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 PROJECT ON: CO-OPERATIVES & RURAL MARKETS

Submitted By:

Project Guide:

University of Mumbai
 Declaration

I, ____________
of______________________________________________________, hereby
declare that I have completed the project titled Co-Operative Banks in the
academic year _________. The information submitted is true and original to the
best of my knowledge.

Signature
 Certificate of Project Completion

Certified that the project report titled Co-operative Bank has been completed
satisfactorily in partial fulfillment of B.M.S course of the academic year
_________by ____________a student of __________________________

PlaceDate:

Principal

Seen By

Internal Examiner

Signature

Date

External Examiner

Signature

Date
 Co-operative Banks
Overview

C o-operative movement is quite well established in India. The first

legislation on co-operation was passed in 1904. In 1914 the Maclagen
committee envisaged a three tier structure for co-operative banking
viz. Primary Agricultural Credit Societies (PACs) at the grass root level,
Central Co-operative Banks at the district level and State Co-operative Banks
at state level or Apex Level. The first urban co-operative bank in India was
formed nearly 100 years back in Baroda. 

Co-operative Institutions are engaged in all kinds of activities namely

production, processing, marketing, distribution, servicing, and banking in
India and have vast and powerful superstructure. Co-operative Banks are
important cogs in this structure. 

In the beginning of 20th century, availability of credit in India, more

particularly in rural areas, was almost absent. Agricultural and related
activities were starved of organized, institutional credit. The rural folk had to
depend entirely on the money lenders, who lent often at usurious rates of
interest. 

The co-operative banks arrived in India in the beginning of 20th Century as

an official effort to create a new type of institution based on the principles of
co-operative organization and management, suitable for problems peculiar to
Indian conditions. These banks were conceived as substitutes for money
lenders, to provide timely and adequate short-term and long-term
institutional credit at reasonable rates of interest. 
In the formative stage Co-operative Banks were Urban Co-operative Societies
run on community basis and their lending activities were restricted to meeting
the credit requirements of their members. The concept of Urban Co-operative
Bank was first spelt out by Mehta Bhansali Committee in 1939 which defined
on Urban Co-operative Bank . Provisions of Section 5 (CCV) of Banking
Regulation Act, 1949 (as applicable to Co-operative Societies) defined an
Urban Co-operative Bank as a Primary Co-operative Bank other than a
Primary Co-operative Society were made applicable in 1966. 

With gradual growth and also given Philip with the economic boom, urban
banking sector received tremendous boost and started diversifying its credit
portfolio. Besides giving traditional lending activity meeting the credit
requirements of their customers they started catering to various sorts of
customers viz.self-employed, small businessmen / industries, house finance,
consumer finance, personal finance etc. 
BANK PROFILE

 NKGSB was founded by a great visionary Sheth Shantaram Mangesh

Kulkarni on 26th September, 1917.

 The Bank with a modest beginning in 1917, is now a Multi-State Bank

having its area of operation in the States of Maharashtra, Karnataka,
Goa, Gujarat and Union territories of Daman, Diu, Dadra and Nagar
Haveli.

 Today the Bank has 42 branches spread over in the state of

Maharashtra, Goa & Karnataka.

 Mumbai - 27 branches

 Navi Mumbai – Vashi, CBD Belapur & Panvel (3 branches)

 Maharashtra other than Mumbai - Pune – (Kothrud & Aund),

Kolhapur – (Kolhapur Main & Uma talkies. These are takeover of
Shahu Co-operative Bank) & Nashik

 Goa- Ponda & Panaji

 Karnataka – Karwar- Main. Karwar -Baad, Hubli,  Belgaum & Sirsi.

 Bank opened its 42nd branch, 5th in Karnataka at Sirsi on 13th

November, 2010 and will shortly be opening branches at Thane,
Kalayan and Goregaon (W) during the financial year 2010-11

 Over the years, the Bank has consistently shown robust growth both
quantitatively and qualitatively. The Bank has not only grown in size
of deposits and advances, but has multiplied its net worth making the
institution financially sound and fundamentally strong.
  The Board of Directors of the Bank consists of well qualified
professionals enriched with varied experience in the strategic fields of
Finance, Technology, Business and Management. Being driven by the
co-operative principles, management lays emphasis on profits but with
focus on the welfare of our stakeholders.

 As a part of good governance practice, the Bank has adopted code of

good business principles and accepted the responsibility to ensure that
they are observed down the line as a work culture in its true spirit.
The business philosophy is based on four core values i.e. pillars of
service excellence, customer focus, product innovation and resourceful
people.

 In terms of our commitment for harnessing the state of art technology,

networking all 42 branches counter under ‘Core banking solution’,
customers can access their accounts and perform banking operations
‘anywhere anytime’ with value added services.

 The Bank has varied Deposit products to suit every needs of

customers, so also the bank has occupied a place of pride with those
who are financed for offering tailor-made complete credit solutions
under one roof packaged at liberal, competitive and flexible terms, let
it be personal finance or loan facilities for Short term as well Long
term requirement of Small Businessman, Professionals, Small &
Medium Enterprises and Corporates.

Financial Achievements of NKGSB CO-OP Bank LTD.

Financial achievements: Significant growth path during the Decade:

2000-2010v/s 1990-2000

No. of No. No. of Owned Deposits Advances  Net No. of

Year Branche of Member Funds (Rs cr) (Rs cr) Profit Employee
s A/Cs s (Rs cr) (Rs s
‘000 ‘000 cr)
1990 9 79 41 3.8 48 29 0.5 152
2000 18 203 55 37.2 438 229 5.1 310
2009 27 431 73 158.3 1,840 1,089 27.2* 541
2010 40 461 74 176.2 2,298 1,370 27.4* 641
Introduction of Cooperative Bank

C ooperative banking is retail and commercial banking organized on

a cooperative basis. Cooperative banking institutions take deposits
and lend money in most parts of the world. Cooperative banking (for
the purposes of this article), includes retail banking, as carried out by credit
unions, mutual savings and loan associations, building societies and
cooperatives, as well as commercial banking services provided by mutual
organizations (such as cooperative federations) to cooperative businesses.
Co-operative banks differ from stockholder banks by their organization, their
goals, their values and their governance. In most countries, they are
supervised and controlled by banking authorities and have to respect
prudential banking regulations, which put them at a level playing field with
stockholder banks. Depending on countries, this control and supervision can
be implemented directly by state entities or delegated to a co-operative
federation or central body. Even if their organizational rules can vary
according to their respective national legislations, co-operative banks share
common features:
• Customer-owned entities: in a co-operative bank, the needs of the customers
meet the needs of the owners, as co-operative bank members are both. As a
consequence, the first aim of a co-operative bank is not to maximize profit but
to provide the best possible products and services to its members. Some co-
operative banks only operate with their members but most of them also admit
non-member clients to benefit from their banking and financial services.
• Democratic member control: co-operative banks are owned and controlled
by their members, who democratically elect the board of directors. Members
usually have equal voting rights, according to the co-operative principle of
“one person, one vote”.
• Profit allocation: in a co-operative bank, a significant part of the yearly
profit, benefits or surplus is usually allocated to constitute reserves. A part of
this profit can also be distributed to the co-operative members, with legal or
statutory limitations in most cases. Profit is usually allocated to members
either through a patronage dividend, which is related to the use of the co-
operative’s products and services by each member, or through an interest or a
dividend, which is related to the number of shares subscribed by each
member.
Co-operative banks are deeply rooted inside local areas and communities.
They are involved in local development and contribute to the sustainable
development of their communities, as their members and management board
usually belong to the communities in which they exercise their activities. By
increasing banking access in areas or markets where other banks are less
present – SMEs, farmers in rural areas, middle or low income households in
urban areas - co-operative banks reduce banking exclusion and foster the
economic ability of millions of people. They play an influential role on the
economic growth in the countries in which they work in and increase the
efficiency of the international financial system. Their specific form of
enterprise, relying on the above-mentioned principles of organization, has
proven successful both in developed and developing countries.
The Co-operative banks have a history of almost 100 years. The Co-operative
banks are an important constituent of the Indian Financial System, judging
by the role assigned to them, the expectations they are supposed to fulfil, their
number, and the number of offices they operate. The co-operative movement
originated in the West, but the importance that such banks have assumed in
India is rarely paralleled anywhere else in the world. Their role in rural
financing continues to be important even today, and their business in the
urban areas also has increased phenomenally in recent years mainly due to
the sharp increase in the number of primary co-operative banks. 

While the co-operative banks in rural areas mainly finance agricultural based
activities including farming, cattle, milk, hatchery, personal finance etc. along
with some small scale industries and self-employment driven activities, the co-
operative banks in urban areas mainly finance various categories of people for
self-employment, industries, small scale units, home finance, consumer
finance, personal finance, etc.
Some of the co-operative banks are quite forward looking and have developed
sufficient core competencies to challenge state and private sector banks. 

According to NAFCUB the total deposits & lendings of Co-operative Banks is

much more than Old Private Sector Banks & also the New Private Sector
Banks. This exponential growth of Co-operative Banks is attributed mainly to
their much better local reach, personal interaction with customers, their
ability to catch the nerve of the local clientele.
The cooperative banks/credit institutions constitute the second segment of
Indian banking system, comprising of about 14% of the total banking sector
asset (March 2007).Bulk of the cooperative banks operates in the rural
regions with rural coop banks accounting for 67% of the total asset and 67%
of the total branches of all cooperative banks. Share of rural cooperatives in
total institutional credit was 62% in 1992-93, 34% in 2002-03 and 53% in
2006-07. Cooperative banks have an impressive network of outlets for
institutional credit in India, particularly in rural India (1 PACS per 7
villages). In March 2007, there were 97,224 PACS in rural India against
30,393 branches of commercial banks (more than 3 times of outlet of coop
banks). In March 2007, there were 102 savings A/C and 113 cooperative bank
members per 1000 rural in India. Cooperative banks (both rural and urban)
cater to small and marginal clients. Financial health of the cooperative credit
institutions, particularly the rural cooperatives, has been found to be poor by
several Committees.

Though registered under the Co-operative Societies Act of the Respective

States (where formed originally) the banking related activities of the co-
operative banks are also regulated by the Reserve Bank of India. They are
governed by the Banking Regulations Act 1949 and Banking Laws (Co-
operative Societies) Act, 1965.
DEFINE
A co-operative bank is a financial entity which belongs to its members, who
are at the same time the owners and the customers of their bank. Co-operative
banks are often created by persons belonging to the same local or professional
community or sharing a common interest. Co-operative banks generally
provide their members with a wide range of banking and financial services
(loans, deposits, banking accounts…).
History Cooperative Banks in India
Brief History of Urban Cooperative Banks in India

T he term Urban Co-operative Banks (UCBs), though not formally

defined, refers to primary cooperative banks located in urban and
semi-urban areas. These banks, till 1996, were allowed to lend money
only for non-agricultural purposes. This distinction does not hold today.
These banks were traditionally centred around communities, localities work
place groups. They essentially lent to small borrowers and businesses. Today,
their scope of operations has widened considerably.

The origins of the urban cooperative banking movement in India can be

traced to the close of nineteenth century when, inspired by the success of the
experiments related to the cooperative movement in Britain and the
cooperative credit movement in Germany such societies were set up in India.
Cooperative societies are based on the principles of cooperation, - mutual
help, democratic decision making and open membership. Cooperatives
represented a new and alternative approach to organisaton as against
proprietary firms, partnership firms and joint stock companies which
represent the dominant form of commercial organisation.

The Beginnings
The first known mutual aid society in India was probably the ‘Anyonya
Sahakari Mandali’ organised in the erstwhile princely State of Baroda in 1889
under the guidance of Vithal Laxman also known as Bhausaheb Kavthekar.
Urban co-operative credit societies, in their formative phase came to be
organised on a community basis to meet the consumption oriented credit
needs of their members. Salary earners’ societies inculcating habits of thrift
and self help played a significant role in popularising the movement,
especially amongst the middle class as well as organized labour. From its
origins then to today, the thrust of UCBs, historically, has been to mobilise
savings from the middle and low income urban groups and purvey credit to
their members - many of which belonged to weaker sections.

The enactment of Cooperative Credit Societies Act, 1904, however, gave the
real impetus to the movement. The first urban cooperative credit society was
registered in Canjeevaram (Kanjivaram) in the erstwhile Madras province in
October, 1904. Amongst the prominent credit societies were the Pioneer
Urban in Bombay (November 11, 1905), the No.1 Military Accounts Mutual
Help Co-operative Credit Society in Poona (January 9, 1906). Cosmos in
Poona (January 18, 1906), Gokak Urban (February 15, 1906) and Belgaum
Pioneer (February 23, 1906) in the Belgaum district, the Kanakavli-Math Co-
operative Credit Society and the Varavade Weavers’ Urban Credit Society
(March 13, 1906) in the South Ratnagiri (now Sindhudurg) district. The most
prominent amongst the early credit societies was the Bombay Urban Co-
operative Credit Society, sponsored by Vithaldas Thackersey and Lallubhai
Samaldas established on January 23, 1906..

The Cooperative Credit Societies Act, 1904 was amended in 1912, with a view
to broad basing it to enable organisation of non-credit societies. The Maclagan
Committee of 1915 was appointed to review their performance and suggest
measures for strengthening them. The committee observed that such
institutions were eminently suited to cater to the needs of the lower and
middle income strata of society and would inculcate the principles of banking
amongst the middle classes. The committee also felt that the urban
cooperative credit movement was more viable than agricultural credit
societies. The recommendations of the Committee went a long way in
establishing the urban cooperative credit movement in its own right.

In the present day context, it is of interest to recall that during the banking
crisis of 1913-14, when no fewer than 57 joint stock banks collapsed, there was
a there was a flight of deposits from joint stock banks to cooperative urban
banks. Maclagan Committee chronicled this event thus:

“As a matter of fact, the crisis had a contrary effect, and in most provinces,
there was a movement to withdraw deposits from non-cooperatives and place
them in cooperative institutions, the distinction between two classes of security
being well appreciated and a preference being given to the latter owing partly
to the local character and publicity of cooperative institutions but mainly, we
think, to the connection of Government with Cooperative movement”.

Under State Purview

The constitutional reforms which led to the passing of the Government of
India Act in 1919 transferred the subject of “Cooperation” from Government
of India to the Provincial Governments. The Government of Bombay passed
the first State Cooperative Societies Act in 1925 “which not only gave the
movement its size and shape but was a pace setter of cooperative activities and
stressed the basic concept of thrift, self help and mutual aid.” Other States
followed. This marked the beginning of the second phase in the history of
Cooperative Credit Institutions.

There was the general realization that urban banks have an important role to
play in economic construction. This was asserted by a host of committees. The
Indian Central Banking Enquiry Committee (1931) felt that urban banks
have a duty to help the small business and middle class people. The Mehta-
Bhansali Committee (1939), recommended that those societies which had
fulfilled the criteria of banking should be allowed to work as banks and
recommended an Association for these banks. The Co-operative Planning
Committee (1946) went on record to say that urban banks have been the best
agencies for small people in whom Joint stock banks are not generally
interested. The Rural Banking Enquiry Committee (1950), impressed by the
low cost of establishment and operations recommended the establishment of
such banks even in places smaller than taluka towns.

The first study of Urban Co-operative Banks was taken up by RBI in the year
1958-59. The Report published in 1961 acknowledged the widespread and
financially sound framework of urban co-operative banks; emphasized the
need to establish primary urban cooperative banks in new centers and
suggested that State Governments lend active support to their development.
In 1963, Varde Committee recommended that such banks should be organised
at all Urban Centres with a population of 1 lakh or more and not by any
single community or caste. The committee introduced the concept of
minimum capital requirement and the criteria of population for defining the
urban centre where UCBs were incorporated.

Duality of Control
However, concerns regarding the professionalism of urban cooperative banks
gave rise to the view that they should be better regulated. Large cooperative
banks with paid-up share capital and reserves of Rs.1 lakh were brought
under the perview of the Banking Regulation Act 1949 with effect from 1st
March, 1966 and within the ambit of the Reserve Bank’s supervision. This
marked the beginning of an era of duality of control over these banks.
Banking related functions (viz. licensing, area of operations, interest rates
etc.) were to be governed by RBI and registration, management, audit and
liquidation, etc. governed by State Governments as per the provisions of
respective State Acts. In 1968, UCBS were extended the benefits of Deposit
Insurance.

Towards the late 1960s there was much debate regarding the promotion of the
small scale industries. UCBs came to be seen as important players in this
context. The Working Group on Industrial Financing through Co-operative
Banks, (1968 known as Damry Group) attempted to broaden the scope of
activities of urban co-operative banks by recommending that these banks
should finance the small and cottage industries. This was reiterated by the
Banking Commisssion (1969).

The Madhavdas Committee (1979) evaluated the role played by urban co-
operative banks in greater details and drew a roadmap for their future role
recommending support from RBI and Government in the establishment of
such banks in backward areas and prescribing viability standards.

The Hate Working Group (1981) desired better utilisation of banks' surplus
funds and that the percentage of the Cash Reserve Ratio (CRR) & the
Statutory Liquidity Ratio (SLR) of these banks should be brought at par with
commercial banks, in a phased manner. While the Marathe Committee (1992)
redefined the viability norms and ushered in the era of liberalization, the
Madhava Rao Committee (1999) focused on consolidation, control of sickness,
better professional standards in urban co-operative banks and sought to align
the urban banking movement with commercial banks.

A feature of the urban banking movement has been its heterogeneous

character and its uneven geographical spread with most banks concentrated
in the states of Gujarat, Karnataka, Maharashtra, and Tamil Nadu. While
most banks are unit banks without any branch network, some of the large
banks have established their presence in many states when at their behest
multi-state banking was allowed in 1985. Some of these banks are also
Authorised Dealers in Foreign Exchange

Recent Developments
Over the years, primary (urban) cooperative banks have registered a
significant growth in number, size and volume of business handled. As on 31st
March, 2003 there were 2,104 UCBs of which 56 were scheduled banks. About
79 percent of these are located in five states, - Andhra Pradesh, Gujarat,
Karnataka, Maharashtra and Tamil Nadu. Recently the problems faced by a
few large UCBs have highlighted some of the difficulties these banks face and
policy endeavours are geared to consolidating and strengthening this sector
and improving governance.

Issues facing the cooperative banking segment in India

• Governance Issues – Dual Control and Borrower driven structure

• Management and HR Issues

• Issues relating to Finance

Governance Issues – Dual Control and Borrower driven structure

• “Cooperation” is a State subject under the Indian Constitution; hence all

cooperative societies are governed by the Cooperative Societies Act of the
State. Registration, incorporation, management, amalgamation etc are
governed by the RCS of the particular State.

• At the same time, certain provisions of the Banking Regulation (BR) Act,
1949, are applicable to the cooperative banks that accept public deposit. In the
rural structure, StCBs and the DCCBs and in the urban structure, PCBs are
covered by these provisions of the BR Act.

• This “duality” of control and regulation has given rise to serious problems in
the governance structure (such as interference by the State Govt. due to its
combined role as dominant shareholder, manager, regulator, supervisor and
auditor; further the precise demarcation of the powers between the two
regulators is ambiguous.)

• The rural cooperative structure in India is focused mainly on credit. The

upper tiers refinance the lower tiers hence the structure is driven by
borrowers at all levels.

• Depositors are either non-members or “nominal” members without voting

rights while the borrowers have full voting rights.
• This is inconsistent to the concept of mutuality (thrift and credit going hand
in hand).

• This also prevents any incentive for good governance since the depositors,
whose money is being intermediated, have no say in the management of their
own money

Management and HR Issues

• Management problem arises due to the impairment of Governance. But

following are also important

• Poor human capital leading

• Generally ageing staff profile characterized by inadequate qualification and

training.

Issues relating to Finance

• The poor recovery of outstanding credit by the rural cooperative banks

makes the whole system unsustainable.

• Lack of standardised business model and risk management systems

• Over exposure to the agri sector and lack of diversification of the loan
portfolios.

• For the LT structure, the loan portfolio consists of a single product – long
terms agri loan of > 5 years term.
Categories of co-operative Banks

There are two main categories of the co-operative banks. 

(a) Short term lending oriented co-operative Banks- within this category
there are three subcategories of banks viz state co-operative banks, District
co-operative banks and Primary Agricultural co-operative societies.

(b) Long term lending oriented co-operative Banks - within the second
category there are land development banks at three levels state level, district
level and village level. 

Cooperative Banking Structure

The co-operative banking structure in India is divided into
following main 5 categories:

1. Primary Urban Co-op Banks

2. Primary Agricultural Credit Societies:

The Primary Co-operative Credit Society is an association of

borrowers and non-borrowers residing in a particular locality.
The funds of the society are derived from the share capital and
deposits of members and loans from central co-operative
banks. 
The borrowing powers of the members as well as of the society
are fixed. The loans are given to members for the purchase of
cattle, fodder, fertilizers, pesticides, implements, etc.

3. District Central Co-op Banks:

These are the federations of primary credit societies in a

district and are of two types – those having a membership of
primary societies only and those having a membership of
societies as well as individuals. 
The funds of the bank consist of share capital, deposits, loans
and overdrafts from state co-operative banks and joint stocks.
These banks finance member societies within the limits of the
borrowing capacity of societies. They also conduct all the
business of a joint stock bank.

4. State Co-operative Banks:

The state co-operative bank is a federation of central co-
operative bank and acts as a watchdog of the co-operative
banking structure in the state. Its funds are obtained from
share capital, deposits, loans and overdrafts from the Reserve
Bank of India.
The state co-operative banks lend money to central co-
operative banks and primary societies and not directly to
farmers. 

5. Land Development Banks:

The land development banks are organized in 3 tiers namely,

state, central and primary level and they meet the long term
credit requirements of the farmers for developmental
purposes. The state land development bank overseas the
primary land development banks situated in the districts and
tehsils in the state. 
They are governed both by the state government and Reserve
Bank of India. Recently, the supervision of land development
banks has been assumed by National Bank for Agriculture and
6. Rural Development (NABARD). The sources of funds for
these banks are the debentures subscribed by both central and
state government. These banks do not accept deposits from the
general public.

Features of Cooperative Banks

1. Co-operative Banks are organized and managed on the
principal of co-operation, self-help, and mutual help. They
function with the rule of "one member, one vote". Function on
"no profit, no loss" basis. Co-operative banks, as a principle,
do not pursue the goal of profit maximization.  Co-operative
bank performs all the main banking functions of deposit
mobilization, supply of credit and provision of remittance
facilities.

2. Co-operative Banks provide limited banking products and

are functionally specialists in agriculture related products.
However, co-operative banks now provide housing loans also.

3. UCBs provide working capital loans and term loan as well.

4. The State Co-operative Banks (SCBs), Central Co-operative

Banks (CCBs) and Urban

5. Co-operative Banks (UCBs) can normally extend housing

loans up to Rs 1 lakh to an individual. The scheduled UCBs,
however, can lend up to Rs 3 lakh for housing purposes. The
UCBs can provide advances against shares and debentures
also. 
6. Co-operative bank do banking business mainly in the
agriculture and rural sector. However, UCBs, SCBs, and
CCBs operate in semi urban, urban, and metropolitan areas
also. The urban and non-agricultural business of these banks
has grown over the years. The co-operative banks demonstrate
a shift from rural to urban, while the commercial banks, from
urban to rural. 

7. Co-operative banks are perhaps the first government

sponsored, government-supported, and government-subsidised
financial agency in India. They get financial and other help
from the Reserve Bank of India NABARD, central government
and state governments. They constitute the "most favoured"
banking sector with risk of nationalisation. For commercial
banks, the Reserve Bank of India is lender of last resort, but
co-operative banks it is the lender of first resort which
provides financial resources in the form of contribution to the
initial capital (through state government), working capital,
refinance.

8. Co-operative Banks belong to the money market as well as

to the capital market. 
Primary agricultural credit societies provide short term and
medium term loans. 
Land Development Banks (LDBs) provide long-term loans.
SCBs and CCBs also provide both short term and term loans. 
9. Co-operative banks are financial intermediaries only
partially. The sources of their funds (resources) are (a) central
and state government, (b) the Reserve Bank of India and
NABARD, (c) other co-operative institutions, (d) ownership
funds and, (e) deposits or debenture issues. It is interesting to
note that intra-sectoral flows of funds are much greater in co-
operative banking than in commercial banking. Inter-bank
deposits, borrowings, and credit from a significant part of
assets and liabilities of co-operative banks. This means that
intra-sectoral competition is absent and intra-sectoral
integration is high for co-operative bank. 

10. Co-operative Banks are subject to CRR and liquidity

requirements as other scheduled and non-scheduled banks are.
However, their requirements are less than commercial banks. 

11. Specific corporate governance: member ownership

Members, who are also customers, own the entire organisation
and are able to influence its decision-making. Members have a
more direct say in the local member bank’s policy, for instance
on the branch location, opening hours, services and sponsoring
activities. Member ownership entails a more consensus-driven
approach and prevents a strong fixation on just one
stakeholder. This is accompanied by a longer term and risk-
averse view, which translates into a more conservative banking
approach focused on retail banking. With their strong local
ties and large networks, co-operative banks are in theory
better equipped to assess the creditworthiness and risks of
customers at a local level.

12. Customers’ interest’s first Co-operative banks have an

edge in portraying trustworthiness as they publicly state that
they do not aim to maximise profits but rather to maximise
customer value. They have a competitive advantage in
establishing trust. An important factor is that co-operative
banks are literally closer to their customers; their branch
network density is higher than that of their competitors.
13. High capitalisation, high rating and low funding costs Co-
operative banks barely distribute profit but add it to their
reserves or the banks’ own funds. Consequently, co-operative
banks are some of the more highly capitalised institutions in
Europe as a result of their unique model and ownership
structure. Co-operative banks accumulate capital by design, as
their original purpose was to overcome a shortage of capital
for their chosen activities. Co-operatives have a lower cost of
capital, because they only need to remunerate the part of their
equity that is represented by member shares, not the often
much larger intergenerational endowment. In addition,
mutual support mechanisms that exist in various countries
contribute to high ratings. These collective guarantee schemes
reduce or even exclude the risk of individual co-operative bank
failure. Finally, high capital reserves and high ratings provide
co-operative banks with opportunities to obtain relatively
cheap capital market funding, because this entails less risks for
other creditors and thus lower risk premiums.

14. Profit as a necessary condition Based on the long-term

focus on customer value and member influence, co-operative
banks claim that they do not aim to maximise short-term
profit7 while healthy profitability is an important necessary
condition for co-operative banks to safeguard their continuity,
to finance growth and credit, and to provide a buffer for
inclement times, profit is not a goal in itself.

15. Conservative business model: focus on retail banking

Member ownership leads to a conservative business model,
focused on sustainable retail banking. This leads to good
liquidity and sound asset quality. The structure, knowledge of
local customers and risk diversification all work in favour of
co-operative banks. The knowledge that capital cannot be
easily replaced by external sources after considerable losses
stimulates co-operative bank managers to apply a relatively
low risk appetite.

16. Proximity to customers: dense branch networks Co-

operative banks have large branch networks, providing co-
operatives with an important, albeit declining, comparative
advantage in retail markets. Co-operative banks are literally
and figuratively closer to their customers and know those
customers well through participation in numerous social
networks. This is because the co-operative banking model
centres above all on ‘relationship banking’ via local presence.
Proximity to their customers is reinforced by actively
supporting local communities. Finally, large branch networks
facilitate mobilising and retaining relatively cheap and
important funding source, provided that their deposit rates are
not much lower than those offered by competitors.

Products Offered by NKGSB CO-OP. Bank

1.Savings Deposit-

Savings Account is primarily meant to inculcate a sense of saving

for your future financial requirements. The main objective is to save
in small or large amount from time to time. Your savings remain
liquid and safe, earning moderate interest. Our Savings Account
comes with a host of convenient features and banking channels to
transact through.

Types of Savings Deposit-

 Regular Savings Account

 Student Power- Savings account for younger generation with

age above 14 years

 Dignity Saving- Savings account for senior citizens above 60

age

 Super Saving- Savings account for high net worth customers

  No Frill Account- Savings account for people of small means

 Non-Resident(External) NRE Saving Account- Savings

account for NRE to maintain foreign currency earnings in
Indian rupees

2. Current Deposits-

Current Account are ideal for carrying out everyday business

transactions. You can access your account anytime and make
unlimited payment with at Par Cheque, Deposit Cheque or Demand
Draft, etc.

Types of current deposits-

 Current account- A regular current account.

 Gold Plus- Current account for high net worth customers

 Platinum Plus-Current Account for preferred elite customers

3.Term Deposit-

Term Deposit scheme to suit your requirement and future plan. You
can not only earn higher income on your surplus funds by investing
in any of our term deposit schemes, but also avail loan against those
funds. Thus fulfill your need, multiply your funds as well as keep
your savings secure

Types of term Deposits

 Short Term Deposit (SDR)- Easy liquidity still earn interest

 Fixed Deposit (FDR)- Invest and earn interest quarterly or

half yearly

 Recurring Deposit (RD)- Regular savings leads to high

 investment

 Monthly Income Plan (MIP)- Earn Monthly interest on your

investment

 Annapurna Tax Benefit Deposit Scheme- Save tax and

maximize interest on your investment

 Quarterly Interest Re-Investment Plan (QIRP)- Gain more by

earning interest on interest

 Automatic Renewal Certificate (ARC)- Automatic renewal of

principal no need to visit for renewal process

 Flexi Quarterly Interest Re-Investment Plan- Break

Investment without loss of interest.

 Automatic Renewal Certificate with Interest- No renewal

hassle guarantees automatic renewal with interest

 Non-Resident(External) NRE Term Deposit Account- Term

Deposit account for NRE to maintain foreign currency
earnings in Indian rupees

4. Retail Loan-

Offers a wide variety of Retail Loans. Whatever be your need, our

range of retail loans will suit your requirement. The PLR of the
bank is 13.5 %.

Types of retail loan-

 Home - A – Loan- Realize your dream with a complete

package to meet all your housing finance needs
  Life Cycle Banking Scheme- Enjoy additional loan anytime
without additional security or guarantee

 Profina- Fast track customized loan for professional

 Medifina- A red carpet welcome for medical professionals

 Vehicle Loan- Zoom ahead in your life

 Mortgage Loan- Mortgage your property to payoff various

expenses

 Educational Loan- Fulfill your dream of higher education

 Personal loan- Buy your dream today with quick finance

 Consumer Loan- Acquire consumer durables, as your home is

more than just four walls

 Swayamsiddha- Loan for professional women

 Stree Udyogika- Loan for women entrepreneurs

 Stree Sakhi- Loan for working women.

5.Corporate Finance-

 Working Capital ( Cash Credit )- Working capital finance by

way of cash credit to fund day to day business operations

 Busifina- Funds meant to augment working capital for small

and medium business enterprise
  Over Draft Against Property- Overdraft against property, to
increase business opportunity

 SME Finance- Funds to bolster the working of a small and a

medium business enterprise

 Bank Guarantee- To satisfy your need of advance payment or

performance guarantee.

 Letter of Credit- To satisfy your need to procure raw material

or acquire fixed assets

 Term Loan- Finance for purchase of fixed assets

 Bill Discounting- To meet your business requirement

 LC Discounting- To meet your business requirement

 Rent Discounting- Discount your future income to multiply

returns and investment in assets

Services Offered by NKGSB CO-OP. Bank

1. Any Branch Banking- Easy operational mobility in
transacting business. Access account to withdraw money up to
Rs. 25000/- across the counter or up to Rs. 15000 /- through
ATM from any branches, round the clock.

2.Quick ATM- To give flexibility to access your account 24

hours 365 days, bank has established network of ATM across
all our branches

3.Ancillary Business- Bank offers various Value Added

Services

 Demat- Our Bank has always been in the forefront to

add on value to its products, to offer best of the services
to customers with convenience. The bank has tied up
with NSDL as a Depository Participant (DP) offering
Demat services at all branches]

 Desk Drawing- Desk drawing facility through HDFC

Bank across the country

 Life Insurance / Non - Life Insurance- We have entered

into strategic alliance, both for Life & Non-life insurance
products. We are a Corporate agent of MAX New York
Life a leader in life insurance industry and Oriental
Insurance Company Pvt. Ltd. a very reliable and sound
name in non- life insurance.

 I-Connect- You can pay all your Direct taxes like Gift
tax, Income tax, Wealth tax etc and Indirect taxes like
Central Excise duty, Service tax etc through I Connect
facility

 Stamp Franking- Stamp Franking activities have

become a credible mode, in the interest of general public
at large. In its quest of adding new products , bank has
obtained license and introduce this value added facility
at its branches to frank impression of stamps on a
variety of instruments on which stamp duty is payable,
under the provision of Indian stamp Act 1899 and the
 Bombay Stamp Act 1958
 Safe Deposit Locker- Just relax, we safeguard your
valuables. No worries any more.

 Forex- We are pleased to announce that the RBI has

granted AD Category II licence to our bank to deal in
foreign exchange.

4. Remittances-

 Real Time Gross Settlement System (RTGS)- RTGS is a

more robust payment system enabling inter-bank fund
transfers of above Rs.1 Lac. Transfer of funds is done by
simple instruction to bank to transfer funds from your
account to another bank account whereby settlement is
done continuously.

 National Electronic funds transfer (NEFT)- Presently all

our branches are CBS enabled to offer NEFT facility to
our customers. This system facilitates an efficient,
secure, economical, reliable and expeditious system to
transfer fund below Rs 1 Lac. and clearing throughout
India.

5. SMS BANKING-

“SMS BANKING” is a service that enables you to access your

bank accounts using a cellular
mobile phone. Banking with a cellular mobile phone is like
having a bank branch in your palm. You can access your bank
any time, from any place.

6. Internet Banking-

Online banking (or Internet banking) allows customers to

conduct financial transactions on a secure website operated by
their retail or virtual bank, credit union or building society.