KAIM JOURNAL OF MANAGEMENT AND RESEARCH - Kaimindia.in

AN ENTREPRENEURSHIP CASE: CAL-DAK CABINETS
OF NORTH DAKOTA, USA
Mark B. Waldera*, M. Saeed** and James Ondracek***
Cal-Dak Cabinets is a company located on the outskirts of Minot, North Dakota, USA. Established in
1975, by Gary Price, Cal-Dak has constructed and supplied residential and commercial cabinetry for
customers in its region and in 24 states. Cal-Dak has experienced multiple challenges over the past
several years that relate to its internal and external environment. Despite various setbacks throughout
its history, the company has endured and is striving to expand its market and increase sales. In the
summer of 2002, Gary Price was contacted by the manager of a Japanese import company who
inquired about the potential for the provision of cabinetry to the Japanese market. Eager to expand
operations and improve the financial status of Cal-Dak, Gary Price has pursued the opportunity
by providing the Japanese company, Grand Stone, and its managers with a detailed, bid, product
samples, and other information. Eventually, Gary was invited to visit Japan for a business meeting.
In preparation for the trip, he researched the business customs and practices of the Japanese. Based
on his experiences and ongoing communication with the Japanese, Gary Price is optimistic about
his company’s potential to become an international cabinetry supplier.
CASE STUDY PERSPECTIVES
The purpose of this case study is to provide an example
of a North Dakota (USA) business in pursuit of new
customers and sales revenues in Japanese market.
A description of the history, current situation and
projections for Cal-Dak Cabinets, a locally owned and
operated company in Minot, North Dakota, is provided
in order to challenge the reader in case analysis and
formulating recommendations based upon case
content and business management principles. This
case was developed through multiple interviews with
Gary Price, the president and CEO of Cal-Dak Cabinets.
Additional information was gathered through a review
of the company’s web site and selected literature
pertaining to Japanese business practices. This case
has been prepared for academic purposes only and
it is not intended to be utilized by anyone to directly
affect the performance of Cal-Dak Cabinets or its
relationship with any of its stakeholders, including
its owner, employees, competitors, or customers. The
information provided in this case study is presented
through permission from Cal-Dak Cabinets and its
president, Gary Price.
INTRODUCTION
Gary Price, CEO of Cal-Dak Cabinets in Minot, North
Dakota, United States of America, was returning home
after his first and only business experience in Kofu,
Japan. As he boarded the Northwest Airlines flight
* Research Associate, Minot State University, USA.
** Professor, Minot State University, USA.
*** Professor, Minot State University, USA.
from Minneapolis to Minot, the final segment of his
return trip, Gary was cautiously optimistic. All the
homework directed toward doing business with the
Japanese had seemed to pay off. Gary believed that
he made a position impression on his new associates
and that a foundation for a business relationship
was established. He displayed genuine respect for
Japanese business customs and a commitment to
meeting their needs. What had begun several months
ago as a response to an e-mail from a Japanese import
company could become the best opportunity for Cal-
Dak to get back on its feet and be more profitable than
at any other time in company history. Gary recognized
that continued patience would be necessary, but if
his firm were to eventually supply cabinets through
international market penetration, long-term financial
security for Cal-Dak Cabinets could be realized.
COMPANY HISTORY
KAIM JOURNAL OF MANAGEMENT AND RESEARCH
VOL.2, No.2, November - April 2010 Pages : 1 - 8
Cal-Dak Cabinets began as an independent
moonlighting operation. In 1975, its founder, Gary
Price, had recently completed his military service and
assumed a woodworking apprenticeship position
at a cabinetry firm in Minot. Having a long-standing
interest in working with wood and his hands, Gary’s
was a quick study, and it didn’t take long for him to
receive the recognition of the firm’s management
and its senior craftsman. In one year, he was provided
with “his own saw” and assumed leadership for a

number of company projects along with his own
production crew of five employees. Gary discovered
that the eight-hour day was an inadequate challenge
for his entrepreneurial spirit, so he began to work on
his own time in a make shift shop after hours with
his employer’s blessings. Soon thereafter, he had
established a steady clientele who appreciated his
attention to detail, work ethic and customer service. By
1977, his reputation as a custom cabinet maker and the
demand for his work had grown enough to justify his
termination from his daytime position and a full-time
endeavor as the president and principal craftsman
in his own company, Cal-Dak Cabinets. Before long,
he hired several employees and Cal-Dak moved its
operations to a barn just on the outskirts of Minot.
Like other business enterprises in Minot, Cal-Dak
Cabinets has experienced the effects of fluctuations
in the agricultural economy. As prices for wheat
and other regional crops drove profits for farmers,
Cal-Dak’s business boomed. Downward trends in
company performance were also associated with more
negative circumstances for farmers and ranchers in
Northwestern North Dakota.
Throughout the company’s first ten years, virtually
all of the work sought out and obtained by Cal-Dak
was residential in nature, and most customers were
local homeowners or builders who subcontracted
with the company for kitchen cabinets and other
residential cabinetry needs. During this time frame,
Cal-Dak made several efforts to find niche markets
on a national level and overcome the limitations
imposed by the local economy. Examples included
custom-built furniture and podiums. Unfortunately,
nothing materialized in these areas for Cal-Dak. Gary
found that his commitment to quality craftsmanship
was compromised in the production of furniture and
that the marketability of podiums was limited, despite
advertising through Toastmaster’s International,
a worldwide network of clubs devoted to the
improvement of public speaking skills.
Eventually, Cal-Dak penetrated the commercial
case-goods and millworks market. In the early 1980’s
Cal-Dak began to supply cabinets for the Flying J
Travel Plazas throughout the United States. Gary
and his crew’s timely delivery and quality products
created a strong business relationship and further
enhanced the company’s reputation. In 1989, the
company was awarded its first large-scale project at
Jamestown College, in Jamestown, North Dakota.
This accomplishment represented a transition for
the company. Cal-Dak performed according to
expectations and made a profit in Jamestown. In
the process, the company demonstrated to the
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regional market that its capabilities extended beyond
residential cabinetry.
In 1991, one of Cal-Dak’s principal competitors,
Minot Woodworks, went out of business. Ahead of
time, arrangements were made for Cal-Dak to assume
all of the contracted work that had been taken on by
the terminating company. This represented another
break and growth opportunity marked by Cal-Dak’s
increased collaboration with prominent building
contractors in the community.
In 1997, the company’s sales and profitability had
grown enough to warrant a move from its location
within the barn on the family farm and continue its
operation in a new location less than a mile away.
The new facility occupies 15,500 square feet and Gary
financed the capital expenditure of approximately
$500,000 with a small business loan from 1 st Western
Bank in Minot. Cal-Dak was taking a bold step toward
a brighter and perhaps riskier future. In the same
year, Cal-Dak performed as a subcontractor for
Lovering and Johnson of Minneapolis, who was the
general contractor for a major project at the Minot
Air Force Base. Gary and his crew provided kitchen
and bathroom cabinetry for close to 50 homes, which
represented sales revenue of over $150,000 for the
company. Since then, the Minot Air Force Base has
been a key market, which has been exemplified by
supplying approximately 900 living units installed by
Cal-Dak. In 1998, Cal-Dak expanded its work with the
US Military by supplying 200 bathroom cabinets and
vanities for the Grand Forks Air Force base located in
the northeastern corner of the state.
Although the company still competed for
residential cabinetry jobs, Gary recognized that the
greatest growth potential for Cal-Dak would be in
the commercial case-goods and millwork market. In
order to increase production capabilities for larger
commercial projects, Gary invested in new technology.
In 1999, Cal-Dak purchased a $65,000 edge bander
and in 2001, production become more automated
and sophisticated through Gary’s introduction of a
computerized numerical control system and a software
program used to optimize wood processing. Over the
past decade, Cal-Dak’s aggressive growth strategy
and investment in technology has led to commercial
casegood business with hospitals, banks, retail stores,
colleges, churches, intermediate schools and the US
Military. The company had built and installed cabinetry
in 24 states, and there appeared to be potential for
Cal-Dak to go global.
Company Mission Statement
Cal-Dak’s mission is to produce a quality product and
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

provide professional service that meets the needs
of the ever changing marketplace and guarantees
customer satisfaction in a timely manner at a fair
price. Cal-Dak maintains a commitment to its team
that it will strive to maintain a safe and enjoyable work
environment that allows personal growth and job
advancement in a partnership with Cal-Dak to ensure
stability and success.
Product
Cal-Dak is a custom builder of wood products falling
into four categories:
1. Residential and commercial cabinets such as
those found in kitchens, bathrooms, and foyers.
2. Contract furnishings for institutional or
commercial use such as headboards, dressers,
and desks.
3. Institutional case-goods, using constructing
techniques, commonly referred to in the
industry as “box construction.” Examples include
desks, drawers, and storage cabinets in schools
and hospitals.
4. Architectural millwork that is exemplified by
standing and running wood trim in banks,
businesses, and other institutions.
The Market
On a local and regional level, Cal-Dak has provided
cabinetry for homeowners and homebuilders as well
as businesses, schools, and other institutions. Over the
years, several prominent customers have emerged,
including Trinity Health, a regional health care
provider, with local hospital and clinic facilities as well
as outreach clinics within Northwestern North Dakota.
Trinity became a customer in 1992 when one of Cal-
Dak’s estimators secured a $50,000 project through the
organization’s plant operations director. Since then,
Cal-Dak has received a number of projects at Trinity
through direct referral or the bid letting process.
Other key customers for Cal-Dak in Minot and the
surrounding area include several large general
contractors, including Rolac Contracting, Mattson
Construction, Mackley Construction, and Craft
Builders. Cal-Dak has worked as a subcontractor
for these companies and their clients on multiple
occasions in home and commercial building projects.
Competition for work as a subcontractor is based
upon price, product, service and reputation. Gary has
worked diligently over the years to maintain a positive
working relationship with all the major contractors
in Minot, but he has also recognized the importance
of marketing his company and its products to other
contractors in and outside of the state.
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Over the past several years, Cal-Dak has been in
contact with out of state contractors who have been
awarded projects at military bases. Cal-Dak provided
a bid to Sundt Construction company from Phoenix,
Arizona in a project at the Grand Forks Air Force Base.
Gary has been successful in a bid to Weiss Builders, San
Diego, California with ten years of consistent work. A key
strategy for Cal-Dak and other commercial cabinetry
companies is to achieve a listing in commercial project
specifications. This accomplishment distinguishes a
company’s products as the standard in the bid letting
process. Cal-Dak has obtained this status in a number
of projects undertaken by the Army Corps of Engineers,
the entity that is responsible for administering military
construction projects like those at the Minot and
Grand Forks Air Force Base.
Cal-Dak has also made progress in penetrating
the hotel market. Very recently, the company was
selected as the supplier of room furniture for a new
Sleep Inn construction project in Minot. Sleep Inn is
a member of the national Choice Hotel International
chain, and Cal-Dak is optimistic that its performance
in the Minot project will lead to other opportunities
on a national level. A model for a Sleep Inn room
is scheduled to be on display at the Dakota Square
Mall in Minot in the near future. Gary is eager for the
Choice Hotel corporate executives to visit Minot and
learn of Cal-Dak’s exceptional craftsmanship and value
as a supplier of woodwork for hotel rooms. Cal-Dak
is also planning for its participation in the Hospital
Association national show. Gary is optimistic that
this event will prove effective in increasing company
exposure to the hotel industry.
As stated earlier, to date Cal-Dak has established
customer relations in 24 states and its market area
has expanded as far west as California and as far
east as Boston and Florida. Although Minot and the
surrounding region provide for a majority of the
company’s business, Cal-Dak has marketed itself
aggressively in multiple locations across the country. In
order to discover opportunities in the community and
region, the company has relied upon its membership
in the Minot Builders and Plains Builders Exchanges.
Subscription to the on-line Construction Market
Data Bulletin has assisted Cal-Dak in maintaining an
awareness of projects across the country that represent
bidding opportunities. Once Gary and the company
become aware of a project, plans and requirements for
approval are obtained. Thereafter, Cal-Dak submits a
bid based upon project specifications. The company
has relied upon this type of market research and
responsiveness as its primary marketing method.
Cal-Dak has its own web site (www.caldak.
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

com) that describes the company and its history,
its commercial and residential product line, and
relationship with contractors. A testimonial from an
architecture firm is provided along with information
concerning Cal-Dak’s Premium Grade certification by
the Architectural Wood Work Institute (AWI) and its
membership and certification in the Kitchen Cabinet
Manufacturers Association (KCMA). Cal-Dak is the only
company in the state that has achieved the KCMA
certification, and this distinction has provided special
credibility in bidding on certain projects, especially
those overseen by the Army Corps of Engineers.
Cal-Dak’s competitors include any cabinetry
company that participates in bidding for large
commercial projects either directly or as a
subcontractor. In Minot, Minot Sash and Door and
Creative Cabinets are primary competitors. Early
in company history, when the focus of operations
was on custom made, residential cabinetry, Cal-Dak
competed with other small cabinetry companies. As
the business has expanded to larger projects, Cal-
Dak’s competition has changed. While the company
is still interested in providing kitchen cabinets and
vanities to private homeowners from time to time,
this has not been the primary market for Cal-Dak in
recent years. Competition with other companies can
be quite intense, especially when the number of large
projects undertaken by general contractors in the
Minot region are few in number. Gary has found that
excessive reliance on the local and regional economy
for business creates limitations for his company, and
for this reason, he has intensified efforts to expand
into the national market. Until very recently, pursuit of
international clients has not been considered.
FinancialSituation
Cal-Dak has had a history of being reasonably
profitable according to industry standards. However,
the company experienced a major setback in 2000
when Gary suddenly realized that Cal-Dak would
be hard pressed to meet payroll requirements for its
employees. Surprised by the financial decline in his
company, Gary undertook an internal audit and it was
discovered that the office manager who had recently
resigned had embezzled close to $100,000 from Cal-
Dak. Legal proceedings followed, and eventually, the
culprit was prosecuted. Unfortunately, the whole
situation had a devastating effect on company
performance. The resources devoted to the audit
and subsequent legal action interfered dramatically
with sales efforts, production, and other aspects of
operations. Cal-Dak found itself in a situation that
would prove crippling for some time to come. In order
to initiate a recovery, Gary had to assume a substantial
4
amount of debt and responsibility for reorganizing
the company. A new office manager was hired and
hard lessons were learned, including the need for
maintaining a more complete and ongoing awareness
of Cal-Dak’s financial performance. Today, Cal-Dak
continues to strive toward a consistently positive
bottom-line through intensified marketing, revenue
generation, cost-containment, and accounting
practices.
According to results of an AWI annual survey, CEO’s
from a sample of the nations cabinetry companies
are optimistic about the future. 65 per cent (n=165)
expressed a positive business sentiment. Perspectives
specific to economic conditions, sales, cash flow,
and labor were quite positive, despite the fact that a
majority of those sampled had experienced negative
business conditions in the previous six months. The
survey also indicated that woodworking companies
strive to achieve 28 per cent gross margins and 10 per
cent operating profit margins in their businesses. In
the West-north Central Region, the following median
financial ratios were reported:
Liquidity
Current ratio 1.51
Quick ratio 1.17
Profitability
Gross profit margin 18.1%
Operating profit margin 4.9%
Pretax net profit margin 4.5%
Balance Sheet Management
Debt to equity 0.99
Assets to equity 1.99
Fixed assets to equity 0.66
Sales to assets 9.58
ROE-operating 32.1%
ROE-pretax 24.4%
ROA-operating 10.8%
Inventory turns (days) 19.91
A/R turns (days) 46.48
A/P turns (days) 16.36
Note: From Cost of Doing Business Survey and Compensation
Study (p. 26), by Architectural Woodwork Institute, Eden Prairie, MN:
Inverra Consulting, Inc. Copyright by Inverra Consulting, Inc. Adapted
with permission.
Human Resources
Including its CEO, Gary Price, Cal-Dak has 20 employees.
They include an office manager, two project estimators,
an operation coordinator, and an individual responsible
for purchasing and inventory management. The rest
of Cal-Dak’s human resources are organized into
production and machining teams, each with a team
leader and two to three working members. Several
of Cal-Dak’s upper level employees have over twenty
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

5
years experience in woodworking and estimating. staff. Financial information specific to Cal-Dak’s
Laborers, making up the majority of the work force, present circumstances and goals is openly discussed
are recruited from the community and generally with employees on an ongoing basis and Gary
have some experience and interest in woodworking continues to maintain an open door policy for those
demonstrated through high school shop classes or experiencing problems in the workplace.
previous employment. Gary starts his new laborers at The employee compensation system at Cal-Dak
a wage of $8.00 per hour and systematically increases has been developed through the assistance of Midwest
their compensation as orientation to shop operations Business Consultants. Ten pay grades have been
are completed and job proficiency is demonstrated. established along with standardized job descriptions.
One of the major challenges for Cal-Dak is employee Employees are evaluated on an annual basis and
recruitment and retention. The company has a history raises are provided according to defined increments
of hiring numerous laborers who walk off the job in in July. In general, Cal-Dak provides compensation for
short order. Gary has found that in many instances, it employees that is competitive with other businesses in
takes several attempts to fill a position with someone Minot, but less than industry standards, especially for
who is willing to stay on board for an extended period. those who work as estimators and production leaders
This has proven to be a somewhat costly trend for the within the company.
company because of the substantial amount of time
and effort devoted to training new employees. This
is not a unique problem according to other CEO’s in
the industry. The AWI survey reported that it takes
about three months to find, hire and fully train a new
employee and that the employee turnover rate for the
industry is 10 per cent.
Cal-Dak has experienced some difficulties in
maintaining a positive work environment for its
employees. In 2000, Gary recognized that employee
morale seemed to be deteriorating. In response to the
situation, services from a business consulting company
were retained, and a study of the work environment
confirmed that employees were exceptionally
stressed and dissatisfied. Based on recommendations
subsequent to data collection, changes were made
in management structure and communication
processes. Since then, employee morale has improved
dramatically.
Motivating employees to be as productive and
efficient as possible has also been challenging for Cal-
Dak, especially when work available for the company
is below average. In order to extend work hours,
production teams tend to slow down in slow times and
cost-effectiveness can be severely compromised. In an
effort to enhance productivity, Gary has experimented
with various team incentive programs with less than
optimal results. The importance of productivity,
efficiency and company profitability has been openly
communicated to employees in staff meetings. In fact,
Gary has indicated that the company’s contribution
to the employee 401K plan is directly dependent
upon profitability. A major problem in determining
worker and team productivity has been the variability
in projects undertaken by the company and the job
tasks for individual employees. Gary and other leaders
within the company have continued to emphasize
the importance of productivity and its relevance to
Cal-Dak’s Opportunity in Japan
One day late in July of 2002, Gary Price received an
email from the manager of Grand Stone, a Japanese
import company, who inquired about Cal-Dak’s
interest in supplying its cabinets to Japanese
homebuilders. Gary’s return message to Grand Stone
confirmed Cal-Dak’s willingness to explore possibilities
and encouraged reference to Cal-Dak’s web site
for additional information. Almost daily thereafter,
Gary and his new Japanese counterpart exchanged
information. Eventually, Grand Stone requested a bid
on four types of cabinetry with four types of material
and four distinctive styles. Developing the detailed
bid according to the specifications and numerous
options requested by Grand Stone would take almost
two full months, but Gary was eager to demonstrate
his motivation to work with the Japanese. Grand
Stone indicated that Cal-Dak was the only company
willing to perform all this work without any guarantee
in a contract. Eventually the cabinet bid was sent to
Grand Stone along with a cabinet stain and counter
top samples. The cost for sending the information to
Kofu, Japan was approximately $500.
Grand Stone is a subsidiary of the Gaku Shizen
Koubo Group. Gaku is head quartered in Kofu, Japan
and owns two franchises for Ishin homes, one in Tokyo
and one in Yamanashi Prefecture. Gaku also owns a
franchise for Earth Homes in Yamanashi as well as its
own real estate division. The president of Gaku, Mr.
Komai oversees the construction of approximately
50 Ishin and Earth Homes per year. As he has worked
to serve the needs and interests of his clients, the
demand for authentic western amenities, like cabinets,
has become obvious. In response to the opportunity,
Mr. Komai founded Grand Stone, and a host of
building material options and customizations through
import agreements have been incorporated into the
financial performance in their communication with
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

company’s marketing and sales program. Prospective
home owners are now provided with the Grand Stone
catalogue in order to consider options such as western
style cabinetry. Gaku has also made its Grand Stone
imports available for approximately 200 other Ishin
and Earth Home franchisees throughout Japan.
After submitting his bid, Gary was anxious to meet
with the Japanese and confirm the potential for a
business relationship. He expressed his willingness to
travel to a business meeting, and after several weeks
of consideration, his contact at Grand Stone invited
him to come to Japan. Gary was excited about this
next step, but realized that he knew little about the
Japanese culture and business customs. He quickly
began to gather research information through the
assistance of acquaintances at Minot State University.
In addition, he was able to recruit a Japanese graduate
student, Daisuke Ozawa, to help him better understand
the Japanese approach to doing business and prepare
him for other aspects of his trip to Japan. Through
his research, Gary discovered that the Japanese
deliberate carefully over business decisions and that
they are based as much upon the nature of a personal
relationship as a company’s service or products. Gary
anticipated that creation of trust and rapport with
his new associates would be crucial. On January 9,
armed with maps of Kofu and a translator data bank
for communication, Gary left Minot to pursue new
business opportunities in Japan.
The Business Meeting
As Gary stepped off the train in Kofu, he reviewed the
map given to him by Daisuke the week before. The
hotel was several blocks away, and he struggled to
establish his bearings without any English speaking
person or street signs to assist him. What was a tenminute
walk for the average Japanese citizen turned
out to be an hour and a half journey for the North
Dakota cabinetmaker. After reaching his destination
and settling into his room, Gary was able to contact
his Grand Stone counterpart and import manager,
Ms. Ena Brooks. As an interpreter, Ena would facilitate
communication between Gary and other members
of Gaku. The itinerary for the next day was confirmed,
and Gary was able to order an evening meal with the
assistance of hi translator data bank.
The next morning, Gary met Ena and the other
staff members of Grand Stone, including the marketing
manager and franchise coordinator. Gary presented
his business card to each member of the Grand Stone
team. He had his business cards specially prepared for
the trip by having company information transcribed in
Japanese. Through his research, Gary had learned that
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business card presentation is of special importance in
Japanese business culture. Gary submitted individual
cards to each company member with a respectful
bow. Complying with this custom and having his
company information translated in writing seemed to
impress his hosts. Gary then provided each member
of the Gaku team with gifts from North Dakota. The
value of each gift varied according to rank within the
company, and Gary presented them in order, with
Mr. Komai receiving the last and most expensive gift.
This practice is also common in Japanese business
relations, especially with those who are new to the
Japanese business environment.
Later in the business meeting, Gary had the
opportunity to review the bid that had been previously
submitted to Gaku. Traditionally, the Japanese expect
estimates for goods or services to be inflated and
that extensive negotiation and reductions in initial
prices will ensue. Unfortunately, Gary had learned
this after the bid had been formally submitted. Before
discussing details, Gary explained to his hosts that
the bid was not prepared according to the “banana
salesman approach,” which meant that there would be
little opportunity for further discounts. He apologized
for not establishing his prices according to Japanese
expectations. Gary had learned prior to visit that being
apologetic and humble were important attributes to
the Japanese. He sensed that his honesty with Mr.
Komai and the others was positively received.
Gary and the Gaku group discussed the methods
used by Cal-Dak in production of cabinetry and
the samples previously sent were analyzed. Gary
confirmed material specifications and packaging
requirements. There was a considerable amount of
discussion concerning freight arrangements and
expenses, all parties understood that the prices for
the products needed to be low enough to allow for
Gaku to make a profit after paying for freight. Gary was
asked if he would like to include Cal-Dak’s products
in the Grand Stone catalogue, but he suggested that
this should be pursued after a working relationship
and agreement had been confirmed. Gary knew that
the Japanese would want to take the time to get to
know him and become comfortable with all aspects
of the new venture. He perceived his patience and
sensitivity to their needs for decision-making to be
an advantage.
Eventually, Gary was provided with a tour of an Ishin
home. In the process, he was able to better understand
how his cabinets would need to be customized to
meet the needs of Japanese homeowners. Gary
discovered special accommodations for appliances
would be required, but that Cal-Dak would be capable
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

of providing cabinetry according to the unique needs
of the Japanese. Throughout the tour, Gary took
pictures and notes to assist him in the construction of
additional samples after he returned home to Minot.
One of the features of Japanese cabinetry is a latch
mechanism that is installed to prevent cabinet door
opening during earthquakes. Gary requested and
received a sample of the device, so that Cal-Dak could
manufacture “earthquake proof” cabinets for his new
customers.
Toward the end of the business meeting, Mr. Komai
directed his employees to provide Gary with a tour of
Tokyo and lunch. Gary sensed that his interaction
with Mr. Komai had gone well. This impression was
reinforced during the tour, when Ena indicated that Mr.
Komai generally does not provide such hospitality to
other visitors. After some sightseeing and socialization
with his new Japanese colleagues, Gary returned to his
hotel and prepared for his trip back to North Dakota.
The Japanese Business Culture
Japan represents the second largest export market
for the United States and poses challenges for
visiting businessmen because of its complexity,
competition, and high costs. In order to secure
a business relationship, a long-term approach is
necessary. While consumers are becoming more
individualistic, business is generally secured through
well-established referral systems and enduring
relationships between individuals and firms. Typically,
Japanese business executives require extensive time to
make major decisions that will affect their companies,
and high-pressure tactics are not recommended.
In fact, it has been suggested that any indication of
limitations on time can compromise one’s bargaining
position (Morrison, Conaway, and Douress, 1997).
Once a Japanese firm confirms that it will enter
into a business agreement with another, it is quite
likely that it could become an exclusive and long
lasting relationship. In Japanese business practices,
group orientation and membership are emphasized.
(Hsu, 1994). For Gary Price and Cal-Dak cabinets, this
represented the greatest opportunity. He knew that if
Grand Stone adopts Cal-Dak as its exclusive provider
of authentic, western made cabinets for Ishin and
Earth Homes, the threat of competition is minimal
and the potential for Cal-Dak to be recommended
as the cabinet import of choice to other franchises is
maximized.
Staying the Course
Gary Price has proven to the Japanese that he is
patient and sincerely interested in meeting their
needs by providing quality products and services at a
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reasonable price. He invested himself and his company
in the Japanese opportunity. Gary demonstrated that
he is confident and that his efforts, including his trip
to Japan, have been unmatched by others.
Explanatory Notes
There are a number of key concepts inherent to the
case of Cal-Dak Cabinets that warrant consideration
in its analysis. These include:
1. The personal attributes of Gary Price as an
entrepreneur, business owner, and manager.
2. The affects of the external environment on the
performance of Cal-Dak Cabinets, including the
local economy, advances in technology and
communication, relationships with customers and
employees, and other market influences.
3. The affects of the internal environment including
financial management, human resource
management, and strategic marketing practices.
4. The methods utilized in effectively managing
new business relations with the Japanese,
including market entry, negotiation techniques,
communication, product customization, and
cross-cultural sensitivity.
Questions for Discussion and Analysis:
1. How did Gary Price and Cal-Dak respond to the
cultural needs of Grand Stone?
2. What risks are associated with Gary Price’s investment
in the Japanese opportunity?
3. What business management issues should be further
considered as Cal-Dak Cabinets moves forward in
its business relationship with Grand Stone?
4. If you were a business owner/manager in Minot,
North Dakota, what lessons would you learn from
reading and analyzing this case?
5. Group Project: Using this case as a model, prepare
a case study of the history and operations of an
entrepreneur in the vicinity of your university or
home.
Focus Statement
The primary focus of the case study is on the efforts
of its owner and principal manager, Gary Price,
and his efforts to respond to the opportunity for a
new market in Japan. In particular, the ability and
willingness to adapt marketing techniques to fit
the Japanese business culture is demonstrated.
Secondarily, this case illustrates how other aspects
of business management are practiced in a growing
cabinet company in response to influences found in
the external and internal environment.
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

REFERENCES
Architectural Woodwork Institute, Cost of Doing Business
Survey and Sompensation Study. Eden Prairie, MN:
Inverra Consulting, Inc.
Cal-Dak Cabinets, About Cal-Dak Cabinets, Retrieved from
http://www.caldak.com/aboutus/aboutusindex.htm
Hsu, R. C. (1994), The MIT Encyclopedia of the Japanese
Economy, Cambridge, MA: The MIT Press.
Morrison, T. Conaway, W.A. and Douress, J.J. (1997), Dun and
Bradstreet’s Guide to Doing Business Around the World,
Paramus, NJ: Prentice-Hall, inc.
8
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

INTRODUCTION
MARKET REACTIONS TO STOCK SPLITS:
EMPIRICAL EVIDENCES
FROM INDIAN EQUITY MARKET
Sultan Singh* and Sakshi Choudhary**
Although stock splits seem to be purely cosmetic event, there exists an impressive body of empirical
research, which exhibited that the stock splits are associated with the positive abnormal returns
around announcement and execution day. The present study examines the stock return behaviour
around stock splits in Indian context from December 1999 to December 2007. An effort has also
been made to disentangle the liquidity, trading range and neglected firm hypothesis. Consistent
to earlier evidences, the study under consideration reported the stock split announcement and
execution effect in Indian context. The statistical test could not lend any support to the hypothesis
daily turnover improved after stock split and consequently the liquidity of stocks in India. The study
could not corroborate the trading range hypothesis as possible explanation of stocks splits in India
as majority of the splitted shares, were traded at low market prices. However, the neglected firm
hypothesis could be associated with the stock splits in India.
All publicly traded companies have a set number of
shares that are outstanding on the stock market. A
stock split is a decision by the company’s management
to increase the number of shares to the current
shareholders. Stock price is also affected by a stock
split. After stock split, the stock price will be reduced
due to increase in the number of shares. Although
the number of outstanding shares and the stock price
change, the market capitalization remains constant.
A stock split is usually done by the companies which
have seen the increase in their share price to the level
that is either too high or beyond the price level of
similar companies in that sector. The primary motive
is to make shares more affordable to small investors
even though the underlying value of the company
does not change.
In an informational efficient market, the incorporation
of new information in stock prices is so swift that
no investor can expect abnormal returns associated
with the information. Still there exist ample empirical
evidences that the stock splits are associated with
positive abnormal returns around the announcement
and the execution day along with an increase in
variance following the ex-day across the world.
REVIEW OF LITERATURE
There is voluminous literature available on stock
returns behavior around the stock splits across the
globe. Most of the studies were focused on testing
four hypotheses- (I) the signaling hypothesis, (II) the
trading range hypothesis, (III) the liquidity hypothesis,
and (IV) the neglected firm hypothesis to explain the
abnormal stocks returns around the stock splits. In the
following sections, studies are categorized according
to their explanations of stock splits.
Shares can split to improve the liquidity of the
stock by expanding the investor base due to reduced
share price, is the central notion of the liquidity
hypothesis. Lamoureux and Poon (1987) argued
that the announcement of a split recognized that,
subsequent to the (reverse) split ex-day, the daily
number of transactions along with the raw volume
of shares traded increased (decreased) and resulted
in an increase in the noisiness of the security’s
return process. Muscarella and Vetsuypens (1994)
investigated splits of American Deposit Receipt (ADR)
securities, which were not associated with splits in the
home country stock. They argued that these splits
were likely to be motivated by the desire for liquidity
improvements only. Angel (1997) argued that the firm
split shares to improve their liquidity because the splits
generate an optimal tick size relative to stock price.
Mishra (2007) confirmed a negative effect on price and
return of stock splits. The results suggested that stock
splits had induced the market to revise its optimistic
valuation about future firm performance, rejecting
signaling hypothesis to which splits conveyed positive
information to markets. The results also showed that
split events enhanced liquidity.
Joshipura (2008) suggested that though there was
*Professor, Department of Business Administration, Chaudhary Devi Lal University, Sirsa. Email: s_singh05@rediffmail.com
**Assistant Professor, Department of Business Administration, Chaudhary Devi Lal University, Sirsa. Email: sakshi_mgt1@yahoo.com
KAIM JOURNAL OF MANAGEMENT AND RESEARCH
VOL.2, No.2, November - April 2010 Pages : 9 - 23

some positive abnormal return associated surrounding
announcement and effective day of the stock split
but it reversed in just a few days after the event
day and ultimately generated significant negative
abnormal return in slightly longer post effective
window. However, a significant improvement was
seen in liquidity surrounding the announcement and
effective day of stock split. Arbel and Swanson (1993)
proposed the neglected firm hypothesis for stock
splits. It suggested that if there is little information
about a firm, its shares could trade at a discount so
firms exercise splits to draw attention of investors.
Wulff (1999) investigated the market reaction to
stock splits using a set of German firms. Consistent
with the U.S. findings, similar effects were observed
for the sample of German stock splits but abnormal
returns around the announcement day are much
lower in Germany than in the U.S. It also documented
that the announcement effect to German stock splits
was best explained by a neglected firm effect and the
observed market reaction could not be attributed to
measurement problems caused by thin trading.
Gupta (2007) exhibited the evidences that there was
no announcement effect associated with stock splits
in Indian capital market though there was existence
of ex-split day effect and improvement in trading
volume. Further, it appeared that reasons for stock split
by low priced companies could be the neglected firm
hypothesis. According to the theory of signalling, splits
are a means of passing information from managers to
stockholders. By announcing a stock split, a company
can reduce any information asymmetries that might
exist between stockholders and management. The
stock price reduction resulting from a stock split
conveys management’s conviction of rising future
earnings (see Fama et al. (1969)).
Grinblatt et al. (1984) presented evidence which
indicated that stock prices, on an average, reacted
positively to stock dividend and stock split
announcements that were uncontaminated by other
contemporaneous firm-specific announcements.
In addition, it documented significantly positive
excess returns on and around the ex-dates of stock
dividends and splits and offered several signalling
based explanations for them. Lakonishok and Lev
(1987) suggested that stock splits were mainly aimed
at restoring stock prices to a “normal range.” The
evidences also supported the oft-mentioned signaling
motive of stock splits. Mcnichols and Dravid (1990)
suggested that management’s choice of split factor
signaled private information about future earnings
and the investors revised their beliefs about firm
10
value accordingly. The analysis also exhibited that
announcement returns were significantly correlated
with split factors after controlling for earnings forecast
errors. The hypothesis of the optimal price range states
that there is a price range in which trading is most
liquid for the stocks of a company. Consequently,
when a stock becomes too expensive, a split will bring
its price back into the optimal price range. Copeland
(1979) postulated the trading range hypothesis as a
possible explanation for the stock splits. The study
suggested that firm may prefer their shares to be
traded within a particular price range when prices are
too high. Besides these explanations to stock splits
various studies documented the splits effects across
the world.
Dhar and Chhaochharia (2007) analyzed the 90
stock splits during the April 2001 to March 2007
and exhibited the presence of significant abnormal
returns on ex-split day. Desai and Jain (1997) found
that, in the period from 1976 to 1991, their sample of
stocks realized an excess return of 7.05 per cent after
a holding period of one year following the stock split.
Ikenberry et al. (1996), examining 1275 stock splits and
observed excess returns of 7.93 per cent in the first year
after a stock split and 12.15 per cent in the first three
years following a split. The findings of positive excess
returns are not confined to the American market. Wu
and Chang (1997) found excess returns over the three
days surrounding a split announcement amounted
to an astounding 18.2 per cent on the Hong Kong
stock exchange by examining 67 splits in the period
from 1986 to 1992. On the whole, most of the studies
indicated abnormal returns associated with stock
splits.
OBJECTIVES OF THE STUDY
The main objective of the study is to examine the
reactions of stocks’ return to announcement of stock
splits in Indian context during the period of December
1999 to December 2007. In addition to this it studies
whether the stock split result in changes in liquidity
in the market. Finally the present study made an
endevaour to check whether the trading range and
neglected firm hypotheses could be associated with
stock splits in India.
RESEARCH METHODOLOGY
(i) Hypotheses
To achieve the objectives of the study, the following
hypotheses are formulated and tested:
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

• There are no significant abnormal returns around the
stock split announcement and execution date.
• There is no increase in liquidity of stocks after stock
split.
• The trading range hypothesis does not hold for stock
splits.
• The neglected firm hypothesis is not applicable in
Indian context.
(ii) Data and Methodology
The initial sample was consisted of 143 stock splits
announced by companies during the period of
December 1999 to December 2007. Of these 143
splits, only 98 cases were considered because for the
remaining 45 companies the required share price data
and/or board meeting dates on which the stocks splits
were considered could not be obtained. Therefore, the
final sample consists of 98 stock splits (Table 1).
Announcement and Execution Effects of Stock Splits
Seminal Studies by Ball and Brown (1968) and Fama
et al. (1969) developed and popularized the event
study methodology. The present study employed this
methodology to examine the effects of stock splits
on share prices by using daily adjusted closing prices
for the sample stocks for 227 days before and 30 days
after the board meeting date (event or announcement
date). Similarly, the effects around the ex-split date
are also analyzed. All the secondary data regarding
announcement and execution date, necessary share
price data and the value of BSE SENSEX are obtained
from Capital-Online an electronic database of
corporate sector in India. The estimation procedure
employed in using the event study methodology is
also used.
(iii) Estimation Procedure
The present study considered two events: (a) stock
split announcements and (b) ex-split dates. An event
window period of 61 days is used i.e., 30 days before
and 30 days after the event day. The event day is the
date of board meeting (ex-split day) for each sample
company and is defined as t = 0. Thirty days before
the event day are designated as -30 to -1 and thirty
days after the event are designated as + 1 to + 30. BSE
SENSEX index is used as a surrogate for the market
portfolio. An estimation period of – 225 to -31 days
are used for computing the expected returns using
the market model given by equation 1.
R = á + â R + å
it
i
i
mt
it
…. (1)
11
Where,
R it = observed daily return for the share of a
company i at time t.
R mt = observed daily return for the market
index i at time t.
á i = estimate of the intercept for the share of
a company i.
â i = estimate for the beta of share of a
company i.
å it = independent and identical distributed
residual error term.
The daily returns for each sample company and
market have been computed for the estimation
window period and also for the window period as:
R it = ( Pit
− Pit
−1
) / Pit
−1
…. (2)
Where,
P it = daily price for the share of a company i at
time t.
P it -1
= daily price for the share of a company i at
time t-1.
R mt = ( I t − I t−1
) / I t−1
…. (3)
Where,
I t = daily value for the market index at time t.
I t-1
= daily value for the market index at time
t-1.
Abnormal return, which is defined as the actual
return minus the expected return is computed for
company i on day t is calculated as:
AR it = R it - á i − â iR
mt …. (4)
In order to eliminate biasness of any one or group
of securities in the abnormal returns, the ARs are
averaged over the number of companies. The ARs
of individual companies are averaged for each day
surrounding the event day (- 30 to + 30 days) using
the following equation:
(AAR ) =
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010
N
t ∑
i=
1
AR
it
/N
…. (5)
In order to check the cumulative effect of the AARs
on days surrounding the event, the umulative Average
Abnormal Return (CAAR) is computed for the window
period by summing up the average abnormal returns
for the period, i.e.

(CAAR ) =
t
N
∑
t=
t 1
AAR
Statistical Significance of AARs
t
…. (6)
Firstly, the standard deviation of abnormal returns for
the estimation period - 227 to – 31 days is computed.
Then the standardized Abnormal Returns (SAR) for
each company is obtained by dividing the abnormal
returns of the window period (- 30 to + 30 days) by the
standard deviation obtained. For the event day t, the
Z-statistics for the average abnormal return (AARs) on
N securities is calculated as:
Z
=
N
t ∑
i=
1
SAR
it
/
N
For testing cumulative abnormal returns for
N securities over T days ( event days t1 to t2 the
Z-statistics is calculated as:
Z
=
t 2i
T ∑
i=
t 1i
(iv) Liquidity
SAR
it
/
T * N
The study used three measures to know the
changes in liquidity around the ex-split date- (a)
trading volume i.e. the number of shares traded daily
(b) number of trades, and (c) daily turnover.
EMPIRICAL RESULTS AND DISCUSSIONS
This section provides empirical results regarding the
effects of announcement and execution of stock splits
in addition to liquidity, trading range and neglected
firm hypothesis.
Stock Return Behaviour around the Announcement
Day
Efficient market hypothesis states that all the new
information regarding the stock prices, corporate
actions should be incorporated in stock prices as
instantaneously that no investor can expect abnormal
return. The same is expected from the stock splits
announcement. The results of the event study
concerning the announcement date are presented in
the Table 2 and Figure1. It can be observed that on
the announcement date itself, the average abnormal
return is 0.98 per cent, which is significant at 1 per cent
level. It is curious to note that the days t-3, t-2 and t-1
exhibit significant average abnormal return of 0.49
per cent, 0.47 per cent and 0.85 per cent respectively.
However on following day (t+1 day) of announcement
day the return is low and insignificant and on t+2 day
the AAR is although low than day t=0 yet significant at 5
12
percent level. Furthermore the AAR is decreasing from
t+4 to t+8 day. The results regarding the cumulative
average abnormal return reveal that for the day t=0,
t-1 and t-2 it is 2.31 per cent, which is significant at
1 per cent level (t=3.21) and for 10 days i.e., t+1 to
t+10 days after the announcement date CAAR is 0.12
per cent, which is also significant at 1 per cent level
(t=2.98). Thus, there noticeably is an announcement
effect associated with stock splits in India.
Stock Return Behaviour around the Ex-Split Day
The results of event study regarding the ex-split day
are presented in Table 3 and Figure 2. On the ex-split
day the trading in shares takes place at the new face
value. Because the information content of stock splits
has already been incorporated in share prices, one
would not expect any abnormal return on and around
the ex-split day according to the EMH. However, the
present study documents the average abnormal return
of 2.21 per cent, which is significant at 1 percent level
(t=9.31) on the ex-split day. The study exhibits that
the positive and significant abnormal return appear
from day t-1 to t+2 and is highest at t=0. Curiously, it
is observed that the days t+4, t+5, t+6, t+7, t+8 and
t+9 yield the significant negative AARs. On the other
hand, cumulative average abnormal returns for two
days, i.e. t=0 and t-1 is 2.80 per cent, which is significant
at 1 per cent level (t=4.73) and for five days from t-5 to
t-1 is 2.01 per cent, which is significant at 5 per cent
level (t=1.98). Thus, there seem to be a pronounced
existence of an ex-day effect on stock splits in India.
The findings are consistent with Grinblatt et al (1984),
Lakonishok and Lev (1987), Mishra (2007), Gupta
(2007) and Joshipura (2008).
Liquidity
Various studies, Lamoureux and Poon (1987), Angel
(1997) and Mishra (2007) argued that the managers
used stock splits as the device to improve the liquidity
of the stock. The study under consideration also
examined the effects of stock splits on liquidity. In
order to achieve this objective, three measures of
trading are used (i) Trading volume, which is the daily
number of shares traded (ii) Number of trades (iii)
Daily turnover.
Trading Volume and Number of Trades
The results regarding the average daily trading volume
of both- during 30 days before the ex-split date and 30
days after that, are presented in Table 4. It is evident
from the results that out of a sample of 98 stock
splits, the average daily volume increased in case of
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

94 in percentage terms after the stock split, whereas
it decreased in case of only four companies. For the
23 companies, the change in average trading volume
was more than one thousand per cent. It was as high
as 7107 per cent for Jai Corporation and as low as
only 4 per cent for Hexaware. The paired t test (t=5.32)
confirmed that there is significant difference between
trading volume before and after the stock splits. Using
the number of trades as measure of liquidity, there
has been an increase in the number of trades for 85
companies, whereas it declined for 11 companies. For
the 45 companies, change in number of trades was
more than one hundred per cent. Again the paired
t test (t=3.98) indicated that there is a significant
difference between the number of trades before and
after the stock splits. Thus, it is clear that splits have
increased the trading volume in India.
Daily Turnover and Market Capitalisation
Table 5 presents the average daily turnover and market
capitalisation both during the 30 days before the
ex-split date and 30 days after the split date. Out of a
sample of 98 stock splits, the average daily turnover
increased in case of 60 companies in percentage terms
after the ex-split date, whereas it declined in case of 38
companies. The paired t test (t=0.55) could not provide
credence to hypothesis that daily turnover increased
after stock split. It is observed from the results that
the daily market capitalisation too increased for 73
companies after the ex-split date, whereas it declined
for 24 companies. The paired t test (t=2.07) supported
the hypothesis that there is significant difference
before and after the stock splits. Thus, the present
study indicated that in spite of significant increase in
trading volume, there were no significant changes in
liquidity of stocks after stock splits as reported in earlier
studies conducted in US and India (Lamoureux and
Poon (1987), Angel (1997) and Mishra (2007)).
Trading Range and Neglected Firm Hypothesis
Trading range hypothesis stated that when stock
becomes too expensive, a split will bring its price
back into the optimal range in which trading is most
liquid for the stocks. In order to check this hypothesis
for stock splits in India, the sample was classified into
eight groups on the basis of their share prices on the
date of splits (Table 6). It is clearly noticeable that the
market prices of shares of Indian companies, which
went for stock split, are not as high so as to call for
a stock split in order to bring back to an affordable
price range of investors. It is curious to note that the
market prices are too low for most of the companies.
13
It is surprising that 36 companies (36.73 per cent) with
the share price of less than Rs. 100 and 51 companies
(52.04 per cent) with the share price of less than Rs.
200 have gone in for stock split. Out of a sample of 98
companies, only three companies-Lak Machine Works,
Jindel Steel and Bosh Ltd have a price of above Rs. 1000
may be genuinely said to split their shares in order to
bring them into a optimal trading range. On the basis
of above discussions, it is clear that the trading range
hypothesis could not explain the stock splits in India
as majority of the splitted share were traded at low
market prices. Arbel and Swanson (1993) proposed the
neglected firm hypothesis for stock splits. It suggested
that if there is little information about a firm, its shares
could trade at a discount so firms exercise splits to
draw attention of investors to ensure that information
about the company is widely recognized than before.
It is evident from the Table 6 that the majority of
companies which have gone in for stock splits in India
(71.43 percent) were low priced. Thus, the findings
exhibited that the neglected firm hypothesis emerges
to be valid in Indian stock market.
CONCLUSION
The present study analyzed the stock return behaviour
around stock splits in Indian capital market. It also
investigated that whether the stock splits were
motivated by the liquidity hypothesis, trading range
hypothesis and neglected firm hypothesis. By taking
a sample of 98 stock splits from December 1999 to
December 2007, the study reported the average
abnormal return of 0.98 per cent, which is significant
at 1 per cent level. The cumulative average abnormal
return for the day t=0, t-1 and t-2 is 2.31 per cent,
which is significant at 1 per cent level (t=3.21) and for
10 days i.e., t+1 to t+10 days after the announcement
date CAAR is 0.12 per cent, which is also significant at
1 percent level (t=2.98). Thus, there noticeably is an
announcement effect associated with stock splits in
India. The study documented the average abnormal
return of 2.21 per cent on the ex-split day, which is
significant at 1 percent level (t=9.31). On the other
hand, cumulative average abnormal returns for two
days, i.e. t=0 and t-1 is 2.80 percent which is significant
at 1 per cent level (t=4.73) and for five days from t-5 to
t-1 is 2.01 per cent, which is significant at 5 per cent
level (t=1.98). Thus, there seem to be a pronounced
existence of an ex-day effect on stock splits in India. On
the liquidity hypothesis, the study reported that out of
a sample of 98 stock splits, the average daily volume
and average number of trades increased in case of
94 and 85 companies respectively in percentage
terms after the stock split and confirmed significant
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

differences between trading volume and trade
numbers before and after the stock splits respectively.
While the average daily turnover increased in case of
60 companies in percentage terms after the ex-split
date, whereas it declined in case of 38 companies. But
the paired t test (t=0.55) could not provide credence
to hypothesis that daily turnover improved after stock
split and consequently the liquidity of stocks in India.
The study could not corroborate the trading range
hypothesis as possible explanation of stock splits in
India as majority of the splitted shares were traded at
low market prices. While the neglected firm hypothesis
could be associated with the stock splits in India.
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Angel, J. (1997), “Tick Size, Share Prices, and Stock Splits”, Journal
of Finance, Vol. 52(2), pp.655-681.
Ball, R. and Brown, P. (1968), “An Empirical Evaluation of
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Conrad, J.S. and Conroy, R.M. (1994), “Market Microstructure
and the Ex-Date Return”, Journal of Finance, Vol. 49,
pp.1507-1519.
Conroy, R.M., Harris, R.S. and Benet, B.A. (1990), “The Effect
of Stock Splits on Bid-Ask Spreads”, Journal of Financial
Economics, Vol. 45, pp.1285 - 1295.
Copeland, T.E. (1979), “Liquidity Changes following Stock Splits”,
Journal of Finance, Vol. 37, pp.115-142.
Desai, H. and Jain, P.C. (1997), “ Long Run Common Stocks
Returns Following Stock Splits and Reverse Splits”, Journal
of Business, Vol. 70, pp.405-422.
Dhar, S. and Chhaochharia, S. (2007), Market Reaction around the
Stock Splits and Bonus Issues: Some Indian Evidence,http://
papers.ssrn.com/sol3/papers.cfm?abstract_id=1087200
Fama, E. F., Fisher, L. Jensen, M. C. and Roll, R. (1969),
“The Adjustment of Stock Prices to New Information”,
International Economic Review, Vol. 10, pp.1-21.
Grinblatt, M.S., Masulis, R.W. and Titman, S. (1984), “The
Valuation Effect of Stock Splits and Stock Dividends”,
Journal of Financial Economics, Vol. 13, pp.461-490.
Gupta, A. (2007), “Market Reaction to Stock Market Splits:
Evidence from India”, The ICFAI Journal of Applied Finance,
Vol.13, No.1, pp.5-22.
Ikenberry, D.L., Rankine, G. and Stice, E.K. (1996), “What do Stock
Splits Really Signal?”, Journal of Financial and Quantitative
Analysis, Vol. 31, pp.357-375.
Joshipura, M. (2007), Price and Liquidity Effects of Stock Split: An
Empirical Evidence from Indian Stock Market, http://www.
nseindia.com/content/research/comppaper194.pdf.
Lakonishok, J. and Lev, B. (1987), “Stock Splits and Stock
Dividends: Why, Who and When”, Journal of Finance Vol.
14
42, pp.913-932.
Lamoureux, C.G. and Poon, P. (1987), “The Market Reaction to
Stock Splits”, Journal of Finance, Vol. 42, pp.1347-1370.
McNichols, M. and David, A. (1990), “Stock Dividends, Stock
Splits and Signaling”, Journal of Finance, Vol. 45, pp.857-
880.
Mishra, A. (2007), “An Empirical Analysis of Market Reaction
Around the Bonus Issues in India”, International Journal
of Theoretical and Applied Finance, Vol. 10, No. 2, pp.251-
271.
Muscarella, C.J. and Vetsuypens, M.R. (1996), “Stock Splits:
Signaling or Liquidity? The Case of ADR Solo Splits”, Journal
of Financial Economics Vol. 42, pp.3-26.
Schultz, P. (2000), “Stock Splits, Tick Size, and Sponsorship,” The
Journal of Finance, Vol. 55 No.1, pp.429-450.
Wu, L. and Chan, B.Y. (1996), “On the Existence of an ‘Optimal
Stock Price’ Evidence from Stock Splits and Reverse Stock
Splits in Hong Kong, Working Paper 86, City University
of Hong Kong, http:// www.cityu.edu.hk/ef/research/
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Wulff, C. (2002), “The Market Reaction to Stock Splits: Evidence
from Germany,” Schmalenbach Business Review, Vol. 54,
No.3, pp.280-290.
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15
Table 1: List of Sample Companies Announcing Stock Splits
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

16
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

17
Table 2 : Average Abnormal Returns and Cumulative Average Abnormal Returns
around Announcement of Stock Split
Note: * Significant at 5 per cent level, ** Significant at 1 per cent level.
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

18
Table 3: Average Abnormal Returns (AARs) and Cumulative
Average Abnormal Returns (CAARs) around Ex- Split Dates
Note: * Significant at 5 per cent level, ** Significant at 1 per cent level.
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

19
Table 4: Average Trading Volume and Number of Trades before and after the Ex- Split Date
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

Note: t values for differences between trading volume and number of trades before and after the ex-split dates were noted as -5.32** and
-3.98** respectively.
20
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

21
Table 5: Average Daily Turnover and Market Capitalisation Before and After the Ex- Split Date
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

22
Note: t values for differences between daily turnover and market capitalisation before and after the ex-split dates were noted as -0.55 and -2.07*
respectively.
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

23
Table 6: Classification of Companies on the Basis of Market Price on the Day of Stock Split
Figure 1 : Average Abnormal Returns around Announcement of Stock Split
Figure 2 : Average Abnormal Returns around Ex- Split Date
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

INTRODUCTION
A STUDY ON FACTORS DETERMINING BUYING BEHAVIOR OF
HANDICRAFT ITEMS-WITH
REFERENCE TO HANDICRAFTS OF ORISSA
R.K. Bal* and Manjusmita Dash**
This research work carried out in Orissa is designed to study customers’ buying behaviour in relation
to four handicraft items. The research primarily is based on primay data collected by mean of survey
with the help of structured questionnaires.Research findings reveal motives for buying these itmes.
It was discovered that customers are generally attracted to handicraft items because of their artistic
value. The study further points out the need for appropriate marketing strategies for business
organisations dealing in these products.
Handicrafts are the material symbols of India’s cultural
ethos. A journey into history would reveal that India
has always possessed a great culture and rich heritage,
which over the ages have left behind memories in
the form of exquisite handicrafts. Handicrafts have
their importance not only as a source of employment
to craftsmen, but, perhaps, much more due to their
capacity to reflect the culture and civilization, hopes
and fears of generations through artistic expression.
These crafts are the custodians of Indian cultural
heritage.
Handicrafts encompass activities that require
a broad range of skills and equipment including
needlework, lace making, weaving, printed textiles,
basketry, pottery, ornamental working, leather
working, woodworking and the making of stained
glass. The basic characteristics of handicrafts are that
they are hand-made rather than machine-made,
incorporate a substantial element of craft-skill and
are luxury rather that essential items. Articles besides
being made by hand having its decorative and artistic
value are only qualified as handicrafts. Handicrafts
have the following attributes:
• Handicrafts are hand-made rather than
machine-made. Sometimes machines with low
technology may be used in the process of
manufacturing, but they are mostly hand operated
and their requirement in the total process is very
negligible.
• Handicrafts are produced invariably by highly
labour-intensive process.
• Labour cost is very high compared to material
and fuel costs.
* Professor, Department of Commerce, Utkal University, Bhubaneswar.
** Faculty, Department. of Business Administration, Utkal University, Bhubaneswar.
KAIM JOURNAL OF MANAGEMENT AND RESEARCH
VOL.2, No.2, November - April 2010 Pages : 24 - 34
• The artistic and esteem values of the handicrafts
are generally more than the functional value.
• The demand for handicrafts is generally income
elastic.
• Handicrafts require minimum capital, equipment
and energy.
• Employment opportunities can be easily created
through abundant use of local skills by creating
more demand for handicrafts.
• Handicraft production is mostly concentrated
in less developed countries and the demand for
handicraft is concentrated in more developed
countries.
OBJECTIVES AND METHODOLOGY OF THE STUDY
The main objective of this research paper is to study
the intention for purchase of handicraft products.
The factors affecting the buying behaviour of the
customers of Orissa have also been examined in this
article. For the present study, Orissa state is purposively
selected, mainly because of the striking selection of
decorative and utilitarian art and craft and special
creative and imaginative craftsmanship of Orissa.
The present research has been conducted for four
handicraft items, i.e., (i) Stone carving, (ii) applique,
(iii) filigree, and (iv) pattachitra.
The required data for the present study have
been collected mainly from primary sources. Primary
data have been collected through the survey method
with the help of structured questionnaires. We have
designed two sets of questionnaires; one for customers
and second for artisans. The sample customers have
been divided into two: rural and urban. The proposed
sample size was of 1000 customers, out of which

898 valid questionnaires have been received. Three
hundred artisans were also covered in the second
survey. We have interviewed each artisan producing
four different craft items.
FACTORS DETERMINING BUYING BEHAVIOR
Religious depiction
Orissa is a land of religions. Puri is recognized as
one of the four most important religious centers in
Hinduism. The Sun Temple at Konark symbolises the
seat of Sun God. Bhubaneswar, the city of temples, is
the place of Lord Shiva. Udaygiri and Dhauligiri in the
outskirts of Bhubaneswar and Lalitgiri at a distance of
70 kms are ancient seats of Buddhist monks and saints.
Khandagiri, near Bhubaneswar, has a magnificent Jain
temple of Digambar jain cult. People in the state have
been highly religious oriented. The culture of Orissa is
often associated with the Jagannath culture. In view
of this dominance of religion in the social day today
life of the people, it is expected that they would have
a distinct preference for products having religious
depictions. For the purpose of the study mythological
depiction will also be considered within the scope
of religious depiction. In view of this expectation we
hypothesized that among buyers of handicraft items
there would be a distinct preference for religious or
25
mythological depictions over other depictions.
Further, over the years the religion orientation
of the rural people has declined. The concepts of
Bhagabat tungi in villages are no more in existence.
Religious activities are more or less confined to upper
class people. In urban locations also worshiping
deities in every house has become a more prevalent
practice than before. People in urban locations are
also worshiping god and goddess irrespective of their
castes. In view of these circumstances, it is expected
and accordingly hypothesized that people in urban
locations will have greater preference for religious
depictions than people in rural locations.
Handicraft items of religious depictions are
generally of higher value since those are generally of
better finish and also of aesthetic value. Upper income
group buyers are likely to be attracted towards such
items. On the other hand, handicrafts of non-religious
depictions other than modern arts and crafts are
generally utility items and low-income group people
are more likely to be attracted towards these items.
Table 1.1 : Location-wise and Income-wise Frequency Distribution on Preference Towards Religious Depictions
* Significant at P= 0.05, ** Significant at P=0.01
The general buyers preference for religious
depictions to other depictions is examined through
tabular form of data. Nearly 65 per cent of respondents
preferred crafts with religious depictions where as
only 35 per cent preferred non-religious depictions.
Further, the urban people and higher income people
will have a greater preference for religious depiction
than rural and low income people. The income in this
case was divided into three categories, i.e., HIG, MIG,
LIG whereas urban, rural aspects has been divided into
two groups, i.e., urban and rural. The actual frequency
for the different groups and c 2 values are given in the
Table – 1.1. In both the cases, the calculated value of
c 2 being greater than the table value of c 2 at p=0.05
; we reject that there is no association between the
variables. In other words, there seems to be sufficient
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

evidence that urban residents and high income buyers
have a distinct preference for religious depictions
compared to other buyers.
Income
The income of the buyer determines the purchasing
power. Therefore, income plays an important role in
Table 1.2: Analysis of Variance (ANOVA) on Expenditure Towards
Different Types of Handicraft Items Between Income Groups.
* Significant at 5% level (P

items are significant at 1% level (P

28
Chart - 1
Average Expenditure on Handicraft Items by Different Income Group Buyers
The significant variation in expenses towards
appliqué between income groups is evident from
table-1.2 (F=7.308**, P

29
Table 1.4 : Relationship of Monthly Income with Total Expenditure on Handicraft Items.
Table 1.5 : Relationship of Monthly Income with Expenditure on Stone Carving.
Table 1.6 : Relationship of Monthly Income with Expenditure on Appliqué
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

30
Table 1.7: Relationship of Monthly Income with Expenditure on Filigree
Table 1.8: Relationship of Monthly Income with Expenditure on Pattachitra.
From table 1.4 to 1.8, it may be concluded that
more the monthly income, more will be expenditure
on handicraft items. The same trend is observed in all
categories of handicraft items.
Urban / Rural Life
Buying of handicrafts items also vary from location to
location, i.e., urban and rural areas. The variation may
be because of non-availability of items, for expensive
pricing, least interest for decoration and unaware
about the product. They only use some of the utility
items of the handicraft mainly for religious purpose. So,
from table-6.9, we can find out location wise responses
to buy handicrafts items. Here we have analyzed
that more households in urban areas would tend to
possess handicrafts items, compared to households
in rural Orissa.
Table 1.9 : Area-wise Opinion on Interest for Handicraft Items
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

It is observed from the figures in Table-1.9 that
majority of the respondents in urban areas are
interested in handicraft items, whereas 41.4 per cent
of respondents in rural areas are interested to buy
handicraft items. Here the hypothesis is accepted.
Accordingly it is concluded that the households in
urban areas tend to possess more handicraft items as
compared to households in rural areas.
Artistic Value
31
As noted any artistic article or commodity produced
by the skill of hands is handicrafts. So, people are
always attracted to any handicraft item because of its
artistic values. Here table-1.10 reveals the motive of
our respondents for buying handicrafts in relation to
certain artistic values. The same figures are given in
chart 6.3. It is found that the main motive for buying
handicrafts would tend to be primarily for their artistic
values.
Table 1.10 : Preferences of Buyers for Purchase of Handicraft Items.
Motivation is concerned with the reasons that drive
people to undertake certain actions. It gives both impetus
and direction to behavior. In view of this, an attempt is
made to know the motives of respondents, which made
them to purchase handicrafts.
While in Rank more than 75 per cent respondents
have mentioned that they have been motivated to
purchase handicrafts due to artistic nature of the
products, 63.3 per cent respondents for utility and
53.7 per cent respondents for status have got Rank II
and Rank III respectively. Majority of the respondents
(55.7%) have stated that luxury is the main motive
behind buying handicrafts and they have opted for Rank
IV. In view of this, it is suggested that the artisans may
concentrate to develop new designs and models having
unique creativity and artistic values for the handicrafts
items. Most of the respondents have been motivated
to purchase handicrafts due to artistic nature of the
products after seeing the item they feel the need for it.
So, at that point, they purchase that item. Here table 1.11
and chart 2 present the importance of impulse for buying
handicrafts items on the basis of locality and income
groups. It was discovered that most of the people would
tend to go for impulse buying of handicrafts items.
The person who influences the buyer decisions may
be different from the person who takes buying decision.
Hence, an attempt is made to know the person who
actually takes buying decisions to purchase handicrafts.
Table 1.11 shows the persons influencing the buying
decisions in handicrafts. According to the locality both
in rural and urban areas the mean is high having 67.59%
and 65.96% (+1.636) respectively for self. According to the
income groups also the self has got high percentage with
high mean value. In case of LIG, MIG, HIG, the mean value
is 72.10% (+1.367), 62.61% (+1.657), 65.00% (+2.191)
respectively. As many as 66.91% (+0.973) respondents
have said that they themselves take the decisions to buy
handicrafts while 13.26% (+0.685) of respondents have
expressed that their spouses take the decision.
Table 1.11 : Influence of Family Members on Purchase of Handicraft Items
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

Therefore, it can be concluded from the above that
a majority of the respondents have expressed that they
themselves take the decision to buy handicrafts.
Handicrafts as Gift Item
32
Chart - 2
Area wise and Income wise Responses on Impulse Buying
Orissa offers a striking selection of decorative and
utilitarian arts and crafts. As far as the handicrafts
are concerned, consumers can satisfy their different
needs using such handicraft products. Handicraft as
a gift item becomes a fully preferred item. So, here
we will examine the statement that for the purpose
of gifts or presentation items, buyers would tend to
buy handicraft items in preference to other items. The
results are shown in table 1.12.
It can be seen from the table that the preference
for handicraft items as gift item over other items
such as money, clothes, crockery, decorative items,
cosmetic products, consumer durables and sweets
is overwhelmingly greater. In only one case, i.e.,
jewelleries, respondents preferred to give jewelllery
over handicraft products. Thus, in general there is a
good reputation of handicraft items particularly for
gift purposes.
Table 1.12 : People Prefer to Purchase Handicraft Items Compared to Other Items for Presentation of Gifts
(Figures in parenthesis indicate the actual responses)
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

With regard to urban and rural respondents in
terms of their preferences for handicraft items over
other items, it was expected that this preference will be
more pronounced in case of urban customer. However
the table shows that there is no such preference. Urban
and rural people for handicrafts over other items,
such as clothes, crockery, decorative items, cosmetic
products, consumer durable, jewellery, sweets etc are
considered, the percentages are almost comparable
urban and rural people having similar preferences for
handicraft items.
With regard to income, it is seen that higher income
group will have greater preferences for handicraft than
other kinds of gifts. The percentages of respondents
showing their preferences for handicraft items over
other items for three separate groups, i.e., LIG, MIG,
HIG are compared, it is found that in all the three
categories, the percentage of people preferencing
handicraft items are almost comparable. The variations
in all the cases are less than 12 per cent. Therefore it
can be reasonably concluded that income level has no
impact on the pattern of preferences for handicrafts
items over other items.
FINDINGS AND CONCLUSION
Customer orientation and satisfaction is the basis for
success in any organization. A study of buying behavior
of customers is a pre-requisite for customer orientation.
The present study is an attempt to examine the buying
behavior of customers as regards handicraft items so
that appropriate marketing strategies can be adopted
by the business organisations selling these items.
People are generally attracted to handicraft items
because of their artistic values. The study reveals the
motive of the respondents for buying handicrafts in
relation to certain artistic values. The artisans may
concentrate to develop new designs and models
having unique creativity and artistic values for the
handicraft items. Most of the respondents have been
motivated to purchase handicrafts due to artistic
nature of the products. Appliqué items are owned by
most of the people as compared to other items. It is
very much popular in each and every corner of Orissa.
In other words appliqué is the most preferred craft
item by the respondents among all handicraft items.
As religious depictions in handicraft items impress
the customers, it is suggested that artisans should
produce more number of handicrafts with religious
depictions in their conventional and modern design.
Most of the respondents pointed out that there is
greater need for improvement in design of handicraft
products, followed by the need for improving quality.
Indifference of sales persons is the third major reason
33
for buyer’s disenchantment. There is an urgent
need for customer orientation for the promotion of
handicraft products in Orissa.
REFERENCES
Chandrasekhar, M. (1994), Marketing of Handicrafts, Venugopal.
K. Rao. R, an distributors, Delhi.
Chattapadhya, Kamaladevi (1996), The Glory of Indian
Handicrafts, Indian Book Company, New Delhi.
Government of India, Census of Handicrafts Artisans.
Das, H.C. (1984), “Glimpses of Orissa Art and Culture”. Golden
Jubilee Volume of the Orissa Historical Research, Journal
Vol – XXX ( Nos – 2, 3 & 4 ),.
Directorate of Handicrafts (1990), Status Report on Handicrafts,
Government of Orissa.
Enarkshi, Bhavnani (1964), Decorative Designs and
Craftsmanship of India, Russi Jal Taroporevala for D.B.
Taraporevala Sons & Co. Pvt. Ltd, Bombay.
Garrett, S.E. (1984), Statistic in Psychology and Education, David
Mckay, Newwork.
Jain, Subash (1998), Marketing Planning and Strategy,
Casebook, South Western College Publishing.
Kinnear, Thomas C. and Bernhardt (1983), Principles of
Marketing, Scott, Foresman.
Kotler, Philip (2008), Marketing Management, Thomson Press
( India) Ltd, New Delhi.
Mahapatra, Ramesh (1991), “Paribartan in Pipili Chandua”
(Appliqué in the Process of Development) in Orissa news
paper Pragatibadi, Col – 1 to 7),
Mohanty, B.C. (1980), Appliqué Crafts of Orissa, Calico Museum
of Textiles, Ahmedabad.
Mohanty, Bijay Chandra (1980), Appique Crafts of Orissa, Calico
Museum of Textiles, Ahmedabad.
Mukhopadhyaya, Durga Das (1994), Folk Art and Social
Communication, Publication Division, New Delhi.
Nag, A. (2002), Marketing Strategy, Macmillan India Ltd.
National Institution for Social Development and Applied
Research, (1999), Technology, Firm size and Performance
a Study of Three Popular Crafts of Orissa, Bhubaneswar.
Nayak, P. and Ray, J. (1996), Handicrafts of Orissa Development
and Potential, Nabakrushna Choudhury Centre for
Development Studies, Bhubaneswar.
Padhy, Dinanath (1990), Traditional Painting of Orissa,
Bhubaneswar, Published by Hony, General Secy, Working
Artists Association of Orissa.
The Samaja (2006), Rajyana Kshyudrasilpa Pain Chin Aatank,
(in Oriya), 12 th September.
Mohapatra, Ramesh Chandra (2005), Changing Patterns in the
Applique Crafts of Pipli, Orissa Review,December,
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S. Seth, (1995), Towards a Volunteer Movement of artisan
Support, Craft news.
Samal,Banani, (1994), Appliqué Craft Tradition of Orissa and
Change, Ph.D. Thesis of Department of Anthropology,
Utkal University.
S.Vijayagopalan, (1993), Economic Status of Handicrafts Artisans
(New Delhi:NCAER,)
Soroj Mishra (2005), Handicraft:Looking Down the Barrel, India
34
First,vol-ii,Isse-21,October.
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

ESTIMATION OF TOTAL IRRIGATION
SUBSIDIES IN HARYANA
N K Bishnoi* and Sushil Sharma**
The success story of Haryana in agriculture was the outcome of adoption of policy induced subsidized
inputs including hybrid seeds, chemical fertilizers and irrigation by the farming community. Since
the massive investment in irrigation facilities by the state government has become a sensitive and
politicized issue, we made an attempt to estimate the total subsidy given by the government on
medium and large irrigation projects. It is expected that estimation can help depoliticize the issue
and help take informed decisions in this context. It is estimated that more than 90 percent of the
total cost in large and medium irrigation facilities in Haryana is borne by the government as subsidy.
Further, recently government has reduced the water charges rather than increasing them. This is also
expected to increase the burden and instigate sub optimal utilization of scarce water resources.
This research paper has been divided into four
sections. Section I provides a brief introduction to the
topic. Section II explains subsidy and its kinds. Section
III is devoted to the issue of methodology. Last section
brings out analysis and the findings, conclusions and
policy recommendations.
INTRODUCTION
SECTION - 1
Haryana is known as a grain bowl of the country. The
state is one of the early adopter of green revolution
in the country. Following the national consensus, the
government of Haryana introduced “chemical fertilizerassured
water intensive hybrid seed” led agriculture
development strategy in the late sixties immediately
after it came into being in the year 1966. As part of
input intensive agri-growth strategy at national level,
the government of Haryana also started doling-out
subsidy for irrigated water, hybrid seeds and chemical
fertilizers in order to encourage the farmers to adopt
the new agri-practices. In the initial years in particular,
the results were extremely favorable for Haryana as
well as India and as a consequence the food sufficiency
was attained in the country.
The new strategy resulted in manifold expansion
of infrastructure and support services related to
agriculture in Haryana. Haryana made a remarkable
progress in the field of agriculture production. The
food grains production touched an impressive figure
of 156.77 lakh tones in 2007-08, up from 25.92 lakh
tones at the time of its inception in 1966-67. The gross
area sown registered in significant increase from 45.99
lakh hectares in 1966-67 to 65.09 lakh hectares in
the year 2006-07. The production of rice and wheat
went up from 4.60 lakh tones and 23.42 lakh tones
in 1970-71 to 36.13 lakh tones and 105.06 lakh tones
in 2007-08 respectively. In the same period, the gross
irrigated area of the state increased from 17.8 lakh
hectare in 1967-68 to 54.51 lakh hectare in 2005-06.
Similarly, net area sown also registered an considerable
increase from 11.32 lakh hectare in 1967-68 to 29.30
lakh hectare in 2005-06. However, area irrigated by
the canals has been stagnant at around 13.5 lakh
hectare since the year 1990-91. The stagnation in canal
irrigated area indicates that government investment
in canal irrigation projects has been more of a political
posturing rather than well considered economically
viable investment.
The subsidy on other inputs except irrigation
facility are current expenditure in nature and therefore
their impact is confined to the year in which they
are incurred. However, expenditure on irrigation
particularly on large and medium irrigation facilities
presents a peculiar case. The expenditure on large
and medium irrigation facilities entails massive capital
expenditure in early stage and thereafter equally
heavy expenditure on the maintenance of these
services. Obviously, without considerable amount of
government subsidy, it is highly unlikely to sustain
theses activities. But the government expenditure
means hard earned money of the tax payers that
is not used in competing activities and that is why
such projects must result in net benefits to the
* Associate Professor, Haryana School of Business, Guru Jambheshwar University of Science and Technology, Hisar,
E-mail: nkbisnoi123@rediffmail.com
** Research Fellow, Haryana School of Business, Guru Jambheshwar University of Science and Technology, Hisar,
E-mail: mrsushilsharma@rediffmail.com
KAIM JOURNAL OF MANAGEMENT AND RESEARCH
VOL.2, No.2, November - April 2010 Pages : 35 - 40

economy. Unfortunately, until subsidy component
on such irrigation projects is estimated, further
comparison between social costs and benefits is not
possible. It implies, as a first step in this direction,
precise estimation of subsidy on large and medium
irrigation projects must be estimated using scientific
methodology.
The government of Haryana has been spending
a significant amount of money on irrigation facilities.
The capital expenditure on irrigation at constant prices
(1999-2000 prices), went up from about Rs. 93.85
crores in 1974-75 to Rs. 218.51 crores in the 2004-05.
Similarly revenue expenditure on irrigation shows
an increase from Rs. 140.54 crore to Rs. 401.46 crore
(1999-2000 prices), during these years. It is of interest
to mention here that in India in general and Haryana
in particular, irrigation economy is highly politicized
and emotional issue. Therefore, it is expected that the
estimation of subsidy on irrigation would contribute to
the more informed debate on the issue. Therefore, we
have attempted to estimate the quantum of subsidy
provided by the government over the period of time
in Haryana in this study.
MEANING OF SUBSIDY
SECTION - 2
Subsidies play a crucial role in stimulating development
of any country through increased agriculture
production, employment and investment. They are
advanced either to promote the use of new inputs
or transfer income in favour of farming community
(Gulati and Sharma, 1995). In case of semi-public good
like irrigation, for maintaining overall economy-wide
efficiency of the investment in irrigation, it is important
that both the direct water users (or direct beneficiaries)
as well indirect water users (indirect beneficiaries)
should bear the full cost of service provision, and not
only the direct beneficiaries as frequently cited in the
literature. In reality, farmers get only about one-fifth
to one fourth of the total economy-wide benefits
of irrigation (Powell, et al., 1985). Full marginal-cost
pricing of irrigation water is rare in the world. Since the
need for metering equipment makes implementation
expensive, obtaining information about all costs is
virtually impossible (Theban, 1998; Johannson et
al., 2002). Charging full marginal costs would result
in much higher water prices, and many farmers
would face financial hardship if they had to pay that
amount (Briscoe,1997). Australia comes closest to full
marginal-cost pricing. Its water prices are based on
operating and maintenance expenses, administrative
expenses, environmental externalities, depreciation on
36
a “replacement cost” basis and the opportunity cost of
capital (OECD, 1999).
The costs of supplying irrigation water consist of
the variable costs of processing and delivering water
to end users and the fixed costs of capital operation
and maintenance (O&M). Variable costs depend on the
amount of water delivered. In most countries, fixed
costs are heavily subsidized (United Nations 1980).
Raising water prices definitely provides an incentive
to stimulate water users to increase water savings. It is
generally agreed that price hikes in the domestic and
the industrial sectors can allow to recover supply costs
(Han and Zheng 2004; Wang et al. 2003).
The experience in India demonstrates that from
the year 1966 to 1999, the level of irrigation subsidy,
which includes major, medium, and minor irrigation
schemes, increased dramatically, at 7.6 percent
per year. The rate of increase was 20 percent in the
1960s, 10 percent in the 1970s and 5 percent in the
1980s. During the 1990s, the growth rate in irrigation
subsidies decreased significantly to only 1 percent
per year. Himachal Pradesh and Jammu and Kashmir
had the highest subsidy per agricultural population,
while Assam and Maharashtra had the lowest.( IFPRI
DP 2007). Another way to measure the gap between
O&M requirements and expenditures is to compare
actual expenditures with gross agricultural income.
The Irrigation Commission of India in its report in 1992
estimated that water charges should be approximately
5 percent for food crops and 12 percent for commercial
crops. Actual amounts collected are between less than
1 percent to 2.9 percent of gross farm income (Gulati,
Svendsen & Choudhury 1995)
Water charges in the form of land revenue were
common before British rule in the states of Andhra
Pradesh, Karnataka, and Tamil Nadu. However India’s
current water charge system originated with the
British colonial administration (Vani 1991; Maloney
and Raju 1994). In nearly all states, actual receipts
fall short of full operation and maintenance costs. In
Bihar and Rajasthan receipts do not cover even the
administrative cost of collection. And the recovery rate
is fast declining: it has fallen from 64 percent in 1974-75
to 8 percent in 1988-89 (CWC Report1995).
Thus by the year 1989-90 operating losses had
accumulated to about Rs. 2000 crore (Government of
India 1992). Inadequate cost recovery also adversely
affects irrigation system performance, since funds
are not available to undertake even the routine
maintenance of canal and drainage works. Collections
would need to be at least Rs. 200-250 per hectare to
cover operation and maintenance expenses, yet in
1989-90 collections amounted to just Rs. 20-70 per
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

hectare (Government of India 1989).
In Haryana the state government has been
spending around Rs. 500 crore per annum on
maintenance and operations of its irrigation facilities
while its revenue from these sources is fluctuating
around Rs. 50 crores. Thereby implying that only one
tenth of the current expenditure is recovered by the
government. It is also of interest to mention here
that the capital expenditure on irrigation by the state
government is around 225 crores.
SECTION - 3
METHODOLOGY
Based on the discussion in the preceding section,
we have measured the budgetary subsidies as unrecovered
costs in the public provision of goods
not classified as public goods through budgetary
allocations. The un-recovered costs are measured
as the excess of aggregate costs over receipts from
the concerned budgetary head. The aggregate costs
comprise of two elements: (i) current costs, and (ii)
annualized capital costs. Current costs consist of
revenue (current) expenditures directly related to the
provision of services classified under different heads.
Estimation methodology is based on Srivastava
and Sen, et. al. (1997) and Srivastava and Amar Nath
(2001). The main steps are described below:
The main elements of the methodology are
described below.
Costs
In terms of symbols, these costs may be written as:
C = RX + (i + d*) K 0 +iZ 0
Here,
RX = Revenue expenditure,
i = Effective interest rate,
d* = Depreciation rate,
K 0 = Aggregate capital expenditure at the
beginning of the period pertaining to the budgetary
head.
Zo = sum of loans and equity investment at the
beginning of the period
d* = Depreciation Rate
The depreciation rate is calculated with reference to
the stock of capital at the beginning of the year. This
stock of capital is the sum of investments (normalized
at 1999-00 prices) in previous years. The methodology
used for this purpose is explained below.
{1 + w + w 2 +.........+ w 31}
D* = 1/50. —————————. (1 + p)
37
{1 + x + x 2 +..........+ x 31 }
Here
D* = Depreciation rate
w = (1+p)/ (1+z)
x = 1/ (1+z)
In the study, the average life of a capital asset is taken
50 years.
The value of w = (1+p)/ (1+z) , here “p” is the
long term inflation rate and “z” is the growth rate of
investment.
The values of x = 1/ (1+z).
Long term inflation rate is the difference between
growth rate of GDP at current prices and growth rate
of GDP at constant prices (1999-2000) calculated
by the regression growth model (Y= e**[b 0 +{b 1 *t}],
Here Y is GDP and t is time ). We have calculated the
growth rate of investment through regression growth
model(model (Y= e**[b 0 +{b 1 *t}], Here Y is Nominal
investment and t is time )
In the study we have taken the total capital
expenditure by the government of Haryana on major
and medium irrigation projects. The distinction of
expenditure between equity and loan is not possible
as government has spent the money out of its
consolidated funds and there is no provision of equity
in the irrigation investment.
Receipts
Aggregate receipts may be written as:
R = RR + (I + D)
Here,
RR = Revenue Receipts from irrigation
I = Interest receipts
D = Dividends
In the study we have not taken the interest
receipts, and dividends because being funded out of
budgetary allocation, there is no provision of interest
and dividend in the irrigation revenue in Haryana.
Subsidy is defined as:
S = C - R,
Here:
S = Calculated Subsidy.
C = Aggregate Cost
R = Aggregate Revenue Receipts
Effective interest rate
Estimation of rate of interest on investment in
irrigation is not possible as the investment is this sector
is made by the government of Haryana directly from
its consolidated pool. As proxy, we have estimated the
effective rate of interest on government liabilities. The
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

ate is 10 percent and therefore, for the study interest
rate is taken at 10 percent.
Aggregate capital expenditure
In this study average life of capital assets is 50 years. So
we required the capital expenditure data for 50 years.
However, we have the data only for 31years (1974-75
to 2004-05) capital expenditures. We attempted to
extrapolate the values backwards for the remaining 17
years. After depreciating the extrapolated values, we
found that the existing data represent the 87 percent
of the total value. Therefore, we decided to ignore
the extrapolated values as he values are arbitrary.
Therefore, the estimates of the subsidy are biased
downward to that extent.
ANALYSIS
SECTION - 4
38
Note: Assumptions: (i) Depreciation Rate: 5.70, (ii) Effective Interest Rate: 10 percent
As outlined above, we estimated the subsidy provided
by the government of Haryana to the medium and
large irrigation facilities in the state from the year
1987-88 to 2004-05 for which the consistent data was
available. The estimated subsidy is presented in the
Table 1 below.
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

Table 1 shows the total irrigation subsidies year
wise. There is no visible trend in subsidy outgo during
the study period. Average subsidy per annum works
out to be Rs. 846.43 crore. The revenue receipts from
irrigation have been fluctuating widely as reflected in
column 2 of the table 2. In fact, the fluctuation points
to the periodic (in place of regular) efforts to collect
the water charges from the users which are bunched
in some of the years. However, there is a visible upward
shift in revenue receipts collection since 1998-98 after
the revision of water charges by the government of
Haryana. Almost similar absence of any trend is found
in the expenditure in revenue as well as capital account
We have also calculated the ratio of revenue
receipts to revenue expenditure, revenue expenditure
to capital expenditure and revenue receipts as
percentage of total cost (revenue and capital) in Table
2. The table reveals that the revenue receipts are less
than 10 percent of revenue expenditure in Haryana.
However, after 1998-99 revision of water rates, the
ratio has jumped to around 0.2 or 20 percent. It is a
healthy sign but as already mentioned the reduction
in water rates in the year 2007 is definitely going
to reverse the trend. One more notable feature is
that in Haryana, the revenue expenditure of large
and medium irrigation facilities is almost two third
39
pertaining to the irrigation in Haryana. In fact, these
observations confirm earlier finding that in Haryana
government budget is a mechanical/ bureaucratic
exercise and without regards to the requirement of the
economy, almost fixed faction of the total expenditure
is allocated for various expenditure items (Bishnoi
2005). It may be pertinent to mention here that the
government of Haryana has substantially reduced the
water rates in the year 2007. Therefore, higher subsidy
can be expected in the year to come.
of the capital consumption. This higher ratio points
out the high cost of the operation and maintenance
cost of such projects thereby implying that capital
expenditure on such irrigation projects commit the
state for higher current expenditure for long time. Last
column of Table 3 presents the estimates of subsidy as
percentage of total cost. It is clear from the table that
recovery is less than 10 percent and balance amount to
the extent of around 90 percent is provided as subsidy
by the government of Haryana.
F I N D I N G S , C O N C L U S I O N S A N D P O L I C Y
RECOMMENDATIONS
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

The study reveals that in Haryana the area irrigated by
the canal is stagnant since 1990-91 onwards, despite
the fact that the state government has been spending
a lot a money on creating canals. In fact, the decision
to start a new canal project is taken on political
considerations without looking into the technical,
legal and economic cost benefit analysis. For example
the water sharing dispute with Punjab has not allowed
the state to utilize the SYL canal and Hansi-Butana
Link Channel. Further, in Haryana, canal water is also
extensively used for drinking and industrial purpose.
However, overall subsidy in irrigation is well above
90 percent of the total cost. This is not sustainable and
needs immediate corrective policy measures. More
seriously, the revenue receipts should be increased to
the extent that revenue expenditure can be covered.
This will require substantial hike in the water charges
for irrigation, drinking and industrial purpose. In fact
the metering of water usage combined with higher
water charges shall encourage the users to use water
optimally. This is also expected to take care of problem
of water logging and falling water table in a various
areas of the state.
REFERENCES
Aart van de laar, (1994). Irrigation Evaluation, Performance
Measurement and Trade-Offs Between Production,
Efficiency and Equity in Irrigation Investment Strategies
(Working paper no.169), Institute of social studies,
Netherland.
Apoorva Oza (2005), Irrigation: Achievement and Challenges.
www.iitk.ac.in/3inetwork/html/reports/IIR2007/07-
Irrigation.pdf.
Srivastava, D. K. Bhujanga Rao C., Chakraborty Pinaki, and
Rangamannar, T. S. (March 2003), Budgetary Subsidies in
India Subsidizing Social and Economic Services, New Delhi,
National Institute of Public Finance and Policy.
Dinar, A. & Subramanian, (1997), Water Pricing Experiences: an
International Perspective, World Bank Technical Paper No.
386,Washington, DC, World Bank.
Ravinder, P.S. Malik (2008), A Disscussion Paper- Towards A
Common Methodology For Measuring Irrigation Subsidies,
International Institute for Sustainable Development
(Geneva), Switzerland.
Dwyer G., Douglas R., Peterson D., Chong, J. and Maddern,
40
(2006), Irrigation Externalities: Pricing and Charges,
Productivity Commission Staff Working Paper, Melbourne,
Australia.
Government of Haryana, Economic Survey of Haryana, Various
issues.
Food and Agriculture Organization of the United Nations (2004),
Water Charging in Irrigated Agriculture- An Analysis of
International Experience.
Government of India, Ministry of Water Resources (2005-06),
Annual Report On Water Resources. New Delhi.
Government of India, Planning Commission (1992), Pricing of
Irrigation Water, New Delhi.
Government of India, Planning Commission (2001), A Study On
Management of Public Expenditure By State Governments
In India, New Delhi
K. William Easter (1977), “Improving Village Irrigation System:
An Example from India”, University of Wisconsin Press. Land
Economics, Vol.53,NO.1.
Bishnoi N.K. (2005), Fiscal Management in Haryana: A Review
(working paper), National Institute of Public Finance and
Policy, New Delhi.
Rita Pandey & D.K.Srivastava(2003), Subsidies and Environment:
With Special Reference to Agriculture In India, (National
and International Policy Issues, EERC Working Paper
Series: NIP-6).
Shyamal Chowdhury & Maximo Torero (2007), Power and
Irrigation Subsidies in Andhara Pradesh and Punjab,
Washington, DC. International Food Policy Research
Institute
Srivastava, D.K., and C. Bhujanga Rao (2001), Subsidies:
Issues and Approach Presented in the World Bank-NIPFP
Conference on Fiscal Polices to Accelerate Economic
Growth, held on May 21-22, 2001, New Delhi.
Statistical abstract of Haryana, various ssues, E.S.O., Haryana
Chandigarh.
Yacov Tsur & Ariel Dinar (1997), “The Relative Efficiency and
Implementation Costs of Alternative Methods for Pricing
Irrigation Water”, The World Bank Economic Review, Oxford
University Press,Vol. 11, No.2, pp 243-262.
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

INTRODUCTION
MICROFINANCE IN INDIA: ITS GROWTH, CHALLENGES AND
PROSPECTS
S. S. Khanka*
The poor in India suffer from the financial exclusion of formal financial institutions due to the lack
of collaterals and high transaction costs involved in lending small loans to them. It is against this
backdrop, the concept of microfinance (mF), based on Prof. Mohammad Yunus’s Grameen Bank
experience of Bangaladesh, has been evolved as a means of financial inclusion of poor based on the
philosophy of ‘credit without collaterals’. By now, mF has been adopted as an effective intervention
of financial inclusion and poverty alleviation in over 40 countries in the world including India where
it has emerged as the largest movement in mF in the world. mF in India has made significant progress
in terms of its outreach and amount lent, but much more is yet to be done to meet its objectives of
financial inclusion and poverty alleviation. The present paper makes a modest attempt to delineate
the evolution and development of mF in India and also highlights its scope vis-à-vis challenges.
Suggestions are also offered towards the end of the paper to make mF more and more effective in
meeting its major objectives of financial inclusion and poverty alleviation.
Poverty is omnipresent in the world with its varied
genesis and dimensions. However, the third world
countries including India are the main sufferers. Since
Independence, the Government of India has taken
several initiatives to tackle the scourge of poverty
through area development approach and / or sectoral
approach. But, even after more than 60 years of
planning and employing various poverty alleviation
programmes, official estimates show that 26.1 per
cent of total population still lives below poverty line
in India in 2000. It indicates the ineffectiveness of
these programmes in alleviating poverty stalking
the land, on the one hand, and bypassing the poor
by development impulses, on the other. Till 1970s,
development economics was considering that the
‘trickle down effect’ of growth oriented Gross National
Production (GNP) will help eradicate poverty gradually.
The Integrated Rural Development Programme (IRDP)
targeted the poorest of the poor and helped them
acquire productive assets through bank loan and
subsidy from the government. But several drawbacks in
the implementation stage faltered these programmes.
In 1982-83, Development of Women and Children in
Rural Areas (DWCRA) was launched in 50 districts as
a sub-scheme of IRDP. They focused enabling women
in group to overcome the inhabitations for they have
never done before, like going to bank, buying an asset,
keeping account etc. But, this scheme too faltered
and failed as women actually wanted small loans
for specific purposes. Similarly the success attained
KAIM JOURNAL OF MANAGEMENT AND RESEARCH
VOL.2, No.2, November - April 2010 Pages : 41 - 48
from other poverty alleviation programmes such as
Training of Rural Youth for Self-Employment (TRYSEM)
and Supply of Improved Toolkits to Rural Artisans
(SITRA) was also not upto the mark due to various
shortcomings in design and delivery of the schemes.
The result was the problem of poverty especially in
rural areas continued. The annual demand for credit by
the poor in the country was estimated to be between
Rs. 15, 000 and Rs. 45,000 crores (Mahajan and Ramola
2003).
It may be mentioned that formal banking
institutions for long time have perceived the poor
non-bankable because of high risks, high transaction
costs involved in small-scale rural lending to a large
number of poor households and absence of collateral
/ securities to be provided by the poor against loan.
As such, the poor more especially poor women in
India were suffering from financial exclusion. It is
against this background the concept of microfinance
was conceived as an instrument to attain the twin
objectives of financial inclusion and poverty alleviation
(World Bank 2007). The Indian microfinance has
already taken its momentum and has emerged as the
largest microfinance movement in the world with its
perceptible impact especially after the second half
of eighties (Firoze and Bhattacharya 2007: 2071).
Nonetheless, much more still remains to be done and
achieved.
It also needs to clarify that the term mF has been
understood and defined differently by different
people. More often than not, mF is defined in a limited
sense of ‘micro credit for micro enterprises.’ Micro
Credit Summit held in 1997 has defined micro credit as
* Professor and Coordinator, Fellow Programme in Management (FPM), National Institute of Financial Management, Ministry of
Finance, Government of India, E-mail: khanka@nifm.ac.in, sskhanka05@rediffmail.com

“programmes that provide credit for self-employment
and other financial and business services (including
savings and technical assistance) to very poor persons”.
However, there is a difference between micro credit
and micro finance. While micro credit refers to credit
only, micro finance includes credit, savings, insurance,
remittances, and other financial services. Raghuram
Rajan Committee (2009), appointed by the Planning
Commission of India, in its report “A Hundred Small
Steps on Financial Sector Reforms” also views: “ Micro
finance (financial inclusion) is not only about credit,
but involves providing a wide range of financial
services, including savings, accounts, insurance,
and remittance products. [C]redit provision, without
adequate measures to create livelihood opportunities
[-] will not yield desired profits.” Thus, micro finance,
in both theory and practice, includes a wide range
of financial services such as savings products,
insurance, pledge, and remittances. As of now, the
most appropriate definition of mF is considered the
one given by the ‘Task Force on Supportive Policy and
Regulatory Framework for Micro-finance’: “mF is the
provision of thrift, credit and other financial services
and products of very small amounts to the poor in
rural, semi-urban or urban areas for enabling them to
raise their income levels and improve living standards.”
However, the Task Force has not chosen to indicate
any specific limit for ‘small amount’. But, the report
on micro credit of the Reserve Bank of India’s (RBI)
‘Micro-credit Special Cell’ has proposed a ceiling on
mF of Rs. 25,000 as constituting the limit per borrower
outstanding at any time.
Here, it also seems pertinent to define and
distinguish the two broad and sometimes overlapping
mF initiatives: poverty lending and micro-banking.
‘Poverty lending’ is the term used to denote the
objectives that give higher priority to social outreach
than financial sustainability, though organizations
may strive for both. However, poverty lending may
also include savings and insurance services within its
fold. But, micro-banking is characterized by a drive
for financial sustainability as a permanent financial
intermediary.
MICRO FINANCE: A HISTORICAL PERSPECTIVE
mF is an old concept but a relatively new term. From
historical point of view, the evolution of the concept
of mF could be traced back to 1300 when the different
forms of mF and collective lending have existed
for hundreds of years. These include the “susus” of
Ghana, “chit funds” in India, “tandas” in Mexico, “arisan”
in Indonesia and “tontines” in West Africa, writes
David Patrikarakos. The evolution and chronological
42
development of the concept of mF has been presented
in Annexure 1.
The origin of the modern concept of mF could
be traced back to the beginning of the cooperative
movement in Europe, where the movement was
started way back in 1844 in the field of cooperativebased
credit system. The basic premise of mF is that
more than subsidies, the poor people need access to
credit. Absence of formal employment makes the poor
non-bankable. This has given genesis to ‘credit without
collateral’, what has been rechristened now as ‘micro
finance’. However, mF emerged as a new concept
and development intervention and tool in the 1970s
mainly due to the establishment of ‘Grameen Bank’,
in 1976, by Muhammad Yunus in Bangladesh. In fact,
the origin of the concept of mF in today’s context is
considered especially from 1976 onwards.
A brief historical profile of ‘Grameen Bank’ seems in
the fitness of the context under discussion. The origin
of ‘Grameen Bank’ can be traced back to 1976 when
Muhammad Yunus of Chittagong University, Dhaka,
Bangladesh launched a research project to examine
the possibility of designing a credit delivery system to
provide banking services targeted to the rural poor. His
premise of mF was that rural poor people have skills
that remain unutilized and/or under-utilized because
of lack of funds. They suffer from financial exclusion
as they do not possess collateral to get credit from
formal financial organizations. It was basically the
terrible Bangladesh famine in 1974 which influenced
Yunus to give a small amount of US$ 27.00 to a group
of 42 families so that they could create small items for
sale without the burdens of predatory lending. Yunus
found it a quite successful experiment. This experience
gave Yunus a belief that the poor and impoverished
people can also rise out of abject poverty if they are
able to access loans mainly small/micro loans to start
their own small economic activities. Accordingly, a
group-based credit approach based on the notion
“One for All and All for One” was applied which
utilized the peer-pressure within the group to ensure
the borrowers follow through and use caution in
conducting their financial affairs with strict discipline,
ensuring repayment eventually and allowing the
borrowers to develop good credit standing. Eventually,
the Grameen Bank as an outgrowth of Muhammad
Yunus’s idea came into existence in 1976. Initially
starting with the village of Jobra, the Bank outreached
the entire Bangladesh and became an immensely
successful development intervention in fighting
with rampant poverty stalking the country (Rahman
2001:4). The Bank today continues to expand across
the nation and still provides small loans to the rural
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

poor mainly women. By now, the Grameen Bank
branches have reached to four digits (around 2,500)
across Bangladesh. By the beginning of 2005, the
Bank had loaned over US$ 4.7 billion to the poor (Papa
et.al. 2006:72). Impressed by the significant role of
mF in poverty alleviation particularly rural poverty,
the United Nations (UN) – the organization of all the
countries of the world – declared the year 2005 ‘The
UN Year of Micro Credit.’
As recognition for its success in removing poverty,
the Grameen Bank received several prestigious awards
including the highest civilian award in Bangladesh,
the Independence Day Award in 1994 and the Bank’s
Low-cost Housing Programme won a World Habitat
Award in 1998. But, the greatest recognition of the
bank’s profound achievements came on October 13,
2006 when the Nobel Committee awarded Grameen
Bank and its founder, Muhammad Yunus, the 2006
Nobel Peace Prize “for their effort to create economic
and social development from below.” The award
announcement also mentions that:
“From modest beginning three decades ago,
Yunus has, first and foremost through Grameen Bank,
developed micro credit into an ever more important
instrument in the struggle against poverty. Grameen
Bank has been a source of ideas and models for the
many institutions in the field of micro-credit that have
sprung up around the world (Nobel Peace Proze for
2006).”
Mosammat Taslima Begum, who used her first
16-euro (20 US Dollars) loan from the Grameen Bank
in 1992 to buy a goat and subsequently became
a successful woman entrepreneur and one of the
elected board members of the Bank, accepted the
Nobel Prize on behalf of Grameen Bank’s investors
and borrowers at the prize awarding ceremony held
at Oslo City Hall on December 10, 2006. The highly
impressive success of the Grameen Bank has by now
inspired similar interventions / tools in more than 40
countries around the world, on the one hand, and had
made the World Bank realize the need for an initiative
to finance Grameen-type schemes, on the other (World
Bank 2007). The impressive success of the Grameen
Bank is best attributed, among other things, to its
system of solidarity lending and the “sixteen decisions”,
call these ‘Corporate Governance of Grameen Bank’ in
the modern corporate lexicon framed for borrowers
(Siddiqui 1984). By now, the Grameen Bank’s micro
finance development intervention from its evolution
in 1976 has emerged almost as a revolution around
the world including India which has the largest
microfinance movement in the world.
This paper makes a modest attempt to briefly
43
delineate development and scope of microfinance
in India, highlighting its challenges and measures
to improve the performance of microfinance in the
country.
THE INDIAN MICROFINANCE:
DEVELOPMENT AND SCOPE
Having presented the mF scenario around the world
in its historical perspective, now it seems pertinent
to present the mF scenario in India. When we talk
about rural finance in India, more often than not, the
stereotype offered is that of a banking system that fails
to reach out the poorer clients and, when it does, fails
to recover the money so disbursed. The counter-point
offered is usually ‘the magic wand of microfinance.’
As regards the evolution of the concept of
‘micro finance’ in historical perspective in India,
it can be traced far back to ‘chit funds’ during the
fourteenth century (see Annexure 1). The enactment
of the Cooperative Credit Societies Act, 1904 could be
considered the beginning of modern micro finance in
India. Since independence, the Government of India,
in general, and the Reserve Bank of India, in particular,
has made concerted efforts to provide the poor with
access to credit. The first step taken in this regard was
setting up the All India Rural Credit Committee in 1966.
But, the tardy and limited success of co-operatives
forged the need for nationalization of commercial
banks and later on establishment of Regional Rural
Banks (RRBs) with a mandate to provide credit to the
low income households. Just Mohammud Yunus is
considered the father of ‘micro finance’ in Bangladesh
and in the world over by establishing ‘Grameen Bank’
in 1976, so is considered Smt. Ela “Ben” Bhatt as mother
of micro finance in India by establishing ‘Shri Mahila
Sewa Sahkari Bank’ under SEWA over three and half
decades ago.
However, the credit flow to the poor for meeting
their requirements did not get institutionalized. Some
of the major causes lie in the difficulties in dealing
effectively with a large number of small borrowers who
require credit frequently and in small sums followed by
the banks’ perception of the risk and creditworthiness
of these small borrowers. To address these problems
effectively, the mF has been tried as a viable alternative
for reaching the hitherto unreached and under-reached
to fill up the demand-supply gap. The success stories in
mF in the neighboring countries, like Grameen Bank in
Bangladesh, Bank Rakiat in Indonesia, Commercial and
Industrial Bank in Philippines etc., gave further boost
to the concept of mF in India during the 1980s. Thus,
India also adopted the similar model of extending
credit to the poor people and also took a number of
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

steps and initiatives to promote micro financing in the
country as a development intervention.
In view of the vast scope for mF in India, mF
industry has been booming like anything. One way,
perhaps the more convincing way, to highlight the
rapid growth of micro financing in India is to look
at from the perspective of phones in India. With the
right enabling environment, and intense competition
amongst private sector players, mobile phones in India
expanded by 160 per cent during just one year 2003-04
(from 13 to 33 million). While this is a heady progress,
there is a less heralded but even more powerful
nationwide success on access to finance or credit.
The result is the increasing number of mF institutions
over the period. The prominent mF institutions in our
country so far include Sa-Dhan, SHARE, Spandana,
SKS, SKDRDP, MFI, AML, BASIX, MYRADA, PRADAN,
Bandhan, Cashpor MC, and GV. On the whole, India
mF has continued growing rapidly towards its main
objective of financial inclusion (Mahajan 2005:4416-
4419). Its outreach has extended to a growing share of
poor households and to the approximately 80 per cent
of the population, which has yet to be reached directly
by the banks (Basu and Srivastava 2005: 1747-1755).
The larger of the two main models, the Self Help Group
Bank Linkage Programme (SBLP) covered about 14
million poor households, in March 2006, and provided
indirect access to the banking system to another
14 million, including the ‘bordering poor.’ Although
the reliable estimates are not readily available, the
Microfinance Institution (MFI) model, served 7.3
million households, of which nearly half (3.2 million)
were poor (EDA Rural Systems 2005). These figures
indicate that the achievement of mF programmes in
the country has been impressive. By the end of the
financial year 2007-08, the outstanding portfolio of
mF institutions accumulated to Rs. 5,954 crores. With
this, they served 14.1 million clients, 80 per cent of
them women. Three quarter of these clients received
loans below Rs. 10,000. However, the performance of
SHGs and MFIs in the South has been much better than
the east, north-east, the central part of India or even
some parts of western India. This, among other things,
underlines the policy implications for the application
of stereo-type models of mF across the country with
vast contextual differences.
There is evidence to believe that the concept of
mF from its evolution to revolution has traveled a
long journey in meeting its twin objectives of poverty
alleviation and financial inclusion. Therefore, it is in
logical sequence also to examine its impact on society
as a whole. Several impact assessment studies on mF
and poverty in India, China, Bangladesh, South Africa,
44
Philippines, Brazil, and Mexico demonstrate that mF
has greatly helped to reduce poverty in different
ways:
• It increases income.
• It allows the poor to build the assets, and It
helps the poor reduce their vulnerability.
• Nonetheless, some research studies have also
reported various problems of micro enterprises
including, but not limited to the following that
inhibit their access to institutional finance:
• Tendency to remain small or void due to the
lack of research and resources
• Lack of adequate infrastructural support
especially in remote areas
• Lack of academic and research institutional
guidance
• Lack of dissemination of market information
regarding inputs and outputs
• Lack of joint participation of micro enterprises
especially of self-help groups and SSIs to discuss
the marketing constraints
• Inadequacy of economies of scale, and
• Absence of clear-cut governmental policies,
i.e. regulatory framework for MFIs.
INDIAN MICROFINANCE : THE
CHALLENGES AHEAD
The impressive success achieved by mF in India
indicates that it has bright future. Recognizing its role
as a magic wand in alleviating rural poverty and, in
turn, ushering in rural development, the Government
of India has been assigning increasing significance to
its development. Of late, the Government of India has
been encouraging mF as an alternative to IRDP type of
poverty alleviation programmes, that some even call
it ‘magic wand for rural development’, because of the
sustainability of mF activities. Accordingly, the Reserve
Bank of India (RBI) has also made a special mention
of mF in its credit policy announced way back in April
1999 and the RBI has established a Micro-Credit Cell
as well. Similarly, the National Bank for Agriculture
and Rural Development (NABARD) has set up a
‘Micro-Credit Innovations Department’, while Housing
and Urban Development Corporation (HUDCO) has
also formulated the similar plan for micro-credit
within its structure. So much so, with an objective to
regulate, monitor, and develop mF on right footing,
the Government of India is proposing to pass ‘Micro
Finance Bill’ in the country. For example, the Finance
Minister Mr. P. Chidambaram while presenting the 2005
national budget announced: “Government intends to
promote MFIs in a big way. The way forward, I believe,
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

is to identify MFIs, classify and rate such institutions,
and empower them to intermediate between the
lending banks and the beneficiaries.”
In its attempt to assess the scope for mF in India, a
World Bank study found that amongst rural households
in Andhra Pradesh and Uttar Pradesh, 59 per cent lack
access to deposit account and 78 per cent lack access
to credit. Thus, considering that the majority of the
360 million poor households (both urban and poor)
lack access to formal financial services, the number
of customers still to be reached, and the variety of
quantum of services to be provided are really quite
large. Mahajan,and Ramola (2003), estimated that
90 million farm holdings, 30 million non-agricultural
enterprises, and 50 million landless households in
India collectively need approximately US$ 30 billion
credit annually. This is about 5% per cent of India’s GDP.
This all clearly indicates huge scope for micro finance
development in India.
However, along with scope for mF development
ahead, there are challenges as well before mF in India.
These include:
• mF has not yet occupied the centre stage
in the Indian financial sector. People still go to
moneylenders. This may be due to the need for
more credit than the MFIs can provide or the
greater flexibility shown by moneylenders (Ghate
2007).
• mF, as pointed out by some researchers,
sometimes leads people to borrow too much;
to the extent that over indebtedness can lead to
suicides in extreme cases. The recent controversy
in Andhra Pradesh shows that the impact of mF
needs to be more rigorously documented in order
to convince policy makers and regulators that the
movement should be supported.
• mF or call it, ‘rural finance’, has suffered from
some of the state interventions in the past like
that of write-offs of credits. This heavily impinges
on the sustainability of mF intervention.
• There are also problems for the MFIs in the
form of regulatory and supervisory apathy leading
to the financial exclusion of large segments of the
poor.
• The regulatory impediments hamper the
effective use of innovative breakthroughs
in delivery of financial services to the actual
clientele.
• So far the issue of higher interest rate charged
by MFIs as compared to that by formal banking
institutions continues to be vexatious discouraging
the poor borrowers of micro-credit.
45
• The successful mF model of a particular
context is blindly replicated in another context
which is likely to be different one. For example,
the just replica of ‘The Grameen Bank Model’
developed in a small country like Bangladesh
may not be successful in a large country like
India which is different in different contexts (see
Annexure 2).
In this context, one quotation from Moid Siddiqui’s
book titled “Corporate Soul: The Monk Within the
Manager” seems worth citing. Siddiqui summed up
the executives’ concern for achievement of results
rather than the improvement of processes beautifully
by the classic black humour about operation theatre:
“The operation was successful but the patient died.”
Why was the operation successful? Because it met
the defined criteria. Why did the patient die? Because
the defined criteria were wrong for that particular
operation. (Siddiqui 2005: 14).”
• So far savings service is the neglected
daughter of the family of financial services.
This metaphor is used because of the sustained
discrimination against and frequent disregard
for savings services despite their productive and
reproductive role in financial services. This has
some parallels to the unabated discrimination
against daughters still going on in many parts
of India. Inclusion of savings within the ambit
of mF serves multi-purposes. One, it meets the
adumbrated objective of financial inclusion. Two,
it strengthens economic condition of borrowers
through its multiplier effects. Third, in the absence
of salary slip, utility bills, clear land titles or
unique identity papers, ‘a regular saving record’
could be the first building block to membership
of the formal financial sector. Fourth, what is
more with savings services, poor customers start
posing trust in financial institutions as partners
in their progress and wellbeing. All these, in turn,
strengthen sustainability of MFIs that is one of the
most desiderata of the time.
• There is no denying the fact that micro finance
over the period has made impressive progress at
least in terms of its outreach in India, it has also
reached some critical crossroads. These are the
issues relating to its sustainability, social impact,
code of conduct for MFIs, and ecosystem, i.e.
equilibrium between growth and effectiveness.
Here, the emphatic mention of Rajan Committee
(2009) of the Planning Commission of India about
‘Microfinance Ecosystem’ seems pertinent to
cite:
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

“A new strategy for increasing access to financial
services will require the creation of a vibrant ecosystem
that supports financial inclusion.”
CONCLUSION
To conclude, micro finance is certainly an effective
instrument for poverty alleviation in our country.
Action teaches. We have to act more and more to make
micro finance more and more useful for our purposes,
i.e. poverty alleviation and financial inclusion. In
this regard, Norman Vincent Peale’s apt view seems
worth quoting: “Action is a great restorer and builder
of confidence. Inaction is not only the result, but the
cause, of fear. Perhaps the action you take will be
successful; perhaps different action or adjustments
will have to follow. But any action is better than no
action at all.”
Following suggestions are submitted to make mF
more effective in meeting its objectives:
• At present, the multiplicity of MFIs has not
helped. Multilayer system, therefore, should
be minimized and phased out over a period of
time.
• There should be, in line with SIDBI, a nationallevel
financial organization with its units at state
level to exclusively meet the fund requirements
of micro enterprises in the country.
• Good governance benefits. Hence, a clear-cut
customized “Code of Conduct” (like 16 decisions of
Grameen Bank) should be framed for MFIs, SHGs,
NGOs, and banks.
• Awareness programmes should be undertaken
to disseminate the information relating to mF.
Research on mF should be encouraged by the
government, non-government, and NGOs and
• Legislation on Micro-finance Institutions
(Development and Regulation) Bill 2007 should
be enacted without further delay.
Last but no means the least, mF should be
people-centric with due weightage being given to the
empowerment of women and the poor.
REFERENCES
Basu Priya and Pradeep Srivastava (2005), “Exploring Possibilities:
Microfinance and Rural Credit Access for the Poor in India”,
Economic and Political Weekly, Vol. 40, No. 17.
EDA Rural Systems (2005), The Maturing of Indian Microfinance:
Findings of a Microfinance Assessment Study (baseline)-
Implications for Policy and Practice, A Study done by
SIDBI, Gurgaon.
Feroze, Sheikh and Biswajit Bhattacharya (2007), “Microfinance
through Self-Help Groups: Concepts, Evolution and Status
46
in India”, Pratiyogita Darpan, June.
Ghate, Prabhu (2007), Indian Microfinance: The Challenges of
Rapid Growth, Sage Publications, New Delhi.
Mahajan, Vijay (2005), From Microfinance to Livelihood Finance,
Economic and Political Weekly, Vol. 40, No, 41.
Mahajan, Vijay and Bharti Gupta Ramola (2003), Microfinance in
India: Banyan Tree and Bonsai, Background Paper prepared
for World Bank, Washington DC: World Bank.
Nobel Peace Prize for 2006, http://nobleprize.org
Papa, Michael J., Arbind Singhal and Wendy H. Papa(2006),
Organizing for Social Change: A Dialectic Journey of Theory
and Practice, Sage Publications, New Delhi.
Raghuram Rajan Committee (2009), A Hundred Small Steps
on Financial Sector Reforms, Planning Commission,
Government of India
Rahman, Aminur (2001), Women and Microcredit in Bangladesh:
Anthropological Study of Grameen Bank Lending, Western
Press, Boulder, Colorado.
World Bank (2007), Microfinance in South Asia: Towards Financial
Inclusion of the Poor, Washington DC: World Bank.
Siddiqui, Kamak (1984), An Evaluation of the Grameen Bank
Operation, National Institute of Local Government, Dhaka,
Bangladesh.
Siddiqui, M., The Monk within the Manager, Response Books (A
Division of Sage Publications), New Delhi.
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

47
Appendix 1
A HISTORY OF MICROFINANCE
1300+
Forms of microfinance and collective lending have existed for hundreds of years. These include the “susus” of
Ghana, “chit funds” in India, “tandas” in Mexico, “arisan” in Indonesia and “tontines” in West Africa, writes David
Patrikarakos.
1865
Friedrich Wilhelm Raiffeisen develops the concept of the credit union. From 1870, unions expand across the
German states. The co-operative movement spreads to Europe, North America and developing countries.
1895
Indonesian People’s Credit Banks or The Bank Perkreditan Rakyat (BPR) opens, specializing in an early form of
microfinance. Today it is the largest microfinance system in Indonesia, with 9,000 operations.
1961
With $90,000 raised from private companies, Joseph Blatchford founds Accion International in Venezuela. Initially
concerned with building schools and water-systems, it turned to microfinance in 1973. It becomes one of the
premier microfinance organizations in the world.
1971
Al Whittaker and David Bussau begin lending to micro-entrepreneurs in Indonesia and Colombia. In 1979 they
form Opportunity International, lending across south-east Asia and South America.
1976
Muhammad Yunus discovers that a loan of $27 can change the lives of 42 families in an impoverished village in
Bangladesh. They pay him back with interest and begin to lift themselves out of poverty.
1983
Yunus creates Grameen Bank. To date, it has lent more than $983m. Its methods have become the basis for
modern microfinance.
1992
Accion helps found BancoSol of Bolivia, the first commercial bank dedicated solely to microfinance. It now has
more than 70,000 clients.
1997
The National Microfinance Bank in Tanzania (NMB) is created. Meanwhile, Deutsche Bank enters microfinance
as part of its drive to embrace social investing.
2001
The Microenterprise Access to Banking Services initiative in the Philippines helps integrate rural banks’
microfinance loan clients into the credit system.
2005
The UN names 2005 as the International Year of Micro credit. Citibank opens Citi Microfinance. Based in London,
New York, India and Colombia, its goal is to broaden the outreach of its financial services.
2006
The Microfinance Summit Campaign Report estimates that there are more than 3,000 microfinance institutions
serving 100 million poor people in developing countries. The total cash turnover of these institutions worldwide
is estimated at $2.5bn. Yunus is awarded the Nobel Peace Prize. Barclays Launches Ghanaian Microfinance,
tapping into one of Africa’s most ancient forms of banking, “Susu collection” International Finance Corporation,
part of the World Bank, announces a $45m investment in credit-linked notes to be issued via Standard Chartered
bank to facilitate microfinance lending in Africa and Asia.
2007
JP Morgan launches a microfinance unit as part of its emerging markets strategy.
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

48
Appendix 2
MICROFINANCE IN THE NORTH-EAST REGION (NER) OF INDIA
The North-Eastern region comprises of the eight states of Assam, Arunachal Pradesh, Meghalaya, Mizoram,
Nagaland, Manipur, Tripura, and Sikkim. Though similar in some ways, each state possesses a distinct physical,
cultural and socio-economic identity. The region as a whole has a population of nearly 4 crores of which Assam
accounts for nearly 3 crores. The region is blessed with plenty of natural resources like forest & oil, tea, water
(which is very scarce now in most part of India). Women in NER enjoy a better social status vis-à-vis the rest of
India. The Women’s Market of Manipur is very famous.
In 2005, Bank credit per capita in the NER was only 21% of the national average (Rs. 2,280 compared to
Rs. 10,752). The informal sector is very vibrant particularly in Assam and Manipur but also in urban areas in
the hilly states. In Manipur where the demand is high and formal suppliers are almost non-existent informal
financial intermediation has acquired the status of banks. This has led to a growth of these entities which govern
everyday life in Manipur. There is even a fairly well developed informal money transfer system to various places.
However, the informal financial market in large parts of Assam has voluntarily scaled down the loan amounts
because of defaults.
Though NABARD’s SHG-Bank linkage programme has dominated microfinance provision in the region,
the overall progress has been slow, and it is picking up only gradually in Assam and some other areas in recent
years. The number of SHGs stands at 62,517 (2006), loans disbursed grew from Rs. 0.014 crores (1998) to Rs.
165.7 crores (2006).
Large areas are scarcely populated; though the mobile phones have brought in telecom accessibility, the
roads and the other means of communication are still very poor. Hence cost of financial service provision is
prohibitive.
Having drawn a detailed map of the (micro) financial sector of the North Easter region, Sa-Dhan’s study
recommends among others:
• There is a need to encourage product diversification. Rather than promoting the SHG approach exclusively,
NABARD should encourage the growth of various models of microfinance.
• Traditional institutions, e.g. “Marups” offer potential to expand outreach of financial services, but have
been neglected in favor of formal institutions like post offices so far.
• IT enabled systems can play a major role in reducing the transaction costs to the client of financial
services.
• It is proposed to create a nodal agency to spearhead the development of the microfinance sector in the
NER.
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

ON-LINE SHARE TRADING AND CUSTOMERS’ SATISFACTION : AN
EMPIRICAL STUDY
I INTRODUCTION
Surinder Singh Kundu* and Sanjeet Kumar**
An Internet based investment activity that involves no direct involvement of the broker is known
as on-line trading. There are many leading online trading portals in India along with the online
trading platforms of the biggest stock houses such as National stock exchange and Bombay stock
exchange. The total portion of online share trading in India has been found to have grown from just
three per cent of the total turnover in 2003-04 to twenty per cent in 2008-09. The study reported in
this paper explores investors’ experiences with technology in terms of on-line share trading. It also
discusses the satisfaction level of the investors towards the on-line share trading. To assess this, 120
customers were interviewed through well-structured questionnaire from Hisar city located in Haryana
state selecting by convenience sampling. And finally, 113 questionnaires were used for analysis and
interpretation of data using some statistical tools like percentage, mean and standard deviation. It is
found that respondents became aware about on-line trading by their reference groups like friends/
relatives followed by advertisements and financial consultant. Most of the respondents perform
online trading with the help of brokers and access the Internet for on-line share trading at stock
broker’s office daily using Karvy’s site followed by Indus portfolio and Sharekhan web sites. Further,
it is found that most of the respondents are satisfied with tally communication and Internet facility
in their city. Moreover, they are found satisfied with accessibility of broker’s website for on-line share
trading and the information provided by the brokers regarding IPO. Transparency is also found in the
online share trading. But, on one parameter i.e. commission charged by the service providers (broker/
site/companies), the respondents are not found satisfied in majority. And the respondents perceived
that online share trading volume may increase in future.
In the present era of technology, investors invest their
money through on-line modes because the service
providers are providing such facility to the customers
in a friendly manner. The investor is very much keen
to know the status of the invested money at a fraction
of second by him/her in various portfolios which is
feasible through on-line trading. Further, they evaluate
their service delivery outcomes by various ways which
may significantly influence their satisfaction and/or
dissatisfaction with a particular service encounter and
their overall views of a firm’s service quality. Therefore, it
becomes pertinent for the brokers or service providers
that they provide accurate and instant information to
investors so that they may decide for further purchase
or sale of the portfolio and book their profit. Moreover,
the service providers have to maintain the personal
contact with the customers in continuity. At the time
of evaluation of the service delivery process, personal
contact is the most important factor responsible for
customer satisfaction and/or dissatisfaction because
customers cannot clearly differentiate the service
they receive from the employees who provide it.
And a change in the series of actions that reduces
KAIM JOURNAL OF MANAGEMENT AND RESEARCH
VOL.2, No.2, November - April 2010 Pages : 49 - 56
personal contact would result in a change in the ways
of evaluation of the service counter by customer.
Today, the technological advances have resulted
in significant changes in service delivery pattern of
different organizations. In particular, services that
were delivered personally in the past between an
organisation’s employees and its customers are now
delivered electronically with minimum direct contact
between two parties. It results into change in the ways
by which consumers evaluate their service encounters.
Therefore, the present aim and intent of the paper
is to assess the impact of technology on customers’
satisfaction.
II REVIEW OF LITERATURE
Customer satisfaction has been found to positively
influence customer retention (Bearden and Teel
1983; Bolton and Drew 1991), word-of-mouth (Fornell
1992), willingness-to-pay (Homburg and Hoyer,
2005), usage (Bolton and Lemon, 1999),and crossselling
opportunities (Bolton 1998), while at the same
time reducing behaviors with negative economic
consequences for the firm such as complaints (Fornell
1992), payment defaults (Bolton 1998), and search
(Ratchford and Srinivasan, 1993). Through its influence
* Assistant Professor, Department of Commerce, C.D.L. University, Sirsa, E-mail: sskcdlu@gmail.com
** Assistant Professor, Department of Business Administration, C.D.L. University, Sirsa, E-mail: sanjeettanwar@yahoo.com

on customer behavior, customer satisfaction is
predicted to increase future revenues and reduce the
cost of associated customer transactions (Reichheld
and Sasser, 1990). Customer retention ensures more
stable future sales and lowers associated costs.
Positive word-of-mouth leads to greater growth
in sales and more efficient acquisition of new
customers. Anticipated future net cash flows should
also increase due to greater willingness-to-pay,
increased usage, and cross-selling. Anderson, Fornell,
and Mazvancheryl (2004) find a positive association
between customer satisfaction and shareholder
value as measured by Tobin Fornell et al (2006) show
that customer satisfaction helps explain changes in
equity prices. Yet, other research suggests that the
association is either insignificant or limited in scope.
In separate event studies, Itner and Larcker (1998)
and Fornell et al (2006) find no impact of customer
satisfaction announcements on stock prices. More
recently, Jacobson and Mizik (2007) find that customer
satisfaction does not provide incremental information
over accounting measures in predicting equity prices.
There is no certainty that bondholders will value
customer satisfaction information over such measures
either. Whether bond- or equity holders are influenced
by customer satisfaction remains an open question.
The ways consumers evaluate their service delivery
outcomes significantly influence their satisfaction
and/or dissatisfaction with a particular service
encounter and their overall views of a firm’s service
quality (Lehtinen and Lehtinen, 1982; Gronroos, 1998).
Technological advances have resulted in significant
changes in how some service organisations deliver their
services. In particular, services that were traditionally
delivered through personal contact between an
organisation’s employees and its customers can now
often be delivered electronically with minimal direct
contact between the two parties. It appears that the
change in the service delivery process has resulted in
a change in the way consumers evaluate their service
encounters. Researchers have begun to explore the
impact of technology on service delivery processes
with the general consensus being that more research
Source : Survey
50
is necessary for a greater understanding (Dabholkar,
1994; Bitner, Brown, and Meuter, 2000). The aim of the
study reported in this article is to explore consumers
satisfaction level towards the technology used in
online trading for the purpose of investment in various
sectors.
III. OBJECTIVES AND METHODOLOGY
Table 1 : Age-wise Profile of the Respondents
In the present work, an attempt has been made to:
(i) study the customers’ satisfaction towards the
on-line share trading; and
(ii) to find out the satisfaction level regarding
the accessibility of on-line share trading and the
commission charged by the brokers.
To accomplish these abovementioned objectives,
a sample of 120 customers has been taken from Hisar
city located in Haryana state through convenience
sampling. Further, the primary data has been
collected through survey using the well structured
questionnaire. During the editing and coding of data
seven questionnaires were not found fit for the final
analysis of data because of response errors. Therefore,
only 113 questionnaires were used for the final analysis
of data. To make the analysis, some statistical tools
like percentage, mean and standard deviation have
been used. It is pertinent to mention here that the
responses collected from the respondents are coded
1, 2, 3 and so on.
The present paper has been divided into five
sections. The first section is on introduction; second
is on review of literature; third section discusses the
objective and methodology; fourth section gives the
empirical analysis and the last section concludes the
findings.
First of all, it is pertinent to discuss about the
profile of respondents demographically.
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

Table 1 indicates the age-wise segment of
respondents who have participated in the survey. It
shows that two-fourths respondents having the age
from 20 to 30 years have the awareness about the
online trading followed by the age group of 30 to 40
years and 40 to 50 years. Whereas, the aged people i.e.
more than 50 years are not interested in participating
Source: Survey
Table 2 shows that the majority of the respondents
(86.7 percent) are male and a very few numbers of the
respondents are females. Hence, it may be concluded
Source: Survey
It may be observed from Table 3 that nearly half of
the respondents are graduates followed by 23 percent
under graduates and 18.6 percent of the respondents
are post graduates. Whereas, the percentage of other
qualified respondents like doctors, lawyers and
Source: Survey
Table 4 brings out that a major chunk of the
respondents i.e. 40.7 percent have the income in the
continuum of Rs. 10,000-20,000 in a month followed
by 31.9 percent in the income between Rs. 20,000 to
30,000 per month and 12.4 percent in the range of Rs.
30,000 to 50,000 per month. About 9.7 percent and
5.3 per cent respondents are inthe income group of
above Rs. 50,000 per month and in the income below
51
Table 2: Gender-wise Profile of Respondents
Table 3 : Education-wise Profile of Respondents
Table 4: Income-wise Profile of Respondents
in the survey. It indicates that the teenagers and aged
persons not having the knowledge and interest in
online share trading, it may be due to lack of money,
lack of decision-making, lack of time, etc. Therefore, it
is evident that majority of the respondents are from
the age group of 20 to 30 years.
female are less interesting in on-line trading whereas,
males are dominating it.
CA. etc. is small. It is thus obvious that the majority
of the respondents having minimum qualification
of graduation take more interest in online share
trading.
Rs. 10,000 per month respectively. Hence, it may be
inferred that higher and lower income earners have
not much interest in online share trading whereas,
middle income strata has interest in online trading.
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

Source: Survey
Table 5 depicts that half of the respondents become
aware about on-line trading by their reference
groups like friends/relatives followed by 25.7 and 23.9
percent by getting the information through advertisements
and financial consultants, respectively. Moreover,
the values of mean (1.7345) and S. D. (0.82395)
Source: Survey
52
Table 5 : On-line Trading and Source of Information
also favour the same. It may safely be concluded that
majority of the respondents are introduced to on-line
trading through their friends/relatives.
Table 6 : Performing On-line Trading with the Help of Brokers
Table 6 reveals that the majority of the respondents (82.3 per cent) explore online trading with the help
of brokers and only 17.7 per cent at their own level.
Source: Survey
The data thrown by Table 7 shows that large
portion of the respondents (77.9 per cent) are
accessing the Internet for on-line share trading at stock
broker’s office, 15 per cent respondents are accessing
Internet for on-line share trading at their home and
very less number of the respondents (7.0 per cent)
Source: Survey
Table 7 : Access of the Internet for On-line Trading
Table 8 : Accessing of On-Line Trading
are accessing Internet for on-line share trading at
Browsing centre. Further, the mean value (1.9204) and
standard deviation value (0.46563) also favour that
majority of the respondents are accessing Internet for
on-line share trading at stock broker office.
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

Table 8 brings out the trading periodicity of the
respondents and it shows that (50.4 per cent) of the
respondents are doing on-line share trading on a
daily basis followed by 25.7 per cent on irregular, and
15 per cent of on-line trading weekly basis. About 10
Source: Survey
The data given in Table 9 discloses that 48.7 per
cent of the respondents choose Karvy’s site for on-line
share trading followed by 37.2, 8.8 and 05.5 per cent
53
Table 9 : Web-Site Used for On-Line Share Trading
per cent respondents are doing business online on
monthly basis. The mean value 2.097345 and S. D.
value 1.274507 also favour the same.
of them using Indus portfolio, Sharekhan and Religare
web sites, respectively.
Table 10 : Satisfaction Level towards the Internet and Tally Communication Facility
Source: Survey
Table 10 indicates the satisfaction level regarding
Internet and tally communication facility. A large
group of the respondents (57.5 per cent) is satisfied
with tally communication and Internet facility in their
city, 23 per cent of the respondents are highly satisfied
and 19.5 per cent of the respondents have an average
Source: Survey
level of satisfaction i.e. they are neither satisfied and
nor dissatisfied. The values of mean 1.964602 and S.
D. 0.653687 show that the majority of the respondents
are satisfied with Internet and tally communication
facility provided by the company/broker in their city.
Table 11: Satisfaction Level towards Accessibility of Brokers’ Website
Table 11 reveals that majority of the respondents
(65.5 per cent) are satisfied with accessibility of broker’s
website for on-line share trading and 10.6 per cent
are highly satisfied. On the other hand, 23 per cent
respondents are in the neutral stage or they are
neither satisfied nor dissatisfied with accessibility of
broker’s website for on-line share trading and only one
respondent is dissatisfied with accessibility of broker’s
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

website. The application of mean value (2.141593) and
standard deviation value (0.595628) also support the
view that a large number of respondents are satisfied
Source: Survey
54
Table 12 : Satisfaction Level Regarding Information Provide Related IPO
(Initial Public Offer)
As far as the respondents perception about
satisfaction level regarding the supply of information
related to IPO is concerned, Table 12 brings out clearly
that majority of the respondents i.e. 67.3 per cent
are satisfied, 20.4 per cent are neutral i.e. they are
neither satisfied nor dissatisfied. On the other hand,
Source: Survey
Table 13 indicates that a high strata of the
respondents (48.7 percent) is satisfied regarding the
transparency in the online share trading followed
by 34.5 percent of who are highly satisfied and 15
percent who are neither satisfied nor dissatisfied.
Source: Survey
with accessibility of broker’s website.
Table 13 : Transparency in On-Line Share Trading
very few respondents (3.5 per cent) are dissatisfied
regarding Information provided by the brokers related
to IPO. The values of mean value (2.185841) and
standard deviation (0.634551) also support the same
conclusion.
Only 02 respondents are found dissatisfied regarding
the transparency parameter in on-line trading. The
mean value (1.840708) and standard deviation value
(0.738802) also support the same claim.
Table 14 : Commission Charged by the Service Providers
(Broker/Site/Companies)
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

Table 14 shows that the majority of the respondents
(47.8 percent) are neutral who are neither satisfied nor
dissatisfied followed by 46.9 percent of them who
are highly satisfied with commission charged by the
service providers (broker/site/companies) and only 5.3
Source: Survey
The data given in Table 15 depicts that a little more
than three fourths of the respondents perceive that
online share trading volume may increase in future
while the rest perceive otherwise.
IV. CONCLUSION AND SUGGESTIONS
To sum up, the respondents generating awareness
with regard to online trading reveals that the share of
on-line trading in the investment portfolio is increasing
rapidly. It is discovered that respondents became
aware about on-line trading by their reference groups
like friends/relatives followed by advertisements and
financial consultants. Most of the respondents perform
online trading with the help of brokers and access the
Internet for on-line share trading at stock broker’s office
daily using Karvy’s site followed by Indus portfolio and
Sharekhan web sites. Further, it is found that most of
the respondents are satisfied with tally communication
and Internet facility in their city. Moreover, they are
satisfied with accessibility of broker’s website for online
share trading and the information provided by
the brokers regarding IPO. Transparency is also found
satisfactory in the online share trading. But, on one
parameter i.e. commission charged by the service
providers (broker/site/companies), the respondents
are not satisfied in majority. Also, the respondents
perceived that online share trading volume may
increase in future. In view of this it may be suggested
that the investors become well versed in tech-savvy
activities so that they remain updated about their
investments and the present value of the money.
REFERENCES
Anderson, Eugene W. Claes Fornell, and Sanal Mazvancheryl
(2004), “Customer Satisfaction and Shareholder Value,”
Journal of Marketing, 68 (X), 172-185.
Bearden, William O. and Jesse E. Teel (1983), “Selected
Determinants of Customer Satisfaction and Complaint
55
Table 15 : Perception about the On-line Trading
percent (6 out of 113) not satisfied with commission
charged by the broker/site/companies. The application
of mean and standard deviation values also support
the above.
Reports,” Journal of Marketing Research, 20 (X), 21–28.
Bitner, M. J., Brown, S. W., & Meuter, M. L., (2000), “Technology
Infusion in Service Encounters,” Academy of Marketing
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Bolton, Ruth N. (1998), “A Dynamic Model of the Duration of
the Customer’s Relationship with a Continuous Service
Provide: The Role of Customer Satisfaction,” Marketing
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Impact of Service Changes on Customer Attitudes,” Journal
of Marketing, 55 (X), 1–9.
——— and Katherine N. Lemon (1999) “A Dynamic Model of
Customers’ Usage of Services: Usage as an Antecedent
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KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

INTRODUCTION
KAIM JOURNAL OF MANAGEMENT AND RESEARCH
VOL.2, No.2, November - April 2010 Pages : 57 - 62
MANAGEMENT OF NON-PERFORMING ASSETS IN
CO-OPERATIVE BANKS IN HARYANA
Hawa Singh* and Neelam Rani **
The present study deals with the analysis of NPA management both in absolute and relative terms
of Sonepat Central Co-operative Bank Ltd. (SCCBL) and Jind Central Co-operative Bank Ltd. (JCCBL).
The study is based on secondary data collected from the annual reports of the banks from 2004-05 to
2008-09. For this purpose ‘T’ test has been applied in this study. It is found that the banks under study
are not successful in restricting the level of NPAs. The two banks differ significantly in managing their
doubtful assets as well as loss assets. On the whole, the performance of SCCBL is better in managing
their NPAs as compared to JCCBL during the study period. The paper also offers some meaningful
suggestions to improve the profitability and financial stability of these banks.
Banking is one of the key sectors of the economy. Its
energy and vitality indicate the health and prosperity
of any nation. Banking institution plays a pivotal role
in the development of the economy by financing the
requirement of trade, industry and agriculture with
higher degree of contribution and responsibility.
Thus, the development of country is integrally linked
with development of banking. Co-operative Banks
also occupies an important place in nation’s banking
system. After deregulation of the Indian economy,
banking sector reforms were initiated on the basis of
the recommendations of the Narasimham Committee
with a view to increase efficiency and productivity in
the banking sector. A major element of the banking
sector reforms popularly known as prudential norms
were introduced by the RBI with effect from 1.4.1992.
The purpose was not only to know the true position
of a bank’s loan portfolio but also helps in arresting
its deterioration. In consultation with NABARD, the
RBI directed all the District Central Co-operative
Banks (DCCBs) to adopt the prudential norms from
the accounting year 1996-97. According to the
recommendations of the Narasimham committee,
loans and advances given by the banks are classified
as standard assets, sub- standard assets, doubtful
assets and loss assets. Standard assets are known as
performing assets while sub- standard assets, doubtful
assets and loss assets together are known as nonperforming
assets (NPAs). The level of NPAs of a bank
is considered to be the measure of its asset quality
and in turn its performance and rating. Increasing
NPAs not only affects the profitability and liquidity
of the banks but also forces the banks to maintain
more liquid assets which mean an increase in cost.
This paper makes an attempt and gives a comparative
picture of NPA management of the selected banks
operating in Sonepat and Jind districts of Haryana
for five year period from 2004-05 to 2008-09. It may
be mentioned that the Sonepat Central Co-operative
Bank Ltd. (SCCBL) was established in the year 1973 with
its head office at Sonepat and is operating exclusively
in the district with a total of 33 Primary Agricultural
Co-operative Societies (PACS) affiliated to 35 branches.
On the other hand, The Jind Central Co-operative Bank
Ltd. (JCCBL) was established in the year 1966 with
its head office at Jind and is operating in the district
with a total of 30 Primary Agricultural Co-operative
Societies (PACS) affiliated to 34 branches. Both the
banks are viable and are classified under ‘A’ (Sonepat)
and ‘B’ (Jind) category as per audit classification norms
prescribed by NABARD.
REVIEW OF LITERATURE
Many research studies have been conducted on non-
performing assets in banking sector at macro as well as
micro level. The main objective of most of the studies
was to identify the various factors responsible for NPAs
and suggest measures to reduce the incidence of these
assets in banking sector. A brief review of the studies
conducted earlier has been presented here.
Kumar (2000) analysed the trend of NPAs in RRBs at all-
India level through the classification of loan assets and
size of NPAs and suggested that proper steps have to
be taken for invisible NPA, i.e. at the commencement
stage of overdue.
Kaur (2004) focused on the problem of NPAs in public
* Professor, Department of Commerce Kurukshetra University, Kurukshetra.
** Research Scholar, Department of Commerce, Kurukshetra University, Kurukshetra, E-mail: neelusaini82@yahoo.in

sector banks and concluded the total elimination of
NPAs is not possible but can be minimized, for which
it is always wise to follow proper policy for appraisal,
supervision and follow- up of advances to avoid
NPAs.
Shiralasheshu (2006) analyzed bank-wise, sectorwise
gross and net NPAs, and suggested that the
banks in India must apply the principles of Financial
Management to solve the problem of NPA.
Singh (2007) has made an attempt to study the
banking sector reforms especially in the area of NPAs
management with special reference to securitization
and enforcement of security interest bill 2002.
He suggested that to maintain the liquidity and
profitability, it was essential to maintain the NPAs with
lower level.
Rajesham and Rajender (2008) found that NPAs
have negative impact on the productivity, funds
deployment and credibility of the banking system and
overall economy and concluded that strong political
will only be able to find satisfactory solution to the
problem mounting level of NPAs and will become
financially strong under the competitive and global
turbulent business environment.
OBJECTIVES OF THE STUDY
The study has the following broad objectives.
• To compare the performance of the banks
through trend analysis of gross NPAs.
• To make comparative analysis of loan assets of
the banks according to the prudential norms of
RBI.
• To offer some meaningful suggestions for the
improvement in the profitability and financial
stability of these banks.
LIMITATION OF THE STUDY
• The study is limited to five years only from 2004-
05 to 2008-09.
• The study is based on secondary data collected
from the annual reports of the banks.
• The study is limited to two banks and hence it
will reflect only a partial view of the overall NPA
management of the Central Co-operative Banks
in the state of Haryana
RESEARCH METHODOLOGY
The present study is based on secondary data and
information provided by the banks. The data has been
collected from the annual reports of SCCBL and JCCBL
58
for the period from 2004-05 to 2008-09. To examine
the NPA management of the banks, a ratio of NPA as a
percentage of loans outstanding has been calculated.
Table -1 shows comparative trend of gross NPAs of
the banks selected for the study. Gross NPA is used
for comparison because gross NPA is better indicator
then net NPA of the quality of loan portfolio, since it
does not incorporate the endogenous provisioning
response. It is found that the banks under study are not
successful in restricting the level of NPAs. To critically
analyze the NPA management of the banks, ‘T’ test
has been applied. Table-3 and 4 show classification of
loan assets of the banks according to the prudential
norms of RBI.
RESULT AND DISCUSSION
The money locked up in NPAs is not available for
productive use and to the extent that banks seek to
make provision for NPAs or write them off, it is charge
on their profits. NPAs in their portfolio are on the rise,
impinging on the bank’s viability. Avoidance of loan
losses is one of the pre-occupations of management
of bank, complete elimination of such losses is not
possible, and bank management’s takes considerable
steps to keep the losses at low level. In fact, it is the
level of NPAs, which to a great extent, differentiates
between a good and bad bank. The following table
shows the picture of NPA of ‘SCCBL’ and ‘JCCBL’.
(i) Trend analysis of gross NPAs
Table 1: Gross NPAs in SCCBL and JCCBL
Source: Annual Reports of SCCBL & JCCBL
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

According to Table-1 the ratio of gross NPA to
total advances of SCCBL increased from 1.96 per cent
in 2004-05 to 6.73 per cent in 2008-09, showing a
decreasing trend up to 2006-07 and further starts
increasing in the year 2007-08. However, the absolute
magnitude of gross NPAs of SCCBL is increased
throughout the study period from Rs. 515.18 lakhs in
2004-05 to Rs.1897.50 lakhs in 2008-09.
In case of JCCBL, the ratio of gross NPAs to total
advances increased from 4.35% in 2004-05 to 10.85%
in 2008-09, showing an increasing trend throughout
the study period. The gross NPAs in absolute term
of JCCBL increased from Rs. 977.96 lakhs in 2004-05
to Rs 3091.04 lakhs in 2008-09. On the whole, the
performance of SCCBL is better in managing their NPAs
as compared to JCCBL during the study period.
As prescribed by NABARD maintenance of NPA
at the level of 2% or below is an indication of sound
management of the bank. Taking into consideration
of this criterion, both the banks are not successful in
restricting the level of NPAs except for SCCBL in the
first four years of the study period. The condition of
both the banks is worst in the year 2008-09 when their
(ii) Analysis of loan Assets
Before taking up the analysis of loans assets, it will be of
interest to have a brief discussion on the classification
of loan assets. According to the prudential norms, a
standard asset is an asset which is not an NPA and
which does not disclose any problem. A sub-standard
asset is an asset that has remained as NPA for a period
59
Table 2: ‘t’ Test for NPAs of SCCBL & JCCBL
NPAs is as high as 6.73 per cent in case of JCCBL and
10.85 per cent in case of JCCBL. On the whole, the
performance of SCCBL in respect of gross NPAs is better
than that of JCCBL during the study period.
To know whether there is any significant difference
between the banks in respect of average NPAs at 5 per
cent level of significance ‘t’ test has been applied.
For this purpose NPA as a percentage of loans
outstanding of the banks under study have been
taken into consideration. Since the calculated value
of ‘t’ test 2.88 exceeds the critical values of ‘t’ test 2.31,
null hypothesis is rejected indicating significance
difference between the average quality of NPAs of
SCCBL and JCCBL. This further strengthens our analysis
that the NPA management of SCCBL is better than
that of JCCBL. However, both the banks should further
continue to improve their quality of assets and JCCBL
in particular takes quick corrective action before its
goes out of hand.
not exceeding three years. Doubtful asset is an asset
that has remained as NPA for a period exceeding
three years. Loss asset is an asset where loss has been
identified by the bank or internal or external auditors,
or the co-operative department or the RBI, but the
amount has not been written off wholly or partly.
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

Source: Annual Reports of SCCBL.
60
Table 3: Classification of Loan Assets of SCCBL from 2004-05 to 2008-09
Table-3 depicts that there has been significant
increase in doubtful assets of SCCBL both in absolute
and relative terms during the period under study from
Rs. 191.92 lakhs, 0.73 per cent in 2004-05 to Rs. 203.96
lakhs, and .82 per cent in 2008-09 which speaks for the
inefficiency of the banks. Standard assets recorded an
increasing trend in absolute terms while in relative
terms; it decreased from 98.04 per cent in 2004-05 to
93.27 per cent in 2008-09. The share of sub-standard
assets to loans outstanding showed an increasing
Source: Annual Reports of JCCBL
trend upto 2005-06 and thereafter declining trend
while in absolute term, it increased from Rs. 293.74
lakhs in 2004-05 to Rs. 1671.15 lakhs in 2008-09. Data
relating to loss assets supports the view that the bank
has been able to reduce the amount of loss assets both
in absolute and relative terms during the study period,
thereby showing efficiency in collecting overdue loans
and advances after becoming doubtful.
Table 4: Classification of Loan Assets of JCCBL from 2004-05 to 2008-09
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

Table-4 also reveals that there has been significant
increase in doubtful assets of JCCBL both in absolute
and relative terms during the study period, clearly
indicating inefficiency of the bank. Standard assets
showed a decreasing trend in relative terms while
in absolute terms it is increased from Rs. 21984.54
lakhs in 2004-05 to Rs. 25414.61 lakhs in 2008-09.
61
Sub-standard assets showed an increasing trend in
relative terms during the study period. Data relating
to loss assets showed a fluctuating trend in relative
terms while in absolute terms the bank is efficient in
collecting the overdue loans and advances during the
study period.
Table 5: ‘t’ test for Classification of NPAs of SCCBL and JCCBL
Table- 5 depicts that there is no significant
difference between the average quality of sub-
standard assets of SCCBL and JCCBL while they differ
significantly in managing their doubtful assets as well
as loss assets during the study period. In particular,
the management of JCCBL must check the alarming
situation of doubtful assets in years to come.
Though both the banks have been able to reduce
the amount of loss assets up to 2008-09, their doubtful
assets have steadily increased during the study period
indicating inefficiency of the banks to collect loans
and advances at the initial stage of NPA. However, the
position of SCCBL in respect of doubtful assets is better
as compared to JCCBL during the period under study
as revealed by Tables 3 and 4. Of late, both the banks
have tried to improve the quality of sub- standard
assets. Both the banks should take immediate steps
not only to reduce the increasing doubtful assets but
also prevent the down-gradation of existing NPAs that
ultimately results into lesser provision or no provision
required to be made by the banks.
SUGGESTIONS
• OTS Scheme as suggested by the RBI: the
banks should adopt the scheme of ‘one- time
settlement’ (OTS) as a one-time measure for the
recovery of NPAs.
• Efficient credit appraisal system: strengthen
the credit appraisal and supervision mechanism
for preventing the incidence of fresh NPAs and
overdues under all categories of loans and
advances.
• Effective monitoring: the bank should have an
effective monitoring system over the use of funds
in order to prevent or minimize diversion of funds
by the borrowers.
• Risk management policy: the management
of the bank should review its credit management
policy in order to improve the quality of assets.
• Compromise: due to complicated legal
formalities for credit recovery, the banks may
adhere to out-of -court procedure for quick
settlement of disputes.
• List of defaulters: to draw attention of the
defaulters, the banks may display the list of
defaulters on their notice board.
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

• File suits: for the recovery of loans and
advances, the banks may file suits against
defaulting borrower through Asset Reconstruction
Company.
• MIS Reports: suitable MIS reports should be
prepared by the banks on a regular basis giving
details of the profile of each PACS, strategies
adopted for the recovery of dues etc.
CONCLUSION
To conclude, it may be stated that the overall
performance regarding NPA management of SCCBL
is better as compared to JCCBL during the period
under study. ‘t’ test also favoured SCCBL for better
performance of managing their NPAs. However, the
banks under the study are not successful in restricting
the level of NPAs and the alarming factor is that
the quantum of doubtful assets of both the banks
increased continuously during the study period. The
NPA level in a bank is an important indicator of the
performance of the banks as to reflect on the quality
of the loan portfolio. NPAs have serious implication
on the profitability of banks. While banks cannot
recognize or book income on NPA accounts, there is
a strain on profitability of banks as profit earned, have
to be diverted towards making provision for impaired
assets. As the level of NPAs to total credits increase,
the liquidity risk of banks also increases. Therefore, it is
one of the foremost tasks of the banks to manage their
NPAs more efficiently and effectively so that they can
change their character from non-performing assets to
performing assets.
62
REFERENCES
Aravanan S. and N. VijayKumar (2007), “Non Performing
Assets- Unavoidable but Not Unmanageable”, The
Management Accountant, July, pp. 568-574.
Das, Shantanu (2009), “Management of Non Performing
Assets in Indian Public Sector Banks with Special
Reference to Jharkhand”, Udyog Pragati, vol. 33, No.1,
January- March, pp. 41-51.
Kaur, Harpreet and J. S. Pasricha (2004), “Management of
NPAs in Public Sector Banks” The Indian Journal of
Commerce, Vol. 57, No 2, April-June, pp.14-21.
Kumar, Sanjay (2000), “Non-Performing Assets in
Regional Rural Banks: Impact and Management”, The
Management Accountant, November, pp. 855-858.
NABARD (1999), Strategies for NPA Management- guidelines,
January, pp.64-73.
Rajesham, C.H. and Rajender, K. (2008), “Management of
NPAs in Indian Scheduled Commercial Banks”, The
Management Accountant, August, pp. 602-608.
Ramesh, T. (2007), “Structural Reforms in Co-operative
Banking”, The Management Accountant, February, pp.
146-149.
Shiralasheshu (2006), “Management of Non-Performing
Assets in Commercial Banks- Some Issues”, Journal of
Banking Finance, February, pp. 14-16.
Singh Pradeep (2007), “Banking Sector Reforms: NPA
Management-Assets Reconstructions Company (ARC) in
Indian Scenario”, The Management Accountant, October,
pp. 822-830.
www.nabard.org.in
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

MARKETING MIX OF HEALTHCARE SERVICES OF SPECIALTY HOSPITALS
IN NORTH INDIA
INTRODUCTION
M.R.P. Singh* and Rajinder Singh**
KAIM JOURNAL OF MANAGEMENT AND RESEARCH
VOL.2, No.2, November - April 2010 Pages : 63 - 68
Healthcare is essential to the quality of life. Indian healthcare services industry is ready to become a
major driver of economic growth. We are witnessing a new dimension in healthcare sector in India
with emergence of private or corporate specialty hospitals. The paper highlights the marketing
mix of healthcare services provided by specialty hospitals. It is evident from the study that most
of the hospitals have specialty services like cardiac, oncology, orthopedic, pediatrics, gynecology,
nephrology, gastroenterology, psychiatry etc., the required diagnostic facility like X-ray, CT-scan, MRI,
BGA, TMT, EEG, ultrasound, echocardiography, pathology laboratory etc., and support services like
OT, ICU, ambulance, blood bank, medical store, canteen, parking etc. The study revels that majority
of hospitals adopt fixed price of services for all patients. They adopt cost plus pricing method while
deciding the prices of services. Hospitals spend on marketing and advertising activity to create
awareness about services, build good image of hospitals and compete with other hospitals. All
the specialty hospitals take time of less than one hour for admission in hospitals and make special
arrangements for beds when bed capacity is over. All the doctors and administrators of specialty
hospitals, under study, have obtained on the job training.
Health is considered as the most important aspect for
a human being. It is a well known concept that health
is wealth (Singh & Sunaina, 2005). In recent years,
the healthcare sector has become very competitive
and is changing rapidly. Significance of marketing is
now beyond the business sector. It is now extended
to colleges, hospitals, voluntary organizations etc.
Marketing approach has significant contributions in
healthcare services in India too (Prasad, 1992).
The increase in number of patients as a consumer,
the introduction of innovative technologies and a
new breed of entrepreneurial managers are the major
factors behind this industrial metamorphosis. Today,
the healthcare market has become consumer-driven.
Patients are better informed and they know more
about health and medical services (Ramanujam,
2009). In this competitive situation, marketing has
assumed a significant role to highlight the healthcare
organization to the end users and intermediaries. With
the healthcare market turning from a sellers’ market
into a buyers’ market, healthcare providers are turning
more and more towards marketing of their services.
The elements of traditional marketing mix
such as product, place, price, and promotion has
reliably outlined the key components of concern
to marketers of goods for many years. Services are
inherently different from goods, and an extension
of the traditional marketing mix is justified to reflect
* Assistant Professor, Haryana School of Business, G.J. University of Science and Technology, Hisar
** Research Scholar, Haryana School of Business, G.J. University of Science and Technology, Hisar
the dramatic contrasts between services and goods.
With the standard 4P’s three more P’s are added and it
extends to 7P’s of marketing that are people, process
and physical evidence. The paper is an attempt to
highlight the marketing mix of healthcare services
provided by specialty hospitals.
REVIEW OF LITERATURE
Gilliand (1987) discusses various measures that need to
be focused on the training of doctors, the promotion
of certain specialist fields, the way in which care is
delivered, the methods of payment, and the evaluation
of services, so as to ensure that the right medical
skills are available and to safeguard the quality of the
services patients receive.
Shrinate (2004) pinpoints that the number of believers
in India’s medical capabilities is increasing, most of the
patients come through word-of-mouth publicity. What
we need is aggressive marketing.
Shanker (2004) speaks out that as the specialized
hospitals are growing in number, each is trying
to create a distinct positioning for itself. There are
hospitals specializing in cardiac surgery, cancer care,
spinal injury, eye hospitals, abortion clinics, maternity
homes, etc. Each one is trying to create a unique
identity and wants to cater to a specific segment of
the market.
Shahi (2004) feels that India’s healthcare industry
would do well if it focuses on providing world–class
care at affordable cost. Indian players should strive

to be recognized domestically and internationally
as operating in accordance with best practice
standards.
Reddy (2000) writes that the healthcare industry has
the potential to show the same exponential growth
that the software and pharmaceuticals industries have
shown in the last decade. The market for healthcare
world wide is expected to be over $4 trillion and of this
over $ 750 million will be the share of the developing
countries.
Revathy (2003) thinks that the health care industry
in India is expected to be more than double within
the next decade. The estimated spending, according
to CII-McKinsey Report, would cross the Rs. 2,00,000
crore- mark by 2012 from Rs. 86,000 crore in 2001.
Jayachandran (2004) describes that in healthcare many
specialized hospitals are coming up in the metro cities
and big towns. They are growing in number and each
one is trying to create a specific positioning with the
general publics as well as patient public. They attempt
to be known for specific as well as general services.
RESEARCH METHODOLOGY
The objective is to study the marketing mix of
healthcare services of specialty hospital in India.
The research design is exploratory cum descriptive.
Questionnaire is used as research instrument.
Sample unit is administrator and doctors of specialty
hospitals. Stratified random sampling method is used.
The sample size is 25 administrators selecting one
administrator from each hospital and 100 doctors
selecting 4 doctors from each of the 25 specialty
hospitals. The data is analyzed using percentage
method. The study covers 25 hospitals (government,
private and charitable) falling in North India from Delhi,
Haryana, Punjab, Himachal Pradesh, J&K, Uttrakhand,
U.P. and Chandigarh.
RESULTS AND INTERPRETATION
The marketing mix applicable to specialty
Table 1: Policy Adopted for Deciding the Prices of Services of Hospital.
Source: Primary data.
Table 1 depicts that 60 percent hospitals adopt the
policy of fixed fee / prices of services for all patients, 28
percent hospital charged as per government policy, 12
percent hospitals adopt the policy of different prices
64
hospitals are explained below:
(i) Product
A service product refers to an activity or group of
activities that a marketer offers to perform, which leads
to the satisfaction of a need of customer. The essential
element in a service product is the understanding
what benefits and satisfaction the customer is seeking
from the service. Most of the hospitals have speciality
services like cardiac, oncology, orthopedic, paediatrics,
gynaecology, nephrology, gastroenterology and
psychiatry, the required diagnostic facility like
X-ray, CT-scan, MRI, BGA, TMT, EEG, ultrasound,
echocardiography and pathology laboratory and
support services like OT, ICU, ambulance, blood bank,
medical store, canteen, parking etc.The government
specialty hospitals have the highest bed strength;
charitable hospitals are the second largest hospital
in bed strength while private hospitals are on third
position in bed strength. Most of the hospitals have
special arrangement for VIP’s, celebrities and affluent
class of society and majority of specialty hospital
take less than one hour in admission of patients in
hospital.
(ii) Price
Price is the only ingredient in the marketing mix
that brings revenue to the firm. Due to intangibility of
services a marketer faces bigger difficulty in fixing the
price of services. Pricing policy generally adopted by
the hospital depends upon the types of hospital. Table
1 shows the pricing policy adopted for deciding the
prices of services by various hospitals.
of services for different class of patients. Healthcare
services providers also use different methods in
deciding the prices of services as shown in table 2.
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

Source: Primary data.
Table 2 shows that 72 percent hospitals adopt
cost plus pricing method for deciding the prices of
services and 28 percent decide the prices of services
as per government specifications.
(iii) Place
Place is concerned with two main issues viz.,
Source: Primary data.
Table 3 depicts that all the specialty hospitals
take a time of less than one hour for admission
in hospitals. Even when the bed capacity is over
Source: Primary data.
Table 4 shows that 56 percent hospitals make
special arrangement for beds when bed capacity is
over. About one third hospitals refer the patients to
other hospitals, 12 percent hospitals kept their patients
in waiting.
(iv) Promotion
image in the public mind to think about the products
Promotion is the means by which we create an
65
Table 2: Methods Used in Deciding the Prices of Services
Table 3: Time Spent for Admission in Hospital
Table 4: Arrangements When Bed Capacity is Over
accessibility and availability. Accessibility refers to ease
and convenience with which a service can be used.
Availability refers to the extent to which a service
is obtainable or capable of being used. Specialty
hospitals are trying to provide speedy services to the
patients as it is evident from Table 3.
most of the hospitals try to provide services to the
patients as shown in Table 4.
or services. Promotion plays an important role in
informing, educating, persuading and reminding
the customer. Hospitals have specific reasons for the
advertisement of the services as mentioned in Table
5.
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

Source: Primary data.
Table 5 exhibits that 24 percent hospitals advertise
for their services for to build good image of their
hospitals, 20 percent to attract maximum number of
patients for their services, 24 percent to compete with
other hospitals and 32 percent hospitals advertise
Source: Primary data.
66
Table 5: Reasons for Advertisement of the Services
for to create awareness about services available with
them. Hospitals use various types of media for the
advertisement of their services as is shown in Table
6.
Table 6: Media Being Used for the Advertisement of Services
Table 6 shows that 32 percent hospital use doctors, nursing staff, and all other staff including
newspaper as media for the advertisement of services, managers and administrators. Healthcare services like
24 percent use medical camps and exhibitions as a other services involve participation of the customer in
media, 16 percent use Journals and magazines, 16 the service encounter, and therefore patients are also
percent use television as a media, 12 percent uses important. Healthcare organizations for satisfactory
Internet as media for the advertisement of services delivery of services provide the package that motivates
of their hospitals.
the employees. Salary package provided to the doctors
(v) People
In case of healthcare services people include
and other staff is shown in Table 7.
Table 7: Salary Package Provided to the Doctors and Other Staff
Source: Primary data.
Table 7 shows that 60 percent of hospitals provide
salary package to the doctors and other staff according
to the salary package given by leading hospitals, 28
percent were provide according to the rules prescribed
by the government, and remaining 12 percent
provide salary package higher than prescribed by the
government. There was no single hospital providing
salary less than prescribed by the government. For
better management of services, administrators as well
as doctors employed with necessary qualification and
specialized training by hospitals are shown in Tables
8 and 9.
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

67
Table 8: Specialized Training Obtained by the Administrators Apart From Professional Qualification
Source: Primary data.
Table 8 shows that all the administrators of the
specialty hospitals under study have obtained on the
job training apart from professional qualifications.
Table 9: Specialized Training Obtained by the Doctors Apart From Professional Qualification
Source: Primary data.
Table 9 exhibits that 99 percent doctors have that dynamically combined to deliver a service to the
obtained on the job training, while only 1 percent consumer. Hospitals are now computerized so services
doctors have not obtained any training apart from could be performed fast and without compromising
professional qualification.
on quality. As regards the proper checking, after
(vi) Process
Process refers to the procedures, mechanisms
and course of activities by which service is delivered.
prescription of medicine, doctors check the quality and
date of expiry of the medicine as shown in Table 10.
Process of services is actually Table 10: the Checking series of of activities Quality and Date of Expiry of the Medicine
Source: Primary data.
Table 10 exhibits that 58 percent doctors check
the quality of drug/medicine and the date of expiry
before administering the medicine to the patient.
About 40 percent doctors occasionally check, and
two percent doctors never check the quality of drug/
medicine and the date of expiry before administering
Table 11: Sterilization of Surgical Equipments
Source: Primary data.
As per Table 11, all the doctors sterilized the equipments with every use.
the drug /medicine to the patient. In these hospitals
surgical equipments are sterilized to prevent infection
and to maintain the quality of services as shown in
Table 11.
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

(vii) Physical Evidence
Physical evidence plays a crucial role in attracting the
patients and making them loyal towards particular
hospital.The physical evidence refers to all of the
tangible representation of the services such as physical
infrastructure in which services are delivered like
building and its room/wards, interior, beds, medicine
dispensed by the hospital, food, etc. Physical evidence
also includes equipment and uniform of medical and
paramedical staff. Actually, physical evidence refers to
the environment/surrounding where the healthcare
service is delivered, and where the healthcare provider
and patients interact, and any tangible component
that facilitates in the delivery of health services. Since
healthcare services are intangible, the healthcare
service providers try to tangiblise the services as to
the extent possible by them. Patients are impressed
about the healthcare services on the basis of physical
evidence like cleanliness of rooms/wards, bed sheets
& pillow cover, hygienic conditions of toilets and
bathrooms as well as drinking water area, meals etc.
All types of hospitals are taking utmost care of these
physical evidence.
Physical evidence is of two types- peripheral
evidence and essential evidence. OPD card, prescription
slip or pad, reports of diagnostic services, film of X-ray
and CT-scan, medicine dispensed by hospital, food
etc are peripheral evidence in the healthcare services,
whereas hospital buildings, rooms/wards, its interior
layout, bed sheet, pillow cover, blanket, cleanliness
etc. are the essential physical evidence. All hospitals
are using physical evidence to leave impression on
the mind of patients so that they can differentiate the
similar offerings of competitors.
CONCLUSION
Most of the hospitals have speciality services
like cardiac, oncology, orthopedic, paediatrics,
gynaecology, nephrology, gastroenterology, psychiatry
etc., the required diagnostic facility like X-ray, CT-scan,
MRI, BGA, TMT, EEG, ultrasound, echocardiography,
pathology laboratory etc., and support services like OT,
ICU, ambulance, blood bank, medical store, canteen,
parking etc. Majority of hospitals adopt the policy of
fixed prices of services for all patients, and adopt cost
plus pricing method. All the specialty hospitals take
time of less than one hour for admission in hospitals
and make special arrangements for beds when bed
capacity is over.
68
Further the major reasons for advertisement of
services of specialty hospitals are : to create awareness
about services, to build good image of their hospitals, to
attract maximum number of patients for their services,
and to compete with other hospitals. The media
used for advertisement by majority of hospitals are
newspaper, medical camps and exhibitions, Journals
and magazines, television, and internet. Majority of
hospitals provide salary package to the doctors and
other staff according to the salary package given by
leading hospitals. All the doctors and administrators of
specialty hospitals under study have obtained on the
job training. Majority of doctors check the quality of
medicine and the date of expiry before administering
the medicine to the patients. All the doctors agree that
surgical equipments are sterilized with every use.
REFERENCES
Gilliand, P. (1987), Free Competition or Prearranged Strategy?
Health Care- Who pays? World Health Organization,
Geneva.
Jayachandran, S. (2004), Marketing Management Text and
Cases, Delhi: Excell Books.
Parsad, P. B. (1992), Marketing of Health Services in Maternity Care-
A Managerial Approach, Doctoral Thesis, Venkateshwara
University, Tirupati, 1-5, 12,13, 41, 42.
Reddy, P. C. (2000), “Healthcare Services in the New Millennium”,
Management and Labour Studies, 25(2), 115.
Revathy, L.N. (2003), “Health Care Spending May Cross Rs.
2,00,000 Crore Mark”, The Hindu Business Line, May 12.
Ramanujam, P.G. (2009). Marketing of Healthcare Services, www.
infibeam.com (date of access 6-7-09).
Singh, D.R & Sunaina (2005), Management of Healthcare Service
Sector- A Study of Primary Health Centres, Indian Journal
of Marketing, December, 35(12), 31,38.
Shahi, G. (2004), World-class Care at an Affordable Cost are the
Watch Phrases for India, Health News, Express Pharma
Pulse, June 3, 28.
Shanker, R. (2004), Services Marketing-the Indian Perspective,
N.Delhi; Excel Books Publishers, 470, 474.
Shrinate, S. (2004), August 29, “Healing the World”, Business
Today, August 29, 67, 68, 70.
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

1. INTRODUCTION
KAIM JOURNAL OF MANAGEMENT AND RESEARCH
VOL.2, No.2, November - April 2010 Pages : 69 - 75
NON- PERFORMING ASSETS IN PUBLIC SECTOR BANKS : AN
EMERGING BOTTLENECK IN KENYA
Surender Banawat*, Andrew Songoro Nyangau** and Richard Nyangosi***
Banking financial institutions are faced with bulging NPAs resulting in lower income and high
provisioning making a dent in profit figures. Also, many financial institutions have collapsed due to
non performing assets. This paper attempts to examine the position of NPAs in Kenyan banks, with
special focus on public sector banks (PSBs) over the earlier six years of the current decade. Data for
the study was collected from annual reports of the Central Banks of Kenya, periodicals, journals and
internet resources. The findings confirm that the level of NPAs has been declining with increasing
trends in provisioning. Also, PSBs’ non-performing loans declined over the period under study from
31.3 percent in 2000 to 26.5 per cent in 2005. Finally, the study concluded that more steps have to
be taken to curb the menace of NPAs in Kenyan banks.
Financial intermediaries especially banks, exert
influence on economic growth. The banking industry
has become the foundation of economic development
and is one industry that impinges on the economy
and affects its performance for better (Batra and
Kapoor, 2008). In recent decades, a large number
of countries have experienced financial distress of
varying degrees of severity, and some have suffered
repeated bouts of distress (Hardy, 1998). Waweru and
Kalani, (2008) believe that in 1980s and early 1990s,
several countries in the developed, developing and
transitional economies experienced several banking
crisis requiring a major overhaul of their banking
system. Kenya has experienced banking problems
since 1986 culminating in major bank failures. For
example, 37 banks failed following the crises of
1986-89, 1993-1994 and 1998, which has seriously
dented public confidence in the deposit system.
Waweru and Karani further quoted Murungu (1998)
who opined that, the crises were mainly attributed to
Non-performing Assets (NPAs). According to Mullei,
(2003) for example, Daima bank was place under
statutory management for failing to meet minimum
core capitalization threshold among, as well as poor
management of loan portfolios.
NPAs are not only non-performing but also makes
the banker and the bank non-performing as it prevents
or delays recycling of funds, derives income from
assets by way of interest and erodes profits by way
of provisions (Awasthi and Singh 2008). Dhanda and
Rani (2008), define non-performing assets to be the
assets, which cease to generate income for the banks
and remain irregular due to non payment of interest
and installments. NPAs can be treated as undesirable
outputs or costs to a loaning bank, which decrease the
bank’s performance. The risk of non-performing assets
mainly arises as the external economic environment
becomes worse off such as economic depressions
(Waweru and Kalani 2008).In Kenya, the problem of
NPAs is not as acute as it appears on the global balance
sheet for most of banking institutions. The NPAs in ten
institutions are historical in nature and arose due to
poor lending practices and external influences on the
board and management of institutions affected.
Table 1 : NPAs Concentration in the Kenya Banking Sector as at 2001(Ksh. Million)
Source: CBK Bank Supervision Annual Report 2000-2001.
Note: Total advances and NPAs are stated net of interests held in suspense.
* Professor, Department of Accounting, J.R.N. Rajasthan Vidyapeeth University, Udaipur.
** Doctoral Fellow, Department of Accounting, J.R.N. Rajasthan Vidyapeeth University, Udaipur.
*** Doctoral Fellow, Faculty of Economics and Business, Guru Nanak Dev University, Amritsar, E-mail:nyangosi2@yahoo.co.in

There are no easy solutions to the problem, but
the idea of Asset Management Company (AMC) has
been floated. For example, in the banking supervision
annual report of Central Bank of Kenya (2001), it
indicated that NPAs were mainly concentrated in ten
institutions mostly public sector banks whose ratio of
NPAs to total loans was 51 percent compared to only
14 percent for the rest of the banking sector. This study
is an attempt to examine the position of NPAs, and
remedies in the Kenyan public sector banks.
2. PREVIOUS CONTRIBUTIONS
Shakunthalamani (2001) highlighted the magnitude
of NPAs in banks, reasons for mounting NPAs, the
impact and the measures adopted for reducing NPAs
in the banking system so far. The study found that
the percentage of NPAs to gross advances had a
downward trend over the years of study (1993 to 1999)
which indicated better management techniques in
banks. Further, legal framework, political interference,
competition and liberalization were identified as
reasons for mounting of NPAs. The study concluded
that recovery efforts had been redoubled and
compromise settlements were agreed upon within
the framework of the guidelines.
Selwyn and Thambi (2001) analyzed the magnitude
of NPAs in Indian commercial banks. They observed
that NPAs of some banks were higher that their capital
and reserves. They further observed that even the
percentage on NPAs to own funds of some of the top
ranking public sector banks were quite high.
Sharma (2004) highlighted the most significant
factors contributing to the problem of NPAs from
the point of view of top bankers from public sector
banks. The study found out that measures required
for management of NPAs which includes formulation
of bankers’ credit appraisal techniques, establishing of
monitoring department among the most important
ones.
Taneja and Singh (2005) attempted to study the
impact of NPAs on the performance of rural regional
banks, factors responsible for the mounting of NPAs,
performance of banks after introduction of prudential
norms and measures to manage NPAs in a rapidly
volatile financial market. The result confirmed that
recovery performance had not been satisfactory and
the position had only improved after introduction of
prudential norms in 1996-97.
Kaur and Pasricha (2008) analyzed trends of NPAs in
private sector banks and recovery of NPAs in India.
The study found that a declining trend in NPAs was
witnessed since the enactment of new legislative
70
measures in2002. Further, the study found out that
the formulation of Asset Reconstruction Company
(ARC), Lok Adalats and Debt Recovery Tribunals (DRT)
helped in disposal of debt-ridden assets in a very
smooth manner.
Awasthi and Singh (2008) examined the position
of NPAs in Indian public sector banks during recent
years and found that at the end of March 2007, net
NPAs in relation to net advances for a majority of
public sector banks were below the level of 2 per cent.
Further, the study pointed out that lok adalats, debt
recovery tribunals (DRT) and scheme of corporate
debt restructuring have provided special thrust to
banks to contain their NPAs. Also, securitization and
reconstruction of financial assets and enforcement
of security interest (SARFAESI) Act has been able to
reduce the NPAs with full vigor.
Dhanda and Rani (2009) examined the position of NPAs
in public sector banks in India, causes and remedial
measures. The findings confirmed that NPAs for the
priority sector increased while that of non-priority
sector reduced. They also found that misutilization
of loan, willful default; crop failure and general slow
down of the economy were important causes.
Waweru and Kalani (2009) in their Kenyan based study
investigated the causes of NPAs, actions that bank
managers had taken to mitigate that problem and level
of success of such actions. It was discovered that lack
of an aggressive debt collection policy was perceived
as the main bank specific factor, contributing to the
non-performing debt problem in Kenya.
2.1 OBJECTIVES
• To study the position of Non- performing assets
in Kenya banks
• To study the trends of Non-performing assets in
Kenyan Public sector banks
2.2 ORGANIZATION OF THE STUDY
The entire paper has been divided into five sections
including the present section. The next section was
dedicated to research methodology followed while
conducting this research. Section four presented the
empirical findings of the study in detail, while the last
section brought out concluding remarks and policy
implication of the study.
3. DATABASE AND RESEARCH
METHODOLOGY
The post-reform period of six years has been taken for
analysis of non-performing assets in Kenyan public
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

sector banks. The years selected for analysis are 2000-
2005. The universe of the study covers all the three
public sector banks in Kenya which includes National
Bank of Kenya (NBK), Consolidated Bank of Kenya (CB)
and Development Bank of Kenya (DBK). This study is
primarily based on secondary data which has been
collected from bank supervision annual reports of
central bank of Kenya, monthly economic reviews,
central bank of Kenya annual reports, statistical bulletin
of central bank of Kenya, periodicals, magazines and
books. To come up with the expected findings, mean,
standard deviation, co-efficient of variation (C.V),
compound growth rate, ratio analysis were used with
the help of SPSS version 12.0
4. FINDINGS AND DISCUSSION
4.1 Position of NPAs in Kenyan Banks
The banking industry Table had 2: 43 Distressed commercial assets banks, in Kenyan Banking sector (in Ksh. Millions)
71
Source: CBK, Bank Supervision Annual Report, Various years
Exchange rate in US$ is calculated on the prevailing rate as in December in the concerned year
including 3 state owned banks, 28 local commercial
banks and 12 multinational banks in December 2008.
Table 2 indicates that total advances contracted by
10.23 percent in 2001 from the previous year Further,
it is seen that there was a declining trend of NPAs in
the Kenyan banking industry from Khs.90240 (US$
1146.63) millions in 2000 to Khs.68629 (US$ 906.47)
millions in 2005.The contraction of NPAs in 2001 was
attributed mainly to the exit of trust Bank and partially
to recoveries, written off and written down of some
debts in a number of institutions.
Figure1: Positions of Non-Performing Assets in Kenyan Banking Sector
Source: CBK Bank Supervision Annual Report, Various years
Notes: NPAs/TLs means non-performing assets as percentage of total loans, Ps/NPAs means provisions as a percentage of non-performing
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

Recoveries were made either through repayment
or foreclosure of collateral, pledge to secure debts.
The table further shows that in the entire period, the
compound growth rate was negative (-4.17 percent).
Further, trends in total advances have been expanding
indicating a CGR of 7.91 for the entire period under
study. However, in 2001 the industry recorded Khs
244976 (US$ 3112.78) which was the lowest in the
entire period of study.
This was attributed to the harsh economic
recessions which lead to closure or scaling down of
operations by manufacturing firms. Figure 1 indicated
that provisioning as a percentage of nonperforming
assets expanded from 49 percent in 2000 to 57
percent in 2005, however, in 2001, provisioning was
less than the previous year by 10 percent which can
be attributed partially to the decline in NPAs, total
loans and NPAs written off against provisions held. For
the entire period, compound growth rate of specific
Source: CBK, Bank Supervision Annual Report, Various years
F-Value:, 250.6 df, 2, 15, P

4.4. Non-Performing Assets in Public Sector Banks
The Kenyan banking industry has been dogging a high
portfolio of bad debts which stood at 33.1 percent
of the total loans in 2001; however, there has been a
decreasing trend which shows a CGR of negative 4.17
percent for the entire period of study. Table 5 indicates
the total non-performing assets in PSBs. The share of
Source: CBK, Bank Supervision Annual Report, Various years.
F-Value: 95.52, df, 2, 15, P

High portfolio of NPAs results in heavy provisioning
which further erodes or reduces profits of the entire
banking industry. Table 6 shows that out of the total
specific provisions in Kenyan commercial banks, 46
CBK, Bank Supervision Annual Report, Various years.
F-Value 50.16, df, 2, 15, P

will reduce the mounting of distressed assets.
REFERENCES
Awasthi, B.D. and Singh, R. (2008), “Non-Performing Assets in
Public Sector Banks: A Study” The Economic Challenger,
No.10, Issue 39, April-June, pp.67-72.
Batra, N. K, Kapoor, N. (2008), “Profitability Analysis of New
Private Sector Banks in India” PIMT Journal of Research,
Vol.1, No.1, March- August, pp.35-40.
(CBK) Central Bank of Kenya Bank Annual Report from 2000
to 2006
Dhanda, N and Rani, S (2009), “An Empirical Study on Position,
Causes and Remedial Measures for Non-Performing Assets
in Public Sector Banks”, KAIM Journal of Management and
Research, Vol.1, No.2, November-April, pp.33-40.
Hardy, D. (1998), “Are Banking Crises Predictable?” Finance and
Development, IMF Quarterly Magazine.
Janadharan, G.N. (2006), “NPAs Management Challenges Before
Banking Sector” The Management Accountant, Vol. 41,
No.5 May, pp.355-360.
Monteiro, M.N.J. and Ananthan, B.R. (2007), “NPAs in Public
Sector Banks: Causes and Cures-Analysis of Managers’
Perception”, The Indian Journal of Commerce, Vol.60,
No.2 June.
Selwyn, K. and Thambi, R. (2001), “An Analysis of Non-Performing
Assts (NPAs) with Banks”, in Gurusamy, S. (ed.) Banking in
the New Millennium, Issues, Challenges and Strategies,
75
Kanishika Publishers, New Delhi, pp.240-246.
Shakunthalamani, P. (2001), “Non-Performing Assets in Banks:
Impact and Management” in (ed) Gurusamy, S. Banking
in the New Millennium, Issues, Challenges and Strategies
Kanishika Publishers, New Delhi, pp.200-213.
Sharma, M. (2004), “The Problem of Non Performing Assets in
Public Sector Banks: A Management’s Perspective” Apeejay
Journal of Management, Vol.1 No.1 pp.43-54.
Taneja, K.P., and Singh, P.P. (2005), “Non-Performing Assets in
Indian Banks and It’s Management: A Case of Regional
Rural Banks”, Gyan Journal of Management and Technology,
Vol.1, issue 1, pp. 9-24.
Tiwari, B. (2004), “Indian Banking: Some Issues And Suggestions
For Improvement” Apeejay Journal For Strategic Decision
Makers, Vol.5, No.2, July-December, pp.10-14
Waweru, N. M. and Kalani, V. M. (2009), “Commercial Banking
Crises In Kenya: Causes And Remedies”, African Journal Of
Accounting, Economics, Finance And Banking Research,
Vol.4, No.4, pp.12-23
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

INTRODUCTION
DETERMINANTS OF CAPITAL STRUCTURE IN
SMALL SCALE INDUSTRIES
Sushma Rani Verma*
KAIM JOURNAL OF MANAGEMENT AND RESEARCH
VOL.2, No.2, November - April 2010 Pages : 76 - 82
Small Scale Industries (SSIs) have a significant role to play in socio-economic upliftment of developing
countries like India. The SSI occupies a unique position in the Indian Economy for its contribution
towards value addition, employment generation, and the expansion of entrepreneurial base and
also for the diversification of the industrial sector. Finance being the lifeblood of every business and
industry, a sound financial structure is a pre-requisite for the development of SSI. The major objective
of this research paper is to analyse the financing pattern of small-scale industries in Haryana. Moreover,
an attempt has also been made to explore the determinants of capital structure (leverage). Percentage,
correlation and regression methods have been used for the purpose. Results of percentage method
show that long term sources are being used more and more with the passage of time. Secured loans
from banks and other financial institutions form the largest part of long term sources of finance. Three
measures of leverage have been used in the analysis. Correlation shows that total leverage is having
a significant relationship with profitability and cost of borrowing. Long term leverage found to be
correlated with size and liquidity. Short term leverage reveals significant relation with size and liquidity.
Seven independent variables are used in regression analysis. Results show that profitability and cost
of borrowing are the determinants of total leverage; tangibility and liquidity are the determinants
of long term leverage and size, tangibility and liquidity emerge as the determinants of short term
leverage. The results support the application of Pecking Order Theory in small sector.
Small-scale industries (SSIs) play a significant role in
socio-economic upliftment of developing countries.
This sector has emerged as a powerful instrument for
bringing about a rapid and decentralized growth in a
country that faces adverse features such as having a
large army of unemployed labor and scarcity of capital
resources. It is considered as an important means for
checking concentration of economic power to bring
about economic dispersal and equitable distribution of
national income. Finance being the lifeblood of every
business and industry, a sound financial structure is
a pre-requisite for the planned development of SSIs.
The main objective of this research paper is to make
a comprehensive study of the financing pattern of
the small-scale sector over a period of five years
(2003-04 to 2006-08). The paper attempts to identify
the independent variables, which are significantly
affecting the financing pattern (capital structure) of
small scale industries.
REVIEW OF LITERATURE
A few research studies are available on the financing
pattern and its determinants in small scale units in
India. A review of these studies is presented here
under:
Prasain et al. (2006) investigated the financing pattern
of small scale industries and reported that for financing
followed by government agencies and commercial
banks are important.
Charles Ou’s (1998) survey is the most comprehensive
database on small firms’ use of credit and financial
services. Over 80 percent of the small businesses
surveyed used some kind of credit and had outstanding
debt on their books. Fifty-five percent of small firms
had some kind of traditional loan, while 71 percent
obtained credit from non-traditional sources, mainly
owners’ loans and credit cards. Owners’ loans were
next in popularity (14.2 percent of small firms used
them), followed by finance companies (13.3 percent).
The percentage of small firms using credit normally
increases with firm size and employment. The
percentage of firms using any credit increased from
70 percent to 99.6 percent as the employment size
of the firms increased from 0 to over 100. The use
of owners’ loans and personal credit cards leveled
off or diminished as firm size increased. The positive
relationship between firm size and the percentage of
credit from depository institutions seems to reflect the
availability of credit to larger small firms. Hence, credit
becomes more available as firm size increases.
Mira (2001) analyzed the determinants of debt policy
decisions in small firms. The study shows how the
* Lecturer, N.C. College of Engineering, Department of Management Studies (Israna), Panipat. E-mail: sushmaharikot@gmail.com

existing capital structure theories can be used to
explain the financing decisions in the small business
sector. The three main capital structure theories
considered are Fiscal Theory, Trade off Theory and
Pecking Order Theory. In Fiscal Theory, they find
leverage to be significantly negatively correlated with
alternative tax shields like depreciation. Taxes are
negatively related to debt. On the other hand, Trade
– Off Theory, allows that size and asset structure are
both positively correlated with firm debt level. SMEs
with more growth options seem to employ more debt,
although this relationship becomes negative with
short term debt. Finally, Pecking Order Theory seems
to explain relatively well debt policy in SMEs, although
the underlying justification of this theory in this case
may resemble manager’s propensity to not losing part
of their control in the firm. Put another way, SMEs rely
their financing on internal resources instead of turning
to outside the firm.
Bhaird and Lucey (2007) presented an empirical
examination of firm characteristic determinants
of the capital structure of a sample of 299 Irish
small and medium sized firms. They identified 6
independent variables for their study i.e. age, size, R
& D, ownership and internal collateral security. The
regression coefficients were statistically significant
for all six dependent variables. Regression results
provide support for a number of the propositions of
pecking order and agency theories viewed through
a life cycle perspective. The results of the study
emphasize (1) The increased use of internal equity
as the firm develops over time, (2) the importance of
the provision of collateral in alleviating information
asymmetries and securing debt finance, and (3) the
significant contribution of the firm owner through the
contribution of equity and pledging personal assets as
collateral for business loans. Results indicate that the
use of long term debt financing is positively related
with the size of the firm, and negatively related with
firm age. Analysis of the variation in the direction and
magnitude of regression coefficients across sectors
suggests that the influence of firm characteristic
determinants of age, size, ownership structure,
intangible activity and the provision of collateral are
similar across sectors.
Narender and Sharma (2006) found that growth is
not a major factor in the determination of the capital
structure of the public enterprises (PEs), tangibility
of assets plays a significant role in determining the
leverage of the PEs, the results for NDTS and tax, lead
us to infer that the PEs are not utilizing debt to pay less
tax; internal sources form a major chunk of resources
for the public enterprises in expansion and financing,
77
these units are mobilizing long-term resources for
meeting short-term requirements, and these units
are following pecking order theory in the process of
mobilizing funds.
Daskalakis and Psillaki (2003) concluded that even
though the small firms are using different types of debt
financing, there seems to be a positive relationship
between size and growth in both countries (Greek
and French). Larger firms and companies with high
growth rates seem to rely more on debt than smaller
and low-growth firms. Furthermore, firms’ asset
structure and profitability seem to be negatively
related with leverage. The negative relationship
between profitability and leverage implies that firms
may finance themselves following the pecking order
pattern of financing. Thus they found that although
the Pecking order theory has originally emerged to
model the financial behaviour of large and publicly
traded companies, the hypotheses inherent to this
theory can also be shared by SMEs.
OBJECTIVES OF THE STUDY
The present study is carried out with the following two
broad objectives:-
1. To know the financing pattern of small scale
industries in Haryana in the recent 5 years.
2. To identify various independent factors which
are having influence on the capital structure decision
of small firms.
RESEARCH METHODOLOGY
Scope of the study
In terms of geographical area, the scope of the study
was limited to the small scale enterprises located
in Haryana State. The study period covers five years
ranging from 2003-04 to 2007-08. The data covers
six industries i.e. Export and Import, Steel and Metal,
Paper and Printing, Polymers, Textiles and Pharma.
Sources of data
For the study, secondary sources of data have been
used. The major sources of secondary data include
the official records of Haryana Financial Corporation
(HFC) and Haryana State Industrial Development
Corporation (HSIDC). Also the SSIs were contacted
personally to collect the secondary data from their
books of accounts.
Sample size and design
A sample of 50 small scale units was taken from the list
of borrowers of HFC and HSIDC for the purpose. Simple
random sampling technique has been used for the
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

selection of sample. The sample covers as many as 13
districts of Haryana namely Hisar, Sonipat, Panchkula,
Chandigarh, Gurgaon, Faridabad, Rohtak, Bhiwani,
Jhajjhar, Jind, Ambala, Karnal and Fatehabad.
Statistical Analysis
Capital structure is defined in different ways by
different authors. According to Rajan and Zingales
(1995), the definition of leverage depends on the
objective of the analysis. Accordingly, there exist
different definitions of leverage such as debt equity
ratio, debt to capitalization, total liabilities to total
assets, and debt to total assets. The present study
follows this procedure. Book values are used for the
measurement of debt and assets.
Dependent Variables Used
The dependent variables or measure of leverage used
in this study is debt assets ratio. Total debt includes
both long term as well as short term debt. Debt assets
ratio has been calculated by taking ratio of total debt
to total assets as suggested by available literature
(Atul Sheel, 1994; Rajan and Zingales, 1995; Kakani,
1999; Booth et al. , 2001; Narender and Sharma, 2006).
Total debt shows the external funds of the firm. Total
assets have been reached by taking total of fixed assets
(less depreciation) and current assets of the sample
firms. The data is presented in the form of tables.
Besides simple statistical tools such as percentages,
averages, standard deviation, correlations, more
advanced statistical tools like multiple regression
analysis has been applied to strengthen the analysis.
Excel and SPSS had been used to process and analyze
the data.
Independent Variables Used
Model Specification for Regression: A linear multiple
78
regression model has been used to measure the
combined effects of independent variables on the
dependent variable, (i.e. proportion of Debt to Total
Assets). Previous empirical literature has been reviewed
to specify the economic model on the determinants
of capital structure. Assuming a linear relationship
between capital structure and its determinants, the
model can be specified as :
LEVERAGE = f (profitability, size, tangibility, growth,,
age, liquidity, cost of borrowing)…………..(1)
The econometric model of equation 1 is specified
as follows:
LEVERAGE = α + β 1 ROA +β 2 SIZE + β 3 TANG + β 4 GROW +
β 5 AGE + β 6 LIQ + β 7 COB + error
Where, LEVERAGE is the dependent variable,
ROA - Return on Assets (profitability) , SIZE – Size
of the firm, TANG – Tangibility of Assets, GROW –
Growth Rate, AGE – Age since Incorporation, LIQ –
Liquidity Ratio, COB – Cost of Borrowing , α - is the
intercept term, and β 1, β 2, β 3, β 4, β 5, β 6, β 7 are regression
coefficients.
Table 1 presents a summary of all the independent
variables considered in this study. Profitability, size ,
tangibility, growth, age, liquidity and cost of borrowing
are seven variables in the analysis. Expected signs are
based on some theories and empirical research work
done in the field of capital structure.
Table 1 : Determinants of Capital Structure – What Theories Say?
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

ANALYSIS OF DATA
For the analysis of data two aspects have been taken.
The first is to know the overall financing pattern of
sample firms and the second to fix the determinants
of financing pattern/capital structure. Percentage
method has been applied to know the pattern of
finance. In addition to this correlation and regression
has been used to assess the determinants.
(I) Overall Financing Pattern of SSIs
In its simplest form financing pattern of any concern
means what had been the percentage share of
different sources of finance in the total capitalization.
Source: Calculated from Secondary data from various sources
The first part, which shows the structural changes
in financing pattern of long-term sources, depicts
a positive trend. Long term sources found to be a
dominant source of financing. On an average, more
than 53 per cent of total finance had been collected by
using long-term funds. Moreover equity and secured
loans were found to be more popular then unsecured
loan, as they constitute 80 per cent of total long-term
finance. Use of unsecured loans had been almost
stable over the period of study.
The second part of table gives the results of shortterm
sources of finance and their percentage share
79
Table 2: Financing Pattern in SSI Sector
It also reveals what had been the trend in terms of
percentage share from year to year. Both long term
and short-term sources had been considered for the
purpose. The results of financing pattern over the
period of study are presented in Table 2. First part
of the table shows the composition of long-term
sources of finance whereas the second part shows the
composition of short-term liabilities. Percentage share
of each source out of total financial structure has been
calculated which is presented in parentheses. The data
of 50 firms had been pooled together for each of the
five years time period.
in total financial structure. It can be observed from
the table that the percentage share of short-term
sources fell down from a percentage share of 56 per
cent in 2003-04 to a percentage share of 43 per cent
in 2006-07. There are five components of short term
liabilities but only two of the components i.e. trade
credit and payables account for more than 80 per cent
share in total short term liabilities. The rest of three
components (Short term borrowing, Provisions and
Other current liabilities) were found to be more or less
stagnant throughout the period of study. The above
table provides very useful insights into the financing
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

pattern of small-scale industries. Secured loans from
banks play a significant role as a major source of
external finance. State and central government are
playing vital role in assisting SSIs through promotional
schemes. In addition to this many development banks
are making efforts for the development of small
industries at the state level (SFCs and SIDCs).
(II) Determinants of Capital Structure in SSIs
Before applying regression analysis on data sets,
coefficient of correlation has been calculated to know
the strength of relation between various dependent
and independent variables. The results of correlation
are presented in Table 3. Zero order correlation matrix
for sample firms had been drawn between dependent
80
variable and seven independent variables (return on
assets, size, tangibility, growth, , age, liquidity and cost
of borrowing). As it can be observed from the table
leverage was found to be significantly correlated to
profitability and cost of borrowing at 1% and 5%
level of significance respectively. The relationship
was found to be negative with both the independent
variables. The negative sign indicates that if more of
debt is used with total assets, profitability and cost of
borrowings may come. In addition to this, tangibility
had a significant negative correlation with size of the
firms. Liquidity had a significant negative relationship
with tangibility.
Table 3: Correlations between various Dependent and Independent Variables
** Correlation is significant at 0.01 level (2-tailed).
* Correlation is significant at 0.05 level (2-tailed).
Multiple linear regression analysis has been applied
to determine the extent of influence of independent
variables on dependent variables. The results of
data set have been reported in Tables 4 and 5. Table
4 provides a summary of model and Table 5 shows
values of different parameters of regression analysis
such as beta, t-value, standard error and p-value. Value
of Durbin-Watson test has also been calculated to
show the reliability of data set. A value near 2 gives a
positive indication of the data set. It reveals whether it
is suitable to apply regression analysis or not. In all the
three models, it was found suitable to apply regression
analysis. There are different ways that the regression
analysis uses. “Enter” method has been applied for this
analysis which is very suitable if the number of cases
is low (less than 10 times the number of independent
variables in study) as suggested by Brace et al.(2003)
REGRESSION ANALYSIS OF DATA
It can be observed from Table 4 that value of R is found
to be .839. R is a measure of the correlation between
the observed value and the predicted value of the
dependent variable. R square is the square of this
measure of correlation and indicates the proportion
of the variance in the criterion (dependent) variable
which is accounted for by our model. Value of .704
indicates that 70.4 per cent of the variation in total
leverage is explained by all the independent variables.
An adjusted R square even gives more accurate answer
to the question of suitability of model. Adjusted R
square value is calculated which takes into account
the number of variables in the model and the number
of observations our model is based on. This gives the
most useful measure of the success of our model.
Adjusted R 2 showed only 59.5 per cent variation in
total leverage.
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

81
Table 4 : Model Summary
Predictors: (Constant), COST, TANG, GROWTH, AGE, PROF, SIZE, LIQ Dependent Variable: DV
The value of standard error of the estimate shows
the standard deviation in criterion variable which is
being predicted with the help of regression model. F
change shows the analysis of variance with a significant
or insignificant value of F change in the very next
sub column. A value of .001 predicts that the model
emerged to be significant at 1% level of significance.
Alternatively stated various independent variables are
found to affect the leverage of firms significantly. Value
of F change is only a rough estimate of the success of
model but the extent of influence can be interpreted
with the help of Table 5.
This table shows results of coefficients of various
variables, which are being considered for the regression
Note: Dependent Variable: DV
The results of beta are used with value of t and
p value which show whether the value of beta is
significant of not. In practice, standardized coefficients
are used to interpret the results (not unstandardized
ones). Now it can be seen from Table 5 that two of
the independent variables are found to be significant
determinants of capital structure (total leverage). The
results of regression analysis determine that return on
assets and cost of borrowing are significant at 1% and
5% level of significance. Both of these were found to be
influencing in a negative direction. As it can be noted
that these results are exactly in line to results of zero
Table 5: Coefficients
model. Very important value in this table is the value
of beta. The beta value is a measure of how strongly
each independent (predictor) variable influences the
dependent variable. For example a beta value of 2
indicates that a change of one standard deviation in
the independent variable will result in a change of 2
standard deviations in the dependent variable. Thus
the higher the beta value the greater the impact of the
independent variable on the dependent variable.
order correlation as discussed earlier. But these results
give more insight in finding the extent to which these
independent variables are influencing the dependent
one (-.618 and -.358).
RESULTS AND CONCLUSION
From above tables it is crystle clear that capital
structure models in small scale industries do have a
good predictive power. By combining the results of
three models, five variables emerge as significant
determinants of capital structure. These variables are
profitability, size of the firm, tangibility, liquidity of the
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

concern and cost of borrowings. Here the determinants
which are found significant in analysis are discussed
on the basis of results of correlation and regression
analysis taken together. Results of percentage share
have been taken care of while giving interpretation.
Profitability
According to the static Trade-off theory, firms with
high profits employ higher amount of debt to gain
tax benefits. On the contrary, the pecking order
hypothesis postulates negative association between
profitability and leverage because firms’ prefer to
equity. The relationship between profitability and
leverage is negative and statistically significant in case
of total leverage. It can be concluded that profitability
of firms exert a negative influence on firms’ borrowing
decisions in small scale sector. The negative sign of
profitability is consistent with the pecking order theory
that predicts a preference for internal finance rather
than external finance. This also confirms that the tax
advantage of debt financing does not have much
relevance in small scale sector.
Cost of Borrowing
Other things being equal, it might be expected that
a company with huge amount of borrowings will be
having a lower cost of borrowing. Results of analysis
also advocate the same. Both correlation as well as
regression analysis revealed a negative relationship
of cost of borrowing with leverage. In addition to this
COB emerged as a significant determinant of leverage.
Regression Equation for leverage is summarized as
under:
Total Leverage = 1.094 - .618 ROA - .358 COB
Initially small firms try to use more of owner’s
funds due to lack of availability of external debt.
External debt may cost very high at the starting up
phase. But as the firm gains some experience and
expertise in the field it becomes easy to get external
debt on easy terms (personal interaction with owners
of SSEs). This fact leads to lower cost of borrowing in
the growth stage of small firms.
REFERENCES
Bhaird, Ciarán mac and Brian Lucey (2007), Determinants
82
of the Capital Structure of SMEs: A Seemingly Unrelated
Regression Approach, Working Paper
Brace, N. Kemp, R and Snelgar, R (2003), Multiple Regression,
SPSS for Psychologists, Palgrave MacMillan Publishers,
New York.
Charles, OU (1998), Survey of Small Business Finance, office of
Economic Research, US Small Business Administration.
Daskalakis, N and Psillaki, M “The Determinants of Capital
Structure of the SMEs: Evidence from the Greek and the
French firms” available at http://www.univ-orleans.fr/deg/
GDRecomofi/Activ/psillaki_strasbg05.pdf
Mira, Francisco Sogorb (2001), “On capital structure in the Small
and Medium Enterprises: the Spanish case”, University
Cardenal Herrera-CEU - Department of Business and
Economics, July 2001 available at http://papers.ssrn.com/
sol3/papers.cfm?abstract_id=277090
Myers, S. C. and. Majluf, N. S. (1984), “Corporate Financing and
Investment Decisions WhenFirms Have Information That
Investors Do Not Have”, Journal of Financial Economics,
187-221.
Narender, V. and Sharma, A. (2006), “Determinants of Capital
Structure in Public Enterprises”, The ICFAI Journal of
Applied Finance, Vol. 12, No. 7, pp. 14-28.
Pal, P. (2001), “Stock Market Development and its Impact on
the Financing Pattern of the Indian Corporate Sector, NSE
Research Initiative”, Working Paper No. 004.
Prasain, G. P. Singh, E N and Singh, N. S. (2006), “Financing
Pattern of Small Scale Industries”, The Indian Journal of
Commerce, Vol. 59, No.-4, October-December, pp 90-97.
Rajan, R. and Zingales, L. (1995), “What Do We Know about
Capital Structure? Some Evidence from International
Data”, Journal of Finance, Vol. L, No5, December, pp.
1421-1460.
Sahu, P K, Gopal, K P and Kishore, C R (1997), Analysis of Debt
Financing in India-A Study of Corporate Sector, Shipra
Publications, New Delhi.
Sheel, A (1994), “Determinants of Capital Structure Choice and
Empirics on Leverage Behavior: A Comparative Analysis
of Hotel and Manufacturing Firms”, Hospitality Research
Journal, Vol. 17, No. 3, pp. 4-15.
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

INTRODUCTION
INCLUSIVE GROWTH - A CASE OF RURAL SECTOR
The goal of development is to improve human wellbeing
in a sustainable way, with particular emphasis
on the less well-off. This view point has been strongly
supported and forwarded by noble laureate Amartya
Sen, who emphasized that development is about
much more than increasing material well-being, it
also includes expansions in capabilities and in both
positive and negative freedoms. A more consistent
attention must be given to assessing development
progress not simply as a measure of an aggregate
of economic activity but as an assessment of the
inclusiveness of economic growth, with emphasis
not only on the distribution of gains but also on the
security, vulnerability, empowerment, and sense of full
participation that people may enjoy in social civic life
i.e. it means sustaining rapid growth and making the
process of economic growth more inclusive – across
sectors, across regions, and bringing the benefits
of higher incomes and living standards to more
people.
The subject of inclusive growth came into the
lime light more prominently when the Parliamentary
election campaign of 2004, with its ‘India Shining’ vs.
‘Aam Aadmi’ confrontation, highlighted an apparently
wide spread perception that the benefits of economic
growth were simply passing too many people by. This
orientation is most visibly manifested in the theme of
the Eleventh Five-Year Plan, which runs from 2007 to
2012. The theme is ‘towards faster and more inclusive
growth’, which clearly reflects the need to find a
sustainable balance between growth and inclusion.
DISPARITY IN URBAN AND RURAL DEVELOPMENT
As a decade in the life of a nation, the 1990s could
attract a variety of descriptions. For one thing, it
was the decade of liberalization, when India, after
a seeming eternity of hesitation, finally decided to
engage with the global economy. For another, it was
when the Indian middle class, thwarted in its ambitions
for generations, carried through its revolution of rising
aspirations. With all this, the 1990s could also be
P.K. Yadav*, Sanjay Mishra** and R.P. Singh***
KAIM JOURNAL OF MANAGEMENT AND RESEARCH
VOL.2, No.2, November - April 2010 Pages : 83 - 85
remembered as the decade when rural sector started
falling off the radar screen.
The policies followed by India led to accelerations
in economic growth that propelled it onto the global
stage as an emerging economic superpower. After
a slowing from 2000-2003 GDP growth resumed its
rapid clip and witnessed a growth rate of around 8
per cent till the recent global slowdown. The signs
of the economic boom in the modern sector are
everywhere. India adds thousands of new cell phone
subscribers every day, automobile and motorbike
ownership is taking off, and cities are vibrant. The
reforms of the early 1990s that moved India towards
a more competitive economy – both domestically and
globally – continued the rapid growth that is allowing
India to emerge as a global superpower. But this
economic progress is worrisome as the gaps between
the best and worst are growing, in general, and urban
and rural are growing, in particular.
India is an emerging global super-power, joining
the elite club of acknowledged nuclear powers; and
India also has child malnutrition rates among the
highest in the world in which rural India’s contribution
is more dominant. Parts of India are indeed shining,
but, as the election results of 2004 revealed, the greater
intensity of the light heightens the contrast with the
shadows, emerging from mainly from rural India where
the shine has not reached. The headcount poverty
rate in rural Orissa (43 per cent) and rural Bihar (41 per
cent) is higher than similarly measured poverty rates
of African countries like Malawi or Ghana.
Parts of urban India are competing successfully
not just in low-skill services like call centers but
also in high skill services like consulting, software
engineering and biomedical research. Indian firms are
pushing the cutting edge of technology and business
in many fields. But over half of the labor force works
in agriculture, often in conditions and with results
that were surpassed centuries ago and agriculture is
growing slowly.
The top students from the Indian Institutes of
Technology are not just globally competitive; in
many ways they set the global standard. The recent
graduates of Indian Institutes of Management and
* Professor and Chairman, Department of Business Administration, Faculty of Management, MJP Rohilkhand University, Bareilly.
** Faculty, Department of Business Administration, Faculty of Management, MJP Rohilkhand University, Bareilly.
*** Faculty of Engineering and Technology, MJP Rohilkhand University, Bareilly.

the new private Indian School of Business are so
in demand that the very top starting salaries are
approaching 1 crore (approx $225,000). Yet, the recent
assessment of learning achievement in rural India, the
first Annual Status of Education Report (ASER) found
that in the worst five states more than half of children
in class V could not read at the levels expected of class
II children and more than two-thirds could not do
simple division.
While there is increasing “medical tourism”, where
people travel to India for high-quality, low-cost
medical treatments – the typical Primary Health Center
(PHC) doctor in Delhi is less competent than doctors in
Tanzania, what to talk about a doctor working in rural
India. A detailed survey of the knowledge of medical
practitioners for treating five common conditions in
Delhi found that the typical quality doctor in a public
primary health center has a more than 50-50 chance of
recommending a harmful treatment. In these facilities
medical practice has yet to reach the “do no harm”
standard. Examples of the best and worst cut across
sector after sector. Delhi’s new metro is a 21 st century
marvel while rural roads in many states are in poor
repair and often impassable.
These gaps are also playing out economically.
Interestingly, in proportionate terms, the most rapid
growth of wages in the 1990s and recent ones were at
the top end of the wage distribution. The percentage
growth of wages has been very fast at the top but
has been quite slow in the middle. This implies that
absolute wage gains have been concentrated at the
top – while the daily wage has increased by about 5
rupees per day (in 1993/94 rupees) for the bottom
decile
FOCUS AREAS
The main challenge facing the country today is not
to raise growth from 8 per cent to 10 per cent, rather
the primary challenge is to sustain rapid growth and
extend this growth and its benefits to more rural India.
Some of the areas that could be focused for achieving
the same are:
• The most worrying feature of the recent growth
performance has been the performance of
agriculture. Average agricultural growth over
the past three years has been 1.3 per cent –
against a Tenth Plan target of 4 per cent per year.
Agricultural growth appears to be decelerating:
from 3.2 per cent in 1980-92, to 2.4 per cent in
1992-2003, and to 1.3 per cent over the past
few years. As two-third of India’s people depend
on rural employment for their main source of
income, this is directly affecting many households.
84
The deceleration seems to be general across all
crops and appears to reflect a broadly based
deceleration in productivity growth (GOI Planning
Commission 2005). As one approaches the issue
of how to address the lagging sector (agriculture)
and the lagging regions (even within prosperous
states) there are four basic strategic directions:
• Intensification: Increasing the output of existing
activities
• Diversification: Shifting into higher value added
crops or products.
• Non-farm linkages: Fostering linkages between
farm and non-farm value addition.
• Exit: Shift into non-agricultural activities.
Improving the efficiency of financial intermediation
and ensuring broader access to financial services is a
critical accelerator for equalizing growth. The World
Bank (2004) study indicates that over 60 per cent of
India’s rural poor do not have a bank account, and
87 per cent have no access to credit from a formal
source. Informal financiers, who charge exorbitant
rates of interest, remain a strong presence in rural
India. The crisis of indebtedness in agriculture is
acute. Two surveys conducted by the NSSO in 2003
have shown that of the 89 million farm households
in the country, 43 million are indebted to some or the
other degree. Indebtedness is extremely high in states
with well0developed farm practices, such as Andhra
Pradesh, Punjab, Maharashtra and Tamil Nadu, as also
in Kerala with its large plantation sector. Significantly,
over 42 per cent of the total debt of the agricultural
sector was owed to non-institutional sources such as
the village moneylender or trader. This represents a
significant backward movement for the agriculture
sector, which was dependent to a relatively minor
degree of 30 per cent on non-institutional credit
sources in the early 1990s. If the financial sector is to
contribute more fully to inclusive economic growth,
it must reach out to more people. Indeed, there is a
growing consensus, based on theoretical and empirical
work, that better access to finance, if embedded with
other reforms that empower the poor to participate
in markets on fair terms, can be an extraordinarily
effective tool for promoting economic growth and
poverty reduction.
A better rural infrastructure (including access to
power, roads, and telecommunications) is critical to
rural economic transformation. Better access to roads
can play a dramatic role in transforming the rural
landscape by integrating the rural population into the
formal economy. But more than 50 percent of rural
habitations are not connected by road in the states of
Bihar, Jharkhand, Madhya Pradesh, Orissa, Rajasthan,
and West Bengal, and in Chhattisgarh, for instance,
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

some 82 percent of rural areas remain unconnected
by road. Investing in road infrastructure is a critical
priority in these states. Access to power can also
have a transformative impact on the rural economy.
Among the major Indian states, the challenge of rural
electrification is the greatest in Uttar Pradesh, which
reports the lowest proportion of electrified villages
(under 60 percent). Access to a phone line can help
link rural producers with markets, raise incomes, and
change lives. Again, the lagging states, particularly
Bihar, Chhattisgarh, Jharkhand, and Uttar Pradesh,
have much catching-up to do on this front.
Of course, even with the best of access to
markets and opportunities there are needs for the
government to engage in social protection to assist
the poorest and help in coping with the risks and
vulnerabilities that citizens face. Well-designed social
protection systems can promote not only equity but
also dynamic efficiency by mitigating market failures
and enhancing opportunities for the poor. India has a
long tradition of social protection. However, its social
protection system has only just begun to adjust to
developments in poverty and vulnerability in recent
decades. While it spends a significant amount on
social protection, this remains largely focused on
social assistance and formal sector social insurance
programs, with very limited efforts at insurance-type
interventions for the unorganized sector. A strategy
is called for which relies on a more balanced mix of
efficient and accountable social assistance programs,
expanded contributory systems where feasible (with
provision for non-contributory programs for certain
groups), and programs which perform an insurancelike
function such as workfare. The rebalancing of
the social protection would also result over time in
greater reliance on cash rather than in-kind benefits
over time.
CONCLUSION
In 1991 India faced an incipient macroeconomic crisis
and could have easily succumbed to policy paralysis
that would end the growth of the 1980s. But bold
85
action turned challenge into an opportunity and laid
the foundations for the next 15 years of sustained
growth and beneficial globalization. The actions taken
in the early 1990s were simultaneously visionary—
informed by a clear long-run goal—and pragmatic—
taking specific concrete incremental steps to make
that vision a reality. We believe that there is a window
of opportunity to address both service delivery and
inclusive growth with similarly bold action—but that
the time for such action will never be better than now.
The government of India has already introduced some
very good schemes like: Bharat Nirman to address rural
infrastructure, the National Rural Health Mission, the
Sarva Shiksha Abhiyan to address primary education,
and the National Rural Employment Guarantee Act
to address rural employment and poverty. The result
of the success these will depend upon their effective
implementation and which in turn will decide the
future of the nation.
REFERENCES
http://www.rediff.com/money/2007/dec 31guest.html
http://www.economywatch.com/economy-articles/inclusivegrowth-india-china.html
http://www.boloji.com/opinion/0515.htm
http://knowledge.wharton.upenn.edu/india/article.
cfm?articleid=4233
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

INTRODUCTION
CUSTOMER SATISFACTION AND BANCASSURANCE :
A COMPARATIVE STUDY OF PUBLIC VS PRIVATE CUSTOMERS
Vinod Kumar Bishnoi* and Supriya Dhillon**
KAIM JOURNAL OF MANAGEMENT AND RESEARCH
VOL.2, No.2, November - April 2010 Pages : 86 - 90
Bancassurance is the selling of insurance products and services by leveraging the existing customer
base of a bank and fulfilling the banking and insurance needs of the customers at the same time. The
concept is beneficial for both the sectors as well as assists customers in term of diversified quality
products, in time and prompt service under the same roof. Service quality plays a pivotal role in
enhancing customer satisfaction and loyalty. The bancassurance concept though in its embryonic
stage has the potential to grow as an attractive channel for distribution of insurance products. The
impetus for its growth can be provided by banks and insurance companies focusing on all aspects
of service quality namely responsiveness, assurance, tangibility, empathy and reliability. This paper
makes an attempt to gauge the likely future actions of the customers based on their perception
of bancassurance service with respect to public and private sector bancassurance customers. The
factors which display customer satisfaction must be given due attention by the banks and insurance
companies alike.
Quality is an essential factor sought by all organizations,
especially the services sector. Quality may be defined
as the customers’ perception of the service provided
(Parasuraman et al., 1985). The same applies in the
banking sector too (Bahia and Nantel, 2000). Perceived
service quality may be defined as the judgement of
the consumer, which is a result of the comparison
between expectations and perceptions of the actual
service performance (Lewis, 1983). Perceived service
quality of a service is the result of an evaluation
process in which customers compare their perception
of service quality against what they expected
(Gronroos, 1982). Customers judge an organization’s
performance on the basis of their benchmarks based
on standards (Lovelock, 2001). It may also be defined
as the customers’ frame of reference with respect to a
product/service that allows anticipation of product/
service performance.
The onset of economic reforms has seen a flurry of
private sector players entering the services industries
especially banking invoking high competition.
Perceived service quality has come to play a significant
role in high involvement industries like banks (Angur
et al., 1999). Today, organizations need to be customer
focused and follow a market-oriented approach if they
want to retain customers. Service quality should be the
basis on which the customer retention strategies are
built (Sureshchandar et al., 2002). From the customers’
perspective, the service quality may be divided into
sought quality (based on expectations) and perceived
quality (overall impression after service realization),
and it gives the service provider an opportunity to
judge the criteria on which customer satisfaction
is based. There are emerging evidences about the
relationship between service quality and profitability.
Studies by Aaker and Jacobson (1994) support the
positive relations theory between satisfaction of
service quality and profitability.
REVIEW OF LITERATURE
Service quality and customer satisfaction are two
constructs that have been investigated by various
researchers. The two aspects of service quality
and customer satisfaction when analyzed as a
multi-dimensional construct have been found to
be independent but closely related implying that
an increase in one is likely to lead an increase in
another (Sureshchandar et al., 2002). Customers in
developing economies consider the technological
factors such as core services and systematization as
a yard - stick for judging the performance of services
(Sureshchandar et al., 2003). Hence, understanding
customer expectations is a prerequisite for delivering
superior service (Parasuraman et al., 1988). The
insurance players need to differentiate themselves
on the basis of service quality to develop sustainable
competitive advantage and retain customers.
* Associate Professor, Haryana School of Business, Guru Jambheshwar University of Science and Technology, Hisar.
** Assistant Professor, Kedarnath Aggarwal Institute of Management, Charkhi Dadri.

Multiple regression analysis indicates strong
relationships between the satisfaction level and
the service dimensions (Gayathri et al., 2006). The
five service dimensions of tangibility, reliability,
responsiveness, assurance and empathy were analyzed
relating to customer expectations and perceptions. On
the basis of mean differences it has been concluded
that service quality varies across demographic
variables and obtaining a reliable measure of service
quality from customers is prerequisite for delivering
high service quality in order to achieve growth
profitability and retention of customers (Bhat, 2005).
Analysis of bank officials’ perception and that of
customers reveal that bank lack in delivery of quality
service.This gap needs to be removed if customer
satisfaction is to be achieved (Bhat, 2005). This has
further been supported by studies where profiles
of customers have been found to have significant
impact on perceptions of service quality (Vanniyaran
et al., 2008). Values and image have been found to be
significant dimensions in determining service quality
in conventional banks (Jabnoun and Khalifa, 2005).
Companies should focus strategy development on
customers’ expectations, customers’ evaluation of
the service process and customer retention strategies
in order to be profitable (Allred and Addams, 2000).
Satisfaction results when performance is equal or
above the expectations whereas dissatisfaction is
a result of performance falling below expectations
87
Bartlett’s test of Sphericity = 0.000, Kaiser-Meyer-Olkin KMO (0.705).
The KMO value of 0.705 indicates the appropriateness of factor analysis.
(Swan and Oliver, 1989).
OBJECTIVE OF THE STUDY
The primary objective of the study is to extract
factors indicating customer satisfaction regarding
Bancassurance channel with respect to public and
private bancassurance customers.
RESEARCH METHODOLOGY AND TOOLS USED
The present research which is exploratory cum
descriptive in nature is focused on the overall
experience of Bancassurance customers on the basis
of which they are likely to go in for future actions. An
attempt has been made to understand the significance
of service quality, its impact on customer satisfaction
and likely course of action of the customers in the
future based on their satisfaction from the services.
The study comprised of three private sector and two
public-sector bancassurance customers from Delhi,
National Capital Region (NCR) and three districts
of Haryana namely Hisar, Rohtak and Bhiwani. The
customers from ICICI, HDFC, Axis, Oriental Bank of
Commerce and Central Bank of India were selected
vide stratified sampling method. 100 questionnaires
were distributed in each of the above stated banks.
The data comprised of respondents from various walks
of life i.e. service class, business class and agrarian
class.
A questionnaire comprising 12 variables and
Table 1 : Factor structuring of Variables
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

Source: Primary Data
indicating customers’ likely actions based on his
overall experience of the service quality of banks
selling insurance was incorporated for the study. All
responses on these 12 variables were obtained on a
5-point scale (the likelihood of the actions was ranging
from 5 for Not at all likely to 1 for Extremely likely). A
total of 500 questionnaires were circulated among
the bancassurance customers. Out of these 445 were
found appropriate for the purpose of further analysis.
The summarized demographic profile of the customers
is delineated in Appendix 1.
Principal component analysis with varimax
rotation was applied on the twelve variables and it
resulted in a three-factor solution. Further t-test was
applied to check if significant differences existed
between public and private bancassurance customers
or not with respect to the twelve variables.
2:
88
RESULTS AND DISCUSSION
The results of principal component method and
varimax rotation are represented in table 1. The factor
analysis resulted in three factors labeled as Word of
Mouth, Cost to Quality Worthiness and Post Purchase
Action, appropriately.
Factor 1: Word of Mouth
The factor word of mouth indicates that if the
customers are satisfied with the service quality of
the banks, they will encourage others to do business
with the bank. The service quality aspect if taken care
of will definitely results in increasing business, being
considered the first choice of the customers and also
help to spread positive word of mouth about the bank
to other people.
Factor 2: Cost to Quality Worthiness
The quality asect plays a significant role in customer
attrition. The customer compares the price in relation
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

to quality of the service and if the services are
satisfactory, the customers would continue doing
business and also pay a premium price rather than
compromise on quality.
Factor 3: Post Purchase Action
Post-purchase action is a highly significant factor
in gauging customer satisfaction and loyalty. The
variables, ‘switching to competitor offering more
attractive prices’, ‘complain to other consumers’,
‘complain to bank employees’ and ‘complain to
external agencies’ are loaded heavily on this factor.
The mean values of all the twelve variables along
with ‘t’-values are depicted in table 3. The overview of
the table brings out the fact that word-of-mouth factor
variables are the most likely actions to be undertaken
by the customers based on their experience of the
bancassurance service. ‘Saying positive things about
bank to other people’ has been significantly rated
by both private and public sector bancassurance
customers.
Variables ‘Saying positive things about bank to
other people’, ‘considering the current bank as first
choice’ and ‘encouraging friends and relatives to do
business’ invite significant differences at 0.01 level
between private and public sector bancassurance
customers.
The variable ‘recommendation to someone who
seeks advice’ invites significant differences at 0.05 level
between the perception of private and public sector
bancassurance customers. The customers depending
upon their experience of service quality may either go
in for an exit option or voice option. The voice option
variable namely ‘complaining to bank employees in
event of a problem’ has been weighed heavily by both
private and public sector bancassurance customers.
The aspects of ‘taking business to a competitor
offering attractive prices’, ‘switching to another bank’,
‘complaining to other consumers’, and ‘complaining
to external agencies’ all invite varied views between
private and public sector bancassurance customers
at 0.01 levels.
The factor variables of cost to quality worthiness
invite divergent views on the aspect of ‘continuing
services even if the prices increase somewhat’
among the private and public sector bancassurance
customers.
CONLUSION
Bancassurance has emerged as an important channel
in the distribution of insurance. The improvements
89
in service quality by understanding customers’
requirements and expectations, further enhancing
consumers purchasing intentions and retaining their
loyalties have become vital for financial institutions.
The companies need to focus on service quality aspects
of responsiveness, reliability, assurance, empathy
and tangibility in order to create a competitive
advantage.
REFERENCES
Aaker, David A. & Jacobson, Robert (1994), “The Financial
Information Content of Perceived Quality”, Journal of
Marketing, May, pp. 191-201.
Allred, Anthony T. & Addams, H. Lon (2000), “Service Quality at
Banks and Credit Unions: what do their customers say”?
Managing Service Quality, 10(1), 52-60.
Angur, Madhukar G., Natarajan, Rajan and Jahera Jr., John
S.(1999), “Service Quality in the Banking industry: an
Assessment in a Developing Economy”, International
Journal of Bank Marketing, Vol. 17 No. 3, pp. 116-123.
Bahia, Kamilia and Nantel, Jacques(2000), “A Reliable and Valid
Measurement Scale for the Perceived Service Quality of
Banks”, International Journal of Bank Marketing, Vol. 18
No. 2, pp. 84-91.
Bhat, Mushtaq A.(2005), “Correlates of Service Quality in Banks:
An Empirical Investigation”, Journal of Services Research,
Vol. 5 No. 1, pp. 77-99.
Gayathri, H. , Vinaya, M.C. and Lakshmisha, K.(2006), “A Pilot
Study on the Service Quality of Insurance Companies”,
Journal of Services Research, Vol. 5 No. 2, pp. 123-138.
Gronroos, Christian (1982), Strategic Management and
Marketing in the Service Sector, Helsinghfors: Swedish
School of Economics and Business Administration
Bhat, Mushtaq A.(2005), “Service Quality Perceptions in Banks: A
Comparative Analysis”, Vision, Vol. 9 No. 1, pp. 11-20.
Jabnoun, Naceur & Khalifa, Azaddin (2005), “A Customized
Measure of Service Quality in the UAE, Managing Service
Quality, 15(4), 374-388.
Lewis, R.C. & Brooms, B.H. (1983), The Marketing Aspects of
Service Quality. In Berry, L., Shostack, G. & Upah, G. (Eds.),
Emerging Perspectives on Services Marketing (99-107).
Chicago: American Marketing Association.
Parsuraman, A., Zeithaml V. & Berry, L. (1985), “A Conceptual
Model of Service Quality and its Implications for Future
Research”, Journal of Marketing, 49, 41-50.
Parasuraman, A., Zeithaml, Valarie A. and Berry, Leonard L.
(1988), SERVQUAL: “A Multiple-Item Scale for Measuring
Consumer Perceptions of Service Quality”, Journal of
Retailing, 64(1), 12-40.
Sureshchandar, G.S., Rajendran, Chandrasekharan,
Anantharaman, R.N. and Kamalanabhan, T.J.(2002),
“Management’s Perception of a Total Quality Service in
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

the Banking Sector of a Developing Economy – A Critical
Analysis”, International Journal of Bank Marketing, Vol. 20
No. 4, pp. 181-196.
Sureshchandar, G.S., Rajendran, Chandrasekharan and
Anantharaman, R.N.(2003), “Customer perceptions of
service quality in the banking sector of a developing
economy: a critical analysis”, International Journal of Bank
Marketing, Vol. 21 No. 5, pp. 233-242.
Swan, J.E. & Oliver, R.L. (1989), “Post Purchase Communications
by Consumers”, Journal of Retailing, 65, 516 – 533.
Vanniyarajan T, Dev, Praba P. Shankari (2008), “Service Quality of
Source: Primary data
90
Appendix - 1
Table 1: Demographic Profile of the Respondents
Life Insurance Companies at Salem”, Global Management
Review, Vol2 No. 2, February, pp. 23-31.
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

INTRODUCTION
HUMAN RESOURCE MANAGEMENT IN
HARYANA TOURISM CORPORATION
Rajwanti Shrma* and Jaipal Sharma**
KAIM JOURNAL OF MANAGEMENT AND RESEARCH
VOL.2, No.2, November - April 2010 Pages : 91 - 97
Tourism industry has emerged as an important service sector in Haryana. An attempt has been made
in this research paper to analyse the management of human resource in Haryana Tourist Corporation.
The analysis has been carried out in evaluating the critical aspects of personnel management policies
in terms of manpower policy, recruitment and selection, training, promotion and industrial relation.
The study based on sample survey also makes same useful suggestions for improving further the
functioning of Haryana Trourism Corporation.
Tourism has emerged as an important service sector,
and it can uniquely respond to global challenges,
if its growth is managed wisely. The dynamic past and
projected growth of the tourism sector, its broad
direct and indirect impact across all economies,
particularly those of developing states, make it a wellsuited
development tool. The growth of international
tourism was slow in the first part of the last century,
rapid in the later part and phenomenal since 1980’s.
In 1950, the total world tourist arrival was only 25
million generating receipts of $ 1 billion. The absolute
number of arrival multiplied two and a half times
between 1960 and 1970 and thereafter it has almost
doubled every decade (Bezbaruah 1999). The world
tourist receipts increased to $ 856 billion in 2007 and
world’s tourist arrival increased to 903 million during
the same period (TS 2007). The total foreign tourist
arrival in India that was only 16,289 in 1951, increased
to 5.08 million in the year 2007. Similarly, total foreign
tourism receipts which were to the order of US $ 1861
million in 1991, increased to US $ 1073 million in 2007.
The total employment generated by tourism industries
was 30491000 in 2008, which is expected to reach at
39615000 in 2018 (NBT 2009). New tourism occupies
an important place in the economy of Haryana state.
REVIEW OF LITERATURE
Bhatt (1997) in his research has made an effort to
convey that tourism has emerged as one of the key
sectors of Indian economy by making significant
contribution to foreign exchange earnings, creating
employment opportunities, opening up backward
areas and providing a large multiplier effect in other
sectors. Tourism also promotes handicraft, art and
culture and has become an instrument for preservation
* Assistant Professor, Department of Commerce, V.A.K.M., Bahadurgarh
** Head, Department of Commerce, G.B.D. College, Rohtak
of heritage.
Negi, Jag Mohan (2004) in his work has tried to
convey that now hotel management has become a
profession which young boys and girls are proud to
join, and get trained for various level positions. The
hotel management education has proliferated into a
series of courses offering technical certificate courses
of specialized nature, diploma, and degree, postgraduate
and master degree programme in hotel,
catering and tourism.
Singh, Hawa (1995) has analyzed the organizational
structure of Haryana tourism corporation, its
organizational health, organizational commitment,
job satisfaction along with some allied attributes.
He has divided the employees of Haryana tourism
corporation into three groups namely whole group,
manager group and worker group.
OBJECTIVE OF THE STUDY
In order to make a systematic study in any field and to
give it proper direction and shape, setting of goals and
objectives at the outset become imperative.
The objective of the present study is to evaluate the
efficiency of human resource management with
reference to recruitment, selection, training, promotion
procedure and management staff relationship in the
Haryana tourism corporation, which was vacated
in ___________ The study covers almost the whole
management of the corporation with reference to the
utilization of human resources.
RESEARCH METHODOLOGY
The study is a descriptive in nature and an analysis
of Haryana Tourism Corporation has been presented.
The analysis is mainly based on the questionnaires
served to the employees of the corporation, which
gave their opinion with regard to the policies

controlling, recruitment, selection, training, promotion,
wages and salaries and industrial relations. The
questionnaire was served to 218 employees in all the
major complexes of Haryana Tourism Corporation
and at its head office. The responses were collected
on simple comparative basis and both quantitative
and qualitative results were drawn. The researcher
has divided the employee of Haryana Tourism
Corporation into four categories. Category I includes
the divisional manager, addition divisional manager
who are acting as D.D.O.’s . Category II includes the
counter incharges and barmen. Category III includes
waiter, cooks, mali, chowkidar, sweepers, etc. and
Category IV includes various employees working in
its head office.
The personnel management policies of any hotel
organization can be evaluated through a critical study
of following aspects:
i. Manpower planning.
ii. Recruitment
iii. Selectioni
v. Training
v. Promotion and
vi. Industrial relation
The researcher has analyzed all the abovementioned
aspects to understand its overall personnel
management and policies. Every hotel organization
has developed its own personnel policies according
to its size and structure. Since Haryana Tourism
Corporation is a commercial organization; it has
framed its own personnel policies. These policies are
always considered while dealing with the problems of
employee. The personnel policies have been framed
by the Board of Directors of the Haryana Tourism
Corporation . The power to frame the policies is given
to board by the company act, 1956. As explained, we
now proceed to discuss these policies.
(i) Manpower Planning
Manpower planning is a technique of ensuring the
right number of people at the right place, at the right
time of doing the right things for the achievement
of organizational goals. It can correct any imbalance
between manpower requirements and the actual
supply in the market. It helps in making adequate
provision of man – power inventory so as to avoid the
problem of shortage of staff. Again, it is the first logical
step in the staffing process as it acts as sound basis for
administrative action to avoid situations of shortage or
surplus of manpower in the organization. The analysis
reveals that the number of employees is decreasing
during the period under study i.e. from 1998 to 2008.
The number of employees stood at 2,228 in the year
92
1998, which decreased to 2,049 in the year 2008. The
number of employee’s data was collected by the
researcher from the various files with the help of office
staff. There was no system of maintaining record of
past years data regarding employees strengths. The
reason for decrease in employee’s strength was that no
fresh recruitment was made since 1996 on the posts
which fell vacant due to retirement. Only one D.M. was
appointed ( previously he was counter incharge) in the
year 1997 and after that only four counter in charges
were appointed.
The analysis further reveals that 32 per cent (620 out
of 2049 in 2008) staff of Haryana Tourism Corporation
is represented by mali, chowkidar and sweeper and
10 per cent staff is at head office. No commercial
organization can afford such a composition of staff i.e.
42 per cent non – operational staff. There is a shortage
of operational staff such as tourist officer, Manager
cum accountant and counter incharges. This situation
is despite the fact that many malis have been promoted
to waiters and cooks. Otherwise the situation would
have been worse
(ii) Recruitment
Recruitment is the process of searching the prospective
employees and stimulating them to apply for jobs in
the organization. The recruitment policy of every
organization should be sound so that the best talent
may be attracted to man the positions in it. In Haryana
Tourism Corporation, adopts following recruitment
methods:
i. Direct Recruitment
ii. Indirect Recruitment i.e. promotion
In Haryana Tourism Corporation all the helpers, kitchen
assitants and waiters are selected through direct
recruitment. Almost 100 per cent posts of barmen are
filled up through indirect recruitment i.e promotion. 50
per cent posts of counter incharges and Manager cum
accountants are filled up through direct recruitment
and 50 per cent through indirect recruitment
i.e. through promotion. But most of the post of
tourist officers (80%) are filled up through indirect
recruitment and only 20 per cent posts are filled up
through direct recruitment. The other higher posts
of supervisor, A.D.M. , D.M. and D.G.M. are filled up
through indirect recruitment . In the year 1996 , the
corporation changed the policy of recruitment of D.M.
and it started to adopt the policy of 50 per cent direct
and 50 per cent indirect. The researcher came to know
that this was made under political pressure to oblige
certain persons by the Haryana government. The post
of chief accounts officer, sub divisional engineer, junior
engineer, drivers, personnel assistant to managing
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

director are filled up through deputation from other
concerned department of the State government and
they are frequently transferred.
Further, eliminating the views of employers
on recruitment policy 87.2 per cent of the sample
showed their satisfaction with the recruitment
procedure, whereas only 28 employees i.e. 12.8 per
cent expressed their dissatisfaction. Those employees
who were dissatisfied with the recruitment policy
argued that the recruitment should be made through
an independent and unbiased body. This policy, if
adopted, in their opinion, would be useful for the
corporation in getting really competent executives.
They further said that deputation component of
indirect recruitment leave ample room for pick and
chose at political and higher administrative levels of
the corporation and it causes dissatisfaction among
those who suffer some genuine discrimination. On the
93
other hand, recruitment by an independent body can
bring satisfaction to the employees and can go a long
way in boosting up the morale of the employees.
Table 1 : Employees’ View of Recruitment Policy of Haryana Tourism Corporation
Source : Questionnaire served to the employees of the corporation
Category I – DDO-DM, ADM, Tourist Officer, Supervisor and Manager-cum-Accountant
Category II – Counter Incharge, Barman
Category III – Senior Waitere, Junior Waiter, Assitant Cook, Helper Cook, Mali, Sweeper, etc.
Category IV – Bead Office Staff
(iii) Selection Procedure
Selection procedure is the most important part of
personnel management as it determines the efficiency
of the organization as a whole. A poor selection can
cause a great wastage of funds and imbalance in the
structure of the organization. An individual selected
wrongly becomes a highly disharmonious factor
for the organization. Therefore a proper selection
procedure is beneficial for the both the employee
and the employer. In Haryana Tourism Corporation,
a candidate is selected only after he clears the
interview. The main object of the interview is to judge
the personality and response of a candidate. The
interview is conducted by the selection committee.
The selected candidates have to produce physical
fitness certificate obtainable from the civil surgeon
of concerned district at the time of joining the job.
The analysis reveals that 83 per cent expressed their
satisfaction with the selection procedure and 17 per
cent showed their dissatisfaction. They were of the
view that educational qualification were not given
due weightage and the selections were made mainly
under political influence ignoring the real worth of the
candidates. They further felt that personal interview
encouraged favoritism and therefore it should be
totally dispensed with.
(iv) Training Procedure
After and employees has been selected, placed
and inducted, he or she must be provided training.
The efficiency of any organization depends directly
on how well its employees are trained. So far as
Haryana Tourism is concerned, on papers, it has a well
established training programme for its employees and
executive. It is committed to develop its personnel, reorient
them, keep their morale high and it gives them
a suitable opportunity for their betterment.
The analysis reveals that training is provided to field
staff only and head office staff is not provided training
at all. Even then entire field staff (26.77 %) is not
provided training and 42.76 per cent of the employees,
who were provided training, were not satisfied with
the training.
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

94
Table 2 : Employees’ View on Selection Procedure of Haryana Tourism Corporation
Source: Questionnaire served to the employees of the corporation
Table 2 A : Categorywise Detail Showing Selection Procedure Followed not
Followed by Haryana Corporation
Source: Questionnaire served to the employees of the corporation
(iv) Training Procedure
After and employees has been selected, placed
and inducted, he or she must be provided training.
The efficiency of any organization depends directly
on how well its employees are trained. So far as
Haryana Tourism is concerned, on papers, it has a well
established training programme for its employees and
executive. It is committed to develop its personnel, reorient
them, keep their morale high and it gives them
a suitable opportunity for their betterment.
The analysis reveals that training is provided to
field staff only and head office staff is not provided
training at all. Even then entire field staff (26.77 %)
is not provided training and 42.76 per cent of the
employees, who were provided training, were not
satisfied with the training.
Table 3 : Category-wise Detail Showing Training Provided / Not Provided by
Haryana Tourism Corporation
Source: Questionnaire served to the employees of the corporation
Table 3A : Employees View of Training Facilities Provided by Haryana Tourism Corporation
Source: Questionnaire served to the employees of the corporation
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

(v) Promotion Procedure
Promotion means shifting from one job to another with
an increase in status, salary and responsibility. It is an
advancement of an employee to a better job - better
in terms of more prestige, greater responsibilities,
greater skill and especially increased rate of pay or
salary. The posts of deputy general manager, divisional
manager, assistant divisional manager, supervisor and
barman are filled up through promotion. The criterion
for promotion adopted by the promotion committee
of the corporation is seniority. The post of tourist
officer, manager-cum-accountant, counter incharge
are filled up partly through promotion and partly by
direct recruitment. The criteria for promotion for these
posts is also seniority.
The analysis reveals that nearly 72.02 per cent
employees showed their dissatisfaction on the
procedure of promotion in the corporation. It can
95
be inferred that there prevails an atmosphere of
general discontentment among employees over the
promotion policy of the corporation. The general view
of the employees in this regard is that there exists
hardly any scope of promotion for the staff , if there
is any scope for it, there are not set rules governing
promotion procedure.
The analysis further reveals that 62.84 per cent
employees expressed their dissatisfaction about
their present pay scales. The most dissatisfaction was
among the employees of category III and category IV
which was 70 per cent and 80 per cent respectively.
Even it was argued with the category III and IV
employees that category I and II employees were not
so much dissatisfied as they were, they argued that the
category I and II employees were having other source
of income other than pay.
Table 4 : Employees View on Present Pay Scale of Haryana Tourism Corporation
Source: Questionnaire served to the employees of the corporation
(vi) Industrial Relations
Since good industrial relations determine the efficiency
and smooth working of an organization, every
organization tries to develop a proper disciplinary
system to maintain amicable industrial relations in
the unit. Good industrial relations are most essential
for ensuring individual development as well as for the
development of the organization. If tension prevails
between the management and the employees, the
organization can not reach at its destination. So far
as Haryana Tourism Corporation is concerned, the
proper procedure has been adopted to settle the
disputes among employees and the management.
The management discourages the employees to
participate in union activities. Hence the category I
and II employees are not the member of union. Only
category III employees are member of union. Analysis
reveals that out of total 200 employees (category
II,III,IV) surveyed only 50 per cent were the members
of union. Some times management punishes those
employees who take active part in union activities,
by transferring them to remote area complexes or
transferring them from one place to another place
frequently. Analysis reveals that there is no worker’s
participations in management. Only 7.5 per cent
employees out of a sample of 200 employees said
that worker’s participation in management exist in
Haryana Tourism Corporation. They argued that they
can send their suggestion , opinion and problems
to the management through their D.D.O. who meet
regularly with the higher management. Due to the
above reason, the relation of employees with the
management are not so such cordial. Analysis reveals
that nearly one half of the total argue that their
relations with the management are not cordial. There
are several reasons for it. Such as lack of worker’s
participation in management, assignment of extra
work inadequate welfare facilities, absence of proper
settlement machinery , inadequate financial incentive
etc. So it calls for additional efforts to improve the
industrial relation in H.T.C.
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

96
Table 5 : Employees’ View on Membership of the Union in Haryana Tourism Corporation
Source: Questionnaire served to the employees of the corporation
Table 5A : Employees’ View on Worker’s Participation in Management of
Haryana Tourism Corporation
Source: Questionnaire served to the employees of the corporation
Table 6 : Employees View on Relationship with Management in Haryana Tourism Corporation
Source: Questionnaire served to the employees of the corporation
SUGGESTIONS
An investigation of Human Resource Management
of Haryana Tourism Corporation has enabled the
researcher to comment on the management and to
suggest measures to improve its functioning. The
suggestions are listed below.
• In Haryana Tourism Corporation Managing Director is
appointed by the Govt. of Haryana from I.A.S. cadre and
he is frequently transferred. The records show that 11
I.A.S. officer have acted as Managing Director of H.T.C.
during a period of last 5 years only. Here it is suggested
that Managing Director must be a professional in the
field of tourism and minimum tenure of Managing
Director should be at least three years so that he
may be able to be familiar with the working of the
corporation and may work more efficiently.
• Since hotel industry is highly sophisticated and
specialized industry so all the posts in the field require
professional qualification. But in Haryana Tourism
Corporation more than one third staff is appointed even
when they do not fulfill the prescribed qualification.
So, it is suggested that only those persons should be
appointed who fulfill the prescribed qualification. In
Haryana Tourism Corporation, a candidate is selected
only after he clears the interview. Analysis reveals
that selections were made mainly under political
influence ignoring the real worth of the candidate. So
it is suggested that, if not totally dispensed with, the
marks of personal interview should be considerably
reduced and recruitment should be made through
an independent and unbiased body by adopting the
proper selection procedure.
• To run hotel business, specially and professionally
trained staff like cooks, waiter, receptionist,
housekeepers, tourist guides , tourist officers and
divisional managers, etc. are required . Moreover,
expansions diversification, technological advancement
and upgrading of existing facilities and standards need
not only larger number of employees into the business
but also suitable training for them into various aspects
of the hotel industry. There should be a set programme
of training for the employees. The corporation should
also organize seminars, refresher courses and food
festivals from time to time for its employees in its own
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

hotels. Out side training should be provided either
at the reputed five star hotels or hotel management
institutes of national or international fame.
• The criterion for promotion is seniority and many
employees do not get even a single promotion in 15
or 20 years. There should be time scale promotion.
The promotion for executive (D.D.O.) post should be
based on merit cum seniority judged through their
performance.
• Keeping in view the technical nature of job of its
employees, the corporation should delink itself from
the state Govt’s pay scales. It should form its own good
pay scales on the line of commercial organization.
Certain cash incentives in the form of increments
should also be given to the meritorious employees.
• It is seen in the present study that no proper need
is give to the grievances of the employees. In fact, the
major cause of dissatisfaction among the employees
of the corporation is the absence of any grievance
handling machinery. The trade union is also not
effective in Haryana Tourism Corporation. Therefore,
the employees have to approach top officials of
political leaders for redressal of their genuine
grievances. It is an effective machinery should be set
up in the corporation which will exclusively look into
the grievance of the employees and will work as an
arbitrator for the grievance redressal.
• In Haryana Tourism Corporation, Divisional Manager
are acting as D.D.O.’s in the complexes at Sohna,
Magpie, Pipli, Kurukshetra, Jyotisar, Morni and
Ambala, Assistant Divisional Managerss are acting
as D.D.O.’s at Panipat, Bahadurgarh, Rohtak, Pinjore,
Mansa Devi and Hansi, Tourist Officers are acting as
D.D.O.’s at Yamuna Nagar, Karnal. Asakhera, Gurgaon
and Dharuhera, Supervisors are working as D.D.O.’s at
Blue Bird, Red Bishop, Sirsa, Ottu, Sultanpur, Kaithal,
Pehawa and Nahar Sing Palace,Ballabgrah, Manager
cum Accountant and Counter Incharge are working as
D.D.O.’s at Badkhal Lake, Jind , Rai, Hodal, Fatehabad ,
Tilyar Lake Rohtak, Samalkha, Karna Lake , Damdama,
Bhiwani, Rewari and Hisar. While analyzing the official
hierarchy , it is observed that D.D.O.’s are appointed
on political ground and no considerations is given
97
to the seniority or designation. Some manager cum
accountant and counter incharges are acting as D.D.O’s
at some places while supervisor and tourist officer are
senior to them and are working under D.D.O’s at some
other places. There are 43 complexes in all 2 DGM 11
DM 7 ADM 12 T.O. and 19 supervisors are working in
H.T.C. the total number of above said official comes
to 51 which is sufficient to hold the office of D.D.O’s
in all the complexes. So it is suggested that a person
below the designation of supervisor should not be
appointed as D.D.O. And the post of supervisor should
be redesigned as assistant tourist officer because
manager cum accountant is junior to him.
REFERENCES
Bezbaruah, M.P. (1999), “Tourism - Current Scenario and Future
Prospects” Yojana, Volume 43, No. 8 Publication Division,
New Delhi. p.7.
Bhatt, A.K. (1997), “Current Situation in Tourism Human Resource
Development in India” IITTM Journal of Travel and Tourism,
Volume 1, No. 1, April 1996-March-1997, Indian Institute of
Tourism and Travel Management Gwalior, p.36
Nav Bharat Times (2009) Jan.29, p.10.
Negi, Jagmohan (2004) Professional Hotel Management S.
Chand & Company Ltd., New Delhi.
Singh, Hawa (1995), Organizational Health of Haryana Tourism
Corporation in Relation to Commitment, Job Satisfaction
and some Allied Attributes Ph.D. thesis submitted to
Department of Commerce, Kurukshetra University,
Kurukshetra.
Tourism Statistics at a Glance 2007, Marketing Research Division,
Ministry of Tourism, Govt. of India p.1.
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

PROTECTION OF TRADITIONAL MEDICINE UNDER INTELLECTUAL
PROPERTY REGIME
INTRODUCTION
Vishal Mahalwar*
KAIM JOURNAL OF MANAGEMENT AND RESEARCH
VOL.2, No.2, November - April 2010 Pages : 98 - 103
Traditional medicines have assumed new role in more recent years all over the world. This is considered
the only affordable and safe treatment in many countries across the globe. But then traditional
medicines under threat in intellectual properly regime. This paper is designed to point out such
threats and then delineates various initiatives under taken by the Indian government to protect its
traditional old medicine system and the rich national biodiversity.
The word medicine has been derived from the latin
word “ars medicina”, which means “art of healing”.
Medicine has become an indispensable part of our
life because it is concerned with maintaining and
restoring human health. In the present era we have
different types of medicine in modern society, like
conventional and alternative medicine. Conventional
medicine includes allopathic medicine, bio-medicine,
mainstream medicine, orthodox medicine, and
Western medicine. On the other hand alternative
medicine are often pronounced as traditional
medicine, complementary, non-conventional i.e.
Ayurveda, Yoga, Unani, Siddha, Naturopathy etc.
Historically, Indians have strong hold over alternative
medicine since last thousands of years. In fact, India
has been very rich in its biodiversity. Therefore, steps
have been put forward to protect these alternative
medicine in India. In Asia, around 70 per cent of the
population continues to use traditional medicine
due to historical circumstances and cultural beliefs.
The World Health Organization points out that in
Africa and India up to 80 per cent of the population
use traditional medicine to meet health care needs.
In China, traditional medicine accounts for around
40 per cent of all health care delivered annually.
Moreover, developed countries are rushing behind the
alternative medicine. Developing countries like India,
have traditional medicine to public health care due to
various economic, social and cultural reasons.
DEFINITION OF TRADITIONAL MEDICINE AND ITS
KNOWLEDGE
Though “Traditional Medicine” has not been defined
in a statute, it means in common parlance the system
of medicine which is based on common knowledge
* Research Associate, National Law University, New Delhi.
acquired and accumulated from generation to
generation through practice. WHO has also defined
“traditional medicine” as: “the sum total of the
knowledge, skills and practices based on the theories,
beliefs and experiences indigenous to different
cultures, whether explicable or not, used in the
maintenance of health, as well as in the prevention,
diagnosis, improvement or treatment of physical and
mental illnesses”.
This is a fact that majority of medicinal plants
resources originate from developing countries.
Traditional medicine is also significant in developed
countries, increasing their commercial consideration.
Traditional medicine generally involves biological
resources and the knowledge of local and indigenous
people. In this way it is concerned with biodiversity
conservation and indigenous people’s right over
their knowledge and resources. Traditional medicine
involves so many complex ethical questions. Traditional
medicine is such a means of cure which offers safe and
cheap treatment to the needy. That’s why majority
of people around the world is rushing behind the
traditional medicine. Because of several reasons
developed countries now a days are introducing and
adopting the system of medicine based on traditional
knowledge.
India’s traditional medicine knowledge can be
categorized into two main streams: codified and non-
codified medicinal knowledge. Codified generally
refers to medical knowledge with theories expressed
in thousands of manuscripts covering all branches
of medicine. Ayurveda, siddha, yoga systems found
in India and homeopathy in Europe are the few
examples. Non-codified medicine knowledge includes
“folk”, “tribal” or “indigenous” medicine. This medicinal
knowledge is nowhere expressed in writing. These are
orally transmitted from one generation to another

generation. The carriers of non-codified medicine are
the indigenous people, traditional village physicians,
“vaidyas” or tribal physicians. Furthermore, there are
two traditional modes to cure the illness i.e. procedure
based therapy and medication based therapy.
Procedure-based therapies are osteopathy, chiropractic
therapy, acupuncture and spiritual therapy. Medicine
based therapies use minerals, animal parts, medicinal
parts and herbs to treat diseases. So, widely there are
only two streams pertaining to traditional medicine
i.e. codified and non-codified.
TRADITIONAL MEDICINE AND BIOPIRACY
It is well established law that to get the patent right
one has to satisfy the basic requirements of the patent
i.e. novelty, inventiveness, industrial applicability. In
case of traditional medicine, it doesn’t satisfy all the
elements which are being required to get patent.
Traditional medicine forms a peculiar category which
is unique and doesn’t fall under the normal course
of protection of intellectual property. So, it demands
special attention and treatment. Many offences are
threatening the Intellectual property, but bio-piracy is
the one which endangers the traditional medicine in a
big way. Bio-logical resources and biological products
are the great treasure of any country or society. The
pilferage and smuggling of bio-logical resources and
products, immensely harms the ecology, economy,
public health and wild life also.
Biopiracy has been described as:”…the use of
intellectual property systems to legitimize the
exclusive ownership and control over biological
resources and biological products and processes that
have been used over centuries in non-industrialized
countries”.
To be simple we could say that biopiracy is such
an evil which causes the harm to indigenous people
and local communities. It is simply misappropriation
of knowledge which is already in public domain held
by indigenous and local communities since long.
Bio-piracy can be committed in many manners. The
percentage of bio-piracy in traditional medicine
is much higher as compared to other traditional
knowledge. The Reason for higher percentage is
inaccessibility of knowledge of traditional medicine
to the patent examiner and sometimes unwritten
traditional medicinal knowledge is also one of the
reasons of biopiracy. The ambit of biopiracy of
traditional medicine is not just limited to the piracy of
vegetation and soil only. In fact, it includes piracy of
animal species and indigenous knowledge also.
Turmeric is the most appropriate instance to get the
understanding of biopiracy. In 1995, two Indians based
99
in U.S. were granted U.S. Patent on use of turmeric
in wound healing, (popularly known as the turmeric
patent), which was assigned to the University of
Mississippi Medical Centre, U.S. The inventor claimed
that turmeric works as medicine to promote the
healing of a wound if the patient uses the turmeric
at the site of an injury and/or takes it orally. The news
was of disbelief and surprise for most people in India,
as traditionally turmeric has been used in India for
its many special properties in wound-healing. For
instance, it is used as a blood purifier, in treating the
common cold, and as an anti-parasitic for many skin
diseases. It is also used as an essential ingredient in
cooking many Indian dishes. How could someone get
a patent - i.e., an exclusive right to sell and distribute
something that was so commonly known - was the
disturbing question? As per the objection raised by
Centre for Scientific and Industrial Research of India,
at the United States Patent and Trademark Office, the
patent was held invalid. Like turmeric, neem is also
another fine example of biopiracy. Apart from these
cases, there are hundreds of other cases where patents
are granted in the same manner.
TRADITIONAL MEDICINE AND INTELLECTUAL
PROPERTY RIGHTS
Biopiracy and theft of bio-logical resources as
well as product has been a matter of grave concern
all over the world. Conservation and protection of
bio- diversity is utmost essential for the healthy
environment. It can be easily understood that
traditional medicine knowledge hinges on rich biodiversity
of the planet. Many countries reaffirmed the
sovereign rights of state over their biological resources
in the convention on biological diversity. The said
convention has the basic objective of conservation
of biological diversity, sustainable utilization and
equitable sharing of benefits arising out of utilization
of bio resources as well as traditional knowledge.
Convention on biological diversity provides protection
to traditional knowledge under Art 8(j) of CBD in the
following words: “Each contracting Party shall, as far
as possible and as appropriate Subject to national
legislation, respect, preserve and maintain knowledge,
innovations and practices of indigenous and local
communities embodying traditional lifestyles relevant
for the conservation and sustainable use of biological
diversity and promote their wider application with
the approval and involvement of the holders of such
knowledge, innovations and practices and encourage
the equitable sharing of the benefits arising from
the utilization of such knowledge innovations and
practices.”
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

Further More, Article 18.4 of CBD states that
Contracting Parties should “encourage and develop
models of co-operation for the development and use
of technologies, including traditional & indigenous
technologies.” In pursuance of these provisions or
international obligations, the countries like India,
Brazil, Peru have enacted the municipal laws for
the protection of tradition knowledge by providing
various systems like prior informed consent, benefit
sharing, disclosure of source etc. In the region of Asia
and Africa in the last few years some incentives have
been put forward by preparing the guidelines and
model provisions. In spite of the fact that traditional
medicine is strength of developing countries, TRIPS
agreements doesn’t provide any safeguards measure
for the protection of traditional medicine.
INDIA’S INITIATIVE IN PROTECTING TRADITIONAL
MEDICINE
In Ancient India, Ayurveda was the main health care
of the country. Inscriptions of Ayurvedic medicine
and usages of plants on the structures of various
civilizations show the importance of Ayurveda.
Monetary gain was never the objective of practice of
medicine. Knowledge of medicine was kept secret as
a pious obligation within the family of practitioner
or the community. There was a strong belief that
the desired therapeutic effect of the medicine
would diminish if disclosed. Ayurveda continued
to flourish and maintain it’s glory with the unani
medicine introduced by Mughal rulers. The Britishers
introduced western medicine and medical education
policy by making allopathic medicine compulsory.
After independence, Indian system of medicine got
momentum. Traditional Medical practitioners came to
be treated as messengers of God for treating human
being and their knowledge was considered sacred.
This traditional knowledge of medicine required
protection. This system of medicine saw a sea change
with the advent of new intellectual property regime
into Indian legal system. Turmeric case became the
turning point in the history of protection of traditional
medicine in India. This led to several legislative and
executive measures by the Government of India.
The Patents Act, 1970
As a sequel to TRIPS Agreement in 1995, India has
amended its Patents Act 1970 to fulfill its obligations.
The Patents (Amendment) Act 2005 introduced the
product patents to food, medicines and drugs. The
important provisions of the Patent Act relating to
Traditional Knowledge include:
(I) The changes made to the definition of the
term “patent” which means a patent granted for an
100
invention under the Act (Under Section.2(1)(m)) and
specifications of “invention” which are not patentable
in Section.3 of the Act which states that “a mere new
use for a known substance” (Under Section.3(d)) and
“an invention which, in effect, is traditional knowledge
or which is and aggregation or duplication or known
properties of traditionally known component or
components” (Under Section.3(p))will not be an
invention.
(II) The inclusion of the new provisions of patent
opposition proceedings which can be done on limited
grounds provided (Under Section .25(1) in the Act as
follows:
Where an application for a patent has been published
but a patent has not been granted, any person may,
in writing, represent by way of opposition to the
Controller against the grant of patent on the ground
of:
—patentability including novelty, inventive step
and industrial applicability; or
— non-disclosure or wrongful disclosure
mentioning in complete specification, source and
geographical origin of biological material used in
the invention and anticipation of invention by the
knowledge, oral or otherwise available within any local
or indigenous community in India or elsewhere.
(III) The inclusion of the provision for the
opposition of a complete patent specification of an
invention which was publicly known or publicly used
in India before the priority date of that claim (Under
Section .25(3)(d)).
The objective of above provisions is to counter the
challenges of misappropriation of TK which is already
in the public domain of India or its use is known to
the Indian communities or individuals from the time
immemorial. It can be inferred from these provisions
that all of them are defensive in nature, which can
help to oppose the patents granted for the inventions
whose source and geographical origin of biological
material used or the knowledge, oral or otherwise, is
available within any local or indigenous community
in India or elsewhere. It is submitted that if this Act
provides protection for Traditional Knowledge of
the individuals and communities which is generally
protected in their own traditional way, then the Act
erodes the rights of these sections of people from
claiming patent protection in future.
The Biological Diversity Act, 2002
Biopiracy is a big threat to the ecology and wild
life causing serious impact on the preservation of
traditional knowledge and traditional medicine.
After the Convention on Biological Diversity (CBD)
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

the contracting countries were required to integrate
consideration of conservation and sustainable use
of biological diversity into relevant legal procedures,
programmes and policies. The Biological Diversity Act
was passed by the Parliament in 2002 after a process
of consultation among stakeholders. Objective of the
Act are-
• Conservation and sustainable use of biological
diversity.
• Conservation and development of areas important
from the standpoint of biological diversity by declaring
them as biological diversity heritage sites.
• Protection and rehabilitation of threatened
species.
• To respect and protect knowledge of local
communities related to biodiversity.
• Regulation of access to biological resources of
the country with the purpose of securing equitable
share in benefits arising out of the use of biological
resources, and associated knowledge relating to
biological resources.
• To secure sharing of benefits with local people as
conservers of biological resources and holders of
knowledge and information relating to the use of
biological resources.
• Involvement of institutions of self-government in
the broad scheme of the implementation of the Act
through constitution of committees.
The Biological Diversity Act, 2002 provides
defensive protection to traditional knowledge. Act
provides that no person shall apply for the intellectual
property right, by what ever name called, in or outside
India for any invention based on any research or
information on a biological resource obtained from
India without obtaining the previous approval of
the National Biodiversity Authority before making
such application (Under Section 6). The Biological
Diversity Act, 2002 is an important tool for protecting
traditional medicine and giving relief to the needy
masses. It makes provisions for the establishment
of Biodiversity Management Committees and State
Biodiversity Boards for discharging various meaningful
functions aiming at conservation of Biodiversity and
preventing Biopiracy, but the efficacy and efficiency
of these statutory bodies has been found below the
desired levels.
Traditional Knowledge Digital Library
Since ancient time, India has possessed rich traditional
medicine knowledge to treat disease afflicting
people. This knowledge has generally been passed
down by word of mouth from one generation to
101
another generation. Some of traditional medicinal
knowledge has been codified in ancient classical and
other literature, often inaccessible to the common
man and even when accessible rarely understood.
For example, books on Ayurveda containing drug
formulations are in Sanskrit, for Unani system these are
in Urdu, Arabic or Persian, and for Siddha in Tamil. In
this way, information existing in these texts are being
misappropriated by converting these into patent
applications and filed as novel innovations for the
grant of patent rights in the national patent office and
international patent offices as well which is a clear case
of piracy. The lack of access to this information to the
patent examiners provides opportunity for biopiracy
and enables the grant of wrong patents.
Documentation of this existing knowledge,
available in public domain, on various traditional
systems of medicine has become imperative to
safeguard the sovereignty of this traditional knowledge
and to protect it from being misappropriated in the
form of patents on non-original innovations, and
which has been a matter of national concern. India
fought successfully for the revocation of turmeric
and basmati patents granted by United States Patent
and Trademark Office (USPTO) and neem patent
granted by European Patent Office (EPO). As a sequel
to this, in 1999, the Department of Ayurveda, Yoga
& Naturopathy, Unani, Siddha and Homoeopathy-
(AYUSH), erstwhile Department of Indian System of
Medicine and Homoeopathy (ISM&H) constituted an
inter-disciplinary Task Force, for creating an approach
paper on establishing a Traditional Knowledge Digital
Library (TKDL).The project TKDL was initiated in the
year 2001. TKDL provides information on traditional
knowledge existing in the country, in languages
and format understandable by patent examiners at
International Patent Offices (IPOs), so as to prevent
the grant of wrong patents. TKDL thus, acts as a bridge
between the traditional knowledge information
existing in local languages and the patent examiners at
IPOs. TKDL is a collaborative project between Council
of Scientific and Industrial Research (CSIR), Ministry of
Science and Technology and Department of AYUSH,
Ministry of Health and Family Welfare, and is being
implemented at CSIR. An inter-disciplinary team of
Traditional Medicine (Ayurveda, Unani, Siddha and
Yoga) experts, patent examiners, IT experts, scientists
and technical officers are involved in creation of TKDL
for Indian Systems of Medicine. The project TKDL
involves documentation of the traditional knowledge
available in public domain in the form of existing
literature related to Ayurveda, Unani, Siddha and Yoga,
in digitized format in five international languages
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

which are English, German, French, Japanese and
Spanish. TKDL is an original proprietary database
fully protected under national and international laws
of Intellectual Property Rights. It is jointly owned
by the department of Ayurveda, Yoga, Unani, Sidha,
Homeopathy (AYUSH) and carried by NISCAIR.
AYUSH has also started TKRC ( Traditional
Knowledge Resource Classification) which enables
conversion of information into various languages like
Spanish, English, French, Japanese, German, Hindi. This
information includes the names of plants, Ayurvedic
description of diseases under modern names and
therapeutic formulations etc. TKDL work on Ayurveda,
Unani,Yoga and Sidha is in progress. Despite all this,
Patents are still being granted.
TKDL has become a model for other countries on
defensive protection of their traditional knowledge
from misappropriation. Countries and organizations
such as South Africa, African Regional Property
Organization (ARIPO), Mongolia, Nigeria, Malaysia and
Thailand have expressed their keen desire to replicate
TKDL. The SAARC countries have also shown interest
in the creation of TKDL.
CONCLUSION AND SUGGESTIONS
Traditional Medicine is popularly practiced all over the
world in general and developing countries in particular.
Hence, it plays critical role in catering to the needs of
health care system for common masses. In fact, this is
the only affordable treatment available to the majority
for various economic, social and cultural reasons.
Scientific advancements have led to misappropriation
of traditional medicine in different ways, leaving the
owners of traditional medicine without any benefit to
102
Table 1: Digital Library
them. To counter this misappropriation of traditional
medicine and monopolization of common heritage
several countries have called for urgent protection
thereof. India has also reasonably incorporated certain
amendments in the existing Patents Act, besides
enacting Biodiversity Act 2002 and undertaking mega
projects like TKDL for the benefit of all. This is a hard
fact that indigenous and local communities don’t
have knowledge of their right, laws and methods
of preserving their heritage including Traditional
Medicine. Effective implementation of Biodiversity Act
is still a distant dream. It is awfully experienced that
the provision of law intended to protect traditional
knowledge including traditional medicine seem to
be recommendatory in nature rather than mandatory.
Resultantly, enough scope for misappropriation of the
traditional medicine has been left. It is submitted that
for the protection of traditional medicine we require
holistic approach. The functioning of State Biodiversity
Boards, Biodiversity Management Committees,
and National Biodiversity Authority needs to be
strengthened and streamlined. Stringent measures
should be taken for conservation of medicinal plants
under threat. Indigenous people must be provided
with marketing facility for the marketing of medicinal
plants. In this regards the National Medicinal Plants
Board can play a very important role.
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

REFERENCES
Murray Lee Eiland, (2007) “Patenting Traditional Medicine”, 89
J. Pat. & Trademark Off. Soc’y 45.
Christopher Heath & Sabine Weidlich (2003), “Intellectual
Property: Suitable for Protecting Traditional Medicine”,
I.P.Q., 1
S. Swarna Latha (2009), “Biopiracy and Protection of Traditional
Medicine in India” ,E.I.P.R. 31(9)
Gerard Bodeker (2003), “Traditional Medical Knowledge,
Intellectual Property Rights & Benefit Sharing”, 11 Cardozo
J. Int’l & Comp. L. 785
Vandana Shiva, (2001) “Protect or Plunder? :Understanding
Intellectual Property Rights”. Ed. 1 st
The Patents Act, 1970
The Biological Diversity Act, 2002
103
Convention on Biological Diversity, 1992
http://www.tkdl.res.in/tkdl/Langdefault/common/Abouttkdl.
asp?GL=Eng
http://www.who.int/mediacentre/factsheets/fs134/en/
http://en.wikipedia.org/wiki/Medicine
http://www.wto.org/english/tratop_e/trips_e/t_agm0_e.htm
http://www.cbd.int/convention/convention.shtml
KAIM Journal of Management and Research Vol. 2 No. 2 November-April 2010

Notes...
STATEMENT ABOUT OWNERSHIP AND OTHER
PARTICULARS OF KAIM JOURNAL OF MANAGEMENT AND RESEARCH
Title of the Journal
Periodicity
ISSN
Language
Owner
Puhlisher
Editor
Printer
Place of Publication
KAIM Journal of Management and Research
Bi-Annual
0974-9462
English
Kedarnath Aggarwal Institute of Management
(KAIM), R.K.Gupta Marg, Charkhi
Dadri (Bhiwani)
Published by Prof. L.N. Dahiya for and on
behalf of KAIM - Charkhi Dadri, Bhiwani
Prof. L.N. Dahiya
Director, KAIM, Charkhi Dadri
(Bhiwani). Mobile: 09896212808
Mr. Ashok Kumar
Dadri Art Printers
Lala Lajpat Rai Chowk
Opp. State Bank of Patiala
Charkhi Dadri
I, Prof. (Dr.) L.N. Dahiya, hereby declare that the particulars given above are true to the best
of my knowledge and belief.
L.N. Dahiya
Editor

KEDARNATH AGGARWAL INSTITUTE OF MANAGEMENT
Established in 1995, Kedarnath Aggarwal Institute of Management (KAIM), has in a short span of its
existence, earned a brand name for itself in the field of management education. The institute set up under
the auspices of the Dadri Education Society (DES) - an educational and philanthropic body founded and
nurtured by Late Sh. Ram Krishan Gupta, an Ex-M.P., veteran freedom fighter and epitome of all virtues, is
constantly surging ahead by undertaking quality enhancement measures for excellence. The Institute af-
filiated to M.D. University, Rohtak and recognised by AICTE, New Delhi and the Govt. of Haryana offers full
time two year MBA programme in four major areas with an enrolment of MAT qualified 240 students. The
Institute is located at Charkhi Dadri, about 90 km from Delhi, 30 km from Bhiwani and 50 km from Rohtak
city. The Institute possessing a sprawling campus of nearly 100 acres of land along with 12 sister institu-
tions on the outskirt of the town is equipped with the state-of-the-art infrastrucure. It has a modern and
innovative building which is architecturally designed and environmental friendly. Its placement record of
students is very impressive and many of them hold coveted positions in academics, industry, business and
other organisations in India and abroad. The Institute has an ambitious futuristic academic and research
plan so as to meet, squarely, the growing needs and aspirations of academics and corporate world alike.
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KAIM JOURNAL OF MANAGEMENT AND RESEARCH
Bi-annual (Refereed) Journal of KAIM
Vol. 2, No. 2, November - April 2010
PUBLISHED BY
Chief Patron : Sh. Jai Parkash Aggarwal, Chairman, KAIM Trust
Patron : Sh. Ashok Kumar Gupta, FCA, General Secretary, KAIM
Editor : Prof. L.N. Dahiya, Director, KAIM
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Editorial Assistance : Dr. Surender Kumar, Mr. Sachin Suhag, Dr. R. Darshan and Mrs. Promila Suhag KAIM
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M.D. University, Rohtak
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M.D.S. University, Ajmer
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Haryana School of Business and
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G.J. University of Science and Technology, Hisar
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Punjabi University, Patiala
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The Institute of Chartered Accountants of India,
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Director, Indian Institute of Finance
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Department of Commerce and Management
University of Jammu, Jammu
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Delhi School of Economics
University of Delhi, Delhi
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University of Rajasthan, Jaipur
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Banaras Hindu University, Varanasi
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Department of Tourism and Hotel Management
M.D. Univeristy, Rohtak
Prof. A.K. Saihjpal
University Institute of Management Sciences
Panjab University, Chandigarh
Prof. J.S. Mor
Former Director, KAIM,
Charkhi Dadri
Prof. M.L. Bansal
Director
Dronacharya Institute of Management and
Technology, Kurukshetra
Prof. Bal Krishan
Faculty of Commerce and Management
H.P. University, Shimla
Prof. R.K. Mittal
Vice-Chancellor
T.M. University, Moradabad
Prof. Naresh Khatri
Department of Hospital Management
Columbia State University, USA
Prof. Mohammad Saeed
Department of Business Administration
Minot State University, Minot
North Dakota, USA
Prof. R.D. Pathak
Chairman, Department of Management
The University of the South Pacific
Suva, Fiji

GUIDELINES FOR AUTHORS
KAIM Journal of Management and Research, invites original research papers from academicians and professionals in
the area of management and other allied fields. While submitting manuscripts for the journal, contributors
should follow the following guidelines:
1. Authors should submit a hard copy of their manuscript, clearly typed, double-spaced on one side of A-4
size bond paper with wide margins and also a soft copy. Paper without CD will not be entertained. Paper
may also be sent electronically (in MS Word format) to our e-mail address. The cover page of the paper shall
contain the title of the manuscript, author’s name, affiliation, postal/email address and phone number. Book
reviews and summary of Ph.D thesis not exceeding two pages, are also welcome.
2. Each manuscript should include an abstract not exceeding 150 words and the length of the full paper should
not exceed 15 typed pages in 12 point font size.
3. References must be arranged alphabetically indicating year within brackets exactly matching that in the
text. Authors should desist in referencing those papers which are not quoted in the text. Titles of books and
journals be written in italics. Examples :
(i) For Books :
Kotler, Philip (2003), Marketing Management, 11th Ed., Prentice Hall of India, New Delhi, pp. 52-56.
(ii) For Journals :
Dahiya, L.N. and K.P. Singh (2000), “Understanding E-Commerce Impact”, I n d i a n
Management, August, pp. 64-73.
References must be typed on a separate page at the end of the manuscript. References’ list should mention
only those sources actually cited in the text or notes. Tables, figures, charts and other diagrams must
be numbered and embeded with an informative heading suitable for direct reproduction. Sources must
be given just below at foot of the table. Appendix (if necessary) may be provided but only after references.
Questionnaire used should also be sent, if necessary, along with the manuscript.
4. Notes (Footnotes) should be avoided. If necessary, then it should be indicated by serial number in the text (1,
2, ......) at the end of the research paper on separate sheet just before references. Notes should not be mixed
with references.
5. All articles, research papers should be original and must not be published elsewhere. KAIM assumes no
responsibility for the views of the authors.
6. Please check your manuscript for clarity, grammar, spelling, punctuation and consistency of references to
minimize editorial changes.
7. Book reviews must provide details such as name of author/ title of the book reviewed/place of publication/
publisher/year of publication/ press/ price and pages.
8. The Editorial Board reserves the right to select and adjust the articles to the style of the journal.
9. An author will receive a complimentary copy of the journal in which his/her paper appears. However, the
manuscript not accepted for publication will not be returned to the author.
10. The copyright of the article and other material, published in the journal, shall lie with the publisher.
11. All correspondence relating to the submission of papers, subscription and all other enquiries be addressed/
emailed to :
Mrs. Supriya Dhillon, Managing Editor, KAIM Journal of Management and Research, Kedarnath Aggarwal
Institute of Management, Charkhi Dadri - 127306, Haryana. Ph. 01250-221489, 223644, Fax : 01250-221489,
e-mail: info_kaim@yahoo.com
Printed and Published by : Prof. L.N. Dahiya for and on behalf of KAIM – Charkhi Dadri –127306

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KAIM JOURNAL OF MANAGEMENT
AND RESEARCH
Vol. 2 No. 2 November - April 2010 ISSN:0974-9462
An Entrepreneurship Case : Cal-Dak Cabinets of North Dakota,
USA
Market Reactions to Stock Splits : Empirical Evidences From Indian
Equity Market
A Study on Factors Determining Buying Behavior of Handicraft
Items - With Reference to Handicrafts of Orissa
Estimation of Total Irrigation Subsidies in Haryana
Microfinance in India : Its Growth, Challenges and Prospects
On-Line Share Trading and Customers’ Satisfaction : An Empirical
Study
Management of Non-Performing Assets in Co-Operative Banks in
Haryana
Marketing Mix of Healthcare Services of Specialty Hospitals in
North India
Non-Performing Assets in Public Sector Banks : An Emerging
Bottleneck in Kenya
Determinants of Capital Structure in Small scale Industries
Inclusive Growth - A Case of Rural Sector
Customer Satisfaction and Bancassurance : A Comparative Study
of Public Vs Private Customers
Human Resource Management in Haryana Tourism Corporation
Protection of Traditional Medicine under Intellectual Property
Regime
Notes
BI-ANNUAL JOURNAL OF KAIM
Mark B. Waldera, M.Saeed and James
Ondracek
Sultan Singh and
Sakshi Choudhary
R.K. Bal and
Manjusmita Dash
N.K. Bishnoi and
Sushil Sharma
S.S. Khanka
Surinder Singh Kundu and
Sanjeet Kumar
Hawa Singh and
Neelam Rani
M.R.P. Singh and
Rajinder Singh
Surender Banawat, Andrew Songoro
Nyangau and
Richard Nyangosi
Sushma Rani Verma
P.K. Yadav, Sanjay Mishra
and R.P. Singh
Vinod Kumar Bishnoi and
Supriya Dhillon
Rajwanti Sharma and
J.P. Sharma
Vishal Mahalwar

CONTENTS
An Entrepreneurship Case : Cal-Dak Cabinets of North Dakota, USA
Mark B. Waldera, M.Saeed and James Ondracek
Market Reactions to Stock Splits : Empirical Evidences From Indian Equity Market
Sultan Singh and Sakshi Choudhary
A Study on Factors Determining Buying Behavior of Handicraft Items - With Reference
to Handicrafts of Orissa
R.K. Bal and Manjusmita Dash
Estimation of Total Irrigation Subsidies in Haryana
N.K. Bishnoi and Mr. Sushil Sharma
Microfinance in India : Its Growth, Challenges and Prospects
S.S. Khanka
On-Line Share Trading and Customers’ Satisfaction : An Empirical Study
Surinder Singh Kundu and Sanjeet Kumar
Management of Non-Performing Assets in Co-Operative Banks in Haryana
Hawa Singh and Neelam Rani
Marketing Mix of Healthcare Services of Specialty Hospitals in North India
M.R.P. Singh and Rajinder Singh
Non-Performing Assets in Public Sector Banks : An Emerging Bottleneck in Kenya
Surender Banawat, Andrew Songoro Nyangau and Richard Nyangosi
Determinants of Capital Structure in Small scale Industries
Sushma Rani Verma
Inclusive Growth - A Case of Rural Sector
P.K. Yadav, Sanjay Mishra and R.P. Singh
Customer Satisfaction and Bancassurance : A Comparative Study of Public Vs Private
Customers
Vinod Kumar Bishnoi and Supriya Dhillon
Human Resource Management in Haryana Tourism Corporation
Rajwanti Sharma and J.P. Sharma
Protection of Traditional Medicine Under Intellectual Regime
Vishal Mahalwar
Notes
Guidelines for Authors
1
9
24
35
41
49
57
63
69
76
83
86
91
98

ISSN : 0974-9462