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Legal and Regulatory Aspects of Banking

Various Acts relating to Banking


Name of Act
Reserve Bank of India
Act 1934
Last amendment to the
Act in 2006.

Banking Regulation Act


1949

Effective
date
1.1.1935

Remarks

16th March
1949

The act extends to whole of India


BR act was enacted to consolidate
and amend law relating to banking
and to provide for a suitable frame
work for regulating the banking
companies
In 1965 the Act was amended to
Co Operative Banks as well with
certain modification (Section 56)
Introduced for taking over Imperial
Bank
Nationalisation of 14 and 6 Banks
respectively.

State Bank of India Act


1955
Banking
Companies
(acquisition
and
Transfer
of
Undertakings) Act 1970
and
Banking
Companies (acquisition
and
Transfer
of
Undertakings) 1980
Regional Rural Bank
Act 1976
National Housing
Board Act 1987
Multi State Co
operative Societies Act
2002.

Reserve Bank of India came into


existence on 1st April 1935
RBI was Nationalized on 1st
January 1949.
Act as Note issuing Authority
Act as Bankers Bank
Banker to State and Central
Government
Function as a promoter of
Agriculture and Industry to
accelerate pace of economic
development
Monitory policy and Credit control
measures are undertaken by RBI

9.7.1988

5 RRBs were formed on 2nd October


1975
Authorised capital of each RRB is
Rs5 Crores.
Authorized capital of NHB is Rs500
Lakhs
This act is applicable to Co
Operative Banks operating in two
state.

The Deposit Insurance


and credit Guarantee
Corporation Act 1961

Negotiable Instruments
Act 1881

1st March
1882

Provides cover for default in


respect of advances under Priority
Sector against payment of
guarantee premium.
Also gives insurance cover for
small depositors up to Rs1,00 ,000/
against payment of guarantee
premium.
The act is applicable to whole of
India including J&K and Sikkim .
There are 147 Section in NI Act
Important sections includes.
The following Sections of NI act
gives protection to the paying
Bank
Section --Payment in due
10
course
Section --protection to a
85
Bank paying
Order Cheque
Section --85A
Section --89
Section --128
Section 31

21st June
2002
Recovery of Debts due to 24th June
Banks
and
Financial 1993
Institution Act 1993 (DRT
1993)
The
Bankers
Book
Evidence Act 1891
Legal Services Authorities
Act 1987 Lok Adalats.
SARFAESI Act 2002

Protection to a
Bank paying order
DD
Payment of
altered cheques
where alteration
is not visible.
Payment of
crossed cheques
Responsibility of
Drawee
Bank
subject
to
satisfaction under
Section 10

Extends to whole of India including


State of J&K
This Act constituted the Special Debt
Recovery Tribunals.)
To facilitate the production of book of
evidence
For compromise or settlement of
disputes between parties.

Consumer Protection Act


1986
Societies Registration Act
1860
Limitation Act 1963
Income Tax Act 1961
Contract Act 1872

Sale of Goods Act 1930


Partnership Act 1932

Companies Act 2013

Foreign
Exchange
Management Act 1999
(FEMA 1999)
Transfer of Property Act
1882
Right to information Act
2005
The prevention of Money
Laundering Act 2002.
Information
Technology
Act 2000
SEBI Act 1992
Arbitration
and
Conciliation Act 1996

This Act is to protect the interest of


consumers.
Regarding registration of Societies.
Regarding limitation period
The Act refers to the general Principles
of Contract and also special types of
contracts like Guarantee and
Indemnities
Deals with the concept of sale, the
rights of unpaid seller etc
Registration of a partnership deed has
added advantage in that the firm can
sue the debtors for recovery of money
due from debtors One partner can sue
the other partners in case one partner
is forced to pay amount to outsiders
through Court order under the Joint and
Several responsibility
Maximum number of partners in a
Banking partnership firm ---- 10
Maximum partners in a firm doing
business other than Banking ----- 20
Partnership with Professionals as
partners ------------- 50
No deed then fluctuating Capital
No deed means sharing profit equal
Private Ltd Company minimum 2
shareholders maximum 200, Public Ltd
Co minimum 7 no maximum One man
Company Share holder 1
To facilitate external trade and
payment for promoting the orderly
development
Deals with sale/ Mortgage etc of
Immovable properties.
Intent to provide for accessing top
information
To prevent money laundering
Bank has to comply with KYC norms
and to report CTR and STR transactions
Prevention of Bad debts
The controller of Capital Markets.
When ever dispute arises between
Banks or Financial Institution with the
Securitization or Reconstruction
Company the same is resolved under

the provisions of Arbitration and


Conciliation Act 1996.

Certain important provisions in Schedule to the limitation Act


Description of suit
For money payable for money
lent
For money lent under an
agreement that it shall be
payable on demand,
On a bill of exchange payable
at sight or after sight but not at
a fixed time.
On a bill of exchange or
promissory note payable at a
fixed time after sight or after
demand
On a promissory Note or a
bond payable by instalments

For arrears of rent


For specific performance of a

Period of
Limitation
Three years

Time from which period


begins to run.
When the loan is made

Three years

When loan is made

Three years

When the bill is presented

Three years

When the fixed time expires.

Three years

The expiration of the first term


of payment as to the part then
payable and for other parts the
expiration of the respective
terms of payment
When the arrears become due.
The
date
fixed
for
the

Three years
Three years

contract

To enforce payment of money


secured by a mortgage or
otherwise charged
upon
immovable property
By Mortgage
a) For foreclosure
By Mortgage
a) For
possession
of
Immovable property

Three years

12 years
30 years

performance or if no such date


is fixed when the plaintiff has
noticed the performance is
refused.
When the money sued become
due.
When the money secured by
the mortgage become due.
When the mortgage becomes
entitled to possession.