Banking Law

BANKING LAW Presented to: J.P. Singh

Presented By: Ajit Awate Ankit Khushwa Ankit Soni Neha Arya Nitin S. Bodkhe Prasad S. Vivek Kumar Vrushsen Patil

INDEX • • • • • • • •

Introduction History Of Banking Banking Regulation Act The Reserve Bank of India Act Non Banking Financial Institute 1983 Amendment and Judgments 1997 Amendments and judgments Relationship between Bank & Consumers

INTRODUCTION • Reserve Bank of India Act 1934 • Banking regulation Act 1949

HISTORY Of BANKING LAW • Prior British Rule – Money Lending and Credit • 19th Century – Modern Banking • 20th Century – Company’s Act 1913 – Imperial Bank of India (1921) – RBI Regulation Act, 1934 – Banking Company’s Act 1949 – Banking Regulations Act 1949 (Amended 1965)

BANKING REGULATION ACT • ACT Requires – Compulsory License Issued by RBI – No company can use word bank, Banking or banker. • Act Provides – A minimum capital required to start a banking company – First Half of 20th century – Amendment in banking regulation Act 1966 • Banking Regulation act broadly defined – Should accept money for lending or Investment. – Money should be repayable on Demand.

RBI Act 1934 • Functions of RBI – Issuing of notes – Banker to State Government Central Government – Banker to all the banks. – Manages foreign exchange.

Provisions For Two Ratios • Cash Reserve Ratio : The percentage of the total demand and time liabilities a bank must maintain as cash reserve. • Statutory Liquidity ratio: The percentage of the demand and time liabilities a bank has to keep in the form of gold, cash and approved securities of the government. • Maintained Separately • Restrain using money in their business processes.

Directives issued by RBI • • • • •

Purpose Margins Maximum amount Rate of interest Priority sector lending.

Types of commercial bank • Scheduled banks – Scheduled bank are those that are included in the second schedule of the banking regulation act.1949. – Required higher paid up capital and reserves with RBI. – Enjoy financial accommodation at concessional rates • Non-scheduled banks

Example • Public - SBI, PNB , Bank of Baroda ,UCO . • Private –ICICI , HDFC, Axis. • Foreign –City bank, standard charted

Non Banking Financial Institution • A non-bank financial institution (NBFI) is a financial institution that does not have a full banking license or is not supervised by a national or international banking regulatory agency. • NBFIs facilitate bank-related financial services, such as investment, risk pooling, contractual savings, and market brokering.

Non Banking Financial Institutions • NBFIs in India

– Unit Trust of India – Life Insurance Corporation – General Insurance Corporation

Non Banking Financial Institutions Contd.. • Directives by RBI  Not to hold deposits in excess of 25% of their paid up capital and reserves  Restrictions on companies carrying on chit business receiving deposits from public  Not to accept deposits from shareholders in excess of 15% of the net owned funds of the companies.  Restrictions on payment of interest rates on deposits not more than 15% per annum.

Non Banking Financial Institutions Contd.. • Deposits not to be accepted in certain cases – Individual – Firm – Unincorporated association

1983 Amendment and Judgments • 1983 Amendments in RBI Act • Judgment made

1997 Amendments and Judgments • 1997 Amendments in the RBI Act. • Amendment made in section 45-S.

Relationship between Bank & Consumers • Debtor and Creditor (Lender & Borrower) – Relationship varies according to nature of account. • Creditor and Debtor • Hiring a safe on lease basis • Principle and Agent • Trustee

Types of Deposits 1) Current Account 2) Saving Account

1) Fixed Deposit 2) Recurrent Deposit

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