Contrary to public perception, the cash transaction tax would prove to be a boon for the co-operative banking sector in Gujarat.
The reason: only scheduled co-operative banks are under the purview of the cash transaction tax norm and there are not more than a dozen co-operative banks in the state, which are scheduled. The state has 326 non-scheduled banks.
According to Dollarbhai Kotecha, president, Gujarat Urban Co-operative Banks' Federation, it is not clear whether only scheduled co-operative banks will be under the purview of the transaction tax.
"The co-operative banking sector in Gujarat will really stand to gain, as more money will flow in and out of co-operative banks where the cash transaction tax is not applicable," he said.
Jyotindra Mehta, chairman of the Rajkot-based Rajkot Nagarik Sahakari Bank, a scheduled co-operative bank, said instead of harming the co-operative banking sector, the cash transaction tax system will prove to be a boon to the sector.
"There are just a handful of scheduled co-operative banks, while there are over 325 non-scheduled co-operative banks. The new tax will prove good for the sector," he said.
He added that in either case, corporates withdrawing over Rs 100,000 will not hesitate in paying a small amount as transaction tax.
R K Dhami, chairman of the Co-operative Bank of Rajkot, which is also known as Raj Bank, said the cash transaction tax will apply to just a few co-operative banks in the state, and the co-operative banking sector as a whole will not be affected.
"There are just about five or six scheduled co-operative banks and I do not think that cash withdrawals in any of these banks would be affected in any way," he said.
A leading co-operative banker from Saurashtra said only a handful of scheduled co-operative banks in the state will be affected by the cash transaction tax.
"All other smaller co-operative banks with deposits below Rs 200 crore (Rs 2 billion) or Rs 250 crore (Rs 2.5 billion) will not come under the cash transaction tax.
In either case, co-operative banks in the state do not normally have many corporates withdrawing over a lakh a day or even individual withdrawing over Rs 25,000 a day on a regular basis," he said.
Jairambhai Patel, chairman, Madhavpura Mercantile Co-operative Bank, said only those banks with huge deposits are likely to be affected by the cash transaction tax.
"Most of the co-operative banks in the state are small and will not come under the purview of the transaction tax. Bigger banks will of course have to put up with the transaction tax," he said.