Cooperative societies can't use 'bank' in name without permission
Thiruvananthapuram: As the urban and multi-state cooperative banks are brought under the direct supervision of the Reserve Bank as per the Banking Regulation (Amendment) Ordinance, 2020, using the term 'bank' in the name of cooperative societies will be regulated.
The Primary Agricultural Credit Societies (PACS) are known as primary cooperative banks in Kerala. When the Banking Regulation Act was amended in 2012, it was directed that the cooperative societies should not use the terms bank, banker or banking without permission of the RBI.
Soon after this, the RBI demanded the State Cooperative Society Registrar that the cooperative societies which are in banking business should apply for banking license within 3 months. Though 17 primary cooperative banks from Kerala applied for the banking license, the RBI replied that they need no license as they are registered as Primary Agricultural Credit Societies. However, they had a condition that no transaction should be done from those who are not members of the society.
The RBI recognizes only the members who have voting right. But as per the Kerala Cooperative Societies Act, all members are recognized even if they do not have voting right. So, the the RBI's directive did not affect the cooperative banks in Kerala. Also the RBI could not intervene in this as the cooperative societies come under the purview of state law. With this, it only directed that the term 'bank' should not be used.