Rejecting Kerala’s move to allow co-op societies to use the tag of the bank in their names, Union Finance Minister Ms. Nirmala Sitharaman said in Lok Sabha on Monday that the use of the term ‘bank’ as part of the societies’ name, results in a false impression among the public.
The minister said that such cooperative societies are not banks and are under the regulation and supervision of RBI. The depositors of such co-op societies are also not covered by Deposit Insurance and Credit Guarantee Corporation (DICGC)protection, she added.
“Therefore, with a view to protecting the members of the public, RBI has cautioned against such societies”, said the Minister in a written reply to a question raised by the member Prof Sougata Ray.
Prof Ray had asked whether the Reserve Bank of India had ordered to ban co-operative institutions from carrying out banking activities like deposits and also stopped them from using the tag bank.
The MP also asked whether RBI considered the impact of such orders on lakhs of co-operative institutions across the country;
Replying the Minister informed that the Reserve Bank of India has informed that they have issued a Press Release cautioning members of the public against some co-operative societies using the word “Bank” as part of their names and accepting deposits from non-members/ nominal members/ associate members, which is tantamount to conducting banking business without obtaining a banking licence from RBI, in violation of the provisions of the Banking Regulation (BR) Act, 1949.
“In this regard, RBI had requested Chief Secretaries of all the States and Union Territories and Central Registrar of Cooperative Societies, to take necessary action against such unlicensed entities operating in their respective jurisdictions”, said the Minister.
The minister also referred to the Kerala case and said that RBI did receive a letter from the Registrar of Co-operative Societies, Kerala, and a letter from the Minister of Co-operation and Registration requesting for withdrawal of the caution notice issued by RBI.
In this regard, RBI has apprised that it is the duty and function of RBI, being a statutory authority, to protect the interest of the members of the public and depositors. RBI has apprised that they have only tried to stop the violation of the statute and their actions are, in no way, against the Cooperative societies functioning as per their
permitted mandate.