By C Raghavendra Rao, Chairman, VCB
The proposed amendment to the MSCS Act, from the perspective of Urban Cooperative Banks, is anti-Cooperatives on two important aspects. Firstly, the UCBs, which do not receive even a rupee from any State or Central Government and depend solely on the trust and confidence of its shareholders and depositors, are already subjected to Income tax, at par with corporates without any concession.
UCBs are also paying a premium to DICGC, on par with Commercial Banks, which is expected to help the depositors when a UCB fails. In addition, UCBs also contribute 1% of their profits to the Cooperative Education Fund, which is not used for training employees or shareholders of Cooperative Urban Banks.
The present proposal for collecting funds from Multi State UCBs, in the name of Rehabilitation, Reconstruction and Development Fund will be an additional drain on the meagre resources of UCBs.
This is unnecessary as one of the functions of the Umbrella Organisation, which is coming up, is to provide liquidity support to all their member UCBs. In the circumstances why an additional Fund is being proposed for the same purpose?
Secondly, the concept of non-voting shareholders, only with the aim of enhancing share capital, is against the basic ethics of Cooperation. A shareholding member, as per principles of cooperation, has certain rights and duties.
We firmly believe that raising Share capital by any Cooperative through additional members is not difficult. Our experience of having more than 93000 shareholders and limiting individual shareholding to only Rs 2 lakhs, shows that raising the required Share Capital is not difficult.
We hope the above aspects will be taken care of in the final amendment to the Act
It is surprising that stalwarts of Cooperative Urban Banks from Maharashtra and Gujarat are not able to see that the additional drain on the meagre resources of cooperatives in the name of Rehabilitation, Reconstruction and Development Fund is avoidable.
Very good successful meeting go ahead
In fact Governments, both States and Central are making UCBs to take their natural death by squeezing their hard earned net profits. In fact this is suicidal for the UCBs. Payment of incometax on par with Corporates is highly objectionable.
We have to see how successful cooperatives across different jurisdictions have been competing,holding their own, and bringing prosperity to their members.
All types of cooperatives have to do business with non members one way or the other to survive and grow to be strong entities.To raise funds for this purpose from outside without such funders interfering is not a bad idea Hybridisation by cooperatives to some extent is essessential in these changing times.
As regards proposal of rehabilitation fund, it may not be of use for cooperative banking sector.in the light of formation of UO.Cooperative credit sector should be kept out of it.Instead formation of a deposit insurance system for credit societies should be envisaged by govt.