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Co-Op Banks Barred From Post-Demonetisation Exercise As They Can’t Detect Fake Notes : Centre To SC

LiveLaw News Network
4 Dec 2016 4:10 AM GMT
Co-Op Banks Barred From Post-Demonetisation Exercise As They Can’t Detect Fake Notes : Centre To SC
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Strongly defending its decision to exclude District Central Cooperative Banks from post-demonetisation exercise of exchanging scrapped Rs 500 and 1000 currency notes for new ones and accepting deposits, Centre has told the Supreme Court that it was a “conscious decision” as their “capability to detect fake currency is low” due to “poor level of automation” and “low order professionalism among their staff”.

“DCCBs as institutions have low level of automation as also low order professionalism among their staff. Their capability to detect fake Indian currency notes is also low. These therefore have been some of the reasons which prompted the authorities to keep them off from exchanging the specified bank notes for public or accepting them for deposit to the credit of their customers accounts”, said the affidavit filed by the Centre which will be taken up for hearing tomorrow.
“RBI generally does not supervise the DCCBs even in respect of registration. DCCBs are deficient in ensuring KYC (Know Your Customer) norms and their capability to detect the fake Indian currency notes is not adequate”, the affidavit added.
The centre also went on to claim that the exclusion of such banks will hardly have any impact on the larger public contending in the affidavit that: “DCCBs are a tier of cooperation banks standing between state cooperative branch and primary cooperative banks. They substantially and primarily cater to the institutional customers such as primary cooperative banks and societies. Incidentally they also serve individual customers. Given that they are institution-centric, their being kept away from the primary exchange facility to their customers does not impact an individual as much”.

District Co-operative Banks (DCBs) of Kerala, Maharashtra, Rajasthan and Tamil Nadu also have filed a writ petition in the Supreme Court seeking a writ to strike down the notification of Reserve Bank of India and the Union Government dated November 8 and November 14 regarding demonetisation.

The notification issued by the centre and the subsequent clarification issued by the RBI prohibits DCBs from accepting or allowing exchange of old 500 and 1000 rupee notes. There are 14 DCBs in Kerala, one in each district.

All the petitions largely states that the impugned notifications severely cripple and hamper their business / banking activities thereby posing a grave threat to the very continuance and sustainability of these decades-old Institutions.” The petitioner banks have argued that these notifications violate their fundamental rights under Article 19(1)(g) of the constitution.


It is to be noted that the Chief Justice T S Thakur-led bench of the Supreme Court had on Friday after hearing the DCCB banks remarked that “their concern appear to be genuine and required a detailed hearing”.

The bench also asked the Union government to spell out the steps taken to ease the suffering and inconvenience of people in rural areas, who are mostly dependent on cooperative banks, post demonetisation.

It asked all the parties should sit together and prepare a list of categories of cases that could be referred to High Courts and those that could be heard by the apex court.


Attorney General Mukul Rohatgi said the government was aware of the situation in cooperative banks, which lacked proper infrastructure and mechanism, compared to scheduled banks.

“Entire chapter in the additional affidavit filed by the Centre is dedicated to the issue of cooperative banks. It is not that we are not aware of the situation but these [the cooperative banks] lack proper facilities, mechanism and proper infrastructure as compared to scheduled banks,” he had said.

“The government deliberately kept cooperative banks out of the drive as these did not have the expertise to detect fake currency. Rohatgi said adding “Several cases are filed each passing day in various high courts on various aspects post demonetisation and it is not possible to deal with cases simultaneously in Kerala, Kolkata, Jaipur and Mumbai... All these matter should be clubbed together and be referred to any one high court or the apex court should hear them.”

Senior advocate P Chidambaram, appearing for cooperative banks questioned the government’s decision, saying the rural economy is almost paralysed due to non-inclusion of cooperative banks.

This article has been made possible because of financial support from Independent and Public-Spirited Media Foundation.

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