KOCHI: Kerala has emerged as the numero uno (among major states) in India’s cooperative landscape, with 76.4 per cent of its population enrolled in one cooperative society or another, as of end-FY24.
With over 6,100 registered cooperatives and a membership base of 2.73 crore, the state far outpaces the national average of just 21 per cent.
The next best-performing states include Karnataka (49.5 per cent), Maharashtra (45.9 per cent), Goa (100 per cent), and even Lakshadweep, where membership exceeds the population count due to overlapping memberships. Yet, none match Kerala’s combination of wide population coverage and an organised network of societies.
Even in absolute numbers, several other states like Maharashtra (over 2.2 lakh cooperatives), Haryana (32,466), and Bihar (26,640) have more cooperatives than Kerala. But Kerala stands out by how deeply embedded cooperative membership is in its socio-economic fabric.
This commanding presence is all the more significant as the Centre has recently launched a national mission to establish a Primary Agricultural Credit Society (PACS) in each of the 18,497 gram panchayats currently uncovered across India.
Originally conceived as thrift-driven credit institutions for farmers and the rural poor, PACS have now evolved into conduits for disbursing institutional credit through refinance facilities. However, this transition has come at a cost- especially in states like Kerala where PACS also function as deposit-taking institutions.
Kerala remains an outlier in that as many of its credit cooperatives mobilise public deposits, something most other states have moved away from. This opens the door to greater financial intermediation – but also greater risk, as recent events have shown.
Scandals undermine reputation
Despite its top ranking, Kerala’s cooperative credit sector has been rocked by repeated scandals involving mismanagement, fraud, and political interference. The most infamous remains the Karuvannur Service Cooperative Bank in Thrissur, where an estimated Rs300 crore was siphoned off using benami accounts, fake documentation, and insider manipulation.
The case is under investigation by the Enforcement Directorate (ED), and several arrests—including that of the former bank secretary – have been made, and the charge sheet may have bigger names from politics. Depositors, many of whom are working-class families and pensioners, continue to struggle to recover their money.
Other societies have also come under scrutiny and these include:
Kandala Service Cooperative Bank in Thiruvananthapuram, where depositors have alleged irregularities worth several crores, though formal charges are still under process.
Mannarkkad Rural Service Cooperative Bank in Palakkad, which faced a government audit following complaints of misappropriation and misuse of deposit funds.
Societies in districts like Malappuram and Kozhikode have also reported issues related to frozen deposits, delayed repayments, and irregularities in loan issuance.
In all these cases, poor oversight, political appointments, and weak internal controls are recurring themes.
Why call banks?
The Reserve Bank of India (RBI) has repeatedly cautioned against credit societies using the word “bank” in their names, warning that this creates a false sense of regulatory backing among the public.
While cooperative banks that fall under RBI supervision are governed by strict norms, many service cooperative societies and credit societies in Kerala operate under state law, with relatively lax auditing mechanisms and minimal public accountability.
Dual control – by the state government and NABARD – further blurs regulatory clarity. Routine audits often miss glaring anomalies until it’s too late.
Crisis of confidence
Kerala’s cooperative model remains a benchmark for membership inclusion – but the recent spate of financial irregularities risks undermining decades of trust. experts have called for urgent reforms to strengthen independent audits; professionalise management; clearly demarcate the roles of credit societies and cooperative banks and establish efficient deposit insurance protections where possible
Unless course correction happens soon, Kerala may find that its leading status in cooperative coverage rings hollow in the face of public disillusionm
