Violation of Section 19 of B.R Act 1949 (AACS)
EC No.  280/DoS- 41    /2020                                                 12 October 2020
Ref. No. NB. DoS. Pol./   2566  /Policy /J-1/ 2020-21
The Managing Director, All State Cooperative Banks
The Managing Director/Chief Executive Officer, All Central Cooperative Banks
Dear Sir/Madam
Violation of Section 19 of B.R Act 1949 (AACS)
1.  Enforcement Department of Reserve Bank of India, on examination of inspection reports of Rural Cooperative Banks, has observed that quite a few banks are found to be holding shares of various co-operative institutions in their books, in violation of provisions of Section 19 of B. R Act, 1949 (AACS). It may be noted here that violations of statute are viewed seriously, irrespective of the amount involved and are liable to attract enforcement action, including levying of penalty etc. 
2.   In light of the above, we advise you to be guided by our Circular No. 207 dated 09 December 2009 (copy enclosed) specifying relaxations and restrictions on holding of shares by cooperative banks in other cooperative societies. It is reiterated that barring the exemptions mentioned in our aforesaid circular, retirement of shares in other cooperative societies is mandatory and even if the investment in shares are treated as performing, the bank would be termed as not complying with the provisions of Section 19 of the Act ibid if the share is not got retired within the specified period. Alternatively, such investments may be written off from the books of the banks after obtaining due approval of Registrar of Cooperative Societies in accordance with the provisions of State Cooperative Societies Acts/Rules/Byelaws of the banks. 
3.   Please acknowledge receipt of this circular to our Regional Office concerned.
Yours faithfully
(K.S. Raghupathi)
Chief General Manager
Encl: as above