Thursday, 17 November 2016

Why Major Political Parties in the Kerala State are Against the Scrutiny of Cooperative Banks?


Of late, the Communist Party of India (Marxist) CPI (M)-led Kerala Government is doing everything possible to scuttle the probe initiated by the Central Vigilance Department, Directorate of Revenue Intelligence and other probe agencies to scrutinize the accounts in the banking entities and societies in the cooperative sector of the state. There has been a long-held belief that many cooperative societies and other entities that do not come under the Reserve Bank of India (RBI) guidelines often flout the rules issued by the central bank under the patronage of the major political parties in the state – CPI (M) and Indian National Congress (INC). The Bharatiya Janata Party (BJP)-led central government wants to see how much of this is true. The major parties in the state actually should have come out in support. In this blog post, we will see why these parties are dead against the probe by the central agencies.

kerala cooperative bank

Major Political Parties have Stake in Cooperative Entities

According to the Directorate of Revenue Intelligence and Income Tax Department, the state cooperative societies and banks have stashed large amount of unaccounted money in many accounts. Many of these accounts are opened by the well-known politicians of the state. According to the latest statistics available in the public domain, nearly 30% of the total amount available in the cooperative sector is black money. In the state, only the CPI (M)-led Left Democratic Front (LDF) or INC-led United Democratic Front forms the government. When these fronts alternatively form the government, they make sure that their people occupy the key portfolios in these cooperative entities. Under the patronage of the parent parties, these politicians conveniently flout the RBI guidelines on every aspect of banking and lending and accumulate large stashes of currencies in their respective accounts.  Department of Cooperation of Kerala Government does the final audit of these entities. Hence, the department under the political mentorship make sure that the illicit stashes of currencies are Okayed.

cooperative banking

Open Flouting of Rules in Cooperative Sector

Take the case of Kannur. On the day of the withdrawal of 500 rupees and 1000 rupees currencies, the unknown persons had transferred a large amount of money to Primary Cooperative Groups. This was widely reported in the media widely. According to some party insiders, many top politicians in the state have multiple debit cards through which they en-cash money at will. When the transfer of large fund takes place, the people concerned should have revealed the source according to one of the guidelines issued by RBI. In all these transactions, these people have not shared any with the bank. This is the reason why the central agencies want to probe the transactions taking place in the cooperative agencies of the state. The political parties claim that the cooperative societies, groups and banks directly deal with the grass root-level people. If that is the case, how very huge amounts of money are getting deposited in these entities when the people at grass root level are making only small-volume transactions. Following the way shown by the major political parties of the state, even the business groups, other non-governmental entities and private individuals with large savings deposit their ill-gotten money in these entities expecting high interest rates in return.

unaccounted money

Cleaning Up

The master-stroke of the Narendra Modi Government at the centre has put these entities in stress. While announcing the demonetization of 500 rupees and 1000 rupees currencies, the Central Government has put in certain conditions for exchanging the withdrawn ones with ones that can easily be tendered legally.  Along with this RBI has come out with a list of bankers who can legally exchange the notes. Due to the disrepute of the cooperative entities in the Kerala State, the Banking Ombudsman of the country did not give any freehand to them. They are not even allowed to transfer the money they have in their accounts to their accounts with the public sector banks through RGTS.  RBI wants to first check these accounts before giving its permission for these entities to freely do the banking transactions.

currency demonetization

Ramifications for Political Parties

This has put the major political parties in the state in a soup. According to some political analysts, the CPI (M), which has a large amount of unaccounted money, cannot pay its leaders and grass root workers as it has put all its money in the cooperative sector where it has full control. Similar is the case with the INC, Indian Union Muslim League (IUML), Communist Party of India (CPI), etc. to name a few. These parties need to exchange the notes before giving to their workers and leaders. Here is the catch for them.
Thuruvananthapuram Thiruvananthapuram, Kerala, India
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