Kerala Lok Ayukta bans unregistered institutions from using the words bank, banking and banker in their names and business

The Kerala Lok Ayukta has ruled that unregistered institutions cannot use the words "bank," "banking," or "banker" in their names or business activities. A two-justice bench, comprising Lok Ayukta Justice N. Anilkumar and Upa Lok Ayukta Justice Ashok Menon, instructed the Registrar of Cooperative Societies to take comprehensive measures to curb such misuse and protect depositors' interests.

The order was issued in response to a petition filed by Babu Joseph, who highlighted the Banking Regulation (Amendment) Act, 2020, which prohibits cooperative societies from using banking-related terms in their names and operations without RBI approval. The petitioner argued that the unlicensed societies' use of these expressions has led to public confusion and facilitated financial frauds, particularly affecting small depositors and vulnerable groups.

The Lok Ayukta emphasized that the 1949 Banking Regulation Act bars non-banking entities from using the term "Bank" in their names, and the RBI has reiterated this through master directions. It stated that only RBI-licensed banking companies can accept deposits for lending, investment, or cheque withdrawals. The forum clarified that unlicensed institutions cannot create the impression of being banks by accepting deposits.

The Registrar of Cooperative Societies, a public servant, is mandated to ensure transparency and prevent injustice resulting from maladministration. The Lok Ayukta acknowledged the Registrar's failure to take effective steps to prevent the misuse and protect depositors' interests. A compliance report following the forum's directive must be submitted within three months.