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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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