Demonetisation spells trouble for farmers
The Reserve Bank of India’s (RBI) decision to not allow District Central Cooperative Banks (DCC) banks to accept or exchange scrapped notes has hit farmers hard in Maharashtra as most of them have accounts only at these banksmumbai Updated: Nov 18, 2016 01:07 IST
The Reserve Bank of India’s (RBI) decision to not allow District Central Cooperative DCC (Banks) to accept or exchange scrapped notes has hit farmers hard in Maharashtra as most of them have accounts only at these banks. The move is likely to affect cultivation of rabi crops as DCC banks are struggling to provide banknotes to farmers that will enable them continue their farm activities for rabi season.
Five days after the announcement of demonetisation of high-denomination currency notes, the RBI issued a circular on November 13 clarifying that no DCC bank in India can exchange or deposit old notes of Rs500 and Rs 1,000 denominations. Finance minister Arun Jaitley has refused to reconsider the decision.
“Farmers are going through difficult times as most of them have their accounts only at DCC Banks. Rabi season is on and they need money to buy seed, fertiliser and for other miscellaneous expenses, but are left with no money. The reason behind is that DCC banks, who are running out of cash, are not allowed to take old notes,” said Vijay Jawanbhia, agriculture activist.
“When the central government is not allowing the DCC banks to take old currency, how can they (DCC banks) maintain liquidity as there is severe crunch of new currency as well,”said Raghunath Patil, farmers’ leader from western Maharashtra. There are cases where farmers failed to pay crop loan instalments owing to cash crunch and will not be held eligible for new crop loans, he added.
“The concept of DCC Banks has been in place since decades. The RBI has granted them banking licence and by leaving them out of the system at such crucial time means you (central government) want the system to collapse, which will be another agrarian crisis, he added.
Maharashtra has around 31 DCC Banks with 3,746 branches being spread across the state. The network of cooperative banks at tehsil and district levels plays a significant role in disbursement of loans and deposits/payments for farmers in rural Maharashtra. Significantly, in Maharashtra, most DCC banks are controlled by Congress and NCP leaders.
The directors and chief executive officers of these banks held a meeting in Mumbai and requested chief minister Devendra Fadnavis to intervene. Pravin Darekar, chairman, Mumbai DCC Bank, said that the chief minister has assured them he will take up the matter with union finance minister Arun Jaitely.
They have also filed a writ petition in the Bombay high court on Wednesday. The hearing on the matter is scheduled on November 21.
The RBI is of the view that DCC banks have not complied with the know-your-customer (KYC) initiative and thus should not be accommodated for the facility, said officials from state finance department.
Darekar said that DCC Banks have strictly implemented the initiative. He also they send daily Suspicious Transaction Reports (STR) to RBI.
Meanwhile, the Maharashtra State Cooperative (MSC) Bank, the apex body of all DCC Banks has also taken up the matter with RBI and chief minister Devendra Fadnavis.
The MSC Bank on Wednesday wrote a letter to the RBI governor requesting him to review its decision as DCC banks have a huge network and people from the remotest of areas have access to these banks, said Pramod Karnad, managing director, MSC Bank.
“The clientele of DCC Banks is majorly farmers and with the decision, the agriculture sector has been deprived from the facility,” he said. In another letter, MSC Bank has requested Fadnavis to intervene to bring DCC Banks out of the crisis.
The ministry of finance on Thursday decided to allow farmers to withdraw up to Rs25,000 cash a week only from KYC compliant accounts. Rahugnath Patil asked how will it help farmers when they don’t have accounts in other banks except in DCC banks.