States lobby centre, RBI to allow co-op banks to accept old notes

RBI informed co-op banks in Maharashtra, Gujarat, Kerala and Tamil Nadu that they are not covered under the scheme to accept old notes

In Maharashtra, co-op bank representatives plan to meet RBI officials to seek permission to accept discontinued notes. Photo: Pradeep Gaur/Mint
In Maharashtra, co-op bank representatives plan to meet RBI officials to seek permission to accept discontinued notes. Photo: Pradeep Gaur/Mint

Ahmedabad/Mumbai/Bengaluru:At least four states have approached the Union finance ministry with a request to allow their district cooperative banks to exchange and accept deposits of the withdrawn Rs500 and Rs1000 currency notes like other banks across the country.

In circulars issued on Sunday and Monday, the Reserve Bank of India (RBI) informed district cooperative banks (DCCBs) in Maharashtra, Gujarat, Kerala and Tamil Nadu that they are not covered under the scheme to “withdraw legal tender character of existing Rs. 500 and Rs. 1000 bank notes”.

Mint has a copy of the circular issued by A. Kamath, general manager, RBI, department of cooperative bank, supervision, Ahmedabad.

Dilip Sanghani, chairman of National Federation of State Cooperative Banks (NAFSCOB) on Tuesday said the central government had assured him of corrective measures including a possible roll-back of the decision to bar DCCBs from exchanging and accepting such deposits . Sanghani, a former BJP Member of Parliament and Gujarat agriculture minister who was in Delhi to meet Santosh Kumar Gangwar, minister of state for finance, said the minister had assured him of corrective measures in the next few days.

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Maharashtra chief minister Devendra Fadnavis on Tuesday called Union finance minister Arun Jaitley to request that DCCBs be allowed to accept old notes as “they are the backbone of rural economy and the only banking apparatus available to farmers and farm labourers,” said a Maharashtra government official who did not wish to be named. In Maharashtra, representatives of 31 DCCBs plan to meet RBI officials on Wednesday to seek permission to accept discontinued notes from account holders, depositors and debtors.

Kerala chief minister Pinarayi Vijayan has also made a similar request to Jaitley. DCCBs in Kerala have moved court challenging the RBI decision.

In Tamil Nadu, the Primary Agricultural Cooperative Banks (PACB) has said that routine work has come to a halt since the demonetization announcement. In the Madurai and Theni districts, PACB employees staged demonstrations on Monday, demanding to be either allowed to transact with the demonetized currency notes or be issued new notes.

Employees of some PACBs across the state began an indefinite strike on Tuesday.

Pramod Karnad, managing director of the Maharashtra State Co-operative Bank, the apex bank for the state’s 31 District Central Co-operative Banks (DCCBs), told a Marathi news channel on Tuesday that RBI had issued a circular on Monday asking all DCCBs in Maharashtra not to accept old currency notes from account holders, depositors, debtors, and others.

Senior Nationalist Congress Party leader and chairman of Kolhapur District Central Co-operative Bank Hasan Mushrif told reporters on Tuesday that the DCCBs would challenge RBI’s decision in court if permission was not granted.

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“The RBI decision not allowing DCCBs to accept old notes is causing enormous misery to farmers, farm labourers, and poor people in rural parts. They are totally dependent on the DCCBs and the credit co-operative societies which are affiliated to DCCBs for their banking needs,” Mushrif said.

Shiv Sena MP Arvind Sawant said the Sena also supported the demand to allow DCCBs to accept old notes. “The DCCBs are the backbone of rural economy and they have to be allowed to cater to the people’s needs when there is a complete chaos due to the demonetisation announcement,” Sawant said.

Sanghani of NAFSCOB said, “The Centre is expected to withdraw its decision in the next few days. Although I have not been given a timeline I am told that they will look into the matter and withdraw the decision very soon,” he said over the phone.

The RBI had on Sunday emailed a circular to all the 18 Gujarat-based DCCBs to not engage in transactions in the demonetized Rs500 and Rs1000 notes, according to Sanghani.

“On Monday a similar circular was issued to DCCBs in other states across the country too. If we talk of rural areas, then nearly half of the farmers deal only with district level co-operative banks. This move will impact rural India greatly. I have also written to RBI regarding this,” Sanghani said.

His meeting comes at a time when political parties from different states are protesting the order stopping DCCBs from exchanging demonetized notes, with some even looking to legal recourse and mass protests.

The RBI circular has been strongly opposed by cooperative banks in Kerala where one local bank in Thrissur district filed a writ petition in court, seeking a directive to the RBI to reverse the decision. The petition will be heard on Wednesday.

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The cooperative banking sector caters to a wide range of urban and rural population in Kerala, as reflected in its deposit base which is about Rs52,813.23 crore, as per state level bankers committee data.

Meanwhile, a plea filed by K. Ramamurthy of Tamil Nadu’s Villupuram has sought a direction to the Registrar of Cooperative Societies to follow RBI’s procedures relating to demonetization and allow withdrawal of cash and exchange of currencies. The judgement is to be given on Wednesday.

Meanwhile in Gujarat, quota agitation leader Hardik Patel issued a statement condemning the RBI move and threatened a mass agitation if the decision is not withdrawn soon.

Dharani Thangavelu in Chennai contributed to this story.

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