M K Madhusoodan
Bengaluru, 30-06-2020: The Union Cabinet on June 24, took a bold step of enacting an ordinance to bring all co-operative banks under the Reserve Bank of India’s ambit.
This was announced by Union Information and Broadcasting minister Prakash Javadekar during a virtual press conference. This happened when many state co-operative banks and among them Kerala-based ones and the Kerala Government itself are trying to resist such a move. But investors and depositors in the many of these banks are feeling relieved after witnessing collapse or freezing operations of co-operative banks following financial indiscipline.
“Government banks, including 1,482 urban cooperative banks and 58 multi-state cooperative banks, are now being brought under supervisory powers of Reserve Bank of India (RBI),” Javadekar said. These banks will come under the supervision of RBI with immediate effect from date of President’s approval on the ordinance.
There are more than 8.6 crore depositors in over 1,500 urban and multi-state cooperative banks across the country. Totally Rs.4.84 lakh crores as deposits are with these co-operative banks.
Karnatakas has the dubious distinction of duping large number of investors in co-operative societies and banks in the sector.
Amanath Bank was started as a service to help minority Muslims in 1977. One of the most progressive looking Co-operative Banks saw its last days when RBI ordered freezing of all its operations in 2013.
This was after the Bank that had the first ATM facility for its customers was found allegedly involved in financial irregularities besides failure to submit annual report to RBI.
More so, in another major scam, many investors were stuck in dire straits, following the Punjab and Maharashtra Cooperative (PMC) Banks fiasco last year. After finding the fate of troubled depositors across some states , the Union Cabinet, in February, was forced to amend Banking Regulation Act to strengthen the cooperative banks..
This year so far, the Reserve Bank of India (RBI) has put at least 44 co-operative banks across the country under watch citing deterioration in their financials or for flouting prudential norms. This includes those cases wherein the regulator has put fresh restrictions on these banks. The CKP Co-operative Bank in Maharashtra and the Mapusa Urban Co-operative Bank of Goa, were asked to cease operations following tthis. These actions raised several questions on the health of co-operative banking sector in India.
In April alone, the RBI acted on nine co-operative banks.
There were eight cases in May where the RBI announced some kind of actions on crisis-ridden co-op banks. On 2 May, the RBI clipped the wings of another bank, the Mumbai-based CKP Co-operative Bank. As on April 30, only about Rs 4 crore out of the Rs 158 crore loan book was remaining standard on the lender’s books, CKP Bank’s gross non-performing asset (GNPA) level had zoomed to 97 percent of the total loans.
Karnataka after Amanath Bank became inoperative, saw a large number of Co-Operative banks in red.
Among those are: Shri Kantiveer Sangolli Rayanna Co-operative Credit Society in Belgaum which refused withdrawal of deposits by its members in August 2017. Deposits of more than Rs 150 crore was found diverted in producing a Kannada period film.
In January, the RBI has imposed a withdrawal limit of Rs 35,000 on those holding accounts in City-based Sri Guru Raghavendra Sahakara Bank. The withdrawal limit is applicable to savings, current or any other deposit account, according to the RBI. ” Sri Gururaghavendra Sahakara Bank has also been restricted from disbursing any loans, making any investment or incurring any liability including borrowing of funds and acceptance of fresh deposits,” according to an RBI statement.
The cooperative bank will have to take approval of the RBI for performing any such tasks.
The bad blood in co-operative sector was the result of corrupt officials of Registrar of Co-operative Societies. The state level institution has shown no strict adherence to rules governing on banks and societies under its control.
It alleged that there are societies and banks registered under Registrar Co-operative Sicieties which are run disregarding the norms and regulations by the Registrar of Co-operative Societies.
For years, these societies with financial transactions and banks have not conducted elections to their governing councils. With RBI tightening its grip, some heads in the Registrar’s office are expected to roll or face criminal action.