Investment of Surplus Fund of housing society

By Legal Bureau

Section 70 of the Act and Rule No.66 of M.S.C.S. Act prescribe that the surplus funds belonging to the society should be invested in the following manner.

1)      In Central or State Co-operative Bank.

2)      In any of the Securities specified in Section 20 of Indian Trust Act, 1982.

3)      In Shares, Securities, Securities, Bonds or Debentures of any other society with limited liability.

4)      In any Co-operative Bank approved for this purpose by the Register.

According to Rule No.56 the following additional modes of investments are prescribed:

1)      In the case of Primary societies in the Central Finance Agencies.

2)      In the case of Central Co-operative and Urban Banks, in the State Co-operative Banks.

3)      In the debentures issued by Land Development Bank of in Government Loans.

4)      In immovable property specified by Registrar by general or special order.

Restrictions on Borrowings: (Important Provision)

According to Rule No.35 of M.S.C.S. Rules, no society can incure a borrowing liability exceeding ten times the total amount of paid up capital, accumulated reserve fund, and building fund minus accumulated losses. Borrowings in excess of this limit require the previous sanction from Registrar.

In case of Central Banks, Urban Banks and producers societies, this limit is twelve times the share capital.

Liabilities incurred by way of borrowings and deposits in excess of this limit shall not be utilised in the business of the society, but shall be invested in Government securities or be deposited with the Central/State Co-operative Banks.

Section 43 of the Act states that a society shall receive deposits and loans from members and other persons, only to such an extent, and under such conditions as may be prescribed or specified by the bye-laws of society. The Registrar may impose some conditions if considered necessary.

According to Rule No. 43 of M.S.C.S.  Rules, every applying for a loan from society shall be required to hold proportionate shares as may be required by the bye-laws of the society.

A society whose objects do not include grant of loan or financial assistance to its members shall not grant loans to its members without the sanction from the Registrar. (Rule No. 44(1)). According to Rule No. 44(2) a Consumer Society may sell goods on credit to its members and other customers up to the deposit accepted from its members.

In case of loans given by the society to the depositors on the security of his fixed deposit with the Society, the amount of loan shall not exceed 90% of the deposit amount, and the period for such loan shall not exceed the date of maturity of deposit.

Writing off of Bad Debts and Losses:

According to Rule No.49 no bad debts or losses shall be written off without the sanction of General Body. All debts which are found irrecoverable and are certified as Bad Debts, by the auditor appointed U/S 81, shall be written off, first against bad debt fund, and the balance if any, may be written off against the Reserve Fund and the share capital of the Society. An approval from Registrar is necessary before writing off the Bad Debts.


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