ICSI proposes to bring co-ops under its scrutiny

The co-operatives in the country are governed by a number of laws but when it comes to compliance, the situation has been lax. That according to the Institute of Companies Secretaries (ICSI) could change if their proposals are accepted.

"We are meeting the chief secretary of Gujarat to give our proposal of amending the state act to provide for professionals to check for legal compliance at the co-operatives." Mahesh Athavale, president of ICSI, told Business Standard. ICSI plans to approach all the major state governments in this regard.

As of now, there is no provision in the laws governing co-operative societies for appointment of independent professionals to check legal compliance, Athavale said.

"We are initially approaching the governments of Gujarat, Maharashtra and Uttar Pradesh as the concentration of co-operatives is high in these states," he added.

As per ICSI's proposal, the compliance officer who would have to be a company secretary would maintain legal records, check distribution of dividends, verify borrowings, conduct elections and oversee the conduct of meetings of management on a regular basis.

ICSI has also proposed for a compliance audit for co-operatives. Lack of effective regulation of the co-operatives has resulted in various scams taking place including the stock market scam of 2000 where customers of Madhavpura Co-operative Bank and City Co-operative Bank lost money.

"While the Reserve Bank of India is tightening the norms related to co-operative banks, there is a need for a compliance officer in co-operatives so that there are no lapses," Athavale said.

ICSI is suggesting a threshold limit of Rs 5 crore turnover for coverage by this regulation.

The concentration of co-operatives in the banking and textile sector is high and these sectors are also expected to witness fast growth. Preventive regulation is therefore essential, he elaborated.

With this proposal, ICSI is also seeking to increase the ambit its operations.

The Centre had set up a task force in August under A Vaidyanathan to recommend an action plan to suggest appropriate regulatory framework for the co-operatives and revitalise rural co-operative banks. The report is expected by end of this month.

Co-operatives, other than multi-state co-operatives, are governed by the various state laws. They also have to comply with tax laws, infrastructure related laws, labour laws and environment laws.