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Co-operative Societies Banned From Using ‘Bank’ In Their Names; Can’t Accept Deposits

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After reports of certain cooperative societies extending the word ‘Bank’ in their names, while accepting deposits from non-members came into picture, RBI notified caution on November 22, against these societies indulging into such practices.

As per an amendment coming into force on September 29, 2020, cooperative societies were prohibited from using the terms ‘Bank’, ‘Banker’, or ‘Banking’ in extension to their names, unless permitted by the RBI, or doctrine under the provisions of BR Act, 1949.

RBI Warns Cooperative Societies

On November 22, the central bank RBI raised caution about reports of certain cooperative societies using the term Bank in their names and accepting deposits from non-members.

This violates Section 7 of the Banking Regulation Act, 1949, as applicable to cooperative societies, stated the bank.

“It has come to the notice of RBI that some Co-operative Societies are using the word “Bank” in their names in violation of Section 7 of the Banking Regulation Act, 1949 (As Applicable to Co-operative Societies) (the BR Act, 1949),” stated the bank on Monday.

Reports of such entities accepting deposits from non-members, or nominal members, or associate members have also come to light, which is the same as violating the provisions of the BR Act, 1949, while conducting banking business.

“Such societies have neither been issued any licence under BR Act, 1949 nor are they authorized by the RBI for doing banking business.

The insurance cover from Deposit Insurance and Credit Guarantee Corporation (DICGC) is also not available for deposits placed with these societies,” clarified the central bank.

Members and non-members of such entities are advised by the RBI to be cautious of such developments, and carry out due diligence of such co-operative societies if they claim to be a bank, and look for banking licence issued by the RBI before dealing with them.

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