Politicians hurt as demonetisation hits ‘Swiss Banks’ in Kerala
Thiruvananthapuram, Nov 19: When the rest of India is gaining back the momentum from the lost tempo of functioning in banks after the demonetisation, the primary banking sector in the southern-most part of the nation is almost paralysed.
Don’t be in a misconception on the words ‘Primary Bank’. Those Cooperative Banks are the Swiss Banks of this region.
You will be surprised to know with the shocking revelations by Income Tax Department the cooperative banks held black money to the tune of Rs 30,000 crore in their accounts.
These banks, mostly in the rural areas, are bypassing banking systems to hoard the black money mostly from the politicians.
Kerala Chief Minister Pinarayi Vijayan led hundreds to the streets, launching a day-long sit-in protest, on Friday to protest against cooperative banks not being allowed to exchange scrapped Rs500 and Rs1,000 currency notes.
The primary banking sector in Kerala has almost come to a paralysed stage as these banks cannot exchange old notes or issue fresh notes to the customers.
The move has surely hit several people, including farmers, housewives and retired government officers, who depend entirely on cooperative banks. For instance, as per Kerala government estimates, 70% of the agricultural credit in the state is routed through the four-layered structure of the cooperative bank structure.
Then how can these banks hold this amount of money? Is it from farmers income or the deposit of pensioners? Never.
The politicians in the state are the major stakeholders in hoarding unaccounted money in these banks. And that is the probable reason why CM Vijayan and the party men are completely hurt by the demonetisation
The entire state cabinet, along with hundreds of other supporters, spilled on to the streets before a regional office of the Reserve Bank of India (RBI), as part of the protest. The leader of the ruling party in the alliance, Communist Party of India (Marxist) or CPM’s general secretary Sitaram Yechury, also made a surprise visit.
In a rare display of unity, leaders of the opposition, Congress-led United Democratic Front (UDF), supported the protest. With the ruling communist parties and the UDF opposing the RBI and the central government’s stand on cooperative banks, the Bharatiya Janata Party finds itself alone in the state.
“Cooperative banks together have an estimated deposit base of Rs1.27 lakh crore. This will not surprise anyone who knows the state and the importance of the cooperative sector here. Those who had no role in Kerala’s development so far naturally will not understand these problems,” the chief minister said, hitting out at the BJP, in his televised speech inaugurating the protest.
Meanwhile, Kerala finance minister Thomas Isaac tweeted, “To confiscate black money, use the enforcement agencies. Why liquidate the cooperatives?”
Vijayan also reiterated his allegation that the current developments are part of a conspiracy hatched by the local unit of the BJP to destroy the cooperative sector, acting in tandem with them the Centre and that the RBI had shown prejudice.
On post-announcement of demonetisation, these cooperative banks were on a spree to accept cash from the customers opening a back-dated fixed deposits as they use physical ledgers. They are also issuing demand drafts (DD) and pay orders against cash mostly from the politicians.
According to banking experts, cooperative banks are using loopholes, wherein the money against DDs and pay orders go into a pool account which is deemed to be the banks.
Since all banks are allowed to take cash from customers and exchange it with the new currency notes, these banks are helping people with unaccounted-for cash, who would otherwise be stuck with stacks of worthless papers that served as valid notes till November 8.
Cooperative banks are vital for our economy because they were conceived as a vehicle of financial inclusion for last mile connectivity in far-flung villages and remote corners. They work at the grass root level and serve those where traditional banks cannot reach. As per a 2015 report, there were as many as 371 DCCBs with 14,060 branches which serve a total of 3,347,203 members which includes a whopping 786,754 cooperative societies. Most of these banks cater to the farming community and poorer classes.