Ch-3- Rbi Act & Banking Reg Act.pdf

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Summary

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CHAPTER I: PRELIMINARY • 1. Short title, extent and commencement • 2. Definitions

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CHAPTER II: INCORPORATION, CAPITAL, MANAGEMENT AND BUSINESS • • • • • • • • •

Establishment and incorporation of Reserve Bank Capital of the Bank Offices, branches and agencies Management Composition of the Central Board, and term of office of directors Local Boards, their constitution and functions Disqualifications of directors and members of Local Boards Removal from and vacation of office Casual vacancies and absences

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• Meetings of the Central Board • Business which the Bank may transact – – – –

– – – –

the accepting of money on deposit The purchase, sale and rediscount of bills of exchange and promissory notes purchase from and sale to scheduled banks of foreign exchange; the making to local authorities, scheduled banks, State co-operative banks and State Financial Corporations of loans and advances, repayable on demand Loans to SFCs, IFCIs, Wrh Corp, Dep Ins Corp,NHB, UT, EXIM bank for prchs of Bonds by Dev banks and NHB the making to the Central Government and State Governments of advances the issue of demand drafts, telegraphic transfers and other kinds of remittances made payable at its own offices or agencies the purchase and sale of securities of the Central Government or a State Government of any maturity

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• the custody of monies, securities and other articles of value, and the collection of the proceeds, whether principal, interest or dividends, of any such securities; • the sale and realisation of all property, whether movable or immovable, which may in any way come into the possession of the Bank in satisfaction, or part satisfaction, of any of its claims; • the acting as agent for the Central Government or any State Government • the purchase and sale of securities issued by the government of any country outside India or by any institution or body corporate established outside India and expressed to be • the making of loans and advances in foreign currencies to scheduled banks, the Development Bank, the Exim Bank,] • Power of direct discount • Validity of loan or advance not to be questioned

• Business which the bank may not transact

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CHAPTER III: CENTRAL BANKING FUNCTIONS • • • • • • • • •

Obligation of the Bank to transact government business Bank to have the right to transact government business in India Bank to transact government business of States on agreement Right to issue bank notes Issue department Denominations of notes Form of bank notes Legal tender character of notes Certain bank notes to cease to be legal tender

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• • • • • • • • • • • • • •

Re-issue of notes Recovery of notes lost, stolen, mutilated or imperfect Issue of special bank notes and special one rupee notes in certain cases Bank exempt from stamp duty on bank notes Powers of Central Government to supersede Central Board Issue of demand bills and notes Assets of the issue department Liabilities of the issue department Obligation to supply different forms of currency Transactions in foreign exchange Transactions in foreign exchange Transactions in foreign exchange Transactions in foreign exchange Appointment of agents

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CHAPTER IIIA: COLLECTION AND FURNISHING OF CREDIT INFORMATION • • • •

Definitions Power of bank to collect credit information Power to call for returns containing credit information Procedure for furnishing credit information to banking companies • Disclosure of information prohibited • Certain claims for compensation barred

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CHAPTER III-B: PROVISIONS RELATING TO NON-BANKING INSTITUTIONS RECEIVING DEPOSITS AND FINANCIAL INSTITUTIONS • • • • • •

Chapter III-B not to apply in certain cases Definitions Requirement of registration and net owned fund Maintenance of percentage of assets Reserve fund Bank to regulate or prohibit issue of prospectus or advertisement soliciting deposits of money • Power of bank to determine policy and issue directions • Power of bank to collect information from non-banking institutions as to deposits and to give directions

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• Power of bank to call for information from financial institutions and to give directions • Duty of non-banking institutions to furnish statements, etc., required by bank • Powers and duties of auditors • Power of bank to prohibit acceptance of deposit and alienation of assets • Power of bank to file winding up petition • Inspection • Deposits not to be solicited by unauthorised persons • Disclosure of information • Power of bank to exempt • Chapter III B to override other laws • Power of Company Law Board to order repayment of deposit • Nomination by depositors

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[CHAPTER III-C: PROHIBITION OF ACCEPTANCE OF DEPOSITS BY UNINCORPORATED BODIES • Deposits not to be accepted in certain cases • Power to issue search warrants

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CHAPTER IV: GENERAL PROVISIONS • Contribution by Central Government to the reserve fund • Contribution to National Rural Credit (Long Term Operations) Fund and National Rural Credit (Stabilisation) Fund • National Industrial Credit (Long Term Operations) Fund • National Housing Credit (Long Term Operations) Fund • Allocation of surplus profits • Exemption of bank from income-tax and super-tax • Publication of bank rate • Auditors, & Appointment of special auditors by government • Powers and duties of auditors • Returns

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• • • • • •

Rural credit and development Rural credit and development Power of bank to depute its employees to other institutions Liquidation of the Bank Power of the Central Board to make regulations Protection of action taken in good faith

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CHAPTER V: PENALTIES • • • • •

Penalties Offences by companies Cognizance of offences Application of fine Power of bank to impose fine

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SCHEDULE - I • About Geographical Definitions…. Given u/s 9

SCHEDULE - II • Alphabetical list of banks…. Given u/s Sections 2(e) and 42

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Banking Regulation Act 1949 • The Banking Regulation Act was passed as the Banking Companies Act 1949 and came into force wef 16.3.49. Subsequently it was changed to Banking Regulations Act 1949 wef 01.03.66. Summary of some important sections is provided hereunder. The section no. is given at the end of each item. For details, kindly refer the bare Act.

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• Banking means accepting for the purpose of lending or investment of deposits of money from public repayable on demand or otherwise and withdrawable by cheque, drafts order or otherwise (5 (i) (b)). • Banking company means any company which transacts the business of banking (5(i)(c) • Transact banking business in India (5 (i) (e). • Demand liabilities are the liabilities which must be met on demand and time liabilities means liabilities which are not demand liabilities (5(i)(f) • Secured loan or advances means a loan or advance made on the security of asset the market value of which is not at any time less than the amount of such loan or advances and unsecured loan or advances means a loan or advance not secured (5(i)(h). • Defines business a banking company may be engaged in like borrowing, lockers, letter of credit, traveller cheques, mortgages etc (6(1). • States that no company shall engage in any form of business other than those referred in Section 6(1) (6(2).

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• For banking companies carrying on banking business in India to use at least one word bank, banking, banking company in its name (7). • Restrictions on business of certain kinds such as trading of goods etc. (8) • Prohibits banks from holding any immovable property howsoever acquired except as acquired for its own use for a period exceeding 7 years from acquisition of the property. RBI may extend this period by five years (9) • Prohibitions on employments like Chairman, Directors etc (10) • Paid up capital, reserves and rules relating to these (11 & 12) • Banks not to pay any commission, brokerage, discount etc. more than 2.5% of paid up value of one share (13) • Prohibits a banking company from creating a charge upon any unpaid capital of the company. (14) Section 14(A) prohibits a banking company from creating a floating charge on the undertaking or any property of the company without the RBI permission.

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• Prohibits payment of dividend by any bank until all of its capitalised expenses have been completely written off (15) • To create reserve fund and 20% of the profits should be transferred to this fund before any dividend is declared (17 (1)) • Cash reserve - Non-scheduled banks to maintain 3% of the demand and time liabilities by way of cash reserves with itself or by way of balance in a current account with RBI (18) • Permits banks to form subsidiary company for certain purposes (19) • No banking company shall hold shares in any company, whether as pledgee, mortgagee or absolute owners of any amount exceeding 30% of its own paid up share capital + reserves or 30% of the paid up share capital of that company whichever is less. (19(2). • Restrictions on banks to grant loan to person interested in management of the bank (20) • Power to Reserve Bank to issue directive to banks to determine policy for advances (21) • Every bank to maintain a percentage of its demand and time liabilities by way of cash, gold, unencumbered securities 25%-40% as on last Friday of 2nd preceding fortnight (24).

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• • • •

Return of unclaimed deposits (10 years and above) (26) Every bank has to publish its balance sheet as on March 31st (29). Balance sheet is to be got audited from qualified auditors (30 (i)) Publish balance sheet and auditors report within 3 months from the end of period to which they refer. RBI may extend the period by further three month (31)

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