Political interference increasing in co-op banks

Visakhapatnam: Visakhapatnam Cooperative Bank Ltd (VCBL) Chairman Chalasani Raghavendra Rao on Tuesday said cooperative banks in various States have sought judicial intervention to safeguard their autonomy and to stop growing incidents of political interference.

VCBL, set up here as a tiny single branch bank in 1916 has been transformed into the biggest urban cooperative banks in South India with 46 branches in Andhra Pradesh and four in Telangana. In the past four decades, the bank witnessed a quantum jump in its business turnover (deposits and advances) from Rs.2.91 crore in 1984-85 to Rs 6,797.98 crore in 2021-22. It had 3,661 members with a share capital of Rs.9 lakh in 1984-85 to 92,200 members with a share capital of Rs.272 crore in 2021-22.

Rao told Bizz Buzz in an interview on Tuesday that interference by the Government of India, Reserve Bank of India and State Governments are posing several difficulties for the independent functioning of cooperative urban banks defeating the letter and spirit of cooperative movement.

He said VCBL was one among several banks which has approached the court for getting justice to get itself free from interference. To a specific question, he pointed out that original character was changed since the amendment of Banking Regulation Act, 1965 and since March 1, 1966 the process for loss of sanctity began with the bringing of the cooperative urban banks under the control of RBI. Provisions of Companies Act are being made applicable to cooperative urban banks, he bemoaned.

Rao said there are 1534 urban cooperative banks pan India. AP has 46 while neighbouring Telangana is home to 51 cooperative urban banks. He alleged that the State Governments are appointing committees to regulate them by nominating representatives from their respective political parties.

He said after amendment in 2020, their autonomy was further dented with the reduction in the tenure of chairman of banks from five to four years and restricting them to hold office maximum for two terms. He said now RBI is empowered to take decisions unilaterally, again against the spirit of cooperative movement, for acquisition and merger of cooperative banks.

VCBL Chairman Emeritus Manam Anjaneyulu and CEO PV Narasimha Murthy at the AGM held recently attributed the success story scripted by the bank to the strong foundations laid when it was set up by the founders. They said unlike other banks, earning profit is not their sole motto and they have been trying to serve the members and communities by offering loans at a lower rate and advancing gold loans as well giving FD interest for senior citizens at 7 per cent.

The AGM resolved to pay a dividend of Rs.24.98 crore to its shareholders for 2021-22. According to the management of the bank, VCBL ranked No. 1 among cooperative urban banks by offering the highest interest on deposits. The bank stands all India 11th position in CRAR (Capital to Risk Asset Ratio).

Original character was changed since the amendment of Banking Regulation Act, 1965 and since March 1, 1966 the process for loss of sanctity began with the bringing of the cooperative urban banks under the control of RBI