In Kerala, cooperative banks shut down

The multi-level cooperative banking network which is facing a crisis after the RBI banned district cooperative banks from exchanging scrapped notes.

Written by Shaju Philip | Thiruvananthapuram | Updated: November 17, 2016 3:05 am
Demonetisation, gujarat cooperative banks, rs 500 ban, rs 1000 ban, dccb, indian express news, india news When demonetisation was announced last week, the cooperative banks were allowed to accept the scrapped notes as deposits from account holders who meet KYC norms.

Kerala’s cooperative banking sector remained shut Wednesday in protest against what it called a bid to weaken the sector under guise of demonetisation.

The multi-level cooperative banking network, which has Rs 52,000 crore in deposits, is facing a crisis after the RBI banned district cooperative banks from exchanging scrapped notes. The cooperative banks are not allowed to collect the Rs 500 and Rs 1,000 notes from customers in exchange of valid currency.

Kerala Minister A C Moitheen said the Centre’s stand would spell trouble for the sector. He said the state would approach the RBI again, and expects it to change its stand.

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When demonetisation was announced last week, the cooperative banks were allowed to accept the scrapped notes as deposits from account holders who meet KYC norms. But the RBI cancelled the permission a few days later on the ground that the cooperative banks would help launder black money. A few cooperative banks had allowed opening of fresh accounts for the purpose of depositing demonetised notes.

The issue has got a political angle with BJP alleging that the CPM and Congress have stashed black money with cooperative banks, which are ubiquitous in CPM strongholds in Kannur.

“We are not against cooperative banks. We are opposing parking of black money in cooperative banks,’’ said BJP state president Kummanam Rajasekharan.

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  1. K
    keralite
    Nov 19, 2016 at 3:34 pm
    in kerala co operative banks are controlled by corrupted politicians....hence they use for depositing their black money.....co operative banks doesnt follow income tax norms....why cant they follow the norms....and protesting instead..... kerala politicians and media are misleading the people.....poor people are suffering beacuse of this issue
    Reply
    1. M
      manu
      Nov 17, 2016 at 10:50 am
      if cooperative bank of marxsist without under RBI and deposit withiout PAN card, as much amount wish by black money holders..theny it cant be named as swiss bank of kerala..
      Reply
      1. R
        RB SHAIKH
        Nov 20, 2016 at 4:26 pm
        Other bank have NPA of Rs. 8.5 lakh crore of which 1.64 lakh have been recently written off including 7000 crore from Malya. The recovery ratio of the DCCBs as on March 2015 is 78% whereas it is 95% for the SCBs. Please note that all SCBs and DCCBs are subject to statutory annual and bi-annual inspections under Banking Regulation Act, 1949 by RBI. They are also subject to banking license, liquidity ( cash reserve and statutory deposit) ratios maintenace with RBI and deposit insurance norms. It is, therefore, wrong to say that they avoid KYC norms in maintaining deposit and loan accounts. However, they are exempt from income-tax on their profits which are very low in view of loans being given to farmers at lower rate ( 8 % for crop loans). On the other hand, to attract deposits, they pay higher rate of interest (by 0.5 -1 %) on deposits compared to other banks, making their profit margin from thin to thinner. As of March 2015, their total membership is 32.16 crore. 38 crore rural potion are out of network of commercial banks. During 2014-15, rural credit of Rs. 340392 crore was disbursed by the SCBs/the DCCBs to the farmers and others through one lakh co-op societies and also to 31 lakh individuals. Their total deposits are Rs. 436523 crore. If what you say is true, why does RBI not liquidate these banks? They have such powers to do so.
        Reply
        1. R
          RB SHAIKH
          Nov 20, 2016 at 4:28 pm
          Please note that all SCBs and DCCBs are subject to statutory annual and bi-annual inspections under Banking Regulation Act, 1949 by RBI. They are also subject to banking license, liquidity ( cash reserve and statutory deposit) ratios maintenance with RBI and deposit insurance norms. It is, therefore, wrong to say that they avoid KYC norms in maintaining deposit and loan accounts. However, they are exempt from income-tax on their profits which are very low in view of loans being given to farmers at lower rate ( 8 % for crop loans). On the other hand, to attract deposits, they pay higher rate of interest (by 0.5 -1 %) on deposits compared to other banks, making their profit margin from thin to thinner. As of March 2015, their total membership is 32.16 crore. 38 crore rural potion are out of network of commercial banks. During 2014-15, rural credit of Rs. 340392 crore was disbursed by the SCBs/the DCCBs to the farmers and others through one lakh co-op societies and also to 31 lakh individuals. Their total deposits are Rs. 436523 crore. If what you say is true, why does RBI not liquidate these banks? They have such powers to do so.
          Reply
          1. R
            RB SHAIKH
            Nov 20, 2016 at 4:09 pm
            The sooner these banks are involved in demonetization process, the better will be a position in rural India for both depositors and farmers needing money for agricultural and consumption needs of Rabi sowing and marriage season, besides daily needs. How their depositors will exchange and withdraw their money? How their borrowers will repay old dues and be eligible for fresh loans?lt;br/gt;lt;br/gt;While these banks are regulated by RBI in all respects and trusted to handle total business of Rs. 776915 crore through deposits and loans together, why cannot they be trusted for demonetization business which is mainly for cash against cash only?
            Reply
            1. A
              A.Radhakrishnan
              Dec 9, 2016 at 11:04 am
              I have one question - Did RBI send any notice to the CO-OP Banking Sector, stating that they will not be allowed to operate in case they don't follow the KYC Norms? Or was it just an advice to be followed?
              Reply
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