- Consumers are asked to be cautious before depositing
- Societies are required to have a license under the Banking Regulation Act: RBI
The RBI has advised people to be vigilant on the issue of many co-operative societies in the country using the word ‘bank’ in their names. The RBI has said that co-operatives cannot use the word ‘bank’ in their names. After the extension of the Banking Regulation Act, 1949, no co-operative society can use words like bank, banker or banking in its name.
However, those societies which have obtained prior approval of RBI will have such exemption under BR Act, 1949. Amendments to the Banking Regulation Act have been in effect since September 29, 2020. “We have received a number of complaints against the co-operatives, alleging that they use the word ‘bank’ in their names,” the RBI said.
It is a violation of Section 7 of the Banking Regulation Act. It has come to our notice that some societies are also conducting banking business by accepting deposits from non-members, nominee members and associate members, in violation of BR Act, 1949.
On this issue, the RBI has warned the people that many such co-operative societies do not even have a license or authority to conduct banking business under the Banking Regulation Act. In addition, they do not have Deposit Insurance and Credit Guarantee Cooperation (DICGC) insurance cover on deposits made in such societies.
DICGC is an institution operating under RBI, which offers depositors up to Rs. Provides insurance cover up to five lakhs. If it is not insured, customers are also less likely to get their deposits back from that institution.