Kolhapur Credit Society In Throes Of Financial Crisis

The Kolhapur-based Bhudargad Co-operative Credit Society, Maharashtra's biggest urban co-operative credit society, has landed in a financial mess by lending around Rs 240 crore against deposits of Rs 255 crore. The registrar and commissioner of co-operative societies (RCS) is probing the development.

Cooperative credit societies can lend only up to 75 per cent of their deposits and invest the balance in liquid banks deposits and government securities. But in the case of Bhudargad, the assets (loans) constituted almost 94 per cent of the liabilities (deposits). The society, which has 52 branches, reportedly offers 16 per cent interest on deposits and charges around 18 per cent on advances.

The RCS has appointed 15 special recovery officers to try and put the beleaguered society back on track. The objective is to tide over the liquidity crisis and safeguard depositors.

The RCS has also appointed a 14-member administrative committee with B G Yashod, the deputy registrar of co-operative societies, as its convenor to revive the society. The committee, among others, includes the district deputy registrars of Kolhapur, Satara, Thane and Pune. Bhudargad's board continues to be at the helm of affairs albeit under directions of the committee.

A cooperative credit society is placed at the lowest tier in a cooperative sector and are allowed to take deposits up to 8-t0-10 times their share capital and can lend up to Rs 5 lakh per member.

"Urban co-operative credit societies extend loans subject to an upper cap of Rs 5 lakh. However, some influential societies manage to get approval of state governments to extend loans up to Rs 5 crore per individual, thereby jeopardising the interest of depositors. Some societies, in gross violation of their by-laws, extend loans to builders and commercial establishments," said a co-operator.

These societies offer credit to lower and lower middle income groups. As an alternative to an informal money lending sector, where rates could be as high as 4 to 5 per cent a month, the societies are known to come to the rescue of those working in the unorganised sector. In Maharashtra, of the 28,000-odd co-operative societies, nearly 50 per cent are defunct. These societies have a combined deposit base of Rs 36,000 crore.