Urban co-op banks facing problems due to section 80 P of l-T Act

Urban co-op banks facing problems due to section 80 P of l-T Act

VIDARBHA Urban Banks Cooperalive Association Limited, Chairman Kailashchandra Agrawal said that the urban co-operative bank (UCB) sector was deprived of the cover of Sec 80 P of Income Tax Act, 1961 which is a measure that caused a huge amount of damage to a sector which was admired as peoples movement of this country. He said that after imposition of Income Tax the financial of cooperative banks have been affected to a large  extent. It requires considerable provisioning from profit. Taking away almost one thirds of the preprovisioning profit as tax is impairing the strengthening process of cooperative hanks endangering the sector and the depositors.He elaborated that cooperative urban banking sector are not aided nor supported by Union Government and Slate Government in raising capital or in getting deposits. They are entirely dependent on the trust of the public who deposit their surplus money in cooperative banks. The Cooperative banks in turn lend to the people of small means in the society and earn a small margin as profit. The cooperative banks also do not have souuo tor non funds income or 10 any kind of fee float funds. Further the cooperative banks have no access to money markets for either capital funds or deposit funds. The levying of Income Tax on Cooperative bans was a liard blow to this sector of the economy. This has reduced the dividend payment and closed the avenues of the capital fund. Thus the capital raising by cooperative urban banks is minimised, hence in order 10 help the coopcrai the banking seclorlo grow, coasolidate and serve the public more effectively. the income tax exemption to cooperative  urban banks is mosi desirable. The urban cooperative banking sector is growing through a bad patch since last 10 years. It is making sincere efforts to improve its financial and credibility. To make it competitive it is in the process of technology up gradation and also RBI made compulsory for urban cooperative banks to become CBS complaint up to June 2014 requiring considerable amount of investment, naturally it is very difficult for small urban banks to sustain in cooperative banking sector. According to Agrawal the tax on cooperative sector has obstructed process of capital formulation since it was imposed on 2006-07 and cooperative banks have been recognised  .is an agency for socioeconomie development particularly that of weaker sections percentage and as such there are hardly any income that would qualify for being taxed. He said that under such circumstances it may not make good economics to contemplate taxing of the cooperative banks income.
He said looking at the history of the cooperative movement and its contribution towards the Indian economy, the existence of the sector is on its own merits, which cannot be ignored. To fight against the forces which are against the cooperative movement it requires active support. Therefore the Vidarbha Urban Banks Cooperative Association Limited requests to take up this important issue in coming monsoon session and withdraw new Sub-Sec 4 in Sec 80 P so as to restore the general deduction as previously available to cooperative banks to save the entire cooperative banking movement to bedivested. Vidarbha Urban Banks Cooperative Association Limited. Nagpur a registered association of urban Coopertive banks of Vidarbha region comprising of two revenue divisions Nagpur and Amravati in the state of Maharashtra with an objective to represent on various issues of Urban Cooperative banks pertaining to RBI, Commissioner of Cooperation. Registrar of Cooperative Societies. Income Tax authorities and other related Government bodies, informs a press release.

Posted in: News 2014