In a major announcement, the Reserve Bank of India on Monday said that co-operative societies are not allowed to use ‘bank’ in their names and also cautioned them against accepting deposits from people who are not their members.
In a statement, the RBI said it has come to notice that some cooperative societies are using the term ‘bank’ in their names, which is a violation of the Bank Regulation Act. Notably, after the amendment in the Banking Regulation Act, 1949, effective September 29, 2020, co-operative societies are not allowed to use the words “bank”, “banker” or “banking” as part of their names, except as permitted under the provisions or by the RBI.
“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). It has also come to the notice of RBI that some Co-operative societies are accepting deposits from non-members/ nominal members/ associate members which tantamount to conducting banking business in violation of the provisions of the BR Act, 1949,” a statement from the RBI read.
The central bank warned that such societies have not been given any licence under BR Act, 1949 and they are not authorized by it for doing banking business.
“Members of the public are hereby informed that 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. Members of public are advised to exercise caution and carry out due diligence of such Co-operative societies if they claim to be a bank, and look for banking license issued by RBI before dealing with them,” the statement from RBI added.
