KOCHI: Is Kerala heading for a revival of district cooperative banks, seven years after their merger into Kerala Bank? Chief Minister V D Satheesan has raised serious questions over the wisdom of the merger, signalling a possible rethink of the cooperative banking structure. However, former Kerala Bank president Gopi Kottamurickal has cautioned that reversing the process would be virtually impossible.
Speaking at the 73rd All India Cooperative Week celebrations in Kochi on Saturday, Satheesan questioned what the state had gained by merging profit-making district cooperative banks into Kerala Bank, bringing them under tighter RBI regulation.
“The Karuvannur bank crisis could have been settled within 48 hours had the Thrissur District Cooperative Bank existed. Now, Kerala Bank is helpless in such situations because it is under the firm grip of the RBI. We merged all profit-making district cooperative banks and surrendered them to the RBI. What have we achieved? This needs serious examination,” he said.
The CM also expressed concern over the crisis affecting 470 cooperative societies and promised a comprehensive deposit guarantee scheme, saying the existing Rs 5 lakh protection was inadequate.
“People deposit their retirement benefits, money earned in the Gulf and savings meant for their children’s marriages. When they lose these deposits, their entire lives and dreams are shattered. This government will not allow that,” he said.
Cooperation Minister M Liju said the government was expediting statutory inquiries under Sections 65 and 68 of the Cooperative Societies Act into troubled societies. “Financial mismanagement is responsible for the crisis in some societies. We will not tolerate it. Steps are being taken to return depositors’ money in phases,” he said.
Senior advocate George Poonthottam, who represented cooperative institutions in litigation concerning Kerala Bank, termed the merger a disastrous decision. He alleged that the previous LDF government had facilitated the writing off of nearly `800 crore in liabilities benefiting its associates. “The merger was an act of cruelty towards Keralam’s cooperative sector. It involved systematic corruption that may now be difficult to unearth,” he told TNIE.
However, Kottamurickal dismissed the feasibility of restoring the earlier three-tier cooperative structure. “Kerala Bank has 825 licensed branches. We have already spent Rs 300-400 crore integrating the district banks, including their banking software. I don’t think RBI licences can be secured again for all these branches if the structure is dismantled,” he said.
Kerala Bank was formed on November 29, 2019, by merging 13 district cooperative banks with the Kerala State Cooperative Bank. Malappuram District Cooperative Bank remained outside the merger.
‘Kerala Bank helpless’
According to Chief Minister V D Satheesan, the Karuvannur bank crisis could have been settled within 48 hours had the Thrissur District Cooperative Bank existed. “Now, Kerala Bank is helpless in such situations because it is under the firm grip of the RBI. We merged all profit-making district cooperative banks and surrendered them to the RBI. What have we achieved? This needs serious examination,” he said
