Deposits in co-operative credit societies are not eligible for insurance cover

Deposits in co-operative credit societies are not eligible for insurance cover

Team Ambitiousbaba and AB are here with a Current Affairs Special Series. In this series, candidates will be introduced to current affairs topics daily, which will not only improve their general awareness but also will ensure that the candidates do not lack in any current affairs topic. Today’s Current Affairs topic is “Deposits in co-operative credit societies are not eligible for insurance cover”

The Reserve Bank has warned the public against co-operative societies using words “bank”, “banker” or “banking” as part of their names unless specifically allowed. RBI has also clarified that deposits with those societies are not entitled for insurance cover.

What is co-operative credit society?

It is a credit society that is a member-owned financial co-operative and is managed & controlled by its member.

According to the Reserve Bank of India some Co-operative Societies are employing the word “Bank” in their names which is breaching the section 7 of the Banking Regulation Act, 1949.

The words like “bank”, “banker” or “banking” cannot be used by co-operative societies as part of their names, except as permitted under the provisions of Banking Regulation Act, 1949 or by the clarification of RBI in a release.

RBI alerted public and informed that such societies have neither been issued any license under Banking Regulation Act, 1949 nor are they authorized by the RBI for doing banking business. The insurance cover which is provided by Deposit Insurance and Credit Guarantee Corporation (DICGC) is also not available for deposits parked 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.

The RBI has also observed that some Co-operative societies are accepting deposits from non-members which indicate conducting banking business in violation of the provisions of the Banking Regulation Act, 1949.

Question & Answer:

Q1. Why Banking Regulation Act, 1949 is important?

Ans. It is legislation in India which regulated all banking firms in India. It provides specific legislation containing comprehensive provisions of the business of banking in India and it also prevents bank to fail by prescribing minimum capital requirement.

Q2. What is the full form of DICGC?

Ans. Deposit Insurance and Credit Guarantee Corporation.

Q3. What is the deposit limit under insurance cover by DICGC?

Ans. There is a maximum amount of Rs.5 lakh could be insured by DICGC