Co-operative societies cannot use the word `Bank’ in their names: RBI
29 Nov 2021
Reserve Bank of India (RBI) has cautioned cooperative credit societies against using the words “bank", "banker" or "banking" as part of their names, except as permitted under the provisions of the Banking Regulations Act, 1949 or by the Reserve Bank of India (RBI).
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 29 September 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).
RBI noted 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).
RBI also said that some co-operative societies are accepting deposits from non-members/ nominal members/ associate members, which is tantamount to conducting banking business in violation of the provisions of the BR Act, 1949.
RBI has cautioned members of the public that such societies have neither been issued any licence under BR Act, 1949 nor are they authorised by the RBI for doing banking business.
Deposits placed with such societies are also not eligible for insurance cover from Deposit Insurance and Credit Guarantee Corporation (DICGC) and hence members of public have to exercise caution and carry out due diligence of such co-operative societies if they claim to be a bank, and look for banking licence issued by RBI before dealing with them, RBI has cautioned.