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A self-governing group of people associated with the same class, appear together voluntarily to tend to ordinary, social, economic, and cultural programs and conditions through an endeavor that is jointly owned and administered democratically by such individuals, known as a Credit Cooperative Society. It works for the motive of encouraging the economy, aligning credit at a competitive fare, and providing other financial amenities to its members. It reveals the willingness of the society to help each other for balancing social responsibility and mutual aid for the welfare of its members. The purpose of encouraging the economy and society is vital for its members.

Any person can be part of the Credit Cooperative Society

  • A certificate from the bank is entailed to proclaim the credit balance in support of it.
  • It ought to have a minimum of fifty members.
  • It must have the promoter’s name and list.
  • No demur certificate of the vigorous inquiry letter.
  • The board members must have at least seven and a maximum of twenty-one.
  • Particulars and copy of pre-registration of the conference are needed which involves capital, members, the board and the operation, etc.
  • The endorsed name by the members of the Credit Cooperative Society.


The enrolment of the individual is laid down in section 5 of the Cooperative Society Act which opinions that no individual be a single member of the enrolled society if he is below the age of 18 years, provided that the regulations of the society impose the minimum age to be the member of the society.


  • Producer Cooperative: It safeguards the affairs of small producers which covers farmers, landholders, or owners of the fishing operations, etc. To maximize the production capability and marketing possibilities. It aids in minimizing the costs and strains in per capita area with mutual profit to the producers.
  • Consumer Cooperative: They are controlled by consumers of a specific area for their complimentary benefit. They try to furnish necessary commodities at rational prices rather than creating their profit.
  • Credit Unions: Their main purpose is to assist people for which they give credit and financial amenities to the members at combative prices. Everyone has the privilege to be a member of the group.
  • Marketing Cooperative Society: Their object is to assist the small producers in trading their products. The producers who want to obtain rational prices for their products are the members of this group. It hoards the production of the individual members. Numerous market functions are executed by society to trade the products with a rational price.
  • Housing Cooperative Society: They assist the people who desire to build a house with a restricted income. Their goal is to resolve the housing issues of the members. They build the houses and offer the option to pay the installment to acquire the house.


This Act includes ten chapters which comprise 50 sections that mostly discuss the liability of society to design the funds to be loaned to its members, and of which most of the members are agriculturists, and of which no member is an enrolled society shall be unbounded. Section 3 talks about the Registrar, the state government may nominate a person to be Registrar for the state or any portion of it and may specify persons to help such registrar.

Section 8 of the act gives the power which says that the query shall be decided by the Registrar, and whose decision shall be last. Section 48 talks about the assistance of the Indian Companies Act, 1882 shall not appeal to registered societies. No person other than a registered society shall commerce or bear on business under any label, tag, or title of which the word Cooperative is a bit without the authorization of the state government. The requirements and the process for the application of the registration are also defined under sections 7 and 8 of this Act.


The Madhava Das Committee had proposed that there is a necessity to cease the practice of primary or initial credit societies beginning banking business without initial acquiring a license from the RBI. According to the amendment in the Act, these societies will have to obey the criterion stipulated by the RBI within 1 year of it being announced. The Banking Regulation Act, 1949 (AACS), Section 5 (CCII) of a cooperative credit society is explained as a cooperative society, “the principal object of which is to furnished financial abodes to its members and covers a cooperative land mortgage bank.” These types of establishments are thrift societies. The difference between a primary or initial credit society and a cooperative credit society is a source of their essence of business.

The initial aim or principal business of a primary credit society is the trade of banking business. When its contributed capital and reserves achieve the level of Rs.1 lakh, a primary credit society inevitably becomes a primary cooperative bank. However, even after a primary credit society set off a cooperative bank, it has to register with RBI for a license to bring on banking business. But it can bring on banking business until it is authorized a license or notified that a license cannot be authorized to it.

Sanjay Lodha And Ors vs Reserve Bank Of India And Ors on 5 December 2019

Bench: S.C. Dharmadhikari, R. I. Chagla September 24, 2019.

Apprehensive depositors tackling with bank employees at Maharashtra Co-operative Bank, Akruli branch of Punjab & to withdraw money in Mumbai. The Reserve Bank of India has assigned Mumbai-based Punjab and Maharashtra Cooperative Bank under measures for six months to the wind-up of business of the bank on September 23, 2019. The depositors will be granted to withdraw a sum not exceeding ₹ 1,000 of the total balance in each current bank account or savings account or any other deposit account, subject to conditions imposed in the RBI Directions.

Thomas, and two entrepreneurs in a fresh Rs 111 crore loan cheating case. Thomas has been in prison since October 2019 for his asserted role in relation to a previous Rs 4,355 crore loan fraud case. The recovery department of the bank had registered an FIR alleging fraud. All the accused have been charged under IPC sections 405, 408, and 409 for breach of trust, cheating (Section 419), and criminal conspiracy (Section 120 B). In the 2019 case, investigation officers said that 21,049 fabricated accounts were used to channel money and the accounts were password-protected and controlled by companions of Thomas.


  • Nirav Modi Bank Scam

Nirav Modi v State of Maharashtra on 18 October 2019;

Commissioner of Income Tax v Nirav Modi on 14 December 2016

Bench – S.S. Shinde

This scam is known as a substantial scam (Rs 11,400 crore) in the banking zone of India. The prime accused of the crime are billionaire jeweler Neerav Modi and Mehul Surakshi (his uncle and the owner of Gitanjali James). Both of them had been presented with the “Letter of Undertaking” from the agreement of the employees of PNB’s Mumbai branch and withdrawn the funds from the foreign banks on the assurance of Punjab National Bank. However, the Enforcement Directorate has seized holdings of Neerav worth approx. Rs 5870 crore.

  • Bank Scam by Vijay Mallya

Dr. Vijay Mallya v Union of India on 3 December 2018.

Bench – A.A. Sayed.

Mallya’s Kingfisher Airlines had loaned ₹ 9,432 crores from 13 banks before February 2018. The State Bank of India was the biggest moneylender with ₹1600 crore accompanied by the PNB ₹800 crores, IDBI ₹650 crores, and the Bank of Baroda loaned ₹ 550 crores. Mallya skedaddled India on March 2, 2016, and was held up in London and the government of India is struggling for his extradition to date.


Cooperative banks play a vital role in the execution of evolution programs and are important for the productive functioning of the banking system in India. India is labeled as an underbanked country, and after so many scandals and scams, it is the need of the hour to take essential measures to remedy the deficiency and to raise the confidence and beliefs of the public in the banking system.

This article is written by Ashmita Dhumas, who has completed her BA LLB from Agra College and is doing a diploma in Corporate Law from Enhelion.

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