The State government has urged the Reserve Bank of India (RBI) to withdraw the ‘caution notice’ issued by it regarding cooperative societies stating that it sows confusion among the public and harms the credibility of the societies in Kerala.
Minister for Cooperation V.N. Vasavan, in a letter on Thursday, requested RBI Governor Shaktikanta Das to direct the officials to draft their messages without ambiguity.
In a separate letter to Yogesh Dayal, Chief General Manager (Department of Communication), RBI, on Wednesday, the Registrar of Cooperative Societies, Kerala, P.B. Nooh, sought the withdrawal of the RBI notice saying that it was contrary to law and would create confusion among the members of cooperative societies and the public.
In its November 22 notice, the RBI had cautioned the public against dealing with cooperative societies using the words ‘bank,’ ‘banker’ or ‘banking’ in their names without authorisation. It noted that some cooperative societies were accepting deposits from non-members/nominal members/associate members, in violation of the Banking Regulation Act, 1949.
Not under ‘banking’
According to the State Cooperation Department, financial transactions by cooperative societies do not fall under the ambit of ‘banking.’ They cannot be called a ‘banking company’ as per the definition given by the Banking Regulation Act, 1949. Cooperative societies collect deposits from members and release loans to members. Loans are not released to non-members or other institutions, the letter noted.
On deposits
On accepting deposits, the Cooperation Department held that ‘members’ include active members as well as nominal and associate members, as per the Kerala Cooperative Societies Act, 1969. The latter also are eligible to deposit money in a society and get services offered by it. They are eligible for loan facilities as applicable to ‘A’ class members.
Insurance factor
The RBI warning that deposits made in cooperative societies are not covered by the Deposit Insurance and Credit Guarantee Corporation (DICGC) is also misleading, according to the department. The DICGC applies to banking companies registered under RBI, unlike cooperative societies which are not. That said, Section 57 (B) of the Kerala Cooperative Societies Act 1969, ensures guarantee to the deposits made in Co-operative Societies under its Deposit Guarantee Scheme, it said.
