For the purpose of amending the Reserve Bank of India Act, 1934 along with the banking companies act, 1949 with an aim of controlling the banking sector coming under some co-operative societies, the central government enacted the Banking Laws (Application to Co-operative Societies) Act, 1965. Under Chapter 2 of the enactment, the Reserve Bank of India Act, 1934 was amended. Accordingly, under the definition agricultural operations, the Act included and added animal husbandry as well as other related functions collectively taken on with the agricultural operations. The Act describes the Central co-operative bank as the chief co-operative society in a State located in any district, the fundamental motive of which is to give financial assistance to different societies. But the proviso to the Act states that the State Government is empowered to pronounce any number of co-operative societies conducting the activity of providing financial assistance to various co-operative societies in such district as the co-operative society under the Centre. Such declaration shall be made in addition to the chief societies located in a district.
The co-operative bank shall consist of Central, State and Primary co-operative societies. The co-operative credit society shall allocate funds to the members. It shall also embrace of co-operative land mortgage bank within the meaning of the enactment. The Act added the meaning of the term director and crops under the amendment. The marketing crop adds the dealing out of crops previous to promotion by manufacturers of agricultural products or any institution of such manufacturers. The primary agricultural credit society comes within the definition of a co-operative society. The fundamental aim of such society is to give funds to the members for carrying out the activities for agriculture which shall consist of promotion of crops. The society engaged in banking sector is the primary co-operative bank and the primary credit society. The disputes with respect to the functions of these societies shall be determined by the bank which shall be absolute.
The Act altered Section 10 and Section 17 of the principal Act where the explanation provided to the provision was deleted. Under Section 18 of the enactment, subsequent to the terms ‘Banking Companies Act, 1949’ certain terms were added as stated in the present Act. As per Section 42 of the enactment, liabilities exempts the paid up capital or the amount held back or any remains on credit in the earnings as well as loss of funds of the bank. The liabilities also exclude the loans advanced from the bank as provided under the enactment or as publicized by the Government of India. Where the bank is a State co-operative bank the liabilities exempt the loan advanced from that bank as of the Government of a State and the bank deposit of funds that stand for the balance amount or any portion which is to be kept apart by the co-operative society where the functions are carried out.
In addition, Chapter III of the enactment alters the Banking Companies Act, 1949. The mention in the Act with respect to the Banking Companies Act, 1949 in any of the legislations or any legal document shall be interpreted to pass on the Banking Regulation Act of 1949. The provisions of the Act were expanded to apply to the co-operative societies as specifically prescribed in the enactment. To some of the co-operative societies the Act shall be made applicable but with certain alterations by the inclusion of Part V to the principal Act. The co-operative banks are directed to initiate and conduct the banking activities only if the collective rate of the paid up capital along with the reserves are Rs. 1 lakh and more. The proviso to the Act states that the above said provision is not applicable to the bank that conducts its activities for a term of 3 years during the initiation of the Banking Laws (Application to Co-operative Societies) Act, 1965. The Act adds special provision for cash reserves as provided under present enactment.