BANKING

REGULATION ACT
1949
PRESENTED BY GROUP 6-Div A
YASHIKA JAIN 20020942013
JASRAJ JAIN 20020942015
MAHIMA GHARAMI 20020942020
ANIRUDH RAO 20020942067
AISHWARYA BADONI 20020942081
INTRODUCTION

▰ Banking Business in India is mainly governed and controlled by the Reserve Bank of India Act,
1934 and the Banking Regulation Act, 1949. The Banking Regulation Act, 1949 contains
various provisions’ governing the Commercial Banks in India. The Act was initially known as
Banking Companies Act, 1949. It was passed in 1949 to consolidate and amend the laws
relating to banking companies. The act was changed to Banking Regulation Act, 1949 from 1st
March, 1966.

▰ The Banking Companies Act, currently known as the Banking Regulation Act, was enacted to
protect depositors' interests, to prevent misuse of power by certain bank staff in charge of banks
in particular, and to protect the interests of the Indian economy in general.

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 Major Points
The Banking Regulation Act, 1949 has 56 Sections in total. Initially 55
Sections were there and the 56th section was added to include the
Cooperative Banks in the Amended Act of 1965.

Three years 1968, 1969, and 1980 witnessed the three major events:
▰ Social Control on Banking Companies imposed through Act 58 of
1968.
▰ The Nationalisation of 14 Major Banks by the Banking Companies
(Acquisition and Transfer of Undertakings ) Act, 1970
▰ Further Nationalisation of 6 Major Banks.

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DIFFERENT PROVISIONS OF BANKING REGULATION ACT

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APPLICABILITY OF THE ACT

Non-
Nationalized
nationalized Co-operative
banks
banks

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 IMPORTANT TERMS IN THE ACT

Approved Banking
Banking
securities Company

Demand
Banking Policy Company Liabilities

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Sec. 6 -BUSINESS OF BANKING COMPANIES

▰ It provides a list of activities which a banking company may

engage in the business of banking.
▰ The Main functions are as follows:
▻ Acting as agents
▻ Managing the public loan
▻ Lending of money
▻ Acquisition
▰ Agency Services
▰ General Utility Services

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 Sec. 7

▰ Provides that Individual, Firm or Group of Individuals and any Company other than
a Banking Company shall not use as part of its name or, in connection with its
business, any of the words ‘bank’, ‘banker’ or ‘banking’ and No company shall
carry on the business of banking in India unless it uses as part of its name at least
one of such words.
▰ Exceptions: A Subsidiary of a Banking Company formed for one or more of the
purposes mentioned in Section 19(1), whose name indicates that it is a subsidiary of
that banking company. Any association of banks formed for the protection of their
mutual interests and registered under Section 8 of the Companies Act, 2013.

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SEC. 11: REQUIREMENTS AS TO MINIMUM PAID-UP
89,526,124$
CAPITAL AND RESERVES

(a) Foreign Banking Companies

(b) Indian Banking Companies

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Sec. 18: MAINTENANCE OF CASH RESERVE

▻ Every bank is required to keep a cash reserve with itself, or by way of

balance in a current account with the Reserve Bank, or by way of net
balance in current accounts or in one or more of the aforesaid ways, a sum
equivalent to at least 4% of the total of its Demand & Time Liabilities in
India
▻ As on the Last Friday of the second preceding fortnight and shall submit to
the Reserve Bank before the 20th day of every month a return showing the
amount so held on Alternate Fridays during a month .

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Sec. 20: RESTRICTIONS ON LOANS AND ADVANCES

▰ (Sec. 20 ) Any banking company shall not:

▻ Grant any loans or advances on the security of its own shares
▻ Enter into any commitment for granting any loan or advance
▰ Sec. 20A: Restrictions On Power To Remit Debts
Except with the prior approval of RBI, a banking company shall not remit in whole or
in part any debt due to it by:
▻ Any of its directors
▻ Any firm or company in which any of its directors is interested as
Director, Partner, Managing Agent or Guarantor
▻ Any individual if any of its directors, is his Partner or Guarantor.

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Sec. 22: LICENSING OF BANKING COMPANIES

▰ No company shall carry on banking business in India unless it holds a

license issued by the Reserve Bank of India. The Reserve Bank of India
may grant a license upon fulfilment of the following conditions:
▻ That the company is or will be in a position to pay its present and
future depositors in full as their claims accrue;
▻ That the affairs of the company are not being or are not likely to be
conducted in a manner detrimental to the interests of its present or
future depositor;
▻ That, in the case of a foreign banking company.
▰ Cancellation of License

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44A. PROCEDURE FOR AMALGAMATION OF
BANKING COMPANIES

▰ Approval of a two-third majority of the total Board member of the respective companies is

required. Further, the Board should give particular consideration to the matters specified in Note
–1
▰ Scheme of amalgamation shall be approved majority in number i.e. two-thirds in value of the
shareholders, present in person or by proxy at a meeting, of each banking company.
▰ An application shall be made to Reserve Bank of Indi, also  the amalgamating and the
amalgamated banking companies shall submit to the Reserve Bank the information as
specified in Note –2
▰ A dissenting shareholder is entitled to claim within 3 months from the date of sanction, the
value of shares held by him in the company and its determination by the Reserve bank of India.

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35A. POWER OF THE RESERVE BANK TO GIVE
DIRECTIONS
▰ (1) Where the Reserve Bank is satisfied that-
▻ in the public interest
▻ to prevent the affairs of any banking company being conducted in a
manner detrimental to the interests of the depositors
▻ to secure the proper management of any banking company
▰ 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 cancelling any direction may impose such conditions as it thinks
fit, subject to which the modification or cancellation shall have effect.
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 CONTROL OVER MANAGEMENT

▰ 36AA. Power of Reserve Bank to remove managerial and other persons from
office.
▻ (a)36AAA. Supersession of Board of directors of a multi State co-
operative bank.
▻ (b)36AAB. Order of winding up of multi-State co operative bank to be
final in certain cases
▻ (c)Reimbursement to Deposit Insurance Corporation by liquidator or
transferee bank
▰ 36AB. Power of Reserve Bank to appoint additional directors
▰ 36AC. Part IIA to override other laws.
▰ 36AD. Punishments for certain activities in relation to banking companies.

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 SUSPENSION OF BUSINESS AND
WINDING UP OF BANKING
▰ High Court defined.
COMPANIES
▰ Suspension of business.

▰ Winding up by High Court.

▰ Court liquidator.

▰ Reserve Bank to be official liquidator.

▰ Application of Companies Act to liquidators.

▰ SAWING RIGULATION

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THANK YOU

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