Restrictions on borrowings and loans.

(1) A society shall receive deposits (of any form or nomenclature) and raise loans from members and associate members only to such extent and under such conditions as may be specified in the bye-laws: Provided that the proposals of society for receiving short term and long term fixed deposits from members and associate members shall have the prior approval of the Registrar. (2) A society shall not grant a loan to any person other than a member, but it may grant loans to another society with the general or special sanction of the Registrar or to its employees on such terms as may be specified in the bye-laws: Provided that a society may make a loan to a depositor on the security of his deposit. (3) (a) Subject to such directions as the Reserve Bank of India may give to Co-operative Banks in this behalf, primary agricultural credit societies shall, during a co-operative year, disburse to small farmers such proportions, having regard to the class of societies and the strength of membership of small farmers therein, as may be prescribed out of the total amounts borrowed by them from the co-operative financial institutions, for granting short term loans or medium term loans to their members during that year, so however that the amount of any such loans that may be granted to each of their members, whether or not he is a small farmer, shall not in the aggregate exceed such amount or amounts as the Government may from time to time by notification in the Telangana Gazette specify in relation to the various classes of members and having regard to the purposes for which loans are required. Explanation.- For purposes of this sub-section, ‘small farmer’ means a member who holds not more than such extent of land as may be notified by the Government, from time to time, and Government may notify different standards for different districts or parts of districts. (b) Every primary agricultural credit society shall, in such areas as may be prescribed disburse the amount granted by it to any of its members towards a short term loan or a medium term loan by way of cheque in favour of the loanee or by electronic transfer to his account at the request of the loanee or by money order; and no such cheque shall be endorsed by the loanee in favour of any officer of the society.