Enabling Cooperative Societies Act for Fast Tracking Micro Finance and Financial Inclusion in India Dr S O Junare, Director National Institute of Cooperative Management, Gandhinagar Gujarat With Special Reference to the Present Status of the Gujarat State Cooperative Societies Act 1961

We proud of our modern cities, our high tech hospitals, our shining universities, our significant industrial growth, our huge Foreign Exchange Reserve, we as a economic superpower, and our bright minds who go on to earn millions. And We should be--- But We proud of our modern cities, our high tech hospitals, our shining universities, our significant industrial growth, our huge Foreign Exchange Reserve, we as a economic superpower, and our bright minds who go on to earn millions. And We should be--- But But we should equally be ashamed of our dying villages, urban slums, where millions population sleep hungry, illiteracy is rampant and curable diseases weaken our people. But we should equally be ashamed of our dying villages, urban slums, where millions population sleep hungry, illiteracy is rampant and curable diseases weaken our people. Ila Bhatt at High level event on Milennium Development Goal at UN General Assembly in New York on 25 th Sept Ila Bhatt at High level event on Milennium Development Goal at UN General Assembly in New York on 25 th Sept. 2008

Recent Modification in Gujarat State Cooperative Societies Act The Gujarat State Cooperative Societies Act of Gujarat Legislature, having been assented to by the Governor on Section – 1 : Short Title and Commencement: Section – 1 : Short Title and Commencement: The Gujarat State Cooperative Societies Act will be called As “The Gujarat State Cooperative Societies (Amendment) Act 2008 The Gujarat State Cooperative Societies Act will be called As “The Gujarat State Cooperative Societies (Amendment) Act 2008 It shall be deemed to have come into force on 8 th October It shall be deemed to have come into force on 8 th October 2008.

Recent Modification in Gujarat State Cooperative Societies Act Section – 2: Definition of Cooperative Credit Structure After clause 7, the following clause shall be inserted, namely: (Clause 7 – Defi. Of Coop Bank) (7 A): The Cooperative Credit Structure means (I) the PACS, (II) DCCBs, and (III) SCBs.

Recent Modification in Gujarat State Cooperative Societies Act Section – 6: In case of Cooperative Credit Structure I.e. (I) PACS, (II) DCCBs, and (III) SCBs. The society shall have power to decide their respective area of operation without any restriction. Section:13 – Applications for registration of amendment of bye laws of a society shall be disposed of within 60 days from the date of receipt.

Recent Modification in Gujarat State Cooperative Societies Act Section – 22: Person who may become member Section – 22: Person who may become member In sub section (1) after clause (f) the following clause shall be inserted. In sub section (1) after clause (f) the following clause shall be inserted. “(g) Any group of individuals eligible under clause (a) whether incorporated on not whether established or not by or under any law.” “(g) Any group of individuals eligible under clause (a) whether incorporated on not whether established or not by or under any law.” (Now SHGs can become a member of any Cooperative Society of three tier cooperative credit structure)

Recent Modification in Gujarat State Cooperative Societies Act Section – 22: Person who may become member Section – 22: Person who may become member In sub section (2) after the following clause shall be inserted. In sub section (2) after the following clause shall be inserted. “(g) a person seeking admission as a member of a society, if duly qualified for membership of such society under the provisions of Act, rules, bye laws of the society, may make the application and the society will communicate decision with in 3 months.” “(g) a person seeking admission as a member of a society, if duly qualified for membership of such society under the provisions of Act, rules, bye laws of the society, may make the application and the society will communicate decision with in 3 months.”

Recent Modification in Gujarat State Cooperative Societies Act Section – 22: Person who may become member Section – 22: Person who may become member In sub section (2) after the following clause shall be inserted. In sub section (2) after the following clause shall be inserted. All depositors having deposits of Rs of above for a period of 1 year and the borrowers shall be compulsorily made members in the PACs. All depositors having deposits of Rs of above for a period of 1 year and the borrowers shall be compulsorily made members in the PACs. Provided that the depositors having deposits less than Rs shall be made nominal members Provided that the depositors having deposits less than Rs shall be made nominal members State Government may modify the minimum amount by notification in the Official Gazette for Class of Society. State Government may modify the minimum amount by notification in the Official Gazette for Class of Society.

Recent Modification in Gujarat State Cooperative Societies Act Section – 27: Prohibition on Exercise of Voting Rights of a member Section – 27: Prohibition on Exercise of Voting Rights of a member The person who has committed a default and remains as defaulter in making repayment of loan or interest thereron for a period of one year from the due date, shall not be entitled to exercise voting rights of a member of a society till all such repayments are made. The person who has committed a default and remains as defaulter in making repayment of loan or interest thereron for a period of one year from the due date, shall not be entitled to exercise voting rights of a member of a society till all such repayments are made.

Recent Modification in Gujarat State Cooperative Societies Act Section – 44 A: Freedom to the Committee of Cooperative Credit Structure Section – 44 A: Freedom to the Committee of Cooperative Credit Structure All cooperative Credit Societies of under Cooperative Credit Structure (as section 22), will have freedom to decided its financial and internal administrative matters: interest rates on deposits & loans, subject to RBI directives, borrowing, investment, deposits of surplus fund, loan policies, and business policies, all personnel policies, internal check and control system appointment of auditor, their compensation, All cooperative Credit Societies of under Cooperative Credit Structure (as section 22), will have freedom to decided its financial and internal administrative matters: interest rates on deposits & loans, subject to RBI directives, borrowing, investment, deposits of surplus fund, loan policies, and business policies, all personnel policies, internal check and control system appointment of auditor, their compensation, Borrowing from any financial institutions regulated by Reserve Bank of India. Borrowing from any financial institutions regulated by Reserve Bank of India.

Recent Modification in Gujarat State Cooperative Societies Act Section – 45: Membership is compulsory to deposit or borrow from cooperative credit society Section – 45: Membership is compulsory to deposit or borrow from cooperative credit society No person or group of person other than member shall eligible to borrow from or make deposit in PACs. No person or group of person other than member shall eligible to borrow from or make deposit in PACs. Section 51: State Government will not subscribe more than 25% of total share capital of any Credit Society under 3 Tier Credit Structure. Section 51: State Government will not subscribe more than 25% of total share capital of any Credit Society under 3 Tier Credit Structure.

Recent Modification in Gujarat State Cooperative Societies Act 73 A: Freedom of Affiliation or Disaffiliation with a federal society of choice 73 A: Freedom of Affiliation or Disaffiliation with a federal society of choice Cooperative Societies under 3T Credit Structure have freedom of Affiliation or Disaffiliation with a federal society of choice, if resolution passed in AGM with three-fourth majority. Cooperative Societies under 3T Credit Structure have freedom of Affiliation or Disaffiliation with a federal society of choice, if resolution passed in AGM with three-fourth majority.

Recent Modification in Gujarat State Cooperative Societies Act Section 74: subsection (1) Section 74: subsection (1) There shall be two professionals on the committee of SCB and GSCB There shall be two professionals on the committee of SCB and GSCB The professionals will have all rights including voting right. The professionals will have all rights including voting right. Section 76: Qualification for Appointment of qualified CEO and Directors by DCCB & SCB will be decided by RBI, NABARD Section 76: Qualification for Appointment of qualified CEO and Directors by DCCB & SCB will be decided by RBI, NABARD

Recent Modification in Gujarat State Cooperative Societies Act Section 80: subsection (2) Section 80: subsection (2) There shall be only one Government Nominee on the Board of SCB and GSCB where the Government has subscribed to the Share Capital. There shall be only one Government Nominee on the Board of SCB and GSCB where the Government has subscribed to the Share Capital. No Government nominee will be nominated on the board of PACs whether Govt. has subscribed share capital or not. No Government nominee will be nominated on the board of PACs whether Govt. has subscribed share capital or not.

Recent Modification in Gujarat State Cooperative Societies Act Section 81 A:The Registrar can remove the committee of PACs if: Section 81 A:The Registrar can remove the committee of PACs if: It incurs loss for 3 consecutive years It incurs loss for 3 consecutive years If serious financial irregularities, fraud identified If serious financial irregularities, fraud identified If there is perpetual lack of quorum over a period of 3 months If there is perpetual lack of quorum over a period of 3 months After removal the members will not be eligible to become a member for atleast next 3 years. After removal the members will not be eligible to become a member for atleast next 3 years.

Recent Modification in Gujarat State Cooperative Societies Act Section 84 :The Audit of District Central Cooperative Bank and SCB will be done only by the Chartered Accountant Section 84 :The Audit of District Central Cooperative Bank and SCB will be done only by the Chartered Accountant 115A: Appointment of liquidator with in two months by the permission of RBI. 115A: Appointment of liquidator with in two months by the permission of RBI. 145 F: Defaulter in District Central Cooperative Bank or SCB for more than 12 month period can be elected or can be contd. As a director. 145 F: Defaulter in District Central Cooperative Bank or SCB for more than 12 month period can be elected or can be contd. As a director.

Recent Modification in Gujarat State Cooperative Societies Act Section 146 Section 146 Prohibition on PACS to use word Bank, Banking, Baker in its name. Prohibition on PACS to use word Bank, Banking, Baker in its name.

Modification in Gujarat State Cooperative Societies Act Chapter : X-B (Chapter inserted after failure of Madhavpura and other urban cooperative banks) Section 115 C: Qualifications & Disqualifications for being committee members: member for 3 yrs. Deposit 25K for one year, No Defaulter of any bank or society, Company in which he/she has interest not in default of loans, not committed crime punishable for fine of Rs. 25K or 6 month imprisonment.

Modification in Gujarat State Cooperative Societies Act Chapter : X-B (Chapter inserted after failure of Madhavpura and other urban cooperative banks) Joint Accountibility and Liabilities of Directors have been fixed Section 115 D: Right to vote (1 year member) Section 115 E: 2 Terms (3 year each) as Chairman, VC or MD. Sections 115 F to 115 L Other provisions (Timely submission of correct Returns, Action of recovery in one year, criminal proceeding initiated Timely against defaulters)

Suggested Modifications in Gujarat State Cooperative Societies Act Section – 22 (Applicability to other cooperatives also) Section – 22 (Applicability to other cooperatives also) SHG to be eligible to become a member of any other cooperative societies. Such as Dairy, Labor, Marketing, Urban Credit Societies, Processing Cooperatives and Handloom and Handicraft Cooperative Societies. SHG to be eligible to become a member of any other cooperative societies. Such as Dairy, Labor, Marketing, Urban Credit Societies, Processing Cooperatives and Handloom and Handicraft Cooperative Societies. Federations at Taluka Level and District Level to be set up and linked to the Cooperative Societies or may be set up as Cooperative Society. Federations at Taluka Level and District Level to be set up and linked to the Cooperative Societies or may be set up as Cooperative Society.

Suggested Modifications in Gujarat State Cooperative Societies Act Section 25: Nominal Associate and Sympathizer Member in Non-Credit Coop Societies or Federations for business purpose Section 25: Nominal Associate and Sympathizer Member in Non-Credit Coop Societies or Federations for business purpose Section - 37: Societies to be bodies corporate: Section - 37: Societies to be bodies corporate: SHG be considered as Bodies corporate like cooperatives so as to enable SHGs to hold property, enter into contract, legal proceedings,

Suggested Modifications in Gujarat State Cooperative Societies Act Section – 43 Powers to exempt from Taxation Section – 43 Powers to exempt from Taxation Concept of Exception for Cooperatives: In any transactions of Cooperative, the motive is not commercial or profit making and what ever profit society earns is returned in shape of dividend, bonus, wages salary etc. some societies do business on “No Profit – No Loss” Concept of Exception for Cooperatives: In any transactions of Cooperative, the motive is not commercial or profit making and what ever profit society earns is returned in shape of dividend, bonus, wages salary etc. some societies do business on “No Profit – No Loss” Similarly : Stamp Duty, Fees of registration, Court Fees, Surcharge. Duty relating to purchase of property, registration of property, mortgage of property, duties and taxes may be levied by the Government.

Suggested Modifications in Gujarat State Cooperative Societies Act Section -51 : Direct Partnership of State Government in Societies or Contribution of Share Capital Section -51 : Direct Partnership of State Government in Societies or Contribution of Share Capital (After registration of SHG as Coop Society) (After registration of SHG as Coop Society) Section - 63: Other forms of State Aid to Societies : Loans, government guarantee, other supports like subsidies (After registration of SHG as Coop Society) Section - 63: Other forms of State Aid to Societies : Loans, government guarantee, other supports like subsidies (After registration of SHG as Coop Society)

Suggested Modifications in Gujarat State Cooperative Societies Act Section – 74 B : Reservation of weaker section seat on committees of certain societies is mandatory on committees of Primary Societies I.e. PACs, milk, industrial, Oilseeds, UCBs Processing, Marketing Section – 74 B : Reservation of weaker section seat on committees of certain societies is mandatory on committees of Primary Societies I.e. PACs, milk, industrial, Oilseeds, UCBs Processing, Marketing Reservation of One SC/ST and one Small & Marginal Farmers Reservation of One SC/ST and one Small & Marginal Farmers Section 74 BB : Reservation of seat for woman in committee of society (1 seat for 11 member committee, 2 for >11. Section 74 BB : Reservation of seat for woman in committee of society (1 seat for 11 member committee, 2 for >11.

Suggested Modifications in Gujarat State Cooperative Societies Act Section – 80: Power to appoint Government Nominee, where government has contributed share capital Section – 80: Power to appoint Government Nominee, where government has contributed share capital (SHG should be excluded) (SHG should be excluded)

Suggested Modifications in Gujarat State Cooperative Societies Act Chaper _ VIII: Audit Inquiry, Inspection and Supervision Section : 84 Auditor Business Turnover > Rs Section: 87 – Inspection of Books of indebted Societies

Modification in Gujarat State Cooperative Societies Act Chapter : X-B (Chapter inserted after failure of Madhavpura and other urban cooperative banks) Certain other provisions relating to Urban Cooperative Banks Section 115 B : Definitions Section 115 C: Qualifications & Disqualifications for being committee members Section 115 D: Right to vote Section 115 E: Term of office of officers Sections 115 F to 115 L Other provisions

Modification in Gujarat State Cooperative Societies Act Chapter – XII Chapter – XII Offences and Penalties Section 146 : Prohibition of use of the Word “ Cooperative” Section- 161: Powers to exempt societies from provisions of Act

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