The Kerala Assembly on Tuesday passed a resolution stating that the Centre should recall its restriction on cooperative banks exchanging old Rs 500 and Rs 1,000 notes. Chief Minister Pinarayi Vijayan told legislators that the rural economy was dependent on cooperative banks and the move had affected farmers the most. The resolution was passed during a special session held to discuss the demonetisation move.
Cooperative banks were stopped from accepting and exchanging the banned Rs 500 and Rs 1,000 notes amid allegations that money laundering was taking place through these institutions. The fears were compounded by the fact that many primary cooperative banks do not follow the KYC (know your customer) process. However, the RBI has not given an official reason for the restrictions.
The move comes after Chief Minister Vijayan’s sharp criticism of the Union government’s decision to demonetise Rs 500 and Rs 1,000 notes. He had accused the Centre and Reserve Bank of India of “trying to strangulate” the country’s financial institutions. He had also alleged that the Bharatiya Janata Party was destroying the cooperative banking sector.On November 19, the Communist Party of India (Marxist) and other Cabinet members staged a demonstration in front of the RBI office in Thiruvananthapuram.
In Kerala, cooperative banks have a total business of more than Rs 1 lakh crore. An estimated 10 million people rely on the state’s four-tier cooperative banking system – which comprises 20 State Co-operative Banks, 60 Urban Co-operative Banks, 784 District Co-operative Banks and 1,611 Primary Co-operative Banks.