Thiruvananthapuram: Kerala is expected to face a huge setback with the implementation of the National Cooperative Policy. The state may be forced to consider reviving district cooperative banks to adapt to the changes.

The central policy is expected to impact the entire cooperative sector. If the state does not accept or revise its stance on the policy, it risks losing its share of funding from central government schemes.

The Ministry of Cooperation has formed two committees to oversee the implementation of the policy's objectives, a move that is likely to increase pressure on Kerala.

District banks will have to be established

The central government’s cooperative policy calls for the establishment of primary cooperative banks in every panchayat and district cooperative banks in every district.

However, Kerala's current policy focuses on transforming primary cooperative banks into financing institutions for local bodies. The state previously merged its existing district cooperative banks into the State Cooperative Bank, forming Kerala Bank.

The Centre's new requirement for district cooperative banks comes in the wake of that merger. If Kerala does not align with the policy, it risks losing services and financial assistance provided to cooperative societies through district-level banks.

  • The Centre wants banking services to be provided through primary cooperative societies, which is being implemented through district banks. This service cannot be provided if there are no district banks in Kerala. The state bank may not get permission for this.
  • Loans of up to five crores will be provided to all types of primary groups without collateral through district banks. This too cannot be implemented in Kerala.
  • Cooperative groups facing financial crisis will get revival assistance through district banks. Kerala Bank cannot provide this.

Other challenges

  • The central government has announced that a model cooperative village will be established in a district. To implement this, agricultural credit cooperative societies should accept the central model by-law. Kerala is not ready for this.
  • Primary cooperative societies are set to become the local-level implementing agencies for central government schemes. To enable this, Kerala would need to amend its cooperative by-laws in line with central guidelines. However, the state has so far not agreed to make these changes.
  • The central government has also announced plans to offer 150 e-services, including passport and Aadhaar services, through cooperative societies. To implement this, cooperative societies in Kerala would need to join the central government's common software platform. So far, that integration has not taken place.
  • To export products from cooperative societies, they must become members of the National Cooperative Society established by the central government. However, the state government opposes this move.