INDUSTRY PROFILE

Introduction:
Co-operative banks in India came into existence with the enactment ofthe Agricultural
Credit Co-operative Societies Act in 1904. Co-operativebank form an integral part of banking
system in India. Under the act of 1904,a number of co-operative credit societies were started.
Owing to theincreasing demand of co-operative credit, anew act was passed in 1912,which was
provided for establishment of co-operative central banks by aunion of primary credit societies
and individuals.
Co-operative Banks in India are registered under the Co-operativeSocieties Act. The
cooperative bank is also regulated by the RBI. They aregoverned by the Banking Regulations Act
1949 and Banking Laws (CooperativeSocieties) Act, 1965.
Credit cooperatives are the oldest and most numerous of all the types ofcooperatives in India.
The cooperative credit institutions in thecountry may be broadly classified into urban credit
cooperatives andrural credit cooperatives. There are about 2090 urban creditcooperatives and
these societies together constitute for about 10 percentof the aggregate banking business and
therefore regarded as animportant segment of the banking system. The urban creditcooperatives
are also popularly known as Urban Cooperative Banks.
The rural credit cooperatives may be further divided into short-term creditcooperatives and
long-term credit cooperatives. With regard to shorttermcredit cooperatives, at the grass-root level
there are around 92,000Primary Agricultural Credit Societies (PACS) dealing directly with
theindividual borrowers. At the central level (district level) District CentralCooperative Banks
(DCCB) function as a link between primary societiesand State Cooperative Apex Banks (SCB).
It may be mentioned thatDCCB and SCB are the federal cooperatives and thus the objective isto
serve the member cooperatives. As against three-tier structure ofshort-term credit cooperatives,
the
long-term cooperative credit structurehas two tiers in many states with PrimaryCooperative
Agriculture andRural Development Banks (PCARDB) at the primary level andState Cooperative
Agriculture and Rural Development Bank at the statelevel. However, some states in the country

have unitary structure withstate level cooperative operating with through their own branches
andin one state an integrated structure prevails. The organizationalstructure of the credit
cooperatives in India is illustrated in chart I.Interestingly, under the Banking Regulation Act
1949, only StateCooperative Apex Banks, District Central Cooperative Banks and selectUrban
Credit Cooperatives are qualified to be called as banks in theCooperative sector. In other words,
only these banks are licensedto conduct full-fledged banking business.

Finance Function:
i.

Cooperative banks in India finance rural areas under:

ii.

Farming
Cattle
Milk
Hatchery
Personal finance

Cooperative banks in India finance urban areas under

Self-employment
Industries
Small scale units
Home finance
Consumer finance
Personal finance

TYPES OF CO-OPERATIVE BANKS:

 CENTRAL CO-OPERATIVE BANKS:

These are the federations of primary credit societies in a district and are of two
types- those having a membership of primary societies only and those having a
membership of societies as well as individuals. The funds of the bank consist of share
capital, deposits, loans and overdrafts from state co-operative banks and joint stocks.
These banks provide finance to member societies within the limits of the borrowing
capacity of societies. They also conduct all the business of a joint stock bank.

STATE CO-OPERATIVE BANKS :

The state co-operative bank is a federation of central co-operative bank and acts as a
watchdog of the co-operative banking structure in the state. Its funds are obtained from share
capital, deposits, loans and overdrafts from the Reserve Bank of India. The state cooperative
banks lend money to central co-operative banks and primary societies and not directly to the
farmers.

LAND DEVELOPMENT BANKS:

The Land Development Banks meet the long term credit requirements of the farmers
for developmental purposes. They are supervised National Bank for Agriculture and Rural
development (NABARD). The state land development banks oversee the the primary land
development banks situated in the districts and tehsil areas in the state. They are governed both
by the state government and Reserve Bank of India. Recently, The sources of funds for these
banks are the debentures subscribed by both central and state government. These banks do not
accept deposits from the general public.

(PRIMARY) URBAN COOPERATIVE BANKS :

Urban credit societies that meet specified criteria can apply to RBI for a banking
license to operate as urban co-operative banks. Primary (urban) co-operative banks are registered
and governed by state governments under the respective co-operative societies acts of the
concerned states. Under the control of the RBI, as covered by the provisions of the Banking
Regulation Act, 1949.

While the managerial aspects of these banks, registration,

management, administration, recruitment, amalgamation, liquidation, etc are controlled by the

state governments, matters related to banking are governed by RBI directives. Traditionally, the
area of operation of primary (urban) co-operative banks is confined to metropolitan, urban or
semi-urban centres and caters to the needs of small borrowers including SSIs, retail traders, small
entrepreneurs, professionals and the salaried class.

DISTRICT CENTRAL CO-OPERATIVE BANKS (DCCBS) AND STATE COOPERATIVE BANKS (SCBS) :
They are co-operative banks at the district level and at the state level. Each district
will have not more than one DCCB with a number of DCCBs reporting to the SCB. Earlier
these two tiers were also under the supervision of the RBI. However, following the establishment
of the National Bank of Agriculture and Development (Nabard) in 1982, the supervisory function
of these banks has been passed on to Nabard. The major objectives of the DCBs are to provide
loans to affiliated societies, to act as a balancing centre of finance for primary societies, to

arrange for the supervision and control of the affiliated societies, to raise deposits from members
and non-members, to convene conferences of the member societies and also prescribe uniform
procedure for the working of primary societies, to open branches of the bank at important places
with the permission of the Registrar of Co-operative Societies and to maintain and utilise state
partnership. These apex banks or State Co-operative Banks are formed by federating DCBs in
each state. The apex banks assume a key-position in the co-operative credit structure because the
financial assistance from RBI and the National Bank for Agriculture and Rural Development are
invariably routed through them.

PRODUCTS AND SERVICES :

DEPOSITS:
Saving Bank Account
Current Account
Recurring Deposits
Fixed Deposits
Cash Certificate
LOANS:
Loans to Salaried employees
Home Needs Loan
Loan to Pensioners
Education and Housing Loan .
SERVICES:
Clearing
Safe Deposit Locker
ATM
Demand Draft/Pay Order

ADVANTAGES OF COOPERATIVE SOCIETY :

1. Easy to form:
Any ten adults can join together and form a cooperative society. Registration of a
cooperative society is very simple and easy. No legal formalities are required for the
formation of cooperative society.
2. No obstruction for membership:

Unless and otherwise specifically debarred, the membership of cooperative society

is open to everybody. Nobody is obstructed to join on the basis of religion, caste, creed,
sex and colour etc. A person can become a member of a society at any time he likes and
can leave the society when he does not like to continue as member.
3. Limited liability:
In most cases, the liabilities of the members of the society is limited to the extent of
capital contributed by them. Hence, they are relieved from the fear of attachment of their
private property, in case of the society suffers financial losses.
4. Service motive:
In Cooperative society members are provided with better good and services at
reasonable prices. The society also provides financial help to its members

the

concessional rates. It assists in setting up production units and marketing of produces c

small business houses so also small farmers for their agricultural products.

5. Democratic management:
The cooperative society is managed by the elected members from and among
themselves. Every member has equal rights through its single vote but can take active
part in' the formulation of the policies of the society. Thus all member are equally
important for the society.

6. Stability and continuity:

A cooperative society cannot be dissolved by the death insolvency, lunacy,
permanent incapability of the members. Therefore, it has stable life are continues to exist
for a longer period. It has got separate legal existence. New members joinand old
members may quit the society but society continues to function unless are otherwise all
members unanimously decided to close the same.

DISADVANTAGES OF COOPERATIVE SOCIETY:

1. Limited resources:
Cooperative societies financial strength depend on the cap contributed by its
members and loan raising capacity from state cooperative banks. The membership fee is
limited for which they are unable to raise large amount of resources as their members
belong to the lower and middle class. Thus, cooperative are not suitable for the large scale
business which require huge capital.

2. Inefficient management:
A cooperative society is managed by the members only. They do not possess any
managerial and special skills. This is considered as major drawback of this sector.
Inefficiency of management may not bring success to the societies.
3. Lack of secrecy:
The cooperative society does not maintain any secrecy in business because the
affairs of the society is openly discussed in the meetings. But secrecy is very important for
the success of a business organisation. This paved the way for competitors to compete in
more better manner.

4. Cash trading:
The cooperative societies sell their products to outsiders only in cash. But, they are
usually from the poor sections. These persons require to avail credit facilities which is not
possible in the case of cooperatives. Hence, marketing is a shortcoming for the
cooperatives.
5. Absence of motivation:
The members may not feel enthusiastic because the law governing the
cooperatives put some restriction on the rate of return. Absence of relationship between
work and reward discourage the members to put their maximum effort in the society.

RECENT TRENDS IN COOPERATIVE BANKS:

Indias cooperative banking sector has been suffering in the last many years due to poor

management and capital shortage.

During 2000-2010, 132 banks had their licenses cancelled and 62 merged with other

banks.
There are over 1,650 UCBs with close to 7,000 branches in the country.
About 45 Indian co-operative banks with combined deposits of Rs.35,600crore face penal
action by the Reserve Bank of India (RBI), including possible prohibition on their
operations, if they fail to meet a 30 June deadline to achieve minimum capital and reserve

requirements.
Of the 45 cooperative banks, 23 do not even have licences but these together have

Rs.7,600crore deposits.
Of these, 16 are in Uttar Pradesh, three in Maharashtra, three in Jammu and Kashmir and
one in West Bengal.

The 16 banks in Uttar Pradesh together have a deposit base of Rs.2,900crore and will
require Rs.1,400 crore of capital to meet the 4% CAR stipulation. The three banks in

Maharashtra have about Rs.3,000crore of deposits.

These 23 banks will require about Rs.2,100crore of capital to achieve 4% capital

adequacy ratio, according to NABARDs estimates.

The remaining 22 of the 45 cooperative banks have licences but were served notices by

the central bank two months ago for non-compliance with its stipulations.
Of these, seven are in Kerala. These banks have to raise their capital adequacy to 4% by
the end of June and to 7% by March 2014. All cooperative banks have to gradually
migrate to 7% capital adequacy by March, 2014.

3.2 COMPANY PROFILE

THE PONDICHERRY CO-OPERATIVE URBAN BANK LIMITED:
The Pondicherry Co-operative Urban Bank was registered as a Co-operative Society on
15th June 1955 and started its working from 11th July 1955 with the membership of 1200 and
share capital of Rs.95,000/-. Later on the above said Society was converted into Bank namely
The Pondicherry Co-operative Urban Bank.
Initially the bank was registered under the Tamilnadu Co-operative Societies Act and
rules. After implementations of the Pondicherry Co-operative Societies Act 1972 and Rules 1973
the said bank was brought under the Pondicherry Co-operative Societies Act and Rules. The
above said bank has obtained license No. UBD. TN1029-P from Reserve Bank of India on 6th
August 1990, to carry on the Baking Business as per section on 22(1) read with section 56(0) of
the Banking Regulation Act 1949.
The Pondicherry Co-operative Urban Bank has been brought under the category insured bank.
The minimum insurance cover given to a depositor is Rs. 1, 00,000/- and the same is made with
the Deposit Insurance and Credit Guarantee Corporation of India. By its performance the
Pondicherry Co-operative Urban Bank has been brought under A class audit classification for
more than 20 years.
The Pondicherry Co-operative Urban Bank functioned under the elected Board of
Management till 31.12.1994. Thereafter the bank is managed by the Administrator appointed by
the Registrar of Co-operative Societies from the cadre of Deputy Registrar of Co-operative
Societies of the Co-operative Department and the same is continued till this date.

OBJECTIVE OF THE BANK:

To lend advances to members either upon security or otherwise.

To draw, make accept, buy, sell, collect and deal in bills, drafts, investment scrits and

other government securities whether transferable or negotiable.

To provide safe deposit vaults.
To open branches or extension counters within the area of operation.
To manage to sell and to realize any property this may come into the possession of the

bank in satisfaction.
To provide financial assistance to self-employed persons for setting up their own

business.
To do any form of business as specified in section 6 of the banking regulation act, 1949

(as applicable to co-operative societies)

To undertake any form of business which the state government may specify in which it is
lawful for banking business.

MEMBERSHIP:
A Class:
Any eligible person can hold A Class share of Rs. 100/-. The Bank is issuing Surety Loan to
salaried class people of Pondicherry State and those who are availing Surety Loan from the Bank
should hold 5% of share to their sanctioned loan amount. A Class member holds the power of
voting in the election to the Board of Directors and he can nominate to the post of Director of the
Bank. If a person holds A Class membership, he can be exempted from deduction of TDS for
the interest amount getting from his deposits in the Bank without any limit. Persons who have
A Class membership in the Bank can avail Jewel Loan above Rs. 1.00 lakh up to Rs.5.00 lakhs.
The total no. of A Class members for the last five years and the share collected is shown hereunder:

Year

No. of member

Amount of Share

2012-13

24,525

Rs. 517.02 lakhs

2011-12

23,927

Rs. 524.19 lakhs

2010-11

23,262

Rs. 507.27 lakhs

2009-10

23,374

Rs. 525.92 lakhs

2008-09

23,336

Rs. 533.94 lakhs

FUNDS:
The Main source of funds of the Bank is the various kinds of deposits collected from the public
namely, Fixed Deposit, Recurring Deposit, Cash Certificate, Savings Deposit, Current Deposit.
The deposit position of the Bank is increasing year after year due to the high rate of interest on
deposits provided by the Bank on comparing the rate of interest with other Co-operative and
Nationalized banks. The rate of interest on deposit has been fixed at least 0.5% or 1% higher than
other banks.The deposit position of the Bank for the past 5 years is shown hereunder:

Year

Amount
(Rs.in crores)

2012-13

150.62

2011-12

126.05

2010-11

121.52

2009-10

110.04

2008-09

100.60

ORGANIZATION CHART:

PROFIT:
The Bank is running on profit from the inception. The profit particulars of the Bank for the past 5
years are as follows:

Year
2012-13
2011-12
2010-11
2009-10
2008-09

Amount
(Rs.in Lakhs)
46.59
32.08
83.66
75.60
30.96

NPA/CRAR REPORTS:
NPA:
To safeguard the deposits of public, the ReserveBank of India fixed NPA norms to all Banks
which comes under their control. The NPA particulars of the Bank are detailed as below

Total
Year

Advances (Rs.in

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

Lakhs)
10416.44
10061.59
9067.05
7915.75
7505.69

Advance on

Gross

NPANet

NPA

(%)

(%)

1356.99
1185.76
1025.05
1263.68
1092.27

13.03
11.79
11.31
15.96
14.55

6.23
4.87
3.85
8.61
8.07

NPA

 CRAR:
The stability and survival of the Bank can be constructed with the CRAR (Capital Risk to Assets
Ratio) of any Bank. The minimum CRAR level needed is 9% as per the directives of Reserve
Bank of India. The CRAR percentage of the Bank for the past 3 years is shown here-under:

Year
31.03.2012
31.03.2011
31.03.2010

Amount
(Rs.in Lakhs)
13.46%
13.66%
15.67%