Banking Regulation Act 1949
The BR Act does not apply to Primary Agricultural Credit Societies
Section
4 & 53 The Govt. has power to suspend operations BR Act / give exemptions from any of
the provisions of the Act on the recommendations of the RBI.
5(a) Approved Securities: In which a trustee may invest money under section 20 of
the Indian trusts act, 1882
5(b)
Banking is defined as the acceptance of deposits of money from the public for the
purpose of lending or investment
5©
A banking company, is a company which transacts business of banking
May be constituted under section 3 of companies Act
Section 51 of Companies act – foreign company
6
Govt. has also power to notify the other forms of Business permissible apart from
banking business. Section 6(1)(0)
Discounting of bills, Collection of cheque and bills. Remittances, safe custody of
articles, safe custody of articles, hiring safe custody of articles, conducting
foreign exchange transactions, conducting (Central/State) government
transactions.
7
Every banking company has to use word bank as part of its name, no other
company can use the word bank, banker, banking as part of its name.
7(1) Prohibits use of words ‘Banker’ or ‘Banking’ or ‘Banking Company’ by a company
other than Banking Company.
7(2) Prohibits use of such words by individual or group of individuals or a firm.
8 Prohibited Business
9 No banking company shall hold any immoveable property howsoever acquired,
except for its own use, for any period exceeding Seven years
10 No Banking company shall be managed by Managing Agent
10A
(28) Board Of Directors: Qualifications for directors of banking companies. At
least 51% of the total number of directors shall be persons who have expertise in
accountancy, agriculture and rural economy, banking, cooperation, economics,
finance, law etc.
Max. period of office for Chairman, Ordinary Director in a banking company is 8
years
If Chairman is removed by the order, he has to apply to Central Govt within 30
days.
10B (29) Whole Time Director / Managing Director
11
If a foreign bank wishes to carry on business in India the aggregate value of
PaidUp share capital and reserves shall not be less than
at a place other than Bombay /Kolkatta Rs. 15 lakh
in Bombay / Kolkatta or both Rs. 20 lakh
An amount of 20% of the profit for each year has to be deposited with RBI.
11(3)(i): The aggregate value of paid-up capital and reserves a banking
company incorporated in India and having place in more than one state
but not in Bombay / Kolkatta Rs. 5 lakhs
and in Bombay / Kolkatta Rs. 10 lakhs
12
The minimum ratio between authorised, Subscribed, and paid-up capital of a
banking company should be: 4 : 2 : 1
12(2)
No person holding shares in a banking company shall exercise voting rights on
poll in excess of 10% of the total voting rights of all shareholders of the banking
company
12A(1)
RBI may ask a banking company to : call a general meeting of shareholders and
elect fresh directors.
13
Prohibits banks from making payment of commission, brokerage, discount or
remuneration on any shares issued by it in excess of 2.5% of the paid-up value of
such shares.
14A(1)
Prohibits a banking company from creating floating charge on the undertaking or
any property of the company or any part thereof.
15
Prohibits a banking company from paying any dividend on its shares until all its
capitalized expenses have been completely written off
16 Prohibits a person to be appointed as director of more than one banking company
17
Reserve Fund(53)
Every banking company incorporated in India is required to transfer each year to a
reserve fund a sum equivalent to not less than 20% of profit before dividend
18
Every banking company not being scheduled bank, cash reserve need not be
maintained with the Reserve Bank. It may be with bank itself, or in current account
with the Reserve Bank.
The balance maintained should not be less than 30% of the demand and time
liabilities as on the last Friday of the 2nd Fort Night.
Return of Cash Reserve of Non-scheduled Banks
19(1)
Approval of Central Govt. is required for formation a subsidiary for the purpose
carrying on business of banking exclusively outside India
effecting, insuring, guaranteeing, underwriting, participating in managing and
carrying out of any issue, public or private
undertaking and executing trusts
19(2)
No banking company shall hold shares in any company, whether as pledge,
mortgagee or absolute owner of an amount exceeding 20% of the paid-up share
capital of that company or 30% of its own paid-up share capital and reserves,
whichever less.
20(1)
Banking Company is prohibited from granting any loan or advance against the
security of its own shares.
20A(1)
Banking Company shall not, except with the prior approval of the RBI, 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
21 Empowers RBI to control advances by banking companies
21A Transaction between a banking company and its debtor cannot be reopened by
any court on the ground that rate of interest charged is excessive.
22(1) Licence from RBI required
22(3) Adequacy of Capital Structure and earning prospectus
23(b) Permission to open office outside India from RBI
23(1) Permission for change of premised within the same city, town or village not
required
23(4A) RRB requiring permission of the RBI for opening a new branch shall forward its
application to RBI through NABARD
24
SLR : The minimum proportion of liquid assets required to be maintained by
banks in India.
Every Banking company at the close of business on any day at least 20% of its
demand and time liabilities in cash, gold or unencumbered approved securities.
24(2)
Cental Govt : Maintenance of Assets (13)
SLR : amount being not less than 25% of its demand and time liabilities required
to maintain in India in cash, gold or unencumbered approved securities on the
Last Friday of the 2nd preceding fortnight. It may be increased by the RBI up tp
40%
24(3) Return on Liquid Assets
24(5)(b)
If a banking company fails to maintain the SLR the reserve bank may, in respect
of such default recover penal interest from the banking company
25
The Assets in India of every banking company at the close of business on the last
Friday of every quarter shall: not be less than 75% of its demand and time
liabilities in India
26
Every banking company to submit an annual return to the RBI in respects of all
accounts in India which have not been operated upon for 10 years,
Return on Unclaimed Deposits
27
Monthly Returns
Banks are required to submit to the Reserve Bank a statement showing their
assets and liabilities as of last Friday of every month
Reserve Bank is empowered to call for statements and information relating to
business or affairs of the banking company
RRB required to submit a copy of the monthly statement of assets and liabilities as
of last friday of every month to NABARD also.
29
Govt. : Notification with reference to accounts and balance sheets
Every banking company is required to prepare its final account i.e. P & L account
and Balance Sheet in the forms prescribed in the Third schedule of the BR Act.
30
31 & 32
Banks are required to send three copies of their accounts and the balance sheet
alongwith the auditor’s report to the ROC(32) and RBI (31)
33
Foreign Bank
Display a copy of its audited balance sheet and P&L account at its principal office
as also every branch in India
Publish its audited accounts in leading national daily newspaper
Obtain permission from the Ministry of External Affairs, GOI for opening any
branch in India
35 Govt.: Power to issue of directions for inspection of bank
Conduct Inspection of any banking company and its books and accounts
Carry out scrutiny of the affairs of any Banking company and its books and
accounts
Inspection of branches outside India carried out by RBI - 35 (ii) (b)
35A
Power to Regulate banking companies
Banking Ombudsman is an authority established in 1995.
35(4)
Central Govt. based on the report from RBI
Prohibit the banking company from receiving fresh deposits
Direct the RBI to apply under section 38 for the winding up of the banking
company
36
Reserve bank is empowered to
Caution or prohibit banking companies against entering into any particular
transaction
Generally give advise to the banking company
Assist, as intermediary or otherwise, in proposals for amalgamation of baning
companies
36(2) Publication released by RBI Trends and Progress of banking in India
36AA
(33) RBI is empowered to remove Chairman, director, officer or employee from the
office of the banking company
36AB Reserve Bank is authorised to appoint additional directors
36AE Govt: Power to acquire undertakings of banks
36AF The central govt. is empowered to make a scheme for any acquired bank in
consultation with RBI.
37
The High Court may, on application of the banking company suspend its business
The RBI may make an application to the High Court for the winding up of a
banking company against which an order under section 37(1) has been passed
38
The high court may order the winding up of the company if the banking company
is unable to pay its debts.
39
Reserve Bank, upon an application made by it, May be appointed as official
liquidator by the High Court in any winding up proceeding.
44A (77) : Amalgamation of one banking company to another.
44B No high court will sanction a compromise or arrangement between a banking
company and its creditors unless it is certified by RBI
45(1) RBI apply to govt for an order of moratorium
45 Suspension of Business and amalgamation of banks.
45B
45Y
Preservation of Records by a Banking Company (Section 45)
Specifying period for which bank has to preserve the books, accounts, instruments
etc are made by Central Govt.
45Y
Following records to be maintained by banks for 5 Years
Cheque Book Register
Vault Register
Telegraphic Transfer Confirmations
Demand Liability Register
Demand Remittances Dispatched Registered
Following records to be maintained by banks for 8 Years
All personal ledgers
Loans and advance Registers and Ledgers
Call, Short/Fixed Deposit Registers, Equitable Mortgage Register
Safe custody register, Overdrafts and Loan Register
Paid Cheques
45ZA Nomination : repayment of deposits
45ZC Nomination : articles kept in safe custody
45ZE Nomination : safety lockers
52 Govt. Rule Making Powers (details to be furnished in various returns, List of
debtors to be submitted by official Liquidator)
56 Applicable to Cooperative Banks (licensing and regulationof banking business)
58 Regulation Of Payment Systems
The BR Act does not apply to Primary Agricultural Credit Societies
Section
4 & 53 The Govt. has power to suspend operations BR Act / give exemptions from any of
the provisions of the Act on the recommendations of the RBI.
5(a) Approved Securities: In which a trustee may invest money under section 20 of
the Indian trusts act, 1882
5(b)
Banking is defined as the acceptance of deposits of money from the public for the
purpose of lending or investment
5©
A banking company, is a company which transacts business of banking
May be constituted under section 3 of companies Act
Section 51 of Companies act – foreign company
6
Govt. has also power to notify the other forms of Business permissible apart from
banking business. Section 6(1)(0)
Discounting of bills, Collection of cheque and bills. Remittances, safe custody of
articles, safe custody of articles, hiring safe custody of articles, conducting
foreign exchange transactions, conducting (Central/State) government
transactions.
7
Every banking company has to use word bank as part of its name, no other
company can use the word bank, banker, banking as part of its name.
7(1) Prohibits use of words ‘Banker’ or ‘Banking’ or ‘Banking Company’ by a company
other than Banking Company.
7(2) Prohibits use of such words by individual or group of individuals or a firm.
8 Prohibited Business
9 No banking company shall hold any immoveable property howsoever acquired,
except for its own use, for any period exceeding Seven years
10 No Banking company shall be managed by Managing Agent
10A
(28) Board Of Directors: Qualifications for directors of banking companies. At
least 51% of the total number of directors shall be persons who have expertise in
accountancy, agriculture and rural economy, banking, cooperation, economics,
finance, law etc.
Max. period of office for Chairman, Ordinary Director in a banking company is 8
years
If Chairman is removed by the order, he has to apply to Central Govt within 30
days.
10B (29) Whole Time Director / Managing Director
11
If a foreign bank wishes to carry on business in India the aggregate value of
PaidUp share capital and reserves shall not be less than
at a place other than Bombay /Kolkatta Rs. 15 lakh
in Bombay / Kolkatta or both Rs. 20 lakh
An amount of 20% of the profit for each year has to be deposited with RBI.
11(3)(i): The aggregate value of paid-up capital and reserves a banking
company incorporated in India and having place in more than one state
but not in Bombay / Kolkatta Rs. 5 lakhs
and in Bombay / Kolkatta Rs. 10 lakhs
12
The minimum ratio between authorised, Subscribed, and paid-up capital of a
banking company should be: 4 : 2 : 1
12(2)
No person holding shares in a banking company shall exercise voting rights on
poll in excess of 10% of the total voting rights of all shareholders of the banking
company
12A(1)
RBI may ask a banking company to : call a general meeting of shareholders and
elect fresh directors.
13
Prohibits banks from making payment of commission, brokerage, discount or
remuneration on any shares issued by it in excess of 2.5% of the paid-up value of
such shares.
14A(1)
Prohibits a banking company from creating floating charge on the undertaking or
any property of the company or any part thereof.
15
Prohibits a banking company from paying any dividend on its shares until all its
capitalized expenses have been completely written off
16 Prohibits a person to be appointed as director of more than one banking company
17
Reserve Fund(53)
Every banking company incorporated in India is required to transfer each year to a
reserve fund a sum equivalent to not less than 20% of profit before dividend
18
Every banking company not being scheduled bank, cash reserve need not be
maintained with the Reserve Bank. It may be with bank itself, or in current account
with the Reserve Bank.
The balance maintained should not be less than 30% of the demand and time
liabilities as on the last Friday of the 2nd Fort Night.
Return of Cash Reserve of Non-scheduled Banks
19(1)
Approval of Central Govt. is required for formation a subsidiary for the purpose
carrying on business of banking exclusively outside India
effecting, insuring, guaranteeing, underwriting, participating in managing and
carrying out of any issue, public or private
undertaking and executing trusts
19(2)
No banking company shall hold shares in any company, whether as pledge,
mortgagee or absolute owner of an amount exceeding 20% of the paid-up share
capital of that company or 30% of its own paid-up share capital and reserves,
whichever less.
20(1)
Banking Company is prohibited from granting any loan or advance against the
security of its own shares.
20A(1)
Banking Company shall not, except with the prior approval of the RBI, 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
21 Empowers RBI to control advances by banking companies
21A Transaction between a banking company and its debtor cannot be reopened by
any court on the ground that rate of interest charged is excessive.
22(1) Licence from RBI required
22(3) Adequacy of Capital Structure and earning prospectus
23(b) Permission to open office outside India from RBI
23(1) Permission for change of premised within the same city, town or village not
required
23(4A) RRB requiring permission of the RBI for opening a new branch shall forward its
application to RBI through NABARD
24
SLR : The minimum proportion of liquid assets required to be maintained by
banks in India.
Every Banking company at the close of business on any day at least 20% of its
demand and time liabilities in cash, gold or unencumbered approved securities.
24(2)
Cental Govt : Maintenance of Assets (13)
SLR : amount being not less than 25% of its demand and time liabilities required
to maintain in India in cash, gold or unencumbered approved securities on the
Last Friday of the 2nd preceding fortnight. It may be increased by the RBI up tp
40%
24(3) Return on Liquid Assets
24(5)(b)
If a banking company fails to maintain the SLR the reserve bank may, in respect
of such default recover penal interest from the banking company
25
The Assets in India of every banking company at the close of business on the last
Friday of every quarter shall: not be less than 75% of its demand and time
liabilities in India
26
Every banking company to submit an annual return to the RBI in respects of all
accounts in India which have not been operated upon for 10 years,
Return on Unclaimed Deposits
27
Monthly Returns
Banks are required to submit to the Reserve Bank a statement showing their
assets and liabilities as of last Friday of every month
Reserve Bank is empowered to call for statements and information relating to
business or affairs of the banking company
RRB required to submit a copy of the monthly statement of assets and liabilities as
of last friday of every month to NABARD also.
29
Govt. : Notification with reference to accounts and balance sheets
Every banking company is required to prepare its final account i.e. P & L account
and Balance Sheet in the forms prescribed in the Third schedule of the BR Act.
30
31 & 32
Banks are required to send three copies of their accounts and the balance sheet
alongwith the auditor’s report to the ROC(32) and RBI (31)
33
Foreign Bank
Display a copy of its audited balance sheet and P&L account at its principal office
as also every branch in India
Publish its audited accounts in leading national daily newspaper
Obtain permission from the Ministry of External Affairs, GOI for opening any
branch in India
35 Govt.: Power to issue of directions for inspection of bank
Conduct Inspection of any banking company and its books and accounts
Carry out scrutiny of the affairs of any Banking company and its books and
accounts
Inspection of branches outside India carried out by RBI - 35 (ii) (b)
35A
Power to Regulate banking companies
Banking Ombudsman is an authority established in 1995.
35(4)
Central Govt. based on the report from RBI
Prohibit the banking company from receiving fresh deposits
Direct the RBI to apply under section 38 for the winding up of the banking
company
36
Reserve bank is empowered to
Caution or prohibit banking companies against entering into any particular
transaction
Generally give advise to the banking company
Assist, as intermediary or otherwise, in proposals for amalgamation of baning
companies
36(2) Publication released by RBI Trends and Progress of banking in India
36AA
(33) RBI is empowered to remove Chairman, director, officer or employee from the
office of the banking company
36AB Reserve Bank is authorised to appoint additional directors
36AE Govt: Power to acquire undertakings of banks
36AF The central govt. is empowered to make a scheme for any acquired bank in
consultation with RBI.
37
The High Court may, on application of the banking company suspend its business
The RBI may make an application to the High Court for the winding up of a
banking company against which an order under section 37(1) has been passed
38
The high court may order the winding up of the company if the banking company
is unable to pay its debts.
39
Reserve Bank, upon an application made by it, May be appointed as official
liquidator by the High Court in any winding up proceeding.
44A (77) : Amalgamation of one banking company to another.
44B No high court will sanction a compromise or arrangement between a banking
company and its creditors unless it is certified by RBI
45(1) RBI apply to govt for an order of moratorium
45 Suspension of Business and amalgamation of banks.
45B
45Y
Preservation of Records by a Banking Company (Section 45)
Specifying period for which bank has to preserve the books, accounts, instruments
etc are made by Central Govt.
45Y
Following records to be maintained by banks for 5 Years
Cheque Book Register
Vault Register
Telegraphic Transfer Confirmations
Demand Liability Register
Demand Remittances Dispatched Registered
Following records to be maintained by banks for 8 Years
All personal ledgers
Loans and advance Registers and Ledgers
Call, Short/Fixed Deposit Registers, Equitable Mortgage Register
Safe custody register, Overdrafts and Loan Register
Paid Cheques
45ZA Nomination : repayment of deposits
45ZC Nomination : articles kept in safe custody
45ZE Nomination : safety lockers
52 Govt. Rule Making Powers (details to be furnished in various returns, List of
debtors to be submitted by official Liquidator)
56 Applicable to Cooperative Banks (licensing and regulationof banking business)
58 Regulation Of Payment Systems
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