A roadmap is ready for constituting a two-tier Kerala Cooperative Bank (KCB) that is expected to make banking operations more easy and accessible to the small and medium farmers, traders, and such other sections.
On becoming fully operational, the proposed two-tier bank with 5,500 touch points and 6,000 branches is expected to do business worth Rs.3,00,000 crore in the first year itself.
M.S. Sriram, chairman of the committee constituted by the government for studying the project, told The Hindu after submitting the report on Friday that the 1,625 Primary Agricultural Credit Cooperative Societies (PACS) in the State would become the fulcrum of the new structure.
The State government had promulgated an ordinance and now the director boards of 14 district cooperative banks stands dissolved. This has made the merger more easy. Scrapping one tier would help to save administrative and other costs, Mr. Sriram said.
The cooperative sector was already wielding 30% of the banking business in the State and it could further grow, diversify, and fill the vacuum left by the State Bank of Travancore following its merger with the State Bank of India. The PACS could also function as third party agents of insurance companies, mutual funds, and pension schemes, he said.
The KCB and the PACS would function in a complementary manner. They would not vie with each other. The PACS would continue their the current banking operations and the KCB would focus on value-added services and specialised banking products. The bank would not levy charges on services. It would issue credit and debit cards to members of societies.
The panel has recommended the setting up of a Kerala State Financial Sector Regulatory Authority. The authority is one of the safeguards mooted to give a firm assurance to the Reserve Bank of India that the new bank would be functioning within a firm regulatory framework.
The committee that gauged the impact of the convulsions of demonetisation on the cooperative sector felt that the RBI would not be sceptical in according clearance to the new bank if a regulatory system is in place.
“The authority, while functioning as a supervisory body for the board, could also monitor the functioning of other financial institutions, including chit funds and such others that come within the ambit of the State. Since the RBI does not have control over chit funds, the proposed authority could take up the task,” he said.
Substantial investments would have to be made for building up IT infrastructure that would serve as the backbone of the new banking system. The new bank would have the leeway to set its fiscal priorities. The RBI has already accorded sanction for setting up a similar bank in Chattisgarh. Hence, the State too is expecting clearance for its proposal.
