Abortion pills in Jeddah |• +966572737505 ] GET CYTOTEC
SIP Mutual funds
1. 1
Summer Internship Project report
ON
Study of Mutual Fund Schemes at
THE DEVIKULAM TALUK VYAPARI VYAVASAI SERVICE
CO-OPERATIVE SOCIETY LTD.
Submitted in partial fulfillment of requirement of Bachelor of
Business Administration (B.B.A) General
BBA 5 Semester B (Morning)
Batch 2012-2015
Submitted to: Submitted by:
Dr. Niti Saxena Adesh Ramesh
Associate Professor 09014101712
JAGANNATH INTERNATIONAL MANAGEMENT SCHOOL
KALKAJI
2. 2
DECLARATION
I hereby declare that the present study of MUTUAL FUND SCHEMES of THE
DEVIKULAM TALUK VYAPARI VYAVASAI SERVICE CO-OPERATIVE
SOCIETY LTD. Is based on my original research work for the fulfillment of the
continuous evaluation of the assessment of two months summer internship
program, BACHELOR OF BUSINESS ADMINISTRATION Class of 2012- 2015
.The report has been done by me under the guidance of Mr. Madhukumar
(Internal guide) And Dr. Niti Saxena (Faculty Guide) the research presented in
this study has not been submitted in full or part in this or any other university of
the award of any degree or diploma.
Place: Kerala
Date:
3. 3
ACKNOWLEDGMENT
My Sincere Thanks and My Deep Sense of Gratitude to the Authorities of The
Devikulam Taluk Vyapari Vyavasai Co-operative Society Ltd. for giving me this
Opportunity to Study the Firm’s Mutual Fund Scheme and carry out this Project
at The Devikulam Taluk Vyapari Vyavasai Co-operative Society Ltd. I- 518.
I thank my project guide Mr. Madhu Kumar and all the staff at The Devikulam
Taluk Vyapari Vyavasai Co-operative Society Ltd. for their constant support and
guidance in carrying out my project successfully.
I would like to express my sincere thanks to Dr. Niti Saxena for her helpful hand
in the completion of my project.
Adesh Ramesh
Date-
5. 5
CONTENTS
CHAPTER
NO.
DESCRIPTIONS PAGE NO.
EXECUTIVE SUMMARY 6
I
INTRODUCTION 10
OBJECTIVES 13
LITERATURE REVIEW 16
II
COMPANY PROFILE 32
RESEARCH METHODOLOGY 62
III
DATA ANALYSIS AND
INTERPRETATIONS
65
FINDINGS SUGGESTIONS AND
CONCLUSION
78
BIBLIOGRAPHY 89
6. 6
List of tables
S. no List of tables Page no.
Table 1.1
Mutual fund
schemes
28
Table 2.1
Receipts and
payment statement
49
Table 2.2 Balance sheet 53
List of figures
S. no List of figures Page no.
Fig 1.1
Risk hierarchy of
mutual funds
27
8. 8
Devikulam Taluk Vyapari Vyavasi Service Co-operative Society Ltd. No I-
518 Adimaly have been registered on 3/07/1998 and commenced functioning
on 2/11/1998 with the area of operation consisting of Devikulam Taluk with
the following objective.
(a) To encourage thrift, self help and co-operative among members
(b) To accept deposits from members to be utilized for loans to members for
Business Development.
(c) Starting Mutual Fund Schemes to members.
(d) The doing of such other business and things for the benefit of members
Share Capital
Authorized Share Capital of the Society shall be 50,00,000 of which 50.000
A-Class shares of INR 100 each; 5,00,000 of which 20,000 B-Class Shares
of INR 25 each and 5,00,000 of which 500 C-Class shares of INR 1,000
each. The total share capital is 60,00,000.
The paid up share capital of the society is INR 46,41,775 of which INR
45,00,000 for A class shares among 45000 shares and INR 1,41,775 for B
class shares among 5671 shares. A class membership is allowed only for
merchants. B class membership is allotted for those who join in Mutual Fund
Scheme, Gold Loan and various types of Deposits.
Acceptance of Deposits from members
In order to increase the habit of thrift and savings the society introduced
many deposit schemes for its members and non members. Savings Bank
Account, Fixed Deposits, Pigmy Deposits and Home Savings Deposits etc.
9. 9
are the major deposit schemes. The deposit position of the society as
on31/03/2014 is INR 16,39,37,395.40/-
Managementand staff
The management affairs of the society vested in the Board of Directors. Our
Director board consists of 11 members (Seven General, one SC/ST, three
Woman). The tenure of the committee is 5 years. The present committee
took charge on 13/09/2013. There are twenty five staffs working in the
society, of which 10 are permanent staff, 14 commission agents and 1 daily
wages.
Loan Schemes
Society Provide loan to members in different schemes like Business
Development Loan (BDLS), Short Term Loan (STL), Personal Loan( PLS)
and Gold Loan (GL). Society also provides Secured Loan (SL) and Mutual
Fund Scheme Loans (MFSL) to its depositors and members. Repayment of
BDLS loans are through daily collection. The loan outstanding of the society
as on 31/03/2014 is INR 19,39,08,660/-
MutualFund Schemes
One of the important schemes of the society is Mutual Fund Schemes; of
which there are 90 numbers of MFS and the sala for that is INR
1,10,00,000/-
10. 10
Audit
Audit of accounts of the society is completed up to 2012-13. We had
distributed 25% dividends to members for the last 16 years.
Branch
Society has started an extension counter at Munnar on 16/07/2006 which is
working smoothly INR 1,04,84,234/- deposits from different schemes and
loans outstanding as on 31/03/2014 is INR 2,44,73,847/- of which overdue is
nil. The branch is running 5 numbers of Mutual Fund Schemes having sala of
5 Lakhs. The extension counter is enhanced as branch in 2010 march.
Financialposition of the society
The society has a very sound financial position to meet its lending needs INR
2,22,99,543/- invested in District Co-operative Bank (IDCB) as fluid resource
and also sanctioned an overdraft facility 2 core from District Co-operative
Bank.
It is remarkable that the society functions on its own funds on good profit
from the starting itself. The society renders good services to its members by
making timely financing assistance to its members for their various needs.
Moreover the society protects the economy of its members by avoiding their
approach with money lenders and pawn brokers for their financial
requirements and saves their financial position.
12. 12
A Mutual Fund is a trust that pools the savings of a number of investors
who share a common financial goal. The money thus collected is then
invested in capital market instruments share as shares, debentures and
other securities. The income earned through those investments and the
capital appreciations realized are shared by its unit holders in proportions
to the number of units owned by them. Thus a Mutual Fund is the most
suitable investment for the common man as it offers an opportunity to
invest in a diversified, professionally managed basket of securities at a
relatively low cost.
The project idea is to project mutual funds as the better avenue for
investment. Mutual fund is productive package for a lay-investor with
limited finances. Mutual fund is a very old practice in U.S. and it has
made a recent entry into India. Common man in India still finds ‘Bank’ as
a safe door for investment. This shows that mutual funds have not gained
a strong foot-hold in his life.
The project creates an awareness that the mutual fund is worthy
investment practice. The various schemes of mutual funds provide the
investor with a wide range of investment options according to his risk-
bearing capacities and interest. Besides, they also give a handy return to
the investor. The project analyses various schemes of mutual fund by
taking different mutual funds in India are also considered.
14. 14
NEED OF THE STUDY
The study basically made to educate the investors about Mutual Funds.
Analyze the various schemes to highlight the risk and return of diversity
of investment that mutual funds offer. Thus, through the study one would
understand how a common man could fruitfully convert a pittance into
great penny by wisely investing into the right scheme according to his
risk- taking abilities.
A small investor is the one who is able to correctly plan & decide in which
profitable & safe instrument to invest. To lock up one’s hard earned
money in a savings bank’s account is not enough to counter the monster
of inflation. Using simple concepts of diversification, power of compound
interest, stable returns & limited exposure to equity investment, one can
maximize his returns on investments & multiply one’s savings.
Investment is a serious proposition one has to look into various factors
before deciding on the instruments in which to invest. To save is not
enough. One must invest wisely & get maximum returns. One must plan
investment in such a way that his investment objectives are satisfied. A
sound investment is one which gives the investor reasonable returns with
a proper profitable management
This report gives the details about various investment objectives desired
by an investor, details about the concept & working of mutual fund.
15. 15
OBJECTIVESOF THE STUDY
• To understand the concept of Mutual Funds.
• To study the different Sectoral Mutual Funds in India.
• To analyse the performance of different sectoral mutual funds.
• To identify the best Sectoral Mutual Funds to invest in India.
• To suggest the best mutual funds for investors.
SCOPE OF THE STUDY
Now a days, there is a lot of scope for the mutual funds. The Financial
managers have to decide whether to invest in the Shares, bonds,
debentures, real estate, gold and other Commodities to get the maximum
benefits for funds. The financial managers should also reduce the risk
from the Investments. The scope of the study is confirmed to the sectoral
funds available in Indian mutual funds.
17. 17
MutualFunds: An overview
A Mutual Fund is a trust that pools the savings of a number of investors
who share a common financial goal. The money thus collected is
invested by the fund manager in different types of securities depending
upon the objective of the scheme. These could range from shares to
debentures to money market instruments. The income earned
through these investments and the capital appreciations realized by the
scheme are shared by its unit holders in proportion to the number of units
owned by them (pro rata). Thus a Mutual Fund is the most suitable
investment for the common man as it offers an opportunity to invest in a
diversified, professionally managed portfolio at a relatively low cost.
Anybody with an investible surplus of as little as a few thousand
rupees can invest in Mutual Funds. Each Mutual Fund scheme has a
defined investment objective and strategy.
A mutual fund is the ideal investment vehicle for today’s complex and
modern financial scenario. Markets for equity shares, bonds and other
fixed income instruments, real estate, derivatives and other assets have
become mature and information driven. Price changes in these assets
are driven by global events occurring in faraway places. A typical
individual is unlikely to have the knowledge, skills, inclination and time to
keep track of events, understand their implications and act speedily. An
individual also finds it difficult to keep track of ownership of his assets,
investments, brokerage dues and bank transactions etc.
A mutual fund is the answer to all these situations. It appoints
professionally qualified and experienced staff that manages each of these
functions on a full time basis. The large pool of money collected in the
fund allows it to hire such staff at a very low cost to each investor. In
effect, the mutual fund vehicle exploits economies of scale in all three
18. 18
areas - research, investments and transaction processing. While the
concept of individuals coming together to invest money collectively is not
new, the mutual fund in its present form is a 20th century phenomenon.
In fact, mutual funds gained popularity only after the Second World War.
Globally, there are thousands of firms offering tens of thousands of
mutual funds with different investment objectives. Today, mutual funds
collectively manage almost as much as or more money as compared to
banks.
A draft offer document is to be prepared at the time of launching the fund.
Typically, it pre specifies the investment objectives of the fund, the risk
associated, the costs involved in the process and the broad rules for
entry into and exit from the fund and other areas of operation. In India, as
in most countries, these sponsors need approval from a regulator, SEBI
(Securities exchange Board of India) in our case. SEBI looks at
track records of the sponsor and its financial strength in granting approval
to the fund for commencing operations.
A sponsor then hires an asset management company to invest the funds
according to the investment objective. It also hires another entity to be
the custodian of the assets of the fund and perhaps a third one to handle
registry work for the unit holders (subscribers) of the fund.
In the Indian context, the sponsors promote the Asset Management
Company also, in which it holds a majority stake. In many cases a
sponsor can hold a 100% stake in the Asset Management Company
(AMC). E.g. Birla Global Finance is the sponsor of the Birla Sun Life
Asset Management Company Ltd., which has floated different mutual
funds schemes and also acts as an asset manager for the funds collected
under the schemes
19. 19
History of Mutual Fund in India:
The mutual fund industry in India started in 1963 with the formation of
Unit Trust of India, at the initiative of the Government of India and
Reserve Bank. The history of mutual funds in India can be broadly
divided into four distinct phases
First Phase – 1964-87
Unit Trust of India (UTI) was established on 1963 by an Act of
Parliament. It was set up by the Reserve Bank of India and functioned
under the Regulatory and administrative control of the Reserve Bank of
India. In 1978 UTI was de-linked from the RBI and the Industrial
Development Bank of India (IDBI) took over the regulatory and
administrative control in place of RBI. The first scheme launched by UTI
was Unit Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores of
assets under management
Second Phase – 1987-1993 (Entry of Public Sector Funds)
1987 marked the entry of non- UTI, public sector mutual funds set up by
public sector banks and Life Insurance Corporation of India (LIC) and
General Insurance Corporation of India (GIC). SBI Mutual Fund was the
first non- UTI Mutual Fund established in June 1987 followed by Canbank
Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89),
Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of
Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June
1989 while GIC had set up its mutual fund in December 1990.
At the end of 1993, the mutual fund industry had assets under
management of Rs.47,004 crores.
Third Phase – 1993-2003 (Entry of Private Sector Funds)
With the entry of private sector funds in 1993, a new era started in the
Indian mutual fund industry, giving the Indian investors a wider choice of
20. 20
fund families. Also, 1993 was the year in which the first Mutual Fund
Regulations came into being, under which all mutual funds, except UTI
were to be registered and governed. The erstwhile Kothari 9Pioneer (now
merged with Franklin Templeton) was the first private sector mutual fund
registered in July 1993. The 1993 SEBI (Mutual Fund) Regulations were
substituted by a more comprehensive and revised Mutual Fund
Regulations in 1996. The industry now functions under the SEBI (Mutual
Fund) Regulations 1996. The number of mutual fund houses went on
increasing, with many foreign mutual funds setting up funds in India and
also the industry has witnessed several mergers and acquisitions. As at
the end of January 2003, there were 33 mutual funds with total
assets of Rs. 1,21,805 crores. The Unit Trust of India with Rs.44,541
crores of assets under management was way ahead of other mutual
funds.
Fourth Phase – since February 2003
In February 2003, following the repeal of the Unit Trust of India Act 1963
UTI was bifurcated into two separate entities. One is the Specified
Undertaking of the Unit Trust of India with assets under management of
Rs.29,835 crores as at the end of January 2003, representing broadly,
the assets of US 64 scheme, assured return and certain other schemes.
The Specified Undertaking of Unit Trust of India, functioning under an
administrator and under the rules framed by Government of India and
does not come under the purview of the Mutual Fund Regulations.
The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB
and LIC. It is registered with SEBI and functions under the Mutual Fund
Regulations. With the bifurcation of the erstwhile UTI which had in March
2000 more than Rs.76,000 crores of assets under management and with
the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund
Regulations, and with recent mergers taking place among different
private sector funds, the mutual fund industry has entered its current
21. 21
phase of consolidation and growth. As at the end of March, 2006, there
were 29 funds.
Future Scenario
The asset base will continue to grow at an annual rate of about 30 to 35
% over the next few years as investor’s shift their assets from banks and
other traditional avenues. Some of the older public and private sector
players will either close shop or be taken over.
Out of ten public sector players five will sell out, close down or merge
with stronger players in three to four years. In the private sector this trend
has already Started with two mergers and one takeover. Here too some
of them will down their shutters in the near future to come.
But this does not mean there is no room for other players. The market will
witness a flurry of new players entering the arena. There will be a large
number of offers from various asset management companies in the time
to come. Some big names like Fidelity, Principal, Old Mutual etc. are
looking at Indian market seriously. One important reason for it is that
most major players already have presence here and hence
these big names would hardly like to get left behind.
The mutual fund industry is awaiting the introduction of derivatives in
India as this would enable it to hedge its risk and this in turn would be
reflected in its Net Asset Value (NAV).
SEBI is working out the norms for enabling the existing mutual fund
schemes to trade in derivatives. Importantly, many market players have
called on the Regulator to initiate the process immediately, so that the
mutual funds can implement the changes that are required to trade in
Derivatives.
22. 22
Recenttrends in mutual fund industry
The most important trend in the mutual fund industry is the aggressive
expansion of the foreign owned mutual fund companies and the decline
of the companies floated by nationalized banks and smaller private sector
players.
Many nationalized banks got into the mutual fund business in the early
nineties and got off to a good start due to the stock market boom
prevailing then. These banks did not really understand the mutual fund
business and they just viewed it as another kind of
banking activity.
Few hired specialized staff and generally chose to transfer staff from the
parent organizations. The performance of most of the schemes floated by
these funds was not good. Some schemes had offered guaranteed
returns and their parent organizations had to bail out these AMCs by
paying large amounts of money as the difference between
the guaranteed and actual returns.
The service levels were also very bad. Most of these AMCs have not
been able to retain staff, float new schemes etc. and it is doubtful
whether, barring a few exceptions, they have serious plans of continuing
the activity in a major way. The experience of some of
the AMCs floated by private sector Indian companies was also very
similar. They quickly realized that the AMC business is a business, which
makes money in the long term and requires deep-pocketed support in the
intermediate years. Some have sold out to foreign owned companies,
some have merged with others and there is general restructuring going
on.
23. 23
Types of Mutual Funds
Mutual fund schemes may be classified on the basis of its structure and
its investment objective.
By Structure:
Open-ended Funds
An open-end fund is one that is available for subscription all through the
year. These do not have a fixed maturity. Investors can conveniently buy
and sell units at Net Asset Value ("NAV") related prices. The key feature
of open-end schemes is liquidity.
Closed-ended Funds
A closed-end fund has a stipulated maturity period which generally
ranging from 3 to 15 years. The fund is open for subscription only during
a specified period. Investors can invest in the scheme at the time of the
initial public issue and thereafter they can buy or sell the units of the
scheme on the stock exchanges where they are listed. In order to provide
an exit route to the investors, some close-ended funds give a option of
selling back the units to the Mutual Fund through periodic repurchase at
NAV related prices. SEBI Regulations stipulate that at least one of the
two exit routes is provided to the investor.
Interval Funds
Interval funds combine the features of open-ended and close-ended
schemes. They are open for sale or redemption during pre-determined
intervals at NAV related prices.
24. 24
By InvestmentObjective:-
Growth Funds
The aim of growth funds is to provide capital appreciation over the medium to
long-term. Such schemes normally invest a majority of their corpus in equities. It
has been proven that returns from stocks, have outperformed most other kind of
investments held over the long term. Growth schemes are ideal for investors
having a long-term outlook seeking growth over a period of time.
Income Funds
The aim of income funds is to provide regular and steady income to investors.
Such schemes generally invest in fixed income securities such as bonds,
corporate debentures and Government securities. Income Funds are ideal for
capital stability and regular income.
BalancedFunds
The aim of balanced funds is to provide both growth and regular income. Such
schemes periodically distribute a part of their earning and invest both in equities
and fixed income securities in the proportion indicated in their offer documents. In
a rising stock market, the NAV of these schemes may not normally keep pace, or
fall equally when the market falls. These are ideal for investors looking for a
combination of income and moderate growth.
25. 25
MoneyMarketFunds
The aim of money market funds is to provide easy liquidity, preservation of
capital and moderate income. These schemes generally invest in safer short-
term instruments such as treasury bills, certificates of deposit, commercial paper
and inter-bank call money. Returns on these schemes may fluctuate depending
upon the interest rates prevailing in the market. These are ideal for Corporate
and individual investors as a means to park their surplus funds for short period.
Load Funds
A Load Fund is one that charges a commission for entry or exit. That is, each
time you buy or sell units in the fund, a commission will be payable. Typically
entry and exit loads range from 1% to 2%. It could be worth paying the load, if
the fund has a good performance history.
No-Load Funds
A No-Load Fund is one that does not charge a commission for entry or exit. That
is, no commission is payable on purchase or sale of units in the fund. The
advantage of a no load fund is that the entire corpus is put to work.
Other Schemes:-
Tax Saving Schemes
These schemes offer tax rebates to the investors under specific provisions of the
Indian Income Tax laws as the Government offers tax incentives for investment in
26. 26
specified avenues. Investments made in Equity Linked Savings Schemes (ELSS)
and Pension Schemes are allowed as deduction u/s 88 of the Income Tax Act, 1961.
The Act also provides opportunities to investors to save capital gains u/s 54EA and
54EB by investing in Mutual Funds, provided the capital asset has been sold prior to
April 1, 2000 and the amount is invested before September 30, 2000.
SpecialSchemes
Industry Specific Schemes
Industry Specific Schemes invest only in the industries specified in the offer
document. The investment of these funds is limited to specific industries like
InfoTech, FMCG, and Pharmaceuticals etc.
Index Schemes
Index Funds attempt to replicate the performance of a particular index such as
the BSE Sensex or the NSE 50
SectoralSchemes
Sectoral Funds are those, which invest exclusively in a specified industry or a group of
industries or various segments such as 'A' Group shares or initial public offerings.
CommoditiesFunds
Commodities funds specialize in investing in different commodities directly or
through commodities future contracts. Specialized funds may invest in a single
commodity or a commodity group such as edible oil or rains, while diversified
commodity funds will spread their assets over many commodities
29. 29
Benefits of MutualFund investment
1. Professional Management:
Mutual Funds provide the services of experienced and skilled professionals,
backed by a dedicated investment research team that analyses the performance
and prospects of companies and selects suitable investments to achieve the
objectives of the scheme.
2. Diversification:
Mutual Funds invest in a number of companies across a broad cross-section of
Industries and sectors. This diversification reduces the risk because seldom do
all stocks decline at the same time and in the same proportion. You achieve this
diversification through a Mutual Fund with far less money than you can do on
your own.
3. Convenient Administration:
Investing in a Mutual Fund reduces paperwork and helps you avoid many
problems such as bad deliveries, delayed payments and follow up with brokers
and companies. Mutual Funds save your time and make investing easy and
convenient.
4. Return Potential:
19 Over a medium to long-term, Mutual Funds have the potential to provide a
higher return as they invest in a diversified basket of selected securities.
5. Low Costs:
Mutual Funds are a relatively less expensive way to invest compared to directly
investing in the capital markets because the benefits of scale in brokerage,
custodial and other fees translate into lower costs for investors.
6. Liquidity:
In open-end schemes, the investor gets the money back promptly at net asset
value related prices from the Mutual Fund. In closed-end schemes, the units can
be sold on a stock exchange at the prevailing market price or the investor can
avail of the facility of direct repurchase at NAV related prices by the Mutual Fund.
30. 30
7. Transparency:
Investors get regular information on the value of your investment in addition to
disclosure on the specific investments made by the scheme, the proportion
invested in each class of assets and the fund manager's investment strategy and
outlook.
8. Flexibility:
Through features such as regular investment plans, regular withdrawal plans
and dividend reinvestment plans, one can systematically invest or withdraw funds
according to your needs and convenience.
9. Affordability:
Investors individually may lack sufficient funds to invest in high-grade stocks. A
mutual fund because of its large corpus allows even a small investor to take the
benefit of its investment strategy 10.Well Regulated:
All Mutual Funds are registered with SEBI and they function within the
provisions of strict regulations designed to protect the interests of investors. The
operations of Mutual Funds are regularly monitored by SEBI
Limitation of MutualFund Investment
1. No ControlOver Cost:
An Investor in mutual fund has no control over the overall costs of investing.
He pays an investment management fee (which is a percentage of his
investments) as long as he remains invested in fund, whether the fund value
is rising or declining. He also has to pay fund distribution costs, which he
would not incur in direct investing.
31. 31
2. No Tailor-Made Portfolios:
Investing through mutual funds means delegation of the decision of portfolio
composition to the fund managers. The very high net worth individuals or
large corporate investors may find this to be a constraint in achieving their
objectives.
3. Managing A Portfolio Of Funds:
Availability of large no. of funds can actually mean too much choice for the
investors. He may again need advice on how to select a fund to achieve his
objectives.
AMFI has taken initiative in this regard by starting a training and certification
program for prospective Mutual Fund Advisors. SEBI has made this
certification compulsory for every mutual fund advisor interested in selling
mutual fund.
4. Taxes:
During a typical year, most actively managed mutual funds sell anywhere
from 20 to 70 percent of the securities in their portfolios. If your fund makes a
profit on its sales, you will pay taxes on the income you receive, even if you
reinvest the money you made.
5. Costof Churn:
The portfolio of fund does not remain constant. The extent to which the
portfolio changes is a function of the style of the individual fund manager i.e.
whether he is a buy and hold type of manager or one who aggressively
churns the fund. It is also dependent on the volatility of the fund size i.e.
whether the fund constantly receives fresh subscriptions and redemptions.
33. 33
CO-OPERATIVE SOCIETIES, PRINCIPLES, TYPES OF SOCIETIES AND
THE REGISTRATRION OF THE SOCIETIES.
INTRODUCTION
Co-operative movement in our country shall not only stay but also grow in
times to come. In spite of the drawbacks experienced in the working and
administration of the co-operative societies, they have positively contributed
to the growth and development of the national economy. Promotion of thrift,
self-help and mutual aid are the fundamental principles of co-operation. The
orientations of commercial organization and co-operative organizations are
basically different. In a commercial organization, earning and maximizing the
profits is the sole motive; whereas in a co-operative organization profit
cannot be the sole motive. The prime objectives, in addition to the three
fundamentals of co-operation mentioned above are to make available the
goods and services in required quantity, of better quality and at a reasonable
price to its members. It does not mean that a Co-operative Society is a
charitable organization. It should, therefore, conduct itself in a business, like
manner in attaining its objectives efficiently.
Broadly speaking there are three sectors operating in the Union of India.
1. PUBLIC SECTOR wherein the State i.e. The Union of India and the
respective State Government undertake developments projects which are
wholly owned by either the Central Government or the State Government.
2. PRIVATE SECTOR which is a sector where private enterprises are
permitted in certain fields of economic activities.
34. 34
3. CO-OPERATIVE SECTOR which is beautifully blended in between a
public sector and the private sector. It has benefits of both the sectors and
disadvantages of neither of them.
PRINCIPLES OF CO-OPERATIVE SECTOR
1. LEGAL STATUS : A co-operative Society is a body corporate registered
under the applicable state Act with perpetual succession having a common
seal. It can acquire, hold and dispose of properties, enter into contracts and
it can sue and it can be sued.
2. VOLUNTARY ASSOCIATION : Co-operative Society is essentially an
organization or an association of persons who have come together for the
common purpose of economic development or for mutual help.
3. SELF HELP AND MUTUAL HELP : The Co-operative societies office
bearers/executive committee is elected as per democratic election
procedure. The Co-operative Society function under the principle of self help
and mutual help which means each will help for themselves and all will help
others.
4. DEMOCRATIC CONTROLS : The Control of a Co-operative enterprise
in not in the hands of capitalists who can corner the share capital and control
the interest in any undertaking which would be a private undertaking.
5. EQUALITY : In co-operative Sector, the principle of “ One man one Vote “
is provided in the statute so as to ensure that the capital does not dominate
the administration of co-operative Society.
35. 35
6. OPEN MEMBERSHIP : Any person can apply for the membership of the
Society without any discrimination. The membership is open for all.
7. SOCIAL APPROACH / NO PROFIT MOTIVE : As the Society is working
on democratic principle and the office bearers of the Society will be
functioning like a trustees for the better management of the society and there
is no separate benefits to the executive committee members. Service is the
main motto and the profit is not the main concern in co-operative societies.
8. PROFITS AND RETURNS TO THE MEMBERS : Co-operative Society is
an association of members and certain percentage profits earned by the
society, as decided in the meeting of the General body will be distributed in
the form of dividend to the members.
9. LIMITED INTEREST ON SHARES : Irrespective of the shareholding,
each member has only one vote in the decision-making in the General body
meeting or at the time of election of the committee for management. The
shares are not traded in the stock exchange.
The State Co-op. Act also prescribes the maximum amount, which a member
can hold as a share capital in any society.
Under M.C.S. Act, 1960 as per Section 28 other than Government or other
society, shall not hold more than 1/5 of the total capital or interest in shares
or exceeding Rs. 20,000/- which the State Government power to change by
way of notification.
10. PERSONAL PARTICIPATION : The shareholders have to personally
attend the meeting or for voting. They are not allowed to appoint proxies for
attending the general body or for voting in the resolution to be passed.
36. 36
11. EDUCATIONS AND CO-OPERATION : Every society has to contribute
towards the education fund maintained and looked after by the district co-
operative education Board as per the notification issued from time to time for
educating the members or the office bearers of the Society.
12. CO-OPERATION AMONGST CO-OP. INSTITUTIONS : The funds
generated or mobilized through the co-operative societies have to be
deposited/ invested in the Co-operative Sector only.
ACT & RULES APPLICABLE
A Co-operative Society functions as per the provisions of
1. Co-operative Societies Act under which the same is registered.
2. Co-operative Societies rules made there under
3. Bye-laws approved by the registrar at the time of registration and
amendments made from time to time and approved by the registrar.
4. Notification and Orders
1. Co-operative Societies Act
We have a number of Co-operative Societies Acts functional in different
states like - Maharastra Co-operative Societies Act, 1960, - Pondicherry
Co-operative Societies Act, 1972, - Karnataka Co-operative Societies Act,
1959, - Delhi Co-operative Societies Act, 1972, - Kerala Co-operative
Societies Act etc. When the area of operation is restricted to one state, the
State Co-operative Act & Rules, under which the society is registered will be
applicable.
In a particular state, if Co-operative Act and Rules is not enacted, the Central
Act which is known as The Co-operative Act, 1912 and its rules will be
applicable.
37. 37
When the area of operation of Society is spread in two or more states. The
Multi-State Co-operative Societies Act, 2002 and its rules shall be applicable.
2. Co-operative Societies Rules A set of rules is also framed under the
respective State Co-operative Act for procedural aspects.
3. Bye-laws Each society also registered with the bye-laws for internal
management of the societies duly approved by the registrar at the time of
registration of the society. The bye-laws of a society constitute a contract
between a member and the society and it provide for the management of the
society. The bye-laws are framed within the provisions of the Act and the
rules made there under.
Bye-laws include the objects of the society and completely define and restrict
the society’s activities, but the rights and liabilities of members are
determined by the Act and Rules and not by the bye-laws as such. 4.
Notification and Orders issued from time to time by the Government, or any
other Authority as prescribed under the Act, Rules there under.
TYPESOF SOCIETIES
A Society is categorized on the basis of its objects. There are various types
of societies that can be formed under the Act under which it is registered:
Under Maharashtra Co-operative Societies Act, 1960 following types of
Societies can be registered :
1. Agricultural Marketing Society: As per section 2(1) “ agricultural marketing
Society” means a society - (a) The object of which is the marketing of
agricultural produce and the supply of implements and other requisites for
agricultural production, and (b) Not less than three-fourths of the members of
which are agriculturists, or societies formed by agriculturists.
38. 38
2. Consumer Society As per Section 2(9) “ Consumer’s Society “ means a
society, the object of which is - (a)The procurement, production or
processing, and distribution of goods to, or the performance of other services
for, its members as also other customers, and (b) the distribution among its
members and customers, in the proportion, prescribed by rules or by the
bye-laws of the society, of the profits accruing from such procurement,
production or processing, and distribution.
3. Co-operative Bank As per section 2(10) “Co-operative bank “ means a
society which is doing business of banking as defined in clause (b) of sub-
section (1) of section 5 of the Banking Companies Act, 1949 and includes
any society which is functioning or is to function as (an Agriculture and Rural
Development Bank) under Chapter XI.
4. Central Bank As per section 2(6), “Central Bank “ means a co-operative
bank, the objects of which include the creation of funds to be loaned to other
societies; but does not include the urban co-operative bank.
5. Crop Protection Society As per section 2(10-A), “Crop Protection Society”
means a society the object of which is protection of the crops, structures,
machinery, agricultural implements and other equipment such as those used
for pumping water on the land.
6. Farming Society As per section 2(12),”Farming Society” means a society
in which, the object of increasing agricultural production, employment and
income and the better utilization of resources, lands are brought together
jointly cultivated by all the members, such lands (a) being owned or leased to
the members (or some of them), or (b) coming in possession of the society in
any other manner whatsoever.
39. 39
7. General Society As per section 2(15),”General Society” means a society
not falling in any of the classes of societies defined by the other clauses of
this section.
8. Housing Society As per section 2(16),”Housing society” means a society,
the object of which is to provide its members with open plots for housing,
dwelling houses or flats; or if open plots, the dwelling houses or flats are
already acquired, to provide its members common amenities and services.
9. Federal Society As per section 2(13),”Federal society”, means a society-
(a) not less than five members of which are themselves societies, and (b) in
which the voting rights are so regulated that the members who are societies
have not less than four-fifths of the total number of votes in the general
meeting of such society
10. Irrigation Society As per section 2(16-A),”Lift Irrigation Society” means a
society, the object of which is to provide water supply, by motive power or
otherwise to its members, for irrigation and otherwise.
11. Process Society As per section 2(22),”Processing society” means a
society, the object of which is the processing of goods.
12. Producers Society As per section 2(23),”Producers Society” means a
society, the object of which is production and disposal of goods or the
collective disposal of labour of the members thereof.
13. Resource Society As per section 2(25),”Resource Society” means a
society, the object of which is obtaining for its members of credit, goods or
services required by them.
40. 40
14. Apex Society As per section 2(2) of M.C.S. Act, “Apex Society “ means a
society, - (a) the area of operation of which extends to the whole of the State
of Maharashtra (b) the main object of which is to remote the principal objects
of the societies affiliated to it as Members and to provide for the facilities and
services to them and (c) which has been classified as an apex society by the
Registrars;
PROVISIONS FOR REGISTRATIONOF CO-OPERATIVE
SOCIETIES
There are different types of Co-operative Societies, which can be registered
under the Maharashtra Co- operative Societies Act, which were explained
earlier.
In all these types of societies, the procedure to be followed for formulation of
registration proposals slightly differs. The requirements in respect of each
type of co-operative society’s needs to be properly understood by every
promoter, or the professional charged with the responsibility of getting the
society registered (chief promoter).
PROVISIONS UNDER THE M.C.S.ACT, 1960
Sections 3 to 11of the Act, provide for registration of Societies and the
conditions for the same. Section 4 provides for a nature of an organization,
which can be registered as a Society. Section 6 lays down the conditions for
registration of the Society. Section 8 provides for application for registration
bye-laws and the registration fees. Section 9 provides for time bound
registration of the Society and the bye-laws.
41. 41
SOCIETIES,WHICH MAY BE REGISTERED
As per section 4, a society, which has as its objects the promotion of the
economic interests or general welfare of its members or of the public, in
accordance with co-operative principles or a society established with the
object of facilitating the operations of any such society, may be registered
under this Act:
Provided that, no society shall be registered if it is likely to be economically
unsound, or the registration of which may have an adverse effect on
development of the co-operative movement, or the registration of which may
be contrary to the policy directives, which the State Government may, from
time to time, issue.
REGISTRATION WITH LIMITED OR UNLIMITED LAIBILITY
As per section 5, a Society may be registered with limited or unlimited
liability.
As per section 2[28] “society with limited liability” means a society having the
liability of its members limited by its bye-laws;
As per section 2[29] “society with unlimited liability” means a society, the
members of which are, in the event of its being wound up, jointly and
severally liable for and in respect of its obligations and to contribute to any
deficiency in the assets of the society;
CONDITIONS OF REGISTRATION
As per section 6(1) No society, other than a federal society, shall be
registered under this Act, unless it consists of at least ten persons [or such
higher number of persons as the Registrar may, having regard to the objects
and economic viability of a society and development of the co-operative
movement, determine from time to time for a class of societies](each of such
42. 42
persons being a member of a different family), who are qualified to be
members under this Act, and who reside in the area of operation of society :
[Provided that, a lift irrigation society consisting of less than ten but of five or
more such persons may be registered under this Act.] (2) No society with a
limited liability shall be registered, unless all persons forming the society
reside in the same town or village, or in the same group of villages.
[(2-A) No crop protection society shall be registered, unless the Registrar is
satisfied, after such inquiry as he thinks necessary, that a draft of the
proposal made by the society for protecting crops, structures, machinery
agricultural implements and other equipment such as those used for
pumping water on the land, was duly published for inviting all owners of land
likely to be affected by the proposal and all other persons likely to be
interested in the said lands to join the proposal or to send their objections or
suggestions and that the objections and suggestions received , if any, have
been duly considered by the society and that the owners in possession of not
less than 66 percent in the aggregate of lands included in the proposal have
given their consenting writing to the making of the proposal and that the
proposal made is feasible. For this purpose, the society shall submit to the
Registrar:
(a) a plan showing the area covered by the proposal and the surrounding
land as shown in the map or maps of the village or villages affected;
(b) an extract from the record of rights duly certified showing the names of
the owners of lands and the areas of the lands included in the proposal;
(c) Statements of such of the owners of the lands as consented to the
making of the proposal signed by owners before two witnesses;
(d) a detailed estimate of the cost of implementing the proposal;
43. 43
(e) a detailed statement showing how the cost is proposed to be met.
When such society is registered, the cost of implementing the proposal shall
be met wholly or in part by contribution to be levied by the society from each
owner of the land included in the proposal, including any such owner who
may have refused to become a member of the society. The owner of every
land included in the proposal shall also be primarily liable for the payment of
the contribution liable from time to time in respect of such land].
(3) No federal society shall be registered unless it has at least five societies
as its members.
(4) Nothing in this Act shall be deemed to affect the registration of any
society made before the commencement of this Act.
(5) The word “limited” or “unlimited” shall be the last word in the name of
every society with limited or unlimited liability, as the case may be which is
registered or deemed to be registered under this Act.
Explanation: For the purpose of this section and section 8, the expression “
member of family” means wife, husband, father, mother, [son, or unmarried
daughter]
POWER TO EXEMPT SOCIETIES [ORCLASS OF SOCIETIES]
FROM CONDITIONS AS TO REGISTRATION
As per section 7, notwithstanding anything contained in this Act, the State
Government may, by general or special order, exempt any society or class of
societies from any of the requirements of this Act as to registration, subject
to such conditions (if any) as it may impose.
44. 44
APPLICATION FOR REGISTRATION
As per section 8(1) For the purpose of registration, an application shall be
made to the Registrar in the prescribed form and shall be accompanied by
four copies of the proposed bye-laws of the society and such registration fee
as may prescribed in this behalf. Different registration fees may be
prescribed for different class of societies, regard being had to the service
involved in processing an application for registration. The person by whom,
or on whose behalf, such application is made, shall furnish such information
in regard to the society, as the Registrar may require.
(2) The application may be signed- a) in case of a society other than a
federal society by at least ten persons (each of such person being a member
of different family), who are qualified under this Act, and, b) in the case of a
federal society, by at least five societies.
No signature to any application on behalf of a society shall be valid, unless
the person signing is a member of the committee of such a society and is
authorized by the committee by resolution to sign on its behalf the
application for registration of the society and its bye-laws; and a copy of such
resolution is appended to the application.
REGISTRATION
As per section 9(1) If the Registrar is satisfied that a proposed society has
complied with the provisions of this Act and the Rules, [or any other law for
the time being in force, or policy directives issued by the State Government
under section 4], and that its proposed bye-laws are not contrary to this Act
or to the rules, he [shall, within two months], from the date of receipt of
application register the society and its bye-laws.
(2) Where there is a failure on the part of the Registrar to dispose off such
application within the period aforesaid, the Registrar shall, within a period of
45. 45
fifteen days from the date of expiration of that period refer the application to
the next higher officer and where the Registrar is himself the registering
officer, to the State Government, who are which, as the case may be, shall
dispose of the application within two months from the date of its receipt and
on the failure of such higher officer or the State Government, as the case
may be, to dispose of the application within that period, the society and its
bye-laws shall be deemed to have been registered.[and thereafter the
Registrar shall issue a certificate of registration under his seal and signature
within a period of fifteen days.
(3) Where the registrar refuses to register a proposed society, he shall
forthwith communicate his decision, with reasons therefore, to the person
making the application and if there be more than one to the person who has
signed first therein.
(4) The Registrar shall maintain a registrar of all societies registered or
deemed to be registered, under the Act.
PROCEDURE FOR REGISTRATIONOF CO-OPERATIVE
SOCIETIES
The procedure for registration of society can be explained as the following
steps:
1. APPOINTMENT OF CHIEF PROMOTER
The first step to register a Society is that minimum 10 adult individuals from
independent families desiring to form a Society should gather and hold a
meeting to
(a) Select a provisional committee and elect a Chief Promoter for formation
of a society and (b) select a name for such Society with three alternatives
and to pass appropriate resolutions in that behalf. c) To collect the
46. 46
entrance fee and share capital from the prospective members. d) To open
the Bank account in the name of chief promoter e) To decide about area of
operation of the Society and f) To decide about the registered office of the
Society g) To authorize chief promoter to submit the proposal for
registration and to do any other thing to get the society registered.
2. NAME RESERVATION
The second step would be to apply to the registration authority (RA) for
reservation of name for the society and obtain letter from the RA in that
connection. The resolutions passed at the promoters meeting as above
should accompany such application for reservation of name as aforesaid.
The letter reserving the name of the society shall be valid for 3 months. The
validity of the name is normally extended on an application for 1 or 2 further
terms of 3 months each.
3. BANK ACCOUNT AND DEPOSITS
The third step would be to (a) open a bank account in the name of the
proposed Society as per the RA’s directions in that behalf that shall contain
in the letter reserving the name and (b) deposit therein the entrance fee
share money and the amount recovered for preliminary expenses from the
promoters and obtain the certificate from such bank in respect of such
deposits. Normally the directions of the RA are to open account with a
proximate branch of the District Central Co-operative Bank or any
Maharashtra State Co-operative Bank or any other urban Co-operative bank.
4. REGISTRATION FEE
The fourth step is to deposit the registration fee with the Reserve Bank of
India and to obtain the receipted challan in that behalf. The registration fee
for Housing Society is Rs.2,500/- and for general Society is Rs.1250/-.
47. 47
5. REGISTRATION PROPOSAL The fifth and final step is to prepare and to
submit to RA the proposal for registration of the society. Under Rule 4 of
Maharashtra Co-operative Societies Rules the chief promoter should submit
the following documents for registration
a) Application for registration - Form A An application for registration of a
society should be made in form. The specimen of Form A. The application
for registration in quadruplicate should be signed by at least 60% of the
promoter’s members and Chief Promoter should attest their signatures. b)
Four copies of the proposed bye-laws of the society c) A list of promoter’s
members, such as the name age occupation current residential a address of
the promoter member the cost of share amount etc. d) A certificate from the
Bank or Banks stating the credit balance therein in favour of the proposed
society; e) A scheme showing the details explaining how the working of the
society will be economically sound and where the scheme envisages the
holding of immovable property by the society, the description of such
property proposed to be purchased, acquired or transferred to the society; f)
Such other documents as may be specified in the model bye-laws, if any,
framed by the Registrar; g) The registration fees at the applicable rates, h)
Other documents like affidavit, indemnity bonds, copy of ration cards, public
notice in newspaper etc., as may applicable for different types of society as
per the notification issued from time to time.
6. REGISTRATION PROCEDURE
As per rule
5[1] On receipt of an application under Rule 4 the Registrar shall enter
particulars of the application in the register of application to be maintained in
Form ‘B’ give a serial number to the application and issue a receipt in
acknowledgement thereof.
48. 48
5[2] The Registrar may give necessary opportunity to the promoters to
modify the proposed bye-laws before finally registering the society or
rejecting the application for registration of the society.
5[3] On registering a society and its bye-laws under sub-section (1) of
section 9 the Registrar shall as soon as may be, notify the registration of the
society in the Official Gazette and grant to the society a certificate the
Registration number of the society, and the date of its registration. The
registrar shall also furnish the society with a certified copy of the bye-laws
approved and registered by him.
7. REFUSAL OF REGISTRATION
Where any society does not furnish the information in regard to the society
as required by the Registrar or fulfill any of the conditions laid down in the
Act or these Rules, Notification or orders, the Registrar may refuse to
register that society.
8. APPEALS
Under section 152 an appeal against an order or decisions of registration of
society, refusal of registration of society shall lie
(a) If made or sanctioned or approved by the Registrar, or the Additional
or Joint Registrar on whom powers of the Registrar are conferred, to
the State Government. (b) If made or sanctioned by any person other
than the Registrar, or the Additional or Joint Registrar on whom the
powers of the Registrar are conferred to the Registrar. Ultimately a
remedy of Writ Petition under Article 226 or 227 of the Constitution of
India is always available even to a Co-operative society or a person
aggrieved in an extraordinary circumstance. Which means if the
decision of State government on the appeal made by the aggrieved
party is not acceptable a Writ Petition can be filled in the High Court
and then Supreme Court?
49. 49
Table 2.1 Receipts and Payment Statement
DEVIKULAM TALUK VYAPARI VYAVASAI SERVICE CO-OP. SOCIETY LTD NO I 518
ADIMALY
RECIPTS AND DISBURSMENTS STATEMENT 2013-2014
DISBURSMENTS AMOUNT
SHARE
A CLASS 12300.00 12300.00
DEPOSITS
FIXED DEPOSITS 96606034.00
SAVING BANK 262206603.50
CURRENT A/C 839416.00
PIGMY DEPOSITS 89480858.00
HOME SAVINGS 10791702.00
RECURING DEPOSITS 225800.00
PIGMY DEPOSITS-A 2839295.00
SOUBHAGYA DEPOSIT SCHEME 90000.00
SOUBHAGYA PIGMY DEPOSIT 2916400.00 465996108.50
BORROWINGS
IDCB SGO 1,2 70021950.00 70021950.00
LOANS TO MEMBERS
BDLS LOAN –A 42539500.00
BDLS LOAN –B 53287000.00
BDLS LOAN –C 24440000.00
BDLS LOAN –D 30740000.00
SHORT TERM LOAN 96049000.00
PERSONAL LOAN 823000.00
GOLD LOAN 110081073.00
SECURED LOAN 11420000.00
MFS LOAN 28074500.00 397454073.00
INTEREST PAID
BORROWINGS 759335.00
DEPOSITS 9564424.00 10323759.00
ESTABLISHMENT
SALARY 2048787.00
51. 51
INTEREST PAID ON STAFF SECURITY 1102.00
SOUBHAGYA DEPOSIT BONUS 78000.00
PD COLLECTION EXPENSES 1912540.00
MPD COLLECTION EXPENSES 496929.00
HSD COLLECTION EXPENSES 114087.00
AGENTS GENERAL INSURANCE 21825.00
CO-OPERATIVE TRAINING 7900.00 7612831.50
FIXED ASSETS
LAND AND BUILDINGS 7108530.00
FURNITURE 217750.00 7326280.00
BANK A/C
ASCB 1203 56982929.00
IDCB CURRENT A/C S 24 24998289.00
IDCB SB S 160 8114195.00
IDCB MUNNAR EVENING 2660000.00
IDCB ADIMALI EVENING S 1 21409062.00
UBI CURRENT A/C NO 14008 3201823.00
MUNNAR SCB A/C 17297 12762260.00 130128558.00
INVESTMENT A/C
FD AT IDCB MANKULAM 1493528.00
FD AT IDCB ADIMALY 3000000.00
FD AT ADIMALY EVENING 10732907.00
CC AT IDCB ADIMALY STAFF SECURITY 10000.00
FD AT IDCB MUNNAR EVENING BRANCH 2000000.00
FD AT IDCB KUNCHITHANNY 1200000.00
FD AT IDCB RAJAKUMARY 1800000.00
FD AT TREASURY ADIMALY 400000.00
FD AT IDCB RAJAKKADU 1210710.00
FD AT MUNNAR SCB 236544.00
FD AT IDCDS LTD PAINAV 400000.00 22483689.00
OTHER INVESTMENT
RF INVESTED AT DCB 1328908.00
PF DEPOSITED IN IDCB 194323.00 1523231.00
OTHER LIABILITIES
UNDIVIDED NET PROFIT 19106125.00 19106125.00
STAFF SECURITY DEPOSIT
STAFF SECURITY DEPOSIT 0.00
ADVANCE DUE TO
ADVANCE DUE TO LAND 567000.00
52. 52
MFS DUE TO
RENT ADVANCE
EMPLOYEES P F CONTRIBUTION DEPOSIT
INTEREST EXCESS PAID
SALARY EXCESS PAID
PROVIDENT FUND ADVANCE 175000.00
ATM A/C 5288200.00
HEAD OFFICE TO BRANCH 7927808.00
LAND PURCHASE ADVANCE 3325000.00 17283008.00
ADVANCE DUE BY
MFS REBATE 25228892.50
MFS PRIZE AMOUNT 147719710.00
MFS AUCTION DEDUCTION 34125060.00
MFS PIGMY DEPOSITS 107757067.00
BDLS DEPOSITS 123144593.00
MFS SETTLEMENT 852250.00
WELLFARE FUND AT DCB 18240.00
MFS ADVANCE 499310.00
MFS FOREMAN PRIZE (BID) 6550000.00
COLLECTION AGENTS SECURITY 20000.00
RD SUSPENSE 406.00
TENDER FEE 2000.00
SOUBHAGHYA DEPOSIT SUSPENSE 54800.00
ELECTION NOMINATION FEE 4000.00
LOAN RISK FUND 270441.00
GROUP PERSONAL ACCIDENT INSURANCE SCHEME 3000.00
EMPLOYEES P F CONTRIBUTION 158987.00
INCOME TAX 99479.00
LIC POLICY PREMIUM 106414.00
LIC POLICY PREMIUM SUSPENSE 106414.00
BRANCH TO HEAD OFFICE 7307008.00 454028071.50
DIVIDEND
DIVIDEND PAID 1061530.00 1061530.00
EDUCATION FUND
EDUCATION FUND 40000.00 40000.00
TOTAL 1607025261.50
CL.CASH BALANCE 1958324.00
GRAND TOTAL 1608983585.50
53. 53
Table 2.2 Balance Sheet
DEVIKULAM TALUK VYAPARI VYAVASAI SERVICE CO-OPERATIVE SOCIETY LTD NO I 518
ADIMALY
BALANCE SHEET AS ON 31/03/2014
LIABILITIES ASSETS
SHARE CAPITAL 4641775.00 CASH IN HAND 1958324.00
DEPOSITS 163937395.40 CASH AT BANKS 22497196.35
BORROWINGS 20170595.00 INVESTMENT A/C 22218039.00
STAFF PF DEPOSIT 1326800.00 STAFF SECURITY IN DCB 81504.00
STAFF SECURITY DEPOSIT 81504.00 RF INVESTED IN DCB 5980945.00
FOREMAN PRIZE MFS 6156500.00 PF DEPOSITED IN DCB 955830.00
COLLECTION AGENTS
SECURITY 129000.00 LOANS AND ADVANCES 193908660.00
MFS REBATE 3094862.50
MUTUAL FUND SCHEME
DUE TO 115400000.00
MFS ADVANCE 10982.50
EQUIPMENTS AND
FURNITURE 3725639.98
RESERVE FUND 13970916.00 LIBRARY BOOKS 6400.00
PROFETIONAL EDUCATION
FUND 955306.00 DCB SHARE 2000.00
MEMBERS RELIEF FUND 13692258.00 SHARE SPCS 1000.00
DIVIDEND 1069395.00
SHARE CO-OPERATIVE
COLLEGE 5000.00
OTHER LIABILITIES 477699.50 DUE TO SOCIETY 2030312.00
SECURITY GOLD APRISER 5000.00 BUILDING SECURITY 1000000.00
RESERVE FOR MFS OVERDUE 6683500.00 LAND AND BUILDINGS 7108530.00
DEPRECIATION FUND 2499806.00 INTEREST RECEVABLES 13438205.00
RESERVE FOR BD & DOUTFUL
DEPT 3321136.00 ATM A/C 243000.00
RESERVE FOR GRATIVITY 642178.00
RESERVE INTEREST OVERDUE 6240852.00
BAD DEPT RESERVE 2146462.00
MFS SETTLEMENT 108250.00
DUE BY SOCIETY 50887.00
INTEREST PAYABLE 7516209.00
LIC PREMIUM 9011.00
INCOME TAX 72000.00
UN DIVIDED NET PROFIT 20568998.00
TOTAL 374231409.33 TOTAL 390680585.33
PROFIT DURING THE YEAR 16449176.00
GRAND TOTAL 390680585.33
GRAND
TOTAL 390680585.33
54. 54
OPERATIONAND CONDUCT OF DEPOSIT ACCOUNTS
CURRENT ACCOUNT/CASH ACCOUNT/SAVINGS BANK A/C
1. General Guidelines:
All applications should be satisfactorily introduced to the
Banks.
Particulars of the account opening forms signed be
constituents are clearly recorded at the head of the ledger
accounts duly authenticated and the form and other document
such as specimen signature card, etc. relative to the opening of
the accounts are serially numbered and systematically filed.
Such serial numbers of the opening form, specimens is
recorded in the ledgers duly authenticated.
All specimen signatures, recorded or specimen signature
cards, should be attested by the Manager with his full
signature.
The specimen signature recorded or specimen signature cards
should be attested by the manager with his full signature.
The specimen signature cards should be kept arranged in
alphabetical order in a cabinet, under the lock and key
authorized official.
When an account is closed, the specimen signature card
should be marked Account closed on and attached to the
relative account opening forms and kept with the closed
account maintained date wise.
At the close of business each day the locked specimen
signature cards cabinet should be lodged in the strong
room/safe.
Vernacular signature should be attested by an authorized
official.
55. 55
2. Cheque book issue:
The custody and issue of cheque books should be under the
direct charge of the Manager/ Accountant
The first and last serial numbers in each cheque book will be
entered in the cheque book register, with separate opening for
each denomination such as 100,50,25 etc. under the initials of
the officer holding custody
When a cheque book is issued, the name of the constituent
and the date of issue will be entered in the cheque book
register and authenticated by the authorized official in charge.
The signature of recipient will be taken in the Signature of
recipient’s column in the register. All cheque books to send by
post must be dispatched by registered post.
Particulars of cheque book issued should be recorded in the
ledger headings under authentication.
A cheque book should ordinarily be issued against an
application, signed by the constituent on the Bankers
requisitions slip from the current cheque book.
When a cheque book is issued to a constituent’s messager, the
constituent must be advised direct and his acknowledgment
should be obtained.
Obtained unused cheque book forms when an account is
closed or transferred to another Branch of the Bank.
A broken cheque book register is to be maintained to enter the
number of unused cheque forms. The officer in whose custody
such cheque forms kept should personally destroy the
requisition slip.
56. 56
3. Pass books
The pass books will show the number of depositors account,
his name and address.
The depositors should be advised to present the pass book for
all withdrawals other than those by cheques.
In case of withdrawals by cheques, the pass books should be
presented within a week from the date of withdrawal, to make
the entries upto date.
The bank will not be responsible for any entries not
authenticated under initials of its authorized officials.
Depositors should be requested to keep their pass book and
cheque book in a place of safety. The bank will not be
responsible for any loss or fraudulent withdrawal out of the
loss of pass book/ cheque book to the depositors neglect.
Every change of address should be intimated immediately to
the bank and pass book sent for corrections.
4. Statements of accounts:
Every current and cash credit account constituent will be
furnished with a statement of account monthly and more
frequently if the constituent so desires. For the sake of
convenience the statement of account will be kept in loose leaf
cone binders.
When pass book in lieu of statements are issued to the
constituents, at their special requests the fact should be
entered in the ledger.
Statements of accounts must be dispatched not later than the
5th of the succeeding month, duly authenticated by the
statement writers/ledger keeper and the supervising official
after due verification and after recording the ledger with the
57. 57
letters ‘S’ and date of issue against the corresponding balance
in the statements, with initials.
The daily, weekly and fort-nightly statements should be
dispatched on the following working day.
Summations need not be given in the statements.
“Net balance in current accounts” maintained by a Co-operative Bank in the
Reserve Bank of India, State Bank of India, State Associated Bank and
Nationalized Banks, any balances or deposits maintained by the Central
Cooperative Banks with the State Cooperative Bank of the State concerned
and any balances or deposits maintained by a Primary Cooperative Bank in
the Central Cooperative Bank concerned or with the State Cooperative Bank
of the State concerned shall be eligible for being computed as liquid assets
under this section.
The monthly return shall indicate the position as on alternate Fridays during
a month and will show the statutory liquid assets based on the demand and
time liabilities as on the last Friday of the second proceeding fort night.
The reserve bank is empowered to call for a daily return from any
cooperative bank in the form and manner the Reserve Bank may specify.
The valuation of “unencumbered approved securities” shall be in accordance
with the method of valuation which the reserve bank of India may specify.
The reserve bank is empowered to impose penal interest on cooperative
banks which default in the maintenance of statutory liquidity ratio.
Section 24A
This new section empowers the reserve bank without prejudice to the
provisions of section 53, to exempt by issue of notification in the official
gazette any cooperative bank or class of cooperative banks with reference to
58. 58
all or any of the offices of such bank or banks or with reference to the whole
or any part of the assets liabilities of such cooperative bank or banks from
the application of whole or any part of the provisions of section 18 or section
24 for such period and subject to such conditions as may we specified in
such notification.
Section 29 and 30
Every bank is required to prepare its profit and loss account sheet in the
prescribed form and to submit it to the reserve bank dually audited and
signed by the principle officer of the bank and at least 3 directors. The
balance sheet is also required to publish in one of the local newspaper.
These are to be complied with before 31st dec of the year or extended time
as maybe allowed by the reserve bank of India.
Section 35 and 35A
Section 35 empowers the reserve bank to inspect cooperative banks by its
officers and supply to the cooperative banks so inspected a copy of its
report. In case of primary cooperative banks, the reserve bank may authorize
the state cooperative bank of state concerned to carry out the inspection on
behalf of the reserve bank. Section 35A empowers that reserve bank to
issue Directors to cooperative banks in general and to any cooperative bank
on particular regarding any aspect of the working of the cooperative banks/
bank concerned. While section 21 referred to earlier confers powers to issue
directions in regarding to advance by Cooperative Bans, Section 35A covers
11 aspects of the functions of Cooperative Banks and these two sections
together give powers to the Reserve Bank to issue directions on all matters
concerning the operations cooperative banks in particular, or all Cooperative
Banks, or a group of cooperative Banks, in general. In additions to
conducting regular inspection under is Section the Reserve Bank is also
empowered to carry is Section the Reserve Bank is also empowered to carry
scrutiny of the affairs of the cooperative bank at any time it is considered
necessary to do so.
59. 59
NABARD has also been statutorily empowered to carry the inspection of the
Cooperative Banks.
Section 16
The Reserve Bank empowered to depute, in case it is considered essential
to do so, for the reorganization or expansion of cooperative credit on sound
lines, one or more of its officers to watch the proceedings at any meeting of
Board of Directors of any cooperative bank or any other body constituted by
it and requires such bank to give an opportunity to the officers so deputed to
be heard at such meeting. Also the Reserve bank may appoint one or more
of its officers to observe the manner in which the affairs of the cooperative
bank or its offices or branches are being conducted, requiring such officers
to make a report thereon.
Section 45
Under this section, the Reserve Bank can recommend to the Central
Government to order a moratorium in respect of a Cooperative Bank. The
power to issue such a moratorium however rests with Central Government.
Section 45Y
This section empowers the Central Government to make rules, in
consultation with the Reserve Bank, specifying the periods for which a
Cooperative Bank shall preserve its books, accounts another documents and
keep with itself different instruments paid by it.
Section 45Z
This section enables the cooperative Banks to return at the request of the
consumer a paid instrument before the prescribed period of preservation
only after making and keeping its possession a true copy thereof made by
mechanical process or other process which in itself ensures the accuracy of
60. 60
the copy. The Bank is also entitled to recover from the customer the cost of
making such copies of the instruments.
Section 45ZA
This section enables depositors of a Bank to nominate one person to whom
in the event of the death of the sole depositor or the deaths of all depositors,
the amount of deposit may be returned by the Bank. In pursuance of the
provisions of this section, the Cooperative Banks Rules 1985 have been
framed and the nomination forms in respect of deposits, safe custody,
lockers have been prescribed.
Section 45ZB
This section gives protection to a cooperative bank in respect of claims made
by persons other than persons in whose names a deposit is held with it.
However if a notice /order is issued by a court of competent Jurisdiction then
the Bank should take due notice of it.
Section 45ZC
This section enables a cooperative bank to return the articles kept by a
person with it in safe custody to his nominee in the event of his death
This section given protection to a cooperative bank in respect of any claim to
any article made by any person other than the person who placed the article
in safe custody with it.
Section45ZE
This section enables an individual locker holder to nominate one person to
whom in the event of his death the cooperative bank may give access to the
locker and liberty and to remove contents of the locker.
61. 61
Section 45ZF
This section gives protection to a cooperative bank in respect of claims from
persons other than the hirers of the locker.
Section 46
In this section, the various penalties that may be imposed on cooperative
banks for non-compliance with the various provisions of the B.R. Act have
been specified.
Section 47A
Under this section the reserve bank is empowered to impose penalties on
any bank for contravention and defaults of the nature referred to in sub-
section(3)and(4)or section 46 of the act,ibid,without recourse to the court of
law. An enquiry is to be conducted and is reasonable opportunity of being
heard should be given to the bank. The procedure for conducting the enquiry
is laid down in rule 11 of the banking regulation rules 1996.the procedure
stipulates the appointment of an enquiry officer by the reserve bank for
holding the enquiry. The enquiry officer is required to send a statement
giving sufficient particulars of the contravention or default of the nature
referred to in sub section (3) or sub section (4) of section 46 of the act and to
give 30 days’ time for sending the reply. The enquiry officer shall fix a date
for conducting the enquiry which should be on a day to day basis. The bank
is entitled to be represented at the enquiry by its authorized representative
who may be a Director of Officer but not by a legal practioner. The procedure
also provide for cross examination of the witness both by the representative
of Reserve Bank or of the Cooperative Bank. After completion of enquiry
they said Officer shall record his findings and submit the entire record to the
Reserve Bank.
63. 63
In the present project work the data has been collected from available source that is
secondary data like websites, Newspapers and magazines. The sample size taken is of 7
different sectoral funds
Sampling Design
Sampling method use is non probabilistic judgmental sampling. The Mutual Fund
Scheme for the study have been selected based on following 3 criteria
1 Type of the scheme Open-ended Sectoral Funds(growth)
2 Minimum Assets Under Mgmt. Rs. 500 Crore
3 Inception Date Prior to 1st April, 2010
Growth option for the entire selected scheme has been considered.
ResearchDesign
1. Benchmark Index: For this study the 50 shares market index S&P CNX
NIFTY has been used as the market index.
2. Period of study: Period of study has been taken as 2months.
3. Risk Free Rate Of Return: Risk free rate of return refers to that
minimum return on an investment that has no risk of losing the investment over which it
is earned. For this purpose of this study risk free rate of return is represented by 91 days
Treasury bill.
64. 64
LIMITATIONS
1. The analysis is based on historical data and thus indicates the past performance
which may not always be indicative of the future performance.
2. Different schemes consider different market indices as their benchmarks, but for the
purpose of uniformity in the study all schemes have to be compared against same
benchmark index.
3. Sharpe ratio (in its simplest forms) that the relationship between risk and return is
linear and remain linear throughout its entire range. Various research works conducted in
this regard show that the relationship is not as simple as Capital Market theory would
suggest. This is an inherent weakness of capital Asset Pricing Model.
4. The time period considered by the study is only three years; a larger period could have
ensured coverage of a full market cycle, thus giving a more real picture of the
performance of the schemes.
66. 66
Sectoral Mutual Funds Considered:-
1. Auto Sector - UTI Transportation and Logistics Fund
2. Banking Sector - UTI Banking Sector Fund
3. FMCG Sector - Franklin FMCG Fund
4. Infrastructure Sector - Tata Infrastructure Fund
5. Power Sector - Reliance Diversified Power Sector Fund
6. Service Sector - Prudential ICICI Services Industries Fund
7. Technology Sector - Franklin Infotech Fund
67. 67
1. Auto Sector:-
UTI Transportation and Logistics Fund
Scheme Snapshot
CIO: A K Shridhar Category: Equity
Fund Manager: Anoop Bhaskar Sub-Category: Sectoral-Auto
Phone: 91 22 5678 6666 / 56578210 Type: Open
Fax: 91 22 2652 4921 Min. Investment(Rs):5000
website: www.utimf.com Total Assets(Rs./Mn): 719.8
Registrars: UTI Technology Services
Limited
Launch Date: 09-MAR-04
Scheme Objective:
The scheme aims to provide to investors growth of capital over a period of
time as well as to make periodical distribution of income from investment in
stocks of respective sectors of the Indian economy.
68. 68
3. FMCG Sector:-
Franklin FMCG Fund
Scheme Snapshot
CIO: Santosh Kamath Category: Equity
Fund Manager: Anil Prabhudas Sub-Category: Sectoral-FMCG
Type: Open
Min. Investment(Rs): 5000
Phone: 91 22 5632 5820
Total Assets(Rs./Mn): 485.42
Fax: 91 22 2281 0923
Registrars: Franklin Templeton Asset Management
Website: http://www.templetonindia.com (India) Pvt. Ltd.
Launch Date: 15-MAR-99
Scheme Objective:
Seeks to provide long term capital appreciation by investing primarily in
shares of companies operating in the FMCG industry.
69. 69
Asset Allocation
Equity Shares 96.13
Call And Other
Assets 2.84
Corporate Debt /
Bonds 1.03
As on 30-NOV-10
Top 5 holdings As on 30-NOV-10
Nestle India Limited 14.97
I T C Limited 11.27
Asian Paints Limited 9.25
Pidilite Industries
Limited 6.48
Marico Limited 6.08
70. 70
4. Infrastructure Sector
Tata Infrastructure Fund
Scheme Snapshot
CIO: Ved Prakash Chaturvedi Category: Equity
Fund Manager: M Venugopal Sub-Category: Sectoral-Infrastructure
Type: Open
Min. Investment(Rs): 5000
Phone: 91 22 56505200 / 251 / 252
Total Assets(Rs./Mn): 18972.93
Fax: 91 22 5631 5194
Registrars: Computer Age Management Services
website: http://www.tatamutualfund.com Pvt.Ltd.
Launch Date: 25-NOV-04
Scheme Objective:
The investment objective of the Scheme is to provide income distribution and / or
medium to long term capital gains by investing predominantly in equity/equity
related instrument of the companies in the infrastructure sect
71. 71
Asset Allocation
Equity Shares 95.22
Cash And Other
Assets 4.78
As on 30-NOV-10
Top 5 holdings As on 30-NOV-10
I C I C I Bank
Limited 4.97
Crompton Greaves
Limited 4.79
Cash And Other
Assets 4.78
Oil & Natural Gas Corporation Limited 4.70
H D F C Bank
Limited 4.58
72. 72
5. Power Sector:-
Reliance Diversified Power Sector Fund
Scheme Snapshot
CIO: K Rajagopal Category: Equity
Fund Manager: Sunil Singhania Sub-Category: Sectoral-Power
Type: Open
Min. Investment(Rs): 5000
Phone: 91 22 3099 4600 Total Assets(Rs./Mn): 50211.2
Fax: 91 22 3041 4899 Registrars: Karvy Computershare Private
Limited
website: http://www.reliancemutual.com/ Launch Date: 29-MAR-04
Scheme Objective:
The primary investment objective of the scheme is to seek to generate continous
returns by actively investing in equity and equity related or fixed income
securities of Power and other associated companies
73. 73
Asset Allocation
Equity Shares
Derivatives,Cash And Other Receivables
As on 30-NOV-10
94.65
5.35
Top 5 holdings As on 30-NOV-10
Other Equities 8.33
Cummins India
Limited 6.32
Torrent Power
Limited 5.99
I C I C I Bank
Limited 5.48
Cash And Other Assets And Derivatives 5.35
74. 74
6. Technology Sector:-
Franklin Infotech Fund
Scheme Snapshot
CIO: Santosh Kamath Category: Equity
Fund Manager: Anand Radhakrishnan, Murali Yerram
Sub-Category: Sectoral-TMT
Type: Open
Min. Investment(Rs): 5000
Phone: 91 22 5632 5820
Total Assets(Rs./Mn): 1403.5
Fax: 91 22 2281 0923
Registrars: Franklin Templeton Asset Management
website: http://www.templetonindia.com (India) Pvt. Ltd.
Launch Date: 22-JUL-98
Scheme Objective: Seeks to provide long term capital appreciation by investing
primarily in Information Technology industry.
75. 75
Asset Allocation
Equity Shares 96.38
Other Current Assets 3.62
Unlisted Equities 0.00
As on 30-NOV-10
Top 5 holdings As on 30-NOV-10
Infosys Technologies
Limited 52.15
Tata Consultancy
Services Limited 25.32
Wipro Limited 9.48
Cash And Other Assets 3.62
Oracle Financial Services Software Limited 3.56
76. 76
7. Service Sector:-
Prudential ICICI Services Industries Fund
Scheme Snapshot
CIO: Nilesh Shah Category: Equity
Fund Manager: Sanjay Parekh Sub-Category: Sectoral-Services
Type: Open
Min. Investment(Rs): 5000
Phone: 91 22 22679665 / 22679676/ 22697989
Total Assets(Rs./Mn): 2802.4
Fax: 91 22 22630419
Registrars: Computer Age Management Services
website: http://www.icicipruamc.com Pvt.Ltd.
Launch Date: 13-OCT-05
Scheme Objective: to generate capital appreciation and income distribution
to unit holders by investing predominantly in equity/equity related securities
of the companies belonging to the service industry and balance in debt
securities and money market instruments including call money.
77. 77
Asset Allocation
Equity Shares 95.80
Futures 2.37
Debt And Cash And
Other Assets 1.82
As on 30-NOV-10
Top 5 holdings As on 30-NOV-10
Infosys Technologies
Limited 7.64
H D F C Bank Limited 7.37
Housing Development Finance Corporation Limited 6.00
Jaiprakash Associates
Limited 5.89
Bharti Airtel Limited 5.72
79. 79
FINDINGS
Rate of Return: Among the funds selected, UTI Banking Sector fund has
given the maximum rate of returns (39%) in the last one year followed by Franklin
FMCG (33%). Reliance Diversified Power Sector fund with a return of (7.5%)
stood last in the table.
Among the funds selected, Reliance Diversified Power has given the maximum
rate of returns (37%) in the last five years followed by Tata Infrastructure (24%).
UTI Transportation and Logistics with a return of (16.98%) stood last in the table.
TotalRisk (Standard Deviation)
UTI Banking Sector fund has the maximum standard deviation of 6.92
while Franklin FMCG has the least standard deviation of 2.96
Systematic Risk (Beta) and Co - relation
UTI Banking Sector fund has the maximum Beta of 1.08 while UTI Transportation
and Logistics has the least Beta of 0.55.
UTI Banking Sector fund has the maximum co-relation of 1.07 while Franklin
FMCG has the least R-Squared of 0.65
Treynor & Sharpe Ratio:
UTI Banking Sector Fund has the maximum Treynor ratio of -0.19 while Reliance
Diversified fund has the least Treynor ratio of -0.85.
Franklin Infotech has the least Sharpe Ratio of -0.15 while ICICI Prudential
Services has the maximum sharp ratio of 0.01
80. 80
SUGGESTIONS & CONCLUSIONS
1. Banking and FMCG sectors have fared well in the last one year and
it is suggested to invest in these sectors.
2. It is advised to be keep away from infrastructure funds especially
Reliance Infrastructure fund.
3. FMCG has the least risk and Banking has the highest risk among
the sectors. It is better to avoid Banking funds for people who want
to avoid the risk.
4. Investors who expect slow and steady returns are advised to for
FMCG sector.
5. UTI Banking Sector has a beta of greater than 1 (i.e market beta).
This implies that Banking Sector has a higher risk compared to the
market portfolio.
6. FMCG, Services, Transportation and Logistics sector has the least
beta and investors can invest in these funds
81. 81
ANNEXURE - I
TERMINOLOGY
Mutual Fund: An investment tool that pools in investments made by people and that
corpus is professionally managed by further investing as per the type of fund that’s
being operated. The intention is to float money in the market by owning assets
components of many companies at the same meeting the assurances made to
investors. There is no obligation whatsoever for assured returns.
NAV- A cumulative market value of total assets component of its liabilities. It’s
actually the measure of what each shareholder would acquire if the assets of the
company are liquidated.
No-Load funds - there is no commission component present to enter and exit of
the fund ownership. It’s a full involvement of the corpus.
ELSS - Equity linked savings scheme is a scheme with a tax rebate allowed as
per the Sec 88 in the Indian income tax act, 1961.It provides the investors with
the opportunity to save gains on capital through investments made in MFs.
Index Funds - An interesting scheme that tries to replicate the behavior of the
particular stock index, that is of interest. The portfolio of the fund would majorly
consist of equities listed in that index.
Sector Funds - An MF scheme that has its portfolio chart of companies that belong
to a certain sector, say Oil. This is a high-risk fund, as the performance of that sector
would directly reflect in the funds NAV. So, here we are with the diverse market of
Mutual Funds. Each one claiming their USP. While MFs certainly are NOT the
safest, but they are relatively more safe than the direct involvement in the equity
market, given that fact that majority of the investors are either ill-informed or not
informed about the way the markets move. So what exactly makes MFs the right
kind of fund management tool, espy in a country like India? A country like India or
for that matter any developing country has some basic problems which prevent
the information to be available freely and that too in an accessible fashion.
82. 82
With so many potential investors in India, MFs can go a long way in
getting established, plus with added set of alternatives within the MF schemes
each has a scheme ready for the specific needs. Just to have a better
perspective, there are various options available in the form of Equity fund, Debt
funds, Balance funds and components like Money market funds, Index funds and
the likes of it. Let’s take a peek at the important ones.
Equity Funds: The High risk - High return scheme invests in the equity markets, the
risk involved is comparatively higher than but not as high as that of the sector funds
that focus investments on specific sectors. But the higher the risk component, the
higher is the return rate. However, there is a variant in this type of equity based
scheme called the ELSS or the Equity Linked Savings Schemes, the offer a tax
rebate under Sec 88 of I-T act, but the investment needs to be locked for at least 3
years! Suitable for risk takers .The problem is that it reacts faster to the market
fluctuations, as the NAV would behave the way market behaves. Alliance AMC is
supposed to have a good equity fund expertise.
Debt Funds: Debt funds invest in the debt component or the fixed income models.
So the return is almost certain and the risk is low. However, the returns are also
combatively low compared to the principle amount. Investments in these kinds of
funds range from Govt.Securities to corporate bonds. If you are looking for short-
term safe investment options then the liquid funds in the category is the answer for
you. Several alternatives this category is now available like the income fund, growth
fund or any long-term childcare fund and the likes of it. More diverse Debt funds are,
more the chances of substantial returns.
Balance funds - This type of funds are part equity and part debt funds. The
pattern investment in balance funds is usually pre-determined. You have open-
ended and closed-ended balance funds, where the funds can be traded in an
open ended case just like equities but based on the Net Asset Value (NAV). The
closed-ended funds are locked and cannot bet traded.
83. 83
When to say goodbye to your Mutual Fund?
There are some professionals who talk of when to exit from mutual funds like
other talk of when to invest in mutual funds. People who want to invest get more
than the fixed deposit earning (risk free rate), preferred option is mutual funds. It
is important to base the decision on relative performance and not absolute
performance. When one fund is down 5% while other funds or the market in
general are up 10%, it is very tempting to switch over to what is "hot." Chasing
Performance is the best way to shoot oneself in the foot as we just discussed
above.
When studying relative performance, one should look at his fund and compare
it to its peers. However, comparisons should be drawn between parallels and so
equity funds cannot and should not be compared with debt funds. When
choosing a benchmark, one must select funds in the same category. If one’s fund
was down 2% and the average equity fund was down 4%, then there is no good
enough reason to sell it. One should compare the returns posted by his fund with
that of the peers across various horizons such as 1-year, 3-year and above. A
short-term view can often lead to committing hara-kiri, as it doesn’t present the
full picture. If it has underperformed the average of its peers in all cases, then it
sure is one of the better reasons to exit from the fund.
A change in life stage
Investments are done with a certain objective in mind and life stages are often
a determining factor of what a person needs. A young man can afford to take
more risks than a person nearing his retirement can. In such cases, it pays to
withdraw money from the equity investments made earlier and put them in
safer, more conservative debt funds that offer stable returns without
compromising on risk. So a change in life stages would be one such reason to
consider switching into a fund that matches with one’s needs. As one nears
84. 84
retirement, one might want to consider more conservative funds. If one gets
married, one might need to compromise one’s risk tolerance and desired
returns with that of the spouse. This could trigger off the need to exit.
A major change in any basic attribute of the fund
When the fund changes any basic attribute as mentioned by it in its offer
documents, the investors have a choice of getting out of it. Even SEBI has
provided for an exit route being made available to the investors. Changes like a
change in Asset Management Company or in investment style of fund or change
of structure say from closed-end to open-end etc. are good enough reasons for
an investor to consider switching or exiting from it as they are certainly likely to
affect the fund in a major way.
Fund doesn’t comply with its objective
One of the important parameters in the selection of the fund is alignment of the
risk profiles of the investor and fund. The objective of the fund says a lot about
how the fund plans to invest. If the objective is not being complied with, it is one
of the exit points worth considering. For example, the three funds discussed
above, Alliance Equity, Birla Advantage and ING Growth all claim to be
diversified equity funds yet they had huge exposures to select ICE sector scripts
that not only added volatility than is expected out of diversified funds but also in
a way, went against their stated objective.
The Fund's Expense Ratio Rises
A small rise in an expense ratio is not a big deal, however a significant rise can
result in substantial reduction of yields and so it would be better to exit the fund.
In the case of bond funds or money market funds, it is highly unlikely that the
fund can increase its returns enough to justify an increase in the fund's
expenses.
85. 85
The Fund Manager has changed
a simple change of fund managers, in itself, is not enough reason to sell a fund
on a short-term basis. If it is a passively managed fund (index fund), then one
has little to no reason to worry. However, if it is an actively managed fund, then
has to keep the eyes open on the new manager. Observing the styles, stock
picking and risks undertaken by the new manager is important for it discloses a
lot about how the fund might fare in the future. If satisfied, one will have no
reason to complain later but the process needs time and so an investor has to
observe the fund manager for some time before one takes a decision.
Enough has been earned
However, nothing is as important as to rein the horses in time. The primary
principle behind safety of investment is to take risks that can be tolerated. The
principle also is specific on the expectations that the investor must have from
any investment. Just as it is important to set realistic targets that one hopes to
achieve from the investment, it is also important to exit when target as expected
has been achieved irrespective of the fact that it might be generating better
returns in a short-term.
The above list is certainly not exhaustive and individuals will have other
better reasons to quit as well. It’s just that most don’t know when to apply thought
and so these would come in handy.
86. 86
TIPS FOR MUTUAL FUND INVESTORS: (SUGGESTIONS)
These are the few exact as regards investment in MF’s taken from the book with
“Marketing for the 90’s” given by the Wall Street.
1. Check your letter of offer of funds prospectus to guard yourselves against any
hidden fees.
2. Ensue that the funds track record is the same as that of the current
management
3. Avoid MF’s that charge exit fees at he back end door (fee s charged by MF
from the unit holders at he time to redemption of the units.)
4. Buy the funds with no sale charged loads.(a load is a charge by the fund
when investor buys it is called the entry load or when he sells is called the exit
load.)
5. If the charge it’s heavy by the M F to discourage the investors from taking
short positions in the funds units because too many investors sell their units
at a time then the fund has to sell its holdings to meet the obligations that
yield into vital of the fines overall return. Most short funds like guilt funds
(these are the funds the invest only in government securities and treasury
bills thus the investors have an opportunities to buy risk free securities).
These funds yield a better return than a money market fund. It is good for the
investors who desire safety of principal amount). Money market funds (these
funds in views in money market instruments such as treasury bills, govt.
bonds, certificates of bank deposits, commercial deposits). They charge no
loads, however loads are limited by SEBI to 7%.
6. Check fund’s performance in bear as well a the bull market.
7. Guard fund risk by checking its portfolio for diversification volatility.
87. 87
KEY STEPS FOR FINANCIAL PLANNING
INSURE YOURSELF BEFORE YOU INVEST
Insurance is the pre-requisite of all investments the main purpose of insurance is to
protect your current life style after retirement. It acts as a shield against all type of
financial risks. Investor has to realize that insurance is more for safe guarding
against risk faced in life rather than being an investment for profit.
CHOOSE SIMPLE INVESTMENT
Our daily life is full of complications the day-to-day grind leaves us with little
energy to keep track of our financial investments. That is copy an investor should
choose simple & complicated instruments.
UTILIZE THE POWER OF COMPOUNDING
Compounding means payment of interest on accumulated interest. Thus money
earned by you works hard & earns more money for you. This implies that not only
the principal earns income for you but interest generated by you also earns
income. One important factor is the time period. Longer the time higher the
benefit
88. 88
INVEST IN INTRUMENTS THAT KEEP YOU AHEAD OF INFLATION
That silently creeps up from behind & starts eating your hard earned savings
even before you realize the situation. An investor should look at the real return
(the rate of return minus the rate of inflation) while considering an investment. He
should invest in instruments, which provide profitable-post-inflation returns.
REDUCE TAX ON YOUR INVESTMENT
There are two realities in the life. One is death & the other is tax. It is advisable
that investments should be so planned that least possible tax would be required
to be paid. Smart move for the investor is to save every rupee from tax man.
GO FOR STABLE & REALISTIC RETURNS
Stability of returns is more important that increased profit. Usually these are
associated with high volatile investment options like equities & even with
government securities or gilts as they also run high market risk. The asset
allocation is suggested according to the risk profile of an investor. So invest in
the best option & get the maximum returns.
89. 89
BIBLIOGRAPHY
Co-operative Societies Laws – P.N. Mohannan (Advocate)
19th edition and 14th edition
Cooperative Banking in India- S Nakirran
www.amfiindia.com
Jay Hambidge, Dynamic Symmetry: The Greek Vase, New Haven CT
Yale University Press, 1920
William Lidwell, Kritina Holden, Jill Butler, Universal Principles of Design
A Cross-Disciplinary Reference, Gloucester MA: Rockport Publishers,
2003
"The Golden Ratio". The MacTutor History of Mathematics archive.
Retrieved on 2007-09-18.
