Demonetisation intensifies tussle over cooperatives in Kerala

Demonetisation intensifies tussle over cooperatives in Kerala

By Santosh Kumar | THIRUVANANTHAPURAM | 27 November, 2016
Demonetisation, Kerala, economy, political parties, Cooperative movement, BJP, COM, LDF
Cooperative movement, the lifeline of Kerala economy, is often used by political parties to widen their bases.

New political battle lines have been drawn in Kerala with the ruling Left Democratic Front in direct confrontation with the Bharatiya Janata Party, both in the state and at the Centre over the question of demonetisation of old Rs 1,000 and Rs 500 notes and the resultant fallout on the cooperative sector in the state. Days after Prime Minister Narendra Modi’s surprise announcement withdrawing the contentious notes from circulation, the Reserve Bank of India, through a directive, barred cooperative banks from accepting the Rs 1,000 and Rs 500 notes as deposits or exchanging them for new currency. Saying this will break the backbone of Kerala society, which is largely dependent on credit cooperative societies, Marxist Chief Minister Pinarayi Vijayan and his Cabinet colleagues sat on a day-long dharna in front of the RBI branch in Thiruvananthapuram. Four days later, a special session of the state Assembly was convened, where a resolution was passed against the Centre for “sidelining cooperative banks”. It was also decided that an all-party delegation would meet the Prime Minister on 24 November over the issue. While even the opposition Congress and other political parties supported the move, the only dissenting voice was of the lone BJP member in the 140-member Assembly, that of veteran O. Rajagopal. Staunchly supporting PM Modi, Rajagopal made a frontal attack on the LDF, putting the ruling party on the defensive. “There are some confirmed reports that black money holders are depositing in the cooperative banks. Money from several foreign countries was flowing into the banks and that was the reason why the Centre has acted tough against them,” said Rajagopal, who was, according to reports, allowed to speak only for a minute. Pointing out that “the masks of several eminent people will be taken off if the government conducts raids at the cooperative banks”, Rajagopal said, adding “this does not mean that the deposits of the common man will be lost.” However, his attempt to move an amendment to the motion was shot down. 

While there is no doubt that the cooperative movement is practically the lifeline of Kerala economy, it is common knowledge that it is also used by various political parties, mainly the CPM, as an instrument for widening their respective bases and keeping a control over their respective cadre. There are many who believe that politicisation of the movement has totally corrupted the system. Elections to cooperative societies are as vigorous as the general elections in the state. All political parties, including the BJP, control societies across the state. The cooperative banking sector in Kerala is a three-tier system with about 1,604 primary cooperative banks attached to 14 district banks. These are further linked to the apex Kerala State Cooperative Bank. State cooperative banks, district cooperative banks and primary cooperative banks constitute the cooperative banking sector in the state. Other than these, there are urban banks and agricultural development banks. Of this, state-district and urban banks come under the purview of RBI. But RBI has no control over primary cooperative banks which work directly under district banks and are under the jurisdiction of the Registrar of Cooperative Societies. They are meant purely for helping the agricultural banks. The state BJP leadership has always contended that these primary cooperative credit societies are virtual dens of black money hoarders. The party has always demanded that these banks too are brought under the ambit of the RBI. Moreover, they allege that during the gap of five days from the day the Prime Minister’s announcement and the day the RBI barred the societies from accepting the Rs 1,000 and Rs 500 notes, a sum of Rs 2,800 crore was deposited in these banks. This is a very serious charge which the LDF government is finding it difficult to brush aside. There is no need to show PAN cards for any deposit less than Rs 50,000 in these banks. Also there is no system of identity verification of the depositor as the crucial KYC (know your customer) norm is not applicable here. Hence most of these banks accept Rs 49,999 as deposits from any Nair, Chandy or Mohammed. Most of them turn out to be benami account holders. It is common knowledge that party funds too are stashed away in these banks. According to the Income Tax Department, these primary banks have at least Rs 35,000 crore in black money. Both the mainline parties, CPM and Congress, have in the past vehemently opposed any move to bring these banks under RBI scanner. They have moved even the Supreme Court to block all moves to get information under the RTI Act. Most of these agricultural banks blatantly flout rules and lend money on gold and land guarantees.

The Left Front move to politicise the cooperative issue got a setback when the PMO denied an audience with the all-party delegation. Instead of the PM they were asked to meet Finance Minister Arun Jaitley. “But the state Finance Minister and I had met Jaitley very recently. Hence we have decided not to go to New Delhi to meet the Finance Minister again, as that would not solve the problem,” Pinarayi Vijayan told newspersons. Terming the PMO’s denial as an affront to the people of Kerala, the Chief Minister charged the BJP with blocking the meeting. A day before the LDF sought the meeting, a BJP delegation led by the state president, Kummanom Rajasekharan, had met Jaitley. They had indeed briefed the Finance Minister about the irregularities taking place under the cover of the cooperative movement and once again demanded RBI intervention. Kummanom had even gone to the extent of calling the two fronts “Black Money Fronts”. More than any other party, CPM stands exposed for its misuse of cooperative funds for its own benefits. The water theme amusement park at the temple town of Parassinikadavu and the Pariyaram Medical College, both in the party stronghold of Kannur district, under party run cooperatives are just two standout examples of such diversion of funds. The Congress, though siding with the LDF, is apprehensive of the Marxist move to merge all cooperative banks and float a Kerala Bank. They fear it is a calculated move to oust them from those 13 district banks under party control. 

So instead of making any effort to cleanse the system of bogus memberships, benami accounts, lakhs of rupees in deposits for employment in those banks, the CPM has called for a day-long hartal on Monday despite strong Congress opposition. Hartal is the new norm in the state since the courts have banned bandhs. Despite assurances from various LDF leaders that normal life won’t be affected, people of Kerala know what the cadre will do if they venture out on the roads or try to go to an ATM to withdraw the much needed cash. As a common Malayalam saying goes, it is a case of someone struck by lightning being bitten by a snake; yet another attempt at scuttling all norms to the winds. 

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