mobilization, lending policy, types of loans, recovery, outstandings and overdues

and the financial strength of the Bank and also the reasons for the causes of
overdues from the farmer defaulters and the authorities of PACBs level and thus
filled the research gap of the earlier studies.

CHAPTER III
PROFILE OF THE STUDY AREA, METHODOLOGY
AND CONCEPTS USED IN THE STUDY

This chapter consists of two sections. The first section deals with the description
of the study area. The second section discusses the methodology and concepts used in
the study.

Section I

Profile of the Study Area

A brief description of the agro-economic and socio-economic characteristics of
the study area would help not only in understanding the problem being studied, but also
in drawing meaningful inferences from the results of the study. Therefore, an attempt is
made in this chapter to present briefly the agro-economic and socio-economic
characteristics of Madurai and Theni districts.

The MDCC Bank operates its business for Madurai District and the newly formed
Theni District bifurcated from Madurai District in 1997. There is no separate CCB for
Theni District. Hence, the study unit, MDCC Bank operates in Madurai and Theni
District. So the area description is given for both districts.
 Location of Madurai and Theni District
Madurai and Theni Districts are covered by Dindigul District in the north,
Sivagangai district in the East, Virudhunagar district in the South and Kerala state in the
West. The geographical area is 6630.96 sq. kilometers for both the districts.

Administrative Structure
Madurai District is divided into two revenue divisions: They are (1) Madurai and
(2) Usilampatti. There are 7 taluks, 13 community development blocks and 683 revenue
villages in the district. Madurai serves as the headquarters, which is well connected,
with the important places within the district and outside the district by a network of
roads and railway lines 44. Theni District has one revenue division, that is, Theni revenue
division and is divided into 5 taluks, 8 community development blocks and 139 revenue
villages.

Table 3.1 shows the number of revenue divisions, taluks and community
development blocks in Madurai and Theni Districts.

44
Hand Book of Madurai District – 2004 District statistical Office, Madurai, pp 1-2.
 TABLE 3.1

NUMBER OF REVENUE DIVISIONS, TALUKS AND COMMUNITY DEVELOPMENT BLOCKS

IN MADURAI AND THENI DISTRICTS

Community Development
Revenue Divisions Taluks
Blocks

I. Madurai District 1. Madurai North 1. Alanganallur

1. Madurai 2. Madurai South 2. Chellampatti

2. Usilampatti
3. Melur 3. Kallikudi

4. Peraiyur 4. T. Kallupatti

5. Thirumangalam 5. Kottampatti

6. Usilampatti 6. Madurai East

7. Vadipatti 7. Madurai West

8. Melur

9. Sedapatti

10. Thirumangalam

11. Tirupparankundrum

12. Usilampatti

13.Vadipatti
 II. Theni District

Theni
1. Theni 1. Theni

2. Bodi 2. Bodi

3. Periyakulam 3. Periyakulam

4. Aundipatti 4. Aundipatti

5. Uthamapalyam 5. Myladumparai

6. Uthamapalayam

7. Cumbum

8. Chinnamanur

Source: District Gazette, Madurai District, No.5 March 5, 2004.

Source: Hand Book of Theni District 2004 Statistical Office, Theni.

Demographical Factors

The population of Madurai district as per the 2001 census was 17,45,964 of which
11, 20, 728 were males and 6,25,236 were females. In Theni district the population of the
district as per the 2001 census was 10,49,323 of which 5,34,191 were males and 5,15,132
were females. The rural population was 7,03,748 and the urban population was 3,45,575
according to the same source45. The density of population in the district was 363 per
sq.km as against the state average of 428 per sq.km.

Agriculture

45
Ibid., p.3.
 The economy of Madurai district is basically agrarian in character and a vast
majority of its population is dependent upon agriculture for income and employment
either directly or indirectly. The agriculture sector not only generates employment but
also fullfils the food requirements of the growing population. The main crops cultivated
in Madurai district are paddy, maize, cumbu, ragi, cotton, sugarcane and groundnut. Of
these crops, paddy and Sugarcane are grown under irrigated conditions and the
remaining crops are cultivated in irrigated and unirrigated conditions in Madurai district.

In Theni district, agriculture, industry and trade play an important role in its
economic development. Principal crops like paddy, sugarcane, cotton, banana, coconut,
groundnut and various other fruits and vegetables are cultivated here. Besides, a number
of agricultural produce-based ventures thrive here. Also, various small scale and tiny
industries are located here.

Climate and Rainfall

Madurai district experiences a tropical hot summer

climate from April to June and a cold climate from
December to February. This climate is conducive to the
cultivation of wetland and dry land crops. Madurai
district is benefited from south-west monsoon as well as
from north-east monsoon in getting rainfall. With the
setting up of south-west monsoon, the temperature
steadily drops and more or less an equitable climate
prevails during the rest of the year. The mean humidity
varies from 51 to 67 per cent.
Madurai district receives most of the rainfall from
the north-east monsoon (from October to December)
followed by the south-west monsoon (from June to
 September) and also from the winter (March to May)
rains.
Theni district enjoys a tropical climate. Its mean minimum temperature ranges
from 20.50 to 26.20c and the maximum temperature varies from 29.50 to 39.20c. May
and June are the hottest months and the lowest temperature is recorded during
December and January.

The district receives maximum rainfall from the north-east and the south-west
monsoons. However, the rainfall is scanty throughout.

Irrigation System in Madurai and Theni Districts: Periyar-Vaigai Irrigation Project

The Periyar-Vaigai irrigation project is a major source of irrigation project, the

second largest in Tamil Nadu covering several districts including Madurai. The Periyar
Dam was constructed in 1887 in Periyar valley, Kerala, to divert the Periyar water
through a tunnel of 1.8 kilometers long into Suruliar, a tributary of Vaigai for irrigating
the dry tracts of Madurai District. The water from the Periyar, after irrigating Cumbum
Valley is stored in the Vaigai Reservoir for the use of the Periyar-Vaigai irrigation project.
The water from the Vaigai Reservoir is released to the project area through two main
canals, namely Periyar and Thirumangalam main canals.

The river Vaigai flows through the districts of Theni, Madurai, Sivaganga and
Ramanathapuram and opens into the Bay of Bengal near the Palk Strait. The flow
characteristics of Vaigai is flash floods which are short lived. Diversion works and tanks
for storage have been developed as sources of irrigation in the Vaigai Basin.

The Periyar-Vaigai I and II project area covers a non-continuous gross area of

about 1,30,000 hectares including 81,100 hectares in the project irrigated service area.46

46
Government of Tamilnadu, Modernisation of Periyar-Vaigai Irrigation Project,
P.W.D., Madurai circle, Madurai, 1998, p.2
 Section II

Methodology and Data Collection

This section exclusively deals with the methodology used in the present study. The
following rationales have been applied in the methodology of the present study.
1. Reasons for the selection of the study area
2. Sources of data
3. Method of data collection
4. Statistical tools used for the analysis of data
1. Selection of the Study Area
In Madurai and Theni District, 39 banks (including MDCC Bank) and their
branches numbering 328 are functioning. In March 2004, the total amount of deposits
mobilised by all the banks was Rs. 3166.86 crores, while the MDCC’s share alone was
Rs. 376.31 crores. In the same year, the total advances were Rs. 2250.85 crores, the while
MDCC’s stood at Rs. 430.84 crores. The credit deposit ratio of all the banks was 71 per
cent whereas MDCC Bank credit deposit ratio was 118.55 per cent47. With this
background in view, an attempt has been made to study the performance of MDCC Bank
with reference to its deposit mobilisation, lending and financial performance.
Madurai and Theni Districts have been selected to analyse the causes of overdues
at farmer defaulters level because these two districts come under the jurisdiction of the
MDCC Bank the bank under study.
The researcher’s interest in studying the causes of overdues in Madurai and Theni
districts has been kindled by another factor, topographical conveneince. Easy
accessibility for collection of data also has been a reason for the selection of Madurai and
Theni districts, since the researcher resides in Madurai district.
Study Period
The study covers 15 years from 1989-90 to 2003-2004 as far as the secondary data
are concerned. This period is selected for the present study because of the availability of
the data from the concerned Bank.
The financial year 2004-2005 is fixed as the reference period for the primary data.
Data collection was done between, July 2005 and September 2005.
2. Sources of data
47
Lead Bank Records, Madurai and Theni Districts.
 The present study is based on both secondary as well as primary data. The
secondary data have been used to analyse the performance of the MDCC Bank with
reference to its deposit mobilisation, working fund management, loans and advances,
recovery of loans, loan outstandings and overdues. Also, the data are used to evaluate the
financial performance of the Bank during the study period. Primary data have been
collected for the purpose of analysing the socio-economic causes of overdues at farmer
borrowers level and that of the authorities of PACBs in Madurai and Theni districts.
3. Compilation of Secondary data
The required secondary data were collected from various published and
unpublished documents maintained by the MDCC Bank and its branches located in
different parts of the Madurai and Theni Districts. The data relating to deposits, lending
performance and the overall financial performance of the Bank were collected from the
published annual reports of the Bank and also from the appropriate records available
with the Bank. The required general information regarding the co-operative system and
its changes were collected from various offices and institutions like the Institute of Co-
operative Management, Madurai, The Tamil Nadu Co-operative Union Chennai,
the office of the state apex co-operative bank, the office of the Director of Statistics and
various libraries of reputed universities. The researcher also had personal discussion
with the officials of the MDCC Bank.

Method adopted in the collection of primary data

To analyse the fifth objective of the study namely the socio-economic causes of
overdues at farmer defaulter level in Madurai and Theni districts, interview schedule
was used. The researcher personally contacted the farmer defaulters and filled-up the
schedule.

A questionnaire was administered to the Authorities of 50 selected PACBs in

Madurai and Theni districts to collect information about the causes of overdues and the
steps taken by the authorities to reduce the overdues.
 Sample Design

Stratified random sampling technique has been used to select the sample
defaulters. Madurai District is divided into 13 blocks and Theni District into 8 blocks.
Agricultural co-operative credit is provided by 40 branches of Madurai District Central
Co-operative Bank with the help of 260 primary agricultural co-operative societies
in both the districts. Therefore, with the help of the list (list of PACBS with high
overdues) given by the MDCC Bank, 21 Primary Agricultural Co-operative Societies
out of 260 PACBs (8 percent) were selected as sample societies. In all the blocks of
Madurai and Theni Districts, the number of PACBS ranged between 3 to 16; therefore,
one PACB from each block was selected as sample.

Each PACB that is functioning in the study area serves 2 to 10 surrounding

villages. Two villages under one PACB, that is, 42 villages (5 per cent of the total villages
of 822) were selected as sample villages in both the districts. Out of the total of 15,810
farmers, who obtained crop loan from the selected PACBS, 5040 belonged to the
“Sample Villages”. From these groups a total number of 252 farmers, that is, 5 per cent
of the sample farmers are selected for the study. Initially 252 sample farmers were
selected for the study. But 2 small farmers in Melur village of Madurai district did not
give correct information. Thus two sample farmers were neglected and 250 farmers
were selected as the sample farmers. On the basis of land size operated, the farmers
are divided into two groups small and marginal. Those with an operated area of less
than 5 acres are segregated as small and marginal and those farmers with an operated
area of more the 5 acres are identified as large farmers. Out of 250 selected sample
borrowers, 166 farmers are small and marginal ones, and 84 are large ones. Thus, 4
small and marginal farmers and 2 large farmers have been selected from each village.
Table 3.2 shows the selected revenue villages from Madurai and Theni districts.
 Pre-Test
A pilot survey was conducted for testing the adequacy of the questions included
in the schedule, and also to check the irrelevance and duplication of entry. Twenty
farmer defaulters who have availed crop loan from the PACBs in Madurai and Theni
Districts were interviewed. The questions were suitably modified to make the schedule
more purposeful.

After the pilot study, with the help of the detailed schedule, the primary data were
collected from the sample farmers of 42 villages from 21 blocks of Madurai and Theni
Districts by interviewing the farmers personally. The researcher herself has conducted the
interview. The interview was quite informal and conducted in natural conversation in
Tamil. It has been recorded by the researcher in the interview schedule. Extra care has
been taken to get the accurate response from the respondents, by personally explaining to
them each and every point in detail. Statistical data about the land owned, amount
borrowed from the PACS, rate of interest, purpose of Borrowing, utilisation of bank
credit and the causes of overdues were collected from the sample farmers. Further, 50
Primary Agricultural Co-operative Societies were randomly selected and data
were collected by post from them regarding their views about the causes of overdues
through the questionnaire.
4. TOOLS OF ANALYSIS

Various statistical tools like Annual Growth Rate, Compound Growth Rate,
Co-efficient of Variation, Correlation Co-efficient, Ratio Analysis, Factor Analysis, Garrett
Ranking Technique, Chi-Square test and t test have been used in the present study for
analysing the data.

Annual Growth Rate

The annual growth rate has been used to study the percentage of increase in
deposits and loans and advances of the Bank. The annual growth rate refers to the
percentage increase in deposits, loans and advances when compared to that of the
previous year.

In order to analyse the first, second and third objectives namely (i) to trace the
origin and growth of the MDCC Bank, (ii) to analyse the deposit mobilisation, interms of
pattern of deposits and their growth, and to study the working funds management of the
Bank and also (iii) to study the lending policies, pattern of lending and recovery
performance of the Bank the following semi-log trend equation and the compound
growth rate formula have been used.

Log Y = a + bt

where,

Y = actual value of deposits/advances/recovery etc

t = time variable

a and b are constants to be estimated. Above trend equation was estimated by

the method of least squares.

Compound growth rate (CGR) = (Antilog b-1) x 100.

To study the stability of deposits, loans and advances during the period under
study, the co-efficient of variation (C.V) method has been used with the following
formula.

Standard deviation (σ)

Co-efficient of variation = --------------------------------- x 100

Arithmetic mean (`X)

 Σ (x – x )2

σ=

N–1

ΣX

X=

where

X = Deposits or Loans and Advances

N = Number of years

If co-efficient of variation is less, it means greater stability, more consistency,

uniformity and homogeneity of growth.

To analyse the fourth objective namely, to evaluate the financial performance of

the Bank, Ratio Analysis and Factor Analysis have been used. The technique adopted
for analysing data in respect of the influencing variable factors on financial strength of
the MDCC Bank is “Factor Analysis”. The principal factor analysis method is
mathematically satisfying because it yields a mathematically unique solution to a factor
problem. The first factor extracts the most variance, the second factor the next most
variance and so on48

48
Harry H. Harman, Modern Factor Analysis, Chicago: The University of Chicago Press,
1967, pp. 99-101.
 The principal factor method actively involves the solution of simultaneous linear
equations. The roots obtained from the solution are called eigen values. Eigen factors are
also obtained after suitable transformation and they become the factor loadings. The
fiction ‘R’ matrix is solved in this manner, yielding the factor matrix to be given.
Thurstone argued that it was necessary to rotate factor matrices if one wanted to interpret
them adequately.49 He pointed out that original factor matrices are arbitrary in the sense
that an infinite number of reference frames (axes) can be found to reproduce any given
‘R’ matrix.50

The extracting factors from the arbitrarily observed correlation matrix locate the
reference axes in a different position. These reference axes were rotated by employing
varimax method.51 A major goal of rotation was to obtain meaningful factors that were as
much consistent as possible from analysis to analysis.52 Each variable finds itself posited
with that factor, with which it is highly correlated, which means that the factor has the
highest loading.53 The orthogonal rotations maintain the independence of factors, that is,
the angles between the axes are kept at 90 degrees. One of the final outcomes of a factor
analysis is called rotated factor matrix, a table of co-efficients that express the ratios
between the variables (ratios) and the underlying factors. The entries in the table are
called factor loadings. The factor loadings range from –1 through 0 to +1. They express
the correlation between the variables (ratios) and the factors. The sum of squares of the
factor loadings of a variable is called commonalties or h2. The commonality of a variable
is its common factor variance. It would give clues to its nature by telling the researcher

49
L. Thurstone and E. Chare, The Measurement of Attitude, Chicage, University of
Chicago Press, 1929, pp. 508-509.
50
Ibid., p.93.
51
Harry H. Harman, op.cit., p.304.
52
Benjamin Fructher, Introduction to factor Analysis, New Delhi, Affiliated East-West
Press, 1967, p.106.
53
Irma Adelman and Cynthia Tayf Morris, “A Quantitative Study of Social and Political
Determinants of Fertility,” Economic Development and Cultural Change, Vol.XIV. No.2
January.1996, p.137.
which other tests share the same common factor variance and which do not. 54 The
variables (ratios) with factor loadings of 0.60 or greater have been considered as
significant variables (ratios). This limit has been chosen because it is found that variables
with less than 50 per cent common variation with the rotated factor pattern (which equals
the square of factor loading times 100) are too week to report.55

In order to analyse the fifth objective namely to study the socio-economic causes
of overdues, Garret Ranking Technique has been used. The farmer defaulters are
asked to rank the socio-economic causes of overdues as specified in the interview
schedule. The socio-economic causes of overdues adopted in the study are

Economic factors

i) Crop failure
ii) Less agricultural income
iii) Misutilisation of Loan amount
iv) Loans are not disbursed in time
v) High Cost of Input

Social and Political factors

vi) Large size family

vii) Increased family expenditure
viii) Less earning members and more dependence
x) More expenses on social ceremonies and
x) Waiver of the dues by the Government

The ranking given by the respondents is converted into per cent position by using
the following formula.

100 (Rij – 0.50)

Per cent Position =

54
Fred, N.Kerlinger, Methods of Factor Analysis: Foundations of Behavioural
Research, Holt Reinhart and Winston Inc., New York, 1973, p. 470..
55
Momoud Ezzammel, op.cit., p.535.
 Nj

Where
Rij = Rank given for the ith factor by jth individual

Nj = Number of factors ranked by jth individual

The present position of each rank thus obtained is converted into scores by
referring to the table given by Garret. The scores of all respondents for each factor is then
added together and divided by the number of respondents experiencing that particular
constraint. The mean scores of each factor thus arrived at, are arranged in a descending
order and the corresponding ranks allotted.

Besides the above tools, percentage analysis has been used wherever necessary.

Testing of Hypothesis

On the basis of the third objective of the study, the following two hypotheses were
framed

(i) “There is no positive correlation between the issue of loans and the recovery of
loans”

(ii) “There is no positive correlation between the loan outstandings and the loan
overdues”

To test these hypotheses correlation Co-efficient and t – test were used.

Null Hypothesis H0 : µ = 0
Alternate Hypothesis Ha : µ ≠ 0

In order to determine the nature and strength of relationship between two

variables, the co-efficient of correlation has been applied. It is a statistical tool used to
describe the degree to which one variable is linearly related to another. The co-efficient
of correlation is applied to findout the relationship between the loans issued and the
recovery of loans. The following is the formula.

SxY

r =

Sx2 SY2

Then the t value has been calculated by applying the following formula.

n-2

t = ryx =

1 – r2yx

Where

(n-2) degrees of freedom

ryx = Co-efficient of correlation between x and y

Chi-Square test has been used to study the following third, fourth and fifth
hypotheses that form the bases of the fifth objective of the study.

(iii) “Amount of overdues does not significantly differ with landholdings”,

(iv) “There is no significant relationship between family size and amount of

overdues and ”.

(v) “There is no significant relationship between situation of land and amount of

overdues”.
 To test these hypotheses, the following formula has been used to calculate the chi-
square test.

(O – E)2

Chi- Square test (c2) = å

Row total x Column total

E= with (r-1) (c-1) degree of freedom

Grand total (N)

Where,

O = Observed frequency

E = Expected frequency

C = Number of columns in a contingency table

r = Number of rows in a contingency table.

3.3. Concepts Used in the Study

The starting point of any research study is to enunciate the goal and to define the
concepts used in the study. To understand the problem and to make a thorough study
of the research utmost clarity of the concepts is needed. An attempt is made by the
researcher here to define the various concepts used in this study.

Co-operation

A renowned co-operator P. Lambert states that “a co-operative society is an

enterprise formed and directed by an association of users, applying within itself the
rules of democracy and directly intended to serve both its own members and the
community as a whole.”56

Co-operative Year

Co-operative year means the period commencing on 1st day of July in a year and
ending on 30th June of the following year

BANK: Bank Means Madurai District Central Co-Operative Bank.

TSCB: TSCB means Tamil Nadu State Co-Operative Bank.

SOCIETY: Society means Co-operative Society.

PACBS, Primary Agricultural Co-operative Banks.

‘A’ Class Members

The members who have the shares of Rs. 50 each have the voting rights in the
bank. All these members of such societies are ‘A’ class members.

‘B’ Class Members

The members who hold shares of five rupee each do not have the voting rights.
All these Individuals and Jewel loan holders are ‘B’ class members.

Officers
Officers of central co-operative banks include Managing Director/Special Officer,
General Manager/Secretary, and Assistant General Managers/Assistant Secretaries.

56
R.S. Jalal, Rural Co-Operatives in India, Anmol Publications Private Ltd., New Delhi,
1998, pp..4-5.
 ACT
Act means Tamil Nadu Co-operative Societies Act 1983.

RULES
Rules means Tamilnadu Co-operative Societies Rules 1988.57

FIXED DEPOSITS
Fixed deposit is a deposit of a definite sum of money for a fixed period at a fixed
rate of interest. Fixed deposits include Cash Certificates, Recurring Deposit, Amudha
Surabi Deposits, Provident Fund Deposits, Perpetual Pension Scheme, Double Pension
Deposit Scheme, Security Deposits from employees, General Provident Fund, Family
Benefit Fund and the like.

Savings Deposits

Saving deposits is the most common type which caters to the needs of almost all
sections of customers. It inculcates thrift and saving habits among the public.

Short-term Credit
Short-term credit means a credit which is made available for a period of 12 to 15
months for meeting the cost of seasonal agricultural operations such as procurement of
seed, manure, implements and marketing.

57
B.S. Mathur, Co-Operation in India., Saitya Bhavan, Agra, 1994, p.53.
MEDIUM-TERM CREDIT
Medium term credit is granted for a period exceeding 15 months but below 5
years. It is granted for consolidation of holdings, reclamation of land, sinking of ordinary
wells and repairing old ones, construction of pucca drains in the fields and purchase of
carts, bullocks, camels and the like.

Long-Term Credit

Long term credit is granted for a period exceeding 5 years but within 20 years.
These loans are given for the purpose of redemption of land, repayment of old debts,
sinking of wells and reclamation of jungle land.58

CROP LOAN
The crop loan to be sanctioned to a farmer is determined on the basis of a) the
area to be cultivated by the farmer and b) the scale of finance for specific crop per
hectare.

The scale of finance includes all expenses to be incurred by the farmers for raising
crops including the cost of all inputs, the cost of operational services and other charges.
The scale of finance, once determined, should be reviewed periodically and revised, if
the cost of cultivation increases59.

KISAN CREDIT CARD

The Kisan Credit Card Scheme was introduced in 1998-99. It is an innovative
scheme. The scheme would cater to the short-term credit requirements of the farmers
including purchase of agricultural inputs such as seeds, fertilizers, pesticides and
58
S.P. Kalyankumar, Crop Loan Advance of Co-operative finance, Rainbow Publication,
Coimbatore, 1983, p.84.
59
R.G. Desai, Farmers Societies and Agricultural Development, Chugh Publications
Allahabad, 1986, p.68.
drawing of cash for their production needs60. Banks may provide Kisan Credit Cards to
the farmers who are eligible for sanction of production credit of Rs. 5000 and above.
Credit would be available to the farmers under this scheme in the form of revolving cash
credit normally valid for three years, subject to an annual review. The rate of interest on
Kisan Credit Cards should be the same as applicable to crop loans. It facilitates short-
term credit to farmers. The scheme has gained popularity among the cultivators 61.

OWN FUNDS
Own funds mean the aggregate of paid up share capital, reserves and other
funds.

WORKING FUNDS
The total of all items appearing in the liabilities side of the balance sheet of the
Bank excluding the contra items and accumulated losses, if any.

OPERATING PROFIT
Operating profit refers to net profit before making provisions and contingencies.

Operating Cost

It implies the non-interest expenses.

Interest Spread

The difference between the interest earned and interest expended.

VOLUME OF BUSINESS
Total of deposits, and loans and advances.

60
P.N. Varshney, Banking Law and Practice, Sultan Chand & Son Publishers, New
Delhi, 2004, pp. 234-235.
61
H.L. Bedi, V.K. Hardikar and C.R. Rao, Practical Banking Advances, UBS Publishers’
Distributors Ltd., New Delhi, 2001, pp. 334-335.
FIXED ASSETS
Fixed assets mean buildings, vehicles, furniture and fittings used for the
administrative purposes of the bank.

NON-PERFORMING ASSETS (NPAS)

Credit facilities in respect of which interest or instalment of principal is in arrears
for more than two quarters.62

‘A’ Class Bank

A Co-operative Bank secures 60 marks and above in the audit report on the basis
of recovery performance, observation of seasonality discipline, operational efficiency,
profit earned and the like.

‘B’ Class Bank

A Co-operative Bank secures marks between 45 and 60 in the audit report on the
basis of recovery performance, observation of seasonality discipline, operational
efficiency, profit earned and the like.

‘C’ Class Bank

A Co-operative Bank which scores marks between 30 and 45 in the audit report
on the basis of recovery performance, observation of seasonality discipline, operational
efficiency, profit earned and the like.

‘D’ Class Bank

A Co-operative Bank which scores marks below 30 in the audit report on the basis
of recovery performance, observation of seasonality discipline, operational efficiency,
profit earned and the like.

62
B.R. Nair “Village Co-operative “– A Century of Service to the Nation,” Yojana.
Vol.48 No.3, March 2004, p.47.
 Outstanding
It refers to any amount of loan to be recovered from the borrowers irrespective
of the due date for payment.

Recovery
Recovery denotes the actual amount collected from the borrowers.

Overdues
It refers to “any amount of loan, the due date of which has already elapsed”. A
loan becomes overdue from the next day of the due date for payment. 63

Genuine Defaulters
The genuine defaulters are those beneficiaries who failed to repay their dues due
to the impact of uncontrollable factors like, floods, earthquakes, droughts crop failure,
inadequate income generation and the like.

Willful Defaulters
The willful defaulters are those beneficiaries who are financially sound, but they
are unwilling to repay the loan amount.64

63
Quoted by U. Sankar, Econometric Applications in Agricultural Economics, edited by
K.L. Krishna, Oxford University Press, New Delhi, 1997, pp.2.7.
64
Ranreer Singh, A.L. Nadda and P.S. Dahiya, “Agricultural Credit Overdues: Some
Alternatives,” Indian Co-operatives Review, Vol.XXXIII, No.3, January, 1995, pp.216.