SECTION 1. Section 19-5-6 of the General Laws in Chapter 19-5 entitled "Credit Unions" is hereby amended to read as follows:

19-5-6. Demand deposits. -- (a) A credit union may offer demand deposits to its members provided the following conditions are met:

(1) That the credit union has shares and deposits of one million dollars ($1,000,000) or more;

(2) That the credit union maintains at all times a reserve of at least twenty percent (20%) of the total outstanding balances of the members' demand deposits in the form of cash, demand deposits in authorized reserve agents, or in obligations of the United States maturing not more than ninety-one (91) days from the date of issuance. Seventy percent (70%) of the reserve shall be in cash or demand deposits; Every credit union shall maintain reserves as required by the provisions with respect to reserve funds and reserve balances contained in the Federal Reserve Act, 12 U.S.C. section 221 et seq., and in the rules, regulations, orders, and rulings from time to time in force of the board of governors of the federal reserve system;

(2) (3) That no overdraft in excess of five hundred dollars ($500) shall be allowed unless authorized as all or part of a loan for which the credit union holds an executed promissory note; and

(3) (4) That the credit union obtain the approval of the director or the director's designee prior to accepting demand deposits, that approval to be conditioned on compliance with the above requirements and on the soundness of the condition and operation of the credit union.

(b) If at any time the credit union ceases to comply with subdivisions (1) through (4) above, the director or the director's designee may, upon thirty (30) days notice and after an opportunity to be heard, withdraw the authority of the credit union to accept demand deposits. Upon withdrawal the credit union shall accept no further sums to be credited to any demand deposit. After two (2) months from the date of withdrawal of authority, the credit union shall cease to maintain demand deposits.

SECTION 2. This act shall take effect upon passage.