The Bangladesh Bank (BB) has suggested the government the ways to properly govern the errant cooperative societies amid allegations of their massive irregularities, officials said Monday.
The ministry of finance (MoF) is going to take steps to amend the Cooperative Society Act aiming to bring the cooperatives under control taking into consideration the central bank suggestions, they added.
Allegations are there that these cooperative societies are involved in various illegal activities including carrying out banking without permission, charging high interest on borrowers, cheating the customers, and operating through by-passing laws.
The massive irregularities by the cooperative societies came to light after exposure of financial scam by the Destiny Multipurpose Cooperative Society Ltd (DMCSL).
An inter-ministerial investigation committee has found that the DMCSL carried out banking activities at 16 per cent rate of interest. The DMCSL collected huge money from its members but 22 people of the Destiny family had carried out most of the transactions among themselves as shareholders.
The committee said the DMCSL collected huge funds but transferred those to accounts of others, which could not be traced later.
Officials said, many cooperative societies collect gold and other valuables as collateral to provide loans to people. But the management shows reluctance when the owners ask for return of the valuables.
They said, many of the cooperative societies collect money from people alluring them high return as the multi-level marketing (MLM) companies are doing.
Presently, there are some 179,880 registered cooperative societies across the country, which are involved in various legal and illegal activities.
Finance minister AMA Muhith recently wrote to the minister for LGRD and cooperatives ministry regarding amendment of the Cooperative Society Act.
The BB in its letter to the MoF suggested upgrading the office of the 'registrar of cooperatives' to 'controller of cooperatives' and giving it full authority to govern the cooperative societies.
It said the registrar's office has some manpower at district levels. Necessary manpower and infrastructural support can be given to those district level offices so that they can control the cooperatives societies properly.
The BB said the existing Bank Company Act-1991 and Financial Institutions Act- 1993 do not permit the central bank to govern the cooperatives.
The Microcredit Regulatory Authority (MRA) can control those if the cooperatives are considered as microcredit institutions under the MRA Act-2006. But the MRA lacks necessary manpower to govern such a big sector, the BB letter mentioned.
"The cooperative societies are cheating people taking the advantage of lack of monitoring. It is high time to take appropriate steps to resolve the issue," the central bank added.