The Reserve Bank of India ordered district central cooperative banks and primary agricultural credit societies – the two pillars of the rural economy – to allow existing customers only to withdraw money from their accounts up to Rs 24,000 per week till November 24. No customer can exchange the now-invalid Rs 500 and Rs 1,000 notes or even deposit defunct currency. The central government, in a surprise move, demonetised Rs 500 and Rs 1,000 notes on November 8.
Though the RBI has not given any reason for such restrictions on operations at district central cooperative banks and primary agricultural credit societies, insiders said it could be because of incomplete Know Your Customer forms and money laundering allegations against a few cooperative banks. The Mumbai District Cooperative Bank has even filed a petition in the Bombay High Court, reported The Indian Express.
Its plea read, “No reason has been given for singling out cooperative banks like this. If the circular is followed, cooperative societies will not be able to deposit the discontinued currency notes with their banker. This would cause loss to members of such societies.”
Farmers in states like Gujarat, Karnataka, Kerala, Maharashtra, Punjab, and Tamil Nadu and Karnataka are worst hit by this step. In Kerala, for instance, cooperative banks have a total business of more than Rs 1 lakh crore, reported The Economic Times. Members of Bharat Kisan Union and All India Kisan Coordination Committee in Punjab too have demanded a rollback of the demonetisation and are upset with the restrictions slapped on the district cooperative banks. The state’s 12,673 villages and farmers mostly deposit their earnings in these banks.
The condition of urban cooperative banks is no better. These banks have alleged that commercial banks have refused to provide them currency support. In a letter to RBI Deputy Governor R Gandhi, the Maharashtra State Cooperative Banks Federation Ltd pointed out that commercial banks have treated them as “general customers”. It said, “In spite of issuance of circular by the RBI that the limit of Rs 10,000 is applicable to general customers and not applicable to cash withdrawal from a bank account by one bank from another bank, these public sector banks, especially State Bank of India and Bank of India, refused to adhere to the request of UCBs.”
Meanwhile, banks saw long queues of senior citizens on Saturday. The Indian Banks Association had said that notes will not be exchanged for customers of other banks, barring senior citizens, on November 19. In Madhya Pradesh, people also withdrew cash from micro ATMs installed in the state capital, reported ANI.