RBI Act

Functions of RBI:

The Reserve Bank of India (RBI) performs a wide range of functions

aimed at maintaining monetary stability, regulating the financial system,
and fostering economic growth in India. Here are the primary functions
of the RBI:

i. Monetary Authority: The RBI is responsible for formulating and

implementing India's monetary policy. It aims to maintain price
stability and control inflation while supporting economic growth.

ii. Currency Issuance and Management: One of the fundamental

functions of the RBI is to issue currency notes and coins in India. It
ensures an adequate supply of currency to meet the demands of the
economy while managing currency circulation efficiently.

iii. Banker to the Government: The RBI acts as the banker and fiscal
agent to the central and state governments. It manages their
accounts, facilitates government borrowing, and provides banking
services to ensure smooth financial operations of the government.

iv. Regulator of the Banking System: The RBI regulates and supervises
banks and financial institutions to maintain stability and integrity in
the banking system. It issues licenses to banks, sets regulatory
guidelines, and monitors compliance with prudential norms.

v. Lender of Last Resort: As the lender of last resort, the RBI provides
emergency liquidity assistance to banks and financial institutions
facing liquidity crises to prevent systemic disruptions in the
financial system.

vi. Foreign Exchange Management: The RBI manages India's foreign

exchange reserves and formulates policies to stabilize the
exchange rate of the Indian rupee. It intervenes in the foreign
exchange market to maintain orderly conditions and external
sector stability.

vii. Developmental Role: The RBI plays a developmental role by

promoting financial inclusion, supporting priority sectors such as
agriculture and small-scale industries, and fostering innovation in
the financial sector through regulatory initiatives.

viii. Regulator of Payment and Settlement Systems: It regulates

payment and settlement systems to ensure the efficiency, safety,
and integrity of payment transactions in the economy. This includes
oversight of payment networks, clearinghouses, and electronic
funds transfer systems.
ix. Data Compilation and Publication: The RBI collects, compiles, and
publishes a wide range of economic and financial data, including
monetary aggregates, banking statistics, and economic indicators.
This data serves as a crucial resource for policymakers,
researchers, and market participants.

x. Consumer Protection: The RBI takes measures to protect the

interests of consumers in the financial sector. It oversees fair
practices by banks and financial institutions and addresses
grievances through mechanisms such as the Banking Ombudsman
Scheme.

Important Sections
Chapter I: Title/Definitions
Chapter II: Incorporation, Capital, Management and
Business
3 Incorporation of RBI
4 Capital of the Bank: ₹5 crore
7 Management:
i. Power of General superintendence and direction is with
Central Board of Directors
ii. Governor and in his absence, DG nominated by him can
also exercise the above power
8 1. Composition of Central Board
(1)(a) 5 Directors appointed by Central Govt.
i. Governor: Shri Shaktikanta Das
ii. 4 Deputy Governors: Dr. M.D. Patra, Sh.
M. Rajeshwar Rao, Sh. T Rabi Shankar,
Sh. Swaminathan J
(1)(b) 4 Directors appointed from Local Boards
i. Northern: Ms. Revathy Iyer
ii. Southern: - Nil
iii. Eastern: Prof. Sachin Chaturverdi
iv. Western: Nil
(1)(c) 10 Directors nominated by Central Govt.
Presently 6 on Board
(1)(d) 2 Directors nominated by Central Govt. from
Government Officials. Presently 2
2.
 Salary & Allowances of Governor/DG
 Central Govt. in consultation with Governor appoint DG
as Chairman of NABARD

3.
 DG cannot vote in Central Board Meeting but can attend
  In the absence of Governor, DG authorised by him can
vote

4. Term of Office of Director appointed under:

 8(1)(a) Governor/DG: 5 yrs and can be reappointed
 8(1)(b): Given in Section 9 {4 yrs, eligible for
reappointment (maximum tenure: 8 yrs)}
 8(1)(c): 4 yrs and eligible for reappointment (maximum
tenure: 8 yrs)
 8(1)(d): At the pleasure of GoI

9 Local Board
 4 Areas notified in Schedule 1st as Local Boards
(represent and protect local interests)
(1)
 4 Board: North, South, East, West
 5 Members in each Board
Each Board elects Chairman among 5 members
(2)
themselves
Tenure of each member: 4 yrs, can be reappointed,
(3)
max tenure: 8 yrs
Advise Central BoDs
(4)
Perform duties as advised by Central BoDs
10 Disqualification of Director/Members of Local Boards
1. No person can be appointed as above if,
a. a salaried Govt. Official
b. insolvent/defaulter
c. lunatic
d. officer/bank employee
e. Director of a banking company/cooperative bank
2. No two persons can be Directors if involved in any manner
in same pvt business/ company
3. Not applicable to Directors appointed under 8(1)(a) and 8(1)
(d)
11 Removal of Director/Member of Local Board in following ways:
(1)GoI can remove all types of Directors
(2)Director under 8(1)(b) & 8(1)(c)– Absent in 3 consecutive
Board Meetings
(3)GoI will remove Directors and Central Board will remove
Members of Local Boards
(4)After disqualification, any of the above cannot be
reappointed till the tenure period of previous appointment is
exhausted
(5)In case Director/Local Board Member is appointed MLA/MP,
the same has to resign from MLA/MP in two months or
otherwise is disqualified
(6)Director can resign to GoI, Local Board Member to Central
Board
13 Meetings of Central BoD
(1)Convened by Governor, 6 times in an year, at least once
 every quarter
(2)Four Director can request Governor to convene a meeting in
case of need
(3)Governor can have a second vote in case of tie. Governor in
his absence can nominate a DG to vote {Section 8(3)}
17 Permitted Business Activities- No Longer relevant- Check
1 Accepting deposit from and for GoI, State Govt., Local
Authorities, Banks, Any other persons without interest
1A Accepting deposit from Banks repayable with interest
2 Purchase, sale and rediscount of bills of exchange,
promissory notes
a Scheduled Bank/State Coop. Bank/Others
Bonafide trade transactions
i. 180 days: Bills of exchange and Promissory
notes for export of goods from India
ii. 90 days: Other cases
b Scheduled Bank/State Coop. Bank/Other
 15 months: Financing agricultural operations/
Marketing of crops
bb State Coop. Bank/State Finance Corporation/Others
 12 months: Financing production/marketing
activities of SSI
c Scheduled Bank
 90 days: Trading in securities of GoI/State
govt.
3 Foreign Exchange
a Purchase and sale of Forex to Scheduled Banks
b Purchase, Sale and Rediscount of Bills of Exchange
drawn in any country outside India which is also
member of IMF
i. 180 days180 days: Bills of exchange and
Promissory notes for export of goods from India
ii. 90 days: Other cases
3A Loans from foreign countries to Scheduled banks/
State Coop Banks against Promissory notes- 180 days
4 90 days loan to Local Authorities, Scheduled Banks,
State Cooperative Banks, State Finance Corporations
against
a. Stocks, Funds and Securities
b. Gold, Silver, Documents of title to same
c. Bills of exchange and promissory notes
d. Promissory notes of Scheduled Banks/State Coop
Banks
4A 18 months Loans to State Finance Corporations
against GoI/State Govt. Securities
4AA Contributions to NRC(LTO) and NRC(Stabilization
funds) under Section 42 and 43 of NABARD Act, 1981
4B Loans to Industrial Finance Corporation of India
a. 90 days (against Securities)
 b. 18 months (against Securities and Guaranteed by
GoI)
4BB Loans to Other Financial Institutions notified by GoI
a. 90 days
b. 18 months (against Securities Guaranteed by
GoI/State Govt.) (Loans<60% of paid up capital)
4BB Loans to Unit Trust of India
B a. 90 days (against Securities)
b. 18 months (against Securities and Guaranteed by
GoI)
4C Loans to Warehousing Corporation of India
WCI established under Agricultural Produce
(Development & Warehousing) Act, 1956
a. 90 days (against Securities)
b. 18 months (against Securities and Guaranteed by
GoI)
(Loans to Central Warehousing Corp.< ₹3 crore,
State Warehousing Corp.<₹50 lakhs)
4D Loans to Deposit Insurance Corporation
(T&C decided by Central Board)
4DD Loans to National Housing Bank
(T&C decided by Central Board)
4E Loans to NABARD, 18 Months
4F Contributing to Initial Capital of Unit Trust
4G Loans to Exim Bank, Reconstruction Bank, SIDBI,
NaBFID or Any Other DFI out of National Industrial
Credit (LTO), Section 46C, RBI Act
4GG Loans to NHB out of National Housing Credit (LTO),
Section 46D, RBI Act
4H Loans to SIDBI
a. 90 days against security of Stocks, Funds and
Securities
b. Against bills of exchange/promissory notes
maturing within 5 yrs
4I Loans to purchase FOREX from RBI
Scheduled Banks, EXIM Bank, Reconstruction Bank,
SIDBI, IFC, NabFID, Others
4J Loans to EXIM Bank
a. 90 days against security of Stocks, Funds and
Securities
b. Against bills of exchange/promissory notes
maturing within 5 yrs
4K Loans to Reconstruction Bank
a. 90 days against security of Stocks, Funds and
Securities
b. Against bills of exchange/promissory notes
maturing within 5 yrs
4L Loans to NaBFID
a. 90 days against security of Stocks, Funds and
 Securities
b. Against bills of exchange/promissory notes
maturing within 5 yrs
5 Loans to GoI and State Govt. repayable in 3 Months
6 Remittances through DD, telegraphic transfers etc.
6A Dealing in derivatives with Central Board approval
Derivative is an instrument to be settled at a future
date, whose value is derived through changes in the
following factors-
i. RoI
ii. Prices of securities of GoI/State Govt.
iii. Prices of foreign securities
iv. FOREX Rate
v. Index of rates/prices
vi. Credit rating/index
vii. Price of gold/silver
viii. Any other variable of similar nature
8 Purchase and sale of GoI/State Govt. securities, P&I
guaranteed by respective Govts.
8A Purchase and Sale of shares of NABARD, Deposit
Insurance Corporation, SBI, Other FIs as notified by
GoI
8AA Promoting, establishing and aiding any financial
institution/subsidiary
8B Keeping of Deposits with State Bank as approved by
GoI
9 Custody of monies, securities and other items of value
10 Sale and realization of movable/immovable properties
11 Act as a agent for GoI/State govt./IFCI/other
Institutions constituted by law for-
a. Sale/Purchase of Gold/Silver/Forex
b. Sale/Purchase/Transfer/Custody of Bills of
Exchange, Securities/Shares
c. Collection of proceeds-principal, interest, dividend
of any securities/shares
d. Remittance of above proceeds by bills of exchange
payable in India/abroad
e. Management of public debt
f. Issue/Management of bonds, debentures
11A Acting as agent of GoI
b. Administering any scheme for subsidizing RoI or
other charges associated with advances for the
purpose of export facilitation
12 Purchase & Sale of Sold/Silver/Bullion/Forex with
Current Authority of Foreign Countries/Bank for
International Settlements/Other Financial Institutions
formed by any Foreign Govt.
12A Sale/Purchase of Securities issued by any Foreign
Govt. or their Institution, Maturity of 10 yrs, Payable
 in Foreign Currency
 For Foreign Govt. Institutions, repayment of
principal & interest needs to be guaranteed by the
Foreign Govt.
12A Lending/Borrowing of Securities of GoI/State
A Govt./Local Authority
12A Dealing in repo/reverse repo
B Lending/Borrowing of funds through GoI/State
Govt./Local Authority
(a) Repo: Borrowing funds by Selling Securities of
Govt./State Govt./Local Authority with an
agreement to repurchase the securities on a
mutually agreed future date at an agreed price
inclusive of interest
(b)Reverse Repo: Lending funds by purchasing
Securities of Govt./State Govt./Local Authority with
an agreement to resell the securities on a mutually
agreed future date at an agreed price inclusive of
interest
12B  Loans & Advances in foreign currency to SCBs,
EXIM Bank, SIDBI, IFC, NaBFID, State Finance
Corporation, Other Financial Insitution, Other DFIs
 Recommendation of RBI and Approval of GoI
Required
 T&C set by Central Board
 Against Promissory notes
 Declaration required from Borrowing bank for:
o Loan and advances in foreign currencies for
financing international trade/import of capital
goods/other purposes approved by GoI
13 Opening of an account with a Bank outside India- Bank
may be incorporated by a Foreign Govt. or a Bank
Incorporated in India having office abroad, Investing
in shares and securities through that account
13A Arrangement for clearing & settlement of amount on
account of external trade of India with any other
country- Remittances
Becoming member of Global Bodies of such clearing
arrangements
14 Borrowing<1 month required for Business of RBI from
 Scheduled Bank
 Principal currency authorities of foreign nations
 At any point such borrowing cannot exceed the
capital of the RBI
15 Making and issue of Bank Notes
15A Exercise of Powers/Functions/Duties entrusted
through this Act
15B Facilities for training in Banking & Research to
facilitate task as per 15A
 16 Dealing with all matters incidental/consequential
while performing duties as per the Act
18 Power of Direct Discount
Section 18 of the RBI Act empowers the Reserve Bank of India
to provide short-term loans to banks and the central
government in exceptional circumstances. These loans are
meant to address temporary liquidity issues and maintain
financial stability. The section doesn't specify the terms or
conditions of these loans, giving the RBI flexibility to respond
to different situations.
Regulating credit in the interests of Indian trade, commerce,
industry and agriculture- without any limitation
18(3) Make loans/advances to
(1)State Coop Bank
(2)Cooperative society on the recommendation of State Coop
Bank within its area of operation
(3)Any other person<90 days, as per T&C of the Bank
18A Validity of Loans/Advances not to be questioned

 Section 18A of the RBI Act safeguards the Reserve Bank's

loans. It ensures two things:

i. Validity of Loans: It prevents challenges to the legality

of loans made by the RBI under a special provision
(Section 18). This protects the RBI's lending decisions.
ii. Funds Used for Repayment: Money received by
borrowers (banks or others) using these loans must be
specifically used to repay the RBI. Borrowers essentially
hold these funds in trust until they settle their dues with
the RBI.
 In short, Section 18A secures the RBI's authority to grant
loans and ensures borrowed funds are used for repayment.
19 Business which the Bank may not transact
(1)Engage in trade/have direct interest in
commercial/industrial activity
(2)Purchase share of Banking Company/Other Company/Grant
loans against such shares
(3)Advance money against immovable property/Become the
owner of immovable property except necessary for its own
office premises and residences for officers/staff
(4)Make loans/advances to the public
(5)Draw/accept bills payable other than on demand
(6)Allow interest on deposits/current accounts

Chapter III- Central Banking Functions

20 Obligations of the Bank to transact Govt. Business
Accept/Make payments for account of GoI-Remittance,
Management of public debt
21 Bank to have the right to transact Govt. Business in India
(1)GoI entrusts RBI with all its money, remittance, FOREX,
banking transactions in India, GoI deposits with RBI is
interest free; GoI should be able to carry on transaction
even at places where RBI’s does not have its
branches/agencies
(2)Management of public debt and issue of new loans
(3)GoI decides conditions for (1) and (2)
(4)Any agreement made under this Section has to be laid
before the Parliament

21A (1)RBI to transact business of State Govt. on agreement

a. State Govt. can entrusts RBI with all its money,
remittance, FOREX, banking transactions in India,
State Govt. deposits with RBI is interest free;
b. Management of Public Debt/Issue of new loans by the
State
(2)Any agreement made under this Section has to be laid
before the Parliament
21B Effect of agreements made between the Bank and certain
States before the 1st November 1956
22 Right to issue Bank Notes
(1)RBI has sole right to issue Bank notes in India, period fixed
by GoI, issue of currency notes of GoI is done on the
recommendation of Central Board
(2)The GoI will cease to issue notes as and when this act comes
into force
22A Important
Section 24, 25, 27, 28 & 39 will not apply to bank notes in
digital form
23 Issue Department
(1)The issue of bank notes shall be conducted by the Bank in
an issue department- which is separated/distinct from
Banking Department; assets of Issue Department is not
subject to any liability other than the ones mentioned in
Section 34
(2)Issue department will not issue bank notes to Banking
Department/Any other person except for exchange of other
bank notes/coins/bullion/securities as permitted by this act
and they form part of RBI’s reserves
24 Denomination of Notes
(1)Denomination of notes is Specified by GoI on
recommendation of Central Board- 2, 5, 10, 20, 50, 100,
500, 1000, 5000, 10000 or any other denomination but less
than 10000
(2)GoI on recommendation of Central Board direct for
discontinuance of issue of bank notes of specific
denominations
25 Form of Bank Notes
 Design, Form & Material approved by GoI, recommended by
RBI
26 Legal Tender Character of Notes
(1)Every bank note is legal tender at any place in India and
guaranteed by GoI
(2)Declaration of denomination of Bank notes ceasing to be
legal tender- recommended by Central Board, notified in
Gazette by GoI
27 Re-issue of notes- RBI will not reissue notes which are torn,
defaced or excessively soiled
28 No person will have right to claim/recovery from GoI/RBI, the
value of lost, stolen, mutilated or imperfect currency note of
the GoI
Bank with the prior approval of GoI specify circumstances
under which value of such currency notes can be refunded,
Such conditions shall be placed before Parliament
28A  Issue of special bank notes and special one-rupee notes in
certain cases
 Section 28A of the RBI Act deals with issuing special
currency for circulation outside India
(1)Issue of following denominations: ₹5,₹10, ₹100
(2)Issue of ₹1 denomination by GoI
(3)Design, Form and Material of Special Notes shall be
approved by GoI, recommended by RBI Governor
(4)Such Notes will not be a legal tender in India
(5)₹1 note is to be treated as ₹1 coin
(6)It can be mentioned on the Special note that it is payable at
a specific bank branch/office, which makes it usable only in
that particular branch/office outside India
(7)RBI with prior approval can issue directions under this
section-
i. Bank notes & ₹1 note in circulation outside India can be
replaced by special notes
ii. Special bank notes may be exchanged for other bank
notes/₹1 note
29 RBI is exempted from stamp duty on bank notes issued by it
under Indian Stamp Act, 1899
30 Powers of GoI to supersede Central Board
(1)If in the opinion of GoI, RBI fails to carry out obligations
imposed on it under the Act, GoI through Gazette
Notification declare the Central Board to be superseded
(2)GoI will submit detailed report for such action within 3
months before Parliament
31 Issue of demand bills and notes- control over money supply in
India
(1)RBI is the only institution that can issue bearer instruments
viz., bills of exchange, promissory notes, hundi etc.
Bearer instruments: Bearer instruments are financial
instruments that are owned by whoever holds physical
 possession of the instrument, rather than being
registered in a specific person's name. These
instruments are payable to whoever presents them for
payment, making them easily transferable from one
person to another without the need for endorsement
or registration.
(2)Central Govt. (with specific authorization) can also issue
bearer instruments
(3)GoI can authorise any Scheduled bank to issue electoral
bonds-
 Electoral Bond is a bearer instrument payable to
the bearer on demand. Unlike a promissory note,
which contains the details of the payer and
payee, an electoral bond has no information on
the parties in the transaction at all, providing
complete anonymity and confidentiality to the
parties.
 This was inserted through amendment in 2017,
currently electoral bonds have been declared
unconstitutional by SC and the hearing is
ongoing
33 Assets of the Issue department
(1)Assets include: Gold Coin, Gold Bullion, FOREX, Rupee
Coin, Rupee Securities
(2)Aggregate value of
 Gold coin + Gold Bullion + FOREX > ₹200 crore
 Gold coin + Gold Bullio > ₹115 crore
(3)Remainder of the assets shall be held in Rupee coin, GoI
rupee securities of any maturity, promissory notes
(4)Valuation of Assets:
 Gold: It dictates that gold coins and gold bullion be
valued at a price not exceeding the prevailing
international market price.
 Rupee Coin: Rupee coins are valued at their face
value.
 Securities: Securities like government bonds are
valued at rates not exceeding the current market
rates.
(5)Section 33(5) of the Reserve Bank of India Act, 1934 deals
with the gold reserves held by the RBI as part of its foreign
exchange reserves. Here's a breakdown of the key points:
 Minimum Gold Holding: This subsection mandates
that at least seventeen-twentieths (85%) of the gold
coin and gold bullion held by the RBI as assets must
be physically located within India.
 Custody of Gold: It further states that all the gold coin
and gold bullion assets of the RBI must be held in the
safekeeping of the Bank itself or its designated
agencies.
  Exceptions: Gold belonging to the RBI that's
temporarily located in any other bank, mint, treasury,
or is in transit can still be considered part of the RBI's
assets.
 In essence, Section 33(5) ensures that a significant
portion of India's gold reserves are physically stored
within the country's borders and under the direct
control of the RBI. This helps maintain confidence in
the stability of the Indian rupee and the financial
system.
(6)Section 33(6) of the Reserve Bank of India Act, 1934 deals
with the types of foreign securities the RBI can hold as part
of its assets within the Issue Department. Here's a
breakdown:
 Foreign Currency Securities:
i. Balances with central banks of International
Monetary Fund (IMF) member countries.
ii. Securities issued by the IMF, World Bank Group
(International Bank for Reconstruction and
Development, International Development
Association, International Finance
Corporation), Asian Development Bank, Bank for
International Settlements, or other approved
banking institutions.
iii. These must be repayable within ten years.
 Bills of Exchange: Short-term commercial debt
instruments with two or more reputable signatures,
drawn and payable within a foreign country. These
must mature within 90 days.
 Government Securities: Bonds issued by foreign
governments, maturing within ten years.
 Central Government Approval: The Act mentions
that specific banking or financial institutions require
approval from the Central Government before their
securities can be held by the RBI
 In essence, Section 33(6) outlines the types of foreign
investments that contribute to the RBI's reserves,
ensuring they are secure and liquid assets that
support the Indian Rupee.
34 Liabilities of Issue Dept.
 Section 34 of the RBI Act links the banknotes in circulation
(liability) with the assets backing them.
 Essentially, it says the total value of rupees issued must be
matched by the RBI's holdings of gold, approved foreign
currency (Section 33(6)), and Indian government securities.
 This ensures the RBI has enough assets to support the value
of the Rupee and maintain financial stability. (98 words)
37  Section 37 of the RBI Act grants the Reserve Bank some
breathing room when it comes to foreign exchange
reserves. While other sections mandate a minimum level of
foreign securities held by the RBI, Section 37 allows
temporary exceptions.

 Here's the catch: the RBI can only suspend this minimum
requirement with the central government's approval. This
suspension is for limited periods, with an initial timeframe
of six months and potential extensions granted in three-
month increments.

 In essence, Section 37 offers the RBI some flexibility in

managing its foreign exchange reserves but maintains
government oversight to ensure financial stability.

38 Section 38 establishes a clear division of responsibility

between the government and the RBI for managing rupee coins
in India. The government mints the coins, while the RBI takes
care of their distribution and circulation.
39  Section 39 of the RBI Act ensures people can exchange their
currency for different denominations
 The RBI must exchange rupees for coins upon request.
 People can exchange larger notes for smaller ones and vice
versa, within limits set by the RBI.
 The government is responsible for supplying enough coins
to the RBI.
40  Section 40 of the RBI Act mandates the Reserve Bank to buy
or sell foreign exchange at its designated offices upon
demand by authorized persons.
 These transactions occur at exchange rates and conditions
set by the central government, considering obligations to
the International Monetary Fund.
 There's also a minimum transaction value requirement of ₹2
lakhs.
42 Cash Reserves of Scheduled Banks to be kept with the Bank
(1) All banks in 2nd schedule are required to maintain an
average daily balance with RBI which is some % of
NDTL as notified by RBI from time to time
(currently - 4.5% )!
(a) Average daily balance- Average of the balances at
the close of business on each day during a
fortnight
(b)Fortnight- Saturday to second Friday, both days
inclusive (14 days)
(c) NDTL does not include:
i. Paid up capital/reserves/credit
balance in P&L
ii. Amount of loan taken from RBI,
 DFIs
iii. For StCB- Loans from State Govt. or
NCDC or Reserve funds of StCB or
Reserve funds of Cooperative
Societies maintained with StCB
iv. For StCB: Loans against balances
maintained by the StCb (e.g. Loan
against FD of StCB)
v. For RRB: loans availed from
Sponsor Bank
(1A) Section 42(1A) of the Reserve Bank of India Act,
1934 empowers the Reserve Bank of India (RBI) to
mandate an additional minimum balance that
scheduled banks must maintain with the RBI. This
additional balance is on top of the Cash Reserve
Ratio (CRR) stipulated under Section 42(1).

The excess amount is calculated by subtracting the

bank's DTL on the specific date from its current
total DTL. If the current DTL is greater than the
base date's DTL, the difference is considered the
excess amount. However, if the current DTL is less
than or equal to the base date's DTL, then there is
no excess amount.
(1C) RBI may declare a class of transaction as liability for
the purpose of calculation of NTDL
(2) Section 42(2) of the Reserve Bank of India Act, 1934
mandates scheduled banks to submit periodic
returns to the Reserve Bank of India (RBI). These
returns essentially act as a report on the bank's
financial health and operations.

Here's a breakdown of what Section 42(2) entails:

 Scheduled banks: These are banks included

in the Second Schedule of the RBI Act. They
are typically commercial banks that meet
certain criteria set by the RBI.
 Periodic returns: Scheduled banks are
required to send these returns to the RBI at
specific intervals, usually on a weekly or
fortnightly basis.
 Content of the returns: The returns must
contain details on various aspects of the
bank's activity, including:
o Liabilities: This includes the bank's
total amount of demand and time
deposits, categorized further as
borrowings from other banks in India
 (classified further as demand and time
liabilities).
o Cash and balances: The bank reports
the total amount of legal tender notes
and coins it holds physically, along with
the balance it maintains with the RBI.
o Borrowings: The bank needs to specify
its borrowings in India and abroad.
o Investments: The returns must mention
the book value of the bank's investments
in government securities like treasury
bills and treasury deposit receipts.
o Advances: This refers to the total
amount of loans and advances provided
by the bank.
o Bills of exchange: The bank reports its
holdings of both inland and foreign bills
of exchange (purchased and
discounted).

Purpose of the returns:

The RBI utilizes the data collected through these

returns for various purposes such as:

 Monitoring liquidity in the banking

system: By analyzing the data on deposits,
cash reserves, and borrowings, the RBI can
assess the overall liquidity in the system and
take corrective measures if needed.
 Formulating monetary policy: This data is
crucial for the RBI to make informed decisions
regarding interest rates and other monetary
policy tools.
 Assessing the financial health of
scheduled banks: The RBI can analyze the
returns to evaluate the financial performance
and stability of individual banks.

In essence, Section 42(2) plays a vital role in

enabling the RBI to maintain oversight and
regulation of the banking system in India.
42 (3) Section 42(3) of the Reserve Bank of India Act, 1934
deals with the penalty applicable to scheduled banks
Omitte that fail to maintain the minimum average daily
d balance mandated by the RBI under Section 42(1) or
42(1A).

Penal interest rate: The Act specifies a tiered

 penalty system:
 For the first fortnight of non-compliance, the
bank needs to pay penal interest at a rate 3%
above the bank rate on the amount by which
the balance falls short.
 If the bank fails to maintain the minimum
balance for the next consecutive fortnight (i.e.,
total of two fortnights), the penalty rate
increases to 5% above the bank rate for that
subsequent fortnight and every fortnight
thereafter until the bank comes into
compliance.
This section is omitted currently but RBI can still
impose penalty to defaulting banks
43 Publication of consolidated statements by the Bank

 Purpose: This section mandates the Reserve Bank of

India (RBI) to publish a consolidated statement every
fortnight (twice a month).
 Content of the statement: This statement shows
the aggregate liabilities and assets of all scheduled
banks together.
 Data source: The information for this statement is
compiled from the returns and information received by
the RBI under the Act or any other law currently in force.
45 Section 45 of the Act actually deals with the appointment of
agents by the Reserve Bank of India (RBI). Here's a breakdown
of its key points:

 Power to Appoint Agents: This section empowers the

RBI to appoint agents for specific purposes at various
locations across India.
 Types of Agents: The RBI can appoint the National
Bank, State Bank of India (SBI), or its corresponding new
banks, or any subsidiary bank of the SBI as its agent.
 Purpose of Appointment: The RBI can appoint these
agents to carry out various functions on its behalf, such
as:
o Receiving payments required to be made into the
Bank.
o Accepting bills, hundies (unsecured promissory
notes), or other securities that need to be delivered
to the Bank, as mandated by any law, rule,
regulation, or other instructions with the force of
law.

In essence, Section 45 allows the RBI to leverage the existing

network of these banks to enhance its reach and facilitate
specific functions across the country.
 Chapter IIIA
Collection and Furnishing of Credit Information
45B Power of the RBI to collect credit information from banking
companies

Banking companiesRBI
45C Power of RBI to call for returns containing credit information
from banking companies

Banking companiesRBI
45D  Procedure for furnishing credit information by RBI to
banking companies upon request
 RBI Banking Companies
 RBI will not disclose Banking Company from which it had
collected the credit information, Fees of RBI<₹25
45E Information exchange under 45C and 45D is confidential and
cannot be published
In case it is imperative to publish such credit information, then
it can be published without mentioning the name of Banking
Companies or its borrowers
45F No compensation will be provided to any party for any loss
incurred due to operation of provisions of this Chapter

Chapter III-B
Provisions Relating to Non-Banking Institutions
Receiving Deposits and Financial Institutions
45H Chapter IIIB is not applicable to SBI or its subsidiaries,
Banking Company defined u/s ‘5’ of BR Act or RRB or
Cooperative Bank or PACS
45I Regulation of Non-Banking Financial Institutions
Non-Banking Institutions are also called Financial Institutions
in this Section
Definitions
(bb) Deposit includes receipt of money by deposit/loan but does
not include:
 Amounts raised by share capital
 Amounts contributed by partners of the firm
 Amounts received from SCB, Coop. Bank, Other Banking
Companies as per Section 5 c of BR Act (Any institution
that accepts deposit is called a Banking Company)
 Amount received from SFC, FI classified by IDBI
 Other institution specified by RBI
 Amount received in ordinary course of business by way
of- security deposit, dealership deposit, earnest money,
advance against orders for goods/properties/services
 Amount received from an individual/firm/association
which is not a body corporate and is registered under
 State Act relating to lending of money
 Amount received by way of subscriptions in respect of a
chit
 Any credit given by a seller to a buyer on the sale of any
property shall not be considered deposit
 Amount accepted by a cooperative society from the
members/shareholders called by whatever name
excluding the amount received as Share Capital will be
considered deposit.
(c) Activities of Non Banking Company/ FI
(i) Financing by loans/advances any activity other than its
own
(ii) Acquisition of marketable securities: shares, stocks,
bonds, debentures or securities issued by a Govt. of local
body
(iii) Letting or delivering of goods to a hirer under a hire-
purchase agreement
(iv) Insurance
(v) Acting as agent of chit or kuries defined under any law in
State
(vi) Collecting monies under any scheme by way of
subscriptions or by sale of units or other instruments and
awarding prizes/gifts in cash/kind but does not cover
institutions whose principal business include-
agricultural operations, industrial activity, purchase or
sale of goods, purchase/construction/sale of immovable
properties
(e) non-banking institution can be company, corporation,
cooperative societies
(f) Non Banking Finance Company-
(i) FI which is a company
(ii) Principal business is receiving of deposit in any manner
and lending in any manner
(iii) Other Institutions as decided by RBI and approved by
GoI
45IA Requirement of Registration and net owned funds
(1)No NBFC can commence business without
a. Obtaining a certificate issued under this Chapter
b. Net owned funds of ₹25 lakhs, but <₹100 crores.
Bank can notify different amount of NOF for different
categories of NBFC
(2)NBFC to apply to RBI for registration (in case an NBFC was
working before 1997 amendment it has to apply for
registration within 6 months after amendment)
(3)NBFC in existence before 1997 amendment and not having
min capital of ₹25 lakhs will continue to carry on business
and given time to comply for
a. 3 yrs
b. More than 3yrs in genuine cases with RBIs permission
 but not more than 6 yrs
(4)Grounds considered while offering registration to NBFC by
RBI-
a. Able to pay present and future depositors
b. Affairs of the NBFC not detrimental to interest of
present/future depositors
c. Non-prejudice nature of its management/board
d. Adequate capital and earning prospects
e. Public interest will be served
f. Non-prejudice to financial sector, monetary stability,
economic growth etc
g. Any other condition considered by RBI for non-
prejudice to public interest
(5)If above conditions are satisfied, RBI may grant a certificate
of registration with conditions as deemed fit by RBI
(6)RBI can cancel certificate of NBFC-
i. Ceases to carry on the business of NBFC
ii. Failure to comply with conditions set forth in
registration certificate
iii. Fails to comply with conditions under sub section 4
iv. Fails to
 Comply with directions issued by RBI
 Maintain accounts as per law
 Offer inspection of its book demanded by ID of RBI
v. Prohibited from accepting deposits and such order is
in force at least 3 months
Before cancellation of license, company will be given
opportunity of being heard unless it is prejudicial to the
public interests/depositors
(7)NBFC aggrieved by rejection of application of registration
or cancellation of registration certificate can file an appeal
within 30 days of such order to the GoI. Decision of GoI will
be final in case of appeal and RBI in case of no appeal

Net Owned Funds in this Section means-

(a) Paid up Capital+Free Reserves minus
 Acc. Losses, deferred revenues exp., other intangible
assets
 Amount Investment by NBFC in – its subsidiaries,
companies in same group, other NBFCs,
 Book value of debentures, bonds, loans o/s, deposits
with- its subsidiaries, companies in same group. To the
extent such amount exceeds 10% of (a) above
45IB Maintenance of percentage of Assets
(1)NBFC shall invest in approved securities an amount which
at the close of business on any day is between 5% to 25% of
Deposit O/s on last working day of 2nd preceding quarter.
The % may be modified by RBI from time to time
RBI may specify different % for different types of NBFCs
 Approved securities- securities of State Govt. or GoI where
both P&I id guaranteed by such Govt., securities should be
unencumbered
(2)Submission of return for compliance to this section in
format prescribed by RBI
(3)If amount invested falls below the min% specified by RBI on
any day, then NBFC will pay penalty of 3% p.a. + Bank Rate
on the shortfall in amount invested. If shortfall continues in
the subsequent quarters, the rate of penal interest will be
5% p.a. above the bank rate for each subsequent quarter
(4)Penal interest shall be payable in 14 days from the date of
issue of notice by RBI, in case of failure, penalty will be
levied by direction of the principal civil court in the
jurisdictional area of NBFC
(5)If NBFC has defaulted under subsection (1) due to genuine
reasons acceptable to RBI then it may note demand penal
interest
45IC Reserve Fund
(1)Every NBFC will create a reserve fund and transfer 25% of
its net profit as disclosed in P&L and before declaring any
dividend
(2)No appropriation of any sum will be allowed from reserve
funds except for purposes notified by RBI, reporting to RBI
in 21 days in case of appropriation
(3)GoI on the recommendation of RBI declare that sub section
(1) shall not be applicable for a specific period (provided
reserve fund + share premium reserve>paid up capital)
45ID Power of RBI to Remove directors from Office
(1)In case affairs of NBFC are considered detrimental to the
interests of depositors or creditors/financial stability/proper
management- RBI wih recorded reasons remove a Director
of such a company (except Govt owned NBFC)
(2)Such Director will be given opportunity for representation
to the Board against such order.
a. During representation period it will not act as director
b. Will not participate in the management of the
company
(3)-
(4)RBI may appoint a suitable director in place of removed
director
(5)Director appointed under subsection (4) will-
a. Hold office at the pleasure of RBI, period< 3yrs
b. Will not have any obligation/liability for anything done
in good faith in the execution of his duties
(6)Director removed under this clause cannot claim any
compensation for termination from office
45IE Supersession of BoD of NBFC (other than Govt owned NBFC)
(1)In case affairs of NBFC are considered detrimental to the
interests of depositors or creditors/financial stability/proper
 management, RBI may supersede its Board for a period not
exceeding 5 yrs
(2)RBI may appoint Administrator in case of supersession of
Board for a period considered suitable by RBI
(3)RBI can issue directions to Administrator & Administrator
has to follow such directions
(4)In case of order for supersession of BoDs
a. Chairman, MD and Other Directors will vacate their
offices
b. All powers, functions and duties vested with BoDs will
be exercised and discharged by the administrator
(5)RBI can constitute a committee consisting of 3 or more
members to assist the Administrator
(6)Salary & Allowances of Administrator and the members of
committee will be specified by RBI and paid by NBFC
(7)Before expiration of period of supersession of the board,
Administrator will facilitate reconstitution of the Board of
NBFC
(8)No person can claim compensation for loss/termination of
his office
(9)Administrator will vacate office after the BoD of NBFC is
reconstituted
45J Bank to regulate or prohibit issue of prospectus or
advertisement soliciting deposit of money
RBI may issue orders to NBFC for the above
Also specify conditions for issue of such prospectus
45JA Power of RBI to determine policy and issue directions
(1)RBI can issue directions related to income recognition,
accounting standards, provision for bad/doubtful loans,
capital adequacy and risk weights, credit conversion factors
for off balance sheet items, deployment of funds
(2)Give directions to NBFCs for
a. Permissible purposes for providing loans and other
financial products
b. Maximum investment or loan amounts NBFCs can
grant to individual borrowers or groups
45K Power of RBI to collect information from NBFIs wrt deposits
and also give directions in this regard
(1)NBFI to furnish information related to deposits received at
intervals and in such forms as directed by RBI
(2)The information may cover: Amount of Deposit, Purpose,
Period, RoI, T&C
(3)RBI can give directions to NBFIs related to receipt of
deposit, period, RoI
(4)Failure to comply with ss (3), RBI may prohibit acceptance
of deposit
(6)RBI can direct NBFIs to send a copy of its Annual B/S, P&L,
Other Annual Accounts to every person from whom NBFI
has mobilised deposit higher than a limit decided by RBI
45L Power of RBI to call for information from financial institutions
and to give directions
The RBI can call for information from "financial institutions" to
regulate credit system and maintain financial stability. The RBI
has the flexibility to:
 Issue general or specific orders for information
gathering.
 Specify the format, frequency, and timeframe for
submitting the information.
Issuing Directions:
 Based on the information collected, the RBI can issue
directions to financial institutions. These directions can
be:
 General, applying to all financial institutions.
 Specific, applying to a particular institution or group of
institutions.
 Related to the conduct of their business as financial
institutions.
While issuing directions, the RBI considers several factors:
 The specific conditions and objectives under which the
financial institution operates.
 Any statutory responsibilities the institution might have.
 The potential impact of the institution's business
activities on money and capital markets.
45M Duty of NBFI to furnish statements etc., required by RBI
45MA Powers and Duties of Auditors
(1)Auditor of the NBFI has to inquire regarding furnishing of
information to RBI related to deposits. In case auditor is not
satisfied, it has to give a report of aggregate amount of such
deposits held by the NBFI
(2)RBI can issue directions to NBFIs or its auditors relating to
balance sheet, p&l account, disclosure of liabilities in the
books of account
(3)RBI can order special audit of accounts of NBFI- is may be
related to a particular class of transaction or for a particular
period
(4)Remuneration of the auditors is fixed by RBI and borne by
NBFI
45MA Power to take action against auditors
A In case auditors fails to comply with the directions under
section 45MA, RBI can remove/debar the auditor for a max.
period of 3 yrs
45MB Power of Bank to prohibit acceptance of deposit and alienation
of assets
 RBI can prohibit NBFC from accepting deposit in case
NBFC fails to comply with directions under this Chapter
 NBFCs which have been issued orders as above, RBI can
also prohibit them not to sell, transfer, create charge or
mortgage or deal in any manner with its property and assets
 without its prior approval, for a period not exceeding 6
months from the date of order
45MB RBI can frame schemes to ensure financial stability and in the
A public interests for- amalgamation of NBFI, reconstruction of
NBFI, splitting NBFIs into different units & vesting viable and
non-viable businesses in separate units.
Also RBI can establish “Bridge Institutions”- Temporary
institutional arrangement to preserve the business continuity
of the NBFC that are critical to financial stability
RBI can also-
 Reduce pay/allowances of CEO, MD, Chairman or anyone
in senior mgmt.
 Cancellation of shares of NBFC held by above officials
 Sale of assets of NBFC
 No compensation for such officials
45MC Power of Bank to file winding up petition for NBFC if it is
satisfied that-
It is unable to pay its debt, become disqualified to carry on
business u/s 45IA, prohibited by RBI to accept deposits > 3
months, operations detrimental to the interests of
public/depositors
Provisions of Companies Act will apply for winding up
proceedings
45N Inspection
 RBI at any time case an inspection by one/more of its
officers/employees of any NBFI to verify correctness and
completeness of information furnished to RBI or to obtain
information which NBFI failed to furnish
 Every director, committee member, any body vested with
the management of the institution, any officer will ensure
availability of all books and records to the inspection team
 During an inspection of a non-banking financial institution
(NBFI) by the Reserve Bank of India (RBI), the inspector has
the authority to question any director of the NBFI under
oath.
45NA Deposits not to be solicited by unauthorised person on behalf
of NBFI
45NA Power in respect of group companies
A  RBI at any time may seek information wrt group company of
a NBFI, seek financial statement separately or annexed with
that of the NBFI
 RBI may also cause an inspection/audit of the group
company of NBFI
45NB Disclosure of Information
 Any type of information collected from NBFI will be
confidential and will not be disclosed unless permitted by
the Act
 Exceptions: publishing information with prior approval of
RBI, publishing of information by RBI wrt NBFI without
 disclosing name of NBFI, disclosure of information by RBI
wrt one NBFI to another as considered customary and
permissible under various Acts
 RBI can disclose info. Wrt NBFI if it is satisfied that in the
public interest it is necessary to disclose information to a
competent authority under any law
 No court, tribunal or competent authority can compel RBI to
furnish information wrt NBFI
45NC RBI can exempt application of a few or all provisions of this
Chapter to NBFIs or a class of NBFI, this can be for a specific
period or permanent
45Q Provisions outlined in Chapter IIIB of the Act supersede any
conflicting provisions in other laws or instruments currently in
force in India.
45QB Section 45QB of the Reserve Bank of India Act, 1934 deals with
the nomination facility for deposits held by non-banking
financial institutions (NBFIs).

Chapter IIIC
Chapter IIIC safeguards depositors by restricting the ability of
unincorporated entities to accept deposits. E.g. partnerships
and sole proprietorships
45S (1)Deposits not to be accepted in certain cases: This is the core
provision. It prohibits unincorporated bodies from accepting
deposits if:
 Their primary business involves activities specified in
Section 45-I of the Act (which likely deals with financial
activities requiring a license).
 Their principal business is receiving deposits and lending
money.
(2)Such bodies to repay the depositors- on maturity or within 3
yrs of enactment whichever is earlier. RBI may give one
more year time in genuine cases
(3)Prohibits unincorporated bodies from issuing
advertisements soliciting deposits after April 1, 1997.
45T Empowers the Reserve Bank of India (RBI) to issue search
warrants by an officer nominated by RBI to check violation of
section 45S
Chapter IIID
Regulation Of Transactions In Derivatives, Money Market
Instruments, Securities, Etc.
45U Definitions:
 Derivative: An instrument which is to be settled at a future
date, its value is derived from change in RoI, FOREX Rate,
Credit Rating, Price of Securities or a combination of two or
more items
 Money market instrument: Call Money, Term money, repo,
reverse repo, CD, CP, other debt instrument havin maturity
 upto 1 yr
 Repo: Borrowing funds by selling securities with an
agreement to repurchase the same at a future date and
price inclusive of interest
 Reverse Repo: Lending funds by purchasing securities with
an agreement to resell the securities at future date and
price inclusive of interest
 Securities mean: Securities of GoI, State Govt., or of a local
body
45V Transactions in derivatives as specified by RBI will be valid if
at least one of the parties to the transaction is the Bank or
entity regulated by RBI Act, BR Act, FEMA, any other Act as
specified by RBI
45W RBI has the power to regulate transactions in securities,
FOREX, derivatives, money market instruments etc. and can
issue directions to agencies dealing with it
RBI can also seek information from such agencies and also
cause an inspection of such agencies
45X It is the duty of every Director of person involved in the
management of the agency dealing in such instrument to
comply with he norms in this section

Chapter III-E Joint Mechanism

45Y  If a financial instrument is a hybrid/composite of money
market instrument regulated by RBI and insurance or any
other product regulated by SEBI, IRDA of PFRDA, then such
matter is referred to a Joint Committee comprising- Finance
Minister, Governor (RBI), Secretary (Dept. of Economic
Affairs), Secretary (DFS), Chairman (SEBI), Chairman
(IRDAI), Chairman (PFRDA).
 Secretary (DFS) will be the convenor
 3 months time given to Joint Committee from day of issue of
reference to give their decision to GoI
 Decision of the committee shall be binding

Chapter III-F Monetary Policy

Provisions of this Chapter to override other provisions of this
45Z
Act
45ZA Inflation target
 GoI in consultation with RBI set inflation target in terms of
CPI once in 5 yrs
 01.04.2021 to 31.03.2026 Target is 4%
 Tolerance range is (+)(-)2%
 The government acknowledged that achieving the exact
target might be challenging. So, they established a
tolerance range. This means an inflation rate between 2%
and 6% would still be considered acceptable.
 Lower tolerance: 2%
  Upper tolerance: 6%
(1)Constitution of Monetary Policy Committee by GoI
(2)Members:
a. Governor RBI
b. DG in charge of MPC
45ZB c. Officer of the Bank nominated by the Central Board
d. 3 persons nominated by GoI^
(3)MPC Determines policy rate required to achieve inflation
target
(4)Decision of MPC is binding
(1)^Recommended by Search cum Selection Committee to GoI
a. Cabinet Secretary
b. Governor RBI or DG RBI
45ZC
c. Secretary, Dept. of Economic Affairs
d. 3 experts in the field of economics, banking,
finance or MPC nominated by GoI
T&C of appointment
 Term-4 yrs and not eligible for reappointment
45ZD
 T&C of appointment, remuneration, allowances decided by
GoI
45ZE Removal of member of MPC
Actions which do not invalidate proceedings of MPC
 Vacancy or defect in constitution of MPC
45ZF  Defect in appointment of a person to MPC
 Irregularity in the procedure of the MPC not affecting
merits of the case
RBI shall appoint a Secretary to MPC to provide secretariat
45ZG
support to MPC
Information for Monetary Policy Committee Members- RBI will
provide information to members of MPC relevant to achieve
45ZH the inflation target. Members of MPC can also seek
information from RBI which it will have to share with all
members
45ZI Meetings of the MPC
 At least 4 meetings
 Meeting schedule to be release by RBI on week before 1 st
meeting in a FY
 Quorum- 4 members, at least one of which has to be
Governor and in his absence DG who is member of MPC
 Meeting is presided over by Governor and in his absence DG
who is member of MPC
 In equality of votes, Governor will have a Second vote
 GoI can share its views with MPC time to time
 Each member of MPC has to specify reasons in case of
voting (for/against)
 Proceedings of MPC shall be confidential
45ZJ Steps to be taken to implement decision of Monetary Policy
Committee-
 Publish document highlighting steps taken for
 implementation of decisions of MPC
 Particulars and frequency of publication decided by
Central Board
45ZK Publication of decisions/resolutions after each MPC Meeting
45ZL Publication of proceedings of MPC covering-resolution, vote of
each member, statement of each member
45ZM Half yearly publish Monetary Policy Report covering-source of
inflation, forecasts of inflation (6-18 months)
45ZN Failure to maintain inflation target
 RBI to submit report to GoI covering- reasons for failure,
remedial actions, estimate of time period for achieving
inflation target
 Factors which constitute failure will be notified by GoI
45ZO GoI may make rules for carrying out provisions of this chapter
through Official Gazette

Chapter V- General Provisions

46 Contribution of GoI to Reserve Funds
46A Contribution of NRC (LTO) and NRC (Stabilization) funds of
NABARD
Amount not fixed
46C National Industrial Credit (LTO)-
 Initial contribution by RBI is ₹10 crore, replenished by ₹5
crore for 5 yrs after enactment
 Usage:
o Loan & advances to EXIM Bank, SIDBI
o Purchase of Bonds and Debentures of EXIM, SIDBI
46D National Housing Credit (LTO)
Amount not fixed, Purpose: Loan & advances to NHB, Purchase
of Bonds and Debentures of NHB
47 Allocation of surplus profit to GoI
After making provisions for bad/doubtful loans, depreciation,
staff & superannuation funds, balance of profits shall be paid
to GoI
48 Exemption of Bank from Income Tax and Super Tax (extra layer
of taxation on individual/institutions with higher income level)
49 Publication of Bank Rate: The Reserve Bank of India (RBI) is
required to make public, from time to time, the standard rate
at which it is prepared to:
Buy or re-discount bills of exchange.
Purchase other commercial paper eligible for purchase under
the Act.
50 Appointment of auditors of RBI-
2 Auditors, appointed by GoI, remuneration decided by GoI
51 Empowering GoI to appoint the Comptroller and Auditor
General of India to conduct a special audit of the RBI's
accounts.
CAG can audit any Govt. body in India
 52 Powers and duties of auditors appointed for the RBI. Here's a
breakdown of their key responsibilities:
 Examining Financial Statements viz., annual balance sheet
and all related accounts and vouchers.
 Access to Information: The auditors have the right to
access: annual balance sheet, list of all books maintained by
the RBI, access to the Bank's books, accounts, and other
documents at all reasonable times.
 Engaging Assistance: If needed, the auditors can employ
accountants or other professionals at the Bank's expense to
assist them in their examination of the accounts.
 Reporting to Government: The auditors are obligated to
submit a report on their findings to the Central Government
of India. This report should address:
o Whether the balance sheet is a fair and accurate
representation of the RBI's financial health.
o Any explanations or information requested from
the Central Board of Directors (the RBI's board)
and whether these explanations were satisfactory.
 Examining Officials: The auditors have the authority to
examine any Director or officer of the Bank to obtain
necessary information related to the accounts.
53 Submission of returns to GoI
 RBI will prepare and transmit weekly account of the Issue
Dept. and Banking dept. by notification in Gazette of India
 Within 2 months after annual closing, submit copy of annual
accounts to GoI signed by Governor, DGs, Chief accounting
officer, certified by the auditor.
 Also, a report from Central Board regarding performance of
RBI during the year is enclosed
54 Rural Credit & Development
 Bank may maintain special staff to study various aspects of
rural credit and development, guide NABARD, conduct
special studies
54A Delegation of powers-
Governor by a general/special order delegate to DG set of
powers and functions exercisable by him for the efficient
functioning of RBI
54AA Power of bank to depute its employees to other institutions-
wholly (100% share) or substantially owned by RBI (>40%
share)
57 Liquidation:
Provisions of Company’s Act for liquidation is not applicable to
RBI
RBI can be liquidated only by GoI
57A  IFSCs are specially designated areas in India that function
as financial hubs with their own regulatory framework.
 RBI's powers under the Act don't automatically extend to
IFSCs unless the Act or specific regulations explicitly state
 otherwise.
 IFSCs might have separate regulations or authorities
established to oversee financial activities within their
designated zones.
 RBI can help IFSCs in developing regulations
58 Power of the Central Board to make regulations
 Requires prior sanction from GoI
 Conduct of business of Central Board and Local Boards
 Delegation of powers & functions of Central Board to
Governor, DGs, Directors, Officers of RBI
 Formation of Committees of RBI
 Constitution and Management of staff and superannuation
funds
 Form of contracts binding on RBI
 Official Seal
 Form of Balance Sheet
 Remuneration of Directors
 Returns to be submitted by Scheduled banks
 Regulation of clearing houses
 Regulation of funds transfer
 Guidelines for refund of lost, stolen, mutilated, imperfect
currency can be refunded
 Remuneration/Allowances of members of MPC
 All regulations available to public
58A Protection of action taken in good faith- No suit, prosecution,
or other legal proceeding can be initiated against GoI/RBI

Chapter V: Penalties
58B  Whoever makes a false statement wrt deposits of money
from public- punishable both by imprisonment and fine
 One lakh fine on failing to produce/furnish any information
sought as per the act. In case of repetition, daily fine of
₹5000 in addition till compliance is completed

Section Imprisonment Fine

31 Amount of contravention
45E 6 months ₹1000
45IA 1-5 yrs 1-25 lakhs
45MA 10 lakhs
45QA Upto 3 yrs ₹5000/day
Twice the amount of
45J Upto 3 yrs deposit received/
advertised/ prospectus
2 times of amount / ₹2000
45S 2 yrs
whichever is more
1 lakhs and ₹1000/day if
Others
default continues
58D Whatever rules or regulations are laid out in Section 58B
 don't apply to anything already covered by Section 42 of the
RBI Act.
58E  Section 58E of the Reserve Bank of India Act, 1934 deals
with the process for initiating legal proceedings against
the RBI for offenses committed under the Act.
 Courts can't take cognizance (formally acknowledge the
case) except under the following conditions: A written
complaint must be filed by an officer of the Bank,
specifically authorized in writing by the RBI, to initiate
legal proceedings.
 Only specific courts can hear such cases:
o Metropolitan Magistrate
o Judicial Magistrate of the first class
o Court superior to a Judicial Magistrate of the first
class (e.g., District Court)
 Exception: A written complaint can also be made by an
officer of the State Government, specifically authorized in
writing for this purpose by the State Government.
 Section 58E aims to strike a balance between:
o Holding the RBI accountable for following the
provisions of the Act.
o Protecting the RBI from frivolous or unnecessary
legal challenges.
58F Section 58F allows the court to decide how the fine amount
should be used. The court can choose to:
 Allocate the entire fine amount to cover court proceedings
costs.
 Allocate a portion of the fine to cover court costs and
direct the remaining amount to the government treasury
or any other purpose as deemed fit.
 Not allocate any of the fine towards court costs and direct
the full amount elsewhere (less likely).
58G The RBI can levy a penalty on an NBFC if it fails to comply
with the provisions of the RBI Act or any directions or orders
issued by the RBI under the Act.
 Show Cause Notice: Before imposing a penalty, the RBI is
required to serve a notice on the NBFC. This notice should:
o Specify the reason for the penalty.
o Mention the amount of the proposed penalty.
o Grant the NBFC a reasonable opportunity to
explain why the penalty should not be imposed.
 Hearing Opportunity: The NBFC has the right to be heard
by the RBI to present its case against the proposed penalty.
 Penalty Amount: The amount of the penalty is determined
by the RBI, but there are no specific guidelines mentioned
in Section 58G itself.
 Payment: The NBFC must pay the penalty within 30 days
of receiving the demand notice from the RBI.
 Non-Payment: If the NBFC fails to pay the penalty within
 the stipulated timeframe, the RBI can have the amount
recovered through a court order.
1st Areas served by various local boards
Schedu
le
2nd List of Scheduled Banks in India
Schedu S.N. Type of Bank Total No.
le 1 Public Sector Banks 12
2 Private Sector Banks 21
3 RRBs 43
4 State Coop. Banks 24 (out of total 34)
5 Small Finance Banks 12
6 Payments Banks 4
7 Foreign Banks 45
8 Urban Coop. Banks 52

1. As per the amended Section 9 of the Banking Regulation Act,

1949, the disposal of non-banking assets mandates that no banking
company shall hold any immovable property howsoever acquired,
except such as is required for its own use, for any period
exceeding seven years from the acquisition thereof 1. This means that
banks cannot retain immovable properties for more than seven years
unless they are necessary for their own operations. If a property is not
being used for banking purposes, it must be disposed of within this
stipulated period.
However, there is a provision that allows banking companies to deal or
trade in such properties within the seven-year period to facilitate their
disposal. Additionally, the Reserve Bank of India (RBI) has the
authority to extend this seven-year period by up to five years in specific
cases if it is in the interest of the depositors of the banking company.
In summary, the disposal of non-banking assets under the Banking
Regulation Act ensures that banks manage their immovable properties
efficiently and do not hold them indefinitely without valid reasons. The
RBI oversees and regulates this process to safeguard the interests of
depositors and maintain financial stability.