Loan from cooperatives to help govt pay welfare pensions

The Finance Department had sought Rs 2,000 crore as it has not been able to distribute the welfare pensions due to the prevailing financial crisis. Photo: Manorama Online

Kozhikode: Facing a financial crunch, the Kerala Government is to borrow Rs 2,000 crore from the cooperative banks for paying welfare pensions. A consortium of cooperative banks has been formed for this purpose. The loan will be advanced to the Kerala Social Security Pension Limited at an interest rate of 8.5 per annum.

Mannarkkad Rural Service Cooperative Bank has been appointed the fund manager for the consortium. The Government has given it the loan repayment guarantee.

The Finance Department had sought Rs 2,000 crore as it has not been able to distribute the welfare pensions due to the prevailing financial crisis. Following this, the Cooperative Department decided to give the funds after forming a consortium.

The terms
The cooperative societies are to deposit the money to a joint account held in the name of the Cooperative Registrar and the Fund Manager at the Kerala Bank. The assurance is that all societies making the deposits within a period of one year would get 8.5 per cent interest every month on a fixed date. Besides Service Cooperative Banks, Employees Cooperative Societies have also been included in the consortium.

Despite the assured high-interest rate and a guarantee certificate, many societies are reluctant to make the deposits owing to concerns about whether the deposits would be returned after a year without fail. In response, the Cooperative Department clarified that the societies have lent about Rs 15,000 crore to the Government at many stages since 2018 and that it has been returned when needed.

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