The Central Government of India has introduced a Bill to amend the Multi-State Co-operative Societies Act, 2002, with the aim of improving the cooperative movement and addressing the issues and challenges faced by financial cooperatives. This essay discusses the cooperative societies in India, the status of financial cooperatives, the issues and challenges faced by them, and the government’s measures to address these challenges.
Cooperative Societies in India
A cooperative society is a voluntary association of individuals with common economic interests. The cooperative movement in India has been present since independence, with the 97th Constitutional Amendment Act in 2011 establishing the right to form cooperative societies as a fundamental right. This amendment also added a new Directive Principle of State Policy on the Promotion of Cooperative Societies and authorized the Parliament to establish relevant laws for multi-state cooperative societies.
Financial Cooperatives in India
Currently, there are around 10 lakh cooperatives in India, of which 1.05 lakh are financial cooperatives. Rural cooperatives have a three-tier system, with primary agricultural cooperative societies, District Central Cooperative Banks, State Cooperative Banks, and rural cooperatives for long-term lending. India also has 1,514 primary urban cooperative banks, with 52 scheduled and the rest unscheduled, some of which are multi-state UCBs.
Issues and Challenges Faced by Financial Cooperatives
One of the major challenges faced by financial cooperatives in India is the dispute over jurisdiction. Cooperatives are kept in the State List while banking is included in the Union List, leading to dual control over cooperative banks. This has resulted in poor corporate governance, which has been the primary reason behind the failure of many cooperative banks. The collapse of the Punjab and Maharashtra Cooperative (PMC) Bank in 2019 was mainly due to financial irregularities, failure of internal control, and under-reporting of exposures.
Government’s Measures
To address these challenges, the Central Government has introduced a Bill to amend the Multi-State Co-operative Societies Act, 2002. The key features of this Bill include the establishment of the Cooperative Election Authority to conduct the election of board members, provisions for amalgamation of UCBs with other multi-State UCBs, the creation of a fund for the rehabilitation of sick multi-State UCBs, restrictions on the redemption of government shareholding, and the appointment of Co-operative Ombudsman for the redressal of complaints.
Why In News
The Central Government’s recent introduction of a bill to amend the Multi-State Co-operative Societies Act, 2002, aims to address the issues and challenges faced by cooperative societies and financial cooperatives in India. The bill proposes key measures to improve the governance and regulation of these institutions, with the goal of promoting their growth and sustainability.
MCQs about Cooperative Societies in India
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The Multi-State Co-operative Societies Act, 2002, was recently amended by:
A. The Central Government
B. The State Governments
C. The RBI
D. The Ministry of Agriculture
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Which of the following is not a feature of the recently introduced Bill to amend the Multi-State Co-operative Societies Act, 2002?
A. The Central Government will establish the Cooperative Election Authority to conduct the election of board members
B. Provision for amalgamation of UCBs with other multi-State UCBs
C. There will be no restrictions on the redemption of government shareholding
D. One or more Co-operative Ombudsman will be appointed by the Central Government for the redress of complaints
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What is the primary reason for the decline of the number of Urban Co-operative Banks (UCBs) in India?
A. Disputes over jurisdiction between State governments and the RBI
B. Poor corporate governance
C. Lack of funds
D. Competition from other types of banks
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What is the significance of co-operative societies in India?
A. They can help in the formalization of the economy
B. They can reduce inequality and improve the standard of living of the poor
C. They can rejuvenate growth
D. All of the above
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