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Beware of cooperative societies using ‘bank’ in their names, warns RBI

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As per the Banking Regulation Act, 1949, cooperative societies are not permitted to use the words ‘bank,’ ‘banker’ or ‘banking’ in their names.

Beware of cooperative societies using ‘bank’ in their names, warns RBI
The Reserve Bank of India (RBI) has asked citizens to exercise caution against cooperative societies that use the word ‘bank’ in their names.
As per the Banking Regulation Act, 1949, cooperative societies are not permitted to use the words ‘bank,’ ‘banker’ or ‘banking’ in their names, except in places allowed by the RBI or under provisions of Banking Regulation Act, 1949, the banking regulator has emphasised.
Citing violations of Section 7 of the Banking Regulation Act, 1949, which is applicable to cooperative societies, the RBI said it has noticed that some cooperative societies were using the word ‘bank’ in their names.
Some cooperative societies have also been conducting banking business by accepting deposits from non-members, which is in violation of the provisions of the Banking Regulation Act, 1949, the RBI said.
Warning the public against such societies, the central bank has said these cooperatives have not been issued any licence under the Banking Regulation Act, 1949 and are, therefore, not authorised by the RBI to conduct any banking business.
Deposits placed with such societies will not be covered by the Deposit Insurance and Credit Guarantee Corporation (DICGC), it said.
The central bank said customers should carry out due diligence of cooperative societies, claiming to be banks before depositing money with them. They should ask for the banking licence issued by RBI before engaging in any transaction with such entities, the RBI advised.
Cooperative societies are formed with the objective of promoting the economic interests of its members. It can maintain accounts and accept deposits from its members only and not from non-members.
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