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      Question

      Under Section 3 of the Banking Regulation Act, 1949, the

      Act shall not apply to a primary agricultural credit society or to a co-operative society whose primary object and principal business is providing long-term finance for agricultural development, subject to conditions. Which of the following conditions must be fulfilled for this exclusion to operate?
      A The society must not be registered under any State co-operative societies law Correct Answer Incorrect Answer
      B The society must not use the words ‘bank’, ‘banker’ or ‘banking’ in its name or in connection with its business, and must not act as drawee of cheques Correct Answer Incorrect Answer
      C The society must obtain a declaration from the Reserve Bank confirming its excluded status Correct Answer Incorrect Answer
      D The society must not accept deposits from persons who are not its members Correct Answer Incorrect Answer
      E The society must have its accounts audited by the Comptroller and Auditor General of India Correct Answer Incorrect Answer

      Solution

      Section 3, as substituted by the Banking Regulation (Amendment) Act, 2020 (Act 39 of 2020) with effect from 26 June 2020, provides that the Act shall not apply to a primary agricultural credit society or to a co-operative society whose primary object and principal business is providing long-term finance for agricultural development, if such society does not use the words “bank”, “banker” or “banking” as part of its name or in connection with its business, and does not act as drawee of cheques. Both conditions must be satisfied cumulatively. If either condition fails — for instance, the society acts as drawee of cheques even without using the word “bank” — the exclusion ceases to apply and the Act governs the society.

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