Sections 87 and 88 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.
Section 87 says that the Central Registrar must order the winding up of a co-operative bank if the Reserve Bank requires it in the circumstances mentioned in the Deposit Insurance and Credit Guarantee Corporation Act, 1961. Section 88 says that if the Deposit Insurance Corporation has become liable to depositors of such a bank, the liquidator or another person reimburses it as that Act provides.
This article follows the Ministry of Cooperation copy of the Act read with the Multi-State Co-operative Societies (Amendment) Act, 2023, in force from 3 August 2023 (notification S.O. 3493(E)). Neither section was amended in 2023, but s.86(5), which deals with banks, was substituted, and new s.120B applies the Banking Regulation Act, 1949.
Section 87 overrides the rest of the Act: if the Reserve Bank requires winding up in the circumstances mentioned in s.13D of the Deposit Insurance and Credit Guarantee Corporation Act, 1961, the Central Registrar "shall make an order". Section 88 provides for reimbursement of the Deposit Insurance Corporation by the liquidator or "such other person" for an insured bank. Both sections name only what that other Act says; this article does not go beyond the text.
Section 87: winding up at the direction of the Reserve Bank
The section is headed "Winding up of cooperative bank at the direction of Reserve Bank" and reads: "Notwithstanding anything to the contrary contained elsewhere in this Act, the Central Registrar shall make an order for the winding up of a cooperative bank, if so required by the Reserve Bank in the circumstances mentioned in section 13D of the Deposit Insurance and Credit Guarantee Corporation Act, 1961 (47 of 1961)."
Four features of the wording stand out:
- It begins with a non-obstante clause. The usual steps in s.86 (a hearing of the society's representations, the grounds in s.86(1) and (2)) are not repeated here; the section says the Act's other provisions give way "notwithstanding anything to the contrary contained elsewhere in this Act".
- The duty is mandatory: the Central Registrar "shall make an order".
- The trigger is a requirement by the Reserve Bank, and the "circumstances" are those mentioned in s.13D of the 1961 Act. Those circumstances are not set out in this Act, and this article does not state them.
- The section speaks of a "cooperative bank". For a multi-State co-operative bank, s.86(5) as substituted and new s.120B both name the Banking Regulation Act, 1949, as explained below.
Readers should check the current law for the corresponding provision of the Deposit Insurance and Credit Guarantee Corporation Act, 1961. A bank, its directors or its depositors who want the position explained can use legal consultation.
Section 88: reimbursement to the Deposit Insurance Corporation
The section is headed "Reimbursement to the Deposit Insurance Corporation by liquidator". It reads: "Where a cooperative bank, being an insured bank within the meaning of the Deposit Insurance and Credit Guarantee Corporation Act, 1961, is wound up and the Deposit Insurance Corporation has become liable to the depositors of the insured bank under sub-section (1) of section 16 of that Act, the Deposit Insurance Corporation shall be reimbursed by the liquidator or such other person in the circumstances, to the extent and in the manner provided in section 21 of that Act."
| Element | What the text says |
|---|---|
| Who is covered | A cooperative bank that is an "insured bank" within the meaning of the 1961 Act |
| Trigger | The bank is wound up and the Corporation has become liable to depositors under s.16(1) of the 1961 Act |
| Who reimburses | "the liquidator or such other person" |
| How much and how | "to the extent and in the manner provided in section 21 of that Act" |
The amount, the priority and the procedure are those of the other Act. This article states none of them, and the sources used here do not reproduce that Act.
Example. The invented Narmada Multi-State Co-operative Bank is wound up. If the Corporation has become liable to its depositors as provided in the 1961 Act, s.88 sends the Corporation's claim for reimbursement to the liquidator, or another person, on the terms of that Act. The liquidator's appointment and powers are in ss.89 and 90.
How these sections fit with the 2023 amendments
Two 2023 changes bear on banks. Section 86(5), as substituted, says: "Notwithstanding anything contained in this section, in case of winding up of multi-State co-operative banks, the provisions of the Banking Regulation Act, 1949 shall also apply." New s.120B provides that the Act applies to a multi-State co-operative society "in respect of matters relating to incorporation, regulation and winding up", with a proviso that, in the case of a society "carrying on the business of banking, the provisions of the Banking Regulation Act, 1949 shall also apply". Our articles on winding up of multi-State co-operative societies and on electronic filing and the Banking Regulation Act discuss them.
Sections 87 and 88 do not use the words "multi-State"; they speak of a "cooperative bank". Whether s.87 reaches every co-operative bank or only those registered under this Act is not stated in the sections, and this article does not decide it. Readers should check the current law for the corresponding provision of the Banking Regulation Act, 1949.
What the 2023 Amendment Act changed
| Provision | Before | After |
|---|---|---|
| Section 87 | As printed above | Not amended |
| Section 88 | As printed above | Not amended |
| Section 86(5) | No co-operative bank wound up except with the previous written sanction of the Reserve Bank | Banking Regulation Act, 1949 "shall also apply" to winding up of multi-State co-operative banks |
| Section 120B | No such section | Inserted; Banking Regulation Act, 1949 also applies to a society carrying on the business of banking |
Need help with a co-operative bank matter?
Banks and their directors, depositors and lenders deal with several laws at once, and the Act itself points to others. For a reading of how these sections interact with the facts of your institution, you can speak to us through legal consultation before any step is taken.
Key takeaways
- Section 87 makes a winding-up order mandatory when the Reserve Bank so requires in the circumstances mentioned in s.13D of the 1961 Act.
- Section 88 provides for reimbursement of the Deposit Insurance Corporation by the liquidator or such other person, as s.21 of that Act provides.
- Neither section was amended in 2023.
- Section 86(5) and new s.120B bring in the Banking Regulation Act, 1949.
- The details sit in other Acts that the reader should check.
Read next
- Multi-State Co-operative Societies Act, 2002: complete guide
- Section 86: winding up of multi-State co-operative societies
- Section 89: appointment of liquidator
- Sections 120A and 120B: electronic filing and the Banking Regulation Act
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.