The Union Ministry of Cooperation has mandated the revival of district cooperative banks across India, tasking NABARD with drafting plans to establish new banks in districts currently lacking such institutions. This initiative aims to reinforce the cooperative sector and enhance financial support for primary cooperative societies.
In Kerala, district cooperative banks were merged into Kerala Bank under the previous Pinarayi government, a move that faced criticism from political opponents, including the UDF. The Malappuram District Cooperative Bank contested the merger in court, and the case challenging the decision is still ongoing. Kerala Bank began operations on November 29, 2019.
In line with Kerala’s example, seven states, including Uttar Pradesh, initially chose to forego district banks but have reconsidered due to concerns about the impact on the primary cooperative sector. Jharkhand also merged its District Cooperative Banks into the State Cooperative Bank.
The central government emphasizes that district banks should function as vital financial institutions supporting all primary cooperative societies. Currently, Agricultural Cooperative Credit Societies, the primary cooperative banks in Kerala, receive the majority of financial assistance. However, other organizations are facing financial challenges. To address this, NABARD has been instructed to modify its operations to provide loans up to Rs 5 crore to all primary groups without requiring collateral.
Challenges in Kerala:
Members of Kerala Bank are primary cooperative banks that need to be transferred to the newly established district banks.
Assets from existing district banks have already been transferred to Kerala Bank and cannot be reclaimed.
New capital and infrastructure will be necessary to set up the new district banks.
76% of Kerala Bank’s investments are in primary groups and will need to be transferred to the district banks.
The shareholding of primary banks in Kerala Bank amounts to Rs 990 crores, which also needs to be transferred to the district banks.
