BANKING REGULATION ACT, 1949

()
BANKING REGULATION ACT, 1949
PART 1 :- PRELIMINARY
1. Short titl, !t"t #"$ %o&&"%&"t
'. A((li%#tio" o) othr l#*+ "ot ,#rr$
-
./. A%t to #((l0 to %o-o(r#ti1 +o%iti+ i" %rt#i" %#++
4. Po*r to +2+("$ o(r#tio" o) A%t
3. I"tr(rt#tio"
'4
.3A. A%t to o1rri$ &&or#"$2&, #rti%l+, t%.
PART II :- BUSINESS O5 BANKING COMPANIES
6. 5or& #"$ ,2+i"++ i" *hi%h ,#"7i"8 %o&(#"i+ &#0 "8#8
9
.-. U+ o) *or$+ 9,#"79, 9,#"7r9, 9,#"7i"89 or 9,#"7i"8 %o&(#"09
4. Prohi,itio" o) tr#$i"8
9. :i+(o+#l o) "o"-,#"7i"8 #++t+
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)or&+ o) &(lo0&"t
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.1;A. Bo#r$ o) :ir%tor+ to i"%l2$ (r+o"+ *ith (ro)++io"#l or othr !(ri"%
1;B. B#"7i"8 %o&(#"0 to , &#"#8$ ,0 *hol-ti& Ch#ir&#"
13
.1;BB. Po*r o) R+r1 B#"7 to #((oi"t Ch#ir&#" o) # ,#"7i"8 %o&(#"0
1;
.1;C. Ch#ir&#" #"$ %rt#i" :ir%tor+ "ot to , r<2ir$ to hol$ <2#li)i%#tio" +h#r+
1;:. Pro1i+io"+ o) +%tio"+ 1;A #"$ 1;B to o1rri$ #ll othr l#*+, %o"tr#%t+, t%.
11. R<2ir&"t #+ to &i"i&2& (#i$-2( %#(it#l #"$ r+r1+
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.1'. R82l#tio" o) (#i$-2( %#(it#l, +2,+%ri,$ %#(it#l #"$ #2thori+$ %#(it#l #"$
1oti"8 ri8ht+ o) +h#rhol$r+
4-
.1'A. El%tio" o) "* :ir%tor+
1/. R+tri%tio" o" %o&&i++io", ,ro7r#8, $i+%o2"t, t%., o" +#l o) +h#r+
14. Prohi,itio" o) %h#r8 o" 2"(#i$ %#(it#l
'4
.14A. Prohi,itio" o) )lo#ti"8 %h#r8 o" #++t+
13. R+tri%tio"+ #+ to (#0&"t o) $i1i$"$
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.16. Prohi,itio" o) %o&&o" :ir%tor+
14
.1-. R+r1 52"$
31
.14. C#+h r+r1
19. R+tri%tio" o" "#t2r o) +2,+i$i#r0 %o&(#"i+
3/
.';. R+tri%tio"+ o" lo#"+ #"$ #$1#"%+
34
.';A. R+tri%tio"+ o" (o*r to r&it $,t+
'1. Po*r o) R+r1 B#"7 to %o"trol #$1#"%+ ,0 ,#"7i"8 %o&(#"i+
13
.'1A. R#t o) i"tr+t %h#r8$ ,0 ,#"7i"8 %o&(#"i+ "ot to , +2,=%t to +%r2ti"0
,0 %o2rt+
''. Li%"+i"8 o) ,#"7i"8 %o&(#"i+
14
.'/. R+tri%tio"+ o" o("i"8 o) "*, #"$ tr#"+)r o) !i+ti"8, (l#%+ o) ,2+i"++
5oot Not+

[Act no. 10 of Year 1949, dated 10th. March, 1949]
An Act to consolidate and amend the law relating to banking
1
[***]
WHEREAS it is expedient to consoidate and a!end the a" reatin# to $an%in#
1
[&&&]'
(t is here$) enacted as foo"s* +

PART 1 :- PRELIMINARY

1. Short tt!", "#t"$t %$& 'o(("$'"("$t
,1- .his Act !a) $e caed the /an%in#
0
[Re#1ation] Act, 1949.
2
[,0- (t extends to the "hoe of (ndia
4
[& & &]
,2- (t sha co!e into force on s1ch date
3
as the 4entra 5o6ern!ent !a), $) notification in the
7fficia 5a8ette, appoint in this $ehaf.
). A**!'%to$ o+ oth"r !%,- $ot .%rr"&
.he pro6isions of this Act sha $e in addition to, and not, sa6e as hereinafter express) pro6ided, in
dero#ation of the
9
[4o!panies Act, 1939 ,1 of 1939-], and an) other a" for the ti!e $ein# in force.
/
01. A't to %**!2 to 'o-o*"r%t3" -o'"t"- $ '"rt%$ '%-"-
:othin# in this Act sha app) to+
,a- a pri!ar) a#ric1t1ra credit societ)'
,$- a co+operati6e and !ort#a#e $an%' and
,c- an) other co+operati6e societ), except in the !anner and to the extent specified in ;art <.]
4. Po,"r to -4-*"$& o*"r%to$ o+ A't
,1- .he 4entra 5o6ern!ent, if on a representation !ade $) the Reser6e /an% in this $ehaf it is satisfied
that it is expedient so to do, !a) $) notification in the 7fficia 5a8ette, s1spend for s1ch period, not
exceedin# sixt) da)s, as !a) $e specified in the notification, the operation of a or an) of the pro6isions of
this Act, either #enera) or in reation to an) specified $an%in# co!pan).
,0- (n a case of specia e!er#enc), the 5o6ernor of the Reser6e /an%, or in his a$sence a =ep1t)
5o6ernor of the Reser6e /an% no!inated $) hi! in this $ehaf !a), $) order in "ritin#, exercise the
po"ers of the 4entra 5o6ern!ent 1nder s1$+section ,1- so ho"e6er that the period of s1spension sha not
exceed thirt) da)s, and "here the 5o6ernor or the =ep1t) 5o6ernor, as the case !a) $e, does so, he sha
report the !atter to the 4entra 5o6ern!ent forth"ith, and the order sha, as soon as !a) $e, $e p1$ished
in the 5a8ette of (ndia.
,2- .he 4entra 5o6ern!ent !a), $) notification in the 7fficia 5a8ette, extend fro! ti!e to ti!e the
period of an) s1spension ordered 1nder s1$+section ,1- or s1$+section ,0- for s1ch period, not exceedin#
sixt) da)s at an) one ti!e, as it thin%s fit so ho"e6er that the tota period does not exceed one )ear.
,4-. A cop) of an) notification iss1ed 1nder s1$+section ,2- sha $e aid on the ta$e of
>
[;aria!ent] as
soon as !a) $e after it is iss1ed.
5. I$t"r*r"t%to$
9
[(n this Act], 1ness there is an)thin# rep1#nant in the s1$?ect or context,+
10
[,a- @appro6ed sec1rities@ !eans+
,i- sec1rities in "hich a tr1stee !a) in6est !one) 1nder ca1se ,a-, ca1se ,$-, ca1se ,$$-, ca1se ,c-
or ca1se ,d- of section 00 of the (ndian .r1st Act, 1>>0 ,0 of 1>>0-'
,ii- s1ch of the sec1rities a1thorised $) the 4entra 5o6ern!ent 1nder ca1se ,f- of section 00 of the
(ndian .r1st Act, 1>>0 ,0 of 1>>0-, as !a) $e prescri$ed]'
,$- @$an%in#@ !eans the acceptin#, for the p1rpose of endin# or in6est!ent, of deposits of !one) fro!
the p1$ic, repa)a$e on de!and or other"ise, and "ithdra"a$e $) cheA1e, draft, order or other"ise.
,c- @$an%in# co!pan)@ !eans an) co!pan) "hich transacts the $1siness of $an%in#
11
[in (ndia]'
Explanation: An) co!pan) "hich is en#a#ed in the !an1fact1re of #oods or carries on an) trade and
"hich accepts deposits of !one) fro! the p1$ic !ere) for the p1rpose of financin# its $1siness as s1ch
!an1fact1rer or trader sha not $e dee!ed to transact the $1siness of $an%in# "ithin the !eanin# of this
ca1se'
10
[,ca- @$an%in# poic)@ !eans an) poic) "hich is specified fro! ti!e to ti!e $) the Reser6e /an% in the
interest of the $an%in# s)ste! or in the interest of !onetar) sta$iit) or so1nd econo!ic #ro"th, ha6in#
d1e re#ard to the interests of the depositors, the 6o1!e of deposits and other reso1rces of the $an% and the
need for eA1ita$e aocation and the efficient 1se of these deposits and reso1rces']
12
[,44- @$ranch@ or @$ranch office@, in reation to a $an%in# co!pan), !eans an) $ranch or $ranch office,
"hether caed a pa) office or s1$+pa) office or $) an) other na!e, at "hich deposits are recei6ed, cheA1es
cashed or !one)s ent, and for the p1rposes of section 23 inc1des an) pace of $1siness "here an) other
for! of $1siness referred to in s1$+section ,1- of section 9 is transacted']
14
[,d- @co!pan)@ !eans an) co!pan) as defined in section 2 of the 4o!panies Act, 1939 ,1 of 1939-' and
inc1des a forei#n co!pan) "ithin the !eanin# of section 391 of that Act']
13
[,da- @correspondin# ne" $an%@ !eans a correspondin# ne" $an% constit1ted 1nder section 2 of the
/an%in# 4o!panies ,AcA1isition and .ransfer of Bnderta%in#s- Act, 19C0 ,3 of 19C0-, or 1nder section 2
of the /an%in# 4o!panies ,AcA1isition and .ransfer of Bnderta%in#s- Act, 19>0 ,40 of 19>0-']
,e- 19
[& & &]
,f- @de!and ia$iities@ !eans ia$iities "hich !1st $e !et on de!and, and @ti!e ia$iities@ !eans
ia$iities "hich are not de!and ia$iities'
1C
[,ff- @=eposit (ns1rance 4orporation@ !eans the =eposit (ns1rance 4orporation esta$ished 1nder
section 2 of the =eposit (ns1rance 4orporation Act, 1991 ,4C of 1991-']
13
[,ffa- @=e6eop!ent /an%@ !eans the (nd1stria =e6eop!ent /an% of (ndia esta$ished 1nder section 2
of the (nd1stria =e6eop!ent /an% of (ndia Act, 1994 ,1> of 1994-'
,ff$- @Exi! /an%@ !eans Export+(!port /an% of (ndia esta$ished 1nder section 2 of the Export+(!port
/an% of (ndia Act, 19>1 ,0> of 19>1-']
1>
[,ffc- @Reconstr1ction /an%@ !eans the (nd1stria Reconstr1ction /an% of (ndia esta$ished 1nder
section 2 of the (nd1stria Reconstr1ction /an% of (ndia Act, 19>4 ,90 of 19>4-']
19
[,ffd- @:ationa Ho1sin# /an%@ !eans the :ationa Ho1sin# /an% esta$ished 1nder section 2 of the
:ationa Ho1sin# /an% Act, 19>C']
,#- @#od@ inc1des #od in the for! of coin, "hether e#a tender or not, or in the for! of $1ion or
in#ot, "hether refined or not'
10
[,##- @!ana#in# a#ent@ inc1des+
,i- secretaries and treas1rers,
,ii- "here the !ana#in# a#ent is a co!pan), an) director of s1ch co!pan), and an) !e!$er thereof
"ho hods s1$stantia interest in s1ch co!pan),
,iii- "here the !ana#in# a#ent is a fir!, an) partner of s1ch fir!']
14
[,h- @!ana#in# director@, in reation to a $an%in# co!pan), !eans a =irector "ho,$) 6irt1e of
a#ree!ent "ith the $an%in# co!pan) or of a reso1tion passed $) the $an%in# co!pan) in #enera !eetin#
or $) its /oard of =irectors or, $) 6irt1e of its !e!orand1! or artices of association, is entr1sted "ith the
!ana#e!ent of the "hoe, or s1$stantia) the "hoe of the affairs of the co!pan), and inc1des a =irector
occ1p)in# the position of a Mana#in# =irector, $) "hate6er na!e caed*]
00
[;R7<(=E= that the Mana#in# =irector sha exercise his po"ers s1$?ect to the s1perintendence, contro
and direction of the /oard of =irectors']
01
[,ha- @:ationa /an%@ !eans the :ationa /an% for A#ric1t1re and R1ra =e6eop!ent esta$ished
1nder section 2 of the :ationa /an% for A#ric1t1re and R1ra =e6eop!ent Act, 19>1 ,91 of 19>1-']
,i-
00
[& & &1
,?- @prescri$ed@ !eans prescri$ed $) r1es !ade 1nder this Act'
01
[,?a- @re#iona r1ra $an%@ !eans a re#iona r1ra $an% esta$ished 1nder section 2 of the Re#iona R1ra
/an%s Act, 19C9 ,01 of 19C9-']
,%-
02
[& & &]
10
[,- @Reser6e /an%@ !eans the Reser6e /an% of (ndia constit1ted 1nder section 2 of the Reser6e /an% of
(ndia Act, 1924 ,0 of 1924-']
,!-
04
[& & &]
,n- @sec1red oan or ad6ances@ !eans a oan or ad6ance !ade on the sec1rit) of assets the !ar%et 6a1e
of "hich is not at an) ti!e ess than the a!o1nt of s1ch oan or ad6ance' and @1nsec1red oan or ad6ance@
!eans a oan or ad6ance not so sec1red'
0C
[,ni- @S!a (nd1stries /an%@ !eans the S!a (nd1stries =e6eop!ent /an% of (ndia esta$ished 1nder
s. 2 of the S!a (nd1stries =e6eop!ent /an% of (ndia Act, 19>9']
10
[,na- @s!a+scae ind1stria concern@ !eans an ind1stria concern in "hich the in6est!ent in pant and
!achiner) is not in excess of se6en and a haf a%h of r1pees or s1ch hi#her a!o1nt, not exceedin# t"ent)
a%hs of r1pees, as the 4entra 5o6ern!ent !a), $) notification in the 7fficia 5a8ette, specif) in this
$ehaf, ha6in# re#ard to the trends in ind1stria de6eop!ent and other ree6ant factors']
13
[,n$- @Sponsor /an%@ has the !eanin# assi#ned to it in the Re#iona R1ra /an%s Act, 19C9 ,01 of
19C9-'
,nc- @State /an% of (ndia@ !eans the State /an% of (ndia constit1ted 1nder section 2 of the State /an% of
(ndia Act, 1933 ,02 of 1933-']
09
[,nd-] @s1$sidiar) $an%@ has the !eanin# assi#ned to it in the State /an% of (ndia ,S1$sidiar) /an%s-
Act, 1939 ,2> of 1939-'
0C
[,ne-] @s1$stantia interest*+
,i- in reation to a co!pan), !eans the hodin# of a $eneficia interest $) an indi6id1a or his spo1se or
!inor chid, "hether sin#) or ta%en to#ether in the shares thereof, the a!o1nt paid+1p on "hich exceeds
fi6e a%hs of r1pees or ten per cent of the paid+1p capita of the co!pan), "hiche6er is ess'
,ii- in reation to a fir!, !eans the $eneficia interest hed therein $) an indi6id1a or his spo1se or
!inor chid, "hether sin#) or ta%en to#ether, "hich represents !ore than ten per cent of the tota capita
s1$scri$ed $) a the partners of the said fir!'
0>
[,o- a other "ords and expressions 1sed herein $1t not defined and defined in the 4o!panies Act, 1939
,1 of 1939-, sha ha6e the !eanin#s respecti6e) assi#ned to the! in that Act.]
,0-
09
[& & &]
)6
05A. A't to o3"rr&" ("(or%$&4(, %rt'!"-, "t'.
Sa6e as other"ise express) pro6ided in this Act,
,a- the pro6isions of this Act sha ha6e effect not"ithstandin# an)thin# to the contrar) contained in the
!e!orand1! or artices of a $an%in# co!pan), or in an) a#ree!ent exec1ted $) it, or in an) reso1tion
passed $) the $an%in# co!pan) in #enera !eetin# or $) its /oard of =irectors, "hether the sa!e $e
re#istered, exec1ted or passed, as the case !a) $e, $efore or after the co!!ence!ent of the /an%in#
4o!panies ,A!end!ent- Act, 1939 ,22 of 1939-' and
,$- an) pro6ision contained in the !e!orand1!, artices, a#ree!ent or reso1tion aforesaid sha, to the
extent to "hich it is rep1#nant to the pro6isions of. this Act, $eco!e or $e 6oid, as the case !a) $e.]

PART II :- BUSINESS O7 BANKING COMPANIES
8. 7or( %$& .4-$"-- $ ,h'h .%$9$: 'o(*%$"- (%2 "$:%:"
,1- (n addition to the $1siness of $an%in#, a $an%in# co!pan) !a) en#a#e in an) one or !ore of the
foo"in# for!s of $1siness, na!e),+
,a- the $orro"in#, raisin#, or ta%in# 1p of !one)' the endin# or ad6ancin# of !one) either 1pon or
"itho1t sec1rit)' and dra"in#, !a%in#, acceptin#, disco1ntin#, $1)in#, sein#, coectin# and deain# in
$is of exchan#e, h1ndies, pro!issor) notes, co1pons, drafts, $i of adin#, rai"a) receipts, "arrants,
de$ent1res, certificates, scrips and other instr1!ents, and sec1rities "hether transfera$e or ne#otia$e or
not' the #rantin# and iss1in# of etters of credit, tra6eersD cheA1es and circ1ar notes' the $1)in#, sein#
and deain# in $1ion and specie' the $1)in# and sein# of forei#n exchan#e inc1din# forei#n $an% notes'
the acA1irin#, hodin#, iss1in# on co!!ission, 1nder"ritin# and deain# in stoc%, f1nds, shares,
de$ent1res, de$ent1re stoc%, $onds, o$i#ations, sec1rities and in6est!ents of a %inds' the p1rchasin# and
sein# of $onds, scrips or other for!s of sec1rities on $ehaf of constit1ents or others' the ne#otiatin# of
oan and ad6ances' the recei6in# of a %inds of $onds, scrips or 6a1a$es on deposit or for safe c1stod) or
other"ise' the pro6idin# of safe deposit 6a1ts' the coectin# and trans!ittin# of !one) and sec1rities'
,$- actin# as a#ents for an) #o6ern!ent or oca a1thorit) or an) other person or persons' the carr)in#
on of a#enc) $1siness of an) description inc1din# the cearin# and for"ardin# of #oods, #i6in# of receipts
and dischar#es and other"ise actin# as an attorne) on $ehaf of c1sto!ers, $1t exc1din# the $1siness of a
20
[Mana#in# A#ent or Secretar) and .reas1rer] of a co!pan)'
,c- contractin# for p1$ic and pri6ate oans and ne#otiatin# and iss1in# the sa!e'
,d- the effectin#, ins1rin#, #1aranteein#, 1nder"ritin#, participatin# in !ana#in# and carr)in# o1t of
an) iss1e, p1$ic or pri6ate, of State, !1nicipa or other oans or of shares, stoc%, de$ent1res or de$ent1re
stoc% of an) co!pan), corporation or association and the endin# of !one) for the p1rpose of an) s1ch
iss1e'
,e- carr)in# on and transactin# e6er) %ind of #1arantee and inde!nit) $1siness'
,f- !ana#in#, sein# and reaisin# an) propert) "hich !a) co!e into the possession of the co!pan)
in satisfaction or part satisfaction of an) of its cai!s'
,#- acA1irin# and hodin# and #enera) deain# "ith an) propert) or an) ri#ht, tite or interest in an)
s1ch propert) "hich !a) for! the sec1rit) or part of the sec1rit) for an) oans or ad6ances or "hich !a)
$e connected "ith an) s1ch sec1rit)'
,h- 1nderta%in# and exec1tin# tr1sts'
,i- 1nderta%in# the ad!inistration of estates as exec1tor, tr1stee or other"ise'
,?- esta$ishin# and s1pportin# or aidin# in the esta$ish!ent and s1pport of associations, instit1tions,
f1nds, tr1sts, and con6eniences cac1ated to $enefit e!po)ees or ex+e!po)ees of the co!pan) or the
dependents or connections of s1ch persons' #rantin# pension and ao"ances and !a%in# pa)!ents to"ards
ins1rance' s1$scri$in# to or #1aranteein# !one)s for charita$e or $ene6oent o$?ect or for an) exhi$ition
or for an) p1$ic, #enera or 1sef1 o$?ect'
,%- the acA1isition, constr1ction, !aintenance and ateration of an) $1idin# or "or%s necessar) or
con6enient for the p1rpose of the co!pan)'
,- sein#, i!pro6in#, !ana#in#, de6eopin#, exchan#in#, easin#, !ort#a#in#, disposin# of or t1rnin#
into acco1nt or other"ise deain# "ith a or an) part of the propert) and ri#hts of the co!pan)'
,!- doin# a s1ch other thin#s as are incidenta or cond1ci6e to the pro!otion or ad6ance!ent of the
$1siness of the co!pan)'
,o- an) other for! of $1siness "hich the 4entra 5o6ern!ent !a), $) notification in the 7fficia
5a8ette, specif) as a for! of $1siness in "hich it is a"f1 for a $an%in# co!pan) to en#a#e.
,0- :o $an%in# co!pan) sha en#a#e in an) for! of $1siness other than those referred to in s1$+section
,1-.
9
0/. U-" o+ ,or&- ;.%$9;, ;.%$9"r;, ;.%$9$:; or ;.%$9$: 'o(*%$2;
,1- :o co!pan) other than a $an%in# co!pan) sha 1se as part of its na!e
13
[or, in connection "ith its
$1siness] an) of the "ords @$an%@, @$an%er@ or @$an%in#@ and no co!pan) sha carr) on the $1siness of
$an%in# in (ndia 1ness it 1ses as part of its na!e at east one of s1ch "ords.
,0- :o fir!, indi6id1a or #ro1p of indi6id1as sha, for the p1rpose of carr)in# on an) $1siness, 1se as
part of its or his na!e an) of the "ords @$an%@, @$an%in#@ or @$an%in# co!pan)@.
,2- :othin# in this section sha app) to+
,a- a s1$sidiar) of a $an%in# co!pan) for!ed for one or !ore of the p1rposes !entioned in s1$+
section ,1- of section 19, "hose na!e indicates that it is a s1$sidiar) of that $an%in# co!pan)'
,$- an) association of $an%s for!ed for the protection of their !1t1a interests and re#istered 1nder
section 03 of the 4o!panies Act, 1939 ,1 of 1939-.]
6. Proh.to$ o+ tr%&$:
:ot"ithstandin# an)thin# contained in section 9 or in an) contract, no $an%in# co!pan) sha direct) or
indirect) dea in the $1)in# or sein# or $arterin# of #oods, except in connection "ith the reai8ation of
sec1rit) #i6en to or hed $) it, or en#a#e in an) trade, or $1), se or $arter #oods for others other"ise than
in connection "ith $is of exchan#e recei6ed for coection or ne#otiation or "ith s1ch of its $1siness as is
referred to in ca1se ,i- of s1$+section ,1- of section 9*
10
[;R7<(=E= that this section sha not app) to an) s1ch $1siness as is specified in p1rs1ance of ca1se
,o- of s1$+section ,1- of section 9.]
Expanation* Eor the p1rposes of this section, @#oods@ !eans e6er) %ind of !o6a$e propert), other than
actiona$e cai!s, stoc%, shares, !one), $1ion and specie and a instr1!ents referred to in ca1se ,a- of
s1$+section ,1- of section 9.
9. <-*o-%! o+ $o$-.%$9$: %--"t-
:ot"ithstandin# an)thin# contained in section 9, no $an%in# co!pan) sha hod an) i!!o6a$e propert)
ho"soe6er acA1ired, except s1ch as is reA1ired for its o"n 1se, for an) period exceedin# se6en )ears fro!
the acA1isition thereof or fro! the co!!ence!ent of this Act, "hiche6er is ater or an) extension of s1ch
period as in this section pro6ided, and s1ch propert) sha $e disposed of "ithin s1ch period or extended
period, as the case !a) $e*
;R7<(=E= that the $an%in# co!pan) !a), "ithin the period of se6en )ears as aforesaid, dea or trade in
an) s1ch propert) for the p1rpose of faciitatin# the disposa thereof*
;R7<(=E= EBR.HER that the Reser6e /an% !a) in an) partic1ar case extend the aforesaid period of
se6en )ears $) s1ch period not exceedin# fi6e )ears "here it is satisfied that s1ch extension "o1d $e in the
interests of the depositors of the $an%in# co!pan).
11
01=. Proh.to$ o+ "(*!o2("$t o+ M%$%:$: A:"$t- %$& r"-tr'to$- o$ '"rt%$
+or(- o+ "(*!o2("$t
,1- :o $an%in# co!pan)+
,a- sha e!po) or $e !ana#ed $) a Mana#in# A#ent' or
,$- sha e!po) or contin1e the e!po)!ent of an) person+
,i- "ho is, or at an) ti!e has $een, ad?1dicated inso6ent, or has s1spended pa)!ent or has
co!po1nded, "ith his creditors, or "ho, is or has $een, con6icted $) a cri!ina co1rt of an offence
in6o6in# !ora t1rpit1de' or
,ii- "hose re!1neration or part of "hose re!1neration ta%es the for! of co!!ission or of a share
in the profits of the co!pan)*
14
[;R7<(=E= that nothin# contained in this s1$+ca1se sha app) to the pa)!ent $) a $an%in# co!pan)
of+
,a- an) $on1s in p1rs1ance of a sette!ent or a"ard arri6ed at or !ade 1nder an) a" reatin# to
ind1stria disp1tes or in accordance "ith an) sche!e fra!ed $) s1ch $an%in# co!pan) or in accordance
"ith the 1s1a practice pre6aiin# in $an%in# $1siness'
,$- an) co!!ission to an) $ro%er ,inc1din# #1arantee $ro%er-, cashier+contractor, cearin# and
for"ardin# a#ent, a1ctioneer or an) other person, e!po)ed $) the $an%in# co!pan) 1nder a contract
other"ise than as a re#1ar !e!$er of the staff of the co!pan)' or]
,iii- "hose re!1neration is, in the opinion of the Reser6e /an%, excessi6e' or
,c- sha $e !ana#ed $) an) person+
14
[,i- "ho is a =irector of an) other co!pan) not $ein#+
,a- a s1$sidiar) of the $an%in# co!pan), or
,$- a co!pan) re#istered 1nder section 03 of the 4o!panies Act, 1939 ,1 of 1939-*
;R7<(=E= that the prohi$ition in this s1$+ca1se sha not app) in respect of an) s1ch =irector for a
te!porar) period not exceedin# three !onths or s1ch f1rther period not exceedin# nine !onths as the
Reser6e /an% !a) ao"' or]
,ii- "ho is en#a#ed in an) other $1siness or 6ocation' or
,iii-
9
["hose ter! of office as a person !ana#in# the co!pan) is] for a period exceedin# fi6e )ears
at an) one ti!e*
20
[;R7<(=E= that the ter! of office of an) s1ch person !a) $e rene"ed or extended $) f1rther periods
not exceedin# fi6e )ears on each occasion s1$?ect to the condition that s1ch rene"a or extension sha not
$e sanctioned earier than t"o )ears for! the date on "hich it is to co!e into force*
;R7<(=E= AFS7 that "here the ter! of office of s1ch person is for an indefinite period, s1ch ter!,
1ness it other"ise co!es to an end earier, sha co!e to an end i!!ediate) on the expir) of fi6e )ears
fro! the date of his appoint!ent or on the expir) of three !onths fro! the date of co!!ence!ent of
section > of the /an%in# Fa"s ,Misceaneo1s ;ro6isions- Act, 1992 ,33 of 1992-, "hiche6er is ater*]
;R7<(=E= EBR.HER that nothin# in this ca1se sha app) to a =irector, other than the Mana#in#
=irector, of a $an%in# co!pan) $) reason on) of his $ein# s1ch =irector.
Expanation * Eor the p1rpose of s1$+ca1se ,iii- of ca1se ,$-, the expression @re!1neration @, in reation
to a persons e!po)ed or contin1ed in e!po)!ent, sha inc1de saar), fees and perA1isites $1t sha not
inc1de an) ao"ances or other a!o1nts paid to hi! for the p1rpose of rei!$1rsin# hi! in respect of the
expenses act1a) inc1rred $) hi! in the perfor!ance of his d1ties.
,0- (n for!in# its opinion 1nder s1$+ca1se ,iii- of ca1se ,$- of s1$+section ,1-, the Reser6e /an% !a)
ha6e re#ard a!on# other !atters to the foo"in#*+
,i- the financia condition and histor) of the $an%in# co!pan), its si8e and area of operation, its
reso1rces, the 6o1!e of its $1siness, and the trend of its earnin# capacit)'
,ii- the n1!$er of its $ranches or offices'
,iii- the A1aifications, a#e and experience of the person concerned'
,i6- the re!1neration paid to other persons e!po)ed $) the $an%in# co!pan) or to an) person
occ1p)in# a si!iar position in an) other $an%in# co!pan) si!iar) sit1ated' and
,6- the interests of its depositors.
,2-
22
[&&&]
,4-
22
[&&&]
,3-
22
[&&&]
,9- An) decision or order of the Reser6e /an% !ade 1nder this section sha $e fina for a p1rposes.]
14
01=A. Bo%r& o+ <r"'tor- to $'!4&" *"r-o$- ,th *ro+"--o$%! or oth"r "#*"r"$'"
,1- :ot"ithstandin# an)thin# contained in an) other a" for the ti!e $ein# in force, e6er) $an%in#
co!pan)+
,a- in existence on the co!!ence!ent of section 2 of the /an%in# Fa"s ,A!end!ent- Act, 199>, or
,$- "hich co!es into existence thereafter,
sha co!p) "ith the reA1ire!ents of this section*
;R7<(=E= that nothin# contained in this s1$+section sha app) to a $an%in# co!pan) referred to in
ca1se ,a- for a period of three !onths fro! s1ch co!!ence!ent.
,0- :ot ess than fift)+one per cent of the tota n1!$er of !e!$ers of the /oard of =irectors of a
$an%in# co!pan) sha consist of persons, "ho+
,a- sha ha6e specia %no"ed#e or practica experience in respect of one or !ore of the foo"in#
!atters, na!e),+
,i- acco1ntanc),
,ii- a#ric1t1re and r1ra econo!),
,iii- $an%in#,
,i6- co+operation,
,6- econo!ics,
,6i- finance,
,6ii- a",
,6iii- s!a+scae ind1str),
,ix- an) other !atter the specia %no"ed#e of, and practica experience, "hich "o1d, in the
opinion of the Reser6e /an%, $e 1sef1 to the $an%in# co!pan)*
;R7<(=E= that o1t of the aforesaid n1!$er of =irectors, not ess than t"o sha $e persons ha6in#
specia %no"ed#e or practica experience in respect of a#ric1t1re and r1ra econo!), co+operation or
s!a+scae ind1str)' and
,$- sha not+
,1- ha6e s1$stantia interest in, or $e connected "ith, "hether as e!po)ee, !ana#er or !ana#in#
a#ent+
,i- an) co!pan), not $ein# a co!pan) re#istered 1nder section 03 of the 4o!panies Act, 1939 ,1
of 1939-, or
,ii- an) fir!,
"hich carries on an) trade, co!!erce or ind1str) and "hich, in either case, is not a s!a+scae ind1stria
concern, or
,0- $e proprietors of an) tradin#, co!!ercia or ind1stria concern, not $ein# a s!a+scae
ind1stria concern.
13
[,0A- :ot"ithstandin# an)thin# to the contrar) contained in the 4o!panies Act, 1939 ,1 of 1939-, or in
an) other a" for the ti!e $ein# in force,+
,i- no =irector of a $an%in# co!pan), other than its 4hair!an or "hoe+ti!e =irector, $) "hate6er
na!e caed, sha hod office contin1o1s) for a period exceedin# ei#ht )ears'
,ii- a 4hair!an or other "hoe+ti!e =irector of a $an%in# co!pan) "ho has $een re!o6ed fro!
office as s1ch 4hair!an, or "hoe+ti!e =irector, as the case !a) $e, 1nder the pro6isions of this Act sha
aso cease to $e a =irector of the $an%in# co!pan) and sha aso not $e ei#i$e to $e appointed as a
=irector of s1ch $an%in# co!pan), "hether $) eection or co+option or other"ise, for a period of fo1r )ears
fro! the date of his ceasin# to $e the 4hair!an or "hoe+ti!e =irector, as the case !a) $e.]
,2- (f, in respect of an) $an%in# co!pan), the reA1ire!ents, as aid do"n in s1$+section ,0-, are not
f1fied at an) ti!e, the /oard of =irectors of s1ch $an%in# co!pan) sha re+constit1te s1ch /oard so as
to ens1re that the said reA1ire!ents are f1fied.
,4- (f, for the p1rpose of re+constit1tin# the /oard 1nder s1$+section ,2-, it is necessar) to retire an)
=irector or =irectors, the /oard !a), $) ots dra"n in s1ch !anner as !a) $e prescri$ed, decide "hich
=irector or =irectors sha cease to hod office and s1ch decision sha $e $indin# on e6er) =irector of the
/oard.
,3- Where the Reser6e /an% is of opinion that the co!position of the /oard of =irectors of a $an%in#
co!pan) is s1ch that it does not f1fi the reA1ire!ents of s1$+section ,0-, it !a), after #i6in# to s1ch
$an%in# co!pan) a reasona$e opport1nit) of $ein# heard, $) an order in "ritin#, direct the $an%in#
co!pan) to so re+constit1te its /oard of =irectors as to ens1re that the said reA1ire!ents are f1fied and,
if "ithin t"o !onths fro! the date of receipt of that order, the $an%in# co!pan) does not co!p) "ith the
directions !ade $) the Reser6e /an%, that /an% !a), after deter!inin#, $) ots dra"n in s1ch !anner as
!a) $e prescri$ed, the person "ho o1#ht to $e re!o6ed fro! the !e!$ership of the /oard of =irectors,
re!o6e s1ch person fro! the office of the =irector of s1ch $an%in# co!pan) and "ith a 6ie" to co!p)in#
"ith pro6isions of s1$+section ,0-, appoint a s1ita$e person as a !e!$er of the /oard of =irectors in the
pace of the person so re!o6ed "here1pon the person so appointed sha $e dee!ed to ha6e $een d1)
eected $) the $an%in# co!pan) as its =irector.
,9- E6er) appoint!ent, re!o6a or reconstit1tion d1) !ade, and e6er) eection d1) hed, 1nder this
section sha $e fina and sha not $e caed into A1estion in an) co1rt.
,C- E6er) =irector eected or, as the case !a) $e, appointed 1nder this section sha hod office 1nti the
date 1p to "hich his predecessor "o1d ha6e hed office, if the eection had not $een hed, or, as the case
!a) $e, the appoint!ent had not $een !ade.
,>- :o act or proceedin# of the /oard of =irector of a $an%in# co!pan) sha $e in6aid $) reason on)
of an) defect in the co!position thereof or on the #ro1nd that it is s1$seA1ent) disco6ered that an) of its
!e!$ers did not f1fi the reA1ire!ents of this section.
1=B. B%$9$: 'o(*%$2 to ." (%$%:"& .2 ,ho!"-t(" Ch%r(%$
23
[,1- :ot"ithstandin# an)thin# contained in an) a" for the ti!e $ein# in force or in an) contract to the
contrar), e6er) $an%in# co!pan) in existence on the co!!ence!ent of the /an%in# Re#1ation
,A!end!ent- Act, 1994, or "hich co!es into existence thereafter sha ha6e one of its =irectors, "ho !a)
$e appointed on a "hoe+ti!e or a part+ti!e $asis as 4hair!an of its /oard of =irectors, and "here he is
appointed on a "hoe+ti!e $asis as 4hair!an of its /oard of =irectors, he sha $e entr1sted "ith the
!ana#e!ent of the "hoe of the affairs of the $an%in# co!pan)*
;R7<(=E= that the 4hair!an sha exercise his po"ers s1$?ect to the s1perintendence, contro and
direction of the /oard of =irectors.
,1A- Where a 4hair!an is appointed on a part+ti!e $asis+
,i- s1ch appoint!ent sha $e "ith the pre6io1s appro6a of the Reser6e /an% and $e s1$?ect to s1ch
conditions as the Reser6e /an% !a) specif) "hie #i6in# s1ch appro6a*
,ii- the !ana#e!ent of the "hoe of the affairs of s1ch $an%in# co!pan) sha $e entr1sted to a
Mana#in# =irector "ho sha exercise his po"ers s1$?ect to the s1perintendence, contro and direction of
the /oard of =irectors.]
,0-
23
[E6er) 4hair!an of the /oard of =irectors "ho is appointed on a "hoe+ti!e $asis and e6er)
Mana#in# =irector] of a $an%in# co!pan) sha $e in the "hoe+ti!e e!po)!ent to s1ch co!pan) and
sha hod office for s1ch period, not exceedin# fi6e )ears, as the /oard of =irectors !a) fix, $1t sha
s1$?ect to the pro6ision of this section, $e ei#i$e for re+eection or re+appoint!ent*
;R7<(=E= that nothin# in this s1$+section sha $e constr1ed as prohi$itin# a chair!an fro! $ein# a
=irector of a s1$sidiar) of the $an%in# co!pan) or a =irector of a co!pan) re#istered cinder section 03 of
the 4o!panies Act, 1939 ,1 of 1939-.
,2- E6er) person hodin# office on the co!!ence!ent of section 2 of the /an%in# Fa"s ,A!end!ent-
Act, 199> ,3> of 199>-, as Mana#in# =irector of a $an%in# co!pan) sha+
,a- if there is a 4hair!an of its /oard of =irectors, 6acate office on s1ch co!!ence!ent, or
,$- if there is no 4hair!an of its /oard of =irectors, 6acate office on the date on "hich the 4hair!an
of its /oard of =irectors is eected or appointed in accordance "ith the pro6isions of this section.
,4-
23
[E6er) 4hair!an "ho is appointed on a "hoe+ti!e $asis and e6er) Mana#in# =irector of a
$an%in# co!pan) appointed 1nder s1$+section ,1A-] sha $e a person "ho has specia %no"ed#e and
practica experience of+
,a- the "or%in# of a $an%in# co!pan) or of the State /an% of (ndia or an) s1$sidiar) $an% or a
financia instit1tion, or
,$- financia, econo!ic or $1siness ad!inistration*
;R7<(=E= that a person sha $e disA1aified for $ein# a
23
[4hair!an "ho is appointed on a "hoe+
ti!e $asis or a Mana#in# =irector], if he+
,a- is a =irector of an) co!pan) other than a co!pan) referred to in the pro6iso to s1$+section ,0-, or
,$- is a ;artner of an) fir! "hich carries on an) trade, $1siness or ind1str), or
,c- has s1$stantia interest in an) other co!pan) or fir!, or
,d- is a =irector, Mana#er, Mana#in# A#ent, ;artner or ;roprietor of an) tradin#, co!!ercia or
ind1stria concern, or
,e- is en#a#ed in an) other $1siness or 6ocation.
,3-
23
[A 4hair!an of the /oard of =irectors appointed on a "hoe+ti!e $asis or a Mana#in# =irector] of
a $an%in# co!pan) !a), $) "ritin# 1nder his hand addressed to the co!pan), resi#n his office
29
[& & &].
2C
[,3A-
23
[A 4hair!an of the /oard of =irectors appointed on a "hoe+ti!e $asis or a Mana#in# =irector]
"hose ter! of office has co!e to an end, either $) reason of his resi#nation or $) reason of expir) of the
period of this office, sha, s1$?ect to the appro6a of the Reser6e /an%, contin1e in office 1nti his
s1ccessor ass1!es office.]
,9- Witho1t pre?1dice to the pro6isions of section 29AA,"here the Reser6e /an% is of opinion that an)
person "ho is, or has $een eected to $e, the
23
[4hair!an of the /oard of =irectors "ho is appointed on a
"hoe+ti!e $asis or the Mana#in#+=irector] of a $an%in# co!pan) is not a fit and proper person to hod
s1ch office, it !a), after #i6in# to s1ch person and to the $an%in# co!pan) a reasona$e opport1nit) of
$ein# heard, $) order in "ritin#, reA1ire the $an%in# co!pan) to eect or appoint an) other person as the
23
[4hair!an of the /oard of =irectors "ho is appointed on a "hoe+ti!e $asis or the Mana#in#+=irector]
and if, "ithin a period of t"o !onths fro! the date of receipt of s1ch order, the $an%in# co!pan) fais to
eect or appoint a s1ita$e person as
23
[4hair!an of the /oard of =irectors "ho is appointed on a "hoe+
ti!e $asis or the Mana#in# =irector], the Reser6e /an% !a), $) order, re!o6e the first+!entioned person
fro! the office, of the
23
[4hair!an of the /oard of =irectors "ho is appointed on a "hoe+ti!e $asis or a
Mana#in# =irector] of the $an%in# co!pan) and appoint a s1ita$e person in his pace "here1pon the
person so appointed sha $e dee!ed to ha6e $een d1) eected or appointed, as the case !a) $e, as the
23
[4hair!an of the /oard of =irectors "ho is appointed on a "hoe+ti!e $asis or the Mana#in# =irector] of
s1ch $an%in# co!pan) and an) person eected or appointed as 4hair!an 1nder this s1$+section sha hod
office for the resid1e of the period of the person in "hose pace he has $een so eected or appointed.
,C- .he $an%in# co!pan) and an) person a#ainst "ho! an order of re!o6a is !ade 1nder s1$+section
,9- !a), "ithin thirt) da)s fro! the date of co!!1nication to it or to hi! of the order, prefer an appea to
the 4entra 5o6ern!ent and the decision of the 4entra 5o6ern!ent thereon, and s1$?ect thereto, the order
!ade $) the Reser6e /an% 1nder s1$+section ,9-, sha $e fina and sha not $e caed into A1estion in an)
co1rt.
,>- :ot"ithstandin# an)thin# contained in this section, the Reser6e /an% !a), if in its opinion it is
necessar) in the p1$ic interest so to do, per!it the
23
[4hair!an of the /oard of =irectors "ho is appointed
on a "hoe+ti!e $asis or a Mana#in# =irector] to 1nderta%e s1ch part+ti!e honorar) "or% as is not i%e)
to interfere "ith his d1ties as
23
[s1ch 4hair!an or Mana#in# =irector.]
,9- :ot"ithstandin# an)thin# contained in this section, "here a person
23
[appointed on a "hoe+ti!e
$asis, as 4hair!an of the /oard of =irectors or Mana#in# =irector] dies or resi#ns or is $) infir!it) or
other"ise rendered incapa$e of carr)in# o1t his d1ties or is a$sent on ea6e or other "ise in circ1!stances
not in6o6in# the 6acation of his office, the $an%in# co!pan) !a), "ith the appro6a of the Reser6e /an%,
!a%e s1ita$e arran#e!ents for carr)in# o1t the
23
[d1ties of 4hair!an or Mana#in# =irector] for a tota
period not exceedin# fo1r !onths.
15
01=BB. Po,"r o+ R"-"r3" B%$9 to %**o$t Ch%r(%$ o+ % .%$9$: 'o(*%$2
,1- Where the office of the
23
[4hair!an of the /oard of =irectors appointed on a "hoe+ti!es $asis or
the Mana#in# =irector] of a $an%in# co!pan) is 6acant, the Reser6e /an% !a), if it is of opinion that the
contin1ation of s1ch 6acanc) is i%e) to ad6erse) affect the interests of the $an%in# co!pan), appoint a
person ei#i$e 1nder s1$+section ,4- of section 10/ to $e so appointed, to $e the
23
[4hair!an of the /oard
of =irectors appointed on a "hoe+ti!e $asis or a Mana#in# =irector of the $an%in# co!pan) and "here
the person so appointed is not a director of s1ch $an%in# co!pan), he sha, so on# as he hods the office
of the
23
[4hair!an of the /oard of =irectors appointed on a "hoe+ti!e $asis or a Mana#in# =irector], $e
dee!ed to $e a =irector of the $an%in# co!pan).
,0- .he
23
[4hair!an of the /oard of =irectors appointed on a "hoe+ti!e $asis or a Mana#in# =irector]
so appointed $) the Reser6e /an% sha $e in the "hoe+ti!e e!po)!ent of the $an%in# co!pan) and
sha hod office for s1ch period not exceedin# three )ears, as the Reser6e /an% !a) specif), $1t sha,
s1$?ect to other pro6isions of this Act, $e ei#i$e for re+appoint!ent.
,2- .he
23
[4hair!an of the /oard of =irectors "ho is appointed on a "hoe+ti!e $asis or a Mana#in#
=irector] so appointed $) the Reser6e /an% sha dra" fro! the $an%in# co!pan) s1ch pa) and ao"ances
as the Reser6e /an% !a) deter!ine and !a) $e re!o6ed fro! office on) $) the Reser6e /an%.
,4- Sa6e as other"ise pro6ided in this section, the pro6isions of section 10/ sha, as far as !a) $e,
app) to the
23
[4hair!an of the /oard of =irectors appointed on a "hoe+ti!e $asis or a Mana#in#
=irector] appointed $) the Reser6e /an% 1nder s1$+section ,1- as the) app) to a
23
[4hair!an of the /oard
of =irectors appointed on a "hoe+ti!e $asis or the Mana#in# =irector] appointed $) the $an%in#
co!pan).]
1=
01=C. Ch%r(%$ %$& '"rt%$ <r"'tor- $ot to ." r">4r"& to ho!& >4%!+'%to$
-h%r"-
23
[A 4hair!an of the /oard of =irectors "ho is appointed on a "hoe+ti!e $asis or a Mana#in# =irector]
of a $an%in# co!pan) ,$) "ho!soe6er appointed- and a director of a $an%in# co!pan) ,appointed $) the
Reser6e /an% 1nder section 0A- sha not $e reA1ired to hod A1aification shares in the $an%in#
co!pan).]
1=<. Pro3-o$- o+ -"'to$- 1=A %$& 1=B to o3"rr&" %!! oth"r !%,-, 'o$tr%'t-, "t'.
An) appoint!ent or re!o6a of a
23
[=irector, 4hair!an of the /oard of =irectors "ho is appointed on a
"hoe+ti!e $asis or Mana#in# =irector] in p1rs1ance of section 10A or section 10/
10
[or section 10//]
sha ha6e effect and an) s1ch person sha not $e entited to cai! an) co!pensation for the oss or
ter!ination of office, not"ithstandin# an)thin# contained in an) a" or in an) contract, !e!orand1! or
artices or associations
11. R">4r"("$t %- to ($(4( *%&-4* '%*t%! %$& r"-"r3"-
,1- :ot"ithstandin# an)thin# contained in
2>
[section 149 of the 4o!panies Act, 1939], no $an%in#
co!pan) in existence on the co!!ence!ent of this Act, sha, after the expir) of three )ears fro! s1ch
co!!ence!ent or of s1ch f1rther period not exceedin# one )ear as the Reser6e /an%, ha6in# re#ard to the
interests of the depositors of the co!pan), !a) thin% fit in an) partic1ar case to ao", carr) on $1siness
11
[in (ndia], and no other $an%in# co!pan) sha, after the co!!ence!ent of this Act, co!!ence or carr)
on $1siness
11
[in (ndia],
14
[1ness it co!pies "ith s1ch of the reA1ire!ents of this section as are appica$e
to it.]
14
[,0- (n the case of a $an%in# co!pan) incorporated o1tside (ndia+
,a- the a##re#ate 6a1e of its paid+1p capita and reser6es sha not $e ess than fifteen a%hs of r1pees
and if it has a pace or paces of $1siness in the cit) of /o!$a) or 4ac1tta or $oth, t"ent) a%hs of r1pees'
and
,$-
29
[the $an%in# co!pan) sha deposit and %eep deposited "ith the Reser6e /an% either in cash or in
the for! of 1nenc1!$ered appro6ed sec1rities, or part) in cash and part) in the for! of s1ch sec1rities+
,i- an a!o1nt "hich sha not $e ess than the !ini!1! reA1ired $) ca1se ,a-' and
,ii- as soon as !a) $e after the expiration of each
40
[&&&] )ear, an a!o1nt cac1ated at t"ent) per
cent of its profit for that )ear in respect of a $1siness transacted thro1#h its $ranches in (ndia, as discosed
in the profit and oss acco1nt prepared "ith reference to that )ear 1nder section 09*]
;R7<(=E= that an) s1ch $an%in# co!pan) !a) at an) ti!e repace+
,i- an) sec1rities so deposited $) cash or $) an) other 1nenc1!$ered appro6ed sec1rities or part) $)
cash and part) $) other s1ch sec1rities, so ho"e6er, that the tota a!o1nt deposited is not affected'
,ii- an) cash so deposited $) 1nenc1!$ered appro6ed sec1rities of an eA1a 6a1e.]
41
[,0A- :ot"ithstandin# an)thin# contained in s1$+section ,0-, the 4entra 5o6ern!ent !a), on the
reco!!endation of the Reser6e /an%, and ha6in# re#ard to the adeA1ac) of the a!o1nts aread) deposited
and %ept deposited $) a $an%in# co!pan) 1nder s1$+section ,0-, in reation to its deposit ia$iities in (ndia
decare $) order in "ritin# that the pro6isions of s1$+ca1se ,ii- of ca1se ,$- of s1$+section ,0- sha not
app) to s1ch $an%in# co!pan) for s1ch period as !a) $e specified in the order.]
,2- (n the case of an) $an%in# co!pan) to "hich the pro6isions of s1$+section,0- do not app), the
a##re#ate 6a1e of its paid+1p capita and reser6es sha not $e ess than +
,i- if it has paces of $1siness in !ore than one State, fi6e a%h of r1pees, and if an) s1ch pace or
paces of $1siness is or are sit1ated in the cit) of /o!$a) or 4ac1tta or $oth, ten a%hs of r1pees'
,ii- if it has a its paces of $1siness in one State none of "hich is sit1ated in the cit) of /o!$a) or
4ac1tta, one a%h of r1pees in respect of its principa pace of $1siness, p1s ten tho1sand r1pees in respect
of each of its other paces of $1siness, sit1ated in the sa!e district in "hich it has its principa pace of
$1siness, p1s t"ent)+fi6e tho1sand r1pees in respect of each pace of $1siness sit1ated ese"here in the
State other"ise than in the sa!e district*
;R7<(=E= that no $an%in# co!pan) to "hich this ca1se appies sha $e reA1ired to ha6e paid+1p
capita and reser6es exceedin# an a##re#ate 6a1e of fi6e a%hs of r1pees*
;R7<(=E= EBR.HER that no $an%in# co!pan) to "hich this ca1se appies and "hich has on) one
pace of $1siness, sha $e reA1ired to ha6e paid+1p capita and reser6es exceedin# an a##re#ate 6a1e of
fift) tho1sand r1pees*
41
[;R7<(=E= EBR.HER that in the case of e6er) $an%in# co!pan) to "hich this ca1se appies and
"hich co!!ences $an%in# $1siness for the first ti!e after the co!!ence!ent of the /an%in# 4o!panies
,A!end!ent- Act, 1990 ,29 of 1990-, the 6a1e of its paid+1p capita sha not $e ess than fi6e a%hs of
r1pees']
,iii- if it has a its paces of $1siness in one State, or !ore of "hich is or are sit1ated in the cit) of
/o!$a) or 4ac1tta, fi6e a%hs of r1pees, p1s t"ent)+fi6e tho1sand r1pees in respect of each pace of
$1siness sit1ated o1tside the cit) of /o!$a) or 4ac1tta, as the case !a) $e*
;R7<(=E= that no $an%in# co!pan) to "hich this ca1se appies sha $e reA1ired to ha6e paid+1p
capita and reser6es exceedin# an a##re#ate 6a1e of ten a%hs of r1pees.
Expanation* Eor the p1rposes of this s1$+section, a pace of $1siness sit1ated
40
[in a State] other than
that in "hich the principa pace of $1siness of the $an%in# co!pan) is sit1ated sha, if it is not !ore than
t"ent)+fi6e !ies distant fro! s1ch principa pace of $1siness, $e dee!ed to $e sit1ated "ithin the sa!e
State as s1ch principa pace of $1siness.
,4- An) a!o1nt deposited and %ept deposited "ith the Reser6e /an% 1nder
42
[&s1$section ,0- $) an)
$an%in# co!pan) incorporated
44
[o1tside (ndia] sha, in the e6ent of the co!pan) ceasin# for an) reason to
carr) on $an%in# $1siness
11
[in (ndia], $e an asset of the co!pan) on "hich the cai!s of a the creditors
of the co!pan)
11
[in (ndia] sha $e a first char#e.
14
[,3- Eor the p1rposes of this section+
,a- @pace of $1siness@ !eans an) office, s1$+office, s1$+pa) office and an) pace of $1siness at "hich
deposits are recei6ed, cheA1es cashed or !one)s ent'
,$- @6a1e@ !eans the rea or exchan#ea$e 6a1e, and not, the no!ina 6a1e "hich !a) $e sho"n in
the $oo%s of the $an%in# co!pan) concerned.]
,9- (f an) disp1te arises in co!p1tin# the a##re#ate 6a1e of the paid+1p capita and reser6es of an)
$an%in# co!pan), a deter!ination thereof $) the Reser6e /an% sha $e fina for the p1rposes of this
section.
11
01). R":4!%to$ o+ *%&-4* '%*t%!, -4.-'r."& '%*t%! %$& %4thor-"& '%*t%! %$&
3ot$: r:ht- o+ -h%r"ho!&"r-
,1- :o $an%in# co!pan) sha carr) on $1siness in (ndia, 1ness it satisfies the foo"in# conditions,
na!e),+
,i- that the s1$scri$ed capita of the co!pan) is not ess than one+haf of the a1thorised capita and the
paid+1p capita is not ess than one+haf of the s1$scri$ed capita and that, if the capita is increased, it
co!pies "ith the conditions prescri$ed in this ca1se, "ithin s1ch period not exceedin# t"o )ears as the
Reser6e /an% !a) ao"'
,ii- that the capita of the co!pan) consists of ordinar) shares on) or of ordinar) shares or eA1it)
shares and s1ch preferentia shares as !a) ha6e $een iss1ed prior to the st da) of G1), 1944*
;R7<(=E= that nothin# contained in this s1$+section sha app) to an) $an%in# co!pan) incorporated
$efore the 13th da) of Gan1ar), 192C.
,0- :o person hodin# shares in a $an%in# co!pan) sha, in respect of an) shares hed $) hi!, exercise
6otin# ri#hts
0>
[on po]
43
[in excess of
49
[ten per cent]] of the tota 6otin# ri#hts of a the sharehoders of
the $an%in# co!pan).
,2- :ot"ithstandin# an)thin# contained in an) a" for the ti!e $ein# in force or in an) contract or
instr1!ent no s1it or other proceedin# sha $e !aintained a#ainst an) person re#istered as the hoder of a
share in a $an%in# co!pan) on the #ro1nd that the tite to the said share 6ests in a person other than the
re#istered hoder*
;R7<(=E= that nothin# contained in this s1$+section sha $ar a s1it or other proceedin#+
,a- $) a transferee of the share on the #ro1nd that he has o$tained fro! the re#istered hoder a transfer
of the share in accordance "ith an) a" reatin# to s1ch transfer ' or
,$- on $ehaf of a !inor or a 1natic on the #ro1nd that the re#istered hoder hods the shares on $ehaf
of the !inor or 1natic.
,4- E6er) 4hair!an, Mana#in# =irector or 4hief Exec1ti6e 7fficer $) "hate6er na!e caed of a
$an%in# co!pan) sha f1rnish to the Reser6e /an% thro1#h that $an%in# co!pan) ret1rns containin# f1
partic1ars of the extent and 6a1e of his hodin# of shares, "hether direct) or indirect), in the $an%in#
co!pan) and of an) chan#e in the extent of s1ch hodin# or an) 6ariation in the ri#hts attachin# thereto and
s1ch other infor!ation reatin# to those shares as the Reser6e /an% !a), $) order, reA1ire and in s1ch for!
and at s1ch ti!e as !a) $e specified in the order.]
4/
01)A. E!"'to$ o+ $", <r"'tor-
,1- .he Reser6e /an% !a), $) order, reA1ire an) $an%in# co!pan) to ca a #enera !eetin# of the
sharehoders of the co!pan) "ithin s1ch ti!e, not ess than t"o !onths fro! the date of the order, as !a)
$e specified in the order or "ithin s1ch f1rther ti!e as the Reser6e /an% !a) ao" in this $ehaf, to eect
in accordance "ith the 6otin# ri#hts per!issi$e 1nder this Act fresh =irectors, and the $an%in# co!pan)
sha $e $o1nd to co!p) "ith the order.
,0- E6er) =irector eected 1nder s1$+section ,1- sha hod office 1nti the date 1p to "hich his
predecessor "o1d ha6e hed office, if the eection had not $een hed.
,2- An) eection d1) hed 1nder this section sha not $e caed in A1estion in an) co1rt.].
11. R"-tr'to$ o$ 'o((--o$, .ro9"r%:", &-'o4$t, "t'., o$ -%!" o+ -h%r"-
:ot"ithstandin# an)thin# to the contrar) contained in
4>
[sections C9 and C9 of the 4o!panies Act, 1939 ,1
of 1939-1, no $an%in# co!pan) sha pa) o1t direct) or indirect) $) "a) of co!!ission, $ro%era#e,
disco1nt or re!1neration in an) for! in respect of an) shares iss1ed $) it, an) a!o1nt exceedin# in the
a##re#ate t"o and one+haf per cent of the paid+1p 6a1e of the said shares.
14. Proh.to$ o+ 'h%r:" o$ 4$*%& '%*t%!
:o $an%in# co!pan) sha create an) char#e 1pon an) 1npaid capita of the co!pan), and an) s1ch char#e
sha $e in6aid.
)6
014A. Proh.to$ o+ +!o%t$: 'h%r:" o$ %--"t-
,1- :ot"ithstandin# an)thin# contained in section 9, no $an%in# co!pan) sha create a foatin# char#e
on the 1nderta%in# or an) propert) of the co!pan) or an) part thereof, 1ness the creation of s1ch foatin#
char#e is certified in "ritin# $) the Reser6e /an% as not $ein# detri!enta to the interests of the depositors
of s1ch co!pan).
,0- An) s1ch char#e created "itho1t o$tainin# the certificate of the Reser6e /an% sha $e in6aid.
,2- An) $an%in# co!pan) a##rie6ed $) the ref1sa of certificate 1nder s1$+section ,1- !a), "ithin
ninet) da)s fro! the date on "hich s1ch ref1sa is co!!1nicated to it, appea to the 4entra 5o6ern!ent.
,4- .he decision of the 4entra 5o6ern!ent "here an appea has $een preferred to it 1nder s1$+section
,2- or of the Reser6e /an% "here no s1ch appea has $een preferred sha $e fina.
15. R"-tr'to$- %- to *%2("$t o+ &3&"$&
49
[,1-] :o $an%in# co!pan) sha pa) an) di6idend on its shares 1nti a its capitaised expenses
,inc1din# prei!inar) expenses, or#anisation expenses, share sein# co!!ission, $ro%era#e, a!o1nts of
osses inc1rred and an) other ite! of expendit1re not represented $) tan#i$e assets- ha6e $een co!pete)
"ritten off.
0>
[,0- :ot"ithstandin# an)thin# to the contrar) contained in s1$+section ,1- or in the 4o!panies Act,
1939 ,1 of 1939-, a $an%in# co!pan) !a) pa) di6idends on its shares "itho1t "ritin# off+
,i- the depreciation, if an), in the 6a1e of its in6est!ents in appro6ed sec1rities in an) case "here
s1ch depreciation has not act1a) $een capitaised or other"ise acco1nted for as a oss'
,ii- the depreciation, if an), in the 6a1e of its in6est!ents in shares, de$ent1res or $onds ,other than
appro6ed sec1rities- in an) case "here adeA1ate pro6ision for s1ch depreciation has $een !ade to the
satisfaction of the a1ditor of the $an%in# co!pan)'
,iii- the $ad de$ts, if an), in an) case "here adeA1ate pro6ision for s1ch de$ts has $een !ade to the
satisfaction of the a1ditor of the $an%in# co!pan).]
11
018. Proh.to$ o+ 'o((o$ <r"'tor-
23
[,1- :o $an%in# co!pan) incorporated in (ndia sha ha6e as a =irector in its /oard of =irectors an)
person "ho is a =irector of an) other $an%in# co!pan).
,1A- :o $an%in# co!pan) referred to in s1$+section ,1- sha ha6e in its /oard of =irectors !ore than
three =irectors "ho are =irectors of co!panies "hich a!on# the!se6es are entited to exercise 6otin#
ri#hts in excess of t"ent) per cent of the tota 6otin# ri#hts of a the share+hoders of that $an%in#
co!pan).
,0- (f i!!ediate) $efore co!!ence!ent of the /an%in# 4o!panies ,A!end!ent- Act, 1939 ,93 of
1939-, an) person hodin# office as a =irector of a $an%in# co!pan) is aso a =irector of co!panies "hich
a!on# the!se6es are entited to exercise 6otin# ri#hts in excess of t"ent) per cent of the tota 6otin#
ri#hts of a the sharehoders of the $an%in# co!pan), he sha, "ithin s1ch period fro! s1ch
co!!ence!ent as the Reser6e /an% !a) specif) in this $ehaf+
,a- either resi#n his office as a =irector of the $an%in# co!pan)' or
,$- choose s1ch n1!$er of co!panies as a!on# the!se6es are not entited to exercise 6otin# ri#hts in
excess of t"ent) per cent of the tota 6otin# ri#hts of a the sharehoders of the $an%in# co!pan) as
co!panies in "hich he "ishes to contin1e to hod the office of a =irector and resi#n his office as a =irector
in the other co!panies.]
10
[,2- :othin# in s1$+section ,1- sha app) to, or in reation to, an) =irector appointed $) the Reser6e
/an%.]
14
01/. R"-"r3" 74$&
,1- E6er) $an%in# co!pan) incorporated in (ndia sha create a reser6e f1nd and
30
[& &&] sha, o1t of the
$aance of profit of each )ear, as discosed in the profit and oss acco1nt prepared 1nder section 09 and
$efore an) di6idend is decared, transfer to the reser6e f1nd a s1! eA1i6aent to not ess than t"ent) per
cent of s1ch profit.
41
[,1A- :ot"ithstandin# an)thin# contained in s1$+section ,1-, the 4entra 5o6ern!ent !a), on the
reco!!endation of the Reser6e /an% and ha6in# re#ard to the adeA1ac) of the paid+1p, capita and
reser6es of a $an%in# co!pan) in reation to its deposit ia$iities, decare $) order in "ritin# that the
pro6isions of s1$+section ,1- sha not app) to the $an%in# co!pan) for s1ch period as !a) $e specified in
the order*
;R7<(=E= that no s1ch order sha $e !ade 1ness, at the ti!e it is !ade, the a!o1nt in the reser6e
f1nd 1nder s1$+section ,1-, to#ether "ith the a!o1nt in the share pre!i1! acco1nt is not ess than the paid+
1p capita of the $an%in# co!pan).]
,0- Where a $an%in# co!pan) appropriates an) s1! fro! the reser6e f1nd or the share pre!i1!
acco1nt, it sha, "ithin t"ent)+one da)s fro! the date of s1ch appropriation, report the fact to the Reser6e
/an%, expainin# the circ1!stances reatin# to s1ch appropriation*
;R7<(=E= that the Reser6e /an% !a), in an) partic1ar case, extend the said period of t"ent)+one
da)s $) s1ch period as it thin%s fit or condone an) dea) in the !a%in# of s1ch report.
51
016. C%-h r"-"r3"
,1- E6er) $an%in# co!pan), not $ein# a sched1ed $an%, sha !aintain in (ndia $) "a) of cash reser6e
"ith itsef or $) "a) of $aance in a c1rrent acco1nt "ith the Reser6e /an% or $) "a) of net $aance in
c1rrent acco1nts or in one or !ore of the aforesaid "a)s, a s1! eA1i6aent to at east three per cent of the
tota of its de!and and ti!e ia$iities in (ndia as on the ast Erida) of the second precedin# fortni#ht and
sha s1$!it to the Reser6e /an% $efore the t"entieth da) of e6er) !onth a ret1rn sho"in# the a!o1nt so
hed on aternate Erida)s d1rin# a !onth "ith partic1ars of its de!and and ti!e ia$iities in (ndia on s1ch
Erida) or if an) s1ch Erida) is a p1$ic hoida) 1nder the :e#otia$e (nstr1!ents Act, 1>>1 ,09 of 1>>1-, at
the cose of $1siness on the precedin# "or%in# da).
Expanation : (n this section, and in section 04+
,a- @ia$iities in (ndia@ sha not inc1de+
,i- the paid+1p capita or the reser6es or an) credit $aance in the profit and oss acco1nt of the $an%in#
co!pan),
,ii- an) ad6ance ta%en fro! the Reser6e /an% or fro! the =e6eop!ent /an% or fro! the Exi! /an%
30
[or fro! the Reconstr1ction /an%]
19
[or fro! the :ationa Ho1sin# /an%] or fro! the :ationa /an%
>0
[or
fro! the S!a (nd1stries /an%] $) the $an%in# co!pan)'
,iii- in the case of a Re#iona R1ra /an%, aso an) oan ta%en $) s1ch $an% fro! its sponsor $an%'
,$- @fortni#ht@ sha !eans the period fro! Sat1rda) to the second foo"in# Erida), $oth da)s inc1si6e'
,c- @net $aance in c1rrent acco1nts@ sha, in reation to a $an%in# co!pan), !eans the excess, if an), of
the a##re#ate of the credit $aance in c1rrent acco1nt !aintained $) that $an%in# co!pan) "ith the State
/an% of (ndia or a s1$sidiar) $an% or a correspondin# ne" $an% o6er the a##re#ate of the credit $aances in
c1rrent acco1nt hed $) the said $an%s "ith s1ch $an%in# co!pan)'
,d- for the p1rpose of co!p1tation of ia$iities, the a##re#ate of the ia$iities of $an%in# co!pan) to
the State /an% of (ndia, a s1$sidiar) $an%, a correspondin# ne" $an%, a Re#iona R1ra /an%, another
$an%in# co!pan), a co+operati6e $an% or an) other financia instit1tion notified $) the 4entra 5o6ern!ent
in this $ehaf, sha $e red1ced $) the a##re#ate of the ia$iities of a s1ch $an%s and instit1tions to the
$an%in# co!pan)'
,e- the expression @4o+operati6e /an%@ sha ha6e the !eanin# assi#ned to it in ca1se ,cci- of section
39.
,0- .he Reser6e /an% !a), for the p1rpose of this section and section 04, specif) fro! ti!e to ti!e, "ith
reference to an) transaction or cass of transactions, that s1ch transaction or transactions sha $e re#arded
as ia$iit) in (ndia of a $an%in# co!pan) and, if an) A1estion arises as to "hether an) transaction or cass
of transaction sha $e re#arded for the p1rposes of this section and section 04 as ia$iit) in (ndia of a
$an%in# 4o!pan), the decision of the Reser6e /an% thereon sha $e fina.]
19. R"-tr'to$ o$ $%t4r" o+ -4.-&%r2 'o(*%$"-
10
[,1- A $an%in# co!pan) sha not for! an) s1$sidiar) co!pan) except a s1$sidiar) co!pan) for!ed for
one or !ore of the foo"in# p1rposes, na!e).+
,a- the 1nderta%in# of an) $1siness "hich, 1nder ca1se ,a- to ,o- of s1$+section ,1- of section 9, is
per!issi$e for a $an%in# co!pan) to 1nderta%e, or
,$- "ith the pre6io1s per!ission in "ritin# of the Reser6e /an%, the carr)in# on of the $1siness of
$an%in# exc1si6e) o1tside (ndia, or
,c- the 1nderta%in# of s1ch other $1siness, "hich the Reser6e /an% !a), "ith the prior appro6a of the
4entra 5o6ern!ent, consider to $e cond1ci6e to the spread of $an%in# in (ndia or to $e other"ise 1sef1 or
necessar) in the p1$ic interest.
Explanation: Eor the p1rpose of section >, a $an%in# co!pan) sha not $e dee!ed, $) reason of its
for!in# or ha6in# a s1$sidiar) co!pan), to $e en#a#ed indirect), in the $1siness carried on $) s1ch
s1$sidiar) co!pan).]
,0- Sa6e as pro6ided in s1$+section ,1-, no $an%in# co!pan) sha hod shares in an) co!pan), "hether
as ped#ee, !ort#a#ee or a$so1te o"ner, of an a!o1nt exceedin# thirt) per cent of the paid+1p share
capita of that co!pan) or thirt) per cent of its o"n paid+1p share capita 1nder reser6es, "hiche6er is ess*
;R7<(=E= that an) $an%in# co!pan) "hich is on the date of the co!!ence!ent of this Act hodin#
an) shares in contra6ention of the pro6isions of this s1$+section sha not $e ia$e to an) penat) therefor if
it reports the !atter "itho1t dea) to the Reser6e /an% and if it $rin#s its hodin# of shares into confor!it)
"ith the said pro6isions "ithin s1ch period, not exceedin# t"o )ears, as the Reser6e /an% !a) thin% fit to
ao".
,2- Sa6e as pro6ided in s1$+section ,1- and not"ithstandin# an)thin# contained in s1$+section ,0-, a
$an%in# co!pan) sha not, after the expir) of one )ear fro! the date of the co!!ence!ent of this Act,
hod shares, "hether as ped#e, !ort#a#ee or a$so1te o"ner, in an) co!pan) in the !ana#e!ent of "hich
an) Mana#in# =irector or Mana#er of the $an%in# co!pan) is in an) !anner concerned or interested.
51
0)=. R"-tr'to$- o$ !o%$- %$& %&3%$'"-
,1- :ot"ithstandin# an)thin# to the contrar) contained in section CC of the 4o!panies Act, 1939 ,1 of
1939-, no $an%in# co!pan) sha+
,a- #rant an) oans or ad6ances on the sec1rit) of its o"n shares, or
,$- enter into an) co!!it!ent for #rantin# an) oan or ad6ance to or on $ehaf of+
,i- an) of its =irectors,
,ii- an) fir! in "hich an) of its =irectors is interested as ;artner, Mana#er, E!po)ee or 51arantor,
or
,iii- an) co!pan) ,not $ein# a s1$sidiar) of the $an%in# co!pan) or a co!pan) re#istered 1nder
section 03 of the 4o!panies Act, 1939 ,1 of 1939-, or a #o6ern!ent co!pan), of "hich
13
[or the s1$sidiar)
or the hodin# co!pan) of "hich] an) of the =irectors of the $an%in# co!pan) is a =irector, Mana#in#
A#ent, Mana#er, E!po)ee or 51arantor or in "hich he hods s1$stantia interest, or
,i6- an) indi6id1a in respect of "ho! an) of its =irectors is a partner or #1arantor.
,0- Where an) oan or ad6ance #ranted $) a $an%in# co!pan) is s1ch that a co!!it!ent for #rantin# it
co1d not ha6e $een !ade if ca1se ,$- of s1$+section ,1- had $een in force on the date on "hich the oan or
ad6ance "as !ade or is #ranted $) a $an%in# co!pan) after the co!!ence!ent of section 3 of the
/an%in# Fa"s ,A!end!ent- Act, 199> ,3> of 199>-, $1t in p1rs1ance of a co!!it!ent entered into $efore
s1ch co!!ence!ent, steps sha $e ta%en to reco6er the a!o1nts d1e to the $an%in# co!pan) on acco1nt
of the oan or ad6ance to#ether "ith interest, if an), d1e thereon "ithin the period stip1ated at the ti!e of
the #rant of the oan or ad6ance, or "here no s1ch period has $een stip1ated, $efore the expir) of one )ear
fro! the co!!ence!ent of the said section 3*
;R7<(=E= that the Reser6e /an% !a), in an) case, on an appication in "ritin# !ade to it $) the
$an%in# co!pan) in this $ehaf, extend the period for the reco6er) of the oan or ad6ance 1nti s1ch date'
not $ein# a date $e)ond the period of three )ears fro! the co!!ence!ent of the said section 3, and s1$?ect
to s1ch ter!s and conditions, as the Reser6e /an% !a) dee! fit*
;R7<(=E= EBR.HER that this s1$+section sha not app) if and "hen the =irector concerned 6acates
the office of the =irector of the $an%in# co!pan), "hether $) death, retire!ent, resi#nation or other"ise.
,2- :o oan or ad6ance, referred to in s1$+section ,0-, or an) part thereof sha $e re!itted "itho1t the
pre6io1s appro6a of the Reser6e /an%, and an) re!ission "itho1t s1ch appro6a sha $e 6oid and of on
effect.
,4- Where an) oan or ad6ance referred to in s1$+section ,0-, pa)a$e $) an) person, has not $een repaid
to the $an%in# co!pan) "ithin the period specified in that s1$+section, then, s1ch person sha, if he is a
=irector of s1ch $an%in# co!pan) on the date of the expir) of the said period, $e dee!ed to ha6e 6acated
his office as s1ch on the said date.
Expanation * (n this section+
,a- @oan or ad6ance@ sha not inc1de an) transaction "hich the Reser6e /an% !a), ha6in# re#ard to
the nat1re of the transaction, the period "ithin "hich, and the !anner and circ1!stances in "hich, an)
a!o1nt d1e on acco1nt of the transaction is i%e) to $e reaised, the interest of the depositors and other
ree6ant considerations, specif) $) #enera or specia order as not $ein# a oan or ad6ance for the p1rpose
of this section'
,$- @=irector@ inc1des a !e!$er of an) $oard or co!!ittee in (ndia constit1ted $) a $an%in#
co!pan) for the p1rpose of !ana#in#, or for the p1rpose of ad6isin# it in re#ard to the !ana#e!ent of, a
or an) of its affairs.
,3- (f an) A1estion arises "hether an) transaction is a oan or ad6ance for the p1rposes of this section, it
sha $e referred to the Reser6e /an%, "hose decision thereon sha $e fina.]
54
0)=A. R"-tr'to$- o$ *o,"r to r"(t &".t-
,1- :ot"ithstandin# an)thin# to the contrar) contained in section 092 of the 4o!panies Act, 1939 ,1 of
1939-, a $an%in# co!pan) sha not, except "ith the prior appro6a of the Reser6e /an%, re!it in "hoe or
in part an) de$t d1e to it $)+
,a- an) of its =irectors, or
,$- an) fir! or co!pan) in "hich an) of its =irectors is interested as =irector, ;artner, Mana#in#
A#ent or 51arantor, or
,c- an) indi6id1a if an) of its =irectors, is his ;artner or 51arantor.
,0- An) re!ission !ade in contra6ention of the pro6isions of s1$+section,1-sha $e 6oid and of no
affect.]
)1. Po,"r o+ R"-"r3" B%$9 to 'o$tro! %&3%$'"- .2 .%$9$: 'o(*%$"-
,1- Where the Reser6e /an% is satisfied that it is necessar) or expedient in the p1$ic interest
>9
[or in the
interests of depositors]
10
[or $an%in# poic)] so to do, it !a) deter!ine the poic) in reation to ad6ances to
$e foo"ed $) $an%in# co!panies #enera) or $) an) $an%in# co!pan) in partic1ar, and "hen the poic)
has $een so deter!ined, a $an%in# co!panies or the $an%in# co!pan) concerned, as the case !a) $e,
sha $e $o1nd to foo" the poic) as so deter!ined.
,0- Witho1t pre?1dice to the #enerait) of the po"er 6ested in the Reser6e /an% 1nder s1$+section ,1-,
the Reser6e /an% !a) #i6e directions to $an%in# co!panies, either #enera) or to an) $an%in# co!pan)
or #ro1p of $an%in# co!panies in partic1ars,
9
[as to+
,a- the p1rposes for "hich ad6ances !a) or !a) not $e !ade'
,$- the !ar#ins to $e !aintained in respect of sec1red ad6ances'
,c- the !axi!1! a!o1nt of ad6ances or other financia acco!!odation "hich, ha6in# re#ard to the
paid+1p capita, reser6es and deposits of a $an%in# co!pan) and other ree6ant considerations, !a) $e
!ade $) that $an%in# co!pan) to an) one co!pan), fir!, association to persons or indi6id1a'
,d- the !axi!1! a!o1nt 1p to "hich, ha6in# re#ard to the considerations referred to in ca1se ,c-,
#1arantees !a) $e #i6en $) a $an%in# co!pan) on $ehaf of an) one co!pan), fir!, association of persons
or indi6id1a' and
,e- the rate of interest and other ter!s and conditions on "hich ad6ances or other financia
acco!!odation !a) $e !ade or #1arantees !a) $e #i6en.]
34
[,2- E6er) $an%in# co!pan) sha $e $o1nd to co!p) "ith an) directions #i6en to it 1nder this section.]
15
0)1A. R%t" o+ $t"r"-t 'h%r:"& .2 .%$9$: 'o(*%$"- $ot to ." -4.?"'t to -'r4t$2
.2 'o4rt-
:ot"ithstandin# an)thin# contained in the Bs1rio1s Foans Act, 191> ,10 of 191>-, or an) other a"
reatin# to inde$tedness in force in an) State, a transaction $et"een a $an%in# co!pan) and its de$tor sha
not $e reopened $) an) co1rt on the #ro1nd that the rate of interest char#ed $) the $an%in# co!pan) in
respect of s1ch transaction is excessi6e.]
)). L'"$-$: o+ .%$9$: 'o(*%$"-
14
[,1- Sa6e as hereinafter pro6ided, no co!pan) sha carr) on $an%in# $1siness in (ndia 1ness it hods a
icence iss1ed in that $ehaf $) the Reser6e /an% and an) s1ch icence !a) $e iss1ed s1$?ect to s1ch
conditions as the Reser6e /an% !a) thin% fit to i!pose.] .
,0- E6er) $an%in# co!pan) in existence on the co!!ence!ent of this Act, $efore the expir) of six
!onths fro! s1ch co!!ence!ent, and e6er) other co!pan) $efore co!!encin# $an%in# $1siness
11
[in
(ndia], sha app) in "ritin# to the Reser6e /an% for a icence 1nder this section*
;R7<(=E= that in the case of a $an%in# co!pan) in existence on the co!!ence!ent of this Act,
nothin# in s1$+section ,1- sha $e dee!ed to prohi$it the co!pan) fro! carr)in# on $an%in# $1siness 1nti
it is #ranted a icence in p1rs1ance of
33
[this section] or is $) notice in "ritin# infor!ed $) the Reser6e
/an% that a icence cannot $e #ranted to it*
;R7<(=E= EBR.HER that the Reser6e /an% sha not #i6e a notice as aforesaid to $e a $an%in#
co!pan) in existence on the co!!ence!ent of this Act $efore the expir) of the three )ears referred to in
s1$+section ,1- of section 11 or of s1ch f1rther period as the Reser6e /an% !a) 1nder that s1$+section thin%
fit to ao".
,2- /efore #rantin# an) icence 1nder this section, the Reser6e /an% !a) reA1ire to $e satisfied $) an
inspection of the $oo%s of the co!pan) or other"ise that
39
[&&&] the foo"in# conditions are f1fied,
na!e)*+
14
[,a- that the co!pan) is or "i $e in a position to pa) its present or f1t1re depositors in f1 as their
cai!s accr1e'
,$- that the affairs of the co!pan) are not $ein#, or are not i%e) to $e, cond1cted in a !anner
detri!enta to the interests of its present or f1t1re depositors']
10
[,c- that the #enera character of the proposed !ana#e!ent of the co!pan) "i not $e pre?1dicia to
the p1$ic interest of its present or f1t1re depositors'
,d- that the co!pan) has adeA1ate capita str1ct1re and earnin# prospects'
,e- that the p1$ic interest "i $e ser6ed $) the #rant of a icence to the co!pan) to carr) on $an%in#
$1siness in (ndia'
,f- that ha6in# re#ard to the $an%in# faciities a6aia$e in the proposed principa area of operations of
the co!pan), the potentia scope for expansion of $an%s aread) in existence in the area and other ree6ant
factors the #rant of the icence "o1d not $e pre?1dicia to the operation and consoidation of the $an%in#
s)ste! consistent "ith !onetar) sta$iit) and econo!ic #ro"th'
,#- an) other condition, the f1fi!ent of "hich "o1d, in the opinion of the Reser6e /an%, $e
necessar) to ens1re that the carr)in# on of $an%in# $1siness in (ndia $) the co!pan) "i not $e pre?1dicia
to the p1$ic interest or the interests of the depositors.]
13
[,2A- /efore #rantin# an) icence 1nder this section to a co!pan) incorporated o1tside (ndia, the
Reser6e /an% !a) reA1ire to $e satisfied $) an inspection of the $oo%s of the co!pan) or other"ise that
the conditions specified in s1$+section ,2- are f1fied and that the carr)in# on of $an%in# $1siness $) s1ch
co!pan) in (ndia "i $e in the p1$ic interest and that the #o6ern!ent or a" of the co1ntr) in "hich it is
incorporated does not discri!inate in an) "a) a#ainst $an%in# co!panies re#istered in (ndia and that the
co!pan) co!pies "ith a the pro6isions of this Act appica$e to $an%in# co!panies incorporated o1tside
(ndia.]
14
[,4- .he Reser6e /an% !a) cance a icence #ranted to a $an%in# co!pan) 1nder this section*
,i- if the co!pan) ceases to carr) on $an%in# $1siness in (ndia' or
,ii- if the co!pan) at an) ti!e fais to co!p) "ith an) of the conditions i!posed 1pon it 1nder s1$+
section ,1-' or
,iii- if at an) ti!e, an) of the conditions referred to in s1$+section ,2-
13
[and s1$+section ,2A-] is not
f1fied*
;R7<(=E= that $efore cancein# a icence 1nder ca1se ,ii- or ca1se ,iii- of this s1$+section on the
#ro1nd that the $an%in# co!pan) has faied to co!p) "ith or has faied to f1fi an) of the conditions
referred to therein, the Reser6e /an%, 1ness it is of opinion that the dea) "i $e pre?1dicia to the interests
of the co!pan)s depositors or the p1$ic, sha #rant to the co!pan) on s1ch ter!s as it !a) specif), and
opport1nit) of ta%in# the necessar) steps for co!p)in# "ith or f1fiin# s1ch condition.
,3- An) $an%in# co!pan) a##rie6ed $) the decision of the Reser6e /an% cancein# a icence 1nder this
section !a), "ithin thirt) da)s fro! the date on "hich s1ch decision is co!!1nicated to it, appea to the
4entra 5o6ern!ent.
,9- .he decision of the 4entra 5o6ern!ent "here an appea has $een preferred to it 1nder s1$+section
,3- or of the Reser6e /an% "here no s1ch appea has $een preferred sha $e fina.]
14
0)1. R"-tr'to$- o$ o*"$$: o+ $",, %$& tr%$-+"r o+ "#-t$:, *!%'"- o+ .4-$"--
,1- Witho1t o$tainin# the prior per!issions of the Reser6e /an%+
,a- no $an%in# co!pan) sha open a ne" pace of $1siness in (ndia or chan#e other"ise than "ithin
the sa!e cit), to"n or 6ia#e, the ocation of an existin# pace of $1siness sit1ated in (ndia' and
,$- no $an%in# co!pan) incorporated in (ndia sha open a ne" pace of $1siness o1tside (ndia or
chan#e, other"ise than "ithin the sa!e cit), to"n or 6ia#e in an) co1ntr) or area o1tside (ndia, the
ocation of an existin# pace of $1siness sit1ated in that co1ntr) or area*
;R7<(=E= that nothin# in this s1$+section sha app) to the openin# for a period not exceedin# one
!onth of a te!porar) pace of $1siness "ithin a cit), to"n or 6ia#e or the en6irons thereof "ithin "hich
the $an%in# co!pan) aread) has a pace of $1siness, for the p1rpose of affordin# $an%in# faciities to the
p1$ic on the occasion of an exhi$ition, a conference or a !ea or an) other i%e occasion.
,0- /efore #rantin# an) per!ission 1nder this section, the Reser6e /an% !a) reA1ire to $e satisfied $)
an inspection 1nder section 23 or other"ise as to the financia condition and histor) of the co!pan), the
#enera character of its !ana#e!ent, the adeA1ac) of its capita str1ct1re and earnin# prospects and that
p1$ic interest "i $e ser6ed $) the openin# or, as the case !a) $e, chan#e of ocation, of the pace of
$1siness.
,2- .he Reser6e /an% !a) #rant per!ission 1nder s1$+section ,1- s1$?ect to s1ch conditions as it !a)
thin% fit to i!pose either #enera) or "ith reference to an) partic1ar case.
,4- Where, in the opinion of the Reser6e /an%, a $an%in# co!pan) has, at an) ti!e, faied to co!p)
"ith an) of the conditions i!posed on it 1nder this section, the Reser6e /an% !a), $) order in "ritin# and
after affordin# reasona$e opport1nit) to the $an%in# co!pan) for sho"in# ca1se a#ainst the action
proposed to $e ta%en a#ainst it, re6o%e an) per!ission #ranted 1nder this section.
3C
[,4A- An) Re#iona R1ra /an% reA1irin# the per!ission of the Reser6e /an% 1nder this section sha
for"ard its appication to the Reser6e /an% thro1#h the :ationa /an% "hich sha #i6e its co!!ents on
the !erits of the appication and send it to the Reser6e /an%*
;R7<(=E= that the Re#iona R1ra /an% sha aso send an ad6ance cop) of the appication direct)
to the Reser6e /an%.]
,3- Eor the p1rposes of this section @pace of $1siness@ inc1des an) s1$+office, pa) office, s1$+pa) office
and an) pace of $1siness at "hich deposits are recei6ed, cheA1es cashed or !one)s ent.]

7oot Not"-
1 Th *or$ 9%o&(#"i+9 o&itt$ ,0 A%t No. '/ o) 1963, *..). 1+t. M#r%h, 1966.
' S2,+tit2t$ ,0 A%t No. '/ o) 1963, )or th *or$ 9Co&(#"i+9 *..). 1+t. M#r%h,
1966.
/ S2,+tit2t$ ,0 A%t No. '; o) 193;, )or th (r1io2+ +2,-+%tio" >'?.
4 Th *or$+ 9!%(t th St#t o) @#&&2 #"$ K#+h&ir9 o&itt$ ,0 A%t No. 6' o)
1936.
3 Noti)i$ $#t i+ 16th. M#r%h, 1949 1i$ Noti)i%#tio" No. 5. 4 >46?-5IA49 $#t$ th
1;th. M#r%h, 1949, GOI, 1949.
6 S2,+tit2t$ ,0 A%t No. 93 o) 1936, )or th *or$+ #"$ )i82r+ 9I"$i#" Co&(#"i+
A%t, 191/9 *..). 14th. @#"2#r0, 193-.
- Th )or&r +%tio" +2,+tit2t$ ,0 A%t No. '/ o) 1963, *..). 1+t. M#r%h, 1966.
4 S2,+tit2t$ ,0 th AO 193;, )or th *or$+ 9th :o&i"io" L8i+l#t2r9.
9 S2,+tit2t$ ,0 A%t No. 33 o) 196/, *..). 1+t. 5,r2#r0, 1964.
1; S2,+tit2t$ ,0 A%t No. 1 o) 1944, *..). 13th. 5,r2#r0, 1944.
11 S2,+tit2t$ ,0 A%t No. '; o) 193; )or th *or$+ 9i" #"0 St#t9.
1' I"+rt$ ,0 A%t No. 34 o) 1964, *..). 1+t. 5,r2#r0, 1969.
1/ I"+rt$ ,0 A%t No. // o) 1939, *..). 1+t. O%to,r, 1939.
14 S2,+tit2t$ ,0 A%t No. // o) 1939, *..). 1+t. O%to,r, 1939.
13 I"+rt$ ,0 A%t No. 1 o) 1944, *..). 13th. 5,r2#r0, 1944.
16 Cl#2+ >? o&itt$ ,0 A%t No. 3' o) 193/.
1- I"+rt$ ,0 A%t No. 4- o) 1961, *..). 1+t. @#"2#r0, 196'.
14 I"+rt$ ,0 A%t No. 6' o) 1944, *..). ';th. M#r%h, 1943.
19 I"+rt$ ,0 A%t No. 3/ o) 194-.
'; A$$$ ,0 A%t No. 34 o) 1964, *..). 1+t. 5,r2#r0, 1969.
'1 I"+rt$ ,0 A%t No. 61 o) 1941, *..). 1'---194'.
'' Cl#2+ >i? o&itt$ ,0 A%t No. // o) 1939, *..). 1+t. O%to,r, 1939.
'/ Cl#2+ >7? o&itt$ ,0 A%t No. // o) 1939, *..). 1+t. O%to,r, 1939.
'4 Cl#2+ >&? o&itt$ ,0 A%t No. // o) 1939, *..). 1+t. O%to,r, 1939.
'3 I"+rt$ ,0 A%t No. /9 o) 1949, *..). -th. M#r%h, 199;.
'6 Cl#2+ >",? r-lttr$ #+ %l. >"$? ,0 A%t No. 1 o) 1944, *..). 13th. 5,r2#r0,
1944.
'- Cl#2+ >"%? r-lttr$ #+ %l. >"? ,0 A%t No. 1 o) 1944, *..). 13th. 5,r2#r0,
1944.
'4 I"+rt$ ,0 A%t No. // o) 1939, *..). 1+t. O%to,r, 1939.
'9 S2,-+%tio" >'? o&itt$ ,0 th AO, 193;.
/; S2,+tit2t$ ,0 A%t No. // o) 1939, )or th *or$+ 9M#"#8i"8 A8"t9, *..). 1+t.
O%to,r, 1939.
/1 S2,+tit2t$ ,0 A%t No. 93 o) 1936 *..). 14th. @#"2#r0, 193-.
/' S2,+tit2t$ ,0 A%t No. 33 o) 196/ )or th )ir+t (ro1i+o, *..). 1+t. 5,r2#r0, 1964.
// S2,-+%tio"+ >/?, >4? #"$ >3? o&itt$ ,0 A%t No. 33 o) 196/, *..). 1+t. 5,r2#r0,
1964.
/4 S%tio"+ 1;A to 1;: i"+rt$ ,0 A%t No. 34 o) 1964, *..). 1+t. 5,r2#r0, 1969.
/3 S2,+tit2t$ ,0 A%t No. '; o) 1994, *..). /1+t. @#"2#r0, 1994.
/6 O&itt$ ,0 A%t No. 1 o) 1944, *..). 13th. 5,r2#r0, 1944.
/- A$$$ ,0 A%t No. 1 o) 1944, *..). 13th. 5,r2#r0, 1944.
/4 S2,+tit2t$ ,0 A%t No. 93 o) 1936, )or th *or$+, ,r#%7t+ #"$ )i82r+9+%. 1;/ o)
th I"$i#" Co&(#"i+ A%t, 191/ >- o) 191/?9, *..). 14th. @#"2#r0, 193-.
/9 S2,+tit2t$ ,0 A%t No. /6 o) 196'.
4; Th *or$ 9%#l"$#r9 o&itt$ ,0 B#"7i"8, P2,. 5i". I"+tit2tio"+ B N8o. I"+tr2.
L#*+ >A&$t? A%t, 1944, *..). /;-1'-1944.
41 I"+rt$ ,0 A%t No. /6 o) 196'.
4' S2,+tit2t$ ,0 A%t No. 6' o) 1936, )or th *or$+ 9i" I"$i#9.
4/ Th *or$+ 9th (ro1i+o to9 o&itt$ ,0 A%t No. // o) 1939, *..). 1+t. O%to,r,
1939.
44 S2,+tit2t$ ,0 A%t No. '; o) 193;, )or th *or$+ 9l+*hr th#" i" # St#t9.
43 S2,+tit2t$ ,0 A%t No. 33 o) 196/, )or th *or$+ 9i" !%++ o) )i1 (r %"t9,
*..). 1+t. 5,r2#r0, 1964.
46 A&"$$ ,0 A%t No. '; o) 1994, *..). /1+t. @#"2#r0, 1994.
4- I"+rt$ ,0 A%t No. 93 o) 1936, *..). 14th. @#"2#r0, 193-.
44 S2,+tit2t$ ,0 A%t No. 93 o) 1936 )or th *or$+, )i82r+ #"$ lttr 9+%tio"+ 1;3
#"$ 1;3A o) th I"$i#" Co&(#"i+ A%t, 191/9, *..). 14th. @#"2#r0, 193-.
49 S%tio" 13 r"2&,r$ #+ +2,-+%tio" >1? thro) ,0 A%t No. // o) 1939, *..).
1+t. O%to,r, 1939.
3; Crt#i" *or$+ o&itt$ ,0 A%t No. /6 o) 196'.
31 S2,+tit2t$ ,0 A%t No. 1 o) 1944, *..). '9th. M#r%h, 1943.
3' I"+rt$ ,0 A%t No. 6' o) 194', *..). ';th. M#r%h, 1943.
3/ S2,+tit2t$ ,0 A%t No. 34 o) 1964, *..). 1+t. 5,r2#r0, 1969.
34 I"+rt$ ,0 A%t No. 33 o) 196/, *..). 1+t. 5,r2#r0, 1964.
33 S2,+tit2t$ )or th *or$+, ,r#%7t+ #"$ )i82r+9+2,-+%tio" >'?9 ,0 A%t No. // o)
1939, *..). 1+t. O%to,r, 1939.
36 Th *or$+ 9#ll or #"0 o)9 o&itt$ ,0 A%t No. 1 o) 1944, *..). 13th. 5,r2#r0,
1944.
3- I"+rt$ ,0 A%t No. 61 o) 1941, *..). 1+t. M#0, 194'.