we viewed that action as insurance against the possibility that the still widespread weakness would become entrenched. with inflation expectations well contained, this additional monetary stimulus seemed to offer worthwhile insurance against the threat of persistent economic weakness and unwelcome substantial declines in inflation from already low levels. in the weeks that followed, financial market conditions continued to improve, but only haltingly. the additional monetary stimulus and the absence of further revelations of major corporate wrongdoing seemed to provide some reassurance to investors. equity prices rose, volatility declined, risk spreads narrowed, and market liquidity increased, albeit not to levels that might be associated with robust economic conditions. at the same time, mounting concerns about geopolitical risks and energy supplies, amplified by the turmoil in venezuela, were mirrored by the worrisome surge in oil prices, continued skittishness in financial markets, and substantial uncertainty among businesses about the outlook. partly as a result, growth of economic activity slowed markedly late in the summer and in the fourth quarter, continuing the choppy pattern that prevailed over the past year. according to the advance estimate, real gdp expanded at an annual rate of only ¾ last quarter after surging 4percent in the third quarter. much of that deceleration reflected a falloff in the production of motor vehicles from the near - record level that had been reached in the third quarter when low financing rates and other incentive programs sparked a jump in sales. the slowing in aggregate output also reflected aggressive attempts by businesses more generally to ensure that inventories remained under control. thus far, those efforts have proven successful in that business inventories, with only a few exceptions, have stayed lean - a circumstance that should help support production this year. indeed, after dropping back a bit in the fall, manufacturing activity turned up in december, and reports from purchasing managers suggest that improvement has continued into this year. excluding both the swings in auto and truck production and the fluctuations in non - motor - vehicle inventories, economic activity has been moving up in a considerably smoother fashion than has overall real gdp : final sales excluding motor vehicles are estimated to have risen at a 2¼ % annual rate in the fourth quarter after a similar 1¾ % advance in the previous quarter and an average of 2 % in the first half. thus, apart from these quarterly fluctuations, the economy has largely extended the broad patterns of performance that were evident at the time of my july testimony. most notably, output has continued to expand,

productive investments benefitting the society in large. lack of hr policies and professionalism 17. the quality of human resources is an important determinant of the success of any organization. this aspect, however, has not received due importance in the cooperative institutions. the cooperative banks are headed by a committee of elected members who are not professionals and do not possess sound knowledge in banking functions. the committee takes crucial business decisions involving sanction of loans, investments, interest rates on deposits and loans, etc. which require a minimum degree of skill and expertise. often, the role of chief executive officers in these areas is minimal. 18. cooperatives do not have well defined capacity building and hr policies in crucial areas like recruitment, placement, training, career progression, succession planning, etc. recruitments are done without any objective and systematic manpower assessment. all these have led to inefficiency and lower productivity. though there is a system of training in place in many cooperative banks, there is no need - assessment to align training with the current and future staff requirements. training programs should be designed to achieve skill upgradation in areas related to audit and expenditure, management and aptitude development. it is also necessary to keep the staff sufficiently motivated through periodic job rotation, job enrichment and recognition of performance. poor recovery performance 19. frequent loan waiver announcements by governments aimed to garner electoral support have vitiated the credit discipline among the borrowers and affected the recovery atmosphere. the resultant weak finances, growing npas and poor resource base have contributed to the declining performance of the cooperatives, particularly at the grass root level. since these grass root institutions depend on liquidity support from higher financing bis central bankers ’ speeches agencies like state and central cooperative banks, non - payment of dues impairs the financial health of the entire chain. inadequate internal control and audit 20. cooperatives do not pay attention to implementation of adequate and foolproof internal checks and control. balancing of books and reconciliation of entries are in arrears for unduly long periods. as a result, there is frequent incidence of frauds involving the staff who game the system. very often, these cases are held up due to protracted litigation in courts of law and the guilty are not brought to book. there is absence of effective audit mechanism. there are delays in the conduct of audits and submission of reports. quality of audit leaves much to be desired in as much as it fails to address the gaps in the systems and processes and