Mumbai: Stricter rules to keep co-op societies clean

The state has decided not to allow loans to be given to relatives of directors of credit societies, restrain administrative and establishment expenditure and other similar regulations.

Ahead of the upcoming Zilla Parishad and municipal corporation elections, the Maharashtra government on Tuesday decided to introduce stringent regulations to curb financial mismanagement in cooperative credit societies — the backbone of the rural economy.

HT Photo

The state government led by the Bhartiya Janata Party (BJP) has decided not to allow loans to be given to relatives of directors of credit societies, restrain administrative and establishment expenditure and other similar regulations. It has done so by clearing a proposal to amend the Maharashtra Cooperative Societies Act.

Violations of the rules will attract fine and imprisonment of up to three years, sources said

Financial mismanagement in cooperative credit societies, mainly run by politicians, is not new to the state. In Maharashtra, of 15,182 credit societies, the non-performing assets (NPA) of 469 credit societies are very high. This has been attributed to bad investments, loans being disbursed without considering the repayment capacity, among others. As a result, depositors have had to suffer, as often, credit societies were found to have failed to return their deposits, said an official from the cooperation department.

Now with this decision, the government has decided to streamline activities of credit societies. Very soon, a regulatory body headed by the cooperation commissioner will be formed to monitor these societies. Further, they will have to maintain liquidity so credit societies continue to operate smoothly and depositors will not be cheated, the official said. Last year, the state had said directors of cooperative banks will be disqualified for 10 years if they are involved in financial irregularities and the state can nominate up to two members in the board of cooperative banks. These were strongly opposed by Congress and NCP — two parties that control cooperative sector .

The co-operative sector in the state has a three-tier credit structure. The rural economy is directly associated with these structures.