Gujarat chief minister Narendra Modi yesterday reiterated his government's resolve to protect the cooperative banking sector in the state.

"We cannot allow the system to break because of some vested interests. We have taken solid steps and will be coming out with more severe directives to check such elements," Modi said while inaugurating the first Gujarat branch of the Mumbai-based Kapol Cooperative Bank in Surat this afternoon.

"The cooperative movement is more than 150 years old in Gujarat and the cooperative banking industry has Rs 16,000 crore (Rs 160 billion) in deposits and Rs 11,000 crore (Rs 110 billion) in advances," he said.

He said that around 389 cooperative banks with over 1,000 branches are functioning in the state.

"Of this, only 15 banks have been affected in the recent turmoil. But let me assure you we will not tolerate any mischief whatsoever from any of these vested interests in the cooperative banking sector which has reached this stage because of 150 years of dedicated missionary approach," Modi said.

According to him, all the ills affecting these banks are due to the malafide intentions of the promoters and directors of the banks and not because of any lacuna in the system.

"Many of the well connected and the well heeled who had played a dubious role in the collapse of cooperative banks are cooling their heels in different jails of the state while some of them are still out but they cannot sleep peacefully at night," Modi said.

Modi said that a directive has been issued by the state government to all the cooperative banks to keep 15 per cent of their profits as reserve funds to meet any contingency. "Modi said that defaulters of cooperative banks will have to pay up. He also appreciated the efforts put by some dedicated employees of some failed banks who have taken up the challenge to rehabilitate their banks even working on half their salary.

He also informed that there were directors who had put in their own money into the banks to ward off liquidity crisis.

Referring to the recent run on different branches of the ICICI Bank in the state, Modi came down heavily on rumour mongers and the negative fallouts that such rumour mongering could result into.

"Such rumour mongers are anti-social and anti-national elements who indulge in such 'maha paap'. Basically it is the mafia which is the root cause of all this," he said adding that the time has come to fight this mafia.

Union textile minister Kashiram Rana said while the future of the cooperative banking sector was good, the need of the hour was to strengthen these.

He also gave details of the pivotal role played by the cooperative sector in disbursement of finance to small and marginal units under the textile upgradation fund scheme.