Question

Write the advantages and disadvantages of Co-operative Credit Societies in India.

Answer 1

MERITS/ADVANTAGES

1. Stable Existence: Society has its own legal entity distinct from its members. Hence, the continuity of the business is not affected by the *****, insolvency or insanity of any member.
2. Equality in Voting Right: The cooperative societies are governed by the principle of ‘one man one vote’. Each member has equal voting right irrespective of his capital contribution in the society.
3. Limited Liabilities: The members have limited liability to the extent to the capital contributed by them. Therefore, they cannot be held personally liable for the payment of debts.
4. Economy in Operations: As the focus is on elimination of middlemen, this helps in reducing costs. The customers or producers themselves are members of the society. So, there is no risk of bad debts.
5. Ease of Formation: Minimum 10 members are required to form a cooperative society. The procedure for the registration of the society is very simple and involves a few legal formalities.
6. Support from government: Government gives all kind of support to cooperative societies in the form of relief in taxation, subsidies and low interest rates on loans.

LIMITATIONS/DEMERITS

1. u200bu200bLimited Resources/Shortage of Funds: The capital contributed by the members constitutes the resources base of the cooperative societies. The rate of dividend offered on investment is very low; hence attracting new members and arranging for more capital from the existing members is very difficult for these societies.
2. Inefficiency in Management: Managing committee of a cooperative society consists of part-time and inexperienced people. It does not have members with adequate technical knowledge. Even it is unable to employ expert managers because of their inability to pay them high salaries.
3. Lack of Secrecy: The Cooperative Societies Act 1912 has made it compulsory for the societies to make their accounts public and to discuss their operations in the meeting of the members. This makes it difficult for the societies to maintain secrecy of their operations.
4. Government Control: In return for the benefits provided to the cooperative societies, the government imposes various rules and regulations related to auditing to accounts, submission of accounts and also interferes in their working. Sometimes these regulations affect the freedom in operation of the society.
5. Differences of Opinion: Because of opinion differences, there are chances of conflict among its members. The *** motive of the society may get dominated by the personal interests of members.