Make assets into guarantees for safety of investors in cooperative sector, RBI directive not implemented in Kerala

THIRUVANANTHAPURAM: Experts believe that if the Reserve Bank's proposal to convert the assets of cooperative banks as guarantees is implemented in Kerala, it will pave the way for the return of investors' money. Reserve Bank has made it mandatory for cooperative banks operating in more than one state.

The existing investment guarantee scheme in Kerala provides a maximum return of Rs 2 lakh in case of bank failure, no matter how large the amount invested. The same can be obtained only after the bank collapses and liquidates. One will have to wait six or eight years.

Last year, the RBI had directed that cooperative banks in Kerala should not use the term bank and if they do, they should be guaranteed by assets. There is also an argument that the government should guarantee cooperative investments.

The provisions introduced by RBI were not implemented in the same way in Kerala. Kerala has the strongest cooperation sector in the country. 1625 primary co-operative societies and thousands of other co-operative societies will not be able to function as they wish if the Reserve Bank's conditions are implemented. If the co-operative banks go ahead with non-transparent money transactions, the central government will intervene.

It is reported that there are financial irregularities in 399 cooperative banks in the state. It is alleged that the irregularities are not coming to light only because the state government is turning a blind eye.

Many complaints have been raised against co-operative banks such as concealment of black money, illegal money transactions by directors, non-repayment of loans by directors in the name of common people, extortion in the name of affiliated institutions. Vigilance investigation is in progress against many banks. Ordinary members are not allowed to interfere in the financial affairs of banks beyond the right to vote in elections held every five years. The RTI Act does not apply to the cooperative sector.

Co-operative banks................................... 1625

Associations................................... 16112

Kerala Bank branches............................ 770

Co-operative Investment ....................................677127 crores

Loan................................................... 443554 Cr

Economic irregularities found at...............399 cooperative banks

Institutions that cannot return the deposit................... 164