Banking Regulation Act controls co-operative societies seeking banking business without RBI licence, subject to narrow statutory exceptions.

Banking by a co-operative society is governed by the Banking Regulation Act, 1949, because banking falls within the Union field and is subject to Reserve Bank control. A society can lawfully carry on banking business only if it qualifies as a co-operative bank holding the required RBI licence, or within the Act's limited statutory exceptions such as a primary credit society or transitional categories. Kerala co-operative law does not create a separate category permitting registration as an unlicensed urban bank, and registration power must be exercised consistently with RBI norms and depositor-protection requirements. The effect is that a co-operative society cannot be formed or run as an urban bank without compliance with the Banking Regulation Act and RBI licensing framework, save for the narrow exceptions recognised by that Act.

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Issues: Whether a co-operative society registered under the Kerala Co-operative Societies Act, 1969 could carry on banking business as an urban bank without a licence from the Reserve Bank of India, and whether the Registrar could register such a society as an unlicensed urban bank contrary to the Banking Regulation Act, 1949.

Analysis: Banking falls within the Union legislative field, and Parliament has exclusive power to regulate banking business. Under the Banking Regulation Act, 1949, a co-operative society may carry on banking business only if it is a co-operative bank holding a Reserve Bank licence, or if it falls within the limited statutory exceptions such as a primary credit society or the transitional categories recognised by the Act. The statutory definitions of co-operative bank, primary co-operative bank, primary credit society, and primary agricultural credit society show that an entity whose principal object is banking business is subject to the licensing and supervisory framework of the Reserve Bank. The Kerala Co-operative Societies Rules, 1969 do not authorise registration of a society as an unlicensed urban bank as a standalone category of formation; the expression operates only in the limited statutory situations where banking business is temporarily or otherwise permitted without a current licence under the Banking Regulation Act. The Registrar's power of registration is also conditioned by sound business requirements and must be exercised consistently with the Reserve Bank's regulatory norms. The Reserve Bank's directions and public warnings against unauthorised banking activity are supported by its statutory duty to protect depositors, banking policy, and the proper management of banking business.

Conclusion: A co-operative society cannot be registered or permitted to function as an urban bank for banking business without compliance with the Banking Regulation Act and the Reserve Bank's licensing and regulatory requirements, except in the limited statutory situations recognised by that Act.

Final Conclusion: The petitions were disposed of by affirming the regulatory supremacy of the Banking Regulation Act over co-operative societies seeking to undertake banking business and by directing the authorities to take appropriate action in accordance with that legal position.

Ratio Decidendi: When a co-operative society undertakes banking business, the Banking Regulation Act, 1949 governs the activity and requires Reserve Bank control, including licensing where applicable, notwithstanding state law on co-operative societies.

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