Cooperative banks are at receiving end in the wake of the Cobrapost sting which eposed some top banks involved into money-laundering. Nabard Managing Director Prakash Bakshi has, however, taken up cudgels on their behalf.

NABARD said that it has found no shortcoming pointing towards any such activity.

“Every year we do an inspection and we have not found anything like that,” National Bank for Agriculture and Rural Development’s (NABARD) chairman Prakash Bakshi said.

Reserve Bank of India has reportedly found that cooperative banks are used as conduits.

The cooperative banks tie-up with scheduled commercial banks to expand their reach. Co-operative banks can accept cash under Rs 50,000 from customers and earn commission.

When asked about the misuse of the system and if this amounts to regulatory arbitrage, Bakshi said, “It is the same regulation for everybody. Banking Regulation Act is same for everybody.”

Online portal Cobrapost had in its sting operation allegedly proved some executives at three top private banks — ICICI Bank, HDFC Bank and Axis Bank – agreeing to receive unverified sums of cash and put them in their investment schemes and benami accounts in violation of anti-money laundering laws.

Earlier this month, it had followed up with a similar operation, showing executives at over 20 financial institutions, including State Bank of India and Life Insurance Corporation of India, offering similar services.

The Reserve Bank has maintained that no transaction has happened while the sting also does not point to “money laundering”.

RBI Governor D Subbarao has also said: “RBI is not directly involved… even banks are not directly responsible. They are not expected to inquire about the source of income. It is for government and tax authorities to check money laundering.”

Courtesy: IE

BJP has urged the RBI to bring the state cooperative banks within the range of the Right to Information Act so that the ordinary citizens are able to know exactly what these banks are doing. In a memorandum issued recently the party has made a foreceful argument for greater transparency in the cooperative banking system.

Sources say there are about two thousand non-scheduled and scheduled banks in the country operating in the cooperative sector. once these banks are brought within the ambit of the right to information act, there would be a discernible improvement in the functioning of the banks, add the sources.

In Andhra Pradesh the cooperative banks and societies would soon be exempt from value added tax, said Andhra cooperative minister while addressing a cooperative society function in Kakinada.

According to the minister, his ministry has sent the relevant proposal to the state cabinet and the central government.

The issue has long been in discussions in the state.

Sources say if the cooperative organizations are exempt from VAT it will give a fillip to the cooperative movement in the state.

Cooperative banks are mostly the whipping horses for Nabard and RBI. But what they do not seem to take into account is the unviable propositions these banks are subjected to. A case in point is Karnataka.

Karnataka Chief Minister said on Thursday that the state has decided to wave loans to the tune of Rs.25000 obtained by farmers from the agri-cooperative societies.

Karnataka has had a deficient monsoon and some portions of the state are already seriously affected by drought.

Talking to the press at Bangalore ,Chief Minister Jagdish Shettar said, his govt.would have to undertake both short term and long term measures to organise relief works. The state govt. has called upon the center to waive loans given to farmers by the nationalised banks.

Well, nationalized banks ever eager to earn profit, may or may not pay heed to CM, cooperative banks have no options and would rather happily help the poor farmers out.

Observers say it is evident from Chief Minister’s remarks that the cooperative bodies would play a role in fighting the difficulties arising out of drought in the state.

The Goa government was pulled up by the CAG for lack of performance on the part of cooperative banks and cooperative societies.

According to the report, the govt has borrowed money on high interest while its investment on various cooperatives has yielded returns much less than expected.

The govt has paid interest of nearly 8 percent on borrowings over the last five years and returns on investments during the same span have not been even one percent.

The government has invested a total amount of Rs 5 crore on the cooperative banks and cooperative societies with little return.

The CAG report argues there is a lack of fiscal discipline and this needs to be acquired. The report adds funds  for various  state agencies be  routed through the state budget or state treasury system as the present system of transferring funds directly to state organisations makes a proper accounting of funds  impossible.

The CAG report has also hinted at the possibility of funds being misused as funds are not given through the state budget.

Sources say in view of the report being critical of the manner in which the govt allocates funds, the govt would be under pressure to shed a skewed sense of priorities and show financial discipline.

The IT giant Wipro has provided the state cooperative banks in 5 states of the country with the core banking solution in a bid to extend e-banking facilities to customers in the countryside. Wipro sources say the cooperative banks are located in Bihar, Haryana, Maharashtra, Punjab and Utter Pradesh.

As  desired by Nabard, the IT company will undertake computerisation of 76 state  and district  cooperative banks including nearly three thousand branches existing in several states across the country.

Provision of computer facilities will mark a revolutionary change in the functioning of the cooperative banks operating in rural areas.

Farmers will be able to receive e-payments towards subsidy, sending of money from cities to the countryside will become easy.

The cooerative banks will expand their business and activities and they will be on a par with the rest of the banks in terms of application of technology and banking methods.

Karnataka Cooperation Minister B J Putta Swamy said that even when the cooperative bodies are reeling from their punctured public image, the cooperative banks are doing some useful work.

They are giving loans to farmers without charging any interest on them and the state govt has offered to pay the difference to NABARD.

As the cooperative banks embody the philosophy of mutual cooperation and help, they could work helping the poor and the intermediate class gain basic economic ability.

However, the minister expressed his resolve to improve things in the cooperative sector. He aimed his barbed remarks at the cooperative societies especially the ones in Banglore that have of late been grabbing the screaming headlines for their highly dishonest and illegal activities.

He has asked his officials to prepare a list of such cooperative bodies. He told the press that 21 district cooperative banks and the Kolar district central cooperative bank were defunct as a large number of their loanees had defaulted on their payments.

BJP farmers’ organisation has lauded the Madhya Pradesh Chief Minister’s bold decision to ensure the provision of interest free loans to farmers in the state.

The president of the organisation Bansilal Gurjar says the historic proposal sets MP apart from other states underscoring the pro-farmer attitude of the BJP govt in MP.

Gurjar claims there has not been a single farmer suicide in the state and the interests of farmers are in good hands here.

Nearly Rs.10 thousand crore would be disbursed as loans through both cooperative and commercial banks.

BJP farmers organisation has criticised the central govt for its anti-farmer attitude and urged it to grant constitutional status to Agricultural Cost Price Commission and to set up soon Agricultural Cost Monitoring Commission.

The cooperative banks’ financial woes are just refusing to go away in Maharashtra.  After the Maharashtra State Cooperative Bank, several district cooperative banks have surfaced as candidates for a similar bailout.

At least, half a dozen district cooperative banks are in serious financial difficulties and have been stopped from accepting fresh deposits.

According to Harshavardhan  Patil , Minister Cooperatives,  the crisis-ridden banks would , in the foreseeable future , be  inspected by Nabard and if given a clean bill of health they would be able to get their banking licence.

A source familiar with the cooperative banking scene in Maharashtra, however, says at least two of the six district cooperative banks seem past redemption as their negative net worth is extremely high.

UP Cooperative Minister Shivpal Yadav recently lamented the decline of honesty and sincerity in the cooperative sector in the State.

He told Vidhan Sabha that the cooperative sector was completely overcome with corruption and nepotism and things have come to a pretty pass. According to the Minister, 25 district cooperative banks are already tottering on the brink of collapse. He promised the new govt. would do all in its power to repair the situation.

It bears repetition that the RBI has refused to renew the license of these banks as they have miserably failed to meet the prescribed norms laid down by the apex bank.

The minister Yadav has informed that his govt. would soon establish contact with the central govt. and the RBI to solve the crisis. He savaged the previous govt. for botching things in the cooperative sector.

However, the BSP rejected the charge and accused the ruling party of misusing the cooperative institutions for its narrow gains and self-aggrandizement.

Cooperative Minister Shivpal Yadav presenting demand for grants for the cooperative dept. assured the house that the govt. would not allow the district cooperative banks to collapse as it would inflict incalculable sufferings on farmers. He underscored the importance of democratization of the cooperative sector otherwise this important sector of the economy would stand reduced to pieces.