The Reserve Bank of India has observed that some of the cooperative societies are employing the word- ‘bank’ in their names, against the rules mentioned in the Banking Regulation Act. Some cooperative societies are not even shying away from accepting deposits from non-members without any licensing or approval from the apex bank.
The RBI has clarified that cooperative societies are prohibited to use “bank”, “banker” or “banking” in their names.
“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,” said RBI in a statement.
Usage of the word – bank by cooperative Societies in their names is the violation of Section 7 of the Banking Regulation Act, 1949 (As Applicable to Co-operative Societies), RBI stated.
The RBI cautioned the general public that such societies do not possess any licence under Banking Regulation Act, nor have they been authorised by the RBI for conducting 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 the public are 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,” RBI noted.