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The Banking Regulation ACT, 1949
The Banking Regulation ACT, 1949
Introduction
The Banking companies act, presently known as banking regulation act was enacted owing to safeguard the interest of depositors, control abuse of power by some bank personnel controlling the banks in particular and to the interest of Indian economy in general. The Banking Regulation Act was passed as the Banking Companies Act 1949 and came into force w.e.f 16.3.49. Subsequently it was changed to Banking Regulations Act 1949 wef 01.03.66.
However, it should be remembered that this act does not supersede the provision of companies act or any other law for the time being in force in respect of banking business.
Definition of banks
In India, the definition of the business of banking has been given in the Banking Regulation Act, (BR Act), 1949. According to Section 5(c) of the BR Act, 'a banking company is a company which transacts the business of banking in India.' Further, Section 5(b) of the BR Act defines banking as, 'accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawable, by cheque, draft, order or otherwise.'
This definition points to the three primary activities of a commercial bank which distinguish it from the other financial institutions. These are: (i) maintaining deposit accounts including current accounts, (ii) issue and pay cheques, and (iii) collect cheques for the bank's customer
This Act applies to following categories of Banks: 1: Nationalized Banks 2: Non-Nationalized Banks Cooperative Banks
Continued
Collecting and transmitting money Managing, selling and realizing any property that may come into the possession of the bank in satisfaction or part satisfaction of any of its dues Acquiring, holding and dealing with any property or any right, title or interest in any such property that may form the security or part of the security for any loans or advances or which may be connected with such security Undertaking and executing trusts
Continued
Acquiring, constructing, maintaining and altering of any building for the purpose of the bank Acquiring and undertaking the whole or part of the business of any person or bank / company if its nature of business is as per the allowed business for the bank
Doing all such other things as are incidental or conducive to the promotion or advancement of the business of the bank Any other business the Central Govt. may by notification specify as a allowed business Banks are prohibited to do any other business
(a) a subsidiary of a banking company formed for one or more of the purposes mentioned in sub-section (1) of section 19, whose name indicates that it is a subsidiary of that banking company;
(b) any association of banks formed for the protection of their mutual interests and registered under section 25 of the Companies Act, 1956 (1 of 1956).]
Banking Policy
Banking Policymeans policy specified by RBI from time to time in the interest of -Banking system -Monitory stability -Sound economic growth -Interest of depositors -Volume of deposits and other resources of the bank -Efficient use of the deposits and resources ..Section 5(ca)
A return about this has to be submitted to RBI before 15thof each month about alternate Friday
(2) Every banking company in existence on the commencement of this Act, before the expiry of six months from such commencement, and every other company before commencing banking business 69[in India], shall apply in writing to the Reserve Bank for a licence under this section.
(a) in the 134[public interest]; or 135[(aa) in the interest of banking policy; or] (b) to prevent the affairs of any banking company being conducted in a manner detrimental to the interests of the depositors or in a manner prejudicial to the interests of the banking company; or (c) to secure the proper management of any banking company generally, it is necessary to issue directions to banking companies generally or to any banking company in particular, it may, from time to time, issue such directions as it deems fit, and the banking companies or the banking company, as the case may be, shall be bound to comply with such directions.
Continued.
(2) The Reserve Bank may, on representation made to it or on its own motion, modify or cancel any direction issued under sub-section (1), and in so modifying or cancelling any direction may impose such conditions as it thinks fit, subject to which the modification or cancellation shall have effect.
Amendments of provisions relating to appointments of managing directors, etc., to be subject to previous approval of the Reserve Bank.
no amendment of any provision relating to the maximum permissible number of directors . no appointment or re-appointment or termination of appointment of a chairman. Further powers and functions of Reserve Banks. 1.(a) caution or prohibit banking companies or any banking company in particular against entering into any particular transaction or class of transactions, and generally give advice to any banking company; (b) on a request by the companies concerned and subject to the provision of section 149[44A], assist, as intermediary or otherwise, in proposals for the amalgamation of such banking companies; (c) give assistance to any banking company by means of the grant of a loan or advance to it underclause (3) of sub-section (1) of section 18 of the Reserve Bank of India Act, 1934 (2 of 1934);
(2) The Reserve Bank shall make an annual report to the Central Government on the trend and progress of banking in the country, with particular reference to its activities under clause (2) of section 17 of the Reserve Bank of India Act, 1934 (2 of 1934), including in such report its suggestions, if any, for the strengthening of banking business throughout the country. (3) The Reserve Bank may appoint such staff at such places as it considers necessary for the scrutiny of the returns, statements and information furnished by banking companies under this Act, and generally to ensure the efficient performance of its functions under this Act.
Court liquidator.
Reserve Bank to be official liquidator. Application of Companies Act to liquidators.
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