Demonetisation: Distress messages go out from cooperative banks in rural India

RBI data says 370 DCCBs held deposits of Rs 236,890 crore as of 2014 while PACS had Rs 81,900 crore deposits.

Written by George Mathew | Mumbai | Updated: November 21, 2016 2:29 pm
cash, money in banks, demonetisation, cooperative banks, rural india, india economy, demonetisation problems, india news Women queue up outside a bank to exchange their old Rs 1000 and 500 notes in Bikaner on Thursday. (PTI Photo)

Operations at 370 district central cooperative banks (DCCBs) and over 93,000 primary agricultural credit societies (PACS) have been severely hit with the Reserve Bank of India (RBI) slapping restrictions following the demonetisation of Rs 500 and Rs 1,000 notes.

Urban cooperative banks (UCBs) too have complained to the RBI that commercial banks are refusing to provide them currency support, affecting their operations.

The RBI has not given any reason for the curbs on DCCBs and PACS — these are considered the lifeline of the rural economy, especially for farmers in states like Maharashtra, Kerala, Uttar Pradesh, Gujarat, Tamil Nadu and Karnataka — but banking sources said it could be related to lax KYC (know your customer) norms and money laundering in some cooperative banks.

WATCH VIDEO: Here’s What The Leader Of Bank Officers’ Union Said Over Demonetisation

RBI data says 370 DCCBs held deposits of Rs 236,890 crore as of 2014 while PACS had Rs 81,900 crore deposits.

The RBI has stipulated that DCCBs and PACS can allow existing customers to withdraw money from their accounts up to Rs 24,000 per week until November 24. It has said no exchange facility against the specified bank notes (Rs 500 and Rs 1000) or deposit of such notes should be entertained by DCCBs. It has advised all banks to permit withdrawal of cash by DCCBs from their accounts based on need.

According to Pramod Karnad, Managing Director, Maharashtra State Cooperative Bank (MSCB), only UCBs and SCBs are allowed to exchange and deposit notes.

The Mumbai District Cooperative Bank, chaired by BJP member Pravin Darekar, has filed a petition in the Bombay High Court against the RBI circular preventing cooperative banks from accepting deposits in demonetised currency notes.

The petition states that the circular is discriminatory and arbitrary besides violating fundamental rights. “No reason has been given for singling out cooperative banks like this. We act as bankers to other cooperative societies within Mumbai district. If the circular is followed, cooperative societies will not be able to deposit the discontinued currency notes with their banker. This would cause loss to members of such societies,” it stated.

The petition points out that several hospitals, petrol pumps, medical stores have their accounts with the bank and they too will be affected. It states that there are 103,873 saving accounts being operated by individuals and 12,285 saving accounts of housing societies.


Although over 1,500 UCBs in the country are allowed to exchange and deposit demonetised notes, they said they have been at the receiving end of the demonetisation scheme following inadequate remittances from the central bank.
“While the apex bank has been making all efforts to provide liquidity for the nationalised and private sector banks, the common man’s cooperative banking sector has been ignored with close to 52 cooperative banks being left out with empty hands over the past two days,” the UCBs said in a letter.

The Maharashtra State Cooperative Banks Federation Ltd, in a letter to RBI Deputy Governor R Gandhi, said, “after the announcement of the scheme of withdrawal of legal tender character of existing Rs 500 and Rs 1000 bank notes, commercial banks refused to provide currency support to our UCBs on November 10, 2016, treating us as ‘general customers’. Later, in spite of issuance of circular by the RBI that the limit of Rs 10,000 is applicable to general customers and not applicable to cash withdrawal from a bank account by one bank from another bank, these public sector banks, especially SBI and Bank of India refused to adhere to the request of UCBs.”

“While the RBI did offer some remittances in the first few days, the approach in the past two days are far from encouraging for the fraternity, which has been fighting shoulder to shoulder with other bankers to make the national cause of demonetisation a great success,” the letter said.

As many as 1,579 cooperative banks have over 10,000 branches and close to 3,000 operational ATMs across the country and constitute nearly four per cent market share in the banking business mix of the country.

UCBs have to depend on local currency chests of public/private sector banks to withdraw or deposit the currency, while many others have partnership of payment systems with the National Payments Corporation of India (NPCI).

Most of these UCBs, the letter stated, are direct members of the RBI for CTS (cheque truncation system) and, therefore, expect good cooperation from the SBI as well as from the other public/private sector banks. “While there are huge queues lined up with public and private sector banks, the cooperative banks have been left out for want of legal tender adding to the chaos,” the letter stated.

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  1. K
    Nov 21, 2016 at 12:32 pm
    not that lucky - unlike indians he has to pay taxes
    1. B
      Nov 19, 2016 at 6:31 am
      This may or may not help in long run but only thing i make out is poor and middle cl have nothing to loose .its the guys dalals/property dealers/agents/corrupt officials in government and private/hawala/drug/counterfeit/terror networks which have been reset for atleast a decade .Cooperative bank is another conduit for illegally stashing ill goten money but other side it also have farmer savings.Esp Kerala the cooperatives have so much money stashed that is mindboggling so yes nothing wrong its in a system just tax it and let owners use;br/gt;balance people who where in fence have with little threat fallen in basically whatever the physical costs it has a positive cost to common man in terms of lower rate of interest for loans/correction in property price/correction in hospitals/schools/insutions in private sector taking capitation-underhand may take more overboard but less underboard etc
      1. A
        Against traitors
        Nov 19, 2016 at 6:10 am
        West BLs and Fonia slaves cry when American soldiers die in Iraq but not Indian soldiers in Kashmir. I have seen this in my office. If you think you will be not called slaves of others by preemptive with your comments, you are mistaken. Rice bags, milk power tin etc. were great items for you fellows once.
        1. A
          Nov 19, 2016 at 6:57 am
          It is seen all Antisocial elements/ Mafias/ Builders/Black Money Holders, Corrupt and dishonest Politicians/Bureaucrats are trying to derail Modi Govt's mission over demonetization. Those who have no Black moneys and ready to support Modi Govt over demonetization even they stood hours together before banks for changing of their Old notes.Some Parties are feared that if Modi Govt succeeds in its mission then they can not come to power.That is Mamata Banerjee invited CPM, being known as her Arch Enemy , to join its mission against Modi Govt to protect black moneys of her Party leaders as stated by M.Salim MP from CPM.
          1. F
            Nov 19, 2016 at 6:34 am
            Gujju very busy, got no;br/gt;lt;br/gt;Gujju collecting billions trillions fromlt;br/gt;housewives,lt;br/gt;old aged,lt;br/gt;savings in cash in house of ordinary;br/gt;lt;br/gt;plus calling people as bkack marketers, smuglers, be rich means very bad thing in india, but his own friends in usa europe adani that all is good.
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