sub opening account with banks by co-op housing soc.

[padmanabhan P]

Dear all,

I draw your attention and request you to give your input on the subject:- 

Whether any competent authorities have issued orders or guidelines  thereby:-

1) co-op housing soc. are restricted or prohibited from opening savings accounts(SB) with banks ( which earn interest on balance) 

and

2) co-op housing societies are required to open an institutional current account for funds/day to day financial transactions since funds held by a housing society are considered commercial in nature which disqualifies them from saving account category.  

My society's managing committee passed a resolution in their meeting for opening a current account with a co-op bank and opened the account without disclosing the purpose to members but advised/mandated members to pay the maintenance charges to the above account . When questioned by some members and requested by members to produce the circular regarding prohibition of maintaining SB with banks, the suggestions were put aside and members were threatened that they will be made defaulters if payment is made to the mentioned  account.  Real motive for opening the account is not known and the bank is also not coming forward to give any information and advised the members to approach their Mc with the stand that the account is opened with complying KYC norms.  

I would like to know any suggestions/order issued for  opening of current accounts by RBI or any other authority and close the existing SB account if any. 

If so , kindly give the corresponding order details or circular for ready reference to understand the nature of direction and to follow the right course. 

regards,

Padmanabhan.P

[Rajiv Patel]

Dear Member,

Section 70 of the Act contemplates that a society “shall invest or deposit its funds in one or more of the following” modes, including “in a District Central Co-operative Bank or the State Co-operative Bank, having awarded at least ‘A’ Audit Class in last three consecutive years”, or in any other mode permitted by rule or government order. In practice this means a society can deposit funds with high-rated cooperative banks or, if the State Government so allows, with scheduled/national banks.

A Maharashtra housing society may open and maintain bank accounts (typically current accounts, fixed deposits, etc.) in its own name to handle society funds. There is no provision in the Act that forbids a society from doing so.

Managing Committee Approvals: Opening a new account is typically authorized by the society’s Managing Committee (under its general powers) or by a general body resolution, as provided in the society’s bye-laws. In practice, the committee passes a formal resolution specifying the bank, type of account, and names of authorised signatories (usually two office-bearers). For example, standard model bye-laws state:

“A Banking Account shall be opened by the society in the nearest State or District Central Co-op Bank having awarded at least “A” Audit Class… and the account shall be operated upon and all instruments and discharges shall be signed by the Secretary jointly with the Chairman or Treasurer.”

This illustrates that (1) the resolution should name the bank and branch, (2) designate the Secretary and another office-bearer (Chairman or Treasurer) as joint signatories, and (3) comply with Section 70’s requirements (e.g. using an approved bank).

RBI Guidelines (Account Type): Importantly, the Reserve Bank of India’s regulations distinguish savings from current accounts for societies. Recent RBI Master Directions clarify that cooperative societies registered under a State Cooperative Societies Act (like ours) are not eligible to open Savings Bank accounts. Instead, RBI permits only societies registered under the Societies Registration Act (1860) or similar charitable societies to maintain savings accounts. Thus, banks should not open “SB” (interest-bearing savings) accounts in the name of a cooperative housing society. In practice, as noted in the banking press, RBI has instructed banks to ask such societies to convert any savings accounts into current accounts.

Applicable Banks: Under the Act (Sec.70) and standard practice, societies usually use the nearest District Central Co-operative Bank (DCCB) or Maharashtra State Cooperative Bank (Class “A” rating), or any scheduled commercial bank branch if permitted. The model bye-law quoted above refers specifically to cooperative banks, but sub‐clause (d) of Sec.70 also allows “any other mode permitted by rules, or by general or special order… by the State Government”. Over the years, many housing societies also maintain accounts with nationalised or private banks (which the Registrar or society by-law permits), provided the society follows government directions (if any) on banking.

In summary, your society may and should open its own bank accounts (typically current accounts) after registration. The legal basis is that societies must maintain and audit their accounts, and Section 70 of the Act explicitly authorizes deposits in co-op/state banks. Be mindful that RBI rules prohibit savings bank accounts for cooperative societies, so use current accounts instead.