Mangalore: State govt imposes regulations on non-agricultural, multipurpose co-operative societies
ಕೃಷಿಯೇತರ, ವಿವಿಧೋದ್ದೇಶ ಸಹಕಾರ ಸಂಘದ ಮಿತ್ತ್ ರಾಜ್ಯ ಸರ್ಕಾರ ನಿಯಮನ್ ವಿಧಿಸಾವುಂಡು.
Mangalore: Effective April 1, 2024, non-agricultural and multipurpose cooperative societies are no longer permitted to set interest rates for deposits and loans arbitrarily, as per an order issued by the state government. This decision, enacted under Column 3B of the Karnataka Cooperative Societies Act of 1959, aims to safeguard the interests of both depositors and borrowers.
In accordance with the RBI Act of 1934 and the Banking Regulation Act of 1949, cooperative societies are directed not to contravene the directives of the Controller of Cooperative Societies. However, it has been observed by the RBI that these rules are being disregarded.
The government and the finance department have received numerous complaints regarding the lack of financial prudence and the imposition of high interest rates on loans by cooperative societies. There are also allegations that interest rates offered on deposits do not align with the credit needs of the members. These issues have been deliberated in both houses of the legislature and in meetings convened by the RBI.
The situation escalated as the government received numerous reports of fund misappropriation and defrauding of depositors by cooperative societies. Despite several directives issued to protect the interests of the public and borrowers, cooperative societies have failed to comply.
Harish Acharya, president of Vishwakarma Cooperative Bank, Mangalore, expressed concerns that the new government order would impede the growth of cooperative societies. He asserted that cooperative societies operate autonomously and should not be subject to government interference. He announced plans to challenge the state government’s order in the high court.
Under the new order, only the State Bank of India (SBI) will determine interest rates for various types of deposits, with an additional 2% interest rate. Senior citizens may be offered an additional 0.5% interest. Pygmy collection deposits are subject to a maximum commission of 3%. Primary cooperative societies or firms formed under the law are prohibited from collecting deposits. Cooperative funds cannot be invested in the stock market. Deposits cannot be accepted by offering commissions and incentives through marketing executives, as cooperatives are local financial institutions. Additional resources can only be invested in District Central Cooperative or Apex Banks. The maximum interest rate on loans should not exceed 12%, with an additional interest rate of 2% in case of default. Management must revise interest rates and submit reports to the district sub registrar of cooperative societies. Senior cooperative officers must conduct quarterly reviews of interest rates, and strict action will be taken against violators. Any departmental officer failing to implement directives will face disciplinary action.
