The Society uses the funds in lending to the members and investments as per the Co-operatives society Act/Rules/By-Laws. Society's lending is in the shape of small loans for business or personal use.
Government of India has framed the laws/rules to ensure the security and safety of deposits and Credit Co-Operative Society strictly abides by the rules and regulations framed by Central Government under the Multi- State Co-Operative Societies Act, 2002.
Multi State Credit society is registered under Multi State Co-Operative societies act and rules. Society is not a personal institution owned by an individual but is a fully democratic organization managed by Board Of Directors who are elected by the members of the society in the Annual General Meetings and the Board Of Directors also take decisions in a collective manner with total transparency.
The Department of Co-Operatives constantly reviews the functioning of the society at regular intervals. Finance companies are usually owned by individuals and frame the so called policies according to the owners. The general members/ depositors/ Investors have no role to play. There are some possibilities of the absence of transparency. Members/ Investors have virtually no knowledge of the affairs/ legal provisions of N.B.F.C. and the statutory liabilities of the N.B.F.C. are also limited..
(1) Banks works as per the rules of Reserve Bank of India while Society works as per the Co-Op. Act. (2) Audit of Bank is done by the panel of C.A. or R.B.I. officers as per the guideline of Reserve Bank of India, while in society auditors came from the registrar office of co-op. for audit. (3) Banks can issue cheque books because they have clearing house license, while society don't have clearing house license so can't issue cheque books. (4) When anybody wants to do transaction with society first of all he/she has to become member of society & have to purchase the shares of it than & than can take loan & put deposite in society. While in Banks without become member & purchase the shares you can take loan & also put FD & other deposit.