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Cooperative banks may get part of PSU business soon

KOCHI: The government has initiated discussions to shift a part of the state PSUs financial transactions to the cooperative banking sector, at least on a temporary basis to strengthen the District Cooperative Banks (DCBs)- battered by the demonetisation drive.
Sources said shifting of cash-rich businesses such as Bevco to the cooperative banking system would help the sector with a steady flow of funds. At present, Consumerfed is the only major state PSU banking with the cooperative banks while most other government undertakings are banking with the State Bank of Travancore, Canara Bank and the State Bank of India. After demonetisation, the cooperative banks in the state are prohibited from accepting the withdrawn currency of Rs 500 and Rs 1000, severely affecting their cash flow and liquidity. Following the restrictions, massive sums of money from Primary Agriculture Credit Societies (PACS) was shifted to nationalised and private sector banks.
“The initial discussions were held to explore the feasibility of moving some of the businesses of state PSUs, except treasury business, to the cooperative banking sector,” said a source. “This will give the DCBs the much-needed liquidity in this hour of crisis.” Finance Minister T M Thomas Isaac’s proposal to establish ‘Kerala Bank’ by merging all the 14 DCBs with the Kerala State Cooperative Bank also involved shifting the business of state PSUs to the unified Kerala Cooperative Bank.
But the discussions, sources said, were aimed only at helping the cooperative sector to tide over the current liquidity crisis. Experts reckoned the move was fraught with danger. “It’s risky to shift all the business of state PSUs such as KSEB, KSRTC etc to cooperative banks as these undertakings are relying on financial assistance from public sector banks such as Canara Bank,” said C D Joson, state general secretary of All India Bank Employees Association.
“Further, there will be political pressure on the cooperative banks to sanction loans to the loss-making PSUs. In the past, couple of DCBs have lost huge sums of money lent to loss-making Supplyco and Rubco,” he said.
Meanwhile, government officials said DCBs collected only Rs 124 crore in withdrawn notes in the November 8-14 period, before the government asked the cooperative banks to stop accepting the banned notes.
“The stock of currencies with DCBs on November 8 was Rs 2,075 crore which increased to Rs 2,119 crore on November 14,” said the official.
He also rubbished the reports of DCBs collecting a whopping Rs 1,800 crore in six days.

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