Political parties cash in on the vast rural banking network
COOPTING VOTES Lakhs of customers of cooperative banks, just recovering from the note ban upheaval, could have a crucial say on voting day
The impact of demonetisation was felt across sectors last year but the rural economy probably suffered the longest in Gujarat owing to its over-dependence on the cooperative banking system.
It was only in June this year that the finance ministry allowed the district cooperative banks (DCBs) to deposit the banned currency notes lying with them since the November 8 demonetisation announcement.
What crippled the functioning of DCBs further was the RBI’s decision to bar these banks from receiving and exchanging banned ₹500 and ₹1,000 currency notes within five days of the demonetisation announcement.
Concerns that these politically connected banks might be used for money laundering had led the RBI to impose the ban.
The decision hit the state hard as DCBs play a major role in its economy, particularly the rural one. Nearly 20% of the over 6 crore population of Gujarat is connected to these banks.
As the state goes to polls by this year-end, the vast network of rural and urban cooperative banks and their lakhs of customers will be counted as a crucial vote bank for the political parties to tap into.
About one crore farmers associated with dairy and agriculture cooperatives and village-based credit societies are connected with 18 district cooperative banks. Moreover, the urban cooperative banks (UCBs) have another one crore customers.
“Though things have stabilised now, many rural folks have returned home after losing their jobs in small and medium sectors. This will adversely affect the BJP’s prospects,” says Sagar Rabari, a farmer who represents Khedut Hit Rakshak Samiti.
“For seven months, around ₹600 crore in old notes remained idle at DCBs. It was a difficult period, but we did not let this affect our customers beyond a point,” says Mahesh Patel, chairman of the Sabarkantha DCB.
Sixteen of the 18 DCBs are in some way connected to the BJP. Only two of the 24 directors in the Gujarat State Co-operative Bank (GSCB), the apex body of all DCBs are not directly connected to the BJP. Among the directors is also BJP chief Amit Shah.
“Until the 1990s, the DCBs were Congress-dominated but now they are ruled by the BJP,” says Narhari Amin, former deputy CM and vicechairman of the state planning commission.
The tide turned in BJP’s favour when Ajay Patel, a close aide of Shah, was elected GSCB chairman in 2009 despite the Congress having 11 directors on the 21-member board. They, too, had voted for Patel.
The following year the BJP wrested control of the Gujarat State Cooperative and Rural Development Bank Limited due to fighting in Congress.
In the aftermath, Amin, who was then the Congress’ tallest cooperative sector leader, switched loyalty to the BJP in 2012.
Amin’s departure triggered an exodus from Congress as soon Mahesh Patel and others followed suit. Saurashtra strongman and Porbandar MP Vithal Radadiya, who is also the Rajkot DCB chairman, was the last to don the saffron colour in 2014, soon after the NDA came to power at the Centre.
Grassroots Congress leaders during late PM Morarji Desai’s time strengthened the cooperative sector in Gujarat. For them, farmers’ interest was uppermost, says Mahesh Patel, whose father was also associated with the Congress.
“But the party could not maintain its dominance. The kind of eagerness the BJP has shown in controlling the sector was totally missing in the Congress,” says Amin.
The Congress accuses the BJP of adopting a “divide and rule” policy. “Be it ADC or GSCB, the BJP came to power through money and muscle,” says Mohan Patel, Congress’ cooperative cell president.
With the BJP in power in the state and at the Centre, the party is focused on addressing the banking sector’s concerns after the demonetisation heartburn.
Of the 7% interest rate that banks charge for farmers’ loans, the central and state governments contribute 2% each. The farmer, in effect, pays back only 3% interest.
“Often it takes two years for the 2% to come from the central government. In the wake of this, the state government has decided to set up a corpus of ₹200 crore to meet the demands of DCBs. This will help us have enough liquidity,” says Mahesh Patel.
Like Patel, UCB Federation chairman Jyotindra Mehta, too, rules out that demonetisation will be an issue in the forthcoming assembly elections.