A significant political conflict is emerging over allegations of corruption within Kerala cooperative banking sector. The state government, led by Chief Minister Pinarayi Vijayan, has expressed concerns about the central government’s recent involvement in the state’s cooperative sector. Vijayan has claimed that there is an attempt to undermine the credibility of Kerala’s cooperative sector, and these destabilizing efforts began during demonetization.
The concerns are linked to various factors. One key development is the recent Enforcement Directorate (ED) probe into an alleged fund scandal at the CPI(M)-controlled Karuvannur Service Co-operative Bank in Thrissur. This case, which falls under the Prevention of Money Laundering Act, involves the alleged siphoning of Rs 150 crore from the bank. The scandal, which emerged in 2021, implicated members of the CPI(M). Many depositors are still awaiting the recovery of their funds from the bank. The ED has alleged that benami loans were issued at the direction of former minister and CPI(M) legislator A C Moideen.
The conflict highlights the intense political rivalry between the Communist Party of India (Marxist) or CPI(M), which controls the state government, and the Bharatiya Janata Party (BJP) at the national level. The Enforcement Directorate’s (ED) involvement in the cooperative banking sector has raised suspicions of political motives behind the investigations, especially considering the upcoming Lok Sabha elections. This conflict is far from over. Both the CPI(M) and the BJP are likely to continue using the issue to gain political mileage, particularly with the Lok Sabha elections approaching.
While reports of irregularities in the state’s cooperative banks have arisen in the past, this marks the first time that a central agency has probed the sector, causing concern within the CPI(M), which has claimed that the ED’s involvement is part of an agenda to weaken the cooperative sector.
CPI(M) state secretary M V Govindan has accused the Bharatiya Janata Party (BJP) and the ED of pursuing political agendas. He alleged that the BJP was using the ED to target CPI(M) leaders in Thrissur district in preparation for the upcoming Lok Sabha elections.
Kerala Cooperative Banking Sector; ALLEGATIONS TO THE FOREFRONT
The ED’s probe into a fund scandal in a CPI(M)-controlled cooperative bank has brought allegations of corruption to the forefront. This not only damages the image of the ruling party but also raises questions about the functioning of cooperative banks in Kerala.
Kerala has a massive cooperative banking sector that plays a crucial role in the state’s economy. The controversy threatens to erode public trust in these institutions, potentially leading to a loss of deposits and undermining the cooperative banking model in the state.
MULTI-STATE CO-OPERATIVE SOCIETIES (AMENDMENT) BILL
Another dispute relates to the recent passage of the Multi-State Co-operative Societies (Amendment) Bill 2023 by Parliament. This bill is aimed at strengthening multi-state cooperative societies, ensuring transparency in their operations, and establishing democratic elections to prevent nepotism in appointments. Kerala is opposed to the amendment due to concerns that it could lead to the expansion of multi-state cooperative bodies, potentially challenging the state’s existing cooperative system. These multi-state bodies might offer higher interest rates than Kerala’s cooperative societies, which could reduce deposits in the state’s cooperative sector. The state government fears that decreased deposits and business could affect the cooperative sector’s socially committed interventions in the state.
Additionally, the state cooperative department would have limited control or administrative roles in these multi-state bodies, except for the state co-operative registrar’s inspection rights. The Kerala government views these changes as a significant challenge to the existing cooperative system in the state.
Dwindling deposits and business in the cooperative sector could have far-reaching economic consequences for the state. The cooperative sector in Kerala is known for its socially committed interventions, and any disruption in its functioning could affect various social and developmental programs.