CO-OPERATIVE BANKS AND RURAL

DEVELOPMENT

A CASE STUDY OF SASTHAMCOTTA

GRAMAPANCHAYATH

BACHELOR OF ARTS IN ECONOMICS

MARCH 2015

CONTENTS
SL NO.
1.
2.
3.
4.

CHAPTER
INTRODUCTION
INDIA-KERALA COMPARISON
SURVEY ANALYSIS
CONCLUSION

PAGE NO.
1 - 11
12 - 29
30 - 39
40 - 42

List of Table
SL
NO

TABLE NO.

CONTENTS

PAGE
No.

Structure of Co- operative

1

2.1

3.1

Credit Institutions

21

Details of the funds for different

31

loans on self security

No. of Loanees of the

3.2

3.3

3.4

Co-operative Bank
Reasons for non-repayment

List of marketing products

List of services of the Co6

3.5

32

operative Bank

33

34
35

3.6

3.7

3.8

Details of Loanees

36

Details of Loans

37

List of defaulted Customer

38

List of profitability and NonProfitability of Agriculture

10

3.9

38

Loanees
List of profitability and NonProfitability of Non- Agriculture

11

3.10

Loanees

39

Introduction
A co-operative Bank is a financial entity which belongs to
its members, who are at the same time owners and the
customers of their bank. Co-operative banks are often created by
persons belonging to the same local or professional community
sharing in a common interest. Co-operative banks generally
provide their members with a wide range of banking and financial
service. (Loans, deposits, banking accounts etc)
Co-operative banks differ from stockholders, banks by their
organization, their goals, their values and their governance. In
most countries they are supervised and controlled by banking
authorities and have to respect prudential banking regulations,
which put them at a level of playing field with stockholders banks.
Depending on countries, this control and Supervision can
be implemented directly by state entities or delegated to a cooperative federation or central body, even if their organizational
rules can vary according to their respective national legislations.

6
Co- operative Banks and Rural Development

The co-operative banks are small sized units which operate

both in urban and non- urban centers. They finance small
borrowers in industrial and trade sectors besides professional and
salary classes. Regulated by the Reserve Bank of India (RBI),
they are governed by the Banking Regulation Act 1949 and
banking laws (Co-operative Societies) act 1965. The Co-operative
banking structure in India is divided in to several categories:

1) Primary Co-operative Credit Society

The Primary Co-operative Credit Society is an
association of borrowers and non-borrowers residing
in a particular locality. The funds of the society are
derived from the share capital and deposits of
members and loans from central co-operative banks.
The borrowing powers of the members as well as of
the society are fixed. The loans are given to members
for

the

purchase

of

cattle,

fodder,

pesticides etc.

2) Central Co-operative Banks

7
Co- operative Banks and Rural Development

fertilizers,

These are the federations of primary credit

societies in a district and are of two types those
having

membership

of

society

as

well

as

individuals. The funds of the bank consist of share

capital, deposits loans and overdraft from State Cooperative Banks and joint stocks. These banks
provide finance to member societies within the units
of borrowing capacity of societies. They also conduct
all the business of a Joint stock Bank.

3) State Co-operative Banks

The State Co-operative banks is a federation of
central co-operative bank and act as a watching cooperative banking structure in the state. Its funds are
obtained from share capital, deposits, loans and
overdraft from the Reserve Bank of India (RBI). The
State Co-operative Banks lend money to central cooperative banks and primary societies and not directly
to the farmers.

According to the International Co-operative alliance statement

of co-operative identity, a co-operative is an autonomous

8
Co- operative Banks and Rural Development

association of persons united voluntarily to meet their common

interest such as economics, social and cultural needs and
aspirations through a jointly- owned and democratically controlled
enterprise.
There are certain principles for co-operative banks:
1.
2.
3.
4.
5.
6.

Voluntary and Open Membership

Democratic member control
Member economic participation
Autonomy and Independence
Education, training and information
Co-operation among co-operatives
7. Concern for community

Co-operative bank share common features:

Customer owned entities: In a co-operative bank, the needs of the
customer meet the needs of the owners, as co-operative bank
members both. As a consequence, the first aim of a co-operative
bank is not to maximize profit but to provide the best possible

9
Co- operative Banks and Rural Development

products and services to its members. Some co-operative banks

only operate with their members but most of them also admit nonmembers clients to benefit from their banking and financial
services.
Democratic members Control: Co-operative banks are owned and
controlled by their members, who democratically elect the board of
directors. Members usually have equal voting rights, according to
the principle of one person one vote.
Profit Allocation: In a co-operative bank a significant part of the
yearly profit, benefits or surplus is usually allocated to constitute
reserves. A part of this profit can also be distributed the cooperative members with legal or statutory limitations in most
cases. Profit is usually allocated to members either through a
patronage dividend, which is related to the use of the co-operative
products and services by each member, on through and interest or
a dividend, which is related to the numbers of shares, subscribed
by each members.
Co-operative banks are deeply rooted inside local areas
and communities. They are involved in a local development and
contributed to the sustainable development of their communities

10
Co- operative Banks and Rural Development

as their member and management board usually belong to the

communities in which they exercise activities. By increasing
banking access in areas on markets where other banks are less
present SMEs, farmers in rural areas, middle on low income
house holders in urban areas.
Co-operative banks reduce banking exclusion and foster the
economic ability of millions of peoples. They play an influential
role on the economic growth in the countries in which they work in
and increase the efficiency of the international financial system.
Their specific form of enterprise, relying on the above mentioned
principles of organization, as has proven successful both in
developed and developing countries.

Objectives of the study

1. To examine the services offered by co-operative banks.

11
Co- operative Banks and Rural Development

2. To interpret the limitations for rural development incurred by

the banks in implementing its programs.
3. To analyze the problems created in the process due to
political interference.
4. To evaluate the delay in the operation of loans due to legal
procedures and formalities.

Methodology

12
Co- operative Banks and Rural Development

The present study is an attempt to examine how cooperative banks promote rural development. The study is both
descriptive and analytical based on primary and secondary
sources. The present study conducted in rural areas of
sasthamcotta panchayath. The samples were selected from cooperative bank, sasthamcotta and from some respondents also
from the specified locality. A structural interview was prepared for
relevant information collection from the peoples who are the
debtors of the co-operative banks.
The secondary data were collected from records, Journals,
previous data source of the banking systems by Mithani and
Gorden.

Chapterisation

13
Co- operative Banks and Rural Development

The study was conducted to examine the role of cooperative banks for rural development. The first chapter includes
Introduction, Objectives, Methodology, Review of literature and
limitations of the study and the second chapter is the comparison
of India-Kerala. Third chapter is true analysis of survey and the
final and fourth chapter includes findings suggestions and
conclusions.

Limitations
1. It is impossible to find the overall development.
2. The availed time is limited.

Review of Literature
Mithani and Gorden, Banking and Financial system point
out as the co-operative bank play an important role in the Indian
financial system, especially at the rural area. In rural finance, as a

14
Co- operative Banks and Rural Development

means of reaching the last man in the last village co-operative

credit has no rural except the traditional money lender
Suraj B.Gupta ,in his book monetary economics as an
important segment of the organized sector of the Indian banking
system is represented by a group of financial institutions
collectively called co-operative banks
The Book Banking Theory and Practices Shekhar &
Shekhar analyzed as co-operative banking in India is federal in its
structure at lower and high there are primary credit societies, then
there are central union or central co-banks and it the top there are
provincial co-banks or state co-banks, otherwise known Apex
banks.
T. N. Hajela, Co-operation principles and problems and practice6th Edition point out as A co-operative bank has been an agency
which is in a position to deal with the small man on his terms of
acceptation the security he has without drawing on the protection
of the rich
Banking Theory Law and Practice, Sudhram & Varshney,
as Co-operative banks are a part of the vast and powerful super
structure of co-operative institution which are engaged in the task

15
Co- operative Banks and Rural Development

of Providing ,Processing, Marketing, Distribution, Servicing and

Banking in India.
B. M. Lal Nigam, Banking Law and Practice- 4 th Edition
point out as when the national economic planning began in India,
co-operative banks were madeon integral part of the institutional
frame work of community development and extension services
Financial Institutions and Market- 3rd Edition L.M Bhole
point out as co-operative banks perform all the main banking
function of deposit mobilization, supply of credit, and provision of
remittance facilities.
Bharati. V. Pathak in his book Indian Financial system as Cooperative banks is financial intermediaries partially. The source
of their funds are central and state government the RBI and
NABARD, other co-operative institutions, ownership funds,
deposits or debentures issue.

India Kerala Comparison

Co-operative Banks and Rural Development in India
Since time immemorial, India has been, still continues to be
and will remain in the foreseeable future, a land of village

16
Co- operative Banks and Rural Development

communities. With more than 700 million of its people living in

rural areas and which its rural sector contributing about 29 percent
of its gross domestic product at factor cost at the 1993-94 prices
(GOI 1999S5), no strategy of socio-economic development of
India that neglects the rural people and the rural areas can be
successful. Rural development is, therefore, a sine qua non of
overall development in India. The term, rural development, is a
subset of the broader term development, which is a subjective
and

value-loaded

concept

and

hence

difficult

to

define.

Howsoever we define it; development is a universally cherished

goal of individuals, families, communities and nations all over the
world.

The

term,

rural

development,

connotes

overall

development of rural areas as revealed in improved quality of life

of rural people. In this sense, it is a comprehensive and
multidimensional process and phenomenon. It encompasses the
development of Agriculture and allied activities, village and cottage
industries and crafts, socio-economic infrastructure, community
services and facilities, and above all, the human resources in rural
areas. Generally speaking, development can be conceptualized
as a non- decreasing set of desirable societal objectives such as
increase in real per capital income, improvement in income
distribution (equity), political and economic freedom, and equitable

17
Co- operative Banks and Rural Development

access to resources, education, health care, employment

opportunities, and justice ( Singh 1999a:9)
Rural development is influenced by a multitude of factors
such as natural resources, human resources (Labour), capital,
technology, public policies and institutions and organizations.
Although the old school of institutionalists led by Thorstein Veblen,
John R. Commons, and Karl Marx emphasised the role of
institutions

in

economic

development,

the

neo-classical

economists did not assign any place to institutions in their theories

( Singh 1999a: 35). However, of late, as a result of failure of neoclassical economics to explain international and Intra national
differences in economic development, it is now widely recognized
that institutions and organisations are an important aid to
development. The economic life of a community takes place in a
milieu of institutions and organisations; the former embodying the
rules of the game and the latter denoting formal or informal
structures comprising groups of individuals having common
interests. They together largely determine the economic structures
of the community and set the rules in which the economic game is
played.

18
Co- operative Banks and Rural Development

Organisations affect rural development in many different

ways including provision of production inputs and services,
reduction of transaction costs, enhancement of bargaining power
of rural producers vis -a vis those to whom they sell their produce
and from whom they buy production inputs and services,
facilitating investments and savings and bringing the two together,
and so on. Vaidyanathan examines in detail the institutional
imperatives of agricultural development in India. He highlights the
crucial importance of institutional reforms, particularly in the
domain of public systems for sustained agricultural development.
There are many forms of organisations such as public
(government)

agencies,

sole

proprietorships,

partnerships,

companies, co-operatives and charitable trusts that can and are,

in fact, serving the needs of rural people in India. Government
intervention in the rural sector in India can be traced to the last
quarter of the 19th century. Since then, the government has
expended thousands of crores of rupees on agricultural and rural
development programmes and is, by all accounts, the biggest
agent of rural development. Co-operatives also have played an
important role in promoting agricultural and rural development in
India, particularly in the field of credit, processing, and marketing.

19
Co- operative Banks and Rural Development

The dairy co-operatives of Gujarat and sugar co-operatives of

Maharashtra are good examples of co-operatives that can
promote and sustain rural development.
Gandhiji saw a great virtue in co-operation as an instrument
of rural development. He assigned specific roles to co-operatives
in the field of agriculture commending the promotion of cooperative farming and thereby preventing further fragmentation of
land holdings. He also advocated the establishment of other types
of co-operatives such as credit co-operatives, weavers and
spinners co-operatives and dairy co-operatives. Pt. Jawahar lal
Nehru, the first Prime Minister of India, also had a strong faith in
the co-operatives. He wanted India to be convulsed with thee cooperative movement, Sardar Vallabhai Patel, the first Deputy
Prime Minister and Home Minister of India, had great faith in cooperation as a means of promoting farmers wellbeing. He was
the prime source of guidance and assistance for the Kheda
District Co-operative Milk Producers Union Limited, popularly
known as AMUL, which later became a model of co-operative
dairy development in India.

20
Co- operative Banks and Rural Development

This paper aims at examining the role of co-operatives in

rural development in India. It is mainly based on a review of the
relevant literature available on the subject.
Co-operative movement in India celebrated its 100 year
jubilee in 2004. It was in 1904, the first Co-operative Societies Act
was passed in India, which marked the beginning of co-operative
movement in India. The co-operative movement was introduced in
India with the chief object of making a break-through in the
stagnation of the poorer classes, especially the vast majority of
agriculturists who were groaning under the heavy weight of
indebtedness. It was the bond of debt, which was largely
responsible for the deteriorating stage of agriculture and the
poverty of masses. Many of the farmers were literally born in debt,
lived in debt and died in debt, passing on their burdens to those
who followed. The advent of British rule in India marked some
further deterioration in the economic conditions of the farmers.
Co-operation in India is considered as an instrument of
democratic planning. The governments, both Central and State,
co-ordinate its efforts along with societies in development. State
also provides financial assistance and guidance to spread the
system of co-operation in all walks of life.

21
Co- operative Banks and Rural Development

Co-operative Week
ICA proposed to celebrate the International Co-operative
day on the 1st Saturday of July every year. But in India, it is
celebrated for a week. It was decided to celebrate the cooperative week from 14th November every year, since it being the
birthday of the first prime minister of our country Jawaharlal
Nehru, who was an ardent promoter of co-operation in India.
Co-operative Flag
ICA designed a co-operative flag and presented to the world. The
flag has seven rainbow colors. The executive committee of ICA
agreed the suggestion of Mr. Charles Gide, a French co-operator
and adopted a spectrum of seven colors. The seven colors
represent prosperity, harmony, peace and welfare of the people.

Nicholsons Report
In 1982, Govt. of Madras deputed Sir Federic Nicholson to probe
into the possibility of forming co-operation in India. In 1889, he
submitted his report and recommended to form agricultural credit
societies in village level on the pattern of Raiffeisen credit

22
Co- operative Banks and Rural Development

societies of Germany. Subsequently the Farming Commission

Report came out in 1901. The commission also recommended the
starting of co-operative credit societies to tackle the problems of
rural indebtedness. As a result, the first co-operative legislation
named Co-operative Credit Societies Act 1904 was passed. In
order to rectify the defects of the Act legislation named Cooperative Societies Act of 1912 was passed.
Co-operative Legislation entered its revolutionary phase
with the constitutional reforms under Govt. of India Act of 1919,
where in co-operation became a provincial subject. Thus,
provinces got powers to make co-operative laws in their
respective areas. Firstly, Bombay province enacted its Cooperative Societies Act in 1925. Madras province followed suit and
passed their Act in 1932. Central Govt. also passed a Multi Unit
Act in 1942 so as to regulate the working of the societies whose
area of operation is extended to more than one province. This Act
was replaced by the Multi State Co-operative Act in 1984.
In 1928, Royal Commission on Agriculture was set up to
find out the need of agricultural credit societies in India. Before
independence, co-operation in India was only a credit oriented

23
Co- operative Banks and Rural Development

agricultural based movement and it was not a popular movement.

It had no planned growth.
After Independence, Govt. of India realized that cooperatives were the only way out to solve many problems faced
by agriculturists. In addition to agriculture credit societies
consumer stores were opened. In 1949 the Govt. of India set up
the Rural Banking Enquiry Committee, which recommended that
the existing co-operatives should be expanded.
In 1951, Rural Credit Survey Committee was setup by the
Reserve Bank of India. It mainly recommended the need of trained
personnel in the organization and also to introduce integrated
schemes of rural credit.
In 1959, Committee on Co-operative Credit was set up. It
suggested increasing the membership of the co-operative
societies.
In 1965, R.N. Mirdha Committee on Co-operation submitted
its report and recommended to set up a National Co-operative
Bank and to give more Co-operative training and education to
people.

24
Co- operative Banks and Rural Development

All India Rural Credit Review Committee was set up in

1969, which recommended providing timely credit to the societies.
Another progress in co-operative movement was the setting up of
NABARD in 1982 to provide credit for the promotion of
agricultural, small-scale industries and handicrafts and other
activities in connection with the rural development. The statutory
duties of RBI under Banking Regulation Act with regard to State
Co-operative Banks and District Co-operative Banks are entrusted
to NABARD.
Co-operation in India is considered as an instrument of
democratic planning. The Governments, both Central and State,
coCo-operative Credit Institutions

Urban Co-operative Bank

Short-Term structure

Rural Co-operative Credit Institutions

Long- Term Structure

Table No. 2.1

Structure of Co-operative Credit Institutions in India
State Co-operative Central
bank Co-operative
Primary
BankAgricultural Credit Societies

25Banks
State Co-operative Agricultural and Rural
Primary
Development
Co-operative
Agriculture and Rural Development Ban
Co- operative Banks and Rural Development

Source: Report on Trend and Progress of Banking in India

Co-operative Banks In Kerala

26
Co- operative Banks and Rural Development

In Kerala, the co-operative movement has spread its wings

in almost all walks of life. The spread and growth of co-operatives
in different sectors were nurtured under development plans with
government initiative and government finance.
The word Co-operation is derived from the Latin word cooperaie, which means work together. In the ordinary sense, cooperation means working together jointly. The term co-operation
implies a common endeavor with a common end. Those who join
together should have some economic aim, which they cannot
normally achieve the common end through self-help and mutual
help. They are guided by the principleeach for all and all for each
In the primitive societies, the germs of co-operation could
be observed in religious institutions and traditional customs. The
working of these customs and institutions throw light on the
instinct and tradition of mutual assistance, joint action, joint
possession and joint management which are found in the thinking
and in the life of the people in all ages and in all countries. In
India, for instance, the principles of co-operation have been
practiced from times immemorial. The spirit of village communities
in India was almost entirely co-operative. The villagers have
throughout the ages worked together on an informal co-operative

27
Co- operative Banks and Rural Development

basis with regard to their religious, social and cultural life. The cooperative element in the community life in India was represented
by joint family system. The Arthasastra of Kaudilya provides
whoever stays away from any kind of co-operative undertaking
shall send his servants to carry on the work, shall have a share in
the expenditure but none in the profits
Co-operation as is understood today, as an economic
system, was born as a peaceful reaction against the mercantile
economy and Industrial Revolution which had resulted in the
concentration of wealth, mass poverty and degradation; in a word.
decay of men, Co-operation was conceived as the answer to the
injustice of capitalism and was developed as its antidote. Poorer
men saw in it a price advantage, economists a new incentive to
efficiency, and the utopian socialists a method of developing a
complete new society. The heard found that by showing a
common front they were a match for the economic carnivores

28
Co- operative Banks and Rural Development

The term co-operation, as generally understood today, is a term,

which likes philosophy and religion defies exact definition and
description. The concept and meaning of co-operation has been
given by utopian socialists, religious thinkers, sociologists,
economists and reformists in their own way in their respective
countries
Benefits of Co-operation
a. Economic Benefits:
From the economic point of view, co-operatives are
engaged in securing for their members services of various
kinds at low costs. Co-operation is also playing an important
role in checking monopolistic tendencies. The following is
the

list

of

economic

advantages

of

co-operative

organisations: - Equitable Distribution of Wealth, Challenge

Monopolies, Avoiding Middlemen, Provide Quality Goods,
Better Standard of Living, Employment Stability etc.
b. Social Benefits
Co-operation offers not only economic benefits to members
but also confers a number of social benefits to the society. This
is so because the object of co-operation is to transform the

29
Co- operative Banks and Rural Development

members condition in such a way that he makes his social life

richer and happier. The well known authority on co-operation
Dr. Fauquet has stated the ultimate aim of co-operation is to
develop men-men imbued with the spirit of self help and mutual
aid in order that individually they may rise to a full personal life
and collectively to a full social life. It is the claims of the cooperators that it can be the principal means of bringing about,
in a peaceful manner social change of a fundamental nature,
ushering in a social order, non- exploitative, equalitarian;
tolerant that harmonizes the dignity of individual with the well
being of the community.
The social purposes of co-operation are more diverse than
economic purposes. They may be to provide a unique
education in democracy, responsibility and toleration; to train
for political power; to evolve an industrial relationship in which
the element of authority is much more evenly distributed than
in private business; to preserve the strong friendly or family
spirit and a sense of pride and power which impersonal; to
encourage a general advance rather than the advance of
particular individuals, to prevent underemployment; to secure
moral as well as physical satisfaction of pure quality, good

30
Co- operative Banks and Rural Development

weight, honest measure, fair dealings in trade or to achieve

better

physical

and

mental

health.

The

distinguishing

characteristic and social features of co-operative societies may

in

many circumstances

make

these

essential,

to

the

achievement of their purposes.

The co-operative movement is an exercise in fellowship,
which seeks to end the exploitation of man by man. The
movement teaches man and woman to rise above their own
interest and think in terms of the general good.

Co-operative Movement in Kerala

31
Co- operative Banks and Rural Development

Co-operative Movement in Kerala started even before the

formation of Kerala state. There were three administrative units in
the erstwhile Kerala-viz, Travancore, Cochin and Malabar. In
1949, Travancore and Cochin merged into a single statee known
as Travancore-Cochin State. Kerala state was formed in 1956 by
merging all the three units.

Co-operative Movement in Travancore

In Travancore the first co-operative society registered under
the Travancore Co-operative Societies Act, 1914 was Trivandrum
Central Co-operative Bank. Then it was formed as the present
Kerala State Co-operative Bank. A central Bank was also formed
for financing primary co-operative credit societies. The societies
were registered with unlimited liability. But recovery of loans
becomes a problem and a number of societies were liquidated
because of excess liability over assets. Then the liability of the
societies was changed into limited from 1918 onwards. Land
Mortgage Bank was formed in 1932 to provide long term loans for
a period of 10 to 20 years on the security of land. In 1963 it was
renamed as Land Development Bank.

Co-operative Movement in Cochin

32
Co- operative Banks and Rural Development

The Cochin Co-operative Societies Act was enacted in

1913. The first co-operative society registered under this Act was
Advanced Co-operative Society. It was a credit society with
unlimited liability. The Cochin Central Co-operative Bank was
formed in 1918; it was based on British co-operative movement.
The long term loans were supplied by Cochin Central Cooperative and Mortgage Bank. The area of operation was limited
to Cochin.

Co-operative Movement in Malabar

Malabar District and Kasargod Taluk was governed by
Madras Co-operative Societies Act of 1932. In Malabar, there
were producers and consumer co-operative societies having large
share capital. The Malabar Co-operative Central Bank registered
in 1917 at Calicut rendered much service in providing loans to
primary co-operatives.

Travancore- Cochin Co-operative Societies Act of 1951

Travancore- Cochin state came into existence in 1949. It
was found necessary to have a uniform co-operative law

33
Co- operative Banks and Rural Development

applicable in the entire Travancore - Cochin area. In 1951,

Travancore Cochin Co-operative Societies Act was passed. This
was in force till Kerala Co-operative Societies Act came into force
in 1969.

Kerala Co-operative Societies Act of 1969

All states in India have its own Acts on Co-operation. All
laws are written on the basis of Indian Co-operative Societies Act
1904 and 1912. When Travancore, Kochi and Malabar were
integrated to form the Kerala state, a common co-operative Law
became inevitable. Accordingly, the Kerala Co-operative Societies
Act came into existence on 15th May 1969. Thereafter, the Cooperative Act in Kerala was revised and modified on various
stages.

Survey Analysis

34
Co- operative Banks and Rural Development

The survey was conducted at the co-operative bank,

sasthamcotta Branch, with regard to the minor project of BA on
the topic Co-operative banks and Rural Development. The
survey was conducted to examine the role of co-operative banks
in rural development. The survey was conducted through
questionnaire prepared by the researcher. Questions were asked
to the president of the Bank and to the customers of the bank.
Their answers compiled and analyzed as follows.
The bank provides many services to its customers like
loans, security facilities, Market opportunities, product from the
Kudumbasree and PDS facilities (NANMA, COIRFED,). The main
services offered by this bank for rural development are loans. The
loans are of two types. Agricultural loans and Non agriculture
loans (Business loans). Through agriculture loans the agriculture
sector of the panchayath was highly improved, the non agricultural
loans denote the loans for business purpose. This facility helped
the development of small scale industries in this Panchayath.

35
Co- operative Banks and Rural Development

Table No: 3.1

Details of the funds for different loans on self security
Loans
Agriculture loans
Non-agriculture loans

Amount
5000 to 500000
5000 to 500000
Source: Survey Data

There are different procedures for granting loans. Thus the

submission of some documents they are: legal documents on property,
Land tax receipt, Location certificate, Copy of the ration card, ID card
etc. For approving it will take maximum of 30 days for loans. Meanwhile
this time the bank does verification which includes site visit and other
formalities. The bank cannot change these rules because it is based on
the co-operative principles.
The bank grants almost 1400 loans per annum to the rural
community.

Table No. 3.2

Loans

Number of loans

Period of repayment of

36
Co- operative Banks and Rural Development

600-700

loan
3 to 5 years

Long term:

200-300

6 months to 1 year

Short term:

300-400

2 to 3 years

Agricultural
Non- Agricultural
( Business purpose)

Source: Survey Data

The Bank gives loans almost 40 crore rupees for loans only. The
bank provides one loan for one customer at a time and they provide
subsidies for agriculture loans up to 7% for giving a support to the
customers. In the case of Non- agricultural loans or business loans the
bank gives 14 % subsidy. In default of loans the necessary actions
taken by the bank; which includes
1.
2.
3.
4.
5.

An ordinary notice
Registered Notice
ARC Filing
Award
Execution of CEP

The majority of the loaners repay the loans on correct time and
almost40% people makes default in repayment. The reasons for the
defaults are
Table 3.3
Agri loans

Non-Agriculture loans

37
Co- operative Banks and Rural Development

Diseases
Marriage
The loss of the yield
Due to natural calamities
The fall in price

Loss of business

Source: Survey Data

The bank provides short term loans for women entrepreneurs for
their empowerment (like cottage industry) mainly Kudumbasree units,
Janasree units, Sree Sakthi units etc. The bank engaged in marketing
of the following products.

Table 3.4
Agri products

Manufacturing products

Coconut

Coir products

Rice

Antique products

Cashew nut

Cosmetics

Vegetables

Ornaments

Seeds
Food Products etc.

38

Co- operative Banks and Rural Development

Source: Survey data

Ruling political parties also plays a pivotal role in loans

promotion and other services from the bank. They help people to use
their opportunities well.
The bank follows co-operative principles strictly in every action.
The overall services from the bank are

Table 3.5
Loans

Deposits

Securities

Chitties

Agriculture

Fixed Deposits

Locker facilities

1 year

Non- Agriculture

( FD)

Go down facilities

2 year

Recurring
Saving
Current
Source: Survey data

39
Co- operative Banks and Rural Development

The bank writes off the debts from the customers who have
made default in repayment as no payment of the principal amount or
interest and made arrear even the date has expired. And the bad debts
will be met by the bank from the incentives from Government and the
Govt. has implemented new programmes like ASWAS 2005 for
helping the banks. Through this survey we could find out that the
programmes of this co-operative bank helps in rural development and
the bank plays an important role in the developing lifestyle of the
people.
Data from Customers
On the basis of the data collected from the bank we have chosen 8
customers for individual interview. The gathered data from them are
encoding below.
Table 3.6
Sl No.
1.

Name
Smt. Leelamani
Amma
Balachandran

2.

Shri

3.

Pillai
Smt Nazeema

4.

Shri Sasidharan Pillai

Address

Loan which

Valiyaveettil Kizhakkathil

have taken
Agriculture

Muthupilakkadu
Kuzhivila Kizhakkathil

Agriculture

Muthupilakkadu West
Kuttiyude Kizhakkathil

Agriculture

Panampally
Geetha Bhavanam

Agriculture

Muthupilakkadu

40
Co- operative Banks and Rural Development

5.

Shri Raghavan Nair

6.

Smt

7.

Amma
Adarsh

8.

Rahul Bhavanam

Agriculture

Muthupilakkadu west
Nellippuzha Veedu

Non- agriculture

Muthupilakkadu West
Panakkal Ellathu veedu

Non- Agriculture

Muthupilakkadu West
Ottoorkkavu Vedu

Non-Agriculture

Sarasamma

Smt Janaki

Muthupilakkadu West
Source: Survey Data
Eight Customers were surveyed and datas were compiled.
Name

Loan

Loan

Interest

Monthly

Perio

Sl
Amount

rate

Payment d of

No
(lakh)
Smt Leelamani

Agri

Amma
Shri Balachandran

Agri

6000

repay
3

7500

4500

6000
7500
8000

3
3
3

8500

4500

1.
3

2.
3.
4.
5.

Pillai
Smt Nazeema

Agri

1
2
2.5

1.5
2
2

Shri Sasidharan Pillai

Shri Raghavan Nair
Smt Sarasamma

Agri
Agri
Non-

Amma

Agri
Non-

Agri
Non-

3.5

agri

10

6.
Adars
7.
h

8.

Smt Janaki

3.5

Table 3.7
Source: Survey Data

41
Co- operative Banks and Rural Development

All the customers have preferred loans below 4 lakh and majority of
them pays payment correctly.
The details of defaulted customer and reason
Table 3.8
Sl

Name

Loan

No
1. Shri Raghavan Nair

Agri

Method of

Reason for

payment

Non

7500

payment
Natural
Calamities
Source: Survey Data

The details show there has only 10% of the loaners make default in
repayment.
The details product and its profitability in the case of Agriculture Loans
Table 3. 9
Sl

Agriculture crop

Profitability

No.
1.

Paddy

2.

Vegetables

3.

Poultry

4.

Poultry

42
Co- operative Banks and Rural Development

5.

Paddy

Source: Survey Data

All the customers have used the loan amount for agriculture and
majority of them gained profit. The details of the products and its
profitability in the case of Non- Agriculture.

Table 3. 10
Sl No
1.

Name
Smt

Type of business

Profitability
Y

Sarasamma
2.

Amma
Adarsh

3.

Smt Janaki

Coir Industry
Matchstick

Ice Plant

Source: Survey Data

43
Co- operative Banks and Rural Development

CONCLUSION

The Study was conducted in Sasthamcotta panchayath to

find out the role of co-operative banks in rural development. The
study result shows that the seventy percent of the development of
the area is promoted and supported by this co-operative Bank. A
major part of the population depends on agriculture. The Cooperative bank implements so many programmes for supporting
the farmer.
In this study, an attempt is made to highlight the major
inferences with a view of provide guide lines that may be adopted
for policy formulations relevant to improve the efficiency in funds
management and rural development by the co-operative banking
sector.
The co-operative societies Act of 1912 permitted registration of
District co-operative banks in India. The Co-operative banks were

44
Co- operative Banks and Rural Development

formed mainly with the objective of meeting the credit

requirements of members of societies. Co-operative banks
mobilize deposits which they utilize for their business operations
for achieving higher profits.
The analysis of loans and advances revealed that
Sasthamcotta Co-operative Bank had sanctioned maximum
amount (about 60% of total loans) for seasonal agricultural and
non-agricultural operations. The present study leads to the
conclusion that through funds mobilization is done reasonably in
Sasthamcotta Co-operative Bank, sufficient attention is given for
efficient utilization of funds.

Suggestions
Based on the above findings, the following suggestions are
offered.
1. Minimize and simplify the formalities to be followed by
customers for getting the loans sanctioned and for its
disbursal.
2. Considering the peculiar economic features of Kerala,
permission to open Non-Resident External (NRE) accounts
may be given as majority of funds are remittances from
abroad. Simultaneously, the staff of the bank should be

45
Co- operative Banks and Rural Development

trained to deal with foreign exchange business.

3. The service of the recovery cell of the co-operative
department may be properly utilized for avoiding delay in
recovery of over dues.

Findings
1. About 75% of the total populations are the beneficiaries of
the loans and advances given by the Co-operative Bank,
Sasthamcotta
2. Funds and resources of the bank are properly mobilized.
3. More efficiency can be achieved by the Bank through more
and more fund mobilization

46
Co- operative Banks and Rural Development

CHAPTER I

CHAPTER II

CHAPTER-III

APPENDIX

The questionnaires are also include in the analysis

The Questionnaire prepared for the banks customers

1. Name
:
2. Address
:
3. Gender
:
4. Occupation
:
5. Loan which have taken
:
6. Amount of the Loan
:
7. Interest Rate
:
8. Validity of the loan
:
9. Monthly Payment
:
10. How did you used the amount
:
11.Do you correctly pays the monthly payment :
12. If not what are the reason
:
13. Agriculture Crop
:
14. Type of Business
:
15. Is the business/ Agriculture profitable
:

1.
2.
3.
4.
5.

Questionnaire for Bank

What are the different loans provided by this bank?
What are the legal procedures for getting a loan?
How many loans you provide per annum?
Do you provide any subsidies in Agriculture loans?
The maximum number of loans granted to one person at a

time?
6. The maximum amount which can be granted on self surety
to customer?
7. The necessary actions taken for loan defaulters?
8. Does every customer repay the loans correctly?
9. Degree of political interference on granting loans and other
services?
10. How do you consider customers for write-off debts?

11.How do you meet the liability due to bad debts?

12. The different programmes provides for women
empowerment?
13. Do you follow co-operative principles strictly?
14.
What are the
services other than loans provided by this bank?
15. What are the new technologies adopted in banking
services?

CHAPTER-IV