Ahead of the civic polls, the government Tuesday cracked the whip on non-agricultural co-operative credit societies across the state. In what it said was an attempt to safeguard depositors, the government will now amend the Maharashtra Co-operative Institutions Act, 1960 to regulate the functioning of these co-operative societies.
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To curb cases of misappropriation and mismanagement, the government also plans a regulatory body under the chairmanship of the state commissioner for co-operatives. The regulator will have oversight on disbursal of loans, setting a uniform interest rate on deposits and other activities of the co-operative credit societies. Also, there will be restrictions on these societies in terms of giving priority to relatives of their board members or other known persons for sanctioning loans.
There are 15,182 co-operative credit societies in urban and rural areas, many of them controlled by politicians. The Banking Regulation Act, which applies to commercial banks, does not apply fully to cooperative banks. As a result, several norms of the Reserve Bank of India (RBI) do not apply to these entities, giving a relatively free hand to the management of these co-operatives.
“The matter came to light in 2007, when it was found that these co-operative credit societies had disbursed loans to people without conducting any sort of background check. There were instances where the amount disbursed as loan was more than the person’s eligibility. Due to these instances of misappropriation and mismanagement, a number of urban and rural non-agricultural co-operative societies in the state were saddled with bad debts,” said a senior official.
In 2009, around 469-odd societies were declared bankrupt, thus locking depositors’ money. Besides, around 135 were revived, licences of 35 were cancelled and action launched against 104 auditors and over 2,500 officers of such societies. “The state government had then sanctioned Rs 200 crore to be repaid to depositors, especially to help women and those Below Poverty Line (BPL),” the official said. “The new move will help regulate the disbursal of loan and its repayment so that credit societies do not turn into Non Performing Assets (NPAs). Similarly, the amendment will also help prevent incidents where funds of credit societies are diverted to work other than loan disbursal,” he added.
The new regulation will make it mandatory for these co-operative societies to contribute towards “stabilisation and liquidity spot fund” with the co-opertaives commissioner stepping in in a “financial crisis”.
Not only this, the new regulations will ensure that directors of banks and societies, which are found to have violated norms, will be barred from all cooperative institutions. Under the new law, the government is making a provision for punishing scamsters, he said.
There have been amendments and additions to various sections of the Maharashtra Co-operative Institutions Act, 1960. While Section 146 (R) 1 to 8 will list offences, Section 147 will list punishments for those offences.
The Co-operative Crisis
According to data released in October 2015 by the then minister of state for co-operatives Dada Bhuse, there are 15,182 co-operative credit societies in Maharashtra of which 5,851 are loss-making and 9,331 profit-making. The total NPA of these societies were to the tune of Rs 1,917 crore. Till October 2015, these societies had total deposits of Rs 23,783 crore. A senior official said, “The total NPA since 2007 was around Rs 2,000 crore that was to be recovered by the state government. Till date, approximately Rs 1,100 crore has been recovered.”
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