Demonetization and its impact on primary agricultural credit societies (PACS) in Kerala

Abstract

Cooperatives in Kerala are well developed and highly democratic in nature. Due to restrictions imposed after demonetization, PA CS were not in a position to lend, mobilize deposits and cany out non-banking businesses. Therefore an attempt was made to pen down the outcome of a seminar held in this respect and a case study. Demonetization has severely affected the ntral economy particularly rural development and agricultural activities supported by the PA CS and other cooperatives as well. Instead of an average transaction o f Rs. 1.5/- crores per week, they were forced to restrict their transactions to Rs. 24000/- per week. Due to the support extended by the government and the think tank o f state cooperative movement, PACS were in a position to manage the shock. Cash sales proceeds in the Consumer store/super markets were used for lending to needy members. DCB cheques were issued to borrowers and depositors. Rigorous confidence building measures such as house to house campaign, awareness programmes, anil meet the depositoi s ].nogi amnns wete carried out. As far as long term strategy is concerned, the participants in the seminar stood against the transformation o f PACS into business correspondents and favoured maintaining the status-quo which means doing both banking and non-banking business. The case study on OUukkara Service Cooperative Bank Limited has proved beyond doubt that the super market sale proceeds has helped the poor small loan borrowers for their livelihood and health care, which was also endorsed by the seminar outcome. The authors are o f the opinion that a high level committee may be appointed by the federal government to study the exponential growth of PACS in Kerala and to identify the uniqueness and deviations from the law if any, and to suggest a suitable legal entity to sustain the laudable banking and non-banking endeavors.