1.2.8 Table showing new accounts open in fixed deposit account. Years Total interest % to the Basic % of Increase year 100% 117% 143% 161% 168% / decrease 0 17% 43% 61% 68%

amt paid 2007 08 2008-09 2009-10 2010-11 2011-12 98 115 140 158 165

36

1.2.8.Chart showing new accounts open in fixed deposit account.

68%
70% 60% 50% 40% 30% 20% 10% 0% 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012

61%

43%

17%

0%

% of Increase/ decrease

INTERPRETATION:-From the above graph, we can observe that the No. of persons deposited in fixed deposit A/c has been increased gradually from 2007-08 to 2011-12 . That is in the base year 2007-08 the % of deposit is 100% . Then it has increased to 117% , 143% in 2008-09 , 161% in 2010-11 , 168 % in the year 2011-12.

37

Jain (1987) analyzed that the usefulness of loyalty as a construct for understanding and analysing the market for banking services is here discussed. Using empirical data, the socio-demographic, attitudinal and behavioural characteristics of loyal versus non-loyal bank patrons are described. Bank loyalty can be measured and is useful in explaining differences in banking skills, expected benefits and attitudes towards banks and level of utilisation of banking services.

38

Voukelatos (1997) examined in his study that quality expectations and evaluation of services received were marginally higher in the private than in the public sector in most of the dimensions measured; the relative importance attached to each quality attribute was, however, of a similar profile for the two sectors. The perception of the profile of services received was, however, different between sectors, thus suggesting that they did deliver a different quality of service. Discusses the implications for strategy since sectoral differentiation in banking is becoming blurred as a result of increasing overlap between services and competition from related and substitute industries. The researcher identified the distinctiveness of what is perceived as a service on offer as essential ingredient to competitive positioning in financial services. Naser (1999) explored in his research study that the Islamic banking system is gaining momentum. Many international conventional banks have started to open branches which operate in accordance with the Islamic Shariah principles in some Islamic countries. The Islamic banking system is expected to face strong competition not only from the Islamic banks but also from well-established conventional banks offering Islamic products and services. In this study, an attempt is made to assess the degree of customer awareness and satisfaction towards an Islamic bank in Jordan. A sample 206 respondents took part in this study. The analysis of their responses revealed a certain degree of satisfaction of many of the Islamic banks facilities and products. The respondents expressed their dissatisfaction with some of the Islamic banks services. Although the respondents indicated that they are aware of a number of specific Islamic financial products like Murabaha Musharaka and Mudaraba, they show that they do not deal with them. Smith (2000) evaluated a model which posits a crucial role for the evaluation of bank customers attitudes towards both human tellers and automated banking in mediating the ease of banking factor/perceived satisfaction linkage. The models explicit consideration of the effects of bank customer attitudes towards human tellers and automation provides additional explanatory power regarding how the perceived trend towards ease of banking

39

influences bank customer overall satisfaction, switching and loyalty behaviour. A linear structural relations methodological approach is used for the modelling process. Pratt (2000) presented the results of a telephone survey of 801 consumers concerning the relationship between bank mergers and service quality perceptions. The setting of the study is a US state which has seen much merger activity. The survey results provide evidence of a significant relationship between bank mergers and service quality perceptions that differs based on the demographic characteristics of the respondents. Among these demographic characteristics are gender, ethnicity, education, and income. In addition to the survey results, the article also contains several managerial implications, including a need for complementarity of marketing strategies for both acquired and nonacquired banks. Chen (2002) explored the impact of information technology (IT) on service quality in the consumer-banking sector. It proposes a service quality model that links customer perceived IT-based service options to traditional service dimensions as measured by SERVQUAL in the context of customer perceived service quality and customer satisfaction. The model also incorporates several variables affecting customers perceptions of IT-based services, and was tested by a structural equation modeling approach using sample data collected from retail bank customers. The results indicate that IT-based services have a direct impact on the SERVQUAL dimensions and an indirect impact on customer perceived service quality and customer satisfaction. The analyses also show that customers evaluations of IT-based services are affected by their preference towards traditional services, experiences in using IT-based services, and perceived IT policies. Doherty (2003) reviewed that the telecommunications companies world-wide are developing 3G mobile phones and applications. In the UK, mobile banking is considered to be one of the most value-added and important mobile services available. However, the adoption rate of using 3G mobile phones for financial services is yet to be determined. The current research examined both innovative attributes and customers perceived risk 40

in order to understand customers behaviour and motivation toward this innovation. It has advanced the theoretical frameworks of innovation and customers risk perception as new attributes and risk dimensions were identified. The findings provide banking executives with a better understanding of what are the perceived advantages and disadvantages of 3G mobile banking services, helping them to plan marketing strategies and promotion approaches for 3G mobile banking services in the future. Jamal (2003) reviewed in his study that customer satisfaction is a significant issue for most marketers. Previous research has identified various factors that determine customer satisfaction in retail banking sector in Western countries. The current paper reports findings from a survey, which looked into determinants of customer satisfaction in the retail banking in Pakistan. A total of 300 questionnaires were randomly distributed to customers of a specific bank in Pakistan. Results indicate that there was a strong relationship between service quality and customer satisfaction. There was, however, no relationship between customer satisfaction and tangible aspects of the service environment. The paper discusses implications for bank management. Rahman (2006) reviewed in his study that loyal customers are considered to be the key to survival and success in many service businesses, in particular in the hospitality, insurance and financial sectors. The assumption is that with customer satisfaction; loyalty, retention and profitability will automatically follow. The current thinking is that the relationship between satisfaction and loyalty is more complex then was originally proposed, however. As commoditisation of many service offerings continues, new sources of competitive differentiation/advantage will come from focusing on the management of customer experiences. Because loyalty is so very important to the survival and profitable growth of a company, measuring it becomes all the more important. Existing approaches to the measurement of loyalty have not proved to be very effective in this task. This study explores and tests the relationship between experience and loyalty. For this purpose, a modified `loyalty acid test' is used. The study concludes that, on average, a majority of customers are satisfied with the present functioning of the bank but would definitely be delighted if the bank changed its interface with the 41

customers to become more cognitive (intelligent), emotional, physically pleasing and well connected. Monzonis (2006) analysed the dimensionality of the concept of perceived value in the banking sector, adapting the GLOVAL scale of measurement of perceived value to the banking services sector. A total of 200 customers of financial entities were surveyed, and structural equations models were used to verify the reliability and validity of the scale of perceived value. Perceived value is found to be a multidimensional construct composed of six dimensions: functional value of the establishment, functional value of the personnel; functional value of the service; functional value price; emotional value; and social value. A scale of overall perceived value in financial services was obtained, composed of six dimensions and represented by 22 items that are significant for their measurement. In future studies it would be interesting to include items to measure nonmonetary sacrifices, such as waiting times, queues, etc. A tool for measuring the value of financial entities as perceived by the customer is presented; with it the value perceived by customers can be quantified, evaluated and monitored. This study proposes a scale of measurement of the value perceived by consumers in the banking sector which incorporates valuations of functional aspects and of affective aspects, thus obtaining an overall quantification of the value perceived by the customer of the purchase made. Esteban (2007) investigated the impact of relational benefits on customer satisfaction in retail banking. This paper presents a causal model that identifies a connection between the relational benefits achieved through a stable and long-term relationship with a given bank and customer satisfaction with retail banking. The results show that confidence benefits have a direct, positive effect on the satisfaction of customers with their bank. However, special treatment benefits and social benefits did not have any significant effects on satisfaction in a retail banking environment. This study was conducted in a retail banking setting, and may not be generalized in other service sectors. It has also focused on the relationship between relational benefits and satisfaction, while other 42

factors that may have an influence on consumer satisfaction have not been considered. Practical implications The findings suggest that banks can create customer satisfaction through relational strategies that focus on building customer confidence. Therefore, frontline employees should be committed to establishing and maintaining confidence benefits for customers. Leonce (2009) highlighted the significance of service quality factors on customer retention within the Australian traditional and automated banking contexts. Design/methodology/approach - The relative importance of traditional and automated service quality factors on customer retention was examined with the intention of determining which indicator factors are likely to have a significant impact on customer retention. The paper then proposes a conceptual model of the relationship between service quality factors within the two contexts and customer retention. AMOS 5 was used to test for the hypothesized relationships. Findings - All of the traditional service quality factors have positively influenced customer retention. Conversely, this paper finds that automated service quality in general has no positive significant influence on customer retention. Research limitations/implications- This research was applied to the financial institutions in Queensland, Australia. Further testing of the proposed conceptual model across different industries and countries is needed to determine the generalisability and consistency of this study's findings. Practical implications - The proposed model of retention prediction has the potential to help Australian bank managers to strengthen the customer-bank relationship and, ultimately, to enhance customer retention ratios. Originality/value - The key contribution of this paper is a conceptualisation of customer retention predictors that takes into account both traditional and automated service customer interactions with banks.

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44

3.1. NEED OF THE STUDY The main purpose of doing this project was to know about deposit schemes and its functioning. This helps to know in details about deposit system industry right from its inception stage, growth and future prospects. It also helps in understanding different schemes of deposit. Because my study depends upon prominent funds in India and their schemes like equity, income, balance as well as the returns associated with those schemes. The project study was done to ascertain the asset allocation, entry load, exit load, associated with the mutual funds. Ultimately this would help in understanding the benefits of deposit to investors. 3.2 Scope of the study In todays world, banking services plays on important role in every lives of individuals. The technological advancements in the banking sector have grown rapidly in the last years. This has led to the birth of new generation banks & competition. The study basically focuses towards the observation of the operations & performance of Indian Bank regarding deposits. The study with in its scope has tried to find out the new trends promoted by the Indian Bank regarding deposits. This study attempts at understanding how Indian Bank functions in its changing scenario & how each department at the head office contributes to the success.

3.1 Objectives of the study To ascertain the problem faced by bank by Public regarding Deposit. To know the different schemes of deposits provided by cooperative bank. To suggest ways & means of developing the deposit schemes. To know the facilities provided by bank to deposit holders. To study & know the financial problem of Bank.

45

46

4. Research Methodology D. Slesinger and M.Stephenson in the encylopedia of Social Sciences define Research as the manipulation of things, concepts or symbols for the purpose of generalizing to extend, correct or verify knowledge, whether that knowledge aids in construction of theory or in the practice of an art. 4.1 RESEARCH DESIGN Conclusion Oriented Research:-Research designed to assist the decision maker

in the situation. In other words it was a research where various views about the research had been given. Descriptive Research:-A type of conclusive research which had as its major objective the description of something-usually market characteristics or functions. In this study descriptive research was used. 4.2 SAMPLE DESIGN A sample design means a defined plan for obtaining a sample from a given population. While developing the sample the sampling design following aspects were covered: 4.2.1 Universe of the study: Theoretical population: In the current research, the theoretical universe consisted of all the investors in stock market. Accessible population: In the current research, the accessible universe consisted of all the respondents who invest in Ludhiana City. 4.2.2 Sample Unit: In the current research, the sample unit consisted of the following investors. It consisted of following: Govt. employees Professionals Private employees 47

Business people

4.2.3 Sample Size: In the research, 100 respondents were covered. 4.2.4 Sample Technique: In the research, convenience technique was used. 4.2.5 Sampling frame: It consists of various sources from which the information about the respondents is extracted. Mainly personal links were used for getting the information about the respondents. 4.3 DATA COLLECTION AND ANALYSIS:

4.3.1 Data source: This refers to the sources that are used for collecting the data. It consisted of two sources: a. Secondary sources: Secondary data were those which have already been collected by someone else which already had been passed through the statistical process .Out of various secondary sources mainly websites were used for collecting the data for research. b. Primary sources: Primary data collected was fresh and for the first time and thus happen to be original in character. The surveys was conducted through questionnaire consisted of closed ended as well as open ended questions. 4.3.2 Tools for Presentation: For presenting the data, tables and figures have used. 4.3.3 Tools for data Analysis: For current research data was analyzed by using following tools:

Steps of methodology:
Collection of data Organization of data 48

Presentation of data Analysis of data Interpretation of data

a) Collection of data: Both the primary data and secondary data has been collected from the bank. The secondary data was provided through the annual report; balance sheet etc. of the bank and the primary data was collected through the medium of face to face interactions/ interviews with the employees of the bank. b) Organization of data: Data once collected needed to be organized for further processing. c) Presentation of data: The data collected is of no use unless and until it is given in a presentable form. Thus, after proper organization, the data is given in a presentable form with complete details with the help of Ratios, Trends, bar diagrams, pie charts etc. d) Analysis of the data: The data is carefully analyzed keeping in consideration both the pros and cons for the purpose of arriving at concrete solutions. e) Interpretation of data: After carefully analyzing the data, it has been aptly interpreted in order to give concrete solutions and proper recommendations.

49

50

ANALYSIS AND INTERPRETATION

The data has been processed and analyzed by tabulation interpretation so that findings can be communicated and can be easily understood. The findings are presented in the best possible way. Tables and graphs had been used for illustration of findings of the research. Statement 5 Demographic Profile of Respondents Table 5 Demographic Profile of Respondents Demographics No. of Respondents % of Respondents

Gender

Male respondents Female respondents Total Graduate Post-Graduate Total Single Married Total Yes No Total

60 40 100 45 55 100 64 36 100 88 12 100

60% 40% 100% 45% 55% 100% 64% 36% 100% 88% 12% 100%

Qualification Marital Status

Location

Income (Rs.)

<20,000 30 30% 20,000-40,000 68 68% 40,000-60,000 2 2% Total 100 100% Interpretation: The above table represented demographics of the respondents. Most of which are male person & most of the respondents are post-graduate. Majority of the respondents are unmarried and also from local are and most of the respondents earn 20,000-40,000. per month. Statement 5.1: Customer awareness regarding the deposit accounts provided by kapurthala Central Co-Op. Bank Ltd.? 51

Table 5.1 Percentage of respondents awareness regarding the desposit schemes. Preference Yes No Figure5.1 schemes No of respondent 100 0 Percentage 100 0

Shows percentage of respondents awareness regarding the desposit

No 0%

Yes 100%

Interpretation From the above pie chart we can find that 100% of the respondents said that they are aware regarding deposit accounts in cooperative bank.

Statement 5.2: What is your occupation? 52

Table 5.2: Occupation of respondents. Occupation Farmer Business man Government employee Shopkeepers Percentage 35 20 30 15

Figure 5.2:Shows occupation of respondents.

Interpretation From the above pie chart we can find that 35% respondents are farmers. 30% are govt...Employees. 20% are business men and 15% are shopkeepers those who have bank accounts 53

Statement 5.3: In which bank you have bank account? Table 5.3: Percentage of respondents having bank account in different bank Occupation HDFC ICICI COOPERATIVE BANK Other( Percentage 25 20 20 35

Figure 5.3 Shows percentage of respondents having bank account in different bank

Interpretation From the above data we can find that 25% respondent have bank account in HDFC bank. 20% have bank account in ICICI and in cooperative bank and 35% respondent have bank account in other banks.

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Statement 5.4: Which type of bank account do you have in a bank? Table 5.4: Percentage of respondents using different Types of bank account. Accounts Fixed account Savings account Current account Other(recurring account) Percentage 25 35 25 15

Figure5.4 Shows Percentage of respondents using different Types of bank account.

Interpretation From the above data we can find that 25% respondents have fixed account.35% have saving account. 25% respondents have current account and 15% have recurring account.

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Statement 5.5: Which type of person using locker facility? Table 5.5: Number of respondents using locker facility. Account holders Business Man Farmer Shopkeepers Housewives Percentage(%) 35 20 20 25

Figure 5.5 Shows number of respondents using locker facility.

Interpretation Pie chart shows that 35% business men use locker facility. 20% farmers and shop keepers use this facility and 25 % housewives also use locker facility.

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Statement 5.6: Do you think bank services are good without online system? Table 5.6: Opinion of Respondents about online system. Preferences Yes No Percentage(%) 12 88

Figure5.6 Opinion of Respondents about online system.

Interpretation From the above pie chart we can observe 88% of the respondent said that bank services are not good without online system. 12% said it is good without online system.

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Statement 5.7: which types of e-banking service you want from cooperative bank? Table 5.7:Respondent views about e-banking services. Services ATM Internet Banking Mobile Banking Other Percentage 70 20 5 5

Figure5.7 Shows respondent views about e-banking services

Interpretation From above chart we can find that 70% respondent wants ATM service from bank..20% people wants internet banking and left respondent wants other services.

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Statements 5.8: what the respondent think about cooperative bank? Table 5.8: Respondent thinking about cooperative bank. Preferences Necessity for protection on security A compulsory tool for saving An ideal investment Percentage(%) 30 55 15

Figure5.8 Respondent thinking about cooperative bank.

Interpretation From the above chart we can find that 30% respondent have bank account for the protection of the security and 55% said that it is a good tool of saving and remaining 15% said that it is an ideal investment. .

Statement 5.9: For what purpose you invest in bank? 59

Table 5.9: percentage of respondents purpose to invest in bank. Response Regular Income Security Purpose Investment Purpose Low Risk Total No. of Respondents 30 20 40 10 100 % of Respondents 30% 20% 40% 10% 100%

Figure 5.7: Shows the percentage of respondents purpose to invest in bank.

Interpretation: 30% respondents purpose was to get Regular income, 20% have the security purpose, 40% have the investment purpose and 10% thinks it contains low risk.

Statement 5.10: : Is cooperative bank provide better service from other banks? Table 5.10: Quality of services provided by the bank Customers satisfaction Excellent Percentage(%) 5 60

Good Fair Satisfied Poor

25 15 30 25

Figure5.10 Shows Quality of services provided by the bank

Interpretation From the above data we can find that 5% respondent said excellent to co-bank.25% said good. 30% are satisfied and remaining give poor remarks to cooperative bank.

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6. FINDINGS
100% respondent have awareness regarding deposit accounts in the co-op bank. It is find that saving deposits is increasing from year to year. 88% respondent wants online system from bank . 62

70% respondent demanded ATM service from bank and 20%.wants internet banking service and other customers wants mobile banking. 55% customers said that it is good tool for saving .15% customer saving in bank it is a ideal investment.20% deposit in cooperative bank for the security of money. It is first choice of farmers for saving their amount,

From the above study it clear that majority of the respondents have saving account with Kapurthala Central Co-Op. Bank Ltd.

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7.1 CONCLUSION
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The face of banking is changing rapidly. The competition and challenges in Indian banking sector is increasing day by day. I made this project on the saving and deposit schemes provided by Kapurthala Central Co-Op. Bank Ltd. From the above study I concluded that the deposits of Kapurthala Central Co-Op. Bank Ltd. are increasing which shows a positive sign in favor of bank. The deposits account holders of Kapurthala Central Co-Op. Bank Ltd. are satisfied with the bank. The bank is also providing customer friendly facilities to the account holders of Kapurthala Central Co-Op. Bank Ltd. Kapurthala Central Co-Op. Bank Ltd. is one of the oldest co-operative bank in India. Kapurthala Central Co-Op. Bank Ltd. has to take necessary initiatives in order to increase customer base. The bank should increase number of branches and install ATMs at the prime locations of Kapurthala. The bank can also introduce gifts and prizes from time to time. From the above study, I can conclude that Kapurthala Central Co-Op. Bank Ltd. has maintained good position in the market and the customers are satisfied with the overall performance of Kapurthala Central Co-Op. Bank Ltd. So, we can say that Kapurthala Central Co-Op. Bank Ltd. is well known for understanding the customer needs in the modern era of banking.

7.2 RECOMMANDATIONS
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Co-operative banks are the important part of banking infrastructure. To make them more effective, efficient and enhance their performance, the various deficiencies and short falls as discussed need to be eliminated. To overcome the various short falls the following steps can be helpful: It should enhance its technological infrastructure. In order to compete in the banking sector, it should provide different online Marketing initiatives taken by the bank are minimal. To increase awareness The bank should take steps to control its cost of management which is very high. The bank needs to provide different cabins for different services. More exposure is required through various resources selecting the right type of The bank should bring out new products and schemes at time-to-time so that more

services e.g. ATM facility, mobile banking and internet banking.. among the mass population, the bank needs to rebuild its marketing program.

media. E.g. advertisements, giving broachers to the customer, tele calling etc. people can be attracted.

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REFERENCE
Books : Khan Masood Ahmed (1992), Banking in India, 3rd Edition, New Delhi, Anmol Kothari, C.R. (1997), Research Methodology, 6th Edition, Delhi, Tata Mcgraw Seethapathi K., Sivaram Y G and Rama T S, (2003), Indian Banking System The Changing Scene, 4th Edition, Hyderabad, ICFAI University Press, pp. 117. Varshney P. N., (1999), Indian Financial System And Commercial Banking, 2nd Edition, New Delhi, Sultan Chand & Sons Publication, pp. 91. Websites : http://www.emeraldinsight.com/10.1108/eb010811 www.emeraldinsight.com/10.1108/02652329710194964 www.emeraldinsight.com/Insight/html/Output/.../0320180303.pdf http://www.emeraldinsight.com/10.1108/09564230210421164 http://www.emeraldinsight.com/10.1108/09590550310476079 www.emeraldinsight.com/10.1108/eb047465 http://www.emeraldinsight.com/10.1108/08876040010320948 http://www.emeraldinsight.com/10.1108/02652320610681729 http://www.emeraldinsight.com/Insight/viewContentItem.do? contentType=Article&contentId=1673342 http://www.ingentaconnect.com/content/mcb/josm/2009/00000020/00000004/art0 0005 http://www.emeraldinsight.com/Insight/viewContentItem.do? contentType=Article&contentId=1610219 http://www.emeraldinsight.com/Insight/viewContentItem.do;jsessionid=C1B693 BD2B2F76545C0833782ED985C8?contentType=Article&contentId=1656674 Publications, pp. 41. Hill, pp. 97.

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http://www.faqs.org/abstracts/Business/Perceptions-of-banking-services-in-thewake-of-bank-mergers-an-empirical-study.html http://www.emeraldinsight.com/Insight/viewContentItem.do? contentType=Article&contentId=851735 http://www.emeraldinsight.com/Insight/viewContentItem.do? contentType=Article&contentId=1567028 http://www.emeraldinsight.com/Insight/viewContentItem.do? contentType=Article&contentId=855007 http://www.emeraldinsight.com/Insight/viewContentItem.do? contentType=Article&contentId=857422 http://www.emeraldinsight.com/Insight/viewContentItem.do? contentType=Article&hdAction=lnkpdf&contentId=854980 http://www.emeraldinsight.com/Insight/viewContentItem.do? contentType=Article&contentId=854939

Journals Jamal A, Kamal N (2003), Factors Influencing Customer Satisfaction in the Retail Banking Sector in Pakistan International Journal of Commerce and Management, Vol. 13, Issue: 2, Pg. 29 53, published by: MCB UP Ltd Al-Hawari, Mohammad; Ward, Tony; Newby, Leonce (2009), The relationship between service quality and retention within the automated and traditional contexts of retail banking, Journal of Service Management, Volume 20, Number 4, 2009 , pp. 455-472(18), Emerald Group Publishing Limited Arturo Molina, David Martn-Consuegra, gueda Esteban (2007), Relational benefits and customer satisfaction in retail banking, International Journal of Bank Marketing, Year: 2007, Vol.: 25, Issue: 4, Page: 253 271, published by Emerald Group Publishing Limited Arun K. Jain, Christian Pinson, Naresh K. Malhotra (1987), Customer Loyalty as a Construct in the Marketing of Banking Services, International Journal of Bank Marketing, Volume: 5, Issue: 3, Page: 49 72, Publisher: MCB UP Ltd 68

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David J. Urban, Michael D. Pratt (2000), Perceptions of banking services in the wake of bank mergers: an empirical study, Journal of Services Marketing, Volume: 14, Issue: 2 Page: 118 131, MCB UP Ltd

Faye X. Zhu, Walter Wymer, Injazz Chen (2002), IT-based services and service quality in consumer banking, International Journal of Service Industry Management, Volume: 13, Issue: 1, Page: 69 90, MCB UP Ltd

Juan Carlos Fandos Roig, Javier Sanchez Garcia, Miguel Angel Moliner Tena, Jaume Llorens Monzonis (2006), Customer perceived value in banking services, International Journal of Bank Marketing, Volume: 24, Issue: 5, Page: 266 283, Emerald Group Publishing Limited

Luiz Moutinho, Anne Smith (2000), Modelling bank customer satisfaction through mediation of attitudes towards human and automated banking, International Journal of Bank Marketing, Year: 2000, Vol. 18, Issue: 3, Page: 124 134, published by MCB UP Ltd.

Morna S.Y. Lee, Peter J. McGoldrick, Kathleen A. Keeling, Joanne Doherty (2003), Using ZMET to explore barriers to the adoption of 3G mobile banking services, International Journal of Retail & Distribution Management, Volume: 31, Issue: 6, Page: 340 348, MCB UP Ltd

Naser K.; Jamal A.; Al-Khatib K.(1999), Islamic banking: a study of customer

satisfaction and preferences in Jordan . The International Journal of Bank Marketing, Vol. 17, No. 3, 1999, pp. 135-151 published by Emerald Group Publishing Limited Peter Kangis, Vassilis Voukelatos (1997), Private and public banks: a comparison of customer expectations and perceptions, International Journal of Bank Marketing, 1997, Vol. 15, Issue: 7, Page: 279 287, published by MCB UP Ltd.

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Questionnaire
I am Deepak pal Singh of Apeejay Institute of Management technical campus, Kapurthala. I am conducting a Survey on Role of Mutual Funds in Indian Capital Market Growth. So I am requesting you to fill this form. It will take only 2-5 minutes for you to fill this questionnaire. I promise you to keep the information confidential

SECTION-A
Name: ________________________________________ Age: _________________________________________ Male Female Post-Graduate

Gender:

Educational Qualification: Graduate

Any other _________________________________ Marital status: Single Are you a local resident: Yes Income ( ): < 20000 40000-60000 Married No 20000-40000

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Ques1: Are you aware of deposit accounts provided by kapurthala Central Co-Op. Bank Ltd. ? A. Yes B. No

Ques2: What is your occupation? A. farmer B. business men C. Govt. employees D. other Ques3: In which bank you have bank account? A. .HDFC B. ICICI C. COOPERATIVE BANK D. OTHER (if yes then specify) Ques4: What type of bank account do you have in bank? A. saving accounts C. current account B. Fixed account D. Others

Ques5: What the people think about the bank? A. Necessity for protection on security B. A compulsory tool for saving C. An ideal investment

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Ques6: Which type of customer mostly using locker facilities in bank? A. Business man B. Farmers C. Shopkeepers D. Housewives Ques7: Do you think bank services are good without online system? A. Yes B. No

Ques8: Which type of service you want from bank? A. ATM B. Internet banking C. Mobile banking D. other Ques9. For what purpose you invest in bank? a. Regular Income c. Investment Purpose b. Security Purpose d. Low Risk

Ques10: Is cooperative bank provide better service from other banks? A. Excellent B. Good C. fair D. Satisfied

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