Thursday, July 4, 2013

IBPS - BANKING/INSURANCE EXAMINATIONS – RAPID READING EXERCISE- BANKING REGULATION ACT 1949







 005
 


BULLET POINTS - PART: 005

BANKING REGULATION ACT, 1949

01. Banking companies act 1949 came into force with effect from 16.03.1949
02. It was changed to Banking Regulation act 1949 with effect from 01.03.1966
03. Banking regulation act was made applicable in Jammu and Kashmir with effect from 1956
04. At present the act is applicable throughout the country
05. The act is not applicable to the following:
·         primary agricultural credit societies,
·         cooperative land mortgage banks
·         non agricultural primary credit societies
06. Banking is defined according to Section 5-b
07. Banking means
·         Accepting for the purpose of lending or investment of deposits of money from public repayable on demand or otherwise
·         And withdrawable by cheque, drafts order or otherwise
08. Demand liabilities (according to section 5-f) are liabilities which must be met on demand and time liabilities means liabilities which are not demand liabilities
09. Secured loan or advances (according to section 5-n) means a loan or advance made on the security of asset, the market value of which is not any time less than the amount of such loan or advances and unsecured loan or advances means a loan or advance, not secured
10. Section 6-1 deals with banking business
11. Banking business means:
·         A banking company may be engaged in accepting deposits
·         Borrowing money, lending money, dealing in bills, collection of bills, buying/selling foreign exchange, lockers, issuing letter of credits, travellers’ cheques, mortgages, insurance business, acting as trustee etc or any other business which central government notify in the official gazette
12. Restriction on business (according to section 6-2) means – no banking company shall engage in any form of business other than those referred in sub section 6(1)
13. Using the word “banking” – section 7 – for banking companies carrying on banking business in India to use at least one word bank, banking, banking company in its name
14. Section 8 – restrictions – on business of trading of goods except realization of securities held by it
15. Section 9 – immovable property – banks are prohibited from holding any immovable property howsoever acquired except as acquired for its own use for a period exceeding seven years from acquisition of the property. RBI may extend this period by five years
16. Section 10 – management – prohibitions on employment like chairman, directors etc – the period of office not more than five years – extendable by another five years
17. Section 11 and section 12 – Paid up capital, reserves and rules relating to these:
·         Foreign banks – minimum Rs. 15 lakhs (Rs. 20 lakhs for business in Mumbai and/or Calcutta)
·         Domestic banks – not less than Rs. 5 lakhs
·         Ratio of authorized, subscribed and paid up capital minimum – 4: 2:1
·         Voting right cannot be more than 10 percent by a single shareholder irrespective of holding of the shareholder
18. Section: 13 - Commission/brokerage – banks not to pay any commission, brokerage, discount etc. more than 2.5 percent of paid up value of one share
19. Section 14– prohibits – a banking company from creating a charge upon any unpaid capital of the company
20. Section 14 A – prohibits – a banking company from creating floating charge on the undertaking or any property of the company without the RBI permission
21. Section 15 – prohibits payment of dividend by any bank until all of its capitalized expenses have been completely written
22. Section 17/1 – A reserve fund has to be created and 20 percent of the profits should be transferred to this fund before any dividend is declared
23. According to the directions received from Reserve Bank of India banks have to transfer not less than 25 percent of net profits to Reserve Fund with effect from March 31, 2001
24. Section 18 – cash reserve – Non scheduled banks have to maintain three percent of the demand and time liabilities by way of cash reserves with itself or by way of balance in a current account with Reserve Bank of India
25. Section 19 permits banks to form subsidiary company for certain purposes
26. Section 19-2 – no banking company shall hold shares in any company, whether as pledgee, mortgagee or absolute owners of any amount exceeding 30 percent of its own paid up share capital plus reserves or 30 percent of the paid up share capital of that company whichever is less
27. Section 20 – Against the security of their own shares, banks cannot grant any loans
28. Section 21 – Control over the advances by Reserve Bank of India – Reserve Bank of India haqs powers to issue directives to banks to determine the policy for advances (such as purpose, margin, extent, rate of interest or other conditions)
29. Section 21A – The rate of interest charged by the banks is not subject to scrutiny by courts with effect from February 15. 1984 on the ground of being excessive
30. Section 22 – Licensing – Obtaining of licence from RBI is essential for conducting banking business
31. Section 23 – Branch licensing – There are restrictions on opening new and transfer of existing place of business
32. Section 24 – statutory liquidity ratio – every bank has to maintain a percentage of its demand and time liabilities by way of cash, gold, unencumbered securities – maximum 40 percent as on the last Friday of second preceding fortnight (details of statutory liquidity ratio are available separately) – Minimum SLR as per RBI discretion instead of earlier 25 percent
33. Section 26 - Unclaimed deposits – return of unclaimed deposits (10 years and above) within 30 days of close of each calendar year to Reserve Bank of India
34. Section 29 - Every bank has to publish its balance sheet as on the last working day of March every year on the Form A and profit and loss account on Form B of third schedule of the act
35. Section 30/1 – audit – the balance sheet is to be got audited from qualified auditors
36. Section 31 – submitting the balance sheet and auditors – report has to be sent within 3 months from the end of period to which they refer, RBI may extend the period by further three months
37. Section 35 – Inspection of banks – RBI has been authorized to undertake inspection of banks and give directions, as deemed appropriate. RBI has directed the banks to round off transactions to nearest rupee under section 21 and section 25
38. Section 35A – powers to give directions in public interest or in the interest of banking policy
39. Section 36 – Reserve Bank of India can terminate any Chairman or any employee of a bank where it considers desirable to do so
40. Section 45 – Reserve Bank of India has powers to apply to central government for suspension of business by a banking company and it can prepare scheme of reconstitution or amalgamation
41. Section 45Y – Preservation of records – central government has powers to frame rules specifying the period for which a bank shall preserve its books
42. Section 45ZA – ZF – Nomination – the section deals with nominations in respect of bank deposits, safe deposit lockers and safe custody of articles
43. Section 45Z –returning of paid instruments – this section deals with returning of paid instruments(cheques, dividend warrants, interest warrants etc) by keeping a true copies of the same with the bank to the customers – Customers obtaining original instruments have to undertake to preserve the instruments as prescribed by central government under section 45/Y
44. Section 47A – Reserve Bank of India can impose penalty for various kinds of violations
45. Section 49A – Other than a banking company/RBI/SBI, no person can accept deposits of money withdrawable by cheque

46. Section 52 – Central government can make rules for matters in connection with banking. 

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