Banking Bill sets alarm bells ringing for State coop. sector

Centre aiming to wrest absolute control of cooperative banks

The Banking Regulation (Amendment) Bill 2020 mooted by the Centre has set alarm bells ringing for the State’s cooperative sector that accounts for nearly 50% of the banking transactions in the national cooperative sector.

Banking sector sources told The Hindu that the Centre was aiming to wrest absolute control of Kerala’s cooperative banks ranging from primary cooperatives to the apex bank that have deposits of about ₹1 lakh crore and total transactions to nearly ₹2 lakh crore.

The cooperative banking sector is the pivot in disbursing social welfare pensions amounting to roughly about ₹8,000 crore annually and has made meaningful interventions in housing as well as a slew of other welfare schemes for the indigent and marginalised sections.

The welfare schemes and other such initiatives are being run on the strength of the functional autonomy being enjoyed by the sector. By bringing the sector under the tight leash of the Reserve Bank of India, it would have to seek the permission of the apex bank for continuing such schemes and exploring fresh pastures. This is feared to seriously debilitate the cooperative sector that has extensive reach all over the State.

The Bill seeks to constrict the functioning of societies and it would even impinge on the execution of the second phase of the housing scheme it implemented for those who have been rendered homeless in the flood. As many as 2,000 houses have been completed for ₹75 crore and the construction of 2,000 more houses is set to be launched soon.

The Central government bid to strip the income tax benefit being enjoyed by the Primary Agricultural Cooperative Societies and the move to impose a 2% tax at source on societies that have cash withdrawals more than ₹1 crore a year from banks have drawn flak.

Such moves are being construed as part of the political agenda of the Centre to bring the cooperative sector under its absolute control. This would give sufficient financial leeway for the Centre, but would deprive the State’s cooperative sector of the functional freedom to support the marginalised farmers, traders and such other sections, sources said.

Cooperation Minister Kadakampally Surendran has called a meeting of stakeholders on Thursday to explore the legal options for addressing the issue.