Banking regulation act law notes

The Banking Regulation Act, 1949

ACT NO. 10 OF 1949

PREAMBLE

An Act to consolidate and amend the law relating to banking. WHEREAS it is expedient to consolidate and amend the law relating to banking

ARRANGEMENT OF SECTIONS

PART I
PRELIMINARY SECTIONS

1. Short title, extent and commencement.
2. Application of other laws not barred.
3. Act not to apply to certain co-operative societies.
4. Power to suspend operation of Act.
5. Interpretation.
   5A. Act to override memorandum, articles, etc.
   PART II
   BUSINESS OF BANKING COMPANIES
6. Form of business in which banking companies may engage.
7. Use of words “bank”, “banker”, “banking” or “banking company”.
8. Prohibition of trading.
9. Disposal of non-banking assets.
10. Prohibition of employment of managing agents and restrictions on certain forms of
    employment.
    10A. Board of directors to include persons with professional or other experience.
    10B. Banking company to be managed by whole time chairman.
    10BB. Power of Reserve Bank to appoint chairman of the Board of directors appointed on a
    whole-time basis or a managing director of a banking company.
    10C. Chairman and certain directors not to be required to hold qualification shares.
    10D. Provisions of sections 10A and 10B to override all other laws, contracts, etc.
11. Requirement as to minimum paid-up capital and reserves.
12. Regulation of paid-up capital, subscribed capital and authorised capital and voting rights of
    shareholders.
    12A. Election of new directors.
    12B. Regulation of acquisition of shares or voting rights.
13. Restriction on commission, brokerage, discount, etc., on sale of shares.
14. Prohibition of charge on unpaid capital.
    14A. Prohibition of floating charge on assets.
15. Restrictions as to payment of dividend.
16. Prohibition of common directors.
17. Reserve Fund.
18. Cash reserve.
19. Restriction on nature of subsidiary companies.
20. Restrictions on loans and advances.
    20A. Restrictions on power to remit debts.
21. Power of Reserve Bank to control advances by banking companies.
    21A. Rates of interest charged by banking companies not to be subject to scrutiny by courts.
22. Licensing of banking companies.
23. Restrictions on opening of new, and transfer of existing, places of business.
24. Maintenance of a percentage of assets.
25. Assets in India.
26. Return of unclaimed deposits.
    26A. Establishment of Depositor Education and Awareness Fund.
27. Monthly returns and power to call for other returns and information.
28. Power to publish information.
29. Accounts and balance-sheet.
    29A. Power in respect of associate enterprises.
30. Audit.
31. Submission of returns.
32. Copies of balance-sheets and accounts to be sent to registrar.
33. Display of audited balance-sheet by companies incorporated outside India.
34. Accounting provision of this Act not retrospective.
    34A. Production of documents of confidential nature.
35. Inspection.
    35A. Power of the Reserve Bank to give directions.
    35B. Amendments of provisions relating to appointments of managing directors, etc., to be subject
    to previous approval of the Reserve Bank.
36. Further powers and functions of Reserve Bank.
    36A. Certain provisions of the Act not to apply to certain banking companies.
    PART IIA
    CONTROL OVER MANAGEMENT
    36AA. Power of Reserve Bank to remove managerial and other persons from office.
    36AB. Power of Reserve Bank to appoint additional directors.
    36AC. Part IIA to override other laws.
    PART IIAB
    SUPERSESSION OF BOARD OF DIRECTORS OF BANKING COMPANY
    36ACA. Supersession of Board of Directors in certain cases.
    PART IIB
    PROHIBITION OF CERTAIN ACTIVITIES IN RELATION TO BANKING COMPANIES
    36AD. Punishments for certain activities in relation to banking companies.
    PART IIC
    ACQUISITION OF THE UNDERTAKINGS OF BANKING COMPANIES IN CERTAIN CASES
    36AE. Power of the Central Government to acquire undertakings of banking companies in certain
    cases.
    36AF. Power of the Central Government to make scheme.
    36AG. Compensation to be given to shareholders of the acquired bank.
    36AH. Constitution of the Tribunal.
    36AI. Tribunal to have powers of a civil court.
    36AJ. Procedure of the Tribunal.
    PART III
    SUSPENSION OF BUSINESS AND WINDING UP OF BANKING COMPANIES
    36B. High Court defined.
37. Suspension of business.
38. Winding up by High Court.
    38A. Court liquidator.
39. Reserve Bank to be official liquidator.
    39A. Application of Companies Act to liquidators.
40. Stay of proceedings.
41. Preliminary report by official liquidator.
    41A. Notice to preferential claimants and secured and unsecured creditors.
42. Power to dispense with meetings of creditors, etc.
43. Booked depositors’ credits to be deemed proved.
    43A. Preferential payments to depositors.
44. Powers of High Court in voluntary winding up.
    44A. Procedure for amalgamation of banking companies.
    44B. Restriction on compromise or arrangement between banking company and creditors.
45. Power of Reserve Bank to apply to Central Government for suspension of business by a
    banking company and to prepare scheme of reconstitution or amalgamation.
    PART IIIA
    SPECIAL PROVISIONS FOR SPEEDY DISPOSAL OF WINDING UP PROCEEDINGS
    45A. Part IIIA to override other laws.
    45B. Power of High Court to decide all claims in respect of banking companies.
    45C. Transfer of pending proceedings.
    45D. Settlement of list of debtors.
    45E. Special provisions to make calls on contributories.
    45F. Documents of banking company to be evidence.
    45G. Public examination of directors and auditors.
    45H. Special provisions for assessing damages against delinquent directors, etc.
    45-I. Duty of directors and officers of banking company to assist in the realisation of property.
    45J. Special provisions for punishing offences in relation to banking companies being wound up.
    45K. [Omitted.].
    45L. Public examination of directors and auditors, etc., in respect of a banking company under
    schemes of arrangement.
    45M. Special provisions for banking companies working under schemes of arrangement at the
    commencement of the Amendment Act.
    45N. Appeals.
    45-O. Special period of limitation.
    45P. Reserve Bank to tender advice in winding up proceedings.
    45Q. Power to Inspect.
    45R. Power to call for returns and information.
    45S. Chief Presidency Magistrate and District Magistrate to assist official liquidator in taking
    charge of property of banking company being wound up.
    45T. Enforcement of orders and decisions of High Court.
    45U. Power of High Court to make rules.
    45V. References to directors, etc., shall be construed as including references to past directors, etc.
    45W. Part II not to apply to banking companies being wound up.
    45X. Validation of certain proceedings.
    PART IIIB
    PROVISIONS RELATING TO CERTAIN OPERATIONS OF BANKING COMPANIES
    45Y. Power of Central Government to make rules for the preservation of records.
    45Z. Return of paid instruments to customers.
    45ZA. Nomination for payment of depositors’ money.
    45ZB. Notice of claims of other persons regarding deposits not receivable.
    45ZC. Nomination for return of articles kept in safe custody with banking company.
    45ZD. Notice of claims of other persons regarding articles not receivable.
    45ZE. Release of contents of safety lockers.
    45ZF. Notice of claims of other persons regarding safety lockers not receivable.
    PART IV
    MISCELLANEOUS
46. Penalties.
    46A. Chairman, director, etc., to be public servants for the purposes of Chapter IX of the Indian
    Penal Code.
47. Cognizance of offences.
    47A. Power of Reserve Bank to impose penalty.
48. Application of fines.
49. Special provisions for private banking companies.
    49A. Restriction on acceptance of deposits withdrawable by cheque.
    49B. Change of name by a banking company.
    49C. Alteration of memorandum of a banking company.
50. Certain claims for compensation barred.
51. Application of certain provisions to the State Bank of India and other notified banks.
    51A. Powers of Reserve Bank not to apply to International Financial Services Centre.
52. Power of Central Government to make rules.
53. Power to exempt in certain cases.
54. Protection of action taken under Act.
55. Amendment of Act 2 of 1934.
    55A. Power to remove difficulties.
    PART V
    APPLICATION OF THE ACT TO CO-OPERATIVE BANKS
56. Act to apply to co-operative societies subject to modifications.
    THE FIRST SCHEDULE
    THE SECOND SCHEDULE.
    THE THIRD SCHEDULE.
    THE FOURTH SCHEDULE.
    THE FIFTH SCHEDULE.