Amendment of Multi-State Co-operatives Societies Act, 2002

Amendment of Multi-State Co-operatives Societies Act, 2002

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April 15. 2023

Recently, the central government introduced a Bill in Parliament for the amendment of the Multi-State Co-operatives Societies Act, 2002.

Insight on Cooperative Societies

About

1. A co-operative society is a type of voluntary association formed by people with common needs who come together to achieve similar economic interests.

2. The objective is to serve the requirements of poorer people within the society through mutual help and self-help principles.

3. The concept of co-operative is as old as the Independence of India.

Significance - Co-operatives have tremendous potential in formalising an economy, rejuvenating growth and minimising inequality in addition to improving the living standards of poorer sections.

• Ministry of Cooperation - The Union Ministry of Cooperation was set up in 2021; earlier the Ministry of Agriculture took care of its mandate.

Financial Cooperatives

1. Status in India - At present, there are nearly 1.05 lakh financial co-operatives out of a total of 10 lakh co-operatives. The Rural co-operatives come under financial co-operatives and they have a three-tier arrangement with about 1.02 lakh primary agricultural co-operative societies (PACS), 34 State Cooperative Banks (SCBs), 351 District Central Cooperative Banks (DCCBs) and additionally, 616 rural cooperatives to aid long-term loans. The nation has 1,514 primary urban co-operative banks (UCBs), out of them 52 are scheduled and the remaining unscheduled while a few are multi-state UCBs.

2. Challenges and Issues - Within conflict on jurisdiction, the Indian Constitution clearly enlists co-operatives within the State List whereas ‘banking’ remains within the Union List.Besides, the State governments own massive responsibility for improving non-financial co-operatives but without jurisdictional disputes. There is dual control in case of both rural and urban co-operative banks that leads to conflicts on jurisdiction. Also, the Registrar of Co-operatives administers incorporation, audit, liquidation, management and supersession, while the RBI prescribes the banking licence, capital adequacy, prudential regulation, etc. A lot of expert committees have suggested that dual control on co-operative banks have been an impediment to their healthy growth.

Within unhealthy corporate governance, a major reason for the collapse of many co-operative banks is bad corporate governance. UCBs have listed more than 1,000 fraud cases within the past five years.

Measures by the government - In December 2022, the central government introduced an amendment Bill to the Multi State Co-operatives Societies Act, 2002.

Source - BL