Amended Cooperative Act paves way for freedom to PACS
The change is based on the recommendations of the Vaidyanathan panel
Societies under CCS will enjoy freedom in financial, administrative matters
Madikeri: The primary agriculture cooperative societies (PACS) can no longer use the word “bank” as per the Karnataka Cooperative Societies (Amendment) Ordinance, 2009, which was published in the Karnataka Gazette Extra-Ordinary on October 30, 2009.
There are 69 PACS, called as Vyavasaya Seva Sahakara Sangha Niyamita (VSSSNs) in Kodagu, and most of them are using the word “bank”.
As per the amended Act, which came into force on November 3, 2009, all the VSSSNs would have to convene a special general body meeting within three months of the date from which it [Act] came into being, which is February 3, 2010, and substitute the word “bank” with “society”.
According to the Department of Cooperation here, the amended rule said that no PACS or its federation, or association, would, except those which are permitted to act as a bank under the Banking Regulation Act (Central Act of 10 of 1949), be allowed to be registered with the word “bank”, “banker” or “banking” or any other derivative of the word “bank”.
The amendments were brought in based on the recommendations of the Vaidyanathan Committee, which suggested to the Union Government to come up with far-reaching changes in the cooperative credit structure (CCS).
The Vaidyanathan Committee report was aimed at reviving the short-term CCS, involving the PACS. Under this, accumulated losses of the PACS would be wiped out and they would be made a well-managed, a vibrant medium to serve the credit needs of rural India, especially small and marginal farmers.
The liability for funding the financial package would be shared by the Union and the State Governments and the CCS, based on the origin of the loss and existing commitments.
The proposed financial assistance would be a one-time package.
However, the amendment paves way for increased freedom to PACS, a source in the Cooperative Department said.
According to the special provisions applicable to societies in the CCS, every person or a group holding a minimum deposit of Rs. 5,000 for a minimum continuous period of one year in the PACS would become a member of the society by subscribing the minimum share capital specified in the bye-laws and have voting rights. And those having a deposit of less than Rs. 5,000 for a period of less than one year would be eligible to become a nominal member.
The societies under the CCS would enjoy freedom in all financial and administrative matters.
The units could decide on the interest rates on deposits and loans in conformity with the guidelines of the Reserve Bank of India, can borrow, invest, deposit surplus funds, re-structure loan policies and other business policies.
Issues relating to recruitment, promotion, staff training, posting, compensation to the staff could be handled by the PACS themselves. PACS could borrow from any financial institution regulated by the RBI.
Significantly, the society could become a member of a federal cooperative society or a secondary cooperative society registered under the provisions of the Karnataka Souharda Act of 1997. The society under the CCS could now invest or deposit, subject to the guidelines of the RBI, in any bank or financial institution, not necessarily in the federal body to which it is affiliated. Similarly, the units could borrow from those institutions.
The source said that nearly Rs. 700 crore benefits would accrue to the loss-making societies under the CCS in Karnataka. Kodagu societies (VSSSNs) would benefit of Rs. 5.03 crore.
As many as 24 VSSSNs, nine in Madikeri taluk, eight in Somwarpet taluk and seven in Virajpet taluk, would benefit from the package in the district.
However, the accumulated loss of the VSSSNs in Kodagu pertaining to direct advances made by them or invested on their own in any business stood at Rs. 1.17 crore, which would have to be borne by the VSSSNs themselves.