Kerala is up in arms to protect its cooperative banks by a forming a human chain from the southern to the northern tip of the state on December 29, 2016. This is to register their unrelenting dissent against the central government’s vicious and hideous attempts to destroy the ever strong cooperative banks of Kerala by portraying them as the store houses of black money.
The cooperative sector in Kerala upholds a great history of spirited people’s struggles. Trivandrum central cooperative bank which was established through the enactment of Travancore cooperative societies act, 1914 is considered to be the first cooperative bank in Kerala. Subsequent to the formation of the state in 1956 this became the Kerala State cooperative bank. The land reforms introduced by the left government in Kerala was a historic event which radically transformed the economic landscape of Kerala. Not only did it result in the destruction of the feudal relations of production but was also a phenomenal leap in improving the living conditions of the agrarian underclass. It brought about redistribution of land in favour of the ‘tiller of the soil’. However farmers who were in abject poverty thanks to the highly exploitative order that prevailed till then had no capital to invest. The cooperative banks played a critical role in ensuring cheap credit for the farmers thereby saving them from the loot of private money lenders during a period when money lending happened in the most oppressive form. The redistributed land served as collateral for borrowings from the co-operative banks. Had it not been for the cooperative banks in Kerala the fruits of land reforms would have been long forgotten. The redistributed land would have reached back the hands of the landlords through the nefarious and highly exploitative landlord-moneylender nexus.
Small savings of the farmers which were otherwise not channelized into banks could be mobilized through the cooperative banks. These small savings which were the result of their hard labour, formed the predominant share of investments in cooperative banks. Hence an immature call to shut down cooperative banks would also mean depriving these families the product of their sweat and lifelong toil.
Today over 4000 credit cooperative societies operate in Kerala. According to NABARD, the primary credit cooperative societies in Kerala have total investments to the tune of 32,000 crores. No primary cooperative society in India can claim such a strong financial position. By mobilizing resources for rural development from the villages itself, the cooperative societies in Kerala form a role model for the rest of the country. That cooperative banks have been successfully serving its customers with no case of bankruptcies is a laudable achievement that needs to be taken note of.
Cooperative banks in Kerala has a three tier structure. Primary credit cooperative societies having members from the locality it serves forms the lowest tier. District cooperative banks which have the primary credit cooperative societies as their members form the second tier. State cooperative bank consisting of the district cooperative banks form the third tier.
The primary credit cooperative societies are not recognized by the RBI and does not come under the purview of the Banking Regulations Act, 1949. The reason for this being the fact that cooperative banks do not satisfy the minimum capital or investment requirements prescribed by the RBI. Kerala State Cooperative Bank was the only cooperative bank which has achieved the status of a scheduled bank. Urban cooperative bank engaged in the distribution of non-agricultural credit also come under the purview of the Banking Regulations Act, 1949 and hence are regulated by the RBI. However this does not mean that the primary credit cooperative societies are illegal. They come under the purview of the Kerala State Cooperative Societies Act, 1969 and is regulated by the Department of Co-operation. Every state has similar legislation with regard to the cooperative sector broadly based on the provisions laid out in the Indian Cooperative Societies Act of 1904 and 1912. Only those societies, having shares mobilized from twenty five or more families from a particular region, are allowed to register as cooperatives societies under the state cooperative societies act. These societies are controlled and regulated by the registrar of cooperative societies who is appointed by the state government.
The general body constituted by all the members of a cooperative society is the highest decision making body of a cooperative society. The day to day activities are managed by an elected committee. The election for this governing body happens under the complete supervision of the state cooperative election commission. There cannot be anything more ridiculous and sinister than arguing that cooperative societies based on such strong democratic principles are illegal entities functioning as store houses of black money.
All cooperative societies are subject to audit every financial year under the direction of the cooperative audit director. The societies are also open to inspections by a vigilance officer having rank equivalent to that of a DYSP. This proves beyond doubt that the attempts to portray cooperative banks in bad light despite having such strong investigative mechanisms is politically motivated.
Cooperative societies ensure numerous economic and social benefits. Economic benefits include guaranteed quality services at affordable rates, ensure equitable distribution of wealth prevents proliferation of monopolies and helps in removing ‘middlemen’. More than these economic benefits the diverse and varied social benefits emanating from cooperative societies underline the importance of why they should be there. These benefits are achieved because the societies are not driven by profit but a constant drive to qualitatively improve the life of its members and the society. It is this reason which empowers a villager who is reluctant to go to other commercial banks for loans and bank transactions to approach cooperative banks for his banking needs.
. This suited up formal approach of commercial banks where one has to go through a number of form-filling and there by intimidating experience for an illiterate/semi-literate rural villager. This is in stark contrast with cooperative banks where a native villager will not feel out of place when a familiar face from his locality provides the essential warmth of friendship and trust because cooperative societies are a people’s initiative.
A 2013 Reserve Banks Study reveals the depth and breadth of cooperative banks’ popular base. The study underscores the fact that poor in Kerala depend on cooperative banks than on commercial banks for their financial needs. The study finds that the procedural delay to get loans and cumbersome processing keeps laymen away from commercial banks and thus suggests simplifying and reorienting it in such as way the banks become accessible to the poor and marginalized.
Cooperative sector in Kerala is not limited to credit societies. There is a strong presence of cooperative societies in agriculture, irrigation, marketing, processing, beedi, healthcare, hantex, handloom, kera-fed, Coir-fed, consumer-fed etc. Thus cooperative sector is a wide chain covering many aspects of social life in Kerala with the help and guidance from government. We should keep in mind that the fair price shops such as Neeti stores, Neethi gas are from cooperative sector. Most of these non-credit societies have their bank accounts with cooperative banks. If cooperative banks come to a halt then these multitudes of societies will also stop working and thus throwing the lives of lakhs of poor into distress. Thus, cooperative sector in Kerala can be considered as a popular movement touching daily lives of people.
Cooperative sector is regarded as a tool of democratic planning. The present central government is trying to dismantle cooperative sector, a legacy which was nurtured financially and guided by central and state governments.
People are hit hard due to ill-prepared Tuglaqian decision of prime minister to ban 86% of currency in circulation. Despite this grave situation cooperative banks were denied permission to exchange demonetized notes due to hidden agenda. Had they allowed cooperative banks to work normally it would have eased the suffering of people at least in states like Kerala where cooperative banks have extensive network.
We had witnessed how LDF government kept it election promise of giving social security pension at homes of the beneficiaries using cooperative banks within three months of coming to power. Disbursing 3,000 crore rupees to 37,00,000 people within a short span of time was made possible only because of the strength of cooperative banks and its extensive coverage in Kerala. Similarly, cooperative banks could have been put to use to ease the suffering of people caused by demonetization. Central government spoiled it.
Cooperative banks deposit a portion of their cash in other commercial banks. They will withdraw this deposit as per the needs of customers and demand. After demonetization, cooperative banks were under restriction from withdrawing this kind of deposit and were allowed only to withdraw a meager 24,000 rupees per week like any other individual account holder according to central government guidelines. Due to this limitation, cooperative banks couldn’t meet the demand for money and investors will panic. Many cooperative societies which had accounts in cooperative banks couldn’t withdraw money from their account and suffers. Without sufficient liquidity, their day to day operations suffer and come to a standstill. Thus, the BJP government is conniving to cripple the cooperative sector, which is the pride of Kerala, by crippling cooperative banks. Center has the responsibility to explain how blackmoney will escape if the cooperative banks were allowed to withdraw the money they have deposited in other commercial banks and permission to exchange demonetized notes as per the norms given to other banks.
Central governments hostility towards cooperative sector is the result of its aversion to the empowerment of marginalized sections of the society; a manifestation of the discontent of dominant forces against losing their preeminence; the basic aversion even to the concept of equality. We shouldn’t forget that BJP and RSS have historical reasons to oppose cooperative sector. RSS’s first violent attack in Kerala was against Beedi workers of Kannur. They were acting as the stooges of a private company named Manglore Ganesh Beedi. Their move failed mainly because of the formation of Dinesh Beedi cooperative society.
It can be concluded from the above example that one element which stood between the RSS and its agenda of violence was the formation of cooperative sector. As mentioned earlier, savarna-feudal lords, who are the natural ally of RSS, couldn’t undermine land reforms due to the active intervention of cooperative sector. It is this detestation of RSS and BJP towards cooperative sector which at play when they got an opportunity to stretch their muscle in the form of BJP lead government at the centre.
The basic approach of cooperatives is to accelerate development through people’s cooperation in services, small scale industries and agriculture. Cooperatives can effectively intervene in the financial sector to the aforementioned end and people are most familiar with the organizational aspects of cooperatives. Strong cooperatives are present even in Western countries even during these times of globalization. Denmark is a shining example of social and economic development through cooperative excellence and our central government is at the forefront to dismantle an efficient cooperative sector. Studies have testified that in US and Europe cooperative banks have fared far better than commercial banks during the 2008 global recession.
There are around one billion people associated with cooperative sector as members, consumers, workers and partners. Almost half of the world population depends on cooperative sector for various needs. Central government’s move to undermine the one hundred eleven year old cooperative sector in India through note-ban will be fought tooth and nail. There will be apt movement to protect Kerala’s cooperative sector. The present struggle is a testimony that cooperative sector, the life blood of Kerala will be strengthened and protected.
Gopakumar T & Aswathi Asok