Regulator RBI has asked credit cooperatives spread across the country to stop using the tag’ Bank’ in their names. It has also warned them against indulging in accepting deposits from non-members.
In a press release issued on Wednesday the apex Bank in the country ” It has come to the notice of Reserve Bank of India (RBI) that some Co-operative Societies are using the word “Bank” in their names. This is a violation of Section 7 of the Banking Regulation Act, 1949 (As Applicable to Co-operative Societies) (the B.R.Act, 1949).”
Reserve Bank of India has asked such credit co-ops not to accept deposits from non-members in the following words “ 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 B.R.Act, 1949.”
Clarifying further RBI says “Members of the public are hereby informed that such societies have neither been issued any licence under the B.R.Act, 1949 nor are they authorized by the RBI for doing banking business. “
RBI further clarifies that 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 Co-operative societies before dealing with them.
While some of the major credit co-ops such as Buldana Urban or Adarsh Credit Co-op are careful in not using the bank tag, hundreds of credit co-ops operating in remote areas in the country are not so particular so far as avoiding the bank tags is concerned.
Earlier, taking note of the situation the Supreme Court had restrained cooperative societies in Rajasthan from carrying out any ‘banking activity,’ as defined under the Banking Regulations Act, and further imposed restrictions on accepting deposits from the general public.
The court said several such societies accepted deposits from nominal members as well as from the public without obtaining a license for a banking business from the Reserve Bank of India.
Though there is no fool-proof data on the number of credit co-ops operational in the country, according to an estimate of NAFCUB- the apex level promotional and advocacy bodies for the urban cooperative credit sector there are close to 1570 urban cooperative banks and over 50,000 cooperative credit societies that are registered under the Multistate Cooperative Societies Act and the various state cooperative societies acts.