**Executive Summary**
This document summarizes the Indian government's response to unstarred question number 2511 concerning Cooperative Banks in Kerala, answered on December 15, 2025. It clarifies the applicability of RBI guidelines, deposit guarantees, government directions for pooling funds, and measures for ensuring transparency and preventing misuse of deposits. No specific deadlines or action items are mentioned in the document for immediate execution.
**Key Points / Main Content**
* **RBI Guidelines Compliance:**
* Cooperative Banks in Kerala, including the Kerala State Cooperative Bank and 58 Urban Cooperative Banks (UCBs) licensed by the RBI, must comply with RBI guidelines for conducting banking business in India.
* **Deposit Insurance:**
* The Deposit Insurance and Credit Guarantee Corporation (DICGC) provides deposit insurance of up to ₹5 lakh (including principal and interest) for cooperative banks licensed by RBI in Kerala.
* DICGC has settled claims amounting to ₹549.27 crore for 03 cooperative banks in Kerala in the past five years.
* **Pooling of Funds:**
* The Union Government has not received information on the Government of Kerala directing Cooperative Banks to pool money for implementing newly declared schemes, as reported by RBI and NABARD.
* **Transparency and Accountability Measures:**
* RBI has implemented a Prompt Corrective Action (PCA) framework for UCBs to enable timely supervisory intervention and remedial measures.
* UCBs (with deposit sizes greater than Rs.100 crore and not salary earners' banks) are required to establish a Board of Management (BoM) for professional management.
* UCBs must implement a transparent mechanism for handling Whistle Blower complaints related to fraud or suspicious activities.
* RBI has issued guidelines for Risk Based Internal Audit (RBIA) systems in UCBs.
* NABARD has introduced the Fraud Vulnerability Index (VINFRA) as a self-assessment tool for banks to assess adherence to fraud management guidelines.
**Impact Analysis**
**Kerala Cooperative Banks (including Kerala State Cooperative Bank and 58 UCBs)**
* **Impact:** Required to adhere to RBI guidelines for banking operations. Subject to PCA framework and potential supervisory interventions by RBI. Must establish a BoM (if applicable) and a Whistle Blower complaint handling system.
* **Action Required:** Ensure compliance with RBI guidelines. Implement PCA measures if required. Establish or maintain a Board of Management (if applicable) and a Whistle Blower policy. Use VINFRA to assess and address fraud vulnerabilities.
**Depositors in Kerala Cooperative Banks**
* **Impact:** Deposits up to ₹5 lakh are insured by DICGC, providing protection against bank failures.
* **Action Required:** Be aware of the deposit insurance coverage limit of ₹5 lakh.
**RBI & NABARD**
* **Impact:** Responsible for ensuring transparency and accountability in the functioning of cooperative banks.
* **Action Required:** Continue implementing and monitoring PCA frameworks, RBIA guidelines, and VINFRA.
Key Entities Referenced
Reserve Bank of India: Regulates Cooperative Banks in Kerala and issues guidelines for their operations.
Banking Regulation Act, 1949: Applicable to cooperative societies and governs the banking business in India.
Kerala: The state where the cooperative banks are located and subject to the mentioned regulations.
Deposit Insurance and Credit Guarantee Corporation (DICGC): Administers the deposit insurance scheme in India and insures deposits in cooperative banks.
National Bank for Agriculture & Rural Development (NABARD): Works with RBI to ensure transparency and accountability in cooperative banks.
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF FINANCIAL SERVICES
LOK SABHA
UNSTARRED QUESTION NO. 2511
ANSWERED ON MONDAY, 15 DECEMBER, 2025/ 24 AGRAHAYANA, 1947 (SAKA)
Cooperative Banks in Kerala
2511. SHRI N K PREMACHANDRAN:
Will the Minister of FINANCE be pleased to state:
(a) whether the Kerala Bank and Cooperative Banks in Kerala are liable to comply with the
guidelines of Reserve Bank of India;
(b) if so, the details thereof;
(c) whether the Government proposes to ensure the guarantee for the deposits in Kerala Bank
and Cooperative Banks in Kerala;
(d) if so, the details thereof;
(e) whether it has come to the notice of the Union Government that the Government of Kerala
has directed to pool money from Kerala Bank and Cooperative Banks for implementing newly
declared schemes;
(f) if so, the action taken for ensuring repayment of deposits;
(g) whether the Government and Regional Rural Banks propose to ensure transparency and
cooperative autonomy in the said banks;
(h) if so, the action taken in connection with the process of mobilizing surplus; and
(i) the initiative taken by the Government to safeguard and prevent the misuse of deposits in
cooperative sector banks in Kerala?
ANSWER
THE MINISTER OF STATE IN THE MINISTRY OF FINANCE
(SHRI PANKAJ CHAUDHARY)
(a) to (b): Cooperative Banks in Kerala, including the Kerala State Cooperative Bank and 58
Urban Cooperative Banks (UCBs), which have been issued license by the Reserve Bank of
India (RBI) u/s 22 read with section 56 of Banking Regulation Act, 1949 (as applicable to
cooperative societies), to conduct banking business in India, are required to comply with the
guidelines issued by the Reserve Bank of India.(c) to (d): Deposit Insurance and Credit Guarantee Corporation (DICGC) administers the
deposit insurance scheme in India as per the provisions of the DICGC Act, 1961, which insures
deposits upto ₹ 5 lakh (including principal and interest) and presently also covers all
cooperative banks which have been issued a license by RBI in Kerala. During the past five
years, DICGC has settled claims amounting to ₹ 549.27 crore for 03 cooperative banks in
Kerala.
(e) to (f): As reported by Reserve Bank of India (RBI) and National Bank for Agriculture &
Rural Development (NABARD), no information on the directions of Government of Kerala to
pool money from Cooperative Banks for implementing newly declared schemes has been
received by the Union Government.
(g) to (i): In order to ensure transparency and accountability in the functioning of cooperative
banks, RBI & National Bank for Agriculture & Rural Development (NABARD) have taken
various measures which inter-alia include:
• RBI has put in place in place Prompt Corrective Action (PCA) framework for UCBs in
order to enable supervisory intervention at an appropriate time and require the UCBs to
initiate and implement remedial measures in a timely manner, to restore their financial
health.
• UCBs (other than those having deposit size less than Rs.100 crore and salary earners’
banks) are required to constitute a Board of Management (BoM) to facilitate
professional management and focused attention to their banking-related activities.
• UCBs shall put in place a transparent mechanism to ensure that Whistle Blower
complaints on possible fraud cases / suspicious activities in account(s) are examined
and concluded appropriately under their Whistle Blower Policy.
• RBI has issued guidelines for Risk Based Internal Audit (RBIA) system in UCBs.
• NABARD has introduced Fraud Vulnerability Index (VINFRA) as a self-assessment
tool for banks to measure their adherence to fraud management guidelines and to
sensitize them on their vulnerability to fraud.
*****