india

Updated: Aug 28, 2019 22:32 IST

In many ways, the dissolution of the board of the Maharashtra State Co-operative Bank, or MSC Bank, by the Reserve Bank of India in 2011 proved to be the beginning of the end of the political hold over the co-operative sector in the state.

For decades, the state’s politics practised by the Congress and the Nationalist Congress Party has been linked to its co-operative sector with doyens of these powerful institutions – banks, sugar-co-operatives, cotton spinning mills - doubling up as politicians and calling the shots on the state’s agrarian policies and rural economy.

Since the BJP came to power in 2014, it has been tightening the screws on the co-operative sector to keep the Congress-NCP clout under check.

But much of the decline of the co-operatives had started much earlier, for one, because of years of mismanagement by politicians who ran the units more as personal fiefdoms than community enterprises. Fattened on government subsidies and loans, many of the sugar co-operative mills controlled by politicians were ailing and sick. Several district co-op banks were also facing inquiries for frauds.

As the state’s apex co-op bank, MSC bank was the central credit agency for the 31 district co-operative banks as well as sugar co-operatives, spinning mills, dairies besides primary co-operative agencies. Nothing exposed the extent of the rot in this sector more than the inquiry by the refinancing agency Nabard and the audit report by third-party auditors of the state apex bank. These findings became the basis for the action against the cooperatives, first by the central bank and later, the FIR against some of the state’s leading politicians.

The RBI action to suspend the board of the apex bank comprising 76 directors, mostly belonging to Congress-NCP, came after the bank, acquired a negative worth of Rs 144 crore.

As irony would have it, it was the Congress-NCP rivalry, most highlighted during former Chief Minister Prithviraj Chavan’s tenure as chief minister that the MSC bank `scam’ was thus outed. Much like the more notorious irrigation scam. Chavan had followed up on the RBI action by setting up an inquiry under the co-operation department into the working and finances of the bank.

The reports gave an insight into the arrogance with which the leading politicians, serving as directors of the bank, disbursed loans to their own in blatant disregard to banking norms. Loans were offered to sugar co-operative mills with even negative worth bypassing norms, fully aware that those loans could not be paid back. Often, the loans weren’t even used for the stated purpose.

As the apex bank’s non-performing assets started ballooning, sick co-operative units were devalued and then purchased at auctions for a song by several leading politicians. In 2013, activists Anna Hazare and Medha Patkar, who highlighted sale of nearly 26 sick co-operative mills to private companies controlled by leading politicians, said that this scam was to the tune of Rs 10,000 crore.

But the investigation might not be able to act against politicians. The state’s Anti Corruption Bureau, which has investigated the irrigation scam for five years, hasn’t been able to pin responsibility for the irregularities on politicians despite “direct evidence” of wrongdoing.

“It’s childish to allege that directors of the bank (from across political parties), who were elected to that post, handed out loans to their own mills. These were co-operative units made up of thousands of farmers, not private firms of politicians. The bank was meant to support the co-operative sector and the farmers. How can there be a case of corruption or quid pro quo here?” said state NCP chief Jayant Patil, who was not a director of the bank at the time of the inquiry.

While things may not be as straightforward as Patil would like us to believe, this line of argument will be deployed by the bank’s directors unless they have personally benefited from the decisions taken as bank directors.

The apex bank was dominated by the NCP at the time and party chief Sharad Pawar was regarded as the undisputed leader of the state’s co-op movement. A petition in the high court alleges that Pawar was the main conspirator in the bank scam. But without any documentary evidence to back up this accusation, this is just another allegation hurled at politicians ahead of the state polls.