Caution against various Co-operative societies using the word “Bank” in their names

Last updated: 24 November 2021

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The Reserve Bank of India (RBI) has issued a caution regarding co-operative societies using the word 'bank' in their names. Following amendments to the Banking Regulation Act, 1949, these societies are prohibited from using 'bank', 'banker', or 'banking' unless specifically permitted by the RBI. The RBI has noted that some societies are violating these rules and even accepting deposits from non-members, which constitutes illegal banking business. These societies are not licensed by the RBI and their deposits are not covered by DICGC insurance. The public is urged to be cautious and verify if such societies hold a valid banking licence from the RBI before engaging with them.

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 September 29, 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).

It has come to the notice of RBI 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) (the BR Act, 1949).

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 BR Act, 1949.

Members of the public are hereby informed that such societies have neither been issued any licence under BR Act, 1949 nor are they authorized by the RBI for doing banking business. The insurance cover from Deposit Insurance and Credit Guarantee Corporation (DICGC) is also not available for deposits placed with these societies. Members of public are advised to exercise caution and carry out due diligence of such Co-operative societies if they claim to be a bank, and look for banking license issued by RBI before dealing with them.

(Yogesh Dayal)
Chief General Manager

Press Release: 2021-2022/1230

FAQ :

No, co-operative societies cannot use the words 'bank', 'banker', or 'banking' in their names unless they have specific permission under the Banking Regulation Act, 1949, or from the Reserve Bank of India (RBI).

Some co-operative societies are using the word 'Bank' in their names and accepting deposits from non-members, which violates the Banking Regulation Act, 1949, and constitutes unauthorised banking business.

No, deposits placed with co-operative societies that are not licensed by the RBI and are operating in violation of the Banking Regulation Act, 1949, are not covered by the insurance from the Deposit Insurance and Credit Guarantee Corporation (DICGC).

Members of the public are advised to exercise caution, conduct due diligence, and check if the co-operative society has a valid banking licence issued by the RBI before dealing with them.

Notification No : PB : 2021-2022/1230
Source : https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=52595

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