Employees Cooperative Societies Surety Loan (Tamil Nadu)

What is the Employees Cooperative Societies Surety Loan?

The Employees Cooperative Societies Surety Loan is a personal credit facility offered by Employees Cooperative Thrift and Credit Societies in Tamil Nadu, which are registered and supervised by the Registrar of Cooperative Societies under the Cooperation, Food and Consumer Protection Department. The Tamil Nadu government scheme directory records the loan as available up to Rs 1,50,000 at an interest rate of 14 per cent.

According to the Registrar of Cooperative Societies, 1,695 Employees Cooperative Thrift and Credit Societies function in Tamil Nadu for the benefit of employees of the State and Central Government. Their stated purpose is cultivating the habit of savings among employees and providing loans at reasonable interest rates, the two halves of a thrift and credit society. A member saves into the society month by month through a salary deduction, builds share capital, and borrows against that standing when a need arises.

What "surety" means here. A surety loan is unsecured by property or gold. It is secured by the personal guarantee of two fellow members of the same society, who sign a surety bond and become liable if the borrower does not repay. That structure is only workable inside a closed group of salaried people who know each other and whose salaries are drawn by the same office, which is exactly what an employees society is. It is also why the recovery mechanism is a salary deduction at source by the Pay Drawing Officer rather than a monthly payment the borrower has to remember to make.

Where employees societies sit. The Registrar classifies Tamil Nadu's cooperative credit institutions into four groups, the short-term cooperative credit structure, the long-term cooperative credit structure, the urban cooperative credit structure, and employees cooperative thrift and credit societies. Employees societies are the fourth of these, standing apart from the agricultural credit system entirely. They serve salary earners, enabling them to avail surety loans and consumer loans based on their share capital and gross salary, with the individual maximum borrowing power fixed by the Registrar of Cooperative Societies.

Read the 14 per cent carefully. That figure is what the state scheme directory records for this product. Individual societies fix their own current rates through their elected boards, and many publish rates below it. The rate on your sanction letter is what binds you. Ask also whether interest is charged on a reducing balance or a flat basis, because on a three- or five-year loan the same headline number produces very different totals.

Who is eligible, and who is not eligible?

You are eligible if:

• You are a member of an Employees Cooperative Thrift and Credit Society, which in practice means you are an employee of the government office, institution or undertaking for which that society is registered.
• You are in permanent salaried employment with a regular pay drawing arrangement.
• Your share capital account is current, since borrowing power is calculated on share capital and gross salary.
• You can arrange two fellow members as sureties who are themselves within their surety limits.
• Your salary can bear the instalment after existing deductions, within the permissible limit on total deductions from pay.
• You are not in default on an earlier loan from the society.

You cannot apply, or are not eligible, if:

• You are not a member of the society. There is no route for an outsider to borrow from an employees society, however creditworthy.
• You are not in permanent employment, casual, contract and daily-wage staff are ordinarily outside the membership these societies are registered for.
• You cannot find two sureties, or the members willing to stand for you have already exhausted their surety limits.
• Your existing deductions leave no room for another instalment. This is the most frequent practical bar, and no society will breach the deduction limit.
• You are already a defaulter to the society, or you are a surety on a loan that has fallen into default.
• You are looking for a grant or a subsidy. This is a loan, and the entire principal and interest are repayable; recovery on default is pursued under the Tamil Nadu Cooperative Societies Act.

How to apply for an employees cooperative surety loan

1. Check your borrowing power with the society secretary. Ask what your share capital and gross salary entitle you to, and whether your existing deductions leave room for an instalment. This one question saves most wasted applications.
2. Collect the loan application form at the society office. It is free.
3. Arrange two sureties from among the members, normally colleagues in the same office — and confirm with the secretary that each is within the society's surety limit.
4. Obtain a letter from your Pay Drawing Officer confirming your employment and gross salary, and undertaking to recover the monthly instalment from your salary and remit it to the society.
5. Submit the completed application with your latest salary certificate or pay slip, identity and address proof, the surety letters and your membership details. Declare all existing borrowings honestly.
6. Execute the loan documents, the promissory note and loan bond, at the society office, with the sureties present to sign the surety bond.
7. Take disbursement, usually by credit to your bank account, and note the rate, the number of instalments and the first due date on the sanction.
8. Let the recovery run through salary. Check your pay slip each month to confirm the deduction is actually being remitted, and keep the society's passbook or statement updated.

What documents are required?

How to check the status of your application

Employees societies are small and work face to face, and there is no online tracker:

1. Ask the society secretary for the serial number of your application and the date of the board meeting at which it will be considered.
2. Confirm that the Pay Drawing Officer's letter has reached the society; this is the document most often still in transit when a file stalls.
3. After disbursement, check that the deduction has started on your pay slip. A missed deduction becomes an arrear even though the fault is administrative.
4. Where a society does not act or refuses without reason, approach the Deputy Registrar or Joint Registrar of Cooperative Societies for your district, who supervises registered societies in that jurisdiction.

Why surety loan applications get rejected

• Deduction limit reached, salary cannot bear another instalment after existing recoveries.
• Sureties unavailable or over-committed, having already stood for the maximum number of loans the society allows.
• Share capital short of what the amount sought requires.
• Pay Drawing Officer's letter missing, so recovery cannot be arranged.
• Existing default, by the applicant or by a loan on which the applicant is a surety.
• Employment not permanent, or the applicant not eligible for membership of that society.
• Suppressed borrowings discovered when deductions are checked against the declaration.

Standing surety: what to know before you sign

Standing surety for a colleague is not a formality. A surety is liable for the outstanding if the borrower stops repaying, and the society can recover from the surety's salary in the same way. Three practical points:

• Your own borrowing power is affected. Live sureties are counted against you when the society computes what you can borrow.
• You cannot usually withdraw a surety once the loan is disbursed. Discharge comes when the loan is repaid or another acceptable surety is substituted with the society's agreement.
• Retirement or transfer of the borrower is the moment risk crystallises. If a colleague you have stood for is retiring, ask the society how the outstanding is being adjusted against terminal benefits.

Where to raise a grievance

• Secretary and elected board of your Employees Cooperative Thrift and Credit Society, first.
• Deputy Registrar or Joint Registrar of Cooperative Societies for your district, under the Cooperation, Food and Consumer Protection Department.
• Registrar of Cooperative Societies, Tamil Nadu: rcs.tn.gov.in, for matters the district office does not settle.
• Where the grievance concerns a wrong or excess salary deduction, raise it with the Pay Drawing Officer in writing at the same time, since the society and the drawing office keep separate records.

Applying is free. No payment should be made to any office bearer or intermediary to obtain a sanction or to arrange a surety.