There seems to be no end in sight for the beleagured District Central Cooperative Banks (DCCB)s as the Reserve Bank of India (RBI) now claims to have received no direction from the central government regarding the old currency notes held by these banks.
The 31 DCCBs in Maharashtra, which recently had 100 per cent KYC verification of its accounts by Nabard, are still saddled with around Rs 2,000 crore in old currency notes.
They said their financial position has weakened substantially since demonetisation, making it difficult for them to meet their crop loan targets.
Soon after demonetisation, the RBI had barred DCCBs from depositing or exchanging old currency notes. The apex bank had also refused to exchange around Rs 2,000 crore, collected by these banks in old currency notes.
The DCCBs had then approached the Supreme Court for relief, which had asked the remittance of the old currency notes, but had asked for 100 per cent KYC compliance of the accounts.
Following the SC verdict, the RBI had asked NABARD to undertake the inspection, which has till date conducted four such verifications.
Across the country, 73 DCCBs have completed 100 per cent KYC verification, while 215 DCCBs did not hold any of the old notes.
On May 8, the RBI had stated that 82 DCCBs in the country were yet to complete their 100 per cent KYC verification.
In its letter to the chairman of the National Federation of State Cooperative Banks, the RBI had drawn attention to Specified Bank Notes (Cessation of Liabilities) Act 2017, by which, specified bank notes (old currency notes) had ceased to be a liability of the RBI.
“A grace period has been provided, during which the SBNs can be deposited by Indian citizens who make a declaration that they were outside India between November 9 and December 30, 2016, subject to condition… In view of this, we not in a position to accept the SBNs collected by DCCBs in terms of the aforesaid Act. Till receipt of further instructions by us from GoI, we have advised NABARD to communicate to the respective DCCBs to hold SBNs in their custody,” the letter had read.
This delay, DCCBs said, has affected their financial health, taking a toll on the disbursal of Kharif loan. Till the first week of May, the banks have distributed Rs 3,539.89 crore, of the Rs 13,076.96 crore-target given to them, for Kharif disbursal. Last year, these banks had distributed Rs 4,566.34 crore during the same time.
Known for their extensive rural outreach, weak DCCBs will prevent many small and medium farmers from accessing credit at the right time, said bankers.
As against the 2,752 rural branches of the commercial banks, the DCCBs have 3,013 rural branches. In Maharashtra, 11 out of the 31 DCCBs might not be in the position to disburse crop loans, which can snowball into a major issue in the state.