Primary housing credit societies are just living from margins they cut from loans originally sourced from Housefed
CL Jose
THIRUVANANTHAPURAM: Cooperative sector of Kerala will continue to make headlines, but for wrong reasons.
The latest is from the Primary Housing Cooperative Societies that refuse or fail to return the security title deeds pledged against the housing loans even after they are paid back.
Has the ‘top brass’ at these primary societies misappropriated the funds paid back by the borrowers and failed to remit it back to Housefed, which has originally funded these loans?
Quite interestingly, the primary housing credit societies is an ‘endangered species’, especially after commercial banks have flooded this segment with competitive terms and speed.
As you know, the state’s credit cooperative societies, in general, have rolled out scores of heart-wrenching headlines in the past, mostly about unsuspecting members being taken for a rude ride.
There were reports that ED has already identified 12 Karuvannur-model scams perpetrated by credit cooperative societies in the state.
(These credit cooperative societies call themselves banks, despite repeated warnings from RBI against using ‘bank’ with their name, as they are not licensed by RBI, nor do they follow any banking principles, either)
In many cases, the innocent members of these societies have lost their deposits or failed to get their deposit money back when it is badly needed.
And in certain other cases, borrowers end up waking up to the bitter fact that the title deeds they have mortgaged against their loans have already been pledged against loans availed by others too, without the owners’ knowledge.
Why security title deeds not returned?
Let’s come to the point. There’s another set of such stories in the making now in the cooperative housing loan sector.
There are reports that in many cases, the primary housing societies fail to return the security title deeds even after these housing loans are repaid.
These have been going on for months and years together pushing the innocent borrowers into irrecoverable financial agonies and fear.
In fact, in the case of housing loans, unlike the other regular loans disbursed by the normal cooperative credit societies, the primary cooperative housing credit societies are not the ones that own the funds deployed for housing loans.
It’s Housefed’s money
It is the money owned by Kerala State Cooperative Housing Federation Ltd (Housefed), the apex body for the primary societies, that has been literally lent to these borrowers, but obviously the loans are routed through the Primary Housing Cooperative Socieites(PHCS).
According to informed sources, these primary societies’ role is to collect the funds from Housefed and distribute them to the borrowers as an intermediary, but with a not-so-bad mark-up.
This model has invited in widespread criticism as these primary societies are just living from the margins they cut from the loans originally sourced from Housefed.
However, these societies and these types of loans have become a rarity as commercial banks are carrying out this job with much more efficiency and at competitive rates.
While the Housefed routes the housing loans to the members of primary societies, the security against these loans are retained with Housefed.
When the members settle their loans with the primary societies, where they have availed the loans from, the latter is supposed to remit the amount to the Housefed and return the security mortgaged with Housefed to the respective member borrowers.
What happens in many cases is that even after the borrowers repay the loan amount with the primary societies, these socities fail to pay it back to Housefed which has originally funded these loans.
Housefed has taken the stand that unless the loans are repaid to them, they wouldn’t return the title deeds lying with them.
The registrar of Cooperative Department has issued strict warnings against the primary housing credit societies against non-remittance of the loans back to the Housefed.
