Several commercial banks have failed in the past. The cooperative banks are not immune to the failures either. Thirteen cooperative banks did collapse in the country during 2012-13. But a deposit insurance scheme endorsed by Reserve Bank of India has ensured a limited compensation to those who lost their money. But only urban cooperative banks, district cooperative banks and State cooperative banks come under the existing scheme.

It is in this context that the Kerala State Department of Cooperation has introduced a credit guarantee scheme for deposits in the primary agricultural credit societies functioning under the cooperative sector across the State. The primary societies do not come under the Banking Regulation Act and hence the credit guarantee scheme being operated under RBI guidance has not been applicable to them.

Those cooperative bodies taking deposits are required to set apart a small sum for the guarantee fund now. It is as low as Re1. per Rs.1,000, but many of the coop bodies resisted the move, a top official of the Registrar of Cooperative Societies said. Under the scheme, a maximum of Rs. 1.5 lakh would be paid to the depositor in case the cooperative body collapses. About 1,500 coop bodies receiving deposits have to abide by the new norm to ensure security of the deposits.

The new guarantee scheme is being launched after several cooperative banks in the country faced insolvency issues in recent years. Maharashtra Cooperative Bank, one of the biggest, collapsed two years ago, said K.V.Radhakrishnan, former Joint Registrar of Cooperative Societies. Over 70 cooperative banks in Kerala are insured with Deposit Insurance and Credit Guarantee Corporation, a wholly owned subsidiary of RBI.

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