Sections 18 and 20 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Sections 18 and 20 both concern a co-operative bank, which section 3(f) defines as a multi-State co-operative society that undertakes banking business. Section 18 lets the Central Registrar, with the Reserve Bank's previous written approval, prepare a scheme of amalgamation or reorganisation while a moratorium is in force. Section 20 says what the amalgamated or reorganised bank owes to the Deposit Insurance Corporation if that Corporation has paid the depositors.
The sections are read as per the Ministry of Cooperation copy of the Act read with the Multi-State Co-operative Societies (Amendment) Act, 2023; neither section was amended in 2023. Banks, depositors and their advisers facing a moratorium or merger can discuss the position in a legal consultation.
When the Central Government has made an order of moratorium for a co-operative bank under the Banking Regulation Act, 1949, the Central Registrar, with the Reserve Bank's previous written approval, may during the moratorium prepare a scheme for amalgamation with another co-operative bank, or for reorganisation (s.18). Where an insured co-operative bank is amalgamated or reorganised and the Deposit Insurance Corporation has become liable to the depositors, the receiving or new bank must repay the Corporation as the Deposit Insurance and Credit Guarantee Corporation Act, 1961 provides (s.20). Neither section was changed in 2023.
Section 18: a scheme during a moratorium
Section 18 begins: "When an order of moratorium has been made by the Central Government under sub-section (2) of section 45 of the Banking Regulation Act, 1949 (10 of 1949) in respect of a cooperative bank, the Central Registrar, with the previous approval of the Reserve Bank in writing, may, during the period of moratorium prepare a scheme-- (a) for the amalgamation of the cooperative bank with any other cooperative bank; or (b) for the reorganisation of the cooperative bank."
Taking it apart:
| Element | What the text says |
|---|---|
| Trigger | An "order of moratorium" made by the Central Government under sub-section (2) of section 45 of the Banking Regulation Act, 1949, "in respect of a cooperative bank" |
| Who prepares the scheme | The Central Registrar ("may", so it is discretionary) |
| Condition | "The previous approval of the Reserve Bank in writing" |
| When | "During the period of moratorium" |
| Choice of scheme | (a) amalgamation of the cooperative bank with any other cooperative bank; or (b) reorganisation of the cooperative bank |
The Banking Regulation Act, 1949 is quoted as printed. The reader should check the current law for the corresponding provision of that Act. Section 18 does not describe the contents of a scheme, who may object to it or how long it takes; the Act is silent on those points. The Reserve Bank is defined in section 3(v) as the Reserve Bank of India constituted under the Reserve Bank of India Act, 1934; see Section 3, clauses (q) to (w).
How this differs from the ordinary route in section 17: section 17 is a society-driven restructuring by a two-thirds resolution, while section 18 is a Central Registrar-prepared scheme during a moratorium. See our article on section 17.
Section 20: repayment to the Deposit Insurance Corporation
Section 20 begins "Notwithstanding anything contained in section 17 or any other provision of this Act". It applies "where a cooperative bank, being an insured bank within the meaning of the Deposit Insurance and Credit Guarantee Corporation Act, 1961, is amalgamated or reorganised and the Deposit Insurance Corporation has become liable to pay to the depositors of the insured bank under sub-section (2) of section 16 of that Act".
In that situation, "the bank with which such insured bank is amalgamated or the new cooperative bank formed after such amalgamation, or, as the case may be, the insured bank or transferee bank shall be under an obligation to repay to the Deposit Insurance Corporation in the circumstances, to the extent and in the manner referred to in section 21 of the Deposit Insurance and Credit Guarantee Corporation Act, 1961."
| Condition | Detail |
|---|---|
| Kind of bank | A co-operative bank that is an "insured bank" within the meaning of the 1961 Act |
| Event | Amalgamation or reorganisation |
| Corporation's position | It "has become liable to pay to the depositors" under sub-section (2) of section 16 of the 1961 Act |
| Who repays | The bank with which the insured bank is amalgamated, the new co-operative bank formed after amalgamation, or the insured bank or transferee bank, as the case may be |
| How much and how | "In the circumstances, to the extent and in the manner referred to in section 21" of the 1961 Act |
The Deposit Insurance Corporation is defined in section 3(j) as the Deposit Insurance and Credit Guarantee Corporation established under section 3 of the Deposit Insurance Corporation Act, 1961 (47 of 1961); see Section 3, clauses (i) to (p). Section 20 states the obligation only by reference to the 1961 Act, so the amount and manner of repayment are found there, not in this Act. The 1961 Act is quoted as printed; check the current law for the corresponding provisions. The Act uses two slightly different titles for it, "Deposit Insurance Corporation Act, 1961" in section 3(j) and "Deposit Insurance and Credit Guarantee Corporation Act, 1961" in section 20; both are quoted as printed.
Link to the 2023 additions
Though sections 18 and 20 were not amended, the 2023 Amendment Act added section 120B, which says the provisions of the Act apply to a multi-State co-operative society "in respect of matters relating to incorporation, regulation and winding up", and that for a society "carrying on the business of banking, the provisions of the Banking Regulation Act, 1949 shall also apply". It is explained in the article on Sections 120A-120B. The Act says nothing further on how section 120B interacts with sections 18 and 20.
A practical example
Narmada Urban Co-operative Bank, an invented multi-State co-operative bank, is under a moratorium ordered by the Central Government under section 45(2) of the Banking Regulation Act, 1949. The Central Registrar, after obtaining the Reserve Bank's written approval, prepares a scheme for its amalgamation with Tapi Co-operative Bank. If the Deposit Insurance Corporation has become liable to pay Narmada's depositors under the 1961 Act, section 20 makes Tapi, or the new bank, repay the Corporation to the extent and in the manner stated in section 21 of that Act. Depositors and directors should read the 1961 Act directly for the amounts.
For the full Act at a glance, see the complete guide.
What the 2023 Amendment Act changed
| Provision | Before | After |
|---|---|---|
| Section 18 | As printed above | No change |
| Section 20 | As printed above | No change |
| New section 120B | Not in the Act | Banking Regulation Act, 1949 also applies to a society carrying on banking business |
Need help with a co-operative bank restructuring?
A moratorium or merger raises questions on depositors' claims, approvals and repayment obligations. Our team offers a legal consultation to map the Act's provisions against the facts before you decide on next steps.
Key takeaways
- The Central Registrar may prepare a scheme only during a moratorium ordered under section 45(2) of the Banking Regulation Act, 1949.
- The Reserve Bank's previous written approval is required.
- The scheme may be an amalgamation with another co-operative bank or a reorganisation.
- Under section 20, the receiving or new bank repays the Deposit Insurance Corporation as the 1961 Act provides.
- Sections 18 and 20 were not amended in 2023; new section 120B adds a Banking Regulation Act link.
Read next
- Section 17: amalgamation, transfer of assets and division
- Section 21: cancellation of registration certificate
- Sections 120A-120B: electronic filing and Banking Regulation Act
- Multi-State Co-operative Societies Act, 2002: complete guide
Disclaimer: Based on the Ministry of Cooperation copy of the Multi-State Co-operative Societies Act, 2002 read with the Multi-State Co-operative Societies (Amendment) Act, 2023 (in force from 3 August 2023), as consulted on 2 October 2026. The Multi-State Co-operative Societies Rules, 2002 as amended, later notifications and later amendments are not covered and should be checked. This article is general information, not legal advice; check the official text before acting.