Kerala government proposes co-operative banks temporarily cover Supplyco’s ₹300 crore dues. 46 banks may pool funds to ensure repayment, with government guarantee.
Thiruvananthapuram: The Kerala government (LDF) has proposed that co-operative banks temporarily bear the expenses to meet dues towards Supplyco. ₹300 crore is needed with immediate effect. Primary co-op banks with over ₹100 crore deposits in Kerala Bank have been asked to contribute ₹20 crore each.
The Registrar of Co-operative Societies called an emergency online meeting on Sunday. Banks raised concerns, noting they have not even received interest for the money given for the pension consortium. The meeting ended with a decision: willing banks will provide funds.
Supplyco owes Kerala Bank ₹520 crore, including ₹167 crore in interest. The amount stems from PRS loans provided for paddy procurement. To maintain capital adequacy as mandated by the Reserve Bank, Kerala Bank must recover at least ₹300 crore by March 31.
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The Chief Minister suggested forming a co-op bank consortium to meet Supplyco’s liability. There are 46 co-operative banks with deposits over ₹100 crore each in Kerala Bank. These banks will pool funds to cover the ₹300 crore, which Supplyco will repay through Kerala Bank. Once the government releases funds to Supplyco, the co-op banks will receive repayment with interest.
The Registrar confirmed that the government will be guarantor for the repayment. Kerala Bank’s CEO added that he had verbally assured giving a guarantee in his personal capacity if the government does not.
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What is implied in the CEO's message is that Kerala Bank may sanction new loans of up to ₹1,000 crore to Supplyco once the current debt is cleared, enabling co-op banks to recover their funds. The interest rate for the repayment has not been finalised. Some banks also expressed concern over timely recovery if a UDF government comes to power in the state. The government is trying to resolve the issue by pooling funds from ruling CPM-controlled banks.
Published: 30 Mar 2026, 08:21 am IST
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