International Journal of Business Management & Research (IJBMR) ISSN 2249-6920 Vol.

3, Issue 1, Mar 2013, 65-74 TJPRC Pvt. Ltd.

ASSESSMENT OF CREDIT DELIVERY OF DISTRICT CENTRAL COOPERATIVE BANK RAJNANDGAON

ANIL KUMAR SONI1 & ABHAY KAPRE2
1 2

Research Scholar, Govt. V.Y.T. Auto. PG College Durg, Chhattisgarh, India

Research Scholar, Pt. Sunder Lal Sharma Open University, Bilaspur, Chhattisgarh, India

ABSTRACT
District Central Cooperative Bank plays a vital role in the agriculture and rural development of the Rajnandgaon. The DCC Bank has more reached to the rural area of Rajnandgaon, through their huge network. The DCC Bank Rajnandgaon acts as intermediaries between State Cooperative Bank (Apex Bank) and Primary Agriculture Cooperative Societies (PACSs). The success of cooperative credit movement in a district is largely depends on their financial strength. DCC Bank is a key financing institution at the district level which shoulders responsibility of meeting credit needs of different types of cooperatives in the district. At present, Cooperative credit structure is the single largest institutional credit delivery system in the district. It provides credit to the people particularly in rural areas at reasonable interest rate thereby reducing the dependency of the farmers on the informal credit source and usurious rate of interest. Therefore, it is necessary to assessment of credit delivery of DCC Bank Rajnandgaon. This paper attempts to assess the overall effectiveness in credit delivery of DCC Bank Rajnandgaon during the period 2009-2010 to 2011-2012. An analytical research design (Descriptive Statistics and Queue Model) is followed in the present study. The study is based on secondary data. Empirical results show DCC Bank Rajnandgaon is effective in credit delivery. The service rate of the bank was sound.

KEYWORDS: Credit Delivery, Effectiveness, District Central Cooperative Bank, Arrival Rate, Approval Rate, Service
Rate, Traffic Intensity

INTRODUCTION
Agriculture continues to be an important sector of the economy with a 26.8 Percent share of the Gross Domestic Produce (GDP). Its contribution in terms of providing employment to nearly two third of the work force has been critical in maintaining livelihoods especially in the rural areas. Credit is a key factor in agricultural development. In the context of technological up gradation and commercialization of agriculture which is envisaged in the coming years, it is necessary that credit support to agricultural sector is stepped up considerably. The cooperative institutions play an important role in providing credit to agricultural sector since 1904 in India. The district central cooperative banks occupy a key position in the cooperative credit structure. Rajnandgaon is agricultural based district and its maximum population stays in rural area. The central cooperative bank occupies a position of cardinal importance in the cooperative credit structure. The DCC bank has plays an important role in agricultural financing. It provides various types of loans taking into account needs of the farmers. The introduction of the Cooperative Credit Societies Act in 1904 for providing production credit to farmers marked the beginning of the institutionalization of cooperative banking system in India. The act of 1904 was amended in 1912 to facilitate the establishment of central cooperative banks at the district level, there by giving it a three tier federal character. The first Central Cooperative Bank was registered in Uttar Pradesh in 1906 as a primary society. In Rajasthan the first DCC Bank was started in 1910 at Ajmer. The period from 1906 to 1918 may be called, the period of origin of

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DCC Banks in India. After independence of the country, the recommendations of the A.D. Gorwala Committee (1954) one central cooperative bank for each district. The DCC Bank Rajnandgaon is most important bank and plays a vital role in the improvement and development of cooperative movement and credit delivery in district.

REVIEW OF LITERATURE
Various studies conducted and numerous suggestions were sought to bring effectiveness in the working and operations of financial institutions. All India Rural Credit Survey Committee by A.D. Gorwala (1951-54), Sir Malcom Darling Report (1957), Committee on Cooperation under the Chairmanship of Shri Ram Niwas Mirdha (1964-65), All India Rural Credit Review Committee by B. Venkatappaiah (1966-69), Committee on Integration of Cooperative Credit Institutions by Dr. R.KL. Hazari (1976), Committee to Review Arrangements for Institutional Credit for Agriculture and Rural Development by B. Sivaraman (1978-81). It may be instructive to recall the excellent contribution made by the Agricultural Credit Review Committee popularly known as Senior Expert Group under the Chairmanship of late Dr. A.M. Khusro (1984) in terms of collection, compilation and analysis of the data to draw most important conclusions on Indian cooperative credit system. Narsimham Committee (1991) emphasized on capital adequacy and liquidity, Padamanabhan Committee (1995) suggested CAMEL rating (in the form of ratios) to evaluate financial and operational efficiency, Tarapore Committee (1997) talked about Non-performing assets and asset quality, Kannan Committee (1998) opined about working capital and lending methods, Basel committee (1998 and revised in 2001) recommended capital adequacy norms and risk management measures. Kapoor Committee (1998) recommended for credit delivery system and credit guarantee and Verma Committee (1999) recommended seven parameters (ratios) to judge financial performance, the National Commission on Farmers under the Chairmanship of Prof. M.S. Swaminathan (2006), Committee on Financial Sector Plan for North Eastern Region by Usha Thorat (2006), Expert Group on Agricultural Indebtedness by Prof. R. Radhakrishna (2007) and Committee on Report on Condition of Work and Promotion of Livelihoods in the Unorganized Sector (2007) headed by Dr. Arjun Sengupta demonstrated the need and important of data base towards policy initiatives in the Indian cooperative credit system. Available data on Indian cooperative credit system has immensely contributed in drawing up of appropriate conclusions by the High Powered Committee on Cooperatives (2009) under the Chairmanship of Shri Shivajirao G. Patil (2009) and a Working Group on Human Resource Policy for Short Term Cooperative Credit Structure under the Charimanship of Shri S.K. Mitra (2009). The Committee on Financial Sector Assessment (CFSA) jointly constituted by the Government of India and RBI under the Chairmanship of Dr. Rakesh Mohan (2009) made recommendations which will have far reaching consequences on the rural cooperative credit and banking institutions and such a recommendation could be possible only because of the importance accorded to the data base issues. Several other committees constituted by Reserve Bank of India to bring reforms in the banking sector by emphasizing on the improvement in the financial health of the banks. Experts suggested various tools and techniques for effective analysis and interpretation of the financial and operational aspects of the financial institutions specifically banks. These have focus on the analysis of financial viability and credit worthiness of money lending institutions with a view to predict corporate failures and incipient incidence of bankruptcy among these institutions. Alufohai (2006) The cooperative has been identified to be a better channel of credit delivery to farmer than the NGOs in term of its ability to sustain the loan delivery function. GoI (2006) The RCC in India has a three-tier federal structure. It comprises of Primary Agricultural Credit Societies (PACS) at the grass root village level, the District Central Cooperative Banks (DCCB) at the intermediate level;

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and at the top, State Cooperative Banks (SCB). India has a well spread short-term credit cooperative network having more than 94,600 village-level PACS, with atleast one PACS for every six villages and total cooperative membership of over 126 million rural people, covering almost half of Indias total population. Satyasai (2008) Public policy on rural credit in India has been focused on institutionalization as a means of providing cheaper credit to farmers. As a result, the share of private moneylenders had decreased substantially from 93 Percent in early-1950s to 31 Percent by 1991. Mandira Sarma Share of rural cooperatives in total institutional credit was 62 Percent in 1992-93, 34 Percent in 2002-03 and 53 Percent in 2006-07. An Overview of Short Term Credit Cooperative Structure The credit cooperatives account for 24 per cent of the investment credit and 51 Percent of short term credit for agriculture and allied activities. Besides, they account for 40 Percent of the total credits to agriculture. Report or the Working Group on Agricultural Credit, Cooperation and Crop Insurance (2002-2007) In the past few decades, credit has played a very important catalytic role in supporting agricultural production and investment activities. The flow of agricultural credit has increased tremendously in quantitative terms. The 9th Five Year Plan envisaged the annual compound growth rate of 16.1 Percent in the agricultural credit. The total agricultural credit has increased from Rs.26411 crores during 1996-97, the terminal year of the 8th Plan to Rs.44612 crores in 1999-2000 and to Rs.53504 crores (projected) during 2000-01. The projection for the terminal year of 9th Plan is around Rs.66771 crores. Although the flow of agriculture has increased, the increasing demand of capital formation in agriculture and the daunting task facing the revamping the agricultural credit structure would continue to attract attention during the 10th Five Year Plan as well. The National Agriculture Policy pronounced by the Govt. of India recently envisages the growth rate of 4 Percent per annum in agriculture sector. This would require the proportionate increase in the agricultural credit which would in turn require the revitalization and strengthening of the credit delivery system. Tripathy, K. K. and Jain, S. K. (2009) The Govt. of Indias policy initiatives for strengthening the rural credit delivery mechanism has, therefore, laid emphasis on enhancing the flow of credit at the grass-root level through an effective credit planning, adoption of region-specific strategies, rationalization of lending policies and procedures and the reduction of cost of rural borrowings. An emphasis was laid on the disbursement of rural credit through a multi-agency network consisting of Commercial Banks (CBs), Regional Rural Banks (RRBs) and Cooperatives.

OBJECTIVES OF STUDY
To assess the credit delivery of the DCC Bank Rajnandgaon. To measure and compare the effectiveness of the DCC Bank Rajnandgaon. To offer suggestions helpful in improving functions on the basis of conclusion.

HYPOTHESIS OF STUDY
DCC Bank Rajnandgaon is an important bank of Rajnandgaon as far as its role in agricultural credit delivery and rural development of Rajnandgaon. The financial management and credit delivery of the bank is effective.

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PROBLEMS OF STUDY
First and important problem of the research work is analysis of credit delivery. Information from the DCC Bank Rajnandgaon was difficult to be obtained. Frequent number of visit was made to DCC Bank Rajnandgaon to collecting data.

SIGNIFICANCE / IMPORTANCE OF STUDY

The research study is significant to analyze credit delivery of DCC Bank Rajnandgaon. The results / findings of the present study are useful to the policy planners in their efforts to improve the working of the DCC Bank Rajnandgaon.

SCOPE AND LIMITATIONS OF STUDY

The information is collected from DCC Bank Rajnandgaon only and based on past three years only. The study is consider only effectiveness assessment other factors ignored. Findings may not always be relevant to other district in the state / country.

AREA OF STUDY
The study is based on the effectiveness in credit delivery of DCC Bank Rajnandgaon. Therefore, study covers Rajnandgaon District to the fulfillment of objectives of the study.

PERIOD OF STUDY
For collection of the secondary data on credit delivery of the DCC Bank Rajnandgaon, three years i.e. from 20092010 to 2011-2012 were taken as the reference period.

RESEARCH METHODOLOGY
The effectiveness in credit delivery of the DCC Bank Rajnandgaon has been analyzed with the help of arrival rate and service rate. Analytical Techniques / Tools Employed Queue Model was undertaken with a view to studying effectiveness in credit delivery related to the bank. The Queue Theory A queue is a waiting line. It is an array of items waiting to be served. The queue model is usually employed to determine the effectiveness of the performance of an organization (Olayemi and Onyenwaku, 1999). The queue model was used to access the arrival rate of loan request of farmers, the service rate, the idle rate and traffic intensity of the cooperative societies. These were computed by the formulae given by (Omotosho, 2002; Alufohai and Ahmadu, 2005). Data obtained from the study were collated and analyzed using simple descriptive statistics such as means and frequencies as well as the Queue Model.

METHOD OF DATA COLLECTION / SOURCE OF DATA

The study is mainly based on secondary data which is collected, compiled and calculated from annual reports and records of the DCC Bank Rajnandgaon. This data was subjected to rigorous credit delivery effectiveness assessment. Other related information collected from journals and websites.

INTERPRETATION OF DATA
The secondary data have been tabulated in a suitable sheet prepared for the purpose. Analyzing and interpreting the collected data, summary has been drawn.

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PROFILE OF THE BANK

The District Central Cooperative Bank Ltd Rajnandgaon established / registered on 3rd December 1974 (Registration No. 141/03.12.1974) as a central financing agency of PACS, with the avowed purpose of catering the agricultural credit needs of the farmers in the district; having 23 Agriculture Branches, 5 Deposit Branches and 135 PACS as its members functioning at block / village level. The Bank has its head office at Rajnandgaon, it covers District Kabirdham also. No branch has been opened / closed during the reference period.

OBJECTIVES OF THE BANK

To meet the short and medium-term credit requirements of member societies and other affiliated societies in district. To collect deposits and arrange funds for the purpose of lending. To implement the credit policy and programmes of Govt. and NABARD and to provide various banking facilities to the member societies as well as to customers. To supervision, guide and control the working of affiliated societies in a district.

CONTRIBUTION OF THE BANK IN IMPLEMENTATION OF GOVT. SCHEMES

The bank has taken active participation in implementing various government schemes of rural and agricultural development. Some of these are Farmers Club- The bank has been taking keen efforts to establish farmers club, up to 31-3-2011, 88 clubs established. Improvement of Self Help Group- The bank improves women self help group, up to 31-03-2011, 4562 SHGs improved. National Agriculture Insurance Scheme- The bank provides crop insurance with loan distribution, 220574 farmers get the benefit during year 2011. Sankat Haran Beema Yojana- IFFCO sponsors this scheme, under this scheme bank provides 4000/- per bag (up to 25 bags) insured amount in the condition of death of farmer during year. Interest Subsidy Scheme- Farmers get benefit of interest subsidy by State and Central Govt., 135259 farmers benefited during year 2010-2011.

SHARE CAPITAL OF THE BANK

The Authorized Share Capital of the DCC Bank Rajnandgaon is Rs. 30 Crores, whereas the paid-up share capital is Rs. 263742306 which is contributed by Govt. of Chhattisgarh Rs. 13300000, Primary Agriculture Cooperative Societies Rs 250433116 and Nominal Members Rs. 9190.

CREDIT DELIVERY EFFECTIVENESS OF THE BANK

Previous studies have shown that cooperative carry out the function of credit delivery to farmers but there is ample evidence that farmers face difficulties in obtaining credit and the problem of sourcing for capital still lingers on. The question therefore is, whether these cooperative are effective or not in credit delivery to farmers. Do farmers actually

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patronize them or is it that the cooperative are slack in rendering this service? If they do, are there delay, does queue exist, if there is, what is the arrival rate, service rate, idle time and traffic intensity. In view of the foregoing, the study is designed to assess farmers access to loans from cooperative societies, identify the arrival rate of loan request of farmers that have access to loans from these cooperative societies, the service rate and idle time of the cooperative societies and the traffic intensity in order to assess the overall effectiveness of their queue system. Arrival Rate = Number of Arrivals / Time Service Rate = Number Served / Time Traffic Intensity = Arrival Rate / Service Rate Idle Time = 1 Traffic Intensity

For the purpose of the study, arrival rate depicts the number of loan request per month, the service rate represents the number of application accepted, considered and loan actually provided. Idle time refers to the period when no application was attended to, even when they had been submitted. Efficiency in queue management is achieved when the traffic intensity is unity that is arrival rate is equal to service rate. In this case no idle time (Idle time = 0).

ACCESS TO CREDIT
Table 1 presents the number of loan application and approvals for year 2009-2010 to 2011-2012 Table 1: Applications and Approvals of DCC Bank Rajnandgaon Key Parameters 2009-2010 2010-2011 Number of Applications 145 118 Number of Approvals 142 114 Approval Rate in Percent 97.93 96.61 Source: - DCC Bank Rajnandgaon - Annual Records. 2011-2012 Total 368 631 366 622 99.45 98.57 (Figures in Numbers)

The short term credit deliver by 23 Branches through 135 PACS and the medium term (MT) and long term (LT) credit proposals / applications send to DCC Bank Rajnandgaon for approval then the credit delivered. If proposals are not properly or with some errors / defects the DCC Bank Rajnandgaon returns proposals for rectification. All the proposals / applications must be under the schemes and loan policies of DCC Bank Rajnandgaon. In the above Table 1 shows that 142 (108 MT + 34 LT), 114 (68 MT + 46 LT) and 366 (316 MT + 50 LT) loan approved against the proposals / applications 145, 118 and 368 during the years 2009-2010, 2010-2011 and 2011-2012 respectively. In all, the DCC Bank Rajnandgaon received a total of 631 loan applications and approved 622 within the study period of three year giving an overall approval rate of 98.57 Percent. An indication that farmers had good access to cooperative loan and were aware of this function of the cooperative hence the request for loan.

ARRIVAL RATE, SERVICE RATE, IDLE TIME AND TRAFFIC INTENSITY

Table 2: Arrival Rate, Service Rate, Traffic Intensity and Idle Time Year Arrival Rate Service Rate Traffic Intensity 2009-10 12.08 11.83 1.02 2010-11 9.83 9.50 1.03 2011-12 30.67 30.50 1.00 Total 52.58 51.83 3.05 Average 17.52 17.27 1.017 Source: - Compiled from DCC Bank Rajnandgaon- Annual Records. No. 1 2 3 Idle Time 0.02 0.03 0.00 0.05 0.017

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RESULTS AND DISCUSSIONS

In accordance with the objectives of the study, the data collected from records were analyzed and interpreted. Effectiveness explains the ultimate credit delivery position of the bank. For this purpose, rates were worked out and presented in Table 2 which are discussed here and the results of the study are presented as under. Arrival Rate and Service Rate The DCC Bank Rajnandgaon had an average arrival rate of 12.08 and service rate 11.83 for the year 2009-2010 depicting that an average of 12.08 loan request were received, 11.83 of them were considered, approved and loan disbursed. The year 2010-2011 and 2011-2012 had arrival rates of 9.83 and 30.67 and service rate 9.50 and 30.50 respectively, showing that maximum loan request received were considered, approved and disbursed indicating that the service rate was in accordance with its loan request. It also shows an improvement in the service delivery from the previous year. This further reflects the effective performance of DCC Bank Rajnandgaon in its credit delivery function. The results for Arrival Rate and Service Rate are presented in Table 2. Traffic Intensity and Idle Time The result of the study showed a traffic intensity of 1.02 and idle time of 0.02 for the year 2009-2010. The year 2010-2011 and 2011-2012 had traffic intensity of 1.03 and 1.00 and idle time of 0.03 and 0.00 which depicts efficiency in the queue management as efficiency is achieved when the traffic intensity is unity and idle time is equal to zero and an improvement from the previous year performance.

SUMMARY OF STUDY (FINDINGS)

The study showed an overall average traffic intensity of 1.017 and an idle time of 0.017 which indicated that the bank had no idle time. This reflects good queue management and the effectiveness of the DCC Bank Rajnandgaon in consideration and delivery of loan request received. The findings that DCC Bank Rajnandgaon received loan request, have overall approval rate of 98.57 Percent, arrival rate of 17.52, service rate of 17.27 per month which resulted that the bank effective in Credit Delivery.

PROBLEMS (WEAKNESSES) OF THE BANK

DCC Bank Rajnandgaon has not succeeded in mobilizing deposits because of severe competition from other banks and financial institutions. The DCC Bank Rajnandgaon suffers from heavy over dues and huge amount of accumulated losses. It has been noticed that there is limited schemes and unusual delay in credit delivery. The loan recovery system / procedure of bank are very poor. One of the important defects - management by untrained members.

SUGGESTIONS (RECOMMENDATIONS) FOR IMPROVEMENT OF THE BANK

The DCC Bank Rajnandgaon should try to increase their deposits by opening branches in business areas, improve the services to clients, introduce different types of deposit schemes and offer competitive rates of interest. The DCC Bank Rajnandgaon should change their loan policies and credit schemes.

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The DCC Banks Rajnandgaon should drop a scientific method to recover over dues and must maintain up to date records on daily basis.

The DCC Bank Rajnandgaon must maintain adequate liquid resources, margin, properly scrutiny of loans and should try to qualitative improvement to the staff.

Accountability and transparency need to be brought in the implementation of the schemes.

CONCLUSIONS
Cooperative banking structure has a unique position in the rural credit delivery system of India. The cooperative banking sector especially with their existence of about a century has made significant strides in the field of rural credit delivery. The DDC Bank had been maintained a reasonable level of credit delivery. The effectiveness in credit delivery of this bank assessed by arrival rate, service rate, traffic intensity and idle time, effectiveness in credit delivery are highly satisfactory, a reflection of a good queue system management and the effectiveness in credit delivery. As we assessed the data it shows that DCC Bank Rajnandgaon is working for the 360 degree credit delivery and development of rural area of District. In short we can say that CCB Bank providing rural Rajnandgaon all round assistance of credit and proved to be an institution where "Growth with Social Justice" exists. The Govt. of Chhattisgarh awarded DCC bank Rajnandgaon for excellence service and contribution in cooperative development for the year 2011. The DCC bank obtained 79 Marks out of 100 Marks and achieved Grade A in Audit Report of Financial Year 2010-2011. CCB Bank plays a major role in rural credit delivery of Rajnandgaon.

REFERENCES
1. 2. Annual Reports. DCC Bank Rajnandgaon. from 2007-2008 to 2010-2011. Alufohai, G.O. (2006). Sustainability of Farm Credit delivery by Cooperatives and NGOs in Edo and Delta State, Nigeria. Educational Research and Reviews 1(8): 262-266. 3. Alufohai G.O. and Ahmadu J. (2005). Queue Management by Nigerian Agricultural Cooperative and Rural Development Bank (NACRDB) in Farm Credit delivery: The Case of Benin Branch, Edo State, Nigeria. Proceedings of the 39 Conference of Agricultural Society of Nigeria (ASN) held at the University of Benin, Benin City, Nigeria, 9 October, 300 303. 4. 5. GoI (2006). Various Reports on Cooperative and Credit. Gupta Jyoti and Jain Suman. (2012). A study on Cooperative Banks in India with special reference to Lending Practices. Int. Journal of Scientific and Research Publications, Volume 2, Issue 10, Oct. 2012. 6. 7. GoI. An Overview of Short Term Credit Cooperative Structure. Izekor O. B.and Alufohai G. O. (2010). Assessment of Cooperative Societies Effectiveness in Agricultural Credit Delivery in Ikpoba Okha Local Government Area, Edo State, Nigeria. African Journal of General Agriculture, Vol. 6, No. 3, September 30, 2010. 8. Kuddus Abdul and Hussian Zakir. (2007) Cooperative Credit and Banking. Limra Publications, Chennai, 2007, 41-42. 9. Mathur B.S. (2001). Cooperation in India. Sahitya Bhavan, Agra.

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10. Misra.B.S. (2009). What Ails Primary Credit Cooperatives in India?: A State Level Analysis. Comparative Economic Studies, September. 11. Misra (2010). Credit Cooperatives in India Past, Present and Future. Routledge. 12. Olayemi, J.K. and Onyenwaku, C.E. (1999). Quantitative Methods for Business Decisions, Bosude Printers Ltd, Ibadan, 55-81. 13. Omotosho, M.Y. (2002). Operation Research Project, Yosode publishers, Ibadan, 63 77. 14. Satyasai K.J.S. (2008). Rural Credit Delivery in India: Structural Constraints and Some Corrective Measures Agricultural Economics Research Review Vol. 21 (Conference Number) 2008, 387-394. 15. Sarma Mandira. Current Developments in Cooperative Banking in India. 16. Srinath A. R. Cooperative Credit in India Problems and Suggestions. 17. www.coop.cg.gov.in 18. www.nafscob.org