Dear esteemed CA members of CHS,
Greetings from CA Shilpa Shinagare!
After the Punjab and Maharashtra Coop Bank i.e. PMC is
brought under 35A direction by RBI, there is panicky situation among
the Co-operative housing societies who must have held their term deposits and
operating savings accounts or either of them.
We started getting emails and calls from MC members on this
crisis situation and hence thought of clarifying certain provisions wrt
opening of bank account and also investing the surplus of a cooperative housing
society.
These provisions are covered by *Sec.70
of MCS Act* on Investments of the funds, the *bye law no.113
on opening of bank account* and Coop Dept *Cir Dtd.05.12.2013* allowing the Coop banks to open an account in nationalised
bank rather than previous mandate of having it with a cooperative bank only.As per model Bye law No.113 of CHS, the bank
account can be opened in the nearest *State or Dist Coop Bank or a Scheduled
Bank having awarded "A" audit classification in last
3 consecutive years*, *nationalised bank* and *any
other mode* as permitted u/s 70 which talks about investments in
securities as mentioned u/s 20 of Indian Public Trust Act.So, ideally *private banks are not
reffered and hence in my opinion opening of bank account with private bank is
not desired and not allowed.* The housing societies, therefore, should
take a collective decision on what sort of option they are going for wrt
opening of operative account and the investments.It's my humble submission that the *Managing
Committee should take the general body approval* whenever they
are *parking or shifting their funds* with a Coop bank
and if its being properly discussed and minutised then it can save them from
future eventualities like this.Also, as the saying goes, *you should
never put all Ur eggs in one basket* , the managing committee is
advised to study, analyse , follow Sec.70 norms and then only select
the good , reputed and criteria compliant cooperative banks for their
investments .Also, *tax planning wrt Interest income* is
another aspect which is being considered or is being advised by the
professionals since *nationalised bank FD income is fully taxable* whereas
for *Cooperative Bank FD interest, the societies can claim 100%
deduction of interest income u/s 80P* and that saves the tax for
the CHS. But, this aspect also, it's advisible to be got it *approved through
*general body* to save the future responsibilities as far as MC is concerned.Going one step further, the *recent
amendment in Sec.20 of Indian Public Trust, the cooperatives can now invest in
mutual funds* also, however, while advising the MC of the societies,
*we advise them not to opt for this option upfront or opt only after getting
it approved from the General body* making then aware about the pros
and cons and *subject to market risk* disclaimer etc.Also, the *investments in Mutual Fund can
be restricted to Debt Funds* in my opinion and this thought of mine
was upheld by the coop dept officials in our housing chapter committee meetings
and infact the then secretary cooperation has unfact advised me to work on
this and give an outline so that dept can come out with a notification
accordingly for safeguarding the financial assets of the CHS.In nutshell, the managing committee members
are advised *not to go overboard* and *too aggressive* as
far as investing the funds of CHS are concerned as the *General body has to
be taken in confidence.*The *statutory and internal auditors* are
advised to give the *alerts and red flags* to the managing
committee *well in advance* and make a *valuable addition* to their job
profiles.Cooperatives, esp the housing society is an *unorganised
sector and hence the professionals like CAs as an auditor, legal and management
consultants should be appointed and should be taken on board by the CHS. *Professional Management* is
something which is one of the *principles of Cooperation* and
is being visualised or thought of by the government also while
going for *constitutional amendment in 2012.*The Co-operative societies are *advised to
spend time on compliances and invest in good human resources* as
well...that the need of the hour.Last, but not the least, it's *not
only the concern of managing committee* members but it
should be *UR Own Concern* when it comes to running the
show of a CHS and hence, *Co-operate, Collaborate add Co-exist*...Let's
*enjoy every bit* of it *leaving the bitterness* aside.
Jai Sahakar!!!
CA Shilpa Shinagare
President - V Indus Cooperative Societies Welfare Association *VISWA*
Thanks for the post.
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