Chapter VIII PROPERTIES AND FUNDS OF CO-OPERATIVE SOCIETIES

No part of the funds other than the net profits of a co-operative society shall be paid by way of bonus or dividend or otherwise distributed among its members: Provided that a member may be paid remuneration, allowances or honoraria on such scale as may be laid down by the bye-laws for any services rendered by him to the co-operative society. 53[47-A. Prudential norms. - A primary agricultural credit society shall follow such prudential norms including Capital to Risk Weighted Assets Ratio as may be specified by the Registrar from time to time in consultation with the National Bank.]

1. (1) A co-operative society shall, out of its net profits in any year,-
   • (a) transfer, to the reserve funds, twenty five percent of its profits within such period as may by prescribed;
   • (b) credit one portion of the profits, as may be prescribed, to the Co-operative Education and Training Fund constituted under the rules;
   • (c) credit such portion of the profits, as may be specified in the bye-laws, in the fund created under bye-laws to meet out the losses, if any; and
   • (d) pay dividend to members on their paid up share capital at such rate, as may be prescribed.
2. (2) The balance of the net profits may be utilised for all or any of the following purpose, namely:-
   • (a) payment of incentive to members on the amount or volume of business done by them with the society, to the extent and in the manner specified in the bye-laws;
   • (b) constitution of, or contribution to, such special fund as may be specified in the bye-laws;
   • (c) donations of amount not exceeding ten percent of the net profits for any charitable purpose as defined in section 2 of the Charitable Endowments Act, 1890 (Central Act 6 of 1890); or for a cause dedicated to the co-operative movement;
   • (d) payment of bonus to employee of the society, to the extent and in the manner specified in the bye-laws: 54[ Provided that a short term co-operative credit structure society shall not be bound to continue to any funds other than funds as may be established or maintained for the improvement of its net worth: Provided further that a primary agricultural credit society may decide disposal of its net profits and declare dividend as per the guidelines issued by the Registrar in consultation with the National Bank.]

A co-operative society shall invest its funds in one or more of the following, namely:-

1. (a) Central Co-operative Bank;
2. (b) Apex Co-operative Bank;
3. (c) in the shares or securities or debentures issued by any other co-operative society with limited liability;
4. (d) in any other mode permitted by the rules or by general or special order of the Government: Provided that notwithstanding anything contained in this section, the guidelines, if any, issued by the Reserve Bank of India in this regard for the Urban Co-operative Banks shall have effect: 55[Provided further that a short term co-operative credit structure society may invest or deposit its funds in any bank or financial institution regulated by the Reserve Bank of India.]

56[ (1)] A co-operative society shall receive deposits and loans only to such extent and under such conditions as may be prescribed or as may be specified in the bye-laws. 57[ (2) Notwithstanding anything contained in this Act or any other law for the time being in force, a short term co-operative credit structure society may -

1. (i) borrow from any bank or financial institution regulated by the Reserve Bank of India and refinance from the National Bank or any other refinancing agency directly or through any financial institution regulated by the Reserve Bank of India and not necessarily from only the federal tier to which it is affiliated; and
2. (ii) decide interest rates on deposits and loans in conformity with the guidelines issued in this regard by the Reserve Bank of India.]

1. (1) A Co-operative Society shall not make a loan to any person other than a member.
2. (2) Atleast one third of total amount of loan to be sanctioned by a primary village service society or a farmer's service society in any year and not less than twenty five percent of the total amount of loan to be sanctioned by a Land Development Bank in a year, shall be sanctioned to those members who belong to weaker sections, provided that where in the opinion of the State Government such reservation is not workable, the State Government may fix different percentages of reservation of such loan for weaker sections in different areas.
3. (3) The Government may, by general or special order, prohibit or restrict the lending of money on the security of movable property or on mortgage of immovable property by any society or class of societies.
4. (4) Notwithstanding anything contained in sub-section (1), a cooperative society may make a loan to depositor on the security of his deposit.
5. (5) The lending policy of a financing bank shall be approved by the Government: Provided that where guidelines are issued by the Reserve Bank of India in this regard for the Urban Co-operative Bank, such guidelines shall have effect. 58[(6) Notwithstanding anything contained in this section, a short term co-operative credit structure society may determines its loan policies and decide individual loan to its members keeping in view the interests of the society and its members.]

Save as provided in sections 50 and 51, the transaction of a cooperative society with persons other than members shall be subject to such restrictions, if any, as may be prescribed.

1. (1) A Co-operative society may establish Contributory Provident Fund for the benefit of its employees to which shall be credited all contributions made by the employees and the society in accordance with the bye-laws of the society.
2. (2) A Contributory Provident Fund established by a co-operative society under sub-section (1) -
   • (a) shall not be used in the business of the society;
   • (b) shall not form part of the assets of the society; and
   • (c) shall not be liable to attachment or be subject to any other process of any court or other authority.