As against the foregoing merits, the co-operatives suffer from the following drawbacks and limitations, which prevent from securing benefits of such merits to the maximum extent:
1. Lack of capital:
The co-operatives are launched by economically weaker sections of society. The shares are generally persons may associate it these societies. The resources of co-operatives are limited to the extent of capital contributed by the members and fund raising capacity from stated cooperative banks.
They cannot undertake large scale production of goods for want of funds. So, co-operative societies suffer from lack of capital. It can not dream to undertake any large scale business for that reason.
2. Lack of efficient management:
The co-operative societies, because of their limited resources, are unable to secure the services of efficient managers. They manage the society by its members who lacks managerial or professional skills. In efficient management may not bring greater success over a period of time.
3. Lack of unity among members:
The members are drawn from different sections of the society. There may be lack of harmony among them. The members do not understand the working of the societies, so they start doubting each other. Some members lack interest in the affairs of the society and leave everything to the paid officials.
4. Lack of motivation:
Co-operation brings an end to the feeling of individual self-interest. But men are selfish by nature. Therefore, generally the members lack motivation to work more. Most of the time ‘every body’ responsibility becomes no bodies’ responsibility.
5. Cash trading:
The co-operative societies sell goods for cash and do not extend credit facilities. Many a consumers from down trodden society need credit facilities. On the other hand, private traders extend credit facilities to the consumers.
Though the societies sell goods at lower prices but absence of credit facilities they prefer to avail the services of the traders for meeting their requirements.
6. Political interference:
The societies are normally under the regulations of the government. As co-operative societies stand in India, government even nominates members to the Managing Committees. Every government tries to send their own party members to these societies.
The societies are governed on political consideration rather than on business lines. Political interference has badly affected co-operative movement in India.
7. Difficult to maintain business secrecy:
The affairs of the co-operatives are very often no such exposed to the members that it becomes difficult for them to maintain business secrecy. But secrecy is very important for success of any business.
8. Unwanted interference by the departmental personnel:
Co-operatives are being exposed to a considerable degree of regulation by the Co-operative department. Although to a certain degree this is welcome, too much of State participation and unwanted interference by the departmental personnel act as a deterrent to the voluntary nature of co-operatives.
It adversely affecting the flexibility of its operation and the efficiency of its management.