4

CHAPTER - II
TAMIL NADU CO-OPERATIVE STATE AGRICULTURE
AND RURAL DEVELOPMENT BANK LIMITED –
AN OVERVIEW

2.1. Introduction

2.2. Early History of Co-operative Banking

2.3. History, Growth and Development of Agriculture and

Rural Development Banks

2.4. Types and Structure of Agriculture and Rural

Development Banks

2.5. State Agriculture and Rural Development Bank

(SARD Bank’s)

2.6. Primary Co-operative Agriculture and Rural

Development Banks (PCARD Banks)

2.7. Tamil Nadu Co-operative State Agriculture and

Rural Development Bank Limited – A Profile

2.8. Administrative set-up of TNCSARD Bank

2.9. Resources of TNCSARD Bank

2.10. Jewel Loans in TNCSARD Bank

2.11. Working Capital of TNCSARD Bank

2.12. Working Results Of TNCSARD Bank

2.13. Loaning Operations of TNCSARD Bank

2.14. Publication of “Nilavalam - Journal”

2.15. Staff Training Centre

2.16. Dindigul District – A Profile

2.17. Summary
 5

2.1. INTRODUCTION

This chapter gives an overview of the history of and recent

developments of the Tamil Nadu Cooperative State Agriculture and Rural

Development Bank Limited. It describes the early development of Co-operative

banking, the origin and development of the Agriculture and Rural Development

Banks in India, the objectives of the Bank, the organisational and administrative

set up, the resources of the Bank and the nature of the business. Secondary data

found in this chapter were collected from the annual reports, bank profiles,

publications of the bank, and other literature in books and articles published by

the experts in this field.

2.2 EARLY HISTORY OF CO-OPERATIVE BANKING

Germany is the birthplace of the Co-operative Credit Movement in

the world. In India, the inspiration for the co-operative movement came largely

from Germany. Mr. Fedrick Nicholson was sent to Europe to study the working

of the agricultural banks and suggest means of introduction of the Co-operative

movement in India. Based on his recommendations mostly on the pattern of

credit societies in Germany, co-operative credit societies were formed in India.

His important advice to Indian Co-operators was "Find Raiffeisen" which

explains the importance he gave to the Raiffeisen system of credit of Germany as

a means of solving the problem of indebtedness of the people in India. The study

of the German Credit System is thus of special interest to India.

 6

Famine, poverty, exploitation and indebtedness, necessitated the

invention of a new idea in Germany in the middle of the nineteenth century. The

poor farmers and labourers of that country were heavily under debt and were

otherwise also greatly exploited by money lenders. The whole of the trade was

also in the hands of the Jews and the farmers mostly bought their requirements as

well as sold their produce through this class. The result was extreme poverty

among the labourers and farmers. It is reported that almost every house and

farmland was encumbered with debt. To add to this misery, famines occurred too

frequently and it almost broke the backbone of the poor class.

When such was the condition around, two pioneers-Herd F.W.

Raiffeisen and Herr Franiz Schulze, both well known personalities in Co-

operative literature, moved by the miserable condition of farmers and labourers,

started making experiments with various methods of relief. They started by

organizing charity for the distressed people but soon, realising the superiority of

self- help over charity, evolved a system based on principles of self-help and

mutual help. Their experiments, is fact, led them from one idea to another and

eventually they were able to formulate certain principles and practices on whose

basis was built the huge super structure of Co-operative Credit.

Herr Franiz Schulze (1808-1883) was a judge and the Mayor of

Delitzch. He was a great enthusiast in the cause of the poor and even sacrificed

his job for the sake of his principles. Raiffeisen (1818-1888) was a military
 7

officer and later on an engineer in the civil service known for his talent and skill.

It is reported that, even when he was blind and sick in bed he designed and

guided the construction of the railway along the Rhine– a most difficult and

dangerous project. Both the pioneers started their experiments in co-operation

while still in service. 1

2.2.1. Schulze - Delitzch System

Much distressed by the miserable plight of the people of Delitzch,

Schulze founded a friendly society in 1849 for providing relief in sickness and in

the same year he established an association of Shoe-makers for the purchase of

raw materials. But he soon realised that the great need of the people was the

provision of cheap credit facilities without which no fruitful improvement was

possible in the condition of the people. So in 1850 he started at Delitzch his first

loan society, diverting his activities from the Co-operative supply of articles to

Co-operative supply of money. The inhabitants of this place were mostly either

artisans or petty traders and their needs had to be catered to the funds of this

society were contributed by some persons who were not expected to borrow

funds from the society. In real sense it was not a co-operative society but was

merely a capitalistic institution where some of the members (who were rich)

agreed to supply funds to other members (who were in need of funds).

1
Raghubans Dev Bedi, Theory, History and Practice of Co-operation, international
Publishing House, Meerut, p.89.
 8

This was the real weakness of the society of which Schulze was

aware. He understood well that unless people tried to stand on their own legs in

an organized manner by self-help no one could help them for long. Hence, he

insisted that anyone who did not become a member of the association should not

be allowed to borrow from it.

In 1852 another society was organised in the neighbouring

village of Eilenburg and with the experience gained here, Schulze also

reorganised the parent society-a self-supporting institution with share

capital, thereby making it fully co-operative. He laid the real foundation for

a splendid co-operative credit movement.2

2.2.1.1 Schulze People Banks

Schulze started his efforts after studying the conditions of the famine

stricken people, in his capacity as Chairman of the Famine Commission. A

charitable bakery was established to distribute bread to the poor with

contributions from his friends. Co-operative effort, however, started with the

realisation by him of the superiority of self-help and mutual help over charity. In

1849, he established his first friendly society of shoe-makers with the object of

making purchases of raw material in bulk and supplying it to members. In 1850,

he started his first bank in his native town. Its function was to create funds to be

lent to its members. With the experience gained by him, he formulated some

2
. Locit., p.90.
 9

principles and published a book written by him in 1856. The number of his banks

grew rapidly and in 1859, he called a congress of his banks, which resolved to set

up "The General Union of German Industrial Societies". He remained as a

Director till his death. The first Co-operative Law was from Prussia in 1867,

which was mostly applicable to the whole of Germany in 1889. At the time of his

death, there were 1929 popular Banks.3

2.2.2. Raiffeisen Banks

Like Schulze, Raiffeissen also started with the distribution of alms,

through his first society organised in 1848. Next year, he started a society with

well-to-do persons as members. It got deposits from the members and lent them

to non members. In 1862, he founded another society at Anhausen, in which

borrowers and lenders were the members of the society. As most of the

borrowers could not offer security, he thought of giving them credit on their joint

liability and made the loans secured by mutual-watchfulness. In 1877, "The

Grand Union of Rural Co-operative Societies", also called "Raiffeisen Union",

was started.

There was another pioneer in Dr. William Hass, who organised a

number of Rural Credit Societies and in 1887 a union called "The Imperial Union

of German Agricultural Co-operative Societies" was formed. In 1905 this union

was amalgamated with the Raiffeisen Union.

3
Locit., p.91.
 10

2.2.2.1 PRINCIPLES AND WORKING OF SOCIETIES

The Schulze and Raiffeisen type of societies have got their own

features and differ from each other in fundamentals. A comparative study

would be interesting of Raiffeisen Societies and Schulze Delitzch Banks

1. As Raiffeisen started his work among the farmers, the membership of his

societies was drawn mostly from the cultivating classes. Schulze on the other

hand started his experiments among the artisans and thus the membership of

his societies was derived from among the artisans and industrial workers.

2. Raiffeisen believed that as most of the members of societies were poor and

were individually not credit worthy, they could avail of loans on the basis of

their joint liability. He, therefore, advocated the introduction of unlimited

joint and several liability of members as a means of mutual help.

Schulze worked among the comparatively well-to-do people who

would not risk their property for the sake of others. He, therefore, advocated

limited liability as the hallmark of the association.

3. As a safeguard against unlimited liability, Raiffeisen considered mutual

watchfulness necessary and advocated that the area of operation of societies

should be small.

As the liability of members of the Schulze type societies was limited,

mutual watchfulness was not given much importance and therefore, the area of

operation of these societies allowed was larger.

 11

4. Members of the Raiffeisen societybeing poor, only small loans were given

to them but in order to give them the maximum benefit of loans recoveries

were spread over a long period.

In the societies of Schulze, bigger loans were only advanced so that

the investment may give better yields and income. The loans were, however,

given as a temporary measure to tide over seasonal difficulties and were

recovered at short intervals. Easy installments were not allowed.

5. In the Raiffeisen type more stress was placed on the character of the

members than on the ownership of property by them. Loans were thus

advanced on the basis of personal sureties taken from among members.

However as a safeguard, loans were advanced only for production purposes

and the application of loans on the desired purpose was closely watched.

In the societies of Schulze, loans with huge amounts were advanced

on the security of tangible assets. Although loans were advanced only for

production purpose, much stress was not placed on the supervision over the

application of funds.

6. Profiteering was never the motive of these societies; all profits remained the

collective property of the bank and were utilized for strengthening the

society. Raiffeisen did not favour the giving of dividends and even when the

law came to provide for the grant of dividends, only a small portion of the

profits was allocated for the grant of dividends.

 12

The Schulze banks were run for profit on commercial lines and

therefore dividends were given freely. It was considered that the giving of good

dividends was an incentive to the popularity of the Banks.

7. Most of the funds were carried to the Reserve Fund. At least two thirds of

the profit were carried to the Endowment Fund which was indivisible and

some profit was carried to the ordinary fund which was meant for meeting

occasional losses.

These banks of Schulze did not place so much stress on the reserve

fund as was done in the Raiffeisen model societies. However, as the keeping of

reserve funds was made obligatory by law, these banks generally kept about 20

per cent of the share capital as reserve fund. Admission fees as also credited to

the reserve fund. The Reserve fund was used to make up the losses but the

deficiency was made good as soon as possible.

8. In these societies of Raiffeisen, the management was honorary and other

cost of management were also kept very low. Except the accountant no one

was paid any salary.

These banks of Schulze were run in wellbuilt buildings and with

efficient, trained and wellpaid staff. Almost all the employees were full time.

Regular hours of work were observed. The Full power of daytoday work was

given to the staff. The Board of Directors only concerned itself with matters of

policy.
 13

9. In these societies the development of the moral side of the members was

considered as important as material well being was: Good habits of thrift,

hard work, mutual help, self-help regular repayments of loans, etc. were

encouraged. Schulze did not lay much stress on moral development. He

believed that the bank, should concern themselves mostly with the material

development of the members.

Thus we find that there were fundamental differences in the ideology

on the basis whereof these two systems of Co-operative Credit worked.

Raiffeisen believed in the capitalisation of character and wanted the members to

help one another and increase their borrowing powers by pooling their resources

and further, he believed that the societies were not business concerns in

themselves but were meant to help the members to improve their financial

condition. Schulze on the other hand believed that co-operative institutions

should be run on sound business lines. He believed less in sentiments and more

in the realities of life and made his societies viable units able to withstand

competition and difficulties. Both were right in their own ways and pressed their

own systems to logical ends. Ultimately when the Co-operative Law was passed,

it did not recognize any of the two schools of thought in toto. For example, it

pressed the Raiffeisen model societies to have some shares and to give dividends.

On the other hand it made it obligatory for the schulze banks to have a statutory

reserve fund.4

4
Locit., pp.93 and 96.
 14

2.3 HISTORY, GROWTH AND DEVELOPMENT OF AGRICULTURE

AND RURAL DEVELOPMENT BANKS

The present day Agriculture and Rural Development Banks were

earlier called Land Development Banks. The Land Development Banks were

earlier called Land Mortgage Banks. The history, growth and development are

detailed in this part of the chapter.

In India Justice Ranade and Sir William Weddernburn prepared a

scheme in 1863 to provide long-term credit for the agriculturists of Bombay

province to enable them to redeem their old debts5. Long term lending in the

sphere of agriculture has fairly a long history and co-operatives took the lead in

institutionalising credit in the country. While short-term credit is provided by the

co-operative structure, investment credit flows mainly through the Agriculture

and Rural Development Banks (ARD Banks). Although Commercial Banks have

entered the field, yet even today, the ARD Banks are the most important

institutions for providing the bulk of the credit needs of farmers for various

purposes. Prior to the introduction of the Land Development Banks the needs of

long-term finance of agriculturists were mainly met by the money lenders and the

Government. The various defects of money lenders prompted the government to

introduce the Land Development Banks6.

5
Kuralkar. K.P., Economics of Agriculture, Atlantic Publisers, New Delhi, 1983, p.71.

6 Land.G.M., Co-operative Banking in India, The Co-operative Book Depot, Bombay,

1955, p. 598
 15

It was in 1863 the first Land Mortgage Bank was established in

India by an English company. The bank was called the , "Land Mortgage Bank of

India Limited" and was incorporated in London on the model of the Credit

Fancier of France7.

The bank largely relied for its working capital on the issue of

debentures which were floated at a little over 5 per cent of interest per annum and

were payable within thirty years at par. For about 20 years the bank carried on a

profitable business throughout India. Thereafter its loan operations declined and

the bank, was closed shortly after 1885. It is significant to note that the bank was

purely a private concern and enjoyed no subsidy and received no special

privilege from the government.

The initiative in the matter of starting the first Cooperative Land

Mortgage Bank in this country was seized by the Punjab. This was done in 1920

and a Land Mortgage Bank was registered at Jahang8.

In Bengal the first Land Mortgage Bank was registered at Naogaon

in 1924. Another Bank was registered in 1927 at Bhola in the district of

Bakargani. Both these Banks were limited liability institutions registered under

the Cooperative Societies Act. In Assam the first Land Mortgage Bank was

started in 1926 at Gauhati and the second one at Sychet in the following year.

7 Mathur. B. S, Co-operation in India, Sahidya Bhawan, Agra, 1971, p. 292.

8
Land. G.M., Co-operative Banking in India, The Co-operative Book Depot,
Bombay,1955 ,p.955.
 16

The Kamrup Land Mortgage Bank at Gauhati was meant to provide loans for

trade, commerce and industry.9

The Registrars’ conference held in 1926 adopted a comprehensive

resolution urging the organization of a Land Mortgage Bank based on co-

operative principles. In Madras, 12 such banks were organized by June 1927. At

the instance of the Townsend Committees on Co-operation (1927-28) in Madras

and the Royal Commission on Agriculture in India, a Central Co-operative Land

Mortgage Bank was started in 1929. Three primary land mortgage banks,

financed by the Provincial Co-operative Department, were organized in 1929 in

the state of Bombay. In the same year a Central Land Mortgage Bank was

formed in Mysore.

In Bombay the formation of the Land Mortgage Bank was suggested

as early as 1923 and materialized in the East Kandesh District during the year

1928-29 only10. These Banks were financed by the Bombay Provincial

Cooperative Bank out of the funds raised by the issue of debentures.

This gave an impetus to the working of new primary banks. Within

ten years the number of such banks in Madras increased from 12 to 119. The

policies and procedures followed by the Land Mortgage Banks hardly benefited

9
Nakkiran. S., Co-operative Banking in India, Rainbow publications, Coimbatore,
1980, p. 312.
10
Henry W. Wolff, Co-operation in Banking, Taraporevala Sons and Co.,
Bombay,1980, p.25.
 17

the small and medium types of agriculturists. They catered to the needs of only

rich and big agriculturists11. In Orissa a provincial Cooperative Land Mortgage

Bank was organized in 1938-39. The organisation of such banks received

stimulus by the depression in the country and by June 30, 1939, Land Mortgage

Banks were organized in eight Indian Provinces and, 16 states.

In fact, until the beginning of the first five year plan, the land

mortgage banks paid all attention towards the redemption of old debts and cared

little for the improvement of land and agriculture. Again, the policies and

procedures followed by them were cumbersome and suited only the big landlords

and agriculturists. It was from the beginning of the third plan that the policies

oriented towards development purposes were adopted. In June 1969 the Land

Mortgage Banks assumed the developmental role of providing capital funds for

the development of agriculture. Hence they were renamed as the “Land

Development Banks”.

In the post-independence period considerable expansion has taken

place in the field of land mortgage banking in the country following the

recommendations of the All Indian Rural Credit Survey Committee. The efforts

of the Reserve Bank of India in this direction are commendable12. In view of the

changing role of the Land Development Banks and as per the recommendations

11
Hough Eleanarm, Co-operative Movement in India, Oxford University Press, Ely
House, London, 1966, p. 293
12
Hajela. T.N., Principles, Problems and Practices of Co-operation, Shiva Agarwala
and Company, p.334.
 18

of the Madhava Das Committee and now they are called the “Agriculture and

Rural Development Banks”.

2.4 TYPES AND STRUCTURE OF AGRICULTURE AND RURAL

DEVELOPMENT BANKS

Agriculture and Rural Development Banks may be organised either as

private shareholders' banks or a joint stock land banks as in USA and Europe; or

as co-operative institution like the Land Chaften of Germany and the Farm Loan

Banks of the USA; or as Quesi Co-operative institution working in Hungary or as

Government managed organisation. In India these banks are organised on the co-

operative basis.

The organisational structure of long-term co-operative agricultural

credit is not uniform all over the country. In some states like Andhra Pradesh.,

Assam, Haryana, Kerala, Karnataka, Madhya Pradesh, Punjab, Orissa, Rajasthan

and Tamil Nadu they are organised under a federal set-up with the Central

Agriculture and Rural Development Banks at State level and Affiliated Primary

Co-operative Agriculture and Rural Development Banks (PCARD) at lower

levels (i.e. either at taluk or block level). In other states like Bihar, Gujarat,

Maharastra, Jammu and Kashmir, Uttar Pradesh and Tripura, a unitary system

exists with the CARD Bank at the apex level and its branches/sub-branches at the

base level. In two states namely Himachal Pradesh and West Bengal there is a

mixed structure with both primaries and branches.

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2.5. STATE AGRICULTURE AND RURAL DEVELOPMENT BANK

(SARD BANK’S)

A Co-operative State Agriculture and Rural Development Bank is a

state level agency formed on the co-operative basis for providing long-term

credit and investment finance for the development of agriculture and allied

economic activities. Although certain other institutional agencies like

Commercial Banks and Regional Rural Banks have also started providing

investment finance to some extent, the Co-operative State Agriculture and Rural

Development Banks continue to be the principal agency for long-term credit and

investment finance to agriculturists.

2.5.1 Constitution of SARD Banks

There is a two-tier federal structure of Agriculture and Rural

Development (ARD) banking. In practice, the Central/State Agriculture and

Rural Development Banks are of a mixed type. The management of a Central

ARD bank vests in the Board of Directors numbering from 16 to 18. They hold

office generally for three years. Of these members 2/3 or 3/4 can be the

representatives of the Primary Agriculture and Rural Development Banks. The

Registrar of Co-operative Societies of the state is an ex-officio member. Some

representation is also given to the debenture holders. The representatives of

debenture holders are generally nominated by the Registrar of Co-operative

Societies. In practice, a slight variation is found in the constitution of the Board

of Directors of these Banks from state to state. Generally, the sanctioning of

loans and disposal of administrative matters are done by an Executive Committee

 20

consisting of President, Vice-President, Treasurer, Registrar and two or three

directors of the board. The term of office of the committee is three years. A full

time paid secretary, assistant secretary, accountant, several sectional heads and a

number of other staff are appointed for the daytoday management of the office.

The powers and duties of the Board, Executive Committee and other important

offices are governed by the bye-laws.

The Bill was set up in the National Bank for Agriculture and Rural

Development (NABARD) which laid down the following definition of the Co-

operative State Agriculture and Rural Development Bank.

"Co-operative State Agriculture and Rural Development Bank

means the co-operative society which is the principal land development bank (by

whatever name called) in a State and which has its primary object as providing

long-term finance for agricultural development.”

“Provided that in addition to such principal Land development bank

in a State, or where there is no such bank in a State, the State Government may

declare any co-operative society carrying on business in that state and authorised

by the Bye-laws of such co-operative society to provide long-term finance for

agricultural development to be a Co-operative State Agriculture and Rural

Development Banks within the meaning of this definition.”13 The Progress of Co-

operative State Agriculture and Rural Development Banks in India is presented

in Table 2.1.

13
Choudery. B.N., Agricultural Banking in India, p.226
 21

TABLE 2.1

Progress of Co-Operative State Agriculture and Rural Development Banks

(SARDBs)
(Rs in Crores)

Particulars/Year 1995-96 1997-98 1999- 2000 2001-02 2003-04

Share Capital 437 526 626 676 762
Reserves & 805 1,159 2,075 1,818 2,742
Provisions
Deposits 158 203 428 533 605
Borrowings 7,202 9,772 12,380 14,832 16,882
Total 8,602 11,660 15,509 17,859 20,991
Acc. Losses 192 402 789 495 856
Net worth * 1050 1283 1912 1999 2648
State Govts equity 90 81 90 89 89
State Govt equity 21 15 14 13 12
as a % to total
Source: Prof.Vaidyanathan Committee report on Revival of Rural Co-operative
Credit Institutions( Long Term), 2005 – www.nabard.org

* Share capital + Reserves + Provisions – Accumulated Losses

It is found from Table 2.1 that the progress of the SARD Banks

shows an increasing trend in their resources. Around 80% of the resources come

from borrowings for the entire structure, while the rest is a combination of the

contribution of members, government share capital and deposits. The Banks have

been permitted to raise deposits that have a limited tenor (one or two years) from

members and non-members. However, the amount of deposits raised has been

marginal. Overall owned capital (share capital and reserves) constitutes around

20% of the total resources.

 22

2.6. PRIMARY CO-OPERATIVE AGRICULTURE AND RURAL

DEVELOPMENT BANKS (PCARD BANKS)

The Primary Co-operative Agriculture and Rural Development Bank

was started as co-operative society at the taluk level or block level which has the

primary object of providing long-term finance for agricultural development.

2.6.1 Area of Operation

The area of operation of the Primary Co-operative Agriculture and

Rural Development Banks differs from State to State. In some states, the area of

operation of a PCARD Bank extends to whole the of a district while in some

others it extends to a sub-division or a few talukas. Thus there is no hard and fast

rule about the area of operation of a PCARD Bank. However, there are a number

of factors which are relevant in determining the area of operation such as the

density of population, the efficiency and sufficiency of the means of

communication, the nature of land, the financial resources of the Bank and the

experience and efficiency of those entrusted with the task of management. The

Royal Commission on Agriculture opined that the area of operation of a Primary

Co-operative Agriculture and Rural Development Bank should be the smallest

unit consistent with competent management.

2.6.2 Objects and Functions of Primary Co-operative Agriculture and

Rural Development Banks

The main object of a Primary Co-operative Agriculture and Rural

Development Bank is to arrange for long-term loans from the State/Central

Agriculture and Rural Development Bank to which it is affiliated and lend to its

agriculturist members against the security of mortgage of lands and immovable

 23

properties owned by them or against any other security specified in this behalf.

So a Primary Co-operative Agriculture and Rural Development Bank borrows

from the Co-operative State/Central Agriculture and Rural Development Bank

and lends to its members for the following main purposes: i) The redemption of

mortgages on agricultural lands; ii) the improvement of agricultural land and of

methods of cultivation, iii) the discharge of other prior debts; and iv) The

purchase of land in special cases so as to enable the ryot to round off his holding

and work it more economically.

The other objects are to encourage among the members the spirit and

practice of thrift, mutual help and self-help. To fulfill these objects, a PCARD

Bank must become the member of the Apex Agriculture and Rural Development

Bank of the State Concerned.

Thus borrowing from the State Agriculture and Rural Development

Banks and lending to members against the appropriate securities constitute the

primary functions of a Primary Co-operative Agriculture and Rural Development

Bank. It performs all the other. subsidiary functions incidental to the main

functions14.

2.6.3 Management

The management of members elects the Board of Directors of the

Bank. The Management of the Primary Co-operative Agriculture and Rural

Development Banks is in the hands of the Board of Directors.

14
Choudery. B.N., Agricultural Banking in India, p.264
 24

In 1976 the Tamil Nadu Government entrusted the management of

the Primary Co-operative Agriculture and Rural Development Bank to a Special

Officer. The special officer is appointed by the Government.

The Officer of Co-operative department is in the cadre of Sub-

Registrars and he is appointed as a Special Officer. He is assisted by the secretary

and other supervisors. But now an elected body looks after the affairs of the

Bank.

2.6.4. Organisational Structure of PCARD Banks

The organizational structure of Primary Co-operative Agriculture

and Rural Development Banks is presented in Diagram 2.1

Diagram 2.1 ORGANISATIONAL STRUCTURE OF PCARD BANK

Special Officer

Secretary

Supervisors Supervisors
(Outdoor-dealing (Indoor-Accounts)
with loan Processing)

Assistant Cashier Section Assistant Cashier Section

Assistant Assistant

Source: Profile of PCARD Bank, Dindigul.

 25

2.6.5 Membership in PCARD Banks

Membership is open to all persons residing within the area of

operation of the bank. Application for admission as a member is made to the

secretary in the form prescribed by the Bank for the purpose. Membership

effects on and from the date of receipt of the membership application in the

office of the Bank. It is divided into two namely:

(i) ‘A’ Class Members,

(ii) Associate Members
‘A’ Class Members:
Only people who fulfill the following conditions are eligible to become

‘A’ class members:

(i) Any person above 18 years of age who is competent to contract or who
owns or cultivates agricultural lands situated in the area of operation of the
bank.
(ii) Any Co-operative irrigation or Agro-service society.
(iii) Agro-Engineering and services, co-operative centres.
(iv) Public trust, Panchayats or Panchayat Unions.
(v) Market Boards \ Market Committees.
(vi) Any type of Co-operative society or Proprietary or Partnership firm or
Company or Institution engaged in agricultural activities that may be
approved by the government under Section 17 (1) (a) of the Tamil Nadu Co-
operative Societies Act, 1961.
(vii) Land Colonization Co-operative Society
(viii) Government of Tamilnadu
(ix) Any person who is a minor can also be admitted through his legal guardian.
Associate Members
Any person, including a minor, is admitted as a nominal member if

his admission is necessary to join in the execution of any document in favour of

 26

the Bank that is required to be registered by a member, as Co-executant.

Associate Members have no right to vote or to participate in the management of

the Bank or for a share in the distribution of profit.

2.6.6 Progress of PCARD Banks

The Progress made by the Primary Co-operative Agriculture and

Rural Development Banks during the period of Study is shown in Table 2.2

TABLE 2.2

Progress of PCARD Banks

(Rs in Crores)
Particulars/Year 1995-96 1997-98 1999- 00 2001-02 2003-04
Share Capital 362 522 667 856 916
Reserves & 255 467 679 1,624 2,055
Provisions
Deposits 30 99 178 255 252
Borrowings 4,150 5,888 7,661 10,331 11,880
Total 4,797 6,976 9,185 13,066 15,103
Acc. Losses 311 546 968 2053 2649
Net worth * 306 443 378 427 322
State Govts equity 53 94 118 122 140
State Govt equity 15 18 18 14 15
as a % to total
Source: Prof.Vaidyanathan Committee report on Revival of Rural Co-operative
Credit Institutions (Long Term), 2005 - www.nabard.org
*Share capital + Reserves + Provisions – Accumulated Losses)

It is clear from Table 2.2 that the progress of the PCARD Banks

shows an increasing trend in their resources. Around 80% of the resources come

from borrowings for the entire structure, while the rest is a combination of the

contribution of members, government share capital, and deposits. The Banks

have been permitted to raise deposits that have a limited tenor (one or two years)

from members and non-members. Overall owned capital (share capital and

reserves) constitutes around 20% of the total resources. The total resources of the
 27

banks had increased to Rs. 15103 crores in the year 2003-2004 as against the Rs.

4797 crores in the year 1995-96. The net worth of the bank shows a fluctuating

trend Rs. 322 crores in the year 2003-2004

2.7 TAMIL NADU CO-OPERATIVE STATE AGRICULTURE AND

RURAL DEVELOPMENT BANK LIMITED–A PROFILE

The Tamil Nadu Co-operative State Agriculture and Rural

Development Bank (TNCSARDB) is the apex institution for all Primary Co-

operative Agriculture and Rural Development Banks constituted for the

development of agriculture in Tamil Nadu. The Loans are advanced on the

security of the lands. In order to help the landless agricultural labourers, loans

are advanced for non-land based occupations such as animal husbandry, poultry,

sheep rearing and the like without land security on the basis of Government

guarantee. Since there is little scope for minor irrigation purpose due to

irregular monsoon and decrease in the ground water potential, the Agricultural

and Rural Development Banks started diversifying their activities and loans are

issued for milch animals, sheep rearing, bullock carts, poultry and the like. With

a view to improve the living conditions of agriculturists, from the year 1990-91,

advances under the Non-Farm sector are also given to Craftsmen and Rural

artisans for setting up of cottage industries, blacksmithy, footwear making, paper

products and the like. At present loans are also given for purchase of mini

lorries, Vans and setting up of rural nursing homes under the Non Farm Sector.

The PCARD Banks advance loans upto 20 lakhs per borrower.

 28

2.7.1. Objectives of the Bank

The main object of the TNCSARD Bank as provided under Bye

Law No.3 is to finance the Primary Agriculture and Rural Development Banks.

Bye Law 4(a) describes the powers vested with the Bank to carry out

the following functions for the fulfillment of the above objective:

(a) Floatation of Debentures:

(b) Receiving Deposits.

(c) Granting loans to the PCARD Banks for purposes approved by the
NABARD and the Registrar of Co-operatives.
(d) Functioning as the agent of any Co-operative Bank subject to such
conditions as the Registrar may specify.
(e) To acquire such immovable properties and constructing such buildings as it
may consider necessary for the proper conduct of its business.
(f) Appointing staff, if considered necessary, for the conduct of the affairs of
the bank.
(g) Inspecting the PCARD Banks and the land mortgaged to them.

(h) Developing, assisting and co-ordinating the work of the affiliated PCARD
Banks.

2.7.2. Organisational Set Up

2.7.2.1. Two-tier Structure
The Co-operative Agriculture and Rural Development Banking

Structure in Tamil Nadu is federal with the Tamil Nadu Co-operative State

Agriculture and Rural Development Bank (SARDB) at the Apex level and the

Primary Co-operative Agriculture and Rural Development Banks (PCARDB’s)

at the base.
 29

2.7.2.2 Area of Operation

The Tamil Nadu Cooperative State Agriculture and Rural

Development Bank provides credit facilities to agriculturists and rural

entrepreneurs throughout the state of Tamil Nadu through 18 Regional Offices

located at the district level and 181 affiliated PCARDB’s covering 384 blocks in

172 taluks of Tamil Nadu at present.

Earlier in 1969, the state government decided to have one Primary

Land Development Bank (PLD) for each block in order to extend the benefits of

the long-term co-operative credit facilities to the farmers. Accordingly the new

PLD banks were registered by December 1970. The Reserve Bank of India (RBI)

advised the State government that while opening new PLD Banks, their viability

should be kept in view and ensured. Pursuant to this advice, the government

stopped the opening of new PLD Banks and amalgamated some of the PLD

Banks with adjoining banks. As on 31-12-85 there were 183 PLD Banks in the

State. Owing to its viability it was amalgamated and as on 31-12-05 there were

180 PCARD Banks in the state.

Among 180 PCARD Banks affiliated to the TNCSARD Bank, 121

Banks are located at the Taluk level and 59 at the Block level. Table 2.3 shows

the number of PCARD Banks functioning at taluk level and at the block level in

each district.
 30

TABLE 2.3
Primary Agriculture and Rural Development Banks in Tamil Nadu
No.of PCARDB’s Functioning
Sl.No. Name of the District Taluk Level Block Level
1. Kancheepuram 3 2
2. Tiruvallur 6 4
3. Vellore 5 4
4. Thiruvannamalai 6 2
5. Villupuram 5 5
6. Cudalore 4 2
7. Thanjavur 6 2
8. Thiruvarur 4 2
9. Nagapattinam 3 -
10. Trichy 5 -
11. Karur 3 -
12. Perambalur 3 -
13. Pudukottai 4 5
14. Madurai 3 4
15. Theni 3 1
16. Dindigul 5 2
17. Virdhunagar 4 2
18. Ramanathapuram 4 2
19. Sivagangai 4 2
20. Thirunelveli 5 3
21. Tuticorin 3 -
22. Kanyakumari 4 1
23. Salem 5 1
24. Namakkal 4 3
25. Dharmapuri 5 -
26. Coimbatore 6 7
27. Nilgris 4 -
28. Erode 6 6
Total 121 59
Source: Short note on the working of TNCSARD Bank, Chennai.
 31

2.7.3. Management and Control:

The administration of the Bank rests with a Board of Directors

consisting of 29 Directors. The SARD Bank and the PCARD Banks are

managed by Special Officers who exercise the powers of the Board.

According to the Tamil Nadu Co-operative Societies Act of 1983 and

the Tamil Nadu Co-operative Societies Rules of 1989, The Board of

Management of the TNCSARD Bank consists of the following members.

1. Twenty-two members elected from among themselves by the

delegates of all member PCARD Banks 22
2. One member being an expert in long-term finance nominated
by the Government 1
3. Three members being
a) The nominee of the NABARD 1
b) The nominee of the TNSC Bank Ltd 1
c) The nominee of the TN Agro-Engineering Service 1
Co-operation Federation
4. The Managing Director of the Bank 1
5. EX-OFFICIO
(i) Additional Registrar of Co-op Societies, Office of 1
the Registrar of Co-operatives, Chennai.
(ii) The Director of Research (Agriculture), Tamil 1
Nadu Agricultural University, Coimbatore
29
Source: Tamil Nadu Co-operative Manual, 2005

2.8. ADMINISTRATIVE SET-UP OF TNCSARD BANK

2.8.1. Head Office

The Head office of the Bank is located at its own building at 79-80,

Luz Church Road, Mylapore, Chennai. The Bank has opened Branch offices

(i.e.) Regional Offices at the district level in order to ensure expeditious sanction

and disbursement of loans, close liaison and supervision over the primary banks.

There are 18 branches functioning in Tamil Nadu.

 32

The following functions are carried out at the Head Office Level

through various sections:

i. Floatation of debentures and other functions relating thereto

ii. Consolidation of accounts relating to Branch offices

iii. Transfer of funds from Head Office to the Branches

iv. Recruitment of staff and other matters relating to them

v. General administration of the PCARD Banks and inspection thereof

vi. Overall administration of the branch office

vii. Technical and Economic appraisal of the Agricultural Refinance and

Development Corporation (ARDC) schemes and projects relating to the

irrigation societies

viii.Collection, Compilation and analysis of statistical information, formulation

of policies,

ix. Liasion with the State Government and the Registrar of Co-operative

Societies, local offices of the RBI, the Agricultural Refinance and

Development Corporation (ARDC).

x. Holding of regional conferences of Primary Banks, publication of farm

journal, and the like.

2.8.2. Branches / Regional Offices

Each Branch Office is under the charge of a Manager. He is assisted

by the following complement of staff namely Assistant Manager, Legal-cum-

 33

Inspecting Officers, Field Officers, Assistant Accountant, Superintendents,

Junior Engineers and Clerks.

2.8.3. Branch Functions

The multifarious functions of a branch are

i. Sanction of loan applications for amounts exceeding Rs. 2,00,000.

ii. Disbursement of loans to PCARD Banks
iii. Maintenance of accounts pertaining to the transactions with the PCARD
Banks
iv. Compiling the cash credit limits sanctioned to the branch by the District Co
operative Central Banks and the like.
v. Effecting the collection of loan instruments from the PCARD Banks,
vi. Supervising the proper utilization of loans,
vii. Test check loan applications sanctioned and disbursed by the PCARD
Banks under the Powers delegated to them along with general financial
control, and supervision over the PCARD Banks
viii. Co-ordinating the activities of the Bank with the department staff, PCARD
Banks and other agencies
ix. Formulation and implementation of loaning programmes
x. Mobilisation of rural savings through fixed deposits and rural
debentures.

2.8.4. Branch Supervision over PCARD Banks

In pursuance of the aforesaid objectives, the Manager of the Branch

Office keeps a close contact with the PCARD Banks in his area for promoting

their functioning and development on sound lines and initiates immediate

effective steps to remove the factors inhibiting their progress. For instance, he

takes steps to ensure that the PCARD Banks expeditiously dispose loan

applications, maintain the prescribed register upto-date, remit the recoveries

 34

promptly to the Bank, deploy the funds judiciously and also takes steps to keep

the position of members’ over dues to the barest minimum, watch the proper

utilisation of the loan amount, observe seasonality in the disbursement of loans

and the like.

2.8.5. Promotional Role of Branches

The Managers are required to visit two to three PCARD Banks every

month to look into the major aspects of their working and to initiate corrective

measures to rectify serious shortcomings in their functioning. The Manager,

keeps the Head Office informed of the developments and programs as regards

various aspects in his district through monthly reports addressed to the Managing

Director of the Bank.

2.8.6. Review Functions

The Managers also convene monthly meetings of the PCARD Banks

in their district to review the progress in their district as regards their lending

programmes, collection of overdues, verification of utilisation of loan

instalments, certification and disbursement of voucher files and implementation

of rehabilitation programme and the like.

2.8.7. Organisational Structure of the Head Office

The Organisational Structure of the Head Office of the TNCSARD

Bank is drawn in Diagram 2.2.

 35

Diagram 2.2

Organisational Structure of the Head Office of TNCSARD Bank, Chennai.

BOARD OF MANAGEMENT

MANAGING DIRECTOR

General Manager General Manager

(Finance & Accounts) (Planning and Schemes)

Deputy General Deputy General Deputy General Deputy Deputy

Manager Manager Manager General General
(Administration) (Finance) (Personnel) Manager Manager
(Training) (Development
Action plan)
Manager Manager Manager

Accounts Officer Accounts Officer Personal Officer

Superintendent Superintendent Superintendent

Assistant Assistant Assistant

Source: Short note on the working of TNCSARD Bank, Chennai. 2004-2005

2.9. RESOURCES OF THE BANK

2.9.1. Main Resources

The TNCSARD Bank generate its financial resources through Share

Capital and Debentures for undertaking initial loaning for un-encumbered

 36

mortgages. The Bank depends upon interim financial accommodation from the

State Co-operative Bank and the District Central Co-operative Bank.

2.9.1.1. Share Capital

The Share capital is the key resource for the TNCSARD Bank. The

Bank collects share capital from its member PCARD Banks around the state.

The PCARD Banks collect share capital from the borrowers at 5% of the project

cost. They invest 3/5th of the share capital so collected in the TNCSARD Bank.

The Bank has built up a sizeable share capital base over the years. The growth of

the share capital of the TNCSARD Bank is presented in Table 2.4

TABLE 2.4

Share Capital of TNCSARD Bank

Year Share Capital (Rs.in Lakhs) Trend

Percentage
1995-1996 2,821.98 100

1996-1997 3,125.74 110.76

1997-1998 3,314.02 117.43

1998-1999 3,552.68 125.89

1999-2000 3,741.55 132.58

2000-2001 3,899.43 138.18

2001-2002 4,047.55 143.42

2002-2003 4,161.91 147.48

2003-2004 4,216.41 220.35

2004-2005 4,216.41 220.35

Source: Short note on the working of TNCSARD Bank, Chennai.

2004-2005
 37

The growth of the Share Capital of TNCSARD Bank shown in

Table 2.4 is represented in the pictorial form in Chart 2.1.

Chart 2.1: Share Capiltal of TNCSARD

Bank
250.00

220.35220.35

200.00
Trend Percentage

150.00
143.42 147.48
138.18
132.58
125.89
117.43
110.76
100.00 100.00

50.00

0.00
1995- 1996- 1997- 1998- 1999- 2000- 2001- 2002- 2003- 2004-
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Year

It is observed from Table 2.4 and Chart 2.1 that the share capital of

the TNCSARD Bank shows a increasing tendency during the period of study. It

has risen from Rs. 2,821.98 lakhs in the year 1995-1996 to Rs.4,216.41 lakhs in

the year 2003-2004. The share capital remains unchanged in the year 2004-2005

due to the stoppage of lending activities in the year 2004.

2.9.1.2. Debentures
Initially Banks floated three types of debentures: Ordinary, Special

and Rural debentures. Debentures are floated against the security of

 38

unencumbered effective mortgages. The State Government guarantees the

debentures up to a prescribed maximum amount both as regard the repayment of

the principal and the payment of interest. The debentures are trustee securities

under the Trusts Act and are also approved securities under the Banking

Regulation Act, 1949. Under the Tamil Nadu Co-operative Land Development

Act, 1934, the Registrar of Co-operative Societies is the Trustee for the

debenture holders and he ensures that the Bank fulfils its obligations to the

debenture holders. The relationship between the Bank and the Trustee is

governed by a Trust Deed. The previous approval of the Trustee from the

NABARD has to be obtained before the floatation of ordinary and special

development debentures.

2.9.1.2.1. Ordinary Debentures

The ordinary debentures floated by the Bank receive support from

various institutions and agencies such as the Life Insurance Corporation of India,

the State Bank of India and its subsidiaries, Commercial Banks, the Government

of India, Government of Tamil Nadu, the Reserve Bank of India, the Provident

Fund Commissioner, other State Agriculture and Rural Development Banks, Co-

operative banks and the like.

2.9.1.2.2. Special Development Debentures

The bank floats special development debentures for financing

development schemes refinanced by the National Bank for Agriculture and Rural

Development (NABARD). On an average NABARD subscribe 90% and the

Central and State Governments subscribes the balance of 10% equally.

 39

Debentures floated by the bank for the past few years are given below

in Table 2.5.

TABLE 2.5

Debentures Floatation in TNCSARD Bank

Debentures Floated (Rs. in Crores)

Year Ordinary Special Total Trend
Debentures Development Percentage
Debentures
1995-1996 2.50 167.43 168.83 100
1996-1997 1.40 227.61 228.72 135.63
1997-1998 1.11 183.10 183.39 108.62
1998-1999 0.79 200.79 201.79 119.52
1999-2000 1.00 200.71 201.71 119.47
2000-2001 1.00 203.77 204.77 121.28
2001-2002 0.00 196.74 196.74 116.53
2002-2003 0.00 231.95 231.95 137.38
2003-2004 0.00 166.91 166.91 98.86
2004-2005 0.00 166.91 166.91 98.86
Source: Short note on the working of TNCSARD Bank, Chennai. 2004-2005

The growth of Debentures floted in TNCSRAD Bank shown in Table

2.5 is represented in the pictorial form in Chart 2.2

 40

Chart 2.2: Debentures Floatation in TNCSARD Bank

160.00

140.00
135.63 137.38

120.00 119.52 119.47 121.28

116.53
108.62
Trend Percentage

100.00 100.00 98.86 98.86

80.00

60.00

40.00

20.00

0.00
1995- 1996- 1997- 1998- 1999- 2000- 2001- 2002- 2003- 2004-
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Year

It is observed from Table 2.5 and Chart 2.2 that the debentures

floatation in the TNCSARD Bank shows a fluctuating trend during the years of

study. The debenture floatation was maximum in the year 1996-1997 (Rs.

228.72 crores) and was minimum in the year 2003-2004 (Rs. 166.91 crores). The

ordinary debenture floatation was discontinued from the year 2001-2002 . The

special development debentures were issued for generating financial resources

and remains stagnant from the year 2004-2005 due to the adverse financial

performance of the bank.

 41

2.9.1.2.3 Rural Debentures

In order to mobilize rural savings and increase its internal resources,

the bank initiated a scheme of rural debentures in 1957. The salient features of

this scheme are:

(i) Rural debentures are divided into two parts, one part i.e. 7/15 th of the total

issue is for a longer duration (7 years ) and made available for subscription

by individuals only. while the second part (8/15) is for a shorter period (5

years) and is to be subscribed entirely by the Reserve Bank of India.

(ii) The rate of interest on the rural debentures to be issued to the individual is

¼% higher than the interest on ordinary debenture and the rate of interest

payable to the Reserve Bank of India on their subscription is one per cent

less than the interest paid to individuals.

One of the difficulties confronted by the bank in connection with

rural debenture pertains to the payment of interest every half year to a large

number of debenture holders was time-consuming. In 1971, the Reserve Bank of

India approved the bank’s revised scheme of Rural Debenture Certificate under

which compound interest is accumulated and paid along with the principal

maturity on the debenture thereby obviating the necessity for sending interest

warrants every half year. Since the return on rural debenture/Rural debenture

Certificate is not very attractive, their floatation was not so successful. Now no

new series have been floated.

 42

2.9.1.3. Interim Finance

For initial loaning upon unencumbered mortgages, the bank avails of

interim finance from the State Co-operative Banks. As the accommodation

granted by the State Co-operative Bank was found inadequate to meet the

requirements, the banks made suitable arrangements with the District Central Co-

operative banks to provide interim finance from the year 1980-81. The

NABARD is also providing interim financial accommodation for the

disbursement of both under the normal and scheme loans. The credit limit is

sanctioned and every year is valid only for the year (April-March) for which it is

sanctioned. Drawals under the limit may be made a number of times. Each

drawal shall be repaid within 2 months in the case of scheme loans and 4 months

in the case of normal programmes. The interim finance should be guaranteed by

the State Government.

2.9.4. Fixed Deposits

In 1971 the Reserve Bank of India permitted, the State Land

Development Banks to accept fixed deposits. This was permitted to enable the

PLD Banks to mobilize resources in a greater measure than through the floatation

of rural debenture or rural debenture certificate. This fixed deposit was not very

popular with the rural investors for various reasons. The RBI however stipulated

that the deposits should not be of less than one year and more than 2 years

duration and the rate of interest should not exceed the rate allowed by the State

Co-operative Banks or the Central Co-operative Banks. It was further stipulated

that the deposits should not be from institutions and borrowers or their near

relations within a period of one year from the disbursement of the loan or before
 43

such disbursement. Table 2.6 shows the fixed deposit collection of the Bank for

the past five years.

TABLE 2.6

Fixed Deposits of TNCSARD Bank

Year Fixed Deposits Trend

( in Rs) Percentage
1995-1996 49,90,385 100
1996-1997 42,05,372 84.26
1997-1998 66,52,870 133.31
1998-1999 82,08,848 164.49
1999-2000 89,41,901 179.18
2000-2001 83,08,608 166.49
2001-2002 1,60,89,495 322.40
2002-2003 5,20,39,695 1042.79
2003-2004 11,93,30,941 2391.12
2004-2005 12,22,67,500 2450.00
Source: Annual Reports of TNCSARD Bank, Chennai. 2004-2005

The growth of Fixed Deposits of TNCSARD Bank shown in Table

2.6 is represented in the pictorial form in Chart 2.3.

 44

Chart 2.3: Fixed Deposits of TNCSARD Bank

3000.00

2500.00
2450.00
2391.12

2000.00
Trend Percentage

1500.00

1000.00 1042.79

500.00
322.4

100.00 84.26 133.31 164.49 179.18 166.49

0.00
1995- 1996- 1997- 1998- 1999- 2000- 2001- 2002- 2003- 2004-
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Year

It is observed from Table 2.6 and Chart 2.3 that the Fixed Deposits

mobilised by the TNCARD Bank shows an increasing trend during the period of

study except for slight decline in the year 2000-2001.

2.10 JEWEL LOANS

The TNCSARD Bank was the first SARD Bank in India which

commenced issue of jewel loans 1990 with the primary objective of enabling the

PCARD Banks to augment their sources of income, for good working results and

to attain sustainable viability. Jewel Loans are issued out of the own funds of the

TNCSARD Bank and no refinance facility is available for this purpose from the
 45

NABARD. The rate of interest charged by the PCARD Banks for jewel loan is

10.5%. The growth of the Jewel Loans in PCARD Banks is presented Table 2.7.

TABLE 2.7
Jewel Loans of PCARD Banks

Year
Jewel Loan Issued Trend
(Rs.in Crores) Percentage
1995-1996 53.52 100
1996-1997 76.70 143.31
1997-1998 71.94 134.41
1998-1999 39.18 73.2
1999-2000 28.94 54.07
2000-2001 31.13 58.16
2001-2002 40.24 75.18
2002-2003 67.65 126.40
2003-2004 60.57 113.17
2004-2005 34.11 63.73
Source: Short note on the working of TNCSARD Bank, Chennai. 2004-2005

The growth of Jewel Loans of TNCSARD Bank shown in Table 2.7

is represented in pictorial form in Chart 2.4

Chart 2.4: Jewel Loans of PCARD Banks

160.00

140.00 143.31
134.41
126.4
120.00
113.17
Trend Percentage

100.00 100.00

80.00
73.2 75.18
63.73
60.00 58.16
54.07
40.00

20.00

0.00
1995- 1996- 1997- 1998- 1999- 2000- 2001- 2002- 2003- 2004-
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Year
 46

It is observed from Table 2.7 and Chat 2.4 that the jewel loans of the

Bank exhibit a fluctuating trend. It was maximum in the year 1996-1997

(Rs76.70 crores) and was highly fluctuating during the years 1997-1998 to 2004-

2005.

2.11 WORKING CAPITAL OF TNCSARD BANK

The Working Capital of the TNCSARD Bank consists of owned

funds and borrowed funds. Owned funds includes the Paid up Share Capital,

Reserve Fund and other reserves like Security deposits, Employees’ Provident

Fund and the like. Borrowed funds include borrowings from the apex bank,

deposits received, and the like. The working capital of the bank is the sum of the

Share Capital, Reserve Funds, other reserves, borrowings, deposits less the

investment in buildings and other fixed assets and accumulated losses. The

growth of the working capital of the bank is presented in Table 2.8.

TABLE 2.8

Working Capital of TNCSARD Bank

Year Working Capital Trend

(Rs.in Crores) Percentage
1995-1996 689.72 100
1996-1997 886.00 128.45
1997-1998 1,011.01 146.58
1998-1999 1,135.97 164.70
1999-2000 1,220.92 177.0
2000-2001 1,231.26 178.51
2001-2002 1,227.66 177.99
2002-2003 1,287.06 186.60
2003-2004 1,563.7 226.71
2004-2005 1,419.74 205.84
Source: Short note on the working of TNCSARD Bank, Chennai. 2004-
2005
 47

The growth of the Working Capital of TNCSARD Bank shown in

Table 2.8 is presented in pictorial form in Chart 2.5

Chart 2.5: Working Capital of TNCSARD Bank

250.00

226.71

205.84
200.00
186.6
177 178.51 177.99
164.7
Trend Percentage

150.00 146.58

128.45

100.00 100.00

50.00

0.00
1995- 1996- 1997- 1998- 1999- 2000- 2001- 2002- 2003- 2004-
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Year

It is seen from Table 2.8 and Chat 2.5 that the working capital of the

bank shows a fluctuating trend over the period of study. It showed a gradual

increase during the years 1996-1997 to 2000-2001. There was a slight decrease in

the year 2001-2002 and a steep increase in the succeeding years and in the year

2004-2005 there was a sudden fall to Rs. 205.84 crores.

 48

2.12 WORKING RESULTS OF TNCSARD BANK

The working result of the Bank is adverse for the past few years due

to many reasons. The Government and the Bank are taking steps for the

improvement of its performance by constituting Review Committees and taking

policy measures. The Profit and Loss position of the Bank during the period of

the study is presented in Table 2.9.

TABLE 2.9

Working Results of TNCSARD Bank

(Rs. in Lakhs)
Year Working Result Cumulative
Profit(+)/ Loss (-) Position
Profit(+)/ Loss (-)
1995-1996 (+) 586.04 (+) 586.04
1996-1997 (-) 723.57 (-) 723.57
1997-1998 (+) 713.78 (-) 9.79
1998-1999 (+) 528.93 (+) 519.14
1999-2000 (-) 196.05 (-) 196.05
2000-2001 (+) 51.85 (-) 144.20
2001-2002 (-) 4381.23 (-) 4525.43
2002-2003 (-) 41.73 (-) 4567.16
2003-2004 (-) 3214.95 (-) 7781.11
2004-2005 (-) 5343.31 (-) 13124.42

Source: Short note on the working of TNCSARD Bank, Chennai. 2004-

2005

It is clear from Table 2.9 that the working results show a

fluctuating trend during the years 1995-1996 to 1999-2000. From the year 2001-

2002 there was adverse financial performance showing a steep increase in the

loss of the bank amounting to Rs. 5,343.31 lakhs in the year 2004-2005.
 49

2.13 LOANING OPERATIONS

The long-term finance for agriculture and rural development in Tamil

Nadu is mainly taken care of by the Co-operative Agriculture and Rural

Development Banks in the past several decades. Loans to the tune of Rs.205.55

crores were issued against the targeted programme of Rs.200.14 crores during the

year 1996-97. In the year 1997-98 Rs.191.60 crores was disbursed against the

programme of Rs. 226.00 crores. The achievement for the year 1998-99 was

Rs.212.51 crores against the target of Rs. 248.60 crores. Loans disbursed for the

year 1999-2000 stood at Rs.202.20 crores against the target of Rs.273.46 crores.

In the year 2000-20001 Rs.202.17 crores was disbursed against the

programme of Rs.300.80 crores. The achievement for the year 2001-2002 was

Rs. 183.52 crores against the target of Rs.250.00 crores. The lending for the year

2002-2003 reached a record of more than 19% growth when compared to the

previous year’s. The quantum of achievement in lending in the year 2002-2003 is

the highest ever, achieved in the history of the bank at 218.15. The achievement

was possible because of the implementation of nineteen new schemes/activities

brought within the umbrella of the NABARD’s refinance.15 The performance of

the loans was very poor from the year 2002 and was the main cause for the

decline in lending. The main thrust has been given for recovery of loan

installments without giving importance for building loans and advances. This has

lead to the stoppage of lending from the year 2004.

15
Annual Reports of TNCSARD Bank, Chennai.
 50

2.14 PUBLICATION OF - “NILAVALAM- JOURNAL”

The TNCSARD Bank continues to publish the monthly farm Journal

‘NILAVALAM’, which means Land Fertility in Tamil language, to educate the

farmers. In pursuance of its new policy guidelines, new features highlighting the

activities of the Agriculture and Rural Development Banks, with special

reference to the diversified activities aimed at cattering the socio-economic

conditions of small farmers the journal has been introduced. The journal enjoys

an annual circulation of 19,000 copies. Special efforts are being taken to increase

the circulation of the journal and to make it a valuable guide to farmers.

2.15 STAFF TRAINING CENTRE

The Bank is implementing the NABARD–assisted Junior Level

Staff Training Programme since July 1976. The Bank runs a Staff Training

Centre of the Head Office Premises and also owns a Hostel at Adyar, Chennai,

for the accommodation of the Trainees. The Expenditure on the training is shared

between the NABARD and the Bank in the ratio of 80:20. The training centre

conducts training courses and seminars for the benefit of candidates belonging to

the PCARD Banks, the SARD Banks, the Central Co-operative Banks, the

Pandyan Grama Bank, the Pondichery Central Agriculture and Rural

Development Bank and the Tamil Nadu State Apex Co-operative Bank.

2.16 DINDIGUL DISTRICT –A PROFILE

Dindigul District has three Revenue Divisions (Dindigul, Palani,

Kodaikanal), Seven Taluks, Fourteen development blocks, thirty-nine firkas and

359 revenue villages covering a geographical area of 6,267 sq.km. It has a

 51

population of 19.19.lakh (2001 census) with a predominantly rural population

(12.47 lakhs or 65% of total population). The district has extensively hilly areas

with undulating plains. All along the western fringes of the district lie the lower

Palani Hill Ranges of the western Ghats ranging in height from 11,000 to 2,700

meters MSL. The upper hills comprises peaks like Perumalmalai and

Vandaerymalai and is home to the beautiful, serene, salubrious hill station

Kodaikanal. The lower plains are made up of hills like Thandikudi and

Virupachi. On the eastern fringes a lower number of isolated peaks like

Sirumalai, Alagarmalai, Karumalai, Kodarangimalai, Rangamalai, Natham,

Ayyalur hills are found. The rest of the district is characterized by an undulating

plain covered mostly (85%) by red soil. Black earth covers the rest of the

plains16.

2.16.1 Economic activities in the District

Agriculture and animal husbandry are the predominant economic

activities in the district. Industry and commerce are also other important

activities prevalent in the district. Leather tanning, cotton spinning and cement

industries are the major industries of the district. Quite a few small scale

engineering and allied industries function in the district. Food processing and

chemical industries have also come up in recent times. The traditional industry

for which the district is known is the Lock and Safe manufacturing industry

where the manual processes still continue. A small town in the district,

Chinnalapatti, is famous for its handloom cotton and synthetic (art silk) sungudi
16
Dindigul District Statistical Hand Book 2006
 52

sarees. Dindigul has a flourishing trade in onions, groundnut and tobacco. A

large fruit and vegetable market at Oddanchatram serves not only the state but

also the neighboring states as well. The district has an important pilgrimage

centre, Palani, where the famous Bala Dandayudhapani temple is situated.

Kodaikanal, a popular hill resort of South India, is also located in the district.

These two places have a flourishing tourism industry. The district also has many

service sector industries.17

2.16.2 Agricultural Cultivations in the District

The major food crops grown in the district are paddy, cholam

(sorghum), cumbu (bajra), maize, pulses and oilseeds like groundnut and

gingelly. The commercial crops cultivated are cotton, sugarcane and tobacco.

The major fruit crops grown in the district are mango, guava, banana, grapes,

sapota, pineapple, plums, pear, orange and the like. Different types of flowers

such as jasmine (gundumalli, mullai, pitchi), marigold, chrysanthemum,

crossandra (kanakambaram), nerium (arali), cockscomb and rose are also grown.

On the lower upper Palani (Kodaikanal) hills of the western ghats, oranges,

lemon, plums, pear, peaches, mangostein, jack fruit and cherries are grown. The

Sirumalai and Palani hills are famous for a hill variety of banana (malaipazham).

Other varieties of banana are grown in the plains. Sapota has recently become a

quite popular food crop. Vegetables like tomato, onion, brinjal, potato, carrot,

beans, ladies finger (vendai/bhindi), cabbage, cauliflower, chillies, chow-chow,

Knol-Khol and drumstick are grown widely in this district. Coffee, cardamom

17
Dindigul District Potential Linked Credit Plan 2005-2006, NABARD, Chennai, P. 6
 53

and pepper are grown on the hills. Coconut is extensively grown in the plains.

Tamarind is another important tree crop grown in this district. Vannilla,

caranations and a few subtropical flower crops are being cultivated on a small

scale on the hills in recent times. Vanilla and cocoa are grown as intercrops in

coconut plantations. Eucalyptus and geranium are grown on the hills.

Dindigul is one of the very few districts which have two distinct agro-

climatic zones, namely semi-arid tropical climate in the plains and subtropical

climate in the hills of western ghats (mainly in Kodaikanal block). The extracts

of aromatic plants have an excellent potential for export in addition to good

domestic demand. An innovative experiment to transfer technology through

precision farming to the farmers is being undertaken by the Dr. M.S.

Swaminathan Research Foundation with grant assistance from the NABARD at

Kannivadi town in the district. A pathbreaking attempt to put information

technology to farmers’ use is also under way. Organic farming practices are

gaining acceptance. A few export-oriented units for processing of gherkins and

extraction of fragrance from flowers like jasmine have come up in the district.18

2.16.3 Banking activities in the District

The district has a fairly good network of bank branches. There are

23 Commercial Banks which operate with their 137 branches in the district. The

short term co-operative structure namely the Dindigul District Central Co-

operative Bank Limited (DDCCB) has a network of 28 branches as well as 193

18
Dindigul District Potential Linked Credit Plan 2005-2006, NABARD,
Chennai,P. 7
 54

affiliated Primary Agricultural Credit Societies (PACS). The long term co-

operative structure operates with 6 Primary Co-operative Agriculture and Rural

Development Banks (PCARD Banks). The Pandian Grama Bank is the Regional

Rural Bank operating in the District. The Canara Bank is the Lead Bank in

Dindigul district.19

2.16.4 Agricultural Finance in the District

The rural credit dispensing agencies namely Commercial Banks,

District Central Co-operative Bank, Co-operative Agriculture and Rural

Development Bank and specialized agencies like the Tamil Nadu Industrial

Investment Corporation (TIIC) and the Tamil Nadu Industrial Co-operative Bank

Ltd. (TAICO) are disbursing credit for various agricultural, industrial and service

activities not only to undertake economically productive activities but also to

create employment opportunities. The Annual Credit Flow for the year 2004-

2005 aims at a ground level credit of Rs. 48,290.46 lakh. The agency-wise and

sector-wise targets are furnished in Table 2.10.

19
Dindigul District Potential Linked Credit Plan 2005-2006, NABARD, Chennai, p.3.
 55

TABLE 2.10
Agency-wise Rural Credit Flow in Dindigul District
(Rs. in Lakhs)
Agency Crop Agricultur Non- Other Total Per-
Loan e and farm Priority centage
Allied Sector Sector
Activities
Commercia 12560.99 4256.42 3141.79 11978.15 31937.35 66.10
l Banks
DCC Banks 12336.75 935.15 31.06 1163.7 14746.2 30.50
ARD 0.00 636.55 56.88 81.00 774.43 1.68
Banks
TIIC 0.00 0.00 31.48 520.00 832.48 1.72
Total 24897.74 5858.12 3821.75 13742.85 48290.46 100
Source: Dindigul District Potential Linked Credit Plan 2005-2006, NABARD,
Chennai.

It is seen from Table 2.10 that Commercial Banks have a majority

share (66.10%) in agricultural finance followed by the DCC Banks (30.50%).

The ARD Banks offer only long-term assistance and their share of 1.68 % of the

total credit outlay is comparatively less among the other agencies offering rural

credit.

2.16.5 TNCSARD Bank – Dindigul District Regional Office

The Regional Office of the TNCSARD Bank in Dindigul district was

started on 1.1.1986 in Dindigul after the bifurcation of the bank from the

Madurai District in 1985. The Bank has been discharging the functions of the

branch office of the TNCSARD Bank efficiently since its establishment. There

are six Primary Co-operative Agriculture and Rural Development Banks

affiliated to the Regional Office functioning in the six taluks of Dindigul District.
 56

The Date of registration and functioning of PCARD Banks in

Dindigul District:

Name of the Date of

S.No PCARD Banks Registration Commencement
1. Dindigul 19.03.1957 31.03.1957
2. Kodaikanal 23.08.1956 13.12.1956
3. Oddanchatram 27.11.1970 .6.12.1970
4. Palani 19.03.1957 29.03.1957
5. Reddiarchatram 22.11.1970 22.11.1970
6. Vedasanthur 27.11.1970 27.11.1970

The affiliated PCARD Banks in Dindigul District discharge the

stipulated functions in their respective taluks. They offer a spectrum of sector-

wise and purpose-wise loans and a gamut of services to the rural population of

Dindigul district contributing to the enhancement of economic activities in the

district

2.17 SUMMARY
The Tamil Nadu Co-operative State Agriculture and Rural

Development Bank, Limited, has progressed in various dimensions throughout its

life with the sole objective of providing long-term assistance on co-operative

basis to the rural population in the state. In this chapter the researcher has given

the glimpses of the origin of Co-operative Banking in India, the history, growth

and development of Agriculture and Rural Development Banks, the types and

structure of Agriculture and Rural Development Banks, the nature of State

Agriculture and Rural Development banks, nature and set up of Primary

 57

Agriculture and Rural Development Banks, a brief profile of the TNCSARD

Bank and its growth during the period of study and a brief profile of Dindigul

District The functional performance has been analysed through Trend

Percentages.