Context: Recently, the Cabinet has approved the extensive amendments to the Multi-State Cooperative Societies Act (MSCS) to bring in transparency. The Act was last amended in 2002.

• Objective of the amendment: To bring transparency in the sector and reform the electoral process.

Salient features of the amendment

• Make the functioning of the board transparent: This is done through processes such as registration becoming simpler and seats can be reserved for women, scheduled caste and scheduled tribe candidates in coop boards.

Formation of specific bodies: The Bill also has specific provisions for setting up

• a) Cooperative Election Authority will be formed to conduct free, fair and timely elections to coops. This, in turn, will help reduce incidents of complaints and malpractices. There is a provision to debar offenders for three years to bring in more electoral discipline.

• b) Cooperative information officer: S/he will enhance transparency by providing members timely access to information.

• c) Cooperative ombudsman: The ombudsman will provide a mechanism for redressal of member grievances in a structured fashion.

To increase ease of doing business: The Bill proposes to reduce the period of registration, with a provision for the applicants to seek additional time of two months for rectification of mistakes.

• Encourages a comprehensive digital ecosystem: The Bill provides for electronic submission and issuance of documents, thus providing for a comprehensive digital ecosystem.

• Applicability: For cooperative banks, the banking functions will be governed by the Banking Regulation Act. However, for all other operational issues of such entities, the MSCS Act and its new amendments will be at play.

• Provision for issuance of non-voting shares would provide multi-State co-operative societies with a tool to raise requisite capital.

• The newly proposed Rehabilitation, Reconstruction and Development Fund will help in revitalising sick multi-State co-operative societies.

• There is provision for stipulating prudential norms will bring in financial discipline.

Cooperative societies in India

• As per government data, there are around 8,55,000 cooperatives in India.

• Of this, 1,77,000 are credit societies, 700,000 are cooperative societies, 17 national-level cooperative unions, and 33 state cooperative banks.

• There are more than 63,000 active Primary Agricultural Credit Society (PACS) with more than 12 crore members.

• Around 91 per cent of the villages have cooperatives.

Current Issues and concerns

• The powers of the Central Registrar, were questionable as in many cases it has led to cases of corruption. 

• Another major issue was the lack of transparency as the board of directors had control of finances and administration.

• Also, the Central Registrar can inspect societies only under special conditions.

• This has even led to Ponzi schemes in some cases.