KOCHI: Crisis in the cooperative banking sector in Kerala went from bad to worse on Wednesday, as day-to-day business of hundreds of small agricultural credit societies of the State came to a standstill due to their inability to withdraw or deposit funds via District Cooperative Banks (DCBs) for the fifth day running.
“Business has halted. Thousands of people at grassroots have been affected, as they cannot conduct transactions to run their societies,” said M K Radhakrishnan, General Manager of Ernakulam DCB, the largest DCB in Kerala with over Rs 9,000 crore deposits and 2 lakh accounts. State Level Bankers Committee (Kerala), says there are 1,670 Primary Agricultural Credit Societies (PACS) and another 750 branches for the 14 DCBs.
“Thousands of small societies, including employees credit societies, harijan societies, vanitha societies, marketing societies and the like, have been affected now,” said Radhakrishnan, adding, “The situation arose because by-laws approved by state government require PACS to deposit only in DCBs. For depositing in other banks, they need government’s permission.”
Cherian Kunju P of Planetfee, a firm handling core-banking at three PACS, namely Kothamangalam Service Cooperative Bank (SCB), Pothanikkadu SCB and Kalliyoor SCB, said the main problem faced by PACS was that they could not remit or withdraw funds with their mother bank, which is the respective DCB.
“Allowing individuals to withdraw Rs 24,000/week (Rs 50,000/week for current account holders) may be okay, but for PACS, it is very little. PACS are also barred from depositing demonetised Rs. 500 and Rs. 1000 notes,” he said, adding that the problem was very acute in rural areas. “A majority of elderly and farmers depend on cooperative banks and have been, therefore, the worst hit by the clampdown on cooperative banking sector,” he said.
Radhakrishnan said RBI had allowed business correspondents - a bank-in-person authorised to collect small ticket deposits and extend small credit on bank’s behalf - to accept and exchange demonetised currencies, while DCBs, which possess proper banking license, are barred from such transactions.
Meanwhile, Minister A C Moideen has written to Union Minister Arun Jaitley urging him to immediately withdraw the measures crippling Kerala’s vibrant cooperative sector.