Multi-state cooperatives’ are helping transfer funds for Ponzi schemes says Standing Committee
Since 2010, the number and amount of multi-state cooperatives have increased 100 times and now become some kind of a shelter for illegitimate funds for Ponzi schemes, the Moily Committee said in its report calling for better regulation
In a startling expose, the Parliamentary Standing Committee on Finance has said, multi-state cooperatives under the Agriculture Ministry, operating without any financial regulatory over sight, have become a conduit for transferring huge amount of money for dubious Ponzi schemes that are ripping off the savings of people across India.
The Committee headed by Congress leader M Veerappa Moily categorically says that since 2010, the number and amount of multi-state cooperatives have increased 100 times and now become some kind of a shelter for illegitimate funds.
"It seems that the present regulator for multi-state cooperatives i.e. Central Registrar falls under Ministry of Agriculture, which do not have any financial regulatory infrastructure. As number and amount of multi state cooperatives have increased hundred times since 2010, the Committee would suggest that the enforcement aspect with regard to financial schemes operating through multi state cooperatives be shifted to Department of Economic Affairs under Ministry of Finance, since the multi-state cooperatives have now become some kind of a shelter for illegitimate funds, which seemed to have surprisingly escaped the notice of the concerned Authorities, particularly the Central Registrar under Ministry of Agriculture," the Committee said in its report presented to the Lok Sabha Speaker on 7 October 2015.
Interestingly, Nationalist Congress Party leader Sharad Pawar was the Minister for Agriculture in the Manmohan Singh government since 2004. The Central Registrar in the Ministry of Agriculture regulates Multi state cooperative societies.
According to the Report, some of the bogus companies running Ponzi schemes, which have transferred their funds and assets to multi state cooperatives include, Samruddha Jeevan Foods Ltd, Sai Prasad, Utkarsh Plotters & Multi Agro Solutions, PGF and PACL, Agri Gold Farm Estates and Saradha Chit Fund.
The Moily Committee recommended the government to institute special audit for multi-state cooperatives so that this scam can be unearthed and corrective action taken immediately. "In this regard, the Committee would also suggest that the regulatory regime in respect of multi-state cooperatives should be streamlined and tightened so that they do not become an instrument of diverting and shielding illegal funds from Ponzi companies," the report said.
In its deposition before the Committee, the Department of Agriculture & Cooperation was asked about the abnormal increase in multi-state cooperatives. "As and when Reserve Bank of India (RBI) or Securities and Exchange Board of India (SEBI) has informed to this Department that particular society is involving in the collection of deposits from the public/ nominal members, the concerned Registrar of Cooperative Societies (RCS) of the States have been requested to conduct inspection u/s 108 of the Multi-State Cooperative Societies Act, 2002 (MSCS Act) and also the societies have been directed to refund the amount collected from the nominal members," the Department stated.