RBI has prevented the sector from exchanging old notes or accepting deposits.

Kerala CM cabinet to protest before RBI want co-op sector banks left alone
news Politics Thursday, November 17, 2016 - 18:40

Tensions between Kerala state government and the Centre over banning of exchange of Rs 500 and Rs 1000 notes at District Cooperative Banks appears to have escalated to new levels. 

Read: Kerala Co-op sector in limbo after RBI bans exchange of demonetised notes at its banks

Protesting the central government’s move, Pinarayi Vijayan on Thursday called for an open protest against the decision. 

Kerala CM, along with all ministers of the state has decided to stage a protest demonstration before the RBI office in Thiruvananthapuram on Friday, from 10 in the morning to 5 in the evening. 

An all-party meeting will be held on Saturday to discuss the future course of protest. The CM has extended invite to the BJP too to attend the meeting.

Pinarayi Vijayan and the Chief Ministers of Punjab, Odisha and Maharashtra had written to Prime Minister demanding his intervention at allowing the cooperative banks to exchange old currency. However, the Centre has reportedly maintained that cooperative banks could not be given the same rights as given to nationalized banks.

RBI versus Co-operative banks

The multi-level cooperative banking network spread across Kerala has Rs 52,000 crore in deposits and deals with Rs 30,000 crore loans. The entire sector has come to a standstill with the RBI and government’s decision to keep these banks away from the demonetization exercise.

The RBI banned district cooperative banks from collecting Rs 500 and Rs 1,000 notes from customers in exchange of valid or new currency.

Though initially the RBI had allowed Co-operative banks and societies to accept old notes as deposits from customers with KYC, it later withdrew that provision.

This left Kerala’s co-operative bank sector (state, district and primary) that has Rs 52,000 in deposits in crisis.

With most co-operative banks not computerised, the centre’s take was that this could lead to these banks taking deposits with pre-dated receipts. A tussle to make co-operative banks accountable to the Income Tax department has been ongoing for years, with Kerala’s co-operative sector staunchly opposing it.

The CPI (M) that controls most such banks across the state, has vowed to protest till the centre and RBI rolls back its decision.

Pinarayi’s stand

In a Facebook post, Pinarayi Vijayan stated that the Centre and the reserve bank's decisions against the cooperative banking sector were beyond level of tolerance. 

"The cooperative sector of Kerala is not a centre to hide black money. Our cooperative sector crumbling would mean that the state's financial stability will also crumble. Public opinion in the state strongly opposes the efforts to destroy the cooperative sector and that is what we are aiming to portray through our protest tomorrow," the CM said.

Opposition leader Ramesh Chennitha had earlier assured the government of cooperation and called for joint protests against the repercussions of demonetization. 

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