microfinance impact on borrowers and challenges of karnataka cooperative apex bank ltd

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MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL INTRODUCTION INDIAN FINANCIAL SYSTEM The economic development of a nation is reflected by the progress of the various economic units, broadly classified into corporate sector, government and household sector. While performing their activities these units will be placed in a surplus/deficit/balanced budgetary situations. There are areas or people with surplus funds and there are those with a deficit. A financial system or financial sector functions as an intermediary and facilitates the flow of funds from the areas of surplus to the areas of deficit. A Financial System is a composition of various institutions, markets, regulations and laws, practices, money manager, analysts, transactions and claims and liabilities. Financial System; Page 1

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MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL INTRODUCTION INDIAN FINANCIAL SYSTEM The economic development of a nation is reflected by the progress of the various economic units, broadly classified into corporate sector, government and household sector. While performing their activities these units will be placed in a surplus/deficit/balanced budgetary situations. There are areas or people with surplus funds and there are those with a deficit. A financial system or financial sector

TRANSCRIPT

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MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL

INTRODUCTION

INDIAN FINANCIAL SYSTEM

The economic development of a nation is reflected by the progress of the

various economic units, broadly classified into corporate sector, government and

household sector. While performing their activities these units will be placed in a

surplus/deficit/balanced budgetary situations.

There are areas or people with surplus funds and there are those with a

deficit.  A financial system or financial sector functions as an intermediary and

facilitates the flow of funds from the areas of surplus to the areas of deficit.   A

Financial System is a composition of various institutions, markets, regulations and

laws, practices, money manager, analysts, transactions and claims and liabilities.

Financial System;

The word "system", in the term "financial system", implies a set of complex

and closely connected or interlined institutions, agents, practices, markets,

transactions, claims, and liabilities in the economy.  The financial system is

concerned about money, credit and finance-the three terms are intimately related

yet are somewhat different from each other. Indian financial system consists of

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financial market, financial instruments and financial intermediation. These are

briefly discussed below;

FINANCIAL MARKETS

A Financial Market can be defined as the market in which financial assets

are created or transferred. As against a real transaction that involves exchange of

money for real goods or services, a financial transaction involves creation or

transfer of a financial asset. Financial Assets or Financial Instruments represents a

claim to the payment of a sum of money sometime in the future and /or periodic

payment in the form of interest or dividend.

Money Market- The money market ifs a wholesale debt market for low-risk,

highly-liquid, short-term instrument.  Funds are available in this market for periods

ranging from a single day up to a year.  This market is dominated mostly by

government, banks and financial institutions.

Capital Market - The capital market is designed to finance the long-term

investments.  The transactions taking place in this market will be for periods over a

year.

Forex Market - The Forex market deals with the multicurrency requirements,

which are met by the exchange of currencies.  Depending on the exchange rate that

is applicable, the transfer of funds takes place in this market.  This is one of the

most developed and integrated market across the globe.

Credit Market - Credit market is a place where banks, FIs and NBFCs purvey

short, medium and long-term loans to corporate and individuals.

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The functions performed by these Banks are

1. Commercial Banks

Commercial Banks perform all the business transactions of typical Bank.

Commercial Banks accept three types of deposits, like Saving Bank Deposits,

Fixed Deposit and Current Deposits. They provide funds of short-term needs of

trade of commerce.

2. Investment or Industrial Banks

Investment Banks are those Banks, which provide fund for long-term

industries. 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 plus, debentures and long term deposits from public.

3. Exchange Banks

These Banks are known as foreign exchange Banks. They provide exchange

for import trade. Their main function is to make international payment through

purchased Bank of exchanges Bills.

4. Co-operative Banks

They are promoted to meet the Banking requirements of consumers. They

established not only in the urban areas but also in the rural areas. In the rural areas

these Banks supply finance to agriculture while in these urban areas they provide

finance to consumer goods.

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5. Land Mortgage Banks

Whenever agriculturist requires investment loans, they have to approach

land development Banks, where loans are given on long term basis. They provide

loans on the security of the land.

6. Central Banks

Central bank is an apex bank in the country, which keeps the entire Banking

system unified, controlled and regulated. It regulates the note issue. RBI is the

Central Bank of India.

FINANCIAL INSTRUMENTS IN INDIA

We took a look at the players in the financial markets earlier. Let us now

look at the Financial Instruments these players have. They van be braodly classified

into Government securities and Industrial securities.

Government Securities( G-Sec ) :

In India G- Sec are issued by the Central Government , State Governments

and Semi Government Authorities such as  municipalities, port trusts, state

electricity boards and public sector corporations.  The Central and State

Governments raise money through these securities to finance the creation of new

infrastructure as well as to meet their current cash needs.  Since these are issued by

the government, the risk of default is minimal. Therefore, interest rates on these

securities often serve as a benchmark for the level of interest rates in the economy.

Other issues may price  their offerings by `marking up’ this benchmark rate to

reflect the credit risk specific to them.

These securities may have maturities ranging from five to twenty years.   

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These are fixed income securities, which  pay interest every six months.  The

Reserve Bank of India manages the issues of the securities. These securities are

sold in the primary market mainly through the auction mechanism. The RBI

notifies issue of a new   tranche of securities. Prospective buyers submit their bids.

The RBI decides to accept bids based on a cut off price.

The G -sec are primarily bought by the institutional investors. The biggest

investors are commercial banks who invest in G-secs to meet the regulatory

requirement to maintain a certain percentage of Statutory Liquidity Ratio (SLR) as

well as an investment vehicle. Insurance companies, provident funds, and mutual

funds are the other large investors. The Primary Dealers perform the function of

market makers through buying and selling activities.

The Government of India also borrows short term funds for up to one year. 

This is through the issue of Treasury Bills which are sold at a discount to the face

value and redeemed at the full face value. 

Industrial Securities:

These are securities issued by the corporate sector  to finance their long term

and working capital requirements. 

The Major Instruments that fall under Industrial Securities are

• Debentures,

• Preference Shares And

• Equity Shares.

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Debentures

Debentures have a fixed maturity   and pay a fixed or a floating rate of

interest during their lifetime.  The company has an obligation to pay interest and the

principal amount on the due dates regardless of its profitability position.  The

debenture holders are not members of the company and do not have any say in the

management of the company.  Since these carry a predefined rate of return, there is

no scope for any major capital appreciation.  However, in case of fixed rate

debentures, their market price moves inversely with the direction of interest rates.

The debenture issues are rated by the professional credit rating agencies regarding

the payment of interest and the  repayment of the capital amount. Apart from the

`plain vanilla’ variety of debentures (periodic payment of interest during their

currency and repayment of capital on maturity), a number of variations have been

devised. For example, zero coupon bonds  are issued at a discount to their face

value and redeemed at the full face value. The difference constitutes return for the

investor.

Preference Shares

Preference Shares   carry a fixed rate of dividends.  These carry a preferential

right to dividends over the equity shareholders.  This means that equity share

holders cannot be paid any dividends unless the preference dividend has been paid

in full.  Similarly on the winding up of the company, the preference share   holders  

get back their capital before the equity share holders. In case of cumulative

preference shares, any dividend unpaid in past years accumulates and is paid later

when the company has sufficient profits. Now all preference shares in India are

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`redeemable’, i.e. they have a fixed maturity period. Thus, preference shares are

sometimes called a `hybrid variety’ – incorporating features of debt as well as

equity.

Equity Shares

Equity Shares are regarded as high return high   risk instruments.  These do

not carry any fixed rate of return and there is no maturity period.  The company

may or may not declare dividend on equity shares. Equity shares of major

companies are traded on the stock exchanges. The major component of return to

equity holders usually consists   of   market appreciation. 

Call Money Market:

The loans made in this market are of a short term nature – overnight to a

fortnight . This is mostly   inter-bank market.  Those banks  which are facing a

short term cash deficit, borrow funds from the cash surplus banks.  The rate of

interest is market driven   and depends on the liquidity position in the banking

system. 

Commercial Paper (CP)   and Certificate of Deposits (CD) :

CPs are issued by the corporates  to finance their working capital needs. 

These are issued for short term maturities.  These are issued at a discount and

redeemed at face value.  These are unsecured and therefore only those companies

who have a good credit standing are able to access funds through this instrument. 

The rate of interest is market driven and depends on  the current liquidity position

and the creditworthiness of the issuing company. 

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The characteristics of CDs are similar to those of CPs except that CDs are

issued by the commercial banks.

RESERVE BANK OF INDIA

The central bank of the country is the Reserve Bank of India (RBI). It was

established in April 1935 with a share capital of Rs. 5 crores on the basis of the

recommendations of the Hilton Young Commission. The share capital was divided

into shares of Rs. 100 each fully paid which was entirely owned by private

shareholders in the begining. The Government held shares of nominal value of Rs.

2,20,000.

Reserve Bank of India was nationalised in the year 1949. The general

superintendence and direction of the Bank is entrusted to Central Board of

Directors of 20 members, the Governor and four Deputy Governors, one

Government official from the Ministry of Finance, ten nominated Directors by the

Government to give representation to important elements in the economic life of

the country, and four nominated Directors by the Central Government to represent

the four local Boards with the headquarters at Mumbai, Kolkata, Chennai and New

Delhi

The Reserve Bank of India Act, 1934 was commenced on April 1, 1935.

The Act, 1934 (II of 1934) provides the statutory basis of the functioning of the

Bank.

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The Bank was constituted for the need of following:

To regulate the issue of banknotes

To maintain reserves with a view to securing monetary stability and

To operate the credit and currency system of the country to its advantage.

Functions of Reserve Bank of India

The Reserve Bank of India Act of 1934 entrust all the important functions of a

central bank the Reserve Bank of India.

Bank of Issue

Under Section 22 of the Reserve Bank of India Act, the Bank has the sole

right to issue bank notes of all denominations. The distribution of one rupee notes

and coins and small coins all over the country is undertaken by the Reserve Bank

as agent of the Government. The Reserve Bank has a separate Issue Department

which is entrusted with the issue of currency notes. The assets and liabilities of the

Issue Department are kept separate from those of the Banking Department.

Originally, the assets of the Issue Department were to consist of not less than two-

fifths of gold coin, gold bullion or sterling securities provided the amount of gold

was not less than Rs. 40 crores in value. The remaining three-fifths of the assets

might be held in rupee coins, Government of India rupee securities, eligible bills of

exchange and promissory notes payable in India. Due to the exigencies of the

Second World War and the post-was period, these provisions were considerably

modified. Since 1957, the Reserve Bank of India is required to maintain gold and

foreign exchange reserves of Ra. 200 crores, of which at least Rs. 115 crores

should be in gold. The system as it exists today is known as the minimum reserve

system.

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Banker to Government

The second important function of the Reserve Bank of India is to act as

Government banker, agent and adviser. The Reserve Bank is agent of Central

Government and of all State Governments in India excepting that of Jammu and

Kashmir. The Reserve Bank has the obligation to transact Government business,

via. to keep the cash balances as deposits free of interest, to receive and to make

payments on behalf of the Government and to carry out their exchange remittances

and other banking operations. The Reserve Bank of India helps the Government -

both the Union and the States to float new loans and to manage public debt. The

Bank makes ways and means advances to the Governments for 90 days.

Bankers' Bank and Lender of the Last Resort

The Reserve Bank of India acts as the bankers' bank. According to the

provisions of the Banking Companies Act of 1949, every scheduled bank was

required to maintain with the Reserve Bank a cash balance equivalent to 5% of its

demand liabilites and 2 per cent of its time liabilities in India. By an amendment of

1962, the distinction between demand and time liabilities was abolished and banks

have been asked to keep cash reserves equal to 3 per cent of their aggregate deposit

liabilities.

The scheduled banks can borrow from the Reserve Bank of India on the basis

of eligible securities or get financial accommodation in times of need or stringency

by rediscounting bills of exchange. Since commercial banks can always expect the

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Reserve Bank of India to come to their help in times of banking crisis the Reserve

Bank becomes not only the banker's bank but also the lender of the last resort.

Controller of Credit

The Reserve Bank of India is the controller of credit i.e. it has the power to

influence the volume of credit created by banks in India. It can do so through

changing the Bank rate or through open market operations. According to the

Banking Regulation Act of 1949, the Reserve Bank of India can ask any particular

bank or the whole banking system not to lend to particular groups or persons on the

basis of certain types of securities. Since 1956, selective controls of credit are

increasingly being used by the Reserve Bank.The Reserve Bank of India is armed

with many more powers to control the Indian money market. Every bank has to get

a licence from the Reserve Bank of India to do banking business within India, the

licence can be cancelled by the Reserve Bank of certain stipulated conditions are

not fulfilled. Every bank will have to get the permission of the Reserve Bank

before it can open a new branch. Each scheduled bank must send a weekly return

to the Reserve Bank showing, in detail, its assets and liabilities. This power of the

Bank to call for information is also intended to give it effective control of the credit

system.

As supreme banking authority in the country, the Reserve Bank of India,

therefore, has the following powers:

(a) It holds the cash reserves of all the scheduled banks.

(b) It controls the credit operations of banks through quantitative and qualitative

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controls.

(c) It controls the banking system through the system of licensing, inspection and

calling for information.

(d) It acts as the lender of the last resort by providing rediscount facilities to

scheduled banks.

Custodian of Foreign Reserves

The Reserve Bank of India has the responsibility to maintain the official rate of

exchange. According to the Reserve Bank of India Act of 1934, the Bank was

required to buy and sell at fixed rates any amount of sterling in lots of not less than

Rs. 10,000. The rate of exchange fixed was Re. 1 = sh. 6d. Since 1935 the Bank

was able to maintain the exchange rate fixed at lsh.6d. though there were periods

of extreme pressure in favour of or against the rupee. After India became a member

of the International Monetary Fund in 1946, the Reserve Bank has the

responsibility of maintaining fixed exchange rates with all other member countries

of the I.M.F. Besides maintaining the rate of exchange of the rupee, the Reserve

Bank has to act as the custodian of India's reserve of international currencies. The

vast sterling balances were acquired and managed by the Bank. Further, the RBI

has the responsibility of administering the exchange controls of the country.

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Supervisory functions

In addition to its traditional central banking functions, the Reserve bank has certain

non-monetary functions of the nature of supervision of banks and promotion of

sound banking in India. The Reserve Bank Act, 1934, and the Banking Regulation

Act, 1949 have given the RBI wide powers of supervision and control over

commercial and co-operative banks, relating to licensing and establishments,

branch expansion, liquidity of their assets, management and methods of working,

amalgamation, reconstruction, and liquidation. The RBI is authorised to carry out

periodical inspections of the banks and to call for returns and necessary

information from them. The nationalisation of 14 major Indian scheduled banks in

July 1969 has imposed new responsibilities on the RBI for directing the growth of

banking and credit policies towards more rapid development of the economy and

realisation of certain desired social objectives. The supervisory functions of the

RBI have helped a great deal in improving the standard of banking in India to

develop on sound lines and to improve the methods of their operation.

Promotional functions

With economic growth assuming a new urgency since Independence, the range of

the Reserve Bank's functions has steadily widened. The Bank now performs a

varietyof developmental and promotional functions, which, at one time, were

regarded as outside the normal scope of central banking. The Reserve Bank was

asked to promote banking habit, extend banking facilities to rural and semi-urban

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areas, and establish and promote new specialised financing agencies. Accordingly,

the Reserve Bank has helped in the setting up of the IFCI and the SFC; it set up the

Deposit Insurance Corporation in 1962, the Unit Trust of India in 1964, the

Industrial Development Bank of India also in 1964, the Agricultural Refinance

Corporation of India in 1963 and the Industrial Reconstruction Corporation of

India in 1972. These institutions were set up directly or indirectly by the Reserve

Bank to promote saving habit and to mobilise savings, and to provide industrial

finance as well as agricultural finance. As far back as 1935, the Reserve Bank of

India set up the Agricultural Credit Department to provide agricultural credit. But

only since 1951 the Bank's role in this field has become extremely important. The

Bank has developed the co-operative credit movement to encourage saving, to

eliminate moneylenders from the villages and to route its short term credit to

agriculture.

Classification of RBIs functions

The monetary functions also known as the central banking functions of the

RBI are related to control and regulation of money and credit, i.e., issue of

currency, control of bank credit, control of foreign exchange operations, banker to

the Government and to the money market. Monetary functions of the RBI are

significant as they control and regulate the volume of money and credit in the

country.

Equally important, however, are the non-monetary functions of the RBI in the

context of India's economic backwardness. The supervisory function of the RBI

may be regarded as a non-monetary function (though many consider this a

monetary function). The promotion of sound banking in India is an important goal

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of the RBI, the RBI has been given wide and drastic powers, under the Banking

Regulation Act of 1949 - these powers relate to licencing of banks, branch

expansion, liquidity of their assets, management and methods of working,

inspection, amalgamation, reconstruction and liquidation. Under the RBI's

supervision and inspection, the working of banks has greatly improved.

Commercial banks have developed into financially and operationally sound and

viable units.

INTRODUCTION TO CO-OPERATIVE BANK

The Co-operative Banks in India started functioning almost 100 years ago.

The Co-operative Bank is an important constituent of the Indian financial system,

judging by the role assigned to Co-operative, the expectations the Co-operative is

supposed to fulfill, their number, and the number of offices the Co-operative Bank

operate. India plays an important role even today in rural financing. The business

of Co-operative Bank in the urban areas also has increased phenomenally in

recent years due to the sharp increase in the number of primary Co-operative

Banks.

Co-operative Banks in India are registered under the Co-operative societies

act. The Co-operative Bank is also regulated by the RBI. They are governed by the

banking regulations Act 1949 and Banking laws. At the end of March, 2000 in the

states in there were 28,708 Co-operatives of different types with the membership

of 1.51 crores. Their working capital was Rs. 16,868.45 crores and total deposits

were Rs.9356.50 crores.

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HISTORY OF THE CO-OPERATIVE MOVEMENT

Co-operation dates back as far as human beings have been organizing for

mutual benefit. Tribes were organized as Co-operative structures, allocating jobs

and resources among each other, only trading with the external communities. Post-

industrial European is home to the first Co-operatives from an Industrial context.

In 1761, the Fenwick weaver’s society was formed in Fenwick, East

Ayrshire, and Scotland to sell discounted oatmeal to local workers. Its services

expanded to include assistance with savings and loans, emigration and education.

In 1810, Welsh social reformer Robert Owen, from Newtown in mid-Wales, and

his partners purchased New Lanark mill from Owen’s father-in –law and

proceeded to introduce better labour standards including discounted retail shops

where profits were passed on to his employees.

The Rockdale Society of Equitable Pioneers, founded in 1844, is usually

considered the first successful Co-operative enterprise used as a model for modern

co-opx, following the Rochdale principles’. A group of 28 weavers and other

artisans in Rochdale, England set up the society to open their own store selling

food items they could not otherwise afford. Within ten years there were over 1,000

co-operative societies in the United Kingdom.

Other events such as the founding of a friendly society by the Tolpuddle

Martyrs in 1832 were key occasions in the creation of organized labour and

consumer movements.

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FEATURES OF CO-OPERATIVE BANK

Some distinguishing characteristics of the Co-operative Bank are as follows:

i. They function on “no profit, no loss” basis.

ii. They are organized and managed on the principles Co-operation, self-help

and mutual help. They function with the rule of “1 member, 1 vote”.

iii. Co-operative Bank performs all the main banking function on deposits,

mobilization of funds.

iv. Co-operative Bank perhaps the 1st government sponsored financial agency

in India.

v. Co-operative Bank belongs to the money market as well as to capital market.

vi. Co-operative Bank do banking business mainly in the agriculture and rural

sector.

vii. Co-operative Bank are subject to CRR and liquidity requirements as other

scheduled and non-scheduled banks.

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STRUCTURE OF BANKING SYSTEM INDIA

Page 18

RBI

NON-SCHEDULE BANK

SCHEDULE BANK

COMMERCIAL

BANKCO-OPERATIVE

BANK

CO-OPERATIVE

BANK

COMMERCIAL BANK

INDIAN BANK

FOREIGN BANK

PUBLIC SECTOR BANKS

PRIVATE SECTOR BANKS

REGIONAL RURAL BANKS

OTHER NATIONALIZED

BANK

STATE BANK OF MYSORE AND its

ASSOCIATE

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INTRODUCTION TO MICROFINANCE:

Today, Microfinance is playing a vital role in development of the economy

in any Country. Moreover, microfinance has moved all beyond its roots in

developing countries. Micro Finance is emerging as a powerful instrument for

poverty alleviation in the new economy. Micro Finance for the poor and women

has received extensive recognition as a strategy for poverty reduction and for

economic and women empowerment. Micro finance means helping people in

providing small financial assistance to poor families to strengthen their financial

position and social status.

Meaning of Microfinance:-

Microfinance refers to small savings, credit and insurance services extended

to socially and economically disadvantaged segments of society. Micro finance, a

concept that is helping the poor to avail of and create economic growth

opportunities.

Microfinance is the provision of financial services to low-income clients,

including consumers and the self-employed, who traditionally lack access to

banking and related services.

Definition:-

The important definitions of microfinance are as follows:-

According to International Labor Organization (ILO), “Microfinance is

an economic development approach that involves providing financial services

through institutions to low income clients”.

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In India, Microfinance has been defined by “The National Microfinance

Taskforce, 1999” as “provision of thrift, credit and other financial services and

products of very small amounts to the poor in rural, semi-urban or urban areas for

enabling them to raise their income levels and improve living standards”.

"The poor stay poor, not because they are lazy but because they have no access to

capital."

History of the Microfinance Movement

In 1974, famine struck Bangladesh. At the time, Dr. Muhammad Yunus was

a professor of economics at the University of Chittagong. Disillusioned by the

elegant theories of economics that could not explain the thousands of poor people

dying of starvation on the streets; he was determined to find a practical way to help

the poor. During a visit to the nearby village of Jorba, he was astounded to find

that a sum of $27 could radically change the lives of 42 people in the village. This

was the sum of money they collectively needed to buy bamboo to make the stools

they sold to make a living. He took $27 from his pocket and made 42 loans to the

stool makers in this tiny village. They were able to pay him back with interest and

take a step towards lifting themselves out of poverty.

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This simple idea that the poor could use credit to lift themselves out of

poverty, led Dr. Yunus to create The Grameen Rural Bank in 1983. Since its

inception, it has made over $8.96 billion in loans to over eight million borrowers.

Its methodologies have become the cornerstone of the microfinance industry. In

2006, The Grameen Bank and Dr. Yunus were awarded the Nobel Peace Prize.

Explosive Growth

In the 1970s and 80s, inspired by Grameen’s success, social innovators and

organizations around the world began to experiment with different programs to

bring financial services to the poor. Microfinance institutions proved that it was

actually possible to build viable businesses through lending to the poor. The

number of microfinance institutions increased rapidly.

The 2006 Microfinance Summit Campaign Report estimates that there are now

more than 3,000 microfinance institutions, serving more than 100 million poor

people in developing countries. The total cash turnover of these institutions world-

wide is estimated at $2.5 billion and the potential for new growth is outstanding.

Indian scenario in Micro Finance

Traditionally, banks in India have not provided financial services, such as

loans, to clients with little or no cash income. Banks incur substantial cost to

manage a client account, regardless of how small the sums of money involved. The

fixed cost of processing loans of any size is considerable as assessment of potential

borrowers, their repayment prospects and security, administration of outstanding

loans, collecting from delinquent borrowers, etc., has to be done in all cases. There

is a breakeven point in providing loans or deposits below which banks lose money

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on each transaction they make. Poor people usually fall below that breakeven

point. A similar equation resists efforts to deliver other financial services to poor

people.

It is then, the concept of micro finance institutions came into the picture.

This has gained considerable importance in Indian Scenario. Approximately 665

million client accounts are maintained with over 3,000 institutions that are serving

people who are poorer than those served by the commercial banks. Of these

accounts, 120 million were with institutions normally understood to practice

microfinance like the postal saving banks, development banks, cooperatives and

credit unions and specialized rural banks.

In India, Micro finance has fueled the efforts at rural development, woman

empowerment and wealth generation by providing small scale savings, credit,

insurance and any other financial services to poor and low-income households.

Microfinance sector has traversed a long journey from micro savings to

micro credit and then to micro enterprises and now entered the field of micro

insurance, micro remittance and micro pension. This gradual and evolutionary

growth process has given a great opportunity to the rural poor in India to attain

reasonable economic, social and cultural empowerment, leading to better living

standard and quality of life for participating households. Financial institutions in

the country continued to play a leading role in the microfinance programme for

nearly two decades now. They have joined hands proactively with informal

delivery channels to give microfinance sector the necessary momentum. During the

current year too, microfinance has registered an impressive expansion at the grass

root level.

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Self Help Promoting Institutions (SHPIs), Revolving Fund Assistance

(RFA) to MFIs, equity/ capital support to MFIs to supplement their financial

resources and provision of 100 per cent refinance against bank loans provided by

various banks for microfinance activities.

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Table : 1.1

Participating Banks in providing Micro finance

Participating Banks Number

Public sector commercial Banks 27

Private sector commercial Banks 19

Regional Rural Banks 81

Co-Operative Banks 318

Small Industries Development Bank of

India

1

DIFFERENT MODEL OF MICRO FINANCE:-

1. SHG- Bank linkage model:- This model involes the SHGs financed directly

by the banks viz., Commercial Banks (Public sector and private sector),

Regional Rural Banks and and Co-operative Banks.

2. Micro Finance Institutions – Bank linkage model:- This model covers

financing of MFIs by banking agencies for onlending to SHGs.

SHGs- Meaning

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SHG is a small, homogenous affinity group of rural poor agriculture

labourers, marginal and small farmers and micro-enterprises which is voluntarily

formed. It can be formal or informal. SHGs are formed by the members, of the

members and for the members.

They are encouraged to practice voluntary thrift on a regular basis. The SHG

generally a minimum of 5 members and not exceeding 20 members. Members save

and contribute to common fund from which small loans are met to needy member

as per the decisions of the group.

There are four stages in SHG formation:-

Forming = 0-2 months

Storming = 2-3 months

Norming = 4-6 months

Functioning = 6-12 months

Objective of SHGs

To evolve a supplementary credit strategy for reaching the rural poor.

To build mutual trust and confidence between banks and rural poor

To encourage banking activities both thrift as well as credit in way to SELF

HELP.

Methodology adopted

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Direct or Indirect finance

Maximum 4 times of Deposit

Minimum 6 months of functioning

100% NABARD Refinance on outstanding

To open a SB account with Bank

Notable figures of Micro finance in India

Table 1.2

SHGs Savings linked with banks

Total No.of SHGs Savings linked with banks Rs.69.53 lakh

Out of Total (of which) exclusive Women SHGs Rs.53.10 lakh

Total savings amount of SHGs with banks as on

31-3-10

Rs.6198.71

crore

Out of total savings of exclusive women SHGs Rs.4498.66

crore

Estimated number of families covered upto 31-

3-2010

Rs.97 million

Table 1.3

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SHGs Credit linked with banks in the year 2009- 10

Total No.of SHGs credit linked during the year

2009-10

Rs.15.87

lakh

Out of Total (of which) exclusive Women SHGs

credit linked

Rs.12.94

lakh

Table 1.4

Loan amount disbursed and loan outstanding in the year

2009- 10

Total amount of loan disbursed to SHGs Rs.14453.30

crore

Out of Total loan disbursed exclusive to

Women SHGs

Rs.12429.37

crore

Total amount of loans outstanding against

SHGs

Rs.28038.28

crore

Out of total loans outstanding against women

SHGs

Rs.23030.36

crore

Average loan amount outstanding per SHG as

on March 2010

Rs. 57,795

Average loan amount outstanding per member Rs. 4,128

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as on 31-3-10

Microfinance Institutions (MFIs) :-

Microfinance Institutions are seen as key players in delivering financial

services to the poor people. They are increasingly seen as a solution to the ever

increasing problem of poverty and an indispensable toot to provide poor but

entrepreneurial people with necessary finances to start their own businesses.

These institutions play a key role in providing a whole range of financial

services to the poor rural households that have been ignored till now by the

mainstream financial institutions because of their inability to provide collateral.

This article discusses the unique characteristics of the microfinance institutions

and the challenges they have to face in order to survive and thrive in the future.

A microfinance institution is generally defined as “as an institution that

provides financial services to the poor”. These institutions play a crucial role in

the economic empowerment of the poor people especially in the rural areas.

These institutions generally include credit unions, co-operatives and financial

NGOs. MFIs provide microfinance services to those people who are inability to

produce guarantees that are required to gain credit from formal financial

institutions.

Microfinance Institutions in India.

Microfinance institutions (MFIs) have emerged over the past three decades

to address this market failure and provide financial services to low-income

clients. Most of the early pioneer organizations in the modern microfinance

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movement operated as non-profit, socially motivated non-governmental

organizations (NGOs). They developed new credit techniques: instead of

requiring collateral, they reduced risk through group guarantees, appraisal of

household cash flow, and small initial loans to test clients. Experience since

then has shown that the poor repay uncollateralized loans reliably and are

willing to pay the full cost of providing them: access is more important to them

than cost.

More than 10,000 micro-lending organizations are today providing loans to

25 million poor people throughout the world, most of them women. The

number of these organizations grew dramatically during the 1990s, spurred by

the notion of ‘Self – help’ and a faith in the creditworthiness and

entrepreneurial potential of the poor. Microfinance for the poor has emerged as

an idea that appeals to several sections of people. In principle, even the world’s

poorest people can acquire savings and investment if they have access to

capital.

The size and types of implementing NGOs range from very small to

moderately big organizations involved in savings and/or credit activities for

individuals and group. These NGOs adopt a variety of approaches, and tend to

operate within a limited geographical range. A few like PRADAN, ICECD,

MYRADA, SEWA operate on a larger scale and have been successful in

replicating their experiences in other parts of the country, they also act as

resource organizations. While a few lending most organizations do lend directly

to borrowers, rely on SHGs to provide the linkage the borrowers

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Table 1.6

Refinance Support from NABARD

Refinance to banks during 2009-10 Rs.3173.56 crore

Cumulative refinance released upto 31-3-10 Rs.12861.65

crore

Microfinance: Strategy adopted by NABARD

The National Bank for Agriculture and Rural Development (NABARD)

have played a significant role in promoting micro finance. NABARD has been

instrumental in facilitating various activities under microfinance sector,

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Table 1.5

Support from NABARD

Capacity building of partner institutions in the year 2009- 10

Number of programme conducted during 2009-10 6804

No, of Participants covered during 2009-10 Rs.2.54 lakh

Cumulative no. of participants trained upto March

2010

Rs.24.55

lakh

Grant support during the year 2009-10 Rs.9.92

crore

Cumulative fund support upto March 2010 Rs.45.02

crore

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involving all possible partners at the ground level in the field. NABARD has

been encouraging voluntary agencies, bankers, socially spirited individuals,

other formal and informal entities and also government functionaries to

promote and nurture SHGs. The focus in this direction has been on training and

capacity building of partners, promotional grant assistance to Self Help

Promoting

With a view to developing a supplementary credit delivery mechanism to

reach the poor in cost- effective and sustainable manner, the NABARD

introduced in 1992 a pilot project for linking 500 SHGs.

NABARD is adopted the following strategies to spread the outreach of

SHG- Bank Linkage programme:-

Widening spatial distribution and intensity of the Programme with

district oriented planning and strategy.

Evolving district- wise plan of action/ strategy in consultation with

existing stakeholders aiming at promotion and linkage of a minimum of

500 SHGs per district every year.

Training and exposure programmes for the staff of the stakeholders.

Providing promotional assistance to partners for promoting and nurturing

the SHGs generally on a ‘add-on’ basis.

Widening the range of SHG promoting agencies.

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Involving banks at their corporate level, organizing training programmes

for the regional/ zonal managers of commercial banks in association with

their central offices.

Establishing the financing of SHGs as a business proposition for banks.

Increasing the participation of the co-operative banks by encouraging

them to finance SHGs as “Financing cooperatives within the co-

operative”.

Associating village communities, people’s institutions, rural volunteers

and individuals to participate in the programme as SHG promoters.

Increasing the quality of the exisiting SHGs by propagating “Self- rating”

tools.

Large- scale dissemination of the concept and approach among the rural

masses.

Encouraging NGOs to play an important role in correcting the regional

imbalance in spread of SHG-Bank linkage programme.

Supportive policies of RBI for linkage programmes

The SHG – Bank linkage was further extended to Regional Rural Banks

(RRBs) and cooperative banks in 1993 and is now permitted by the RBI as a

component of priority sector lending. RBI extends full support to NABARD’s

initiatives in introducing and implementing the linkage programme. The

supportive policies of RBI are :-

Interest rates of banks to the micro-credit institutions or by the micro-

credit institution to SHGs or their members deregulated.

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Complete freedom to banks to choose their models.

Freedom in designing, lending and savings products.

Maximum flexibility provided in lending norms.

Making micro finance an integral part of banks corporate credit plans.

Micro finance has been hailed as the best method of creating additional

employment and for removing poverty. NABARD has been playing a catalytic role

in terms of promotional support to NGOs and also in nurturing quality SHGs.

Credit sanctioned by the Micro financial institutions have vast market in the rural

as well as in the urban areas. Successful marketing of microfinance to SHGs will

further strengthen the movement. The NGOs therefore needs to be given priority

for standardizing the quality of service. Indian micro finance has recorded

substantial achievements over the past few years. India’s leading MFIs are now

highly regarded all over the world. Linking of SHGs with banks play a vital role

for women development.

RESEARCH DESIGN

TITLE OF THE PROJECT

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“A STUDY ON MICROFINANCE IMPACT ON BORROWERS AND

CHALLENGE OF KARNATAKA STATE CO-OPERATIVE APEX BANK

LIMITED”.

STATEMENT OF THE PROBLEM.

Microfinance has proven to be a very effective development tool because it

provides empowerment instead of charity. Typically, microfinance clients are self

employed house hold entrepreneurs who lack the resources to invest in their

business their future and thus cannot escape the grips of extreme poverty. So the

study will determine the impact of micro finance on barrowers of three different

programmes of Karnataka state co-operative Apex bank ltd.(KSCABL)

OBJECTIVES OF THE STUDY

To know the evolution of microfinance as bought up by KSCABL.

To understand the role played by KSCABL and its achievements in

microfinance.

To understand the impact of microfinance on the borrowers of selected

programs.

To explore the challenges faced by KSCABL for microfinance.

To give some study based suggestions to KSCABL.

RESEARCH METHODOLOGY OF THE STUDY .

There are many microfinance programs that work through solidarity

groups, the primary focuses of most implementing agencies remains on the

progress of the individual rather than community, they pronounce the success of

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each woman, each borrower. Rather than seeing the individual with in the context

of community. With all good intent, this study shall eye on SHG – bank linkage

programme, the most successful microfinance programme, backed by cooperatives

with reference KSCABL. And the facts, figures and other relevant materials, past

and present, serving has bases for the study and analysis will be determined from

the primary data and secondary data.

Primary data

The primary data for the study shall be triggered by the following available

sources.

Bank’s Representatives.

Personal interviews

Observations etc

Secondary data

The secondary data shall be pulled out from the following available sources.

Newspapers and magazines

Company reports/records

Monodrama year book – 2010

Standard reference text books

Various websites etc…

The facts, figures collected from the respondents are classified and tabulated and

analyzed by using some available statistical tools.

ANALYSIS AND INTERPRETATION.

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Analysis of the study shall be purely based on classifiable and tabulate data

analysis in the form theory that can be interpreted in accordance with the help of

comparative and percentile analysis and other simple method of statistics to make

the readers understand the analysis. Bar charts, pie diagrams, multiple bar

diagrams etc.

LIMITATIONS OF THE STUDY.

The study has major limitations of the time and resources.

The study is limited to know the benefits of SHG – BLP since its inception, in

brief.

The study is limited to only KSCABL.

Analysis of the data will be done by assuming that the information provided by

the representatives is genuine.

PROFILE OF KARNATAKA STATE CO-OPERATIVE APEX BANK LTD.

Our bank

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Co-operative sector has a long history of more than a century. In the Co-

operative movement agriculture credit sector has acquired a special importance in

order to avoid the exploitation of poor farmers from the middlemen and

moneylenders and to provide suitable assistance to the eligible farmers. As our

nation is basically an agriculture country, agriculture credit system plays an

important role in the development of this sector. Through this system, the credit

sector is extending helping hand to the farmers in its own way to boost the

agriculture production in the state in particular and in the country at large.

Karnataka State Co-operative Apex Bank over the 95 years, since its

inception has always come forward to extend its assuring hand to the farmers of

the state through District Central Co-operative Banks, Primary Agriculture Co-

operative Societies working under three tier Agriculture Co-operative Credit

System . Besides the bank is providing the needed financial assistance for

development of human resources, training, computerisation and all other

encouragement from time to time to the DCC Banks and PACS.

The Government of Karnataka has accepted Prof. Vaidyanathan's Committee

recommendations for revival of Co-operative Credit Institutions and Apex Bank is

committed to its successful implementations in the state.

PREAMBLE:

The Karnataka State Co-operative Apex Bank Limited.., established in the

year 1915 with deposits of Rs 1.26 lakh, owned funds of Rs.0.54 lakh and working

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capital of Rs.1.80 lakh is extending its continued service for the past 95 years to its

members and customers. The Bank which had a humble beginning in the year 1915

grew over the years and achieved a significant development in the Co-operative

Banking sector and became a Pioneer State Co-operative Bank, among the State

Co-operative Banks in the Nation. Apex bank rendering its service in the Co-

operative Sector, very particularly in the Agriculture Credit Sector known for its

commitment for the development of farmers in the state and credit Co-operative

institutions. The primary objective of the Bank is to provide Short term and

Medium term loans to farmers through DCC Banks and PACS, to the farmers so as

to help them in managing their agricultural activities. The Bank is also extending

loans to sugar sector, marketing and schematic activities, which are linked with

agriculture.

NATURE OF BUSINESS:

The business carried by the bank is generally related with providing short

term and long term agricultural loans. It also accepts deposits from the public.

Apex bank also provides loans to processing, marketing and consumer co-

operatives as well as sugar factories in Karnataka and working capital loans to state

level and national level institutions.

Board of Directors:

The management of the affairs of the bank shall vest in a committee called

the board of directors consisting of 23 members including the president of the

bank.

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a) Nineteen directors to be elected by the board of directors of each District

Credit Co-operative Bank affiliated to the Apex bank from among themselves at

the rate of one person for each District Credit Co-operative Bank.

b) Nominees of State Government shall not exceed three of whom one shall be a

banking expert who shall also be the managing director of the bank.

The president of the Karnataka State Credit Agriculture and Rural

development Bank Limited Bangalore, shall be an exofficio member of the board,

He need not be a member of the bank.

Term of office of the Board

The term of office of the elected members of the board shall be deemed to

empire on the date of the annual general meeting of the bank but they will continue

in office until their successors are elected.

Powers and Duties of Board of Directors.

Without prejudice to the general powers conferred by these bye laws the

following powers are conferred on the duties entrusted to the Board of directors.

Admission of members.

To purchase, take on lease or otherwise acquire any building or land whether

freehold, leasehold, or otherwise from any person for the Bank's purpose in

Bangalore or elsewhere and build or to sell or alter any building or

buildings, house or houses, shops or godowns, office or offices or a

residence for the president, Member of the Parliament, Secretary or General

Manager or any other person in the employ of the bank and to pay for such

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land and/or buildings whether purchased, leased, acquired, built or

constructed by the bank either in cash or otherwise and to purchase all

furniture and other things necessary or convenient for carrying on the

business of the bank.

To raise, borrow such sums of money as may be required from time to time

for the purpose of the bank in accordance with and subject to the provisions

of these bye-laws and the act or rules framed these under.

To draw, accept, endorse, negotiate and sell bills of exchange and other

negotiable instruments with or without security.

To make laws and advances to members at such rates of interest as the board

may deem fit either without taking any security for the repayment thereof or

upon security of property whether movable or immovable or of document of

title or otherwise, subject, however to the condition that the rates of interest

charged to Co-operative Societies on loans for agriculture and non-

agriculture which are refinanced by the Reserve Bank of India/ National

Board of Agriculture Rural Development of India at a concessional rate of

interest shall not exceed the ultimate lending rates prescribes in that respect

by the said lending institutions.

To make advances to members of this bank and to allow them overdrafts in

their current accounts with this bank either without security or upon the

security of money which may have at the time when such advances are made

or overdrafts allowed, been deposited by them with this bank on fixed

deposit or upon the deposit of securities, specified in clauses(a), (b), (c)and

(d) of section 20 of the Indian Trusts Act of 1882 or upon the pledge of

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agricultural produce, requisites and finished products of small scale and

village industries or gold and silver ornaments belonging to them.

To give guarantee to Co-operative Societies which are members of this bank

in respect of advances to their own members or the loans granted by the

Government or any other agencies subject to such conditions as are laid

down in this regard and charge commission thereon.

To establish and to support or aid in the establishment of funds calculated to

benefit of employees at ex-employers of the bank.

To execute all deeds, agreements, extracts receipts and other documents that

may be necessary or expedient for the purpose of the bank.

To call for periodical reports and returns from District Central Co-operative

Banks and affiliated societies and to prescribe forms for such returns.

To undertake liquidation work of affiliated societies indebted to the bank on

conditions laid down by the registrar with a view to facilitate recoveries

from the affiliated societies.

The Executive Committee.

a) There shall be an Executive Committee consisting of Seven members as

follows:-

The President.

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The Vice-President.

The Managing Director.

One nominee of the State Government other than the Managing Director.

Three members to be elected by the board.

b) The members of the Executive Committee shall hold office only so long as

they continue to be the members of the board. A members of the Executive

Committee shall cease to hold office if he absents himself committee but he may

be reinstated in office by the committee for sufficient reasons to be recorded in

writing. Any interim vacancy by resignation or otherwise occuring among elected

members of the committee shall be filled up by election by the board.

c) Four members of the Executive Committee shall form the quorum.

Management.

Annual General Meeting.

a) Subject to the provisions of the Karnataka Co-operative Societies Act of

1959, the Karnataka Co-operative Societies Rules 1960 and the bye-laws of the

bank, the final authority of the bank shall vest in the General Body of Members;

provided that nothing contained in this bye-law shall affect the exercise by the

Board or the Executive Committee or such officers by the act or the rules or the

bye-laws.

b) The Annual General Meeting of the bank shall be held at the Registered

office of the bank and shall be held once in a year within a period of three months

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after the co-operative year for the purpose of:

Approval of the program of the activities of the bank including the budget

estimate prepared by the board for the ensuring year.

Elections if any, in the prescribed manner of the members of the board other

than the nominated members.

Considerations of the latest audited Profit and Loss account and Balance

Sheet and consideration of the Annual Report, the latest available Audit

Report and disposal of the net profits.

Consideration of the amendment or repeal of any existing bye-laws or to

adopt new bye-laws.

Consideration of any other matter which may be brought forward in

accordance with the bye-laws.

Provided that with the general or special order of the Registrar the period for

holding such meeting may be extended by a period not exceeding six

months.

Study on functional departments of the Karnataka State Co-operative Apex

Bank Limited.

I. Administration and Development Department:

This department is headed by Chief General Manager which is sub divided into

two main department namely:

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a) Planning, development, administration and establishment department:

This department is concerned with formulating and implementing various

plans and strategies for development of Apex bank, District Central Co-operative

Banks and Primary Agriculture Co-operatives. It formulates development action

plans for District Co-operatives and Business Development Plans for Primary

Agriculture Co-operatives. This department comprises of planning and

development, statistics and development action plan.

b) Human Resource Department:

The service conditions of the employee of the bank are governed by

subsidiary rules of the Bank. As per subsidiary rules, all appointments will be

made direct recruitment after notifying vacancies in daily news papers. The

recruitment committee is headed by the president of the bank and the managing

director of the bank will be the member secretary, the recruitment will be made as

per the recruitment rules issued by Government of Karnataka from time to time.

The Apex bank has established Agricultural Co-operative Staff Training

Institute (ACSTI) for imparting training to staff of the Apex bank, District Central

Co-operative Banks and Primary Agriculture Co-operative Societies and urban

banks in the state in order to enhance the skills of the managerial staff in the light

of diversification of business in the competitive environment. The programs

mainly focus on systems and procedures including improvement in management

information system.

Apart from providing training to the staff of the staff of the bank at ACSTI,

the officers will be deputed for the training programs conducted by training college

of NABARD, regional training centre, Mangalore. Vykunta Mehta National

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Institute of Co-operative Management, Pune.

II. Finance and Audit Department:

This department is headed by Chief General Manager which is sub divided into

two namely:

a) Inspection and Audit Department:

The bank has a separate audit and inspection department to conduct

concurrent audit of the branches. In addition to this, conducting annual inspection

of the bank's branches and complaints is obtained from them. The complaints will

be reviewed with reference to the observations made in the report and a list of

important observations will be placed before of inspection and monitoring

committee meeting for review. The concerned branch manager is also invited to be

present in the said meeting and branch manager concerned is suitably advised.

b) Banking Department:

This department functions in general banking business of accepting

deposits, giving loans and advances, providing credit facilities to farmers,

processing working capital requirements of various institutions, managing day to

day general banking activities.

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VISION, MISSION AND QUALITY POICY:

VISION:

As a state co-operative bank, Apex bank shall be a dominant financial

institution in the state, leading the state to economic prosperity.

They shall be the model of an effective, protective, dynamic and financial

sound organization, respectively to state goals and aspiration.

They shall maintain highly trained and motivated professionals committed to

the highest standards of ethics and excellence.

They shall contribute to building progressive and standard of co-operative

societies in the service of farmers and rural mass.

MISSION:

Ensuring the best quality of life and success of their farmers, agricultural co-

operative societies, district central co-operative banks, clients and employees who

are the reasons for their being.

For their Farmers:

They shall continue to improve their socio-economic status through timely

financial and technical support.

For their Clients:

They shall deliver innovative and advanced products and services in productive

and effective manner to meet their local demands.

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For their PACS and DCC banks:

They shall ensure mutual co-operation and compliment action to achieve optimum

gains in an environment of confidence and trust.

For their Employees:

They shall ensure a work atmosphere of mutual respect and team work team work

within a system of recognition and regards. They shall continue to provide

appropriate training and value enhancement to ensure the highest degree of

professionalism and integrity. They shall hold their organization composed of

highly competent people driven by superior technology.

For the People of Karnataka:

They commit their unvarying loyalty and dedicated service in the pursuit of state

farmer’s interest.

Quality Objectives:

To serve as a state co-operative bank and as a balancing center in the state of

Karnataka for registered co-operative societies.

To raise funds by way of deposits, loans, grants donations, subscription,

subsidies etc for financing the members by way of loans, cash credits,

overdrafts and advances.

To develop, assist and co-ordinate the member DCCBs and other co-

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MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL

operative societies and secure financial assistance for them.

To arrange/hold periodical co-operative conferences of the DCCBs and other

members of the bank and to take action for the growth and development of

the co-operative credit movement.

To serve as a State Co-operative Bank and as a Balancing center in the State

of Karnataka for registered co-operative societies.

To participate in financing Co-operative and other institutions who are

members of the bank directly or through consortium of Bankers.

To participate in the schematic lending and to provide loans for which

refinance facility is available with term lending institutions.

Ta arrange for the inspection and supervision of the affiliated District

Central Co-operative Banks and other Co-operative Societies and guide

them in their working.

To buy and sell securities for the legitimate investment of surplus funds and

act as a agents for buyers and sellers of securities of Central/State.

To carry on general business of banking and other banking activities to the

members and customers.

To purchase, acquire or raise or otherwise obtain moveable or immovable

property for the own use of the bank and also to dispose them of when not

required

To promote and undertake Co-operative Research and Co-operative

Developement.

To manage, sell or release any property which may come into the possesion

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of the bank in satisfaction of or part satisfaction of any of its claims.

To promote economic interest of the members of the bank in accordance

with the principles of cooperation.

To do such other things as are incidental or conductive to the promotion and

advancement of the business of the bank.

Functions of Apex Bank Ltd:

Financing of short-term loans to seasonal agricultural operation and marketing

of crops repayable within one year.

Advancing cash credit loans to meet working capital for processing, marketing

and consumer co-operative including co-operative sugar factories in Karnataka.

Sanctioning advances to the non-farm sector to develop cottage industries,

small scale industries and rural artisans.

Participating in financing processing co-operatives for block capital under

consortium arrangement.

Providing loan facilities like consumer durable loans, installment loans, vehicle

loans, housing loans and safe deposit locker facilities to the consumer of the

bank.

Supporting the primary agriculture credit societies under the business

development programs and District Central Co-opertive Bank under the

development plan.

Advancing medium term loans for development of agriculture infrastructure

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such as life irrigation, dairy, poultry, plantations, gobar gas etc., under the

schematic lending.

It also gives advances to oil seeds, weavers and staff of Apex bank.

The Bank’s core processes

 

Credit and

Lending

Investments and

Deposits

Transactions and Payments

Business banking

-         Loans

Commercial instruments

-         Purchase of

commercial paper for

Accounts

 

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-         Overdrafts

-         Asset based

finance

-         Bank

assurance

Corporate and

Institutional Finance

-        

Loans/Syndicate

d Loans

-         Overdrafts

-         Structured

finance

-         Line of

credits

-         Structured

Finance

-         Guarantees

Term Loan

Working Capital

Project Finance

Refinance

Retail banking

-         Personal loans

-         Debt

bank portfolio

-         Purchase of

commercial paper for

customers

-         Bank acceptances

-         Time and call

deposits

-         Short term deposits

-         S&L fixed deposits

 

Government securities

 

-         Treasury bills and

bonds

Inter-bank operations

 

- Money market

-         Savings

-         Personal

-         Account management

-         Certificate of depositor

 

Cash operations

 

-         Money transfers

-         Cash and cheques receipts

-         Draft payments

-         Direct debit payments

 

Card products

 

-         Prepaid

-         Post paid

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management

Mortgage Lending

-         Mortgage

financing

-         House

development

bonds

SERVICE PROFILE OF THE BANK:

The Karnataka State Co-Operative Apex Bank Limited provides following

services to the societies:

Financing of short term loans

Financing of medium term loans

Financing of Kisan credit card scheme/loan

Credit facilities to self help groups. Advancing medium term loans economic

development and providing cash loans

Advancing workshop capital loans

Collection of cheques and drafts

Loans through various schemes

Personal banking

Services provided by the bank in detail:

Financing of short term loans:

Financing of short term loans for seasonal agricultural operations and for

marketing of crops. These loans are repayable within one year.

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Financing of medium term loans:

These loans are sanctioned for agricultural purpose and non-agricultural

purpose

.

Financing of Kisan credit card schemes/loan:

Kisan credit card aims at providing timely and adequate credit support to

farmers for their cultivation including investment credit needs in a flexible and cost

effective manner. All DCC banks in the state have implemented the kisan credit

scheme.

Credit facilities to self help groups:

All the DCCBs have taken keen interest in the formation of self help groups

in co-ordination with PACS. Self help groups mobilize their savings and avail

credit facilities from DCCBs and PACS.

Advancing medium term loans with economic development:

These loans are advanced for the agricultural infrastructures such as lift

irrigation, diary, poultry, plantation, gobar gas etc that constitutes schematic

lending.

Providing cash credit loans:

Providing cash credit loans to processing marketing and consumer co-

operatives as well as sugar factories in Karnataka and also term loans to sugar

factories under consortium agreement.

Advancing working capital loans:

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Advancing working capital loans to state level co-operatives like

MARKFRED, KCCF and to the national level co-operatives like IFFCO and

KRIBHCO. The bank provide similar facilities to public sector undertakings like

Karnataka Silk Marketing Board, Karnataka Handloom Development Corporation,

Karnataka Small Scale Industries Development Corporations, Food Corporations

of India directly and also through consortium arrangements through commercial

banks.

Collection of Cheques and Drafts:

The bank extends finance to the non-farm sector and to the development of

cottage industries, small scale industries and rural artisan weavers. It is a scheduled

bank in all aspects including remittance of funds, demand drafts, mail transfers,

collection of cheques and drafts.

Loans through various schemes: Such as:

Vehicle loans

Housing loans

Mortgage loans

Installment loans

Jewel loans

Other loans

Personal Banking:

Apex bank provides the following deposit schemes to the customers:

Fixed Deposits:

In this account, the customer deposits money period up to 10 years.

Current deposits:

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In this type, the individuals or businessmen operate. This account is kept open for

the entire day. The customer can make any number of deposits and withdrawals in

a day during business hours.

Saving Bank Deposits:

In this deposit, the low income class groups and marginal customer deposits the

money.

AREA OF OPERATION

Apex bank works in the regional level only. It does not work in national

level. The area of operation covers the entire Bangalore. It has 31 branches in

Bangalore and head quarter is situated in Chamarajpet. The branch offices of bank

are adequately delegated with power of sanction of disbursements. If the loans are

to be provided upto 10 lakhs it is handled by concerned branch offices but if it is

more than 10 lakhs then it is handled by concerned branch offices but if it is more

than 10 lakhs then it is handled by main branch.

BRANCHES AT BANGALORE:

Head office Branch- Chamarajpet.

Ashoka Pillar.

Banashankari.

Basaveshwara nagar.

Girinagar.

Gokula.

Gandhinagar.

Agra- HSR Layout.

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Indiranagar.

Jayanagar Market Complex.

Jayanagar 9th Block.

J.P nagar.

Kalpatharu Super Bazaar.

Koramangala.

Kengeri Satellite Town.

Lakkasandra.

Magadi Road.

Ganganagar.

Padmanabha nagar.

Public Utility Building.

Rajajinagar.

R.P.C Layout.

Vijayanagar.

Vidhana Soudha.

Legislators’ Home.

M.S Building.

Mahalakshmipuram.

Vyalikaval.

Chandra Layout.

Vivekananda College (Ext. counter).

R.T Nagar.

OWNERSHIP PATTERN

Apex bank is state co-operative bank established by the state government in

the year 1915 under the organization of Primary Agricultural Co-Operative Credit

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Societies (PACS) in villages and Urban Co-Operative Banks in towns and cities

offer passing the co-operative credit societies at 1904 to meet mainly short and

medium term financial needs of farmers.

COMPETITORS INFORMATION

The major competitors are:

Land bank (Agricultural based finance).

Amanath Scheduled Co-operative Bank.

Sham Rao Vittal Co-operative Bank.

Commercial Banks.

Small Industrial Service Institution.

Small Industrial Development Bank of India.

Corporate Banks.

Some local Co-operative Banks.

ACHIEVEMENTS/AWARDS:

1) Bank is able to lend 75% of the farmers in the state and it covers all sugar

factories in Karnataka.

2) Apex bank is habituated to get awards at National levels year after year.

Similarly NABARD has been giving best performance award and even PACS have

not have logged behind in getting National recognition. All DCC banks and merely

80% of PACS have proved themselves to be financially viable.

INFRACTRUCTURAL FACILITIES

The new administrative building at a cost of around Rs. 800 lakhs completed

in 2002 provides additional impetus to a new work culture and new mindset of all.

The gigantic building with granite cladded façade having circular and rectangular

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columns suggesting strengths and stability reflects the character of the

organization. This four storied block caters mainly to the administrative

requirement of the bank along with the hi-tech banking hall on the ground floor.

The architects M/s.Zechariah consultant effectively conceptualize the vision of the

corporate head office floated by the Directors of the Board. The built up area of

“UTHUNGA” has been 67,820 Sq. ft. the civil cost has come to Rs. 888 per sq. ft.

and interiors all inclusive worked out at Rs. 357 per sq. ft. They believe that their

members are always behind them not only to encourage but also to guide them in

case they go wrong. They are grateful to them. Similarly they are grateful to the

Government of Karnataka, RBI, NABARD and all other sister Co-Operative in the

state for what they are today.

WORK FLOW MODEL

Page 58

APEX BANK

DCC BANKS

PRIMARY CO-OPERATIVE BANKS

FARMERS

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FUTURE GROWTH AND PROSPECTUS:

The Honorable Union Minister for finance has already announced and

introduced and instructed all the banks in the country for building the agriculture

credit in 3 years. The Co-operatives too, in the state have to increase the

agriculture credit to farmers by 30% during the years 2006-07. The state

government in its budget proposals also announces to issue agricultural loans at

4% interest. The Apex bank will endeavor to further increase in the agriculture

loans from 1258.20 crores of total agricultural loans portfolio in the year 2005-06

to 1450.00 crores to the end of 31st march 2007. Accordingly a target has been set

to mobilize additional resources to the extent of Rs.166.05 crores through the bank

branches. NABARD also inform apex bank and District Central Co-operative

banks to take appropriate action to mobilize additional resources to utilize such

funds to increase the seasonal agricultural operations.

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ANALYSIS AND INTERPRETATION OF DATA

TABLE-1

OPINION REGARDING AWARENESS OF MICROFINANCE

SL.NO OPINION NO OF RESPONDENT PERCENTAGE

1 YES 38 76%

2 NO 12 24%

TOTAL 50 100

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ANALYSIS

From the following information it is clear that 76% are aware of microfinance and 24% of not aware of microfinance.

NO OF RESPONDENT

76%

24%

1 YES

2 NO

INFERENCE:

From the above graph it can be inferred that 76% of the respondents are positive opinion and rest of 24% respondents shows negative attitude towards the awareness of microfinance.

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TABLE-2

OPINION REGARDING MICROFINANCE SERVING THE RURAL AND POOR PEOPLE.

SL.NO OPINION NO OF RESPONDENT PERCENTAGE

1 STRONGLY AGREE 10 20%

2 AGREE 10 20%

3 CANNOT SAY 20 40%

4 DISAGREE 7 14%

5 STRONGLY DISAGREE 3 6%

TOTAL 50 100

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ANALYSIS:

From the above table we can analyse that microfinance serves the poor and rural people it is therefore clear that 40% of the respondents are neutral (cannot say) and 20% of the respondents strongly agree, 20% of the respondents are agree, 14% of the respondents disagree and 6% of the respondents strongly disagree.

NO OF RESPONDENT

20%

20%

40%

14%

6% 1 STRONGLYAGREE

2 AGREE

3 CANNOT SAY

4 DISAGREE

5 STROGNLYDISAGREE

INFERENCE:

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The respondents were asked whether the microfinance serves the poor and the rural population as 40% of the people were not sure about it we can analyse that the microfinance is not helping them effectively.

TABLE-3

OPINION REGARDING MICROFINANCE CONTRIBUTION TO

ENTERPRISES GROWTH.

SL.NO OPINION NO OF RESPONDENT PERCENTAGE

1 STRONGLY AGREE 8 16%

2 AGREE 10 20%

3 CANNOT SAY 25 50%

4 DISAGREE 5 10%

5 STROGNLY DISAGREE 2 4%

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TOTAL 50 100

ANALYSIS:

From the above table we can analyze that the 50% of the people were not sure whether microfinance contributes the enterprise growth. 20% of the respondents agree, 16% of the respondents strongly agree, 10% of them disagreed and 4% of the strongly disagreed.

NO OF RESPONDENT

16%

20%

50%

10%4% 1 STRONGLY

AGREE

2 AGREE

3 CANNOT SAY

4 DISAGREE

5 STROGNLYDISAGREE

INFERENCE:

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The respondents were not sure that microfinance will help for the growth and development of the enterprise were as 36% of the respondents agreed that they helps in growth and very few respondents disagreed.

TABLE-4

OPINION REGARDING MICROFINANCE HELPS RURAL WOMEN TO TAKE EMPOWERMENT.

SL.NO OPINION NO OF RESPONDENT PERCENTAGE

1 STRONGLY AGREE 4 8%

2 AGREE 10 20%

3 CANNOT SAY 30 60%

4 DISAGREE 4 8%

5 STROGNLY DISAGREE 2 4%

TOTAL 50 100

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ANALYSIS:

From the above table we observe that 60% of respondents are not sure that microfinance help rural women to take a empowerment. 20% of respondent agree, 8% of the respondents strongly agree, 8% of the respondents disagree, 4% of the respondents strongly disagree.

NO OF RESPONDENT

8%20%

60%

8% 4%

1 STRONGLYAGREE

2 AGREE

3 CANNOT SAY

4 DISAGREE

5 STROGNLYDISAGREE

INFERENCE:

As majority of the people are not sure about we can analyze that microfinance is not very much helpful for the financial development of rural population.

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TABLE-5

OPINION REGARDING MICROFINANCE LEAD TO POOR ALLEVIATION.

SL.NO OPINION NO OF RESPONDENT PERCENTAGE

1 STRONGLY AGREE 3 6%

2 AGREE 8 16%

3 CANNOT SAY 27 54%

4 DISAGREE 7 14%

5 STROGNLY DISAGREE 5 10%

TOTAL 50 100

ANALYSIS:

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From the above data it is analyze that the microfinance lead to poor alleviation 54% cannot say, 16% agree and 6% strongly agree.

NO OF RESPONDENT

6%

16%

54%

14%

10% 1 STRONGLYAGREE

2 AGREE

3 CANNOT SAY

4 DISAGREE

5 STROGNLYDISAGREE

INFERENCE:

Microfinance does not help much for the financial development of the poor population because majority of the respondents were not sure it at all microfinance helped them in alliving the poverty.

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TABLE-6

OPINION REGARDING EDUCATIONAL OPPORTUNITY FOR THE POOR CHILDREN BY THE MICROFINANCE.

SL.NO OPINION NO OF RESPONDENT PERCENTAGE

1 STRONGLY AGREE 2 4%

2 AGREE 10 20%

3 CANNOT SAY 30 60%

4 DISAGREE 6 12%

5 STROGNLY DISAGREE 2 4%

TOTAL 50 100

ANALYSIS:

From the above data it is analyze that the microfinance take advantage of educational opportunity for the poor children 60% cannot say, 20% agree and 4% strongly agree.

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NO OF RESPONDENT

4%20%

60%

12% 4%

1 STRONGLYAGREE

2 AGREE

3 CANNOT SAY

4 DISAGREE

5 STROGNLYDISAGREE

INFERENCE:

Microfinance should provide educational benefits to the poor children as it helps in the development privileged children.

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TABLE-7

OPINION REGARDING LEVEL OF INCOME IN THE SOCIETY THROUGH MICROFINANCE.

SL.NO OPINION NO OF RESPONDENT PERCENTAGE

1 STRONGLY AGREE 10 20%

2 AGREE 15 30%

3 CANNOT SAY 20 40%

4 DISAGREE 4 8%

5 STROGNLY DISAGREE 1 2%

TOTAL 50

ANALYSIS:

From the above data it is analyzed that the microfinance helps in improving level of income in the society 30% agree, 20% strongly agree and 40% cannot say.

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INFERENCE:

Many of the respondents were not sure hence we can inferred that microfinance does not help in improving the economic status of the society.

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NO OF RESPONDENT

20%

30%

40%

8% 2% 1 STRONGLY AGREE

2 AGREE

3 CANNOT SAY

4 DISAGREE

5 STROGNLYDISAGREE

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TABLE-8

OPINION REGARDING INCREASE IN CONTROL OF WOMEN OVER RUNNING FAMILY ENTERPRISES.

SL.NO OPINION NO OF RESPONDENT PERCENTAGE

1 STRONGLY AGREE 6 12%

2 AGREE 25 50%

3 CANNOT SAY 10 20%

4 DISAGREE 6 12%

5 STROGNLY DISAGREE 3 6%

TOTAL 50

ANALYSIS:

From the above data it is analyzed that the microfinance enable increase in control of women over running family enterprise 50% agree, 12% strongly agree and 20% cannot say.

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NO OF RESPONDENT

12%

50%

20%

12%

6% 1 STRONGLY AGREE

2 AGREE

3 CANNOT SAY

4 DISAGREE

5 STROGNLYDISAGREE

INFERENCE:

Microfinance help the women to start up their own business and get self-employed which will help them to run there family.

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TABLE-9

OPINION REGARDING AWARENESS OF KISAN CREDIT SCHEME LOANS

SL.NO OPINION NO OF RESPONDENT PERCENTAGE

1 YES 40 80%

2 NO 10 20%

TOTAL 50

ANALYSIS:

From the above table it is clear that 80% of the respondents are aware of kisan credit scheme loan and 20% of the respondents are not aware of this scheme.

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NO OF RESPONDENT

80%

20%

1 YES

2 NO

INFERENCE:

Kisan credit loans are provided to the farmers as the majority of the respondents agreed that they are satisfied with the availability of kisan credit loans.

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TABLE-10

OPINION REGARDING SATISFACTION WITH MICROFINANCE FACILITIES.

SL.NO OPINION NO OF RESPONDENT PERCENTAGE

1 YES 27 54%

2 NO 23 46%

TOTAL 50

ANALYSIS:

From the above table it is clear that 54% of the respondents are satisfied with the micro financing facilities provided by the bank and 46% of the respondents not satisfied.

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NO OF RESPONDENT

54%

46%1 YES

2 NO

INFERENCE:

Facilities provided by the bank are been satisfied by the majority of customer. So it is observed that bank provide good facilities to the customers.

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TABLE-11

OPINION REGARDING MICROFINANCE HEOP TO DEVELOP ENTERPRISES

SL.NO OPINION NO OF RESPONDENT PERCENTAGE

1 YES 17 34%

2 NO 33 66%

TOTAL 50

ANALYSIS:

From the above table it is clear that 66% of the respondents does not help to develop the enterprise and 34% of the respondents help to develop the enterprise.

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NO OF RESPONDENT

34%

66%

1 YES

2 NO

INFERENCE:

Microfinance is for the people who are in need which helps the women and farmers for the economic development.

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TABLE-12

OPINION REGARDING SECTOR THAT BENEFITS THE MOST

SL.NO OPINION NO OF RESPONDENT PERCENTAGE

1 AGRICULTURE 23 46%

2 ENTERPRISES 3 6%

3 SELF EMPLOYED 17 34%

4 OTHERS 7 14%

TOTAL 50

ANALYSIS:

From the above table it is clear that 46% of the respondents share their view that agricultural sector will be more beneficial and 34% of the respondents share their view that self employment will be more beneficial, 6% of the respondents agree that enterprise will be more beneficial and 14% of the respondents share their view agreed that the other sector will be beneficial for microfinance.

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NO OF RESPONDENT

46%

6%

34%

14%

1 AGRICULTURE

2 ENTERPRISES

3 SELF EMPLOYED

4 OTHERS

INFERENCE:

Microfinance is beneficial for the agricultural and self employed sector as the people get employed and credit facilities are provided to the farmers.

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TABLE-13

OPINION REGARDING AWARENESS OF THE NEWLY EMERGING FACILITIES.

SL.NO OPINION NO OF RESPONDENT PERCENTAGE

1 YES 13 26%

2 NO 37 74%

TOTAL 50

ANALYSIS:

From the above table it is clear that 74% of the respondents are not aware of equity investment and 26%of the respondents are aware of equity investment.

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NO OF RESPONDENT

26%

74%

1 YES

2 NO

INFERENCE:

Karnataka apex bank has come up with the new emerging microfinance which is still not popular among the customers of the bank as they are not educated.

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TABLE-14

OPINION REGARDING THE POWERFUL INSTRUMENT FOR SELF EMPOWERMENT OF RURAL WOMEN.

SL.NO OPINION NO OF RESPONDENT PERCENTAGE

1 YES 30 60%

2 NO 20 40%

TOTAL 50

ANALYSIS:

From the above table it is clear that 60%of the respondents are accepted it is a powerful instrument and 40% of the respondents does not accept it is a powerful instrument.

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NO OF RESPONDENT

60%

40%

1 YES

2 NO

INFERENCE:

Micro financing is helpful for the rural women as it provides self employment opportunity for the women which will help them to improve there per capita income.

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TABLE-15

OPINION REGARDING NABARD SIGNIFICANTE ROLE IN PROMOTING MICROFINANCE.

SL.NO OPINION NO OF RESPONDENT PERCENTAGE

1 YES 19 38%

2 NO 31 62%

TOTAL 50

ANALYSIS:

From the above table it is clear that 62% of the respondents does not agree that NABARD play a significant role in promoting microfinance and 38%of the respondents agree that NABARD play a significant role in promoting microfinance.

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NO OF RESPONDENT

38%

62%

1 YES

2 NO

INFERENCE:

NABARD play a significant role because it provides loans to the formers and other facilities.

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TABLE-16

OPINION REGARDING AWARNESS OF THE PROCEDURE FOR LOAN.

SL.NO OPINION NO OF RESPONDENT PERCENTAGE

1 YES 34 68%

2 NO 16 32%

TOTAL 50

ANALYSIS:

From the above table it is clear that 68% of the respondents are aware of procedure for applying micro finance loans and 32% of the respondents are not aware of their procedure.

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NO OF RESPONDENT

68%

32%

1 YES

2 NO

INFERENCE:

It is therefore inferred that majority of the people are aware of the procedure for applying for loan for microfinance.

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TABLE-17

OPINION REGARDING SATISFACTION WITH SERVICES.

SL.NO OPINION NO OF RESPONDENT PERCENTAGE

1 YES 28 56%

2 NO 22 44%

TOTAL 50 100

ANALYSIS:

From the above table it is clear that 56% of the respondents are satisfied with services provided by the bank and 44% of the respondents are not satisfied with services provided by the bank.

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NO OF RESPONDENT

56%

44% 1 YES

2 NO

INFERENCE:

When enquired the respondents majority of the customers were extremely satisfied with services that is provided by the bank.

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TABLE-18

OPINION REGARDING EARLIER BORROWED OF LOAN FROM THUS BANK.

SL.NO OPINION NO OF RESPONDENT PERCENTAGE

1 YES 31 62%

2 NO 19 38%

TOTAL 50 100

ANALYSIS:

From the above table it is clear that 62% of the respondents had borrowed micro financing loan from the bank and 38% of the respondents had never borrowed a micro financing loan from the apex bank.

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NO OF RESPONDENT

62%

38%

1 YES

2 NO

INFERENCE:

Microfinance helps a lot of people because of the many of the rural folk are satisfied with microfinance as well the women as self employed.

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TABLE-19

OPINION REGARDING OF PROCEDURE TO REPAY THE LOAN.

SL.NO OPINION NO OF RESPONDENT PERCENTAGE

1 YES 39 78%

2 NO 11 22%

TOTAL 50 100

ANALYSIS:

From the above table it is clear that 78% of the respondents are aware of the procedure of paying back the loan after borrowing and 22% of the people not aware of this procedure.

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NO OF RESPONDENT

78%

22%

1 YES

2 NO

INFERENCE:

It is therefore inferred that 78% of the people are aware of the procedure of paying back the loan.

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TABLE-20

OPINION REGARDING MEDIUM OF AWARENESS OF MFI’s

SL.NO OPINION NO OF RESPONDENT PERCENTAGE

1 THROUGH AGENCIES 4 8%

2 RRBS 26 52%

3 CO-OPERATIVE BANKS 17 34%

4 ANY OTHERS 3 6%

TOTAL 50

ANALYSIS:

From the above table it is clear that 52% of the respondents are aware of MFI’s through regional rural banks, 34% of the respondents are aware of MFI’s through co-operative banks, and 8% of the people are aware of this bank through agencies and 6% of the respondents are aware of this bank from other sources.

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NO OF RESPONDENT

8%

52%

34%

6%1 THROUGHAGENCIES

2 REGIONAL RURALBANK

3 CO-OPERATIVEBANK

4 ANY OTHER

INFERENCE:

When asked majority of the awareness is from rural bank and co-operative societies.

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TABLE-21

BANK FROM WHICH BORROWED LOAN RESPONDENTS.

SL.NO OPINION NO OF RESPONDENT PERCENTAGE

1 APEX BANK 4 8%

2 NABARD 17 34%

3 COMMERCIAL BANK 9 18%

4 CO-OPERATIVE BANK 13 26%

5 RRBS 7 14%

TOTAL 50 100

ANALYSIS:

From the above table it is clear that 34% of the respondents have borrowed microfinance loan from NABARD, 26% of the respondents borrowed from co-operative bank, 18% of the respondents have borrowed microfinance loan from the commercial bank, and 14% of the respondent have borrowed microfinance loan from RRBS, and 8% of the respondents have borrowed microfinance loan from the apex bank.

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NO OF RESPONDENT

8%

34%

0%18%

26%

14%

1 APEX BANK

2 NABARD

2

3 COMMERCIALBANK

4 CO-OPERATIVEBANK

5 RRBS

INFERENCE:

As microfinance is helpful for the rural and poor population but still majority of the people opt NABARD because change less interest compared to NGO’s.

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TABLE-22

OPINION REGARDING MICROFINANCE IS A TOOL TO A ERADICATE POVERTY.

SL.NO OPINION NO OF RESPONDENT PERCENTAGE

1 YES 34 68%

2 NO 16 32%

TOTAL 50 100

ANALYSIS:

From the above table it is clear that 68% of the respondents agree that microfinance is a tool to eradicate poverty and 32% of the respondents do not agree that microfinance is a tool for eradicate the poverty.

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NO OF RESPONDENT

68%

32%

1 YES

2 NO

INFERENCE:

Microfinance is a part of eradicate of poverty as it does not reach some of the needy because they are not aware of the facilities given by the bank as only 3/4 of the people enjoy the facility and1/4 of them are unaware of the benefits.

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TABLE-23

OPINION REGARDING IMPROVED STANDARD OF LIVING AMONG THE RURAL POPULATION.

SL.NO OPINION NO OF RESPONDENT

PERCENTAGE

1 YES 33 66%

2 NO 17 34%

TOTAL 50 100

ANALYSIS:

From the above table it is clear that 66% of the respondents has shared their view that MFI’s will increase the standard of living of the rural population and 34% of the respondents has share their view that MFI’s will does not help in increase in the standard of living of the rural people.

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NO OF RESPONDENT

66%

34%

1 YES

2 NO

INFERENCE:

Standard of living has been improved as the customers do have the facilities which will help them to get employed and finance to raise better crops.

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SUMMARY OF FINDINGS:

Majority of the people opinioned say that they are aware of microfinance.

Majority of the people are not sure that microfinance serves the rural

population.

50% of the respondents are not sure that microfinance will contribute in

growth and development of enterprise.

Majority of the women are not sure that microfinance helps rural women to

take a self employment.

Microfinance does not lead to evaluation of the poor people as majority of

the people are unaware microfinance.

Majority of the people disagree that microfinance provides educational

benefits to the poor children.

Microfinance does not help in the economic development of many

unprivileged population.

50% of the respondents are aware of kisan credit loans schemes.

Majority of the respondents are the satisfied with the microfinance facilities

provided by the bank.

Decrease in the repayment of microfinance loans causes in losses.

Banks has to provide microfinance to agriculture and non-agricultural sector.

Majority of microfinance is a powerful instrument for self empowerment for

rural peoples.

Procedure for applying for micro financing loan is easier than compare to

long term loans.

Sanctioning of microfinance loans is easier compare to long term loan.

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CONCLUSION

The main idea behind Microfinance is that poor people, who can provide no

collateral, should have access to some sort of financial services. Microfinance

began with microcredit: the provision of small loans to very poor families to help

them engage in productive and self-sustaining activities.

Microfinance has proven to be a very effective development tool because it

provides empowerment instead of charity. Typically, microfinance clients are self-

employed household entrepreneurs who lack the resources to invest in their

business and their future and thus cannot escape the grip of extreme poverty.

From the research we can conclude that majority of the respondents agree that

“microfinance is a powerful instrument for rural people for self-empowerment”,

“help in the economic development of many unprevilised population” etc.,

Majority of the people are aware about the microfinance but, however few of the

people not sure that microfinance serves the rural population, does not lead to

evaluations of the poor people & partially sanctioning of microfinance takes times

but not much time as compared to long term loan.

Majority of the respondents are satisfied with microfinance facilities provided by

the bank & most of the respondents are aware about the kisan credit loans schemes.

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SUGGESSTIONS

Campaign through media on the advantage of microfinance through Co-

operative Banks viz., Radio, TV, Local News Paper, Pamphlets, Posters,

etc., can increase the awareness among SHGs.

Village wise door-to-door surveys can be conducted through PACS to

identify those families which are not yet involved in any SHGs and motivate

them to form new SHGs.

Efforts may be made to promote SHGs in the Districts like Koppal, Bellary,

Chamarajnagar, Bagalkot, Kolar and Dharwad where the development of

SHGs-BLP is less

Few of the rural population are not aware of the microfinance such people

should be educated about the benefits provided to them

The interest rate should be subsidized to the people who come under below

poverty line

It is suggested that bank should develop a standiszed recovery system

Microfinance is misused a lot so their should be a proper procedure while

allotting the finance.

It should help the needy and not the enterprises.

It should help the people below the poverty line

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ANNEXURE

QUESTIONNAIRE FOR “MICROFINANCE IMPACT ON BORROWERS AND

CHALLENGES OF KARNATAKA COOPERATIVE APEX BANK LTD”.

Dear sir/madam.

MEMBER INFORMATION:

(Please tick whichever is applicable)

NAME:

AGE:

a) 22-31 years ( )

b) 32-41 years ( )

c) 42-51 years ( )

d) More than 51 years ( )

GENDER:

a) Male ( )

b) Female ( )

1) Are you aware of microfinance?

a) Yes ( ) b) No ( )

2) Does microfinance serve poor and rural people?

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MICROFINANCE IMPACT ON BORROWERS AND CHALLENGES OF KSCABL

a) Strongly agree ( ) b) Agree ( ) c) cannot say ( )

d) Disagree ( ) e) strongly disagree ( )

3) Does microfinance contribute to enterprise growth and income?

a) Strongly agree ( ) b) Agree ( ) c) cannot say ( )

d) Disagree ( ) e) strongly disagree ( )

4) Does microfinance helped rural women to take an empowerment.

a) Strongly agree ( ) b) Agree ( ) c) cannot say ( )

d) Disagree ( ) e) strongly disagree ( )

5) Does microfinance lead to poor alleviation?

a) Strongly agree ( ) b) Agree ( ) c) cannot say ( )

d) Disagree ( ) e) strongly disagree ( )

6) Does microfinance take advantage of educational opportunity for the poor

children?

a) Strongly agree ( ) b) Agree ( ) c) cannot say ( )

d) Disagree ( ) e) strongly disagree ( )

7) Microfinance helps in improving levels of income in the society.

a) Strongly agree ( ) b) Agree ( ) c) cannot say ( )

d) Disagree ( ) e) strongly disagree ( )

8) Microfinance enables increase in control of women over running family

enterprises.

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a) Strongly agree ( ) b) Agree ( ) c) cannot say ( )

d) Disagree ( ) e) strongly disagree ( )

9) Are you aware of kisan credit scheme loans provided by KSCABL?

a) Yes ( ) b) No ( )

10) Are you satisfied with the micro financing facilities provided by the bank?

a) Yes ( ) b) No ( )

11) Does microfinance help only to develop enterprises?

a) yes ( ) b) No ( )

12)which sector does microfinancing benefits the most.

a)Agriculture( ) b)Enterprises( ) c)Self

employed( )

d)others( )

13)Are you aware of the newly emerging microfinance facilities (equity

investment).

a)yes( ) b)No( )

14)Is microfinancing powerful instrument for self empowerment for rural women.

a)yes( ) b)No( )

15)Does NABARD play a significant role in promoting microfinance.

a)yes( ) b)No( )

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16)Are you a ware of the procedure for receiving the microfinance loans from the

bank.

a)yes( ) b)No( )

17)Are you satisfied services provided by the bank.

a)yes( ) b)No( )

18)Have you ever borrowed microfinancing loan from thus bank.

a)yes( ) b)No( )

19)Are you aware of the procedure involved for paying back the loan after

borrowing.

a)yes( ) b)No( )

20)medium of awareness of MFIs.

a)Through agencies( ) b) Regional Rural Bank ( )

c) Co-operative bank ( ) d)Any other( )

21)From which institutions you taken from microfinance.

a)Apex bank( ) b)NABARD( )c)Commercial Bank( )

d)Co-operative bank( ) e)Regional Rural Bank( )

22)Do you think microfinance is a tool to eradicate poverty.

a)yes( ) b)No( )

23)Has the standard of living improved among the rural population because of

MFIs

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a)yes( ) b)No( )

BIBILIOGRAPHY

REFERENCES:

To obtain more information regarding this project report and to substantiate it with

theoretical proof, the following references were made:

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BOOKS REFERRED:

Review of SHG-Bank linkage in Karnataka Apex Bank Limited 2009-2010

Publications by KSCABL

Journals’ & Magazines’ of KSCABL

WEBSITES VISITED:

WWW.nabard.org

WWW.karnatakaapex.com

WWW.microfinancegateway.com

WWW.grameenfoundation.org

WWW.google.com

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