POWER OF THE RBI

TO ISSUE
DIRECTIONS
By Shruti Kejriwal Dasgupta, Faculty, UPES
The RBI drives the powers to issue directions to
banking companies through provisions of 
Banking Regulation Act, 1949. The Section 21,
35A and 36 of BR Act confers powers of RBI to
issue directions to banking companies.
The Section 21 of Act allows RBI to control loans and advances extended by banking companies.  RBI may
issue directions in respect of following items to banking companies and every banking company has to
necessarily comply with its directions:

•To specify the purposes for which advances may or may not be made.
•The margins to be maintained in respect of secured advances

•The maximum amount of advances that can be made to particular company, firm, association of persons or
individual having regard to the paid-up capital, reserves and deposits of a banking company.

•The maximum amount of guarantee that can be made by banking on behalf of particular company, firm,
association of persons or individual having regard to the paid-up capital, reserves and deposits of a banking
company.

•The rate of interest and other terms and conditions on which advances may be made or guarantees may be
given
The Reserve Bank of India (RBI) regulates and supervises Public Sector And Private Sector
Banks.

Under the provisions of the Banking Regulation Act, 1949.

1.inspect the bank and its books and accounts (section 35(1) 
2.examine on oath any director or other officer of the bank (section 35(3) 
3.cause a scrutiny to be made of the affairs of the bank (section 35(1A) 
4.give directions to secure the proper management of the bank section 35A 
5.call for any information of account details (section 27(2) 
6.determine the policy in relation to advances by the bank (section 21
7.direct special audit of the bank (section 30(1B)
8.direct the bank to initiate insolvency resolution process in respect of a default, under the
provisions of Insolvency and Bankruptcy Code, 2016 (section 35AA 
 Banking Regulation Act, 1949

35A. Power of the Reserve Bank to give directions

(1) Where the Reserve Bank is satisfied that-

(a) in the 142[public interest]; or
(aa) in the interest of banking policy; or]
(b) to prevent the affairs of any banking company being conducted in a manner detrimental to the interests of
the depositor or in a manner prejudicial to the interests of the banking company; or
(c) to secure the proper management of any banking company generally; it is necessary to issue directions to
banking companies generally or to any banking company in particular, it may, from time to time, issue such
directions as it deems fit, and the banking companies or the banking company, as the case may be, shall be
bound to comply with such directions.
(2) The Reserve Bank may, on representation made to it or on its own motion, modify or cancel any direction
issued under sub-section (1), and in so modifying or canceling any direction may impose such conditions as it
thinks fit, subject to which the modification or cancellation shall have effect.
Power of RBI under Section 36

Under Section 36 of Banking Regulation Act, the

RBI is empowered to caution or prohibit any
banking company regarding any transaction or
class of actions.