The Reserve Bank of India has noted that some cooperative societies are using the word ‘bank’ in their names, in contravention of the Banking Regulation Act. Some cooperative societies are even accepting deposits from non-members/nominal members/associate members without any licensing or approval from the central bank, which is tantamount to conducting banking business in violation of the provisions of the BR Act, 1949. The insurance cover from Deposit Insurance and Credit Guarantee Corporation (DICGC) is not available for deposits placed with these societies, it said.
The Central Bank in its notification dated 22.11.2021 said that “the Banking Regulation Act, 1949 (BR Act, 1949) was amended by the Banking Regulation (Amendment) Act, 2020 (Act 39 of 2020) which came into force on September 29, 2020. Accordingly, co-operative societies cannot use the words “bank”, “banker” or “banking” as part of their names, except as permitted under the provisions of BR Act, 1949 or by the Reserve Bank of India (RBI)”. Using the word “Bank” in their name is in violation of Section 7 of the Banking Regulation Act, 1949 (As Applicable to Co-operative Societies) (the BR Act, 1949), it added.
Since these types of societies that are accepting deposits have neither been issued any licence under BR Act, 1949 nor are they authorized by the RBI for doing banking business, the Apex bank advised the public to be careful while dealing with such societies. The public is also advised to exercise caution and carry out due diligence of such cooperative societies if they claim to be a bank and look for banking licenses issued by RBI before dealing with them.
