Union government tasks NABARD to revive District Banks across India

Thiruvananthapuram: The Union Ministry of Cooperation has decided to reintroduce district cooperative banks in every district nationwide. The central government has directed NABARD to draft plans for establishing new banks in revenue districts currently without such facilities. 

In Kerala, district cooperative banks were merged into the Kerala Bank under the previous Pinarayi government, a move criticised by political opponents, especially UDF. The Malappuram District Cooperative Bank contested this merger in court till the last minute. The government compelled the merger of the bank through an amendment to the law. The case challenging this decision is still pending in court. Kerala Bank commenced operations on November 29, 2019.

Following Kerala's example, seven states, including Uttar Pradesh, initially opted against maintaining district banks. However, they reconsidered due to concerns that the elimination of district banks would negatively impact the primary cooperative sector. Jharkhand also merged its District Cooperative Banks into the State Cooperative Bank.

The centre emphasises that district banks should serve as financial institutions providing assistance to all primary cooperative societies.

Currently, Agricultural Cooperative Credit Societies (primary cooperative banks in Kerala) receive majority of financial assistance. However, many other organisations are facing financial crises. To address this issue, NABARD has been instructed to modify operations to provide loans up to Rs 5 crore to all primary groups without requiring collateral.

Problems in Kerala

• Members of Kerala Bank are primary cooperative banks. They will need to be transferred to the District Bank.
• All the assets of the existing district banks have already been transferred to Kerala Bank and cannot be reclaimed.
• New capital and infrastructure must be secured for establishing new district banks.
• 76% of Kerala Bank's investments are of primary groups. These will need to be transferred to district banks.
• The shareholding of primary banks in Kerala Bank is Rs 990 crores. This will also need to be transferred to district banks.