An empirical study to measure service quality gaps in

Kerala State Financial Enterprises Ltd.

KSFE

Study report submitted in partial fulfillment of

requirement for the award of degree of

Master of Business Administration of Kerala University

Submitted by

Induchoodan.S.V

Under the guidance of

Dr. J.RAJAN

INSTITUTE OF MANAGEMENT IN KERALA

UNIVERSITY OF KERALA
TRIVANDRUM
 DECLARATION

I declare that the project report entitled ‘An empirical study to measure service quality
gaps in Kerala State Financial Enterprises Ltd.’ submitted by me for the award of the
degree of Master of Business Administration of the University of Kerala is my own work.
The report has not been submitted for the award of any other degree of this University or
any other University.

Place: Thriruvananthapuram Induchoodan.S.V

Date : 10.12.2009 Roll No:

 Date…..

CERTIFICATE

This is to certify that the project report entitled ‘An empirical study to measure

service quality gaps in Kerala State Financial Enterprises Ltd.’, submitted here is an

bonafide record of the work done by Mr. Induchoodan.S.V under my guidance in partial

fulfillment of the requirement for the award of Degree in Master of Business

Administration of the University of Kerala and this work has not been submitted by

him for the award of any other degree, diploma or title of recognition earlier.

Director: Faculty Guide

Certficate of the Organisation
 Acknowledgements

I thank the Almighty for giving me the courage and wisdom to take up this study
and complete it successfully.

I am greatly indebted to Dr .K.S Chandra Sekhar, Director, IMK for providing me

an opportunity to undertake this project. I express my sincere gratitude to Dr.J.Rajan ,co-
ordinator, MBA Evening Program, IMK for his valuable support and guidance.

Words can hardly express my gratitude to Sri.P.Sivanandan- AGM (KSFE

Trivadrum Region), Sri.Abdul Salam (Liaison Officer), Sri.Renjith Kumar–Senior
Manager, KSFE Regional Office, Sri. R.Venugopal – Senior Manager, KSFE Statue
Branch and Sri. K.L.Raj, Assistant Manager, KSFE Regional Office for their valuable
guidance and assistance in completing the work successfully.

Last but not the least, I thank my family and friends for their inspiration, encouragement,
moral support and prayers without which my study would not have been successful.
 CONTENTS

1) Introduction ……………………………………

I. Chapter 1 Introduction

. Statement of the problem

. Review of literature
. Objectives
. Research Design

- Type of research design

- Data collection from secondary sources
- Data collection from primary sources
- Sampling techniques
- Scaling techniques
- Data analysis tools and techniques

. Scope of the Study

. Limitations
. Chapterisation

Chapter 2. Industry Profile

Chapter 3. Company Profile

Chapter 4. Data analysis and interpretation

Chapter 5. Findings, Conclusion and Suggestions.

X Bibliography
XI . Appendix

. Questionnaire and forms

. Statistical Output etc.
List of Tables and Charts
Executive Summary
 Introduction

Need for Study

Organisation definitely is the backbone of the management and without its proper care at
the higher, middle and lower levels of administration, it would be practically impossible
for any management to run the show smoothly. It is a means by which problem of the
enterprise connected with policies, operations and administration can effectively be
solved. Sound organization can contribute greatly to the continuity and success of the
enterprise.

The better the organization, the fuller would be the achievement of the common
objectives. Organisation structure is an indispensable means to the end of business
performance and may even destroy it. This fact makes it appropriate to conduct a
thorough organization study of an industrial unit and bring to the light the flaws lying
discarded by the organization.

Objectives of the study

To study a professional organization in detail

To acquire practical knowledge of the application of management theories.

To understand the new techniques adopted by the organization

To study the functions of the various departments

To acquire knowledge regarding the profile of the organization

Scope and Significance of the study

KSFE is a major chit fund company in Kerala. It is a government owned company.

Studying the various aspects of management of an organization like KSFE will be a great
benefit to management student. It helps to understand the overall functioning of an
organization.

Methodology

Primary data was collected through direct personal interviews with officials

Secondary data was collected from the department manual and reports and various other
documents of the organization.

Limitations of the study

 Time was the major limiting factor. The period allotted for the study was one
month within such a short period it is difficult to study an organization in detail

 Chance of personal prejudice and bias on the part of the interviewee of the
department

 Errors and inexperience of the interviewer.

CHAPTERISATION

Chapter 1 is the introductory part; it deals with objectives of the study, methodology,
scope of the study and limitation of the study.

Chapter 2 gives the brief details about the organization and its position today

Chapter 3 deals with the organization profile and it deals with its history, strategic intent
and its major programmes

Chapter 4 deals with organization structure, detailed structure of departments and their
functions.

Chapter 5 deals with SWOT analysis, ie, the organization’s strength, weakness,
opportunity and threat

Chapter 6 deals with the findings, conclusion and suggestions of the study.
INDUSTRY PROFILE
KSFE is a Miscellaneous Non Banking Financial company. A Non-Banking Financial
Company (NBFC) is a company registered under the Companies Act, 1956 and is
engaged in the business of loans and advances, acquisition of
shares/stocks/bonds/debenture issued by Government or local authority or other securities
of like marketable nature, leasing, hire-purchase, insurance business, chit business but
does not include any institution whose principal business is that of agriculture activity,
industrial activity, sale/purchase/construction of immovable property. A non-banking
institution which is a company and which has its principal business of receiving deposits
under any scheme or arrangement or any other manner, or lending in any manner is also a
non-banking financial company

NBFC are doing functions akin to that of banks; however there are a few differences

• NBFC cannot accept demand deposits. (Demand deposits are funds deposited at a
depository institution that are payable on demand -- immediately or within a very
short period.)
• It is not a part of the payment and settlement system and as such cannot issue
cheques to its customers.
• Deposit insurance facility of DICGC is not available for NBFC depositors unlike
in case of banks
.
Chit companies as defined in clause (b) of Section 2 of the Chit Funds Act, They are
regulated by respective state governments.

While making deposits with a NBFC, the following aspects should be borne in mind:

(I) Public deposits are unsecured.

(II) A proper deposit receipt which should, besides the name of the depositor/s
state the date of deposit, the amount in words and figures, rate of interest
 payable and the date of maturity should be insisted. The receipt shall be duly
signed by an officer authorized by the company in that behalf.
(III) The Reserve Bank of India does not accept any responsibility or guarantee
about the present position as to the financial soundness of the company or for
the correctness of any of the statements or representations made or opinions
expressed by the company and for repayment of deposits/discharge of the
liabilities by the company.

A robust banking and financial sector is critical for activating the economy and
facilitating higher economic growth. Financial intermediaries like NBFCs have a definite
and very important role in the financial sector, particularly in a developing economy like
ours. They are a vital link in the system. After the proliferation phase of 1980s and early
90s, the NBFCs witnessed consolidation and now the number of NBFCs eligible to
accept deposits is around 600, down from 40000 in early 1990s. The number of asset
financing NBFCs would be even lower, around 350, the rest are investment and loan
companies. Almost 90% of the asset financing NBFCs are engaged in financing
transportation equipments and the balance are in financing equipments for infrastructure
projects. The role of non-banking sector in both manufacturing and services sector is
significant and they play the role of an intermediary by facilitating the flow of credit to
end consumers particularly in transportation, SMEs and other unorganized sectors.
NBFCs due to their inherent strengths in the areas of fast and easy access to market
information for credit appraisal, a well-trained collection machinery, close monitoring of
individual borrowers & personalized attention to each client as well as minimum
overhead costs, are in a better position to cater to these segments.

Now, unlike in the past, NBFCs are very well regulated and supervised. Just like banks
they are required to be registered with RBI, follow stringent prudential norms prescribed
by RBI in the matters of capital adequacy, credit/investment norms, asset-liability
management, income recognition, accounting standards, asset classification, provisioning
for NPA and several disclosure requirements. Besides this, RBI also supervises the
functioning of NBFCs by conducting annual on-site audits through its officials. Such a
rigorous regulatory framework ensures that NBFCs function properly and follow all the
guidelines of RBI. Thus in all respect the monitoring of NBFCs is similar to or in some
case more stringent than banks.

The role of NBFCs in creation of productive national assets can hardly be undermined.
This is more than evident from the fact that most of the developed economies in the
world have relied heavily on lease finance route in their developmental process, e.g.,
lease penetration for asset creation in the US is as high as 30% as against 3-4% in India.
A conducive and enabling environment has been created for the NBFC industry globally,
which has helped it grow and become an essential part of the financial sector for
accelerated economic growth of the countries. This is not the case in our country. It is,
therefore, obvious that the development process of the Indian economy shall have to
include NBFCs as one of its major constituents with a very significant role to play.
In fact, RBI’s latest report titled “Report on trends on progress of banking in India 2002-
2003" observes:

“Notwithstanding their diversity, NBFCs are characterised by their ability to provide

niche financial services in the Indian economy. Because of their relative organisational
flexibility leading to a better response mechanism, they are often able to provide tailor-
made services relatively faster than banks and financial institutions. This enables them to
build up a clientele that ranges from small borrowers to established corporates. While
NBFCs have often been leaders in financial innovations, which are capable of enhancing
the functional efficiency of the financial system, instances of unsustainability, often
on account of high rates of interest on their deposits and periodic bankruptcies,
underscore the need for reinforcing their financial viability.”

The reach and volume of chit funds business, which has become an integral part of the
non-banking financial sector of Kerala, has been on the rise in recent years A measure of
the phenomenon can be had from the fact that between 1997-98 and 2002-03, the number
of chits registered in the formal sector was more than 45,000 with a total capital turnover
of Rs.360 core.

According to a study by a working group constituted by the State Planning Board, about-
two thirds of these chits were registered in Thiruvananthapuram and Ernakulam districts
with 43 per cent and 23 per cent, respectively

Similarly, it was found that there were 5,996 money-lending institutions in the organized
sector in the State as on March 2004 with the four southern districts of
Thiruvananthapuram, Kollam, Pathanamthitta and Alappuzha accounting for more than
half of them.Against this, there were only 3,376 commercial bank branches in the State.
The population covered per money-lending institution is 5,590 as compared to 9,431 per
commercial bank branch. A case study conducted by the working group in Kannur
district revealed that there were 139 money-lending institutions in the formal sector,of
which 45 per cent were registered after 2001. The annual business turnover of these
institutions worked out to Rs.13.57 core. Of these institutions, around 70 percent had
business turnover of less than Rs.5 lakh and only five per cent had turnover of more than
Rs.50 lakh.

A survey in Thiruvananthapuram district showed that around 15 per cent of the

moneylenders accepted deposits at interest rates of between seven and 12 per cent, while
a majority of them extended loans at rates between 10 and 20 per cent on security of gold.
The major depositors were non-resident Indians and most of the borrowers were ordinary
workers, government employees and businessmen. And the major defaulters were
farmers.

A primary survey among selected unregistered money-lending institutions in Kollam and

Kottayam districts by the Department of Economics and Statistics found that 50 per cent
of them operated their business in own buildings, while some others were operating
straight from the cash bag. The securities against which loans were given included gold,
cheques, promissory notes and land documents.

The working group is of the view that the money-lending institutions have been thriving
due to the inability of the conventional banking sector to accommodate more people due
to high operating cost. At the same time, bulk lending for micro credit can help redeem
the situation to a large extent.

Kerala State Financial Enterprises (KSFE) is the Government-owned, the dominant chit’s
player in the State. There were several private chit fund companies providing financial
services. It has a great prospect in nearby feature and aiming to be competitive with other
banks in Kerala.
COMPANY PROFILE
During the year 1967 Government of Kerala took a policy decision to the effect that
Chitties/Kuries should be conducted under State auspices. The then Finance Minister in
his budget speech for financial year 1967-68 made the following announcement on the
floor of the Assembly:
“I view this decision as a bold step forward along the path towards socialism, aimed at
bringing banks and other financial institutions under social control”. The Chitty/Kuri
business being what it is, there existed ample scope for exploitation of the ignorance,
indifference and gullibility of the needy people by unscrupulous promoters, who
organized financial institutions in the name of chitty/kuri fund in order to mobilize fluid
resources in their own interest and appropriate for themselves substantial profit accrued
out of such organizations. Government wanted to introduce a check on the unbridled
growth of such financial institutions with a view to safeguard the interest of the general
public and at the same time to channelise the savings so consolidated for productive
purposes. With these objectives, Government appointed a Special Officer in the year
1967 to prepare a comprehensive scheme for starting chitties and kuries under
Government control. The Special Officer presented his report on 7th October 1967
analysing all aspects involved in the proposal and recommending strongly the entry of
Government in the field of chitties and kuries. Though the recommendation was for
conducting the business as an adjunct of the Registration Department, Government,
however, took a different view and decided to bring within the purview of Government
control not only chitties/kuries but also some other financial transactions for which
socialsation was felt necessary. Hire purchase financing and insurance were the new
areas suggested for inclusion within the ambit of the proposed organization. Accordingly,
Government decided to organize a public sector undertaking with the name ‘The Kerala
State Financial Enterprises Limited’ for the purpose of conducting Chitty,Hire Purchase
and Insurance business under Government control.
The Kerala State Financial Enterprises Limited is fully owned by theGovernment of
Kerala and is the first Public Sector Company to conduct chit business in the whole of
India. It was incorporated on 6thNovember 1969 with its registered office at Trichur. It
has an authorized capital of Rs.25 lakhs divided into 25,000 equity shares of Rs.100 each
and a paid up capital of Rs.2 lakhs as initial contribution from Government of Kerala.
The share capital contribution of Government was progressively increased from Rs.2
lakhs to Rs.7 lakhs in the year 1970-71, to Rs.12 lakhs in the year 1971-72, to Rs.15.5
lakhs in the year 1972-73, to Rs.20.5 lakhs in the year 1973-74, to Rs.27 lakhs in the year
1974-75, to Rs.28 lakhs in the year 1977-78 and to Rs.38 lakhs in the year 1987-88. The
authorized capital was raised to Rs.50 lakhs in the year 1974-75 , to Rs.100 lakhs in the
year 1989-90,to 10 crores in 2002-03 and to 20 crores in 08-09. The authorized capital at
present is 50 crores.

The Management of the company is vested in the Board of Directors constituted by

Governor from time to time. The number of Directors shall not be less than 2 and shall
not ne more than 9. The maximum number has been subsequently raised to 15. The
Directors shall hold office during the pleasure of the Governor. The Governor may, from
time to time, appoint two Directors other than the Managing Director as Chairman and
Vice Chairman of the Board. The first Board was constituted as per Government Order
No.G.O. (Rt) 4876/69/Fin. Dated 26th November 1969 and they assumed charge on 28th
November 1969. The Managing Director is appointed by the Governor on such terms and
remuneration as he may think fit from among the Directors for the conduct and
Management of the business of the company subject to the control and supervision of the
Board of Directors. General Body representing the shareholders shall be the supreme
governing body of the Company.
OBJECTIVES

The objectives of the company are listed in the Memorandum of Association of the
company. The important objects are as follows:

(a) To start, conduct, promote, manage and carry on the business of chitties in India or
elsewhere.

(b) To promote, undertake, organize, conduct, manage and carry on the business of
general and miscellaneous insurance of any kind in India or elsewhere.

(c)To start, promote, conduct, operate, carry on and manage the business of dealers,
agents and traders under hire purchase system of articles, vehicles, machinery, materials
goods and tools, of all capital goods and consumer goods and property of all nature and
description for personal, domestic, office, commercial, industrial and community use and
consumption as a business of the Company or as agents of the Government, State or
Central or any body or organization there under or of any other Company. Besides these
objects, there are many other objects, which are incidental or ancillary to the main objects
such as to advance, deposit with or lend money, securities, property or to receive loans or
grants or concession of any nature or deposits from Banks, Government or Governmental
organizations or others.
From a very humble beginning of . Rs.2 lakhs paid up capital , 10 branches and 45
employees to it’s roll the present scenario is an impressive one with

 Paid up Capital is Rs. 20Crores.

 Total number of employees is more than 4,200
 The number of branches is 306.
 The number of customers is more than 20 Lakhs.
 Annual Business is Rs. 5,462 Crores.

KSFE today is synonymous with chit funds and is presently the biggest chit promoter in
India. KSFE’s vision is to become a ‘financial supermarket’, a ‘One stop Shoppe’ for all
financial services.

A striking point is that all the funds mobilized by KSFE through its various deposit
schemes and chitties are advanced wholly to the public in Kerala itself; whereas other
financial institutions and banks channel their deposits collected in Kerala for advances
outside the State. KSFE pays to the Government of Kerala, crores of rupees every year by
way of:Guarantee Commission, Service Charges, and Dividend. Up to 31.03.2008 an
amount of Rs. 240 Crores has been paid on the above head of accounts. Therefore,
financially and service wise, KSFE contributes immensely towards the Kerala economy.
Vision of KSFE

To become a significant player in the financial services sector by

Providing a whole range of quality services and products.

• Adopting technology and benchmark standards in customer service and
performance.
• Spreading our wings beyond the borders of Kerala, on a global level.
• Retaining the pre-eminent role in Chitty business.
• Continuing focus on extending resources to the Govt. of Kerala
• Sustaining commitment to the weaker sections of society, as the
neighborhood institution for support, trust and security.

Businees Performance through the years

TURNOVER, GROWTH, PROFIT & NETWORTH (Rupees in lakhs)

Year
(Rs in Cr. 01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09
)
Turnover 3215 3495 3559 3654 3937 4538 5462 7870
%
14.4 8.71 1.83 2.67 7.74 15.3 20.36 44.09
Growth
Profit 28.5 38.3 42.1 43.7 44.1 39.1 15.00 28.00
Net
26.8 46.5 61.6 78.7 100.0 111.0 120.0 130.0
worth

Table 1
CHITTY SALA FOR LAST SIX YEARS (Rupees in Crores)
Year 01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09
New Chiity sala 30.69 29.88 32.82 38.03 43.26 67.24 109.00 132
Sala as on March 31 st 128.35 138.28 138.72 149.21 158.86 187.54 254.44 350

Table 2

140

120

100

80
New Chitty
60 sala

40

20

0
01-02 02-03 03-04 04-05 05-06 06-07 07-08 08-09

Chart 1

Foreman’s Commission and Staff Cost

Year 97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08
FC 3060 3946 4836 5410 6614 7318 7128 7155 7668 8650 11500

Staff 2561 3198 4551 4809 5404 5573 7586 8501 9090 10266 12600
cost

Table 3
 14000

12000

10000

8000
FC
Staff cost
6000

4000

2000

0
97-98 98-99 99-00 00-01 01-02 02-03 03-04 04-05 05-06 06-07 07-08

Chart 2

The growth in overall business showed a positive trend during all the years of the
company’s operation, but at the same time, there was an alarming disparity creeping up
between the foreman’s commission (the main source of company’s profit) and staff cost.
The Government and top management of the company had realized this dangerous
situation by 06-07 fiscal itself and took the following strategic measures to minimize this
offset.

 Introduction of a vision statement with clear set objectives

 Structural re organization and giving autonomous status

 Expansion and strengthening of Agency network

 Introduction of special chitties/campaigns with special offers/prizes for

enrollement
  Rationalisation of security norms.

 Accelerating the computerization activities

 Conducting Training programs for employees at all levels, with particular focus
on developing soft skills of the employees.

Vision 2010

On 22.04.2007 KSFE released vision document named VISION 2010.

VISION 2010.

Marching forward to Reach

Mar 07 Mar- 09
Rs In Lacs Mar 08 Mar 09 Mar 10
(Actual) Actual
Chitty 188 250 350 362 500
a ) Sala
b) Turn over 1994 3000 4200 4340 6000

Deposits 1696 1800 2000 2246 2500

Advances 848 1000 1250 1284 1500

Total 4538 5800 7450 7870 10000

Table 4

Structural Re-Organisation and Autonomous Status

The organization has been undergoing an extensive re orgainsation process since 2007.
The Government, especially the Finance Minister, showed greater interest and vision in
the face lifting operations undertaken by the company. The idea is to make the
organization, a serious partner in the developmental process of Kerala and to introduce
the much-needed professionalism in to the organization. As part of these efforts two
important changes were introduced
  Re organisation and expansion of the organizational structure.

 Giving more financial autonomy.

Re Organisation and expansion

Starting of two more regional offices at Kottayam and Kannur in addition to the existing
five regional offices at Trivandrum, Kollam, Eranakulam, Trissur and Kozhikkode.

Re structuring the organization into four departments viz Businees, Finance, Personnel
&Human Resources and Internal Audit & Vigilance along with a secretariat to assist the
Chairman and Managing Director in their activities.

Establishing two additional cadres viz Deputy General Manager (DGM) and Assistant
General Manager (AGM).

The restructuring is aimed to provide better service to the external customers as well as to
provide more developmental opportunities for the employees.

Financial Autonomy

As with any organization directly under Governmental control, KSFE was also facing
numerous procedural bottlenecks in respect of its activities, especially with financial
matters. This was evident in the computerization process of the company. Even though
the computerization process has been started way back in 2000, the organization hasn’t
made much progress in its efforts till 2007. The major reason, even though not the single
one, was the delay in the tendering and purchasing activities due to the innumerous
hurdles involved in it. The Government made much deliberation over the issue and
decided to give more financial autonomy to the organization. The striking feature is that,
the annual budget of KSFE is now included in the State annual budget and the
organization need not obtain further sanction for this planned expenditure. This in effect,
calls for a much more detailed planning on the part of the top management, which will be
more beneficial for the organization.

Strengthening of the existing agency network

The agency system for canvassing has been existing in the company for a very long time.
But, since the agency commission was calculated as a certain percentage (10-15% at
present) of the first installment of the chitty, the system failed to provide a continuous
stream of income to the agents involved, making it unattractive as a career option. Also it
was impossible for the company to provide commission on every remittance, which can
be effected only by drastically reducing the percentage of the first commission, again
making the system unattractive to a majority of agents. Due to growing public demand
and as a strategic move to expand the customer base to the daily income earners like
traders, the company during 04-05 FY introduced ‘collection agents’ scheme for daily
door collection of chitty installments. The door collection agents were given a certain
percentage of the collections they make, which can provide them with a regular source of
income.

As a strengthening measure, these two schemes were clubbed during 06-07. At

present company provides two options for the agents, either to work as a
Canvassing/Collection agent or to work only as a Canvassing agent. The first option is
intended to make the KSFE agency system more attractive as a career option for the
aspirant. Other important measures, like providing the collection agents with ‘Simputer’ (
a hand held device similar to the one being used by KSRTC conductors) and providing
training on marketing /selling skills to the selected agents, are also carried out.
Internally, a ‘New Business Development ‘ post has been created at the regional level to
monitor and guide the activities of the agents.
Introduction of special chitties/campaigns

Traditionally, the chitty budget targets for a Financial Year were fixed as a certain
increase in the previous year’s target and achievement of the same was aimed mainly
through the selling efforts of the unit staff with minimum allocation on advertisement
expenses. The advertisements were also focused on the unit level, with more focus on
hoardings and banners placed on important local areas.

In contrast to this, the organization has adopted an entirely different approach during the
06-07 FY by

a. Hiking the annual chitty budget to an exorbitant level

b. Launching special campaigns as an effort to achieve these targets.
c. Focusing on centralized advertisement aimed at building a corporate image
d. Introducing, for the first time a ‘Brand Ambassador’ approach by using well,
the ‘common man’ image of the famous cine actor Sreenivasan .
e. By undertaking different PR activities by the top management persons,
thorough their participation in ‘Talk Shows’ and interviews through audio and
video media and thorough sponsorships of different TV programs.

All the campaigns were loaded with attractive prizes for enrollment, with the notion of
giving back to the customers a share in the profit generated.

The first among these special campaign chitties were launched on November 2006 to
mark the occasion of the Golden Jubilee Celebrations of the formation of our state. In this
‘Golden Jubilee Chitties’, apart from the one time prizes for enrollment, a novel scheme
in the form of KSFE purchasing lottery tickets through the entire tenure of the chitty on
behalf of the prompt customers based on their amount of remittance was introduced.
Many of the subscribers of KSFE were prized through this scheme and this gave the
required momentum for the subsequent campaigns.
After the ‘Golden Jubilee Chitties’, KSFE went on to introduce the ‘Ponnonam 2007’
campaign during the Onam festival season. As with the previous campaign, Ponnonam 07
also featured both one time prizes and a chain of prizes to the customers.

As a last campaign of 07-08 FY, another novel scheme named ‘Pravasi Bandhu
Chiitties’ were launched in the last quarter. The scheme targeted the NRK’s in general
and especially those working in the gulf countries. Initially the organization proposed a
scheme in which the NRK’s can make direct remittances, but due to want of sanction by
the RBI the same was modified as a scheme for the relatives of NRK’s. This scheme
differed from the previous campaigns both in terms of nature of prizes offered (Air
tickets to Gulf countries was the prize offer ) as well as the added benefits made available
like loan packages at reduced rates.

All the above five campaigns, run during the period of November 06 to March 08, were
big success stories and with every campaign surpassing the set targets.

Performance data of Special Campaigns

Scheme New Sala No.of New
(Rs.Lacs) Subscribers
Kerala Golden Jubilee chitties 2006 4232 149241
Ponnona chittikal 2007 5520 129205
Pravasi Bandhu chittikal 2007 4725 111025
Ponnona chittikal 2008 6838 149500
Pravasi Bandhu chittikal 2008 6313 136320
Total 27628 675291

Table 5

At present the company is aiming to achieve the 500 crore chitty sala target by
31.03.2010. The immense success of the special campaigns introduced during the 06-07
FY is continued as a business model, with the company planning to achieve major chunk
of it’s budgeted business through two campaigns ‘Festival Chitties’ and ‘Pravasi Bandhu
Chitties’ in every year.

Rationalisation of security norms.

There has been a long-standing grievance on the part of the customers about the rigidity
of the security norms stipulated by KSFE. Even though minor changes were introduced in
the norms over time, they remained focused on the Government Sector employees. These
one-sided norms kept a large sector of professionals and private employed persons away
from KSFE. Apart from this, the property valuation system, in which a single person
valuation (usually the unit head) was followed, was also a source of many complaints
from the customers due to perceived under valuation. The valuators also raised
complaints due to the unshared responsibility and resulting risk faced by them.

Keeping in view these points, the company revised its personal security norms and
introduced a multi point rating system, called ‘credit score’, which can be used to assess
the creditworthiness of people belonging to every sector. The property valuation system
was also changed to ‘committee valuation’, wherein a team consisting of two internal and
one approved external valuer is engaged for the purpose.

Accelerating the computerization activities

The company is in the track of computerizing its activities. Now more than 70 branches
(24%) have been fully computerized. Software developed by M/s Accel Front Line,
named ‘BAS’ (Branch Automation software) is used for this purpose. The BAS, which
was developed in 2001,with Visual Basic as front-end and Oracle as back-end, is now
facing a saturation condition and incapacity for further expansion, requiring a revamping
of the same in the immediate future itself. Considering this, the company has invited
tenders for Centralized Software with a plan of migrating to the central application by
March 2011. However, the company is also engaged in the process of rolling out the
existing BAS application to additional 125 (making the total to 64%) branches as the
second phase of computerization, which is expected to be completed by 31.03.2010. For
the smooth implementation of the computerization process, a separate team of
‘Implementers’ were formed from existing employees who posses the required
knowledge and skills. Continuous Training to implementers and other staff is provided by
IT department at H.O. Fully computerized KSFE would definitely be a real threat to all
other financial institutions in Kerala.

A single PC with broadband Internet connection is installed at all non-fully computerized

branches. Company circulars, Newsletters etc are circulated through Internet. Every
branch uploads details of customers enrolled in special chitty campaigns to a central
server located at head office , enabling easy conduction of prize lots announced in such
campaigns.

Details of new chitties floated at branches are also uploaded in this server and through a
link, is made available in the company web site for public viewing. The company web
site, www.ksfe.com , hosted by CDIT, provides useful information with respect to all the
activities of the company. Company’s in house IT department has developed a software
called ‘Smart MIS’ for uploading monthly business report to respective regional offices
by the first week of the succeeding month.

Conduction of Training Programs

The intensive training programs also marked the 07-08 financial year. Employees at all
levels were offered training with particular focus on the soft skill development aspects.
The training sessions were arranged with the help of external faculties, on topics and
skills, which have a contemporary relevance. Such training programs are not conducted
as an one shot affair, but it is undertaken on a continuous basis with the future plans of
establishing a permanent in house training facility.
Future plans KSFE contemplates:

1. Making KSFE a fully computerized Company.

2. Opening more and more new branches, including chitty units to establish its
presence in all major centers and backward areas, aiming at effective rural
penetration.
3. Introducing value additions in chitty schemes-for coping with the fierce
competition in the financial market, for more popularity and widening their
customer base.
4. Acting as the collection agent for KSEB,KWA.etc., throughout the state.
5. To construct a multi-storeyed building in KSFE’s own premises in Kakkanad
Cochin and to house among others Staff Training College for itself.
6. Introduction of new schemes like, Educational Loan, Agricultural Overdraft and
Cumulative Deposit Scheme.
7. Expanding its door collection facility to loan accounts and deposit schemes
suitable, which is expected to create considerable – employment opportunities as
part of its social objective.
8. Introduction of chitties with simultaneous draw and auction which can be offered
as an incentive to regular customers for whom it will be a great attraction,
particularly for those with saving attitude
9. Introduction of Daily/Weekly draw/auction chitties, which is expected to have a
wide scope among traders, will raise the Company’s market share considerably.
10. Enter the arena of Credit/Debit Card business-immediately after branch
networking the company plans to launch the ‘Debit Card business.
11. Staring of Virtual Branch through net worked computer systems for the benefit of
NRIs particularly Malayalees in the Gulf & other countries is on the anvil.

Today, KSFE is synonymous with chit funds and is presently the biggest chit promoter in
India. KSFE’s vision is to become a’ financial supermarket’, a ‘One stop Shoppe’ for all
financial services.
Labour unions in KSFE

1. Staff Association (KSFE –SA)

2. Financial Enterprisers Employees Association (FEEA)

3. Officers Union (OU)

4. Officers Association (OA)

BOARD OF DIRECTORS

The ultimate authority of the organization in corporate form lies with the Government.
The Government select a board of directors in order to manage the activities of company
efficiently. The board of directors are

Sri.Mani Vithayathil :Chairman

Smt.B.Sreedevi (Addl Secretary, Taxes Dept) :Vice Chairman

Sri.C.M.Pillai :Managing Director

Sri. A.K. Ramakrishnan (I.G. of Registration) : Director

Sri.V.Rajappan (Joint Secretary (Finance)) : Director

Sri. P. Sasi : Director

Sri. P. Janardhanan : Director

Sri. P. Mammy kutty : Director

Sri. M.M. Varghese : Director

Sri. Kunhikannan : Director

Sri. Antony Thomas : Director

Sri. S. Sathyapalan : Director

Sri. George Thomas : Director

Sri. Kulathur Kunjukrishna Pillai : Director

Sri.V.K.Mohanan : Director
The Statue branch of KSFE was started on 12.06.1995 as the first Evening Branch of
Trivandrum Region, realizing the need for extended working hours in line with the public
demand for an evening branch. Within a very short span of its commencement, the unit
achieved its break even business and now it holds the status of a major branch. The
branch activities were fully computerized on 18.06.2007. The business position of the
unit as on 31.03.09 is as follows

(Rupees in lakhs)

Chitty Sala as on 31.03.09 : 211.50

No: of Chitty Subscribers : 5180

Total Advances : 1048.82

No : of loanees : 2268

Total Deposits : 1430.01

No: of Depositors : 4059

 SERVICES OFFERED

Chitty

The Rotating Savings and Credit Association (Rosca) plays an important role as a
financial intermediary in many parts of developing countries. They flourish in both urban
and rural settings, especially where formal financial institutions seem to fail to meet the
needs of a large fraction of the population. Bouman (1979), for example, estimates that,
in central African countries, about 20% of household savings are accumulated in informal
Roscas. In the South-Indian state of Tamil Nadu with a population of 62 million, the
turnover in formal Roscas has been estimated at 100 billion Rupees, about 2.5 billion US
dollars, in 2001 (G. Ranga Rao, 2001). Given the extensive economic literature on the
peculiarities of finance and financial intermediation in rural settings of developing
economies and recently flourishing interest in micro finance institutions such as the
Grameen Bank, Roscas have received little attention by economists.

In each part of the world, Roscas come under different names, all of them share,
however, some common features. More specifically, Calomiris and Rajaraman (1998)
define a Rosca as ‘a voluntary grouping of individuals who agree to contribute financially
at each of a set of uniformly-spaced dates towards the creation of a fund, which will then
be allotted in accordance with some prearranged principle to each member of the group in
turn’. Once a member has received a fund, in South India also called a ‘chit’, she is
excluded from the allotment of future chits until the Rosca ends. The term ‘chit’ stems
from the Tamil word ‘chitty’, meaning a written piece of paper, which directly points to
one important allotment mechanism, where a lot determines each date’s ‘winner’ of the
chit. In contrast to such a random Rosca, in a bidding Rosca, an auction is staged among
the members who have not yet received a chit. The highest bid wins the chit and the price
the winner pays is distributed among the other bidders.
 In a chit scheme, a specific number of individuals come together to pool a specific
amount of money at periodic intervals. Usually the number of individuals and the number
of periods will be the same. At the end of each period, there will be an auction of the
money. Members of the chit will participate in this auction for the pooled money during
that interval. The money will be given to the highest bidder. The bid amount will be
divided by number of members, and thus determining per head contribution during that
period. Usually the discount will continue to decrease over periods. The person getting
money in the last period will receive the full scheme amount.

Such chit fund schemes may be conducted by organized financial institutions or may be
unorganized schemes conducted between friends or relatives. There are also variations of
chits where the savings are done for a specific purpose. Chit funds also played an
important role in the financial development of people of south Indian state of kerala, by
providing easier access to credit. In Kerala,chitty (chit fund) is a common phenomenon
practiced by all sections of the society. Chit Funds are also misused by its promoters and
there are many instances of the founders running what is basically a Ponzi scheme and
absconding with their money.

A chitty is conducted by a person or an institution and this entity is called the foreman. In
the case of KSFE Chitties, KSFE is the foreman.

Chitty is a unique scheme incorporating the aspects of a recurring deposit and an

advance scheme. In chitty, the subscriber has an opportunity to bid and avail of advance
which amounts to a certain percentage of the total denomination of the chitty (sala),
whereas in recurring deposit the advance can be availed only on the paid up amount. In
case bidding is delayed due to draw of lots in the initial instalments, one can resort to
availing of chitty loan, which is a loan that “bridges” the gap between the need of the
subscriber for money and the delay in the chitty getting prized.

The total of the periodic subscription, called the chitty amount, will be given out
as “prize money” to the person who bids by allowing for the maximum reduction in the
prize money. The maximum reduction possible is 25% as per the prevailing Chitty Act
and if there is more than one subscriber interested in bidding at 25% reduction, the
numbers of the such bidders will be put to a draw. Thus each subscriber gets an
opportunity to receive the prize money once during the tenure of the chitty. All the
promoters have to contribute the periodic subscription till the end of the chitty.

The number of tickets enrolling in a chitty will be equal to the number of months
for which the remittance have to be made or the duration of chitty in months. Maximum
number of tickets one can subscribe is limited to 10% of the total number of tickets of
that chitty, subject to approval by foreman.

A subscriber can participate in the auction, which will be conducted in the Branch
where the chitty pertains to, either in person or through proxy. A subscriber can authorize
the concerned branch manager to be a proxy to his ticket by signing on a proxy form
specifying the amount up to which the ticket has to be bid. This proxy will be valid for
maximum of 12 months. Alternatively subscriber can authorize any person, above 18
years of age, to participate in any of the auctions by forwarding a proxy form duly signed
and stamped in the format prescribed at the last page of passbook.

The types of security acceptable for chitty prize payment, belong to various
categories like personal sureties (of employees of Government, aided schools public
undertakings, banks etc.)financial documents (like fixed deposits with banks and reputed
organizations, Deposit –in-Trust, LIC policies, bank guarantees, National Savings
Certificates etc.).Sugama Security, landed property or Gold ornaments.

A person can enroll in a chitty either by visiting the Branch or through the agents
of KSFE. The company has appointed daily door collection agent who will come and
collect the amount towards monthly instalment daily from a subscriber‘s office/residence.
Customer can remit the chitty instalment in any of the Branchs of KSFE. The foreman is
entitled to a certain percentage of the chitty amount(not more than 5% of the chitty
amount) as his commission from each member.
FINANCIAL AND INVESTMENT PLANNING THROUGH KSFE CHITTY

• Chitty can be used as a best medium of savings for all types of individuals,
traders,business class, self-employed persons, etc and any desired
asset/portfolio can be created within the duration of the chitty. Chitty an be
best used as a low-cost source of fund by all individuals, compared to any
other source of funds/loans in the debt market.
• All future financial requirements/objectives can easily be planned and met
through chitty.
• Traders can use chit funds as the cheapest cost of funds for commercial use
and net outflow in chitty is deductible business expenditure as per Indian tax
laws.
• Chitty can be used as a medium of investment. The prize money can be
utilized for other investment/productive purposes.
• Effect of inflation will be almost zero in chitty as the corpus of the chitty is
received back well before the termination date of the chitty compared to any
other banking/financial products.
• Tenure/duration and denomination is flexible in chitty scheme
• Enrolement in chitty of appropriate duration/time span ensures fulfilling each
of the future financial needs/objective such as House Construction/acquiring
immovable properties, vehicles, furniture, house-hold equipments,
foreigntours, marriage of daughters, children’s education, retirement planning
hospitalization/treatment cost etc.
• Tax planning can be made through chitty.
SUPERIORITY OF KSFE CHITTY AS A CREDIT & INVESTMENT
INSTRUMENT OVER OTHER FINANCIAL INSTRUMENTS:-

• Better Returns to investors.

• Lowest Cost to borrowers.
• Easy liquidity through advance under Pass Book Loan (PBL).
• New Chitty Loan(NCL)schemes.
• CSDT-facility.
• Investor protection through Chitty Act.
• Public trust, credit worthiness and branch network.
• Door collection and service of agents.
• Acceptance of gold as security and wide array of other securities.
• Convenient duration and subscription amount.
• Easy and transparent operation & inter branch remittance facility.

CHITTY LOAN

It is one of the services provided by KSFE. Chitty Loan is a bridge between your
actual financial need and the delay in chitty getting prized in your favour. To get a
chitty loan one has to be a non-prized subscriber in a chitty and remitted 10% of the
total numer of instalments promptly, he is eligible for an advance up to 50% of the
total chitty amount or sala(gross subscription to be remitted per month multiplied by
the number of instalments in the Chitty). In the case of 100 months chitties, the
maximum loan amount will be 30% of the sala. The principal of the advance is settled
by adjustment from the Chitty Prize money and the interest has to be remitted every
month. The interest rate of the advance is 14.5% (simple) and for defaulted accounts
16.5%.
 REALIABLE CUSTOMER LOAN

An existing customer of KSFE , with a sound track record, for one year or more
is eligible for this advance. The maximum advance is Rs.1,00,000/-on personal
security /property security and Rs.5,00,000/- on financial documents. Maximum
duration of advance is 48 months. The interest rates is 12%(yearly diminishing)and
for defaulted accounts 18%.p.a

Special features

• Premature closing facility

• When 10% of total loan amount is remitted-EMI is re fixed for the benefit of
customer.
• No hidden charges or incidental charges.

CONSUMER VECHILE LOAN (CVL)

KSFE CVL Scheme helps you in acquiring white articles. Vehicles etc.,

The articles for which CVL is made available include all consumer durable articles
including computers, motor vehicles-two & four wheelers, certain durable medical
equipments for clinics, agricultural equipments/appliances etc…

13.5% (simple)is the interest rate applicable and for defaulted accounts 15.5%
(simple). The duration of the advance is between 12 months and 60 months.
GOLD LOAN SCHEME

This facility is for meeting any type of contingent requirements, thus harnessing
the yellow metal, which is usually a “non-sweating” asset, for productive purposes.
Maximum amount of loan is Rs.3-lakhs.

The advance is for duration of six months. But it can be renewed, if necessary, up
to an aggregate period of 24 months by remitting interest in every six months.

The interest rate is 12% per annum (simple) to a loan upto and including
Rs5000/-.Interest rate for loans above Rs 5000/- and upto & including Rs 25000/- is 13%
per annum(simple).Interest rate for a loan of above Rs 25000/- is 14% per
annum(simple). The special feature for this loan is that the interest is charged for the
actual number of days for which the gold is pledged, subject to the condition that
minimum interest of Rs.25/- will be charged for an advance exceeding Rs.5000/-

PASS BOOK LOAN

A non-prized chitty subscriber, without any default in remittances of instalments,

is eligible for a passbook loan, the ceiling of which is based on certain discounts from the
paid up amount in the respective chitty.No security, other than the passbook is required
for the advance. The interest rate is 13% (simple) and for defaulted accounts 15%.

Trade Finance

An advance intended for the small-scale traders to enhance their working capital.

Limit: Upto Rs.1-lakhs. The applicant should have a small-scale trading venture. The
proof for the same, such as license from the local body, lease deed etc. has to be
produced.
The Manager concerned will conduct a site inspection to ascertain the location and
holding of stock-in-trade. Interest Rate: 13.5% p.a.(simple) and for defaulted accounts
15.5% (simple)

Repayment Perod:12-months to 60-months.

Security: As in the case of Chitty.

Housing Finance

This finance is available for :

» Construction of new house

» Purchase of house plots

» Outright purchase of house/flat

» Renovation of existing house

Eligible Persons
SalariedPersons,Professionals like doctors, engineers, chartered accountants,
lawyers etc.
Businessmen who are incometaxassessees.Non-resident Indians.Persons earning
rental income. The principal, along with the interest,should be repayed within a
maximum period of 180 months (i.e, 15 years).
The maximum advance
The amount of advance is limited to such amount, the corresponding monthly
instalments of which does not exceed 45% of the monthly income of the applicant
Interest rate
Amount & Period Interest rate
Rs.5 lakhs and below 10.25%p.a (Yearly
Diminishing)
Above Rs.5 lakhs and upto 10 lakhs 10.50% p.a (Yearly
Diminishing)

The securities acceptable for availing of the advance

For the purchase of plot, the advance will be limited to 75% of the
documented value of the plot.

In the case of outright purchase of plot and house, the advance will be limited to
75% of the documented value of the plot and house.

For house construction, the advance amount will be limited to 75% of the
estimated value of the house to be constructed. The land and/or house, as the case
may be, will be the security for the advance.

SugamaDepositScheme

This is not a term deposit scheme. This scheme is quite comparable to the Savings bank
deposits in banks, but of course, with marked difference in interest rates. Whereas the
maximum interest offered by banks for this scheme is 3.5%, KSFE is offering 5.5%. This
is undoubtedly the best offer in the financial service sector, among the deposit schemes
belonging to the SB a/c category.
FixedDeposit
It has many features of the FDs in banks and more attractive due to higher
interest rates offered. The effective returns are really higher than the
published interest rates, because of monthly payment of interest (in the case
of all other institutions, the interest is paid quarterly).

The annual interest rate in case of deposits from the public is 9.75% per annum. Interest
for chitty prize money deposits upto Rs 1 lakh is also 9.75% per annum. Interest for
chitty prize money deposit for Rs 1 lakh and above is 10% per annum. Due to the
monthly payment of interest, the effective rate will be higher than this rate. Senior citizen
will get 10.25% for fresh deposits as well as for prize money deposits.

Loan facility

Normally 75% of the fixed deposit amount can be availed as loan. This facility is called
Fixed Deposit Loan. In exceptional cases loan upto 90% can be sanctioned by the branch
manager using discretionary power. Interest for the loan is 2% above the rate of interest
on Fixed Deposit.

Fixed Deposit is accepted as security for loan/advance schemes of the company.

Short Term Deposit

Now KSFE is collecting Short Term Deposits for periods ranging from 30 days to 364
days offering attractive rates of interest for different slabs. Individuals and Institutions
can prefer this deposit for temporary parking of fund. When compared to Nationalised
and Scheduled Banks, the rates of interest are much higher.

Rates of interest for different slabs

Period Rates of interest per annum

30 days to 45 days 5.50%
46 days to 60 days 5.75%
61 days to 90 days 6.00%
91 days to 180 days 6.25%
181 days to 364 days 6.50%

Minimum amount that can be deposited under this scheme is Rs.5,000/-

Deposits in multiples of Rs.500/- will be accepted.

Short Term Deposits will be accepted as security to future liability in chitty and loan
schemes of KSFE. On maturity these deposits can be renewed for a further period at the
then existing rates. Provision is also there for premature closure of these deposits.

Car Loan

For enabling salaried persons and self employed professional/ Businessmen / Income tax
assesses to acquire new cars availing of advances, with moderate rates of interest.

Eligibility

a. Salaried persons having a net monthly pay exceeding Rs. 10,000/-. Husband and
wife can be considered as oneunit. Net salary of spouse if employed can be
considered for arriving at the net pay.

b. Self employed Professionals/Businessmen/Income Tax Assessee having an

average annual total income exceeding Rs. 2,00,000/- for the last 3-years.

Limit of Advance

a. In the case of salaried persons:

Least of the following:

1) 85% of the on the road cost of the vehicle (on the road cost means aggregate of
cost of vehicle, life tax paid, registration charges and comprehensive insurance)

2) 30 times the combined net monthly salary of loan applicant and spouse.

3) Corresponding loan amount if 45% of the combined net monthly salary of

applicant and spouse is taken as available for remittance as EMI.

b. In the case of Income Tax Assessees:

Least of the following:

1) 85% of 'on the road cost' as above.

2) 1.5 times of the average annual total income for the past three years based on the
income tax returns.

3) Corresponding loan amount if 25% of the average monthly total income as

evidenced by the tax returns is taken as available for remittance of EMI.

Security

No collateral

Lien to be noted in the RC book

Post dated cheques 5 numbers.

Period of Loan

Minimum 6 months and maximum 60 months.

Rate of Interest

Upto 35 months - 12 % (monthly diminishing)

Exceeding 35 months - 12.5% (monthly diminishing)

Flexy Trade Loan

Flexy Trade Loan is intended to provide financial assistance to small traders/businessmen

for supplementing their working capital requirements with over draft facility. Ongoing
concerns such as Individuals, Partnership firms, Companies, Hindu Undivided Family,
Association of persons, Body of Individuals, Trust and Registered Co-operative Societies
with taxable income of Rs.1,00,000/- minimum for the past three years having KGST
registration, CST registration wherever required and requisite licence from the Local
Body are eligible for loan. Loan will not be available for Vegetables and fruit Traders
Cold Storages, Hotels, Cinema Theatres, Flower Merchants and for those dealing in
perishable and decaying items.

The trader/business man should not have any overdraft/credit facility with banks/other
financial institutions.

Limit of Advance

The amount of Over Draft is limited to Rs.10 lakhs or 20% of the previous years turnover
(sales) whichever is less.
Rate of Interest
13.5% (Diminishing) on product basis with quarterly rests
Repayment Period
The over draft facility will be available for an initial period of 24 months from the
date of sanction. At the end of the initial period of two years if the OD facility has
been cleared or the account shows a credit balance and if interest has been remitted
as and when due it can be renewed
Security
The stock in trade and cash in the shop will be the primary security for the loan and
the same should be hypothecated to the Company. Landed property, Fixed Deposit,
Other Financial Documents and Gold Ornaments can be accepted as collateral
security.
Processing fee
0.2% of the advance amount applied for subject to a minimum of Rs.250/- which is
refundable if the loan is not availed.
Repayment of loan
Loanee is free to make any remittance to this over draft account. There is no fixed
date or fixed repayment instalment.

Sugama Security Scheme

The Sugama Security Scheme is intended for accepting amount outstanding in
Sugama Deposits as security towards future liability in chitty and other schemes.
The advantage under this scheme is that the advance will be secured and the
monthly instalments can be adjusted from the account and at the same time the
customers can enjoy interest income on the Sugama Deposit.
Sugama Security Account is to be opened in the name of the subscriber/loanee only
either by depositing the future liability in cash or by transfer. No further remittance
by any mode is allowed in this account. The deposit amount should atleast be the
future liability. However, in the case of combined security the deposit amount can
be limited to the shortage of security of chitty/loan amount.

Rate of interest will be the same as for Sugama Account. (Now 5.5%). The depositor
can withdraw the interest accrued and credited to the account from time to time. He
can withdraw the balance in the account after termination of the liability or on
providing alternate security.

Deposit-in-Trust Scheme

Deposit-in-Trust means the prize money, in full/part entrusted to the Company

(depending on the future liability) by the prized subscriber of a chitty as security against
future liability intending to withdraw the same on furnishing adequate alternate security
or repayable on termination of the chitty. However, amount deposited under this scheme
should not exceed the future liability in the chitty.

Period of deposit

Minimum - 30 days

Maximum - Till the date of termination of chitty only.

Rate of interest

Deposits for 30 days and above but less than 1 year - Rates applicable for Short Term
Deposits

Deposits for 1 year and above is 9.75% upto Rs 1 lakh.Interest rate of deposits of Rs 1
lakh and above is 10.25% per annum.
Interest rate of Chitty security deposits in Trust(CSDT) under special campaigns (like
PonnonaChittikal and PravasiBandhuChittikal) is 10.25% per annum.

The rate of interest for senior citizens also is 10.25%.

Due to the monthly payment of interest, the effective rates are higher than that offered by
nationalized and scheduled banks

Safe Deposit Locker

Company has introduced Safe Deposit Locker facility in some units in order to give more
service to the public. Lockers may be hired in the names of :

1. Individuals single or joint

2. Firms

3. Companies

4. Association of persons or clubs

5. Trustees

6. NRI's

7. Govt. Departments

8. Co-operative Societies

9. Body of Individuals
Lockers can also be opened in the name of minors duly represented by guardian.

Locker Rent

The rent of the locker will be collected on yearly basis in advance. At present the rent per
year for a single locker is fixed as Rs.350/- + 10.2% service tax.

Nomination facility is available for locker holders.

Tax Planning Loan Scheme (TPLS)

This is a novel loan scheme whereby any income tax payee can avail loan for the
purchase of National Saving Certificates , which will entail them for claiming deduction
up to Rs.1lakh from the total income of a year. Loan will be given up to 80% of the face
value of the certificate intended to be purchased. Balance amount has to be remitted by
the customer.

Security

The only security is the certificate purchased on which lien will be noted

Period

6 years

Interest

12% simple. If defaulted 13%

Repayment

Principal plus interest in equal monthly installments.

Western Union Money Transfer

KSFE has entered into the field of Money Transfer Services which is a fee based activity,
joining hands with M/s.Paul Merchants Limited, the principal agent of Western Union
Financial Services Inc, New Jersey, USA, to act as their agent partner for promoting the
Western Union Money Transfer Services through our branches in a phased manner.
Western Union is a leader in money transfer services globally and one of the world's
oldest and best known brand names, having a net work of more than 1,80,000 locations
spread in 226 countries. This scheme serves as the fastest and legally approved way to
receive money from anywhere in the world. By entering into this new venture in the year
2004, our Company provides one more additional financial service to the people.

Money Transfer

Money transfer here means transfer of money from a foreign country to India. Transfer
within the country and out of the country are not permitted under this scheme. The sender
in a foreign country can approach any Western Union location for sending money. The
details of money so sent is to be transmitted immediately by the sender to the receiver in
India. The money so sent can be collected from any of the Western Union location
nearest to the receiver. At present money transfer services are available from 207
branches of KSFE spread all over Kerala.

Mode of operation

Money transfer operations are controlled and conducted through computer net work
(including the internet) connecting the sender location (Western Union) and the receiver
location (Branch of KSFE).

Procedure

The customer who approaches KSFE branch to receive money sent from a Western
Union location in a foreign country has to produce a photo ID card of himself (like
Passport, Voters identity card, Driving Licence., PAN card etc) along with the "To
Receiver Money Form (TRM Form)" duly filling details such as receiver's name and
address, Senders name, Amount expected, the country from where the money has come
and Money Transfer Control Number (MTC Number).The details will be checked in the
computer and on getting okayed the amount will be paid to the customer. For amounts in
excess of Rs.50,000/- crossed a/c payee cheque will be issued as per the direction of
R.B.I. in this regard.

Securities Acceptable

securities can be defined as follows:

"Anything, such as salary recovery undertaking, landed property, deposit receipts, etc.,
that is deposited or pledged as a guarantee for the fulfillment of an undertaking regarding
the repayment of an advance, along with interest thereon, to be forfeited in case of
default".

The various types of securities accepted by the KSFE for its different schemes are the
following:

Personal Security (Not applicable to Flexy Trade Loan and Special Car Loan)

Fixed Deposits of KSFE and Other Bank Deposits

Short Term Deposits of KSFE

Deposit-in-Trust of KSFE

L.I.C. Policy

Bank Guarantee

Pass Book of Non-prized Chitties of KSFE

National Savings Certificates VIII Issue

Kissan Vikas Patra

NRI Deposits

Property Security

Gold Ornaments

Sugama Security

Combined Security
ORGANISATIONAL STRUCTURE
An organizational structure manned by a group of individuals who are working
together towards a common goal. The process of organizing leads to the creation of
the structure which can contribute to success of an organization. A good
organization structure may be defined as a system of job positions, the roles
assigned to them and the authority defined as a system of job positions, the roles
assigned to them and the authority relationships among the various positions in the
organization. In short organizing is :

 Determining, grouping and arranging of various activities deemed necessary for

the attainment of the objectives

 Assign the people of these activities.

 Providing of suitable physical factors of environment.

 Indication of the relative authority delegated to each individual charged with

execution of each respective activity.

The important steps involved in the process of organization may be stated as:

Determining of Activites

The principal activities are spelled out from the objectives of the enterprise. The
entire work is broken down into activities that are able to be performed each individual.

Grouping of Activities

The closely related and similar activities are grouped into divisions or
departments, and the departmental activites are further divided into sections.
Allocations of fixed responsibility to definite persons

Here, specific job assignments are made to different subordinates for ensuring a
certainty of work performance.

Delegation of authority

It is the entrustment of responsibility and authority to another and the creation of

accountability for performance. Authority without responsibility is dangerous and
similarly responsibility without authority is an empty vessel. Hence, corresponding to the
responsibility, authority is delegated to the subordinate for enabling them to show work
performance.
It pinpoints the relative status levels or positions of members in the organization.
The structure provides a basis or framework for managers and other employees for
performing their various functions. Some of the important functions of organization
structure are:

 It clearly defines employee work.

 It enhances specialization in the organization.

 It co-ordinates and unifies the efforts of the people.

 It clarifies authority, power and avoids duplication of work.

 A good organization structure facilitates easy adaptation to changes

 It is a source of support, security and satisfaction to managers and employees in

performing their assigned tasks. .
Diagrammatical representation of organization structure is known as organizational chart.
Organisational chart is the vital tool for providing information about relationships. Such a
chart shows the major functions and their respective relationship, channels of formal
authority and relative authority of each manager who is in charge of respective function.

The Kerala State Financial Enterprises Limited is a composite organization where

different bases of grouping the activities are used. The general administration of the
organizationand control of business development was initially centralised. But with the
expansion of business and multiplication of branches throughout the State, the need for a
greater measure of decentralisation was felt and in consequence Regions came into
existence in charge of Regional Managers.
The organizational set up is by and large a three-tier system with the Head Office as a
top controlling and co-ordinating body, the Regions constituting the intermediary level
coordinating and controlling all the activities of the various units under them and the
units at the base level as profit generating centres. These units are engaged in chitty
business and different loan schemes as their main products and acceptance of deposits
from public as a parallel product.

In the Head Office the activities are grouped on functional as well as product-basis under
the control and supervision of the Managing Director who is the Chief Executive.
 BOARD OF DIRECOTRS

Chart3 CHAIRMAN

Organisation Chart
MANAGING DIRECTOR
SECRETARIATE PA, SM(PR) & CO.SECRETARY

GM (Bus) GM (Fin)

DGM (Ops) DGM (P&HR) DGM (IA&V)

AGM AGM (Legal) AGM (Region) AGM AGM (P&HR) AGM (IT)
(Plg&Bus) (Recovery)

SM/ SM/ SM/ SM/ Security SM/ SM/CM SM/CM SM/ SM/CM SM/CM SM/CM SM/C
CM CM CM CM Officer (A/C) (Recover CM (Trainin (P&HR) (IT) M
CM
(Pl (Bu (le (GA y) (RR) g) (IA)

JM JM JM JM
(Plg (Bus) (I&V)
)

BRANCHES
GM (BUS) : General Manager ( Business)
GM (FIN) : General Manager ( Finance)
DGM (OPS) : Deputy General Manger (operations)
DGM (P&HRD) : Deputy General Manger (personnel&human
resource development)
DGM (IA&V) : Deputy General Manger (Internal Audit &
Vigilance)
AGM(PLG&BUS) : Assistant General Manager ( Planning & Business)
AGM (P&HRD) : Assistant General Manger (personnel&human
resource development)
AGM (IT) : Assistant General Manager ( Information
Technology)
AGM (REGION) : Assistant General Manager ( Region)
SM/CM (PLG) : Senior/Chief Manager (Planning)
SM/CM (RR) : Senior/Chief Manager (Revenue Recovery)
SM/CM (IT) : Senior/Chief Manager (Information Technology)
SM/CM (GAD) : Senior/Chief Manager (General Administration)
SM/CM (TRNG) : Senior/Chief Manager (Training)
SM/CM ( IA) : Senior/Chief Manager (Internal Audit)
SM (PR) : Senior Manager ( Public Relations)
JM/BM (I&V) : Junior/Branch Manager ( Inspection &
Vigilance)
DEPARTMENTS
A) The different departments of the Head Office are the following.:

(i) Business Department :-

This is headed by General Manager(Business) who is responsible for all business
activities of the Company.

(ii) Finance Department :-

This department is headed by the General Manager (Finance). The main functions of
this department are planning, budgeting and control, compilation of accounts,
reconciliation and preparation of annual accounts, and controlling Deposit Schemes of
the Company etc.

(iii) Administration Department :-

This is headed by the DGM P& HR to be in charge of personnel administration ,
salary, industrial relations, man power planning etc.

(iv) Secretarial Department :-

This department is headed by the Company Secretary who is responsible for the
functions conferred on him by the Company’s Act, 1956.

(v) General Administration Department :-

This department is headed by one of the Senior officers of the Company who will be
responsible for the General Administration including purchase, printing etc.

(vi) Legal Department :-

This department is headed by AGM (Legal) who is responsible for all day to day legal
matters.

(vii) Internal Audit Department :-

This department is headed by the DGM (IA&V) assisted by seventeen audit teams
to exercise internal check and control.
 All the above Department Heads report directly to the Managing Director.

(B) The different departments of the Regional Office

The activities of the Regional Managers are grouped functionally as well as scheme
wise. They are mainly responsible for the proper and healthy functioning of the
Branches and to be in charge of the overall growth and development of the Branches
under their jurisdiction. The Regional Managers report directly to the General
Manager Business and the General Manager Finance for the respective functions and
to the Managing Director relating to the other functions. The functional departments
of Regional Office are Business, Accounts, and default; which corresponds to
respective departments of HO but with focus on operational aspects.

AGM(REGION)

SM/CM
SM/CM SM/CM SM/CM
(Accounts (New Bus: Dev)
(Admn) (Default)
)
External
Legal panel
for legal
scrutiny of
property
documents

Asst Man:
Asst Man:
(General Asst Man: Asst Man:
(business)
Admn)

Assistant Assistant Assistant Assistant Assistant Assistant

Agents

Chart 4
 (C) The different departments at Units level

At the base level the Units are graded into three categories viz.

(i) Major Branches having a chitty sala of Rs.70 lakhs and above.

(ii) Medium Branches having a chitty sala of Rs.40 lakhs and above and

(iii) Small Branches having a chitty sala of below Rs.40 lakhs

A Unit Head viz, the Manager; heads each Unit and its activities are grouped under
Assistant Manager(s)/ Deputy Manager(s). The Unit Heads report directly to the
Regional Manager concerned and to the Departmental Heads in the Head Office on
matters pertaining to the departments concerned. In exceptional circumstances the
Unit Heads can report directly to the General Manager (Business)/ General Manager
(Finance) and Managing Director.

The different departments in the unit are as follows:

1) Collection Department

Assistant Manager
(Collection)

Assistant (Cash) Assistant (FD/STD) Assistant (Sugama) Assistant (Auction)

Chart 5

Important functions of collection department are

 Receive money from customers

 Give receipt to customers
 Ensuring proper document for every receipt
  Entry of transactions in the books.
 Internal checking
 Maintain effective coordination with accounting department
 Preparing periodic collection report
 Sending collection agents to collect money.
 Transfer the collected amount to the respective authority.
 All works related to conduct of chitty auction as per the provisions of the
Kerala Chitty Act
 To arrange for the preparation of chitty balance sheets and its filing.

An assistant manager will be the head of this department. He/She monitors all
activities relating to receipt of cash and has the responsibility of ensuring that there
are no mistakes or frauds committed during transactions. Major decisions relating to
the receipts of funds are taken by the AM Collection. All staff in the collection
department should report to him/her. He/She delegates responsibility to the staff under
him/her.

2) Accounts Department

Assistant Manager
(Accounts)

Assistant (Loans/chitty
Assistant (Book keeping)
prize money Payments)

Chart6
 Important functions of accounts department are

 To be responsible for the remittance of daily cash collection (including the

Money Order collection) and cheques in to the bank on the date of collection
itself or latest by the next working day.

 To ensure once in every fifteen days that the cheques sent for collection are
either realized or dishonored and the entries in the Cheque Sent for Collection
Register are complete in every respect.
 To ensure the writing up of the Main Cash Book, to sign it and to check the
postings of General Ledger and to be responsible for the accuracy of the
postings.

 To examine all the documents concerned with the payment of prize amount
and other
 payments and ensure that they are generally in order and in particular ensure
that all the amounts mentioned in the documents are accurate.

 To ensure satisfactory maintenance of accounts in the branch, arrange the

preparation of all statements/ schedules relating to the accounts and to render
all returns relating to Accounts to the Head Office/ Regional Office.

 To ensure timely completion of annual accounts and related statements.

3) General Administration Department

Assistant Manager
(General)

Assistant (Loans/chitty Assistant (New chitty Canvassing/Collection

prize money Payments) registration) Agents

Chart 7
Important functions of general administration department are
  To initiate action for the starting of chitties in the Branch and to arrange the
release of Advertisements.

 To assist the Manager in canvassing subscribers as and when necessary

 To issue variolas(application form for joining chitty) to the canvassing agents

of the Branch, maintain the Agents Register and verify the claims for
commission received from agents.

 To take steps for the payment of prize money to the prized subscriber on the
due date, if the subscriber has furnished adequate security for the payment of
future subscriptions, and to intimate the fact to the prized subscribers.

 To verify the genuineness/ liability of the subscribers/ sureties.

 To be responsible for the entire personnel administration of the Branch for the
proper maintenance of Attendance Register, Casual Leave Register and other
leave accounts, personal files, service records/ books , provident fund records,
loans, advances and its repayment etc.

4) Default follow up Department

Assistant Manager
(Default)

Assistants (Current Assistant (Chronic

default) default)
Chart 8
Important functions of default follow up department are

 Monitoring of default on a current basis in all schemes of the company.

 Initiating necessary follow up action including RR, in cases of chronic default.
  Timely preparations of default statements.

5) Special Gold Loan Department

Assistant Manager
(Gold Loan)

Assistant Appraiser
Chart 9
Important functions of special gold loan department are

 Speedy and efficient disbursal of Gold Loan

 Safe custody of ornaments pledged.
 Default monitoring of the Gold Loan scheme
 Initiating auction steps in cases of chronic default.
 Preparation of periodic schedules.

6) Systems Department
Assistant Manager

Implementer

Chart 10
KSFE is passing through the infancy stages of its computerization process. The unit
level systems department is now formed on an ad-hoc basis. There is no exclusive
assistant manager provided for this function. Generally any one of the assistant
managers who is in charge of Collection/Accounts/Default is given additional
responsibility to supervise this function. The functions of the implementer are also not
exclusively defined as such. Generally, he is required to look after issues related to
software /hardware/data entry errors etc, and at the same time extent a helping hand to
other general activities of the branch.

Important functions of systems department are

 Ensure smooth functioning of all the computer systems.
 Reporting software errors/bugs to Head Office.
 Timely reporting of hardware failures to the Vendor/AMC Company.
 Taking data back ups at the prescribed intervals.
 Providing information and assistance to other employees in matters related to
system.
SWOT ANALYSIS
It means analysis and assessment of comparative strength and weakness of an
organization in the present situation, in relation to competitors and environmental
opportunities and threats which company face.

STRENGTH

• Government owned Company

• Variety of services other than chitties.
• Variety of chitty schemes and several other facilities associated
with chitties.
• Works similar to banks.
• Branches throughout Kerala.
• Skilled employees selected through public examinations
• A relatively younger work force.
• Transparency in operations.
• Updated website gives information about new developments in all
branches.
• Tie up with insurance and western union money helps to attract
more customers.
• It uses effective advertising campaigns.

WEAKNESS

• Lagging computerization process.

• Absence of proper CRM.
• It has the limitations of NBFC’s.
• Buaeuroccratic delays associated with government mechanism.
• Absence of an internal employee transfer norms.
• Poor agency network.
• Still main business area is on chitties and not yet able to grow in
other services.
• Not able to attract upper class in the society.
 • Lack of fieldwork in marketing.

OPPORTUNITIES

• Expansion of small-scale industries in the state.

• Rising middle class.
• Rise in income increase saving tendency.
• Collapsing of different Ponzi schemes and private chit funds.
• General risk aversion tendency of Keralites especially in the
context of present recession.
• Ensuring more participation of NRI families in the schemes of
KSFE.
• Developing in rural areas provide an opportunity to increase
customer base.
• Diversify schemes for weaker section of the society there by
showing CSR of the organization.

THREAT

• Stiff competition from private sector chit funds.

• Increasing popularity of financial products like mutual funds
among the younger generation of the middle class.
• Coming of new generation banks.
• Increased inflation rates have negative effects on savings.
• Easy availability of credit, which lowers the propensity to save.
FINDINGS

• KSFE is leading player in chit business in Kerala.

• Possess an uncorrupt and dedicated work force.
• The organization is engaged in a face lifting effort.
• Variety of sevices for various needs of customers.
• Government owned company which mobilizes the fund within
Kerala.
• The extensive branch network combined with its elite and
dedicated work force gives the much-needed flexibility for the
organization.
• Flexibility in schemes according to customer needs.
• Some of the services are unique to KSFE.
• Wide acceptability among middle class.
• It improves saving habit of people.

• Lack of computerization.
• Agency system has not yet proven its merit and there seems to
be clear divide between agents and company staff.
• Lack of concentrated and coordinated marketing efforts .
• Lack of specific transfer norms and the undue influence of
trade unions in these matters.
• Total absence of modern performance appraisal mechanisms.
• No modern facilities for remittances like e-payment or ECS.
• Total absence of CRM.
• Absence of effective customer feed back surveys and marketing
research.
SUGGESTIONS
• There is need for competitive marketing.
• Effective customer feed back mechanisms should be
introduced.
• The benefits of Computerisation should be tangible for the
customers in terms of reduced transaction time and additional
facilities like e- statements, SMS alerts, e-payments and ECS.
• The present departmentation based on specific functions at unit
level should be re structured in the computerized scenario.
• General quality of service is to be enhanced.
• Need more branches in rural areas.
• Showing the corporate social responsibility through providing
schemes for weaker section in the society.
• Employee motivation needed.
• More management techniques need to be adopted.
• Proper assessmet of effectiveness of T&D should be
undertaken.
• Scientific performance appraisal systems are to be introduced.
• Specific transfer norms are to be introduced.
CONCLUSION

The KSFE Ltd. Established for preventing people from exploitation of private
chit promoters, who fly by night with all hopes of investors, has become one of the
leading players in the economy of Kerala State. Now KSFW is a role model in the
industry with it’s success in chitty campaigns and many loan schemes like gold loan.

The striking point is that the funds mobilized by KSFE are advanced and
utilized for the people of Kerala itself. The increase in customer base to more than 20
lakh and number of branches from 10 to 306 shows the acceptance by the public to
thia renowned public sector undertaking. KSFE is also paying the state exchequer
cores of rupees by way of guarantee commission, service charges, dividend etc.

The vision of KSFE always has a societal view,showing dedication to the

society by ensuring their financial needs of any type at their nearby locality, at
convenient timings.

The organization is currently passing through a changing phase and the

success of these change efforts depends on the adaptability and flexibility of it’s
human resources in the wake of changing technology and customer demands . The
newly introduced Human Resource department, in place of the earlier Personnel
Department, has to play a leading role in this transition stage.

This study helped me to understand various aspects of functioning of an

organization. It helped to understand how principles of management are applied in
practical way. It helps to me know about the various departments and its functions. It
improves our analyzing capabilities. It gave me general idea of a non banking
financial institutions working in our state.