Kerala’s own bank, ‘Kerala Bank’ turns into reality

Banking domain has a significant part in enervating a state’s economy and its development progression. The concept of Kerala Bank took shape with the goal of being beneficial for our state’s progress and comprehensive development. As the government completes three and half years, Kerala Bank has been realized as promised in the election manifesto, creating history in the banking domain.

What is Kerala Bank?

Election manifesto promised a bank at the state level merging the state cooperative bank and district cooperative banks. The aim behind the decision was to combine Kerala’s banking requirements. The goals behind the concept of Kerala Bank included providing loans to common people at lower interest rates, making investments by diasporic Malayalis possible and creating a banking system which enables people’s intervention in state’s social issues. The foundational target of Kerala Bank is to ensure the accessibility of safe and reliable modern banking services to everyone. 

When the current government got into power, the decision to form Kerala Bank was announced. An expert committee under the chairmanship of Dr. M. S. Sriram (Indian Institute of Management – IIM) was constituted to study and submit a report regarding the formation of Kerala Bank. The steps to set up Kerala Cooperative Bank by merging state cooperative banks and district cooperative banks were initiated based on this expert panel report. Reserve Bank was approached for the setting up of Kerala Bank. In spite of some attempts against the realization of Kerala Bank, government went ahead against all odds. Reserve Bank granted permission for Kerala Bank with certain conditions. With high court’s orders on cases involved, another dream project of the state turned into reality. Chief Minister Pinarayi Vijayan did the official announcement of Kerala Bank.

Benefits targeted by Kerala Bank

A big opportunity for the growth of cooperative banks in Kerala has been intended through Kerala Bank. Kerala Bank will strengthen novel ideas and plans in the agricultural and commercial domain. The commencement of Kerala Bank will help in making services available to consumers economically, reducing the interest rates for loans and intervening more effectively in the area of micro finance.

More agricultural loans can be provided through Kerala Bank and at an interest rate lower than the existing rates. Interest rates can also be reduced for non- agricultural loans.

With the arrival of Kerala Bank, loans and deposits are expected to increase by several fold. By attaining the capacity to collect foreign investment, transaction and trade of foreign currency will increase. With Kerala Bank attaining a significant portion of NRI investments which are currently under the dominion of public sector and private sector- new generation banks, cooperative sector will see a leap in the credit sanctioning ability. 

Completely digitalized banking services will be made possible. The exploitation carried out by public sector- private- new generation banks in the name of digital transaction and other service charges can be ended. With the cooperative banking sector achieving modern technical advancement, more young consumers can be attracted to this sector. Currently, only 23% make up consumers who are below 50 years of age. Compared to the individually existing banks, the coordinated Kerala bank will be more capable to provide the technological facilities required by the youth. It will also be possible for Kerala bank to acquire the “brand value” demanded by the youth.

The Second-biggest bank in Kerala

With the merging of District cooperative banks to the State Cooperative bank, Kerala bank will be able to the level of a reserve bank recognized, nationally and internationally renowned bank offering all kinds of services. Kerala bank will be the second biggest bank when it gets launched. At first, Kerala bank will have 825 branches. There is already an investment of more than 65000 crores. As the bank gets permission for accepting NRI investment and its service is made accessible to the rural population, it is certain that Kerala bank will become the foremost bank in Kerala. 

Apart from the state and district banks, there are 1625 primary cooperatives and 60 licensed urban banks in Kerala. These will become the members or shareholders of Kerala bank. There are more than 4500 branches for these primary cooperatives and urban banks put together. There is an investment of over one lakh crore rupees. The banking network comprising all these will be sufficient for carrying out the banking requirements of the state. 

Kerala bank, which will be formed by merging district cooperative banks to state bank as an alternative to the commercial banking sector in Kerala that consists of 21 public sector banks, one grameen bank, 19 private commercial banks and 2 small finance banks, and the 1600 plus primary cooperatives and urban banks, which will be the members of the Kerala bank, could work upholding the interests of the state. 

With the formation of the Kerala Bank, primary agricultural loan groups and their members would be its biggest beneficiaries. They are the rightful inheritors and owners of Kerala Bank. Government’s outlook of maintaining the transparency of agricultural loan- banking activities is behind the policy. All modern banking facilities will be made available to the consumers through Kerala Bank.  More loans can be made available at lower interest rates. Another advantage is that more loans can be made available to the members and thereby increase the profit margin. It will be possible to transfer various benefits of central and state governments directly to the accounts of rural beneficiaries.

It is to be particularly emphasized that the refinance amount from NABARD can be increased as the financial position of the Kerala bank is strong. Thereby, the agricultural loan proportion could also be increased. As the working value of the bank increases, there will be an increase of profit dividend. It will also be possible to make effective intervention in the microfinance sector. The benefits of banking technologies could be provided to the non-loaning cooperatives too, along with the existing provision of services and authority.

As the existing district banks get merged to the Kerala bank, they will receive the status of scheduled banks (They did not have the qualification for scheduled bank according to the RBI act of 1934). The State cooperative bank will be able to attain financial stability through the Kerala bank. The boosted strength from the merging of banks will enable better intervention towards the development of Kerala. Through Kerala bank, a more effective intervention into the growth of the cooperative movement will also be possible.

Reserve bank and NABARD will be able to supervise the core banking and modern banking facilities through the computerized system. The induction of a board of management and professionally trained top level officials will help improving the efficiency of the bank. As all laws pertaining to scheduled banks will be applicable to Kerala bank too, the aspect of transparency will also be ensured. 

It will be possible to create an exemplary model in front of the world for state and central governments through Kerala bank. It will help attaining the government’s goals such as Digital India, economic inclusiveness, economic literacy. Making the local economy more productive and dynamic will boost our market. The ability to financially support for the development goals will encourage the government to take up bigger projects. A better control of the governance will be possible through the Kerala bank.

Representatives of primary cooperatives and urban banks will be the administrators of the bank. The realization of a big bank based on cooperative democracy is indeed a proud moment for the cooperative members. It will be also possible for the young generation to have more employment opportunities through the bank. The objective of a “people’s bank for the development of the land” could also be realized through the Kerala bank.

The goal of long-term development

Government’s goal is Kerala state’s consistent development. Strong social-economic institutions   are necessary in order to turn this goal into reality. Through government’s Nava Kerala Mission, attempts are being made to find permanent solution for basic amenities like good quality public schools, public health centers, agricultural- economic development and housing. We must be able to progress in the matter of basic amenities. Kerala Bank, the catalyst for this progress, will be our own, strong economic nerve.