Demonetization: distress messages disseminated by cooperative banks in rural India


The operations of 370 Central District Co-operative Banks (DCCBs) and over 93,000 Primary Agricultural Credit Societies (PACS) have been severely affected by restrictions imposed by the Reserve Bank of India (RBI) following the demonetization of banknotes of 500 and 1000 Rs.

Urban Cooperative Banks (UCBs) have also complained to the RBI about the refusal of commercial banks to provide them with foreign exchange support, which affects their operations.

The RBI gave no reason for the restrictions on DCCBs and PACS – these are seen as the lifeline of the rural economy, especially for farmers in states like Maharashtra, Kerala, l ‘Uttar Pradesh, Gujarat, Tamil Nadu and Karnataka – but banking sources said it could be linked to lax KYC (know your customer) standards and money laundering at some cooperative banks.

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RBI data indicates that 370 DCCB held deposits of Rs 236,890 crore in 2014, while PACS had deposits of Rs 81,900 crore.

The RBI has stipulated that DCCB and PACS can allow existing customers to withdraw money from their accounts up to Rs 24,000 per week until November 24. tickets should be received by DCCBs. He advised all banks to allow cash withdrawals by DCCBs from their accounts as needed.

According to Pramod Karnad, Managing Director of Maharashtra State Cooperative Bank (MSCB), only UCBs and SCBs are allowed to exchange and deposit notes.

The Mumbai District Cooperative Bank, chaired by BJP member Pravin Darekar, has filed a lawsuit in the Bombay High Court against the RBI circular preventing cooperative banks from accepting deposits of demonetized banknotes.

The petition claims that the circular is discriminatory and arbitrary in addition to violating fundamental rights. “No reason was given to isolate cooperative banks like this. We act as bankers to other cooperative societies in Mumbai district. If the circular is followed, cooperative societies will not be able to deposit abandoned banknotes with their banker. This would cause losses to the members of these societies, ”he said.

The petition points out that several hospitals, gas pumps, medical stores have their accounts in the bank and that they too will be affected. It indicates that there are 103,873 savings accounts managed by individuals and 12,285 housing company savings accounts.


Although more than 1,500 UCBs in the country are authorized to exchange and deposit demonetized banknotes, they said they were the recipients of the demonetization program as a result of insufficient payments from the central bank.
“While apex bank has made every effort to provide liquidity to nationalized and private sector banks, the common man’s cooperative banking sector has been ignored with nearly 52 cooperative banks left empty-handed over the course of of the last two days, “he added. UCB said in a letter.

The Maharashtra State Cooperative Banks Federation Ltd, in a letter to RBI Deputy Governor R. Gandhi, said: “After the plan was announced to withdraw from the legal tender status of existing banknotes of Rs 500 and Rs 1000, commercial banks refused to provide foreign exchange support. to our UCBs on November 10, 2016, treating us as “general customers”. Later, despite the issuance of a circular by the RBI according to which the limit of Rs 10,000 is applicable to general customers and not applicable to cash withdrawals from a bank account by a bank of another bank, these Public sector banks, in particular SBI and Bank of India refused to accede to UCB’s request.

“While the RBI offered a few remittances the first few days, the approach of the last two days is far from encouraging for the fraternity, which has fought alongside other bankers to make the national cause of the demonetization a great success, “says the letter.

No less than 1,579 cooperative banks have more than 10,000 branches and nearly 3,000 operational ATMs across the country and constitute nearly 4% of the market share in all banking activities in the country.

UCBs have to depend on the local currency vaults of public / private sector banks to withdraw or deposit change, while many others have a payment systems partnership with the National Payments Corporation of India (NPCI).

Most of these UCBs, the letter says, are direct members of the RBI for the CTS (Check Truncation System) and, therefore, expect good cooperation from the SBI as well as other public sector banks. /private. “Although there are huge queues with public and private sector banks, cooperative banks have been left out for lack of legal tender, which adds to the chaos,” the letter said.


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