If depositors money not returned, people will lose trust in coop banks: HC

The Kerala High Court has said that unless the authorities take steps to ensure depositors' request for return of their money is honoured, people's trust in the cooperative banking sector would be "seriously diminished".

Justice Devan Ramachandran said that people losing faith in the cooperative banking sector would "prejudice" the state deeply, "particularly when the present fiscal situation is not as satisfactory as it ought to have been".

"... the return of fixed deposits by the cooperative banks is the sine qua non of a healthy financial scenario; and violations of it would certainly create unrest in the minds of persons and would impede them from relying upon such banks in future," the court said in its order of June 13.

The observations by the court came while hearing a batch of petitions by depositors seeking return of their money in various cooperative banks in the state.

The court, during the proceedings, noted that since the last hearing on May 21, there has not been enough progress in the matters since "none of the respondent-banks have reported substantial payments to the various depositors".

"What is important is prevention and not merely cure because, unless the authorities step in to devise means to ensure that requests for deposits are not violated, the trust of the people in the cooperative banking sector would be seriously diminished.

"This would not be to the benefit of the state, but to its deep prejudice, particularly when the present fiscal situation is not as satisfactory as it ought to have been," Justice Ramchandran said.

The state government, during the hearing, said it was devising methods, including amendments to the statutes, to ensure timely return of depositors' money when they ask for it and sought a week's time to inform the court about the steps taken.

One of the respondent-banks -- Kumplampoika Service Co-operative Bank -- told the court that it returned 40 per cent of the deposits, while another bank -- Kizhathadiyoor Service Co-operative Bank -- claimed it had already disbursed about Rs 25 crore to its depositors.

The court said delay in disbursement of deposit certainly causes a social impact with most of the depositors relying on the said amounts for even their day-to-day sustenance, including medical expenses.

"This court certainly treats these matters very intently and requires the government to act proactively," it said and listed the matter for further hearing on June 19.