Cash deposits in 285 district cooperative banks (DCBs) across India surged six fold in the first four working days after the recall of high-value currency on November 8, as compared to reserves a day before the announcement, HT has found.
An analysis of classified bank transaction data revealed DCBs deposited Rs 3,051.2 crore with public sector banks between November 8 — when Rs 500 and Rs 1,000 were withdrawn — and November 14, when the Reserve Bank of India (RBI) banned the institutions from accepting cash.
This is six times the Rs 496.88 crore reserves in the DCBs on November 7.
All cooperative banks maintain a current account with a public sector bank, where they have to hold their cash deposits.
Prime Minister Narendra Modi yanked the two banknotes out of circulation to drain illegal cash from the economy and announced a 50-day window to deposit or exchange the banned currency.
But experts fear that most of the “black money” may have returned to the banks because of lax oversight, corrupt bank officials and fake deposits or accounts.
On Wednesday, Bloomberg said 97% of the Rs 15.4 lakh crore, which was recalled, had come back to banks.
The Enforcement Directorate (ED) is already investigating 300 cooperative banks, set up to expand banking in rural areas. Emails and text messages to the RBI and finance ministry were unanswered.
The highest cash deposit was made by the Amreli Jilla Madhyastha Sahakari Bank Ltd (AJMSBL) in Gujarat’s Saurashtra region.
The bank had cash deposits of Rs 1.3 crore on November 7 but over the next four working days, it made deposits of Rs 209.15 crore in the State Bank of India branch in Kovaya, a small village in Rajula taluk of Amreli district. The highest deposit in the last quarter from the bank was Rs.6.2 crore.
There are three types of cooperative banks in India, state cooperative bank, urban cooperative banks and district cooperative banks. Only DCBs were banned by RBI after allegations of money laundering.
But around 100 urban cooperatives banks are also being probed by the ED.
In the first three weeks after demonetisation, nearly Rs 12,000 crore worth high-value cash deposits worth Rs 80 lakh each were made by 325 urban cooperative banks from remote districts, HT’s investigation found.
This is nearly a 25-fold increase in cash balance of these urban cooperative banks compared to their last balance on November 7.
HT also found 1,12,465 individuals and other business entities who made more than Rs 1 crore cash deposits till November 30.
Dileepbhai Sanghani, chairman of AJMSBL and Gujarat’s agriculture minister told HT, “There was no specific ban on district cooperative banks accepting deposits until Nov 14. So the said 209 crore is the deposit in those four days. RBI asked us to give details of KYC of depositors and we have given all of it.”
In another case, cash deposits at Sindhudurg district cooperative bank jumped from Rs 2.22 crore on November 7 to Rs 78.3 crore by November 14.
The ED probe revealed one instance where a bank account had showed a fixed deposit of Rs 1.45 crore during November 9 to 30. However, the record showed there was no amount in the account between October 1 and November 8. Bank officials did not respond to HT’s text message and telephone calls.
The cooperative banks first came under the scanner after the ED found Maharashtra-based SVC Cooperative Bank Limited told the RBI that it collected Rs 1450 crore in old currency. But an ED inspection found only Rs 946 crore in its chest.
This made SVC officials admit an “error” of approximately Rs 504 crore in “reporting”. Later, the ED initiated a probe against 300 cooperative banks.
But Sanghani – who is also the president of the national federation of state cooperative banks – blamed the RBI and pointed out that no DCB official had been caught for fraud while other bank officials had been arrested.
“Yet, the RBI is not giving us new currency or accepting the deposits with us. The RBI and private banks are responsible for spreading defamatory rumours against us.”
“RBI is responsible for the bad situation in rural agrarian economy by not releasing cash to district cooperative banks,” he added.