Amid protests from various states, including Kerala, against an RBI circular that said the demonetised Rs 500 and Rs 1,000 notes could not be exchanged at cooperative banks, the Tamil Nadu government has said the move has “crippled the functioning” of its credit societies and cooperative banks.
The government said that until the first week of November, cooperative institutions had disbursed only Rs 2,075.41 crore towards crop loans against the targeted sum of Rs 6,000 crore. Demonetisation, it said, had affected over three lakh farmers who depend on the cooperative sector. The government said while crop loans had benefited only 3.38 lakh farmers so far, the total number of beneficiaries during the corresponding period last year was 6.38 lakh.
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Crop loan is an important component of agricultural credit extended by the Primary Agricultural Cooperative Credit Societies (PACCS).
State Cooperative Minister Sellur K Raju held a review meeting on the impact of RBI decision. The government said “several lakhs of customers” who depend on the state’s 23 district cooperative banks and their 813 branches had been affected.
The statement said RBI’s circular also prevents farmers from repaying loans in time to PACCS. It said the state cooperative sector was paralysed as it is unable to get new deposits or extend new loans especially, during a period when long-term samba crop cultivation has begun.
The government said it was facing difficulties disbursing the 7 per cent interest subsidy to farmers who repay crop loans promptly, although a sum of Rs 200 crore had been allocated.
T Thamizharasu, state general secretary of the Cooperative Bank Employees Federation (CCEF) of Tamil Nadu, said the reasons cited by RBI were baseless. “The RBI’s decision may have been prompted by worries about counterfeit currency and black money. Counterfeit currency is detected by machines, not our bank staff. In Tamil Nadu, cooperative bank branches doing major transactions, including many in Chennai, have machines to detect counterfeit notes,” he said.