UNIVERSITY OF MUMBAI

Project Report on

STUDY AND ANALYSIS OF MICRO FINANCE WITH SPECIAL EMPHASIS ON THANE DISTRICT CENTRAL CO-OPERATIVE BANK LTD.

SUBMITTED BY

Mr. NILESH SURESH DONGRE

ROLL NUMBER F1112010

MASTER IN FINANCIAL MANAGEMENT (PART TIME) ACADEMIC YEAR 2013-14

PROJECT GUIDE PROF. MS. SHRADDHA DAFTARDAR

INSTITUTE OF MANAGEMENT & COMPUTER STUDIES

C-4, WAGLE IND ESTATE, NEAR MULUND CHECK NAKA, THANE (W) 400604

ACKNOWLEDGEMENT
I have immense pleasure in presenting this project report for my project entitled Study and analysis of Micro Finance with special emphasis on Thane District Central Cooperative Bank Ltd..

I wish to take this opportunity to express my deep gratitude to the persons and the organization that have helped, encouraged, inspired and enlightened me with their constructive ideas and overall support towards the completion of this project successfully. This project would have been incomplete without the active co-operation and guidance of the manager.

I am very grateful to my project guide Ms. Shraddha Daftardar for giving me an opportunity to work on this project and providing me their expertise in the completion of my project as I could not only understand the different aspects of banking but also got to interact with a lot of knowledgeable people of the said field.

I am very thankful to Chairman Mr. Kapil Moreshwar Patil, Vice Chairman Mr. Devidas Pandurang Patil, Chief Executive Officer Mr. Kishor Vishnu Kudav, Dy.CEO Mrs. Pramila Patil, and his senior staff members for helping me throughout my project showing me the right direction towards the completion of my project.

No words and language can ever be sufficient to express my gratitude to the abovementioned persons who provided me with the support to prepare this project.

Nilesh Suresh Dongre

DECLARATION

I, Nilesh Suresh Dongre, a student of Institute of Management and Computer Studies, of MFM 3rd Year, hereby declare that I have completed a project on Study and analysis of Micro Finance with special emphasis on Thane District Central Co-operative Bank Ltd in the Academic year 2013-2014. The information submitted is true and original to the best of my knowledge.

Date: Signature of the Student

TABLE OF CONTENTS

Chapter Sr Contents no no.

Executive Summary 1 1.1 1.2 1.3 1.4 2 2.1 2.2 2.3 2.4 2.5 3 3.1 3.2 3.3 3.4 3.5 3.6 3.7 4 4.1 4.2 4.3 4.4 4.5 Introduction Introduction to Microfinance Concept of Microfinance An Introduction to Indian Microfinance: Modes of Delivery of Microfinance Research Methodology Research Study Highlights of the study Income Impacts on lives of clients Impact on Empowerment Limitation Industry profile District Central Cooperative Banks (DCCBs) General Information Role of NABARD NABARDs Strategic Focus on SHG-BLP (2013-17) Progress under Microfinance during 2012-13 Overall progress under SHG-Bank Linkage Program Balance Sheet of NABARD Bank profile The Thane District Central Co-operative Banks Profile Status of Computerisation Awards Growth of the Bank since last 5 years Loans and Advances : 2 Years

Page no

1 4 5 7

9 9 10 10 11

12 12 14 15 16 17 19

21 22 22 23

5 5.1 5.2 5.3 6 6.1 6.2 6.3 6.4 6.5 6.6 7 7.1 7.2 7.3 7.4 7.5 7.6 7.7 8

Conceptual framework Accounting policies Notes to Accounts Earnings per share Product profile Loans other than Agriculture New Schemes introduced for Farmers Criteria/Conditions for Non-Agricultural Loan Agricultural loan Agriculture Finance Information Criteria/Conditions for Agricultural Loan Data collection, Analysis and Interpretation Short Term Loan Repayment Dates Interest rate for short term and medium term loan Ways of disbursement of Loans Recovery of Loan Graphs of Repayment of Loans Analysis of thane district central co-operative bank ltd. with Bank of Maharashtra Analysis of thane district central co-operative bank ltd. with Canara bank Findings & Suggestions Conclusion Bibliography 46 47 48 57 60 63 65 67 68 69 29 31 32 35 37 38 27 28 28

LIST OF TABLES

Table no. Description 2.3.1 2.3.2 3.6 3.7 4.4 4.5 5.3 6.5.1 6.5.2 6.5.3 6.6.1 6.6.2 7.1 7.2.1 7.2.2 7.2.3 7.3.1 7.3.2 7.3.3 7.4.1 7.4.2 7.4.3 7.5.1 7.5.2 7.5.3 7.6 7.7 Income Impacts on lives of clients Impact on Empowerment Overall progress under SHG-Bank Linkage Program Balance Sheet of NABARD Growth of the Bank since last 5 years Loans and Advances Earnings Per Share (EPS) Information of Primary Agriculture Credit Societies and their Members Primary Agriculture Credit Societies Members: Kisan Credit Card upto 31/03/2013: Self investment : Loan repayment capacity for Rice per hector Short Term Loan Repayment Dates Interest Rate for Short Term Loan Interest rate for Medium Term Loan Interest rate for cash credit Short Term Agriculture Loan Medium Term Agriculture Loan: Agriculture Loan disbursement for last 3 years: Agriculture Short Term Loan Expected Recovery v/s. Actual Recovery Agriculture Medium Term Loan Expected Recovery v/s. Actual Recovery for last 3 years Agriculture Loan Actual Loan Recovery with respect to Expected Loan Recovery for last 3 years Agriculture Loan Outstanding for last 3 years Agriculture Loan Overdue for last 3 years: Agriculture Loan Overdue Percentage for last 3 years Analysis of thane district central co-operative bank ltd. with Bank of Maharashtra Analysis of thane district central co-operative bank ltd. with Canara bank

Page no 10 10 17 19 23 26 28 37 37 37 42 43 46 47 48 48 52 56 57 58 59 60 61 62 63 65

LIST OF CHARTS

Chart no. 4.4.1 4.4.2 4.4.3 4.4.4 4.5 7.3.1 7.4.1 7.4.2 7.4.3 7.5.1 7.5.2 7.5.3

Description Deposits Investments Working capital Profits Types of Loans Agricultural loan disbursement Short Term Loan Medium Term Loan Actual Loan Recovery w.r.t. Expected Loan Recovery Agriculture Loan Outstanding Agriculture Loan Overdue Agriculture Loan Overdue Percentage

Page no 24 24 25 25 26 56 57 58 59 60 61 62

EXECUTIVE SUMMARY
Loans to poor people by banks have many limitations including lack of security and high operating cost and so Microfinance was developed as an alternative to provide loans to poor people with the goal of creating financial inclusion and equality.

Muhammad Yunus a Nobel Prize winner, introduced the concept of Microfinance in Bangladesh in the form of the "Grameen Bank". NABARD took this idea and started concept of Micro Finance in India.In this concept, there exists a link between SHGs (Selfhelp group), NGOs and Banks. The SHGs are formed and nurtured by NGOs and only after accomplishing a certain level of maturity in terms of their internal thrift and credit operations.They are entitled to seek credit from the banks. There is an involvement of the concerned NGO before and even after the SHG-Bank linkage.The SHG-Bank linkage programme, which was undertaken since 1992 in India, had financed about 22.4 Lacs SHGs by 2006. It involved commercial banks, Regional Rural Banks (RRBs) and cooperative banks in its operations.

The research involved study of the past literatures about the microfinance sector, related online research papers and journals. The annual reports and the sector reports published by Thane District Central Cooperative Bank facilitated the study, especially in understanding the size, growth and past trends. Interactions with some of the industry experts helped in understanding and analysing the emerging concerns in the microfinance sector and also to look for some possible solutions. Although the microfinance sector is having a healthy growth rate, there have been a number of concerns related to the sector, like grey areas in regulation, transparent pricing, low financial literacy etc. In addition to these concerns there are a few emerging concerns like cluster formation, insufficient funds, multiple lending and over-indebtedness which are arising because of the increasing competition among the MFIs. On a national level there has been a spate of actions taken to strengthen the regulation of MF sector including, enactment of microfinance regulation bill by the Government of Andhra Pradesh, implementation of sector-specific regulation by Reserve Bank of India and most

recently, release of Draft Microfinance Institutions (development and regulation) Bill, 2011 for comments.

Based on the research work, a few major recommendations made in the report include field supervision of MFIs to check ground realities and the operational efficiency of such institutions. Offer incentives to MFIs for opening branches in unbanked villages, so as to increase rural penetration. Also MFIs be encouraged to offer complete range of products to their clients. Transparent pricing and technology implementation to maintain uniformity and efficiency are among the others which these institutions should adopt. Inability of MFIs in getting sufficient funds is a major hindrance in the microfinance growth and so these institutions should look for alternative sources of funds. Some of the alternative fund sources include outside equity investment, portfolio buyouts and securitization of loans which only a few large MFIs are currently availing.

Short Term Finance is provided for seasonal Agriculture operation to the farmer members of primary Agriculture co-operative societies, through these societies against security of land.

Medium Term loan is also made available to the Agriculturist through the societies for purchase of motor pumps sets, constructions of pump house, repairing deepening of old wells, installation of pipe line, purchase of bullocks/bullock carts and agriculture implements, purchase of power tiller, tractors and construction of bio gas plants. Finance is also provided to the farmers through the societies for purchase of milk cattle rearing of goats, running of the poultry farms etc., with view to make them available side business to support their agriculture / activities. For Crop Loans, Bank is giving interest free loan to the farmers, who are repaying the outstanding crop loan before 31st March every year (reimbursement of interest).