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INTRODUCTION OF CO-OPERATIVE BANK

INTRODUCTION OF CO-OPERATIVE BANK

A co-operative in an association of person united voluntarily to meet their common economic, social and culture needs. Co-operative is based on the values of self- responsibilities, democracy, and equality. In the tradition of their founder, Co-operative member believe in the ethical values of honesty, openness, social responsibilities and caring for other. Co-operative Bank cannot take trading activities. No Co-operative bank shall commence or carry on the business of banking in India unless the aggregate value of its paid up capital. For the purpose of this section value means the real of exchangeable value and the nominal value shown in the books of the bank. Co-operative bank are best suited for this purpose. The object of cooperative bank is to offer banking facilities to persons of limited means requiring credit for productive purposes in the use of the land and labor` at their disposal. In 1914, the government of India appointed a committee under Sir award Maclagan to survey the progress of co-operation in the country. The committee submitted its report in 1915, in which it made several recommendations, the principal one being the institution of provincial cooperative banks to serve as apex bank in the hierarchy of the co-operative pyramid. The present organization in India is based upon findings of this report. In 1919, the Montague-Chelmsford Act made co-operation a

provincial subject. Since then, all the state governments have passed their own separate co-operative societies Act. State co-operative banks and primary co-operative banks are requiring obtaining prior permission of the RBI for opening new branches. Central co-operative banks not need for opening new branches within their areas of operation. Co-operative other than the scheduled state co-operative bank/primary cooperative bank is require to maintain cash reserve with it self or in current account open with reserve bank or state bank of India or state co-operative concern or with only other bank notified by the government. Every cooperative bank shall maintain in cash unencumbered approved securities an amount which shall not at the business on any day, be less than 25% or such other percentage not exceeding 40% of the total of it demand & time in India or as the Reserve Bank may specify time to time. In terms of notification under amended sec.29, the banks are now require to prepare their profit and loss account and balance sheet as at 31st March of each year. The bank will have to submit to the reserve bank three copies of profit and loss A/C and Balance sheet together with the statutory auditors report signed by the principal officer of the bank and at least three directors, before 30th of each year. The balance sheet is also required to published as require under rule 10 in one of the local newspaper within a period of a month from the end of the period to which they related. The published Balanced and profit and loss A/C along with auditors report is not submitted before 30th September, every year. .

The co-operative banking structure in Indian may be three component parts, viz., Primary credit societies at the base, Central co-operative banks at the middle, and Provincial co-operative banks at the top. PRIMARY CREDIT SOCIETIES AT THE BASE: The primary credit society is an association of borrowers and nonborrowers resulting in a particular locality. The funds of the societies are derived from the share capital and deposits of members and loans from central co-operative banks. The borrowing power of the member as well as the society is fixed. CENTRAL CO-OPERATIVE BANKS: These are the federation of the primary credit societies in the district, are of two types-those having a membership of primary societies only and those having the membership of societies as well as individual. The funds of the bank consist of share capital, deposits, loans and overdrafts from state co-operative banks and joint stock. These banks finance member societies within the limit of borrowing capacity of societies. They also conduct all the business joint-stock bank.

STATE CO-OPERATIVE BANKS: The state co-operative bank is a federation of central co-operative banks and acts as a watchdog of a co-operative banking structure in the state. Its funds are obtained from share capital, deposits, loans and overdraft from RBI. The state co-operative banks lend money to central co-operative banks. NOMINATION RULES: The following clarification on certain queries relating to the nomination facilities according to the nomination rules. Nomination of more then person in a joint deposit account: There cannot be more than nominee in respect of a joint account. Nomination facilities in respect of articles kept in safe custody jointly: Nomination facilities available only in case of individual depositor and not in respect of person jointly depositing articles for safe custody. Opening of close packets at the time of return to the serving hires: -

Banks are not require to open/close packets left with them for safe custody of found them in locker while releasing them. INTRODUCTION ABOUT SUTEX CO-OPERATIVE BANK The Sutex Co-operative Bank Ltd. Has started on 15th May, 1972. the bank has register number as per Gujarat state Co-operative Act. MSCS/CR/8099 on 8th February 1999. With the help of Mr. Surajram Hiralal Bachakaniwala. Mr. Jyotindra Bhawandas Lakhadiya & other director member at Surat. The bank is last 31 years providing service in various areas. The bank has one administrative office. The bank slogan is HALPS YOU LIVE BETTER. The date and time of all branches opened as follows:

First main office 15

th

may, 1972.
th

Station road branch 26 Gopipura branch 4


th

july,1986.

April, 1990.

Katargam branch 25 May, 1993.

Rander road branch, 1

st

November, 1994.
th

Varachha road branch 26

January, 1995.
st

Udhana magdalla road branch, 1 Athwalines branch 9


th

April 1995.

april 1995.

Parvat patiya branch 17

th

july, 1995.
th

Kim pepodara branch, 25 Sachin G.I.D.C branch 1 Salabatpura branch 30


th

September, 1995.

st

October, 2000

june, 2001.

The bank providing various facilities to customer is better than the other bank. The bank has thirteen branches, one administrative office & the ATM service available to customer in various. The bank providing 42 hour ATM service to its customer. The fast clearing service also available in the Sutex Co-operative Bank Ltd. The all branches are inter related to each other. The Sutex bank is first fully computerized Co-operative bank in Surat city. The bank provides good facility to senior citizen in fixed deposit. The facility is 1% more interest on fixed deposit. The bank is economical, medical activity with go ahead in Surat city & Surat district. Bank has provided donation in year 2001-02 & also in 2002-03 in various economical and social activities. The bank has received audit class A in last 21 year, it is great achievement of the bank. The bank provide 15% dividend to shareholder as profit. The bank start with 272 shareholder & today shareholder member is 14,800. The bank started with Rs. 5,23,315 /- working capital & today is Rs,

302,10,12,404/-.

Organization Chart
Chairman Vice-chairman Hon secretary Chief Executive officer Personnel Manager Manager Officer Clerk Peon & other Staff

Classification of Bank CLASSIFICATION OF BANK


Banks are classified into several types based on the functions they perform. Generally the banks are classified into:

1) Cooperative banks. 2) Investment or industrial banks. 3) Commercial banks. 4) Exchange banks. 5) Land development banks 6) Savings banks. 7) Central banks.

1) Co-operative banks: Co-operative banks are promoted to meet the banking requirement of consumer not only in urban areas but also in the rural areas. The co-operative banks function like commercial banks receiving deposits and leading money. In the rural areas, these banks supply finance to agriculture, while in the urban areas they provide finance to buy consumer goods. They provide short and medium-term loans. They are formed on the co-operative principles and as such they are more service oriented than profit-oriented. The co-operative banks provide credit at lower rates of interest to people of small means, like small cultivators and artisans, petty shopkeepers etc. Co-operative banks function in a given area, while commercial banks function over a wider area not limited by the boundaries of a state or a district. Most of the commercial banks have a number of branches spread over the entire country. Most of these banks function in semi-urban rural areas. In recent years, they are being established in metropolitan centers too, to canter the needs of small income groups. Co-operative banks have been classified into land development banks or land mortgage banks and urban credit-oriented banks. 2. Investment or Industrial Banks Investment banks are those banks which provide funds on longterm for industries. The investment banks are also called industrial banks. These banks have specialized in providing long term loans to industries with

a view to buy plant and machinery. The investment banks obtain funds through share capital, debentures and-term deposit from the public. The industrial or investment banks float bonds for the sake of mobilizing funds to provide funds for industrial corporations. These banks also underwrite or issue new shares and debentures of industrial companies. They also purchase entire issue of new securities of companies and later sell them to the public at a higher price. This type of specialized banking institutions is found in some developed countries like Japan. In England, issue houses or finance companies supply long-term financial needs of industrial concerns.

3.Commercial Banks Commercial banks perform all the business transactions of a typical bank. Commercial banks accept three types of deposits-the savings bank deposits, fixed deposits and current deposits. They accept these deposits, which are repayable on demand or on short notice. As such, they lend or invest only for short durations. They provide funds only for shortterm needs of trade and commerce. The commercial banks confine their activities to day-to-day functions of trade and industry. Since the commercial banks are expected to meet immediate requirements of depositors, they cannot invest credits and overdrafts. The commercial banks render an important service by providing to its customers a simple means of exchange called cheque. With the elaborate and wide use of cheque for settling debts, the use of cash has been much reduced. The cheque is considered as the most developed type of credit instrument. The commercial banks also perform a large number of

agency functions to there for which they charge a commission. The various agency functions are (1) Transfer of funds from one place to another through a medium called Banks Draft (2) Collecting customers stocks and share and safe keeping of valuables of their customers. They discount bills of exchange and such other commercial bills only for short periods. A detailed account of the functions of the commercial banks is discussed in the next chapter.

4. Exchange Banks Exchange banks are known as foreign banks or foreign exchange banks, which provide foreign exchange for import trade. Their main function is to make international payment through the purchase and sale of exchange bills. They convert home currency into foreign currency and vice versa. They discount foreign exchange bills, which are used in foreign trade. The foreign exchange banks function like commercial banks, accepting deposits and lending funds for investment. The values of foreign exchange fluctuate in view of the disequilibria in the demand and supply of foreign exchange for international trade. These banks are required to undertake the business with utmost care. Now days, some commercial banks are undertaking foreign exchange business. 5.Land development Bank

In case of co-operative banks, loans are provided for small duration only. When ever agricultural require investment loans, they have to approach land development banks, where the loans are given on long-term basis. Modern land mortgage banks provides loan terms loan on security of the land to initiate permanent improvements on the land and to buy agricultural machineries. The central land mortgage banks raise resources by means of selling debentures in the money market. Generally, these debentures are bought by big commercial banks and the central bank. The government may also stand as security to the debentures. Separate agricultural banks have been established to under take marketing of agricultural products. In India the land development banks function on co-operative principals. 6. Savings Banks Savings banks are specialized financial institutions established to mobilize savings from the people. Generally they pool the savings of the small incomes of the community. The primary object of the commercial banks is to promote thrift among the low and middle-income groups. The bank also offers interest on these deposits. The depositor is allowed to withdraw from their accounts as and when necessary. All commercial and co-operative banks have provided the saving bank accounts. The post office also runs savings banks all over the country. In fact, post office savings are losing importance with the emergence of co-

operative and commercial banking. The cheque, which is very popular with commercial bank, has been introduced in post office saving banks also. The savings bank business. 7. Central banks: Central bank is an apex bank in the country, which brings the entire banking system unified, controlled and regulated. In fact, the central bank is the main source of an efficient bank system in the country. The monetary policy of a country is formulated and enforced by the central bank. These banks are responsible for monitory responsibility in the country. Central banking is a specialist monetary system under which all other banking institution have to function. It regulates the note issue. The expansion and contraction of note issue are managed by the central bank. It assists the government in the implementation of various economic policies. It maintains not only internal value, but also external value of the currency. The banking system in the country cannot function without the guidance of the central bank. Thus the bank holds importance in the economic system of a country.

CHAPTER-5
RESOURCES OF BANK

RESOURCES OF BANK The funds the bank gives comprise of the following: Paid up capital reserves, Deposits and other accounts borrowing from the RBI are given by the bank. Participation certificates, certificates of deposits, commercial paper, undistributed profit, refinance loans from RBI, NABARD, small scale Industrial Development Bank of India and loans from financial institution. The resources may be stated in the form of a chart as follows: The resources of the bank are used in many ways to earn an income. The resources are used in conformity with the leading policy of the banks. The uses of funds are classified as follows: 1) Call loans and loans repayable in short notice. 2) Investment in government securities.

3) Loans and advances.

1) Call loans & loans repayable in short notice: The call loans are generally given to the stock and share brokers, discount houses and to the stock exchanges. As every bank deposits, which may be withdrawn without notice, and the cash balance in the banks vaults and balances with other banks may not be enough for meeting such demands, money lent in the form of call loans and loans repayable on short notice acts as the second line of defense. As earlier stated, cash reserve with the RBI acts as the first line of defense. In the distribution of assets, these to items are considered to be the safe items. Since these loans earn interest, it is also income-earning assets, while the money kept in reserve bank does not any income. In India owing to absence of a well-established money market, the surplus funds are invested in short government securities. However, there is inter bank lending in cities like Bombay and Calcutta and call money rate is 10%. Investment of Indian banks in the form of money at call short notice is very insignificant.

2) Investment in government security: Investment in government security is a statutory obligation. Since the demand for funds for economic development by the

government is increasing. It has been increased from 34% to 38.5% during the period of 3 decades. Private sector banks a small portion of resources in the form of shares and debenture of private companies. The state bank of India and national banks are not authorized to invest in the shares of joint stock companies. The investment policy of bank is guided by the following factor: Safety: the banks look for safety of investment as they can not

afford to lose the money they invest. If they invest in shares and stock in private companies, they are bond to lose, since their prices are not remain stable for a long period. But in the case of government securities, the rate of interest though low, remains stable, so Bankers prefer government securities to share and stock of industries. Marketability: The government securities are easily marketable while the shares and stocks of companies are not so. Investment in government security is considered as third line of defense. If the bank faces any crisis, it can sell government securities to the reserve bank without increasing any loss. In an individual decide to sell the shares and stocks in the exchange, he may gate a higher price or incur loss. Liquidity: Liquidity means converting an asset in to cash

without any loss. The government bonds have a ready market but it is not so in the case of shares and stocks of private company. The company, which issues stocks and shares will not buy them back.

It has to be sold in the share market where the price is not guaranteed. He may not find buyer for his shares. Hence the shares and stock of companies are not liquid. Income and yield: The banker must also aim at getting a fair and stable return on the capital outlay. He should not look for high yield. The speculative securities may bring high yield for some period but not permanently. He should not think investing in such speculative securities. He should not aim at high yield at the cost of safety. The yield depends upon the market price at time of purchase, the rate of interest that the securities carry, its price at time of deduction of taxes if any. The securities yield different rates of profit when purchase at a discount.

3) Loans and advances:


Loans and advances are considered to be important banks to deploy the finds. They are of several kinds; cash credit, overdrafts, demand loans, term loans, packing credit, export bill purchased discounted, advances against important bills etc. cash credit is a simple lone where cash is given against the promissory note. It is essentially a drawing account against loan granted by the bank and is operated in the same way as a currant account on which overdraft is sanctioned. In Indian, cash is one of the most popular forms of loan. Cash is grant against hypothecation of goods, book debts and personal security.

CLASSIFICATION OF SECURITIES It is a statutory obligation on the part of the banks to invest a certain percentage of deposits in the form of government securities. As the deposits in the commercial banks swells, the amount of money invested in government securities also increases. The investment of banks in central and state loans and treasury bills increased from Rs.9, 400 crore in 1979 to Rs. 13, 800 corer in1983 and to Rs. 1, 04, 902 corer in 1992-1993. in recent years, there has been increase in the rate of interest of government loans. As the achievement is valued at market prices, the banks will be compelled to find additional in government securities to maintain SLR at 38.5 percent. The following are the main classes of stock exchange securities.

Public Debts: Government of India and state government raise public loans to cover the budgetary deficits. The term as regards the rate of interest and repayments are made very clear while announcing the loans. When the government borrows from the public, the credit of the entire nation is pledged. Generally, all the commercial banks in India subscribe to government loans.

Semi Government Securities: Theses are the bonds executed port trust, the government guarantees municipal councils etc. theses, they are also safe, and the government guarantees the repayment.

Gilt-Edged Securities: They include not only government securities but also municipal bonds.

Treasury bills: The banks whenever they find surplus of cash in its vaults, they invest in treasury bills. The RBI sells treasury whenever necessary on behalf of central government. The sales of treasury bills provide short term finance to government and also help to absorb excess of liquidity in the money market. The buyers of the treasury bills are commercial banks only. The RBI rediscounts the bills when the banks are in the need of funds.

Industrial securities: In this are included all the securities such as shares, stocks, bonds and debenture of companies engaged in production and distribution of varieties of commodities and services. Such companies are classified in to manufacturing, trading, extracting and shipping.

OVER DRAFTS Loan is a facility given to current account holders. In this arrangement, the customer is permitted to draw up to a limit fixed by the bank. The security for overdraft is personal, shares, stock, debenture, government papers etc. overdrafts are temporary in nature and generally are give to business of high standing and integrity. Demand Loans:

Demand Loans are simple loans, which have not stated maturity and may be asked to pay on demand. The silent feature of this loan is that the contract account is paid to customer at one time either in cash or by transfers to his current account. Term Loans: Term Loans are defines as loans given by the bank to the customers whose final maturity period is longer than one year. A term loan enables the party to by plant and machinery. The duration of loan may be 8 to 10 years over the year and the volume of term loans has more than doubled since bank nationalization. Bills Purchased: Banks land money against bills, or documentary of the customers. Banks purchase the bills or hold the bills against bank loan. This facility is given only trust worthy customers. Bills Discounted: The bank discounts usance bills with a maturity period of about 960 days or after the date or sight of approved parties. After discounting the bills of exchangers, the proceeds are credited to the customers account. The discount constitutes profits to the bank. Discounting of promissory notes constitute a clean exchange advance against the signatures of two parties

known to the bank, of whom becomes the endorser and the other becomes drawer or the maker. Packing Credit: Packing credit is a short-term advance granted by a bank to an exporter to against him in packing and shipping the goods. The loans against such items are given for a maximum period a tree months. Consumer Credit: The banks provide consumer loans to their customer to by household goods. The amount of loan is recovered by suitable installments. Clean Advance: It is a short period advance gives to customers taking in into consideration their liquid resources since there is no security offered to this loans-they are granted against personal securities. Clean advance are spread over a number of parties and are sometimes reinforced by suitable guarantees.

BANKERS Number of definition of the term BANKER has been put forward by different writer on the subject. We have discussed here some of the important ones. But one of the definition give a precise meaning of the term.

DEFINITION: A banker or bank is a person or company carrying on the business of receiving money and collecting drafts, for customer subject to the obligation of honoring cheque drawn upon them from time to time by the customers in the extent of the amounts available in their current accounts . This definition tells the features of an institution to be called a bank or banker. They are: (1) Receiving money and collecting drafts-this means accepting the money on current accounts and collecting the cheque and drafts on behalf of the customers. (2) The obligation of honoring cheque drawn upon them, making payment across the counter on demand by the customers to the extent of money available at the credit of customers account or up to the sanctioned limit on case of overdrafts. (3) The main line of activity of the organization should be the banking business (It was held in a court decision Stafford us Henry (1950) that one Mr. Labertouche , who carried wide variety of business activities in his organization, was not a banker as his main line of activity was not banking business), Definition By Kinlay:

An establishment which makes to individuals such advance of money as may be required and safely made and to which individuals entrust money when not needed by them for use. The Indian banking companies Act, 1949, renamed form 1966, the banking regulation Act, gives a definition of term Banker. Accordingly, any company which transacts the business of banking in India is called company. The term banking has been define as accepting for the purpose of lending and investment, of deposits of money from the public, repayable on demand or otherwise and withdrawal by cheque, draft. Section of the Act list out various functions in which a banking institution can be engaged. They are: The borrowing, raising or taking up of money in the form of deposits in time, current or savings account. Granting and issuing letters of credit, travelers cheque and circular notes. The buying and selling of foreign exchange including forengin notes.

Acquiring, holding, issuing on commission, underwriting and dealing in stocks, funds, shares, debenture, bonds, obligation. Securities and investment of all kinds. The receiving of all kinds of bonds, or valuable on deposits. The provision of safe deposits. The collecting and transmitting of money and securities. Undertaking and executing trust. Contracting for public and privet loan and negotiating and issuing the same. The Indian banking regulation Act covers a wide variety of activities that can be taken up by the banking companies. Based upon such activities, an institution can identify as banking company or banker.

As already stated, it should satisfy the following condition:

There should be the acceptance of the deposit from the public. But lending money without accepting the deposit amounts cannot be called banking activities. This has been stated in much legal decision. Any type of deposit viz. time, current and savings account can be accepted. But the current account should be operated through cheque. This is the distinct feature in banking companies. The deposit on maturity should be paid through cheque or through any other approved withdrawing instrument. The deposit can be paid on demand to the depositors even prior to the maturity. The deposit so accepted shall be lent or invested in different approved securities. Another condition is that the bank should have banking function as the main line of activity.

CUSTOMER

DEFINITION: To constitute a customer, there must be some recognizable of habit of dealing in the nature of regular banking business. It is difficult to reconcile the idea of a single transaction with that of a customer. The ward customer surely predicates even grammatically, some minimum of custom antithetic to an isolated act. It is believed that tradesman differentiates between a customer and a casual purchaser. This viewpoint indicates that two aspects are essential to constitute a customer: (1) There must be some recognizable course of habit of dealing between the person and the bank. And (2) The traction must be in the nature of regular banking business. The first essential condition that more opening an account with the bank by a person cannot make him a customer of the bank was upheld in the Mathews vs Williams, Brown & Co., suit. It was held that a customer should have regular transaction with the bank and just opening an account with bank cannot constitute him a customer. this was called Duration Theory, as the relationship with the banker was suppose to be continuous and in greater frequency.

John Paget observed the the relationship of customer and banker beings as soon as the first cheque is paid in and accepted for collection and not merely when it is paid. According to this judgment, a person is identified as a customer when he opens an account with the bank. Types of customer: MINOR: A person who has completed 18 years of age is a minor. If the court appoints a guardian of his person or property before the 18th years, he remains minor till he completes his 21st year. According to the Indian contract Act, 1872, a minor is not capable of entering into a valid contract and a contract entered in to by a minor is void. Therefore a banker should be very care full in dealing with a minor and take the following precaution: (1) The banker ma open a saving account in the name of minor, in any of the following ways: In the name of the minor, to be operated upon by himself, if he has attained the age of years. Two such minors can jointly open such an account, to be operated upon by them jointly. In the name of the minor, to be operated by the natural guardian of the minor or the guardian appointed by the court. Such account can also be

opened in the joint names of two of more minors, to be operated by the guardian. (2) The bank records the date of birth of the minor as given by the minors guardian. On the appointment of majority, the account of the minor in the name of the guardian should be closed and the balance paid to the minor. (3) If the father of Hindu minor dies, his mother becomes his natural guardian. After the death of mother, during the minority of the boy there is either the testamentary guardian appointed by the court. (4) In case the minor dies, the balance in the account is permitted to be withdrawn by the guardian and in case of joint account the balance will be held at the absolute disposal of the guardian. As Agent: A minor can act agent for another person who is competent to contract. Provided his principal has duly authorized him to do so. E.g. a minor son may make contracts, besides endorsing cheque and bills, on behalf of his father, if his father has duly authorized him to act as his agent. Lunatic:

According to section 12 of Indian contract act, 1872, a person is said to be of sound mind for the purpose of making a contract, if at the time when hw makes it, he is capable of understanding the nature and effect of the same and of forming a rational judgment as o its effect upon his interest. This definition is act as guide in deciding whether a person is a lunatic or not. As soon as the banker comes to know of the insanity of his customer. If the customer is confined to a lunatic asylum or judicially declared a lunatic be a competent court under the lunacy Act. Married Woman: A Hindu married woman can enter in to contracts and bind her estate. A married woman not disqualified from entering in to contracts by reason of her marriage. Married women of other communities in India are given the same power of holding separate properties by section 4 of the Indian succession Act, 1925, and section 4 of he married womens property Act, 1874. a contract by a married women would bind her husband only if it is fir the purchase of her necessities.

RELATIONSHIP Essentially the relationship between the banker and the customer is that of a contractual relationship. This relationship of two types General relationship and special relationship. General relationship may further be classified as Primary and Secondary relationship. Primary General relationship is in the form of a Debtor, which arises out of a contract between the banker and the customer. Banker is neither a bailee nor a trustee nor an agent only a debtor. Thus the fundamental relationship is that of Debtor and Creditor. Some times the banker discharges agency functions like collection of bills, cheque etc, acts as a bailee by keepings valuables in safe custody and acts as trustee by administrating the property for the benefit of defined beneficiary. Here the relationship is not that of Debtor-Creditor. The authorities on banking law have said that primary relationship is that of Debtor and Creditor.

DEBTOR-CREDITOR RELATIONSHIP Sir John Paget stated the The relation of the banker and the customer is primarily that of debtor and creditor, the perspective position being determine by the existing state of the account. H.P.Sheldon is of the opinion that the banker, when he receives money from customers, does not hold the money in a fiduciary capacity. To say that money is deposited with a banker is likely to cause misapprehension, what really happens is that the money is not deposited with, but lent to the banker all that the banker agrees to do is to discharge the debt by paying over an equal amount when call upon. Even in Indian courts a similar opinion is given. By perusing these court decisions and sayings of the authorities on the subject, it is clear that exists between the banker and customer is primarily that of the debtor and creditor. A banker is neither a bailee nor trustee nor agent of the customers money deposited in the account. According to bailment, the bailee has to return the goods bailed to the bailor without using it. But the banker does not have any such condition from the customer that whatever money deposited

in any account shall be given back to the customer intact without using it. Banker is a liberty ti utilse the same for lending and returns the money to the customer only on demand at the right place and at right time. The demand should be through an instrument-cheque-and in writing. Similarly, the trustee position implies that the money shall be utilized according to the trust deed. But the banker nit need utilize money in accordance with the specified deed and is free to utilize the deposited money in any manner he deems fit. Thus, when the deposit is accepted from the customers, the banker is only a debtor and the customer is creditor. However, when the loans obtain by the customer exceeds any money to his credit at that bank, the position changes and the banker becomes creditor and the customer becomes debtors and the relationship of banker and customer is that of debtor and creditor and it may change vice versa. SPECIAL FEATUYRE OF DEBTOR-CREDITOR RALATIONSHIP Banker is called a dignified debtor. Virtually he borrows money but it is given a number called Deposit. No security need be given for this borrowing. The peculiar feature is that the debtor need not go to the creditor for obtaining funds and the debts has to be paid during the business hours of the bank only when the creditor demands. Customer is not the secured creditor of the bank, as he is not having any charge on any asset of the bank. He is only an assured creditor.

Banker should pay the deposit money on demand by the customer. The demand should be med by the customer on working days and during the business hour and it should made in proper form. If any payment is made on holidays and in non-business it will not be a payment on due course.

There are certain basic difference between an ordinary debt and due by a bank as a debtor to the customer. The bank debt is called deposit whereas the monetary obligation between creditor and debtors is called debt. In the normal leading transactions, the debtor goes to the creditor for borrowing. But in case of bank deposit, it is quite the other way. Bank deposit can withdraw whenever the customer wants to do so. The debtor cannot demand the ordinary debt. The banker at a specific place repays bank deposits during working hours, whereas the commercial debt can be paid anywhere, any day and at any time.

Ordinary commercial debt can be settled orally. But the banker will clear bank debt only when the demand is maid in writing.

OPERATION OF BANK AACOUNT (Different Department Of Banking System) In India, banks generally accept deposits in four types of account, namely: (1) Fixed Deposit Account; (2) Saving Deposit Account; (3) Current Account; FIXED DEPOSIT In the case of fixed deposit and time deposit, the depositor agrees not to withdraw the amount deposited for a specific period, which ordinarily varies from three months to five years. The fixing of the period enables the banker to invest the money. Without having to keep reserve, and this is one of the reasons why fixed deposit are so popular. The fixed deposits are also termed time liabilities, which means that withdrawable deposits are subject to a notice and not on demand. Features of Fixed Deposit:

Legal position: In the case of fixed deposits, the legal position of a banker is that of a debtor who is not bound to repay the amount before its due date. The banker continues to be a debtor even though the period fixed for the deposit has expired and the depositor has not withdrawn in. Transferability: When the money is deposited in this account, the banker issue a receipt known as a Fixed Deposit Receipt, which is usually marked: not negotiable. This receipt is not recognized as a negotiable instrument, as giving the transferee the right to use the bank in his own name. It may be transferred by way of assignment to a third party, but since it is not a negotiable instrument, the transferee cannot have a better title than the transferor. Loss of Deposit Receipt: If a fixed deposit receipt is lost, the amount can safely be paid by the bank on obtaining an ordinarily indemnity bond signed by the depositor. Deposit in joint names: Banker frequently receives fixed deposit in joint names of two or more person. In such cases, both or all the parties should jointly withdraw

except one has died, in which case the property in the usual course passes to the survivor or survivors, to whom a banker can safely pay, provided ha has no knowledge of any trust.

Request for Duplicate Receipt In case of the joint depositors inform about the lose of the FRD and request it to issue a duplicate one, the banker should insist that such request should be signed by the depositor. Donation of receipt: A deposit receipt is held to be a good subject of a donation mortis causa; and on the death of donor. The gift will pass to the donee, although it is expressly said to be not transferable. Payment of interest: Normally the interest accrued on fixed deposits is payable at maturity, but banks pay interest quarterly or half yearly at the request of the depositor. The interest earn during the quarter is paid to the depositor in case or is credited to his savings bank account. Interest After Maturity of Fixed Deposit:

On the maturity of the fixed deposit, interest cases to accrue, but the bank may, at its direction, allow interest, if the deposit is renewed. According to the directive of the reserve bank, a banker may at his direction, allow interest on matured fixed deposit for the overdue period provided that: (1) The deposit is renewed with effect from the date on which it matured for payment and (2) The rate of interest allowed does not exceed the appropriate rate applicable to the period for which the deposit is proposed to be renewed as ruling on the date of maturity of the deposit. Renewal before maturity: The reserve bank have permitted the banks to the renew an existing term deposit before maturity without invoking the penalty provided. It is renewed before the date of maturity, and The period of renewal is longer than the remaining period of the original deposit. In such case the inters will be payable as follows: (1) On the original deposit the rate applicable to the period, which the deposit has actually run prevailing at the time of original deposit.

(2) Interest for the period from the date of renewal will be allowed at the rate prevailing on the date of renewal.

Advance Against Fixed Deposit: A banker may give advance to the depositor on the maturity of the fixed deposit the amount of advance can be up to 71 per cent of the actual deposit plus interest accrued thereon up to the time the loan is give. On such advances, the bank chares a rate of interest, which is 2 percent higher than interest payable on the deposit.

Payment of fixed deposit before maturity: Although, normally fixed deposit is payable on or after the date of maturity, banks allow the depositor premature encashment if ha desire. In premature encashment of fixed deposit the rate of interest is calculated as under. First, the rate of interest applicable foe the deposit on the basis of the period for which it retained with the bank is determined. Then the said rate is reduce by one percent point. This penalty for premature withdrawal of the term deposit was reducing from the two percent to one percent.

SAVINGS DEPOSIT ACCOUNT This type of account is suited to those who want to deposit their small savings in bank, which they need to withdraw only occasionally. The interest rate on saving deposit is lower than that allowed on fixed deposits. It is calculated on the lowest balance kept during a month. To open a savings bank account, a person has to fill in a prescribe form and make a declaration therein that he has read the rules governing the savings bank account. Ha has also to give his specimen signatures. The customer is given a passbook, a cheque for withdrawal and pay-in-slip book for deposit.

Restriction on Savings Bank Deposit: Any amount subject to a minimum of Rs. 50 may be deposited in the savings bank account. Minimum opening amount for semi urban area is Rs. 200/- whereas for urban area it is Rs.500/-. Minimum balance for

chequebook A/c. in semi urban area is Rs.250/- whereas in urban area it is Rs. 500/-. Restriction on Withdrawals: Bank imposes restriction on the right of the depositor to withdraw money within specified period of time. In one year, the number of withdrawals is limited to 150. But bank may allow more withdrawals in special cases according to their direction. Depositors are not allowed to withdraw a sum, which is less than Rs. 50/- or a sum which not multiple of Re.1/- unless the account of depositor is closed. Interest on Savings Bank Account: The rate of interest to be paid by the banks to depositors on savings bank deposit is prescribed by the reserve bank of India. At present the rate of interest on saving bank account is 4.5%. Cooperative bank and regional rural bank have been allowed to give % more interest than the normal interest rate prescribed by the reserve bank. Interest is calculated at quarterly or half yearly rates, on the minimum balance to the credit of the account during the period from the tenth day to the last day of the credit calendar of each calendar month on every complete sum of Rs. 10/- and is credited to the account. Saving account should not be opened by the bank in the name of government department, Municipal Corporation, state cooperative societies, state housing boards.

CURRENT DEPOSIT ACCOUNT In the case of deposits in current accounts, also called demand deposits, the bankers incurs the obligation of paying all cheque drawn against him loan as there is enough money to the credit of his customer. The customer on the other hand, pays money in the form of cash, cheque, postal orders etc. in his current account. The banker supplies to the customer a passbook, a pay-in-slip book for deposit and a chequebook for withdrawals. The customer is allow to deposit or withdraw money as and when he likes. No interest is allow by most banks on current account deposit, banks do allow interest in the balance does not fall below a certain limit. Some banks charges one or two rupees every half year with a view to meeting the expense of maintaining such account. A current account carries certain privileges, which are not given to a saving bank A/c holder, e.g.

(1) Third party cheque and cheque with endorsement may be deposited in the current for collection and credit (2) Over draft facilities are given in case of current account only. (3) The loans and advances grated by the banks to their customer are not given in the form of cash but through the current accounts. .

New Deposit Schemes Introduced By Bank: Super saving Package: This is a scheme of long term savings in which the depositor has to deposit every month a specified sum for a long period say 10 to 40 years, and after the expiry of that period the total amount along with accumulated interest is paid back to him. Cash Certificate: Case certificate of different face values are issued by banks. These certificate are payable after a specified period of maturity. The issue price and the period of maturity is specified in advance.

Annuity Deposit

In this scheme the depositor makes an initial deposit of a specified amount and there fore receives monthly annuity amount for a specified time period. The depositor has to opt for a monthly annuity for 24, 36, 48, 84 120 months and the amount of initial deposit depends upon the period of annuity. Perennial Pension Plan: In the perennial pension plan, the depositor deposits a specified sum every month for 84 month. From the 86th month bank pays a monthly pension. The banker agrees to pay a specified sum to the depositor when pension is discontinued. Educational Plan: This is a plan to motivate the depositors to save for the education of their children. The depositor is required to deposit Rs. 100 per month during the period his child studies sum annually from nursery to seventh class. After this period, the bank pays a specified sum annually up to the time the child completes university education. In the same plan, there are provisions for higher education or even education abroad.

CLASSIFICATION OF DEPOSITS: Deposit of bank have classified by reserve bank in to broad categories, (1) Demand Deposit, and (2) Time Deposits. Demand Deposits: Current Deposits Demand liabilities portion of savings bank deposits. Balance in overdue Deposits. Cash Certificate. Recurring Deposits. Unclaimed Deposits. Credit balance in cash credit account

Time Deposits: Fixed Deposits. Cash Certificate. Recurring Deposit, Staff security Deposits. Fixed deposits held as security for advances.

FUNCTIONS OF BANK: Making loan and Advances: Banks service deposits with a view to lend. Providing loans and advances out of money which the bank receives by way of deposits is the first major function of commercial bank. They different types of loans. Direct loan and advances are given to person against the security of movable priorities. The different types of loan given by the bank are direct loans, cash credits, bills discounted and over draft etc. an over draft is an arrangement where the customer is allowed to overdue from his account. It is done through discounting bill of exchange. The depositors are provided loans not only to protect surplus funds, but also for safe investments. Cash credit is given to manufacture against the security of goods or proposal security of one or more person. Traders prefer cash credit direct

loan. The interest is charged only on the amount drawn by the customer. Banks also provide loans by discounting the bills of exchange. This is the most common method of advancing loans to businessmen in western countries. Thus, banks working as the middleman, mobilize the savings from the public and provide them to the traders and industrialists for development of the nation.

Agency service: Apart of functions, the banks also perform other use full function, they are the following: Popularizing the cheque system: The banks have developed and popularized the cheque system through, which transfer of money is made possible. The cheque system has reduced the use of cash to a considerable extent. The cheque system is a highly developed system of credit instrument through, which money can be transferred from one country to another. The bank function miscellaneous functions such as undertaking the payment subscriptions, insurance premium, rent etc.

The bank accept the standing instrument from the customer and make payment as and when directed. They charge a certain amount of fee means of commission for these services. The bank also undertakes to buy and sell securities on behalf of the customers. Banks also act like a representative of the customers, other banks and financial institution. Finally, the banker acts as a trustee, executor, administrator and an attorney. General utility services: The commercial banks render a good number of useful service known as general utility services. The general utility services include the safekeeping of valuables and documents, the issue of credit instruments for easy transfer of funds, collection of credit information regarding the customers, transaction in foreign exchange and provision of specialized advisory Services to the customers. The bank provides safe deposit lockers o the customers to keep their securities, jeweler, documents of tile to goods, etc. he customer require o pa an annual rent for this purpose. The banks discount the foreign exchange bills drawn by Indian exporters on the foreign importers and thus help the exporters to get money in home currency.

CONCEP OF MODERNBANKING Foundation of Modern Banking: Modern banking as a services institution is a large corporate giant with large resources and multi-faceted activities. Since the nationalization of banks in India, there has been a great surge in the banking industry throughout the world with the growing number of banking offices. The banking business today has become highly critical and competitive between various class of banks in offering a grater variety of services nationally and internationally. Indian banks have also realized that to cope with enormously increased volume of business, like their counterparts in the western countries. Modern banking institution has resorted to automation by means

of introducing computers and other equipment as well as the wealth of information technology. The main aim of modernizing banking system is to improve bank operation with a view to maintain high standard banking. This involves application of better management techniques. In India, class banking has given way to mass banking, thereby bringing in its fold a large number of customers. In India apart from providing credit to agriculture, trade industry and commerce, are offering a good number of service to the customer such as making pension payment to retired government servant and collection of water and electricity bills, telephone bills, taking by and sell decision on behalf of their customer. Evaluation of Modern Banking: The growth of banking in nineteenth century paved the way for the establishment of systematic banking system in the world. Banking institution in the past performed, limited fuction such as receiving deposit against bank note then issuing note in the country. As time advanced, commerce and industry expanded and the scope of banking also expanded. Banking institution deal with large number of services to the customers. They finance import and exports. The document relating to import and export passed through banks. They deal not only bill of exchange, but also bill of lading, railway receipt, warehouse warrants, and receipt. As banker they advance money on security and issue latter of credit.

The bankers also countersign indemnities and provide guarantee to the party on the behalf of their customer. They undertake the administration of estates. They assume the position of trustee. They assist industrial undertakings by underwriting their debentures and shares and provide for working capital and fixed capital requirement. The more highly developed a country is the greater is the instrumentality of the banker utilized to carry out through commercial transactions.

SUGGESTIONS The bank has to create good relation with its customer that will increase the well image of the bank in the market than the other banks. The bank should increase the capacity of giving loan and advances. The bank should provide ATM service like other banks For increasing the business, the bank should follow the system of urban bank.

The bank should provide the demat service to its customer. The bank should adopt modern technology by converting possible activities of its in to computerized.

ACKNOWLEDGEMENT
After the completion of the task, I fill it necessary to thank those person who have helped me directly or indirectly in the preparation of the project. First off all, I gratitude to Mr. J.B.Sinde, Manager, who providing opportunity me to undertake the project. I am also thankful to Mr. K.N.Nayak,Cheaf Exicutive for their cooperation and guidance given me as senior. I express my deep sense of gratitude to all staff members of Sutex Cooperative Bank for their help during the course of the project.

I am very grateful to the Hon.Diractor/ Co-ordinatorof Pro. V.B.Shah Institute of Management and R.V. patel College of Commerce for giving me the opportunity to come to this stage. Kindly the project would have been possible unless carried out the experience, guidance and supervision of Prof. Mahesh Abale has potentially and critically gone through the subject matter. Finally I would like to thank to all those people, who are direct or indirectly contributed to my project. Chaudhari Surendra A. (March 2004)