Kerala govt protests RBI’s directives on co-operatives
Thiruvananthapuram: The ruling Left Democratic Front (LDF) in Kerala on Tuesday launched a statewide agitation against the latest regulatory measures of the Reserve Bank of India (RBI) to rein in primary co-operative societies and banks, calling it an “attack on the federal structure” of India.
Chief minister Pinarayi Vijayan, who sat on a dharna outside the Raj Bhawan on Tuesday, said, “The RBI’s latest move is aimed at crippling the co-operative sector. Since co-operative sector is a state subject it is another attack on federal structure of the country. We will not allow this to happen.”
In its directive issued last month, the RBI barred co-operative societies from using the term banks and restrained them from taking deposits from those who do not have voting rights. It also asked co-operative societies not to use locker facilities and other banking norms.
The chief minister said his government will talk to other non-National Democratic Alliance (NDA)-ruled states like Maharashtra, Tamil Nadu and West Bengal to evolve a common strategy towards the directive against co-operative societies. HT has learnt that Kerala’s finance minister KN Balagopal and co-operation minister TN Vasavan have been asked to co-ordinate with other states.
Vijayan said the co-operative sector is the “first point of the common man in banking solutions and any attempt to weaken it will affect the poor and marginalised sections”.
The Kerala government has also decided to approach the Supreme Court over the RBI guidelines this week, Vasavan said on Tuesday.
In Kerala, at least 70% of the co-operative societies and banks are being controlled by the ruling Communist Party of India (Marxist). In 2019, the Kerala state co-operative bank and 13 district co-operative banks were merged to float the Kerala Bank, which now has 769 branches across the state. While the new regulations won’t affect the Kerala Bank, there are 1,692 primary agricultural societies, 1,200 rural co-operative banks and 16 urban co-operative banks that are likely to be affected.
The RBI came up with provisions to regulate primary co-operative banks based on the Banking Regulation Amendment Act passed by Parliament in September last year. The directive was advertised by RBI in newspapers last week.
“Co-operative sector is a state subject. The Supreme Court had made it clear that co-operative banks have right to receive deposits and grant loans. The Centre’s move to interfere with co-operative sector was stalled by the court in a plea related to 97th constitutional amendment,” said Vasavan.
In July 2020, the Supreme Court struck down a portion of the 97th constitutional amendment that took away exclusive authority of states over co-operative banks. A three-judge bench of the apex court ruled that co-operative societies come under the legislative power of the state assemblies while taking exception to the fact that the amendment was passed without ratification from states.
“The latest RBI announcement has created enough confusion among customers. Such measures will cripple the co-operative sector. During the Covid-19 lockdown we disbursed enough fund to the needy. Since we are facing competition from micro-finance institutions, these steps will annihilate the co-operative sector eventually,” said Sreejith Choyan, president, Kadirur Service Co-operative Bank Ltd (Kannur district). An award-winning bank, it has 11 branches and a total turnover of ₹750 crore.
“Many banks have started dishonoring cheques and transactions of the co-operative banks. Customers have started raising questions after the RBI publicized its guidelines in major newspapers. Such steps will cripple co-operative banks,” said a manager of another bank, who did not wish to be named.
The Opposition Congress said it will oppose any move to weaken the co-operative sector. “We will give issue-based support to the government,” said Kerala Congress president K Sudhakaran.
However, the Bharatiya Janata Party (BJP) justified the RBI directives. “Recently, the state witnessed several misappropriations in co-operative banks. In Karuvannur co-operative bank in Thrissur alone fraud worth ₹500 crore came to light. There is no proper auditing and supervision and most of them turned extended offices of the ruling party,” said Kerala BJP chief K Surendran.