Kerala revises Co-op Deposit Scheme; Unclaimed funds to be transferred to Guarantee Board

Thiruvananthapuram: The Kerala government has made crucial changes to the Cooperative Deposit Guarantee Scheme, aiming to increase the fund’s efficiency and enhance protection for depositors. The updated scheme now includes provisions for unclaimed deposits to be transferred to the Guarantee Board and introduces a special loan facility for banks and groups facing financial difficulties.

Under the revised scheme, cooperative banks and groups will now pay a guarantee share for the entire deposit at a rate of four paise for every Rs 100 annually. Previously, 10 paise for every Rs 100 was paid, and only additional deposits were considered in the following year. To ease the transition, this year, the payment will be set at two paise for every Rs 100. Banks and associations failing to pay their share could lose permission to accept deposits.

Expected fund boost for guarantee board

These revisions are expected to double the annual funds collected by the Guarantee Board. Also, unclaimed deposits, including money from accounts that have been inactive for ten years, will now be transferred to the Guarantee Board.

The updated scheme also introduces a special loan provision for banks and associations facing a financial crisis. These institutions will be eligible for loans under a seven-year revival plan prepared by the Registrar, with an interest rate 2 percent higher than the fixed deposit rate at Kerala Bank. However, there is a growing demand to reduce this interest rate.

Protection for depositors

The revised scheme will protect depositors by providing up to Rs 5 lakh to a depositor if a cooperative bank or association is closed. In the case of unclaimed deposits, if a claimant comes forward after the money has been transferred to the Guarantee Board, the bank will return the amount along with interest. The bank can recover this amount back from the board.

Summary of key changes

• Cooperative banks and groups to pay 4 paise per Rs 100 in deposits annually (2 paise this year).
• Unclaimed money in dormant accounts to be transferred to the Guarantee Board.
• Struggling banks to receive loans for financial revival at higher interest rates.
• Up to Rs 5 lakh protection for depositors when a bank or association closes.