Thiruvananthapuram: The Kerala Government is planning to approach the Supreme Court of India against the decision of the Reserve Bank of India (RBI) to impose stringent regulatory measures on the primary cooperative societies and banks.
The State Cabinet has decided to seek the opinion of the Advocate General and other legal experts to find a way to overcome the harsh conditions imposed on the cooperative societies by the RBI which, according to the government, would hamper the smooth functioning of the cooperative societies.
The Cabinet entrusted Finance Minister K N Balagopal and Cooperation Minister V N Vasavan to take the follow-up action.
The state government would also approach the RBI and would try to convince the regulatory body about the special relevance of the cooperative societies in Kerala and how these new RBI guidelines would adversely hit the State's interests.
Kerala would also try to seek the support of other States, which is also going to bear the brunt of the new RBI guidelines. The Cooperation Ministers of other States would be consulted on the issue. A delegation would also be sent to New Delhi to brief the Central Government about Kerala's concerns on the matter.
What has irked Kerala
The recent RBI guidelines insist that the cooperative societies should not use the term "cooperative bank". The RBI, through the note issued the other day, also restrained the cooperative societies from taking deposits from those members who do not have voting rights. The new decision by the RBI would adversely affect the functioning of almost 1,625 primary cooperative societies and thousands of other cooperative banks.
The RBI came up with stringent provisions to regulate primary cooperative societies based on the Banking Regulation Amendment Act passed by Parliament in September. But the provisions of the Act were not effectively implemented in Kerala. It is alleged that the Central Government is now trying to put pressure on the State to implement the same by issuing these guidelines.
RBI move vindictive, says Vasavan
Cooperation Minister V N Vasavan alleged that the Central Government was trying to overcome the two favourable orders passed by the Supreme Court in favour of cooperative society movement in the State even after Parliament passed the Banking Regulation Amendment Act.
He said the move by the Central Government to interfere with the functioning of the cooperative sector in States was stalled by the Supreme Court in the case related to the 97th Constitutional amendment, which dealt with issues related to the effective administration of co-operative societies in the country.
Vasavan cited an SC verdict on an income tax case to oppose the RBI bar on taking deposits.
"In the income tax case, the Supreme Court had ruled that those who have voting rights and those who do not have such a right have equal rights. Based on the two verdicts passed by the Supreme Court, the cooperative societies have the power to receive deposits and grant loans. As per the Cooperative Act existing in the State, such transactions can be done," the minister said.
Vasavan pointed out that the Central Government was taking such a strong negative stand because 60 percent of service cooperative societies were functioning well in Kerala.