Chapter-III History and Progress of District Central Cooperative Bank in India

Chapter-III History and Progress of District Central Cooperative Bank in India The third chapter deals with history and Progress of district central Cooperative banks in India, the chapter highlights on Origin of District Central Cooperative Banks In India, Trends of Capital, Reserves and Borrowings of DCCB`s in India, Deposit, Credit and CD ratio of DCCB`s in India, Place of Maharashtra District Central Cooperative Banks on Indian Scene and Origin and Progress of district central cooperative banks in Marathwada Region. Introduction: The cooperative movement was started in India largely with a view for providing agriculturists funds for agricultural operations at a low rates of interest and protect them from the clutches of moneylenders. The average Indian Agriculturists is the delight tiller of the soil, whose diet is sparse, whose wants are few and whose standard of living is perhaps the lowest in the civilized world. He lives on the margin of subsistence very often he borrows not because he can but because he must. His chronic indebtedness is the result of his poverty. Without removing the factors, which contribute to his chronic poverty, indebtedness cannot be liquidated. The increasing dependence of the population on agriculture, the decline of rural industries which once furnished subsidiary occupation, the oppressive burden of land taxation, the uneconomic system of land tenure, dependence on money lendercum-trader for the sale of his produce and as a source of credit, and other indisputable economic factors have contributed largely to the ever growing economic ability of the agriculturist and his proverbial poverty. And as the royal commission on agriculture remarked, "The Indian 103

peasant is born in debt, dies in debt and bequeath death". It is this debt which has been the root cause of the degeneration of the peasantry in India. It is here that the cooperative movement can and must come forward to improve the economic conditions of the masses and increase their income and purchasing power 1. The process of rural development is of vital importance in a developing country like India, where according to census 2001, near about 72.2 percent population is living in the rural areas. For increasing agricultural production and implementing advanced methods in the agriculture sector, the farmers need adequate credit for stimulating the tempo of agricultural production. It is imperative that the farmers must be provided with essential pre-requisites like fertilizers, improved seeds, irrigation facilities, modern implements, marketing facilities etc. It is quite natural that without adequate and timely credit they would not be able to make use of these essential inputs. The use of greater and better quantity of inputs would mean greater demand for rural credit Mr. Hohn D. Black, professor of Economics, Harvard university has very rightly stated", If we are all concerned about increasing total agricultural output in the shorter period, we must provide credit first and foremost 2. Thus the government of India, in 1901 appointed a committee under the chairmanship of sir Edward Low to study the questions of starting cooperative credit societies in India. This committee also recommended the establishment of cooperative societies on the Raiffeisen model. The famine committee of 1901 also recommended the setting up of mutual credit associations. Accordingly the cooperative credit societies Act was passed in 1904. This act provided for the establishment of credit societies both in rural and urban areas, for providing credit facilities at cheap rates to small men living in the same 104

locality. Rural societies were to be organised on the Raiffeisen model while the urban societies were to be established on the Schulze Delitzsch pattern. Provision was also made in the Act for the appointment of registrars in every province. The modern cooperative movement in India, thus may be said to have started with the passing of this Act 3, for providing agricultural and non-agricultural credit to rural areas. The cooperative movement could not achieve much success before independence. After the attainment of independence in 1947, there was marked change in the conception of governmental functions and the idea of the welfare state began to influence all activities of the government. The national endeavour has been to promote repaid and balanced economic development. The nation has accepted the concept of planned economy and to work for a socialistic pattern of society to achieve this objective the cooperative movement has to play an increasingly important role 4. History of cooperative movement around world The cooperative movement began in Europe in the 19th century, primarily in Britain and France, although The Shore Porters Society claims to be one of the world's first cooperatives, being established in Aberdeen in 1498 (although it has since demutualized to become a private partnership). [1] The industrial revolution and the increasing mechanism of the economy transformed society and threatened the livelihoods of many workers. The concurrent labour and social movements and the issues they attempted to address describe the climate at the time. The first documented consumer cooperative was founded in 1769, [2] in a barely furnished cottage in Fenwick, East Ayrshire, when local weavers manhandled a sack of oatmeal into John Walker's whitewashed front 105

room and began selling the contents at a discount, forming the Fenwick Weavers' Society. In the decades that followed, several cooperatives or cooperative societies formed including Lennoxtown Friendly Victualling Society, founded in 1812. [3] By 1830, there were several hundred co-operatives. [4] Some were initially successful, but most cooperatives founded in the early 19th century had failed by 1840. [5] However, Lockhurst Lane Industrial Cooperative Society (founded in 1832 and now Heart of England Cooperative Society), and Galashiels and Hawick Co-operative Societies (1839 or earlier, merged with The Co-operative Group) still trade today. [6][7] It was not until 1844 when the Rochdale Society of Equitable Pioneers established the Rochdale Principles on which they ran their cooperative, that the basis for development and growth of the modern cooperative movement was established. [8] Financially, credit unions were invented in Germany in the mid-19th century, first by Franz Hermann Schulze-Delitzsch (1852, urban), then by Friedrich Wilhelm Raiffeisen (1864, rural). While Schulze-Delitzsch is chronologically earlier, Raiffeisen has proven more influential over time see history of credit unions. In Britain, the friendly society, building society, and mutual savings bank were earlier forms of similar institutions. The English CWS and Co-operative Group The Co-operative Group formed gradually over 140 years from the merger of many independent retail societies, and their wholesale societies and federations. In 1863, twenty years after the Rochdale Pioneers opened their co-operative, the North of England Co-operative 106

Society was launched by 300 individual co-ops across Yorkshire and Lancashire. By 1872, it had become known as the Co-operative Wholesale Society (CWS). Through the 20th century, smaller societies merged with CWS, such as the Scottish Co-operative Wholesale Society (1973) and the South Suburban Co-operative Society (1984). By the 1990s, CWS's share of the market had declined considerably and many came to doubt the viability of co-operative model. CWS sold its factories to Andrew Regan in 1994. Regan returned in 1997 with a 1.2 billion bid for CWS. There were allegations of "carpet-bagging" - new members who joined simply to make money from the sale - and more seriously fraud and commercial leaks. After a lengthy battle, Regan's bid was seen off and two senior CWS executives were dismissed and imprisoned for fraud. Regan was cleared of charges. The episode recharged CWS and its membership base. Tony Blair's Co-operative Commission, chaired by John Monks, made major recommendations for the co-operative movement, including the organisation and marketing of the retail societies. It was in this climate that, in 2000, CWS merged with the UK's second largest society, Co-operative Retail Services. Its headquarters complex is situated on the north side of Manchester city centre adjacent to the Manchester Victoria railway station. The complex is made up of many different buildings with two notable tower blocks of New Century House and the solar panel-clad CIS tower. Other independent societies are part owners of the Group. Representatives of the societies that part own the Group are elected to the Group's national board. The Group manages The Co-operative brand and the Co-operative Retail Trading Group (CRTG), which sources and promotes goods for food stores. [10] There is a similar purchasing group (CTTG) for co-operative travel agents. 107

Co-operative Women's Guild Alice Acland, the editor of the "Women's Corner" in the "Co-operative News" publication, and Mary Lawrenson, a teacher, recognized the need for a separate women's organization within the Cooperative Movement and began organizing a "Woman's League for the Spread of Cooperation" in 1883. This League formally met for the first time during the 1883 Co-operative Congress in Edinburgh in a group of 50 women and established Acland as its organizing secretary. By 1884 it had six different branches with 195 members, and the League was renamed the Women's Cooperative Guild. [11] The Guild organized around working women's issues and expanding the Cooperative Movement. It continued to publish articles advocating for women's involvement in the Cooperative Movement in the "Women's Corner," and later through its own publications such as "The importance of women for the cooperative movement." The Guild also opened the Sunderland cooperative store in 1902, which catered to poor working class women. It engaged in many political campaigns concerning women's health, women's suffrage and pacifism. [12] The organization still exists today as the Co-operative Women's Guild and participates in social justice activism. [13] History of Co-operative Movement in India Pre-independence era: The co-operative movement in the Indian context in the preindependence era can be classified into four phases. They are- (a) initiation stage (1904-1911), (b) modification stage (1912-1918), (c) expansion stage (1919-1929) and (d) restructuring stage (1930-1946). 108

(a) Initiation stage (1904-1911): In olden days non- institutional agencies in the shape of money-lenders were charging exorbitant rates of interest from the helpless peasants. The situation was such that the farmers were forced to sell their belongings to repay the debts. In some parts of the country especially in Poona and Ahmednagar the farmers spearheaded an agitation against the moneylenders. Ultimately the government understood the miserable plight of the farmers and passed three Acts viz, the Deccan Agriculture Relief Act (1879), the Land Improvement Loan Act (1883) and the Agriculturists Loan Act (1884). During 1892, the Madras Government appointed Frederick Nicholson to study the village banks organized on co-operative lines in Germany. On his return he submitted a report. The name of the report was Find Raiffeissen. In the report he suggested to establish co-operative societies for supplying rural credit. The Famine Commission of 1901 strongly recommended that in order to prevent famine, agriculturists should be granted loans to improve agriculture. By 1904, the Co-operative Society Act was passed. Salient features of 1904 Act: 1. Rural-urban classification of societies was made. Rural co- operative societies were to be organised on the basis of Raiffeissen Model where liability was unlimited and loans were granted to the members only for productive purposes. Urban credit societies were organised on the basis of Shulze-delitizsch Model where liability was limited and the societies also carried out certain non-credit functions. 2. Registrar was supposed to organise and control the societies. 109

3. Loans could be given to members on personal or real (immovable) security. 4. One-man, one vote was specified in the Act. The working of this Act showed several defects- 1. There was no provision for setting up of non credit cooperative societies in rural areas. 2. There was no central agency to supervise and supply funds. 3. The classification of societies into rural and urban was extremely unscientific. 4. There was the need for re-organisation for payment of credits. (b) Modification stage (1912-1918): The shortcomings of the Act of 1904 were rectified by enacting another Co-operative Societies Act of 1912. The new Act provided legal protection to all types of co-operatives including central financing agencies and supervising unions. The distinction between rural and urban societies was given a new focus. The liability was limited in the case of primary societies and unlimited for central societies. Since this Act provided for the registration of all types of co-operative societies, it led to the emergence of rural cooperatives both on credit front and non-credit front, but this growth was uneven spatially. In 1914 the Government appointed a committee under the chairmanship of Sir Edward Mac Lagan to review the progress of co-operative movement. The report of the committee came out in 1915. The committee observed that illiteracy and ignorance of the masses, misappropriation of funds, rampant nepotism, inordinate delay in granting loans and viewing co-operative movement as a Government movement were some of the glaring defects of the co-operative 110

movement. These observations prompted Mac Lagan to offer the following suggestions for the effective and smooth functioning of the co-operative societies. 1. All members should be made aware of the co-operative principles. 2. Honesty should be the main criterion for taking loan. 3. Dealings should be strictly confined to the members only. 4. Applications should be carefully scrutinized before advancing loan and there should be careful follow up for effective utilization of loan. 6. One member-one vote should be strictly followed. 7. Capital should be raised as far as possible from the savings of the members only. 8. Punctual repayment should be insisted. These recommendations could not be put into practice because of the 1st World War. (c) Expansion stage (1919-29): Under the Montague- Chelmsford Act of 1919, co-operation became a provincial subject which gave further impetus to the movement. Various states passed their own Acts to make co-operative movement a successful one. The membership of the co-operative societies increased considerably during this period. The same period also witnessed the birth of co-operative land mortgage banks first in Punjab and subsequently land mortgage banks were registered in Madras (1925) and Bomaby (1926). The year 1929 witnessed a worldwide economic depression. The prices of the agricultural commodities fell down to a remarkable extent. Unemployment along with other economic crises grew up. The agriculturists could not pay back the loans of the societies. Over dues increased unexpectedly and co-operative societies were ruined. 111

(d) Restructuring stage (1930-1946): Various enquiry committees, viz., Vijayaraghava Charya Committee in Madras, Rehabilitation Enquiry Committees of Travancore and Mysore, Kale Committee in Gwalior, Mehta and Bhansali Committee in Bombay and Wace Committee in Punjab etc. were appointed for examining the possibilities of restructuring the co-operative societies. The Indian Central Banking Enquiry Committee (1931) highlighted the glaring lacunae, particularly with reference to undue delays and inadequacy of credit. Meanwhile the Madras Co-operative Societies Act of 1932 and the Madras Co-operative Land Mortgage Banks Act of 1934 came into force with the former aiming at the growth of cooperative movement, while the latter for developing the long term credit. In 1937 the Congress Ministry came to power in many states and revived interest in organising the cooperative movement. They conducted enquiries about the failure of the cooperative societies and made provisions for payment of overdues. Then came the Second World War. The abnormal conditions created by Second World War led to far-reaching developments in the co-operative movement. Prices of agricultural commodities began to rise. The rural farmer got extra economic gains. Non- credit societies like marketing, production and consumer societies increased rapidly. The working capital of co-operative societies also increased. The cooperative societies gained in strength and vigour. The All India Cooperative Planning Committee in 1945 also gave a Philip to the growth of co-operative movement. India since the country's independence from Britain in 1947 has seen a huge growth in Cooperative societies serving mainly the farming sector. 112

For example, most of the sugar production in India takes place at mills owned by local cooperative societies. The members of the society include all farmers, small and large, supplying sugarcane to the mill. [1] Over the last fifty years, the local sugar mills have played a crucial part in encouraging political participation and as a stepping stone for aspiring politicians. [2] This is particularly true in the state of Maharashtra where a large number of politicians belonging to the Congress party or NCP had ties to sugar cooperatives from their local area. Unfortunately, due to a policy of "profits for the company but losses to be borne by the government", has made a number of these operations inefficient. [3] Cooperatives also play a great part in dairy marketing as well as banking. Cooperative banks in India serve both the rural and urban societies. Just like the Sugar companies, these institutions serve as the power base for local politicians. Verghese Kurien in his book "I too had a dream" details the problems, solutions and experiences he had in setting up and developing the dairy co-operative society now known as Amul. Origin of District Central Cooperative Banks In India: The Cooperative Societies Act was passed in 1904, there was no provision for the formation of central bank. The sponsors of the cooperative movement expected that the rural credit societies would be able to attract substantial deposits from the members and well to do sections of the village community and their savings would be available to meet the needs of the needy in the villages. It was also contemplated that any deficiency in the funds would be made good by loans from the government. But these expectations of the promoters did not materialize. The isolated and poorly managed societies failed, in the first instance, to 113

tap funds from the more affluent, secondly they could not augment their own capital base by encouraging thrift and self help among their members 5. The movement gained popularity, the societies started increasing in number by leaps and bounds. But the financial arrangements envisaged did not yield enough money to meet their growing requirements. The Cooperative Societies Act was, therefore, amended in 1912 with a view to permitting registration of central societies. It may be of interest to note that even before the amendment, some central banks had been established to cater to the financial needs of the primary societies. The first central bank was registered in Uttar Pradesh in 1906 as a primary society. But the first perfect central bank in the modern sense saw the light of the day in the farmer central provinces and Berar. In Rajsthan, the first central cooperative bank was started in 1910 at Ajmer 6. But there was no provision for formation of central cooperative banks prior to 1912. It was in the year 1912 that an Act, relating to cooperative societies provided for the formation of central cooperative banks. The all India Rural Credit Survey Committee endorsed the views expressed by this Reserve Banks standing advisory committee on agricultural credit, that there should be only one central bank for each district, but if, however, other conditions, justified, the formation of a bank for a region smaller than a district, there should be no objection to that. In view of the existence of more than one central bank in a district which did not conform to the standard, the committee strongly recommended that schemes of amalgamation must be introduced in all states almost on a compulsory basis and the minimum standards in regard to owned capital and working capital of the district central banks 114

were also agreed to paid up share capital and reserves about Rs.3 lakhs and working capital of Rs.20 to 25 lakhs 7. The central bank has passed through several phases of expansion, stagnation and revival from their inception to the dawn of the planning era. Their progresses made during the war period central cooperative banks in many parts of the country were weak and needed rationalization. The all India Rural Credit Survey Committee pointed out that, "The central cooperative banks in most states are extremely unsatisfactory institutions. It is therefore, important to draw up for each state plans for the rationalization and strengthening of central cooperative banks in several of their aspects including financial and the administrative in several stages. However, the banks have made rapid progress with active support of the government and the Reserve Bank of India and state cooperative bank. Now, they have banker of central cooperative banks and such acts as lender of last resort 8. History of Cooperative Banking In India: The cooperative history in India may be traced back to year 1904, in which Cooperative Societies Act was passed. There were no provisions for the formation of central bank. The sponsors of the cooperative movement expected that the rural credit societies would be able to attract substantial deposits from the members and well to do section of the village community and their savings would be available to meet the needs of the needy in the village. It was also contemplated that any deficiency in the funds would be made good by loans from the government. But these expectations of the promoters did not materialize. The isolated and poorly managed societies failed, for instance, to tap fund from the more affluent, secondly they could not augment their own capital base by encouraging thrift and self help among their members. 115

As the movement gained in popularity, the societies started increasing in number by leaps and bounds. But the financial arrangements envisaged did not yield enough money to meet their growing requirements. The Cooperative Societies Act was, therefore, amended in 1912 with a view to permitting registration of central societies. It may be of interest to note that even before the amendments, some central banks had been established to cater to the financial needs of the primary societies. First central cooperative bank was started in 1910 at Ajmer. But the revised act stimulated the growth of the central financing agencies and within a few year a large number of such bank were established, the period from 1906 to 1918 may be called the period of origin of the central banks in various parts of the country. The decade from 1919 to 1929, which was roughly to period between the end of the first war and the onset of the world-depression, was marked by the expansion of cooperative banking system. The number of central cooperative banks increased from 1919-20 to 1929-30 while there members and working capital increased. The war period provided a great fillip to cooperative banking in India. There was a substantial increase in the owned funds and working capital of these banks. The position of the central cooperative banks was a general improvement in financial as a result of war 9. Therefore the cooperative credit societies in India are very important because they accepted threetire structure of cooperative credit societies. Sources of Rural Credit In India: There are two sources of rural credit in India 10. 1. Non-Institutional Sources: Before the planning in India, rural people were dependent for their credit needs on non-institutional sources or private agencies. Noninstitutional sources or private sources, include money lenders, 116

commission agents, traders, landlords, relatives. In rural areas, the farmers largely depend upon the moneylenders for their credit requirement. Among all the sources of rural credit, moneylender is the most important and dominants source in the rural areas. According to the all India Rural Credit Survey Committee 1954, the percentage of rural credit provided by the moneylenders was 70 among all the sources of rural credit. But there are many serious defects of non-institutional sources of rural credit. 2. Institutional Sources: Institutional sources consist of government, commercial banks, cooperative banks and the regional rural banks. The needs for institutions in rural credit areas are due to inadequacy of private agencies to provide credit to agriculture. Moreover private rural credit is exploitative and expensive. The rural credit co-operative has also played an important role in providing credit to the agricultural sector. Central Co-operative Banking And Banks Union: The original scheme of cooperation provided for organisation of primary agricultural credit societies at the village level with a view to reduce the exploitation of poor peasants by the private money-lenders. It did not contemplate the organisation of federal societies to function as financing agencies for the village primaries, which in most cases could not mobilize adequate financial resources through share capital from members, and thus failed to meet the even increasing demand for agricultural credit by farmers. However, this did not prove to be a healthy and conductive arrangement for primary cooperative societies which did not have any say in the management of such banks except having the relationship of a borrower and lender primaries in surplus 117

areas having excess thrift deposits could not find proper channel for proper utilization of surplus resources to meet the demands of societies in deficit areas. Hence, there was the need for a balancing centre. Having failed to get proper financial support and guidance from appropriate agency, they felt the necessity of having their own arrangements with a right to participate in the shares and the management of their financing agency etc. All problems, facing the primaries the central government passed another cooperative Act of 1912. These act provided for the organisation of higher federal societies. Taking advantage of the new enactment, primary cooperative credit societies in compact areas federated themselves into banking unions and formed central cooperative banks which in view of their financial strength and management competence were expected to mobilize funds from urban areas to village societies most of whom were starting for want of funds. Thus the central cooperative banks as federal institutions formed, composed and governed by primary societies them selves, came to be organised all over the country 11. Central Banks: The district central banks with mixed constitution organised on the lines suggested by the Maclagan committee. These banks consist of societies and individuals both, in which societies are not only assigned certain proportion of the shares but also are given separate representation on the board of directors. The committee further observed that if majority was secured for the societies on the board, the dividends were limited to a reasonable rate and the individuals shareholders were prevented from enjoying an under advantage; that type of banks would be well suited to the then conditions. But sometime, they recommended for making provisions which should enable the banks by degrees to 118

become more co-operative by diminishing the number of it's individual shareholders either by lapse or by redeeming their shares or by confining fresh issues to societies only a great majority of central bank today conform to this pattern. The instance of the committee of direction of the All India Rural Credit Survey the process of gradual elimination of the individual shareholders has been introduced in most of the banks in a bid to make them fully cooperative in character 12. Progress of District Central Cooperative Banks In India: The progress of district central cooperative bank in India has been divided into two period i.e. first period are 1950-51 to 1989-90, before new economic policy and second period after new economic policy i.e. 1990-91 to 2004-05. These periods are discussed below. Progress of district central cooperative banks in India before New Economic Policy (1950-51 to 1989-90): In this period, large changes in India i.e. the advent of planning in 1951 after independence however the situation had changed our national leaders were firmly in favour of a strong cooperative movement as peoples movement to transform the rural economy. Cooperation was not only visualized as a way of life for the people but also a foundation for economic and political democracy. Table No. 3.1 indicates an overall trends of the growth of district central cooperative banks in India. The Table No. 3.1 depicts the following progress of district central cooperative banks in India from 1950-51 to 1989-90. On the eve of the first five year plan 1950-51, there were 505 district central cooperative banks in India, which decreased up to 349 in 1989-90. The number of district central cooperative banks in India was 119

decreased 69.11 times during the period 1950-51 to 1989-90. The number of district central cooperative banks in India has increased in 1984-85. On an average annual increase of district central cooperative bank was 387 in India an average percentage in growth in number of district central cooperative bank shows negative trends (-4.87 percent) during the period from 1950-51 to 1989-90. The share capital of district central cooperative banks in India was Rs.04 crores in first five-year plan. It was increased up to Rs.903 crores in 1989-90. The share capital of district central cooperative banks, in India shows the continuous increasing trends during the period from 1950-51 to 1989-90. With an average annual increase in Share capital was Rs.249.63 crores and annual average growth rate in share capital of these banks was 17.31 percent during the period from 1950-51 to 1989-90. The reserves of district central cooperative banks in India were Rs.04 crores in the starting of first five-year plan, which increased up to Rs.830 lakhs in the 1989-90. The reserves of these banks were continuously raising during the period from 1950-51 to 1989-90. On an annual average in reserve of district central cooperative bank was Rs.209.38 crores with an average increasing percentage of growth in reserve was 120.57 during the period before new economic policy. The owned funds of district central cooperative banks in India were Rs.08 crores in 1950-51, which increased up to Rs.1734 crores in 1989-90. On an annual average in owned funds of these banks was Rs.461.25 crores. With an annual average growth rate in owned funds was 122.09 percent during the period from 1950-51 to 1989-90. The owned funds of these banks has continuously raising trends during the period. 120

The deposits of district central cooperative banks in India were Rs.38 crores in 1950-51, which increased up to Rs.9338 in 1989-90. The deposits of these banks were continuously raising positive trends during the period 1950-51 to 1989-90. On an average annual increasing in deposits was Rs.2061.25 crores with an average growth in deposits of district central cooperative banks in India was 124.27 percent during the period 1950-51 to 1989-90. It means, district central cooperative banks have created the faith of public in cooperative banking business. The working capital of district central cooperative banks in India was Rs.55crores in 1950-51, which was increased up to Rs.16542 crores in 1989-90, with an average, annual growth in working capital was 136.25, percent during the study period. The growth in working capital of these banks was continuous and positive raising during the period 1950-51 to 1989-90. The maximum growth was 159.35 percent in 1973-74 and minimum was 69.9 percent in 1955-56 during the period from 1950-51 to 1989-90. The borrowings of district central cooperative banks in India were Rs.10 crores in 1950-51, which increased up to Rs.5470 crores in 1989-90. The borrowings of these banks were increased with an average growth rate of 172.90 percent during this period. The growth in borrowing was shown continuous and positive on an average borrowing of this bank was Rs.1182.38 crores during the period from 1950-51 to 1989-90. The loans and advances of these banks were Rs.34 crores in 1950-51, which increased to Rs.10673 crores in 1989-90 on an average growth in loans and advances was 134.75 percent during the study period. The growth in loans and advances outstanding was continuously 121

increased during this period. The highest growth was 165.53 percent and lowest was 70.59 percent during the period from 1950-51 to 1989-90. The overdues of district central cooperative bank in India were Rs.3 crores in 1950-51, which increased to Rs.3528 crores in 1989-90. On an average overdues of these bank was Rs.790.88 crores. The overdues of these banks were increased with an average growth rate of 185.29 percent. On an average percentage of overdues to outstanding loans of these banks was only 0.94 percent, which, is good sign of efficient management of district central cooperative banks. The district central cooperative banks in India was found that a positive growth in all parameters of their growth during 1950-51 to 1989-90. During the period, the share capital, reserve, borrowing, loans & advances, deposits, owned funds and working capital has been shown continuous positive trends during the study period from 1950-51 to 1989-90 and the recovery of district central cooperative banks in India was found satisfactory during the period from 1950-51 to 1989-90. Growth of District Central Cooperative Banks In India After New Economic Policy (1990-91 to 2004-05): In this period large changes in India took place. India has accepted new economic policy in 1991 and the agreement established the World Trade Organization (WTO) came into force on January o1.1995, In many ways, the WTO is different from its predecessors, the general agreement on trade and Tariff (GATT). WTO members have to accept all obligations of GATT and other relevant agreements. In this period an attempt is made here to study the trends in growth of district central cooperative banks by taking quantitative and qualitative 122

indicators from 1990-91 to 2004-05. Table No.3.2 reveals the trends in growth of district central cooperative banks in India from 1990-91 to 2004-05. 1. Number of Banks: The number of banks has shown quantitative growth, can be measured in number of district central cooperative banks in India from the period of 1990-91 to 2004-05. The overall trends in number of banks were increased during the study period except in 1991-92 and 2002-03. In this year growth in number of banks shows negative trends. The number of district central cooperative banks in India was 353 in 1990-91, which increased, up to 368 in 2004-05. On an average increase was 0.30 percent per annum during the study period. The maximum numbers of district central cooperative banks in India was 1.99 percent in 1993-94 and remaining whole period numbers of district central cooperative banks was found below 1.00 percent with an average 364 district central cooperative banks in India were working during the period. 2. Share Capital: The paid up share capital of district central cooperative banks in India was Rs.985 crores in 1990-91, which increased to Rs.4115 crores in 2004-05. The increase in share capital was 4.18 times in 15 years. On an average growth was 10.82 percent and growth in shares capital showed continuously positive during the period from 1990-91 to 2004-05. The increase in share capital was due to increase in membership of district central cooperative banks throughout the period. The maximum increase in growth of this bank was 17.40 percent in 1988-99 and minimum was 5.50 percent in 1993-94 during the study period. 123

3. Reserve: In 1990-91, the reserves were Rs.1096 crores, which increased to Rs.12673 crores in 2004-05. On an average annual growth rate of reserve was 23.55 percent. The increase in reserve of this bank was 11.56 times during the study period. The reserve showed continuous rising trend during the study period except 1993-94 and 1997-98. The maximum growth in reserve was (163.97 percent) due to the increase in profit and minimum was (-18.47 percent) due to increase in loss during the study period. 4. Owned Funds: The owned funds of district central cooperative banks in India were Rs.2081 crores in 1990-91, which increased to Rs.16788 crores in 2004-05. The increase in owned funds of this bank was 8.07 times during the study period. On an average annual growth in owned funds was 17.80 percent. The owned funds of these banks showed continuous positive trend during study period except 1993-94 and 1997-98. The maximum growth in owned funds of these banks was 95.13 percent in 1996-97 due to increase reserve and minimum was (-9.63 percent) due to decrease reserves during the study period. 5. Deposits: In 1990-91, the deposits of these banks were Rs.10357 crores, which increased to Rs.80476 crores in 2004-05. The increase in deposits was 7.77 times during the study period, with an annual average growth rate in deposits was 16.00 percent. The increase in deposits showed continuously positive trend during the study period due to faith of public on working of district central cooperative banks in India. The maximum 124

growth rate in deposits of these banks was 31.98 percent in 1996-97 and minimum was 4.79 percent in 2004-05 during the study period. 6. Working capital: The working capital of district central cooperative banks in India was Rs.17986 crores in 1990-91, which increased to Rs.122633 crores in 2004-05. The working capital of these banks was increased 6.82 times during the study period. With an average annual growth in working capital was 15.12 percent on an average working capital was Rs.63927 crores. The working capital of these banks shows continuous rising trend during the study period. The substantial increase in working capital is an indication of growth in volume of business of district central cooperative banks due to increase in membership, owned funds and deposits during the study period. 7. Borrowings: In 1990-91, borrowings of district central cooperative banks were Rs.5548 crores which increased to Rs.21557 crores in 2004-05. The borrowing of these banks show continuous rising trend during the study period. On an average growth in borrowing was 10.34 percent during the study period. The highest growth in borrowings of these banks was Rs.24.61 percent in 1994-95 and lowest was Rs.0.48 percent in 1993-94. The percentage of borrowing to working capital of district central cooperative banks in India was 20.11 percent. It means these banks are low dependent upon external source of funds. 8. Loans and Advances: India The loans and advances of district central cooperative banks in 125

were Rs.12070 crores in 1990-91, which increased to Rs.72090 crores in 2004-05. The loans and advances of these banks were increased 5.97 times during the study period. On an average annual growth in borrowing was 10.34 percent during the study period. The loans and advances of these banks were found continuously rising trends during the study period. With an average loans and advances of this banks was 13.78 percent during the study period. The percentage of overdues to loans and advances was 25.99 percent during the study period. It means the district central cooperative banks in India could not recover the loans and advance during the study period. 9. Overdues: In end of the years 1990-91, the overdues of district central cooperative banks in India were Rs.3155 crores, which raised to Rs.18025 crores in 2004-05. The amount of overdues increased by 5.71 times. On an average annual growth in overdues of these banks was 13.66 percent during the study period. The growth in overdues shows continuously rising trends except 1998-99 and 2004-05. The percentage of overdues to loans and advances was found more. It was not healthy sign progress of district central cooperative banks in India during the study period from 1990-91 to 2004-05. 126

Table No:-3.1 Growth of DCCB`s in India Year No of DCCBs No of offices Total Membership 2001-02 371 13068 1837433 2002-03 366 (-1.35) 12956(0.86) 2183731 (18.85) 2003-04 368 (-0.81) 12933 (-1.03) 2149071 (16.96) 2004-05 368 (-0.81) 12858 (-1.61) 2145876(16.78) 2005-06 370 (-0.27) 12991 (-0.59) 2267850 (23.42) 2006-07 371 (0.00) 12928 (-1.07) 3264849 (77.68) 2007-08 372 (0.27) 13151 (0.63) 3396881 (84.87) 2008-09 373 (0.54) 13233 (1.26) 3528802 (92.05) 2009-10 372 (0.27) 13181 (0.86) 3975660 (116.37) 2010-11 371 (0.00) 13327 (1.98) 3146070 (71.22) Mean 370..2 13062.6 1837433 S.D 2.20 154.22 748736.78 CV 0.59 1.18 26.84 Source; NAFSCOB Reports, Base Year; 2011-12 The above table reveals that, the growth of DCCBs in terms of number of banks, Offices and Membership. In terms of number of banks they have negative growth from 2002 to 06 and there is a fluctuating from 2007 to 2011. Similarly number of offices also have decreased growthup to 2006-07, from 2008-09 there is a positive fluctuating growth. In case of membership in DCCBs have been increased to 116.37% with the membership of 3146070 (thousands) in 2009-10 when compare to 2001-02 with the membership of 1837433 (thousands). There is a decrease in membership in 2010-11 with 3146070 (thousands) with a percentage of 71.22. 127

Table No:- 3.2 Trends of Capital, Reserves and Borrowings of DCCB`s in India (RS. IN LAKHS) Year Capital Reserves Borrowings Amount Trend Amount Trend Amount Trend 2001-02 338800 100 792982 100 1827605 100 2002-03 357680 105.57 967591 122.02 1923847 105.27 2003-04 381003 112.46 1120824 141.34 2112810 115.6 2004-05 411547 121.47 1267286 159.81 2155710 117.95 2005-06 451147 133.16 1408294 177.59 2320213 128.36 2006-07 509813 150.47 1550512 195.52 2794060 152.88 2007-08 582923 172.05 1643573 207.26 3053334 167.07 2008-09 607141 179.2 1780801 224.57 2847764 155.82 2009-10 777653 229.53 2013296 253.88 3035483 166.09 2010-11 725768 214.22 2069202 260.94 3910116 213.95 Mean 514347.5 151.81 1461436.1 184.293 2598094.2 142.29 S.D 154584.3 45.63 430023.24 54.23 647849.13 35.38 CV 30.05 30.05 29.42 29.42 24.95 24.95 Source; NAFSCOB Reports, Base Year; 2011-12 128

Table No:-3.3 Deposit, Credit and CD ratio of DCCB`s in India (RS.IN LAKHS) Year Deposits Loans outstanding CD Ratio 2001-02 6679721 5050214 75.6 2002-03 7239443 (1.08) 5282006 (1.04) 72.96 2003-04 7688452 (1.15) 5485187 (1.08) 71.34 2004-05 8049350 (1.20) 6155483 (1.22) 76.47 2005-06 8665222(1.30) 6548656(1.30) 75.57 2006-07 9218136(1.38) 8545975 (1.69) 92.71 2007-08 10599372 (1.59) 9597423 (1.90) 90.55 2008-09 12372182 (1.85) 9720682 (1.92) 78.67 2009-10 14630314 (2.19) 10499715(2.08) 71.76 2010-11 16130882 (2.41) 12279548 (2.43) 76.12 Mean 10127307.4 7916488.9 78.17 S.D 3249582.96 2543523.72 7.46 C.V 32.08 32.13 9.54 Source; NAFSCOB Reports 129

Chart No:-3.1 Deposit and Loans outstanding Position in DCCB`s The above table has been depicted that during the 2001-02 the Deposits are registered Rs. 6679721 Lakhs it has been increased to Rs.16130882 Lakhs in 2010-11. The mobilization of deposits have been increased gradually during the study period, and the average deposits mobilized by bank is 10127307.4. Whereas credit deployment of DCCBs in India is just Rs. 5050214 Lakhs in 2001-02, it has been increased to 2.43 times with an amount of 12279548 Lakhs in the year 2010-11. The average credit issued by the banks is Rs. 7916488.9 lakhs. These banks are Service oriented institutions which supply Credits to industry, trade and commerce, agriculture in the form of loans and advances for their smooth functioning. While, the proportion of the Credit deployed to the deposit mobilized, popularly known as C/D Ration, is one of the Parameter to assess the performance of a bank. The 130

C/D Ratio of a bank in general, indicates the extent to which the depositor s money is invested in credit. The Credit Deposit Ratio of DCCBs from 2002 to 2011 is shown a fluctuating trend. The highest C/D Ratio of the banks estimated with 92.71% in 2006-07 and the lowest C/D Ratio 71.76% is recorded in the year 2009-10. The average C/D ratio during the study period 78.17%. with a variance of 9.54%. The S.D is 7.46 which is very less it indicates high degree of uniformity of observations as well as homogeneity of the series. Table No:-3.4 Cost of Management Per Employee and Percentage of Cost of Management to working (RS. IN LAKHS) Cost of Mol To Working Cost of No. of.cost of Mg & orkmo Capital Mat employees per Employee Capital 10202039 2.89834 113088 156 184 10909239 323702 110078 194 196 11890531 334579 110058 3M 181 12263289 368012 109124 137 3 13124185 301304 105885 184 129 14608363 377984 91768 412 159 16813752 374876 90035 4.16 123 18403787 422724 89259 4.74 2.3 20691844 443737 87554 5.07 114 23543070 530745 87922 6.04 125 15245009.9 376749.7 99477.7 188 154 4475134.98 73208.75 10915.07 114 0.34 2935 19.43 10.97 29.32 1121 Source; NAFSCOB Reports Cost of Management of District Central Co-operative Banks includes salaries and other operating expenses. It is a parameter of the 131

bank to measure the efficiency, the cost of management per employee decreases it is good sign, the bank is utilizing its resources effectively. If it is increases we can say that the bank is not properly utilizing its resources and the performance that bank not good. The Cost of management of DCCBs is shown in above table it revealed that the cost management per employee has been increasing constantly year by year from Rs.2.56 lakhs (2001-02) to 6.04 lakhs (2010-11). The average cost of management is Rs.376749.7 lakhs and the S.D is 73208.75 with a variance of 19.43%. The low degree of variance is recorded due to decrease in employees in the DCCBs in India. With regards to the percentage of cost management to working capital, it has been fluctuating from 2.14% to 3% during the study period. The lowest percentage was recorded in the year 2009-10 with 2.14% and the highest percentage was recorded in the year 2004-05 with 3%. 132

Table No:- 3.5 Growth of Investment By India DCCB`s (RS.IN LAKHS) Year Investment % of Growth 2001-02 2831959 100.00 2002-03 3113877 109.95 2003-04 3567729 125.98 2004-05 3478322 122.82 2005-06 3712739 131.10 2006-07 4 079112 144.04 2007-08 4 824662 170.36 2008-09 6104 124 215.54 2009-10 75624 46 267.03 2010-11 75624 46 267.03 Mean 4683741.6 165.38 S.D 1779879.52 62.85 C.V 38.00 38.00 Source; NAFSCOB Reports 133

Chart No:-3.2 Growth of Investment By DCCB`s The District Central Co-operative Banks have been investing it s funds in different investment avenues. The details of investment by DCCBs are investment in Govt. Securities, Other trustee securities, purchasing the Debentures of Land Development Banks, fixed deposits and other investments. The table- 5 depicted growth pattern of investment by DCCBs, the investment in 2001-02 is Rs.2831959 lakhs and it has been increased gradually year by year and recorded Rs.7562446 lakhs in the year 2010-11with a growth rate 167.035 (267.03-100.00). The average investment of the bank is 4683741.6 lakhs during the study period. The Standard Deviation is 1779879.52lakhs and the C.V is 38.0 which is higher it indicates low degree of homogeneity as well as heterogeneity of the series. 134

Place of Maharashtra District Central Cooperative Banks on Indian Scene: Place of Maharashtra district central cooperative banks on India scenario is shown in table 3.3. The Maharashtra state ranks first in India in terms of almost all performance parameters such as number of branches, number of members, sources of funds i.e. share capital, reserves owned funds, deposits, working capital and uses of funds i.e. cash and banks balance, borrowings and loans and advances. 1. Number of Branches: The total number of branches of district central cooperative banks in India was 12,858 of these 3748 branches are in Maharashtra. It compares favorably with National average of 643 the number of branches in Maharashtra was 29.15 percent, 10.28 percent in Uttar Pradesh, and 7.97 percent in Gujarat of total branches, these three states have formed near about 50 percent branches. It means Maharashtra state this regard ranks first, Uttar Pradesh is second and Gujarat was third in the formed of number of branches in India. 2. Membership: The membership of district central cooperative banks in Maharashtra was 114612 in 2005, in absolute terms contributing 5.34 percent of the total membership of all district central cooperative banks in India. The national average of membership was 107294 and Maharashtra had 0.94 times more membership than the National average Maharashtra has sixth rank in membership of district central cooperative banks in India, Andhra Pradesh has first ranks Madhya Pradesh has 135

second rank, Jammu and Kashmir has third rank, Bihar has fourth ranks and Punjab has fifth rank respectively. 3. Share capital: Maharashtra ranks first with share capital of Rs.99330 lakhs in absolute terms and contributes towards 24.14 percent of total share capital against national average of Rs.20577 lakhs. Further, Andhra Pradesh ranks second with Rs.61290 lakhs (14.89 percent) and Tamil Nadu ranks third with Rs.43959 lakhs (10.68 percent) of paid up share capital Maharashtra, Andhra Pradesh and Tamil Nadu had near about 50 percent paid up share capital of district central cooperative banks in different states of India. 4. Reserves: The reserves of district central cooperative banks in Maharashtra were Rs.413201 lakhs in 2005, in absolute terms contributing 32.61 percent of total reserves of all district central cooperative banks in India. The national average of reserves was Rs.63364 lakhs and Maharashtra had 0.15 times more reserves than national average of reserves in 2005. Maharashtra ranks first with Rs.413201 lakhs (32.61 percent), Tamil Nadu ranks second with Rs.139090 lakhs (10.98 percent) Gujarat ranks third with Rs.115445 lakhs (9.11 percent) and Madhya Pradesh ranks fourth with RS.92207 lakhs (7.28 percent) of reserves. These four states had 59.98 percent reserves due to regional imbalanced growth of district central cooperative banks in India. 5. Owned capital: The total owned capital of district central cooperative banks in Maharashtra was Rs.512531 lakhs in 2005 and sharing 30.53 percent of 136