with refrences to cooperative banks

1. 1
Meaning and Definition of Banking
Meaning of Banking
You know people earn money to meet their day to day expenses on food, clothing, education
of children, having etc. They also need money to meet future expenses on marriage, higher
education of children housing building and social functions. These are heavy expenses, which
can be met if some money is saved out of the present income. With this practice, savings
were available for use whenever needed, but it also involved the risk of loss by theft, robbery
and other accidents. Thus, people were in need of a place where money could be saved safely
and would be available when required. Banks are such places where people can deposit their
savings with the assurance that they will be able to with draw money from the deposits
whenever required. Bank is a lawful organization which accepts deposits that can be
withdrawn on demand. It also tends money to individuals and business houses that need it.
Definitions of Bank
1. Indian Banking Companies Act –
“Banking Company is one which transacts the business of banking which means the
accepting for the purpose of lending or investment of deposits money from the public
repayable on demand or otherwise and withdrawable by cheque, draft, order or otherwise”.
2. Dictionary Meaning of the Word ‘Bank’
-The oxford dictionary defines a bank as “an establishment for custody of money received
from or on behalf of its customers. It’s essential duty is to pay their drafts on it. It’s profits
arises from the use of the money left employed by them”.
3. The Webster’s Dictionary Defines
a bank as “an institution which trades in money, establishment for the deposit, custody and
issue of money, as also for making loans and discounts and facilitating the transmission of
remittances from one place to another”.

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4. According to Prof. Kinley,
“A bank is an establishment which makes to individuals such advancesof money as may be
required and safely made, and to which individuals entrust money when it required by them
for use”.
The above definitions of bank reveal that bank is an Business institution which deal in money
and use of money. Thus a proper and scientific definition of the bank should include various
functions performed by a bank in a proper manner. We can say that any person, institution,
company or enterprise can be a bank. The business of a bank consists of acceptance of
deposits, withdrawals of deposits, Making loans and advances, investments on account of
which credit is exacted by banks.
Types of Banks
There are various types of banks which operate in our country to meet the financial
requirements of different categories of people engaged in agriculture, business, profession
etc. on the basis of functions, the banking institution may be divided into following types:
: Types of Banks
1. Central Bank
A central bank functions as the apex controlling institution in the banking and financial
system of the country. It functions as the controller of credit, banker’s bank and also enjoys
the monopoly of issuing currency on behalf of the government. A central bank is usually
control and quite often owned, by the government of a country. The Reserve Bank of India
(RBI) is such a bank within an India.
2. Commercial Banks
It operates for profit. It accepts deposits from the general public and extends loans to the
households, the firms and the government. The essential characteristics of commercial
banking are as follows:
- Acceptance of deposits from public
- For the purpose of lending or investment

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- Repayable on demand or lending or investment.
- Withdrawal by means of an instrument, whether a cheque or otherwise.
Another distinguish feature of commercial bank is that a large part of their deposits are
demand deposits withdrawable and transferable by cheque.
3. Development Banks
It is considered as a hybrid institution which combines in itself the functions of a finance
corporation and a development corporation. They also act as a catalytic agent in promoting
balanced and viable development by assuming promotional role of discovering project ideas,
undertaking feasibility studies and also provide technical, financial and managerial assistance
for the implementation of project.
In India ‘Industrial Development Bank on India’ (IDBI) is the unique example of
development bank. It has been designated as the principal institution of the country for co-
ordinating the working of the institutions engaged in financing, promoting or development of
industry.
4. Co-operative Banks
The main business of co-operative banks is to provide finance to agriculture. They aim at
developing a system of credit. Agriculture finance is a special field. The co-operative banks
play a useful role in providing cheap exit facilities to the farmers. In India there are three
wings of co-operative credit system namely –
(i)Short term,
(ii) Medium-term,
(iii) Long term credit.
The former has a three tier structure consisting of state co-operative banks at the state level.
At the intermediate level (district level) these are central co-operative banks, which are
generally established for each district. At the base of the pyramid there are primary
agricultural societies at the village level. The long term exit is provided by the central land
development Bank established at the state level. Initially, these banks used to advance loans
on mortgage of land for the purpose of securing repayment of loans.

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5. Specialised Banks
These banks are established and controlled under the special act of parliament. These banks
have got the special status. One of the major bank is ‘National Bank for Agricultural and
Rural development’ (NABARD) established in 1982, as an apex institution in the field of
agricultural and other economic activities in rural areas. In 1990 a special bank named small
industries development Bank of India (SIDBI) was established. It was the subsidiary of
Industrial development Bank of India. This bank was established for providing loan facilities,
discounting and rediscounting of bills, direct assistance and leasing facility.
6. Indigenous Bankers
That unorganised unit which provides productive, unproductive, long term, medium term and
short term loan at the higher interest rate are known as indigenous bankers. These banks can
be found everywhere in cities, towns, mandis and villages.
7. Rural Banking
A set of financial institution engaged in financing of rural sector is termed as ‘Rural
Banking’. The polices of financing of these banks have been designed in such a way so that
these institution can play catalyst role in the process of rural development.
8. Saving Banks
These banks perform the useful services of collecting small savings commercial banks also
run “saving bank” to mobilise the savings of men of small means. Different countries have
different types of savings bank viz. Mutual savings bank, Post office saving, commercial
saving banks etc.
9. Export - Import Bank
These banks have been established for the purpose of financing foreign trade. They
concentrate their working on medium and long-term financing. The Export-Import Bank of
India (EXIM Bank) was established on January 1, 1982 as a statutory corporation wholly
owned by the central government.

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10. Foreign Exchange Banks
These banks finance mostly to the foreign trade of a country. Their main function is to
discount, accept and collect foreign bulls of exchange. They also buy and self foreign
currencies and help businessmen to convert their money into any foreign currency they need.
Over a dozen foreign exchange banks branches are working in India have their head offices
in foreign countries.
11. International Banks
1 Make the basic list of those International Banks within India which help the banking sector
of India to develop in International market.
Types of Banking
Banking is described as the business carried on by an individual at a bank. Today, several
forms of banking exist, giving consumers a choice in the way they manage their money most
people do a combination of at least two banking types. However, the type of banking a
consumer uses normally based on convenience.These are different types of banking through
which consumer can attach to it-
(A)Walk-in-Banking
It is still a popular type of banking. As, in the past, it still involves bank tellers and
specialized bank officers. Consumers must walk into a bank to use this service normally, in
order to withdraw money or deposit it,aperson must fill out a slip of paper with the account
and specific monetary amount and show a form of identification to a bank letter. The
advantage of walk in Banking is the face to face connection between the banker and a letter.
Also unlike drive thru and ATM banking, a person can apply for a loan and invest money
during a walk in.
(B) Drive thru Banking
It is probably the least popular form of banking today, but is still used enough by consumers
to create a need for it. It allows consumers to stay in their while and drive up to a machine
equipped with container, chute and intercom. This machine is connected to a bank and is run
by one or two bank letters. A person can withdraw or deposit money at a drive thru. He must

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fill out a slip with his account and specific monetary amount and put it in the container. The
container travels through the chute to the bank letter, who will complete the banker’s request.
This is where the intercom comes into play. The bank teller and banker use it to communicate
and discuss the specific banking request.
(C) ATM Banking
It is very popular because it gives a person 24 hour access to his bank account. Walk in and
drive thru banking does not offer this perk. In order to use an ATM, a person must have an
ATM card with personal identification number (PIN) and access to an ATM machine. Any
ATM machine can be used, but charges apply if the ATM machine is not affiliated with the
bank listed on the ATM card. By sliding an ATM card into an ATM machine, it is activated
and then through touching buttons on the machine, a consumer is able to withdraw or deposit
money.
(D)Online Banking
It allows a person to get on the internet and sign into their bank. This process is achieved with
the use of a PIN, different from the one used for the ATM card. By going website of a bank
and entering it, a consumer can get into his account, withdraw money, deposit money, pay
bills, request loans and invest money. Online banking is growing in popularity because of its
convenience. These different types of banking give a consumer the power of choice and also
give them a comfortable banking system that gives them a convenient choice
BANKING IN INDIA
Indian banking is the lifeline of the nation and its people. Banking has helped in developing
the vital sectors of the economy and usher in a new dawn of progress on the Indian horizon.
The sector has translated the hopes and aspirations of millions of people into reality. But to
do so, it has had to control miles and miles of difficult terrain, suffer the indignities of foreign
rule and the pangs of partition. Today, Indian banks can confidently compete with modern
banks of the world. Before the 20th century, usury, or lending money at a high rate of
interest, waswidely prevalent in rural India. Entry of Joint stock banks and development of
Cooperative movement have taken over a good deal of business from the hands of the Indian
money lender, who although still exist, have lost his menacing teeth. In the Indian Banking

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System, Cooperative banks exist side by side with commercial banks and play a
supplementary role in providing need-based finance, especially for agricultural and
agriculture-based operations including farming, cattle, milk, hatchery, personal finance etc.
along with some small industries and self-employment driven activities. Generally, co-
operative banks are governed by the respective co-operative acts of state governments. But,
since banks began to be regulated by the RBI after 1stMarch 1966, these banks are also
regulated by the RBI after amendment to the Banking Regulation Act 1949. The Reserve
Bank is responsible for licensing of banks and branches, and it also regulates credit limits to
state co-operative banks on behalf of primary co-operative banks for financing SSI units.
Banking in India originated in the first decade of 18th century with The General Bank of
India coming into existence in 1786. This was followed by Bank of Hindustan. Both these
banks are now defunct. After this, the Indian government established three presidency banks
in India. The first of three was the Bank of Bengal, which obtains charter in 1809, the other
two presidency bank, viz., the Bank of Bombay and the Bank of Madras, were established in
1840 and 1843, respectively. The three presidency banks were subsequently amalgamated
into the Imperial Bank of India (IBI) under the Imperial Bank of India Act, 1920 – which is
now known as the State Bank of India. A couple of decades later, foreign banks like Credit
Lyonnais started their Calcutta operations in the 1850s. At that point of time, Calcutta was
the most active trading port, mainly due to the trade of the British Empire, and due to which
banking activity took roots there and prospered. The first fully Indian owned bank was the
Allahabad Bank, which was established in 1865. By the 1900s, the market expanded with the
establishment of banks such as Punjab National Bank, in 1895 in Lahore and Bank of India,
in 1906, in Mumbai – both of which were founded under private ownership. The Reserve
Bank of India formally took on the responsibility of regulating the Indian banking sector from
1935. After India‟s independence in 1947, the Reserve Bank was nationalized and given
broader powers. As the banking institutions expand and become increasingly complex under
the impact of deregulation, innovation and technological upgradation, it is crucial to
maintain balance between efficiency and stability. During the last 30 years since
nationalization tremendous changes have taken place in the financial markets as well as in the
banking industry due to financial sector reforms. The banks have shed their traditional
functions and have been innovating, improving andcoming out with new types of services to
cater emerging needs of their customers. Banks have been given greater freedom to frame
their own policies. Rapid advancement of technology has contributed to significant reduction

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in transaction costs, facilitated greater diversification of portfolio and improvements in credit
delivery of banks. Prudential norms, in line with international standards, have been put in
place for promoting and enhancing the efficiency of banks. The process of institution
building has been strengthened with several measures in the areas of debt recovery, asset
reconstruction and securitization, consolidation, convergence, mass banking etc. Despite this
commendable progress, serious problem have emerged reflecting in a decline in productivity
and efficiency, and erosion of the profitability of the banking sector. There has been
deterioration in the quality of loan portfolio which, in turn, has come in the way of bank‟s
income generation and enchancement of their capital funds. Inadequacy of capital has been
accompanied by inadequacy of loan loss provisions resulting into the adverse impact on the
depositors‟ and investors‟ confidence. The Government, therefore, set up Narasimham
Committee to look into the problems and recommend measures to improve the health of the
financial system. The acceptance of the Narasimham Committee recommendations by the
Government has resulted in transformation of hitherto highly regimented and
overbureaucratized banking system into market driven and extremely competitive one. The
massive and speedy expansion and diversification of banking has not been without its strains.
The banking industry is entering a new phase in which it will be facing increasing
competition from non-banks not only in the domestic market but in the international markets
also. The operational structure of banking in India is expected to undergo a profound change
during the next decade. With the emergence of new private banks, the private bank sector has
become enriched and diversified with focus spread to the wholesale as well as retail banking.
The existing banks have wide branch network and geographic spread, whereas the new
private banks have the clout of massive capital, lean personnel component, the expertise in
developing sophisticated financialproducts and use of state-of-the-art technology. Gradual
deregulation that is being ushered in while stimulating the competition would also facilitate
forging mutually beneficial relationships, which would ultimately enhance the quality and
content of banking. In the final phase, the banking system in India will give a good account
of itself only with the combined efforts of cooperative banks, regional rural banks and
development banking institutions which are expected to provide an adequate number of
effective retail outlets to meet the emerging socio-economic challenges during the next two
decades. The electronic age has also affected the banking system,leading to very fast
electronic fund transfer. However, the development ofelectronic banking has also led to new
areas of risk such as data security and integrity requiring new techniques of risk management.

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Cooperative (mutual) banks are an important part of many financial systems. In a number of
countries, they are among the largest financial institutions when considered as a group.
Moreover, the share of cooperative banks has been increasing in recent years; in the sample
of banks in advanced economies and emerging markets analyzed in this paper, the market
share of cooperative banks in terms of total banking sector assets increased from about 9
percent in mid- 1990s to about 14 percent in 2004.
Industry scenario of Indian Banking Industry:
The growth in the Indian Banking Industry has been more qualitative than quantitative and it
is expected to remain the same in the coming years. Based on the projections made in the
"India Vision 2020" prepared by the Planning Commission and the Draft 10th Plan, the report
forecasts that the pace of expansion in the balance-sheets of banks is likely to decelerate. The
total assets of all scheduled commercial banks by end-March 2010 is estimated at
Rs40,90,000crores. That will comprise about 65 per cent of GDP at current market prices as
compared to 67 per cent in 2002-03. Bank assets are expected to grow at an annual composite
rate of 13.4 per cent during the rest of the decade as against the growth rate of 16.7 per cent
that existed between 1994-95 and 2002-03. It is expected that there will be large additions to
the capital base and reserves on the liability side.
The Indian Banking industry, which is governed by the Banking Regulation Act of India,
1949 can be broadly classified into two major categories, non-scheduled banks and scheduled
banks. Scheduled banks comprise commercial banks and the co-operative banks. In terms of
ownership, commercial banks can be further grouped into nationalized banks, the State Bank
of India and its group banks, regional rural banks and private sector banks (the old/ new
domestic and foreign). These banks have over 67,000 branches spread across the country.
The Public Sector Banks(PSBs), which are the base of the Banking sector in India account for
more than 78 per cent of the total banking industry assets. Unfortunately they are burdened
with excessive Non Performing assets (NPAs), massive manpower and lack of modern
technology. On the other hand the Private Sector Banks are making tremendous progress.
They are leaders in internet banking, mobile banking, phone banking, ATMs. As far as
foreignbanks are concerned they are likely to succeed in the Indian Banking Industry In the
Indian Banking Industry some of the Private Sector Banks operating are IDBI Bank, ING
Vyasa Bank, SBI Commercial and International Bank Ltd, Bank of Rajasthan Ltd. and banks
from the Public Sector include Punjab National bank, Vijaya Bank, UCO Bank, Oriental

10. 10
Bank, Allahabad Bank among others. ANZ Grindlays Bank, ABN-AMRO Bank, American
Express Bank Ltd, Citibank are some of the foreign banks operating in the Indian Banking
Industry.As far as the present scenario is concerned the Banking Industry in India is going
through a transitional phase. The first phase of financial reforms resulted in the
nationalization of 14 major banks in 1969 and resulted in a shift from Class banking to Mass
banking. This in turn resulted in a significant growth in the geographical coverage of banks.
Every bank had to earmark a minimum percentage of their loan portfolio to sectors identified
as “priority sectors”. The manufacturing sector also grew during the 1970s in protected
environs and the banking sector was a critical source. The next wave of reforms saw the
nationalization of 6 more commercial banks in 1980. Since then the number of scheduled
commercial banks increased four-fold and the number of bank branches increased eight-fold.
After the second phase of financial sector reforms and liberalization of the sector in the early
nineties, the Public Sector Banks (PSB) s found it extremely difficult to compete with the
new private sector banks and the foreign banks. The new private sector banks first made their
appearance after the guidelines permitting them were issued in January 1993. Eight new
private sector banks are presently in operation. These banks due to their late start have access
to state-of-the-art technology, which in turn helps them to save on manpower costs
and provide better services.
During the year 2000, the State Bank Of India (SBI) and its 7 associates accounted for a 25
percent share in deposits and 28.1 percent share in credit. The 20 nationalized banks
accounted for 53.2 percent of the deposits and 47.5 percent of credit during the same period.
The share of foreign banks (numbering 42), regional rural banks and other scheduled
commercial banks accounted for 5.7 percent, 3.9 percent and 12.2 percent respectively in
deposits and 8.41 percent, 3.14 percent and 12.85 percent respectively in credit during the
year 2000.
Current Scenario:
The industry is currently in a transition phase. On the one hand, the PSBs,which are the
mainstay of the Indian Banking system are in the process of shedding their flab in terms of
excessive manpower, excessive non PerformingAssets (Npas) and excessive governmental
equity, while on the other hand the private sector banks are consolidating themselves through

11. 11
mergers and acquisitions. PSBs, which currently account for more than 78 percent of total
banking industry assets are saddled with NPAs (a mind-boggling Rs 830 billion in 2000),
falling revenues from traditional sources, lack of modern technology and a massive
workforce while the new private sector banks are forging ahead and rewriting the traditional
banking business model by way of their sheer innovation and service. The PSBs are of course
currently working out challenging strategies even as 20 percent of their massive employee
strength has dwindled in the wake of the successful Voluntary Retirement Schemes (VRS)
schemes.
The private players however cannot match the PSB‟s great reach, great size and access to low
cost deposits. Therefore one of the means for them to combat the PSBs has been through the
merger and acquisition (M& A) route. Over the last two years, the industry has witnessed
several such instances. For instance, HdfcBank‟s merger with Times Bank IciciBank‟s
acquisition of ITC Classic, Anagram Finance and Bank of Madura. Centurion Bank, Indusind
Bank, Bank of Punjab, Vysya Bank are said to be on the lookout. The UTI bank- Global
Trust Bank merger however opened a pandora‟s box and brought about the realization that all
was not well in the functioning of many of the private sector banks. Private sector Banks
have pioneered internet banking, phone banking, anywhere banking, mobile banking, debit
cards, Automatic Teller Machines (ATMs) and combined various other services and
integrated them into the mainstream banking arena, while the PSBs are still grappling with
disgruntled employees in the aftermath of successful VRS schemes. Also, following India‟s
commitment to the W To agreement in respect of the services sector, foreign banks, including
both new and the existing ones, have been permitted to open up to 12 branches a year with
effect from 1998-99 as against the earlier stipulation of 8 branches. Talks of government
diluting their equity from 51 percent to 33 percent in November 2000 has also opened up a
new opportunity for the takeover of even the PSBs. The FDI rules being more rationalized in
Q1FY02 may also pave the way for foreign banks taking the M& A route to acquire willing
Indian partners. Meanwhile the economic and corporate sector slowdown has led to an
increasing number of banks focusing on the retail segment. Many of them arealso entering
the new vistas of Insurance. Banks with their phenomenal reach and a regular interface with
the retail investor are the best placed to enter into the insurance sector. Banks in India have
been allowed to provide fee-based insurance services without risk participation, invest in an

12. 12
insurance company for providing infrastructure and services support and set up of a separate
joint venture insurance company with risk participation.
Introduction
Modern commercial banking, in its present form, is of recent origin. Though bank is
considered to be an ancient institution just like money.It’s evolution can be traced in the
functions of money lender, the goldsmiths and the merchants.
A bank has been often described as an institution engaged in accepting of deposits and
granting loans. It can also be described as an institution which borrows idle resources, makes
funds available to. It does not refer only to a place of tending and depositing money, but
looks after the financial problems of its consumers.
This era is the age of specialization with the changing situation in the world economy,
banking functions have broadened. Financial institutions which are shaped by the general
economic structures of the country concerned vary from one country to another. Hence, a
rigid classification of banks is bound to the unrealistic.
Origin and Development of Banking
There seem so be no uniformity amongst the economist about the origin of the word ‘Bank’.
It has been believed that the word ‘Bank’ has been derived from the German word ‘Bank’
which means joint stock of firm or from the Italian word ‘Banco’ which means a heap or
mound.
In India the ancient Hindu scriptures refers to the money - lending activities in vedic period.
They performed most of those functions which banks perform in modern times. During
Ramayana and Mahabharata eras also banking had become a full-fledged business activity. In
other words the development of commercial banking in ancient times was closely associated
with the business of money changing.
In simple words, bank refers to an institution that deals in money. This institution accepts
deposits from the people and gives loans to those who are in need. Besides dealing in money,
bank these days perform various other functions, such as credit creation, agency job and
general service. Bank, therefore is such an institution which accepts deposits from the people,
gives loans, creates credit and undertakes agency work.

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CO-OPERATIVE BANKING IN INDIA
HISTORY OF BANKING
Banking is nearly as old as civilization. The history of banking could be said to have started
with the appearance of money. The first record of minted metal coins was in Mesopotamia in
about 2500B.C. the first European banknotes, which was handwritten appeared in1661, in
Sweden. cheque and printed paper money appeared in the 1700’s and 1800’s, with many
banks created to deal with increasing trade.
The history of banking in each country runs in lines with the development of trade and
industry, and with the level of political confidence and stability. The ancient Romans
developed an advanced banking system to serve their vast trade network, which extended
throughout Europe, Asia and Africa.
Modern banking began in Venice. The word bank comes from the Italian word “ban co”,
meaning bench, because moneylenders worked on benches in market places. The bank of
Venice was established in 1171 to help the government raise finance for a war.
At the same time, in England merchant started to ask goldsmiths to hold gold and silver in
their safes in return for a fee. Receipts given to the Merchant were sometimes used to buy or
sell, with the metal itself staying under lock and key. The goldsmith realized that they could
lend out some of the gold and silver that they had and charge interest, as not all of the
merchants would ask for the gold and silver back at the same time. Eventually, instead of
charging the merchants, the goldsmiths paid them to deposit their gold and silver.
The bank of England was formed in 1694 to borrow money from the public for the
government to finance the war of Augsburg against France. By 1709, goldsmith were using
bank of England notes of their own receipts.New technology transformed the banking
industry in the 1900’s round the world, banks merged into larger and fewer groups and
expanded into other country.

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BANKING STRUCTURE IN INDIA:
In today’s dynamic world banks are inevitable for the development of a country. Banks play a
pivotal role in enhancing each and every sector. They have helped bring a draw of
development on the world’s horizon and developing country like India is no exception.
Banks fulfills the role of a financial intermediary. This means that it acts as a vehicle for
moving finance from those who have surplus money to (however temporarily) those who
have deficit. In everyday branch terms the banks channel funds from depositors whose
accounts are in credit to borrowers who are in debit.
Without the intermediary of the banks both their depositors and their borrowers would have
to contact each other directly. This can and does happen of course. This is what has lead to
the very foundation of financial institution like banks.
Before few decades there existed some influential people who used to land money. But a
substantially high rate of interest was charged which made borrowing of money out of the
reach of the majority of the people so there arose a need for a financial intermediate.
The Bank have developed their roles to such an extent that a direct contact between the
depositors and borrowers in now known as disintermediation.
Banking industry has always revolved around the traditional function of taking deposits,
money transfer and making advances. Those three are closely related to each other, the
objective being to lend money, which is the profitable activity of the three. Taking deposits
generates funds for lending and money transfer services are necessary for the attention of
deposits. The Bank have introduced progressively more sophisticated versions of these
services and have diversified introduction in numerable areas of activity not directly relating
to this traditional trinity

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INDIAN BANKING SYSTEM
Reserve Bank of India
Schedule Banks
Non-Schedule Banks
Commercial Banks
Central co-op
Banksand Primary
Cr. Societies
Commercial BanksState co-op
Banks
ForeignIndian
HDFC,
ICICI etc.
Private Sector Banks
Public Sector
Banks
Regional Rural
Banks
Other Nationalized BanksState Bank of India
and its Subsidiaries

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COOPERATIVE BANKS IN INDIA
Co-operative Banks in India are registered under the Co-operative Societies Act. The
cooperative bank is also regulated by the RBI. They are governed by the Banking
Regulations Act 1949 and Banking Laws (Co-operative Societies) Act, 1965.
 Cooperative banks in India finance rural areas under:
 Farming
 Cattle
 Milk
 Hatchery
 Personal finance
 Cooperative banks in India finance urban areas under:
 Self-employment
 Industries
 Small scale units
 Home finance
 Consumer finance
 Personal finance
A co-operative bank is a financial entity which belongs to its members, who are at the same
time the owners and the customers of their bank. Co-operative banks are often created by
persons belonging to the same local or professional community or sharing a common interest.
Co-operative banks generally provide their members with a wide range of banking and
financial services (loans, deposits, banking accounts...).
Co-operative banks differ from stockholder banks by their organization, their goals, their
values and their governance. In most countries, they are supervised and controlled by banking
authorities and have to respect prudential banking regulations, which put them at a level
playing field with stockholder banks. Depending on countries, this control and supervision

17. 17
can be implemented directly by state entities or delegated to a co-operative federation or
central body.
Even if their organizational rules can vary according to their respective national legislations,
co-operative banks share common features :
 Customer's owned entities : in a co-operative bank, the needs of the customers meet
the needs of the owners, as co-operative bank members are both. As a consequence,
the first aim of a co-operative bank is not to maximise profit but to provide the best
possible products and services to its members. Some co-operative banks only operate
with their members but most of them also admit non-member clients to benefit from
their banking and financial services.
 Democratic member control : co-operative banks are owned and controlled by their
members, who democratically elect the board of directors. Members usually have
equal voting rights, according to the co-operative principle of "one person, one vote".
 Profile allocation : in a co-operative bank, a significant part of the yearly profit,
benefits or surplus is usually allocated to constitute reserves. A part of this profit can
also be distributed to the co-operative members, with legal or statutory limitations in
most cases. Profit is usually allocated to members either through a patronage
dividend, which is related to the use of the co-operative's products and services by
each member, or through an interest or a dividend, which is related to the number of
shares subscribed by each member.
 History of co-operative banks in India
For the co-operative banks in India, co-operatives are organized groups of people and jointly
managed and democratically controlled enterprises. They exist to serve their members and
depositors and produce better benefits and services for them. Professionalism in co-operative
banks reflects the co-existence of high level of skills and standards in performing, duties
entrusted to an individual. Co-operative bank needs current and future development in
information technology. It is indeed necessary for co-operative banks to devote adequate
attention for maximizing their returns on every unit of resources through effective services.
Co-operative banks have completed 100 years of existence in India. They play a very
important role in the financial system. The co-operative banks in India form an integral part
of our money market today. Therefore, a brief resume of their development should be taken

18. 18
into account. The history of co-operative banks goes back to the year 1904. In 1904, the co-
operative credit society act was enacted to encourage co-operative movement in India. But
the development of co-operative banks from 1904 to 1951 was the most disappointing one.
The first phase of co-operative bank development was the formation and regulation of co-
operative society. The constitutional reforms which led to the passing of the Government of
India Act in 1919 transferred the subject of “Cooperation” from Government of India to the
Provincial Governments. The Government of Bombay passed the first State Co-operative
Societies Act in 1925 “which not only gave the movement, its size and shape but was a pace
setter of co-operative activities and stressed the basic concept of thrift, self help and mutual
aid.” This marked the beginning of the second phase in the history of Co-operative Credit
Institutions.
THE PUNJAB STATE COOPERATIVE BANK LTD.CHANDIGARH
THE Punjab State Cooperative Bank Ltd., Chandigarh was established on 31 August
1949 at shimla vides Registration No.720 as a principal financing institution of the
cooperative movement in the state. It has 17 branches and 1 extension counter in the city of
Chandigarh. 20 Central Cooperative Banks having 802 branches in the State of Punjab are
affiliated with the bank. In the Cooperative banking structure the position of the Punjab State
Coop Bank is extremely important as a the whole short term credit system revolves around it.
This bank ensures that its member central cooperative banks follow sound banking practices
and observe strict financial discipline. The Central Cooperative Banks are financing the
farmers through PACS at the village Level. There is no arena of life where this premier
institution has not played its part. From a farmer, artisan to traders/businessman, everybody
has been covered in the fold of this institution. The green, white and sweet revolutions in the
state of Punjab are some of the major achievement in which this institution has played a vital
role.

19. 19
The Punjab State Cooperative Bank has already been awarded”BEST PERFORMANCE
AWARD" by NABARD and NAFSCOB on number of occasions.
To serve as a Balancing Center for Cooperative Societies in the State of Punjab registered
under the Punjab Cooperative Societies Ac, 1961 for the time being in force.
To promote the economic interest of the member banks and cooperative societies in the state
in accordance with cooperative principles and to facilitate the development and funding of
any cooperative society registered under the said act. To carry on banking and credit
business.
The historical roots of the Cooperative Movement in the world days back to days of misery
and distress in Europe faced by common people who had little or no access to credit to fund
their basic needs, in uncertain times. The idea spread when the continent was faced with
economic turmoil which led large populations to live at subsistence level without any
economic security. People were forced to poverty and deprivation. It was the idea of
Hermann Schulze (1808-83) and Friedrich Wilhelm Raiffeisen (1818-88) which took shape
as cooperative banks of today across the world. They started to promote the idea of easy
availability of credit to small businesses and for the poor segment of society. It was similar to
the many microfinance institutions which have become highly popular in developing
economies of today. Although this helped spread cooperative movement in many parts of
Europe, in British Isles it is came from the revivalist Christian movement and found high
acceptance with working class and lower middle class segments of society. However, UK and
Irish credit unions in 20th century were inspired by US credit unions which in-turn owe their
emergence to Canadian adaptations of the German cooperative banking concept. These

20. 20
movements were supported by governments of the respective countries. This success was
achieved due to the failure of the commercial banks to fund and support the needs of small
business owners and ordinary people who were outside the formal banking net. Cooperative
banks helped overcome the vital market imperfections and serviced the poorer layers of
society. Indian Cooperative Banks was also born out of distress prevalent in Indian society.
The Cooperative Credit Societies Act, 1904
The act was based on recommendations of Sir Frederick Nicholson (1899) and Sir Edward
Law (1901). Their ideas in turn were based on the pattern of Raiffeisen and Schulze
respectively. The Cooperative Societies Act of 1912 further gave recognition to the formation
of non-credit societies and the central cooperative organizations. In independent India, with
the onset of planning, the cooperative organizations gained more leverage and role with the
continued governmental support. Machlagan Committee in 1915, highlighted the deficiencies
of in cooperative societies which seeped-in due to lack of proper education to the masses. He
also laid down the importance of Central Assistance by the Government to support the
movement. The Royal Commission on Agriculture 1928, enumerated the importance of
education of members/staff for effective implementation of cooperative movement. Saraiya
Committee, in 1945, further recommended the setting up of a Cooperative Training College
in every state and a Cooperative Training Institute for Advanced Study and Research at the
Central level. Central Committee for Cooperative Training in 1953, constituted by RBI for
establishing Regional Training Centres. Rural Credit Survey Committee, 1954 was the first
committee formed till then to first delve into the problems of Rural credit and other financial
issues of rural society. The cooperative movement and banking structures soon spread and
resonated with the unexpressed needs of the rural Indian and small scale businesses. Since,
1950s, they have come a long way to support and provide assistance in activities like credit,
banking, production, processing, distribution/marketing, housing, warehousing, irrigation,
transport, textiles, dairy, sugar etc. to households.
Extent of Cooperative Banking
Indian cooperative structures are one of the largest such networks in the world with more
than 200 million members. It has about 67% penetration in villages and fund 46% of the total
rural credit. It also stands for 36% of the total distribution of rural fertilizers and 28% of rural
fair price shops.

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Structure of Cooperative Banking in India
The structure of cooperative network in India can be divided into 2 broad segments
1. Urban Cooperative
2. Banks Rural Cooperatives
Urban Cooperatives
Urban Cooperatives can be further divided into scheduled and non-scheduled. Both the
categories are further divided into multi-state and single-state. Majority of these banks fall in
the non-scheduled and single-state category.
 Banking activities of Urban Cooperative Banks are monitored by RBI.
 Registration and Management activities are managed by Registrar of Cooperative
Societies (RCS). These RCS operate in single-state and Central RCS (CRCS) operate
in multiple state.
Rural Cooperatives
 The rural cooperatives are further divided into short-term and long-term structures.
The short-term cooperative banks are three tiered operating in different states. This
are-
 State Cooperative Banks- They operate at the apex level in states
 District Central Cooperative Banks-They operate at the district levels
 Primary Agricultural Credit Societies-They operate at the village or grass-root level.
Likewise, the long-term structures are further divided into –
I. State Cooperative Agriculture and Rural Development Banks (SCARDS)- These
operate at state-level.
II. Primary Cooperative Agriculture and Rural Development Banks (PCARDBS)-They
operate at district/block level.
The rural banking cooperatives have a complex monitoring structure as they have a dual
control which has led to many problems. A Forum called State Level Task Force on

22. 22
Cooperative Urban Banks (TAFCUB) has been set-up to look into issues related to duality in
control.
 All banking activities are regulated by a shared arrangement between RBI and
NABARD.
 All management and registration activities are managed by RCS.
FUNCTIONS OF A COMMERCIAL BANK
The functions of a commercial bank are broadly classified as:
1. Primary Functions
2. Secondary Functions
1. PRIMARY FUNCTIONS:-
Primary Functions of Commercial Banks includes:-
(A) ACCEPTING DEPOSITS
A banks accepts deposits from the public on various accounts such as
(i) Savings Deposits Account: Such Deposits are accepted by the banks in order to
cultivate the savings habits in the public. Some restrictions are laid on the
account holder or the depositor regarding the number of withdrawals during a
given period of time. Bank pays interest to accountholder but it is at lower rate
as compare to Fixed Deposit.
(ii) Fixed Deposit Account: In this type of account the money is deposited for a
stipulated period of time and that money cannot be withdrawn before the expiry
of that period. If a depositor does so then he has to forego some interest to the
bank. This account carries high rate of interest. Longer the period of deposit,
higher will be the rate of interest and vice versa.
(iii) Current Account Deposits: This type of account is generally maintained by the
Businessmen and Traders. As per the Banking Law there are no restrictions on
number of withdrawals. Bank does not give any rate of interest on such deposits

23. 23
rather the depositor has to pay some incidental charges to the bank for the
facility availed.
(iv) Recurring Deposit Account: In this account a depositor has to deposit a
specified amount of money on the basis of regular installments for a fixed period
of time. The depositor gets the deposited amount along with the interest on the
time of maturity. It carries almost same rate of interest as of fixed deposit
account.
(v) Home Safe Account: Under this type of account, a safe is given to the depositor
by the bank which the depositor has to keep at home and puts his small savings
in it. Periodically this safe is taken to the bank where the amount of the safe is
credited to the account holder. The rate of interest is less than Saving Deposit
Account.
(B) ADVANCING LOANS
In order to earn profit the bank advances loans to the public. Various types of advances
are given by the bank are:
(i) Money at call or Short Notice: As the name suggests that loan which can be called
back by the bank at a very short notice of one to fourteen days is called Money at call
or Short Notice. Banks earn very low rate of interest from such loans.
(ii) Cash Credit: The loan which is given to the borrower against current assets such as
Shares, Stocks, and Bonds etc. is called as cash credit. The borrower can withdraw
money through Cheque up to a certain limit as determined by the bank.
(iii) Overdraft: When a depositor withdraws more money than actually lying in his
account then it is called as ‘overdraft’. Such facility is provided by the bank that has
good reputation and goodwill. The borrower has to pay interest on the overdrawn
amount.
(iv) Discounting Bills of Exchange: Bill of exchange is a very popular credit instrument
in the modern business world. It is a bill which is drawn by the creditor on the debtor
and the debtor accepts the bill by putting his signatures and agrees to pay the specified
amount mentioned in the bill on maturity. Banks also discounts such bills i.e. after

24. 24
making some deductions bank pays the amount to the bill holder. Bank gets its
payment, from the debtor who accepted the bill on maturity.
(v) Short Term Loans: Short term loans are those loans which are given by the bank for
a short period say less than one year. Such types of loans are given to the businessmen
and individuals to meet out their short term credit requirements.
(vi) Long Term Loans: Bank also gives long term loans of maturity period more than one
year. The interest is charged on the whole amount of the loan whether the borrower
withdraws it fully or partially. These loans are also given against some security.
2. SECONDARY FUNCTIONS:-
In addition to Primary Functions, Commercial Banks also undertake some Secondary
functions such as
(a)AGENCY FUNCTIONS: Banks performs certain agency functions for its customers for
which it charges certain commission. Some of the agency functions are
I. Transfer of Funds: By using the instrument of ‘Bank Draft’ commercial banks help
their customers in transferring funds from one place to another.
II. Collection of Customer’s Funds: Banks collects the funds of its customers from
other banks and credits them to their accounts.
III. Collection of Dividends on the Shares of the Customers : Banks collects dividends
on the shares of the customers and credits them to the accounts of customers.
IV. Purchase and Sale of Shares and Securities : On the behalf of its Customers, bank
also purchases and sells shares and other securities. For this Bank charges
commission from its customers.
V. Payment Of Premium: The banks pays premium to the insurance companies on the
behalf of its customers. Banks may also pay some other bills such as electricity bills,
telephone bill, rent etc.
(b)GENERAL UTILITY FUNCTIONS: Certain general utility functions performed
by the banks are :

25. 25
I. Issuing of Traveler’sCheque: Banks also issue the traveler’sCheque or circular letter
of credit to its customer so that they could avoid the botheration and risk of carrying
cash during their travels.
II. Safe Custody of Valuable Commodities or Locker Facility : The banks provides
the locker facility to its customer so that they can keep their valuables such as gold
and silver ornaments, important papers etc.
III. Information about Business and Collection of Statistics : Banks collects
information and statistics regarding money, trade, industry and publishes them in
various journals and bulletins so that people get information about business world.
RBI Policies for co-operative banks
The RBI appointed a high power committee in May 1999 under the chairmanship of Shri. K.
Madhava Rao, Ex-Chief Secretary, Government of Andhra Pradesh to review the
performance of Urban Co-operative Banks (UCBs) and to suggest necessary measures to
strengthen this sector. With reference to the terms given to the committee, the committee
identified five broad objectives:
 To preserve the co-operative character of UCBs
 To protect the depositors’ interest
 To reduce financial risk
 To put in place strong regulatory norms at the entry level to sustain the operational
efficiency of UCBs in a competitive environment and evolve measures to strengthen
the existing UCB structure particularly in the context of ever increasing number of
weak banks
 To align urban banking sector with the other segments of banking sector in the
context of application or prudential norms in to and removing the irritants of dual
control regime
 RBI has extended the Off-Site Surveillance System (OSS) to all non-scheduled urban
co-operative banks (UCBs) having deposit size of Rs. 100 Crores and above.

26. 26
Types of Co-operative Banks
The co-operative banks are small-sized units which operate both in urban and non-urban
centers. They finance small borrowers in industrial and trade sectors besides professional and
salary classes. Regulated by the Reserve Bank of India, they are governed by the Banking
Regulations Act 1949 and banking laws (co-operative societies) act, 1965. The co-operative
banking structure in India is divided into following 5 components:
Primary Co-operative Credit Society
The primary co-operative credit society is an association of borrowers and non-borrowers
residing in a particular locality. The funds of the society are derived from the share capital
and deposits of members and loans from central co-operative banks. The borrowing powers
of the members as well as of the society are fixed. The loans are given to members for the
purchase of cattle, fodder, fertilizers, pesticides, etc.
Central co-operative banks
These are the federations of primary credit societies in a district and are of two types those
having a membership of primary societies only and those having a membership of societies as
well as individuals. The funds of the bank consist of share capital, deposits, loans and
overdrafts from state co-operative banks and joint stocks. These banks provide finance to
member societies within the limits of the borrowing capacity of societies. They also conduct
all the business of a joint stock bank.
State co-operative banks
The state co-operative bank is a federation of central co-operative bank and acts as a
watchdog of the co-operative banking structure in the state. Its funds are obtained from share
capital, deposits, loans and overdrafts from the Reserve Bank of India. The state co- operative
banks lend money to central co-operative banks and primary societies and not directly to the
farmers.

27. 27
Land development banks
The Land development banks are organized in 3 tiers namely; state, central, and primary level
and they meet the long term credit requirements of the farmers for developmental purposes.
The state land development banks oversee, the primary land development banks situated in
the districts and tehsil areas in the state. They are governed both by the state government and
Reserve Bank of India. Recently, the supervision of land development banks has been
assumed by National Bank for Agriculture and Rural development (NABARD). The sources
of funds for these banks are the debentures subscribed by both central and state government.
These banks do not accept deposits from the general public.
Urban Co-operative Banks
The term Urban Co-operative Banks (UCBs), though not formally defined, refers to primary
co-operative banks located in urban and semi-urban areas. These banks, till 1996, were
allowed to lend money only for non-agricultural purposes. This distinction does not hold
today. These banks were traditionally centered on communities, localities, work place groups.
They essentially lend to small borrowers and businesses. Today, their scope of operations has
widened considerably.
The origins of the urban co-operative banking movement in India can be traced to the close of
nineteenth century. Inspired by the success of the experiments related to the co- operative
movement in Britain and the co-operative credit movement in Germany, such societies were
set up in India. Co-operative societies are based on the principles of cooperation, mutual help,
democratic decision making, and open membership. Co-operatives represented a new and
alternative approach to organization as against proprietary firms, partnership firms, and joint
stock companies which represent the dominant form of commercial organization. They
mainly rely upon deposits from members and non-members and in case of need, they get
finance from either the district central co-operative bank to which they are affiliated or from
the apex co-operative bank if they work in big cities where the apex bank has its Head Office.
They provide credit to small scale industrialists, salaried employees, and other urban and
semi-urban residents.

28. 28
Functions of co-operative banks
Co-operative banks also perform the basic banking functions of banking but they differ from
commercial banks in the following respects
 Commercial banks are joint-stock companies under the companies’ act of 1956, or
public sector bank under a separate act of a parliament whereas co-operative banks
were established under the co-operative society’s acts of different states.
 Commercial bank structure is branch banking structure whereas co-operative banks
have a three tier setup, with state co-operative bank at apex level, central / district co-
operative bank at district level, and primary co-operative societies at rural level.
 Only some of the sections of banking regulation act of 1949 (fully applicable to
commercial banks), are applicable to co-operative banks, resulting only in partial
control by RBI of co-operative banks and
 Co-operative banks function on the principle of cooperation and not entirely on
commercial parameters.
Problems of Co-operative Banks
Duality of control system of co-operative banks
However, concerns regarding the professionalism of urban co-operative banks gave rise to
the view that they should be better regulated. Large co-operative banks with paid-up share
capital and reserves of Rs.1 lakh were brought under the purview of the Banking Regulation
Act 1949 with effect from 1st March, 1966 and within the ambit of the Reserve Bank’s
supervision. This marked the beginning of an era of duality of control over these banks.
Banking related functions (viz. licensing, area of operations, interest rates etc.) were to be
governed by RBI and registration, management, audit and liquidation, etc. governed by State
Governments as per the provisions of respective State Acts. In 1968, UCB’s were extended
the benefits of deposit insurance.
Towards the late 1960s there was debate regarding the promotion of the small scale
industries. UCB’s came to be seen as important players in this context. The working group on
industrial financing through Co-operative Banks, (1968 known as Damry Group) attempted
to broaden the scope of activities of urban co-operative banks by recommending these banks

29. 29
should finance the small and cottage industries. This was reiterated by the Banking
Commission in 1969.
The Madhavdas Committee (1979) evaluated the role played by urban co-operative banks in
greater details and drew a roadmap for their future role recommending support from RBI and
Government in the establishment of such banks in backward areas and prescribing viability
standards.
The Hate Working Group (1981) desired better utilization of bank’s surplus funds and that
the percentage of the Cash Reserve Ratio (CRR) & the Statutory Liquidity Ratio (SLR) of
these banks should be brought at par with commercial banks, in a phased manner. While the
Marathe Committee (1992) redefined the viability norms and ushered in the era of
liberalization, the MadhavaRao Committee (1999) focused on consolidation, control of
sickness, better professional standards in urban co-operative banks and sought to align the
urban banking movement with commercial banks.
A feature of the urban banking movement has been its heterogeneous character and its
uneven geographical spread with most banks concentrated in the states of Gujarat, Karnataka,
Maharashtra, and Tamil Nadu. While most banks are unit banks without any branch network,
some of the large banks have established their presence in many states when at their behest
multi-state banking was allowed in 1985. Some of these banks are also Authorized Dealers in
Foreign Exchange.
Cooperative Banks-Irritants and Future Trends.
A cooperative bank is an institution which is owned by its members. They are the
culmination of efforts of people of same professional or other community which have
common and shared interests, problems and aspirations. They cater to a services like loans,
banking, deposits etc. like commercial banks but widely differ in their values and governance
structures. They are usually democratic set-ups where the board of members are
democratically elected with each member entitled to one vote each. In India, they are
supervised and controlled by the official banking authorities and thus have to abide by the
banking regulations prevalent in the country. The basic rules, regulations and values may
differ amongst nations but they have certain common features:

30. 30
 Customer-owned
 Democratic structures
 Profits are mainly pooled to form reserves while some amount is distributed to
members
 Involved in community development
Foster financial inclusion by bringing banking to the doorstep of the lowest segment of
society these banks are small financial institutions which are governed by regulations like
Banking Regulations Act, 1949 and Banking Laws Cooperative Societies Act, 1965. They
operate both in urban and rural areas under different structural organisations. Their functions
are decided by the level at which they operate and the type of people they cater to. They
greatly differ from the commercial banking entities.
 These are established under specific acts of cooperative societies operating in
different states unlike mainstream commercial banks which are mainly joint-stock
companies.
 They have a tiered network with a bank at each level of state, district and rural. The
state-level bank forms the apex authority. Not all sections of banking regulation act
are applicable to cooperative banks
 The ultimate motive is community participation, benefit and growth as against profit-
maximization for commercial banks.
Major irritants in the functioning of the Cooperative Banks
 The duality in control by RCS of a state as ‘Cooperation’ is a state subject. However
financial regulatory control by RBI has led to many troubles as there is ambiguity in
power structure as there is no clear demarcation.
 Patchy growth of cooperative societies across the map of India. It is said these have
grown maximally in states of Gujarat, Maharashtra, Tamil Nadu whereas the other
parts of India don’t have a heightened presence.

31. 31
 The state partnership has led to excessive state control and interference. This has
eroded the autonomous characters of many of these. Dormant membership has made
them moribund as there is a lack of active members and lack of professional attitude.
 Their main focus being credit so they have reduced to borrower-driven entities and
majority of members are nominal and don’t enjoy voting rights. Credit recovery is
weak especially in rural areas and it has sustainability crisis in some pockets.
 There is a lack of risk management systems and lack of basic standardized banking
models. There is a widening gap between the level of skills and the increasing
computerization of banks. The government needs to have a serious look into the
issues as they did not show an impressive growth in the last 100 years.
Co-operative banks are deeply rooted inside local areas and communities. They are involved
in local development and contribute to the sustainable development of their communities, as
their members and management board usually belong to the communities in which they
exercise their activities. By increasing banking access in areas or markets where other banks
are less present - SMEs, farmers in rural areas, middle or low income households in urban
areas - co-operative banks reduce banking exclusion and foster the economic ability of
millions of people. They play an influential role on the economic growth in the countries in
which they work in and increase the efficiency of the international financial system. Their
specific form of enterprise, relying on the above-mentioned principles of organization, has
proven successful both in developed and developing countries.

32. 32
PUNJAB STATE COOPERATIVE BANK
INTRODUCTION
Welcome to Punjab State Cooperative Bank.
First of all we should know about the Cooperatives in Indian Economy.
Cooperatives have played a vital role in improving the economic conditions of farmers and
accelerating the pace of development in Punjab. Cooperative principles ensure harmonious
development, through democratic management and governance. Cooperatives have brought
both the services and resources at the doorsteps of villagers in Punjab. These have been
enthusiastically serving the people of Punjab in areas such as agriculture, housing, sugar
production and dairy etc.
Promotion and sustenance of economic interest & providing easy finance, cost effective and
quality banking services of customer & PACs
The Punjab State Cooperative Bank was established on 31st August, 1949 at Shimla vide
registration No. 720 has a principle financing institution of the cooperative movement in
Punjab. In 1951 its Head Office was shifted to Jalandhar from where it moved in 1963 to its
present building at Chandigarh.
In the cooperative Banking structure, the position of the Punjab State Cooperative Bank is
extremely important as the whole credit system revolves around it. It has 19 branches and 3
extension counter in Chandigarh. There are 20 District Central Cooperative Banks having
808 branches/extension counters all over Punjab, mostly in rural areas of the State.
Experience a whole new Era of Banking Technology. Where banking is made easier and
convenient for our customers. The Punjab State Cooperative Bank provides you with the New
Generation banking architecture to progress in the future in an evolutionary manner. Punjab
State Cooperative Bank (PSCB) is customer centric. Therefore it is designed to encompass all
the constituents of the banking space- the management of the bank, the employees of the
bank and the customers of the bank.

33. 33
Main Schemes adopted by Cooperative Banks
to clear Non Performing Assets (NPA).
upto principal amount is to be reversed.
t loan accounts.
-employees involved in embezzlements.
Mission:-
Punjab Cooperatives resolve for Greater self-reliance, Administrative efficiency and
structural reforms.
Values & Principles:-
A cooperative is a system constituted voluntarily to meet
the common economic, social and cultural needs and aspirations of the members through a
jointly-owned and democratically controlled enterprise.
Cooperatives are voluntary organizations, open to all persons who are able to use their
services and willing to accept the responsibilities of membership, without social , racial ,
political and religious discrimination.

34. 34
Cooperatives are democratic organisations controlled by their members , who actively
participate in setting their policies and making decisions . Men and women serving as elected
representatives are accountable to the members.
Members contribute equitably to, the capital of their cooper-ative. That capital is usually the
common property of the cooperatives. Members usually receive limited compensation, if any,
on Capital Subscribed as a condition of membership.Members allocate surpluses for any or
all of the following purposes ::
1.Developing their cooperatives possibly by setting up reserves, part of which at least would
be indivisible
2.Benefiting the members in proportion to their transaction with the cooperative and
supporting other activities approved by the members
Cooperatives are autonomous , self-help organisations controlled by their members . If
they enter into agreements with other organisations, including Governments, or
raise capital from external sources,they do so on terms that ensure democratic control by their
embers and maintain their cooperatives autonomy.
Cooperatives provide Education and Training to their members, Managers and employees so
that they can contribute effectively to the development of their cooperatives.
Cooperatives serve their members most effectively and strengthen the cooperatives
movement by working together through Local, National, Regional and International
structures.
Cooperatives work for the sustainable development of the community through policies
approved by their members. Their motto is to make the progress line go higher and higher.

35. 35
Revolving Cash Credit
In 1998, the cooperative banks launched a new scheme of revolving cash credit for the
farmers. The scheme envisages to provide Cash credit limit to the farmers against the
mortgage of their land for all credit requirements of the farmers. It aims at freeing them from
the clutches of traditional money lenders. A cash credit limit of Rs. 1.00 lac per acre subject
to the maximum of Rs. 6.00 lac is provided to the farmers for fulfilling their socio-economic
liabilities. So far, Limits worth Rs 2192.03 crore has been sanctioned to 152207 farmers in
the state since inception of the scheme.
Key Observations
been multi directional. It has helped the farmers in the purchase of production inputs, farm
investments, consumptions and social requirements and reduced their dependence on high
interest loans.
availed under the scheme has been spent for productive purposes, whereas remaining was
provided for socio-economic needs.
small and marginal farmers as well.
nder the scheme is also low.
besides creating provisions for consumption credit. Therefore, its role is complementary to
the institutions credit available to farmers from different sources.
SehkariBimaYojna
The Cooperative Banks in Punjab are pioneers of starting the SehkariBimaYojnaw.e.f.
01.06.1999 in the country. Under this scheme, every depositor who opens a Saving Bank
Account with Rs.1000/- or more is provided Personal Accidental Insurance cover for Rs. 1
lakh, during the period he keep s the account with the bank, at a very nominal premium. The
scheme has benefited the under privileged rural masses, particularly those who have no
access to the insurance companies.

36. 36
Loans
Cooperative banks also provide Loans. The various types of loans are as follow:
Personal Loan
Consumer Durable Loan
Urban Housing Loan Scheme
Non Farm Sector Loan
Rural Housing Loan Scheme
Mini Dairy Loan Scheme
Vehicle Loan Scheme
Two Wheeler Loan to farmers
Second hand vehicle loan scheme
Education loan scheme
New schemes launched by the Bank
1) Loan against property
2) Loan scheme for earnest money
3) Loan against rental income scheme
4) Commercial Dairy Development scheme
5) Dairy Loan Scheme for purchase of a cow
INTEREST RATES
Savings: 3.50%
A minimum amount of Rs.500/- is required without cheque books and Rs.1000/- with
cheque book.

37. 37
Fixed Deposits
A minimum amount of Rs.1000/- is required to open the account.
Period
Revised rate of Interest
For Branches of Punjab State Cooperative
Bank (w.e.f. 23.07.09)
For Central
Coop.
Banks(w.e.f.
19.05.09)Below Rs. 1.00 Crore Rs. 1.00 Crore& Above
7 days to 14 days 3.00% 3.00% 1.75%
15 days to 45 days 3.50% 3.50% 2.25%
46 days to 90 days 4.25% 3.50% 3.25%
91 days to 179 days 5.50% 4.25% 4.25%
180 days to < 1year 6.50% 5.50% 5.25%
1 Year to < 2Years 7.00% 6.25% 6.25%
2 Years to < 5 Years 7.25% 6.25% 6.25%
5Years and above 7.50% 6.25% 6.25%
Fixed Deposits Chart
Interest rate @ 0.50% above these rates to the Senior citizen will be admissible on single
Fixed deposit Receipt of Rs. 5000/- and above . All other terms and conditions will be remain
the same.
Future Planning :-

38. 38
Cooperative Credit Policy
The Cooperative Credit Institutions are distinctively structured to provide for short-term and
long-term credit needs of the farmers in the State. The Punjab State Cooperative Bank
(PSCB) and its constituent 20 Central Cooperative Banks (CCBs) and 4000 Primary
Agricultural Cooperative Service Societies (PACS) direct and deliver short-term production
credit to the farmers. The Punjab State Cooperative Agricultural Development Bank
(PSADB) and its constituent 84 Primary Cooperative Agricultural Development Banks
(PADBs) cater to long term credit needs of the farmer. These institutions are committed to
promote and sustain economic interests of their members and customers in keeping with the
principals of self-help, self-responsibility and self-administration. They facilitate
development of their members by providing easy, timely, cost-effective and quality services.
Cooperatives are not unaffected by structural adjustments and globalisation of commodity
market. As a result, Cooperative Banks are required to redesign their strategies for
sustainability and growth. The economic reforms initiated by the government of India in 1991
have affected the Financial Institutions including the Cooperative Financial Institutions.
These reforms aim at liberalisation and deregulation of Indian economy.
The Cooperative Banks of Punjab have accepted the reforms in Indian economy, especially,
the financial reforms in right spirit. Since these Banks have mainly been providing credit to
agriculture sector, changes in agricultural economy affect them more closely. The Banks
envisage following scenario as a result of liberalised agricultural policy :
of agricultural policy would result in greater capital intensity and
borrowed capital requirements of agriculturists. In order to induce diversification and
produce quality products for international market. For this purpose, Punjab farmers
would need greater credit support for improved technology, seeds and agro-inputs.
holdings and would result in exodus of employment opportunities from agricultural
sector to other sectors of economy. Such as small business enterprises, services and
industrial sector.
earning a status of industry attracting high skilled professionals in agriculture sector.

39. 39
development institutions in improving the productivity and quality of agricultural
operations.
agricultural policy would result in greater thrust on value addition in
agriculture. Therefore, a great deal of thrust would be on agro-processing units.
added agro-products.
Leading to a great deal of crop diversification.
With this perspective, the Cooperative Credit Policy, both for short-term and long term
requirements of the farmers, needs to be restructured. Accordingly, the Cooperative Banks in
the State resolve to pursue credit policy in keeping with the following.
Cooperative
The Cooperative would continue to sustain agricultural production in changing scenario of
agriculture in the State. They would endeavour to provide for short-term and long term
requirements of the farmers, through specifically targeted schemes and projects, which do not
encourage and increase indebtedness amongst the farmers.
The Cooperative Banks would act as catalyst to bring about and sustain diversification in
agricultural sector in keeping with the liberalised economy. Credit provisioning and interest
rates would be restructured induce diversification of agriculture. Greater thrust would be
given on short-term loans for cultivation of sugarcane, sunflower, vegetables and fruits and
long term loans for warehousing, commercial dairies, cattle breeding and marketing
infrastructure. Cash Credit Scheme would be pursued for Primary Milk Producer’s
Cooperative Societies to encourage quality milk production in the State.
The Cooperative Banks would continue to be farmer driven, ensuring to make agriculture a
multi-functional occupation. They would finance and support agri-business, agro-processing
and farm equipments industry to supplement and complement farmers sources of income.

40. 40
at
improvement in quality of agricultural produce and products by giving liberal finance for
technology introduction and up-gradation and for procuring high quality agro- inputs.
facilities, farm machinery like tractors and other agricultural implements at the level of
Cooperative Marketing-cum-Processing Societies and PACS so as to reduce debt burden
and input costs of the farmers.
-farm sector
of economy, especially for those rendered surplus in rural and semi-urban areas due to
liberalised agriculture policy Gainful self employment activities and small businesses
would be promoted by providing cheap, easy and adequate credit. Special schemes and
products would be launched for low income groups including small and marginal farmers.
-se linkages in financing the Projects,
requiring long-term capital investment and short term working capital, PSADB/PADBs
would provide for long-term capital finance which would be supplemented by short-
term working capital finance by PSCB/CCBs.
-term finance for promotion of
housing, particular for rural population in the State.
Schematic Loans
Schematic Loans covers Fundamentals and Diversified Schemes. Fundamental Schemes are
All minor irrigation schemes, Soil Conservation schemes, Land levelling schemes, U.G.C.
Schemes, Tractor Schemes and Thresher Schemes. Diversified Schemes are Diary, Poultary,
B/Cart, Camelcart, Jhota Cart, Farm Forestry, Fish Farm, Bee keeping, All Horticulture,
Sheep Rearing, Goat Rearing, Piggery, Rabbit Rearing, Bio Gas Plant, Mushroom and Poplar
Schemes. Schematic loans also covers cash credit, Rural housing and Kisan Credit Card
Schemes. Non-Farm Sector Loans The Non-Farm Sector Loans are divided into 2 categories
such as: Manufacturing, processing, assembling, service activities; Small Road Transport
Operator under the following conditions: (a) This transport only be for carriage of goods of
gross vehicle weight (c) It must be registered as carriage of goods purposes i.e. public carrier.
No activity of trading under non farm sector is allowed to be financed by the PADBs.

41. 41
THE PATIALA CENTRAL CO-OPERATIVE BANK LTD. PATIALA
1 .INTRODUCTION
The Cooperative finance in the erstwhile State of Patiala was made available by a State
owned bank viz. the Patiala State Bank (now State Bank of Patiala). With taking over the
assets and liabilities of the then Patiala Cooperative Union, the Patiala Central Cooperative
Bank Ltd., Patiala was registered on 28/09/1949 under the Cooperative Societies Act, 1912.
The Bank is presently serving in its 65 year.
2. Constitution and Management
The Bank is managed by the Board of Directors (9 elected by the members Cooperative
Societies and 3 nominated by the Govt. being member of the Bank having contributed an
amount of Rs.70.00 lacs as share capital).
3. Branches
Apart from its Head Office at Patiala, the Bank has a network of its 42 branches spread all
over the district. 16 out of the 42 branches of the Bank, are working at the Focal Points a
scheme started by the Govt. of Punjab in the year of 1978.
Membership
As per the Bye –laws of the bank , the Coop. Societies in the area of operation of this bank is
whole Distt. Patiala can become of the bank .Membership of the bank as on on date 506.
Elected Status of Board of Management: Board.
Sr.No Designation Name Telephone Number
1 Chairman Sh Ram Singh Jogipur
2 Managing Director Sh. Harinderpal Singh Chandumajra 9814361261
3 Distt. Manager ShGurbaz Sing 9417018547

42. 42
Board of Director:-
The Management of the bank vests with Board of Director consisted on dated
List of Board of Directors as under:-
Sr.No Name of Director Designation Mobile No
1 S. Ram Singh Jogipur Chairman 9815021703
2 S.Harinderpal Singh Chandumazra Managing Director 9915198355
3 S. Nardev Singh Akri Vice Chairman 9872733128
4 S. Pritpal Singh Bhinder Director 9417446853
5 S. Jarnail Singh Kartarpur Director 9780032206
6 S. Gian Singh Mungo Director 9855800055
7 S. Mohinder Singh Panjeta Director 9855343522
8 S. Gurpiar Singh Patran Director 9463054415
9 S. Gulab Singh Balamgarh Director 9814300825
10 Deputy Registrar Coop Soc;s Govt.Nominee 0172235533
11 DDM NABARD Patiala Sep.Invatee 9779865253
12 Distt.Manager Nominee PSCB CHD 9417018547

43. 43
4. Business Turn Over
The business turn - over of the Bank for the year 2012-13 was Rs.1350047.93 lacs.
5. Resources
The Bank raises its resources with the collection of
31/03/2011 31/03/2012 31/03/2013
Share Capital 1520.15 1668.22 1842.94
Owned Funds 6472.34 7076.14 8104.40
Deposits 38818.10 39973.69 43726.71
Borrowings 57042.65 66276.48 71154.89
6. Deposits
There are various schemes of deposits namely
* Current Deposits
* Savings Bank Deposits
* Fixed Deposits
* Recurring Deposits
7. Advances
The Bank advances both in farm and non-farm-sector. Total loans outstanding as on
31/03/2012 stood at Rs.96191.24 lacs and as on 31/03/2013 is Rs.105671.04 lacs.

44. 44
Staff Strength
Per Branch and Per Employee Business
31/03/11 31/03/12 31/03/13
1. Per Branch Business 2691.47 2890.28 3180.68
2. Per employee Business 710.02 771.94 727.50
S.No Name of Post Sanctioned Working Vacant
1 District Manager 1 1 -
2 Senior Manager 9 2 7
3 Manager 12 11 8
4 Supdt. 1 1 -
5 Asstt.Manager 55 50 5
6 Accountant 39 20 19
7 Steno-typist 7 - 7
8 Clerk 121 60 61
9 Driver 5 3 2
10 Dafatri 1 1 -
11 Peon 106 30 76
12 Sweeper/Mali 2 - 2
Total 366 179 187

45. 45
Farmers Club
There are 25 Farmers Clubs working in this District adopted by this Bank out of which 17
farmers clubs are newly framed.
Self Help group
There are 2171 Self Help Groups formed in the District out of which 475 Groups are
associated with this Bank. There are 248 Groups financed by the Bank, an amount of
Rs.87.53 lacs Loan outstanding against them as on 31/03/2013.
All branches of the Bank are computerized under CBS.
Address
The Patiala Central Cooperative Bank Ltd,
Mall Road,
Patiala
Phone No.-
0175-5000271,5000270

46. 46
Meaning of services
The world economy nowadays is increasingly characterized as a service economy. This is
primarily due to the increasing importance and share of the service sector in the economies of
most developed and developing countries. In fact, the growth of the service sector has long
been considered as indicative of a country’s economic progress.
Economic history tells us that all developing nations have invariably experienced a shift from
agriculture to industry and then to the service sector as the main stay of the economy.
This shift has also brought about a change in the definition of goods and services themselves.
No longer are goods considered separate from services. Rather, services now increasingly
represent an integral part of the product and this interconnectedness of goods and services is
represented on a goods-services continuum.
The American Marketing Association defines services as - “Activities, benefits and
satisfactions which are offered for sale or are provided in connection with the sale of goods.”
The defining characteristics of a service are:
Intangibility: Services are intangible and do not have a physical existence. Hence services
cannot be touched, held, tasted or smelt. This is most defining feature of a service and that
which primarily differentiates it from a product. Also, it poses a unique challenge to those
engaged in marketing a service as they need to attach tangible attributes to an otherwise
intangible offering.
1. Heterogeneity/Variability: Given the very nature of services, each service offering is
unique and cannot be exactly repeated even by the same service provider. While products can
be mass produced and be homogenous the same is not true of services. eg: All burgers of a
particular flavor at McDonalds are almost identical. However, the same is not true of the
service rendered by the same counter staff consecutively to two customers.
2. Perishability: Services cannot be stored, saved, returned or resold once they have been
used. Once rendered to a customer the service is completely consumed and cannot be
delivered to another customer. eg: A customer dissatisfied with the services of a barber
cannot return the service of the haircut that was rendered to him. At the most he may decide
not to visit that particular barber in the future.

47. 47
3. Inseparability/Simultaneity of production and consumption: This refers to the fact that
services are generated and consumed within the same time frame. Eg: a haircut is delivered to
and consumed by a customer simultaneously unlike, say, a takeaway burger which the
customer may consume even after a few hours of purchase. Moreover, it is very difficult to
separate a service from the service provider. Eg: the barber is necessarily a part of the service
of a haircut that he is delivering to his customer.
Service Marketing Mix
The service marketing mix is also known as an extended marketing mix and is an integral
part of a service blueprint design. The service marketing mix consists of 7 P’s as compared to
the 4 P’s of a product marketing mix. Simply said, the service marketing mix assumes the
service as a product itself. However it adds 3 more P’s which are required for optimum
service delivery.
The product marketing mix consists of the 4 P’s which are Product, Pricing, Promotions and
Placement. These are discussed in my article on product marketing mix – the 4 P’s.
The extended service marketing mix places 3 further P’s which include People, Process and
Physical evidence. All of these factors are necessary for optimum service delivery. Let us
discuss the same in further detail.
Product – The product in service marketing mix is intangible in nature. Like physical
products such as a soap or a detergent, service products cannot be measured. Tourism
industry or the education industry can be an excellent example. At the same time service
products are heterogenous, perishable and cannot beowned. The service product thus has to
be designed with care. Generally service blue printing is done to define the service product.
For example – a restaurant blue print will be prepared before establishing a restaurant
business. This service blue print defines exactly how the product (in this case the restaurant)
is going to be.
Place - Place in case of services determine where is the service product going to be located.
The best place to open up a petrol pump is on the highway or in the city. A place where there
is minimum traffic is a wrong location to start a petrol pump. Similarly a software company

48. 48
will be better placed in a business hub with a lot of companies nearby rather than being
placed in a town or rural area.
Promotion – Promotions have become a critical factor in the service marketing mix. Services
are easy to be duplicated and hence it is generally the brand which sets a service apart from
its counterpart. You will find a lot of banks and telecom companies promoting themselves
rigorously. Why is that? It is because competition in this service sector is generally high and
promotions is necessary to survive. Thus banks, IT companies, and dotcoms place themselves
above the rest by advertising or promotions.
Pricing – Pricing in case of services is rather more difficult than in case of products. If you
were a restaurant owner, you can price people only for the food you are serving. But then
who will pay for the nice ambience you have built up for your customers? Who will pay for
the band you have for music? Thus these elements have to be taken into consideration while
costing. Generally service pricing involves taking into consideration labor, material cost and
overhead costs. By adding a profit mark up you get your final service pricing. You can also
read about pricing strategies.
Here on we start towards the extended service marketing mix.
People – People is one of the elements of service marketing mix. People define a service. If
you have an IT company, your software engineers define you. If you have a restaurant, your
chef and service staff defines you. If you are into banking, employees in your branch and
their behavior towards customers defines you. In case of service marketing, people can make
or break an organization. Thus many companies nowadays are involved into specially getting
their staff trained in interpersonal skills and customer service with a focus towards customer
satisfaction. In fact many companies have to undergo accreditation to show that their staff is
better than the rest. Definitely a USP in case of services.
Process – Service process is the way in which a service is delivered to the end customer. Lets
take the example of two very good companies – Mcdonalds and Fedex. Both the companies
thrive on their quick service and the reason they can do that is their confidence on their
processes. On top of it, the demand of these services is such that they have to deliver
optimally without a loss in quality. Thus the process of a service company in delivering its
product is of utmost importance. It is also a critical component in the service blueprint,

49. 49
wherein before establishing the service, the company defines exactly what should be the
process of the service product reaching the end customer.
Physical Evidence – The last element in the service marketing mix is a very important
element. As said before, services are intangible in nature. However, to create a better
customer experience tangible elements are also delivered with the service. Take an example
of a restaurant which has only chairs and tables and good food, or a restaurant which has
ambient lighting, nice music along with good seating arrangement and this also serves good
food. Which one will you prefer? The one with the nice ambience. That’s physical evidence.
Several times, physical evidence is used as a differentiator in service marketing. Imagine a
private hospital and a government hospital. A private hospital will have plush offices and
well dressed staff. Same cannot be said for a government hospital. Thus physical evidence
acts as a differentiator
Service quality
Service quality is a comparison of expectations with performance. A business with high
service quality will meet customer needs whilst remaining economically competitive.
Improved service quality may increase economic competitiveness.
This aim may be achieved by understanding and improving operational processes; identifying
problems quickly and systematically; establishing valid and reliable service performance
measures and measuring customer satisfaction and other performance outcomes.
Measuring service quality
Measuring service quality may involve both subjective and objective processes. In both cases,
it is often some aspect of customer satisfaction which is being assessed. However, customer
satisfaction is an indirect measure of service quality.
Subjective processes can be assessed in characteristics (assessed be the SERVQUAL
method); in incidents (assessed in Critical Incident Theory) and in problems (assessed
byFrequenzRelevanz Analyze a German term. The most important and most used method
with which to measure subjective elements of service quality is the Seroquel method
Objective processes may be subdivided into primary processes and secondary processes.
During primary processes, silent customers create test episodes of service or the service

50. 50
episodes of normal customers are observed. In secondary processes, quantifiable factors such
as numbers of customer complaints or numbers of returned goods are analyzed in order to
make inferences about service quality.
Approaches to the improvement of service quality
In general, an improvement in service design and delivery helps achieve higher levels of
service quality. For example, in service design, changes can be brought about in the design of
service products and facilities. On the other hand, in service delivery, changes can be brought
about in the service delivery processes, the environment in which the service delivery takes
place and improvements in the interaction processes between customers and service
providers.
Various techniques can be used to make changes such as: Quality function deployment
(QFD); failsafing; moving the line of visibility and the line of accessibility; and blueprinting.
Approaches to improve the conformity of service quality
In order to ensure and increase the 'conformance quality' of services, that is, service delivery
happening as designed, various methods are available. Some of these includeGuaranteeing;
Mystery Shopping; Recovering; Setting standards and measuring; Statistical process control
and Customer involvement
How to Measure Service Quality
Three Parts :Getting Customer Feedback Evaluating Your Business Improving Your
Business’s Service Providing high-quality service is a major concern for nearly any business.
Quality of service can be a major factor when customers decide which business to use to
solve their needs. Customers have certain expectations about the level of satisfaction they'll
get from businesses they patronize. Businesses that make a habit of meeting these
expectations can enjoy consistent business and a loyal customer base. However, it's difficult
to improve your quality of service if you don't have any input from your customers about
how to improve. Thus, gathering customer feedback and using it to measure service quality
should be a significant part of nearly any business's game plan.
Part 1 of 3: Getting Customer Feedback
1.

51. 51
1
Use surveys. Perhaps the most simple, direct way to get feedback from your customers is
simply to ask for it. One easy way to do this is with a survey — a list of questions about their
experience. Surveys with multiple-choice questions are especially useful for businesses
because answers to these sorts of questions can easily be quantified, so it's easy to express
conclusions from the data in the form of graphs, scatter plots, etc.
• Usually, surveys are given at the end of the consumer's experience (such as after
dinner or as they are checking out of a hotel). You may want to include a survey with the
documentation that completes the transaction, like the bill after a meal, the receipt for a store
purchase, and so on.
• Keep things short and sweet — almost no one likes filling out long, detailed surveys.
The more simple and to-the-point your survey is, the more likely people are to fill it out.
Follow up with customers after service. Another common way that businesses get
feedback from their customers is by contacting them after the service has been completed.
This is usually done by using the contact info provided by the customer as part of receiving
their service — you may have participated in this form of feedback if you've ever gotten a
follow-up call from your cable company after having a receiver installed, for instance. This
form of feedback has the advantage of giving customers some time to use your business's
service before asking for their opinion.
• Unfortunately, one disadvantage of this type of feedback is that it can be seed as rude
or cloying. For instance, if a family receives a follow-up call during their nightly dinner, this
may negatively affect their view of your business. One way to offset this somewhat is to use
less obtrusive ways of contacting your customers, like email, social media, and other
electronic modes of communication. Note, however, that electronic methods have been
shown to favor data from different demographic groups than phone surveys.
Offer usability tests. The two customer feedback examples above have both involved
gathering service quality data from customers after they've used your business. Usability
tests, on the other hand, offer the ability to get feedback from your customers during their use
of your product or services. Typically, in a usability test, a few participants are given samples
of your product or service while observers watch and take notes. The participants are usually

52. 52
asked to complete specific tasks or problems with the product or service — if they can't
complete them, this can be a sign that the product or service has design issues.
• Usability tests can give extremely valuable data about how to improve a product or
service. For instance, if you're testing the quality of your new cloud-based writing platform
and you notice that most of your participants have a hard time changing the font size, you'll
know that this option should be made more intuitive during the final release.
• To keep the cost of usability tests low, make the most of the resources at your
disposal — conduct the tests in your offices, during your business hours, and, if possible, use
your business's own recording equipment .Renting these things can become very expensive.
Monitor your social media presence. Today, "word of mouth" doesn't refer only to the
conversations people have with each other in person — the rise of social media in the past
decade has made it easy for people to discuss their likes and dislikes online. Take the
comments made about your business on social media seriously — though the standards for
online communication aren't particularly high, people are somewhat more likely to be honest
online, where they have a degree of anonymity, than they are in person.
• If your business doesn't already have an account on at least one major social media
site (like Facebook, Yelp, or Twitter), get to work on making one right away. Not only is this
a way to start monitoring your social media "footprint", but also to promote your business
and notify your customer base of upcoming events.
• One site in particular that you'll want to have a presence on is Yelp. Since Yelp is a
very widely-used repository of reviews and testimonials, it can have a major effect on a
business — in one recent study, small businesses reported that a strong Yelp presence helped
them achieve an additional $8,000 in revenue per year.
Incentivize the feedback process. Customers are human beings with plenty of their
own commitments, so their time and effort are valuable. Thus, you're much more likely to get
feedback from customers if you make it worth their while. One way to do this is simply to
pay customers to give you detailed feedback or participate in tests. If you can't spare the cash
for this, you can still incentivize your customers to give you good feedback if you're willing
to get creative. Below are just a few sample ideas:

53. 53
• Offer discounts or preferred status to participating customers
• Enroll participating customers in a drawing or contest for a prize
• Give gift cards or store credit
• Give out free merchandise
Use analytics data for online business. If your business does some or all of its
operations online, you can use the power of web analytics to draw conclusions about the
quality of service on your website. By monitoring which pages your customers view, how
long they stay on each page, and other browsing habits, it's possible to draw valuable
conclusions about the quality of your online service.
• For example, let's say that you operate a company that lets users pay to watch DIY car
repair videos made by expert mechanics. Using an analytics tool that lets you monitor the
traffic to each page, you discover that 90% of visitors make it to the pricing information page
but only 5% go on to select one of the service options. This may be a sign that your pricing
scheme isn't competitive — perhaps lowering your prices may get you a more favorable sales
rate.
• Just a few popular web analytics tools include. Google Analytics (free), Open Web
Analytics (free), Clicky (requires registration), Mint (paid), and Click Tale (paid).
Outsource your feedback needs to a competent third party. If your business is really
struggling with measuring its service quality, it's important to remember thatit doesn't have to
handle this task on its own. If you simply don't have the time or resources to effectively
gather customer feedback, try enlisting the services of a high-quality customer service firm.
The best firms will take your business's unique mission into account while handling your
customer feedback needs and keeping you up-to-speed on any problems. For businesses with
room in their budget for outsourcing, third party solutions can be huge time-savers and
efficiency-boosters.
• Note, however, that using a third party to handle your customer service can
sometimes make it appear as if your business doesn't consider customers' opinions important
enough to deal with directly. Because of this, when outsourcing your customer service needs,
it's extra important to present an empathetic, "human" image to consumers.