CHAPTER 1 INTRODUCTION

INDIAN BANKING SECTOR

Banking in India has its origin as early as the Vedic period. It is believed that the transaction from

money lending to money banking must have occurred even before Manu, the great Hindu Jurist, who

has devoted a section of his work to deposits and advances and laid down the rules relating to rate of

interest. During Mogul Period, the indigenous bankers played a very important role in lending

money and finance foreign trade and commerce. During the days of the East- India Company, it was

the turn of the agency house to carry on the banking business the General Bank of India was the first

joint stock bank to be established in the year 1786. The others that followed were the Bank of

Hindustan and the Bengal Bank. The Bank of Hindustan is reported to have continued till 1906

while the other two failed in the meantime. In the first half of the 19th century the East-India

company established three banks, Bank of Bengal in 1809, Bank of Bombay in 1840 and Bank of

Madras in 1843.

These three banks are also known as the Presidency Banks they were amalgamated in 1920 and a

new Bank ± Imperial Bank of India was established on 27th January 1921. With passing of the State

Bank Act 1955 the under taking of the Imperial Bank of India was taken over by the newly

constituted State Bank of India.

 HAT IS BANKING?

The term bank is derived from that Italian word ³Banka´ and banking refers to the companies that

provide banking products and services such as savings, deposits, loans, leases, mortgages, credit

cards ATM network, securities, brokerage, investment banking, insurance, mutual funds and pension

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plans. Banking means accepting for the purpose of lending or investment of deposits of money from

the public repayable on demand or otherwise withdrawal by cheque, draft or otherwise. Banks in

India were started on the British pattern in the beginning of the 19th century. At the time of Second

World War about 1500 joint- stock banks were operating in undivided India, out of which over 1400

were non- scheduled banks. These banks were managed by bad and dishonest management and

naturally there were number of bank failures. Hence the government had to step in and the banking

companies¶ act 1949 was enacted which led to gradual elimination of weak banks that were not in

position to fulfill the various requirements of the Act. In order to strengthen the weak banks and

receive public confidence in banking system, a new section 45 was inserted in the Banking

Regulation Act in September 1960, empowering the Government of India to compulsorily

amalgamate weak unit with stronger ones on the recommendations of RBI,

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 CLASSIFICATION OF INDIAN BANKING SYSTEM

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Figure: Classification of Banking System

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Financial institution of India consists of organized sector and un-organized sector.

ORGANISED SECTOR: It is the sector whose parts and activities are systematically coordinated

by the monetary authority. It includes the RBI. COMMERCIAL BANKS, P.O. SAVING, NON-

BANKING COMPANIES, AND COOPERATIVE BANKS. It is an apex of the Indian money

market.

R.B.I: Reserve Bank of India, being the central Bank of the country though the R.B.I. does not enter

into direct transaction in the money market, but it guides and controls the money market through the

bank rate.

COMMERCIAL BANKS: These are the most important segment of our money market. These

commercial banks play a very important role in mobilizing the money (savings) from various sectors

of the economy.

SCHEDULED COMMERCIAL BANKS: SCBs include SBI and its 8 associates, 19

nationalized commercial banks and other scheduled banks, foreign banks & regional banks. Today

we have 64,918 branches of scheduled banks these are those banks which are included in the second

schedule to the Reserve Bank of India Act 1934. In term of Sec 42/5 of RBI Act a commercial bank

should fulfill the following conditions:

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 ac Bank must have a paid up capital and reserve of an aggregate value of not less than Rs. 5

lacs.

ac It must satisfy RBI that all of its affairs are not conducted in a manner detrimental to the

depositor.

ac The scheduled banks enjoy certain privilege like approaching RBI for financial assistance,

re-finance and correspondingly, they have certain obligations alike maintaining certain cash

reserves as prescribed by the RBI, submission of returns etc.

NON SCHEDULED BANKS: These are those banks which are not included in the second

schedule of the RBI Act on the account of failure of the bank with the minimum requirements for

being scheduled.

P.O. SAVING BANKS: This is the oldest in the official small saving schemes in India. Though

P.O. saving scheme has received a lot of attention from the attraction of savings, but these are not as

much popular as the saving deposit accounts with the commercial banks.

REGIONAL RURAL BANK: In 1975 the Regional Banks were established in the supervision

and recommendation by a working group headed by Mr. M Narasima when it was felt that the

commercial and co-operative banks are not able to serve the small, marginal farmers, agricultural

labor and artisans. Thus to serve this segment the Regional banks were established.

NON- BANKING FINANCIAL: IT includes LIC, the GIC and subsidiaries, the UTI.

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CO-OPERATIVE BANKS: The word co-operative stands for willingness to work together in the

production and marketing of goods, it is profitable to both producer and consumer to avoid

middlemen. If, for instance, farmers can set up their own markets instead of sending their produce to

a wholesaler, they can sell at a price that includes only their costs and a fair profit. Additional

wholesale and retail costs are avoided, and prices to the consumer are kept relatively low. In order to

take part in this kind of direct production±marketing enterprise, people have formed co-operatives

these are voluntary associations of either producers or consumers who band together for the group

members' benefits Co-operative organizations formed for financial benefits exist in most countries of

the world. The co-operative way of doing business takes many forms, ranging from local to regional

and federated organizations and from highly specialized to multipurpose societies. The co-operative

banks have a three tier structure. At the top level there are State Co-operative Banks, at the district

level there are Central Co-operative Bank, at local level there are Rural Primary Co-operative banks

and Urban Primary Co-operative Banks. Co-operative banking structure has unique position in the

rural credit delivery system of India.

The cooperative banking sector which is now a century old has a significant role in the field of credit

to the rural through the short-term and long-term structure from many years the co-operative banks

are the prime institutional agencies with a vast network, wide coverage and reach up to the remote

areas. Keeping the view of co-operation the H.P. State Cooperative Bank was established in

Himachal Pradesh in August 1953 under the Co-operative Society Act, 1912. Since its establishment

the bank is developing day by day and satisfying the needs of many people.

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HISTORY

The commercial banks were operating for the years, but it was being felt that these banks were not

paying necessary heed to the credit requirements of common masses. Further the commercial banks,

were mainly concentrating their business in the urban area and the banking facilities to rural people

were not available, consequently, the Co-operative Banks came into picture after 1904. Himachal

Pradesh has the distinction of having first Co-op. Society Registered in India. Co-operative were

primarily visualized as specialized agency for financing the credit requirement of rural people in the

country particularly agriculture. Foundation of the Himachal Pradesh State Co-operative Bank was

laid in 1953 by uniting the Mahasu Central Co-operative Bank ltd. the Mandi central bank and The

Chamba Co-operative Bank. Its registration was done in august 1953 under the co-operative

society¶s act 1912. Later the bank started functioning on 15th March 1954. Bank started functioning

as APEX (at the top) Bank under 2- tier system in 6 ± districts of Himachal. In 1955 two more Banks

namely ³Bank of Sirmour & Joint Stock Bank´ merged into H.P. State Co-operative Bank. On 1st

November 1966 many parts of Punjab (previous districts Kangra, Kullu, Lahaul & Spiti, and some

parts of districts Hoshiarpur, Gurdaspur, Ambala) were merged into Himachal Pradesh. This resulted

in transfer of Co-operative Banking System of these areas into Himachal Pradesh with 2 already

functioning banks ³The Kangra Central Co-operative Bank & the Jogindra Central Co-operative

Bank´. In 1972 when Solan was awarded with the status of separate district two separate branches of

H.P. State Co-operative bank at Solan & Arki were formed while 1 branch of Jogindra Central Co-

operative Bank was working at Totu (Shimla). Till 29th September 1976 the assets and liabilities of

all these 3 Banks were transferred to each other now in Himachal Pradesh, the State Co-operative

Bank ltd. With head office at Shimla functioning as a Central Co-operative Bank in 6 districts

namely Solan, Shimla, Bilaspur, Mandi, Chamba, Sirmour and Kinnaur were having 36 blocks. The

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Kangra Central Co-operative Bank with head office at Dhramshala was functioning as a Central Co-

operative Bank. In Solan district the Jogindra Co-operative Bank with head office at Solan was

functioning as Co-operative Bank catering the need of people of 5 districts beside being a State Co-

operative Bank for the state as whole, the Himachal Pradesh Co-operative Bank is working as the

financing agency for the 6 districts of state and an apex bank for whole of the state. The Himachal

Pradesh Co-operative Bank is serving the people of the State through a network of 190 branches and

Extension Counter of which about 94% is in the rural areas of the State and one branch at New

Subzi Mandi Azadpur New Delhi for the benefit of horticulturists of the State.

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POSITIONAL STATUS

The Himachal Pradesh State Co-operative Bank works at the APEX level in the hierarchy of the co-

operative banking. It acts as the central financing agency to the Kangra Central Co-operative Bank &

Jogindra Central Co-operative Bank the bank has the working capital of Rs. 418334.59 lacs and

deposits are 343375.01 lacs.

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Mission & Vision

Mission Target of the bank is to help the self helped groups by providing those loans at low rate

providing the education to the workers/employees of the co-operative societies while managing the

financial status of the co-operative societies.

1.c Connecting all the branches with the core banking system (C.B.S.) to provide the online

banking facility till the end of 2010.

2.c Installing the A.T.M machines in all the branches.

3.c Achieving the schedule status for the bank.

4.c Providing the retail banking to the customers with the help of Information Kiosk.

Vision

1.c Starting the new schemes for the co-operative societies to recover the N.P.A. (non

performing assets)

2.c Opening the education center for co-operative societies to improve/increase the business

through giving them proper training & suggestions.

3.c Providing the loans for new schemes time to time.

4.c Repairing the plans for encouraging & awarding the employees of the Bank.

Alliance & Joint Ventures

The bank has alliances with the UTI bank and has RIMITANCES ALLIANCE with all the banks to

cash the drafts and deposit the money in the account of customers in any branch of any banks in

India

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Research and Development:

The Business Development Department (BDD) of the H.P. State Co-operative Bank Shimla deals

with the research and development of the organization. The main focus of the department is to find

out the possibilities of the bank for serving more people in the rural and urban areas and to provide a

frame work for the future expectation of the bank other functions are providing the better facilities

for the consumers like installing the ATMs, developing the blue print for online banking , internet

banking, determining the market strategies for future, determining the interest rate on various

schemes to earn reasonable profit for the bank.

PRODUCT LINE:

H.P. State Co-operative Bank has various products for the customers like Deposits, Loans, etc.

When we say about the deposits the HP State Co-operative Bank has the following accounts Current

Account, Saving Bank Account, Term Deposits, R.D., in Term Deposit bank further have the

following schemes like Fixed Deposits, Sarvapriya deposits, and Mahalakshmi deposits. Himpuran

Nivesh Loans includes different types of loan schemes. Currently the H.P. State Co-operative Bank

has 40 loans schemes. Like Personal Loans, Home Loans, Vehicles Loans, Education loans, Non

agriculture loan, Minor irrigation, Self Helped Group Scheme, Self Employed Group Scheme etc. It

also includes the locker facilities, drafts, electronic funds transfers etc.

Present Status of Bank

In term of market share the market share of the bank in the Himachal Pradesh is about 55% of the

total shares of the banks in Himachal Pradesh. When we talk about the size of the bank it has 175

branches all over the Himachal Pradesh. The major competitors of the Himachal Pradesh State Co-

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operative Bank and its alliance are S.B.I, I.C.I.C.I., Punjab National Bank, U.C.O. Bank, and other

banks. In case if the bank has shortage of money and bank needs the money for its various purposes

then the main supplier/ lender of the money is the shareholders or the RBI. When we say bank needs

money then the question arises why the bank needs the money it may be for lending the money to

the needy persons, or to provide the money to the depositors in case when the depositors take the

money back or persons who take the loan are known as the customers of the Bank.

Awards and other recognitions

The H.P. State Co-operative Bank Ltd. has been granted the national award for achieving overall

excellence in banking operations.

The H.P. State Co-operative Bank Ltd was ³the first co-operative bank to implement co-operative

banking computer solution (the facilitator of internet banking) where as only few of nationalized

banks are providing this system.´

The H.P. State Co-operative Bank Ltd. is one of the few organizations which are in true profit and

are paying the dividend continuously.

The H.P. State Co-operative Bank Ltd. has doubled the agricultural advancement in about 2 years

against the planned period of Govt. of India of 3 years.

The H.P. State Cooperative Bank Ltd is the winner of the ³Best Outreach Award´ for SHGs. Bank

has implemented the various loan schemes for the all sectors of society to suit them, the main focus

of bankµs service is to develop the rural masses.

Bank is also involved in implementing the programs related to eradication of poverty run by the

Govt. like SGSY/SJSRY, Rural Housing etc.

The credit needs of farmers are also fulfilled by the bank at low rate of 7%.

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CHAPTER 2 ORGANISATIONALSTRUCTURE

ORGANISATIONAL STRUCTURE

The organizational structure of the H.P State Co-operative Bank Ltd. is as shown below:

MANAGEMENT STRUCTURE

As per Bye-Law No. 36 of the Bank¶s Bye ±laws, the management of the affair of the Bank invests

in General Body, Board of Directors, President and the Managing Director. The President is elected

among the members of Board of Directors on its constitution and the appointment of Managing

Director is done by the State Govt. under the provision of section 35-B of the H.P. Co-operative

Societies Act, 1968. The B.O.D. is elected after every 4 -5 years as under:

1.c Six Directors are elected from six districts duly elected by the members of Co-operative

societies. There is one director each from Kinnaur, Bilaspur, Chamba, Shimla, Mandi and

Sirmour Districts. Out of these 6 Directors one Director must be from MF/SF/SC/ST.

2.c Both Kangra Central Co-operative Bank and Jogindra Central Co-operative Bank from their

members of board nominate 1 Director each.

3.c H.P State Co-operative M&C Federation also nominates 1 director.

4.c H.P State Co-operative Agriculture & Rural Development Bank also nominates 1 director.

5.c 1 director who represents the Weaver and Industrial Co-operative Societies is nominated by

H.P. Handloom Weaver Apex Co-operative Society Kullu.

6.c State Govt. (under section 35 of HP Co-op. Societies Act, 1971) nominates 3 directors or 1/3

of total no. of directors (whichever is less).

7.c Registrar Cooperative Societies or its nominee

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 8.c 2 directors (under rule 39 of HP Co-operative Societies rule 1971) are nominated by the

Registrar Co-operative Societies.

9.c Managing director as Ex- officio director.

CHANNEL OF INFORMATION SHARING

In the H.P. State Co-operative Bank the channel of information sharing from top to bottom and from

bottom to top if the management has to pass the information to the other branches then it is passed

through a circular by the bank to the different branches. These informations are sent to the district

office, which circulate the information to the division¶s branches where these informations are then

given to the employees who work according to these information¶s/guidelines.

Any information from the bottom level is passed to the higher level through branch manager to the

division manager to district manager to head office and then the information is presented to the

management.

Information at corporate level and unit level is exchanged by using one of the following channels:

öc On-line / internet: Website of NFL

öc E-mail system

öc Paper reply system

öc Courier system

Information exchanged can be broadly divided into two categories of communication namely verbal

and written communication.

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 This refers to informal type of communication where information is

exchanged verbally for example Telephonic conversation. There is no legal restriction of keeping

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 c

 cIn this type of communication a record of information exchanged is kept

.It is legally bound to keep such records. Maintenance of Master file is an example of this type of

communication.

CHANNEL OF DOCUMENTATION

The channel of documentation is same as that of the channel of information sharing but the

difference is that in the documentation there is generally the flow of different type of written reports

about the branch to the head office. These may include the weekly book, quarterly report, yearly

report, etc

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CHAPTER 3 ANALYSIS OF ANNUAL REPORT

ANALYSIS is the process of evaluating the relationship between components parts of financial

statement to obtain a better understanding of firm¶s position and performance. The purpose of

financial analysis is to diagnose the information contained in it so as to judge the profitability and

financial status of the firm. In the words of Myers, ³Financial statement Analysis is largely a study

of relationship among the various financial factors in a business as disclosed by a single set of

statements, and a study of the trends of these factors as shown in a series of statements´.

METHODS OF FINANCIAL ANALYSIS

There are various methods of annual report analysis the following methods of analysis is generally

used:

1.c Comparative statement

2.c Trend analysis

3.c Common size statement

4.c Funds flow analysis

5.c Ratio analysis

6.c Cost volume profit analysis

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FINANCIAL POSITIONS OF THE BANK IN RECENT YEARS STARTING FROM THE FINANCIAL YEAR

2003-04 TO 2009-10

FINANCIAL YEAR Amount (in lacs) Trend Percentage

2003-2004 74868500.00 100.00
2004-2005 76198200.00 101.78
2005-2006 75773300.00 101.21
2006-2007 79120700.00 105.68
2007-2008 79891100.00 106.71
2008-2009 80174532.00 107.08
2009-2010 81674367.00 109.09

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 2003-2004
Particular 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
(Base Year)

Capital 74868500.00 76198200.00 75773300.00 79120700.00 79891100.00 80563447.86 81667537.76

Reserve Funds
and other 1784044114.67 1782884182.76 2009811367.15 2007214709.15 2561016783.94 2671318943.51 2690653988.45
funds

Fixed deposits 11407803231.99 12720977213.59 14353418535.22 16493064660.34 25618203646.98 26324893787.34 26875384967.68

Saving Bank
4664540265.58 5493584952.32 6090965527.69 6919163118.36 8222530379.22 8398374893.84 8457946839.32
Deposits

Current
406796873.58 341542003.46 709722064.79 664733958.72 416367640.71 561760464.39 567847898.63
Deposits

Borrowings 2305211259.08 2378236712.08 2421882725.08 2464500264.08 1830012333.08 1798347493.08 176637849.08

Overdue
Interest 101545736.66 98039421.09 94356053.29 155452173.39c 161093349.29 107352484.60 118483838.97
Revenue
Interest
22670180.03 22881111.03 25258966.10 32707644.03 26468756.23 26587864.64 27873478.74
Payable
Other
256001472.73 395016879.84 533707421.43 584005199.71 881945510.61 673981233.61 667369487.81
Liabilities

Provision 652890247.45 690232611.72 618778674.76 748274591.29 991253764.74 986346873.73 962834763.47

Profits 316641483.84 605758234.25 858676377.19 1152681197.15 1017820170.86 1034778348.64 1138949483.73

Cash 1032594439.08 660184826.48 63260437.31 1096016735.71 4465424294.39 4487952485.98 4529934818.72

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 Balance with
2289272341.02 4004907803.33 6770074259.74 7872977039.38 11804482166.93 11932683291.74 12728937893.73
other banks

Investments 10819697915.99 10383959790.50 10508778366.67 10277424381.20 11021080106.00 11873830283.64 12738376492.93

Advances 6225131399.29 7704446604.18 7856385765.56 10760522714.66 12476970459.87 12867892947.72 11839289023.45

Interest
669359342.01 531392255.53 441310420.58 457048686.73 721916427.51 632938640.62 707839283.76
Receivable

Branch adj 311957832.24 521386862.06 582498257.91 221475603.13 722184042.33 713947573.73 762991023.76

Premises less
43387933.13 36549909.91 30958606.34 74089921.52 86421979.70 85379483.82 91673496.63
Depreciation
Other assets 542901283.53 710040384.50 923191533.20 498682440.75 712146504.93 812773947.38 789278349.48

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 1.c 2TREND ANALYSIS

The analysis in which the trend of last few years is taken into consideration in this we take

one year as the base year then we see the trend according to that year i.e. what trend is

followed w.r.t. the base year.

I. Capital Built of the Bank

FINANCIAL YEAR Amount (in lacs)

% age
2003-04 10325.94
100.00
2004-05 6601.85
63.93
2005-06 6326.20
61.27
2006-07 10960.17
106.14
2007-08 44654.24
432.45
2008-09 45986.56
445.38
2009-10 46869.55
453.90

INFERENCE: Starting from the financial year 2003-04 the capital build up of the H.P. Sate Co-

operative Bank was Rs.74,868,500.00 which increases by 1.7% of base year in 2004-05. In 2005-06

the capital decreases and remains only about 1.2% of the base year. But in the financial year 2006-07

capital increases by large value and become more than base year by 5.6% and in the financial year

2007-08 the capital still increases than the base year and is more than the base year by 6.7% the

same pattern of growth is seen in the next two years i.e. 2008-09 and 2009-10 also. Thus the capital

is increasing continuously therefore the capital growth is satisfactory. And thus the bank has greater

capacity to bear risk.

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II. Cash flow to bank in different years

INFERENCE: - Starting from the financial year 2003-04 the cash of the H.P. Sate Co-operative

Bank was Rs.10325.94 which decreased by 36.07% of base year in 2004-05. In 2005-06 the cash

further decreases and remains about 38.73 % of the base year. But in the financial year 2006-07 cash

increases by large value and becomes more than base year by 6.14% ,and in the financial year 2007-

08 the cash with bank increase un-expectedly instead of the recession by 32.45% than the base year

and so was the case in the year 2009-10 also.

III. Advances and outstanding loans of the bank from 2003-04 to 2009-10.

Advances & Outstanding Loans

FINANCIAL
YEAR
Amount (in lacs) %age

2003-2004 62251.31 100.00

2004-2005 77044.47 123.76

2005-2006 78563.86 126.20

2006-2007 107605.23 172.86

2007-2008 124769.70 200.43

2008-2009 129876.76 208.63

2009-2010 136587.65 219.41

INFERENCE: - Starting from the financial year 2003-04 the ADVANCES & OUTSTANDING

LOANS of the H.P. Sate Co-operative Bank was Rs. 62,251.31 which increased by 23.76% of base

year in 2004-05. In 2005-06 the ADVANCES & OUTSTANDING LOANS further increases and

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stays about 26.20 % of the base year. In the financial year 2006-07 ADVANCES &

OURTSTANDING LOANS increases by large value and becomes more than base year by 72.86%

,and in the financial year 2007-08 the ADVANCES & OUTSTANDING LOANS Increase to the

double of the base year and stays at 100.43% more than the base year. In 2008-09 increase of

108.63% was seen and the year 2009-10 also showed an increase of 119.41%.

IV. Different types of deposits during 2003-04 to 2009-10.

Fixed Deposits Saving Bank Deposits Current Deposits

FINANCIAL
Amount (in Amount (in Amount (in
YEAR %age %age %age
lacs) lacs) lacs)

2003-2004 114078.03 100.00 46645.40 100.00 4067.97 100

2004-2005 127209.77 111.51 54935.85 117.77 3414.42 83.93

2005-2006 143534.19 125.82 60909.66 130.58 7097.22 174.46

2006-2007 164930.65 144.58 69191.63 148.34 6647.34 163.40

2007-2008 256182.00 224.57 82225.30 176.28 4163.67 102.35

2008-2009 258727.28 226.79 85638.63 183.59 5683.83 139.72

2009-2010 268392.73 235.27 86339.45 185.09 6673.84 164.05

INFERENCE: STARTING FROM THE financial year 2003-04 the H.P. State Co-operative Bank

has the fixed deposits of RS. 114,078.03 lacs, the saving bank deposit was about 4,665.40 lacs and

the current deposits were about 4,067.97 lacs. In the financial year 2004- 05 the FD increase by

11.5%, SBD increase by 17.77% and there is a fall in the current deposits. In next financial year the

FD increased up to 25%, SBD increased up to 30%, CD increased by almost 95% is at 74.46% more
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with respect to the base year. In financial year 2006-07 FD increased slightly more and stays at

44.58% more than base year in case of SBD the increase stands at 48.34% of base year and in case

of CD there is decrease in the deposits from last year but stands more than the base year. This means

that the trust of the people is continuously increasing on the bank.

V. Borrowing and investment of bank during 2003-04 to 2009-10

Borrowings Investments
FINANCIAL
YEAR %age %age
Amount (in lacs) Amount (in lacs)
2003-2004 23052.11 100.00 108196.98 100.00

2004-2005 23782.36 103.17 103839.60 95.97

2005-2006 24218.82 105.06 105087.78 97.13

2006-2007 24645.00 106.91 102774.24 94.99

2007-2008 18310.21 79.43 110210.80 101.86

2008-2009 182678.76 79.24 125654.65 116.13

2009-2010 176698.98 76.65 136585.46 126.23

INFRENCE: In the financial year 2003-04 the borrowings of the bank were about Rs. 23,052.11

investments of the bank were decreased by 4.03%. in the next financial year the borrowings stays at

5.06% more than the base year and the investment stays at 2.87% less than the base %age . In next

year the borrowing increased slightly by 1.85% then last year and the investment further decreased

by 5.01% than the base %age. In the financial year 2007-08 the borrowing decreased positively by

20.57%, the investment increased by 6.87% than previous year which is more than the base year by

1.86%. in the next two years i.e. 2008-09 and 2009-10 investments increased to around 7.3% and

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8.2% respectively. Thus the income of the bank on investment increases and the expenditure on

borrowing decreased effectively.

VI. Other liabilities and other assets of bank during 2003-04 to 2007-08

Other liabilities Other Assets

FINANCIAL
YEAR %age %age
Amount (in lacs) Amount (in lacs)
2003-2004  
 100.00 
 100.00

2004-2005  
  
 
 


2005-2006 
 
 
 


2006-2007 
 
 
 


2007-2008 
 
 
 


2008-2009 
c 
c 
c 
c

2009-2010 
c  
 c 
c 
c

INFERENCE: - In the financial year 2003-04 the other small liabilities of the bank were about

2,560.01 lacs which increased by 54.30% in next financial year. In financial year 5-06 the liabilities

became almost the double of the base year. And in financial year 07-08 the other liabilities of bank

became more than 3 times the base year. In case of the assets there is a continuous increase in the

assets till 2005-06 by 70.05 % and then in 2006-06 there is a huge decrease in the other assets about

80% of last year, but in 2007-08 the other assets stayed at 31.17% more than the base year i.e. there

was a growth in the bank other assets in the next two years as well i.e.2008-09 and 2010 also. It is

clear the other liabilities of the bank increased at the higher rate than the increase in the other assets.

c

c
c
RATIO ANALYSIS
The ratio analysis of the service sector is slightly different from the production sector. In terms of

service sector the ratio analysis depends on certain different aspects. In case of banking sector we

calculate the sum of all liabilities and assets as below (the values are calculated on the bases of

average of every month).

LIABILITIES Amount ( In Lacs) ASSETS Amount ( In Lacs)

Owned Funds 38261 Cash In hand 13176

Deposits 273547 Loans & Adv. 108079

Borrowing 22015 Investments 211072

Other Liabilities 12782 Other assets 14278

Total 346605 Total 346605

Cost of Funds
Amount % of Relative Rate per  eighted
Liability Int. Paid
( In Lacs) Share 100 Cost

11.04
RESERVES 38261
1) ACSF 7906 2.28 201.47 2.55 0.06
2)OTHERS 30355 8.76 0
DEPOSITS 273547 78.92 19006.14 6.95 5.48

c

c
c
 BORRO ING 22015 6.35
I)DCCB 7336 2.12
ii)Apex Bank 14679 4.24 969.76 6.61 0.28
›cc
 
cc 85.27




c

Other Liabilityc 12782c 3.69

TOTAL 346605 100.00 5.82

Then we find the %age of relative share, interest paid, weighted cost by the following formulas for

%of relative share = amount x 100/total, rate per 100 = int. paid / % of relative share x 100, For

weighted cost = rate per 100 x %of relative share/100.

P & L 31.3.2010
Amount
Expenditure Amount Income
( In Lacs)
( In Lacs)
10267.32
Int. on Deposits 19006.14 Interest on loan & adv.
Int. on ACSFCDF 201.47 Interest on investment 20325.45
(SLR and Non SLR)
Int. on borrowing 969.76 Income From Non 1369.30
Banking Assets
Int. on Income Tax
Risk Cost (NPA Provision) 1480.55
Refund

0
Premium amortization 812.54 Premium Amortization
Cost Of Management 4677.64 Excess provision
112.72
written back
Other Provisions 686.48

241.96
Branch Adjustments Branch Adjustments
0

Net Profit 4429.18 Misc. income 430.93

c

c
c
 TOTAL 32505.72 TOTAL 32505.72

After the completion of the P&L account the calculation of the financial margin is done as follows:

CALCULATION OF FINANCIAL MARGIN

 eighted Yield 8.83
 eighted Cost 5.82
Financial Margin 3.00
Misc. expenditure as % to  .C. -
-
Misc. Inc. as % to  .C. 0.16
Other Income as %age to  C - -c
Cost Of Management 1.35
Risk Cost as % to  .C 0.43
NET MARGIN 1.28
NET PROFIT 4429.18 lacs

Financial margin = weighted yield ± weighted cost

After the calculation of this we reduce different misc. expenditure, income, etc as percentage to

weighted cost mainly which are not included in the earlier calculation of weighted cost on the basis

of these calculations the different interpretation are calculated these interpretations are based on the:

1.c Capital adequacy ratio

2.c Net worth to average working funds ratio

3.c Borrowings to average working fund ratio

4.c Borrowing to net worth ratio

5.c Various Composition of capital ratio

6.c Deposit composition ratio

7.c Asset compositions ratio

8.c Asset quality ratio

c

c
c
 9.c Profitability ratio
10.cOther ratios
INTERPRETATION OF RATIOS
SN RATIO
Capital Adequacy
1 Ratio-Capital to total
risk weighted assets
Net worth to Average
2  orking Fund
Borrowing to Average
3  orking Fund
Borrowing to Net
4 worth
5 Composition of Capital
Govt. Share Capital to
A Total Share Capital
c
INTERPRETATION AS ON 31.3.2010
Higher the capital ratio, higher the
capacity of
banks to bear risks
This ratio shows the share of Net
worth to the total working fund. It
12.47
indicates the strength of the
institution. Higher this ratio, better
for the institution.
This ratio indicates the
dependency level of the institution
on outside support for doing its
business. The interpretation of this
ratio depend
4.24
on the sources of borrowings. If
the institution's borrowings are
largely comprised of high cost
borrowings, higher the ratio,
higher will be the cost of funds
This ratio indicates how many
times of its Net Worth the
institution is borrowing. This has
to be seen with restrictions, if any,
imposed by statute/ bye-laws/ 33.97
Board on the borrowing powers of
the institution and commented
upon.
Higher the ratio, higher is the
control of the
Govt. over the institution. But, it 30.11
also indicates the State's
participation and interest evinced
by it in strengthening the
c

c
 institution. This ratio may also be
seen in the light of adoption of
Model Co-operative Societies Act
by the State concerned.

Share Capital of Higher ratio indicates the higher

B Individuals to Total level of participation of 0.10
Share Capital individuals.
Composition of
6 Deposits

The ratio indicates the proportion

of low cost deposits in the total
Current and Savings
deposits. Higher the ratio, better it
A Deposits to Total 29.08
is for the institution. This would
Deposits
help in keeping down the
Financial Cost (FC)
This ratio indicates proportion of
high cost deposits in the total
Term / Fixed Deposit to deposits. Higher ratio indicates
B 70.92
Total deposits higher cost of funds. Institutions
should maintain proper mix of low
and high cost deposits.
Higher ratio indicates the stability
Ratio of Time Deposits of the deposit base of the bank. It
C
to Total Deposits has also a bearing on the cost of
fund mobilized by the bank.
Ratio of Customer
deposits to Total assets
Higher ratio helps in reducing the
D (Customer deposits refer 53.79
liquidity risk substantially.
to deposits of
individuals only)
Ratio of Volatile
Liabilities to Total
Assets (Volatile
Liabilities refer to all
liabilities which are
46.21
E likely to be withdrawn Lower the ratio, better the liquidity
even if slightly higher
rate is paid by other
Market players. Ex:
Institutional deposits,
Govt. deposits etc.)
7 Asset Composition
Non-earning Assets to This ratio indicates proportion of
a 5.78
Total Assets (Nonearning non-earning assets to total assets.
c

c
c
 assets to cash, Higher the ratio, lower will be
current account earning ability of the banks.
balances, interest Normally, banks should attempt to
receivable, other fixed maintain non-earning assets at the
assets etc.) minimum. Lower the ratio, better
it is for the bank.
Cash and current
account balances to This indicates the cash
B
Total Demand management position of the bank
Liabilities (TDL)
Prime Asset Ratio I.e.
Prime assets to Total
assets Prime Assets are
Higher the ratio, better the
C Cash, Inter-Bank
liquidity
Placements (due within
30 days) and liquid
Securities
Higher the ratio, higher is the
tendency of the bank for going for
risk free earning. However, this
Total investments to
D ratio will have to be interpreted
TDL
keeping in view the funds position
of the bank, lending opportunities
etc.
The position is to be examined
with reference to availability of
Non-SLR investments to
E Non-SLR surplus funds and RBI/ 62.87
Total Investment
NABARD guidelines in this
regard.
This ratio has to be interpreted
Investment in share and
keeping in view the instructions
F debentures to Total
issued by RBI /NABRD from time
Investments.
to time.
These ratios indicate what
proportion of loans and advances
are of short-term and long-term in
nature. These ratios have to be
ST loans outstanding to compared with the ratios of ST
G 34.24
Total loans outstanding and LT liabilities to total liabilities
to understand whether there is any
Unduly large asset liability mis-
match which may lead to liquidity
crunch.
L.T. loans outstanding to
H 31.05
total loans outstanding
i High yielding advances The ratio indicates the extent of
c

c
c
 to total advances high value advances in the total
outstanding loan portfolio. Higher the ratio
better will be the earning ability of
the bank. However, while
interpreting this ratio, IO will have
to study the extent of impaired
assets in this category, appraisal
capability of the bank, supervisory
mechanism etc.
Ratio of Net loans to
Primary deposits
primary deposits refer to
67.55
deposits other than
Certificate of Deposits,
Interbank Deposits etc.
8 Asset Quality
Higher the ratio better is the
quality of advances portfolio of
Standard assets to Total
A the bank. Besides more standard 87.99
loan assets
assets means more earning
capacity of the bank
This ratio indicates the extent of
poor quality loans. If it is more
than 5% of the loan, portfolio, the
IO is required to critically examine
Impaired assets to Total
B the 12.01
Loans
Impaired assets and their
composition and suggest measures
for improving the recovery
position.
9 Profitability Ratios
The ratio indicates the proportion
Interest Income to Gross
A of interest income to the gross 94.12
Income
income.
The ratio indicates the proportion
Income from of income from non-fund based
Commission, brokerage business. Higher the ratio, better
B 5.88
and exchange and other the profitability of the bank.
sources to Gross Income Normally, this ratio will be around
10%
This ratio indicates the proportion
Interest paid including
of interest income utilized for
interest due but not paid
meeting the interest cost. It
C on deposits and 65.95
also indicates the spread available
borrowings to interest
to the bank to meet the COM and
income
other cost. Very high ratio
c
 c
c
 would indicate serious problem in
the bank as to asset liability miss-
matches.
The ratio indicates what part of the
Gross Income goes to meet cost of
Cost of Management
D management. This ratio will 14.39
(CoM) to Gross Income
have to be compared with State
average and peer group averages.
The ratio indicates the proportion
of interest cost in the total cost. A
Interest on deposits and
high level of interest cost indicates
E borrowings to Total 71.87
a poor level of internal resources
expenditure
position and heavy dependence on
outside sources.
This ratio indicates the proportion
Staff cost to Total
F of staff cost in the total 16.66
Expenditure
expenditure of the bank
This ratio indicates at what cost
the incremental business of the
bank is built up. What is required
Incremental CoM to to be examined is whether the
G
incremental business bank is incurring higher
incremental expenditure for
generating Rs. 100 of additional
business.
This ratio indicates what portion
of the gross income is available.
Net profit to Gross This will have to be examined in
H 13.63
Income relation to statutory restrictions. If
any and as per NABARD's
guidelines.
This ratio indicates the % of
dividend declared by the bank.
Dividend payout ratio
This will have to be examined in
I Dividend paid to Net
relation to statutory restrictions. If
Profit
any and as per NABARD's
guidelines.
This ratio indicates return on
J Net profit to owned fund 10.25
owned funds
Net profit to average The ratio indicates margin of
K 1.28
working funds profitability available to the bank
Interest Cost (on
deposits and This ratio gives the average cost of
L 5.82
borrowings ) to average funds
Working Funds
M Interest Cost (on loans This ratio gives the average yield 8.83
c
 c
c
 and advances plus on WF
investments ) to average
Working Funds
This ratio indicates the extent of
Total provisions made
provisions made by the bank. The
towards impaired assets
N bank is required to make full
to Total provision
provision as per the prudential
required to be made
norms
This ratio indicates degree of risk
Total provisions of loaning operations in the bank.
required to be made to This ratio should be compared
O
loans and advances with State, district as well as peer
outstanding Groups¶ averages and commented
upon.
This ratio indicates the quality of
Erosion in Assets to assets. A higher ratio reflects the
P
Total Assets poor quality of assets held by the
bank.
10 Other Ratios
Higher the ratio better is the
Net Worth to Total intrinsic strength of the bank. This
I
Outside Liabilities also indicates risk bearing
capability of the bank.
The ratio indicates the level of
staff productivity in the bank. This
ratio will have to be compared
with State, district and peer group
II Business per staff 357.09
level averages. This can also be
compared with per staff break-
even
Level of business.
This ratio indicates the level of
branch productivity. As in the case
of staff productivity,
III Per Branch business 2675.11
this ratio will have to be compared
with that of State, District and peer
groups.
c c

c

c
c
CHAPTER 4 S OT ANALYSIS

The overall evaluation of a business¶s strengths, weaknesses, opportunities, and threats is called

@
c cSWOT analysis consists of an analysis of the external and internal environments.

External Environment Analysis

In general, a business unit has to monitor key 

c  
c 
c (demographic economic,

technological, political-legal, and social-cultural) and 

c  
c  
c (customers,

competitors, distributors, and suppliers) that affect its ability to earn profits Then, for each trend or

development, management needs to identify the associated marketing opportunities and threats. A

marketing opportunity is an area of buyer¶s need in which a company can perform profitably.

Opportunities can be classified according to their 

  c and their  c 
 c The

company¶s success probability depends on whether its business strengths not only match the key

success requirements for operating in the target market, but also exceed those of its competitors.

Mere competence does not constitute a competitive advantage. The best-performing company will

be the one that can generate the greatest customer value and sustain it over time. An environmental

threat is a challenge posed by an unfavorable external trend or development that would lead, in the

absence of defensive marketing action, to deterioration in sales or profit. Threats should be classified

according to 
c and 
c c  

  c Minor threats can be ignored; somewhat

more serious threats must be carefully monitored; and major threats require the development of

contingency plans that spell out changes the company can make if necessary.

c
c
c
Internal Environment Analysis

It is one thing to discern attractive opportunities and another to have the competencies to succeed in

these opportunities. Thus, each business needs to periodically evaluate its internal strengths and

weaknesses in marketing, financial, manufacturing, and organizational competencies. Clearly, the

business does not have to correct all of its weaknesses, nor should it gloat about all of its strengths.

The big question is whether the business should limit itself to those opportunities in which it

possesses the required strengths or consider better opportunities to acquire or develop certain

strengths. Sometimes a business does poorly because its departments do not work together well as a

team. It is therefore critically important to assess interdepartmental working relationships as part of

the internal environmental audit.

STRENGTH

The strengths of the H.P. State Co-operative Bank depending on its external and internal

environment are

1.c The bank is spread into only 6 districts due to its limited area it is easy to monitor minor

requirements of the customers which may else ignored by other banks.

2.c The bank provides the easiest way to open a new account into any of its branch as the

customers has to fill minimum requirements which are asked by other banks.

3.c The bank has the branches in the remote areas where the branches of other banks are not yet

opened which give the bank edge over the other banks.

4.c As the bank is a co-operative bank thus bank gets the advantage of getting priority by the

different co-operative societies for transactions and loans.

5.c Due to the co-operative in nature people have faith in the bank.

c
c
c
 6.c Co-operative staff is the main strength of all the organization as in case of the bank its co-

operative staff is the main strength of the bank.

7.c Adherence to co-op values and principles.

8.c The H.P. State Co-operative Bank has well knit organizational structure.

9.c The H.P. State Co-operative Bank has deep roots in the community.

10.cThe H.P. State Co-operative Bank deals the user as not only the customers but also the

member of the bank.

11.cIt has great amount cooperation with other district cooperative banks (Kangra Central Co-

operative Bank, Jogindra Central Co-operative bank).

12.cThe H.P. State Co-operative Bank focus on the person of limited means & the poorer section

13.cThe main priority of The H.P. State Co-operative Bank is member services rather than profit.

14.cThe H.P. State Co-operative Bank has the capacity to thrive in crisis.

15.cThe main emphasis of The H.P. State Co-operative Bank is on localization

 EAKNESSES

1.c The H.P. State Co-operative Bank has less resources¶ as compared to the other nationalized

and public banks.

2.c The H.P. State Co-operative Bank staff lacs the professionalism.

3.c Political pressures on the employees of the bank as compared to the other banks.

4.c There is some sort of government control over the working of The H.P. State Co-operative

Bank.

5.c In the H.P. State Co-operative Bank dependence syndrome is there. Each person thinks his

work may be done by the other.

c
c
c
 6.c Internet connectivity in remote areas is a problem.

7.c ATM network is not well spread like other nationalized and public banks.

8.c Most of the branches are not online however they are computerized.

9.c Less advertisement is other weakness of The H.P. State Co-operative Bank.

10.c Lack of time management.

11.c Lack of knowledge about the many aspects of banking to the employees.

12.c Due to the restricted area the total capital of The H.P. State Co-operative Bank is limited.

OPPORTUNITIES

1.c Being the co-operative bank it has the opportunity to finance the government projects.

2.c Providing ATM facilities may take bank a long way.

3.c With the growth of axis bank in the term of customers and market share the growth of bank

is also certain.

4.c As it is a state co-operative bank this bank is in demand.

5.c Being co-operative bank this bank gets priority over the other banks for co-operative

societies.

6.c Existence of bank in remote areas.

7.c Bank may take the advantage of being co-operative bank by promoting itself.

THREATS

1.c The main threat to The H.P. State Co-operative Bank is increasing steps/roots of the public

banks.

2.c Easy policies of the public banks.

c
c
c
 3.c Less documentation of the public banks for different types of loans.

4.c Instant /one minute service provided by some banks.

5.c Online banking and mobile banking facilities of other nationalized and public banks

6.c Facilities like ZERO BALANCE ACCOUNT by some of public sector banks.

7.c Increasing market share of the other bank threaten the H.P. State Co-operative Bank to lose

its position in the market.

8.c More significant brand image in public acceptance of product and services of public and

nationalized banks as compared to co-operative banks.

c
c
c
CHAPTER 6 CONCLUSION

The present study on H.P. State Co-operative Bank may be concluded as

1.c Total no. of branches of bank increased up to 180 in 2010.

2.c The total deposits in the bank in 2010 are Rs. 443433 lacs.

3.c The total investment of the bank in 2010 is Rs. 319421 lacs.

4.c The total loans and advances of the bank in 2010 is Rs. 144765 lacs.

5.c The total working capital of the bank for 2010 is Rs. 518300 lacs.

6.c The H.P. State Co-operative Bank is working at the apex level in the state.

7.c The H.P. State Co-operative Bank has alliance with the UTI for clearing and issuing the

bank drafts.

8.c The H.P. State Co-operative Bank is running various loans and deposits schemes for the

customers.

9.c The H.P. State Co-operative Bank has won various awards for its appreciable work done in

rural areas.

10.c The capital of the bank is increasing continually and is about Rs. 798 lacs, thus the bank has

greater chance to bear risk is increasing.

11.c The cash in hand or with other banks of The H.P. State Co-operative Bank is continuously

increasing and is Rs. 64654.26 lacs.

12.c In all the 3 deposits the rate of increasing of fixed deposit is maximum/highest.

13.c The investment of the bank is more than the borrowings of the bank from recent years.

14.c The average total liabilities/assets of the bank for the financial year 2009-10 are Rs. 406605

lacs.

15.c The weighted cost for the liabilities is 5.82; the weighted yield for assets is 8.83.

c
c
c
 16.c Total average expenditure/income for the financial year 2009-10 is Rs.42505.72 lacs.

17.c Ne t profit of the bank for the financial year 2009-10 is Rs. 6429.18 lacs.

18.c The financial margin is 3.00, the net margin is 1.28.

19.c The bank has higher the capital ratio, thus higher the capacity of banks to bear risks.

20.c Net worth to Average Working Fund ratio is 12.47% thus higher the ratio better the

institution.

21.c Borrowing to Average Working Fund ratio is 4.24% thus lower the ratio lower will be the

cost of funds.

22.cBorrowing to Net worth ratio is 33.97 thus the bank is borrowing more than 33 time of its

net worth.

23.cThe Govt. Share Capital to Total Share Capital ratio is 30.11%, which means the

government has higher control over the bank as higher the ratio higher the control of the

govt. over bank.

24.cShare Capital of Individuals to Total Share Capital ratio is 0.10 %which means there is low

level of participations of individuals

25.c Current and Savings Deposits to Total Deposits ratio is29.08% it means the bank is in better

conditions.

26.c Term / Fixed Deposit to total deposits ratio is 70.92% it indicates the higher cost of funds.

27.cRatio of Customer deposits to Total assets (Customer deposits refer to deposits of

individuals only) is 53.79% , indicates that the bank has reduced liquidity risk

28.c Ratio of Volatile Liabilities to Total Assets (Volatile Liabilities refer to all liabilities which

are likely to be withdrawn even if slightly higher rate is paid by other market players. Ex:

c
c
c
 Institutional deposits, govt. deposits etc.) is 46.21% which is on lower side thus the bank

has better liquidity.

29.cNon-earning Assets to Total Assets (Non-earning assets to cash, current account balances,

interest receivable, other fixed asset etc.) is only 5.78% which is defiantly on the lower side

thus the bank has higher ability of earning.

30.cThe average Per Branch business of the bank is 2675.11 lacs

31.c Net profit to Gross Income ratio is 13.63%, Net profit to Owned Fund Ratio is 10.25%, Net

profit to average working funds ratio is 1.28%.

32.c Ratio of Interest Cost (on deposits and borrowings) to average Working Funds is 5.82%,

ratio of Interest Cost (on loans and advances plus investments) to average Working Funds is

8.83%.

33.c The ratio of L.T. loans outstanding to total loans outstanding is 31.05%, ratio of ST loans

outstanding to Total loans outstanding is 34.24%

34.c Standard assets to total assets ratio is 87.99%, means more earning capacity of bank. Ratio

of Impaired assets to Total loans is 12.01%.

35.c Interest Income adds 94.12% to the gross income of the bank, Interest paid including

interest due but not paid on deposits and borrowings contributes 65.95% to the income

through interest.

36.c Interest on deposits and borrowings contributes 71.87% in total expenditure.

37.c Business per staff ratio of the bank is 357.09 and tells about the productivity of bank staff.

c
 c
c
SUGGESTIONS AND RECOMMENDATIONS

To run any organization successfully the management needs to think always for the betterment of

their service and product, every time there is a chance of improvement in the functioning of every

organization specially when we talk about the banking sector in past there is very less or no

competition in the market and the banks has no pressure to provide better facilities to the people but

in recent years the competition is increased due to the entry of the public banks and other money

lending units . Considering this the state cooperative banks need to be more careful and needs to take

such step which favors them to stay ahead in the market. Some of the suggestions and

recommendation are given here which may help the H.P. State Co-operative Bank to stay in the

competitive market if they adopt these.

1.c In order to be competitive in the market, all three ±segments of co-operative banks should

jointly work out a co-ordinated strategy for establishing workable synergy to compliment

and supplement each other.

2.c Co-operative bank has to work out institution specific areas specific strategy keeping in

view market, regulatory framework and cooperative values related factors.

3.c Healthy relationship should be established with the customer.

4.c More mass awareness campaigns should be organized in order to enhance market share of

bank.

5.c Customer¶s satisfaction must be the top priority of the bank

6.c More branches should be open at the remote areas of Himachal Pradesh.

7.c Maximum practical exposure should be provided to the job trainees so that they may handle

the various enquiries of customer effectively.

c
 c
c
 8.c Bank can provide the facility of ZERO BALANCE ACCOUNT to the students or the

employees.

9.c Loaning procedure should be simple; less documentation should be involved in the loan

sanctioning procedure.

10.c Functioning should be fast i.e. the time taken to do any work should be reduced efficiently.

11.c Online banking should be provided to customers for better service.

12.c Customer¶s care center should be established.

13.cHelp line no. should be given to every customer.

14.c A.T.M. machines should be installed at the faster rate so that maximum customers can take

advantage of this facility in wide spread area.

15.cCredit cards should be provided to the customers according to their reliability.

16.cStaff should be more co-operative.

17.c Banking timing should be increased from 8 AM to 8 PM.

18.c Loaning criteria should be revised.

19.c Bank should provide appropriate knowledge about their products.

20.c All branches should be online.

21.c No inter branch charges should be deducted

22.c Commission on bank drafts should be reduced.

23.c Proper use of machinery and the infrastructure, assets should be made.

24.c Usually there is a large time gap between transaction and printing or pass book which need

to be reduced.

25.c Run different schemes for the different types of customers. Like more interest for those who

deposit more than one lac or other.

c

c
c
 26.c Special line of credit may be extended to rural credit cooperative financing rural women

entrepreneurs at interest rate of 4%.

27.c There is a need of upward revision of the interest subvention from the present 3% to at least

4.5% in order to meet the requirement of lending short term credit at 7%.

28.c Banks should switch over to loan system instead of debentures for giving funds to ARDBs.

29.c Today the commercial banks are taking to the correspondent or agency model to increase

their outreach and to meet their financial inclusion goals. They are associating with MFs in a

big way to finance large no. of SHGs. Cooperative bank should be aggressive in this

direction as they are not aggressive in this direction.

30.c Bank should adopt the essential feature of good corporate governance i.e. efficiency,

professionalization, transparency and accountability.

31.c In order to compete at the market place, brand image is of great significance in public

acceptance of product and services.

32.c Roots should be more deepen into the community.

33.c Co-operative bank has fewer resources than required which should be overcome.

34.cProper posting of the staff should be done. It is generally seen the branch has requirement of

5 employees but there are only 3-4 employees working in that branch.

35.cEmployees should be more professional.

36.c Policies should be made for the less chances of the NPA.

37.c Proper channel for the recovery of the loans should be established.

38.cTime to time review of the customers should be done.

39.c Transaction more than a particular amount should be made confirmed by the customer by

telephonic conversation.

c
c
c
 40.c Intimation to the customers about the deposition of cheque into their account should be

given to the customer by any communication medium.

41.c Market status of the bank should be informed to the customers periodically.

42.c Customers should be treated as family members.

43.c Loans must be given at floating rate of interest to the customer.

44.c Door to door campaign should be done.

45.c Seminars on the working of the bank should be held time to time.

46.c Refresher training to the employees should be given time to time.

47.c Staff should be more supportive with the customers.

48.cSupporting environment should be provided to the employees.

49.c Mobile banking should be included in the future plane of the bank.

50.c Bank may strengthen prudential norms and market discipline.

51.cBank should adopt international benchmarks as appropriate to situation.

52.c Management of organizational changes and consolidation within the financial system

should be done.

53.c Website should be updated regularly and the details of the different policies and interest

rates must be posted properly.

54.c More and more information pamphlets should be provided to the customers.

55.c Bank should upgrade the technological infrastructure of the financial system.

56.c HRD department should be strengthened.

57.c Bank may replace the government guarantee with rating as recommended by Vaidyanathan

Task Force.

58.c Bank should extend the credit facilities.

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 59.c Bank may promote marketing facilities to the members to sell their produce at remunerative

prices.

60.c Bank may provide consumer goods, especially essential commodities under P.D.S program

at reasonable prices.

61.c Bank may work on the updating of skill of the artisans, craftsmen and weaker sections of

the society engaged in industrial activities and help them to market their produce.

62.c Bank should work to enable to all persons to come together and gainfully employ

themselves in diverse field such as Horticulture, Floriculture, Fisheries, Housing, Wool,

Poultry, Labor & Construction, Dairy and Tourism etc.

63.c Enrollment subsidy should be provided to newly enrolled member of IRD/Scheduled caste/

Scheduled tribe families, equivalent to value of one share is provided to the beneficiaries to

encourage them for becoming members of the co-operative societies.

64.c Managerial subsidy/Interest Subsidy and working capital subsidy being provided engaged in

consumer/marketing under special central assistance for special component plant/Tribal area

sub-plan.

65.c Bank should encourage the un-employed educated youth, to organize tourism Co-operative.

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PERSONAL LEARNING

Getting a chance to assist in the internal audit of H.P. State Co-operative Bank as a part of summer

training is a highly knowledgeable experience for me as it teaches me various lessons. H.P. State Co-

operative Bank is a co-operative bank which is working at the apex level of all Central Co-operative

Banks in Himachal Pradesh. While auditing this bank I learnt many things which are definitely going

to help me in future for my carrier as well as for my moral. The organization of co-operative bank is

different than the other nationalized banks, and thus helps me in having good knowledge of banking

sector. It is not an easy task to conclude what I learnt from the H.P State Co-operative Bank as what

I learnt there is as much valuable as much the knowledge of books for a person. I learnt their many

valuable facts and some of them are:

1.c What is the bank? Why we need a bank? What is the role of banking in our money market?

2.c Various reasons behind the establishment of banks in India.

3.c Types of banks in India.

4.c Meaning of cooperative bank, need of co-operative bank.

5.c Different levels/types of co-operative banks.

6.c Positional status, mission, vision, etc of H.P. State Co-operative Bank.

7.c How the organization works i.e. organizational structure of H.P. State Co-operative Bank.

8.c Various departments of the bank and how they work.

9.c How the research and development is done in H.P. State Co-operative Bank.

10.c Leave procedure of the bank and how many leaves a person can take in 1 year.

11.c How the recruitment and the transfers of the new/ old employees are done.

12.c How the various orders/instructions/circulars are issued to different branches.

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 13.c How they mention the records of all the documents related to anything like instruction

issued to different branches or transfer orders or recruitment orders.

14.c How the annual reports of the employees are made.

15.c Different types of loans facilities provided by the bank to the customers.

16.c How the interest is calculated on the loans.

17.c Difference between floating rate of interest and fixed rate of interest.

18.c What is the different documentation required for person to apply for different loans like for

personal loan salary statement, for education loans fee structure of the institute, for vehicles

loans the invoice of the dealer, etc...

19.c The criteria set by the bank for a person to avail the loan (i.e. person can take his 35% net

salary after all deduction of all installments.)

20.c Why the bank need a guarantor while sanctioning of loans.

21.c Responsibilities of the guarantor for the person applying for loans.

22.cRestrictions on the branch for sanctioning of loans.

23.cProcedure of repayment of loans i.e. the installments of loan payment.

24.c Procedure of recovery of the loans if not paid at time.

25.c Procedure of clearing the guarantee after the payment of loans.

26.c Mode of payment of the loans to the customers.

27.c How a new account of the person is opened.

28.c Documentation involved in opening of new account.

29.c What are the responsibilities of the cashier?

30.c Different types of accounts in H.P. State Co-operative Bank provided to the customers.

31.cProcedure of deposition and withdrawing from the account.

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 32.cDifference between the transfer, deposit, withdrawing, draft forms.

33.c How a cheque book is entered, enlisted, issued and destroyed by the bank.

34.c Difference between cross cheque and normal cheque.

35.c Necessity of authorization of any transaction.

36.c How the authorization of the transactions is done by the higher authority.

37.c How different types of vouchers are entered into the system.

38.c What is inward clearing, why it is necessary?

39.c What is clearing, procedure of clearing?

40.c Difference between inward and outward clearing.

41.c Procedure of outward clearing.

42.c What is lodging and bouncing of clearing.

43.c How the printing of passbook, drafts, FD is done and how they are authorized after printing.

44.c How the day book is generated and printed and then got verified through vouchers.

45.c How different types of reports like control report, balance report, general common report,

registers, interest related report, clearing related reports, user related reports, parameter

related reports and HO related reports are printed and monitored.

46.c How to differentiate between the false currency and real currency.

47.c Precautions taken by bank not to supply the false currency to the customers.

48.c How the bank analyses its market positions.

49.c All the figures of the bank are on average basis.

50.c Provide Motivation: Job training provides motivation to learn.

51.c It provide feel of actual job.

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 52.c Learnt the rules & regulations: It help to learn the rules, regulation and procedure by

observing their day ±to-day application.

53.c Teaching of knowledge and skill. Job training is the best method for teaching knowledge

and skill which can be acquired through personal observation in a relatively short period.

54.c Economical Method: This method is very economical because no additional space,

equipment, personnel or other facilities are required for training.

55.c Teaching of knowledge and skill in short time period: It is appropriate for teaching

knowledge and skills which can be learnt in short period of time.

56.c Practice makes a Man Perfect .The skills practice on the job training are better learned and

less easily for gotten.

57.c Feedback: On the job training provides information on how much we have learned and how

well we are doing.

58.c Make possible to feel like part of organization: Summer training makes trainees to feel as

the part of organization

59.cTeach how to work in an organization: it gives practical experience of work in an

organization. It teaches how to follow the senior officers and to obey their orders. It helps in

understanding how to build healthy relationships within organization.

60.c It helps in understanding the competitors & their strategies: This training is useful in

knowing the competitors and their different strategies to deal with.

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 BIBLIOGRAPHY

1. www.hpscb.com

2. www.nabard.com

3. www.google.com

4. www.rbi.com

5. www.bankmate.com

6. Documents provided by the bank employees.

7. Various circulations issued by the bank itself, by RBI, by NABARD.

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