The Reserve Bank of India (hereinafter referred to as “RBI”) vide press release 2017-2018/1467 dated November 29, 2017, clarified that Co-operative Societies cannot use the word “Bank” in their names.
It had been earlier noticed by the Reserve Bank of India that some of the Co-operative Societies are using the word “Bank” in their names which is a direct violation of Section 7 of the Banking Regulation Act, 1949 (hereinafter referred to as the “B.R. Act”)
- Section 7 (B.R. Act) = No company other than a banking company shall use as part of its name [or in connection with its business] any of the words "bank", "banker" or "banking" and no company shall carry on the business of banking in India unless it uses as part of its name at least one of such words. No firm, individual or group of individuals shall, for the purpose of carrying on any business, use as part of its or his name any of the words "bank", "banking" or "banking company".
Co-operative Society means a society registered or deemed to have been registered under any Central Act for the time being in force relating to the multi-State Co-operative Societies, or any other Central or State law relating to Co-operative Societies for the time being in force. Co-operative Societies do not possess banking license and are formed with the object of promotion of economic interests of its members. Hence, co-operative societies can maintain accounts and accept deposits from its members only.
It has also been noticed by the RBI that some Co-operative societies are further violating the provisions of the B.R.Act by accepting deposits from non-members / nominal members / associate members which is identical to conducting banking business. Therefore, RBI vide its press release informed the public that such societies have neither been issued any license under the B.R.Act nor they are authorized by the RBI for doing any type of banking business. The RBI further advices the public to exercise caution and carry out due diligence of such Co-operative Societies before dealing with them.