Kerala Cooperative Bank in one-and-a-half years

Thiruvananthapuram: If the M.S. Sreeram Expert Committee’s road map is adhered to and RBI is willing to play ball, the Kerala Cooperative Bank (KCB), will come into existence within one-and-a-half years as a two-tier system with the apex Kerala Cooperative Bank at the Centre and the large network primary agricultural cooperative societies (PACS) functioning not as branches, but as “autonomous nodes” around it.

While KCB will roll out modern banking services, PACS will continue to serve people independently at the local level.

The five-member Expert Committee, which was set up in July 2016, submitted its report to Chief Mini-ster Pinarayi Vijayan on Friday. The autonomy of PACS will be retained, and the report emphasises that the apex bank, KCB, will not compete with PACS.

The second tier in the existing three-tier cooperative banking structure in the state will soon be knocked off with the merger of district cooperative banks with the apex bank. The process is already on with the disbanding of the director boards of all the 14 DCBs on April 10; last September the Registrar of Cooperatives had fro-zen fresh recruitments in DCBs, and also prohibited the opening of branches by them.

The Sreeram Committee wants the management of the apex bank, which will remain in the cooperative sector, to be thoroughly professional, but it has not tinkered with the management structure of PACS.

The three regional boards the committee had recommended, too, will have more of political appointments than professional names. In short, politicians will continue to call the shots. Nonetheless, all the non-banking activities of DCBs, like the running of provision stores and marriage halls, will have to be wound up. The Sreeram Committee report, however, allows PACS to continue with their non-banking activities.

The ultimate objective of the cooperative sector reforms recommended by the Sreeram Committee is the RBI nod for the merger process.

“Our recommendations are framed in such a way that RBI gets the comfort to grant us a licence,” said M.S. Sreeram, the chair of the Expert Committee.

A key recommendation is the setting up of Kerala State Financial Regulatory Body, an RBI-like regulator that would supervise and inspect credit and entities that perform banking business.

“This is to give RBI the confidence that cooperative societies in the state are under strict supervision,” Prof Sreeram said. It is also felt that the merger of DCBs flush with resources will give the bank enough asset base to get RBI nod. Besides asset base, technology upgradation and the scaling up of professionalism are two preconditions for RBI approval.