Multi-State Cooperative Societies (MSCS) may soon come under the purview of the money laundering act.

Earlier this month, the Union government asked MSCS to furnish details of their turnover as a step towards bringing them under the fold of Prevention of Money Laundering Act (PMLA). The societies have been given time till 31st January to submit the details.

Recently in a circular to The National Federation of Urban Cooperative Banks and Credit Societies (NAFCUB), the Ministry of Agriculture and Farmers Welfare said, “ as the matter regarding bringing MSCSs under the definition of reporting entities under the prevention of Money Laundering Act, 2002 is under consideration, in the Department of Revenue, Ministry of Finance, Government of India, therefore the details of the turnover of all the Multi-State Cooperative Societies under various turnover slabs is required to be provided by this department to them.”

NAFCUB is the apex promotional body of Urban Cooperative Banks (UCBs) and Credit Societies.

There are about 1267 MSCSs operating in the country, with about 500 being credit societies. The second and third highest number of MSCS being in Agro and Housing sectors respectively. During demonetization, several credit cooperative societies had come under fire for allegedly accepting unaccounted cash.

This apart, with a spurt in low-cost housing schemes, there has been a proliferation in the number of housing societies. At present, there are about 137 housing societies registered with the government.

Maharashtra has the highest number of registered MSCSs.

“Last year, the standing committee of the ministry of finance had suggested all unregulated financial entities to be brought under money laundering act. They had also suggested that regulations for MSCS should be tightened. The present circular is a step towards that,” Subhas Gupta Chief Executive of NAFCUB, told Business Standard.

Last year, RBI too had warned credit societies against using the tag ‘Bank’ in their names.

The RBI in a circular in November 2017 had said, “It has come to the notice of Reserve Bank of India (RBI) that some Co-operative Societies are using the word “Bank” in their names. This is a violation of Section 7 of the Banking Regulation Act, 1949 (As Applicable to Co-operative Societies) (the B.R.Act, 1949).”

So far credit societies have largely remained outside the purview of banking regulations. However, they are governed by the Multi-State Cooperative Societies Act, 2002.

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