CHAPTER VIII

SUMMARY AND SUGGESTIONS

8.1 INTRODUCTION
Cooperative movement in India owes its origin to agriculture
and allied sectors. Cooperative movement which originated in the
west, but the importance that such banks have assumed in India, is
rarely paralleled anywhere else in the world. In rural areas the supply
of credit particularly institutional credit was inadequate and farmers
for their financial requirements depend upon money lenders which in
return charge a very high rate of interest. Agriculturists had no
securities to offer for the guarantee of loan so they remain uncared by
the banking world. They had no credit because they were poor and
they remain poor because they had no credit. Then the need was felt
for an agency which could attract funds from towns and employ them
safely and profitably in villages. Then cooperative banks came in
existence to provide short term and long term credit at reasonable
rates of interest. The beginning of cooperative banking in India dates
back to about 1904 when official efforts were initiated to create a new
institution based on the principles of cooperation which were
considered to be suitable for solving the problems related to Indian
agricultural conditions. The role of cooperative banks in rural
financing continues to be important today and their role has also
increases in urban areas in the recent years. When national economic
planning started in independent India then cooperative banks were
given an important role. With the advent of planning process,
cooperatives became an integral part of the

five

year plans.

Cooperative Banks are Government sponsored, government supported

and government subsidized financial agency in India. They get
financial and other help from Reserve Bank of India, National Bank for
Agriculture and Rural Development (NABARD), Central Government
and State Governments. Cooperative Banks are subject to control and

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audit under the Cooperative Societies Act of the state and by the
Reserve Bank of India (RBI) under the Banking Regulation Act. RBI
and the State Government lay down the rules for the investment and
loans policies of cooperative banks. Cooperative banks have played a
pivotal role in the development of short term and long term rural
credit structure in India.
Cooperative

banking structure in India comprises Urban

Cooperative Banks and Rural Cooperative credit institutions. Urban

Cooperative Banks consist of a single tier i.e. primary cooperative
bank referred as Urban Cooperative Banks (UCB). The rural
cooperative credit structure has been divided into short term and long
term. Short term cooperative credit institutions have a three tier
structure consisting of a large number of Primary Agricultural Credit
Societies (PACS) at the grass root level, Central Cooperative Banks
(CCB) at the district level and State Cooperative Banks (SCB) at the
state level. The smaller states and Union Territories have a two tier
structure i.e. SCB directly meeting the needs of PACS. The long term
rural cooperative structure has two tiers i.e. State Cooperative
Agriculture and Rural Development Banks (SCARDB) at the state level
and Primary Cooperative Agriculture and Rural Development Banks
(PCARDB) at the Tehsil level. Some states have a unitary structure
with the SCARDB operating through their own branches.

8.2 COOPERATIVE MOVEMENT IN PUNJAB

All along its conquered history, Punjab has predominantly been
agricultural province, as an overwhelming percentage of its population
has been throughout the ages directly and indirectly dependent on
agriculture for its living. The cooperative movement in Punjab is as old
as it is in the rest of the country. When Cooperative Societies Act
1904, was passed, Punjab Government appointed a Registrar for
whole of the province with the duty of organizing Cooperative societies
for the promotion of thrift, self help and cooperation and to provide

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supervision and control. By the close of 1905, about a dozen societies

have been registered. In 1911, the number of cooperative societies
shot up to 1000. In 1912, another Cooperative Societies Act was
passed to remove deficiencies of the previous Act. The Act of 1912
recognized the establishment of non-credit societies and an era of
rapid expansion were ushered in, which lasted in 1928-29. In 1924,
Punjab Provincial Cooperative Bank was established at Lahore with a
view to control and regulate the over expanding inter lending between
Central Cooperative Banks. The great depression of thirties gave a
severe jolt to the cooperative movement. There was abnormal fall in
the price of the raw and manufactured goods which resulted in the
industrial fall and in the income of the cultivators and affected their
repaying capacity. All this meant a serious check to the expansion of
the movement. Such a state of affairs continued up to 31st July 1934,
and during this period consolidation rather than expansion was
followed. This was followed by a period of revival and expansion until
the partition of Province in 1947. Due to the depression many
societies were cancelled, so the task was to repair the damage. At the
end of the year 1946-47 the number of societies was 14882 with a
membership of 7.51 lacs with working capital of Rs. 1103.35 lac.
The partition of Punjab adversely affected the cooperative
banking and Punjab Provincial Bank at Lahore was taken over by
Pakistan and large sums of money belonging to cooperatives in east
Punjab were locked up with the Provincial Cooperative Bank at Lahore
and this hampered their progress for many years. After partition
efforts were made to find ways to repair the cracks that had appeared
in the movement. During the period 1947-50, the movement
attempted to recover itself and recorded a certain degree of positive
progress, as the number of societies, working capital and membership
increased.

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The Punjab State Cooperative Bank at the apex level was

registered on 31-8-1949 at Shimla. Its head quarters was shifted to
Jalandhar in 1951 and then to Chandigarh in 1963. With the efforts of
the Government the movement began to pulsate with a new life.

8.3 FINDINGS OF THE STUDY

8.3.1 GROWTH AND REGULATORY FRAMEWORK OF
COOPERATIVE BANKS IN INDIA
8.3.1(a) GROWTH OF COOPERATIVE BANKING IN INDIA
Cooperative banks as component of Indian Banking System
originated in India with the enactment of Cooperative Credit Societies
Act of 1904. Cooperative movement has been initiated and supported
by the Government but in other countries cooperative movement grew
on the strength of peoples own will. During 107 years of the existence,
Cooperative movement passed through various stages. The movement
up to 1947 can be broadly divided into four stages. The first stage
covered the period of 1904-1912. In 1904, Cooperative Credit Societies
Act was passed and the passage of the Act was the first landmark in
the Cooperative Movement in India. It was a new experiment and
people were full of enthusiasm for it. The Act of 1904 provided for the
organization of primary credit societies and stress was on the
promotion of agricultural credit only. The condition of societies
however, could not said to be good. Loans were generally marked by
insufficiency and delay. Recoveries were far from satisfactory and loan
system was defective. The working of societies formed under the Act of
1904 showed a number of deficiencies, viz., it did not give legal
protection to cooperative societies for purposes other than credit. In
the second stage (1912-1919) a new Act was passed in 1912 to remove
the deficiencies of the previous Act. The important provisions of the
Act were that the Act provided for the registration of non credit
societies also. The Act of 1912 gave a great stimulus to the cooperative
movement. There was a rapid expansion in the registration of
cooperatives in the country, but without any tangible results. Under

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the reforms of 1919, cooperation was made a provincial transferred

subject, in each state in the third stage (1919-1939). Some provinces
enacted special legislation to suit their local requirements. After
cooperation became a transferred subject, the movement made very
rapid progress and all seemed to be going very well. Its success was,
however, more quantitative rather than qualitative in nature. The
rapid growth of the movement during 1919-1930 was characterized by
Mr. Ramdas Pantulu as the period of unplanned expansion. The world
wide economic depression in 1929 gave a severe blow to the
cooperative movement in India which was still in infancy. As a result
of slump in the market, prices of agricultural commodities came down,
overdues mounted up; liquidation of societies had to be resorted to in
a few cases. The creation of Reserve Bank of India in 1934, and setting
up of rural credit department in the bank gave a new life and vitality
to the cooperative movement. The provincial autonomy in 1937 further
strengthened the cooperative movement. The abnormal conditions
created by the World War II led to some far reaching developments in
the cooperative movement. As a result of high prices most of the over
dues were cleared off. Thus during the war, the societies gained in
strength and vigour. An important landmark of fourth stage (19391947) was the setting up of Cooperative Planning Committee, which
drew up plans for the development of cooperative movement in various
spheres.
The attainment of independence in 1947 and the consequent
establishment of National Government in the country came in as a
fountain of inspiration for the movement. It was during the Five Year
Plans that cooperative credit was assigned to play significant role in
the economic development of the rural areas. The First Five Year Plan
(1951-56) emphasized the need for expanding the cooperative credit
system so as to bring 50 per cent of the villages and 30 per cent of the
rural population in the ambit of primary societies with in ten years.
The progress of cooperative movement in the First Plan was mixed. By

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1955-56, 70 per cent of the villages of the country were covered by

Primary Agricultural Credit Societies against the target of covering 50
per cent of the villages. As against the target of Rs. 100 crore to be
disbursed as short term credit, fresh advances increased from Rs.
24.21 crore in 1951-52 to Rs. 49.62 crore in 1955-56. The short term
loans outstanding increased from Rs. 33.66 crore to Rs. 59.84 crore
and the medium term loans advanced amounted to Rs. 15 crore in
1955-56 as against the target of Rs. 25 crore. Second Five Year Plan
(1956-61) observed that the building up of a co-operative sector as
part of the scheme of planned development is, one of the central aims
of national policy. The plan aimed that Credit is only the beginning of
co-operation. From credit, co-operation has to extend to a number of
other activities in the village, including cooperative farming. Short
term loan advanced were Rs. 182.82 crore in 1960-61 against the
target of Rs. 150 crore and medium term loan given was Rs. 19.93
crore in 1960-61 which was less than the target of Rs. 50 crore. In
the Third Five Year Plan (1961-66) the cooperatives were assigned a
vital role in implementing the programmes of agricultural production.
There was shortfall in achievement of short term and medium term
loans. With the nationalization of the major 14 commercial banks in
July, 1969 more or less the monopolistic position held by the
cooperatives in dispensation of agricultural credit came to an end. The
loans advanced increased from Rs. 203 crore in 1960-61 to Rs. 342
crore in 1965-66 as against the target of Rs. 530 crore. The Fourth
Five Year Plan (1969-1974) gave high priority to the re-organization of
cooperatives to make cooperative short-term and medium-term
structure viable. No increase in the number of societies was envisaged
but an additional increase in membership so as to cover about 60% of
agricultural families was provided. As against the target of disbursing
short term and medium term loans of Rs. 750 crore, the PACS issued
loans of Rs. 763 crore in 1973-74.

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In the strategy of cooperative development in the Fifth Five Year

Plan (1974-79), structural reformation receives special attention. A
major objective of credit policies in the Fifth Five Year Plan was to
ensure a substantial increase in the flow of institutional credit to the
small farmers, marginal farmers, tenants and share croppers. It has
also been decided that concessional finance provided by the Reserve
Bank will also be available to the non- agriculturist and agricultural
labourers who are members of primary credit societies for purchase of
milch cattle and poultry farming activities. The Fifth Five Year Plan
took note of the high level of over-dues. The Sixth Five Year Plan
(1979-85) document stated that while all round progress has been
made in the field of credit by cooperatives, the rate of growth of
agricultural credit advanced by the cooperatives has lately slowed
down. The National Bank for Agriculture and Rural Development
(NABARD) Act was passed in 1981 and NABARD was set up to provide
re-finance support to Cooperative Banks to enhance credit flow to the
agriculture and rural sector. The Seventh Five Year Plan (1985-1990)
pointed out that while there had been all round progress in credit,
poor recovery of loans and high level of overdues were matters of
concern.

The

Plan

recommended

the

development

of

Primary

Agricultural Credit Societies as multiple viable units. The opening up

of the economy in 1990, and the liberalized economic policies followed
by the government since then, led to increasing pressures for various
governments, state and central, to bring about changes that would
provide cooperatives a level playing field to compete with the private
sector. The Eighth Five Year Plan (1992-97) laid emphasis on building
up the cooperative movement as a self-managed, self-regulated and
self-reliant institutional set-up, by giving it more autonomy and
democratizing the movement. It also spoke of enhancing the capability
of

cooperatives

employment

for

improving

opportunities

for

economic
small

activity

farmers

and

and

cooperative functionaries in professional management.

353

creating

training

of

Under the

Ninth Five Year Plan (1997-2002), the Government adopted the Kisan
Credit Card (KCC) Scheme formulated by NABARD which aims at
provision of adequate and timely credit support to the farmers for their
cultivation needs including purchase of inputs in a flexible and cost
effective manner. The scheme was being implemented through the
district central cooperative banks and the primary agricultural
cooperative banks. From the Ninth Plan onwards, there has been no
specific mention about cooperatives as a part of the Plan. A total of
249.07 lacs KCCs had been issued till 30 June 2002. In the Tenth
Five Year Plan (2002-07), the recapitalization and revamping of the
cooperative credit institutions is being considered. Credit growth by
the cooperatives to the agriculture sector has gradually picked up
during the course of the Tenth Five Year Plan. The number of loan
accounts however, declined from 224.6 lacs in 200405 to 192.8 lacs
in 200506. Continued emphasis will be placed on progressive
institutionalization for providing timely and adequate credit support to
farmers with particular focus on small / marginal farmers and weaker
sections of society to enable them to adopt modern technology and
improved

practices

for

increasing

productivity. Eleventh Five

agriculture

production

and

Year Plan (2007-12) envisaged the

revitalization of the co-operative credit structure in order to transform

them into vibrant and viable democratic financial institutions. It was,
therefore, extremely important, that the restructuring of co-operative
credit now in progress are implemented speedily and rigorously.

8.3.1(b)REGULATION AND CONTROL

The regulation and control of cooperative banking rests with the
Reserve Bank of India (RBI) and the State Government. The State
Government controls it under the Cooperative Societies Act through
the Department of Cooperation. Department of Cooperation is headed
by the Registrar, Cooperative Societies. Registrar has been entrusted
with the duties of promoting, sustaining as well as guiding the
Cooperative Societies in the state. Cooperative banks are registered

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under the Cooperative Societies Act of the states by the Registrar of

Cooperative Societies and are governed by the Acts and rules of the
State Government. In terms of the Cooperative Societies Act of the
State, the Registrar of Cooperative Societies have jurisdiction over the
incorporation, registration, management, amalgamation, merger and
liquidation.
The RBI exercises a promotional and regulatory control over
cooperative

banking

under

the

Banking

Laws

(Application

to

Cooperative Societies) Act, 1965; extending the provisions of RBI Act,

1934; and Banking Regulation Act, 1949. The Banking Laws Act,
1965, in addition to the regulatory powers of the RBI, has extended its
statutory control to cooperative banks. The Act came into force on
March 1, 1966. It extends to State Cooperative Banks, Central
Cooperative

Banks

and

PACSs.

With

the

State

Governments

committed to a policy of positive support to cooperative banks, it was

felt that the impact of cooperative credit institutions on the monetary
and credit policy was going to become more and more significant.
Hence, the RBI felt that it was a regulatory necessity to bring the
banking institutions operating in the cooperative sector within the
statutory control of RBI. After prolonged deliberations on the need for
RBI to have control over cooperative societies carrying on banking
business, the Banking Laws (Application to Cooperative Societies) Bill
was passed by the Parliament. It received the assent of the President
in September 1965 and the Act came into force from 1 March, 1966.
With amendments in the Banking Regulation Act, certain provisions of
the Banking Regulation Act became applicable to cooperative banks
carrying on banking business. The Reserve Bank is now the regulator
and supervisor of banking activities carried on by cooperative
societies. The Registrar of Cooperative Societies of the concerned state
continues

to

be

the

regulator

institutions.

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and

supervisor

of

cooperative

8.3.2

OPERATIONAL PERFORMANCE OF
COOPERATIVE BANKS IN PUNJAB

CENTRAL

The operational performance of Central Cooperative Banks in

Punjab has been analyzed with regard to branch expansion, deposits,
credit, working funds, owned funds, manpower, volume of business,
recovery as percentage to demand and Non Performing Assets (NPA) to
advances. The findings on operational performance of Central
Cooperative Banks are as follows:
BRANCH EXPANSION: Central Cooperative Banks in Punjab have
made a very slow progress as far as Branch expansion is concerned.
The number of branches increased from 777 in 1997-98 to 834 in
2001-02, then decreased to 804 in the year 2009-10, thus showing a
fluctuating trend in the case of branch expansion. The growth rate in
branch expansion by all the Central Cooperative Banks in Punjab is
0.41 per cent. At the end of the study period, Jalandhar Central
Cooperative Bank had the maximum number (72) of branches, while
Mansa Central Cooperative Bank and Muktsar Central Cooperative
Bank had the minimum number (22) of branches. The highest
exponential growth rate in branch expansion was recorded by
Kapurthala Central Cooperative Bank (2.25%). There was exponential
decline in branch expansion in case of Tarn Taran Central Cooperative
Bank,

Ferozepur

Central

Cooperative

Bank,

Amritsar

Central

Cooperative Bank and Ludhiana Central cooperative Bank. The degree

of variation was lowest in N. Shahr Central Cooperative Bank (C.V. =
2.14) and the variation was highest in Ferozepur Central Cooperative
Bank (C.V. = 16.63) during the period of study. The coefficient of
concentration ranges from 14 to 16 per cent. The analysis of
coefficient of concentration shows that there is no concentration of
branches in few districts.
DEPOSIT MOBILIZATION: Central Cooperative Banks in Punjab have
been

successful

in

deposit

mobilization.

Deposits

of

Central

Cooperative Banks in Punjab increased from Rs. 177243.32 lac in

1997-98 to Rs. 751261.51 lac in 2009-10 listing an exponential

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growth rate of 11.92 per cent during the period under study. The
share of fixed deposits in total deposits decreased from 56.94 per cent
to 49.40 per cent and the share of savings deposits increased from
39.19 per cent in 1997-98 to 47.28 per cent in 2009-10. The share of
current deposits remained almost the same. Savings deposits recorded
the highest exponential growth rate of 14.92 per cent whereas fixed
deposits recorded the lowest exponential growth rate of 9.33 per cent.
At the end of the year 2009-10, Jalandhar Central Cooperative Bank
contributed maximum Rs. 91478.56 lac to the total deposits (12.18
per cent of total deposits) and the contribution of Muktsar Central
Cooperative Bank to total deposit was minimum Rs. 10770.26 lac
(1.43 per cent). Coefficient of concentration ranged from 25 to 30 per
cent. The data of coefficient of concentration shows that there was no
concentration of deposits in few districts. The degree of variation in
the growth of deposits was highest for Mansa Central Cooperative
Bank (C.V. = 54.37) and the consistency in the growth of deposits was
highest in Jalandhar Central Cooperative Bank (C.V. = 34.04).
CREDIT DEPLOYMENT: The Central Cooperative Banks in Punjab
have shown a considerable success in the growth of advances.
Advances of Central Cooperative Banks in Punjab increased from Rs.
232396.10 lac in 1997-98 to Rs. 1126892.49 lac in 2009-10 with an
exponential growth rate of 12.71 per cent. There is about five-fold
increase in loans. The growth rate of advances is more than the
growth rate of deposits during the period under study. The share of
short-term advances increased from 61.17 per cent to 86.40 per cent
during the study period. The share of medium term advances
decreased from 30.45 per cent to 7.95 per cent while the share of long
term advances decreased from 8.38 per cent to 5.65 per cent. The
highest exponential growth rate in loans deployment was recorded by
Fatehgarh Sahib Central Cooperative Bank, whereas the lowest for
Jalandhar Central Cooperative Bank. Sangrur Central Cooperative
Bank had the maximum average advances while Mansa Central

357

Cooperative Bank had the minimum average advances. The variation

in the growth of loans advanced was lowest in N.Shahr Central
Cooperative Bank (C.V =32.36) and the variation was highest in
Fatehgarh Sahib Central Cooperative Bank

(C.V

=62.93). The

Coefficient of concentration of loans advanced of all the Central

Cooperative Bank operating in Punjab ranges from 14 to 22 per cent
during the period under study. The coefficient of concentration shows
that there is no concentration of loans advanced in few districts.
VOLUME OF BUSINESS The volume of business presents the total of
deposits and advances. The volume of business of Central Cooperative
Banks operating in Punjab increased from Rs. 409639.40 lac in 199798 to Rs. 1878154.01 lac in 2009-10 and indicated exponential
growth rate of 12.39 per cent during the period covered under study.
Fatehgarh Sahib Central Cooperative Bank recorded the highest
exponential growth rate, while Jalandhar Central Cooperative Bank
recorded the lowest exponential growth rate in volume of business.
Average volume of business was maximum in case of Jalandhar
Central Cooperative Bank and the minimum for Mansa Central
Cooperative Bank. Throughout the period of study, Jalandhar Central
Cooperative Bank contributed maximum in total Volume of Business.
Coefficient of concentration of volume of business ranged from 16 to
22 per cent during the study period. The data of coefficient of
concentration shows that there is no concentration of Volume of
Business in few districts. The variations in the growth of volume of
business was lowest in Jalandhar Central Cooperative Bank (C.V
=32.82), and was highest in Fatehgarh Sahib Central Cooperative
Bank (C.V =58.87).
WORKING FUNDS: The working funds of Central Cooperative Banks
operating in Punjab have increased from Rs. 277573.83 lac in 199798 to Rs. 1195956.11 lac in 2009-10 listing an exponential growth
rate of 12.84 per cent. Patiala Central Cooperative Bank recorded the
highest exponential growth rate 16.45 per cent and Ferozpur Central

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Cooperative Bank registered the lowest exponential growth rate of 9.96

per cent. The overall coefficient of concentration ranges from 17 to 20
per cent and the data of coefficient of concentration show that there is
no concentration of working funds in few districts. The highest
average working funds were observed in the case of Jalandhar Central
Cooperative Bank and the lowest in Faridkot Central Cooperative
Bank. The variation in the growth of working funds was lowest in Tarn
Taran Central Cooperative Bank (C.V =38.32) and was highest in
Patiala Central Cooperative Bank (C.V = 55.50) during the study
period.
OWNED FUNDS: Owned funds of the bank represent share capital
and reserve funds. Owned funds are an indication of internal financial
soundness of the organization. The amount of owned funds increased
from Rs. 20747.63 lac in 1997-98 to Rs. 107020.17 lac in 2009-10 at
an exponential growth rate of 15.11 per cent. Ropar Central
Cooperative Bank recorded the highest exponential growth rate of
21.90 per cent while Ferozpur Central Cooperative Bank recorded the
lowest growth rate of 5.94 per cent. Average owned funds were found
maximum in case of N. Shahr Central Cooperative Bank whereas
minimum for Mansa Central Cooperative Bank. The variation in the
growth of owned funds was lowest in Ferozepur Central Cooperative
Bank (C.V =22.32) and was highest in Amritsar Central Cooperative
Bank (C.V =67.24) during the study period. . The overall coefficient of
concentration ranges from 22 per cent to 27 per cent during the study
period. The data of coefficient of concentration shows that there is no
concentration of owned funds in few districts.
MANPOWER: The effectiveness of an organization depends largely on
the quality of the manpower especially in service industry like
banking. The number of staff members of Central Cooperative Banks
in Punjab decreased during the study period. There is decline in the
number of staff members in each Central Cooperative Bank. The
exponential growth rate is negative for all the Central Cooperative

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Banks. At the end of March 2010 Jalandhar Central Cooperative Bank

has the maximum number of staff members, i.e., 444 (11.75 per cent
of the total staff members) and Muktsar Central Cooperative Bank has
the lowest number of staff members. The average staff members were
highest in Jalandhar Central Cooperative Bank and were lowest in
Mansa Central Cooperative Bank during the period of study.
NON PERFORMING ASSETS (NPA) AS PERCENTAGE TO TOTAL
ADVANCES: Average non performing assets as percentage to advances
of all the Central Cooperative Banks in Punjab is 6.53 per cent. The
highest average percentage of NPA to total advances pertained to
Gurdaspur Central Cooperative Bank that is, 15.75 per cent during
the same period. The top rank in NPA as percentage to total advances
pertained to N.Shahr Central Cooperative Bank while Gurdaspur
Central Cooperative Bank appeared at the bottom.
RECOVERY AS PERCENTAGE TO DEMAND: The recovery performance
of Central Cooperative Banks in Punjab was quite satisfactory, as the
percentage of recovery against demand ranged from 85 per cent to 90
per cent. Average recovery performance of all the Central Cooperative
Banks in Punjab during the study period was 87.37 per cent. The top
rank in average recovery performance was in case of Jalandhar
Central Cooperative Bank and the lowest rank was for Gurdaspur
Central Cooperative Bank.

8.3.3 PROFITABILITY AND PRODUCTIVITY PERFORMANCE

OF CENTRAL COOPERATIVE BANKS IN PUNJAB
8.3.3(a) PROFITABILITY ANALYSIS
(i) STRUCTURE OF INCOME
The main sources of income of Central Cooperative Banks are
interest and discount income, commission, exchange and brokerage
and other receipts. Interest and discount income accounted for 98.45
per cent to 99.57 per cent of the total income, while non-interest
income constituted a very marginal portion. At the end of the study

360

period, Jalandhar Central Cooperative Bank contributed the highest

share in total income (10.85 per cent) and Mansa Central Cooperative
Bank had the lowest share in total income (2.12 per cent). Total
income of all the Central Cooperative Banks recorded an exponential
growth rate of 8.65 per cent. The highest exponential growth rate in
total income was observed in the case of Patiala Central Cooperative
Bank (11.77 per cent) and the lowest in Tarn Taran Central
Cooperative Bank (4.49 per cent). Patiala Central Cooperative Bank
had the highest exponential growth rate in interest income (11.76 per
cent) and the exponential growth rate was lowest for Tarn Taran
Central Cooperative Bank (4.32 per cent). At the end of the study
period Jalandhar Central Cooperative Bank contributed maximum
share in interest income (10.87 per cent) while minimum share in
interest income pertained to Mansa Central Cooperative Bank (2.13
per cent). Income from other receipts grew at an exponential growth
rate of 13.07 per cent during the period of study. Gurdaspur Central
Cooperative Bank had the highest share in other income (12.42 per
cent) whereas Mansa Central Cooperative Bank had the lowest share
in other income (0.95 per cent).
(ii) STRUCTURE OF EXPENDITURE
Interest paid on deposits and borrowings, manpower expenses,
i.e., establishment cost and other expenses constituted the three main
components of total expenditure of all the Central Cooperative Banks
in Punjab. Total expenditure of all the Central Cooperative Banks
recorded an exponential growth rate of 8.27 per cent. The highest
exponential growth rate in total expenditure was for Patiala Central
Cooperative Bank (10.94 per cent) and lowest for Tarn Taran Central
Cooperative Bank (4.63 per cent). At the end of March 2010,
Jalandhar Central Cooperative Bank had the highest share in total
expenditure (11.18 per cent) and the lowest share pertained to
Muktsar Central Cooperative Bank (1.98 per cent). Interest paid
contributed 63 per cent to 71 per cent of the total expenditure of all

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the Central Cooperative Banks in Punjab. At the end of the study

period, the contribution to interest paid was maximum for Jalandhar
Central Cooperative Bank (10.83 per cent) and minimum for Muktsar
Central Cooperative Bank (2.12 per cent). The exponential growth rate
in interest expanded was 8.27 per cent over the study period. Patiala
Central Cooperative Bank had the highest exponential growth rate
(12.40 per cent) and lowest exponential growth rate pertained to Tarn
Taran Central Cooperative Bank (3.23 per cent). Establishment cost
which includes cost of management, i.e., salaries, allowances, bonus
to staff, etc. contributed 21 per cent to 23 per cent to the total
expenditure of all the Central Cooperative Banks. At the end of the
study period Jalandhar Central Cooperative Bank had maximum
share in establishment cost (10.93 per cent) while minimum share
was observed in the case of Muktsar Central Cooperative Bank (1.15
per cent). Kapurthala Central Cooperative Bank recorded the highest
exponential growth rate (10.93 per cent) and the lowest was shown by
Muktsar Central Cooperative Bank (3.73 per cent). The third
component of total expenditure is other expenditure which includes
stationery, printing, taxes, etc. The share of other expenses in total
expenses was 4 per cent to 7 per cent during the period of study. The
highest percentage to total other expenses pertained to Jalandhar
Central Cooperative Bank (16.24 per cent) while the lowest was shown
by Mansa Central Cooperative Bank (2.05 per cent).
(iii) TREND IN NET PROFIT/LOSSES
The total profits of all the Central Cooperative Banks in Punjab
exhibited an exponential decline of 2.75 per cent over the study
period. At the end of the study period N.Shahr Central Cooperative
Bank contributed the most, i.e., Rs. 882.24 lac (40.07 per cent share
in total net profit) followed by Kapurthala Central Cooperative Bank
with Rs. 508.98 lac (23.12 per cent share in total net profit). Faridkot
Central Cooperative Bank and Mansa Central Cooperative Bank
showed losses at the end of study period. The highest exponential

362

growth rate in case of net profit was recorded by Fatehgarh Sahib

Central Cooperative Bank (13.58 per cent) followed by Patiala Central
Cooperative Bank with exponential growth rate of 11.89 per cent. The
analysis of coefficient of concentration brings out that at the end of
study period there was concentration of net profit in few districts. At
the end of study period, only two banks, viz. Jalandhar Central
Cooperative Bank and N. Shahr Central Cooperative Bank contributed
about 63 per cent of the total profits of all the Central Cooperative
Banks.
(iv) PROFITABILITY RATIOS
The highest overall interest earned ratio and interest paid ratio
pertained to Tarn Taran Central Cooperative Bank, whereas the lowest
interest earned ratio and interest paid ratio were observed in the case
of Mansa Central Cooperative Bank and Ludhiana Central Cooperative
Bank respectively. There is no clear cut trend in the ratio of non
interest income to working funds. The special feature of non interest
income to working fund ratio was its very small magnitude during the
period of study. The ratio was highest for Gurdaspur Central
Cooperative Bank and lowest for N.Shahr Central Cooperative Bank.
The movement of establishment cost to working fund ratio showed no
set trend. At the end of March 2010, Amritsar Central Cooperative
Bank recorded the highest ratio followed by Faridkot Central
Cooperative Bank. However, the lowest ratio was recorded by Muktsar
Central Cooperative Bank at the end of study period. Moga Central
Cooperative Bank had the highest average other expense to working
fund ratio, while Kapurthala Central Cooperative Bank had the lowest
ratio. Total income ratio and total expense ratio did not indicate any
clear cut trend in their movement throughout the period of study. The
highest total income ratio was observed in the case of Kapurthala
Central Cooperative Bank, whereas the lowest in Mansa Central
Cooperative Bank. At the end of March 2010, Faridkot Central
Cooperative Bank recorded the highest total expense ratio while the

363

lowest in Muktsar Central Cooperative Bank. The ratio between total

spread to working fund of all the Central Cooperative Banks in Punjab
taken together during the study period showed no set trend. The
average total spread to working fund ratio was the highest for
Ludhiana Central Cooperative Bank, while Mansa Central Cooperative
Bank recorded the lowest ratio. The ratio between total burden to
working fund was the highest for Amritsar Central Cooperative Bank
followed by Faridkot Central Cooperative Bank, and the lowest was
recorded by Muktsar Central Cooperative Bank. The behaviour of net
profit/losses to working funds ratio indicated no set trend. The ratio
was positive for all the Central Cooperative Banks in Punjab during
the years 1998-99 and 2000-01 to 2005-06, but at the state level the
ratio was positive throughout the period of study. The highest ratio
was recorded by N.Shahr Central Cooperative Bank, while Amritsar
Central Cooperative Bank showed the lowest ratio. All the Central
Cooperative Banks in Punjab except Amritsar Central Cooperative
Bank showed a positive average ratio between net profit/losses to
working fund during the study period.

(v) STEP WISE MULTIPLE REGRESSION ANALYSIS

Profitability is an important criterion to evaluate the overall
efficiency of bank groups. Profitability is a relative concept and
indicates net profit as percentage of working funds. The most widely
used measure of bank profitability i.e. net profit as a percentage of
working funds (Y) has been used as the dependent variable for
statistical analysis and ten variables has been taken as independent
variables. Multiple regression analysis has been done to look for
different

combinations

of

variables

that

explain

variation

in

profitability of the Central Cooperative Banks in Punjab. The

correlation coefficient matrices explain that variable, namely, X1
(spread as percentage to working funds) has a significant positive
correlation with bank profitability. Other variable namely, X4 (total
loans as percentage to total deposits), X7 (short-term loans as

364

percentage to total loans) have a significant but negative correlation

with

bank

profitability.

The

correlation

is

also

positive

but

insignificant with two other variables, i.e., X5 (fixed deposits as

percentage to total deposits) and X6 (current deposits as percentage to
total deposits). The variables having insignificant and negative
correlation with bank profitability are X2 (burden as percentage to
working funds), X3 (total loans as percentage to working funds), X 8
(other income as percentage to total income), X9 (total capital as
percentage to working funds) and X10 (establishment cost as
percentage to total expenses). The results of step-wise multiple
regression analysis for the study period explain that spread as
percentage to working funds (X1) entered in the regression model in
the first step, burden as percentage to working funds (X2) entered in
the second step, short-term loans as percentage to total loans (X7)
entered in the third step and in the fourth step, equity capital as
percentage to working funds (X9) entered the regression model. These
four variables collectively explain 73.30 per cent variations in
profitability. After the fourth step, no other variable was found to be
significantly affecting profitability of the banks.

8.3.3(b) PRODUCTIVITY ANALYSIS

Productivity

analysis

shows

that

Kapurthala

Central

Cooperative Bank remained the top performer for 9 years, i.e., 199798 to 2005-06. Muktsar Central Cooperative Bank was the top
performer only during the year 2006-07. However, Gurdaspur Central
Cooperative Bank emerged as the top performer for 2007-08 and
2008-09, while N.Shahr Central Cooperative Bank was top performer
during the year 2009-10. Out of the total 19 Central Cooperative
Banks under study, only three Central Cooperative Banks, i.e.,
Kapurthala Central Cooperative Bank, Muktsar Central Cooperative
Bank and N.Shahr Central Cooperative Bank remained efficient
throughout the period of study from 1997-98 to 2009-10. Tarn Taran

365

Central Cooperative Bank, Jalandhar Central Cooperative Bank and

Ludhiana Central Cooperative Bank remained efficient throughout the
period of study except in the year 2008-09. The banks showing the
worst performance were Bathinda Central Cooperative Bank and
Fazilka Central Cooperative Bank which remained inefficient for 9
years throughout the study period, while Sangrur Central Cooperative
Bank remained inefficient for eight years out of 13 years of study
period. The performance of Ropar Central Cooperative Bank was found
to be inefficient for the initial two years of the study period, but after
that it showed good results. Similarly, Patiala Central Cooperative
Bank

also

started

showing

good

results

after

2001-02.

The

performance of Fatehgarh Sahib Central Cooperative Bank, Mansa

Central Cooperative Bank and Moga Central Cooperative Bank was
found to be inefficient for four years throughout the period of study,
whereas Faridkot Central Cooperative Bank and Hoshiarpur Central
Cooperative Bank remained inefficient for five years. However,
Amritsar Central Cooperative Bank remained inefficient for six years.
The main reason of inefficiency of Amritsar Central Cooperative Bank,
Fatehgarh

Sahib

Central

Cooperative

Bank,

Faridkot

Central

Cooperative Bank, Ferozepur Central Cooperative Bank, Fazilka

Central Cooperative Bank, Gurdaspur Central Cooperative Bank,
Hoshiarpur Central Cooperative Bank, Jalandhar Central Cooperative
Bank was that these banks failed to use their inputs i.e. employees
and branches optimally. Other Central Cooperative Banks were found
to be not using their deposits and borrowings properly to raise their
level of output, i.e., investments and income. Year wise productivity
analysis brought out that minimum eleven banks were efficient in the
year 2008-09 and maximum seventeen banks were efficient in the
year 2006-07.

366

8.3.4 PERCEPTION OF BENEFICIARIES AND BANK EMPLOYEES

ABOUT THE PERFORMANCE OF COOPERATIVE BANKS IN
PUNJAB
8.3.4(a) BENEFICIARIES PERCEPTION

Majority of the respondents (52.33 per cent) belong to the age

group of above 45 years followed by 20.33 per cent who belonged
to the age group of 25-35 years. About two third, i.e., 64.67 per
cent

of the

respondents are

matriculates. Majority of the

respondents belonged to general category followed by schedule

caste and backward class. About two third of the respondents, i.e.,
68 per cent belonged to agriculture occupation including poultry
and farming followed by service and business category. Bank wise
also the same trend visible. Majority of the respondents, i.e., 30.33
percent have monthly income, in the income group of Rs. 500110000 followed by 28 per cent respondents belonged to the income
group of Rs. 10001-15000, 22.7 per cent respondents belonged to
the income group of above Rs. 20000.

44.67 per cent of the respondents have availed loans for

agriculture purpose, 17.33 percent for consumption needs, 16.33
per cent for purchase of a vehicle, 11 per cent for their business
requirements

and another

10.67 per

cent

for

their

home

requirements. Bank wise, majority of the respondents from each

bank have taken loan for the agriculture purpose. A good
proportion of respondents from Bathinda Central Cooperative
Bank (30 per cent), Faridkot Central Cooperative Bank (24 per
cent) and Tarn Taran Central Cooperative Bank (20 per cent) have
taken personal loan. 24 per cent respondent in Tarn Taran Central
Cooperative Bank, 22 per cent in Faridkot Central Cooperative
Bank and 18 per cent in Bathinda Central Cooperative Bank have
taken vehicle loan.

31 per cent of the respondents have availed loan for an amount of

Rs. up to 50000, 23.67 per cent respondents for an amount of Rs.

367

50001 to 100000, 23.33 per cent respondents for an amount of

above Rs. 200000, 13.67 per cent respondents for an amount of
Rs. 100001 to 150000 and 8.33 per cent for an amount of Rs.
150001 to 200000. Bank wise analysis shows that large proportion
of respondents from Bathinda Central Cooperative Bank, Faridkot
Central Cooperative Bank and Tarn Taran Central Cooperative
Bank had taken loan for an amount up to Rs. 50000. In
Kapurthala

Central

Cooperative

Bank

and

Patiala

Central

Cooperative Bank majority of respondents had taken loan for above

Rs. 200000 and in Ludhiana Central Cooperative Bank had taken
loan for Rs. 50001 to 100000.

Three-fourth of the respondents, i.e., 74.33 per cent has not filled
the forms on their own, but they have to seek outside help for
filling of the forms. Out of total 300 respondents, 204 respondents
faced difficulties in filling the application forms and the major
difficulty faced is length of the form followed by form seeks
excessive information and the language of the form.

Majority of the respondents in all the Central Cooperative Banks

have been influenced by the bank officials for taking loans from the
cooperative banks. In Bathinda 100 per cent respondents have
been influenced by the bank officials.

37 per cent respondents opined that it takes 15-21 days to

sanction the loan, and in 21.33 per cent cases it takes 22-28 days.
In all the banks majority of the respondents opined that it takes
15-21 days to sanction the loan except the respondents from
Bathinda Central Cooperative Bank where it takes 22-28 days.
About one-third of the respondents, i.e., 33.67 per cent got their
loans disbursed in 15-21 days, 19.67 per cent in 8-14 days.

27.33 per cent of the respondents surveyed had to visit 5-6 times
for getting their loans sanctioned/disbursed, 26 per cent visited 78 times, 18.67 per cent respondents visited 3-4 times. As many as
15 per cent had to visit more than 8 times while 13 per cent had

368

visited just once or twice. Bank wise, a large proportion of the

respondents from Bathinda Central Cooperative Bank, Faridkot
Central Cooperative Bank and Kapurthala Central Cooperative
Bank had visited 7-8 times. However, majority of the respondents
from

Ludhiana

Central

Cooperative

Bank,

Patiala

Central

Cooperative Bank and Tarn Taran Central Cooperative Bank had

visited 5-6 times to get their loans sanctioned/disbursed.

Maximum

respondents

who

complained

delay

in

sanctioning/disbursement of loans belonged to Bathinda Central

Cooperative

Bank followed by those from Faridkot Central

Cooperative

Bank,

Tarn

Taran

Central

Cooperative

Bank,

Kapurthala Central Cooperative Bank, Patiala Central Cooperative

Bank and Ludhiana Central Cooperative Bank. The main reasons
put

forward

for

delays

by

the

respondents

are

excessive

documentation followed by shortage of staff and unnecessary

queries made by the officials while sanctioning/disbursement of
loan.

Majority of the respondents, i.e., 55.33 per cent found that

inspection was made by the cooperative banks while granting of
loans. Majority of the

respondents from Ludhiana

Central

Cooperative Bank (72 per cent), Kapurthala Central Cooperative

Bank (64 per cent) and Patiala Central Cooperative Bank (62 per
cent) viewed that inspection was made by the bank officials.

61 per cent of the respondents pledged their immovable property

as security whereas the remaining 39 per cent took loan against
their movable asset. Bank wise also the same trend is visible
except Bathinda Central Cooperative Bank (52 per cent) and
Faridkot Central Cooperative Bank (54 per cent) where majority of
the respondents have provided movable property as security. In
Tarn Taran Central Cooperative Bank, 50 per cent respondents
have given immovable property and 50 per cent has given movable
property as security. In every Central Cooperative Bank majority of

369

the respondents had given immovable property as security except

Bathinda

Central

Cooperative

Bank

and

Faridkot

Central

Cooperative Bank.

In majority of the cases, i.e., 70.67 per cent the repayment

schedule is half yearly. Bank wise also majority of the respondents
in all the Central Cooperative Banks under study repay their loans
half yearly except Faridkot Central Cooperative Bank where
majority repay their loan monthly.

Majority of the respondents expressed their satisfaction with

regard to repayment schedule (99.67 per cent), behaviour of staff
(94 per cent), knowledge of staff (92 per cent), presence of staff (79
per cent), and grievance handling (66.33 per cent). However the
majority of respondents have expressed their dissatisfaction
regarding interest rates (79.67 per cent), adequacy of staff (75.33
per cent) and security requirements (50 per cent). 32 per cent of
the respondents are indifferent with regard to grievance handling.
From Average Weighted Scores it was found that respondents are
highly satisfied with repayment schedule (1.79), behaviour of staff
(1.18) and knowledge of staff (1.05). Further, the respondents are
found to be satisfied with the factor, viz. presence of staff (0.84)
and grievance handling (0.80). But the respondents are dissatisfied
with the factors such as rate of interest (- 0.92), adequacy of staff (0.76) and security requirements (-0.17). The respondents belonging
to all the banks, occupations and income groups showed
dissatisfaction with the factors such as adequacy of staff, and rate
of interest charged on loan and showed satisfaction with factors
such as repayment schedule, behaviour of staff and knowledge of
staff. The mean value of Average Weighted Scores corresponding to
the degree of satisfaction expressed by the respondents regarding
various opinion/ perception statements bank-wise is highest for
Patiala Central Cooperative Bank (0.607) followed by Bathinda
Central Cooperative Bank (0.527), Kapurthala Central Cooperative

370

Bank (0.465), Ludhiana Central Cooperative Bank (0.465) Tarn

Taran Central Cooperative Bank (0.420) and Faridkot Central
Cooperative Bank (0.375); occupation-wise highest for business
category (0.69) followed by service (0.64) and agriculture & allied
(0.39); and income-wise highest for the monthly income group of
Rs.15001-20000 (0.55), followed by Rs.5001- 10000 (0.49), above
Rs.20000 (0.48), Rs.10001- Rs.15000 (0.43) and up to Rs.5000
(0.40). The Kendalls coefficient of concordance shows that there
exists concurrence of ranking among the respondents from
different banks, different occupations and different income groups.

Majority of the respondents expressed their agreement with regard

to convenience regarding the timing of banks (96 per cent), staff of
cooperative banks is motivated (84.67 per cent) and cooperative
bank help in reducing dependence on money lenders (52.67 per
cent), increase in income after availing loan (49.67 per cent) and
customer satisfaction is assessed (43.33 per cent). Further 55.33
per cent of the respondents disagree with regard to training
facilities provided by the Central Cooperative banks and 41.67 per
cent of the respondents are indifferent towards the training
facilities provided by Central Cooperative Banks. However the
majority

of

the

respondents

expressed

their

disagreement

regarding Central Cooperative Banks advice on the choice of the

product (51.67 per cent). And 38 per cent of the respondents
disagreed that their income has increased after availing of loans.
Further 65.67 per cent of the respondents are indifferent toward
the cooperative banks provide more facilities than other banks and
40.33 per cent of the respondents are indifferent towards that
customer satisfaction is assessed by the Central Cooperative
Banks. The respondents from all the banks, occupation and
income groups are of the same opinion that they agreed with the
factor, i.e., convenience with regard to timing of banks and

371

disagreed with the factors that cooperatives provide training for the
use of the loan. The mean value of Average Weighted Scores
corresponding to the degree of agreement expressed by the
respondents regarding various opinion/perception statements
bank-wise is highest for Kapurthala Central Cooperative Bank
(0.572) followed by Ludhiana Central Cooperative Bank (0.477),
Bathinda Central Cooperative Bank (0.392), Patiala Central
Cooperative Bank (0.207), Faridkot Central Cooperative Bank
(0.067) and Tarn Taran Central Cooperative

Bank (0.045);

occupation-wise is highest for agriculture and allied (0.330)

followed by business (0.300) and service(0.16); and income-wise
highest for the income group Rs.10001-15000 (0.39) followed by
the income group of Rs.15001-Rs.20000 (0.32), above Rs.20000
(0.27), Rs.5001- Rs.10000 (0.25) and below Rs. 5000 (0.02). The
Kendalls coefficient of concordance shows that there exists
concurrence of ranking among the respondents from different
banks, different occupations and different income groups.

8.3.4(b) EMPLOYEES PERCEPTION

All the respondent employees considered security as an important

variable while financing a project. However, the suitability of a
project needs to be judged keeping in view the factors like effect on
income after financing the project, capability and character of the
client, technical feasibility of the project, supporting facilities and
infrastructural facilities available.

One-fourth of the total respondent employees explained that

generally a loan is sanctioned with in a period of 15-21 days.
However, an equal; number of respondent employees, i.e. 23 per
cent each claimed that a loan is sanctioned with in 8-14 days and
22-28 days. As many as 17 per cent of the employees viewed that a
loan is sanctioned within a weeks time , while the remaining 12
per cent employees admitted that it takes more than 28 days to
sanction a loan.

372

About one-third of the respondents, i.e., 32 per cent that it takes

15-21 days to disburse a loan. However, 23 per cent respondents
claimed that a loan is disbursed with in 8-14 days. As many as 22
per cent employees viewed that it takes up to 7 days, while another
16 per cent and 7 per cent respondent employees admitted that a
loan is disbursed within a period of 22-28 days and more than 28
days respectively.

Majority of the respondent employees, i.e., 60 out of the total 100

admitted

that

generally

there

occurs

delay

in

the

sanction/disbursement of loans mainly for the reason that the

beneficiaries provide incomplete information, followed by another
reason like inadequate staff, lack of authority with the employees
and inability of the staff.

The bank employees admitted that sometimes the customers are

not able to get the loans sanctioned for the reason mainly due to
defective land records followed by the other reasons like inability of
the borrower to provide guarantee and margin money and
competition from the money lenders.

Majority of the respondents, i.e., 68 per cent admitted that the

programme of branch expansion of cooperative banks is adequate.

48 per cent of the respondents found that the recovery position of

the banks is not adequate mainly due to the reason that willful
default is made by the beneficiaries followed by the other reasons
such as misutilisation of loan amount, risk in agriculture, and
defective supervision system of the banks. The bank employees
opined that to improve recovery legal action should be taken
against willful defaulters.

59 per cent respondents admitted that there is staff shortage in

Central Cooperative Banks which affect the quality of the work of
employees. 52 per cent bank employees showed satisfaction with
the existing loan monitoring system of the bank. About threefourth of the respondents, i.e., 77 per cent agreed that the fixed
targets are achieved by the bank.

373

Majority of the respondent employees of all the Central Cooperative

Banks found their jobs challenging, having growth potential and
provide satisfaction to them except Gurdaspur Central Cooperative
Bank, Hoshiarpur Central Cooperative Bank, Jalandhar Central
Cooperative Bank and Tarn Taran Central Cooperative Bank. The
designation of employees does not significantly influence their
opinion about their job and the same is in the case with the
experience of employees, as experience does not significantly
influence their opinion about their jobs.

8.4 PROBLEMS AFFECTING THE PERFORMANCE OF

COOPERATIVE BANKS

Political interference in the functioning of cooperative banks has

been the biggest snag in the efficient functioning of Central
Cooperative Banks in the state.

Another difficulty is that there is no coordination between the

activities of Commercial banks, Regional Rural Banks and
Cooperative Banks. These institutions are working in the same
field, but they are not complementary but competitive.

There is shortage of staff in the branches of Central Cooperative

Banks in the state. Due to this work load per employee increases
and affects the quality of work adversely.

Another difficulty faced by the beneficiaries of the bank is the

length of the form and difficult language of the form. And there is
also delay in the sanctioning and disbursement of loan.

Poor infrastructural facilities like inadequate facilities of power,

drinking water, and seating arrangement are major difficulties
faced by the employees and beneficiaries of the bank.

No training is given to the employees of the cooperative banks to

adopt the changes in technology, which hampers the performance
of bank employees of Central Cooperative Banks in the state.

The new technologies are not used in the cooperative banks like
computer facilities, no facility of Automatic Teller Machine (ATM)

374

etc. also adversely affect the performance of Central Cooperative

Banks in the state.

The problem of mounting overdues in cooperatives is a matter of

serious concern to the policy makers. The mounting overdues
disrupt over time the flow of credit to the farmers from the
cooperatives and adversely affect the capacity of lending and to
provide adequate and timely credit to agriculture and thus hamper
the pace of economic development.

8.5 SUGGESTIONS
The suggestions emerging out of the present study are given as
under:

The modern techniques of banking including the use of ATM

should also be extended to the cooperative banks so as to make
them more competitive in the financial market.

The main reason of inefficiency of the cooperative banks was that

the banks fail to use their inputs optimally. So to improve the
efficiency of banks, the banks should use their inputs, i.e.,
deposits, manpower, branches and borrowings optimally.

There is need to provide adequate staff in the banks under study.

The selection of staff should be made purely on the basis of merit
to improve the efficiency of these banks.

The employees of cooperative banks under study need to be

imparted extensive training from time to time. Appraisal of
employees work on regular basis can help to increase their
performance.

The process of advancing loans to the people should be made

simple. Unnecessary formalities followed by these banks need to be
curtailed.

Most of the branches of cooperative banks need to be computerized

for quick disposal of work and to survive in the competitive
environment.

375

It is necessary to stop political interference in the day-to-day

functioning of cooperative banks so as to make them more efficient
and profit-oriented.

It has been found that cooperative banks even fail to provide the
basic amenities like drinking water, clean surroundings, proper
sitting arrangement and inconvenience due to power cuts to their
customers and employees as well. Immediate attention is required
to improve such facilities.

It has been observed that in order to attain certain narrow political

ends the government has announced in the past certain relief
measures for the defaulters like waving off the loan up to a certain
limit; such decisions hinder the growth of banks, and hit hard
their recovery process.

To improve profitability, the banks should make efforts to increase

their income and reduce non-interest expenses i.e., establishment
cost and other expenses.

The dual control by the state government and the RBI over the
cooperative banks is against the functional autonomy of these
banks. The overlapping of control should end immediately in the
largest interest of these banks.

It has been observed that generally the cooperative banks remain

devoid of the services of rural credit experts and economists. It is
required that in order to have the benefit of their deep knowledge
and experience in the field, such people should be taken on the
board of these banks. Only merits and previous banking sector
experience should form the basis in the appointment of CEOs.

The banks should have an effective monitoring system over the use
of funds in order to prevent or minimize diversion of funds by the
borrowers.

Quick recovery of dues can lead to reduce the overdues of

cooperative banks in Punjab. This is possible only when the bank
authorities empowered by law to take action against the willful

376

defaulters. There is also need to strengthen the credit appraisal

and supervision mechanism for preventing the incidence of fresh
NPAs and overdues under all categories of loans and advances.

The share of other income in total income of cooperative banks

ranges from 0.5 per cent to 1.5 per cent. Hence, the Central
Cooperative Banks should make efforts to increase their income
from other sources.

8.6 SCOPE FOR FURTHER STUDY

The present research work is limited in its attempt to explain
only the specific objectives formulated for the study. Time and cost
involved to carry out this research are the other constraints. However,
the important areas that can be taken up for further research are as
under:

The

present

study

evaluates

the

performance

of

Central

Cooperative Banks in Punjab only. A comparative study by taking

more states can be done or the study of any other state may be
undertaken on the pattern of this study.

The socio-economic benefit analysis of cooperative banks can also

be another area for further research.

The present study examines the perception of beneficiaries on

certain attributes. Similar studies can be conducted by adding
some more attributes.

377

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