SECOND REPORT

Types of risk Credit risk Credit risk is defined as the loan in the event of default by the borrowers or in the event of deterioration of the borrowers credit worthiness .there is always a scope for the borrower to default from his commitment for one or the other reason resulting in crystallization of credit risk to the bank

Tool of credit risk management 1-Exposer norms 2-Review /renewal 3-Risk based pricing 4-Risk rating

Risk monitoring Once a loan is granted ,it is necessary to review the credit worthiness of the borrowers .the credit review process be conducted at least twice in a year in respect of major borrower .

Market risk Market risk is the market to the bank earnings and capital due to change in the market level of interest rates or price of securities foreign exchange and equities as well as the volatilities of these prices market risk management provides a comprehensive and dynamic framework for measuring monitoring and managing liquidity risk.

Liquidity risk

Liquidity refers to the ability of the bank efficiently accommodates reduction in liabilities and honor various commitment of the bank and to fund the loan growth and possible funding of balance sheet claims .liquidity is the safety cushion provided by the portfolio of liquid assets or the banks ability to raise funds at the normal cost. Interest rates risk Interest rates risk is the potential negative impact on the net interest income due to the change in interest rates and it refers to the vulnerability of an institution s financial condition to the movement in interest rates.

Operational risk Operational risk is the risk of loss arising from various types of technical or human error or failed process internal process, legal hurdles .fraud failure of people and system or from external agencies.

SHORT TERM COOPERATIVE CREDIT STRUCTURE The cooperative system in the country though federal in its organization structure is integrated on the basis of functional responsibilities of the various components of the system .the short term cooperative credit structure has at its base the primary societies which are expected to be multipurpose in character but in a large number of cases deal mainly in credit ,the farmer services societies generally referred to as FSSs which are, in fact multipurpose primary societies but with a larger areas of operation and larger membership ,large sized adivasi multi multi purpose societies in large organization of different kinds all federated into district central cooperative banks at the district level which in turn are federated into the state cooperative banks at the state level known into popularly as the apex banks as on 31 march 2006 there were 106384 PACS ,366 DCCBs and 31 SCBs supplying short term and medium term agricultural credit .their coverage extend to remotest parts of the country they have come a long way since the first primary cooperative society was set up in 1904 .

PRIMARY AGRICULTURE CREDIT SOCITIES A viable unit according to one of the committee was one which might be expected within a reasonable time to render the more important of the services expected of credit societies adequately and to as large a number of producers as possible without depending upon financial from the government expect for a limited period. A large number of societies continue to have low borrowing membership low business turnover and level of overdue resulting in accumulation of losses.