NAME:- MORMARE AKASH SURESH

STD:- M.COM PART 1

ROLL NO:-59
DIV:- A
GUIDE:- PROF.MAHENDRA AGALE.
TOPIC:- WHAT ARE THE POWERS OF RBI UNDER SECTION 21, SECTION 35 AND SECTION 36 TO
36AD OF BANKING REGULATION ACT, 1948?

Powers of RBI section 21 section 35 and section 36 to 36AD

As per the act reserve Bank of India is the regulatory authority of banks. Reserve Bank of
India has some powers for regulation of bank under the act. These powers are explained
below:-
1. Section 21:- control advances by banking companies
Section was introduced with a view to enable the reserve Bank to give directions to bank
regarding the loan policies so that it may control facilities and check speculative activities.
Under the provisions of section 21, the reserve Bank has been empowered to determine the
policy in in relation to advances to be followed by banking companies in the interest of
public. The reserve Bank in particular mein give direction to banking companies, either
generally or to any banking company or group of Banking companies particularly, as to the
purpose for which advances may or may not be made, the margins to be maintained in
respect of secured advances etc. The reserve bank gives direction to banking companies as
to:-
1. The purpose for which advances may or may not be made.
2. The margins to be maintained is risk in respect of secured advances.
3. The maximum amount of advances or other financial accommodation which, having
regard to the paid up capital reserves and deposits of a banking company and other
relevant consideration, may be made by that banking company to anyone company,
firm, association of persons or individual.
4. The maximum amount up to which having regard to the consideration referred to in
clause c guarantees may be given by a banking company on behalf of anyone
company, firm, association of persons or individual.
5. The rate of interest and other terms and conditions on which advances or other
financial accommodation may be made or guarantees may be given.
Every banking company shall be bound to comply with any directions given to the under this
section.
Section 35 :-Inspection
Section 35 of the act deals with the reserve Bank power of audit and inspection
I a) According to this section the reserve Bank may
 1) at its own initiative or
2) at the instance of Central government
b) cause and inspection of any banking company and its book and accounts it may be made
by one or more officers of the reserve Bank.such an inspection is done to find out that
whether the affairs of banking company are conducted in the interest of the depositors or
not.
c). Directors or officers of the banking company shall be under an obligation to produce to
the inspecting team all the documents in his position relating to the affairs and the account
of the company.
d). Report is prepared by the officials after inspection. A copy of it is sent to the central
government. On receipt of the inspection report received from the reserve Bank if the
central bank finds that the affairs of the banking company concerned are not been
conducted in the best interest of the depositors and opportunity is given to the sach
banking companies to remove the irregularities.
e). Economical and other assistance is also provided to such banking company.
f). The reserve Bank of India after giving opportunity to the banking company to explain its
position may:-
1. Prohibited the banking company from receiving fresh deposits or
2. Apply to the high court for winding up business of the concerned banking company.
Section 36:- for the powers and functions of the reserve Bank:
Under section 36 1 of the act reserve Bank has power to caution or prohibit banking
companies against entering into any transaction or class of transaction.
a). It has power to give advice to any banking company.
b). On a request by the company's it can assist as intermediary or otherwise in proposals for
the amalgamation of search banking companies.
c). It has a power to require the banking company to call a meeting of its directors for the
purpose of considering any matters relating to affairs of banking company.
d). It has a power to recruit one or more officer to watch the proceedings at any meeting on
the boards of directors of any committee.
e). It also has a power to one or more officers to observe the manner in which the affairs of
the banking company of IPS officers or branches are being conducted.
f). It can ask for changes in the management of any banking company.
g). The reserve Bank may appoint sub staff at such places as it considers necessary for the
screen ATI of the returns statement and information furnished by banking companies under
the act and to ensure its efficient performance of its responsibility.
Section36 (AA):- managerial and other persons from office.
Under section 36 a of Banking regulation act RBI enjoys vas power of day-to-day supervision
and control of Banking companies.
a). When the RBI is satisfied that it is in the interest of the public or depositors it may be
removed from office and chairman director chief executive officer or other officers or
employees of a banking company after giving a reasonable opportunity of making a
representation to the RBI against the proposed order.
b). However if in opinion of RBI the delay will be detrimental the interest of the banking
company or is deposited it made first and then consider the representation.
c). The person sorry move will have a right to appeal to the central government within 30
days from the date of communication to him of the order and the decision of the central
government shall be final and shall not be called into question by any court.
d). Search an order has been made by the RBI it may appoint a suitable person in the place
of the remove person and he will hold office during the pressure of RBI for a period not
exceeding 3 years or search for the period not exceeding 3 years.the person remove under
this section shall not be entitled to claim any lekin pension for loss or termination of office.
Reserve Bank of India is empowered under section 36AA of the banking regulation act
remove any chairman director chief executive officer aur other officer or employee of a
banking company. For this purpose the bank has to be satisfied that it is necessary to do so.
The bank RBI has the discretionary power to remove management in other personnel in the
following circumstances.
1). Public interest
2). In the office of the banking company being conducted in a manner.
3). Securing proper management of the banking company the reserve Bank has to pass
search in order recording the reasons in writing. Before passing the order the affected
person has to be given a reasonable opportunity of making a representation against the
proposed order where an urgent action is required and delay would be against the interest
of the company or its depositors the reserve Bank is empowered to direct by order. At the
time of giving opportunity of making a representation that the person considered shall not
act in his or her official capacity or directly or indirectly take part in the management of the
bank for the date of such order pending consideration of the representation. The awesome
so remove shall not be entitled to any compensation for loss of office not withstanding
anything contained in any law, the memorandum, articles on any contract as the provisions
of section 36AA have overriding effect.

 *Appeal:-an appeal against the order of removal lies with the central government.
An appeal has to be filed within 30 days from the date of communication of the
order. Applate decision of the central government and subject there to the order of
the reserve Bank shall be final and not liable to challenge in any civil court.
 *Effect of the order of removal:-reserve Bank passing a removal order the person
concerned ki cheeses to hold office with he or she was holding till then. Further he or
she is prohibited from directly or indirectly taking part in the management of any
banking company for a a period not exceeding five years as may be specified in the
order. Contravention of the order is punishable with a line of rupees 250 for each
day during which the contravention continuous.
  *Appointment of a suitable person:-when any chairman director chief executive
officer other officer or employee is removed by the reserve Bank under section 36AA
as above, the reserve Bank may appoint a suitable person in this place. Such person
shall hold office at the pleasure of the reserve Bank. Subject to this, the appointment
may be for a period not exceeding three years and is extendable for the period not
exceeding three years at a time. Such appointee shall not include any obligation or
liability for action taken in good faith in the execution of the duties of his office.
Section36 (AB):-appoint additional directors.
a). If the reserve Bank is in the interest of the banking company or its depositors it is
necessary to do it may from time to time by order in writing a point with effect from such
date as may be specified in the order one or more persons to hold office as a additional
directors of the banking company.
b). Any person appointed as additional director in pursuance of the section
 Shall hold office during the pleasure of the reserve Bank and subject there to for a
period not exceeding three years for search for the period not exceeding three years
at a time as a reserve tank and specify.
 Shall not include any obligation or liability by reason not only for his been a director
or anything done or omitted to be done in good faith in the execution of the duties
of his office or in relation there to and
 Shall not be required to hold qualification shares in the banking company.
c). For the purpose of a reckoned meaning and proportion of the total number of directors
of the banking company and additional directors appointed under this section shall not be
taken into account.
Section36 (AC):-override other laws.
Any appointment or removal of a director chief executive officer or other officer or
employee in persons of section 36 AA or section 36 AB shall have effect not with
understanding anything to the contrary contained in the companies act 1956 or any other
law for the time being in force or in any contract or any other instrument.
Section 36 (AD):-punishments for certain activities in the waiting to the Banking companies.
Amending act 1968 has introduced part to be containing only section 36 AD. This section is
intended mainly to prohibit bank employees from the sorting to the demonstration and
causing obstruction to the the public while agitating for their demands related to the service
conditions.
a). Prohibited persons from:
 According to this section is prevented from obstructing any person from lawfully
entering or leaving any office or place of business or a banking company or from
carrying on any business there.
 In the same way a person is prevented from any demonstration in the office of the
banking company which is boiling which results in the extraction of the transaction
of normal business of the banking company.
  A person should not do any actor any manner calculating to undermine the
confidence of the depositors in the banking company.
b). A person controlling the above person without any reasonable excuse shall be
punishable with imprisonment for a term which may extend to six months or with fine may
exchange to 1 rupees or with both.