Technical Assistance Consultant’s Report Volume 1A ...€¦ · 1 Source: NABARD: Cooperative...

Technical Assistance Consultant’s Report

This consultant’s report does not necessarily reflect the views of ADB or the Government concerned, and ADB and the Government cannot be held liable for its contents. All the views expressed herein may not be incorporated into the proposed project’s design.

Volume 1A: Rajasthan Credit Cooperative Structure (CCS) Project

Project Number: 36343 December 2003

INDIA: Rural Finance Sector Restructuring and Development (Financed by the Government of the United Kingdom)

FINAL REPORT

Prepared by

PriceWaterHouse Coopers PVT. Limited (Finance & Governance), India in association with Bhartiya Samurdhi Investment and Consulting Services Limited (BASIX), India

For Ministry of Finance, Department of Economic Affairs (Banking Division) TA Management Committee formed by the Ministry of Finance, Department of Economic Affairs (Banking Division)

Technical Assistance (TA) No. 4247-IND Rural Finance Sector Restructuring and Development

Final Report Volume 1A: Rajasthan CCS Project

SEPTEMBER, 2004 PAGE II

TABLE OF CONTENTS

1 INTRODUCTION 1

1.1 COUNTRY CONTEXT............................................................................................................... 1 1.2 THE COOPERATIVE CREDIT STRUCTURE ................................................................................. 1

2 CONTEXT FOR THIS PROJECT 4 3 RAJASTHAN 5

3.1 BACKGROUND ....................................................................................................................... 5 3.2 THE RAJASTHAN CCS: AN OVERVIEW..................................................................................... 6 3.3 THE SHORT TERM CCS IN RAJASTHAN ................................................................................... 8 3.4 POVERTY, SOCIAL, AND GENDER ANALYSIS........................................................................... 11 3.5 ENVIRONMENTAL ANALYSIS .................................................................................................. 12

4 THE PROJECT 15 4.1 STRATEGY .......................................................................................................................... 15 4.2 PRINCIPLES......................................................................................................................... 15 4.3 COMPONENTS OF STRATEGY................................................................................................ 17 4.4 PROGRAMME FRAMEWORK................................................................................................... 32 4.5 BUDGET OVERVIEW ............................................................................................................. 34 4.6 IMPLEMENTATION SCHEDULE................................................................................................ 36

5 POLICY MATRIX 37 6 IMPLEMENTATION MECHANISM 46 7 ROLES AND RESPONSIBILITIES 47 8 RISKS ANALYSIS AND MITIGATION 50 ANNEXES: 1. PREVIOUS STUDIES/ REPORTS 2. THE RAJASTHAN CCS 3. SOCIAL, POVERTY AND GENDER ANALYSIS 4. INITIAL ENVIRONMENTAL ANALYSIS 5. FINANCIAL RESTRUCTURING AND MODEL RESTRUCTURING PLANS 6. INDICATIVE HARDWARE AND SOFTWARE CONFIGURATION 7. PROGRAMME FRAMEWORK 8. DETAILED BUDGET 9. IMPLEMENTATION PLAN



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1 INTRODUCTION

1.1 Country Context 1-1 Rural India contributes approximately 40% of India’s GDP and has a population of nearly 700 million. Three quarters of this population is dependent on agriculture for its livelihood. India has one of the world’s most extensive formal rural credit systems, with nearly 46,000 bank branches and more than twice as many cooperative credit outlets in rural areas. Physical outreach is not an issue, except in some remote areas, however access to rural financial services is. 1-2 Commercial Bank credit to rural areas is 10% of total bank credit as against rural contribution to GDP of 40%. The Regional Rural Banks (RRBs) account for just 8% of the total formal sector credit, with nearly 60% thereof being lent to the “non-target group”. Similarly, the Cooperative Credit Structure (CCS) is known to serve the interests of middle and larger farmers. Studies indicate that less than half of the credit usage by rural households comes from formal sources. Rural financial institutions (RFIs) typically function in a backdrop of poor credit discipline in rural areas and frequent extensions of populist measures such as interest and loan waivers, which have led to their being unprofitable and a substantially eroded capital base for these RFIs. RRBs were recapitalised with an infusion of over Rs. 21 billion, while the Government of India (GoI) has recently announced its intention to recapitalise the CCS also. 1-3 The landless, who constitute the bulk of the rural poor, do not get much credit from any formal financial institution. The recent bank loans through self-help groups (SHGs) are the sole exception, where the landless and other poor are being reached significantly. A variety of microfinance institutions (MFIs) working with the poor, while being effective, lack scale due to their limited ability to raise resources and function without facilitative regulations. None of the existing institutions, however, have been able to provide savings services to the poor. The near absence of risk mitigation instruments and mechanisms such as insurance for life, health, crops and assets and commodity derivative contracts to deal with price risks, only exacerbates the vulnerability of the poor. 1-4 The RFIs and apex institutions were conceived in an era when the challenges were quite different – the predominant one being to ensure food self-sufficiency in India. Thus, these institutions, need to revisit their raison d’etre, and devise a strategy, which would make them dynamic and responsive players to the emerging challenges and opportunities of rural financing in India in the post-reform era.

1.2 The Cooperative Credit Structure (CCS) 1-5 The CCS caters to both the short term and long term credit need of the rural consumers. The short-term cooperative credit structure functions through three tiers, State Cooperative Bank (SCB), District Central Cooperative Banks (DCCBs) and Primary Agricultural Credit Societies (PACS). The long-term structure works through



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two tiers, State Cooperative Agriculture and Rural Development Bank (SCARDB) and Primary Cooperative Agriculture and Rural Development Bank (PCARDB) at the state and district levels respectively. 1-6 In March 2003, there were 30 SCBs, 367 DCCBs and 98247 PACS with loans outstanding of INR 646.65 billion. The long term loans outstanding were at INR 153.85 billion extended through 768 PCARDBs and 20 SCARDBs1. In the states of Andhra Pradesh and Jharkhand, the long term and short term structures have been merged. 1-7 The importance of rural finance and within that the importance of the CCS is evident from the number of task forces and committees that have been constituted over the past few years to analyse the issues besetting the CCS and to propose solutions accordingly. The main recent committees have been the Jagdish Capoor Committee (April 1999), The Patil Committee (Oct 2001), The Vyas Committee (2003) and The Rama Rao Committee (for Andhra Pradesh). The broad issues that need to be addressed as identified by these task forces/ committees include: • Strengthening of PACS • The need for cooperatives to be constituted as and to function as member

driven organisations • Implementation of the Model Cooperative Societies Act by all State

Governments • Revising the regulatory framework, reducing the existing duality of control over

cooperative banking institutions • Governance issues such as professionalisation of boards of directors and

improving of human resources • Diversification of business operations • Rationalisation of the short and the long term structures • Delayering of the cooperative system – reducing the number of tiers • Need to develop systems for internal checks and controls • Revisiting cost of funds, fund management and sources of finance • Depoliticisation and creation of a facilitative environment for credit discipline

1-8 The Capoor Committee recommended revitalisation of the CCS by working with the potentially viable units, and taking a bottom-up approach which would focus on strengthening of PACS. The GoI convened a conference of Chief Ministers in 2001 to discuss the revitalization package recommended by the Capoor Committee. Consensus was reached on several issues but no consensus could be reached on sharing of the amount of revitalization assistance between the Centre and States. A need was also felt to re-examine the delayering of CCS. The Patil Committee was accordingly set up and suggested a sharing pattern of assistance among GoI, State Governments, and Cooperatives, the funding mechanism, and the feasibility of delayering. The ‘Expert Committee on Rural Credit’, known as the Vyas Committee though not focussed on CCS also made recommendation on the CCS. It recommended eliminating one of the three tiers in the CCS, introducing more liberal NPA norms for agricultural credit, upgrading the skills of bank staff. The Rama Rao

1 Source: NABARD: Cooperative Credit Structure: an Overview: 2002-03



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Committee recommended reorganisation of PACS and performance based classification of PACS and DCCBs into four categories and suggested that the entities that do not hold any hopes of survival (as per laid out criterion) should pass on their business to other entities viz., the apex, neighbouring DCCB/PACS or a new entity. Annex 1 provides a matrix of recommendations on key issues in a summary form.



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2 CONTEXT FOR THIS PROJECT 2-1 India embarked on financial sector reforms in the late eighties. This has resulted in substantial transformation of commercial banking institutions. If anything, these reforms have reduced the focus of the commercial banking system including regional rural banks in rural areas. The CCS is perhaps the only network with the physical outreach to address the financial services needs of the rural households. However, this potential is unrealised due to a combination of inadequate regulation, political interference, poor governance and administration, very poor accounting, reporting and auditing systems and a lack of innovation in development of viable products and channels to address the specific needs of the rural clientele. This potential can only be realized through fundamental changes in the regulation/supervision approach, governance, financial and institutional arrangements. 2-2 This Project proposes to work with the short term structure in identified states and suggests ways of either improving or changing the overall approach of the CCS as there appears to be general agreement around the fact that having two structures, to basically provide the same type of services (different products) to serve the same set of clients, might not be the most productive way of doing things. 2-3 Restructuring the cooperative system should be a vital part of the rural finance sector restructuring and development exercise. A healthy and vibrant cooperative sector with its tremendous outreach could be the ideal delivery mechanism for products like SHG linkages, insurance, and commodity pricing dissemination which are also critical for risk mitigation for the rural household.



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3 RAJASTHAN

3.1 Background 3-1 Rajasthan state is located in the western-most part of India covering the Thar Desert.

Rajasthan: A Snapshot2 Geographic Details

Number of Districts 32 Number of Sub-districts 241 Number of Villages 41,353 Total Land Area (million hectares) 34.22 Total Forest Area (% of Total Land Area)

9%

Total Sown Area (million hectares) 17.07 (50% of Total Land Area) Total Irrigated Area (million hectares) 6.67 (19% of Total Land Area)

Demographic Details Population 56 million Rural Population 77% Population Density 165 persons per sq. km Literacy Percentage 61% Male literacy 76% Total number of Households (million) 9.32 Average Size of a Household 6.1 Female literacy 44% Below Poverty Line (BPL) population3 27% Rural population Below the Poverty Line

26%

Urban population Below the Poverty Line

30%

3-2 The following tables present the trend in deposits and credit in the commercial banking systems in Rajasthan respectively, showing that only 50-55% of the deposits mobilized in the state are lent back within the state. However, in recent years, credit growth is leading deposit growth, resulting in a 5% increase in the state’s CD ratio from 50% in 2000 to 55% in 2003.

Trend of Deposits in Rajasthan: Commercial Banks (INR Million)

2000 2001 2002 2003Current 25,131 29,703 34,423 40,442Savings 60,321 71,206 85,252 102,324Term 152,936 174,472 196,157 206,537Total 238,388 275,388 315,933 349,304

Source: Various issues of Basic Statistical Returns, RBI 2 Source: Census 2001 3The planning commission defines the poverty line as a per capita monthly expenditure of Rs. 49 for rural areas, and Rs. 57 in urban areas, at 1973-74 all India prices. These poverty lines correspond to a total household per capita expenditure sufficient to provide, in addition to basic non food items that is clothing and transport, a daily intake of 2400 calories per person for rural areas, and 2100 in urban areas. Individuals who do not meet these calorie norms fall below the poverty line.



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Trend in Sector wise Credit in Rajasthan: Commercial Banks (INR Million)

2000-01

2001-02 2002-03 2003-04

Agriculture 27,058 31,737 40,903 48,537Industry 42,271 45,963 49,919 54,843Services 50,111 58,921 84,334 89,692Total 119,440 136,621 175,156 193,072

Source: Various issues of Basic Statistical Returns, RBI 3-3 As against total agricultural outstanding of about 40 billion of the commercial banking institutions as on March 31, 2003, Cooperative Sector outstanding was Rs 34.6 billion, with the short term structure accounting for Rs 22.6 billion out of this. 3-4 In terms of physical outreach, all scheduled commercial banks put together had 3,392 outlets in the state in 2002-03 against 5,252 PACS, 397 branches of the short term cooperative structure and 134 branches of the long term cooperative structure. Thus the CCS expanded the agricultural outstanding by 85% through expansion in physical outreach by 170% over the commercial banking system.

3.2 The Rajasthan CCS: An Overview 3-5 Rajasthan, like most other Indian states, has two distinct and separate structures in the cooperative system, for addressing the long and short-term credit needs of rural households. As on March 31, 2003, the short term rural credit cooperative structure had a membership of 4.59 million members covering about 60% of rural households in Rajasthan through a three tier structure. A two-tier structure for long-term credit covers 1.04 million members.

Short Term

Status of Co-operative in the State of RajasthanCo-operative Credit Structure

Long Term

I – Apex Level I – Apex Level

RSCB (Est. 14 Oct. 1953) RSLDB

(9 Branches) 7 Regional Offices

II – District Level II – District Level

26 DCCBs 36 PLDBs

388 Branches 127 Branches

III – Village Level

5252 PACS



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3-6 The latest available reported financial position of the Short Term and the Long Term structures is given the table below. 3-7 However, the reported figures cannot be relied upon when the recovery rates reported at the lowest tier are 63% for the ST structure and about 30 % for the LT structure. Key Data: Short Term and Long Term Structure4 (Figures as of 2002-03, in INR Million) RSCB DCCBs PACS RSLDB PLDB Owned Funds 2,281 4,474 3,243 864 3,794 Deposits 9,919 18,594 943 30 Nil Borrowing (o/s) 6,939 9,187 12,530 12,669 11,933 Advances (o/s) 11,119 20,703 13,251 11,992 12,219 Investments 7,252 7,300 N.A. 1,930 769 Recovery Rate 95.46% 77.24% 62.75% 45.92% 29.37% No. of profit making units

-- 23 3,891 -- 23

Current Profit 150 333 288 89 97 No. of loss making units

-- 3 1,349 -- 13

Current Loss 32 123 -- -142 Accumulated Profit

398 N.A. Nil 898 152

Accumulated Loss

Nil N.A. -620 -702

Average Cost of Funds

9.34% N.A. N.A. 7.12% N.A.

Financial Margin 2.66% N.A. 3.76% 1.44% 3.57% Transaction Costs (% to WC)

0.40% 1.93% 2.90% 0.41% 1.28%

Net Margin (%) 0.90% - 0.86% 1.03% 2.29% Source: NABARD Laws and Regulations 3-8 Banking is a central (federal) subject in India while cooperation is a state (provincial) subject. As a result the cooperative credit system in India is subject to dual control, i.e. that of the Reserve Bank of India in respect of its banking function and that of the state government in respect of the setting up and operation of cooperatives. 3-9 The Rajasthan State Cooperative Bank Ltd., the short-term apex institution, was set up in 1953, under The Rajasthan Cooperative Societies Act, 1953. The apex

4 There is another compilation available for RSCB, which is somewhat different from the above. It may be mentioned that for some entities, previous year figures are included to arrive at aggregates due to non-availability of relevant year financials.



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institution of the long-term structure (The Rajasthan State Land Development Bank) was incorporated in 1957, under The Rajasthan Cooperative Land Mortgage Act, 1956. The DCCBs and PACS have typically been functioning for a longer time, and were constituted under earlier legislation. Post 1953, all the short term institutions were incorporated under the 1953 Act. This Act, however, did not have any provision to cover the long-term institutions. This lack of uniformity in the system, vis-à-vis the governing Act, was corrected in 1965, when the 1953 Act was replaced by The Rajasthan State Cooperative Societies Act, 1965. The 1965 Act catered to both the short and the long-term institutions. 3-10 The Cooperative law in Rajasthan has recently undergone another major change with the enactment of The Rajasthan Cooperative Societies Act of 2001. This Act is not an amendment of the earlier Act, but a new one. However, on probing for differences between the two Acts, most respondents (at all levels in the system) reported no major differences, and said that ‘this (the 2001 Act) is old wine in a new bottle.’ The rules for the new Act are still being framed.

3.3 The Short Term CCS in Rajasthan 3-11 Ownership, Organisation and Governance. While the CCS is ostensibly member owned, the state government of Rajasthan has also invested in and is a shareholder in the RSCB, DCCBs, and PACS. For example the state government owns 3.7 % of the RSCB, making it the single largest shareholder even though the DCCBs collectively own over 96% of the total paid up share capital. 3-12 There have been no elections in the credit cooperative system in Rajasthan for over ten years and all the Boards other than of PACS are superseded. An Administrator (deputed from State government) works in place of each board. In the case of the RSCB, the Administrator is the Secretary Cooperation, Rajasthan who also has primary responsibility for regulating the system through the Registrar of Cooperative societies, a functionary under his direct control. Thus the roles of owner, regulator, and management are all rolled into one. 3-13 Operations. Cooperatives account for about a third of the short-term agricultural credit provided by the formal financial sector in Rajasthan, making them critical to rural outreach. Yet, on an overall basis, during 2002-03, PACS lent to only 40% of their members, accounting for less than a quarter of rural households in Rajasthan, thus presenting a large opportunity to improve outreach. For the year 2002-03, PACS disbursed INR 12995 million to members, with an average loan amounting to about INR 7,600. As on 31st March 2003, about 22% of total PACS outstanding was to small and marginal farmers5. SC/ST6 clients accounted for 16% of outstanding as on that date. The State Department of Cooperation, Rajasthan has issued guidelines under which, the Board of a PACS can authorise the society to function as a mini bank. For a beginning, the financial service which the mini banks can provide in addition to their lending is acceptance of deposits. There are around 1100 PACS functioning as mini banks and their total deposits are at around INR 1002 million. 5 As per NABARD definition 6 As per Rajasthan State definition



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3-14 At the DCCB level, lending to PACS accounts for about 65% of total outstanding. While specific figures are not available, it is estimated that three-fourth of the non-PACS lending of DCCBs is to other cooperatives, while the balance one-fourth is to individuals and incorporated bodies engaged in activities allied to agriculture or processing of agricultural output. DCCBs also accept deposits and carry out other banking functions similar to commercial banks, such as participation in the payments system. Key services provided by DCCBs to PACS, other than loans include sanctioning of all loans originating from PACS, arranging insurance for cash in transit and personal accident insurance for PACS borrowers and conducting inspection of PACS. 3-15 The branch network of the RSCB caters primarily to the DCCBs, and provides some services such as cash credit, term loans, working capital, draft making, guarantees and letters of credit to others. The overall direct lending of the RSCB is around INR 2 billion out of an outstanding of more than 11 billion. The bulk of this INR 2 billion is lent to a few large cooperative sector borrowers. We understand that direct lending to individuals is only about INR 40 million. The RSCB provides operational direction to its lower tiers, does monitoring and supervision, and conducts an annual audit of all its DCCBs. It prepares and communicates annual targets for all its DCCBs, and sanctions their credit limits and reviews and monitors the progress of the DCCBs, through regular meetings. 3-16 Organisation and Systems: The cooperative organisations at all tiers are headed by government appointees, whose tenure is typically uncertain. Delegation of financial and administrative powers is minimal, decision making is centralised, and in practice, mostly in the hands of the staff deputed from the government. There was shortage of staff at most levels. There has been almost no fresh recruitment for a long period. The average age of an employee is around 50 years, and it is only increasing. 3-17 The PACS lack even basic accounting systems. The higher tiers are in somewhat better shape with regard to basic accounting but it is difficult to rely on any numbers put out on the system because of the problems with the base data as also the lack of automation. 3-18 Portfolio Quality and Profitability. As per reported figures for 2002-03, 3,981 (76%) of 5,252 PACS, 23 of 26 DCCBs and the RSCB are profitable. But 2002-03 was a rare ‘good’ year and a larger proportion of the institutions otherwise have accumulated losses, e.g., only 12 DCCBs have reported accumulated profits as at the end of fiscal 2003. However, the figures cannot be relied upon when the recovery rates reported at the lowest tier are 63%. 3-19 At the lowest tier i.e. at PACS, there is no asset classification or provisioning. Further, loans are often restructured due to drought or other calamities. Since 1998, restructurings have been affected in all but 2 years, covering 5% - 60% of the outstanding portfolio in different years. Reported transaction costs are about 3% of working capital for the aggregate. It is difficult to assess transaction cost of the



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lending operations separately as common personnel and infrastructures are used for credit and non-credit operations. 3-20 At the DCCB level as on March 31, 2003, out of total advances outstanding of INR 20,703 million reported gross NPA was INR 2,802 million. Reported NPAs as a percentage of total advances have gone down from 16.8% in FY2001 to 13.5% in FY 2003. The provisioning in respect of this was INR 1151 million. Reported transaction costs are about 2% in the aggregate. Because of poor data integrity and successive restructurings, it is difficult to assess the additional provisioning requirements of the Rajasthan short term CCS. But is estimated at a minimum additional 10-15% of gross outstanding.7

7 The provisioning estimates have been worked out without taking into account relaxation of prudential norms for Agricultural loans effected in the summer of 2004. It is likely, if these norms are applied that additional provisioning requirements would be minimal. On the other hand, it is difficult to assess the portfolio quality due to likely evergreening. Please see Annex 2 for a further discussion on this issues.




3.4 Poverty, Social, and Gender Analysis India 3-21 India is the second most populous country in the world with a population of over one billion. As of 2001, over 30% of its population was under 15 years of age. India’s HDI ranking in 2003 was at 127 in a list of 175 countries. Compared with an annual population growth rate of 2% in 1975-2001, the projected rate for the next fifteen years is 1.3%8. 3-22 Poverty levels in independent India increased from around 45% to 57% in the first three decades. The decline in poverty began from the early 1980s, largely as a result of a sharp decline (20%) in incidence of poverty in the rural areas as compared to urban areas. As of the NSS 55th round (1999-2000), the poverty levels (measured by the head count ratio) are at around 26% for all India, broken down into 27% percent for rural areas and 23.6% for urban areas. The gini index of income and consumption inequality was 37.8% for 1997. The quantum and incidence of poverty in rural areas have a far greater influence on the national average than that of urban areas as 70 percent of the total population lives in the rural areas. 3-23 There are wide regional disparities with regard to poverty levels within India. Eastern and North Eastern states still have poverty levels above 40%, and states like Haryana, Punjab, Kerala have poverty levels less than 10%. The head count ratio among the SC and ST population is very high at over 50%. The growth rate of employment has gone down between 1993 and 2000, and the decline being more marked in rural areas. The All India unemployment rate was at 7.32% in 1999-2000, with 26.6 million unemployed persons. The overall literacy levels are at around 65% (as of 2001), but female literacy is 20% lower than male literacy. The life expectancy at birth (2001) was 63.3 years. Rajasthan 3-24 Rajasthan is one of the largest states in India, a large part of its land area being desert. Around 77% of its population of 56 million lives in rural areas. The population growth rate at 28% is much higher than the national average of 21%. Droughts being a regular phenomenon in the state, economic growth rates and livelihood options are a function of the drought patterns. The Net State Domestic Product at current prices was INR 793 billion in 2001-02, and it fell to INR 769 billion in 2002-03 due to a drought in the previous year. The population growth rate being very high, the per capita income in the state has grown at a very slow pace. 3-25 The head count ratio for Rajasthan in 1999-2000 was 15.28%, which is much lower than the national average of 26.10%. Unlike in most states, urban poverty in Rajasthan (19.85%) is higher than rural poverty (13.74%). Under employment and migration to cities, both within the state and outside is widespread during drought. The higher urban poverty rates could to some extent be a result of this phenomenon. 8 UNDP HDR 2003




3-26 The employment growth rates for the unorganised sector in Rajasthan have far outperformed the national averages. For the period 1990-98, the growth rate of employment in rural areas was 3.92%, as against the national growth rate of 2.15%, urban employment growth rate similarly was also higher at 1.77% compared to national growth of 1.34%. The incidence of unemployment in Rajasthan at 0.8 is much lower than the national average of 2.3. The high population growth rate however outpaces the growth rate of employment. Agriculture engages the largest proportion of the workforce and has been facing sluggish growth rates. The service sector on the other hand has employed a very small number of persons. 3-27 Rating by the Human Development Index of 1991, Rajasthan, ranks 27th out of 32 states. The overall literacy rate (61%) is lower than the national average (65%), however the rate of growth of literacy rate has been noteworthy. In the decade 1991-2001, the literacy rate has gone up from 38% to 61%, which is the fastest growth rate in the country. 3-28 In terms of health indicators, the life expectancy is more or less at par with national figures. The infant mortality ratios and maternal mortality ratios for Rajasthan were amongst the highest in the country in 2001. The fertility rate in 1998 was also very high at 4.2, compared with the national average of 3.4. The number of working children in Rajashtan is the second highest in the country. The per capita per diem intake of calories for Rajasthan was amongst the highest in the country, next only to Haryana, both for rural and urban areas. 3-29 The gender related indicators in the state are much lower relative to the rest of the country. The urban sex ratio for Rajasthan in 2001 was appalling at 890 and the rural sex ratio was 932. The corresponding national figures were 901 and 946 respectively. The literacy rates for females, both in urban and rural areas however are much lower than the corresponding all India figures. The enrolment ratios, particularly for girls are lower than all India figures. Child labour amongst girls is a serious problem in Rajasthan, the proportion of working girls in rural areas, in the age group of 5 -14 yrs remained at around 9.8% in the decade 1981- 91. For urban and rural areas put together, in Rajasthan in 1991, 7.9% of girls were working compared to the all India figure of 2.7%. 3-30 A comprehensive analysis is provided in Annex 3.

3.5 Environmental Analysis 3-31 With a desert covering much of the land area, and around 7% covered under forest area, the day temperatures are typically high, humidity is low, rainfall is erratic and low leading to frequent droughts. Over 70% of the rural population depends on agriculture for subsistence, which is mainly rain fed. 3-32 Environmentally, soil erosion and moisture loss are serious problems for land in Rajasthan. More critical however is the water situation, given the limited water resources and a steadily increasing population. The total water utilization in Rajasthan is 70% from surface water and 30% from ground water. Ground water




levels are depleting at high rates of around 2m/yr in places like Jaipur. Pollution of groundwater is a growing concern and so is competition between urban and rural areas over available groundwater. Such depletion typically tends to discriminate poor farmers who cannot dig deeper as the costs of digging rise with depth. 3-33 Rajasthan, due to its size and location, is rich in biodiversity and wildlife. The state also has rich mineral base, which supports industries such as marble and granite processing. Unplanned and un-scientific marble extraction leads to marble slurries flowing to crop areas causing loss of fertility and crops. Rajasthan accounts for 90% of the cement production of the country, but the cement and textile industries of Rajasthan also lead to environmental pollution. Environmental Impact of Prospective Subprojects 3-34 The activities under the project are directed at enhancing incomes and income generation opportunities primarily in agriculture and allied activities, agro processing, cottage industries, small scale trading and small commercial activities. As the project activities will contribute to an enhancement in household incomes of rural families, it is likely to have an overall beneficial impact on the environment. Intensification of crop and livestock production will lessen marginal land degradation, livestock grazing on fragile lands (due to stall feeding) and cropping of the most infertile and erosion prone soils. 3-35 Notwithstanding the general positive environmental prognosis, individual sub project loans provided for certain micro-enterprises may occasion deleterious environment impacts. There is therefore a need to regularly monitor and mitigate these risks as much as possible. 3-36 Some illustrative examples of the possible harmful environment impacts from activities to be financed under the project are: Agricultural production: To the extent that more and more land area is brought under cultivation, unplanned settlements and roads leading to that area are likely to lead to the irreversible loss of habitat. Increased agricultural production will also impinge on the sustainable use of water and land resources. Inappropriate use of pesticides may lead to impairment of surface and groundwater and soil quality. Agro processing industries: Ozone depleting substances could be in use in the refrigeration equipment. Also if chemicals are stored in godowns, handling and disposal of chemical waste becomes an issue. Livestock loans: Pathogens in manure from animal waste can cause diseases in humans if people come in contact with them. Food safety becomes a concern if manure application is inappropriate. Additional pressure on forests and land resources could result from incremental fodder needs. Non farm sector loans: Loans to cottage industry, artisans for handicrafts are not expected to have large impacts. There could be localized impacts due to the use of hazardous chemicals, emissions from fuel use and wastewater from washing and cleaning. Some cottage industries could use high value forest products such as timber, bamboo and fuelwood causing depletion of a resource faster than the natural rate at which the resource is replenished.




3-37 While some sub project loans could lead to some environmentally undesirable consequences, the micro/small scale of these sub project activities and the likely low intensity of lending in a given location/ area, should ensure that the environmental effects of the project as a whole should not be of significant concern. Nevertheless, in order to ensure maximum productivity of the loans and at the same time minimum adverse impact on the environment, desirable interventions to mitigate the possible harmful effects of these sub project loans as well as regular monitoring requirements have been specified. 3-38 A complete environmental analysis can be found in Annex 4.




4 THE PROJECT

4.1 Strategy 4-1 In the last few years many plans for revitalising the financial cooperatives have been evolved and a few initiatives have been implemented. 4-2 The previous restructuring plans have not worked in the past because these have addressed only a part of the problem (people’s representation, systems, training). This project is developed on the premise that if the CCS has to be revitalized all parts of the problem will need to be addressed simultaneously. In particular, policy, governance, supervision and regulation issue are vital. The CCS is said to suffer the problem of dual control. We believe it suffers from a surfeit of rules and no regulation. It suffers from too many supervisors and no supervision. It has too many owners and no ownership. So in addition to the policy, governance, supervision and regulation issues, systems and procedures and professional management (banking) that feels accountable to owners, supervisors and regulators are vital. 4-3 The thrust of the actions is then that restructuring the CCS should involve short (immediate), medium (2 – 3 years) and long term (4 - 5 years) actions along the three dimensions of regulations and supervision, institutional development and financial restructuring with movement to the next phase only after achieving objectives /performance benchmarks on all three dimensions in the preceding phase. Further, the Cooperative Development Framework has to be accepted and agreed by the stakeholder in full before embarking on the elements of the project.

4.2 Principles 4-4 The following have been kept in view in developing the strategy:

Firstly we should accept that the system is profoundly ill, and that it must go through treatments to be healed. The infrastructure of the CCS is so spread out there is, therefore, no other alternative of comparable outreach for extending financial services to the rural population.

The willingness of stakeholders in fixing the system should not be questionable;

governments, regulatory authority, the institution itself, and the rural population should all want to address properly this issue. We should not hesitate to use, indeed do so pro-actively, political means to support what we think are technically and financially prudent strategies.

Even if the cooperative system has its own particularity, it has to recognise that it

is an intrinsic part of the main stream Indian financial system; therefore, abiding by all the rules, constraints but also benefits of that financial system is a necessity to obtain the regulatory recognition.




The system may be broken but it does not mean all the components are bad in their intrinsic design. For example, the idea of Primary Agricultural Cooperative Societies (PACS) is not bad even if 90 percent of PACS are sick. A lot of the dysfunction is caused by bad governance, management, and processes. There is nothing wrong with the idea.

To ensure a strong structure, CCS must be built from the bottom up, starting with

the PACS to make DCCBs and Apex profitable as well; if necessary new progressive cooperative acts should be used.

If we have to rebuild the CCS structure, we have to redesign its configuration to

make it base oriented and more responsive to the needs of the local population, for that the most important aspect will be to invest in the human processes from the bottom up by working with community based organisations as well as individuals. These processes include a sense of ownership among members, their involvement in governance, training and HRD of staff and building a support system of functions such as inspection, audit, training, marketing, MIS and so on.

The newly designed CCS will have to offer a range of composite financial

services through a single window therefore simplifying for the customer/member access to these services. When a PACS has to be closed in one particular area for non-viability reasons an alternative will have to be provided to ensure service delivery to the local rural population. The same outlet – the refurbished PACS - should be able to provide services of savings, credit (including crop loans, agricultural term loans, consumer loans), deposits (fixed, recurring and current), insurance for both life and livelihoods, money transfer, pension payments, commodity derivatives, and securities trading.

It is time for the CCS to enter the new era of information technology (IT)

intensively, thereinafter increasing services while reducing operational and transactional costs. They need to do with IT in the cooperative sector what the telecom and other sectors did to their operation. Thus, for example, biometric smart cards, WLL swipe machines and low cost ATMs should all be part of the new architecture of rural financial services.

It is also time for the CCS to mainstream innovations such as available from the

micro-finance field, extend its outreach to the landless and poor and to play a proactive role in finding ways to mitigate portfolio risk arising from agro climatic conditions and calamities.

The reform requirements as outlined through the above principles are enormous.

At the same time, the GoI has set itself the target of doubling agricultural credit in three years. If this objective is to be achieved, the strategy has to focus on turning around a large proportion of CCS entities very rapidly. Given the current state of the CCS, this is not only a difficult task but almost impossible if even 70-80% of PACS have to be strengthened to become financial intermediaries in the true sense. The strategy accordingly must include innovative ways to leverage the existing physical reach of the system without expanding financial intermediation in an indiscriminate and risky way.




4.3 Components of Strategy 4-5 The strategy is divided into 10 components: Laws and Regulations 4-6 Rajasthan still has two laws for the cooperative sector. However, as soon as the rules for the new cooperative law are set, all cooperatives will be governed by the new law. This law and its rules have to ensure that it creates an enabling environment for the CCS, and that the financial cooperatives while being registered under that law gain freedom of management and action. The cooperative law and rules will also need to ensure that in regard to cooperative banks, authorities and mechanisms are provided to enable RBI and NABARD to perform regulatory and supervisory functions with minimal overlap in role and functions with the RCS. RBI is currently the regulator of the banking functions of the CCS. It has delegated the inspection of the network to NABARD. Therefore, RSCB and the DCCBs being banks are also regulated by the B. R. Act. As a long-term goal, there should be one law regarding financial cooperative (could be a separate chapter of the B. R. Act) with one central regulator and one central supervisor. 4-7 As an interim measure the government should issue executive orders to facilitate early implementation of the changes. These orders should cover inter alia:

• All members should have the same rights and that every individual borrowing or making deposits with the cooperatives is a member

• Bye-laws should define clearly roles and responsibilities of Directors, and foster regular elections

• Bye-laws and regulations should provide for professional presence at the governing and administrative level

• Abolish Board positions from GoR and prepare to exit from share capital of CCS

• Define and restrict role of RCS, withdraw restrictive orders on CCS actions • Provide appropriate authority to RBI/NABARD for cooperative banks.

4-8 The member centric and member managed nature of the CCS also implies that the State Government should not be a shareholder. Once the executive orders in this regard are in place, state government share capital may be returned at an appropriate valuation. 4-9 GoI/RBI will also have to establish regulation allowing transformation to take place, including:

• Establish prudential norms and changes in the BR Act, keeping in view the cooperative character of DCCBs & SCBs.

• Allowing DCCBs to have agents to raise deposits • Clarifying the role of NABARD as the supervisor with appropriate tools at its

disposal.




Structure 4-10 There is a general agreement around the fact that the structure itself is not badly designed, parts of it might be dysfunctional, but the concept is sound and has proven in many places that it could work. Therefore, our intention is not to drastically change it but to create a workable environment in the context of a restructuring plan. 4-11 Restructuring the short term CCS means that there is an understanding that all its parts have to work together and aim at the same goal – providing efficient, reliable, timely, and required services to the target group, namely the rural population. 4-12 Each of the tiers has a role to play, and if it is done right the overall cost of the structure will not be a deterrent.

The SCB should provide standardization and bargaining power for relationship with the State, the Centre and the capital markets

The DCCB should be the driving force of service delivery, make the whole structure more manageable and provide required and adapted products to the base

The PACS is the guardian of the cooperative concept, the difference with the traditional banking system, and the only real possibility to outreach for millions of ultimate clients.

4-13 The backbone of that structure should be the PACS, owned and managed by the local members, they should, be an outlet facilitating multiple financial services to its members through a single window. It would be highly unrealistic to think that 5,252 PACS could be transformed into full financial intermediaries; therefore, it is proposed that PACS become agents of the DCCBs delivering locally all financial services available with a DCCB. The PACS would therefore be agent of the DCCBs for providing financial services (credit, deposits, insurance, and other type of banking services) and will have their own operation for farm inputs. The larger and more profitable PACS could, if they are meeting all prudential norms apply for a banking license and have their own banking operation over time. However, in the short term, the agent concept represents an easier methodology for the PACS as there would almost no financial risk, small requirements in banking expertise, and a well defined revenue structure. 4-14 The DCCBs, owned by the PACS, should service direct clients, through PACS and branches, located where there are no PACS. The range of services that they should handle is discussed in the section on operations. 4-15 The last tier of the organisation is the apex organisation – RSCB. It is owned by the DCCBs and should primarily service the DCCBs through services like, planning, product development, human resources, information technology, standardisation, internal supervision, investments, etc. RSCB will also play the role of intermediary with the Government, Regulator, Supervisor, and funding agency especially NABARD. In the current environment, they do not play much of a role in raising wholesale financing at competitive rates for the network. However, it may be




easier for them to continue to play the apex role if NABARD refinance is routed through them. But they should gradually pull out of retail services. 4-16 To achieve this, each unit will produce, with the help of the Project, a restructuring plan. The higher tier will need to review it, take ownership and prepare merger /winding up plans for dormant or unviable units. In all cases continued service to areas currently served by the entities to be closed/wound up will need to be assessed. 4-17 To illustrate, many PACS are dormant. It may not be possible to revitalize all the rest for a variety of reasons or they may choose not to participate in the program. An orderly exit/attrition strategy will need to be developed for these. More importantly, the households in these areas require to be served. It is proposed that this be achieved through a combination of linking the households to nearby good PACS and/or through extension counters of such PACS or the DCCB Branch. Similarly, some DCCBs (perhaps the bottom 2-3) may need to be closed. In such cases their PACS will be required to be linked to nearby good DCCBs. Governance 4-18 The project will promote active General Body, Board of Directors and Board Committees for effective governance. 4-19 Even if it is recognized that in most places the owners don’t necessarily have the capacity to govern financial institution professionally, it is of primary importance to give back the power where it is supposed to be – the members. Therefore sensitization programme will be conducted to prepare members for the active role they have to play in their organisation. 4-20 Currently the members with voting rights are only the borrowers. With PACS becoming agents of DCCBs and to create an impact on savings, the same rights will be given to users of services provided / facilitated by PACS; after all it is widely admitted that the feeling of ownership is directly proportionate to the amount of money inside the system belonging to the members themselves. To decrease political interference all non-active accounts will be eliminated and it will take at least 6 months of activity in the organisation before obtaining voting rights – an active account would be defined with at least one transaction a month. 4-21 PACS Boards will remain member centric but DCCB and SCB Boards need to be professionalized as Board members must have the ability and skills to guide banking operations. It is accordingly proposed that DCCB and SCB byelaws require the Board to be limited to 12-15 members, at least one third of whom will need to be individuals with relevant experience. 4-22 The Boards and Committees of DCCBs and SCB will also require intensive inputs in relation to governance issues in general and specific issues of current relevance to cooperative banks in particular. 4-23 The project envisages significant training and support for this component.




Management 4-24 Managing a financial institution requires specific skills, managing a financial institution in a cooperative environment requires more skills. Currently most of the managers are governmental employees on deputation, mainly from the Cooperative department. It is essential to put the right person at the right place. A plan to professionalize the management will be prepared in which all deputed employees should be repatriated by their respective departments and be replaced by professional managers. 4-25 Training plans on every aspects of the life of the financial institution will be offered to the managers. 4-26 Hiring professional managers and managing this exercise will be a difficult operation and can be subject to a lot of external pressure; therefore, the project will help in establishing in RSCB a specific cell to undertake Human Resources Management for the CCS, as an outsourced function on payment of appropriate fees. At the same time, it is important to be clear that these professional managers will be employees of individual CCS entities and will be subject to promotion, increments, etc. as per the decisions of the individual DCCB Operations PACS 4-27 The project will implement a strategy that focuses on improved governance, infrastructure and business volumes but takes the PACS out of the business of financial intermediation as principals. Rather they will be multi purpose cooperatives serving as agents of DCCBs. Moreover, the PACS business model will be reviewed, in particular to take into account variations in business volume and access. In particular, retail outlet open days, timing and complement and skills of staff need to vary with business volumes if PACS are to be viable entities. 4-28 At the same time every entity deserves the chance to come into the fold of the system. Many entities may have to be closed due to their incapacity of achieving some minimum standards. Therefore, to avoid major closures, the strategy will be to transform the PACS into agent of a financial institution (DCCB) offering /facilitating a full array of financial services:

Credit (short and long term, in cash and in kind, loans for agriculture, non farm sector, micro enterprises and general purpose)

Savings (fixed and recurrent deposits) Current account Insurance (life, health, crop and agri-business) Kisan Credit Card (small line of credit facility) Demand draft (a partnership between DCCB and a commercial bank) Security lockers And other type of financial services.




4-29 Offering a complete array of services will improve the PACS image of a professional organisation, thus attracting more members (customers). The important impact is that the members should be able to get the majority of their financial services under the same roof. 4-30 PACS will have to maximize their outreach; CCS is currently providing around 35% of agricultural loans. Even if this figure does not look bad, we must remember that the formal financial system addresses only a small portion of the total demand for these services. Even within their own membership, PACS are servicing only 40% of their members and this represents a real opportunity of growth. 4-31 The most important problem plaguing the system is recovery of loans; PACS and DCCBs have a very bad record on this matter. The project will aim to provide training and inputs to DCCBs and PACS so that the front line organizations intensively use micro-finance best practices in their lending methodology. These include the group model, because this model has proven to be creditworthy. It could be through the SHG concept (recovery rate throughout the country is over 96%) but also, primarily for crop loans, through the JLG (joint liability group) model where the loans are individual loans but the whole group is liable for repayment. This will also improve social and poverty outreach as loans can be extended without collateral. Other micro-finance best practices that need to be mainstreamed are credit appraisal based on appraisal of income of the family from all sources, regular monitoring and recovery of loans at regular intervals (e.g. at the end of a crop season rather than the end of an year) and intensive use of technology so that human resources can concentrate on human contact related tasks rather than book keeping and reporting. 4-32 The PACS being agents will become delivery channels for a DCCB and all the banking transactions should sit in the DCCB books. The outreach of the PAC should also be used to mobilise deposits and provide insurance services to their members on behalf of DCCBs. 4-33 To ensure that the PACS are motivated, they should receive a fee for their services, that fee should be linked to sanctioning and recovery of a loan account, policies issued and premium collected, total deposit amount, DD and check processed, and all services rendered as an agent to the DCCB. 4-34 While, with the passage of time, overall increase in rural incomes will translate into higher demand for insurance, there is reason to accelerate insurance coverage by: • Devising products, which are, suited to the seasonal cash flow patterns of rural

agricultural households and fall within the affordability range of the rural poor households. Further, there is a need for products aimed at women.

• Where little insurance exists and premium-paying resources are very scarce, group insurance products will be the best way to proceed.

• Changing procedural requirements for origination, under-writing, documentation, claim processing and settlement, to take into account attributes of rural/poor households such as lower levels of education or illiteracy, lack of documentary proof of age and sometimes land ownership, and difficulty in getting certificates in the event of death or loss of assets.




4-35 The project includes TA support for the SCB to work with identified life, general and health insurance agencies to develop group insurance products for delivery through the CCS. 4-36 The project, with the help of 5% of these PACS will also test the possibility of using commodity futures prices for price discovery by disseminating commodity futures prices and training to the farmers. DCCBs 4-37 The primary objective of the DCCBs will be to provide to its members (PACS agents) the best services. The members of the DCCBs are the PACS; therefore, most of the services will be oriented towards them. However, the DCCBs are also banks and will continue to operate as banks necessarily meeting the requirements of banking regulations. 4-38 The DCCB will have to ensure close control over the PACS (even if they are agents) by conducting inspection (on and off site) and proposing when required action to be taken for improving the situation of the PACS, after all lots of transactions done by the PACS will sit in DCCB’s books of accounts. The DCCB will review and assess the audit report of the PACS, compare them with their own inspection reports and take action when required. 4-39 The PACS are the main financial window for the ultimate member; therefore the DCCB will make sure that they are not entering in competition with the PACS. Nevertheless there will be areas where the PACS are either too weak, dormant, or simply there will be no PACS at all. The DCCB should try to fill such gaps with one of its own branches or extension counters. There are also bigger villages where banking activities and number of transactions justify the utilisation of a DCCB branch instead of a PACS. 4-40 DCCBs will also play a lead role in utilizing the CCS network and infrastructure to provide services to the unreached and underserved. The project has built in specific support to each DCCB in sensitising and training its Board Members and officers in developing products and schemes, building linkages and undertaking a range of initiatives to extend the reach of the CCS to women and the unreached and underserved. 4-41 DCCBs will also provide a larger suite of banking services to the rural clientele through PACS where feasible and directly otherwise. The project has a component to support the training and preparatory work in this area. RSCB 4-42 RSCB will play a dual role. It will be the wholesale lender for the network providing funds coming mainly from NABARD, but also from other financial sources if the conditions are better. The DCCB should be allowed to have their own sources of fund including external borrowing if, and only if, they can negotiate better deals in the




financial market then what they can obtain from RSCB. However, if RSCB can match commercial funds, the DCCB should have to borrow from the RSCB. 4-43 RSCB will also be a service provider for all the DCCBs. RSCB will provide services like:

Advocacy and Promotion: RSCB: will ensure the link between the network of cooperatives and governmental organisations; will work to increase the outreach by ensuring proper coverage of the network; and will promote professionalism to ensure the credibility of the network.

Planning: RSCB will facilitate business planning and implementation for the CCS structure. The business planning will be bottom up but will also include a top down review to identify ways to fill up the demand/supply gap and provide with new ways of serving the market.

Human resources: the RSCB will establish a human resource cell to bring into the fold of the network professionals at all levels, and will develop training tools and plans to ensure that all managers and officers have the skills needed to undertake their respective tasks

Standardisation: RSCB will make sure that all systems used in the network are standardised therefore providing for better communication between the units but also with outside the network

Product development: RSCB will develop adapted credit and savings products aiming at the ultimate borrowers; and will negotiate with service providers (insurance, commodity, commercial banks) packages to increase the type of services offered to the ultimate members.

Information technology: RSCB will ensure that new technologies are deployed for transaction cost reduction (MIS and computerisation, communication links, ATM, etc.)

Internal supervision: RSCB will implement an independent internal control cell to ensure that the whole network is complying with laws, regulations, and prudential norms applied to the network

Investments: RSCB will act as an advisor for the DCCBs for their investments. 4-44 To finance all these services RSCB will have its own, non competitive with other units of the network, banking operations and will be allowed to levy a service charge on borrowed fund from external sources, to charge for direct services (services that are not common to the group: special products, special inspection when units are not in compliance, etc) and to fix a general contribution from all units depending on their individual assets. Human resources 4-45 The CCS has an aging human resource profile with key positions filled by employees of the State Government who are not trained in cooperative financial services operations. To revitalize the sector, there has to be a well thought out and coordinated strategy for energizing the human resources and strengthening the institutional frameworks at all the levels. 4-46 There are at least five distinct layers within each organization, which will need to be addressed.




Members The governing body of the board The executive layer The managerial or supervisory level Front line staff

4-47 In the PACS, a small team usually drawn from the membership handles managerial/ supervisory and frontline tasks. Adaptive Challenges Institutional Capacity

Governance issues have to be addressed – by a functioning ‘intelligent’ board

Business development should become the focus instead of mere

compliance with coop dept norms

Managerial or operational efficiency should be ensured by proper planning, executive initiative and monitoring /inspections/audit etc. from within as well as by the regulatory mechanisms.

Individual Capacity 4-48 At present the executive layer of these institutions are usually drawn from the bureaucracy, and their focus is meet stipulations of coop registrar/ district collector. To make this structure responsive to client needs the executive layer should develop an orientation:

Banking operations Product diversification Customer orientation Team playing skills Skills in IT based banking applications

Steps in HR Strategy 4-49 The strategy should be built on developing the capacities of the membership, the leadership and the executive and staff of these banks/PACS. The effort would involve working on all these levels. People’s Capacity

Building an alignment Developing the clear focus for each level Communicating priorities and requirements Developing required skills

Institutional Resilience




Orientation to the rural markets Technology solutions Re-skilling challenges and exit routes for staff Recruiting/induction/skill development/compensation benefits/career

development strategies Role definitions/delegation, control supervision and monitoring Team development

4-50 An illustrative list of institutional capacity building inputs required at the five layers is provided below. This will need to be detailed and elaborated during project implementation.




Layer Key Issues Key Inputs Governance (Members, Board)

Role of board/Membership, the board members has more responsibilities than rights

Correcting and updating membership lists/records. Norms about requisites for board members. Elections and rotation of members on board Orientation workshops for board members and general body members.Training in meeting management, secretarial tasks, etc.

Managerial and supervisory levels

Operational efficiency. Concern for customer Openness to IT Anxiety about reviving the system

Performance monitoring system Strong measures to deal with corruption Emphasis on recoveries Customer orientation, service quality etc. Credit appraisal and loan processing skills Appropriate IT based solutions for loan processing, tracking and CRM Innovation in service delivery Profit planning systems in place Standard norms about compensation etc. performance linked pay Clarity about service conditions especially for PACs staff Orientation to team Job descriptions, manuals on procedures and systems

New perspectives to be absorbed

Changes in various systems Recruitment/enrolment – induction

– compensation benefits Career development – punishment

– grievance redressal – exit route Executive level/ Frontline staff

Owing responsibility for business growth – away from bureaucratised control systems

Training in business orientation Strengthening business planning processes Individual/unit level goals and objectives Performance based evaluation Financial + livelihood support servicesSensitivity to social issues – gender caste etc. Better understanding of pricing policies Delegation system/control and monitoring systems.




4-51 Rajasthan has cooperative training institutions, therefore RSCB will be provided with Project inputs to review their training modules, effectiveness and suitably of training and remodel the same to meet the requirement. There is also a need to develop mobile training units to ensure on the job training where the number of officers does easily allow for someone to leave his work place for an extended period. The restructuring plan should include training plans for each target groups. With the help of training facilities complemented by external resource persons and trainers, RSCB will elaborate adapted curriculum, and training schedule to reach a maximum of trainees. The project will particularly encourage the use of indigenous methods of mass communication and entertainment (such as street plays and puppet shows)to reach out to the members so as to sensitize them about the reform and their responsibilities and rights as cooperative members. Management Information System and Technology 4-52 Managing a financial institution is a challenge by itself. Converting a bad institution into a good one is therefore a huge task. Reliable information is at the core of management processes, for day to day operations as well as for control. Therefore, RSCB and DCCBs including all branches included in the restructuring process, will be computerized to ensure reliability of information but also access to the same on a timely basis. It is proposed that PACS computerisation be done in phases with focus on affordability i.e. only those PACS with adequate business volumes are computerised. Innovative solutions for automating processing of information would be explored for the balance. A common MIS will be designed and implemented not only in the DCCBs & RSCB but also PACS; the standardisation of the system is very important to provide comparable data and facilitate training. A strong MIS will have a positive impact on management and transaction costs, thereby increasing profitability; moreover, it will improve member relations by accelerating the decision making process and ensuring accuracy in members’ accounts. 4-53 Communication is also nowadays an intrinsic feature of a modern organisation. To accelerate processing of information all the units will be linked together. Moreover, the CCS will propose to stakeholders (regulator, supervisor) and business associates (banks, insurance company, and commodity exchange), to link themselves with them, thus increasing the circulation of data and providing more services to the members. 4-54 A study on technology application will be commissioned by the project to measure the opportunity to use new technology strategically. The main goal will be to increase efficiency in the system, and services to the members. Technologies initially identified for exploration include the usage of smart cards, low cost ATMs, and mobile computing. Use of handheld devices may be explored to capture transactions at the field level to improve customer service and to avoid duplication of data entry. This can permit the already scarce staff at the CCS units to focus more on verification of data entered as also other developmental activities like fresh disbursement and intensified recovery.




4-55 The earlier attempts at computerization at the RSCB must however be remembered and lessons learnt from that. Just getting the technology right is not enough, a plan to address motivation, training and resistance issues must be developed and the implementation be driven from the top. 4-56 The Project will support development of a Computerization Plan detailing the systems and procedures required to be followed for successful computerization. Staff will be identified, trained and motivated for faster and effective implementation of Information Technology to streamline MIS compilation and reporting to the appropriate authorities. The investments made for IT (hardware and software) would be monitored closely and remedial action taken in case of delays or improper/ inadequate utilization of hardware and software resources. CCS units are found to be separately taking up the exercise of software development with various unknown or local software development agencies having inadequate knowledge and experience about Banking Laws and Practice as also the MIS needs of the CCS units. The project will support short-listing of reputed software agencies as also their Banking Software Applications after a thorough review and audit of the software applications available in the market. The project will also support Open Platforms as far as the Operating System, Databases and other telecommunication and utility programs are concerned. This would help CCS units in substantially bringing down the cost of ownership as there would be significant savings on License Fees. Please see Annex 6 for recommended hardware and software configuration and indicative costing. Control and Supervision 4-57 The success of all financial institutions is primarily based on the trust its potential customers place on the organisation. Many institutions around the world have risen and fallen because of that. It is obvious from field reports that the CCS is suffering from a lack of trust. This is also evident if one compares the tremendous outreach with the small deposit base of the CCS Field Work confirms that if there are two financial institutions in the same area, the depositor will not favour the CCS unit. 4-58 Trust is engendered not only because of security but also because the customer knows that the institution is well managed. Currently this perception is negative mainly because it is well known that control over CCS is almost not existent. Therefore, if regulations, policies, and procedures are not strictly followed, units should not receive permission to operate freely. 4-59 “…it is possible to identify a limited number of models of supervision. …, it is observed that the models of supervision are named according to the persons who practice it: the network (internal supervision), the government authorities (external supervision) or else a combination of both, according to the degree of integration (parallel or integrated supervision).”9 In context of the situation in India, an integrated supervision system will be implemented. 9 Supervising Community Finance Institutions: A Responsibility To Be Shared? Dévelopement international Desjardins, July 2002




4-60 In this system, two levels of control and supervision are required. Firstly, the internal control system should be reinforced by implementing state of the art system through which regular inspection (once a year for performing units and as required for non-performing) could be conducted. The RSCB would supervise the DCCBs; and DCCBs, the PACS. RSCB and DCCBs will have internal separate entities for this function comprising professionals. These professionals will be granted with enough independence to avoid interference and they will conduct on and off site inspection and surveillance. 4-61 The supervision of the SCBs, DCCBs, the core of their activities being banking, is the responsibility of the banking regulator. NABARD has been currently delegated this function, but without authority to use supervisory tools. It is critical that NABARD’s supervisory role be clarified vis-a-vis that of RBI as a regulator and that there is a specialised set up for supervision of the cooperative banks with appropriate supervisory tools. 4-62 Supervising and auditing cooperatives is a special task, therefore international expertise will be used local effort to deliver the best possible system for the Indian environment. Financial Restructuring 4-63 Cleaning up the balance sheets of these organisations will be necessary. But before that, a thorough audit/review will need to be carried out on to assess the portfolio quality and draw up financial statements using generally accepted prudential norms. Based on the estimates for additional provisioning at the DCCB level, we have made, at the interim stage, an attempt at estimating the total financial restructuring requirement, suggested principles and carried out an exercise in modelling typical DCCBs of the system to see what the financial restructuring could look like. Whilst we have made some estimates of the additional provision requirement, these are essentially indicative in nature and could undergo change once a thorough audit of the reforming entities is carried out. 4-64 The major issues that will have to be faced to estimate the full extent of requirement of financial restructuring are:

There are accumulated losses at all levels Basic accounting is unreliable and PACS do not follow prudential norms There have been successive loan restructurings. RBI norms do not require

provisioning on restructured agricultural assets. Cooperative Law requires interest to be recognized on accrual basis. While RBI norms require overdue interest to be provisioned, the treatment is not followed consistently.

Actual asset erosion is likely to be substantially higher than currently assessed in the system or what CCS books will show after the summer 2004 circulars on restructuring and provisioning for agricultural loans are implemented.




4-65 Therefore, no financial restructuring of the CCS will be carried out without taking steps to ensure the CCS’s sustainability. Principles guiding this action will be followed:

The state will accept the policy and reform framework in toto. This includes issuing executive orders to give effect to changes in the regulations, governance and ownership of CCS entities pending legislative changes.

PACS will initiate changes to have a single class of members characterized by voting rights.

Steps will be taken to hold elections at all levels. Financial restructuring will not involve infusion of funds in such a manner

that the state or its agencies are left as shareholders in CCS entities. No funds will be provided to individuals or entities so that they can infuse

capital into the system. Only potentially viable entities must be financially restructured. While GoI, GoR, the CCS entities and CCS members must all share the

cost of financial restructuring of of CCS to the extent that proximate responsibility can be assessed, it will be important that the amounts required are available from a single pool so that delays in release of funds from any entity do not jeopardize project implementation. It is accordingly proposed that contributions by CCS members and entities be limited to the extent of owned funds and that GoR be provided a loan by GoI to the extent of its assessed contribution with the actuall funds flowing to the CCS through NABARD without going through the State Governmemnt.

4-66 It is critical that financial restructuring is carried out only to support and incentivize revitalization of the CCS as a whole and that it is preceded by stakeholder acceptance of an institutional restructuring plan including governance and management. It is also critical that any restructuring be contingent on achieving pre-agreed performance benchmarks. Thus first the project will have to identify candidates for restructuring. Many PACS are dormant. Many others are in very poor shape. Similarly, some DCCBs may need to be wound up or merged with other DCCBs. A more detailed approach to financial restructuring together with a system modeling output as well as model restructuring plans are presented in Annex 5. Managing Risks 4-67 The rural/ poor households are vulnerable to a number of risks. Some of these are frequent, such as minor illnesses but have relatively little impact, while others can be infrequent, such as a cyclone, with great impact. While the former are best handled by dipping into one’s savings, or occasional borrowing, the latter require outside support, either in the form of insurance payouts or disaster relief. One can also distinguish between idiosyncratic and covariant shocks. Covariant shocks, such as drought, can affect all households in a locality while an idiosyncratic shock, such a theft, may be restricted to only a given household. 4-68 The poor adopt a mix of strategies depending on the severity and co-variability of the shocks. Self-insurance strategies include a) reduced consumption of food grains b) taking children out of school c) temporary migration d) diversification of income sources. It may be noted that some of the above strategies reduce the




ability to withstand future shocks and thus if there are successive droughts or bouts of illness, then the family becomes more and more prone to risk. 4-69 Therefore, it is critical that the CCS build inherent capacity to address the risk of its clientele as well as risk to its own sustainability in context of the risk proneness of its clientele by: • Expanding outreach of savings and insurance services to its members. The

project will focus on development of suitable products and linkages between insurance product providers and the CCS.

• Mainstreaming micro finance best practices in the CCS: best practices are being incorporated in each of the section of this strategy. A full review of products, procedures and processes will be carried out to introduce MFI best practices to the CCS.

• Hedging the portfolio risk through weather derivatives: hedging agricultural risk is very difficult, but there are derivative products available (such as rain fall insurance) which could serve to mitigate risk. The project will provide support for pilot activities in this area.

• Disseminating commodity pricing and knowledge will enable the farmer to mitigate price risk. The project will implement pilots.

• Creating Risk Fund: If the CCS is to be sustainable, without resorting to changes in prudential norms, it will be necessary to create a risk fund which will be partially funded by members. Given the State’s drought proneness and the need for keeping cost of funds to ultimate members low, a charge on the members to create the risk fund is not for immediate implementation but needs to be done in 2-3 year’s time. A charge of INR 100 per member will create a fund of about INR 460 million, i.e. equivalent to about 3% of the current outstanding of the PACS.




4.4 Programme Framework

Design Summary

Measurable Indicators

Monitoring Mechanism

Assumptions And Risks

GOAL Sustained rural economic growth and reduced rural poverty incidence in Rajasthan

Reduced rural poverty incidence by 3% points in the state Maintained economic growth rate of 7% in the state

Economic reform program assessment

Impact monitoring report Program completion report (PCR)

Program Performance Audit Report (PPAR)

PURPOSE Establish a sustainable rural finance system using the cooperative credit system through policy, legal, regulatory and institutional reforms

CCS restructured to operate as autonomous institutions Enhanced profitability of the CCS Greater availability of affordable rural financial services

Program reports and reviews

Reserve Bank of India (RBI) and National Bank for Agriculture and Rural Development (NABARD) assessment reports

ADB review missions

PCR

Commitment of the Government of India (Government) and state governments to pursue economic policy and agriculture reforms that enable RF institutions including CCS to operate autonomously within a liberalized financial policy regime

OUTPUTS I- Adopted conducive rural finance policy environment for CCS reform II- Improved legal framework for sustainable CCS operation III- Autonomy, democracy, and good governance for the CCS IV- Adopted effective CCS supervision and regulation mechanisms

The government of Rajasthan accepts a comprehensive Cooperative Banking Development Framework (CBDF) for legal, financial, organizational, and institutional changes in CCS Amendments to the existing law through special chapter in the law for financial cooperative to provide adequate autonomy to the CCS Executive Orders issued by State Government to limit State Authority and cause desired actions by CCS institutions pending legislative changes Divestment of shares held by the state government in the CCS Elections held for all the tiers of the CCS Code of good governance adopted for each tier of the CCS State government nominees withdrawn from the Board and Management of CCS Institutions Harmonized regulatory standards for the multi-tier CCS system Strengthened supervisory capacity at RSCB and DCCB levels as well as in NABARD

Program reports and reviews RBI, NABARD, and CCS assessment reports

ADB review missions reports Law, policy enactments


RBI, NABARD, and CCS assessment reports

ADB review missions reports

Policies and guidelines issued by state





RBI, NABARD, CCS assessment reports


Government maintain their commitment to facilitate and improve rural finance market environment Continued commitment of state governments for introducing legal reforms conducive for autonomy of the CCS The election process is fair, free and informed The state government and CCS commit to the enhanced supervisory and regulatory measures




Design Summary




V- Sustained institutional reforms (V-1) Transformed State Cooperative Bank RSCB as an apex to support efficiency and sustainability of District Central Cooperative Banks (DCCBs) and Primary Agricultural Societies (PACS) (v-2) Transformed DCCBs to efficiently provide affordable rural financial services (v-3) Strengthened PACS as the foundation of the CCS and primary agent with mass outreach

Proposal for unified CCS supervision developed RSCB is able to provide financial, management, and technical support services to the lower tiers RSCB is able to implement ways to expand outreach of the network Improved operational performance and financial health of the RSCB RSCB is able to implement measures to mitigate portfolio risk. Improved operating efficiency, loan collection, range of products and savings mobilization in the DCCBs selected for institutional reforms DCCBs are able to expand outreach to the poor & women Increased profitability of DCCBs selected for institutional reforms Improved operating efficiency, loan collection, record keeping, internal control, and range of products in the in the PACS selected for institutional reforms Increased outreach to women and poor Increased flow if financial services to rural areas Increased profitability of PACSs selected for institutional reforms










The state governments maintains competitive and conductive operating environment for RSCB Efficacy of program design in addressing covariant risk (drought) The state governments does not interfere in management of DCCBs Institutional strengthening and improved governance will discourage politicization of PACS Conducive local economic environment for operation of PACS

INPUTS Favourable policy environment Legal reforms CCS good governance and democratization Strengthening supervision and regulations Institutional reforms – SCB, DCCBs, and PACS Implementation

(All amounts rounded off to the nearest million)

INR 2 million

INR 6 million

INR 853 million

INR 51 million

INR 302 million

INR 55 million






Design Summary




Financial Assistance Contingency Total

INR 6,036 million

INR 647 million

INR 7,953 million =USD 177 million

4-70 The complete programme framework including activities related to every output is presented at Annex 8.

4.5 Budget Overview In estimating the budget for the Rajasthan CCS project, we have made separate estimates for each of the key components, viz., Policy Environment, Legal Reform, Governance, Supervision and Regulation, Institutional Development (including special projects on Insurance and Commodity Futures) and the cost of project implementation. We have also made separate estimates for the financial assistance required, based on the principles discussed in this project report and detailed in Annex 2 and Annex 5. In addition, we have also assumed a 10% contingency margin. The total budget works out to about Rs 7.95 billion or USD 177 million (at an exchange rate of Rs 45 per USD).




Amounts in Rupees ADB GoR CCS NABARD TotalPolicy Environment

Monitoring structure 1,200,000 1,200,000Workshop 1,000,000 1,000,000

Legal ReformWorkshops 150,000 150,000Short Term Consultants 6,300,000 6,300,000

Governance and DemocratizationRepayment of GoS Capital 800,000,000 800,000,000Reorientation and Revival 47,434,000 47,434,000Short Term Consultants 5,940,000 5,940,000

Supervision and RegulationShort Term Consultants 11,880,000 11,880,000Training 1,619,000 1,619,000Audit 37,440,000 37,440,000

Institutional reformsTraining 23,464,000 23,464,000Short Term Consultants 21,480,000 21,480,000Computerization 241,462,000 241,462,000Special Projects 16,040,000 16,040,000

ImplementationImplementation Team 11,160,000 900,000 1,440,000 1,800,000 15,300,000Dom & Intl support 35,640,000 35,640,000Communication 4,500,000 4,500,000

Financial Assistance 5,209,000,000 826,500,000 6,035,500,000

Contingency 647,571,000 647,571,000

Total project for Rajasthan 7,123,280,000 827,400,000 1,440,000 1,800,000 7,953,920,000In US$ terms US$ 158,295,000 US$ 18,386,667 US$ 32,000 US$ 40,000 US$ 176,754,000

Exchange Rate 45.00 The detailed budget is presented at Annex 7.




4.6 Implementation Schedule 4-71 The implementation of the project will take place over four years and will be divided in three phases. 4-72 Phase I will around 6 to 12 months concentrate mainly on acquiring a favourable environment, assessing through audits the exact situation of the CCS units, preparing the restructuring plans, developing the tools, manuals, and procedures and finally seeking agreement from stakeholders on the sequence of activities to be undertaken. 4-73 Phase II, the most intensive one, will last for at least 24 months and will aim at implementing the restructuring plan: modifying the legal and supervisory environment; adapting the structure to ensure viability and sustainability; creating operational processes enabling professionalism and outreach through a set of new products and best practices; and providing resources (financial, human and technical) ensuring smooth governance, management, and operation. 4-74 Finally, Phase III will look at consolidating and assimilating what has been acquired. 4-75 A detailed implementation plan describing all the activities, when they will take place and who is responsible is presented at Annex 9.




5 POLICY MATRIX

Objectives Rationale First Tranche Second Tranche

(Within 18 months of the First Tranche)

Third Tranche (Within 18 months of the Second

Tranche)

The goals of the proposed Rural Finance Sector Restructuring and Development Program are to ensure sustainable access to institutional financial services for a majority of rural households. Specific objective is to support a sustainable financial cooperative system for providing affordable services, primarily to the middle and lower segments of the rural finance market for a significant income expansion impact. Increased financial intermediation will provide opportunities to clients to increase incomes and employment and improve their quality of life through access to strengthened and responsive financial cooperative system.

(I) Creating a Favourable Policy Environment

Adopt a progressive Cooperative Banking Development Framework (CBDF)

The negative impact of governmental and political interventions reflected in lack of autonomy and weak institutional and financial status necessitate that a new rural finance paradigm be adopted. Under the new paradigm, the role of the state should be to complement, facilitate, and improve the functioning of the CCS. Focus shall be on strengthening good governance, creating conducive policies, promoting strategic initiatives, restructuring

Adoption by GoI and GoR of a Cooperative Banking Development Framework (CBDF) involving policy, legal, financial, organizational and institutional reforms of the CCS – including the State Cooperative Bank (SCB), District Central Cooperative Banks (DCCBs) and the Primary Agricultural Credit Societies (PACS) for phased implementation. (Policy Letter – GoI and State Government)

Phase out interest rate controls and subsidies. (Policy Letter- State Government) Review of and amendment to refinance norms for CCS to ensure appropriate incentives for adherence to the CBDF. (Guidelines of National Bank for Agriculture and Rural Development (NABARD)).

Policy review in consultation with key stakeholders for addressing other emerging issues within the scope of the Program. (NABARD, State Governments, Reserve Bank of India, Asian Development Bank (ADB))







Tranche)

potentially viable entities, and granting autonomy for business decisions.

(II) Building a Facilitating Legal Framework

A conducive legal framework for sustainable operations

While Rajasthan has adopted features of the progressive law based on the Model Cooperative Act, the rules are still to be published; therefore, the CCS has not operated yet under the provisions of the amended law. The transitory arrangements are also not well defined.

The state government is committed to ensure the migration of the CCS to the new legal provisions for ensuring their autonomy. (Approved CBDF – State Government)

Working group is established to review the laws and develop draft amendment bill. (State Government Notification)

Executive orders to give immediate effect to minimum required changes pending legislative action:

Ensure full membership rights to all users of financial services at PACS

Remove state intervention in administration and financial affairs of the CCS

Withdraw restrictive orders in regard to financial matters of the CCS

Empower RBI to exercise full authority on financial matters of cooperative banks

Exit equity and board positions throughout the CCS

Amendments made to the new Act finalized and placed in the state legislature. (Draft Amendment Bill- State Government) Rule and regulations corresponding to the amendments drafted and finalized in consultation with NABARD. (Draft Rules – State Government Letter) Divestment of the equity with regard to CCS. (Certificate – Registrar of Cooperative Societies) BR Act Amendment to bring cooperative banks at par with commercial banks while ensuring maintenance of democratic character of cooperatives (Draft of Amendment Bill – RBI) Clarification of NABARD’s role as a supervisor of Coop banks (Letter GoI/RBI)

The amendments to the Cooperatives Societies Act enacted. (Enacted Law-State Government) The jurisdiction of the Registrar of Cooperative Societies is confined to registration and liquidation of cooperative societies. (Enacted Law-State Government) Rule and regulations corresponding to the amendments adopted. (State Government Letter along with adopted rules) All eligible CBS unit migrate to the provisions of the new law in Rajasthan. (Certificate – Registrar of Cooperative Societies) Divestment of the equity with regard to CBS. (Certificate – Registrar of Cooperative Societies) BR Act Amendment (Enacted Law – GoI)







Tranche)

Prescribe prudential norms for PACS based on NABARD recommendations (Executive Orders – State Government)

(III) Democratic Character and Good Governance Practices

estoring the democratic character of the CBS and enhancing good governance

The fact that state government nominees operate the entire structure is undermining the democratic spirit of a member-based CCS. Elections in the CCS have not been held since the amendments to the Cooperative Societies Act in 2002 in Rajasthan.

As part of the CBDF, the state government has announced the elections for all the three tiers of the CCS including a time frame for action. (Approved CBDF – State Government)

Elections are held for all the tiers of the CCS. (Notification of Results - State Election Commission) Elected officials – General Body, Board of Directors, and Committees - are in position at the SCB, DCCBs, and PACS. (Notification- Registrar of Cooperative Societies) Code of good governance in CCS is developed in consultation with the NABARD (Draft Code of good governance – NABARD) Policy of independent annual audit of CCS adopted and implemented. (Notification of Registrar of Cooperative Societies and Panel of Auditors) Actions against known cases of misuse of CCS resources initiated. (Letter from respective SCB and DCCBs).

The code of good governance is made applicable to the CCS and is adopted by the CCS. (Board resolution of SCBs DCCBs and PACSs). Actions against known cases of misuse of CCS resources initiated. (Letter from respective SCB and DCCBs) The democratic character of CCS is reviewed for further improvements. (State Governments, NABARD, Reserve Bank of India, Government of India)







Tranche)

(IV) Instituting Effective Regulation

Orderly development of the CCS and enhanced deposit protection

Multiplicity of agencies involved in supervision of CCS and the sheer number of units to be supervised adversely affects the supervision of CCS.

As part of the CBDF, the state government has to transfer the supervision of the banking cooperatives i.e. DCCBs & RSCB to RBI and NABARD. (Approved CBDF – State Government). PACS would be essentially self regulated with substantial supervision by DCCBs. RCS powers to be very limited. RBI brings regulation and supervision of DCCBs & RSCB on par with commercial banks. (Letter RBI) Group of experts review the prudential norms and other standards of supervision for PACS and recommend appropriate standards. (Recommendations of Expert Group - NABARD Letter) Interim Executive Orders (State Government) RBI drafts amendments to BR Act keeping in view cooperative character of DCCBs & SCBs. (Draft Amendments to BR Act)

PACS bought under the supervisory oversight of the DCCBs. (Notification- Registrar of Cooperative Societies) Creation of supervisory cells within the DCCBs to supervise PACSs (Letter from respective DCCB) Training manual for DCCBs to undertake supervision of PACS developed by NABARD. (Manual– NABARD)

Enhanced regulatory and supervisory standards are adopted for the CBS. (RBI Letter) Training of NABARD conducted on supervision and regulation of CBS. (Training Activity Report – NABARD) Training of State Coop Department, SCB & DCCBs conducted on supervision of PACS (Training Activity Report – NABARD) Regulatory standards and efficacy of supervision for CBS reviewed and measures initiated to make required legal/institutional changes. (RBI, NABARD, Government of India)







Tranche)

(V) Institutional Reforms for Sustainability

State Cooperative Bank (SCB)

Transform SCBs into an apex that supports the efficiency and sustainability of the system

The SCB while seemingly in good financial health cannot be insulated from the deteriorating institutional and financial status of the DCCBs and PACS. It needs to take a proactive role in the strengthening of the DCCBs and the PACS.

Within the overall CBDF, the SCB reorganization will aim to (i) enhance its operational efficiency, (ii) work in the strengthening of the DCCBs and PACS, (iii) promote CBS financial standing to be able to mobilize resources from the market at favorable interest rates, and (iv) provide financial, management, and technical services to the lower tiers. (Approved CBDF – State Government)

SCB implements the plan. (Implementation Report – NABARD) Identification, development, introduction, and implementation of financial services for risk mitigation and mainstreaming commodity trading. (Guidelines of NABARD).

Continued implementation of the reorganization plan. (Implementation Report – NABARD) Assessment of SCB contribution in strengthening the lower tiers (Program Review – NABARD, ADB)

District Central Cooperative Banks (DCCBs)

Institutional transformation of DCCBs into sustainable rural finance institutions for providing affordable services

DCCBs have largely failed to meet sustainability and outreach expectations due to politicization and weak management. Considering the potential contribution of DCCBs in enhancing outreach, it is important to select DCCBs that are likely to be viable

Adoption of DCCB Restructuring Policy including a Model Restructuring Plan as part of the CBDF. The Model Restructuring Plan will cover (i) governance; (ii) human resources; (iii) products and services; (iv) business models and processes; (v) management information system; (vi) auditing and accounting; and (vii) performance benchmarks. (Approved CBDF – State Government)

Process of independent audit of the CBS initiated. (List of Auditors – NABARD) DCCBs classified into three categories viable, potentially viable, and nonviable. (Classification – NABARD). Operating manuals and best practice guidelines for DCCBs developed. (Manual and Guidelines – NABARD) DCCB staff trained on operating

Implementation of the model DCCB restructuring plan – second phase for 70% of the eligible DCCBs. (Program Report – NABARD) Review of achievement of performance benchmarks. (Program Report –NABARD) Determination of course of action for DCCBs that fail to achieve performance benchmarks. (Proposal of NABARD)







Tranche)

for transformation through fundamental changes in governance, organization, human resources, business process, and products and services.

manuals and best practice guidelines. (Training Activity Report – NABARD) Management information system (MIS) and Information technology plan for upgrade should developed for implementation. (DCCB MIS Package – NABARD) Implementation of the model DCCB restructuring plan (Program Report – NABARD)

- assessment of actual cost of financial restructuring including erosion of deposits;

- appointment of professional board of directors as set out in executive orders of State Government and RBI;

- constitution of audit, compensation, asset and liability, recovery, and non-performing assets resolution committees;

- preparation of business plan based on NABARD guidelines to achieve viability within 3–5 year time frame;

- appointment of chief executive officer and senior executives that are qualified professionals;

- adoption of credit, human resources, recovery, and

Completion of the withdrawal of the state government personnel deputed to DCCBs. (State Government Letter) Review of the need for further restructuring support. (Program Review – NABARD, ADB) Financial restructuring support to DCCBs on implementation of the restructuring plan. (Program Review Report - NABARD)







Tranche)

branch profit centre policies; and

- assessment of excess staff and redeployment.

Financial restructuring support to DCCBs on progress on implementation of the restructuring plan. (Program Review Report - NABARD) Course of action for DCCBs not considered potentially viable. (Draft Policy and Plan – NABARD) Identification, development, introduction, and implementation of financial services for risk mitigation and mainstreaming commodity trading. (Guidelines of NABARD).

Reforming the Primary Agricultural Credit Societies (PACS)

Strengthening the PACS as the foundation of the CCS

While the most numerous and the most critical, the PACS are the weakest among the three-tiers. A majority of them are non-viable. In addition, their operation and record keeping is totally inconsistent with their frontline role as a financial

Adoption of PACS Restructuring Policy including a Model Restructuring Plan as part of the Cooperative Banking Development Framework. The Model Restructuring Plan will cover (i) legal structuring; (ii) governance; (iii) products and services; (iv) human resources; (v) business processes; (vi) management information system; (vii) auditing and accounting; and (viii) performance benchmarks. (Approved CBDF – State Government).

PACS classified into three categories: viable, potentially viable, and nonviable. (Classification – NABARD). Transformation of the participating PACS into agents of the DCCB while preserving their member driven organisation characteristics. (Approved CBDF – State Government)

- Approval from AGM - Modification of bye-laws

Implementation of the model PACS restructuring plan for eligible PACS. (Program Report – NABARD) Completion of the withdrawal of the state government personnel deputed to PACS. (State Government Letter) Review of the need for further restructuring support. (Program Review – NABARD, ADB) Implementation of action for PACS not







Tranche)

intermediary. Process of independent audit of PACS initiated. (List of Auditors – NABARD)

- Modification of rules - Approval of business plan - Expansion of services to the

landless and women - Implementation of new

services - Transfer of loan assets and

deposits to DCCB

Operating manuals and best practice guidelines for PACS developed. (Manual and Guidelines – NABARD)

Identification, development, introduction, and implementation of financial services for risk mitigation and mainstreaming commodity trading. (Guidelines of NABARD).

PACS staff trained on operating manuals and best practice guidelines through DCCBs. (Training Activity Report – NABARD)

Determination of course of action for PACS that fail to achieve performance benchmarks. (Proposal of NABARD)

MIS and Information technology plan for upgrade should developed for implementation. (PACS MIS Package – NABARD) Implementation of the model PACS restructuring plan. (Program Report – NABARD)

- assessment of actual cost of

considered potentially viable. (Draft Policy and Plan – NABARD)







Tranche)

financial restructuring including erosion of deposits;

- preparation of business plan based on NABARD guidelines to achieve viability within 3–5 year time frame;

- adoption of new products and services

- linkages with self-help groups and formation of self-help groups of the existing members of PACS; and

- rationalization and mechanization of systems and procedures




6 IMPLEMENTATION MECHANISM 6-1 NABARD will be the implementing agency for GoI. For that purpose GoI and GoR will provide NABARD with all the necessary resources and power required to implement the changes proposed in the current project. NABARD will report to the MoF on progress, difficulties and modification required. 6-2 NABARD will create at its Head Office a special cell dedicated entirely to the implementation of this project. This cell will comprise officers from NABARD and external expertise from domestic and international consultants. This outside expertise will act as advisors and technical developers (modules, tools manuals…). The cell will report directly to NABARD upper management. 6-3 NABARD will also create a dedicated cell at its Regional office in Rajasthan with representative of the government and RSCB. This cell will coordinate action at the State level and report on progress to GoR and NABARD HO. 6-4 At the district level (in each DCCB) another implementation cell entirely dedicated to this project will ensure that activities are taking place at the DCCB and PACS and changes being implemented. This cell will comprise a NABARD officer, an officer from the DCCB and an external domestic expert. The cell will report to the State cell of implementation and share progress report with the DCCB and the RSCB. 6-5 Finally a Steering Committee comprising MoF, NABARD, GoR, ADB and RSCB will provide general guidance and approve required modifications to original plan, framework and policy.




7 ROLES AND RESPONSIBILITIES 7-1 No project of this complexity and size could reach a successful ending if not supported by the main stakeholders. The CCS itself and the implementation facility will be directly accountable for what is happening towards realisation of the project. However this can only happen if the proper environment has been set. Government of India 7-2 This project is directly emerging from an agreement between ADB and GoI, the main responsibility of GoI will be to ensure that a favourable environment is created. GoI will:

• Sign agreement with ADB and with GoR • Give NABARD the implementation responsibility, this should be link to provide

adequate power and resources • Propose modification to the BR Act based on RBI’s recommendations to bring

Coops on par with other banks but with due recognition to their cooperative character

• Monitor the progress and make adjustment as and when required • Ensure that required financial assistance is available in a timely manner • Clarify NABARD’s supervisory role vis-à-vis role of RBI as a regulator and

empower NABARD with appropriate tools for effective supervision Government of Rajasthan 7-3 Cooperatives is a State subject, moreover, the GoR will definitely be one of the main beneficiary of a successful project. Therefore, GoR is at the core of that success by implementing the right environment he will influence the course of actions. GoR will have to:

• Adopt a comprehensive Cooperative Banking Development Framework • Sign MoU with implementation facility (NABARD) and CCS • Approve modification to byelaws to ensure easy implementation of project

activities • For the interim phase issue Executive Orders so as to:

o Ensure full membership rights to all users of financial services at PACS o Remove state intervention in administrative and financial affairs of the

CCS o Withdraw restrictive orders on financial matters of CCS o Empower RBI to exercise full authority on financial matters of

cooperative banks o Exit equity and board positions throughout the CCS o Prescribe prudential norms for PACS based on NABARD’s

recommendation




• Ensure that audit are conducted regularly, professionally and on a timely manner

• Amend Cooperative Society Act to create a favourable environment for the financial cooperative

• Release financial resources as per the agreed plan




Reserve Bank of India 7-4 All banking matters are under the purview of RBI; RSCB and DCCBs are also banks. However, on one side most of them are not behaving like real professional financial institution and on the other side there is some permissiveness from the regulator/supervisor that should not exist. 7-5 While ensuring the establishment of strict rules, RBI will have to preserve the special character of these cooperatives working with and reaching a clientele that almost nobody wants to serve. RBI will inter alia, in respect of cooperative banks:

• Prescribe prudential norms for: o Net worth o CRR and SLR o CRAR o Corporate Governance o Qualifications of CEOs

• Monitor the progress National Bank for Agriculture and Rural Development 7-6 NABARD, since its inception, has been granted the responsibility for the inspection of the rural cooperatives, their development and refinance. Now, they have been given the task of implementing the projects related to the agreement between ADB and GoI. NABARD will have to:

• Create National and State level implementation cells comprising dedicated experts from NABARD, the CCS and from external sources

• Prepare documentation, guidelines and give direction to: o Implementation cells o Ensure signature of MoUs between GoR, Implementation Cell and

CCS o For specific requirements in the audit of PACS

• Ensure that refinance mechanism is responding to the need of the CCS units • Prepare Guidelines the Cooperative Banking Framework • Ensure standardisation of MIS and accounting through computerisation and

automation • Establish state-of-the-art processes for off-site and on-site

inspection/supervision for SCBs & DCCBs • Proactively review progress of the CCS reform, identify and implement course

corrections in consultation with stakeholders.




8 RISKS ANALYSIS AND MITIGATION 8-1 Political risk: The stability of the Government, both at the Centre as well as the State is crucial to success of the project as key decisions require formal approval of the Government. Any instability will inevitably lead to delays in implementation even if it does not result in defocusing the approach to the project. Indiscriminate statements and promises by political leaders such as loan and interest waiver which are contrary to the financial norms and discipline can be detrimental to the outcome of the project. Populist policy measures such as declaration of floor and ceiling on interest rates and general subsidies would also have a deleterious impact on the project. 8-2 One of the key impediments, as has been observed during the field visit is politicization of operations of co-operatives. The co-operatives have been used as a vehicle for pushing forth government agendas and vested interests of the local political leaders. The actions often negate financial prudence and distort the management systems and processes. Such politicization has also impeded the much required professional development in the co-operative sector. This has inhibited the growth of the co-operatives as well as affected its sustainability. 8-3 Such risks can be minimised through upfront agreement on the Cooperative Development Framework with both Government of India (Ministries of Agriculture and Cooperatives and Finance) and the respective State Governments (Department of Co-operation, sometimes under Ministry of Rural Development). 8-4 Economic risk: Macro-economic stability of the country is a pre-requisite to financial sector stability in the country. Stable macro-economic indicators such as the low inflation rate, fiscal deficit as per the plan or budget, steady or planned growth rate of the economy, low volatility in the foreign exchange market, manageable trend in balance of trade, etc. will have a minimal impact on the sectoral policies, especially in the financial sector. The Reserve Bank credit policy, including the interest rates, is highly linked to these macro-economic indicators. Any adverse fluctuation in them could result in sharp measures, which may have an indirect impact on the project. Some of the risks of course are linked to global phenomenon such as rise in crude oil prices, and hence can not be controlled. 8-5 In case, there are changes in financial sector policies in view of macro-economic disturbances, there is a possibility of indirect impact on the project. However, unless there is a severe macro-economic instability, the project outcomes are expected to be normal. 8-6 Sector policy risk: Although the need for financial discipline and improvement of the viability of the rural financial institutions are recognized as important parameters governing rural financial sector policies, sometimes these are vitiated or relaxed in view of attaining other objectives such as increased credit flow to chosen sectors or sections of the people. Such policy variation can create confusion during project implementation and might have an indirect impact on the project.




8-7 Micro-finance as a tool for higher access to institutional finance for the poor has been recognised by NABARD, the Reserve Bank of India and Finance Ministry, Government of India. However, the over-emphasis on SHG as a means for directing funds for various programmes could send a wrong signal to the micro-finance sector if the achievement of quantitative targets is emphasized at the cost of quality. 8-8 The project envisages certain policy level changes to be incorporated in due course, which will help in bringing about structural changes in the co-operative sector leading to better monitoring and control. The acceptance of the recommended changes is contingent on several players and finally has to accepted and implemented by the State Government, Central Government, RBI and NABARD. The extent to which the recommendations would be acceptable and changed might have an influence on the project outcomes. 8-9 It will be critical that decision makers in the Central Government, the Reserve Bank of India, the Co-operative department in the state, NABARD and Top Management of the State Co-operative Bank are exposed to successful cooperative turnaround efforts. This will lend veracity to the project outlined. 8-10 Operational Risk: There is a possibility of resistance to the proposed changes being advocated for revamping the co-operative sector. Structural changes being suggested with an objective of higher accountability of the staff and improving the efficiency can find resistance at various levels in the existing system. Due to lack of professionally trained staff, there is a risk of delayed adaptation of changes in systems and processes as envisaged in the project, which might lead to delays in achieving the desired results. Moreover, there is always a risk of failure due to unforeseen circumstances such as drought or any other natural calamity as the co-operative sector caters to the rural economy, especially agriculture. 8-11 It will be critical to sensitise the key players and senior management to issues in change management through discussions, training cum exposure visits as well as through assistance provided by experts. This will enable the people to understand the complexity involved therein and the cost-benefits of such a change. The project has also outlined development of financial derivative products to address some of the expected climatic risks. Such products must be developed as soon as possible with the help of experts in conjunction with implementing agencies. Similarly, recommendations also have been given to mitigate other risks faced by rural households through involving the cooperatives in developing appropriate products with insurance agencies and distributing the same.


Final Report Volume 1A: Rajasthan CCS - Annex 1

October 2005 Page 1

ANNEX 1: PREVIOUS STUDIES / REPORTS In the last few years, the central and state governments have tried to grapple with problems besetting the Cooperative Credit Structure (CCS) and therefore, have commissioned task forces/ committees to propose solution to the growing problems. From all these Task Forces’ reports one element is common – the system is broken and it has to be fixed, if the intention of the government is to provide financial services in the rural area. Moreover, while the recommendations differ in the detail,and all of them agree that a restructuring plan will have, in order to succeed, to address each and every component of the CCS. The key committees have been: “Task Force to Study the Functioning of Cooperative Credit System and Suggest Measures for its Strengthening” also known as the Capoor Committee. The Capoor Committee was constituted on 9 April 1999: • Reviewed the functioning of the cooperative credit structure and suggested

measures which would make them member- driven professional business enterprises

• Studied aspects relating to the costs, spreads and effectiveness at various tiers of cooperative credit structure and made recommendations for their rationalization and improvement

• Studied the financial performance of the cooperative bodies and made recommendations for improving their financial health

• Reviewed the existing supervisory and regulatory mechanism for cooperative credit institutions and suggested measures for strengthening the arrangements.

The key recommendations of the Capoor Committee were: Rehabilitation of Cooperatives

• Urgent need for rehabilitation of cooperatives as they constitute the major segment of the rural financial system

• Rehabilitation to be limited to potentially viable units only • 4-dimensional revitalization package encompassing financial, operational,

organizational and systemic aspects • To be implemented in a phased manner keeping in view the large fund

requirement • Focus on strengthening of PACS as stronger PACS would automatically

result in stronger DCCB • Establishment of a Cooperative Rehabilitation and Development Fund in

NABARD • Establishment of a Mutual Assistance Fund at state level



October 2005 Page 2

Cooperatives as member driven organizations • Urgent need for state government to review and relax their control over

the cooperatives • Government should not appoint its officers as CEOs

Implementation of Model Act

• Adoption of essential features of the Model Cooperative Societies Act by all state governments

HRD in Cooperatives

• Objective and transparent policies for recruitment of staff • Appropriate steps for development of Human Resources in cooperatives

through training at various levels Professionalism in Cooperative Banks

• Banks’ Boards should be professional and accountable • Caderization within cooperatives to be disbanded; frequent transfers to be

discouraged Duality of Control

• Overlapping of control between state governments on the one hand and RBI/ NABARD on the other has adversely affected the working of cooperative banks and this duality of control should be addressed, giving functional autonomy and operational freedom to cooperatives

• Banking functions should be brought completely under the Banking Regulation Act to be regulated by the RBI

Business Diversification

• Cooperative Institutions should seek to diversify their business products • Removal of restrictions on cooperatives from investing in sectors outside

the cooperative fold. The committee recommended that cooperative banks may be permitted to lend up to 10% of their deposits outstanding at the end of the previous year to entities outside the cooperative fold

• Cooperative Banks may be afforded adequate freedom in regard to investment decisions subject only to a general exposure norm

• Revival of Cyclical Credit Scheme • No unremunerative business should be thrust upon PACS • There should be no compulsion on PACS to keep deposits with DCCB • Apex level institutions should constitute Investment Cells for effective

management of surplus funds Rationalization

• Integration of ST and LT structure should be given serious thought, with due regard to local conditions



October 2005 Page 3

Capital Adequacy • Cooperative Banks should make a beginning towards strengthening their

capital base so that they can conform to the norms applicable to commercial banks over a period of time

Loan Recovery

• A decision should be taken at all levels that loan waivers/ postponement of recoveries/ granting of interest rate subsidies for populist reasons would not be made in future

Internal Checks and Controls

• Cooperative Banks should strengthen their internal checks and controls as well as MIS for more effective supervision and decision making

• Audit at all levels should be carried out by firms of Chartered Accountants The Government of India convened a Conference of Chief Ministers of States on 25 August 2001 to discuss, inter alia, the revitalization package for cooperative institutions as proposed by the Capoor Committee. Consensus was reached on several issues including

• the need to amend State Cooperative Acts/ bring in new Cooperative Acts on the lines of the Model Cooperative Act proposed by Ch. Bramh Prakash Committee

• the need to review the role of state governments in the functioning of the Cooperative credit institutions

• the need to develop cooperatives as member driven institutions • the need to bring in professionalism in the governance of cooperative

banking system • the need to give greater operational freedom to cooperatives, e.g., in

determining interest rates and margins at various levels. However, no consensus could be reached on the issues involved in sharing of the amount of revitalization assistance. Most states insisted that the Centre should pick up 100% of the amount of revitalization assistance required. Also, the need was felt for re-examining the recommendations regarding de-layering of CCS. Accordingly, “The Joint Committee on Revitalisation Support to Cooperative Credit Structure” known as the Patil Committee was constituted. Its terms of reference were:

1. Determination/ Identification of sharing pattern of revitalization assistance among GoI, State Governments and Cooperatives

2. Funding Mechanism 3. Feasibility of delayering of CCS, especially with a view to regulate

intermediation costs. 4.



October 2005 Page 4

The Patil Committee concurred with the Capoor Committee recommendation that revitalization assistance be provided to cooperative credit institutions. Further, it laid out detailed guidelines for

• Computation of assistance amount (at various levels of the CCS) • Pattern of Sharing of the assistance amount between the Central

Government, the State Government and the members of the Cooperatives. The recommended sharing pattern was:

o Central Government: 60%, State Government: 40%, except in Jammu and Kashmir and NE States, where Central Government was expected to contribute 90% and State Government 10%

• Funding mechanism • Criteria for Selection of States

o Commitment to meet own share o Disbanding of common cadre system for PACS secretaries o Commitment to provide greater autonomy to CCSs and minimize

state control o Greater transparency in HRD policies

• Criteria for selection of Cooperative Credit Institutions for Assistance o Viable Functioning o Timely Audit o Rationalization of the sharing of interest margin amongst different

tiers of the ST/LT structure o Deregulation of interest rates o Grass roots level business planning o Diagnostic review and rationalization of systems and procedures

relating to loans/ advances, deposits, investments, accounts updation and reconciliation, general management and HR management

o Strengthening of MIS • Delayering of the Cooperative Credit System

o Forced delayering could endanger the very existence of the cooperative ethos and the decision should be left on the individual states themselves

o Scheduling of DCCBs would allow them to borrow directly from NABARD, thereby reducing their dependence on the Apex Cooperative

o PACS may be allowed freedom to access commercial banks/ RRBs for all their financial requirements

o Where DCCBs are weak, the Apex should step in directly to finance the PACS and where PACS are weak, the DCCB should provide finance to members directly

o Over a period of time, delayering will automatically be achieved • For the LT structure

o SCARDBs/ SLDBs should be converted into full fledged banks and liquidation of weak ARDBs/ PLDBs should be expedited



October 2005 Page 5

More recently, the RBI appointed an “Expert Committee on Rural Credit” known as the Vyas Committee. Though the focus of this committee was not on the CCS, it did address issues which are also the CCS concerns. The Committee has: • Suggested revising the definition of NPAs in agriculture and priority sector

norms. • Looked at ways of expanding flow of agricultural credit and outreach, and

doing away with the Service Area Approach, except for credit linked to government schemes.

• Examined measures to reduce rates of interest on loans to agriculture and possible use of information technology.

• Identified impediments in flow of credit to disadvantaged sections, micro finance, etc.

Some of the main recommendations of the Vyas Committee affecting the CCS are: • Eliminate one tier of the 3 tier co-operative banking model, • Build direct credit support linkage of well performing PACS with commercial

banks • Introduce incentive system for borrowers who repay promptly • Upgrade ability of bank staff through training to appraise and monitor loans • Banks should provide loans for a mix of production and consumption needs • Co-operative banks take up SHG promotion on a significant scale which can

revitalize the dormant banks • Use the Joint Liability Group methodology • More liberal NPA norms which take into account that non repayment of loans

for a failed crop can be recovered over another two cropping cycles “Expert Committee on Restructuring of Cooperative Credit Institutions (Andhra Pradesh)” known as the Rama Rao Committee Though this report was specifically commissioned by the State of Andhra Pradesh it provides for a comprehensive analysis of the strength and weaknesses of the CCS, which are relevant to the other states as well. This study has analysed all the elements (governance, financial, operation, supervision, etc) of the CCS and gave structured recommendations for each of the elements. The key recommendations include: • The Need for Reorganisation of DCCBs and PACSs. “The emerging situation

– post financial sector reforms and market orientation – compels the cooperatives to become more efficient, vibrant and cost effective, leveraging technology to reinvent themselves. Restructuring of the PACS as



October 2005 Page 6

organizationally strong and financially viable entities is an urgent imperative for imparting the required strength to the whole system. Hence, this exercise needs to be taken on a priority, as the first step in the process.”

• Based on performance, the DCCBs as well as PACSs should be classified

into 4 categories as per the standards given in the report. DCCBs/ PACSs whose performance rating is sub-marginal (non-viable category-B) would not hold any promise of survival as sustainable financial entities. The business of such banks should be taken over by an agency viz., Apex, neighbouring DCCB or a new entity. A plan of take-over of business of such units should be prepared after identifying the agency for take-over.

• PACS whose performance rating is sub-marginal (non viable category-B)

would not hold any promise of survival as sustainable financial entities. The business of such PACS will have to be taken over by a neighbouring viable PACS or any other appropriate agency. A plan of take-over of business of such units to be prepared after identifying the agency to take-over.

• Reconstitution of the Boards of Management with majority of professionals

(75%)

(a) A list of professionals available at the state and district levels for consideration for appointment on the Boards of Apex/ DCCBs should be prepared. (It should be an annual exercise with periodical updating).

(b) First appointment of such professionals consisting of bankers, CAs, Agricultutal Scientists, IT and management professionals and depositors’ representatives should be completed after due process.

(c) Representatives of borrowers should not exceed 25% of the board strength and they should be selected after a careful scrutiny to weed out defaulters and identify capable and enlightened borrowers.

(d) Representatives of regulators and supervisors and financing banks should be avoided on the board.

• The principles of corporate governance to be included in the management

practices (particularly accountability of the management).

(a) Enabling provisions in the Act & rules to be ensured.

(b) Comprehensive guidelines to be drafted and circulated to the management.

(c) Comprehensive awareness programmes to be conducted for the management.



October 2005 Page 7

• CEO and senior executives should be qualified professionals from the cadres of the bank or from the market, but not on deputation.

(a) A strong HRD policy should be put in place.

(b) Enabling Act and Bye-law provisions should be put in place (particularly in regard to CEO).

• The branch structure should be consolidated to ensure viability of each

branch (to work as an independent profit center).

(a) Introduction of transfer price mechanism and identification of viable branches and weeding out the weak and loss making branches.

• For a better business management, a system of (i) ALM and (ii) Recovery and

NPA management should be introduced on the lines suggested by NABARD. • Two indepth studies by specialists to be undertaken covering manpower

planning and HRD in DCCBs and training of personnel of cooperative rural credit institutions and appropriate follow up action on the recommendations to be ensured.

• Funding support for recapitalisation (rehabilitation and restructuring)

linked to a specific action plan and performance bench marks. • Constitution of Relief and Guarantee Fund (To provide relief to the farmers

effected by successive droughts). • Stress on the need to evolve strategy for recovery of loans

i) Publishing names of Wilful/Chronic defaulters ii) Effectively deter calls for non- payment, waiver or remission of loans. iii) Appeals to be issued from powerful quarters for recovery of loans. iv) Social mobilization for creating awareness on repayment ethics. v) Incentives to Staff.

• Reduction of cost of funds for Coop. Credit Institutions.

i) RBI/NABARD to consider restoring earlier practice of lending SAO loans at 2 to 3% below the Bank rate.

• Segregation of social responsibilities from economic issues.

Relief packages/ concessions to be implemented by Govt. outside the Banking system as a back-ended subsidy as a reward for timely repayment of loans



October 2005 Page 8

• An efficient MIS has to be developed at all the 3 levels (PACs to APCOB) on

the lines of RV Gupta Committee recommendations for commercial banks. • The role of the State Govt. has to be clearly defined so as to insulate the

banking/ financial matters from its intervention. • Implementation of the Reorganization

(a) Constitution of an empowered State Level Implementation Monitoring Committee (SLIMC) consisting of, among others, a senior functionary from each of the stakeholders (i.e. RCS, NABARD & RBI) with MD, Apex Bank as the Member Secretary and a senior rural credit professional from outside the system as Chairman, to review, on a ongoing basis, the progress of implementation of the restructuring programme and also to sort out implementation problems.

(b) Constitution of District Specific Committee at each District headed by the Collector/Joint Collector with District Coop. Officer (DCO) and GM of DCCB/RM of APCOB, as the case may be, as members (GM/RM being the Convenor). The District Level Committee (DLIMC) to work under the guidance and control of the SLIMC.

(c) Ensuring appropriate arrangements for an independent external review of the benchmark performance and evaluation of the impact of the reform process from time to time.

A matrix of recommendations on key issues by recent committees is presented next.



October 2005 Page 9

MATRIX OF KEY RECOMMENDATIONS In the matrix below, we have listed the key issues addressed by the recent committees1 set up to study the Cooperative Credit Structure and their recommendations on each of these issues. Where any of the committees does not have a view on a particular issue, the grid has been left blank. Overall, there is a high degree of convergence among the various committees.

Issues Capoor Committee Patil Committee Vyas Committee Rama Rao Committee

Coops as member driven organisations

• State Govt. to review and relax control on coops on an urgent basis.

• Govt. to not appoint its officers as CEOs.

• Representatives of regulators, supervisors and financers to be avoided on the board.

Implementation of the Model Act

• Adoption of features of the Model Cooperative Societies Act by all State Governments.

Regulatory Framework

• Reduce duality of control - Banking

Reemphasized the need to implement the

• Role of the State Govt. has to be

1 “Task Force to Study the Functioning of Cooperative Credit System and Suggest Measures for its Strengthening” also known as the Capoor Committee “The Joint Committee on Revitalisation Support to Cooperative Credit Structure” known as the Patil Committee “Expert Committee on Rural Credit” known as the Vyas Committee “Expert Committee on Restructuring of Cooperative Credit Institutions (Andhra Pradesh)” known as the Rama Rao Committee





functions to be brought under the BR Act, RBI to regulate.

• Functional autonomy and operational freedom to coop institutions.

recommendations of Capoor Committee on duality of control.

clearly defined so as to insulate financial/ banking matters from its intervention.

HRD in Coops • Objective and transparent recruitment policies.

• HR development through training at various levels.

• Upgrade ability of bank staff through training to appraise and monitor loans.

• Skill building of PACS, provision of performance linked infrastructure support for computerisation, etc

• Detailed manpower planning and HRD to be done by specialists.

Professionalism in Coops

• Boards should be professional and accountable.

• Cadres to be disbanded

• Frequent transfers to be discouraged

• 75% of the board members to be professionals

• Principles of corporate governance to be included in the management practices




Issues Capoor Committee Patil Committee Vyas Committee Rama Rao Committee • Senior executives

should be qualified professionals, but not on deputation.

Business Diversification/ Innovations in operations

• Introduce diversified products.

• Removal of restrictions from lending outside the coop sector, and freedom to invest, subject to some general norms.

• No unremunerative business to be thrust on PACS

• No compulsion for PACS to keep deposits with DCCBs

• Revival of Cyclical Credit Scheme

• Lend for a mix of consumption and production needs

• Use Joint Liability Group (JLG) methodology

• Cooperative banks may take up Self Help Group (SHG) banking on a significant scale with active support from NABARD and State Governments

• Branches should be reorganised to function as independent profit centres

Rationalisation of ST and LT

• Integration should be considered seriously, with due regard to local

• SCARDBs / SLDBs should be converted into full fledged banks and





conditions. liquidation of weak ARDBs/ PLDBs should be expedited.

Capital Adequacy

• Steps to ensure strengthening of the capital base, to conform to norms applicable to commercial banks.

Loan Recovery • A decision to stop loan waivers and postponements must be made.

• Introduce incentives for borrowers who repay promptly.

• More liberal NPA norms which take into account that non repayment of loans for a failed crop can be recovered over another two cropping cycles.

• Strategy for loan recovery to include incentives to staff, publishing names of wilful defaulters, appeals from powerful quarters, social mobilisation for awareness creation.

Internal Checks and Controls

• Strengthen internal checks, controls and MIS.

• Audit at all levels by

• Efficient MIS to be developed at all the three levels on lines of the RV Gupta





Chartered Accountants.

Committee recommendations to commercial banks.

Delayering the Coop system/ making the layers lighter

• Scheduling of DCCBs, such that they can borrow directly from the NABARD.

• Freedom to PACS to access commercial banks and RRBs for their requirements

• Apex to fund PACS directly where DCCBs are weak, and DCCBs to do direct lending where PACS are weak.

• Eliminate one of the three tiers in the CCS.

• Build direct credit support linkage of well performing PACS with commercial banks.

• Pending integration of the ST and LT structures, NABARD may explore feasibility of extending ST agri loans through SCARDBs in areas where PACS are weak.

• DCCBs and PACS should be classified into four categories, the business of the ones in the lowest grade should be taken up by other agencies, as they have no scope for survival by themselves.

Cost of funds/ Fund Management/ Sources of Finance

• Commercial banks could extend funds and credit support for marketing of inputs /outputs to identified PACS.

• RBI/NABARD to consider giving loans at 2 to 3% below bank rate, like earlier.

• A system of ALM,





• If interest remains unpaid for two harvest seasons after principal has become overdue, such advance should be treated as NPA.

and recovery NPA management should be introduced along the lines suggested by NABARD.

Implementation Arrangements for Proposed Restructuring

• Computation of assistance amount at various levels of the CCS.

• Pattern of sharing the assistance: Centre 60%, States 40%2.

• State selection to be done based on their commitment levels for funding, disbanding of cadre system for PACS secretaries, providing greater autonomy to CCS, minimise State control and greater

• Reemphasized the need to implement the Patil Committee recommendations in relation to recapitalization.

• Constitution of an empowered State Level Implementation Monitoring Committee, comprising key stakeholders

• Constitution of District Specific Committees at each District to work under the State Level Committee

• Independent external review of the benchmark performance and

2 Except J&K, and the NE States, where it is 90% and 10% for the Centre and the State respectively.





transparency in HR policies.

• Coop institutions to be selected based on their viability, timely audit, rationalisation of sharing of interest margins between different tiers, deregulation of interest rates.

impact evaluation of the reform process

• Funding support for recap to be linked to a specific action plan, and performance benchmarks.

• Constitution of Relief Guarantee Fund (for drought relief to farmers)

Screening Criteria for Selection of institutions for revival/ assistance

Following criteria were recommended: • Only viable and

potentially viable institutions to be taken up for restructuring

• Viable institutions are those that are reporting profit for at least last 2 years

• Potentially viable are those reporting loss but have drawn up an action plan so as to report current

• All the existing institutions to be classified as on a reference date into 4 categories viz., viable, substantially viable, non-viable (marginal) and non-viable (unsustainable).

• The criteria and norms for classification of institutions have been separately specified for DCCBs





profit latest by the end of 3rd year of the provision of assistance. Assistance to stop if profit not achieved in 4th year, except in certain cases where it may be extended to 5 years.

and PACS. (Please see Exhibit A for details)




EXHIBIT A

RAMA RAO COMMITTEE NORMS FOR ASSESSMENT OF VIABILITY OF DCCBS S.No. Norms/Subnorms Weightages1. CAPITAL ADEQUACY :

i) Capital adequacy ratio. ii) Compliance with Section 11 or BR Act iii) Positive Networth iv) Levels of deposit erosion

20 5 5 5 5

2. PERFORMANCE IN MANAGING RESOURCES : i) Progress in deposit mobilization ii) Repayment performance of borrowed funds

(including deposits) iii) Achievement of break even levels of business iv) Asset/Liability mismatch (liquidity status)

20 5 5 5 5

3 QUALITY OF LOAN PORTFOLIO : i) % of NPAs to loans outstanding ii) Proportion of hardcore NPAs (doubtful/loss

assets) to total NPAs

25 12.5 12.5

4. MANAGEMENT COSTS : i) With reference to working capital/gross profit ii) With reference to net financial margin

10 5 5

5 PROFITABILITY : i) Working results for the last three years ii) Level of accumulated losses iii) Imbalances

15 5 5 5

6. AUDIT CLASSIFICATION 10 TOTAL 100 CLASSIFICATION OF DCCBs ON THE BASIS OF SPECIFIED NORMS S.No. Category Qualifying marks 1 Viable DCCBs 60% and above 2 Substantially Viable DCCBs 45% upto 60% 3 Non-viable DCCBs – Category “A” 30% upto 45% 4 Non-viable – Category “B” Less than 30%




RAMA RAO COMMITTEE NORMS FOR ASSESSMENT OF VIABILITY OF PACS S. No. Norm Viability Substantially Viable

(on road to achieving viability)

1 Positive Networth No accumulated losses Level of accumulated losses within owned funds

2 Performance in managing resources

(i) Deposits above Rs. 20.00* lakhs or above, and (ii) Ability to repay borrowed funds on time: A repayment rate of 75% or more, (i.e. there are either no overdue borrowings or overdues are within 25% of the total borrowings).

(i) Deposits not below the level of previous year, and (ii) Ability to repay borrowed funds on time : A repayment rate of 75% or more, (i.e. there are either no overdue borrowings or overdues are within 25% of the total borrowings).

3 Quality of loan portfolio

(i) Reovery rate at 60% or above **, and (ii) Overdues over 3 years to be less than 50% of total overdues.

(i) and (ii)

4 Cost of Management

(i) 2% or less to Working Capital, or (ii) 30% or less to Gross Profit, whichever is less

(i) and (ii)

5 Profitability Working at a net profit ***

Net profit at least for one of the last 3 years

6 Audit Classification Not below “B” class With “B” class for at least 2 of the last 3 years

PACs complying with all of above 6 norms would be classified as viable/substantially viable as indicated above. Those fulfilling any 3 or more of above norms would be classified as marginally viable, which are expected to




achieve viability with the time-bound reform package. Other will be treated as non-viable. * All India Average ** The year 2002-03 is not deemed as a normal year due to severe drought, which dampened the overall loan repayment climate. The data will be more representative for 2001-02 and hence worked out as such. *** Represents net profit for the year not reckoning accumulated losses and imbalances.



October 2005 Page 1

ANNEX 2: THE RAJASTHAN CCS 1 EXECUTIVE SUMMARY.................................................................................................3

1.1 RURAL COOPERATIVE CREDIT STRUCTURE OF RAJASTHAN ..........................................3 2 BACKGROUND ..............................................................................................................7 3 THE RAJASTHAN CCS: AN OVERVIEW ......................................................................9

3.1 LAWS AND REGULATIONS.........................................................................................11 4 STUDY COVERAGE AND STRUCTURE OF THIS REPORT.......................................12

4.1 STRUCTURE OF THE REPORT ...................................................................................13 5 PRIMARY AGRICULTURAL COOPERATIVE SOCIETIES - PACS.............................14

5.1 ORGANIZATION, OWNERSHIP AND GOVERNANCE .......................................................14 5.2 OPERATIONS ..........................................................................................................15 5.3 MANAGEMENT AND HUMAN RESOURCES...................................................................17 5.4 SYSTEMS................................................................................................................18 5.5 MANAGEMENT INFORMATION SYSTEM.......................................................................18 5.6 INTERNAL AUDIT, AUDITED CONTROLS......................................................................18 5.7 PORTFOLIO REVIEW ................................................................................................19 5.8 PROFITABILITY AND TRANSACTION COST...................................................................20

6 DISTRICT CENTRAL COOPERATIVE BANKS - DCCBS............................................22 6.1 ORGANIZATION, OWNERSHIP AND GOVERNANCE .......................................................22 6.2 OPERATIONS ..........................................................................................................22 6.3 MANAGEMENT AND HUMAN RESOURCES...................................................................23 6.4 SYSTEMS................................................................................................................24 6.5 CREDIT APPRAISAL AND DOCUMENTATION: ...............................................................25 6.6 POST SANCTION DISBURSEMENT, MONITORING, FOLLOW UP AND RECOVERY..............25 6.7 PACS INSPECTION..................................................................................................25 6.8 BOOK KEEPING, AUDIT, INTERNAL CONTROL .............................................................26 6.9 MANAGEMENT INFORMATION SYSTEM.......................................................................26 6.10 PORTFOLIO REVIEW ................................................................................................27 6.11 PROFITABILITY & TRANSACTION COSTS ....................................................................32

7 RAJASTHAN STATE COOPERATIVE BANK - RSCB ................................................33 7.1 OWNERSHIP, ORGANIZATION AND GOVERNANCE .......................................................33 7.2 OPERATIONS ..........................................................................................................33 7.3 MANAGEMENT AND HUMAN RESOURCES...................................................................34 7.4 SYSTEMS................................................................................................................35 7.5 INSPECTION OF THE DCCB ......................................................................................36 7.6 MANAGEMENT INFORMATION SYSTEM.......................................................................36 7.7 PORTFOLIO QUALITY ...............................................................................................36 7.8 TRANSACTION COST AND PROFITABILITY...................................................................38 7.9 AUDIT/INTERNAL CONTROL ......................................................................................38

8 PRIMARY LAND DEVELOPMENT BANK SOCIETIES - PLDBS.................................40 8.1 OWNERSHIP, ORGANIZATION AND GOVERNANCE .......................................................40 8.2 OPERATIONS ..........................................................................................................41 8.3 MANAGEMENT & HUMAN RESOURCES.......................................................................42 8.4 SYSTEMS................................................................................................................42 8.5 MANAGEMENT INFORMATION SYSTEM.......................................................................43 8.6 PORTFOLIO ANALYSIS..............................................................................................45 8.7 PROFITABILITY AND TRANSACTION COSTS.................................................................46

9 RAJASTHAN STATE LAND DEVELOPMENT BANK - RSLDB ..................................47



October 2005 Page 2

9.1 OWNERSHIP AND GOVERNANCE ...............................................................................47 9.2 OPERATIONS ..........................................................................................................47 9.3 LOANS & ADVANCES OUTSTANDING..........................................................................47 9.4 MAJOR SOURCES OF FINANCE .................................................................................48 9.5 MANAGEMENT AND HUMAN RESOURCES...................................................................49 9.6 SYSTEMS................................................................................................................49 9.7 MANAGEMENT INFORMATION SYSTEM.......................................................................50 9.8 PORTFOLIO ANALYSIS..............................................................................................52 9.9 TRANSACTION COST AND PROFITABILITY...................................................................52

10 CONCLUSION ..............................................................................................................53 10.1 STAKEHOLDERS COMMENTS ....................................................................................53 10.2 CONCLUSION ..........................................................................................................53

Exhibit A: Legal Note



October 2005 Page 3

1 Executive Summary

1.1 Rural Cooperative Credit Structure of Rajasthan 1-1 Rajasthan, like most other Indian states, has two distinct and separate structures in the cooperative system, for addressing the long and short term credit needs of rural households. As on March 31, 2003, the short term rural credit cooperative structure had a membership of 4.59 million members covering about 60% of rural households in Rajasthan through a three tier structure. A two tier structure for long term credit covers 1.04 million members.

1-2 Legal Framework, Organisation and Governance Banking is a central (federal) subject in India while cooperation is a state (provincial) subject. As a result the cooperative credit system in India is subject to dual control, i.e. that of the Reserve Bank of India in respect of its banking function and that of the state government in respect of the setting up and operation of cooperatives. 1-3 The state government of Rajasthan has also invested in and is a shareholder in the RSCB, DCCBs, and PACS. For example the state government owns 3.7 % of the RSCB, making it the single largest shareholder even though the DCCBs collectively own over 96% of the total paid up share capital. 1-4 There have been no elections in the credit cooperative system in Rajasthan for over ten years and all the Boards other than of PACS are superseded. An Administrator (deputed from State government) works in place of each board. In the case of the RSCB, the Administrator is the Secretary Cooperation, Rajasthan who also has primary responsibility for regulating the system through the Registrar of Cooperative societies, a functionary under his direct control. Thus the roles of owner, regulator, and management are all rolled into one 1-5 Operations. Cooperatives account for about a third of the short term agricultural credit provided by the formal financial sector in Rajasthan, making them critical to rural outreach. Yet, on an overall basis, during 2002-03, PACS lent to only 40% of their members, accounting for less than a quarter of rural households in Rajasthan, thus presenting a large opportunity to improve outreach. For the year 2002-03, PACS disbursed INR 12995 million to members, with an average loan amounting to about 7,600. As on 31st March 2003, about 22% of total PACS outstanding was to small and marginal

Members State/ Apex Districts Villages 1 RSCB 26 DCCBs Short Term 4,590,000 9 branches 388 branches 5,252 PACS



October 2005 Page 4

farmers1. SC/ST2 clients accounted for 16% of outstanding as on that date. The State Department of Cooperation, Rajasthan has issued guidelines under which, the Board of a PACS can authorise the society to function as a mini bank. For a beginning, the financial service which the mini banks can provide in addition to their lending is acceptance of deposits. There are around 1100 PACS functioning as mini banks and their total deposits are at around INR 1002 million. 1-6 At the DCCB level, lending to PACS accounts for about 65% of total outstanding. While specific figures are not available, it is estimated that three-fourth of the non-PACS lending of DCCBs is to other cooperatives, while the balance one-fourth is to individuals and incorporated bodies engaged in activities allied to agriculture or processing of agricultural output. DCCBs also accept deposits and carry out other banking functions similar to commercial banks, such as participation in the payments system. Key services provided by DCCBs to PACS, other than loans include sanctioning of all loans originating from PACS, arranging insurance for cash in transit and personal accident insurance for PACS borrowers and conducting inspection of PACS. 1-7 The branch network of the RSCB caters primarily to the DCCBs, and provides some services such as cash credit, term loans, working capital, draft making, guarantees and letters of credit to others. The overall direct lending of the RSCB is around INR 2 billion out of an outstanding of more than 11 billion. The bulk of this INR 2 billion is lent to a few large cooperative sector borrowers. We understand that direct lending to individuals is only about INR 40 million. The RSCB provides operational direction to its lower tiers, does monitoring and supervision, and conducts an annual audit of all its DCCBs. It prepares and communicates annual targets for all its DCCBs, and sanctions their credit limits and reviews and monitors the progress of the DCCBs, through regular meetings. 1-8 Organisation and Systems: The cooperative organisations at all tiers are headed by government appointees, whose tenure is typically uncertain. Delegation of financial and administrative powers is minimal, decision making is centralised, and in practice, mostly in the hands of the staff deputed from the government. There was shortage of staff at most levels. There has been almost no fresh recruitment for a long period. The average age of an employee is around 50 years, and it is only increasing. 1-9 The PACS lack even basic accounting systems. The higher tiers are in somewhat better shape with regard to basic accounting but it is difficult to rely on any numbers put out on the system because of the problems with the base data as also the lack of automation. 1-10 Portfolio Quality and Profitability. As per reported figures for 2002-03, 3,981 (76%) of 5,252 PACS, 23 of 26 DCCBs and the RSCB are 1 As per NABARD definition 2 As per Rajasthan State definition



October 2005 Page 5

profitable. But 2002-03 was a rare ‘good’ year and a larger proportion of the institutions otherwise have accumulated losses, e.g., only 12 of the 26 DCCBs have reported accumulated profits as at the end of fiscal 2003. However, the reported figures cannot be relied upon when the recovery rates reported at the lowest tier are 63%. 1-11 At the lowest tier i.e. at PACS, there is no asset classification or provisioning. Further, loans are often restructured due to drought or other calamities. Since 1998, restructurings have been affected in all but 2 years, covering 5% - 60% of the outstanding portfolio in different years. Transaction costs are about 3% of working capital for the aggregate. 1-12 At the DCCB level as on March 31, 2003, out of total advances outstanding of INR 20,703 million reported gross NPA was INR 2,802 million. It is difficult to assess transaction cost of the lending operations separately as common personnel and infrastructures are used. Reported NPAs as a percentage of total advances have gone down from 16.8% in FY2001 to 13.5% in FY 2003. The provisioning in respect of this was INR 1151 million. Because of poor data integrity and successive restructurings, it is difficult to assess the likely additional provisioning requirements but is estimated at a minimum additional 20-25% of gross outstanding. 1-13 India embarked on financial sector reforms in the late eighties. This has resulted in substantial transformation of commercial banking institutions. If anything, these reforms have reduced the focus of the commercial banking system including regional rural banks in rural areas. The CCS is perhaps the only network with the physical outreach to address the financial services needs of the rural households. However, this potential is unrealised due to a combination of inadequate regulation, political interference, poor governance and administration, very poor accounting, reporting and auditing systems and a lack of innovation in development of viable products and channels to address the specific needs of the rural clientele. This potential can only be realized through fundamental changes in the regulation/supervision approach, governance, financial and institutional arrangements. 1-14 This report is proposing to work with the short term structure and suggests ways of either improving or changing the overall approach. At this stage we are not considering working with the long term structure. There appears to be general agreement around the fact that having two structures, to basically provide the same type of services (different products) to serve the same set of clients, might not be the most productive way of doing things. 1-15 Restructuring the cooperative system should be a vital part of the rural finance sector restructuring and development exercise. However, it is not the only part and linking/coordinating the other components, like working with microfinance organisation and SHGs, risk mitigation and commodity pricing awareness, with the CCS should also be considered critical. A healthy and vibrant cooperative sector with its tremendous outreach could be the ideal



October 2005 Page 6

delivery mechanism for products like SHG linkages, insurance, and commodity pricing dissemination.



October 2005 Page 7

2 BACKGROUND 2-1 Rajasthan state is located in the western-most part of India covering the Thar Desert.

Rajasthan: A Snapshot3

Geographic Details Number of Districts 32 Number of Sub-districts 241 Number of Villages 41,353 Total Land Area (million hectares) 34.22 Total Forest Area (% of Total Land Area)

9%

Total Sown Area (million hectares) 17.07 (50% of Total Land Area) Total Irrigated Area (million hectares) 6.67 (19% of Total Land Area)

Demographic Details Population 56 million Rural Population 77% Population Density 165 persons per sq. km Literacy Percentage 61% Male literacy 76% Total number of Households (million) 9.32 Average Size of a Household 6.1 Female literacy 44% Below Poverty Line (BPL) population4 27% Rural population Below the Poverty Line

26%

Urban population Below the Poverty Line

30%

2-2 The two following tables present the trend in deposits and credit in the commercial banking systems in Rajasthan respectively, showing that only 50-55% of the deposits mobilized in the state are lent back within the state. However, in recent years, credit growth is leading deposit growth, resulting in a 5% increase in the state’s CD ratio from 50% in 2000 to 55% in 2003.

3Source: Census 2001 4

The planning commission defines the poverty line as a per capita monthly expenditure of Rs. 49 for rural areas, and Rs. 57 in urban areas, at 1973-74 all India prices. These poverty lines correspond to a total household per capita expenditure sufficient to provide, in addition to basic non food items that is clothing and transport, a daily intake of 2400 calories per person for rural areas, and 2100 in urban areas. Individuals who do not meet these calorie norms fall below the poverty line.



October 2005 Page 8

Trend of Deposits in Rajasthan: Commercial Banks (INR Million)

2000 2001 2002 2003 Current 25,131 29,703 34,423 40,442 Savings 60,321 71,206 85,252 102,324 Term 152,936 174,472 196,157 206,537 Total 238,388 275,388 315,933 349,304

Source: Various issues of Basic Statistical Returns, RBI

Trend in Sector wise Credit in Rajasthan: Commercial Banks (INR Million)

2000-01

2001-02 2002-03 2003-04

Agriculture 27,058 31,737 40,903 48,537 Industry 42,271 45,963 49,919 54,843 Services 50,111 58,921 84,334 89,692 Total 119,440 136,621 175,156 193,072

Source: Various issues of Basic Statistical Returns, RBI 2-3 As against total agricultural outstanding of about 40 billion of the commercial banking institutions as on March 31, 2003, Cooperative Sector outstanding was Rs 34.6 billion, with the short term structure accounting for Rs 22.6 billion out of this. 2-4 In terms of physical outreach, all scheduled commercial banks put together had 3,392 outlets in the state in 2002-03 against 5,252 PACS, 397 branches of the short term cooperative structure and 134 branches of the long term cooperative structure. Thus the CCS expanded the agricultural outstanding by 85% through expansion in physical outreach by 170% over the commercial banking system.



October 2005 Page 9

3 THE RAJASTHAN CCS: AN OVERVIEW 3-1 Rajasthan, like most other Indian states, has two distinct and separate structures in the cooperative system, for addressing the long and short term credit needs of rural households. As on March 31, 2003, the short term rural credit cooperative structure had a membership of 4.59 million members covering about 60% of rural households in Rajasthan through a three tier structure. A two tier structure for long term credit covers 1.04 million members.

Short Term

Status of Co-operative in the State of Rajasthan Co-operative Credit Structure

Long Term

I – Apex Level I – Apex Level

RSCB (Est. 14 Oct. 1953) RSLDB

(9 Branches) 7 Regional Offices

II – District Level II – District Level

26 DCCBs 36 PLDBs

388 Branches 127 Branches

III – Village Level

5252 PACS




3-2 The latest available reported financial position of the Short Term and the Long Term structures is given the table below. 3-3 As per reported figures for 2002-03, 3,981 (76%) of 5,252 PACS, 23 of 26 DCCBs and the RSCB are profitable. But 2002-03 was a rare ‘good’ year and a larger proportion of the institutions otherwise have accumulated losses, e.g., only 12 of the 26 DCCBs have reported accumulated profits as at the end of fiscal 2003. Similarly, while 23 out of 36 PLDBs and RSLDB, the LT Apex reported profits during 2002-03 only 16 PLDBs reported accumulated profits. 3-4 However, the reported figures cannot be relied upon when the recovery rates reported at the lowest tier are 63% for the ST structure and about 30 % for the LT structure.

Key Data: Short Term and Long Term Structure5 (Figures as of 2002-03, in INR Million)

RSCB DCCBs PACS RSLDB PLDBOwned Funds 2,281 4,474 3,243 864 3,794Deposits 9,919 18,594 943 30 NilBorrowing (o/s) 6,939 9,187 12,530 12,669 11,933Advances (o/s) 11,119 20,703 13,251 11,992 12,219Investments 7,252 7,300 N.A. 1,930 769Recovery Rate 95.46% 77.24% 62.75% 45.92% 29.37%No. of profit making units

-- 23 3,891 -- 23

Current Profit 150 333 288 89 97No. of loss making units

-- 3 1,349 -- 13

Current Loss 32 123 -- -142Accumulated Profit

398 N.A. Nil 898 152

Accumulated Loss

Nil N.A. -620 -702

Average Cost of Funds

9.34% N.A. N.A. 7.12% N.A.

Financial Margin 2.66% N.A. 3.76% 1.44% 3.57%Transaction Costs (% to WC)

0.40% 1.93% 2.90% 0.41% 1.28%

Net Margin (%) 0.90% - 0.86% 1.03% 2.29%Source: NABARD

5 There is another compilation available for RSCB which is somewhat different from the above. It may be mentioned that for some entities, previous year figures are included to arrive at aggregates due to non-availability of relevant year financials.




3.1 Laws and Regulations 3-5 Banking is a central (federal) subject in India while cooperation is a state (provincial) subject. As a result the cooperative credit system in India is subject to dual control, i.e. that of the Reserve Bank of India in respect of its banking function and that of the state government in respect of the setting up and operation of cooperatives. 3-6 The Rajasthan State Cooperative Bank Ltd., the short term apex institution, was set up in 1953, under The Rajasthan Cooperative Societies Act, 1953. The apex institution of the long term structure (The Rajasthan State Land Development Bank) was incorporated in 1957, under The Rajasthan Cooperative Land Mortgage Act, 1956. The DCCBs and PACS have typically been functioning for a longer time, and were constituted under earlier legislation. Post 1953, all the short term institutions were incorporated under the 1953 Act. This Act, however, did not have any provision to cover the long term institutions. This lack of uniformity in the system, vis-à-vis the governing Act, was corrected in 1965, when the 1953 Act was replaced by The Rajasthan State Cooperative Societies Act, 1965. The 1965 Act catered to both the short and the long term institutions. 3-7 The Cooperative law in Rajasthan has recently undergone another major change with the enactment of The Rajasthan Cooperative Societies Act of 2001. This Act is not an amendment of the earlier Act, but a new one. However, on probing for differences between the two Acts, most respondents (at all levels in the system) reported no major differences, and said that ‘this (the 2001 Act) is old wine in a new bottle.’ The rules for the new Act are still being framed.




4 STUDY COVERAGE AND STRUCTURE OF THIS REPORT 4-1 The study covered 22 locations.

Institutions Visited Institutions visited Number Detail

Apex 2 Rajasthan State Cooperative Bank Ltd Rajasthan State Land Development Bank Ltd.

DCCBs 3 DCCB Bharatpur DCCB Bikaner DCCB Jaipur

DCCB Branches 5 Kumber Branch, Bharatpur Main Branch, Bikaner, Nokha Branch, Bikaner Chandpole Branch, Jaipur Chaksu Branch, Jaipur

PACS 9 Jaipur Khora Vissel GSS Sevapura GSS Chandlar GSS Rupaheri GSS Bharatpur Bacchamadi GSS Supawas GSS Bikaner Udasar GSS NokhaGaon GSS Jorabpura GSS

PLDBs 2 PLDB Bikaner PLDB Jaipur

PLDB Branches 2 Norkha Branch, Bikaner Jaipur Branch, Jaipur

4-2 The study focused on a review of organization, ownership, governance, management and human resources, operations, systems, including bookkeeping and internal control, portfolio quality, profitability and transaction cost. This was done through review of documentation including byelaws, audit inspection reports, MIS, policies and loan files and interviews with key personnel and sample employees (80) as well as a sample of customers/potential customers (74). A suite of instruments including questionnaires were used to ensure uniformity. (Please refer Volume 1 of Interim Report).




4.1 Structure of the Report

4-3 This report is organized as follows: 4-4 Sections 1, 2 & 3 provide the background, an overview of the Rajasthan CCS and study coverage. 4-5 Sections 5 to 9 provide study findings in respect of PACS, DCCBs, RSCB, PLDBs and RSLDB respectively. 4-6 Section 10 provides conclusions and recommendations.




5 PRIMARY AGRICULTURAL COOPERATIVE SOCIETIES - PACS

5.1 Organization, Ownership and Governance 5-1 PACS were not incorporated under a uniform Act. The Act varied depending on the year of establishment of the society, and also the State to which that area belonged at the time of establishment (e.g. Bikaner used to be a separate State earlier). The oldest society in our sample, Bachamadi GSS, Bharatpur District, was registered in 1934, the youngest was Khora Vissel GSS of Jaipur District, which was formed in 1974. 5-2 The shareholders in a PACS are the State Government and the individual members. In our sample PACS, the proportion of shares capital held by the State Government ranged between 30% to 45%. While aggregate data on shares of government in share capital for PACS is not available, we understand that our sample of PACS is representative. The borrowing membership and the borrowed amounts have a direct bearing on the share capital, because the PACS require their members to contribute 6% of all incremental loans as share capital (this amount was 15% till December 2000). 5-3 PACS do not report on the composition of members. All PACS in our sample reported membership drives some ten to twelve years back, driven by the local leaders of the area, to increase their voters in the PACS. The membership fee of INR 11/- for the nominal/landless members was also paid by the leaders in many cases. In due course, the fee was increased to INR 110/-. The overall membership of PACS declined by 0.33% between 2001 and 2002, and increased by 1.6% the next year. 5-4 The overall awareness and feeling of ownership of members seen at most of the locations was rather low (Only 19 of 56 members surveyed at the 9 sample PACS said that members are owners of PACS. Many other thought that office bearers (18) or Government (10) are the owners). Members’ expectations of PACS are as borrowers, and not as owners. The awareness levels of members of the Bacchamadi GSS in Bharatpur District were high, but even here the members of the PACS seemed to say that while they were in touch with most of the issues facing the society, and are actively looking at resolving them, in reality their opinion didn’t matter much. 5-5 The AGM is normally held annually, and the normal agenda includes

The proceedings and decisions at the previous AGM Activities of the society Payment of dividends Pending legal issues if any Overdue Recovery




Expenditure approval Audit compliance Purchase of fertiliser and seeds Increments to staff

5-6 Voting in AGMs is done by raising of hands. The proceedings of the AGMs are recorded in a Proceeding Register, which is checked by the auditor. This register was not made available at all our sample PACS. The few that were seen suggested broadly similar type of proceedings. 5-7 The last cooperative elections in Rajasthan were held in 1991. In all our sample PACS, the 1991 Board still existed. The frequency of Board meetings is uncertain, and varies from one society to another. At one society, Board meetings were held ten times in a year, at some others they were held once or twice. The proceedings are recorded in a Proceeding Register. There are ten to twelve members on the board of the PACS, seven to nine are elected and one each is nominated from the Agriculture Department and the Cooperative Department (inspector) of the State Government. The loan supervisor also serves on the board, and the PACS manager is the ex officio member. Replacements for members who have expired are not easy to get on board, so the number keeps reducing. Typically the proceedings register shows quorum, with all needed signatures, but reportedly this is done by taking the register to the respective persons later and taking their signature. 5-8 It is difficult to comment on whom control of the PACS vests with. At one level, since the Boards are not superseded, they should be in control. However, in practice, there are no elections, Board members do not change, the old ones are not really active or interested in the functioning of the PACS, some members have died, and no replacements have been made. So in the final reckoning, though the Boards still have the powers, they are rather ineffective, and it is the State Government, through the DCCBs that govern and control the PACS.

5.2 Operations 5-9 PACS operations in Rajasthan have seen a steady rise.

(INR millions) FY 2000 – 2001 2001 – 2002 2002 – 2003

Own Funds 2,837.4 3,183.0 3,243.3 Deposits 650 764.5 942.7 Borrowing 8,720.5 10,117.7 12,530.7 Advance issued 9,020 11,220 12,995 Growth % - 24.4 15,8 Advance outstanding

10,806 12,064.7 13,251

Growth % - 11.6 9.8




5-10 PACS are not pure financial intermediaries as other than seasonal credit operations, they get involved in buying farm inputs in bulk and selling this to members. About 2000 PACS in Rajasthan also offer other services, one such service such as distribution of products under the Public Distribution System (PDS). PDS involves selling of subsidised grains, kerosene and other products and there is a margin earned from this activity. The PACS conveyed an impression that the PDS business is thrust upon them, they seemed to do it rather unwillingly. 5-11 The financing operation of a PACS is divided into two components, A and B, the former is cash financing to farmers, and the latter is financing in kind for fertilisers, pesticides and seeds. The fertilisers, seeds etc. are procured from the market and given onwards to the farmers, under their sanctioned credit limit. 5-12 PACS also earn margins from their business of seeds, fertiliser and pesticide financing. There is a fixed amount earned per bag of fertiliser, which gives them a 6% to 7% margin on sales. Timely availability of seeds, fertilisers and other products was a common complaint of members in most villages. One of the major reasons cited by members for being associated with the cooperatives for their credit needs was because the same agency also provided seeds and fertilizers without having to pay in cash. 5-13 About 60% of rural households are covered by PACS membership. However, this coverage varies widely across the state. In Pali and Banswara districts, over 90% of the rural households are members of PACS whereas in districts like Durgapur and Nagaur the membership is 2% and 6% respectively. On an overall basis, during 2002-03, PACS lent to only 40% of their members thus reaching less than a quarter of rural households in Rajasthan. Borrowers to members ratios also vary widely across the state (e.g. Bikaner 6%, Jalore 87%). For the year 2002-03, PACS disbursed INR 12995 million to members, with an average loan amounting to about 7,600. As on 31st March 2003, about 22% of total PACS outstanding was to small and marginal farmers6. SC/ST7 clients accounted for 16% of outstanding as on that date. We were unable to obtain any gender analysis data but the proportion of women borrowers is likely to be low. The State Department of Cooperation, Rajasthan has issued guidelines under which, the Board of a PACS can authorise the society to function as a mini bank8. For a beginning, the financial service which the mini banks can provide in addition to their lending is acceptance of deposits. There are around 1100 PACS functioning as mini banks and their total deposits are at around INR one billion. 6 As per NABARD definition 7 As per Rajasthan State definition 8 This is in direct contravention of the BR Act which lays down very specific requirements of what sorts of entities can call themselves ‘banks’..




5.3 Management and Human Resources 5-14 Each PACS is managed by a Secretary/Manager. The manager of the PACS can be appointed and removed, for full time or part time charge, only by an approval to that effect from the Board of the society. The bye laws of the societies, however, do not give any real administrative or financial sanction powers to the managers. All the loans applications of PACS are consolidated by the DCCB branch, and sent to the DCCB HO for sanction. The Loan Supervisor from DCCB also contributes significantly to the PACS by acting as a link between the DCCB branch and the PACS. He also acts as a mentor for the PACS managers for all operational issues. 5-15 One of the primary HR concerns voiced at all levels was with regard to PACS managers. When the PACS managers were selected, there was a government run Cadre authority (up to 1991) through which they entered the system, so in some ways they were quasi-government employees. They are presently working as employees of the societies, and are being paid from the PACS. They began their service as quasi-government servants, so the current status is not acceptable to them. Their salary is INR 4000/- a month, they are not given any other benefits such as Provident Fund (PF), pension, medical benefits etc. 5-16 Many PACS managers have two to three societies under their control. The manager is paid INR 100 to manage each additional charge. Each such payment of INR 100 to the manager has to be approved by the board. The managers receive a recovery incentive for the additional societies handled. Disbursement of the PACS (INR)

Recovery Incentive Incentive is given only when recovery at PACS level is greater than 90%, and at bank level is greater than 80%.

Between 1 and 1.5 million INR 6,000/- Between 1.5 and 2.0 million INR 12,000/- Greater than 2.0 million INR 14,400/- 5-17 The staff strength at the PACS level, which was also an issue of concern, varied across the districts studied, but the maximum was at three, including one manager, one cashier and one grade IV staff, and the minimum number was one, just the PACS manager. The latter was true of all PACS in Bikaner. Even where two or more employees existed, there was a near complete overlap of work being performed. 5-18 None of the PACS managers in our sample had received any training in their career, except when they joined service through the cadre authority.




5.4 Systems 5-19 The PACS do not have appropriate systems for accounting, operations or reporting purposes. In many cases, the entries of the cash book and the loan ledger did not match. 5-20 Planning and budgeting is primarily top down (based on norms provided by DCCBs) and based on `as last’. In theory, the PACS are supposed to do a business planning exercise, but only around half of the PACS are reported to send in their plans. At the PACS we visited, the only exercise which came close to planning was preparing and approving an annual budget. The PACS manager and loan supervisor prepared a budget in advance of the AGM and got it ratified by the members in the AGM. 5-21 Credit Appraisal: There is almost no formal credit appraisal at the level of the PACS. The only aspect which is verified is the ownership of land, for which land related documents are sought, and the patwari verifies the land holding declared by the member. No checks are conducted on the creditworthiness of the borrowers. The loan supervisors and PACS managers carry the impression that they cannot pick and choose their borrowers, the system offers no scope to discriminate between two members, and that they were obliged to give loans to all those who become members of societies, irrespective of their creditworthiness and repayment capacity. 5-22 Disbursement, Post disbursement Follow-up and Recovery: There is no follow up until the recovery season (March to June). Recovery is generally effected once the borrower is sure of issuance of a fresh loan. A review of the overdue cases and legal action9 cases at any PACS shows that entire extended families are defaulters and legal action is more often than not politically motivated (action is taken against all defaulters in an extended family in any year).

5.5 Management Information System 5-23 The formats that have been prescribed for reporting to the higher tiers are broadly adequate. However actual reporting is incomplete, inaccurate, not timely and unreliable. While this is partly due to poor bookkeeping and lack of automation, staff inadequacy is also a major contributor.

5.6 Internal Audit, Audited Controls

9 The Rajasthan Cooperative Societies Act, 2001, provides for an automatic creation of charge on the agricultural produce for any loan given for agricultural purposes by Cooperative Societies. For loans other than short-term loans, a charge is created on the unmovable property.




5-24 There is no system of internal audit at the PACS level. Thus frauds and misappropriation (if any) are not timely detected and reported. The loan supervisors of the relevant DCCB branch are required to conduct inspection of the PACS at least once in a year. However in the PACS that we visited, less than half had been inspected during the last year. Further, in several cases, no formal report had been issued although an inspection had been carried out. We have observed that often the PACS carry cash balances in excess of the limits fixed by the bye-laws of the society. It was also observed that there is a delay in remittance of cash to DCCB. Generally, PACS do not hold adequate insurance cover for cash in hand and cash in transit.

5.7 Portfolio Review 5-25 PACS do not identify NPAs in their loan portfolio and do not make provisions. As per the Rajasthan State Cooperative Societies Act 2001, interest is recognized as income on an accrual basis. As per NABARD guidelines, overdue interest is required to be provided. In the PACS visited by the study team, this was being done. On the other hand, when loans are restructured, overdue interest is added to the capital and is restructured (thereby, the provision to be made for overdue interest is avoided). There may also be ever-greening in some of the accounts because very often, a loan is disbursed within a few days of recovery on the previous loan. 5-26 As per information made available to us, the following restructurings have been carried out in Rajasthan in the recent past: Restructuring Amounts in million INR1998 Kharif (effected during FY2000) 2371999 Kharif (effected during FY2001) 1,0602000 Kharif (effected during FY2002) 1,1542002 Kharif (effected during FY2004) 7,044

Source: RSCB 5-27 Reported information on recovery and overdue for all PACS in Rajasthan is as follows:

(INR Million) Demand Recovery Collection (%) Overdues 2000-01 11,125.9 7,814.3 70.2 3,311.62001-02 14,089.4 9,731.8 69.1 4,357.62002-03 16,517.5 12,714.9 77.0 3,802.6

Source: RSCB 5-28 We visited 9 PACS under three DCCBs of Rajasthan. Their total outstanding loans, recovery position and overdues are presented in the table below.




A. Data for the 9 PACS as a whole (INR Million)

FY 2002-03 Khora Vissel

Sevapura

Rupaheri

Chandlai

Supawas

Bacchamadi

Jorabpura

Udasar

Nokha Gaon

Outstanding 3.3 2.2 2.8 3.8 1.9 1.9 2.4* 1.1 2.7Recovery 2.6 3.7 2.9 3.7 - 2.9 - - -Overdue* 0.4 1.7 0.2 0.3 *Figures for 2003-04

5-29 At the 9 PACS visited, we carried out a review of a random sample of 74 accounts. One PACS did not make available its loan ledgers and in 4 PACS, all accounts reviewed were found to be Standard if NABARD guidelines are applied. For the remaining 4 PACS, the assessed quality of the portfolio based a review of available information on sample loans is presented below. B. Data for Sample accounts

FY 2002-03 Supawas Bacchamadi

Jorabpura Nokha Gaon

Number of sample accounts 10 8 8 8Value of accounts studied (INR ‘000)

100 50 130 150

Number of NPA accounts 5 1 5 1Number of NPA accounts as % of number of accounts studied

50% 13% 63% 13%

Value of NPA accounts (INR ‘000) 78 8.5 30 5% of NPA to total value of sample 78% 17% 24% 3%

5.8 Profitability and Transaction Cost Aggregate Profitability for PACS (INR million)

FY 2000 – 2001 2001 – 2002 2002 – 2003 Net Profit (Loss) 75 114.8 165.3Growth % - 53 44Acc. Profit (Loss) (613.7) (704) (620.3)Growth % - 14.7 -11.9

Source: NABARD 5-30 Number of PACS reporting profit has been increasing, with 3,891 reporting profit in FY03. There was a net profit for all the PACS put together as the aggregate profits of the profit making PACS (INR 288.3 million) was higher than the aggregate losses for the 1,349 loss making PACS (INR 123 million). 5-31 Clearly, if appropriate provisioning is carried out, the situation will look much worse. Reported transaction costs for PACS are around 3% of working capital. PACS visited by us had transaction costs in the range of 1.48% to 3.44%




of working capital (Refer table below). As the denominator (working capital) currently includes assets which are eroded, transaction cost as a percentage of net working capital (after accounting for asset erosion) would be higher. Transaction Costs (INR Million)

FY-2002-03 Khora Vissel

Sevapura Rupaheri Chandlai Bacchamadi

Working Capital 6.04 3.2 4.1 5.4 4.7Transaction cost 0.20 0.11 0.07 0.08 0.12Transaction cost as percentage of Working Capital (%)

3.31 3.44 1.48 1.71 2.55

5-32 Problem of imbalances: PACS do not account for the recoveries in a manner consistent with that adopted by the DCCBs. The PACS while making payment to the DCCB, appropriates part of the proceeds towards the principal and the rest towards the interest whereas the DCCB appropriate the proceeds first towards the interest and the surplus (if any) towards principal. This results in an imbalance between the principal amounts as shown by the DCCB and as shown by the PACS. The problem is exacerbated as the DCCB keeps on charging interest on the outstanding amount. The same does not tally with the figure appearing in the books of the PACS. At the end of 2003 the amount of imbalance was estimated to be 620 million.




6 DISTRICT CENTRAL COOPERATIVE BANKS - DCCBs

6.1 Organization, Ownership and Governance 6-1 There are 26 DCCBs, covering the 32 districts of the state. The overall share capital for all DCCBs put together is INR 1785.6 million. They are owned by Primary Agricultural Cooperative Societies & other cooperative societies, and the state government. The different categories of shares of DCCBs are:

A class shares, which can be held by State Government and the apex bank. The face value of these shares being INR 10,000/-.

B class shares, which can be owned by PACS. The face value is INR 1000/-. C class shares held by the nominal (non voting) members, can be held by

autonomous institutions, local institutions/bodies, public corporations, or institutions which are registered under the Registration Act of 1958, different trading houses, and such people or groups as a depositors and are willing to take the facility of loan, CC, OD, etc. The face value is INR 11/- and a deposit of INR 1000/- has to be made by such members.

6-2 The ownership of the government in the DCCBs, for our sample districts ranges between 22% and 33%. At the aggregate of DCCB level, the government owns 30% of the share capital. 6-3 The Byelaws of DCCBs require DCCB Boards to be constituted as follows:

Three nominated members from the state One to two members from other cooperatives such as marketing coops and

thrift and credit coops Balance elected members from among the PACS (each district is divided into

zones and each zone is represented on the DCCB Board)

6-4 There have been no elections in Rajasthan for over ten years and all the Boards are superseded with the district collector acting as Chairman and Administrator. The Managing Director is also a Government officer (from the department of cooperatives)

6.2 Operations 6-5 There has been steady growth in operations of DCCBs (INR millions)

FY 2000 – 2001 2001 – 2002 2002 – 2003 Owned Funds 3,580 4,027 4,474Deposits 15,257 16,939 18,594Borrowing 6,049 7,614 9,187Loans Issued 13,316 17,433 22,931Loan Outstanding

14,736 17,291 20,703




6-6 The primary clientele of all DCCBs are the PACS and these continue to account for about two third of the outstanding of DCCBs in Rajasthan on an aggregate basis.

6-7 While specific figures are not available, it is estimated that three-fourth of the non-PACS lending of DCCBs is to other cooperatives, while the balance one-fourth is to individuals and incorporated bodies engaged in activities allied to agriculture or processing of agricultural output. DCCBs also accept deposits and carry out other banking functions similar to commercial banks, such as participation in the payments system. Key services provided by DCCBs to PACS, other than loans include sanctioning of all loans originating from PACS, arranging insurance for cash in transit and personal accident insurance for PACS borrowers and conducting inspection of PACS. 6-8 There is increasing pressure on DCCBs across the state to compete with commercial banks, offering the same type of products and services, to increase both their market share and their profitability. This changes the profile of DCCB from focussing primarily on agricultural and/or rural loans to include commercial borrowings, and it also raises issues related to HR and capacity of the DCCB branch to service loans of a different type.

6.3 Management and Human Resources 6-9 Each DCCB is managed by a Managing Director, who is deputed from the government; next in line is the Executive Officer (EO), who is also from the government. 6-10 The typical organization structure is as follows:

Chairman (District Collector)

Managing Director (Government Officer)

EO (Government Officer)

Branches

Accounts Planning & Operations Inspection and Development Supervision




6-11 The head office manages administrative issues, and gives policy directives to its branches. The head office also does supervision of branches, appraisal and sanction of loans that originate from the DCCB, and handles all disputes and issues. Most administrative issues (such as salaries and leave), policy issues, human resource issues, and financial powers are with the DCCB HO, the delegation to branches is minimal. 6-12 The MD has all administrative powers and financial powers in a DCCB. No loans are sanctioned by any DCCB branches without the approval of the MD. The branch managers have no financial sanction powers. They were given powers to sanction consumer loans up to INR 25,000/-, but as of now this also stands withdrawn. The administrative powers with the branch manager are also minimal, all salaries and leave, except casual leave to branch staff lies with the HO. 6-13 The branches we visited had discontented staffs, who want more powers to produce any results. At present, the system depends totally on schemes and products designed and sent from the apex level, there is no scope for innovation and improvisation by DCCB branches or HOs, to cater to the needs of the local clientele.

There are no clear cut job profiles or promotion policies Recruitments are rare Less than a half of the employees interviewed reported any training in

the last three years. The training related to the use of computers in most cases.

6.4 Systems 6-14 Planning & Development: The DCCB HOs do a planning exercise for each one of their branches. The branches similarly allocate their targets amongst their PACS. 6-15 There is, both on paper and in practice, a lot of activity happening under the head of planning and development, there are several planning meetings scheduled at regular intervals. This does not seem to lead to any type of specific action for achieving targets, or even to provide for more effective decision making. 6-16 The planning process is simple, for deposits, a mark up of 20% on the previous years’ deposits is taken for each branch. For loans under different categories, such as ST and NFS, targets are received from the Apex bank for different zones, which are allocated among its branches in that region, based on factors like previous performance.




6-17 The increase in amounts of advances under various categories is dependent primarily on changes in norms10. Besides this, the Executive Officers use their value judgement and make changes in consultation with the field officers, and some of the aspects they consider are the advances in the previous year, change in number of members. Politics too plays a part. While there is no real bottom up planning, there is no accountability for top down plans either.

6.5 Credit Appraisal and Documentation: 6-18 The origination of the loan, the documentation, and the recommendation on the loan application are done at the branch, the sanctioning is done through the head office. Once approved, the loan is disbursed from the branch. For agricultural loans a Maximum Credit Limit prepared by the PACS manager forms the basis of the loan, and for other loans, detailed documentation on the same lines as the commercial banks is supposed to be done. 6-19 Our review of loan documentation at branches found a high incidence of incomplete, and some unnecessary documentation. In some cases, blank affidavits signed by the borrower were found and blank, uncrossed signed PDCs were seen for some consumer loans. Loan applications were often seen to be incomplete.

6.6 Post Sanction Disbursement, Monitoring, Follow up and Recovery 6-20 A significant time gap was noticed between the approval and the disbursement of loans. No proper record for the physical verification of assets acquired from the loans was being maintained at the branch level. 6-21 In some of the cases observed, for instance insurance was not effected from the date of loan distribution, also insurance was not been renewed on time in all cases.

6.7 PACS Inspection 6-22 The DCCBs prepare an inspection calendar for their PACS each year. The loan supervisors are given dates well in advance for inspection of the mentioned PACS. All PACS are supposed to be covered under this inspection process, but in practice this seemed more like an obligatory exercise as three to four PACS were allocated to a loan supervisor in a single day. The calendar prepared by the Jaipur DCCB in August 2003, for example mentioned that most of the loan supervisors had not inspected the PACS allocated to them and in fact, many had not reported even a single inspection in the previous year.

10 These norms refer to the amount of loan per unit of land, for sowing different types of crops, in different areas. A technical committee prepares these norms, which are valid for three years.




6.8 Book Keeping, Audit, Internal Control 6-23 The accounting at DCCB branches is done manually. Our review of the books of accounts relating to loans & advances revealed that:

Loan Application Register was not maintained upto date. Cuttings/overwriting were not authenticated in loan ledgers. Interest calculation was incorrect in some cases. Physical verification /movement register was not maintained to ensure

the verification of mortgaged properties. Insurance register was not maintained at some of the branches visited

by us. 6-24 Audit is carried out by the office of the State Registrar of Cooperatives. This does not lay adequate emphasis on loan classification and provisioning. NABARD carries out an inspection every two years. The system of risk based onsite and offsite surveillance used by RBI for commercial banks is not yet implemented for the CCS.

6.9 Management Information System 6-25 The management information system at DCCBs is completely manual but various MIS data is derived from the ad hoc computerization resorted to at the branches in absence of any systematic procurement of hardware and software by the DCCBs. Retail banking (Front Office) operations are not on-line. Similarly the back office operations like maintenance of ledgers and registers at the branch are also carried out manually. The MIS compilation and reporting is basically through manual systems. 6-26 DCCBs are not regular in submission of various returns in time to the Apex Bank. The delay in receipt of MIS returns, coupled with ineffective monitoring results in delays on the part of Apex Bank in submitting the consolidated MIS Returns to the regulators. 6-27 Some DCCBs are outsourcing the daily transaction posting work to local data processing agencies for nominal fees. 6-28 Even in such cases, the branch continues with the Manual Ledgers and uses the reports generated by the data processing agency, essentially to identify differences in manual posting of transactions by comparing account-wise list of balances and in some cases also uses the interest computation reports on a test-check basis. 6-29 There is a monthly allowance of Rs.500 which is paid to the staff members who work on the computers. This is as per the State-level Bipartite Agreement




with the Unions. As such there is no reported resistance from the Unions against any kind of computerization.

6.10 Portfolio Review 6-30 During FY2003 the amount of loans and advanced issued were INR 22,931 million, showing an increase of 32% over FY02 (INR 17,433 million). Term Agriculture advances, comprised over 49% of the total advances. Advances Issued and Outstanding: DCCBs (INR million)

FY 2000 – 2001 2001 – 2002 2002 – 2003 Advance issued 13,316 17,433 22,931Growth % - 31 32Advance outstanding 14,736 17,268 20,703Growth % - 17.2 19.9

6-31 As on March 31, 2003, out of total advances outstanding of INR 20,703 million, gross NPA reported was at a level of INR 2,802 million. This has increased by around 13% over FY2001. However, reported NPAs as a percentage of total advances have gone down from 16.8% in FY2001 to 13.5% in FY 2003. NPAs : DCCBs (INR millions)

FY 00 – 01 01 – 02 02 – 03 Standard loan assets 12,260 14,803 17,901Impaired loan assets (NPA) 2,476 2,465 2,802Impaired assets as % of total loans o/s

16.81 14.28 13.53

6-32 As per the guidelines framed by NABARD/RBI, an NPA11 is an advance in respect of which,

interest and/ or instalment of principal remain overdue for more than 180 days

interest and/ or instalment of principal remains overdue for two harvest seasons, but for a period not exceeding two half years in the case of an advance granted for agricultural purposes

6-33 While making provisions, the quality and value of security assessed at the time of disbursement of loan are considered to be fair values even after the instalments are overdue at a later date. In other words, the assets are not valued at the market price/depreciated value for provisioning purposes. Accordingly, there would be a wide gap in the provisioning made in the books and the actual

11 Please see Volume 1 for the full circular.




provision based on the value of security. The Loan Recovery data for the last few years is presented below.

Demand and Recovery (INR million) 2000 – 2001 2001 – 200212

Demand 11,363 18,051 Recovery 8,484 12,408 Recovery (%) 74.66% 69.74% Overdues 2,731 3,471

6-34 We carried out a review of 89 sample accounts value of INR 1.54 million at the 5 DCCB branches visited by us. The findings are presented below. As may be seen the NPA percentage in our sample accounts varied from 11% to 54% (with an exception in one case) in comparison with the system aggregate reported NPA level of 13.5%. A. Figures for Branch as a whole for Sample Branches (INR million) Figures for 2002-03

Main, Bikaner

Nokha Chaksu Chandpole Kumher

Advances Outstanding

23.39* 38.57* 54.31 27.07 60.32

NPA amount as a % of total accounts

13.73* 7.33* NA 21.1* 19.38

*Figures for March, 2004. B. Figures for sample accounts in Sample Branches (INR million) Main,

BikanerNokha Chaksu Chandpole Kumher

Number of Sample Accounts

15 15 20 19 20

Value of Sample Accounts

3.1 2.9 2.9 1.3 5.2

Number of NPA Accounts

4 6 2 6 8

NPA Accounts as a % of Accounts studied (number)

27% 40% 10% 32% 40%

Value of sample NPA Accounts

1.4 0.73 0.01 0.7 0.6

Value of Sample NPA Accounts as a % of value of sample accounts

45% 25% 0.33% 55% 11%

6-35 Estimating required provisioning for the CCS is a very difficult exercise as the base data is not entirely reliable. Further, individual institutional data is not

12 Data for 2002-03 not available.




available at adequate disaggregate level (e.g. NPAs for PACS, other Coops and other borrowers for a DCCB) to enable either individual institution or system aggregates to be properly analyzed. 6-36 In context of this, we have made an attempt to estimate the provisioning requirements at the DCCB level using the following approach:13

(i) Look at overdue loans (as reported) of all PACS under the DCCB and assign percentages of required provisioning on the basis of age analysis (say 30% for overdue less than 3 years old and 90% for overdue greater than 3 years old)

(ii) Add this to the existing imbalances of the DCCB with respect to its PACS portfolio

(iii) Add to this 10%-20% provision on loan restructurings carried out in the last five years

(iv) It is further assumed that the balance lending in the DCCB system is neither worse nor better than the PACS portfolio. Thus the system provisioning at the DCCB level is extrapolated from the previous exercise on the basis of ratio of PACS level borrowings to DCCB level outstanding.

(v) From (iv) we subtract existing available provisioning at the DCCB level to arrive at the additional provisioning required.14

(vi) A sanity check is carried out through a review of overdues and their ageing at the DCCB level.

(vii) A sanity check is also carried out through sample data analysis. For this purpose, • All the sample accounts for PACS as well as DCCBs are classified

as standard, substandard and doubtful based on the duration of their overdue position

• Based on this classification, we get a sense of the proportion of PACS loans that are non performing and similarly the proportion of DCCB loans that are non-performing

(viii) However, the book keeping at the PACS and even the DCCB branches is not the best and on several occasions it is difficult to understand the timing and flow of funds. Interest accrual is not recorded in a timely manner. Often, cash receipts are almost arbitrarily split into interest and

13 In making these estimates we have not taken into account NABARD circulars of June and July 2004 (please see Volume 1 of Interim Report) in regard to restructured assets, which effectively could result in lower provisioning requirements as over dues and restructured loans are treated as standard assets in these guidelines. 14 In an actual exercise to restate the CCS accounts erosion in assets comprising of PACS loans could be lower (due to availability of share capital and reserves of defaulters at PACS to offset some part of the erosion). However, partly because of poor quality of base data, expected evergreening and partly due to our exercise not having covered working capital other than in relation to the credit operations, we have not made any adjustment in this regard.




principal. There are also certain cases that appear to suggest ever-greening of accounts, though there is no firm evidence.

(ix) Given this background, the estimates of NPAs that are obtained from this exercise may not be reliable and should only be treated as a pointer to the critical need for a proper audit of the portfolio.

6-38 The exercise results in the following estimates of assets at risk and additional provisioning requirements. INR million 2001-

02 2002-

03Total Assets 17,290 20,700Assets at risk including Classified NPA, Overdues and Restructured Assets Classified as Standard

9,960 18,400

Classified NPA (as reported) 2,370 2,920




Rajasthan Short Term Credit Cooperative StructureAssessment of Provisioning Requirements

Rs million Source 2001-02 2002-03

1 Imbalances between DCCB outstandings to PACS and PACS borrowings RSCB 502 615 Provisioning required in DCCB books 100% 502 615

2 Provisioning for Overdue Loans of PACSTotal Advances of PACS RSCB 11,256 13,480 Total overdues RSCB 4,189 3,800

Overdues > 3years RSCB 850 1,000 Overdues < 3years RSCB 3,339 2,800 Provisioning rate for Overdues > 3 years Assum 90% 90%Provisioning rate for Overdues < 3 years Assum 30% 30%Provision for Overdues > 3 years Calc. 765 1,000 Provision for Overdues < 3 years Calc. 1,002 2,800

Total Provision for Overdue Loans Calc. 1,767 1,740

3 Provisioning for Restructured Loans of PACSAmount of Loans Restructured RSCB 1,999 7,244

Provisioning rate (lower end) Assum 10% 10%Provisioning rate (upper end) Assum 20% 20%

a. Total Provision for Restructured Loans (lower end) Calc. 200 724 b. Total Provision for Restructured Loans (upper end) Calc. 400 1,449

4 Total Provision for PACS portfolioTotal DCCB Outstanding to PACS Assum* 11,758 14,095

a. Lower end (1+2+3a) Calc. 2,468 3,080 b. Upper end (1+2+3b) Calc. 2,668 3,804

5 Provisioning for Loans to entities other than PACSLoans Outstanding RSCB 17,290 20,703 less: Loans Outstanding to PACS Assum 11,758 14,095 Loans Outstanding to Others Calc. 5,532 6,608 Provisioning rate

Lower end Assum 21.9% 22.8%Upper end Assum 23.7% 28.2%

Amount of provision requireda. Lower end Calc. 1,213 1,510 b. Upper end Calc. 1,311 1,865

6 Total Provisioning Requireda. Lower end (4a + 5a) Calc. 3,681 4,589 b. Upper end (4b + 5b) Calc. 3,979 5,669

7 Existing Bad and Doubtful Debts Reserve RSCB 630 1,042

8 Additional Provision RequiredLower end (6a - 7) Calc. 3,051 3,547 as % of loans outstanding 18% 17%Upper end (6b - 7) Calc. 3,349 4,627 as % of loans outstanding 19% 22%

* Taken at PACS outstandings plus imbalances in the absence of data.




6.11 Profitability & Transaction Costs 6-39 During the year 2002-03, 23 DCCBs reported profits, while 3 reported losses. 6-40 Given the foregoing analysis in respect of NPA, these numbers are likely to undergo substantial change when prudent accounting standards are implemented for the PACS portfolio and the DCCB portfolio is corrected for misclassification. 6-41 At an aggregate level, the reported transaction cost of DCCBs is about 2% of working funds. For the DCCBs in our sample, the range is 1.4% to 2.2% for 2002-03. Transaction Costs (INR Million) FY 2002-03 Jaipur Bikane

r Bharatpur

Working Capital 1,880.9 715.9 1,131.0Transaction cost 26.1 13.6 24.3Transaction cost as percentage of Working Capital

1.4% 1.9% 2.1%




7 RAJASTHAN STATE COOPERATIVE BANK - RSCB

7.1 Ownership, Organization and Governance 7-1 The ownership of the RSCB lies with the state government and other cooperative institutions, primarily the DCCBs. The share of the State government is 3.7% and that of the DCCBs is over 96% of the total, INR443 million, paid up share capital. 7-2 The apex has not had elections since 1994 a Board of Management does not exist and an Administrator is officiating at present. As per the Bye-Law of the society, the Board is supposed to be constituted as follows:

Eight elected members from the DCCBs One elected member from other member cooperative societies The registrar of Cooperative societies as an ex-officio member Two members nominated by the government The Managing Director, who is the ex-officio director on the board.

7.2 Operations 7-3 The operations of the RSCB have been growing at a somewhat lower rate than that of DCCBs. (INR millions)

FY 2001 – 2002 2002 – 2003 2003 – 2004 Owned Funds 2,178 2,430 2,787Borrowing 6,024 6,939 8,247Deposits 9,674 9,919 10,221Loans issued 11,442 13,357 11,023Loan Outstanding

9,912 11,119 12,263

7-4 The branch network of the RSCB caters primarily to the DCCBs, and provides some retail services such as:

Cash credit Term loans Working capital Draft making Guarantees and letters of credit to others.

7-5 Their lending business outside the cooperatives is a very small proportion of total business. While the overall direct lending of the RSCB (i.e. other than lending to DCCBs) is about Rs.2 billion, most of these loans are to other cooperatives.




7-6 The RSCB provides operational direction to its lower tiers. It also prepares schemes, does monitoring and supervision, and conducts an annual audit of all its DCCBs. It prepares and communicates annual targets for all its DCCBs, and sanctions their credit limits and reviews and monitors the progress of the DCCBs, through regular meetings.

7.3 Management and Human Resources 7-7 The managing director of RSCB is of the rank of Additional Registrar of Cooperatives, and is on deputation from the State government. The MD has to be appointed by the government in consultation with the board. The tenure of the MD is uncertain, and the MD could well be from a non-banking background. 7-8 Delegation of powers to the MD is as per by-laws, the MD has full powers over salary and allowances, approval of tours, advances to staff, deputation of training, issue of guarantee, decision for rate of interest and deposits, etc.

7-9 The other management positions at RSCB are GM, DGM & AGM. There is one GM and there are six Deputy GMs, handling administration and personnel, inspection and supervision, planning and development, operations, accounts and finance, training respectively. There are five regional branches of the RSCB, which are headed by AGMs. There are currently at least 3 positions vacant mainly due to a freeze in recruitment. 7-10 One of the primary issues plaguing the system is the state of its human resources. They are not invested in and cared for. Also from the employees’ side, there is a general element of disinterest in the system.

There is shortage of staff at most levels, this clubbed with the fact that there is a blanket ban on fresh recruitments in the system, made the situation worse. There has been no fresh recruitment in the RSCB for example, for the last twenty years. The average age of an employee is around 50 years, and it is increasing.

There are obvious overlaps in work actually performed by various employees.

Most of the organisations are headed by government appointees, whose tenure is typically uncertain. It was observed that often by the time they actually get a hang of the system, and are in a position to add value to it, they are moved out. They are seen as outsiders and do not often have domain knowledge.

Delegation of financial and administrative powers is minimal, decision making is extremely centralised, and in practice mostly in the hands of one staff deputed from the government.

Unions exist for employees, and similar associations exist for officers. There seems to be a lot of friction between the management and the unions at the RSCB.




Training is an area of concern both with respect to quality and coverage in numbers. At all levels, the staff in the credit cooperative institutions were inadequately trained, many have never undergone training. None of the sampled institutions had a training plan for their employees, they depended on the training institutions for a training calendar, which guides them in sending their staff for trainings.

7.4 Systems Planning and Development 7-11 Planning in the cooperative credit system is performed primarily as a budgeting exercise. The planning departments of these institutions prepare budgets at regular intervals. One of the important factors guiding the budget making exercise is the targets given by the government. The only purpose that the planning exercise serves is to set targets, there is no corresponding analysis and the plans and target achievements of previous years are not used for any other decision making, besides setting the next targets. These plans or budgets are used only as indicators of the direction in which the system should move, and achievements against these targets are not important. 7-12 Planning is said to be done at each institution in the cooperative credit system, but in reality it is a top down exercise. Each lower tier does some allocation of targets to the banks in its ambit, within the overall target given to it by the immediate upper tier. The RSCB first prepares some overall district wise targets for the entire State, on a scheme wise and sector wise basis, in consultation with NABARD. Accordingly, it prepares targets for each DCCB based on their previous two to three years’ performance, for each scheme. No market analysis, product development, demand gap analysis, are included in the exercise. 7-13 There is system of signing of a Memorandum of Understanding (MoU) between the successive tiers, once the plans/budgets are finalised every year. An MoU is signed between the NABARD and the respective apex institutions, and similarly between the apexes and their DCCBs/PLDBs. This MoU is to the effect that both parties involved will take all necessary steps to achieve the targets in the agreed upon timeframe. The MoU also specifies the key action points to achieve the targets. 7-14 Planning being a top down exercise, the apex institution does most of the planning. The growth rates assumed from one year to another take most ground realities into consideration, but in the ultimate event, the rates of growth used cannot be broken down and analysed, because of a significant element of subjectivity and value judgement.




7.5 Inspection of the DCCB 7-15 As per RSCB’s policy, the bank was required to take up the inspection of DCCBs on yearly basis. Until 27th August 2003, out of the total 26 DCCBs, inspection was carried out and inspection report issued for 20 DCCBs.

7.6 Management Information System 7-16 Information Requirements for supervising the CCS and reporting to lenders and supervisors are fairly well defined. However reporting from the lower tiers is irregular and of poor quality due to both low data integrity as also lack of automation. 7-17 Performance Review Meetings are conducted to monitor the functioning of various branches of the Apex Bank and to take necessary measures wherever the achievements are falling short of the targets under various parameters. The meetings are followed by communication of Targets discussed during the meetings and status of various pending compliance matters. This is then followed up with the branches by the respective departments at the Head Office of RSCB. 7-18 At RSCB, the computerization of MIS work was still at the laboratory stage. Although a pilot run was said to have been carried out at RSCB’s HO, its Bank-wide implementation was held up, reportedly due to non-cooperation from the staff. The study team was shown a demo of the software to compile the monthly data at the H.O. The software was found to be functional. Change of mind-set of the staff is needed to improve the MIS flow at this Bank.

7.7 Portfolio Quality 7-19 Advance outstanding (INR million)

FY 2001 – 2002 2002 – 2003 2003 – 2004 Advance issued 11,442 13,357 11,023Growth - 16.7% -17.5%Advance outstanding 9,912 11,119 12,263Growth - 12.2% 10.3% 7-20 There has been a drop in the loan advanced by approximately 3.6% (INR 11,442 million to INR 11,023 million) in FY 2004 as compared to FY 2002. However advances outstanding have increased by about 24% (INR 9,912 to INR 12,263 million) during the same period. 7-21 Classification of Loan Assets: As per reported data, percentage of non performing assets to the total loan outstanding has improved significantly from 8.40% in FY 2002 to 2.25% in FY 2004.




(INR million) Financial Year 01 – 02 02 – 03 03 – 04 Total loan assets 9,912 11,119 12,263Standard loan assets 9,080 10,741 11,973NPAs 832 378 290NPA as % of total loan assets 8.4% 3.4% 2.3% 7-22 It may be noted that out of total impaired assets of INR 290 million, around 47% of the loans, amounting to INR 127 million are over 6 years old. At the same time, it must also be mentioned that RSCB has been making adequate provisioning, at least with respect to its reported NPAs. For example, at the end of FY2004, RSCB had a Bad and Doubtful Debts Reserve of INR 63 million. In addition it had Provisions for NPAs of INR 241 million. In other words, the total provisioning for NPAs (INR 304 million) in the books of RSCB as of March 31, 2004 actually exceeds the total reported NPAs (INR 290 million). On top of this, RSCB also has a Contingent Provision for Standard Assets of INR 414 million which amounts to about 3.5% of its Standard Assets. It may be noted that commercial banks typically maintain 0.25% provision for standard assets. However, the higher level of provisioning appears to be justified in light of the fact that a large proportion of RSCB’s standard assets are restructured assets. 7-23 Accrual of Interest for NPAs Interest is accrued on all NPAs. However, the interest income accrued is fully provided for in the profit and loss account at the end of each financial year. As of March 31, 2004, RSCB’s balance sheet carried a Rs 711 million as Overdue Interest Reserve. The above reported numbers need to be read with caution in view of the performance of the lower tiers. We have, however, not attempted to estimate asset erosion at the SCB level since the suggested approach is to clean up the balance sheet at the DCCB level (please refer Section 10.3.10). Recovery 7-24 RSCB has reported fairly high recovery levels over the last few years. Financial Year 01-02 02-03 03-04 % of recovery to total demand 90% 96% 95% 7-25 However it may be noted that following the drought conditions in the state, certain ST loans are converted to MT loans. As a result the recovery percentage artificially goes up.




7.8 Transaction Cost and Profitability Profitability (INR million) Financial Year 2001 – 2002 2002 – 2003 2003 – 2004 Net Profit 130.7 150.4 175.5Growth - 15.1% 16.7% 7-26 RSCB has been reporting a steady increase in the net profit. Transaction cost as a percentage of Working Capital has improved steadily from 0.48% in FY 2002 to 0.38% in FY 2004. This is partly because of reduction in staff over the years on account of retirement of employees, a freeze on new employment and partly due to growth in the total funds under management. The Net Margin has remained in the range of 0.85% to 0.94% during the review period.

7.9 Audit/Internal Control 7-27 The Registrar of Cooperatives RCS conducts the concurrent audit of RSCB. For this purpose, RCS has empanelled several CA’s, one of whom is selected to carry out the audit. As per the chief auditor in the RCS, the DCCB’s have the option of getting their accounts audited either by an independent CA or by RCS employees. According to him, the DCCBs prefer to use RoC employees as they believe that the RCS employees have a better understanding of the context. 7-28 The Annual accounts are audited and signed by a Chartered Accountant. RSCB also has an Inspection and Supervision department which coordinates with the RCS, prepares compliance reports on the issues raised during the course of the RCS audit. It also conducts the inspection of the branches of the bank. 7-29 NABARD carries out an inspection once in two years. NABARD is yet to implement the risk based offsite and onsite surveillance system that RBI uses for the commercial banking system. 7-30 Issues raised by the NABARD inspection of books for the financial year 2002-03:

There is no manual on loans and advances, which could give

instructions on systematic processing of the loan applications Physical verification of assets financed by the bank, so as to ensure

proper end use of the funds. Instances of assets being financed by the bank being insured or fully

insured. In case of cash credit limits given to customer:




o Limits have been sanctioned in some cases based on provisional balance sheet submitted by the customer

o Non submission of periodic stock statements by the customer Instances of overdrawing from the account In case of Term loans and working capital loans the loan agreements

in some cases were not countersigned by the bank officials, making the agreements invalid.




8 PRIMARY LAND DEVELOPMENT BANK SOCIETIES - PLDBS

8.1 Ownership, Organization and Governance 8-1 The shares of PLDBs are held by the State Government and individual members. For all PLDBs put together, the State has 16% shareholding. 8-2 Share capital is also related to advances, as 5% of the loan amount (in case of loans less than INR 0.2 million) and 3% of the loan amount (in case of loans greater than INR 0.2 million) is deducted towards share capital from borrower members. A non borrower only pays INR 100 towards shares in the PLDB. There are four categories of shareholders at PLDBs, these are:

“A” category – Individual farmers, PACS, multipurpose cooperative societies can be members under this category; INR 100/- as share capital

“B” category - the members in this category are State Govt. and RSLDB; share value is INR 100/-.

“C” Category - Public Trust, Municipal Corporation, Local Bodies are the members

“D” category - District Council, Panchayat Samiti, KPVC Board are the members under this category

8-3 The General Body comprises all members under categories A and B, and the nominated members on the Board of directors. The quorum is 20% or 150 members, whichever is lower. Every member has one voting right. The agenda for the Annual General Body (AGM) meeting is election of the Board members, approval of the budget and the P&L, distribution of the net profit, amendment to any rules, etc. The 2003 AGMs have not been held because the legislative assembly elections were being held. 8-4 As per the bye laws, the Board should inlude the following members:

Nine elected members, one from each of the nine wards One nominated member from the office of the RCS One nominated member from the SLDB One nominated member from the Agricultural Department One nominated member – Additional Collector, Development

8-5 The operational area of PLDB is divided into 9 wards. Each ward is the further divided into sub-wards (100 to 200 members to a ward). As per the bye laws, the elected members at the sub-wards together elect the members to represent their ward (approx 12/13 members elected per ward) in the Board. The members of the Board elect their Chairperson, who has to be from amongst the elected members. As per the byelaws, the term of the Board is to be three years. There are no elected boards at PLDBs at present, and an Administrator officiates




in place of the Board. The Administrator is normally the District Collector, an IAS officer.

8.2 Operations (INR million)

FY 2000 – 2001 2001 – 2002 2002 – 2003 Owned Funds 2,802 3,329 3,794Borrowing 10,244 11,191 11,933Loans Issued 2,367 2,210 2,071Loan Outstanding

10,446 11,397 11,219

8-6 PLDBs have a diminishing operation. The loan advancements decreased by 6.5% between FY2002 and FY2003. In the previous years also a similar decline of 6.6% was seen. Further we understand that advancement during FY 2004 has been lower than the FY2003 level. At the same time the loans outstanding increased by 16% over the 2 year period under-living in the poor recovery performance of PLDBs. 8-7 Discussions with key functionaries of the LT structure (at HO as well as PLDB level) suggested that the PLDBs are facing stiff competition from commercial banks (especially private sector banks) in Farm Mechanisation loans (especially tractor loans). Besides lower rate of interest, the commercial banks are providing 100% finance towards the cost of the tractor, (by providing limits under KCC scheme to cover the margin money). While this may not be prudent banking, it is taking away market share from PLDBs. Moreover the borrower does not need to contribute towards the share capital (which most borrowers consider a wasteful expenditure) 8-8 On the Minor Irrigation Scheme (MIS) side, the LT structure now faces a new challenge. As of March 31, 2004, more than half the blocks in the Rajasthan state have been declared as dark blocks, thereby debarring PLDBs from giving MIS loans in these areas. This is expected to severally hamper PLDBs lending operations. 8-9 The product mix of the PLDBs is shifting from the longer term and capital intensive activities, to the medium and short term, non capital intensive needs. The traditional loan products of the PLDBs are loans for new wells, well deepening, lining of field channels, pump sets, tube wells, sprinklers, fencing, tractors, etc. These institutions however are diversifying its portfolio and is increasingly lending for activities which do not necessarily need long term investments, such as horticulture, fruit plantation, dairy, poultry, sheep and goats, draft animals, piggery, fishery, sericulture, etc. They also finance construction of new houses with assistance from the National Housing Bank.




8.3 Management & Human Resources 8-10 PLDB branches are managed by a Secretary. The secretaries are on deputation from the Cooperative Department. A separate cadre had been created by the NABARD out of Rajasthan Provincial Services, for working as PLDB secretaries. Appointment/transfers are undertaken by the RCS department. The formal delegation of powers to the Secretary and further delegation to the staff is given in the bye laws of the bank. 8-11 In contrast to the short term structure, the Branch Secretaries have loan sanctioning powers in the long term structure. The Branch Secretary can sanction loan less than INR 25,000. It was reported, however, that in practice, the Branch Managers do not sanction any loans. The NABARD’s inspection report of the RSLDB in 2002 pointed out that there were frequent transfers of the Secretaries of the PLDBs. 8-12 The PLDB HO carries out internal control of branches, sanctions loans and guides the branches in loan disbursement, recoveries and reimbursements if any, and ensures implementation of the policies and guidelines set out by the RSLDB. There is no direct loaning done from the PLDB HO. The branches give loans and takes fixed deposits from its members. Apart from this the branches also carry out asset and accident insurance. There are plans to introduce crop insurance from this financial year onwards.

8.4 Systems 8-13 Planning and Development. The PLDBs do not have a separate planning department, their Accounts and Statistics Department handles their planning. The planning process in PLDBs is similar to the DCCBs, whereby they also do an allocation of targets to their various branches, based on the targets received by them from the Apex, and the performance of the branches in the previous years. 8-14 Credit Appraisal. Our scrutiny of the records of PLDB – at Jaipur and Bikaner as regards loan processing indicates that loan applications are incomplete, scrutiny of loan applications is perfunctory, some times there are blank affidavits signed by applicants and there is no standardized process for rejection of loans 8-15 Post Sanction Disbursement, Monitoring and Follow up. Inspection reports point out that there was always a huge time gap in between loan approval and loan distribution. In case of consumer loans, PLDB obtains post dated cheques (PDC) from its customers. It was noticed in some case verified by us the PDC obtained were blank uncrossed cheques leading to the risk of misuse of the PDCs.




8-16 Although the instruments on various loans are payable at different time during a year, the recovery season is from April to June each year. The PLDB staff focuses on recovery only during this period. Loans where recoveries do not materialise are reported to the head office for further action. 8-17 Book-keeping, Audit and Internal Controls. The accounting at PLDB’s is done manually. Our review of the books of accounts relating to loans & advances revealed that:

Loan Application Register was not maintained up to date. Details were not filled in completely in loan application register. Cuttings/overwriting were not authenticated in loan ledgers. Interest calculation was incorrect in some cases. Physical verification /movement register was not maintained to ensure

the verification of mortgaged properties. Insurance register was not maintained Document register was not available for verification Purpose wise loans register was not available for verification. Mortgage register was not up to date.

8-18 Cash & Bank. The physical cash balance maintained at the branches exceeds the approved limit at most of the time and moreover the insurance cover on the cash is inadequate. 8-19 Other issues

Loan sanctioned amount in some cases have been beyond the powers of the PLDB secretary

Inadequate insurance coverage has been taken of assets financed by the bank.

Instances on non-adhered to the margin money norms stipulated by NABARD.

Physical verification of the financed assets needs to be done at least once a year as per the norms but actually verification is done only once during the tenure of the term of the loan.

Loan application register required to be made at PLDB level not being maintained at all at some PLDBs.

Violation of financial power by PLDB secretary and Branch secretary (as regards loan disbursement).

Non-implementation of certain schemes like Rural Accident Insurance Scheme

8.5 Management Information System 8-20 Generally speaking, the long term structure has fairly well defined MIS formats and reporting requirements. PLDBs are required to produce the Balance Sheet and the P&L, in the prescribed formats (T1 and T2) on an annual basis for




reporting to the NABARD. Besides these, the PLDBs are required to prepare monthly reports on the following:

Effective Mortgages Loan Distribution and recovery 20 point programme compliance Branch income/expenses

8-21 In addition, during the recovery season, the PLDBs are required to produce weekly recovery reports. However, report are often delayed. Monthly meetings of the PLDB staff are held, and the Branch Secretary is updated about the ongoing activities.




8.6 Portfolio Analysis

8-22 There has been a steady reduction in reported recovery accompanied by growth in reported non performing assets of the PLDBs in Rajasthan. Recovery (INR million) Financial Year 2000-01 2001-02 2002-03Demand 4,262 5,786 5,188Collection 1,899 2,548 1,317% Of Collection to Demand 44.6% 44.0% 25.4%Overdue 1,174 1,536 2,098 NPA and Provisioning (INR million) Financial Year 2000-01 2001-02 2002-03Standard 8,089 8,458 8,608NPA 2,356 2,938 3,610Provision required (as reported) 485 588 686Provision actually made in books 490 601 616Excess/(Short) 5 13 (70) 8-23 There was a steep rise in demand in FY2002 over FY2001. There has been a drop in demand in FY 2003 as compared to FY 2002 by approximately 10.33%. This, we understand, was due to deferment of demand on account of drought prevailing in the state. Approximately INR 1,586 million worth of loans were deferred. 8-24 Out of total overdue amount of INR 3,864 million as on June 30, 2003, INR 940 (24%) million is overdue for over six years. 8-25 The increase in NPA for the FY2001 to FY2002 was 24% whereas the increase between FY2002 and FY2003 was 22.8%. Amongst NPAs there was a steady growth in sub-standard asset as well as doubtful assets. The standard assets have experienced a marginal growth over the last 3 years. As on March 31, 2003, provision made in the books against NPA was short by INR 70 million (as reported). 8-26 However, the actual NPA and provisioning requirement is clearly higher even in regard to reported figures if deferments (restructurings) are treated as loans at risk.




8.7 Profitability and Transaction Costs 8-27 Inexplicably, despite poor recovery the number of PLDBs reported profits have increased from 16 in FY 2001 to 23 in FY 2003. There has been a constant growth in profit as well, with a 50% growth in FY2002 and a growth of 9.3% in FY2003. 8-28 However, on an aggregate basis the State PLDBs put together report losses. Losses have exceeded the profits by a good margin. We understand that the increase in the number of profitable PLDBs and decrease in the aggregate net loss in FY 2003 was due to write back of provision for interest accrued in accordance with the NABARD guidelines. Key Financial Parameters: Aggregates for PLDBs Financial year 2001 2002 2003Average return on Funds as % of WC 10.97 11 10.81Average cost of fund as % of WC 7.49 7.32 7.24Financial margin (%) 3.48 3.67 3.57Transaction Cost as % of WC 1.39 1.34 1.28Net margin before risk cost (%) 2.09 2.33 2.39Risk Cost (%) 2.72 2.90 2.68Net margin (%) -0.63 -0.57 -0.29 8-29 Transaction cost is reported at about 1.3% of working capital on an aggregate basis. However, this number is not very meaningful as working capital includes a large proportion of asset erosion.




9 RAJASTHAN STATE LAND DEVELOPMENT BANK - RSLDB

9.1 Ownership and Governance 9-1 The Long Term credit cooperative structure in Rajasthan began with the incorporation of the RSLDB. The membership of the RSLDB comes from PLDBs, State Government, Central Cooperative Banks and PACS. As per the bye laws, each PLDB has to invest 5% of its loan amount in the shares of the RSLDB, and in addition such other proportion as prescribed by the Registrar from time to time. Of the total share capital of INR 267.5million, the State Government owns 7% of the shares and of the remaining, 92% shares are held by PLDBs and 1% by the DCCBs. 9-2 As per the bye laws, the Chairman and the Secretary should be elected by the members of the Board, the term of the board is three years, and the constitution of the Board should be:

8 elected members from seven zones 1 member elected by other members 2 members nominated by the State Government 1 member, by virtue of being the Managing Director of the RSLDB

9-3 There was a board till 1973, after which it was superseded. In 1981 the entire board was nominated by the government. In 1997, by an order of the Honourable High Court an election was held, and the term of the board lasted till 2001. As of date, no Board exists for the RSLDB, and an Administrator officiates in place of the Board. The Administrator is the Registrar of Cooperative Societies of Rajasthan, an IAS officer.

9.2 Operations

FY 2000 – 2001 2001 – 2002 2002 – 2003 Owned Funds 746 786 864Deposits - - 3Borrowing 11,145 12,224 12,669Loans Issued 2,265 2,154 1,994Loan Outstanding

10,315 11,264 11,992

9.3 Loans & Advances Outstanding 9-4 The LT system provides loan for construction of new wells, deepening of existing wells, lining of field channels, pump-sets, tractors etc and for various other diversified purposes like horticulture, sericulture, fruit plantation, dairy,




piggery, poultry etc. It also provides loans for various non-farm sector activities. Since 1998-99, it has also been in the business of housing finance. 9-5 RSLDB had total outstanding loans and advances of approximately INR 12,000 million as at the end of FY 2003. The bulk of these advances are to PLDBs in the form of refinance for the loans and advances given by them to the ultimate borrowers under the various schemes like Farm Mechanization Scheme (FMS), Minor Irrigation Scheme (MIS) and Diversified activities. Out of the total outstanding, around 6.75% amounting to INR 810 million are overdue.

9.4 Major Sources of Finance 9-6 Since the long term structure does not generate any of its own resources, resource mobilisation is a major function of the RSLDB. The RSLDB therefore arranges for debenture floatation, to mobilise funds. With the objective of reducing dependence on NABARD for funds, in 2002, the RSLDB, launched deposit mobilisation through 16 PLDBs on a pilot basis. The scheme does not seem to have been very successful. The RSLDB does no direct lending operations, all its lending is through the PLDBs. 9-7 Based on the latest available audited annual accounts for the year ended March 31, 2003, the major sources of finance of RSLDB (amounting to INR 14,269 million) include the share capital (1.88%), reserves & other funds (3.05%), accumulated profits (6.30%) and borrowings (88.78%). 9-8 The biggest component of RSLDBs sources of funds is borrowings, which comprising approximately 89% of the sources of funds. Total borrowings have also not increased much during FY2003 compared to FY2002, reflecting a substantial slowdown in the operations of RSLDB. 9-9 Borrowings in the form of refinance have mainly been from NABARD through the issue of debentures. These debentures are redeemable over a period of 5 to 17 years, depending on the term of the loan against which these have been issued (e.g., if the term of a loan is 3 years, the debentures issued to refinance such loans will typically have a term of 5 years). The Debentures are subscribed to by NABARD, Government of Rajasthan (GoR) and Government of India (GoI), respectively, in the following proportion: 95.0%: 2.5%: 2.5%. 9-10 The flow of funds for such refinance is as follows:

PLDBs, through their various branches, disburse loans to the borrowers against mortgage of land

Thereafter, PLDBs submit refinance claim to Regional office of RSLDB RSLDB, refinances the PLDB claim (after making adjustments for the

share capital and prior year outstanding) Subsequently, RSLDB submits refinance claim to NABARD, which

approves the debenture float for the appropriate amount.




9-11 The RSLDB formulates lending policies and procedures, norms on NPA management, investment policy, HR policies, and is also responsible for audit and inspection of PLDBs. Operationally it provides planning support, funds for buildings to PLDBs, details MIS requirements, gives loan approval beyond INR 0.75 million, and recovery assistance, and human resource support to weak banks, and sets targets for the PLDBs. Also services such as conflict resolution, arranging farmers’ meets, and exposure visits are undertaken by the apex institution.

9.5 Management and Human Resources 9-12 The MD is a Joint Registrar rank officer of the State Department of Cooperation, on deputation to the RSLDB. The other management position in the RSLDB is the General Manager, who is also deputed from the cooperative department, and is a Deputy Registrar rank officer. The entire management of the bank is handled between the Administrator, the MD, and the GM. 9-13 The managing director heads the organisation and there is a general manager and four mangers (Accts & Fin, Planning & Devt/Loans, Agronomy, Hydro) who report to him. The GM directly handles the administration, personnel, women's development cell, expenditure cell, computer cell, and inspection & supervision. 9-14 The ‘Rules of Business’ give details of the administrative and financial powers of the MD, as well as the power of the Board of the Land Development Bank. The MD is authorised to sanction loans up to INR 500,000/- for example. The bye laws of RSLDB hold the MD responsible to formulate the credit policy of the bank, check and review progress of the bank, calling meetings of the board of directors and the general body. 9-15 The human resources and their issues are similar to the short term system. Most of the staff interacted with had not received formal trainings, some reported trainings on the use of computers. The average age of an employee in the system is high at around 50 years. There is like the short term system, ban on fresh recruitments.

9.6 Systems Planning and Development 9-16 At the apex level, business plans and budgets are prepared. There is a yearly plan and a five yearly plan. The respondent at the apex felt that the five year plan was essentially a paper exercise. For the yearly planning, the focus is on quantitative targets. The recovery rates and the NPA rates of the branches form the base of the next year's targets. If the NPA level is less than 15%, any




amounts can be given as targets to such branches, and if the NPA level is greater than 15%, there are four options. In the latter case, the maximum of the following is taken as the targeted figure:

Last years' advances Average of the last three years' advances Last years' recovery Average recovery of the last three years

Audit/ Internal Audit/ Internal Control

9-17 The concurrent audit of the Bank for the first three quarters every year is done by the office of Registrar of Co-Operative Societies. However, for carrying out the annual audit, an independent Chartered Accountant is appointed as auditor. 9-18 Besides this, periodic inspection is also carried out by NABARD under section 35(6) of the Banking Regulation Act, 1949, generally once in 2 years. The last NABARD inspection was carried out for the year ended March 31, 2003. 9-19 The Bank also has an internal Inspection & Supervision department which coordinates with the external agencies carrying out the audit. It is instrumental in preparation of the compliance report in respect of the issues raised in the various audit reports. 9-20 No internal audit is being carried out by the bank presently. We understand that this is due to scarcity of staff. 9-21 The latest available inspection report had highlighted the following regulatory issues.

Although as per the bye laws of RSLDB, it is required to set aside some amount towards agriculture credit stabilisation fund out of its profit, which RSLDB has failed to do.

It has also failed to make provision @ 7.5% towards the bad & doubtful reserve fund required as per statute.

The Annual General Meetings (AGM) for the FY2001, 2002 and 2003 were not conveyed within the stipulated time prescribed by the Registrar of Co-operatives

9.7 Management Information System 9-22 The RSLDB has well defined reporting requirements and formats. The planning department of RSLDB receives reports on disbursement, recovery, overdue, NPAs etc. on a monthly/ annual basis from various PLDBs, processes them and then passes on the information to senior management well as to NABARD, Cooperatives Department and Social Welfare Department as the case may be.




9-23 It was observed that due to delays in receipt of information from lower tiers, MIS reports are often prepared with a substantial lag. In addition to reports, management information is shared through meetings held on a regular basis. These include review meetings, planning meetings well as meetings with specific PLDBs. During these meetings targets are set, compliance is reviewed and concerned departments are required to follow up.




9.8 Portfolio Analysis Classification of Assets and Status of NPAs

9-24 There has been a sharp increase in the non performing assets of RSLDB over the last few years. NPAs as a proportion of total loans outstanding have increased from less than 1% (INR 94 million) in FY2001 to more than 7% (INR 872 million) in FY2003. 9-25 It may be noted that RSLDB has not classified any of its assets as doubtful or loss. Its NPAs are all in the sub-standard category

Recovery Performance (INR million) Financial Year 2000-01 2001-02 2002-03

Demand 2,713 3,761 2,844 Collection 1,800 2,403 1,306

% Of Collection to Demand 66.4% 63.9% 45.9% Overdue 913 1,358 1,538

9-26 Rajasthan has been affected by drought for the last four consecutive years and this has severely affected the recovery of loans in the state. The recovery percentages have dropped from over 66% in FY 2001 to around 46% in FY 2003; this is reflected in the growth in NPA as a percentage of total advances outstanding during the discussed period. 9-27 In context of the portfolios of PLDBs, the above numbers are likely to require large adjustments.

9.9 Transaction Cost and Profitability 9-28 Reported Net profit as percentage of gross income has decreased from 15.7% (INR 184 million) in FY2001 to 6.8% (INR 89 million) in FY2003. The drop in the reported net profit is due to both reduction in financial margin as well as increase in transaction cost. Financial margins of RSLDB have been under pressure. The margin has gone down from 1.8% in FY 2001 to 1.44% in 2003.




10 CONCLUSION

10.1 Stakeholders Comments 10-1 In principle most of the stakeholders agree to the changes that the system needs, but the modus operandi is far from clear and also there seems to be the need for some external push to make these things actually happen. The various stakeholders voiced their preferred set of options to improve the system, some of which are given here:

The Cooperation department officers said that they would be looking at investing more money in manpower, information technology, strengthening of capital base, and infrastructural support.

NABARD officials suggested that the cooperative system cannot be rejuvenated without infusing professional staff. They said that since the cooperative system cannot bear the cost of professional staff at present, one needs to look for some external funding till such (reasonable) time as a turnaround can be made. There should be management committees to guide the administrators. Government/bureaucracy must stay away from the system. While the credit structures are cooperatives, they are also banks and need to function like professional banks. NABARD should guide the DCCBs and help them develop good internal systems, supervisions, provisioning norms, accounting practices etc. Some senior officials commented that the number of tiers should be reduced to reduce the cost of funds.

The need for deposit guarantees was voiced by some in the system The need for another regional training centre, in Udaipur was

discussed. People mentioned that interest rates of the Long Term and Short Term

should be at par. Many persons said that the Short and the Long Term structures should

be merged. The DCCBs were all interested in catering to a larger area, in order to

expand their business.

10.2 Conclusion 10-2 India embarked on financial sector reforms in the late eighties. This has resulted in substantial transformation of commercial banking institutions. If anything, these reforms have reduced the focus of the commercial banking system including regional rural banks in rural areas. The CCS is perhaps the only network with the physical outreach to address the financial services needs of the rural households. However, this potential is unrealised due to a combination of inadequate regulation, political interference, poor governance and administration, very poor accounting, reporting and auditing systems and a lack of innovation in




development of viable products and channels to address the specific needs of the rural clientele. This potential can only be realized through fundamental changes in the regulation/supervision approach, governance, financial and institutional arrangements. 10-3 This Project proposes to work with the short term structure in identified states and suggests ways of either improving or changing the overall approach of the CCS as there appears to be general agreement around the fact that having two structures, to basically provide the same type of services (different products) to serve the same set of clients, might not be the most productive way of doing things. 10-4 Restructuring the cooperative system should be a vital part of the rural finance sector restructuring and development exercise. A healthy and vibrant cooperative sector with its tremendous outreach could be the ideal delivery mechanism for products like SHG linkages, insurance, and commodity pricing dissemination which are also critical for risk mitigation for the rural household.


Final Report: Rajasthan CCS - Annex 3

October 2005 Page 1

ANNEX 3: SOCIAL, POVERTY AND GENDER ANALYSIS 1 INDIA 1.1 POVERTY

1.1.1 Trends of Poverty in India 1-1 In the first three decades after independence, there has been increase in the overall poverty1 in the country (Refer Table 1). The decline in the poverty in the country has been observed from the eighties. The decline can be attributed to a sharp decline (20%) in incidence of poverty in the rural areas as compared to urban areas. Even with this scale of achievement, the poverty levels are as high as 27 percent in the rural areas. The quantum and incidence of poverty in rural areas have a far greater influence on the national average than that of urban areas as 70 percent of the total population is in the rural areas. Hence eradication of rural poverty through various policies and programs has been the focus of the both Central and State Governments in India.

Table 1: Trend of Poverty in India Survey Period Head Count Index NSS Round Rural Urban National 3 (Aug 51-Nov 52)

47.37 35.46 45.31

10 (Dec 55-May56)

48.34 43.15 47.43

20 (Jul 65-Jun 66) 57.60 52.90 56.71 32 (Jul 77-Jun 78) 50.60 40.50 48.36 42 (Jul 87-Jun 88) 39.23 36.20 37.69 52 (Jul 95-Jun 96) 37.46 28.04 35.00 55 (1999-2000) 27.61 25.09 -

Source: Jha, 20012

1.1.2 Spatial Distribution of Poverty 1-2 Even though there has been overall decline in the poverty level in the country, there are still pockets of high poverty levels (Refer Table 2). The states like Bihar, Jharkhand, North-Eastern states, Orissa still have poverty ratios at more than 40 percent of population. On the other hand, states like Punjab, Haryana, Kerala have poverty ratios at less than 10 percent of population. Besides this disparity, the high level of growth of poverty in backward areas of Maharastra, Assam, South-western

1 The Indian Planning Commission defines the poverty line as a per capita monthly expenditure of Rs 49 in rural areas and Rs 57 in urban areas at 1973-74 prices. This definition corresponds to expenditure sufficient to provide , in addition to basic non food items that is clothing and transport, a daily intake of 2400 calories in rural areas and 2100 calories in urban areas. 2 Jha, Raghbendra, (2001) “Economic Reforms, Economic Growth and Anti-Poverty Strategy in India” IFAD Report



October 2005 Page 2

Madhya Pradesh, Arunachal Pradesh and Himalayan regions of West Bengal is also a great concern.

Table 2: Characteristics of Rural Poverty Change between 1987-88 and 1993-94 Low and Increasing High and Increasing Manipur plains, Himachal Pradesh, Harayana, Uttranchal, Mizoram

Northern, Central and Eastern Maharastra, South-western Madhya Pradesh, Assam, Arunachal Pradesh, Manipur hills Himalayan regions of West Bengal

Low and Decreasing High and Decreasing Inland and Southern Andhra Pradesh, Saurastra region of Gujarat, Coastal and Inland Eastern Karnataka, Malwa and North Madhya Pradesh, Punjab, Coastal Maharastra, Goa, North-eastern Rajasthan

Central and Northern Bihar, Central and Eastern UP, Inland Northern Karnataka, South, South-west and Central Madhya Pradesh, Orissa, Southern Rajasthan, Sikkim, Eastern, Western and Central parts of West Bengal, Coastal and Southern Tamilnadu

High indicates Head Count Ratio over 40 percent in 1993-94 and Increasing refers to growth rate over 5 percent( Jha 20013 ) 1.2 EMPLOYMENT AND UNEMPLOYMENT

1-3 Poverty is an upshot of low income and unemployment, especially in the rural areas (Refer Table 3). There has been decline in growth rate of employment in the period 1993-2000, mainly due to low economic growth rate in the rural areas. Correspondingly, an increase in both absolute unemployment (20 million in 1993-94 to 27 million in 1999-2000) and its growth rate in the country has been observed. Moreover, the number of unemployed persons is greater in the rural areas as compared to urban areas and so is its growth rate, primarily due to near stagnation of employment in agriculture.

Table 3: Employment and Unemployment Status in person years Million Growth per annum

(%) 1983 1993-

941999-2000

1983 to 1993-94

1993-94 to 1999-2000

All-India Population 718.20 894.01 1003.97 2.00 1.95Labour Force 261.33 335.97 363.33 2.43 1.31

3 Jha, Raghbendra, (2001) “Economic Reforms, Economic Growth and Anti-Poverty Strategy in India” IFAD Report



October 2005 Page 3

Million Growth per annum (%)

1983 1993-94

1999-2000

1983 to 1993-94

1993-94 to 1999-2000

Workforce 239.57 315.84 336.75 2.70 1.07Unemployment rate (%)

8.30 5.99 7.32

No. of Unemployed 21.76 20.13 26.58 -0.08 4.74 Rural Population 546.61 658.83 727.50 1.79 1.67Labour Force 204.18 255.38 270.39 2.15 0.96Workforce 187.92 241.04 250.89 2.40 0.67Unemployment rate (%)

7.96 5.61 7.21

No. of Unemployed 16.26 14.34 19.50 -1.19 5.26 Urban Population 171.59 234.98 276.47 3.04 2.74Labour Force 57.14 80.60 92.95 3.33 2.40Workforce 51.64 74.80 85.84 3.59 2.32Unemployment rate (%)

9.64 7.19 7.65

No. of Unemployed 5.51 5.80 7.11 0.49 3.45Source: Economic Survey, 2003-04, published by CSO

1.3 LIVELIHOOD CHARACTERISTICS OF RURAL POOR IN INDIA

1-4 The rural poor primarily depend on agriculture for their livelihood as 74 percent of them are engaged either as agricultural labour or in activities indirectly related to agriculture indicating that there is limited opportunity for the poor in other sectors in the rural economy and a high level of dependence on agriculture for livelihood despite low wages and unemployment. Around 42 percent of the rural poor belongs to scheduled caste and scheduled tribes (Refer Table 4) and hence constitute the most vulnerable section of the population.

Table 4: Livelihood Characteristics of Rural Poor in 1993-94 (figures in percentage)

Social Groups Livelihood category Scheduled

TribeScheduled

CasteOthers All

Households (HHs)

Self-employed HHs in Non-Agriculture

0.75 2.38 7.70 10.83

Agricultural Labour HHs

6.49 16.19 18.91 41.59



October 2005 Page 4

Other Rural Labour HHs

1.45 2.40 3.98 7.83

Self-employed HHs in agriculture

5.62 4.76 22.49 32.87

Other ( Residential HHs)

0.73 1.46 4.69 6.88

All Households 15.04 27.19 57.77 100Source: Sarvekshana, 2000, published by NSSO

1-5 Ninety four percent of the Scheduled Caste (SC) population are marginal farmers possessing less than 2 hectares of land (Refer Table 5). Similarly 72 percent of the Scheduled Tribe (ST) population belongs to marginal farmer category having mostly non-arable forest lands. The other striking feature is Head Count Ratio of poverty among SC and ST is 50.3 and 54.3 respectively, signifying that sizeable portion of the poor belongs to these categories. The concentration of the ST population primarily is in Santhal Parganas in Jharkhand and Bastar in Madhya Pradesh whereas SC population is dispersed throughout the country.

Table 5: Percentage distribution of households across land holding for select target groups in 1993-94

Land Holding in hectares

Scheduled Caste

Scheduled Tribe

<0.01 16.95 11.0 0.01-0.04 52.13 28.41 0.41-1.00 16.51 22.46 1.01-2.00 8.84 20.07 2.01-4.00 3.88 20.07 >4.00 1.69 4.97 All Categories 100 100 Head Count Ratio 50.3 54.2 Total Population in million 123.4 63.2 Source: National Sample Survey Organization, Report No. 422

1.4 SOCIAL AND GENDER INDICATORS

1-6 Though there has been a considerable improvement in literacy rates for both males and females since independence, female literacy is still about 20 percent lower than that of males (Refer Table 6). The adult literacy rate of India is far lower than that of China and Sri Lanka (UNDP Human Development Report, 2003). Similarly, while there has been an improvement in health related parameters, much still needs to be done.



October 2005 Page 5

Table 6: Trend of Select Social Indicators in India

Particulars 1951 1991 Current Literacy- male (%) 27.16 64.13 75.85

(2001)Literacy- female (%) 8.86 39.29 54.16

(2001)Literacy- total (%) 18.33 52.21 64.84

(2001)Crude Birth Rate (per 1000 population) 40.8 29.5 29.5

(2002)Crude Death Rate (per 1000 population)

25.1 9.8 8.1 (2002)

Infant Mortality Rate (per 1000 live birth)

146 80 64 (2002)

Maternal Mortality Rate (per 100,000 live birth)

NA 437 (1992-93)

407 (1998)

Life Expectancy at Birth-Male 37.2 59.7 (1991-95)

63.9 (2001-06)

Life Expectancy at Birth-Female 36.2 60.9 (1991-95)

66.9 (2001-06)

Source: Economic Survey, 2003-04



October 2005 Page 6

1.5 ACCESS TO CREDIT

1-7 According to All India Debt and Investment Survey 1992, households in the lowest asset base category depend primarily on non-institutional sources for their borrowing needs in the rural areas (Refer Table 7). With increasing asset base, the proportion of households accessing formal credit as well as its share in total outstanding increases. The picture is similar in urban areas. This means that informal sources of finance are still critical for poor with low asset base.

Table 7: Proportion of Households Reporting Debt and Share in Total Amount Outstanding According to Credit Sources and Asset Group, 1991

Asset Group (Rs 000)

RURAL URBAN

Institutional Agencies

Non Institutional Agencies

Total Institutional Agencies

Non Institutional Agencies

Total

P S P S P S P S P S P S <5 5.3 37.1 14.2 62.0 18.

9 100 2.9 31.7 14.2 65.7 16.1 100

5-10 9.8 38.4 22.2 56.8 30.7

100 4.9 23.0 19.5 72.4 23.1 100

10-20 10.7 35.2 21.3 52.0 30.2

100 8.8 37.3 20.3 58.8 27.1 100

20-30 15.5 55.7 19.4 38.0 32.2

100 8.1 36.9 17.4 52.5 24.8 100

30-50 15.3 46.9 20.3 50.4 32.6

100 11.2 42.0 19.4 53.2 27.3 100

50-70 15.8 47.6 19.7 49.2 31.9

100 12.0 51.5 18.4 47.3 27.6 100

70-100 16.8 49.8 20.7 46.3 33.1

100 12.4 47.3 23.3 48.0 32.7 100

100-150

19.4 52.2 21.5 41.3 35.3

100 19.0 82.4 18.8 16.4 31.8 100

150-250

20.2 58.8 19.6 27.8 38.2

100 21.2 72.0 14.2 24.4 31.1 100

250 and

above

25.5 56.6 20.0 39.6 32.0

100 11.8 64.3 18.0 32.0 26.9 100

Total 15.6 56.6 20.0 39.6 32.0

100 11.8 64.3 18.0 32.0 26.9 100

N.B. (I) Debt comprises cash loans and current liabilities (II) Total includes unspecified; P=proportion of households reporting (percent), S = Percentage share in total Source: All India Debt and Investments Survey (1991-92) reported in RBI Bulletin, February 2000



October 2005 Page 7

2 RAJASTHAN 2.1 DEMOGRAPHY

2-1 Rajasthan is the largest State in India with 10.41% of the total land area of the country. The population of Rajasthan is 56.5 million as per the 2001 census. The ratio of rural to urban population in the state is 77:23. The density of population is 165 persons per square km as per 2001 census. It varies from 84 persons per sq. km in the desert regions and 203 persons per sq. km in other areas. 2-2 The State's population has been growing at a rate much faster than the national average. The decadal growth rate (1991-01) for Rajasthan was 28.33% as against the national growth rate of 21.34%.

Table 8: Trend of Population in Rajasthan (in millions) 1991 2001 Total Population 44.01 56.47 Rural 33.94 43.27 Urban 10.07 13.21 Male 23.04 29.38 Female 20.96 27.09 SC and ST population 13.08 NA Source: Census of India 1991, 2001

2.2 ECONOMY

2.2.1 Net State Domestic Product

2-3 The Net State Domestic Product (NSDP) in Rajasthan at current prices is estimated at INR 769 billion4 in 2002-03 as against INR 793 billion5 in 2001-02. 2-4 Share of NSDP at 1993-94 prices in 2001-026.

1. Agriculture and allied activities - 31% 2. Mining-2% 3. Manufacturing-13% 4. Construction-9% 5. Electricity, gas & water supply-3% 6. Services-42%

2-5 The Net State Domestic Product (NSDP) of Rajasthan multiplied (nearly seventeen fold) from INR 41.26 billion in 1980-81 to INR 694 billion in 1999-2000, with an annual growth rate of 15.3 percent at current prices. However on a year on year basis, NSDP growth rates have fluctuated, registering negative figures in the years following drought. The incidence of drought and deceleration of economic growth is an important issue to be addressed in Rajasthan, since agriculture and animal husbandry 4 Advanced Estimate, Economic Survey 2003-04 5 Quick Estimate, Economic Survey 2003-04 6 Bureau of Investment Promotion, Rajasthan



October 2005 Page 8

are heavily dependent on rainfall for ensuring adequate crop production and fodder availability. 2-6 The dependence of incomes in Rajasthan on agriculture and related activities becomes more evident in the correlation between growth rates in the primary sector and NSDP growth. The highly positive correlation between NSDP and the contribution of agriculture and allied activities (0.975) contrasts that of the secondary sector (0.523) and tertiary sector (0.506)7. Therefore, given the current trend, the primary sector is nearly twice as important as the other sectors for the prospects of sustained economic growth in the state. 2.2.2 Per Capita Income 2-7 The per capita income at current prices for 2002-03 as per advanced estimates is Rs.13066 as compared to Rs.13825 in 2001-028. Given the fact that Rajasthan has experienced very high rates of population growth (the highest among India’s major states between 1981 and 1991), per capita incomes have shown low rates of gain. Over the last seventeen years the annual rate of growth has been 12.6 percent at current prices (3.6 percent at constant prices), while over the last five years it has been 11.9 percent at current prices (2.1 percent at constant prices). Thus, the decade of the 1990’s has shown a deceleration in both the NSDP and per capita rates of growth. 2.3 POVERTY TRENDS IN RAJASTHAN

2-8 The overall poverty in the state of Rajasthan has been lower than the national average since the eighties. Unlike in most states, urban poverty in Rajasthan is higher in comparison to rural poverty. In fact, there has been a significant decline of rural poverty figures from 33 percent in 1987-88 to less than half (14%) in 1999-2000. This is enumerated in the following Table 9. Moreover, the trend of decline in poverty has been higher in Rajasthan as compared to national figures.

Table 9: Head Count Ratio of Poverty between 1983-84 and 1999-2000 in Rajasthan

(in percentage) Particulars 1983-84 1987-88 1993-94 1999-

2000 India 44.8 39.3 33.5 26.10 Rural 45.6 39.1 33.4 27.09 Urban 42.2 40.1 33.7 23.62 Rajasthan 35.0 34.9 20.1 15.28 Rural 33.5 33.2 16.2 13.74 Urban 40.4 39.0 33.1 19.85 Source: NHDR 2001

7 Rajasthan HDR 2002 8 Bureau of Investment Promotion, Rajasthan



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2.3.1 Decomposition of Rural and Urban Poverty in Rajasthan Rural Sector 2-9 In a recent study 9of spatial distribution of poverty in India, Rajasthan was found to be one of the ten states where poverty levels were lower than the national average. Andhra Pradesh and West Bengal were also among the ten states which had lower incidence of poverty than All India average. In most of the states, more than 50% of the total difference between the national and state poverty level was explained by the high mean income levels of these states. Most of these states also had “better” distribution of income than at All-India level. Urban Sector 2-10 In the urban sector, 8 out of 15 states had poverty levels lower than the All-India poverty levels, and Rajasthan was one of these eight states. The mean income level in Rajasthan, however, was lower than all-India mean income. Yet poverty (based on head count ratio) in this state was also lower than all-India poverty, due to the fairly equal distribution of income indicated by low Gini coefficient. 2.4 POVERTY FACTORS

2-11 Poverty is an outcome of a combination of many social, cultural and economic factors. Income poverty can be directly linked with employment .Another important measure of human poverty is nutritional intake.

2.4.1 Employment 2-12 As evident from Table 10, there has marked improvement in the growth rate (around 250%) of employment in rural areas in Rajasthan in contrast to decline in overall growth rate of employment in rural areas across India. Rajasthan was one of the few states with a high growth rate in this sector at 3.92%. In urban areas, the decline in growth rate in Rajasthan is less steep than for all India. In the overall picture, while the growth rate of employment has gone down for the country as a whole, Rajasthan has beaten this trend.

Table 10: Growth Rate of Employment in Rajasthan Rural Growth Urban Growth Combined Growth

1980-1990

1990-1998

1980-1990

1990-1998

1980-1990

1990-1998

Rajasthan 1.48 3.92 2.57 1.77 2.05 2.81All India* 2.88 2.15 2.81 1.34 2.84 1.71

*Excluding Assam and J&K Source: Economic Census 1998

9 Spatial Decomposition of Poverty In India: Shatakshee Dhongde, March 2003




2-13 The unemployment rate in the state was at 3.2% in 1999-2000, which was higher than the 1993-94 figure of 1.31%, but it compared favourably with the national average of 7.32%10. In addition, the incidence of unemployment11 (Refer Table 14) in Rajasthan is 0.8 which is much lower than the all India level of 2.3. 2-14 The growth rate in employment is due to absorption of workers in sectors other than agriculture (Refer Table 11). There has been a 15 percent drop of workforce employed in agriculture between 1997-78 to 1993-94. On the other hand, there has been significant increase in the workforce in percentage terms in various sectors like mining and quarrying (132%), construction (185%), trade (48%) and services (53%). Table 11: Employment Share of Sectors in Rajasthan in Principal and Subsidiary

Status (in percentage) Particulars 1977-78 1983-84 1987-88 1993-94 % age

change

Agriculture plus allied 81.15 76.28 63.94 68.83 (15)Mining & Quarrying 0.72 0.49 1.31 1.67 132Manufacturing 5.90 7.02 8.41 6.3 7Electricity, Gas and Water 0.21 0.17 0.38 0.41 95

Construction 2.53 4.08 11.59 7.22 185Trade 3.39 4.04 5.28 5.04 48Transport 1.24 1.74 2.22 2.31 86Services 4.86 5.16 6.75 7.44 53Others 0 0.12 0.12 0.74 74Total 100 100 100 100 Source: Rajasthan HDR 2001

2-15 It is also clear that the percentage of women workers has increased over the period 1981-91. The increase in share of women in total workforce is more profound in the rural areas. In fact about a third of the total workers in rural areas were women (Refer Table12).

Table 12: Share of Women in the Total Workforce Type of Worker All Workers Rural

Workers Urban

WorkersMain workers (1981) 14.6 16.1 7.8Main workers (1991) 19.16 22.2 9.2Main and Marginal workers (1981) 27.6 30.8 10.0Main and Marginal workers (1991) 33.6 37.9 12.0Source: Registrar General of India, Primary Census Abstract, 1991 and 1981, Rajasthan series, Government of India, New Delhi.

10 Source: Economic Survey 2003-04 11 The incidence of unemployment is defined as the proportion of persons unemployed in the age group 15 years and above on the usual principal and subsidiary status to the total number of persons in the labour force.




2.4.2 Nutritional Intake 2-16 The calorie intake of both rural and urban Rajasthan is higher than the corresponding all India figures (Refer Table 13). The rural per capital calorie intake is next only to Haryana, and the urban per capita calorie intake is the highest in the country. It is also a reflection of the comparatively lower poverty level in Rajasthan.

Table 13: Per Capita per diem intake of Calories (Kcal) Rural Urban Rajasthan 2425 2335 All India 2149 2156 Source: Sarvekshana, April to September, 2001

2.5 SOCIAL INDICATORS

2-17 In spite of some improvement in economic indicators in the last two decades , Rajasthan continues to rank on the lower side among all states in terms of human development indices .Even though the gender disparity is comparable with India, the sex ratio is lower than All-India average for the population as well as children below six years. The average literacy is higher for the state as compared to All-India figures mainly accounted by higher male literacy in both urban and rural areas. On the other hand, female literacy is lower in both rural and urban areas in comparison to All-India figures. Although life expectancy is comparable, the infant and maternal mortality rate of Rajasthan is higher than All-India average.

Table 14: Rajasthan - Human Development Fact Sheet

Indices State IndiaGender Disparity Index Value 1991 0.692 0.676Gender Disparity Index Rank (out of 32) 16 Sex Ratio – 2001 922 933Sex Ratio Children 0-6 years – 2001 904 927Incidence of Unemployment as a percentage of labour force 0.8 2.3 Literacy Rate - 2001 (%) 61 65Male Literacy Rate - 2001 (%) 76 76Female Literacy Rate - 2001 (%) 44 54Rural Literacy Rate - 2001 (%) 56 59Rural Male Literacy Rate – 2001 (%) 73 71Rural Female Literacy Rate – 2001 (%) 38 47Urban Literacy Rate - 2001 (%) 77 80Urban Male Literacy Rate - 2001 (%) 87 86Urban Female Literacy Rate – 2001 (%) 65 73Gross Enrolment Ratio Class I-V ( 6-11 years),1991 39 46Boys-Gross Enrolment Ratio Class I-V ( 6-11 years), 1991 50 52Girls -Gross Enrolment Ratio Class I-V ( 6-11 years), 1991 26 39Teacher-Pupil ratio (Primary School), 1997-98 42 42 Life Expectancy at Birth, 1992-96 (yrs.) 60 61




Indices State IndiaLife Expectancy at Birth (Rural), 1992-96 (yrs.) 58 59Life Expectancy at Birth (Urban), 1992-96 (yrs.) 64 66Infant Mortality Rate – 1991 87 77Under 5 Mortality Rate – 1991 110 94Under 5 Mortality Rate - Male -1991 103 91Under 5 Mortality Rate – Female -1991 117 101Maternal Mortality Rate – 1998 (per 100,000 live births) 670 407Total Fertility Rate – 1998 4.2 3.4

Source: NHDR 2001 2.6 ACCESS TO FINANCE

2-18 One of the important players in the rural financial market is the co-operatives, which has highest number of retail outlets (Primary Agriculture Co-operative Societies-PACS) in the country. In Rajasthan, each PACS covers on an average 8 villages in comparison to All-India average of 6. Moreover, only 34 percent of the total members are borrower members, which can be improved significantly. 2-19 Use of SHGs methodology for creating higher access to the poor to institutional credit has been done through the SHG-Bank linkage of NABARD. There has been considerable progress of number of SHGs linked to banking system in Rajasthan. It has almost trebled from 12,564 SHGs linked in 2002 to 33,846 in 2004 but much lower than Andhra Pradesh and Tamilnadu12. Rajasthan, Madhya Pradesh and Uttar Pradesh has been identified by NABARD as the poor states where more emphasis on improving the SHG-bank linkage. 2-20 The conclusions in one of micro-studies done in Udaipur district of Rajasthan reveal that poor still do not have access to institutional sources of finance13. Even though the average size of loan was low from moneylenders, the borrowings from informal sources accounted for 85 percent of the loan outstanding for the sample families. The study also concluded that the upper strata of the poor benefited from the SHG movement and not the poorest of the poor. 2.7 POVERTY STUDIES

2.7.1 Childhood Poverty in Rajasthan – A review of literature14 2-21 This paper reviews the literature on childhood poverty in the Indian state of Rajasthan in addition to other aspects of poverty such as health and gender. Some of the findings of the review include

• Rajasthan had the highest maternal mortality ratio, the third highest total fertility rate and the fourth highest infant mortality rate among the major states

12 NABARD Annual Report, 2003-04 13 Sriram, M.S. and Parhi, S (2002), Financial Status of Rural Poor: A Study in Udaipur District, Working Paper, Indian Institute of Management, Ahmedabad 14 Childhood Poverty Research and Policy Centre (CHIP), 2004




in India in 2001. The infant mortality rate for Scheduled Caste and Scheduled Tribes is 98.5 and 95 respectively in comparison to 81 for other castes.

• The prevalence of child malnutrition increased from 42 per cent in 1993 to 51 per cent in 1999. In 1998-99, one study found that 51 per cent of children under the age of three were underweight, 52 per cent were stunted and 12 per cent were wasted.

• Access to education, nutrition and health services in Rajasthan is influenced by gender, caste and class much more than in other parts of India. Girls, children from lower castes, and children living in rural and remote areas are more likely to have higher infant, child and maternal mortality rates, poorer nutrition, lower access to healthcare and other services, particularly education. Moreover, education for girls is not given a priority in the families.

• The high cost of sending children to school is a major cause for poor literacy among girls.

• The number of working children in Rajasthan is the second highest in the country for which migration and farming are causes of disruption of school and is a cause of child labour.

2.7.2 Escaping poverty and becoming poor: Who gains and who loses, and why? 15

2-22 A survey of 6,376 households in 35 villages spread over districts of Ajmer, Bhilwara, Rajsamand, Udaipur and Dungarpur was carried out by Anirudh Krishna in 2002. The study probed into movement of households from poor to non-poor category and vice-versa over a period of 25 years. The study reveals that 11 percent of households in these villages overcame poverty in the last 25 years, but members of another 8 percent have fallen into poverty at the same time. Diversification of income was one of the prime reasons for overcoming poverty by the households. The main reasons for the latter were health related expenses, high cost of private debt and spending on social occasions. 2.7.3 The Human Development Report of Rajasthan 2002 2-23 The issues highlighted in the HDR of Rajasthan were: • Drought has a significant impact on poverty in Rajasthan with adverse implications

for poor people’s livelihood and survival strategies, such as loss of land, cattle, and household goods and valuables. Debt and bondage are often the result of external shocks such as drought.

• Under-employment and migration to cities, both within the state and outside, is very widespread during drought. The higher urban poverty rates could be attributable to some extent to this phenomenon.

• The relatively low income poverty rates in the state indicate that:

15 Anirudh Krishna, Duke University.




o For the people involved in the primary sector and the very poor, there are avenues of alternative employment in the state during drought periods and even otherwise.

o The poor have mechanisms of coping with poverty, which include: (1) migration




o for livelihood support; (2) relying on more than one source of livelihood even while dependent on agriculture in times of rural distress; (3) Mobility of workers to move from regular employment or self-employment to wage employment or casual labour.

2.8 GENDER ANALYSIS

2-24 As per a study on gender disparity in South Asia16, within India, the ratio of female to male children who received no treatment for episodes of fever or acute respiratory infection (ARI) was the highest for Rajasthan at 1.79, indicating that females in Rajasthan were the least likely to receive medical attention when compared to the rest of the country. 2-25 The same study shows that the ratio of female to male enrolment in the age group 11 to 14 years was the lowest in the country for Rajasthan at 0.49, indicating that females of this age group were the least likely to be enrolled as compared to the rest of the country. 2-26 The urban sex ratio in Rajasthan is extremely low at 890, as compared to the rural sex ratio of 932. In terms of female work participation rate Rajasthan ranks 11th in the country with a WPR of 33.48%. The states with a higher WPR for females are mainly the smaller states including many North-Eastern states, the only big state being Andhra Pradesh. 2-27 As far as literacy among the children and their enrolment in school is concerned, it is lower for Rajasthan as compared to national average, in which percentage of girls is much lower. It indicates that not much importance is given towards education of girls in Rajasthan in comparison to boys (Refer Table 15). As stated earlier, female literacy is lower for the state in comparison to national average. Table 15: Literacy and Enrolment Percentage of Girls vis-à-vis Boys in Rajasthan

(percentage) Literacy (Age 7-14 years) Enrolment in school (6-11

years) Boys Boys Girls Girls Boys Boys Girls Girls 1981 1991 1981 1991 1981 1991 1981 1991Rajasthan 51.94 61.96 19.27 30.74 47.3 50.3 18.8 26.3All-India 60.58 71.44 41.57 56.23 55.3 56.6 38.5 45.4

Source: NHDR 2001 2-28 Although the percentage of boys working as child labour in Rajasthan is comparable with national average, the figures for girls are worse than All-India Figures. Moreover, there has been decline in child labour among boys whereas it has remained

16 By D. Filmer, E. King and L. Pritchett, January 1998




stagnant for girls (Refer Table 16). This probably indicates girls form the poor families, especially in rural areas are being pushed to work as labour.




Table No 16: Working Children in the Age Group 5-14 in Rajasthan (Percentage)

1981 1991 Boys Girls Boys Girls Rajasthan-Rural 10.2 9.7 6.0 9.8 Rajasthan -Urban 3.3 1.1 2.2 1.1 Rajasthan -Total 8.8 8.0 5.2 7.9 All-India-Rural 10.0 7.8 6.6 6.3 All-India-Urban 3.7 1.6 2.8 1.2 All-India -Total 8.6 6.4 5.6 2.7

Source: NHDR 2001

2-29 It is evident that there is a scope of improvement in several of the indices related to gender in the state through government support or otherwise. 2.9 CASTE DISCRIMINATION IN RAJASTHAN

2-30 There is high caste and gender discrimination Rajasthan, thereby creating inequality. This is more striking in the rural areas. This is evident from data in table No 17 and 18. The access to basic amenities is lower for SC population in comparison to others in Rajasthan by at least by 30 percent. It is even lower for the Scheduled tribes (Refer Table 17). This is true for both rural and urban areas. Moreover, Rajasthan has lower average figures in comparison to the All-India average indicating poor facilities in the state in general. 2-31 A similar situation can be observed for discrimination of the scheduled caste and tribes regarding literacy. The literacy rate is lower for both males and females in both rural and urban areas in comparison to others. It is even lower for the scheduled tribes. This is more striking for females, irrespective of the caste to which they belong. This shows that discrimination is quite prevalent in Rajasthan both on caste lines as well as gender.

Table 17: Percentage of Scheduled Caste Household with Access to Basic Facilities in 1991

Scheduled Caste Scheduled Tribe Others Rural Urban Total Rural Urban Total Rural Urban Total

Access to Toilet Facilities Rajasthan 5.1 34.0 10.6 1.0 36.4 3.1 8.6 69.1 25.3

All- India 8.2 38.3 11.2 4.1 40.7 7.2 11.5 68.4 28.7 Access to Safe Drinking Water

Rajasthan 53.4 82.9 59.1 47.2 75.7 48.8 50.6 87.7 60.9

All- India 59.8 86.6 63.6 41.1 65.7 43.2 56.4 51.9 64.1

Access to Electricity Rajasthan 15.6 55.8 23.3 7.6 53.9 10.3 28.4 82.0 43.3

All- India 21.8 56.3 28.1 19.7 55.9 22.8 34.6 79.3 48.1Source: NHDR, 2001




Table No. 18: Literacy among Scheduled Caste and Tribes vis-à-vis Others in Rajasthan in 1991 (in percentages)

Rural Urban Combined Male Female Total Male Female Total Male Female TotalSC 37.6 4.7 22.1 61.4 22.9 43.4 42.4 8.3 26.3ST 31.7 3.6 18.2 62.2 21.9 44.5 32.9 4.4 19.2Combined 47.6 11.6 30.4 79.1 51.2 66.1 55.0 20.4 38.6

Source: Rajasthan HDR, 2001 2.10 CONCLUSION AND RECOMMENDATIONS

2-32 Despite being in the rain shadow region of the country with a high dependence on agriculture in the economy, Rajasthan has exhibited a decline in its poverty. This has been made possible through creation of alternate jobs in the rural areas, especially in the construction, services and mining and quarrying sector. This has resulted in relatively high growth rate of employment in the state. This is an encouraging sign of development in the state. 2-33 Even though some economic progress has been achieved in Rajasthan, social indicators reveal a different picture of development. Rajasthan is one the states in the country where discrimination based on caste and gender continues to be high. Low sex ratio, low female literacy, lower enrolment of girls in comparison to boys and higher incidence of girl child labour are some of the indicators exhibiting such discrimination. 2-34 In order to further reduce poverty , there has to be focus on improving productivity in agriculture as well as on improving livelihood opportunities beyond agriculture . Within Agriculture there has to be a focus on drought proofing , providing irrigation and increase in agriculture productivity. This will help in non-migration of labour in the state, who basically engages themselves in hazardous jobs like construction and mining. 2-35 A project to improve institutional credit flow in rural areas will support the state Government’s focus on improving agricultural productivity and off farm livelihood promotion. It is critical that the project has a proactive strategy to address social and gender disparity issues.




REFERENCES: 1 Bureau of Investment Promotion, Rajasthan

2 Central Statistical Organization, Economic Survey, 2003-04

3 Childhood Poverty Research and Policy Centre (CHIP), 2004- “Childhood Poverty in Rajasthan- A Review of Literature”. CHIP Report No. 2.

4 Dhongde, S. (2003) “Spatial Decomposition of Poverty in India”, Paper presented in UNU/WIDER Conference in Spatial Inequality in Asia”, United Nations University Centre, Toyoko.

5 Filmer, D., King E. and Pritchett L., (1998), “A Study on Gender Disparity in South Asia”

6 Jha, Raghbendra(2001) “Economic Reforms, Economic Growth and Anti-Poverty Strategy in India” IFAD Report

7 Krishna, Anirudh, “Escaping poverty and becoming poor: Who gains and who loses, and why?”, Duke University- Forthcoming in World Development

8 National bank for Agriculture and rural Development- Annual Report 2003-04

9 RBI Bulletin, (February 2000)-All India Debt and Investments Survey (1991-92)

10 Sarvekshana, 2000, published by NSSO

11 Sriram, M.S. and Parhi, S (2002), Financial Status of Rural Poor: A Study in Udaipur District, Working Paper, Indian Institute of Management, Ahmedabad

12 United Nation Development Report (2001), National Human Development Report.

13 United Nation Development Report (2001), National Human Development Report- Rajasthan



October 2005 Page 1

ANNEX 4: INITIAL ENVIRONMENTAL ANALYSIS

1 Introduction 1-1 The Rural Finance Sector Restructuring Project as proposed by ADB will address the Cooperative Credit System (CCS) in Rajasthan.

1-2 The Initial Environmental Examination (IEE) presented herein has been prepared during the data collection and analysis phase of the Program preparation, to assess the potential environmental impacts of the identified subprojects.

2 Description of the Program 2-1 Subprojects will be financed through SCBs, DCCBs and PACS using the credit line provided by ADB under the Program using funds for on lending provided by NABARD. A sample of typical subprojects that will take up credit have been identified. The subprojects identified are as follows:

2.1. Agro-Processing • Cold Storage and Godown

2.2. Agricultural Production • Short Term Agricultural Loans (including cash and inputs such as

seeds, fertilizers and pesticides) • Medium Term Agricultural Loans (3 to 9 years) for agriculture and

ancillary activities like - Dry land development, Land development, Wasteland development - investment loans for pump sets, deepening of wells, digging of wells,

• Bio-agriculture / organic cultivation and Contract Agriculture under Agriculture Export Zone

• Aromatic and medicinal plant cultivation • Agri-clinic • plantation of horticulture crops ( mango, litchi etc) • cut flower cultivation, • Minor Irrigation (including sprinklers, drip irrigation) • Tractor and Bullock Cart

2.3. Livestock • Animal Husbandry • Poultry Farm • Ornamental Fisheries



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2.4. Medium Term Non Farm Sector Loans • Cottage industry and Artisans, handicrafts • Rural and other Housing • Term Loan and Working Capital facilities for large and small industrial

units • Small Vehicle, Tractor, Trolley, Matador, Tripper Lorry • Miscellaneous loans : Consumer Loan, Loan against Fixed Deposits,

NSC, Kisan Vikas Patra, Vehicle loans including commercial vehicles, Cash credit limit for traders, Education Loan

• Hotel, motel, restaurant loan • Clinic, Diagnostic Centre, Hospital Loan

2.5. Other Loans • Small agricultural credits under the Swarn Jayanti Swarozgar Yojana

(SGSY) • Loans to Self Help Groups (SHGs)

3 Description of the Physical Environment

3.1. Temperature 3-1 In Rajasthan temperature increases as we move from the eastern part of the state to the western part. On the basis of the annual average temperature, the entire state has been divided into two parts: East and West Rajasthan. It has been observed that the average maximum temperature of the East Rajasthan in the year 2000 was 44.2 °C and for the West Rajasthan it was 46.1 °C. Similarly, in the year of 2001 East Rajasthan recorded average maximum temperature of 44.8 °C and the West Rajasthan recorded 47.3 °C. Similarly, the average minimum temperature recorded for both the two parts in the year of 2000 were 2.8 °C and 1.7 °C for the East and the West Rajasthan respectively. In the year 2001 the average minimum temperature recorded as 4.5 °C and 2.7 °C for the East and West Rajasthan respectively1. From the above average temperature data we can observe that the average mean temperature is gradually increasing.

3.2. Humidity 3-2 Humidity level in Rajasthan is reasonably low through out the year. Occasionally, it increases to the level of 60%. In the year 2000 East Rajasthan recorded the average humidity of 49% and the West Rajasthan recorded only 45%. Similarly in the year of 2001, East Rajasthan recorded 52% and the West Rajasthan recorded only 46%2

1 Data compiled from the information received from the Indian Metrological Department, Jaipur. 2 Source: Indian Metrological Department, Metrological Center, Jaipur.



October 2005 Page 3

3.3. Rainfall 3-3 The behavior of the monsoon in Rajasthan is usually erratic and uncertain. In the year 2003, arrival of monsoon was about a week earlier than the normal arrival i.e. on 18th June 2003. In the first phase, the districts of Udaipur, Jodhpur, Ajmer and Kota received rains. During the 2nd phase of monsoon that started on 1st week of July 2003, rains occurred almost in all the districts of this state. Some states received heavy rain fall and that weakened during the third and fourth week of July. In the 1st week of the August upto 5th August of the month adequate rain was registered and average rains continued upto the second week of the month but became weak in the 3rd week. Monsoon again reactivated on 23rd August with heavy rainfall. In the year 2003 the rainfall during June to September was recorded 55.29cm against the normal rainfall of 54.78cm which is 1.0% more than the normal rainfall of the same period. The Table1 shows the rainfall variations in the last 2 years.

Table 1: Average rainfall in Rajasthan and percentage of precipitation change Year Normal

(cm )

June-Sep S-W Monsoon (cm)

Oct.- Jan S-E Monsoon (cm)

Intermediate Monsoon (cm)

Total (cm)

Departure from the Normal (cm)

2000-01 57.51 38.59 0.18 5.00 43.77 (-)13.74 2001-02 57.51 NA NA NA 26.71 (-)53.6

Source: Board of Revenue ( Land Records), Rajasthan

3.4. Land Use 3-4 Rajasthan State is based on agriculture and agriculture allied business. The land utilization profile shows that the major portion of the total land area is under the net sown area and the cultivable waste land together. Only 7% area is covered under forest. The Table 2 shows the last three years’ land use patterns in Rajasthan.

Table2: Land Use pattern in Rajasthan (all in % of the total reported area) Land Use Indicators

1999-2000 2000-2001 2001-2002 % change in last year

Total Reported Area 34258000 Hects.

34265000 Hects

34265309 Hects

Forest 7.53 7.61 7.72 0.01Non-Agricultural Use 5.04 5.08 5.11 0.005Barren & un-culturable land

7.53 7.49 7.35 (-)0.02

Permanent pasture & other grazing land

5.0 4.98 4.96 (-)0.01

Land under mics. Tree crops & groves

0.04 0.04 0.04 0.00

Culturable waste 14.56 14.32 13.81 (-)3.5Current Fallow 7.70 7.05 5.31 (-)24.68Other Fallow Land 7.33 7.13 6.77 (-)5.04Net Area Sown 45.27 46.30 48.93 5.68

Source: Board of revenue (Land records), Rajasthan



October 2005 Page 4

3.5. Soil 3-5 Soil erosion is a serious problem to the productive land. Soil also suffers heavy moisture loss by quick evaporation due to low humidity level. Uncontrolled flow of water not only results in loss of water and good top soils but also damages the valuable soil nutrients. Therefore, appropriate soil conservation can increase the soil quality, fertility etc. the Watershed Development and Soil Conservation Department has executed soil conservation works in an area of approximately 2.6 million hectares (7% of the total land area of the state) recently in the year of March, 2004.

3.6. Water 3-6 Rajasthan has 10% of the country’s total area but only 1% of its total water resources. Rajasthan is an extremely dry state. Its surface and ground water resources are of vital importance for human survival and production of basic food and fibres. The health of the overall economy of the State, and the alleviation of poverty of a substantial part of its population, hinge upon the performance of the agricultural sector. Every effort has therefore to be made by the State authorities to achieve, by appropriate policy measures, a more efficient, equitable and sustainable exploitation of this precious resource, above all in agriculture, which is, by far, the major water consumer. 3-7 Limited water resources and the need to satisfy a steadily increasing population mean that the future growth of agriculture must rely primarily on intensifying production on irrigated lands. Improving the regularity of water supplies, and as a result increasing the possibilities of diversification to higher-value crops, will at least partially relax the constraints imposed by an unsteady semi-desert and desert climate conditions prevailing in Rajasthan. 3-8 However, even if all the potentially available water resources of the State are harnessed, and the resources allocated from basins located in neighbouring States are added, a great part of irrigable land would still remain without irrigation. 3-9 Therefore, in order to attain the highest possible degree of water resources utilisation and secure an adequate, if possible uninterrupted, supply of water to the growing population and agricultural economy, the planning and management of water resources utilisation has to be done under a well defined and binding State water policy. Groundwater plays a particularly important role in Rajasthan. Roughly 63% of the net area irrigated, and over 80% of all drinking water supplies, are met from groundwater resources. The economic significance of groundwater is compounded by the fact that groundwater irrigated areas tend to have significantly higher yields than areas irrigated by other sources 3-10 Due to the high variability of hydrometeorological phenomena, not all the potentially available resources can be harnessed and made utilizable for consumers. The overwhelming interest of the State is to bring, by physical and managerial measures, as much of the potentially available resources into beneficial utilisation as is physically and economically feasible. At present, out of these inter-state allocations only 11.11 Bm3/yr of water is available. So, the present mean annual surface water resources amounts to some 31.27 Bm3.The groundwater potential under balanced utilisation conditions, i.e. equal to the calculated long term natural aquifer recharge, is estimated as 7.33 Bm3/yr. In the long term, the State of Rajasthan could thus have a total mean annual water resources potential of some 62.39 Bm3 (surface and ground water). The total area presently irrigated by surface water systems and by wells is (according to the publication Vital Agricultural Statistics, 1993-94, by the Department of



October 2005 Page 5

Agriculture) some 5.24 Mha. The total potentially irrigable area in Rajasthan has been estimated as 15.75 Mha. 3-11 With the present cropping patterns and irrigation practices, the amount of water required on average to meet crop water requirements in the entire area presently irrigated is estimated as 25.77 Bm3/yr. Future long-term agriculture water demand projections depend on assumed changes in cropping patterns and irrigation practices. According to a recent prediction, if the entire irrigable land in Rajasthan is brought under irrigation, the mean annual demand would amount to 115.99 Bm3. 3-12 Domestic water demand, i.e. the amount of water required according to accepted norms for the entire present (1995) State population, is estimated as 1.61 Bm3. Future demand projections may vary considerably with assumed population growth rates, standard of living and consumption practices. According to a recent prediction for the year 2045 the total mean annual domestic water demand could reach some 5.52 Bm3. Adding to this the predicted water demand by livestock, industries and other non-agricultural sectors, the following picture emerges:

Table 4: Water Availability in Rajasthan from different sources (figures in Bm3/yr)

Present Ultimate (2045)Surface 19.32 55.06Ground 7.33 7.33Available Water

Resources Total 26.65 62.39Agricultural 25.77 115.99Other 2.97 8.33Demand Total 28.74 124.32

3-13 There is thus ample scope for harnessing and fully utilising as much as possible of the water resources of the State and meeting the balance demand from out-of-State sources. To achieve this, a water resources development master plan should be prepared for all the river basins of Rajasthan and for the State as a whole.

Surface Water 3-14 Surface water resources within the boundaries of Rajasthan are estimated as follows, in mean annual terms:

Table 5: Surface water availability and future demand projection

Sources of surface water Bm³/yr Harnessed by existing dams and reservoirs 8.21 To be harnessed by on-going schemes 2.10 Total harnessed by existing and on-going projects

10.31

Balance to be harnessed to the maximum possible

NA

extent by future schemes 9.85 Total potentially available surface water 20.16 In addition, Rajasthan has been allocated water 18.18



October 2005 Page 6

Sources of surface water Bm³/yr under inter-State agreements The expected allocation (under negotiation) from River Mahi (Kadana Project) is

1.92

Furthermore, Rajasthan has demanded a share in the Ganga river of

14.80

Total long-term expected potentially available NA surface water resources from internal and external sources

55.06

Source: Water Resources Planning for the state of Rajasthan, Tahal, WAPCOS

Ground Water 3-15 Groundwater development in Rajasthan has proceeded rapidly, particularly over the period from 1970 to 1990. This has been concentrated in the central and eastern parts of the State, having high quality groundwater, good yields and limited sources of surface water supply. The net result has been the creation of overdraft conditions across large areas, accompanied by significant declines in water levels. Under the city of Jaipur, water levels are declining at rates of approximately 2 m/yr. Between 1984 and 1994, declines of 3 to 10 metres occurred throughout most of central and eastern Rajasthan. Water quality also declined in many areas. 3-16 In contrast to overdraft conditions in areas heavily dependent on groundwater, water levels have risen substantially in many canal command areas. In the northeastern sections of the State, in the command areas of the Gang, Bhakra and IGNP systems, water level rises of up to 5 metres are common and some areas have experienced rises greater than this. In parts of the IGNP command area, water levels are rising at an average rate of 0.8 m/yr, and in the Bhakra command at a minimum of 0.33 m/yr. Waterlogging and associated salinity problems are a growing concern in many canal irrigated areas. In the IGNP area, large amounts of relatively fresh water are seeping through the canal lining and sandy soils and accumulating on top of the native saline water along the canal. Wells located near canals, ponds and flood channels yield good quality water, while those located away from them yield saline water. 3-17 Pollution of groundwater resources is a growing concern in some areas. Of potentially great importance is the growing load of pesticides and fertilisers from agriculture, as their use is growing at a rapid pace. 3-18 Competition between urban and rural areas over available groundwater supplies has been known as an issue for nearly a decade. For instance, in Jaipur region farmers object to the city’s intention to increase groundwater withdrawal and convey the water to Jaipur because the wellfield in question taps the same groundwater region which is tapped by the farmers’ private wells. This can be expected to intensify. 3-19 Depletion effects tend to discriminate the poor farmers. Those who have the financial resources can afford to “chase the water table”. Others are frequently displaced. Dropping groundwater levels can lead to the wealthy gaining effective control over land areas. In some areas groundwater depletion is already causing migration of farmers to urban areas.



October 2005 Page 7

Declining water tables have also forced small holders to become share croppers working for more wealthy individuals who have been able to retain access to groundwater resources.

Irrigation 3-20 A tentative assessment has been made of the areas which can be irrigated from available water resources (ground and surface) at present and in the long-term future, i.e. year 2045. The total estimated available amounts of water, internal and from outside Rajasthan, are as shown above. Taking into account anticipated changes in irrigation practices and cropping patterns, it is estimated that the total area which can be irrigated with the available internal and out-of-State amounts of water (not including river Ganga) in the year 2005 is 6.52 Mha, increasing to 7.12 Mha in 2015, but due to the need to cover higher priority demands (mainly domestic and livestock), reduces to 5.53 Mha in the year 2045. In comparison, the total irrigated area in the recent few years amounted to an average of 5 Mha.

3-21 The largest potential for increasing the total irrigated area lies within the command of IGNP, where works are in progress to complete Phase II of the project and open up for irrigation some 1,012 kha. Work is also in progress in a total of 208 other ongoing irrigation projects, with a target total command area of 256 kha.

3-22 There are four major sources of the irrigation viz. canals, tanks, wells and tube-wells. The gross irrigated area in the state during the year 2002-03 was 5.3 million hectares which is 21.83% lower than that of 7.7million hectares in the year 2001-02. The gross irrigated area is only 39.89% of the gross cropped area during the year 2002-03. Out of this gross irrigated area 73.73% was irrigated by wells and tube-wells, 25.57% by canals and 0.70% by other sources. The area irrigated by different sources in the state during the year 2000-01 and 2002-03 is given in the table 6.

Table 6: Source-wise irrigated area in Rajasthan

Source of irrigation

Net area irrigated (Area in ‘000 hectors)

Gross area irrigated (Area in ‘000 hectors)

2000-01 2001-02 2002-03 2000-01 2001-02 2002-03Canals 1354 1452 960 1976 2186 1348Tanks 38 105 8 41 109 8Wells & Tube Wells

3473 3816 3377 4073 4399 3887

Others 42 47 27 45 50 29Total 4907 5420 4372 6135 6744 5272Source: Economic Review 2003-04, Rajasthan Government, p.48

Agriculture 3-23 Agriculture plays a vital role in the economic development of the state. 75% of the total population live in the rural areas and 70% of them depend on the agriculture directly or indirectly. The north west region of the state comprising 61% of the total area is either desert or semi desert which depends absolutely on the rains for water requirement and agriculture. The gross cropped area various from year to year depending upon the monsoon. The gross area sown during 2002-3 was 13.2 million hectors. The salient features of the state agriculture are as follows:



October 2005 Page 8

• Agriculture is basically rain fed. • The period of monsoon is short around three months, the state faces late onset

and early withdrawal of monsoon. • 90% of the rainfall is received during monsoon season. In addition to spatial

variation there is variation in the time spread of the rainfall. • 65% of the total cultivation is under kharif season and is mostly dependent on

rainfall which is aberrant and uncertain. • 60% of the irrigated area is under wells and tube wells. The ground water table is

gradually going down. 3-24 A well developed agriculture extension network has been created in the state. However, natural constraints like climate, problematic soil and salinity adversely affect growth in the sector. Social constraints viz. rapid growth in population, wide spread illiteracy, large number of small and marginal farmers and technology gaps have reduced the capacity of the farming community to cope with the production fluctuations. 3-25 Agriculture production plays an important role in the state’s economy as about 27 to 37% of the Net State Domestic Product is generated by the agriculture and allied sector. The detail of the area and production under kharif and rabi crops for last three years are shown in the Table.



October 2005 Page 9

Table 7: Area and Production of Kharif and Rabi crops in the state

Crop Area in lakh hectors Production in lakh tons 2001-02

(Revised Final)

2002-03(Final)

2003-04(Expected)

2001-02(Revised

Final)

2002-03 (Final)

2003-04(Expected)

Cereals 93.86 68.08 100.41 125.76 70.48 162.87Pulses 33.57 18.02 40.67 14.26 4.84 26.14Food grain

127.43 86.110 141.08 140.02 75.32 189.01

Oil Seeds 31.06 24.49 32.66 31.29 17.55 39.36Cotton 5.10 3.86 2.90 2.81 2.52 5.32

Source: Economic Review, 2003-04, Rajasthan Government,p.43

Agriculture Extension and Input Management 3-26 Under the agriculture extension and input management program various measures are being taken to reduce the adverse effect of erratic monsoon and hostile weather conditions on agricultural production. Achievements under agriculture extension and input management programs during the years 2002-03 and 2003-04 are shown in the following table:

Table 8: Achievements under Agriculture Extensions and Input management

Items Seasons 2002-03Achievement

2003-04

Target AchievementArea under high yielding varieties

Kharif 20.61 LH 19.00 LH 25.59 LH

Rabi 8.90LH 19.00LH 14.00LHDistributing high yielding seeds

Kharif 72.39K Qtl. 91.40K Qtl. 89.52K Qtl.

Rabi 260.41K.Qtl. 276K Qtl. 207.39K QtlArea covered under plant protection

Kharif 31.62 LH 41.75LH 43.98LH

Rabi 33.49LH 39.25LH 35LHWater Management Program i) Sprinkler Sets ii) Pipeline Extensions

9004 unit9.5 Lakh meter

11718 units

16.50 Lakh meter 11440 units

16Lakh meterSource: Economic Review, 2003-04 Rajasthan Government, p.44

Agriculture Marketing 3-27 Rajasthan has a State Agriculture Marketing Board and one of its main functions is to construct rural roads and mandi buildings in Krishi Upaj Mandi Samiti (KUMS) areas and also upgrade the roads already constructed under the Road Up-gradation Project. During the financial year 2003-04 a provision of Rs.110 crores was kept for execution of the task under taken, against which Rs. 141 Crores have been spent.




4 Ecological Resources

4.1. Forests 4-1 Forestry is the pivot of ecological and environmental balance and plays a significant role in the economy. As per the report of the Forest Survey of India, Rajasthan has registered an increase of 464 sq. km in forest cover during assessment period 1993-97 and increase of 518 sq.km during the assessment period 1997-99. Rajasthan is the only state in the country which has registered spontaneous hike in forest cover during last four consecutive bi-annual surveys. 4-2 The state government issued new directives with regard to policy formation for improvement of forest development related schemes with consultations of Panchyati Raj Institutions. With a view to ensure public participation in formation of various programs related with afforestation, 3667 Village Forest Protection and Management Committees ( VFPMC) have been constituted under revised guidelines, lays emphasis on participation of women and persons belonging to backward classes. A target of plantation in an area of 8500 hectors and distribution of 60lakh seedlings was kept under the 20point Program during the year 2003-04. Plantation on 14502 hectors of land has been completed and 99.19lakh seedlings were distributed by March 2004. 4-3 The following two tables show the forest produce of the state and the respective revenue earned during 1999-00 and 2000-01 periods.

Table 9: Forest Produce in Rajasthan

Forest Produce Unit 1999-00 2000-01Firewood Qtl 375000 598752.77Timber Qtl. 170590 352621.78Bamboo Lakh. No. 20.57 17.91Tendu Patta No. of Std. bags 567466 595381Source: Economic Review 2003-04, Rajasthan Government; p.104

Table 10: Revenue from the forest produce

Items 1999-2000 (Rs. In Lakh) 2000-2001 (Rs. In Lakh)Timber 141.05 51.05Bamboos 218.64 217.03Tendu Patta 820.73 1072.14Fire Wood 343.01 1182.70Others 737.84 1115.19Total 2261.27 3638.11Source: Economic Review 2003-04, Rajasthan Government; p.104

4.2. Wildlife 4-4 Rajasthan due to its size and geographical location is very rich in biodiversity and wildlife. The state provides a variety of habitat that support a number of rare and endangered animal and bird species viz. great Indian Bustard, tiger, leopard, chinkara, sloth bear, wolf, black necked storks etc.




4-5 The State offers ample opportunities for eco-tourism. The state has two national parks and 25 sanctuaries. Besides, there are 32 closed wildlife areas spread over a area of 14865 sq.km which are being looked after by the wildlife wing of the Forest Department.

4-6 Rajasthan has two national parks (Keoladeo Ghana National Park near Bharatpur and Desert National Park near Jaisalmer), 23 Sanctuaries and 33 closed areas. To sustain and develop these national parks, sanctuaries and closed areas, and to restore the natural habitat, the relevant authorities provide water holes, eradicate weeds and exercise grazing control in the respective areas. 4-7 The source of water, its quantity and quality are major factors affecting the Keoladeo wetland ecology. The Gambhir and Banganga river systems, at the confluence of which this national park is located, bring in water to it. Water from the Gambhir is brought into the Ajan Bund through Pichuna canal, and from Banganga through Uchain canal. The amount of water supplied to this park during the 1970s and 1980s varied from a minimum of 0.017 Mm3/yr in 1986 to a maximum of 15.32 Mm3/yr in 1985. In most of the years it was above 14 Mm3/yr. The Rajasthan Forest Department is receiving 14 Mm3/yr of water from the Irrigation Department. 4-8 The other important wetlands and game sanctuaries in Rajasthan are: National Chambal (Gharial) Wildlife Sanctuary, Jai Samand Wildlife Sanctuary, Lake Sambhar, Phulera and Didwana Salt Lakes, Pichola - Fatehsagar Lake and other lakes of central Rajasthan, Darrah Game Sanctuary, Siriska Game Sanctuary, Mount Abu Game Sanctuary, Sawai Madhopur Game Sanctuary, Tal Chhapar Game Sanctuary and Van-Vihar and Ram Sagar Sanctuary. 4-9 In the case of Sambhar Lake, there is a growing utilization of water in the catchment area, and this poses a potential of substantially reducing the inflow of water, and the accompanying nutrients and organic matter. This concern had been voiced even during the British period (late 19th century) when reservoirs were planned in the catchment of River Rupanagarh. However, during the past century or so, hundreds of water-storage schemes have been implemented in the Sambhar Lake catchment without any apparent effect on salt production or otherwise on the system's characteristics. The increasing desertification in the catchment and deposition of aeolian sand in river beds are also a potential threat to the wetland. 4-10 Most of the other Game sanctuaries are located in forest areas and depend for their water needs on the rain.

4.3. Quality of environment and natural resources3

Water 4-11 Rajasthan is one of the most vulnerable states in India in terms of the availability of the drinking water and also water in general. The Rajiv Gandhi Drinking Water Project, Rajasthan has the following findings for the state from various studies under this project.

3 This section includes inputs based on an Interview with Prof. B.N. Gupta, Civil Engg. Dept. Malviya National Institute of Technology, Jaipur.




i) Lack of water quantity: The entire state is suffering from the availability of the water in required volume first of all. Most of the districts are water scarce and during summer water is hardly available. Water tables are very deep in some places that the extractions become expensive or impossible technically.

ii) High Florides Content: All the 32 districts are declared Fluoride prone in Rajasthan. Most of the ground water tables are having high level of fluoride compounds that are not permissible for drinking water. The contamination level is far above the permissible limit of the WHO/Unicef standard. In the entire state Defluoridation program is actively going on. Part of it is done by the state government, part of it also under the project of Unicef Defloridation Campaign. Under the government initiatives, in the Phase-I project, 6000 villages were identified where the Fluorides content is above 5ppm. By the end of this year another 2500 villages would likely to be added to this project.

iii) High Nitrates contamination: Entire Rajasthan state is suffering from the nitrate contamination in the ground water tables. Most of the cases show very high contamination; i.e. more than 45 ppm. There are some places where the levels are ranging between 250ppm to 750ppm, which makes the water completely non potable.

iv) High TDS (Total Dissolve Solids) in ground water: In this state most of the ground water tables are very deep and the seepage of water through various levels of the earth’s cast makes this ground water heavy with TDS contamination. Level of TDS some times reach the 75% of the TDS factor of the sea water and thus make the water completely non potable. Therefore, RO/ED (Reverse osmosis / Electrolytic Distillation) is very much required in most of the places in Rajasthan, especially for the western part (close to desert). Due to low population density of the western Rajasthan (Lowest in India) mobile RO/ED units are the only solution for those villages. Mobile units visit those places on a regular basis to provide drinking waster. 85% of the RO/ED mobile units of the country are located in Rajasthan, but still more to be added.

Sewerage System 4-12 Sewerage is one of the major problems of the Rajasthan’s urban development initiatives. Leaving apart the villages, none of the cities in any of the 32 districts has scientific and proper sewerage facilities. Even in Jaipur, drainage and sewerage systems are non existent. There is a project funded by ADB, Rajasthan Urban Infrastructure Development Project, is working to sort out various urban planning and development problems in various cities in Rajasthan which also includes urban sanitation and sewerage. Otherwise, no such initiative has so far been visible in this state.

Air Pollution 4-13 Rajasthan is more or less out of the threat of air pollution like other metropolitan cities (Delhi, Mumbai, Kolkata etc.) due to lack of heavy industries and low population density. Kota, is the only city in Rajasthan, which has considerable air pollution problems because of various power plants in and around. SPM and RSPM levels are high in this particular place.




Noise Pollution 4-14 This is an increasing problem for the cities in Rajasthan. As the number of vehicles are increasing, level of noise is also increasing. 65dB(A) is the permissible limit of noise level, but there are some places in Jaipur itself, where the daily average of the noise level is above 95db.

Irrigation 4-15 Agricultural development mainly depends on the irrigation system in Rajasthan due to natural availability of the water, poor rainfall, deep ground water tables etc. Rajasthan Canals (Phase-I and II) are the main irrigation canals in this state. But, water logging along the canals are the major problem now in Rajasthan and especially for the Hanumangarh and Ganganagar districts. Spill over water from the canals get stored in the canal banks in the form of ponds or lakes. Due to high temperature, low humidity water gets evaporated soon and precipitates salt in the soil. Therefore, water logging on the bank of the canals is a serious issue for the farmers having crop land just besides the cannels. Soil becomes saline and also the water becomes saline which has got no use in agriculture.

5 Economic Resources and Condition

5.1. Industrial and Economic development 5-1 Rajasthan is a major producer of blended yarn (40% of the country’s production), cement, TV picture tubes, chemicals, fertilizers and sophisticated electronic items. There is a potential for growth in agro-based industries, wool, synthetic fibres, cotton, other textiles, non-metalic mineral products, gems, machines, machine tools and handloom.

5-2 Table 11 below illustrates the leading role of Rajasthan in mineral production in India. The rich mineral base of Rajasthan provides great opportunities for setting up mineral based industries in the State. Mineral based industries such as cement, marble processing, granite processing and Kota stone processing, have witnessed impressive growth. 5-3 Rajasthan also has large deposits of lignite. The State's reserves stand at approximately 3,000 million tonnes (MT), with a proven reserve of 1,000 MT. The major deposits are located in Districts of Barmer (800 MT), Bikaner (400 MT), and Nagaur (200 MT). Lignite can be used for power generation, as well as fuel for industry. Some of the potential lignite based power plants are: Barsinghsar Project (2×120 MW), Palana Project (2×60 MW) and Gura-Bithnok (around 300 MW).

Table 11: Mineral Production in Rajasthan

Mineral Production in Rajasthan in

1992- 93, MT

Proportion of National Production,

% Lead Concentrate 48,000 81 Silver 12,836 51 Zinc Concentrate 300,000 100 Phosphorite 270,000 56 Asbestos 41,000 98 Gypsum 1,106,000 93




Stearite 313,000 84 Wollastonite 56,107 97 Calcite 69,800 70 Felspar 70,000 70 Ball Clay 270,000 71

Mining and Industrial situation 5-4 Though Rajasthan is not an industry intense state, but there are two major types of industries that are creating serious environmental problems; Cement and Textile industry. 90% of the country’s cement production happens to be in Rajasthan and therefore, poses the threat of various kinds of respiratory disease for the neighboring community

5-5 There is a large Textile Belt near Jaipur region (East and South Rajasthan) that produces good quality textile products and earn revenue from exports. In the manufacturing process of various textile products, certain hazardous processes with significant waste generation potential such as Tie & Dye are outsourced to the small or medium size enterprizes. These SMEs, use the banned Azodyes and remain out of the reach of the law.

5-6 Rajasthan is rich in mineral resources. 90% of the country’s total marble is produced in this state. But this particular segment of this mining industry is not properly managed. Marble slurries are a threat in the areas like Kishangargh and Rajsamand. Unplanned and unscientific marble extraction allows marble dust to mix with water to become slurry and flow as viscous fluid to the plain land areas and cover the crop lands. This causes huge crop loss and land fertility also goes down.

5.2. Economic condition 5-7 The follwing table shows the current gross state domestic product by industrial origin at the current price value. This table gives the economic contribution of the each factor the GDP. It shows that the Agriculture has the maximum contribution to the state earnings in Rajasthan. So for the economic betterment state has to take the policies that would protect and prosper the agricultural sector.

Table 14: Gross State Domestic Products by Industrial Origin at the Current Price ( all in %)

Sector 1999-00 2000-01 2001-02 (P) 2002-03 (Q) 2003-04 (A)Agriculture With Animal Husbandary

28.39 24.44 26.52 20.78 26.83

Forestry 1.22 1.33 1.41 1.45 1.24Fisheries 0.07 0.07 0.07 0.07 0.08Mining 2.38 2.41 2.18 2.69 2.53Manufacturing (Registered)

8.99 8.48 8.04 9.14 8.08

Manufacturing (unregistered)

5.79 5.71 5.72 5.65 5.02

Construction 9.55 9.27 8.92 9.52 8.29Electricity,Gas & Water Supply

4.20 4.53 4.37 4.95 4.62




Railways 1.02 1.08 1.13 1.29 1.20Other Transport and Storage

2.77 3.59 2.98 3.36 2.90

Communication 1.21 1.40 1.46 1.68 1.60Trade, Hotel and Restaurants

12.82 13.75 13.67 13.36 13.63

Bankibng & Insurance

3.04 3.35 3.52 4.11 3.96

Real Estate 5.44 6.31 6.33 7.03 6.20Public administration

4.42 4.70 4.40 4.92 4.49

Other Services 8.69 9.58 9.28 10.00 9.33Source: Economic Review of Rajasthan, 2003-04; p106

6 Environmental Impact of Prospective Subprojects 6-1 Both short term environmental impacts of the subprojects proposed for funding to sub-borrowers by the Program, and the anticipated longer-term impacts of changes in employment and land use resulting from the dynamic process of rural change accelerated by Program activities, are summarised in this section. As the Program activities will contribute to an enhancement in income generation, particularly in agro processing, cottage industries, small scale trading and high value agricultural production, it is likely to have beneficial impact on the environment. 6-2 Intensification of crop and livestock production, coupled with increased efficiency of livestock production through increased use of stall feeding, will lessen marginal land degradation, livestock grazing on fragile lands and cropping of the most infertile and erosion prone soils. This could complement community and state efforts to protect and manage forest and grassland resources, resulting in a general increase in biomass production. This in turn will positively affect fodder, fuel and construction material availability. In addition, the ensuing improvement in quality of vegetative cover will reduce soil erosion and nutrient loss. 6-3 Notwithstanding the generally positive environmental prognosis, individual sub-loans provided for certain micro enterprises may occasion deleterious environmental impacts. Although less significant in magnitude, the cumulative adverse impact of a large number of such undertakings could be highly significant. Therefore these will have to be mitigated and monitored by incorporating modest but effective measures into the Program design. Program implementers are expected to bear a major share of the burden of recognising negative impacts and ensuring the instituting and implementing of mitigation measures.

6.1. Agro-Processing 6-4 Loans are expected to be provided for cold storage and go-down for storage of seeds, agro-chemicals and agricultural products. Considering the nature of this business as well as the value of loans required, one can expect very few such loans to be extended through the project. As a result the possible environmental hazards, as listed below would have a very limited scale.




Impacts and Mitigation 6-5 Cold Storage facilities would need refrigeration and air-conditioning equipment that would use electrical energy. There is a possibility that Ozone Depleting Substances (typically R-11 and R-12) may still be in use in air-conditioning equipment. In godowns and cold storages, in order to maintain hygienic condition for the storage of products, insecticide and pest control chemicals may be used. Fire hazards would be another area of concern. 6-6 The climatic factors such as extreme heat and low humidity should be incorporated in the design of the cold storage and godown facilities. 6-7 If chemicals are stored in the godowns, waste from breaking of packets and containers during unloading and handling will generate agro-chemical waste which should be disposed using best practices of safe disposal of agro-chemical waste. Further, care should be taken to protect workers from contaminated air inside storage facilities. Training should be provided on proper handling methods and these should be applied.

Assumptions and Risks 6-8 It is assumed that the size of cold storage and godowns would be small to medium and no flammable substances (such as fuels, fuel wood etc.) would be stored. The design and construction of cold storages would consider fire and safety hazards at the design stage. In case of cold storage, the loan component would ensure that supply of electrical power and cost of electricity is included in the operating cost of the cold storage.

Environmental Monitoring 6-9 The specific indicators to be monitored are:

• Ensuring hygienic conditions at cold storage and prudent use of pest control as per guidelines, particularly temperature and humidity control;

• Checking the use of banned ODS gases as required under Ozone Depleting Substances (Regulation) Rules, 2000; and

• Energy use monitoring like routine check up of the efficiency

• Monitoring of the waste disposal (rotten perishable items).

6.2. Agricultural Production 6-10 Short and medium term agricultural loan facilities will be made available for agricultural production. Traditional crop cultivation as well as non-traditional horticulture and organic cultivation will increase, utilising loan facilities. Beneficiaries will use the loans for procuring seeds, fertilizers, pesticides, labour and water.

Impacts & mitigation 6-11 The main environmental impact to be aware of is the irreversible loss of habitats. It is most critical when it is "wildland," but even degraded habitats, e.g., wetlands, perform valuable services. Such loss reduces economically valuable environmental services and accelerates extinctions and loss of wildlife. This loss can occur from two main causes: first, access roads that reach the project area; and second, clearing natural habitat for planting and processing of crops. Access roads leading into the project area or near habitat may facilitate unplanned settlements and destruction of that habitat. Parts of Rajasthan have




severe water shortage that often threaten the state’s fragile ecosystems. For example, the source of water, its quantity and quality are major factors affecting the Keoladeo wetland ecology that protects endangered species. Hence agricultural development has to clearly steer away from areas that could threaten habitats. 6-12 Land development would require land clearing and poses the threat of decreasing the thin layer of fertile topsoil, exposing infertile subsoil, and accelerating erosion. In Rajasthan, soil erosion is a serious problem to the productive land. Soil also suffers heavy moisture loss by quick evaporation due to low humidity level. Uncontrolled flow of water not only results in loss of water and good top soils but also damages the valuable soil nutrients. 6-13 Increased agricultural production will impinge on the sustainable use of water and land resources. While improved water management could address the heavy demand on water, pressure on marginal lands and intensive cultivation of erosion-prone land may have to be addressed by environmental interventions and intensification of cropping. The state of Rajasthan has chronic water shortage. Although Rajasthan has 10% of the country’s total area but one 1% of its total water resources. Rajasthan is an extremely dry state. Improving the regularity of water supplies, and as a result increasing the possibilities of diversification to higher-value crops, will at least partially relax the constraints imposed by an unsteady semi-desert ond and desert climate conditions prevailing in Rajasthan. Groundwater plays a particularly important role in Rajasthan. The economic significance of groundwater is compounded by the fact that groundwater irrigated areas tend to have significantly higher yields than areas irrigated by other sources. However, the quality of groundwater in Rajasthan is suspect in various places due to the presence of fluorides, high nitrates and total dissolved solids. Both the quality and quantity of groundwater available should be assessed for agricultural and related use. 6-14 The primary pollutants from pesticides are the active and inert ingredients, diluents, and any persistent degradation products. Pesticides and their degradation products may enter groundwater and surface water in solution, in emulsion, or bound to soils. Pesticides may, in some instances, cause impairments to the uses of surface waters and groundwater. Both the degradation and absorption characteristics of pesticides are highly variable. Some types of pesticides are resistant to degradation and may persist and/or accumulate in aquatic ecosystems. Pesticides may harm the environment by eliminating or reducing populations of desirable organisms, including endangered species. 6-15 Runoff of agricultural chemicals, including pesticide residues, to surface and groundwater bodies could result from agricultural production. The broad spectrum effect of certain pesticides can cause incidental damage to a wide array of fauna and flora. They are easily dissipated in air and through both surface and groundwater sources. 6-16 The potential direct negative environmental impacts of the use of groundwater supplies for irrigation arise from overtapping groundwater supplies (withdrawing water in excess of the rate of recharge). This results in the lowering of the water table, land subsidence, decreased water quality, and saltwater intrusion (in coastal areas). Groundwater development in Rajasthan has proceeded rapidly in recent years. As much as 60% of the irrigated area is under wells and tube wells. This has been concentrated in the central and eastern parts of the State, that have high quality groundwater, good yields and limited sources of surface water supply. The net result has been the creation of overdraft conditions across large areas, accompanied by significant declines in water levels. Well development




for agriculture should not be carried out in water stressed areas and particularly where there exists “competitive” use of groundwater for drinking, irrigation or other purposes. 6-17 Salinity problems, naturally more acute in arid and semi-arid areas which have more rapid surface evaporation and saline soils, are exacerbated by irrigation. Waterlogging and associated salinity problems are a growing concern in many canal irrigated areas in Rajasthan. Waterlogging concentrates salts, drawn up from lower in the soil profile, in the plants' rooting zone. Salinity problems are not expected as drip and sprinkler irrigation is being proposed.

Environmental Interventions 6-18 Explicit attention to improving farmer knowledge of water management, soil conservation, safe handling and use of pesticides, integrated pest management and complimentary use of organic fertilisers and pesticides will be required to mitigate adverse impacts from increased crop production. Co-ordination with existing Government extension services, and central and provincial environmental authorities, and enhancing the monitoring capacities of the cooperative credit institutions are some of the action which could minimise negative impacts on civil societies, community health and environment as a whole, during and after the Program. Participation of the CCS in promotion of organic farming will benefit both the growers and consumers due to its environmental health benefits. 6-19 As a significant portion of the Program loans are expected to be availed by the farming community, coordination with Government extension services providing integrated pest management training will be a high priority. Design of training and monitoring programs will require the services of a local Environmental Impact Management consultant. The training program should focus on all farming activities utilising pesticides, and should consist of curricula, timing and training localities. Extension materials should be prepared with the PACS functionaries in mind. Incorporating the environmental training into the Program training package will be desirable.

Assumptions and Risks 6-20 It is assumed that appropriate soil conservation and water management will be practised on erosion prone lands used for high value crops. Another assumption is that Government training programs for IPM and organic fertilizer use will succeed in bringing out safe, economical, and low-impact use of agro-chemicals. However, there is always the risk that that the CCS and beneficiaries would ignore these factors, downgrade the importance of training and monitoring programs and fail to coordinate loans with environmental guidelines, leading to serious health hazards and severe localised adverse environmental impacts.

Environmental Monitoring 6-21 The Program Implementation Unit (PIU) will monitor:

• the general level of awareness of key environmental issues among CCS staff through various capacity building programs.

6-22 The PIU will also monitor specific indicators such as: • the number of relevant beneficiaries receiving IPM training;

• knowledge of IPM among CCS staff and beneficiaries as reflected in a simple attitudinal survey;




• the number of beneficiaries receiving training in organic fertilizers; and

• annual field observation of selected sites where high value crops are a part of the loan portfolio, to assess farmer knowledge of IPM techniques, overuse of pesticides and chemical fertilizers, and opportunities and constraints to increased use of organic compost.

• To check well development in drought prone areas for agricultural purposes

6.3. Livestock 6-23 Sub-loans are expected to be provided for purchase of poultry and finance animal husbandry.

Impacts 6-24 Animal waste includes the fecal and urinary wastes of livestock and poultry; process water (such as from a milking parlor); and the feed, bedding, litter, and soil with which fecal and urinary matter and process water become intermixed. Manure and wastewater have the potential to contribute pollutants such as nutrients (e.g., nitrogen and phosphorus), organic matter, sediments, pathogens, heavy metals, hormones, antibiotics, and ammonia to the environment. Decomposing organic matter (i.e., animal waste) can reduce oxygen levels and cause fish kills. Solids deposited in waterbodies can accelerate eutrophication through the release of nutrients over extended periods of time. Contamination of groundwater can be a problem if runoff results from the misapplication or over application of manure to land or if storage structures are not built to minimize seepage. Because animal feed sometimes contains heavy metals (e.g., arsenic, copper, zinc), the possibility for harmful accumulations of metals on land where manure is improperly or over applied is possible. Pathogens in manure can cause diseases in humans if people come in contact with the manure. Pathogens in manure also create a food safety concern if manure is applied directly to crops at inappropriate times or if manure contaminates a product (e.g., food, milk). Air pollution is also a concern in relation to animal wastes. Farms on which animals are raised often concentrate odors associated with the microbial degradation of manure and other by-products of the production of meat, milk and eggs. There could also be biosecurity concerns requiring procedures to control the spread of animal diseases from one facility to another. Cattle and other grazing animals can overgraze contributing to soil losses due to severe erosion, and impoverishment can change the vegetation composition and associated organisms in rangelands. 6-25 No significant adverse environmental impacts are envisaged from breeding and fattening of chicken, ducks or other small livestock. As the subloans for these activities are expected to be small, accumulation of unutilised manure is not expected, particularly as the demand for organic manure is increasing. Furthermore, insofar as loans improve household incomes, pressure of subsistence cultivation on marginal lands, especially in the dry zone, will decrease and household sanitation will improve. Periodic cleaning of pens will generate effluent with high Biochemical Oxygen Demand (BOD), which also could be used as manure. 6-26 In providing subloans for purchase of dairy cattle and buffalo, the lender should ensure that the beneficiaries take into account the fodder or forage availability and the negative impact of the pressure imparted on land and forests. Stall feeding would allow for better land management and efficient use of manure. Uses of manure are many including,




but not limited to, fertilization of crops and biogas generation. Use of manure as fertilizer will be an incentive to organic farming while reducing soil degradation.

Environmental Interventions 6-27 Monitoring fodder production and availability will assist in mitigating adverse impacts of large ruminants while no interventions are required for poultry. When action is taken to ensure that the sub-borrower or beneficiary has a good knowledge not only of animal husbandry and feed plans but also the risk of animal loss, the success rate of the subloans will be high. In areas where the demand for livestock loans are high, CCS functionaries will need to arrange training utilising the existing extension services.

Assumptions and Risks 6-28 It is assumed that prior to making available of livestock subloans, the lending institutions will ensure that beneficiaries have knowledge or obtain training on health and nutrition needs of the animals and sustainable extraction of fodder. A further assumption is that, as the demand for fodder increases, commercial production of fodder in community and private land will develop in the area. Nevertheless, there is a risk that feed availability will not be satisfactory and as fodder becomes a limiting factor of production pressure on public lands will increase.

Environmental Monitoring 6-29 Indicators that need to be monitored are:

• number of beneficiaries who have planted fodder crops and trees on their own land;

• increase in local fodder production and increase in organic farming and biogas production.

• availability of and access to natural fodder and forage, cultivated fodder, and imported feedstuffs (in stallfed animals)

• Using pre-existing water bodies for ornamental fish cultivation and utilizing the natural productivity of the intact ecosystems (e.g., mangroves, salt grass marshes) instead of converting them to pond production.

• numbers and types of animals

• seasonal distribution and movement of animals

• condition of the livestock (weight, presence of disease, other health indices)

• condition of the soil (i.e., signs of increased erosion, compaction, decreased fertility, etc.)

• water points (location, condition, and intensity of use, and condition of vegetation around the water points) & market conditions (changes in price, development of alternative markets, etc.)

• changes in economic indices of livestock producers (e.g., income levels and health)




• changes in social organization

• external land use changes and demographic changes which have impacts on the range resource and livestock producers

• changes in wildlife populations and habitat due to livestock production

6.4. Medium Term Non Farm Sector Loans 6-30 Subloans are expected to be made available to small scale cottage industry, rural housing, working capital loans for industrial units, loans for small hospitality services and medical services. In addition, there would be miscellaneous consumer loans including vehicle loans and educational loans. 6-31 Of the identified sub-projects, loans to industrial units, medical services and hospitality services can cause significant environmental impacts. Depending on the type of industry and its pollution potential, industries can cause a wide array of water, air, land and ecological impacts. Medical clinics (pathological labs, diagnostic centers, blood banks etc.) and hospitals pose medium or large scale bio-medical waste disposal risks and are mandated by Bio-Medical Waste (Management and Handling) Rules, 1998. Small hotels, motels and restaurants cause air and water pollution and require “consents” under the Water and Air Acts and Rules. Housing loans may lead to temporary impacts during construction from the use of water and dust emissions. If wood is used for housing construction, there could be a possibility of stress on local forestry. Maintenance and use of vehicles (Tractor, Trolley, Matador, Tripper Lorry, commercial vehicles) would cause air and water pollution as well as pose problems of hazardous waste such as used oils, discarded oil filters, spent batteries etc. The wastes from maintenance and repair activities can include used oil, spent fluids, spent batteries, metal machining wastes, spent organic solvents, and tires. These wastes have the potential to be released to the environment if not handled properly, stored in secure areas with secondary containment, protected from exposure to weather, and properly disposed of. If released to the environment, the impact of these releases can be contamination of surface waters, groundwater, and soils, as well as toxic releases to the atmosphere. Groundwater pollution can also result from discharges of wastes to wells.

6-32 While loans to Cottage industry and Artisans, handicrafts are not expected to have large impacts, there could be localised impacts due to use of hazardous chemicals (solvents, paints, laquers, acids etc), emissions from the use of fuel and wastewater from washing and cleaning. Industries in Rajasthan that have chronic environmental problems include small and medium textile industries that use of banned Azo Dyes, Marble and mineral industry that produce slurries that destroy crop lands), and cement, which produces local air quality impacts.

6-33 The short term credit structure does most of its lending in the agriculture and related sectors, and loans for the above projects are likely to be few. However small the number and extent of such loans, It is necessary for both the lender and the borrower to be aware of the hazards and to take remedial measures accordingly.

Environmental Interventions 6-34 Loan applications for housing, cottage or other industry using high-value forests products should be assessed carefully to ensure sustainability of resource. Financial and




technical feasibility can be expected to imply environmental sustainability. Environmental hazards from water based effluents, hazardous and bio-medical waste disposal, air emissions from industrial units, medical clinics and hospitals, will have to be mitigated by ensuring subloan requirements through loan conditions, that the waste is neutralised and disposed using best practises. Compliance to environmental laws should be considered a pre-requisite to disbursement of loans to these sectors. By promotion of reuse of waste/byproducts through cleaner production technology the waste released to the environment could be minimised. Cleaner production promotion should be built into the environmental training of the Program and the monitoring plan should include occasional checks to monitor the disposal of effluent to the environment.

Assumptions and Risks 6-35 The principal assumption here, is that extraction of high-value timber products and fuelwood will be done at sustainable levels only. A further assumption is that markets for faster growing forest products as some types of timber and fuelwood will supply requisite quantities. However, there is always the risk of over-exploitation of high-value forest products, particularly in housing and cottage industries. The risk of market inability to supply materials like timber, fuelwood and bamboo is slight in the longer term although short-term market sluggishness may occur. A further assumption is that the liquid waste will be treated and disposed as specified. This will be of prime importance when several of the effluent generating activities are located in close proximity.

Environmental Monitoring 6-36 The specific indicators for monitoring are:

• Check Compliance to Water (Prevention And Control Of Pollution) Act, 1974, Air (Prevention And Control Of Pollution) Act, 1981? Hazardous Wastes (Management and Handling) Amendment Rules, 2003, Manufacture, Storage and Import of Hazardous Chemical Rules, 1989 for industrial units, hotels and restaurant establishments. In addition to this, for medical clinics, Bio-Medical Waste (Management and Handling) Rules, 1998 compliance may also be monitored

• shortage or high cost of fuel or other raw material

• emission of noxious effluents or smoke, liquid waste; and

• depletion of the resource base.

6.5. Other Loans 6-37 Program loans are expected to be utilised for small service enterprises under the Swarn Jayanti Swarozgar Yojana (SGSY). Also lending will be done for miscellaneous purposes through Self Help Groups (SHGs).

Impacts 6-38 Environmental impacts of the above enterprises will be minimal. However, insofar as subloan facilities improve household incomes, pressure on forested areas and cultivation on sensitive land is expected to be reduced.




Environmental Interventions and Monitoring 6-39 Considering the scale of operations and the level of adverse impacts no environmental interventions or monitoring is required.

7 Findings and Recommendations 7-1 Considering the positive and negative impacts of the proposed subproject loans, the overall impact is expected to be positive. Most of the short term negative impacts identified could be mitigated by creating greater awareness on the possible environmental impacts of the activities in question. Other short-term adverse impacts could be addressed by implementing recommended mitigation and monitoring activities 7-2 Loans to industrial units, hospitals and hotels need focus with regard to their compliance to Indian Environmental laws and regulations. Typically, it should be sufficient to check if the loan beneficiary possesses the permits (consents) and authorizations mandated by the regulations. Detailed EIA is required for 29 categories of industries under the Indian laws and regulation for new projects and for modernization and expansion projects with value above INR 500 million. However,the project finance in question is not expected to result in such large interventions and hence would not require an EIA under Indian Environmental laws. 7-3 Considering the inadequacy of the current knowledge of beneficiaries and the farming community of the state as a whole regarding the use of pesticides, training programs and extension material on the basics of safe, economical and sustainable use of agrochemicals and IPM are an absolute necessity. High value and organic crop production should be supported by Program financing, and the borrowers should receive training on fundamentals of pesticide handling and use, IPM and use of organic fertilizers. Further benefits as arresting land degradation and conservation of marginal lands and forested areas may result if this training could be extended to include water and soil conservation and sustainable extraction of non-forest and forest products for fuel, fodder and woodcraft. 7-4 Development and delivery of training on the basics of waste and wastewater disposal and environmental pollution will also be required to minimise adverse impacts of micro-enterprises funded by the Program 7-5 Institutional capacities of the Cooperative Credit Institutions will have to be improved to include staff for acquiring capability to screen the potential subprojects using the environmental guidelines provided and evaluate potential environmental impacts and identify mitigation for approved subprojects as part of the credit approving process. Environmental interventions of the cooperative credit institutions will be have to be limited to deciding on the environmental feasibility of the subprojects by simply referring to the subloan Risk Categories , provided in the Environmental Guidelines. 7-6 A monitoring program developed during the preparatory phase of the project will be implemented by outsourcing the periodical and ‘as required’ environmental monitoring. After the Program period, monitoring of environmental impacts and mitigation will be continued with funds from the Apex and inputs from central and local environmental authorities




8 Conclusions 8-1 This IEE has listed all potential impacts of the Program funding activities of the CCS. No significant adverse environmental impacts that require detailed EIA were identified. Thus, the IEE represents the complete environmental assessment of the Program funding activities. 8-2 The CCS should use the environmental guidelines annexed to this document to determine whether the subprojects are acceptable and they could further use the guidelines to decide on the required mitigation measures and monitoring.




Attachment – Initial Environmental Guidelines These Guidelines focus on a categorization of projects funded through sub loans into four environmental impact categories , I ( lowest impact ) to IV (highest impact) and outline actions for mitigation of potential adverse environmental impacts . The Categories are : Permit after informing borrower that due care is to be taken and progress is to be monitored CCS institution to communicate the mitigation and montoring measures needed for the specific sub-projects as mentioned above to the beneficiary. Permit after informing due care to be taken, initiate capacity strengthening so that due care is taken and monitor CCS institution to co-ordinate group training on mitigation measures and initiate periodic survey on the sub-projects to evaluate the implementation of mitigation measures Permit only after assuring due care will be taken CCS institution to communicate the mitigation and monitoring measures needed for the specific sub-projects and assess the beneficiary’s capability, both financial and practical knowledge, in implementing them and in monitoring any residual adverse impacts. Regulatory compliance check (consents, permits, authorizations from pollution control board) should be a part of this assessment. Permit only after due care is taken Due to inherent complexities and/ or characteristics, subprojects on this list have the potential to cause significant environmental impact. They require detailed environmental appraisal by competent environmental staff. The CCS will have to consider these subprojects only after appraisal, if needed, by outside assistance. Note : Notwithstanding the level of impact, the subloan processing institution would have to seek professional advice if the institution does not possess the capacity to assess the cumulative impact of a concentration of these subprojects in a limited or sensitive area.




Initial Categorization Of Sub Projects and Environmental Guidelines Sub-project Project

category (impact)

Mitigation Monitoring

Agro-Processing Cold Storage and Godown I Use of non-ODS refrigerant gases

Fire and electrical safety Training on safe handling and disposal of agro-chemicals

Consideration of climatic factors (temperature and humidity) in the design of the cold storages and godowns

Hygiene in the godowns for food storage

Energy use of refrigeration equipment Waste disposal and use of biomethanation

Agricultural Production Short Term Agricultural Loans (including cash and inputs such as seeds, Fertilizers Pesticides Medium Term Agricultural Loans (3 to 9 years) for agriculture and ancillary activities like – Dry land development

II

II

II

II

II

II

Avoidance of ecologically sensitive areas and water stressed areas; Replacement of top-soil after land clearing

Farmer knowledge of sustainable Water management through planned irrigation

Avoiding sinking of wells in fast depleting aquifers and in areas with poor ground water quality Training on pesticide and chemical application and integrated pest management

Training and awareness of farmers

General level of awareness on the key environmental issues of CCS staff

No land of ecological / social importance is converted to agriculture / horticulture

The percentage of farmers who practice IPM and drip irrigation

Wells developed in drought prone




Sub-project Project category (impact)


Land development Wasteland development Investment loans for pump sets Bio-agriculture/organic cultivation Cut flower cultivation Contract Agriculture under Agriculture Export Zone Automatic and medicinal plant Agri-clinic Minor Irrigation (including sprinklers, drip irrigation) Tractor and Bullock Cart

III I

II

II

III

III

II I I

areas

Quality of groundwater (Fluoride, nitrates and TDS)

Top soil eroded lands / moisture loss affected saline lands

Deepening of wells III Avoiding sinking of wells in fast depleting aquifers and in areas with poor ground water quality


Digging of wells III Avoiding sinking of wells in fast depleting aquifers and in areas with poor ground water quality


Livestock Animal Husbandry III Fodder availability Number of beneficiaries with






Use of manure as fertilizer and wastewater for agricultural use Beneficiaries knowledge on animal husbandry practices such as feed plants, risk of animal loss etc. Adequacy of water quality for livestock (salinity, fluoride, nitrates etc.)

fodder crops

availability of and access to natural fodder and forage, cultivated fodder, and imported feedstuffs (in stallfed animals)

number and type of animals

condition of the livestock (weight, presence of disease, other health indices)

changes in wildlife populations and habitat due to livestock production Data on bio-security concerns (spread of animal and poultry diseases in the area)

Poultry Farm I Medium Term Non Farm Sector Loans

Knowledge of use of hazardous substances

Cottage industry and Artisans, handicrafts

I

Rural and other Housing I Non- use of high value forest products Term Loan and Working Capital facilities for large and small

III Compliance with environmental laws and regulations (see list above)

Monitoring of effluent and emissions in conformance with






industrial units Systems of adequate treatment and disposal of wastes Loans for textile, mineral processing, cement and metal industries need more focus on account of their pollution potential

laws

Small Vehicle, Tractor, Trolley, Matador, Tripper Lorry

II Ensuring the PUC certificates are accorded to these vehicles

Routine emission testing carried out

Miscellaneous loans : Consumer Loan, Loan against Fixed Deposits, NSC, Kisan Vikas Patra, Vehicle loans including commercial vehicles, Cash credit limit for traders, Education Loan

I

Hotel, motel, restaurant loan II Compliance with environmental laws and regulations Systems for sewerage and drainage exist in the facilities

Clinic, Diagnostic Centre, Hospital Loan

III Compliance with environmental laws and regulations

Other Loans Small agricultural credits under Swarn Jayanti Swarozgar Yojana (SGSY) and miscellaneous loans to Self Help Groups (SHGs)

I



October 2005 Page 1

ANNEX 5: FINANCIAL RESTRUCTURING AND MODEL RESTRUCTURING PLANS

Cleaning up the balance sheets of the CCS will require substantial financial restructuring including funds infusion to wipe out accumulated losses and reach minimum capital norms within a time bound period. This exercise will need to commence with a thorough audit/review to assess the portfolio quality and draw up financial statements using generally accepted accounting principles and prudential norms. In this context, RBI’s circular issued in the summer of 2004 is a regressive step. Based on the estimates for additional provisioning at the PACS and DCCB portfolio, and forecast financials at the DCCB level, we have made an attempt at estimating the total financial restructuring requirement, suggested principles and developed model restructuring plans for typical DCCBs. The additional provisioning requirement is indicative in nature and could undergo change once a thorough audit of the CCS entities is carried out. The major issues that will have to be faced in carrying out financial restructuring are:

There are accumulated losses at all levels Basic accounting is unreliable and PACS do not follow prudential

norms There have been successive loan restructurings. RBI norms do not

require provisioning on restructured agricultural assets. Cooperative Law allows interest to be recognized on accrual basis

even on NPAs. While RBI norms require overdue interest to be provisioned, the treatment is not followed consistently.

Actual asset erosion is likely to be substantially higher than currently assessed in the system or what CCS books will show after the summer 2004 circulars on restructuring and provisioning for agricultural loans are implemented.

We should not carry out financial restructuring of the CCS without taking steps to ensure the network’s sustainability. Therefore, principles guiding this action will have to be followed:

It is critical to remove state intervention in day to day management Cooperatives being people’s institutions, states or state owned

agencies such as NABARD must not be shareholders Financial restructuring should not involve infusion of funds in such a

manner that the state or its agencies are left as shareholders in CCS entities.



October 2005 Page 2

No funds must be provided to individuals or entities so that they can infuse capital into the system.

Only potentially viable entities must be financially restructured. It is critical that financial restructuring is carried out only to support and

incentivize revitalization of the CCS as a whole and that it is preceded by stakeholder acceptance of legal and regulatory reform as well as an institutional restructuring plan including in relation to governance and management.

It is also critical that fund infusion should be phased, contingent on achieving pre-agreed performance benchmarks.

First we must identify candidates for restructuring. Many PACS are dormant. Many others are in very poor shape. Similarly, some DCCBs may need to be closed or merged with other DCCBs. For the ones that are identified for restructuring, there must be stakeholder agreement on the revitalization plan and performance related financial restructuring. Illustrative eligibility criteria are presented below: PACS Financial Margin > 50% of operating costs Recovery > 60% DCCBs Deposit erosion < 25% of total deposits Further, in every case taken up for restructuring, the business plan must show prima facie possibility of profitable operations in 2-4 years time, given realistic assumptions of business growth and cost profile. A. PACS

We need to make a distinction between the two types of PACS currently operating in Rajasthan:

PACS with only members’ capital, state government capital and DCCB borrowing as sources of funds. Here, once reliable financial statements are available the following approach may be adopted.

o Write off bad loans, assess loans at risk, make provisions, cleanse balance sheet of other unrealizable assets and assess total amounts receivable from Government as well as total accumulated losses

o Adjust any free reserves and accumulated profits against accumulated losses

o Write down capital of individuals whose loans have to be written off/ provided for and adjust accumulated losses



October 2005 Page 3

o Write down state government share capital and adjust accumulated losses, balances if any to be returned1

o Amounts to be received from Government (subsidies, waiver related payments, fees, commissions, etc.) to be released by Government (Amount to be included in package and released as per a time bound plan).

o Balance accumulated losses to be addressed by phased write off of loans by DCCB based on performance benchmarks. Any write-off of such loans in the books of DCCBs should be accompanied by proportionate reduction in share capital invested in DCCB.

PACS with deposits

o PACS with large business and substantial deposits should be candidates for licensing by RBI (we are not aware of any such PACS in Rajasthan)

o PACS with small amounts of business including deposits cannot be licensed. These PACS should be required to transfer the entire deposits to DCCBs so that deposits can be with regulated institutions.2

o Any erosion in deposits to be made good in the manner above i.e. writing off of bad loans by DCCBs.

We present illustrative restructuring results for two typical PACS3, one where

NPA levels are low enough for loan losses to be offset with share capital and reserves available with the PACS and another one where NPA levels are such that a write off/ provision is necessary at the DCCB level.

1 All write offs and infusions required from Government sources as well as required repayments of capital should be pooled together. 2 DCCBs will of course need to find the mechanisms to service such depositors regulatory. We have recommended fixed time extension counters at the PACS for this purpose. 3 No aggregate level forecast has been carried out as PACS are not envisaged to be financial intermediaries in the future.



October 2005 Page 4

PACS-I Adjustment of reserves

B/Sheet after adjusting for reserves

Adjustment for NPAs & unrealisable assets

Adjusted B/sheet

Adjustment of defaulters Share Capital

Adjusted B/sheet

Particulars -2002-031 2 3 4 5 6 7 8

INR '000I) Sources of FinanceA) Paid up Share Capital 533 533 533 (23) 510B) Deposits 2122 2122 2122 2122C) Borrowings 1383 1383 1383 1383D) Reserves -Own Funds 6 (6) 0 0 0E) Other Reserves 2 (2) 0 0 0F) Imbalance 0 0 0 0G) Accumulated Profit 696 (360) 337 (360) (23) 23 0H) Other Liabilities & Provisions 308 308 308 308Total 5049 4682 4322 4322

III) Loans & Advances

A) Outstanding Amount 1863 1863 (233) 1630 1630B) Cash & Bank 2235 2235 2235 2235C) ImbalanceD) Investments 186 186 186 186E) Other Assets 398 398 (127) 271 271F) Accumulated Losses 367 (367) 0 0 0Total 5049 4682 4322 4322

Notes: Column-1& 2 together show a balance sheet of a typical PACS which has accumulated profits. Column-3: Shows adjustment of the accumulated profits and reserve funds against the accumulated losses Column-4: Shows the balance sheet after adjustment of accumulated profits and reserves Column-5: Shows adjustment made to: (a) the advances outstanding, the assumption being that NPAs constitute 25% of the loans o/s and provision to the extent of 50% of the NPAs is required (b) adjustment required on account of other unrealizable assets appearing in the balance sheet Column-6: Shows the adjusted balance sheet after adjustment on account of provision required in respect of NPAs and other unrealizable assets Column-7: Shows the adjustment made to accumulated losses by write-down of the defaulting borrowers' share capital. Column-8: Shows the adjusted balance sheet after writing off the defaulting borrowers' share capital. As can be seen, this enables the PACS to wipe off its accumulated losses, including losses due to additional provisioning. No write-off/ provisioning is required at the DCCB level. The PACS will need to return state government share capital for which it appears to have cash.



October 2005 Page 5

PACS-IIAdjustment of reserves

B/Sheet after adjusting for reserves

Adjustment for NPAs & unrealisable assets

Adjusted B/sheet

Adjustment of defaulters Share Capital

Adjusted B/sheet

W/off of State Govt Share Capital

Adjusted B/Sheet

Particulars -2002-031 2 3 4 5 6 7 8 9 10

INR '000I) Sources of FinanceA) Paid up Share Capital 614 614 614 (240) 375 (135) 240B) Deposits 56 56 56 56 56C) Borrowings 3350 3350 3350 3350 3350D) Reserves -Own Funds 120 (120) 0 0 0 0E) Other Reserves 8 (8) 0 0 0 0F) Imbalance 0 0 0 0 0G) Accumulated Profit/(Loss) 81 (308) (227) (1012) (1239) 240 (1000) 135 (865)H) Other Liabilities & Provisions 373 373 373 373 373Total 4601 4165 3153 3153 3153

III) Loans & Advances

A) Outstanding Amount 2763 2763 (691) 2072 2072 2072B) Cash & Bank 108 108 108 108 108C) Imbalance 0 0 0 0D) Investments 340 340 340 340 340E) Other Assets 954 954 (321) 633 633 633F) Accumulated Losses 436 (436) 0 0 0 0Total 4601 4165 3153 3153 3153

Notes: Column-1& 2 together show a balance sheet of a typical PACS which has accumulated losses on the higher side. Column -3: Shows adjustment of the reserve funds against the accumulated losses Column -4: Shows the balance sheet after adjustment of reserves Column -5: Shows adjustment made to: (a) the advances outstanding, the assumption being that NPAs constitute 50% of the loans o/s and provision to the extent of 50% of the NPAs is required (b) adjustment required on account of other unrealizable assets appearing in the balance sheet Column-6: Shows the adjusted balance sheet after adjustment on account of provision required in respect of NPAs and other unrealizable assets Column -7: Shows the adjustment made to accumulated losses by write-down of the defaulting borrowers' share capital. Column-8: Shows the adjusted balance sheet after writing off the defaulting borrowers' share capital Column-9: Shows the adjustment made to accumulated losses by write-down of the State Government's Share Capital Column-10: Shows that despite all the above adjustments, the PACS balance sheet still shows accumulated losses. This implies that the PACS's borrowings would need to be adjusted/ written down to the extent of Rs 865,000 with consequent write-off/ provisioning at the DCCB level.



October 2005 Page 6

B. DCCBs For DCCBs, we propose the following approach:

Rewrite balance sheet after cleansing of PACS balance sheets, write off imbalances, write-off/ provide bad debts in non-PACS portfolio, and assess receivables from Government and the quantum of accumulated losses after full provisioning and write offs. To restructure, o Adjust any free reserves and accumulated profits against accumulated

losses o Write down share capital held by PACS whose borrowings have had to be

written off and adjust accumulated losses of DCCB o Assess amounts to be received from GoI/ GoR by way of subsidies,

waivers, invoked guarantees. Such amounts to be included in overall package and released in a time bound manner as a part of the financial restructuring package.

o Write off loans from SCB to the extent of ratio of outstanding state government guarantees to NABARD for borrowings by RSCB in proportion to the total accumulated losses to total outstanding loans

o NABARD to receive the guarantee amount as a part of the financial package and use it to set off outstanding loans to RSCB which, in turn, will write off loans to the respective DCCB(s)

o Write down state government share capital in proportion to the ratio that accumulated losses bear to outstanding loans, balance if any to be returned to GoR

o Balance through step up coupon bonds which allow DCCB to earn a spread over a period of time.

C. RSCB

Rewrite balance sheet after addressing DCCB asset erosion issues and against state government guarantees

There should be no further erosion in these balance sheets if RSCB is treated as pass through and DCCBs balance sheet have been cleansed except to the extent of those DCCBs that have to be closed down

For the restructuring DCCBs, SCBs will be pass through for the step up coupon bonds, keeping a small service fee. For the DCCBs to be closed down, SCB balance sheet to take a hit and to be supported in the same manner as DCCB.

DCCB Financial Model

We have attempted a forecast at DCCB aggregate level taking into account

provisioning required for the PACS portfolio as also non-PACS portfolio at DCCB. No separate exercise has been carried out for RSCB as the



October 2005 Page 7

provisions available at the SCB level are considered adequate once DCCBs have been recapitalized.

In making the projections, we have assumed substantial improvement in

operating performance especially in regard to new advances.



October 2005 Page 8

Key Operating Assumptions

• 10 year projection period (FY2005 to FY2014) • Advances to grow by 25% per annum during FY2005 to FY2007, followed by 20% per annum

for the remaining projection period • Deposits to grow by 10% per annum during FY2005 to FY2007, followed by 25% per annum

for the remaining projection period • Gradual decline from current levels in investments, cash and bank balance and interest

receivable as a % of advances outstanding. In other words, gradual increase in the proportion of productive assets

• Yield on Advances and Investments to decline from the current levels to 10.5% and 7.5% respectively over the next few years and then to stabilize

• Similarly, Cost of Borrowings and Deposits to decline from current levels to 6% and 5% respectively over the next few years and then to stabilize

• Step wise decline in occurrence of NPAs – from 10% in FY2005 to 5% in FY2014 • Salary cost and other expenses to grow but at a slower rate than the growth of advances • Significant yearly growth in non-fund income through the projection period • Step up coupon bonds to be interest free for the first 3 years. Afterwards, rate of interest to

increase by 1% per annum. Bonds to be repayable by end of projection period.

Based on the methodology discussed above, we forecast financing requirements for restructuring PACS and DCCBs at Rs 5,356 million to Rs 6,716 million comprising additional provisioning and forecast losses as follows:

Rs million Low Case High CaseRequirement of Funds

Existing Accumulated Losses 0 0Additional Provisioning 3,833 5,057 Forecast Losses 1,080 1,240 GoR Share Capital Return 443 419

Total 5,356 6,716 Means of Financing

State Govt Guarantee 739 914 Cash Grant 2,087 2,691 Step up Coupon Bonds 2,530 3,110

Total 5,356 6,716

It must be emphasized that this model needs to be revisited once a thorough audit of the CCS has been carried out and assets at risk are better known. It must also be mentioned that in carrying out this analysis, we have not used NABARD guidelines on restructured loans. If these guidelines are used, the assessed provisioning will be smaller, but will not reflect the portfolio risk.

On the other hand, it must be noted that at the aggregate level, the accumulated losses of the loss making DCCBs are partly offset by the accumulated profits of the profit making DCCBs. In practice, this may not happen, and to that extent, the assistance required could be larger.



October 2005 Page 9

We recommend postponing financial restructuring until efforts on institutional restructuring are well under way. The financial restructuring process should commence only when the CCS begins to demonstrate efficient implementation of the new structure; this should also be associated with stringent conditions to protect public money against misuse. We would however recommend that all DCCBs that have developed acceptable revitalization plans linked to performance benchmarks be assisted to meet Section 11(1) requirements to enable the regulator to treat them as complying banks as soon as feasible. As of March 31, 2003, 4 DCCBs (Ajmer, Bundi, Udaipur and Jaisalmer) were not in compliance with Section 11(1) of B. R. Act (AACS). With a thorough audit and application of generally accepted prudential norms, this number could go up but not all such DCCBs may be candidates for revitalization.




All Rajasthan DCCBs (Rs million) Actuals ProjectionsFinancial Year FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14

Assumptions

Growth rate of Advances 17% 20% 9% 25% 25% 25% 20% 20% 20% 20% 20% 20% 20%Growth rate of Deposits 11% 10% 10% 10% 10% 10% 20% 25% 25% 25% 25% 25% 25%Share Capital Contribution 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5%Investments as a % of Advances 41% 40% 35% 34% 34% 33% 32% 31% 30% 30% 30% 30% 30% 30%Cash and Bank Balance as % of Advances 11% 12% 10% 9% 9% 8% 7% 6% 5% 5% 5% 5% 5% 5%Interest Receivable as % of Advances 11% 11% 9% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8%Yield on Advances 14.0% 13.0% 12.5% 12.0% 11.5% 11.0% 10.5% 10.5% 10.5% 10.5% 10.5% 10.5% 10.5%Occurrence of NPAs among fresh advances 10.0% 6.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%Provisioning Requirement for fresh NPAs 5.0% 3.0% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5%Yield on Investments 10.5% 9.3% 8.6% 8.0% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5%Cost of Deposits 8.2% 7.9% 6.8% 6.5% 6.0% 5.5% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%Cost of Borrowings 8.3% 7.9% 7.3% 7.0% 6.8% 6.5% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%Growth in Salary Cost 3.5% 7.1% 22.5% 15.0% 15.0% 15.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%Growth in Other Expenses 0.7% 0.6% 0.6% 0.5% 10.0% 10.0% 10.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%Increase in non-fund income -5% 0% 0% 0% 35% 35% 30% 30% 30% 30% 30% 30% 30%Amount of Step-up Coupon Bonds 2,087 Drawdown Profile 0% 0% 0% 0% 0% 25% 50% 25% 0% 0% 0% 0% 0% 0%Repayment Profile 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 25% 50%Opening Balance - - - - - - 522 1,565 2,087 2,087 2,087 2,087 2,087 1,565 Drawdown - - - - - 522 1,044 522 - - - - - - Repayment - - - - - - - - - - - - 522 1,044 Closing Balance - - - - - 522 1,565 2,087 2,087 2,087 2,087 2,087 1,565 522 Average Balance - - - - - 261 1,044 1,826 2,087 2,087 2,087 2,087 1,826 1,044 Rate of Interest on Step-up Coupon Bonds 0.0% 0.0% 0.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0%Recovery of Existing Advances 40.0% 30.0% 19.7%Case Selected Lower End 1,080 Total Provision Required 22.8% 5,164 Guarantee Available 5,356 5,356

Less: Recovery Through Invoked Guarantee - Relating to.. Amt o/s 3,833 739 Less: Recovery Through Guarantee 22.8% 739 1995 1.8 1,080 2,087

Effective Total Provision Required 19.5% 4,425 1995 0.0 443 2,530 Provision Already Made 1,331 1999 122.4 Balance Provision Required 13.7% 3,094 2001 124.0

Less: Recovery thru Cash Grant 2,087 2001 416.3 Effective Additional Provision Required 10.3% 2,338 2001 61.4

2003 2,386.0 Reduction in Share Capital 13.7% 253 Ctn Cmplx 130.0 Additonal Provision Required 3.3% 755 Total 3,241.9

FY05 FY06 FY07 FY08 Phasing - 755 - -




All Rajasthan DCCBs Actuals ProjectionsFinancial Year FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 Proforma Balance Sheet

Sources of FundsPaid up Share Capital 1,554 1,717 1,786 1,849 2,047 2,042 2,352 2,662 3,033 3,479 4,014 4,656 5,427 6,352

of which, Government 510 513 513 513 513 - - - - - - - - - of which, Coops and Others 1,044 1,204 1,273 1,336 1,534 2,042 2,352 2,662 3,033 3,479 4,014 4,656 5,427 6,352

Reserves and Provisions 2,001 2,276 2,688 2,977 3,713 5,325 6,373 7,641 9,176 11,028 13,263 15,957 19,201 23,105 Statutory Reserves 47 64 64 64 64 64 64 64 64 64 64 64 64 64 Agri. Stab Fund 30 33 33 33 Bad and Doubtful Debts Reserve 586 630 1,042 1,331 2,067 3,679 4,727 5,996 7,530 9,382 11,617 14,311 17,555 21,459 Other Reserves 612 692 692 692 692 692 692 692 692 692 692 692 692 692 Provision for Overdue Interest 726 857 857 857 857 857 857 857 857 857 857 857 857 857

Principal State Partnership Fund 448 449 449 449 449 449 449 449 449 449 449 449 449 449 Fund Requirement 21,351 24,510 27,781 30,693 38,509 47,028 57,206 67,137 79,334 95,101 113,858 136,158 163,182 195,704 Deposits Outstanding 15,257 16,944 18,594 20,507 22,558 24,814 27,295 32,754 40,943 51,179 63,974 79,967 99,959 124,948 Borrowings Outstanding 6,094 7,567 9,187 10,186 15,951 22,215 29,911 34,383 38,391 43,923 49,884 56,191 63,224 70,756 Interest Payable 243 218 218 218 218 218 218 218 218 218 218 218 218 218 Other Liabilities 705 850 850 850 850 850 850 850 850 850 850 850 850 850 Step-up Coupon Bonds 1 - - - - - 522 1,565 2,087 2,087 2,087 2,087 2,087 1,565 522 Step-up Coupon Bonds 2 (GoR Sh Cap) 443 443 443 443 443 443 443 443 443 Accumulated Profits 220 - - 261 - - - - - - - - 503 1,975 Total Sources 26,522 30,021 33,772 37,298 45,786 56,878 69,457 81,488 95,590 113,656 135,183 160,818 191,838 229,618

Uses of FundsCash and Bank Balance 1,632 2,019 2,019 2,019 2,548 2,831 3,097 3,185 3,185 3,822 4,587 5,504 6,605 7,926 Investments 6,070 6,863 7,300 7,774 9,626 11,679 14,156 16,457 19,111 22,933 27,520 33,024 39,629 47,555 Principal State Partnership Fund 448 449 449 449 449 449 449 449 449 449 449 449 449 449 Advances 14,736 17,291 20,703 22,650 28,313 35,391 44,239 53,087 63,704 76,445 91,734 110,080 132,096 158,516

Existing Advances 22,650 13,590 6,795 2,338 2,338 2,338 2,338 2,338 2,338 2,338 2,338 Fresh Advances - 14,723 28,596 41,901 50,749 61,366 74,107 89,396 107,742 129,758 156,178

Interest Receivable 1,659 1,914 1,914 1,914 2,265 2,831 3,539 4,247 5,096 6,116 7,339 8,806 10,568 12,681 Fixed Assets 142 115 115 115 115 115 115 115 115 115 115 115 115 115 Other Assets 796 872 1,075 2,377 2,377 2,377 2,377 2,377 2,377 2,377 2,377 2,377 2,377 2,377 Accumulated Losses 1,040 498 197 - 93 1,205 1,486 1,572 1,553 1,400 1,064 463 - - Total Uses 26,522 30,021 33,772 37,298 45,786 56,878 69,457 81,488 95,590 113,656 135,183 160,818 191,838 229,618




All Rajasthan DCCBs Actuals ProjectionsFinancial Year FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 Proforma P&L Account

Income 883 2,491 3,877 4,864 5,886 7,112 8,584 10,350 12,469 15,012 Interest on Advances 1,929 2,246 2,460 2,717 2,689 3,181 3,781 4,368 5,217 6,234 7,454 8,917 10,671 12,774

Interest on Existing Advances 1,894 903 245 - - - - - - - Interest on Fresh Advances 795 2,277 3,536 4,368 5,217 6,234 7,454 8,917 10,671 12,774

Interest on Deposits and Investments 664 677 661 645 696 799 969 1,148 1,334 1,577 1,892 2,270 2,724 3,269 Non-Fund Income 86 82 82 82 82 110 149 194 252 328 426 554 720 936

Total Income 2,679 3,005 3,203 3,444 3,467 4,090 4,899 5,710 6,802 8,138 9,772 11,741 14,115 16,979 Expenses

Salary 409 423 453 556 639 735 845 930 1,023 1,125 1,237 1,361 1,497 1,647 Other Expenses 106 107 122 120 132 145 160 168 176 185 194 204 214 225 Reserves 363 245 259 262 736 1,612 1,048 1,269 1,534 1,853 2,235 2,694 3,244 3,904

Provisions for Existing Portfolio - 755 - - - - - - - - Provisions for Fresh Advances Portfolio 736 858 1,048 1,269 1,534 1,853 2,235 2,694 3,244 3,904

Bad and Doubtful Debts Reserve 118 80 412 289 736 1,612 1,048 1,269 1,534 1,853 2,235 2,694 3,244 3,904 Overdue Interest Reserve 184 115 - - - - - - - - - - - - Other Reserves 61 51 - - - - - - - - - - - -

Interest on Deposits 1,226 1,315 1,407 1,338 1,400 1,421 1,433 1,501 1,842 2,303 2,879 3,599 4,498 5,623 Interest on Borrowings 480 564 660 711 915 1,288 1,694 1,929 2,183 2,469 2,814 3,182 3,582 4,019 Interest on Step-up Coupon Bonds 1 - - - - 21 42 63 83 91 63 Interest on Step-up Coupon Bonds 2 - - - 4 9 13 18 22 27

Total Expenses 2,584 2,654 2,902 2,986 3,822 5,202 5,179 5,796 6,784 7,985 9,435 11,140 13,149 15,507 Net Profit / (Loss) 95 351 301 458 (355) (1,112) (280) (87) 19 153 337 600 966 1,472 Net Profit / (Loss) excl. additional prov. (355) (357) (280) (87) 19 153 337 600 966 1,472

Key ResultsAccumulated Losses Wiped out? FALSE FALSE FALSE TRUE FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE TRUE TRUEYear in which Accumulated Losses Wiped out FALSE FALSE TRUE FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE TRUE FALSEProfitability Sustainable? TRUE




All Rajasthan DCCBs Actuals ProjectionsFinancial Year FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 Margins

Return on Funds 9.90% 9.36% 9.01% 8.62% 8.60% 8.57% 8.55% 8.53% 8.51% 8.49%Cost of Funds (incl. Step-up Coupon Bonds) 6.69% 6.30% 5.88% 5.36% 5.37% 5.39% 5.40% 5.40% 5.39% 5.38%Margin 3.21% 3.07% 3.13% 3.26% 3.23% 3.18% 3.15% 3.13% 3.12% 3.12%

Return on Funds 9.90% 9.36% 9.01% 8.62% 8.60% 8.57% 8.55% 8.53% 8.51% 8.49%Cost of Funds (excl. Step-up Coupon Bonds) 6.69% 6.33% 6.00% 5.52% 5.50% 5.47% 5.45% 5.42% 5.40% 5.37%Margin 3.21% 3.03% 3.01% 3.11% 3.10% 3.10% 3.10% 3.10% 3.11% 3.12%

Average Working Capital 41,542 51,332 63,167 75,472 88,539 104,623 124,420 148,001 176,328 210,728 Return on Working Capital 8.15% 7.75% 7.52% 7.31% 7.40% 7.47% 7.51% 7.56% 7.60% 7.61%Cost of Wkg Cap (incl Step-up Coupon Bonds) 5.57% 5.28% 4.95% 4.54% 4.57% 4.60% 4.63% 4.64% 4.63% 4.61%Financial Margin 2.58% 2.47% 2.57% 2.76% 2.83% 2.86% 2.89% 2.92% 2.96% 3.01%Other Income to Working Capital 0.20% 0.22% 0.24% 0.26% 0.28% 0.31% 0.34% 0.37% 0.41% 0.44%Salary Cost to Wkg Capital 1.54% 1.43% 1.34% 1.23% 1.15% 1.08% 0.99% 0.92% 0.85% 0.78%Other Expenses to Wkg Capital 0.32% 0.28% 0.25% 0.22% 0.20% 0.18% 0.16% 0.14% 0.12% 0.11%Operating Margin 0.92% 0.98% 1.21% 1.57% 1.76% 1.93% 2.08% 2.24% 2.40% 2.56%Risk Cost to Wkg Cap (Current yr advances) 1.77% 1.67% 1.66% 1.68% 1.73% 1.77% 1.80% 1.82% 1.84% 1.85%Net Margin -0.85% -0.70% -0.44% -0.11% 0.03% 0.15% 0.28% 0.42% 0.56% 0.71%




We also made similar projections for two individual DCCBs, one of which is reporting current and accumulated profits (DCCB ‘A’) and the other is reporting current and accumulated losses (DCCB ‘B’). While the detailed projections are provided at Exhibit A, we present below a summary of the key results.

INR Million DCCB “A” DCCB “B”

Advances Outstanding 528 221Advances as % of Working Funds 67% 55%Transaction Cost as % of Advances 3.8%4 2.7%Accumulated Losses 0 52Additional Provisioning Requirement5 (lower end) 14% 25%Additional Provisioning Requirement (upper end) 17% 30%Guarantee in proportion to DCCB Advances 14% 14%Key Results (lower end provisioning) Assistance in the form of • Payment against guarantees • Cash Grant to fund additional provisioning and

forecast losses • Step up coupon bonds to fund additional

provisioning and forecast losses • Cash Grant to fund existing accumulated losses • Step up coupon bonds to fund repayment of GoR

share capital

21

57

570

13

15

32

3252

7Whether DCCB turns profitable Yes Yes Whether Accumulated Losses are wiped out and first year of accumulated profits

Yes (FY14) Yes (FY14)

Key Results (higher end provisioning) Assistance in the form of • Payment against guarantees • Cash Grant to fund additional provisioning and

forecast losses • Step up coupon bonds to fund additional

provisioning and forecast losses • Cash Grant to fund existing accumulated losses • Step up coupon bonds to fund repayment of GoR

share capital

23

66

660

13

17

39

3952

6Whether DCCB turns profitable Yes YesWhether Accumulated Losses are wiped out and first year of accumulated profits

Yes (FY14) Yes (FY14)

4 In this particular DCCB, transaction cost as proportion of advances is disproportionately high. It

is assumed that due to institutional development and other performance improvement measures, transaction cost as a proportion of working capital will reduce at a faster pace in this DCCB compared to the state average.

5 After adjusting for existing provisions

Rajasthan Short Term Credit Cooperative Structure


Assumptions

Growth rate of Advances 17% 20% 9% 25% 25% 25% 20% 20% 20% 20% 20% 20% 20%Growth rate of Deposits 11% 10% 10% 10% 10% 10% 20% 25% 25% 25% 25% 25% 25%Share Capital Contribution 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5%Investments as a % of Advances 41% 40% 35% 34% 34% 33% 32% 31% 30% 30% 30% 30% 30% 30%Cash and Bank Balance as % of Advances 11% 12% 10% 9% 9% 8% 7% 6% 5% 5% 5% 5% 5% 5%Interest Receivable as % of Advances 11% 11% 9% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8%Yield on Advances 14.0% 13.0% 12.5% 12.0% 11.5% 11.0% 10.5% 10.5% 10.5% 10.5% 10.5% 10.5% 10.5%Occurrence of NPAs among fresh advances 10.0% 6.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%Provisioning Requirement for fresh NPAs 5.0% 3.0% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5%Yield on Investments 10.5% 9.3% 8.6% 8.0% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5%Cost of Deposits 8.2% 7.9% 6.8% 6.5% 6.0% 5.5% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%Cost of Borrowings 8.3% 7.9% 7.3% 7.0% 6.8% 6.5% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%Growth in Salary Cost 3.5% 7.1% 22.5% 15.0% 15.0% 15.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%Growth in Other Expenses 0.7% 0.6% 0.6% 0.5% 10.0% 10.0% 10.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%Increase in non-fund income -5% 0% 0% 0% 35% 35% 30% 30% 30% 30% 30% 30% 30%Amount of Step-up Coupon Bonds 2,087 Drawdown Profile 0% 0% 0% 0% 0% 25% 50% 25% 0% 0% 0% 0% 0% 0%Repayment Profile 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 25% 50%Opening Balance - - - - - - 522 1,565 2,087 2,087 2,087 2,087 2,087 1,565 Drawdown - - - - - 522 1,044 522 - - - - - - Repayment - - - - - - - - - - - - 522 1,044 Closing Balance - - - - - 522 1,565 2,087 2,087 2,087 2,087 2,087 1,565 522 Average Balance - - - - - 261 1,044 1,826 2,087 2,087 2,087 2,087 1,826 1,044 Rate of Interest on Step-up Coupon Bonds 0.0% 0.0% 0.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0%Recovery of Existing Advances 40.0% 30.0% 19.7%Case Selected Lower End 1,080 Total Provision Required 22.8% 5,164 Guarantee Available 5,356 5,356

Less: Recovery Through Invoked Guarantee - Relating to.. Amt o/s 3,833 739 Less: Recovery Through Guarantee 22.8% 739 1995 1.8 1,080 2,087

Total Provision Required after Guarantee inflow 19.5% 4,425 1995 0.0 443 2,530 Provision Already Made 1,331 1999 122.4 Balance Provision Required 13.7% 3,094 2001 124.0

Less: Recovery thru Cash Grant 2,087 2001 416.3 Total Provision Required after Gtee and Cash Grant inflow 10.3% 2,338 2001 61.4

2003 2,386.0 Reduction in Share Capital 13.7% 253 Ctn Cmplx 130.0 Additonal Provision Required after Gtee, Cash Grant, Existing Provisions and reduction in Share Capital 3.3% 755 Total 3,241.9 -

#REF! #REF! #REF! #REF!Phasing of Provisioning - 755 - - Phasing of Cash Funding of Accumulated Losses - - - -


All Rajasthan DCCBs (Rs million) Actuals ProjectionsFinancial Year FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 Proforma Balance Sheet

Sources of FundsPaid up Share Capital 1,554 1,717 1,786 1,849 2,047 2,042 2,352 2,662 3,033 3,479 4,014 4,656 5,427 6,352

of which, Government 510 513 513 513 513 - - - - - - - - - of which, Coops and Others 1,044 1,204 1,273 1,336 1,534 2,042 2,352 2,662 3,033 3,479 4,014 4,656 5,427 6,352

Reserves and Provisions 2,001 2,276 2,688 2,977 3,713 5,325 6,373 7,641 9,176 11,028 13,263 15,957 19,201 23,105 Statutory Reserves 47 64 64 64 64 64 64 64 64 64 64 64 64 64 Agri. Stab Fund 30 33 33 33 Bad and Doubtful Debts Reserve 586 630 1,042 1,331 2,067 3,679 4,727 5,996 7,530 9,382 11,617 14,311 17,555 21,459 Other Reserves 612 692 692 692 692 692 692 692 692 692 692 692 692 692 Provision for Overdue Interest 726 857 857 857 857 857 857 857 857 857 857 857 857 857

Principal State Partnership Fund 448 449 449 449 449 449 449 449 449 449 449 449 449 449 Fund Requirement 21,351 24,510 27,781 30,693 38,509 47,028 57,206 67,137 79,334 95,101 113,858 136,158 163,182 195,704 Deposits Outstanding 15,257 16,944 18,594 20,507 22,558 24,814 27,295 32,754 40,943 51,179 63,974 79,967 99,959 124,948 Borrowings Outstanding 6,094 7,567 9,187 10,186 15,951 22,215 29,911 34,383 38,391 43,923 49,884 56,191 63,224 70,756 Interest Payable 243 218 218 218 218 218 218 218 218 218 218 218 218 218 Other Liabilities 705 850 850 850 850 850 850 850 850 850 850 850 850 850 Step-up Coupon Bonds 1 - - - - - 522 1,565 2,087 2,087 2,087 2,087 2,087 1,565 522 Step-up Coupon Bonds 2 (GoR Sh Cap) 443 443 443 443 443 443 443 443 443 Funding for Accumulated Losses - - - - - - - - - - Accumulated Profits 220 - - 261 - - - - - - - - 503 1,975 Total Sources 26,522 30,021 33,772 37,298 45,786 56,878 69,457 81,488 95,590 113,656 135,183 160,818 191,838 229,618

Uses of FundsCash and Bank Balance 1,632 2,019 2,019 2,019 2,548 2,831 3,097 3,185 3,185 3,822 4,587 5,504 6,605 7,926 Investments 6,070 6,863 7,300 7,774 9,626 11,679 14,156 16,457 19,111 22,933 27,520 33,024 39,629 47,555 Principal State Partnership Fund 448 449 449 449 449 449 449 449 449 449 449 449 449 449 Advances 14,736 17,291 20,703 22,650 28,313 35,391 44,239 53,087 63,704 76,445 91,734 110,080 132,096 158,516

Existing Advances 22,650 13,590 6,795 2,338 2,338 2,338 2,338 2,338 2,338 2,338 2,338 Fresh Advances - 14,723 28,596 41,901 50,749 61,366 74,107 89,396 107,742 129,758 156,178

Interest Receivable 1,659 1,914 1,914 1,914 2,265 2,831 3,539 4,247 5,096 6,116 7,339 8,806 10,568 12,681 Fixed Assets 142 115 115 115 115 115 115 115 115 115 115 115 115 115 Other Assets 796 872 1,075 2,377 2,377 2,377 2,377 2,377 2,377 2,377 2,377 2,377 2,377 2,377 Accumulated Losses 1,040 498 197 - 93 1,205 1,486 1,572 1,553 1,400 1,064 463 - - Total Uses 26,522 30,021 33,772 37,298 45,786 56,878 69,457 81,488 95,590 113,656 135,183 160,818 191,838 229,618

TRUE TRUE TRUE TRUE TRUE TRUE TRUE TRUE TRUE TRUE TRUE TRUE TRUE TRUEFinancial Year FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 Proforma P&L Account

Income 883 2,491 3,877 4,864 5,886 7,112 8,584 10,350 12,469 15,012 Interest on Advances 1,929 2,246 2,460 2,717 2,689 3,181 3,781 4,368 5,217 6,234 7,454 8,917 10,671 12,774

Interest on Existing Advances 1,894 903 245 - - - - - - - Interest on Fresh Advances 795 2,277 3,536 4,368 5,217 6,234 7,454 8,917 10,671 12,774

Interest on Deposits and Investments 664 677 661 645 696 799 969 1,148 1,334 1,577 1,892 2,270 2,724 3,269 Non-Fund Income 86 82 82 82 82 110 149 194 252 328 426 554 720 936

Total Income 2,679 3,005 3,203 3,444 3,467 4,090 4,899 5,710 6,802 8,138 9,772 11,741 14,115 16,979



ExpensesSalary 409 423 453 556 639 735 845 930 1,023 1,125 1,237 1,361 1,497 1,647 Other Expenses 106 107 122 120 132 145 160 168 176 185 194 204 214 225 Reserves 363 245 259 262 736 1,612 1,048 1,269 1,534 1,853 2,235 2,694 3,244 3,904

Provisions for Existing Portfolio - 755 - - - - - - - - Provisions for Fresh Advances Portfolio 736 858 1,048 1,269 1,534 1,853 2,235 2,694 3,244 3,904

Bad and Doubtful Debts Reserve 118 80 412 289 736 1,612 1,048 1,269 1,534 1,853 2,235 2,694 3,244 3,904 Overdue Interest Reserve 184 115 - - - - - - - - - - - - Other Reserves 61 51 - - - - - - - - - - - -

Interest on Deposits 1,226 1,315 1,407 1,338 1,400 1,421 1,433 1,501 1,842 2,303 2,879 3,599 4,498 5,623 Interest on Borrowings 480 564 660 711 915 1,288 1,694 1,929 2,183 2,469 2,814 3,182 3,582 4,019 Interest on Step-up Coupon Bonds 1 - - - - 21 42 63 83 91 63 Interest on Step-up Coupon Bonds 2 - - - 4 9 13 18 22 27

Total Expenses 2,584 2,654 2,902 2,986 3,822 5,202 5,179 5,796 6,784 7,985 9,435 11,140 13,149 15,507 Net Profit / (Loss) 95 351 301 458 (355) (1,112) (280) (87) 19 153 337 600 966 1,472 Net Profit / (Loss) excl. additional prov. (355) (357) (280) (87) 19 153 337 600 966 1,472

Key ResultsAccumulated Losses Wiped out? FALSE FALSE FALSE TRUE FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE TRUE TRUEYear in which Accumulated Losses Wiped out FALSE FALSE TRUE FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE TRUE FALSEProfitability Sustainable? TRUE

Financial Year FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 Margins

Return on Funds 9.90% 9.36% 9.01% 8.62% 8.60% 8.57% 8.55% 8.53% 8.51% 8.49%Cost of Funds (incl. Step-up Coupon Bonds) 6.69% 6.30% 5.88% 5.36% 5.37% 5.39% 5.40% 5.40% 5.39% 5.38%Margin 3.21% 3.07% 3.13% 3.26% 3.23% 3.18% 3.15% 3.13% 3.12% 3.12%

Return on Funds 9.90% 9.36% 9.01% 8.62% 8.60% 8.57% 8.55% 8.53% 8.51% 8.49%Cost of Funds (excl. Step-up Coupon Bonds) 6.69% 6.33% 6.00% 5.52% 5.50% 5.47% 5.45% 5.42% 5.40% 5.37%Margin 3.21% 3.03% 3.01% 3.11% 3.10% 3.10% 3.10% 3.10% 3.11% 3.12%

Average Working Capital 41,495 50,683 61,822 73,944 86,976 103,146 123,188 147,237 176,097 210,728 Return on Working Capital 8.16% 7.85% 7.68% 7.46% 7.53% 7.57% 7.59% 7.60% 7.61% 7.61%Cost of Wkg Cap (incl Step-up Coupon Bonds) 5.58% 5.35% 5.06% 4.64% 4.65% 4.67% 4.67% 4.66% 4.64% 4.61%Financial Margin 2.58% 2.51% 2.63% 2.82% 2.88% 2.91% 2.91% 2.94% 2.97% 3.01%Other Income to Working Capital 0.20% 0.22% 0.24% 0.26% 0.29% 0.32% 0.35% 0.38% 0.41% 0.44%Salary Cost to Wkg Capital 1.54% 1.45% 1.37% 1.26% 1.18% 1.09% 1.00% 0.92% 0.85% 0.78%Other Expenses to Wkg Capital 0.32% 0.29% 0.26% 0.23% 0.20% 0.18% 0.16% 0.14% 0.12% 0.11%Operating Margin 0.92% 0.99% 1.24% 1.60% 1.79% 1.95% 2.10% 2.25% 2.40% 2.56%Risk Cost to Wkg Cap (Current yr advances) 1.77% 1.69% 1.69% 1.72% 1.76% 1.80% 1.81% 1.83% 1.84% 1.85%Net Margin -0.86% -0.70% -0.45% -0.12% 0.03% 0.16% 0.28% 0.42% 0.56% 0.71%

Technical Assistance (TA) No. 4247-INDRural Finance Sector Restructuring and Development

Final Report Volume 1A: Rajasthan CCS - Annex 5 Exhibit A

Exhibit A to Annex 5 of Final Report

DCCB "A" Actuals ProjectionsFinancial Year FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14

Assumptions

Growth rate of Advances 21% 24% 9% 25% 25% 25% 20% 20% 20% 20% 20% 20% 20%Growth rate of Deposits 12% 38% 21% 10% 15% 20% 25% 25% 25% 25% 25% 25% 25%Share Capital Contribution 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5%

Investments as a % of Advances 24% 20% 19% 24% 25% 25% 25% 25% 25% 25% 25% 25% 25% 25%Cash and Bank Balance as % of Advances 3% 3% 3% 3% 3% 3% 3% 3% 3% 3% 3% 3% 3% 3%Interest Receivable as % of Advances 11% 11% 9% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8%

Yield on Advances 14.4% 14.5% 13.3% 12.0% 11.5% 11.0% 10.5% 10.5% 10.5% 10.5% 10.5% 10.5% 10.5%Occurrence of NPAs among fresh advances 10% 6% 5% 5% 5% 5% 5% 5% 5% 5%Provisioning Requirement for fresh NPAs 5% 3% 3% 3% 3% 3% 3% 3% 3% 3%Yield on Investments 10.3% 9.0% 7.7% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5%Cost of Deposits 6.5% 7.1% 6.5% 6.0% 5.5% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%Cost of Borrowings 9.4% 8.6% 8.6% 8.0% 7.5% 7.0% 6.5% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%

Growth in Salary Cost 2.4% 13.5% 50.3% 10.0% 10.0% 10.0% 5.0% 5.0% 5.0% 5.0% 10.0% 10.0% 10.0%Growth in Other Expenses 0.9% 0.8% 0.6% 0.6% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%

Increase in non-fund income -9% 0% 0% 0% 35% 35% 30% 30% 30% 30% 30% 30% 30%

Amount of Step-up Coupon Bonds 66.2 Drawdown Profile 0% 0% 0% 0% 0% 25% 50% 25% 0% 0% 0% 0% 0% 0%Repayment Profile 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 25% 50%

Opening Balance - - - - - - 17 50 66 66 66 66 66 50 Drawdown - - - - - 17 33 17 - - - - - - Repayment - - - - - - - - - - - - 17 33 Closing Balance - - - - - 17 50 66 66 66 66 66 50 17 Average Balance - - - - - 8 33 58 66 66 66 66 58 33

Rate of Interest on Step-up Coupon Bonds 0.0% 0.0% 0.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0%

Recovery of Existing Advances 40.0% 30.0% 16.0%

October 2005 Page 1




DCCB "A" Actuals ProjectionsImbalances 3 3 5 5 Total Advances of PACS 255 309 361 393 Total Overdue Loans of PACS 127 156 187 204 Required Provisioning for Overdue Loans 45.75% GteeProvision Required 93 75.62 Rescheduled Loans 37 32 115 115 14%Case Selected (1=Lower end, 2=Upper end) Upper End 45.0 Required Provisioning for Rescheduled Loans 20%Provision Required 23 Loans to entities other than PACS 135 Provisioning requirement of PACS (%) 30.6%

Assuming Similar Requirement for non-PACS loans 41 Total Provision Required 163 Less: Recovery Through Guarantee 30.6% 23 Total Provision Required after Guarantee inflow 26.5% 140 Provision Already Made 53 Balance Provision Required 16.5% 87 Less: Recovery Through Cash Grant 66.2 Total Provision Required after Gtee and Cash Grant inflow 14.0% 74

Reduction in Share Capital 16.5% 8 Additonal Provision Required after Gtee, Cash Grant, Existing Provisions and reduction in Share Capital 13 Funding of Existing Accumulated Losses -

FY05 FY06 FY07 FY08 Phasing of Provisioning 13

Phasing of Cash Funding of Accumulated Losses - - - -

October 2005 Page 2



Exhibit A to Annex 5 of Final ReportDCCB "A" Actuals ProjectionsFinancial Year FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 Proforma Balance Sheet

Sources of FundsPaid up Share Capital 35 40 47 47 52 37 44 51 60 70 83 98 116 137 of which, Government 15 15 15 15 15 - - - - - - - - - of which, Coops and Others 20 25 31 32 36 37 44 51 60 70 83 98 116 137 Reserves and Provisions 52 67 92 98 115 146 170 200 235 278 329 392 467 557 Statutory Reserves 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Agri. Stab Fund 0 0 0 0 Bad and Doubtful Debts Reserve 18 22 46 53 69 101 125 154 189 232 284 346 421 512 Other Reserves 10 12 12 12 12 12 12 12 12 12 12 12 12 12 Provision for Overdue Interest 24 33 33 33 33 33 33 33 33 33 33 33 33 33 Principal State Partnership Fund 11 11 11 11 11 11 11 11 11 11 11 11 11 11 Fund Requirement 364 418 536 580 758 960 1,186 1,422 1,716 2,066 2,481 2,975 3,580 4,312 Deposits Outstanding 172 193 266 321 353 406 487 609 761 951 1,189 1,486 1,858 2,322 Borrowings Outstanding 193 226 271 260 405 554 699 813 955 1,115 1,292 1,489 1,722 1,989 Interest Payable 2 2 2 2 2 2 2 2 2 2 2 2 2 2 Other Liabilities 25 37 37 37 37 37 37 37 37 37 37 37 37 37 Step-up Coupon Bonds 1 - - - - - 17 50 66 66 66 66 66 50 17 Step-up Coupon Bonds 2 (GoR Sh Cap) 13 13 13 13 13 13 13 13 13 Funding for Accumulated Losses - - - - - - - - - - Accumulated Profits 2 3 4 15 3 - - - - - - - - 21 Total Sources 493 579 730 791 977 1,223 1,513 1,802 2,140 2,543 3,022 3,594 4,275 5,107

Uses of FundsCash and Bank Balance 10 14 14 14 20 25 31 37 45 53 64 77 92 111 Investments 76 79 94 128 165 206 258 310 371 446 535 642 770 924 Principal State Partnership Fund 11 11 11 11 11 11 11 11 11 11 11 11 11 11 Advances 322 391 484 528 660 825 1,032 1,238 1,486 1,783 2,140 2,568 3,081 3,697 Existing Advances 528 317 158 74 74 74 74 74 74 74 74 Fresh Advances - 343 667 958 1,164 1,412 1,709 2,066 2,494 3,007 3,623 Interest Receivable 34 41 41 41 53 66 83 99 119 143 171 205 246 296 Fixed Assets 2 2 2 2 2 2 2 2 2 2 2 2 2 2 Other Assets 37 42 83 66 66 66 66 66 66 66 66 66 66 66 Accumulated Losses - - - - - 21 31 39 40 39 33 23 6 - Total Uses 493 579 729 790 977 1,223 1,513 1,802 2,140 2,543 3,022 3,594 4,275 5,107

TRUE TRUE TRUE TRUE TRUE TRUE TRUE TRUE TRUE TRUE

October 2005 Page 3



Exhibit A to Annex 5 of Final ReportDCCB "A" Actuals ProjectionsFinancial Year FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 Proforma P&L Account

IncomeInterest on Advances 43 51 63 67 60 72 86 100 120 144 172 207 247 297 Interest on Existing Advances 42 19 5 - - - - - - - Interest on Fresh Advances 19 53 82 100 120 144 172 207 247 297 Interest on Deposits and Investments 7 8 8 9 11 14 17 21 26 31 37 44 53 64 Non-Fund Income 2 2 2 2 2 2 3 4 5 6 8 10 13 17 Total Income 51 61 73 77 73 88 106 125 150 181 217 261 314 377 ExpensesSalary 10 10 11 17 18 20 22 23 25 26 27 30 33 36 Other Expenses 3 3 3 3 3 3 4 4 4 4 4 5 5 5 Reserves 13 15 20 6 16 32 24 29 35 43 52 62 75 91 Provisions for Existing Portfolio - 13 - - - - - - - - Provisions for Fresh Advances Portfolio 16 18 24 29 35 43 52 62 75 91 Bad and Doubtful Debts Reserve 1 5 25 7 16 32 24 29 35 43 52 62 75 91 Overdue Interest Reserve 11 10 - - - - - - - - - - - - Other Reserves 2 1 - - - - - - - - - - - - Interest on Deposits 11 12 16 19 20 21 22 27 34 43 54 67 84 105 Interest on Borrowings 13 20 21 23 26 36 44 49 53 62 72 83 96 111 Interest on Step-up Coupon Bonds 1 - - - - 1 1 2 3 3 2 Interest on Step-up Coupon Bonds 2 - - - - 0 0 0 1 1 1 Total Expenses 50 60 71 67 85 112 116 133 152 179 211 250 296 350 Net Profit / (Loss) 1 1 1 10 (12) (24) (10) (8) (2) 1 6 11 17 27 Net Profit / (Loss) excluding additional provisioning (12) (10) (10) (8) (2) 1 6 11 17 27

Key ResultsAccumulated Losses Wiped out? TRUE TRUE TRUE TRUE TRUE FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE TRUEYear in which Accumulated Losses Wiped out TRUE TRUE TRUE TRUE FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSEProfitability Sustainable? TRUE

October 2005 Page 4



Exhibit A to Annex 5 of Final ReportDCCB "A" Actuals ProjectionsFinancial Year FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 Margins

Return on Funds 9.65% 9.29% 8.94% 8.56% 8.55% 8.54% 8.53% 8.52% 8.51% 8.50%

Cost of Funds (including Step-up Coupon Bonds) 6.97% 6.53% 5.98% 5.62% 5.38% 5.43% 5.46% 5.47% 5.48% 5.47%Margin 2.68% 2.76% 2.95% 2.94% 3.17% 3.11% 3.07% 3.05% 3.03% 3.03%

Return on Funds 9.65% 9.29% 8.94% 8.56% 8.55% 8.54% 8.53% 8.52% 8.51% 8.50%

Cost of Funds (excluding Step-up Coupon Bonds) 6.97% 6.59% 6.17% 5.87% 5.56% 5.55% 5.53% 5.51% 5.49% 5.47%Margin 2.68% 2.70% 2.77% 2.69% 2.99% 2.99% 3.00% 3.01% 3.02% 3.03%

Average Working Capital 884 1,089 1,342 1,623 1,931 2,302 2,746 3,280 3,920 4,688 Return on Working Capital 8.09% 7.92% 7.73% 7.49% 7.54% 7.58% 7.61% 7.64% 7.66% 7.68%Cost of Working Capital (incl Step-up Coupon Bonds) 5.28% 5.19% 4.93% 4.72% 4.55% 4.61% 4.65% 4.66% 4.66% 4.65%Financial Margin 2.81% 2.72% 2.80% 2.77% 2.99% 2.97% 2.97% 2.98% 3.00% 3.04%Other Income to Working Capital 0.17% 0.19% 0.21% 0.22% 0.24% 0.26% 0.29% 0.31% 0.34% 0.37%Salary Cost to Wkg Capital 2.09% 1.86% 1.67% 1.45% 1.28% 1.12% 0.99% 0.91% 0.84% 0.77%Other Expenses to Wkg Capital 0.37% 0.32% 0.27% 0.24% 0.21% 0.18% 0.16% 0.14% 0.12% 0.11%Operating Margin 0.51% 0.72% 1.07% 1.31% 1.74% 1.92% 2.10% 2.24% 2.38% 2.52%Risk Cost to Working Capital (Current year advances) 1.85% 1.68% 1.78% 1.79% 1.83% 1.86% 1.88% 1.90% 1.92% 1.93%Net Margin -1.33% -0.96% -0.72% -0.48% -0.08% 0.07% 0.22% 0.34% 0.46% 0.59%

October 2005 Page 5




DCCB "B" Actuals ProjectionsFinancial Year FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 Assumptions



Yield on Advances 14.9% 13.3% 12.6% 12.0% 11.5% 11.0% 10.5% 10.5% 10.5% 10.5% 10.5% 10.5% 10.5%Occurrence of NPAs among fresh advances 10.0% 6.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%Provisioning Requirement for fresh NPAs 5.0% 3.0% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5%Yield on Investments 8.8% 6.8% 7.3% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5%Cost of Deposits 5.3% 6.5% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%Cost of Borrowings 10.6% 8.6% 6.7% 6.5% 6.5% 6.5% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%

Growth in Salary Cost 5.4% 38.9% -31.9% 15.0% 15.0% 15.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%Growth in Other Expenses 0.9% 1.2% 0.8% 0.8% 10.0% 10.0% 10.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%

Increase in non-fund income 1% 9% -15% 0% 35% 35% 30% 30% 30% 30% 30% 30% 30%

Amount of Step-up Coupon Bonds 42.1 Drawdown Profile 0% 0% 0% 0% 0% 25% 50% 25% 0% 0% 0% 0% 0% 0%Repayment Profile 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 25% 50%

Opening Balance - - - - - - 11 32 42 42 42 42 42 32 Drawdown - - - - - 11 21 11 - - - - - - Repayment - - - - - - - - - - - - 11 21 Closing Balance - - - - - 11 32 42 42 42 42 42 32 11 Average Balance - - - - - 5 21 37 42 42 42 42 37 21


Recovery of Existing Advances 40.0% 30.0% 14.3%

October 2005 Page 1




DCCB "B" Actuals ProjectionsFinancial Year FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14

Imbalances 1 2 1 1 Total Advances of PACS 53 84 89 94 Total Overdue Loans of PACS 53 57 76 81 Required Provisioning for Overdue Loans 45.75% GteeProvision Required 37 75.62 Rescheduled Loans 17 17 61 61 34%Case Selected (1=Lower end, 2=Upper end) Upper End 40.0 Required Provisioning for Rescheduled Loans 20%Provision Required 12 Loans to entities other than PACS 127 Provisioning requirement of PACS (%) 52.5%

Assuming Similar Requirement for non-PACS loans 67 Total Provision Required 116 Less: Recovery Through Guarantee 52.5% 40 Total Provision Required after Guarantee inflow 34.7% 77 Provision Already Made 33 Balance Provision Required 20.0% 44 Less: Recovery Through Cash Grant 42.1 Total Provision Required after Gtee and Cash Grant inflow 15.7% 35

Reduction in Share Capital 20.0% 5 Additonal Provision Required after Gtee, Cash Grant, Existing Provisions and reduction in Share Capital - Funding of Existing Accumulated Losses 52

FY05 FY06 FY07 FY08 Phasing of Provisioning - Phasing of Cash Funding of Accumulated Losses 13 13 13 13

October 2005 Page 2




DCCB "B" Actuals ProjectionsFinancial Year FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 Proforma Balance Sheet

Sources of FundsPaid up Share Capital 25 25 25 25 27 17 20 24 27 31 37 43 51 60 of which, Government 8 8 8 8 8 - - - - - - - - - of which, Coops and Others 17 17 16 16 18 17 20 24 27 31 37 43 51 60 Reserves and Provisions 51 59 74 91 99 107 117 129 144 162 183 209 240 278 Statutory Reserves 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Agri. Stab Fund - - - - Bad and Doubtful Debts Reserve 1 1 15 33 40 48 58 70 85 103 124 150 182 219 Other Reserves 49 58 58 58 58 58 58 58 58 58 58 58 58 58 Provision for Overdue Interest 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Principal State Partnership Fund 5 5 5 5 5 5 5 5 5 5 5 5 5 5 Fund Requirement 235 246 272 290 330 391 457 528 654 812 1,002 1,230 1,513 1,861 Deposits Outstanding 105 121 161 163 179 197 217 260 325 407 508 635 794 993 Borrowings Outstanding 130 125 112 128 151 193 240 267 329 406 494 595 719 868 Interest Payable 19 14 14 14 14 14 14 14 14 14 14 14 14 14 Other Liabilities 21 28 28 28 28 28 28 28 28 28 28 28 28 28 Step-up Coupon Bonds 1 - - - - - 11 32 42 42 42 42 42 32 11 Step-up Coupon Bonds 2 (GoR Sh Cap) 7 7 7 7 7 7 7 7 7 Funding for Accumulated Losses 13 26 39 52 52 52 52 52 52 52 Accumulated Profits - - 1 - - - - - 10 17 24 32 43 56 Total Sources 355 378 420 454 515 605 718 827 982 1,169 1,393 1,661 1,984 2,370

Uses of FundsCash and Bank Balance 26 23 23 23 25 28 30 31 31 37 45 54 64 77 Investments 39 50 54 55 69 86 108 130 155 187 224 269 322 387 Principal State Partnership Fund 5 5 5 5 5 5 5 5 5 5 5 5 5 5 Advances 182 186 209 221 276 345 432 518 622 746 895 1,074 1,289 1,547 Existing Advances 221 133 66 35 35 35 35 35 35 35 35 Fresh Advances - 144 279 397 483 587 711 860 1,040 1,254 1,512 Interest Receivable 47 53 53 53 55 69 86 104 124 149 179 215 258 309 Fixed Assets 2 2 2 2 2 2 2 2 2 2 2 2 2 2 Other Assets 24 25 29 43 43 43 43 43 43 43 43 43 43 43 Accumulated Losses 31 34 45 52 40 27 12 (5) - - - - - - Total Uses 355 378 419 453 515 605 718 827 982 1,169 1,393 1,661 1,984 2,370

TRUE TRUE TRUE TRUE TRUE TRUE TRUE TRUE TRUE TRUE

October 2005 Page 3




DCCB "B" Actuals ProjectionsFinancial Year FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 Proforma P&L Account

IncomeInterest on Advances 28 27 26 27 25 30 36 41 50 60 72 86 103 124 Interest on Existing Advances 17 7 2 - - - - - - - Interest on Fresh Advances 8 22 34 41 50 60 72 86 103 124 Interest on Deposits and Investments 4 4 4 4 5 6 7 9 11 13 15 18 22 27 Non-Fund Income 1 1 1 1 1 1 2 2 3 4 5 6 8 10 Total Income 33 32 31 32 30 37 45 53 63 76 92 111 133 161 ExpensesSalary 4 4 6 4 5 5 6 7 7 8 9 10 11 12 Other Expenses 2 2 2 2 2 2 2 3 3 3 3 3 3 3 Reserves 10 9 15 18 7 8 10 12 15 18 22 26 31 38 Provisions for Existing Portfolio - - - - - - - - - - Provisions for Fresh Advances Portfolio 7 8 10 12 15 18 22 26 31 38 Bad and Doubtful Debts Reserve - - 14 18 7 8 10 12 15 18 22 26 31 38 Overdue Interest Reserve - 7 - - - - - - - - - - - - Other Reserves 10 2 - - - - - - - - - - - - Interest on Deposits 7 6 9 8 9 9 10 12 15 18 23 29 36 45 Interest on Borrowings 15 13 10 8 9 11 14 15 18 22 27 33 39 48 Interest on Step-up Coupon Bonds 1 - - - - 0 1 1 2 2 1 Interest on Step-up Coupon Bonds 2 - - - - 0 0 0 0 0 0 Total Expenses 38 35 42 40 31 37 43 49 58 70 85 102 123 147 Net Profit / (Loss) (5) (3) (11) (8) (1) 0 2 4 6 6 7 9 11 14 Net Profit / (Loss) excluding additional provisioning (1) 0 2 4 6 6 7 9 11 14

Key ResultsAccumulated Losses Wiped out? FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE TRUE TRUE TRUE TRUE TRUE TRUEYear in which Accumulated Losses Wiped out TRUE TRUE TRUE TRUE FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSE FALSEProfitability Sustainable? TRUE

October 2005 Page 4




DCCB "B" Actuals ProjectionsFinancial Year FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 Margins

Return on Funds 9.48% 9.14% 8.83% 8.49% 8.49% 8.49% 8.49% 8.49% 8.48% 8.48%

Cost of Funds (including Step-up Coupon Bonds) 5.67% 5.63% 5.49% 5.13% 5.20% 5.31% 5.39% 5.43% 5.47% 5.48%Margin 3.81% 3.50% 3.34% 3.35% 3.28% 3.18% 3.10% 3.05% 3.02% 3.00%

Return on Funds 9.48% 9.14% 8.83% 8.49% 8.49% 8.49% 8.49% 8.49% 8.48% 8.48%

Cost of Funds (excluding Step-up Coupon Bonds) 5.67% 5.72% 5.77% 5.52% 5.50% 5.50% 5.50% 5.49% 5.48% 5.47%Margin 3.81% 3.42% 3.06% 2.97% 2.98% 2.99% 2.99% 3.00% 3.00% 3.01%

Average Working Capital 439 527 642 769 907 1,076 1,281 1,527 1,822 2,177 Return on Working Capital 6.72% 6.74% 6.68% 6.55% 6.66% 6.75% 6.80% 6.84% 6.87% 6.90%Cost of Working Capital (incl Step-up Coupon Bonds) 4.02% 3.91% 3.81% 3.53% 3.63% 3.83% 3.99% 4.12% 4.22% 4.30%Financial Margin 2.70% 2.83% 2.87% 3.02% 3.03% 2.92% 2.81% 2.72% 2.65% 2.61%Other Income to Working Capital 0.21% 0.24% 0.26% 0.28% 0.31% 0.34% 0.37% 0.41% 0.44% 0.48%Salary Cost to Wkg Capital 1.05% 1.00% 0.95% 0.87% 0.81% 0.75% 0.70% 0.64% 0.59% 0.54%Other Expenses to Wkg Capital 0.47% 0.43% 0.38% 0.34% 0.30% 0.27% 0.23% 0.21% 0.18% 0.16%Operating Margin 1.40% 1.63% 1.80% 2.09% 2.23% 2.24% 2.25% 2.28% 2.32% 2.38%Risk Cost to Working Capital (Current year advances) 1.64% 1.59% 1.55% 1.57% 1.62% 1.65% 1.68% 1.70% 1.72% 1.74%Net Margin -0.24% 0.04% 0.26% 0.52% 0.62% 0.59% 0.57% 0.58% 0.60% 0.65%

October 2005 Page 5

Annex A to Interim Report Volume 1A: CCS Rajasthan


Assumptions



Yield on Advances 14.9% 13.3% 12.6% 12.0% 11.5% 11.0% 10.5% 10.5% 10.5% 10.5% 10.5% 10.5% 10.5%Occurrence of NPAs among fresh advances 10.0% 6.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%Provisioning Requirement for fresh NPAs 5.0% 3.0% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5%Yield on Investments 8.8% 6.8% 7.3% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5%Cost of Deposits 5.3% 6.5% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%Cost of Borrowings 10.6% 8.6% 6.7% 6.5% 6.5% 6.5% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%

Growth in Salary Cost 5.4% 38.9% -31.9% 15.0% 15.0% 15.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%Growth in Other Expenses 0.9% 1.2% 0.8% 0.8% 10.0% 10.0% 10.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%

Increase in non-fund income 1% 9% -15% 0% 35% 35% 30% 30% 30% 30% 30% 30% 30%

Amount of Step-up Coupon Bonds #REF! 3.10Drawdown Profile 0% 0% 0% 0% 0% 25% 50% 25% 0% 0% 0% 0% 0% 0%Repayment Profile 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 25% 50%

Opening Balance - #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Drawdown #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Repayment #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Closing Balance #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Average Balance #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!


Recovery of Existing Advances 25.0% 15.0% #REF!



Imbalances 1 2 1 1 Total Advances of PACS under the DCCB 53 84 89 89 Total Overdue Loans of PACS under the DCCB 53 57 76 76 Required Provisioning for Overdue Loans (assumed) 45.75%Provision Required 35 Rescheduled Loans 17 17 #REF! #REF!Required Provisioning for Rescheduled Loans (assumed) 10%Provision Required #REF!Loans to entities other than PACS 132 31.63733526Provisioning requirement of PACS (%) #REF! 0.143129457

Assuming Similar Requirement for non-PACS loans #REF!Total Provision Required #REF!Less: Recovery Through Guarantee 100% 32 Effective Total Provision Required #REF! #REF!Provision Already Made 33

Additonal Provision Required and Phasing Thereof #REF! #REF! #REF! #REF! #REF! #REF!#REF!

Interest Receivable 53 Provision Required 0 24 Existing Provision 7

Additional Provision Required and Phasing thereof 16 4 4 4 4

Total Additional Provisioning Requirement for existing assets #REF! #REF! #REF! #REF! #REF!


DCCB "B" Actuals ProjectionsFinancial Year FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 Proforma Balance Sheet

Sources of FundsPaid up Share Capital 25 25 25 25 27 29 32 35 39 43 48 55 62 71 of which, Government 8 8 8 8 8 8 8 8 8 8 8 8 8 8 of which, Coops and Others 17 17 16 16 18 21 24 27 30 35 40 46 54 63 Reserves and Provisions 51 59 74 91 #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Statutory Reserves 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Agri. Stab Fund - - - - Bad and Doubtful Debts Reserve 1 1 15 33 #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Other Reserves 49 51 51 51 51 51 51 51 51 51 51 51 51 51 Provision for Overdue Interest 1 7 7 7 7 7 7 7 7 7 7 7 7 7 Principal State Partnership Fund 5 5 5 5 5 5 5 5 5 5 5 5 5 5 Fund Requirement 235 246 273 291 #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Deposits Outstanding 105 121 161 163 179 197 217 260 325 407 508 635 794 993 Borrowings Outstanding 130 125 112 128 #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Interest Payable 19 14 14 14 14 14 14 14 14 14 14 14 14 14 Other Liabilities 21 28 28 28 28 28 28 28 28 28 28 28 28 28 Step-up Coupon Bonds - - - - #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Accumulated Profits - - - - #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Total Sources 355 378 419 454 #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!

Uses of Funds 50% 49%Cash and Bank Balance 26 23 23 23 25 28 30 31 31 37 45 54 64 77 Investments 39 50 54 55 69 86 108 130 155 187 224 269 322 387 Principal State Partnership Fund 5 5 5 5 5 5 5 5 5 5 5 5 5 5 Advances 182 186 209 221 276 345 432 518 622 746 895 1,074 1,289 1,547 Existing Advances 221 166 133 #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Fresh Advances - 111 213 #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Interest Receivable 47 53 53 53 55 69 86 104 124 149 179 215 258 309 Fixed Assets 2 2 2 2 2 2 2 2 2 2 2 2 2 2 Other Assets 24 25 29 43 43 43 43 43 43 43 43 43 43 43 Accumulated Losses 31 34 45 53 #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Total Uses 355 378 419 454 #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!


DCCB "B" Actuals ProjectionsFinancial Year FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 Proforma P&L Account

IncomeInterest on Advances 28 27 26 27 #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Interest on Existing Advances #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Interest on Fresh Advances 6 17 #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Interest on Deposits and Investments 4 4 4 4 5 6 7 9 11 13 15 18 22 27 Non-Fund Income 1 1 1 1 1 1 2 2 3 4 5 6 8 10 Total Income 33 32 31 32 #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Expenses 3.6%Salary 4 4 6 4 5 5 6 7 7 8 9 10 11 12 Other Expenses 2 2 2 2 2 2 2 3 3 3 3 3 3 3 Reserves 10 9 15 18 #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Provisions for Existing Portfolio #REF! #REF! #REF! #REF! - - - - - - Provisions for Fresh Advances Portfolio 6 6 #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Bad and Doubtful Debts Reserve - - 14 18 #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Overdue Interest Reserve - 7 - - Other Reserves 10 2 - - Interest on Deposits 7 6 9 8 9 9 10 12 15 18 23 29 36 45 Interest on Borrowings 15 13 10 8 #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Interest on Step-up Coupon Bonds #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Total Expenses 38 35 42 40 #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Net Profit / (Loss) (5) (3) (11) (8) #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Net Profit / (Loss) excluding additional provisioning #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!

Key ResultsAccumulated Losses Wiped out? FALSE FALSE FALSE FALSE #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Year in which Accumulated Losses Wiped out FALSE FALSE FALSE #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Profitability Sustainable? #REF!


DCCB "B" Actuals ProjectionsFinancial Year FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 Margins

Return on Funds #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!

Cost of Funds (including Step-up Coupon Bonds) #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Margin #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!

Return on Funds #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!

Cost of Funds (excluding Step-up Coupon Bonds) #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Margin #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!

Average Working Capital #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Return on Working Capital #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Cost of Working Capital (incl Step-up Coupon Bonds) #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Financial Margin #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Other Income to Working Capital #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Salary Cost to Wkg Capital #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Other Expenses to Wkg Capital #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Operating Margin #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Risk Cost to Working Capital (Current year advances) #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Net Margin #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!

Rajasthan Short Term Credit Cooperative StructureJaipur DCCB Actuals ProjectionsFinancial Year FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 Assumptions

Growth rate of Advances 25% 40% -5% 25% 25% 25% 20% 20% 20% 20% 20% 20% 20%Growth rate of Deposits 21% 19% 7% 10% 10% 10% 20% 25% 25% 25% 25% 25% 25%Share Capital Contribution 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5%

Investments as a % of Advances 53% 42% 36% 45% 40% 35% 33% 31% 30% 30% 30% 30% 30% 30%

Cash and Bank Balance as % of Advances 6% 22% 16% 17% 9% 8% 7% 6% 5% 5% 5% 5% 5% 5%Interest Receivable as % of Advances 12% 13% 10% 10% 8% 8% 8% 8% 8% 8% 8% 8% 8% 8%Yield on Advances 12.7% 12.9% 11.5% 11.5% 11.5% 11.0% 10.5% 10.5% 10.5% 10.5% 10.5% 10.5% 10.5%Occurrence of NPAs among fresh advances 10.0% 6.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%Provisioning Requirement for fresh NPAs 5.0% 3.0% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5%Yield on Investments 8.4% 9.8% 8.8% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5% 7.5%Cost of Deposits 6.5% 7.2% 5.9% 5.5% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%Cost of Borrowings 5.8% 7.5% 7.6% 7.0% 6.5% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0%

Growth in Salary Cost 6.4% -3.2% 24.4% 15.0% 15.0% 15.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%Growth in Other Expenses 0.5% 0.5% 0.4% 0.6% 10.0% 10.0% 10.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%

Increase in non-fund income -11% 0% 0% 0% 35% 35% 30% 30% 30% 30% 30% 30% 30%

Amount of Step-up Coupon Bonds Rs million - Drawdown Profile 0% 0% 0% 0% 0% 25% 50% 25% 0% 0% 0% 0% 0% 0%Repayment Profile 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 25% 50%Opening Balance Rs million - - - - - - - - - - - - - - Drawdown Rs million - - - - - - - - - - - - - - Repayment Rs million - - - - - - - - - - - - - - Closing Balance Rs million - - - - - - - - - - - - - - Average Balance Rs million - - - - - - - - - - - - - -

Rate of Interest on Step-up Coupon Bonds Rs million 0.0% 0.0% 0.0% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0%Recovery of Existing Advances Rs million 40.0% 30.0% #REF!Imbalances Rs million VI-F 34.4 2.5 2.9 2.9 Total Advances of PACS Rs million VII-A 471.6 585.5 902.0 902.0 Total Overdue Loans of PACS Rs million VII-A 93.1 368.2 353.2 353.2 Required Provisioning for Overdue Loans % (Assum) 45.75%Provision Required Rs million Calc. 161.6 Rescheduled Loans Rs million IV-M 47.3 41.8 #REF! #REF!Required Provisioning for Rescheduled Loans % (Assum) 10.00%Provision Required Rs million Calc. #REF!Loans to entities other than PACS Rs million Calc. 238.5 Provisioning requirement of PACS (%) % Calc. #REF!Assuming Similar Requirement for non-PACS loans Rs million Calc. #REF!Total Provision Required Rs million Calc. #REF! #REF!Less: Recovery Through Guarantee Rs million (Assum) 10.0% 114.1 Effective Total Provision Required Rs million Calc. #REF! #REF!Provision Already Made Rs million Calc. 79.4 Additonal Provision Required and Phasing Thereof Rs million Calc. #REF! #REF! #REF! #REF! #REF!Interest Receivable Rs million 114.7 Provision Required % 45% 51.6 Existing Provision Rs million 37.9 Additional Provision Required and Phasing thereof Rs million 13.8 3.4 3.4 3.4 3.4

Total Additional Provisioning Requirement for existing assets Rs million #REF! #REF! #REF! #REF!

Rajasthan Short Term Credit Cooperative StructureJaipur DCCB Actuals ProjectionsFinancial Year FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 Proforma Balance Sheet

Sources of FundsPaid up Share Capital Rs million II-B 94.5 101.5 113.6 116.4 126.3 138.8 154.4 170.0 188.7 211.2 238.1 270.5 309.3 355.8 of which, Government Rs million II-F 38.5 38.5 38.5 38.5 38.5 38.5 38.5 38.5 38.5 38.5 38.5 38.5 38.5 38.5 of which, Coops and Others Rs million Calc. 56.0 63.0 75.1 77.9 87.8 100.3 115.9 131.5 150.2 172.7 199.6 232.0 270.8 317.3 Reserves and Provisions Rs million II-B 107.4 124.3 151.5 156.2 #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Statutory Reserves Rs million II-B 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 Agri. Stab Fund Rs million II-B 0.1 0.1 0.1 0.1 Bad and Doubtful Debts Reserve Rs million II-B 38.3 47.5 74.7 79.4 #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Other Reserves Rs million II-B 32.7 38.1 38.1 38.1 38.1 38.1 38.1 38.1 38.1 38.1 38.1 38.1 38.1 38.1 Provision for Overdue Interest Rs million II-B 35.6 37.9 37.9 37.9 37.9 37.9 37.9 37.9 37.9 37.9 37.9 37.9 37.9 37.9 Principal State Partnership Fund Rs million II-B 28.2 28.2 28.2 28.2 28.2 28.2 28.2 28.2 28.2 28.2 28.2 28.2 28.2 28.2 Fund Requirement Rs million Calc. 1,049.5 1,299.1 1,610.9 1,637.8 #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Deposits Outstanding Rs million II-B 755.1 916.9 1,094.7 1,172.6 1,289.9 1,418.9 1,560.7 1,872.9 2,341.1 2,926.4 3,658.0 4,572.5 5,715.6 7,144.5 Borrowings Outstanding Rs million II-B 294.4 382.2 516.2 465.2 #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Interest Payable Rs million II-B - - - - - - - - - - - - - - Other Liabilities Rs million II-B 41.6 40.1 40.1 40.1 40.1 40.1 40.1 40.1 40.1 40.1 40.1 40.1 40.1 40.1 Step-up Coupon Bonds Rs million Calc. - - - - - - - - - - - - - - Accumulated Profits Rs million II-B - - - 1.1 #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Total Sources Rs million 1,321.3 1,593.2 1,944.2 1,979.8 #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!

Uses of Funds 10% 26% 58%Cash and Bank Balance Rs million II-C 43.1 192.4 192.4 192.4 128.3 142.6 155.9 160.4 160.4 192.5 231.0 277.1 332.6 399.1 Investments Rs million II-C 366.3 358.3 433.8 512.7 570.3 623.7 735.1 828.7 962.3 1,154.8 1,385.7 1,662.9 1,995.5 2,394.6 Principal State Partnership Fund Rs million II-C 28.2 28.2 28.2 28.2 28.2 28.2 28.2 28.2 28.2 28.2 28.2 28.2 28.2 28.2 Advances Rs million II-C 687.7 857.4 1,197.7 1,140.5 1,425.7 1,782.1 2,227.6 2,673.1 3,207.7 3,849.3 4,619.1 5,543.0 6,651.6 7,981.9 Existing Advances Rs million 1,140.5 684.3 342.2 #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Fresh Advances Rs million - 741.3 1,439.9 #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Interest Receivable Rs million II-C 84.2 114.7 114.7 114.7 114.1 142.6 178.2 213.8 256.6 307.9 369.5 443.4 532.1 638.5 Fixed Assets Rs million II-C 7.0 9.4 9.4 9.4 9.4 9.4 9.4 9.4 9.4 9.4 9.4 9.4 9.4 9.4 Other Assets Rs million II-C 35.0 (23.5) (68.1) (18.1) (18.1) (18.1) (18.1) (18.1) (18.1) (18.1) (18.1) (18.1) (18.1) (18.1) Accumulated Losses Rs million II-C 70.0 56.3 36.1 - #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Total Uses Rs million 1,321.3 1,593.2 1,944.2 1,979.8 #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!

TRUE TRUE TRUE TRUE #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Proforma P&L Account 0.0 (0.0)

IncomeInterest on Advances Rs million II-J 86.8 98.2 133.1 134.6 #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Interest on Existing Advances Rs million #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Interest on Fresh Advances Rs million 38.4 114.7 #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Interest on Deposits and Investments Rs million II-J 29.5 30.4 38.8 41.7 40.6 44.8 51.0 58.6 67.2 79.4 95.3 114.3 137.2 164.6 Non-Fund Income Rs million II-J 6.9 6.2 6.2 6.2 6.2 8.3 11.2 14.6 18.9 24.6 32.0 41.6 54.1 70.3 Total Income Rs million 123.2 134.8 178.1 182.4 #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!ExpensesSalary Rs million II-J 23.0 24.5 23.7 29.5 33.9 38.9 44.8 49.3 54.2 59.6 65.6 72.1 79.3 87.3 Other Expenses Rs million II-J 3.3 4.3 4.8 6.3 7.0 7.7 8.4 8.8 9.3 9.7 10.2 10.7 11.3 11.8 Reserves Rs million II-J 12.8 18.5 23.5 5.6 #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Provisions for Existing Portfolio Rs million #REF! #REF! #REF! #REF! - - - - - - Provisions for Fresh Advances Portfolio Rs million 37.1 43.2 #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Interest on Deposits Rs million II-J 52.5 54.5 72.1 66.7 67.7 67.7 74.5 85.8 105.4 131.7 164.6 205.8 257.2 321.5 Interest on Borrowings Rs million II-J 14.2 19.5 33.7 37.2 #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Interest on Step-up Coupon Bonds Rs million Calc. - - - - - - - - - - Total Expenses Rs million 105.7 121.1 157.8 145.2 #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Net Profit / (Loss) Rs million 17.5 13.6 20.2 37.3 #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!provisioning Rs million #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Advances 37.1 80.3 #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!fresh advances 5.00% 5.57% #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!

Rajasthan Short Term Credit Cooperative StructureJaipur DCCB Actuals ProjectionsFinancial Year FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14

Key ResultsAccumulated Losses Wiped out? #REF! FALSE FALSE FALSE TRUE #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!out TRUE TRUE TRUE TRUE FALSE #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Profitability Sustainable? #REF!

AveragesAverage Advances Rs million 773 1,028 1,169 1,283 1,604 2,005 2,450 2,940 3,529 4,234 5,081 6,097 7,317 Average Investments Rs million 362 396 473 541 597 679 782 895 1,059 1,270 1,524 1,829 2,195 Average Deposits Rs million 836 1,006 1,134 1,231 1,354 1,490 1,717 2,107 2,634 3,292 4,115 5,144 6,430 Average Borrowings Rs million 338 449 491 #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!

#REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!#REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!

MarginsReturn on Funds #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Cost of Funds (including Step-up Coupon Bonds) #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Margin #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!

Return on Funds #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Cost of Funds (excluding Step-up Coupon Bonds) #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Margin #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!

Average Working Capital #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Return on Working Capital #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Cost of Working Capital (incl Step-up Coupon Bonds) #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Financial Margin #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Other Income to Working Capital #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Salary Cost to Wkg Capital #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Other Expenses to Wkg Capital #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Operating Margin #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Risk Cost to Working Capital (Current year advances) #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Net Margin #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!

#REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!Risk Cost to Working Capital (Current year advances) #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF! #REF!

Profit for 2003-04 Accumulated losses Losses as well as Acc Losses Profits as well as Acc ProfitsJAISALMER 79.75- 445.78 TRUE FALSEBHILWARA 33.88- NA TRUE FALSES.MADHOPUR 43.24 - FALSE TRUEBANSWARA 59.93 85.99 FALSE FALSECHITTORGARH 62.57 150.92 FALSE FALSEDUNGARPUR 71.29 185.49 FALSE FALSESIROHI 90.60 - FALSE TRUEAJMER 94.55 1,173.08 FALSE FALSEBIKANER 101.04 - FALSE TRUEJHUNJHUNU 103.89 274.76 FALSE FALSEBUNDI 124.53 890.18 FALSE FALSEPALI 129.12 - FALSE TRUEJALORE 145.68 - FALSE TRUEJHALAWAR 153.80 - FALSE TRUEBHARATPUR 198.06 904.20 FALSE FALSETONK 199.91 - FALSE TRUENAGAUR 204.58 248.96 FALSE FALSECHURU 205.70 413.13 FALSE FALSES.GANGANAGAR 281.79 - FALSE TRUESIKAR 288.20 - FALSE TRUEJODHPUR 301.46 - FALSE TRUEKOTA 315.70 172.75 FALSE FALSEALWAR 365.76 276.40 FALSE FALSEJAIPUR 372.61 361.25 FALSE FALSEBARMER 373.02 - FALSE TRUEUDAIPUR 410.76 856.62 FALSE FALSE

4584.16 6439.51

Selection of DCCBs

Misc. Information of CCBs ( AS PER AUTOMATIC)( Rs. in lakhs)

Actual Projection 2001-2002 2002-2003 2003-2004 2003-2004 2004-2005

1 2 3 4 6 5 7S.No. Items

1 No. of Branches (excluding H.O.) 5 5 5 5 52 No. of PACS 84 84 84 84 843 No. of Memers 131 104 102 100 1004 No. of Employees 37 32 28 32 325 Share Capital 254.45 246.15 246.99 241.00 252.006 Total Reserves & Provisions 594.75 739.27 914.81 740.00 1013.677 Deposits 1206.01 1614.37 1629.36 1850.00 2200.008 Borrowings Outstanding 1252.41 1119.49 1280.89 1278.00 1357.339 Loans & Advances Issued 530.82 472.20 490.00 750.00 800.0010 Total Loans Outstanding 1862.68 2085.49 2210.40 2365.00 2550.0011 Investments: 497.85 537.03 550.41 635.00 959.32a) SLR 433.53 394.15 479.14 560.00 885.00b) Non-SLR 64.32 142.88 71.27 75.00 74.3212 Working Capital 3287.11 3852.83 4255.80 4250.00 5000.0013 Net Working Capital - - 3701.20 - 4467.7214 Total Income 322.42 308.55 318.95 358.00 358.0015 Salary & Allowances( in amount) 42.36 58.82 40.03 50.00 45.0016 %of Salary & Allowance to Av.Wkg.Cap. 1.25 1.71 1.04 1.32 1.0017 Other Expenses( in amount) 22.35 17.00 18.55 19.00 20.0018 %of Other Exp.to Av.Wkg.Cap. 0.66 0.50 0.48 0.50 0.4419 Total Expenditure 258.79 269.94 219.93 288.00 243.0020 Net Profit -25.82 -107.04 -79.75 40.00 3421 Total Overdues 755.30 791.16 922.01 680.00 700.0022 %of Recovery to Demand 34.46 32.92 30.12 45.00 33.0923 Average Borrowings 1181.27 1066.36 1161.61 1200.00 1310.0024 Average Investments 400.99 479.86 541.06 525.00 850.0025 Average working Fund 3379.71 3433.58 3858.41 3800.00 4500.0026 Average Deposit 1092.92 1325.75 1512.56 1500.00 1750.0027 Average Advances 1814.08 1891.30 2069.68 2225.00 2300.0028 Average Business 2907.00 3217.05 3582.24 3725.00 4050.0029 Cost of Deposit(%) 5.43 6.94 5.33 6.93 5.2630 Cost of Borrowings(%) 11.41 9.58 6.94 9.58 6.5631 Yield on Advances(%) 15.07 14.02 13.06 13.84 12.6532 Yield on Investment(%) 9.75 6.80 7.31 6.86 6.4733 Return on Funds(%) 9.25 8.67 8.03 9.05 7.6934 Cost of Funds(%) 5.74 5.65 4.18 5.76 3.9635 Financial Margin(%) ( 33-34) 3.50 3.02 3.85 3.29 3.7336 Misc. Income in Amount 9.92 10.84 9.18 14.00 12.0037 Misc. Income in % 0.29 0.32 0.24 0.37 0.2738 Total (35+37) 3.80 3.33 4.08 3.66 4.0039 Cost of Management(%) 1.91 2.21 1.52 1.82 1.4440 Operative Margin (38-39) 1.88 1.12 2.57 1.84 2.5641 Risk Cost 2.65 4.24 4.63 0.79 1.8042 Net Margin (%)(40-41) -0.76 -3.12 -2.07 1.05 0.7643 Per Branch Deposit 218.58 265.15 302.51 300.00 350.0044 Per Branch Advances 362.82 378.26 413.94 445.00 460.0045 Per Branch Business 581.40 643.41 716.45 745.00 810.0046 Per Employee Business 78.57 100.53 127.94 116.41 126.5647 Non-earning Assets to W.F. ( %) 34.46 30.94 32.34 27.63 30.0048 %age of Borrowings to Adv. 65.12 56.38 56.13 53.93 56.9649 COM to Total Income % 20.07 24.57 18.37 19.27 18.1650 COM to Total Expenses % 25.00 28.09 26.64 23.96 26.7551 Per Employee COM 1.75 2.37 2.09 2.16 2.0352 %age NPA(loans) to Working Funds 19.11 20.13 20.55 15.76 13.5053 CD ratio % 165.98 142.66 136.83 148.33 131.4354 % of Investment to Deposits 36.69 36.20 35.77 35.00 48.5755 Dividend Declared - - - - -56 Classification of Loan Assets 1862.68 2085.49 2210.40 2365.00 2550.00

a) Standard 1234.52 1309.82 1335.68 1695.00 1875.00b) Sub-standard 310.44 365.31 241.34 300.00 200.00c) Doubtful Assets 282.85 338.47 589.26 300.00 450.00d) Loss Assets 34.87 71.89 44.12 70.00 25.00e) Total Impaired Assets 628.16 775.67 874.72 670.00 675.00f) Impaired Assets as % to total loan o/s 33.72 37.19 39.57 28.33 26.47lotus/bnv/MOU2004-2005/ratio-analysis-3(sheet-1)

JAISALMER

THE RAJASTHAN STATE COOPERATIVE BANK LTD., JAIPURVarious Information from CCBS from 2001-2002 to 2004-2005(Rs. in lakhs)

Actual Actual Projection Actual Projection Actual Actual Projection Actual Projection2001-2002 2002-2003 2003-2004 2003-2004 2004-2005 2001-2002 2002-2003 2003-2004 2003-2004 2004-2005

1 AJMER 13.00 13.00 13.00 13.00 13.00 148.00 148.00 148.00 148.00 148.002 ALWAR 15.00 15.00 15.00 15.00 15.00 298.00 298.00 298.00 299.00 300.003 BANSWARA 7.00 7.00 7.00 7.00 7.00 88.00 88.00 88.00 88.00 88.004 BARMER 21.00 21.00 21.00 21.00 21.00 224.00 224.00 224.00 224.00 224.005 BHARATPUR 14.00 14.00 14.00 14.00 14.00 344.00 344.00 344.00 344.00 344.006 BHILWARA 17.00 17.00 17.00 17.00 17.00 198.00 198.00 198.00 198.00 198.007 BIKANER 9.00 10.00 10.00 10.00 10.00 170.00 193.00 193.00 193.00 193.008 BUNDI 11.00 11.00 11.00 11.00 11.00 121.00 121.00 121.00 121.00 121.009 CHITTORGARH 16.00 16.00 17.00 17.00 17.00 199.00 199.00 199.00 199.00 199.00

10 CHURU 10.00 9.00 9.00 9.00 9.00 176.00 153.00 153.00 153.00 153.0011 DUNGARPUR 9.00 9.00 9.00 9.00 9.00 51.00 51.00 51.00 51.00 51.0012 JAIPUR 21.00 21.00 22.00 22.00 22.00 363.00 363.00 363.00 363.00 363.0013 JAISALMER 5.00 5.00 5.00 5.00 5.00 84.00 84.00 84.00 84.00 84.0014 JALORE 11.00 11.00 11.00 11.00 11.00 156.00 156.00 156.00 156.00 156.0015 JHALAWAR 14.00 14.00 14.00 14.00 14.00 150.00 150.00 150.00 150.00 150.0016 JHUNJHUNU 13.00 13.00 13.00 13.00 13.00 159.00 159.00 159.00 159.00 159.0017 JODHPUR 15.00 16.00 17.00 16.00 17.00 207.00 207.00 207.00 207.00 207.0018 KOTA 19.00 19.00 19.00 19.00 21.00 276.00 276.00 276.00 276.00 276.0019 NAGAUR 15.00 15.00 15.00 15.00 15.00 279.00 279.00 279.00 279.00 279.0020 PALI 27.00 27.00 28.00 28.00 28.00 217.00 217.00 217.00 217.00 217.0021 S.MADHOPUR 15.00 15.00 15.00 15.00 15.00 265.00 265.00 265.00 265.00 265.0022 SIKAR 19.00 19.00 19.00 19.00 19.00 171.00 171.00 171.00 171.00 171.0023 SIROHI 11.00 11.00 11.00 11.00 11.00 63.00 63.00 63.00 63.00 63.0024 S.GANGANAGAR 34.00 34.00 34.00 34.00 34.00 486.00 486.00 486.00 486.00 486.0025 TONK 9.00 9.00 9.00 9.00 9.00 155.00 155.00 155.00 155.00 155.0026 UDAIPUR 15.00 15.00 15.00 15.00 15.00 204.00 204.00 204.00 204.00 204.00

T O T A L 385.00 386.00 390.00 389.00 392.00 5,252.00 5,252.00 5,252.00 5,253.00 5,254.00

S.No. Name of CCB

No. of Branches excluding H.O. No. of PACS


1 AJMER2 ALWAR3 BANSWARA4 BARMER5 BHARATPUR6 BHILWARA7 BIKANER8 BUNDI9 CHITTORGARH

10 CHURU11 DUNGARPUR12 JAIPUR13 JAISALMER14 JALORE15 JHALAWAR16 JHUNJHUNU17 JODHPUR18 KOTA19 NAGAUR20 PALI21 S.MADHOPUR22 SIKAR23 SIROHI24 S.GANGANAGAR25 TONK26 UDAIPUR

T O T A L

S.No. Name of CCBActual Actual Projection Actual Projection Actual Actual Projection Actual Projection

2001-2002 2002-2003 2003-2004 2003-2004 2004-2005 2001-2002 2002-2003 2003-2004 2003-2004 2004-2005500.00 499.00 500.00 497.00 510.00 92.00 88.00 86.00 84.00 81.00

0.00 0.00 0.00 0.00 0.00 115.00 113.00 111.00 113.00 108.00126.00 126.00 130.00 126.00 126.00 55.00 51.00 51.00 53.00 53.00290.00 289.00 289.00 289.00 289.00 129.00 129.00 126.00 124.00 150.00457.00 457.00 457.00 458.00 458.00 101.00 92.00 97.00 82.00 72.00209.00 209.00 209.00 209.00 209.00 107.00 103.00 110.00 107.00 110.00335.00 335.00 335.00 335.00 335.00 64.00 68.00 66.00 68.00 68.00211.00 311.00 311.00 311.00 321.00 83.00 75.00 71.00 71.00 67.00350.00 350.00 350.00 532.00 550.00 107.00 102.00 100.00 95.00 100.00176.00 153.00 153.00 153.00 153.00 80.00 71.00 71.00 68.00 70.0085.00 85.00 85.00 85.00 85.00 51.00 50.00 50.00 50.00 50.00

455.00 455.00 455.00 455.00 455.00 154.00 153.00 155.00 138.00 138.00131.00 104.00 100.00 102.00 100.00 37.00 32.00 32.00 28.00 32.00186.00 186.00 186.00 187.00 190.00 79.00 75.00 75.00 70.00 100.00314.00 314.00 314.00 314.00 314.00 94.00 96.00 93.00 80.00 102.00318.00 318.00 318.00 318.00 318.00 72.00 73.00 73.00 74.00 74.00278.00 278.00 278.00 278.00 278.00 124.00 122.00 148.00 120.00 154.00645.00 645.00 645.00 645.00 645.00 157.00 155.00 150.00 145.00 138.00542.00 542.00 542.00 542.00 542.00 111.00 104.00 104.00 97.00 95.00435.00 435.00 435.00 435.00 435.00 185.00 181.00 179.00 177.00 173.00404.00 403.00 403.00 403.00 403.00 106.00 105.00 103.00 105.00 103.00304.00 297.00 297.00 289.00 289.00 117.00 100.00 100.00 100.00 99.00111.00 111.00 111.00 111.00 115.00 58.00 57.00 66.00 54.00 66.00551.00 551.00 551.00 551.00 551.00 269.00 267.00 267.00 263.00 269.00298.00 298.00 304.00 304.00 325.00 78.00 69.00 69.00 77.00 77.00366.00 366.00 366.00 366.00 366.00 99.00 100.00 97.00 93.00 91.00

8,077.00 8,117.00 8,124.00 8,295.00 8,362.00 2,724.00 2,631.00 2,650.00 2,536.00 2,640.00

No. of Members No. of Employee




T O T A L


2001-2002 2002-2003 2003-2004 2003-2004 2004-2005 2001-2002 2002-2003 2003-2004 2003-2004 2004-2005665.61 722.45 800.00 905.45 1,150.00 1,097.04 1,158.12 1,200.00 1,173.58 1,210.00

1,057.58 1,055.93 1,080.00 1,077.36 1,085.00 1,344.60 1,401.36 1,401.00 1,431.27 1,460.00375.28 382.11 435.00 394.24 500.00 392.52 518.10 578.00 607.81 679.00757.42 802.17 810.00 812.27 820.00 1,030.44 1,211.84 1,300.00 1,379.93 1,530.00

1,003.79 1,028.00 1,030.00 998.87 1,050.00 1,180.18 1,181.25 1,200.00 1,157.23 1,175.00479.75 480.40 550.00 483.93 550.00 877.95 1,022.97 1,063.97 1,206.36 1,360.00400.00 466.77 470.00 470.06 475.00 671.28 916.60 1,015.00 984.22 1,059.50450.34 510.88 725.00 570.39 770.00 710.03 700.95 755.00 700.10 759.00614.77 625.86 670.00 633.64 680.00 976.20 1,064.35 1,070.00 1,277.51 1,270.00606.23 594.78 650.00 602.92 650.00 546.91 766.27 780.00 785.37 800.00263.67 286.16 350.00 303.17 325.00 290.58 311.57 312.00 322.52 323.00

1,015.21 1,135.66 1,185.00 1,163.69 1,285.00 1,242.83 1,514.81 1,527.15 1,561.82 1,827.15254.45 246.15 241.00 246.99 252.00 594.75 739.27 740.00 914.81 1,013.67584.02 605.73 610.00 610.52 615.00 836.23 1,010.45 1,060.00 1,275.71 1,330.00603.67 632.78 685.00 650.98 677.00 735.84 849.41 870.52 1,030.23 1,051.00522.51 532.58 547.00 539.33 559.33 704.60 854.26 986.30 922.76 1,023.05631.92 650.00 665.00 671.06 685.00 688.17 779.08 840.00 958.31 1,025.00947.53 966.76 1,031.00 967.18 970.00 1,621.89 2,016.93 2,017.00 2,218.55 2,490.00731.63 747.36 850.00 755.90 850.00 930.10 937.12 950.05 1,061.20 1,100.00687.84 714.79 785.00 731.29 790.00 1,057.85 1,192.44 1,225.76 1,401.37 1,450.00849.07 851.40 870.00 861.05 870.00 688.27 1,021.70 1,100.00 1,246.49 1,476.00847.37 884.77 886.00 886.51 890.00 770.08 977.15 1,035.00 1,091.75 1,175.00217.17 239.60 289.60 260.65 310.00 460.13 529.45 609.45 562.03 642.03

1,191.73 1,236.19 1,350.00 1,417.37 1,575.00 1,514.78 2,001.38 2,050.00 2,236.39 2,450.00741.45 761.73 831.73 767.19 792.00 715.95 775.23 863.63 922.49 1,023.00670.60 695.03 800.00 706.02 800.00 1,081.35 1,428.87 1,450.00 1,336.97 1,355.00

17,170.61 17,856.04 19,196.33 18,488.03 19,975.33 22,760.55 26,880.93 27,999.83 29,766.78 32,056.40

Share Capital Total Reserves & Provisions




T O T A L


2001-2002 2002-2003 2003-2004 2003-2004 2004-2005 2001-2002 2002-2003 2003-2004 2003-2004 2004-20054,853.36 5,475.81 6,500.00 5,919.44 7,500.00 2,343.86 2,621.20 2,930.00 3,085.51 3,700.006,119.35 6,099.62 7,300.00 6,913.18 8,000.00 4,143.01 5,347.48 7,000.00 5,519.68 6,274.002,948.75 3,105.82 3,700.00 3,503.60 4,300.00 1,590.19 1,823.06 2,135.00 1,980.31 2,200.00

12,234.41 13,487.06 14,200.00 14,366.76 15,000.00 1,755.74 4,292.83 3,400.00 3,064.42 3,000.004,787.60 5,528.58 6,400.00 6,030.02 6,750.00 3,228.09 4,176.21 4,700.00 5,203.49 5,200.007,876.05 8,605.23 10,000.00 9,302.39 11,000.00 2,119.29 2,506.09 2,870.00 2,606.48 2,900.001,925.96 2,656.68 3,200.00 3,208.46 3,600.00 2,258.83 2,710.81 3,300.00 2,602.54 3,230.003,184.90 3,228.58 4,222.00 3,672.32 5,080.00 1,441.48 1,710.51 2,700.00 2,050.35 2,500.009,144.04 9,858.19 11,040.00 10,904.86 12,000.00 2,156.50 2,584.76 3,330.00 2,535.53 3,332.003,116.77 3,287.33 3,800.00 3,573.75 4,200.00 2,779.62 2,853.67 2,600.00 3,425.69 3,450.004,578.82 5,045.71 5,500.00 5,715.91 6,200.00 509.19 713.47 578.33 816.78 1,010.229,168.95 10,946.52 11,500.00 11,726.14 14,400.00 3,821.93 5,162.30 10,151.72 4,651.79 7,673.721,206.01 1,614.37 1,850.00 1,629.36 2,200.00 1,252.41 1,119.49 1,278.00 1,280.89 1,357.335,493.43 5,648.39 6,350.00 6,366.63 7,325.00 3,722.79 3,833.48 4,250.00 3,692.25 4,300.006,216.93 6,517.15 7,200.00 7,533.76 8,500.00 2,561.42 3,387.39 4,033.00 3,118.25 3,249.003,452.63 3,995.45 4,400.00 4,438.62 5,000.00 3,310.48 3,732.76 4,441.00 4,790.75 5,086.51

10,702.60 11,867.76 12,750.00 13,465.57 14,750.00 1,925.66 3,057.41 2,870.00 2,999.57 3,270.0013,018.39 12,674.48 14,700.00 13,829.02 15,500.00 3,850.21 5,658.11 6,204.00 6,240.64 6,460.006,351.85 7,229.95 8,315.00 7,782.52 8,560.00 4,670.66 5,786.43 4,765.00 5,497.45 5,220.00

11,483.37 12,482.50 13,730.00 12,532.95 13,785.00 3,626.99 3,715.00 4,490.00 4,885.04 5,050.004,501.52 4,830.13 5,400.00 5,689.08 6,200.00 5,079.64 5,641.01 7,100.00 6,551.73 6,625.458,761.77 9,543.22 10,500.00 10,470.79 11,500.00 2,746.40 3,483.06 4,640.00 5,389.36 5,200.003,584.63 4,297.78 5,000.00 5,010.45 6,000.00 720.13 837.60 1,200.00 897.80 1,100.00

11,543.17 13,407.06 15,700.00 15,623.53 18,000.00 8,470.14 8,967.58 9,950.00 11,915.98 11,775.004,995.46 5,566.17 6,700.00 5,963.43 7,200.00 3,020.65 3,493.51 4,282.00 5,044.08 4,713.118,186.12 8,941.25 10,400.00 9,901.55 11,000.00 2,562.80 2,656.52 3,263.30 2,011.74 2,465.00

169,436.84 185,940.79 210,357.00 205,074.09 233,550.00 75,668.11 91,871.74 108,461.35 101,858.10 110,341.34

Deposits Borrowings Outstanding




T O T A L


2001-2002 2002-2003 2003-2004 2003-2004 2004-2005 2001-2002 2002-2003 2003-2004 2003-2004 2004-20054,758.12 4,220.05 4,500.00 4,038.07 5,600.00 4,885.14 5,508.43 6,700.00 6,447.13 8,200.008,574.15 13,240.25 9,400.00 6,325.15 10,020.00 8,099.70 9,551.31 11,700.00 10,284.40 12,000.004,290.48 3,767.00 3,500.00 2,773.97 3,720.00 3,165.09 3,666.47 4,380.00 4,440.78 5,300.006,913.86 11,695.78 10,040.00 9,499.15 10,400.00 6,952.98 10,020.06 10,400.00 9,746.25 10,000.004,428.48 10,424.88 7,650.00 7,005.70 8,350.00 6,259.87 7,686.76 9,780.00 7,340.78 10,000.005,177.40 5,865.65 7,010.00 4,246.80 5,860.00 6,217.04 6,728.82 8,300.00 7,806.45 9,200.003,466.24 3,523.61 4,530.00 2,944.24 4,100.00 3,909.20 4,844.72 5,800.00 5,283.06 6,320.003,077.61 4,661.62 4,100.00 2,754.89 5,000.00 2,992.68 3,694.15 5,000.00 4,144.40 5,830.00

12,938.63 8,626.12 10,242.00 6,089.79 11,530.00 6,398.94 7,633.90 8,870.00 8,285.86 9,800.004,957.28 4,781.86 4,750.00 4,220.01 4,350.00 4,666.03 5,055.30 5,300.00 6,092.29 6,600.002,337.20 2,168.93 2,500.00 2,117.01 2,500.00 2,444.48 2,707.78 3,000.00 3,365.40 3,700.008,331.92 15,035.69 10,460.00 8,187.85 13,245.00 8,573.63 11,976.96 16,883.00 11,405.28 16,700.00

530.82 472.20 750.00 490.00 800.00 1,862.68 2,085.49 2,365.00 2,210.40 2,550.007,375.97 6,552.48 8,100.00 5,559.91 7,600.00 7,912.84 8,276.20 9,899.73 9,222.80 11,133.948,041.34 8,705.89 6,929.00 5,326.41 7,400.00 5,603.78 7,311.83 8,300.00 7,439.16 8,600.005,566.58 6,901.70 5,815.00 5,306.03 6,600.00 5,633.66 6,752.10 7,850.00 8,031.18 9,200.00

11,543.64 8,711.26 8,225.00 7,694.07 9,280.00 6,308.28 8,193.06 8,850.00 9,275.02 10,575.0014,956.16 17,968.93 15,100.00 11,036.98 12,500.00 13,751.44 15,507.71 17,860.00 16,952.79 18,734.008,819.60 9,910.05 7,885.00 4,209.93 7,075.00 8,214.68 10,419.67 10,565.00 10,202.97 10,850.009,579.54 12,151.80 10,155.00 8,201.70 11,035.00 9,405.61 11,710.73 12,670.00 12,371.81 13,700.009,861.80 11,822.88 10,000.00 7,856.32 11,000.00 7,277.18 9,191.13 12,000.00 8,995.46 12,000.007,571.58 13,324.66 10,535.00 9,327.79 11,650.00 8,860.19 10,558.94 11,700.00 12,522.37 13,150.001,819.40 2,203.69 2,700.00 2,546.77 3,000.00 2,954.62 3,419.24 4,050.00 3,916.40 4,750.00

22,523.29 29,156.89 26,100.00 27,577.34 33,950.00 18,036.18 19,766.43 24,000.00 24,870.19 28,400.006,554.78 8,879.14 8,755.00 5,335.56 6,605.00 6,183.71 7,703.68 9,600.00 8,555.07 10,000.004,600.53 4,539.06 5,200.00 3,658.79 5,000.00 6,339.83 7,062.82 9,400.00 7,295.08 8,700.00

188,596.40 229,312.07 204,931.00 164,330.23 218,170.00 172,909.46 207,033.69 245,222.73 226,502.78 265,992.94

Loans & Advances Issued Total Loans Outstanding




T O T A L


2001-2002 2002-2003 2003-2004 2003-2004 2004-2005 2001-2002 2002-2003 2003-2004 2003-2004 2004-20051,340.21 1,603.21 1,825.00 1,660.21 2,235.00 1,210.00 1,465.00 1,675.00 1,509.00 2,065.002,323.62 2,321.22 3,000.00 2,272.57 3,000.00 2,048.00 2,086.38 2,745.00 2,016.51 2,730.001,225.84 1,241.33 1,550.00 1,135.12 1,550.00 914.13 1,029.85 1,414.00 861.50 1,270.007,530.06 8,485.15 8,250.00 8,297.73 9,400.00 4,886.62 5,382.82 5,600.00 5,931.93 8,900.001,321.52 1,539.15 1,825.00 1,944.98 2,250.00 1,156.33 1,370.21 1,650.00 1,581.11 1,650.003,187.13 3,921.17 4,800.00 3,294.54 4,152.00 2,791.80 3,352.64 4,080.00 2,746.47 3,460.00

785.95 937.95 1,150.00 1,279.94 1,400.00 572.26 714.26 935.00 1,036.72 1,140.001,111.09 890.72 1,200.00 1,080.29 1,515.00 1,030.85 805.62 1,114.90 948.11 1,365.004,467.62 4,252.57 5,100.00 4,795.63 5,300.00 4,309.37 4,094.37 4,692.00 4,444.79 4,900.001,189.53 929.28 1,150.00 1,092.06 1,300.00 1,042.41 772.36 950.00 915.88 1,210.002,351.46 2,710.59 3,000.00 2,607.60 3,400.00 1,930.05 2,370.43 2,868.04 2,410.43 3,206.233,583.12 4,337.71 5,315.00 5,126.87 6,600.00 3,191.46 2,997.91 3,935.00 4,729.09 6,300.00

497.85 537.03 635.00 550.41 959.32 433.53 394.15 560.00 479.14 885.001,680.10 1,888.42 2,100.00 2,070.33 2,300.00 1,417.26 1,625.10 1,836.68 1,800.10 2,029.772,622.52 2,034.67 2,500.00 2,411.19 2,900.00 2,486.74 1,830.33 2,300.00 2,106.33 2,600.00

896.02 1,099.02 1,315.00 1,348.57 1,530.00 716.00 896.00 1,120.00 1,056.31 1,230.006,533.84 7,331.09 7,550.00 7,904.05 8,500.00 4,648.67 5,929.28 5,950.00 5,982.87 6,450.003,716.49 3,538.82 4,000.00 3,490.88 5,000.00 3,461.67 3,308.72 3,768.00 3,248.91 4,750.001,944.39 2,128.85 2,598.00 2,192.33 2,780.00 1,692.07 1,871.54 2,338.00 1,921.52 2,500.005,106.37 4,342.65 5,650.00 4,605.10 5,200.00 3,851.14 3,472.56 4,405.00 3,600.94 4,045.001,265.42 1,412.49 1,606.00 1,806.98 1,956.00 1,010.07 1,154.20 1,350.00 1,551.63 1,700.002,835.87 3,025.51 3,400.00 3,973.86 4,200.00 2,581.87 2,787.35 3,212.00 3,505.70 3,700.001,266.42 1,835.17 2,300.00 1,942.71 2,430.00 1,102.67 1,794.17 2,259.00 1,858.96 2,389.003,997.20 4,792.66 4,800.00 4,557.83 5,350.00 3,231.16 4,171.51 4,300.00 3,936.68 4,700.001,858.50 1,919.51 2,200.00 1,946.36 2,110.00 1,858.50 1,751.33 2,030.00 1,742.68 1,900.003,990.76 3,943.95 4,780.00 4,350.17 4,900.00 3,685.52 3,709.76 4,380.00 3,780.62 4,165.67

68,628.90 72,999.89 83,599.00 77,738.31 92,217.32 57,260.15 61,137.85 71,467.62 65,703.93 81,240.67

Investments SLR




T O T A L


2001-2002 2002-2003 2003-2004 2003-2004 2004-2005 2001-2002 2002-2003 2003-2004 2003-2004 2004-2005130.21 138.21 150.00 151.21 170.00 7,843.29 10,049.88 11,500.00 11,133.10 13,615.00275.62 234.84 255.00 256.06 270.00 13,101.32 14,213.67 17,217.00 15,418.21 17,550.00311.71 211.48 136.00 273.62 280.00 5,170.09 5,907.18 6,950.00 6,553.62 7,850.00

2,643.44 3,102.33 2,650.00 2,365.80 500.00 16,289.75 20,540.23 20,610.00 20,534.59 21,480.00165.19 168.94 175.00 363.87 600.00 9,426.99 11,991.29 13,530.00 13,530.75 14,370.00395.33 568.53 720.00 548.07 692.00 11,306.76 12,813.97 14,823.19 13,765.63 16,050.00213.69 223.69 215.00 243.22 260.00 5,418.49 6,893.94 8,350.00 7,545.21 8,810.0080.24 85.10 85.10 132.18 150.00 5,053.95 6,447.83 8,700.00 7,341.01 9,482.00

158.25 158.20 408.00 350.84 400.00 12,720.06 14,315.71 16,500.00 15,615.32 17,800.00147.12 156.92 200.00 176.18 90.00 6,687.36 7,780.99 8,100.00 9,031.48 9,408.00421.41 340.16 131.96 197.17 193.77 5,570.01 6,478.51 6,882.00 7,268.93 8,050.00391.66 1,339.80 1,380.00 397.78 300.00 14,854.31 18,939.34 24,533.87 19,365.37 25,596.0064.32 142.88 75.00 71.27 74.32 3,287.11 3,852.83 4,250.00 4,255.80 5,000.00

262.84 263.32 263.32 270.23 270.23 11,407.65 12,144.25 13,447.68 13,177.88 15,000.00135.78 204.34 200.00 304.86 300.00 10,510.60 11,655.66 13,349.92 12,769.84 14,200.00180.02 203.02 195.00 292.26 300.00 7,954.69 9,297.23 10,602.80 10,963.54 11,984.39

1,885.17 1,401.81 1,600.00 1,921.18 2,050.00 14,524.33 17,188.45 18,265.14 19,342.61 21,125.00254.82 230.10 232.00 241.97 250.00 19,810.56 22,063.78 25,300.00 24,419.72 27,100.00252.32 257.31 260.00 270.81 280.00 12,339.44 15,093.27 15,222.00 15,558.22 16,260.00

1,255.23 870.09 1,245.00 1,004.16 1,155.00 16,971.69 18,359.10 20,900.00 19,902.74 21,900.00255.35 258.29 256.00 255.35 256.00 11,320.65 12,569.57 15,000.00 14,588.41 15,500.00254.00 238.16 188.00 468.16 500.00 13,692.21 15,589.64 18,100.00 18,760.45 20,160.00163.75 41.00 41.00 83.75 41.00 5,195.37 6,205.30 7,450.00 7,087.84 8,480.00766.04 621.15 500.00 621.15 650.00 24,362.74 27,602.24 31,400.00 33,491.70 36,450.00

0.00 168.18 170.00 203.68 210.00 10,043.79 11,171.47 13,371.00 13,435.83 15,057.00305.24 234.19 400.00 569.55 734.33 12,050.37 13,913.98 16,198.30 14,614.89 16,200.00

11,368.75 11,862.04 12,131.38 12,034.38 10,976.65 286,913.58 333,079.31 380,552.90 369,472.69 414,477.39

Non-SLR Working Capital




T O T A L


2001-2002 2002-2003 2003-2004 2003-2004 2004-2005 2001-2002 2002-2003 2003-2004 2003-2004 2004-2005- - - 10,030.17 12,685.00 880.38 901.07 996.00 935.22 1,050.00- - - 15,216.97 17,336.00 1,250.04 1,362.65 1,663.00 1,467.06 1,440.00- - - 6,521.44 7,850.00 519.42 567.22 604.00 601.76 638.00- - - 20,412.12 21,300.00 1,536.14 1,721.37 1,790.00 1,719.61 1,715.00- - - 13,030.65 15,260.00 1,001.63 1,119.09 1,270.00 1,128.80 1,157.00- - - 13,363.19 15,647.56 1,128.84 1,176.09 1,290.00 1,198.96 1,360.00- - - 7,514.24 8,760.00 608.66 726.58 850.00 774.44 810.00- - - 6,487.96 8,751.97 492.83 559.11 675.00 631.64 751.00- - - 15,615.32 17,800.00 1,349.34 1,343.23 1,465.00 1,372.07 1,395.00- - - 8,154.32 8,952.32 704.79 732.40 746.00 851.92 882.00- - - 7,211.35 7,811.50 555.07 593.35 652.00 597.98 640.00- - - 19,235.03 25,425.87 1,347.65 1,780.55 2,160.00 1,824.45 2,230.00- - - 3,701.20 4,467.72 322.42 308.55 358.00 318.95 358.00- - - 13,090.94 14,903.00 1,062.08 1,132.70 1,150.00 1,347.21 1,232.00- - - 12,744.97 14,150.00 1,022.38 1,147.79 1,265.00 1,340.86 1,300.00- - - 10,666.42 11,784.34 794.81 879.04 948.00 972.24 1,045.00- - - 19,043.02 20,797.00 1,520.58 1,565.64 1,638.89 1,780.66 1,702.00- - - 24,212.44 23,900.00 2,149.57 2,531.92 2,760.00 2,752.30 2,861.00- - - 15,281.49 16,192.00 1,330.61 1,472.12 1,478.00 1,552.01 1,562.50- - - 19,628.84 21,650.00 2,313.51 1,887.60 2,010.00 1,957.06 1,955.00- - - 14,560.00 15,460.00 1,173.97 1,239.42 1,440.00 1,321.52 1,380.00- - - 18,659.51 20,000.00 1,448.40 1,613.81 1,710.00 1,679.32 1,750.00- - - 7,060.38 8,450.00 563.95 580.49 656.00 631.86 686.00- - - 33,292.84 36,212.00 2,650.85 2,614.82 2,825.00 2,944.06 2,915.00- - - 13,435.83 15,027.00 1,048.05 1,160.06 1,296.50 1,289.49 1,355.85- - - 13,841.94 15,300.00 1,276.53 1,313.09 1,425.00 1,452.58 1,400.00

0.00 0.00 0.00 362,012.58 405,873.28 30,052.50 32,029.76 35,121.39 34,444.03 35,570.35

Net Working Capital Total Income




T O T A L


2001-2002 2002-2003 2003-2004 2003-2004 2004-2005 2001-2002 2002-2003 2003-2004 2003-2004 2004-2005169.77 176.13 190.00 171.12 190.00 2.02 1.87 1.78 1.61 1.53182.37 180.80 300.00 244.41 250.00 1.53 1.40 1.90 1.67 1.5282.12 80.34 100.00 96.61 110.00 1.65 1.48 1.60 1.59 1.55

200.18 217.00 300.00 293.15 290.00 1.44 1.30 1.69 1.63 1.51172.26 188.51 225.00 204.81 210.00 1.79 1.74 1.87 1.65 1.65162.93 166.63 220.00 209.82 270.00 1.54 1.43 1.56 1.65 1.7598.36 111.67 178.00 167.88 148.00 1.99 1.80 2.46 2.38 1.85

143.59 138.32 164.00 133.08 140.00 2.73 2.32 2.38 1.95 1.70162.66 169.95 273.00 213.32 270.00 1.35 1.31 1.84 1.50 1.71124.67 142.66 210.00 145.84 163.25 1.84 1.97 2.69 1.67 1.8086.28 92.80 105.00 102.93 114.00 1.63 1.62 1.60 1.59 1.58

244.53 236.80 240.00 294.50 400.00 1.96 1.41 1.03 1.62 1.6742.36 58.82 50.00 40.03 45.00 1.25 1.71 1.32 1.04 1.00

121.10 114.13 150.00 180.59 150.00 1.30 1.13 1.47 1.56 1.24147.02 145.51 220.62 205.24 200.00 1.60 1.37 1.81 1.68 1.52106.09 111.13 160.00 154.24 185.00 1.48 1.34 1.76 1.58 1.66233.40 240.50 257.25 274.81 285.00 1.74 1.60 1.55 1.57 1.46260.80 419.86 377.00 280.90 295.00 1.40 2.04 1.61 1.22 1.18158.73 158.16 190.00 195.40 235.00 1.32 1.14 1.34 1.28 1.50269.80 278.65 290.00 368.99 400.00 1.72 1.62 1.53 1.95 1.92163.88 171.51 240.00 278.78 260.00 1.60 1.57 1.85 2.07 1.86140.72 140.86 210.00 247.61 215.00 1.17 1.00 1.31 1.52 1.2283.88 109.50 121.00 122.25 134.50 1.75 2.05 1.97 1.93 1.80

390.88 394.39 550.00 620.69 500.00 1.81 1.64 1.99 2.16 1.48118.44 112.89 150.00 135.95 136.57 1.35 1.14 1.28 1.19 1.08167.31 176.85 210.00 173.54 210.00 1.35 1.36 1.43 1.25 1.37

4,234.13 4,534.37 5,680.87 5,556.49 5,806.32 1.60 1.52 1.67 1.64 1.54

Salary & Allowance(in Amount) %of Sal.& Allow. to Avg.Wkg.Capital




T O T A L


2001-2002 2002-2003 2003-2004 2003-2004 2004-2005 2001-2002 2002-2003 2003-2004 2003-2004 2004-200537.65 38.97 40.00 34.11 35.00 0.45 0.41 0.37 0.32 0.2840.92 58.32 45.00 47.25 50.00 0.34 0.45 0.29 0.32 0.3019.40 20.32 25.00 19.75 25.00 0.39 0.37 0.40 0.32 0.3546.60 86.06 50.00 53.55 55.00 0.33 0.52 0.28 0.30 0.2927.73 31.66 40.00 34.49 40.00 0.29 0.29 0.33 0.28 0.3130.65 67.55 20.00 57.10 50.00 0.29 0.58 0.14 0.45 0.3229.51 27.45 30.25 31.55 36.75 0.60 0.44 0.42 0.45 0.4620.58 17.12 20.00 22.53 25.00 0.39 0.29 0.29 0.33 0.3045.22 61.72 81.00 59.44 60.00 0.37 0.48 0.55 0.42 0.3816.97 18.80 25.00 24.57 32.50 0.25 0.26 0.32 0.28 0.3619.09 20.49 22.00 33.11 25.00 0.36 0.36 0.34 0.51 0.3543.12 48.23 50.00 63.24 80.00 0.35 0.29 0.21 0.35 0.3322.35 17.00 19.00 18.55 20.00 0.66 0.50 0.50 0.48 0.4464.15 46.04 50.00 47.66 50.00 0.69 0.46 0.49 0.41 0.4129.32 33.56 40.00 31.40 35.13 0.32 0.32 0.33 0.26 0.2730.86 34.42 35.00 34.86 35.00 0.43 0.41 0.38 0.36 0.3150.48 51.79 55.50 65.37 65.00 0.38 0.34 0.33 0.37 0.3362.18 79.98 85.00 72.72 80.00 0.33 0.39 0.36 0.32 0.3256.87 54.40 60.00 49.12 65.00 0.47 0.39 0.42 0.32 0.4270.95 81.13 75.00 79.68 80.00 0.45 0.47 0.39 0.42 0.3836.82 33.74 34.40 34.93 35.80 0.36 0.31 0.26 0.26 0.2654.10 63.01 60.00 71.25 65.00 0.45 0.45 0.37 0.44 0.3723.45 28.68 29.00 24.61 27.50 0.49 0.54 0.47 0.39 0.37

128.24 125.56 145.00 115.22 130.00 0.59 0.52 0.52 0.40 0.3824.32 39.96 40.00 39.85 40.47 0.28 0.40 0.34 0.35 0.3233.70 30.55 30.00 34.15 35.00 0.27 0.23 0.20 0.25 0.23

1,065.23 1,216.51 1,206.15 1,200.06 1,278.15 0.40 0.41 0.35 0.35 0.34

Other Expenses %of other exp. to Av.Wkg.Capital




T O T A L


2001-2002 2002-2003 2003-2004 2003-2004 2004-2005 2001-2002 2002-2003 2003-2004 2003-2004 2004-2005772.49 805.97 840.00 808.49 833.00 -74.22 16.98 131.00 94.55 180.00926.03 982.83 1,263.00 1,061.20 1,102.00 224.01 325.82 375.00 365.76 308.00409.35 404.68 459.00 422.17 483.00 77.98 29.91 85.00 59.93 84.00

1,269.67 1,368.82 1,440.00 1,306.59 1,320.00 253.47 332.55 335.00 373.02 375.00765.51 888.06 985.00 905.95 912.00 198.56 206.03 260.00 198.06 230.00924.14 1,000.80 1,064.00 1,055.81 1,195.00 176.01 39.42 185.00 -33.88 25.00443.47 520.38 651.00 604.25 601.75 12.23 12.58 99.00 101.04 133.25474.40 483.51 548.00 494.11 540.00 -19.76 75.60 72.00 124.53 150.00

1,066.93 1,075.28 1,232.00 1,069.86 1,147.00 202.41 158.83 223.00 62.57 238.00617.63 629.39 680.00 636.22 661.00 68.94 -108.34 66.00 205.70 216.00470.83 479.34 530.00 494.42 521.00 30.27 81.25 112.00 71.29 104.00

1,026.84 1,299.45 1,560.00 1,311.84 1,730.00 136.31 202.10 250.00 372.61 250.00258.79 269.94 288.00 219.93 243.00 -25.82 -107.04 40.00 -79.75 34.00919.10 870.04 900.00 956.54 900.00 65.28 90.11 200.00 145.68 280.00831.27 883.69 1,009.42 954.79 964.88 175.86 118.82 212.58 153.80 314.72649.57 694.83 733.00 807.63 845.00 4.49 27.29 83.00 103.89 120.00

1,266.28 1,263.63 1,331.52 1,309.53 1,316.50 154.30 248.88 227.37 301.46 291.501,669.03 2,106.66 2,087.00 1,979.53 2,087.00 323.90 85.07 673.00 315.70 504.001,118.57 1,209.63 1,216.05 1,217.97 1,253.50 -55.57 252.60 248.95 204.58 287.002,038.84 1,553.75 1,575.00 1,550.79 1,575.00 127.00 151.66 400.00 129.12 330.00

860.92 895.20 1,100.00 1,077.15 1,067.00 313.05 35.43 270.00 43.24 83.001,062.13 1,115.79 1,265.00 1,269.25 1,305.00 222.04 288.37 385.00 288.20 360.00

396.01 448.60 495.00 503.44 544.00 167.94 66.26 81.00 90.60 62.002,017.23 2,086.25 2,290.00 2,417.52 2,340.00 311.61 213.25 460.00 281.79 365.00

735.81 805.26 902.00 944.28 1,003.02 312.24 274.65 289.50 199.91 207.831,097.33 1,073.39 1,170.00 994.33 1,075.00 128.76 -105.19 230.00 410.76 300.00

24,088.17 25,215.17 27,613.99 26,373.59 27,564.65 3,511.29 3,012.89 5,993.40 4,584.16 5,832.30

Total Expenditure Net Profit




T O T A L


2001-2002 2002-2003 2003-2004 2003-2004 2004-2005 2001-2002 2002-2003 2003-2004 2003-2004 2004-20051,898.60 1,350.40 1,100.00 2,042.68 1,400.00 55.76 70.00 70.00 56.28 70.005,293.93 1,965.81 5,000.00 4,186.49 4,000.00 45.98 67.92 50.00 47.56 50.001,261.08 1,441.95 1,318.00 1,923.94 1,828.00 74.94 65.11 67.00 45.86 65.00

196.52 183.89 275.00 326.55 350.00 95.88 97.62 95.00 96.03 95.004,571.00 2,151.00 3,237.00 3,456.08 2,937.00 45.29 80.26 58.90 56.00 64.002,039.40 1,325.81 1,300.00 2,813.37 2,600.00 67.34 80.14 80.00 52.97 65.001,667.15 2,208.37 2,000.00 2,103.00 2,835.00 58.43 57.72 60.00 50.94 55.001,398.88 744.65 1,350.00 1,226.24 1,640.00 60.09 77.78 70.00 56.00 70.001,745.31 1,936.97 1,200.00 2,603.83 2,900.00 74.21 76.00 80.00 59.18 75.001,596.58 1,000.38 1,100.00 2,158.49 1,925.00 68.92 75.59 75.00 62.85 70.00

608.33 614.65 550.00 1,034.52 800.00 66.13 70.00 70.00 48.62 60.004,270.97 4,951.19 4,000.00 4,900.09 4,500.00 60.84 58.00 65.00 63.81 65.00

755.30 791.16 680.00 922.01 700.00 34.46 32.92 45.00 30.12 33.09743.52 416.91 350.00 2,553.23 1,800.00 88.19 77.30 80.00 60.31 70.00

2,231.69 1,286.15 2,360.00 2,796.42 2,408.00 66.46 81.79 70.85 57.09 75.001,197.39 1,276.40 1,200.00 1,914.65 1,500.00 76.23 80.98 80.00 65.86 80.00

700.81 653.78 750.00 1,904.99 1,400.00 89.80 64.36 75.00 77.72 80.004,161.44 4,637.63 4,000.00 7,348.11 5,500.00 66.53 68.89 60.00 45.24 60.002,276.86 1,697.33 1,350.00 3,227.29 2,125.00 62.86 80.09 80.00 45.21 70.002,208.15 2,608.98 2,000.00 3,840.04 2,600.00 77.11 74.50 80.00 58.91 70.002,886.12 1,419.11 2,400.00 1,407.42 2,400.00 71.41 75.64 75.00 84.90 85.002,633.81 1,196.75 2,560.00 2,299.90 2,500.00 68.66 89.65 70.00 73.03 75.001,038.20 1,046.04 1,000.00 1,331.62 1,300.00 53.43 57.32 65.00 51.51 60.004,545.57 4,126.49 4,085.26 5,090.24 5,514.00 81.04 85.80 86.00 77.72 85.001,612.42 850.78 1,100.00 2,815.93 2,500.00 64.77 59.72 75.00 59.72 65.002,891.45 2,767.79 830.00 3,653.52 2,800.00 54.71 55.52 70.00 42.25 70.00

56,430.48 44,650.37 47,095.26 69,880.65 62,762.00 68.74

% of Recovery to DemandTotal Overdues




T O T A L


2001-2002 2002-2003 2003-2004 2003-2004 2004-2005 2001-2002 2002-2003 2003-2004 2003-2004 2004-20052,169.78 2,456.88 2,700.00 2,932.87 3,400.00 1,256.52 1,430.21 1,700.00 1,612.63 1,800.003,282.32 3,926.76 5,600.00 5,185.38 5,900.00 2,386.44 2,315.91 2,800.00 2,279.19 2,700.001,484.31 1,638.71 1,875.00 1,890.51 2,100.00 1,217.59 1,153.50 1,440.00 1,161.10 1,400.00

982.54 1,864.30 2,000.00 1,804.06 2,000.00 7,422.72 8,326.49 7,600.00 7,534.21 7,850.002,578.26 3,244.28 3,710.00 4,286.28 4,000.00 1,256.00 1,411.92 1,660.00 1,752.62 1,800.001,714.67 1,805.06 2,742.00 2,600.81 2,750.00 3,038.81 3,482.00 4,375.00 3,622.95 3,768.002,182.93 2,523.94 2,900.00 2,576.59 3,000.00 675.95 809.20 930.00 1,028.13 1,150.001,000.18 1,436.22 1,800.00 1,922.96 2,210.00 904.93 915.03 965.00 982.55 1,250.001,875.49 1,890.61 2,500.00 2,110.64 2,600.00 3,969.84 4,095.12 4,500.00 4,022.13 4,300.002,643.06 2,809.20 2,650.00 3,606.81 3,550.00 891.56 901.21 1,050.00 1,035.06 1,150.00

444.61 562.66 645.00 727.66 800.00 2,210.35 2,342.83 2,805.00 2,574.65 3,100.002,728.48 4,420.04 10,000.00 4,889.89 7,200.00 2,807.24 3,562.07 5,150.00 3,275.04 6,000.001,181.27 1,066.36 1,200.00 1,161.61 1,310.00 400.99 479.86 525.00 541.06 850.002,406.11 2,612.27 2,700.00 3,220.99 3,500.00 2,052.22 2,032.17 2,100.00 1,906.76 2,200.001,979.32 2,854.90 3,800.00 3,588.71 3,300.00 1,912.25 1,995.76 2,400.00 2,129.06 2,280.002,660.71 3,222.22 3,400.00 4,150.42 5,000.00 886.50 988.87 1,200.00 1,198.07 1,350.001,890.48 2,479.68 2,400.00 2,673.97 3,000.00 5,649.96 6,316.84 6,800.00 6,973.29 7,750.002,523.08 4,064.01 5,500.00 6,122.79 6,500.00 3,675.46 3,803.21 3,800.00 3,473.51 4,800.004,541.78 5,246.35 4,890.00 5,962.16 5,500.00 1,767.63 2,033.52 2,398.00 2,148.98 2,450.003,244.19 3,167.89 3,515.00 4,412.41 4,800.00 4,796.11 4,799.55 5,400.00 4,450.12 4,800.004,481.66 4,546.70 6,000.00 6,272.26 5,920.00 1,292.21 1,352.73 1,500.00 1,495.93 1,500.002,697.94 2,956.92 4,000.00 4,167.50 4,600.00 2,629.65 2,616.59 3,100.00 3,081.16 3,300.00

624.09 583.61 750.00 765.78 950.00 1,011.21 1,479.84 1,900.00 1,741.19 2,100.007,282.91 6,909.60 8,000.00 9,172.13 10,850.00 3,730.03 4,124.10 4,435.00 4,414.55 5,050.002,669.17 3,178.95 4,170.00 4,400.00 4,198.00 1,505.50 1,605.00 1,700.00 1,715.00 1,900.002,274.69 2,692.23 3,000.00 2,414.44 2,600.00 3,981.09 3,937.36 4,300.00 3,959.06 4,500.00

63,544.03 74,160.35 92,447.00 93,019.63 101,538.00 63,328.76 68,310.89 76,533.00 70,108.00 81,098.00

Average Borrowings Average Investments




T O T A L


2001-2002 2002-2003 2003-2004 2003-2004 2004-2005 2001-2002 2002-2003 2003-2004 2003-2004 2004-20058,400.02 9,399.37 10,700.00 10,660.11 12,400.00 4,574.64 5,034.44 6,000.00 5,622.74 6,600.00

11,881.31 12,906.77 15,773.00 14,595.45 16,405.00 5,880.25 5,821.65 6,800.00 6,515.95 7,600.004,984.47 5,419.35 6,250.00 6,086.44 7,100.00 2,621.58 2,829.09 3,315.00 3,065.56 3,700.00

13,945.74 16,650.84 17,700.00 17,984.04 19,200.00 10,868.60 12,294.94 13,000.00 13,259.29 14,000.009,637.04 10,862.57 12,050.00 12,395.42 12,720.00 4,344.38 5,044.88 5,660.00 5,558.15 6,100.00

10,611.74 11,621.20 14,101.25 12,753.80 15,392.00 7,436.29 8,135.34 9,425.00 8,442.55 10,230.004,950.36 6,214.97 7,250.00 7,048.76 8,000.00 1,680.65 2,314.39 2,700.00 2,845.44 3,200.005,254.88 5,949.75 6,900.00 6,839.57 8,235.00 2,899.81 3,035.50 3,595.00 3,356.31 4,430.00

12,090.45 12,979.54 14,800.00 14,224.58 15,800.00 8,552.19 9,294.68 10,400.00 10,085.88 11,000.006,784.51 7,223.73 7,800.00 8,741.06 9,050.00 2,972.23 3,005.01 3,520.00 3,415.25 3,780.005,279.48 5,741.95 6,555.00 6,475.44 7,200.00 4,110.69 4,372.71 4,948.00 4,904.19 5,500.00

12,474.74 16,803.60 23,350.00 18,232.74 24,000.00 7,222.06 9,524.39 10,000.00 9,923.14 12,900.003,379.71 3,433.58 3,800.00 3,858.41 4,500.00 1,092.92 1,325.75 1,500.00 1,512.56 1,750.009,340.23 10,088.30 10,200.00 11,562.90 12,130.00 5,364.71 5,695.15 5,800.00 6,162.51 6,300.009,210.11 10,582.99 12,175.00 12,204.27 13,170.00 5,769.21 6,163.89 6,600.00 6,749.35 7,800.007,153.13 8,299.92 9,100.00 9,744.25 11,150.00 3,120.67 3,517.37 4,000.00 3,902.09 4,400.00

13,405.21 15,075.65 16,625.00 17,477.04 19,500.00 9,756.28 10,476.50 11,950.00 12,277.85 13,600.0018,656.85 20,550.71 23,400.00 23,070.72 25,000.00 12,558.91 12,999.94 14,100.00 12,911.16 14,400.0012,012.51 13,890.11 14,200.00 15,248.61 15,645.00 5,919.20 6,648.58 7,350.00 7,286.78 8,015.0015,706.18 17,173.58 19,000.00 18,933.46 20,825.00 10,607.75 11,941.78 13,300.00 12,231.00 13,450.0010,232.91 10,905.48 13,000.00 13,470.02 14,000.00 3,967.90 4,478.07 4,800.00 4,952.43 5,700.0012,007.98 14,090.63 16,010.00 16,254.58 17,600.00 7,678.84 8,678.67 9,500.00 9,264.84 10,000.004,779.76 5,329.74 6,150.00 6,339.13 7,480.00 3,336.12 3,800.76 4,400.00 4,462.14 5,250.00

21,617.78 23,977.47 27,680.00 28,718.78 33,800.00 10,308.98 12,415.69 14,500.00 14,133.94 16,900.008,761.60 9,944.65 11,700.00 11,455.00 12,645.00 4,226.09 4,846.00 5,800.00 5,145.50 6,400.00

12,355.36 13,010.30 14,730.00 13,841.94 15,300.00 8,101.45 8,291.43 9,400.00 8,920.41 10,000.00264,914.06 298,126.75 340,999.25 338,216.52 378,247.00 154,972.40 171,986.60 192,363.00 186,907.01 213,005.00

Average Working Fund Average Deposit




T O T A L


2001-2002 2002-2003 2003-2004 2003-2004 2004-2005 2001-2002 2002-2003 2003-2004 2003-2004 2004-20054,873.60 5,410.63 6,200.00 6,297.11 7,775.00 9,448.24 10,445.07 12,200.00 11,919.85 14,375.007,459.35 8,595.81 11,000.00 10,459.57 11,800.00 13,339.60 14,417.46 17,800.00 16,975.52 19,400.003,043.80 3,524.53 4,065.00 4,075.31 4,800.00 5,665.38 6,353.62 7,380.00 7,140.87 8,500.005,140.02 7,064.27 8,600.00 8,909.11 9,800.00 16,008.62 19,359.21 21,600.00 22,168.40 23,800.006,163.73 7,415.22 8,900.00 8,419.60 9,000.00 10,508.11 12,460.10 14,560.00 13,977.75 15,100.005,912.29 6,254.15 7,425.00 7,198.59 8,562.50 13,348.58 14,389.49 16,850.00 15,641.14 18,792.503,730.46 4,682.37 5,400.00 5,123.56 5,900.00 5,411.11 6,996.76 8,100.00 7,969.00 9,100.002,764.97 3,422.13 4,285.00 4,114.79 5,100.00 5,664.78 6,457.63 7,880.00 7,471.10 9,530.006,310.79 7,125.14 8,350.00 8,111.56 9,200.00 14,862.98 16,419.82 18,750.00 18,197.44 20,200.004,631.00 4,836.22 5,175.00 6,150.94 6,500.00 7,603.23 7,841.23 8,695.00 9,566.19 10,280.002,287.10 2,577.19 2,804.00 3,016.75 3,300.00 6,397.79 6,949.90 7,752.00 7,920.94 8,800.007,754.03 11,322.39 16,000.00 12,673.18 15,550.00 14,976.09 20,846.78 26,000.00 22,596.32 28,450.001,814.08 1,891.30 2,225.00 2,069.68 2,300.00 2,907.00 3,217.05 3,725.00 3,582.24 4,050.006,110.70 6,797.11 7,000.00 8,361.64 8,780.00 11,475.41 12,492.26 12,800.00 14,524.15 15,080.005,918.11 7,050.23 8,100.00 8,273.64 8,840.00 11,687.32 13,214.12 14,700.00 15,022.99 16,640.005,186.35 6,248.95 6,800.00 7,521.77 8,700.00 8,307.02 9,766.32 10,800.00 11,423.86 13,100.006,671.68 7,668.04 8,610.00 9,026.64 10,150.00 16,427.96 18,144.54 20,560.00 21,304.49 23,750.00

12,306.59 13,944.68 16,700.00 16,844.39 17,800.00 24,865.50 26,944.62 30,800.00 29,755.55 32,200.008,521.97 9,957.16 9,850.00 10,810.85 10,900.00 14,441.17 16,605.74 17,200.00 18,097.63 18,915.009,120.06 10,601.36 11,850.00 12,432.50 13,795.00 19,727.81 22,543.14 25,150.00 24,663.50 27,245.007,676.06 8,485.45 10,500.00 10,187.69 11,400.00 11,643.96 12,963.52 15,300.00 15,140.12 17,100.008,326.50 10,330.88 11,760.00 11,932.66 13,150.00 16,005.34 19,009.55 21,260.00 21,197.50 23,150.003,104.06 3,137.56 3,650.00 3,783.42 4,450.00 6,440.18 6,938.32 8,050.00 8,245.56 9,700.00

16,529.18 18,191.30 21,500.00 21,867.79 26,450.00 26,838.16 30,606.99 36,000.00 36,001.73 43,350.006,068.46 7,275.64 9,000.00 8,500.00 9,450.00 10,294.55 12,121.64 14,800.00 13,645.50 15,850.006,257.41 6,833.28 8,300.00 7,260.03 8,500.00 14,358.86 15,124.71 17,700.00 16,180.44 18,500.00

163,682.35 190,642.99 224,049.00 223,422.77 251,952.50 318,654.75 362,629.59 416,412.00 410,329.78 464,957.50

Average BusinessAverage Advance




T O T A L


2001-2002 2002-2003 2003-2004 2003-2004 2004-2005 2001-2002 2002-2003 2003-2004 2003-2004 2004-20058.27 7.58 6.50 6.65 5.74 8.60 8.51 8.15 7.82 6.747.23 6.75 6.50 5.81 5.50 8.46 8.93 8.50 7.54 6.517.80 6.92 6.33 6.00 5.86 6.97 6.60 6.61 6.45 6.248.73 7.58 7.31 6.27 6.00 7.57 7.15 7.00 7.12 6.757.93 8.05 7.60 6.47 6.26 8.57 8.07 7.82 7.16 7.008.21 7.93 7.00 7.34 6.84 7.02 6.75 5.98 6.50 6.367.03 7.08 7.00 6.48 6.00 9.04 8.61 8.75 8.56 7.508.10 7.11 6.82 6.00 5.49 7.54 7.82 6.61 7.13 5.978.57 7.83 6.90 6.64 6.00 6.71 6.14 6.40 6.04 6.048.66 7.99 6.99 5.60 5.50 8.27 8.11 7.51 7.61 7.258.21 7.49 7.26 6.31 6.00 6.26 6.83 6.82 6.74 6.507.54 7.16 6.80 5.88 5.81 7.13 7.51 5.90 7.57 6.945.43 6.94 6.93 5.33 5.26 11.41 9.58 9.58 6.94 6.569.91 8.73 8.10 7.92 7.22 8.41 8.14 8.52 7.45 7.008.94 8.14 7.60 6.98 6.50 6.91 7.11 6.50 6.88 6.758.20 7.68 6.00 7.54 6.25 9.65 8.66 8.76 7.81 7.008.83 7.81 7.25 6.54 5.75 6.40 6.17 6.35 6.21 6.159.11 9.93 8.51 9.05 8.55 7.98 7.78 7.73 7.47 7.408.63 8.09 7.68 7.14 6.75 8.63 8.75 8.22 7.61 7.509.47 8.39 7.52 6.81 6.02 21.38 6.05 5.97 6.09 5.947.62 7.24 7.20 6.04 6.00 7.99 8.04 8.00 7.40 7.258.81 7.92 7.53 7.02 7.00 7.08 7.59 7.00 7.21 7.077.22 7.14 6.75 6.85 6.17 7.68 6.66 6.40 6.66 6.118.29 7.96 6.86 7.14 5.95 8.84 8.37 7.50 7.32 6.507.80 7.40 6.50 7.14 7.05 9.87 9.25 8.03 9.12 8.938.97 8.07 7.66 6.89 6.50 7.44 7.30 7.00 7.12 6.928.49 7.92 7.23 6.84 6.33 8.87 7.88 7.37 7.34 6.89

Cost of Deposit(%) Cost of Borrowings(%)




T O T A L


2001-2002 2002-2003 2003-2004 2003-2004 2004-2005 2001-2002 2002-2003 2003-2004 2003-2004 2004-200514.86 13.87 13.00 12.32 11.25 9.94 9.27 8.53 8.67 6.9413.23 13.14 12.66 12.09 10.20 10.43 9.44 8.93 8.27 8.0013.09 13.16 12.00 12.27 11.00 8.99 8.04 7.01 7.73 6.7913.28 12.13 12.03 11.73 11.22 10.60 9.61 9.01 8.26 7.1310.79 13.42 12.36 11.56 10.89 25.74 7.84 7.83 8.12 7.6113.07 12.81 11.52 12.28 11.97 11.17 10.26 9.14 8.14 8.0913.77 13.79 13.75 13.21 12.00 11.81 9.01 8.92 7.74 6.5213.71 13.52 13.26 13.07 12.49 10.61 9.30 8.99 8.53 7.5213.48 12.79 12.63 12.17 11.50 11.93 9.87 8.38 8.61 6.9113.12 13.30 12.49 12.32 12.00 9.71 9.03 8.52 8.37 8.0013.21 12.97 12.70 11.96 11.00 10.86 10.62 10.12 8.74 8.5012.67 12.13 10.00 11.71 11.00 10.82 9.81 9.32 8.81 7.5015.07 14.02 13.84 13.06 12.65 9.75 6.80 6.86 7.31 6.4713.82 13.86 13.57 13.34 11.67 8.44 7.54 7.48 10.73 7.5014.13 13.69 13.00 13.18 12.67 8.34 8.36 8.00 11.09 7.0013.24 12.66 12.50 11.60 10.92 8.91 7.12 6.50 6.92 5.5613.24 12.16 11.95 12.95 10.97 10.47 9.46 8.50 8.31 7.1513.99 15.43 14.35 14.36 13.50 10.55 9.29 8.50 8.96 8.5013.17 12.94 12.75 12.44 12.35 9.19 8.08 8.00 8.67 7.0019.30 12.86 11.98 12.25 11.49 9.91 9.57 9.54 8.37 6.2513.41 13.30 12.50 11.63 11.00 9.69 7.18 7.00 7.98 7.0013.19 12.77 11.86 11.50 11.03 10.91 9.80 8.06 8.38 7.2714.36 13.93 13.51 12.66 12.00 9.68 8.55 7.47 7.70 6.0513.08 11.73 11.30 11.62 9.64 11.72 10.59 7.56 8.19 6.2414.71 13.96 12.81 13.13 12.25 9.20 8.04 7.00 8.99 8.8713.37 13.39 12.05 13.27 12.94 10.23 9.53 9.07 9.48 6.0013.72 13.12 12.36 12.40 11.45 10.70 9.33 8.52 8.56 7.18

Yield on Advances(%) Yield on Investment(%)




T O T A L


2001-2002 2002-2003 2003-2004 2003-2004 2004-2005 2001-2002 2002-2003 2003-2004 2003-2004 2004-200510.11 9.39 8.89 8.59 8.06 6.73 6.29 5.70 5.66 4.9010.40 10.44 10.42 9.95 8.66 5.91 5.76 5.82 5.27 4.8910.19 10.27 9.42 9.69 8.77 6.18 5.61 5.34 5.02 4.9010.54 9.95 9.72 9.27 8.65 7.33 6.40 6.16 5.34 5.0810.26 10.18 10.21 9.00 8.78 5.87 6.15 5.98 5.38 5.2010.48 9.97 8.90 9.24 8.64 6.88 6.60 5.84 6.19 5.6811.99 11.56 11.39 10.73 9.79 6.38 6.13 6.11 5.74 5.219.04 9.21 9.49 9.09 8.88 5.90 5.51 5.28 4.95 4.55

10.95 10.14 9.68 9.38 8.58 7.11 6.50 5.93 5.60 5.1710.23 10.03 9.44 9.66 9.64 7.02 6.48 5.71 5.33 5.1410.27 10.15 9.76 9.05 8.70 6.92 6.38 6.15 5.53 5.3110.31 10.25 8.91 9.72 9.00 5.93 6.04 5.44 5.23 5.219.25 8.67 9.05 8.03 7.69 5.74 5.65 5.76 4.18 3.96

10.90 10.86 10.85 11.42 9.81 7.86 7.04 6.86 6.30 5.7710.81 10.70 10.23 10.87 9.72 7.11 6.66 6.15 5.88 5.5410.70 10.38 10.20 9.81 9.19 7.17 6.62 5.91 6.35 5.6111.01 10.15 9.67 10.00 8.55 7.33 6.44 6.13 5.55 4.9611.31 12.19 11.62 11.83 11.24 7.21 7.82 6.94 7.05 6.8510.69 10.46 10.20 10.04 9.70 7.52 7.18 6.80 6.38 6.0914.24 10.62 10.18 10.01 9.05 10.81 6.95 6.37 5.82 5.2611.28 11.24 10.90 9.68 9.71 6.45 6.33 6.35 5.67 5.5111.53 11.18 10.27 10.03 9.60 7.22 6.47 6.21 5.85 5.8211.38 10.57 10.33 9.67 8.84 6.04 5.82 5.61 5.63 5.1112.03 10.72 9.99 10.10 8.48 6.93 6.53 5.76 5.86 5.0611.77 11.51 10.87 11.08 10.49 6.77 6.56 6.09 6.71 6.5310.07 9.92 9.44 9.67 8.95 7.25 6.66 6.31 5.68 5.4211.04 10.53 10.03 9.97 9.17 7.09 6.53 6.08 5.80 5.41

Return on funds(%) Cost of Funds(%)




T O T A L


2001-2002 2002-2003 2003-2004 2003-2004 2004-2005 2001-2002 2002-2003 2003-2004 2003-2004 2004-20053.38 3.11 3.19 2.93 3.16 31.53 18.08 45.00 19.58 50.004.49 4.68 4.60 4.68 3.77 13.92 14.72 20.00 14.37 20.004.01 4.66 4.08 4.67 3.87 11.48 10.51 15.00 11.96 15.003.20 3.55 3.56 3.93 3.57 66.40 64.14 70.00 52.07 55.004.39 4.03 4.23 3.62 3.58 13.01 12.98 40.00 13.01 40.003.60 3.37 3.06 3.06 2.96 16.41 17.47 35.00 20.19 30.005.61 5.43 5.28 4.99 4.58 15.10 8.01 24.50 18.01 27.003.14 3.70 4.21 4.14 4.32 17.73 11.17 20.26 10.09 20.003.84 3.64 3.74 3.77 3.41 25.51 27.58 33.00 38.04 40.003.21 3.55 3.73 4.33 4.49 10.75 7.67 10.00 7.59 10.003.35 3.78 3.62 3.51 3.40 12.68 10.30 12.00 12.15 13.504.38 4.22 3.47 4.49 3.79 61.51 57.53 80.00 51.64 70.003.50 3.02 3.29 3.85 3.73 9.92 10.84 14.00 9.18 12.003.04 3.82 3.99 5.12 4.04 44.32 37.58 43.00 26.82 42.003.70 4.04 4.08 4.98 4.18 26.68 15.65 20.00 14.64 20.003.54 3.76 4.29 3.46 3.59 29.09 17.31 20.00 16.58 20.003.68 3.71 3.54 4.46 3.59 45.26 35.54 32.00 32.09 35.004.09 4.37 4.68 4.79 4.40 40.02 26.81 40.00 22.04 50.003.17 3.28 3.39 3.65 3.60 46.27 19.64 30.30 21.36 45.003.43 3.66 3.82 4.19 3.79 77.45 64.36 75.00 62.18 70.004.83 4.91 4.55 4.01 4.20 19.25 13.87 22.50 17.79 21.004.31 4.71 4.06 4.18 3.78 63.39 38.05 65.00 49.04 60.005.34 4.75 4.72 4.05 3.73 20.24 16.97 21.00 18.72 25.005.10 4.19 4.23 4.25 3.42 51.23 43.45 60.00 42.53 50.005.00 4.95 4.78 4.38 3.95 16.75 15.28 25.00 19.72 30.002.82 3.26 3.12 3.99 3.53 32.35 22.77 35.00 113.77 30.003.94 4.00 3.96 4.17 3.75 818.25 638.28 907.56 735.16 900.50

Financial Margin(%) Misc.Income in Amount




T O T A L


2001-2002 2002-2003 2003-2004 2003-2004 2004-2005 2001-2002 2002-2003 2003-2004 2003-2004 2004-20050.38 0.19 0.42 0.18 0.40 3.75 3.30 3.61 3.11 3.560.12 0.11 0.13 0.10 0.12 4.61 4.80 4.72 4.78 3.890.23 0.19 0.24 0.20 0.21 4.24 4.86 4.32 4.86 4.080.48 0.39 0.40 0.29 0.29 3.68 3.94 3.95 4.22 3.850.13 0.12 0.33 0.10 0.31 4.53 4.15 4.56 3.73 3.890.15 0.15 0.25 0.16 0.19 3.75 3.52 3.30 3.22 3.150.31 0.13 0.34 0.26 0.34 5.92 5.56 5.62 5.24 4.910.34 0.19 0.29 0.15 0.24 3.47 3.88 4.51 4.29 4.570.21 0.21 0.22 0.27 0.25 4.06 3.85 3.97 4.04 3.660.16 0.11 0.13 0.09 0.11 3.37 3.66 3.86 4.42 4.600.24 0.18 0.18 0.19 0.19 3.59 3.96 3.80 3.70 3.580.49 0.34 0.34 0.28 0.29 4.88 4.56 3.81 4.77 4.080.29 0.32 0.37 0.24 0.27 3.80 3.33 3.66 4.08 4.000.47 0.37 0.42 0.23 0.35 3.51 4.19 4.41 5.35 4.390.29 0.15 0.16 0.12 0.15 3.99 4.19 4.24 5.10 4.330.41 0.21 0.22 0.17 0.18 3.94 3.97 4.51 3.63 3.770.34 0.24 0.19 0.18 0.18 4.01 3.94 3.73 4.64 3.770.21 0.13 0.17 0.10 0.20 4.31 4.50 4.85 4.88 4.600.39 0.14 0.21 0.14 0.29 3.56 3.42 3.61 3.79 3.890.49 0.37 0.39 0.33 0.34 3.92 4.04 4.21 4.52 4.130.19 0.13 0.17 0.13 0.15 5.02 5.04 4.73 4.14 4.350.53 0.27 0.41 0.30 0.34 4.84 4.98 4.47 4.48 4.120.42 0.32 0.34 0.30 0.33 5.76 5.07 5.06 4.34 4.060.24 0.18 0.22 0.15 0.15 5.33 4.37 4.44 4.40 3.570.19 0.15 0.21 0.17 0.24 5.19 5.10 5.00 4.55 4.190.26 0.18 0.24 0.82 0.20 3.08 3.44 3.36 4.81 3.730.31 0.21 0.27 0.22 0.24 4.25 4.21 4.22 4.38 3.99

Misc.Income in % Total(Final.Margin&Misc.Income)




T O T A L


2001-2002 2002-2003 2003-2004 2003-2004 2004-2005 2001-2002 2002-2003 2003-2004 2003-2004 2004-20052.47 2.29 2.15 1.93 1.81 1.28 1.01 1.46 1.19 1.751.88 1.85 2.19 2.00 1.83 2.73 2.94 2.54 2.78 2.062.04 1.86 2.00 1.91 1.90 2.21 3.00 2.32 2.95 2.181.77 1.82 1.98 1.93 1.80 1.91 2.12 1.98 2.30 2.062.08 2.03 2.20 1.93 1.97 2.45 2.13 2.37 1.80 1.931.82 2.02 1.70 2.09 2.08 1.93 1.51 1.60 1.12 1.072.58 2.24 2.87 2.83 2.31 3.34 3.32 2.74 2.41 2.603.12 2.61 2.67 2.28 2.00 0.35 1.27 1.84 2.01 2.561.72 1.78 2.39 1.92 2.09 2.34 2.06 1.57 2.12 1.572.09 2.24 3.01 1.95 2.16 1.28 1.43 0.85 2.47 2.442.00 1.97 1.94 2.10 1.93 1.60 1.99 1.86 1.60 1.652.31 1.70 1.24 1.96 2.00 2.57 2.86 2.57 2.81 2.081.91 2.21 1.82 1.52 1.44 1.88 1.12 1.84 2.57 2.561.98 1.59 1.96 1.97 1.65 1.53 2.60 2.45 3.38 2.741.91 1.69 2.14 1.94 1.79 2.08 2.50 2.10 3.16 2.541.91 1.75 2.14 1.94 1.97 2.03 2.22 2.36 1.69 1.792.12 1.94 1.88 1.95 1.79 1.90 2.00 1.85 2.70 1.981.73 2.43 1.97 1.53 1.50 2.58 2.07 2.88 3.35 3.101.79 1.53 1.76 1.60 1.92 1.77 1.89 1.84 2.19 1.982.17 2.09 1.92 2.37 2.30 1.75 1.94 2.29 2.15 1.821.96 1.88 2.11 2.33 2.11 3.06 3.16 2.62 1.81 2.241.62 1.45 1.69 1.96 1.59 3.22 3.53 2.78 2.52 2.532.25 2.59 2.44 2.32 2.17 3.51 2.47 2.62 2.03 1.902.40 2.17 2.51 2.56 1.86 2.93 2.20 1.93 1.83 1.701.63 1.54 1.62 1.53 1.40 3.56 3.57 3.37 3.01 2.791.63 1.59 1.63 1.50 1.60 1.45 1.84 1.73 3.31 2.122.00 1.93 2.02 2.00 1.87 2.25 2.29 2.20 2.39 2.12

Cost of Management(%) Operative Margin




T O T A L


2001-2002 2002-2003 2003-2004 2003-2004 2004-2005 2001-2002 2002-2003 2003-2004 2003-2004 2004-20052.17 0.83 0.23 0.30 0.30 -0.88 0.18 1.22 0.89 1.450.84 0.42 0.16 0.27 0.18 1.89 2.52 2.38 2.51 1.880.64 2.45 0.96 1.97 1.00 1.56 0.55 1.36 0.98 1.180.09 0.12 0.08 0.22 0.10 1.82 2.00 1.89 2.07 1.950.39 0.23 0.21 0.20 0.12 2.06 1.90 2.16 1.60 1.810.27 1.17 0.29 1.39 0.91 1.66 0.34 1.31 -0.27 0.163.09 3.12 1.38 0.98 0.94 0.25 0.20 1.37 1.43 1.670.73 0.00 0.80 0.19 0.74 -0.38 1.27 1.04 1.82 1.820.66 0.84 0.07 1.68 0.06 1.67 1.22 1.51 0.44 1.510.27 2.93 0.00 0.11 0.06 1.02 -1.50 0.85 2.35 2.391.02 0.57 0.15 0.50 0.21 0.57 1.42 1.71 1.10 1.441.48 1.66 1.50 0.77 1.04 1.09 1.20 1.07 2.04 1.042.65 4.24 0.79 4.63 1.80 -0.76 -3.12 1.05 -2.07 0.760.83 1.71 0.49 2.12 0.43 0.70 0.89 1.96 1.26 2.310.17 1.37 0.35 1.90 0.15 1.91 1.12 1.75 1.26 2.391.97 1.89 1.45 0.62 0.72 0.06 0.33 0.91 1.07 1.080.75 0.35 0.48 0.97 0.48 1.15 1.65 1.37 1.72 1.490.84 1.66 0.00 1.98 1.08 1.74 0.41 2.88 1.37 2.022.23 0.07 0.09 0.85 0.14 -0.46 1.82 1.75 1.34 1.830.94 1.06 0.18 1.46 0.24 0.81 0.88 2.11 0.68 1.580.00 2.83 0.54 1.49 1.64 3.06 0.32 2.08 0.32 0.591.37 1.49 0.37 0.75 0.48 1.85 2.05 2.40 1.77 2.050.00 1.23 1.30 0.60 1.07 3.51 1.24 1.32 1.43 0.831.49 1.32 0.27 0.85 0.62 1.44 0.89 1.66 0.98 1.080.00 0.81 0.90 1.27 1.15 3.56 2.76 2.47 1.75 1.640.41 2.65 0.17 0.34 0.16 1.04 -0.81 1.56 2.97 1.960.93 1.28 0.44 1.03 0.57 1.33 1.01 1.76 1.36 1.54

Net Margin(%)Risk Cost




T O T A L


2001-2002 2002-2003 2003-2004 2003-2004 2004-2005 2001-2002 2002-2003 2003-2004 2003-2004 2004-2005351.90 387.26 461.54 432.52 507.69 374.89 416.20 476.92 484.39 598.08392.02 388.11 453.33 434.40 506.67 497.29 573.05 733.33 697.30 786.67374.51 404.16 473.57 437.94 528.57 434.83 503.50 580.71 582.19 685.71517.55 585.47 619.05 631.39 666.67 244.76 336.39 409.52 424.24 466.67310.31 360.35 404.29 397.01 435.71 440.27 529.66 635.71 601.40 642.86437.43 478.55 554.41 496.62 601.76 347.78 367.89 436.76 423.45 503.68186.74 231.44 270.00 284.54 320.00 414.50 468.24 540.00 512.36 590.00263.62 275.95 326.82 305.12 402.73 251.36 311.10 389.55 374.07 463.64534.51 580.92 611.76 593.29 647.06 394.42 445.32 491.18 477.15 541.18297.22 333.89 391.11 379.47 420.00 463.10 537.36 575.00 683.44 722.22456.74 485.86 549.78 544.91 611.11 254.12 286.35 311.56 335.19 366.67343.91 453.54 454.55 451.05 586.36 369.24 539.16 727.27 576.05 706.82218.58 265.15 300.00 302.51 350.00 362.82 378.26 445.00 413.94 460.00487.70 517.74 527.27 560.23 572.73 555.52 617.92 636.36 760.15 798.18412.09 440.28 471.43 482.10 557.14 422.72 503.59 578.57 590.97 631.43240.05 270.57 307.69 300.16 338.46 398.95 480.69 523.08 578.60 669.23650.42 654.78 702.94 767.37 800.00 444.78 479.25 506.47 564.17 597.06661.00 684.21 742.11 679.53 685.71 647.72 733.93 878.95 886.55 847.62394.61 443.24 490.00 485.79 534.33 568.13 663.81 656.67 720.72 726.67392.88 442.29 475.00 436.82 480.36 337.78 392.64 423.21 444.02 492.68264.53 298.54 320.00 330.16 380.00 511.74 565.70 700.00 679.18 760.00404.15 456.77 500.00 487.62 526.32 438.24 543.73 618.95 628.03 692.11303.28 345.52 400.00 405.65 477.27 282.19 285.23 331.82 343.95 404.55303.21 365.17 426.47 415.70 497.06 486.15 535.04 632.35 643.17 777.94469.57 538.44 644.44 571.72 711.11 674.27 808.40 1,000.00 944.44 1,050.00540.10 552.76 626.67 594.69 666.67 417.16 455.55 553.33 484.00 566.67402.53 445.56 493.24 480.48 543.38 425.15 493.89 574.48 574.35 642.74

Per Branch AdvancesPer Branch Deposit




T O T A L


2001-2002 2002-2003 2003-2004 2003-2004 2004-2005 2001-2002 2002-2003 2003-2004 2003-2004 2004-2005726.79 803.47 938.46 916.91 1,105.77 102.70 118.69 141.86 141.90 177.47889.31 961.16 1,186.67 1,131.70 1,293.33 116.00 127.59 160.36 150.23 179.63809.34 907.66 1,054.29 1,020.12 1,214.29 103.01 124.58 144.71 134.73 160.38762.32 921.87 1,028.57 1,055.64 1,133.33 124.10 150.07 171.43 178.78 158.67750.58 890.01 1,040.00 998.41 1,078.57 104.04 135.44 150.10 170.46 209.72785.21 846.44 991.18 920.07 1,105.44 124.75 139.70 153.18 146.18 170.84601.23 699.68 810.00 796.90 910.00 84.55 102.89 122.73 117.19 133.82514.98 587.06 716.36 679.19 866.36 68.25 86.10 110.99 105.23 142.24928.94 1,026.24 1,102.94 1,070.44 1,188.24 138.91 160.98 187.50 191.55 202.00760.32 871.25 966.11 1,062.91 1,142.22 95.04 110.44 122.46 140.68 146.86710.87 772.21 861.33 880.10 977.78 125.45 139.00 155.04 158.42 176.00713.15 992.70 1,181.82 1,027.11 1,293.18 97.25 136.25 167.74 163.74 206.16581.40 643.41 745.00 716.45 810.00 78.57 100.53 116.41 127.94 126.56

1,043.22 1,135.66 1,163.64 1,320.38 1,370.91 145.26 166.56 170.67 207.49 150.80834.81 943.87 1,050.00 1,073.07 1,188.57 124.33 137.65 158.06 187.79 163.14639.00 751.26 830.77 878.76 1,007.69 115.38 133.79 147.95 154.38 177.03

1,095.20 1,134.03 1,209.41 1,331.53 1,397.06 132.48 148.73 138.92 177.54 154.221,308.71 1,418.14 1,621.05 1,566.08 1,533.33 158.38 173.84 205.33 205.21 233.33

962.74 1,107.05 1,146.67 1,206.51 1,261.00 130.10 159.67 165.38 186.57 199.11730.66 834.93 898.21 880.84 973.04 106.64 124.55 140.50 139.34 157.49776.26 864.23 1,020.00 1,009.34 1,140.00 109.85 123.46 148.54 144.19 166.02842.39 1,000.50 1,118.95 1,115.66 1,218.42 136.80 190.10 212.60 211.98 233.84585.47 630.76 731.82 749.60 881.82 111.04 121.72 121.97 152.70 146.97789.36 900.21 1,058.82 1,058.87 1,275.00 99.77 114.63 134.83 136.89 161.15

1,143.84 1,346.85 1,644.44 1,516.17 1,761.11 131.98 175.68 214.49 177.21 205.84957.26 1,008.31 1,180.00 1,078.70 1,233.33 145.04 151.25 182.47 173.98 203.30827.67 939.45 1,067.72 1,054.83 1,186.12 116.98 137.83 157.14 161.80 176.12

Per Branch Business Per Employee Business




T O T A L


2001-2002 2002-2003 2003-2004 2003-2004 2004-2005 2001-2002 2002-2003 2003-2004 2003-2004 2004-200527.02 27.22 26.17 25.80 22.78 44.52 45.41 43.55 46.57 43.7317.13 15.46 12.51 12.72 11.61 44.00 45.68 50.91 49.58 50.0014.51 13.68 11.92 13.97 12.68 48.77 46.49 46.13 46.39 43.759.92 7.57 8.47 8.57 8.07 19.12 26.39 23.26 20.25 20.41

23.01 18.74 12.37 17.94 15.09 41.83 43.75 41.69 50.91 44.4415.65 16.22 16.32 15.15 19.89 29.00 28.86 36.93 36.13 32.1210.99 11.64 12.69 12.73 11.88 58.52 53.90 53.70 50.29 50.8530.16 27.10 23.91 25.47 22.89 36.17 41.97 42.01 46.73 43.3314.97 13.55 13.18 14.70 14.56 29.72 26.53 29.94 26.02 28.2618.60 20.58 20.19 17.79 15.47 57.07 58.09 51.21 58.64 54.6214.81 14.31 14.43 13.65 11.11 19.44 21.83 23.00 24.12 24.2415.34 11.42 9.42 12.53 10.21 35.19 39.04 62.50 38.58 46.3034.46 30.94 27.63 32.34 30.00 65.12 56.38 53.93 56.13 56.9612.60 12.48 10.78 11.20 9.48 39.38 38.43 38.57 38.52 39.8614.98 14.52 13.76 14.76 15.57 33.45 40.49 46.91 43.38 37.3315.10 12.80 12.09 10.51 9.87 51.30 51.56 50.00 55.18 57.478.08 7.24 7.31 8.45 8.21 28.34 32.34 27.87 29.62 29.56

14.34 13.64 12.39 11.93 9.60 20.50 29.14 32.93 36.35 36.5214.34 13.67 13.75 15.01 14.67 53.29 52.69 49.64 55.15 50.4611.40 10.32 9.21 10.83 10.71 35.57 29.88 29.66 35.49 34.8012.36 9.79 7.69 13.26 7.86 58.38 53.58 57.14 61.57 51.938.76 8.11 7.18 7.63 6.53 32.40 28.62 34.01 34.93 34.98

13.90 13.37 9.76 12.85 12.43 20.11 18.60 20.55 20.24 21.356.28 6.93 6.30 8.48 6.80 44.06 37.98 37.21 41.94 41.02

13.56 10.70 8.55 10.82 10.24 43.98 43.69 46.33 51.76 44.4217.13 17.21 14.46 18.95 15.03 36.35 39.40 36.14 33.26 30.5914.31 13.14 11.85 13.21 11.95 38.82 38.90 41.26 41.63 40.30

% of Borrowings to AdvancesNon-earning Assets as % to W.F.


Actual Actual Projection Actual Projection Actual Actual Projection Actual Projection2001-2002 2002-2003 2003-2004 2003-2004 2004-2005 2001-2002 2002-2003 2003-2004 2003-2004 2004-2005

1 AJMER 23.56 23.87 23.09 21.94 21.43 26.85 26.69 27.38 25.38 27.012 ALWAR 17.86 17.55 20.75 19.88 20.83 24.11 24.33 27.32 27.48 27.223 BANSWARA 19.54 17.75 20.70 19.34 21.16 24.80 24.87 27.23 27.56 27.954 BARMER 16.06 17.61 19.55 20.16 20.12 19.44 22.14 24.31 26.53 26.145 BHARATPUR 19.97 19.67 20.87 21.20 21.61 26.13 24.79 26.90 26.41 27.416 BHILWARA 17.15 19.91 18.60 22.26 23.53 20.95 23.40 22.56 25.28 26.787 BIKANER 21.01 19.15 24.50 25.75 22.81 28.83 26.73 31.99 33.00 30.708 BUNDI 33.31 27.80 27.26 24.64 21.97 34.61 32.15 33.58 31.49 30.569 CHITTORGARH 15.41 17.25 24.16 19.88 23.66 19.48 21.55 28.73 25.49 28.77

10 CHURU 20.10 22.05 31.50 20.00 22.19 22.93 25.65 34.56 26.78 29.6111 DUNGARPUR 18.98 19.09 19.48 22.75 21.72 22.38 23.63 23.96 27.52 26.6812 JAIPUR 21.34 16.01 13.43 19.61 21.52 28.01 21.93 18.59 27.27 27.7513 JAISALMER 20.07 24.57 19.27 18.37 18.16 25.00 28.09 23.96 26.64 26.7514 JALORE 17.44 14.14 17.39 16.94 16.23 20.16 18.41 22.22 23.86 22.2215 JHALAWAR 17.25 15.60 20.60 17.65 18.09 21.21 20.26 25.82 24.78 24.3716 JHUNJHUNU 17.23 16.56 20.57 19.45 21.05 21.08 20.95 26.60 23.41 26.0417 JODHPUR 18.67 18.67 19.08 19.10 20.56 22.42 23.13 23.49 25.98 26.5918 KOTA 15.03 19.74 16.74 12.85 13.11 19.35 23.73 22.14 17.86 17.9719 NAGAUR 16.20 14.44 16.91 15.76 19.20 19.27 17.57 20.56 20.08 23.9320 PALI 14.73 19.06 18.16 22.93 24.55 16.71 23.16 23.17 28.93 30.4821 S.MADHOPUR 17.10 16.56 19.06 23.74 21.43 23.31 22.93 24.95 29.12 27.7222 SIKAR 13.45 12.63 15.79 18.99 16.00 18.34 18.27 21.34 25.12 21.4623 SIROHI 19.03 23.80 22.87 23.24 23.62 27.10 30.80 30.30 29.17 29.7824 S.GANGANAGAR 19.58 19.88 24.60 25.00 21.61 25.73 24.92 30.35 30.44 26.9225 TONK 13.62 13.18 14.65 13.63 13.06 19.40 18.98 21.06 18.62 17.6526 UDAIPUR 15.75 15.79 16.84 14.30 17.50 18.32 19.32 20.51 20.89 22.79

T O T A L 17.63 17.95 19.61 19.62 19.92 22.00 22.81 24.94 25.62 25.70

COM to Total Income %

S.No. Name of CCB

COM to Total Expenses %




T O T A L


2001-2002 2002-2003 2003-2004 2003-2004 2004-2005 2001-2002 2002-2003 2003-2004 2003-2004 2004-20052.25 2.44 2.67 2.44 2.78 11.14 8.59 7.36 8.59 6.021.94 2.12 3.11 2.58 2.78 10.06 8.43 6.10 7.46 5.811.85 1.97 2.45 2.20 2.55 5.43 13.14 5.38 10.26 9.301.91 2.35 2.78 2.80 2.30 2.03 0.85 0.92 1.03 1.121.98 2.39 2.73 2.92 3.47 22.49 10.74 6.33 7.68 6.051.81 2.27 2.18 2.49 2.91 4.52 8.59 5.28 7.27 6.892.00 2.05 3.16 2.93 2.72 14.18 21.90 13.29 21.43 17.031.98 2.07 2.59 2.19 2.46 17.72 11.24 8.83 10.03 10.441.94 2.27 3.54 2.87 3.30 6.65 6.67 4.85 8.15 6.571.77 2.27 3.31 2.51 2.80 7.30 8.09 5.32 6.95 6.112.07 2.27 2.54 2.72 2.78 4.85 4.21 3.41 4.56 3.071.87 1.86 1.87 2.59 3.48 6.42 7.56 5.30 9.18 10.941.75 2.37 2.16 2.09 2.03 19.11 20.13 15.76 20.55 13.502.34 2.14 2.67 3.26 2.00 5.90 5.61 3.95 10.58 7.201.88 1.87 2.80 2.96 2.31 10.28 9.02 6.90 9.50 7.521.90 1.99 2.67 2.56 2.97 6.76 6.88 6.04 7.88 7.512.29 2.40 2.11 2.83 2.27 2.89 2.70 2.61 2.95 2.762.06 3.22 3.08 2.44 2.72 15.11 12.96 10.43 10.26 9.681.94 2.04 2.40 2.52 3.16 6.52 8.77 6.48 9.85 7.561.84 1.99 2.04 2.53 2.77 8.82 9.18 7.18 9.52 7.531.89 1.95 2.66 2.99 2.87 4.63 9.12 7.80 7.49 6.391.67 2.04 2.70 3.19 2.83 5.18 6.84 4.70 5.80 4.961.85 2.42 2.27 2.72 2.45 14.32 12.55 9.33 8.43 6.961.93 1.95 2.60 2.80 2.34 5.96 7.57 4.94 5.64 4.121.83 2.22 2.75 2.28 2.30 8.65 7.11 7.31 9.15 8.882.03 2.07 2.47 2.23 2.69 9.60 12.53 3.57 13.60 8.091.95 2.19 2.60 2.66 2.68 8.28 8.41 6.03 8.15 6.90

Per Employee COM %of NPA(Loans) to Wkg.Fund




T O T A L


2001-2002 2002-2003 2003-2004 2003-2004 2004-2005 2001-2002 2002-2003 2003-2004 2003-2004 2004-2005106.54 107.47 103.33 111.99 117.80 27.47 28.41 28.33 28.68 27.27126.85 147.65 161.76 160.52 155.26 40.58 39.78 41.18 34.98 35.53116.11 124.58 122.62 132.94 129.73 46.44 40.77 43.44 37.88 37.8447.29 57.46 66.15 67.19 70.00 68.30 67.72 58.46 56.82 56.07

141.88 146.99 157.24 151.48 147.54 28.91 27.99 29.33 31.53 29.5179.51 76.88 78.78 85.27 83.70 40.86 42.80 46.42 42.91 36.83

221.97 202.32 200.00 180.06 184.38 40.22 34.96 34.44 36.13 35.9495.35 112.74 119.19 122.60 115.12 31.21 30.14 26.84 29.27 28.2273.79 76.66 80.29 80.42 83.64 46.42 44.06 43.27 39.88 39.09

155.81 160.94 147.02 180.10 171.96 30.00 29.99 29.83 30.31 30.4255.64 58.94 56.67 61.51 60.00 53.77 53.58 56.69 52.50 56.36

107.37 118.88 160.00 127.71 120.54 38.87 37.40 51.50 33.00 46.51165.98 142.66 148.33 136.83 131.43 36.69 36.20 35.00 35.77 48.57113.91 119.35 120.69 135.69 139.37 38.25 35.68 36.21 30.94 34.92102.58 114.38 122.73 122.58 113.33 33.15 32.38 36.36 31.54 29.23166.19 177.66 170.00 192.76 197.73 28.41 28.11 30.00 30.70 30.6868.38 73.19 72.05 73.52 74.63 57.91 60.30 56.90 56.80 56.9997.99 107.27 118.44 130.46 123.61 29.27 29.26 26.95 26.90 33.33

143.97 149.76 134.01 148.36 136.00 29.86 30.59 32.63 29.49 30.5785.98 88.78 89.10 101.65 102.57 45.21 40.19 40.60 36.38 35.69

193.45 189.49 218.75 205.71 200.00 32.57 30.21 31.25 30.21 26.32108.43 119.04 123.79 128.80 131.50 34.25 30.15 32.63 33.26 33.0093.04 82.55 82.95 84.79 84.76 30.31 38.94 43.18 39.02 40.00

160.34 146.52 148.28 154.72 156.51 36.18 33.22 30.59 31.23 29.88143.60 150.14 155.17 165.19 147.66 35.62 33.12 29.31 33.33 29.6977.24 82.41 88.30 81.39 85.00 49.14 47.49 45.74 44.38 45.00

105.62 110.85 116.47 119.54 118.28 40.86 39.72 39.79 37.51 38.07

CD Ratio% % of Investment to Deposit




T O T A L


2001-2002 2002-2003 2003-2004 2003-2004 2004-2005 2001-2002 2002-2003 2003-2004 2003-2004 2004-2005- - - - - 4885.14 5508.43 6700 6447.13 8200- - - - - 8,099.70 9,551.31 11,700.00 10,284.40 12,000.00- - - - - 3,165.09 3,666.47 4,380.00 4,440.78 5,300.00

6.00 6.00 ND ND 6.00 6,952.98 10,020.06 10,400.00 9,746.25 10,000.00- - - - - 6,259.87 7,686.76 9,780.00 7,340.78 10,000.00- - - - - 6,217.04 6,728.82 8,300.00 7,806.45 9,200.00- - - - - 3,909.20 4,844.72 5,800.00 5,283.06 6,320.00- - - - - 2,992.68 3,694.15 5,000.00 4,144.40 5,830.00- - - - - 6,398.94 7,633.90 8,870.00 8,285.86 9,800.00- - - - - 4,666.03 5,055.30 5,300.00 6,092.29 6,600.00- - - - - 2,444.48 2,707.78 3,000.00 3,365.40 3,700.00- - - - - 8,573.63 11,976.96 16,883.00 11,405.28 16,700.00- - - - - 1,862.68 2,085.49 2,365.00 2,210.40 2,550.00- - - - - 7,912.84 8,276.20 9,899.73 9,222.80 11,133.94- - - - - 5,603.78 7,311.83 8,300.00 7,439.16 8,600.00- - - - - 5,633.66 6,752.10 7,850.00 8,031.18 9,200.00- 4.00 4.00 - - 6,308.28 8,193.06 8,850.00 9,275.02 10,575.00- - - - 5.00 13,751.44 15,507.71 17,860.00 16,952.79 18,734.00- - - - - 8,214.68 10,419.67 10,565.00 10,202.97 10,850.00- - - - - 9,405.61 11,710.73 12,670.00 12,371.81 13,700.00- - - - - 7,277.18 9,191.13 12,000.00 8,995.46 12,000.00- - - - 2.00 8,860.19 10,558.94 11,700.00 12,522.37 13,150.00- - - - - 2,954.62 3,419.24 4,050.00 3,916.40 4,750.00- - - - - 18,036.18 19,766.43 24,000.00 24,870.19 28,400.00- - - - - 6,183.71 7,703.68 9,600.00 8,555.07 10,000.00- - - - - 6,339.83 7,062.82 9,400.00 7,295.08 8,700.00

172,909.46 207,033.69 245,222.73 226,502.78 265,992.94

Total Loan AssetsDividend Declared




T O T A L


2001-2002 2002-2003 2003-2004 2003-2004 2004-2005 2001-2002 2002-2003 2003-2004 2003-2004 2004-20054011.54 4645.00 5854.00 5491.17 7380.00 522.47 527.94 515.00 562.55 500.00

6,782.12 8,352.64 10,650.00 9,134.60 10,980.00 1,072.97 992.21 900.00 880.37 800.002,884.40 2,890.27 4,006.00 3,768.08 4,570.00 266.10 719.46 350.00 591.60 630.006,622.40 9,845.31 10,210.00 9,533.93 9,760.00 121.33 144.42 150.00 175.79 200.004,140.02 6,399.20 8,924.00 6,302.02 9,130.00 1,669.75 905.68 610.00 557.77 475.005,706.26 5,627.51 7,517.45 6,806.03 8,094.00 272.36 701.81 601.90 724.70 931.003,140.78 3,335.21 4,690.00 3,666.43 4,820.00 529.62 1,038.44 850.00 1,051.97 1,000.002,097.33 2,969.23 4,232.00 3,408.12 4,840.00 841.45 657.05 700.00 624.80 845.005,553.11 6,679.55 8,070.00 7,013.84 8,630.00 664.11 650.00 600.00 848.81 800.004,177.66 4,425.52 4,869.00 5,464.69 6,025.00 259.76 459.05 350.00 393.93 364.002,174.22 2,435.07 2,765.00 3,033.63 3,453.00 229.13 209.47 192.00 246.34 202.007,619.71 10,545.34 15,583.00 9,627.37 13,900.00 33.90 653.61 600.00 912.71 1,400.001,234.52 1,309.82 1,695.00 1,335.68 1,875.00 310.44 365.31 300.00 241.34 200.007,239.79 7,595.17 9,368.70 7,828.18 10,054.00 563.11 445.38 345.38 1,057.82 793.504,523.27 6,260.55 7,379.44 6,226.37 7,531.54 788.79 783.68 702.00 939.99 850.005,095.80 6,112.91 7,210.00 7,166.71 8,300.00 367.86 514.97 500.00 749.46 775.005,888.65 7,729.46 8,372.86 8,705.37 9,992.92 303.36 299.28 325.00 404.19 410.00

10,757.64 12,648.00 15,220.00 14,447.17 16,111.00 1,985.21 2,244.14 2,100.00 2,025.62 2,163.007,409.65 9,095.69 9,578.00 8,669.85 9,620.00 568.85 1,027.97 750.00 1,172.88 950.007,908.58 10,025.80 11,170.00 10,476.59 12,050.00 1,167.59 1,164.93 1,000.00 873.02 850.006,752.64 8,044.50 10,830.00 7,902.93 11,010.00 328.36 804.55 820.00 697.35 600.008,150.43 9,493.09 10,850.00 11,433.57 12,150.00 522.60 812.88 600.00 722.55 700.002,210.65 2,640.63 3,355.00 3,318.62 4,160.00 614.64 637.74 580.00 420.15 450.00

16,584.44 17,678.16 22,450.00 22,982.64 26,900.00 1,214.39 1,440.34 1,000.00 1,142.80 900.005,314.60 6,909.05 8,623.00 7,326.13 8,663.50 642.19 594.18 782.00 1,008.79 1,079.185,183.46 5,319.30 8,821.46 5,308.06 7,390.00 927.53 1,322.35 400.00 1,544.07 1,000.00

149,163.67 179,011.98 222,293.91 196,377.78 237,389.96 16,787.87 20,116.84 16,623.28 20,571.37 19,867.68

Standard Assets Sub-standard Assets




T O T A L


2001-2002 2002-2003 2003-2004 2003-2004 2004-2005 2001-2002 2002-2003 2003-2004 2003-2004 2004-2005308.81 298.72 295.00 315.55 270.00 42.32 36.77 36.00 77.86 50.00141.55 172.94 125.00 236.58 200.00 103.06 33.52 25.00 32.85 20.00

9.42 50.22 20.00 16.64 15.00 5.17 6.52 4.00 64.46 85.006.86 30.33 40.00 36.53 40.00 202.39 0.00 0.00 0.00 0.00

408.76 336.02 210.00 427.44 350.00 41.34 45.86 36.00 53.55 45.00140.04 193.11 164.00 256.62 125.00 98.38 206.39 16.65 19.10 50.00237.85 389.69 200.00 460.82 400.00 0.95 81.38 60.00 103.84 100.0046.78 33.85 34.00 83.08 120.00 7.12 34.02 34.00 28.40 25.00

159.66 283.39 180.00 401.63 350.00 22.06 20.96 20.00 21.58 20.00204.76 169.70 80.00 232.65 210.00 23.85 1.03 1.00 1.02 1.0013.96 39.57 28.00 64.55 30.00 27.17 23.67 15.00 20.88 15.00

162.01 427.76 400.00 316.02 400.00 758.01 350.25 300.00 549.18 1,000.00282.85 338.47 300.00 589.26 450.00 34.87 71.89 70.00 44.12 25.0099.95 234.56 184.56 335.71 285.35 9.99 1.09 1.09 1.09 1.09

284.12 259.04 210.00 264.34 210.00 7.60 8.56 8.56 8.46 8.4655.86 79.03 90.00 83.66 100.00 114.14 45.19 50.00 31.35 25.00

114.11 162.18 150.00 163.38 170.00 2.16 2.14 2.14 2.08 2.08870.48 575.32 500.00 400.00 380.00 138.11 40.25 40.00 80.00 80.00190.38 220.95 180.00 313.12 250.00 45.80 75.06 57.00 47.12 30.00312.16 426.27 400.00 886.85 700.00 17.28 93.73 100.00 135.35 100.00109.47 147.41 150.00 261.19 250.00 86.71 194.67 200.00 133.99 140.00176.06 252.97 250.00 366.25 300.00 11.10 0.00 0.00 0.00 0.0094.10 140.87 115.00 177.63 140.00 35.23 0.00 0.00 0.00 0.00

113.66 512.59 450.00 732.63 587.00 123.69 135.34 100.00 12.12 13.00134.76 168.78 160.00 194.75 236.64 92.16 31.67 35.00 25.40 20.68222.53 407.63 165.00 428.19 300.00 6.31 13.54 13.54 14.76 10.00

4,900.95 6,351.37 5,080.56 8,045.07 6,868.99 2,056.97 1,553.50 1,224.98 1,508.56 1,866.31

Loss AssetsDoubtful Assets




T O T A L


2001-2002 2002-2003 2003-2004 2003-2004 2004-2005 2001-2002 2002-2003 2003-2004 2003-2004 2004-2005873.6 863.43 846 955.96 820 17.88 15.67 12.63 14.83 10.00

1,317.58 1,198.67 1,050.00 1,149.80 1,020.00 16.27 12.55 8.97 11.18 8.50280.69 776.20 374.00 672.70 730.00 8.87 21.17 8.54 15.15 13.77330.58 174.75 190.00 212.32 240.00 4.75 1.74 1.83 2.18 2.40

2,119.85 1,287.56 856.00 1,038.76 870.00 33.86 16.75 8.75 14.15 8.70510.78 1,101.31 782.55 1,000.42 1,106.00 8.22 16.37 9.43 12.82 12.02768.42 1,509.51 1,110.00 1,616.63 1,500.00 19.66 31.16 19.14 30.60 23.73895.35 724.92 768.00 736.28 990.00 29.92 19.62 15.36 17.77 16.98845.83 954.35 800.00 1,272.02 1,170.00 13.22 12.50 9.02 15.35 11.94488.37 629.78 431.00 627.60 575.00 10.47 12.46 8.13 10.30 8.71270.26 272.71 235.00 331.77 247.00 11.06 10.07 7.83 9.86 6.68953.92 1,431.62 1,300.00 1,777.91 2,800.00 11.13 11.95 7.70 15.59 16.77628.16 775.67 670.00 874.72 675.00 33.72 37.19 28.33 39.57 26.47673.05 681.03 531.03 1,394.62 1,079.94 8.51 8.23 5.36 15.12 9.70

1,080.51 1,051.28 920.56 1,212.79 1,068.46 19.28 14.38 11.09 16.30 12.42537.86 639.19 640.00 864.47 900.00 9.55 9.47 8.15 10.76 9.78419.63 463.60 477.14 569.65 582.08 6.65 5.66 5.39 6.14 5.50

2,993.80 2,859.71 2,640.00 2,505.62 2,623.00 21.77 18.44 14.78 14.78 14.00805.03 1,323.98 987.00 1,533.12 1,230.00 9.80 12.71 9.34 15.03 11.34

1,497.03 1,684.93 1,500.00 1,895.22 1,650.00 15.92 14.39 11.84 15.32 12.04524.54 1,146.63 1,170.00 1,092.53 990.00 7.21 12.48 9.75 12.15 8.25709.76 1,065.85 850.00 1,088.80 1,000.00 8.01 10.09 7.26 8.69 7.60743.97 778.61 695.00 597.78 590.00 25.18 22.77 17.16 15.26 12.42

1,451.74 2,088.27 1,550.00 1,887.55 1,500.00 8.05 10.56 6.46 7.59 5.28869.11 794.63 977.00 1,228.94 1,336.50 14.05 10.31 10.18 14.37 13.37

1,156.37 1,743.52 578.54 1,987.02 1,310.00 18.24 24.69 6.15 27.24 15.0623,745.79 28,021.71 22,928.82 30,125.00 28,602.98 13.73 13.53 9.35 13.30 10.75

Total Impaired Assets Imp.Ass.%to total loan o/s

Projection Actual Projection2001-2002 2002-2003 2003-2004 2003-2004 2004-2005

1 No. of Branches (excluding H.O.) 385.00 386.00 390.00 389.00 392.002 No. of PACS 5,252.00 5,252.00 5,252.00 5,253.00 5,254.003 No. of Memers 8,077.00 8,117.00 8,124.00 8,295.00 8,362.004 No. of Employees 2,724.00 2,631.00 2,650.00 2,536.00 2,640.005 Share Capital 17,170.61 17,856.04 19,196.33 18,488.03 19,975.336 Total Reserves & Provisions 22,760.55 26,880.93 27,999.83 29,766.78 32,056.407 Deposits 169,436.84 185,940.79 210,357.00 205,074.09 233,550.008 Borrowings Outstanding 75,668.11 91,871.74 108,461.35 101,858.10 110,341.349 Loans & Advances Issued 188,596.40 229,312.07 204,931.00 164,330.23 218,170.0010 Total Loans Outstanding 172,909.46 207,033.69 245,222.73 226,502.78 265,992.9411 Investments: 68,628.90 72,999.89 83,599.00 77,738.31 92,217.32a) SLR 57,260.15 61,137.85 71,467.62 65,703.93 81,240.67b) Non-SLR 11,368.75 11,862.04 12,131.38 12,034.38 10,976.6512 Working Capital 286,913.58 333,079.31 380,552.90 369,472.69 414,477.3913 Net Working Capital 0.00 0.00 0.00 362,012.58 405,873.2814 Total Income 30,052.50 32,029.76 35,121.39 34,444.03 35,570.3515 Salary & Allowances( in amount) 4,234.13 4,534.37 5,680.87 5,556.49 5,806.3216 %of Salary & Allowance to Av.Wkg.Cap. 1.60 1.52 1.67 1.64 1.5417 Other Expenses( in amount) 1,065.23 1,216.51 1,206.15 1,200.06 1,278.1518 %of Other Exp.to Av.Wkg.Cap. 0.40 0.41 0.35 0.35 0.3419 Total Expenditure 24,088.17 25,215.17 27,613.99 26,373.59 27,564.6520 Net Profit 3,511.29 3,012.89 5,993.40 4,584.16 5,832.3021 Total Overdues 56,430.48 44,650.37 47,095.26 69,880.65 62,762.0022 %of Recovery to Demand 68.74 0.00 0.00 0.00 0.0023 Average Borrowings 63,544.03 74,160.35 92,447.00 93,019.63 101,538.0024 Average Investments 63,328.76 68,310.89 76,533.00 70,108.00 81,098.0025 Average working Fund 264,914.06 298,126.75 340,999.25 338,216.52 378,247.0026 Average Deposit 154,972.40 171,986.60 192,363.00 186,907.01 213,005.0027 Average Advances 163,682.35 190,642.99 224,049.00 223,422.77 251,952.5028 Average Business 318,654.75 362,629.59 416,412.00 410,329.78 464,957.5029 Cost of Deposit(%) 8.49 7.92 7.23 6.84 6.3330 Cost of Borrowings(%) 8.87 7.88 7.37 7.34 6.8931 Yield on Advances(%) 13.72 13.12 12.36 12.40 11.4532 Yield on Investment(%) 10.70 9.33 8.52 8.56 7.1833 Return on Funds(%) 11.04 10.53 10.03 9.97 9.1734 Cost of Funds(%) 7.09 6.53 6.08 5.80 5.4135 Financial Margin(%) ( 33-34) 3.94 4.00 3.96 4.17 3.7536 Misc. Income in Amount 818.25 638.28 907.56 735.16 900.5037 Misc. Income in % 0.31 0.21 0.27 0.22 0.2438 Total ( 35+37) 4.25 4.21 4.22 4.38 3.9939 Cost of Management(%) 2.00 1.93 2.02 2.00 1.8740 Operative Margin ( 38-39) 2.25 2.29 2.20 2.39 2.1241 Risk Cost 0.93 1.28 0.44 1.03 0.5742 Net Margin (%)( 40-41) 1.33 1.01 1.76 1.36 1.5443 Per Branch Deposit 402.53 445.56 493.24 480.48 543.3844 Per Branch Advances 425.15 493.89 574.48 574.35 642.7445 Per Branch Business 827.67 939.45 1,067.72 1,054.83 1,186.1246 Per Employee Business 116.98 137.83 157.14 161.80 176.1247 Non-earning Assets to W.F. ( %) 14.31 13.14 11.85 13.21 11.9548 %age of Borrowings to Adv. 38.82 38.90 41.26 41.63 40.3049 COM to Total Income % 17.63 17.95 19.61 19.62 19.9250 COM to Total Expenses % 22.00 22.81 24.94 25.62 25.7051 Per Employee COM 1.95 2.19 2.60 2.66 2.6852 %age NPA(loans) to Working Funds 8.28 8.41 6.03 8.15 6.9053 CD ratio % 105.62 110.85 116.47 119.54 118.2854 % of Investment to Deposits 40.86 39.72 39.79 37.51 38.0755 Dividend Declared 0.00 0.00 0.00 0.00 0.0056 Classification of Loan Assets 172,909.46 207,033.69 245,222.73 226,502.78 265,992.94

a) Standard 149,163.67 179,011.98 222,293.91 196,377.78 237,389.96b) Sub-standard 16,787.87 20,116.84 16,623.28 20,571.37 19,867.68c) Doubtful Assets 4,900.95 6,351.37 5,080.56 8,045.07 6,868.99d) Loss Assets 2,056.97 1,553.50 1,224.98 1,508.56 1,866.31e) Total Impaired Assets 23,745.79 28,021.71 22,928.82 30,125.00 28,602.98f) Impaired Assets as % to total loan o/s 13.73 13.53 9.35 13.30 10.75

Misc. Information of CCBs ( AS PER AUTOMATIC)( Rs. in lakhs)

S.No. ItemsActual

Projection

2001-2002 2002-2003 2003-2004 2003-2004 2004-20051 No. of Branches (excluding H.O. 385.00 386.00 389.00 392.002 No. of PACS 5,252.00 5,253.00 5,253.00 5,254.003 No. of Memers 8,077.00 8,117.00 8,295.00 8,362.004 No. of Employees 2,724.00 2,657.00 2,536.00 2,640.005 Share Capita 171.71 178.55 184.88 199.756 Total Reserves & Provisions 227.61 270.65 297.67 320.567 Deposits 1,694.37 1,859.38 2,050.74 2,335.508 Borrowings Outstanding 756.68 915.18 1,018.58 1,103.419 Loans & Advances Issued 1,885.96 1,643.30 2,181.7010 Total Loans Outstanding 1,729.09 2,069.92 2,265.03 2,659.9311 Investments 686.29 728.23 777.38 922.17a) SLR 572.60 657.04 812.41b) Non-SLR 113.69 120.34 109.7712 Working Capital 2,869.14 3,247.22 3,694.73 4,144.7713 Net Working Capita 0.00 3,620.13 4,058.7313 Total Income 300.53 325.13 344.44 355.7014 Salary & Allowances( in amount 42.34 45.37 55.56 58.0615 %of Salary & Allowance to Av.Wkg.Cap 1.60 1.52 1.64 1.5416 Other Expenses( in amount 10.65 11.64 12.00 12.7817 %of Other Exp.to Av.Wkg.Cap 0.40 0.39 0.35 0.3418 Total Expenditure 240.88 256.47 263.74 275.6519 Net Profit 35.11 31.86 45.84 58.3220 Total Overdues 564.30 698.81 627.6222 %of Recovery to Demand 68.74 0.00 0.0021 Average Borrowings 635.44 741.60 930.20 1,015.3822 Average Investments 633.29 683.11 701.08 810.9823 Average working Fund 2,649.14 2,981.27 3,382.17 3,782.4724 Average Deposit 1,549.72 1,719.87 1,869.07 2,130.0525 Average Advances 1,636.82 1,906.43 2,234.23 2,519.5326 Average Business 3,186.55 3,626.30 4,103.30 4,649.5827 Cost of Deposit(%) 8.49 7.92 6.84 6.3328 Cost of Borrowings(%) 8.87 8.53 7.34 6.8929 Yield on Advances(% 13.72 13.43 12.40 11.4530 Yield on Investment(% 10.70 9.12 8.56 7.1831 Return on Funds(%) 11.04 10.68 9.97 9.1732 Cost of Funds(%) 7.09 6.69 5.80 5.4133 Financial Margin(%) ( 33-34) 3.94 3.99 4.17 3.7534 Misc. Income in Amount 8.18 6.80 7.35 9.0135 Misc. Income in % 0.31 0.23 0.22 0.2436 Total ( 35+37) 4.25 4.22 4.38 3.9937 Cost of Management(%) 2.00 1.91 2.00 1.8738 Operative Margin ( 38-39 2.25 2.30 2.39 2.1239 Risk Cost 0.93 1.23 1.03 0.5740 Net Margin (%)( 40-41) 1.33 1.07 1.36 1.5441 Per Branch Deposit 4.03 4.46 4.80 5.4342 Per Branch Advances 4.25 4.94 5.74 6.4343 Per Branch Business 8.28 9.39 10.55 11.8644 Per Employee Business 1.17 1.36 1.62 1.7645 Non-earning Assets to W.F. ( %) 14.31 13.14 13.21 11.9546 %age of Borrowings to Adv. 38.82 38.90 41.63 40.3047 COM to Total Income 17.63 17.54 19.62 19.9248 COM to Total Expenses 22.00 22.23 25.62 25.7049 Per Employee COM 0.02 0.02 0.03 2.6850 %age NPA(loans) to Working Funds 8.28 9.02 8.15 6.9051 CD ratio % 105.62 110.85 119.54 118.2852 % of Investment to Deposits 40.86 39.72 37.51 38.0755 Dividend Declared 0.00 0.00 0.0053 Classification of Loan Assets 1,729.09 2,069.92 2,265.03 2,659.93

a) Standard 1,491.63 1,777.29 1,963.78 2,373.90b) Sub-standard 167.88 188.44 205.71 198.68c) Doubtful Assets 49.01 60.38 80.45 68.69d) Loss Assets 20.57 43.81 15.09 18.66e) Total Impaired Assets 237.46 292.63 301.25 286.03f) Impaired Assets as % to total loan o/s 13.73 14.14 13.30 10.75

PROGRESS OF DCCBS DURING LAST 3 YEARS AT A GLANCE

( Rs. in crores)

S.No. Items

Scheduled Commercial Banks FY2003Interest on Deposits 82,643 Aggregate Deposits 1,280,853 Cost of Deposits 6.45%



October 2005 Page 1

ANNEX 6: INDICATIVE HARDWARE AND SOFTWARE CONFIGURATION The following pictures show the recommended hardware setup for computerization of MIS at the CCS units.

Hand Held Devices

Server

Client 2Client 1

Web Camera

Thumb Impression Scanner

Printer

Document Scanner

Proposed System Architecture for a branch of Rural Financial Institutuion.

Branch 1Branch 2

Branch 3

Switch

State Head Quarters District Head Quarters

Proposed System Architecture for I.T. Network in the State/ District connecting H.O. with Branches.



October 2005 Page 2

Phase I

Phase V

Phase II

Phase III

Phase IV

Phase VI

Project Mobilization

System Design & customization

Finalization of Hardware requirement

Software development / customization of existing software

Lab Test & User Acceptance Test

Parallel Run at Pilot Site

Phase VII User Training & Live Run

Phase I

Phase V

Phase II

Phase III

Phase IV

Phase VI

Project Mobilization

System Design & customization

Finalization of Hardware requirement

Software development / customization of existing software

Lab Test & User Acceptance Test

Parallel Run at Pilot Site

Phase VII User Training & Live Run

Project Management

Quality Assurance

ChangeManagement

Scop

e M

anag

emen

t

Project Management

Quality Assurance

ChangeManagement

Scop

e M

anag

emen

t

Recommended methodology for computerization of M.I.S. needs

80,000 Not needed Not needed 040,000 One PC only One PC only 20,000

Hand Held Device with Printer ( Two) 30,000 One only 2 with printer 30,000Document Scanner (One) 3,000 Not needed 0Printer ( 132 column ) 9,000 9,000

18,000 18,000Generator of 1 KVA capacity 18,000 Not needed 0Modem for data transfer ( One ) 1,500 1,500Thumb Print Scanner with software ( One ) 3,000 Not needed 0Web Camera with driver software ( One ) 1,500 Not needed 0

8,000 Not needed Not needed 0Installation expenses at each location 10,000 1,000

222,000 79,5001,00,000 1,00,000 75,000

3,0009,000

PACSBranch with less than 100 transactions per

day

020,00015,000

At H.O. or branch with over 100

transactions per day

Minimum configuration recommended :

One time cost of hardware

Server with 1GB RAM & 40 GB SCSI Hard Disk Drive ( One )Client / Terminals ( Two)

UPS system of 1 KVA capacity with 30 minutes backup (One) 18,00018,0001,5003,000

One time cost of software (includes customization & implementation)

1,5000

5,00094,000

Wireless LAN



October 2005 Page 1

ANNEX 7: PROGRAMME FRAMEWORK

Design Summary




GOAL Sustained rural economic growth and reduced rural poverty incidence in Rajasthan

Reduced rural poverty incidence by 3% points in the state Maintained economic growth rate of 7% in the state

Economic reform program assessment

Impact monitoring report Program completion report (PCR)

Program Performance Audit Report (PPAR)

PURPOSE Establish a sustainable rural finance system using the cooperative credit system through policy, legal, regulatory and institutional reforms

CCS restructured to operate as autonomous institutions Enhanced profitability of the CCS Greater availability of affordable rural financial services


Reserve Bank of India (RBI) and National Bank for Agriculture and Rural Development (NABARD) assessment reports

ADB review missions

PCR

Commitment of the Government of India (Government) and state governments to pursue economic policy and agriculture reforms that enable RF institutions including CCS to operate autonomously within a liberalized financial policy regime

OUTPUTS I- Adopted conducive rural finance policy environment for CCS reform II- Improved legal framework for sustainable CCS operation III- Autonomy, democracy, and good governance for the CCS

The government of Rajasthan accepts a comprehensive Cooperative Banking Development Framework (CBDF) for legal, financial, organizational, and institutional changes in CCS Amendments to the existing law through special chapter in the law for financial cooperative to provide adequate autonomy to the CCS Executive orders issued by State Government to limit State authority and cause desired actions by CCS institutions pending legislative changes Divestment of shares held by the state government in the CCS Elections held for all the tiers of the CCS Code of good governance adopted for each tier of the CCS State government nominees withdrawn from the Board and Management of CCS Institutions


ADB review missions reports Law, policy enactments




Policies and guidelines issued by state





Government maintain their commitment to facilitate and improve rural finance market environment Continued commitment of state governments for introducing legal reforms conducive for autonomy of the CCS The election process is fair, free and informed The state government and CCS



October 2005 Page 2

Design Summary




IV- Adopted effective CCS supervision and regulation mechanisms V- Sustained institutional reforms (V-1) Transformed State Cooperative Bank RSCB as an apex to support efficiency and sustainability of District Central Cooperative Banks (DCCBs) and Primary Agricultural Societies (PACS) (v-2) Transformed DCCBs to efficiently provide affordable rural financial services (v-3) Strengthened PACS as the foundation of the CCS and primary agent with mass outreach

Harmonized regulatory standards for the multi-tier CCS system Strengthened supervisory capacity at RSCB and DCCB levels as well as in NABARD Proposal for unified CCS supervision developed Improved operational performance and financial health of the RSCB RSCB is able to implement ways to expand outreach of the network Improved operational performance and financial health of the RSCB RSCB is able to implement measures to mitigate portfolio risk Improved operating efficiency, loan collection, range of products and savings mobilization in the DCCBs selected for institutional reforms DCCBs are able to expand outreach to the poor and women Increased profitability of DCCBs selected for institutional reforms Improved operating efficiency, loan collection, record keeping, internal control, and range of products in the in the PACS selected for institutional reforms Increased outreach to women and poor Increased flow of financial services to rural areas Increased profitability of PACS selected for institutional reforms








ADB review missions reports Program reports and reviews



commit to the enhanced supervisory and regulatory measures in line with RBI/NABARD The state governments maintains competitive and conductive operating environment for RSCB Efficacy of program design in addressing covariant risk (drought) The state governments do not interfere in business decisions of DCCBs Institutional strengthening and improved governance will discourage politicization of PACS Conducive local economic environment for operation of PACS

ACTIVITIES Output I Adopt conducive rural finance policy environment for CCS reform

Sustainable RF operation adopted as the principle for CCS reforms in 2005 by GOI and GOR Acceptance of CBDF Framework by GOI and GOR in 2005




The state governments adherence to the reform policies and process



October 2005 Page 3

Design Summary




110 Issue of policy statement by GOI and GOR 120 MoU between GoR and NABARD 130 NABARD reviews and adopts refinance norms in line with CBDF 140 NABARD signs MOU with RSCB , RSCB with DCCBs and DCCBs with PACS

Discontinuation of subsidies, interest rate controls and conversion schemes by the state governments by end 2005 Creation of a risk fund to assist CCS in times of extreme distress (initial contribution from repayment of GOR share capital by GOR ) The MoU is signed and outlines specific roles and responsibilities for smooth implementation Refinance norms in line with CBDF MoUs demonstrate the acceptance of CBDF and willingness of CCS units to participate in the restructuring plan

Output II Improved legal framework for sustainable CCS operation 210Amend state coop law and regulations 220 GOI and RBI work together to Amend BR Act

As an interim measure, government issues executive orders to : • Ensure full membership rights to all

users of financial services in cooperative institutions

• Remove state intervention in administration and financial affairs of the CCS

• Withdraw restrictive orders in regard to financial matters of the CCS

• Empower RBI to exercise full authority on financial matters of cooperative banks

• GoR to exit equity and board positions throughout the CCS

• Prescribe prudential norms for PACS based on NABARD recommendations

• Clearer definition of roles and responsibilities of directors

• Regular elections • Professional presence at governing and

administrative levels • RCS role is clearly defined and

restricted, in particular not to audit and supervise DCCBs and SCB

A new financial cooperatives law (FCL) adhering to principles of cooperation is passed into law by 2006 BR Act is amended to bring regulation and supervision of SCBs and DCCBs under RBI




The Laws

Sustained political will to enact legal amendments



October 2005 Page 4

Design Summary




230 GOI clarifies NABARD’s supervisory role in respect of Coop Banks

on par with commercial bank keeping in view the character of cooperative banks by 2007 NABARD’s supervisory role is clarified and it is empowered with appropriate supervisory tools

Output III Adopted autonomy, democracy, and good governance for the CCS 310 State Government announces election for CCS 320 Sensitization of CCS members 320 Code of Good Governance is prepared in consultation with stakeholders 330 Local language audio visual and print material in local language is prepared describing the importance of elections and roles and responsibilities of members and office bearers as also the objectives of reform 340 Hold elections 340 Modify Bye-Laws accordingly with restructuring plan 350 Prepare training material and train governing body members, committee members and senior management 360 Institute Committees in particular Audit, Credit, ALM and NPA Resolution committees and train Board and Committee members as well as senior management in Code 370 Develop standardized accounting practices and disclosure norms for financial cooperative in

Sensitization training held for members prior to elections Manuals describing roles, responsibilities are distributed and available in each units Adopted code of good governance for each tier of the CCS. This code addresses differentiation in role of CEO and Board Elections held for all the tiers of the CCS by 2006 Bye-Laws of every unit amended in line with CBDF Officials for all the tiers of the CCS : Board of Directors, Committees - in place and trained at the RSCB, DCCBs and PACS in 2006 Manuals providing guidance for accounting and audit of Coop Banks



ADB review missions reports Codes and Training materials

No interference by the state government and political parties in operation and management of the CCS system



October 2005 Page 5

Design Summary




line with requirements of RBI and facilitate training of chartered accountants to carry out audits of DCCBs and SCBs in line with these requirements 380 Develop standardized accounting practices and disclosure norms for PACS in line with requirements of prudential reporting for PACS and train RCS staff in carrying out audit of PACS 390 GOR to exit equity and management positions in CCS

Manuals providing guidance for accounting and audit for PACS GOR capital written down or returned in line with Financial restructuring plan for all CCS units by 2007

Output IV Adopt effective CCS supervision and regulation mechanisms 410 Create an autonomous internal supervision cell in RSCB and DCCBs and staff these appropriately 420 Develop and implement state of the art methodologies and systems for internal supervision of DCCBs by RSCB comprising early warning system for efficient off-site supervision in 2005 through training , manuals and IT support 430 Develop and implement manual and training to support internal prudential supervision of PACS by DCCBs in 2005 440 Review Prudential norms for SCBs and DCCBs and institute changes in a phased manner and in keeping with banking character 450 Recommend prudential norms for PACS

Established supervisory cell with autonomy and independence within RSCB and DCCBs by 2006 On-site supervision for each DCCB conducted by RSCB by 2005 and off-site supervision functioning by 2006 Every PACS inspected by the DCCB by end of FY2006 RBI notification NABARD draft norms State Government Notification




SCBs and DCCBs are able to recruit and retain skilled staff for internal monitoring and supervision



October 2005 Page 6

Design Summary




undertaking any financial intermediation on their own account to be notified by State Government 460 Supervision practices, tools and capability of NABARD to be strengthened and harmonised with RBI’s practices in relation to commercial banks and keeping in view SCBs supervision of DCCBs 470 Codification of role of internal and external supervision

RBI/GOI notification on supervisory tools available with NABARD Offsite and onsite surveillance system in NABARD on par with that available with RBI for commercial banks Code to be published by 2007

Output V Sustained institutional reforms 510 An adapted structure for CCS – RSCB more service organisation, DCCBs banking organisation, and PACSs multipurpose grass roots distribution channel to maximize outreach – is adopted and implemented 520 Detail and agree an institutional restructuring and financial restructuring plan establishing criteria, milestones and conditions to participate 530 All CCS entities to produce audited balance sheets and P&L accounts as per requirements specified by RBI in the case of RSCB and DCCBs and by NABARD in the case of PACS 540 Cleanse balance sheets of all CCS entities of unrealisable assets , assess assets at risk and any required provisions for bad debts , expenses or claims due , assess accumulated losses as also amounts receivable from GOI or GOR 550 Detail business plan

CCS reorganization plan implementation completed by 2007 Agreed detailed Program Plan within 6 moths of Project Commencement Independent audit of RSCB, DCCBs and PACS initiated in 2005







Sustained commitment to reforms RSCB commitment to the reform



October 2005 Page 7

Design Summary




for each entity focussing on demonstrating how CBDF objectives will be met including financial sustainability and outreach goals 560 Categorise DCCBs and PACS into viable, potentially viable and non Viable 570 Develop winding up/ merger plans for unviable entities and servicing plans for areas vacated by these entities 580 Restructure balance sheets of all entities found to be eligible to participate and develop and agree funds infusion plan based on achievement of milestones and performance benchmarks 590 Proceed with phased funds infusion into CCS and complete financial restructuring V 1- Transformed State Cooperative Bank RSCB as an apex to support efficiency and sustainability the District Central Cooperative Banks (DCCBs) and Primary Agricultural Societies (PACS) 1-511 Develop a business plan in line with CBDF including a modified revenue model 1-512Develop a plan for repatriation of GOR secondees and Recruit professional managers for positions to be vacated by GOR officers 1-513 Design and implement internal reengineering plan to

DCCBs and PACS classified into three categories viable, potentially viable, and nonviable in 2005 Winding up / merger of defunct and unviable units completed by 2007 RSCB and participating DCCBs comply with section 11 of BR Act by end of 2005; RSCB and DCCBs comply with all prudential norms by 2008 Business Plan by 2005 Governmental employees on deputation RSCB are reverted to GOR or permanently transferred to RSCB All managing positions are filled with professionals in the relevant fields by 2006 Reengineering completed by 2005




DCCBs’ commitment to the reform



October 2005 Page 8

Design Summary




implement service delivery structure on: Planning and development; Human resources; Standardisation; Product development; Information technology; Supervision; Investments; Wholesale lending (to DCCBs); and Public relation and Communication 1-514 Transfer banking activities to DCCBs where the DCCBs operate more efficiently and strengthen banking presence where DCCBs are weak and have to be wound up I-515 Develop training and recruitment plan for RSCB in context of new business plan and implement I-516 Review MIS implementation for RSCB and develop and implement a change management plan together with revised MIS and automation plan for more effective implementation 1-531 Set up HR support cell to provide HR services to the CCS 1-532 Design job and position descriptions and recruit officers for DCCBs and PACS as a part of role of providing outsourcing and quality control services to network 1-533 Evaluate training institute and facilities for delivering training to network and prepare plan for supporting the institution including supplementation 1-534 Work with training

RSCB no longer in competition with DCCBs, A policy motivating employees is implemented in 2005. Each employee/officer is well aware of his role and responsibilities. By end of 2006 the units have adequate staffing. Managers are fully trained for their respective task by end of 2006 RSCB to be equipped with appropriate MIS and automation by 2006 HR Cell staffed fully and functional by 2005 Brochure for services provided by HR Cell , listing services , terms and guidance A plan to upgrade the training institute A training plan and calendar for the CCS





October 2005 Page 9

Design Summary




institute to Identify training needs for CCS officers in Banking, Product development, Accounting, Marketing, Human resources, IT, Planning, Supervision, Governance…, develop training programs and facilitate supplementation of Institute resources and capabilities in implementing training programs I-535 Design and implement a communication strategy using indigeneous approaches for communicating the challenges and successes of the reform to all members and stakeholders I-536 Elaborate role of PACS and DCCBs in the new structure , develop local language communication material for different levels including PACS members 1-541 Review business processes in CCS entities , design accounting and MIS for CCS in collaboration with RBI and NABARD and model new processes 1-542 Elaborate and implement a computerisation plan for the DCCBs and identified PACS taking into account process reengineering issues I-551 Set up separate supervision cell, staff and train appropriately , strengthen internal supervision approach and methodologies and implement 1-561 Conduct a new technology study and pilots to test strategic use of technology in CCS business to evaluate

Communication strategy rolled out by 2005 New systems are designed,, tested an implemented by 2006, the designs meets RBI and NABARD requirements 60 % DCCBs and 10 % PACS are computerised and staff trained by 2006 Balance DCCBs and cumulative 20 % PACS are computerized by 2007 Supervision Cell with appropriate staffing and systems in place by 2005 Pilots are mounted and results analysed for larger roll out New product design available for use by the CCS by 2005 Group products rolled out on pilot basis by 2006


PACS’ commitment to the reform




Design Summary




possibilities of increasing effectiveness while decreasing cost I-571Review products offered by CCS and design new products taking into account the outreach objectives to the poor and women as well as efficiency considerations I-572 Identify and develop insurance and other risk mitigation products in collaboration with insurance service providers, commodity exchanges etc I-573 Negotiate terms for distribution of insurance and other risk mitigation products through the network V2-Transformed DCCBs to efficiently provide affordable rural financial services 2-511 Develop a business plan in line with CBDF focussing on outreach and sustainability as well as new services 2-512 Develop and implement a repatriation plan for managers on deputation from GoR and Recruit professional managers for positions vacated by GOR staff 2-513 Design and implement internal reengineering plan to implement new business plan and revenue model focussing on Deposit mobilisation; Credit assessment; Risk management; Recovery procedure; Customer relation; and Branches operation. 2-514 Take over banking activities of PACS and

Restructuring Plan first phase in 2005 for 30% of the selected DCCBs and the second phase in 2006 for the remaining eligible DCCBs Government employees on deputation in the CCS are back to government or permanently transferred as CCS employees by end of 2006 All managing positions are filled with professionals in the relevant fields by 2006 Reengineering completed by 2006 including Micro finance best practices, risk mitigation through diverse insurance scheme and pilot testing of commodities futures 90% of Rajasthan villages ( as measured at Gram Panchayat Level ) are receiving financial services through the CCS by end of 2007 All PACS receive services from DCCBs by end of 2006 Managers and staff are fully trained for their respective task by end of 2006 A policy motivating employees is implemented in 2005 Each employee/officer is well aware of his role and responsibilities. By end of 2006 the units have adequate staffing 60 % of DCCBs are computerised by 2006 and balance by 2007




Design Summary




strengthen banking presence where PACS are weak and have to be wound up through branches , affiliation with SHGs or MACS societies in line with state plan 2-515 Develop staff rationalisation, training and recruitment plan and HR policy for DCCB staff in context of new business plan and implement with support from RSCB and training institute 2-516 Review MIS implementation for DCCB , develop and implement a change management plan together with revised MIS and automation plan for more effective implementation 2-517 Review products , policies , methodologies and documentation required from customers and support state team in designing anew taking into account the new business plan and objectives 2-518Develop and implement group methodologies for extending outreach to the poor and women 2-519 Upgrade infrastructure to ensure bank image 2-521 Develop manuals to elaborate services to PACS and strategy to communicate about the changed role and implement 2-522 Set up separate department to supervise PACS and staff and train appropriately V3-Strengthened PACS

Roll out of new products, policies, methodologies Women to constitute 10 % of clients by number by 2007. Small and marginal farmer, landless and women to account for 40% of loans outstanding by 2007 against the current (2003) level of 22% Manuals to be available by 2005 Cell with appropriate staff and systems in place by 2005 Implementation of the model PACS restructuring plan first phase in 2005 and second phase in 2006 and third phase in 2007 for the eligible PACS Cadre Employees are reverted to GOR or permanently transferred to PACS All managing positions are filled with skill resources by 2006




Design Summary




as the foundation of the CCS and primary institution with mass outreach 3-511 Develop a business plan in line with CBDF focussing on outreach and sustainability as well as new services and taking into account new role as agents 3-512 Develop and implement a repatriation plan for managers on deputation from GoR and Recruit professional managers for positions vacated by GOR staff 3-513 Take over activities of weak PACS and strengthen presence where PACS are weak and have to be wound up through affiliation with SHGs or MACS societies in line with state plan 3-514 Implement staff rationalisation , training and recruitment plan and HR policy for PACS staff in context of new role and business plan with support from RSCB, DCCB and training institute 3-516 Implement MIS and automation where determined appropriate based on business size and institute a change management plan together with MIS and automation plan for more effective implementation 3-517 Implement new products , policies , methodologies and documentation required from customers 3-518 Implement group methodologies for extending outreach to the poor and women

Managers and staff are fully trained for their respective task by end of 2006 Each employee/officer is well aware of his role and responsibilities. By end of 2006 the units have adequate staffing New systems are implemented by 2007, the designs meets NABARD requirements New products , policies and methodologies are rolled out by 2006




Design Summary




VI Implementation 610 Set up implementation teams at NABARD, State and District Levels and define roles and responsibilities 620 Recruit contract staff and depute staff from NABARD, SCB and DCCB as per plan 630 Detail CCS reform plan, identify short term consulting needs and detail TOR 640 Monitor, report progress to Steering Committee and assist in developing and implementing course corrections

Teams to be in place at the beginning of the reform project All necessary staff recruitment and deputation completed within 2005 Detailed plans to be developed and agreed with NABARD, RBI, GoI,GoR, RSCB and ADB within 2005 Quarterly progress reports



ADB review missions reports Quarterly progress reports produced by implementation team

INPUTS Favourable policy environment Legal reforms CCS good governance and democratization Strengthening supervision and regulations Institutional reforms – SCB, DCCBs, and PACS Implementation Financial Assistance Contingency Total

(All amounts rounded off to the nearest million)

INR 2 million

INR 6 million

INR 853 million

INR 51 million

INR 302 million

INR 55 million

INR 6,036 million

INR 647 million

INR 7,953 million =USD 177 million






Amounts in Rupees ADB GoR CCS NABARD TotalPolicy Environment 2,200,000

Monitoring structure 1,200,000 1,200,000Workshop 1,000,000 1,000,000

Legal Reform 6,450,000Workshops 150,000 150,000Short Term Consultants 6,300,000 6,300,000

Governance and Democratization 853,374,000Repayment of GoS Capital 800,000,000 800,000,000Reorientation and Revival 47,434,000 47,434,000Short Term Consultants 5,940,000 5,940,000

Supervision and Regulation 50,939,000Short Term Consultants 11,880,000 11,880,000Training 1,619,000 1,619,000Audit 37,440,000 37,440,000

Institutional reforms 302,446,000Training 23,464,000 23,464,000Short Term Consultants 21,480,000 21,480,000Computerization 241,462,000 241,462,000Special Projects 16,040,000 16,040,000

Implementation 55,440,000Implementation Team 11,160,000 900,000 1,440,000 1,800,000 15,300,000Dom & Intl support 35,640,000 35,640,000Communication 4,500,000 4,500,000

Financial Assistance 5,209,000,000 826,500,000 6,035,500,000

Contingency 647,571,000 647,571,000

Total project for Rajasthan 7,123,280,000 827,400,000 1,440,000 1,800,000 7,953,920,000In US$ terms US$ 158,295,000 US$ 18,386,667 US$ 32,000 US$ 40,000 US$ 176,754,000

Exchange Rate 45.00

October 2005 Page 1


Final Report Volume 1A: Rajasthan CCS - Annex 81 Policy Environment

1.1 Monitoring StructureTo comprise a committee of 5 people at state levelMembers Monthly salary/ fees No of people No. of months TotalCooperators 5,000 1 48 240,000 Political representative 5,000 1 48 240,000 Banking 5,000 1 48 240,000 Regulatory 5,000 1 48 240,000 I T 5,000 1 48 240,000

1,200,000 1.2 Workshops

1 workshop per quarter in first 6 quarters; 1 workshop every 6 months over next 10 quartersWorkshops to be organized in state capital, approximately 50 participants in eachCost per workshop No. of workshops Total 100,000 10 1,000,000

1,000,000

October 2005 Page 1


Final Report Volume 1A: Rajasthan CCS - Annex 82 Legal Reform

2.1 WorkshopsWorkshops involving NABARD, SCB, State Govt., Legal ExpertsWorkshops to be organized in state capital, approximately 25-30 participants in eachCost per workshop No. of workshops Total 50,000 3 150,000

150,000

2.2 Short Term ConsultantsFor legal and commercial inputs, and drafting supportDomestic Consultants Monthly Rate No. of manmonths TotalLegal Experts 300,000 6 1,800,000 Coopertives Experts 200,000 3 600,000 Financial Experts 300,000 3 900,000 Total Fees 3,300,000 Out of Pocket Expenses 20% 660,000

3,960,000

International Consultants

Monthly Rate No. of manmonths Total

Cooperatives Regulatory Expert

900,000 2 1,800,000

Out of Pocket Expenses 30% 540,000

2,340,000

Total for Short Term Consultants 6,300,000

October 2005 Page 1



3 Governance and Democratization

3.1 Repayment of GoS Share CapitalAssumed that GoS Share Capital shall written down by 20% and the balance paid off using step-up coupon bonds 800,000,000

3.2 Reorientation and Revival(a) PACS Level

Number of PACS 5,252 Proportion of PACS eligible for revival 80%Number of PACS Boards per Session 4 Number of Board Members/ PACS 12 Propotion of eligible Board members reoriented 80%Number of Members of the CCS 4,590,000 Propotion of CCS members reoriented 10%

Board Members* TotalRate People Days Amt Rate People Days Amt Amt

Trainers 3,000 2 1,050 6,302,400 2,000 1 1,050 2,100,800 8,403,200 Venue 1,000 1,050 1,050,400 500 1,050 525,200 1,575,600 Material/ Equipment 3,000 1,050 3,151,200 2,000 1,050 2,100,800 5,252,000 Travel 200 40,335 1 8,067,072 8,067,072 Food and Stay 300 40,335 1 12,100,608 20 459,000 1 9,180,000 21,280,608 Misc 1,000 1,050 1,050,400 1,000 1,050 1,050,400 2,100,800 Total R & R 31,722,080 14,957,200 46,679,280

*The project will aim to use indigenous methods of communication and entertainment (e.g., street plays) for member sensitization.These methods could be used to replace/ supplement the formal training effort.

(b) DCCB LevelNumber of Eligible DCCBs (assuming 90% of all DCCBs eligible) 23 Number of Board Members/ Senior Staff per DCCB 20 Number of DCCBs per Session 2 Duration of Each Session (days) 2

Board and Sr Mgt Member TotalRate People Days Amt Rate People Days Amt Amt

Trainer 3,000 2 23 138,000 138,000 Venue 1,000 23 23,000 23,000 Material/ Equipment 3,000 23 69,000 69,000 Travel 200 460 2 184,000 184,000 Food and Stay 300 460 2 276,000 276,000 Misc 1,000 23 23,000 23,000 Total R & R 713,000 - 713,000

October 2005 Page 1



(c) SCB LevelNumber of SCBs 1 Number of Board Members/ Senior Staff 20 Duration of Each Session (days) 2

Board and Sr Mgt Member TotalRate People Days Amt Rate People Days Amt Amt

Trainer 3,000 2 2 12,000 12,000 Venue 1,000 2 2,000 2,000 Material/ Equipment 3,000 2 6,000 6,000 Travel 200 20 2 8,000 8,000 Food and Stay 300 20 2 12,000 12,000 Misc 1,000 2 2,000 2,000 Total R & R 42,000 - 42,000

Grand Total R&R 47,434,280

3.3 Short Term ConsultantsFor designing training and sensitization programmeDomestic Consultants Monthly

RateNo. of

manmonthsTotal

Institutional Development Experts 200,000 5 1,000,000

Coopertives Experts 200,000 5 1,000,000 Financial Experts 300,000 2 600,000 Gender Specialist 200,000 2 400,000 Total Fees 3,000,000 Out of pocket expenses 20% 600,000

3,600,000

International Consultants Monthly Rate

No. of manmonths

Total

Institutional Development Experts 900,000 2 1,800,000

Out of pocket expenses 30% 540,000 2,340,000


October 2005 Page 2


Final Report Volume 1A: Rajasthan CCS - Annex 84 Supervision and Regulation

4.1 Short Term Consultants

Domestic Consultants Monthly Rate

No. of manmonths

Total

Financial Experts 300,000 10 3,000,000 Supervision Specialists 300,000 10 3,000,000 Total 6,000,000 Out of pocket expenses 20% 1,200,000 Total 7,200,000


No. of manmonths

Total

Financial Supervision Specialists 900,000 4 3,600,000 Out of pocket expenses 30% 1,080,000 Total 4,680,000

Total for Short Term Consultants

11,880,000

4.2 Dissemination and Training

(a) Appropriate State Govt Department for PACS LevelNo. of Personnel Engaged in Audit and Supervision 200 No. of Trainess per session 25 Duration of Each Session (days) 2

Rate People Days Amt

Trainer 20,000 2 16 640,000 Venue 2,000 16 32,000 Material/ Equipment 5,000 16 80,000 Travel 200 200 2 80,000 Food and Stay 300 200 2 120,000 Misc 1,000 - - Total 952,000

For assistance in standardization of reporting formats, development of provisioning norms, designing manuals.

October 2005 Page 1


Final Report Volume 1A: Rajasthan CCS - Annex 8(b) DCCB Level

Number of Eligible DCCBs (assuming 90% of all DCCBs eligible 23 Number of Staff Members per DCCB 5 Number of DCCBs per Session 5 Duration of Each Session (days) 2

Rate People Days Amt

Trainer 20,000 2 9 360,000 Venue 2,000 9 18,000 Material/ Equipment 5,000 9 45,000 Travel 200 115 2 46,000 Food and Stay 300 115 2 69,000 Misc 1,000 23 23,000 Total 561,000

(c) SCB LevelNumber of SCBs 1 Number of Staff Members 10 Duration of Each Session (days) 2

Board and Sr MgtRate People Days Amt

Trainer 20,000 2 2 80,000 Venue 2,000 2 4,000 Material/ Equipment 5,000 2 10,000 Travel 200 10 2 4,000 Food and Stay 300 10 2 6,000 Misc 1,000 2 2,000 Total 106,000

Grand Total 1,619,000

4.3 Audit of PACSOne-time Audit for preparation of reference balance sheet1 Audit Specialist per district for 6 monthsNumber of DCCBs (All DCCBs will be involved in this exercise) 26 Number of Manmonths per DCCB 6 Monthly Rate 200,000 Total Fees 31,200,000 Out of pocket Expenses 20% 6,240,000 Total 37,440,000

October 2005 Page 2


Final Report Volume 1A: Rajasthan CCS - Annex 8 5 Institutional Development

5.1 TrainingPACS LevelNumber of PACS 5,252 Proportion of PACS eligible for revival 80%Number of Trainees per Session 50

Managers FrontlineNumber per PACS 1 1 Proportion Trained 95% 95%Number of Days of Training 6 4

Managers Frontline Staff TotalRate People Days Amt Rate People Days Amt Amt

Trainers 3,000 2 479 2,873,894 3,000 2 319 957,965 3,831,859 Venue 1,000 479 478,982 1,000 319 319,322 798,304 Material/ Equipment 3,000 479 1,436,947 3,000 319 957,965 2,394,912 Travel 200 3,992 1 798,304 200 3,992 1 798,304 1,596,608 Food and Stay 300 3,992 6 7,184,736 300 3,992 4 4,789,824 11,974,560 Misc 1,000 479 478,982 1,000 319 319,322 798,304 Total 13,251,846 8,142,701 21,394,547

DCCB LevelNumber of Eligible DCCBs (assuming 90% of all DCCBs are eligible) 23 Number of Trainees per Session 40

Managers FrontlineNumber of Staff per DCCB 10 20 Number of Days of Training 6 4


Trainer 3,000 2 35 207,000 3,000 2 46 138,000 345,000 Venue 1,000 35 34,500 1,000 46 46,000 80,500 Material/ Equipment 3,000 35 103,500 3,000 46 138,000 241,500 Travel 200 230 1 46,000 200 460 1 92,000 138,000 Food and Stay 300 230 6 414,000 300 460 4 552,000 966,000 Misc 1,000 23 23,000 1,000 23 23,000 46,000 Total R & R 828,000 989,000 1,817,000

October 2005 Page 1


Final Report Volume 1A: Rajasthan CCS - Annex 8 SCB LevelNumber of SCBs 1 Number of Trainees per Session 25

Managers FrontlineNumber of Training Sessions 1 2 Number of Staff 20 50 Number of Days of Training 6 4


Trainer 3,000 2 6 36,000 3,000 2 8 48,000 84,000 Venue 1,000 6 6,000 1,000 8 8,000 14,000 Material/ Equipment 3,000 6 18,000 3,000 8 24,000 42,000 Travel 200 20 1 4,000 200 50 1 10,000 14,000 Food and Stay 300 20 6 36,000 300 50 4 60,000 96,000 Misc 1,000 1 1,000 1,000 1 1,000 2,000 Total R & R 101,000 151,000 252,000

Grand Total Training 23,463,547

5.2 Short Term ConsultantsFor designing training programme and implementing IT solutionsDomestic Consultants Monthly

RateNo. of

manmonthsTotal

Institutional Development/ HR Experts 200,000 10 2,000,000 IT/ MIS Experts 300,000 10 3,000,000 Financial Experts 300,000 10 3,000,000 Gender Specialist 200,000 5 1,000,000 Environment specialists 200,000 5 1,000,000 Microfinace Specialists 200,000 5 1,000,000 Product Development Specialists 300,000 10 3,000,000 Total Fees 14,000,000 Out of Pocket Expenses 20% 2,800,000

16,800,000


No. of manmonths

Total

Product Development Specialists 900,000 4 3,600,000 Out of Pocket Expenses 30% 1,080,000

4,680,000

Total 21,480,000

October 2005 Page 2


Final Report Volume 1A: Rajasthan CCS - Annex 8 5.3 Computerization

Number of Eligible DCCBs (assuming 90% of all DCCBs eligible) 23Basic Hardware 440,000 10,120,000Software 330,000 7,590,000

17,710,000Total DCCB HO

DCCB Branches 388Basic Hardware 220,000 85,360,000Software 130,000 50,440,000Total DCCB branches 135,800,000

SCB HO 1Basic Hardware 440,000 440,000Basic Software 330,000 330,000Total SCB HO 770,000

SCB Branches 9Basic Hardware 220,000 1,980,000Software 130,000 1,170,000Total SCB Branches 3,150,000

Total computerisation 157,430,000

PACS 5,252% of implementation Automation 80%% of implementation Computerization 20%Hardware and software 100,000 84,032,000Total PACS 84,032,000

Total cost 241,462,000

October 2005 Page 3


Final Report Volume 1A: Rajasthan CCS - Annex 8 5.4 Special Projects

(a) Pilot Project for Commodity FuturesNumber of PACS in state 5,252% of PACS involved 5%Number of PACS involved 263Connectivity cost per PACS 10,000Total Connectivity Cost 2,630,000


No. of manmonths

Total

Project Design 300,000 4 1,200,000 Project Execution 200,000 12 2,400,000 Total 3,600,000 Out of pocket expenses 20% 720,000 Total 4,320,000


No. of manmonths

Total

Project Design 900,000 2 1,800,000 Out of pocket expenses 30% 540,000 Total 2,340,000


Total Cost of (a) 9,290,000

(b) Development of PACS as distribution channel for Insurance products


No. of manmonths

Total

Weather Insurance Specialist 300,000 3 900,000 Asset Insurance Specialist 300,000 3 900,000 Life Insurance Specialist 300,000 3 900,000 Total 2,700,000 Out of pocket expenses 20% 540,000 Total 3,240,000


No. of manmonths

Total

Insurance Specialist 900,000 3 2,700,000 Out of pocket expenses 30% 810,000 Total 3,510,000

Total Cost of (b) 6,750,000

Total Cost of Special Projects 16,040,000 October 2005 Page 4


Final Report Volume 1A: Rajasthan CCS - Annex 86 Implementation

6.1 Implementation Team(a) External

Team Members Monthly salary/ fees No of people No. of months TotalProject Manager 150,000 1 36 5,400,000 Support Professionals 80,000 2 36 5,760,000

11,160,000 (b) NABARD

Team Members Monthly salary/ fees No of people No. of months TotalSCB Level 30,000 1 36 1,080,000 DCCB Level 20,000 1 36 720,000

1,800,000 (c) CCS

Team Members Monthly salary/ fees No of people No. of months TotalSCB Level 25,000 1 36 900,000 DCCB Level 15,000 1 36 540,000

1,440,000 (d) State Government

Team Members Monthly salary/ fees No of people No. of months TotalSCB Level 25,000 1 36 900,000 DCCB Level 15,000 - 36 -

900,000


October 2005 Page 1


Final Report Volume 1A: Rajasthan CCS - Annex 86.2 Short Term Consultants

(a) International Consultants Monthly Rate No. of manmonths Total

Impact Assessment/ Review (including environment, gender, insurance, microfinance, cooperation)

900,000 12 10,800,000

Out of Pocket Expenses 30% 3,240,000 14,040,000

(b) Domestic Consultants Monthly Rate No. of manmonths TotalImpact Assessment/ Review (including environment, gender, insurance, microfinance, cooperation)

300,000 60 18,000,000

Total Fees 18,000,000 Out of Pocket Expenses 20% 3,600,000

21,600,000


6.3 Communication to StakeholdersAnnual Budget No. of years Total

Lumpsum 1,500,000 3 4,500,000 4,500,000

October 2005 Page 2

1. Creating a Favourable Policy EnvironmentIssue of Policy Statement by GoI and GoRMoU between GoR and NABARDNABARD adopts refinance norms in line with CBDFMoUs between

NABARD and RSCBRSCB and DCCBsDCCBs and PACS

2. Improved Legal Framework for sustainable CCS operationIssue executive orders as interim measureAmend state cooperative law and regulationsAmendment to BR ActGoI clarifies NABARD's supervisory role in respect of Coop Banks

3. Autonomy, Democracy and Good Governance in the CCSAnnouncement of elections for all CCS bodiesSensitization of CCS Members including through use of indigenous means of communication and entertainmentCode of good governance is prepared in consultation with stakeholders

Holding ElectionsModify bye-laws in accordance with restructuring planPrepare training material and train governing body members, committee members and senior managementInstitute various board level committees - Audit, Credit, ALM, NPA resolutionTrain Board Members, Committee Members and Senior management on Code of Good GovernanceDevelop standardized accounting practices and disclosure norms for financial cooperatives in line with RBI requirementsFacilitate training of CA's to carry out audits of DCCBs and SCBs in line with RBI requirements

IMPLEMENTATION SCHEDULE

Q12

2008

Q16

GoI

GoR

Planned Activity for year number

Q3 Q5Q4



2006 2007

CCS

Regu

lator

Impl

emen

tor

RSCB 2005

Q1 Q2

Activity

Q11 Q13Q8 Q14Q10 Q15Q6 Q7 Q9

Page 1


Q12

2008

Q16

GoI

GoR


Q3 Q5Q4



2006 2007

CCS

Regu

lator

Impl

emen

tor

RSCB 2005

Q1 Q2

Activity

Q11 Q13Q8 Q14Q10 Q15Q6 Q7 Q9Facilitate training of RCS staff to carry out audits of PACS in line with RBI requirementsGoR to exit equity and management positions in CCS

4. Adopt Effective CCS supervision and regulation mechanismCreate autinomous internal supervision cell in RSCB and DCCBsDevelop and implement state-of-art methodologies and systems for internal supervision of DCCBs by RSCBDevelop and implement manual and training to support internal prudential supervision of PACS by DCCBsReview prudential norms for SCB and DCCBs and institute changes in a phased mannerReview prudential norms for PACS and institute changes in a phased mannerSupervision practices, tools and capability of NABARD to be strengthened and harmonized with RBI's practicesin relation to commercial banks

Codification of role of internal and external supervision

5. Sustained Institutional ReformDetail and agree an institutional and financial restructuring plan establishing criteria, milestones and conditions to participateAll CCS entities to produce audited balance sheets and P&L accounts as per requirements specified by RBI/ NABARDCleanse Balance Sheets of all unrealizable assets/ assets at risk and make appropriate provisions for bad debts, etc.Detail business plan for each entity including financial sustainability and outreach goalsCategorize DCCBs and PACS into viable, potentially viable and unviable

Develop widing up/ merger plans for unviable entities and servicing plans for areas vacated by these entities

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Q12

2008

Q16

GoI

GoR


Q3 Q5Q4



2006 2007

CCS

Regu

lator

Impl

emen

tor

RSCB 2005

Q1 Q2

Activity

Q11 Q13Q8 Q14Q10 Q15Q6 Q7 Q9Restructure Balance Sheets of all entities found eligible and agree funds infusion plans based on achievement of milestones and performance benchmarksProceed with phased funds infusion into CCS and complete financial restructuring

5a. RSCB to be transformed to efficiently support reforming DCCBs and PACS

Develop a business plan in line with CBDF including a modified revenue model Repatriate GOR secondees; recruit professional managers in their place

Design and implement internal reengineering planTransfer banking activities to DCCBs where the DCCBs operate more efficiently and strengthen banking presence where DCCBs are to be wound up Develop and implement training and recruitment plan for RSCB in context of new business plan Develop and implement a change management plan together with revised MIS and automation planSet up HR support cell to provide HR services to the CCS Design job and position descriptions and recruit officers for DCCBs and PACSEvaluate training institute and facilities for delivering training to network and prepare plan for supporting the institution including supplementation

Work with training institute to identify training needs for CCS officers and Develop training programsDesign and implement a communication strategy using indigeneous approaches Develop local language communication material for different levels including PACS members

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Q12

2008

Q16

GoI

GoR


Q3 Q5Q4



2006 2007

CCS

Regu

lator

Impl

emen

tor

RSCB 2005

Q1 Q2

Activity

Q11 Q13Q8 Q14Q10 Q15Q6 Q7 Q9Review business processes in CCS entities, design accounting and MIS for CCS in collaboration with RBI and NABARDElaborate and implement a computerisation plan for the DCCBs and identified PACS Set up separate supervision cell with appropriately trained staff, strengthen and implement internal supervision approach and methodologies

Conduct a new technology study and pilots to test strategic use of technology in CCS business in order to increase effectiveness while decreasing costDesign new products to improve outreach especially to the poor and women while improving efficiencyIdentify and develop insurance and other risk mitigation products in collaboration with insurance service providers, commodity exchanges etc

Negotiate terms for distribution of insurance and other risk mitigation products through the network

5b. DCCB to be transformed to efficiently provide rural financial services

Develop a business plan in line with CBDF focussing on outreach and sustainability as well as new services Repatriate GOR secondees; recruit professional managers in their place

Design and implement internal reengineering planTransfer banking activities to PACS where the PACS operate more efficiently and strengthen banking presence where PACS are to be wound up Develop staff rationalisation, training and recruitment plan and HR policy for DCCB staff in context of new business plan and implement with support from RSCB and training instituteDevelop and implement a change management plan together with revised MIS and automation plan

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Q12

2008

Q16

GoI

GoR


Q3 Q5Q4



2006 2007

CCS

Regu

lator

Impl

emen

tor

RSCB 2005

Q1 Q2

Activity

Q11 Q13Q8 Q14Q10 Q15Q6 Q7 Q9Support state team in designing new products taking into account the new business plan and objectivesDevelop and implement group methodologies for extending outreach to the poor and womenUpgrade infrastructure to ensure bank imageDevelop manuals to elaborate services to PACS and strategy to communicate about the changed roleSet up separate department to supervise PACS and staff and train appropriately

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Q12

2008

Q16

GoI

GoR


Q3 Q5Q4



2006 2007

CCS

Regu

lator

Impl

emen

tor

RSCB 2005

Q1 Q2

Activity

Q11 Q13Q8 Q14Q10 Q15Q6 Q7 Q95c. Strengthen PACS as the foundation of the CCS and primary institution with mass outreach

Develop a business plan in line with CBDF focusing on outreach and sustainability as well as new servicesRepatriate GOR secondees/ cadre staff; recruit professional managers in their placeTake over activities of weak PACS through affiliation with SHGs or MACS societies in line with state planImplement staff rationalisation , training and recruitment plan and HR policy for PACS staff in context of new role and business plan with support from RSCB, DCCB and training instituteImplement MIS and automation where determined appropriate based on business size and institute a change management plan together with MIS and automation plan Implement new products , policies , methodologies and documentation required from customers Implement group methodologies for extending outreach to the poor and women

6. ImplementationSet up implementation teams at NABARD, State and District levels and define roles and responsibilitiesRecruit contract staff and depute staff from NABARD, SCB and DCCB as per planDetail CCS reform plan, identify short term consulting needs and detail TORMonitor, report progress to Steering Committee and assist in developing and implementing course corrections

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Technical Assistance Consultant’s Report Volume 1A ...€¦ · 1 Source: NABARD: Cooperative...

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