Concerns of co-op banks appear genuine: SC

 The court said there had been a rush of petitions over demonetisation.

The court said there had been a rush of petitions over demonetisation.

Noting that concerns raised by co-operative banks on demonetisation appear “genuine,” the Supreme Court on Friday asked the Centre to look into the issues raised by the financial institutions which largely cater to agrarian and semi-rural population across the country.

A Bench led by Chief Justice of India T.S. Thakur said the co-operative banks, which had complained of cash crunch after having been denied primary exchange facility by the government after the November 8 demonetisation, had raised “distinct” problems which needed to be addressed.

‘Step-motherly treatment’

“Their concerns seem to be genuine,” Justice Thakur acknowledged. Senior advocates P. Chidambaram and Kapil Sibal questioned why the co-operative banking sector was subjected to such a step-motherly treatment, causing havoc in the rural economy.

A joint petition filed by seven district co-operative banks from Kerala had accused the Centre and the RBI of attempting to cripple the rural and agrarian economy through demonetisation, which they termed “anti-competitive, violative of the spirit of the Constitution.”

More co-operative banks from Maharashtra, Tamil Nadu and Rajasthan have moved the court. Kerala’s petition described demonetisation as an unfair exercise seeking to promote the interests of “certain banks and financial institutions.”

Centre’s affidavit

The Centre informed in its latest affidavit on December 1 that it was a “conscious decision” to keep the co-operative sector banks out.

The Centre accused District Central Co-operative Banks (DCCBs) of “low-order professionalism among their staff and low-level of automation.” The government said the “capability of DCCBs to detect fake currency notes is also low.” These handicaps were roadblocks to the government’s twin objectives of demonetisation — weeding out black money and ending a “parallel economy” fuelled by fake currency.

The affidavit said DCCBs were controlled by the respective State governments and not the RBI.

It said distancing DCCBs hardly had an impact on individual citizens as their clientele was primary co-operative banks and societies.

Hearing adjourned

The Bench, which was scheduled to preside over an omnibus hearing on the constitutionality of the November 8 demonetisation notification and the ground realities post the implementation of the policy, adjourned the hearing to December 5.

The court said there had been a rush of petitions, presently over 70 in number, to the Supreme Court in the past few days. These are petitions both for and against demonetisation. The Bench asked Attorney-General Mukul Rohatgi and senior advocates like Mr. Sibal to sit together and sort out the issues the court had to adjudicate on.

In its second affidavit filed on Thursday, the Centre said demonetisation and the restrictions on cash transactions were “reasonable restrictions.”

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Printable version | Aug 15, 2022 8:40:17 pm |