Reserve Bank of India Act, 1934

The Act contains the definition of the scheduled banks, as they are mentioned in the 2nd
Schedule of the Act. These are banks which were to have paid up capital and reserves above 5
lakh

Section 7 controversial and confusing section: Section 7 states that central government can
legislate the functioning of the RBI through the RBI board, and the RBI is not an autonomous
body.

Section 17 of the Act defines the manner in which the RBI can conduct business.

The RBI can accept deposits from the central and state governments without interest.

It can purchase and discount bills of exchange from commercial banks.

It can purchase foreign exchange from banks and sell it to them.

It can provide loans to banks and state financial corporations.

It can provide advances to the central government and state governments.

It can buy or sell government securities.

It can deal in derivative, repo and reverse repo

Section 18 deals with emergency loans to banks.

Section 21 states that the RBI must conduct banking affairs for the central government and
manage public debt.

Section 22 states that only the RBI has the exclusive rights to issue currency notes in India.

Section 24 states that the maximum denomination a note can be is ₹10,000 (US$130).

Section 26 of Act describes the legal tender character of Indian bank notes.

Section 28 allows the RBI to form rules regarding the exchange of damaged and imperfect notes

Section 31 states that in India, only the RBI or the central government can issue and
accept promissory notes that are payable on demand. However, cheques, that are payable on
demand, can be issued by anyone.[2]
Section 42(1) says that every scheduled bank must have an average daily balance with the RBI.
The amount of the deposit shall be more that a certain percentage of its net time and demand
liabilities in India
Banking Regulation Act, 1949
The Banking Regulation Act, 1949 is a legislation in India that regulates all banking firms in
India.[1] 

Passed as the Banking Companies Act 1949, it came into force from 16 March 1949 and
changed to Banking Regulation Act 1949 from 1 March 1966.

It is applicable in Jammu and Kashmir from 1956.

Initially, the law was applicable only to banking companies. But, 1965 it was amended to make it
applicable to cooperative banks and to introduce other changes. [2]

In 2020 it was amended to bring the cooperative banks under the supervision of the Reserve
Bank of India

The Act provides a framework under which commercial banking in India is supervised and
regulated.
The Act supplements the Companies Act, 1956.[4] 
Primary Agricultural Credit Society and cooperative land mortgage banks are excluded from the
Act.[2]
The Act gives the Reserve Bank of India (RBI) the power to license banks, have regulation
over shareholding and voting rights of shareholders & supervise the appointment of the boards
and management;
regulate the operations of banks;
lay down instructions for audits;
control moratorium, mergers and liquidation;
issue directives in the interests of public good and on banking policy, and impose penalties. [2]

In 1965, the Act was amended to include cooperative banks under its purview by adding the
Section 56.
Cooperative banks, which operate only in one state, are formed and run by the state
government. But, RBI controls the licensing and regulates the business operations. [2] 
The Banking Act was a supplement to the previous acts related to banking.
In 2020, Finance Minister Nirmala Sitaraman introduced a bill to amend the Act. The bill sought
to bring all cooperative banks under the Reserve Bank of India. It brought 1,482 urban and 58
multi-state cooperative banks under the supervision of the RBI. The bill granted the RBI ability to
reconstruct or merge banks without moratoriums. The bill was passed by the parliament
Foreign Exchange Management Act
The Foreign Exchange Management Act, 1999 (FEMA), is an Act of the Parliament of India "to
consolidate and amend the law relating to foreign exchange with the objective of facilitating
external trade and payments and for promoting the orderly development and maintenance of
foreign exchange market in India". [1] 

It was passed in the 29th December 1999 in parliament, replacing the Foreign Exchange
Regulation Act (FERA) 1973 , which had become incompatible with the pro-liberalization policies
of the Government of India.(  It required imprisonment even for minor offences. Under FERA, a
person was presumed guilty unless he proved himself innocent, whereas under other laws a
person is presumed innocent unless he is proven guilty)

It enabled a new foreign exchange management regime consistent with the emerging

framework of the World Trade Organization (WTO).

It also paved the way for the introduction of the Prevention of Money Laundering Act, 2002,
which came into effect from 1 July 2005.

MAIN FEATURES OF FEMA: The buying and selling of foreign currency and other debt
instruments by businesses, individuals and governments happens in the foreign exchange
market.
Apart from being very competitive, this market is also the largest and most liquid market in the
world as well as in India.
It constantly undergoes changes and innovations, which can either be beneficial to a country or
expose them to greater risks. The management of foreign exchange market becomes
necessary in order to mitigate and avoid the risks.
Foreign Exchange Market Whether under FERA or FEMA’s control, the need for the
management of foreign exchange is important. It is necessary to keep adequate amount of
foreign exchange.
FEMA served to make transactions for external trade easier –
1. Transactions involving current account for external trade no longer required RBI’s permission.
2. The deals in Foreign Exchange were to be ‘managed’ instead of ‘regulated’.

Main Features
 Activities such as payments made to any person outside India or receipts from them, along
with the deals in foreign exchange and foreign security is restricted. It is FEMA that gives the
central government the power to impose the restrictions.
 Free transactions on current account subject to reasonable restrictions that may be imposed.
 Without general or specific permission of FEMA, MA restricts the transactions involving
foreign exchange or foreign security and payments from outside the country to India – the
transactions should be made only through an authorized person.
 Deals in foreign exchange under the current account by an authorized person can be
restricted by the Central Government, based on public interest generally.
 Although selling or drawing of foreign exchange is done through an authorized person, the
RBI is empowered by this Act to subject the capital account transactions to a number of
restrictions.
 Residents of India will be permitted to carry out transactions in foreign exchange, foreign
security or to own or hold immovable property abroad if the currency, security or property
was owned or acquired when he/she was living outside India, or when it was inherited by
him/her from someone living outside India.
Government Securities Act, 2006
The Government Securities Act, 2006 is a legislation of the Parliament of India, which aims to
introduce various improvements in the government securities market and the management of
government securities by the Reserve Bank of India (RBI)

The Public Debt Act, 1944 was an act of the Parliament of India which provided a legal
framework for the issuance and servicing of government securities in India. It was considered
outdated, and the Government Securities Act, 2006 was introduced to replace it. [2] The Act
oversees government securities and their management by the Reserve Bank of India.[3]

The second clause of Section 2 defines government securities as a securities issued by the
central or a state government for the purpose of raising a public loan.