In November, Kerala saw state government protesting against the alleged moves of the Centre to destroy cooperative banks in the state. The left parties protested statewide against the 'undemocratic moves' to usurp powers of the cooperative banks and to destabilize them.

 

Despite all the rhetoric about the autonomy of cooperative banks, the state government opted the ordinance route the other day to dismiss the elected governing bodies of 14 district cooperative banks (DCB). Almost all of them were ruled by pro-UDF councils. The ordinance brought all the DCBs under the direct control of the government through administrator rule.  

 

All except one DCB is under UDF rule. This is a highly undemocratic move, said former Chief Minister Oommen Chandy. The UDF will oppose the move politically and legally, he added.

 

The government has multiple goals to achieve through the ordinance to dismiss the DCBs. 
 

But, such ordinances and the political interventions are not new to Kerala. Ordinances to unseat DCB governing bodies happen every time a new government assumes charge. The new government would bring in changes in the voting rights to the coop banks with political goals and to ensure that pro-government administrative bodies get elected.

 

But this time, the government has multiple goals to achieve through the ordinance. It would mean that the administrator rule in DCBs would be in force for a year. It also ensures mean that the government will have lesser resistance in the formation of the Kerala Bank, the ambitious project to merge all the cooperative banks to form the biggest bank in the state.

 

 If the pro-UDF DCBs oppose the merger of coops, the government would find it a formidable task. The general body of DCB Malappuram had passed a resolution against Kerala Bank last year. If other DCBs follow suit, it would put legal hurdles in the formation of Kerala Bank. By eliminating the administrative bodies of DCBs, the government hopes a smooth sail towards the formation of the apex bank.

 

By eliminating the administrative bodies of DCBs, the government hopes a smooth sail towards the formation of the apex bank.
 


Why Kerala Bank is a smart move

  • Kerala Bank is an ambitious project mooted by the LDF government.  It would mean the merger of all the DCBs and Primary Cooperative Banks.
     
  • Once Kerala Bank comes into being the DCBs would become an non-entity. The Kerala Bank is planned as a two-tier system with 840 branches and a network of 1,425 primary credit societies. All assets and liabilities of the district banks would be transferred to the Kerala Bank.
     
  • 14 DCBs and Kerala State Cooperative Bank (KSCB) together have 820 branches. No other commercial bank can match this network. The total investment in the cooperative sector in Kerala is estimated to be around Rs.1.27 lakh crores. With this, the proposed Kerala Bank could easily become the biggest bank in the state.
     
  • The KSCB, DCBs and Primary Agricultural Credit Societies (PACS) have a cumulative account base of 3.51 crores.
     
  • The cooperative sector also disburses loans like no other bank does. The coops have given away Rs.1 lakh crore in the state.
     
  • The new ordinance envisages formation of an apex society for farm cooperatives. Nearly 10,000 primary cooperative credit societies would come under its ambit.
     
  • The Reserve Bank of India had stated earlier that the primary cooperative banks cannot be considered banks in its true sense. Once the RBI approves the Kerala Bank and the merger of coops, these primary institutions could enjoy legal status as banks.